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House of Representatives,
Committee on Veterans' Affairs,
Washington, DC.
    The committee met, pursuant to notice, at 10 a.m., in room 334, Cannon House Office Building, Hon. Bob Stump (chairman of the committee) presiding.
    Present: Representatives Stump, Bilirakis, Everett, Quinn, Stearns, Cooksey, Hutchinson, Hayworth, LaHood, Evans, Filner, Gutierrez, Mascara, Peterson, Reyes, Snyder and Rodriguez.

    The CHAIRMAN. The meeting will please come to order.
    I would like to begin by welcoming Secretary West, who has been nominated by the President to be our new Secretary of Veterans Affairs. Mr. Secretary, welcome this morning. This is Mr. West's first appearance before the full committee. We did have him before the subcommittee a couple of days ago and we look forward to working with him throughout the year.
    As you know, Mr. Secretary, we look at the budget each year as a gauge of how well we are meeting the commitments made to our veterans. This year's budget has some good proposals and unfortunately, I think some that are probably a little short.
    The budget proposes an increase in the Montgomery GI Bill and in other areas. However, these proposals are linked to repeal of the authority to pay disability compensation to most veterans who have health-related conditions attributable to tobacco.
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    If the Congress doesn't go along with the repeal of this authority to pay tobacco-related benefits, it could cost us anywhere from CBO's estimate of $500 million up to OMB's about $750 million a year. If that happens, of course, we will not be able to report legislation enhancing education and compensation benefits or any other benefit to which PAYGO budget rules apply. This is not and should not be a partisan issue.
    Although many members of the committee have concluded that the Federal Government is not responsible for individual decisions made by service members about whether or not to use tobacco, this view is not unanimous.
    Another important issue in the proposed budget was debated when we examined last year's budget. As you said in your written statement, Mr. Secretary, veterans are counting on the VA to deliver the health care they need.
    While the budget projects an increase in the number of veterans who will use the VA health care system in 1999, it is tied to a projected increase in receipts from third parties. Unfortunately, the VA is falling well short of our expectations.
    In the first quarter of fiscal year 1998 the VA was $9 million or 7 percent short on its collections compared to what was projected in the 1998 budget. Given the lack of evidence that VA can significantly increase its collections, we do not believe you should base your budget request on a projected increase.
    Let me take just one minute to mention our National Cemetery System. The VA expects to inter about 76,000 veterans this year and their dependent family members. To meet the increased demand for burials in a national cemetery, VA plans to dedicate four new national cemeteries in 1999, which the VA Committee has strongly supported.
    Mr. Secretary, this should not be the last of our VA cemeteries. There are still parts of the country where burial in a national cemetery is not a feasible option, and the Administration needs to reexamine its policy of capping the size of our National Cemetery System.
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    Finally, I would like to remind members that we will have a hearing on the budget next Thursday, February 12, at 9:30 a.m. with Judge Nebeker and the veterans' service organizations and the Military Veterans Alliance.
    I would now like to yield to Mr. Evans, the ranking member from Illinois, for any comments he may wish to make.

    Mr. EVANS. Thank you, Mr. Chairman. I also join with you in welcoming Secretary West to the hearing today.
    We look forward, Mr. Secretary, to your presentation and the information you will provide us on the Administration's proposed fiscal year 1999 budget for veterans' benefits and services. Because we have had so little time to review this Administration budget, I am certain we would like to ask additional questions and put them in the record. And Mr. Chairman, at this point I would ask unanimous consent that all members be able to enter questions in the record and the responses be made part of that record.
    The CHAIRMAN. Certainly, without objection.
    [The questions appear on p. 187.]

    Mr. EVANS. In some respects this proposed budget is very commendable. It is troublesome in other respects, however. In recognition of our veterans' honorable service to our nation, over the years Congress has established a number of veterans' benefits and services. These important programs have historically been funded by federal taxpayer dollars, authorized and appropriated by the Congress. In the past, these programs have generally been adequately and appropriately funded and, in several important accounts, the Administration's proposed Fiscal Year 1999 budget continues this support.
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    In recent years, however, there has been an erosion of this historic commitment to the funding of veterans' programs. This budget, I believe, accelerates that erosion.
    I join with the Chairman in my support for increases in the Montgomery GI Bill, as well as for the Survivors' and Dependents' Education program. I am also troubled, as the Chairman has indicated, by the Administration's apparent linkage between the increase in VA educational benefits and the enactment of legislation by Congress to repeal existing authority to provide compensation for tobacco-related disabilities.
    For veterans' health care, the Administration proposes to provide higher quality care to more veterans with a smaller appropriation. What we saw last year and what we are witnessing again today is a dramatic and disturbing change in the philosophy related to the funding of veterans' medical care. It seems risky for the VA to assume that nonappropriated revenue will fully provide the funds to meet the VA health care system's needs. Third-party reimbursements are eroding and no authorization for the VA to collect and retain Medicare funding exists today. Yet this is the same source of funding that the VA is depending on in lieu of appropriations. This is a gamble I, for one, am not willing to take with our veterans' health care.
    Every member of this committee has said at one time or another that the federal budget should not be balanced on the backs of veterans. With a projected saving from the proposed enactment of legislation to deny compensation for smoking-related disease, it now appears that the Administration is using the backs of veterans as a foundation for budget surpluses. This committee must examine why veterans are being asked to contribute to that surplus while the VA health care system is laying off thousands of workers, and while veterans have sometimes had the problem of waiting for years to receive an adjudication of their claims for benefits. In this revived economy, it is not very fair for others to feast while veterans starve.
    We who serve on this committee and, in fact, all members of Congress, I believe, have a solemn obligation to our fellow citizens to provide adequate and appropriate benefits to those who have protected and defended this country in the armed services. We must have the courage to continue those benefits, and it is clear to me that those benefits will not be provided without a fight.
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    So I want to thank you, Mr. Chairman. I appreciate your holding the hearing and I look forward to the testimony.
    [The prepared statement of Congressman Evans appears on p. 75.]

    The CHAIRMAN. Thank you, Mr. Evans.
    Mr. Secretary, the floor is yours. Of course your entire statement will be printed in the record and you may proceed in any way you see fit. If you care to introduce those accompanying you, please do so.

    Secretary WEST. Thank you, Mr. Chairman, Mr. Evans, members of the committee. It is a pleasure to be with you today.
    Mr. Chairman, I will take your advice. To my immediate right is our under secretary for health affairs and to his right is the director of the National Cemetery System—Dr. Kizer and Mr. Bowen.
    To my left is the acting assistant secretary for management, our financial guru. I think you all know him, Mark Catlett. And to his left is the under secretary who is in charge of the Veterans Benefits Administration, our under secretary for Veterans Benefits, Joe Thompson.
    Mr. Chairman, thank you for permitting my testimony to be entered into the record. I have a few opening comments and then we will be ready for your questions, if I may proceed.
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    Mr. Chairman and members of the committee, during my years of service to this country, most recently as Secretary of the Army, I have learned first-hand of the extraordinary service of our men and women in uniform to this nation and to those who are citizens of this nation.
    Today, as our President's nominee for Secretary of Veterans Affairs, I appreciate this opportunity to work again, more directly on behalf of our veterans, those men and women who have earned the nation's gratitude by their service.
    I see my job, this new job, as an opportunity to fulfill something that I said to soldiers and their families when I was the Secretary of the Army as a full-time job. I said to them then that even as they were standing up for America every day, on the training fields of America, on the battlefields of the world, so also when they became veterans and when there was need, America would stand up for them.
    The Department of Veterans Affairs is the department of our Federal Government charged with the responsibility for standing up for our veterans, for making sure that America delivers on the commitment it has made to everyone who serves in uniform.
    In 5 years of this Administration, Mr. Chairman, the Department of Veterans Affairs has made significant progress in changing the way we provide services to veterans and to their families. I believe that progress has created a solid foundation on which we can move forward in the manner represented by this budget.
    There have been changes and those changes have resulted in improvement in the time it takes to process benefits claims by veterans. The fact is that process is better than it was 5 years ago, but we still have room for improvement.
    In fiscal year 1994 the average processing time for a claim was some 213 days. At the conclusion of fiscal year 1997 that was some 133 days. And our target for fiscal year 1996 is 100 days, just over 3 months.
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    Yes, Mr. Chairman and members of the committee, there is work to be done. We are in the fourth year of a massive transformation of the Veterans Affairs health system. That transformation has resulted in more outpatient care, less inpatient care, including the establishment of more outpatient clinics and yes, the closing of unused and unneeded hospital beds.
    Our budget request for fiscal year 1999, the President's fiscal year 1999 budget request for the Department of Veterans Affairs, will permit us to provide even more health care to more veterans, and it is our determination that that will be quality health care in which the line on quality is on an upward slant.
    We continue, Mr. Chairman, to integrate organizational elements within the department to become more efficient, more cost-effective and more vigilant in the expenditure of taxpayer dollars.
    As we move towards the next millennium I look forward to working with you, with this committee, with veterans and their families. I will expect and am prepared to demand of the department several things: first, that we improve the timeliness and dependability of the delivery of benefits to our veterans and their families; secondly, that we continue the transformation of the health care system of this department, emphasizing quality, emphasizing compassion and emphasizing effectiveness; that we master the challenges of information technology, including the looming presence of Y2K; that we assure our employees in this department of a work environment that is conducive to their best efforts in order that they can better serve our veterans; and that we continue our efforts to more fully integrate the department across its organizational elements.
    This proposed budget for fiscal year 1999, Mr. Chairman, will permit Veterans Affairs to continue to keep America's promise to veterans and their families by building on previous successes and continuing that momentum.
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    This is a $42.8 billion budget request with some $17.7 billion for medical care, some $21.9 billion, roughly $22 billion, for compensation and pension systems and with $92 million for the National Cemetery System.
    Within those numbers, Mr. Chairman and members of the committee, we are requesting a 10 percent increase in funding for medical research, a 7 percent increase for the Administration of veterans' benefits programs and a 9 percent increase in funding for the National Cemeteries.
    This means that we will be able to open 71 new outpatient clinics, if this request is approved and treat some 134,000 more veterans in fiscal year 1999 than in fiscal year 1998. The further details of that, of course, are in the written statement which we have included in the record, Mr. Chairman.
    The budget reaffirms the strategic goals of this department. We continue to strive for realization of the 30–20–10 goals by the year 2002: to reduce per patient cost of health care by 30 percent, increase the number of veterans served by 20 percent, and fund 10 percent of our health care budget from nonappropriated sources.
    We will expand and improve health care delivery without any increase in appropriated funds beyond the 1998 enacted level if we can receive the assistance we requested in this plan. This marks the second year of our baseline funding strategy.
    Mr. Chairman, I ask for the privilege of one slight departure and that is to recognize your role and the role of this committee as an active partner in helping us achieve our goals. Last year, at the Administration's request, you passed legislation allowing the Department of Veterans Affairs to retain all third-party collections. I cannot overstate, Mr. Chairman, the value of your recent efforts in meeting with the chairman of the House Ways and Means Subcommittee on Health and your discussions which led to real progress toward our mutual goal of authorizing Medicare reimbursement for services provided to certain Medicare-eligible veterans.
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    I acknowledge the strong bipartisan support of this committee for the proposed Medicare reimbursement concept. Your active support was clearly demonstrated on May 21 when this committee overwhelmingly approved legislation to authorize a pilot program.
    On behalf of all of us who work for veterans and their families and on behalf of veterans and their families, I want to thank you publicly for your hard work in this area.
    We still need your help. It is our hope to collect Medicare reimbursement for higher-income, nonservice-connected veterans who choose Veterans Affairs' health care. We seek your continued strong support of a demonstration project to test the feasibility of this proposal. Medicare reimbursements are critical to our baseline funding strategy for medical care.
    I think Dr. Kizer sort of lives and dreams this all the time. It is a part of his everyday concerns and we owe it to him to support that effort.
    There are initiatives in this budget, Mr. Chairman and members of this committee. We will be requesting authorization of a new smoking cessation program for any honorably discharged veteran who began smoking in the military. The proposed request is some $87 million to establish the effort.
    Our budget also proposes to increase the Montgomery GI Bill education benefits by some 20 percent. It is my belief that this is an increase, a long-awaited increase, that is greater than any since the inception of the program, some $191 million in 1999. This would raise the active duty benefit to more than $500 per month in 1999 for full-time enrollment. The 5-year cost of this proposal is estimated to be $1 billion.
    We are proposing a $100 million increase in the department's readjustment benefits accounts to reimburse the Department of Labor for its programs of assistance to veterans in finding employment. And this budget includes funding and personnel to continue the activation of the four new cemeteries of the National Cemetery System over the next 2 years, those cemeteries to be located in Chicago and Dallas and Saratoga, NY and in Cleveland, OH.
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    In summary, Mr. Chairman and members of the committee, this is a sound budget. It is a budget that is realistic. And it is a budget that puts our veterans and their families first, even in the context of an environment in which the President has proposed the first balanced budget in a generation.
    Our job, Mr. Chairman, in this department is that we be part of the Administration's program but to keep foremost in our minds and our planning that we are here to serve veterans, that we are here to do right by those who have done right by the country.
    When the President announced my nomination some 2 months ago, or his intent to nominate me, he referred to a comment that he said I made in a speech at West Point more than 5 years ago in which I said to the cadets, ''You teach the life you live.''
    Well, those are not my words. Those are the words of my father, a public school teacher. He did indeed say that to teachers. Our veterans have taught us in America much by the lives they have lived, whether it has been a lifetime of service or a brief moment. And we in this department and this committee can teach them something about America's gratitude and America's desire to support them in the time of their need.
    Thank you for this opportunity, Mr. Chairman. We are available for your questions.
    [The prepared statement of Secretary West appears on p. 83.]

    The CHAIRMAN. Mr. Secretary, thank you for those comments. I know we are pleased with some of the increases in the various areas.
    I would like to take this opportunity to commend Dr. Kizer and his staff and give credit to Bill Thomas and his staff, as well as all the work that this committee staff did, in coming to a conclusion on Medicare subvention. We are in the process of preparing a bill and Dr. Kizer, we thank you very much for your help and your input. Without the two of you it would not have been possible.
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    And for the information of the members, we will have a bill shortly. You all will have an opportunity to cosponsor that.
    The Chair recognizes Mr. Bilirakis.

    Mr. BILIRAKIS. Thank you, Mr. Chairman.
    Mr. Secretary, you have a tough job and I think we all recognize that. I guess I congratulate you, maybe a little sympathy along with that, on your elevation to this position.
    Most of the people on this committee have requested to get on this committee because they care about veterans in general. Obviously that is our concern but, of course, we also have our parochial concerns.
    I would like to hit maybe one of those that probably will not come as too much of a surprise to Dr. Kizer, maybe not to you, either. This concern is the Spinal Cord Injury Center in Tampa. The VA has been planning to expand that facility for 20 years. And I might add that that particular facility and the health care center is not directly in my congressional district. Obviously many of my veterans use it, so I say parochial and yet, it is not as parochial as it might be.
    But Tampa and Miami are the only SCI facilities in the State of Florida. There are 36 beds in Miami, 70 beds in Tampa, a total of 106 beds for this very populated State. In fact, even the 70 beds in Tampa were not originally designed for the unique needs of SCI patients.
    Now I see the first phase has been completed for that particular center. We are talking about an awful lot of lost dollars gone down the drain and not ever completing this project because you have not included the second phase of the project in your budget. I wonder if someone might comment regarding that.
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    Dr. KIZER. That particular project, as all projects, have been looked at very carefully, particularly in light of the dramatic changes that have been occurring throughout the system. I think it is safe to say we have taken a very different and fresh look at construction of all types and that is reflected in the budget process.
    Mr. Catlett may want to respond further as far as this specific capital project, but I think this re-look is appropriate in an environment where, in the last 3 years, we have closed 43 percent of all of our acute care beds and have accomplished some other very dramatic changes in the system. We must take a long view of any capital outlay to see if it is indeed what we need or if there may be some alternative mechanism that would achieve the same goal of taking care of patients with better or more frugal use of taxpayer dollars.
    Mr. BILIRAKIS. But Doctor, you are talking about acute beds which, of course, is a general term, including all sorts of illnesses. I mean, we are talking about unique needs here. You can't put it in the category of taking a look at all the acute beds across the country.
    I just really wonder, and I am not going to take up the committee's time in this regard, but I sure would like to hear what other projects have been given higher priority than the completion of this SCI unit.
    You know, I am very disappointed, quite frankly. We are talking about a waste of money here. We are not talking about spending additional money. We are talking about a waste of money, money that has gone down the drain if we don't complete this project.
    And I might add, as I said before, it is not in my congressional district. It is in the congressional district of a gentleman whose party is different than mine.
    Secretary WEST. Let me make sure I understand. It is your belief that we are not completing that project, Congressman?
    Mr. BILIRAKIS. It is not in the budget. How could you be completing the project if it is not in the budget?
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    Secretary WEST. I think we may need to give you an answer for the record. I am not sure that my understanding is the same as the one you have, sir.
    Mr. BILIRAKIS. Well, I may have hit you cold and I appreciate that. We have studied it. Maybe you haven't had a chance to look at it but hopefully your answer will be that we do plan to complete the project and that the money is in the budget.
    How can we get together on that?
    Secretary WEST. What I'm told is what is not there is any further construction funds because that is not needed. My impression is that does not mean that there are not plans to complete that center and to provide health care in that location.
    But there are three of us sitting here. We are all talking amongst ourselves. Why don't we give you our coordinated answer, sir?
    Mr. BILIRAKIS. Okay, how can we do that?
    Secretary WEST. We will give you the answer for the record, if we might.
    Mr. BILIRAKIS. Right now, you mean?
    Secretary WEST. We will provide it to you afterwards, sir, this afternoon.
    Mr. BILIRAKIS. Thank you, Mr. Chairman.
    The CHAIRMAN. The gentleman from California, Mr. Filner.

    Mr. FILNER. Thank you, Mr. Chairman, and welcome, Mr. Secretary. We appreciate your being here and look forward to working with you.
    I want to associate myself with the remarks of our Chairman and our ranking member in their opening statements, where they both pointed out the increase of the GI Bill funds that are in the budget. Although I don't think they have come up to inflation since last dealt with, at least it is a significant increase.
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    I also want to associate myself with their remarks, which you did not address in your statement, Mr. Secretary, that I don't think any of us so far have agreed with the fact that the funding for these new initiatives come out of a measure that would deny compensation for tobacco-related disabilities.
    I think it is safe to say, and our committee staff has studied this very carefully, that the Federal Government for over a century has contributed to the nicotine addiction of some members of our armed forces. We are going to be looking at that legislative proposal in some detail, but I want to urge my colleagues to very carefully consider the consequences of repealing a benefit for service-connected disabled veterans just because OMB says the cost of meeting this obligation is too high.
    If we are willing to break faith on this issue now, what obligation will we be willing to duck in the future?
    Now, I have, with Mr. Evans, asked the VA to look into the fact of getting involved in the tobacco negotiations that are on-going and say rather than duck the issue of VA obligation, participate in those tobacco discussions and get some money for the VA. I want to ask you specifically about that issue because we wrote a letter to Mr. Gober when he was acting secretary and have never received an answer.
    Let me first ask you, because you did not address it at all, as I heard it, in your statement and as I looked at your testimony, the budget that you have submitted assumes a savings from that legislation, which I do not favor, of $741 million roughly. What happens if that legislation doesn't pass? Are the COLA increases, are the GI Bill, are the other things that I notice in the budget under that category, are they all sacrificed if that legislation does not pass?
    You have, under proposed legislation, COLA increases, readjustment benefits, medical programs, veterans' insurance. All those look to be, in the way I read the budget, dependent on us passing that legislation saving $741 million. Is that the case?
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    Secretary WEST. No. There are some initiatives in our proposed budget that will be funded, I think one or two, but the bulk of our initiatives are not funded by the savings. They are funded by the budget.
    Let me just let Mark Catlett run down exactly the sources. But no, that is not a correct assumption. Mark?
    Mr. FILNER. The way the budget tables are presented, they are in the same category, so they appear to be linked.
    Mr. CATLETT. The one proposal specifically linked to the tobacco savings is the 20 percent increase for the GI Bill monthly payment, as well as the $100 million transfer payment to the Department of Labor. Most importantly, the——
    Mr. FILNER. So you link the GI Bill 20 percent increase, which is way overdue, to the tobacco savings?
    Mr. CATLETT. As you know, that is a PAYGO requirement. If you are going to propose an increase, there has to be an offsetting savings.
    You mentioned the COLAs. I wanted to get to that point. The COLAs for the compensation do not require PAYGO offset, so they are regularly there every year. So they are not affected or related to this.
    The only other large item that we have, then, is this proposal to significantly expand education benefits, and that would require PAYGO offset. Obviously that extra $1.5 billion over 5 years can come from the $17 billion savings over 5 years projected with the proposal for tobacco.
    Mr. FILNER. I find that very disturbing. In addition, even if that legislation passed, and I understand from Administration officials that when Mr. Gober was the acting secretary, they wanted to take all that savings and take it out of the VA and he managed, as I understand, to preserve most of it. But still, $73 million, to me, adds insult to injury. That is, not only is this legislation proposed but not even all the savings are given back to the VA. Is that correct? Am I reading the budget accurately?
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    Secretary WEST. That reading is correct. Yes, sir.
    Mr. FILNER. I find that more insulting than the injury that was already produced.
    Lastly, if I may, Mr. Chairman, Mr. Evans and I sent a letter to Mr. Gober, as Acting Secretary, about an idea of not asking for this legislation but getting the money out of the tobacco settlement. We never had an answer to that. If it is a lousy idea, someone should tell us. If it is a good idea, respond to it. But not to answer, what we considered a very serious proposal, seems to me not the way to deal with us. Can you go into that?
    Secretary WEST. We will see that you get an answer. I think the delay was not intended to minimize either the idea or the significance of the concern. It was simply an effort for us to make sure we understood exactly what we were working with within the department and, sir, within the Administration.
    Mr. FILNER. Well, is there any intent to try to inject this issue into those tobacco discussions?
    Secretary WEST. I think the Administration's position is set now and we are going to have to march in accord with that.
    Mr. FILNER. So the answer is no, that you don't intend to do that?
    Secretary WEST. Why don't we get you your letter? But for the moment, I believe the position is set as to how that is going to be done.
    Mr. FILNER. I think, Mr. Chairman, that we ought to look at that as it comes to Congress. Rather than pass this legislation that takes away the department's obligation, in my view, to deal with service-connected disability benefits, that we insist that some of this money on the table go to the VA to pay just for that and not allow our servicemen who need a GI Bill adjustment and some of these other things to go down the tubes just because that legislation may not pass.
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    The CHAIRMAN. Thank you, Mr. Filner.
    The Chair recognizes Mr. Everett.

    Mr. EVERETT. Thank you, Mr. Chairman.
    Mr. Secretary, it is a pleasure to see you here today, along with your panel. I am very familiar with them. They are a very talented group of folks and I think it is obvious to me, along with Mr. Gober as well as you, they have the best interest of the veterans at heart. And not only that we have adequate funding for our veterans' programs but that we spend that money well. And I appreciate the past relationship I have had in working with them, where we have worked through some very tough issues.
    I also would like to associate myself with much of the opening statements by the Chairman and by the ranking member.
    Let me get directly to the Y2K problem. How much is in the VA budget for fiscal year 1999 to deal with this challenge? And have you personally been briefed on the consequences of what will happen if we don't win this battle?
    Secretary WEST. Let me ask the assistant secretary for management to give you the number and then I will answer the second part of that, if I may, sir.
    Mr. EVERETT. Certainly.
    Mr. CATLETT. Mr. Everett, we have, in round numbers, $50 million in the 1999 budget for the Y2K problem, as we call it now, which excludes the bio medical equipment estimate. The next progress report we will be making to OMB is our quarterly report due on February 15 and you will receive that within a day or two of that delivery and we will be informing you then I think of good progress, as we have been making over the last three quarterly reports.
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    We obviously expect still to find problems as we move through this but our estimate has not changed significantly in terms of the cost.
    And, most importantly, a specific concern of yours and of the Administration is completing the assessment of the potential problem in our health care system. That was done. The report has been delivered to OMB and you will be receiving that again within this next 2-week period.
    Mr. EVERETT. Let me ask you, are we confident the VA will finish that this year so that we can have a year to test the program before we get to the year 2000?
    Mr. CATLETT. Yes, sir. And, as you are probably aware, the OMB has moved the schedule forward, requiring us to complete those renovations and all the work so that we have that year of testing begun earlier than 1999. We think this report we will submit will demonstrate that we are going to meet that new schedule.
    Secretary WEST. Mr. Everett, the second part of your question was whether I had been briefed. I have received some briefings. I have more to receive.
    Since I have come on duty, each of us who heads a cabinet agency and the other agencies have been warned by the director of OMB that we have to take personal responsibility for what is happening in our department and be personally involved.
    I am happy to note that before I arrived, Deputy Secretary Gober was doing just that. He has proclaimed himself as the spearhead, as the czar, if you will. I will take on that role, as well.
    And yes, it is not hard to imagine the things that will happen if we don't make sure we do this right—the checks that won't go out, the many disasters that could occur.
    At this point, the assessment I have received is the one you heard from Mark, but we are not assuming anything. In fact, we are assuming just the opposite, that at every moment there is another possibility that there is something we haven't found that may not be going as well as we think it is.
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    Mr. EVERETT. Along the same lines, Mr. Secretary, is the computer modernization efforts. Has the department made a decision to have a dedicated CIO to head up this extremely important initiative?
    Secretary WEST. You are asking if we have made a decision on whether to have a——
    Mr. EVERETT. CIO, chief information officer.
    Secretary WEST. And you mean separate from other duties?
    Mr. EVERETT. That is right.
    Secretary WEST. I was warned of that when I arrived, Mr. Chairman, that the issue was pending, that I would have to make that decision. I will tell you that I have not had my briefing on that, but my inclination is there should be a separate dedicated CIO.
    Mr. EVERETT. Is the VA in compliance with the Clinger-Cohen Act?
    Secretary WEST. Which requires—I know the Clinger-Cohen Act because I worked until quite recently for one of the authors of the bill, but did you have a particular part in mind, Mr. Chairman, or just——
    Mr. EVERETT. With the appointment of these different officers. For instance, the CFO.
    Secretary WEST. I think the department thinks it is in compliance. But, in any event, if your interpretation is that the Act requires a separate person who is not doing other duties, we soon will have such a person.
    Mr. EVERETT. How about chief financial officer?
    Secretary WEST. The same. That is what the debate in the department is, is it not, that at the present they are the same person and that he is seated here to my left?
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    Mr. EVERETT. That is right.
    Secretary WEST. I am aware of the issue, sir, and we intend to address it.
    Mr. EVERETT. I mentioned earlier you had a very talented panel there. I am just not sure how talented they are, how many hats they can wear. That is the reason I asked the question.
    Secretary WEST. We intend to address it right away. If you wish, I will give you an even clearer answer in the record that says exactly what we have done.

    (The information follows:)
    We are actively considering the separation of the Chief Information Officer (CIO). We have begun a review of the current organization and are in the process of considering various options for the future of the CIO organization.

    Mr. EVERETT. Certainly.
    Mr. Chairman, I have additional questions for the record. Thank you, Mr. Secretary.
    (See p. 185.)

    The CHAIRMAN. The gentleman from Illinois, Mr. Gutierrez, is recognized.

    Mr. GUTIERREZ. Thank you very much.
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    Welcome, Mr. Secretary.
    Secretary WEST. Thank you, sir.
    Mr. GUTIERREZ. I would like to raise two issues. They have been raised before but I think they are very, very important.
    Number one, last year when we sat here to review the budget it was said that third-party income to the VA would be able to cover a wide array of funding. In the judgment and, in retrospect, in the wisdom of this committee, we did not allow the budget to stay the same and we allocated some $475 million to make sure there was no shortfall; indeed, dollars that came to be used.
    This year there is about $677 million which you expect to collect. If there was a 9 percent shortfall and I know that on February 15 we are going to have another report, I am just really concerned that once again we are going to go into a fiscal year saying this is what we project and if we do not get the money, what is it that we are going to do as a department?
    So maybe we could speak a little bit more about the accuracy of the $677 million, just how assured everybody feels, given the past and given the future, about that funding cycle.
    And secondly, amongst many other questions is the whole proposal to deny compensation for tobacco-related disabilities. I am open to a discussion of the merits of this proposal but I am not sure how, in fact, tobacco-related disabilities are going to be defined as it relates to veterans those that have them already.
    And it seems to me that the Department of Veterans Affairs would not want to be headed in the opposite direction of attorneys general of the States across this country, from Texas to Florida, who are suing the tobacco industry for compensation and reimbursement for tobacco-related health care provisions, that the Federal Government had to provide, by the way, under Medicaid and Medicare and that in the Veterans Department they are saying, well, we are kind of headed in the opposite direction while everybody else is looking for money and ensuring that money is there for their populations. I think that would be really tragic to see something like that. Even the airline flight attendants all got together and sued the airlines, said we had to be here on these airlines together.
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    So if you could just address those two issues as broadly and as specifically as you could this morning. Thank you very much.
    Secretary WEST. Congressman, let me take the second one first. Because I don't know that much about it, my answer should be a brief one.
    I am new to the job—3 weeks. I think one of the reasons that I am here on the panel is so that the two people sitting next to me can hold me down if I wander too far out. But it doesn't seem to me that it is fair to say that either the proposal or the attitude of the Administration or the attitude of this department is that we won't compensate veterans for tobacco-related illnesses.
    I think the proposal has to do with the assumption that if you smoked on active duty and years later have an illness that can be attributable to nicotine usage, that you don't have to make the connection that we make in all other cases. Now, if I am wrong, these guys are going to speak in a minute anyway and they are going to clear it up, but that is my belief.
    The legislation will simply require that a smoking-related illness manifest itself while in service for the veteran to receive compensation. I don't think that is unreasonable. I don't think that is uncaring about our veterans. And I don't think that is ignoring the ravages of tobacco-induced illnesses.
    I think that every one of us cares about what happens to our veterans, especially in this touchy area. I am from a tobacco State. I grew up in Winston-Salem, NC. My parents smoked all their lives. I care about that as much as you do. I think we are simply trying our best to work our way through a clear and logical understanding of this and to compensate accordingly.
    You asked the first question but just on the off-chance that I have stated it wrong, I would like Dr. Kizer——
    Dr. KIZER. I only would say that this whole issue of tobacco is a very complex one. I can recall being asked to testify before Congress a decade ago, long before any attorney general had discovered the issue and long before it was a Federal Government issue, about things that the State of California was doing to try to address the problem.
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    So having been involved in this matter for well over a decade, I can say that there are a whole lot of issues attendant to it. I think many of them go to public policy choices and that is what is trying to be sorted out by this legislation.
    The issue of whether nicotine creates dependence and causes diseases is really not a question. Those things are well established. The issue here has more to do with what should be the public policy regarding the role of society's mores in general versus the specific role of the military. I think I will leave it at that for now.
    Secretary WEST. On the specific question of whether I have stated the proposal correctly, Joe, can you——
    Mr. THOMPSON. Concerning paying disability compensation for tobacco-related illnesses, the position is that the use of tobacco is a personal choice and that it is not the responsibility of the United States government to compensate veterans for that.
    But probably most importantly, the disability compensation program enjoys tremendous public support. Paying tobacco claims, we believe, would begin to erode that public support for what is really the cornerstone of the benefits program, taking care of people who got hurt as a result of service, direct result of service. The position is to not service-connect for diseases arising from tobacco usage.
    Mr. GUTIERREZ. Mr. Chairman, I just think that we are going to need to investigate and look at this a whole lot more before we reach that decision because if the Army and the Navy and our armed forces are going to basically give cigarettes away to our members of the armed forces, as they did for decades at one place and another, I think we have to remember that there is some kind of responsibility. And that is just one point of many that we could look at.
    Also there is the fact that your own legal team at the VA has found that they should be compensated and what are we going to do?
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    So it is a broad issue. It is one that I think we need to really, really, really look at carefully, very carefully, because when our men and women were out there and they were paying 10 cents a pack and we were saying, ''Here, here it is for you'' while they were in the Army because, of course, if they were not in the Army or Navy, they aren't getting it for 10 cents a pack, I think we have to have some kind of relationship with that cut-rate deal we were offering them as members of our armed forces.
    That is my only point right now. There are many, many more things.
    Thank you, Mr. Chairman. Mr. Chairman, I'm going to ask to be excused. I have to go with Mr. Kennedy. We have a Banking Committee markup as we speak. Thank you.
    [The prepared statement of Congressman Gutierrez appears on p. 78.]

    The CHAIRMAN. The gentleman from Texas, Mr. Reyes.

    Mr. REYES. Thank you, Mr. Chairman. I do have a statement for the record.
    The CHAIRMAN. Absolutely.
    [The prepared statement of Congressman Reyes appears on p. 81.]

    Mr. REYES. In the interest of time I want to first of all associate myself with the comments of my colleagues. I also want to welcome you, Secretary West. I know that based on past performance and knowing your dedication to the armed forces and its veterans, we can look for a tenure that will take care of a lot of the concerns that we have as a committee and that we all have really as Americans.
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    I would like to follow up on an issue that is very important in my district. Very briefly, I want to make sure that we get some sense of your perspective on it. That is again the fact that we have only collected an estimated 20 percent of the anticipated $677 million from third-party insurance.
    I mention that because in my district there is a lot of concern about our ability, as the veterans population ages, our ability to keep pace with it. And while we are opening up 71 outpatient clinics and forecasting the treatment of 134,000 more veterans, the way the budget submission has been analyzed by members of our staff here leads some of us to raise some concerns about that. So if you could comment on that, I would really appreciate that.
    Secretary WEST. First, let me make sure I understand the numbers you just used, Congressman. You said only what percent?
    Mr. REYES. According to information we received yesterday of the projected amount from third-party for the last budget cycle, only about 20 percent has been collected. And the concern here is that if we are relying on the collection of $677 million to offset some of this medical cost, then if we don't realize that number, then we want to make sure that there is a plan B.
    Dr. KIZER. I am not sure what is the genesis of the 20 percent that you quote. At the end of the first quarter of fiscal year 1998 we had collected, as I recall, $118 million out of a projected $127 million, so the discrepancy was about 7 percent. I am not sure that in any health care bill collection system the collections at the end of the first quarter of the year can be extrapolated too far because of lag times in bill payment and a number of other things.
    At the end the last fiscal year, as I recall, we had projected collections of $540 million, we had actually collected $528 million. That equates to about a 2 percent discrepancy between actual and projected.
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    The other point I would make is that there are a number of initiatives under way to enhance our collections. There's about a dozen different components and something that has been somewhat euphemistically referred to as our ''ICU approach,'' which refers to better identification of the insurance; better setting of rates, addressing receivables, other steps related to collections; and better utilization management.
    There are a number of different things related to how we can better collect receivables. For example, should the Congress authorize our proposed Medicare subvention project, there are a number of dollars that would accrue simply from billing the co-insurance that Medicare beneficiaries often have. Currently since we are not authorized to collect from Medicare, we also cannot collect from the co-insurance that Medicare beneficiaries often have.
    We would be happy to provide you with more detail about the specifics of the initiatives that are under way. At this point we believe we will hit the end of the year on target, and I am hopeful that we may actually exceed that target.

    (Subsequently, the Department of Veterans Affairs provided the following information:)

Offset folios 1 to 3 insert here
Makes pp. 17 to 19

    Mr. REYES. Okay. I appreciate that and we will follow up with you on that.
    Secretary WEST. Might I just say that I have heard now two or three expressions of reservations as to whether these efforts in this way of financing, how we are going to deliver health care, can really work or whether we are putting veterans at risk or taking a gamble.
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    What I have seen in the few weeks that I have been here is a department that has made an effort to take the problem—the perennial problem of how to finance health care and assure a future for it—by the throat and try to yank it into a position where we have some assurance that we can see what is out there in the future.
    It is an effort to make an assessment, quite frankly, as to whether we are likely to be more successful getting funding from these efforts or funding simply from reliance on increasing appropriations. I think it is a hard-headed effort to do what is best for our veterans.
    I think it is too early to say that this cannot work because every indication we are getting is that Dr. Kizer's projections and the projections of the Veterans Health Administration are not outrageous. Oh, they are a challenge, but we will never achieve any breakthroughs for our veterans if we are not willing to take on challenges.
    Yes, they are a different way of doing business, but we cannot get improvements from them if we keep the same old ways that have not gotten us the kinds of assurances for the future and the kinds of quality we want.
    I think there is every indication that this is going to work. I think we have to have the intestinal fortitude to stay the course over this 5-year period.
    The CHAIRMAN. The gentleman from Arkansas, Dr. Snyder, is recognized.

    Mr. SNYDER. Thank you, Mr. Chairman.
    First of all, a couple of comments. First of all, Mr. Chairman, you gave some praise a while ago to those who have been working on the Medicare subvention. I know that you have done a lot of work on that issue, too. In fact, you had some dark days for a while there a few months ago when you weren't sure you were going to get there, but we all appreciate the work that you have done.
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    I want to make a comment as a family doctor that trained both in the VA hospital in Portland, OR and in Little Rock, AR. I appreciate your staying focussed on the importance of the VA facilities to research. This Congress, in a bipartisan manner, I think, in several areas of the budget, not just in the Veterans budget, have been very supportive of research and I think will again hopefully this next session. But I think that a lot of Americans just don't realize how much research that they benefit from on a daily basis comes out of the VA system.
    I guess I would say by way of comment that I hope that your increase was adequate for what you all want to do and perhaps could do, because there may be some support here in the Congress.
    With regard to the tobacco issue I just want to talk about the suit. Personally, I don't think you are ever going to get a piece of that settlement. That is a Medicaid settlement, I think, essentially, but I may be wrong on that.
    But the issue, it seems to me, one of the concerns I have about the whole tobacco settlement is I hear there is a viewpoint out there that says one of the reasons the tobacco companies want to settle this thing is because the real dollars would come from the military and the veterans. If you all ever got coordinated and decided to sue the tobacco companies, given the history and the interrelationship between tobacco companies, there would be a huge chunk of money out there.
    So it makes me apprehensive to hear you even talk about, ''Well, let's just get a piece of the settlement.'' There may be some real dollars out there. For example, and I have no evidence of this at all but let's suppose that what we thought was a show of courtesy by the tobacco companies through the literally 50 or 60 years of helping with cigarettes, giving little packs in the C-rations when they were dispersed around the world, that it turned out we found memos that said, ''Oh, this will be a great way to addict our 17-, 18- and 19-year-olds for our future markets.'' Maybe our attitude about how benevolent an act this was by our friends in the tobacco industry—you know, there may be those kinds of issues sitting out there and it concerns me that perhaps we are not taking up the option of looking at those kinds of revenue sources because, as somebody who has worked in those VA systems, as you know, there is a tremendous amount of tobacco-related illness that you all deal with.
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    A question I wanted to ask, with regard to the year 2000, you have a 7 percent increase in your Veterans Benefits Administration and you talk about increasing smooth delivery. Where is the 7 percent from? Is part of that the year 2000 money? Is the bulk of that money the year 2000 problem?
    Secretary WEST. Let me let our Under Secretary for Benefits answer that.
    Mr. THOMPSON. No. In fact, the majority is in operating expenses for the regional offices. There is a small increase for the Year 2000 but right now the budget for that, we feel, is adequate.
    Mr. SNYDER. And with regard to the third-party payments, isn't the posture of the law still currently that those third-party collections go into the total VA budget? What are your current thoughts about should this stay at the facility that collects them? What is the status of that?
    Dr. KIZER. The collections go into the Medical Care Collection Fund, and collections from each VISN are returned to that VISN for use. This is one of the incentivizing efforts that we have under way at the network level to increase the receipts that they generate. The trade-off, or the balance, is some equity across the system. Certainly in a system where there is a considerable flow of patients across the entire country, and that balance is a challenge, but what we are trying to achieve.
    Mr. SNYDER. Is that something that you all have the authority to do, anyway? That is not something you need from Congress. That is a decision you all are going to make; is that correct?
    Secretary WEST. As to?
    Mr. SNYDER. Making a decision. Let's suppose you decide to let them keep the money at the site where they collect it.
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    Secretary WEST. As long as it is spent within that administration.
    Dr. KIZER. It's my understanding that we have that authority, since the Medical Care Collection Fund has been authorized and is now established in law.
    Secretary WEST. It was effective last fall but that money is not available for other departmental uses. It is solely within the Health Care Administration.
    Mr. SNYDER. We are several months into this fiscal year. With regard to the 30–20–10 goals that we heard discussed here a year about, or I did here as a member for the first time, can we anticipate that this time next year we will be able to discuss, okay, we started out headed for 30–20–10; we are now at 27.2, 18.6 and 7.3? I mean, is this something that you all are going to track that closely, that we are throwing that out there as a goal?
    Secretary WEST. Well, we are tracking it closely but I think you should hear the answers of Dr. Kizer and then of Mr. Catlett on that.
    Dr. KIZER. I would only say those are the discussions I am having with the network directors because they are being held to accountable to achieving certain targets, so I would certainly be more than happy to have the same discussion with you.
    Mr. SNYDER. We do have the ability to count how we are doing on cutting costs, increasing patients.
    Dr. KIZER. In the aggregate. One of the problems, and one of things we have discussed before this committee in the past, is trying to apportion exactly how much came from here and how much from there. That gets very difficult because there are so many things going on at the same time. That is why we are looking at the global cost; that is the figure that we expect to be tracking and discussing with our facility and network management.
    Mr. SNYDER. Thank you, Mr. Chairman.
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    Secretary WEST. Mr. Chairman, if I may, I would like to be clear for the committee in response to your question, Congressman. The determination that we will meet these goals is a serious one. It is one which Dr. Kizer is going to push.      We are not, however, looking at this process through rose-colored glasses. We are watching realistically the numbers as they fall and looking at the projections. That is why I mentioned that Mark and his office are following them very carefully. Where we see signs that we have to watch as to whether we are getting there, we are taking note of them. We openly discussed those issues with your staff yesterday or the day before and we are happy to discuss them with you.
    Mr. SNYDER. I understand.
    Secretary WEST. The determination is there but also we are realistically appraising it as we go along.
    Mr. SNYDER. And part of that realism is the Congress has a role in that, too. The Medicare subvention is the most striking example.
    Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Rodriguez is recognized.

    Mr. RODRIGUEZ. Thank you, Mr. Chairman.
    Secretary West, let me first of all indicate congratulations and let me let you know that we have high expectations of your abilities and hopefully you will be able to walk on water, too.
    Let me just share three areas of concern. I am happy with some of the things that you have been doing and some of the directions and I know that you have just come in, but I think we have a real serious situation out in the field. I had 17 town hall meetings in August. I know Chairman Evans attended with me and he got to hear some of the testimony and I was very pleased that I was able to get some of your leadership down there so they could hear some of the concerns of some of the constituents.
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    I want to ask you, I have been a case worker in mental health for about 10 years myself so I want to ask you to please look at that situation in terms of casework because I know the first thing they told me, ''Well, you have a 1/800 number.'' I want to ask you to please call it yourself and don't identify yourself and see what kind of response you get, because it took me more than a couple of days to get through.
    Then I know you have been told that you moved into a better system that did away with the casework. Well, I have ten people that work in the district; seven of them are doing direct casework and a lot of them are doing some of the work that should be done by the Veterans Department instead of the work that is done by some of the workers that work for us.
    So I think that that area needs some real serious look at it and I want you to hopefully later on provide some feedback and maybe getting rid of some of the paperwork that is there because I know a lot of the veterans and workers that are working and responding are burned out and there is a real serious need and I have some documentation. I have asked down there for some kind of investigation in terms of the whole process. I know that they are overworked in some cases but I think that you really need to kind of look at that.
    Secondly, the second concern that I have deals with benefits. I have been told, and you correct me if I'm wrong, that about 90 percent of your resources go directly to universities in terms of providing. A lot of the veterans out there would like to get some kind of voc-ed training in terms of plumbing, electrician and that kind of work. Somehow resources don't go in that direction in terms of voc-ed and maybe later on you can provide me some data on that and maybe we can see how we can provide some access to some of those veterans that might want to go into plumbing or some of the other areas.
    The third area of concern that I have deals with third-party reimbursements. It is my understanding that the way you have it structured now, as you get those resources, that they are going to go to the region or beyond the region.
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    Well, I represent the border in Texas. We have one county that has a city of 2,000 and it jumps to about 5,000 because we get a lot of winterbirds or snowbirds. They come in and a lot of them are veterans. We get them all throughout the valley and I am sure that Florida gets them and the other southern States also get them. But there is a disproportionate number of veterans in those areas. And those monies are not following those veterans the way they should.
    And I do want to congratulate you for the move to push and get more clinics because we definitely need them but there's still a need. And I want to get some clarification. When you pick up those third-party reimbursements, where is that money going to be headed? Is it going to leave my region and go further north and go to the bureaucratic cities up there?
    I know you have some bureaucrats with you today but there is a real serious need. If you look in terms of expansion, I would ask you to seriously look at providing those resources directly to those people that have direct contact with veterans out there. And I think that that's so important because if not, then I want to invite you to come to one of my town hall meetings so you can hear it directly. Thank you very much.
    Secretary WEST. Yes, sir. On the third-party reimbursements, I have an answer for you but I have someone chomping at the bit to answer on my right here, so I am going to let Dr. Kizer say something. Then I'm going to jump back in.
    Dr. KIZER. I would make two points, in brief. Under the VERA allocation methodology, the issue of the snowbirds is addressed. There is a transfer pricing mechanism. Depending on how much time or how much care an individual receives in one part of the country, versus the other, an adjustment is made.
    When I responded to Mr. Reyes, that was the point I was making, i.e., the exact one that you raised. The decision as to where those third-party funds go, whether they go to the site where care is received when an individual may be also receiving care elsewhere in the country requires that we strike the right balance between network allocation versus a specific facility allocation. What we are trying to do is gain enough experience with the actual receipt so we can make an informed decision in that regard.
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    But your point is exactly the one that I was trying to make to Mr. Reyes that it is not simply that they all go here or they all go there. We have to strike a balance because our population is mobile and often receives care at multiple sites and in multiple States over the course of a year.
    Secretary WEST. I think the bottom line is our intent to meet precisely the problem that you raised and if we are not doing it then we need to work with it more because the whole transformation is, at least in part, an effort to deal with that.
    I accept your invitation for the town hall. We will have to figure out when you are going to do it. I have a scheduler somewhere cringing that I give these sort of assurances without bothering to look at a calendar but the point you make is correct.
    The fact is not only do I not walk on water; I don't even do well on land. I stumble a lot. I need a little help to be picked up. One of the ways to get the help is to go out and listen, so I will be there.
    Mr. THOMPSON. Your concerns about claims and the amount of time it takes to do them and how much work is sitting out there, particularly in the State of Texas, is a concern of mine, also. We have a lot of work; it takes us too long to do it and the quality is not acceptable.
    I am pleased that the proposal for fiscal year 1999 will give us a little bit of breathing room in the budget because we have been declining in resources over the last few years.
    Your concerns about vocational rehabilitation I also share. We are in the process of looking at the program to see if, in fact, we divert veterans into training, particularly college training, without considering other options that may be in their best interest, such as vocational options. We are in the process of looking at that, as well.
    The CHAIRMAN. The gentleman from Pennsylvania, Mr. Mascara.
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    Mr. MASCARA. Thank you very much, Mr. Chairman.
    Welcome, Mr. Secretary. I compliment you on your choice of bureaucrats. They are excellent, excellent.
    First of all, Mr. Chairman, I have an opening statement I would like to place in the record.
    The CHAIRMAN. Certainly.
    [The prepared statement of Congressman Mascara appears on p. 82.]

    Mr. MASCARA. And secondly, since there seems to be unanimity in associating our remarks with the Chairman and the ranking member, in a true spirit of bipartisanship, I would also like to associate myself with those remarks.
    The CHAIRMAN. Thank you.
    Mr. MASCARA. First, there have been several questions about the possibility of not receiving the kinds of revenues that we can expect from third-party payments and also to disallow compensation benefits for tobacco-related disabilities.
    From what I have read, and I had difficulty sleeping last night so I read some of this, I first of all wanted to talk about the $677 million, or about $700 million in third-party payments. You said earlier, Dr. Kizer, that we received all but 2 percent of the anticipated revenues in the last fiscal year. Is that correct?
    Dr. KIZER. That is correct.
    Mr. MASCARA. So we do not expect, then, any huge difference between the last fiscal year and this fiscal year and we should collect about the same, so we shouldn't be concerned about where we will make up those revenues should we have a shortfall?
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    Dr. KIZER. Well, I would never go so far as to say you shouldn't be concerned because I know that would be unrealistic. We are certainly concerned, but I also am optimistic that we will achieve that target. Indeed, I think there is some chance we may even exceed it if we are successful with the various initiatives that are under way, and if we get authorizing legislation from Congress and some other things.
    Mr. MASCARA. And should we pass the bill, and I want to go on the other side with the compensation for benefits for tobacco. In the 1999 fiscal year we are talking about $741 million of the $17 billion in savings over 5 years? Is it the likelihood again then, if this should pass, that that number is a pretty safe number that we can anticipate? And if not, where will we make it up?
    Dr. KIZER. Again those projections are predicated on the best estimates and the best information that we have at this point. All of those numbers I think have to be viewed in the light that as circumstances change, as the world changes, they may need refinement. We think they are the best numbers that we can present at this time. We are also optimistic that we will achieve those.
     I think it is perhaps worthwhile, if I recall Mr. Evans' comments earlier, just to put this in some perspective. This year, those numbers relate to about 4 percent of our total medical care operational budget, and by the year 2002 they will be only about 10 percent of the total operating budget.
    Mr. MASCARA. Of the $17.7 billion that the Secretary spoke of earlier in medical care?
    Dr. KIZER. That is correct.
    Mr. MASCARA. So my question is, and I was sort of leading up to the question when I was talking about third-party payments, as the VA seeks to become the health care provider for higher-income veterans, who already have provider options, the GAO has suggested the VA is not meeting the needs of some low-income and disabled veterans. How do you respond to this concern?
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    As the VA seems to become a competitive health care provider, is the VA still first and foremost a provider of health care to service-connected and low-income veterans who lack alternative health care resources?
    Dr. KIZER. Absolutely. Three points I would make in response.
    One is that under the VERA resource allocation methodology, funding is apportioned only for those category A veterans—i.e., the ones that you are referring to, the service-connected and poor veterans. So that for appropriated funds, they are the priority. Essentially none of the appropriated funds are going to go towards the higher-income or category C veterans per se.
    Second, there are a couple of benefits to achieving the targets here, or working towards the targets of nonappropriated sources of funding such as we are talking about. The two that I think are perhaps most germane to your question is that we believe we can provide the care for these higher-income veterans at rates that are reimbursable, whether it be through Medicare or through third-party insurance, that still have some margin left over that could then go towards taking care of more category A veterans.
    The appropriation covers a certain number of those category A veterans. We are using all of that, but we think we can do more and cover more of the needy and the service-connected veterans by bringing in some additional patients who, through even very small margins we can use to enhance the care that we are already providing.
    In addition there are indirect benefits. This was, highlighted in a recent report that Price Waterhouse did for us, looking specifically at what is happening under CHAMPUS. They identified a number of indirect benefits that accrue from attracting these patients, whether it is in service satisfaction, user responsiveness and the environment of care, or enhancing some of the administrative and other systems in place.
    So there are both direct and indirect benefits to what we are talking about. The net effect should be that we will take care of not only the existing category A veterans, but more of those needy veterans, and more higher-income veterans.
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    Mr. MASCARA. So you feel comfortable that since we are in competition now—from day one, when we talked about subvention and third-party payments, my concern has been that somehow those poor VA patients will not be given the care that they should be given; since we are looking for new dollars and looking for ways to balance the federal budget, that somehow these veterans would not receive the care that they should receive.
    Dr. KIZER. I think that is a really important point to stress. An integral part of this strategy is to allow us to take care of more of the poor veterans, the service-connected veterans, which we can't do through appropriated funds alone. I just can't emphasize that enough. This is directly related to our target. We know we can only do so much with the appropriated funds. We know we can do more for those poor and service-connected veterans if we also can tap into some additional resources, as well as taking care of more of the category C veterans that way.
    Secretary WEST. Of the million additional over 5 years that is in our projection, the bulk of those are low income.
    Mr. MASCARA. Thank you.
    Mr. Chairman, my time is up. I am going to have to leave. I have a brother, August J. ''Augie'' Mascara, that passed away who was in the United States Navy, during World War II. He served for 36 months on the U.S.S. Lexington, and was a distinguished veteran. So I am going to need to leave. Thank you very much.
    The CHAIRMAN. We are sorry to hear that, Mr. Mascara.
    Just so it doesn't appear to some that I have not been fair, it has been the policy of the Chair to always recognize both sides of the aisle in the order they came in first off, those that were here when the gavel went down, and I have done that. Unfortunately, there weren't enough Republicans in when the gavel went down to alternate back and forth. So now we have a big line of Republicans.
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    Mr. Quinn is recognized, the gentleman from New York.

    Mr. QUINN. Thank you, Mr. Chairman.
    I know, Mr. Mascara, the Chairman and ranking member, all of us send our thoughts and prayers with you and your brother.
    Thank you, Mr. Chairman.
    Mr. Secretary, welcome. We are happy to have you with us today. I think during my 5 minutes here I would like to maybe summarize and not ask any specific questions today because you have done a great job responding to a lot of the specifics that have been brought up by my colleagues here on to committee.
    I want to begin by thanking the Chairman and ranking member Lane Evans for assisting me in holding a hearing in Buffalo, NY, my home district, in December dealing with homeless veterans. In fact, Mr. Evans joined me out there in Buffalo and Lane, I appreciate the effort and the staff work here to conduct that.
    I know you already know that of the homeless people in the United States, a third of them are veterans. We have heard a lot of interest from the president dealing with homelessness and working through HUD and different agencies. I would like to work with you in the coming months and year to make sure that if we are going to talk about homelessness in this country and the president and the Administration is going to talk about it, that we make sure our oar is in the water for homeless veterans.
    If we are going to talk about funding somehow, if we are going to talk about directing money toward it, a third of the homeless people in this country are veterans; then a third of the money, in my opinion, ought to be designated to homeless veterans somehow. And I am willing to work with other agencies, whether it is HUD or other departments here, along with your help and the contacts that you have at the White House, to make sure that we don't forget our veterans who are homeless.
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    Chapter 31 of the voc-rehab program, we are going to have a little discussion this afternoon at a hearing. I have been talking with my colleagues with that whole program for a long time now. I now have an employee in both my district office in Buffalo and my office here in Washington, DC right down the hall here, in Cannon, where there is someone from the program working in my office and I have suggested that all of us take a lead in that program. So I would like to continue our discussion of that in this coming year.
    Also I want to point out I am a little disappointed that for the hearing this afternoon at 2 o'clock our Subcommittee on Benefits, Mr. Filner and I, we still don't have your testimony. Mr. Thompson I think was going to prepare that. I know you have been very, very busy preparing for today's testimony but it makes it a little bit difficult for the staff and the members to review that stuff if it's scheduled at 2 o'clock; it is 11:15 and we still don't have it.
    Is there anything we need to know about that?
    Secretary WEST. I just asked Mr. Thompson if I were holding it up, since that often seems to be the case.
    Mr. THOMPSON. My apologies, Mr. Chairman. It is my responsibility. We were trying to get ready for three hearings in 2 days and as a new kid on the block, it was my unfamiliarity with the process that held it up.
    Mr. QUINN. Well, we are willing to work with you, Mr. Secretary and Mr. Thompson, always. If you give us a call and tell us what the problem is, I might have even considered postponing the hearing to adjust to your schedule. Would we not inconvenience the other four panels, I seriously thought about canceling about 30 minutes about but don't want to inconvenience the other four panels that are going to testify. So we will go with it this time but let us know if we can help in any way and if you are going to be delayed, certainly I can understand why and we would have maybe adjusted to fit your schedule. We will do that whenever we can. Mr. Filner and I are willing to help you with that whenever we can.
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    Mr. THOMPSON. Thank you.
    Mr. QUINN. Every single speaker this morning talked about this tobacco situation. The VA talks about $17 billion over 5 years.
    My question is much more general. If that savings occurs, are we satisfied that any savings, whatever it is, will go to veterans' programs or that the Administration might try to use it in other parts of the budget? A general question: where do you stand?
    Secretary WEST. Two things about the savings, Mr. Quinn. First of all, remember that if we don't get it, if we don't get the legislation, then today's budget is inadequate.
    Mr. QUINN. Right.
    Secretary WEST. So that is the first point. We do need the savings in terms of not having that in the budget, if that is going to be the case.
    Secondly, no, a portion of the savings will go to veterans. That has been our position. It is the position that Deputy Secretary Gober took to the White House and emphasized strongly. I think it is actually mentioned in one other colloquy. A portion of that savings will be used for programs within the department.
    Mr. QUINN. A portion.
    Secretary WEST. Yes, $1.5 billion.
    Mr. QUINN. So the other $15.5 billion goes where?
    Secretary WEST. It is part of the general governmental pie.
    Mr. QUINN. I would like to continue our discussion with you on that into the future, and I think most of the committee members would like to continue our discussion about that.
    Lastly, Mr. Chairman—I know the yellow light is on and we are being called to a vote—not a question, sir, but an observation. Mr. Filner and I met this week to talk about the hearing schedule that we are going to set up in our subcommittee. We routinely share that information openly with everybody but want to also work with you as this committee and our subcommittee talks about Persian Gulf matters. There again, we have been here for an hour and a half almost now and have talked about everything under the sun and not a word so far about that.
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    We will be moving that discussion up a little bit before us in the subcommittee, in consultation with the Chairman and the ranking member, but I want to alert you to that, that that will be a little bit more emphasized this session of the Congress before our subcommittee and we look forward to working with you.
    The CHAIRMAN. Thank you, Mr. Quinn.
    Mr. Secretary, it will be necessary for us to recess for a few minutes. There are two votes, one on the previous question and one on the rule. There are four members still to be heard from and also I think there are members who have requested a second go-around. We will have to be gone approximately 15 minutes or so.
    Secretary WEST. We will be here, sir.
    The CHAIRMAN. Mr. Secretary, thank you.
    The Chair recognizes the ranking member, Mr. Evans.
    Mr. EVANS. Thank you, Mr. Chairman.
    Mr. Secretary, on page 154 of the President's comprehensive budget document there is a rather troubling section entitled ''Accurately recognizing and reporting veterans' benefits.'' If the recommendations included in the third paragraph of this section were to be implemented, what would be the short-term and the long-term effect of those recommendations?
    Secretary WEST. I am trying to find what you are referring to.
    Mr. EVANS. I am referring to the third paragraph of that document, in terms of studying and making recommendations about transferring certain veterans-related discretionary accounts to defense functions, several different recommendations.
    Secretary WEST. To give you an answer, I am going to have to provide it for the record, sir.

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    [The information follows:]

    While it may be more appropriate for OMB to respond to this question, there is some indication that OMB's inclusion of this proposal reflects a dedication to the precepts of performance budgeting which examines the interrelationships of programs and cross-cutting issues in concert with the Government Performance and Results Act. While the intended purpose of this part of the President's budget may have been to introduce the fact that veterans programs are, in many ways, an outcome of the actions we take in providing for the defense of this nation's freedoms, it would also seem obvious that VA is not the only non-defense program interrelated with such programs and to single out veterans programs is misleading.
    In any event, I am disappointed the proposal was placed in the budget without some discussion among OMB, VA and DOD. While I am not opposed to participating in discussions which address the best way to ensure that this Nation's obligations to its veterans are met, I want those discussions to be open and inclusive of the views of Congress and the veterans service organizations and the affected executive branch departments.

    Mr. EVANS. That would be fine, Mr. Secretary.
    Secretary WEST. I am told that the department was not consulted on this, so we will need to sort this out.
    Mr. EVANS. You know, it seems to me that the impact would be to start a process to combine the Department of Veterans Affairs with the Department of Defense.
    Secretary WEST. Well, we can do a lot with their money.
    Mr. EVANS. I think it is the other way around. They want to take our money. If you would look at that, I am concerned about the VA coming under this kind of study but also I would want to know is the Administration also conducting a like review with respect to the Departments of Energy and Defense, given the fact that a significant portion of the Department of Energy's budget is also related to defense matters?
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    Secretary WEST. I don't know the answer to that, either, but we will see what we can find out for you.
    Mr. EVANS. Yesterday I understand members of the New York delegation met with the VA and the VISN 3 director acknowledged that there would be shortfalls in the network due to the VERA distribution having to absorb inflation costs. What is the magnitude of this kind of shortfall system-wide for fiscal year 1998?
    Secretary WEST. Dr. Kizer was there.
    Dr. KIZER. I actually have heard about some press accounts but I haven't seen the press accounts so I don't know the figures that they are talking about. The projections under the VERA have not changed and the numbers that were previously talked about are the same as far as the adjustments that need to be made.
    The inflation or the absorption of inflation is the same across the country and we have had this discussion here on quite a number of occasions in the past, as far as the adequacy of the increased funding, for example, in 1995 and 1996, as I recall, when there was about a $400 million increase to the VA budget, which equated to about a 2.7 percent increase in the VA medical care budget and inflation was running about 4 or 5 percent. The net effect was a reduction in the overall budget, which has been the way that the VA has been funded for the past 20 years. The funding for the VA budget has never even closely approximated the increases that are given for Medicare and Medicaid.
    So that issue of absorbing the inflation is one that is certainly well known to the department, well known to veterans, and we can flush out your specific comment as far as the projected impact systemwide as soon as we have some better figures on the anticipated inflation rate and the health care market for this year.
    Part of that is there is some uncertainty in what the projected inflation rate will be, but clearly there is going to be a systemwide impact that we will have to absorb that and accrue efficiencies if we are going to continue to provide the same level of service. And we have been able to do that so far, but it is a very real issue that we are wrestling with.
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    Mr. EVANS. I understand the director of VISN 3 was not actually talking about projections but the reality of shortfalls soon in this process, at least as far as VISN 3 is concerned.
    Dr. KIZER. Again, I am not sure what source you are referring to but it is the same discussion that has been on-going as far as Network III in particular with the VERA allocation and the redistribution of funds across the system, that there is a disproportionate impact, if you will, on Network III because of their historical markedly higher expenditures per patient there than compared to areas of the country like Phoenix or Southern California. That is what is behind the whole VERA methodology. And even stating that, their rate of reimbursement will still be higher than the norm in the country.
    The other point that I guess is relevant is that despite the reduction that is planned and has been projected for that network, they should have actually some net increase, ignoring inflation for the moment, because of projected increase revenues from third-party collections.
    Mr. EVANS. I am over my time, Mr. Chairman, but if I could just ask one follow-up question.
    The CHAIRMAN. The gentleman is recognized.
    Mr. EVANS. Thank you, Mr. Chairman.
    Is the VA requesting enough this fiscal year, 1999, to deal with the year 2000 problem? Is that on track?
    Secretary WEST. It is our belief that we are doing so. I am being very cautious about Y2K, as I said earlier, Congressman, because my experience is that it is what we don't know that can come up to bite us. But I find this department pursuing the Y2K issues very well, much better than in some earlier experiences I had in a different location.
    And yes, I think we have requested sufficient funds in this budget.
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    Mr. EVANS. Thank you, Mr. Chairman.
    The CHAIRMAN. Thank you.
    The Chair recognizes the gentleman from Florida, Mr. Stearns.

    Mr. STEARNS. Good morning and thank you, Mr. Chairman.
    Mr. Chairman, myself and the staff have reviewed the President's fiscal year 1999 budget for VA with particular emphasis on the programs under my jurisdiction as chairman of the Subcommittee on Health.
    Let me say, Mr. Chairman, I am disappointed, disappointed that with the reported $65 billion in new funding based upon a national tobacco settlement, this budget does nothing for the VA health care system.
    I am disappointed that the VA's medical care appropriation would shrink under this budget and, despite an anticipated budget surplus, would remain frozen through the year 2002. Medical inflation will not stay frozen, of course.
    I am disappointed that we need rose-colored glasses to make sense of this budget's third-party recovery projections and to get the figures to add up. Mr. Mascara has mentioned that and I have a question with regard to that.
    I am disappointed that while medical research spending would increase, there is no commitment to needed increases beyond fiscal year 99. I am disappointed that this budget turns its back on our aging veterans at a time when VA is meeting only 7 percent of their needs for home care and other community-based long-term care.
    And I am disappointed at the lack of commitment to maintain and upgrade VA's aging fiscal plants. This budget ignores the need for major medical construction at many, many facilities at the same time that it sharply cuts even the minor construction budget.
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    Finally, Mr. Chairman, I am disappointed at the message this budget sends to the States, with a more than 50 percent cut in funding for State veterans home construction needs.
    In the State of the Union the President did not mention the word veterans once. That is not a good sign.
    My question for you, Mr. Secretary and Dr. Kizer, is the GAO is very skeptical of VA's projection of third-party collection. In the first 2 months of fiscal year 1998, after new incentives were in place, collections were well behind prior year figures. Would you bet your salary, 10 percent of it, that you are going to collect the $677 million projection? I mean, would you go on record to say that if we don't, you will give 10 percent of your salary? I would like to see that kind of commitment from you.
    This budget has no safeguards to project against a significant shortfall in collections. How do you avoid seriously compromising quality care if additional cuts have to be made because you miss the collection target. Mr. Secretary?
    Secretary WEST. Well, with all due respect, sir, the issue of whether or not I bet 10 percent of my salary is beside the point. The point is this: can we rely on the projections? Do we have reasons for confidence? I am going to let Dr. Kizer respond in a second but I know I heard him earlier provide the numbers for the first 2 months of fiscal year 1998 and they are more encouraging than what I heard from you. But I'm a newcomer to it and I may be missing the point there.     I believe that third-party collections are not the vulnerable part of this picture because I don't dispute your underlying concern that we have to be very, very careful not to leave our veterans hanging out there on the question of health care and our ability to deliver. The vulnerable part is whether we can get Medicare subvention in time to meet our program and what we hope to do over the 5 years. That is the one thing that we, within the department, don't have control over and it is why we are so grateful for what you and the other members of this committee have done already to support it.
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    But on third-party collections, which I have heard mentioned over and over again, I see a sense among those in the department the follow the issue, that we will be able to meet those requirements. We are working hard, but I don't think that the picture is gloomy. I will let Dr. Kizer address the issue because I am interested in how your numbers for the first 2 months compare with his numbers for the first quarter.
    Dr. KIZER. Sir, again this continues a dialogue that we have had on a number of occasions as far as the challenge there and clearly we recognize the challenge, and many factors are out of our control, as we have discussed before, as far as the changing marketplace and managed care and other things, how those relate.
    To go specifically to your question, at the end of the first quarter we were at 20 percent. We were 7 percent less than projections on an annualized basis. Typically at the end of the first quarter we would be at 21 percent. We were at 20 percent. I am not sure that that difference is enough that should be viewed with other than concern, but I am not sure how much you can make of that particular difference.
    Mr. STEARNS. The first quarter, from our records, for the fiscal year, 13 of your 22 networks are below their target. Instead of getting A for effort here, you are talking about something that hasn't even met 80 percent of your target.
    Are you willing to bet 10 percent of your salary that you are going to make up these, of the first quarter? I mean, you admit now from your figures, and ours are different, but ours show only 13 of your 22 networks are below their targets. It just seems critical. We discussed this last year about the third-party collections.
    Dr. KIZER. Let me just make sure. Does your bottom line there reflect total collections of $118 million?
    Mr. STEARNS. Good question. Yes, it does.
    Dr. KIZER. Okay. So the projected rate would be $127 million. At the end of the first quarter we were at $118 million, 7 percent difference, 20 percent on the year.
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    So, as I say, there is about a 1 percent difference there. Most medical collection agencies would not consider 1 percent difference at the end of a first quarter a significant difference.
    I am wrestling with the question do I want to bet 10 percent of my salary.
    Mr. STEARNS. You feel pretty confident here. Just for fun, why don't we do that?
    Dr. KIZER. Is the other side of it that 10 percent of yours goes if we prevail?
    Mr. STEARNS. If we had jurisdiction over this, I would be willing, but I have no jurisdiction over it. You are the one that is in charge.
    Secretary WEST. Well, let me suggest it is a good bet but this is my bureaucrat; he belongs to me; I'm his supervisor; he is not allowed to make the bet.
    Secondly, our evidence is encouraging. Last year essentially we made our projections. The first quarter essentially we are making our projections. I am sorry, but I don't have your feeling of gloom.
    And let me say one other thing. You mentioned being disappointed in this budget. I don't know why because this is the second year we have tried to do this, that we have tried to take the system of financing health care, threw off some of the old shibboleths and try to think new thoughts. It is never easy, but what we need is to be given a chance to do it. We will put ourselves into it. Dr. Kizer is working hard. Give us a shot at this and help us on Medicare subvention, as you have.
    Mr. STEARNS. Thank you, Mr. Chairman.
    The CHAIRMAN. Thank you.
    Mr. Filner, do you have another question?
    Mr. FILNER. Thank you, Mr. Chairman.
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    Thank you, sir. Again we appreciate your patience with us.
    By the way, I don't want to get out of line here on your public commitments. Mr. Rodriguez invited you to his district, and I want to get your scheduler in worse trouble. I would hope you can get to San Diego also at some point and follow your predecessors, Mr. Brown and Mr. Gober.
    Secretary WEST. I will make it worse. I will come anywhere to hear our veterans talk. I think that is part of the assignment.
    Mr. FILNER. Thank you very much.
    If you would help me with some math, I heard two different answers to some questions that I had posed and Mr. Quinn had posed and maybe we used a little bit wrong language, but we were getting to the same intent, I think.
    Your budget assumes there is a $741 million savings from the tobacco legislation.
    Secretary WEST. This year.
    Mr. FILNER. This year. And I had asked about new proposals and you said only the GI Bill is affected. Mr. Quinn asked, I guess, a more general question. He said, ''Well, what happens if that doesn't pass?'' and you said, ''Well, we don't make our budget.''
    So my math says you are getting $685 million out of it, roughly. I wish we had all of it and I know Mr. Gober had to work very hard to get that $668 million, is that is the correct number—$668 million?
    Now, if the GI benefits from your previous answer are roughly about $300 million, that leaves $338 million deficit. So what suffers is that legislation doesn't pass? That is my question.
    You gave us, I think, two different answers and maybe it is because I posed it in a different way than Mr. Quinn. You said there is no impact if the legislation doesn't pass, in answer to me, and in answer to Mr. Quinn you said, ''We don't make our budget.'' So I'm asking what happens in that case?
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    Secretary WEST. The reason I am looking puzzled is, as a newcomer, I am trying to make sure that I am not getting two different $17 billion numbers mixed up here. One is $17.7 billion for the health care budget. And this $741 million is part of that.
    Mr. CATLETT. Of the tobacco estimate.
    Secretary WEST. I'm sorry. No, it's not part of that. It is part of the tobacco estimate.
    The other point I was trying to deal with is there is a $17 billion in round numbers that are the savings that will be produced if the legislation that changes our position on tobacco, on payment of tobacco claims, is passed. It is this latter figure, the tobacco claims savings, savings from the legislation, to which I was referring when I said if we don't get the legislation, if we don't get the savings, then we don't make our budget.
    Mr. FILNER. That is essentially what I asked earlier and——
    Secretary WEST. The point being that that amount then has to be paid somehow. We will need a supplemental or something.
    Mr. FILNER. I would sort of like to know, especially when we get to the debate on that issue, what you think is going to have to suffer as a result of that, because there will be a shortfall in your budget.
    Secretary WEST. At this point I would not anticipate—I would have to wait and see—an impact other than those one or two items that are in this budget that have to be paid from the savings.
    Mr. FILNER. I need to understand that because——
    Secretary WEST. Let me just say more.
    Mr. FILNER. But you gave a different answer to Mr. Quinn.
    Secretary WEST. But we would still need an add-on essentially over 5 years to pay the additional claims burden. And I would not propose initially to solve it at the expense of other things within the existing budget. In fact, I have every reason to believe that we would be authorized to send up a supplemental request.
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    That is the bottom line, sir. Let me say it again. I have every reason to believe we would be authorized to send up a supplemental request, which is then an add-on to what we have.
    Mr. CATLETT. Can I clarify? No program in the VA will suffer. This $17 billion is costs that we anticipate incurring now if the legislation to eliminate this relationship to compensation is not passed. That is a general counsel decision that does not have any PAYGO implications. It is an entitlement. It has to be paid.
    So no program will suffer. We will get those funds. We will seek those funds to pay that if there is no change in law. So there is no program that is going to be suffering at the VA if you do not pass that legislation.
    Mr. FILNER. Just very quickly in my last few seconds, you will be getting a letter from me today, Mr. West. Last month I had a constituent who was in the VA hospital in San Diego waiting for a liver transplant. His family got hold of me and said this man is going to die if he doesn't get a transplant soon.
    We called the VA and they said, ''Well, we will look into it,'' and they handled it in a very bureaucratic fashion. ''We're trying to make a decision whether he should have this liver transplant.'' A week later he died.
    I found that extremely upsetting. The family understood the issue; I tried to make it clear to your folks that this was serious.
    And I want to know what happened. I think you need to look at your processes. It looked like bureaucratic decisions led to the death of this constituent. His name is John Anthony Jones, but you will get a letter from me. I would like to know if this has happened in other cases. Would this make you look at those decisions, the process?
    We tried to get a decision very quickly and we just got a standard, ''We are looking into it. The DVA hasn't made a decision.'' It was a very bureaucratic response to a very personal concern, and it turned out to be true. I mean, the man did die a week later. I am very upset because I don't think he had to die. We were told the liver was available. The decision from Washington just didn't come.
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    Secretary WEST. Well, I await your letter, Congressman. Any death upsets us all. If it is one we could have avoided, that is more troubling, but we will await your letter.
    Mr. FILNER. Thank you very much. Thank you, Mr. Chairman.
    The CHAIRMAN. The Chair recognizes the gentleman from Louisiana, Dr. Cooksey.
    Mr. COOKSEY. Thank you, Mr. Chairman.
    Dr. Kizer, I need you to help me refresh my memory. You and I were probably in medical school about the same time. Your hair is not quite the right color but it is headed that way.
    What was the year that the surgeon general first put the warning on tobacco products about the adverse effects of it? Do you remember?
    Dr. KIZER. Yes, it was 1964, following about a decade of investigation by the medical community trying to establish a sufficient evidentiary base that led to that warning.
    Mr. COOKSEY. Okay, 34 years ago. I was a junior in medical school.
    Who was the surgeon general then? Do you remember?
    Dr. KIZER. Actually I do but I am blocking on the name.
    Mr. COOKSEY. He came from Tulane.
    Dr. KIZER. I wasn't in high school yet, so——
    Mr. COOKSEY. I can remember those days. That is the thing about being an old vet and an old doctor.
    Next question, am I correct that the VA will spend $17.7 billion this year on health care? Is that correct, and that 0.7 of it is from third-party payers but the $17 billion——
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    Secretary WEST. That is in this year's budget, yes, sir.
    Mr. COOKSEY. Am I correct that you anticipate making $17 billion in tobacco-related payments over a 5-year period? Is that the number?
    Mr. THOMPSON. Yes, that is correct.
    Dr. KIZER. I think it is important to point out that that is in compensation and pension, not medical care.
    Mr. COOKSEY. Okay, correct. The medical care will be $4 billion; is that correct? So that is $17 billion in compensation benefits and then another $4 billion in medical care, $21 billion total, tobacco related. Is that right? These numbers came from your material.
    Mr. CATLETT. The $4 billion you refer to is what we will spend of the $17.7 billion in health care. That is the amount we spend now on veterans getting care based on a general estimate of about 25 percent of the total health care budget being related to tobacco-related illness.
    Mr. COOKSEY. So that is $4 billion, okay. But the point is in a 5-year period we are going to spend as much on tobacco-related illnesses as we are going to spend in one year on the total VA budget.
    Now the second point is there have been warnings out there since 1964 that people should not smoke cigarettes because they are bad for you. The information has been out there. I think the two biggest problems today in this country are tobacco and trial lawyers. Charles Kurault asked an old southern farmer one time what he felt the two biggest problems were in the Southeast and he said kudzu and Baptist preachers, but I wouldn't go that far. I think it is tobacco and trial lawyers.
    One thing that concerns me as a physician is this Administration has really wrapped the whole budget around a tobacco settlement. Now, I am from Louisiana and the only thing that separates Louisiana from Mississippi is a river. And to give you a little that you may not know because you may have been in medical school then, but a fast-talking Mississippi lawyer was the one that put together the deal on the asbestos settlement and probably half of those people that got compensation from asbestos had no exposure to asbestos or no problems related to asbestos; they really had their problems from cigarettes, from smoking. But that is done. The settlement is done.
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    Well, that same lawyer—incidentally, his brother-in-law happens to be a Republican Senate majority leader; I won't call names—that same lawyer has basically guided another fast-talking Mississippi lawyer along in putting together the tobacco settlement, gave him his Cessna Citation, and I am still a pilot and I know it is fun to fly Citations around, particularly when somebody else is paying the bill. But that second fast-talking Mississippi lawyer has been going around the country putting the tobacco deal together.
    I have a problem with that. I hate to see the VA get sucked into this bogus deal on the tobacco settlement when we have the lives and health of our veterans, who have put their lives on the line for this country. I think that we ought to be spending more money for the veterans that truly got injuries in combat, because I have seen those as patients and you have seen them, too.
    I do not feel the same obligation—I don't think this country has the same obligation to give settlements to people because they smoked cigarettes, because for 34 years it has been on every package of cigarettes that they shouldn't do it.
    So I would caution you about going down this slippery slope and getting involved in this big tobacco settlement, which really may not ever occur. Words from an old freshman.
    The CHAIRMAN. I thank the gentleman.
    The gentleman from Arkansas, Mr. Hutchinson, is recognized.

    Mr. HUTCHINSON. Thank you, Mr. Chairman. I want to apologize to the Chair and to our panel of witnesses for me darting in and out. I have two constituents who were being held by the Laotian government and we were able to obtain their release but it occupied me a little bit this morning. But I have reviewed the budget and wanted to be here to ask one particular question or area of inquiry and to express my appreciation to the Department of Veterans Affairs and Mr. Secretary for the work on the outpatient health clinics.
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    My state is Arkansas and in Arkansas we have an outstanding veterans' facility in Fayetteville and one in Little Rock, but the veterans in my district in two locations have to get on a bus and ride 4 hours on a bus to the veterans' facility. The outpatient facility for Mountain Home, which is 4 hours away from Little Rock, has been approved and we are in the process or you are in the process of getting that accomplished.
    There is another location, Mena, in my district where the outpatient clinic is vitally important. The veterans again travel 4 hours there and 4 hours back and you wait. It is just a terrible circumstance when you are considering their health.
    I am convinced that this is going to add to your patient load. We have a significant number of veterans in Fort Smith and you move an outpatient clinic there, they are going to be served to a much larger extent and then also bring that into the VA hospital in Fayetteville because then they are being served on an outpatient basis. They are going to be referred up there.
    So I just want to congratulate all of you and Mr. Secretary for this and tell you how important it is.
    Now, I notice in the budget that I believe there are 71 new outpatient clinics that are designated for this year. I think I want a whole bunch of those here in my district, but I know that has to be spread over the United States.
    Tell me, is there adequate money allocated in the budget for the outpatient clinic program and whether you anticipate any hurdles in getting these outpatient clinics established in the areas that legitimately needed them and will serve the purposes of the veterans?
    Dr. KIZER. I would just note that all of the clinics, and to date we have either approved and implemented or are in the process of approving and implementing nearly 200 new clinics over the last 2 years, all of which have come from redirected money. There is no new money that has gone into establishing any of those clinics. It is only by changing the way that we do business, being able to do this.
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    The number 71 is in the budget. It was a projection. I frankly will probably not be satisfied if that is the number because I think we can do more and we want to do more. Obviously there is an issue of equity in spreading these around the country because our veterans everywhere in the country have to travel too far.
    We have a goal that we would like to see veterans travel no farther than 30 minutes to have access to care. In some parts of the country, like Montana and Wyoming, that is probably not realistic. We do expect that in some States this year we will achieve that goal. For example, Connecticut we expect to and maybe others and, as we look down the road, we hope that additional States will be able to accomplish that objective. But that will only occur if we are allowed to continue the way that we have been able to make the system change, if we are able to get Medicare subvention, if we are able to do a number of the other things that have been talked about before this committee and others as part of the overall strategy over the next several years.
    Mr. HUTCHINSON. Well, I am very supportive of the Medicare subvention program, as well. I know the Chairman has worked extremely hard on that and I hope that that is implemented this year.
    What was the time limit that you're hoping for? You said that they wouldn't have to travel more than how long?
    Dr. KIZER. The goal is that they wouldn't have to travel more than 30 minutes. And I say that well knowing the exceedingly difficult challenge that poses even far into the future.
    Mr. HUTCHINSON. I am just delighted with this. I hope you will continue to work on that. It is very important.
    Also I am glad you all are addressing the backload in adjudication of cases.
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    Mr. Chairman, I want to yield to Mr. Cooksey. He wanted to ask a question on that same subject.
    The CHAIRMAN. Certainly.
    Mr. COOKSEY. I represent a similar area, a rural area, a large area. Incidentally, I talked to Dr. John Higgins about this. He is really a good man. And incidentally, the VA hospital that is in my district is wonderful and does a great job and has a very approval from the veterans.
    But have you ever considered a program where you would have a physician go out to a rural community and see patients there, maybe through some sort of collaborative agreement so he could use the hospital facility? Is that possible?
    Dr. KIZER. We are doing it. That is being done in a number of places. We are contracting with local providers now, local private providers, to provide care. We have mobile clinics. I mean, there are a number of venues like that being utilized. And, of course, much of that was only possible as a result of the eligibility reform legislation that was passed not that long ago that gave us the flexibility and the options to do some of that, ways of doing business that we need.
    Mr. COOKSEY. I am saying someone that is a physician that is under contract to the VA hospital, not to go to a facility that you would have to rent and establish but just find some hospital that would let you use a room, an examining room, some of your laboratory facilities.
    You know, when I was in the Air Force, a lot of veterans came in and they wanted to get their prescriptions filled, their blood pressure checked, and a lot of it is really minimal care, and I am glad to know that. I want to find out more about it.
    Dr. KIZER. If I understand better the specific scenario that you are talking about, I do believe that is occurring but if so, it is only at a few sites and it involves a number of issues, some of which are under our ability to control and some aren't; for example, whether the private facility would agree to credentialing and privileging someone that is not really on their staff, and there are a number of issues that go beyond what we can control ourselves.
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    Mr. COOKSEY. Thank you, Mr. Hutchinson, and thank you, Mr. Chairman.
    The CHAIRMAN. Any other questions?
    Thank you for staying around.
    I would like the record to show that Mr. LaHood of Illinois, Mr. Peterson of Minnesota and Mr. Hayworth of Arizona were also present today. I would like to acknowledge the presence of Mr. Gober. Mr. Gober, it is nice to have you with us today.
    Mr. Secretary, we thank you and the gentlemen with you today for all the hard work. I repeat, we appreciate the work that Dr. Kizer has put in with us on Medicare subvention.
    I do have two questions but if you will promise me a prompt answer, I won't ask them and I will ask them for the record.
    If there are no other questions, the meeting stands adjourned.

    [Whereupon, at 12:18 p.m., the hearing was adjourned.]


House of Representatives,
Committee on Veterans' Affairs,
Washington, DC.
    The committee met, pursuant to notice, at 9:30 a.m., in room 334, Cannon House Office Building, Hon. Bob Stump (chairman of the committee) presiding.
    Present: Representatives Stump, Quinn, Stearns, Schaefer, Cooksey, Hutchinson, Evans, Kennedy, Filner, Guttierez, Mascara, Peterson, Reyes and Rodriquez.
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    Chairman STUMP. The hearing will please come to order. I would like to welcome all the witnesses today who are here to present their testimony.
    Today, members will be given an opportunity to focus on the testimony from the Honorable Frank Nebeker, Chief Judge of the United States Court of Appeals; the Honorable Espiridion ''Al'' Borrego, Assistant Secretary for Veterans' Employment and Training Service, U.S. Department of Labor; the Independent Budget Panel consisting of DAV, VFW, AMVETS, and the PVA, as well as the American Legion and the Military Veterans' Alliance.
    Let me mention one thing before we get started, and there should be a letter in your folder. Mr. Evans and I plan to introduce today—today, we want to get it in today so we can have a hearing in March, so if anyone wants to cosponsor it—legislation that would codify the eligibility criteria for burial in Arlington National Cemetery. The chairman of the subcommittee, Mr. Quinn, and Mr. Filner expect to hold hearings promptly so that we can get on to this bill in March.
    And let me tell you, you had better take a look at it, because it does away with exemptions, including Members of Congress, like us. Unless you qualify as a military person, under those qualifications, all Cabinet offices and everybody else would not be eligible. It terminates eligibility to Members of Congress and other high-ranking Government officials who are veterans, but do not meet the distinguished military criteria as applicable to all other veterans.     Second, it clarifies that only veterans and family members described in the legislation are eligible for burial at Arlington. In other words, it does not contemplate any waivers or exceptions for persons who don't meet the statutory criteria. It will be down in black and white; we won't have to worry about these waivers anymore.
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    If any of you members want to sign on, be sure to tell Jeanne McNally before noon today, if you can, so that we can get it in before we adjourn.
    Before we begin with our first witness, Judge, I would like to turn to Mr. Evans, our ranking member, for any statement he might want to make. And let me apologize; we have a CIA briefing over in the National Security Committee, and there are either seven or eight members who are on both committees, and it presents a little bit of a problem. We just couldn't work out the schedule, so I apologize.
    Mr. Evans.

    Mr. EVANS. Thank you, Mr. Chairman. I am very pleased to welcome all of the witnesses this morning. We have a distinguished group of witnesses, and I look forward to hearing from them.
    As most of you know, we heard from the VA last week regarding the VA's proposed budget for fiscal year 1999. At that time, I voiced my concern regarding the linking of long overdue increases in educational benefits to the enactment of controversial legislation which would repeal existing authority to provide compensation for tobacco-related disabilities. I also voiced my concern regarding the disturbing change in philosophy related to funding of veterans' medical care reflected in that budget. My concerns were in no way lessened by the discussion we had with the Secretary and VA officials at that hearing.
    I believe that throughout their service in America's Armed Forces, our veterans have earned access to the benefits and programs our grateful Nation has provided for them. These benefits should be funded at all levels necessary to ensure that they accomplish the purpose for which they were established. They should be directly funded, no gimmicks, no strings attached, and those benefits should be reliable. Eligible veterans should know that they have access to health care, and not wonder if the care is dependent on the VA's ability to collect non-appropriated revenues.
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    Veterans that are students should know that their educational benefits will keep up with increasing costs of higher education. Service-disabled veterans should know that their specially-adapted housing grant programs provided for them will keep pace with increased costs of real estate and construction. The Department of Labor's programs, specifically designed to meet the needs of homeless veterans, should be fully funded to the level authorized by Congress.
    Does the administration's budget for fiscal year 1999 accomplish these goals? I believe the answer is, no, it does not. The budget does not provide the resources required to fulfill the mandate and the intent of Congress and of the American people, and I hope that all of us in the committee will fight for a budget that fulfills our Nation's solemn obligations to its veterans.
    So, thank you, Mr. Chairman. I do urge my Democratic colleagues to support your legislation concerning Arlington Cemetery, so we have no further problems with that issue.
    [The statement of Congressman Kennedy of Massachusetts appears on p. 93.]

    [The statement of Congressman Gutierrez appears on p. 96.]

    The CHAIRMAN. Thank you.
    Judge Nebeker, as you know, your statement will be printed in its entirety in the record. If you would care to summarize, we would appreciate it. You may proceed in any way you see fit.

    Judge NEBEKER. Thank you, Mr. Chairman and members of the committee. My statement will be brief. I understand I am allotted 10 minutes; I will use half of that.
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    I have three things I would like to address this morning. The first, of course, is our proposed budget for the ensuing fiscal year. Our budget is $876,000 more than last year, and I break it down in this way to explain it; that is a 9 percent increase over last year. Forty-five percent, nearly half of that 9 percent increase, goes to mandatory pay raises and benefits, and 16 percent of that increase goes to rent and mandated security. The mandated security I refer to is what the General Services Administration commands be done at all Federal judicial facilities in light of the Oklahoma city bombing. And then we have an additional 9 percent added to that for discretionary activities, which the court finds necessary.
    The reason the court finds these activities necessary is we have suddenly had a deluge—an increase in the caseload that is coming from the Board of Veterans' Appeals to our court. We now have—and I will address that as the third item I want to talk to you about—we now have a substantial backlog, and I will explain what the problem is with respect to that backlog. That, in a nutshell, is our budget.
    I have with me Judge Ivers, Mr. Comeau, the clerk of our court; my right hand and arm, Sandy Montrose, and we also have Ann Olson, our fiscal officer. If there are questions, which I can't field—and that is highly probable—they are here for that purpose.
    The second thing I would like to address is the legislative package, which this court submitted to both Houses some time ago, and which I understand has been under scrutiny here in this committee, which we welcome. There are three reasons for this legislative package, and we would urge your support and prompt action on it.
    The first is one in which we are trying to plan ahead to avoid a collision in the year 2004. At that time, the court could almost be inoperable, because it is an election year and there will be four vacancies all at once, because of the way in which the appointments were made at the beginning of 1989. And, so, our legislative proposal would permit a limited retirement at an early age, so as to begin to stagger the vacation of terms—the end of terms, thus to eliminate what, in an election year, is the highly probable incapacitation of the court, because of the number of vacancies that would occur all within that time frame.
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    The second reason for this legislative package deals with bringing the benefits for survivors of the judges up on a par with the survivor benefits of those in other courts. It is a comprehensive package. I won't go into great detail on it, but you will see, if you do look at it, that we have brought you the facts and figures from all the other courts, and show how they differ, and they are a ''Heinz'' variety, but what we are trying to do is do justice to one—our lone current survivor, and those that we could, perhaps, anticipate in the future.
    The third element of the legislative package has to do with the court's retirement fund. What we would like to do there is have the court authorized to pay into the fund based on actuarially determined liability. We do not have that kind of authority at this point.
    There are other provisions of the package which would bring the court's retirement system in line with other judicial retirement systems. I understand that this package has been introduced as S. 988 in the Senate, and I understand that it has, or is shortly to be, introduced in this House. We would welcome any questions on that. Probably the best way to handle it would be written answers, because it is such a comprehensive package that it would be almost impossible to go into it in a short period of time.
    The third thing I would like to address, this morning, in the remaining minute or so that I have, is what I referred to a second ago about backlog in our court. The court, two weeks ago—a week and a half ago—held a hearing on a motion to extend time to file the Secretary's brief. It was the fifth motion to extend time. I am not critical of the Assistant General Counsel who was assigned to that case. It is a very, very difficult situation for all of those people down there. They have got far more to do than they can possibly do, and I would like to submit for the record a copy of the order, which I entered that day, asking the Secretary to respond by the 19th of this month to this question: If this court adopts a rule that within 6 months it will not grant an extension motion based upon workload, is the Secretary prepared to take the steps necessary to ensure that the records on appeal are designated and that the briefs are timely filed? That response is promised on February 19.
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    To show you just a snapshot of the problem—and that is basically where the backlog is—in 1997 there were over 1,000 motions on behalf of the Secretary to extend time. Here, in November, there were 215 to extend a brief, in December, 307, and in January, 260. There were, likewise, a substantial number of motions to extend time to prepare the record on appeal to get the case going in our court to start with.
    The situation with the Board of Veterans' Appeals deciding more and more cases is reaching a critical point, and I think that the whole matter needed to be brought to the attention of the present Secretary, who I understand is an experienced litigator, and will appreciate what the problems are that the court is confronted with.
    So, I will submit that order for your information and for the record. It is a public order, of course. And, that concludes my comments.
    [The prepared statement of Chief Judge Nebeker appears on p. 102.]

    The CHAIRMAN. Thank you, Mr. Nebeker. Mr. Evans and I did introduce that bill, and we did so by request, which means that we basically have not taken a position for or against.
    Judge NEBEKER. I know that.
    The CHAIRMAN. I have some questions, and I am sure others will, including Mr. Evans also.
    The VA budget includes, I understand, additional funds for 11 FTEs for lawyers, so the VA can hire more lawyers for the court. Is that your understanding?
    Judge NEBEKER. I do not have an understanding about that. I have not been consulted on it.
    The CHAIRMAN. That is in the VA budget.
    Judge NEBEKER. I don't know whether that is adequate or not. I don't know where they are going to go. I don't know whether these FTE's are going to go to Group VII, which is the office that represents the Secretary before our court. I am not privy to their budgeting or plans.
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    The CHAIRMAN. We will work it out with you. Mr. Evans.
    Mr. EVANS. Thank you, Mr. Chairman. Judge, in a number of recent cases the court has indicated that a veteran has been treated unjustly by the Department of Veterans Affairs, or that the court is not authorized to provide a remedy. In your opinion, should the jurisdiction of the court be expanded to explicitly provide for equitable relief in addition to that available under the All Writs Act?
    Judge NEBEKER. Well, Mr. Evans, the All Writs Act is a rarely-used tool. To the extent that there would be an impact on the workload of the court, I think I could legitimately comment on it, but to the extent that it is a political judgment to be made, I would offer no comment with respect to it. I should imagine that it would increase the caseload substantially, and at this particular time it is being increased substantially anyway.
    Mr. EVANS. The court has indicated that a large number of unrepresented veterans before the court may be attributable to a claims system that ''does not encourage attorney representation.'' Do you favor any actions that allow attorneys to collect fees, perhaps at an initial stage of their claim. For example, do you favor the practice of paying attorneys' fees directly from the veteran's passthrough award in order to encourage attorney representation, or any other practices that might encourage attorneys' participation in the process?
    Judge NEBEKER. I understand the history has been that the veterans' benefit system has not wanted to have—well, I will use the expression ''lawyerfied'' at the base level. Being a lawyer, I don't necessarily share that view. We certainly get a great deal of assistance from the volunteer lawyers that come before our court, and in any way that lawyers could help, and I think they can, at the administrative level, it would certainly make for a more just system, and I think, ultimately, a more rapidly developing system.
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    Mr. EVANS. Do you have any suggestions in that regard?
    Judge NEBEKER. Well, we do run across the problem of a lawyer not being able to charge a fee until after there has been a final BVA decision, which means, basically, that the lawyer is either not going to represent the veteran at that earlier stage, or is doing that pro bono, with the hope that he will get a final decision after which a fee can be charged. There is great chagrin on the part of many lawyers who take cases because of the threat of criminal prosecution. Albeit a misdemeanor, but it is still a pretty substantial threat. I have heard of a number of attorneys who have simply said, with that threat and the nasty letter from somebody at the VA at one time or another reminding them that they can't charge a fee, they are not going to take these cases. Whether that represents a substantial number of cases, I am not in a position to say, but there is reluctance to take cases where there is a threat of criminal prosecution. Again, I think these are policy questions and political questions. To the extent that lawyers would help, I think it would be a good idea to have the rules relaxed.
    Mr. EVANS. All right, thank you, Judge. Thank you, Mr. Chairman.
    The CHAIRMAN. The gentleman from New York, Mr. Quinn, is recognized.
    Mr. QUINN. No.
    The CHAIRMAN. Mr. Gutierrez.
    Mr. GUTIERREZ. Thank you, Mr. Chairman.
    Judge, you stated that the number of denials by the Board of Veterans' Appeals has risen from 6,407 in fiscal year 1995 to 15,865 in fiscal year 1997; thus, your court will have more work to do and requires greater appropriation. I am wondering, however, what accounts for the rise in denials by the BVA? Is it demographics or legislative reforms that have led to increase of denials or something other?
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    Judge NEBEKER. My opinion is that it has been the increased capacity of the Board to produce decisions. As you will recall in past years, the Chairman got authority to do away with three member boards, and they are operating now as single member boards. They have increased their capacity to decide cases. Of necessity, the proportion of denials is going to increase. I believe that that is at the bottom of why there have been so many increases in denials. I have no figures on how many unappealable decisions the Board has made. I say unappealable decisions because there, of course, would be two kinds of them: those where they grant benefits and the veteran goes away happy, and those where they remand back to the agency of original jurisdiction because they have found a need to flesh out consideration at that level. And, I understand that there are a lot of remands to the agencies of original jurisdiction, but the increase is basically their increased capacity.
    Mr. GUTIERREZ. Well, Judge, maybe if you could make available to us the total number of cases heard——
    Judge NEBEKER. By the Board?
    Mr. GUTIERREZ. Yes, total number——
    Judge NEBEKER. I wouldn't have that figure, sir.
    Mr. GUTIERREZ. Well, maybe if you don't have it here now——
    Judge NEBEKER. No, I mean that is a Board figure. I could ask the Board for it.
    Mr. GUTIERREZ. I think it would be good to ask the board for it, just to see how many—we know how many denials are being made, just so that maybe we know the total number of cases.
    Judge NEBEKER. Well, I would assume that the Acting Chairman is going to be appearing before you also, and he should have that, but if you want me to get it I will.
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    Mr. GUTIERREZ. It would be good, just so that—I mean if you could help us, Judge, it would certainly be nice——
    Judge NEBEKER. Sure.
    Mr. GUTIERREZ (continuing). To know how many cases were heard, and how many denials were made, just in case. My curiosity may just be going the wrong way, but maybe it is more denials, as you say, because there are more cases heard, and as more cases are heard there are obviously more denials. I just want to take a look at it.
    Judge NEBEKER. Sure.
    [The information follows:]

    The Board of Veterans' Appeals reports that it issued 43,347 decisions in fiscal year 1997 (up from 33,944 decisions in fiscal year 1996 and 28,195 decisions in fiscal year 1995).

    The CHAIRMAN. Thank you, Mr. Gutierrez. I believe we have those figures. The VA reports those to the committee, and sometimes even in the budget.
    Mr. Mascara.
    Mr. MASCARA. Thank you, Mr. Chairman. I have some opening remarks I would like to be included in the record.
    The CHAIRMAN. Certainly, without objection.
    [The prepared statement of Congressman Mascara appears on p. 99.]

    Mr. MASCARA. Judge, on page 4 of your statement, you asked that the pro bono representation program be authorized and funded outside of the court's appropriation. Could you shed some light on that for me, please?
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    Judge NEBEKER. Yes, sir; there is a history behind that request, because when we first started the pro bono representation program it was with funding that was excess to the court's budget. We got permission from the Hill to go ahead and start the program as a pilot project. It has progressed, and it has proceeded to be quite successful. We start out with a 75 to 80 percent rate of pro se litigants in our court; by the time the cases are ripe for decision, it is down to 50 percent. So you can see that it makes a substantial dent—it, plus the growing bar throughout the United States, the growing bar of our court. But, when their operating funds were taken out of our operating funds, it created a problem. And the problem it creates is not only one of friction between the two entities, but also the appearance of partiality, if you will, is there, because if the court's operating budget has to be sacrificed in order to fund one side of the litigation that comes before the court, then there is a very serious problem, because you are suddenly having the judicial neutral branch supporting and assisting, at its own expense, that one side in representation before the court.
    Put it the other way around, would it be seemly to have the court's operating budget sustain Group VII in the Department of Veterans Affairs? Obviously, not; and so, we have asked the Appropriations Committees to try to figure out a way to separate our budget from theirs, so that our operating budget is not diminished by their needs. And, it is an intractable problem of jurisdiction between various Appropriations subcommittees, and we recognize that. So, I have asked the Appropriations subcommittees to please—in their own mind—consider the pro bono program's budget totally separate from our operating budget. They assure me they do. I believe, mechanically, it is being done that way, and it is probably the best fix that is possible for this rather difficult and intractable problem.
    Mr. MASCARA. What costs are associated with the pro bono side of the representation program?
    Judge NEBEKER. What costs? I don't recall right now, and I will tell you one of the reasons why I don't know. I am at arms length from their budget. I don't really want to know anything about their budget. They tell us what it is, and we just plug it into ours because it is convenient for the Appropriations Committee to have it in as one figure in that budget. They are here today, and if there is a question that you would like directed to—I believe I saw the chairman of their committee here a moment ago—he probably would be able to answer that, but I am not able to answer it, because as far as their budget is concerned I want hands off.
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    Mr. MASCARA. Thank you, Judge.
    The CHAIRMAN. The gentleman from Texas, Mr. Rodriguez.

    Mr. RODRIGUEZ. Thank you, Mr. Chairman.
    Let me ask you—and I know I am a little naive, and I apologize to the other members, but one of the things that kind of concerns me—you indicated in terms of an increased capacity in denials—is there a process, you know—I gather, you know, because I had a particular—and I go back to kind of specific items—an individual that I had that finally has gotten some benefits, but in the process took a long time for it to occur. I am not a physician, but by looking at him, I knew that there was a serious problem there. Is there a set process that, you know, that automatically they get denied the first couple of times? Is that the way it works? And I apologize, because I don't know, but I gather that you automatically deny them initially——
    Judge NEBEKER. Well, I know of no arbitrary bent, as far as VA is concerned in that regard. We only see the cases after they have gone through the administrative mill.
    Mr. RODRIGUEZ. I understand that, but why would they, you know, force these individuals, that in some cases—like in this particular case it was so obvious that there was a problem, that they made him have to go through the mill of, you know, redoing, resubmitting, going to the doctor one time and again. I mean, that will create a problem from some of this backlog.
    Judge NEBEKER. Oh, it definitely does, and particularly World War II veterans now are getting in the twilight. I don't know about how they handle those things at the VA level, because we are separate and apart from VA. We can't micro or macro manage VA. We can only decide the cases that are brought before us. We had one, here just this month, in which the appellant was I think 96 or 98 years of age and in failing health. We expedited that decision—the appeal—we expedited the appeal and issued an order very promptly after a hearing on the case in which we indicated to the Secretary that we were inclined to rule a certain way—we did not rule, but we were inclined to rule a certain way, and under the circumstances we gave the Secretary a short period to notify the court whether the Secretary was willing to entertain equitable relief. The Secretary has unreviewable equitable power, where there has been an error made that he can correct, even if the system is intractable enough that it can't. It goes to him directly and he exercises personal discretion. We have yet to hear from the Secretary on that one. But, where there are these situations, our court does expedite consideration of the case when we are asked to do so.
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    Mr. RODRIGUEZ. Do you find any—on the data—do you find any disparity that maybe from certain regions you get people who are in tortuary type of situation versus where it might be a little bit harsher than in other sectors of the country?
    Judge NEBEKER. No, we have no information——
    Mr. RODRIGUEZ. You have no information——
    Judge NEBEKER. No, no knowledge.
    Mr. RODRIGUEZ. Oh, no knowledge about that?
    Judge NEBEKER. No, no knowledge or information about it.
    Mr. RODRIGUEZ. Is there a way of assessing that to see if they are being a little tougher in some areas and just automatically denying and they are causing them to have to go through the mill?
    Judge NEBEKER. I should imagine the Secretary would be able to break it down in terms of the regions and what their track record is. We do not keep those figures at all. We are only concerned with the legal issues that are brought to us, not with the administrative problems, and whether the West Coast is more harsh on veterans' claims than the East Coast; that is not a matter of concern to the court.
    Mr. RODRIGUEZ. Okay. The other thing is that in terms of the legal manners, I think the only concern that I have in the back of my mind is what has happened in other areas that when we have taken out the opportunity for the attorneys to participate—I know that a lot of these individuals would hate to go to attorneys, but in some cases they have no other recourse, and it is unfortunate that we have put them in those situations and the difficulties that they are encountering now with some of the insurance companies in the private sector where they don't have that avenue anymore and are finding themselves at the mercy of that particular insurance company, and I hope that we don't get to this point at this level. Thank you.
    Mr. QUINN. Mr. Chairman, excuse me, would the gentleman yield with some time that remains, just for a follow-up question?
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    Judge, in the case that you just responded to Mr. Rodriguez about expediting, acting promptly with the 96-year-old—how long did all that take?
    Judge NEBEKER. How long did it take?
    Mr. QUINN. Yes, sir.
    Judge NEBEKER. I don't have the docket sheet in front of me; I wish I did, but I didn't anticipate talking about the case. I don't know when the motion to expedite the case was filed, but typically it is going to take the Secretary the better part of 6 months or more to get the record on appeal together; that is the motions to extend——
    Mr. QUINN. Excuse me, so that if you responded to the gentleman that you expedited, acted promptly, and still haven't heard back from the Secretary—in that one case, what is expedited and promptly? How long?
    Judge NEBEKER. I think when we expedited it, it took us—just a moment, maybe Mr. Comeau has a specific answer.
    Mr. COMEAU. The parties did, in response to the court's order about expediting that case, did come in yesterday with a joint motion. I signed-off on it and the widow was paid yesterday afternoon——
    Mr. QUINN. So, all of that expediting promptly takes how long? That is great, by the way, but how long?
    Mr. COMEAU. Probably within a couple of months at our level. In other words, the lawyers come in and at some point they realize that things need to move faster and so they move for expedited consideration.
    Mr. QUINN. That is what I am trying to get at. So, a 96-year-old, at your level, took 2 months——
    Mr. COMEAU. Something like that—we will fill in that information for the record.
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    [The information follows:]

    On June 13, 1997, the appellant, a 97-year-old widow, appealed to this Court from a Board of Veterans' Appeals decision. On July 29, 1997, her attorney filed a motion to expedite the proceedings. On August 11, 1997, a judge of the Court granted the motion. By December 11, 1997, the record on appeal had been agreed upon and filed, and briefs had been filed by the parties. The case was evaluated and referred to a panel of judges on January 6, 1998. The Court heard oral argument on January 27, 1998. On February 11, 1998, the parties filed a joint motion to dismiss pursuant to a settlement agreement. That motion was granted the same day. The time in the Court, from notice of appeal to disposition, was 243 days.
    The parties' settlement in Court provided for Dependency and Indemnity Compensation (DIC) retroactive to October 1, 1978 (the effective date of applicable legislation). On February 2, 1994, the appellant had submitted a claim for DIC. The VA regional office awarded DIC, but retroactive only to February 2, 1993. The appellant appealed from that decision to the Board of Veterans' Appeals, which decided against her on February 20, 1997. The time in the VA administrative system, from claim to Board denial, was 1,114 days.

    Mr. QUINN. Thank you. So, at your level it took 2 months, but how many other months would be involved in here typically?
    Judge NEBEKER. I think you are talking years.
    Mr. COMEAU. It varies all over the lot, sir; really it does.
    The CHAIRMAN. Bob, would you identify yourself for the record, please?
    Mr. COMEAU I am Bob Comeau, the clerk of the court.
    Mr. QUINN. Thank you, Bob.
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    The CHAIRMAN. The gentleman from Colorado, Mr. Schaefer, is recognized.
    Mr. SCHAEFER. Thank you, Mr. Chairman.
    I just have one question for the judge. We have talked about the number of denials and this type of thing. In 1995, you had about 1,200 cases per year on an average, and now all of the sudden in 1996 there was an increase of 27 percent, and in 1997, 38 percent. What do you attribute this dramatic increase to since 1995?
    Judge NEBEKER. It is the aging of our World War II veterans, Korean veterans. The capacity of the Board of Veterans' Appeals to get to its backlog; they have increased their capacity substantially.
    Mr. SCHAEFER. Okay, well are you saying that there aren't that many more cases filed? Are you finally getting into some pre-1995 ones, or what?
    Judge NEBEKER. Yes, there are cases that have been at the VA for years, 2 or 3 years maybe. The Board has had thousands in backlog, unable to get to them. As they have increased their capacity, their staff, and their ability to act by single board member instead of two or three, they have produced far more decisions, grants, as well as denials, as well as remands back. And, so it is that increased capacity that has brought the onslaught of cases to us, where there have been final decisions and denials.
    Mr. SCHAEFER. I thank the chairman.
    The CHAIRMAN. Mr. Schaefer—Mr. Hutchinson.
    Mr. HUTCHINSON. Thank you, Mr. Chairman.
    In reading your testimony, I believe there was 73 percent in fiscal year 1997 of the appellants were unrepresented, and then looking at the Board of Veterans' Appeals there were 15,000 denials in fiscal year 1997, from which your appeals arise. What is your affirmance record? What percent of the cases coming from the Board of Veterans' Appeals are simply affirmed?
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    Judge NEBEKER. The figures have changed, I think, recently. The number of cases in which we find error is substantially higher than I think in any other Federal court in the country. Mr. Comeau has got, I think, a breakdown of those figures available to him.
    Mr. COMEAU. In our court, 31—in the last fiscal year, which is reasonably typical—31 percent of the cases washed-out for procedural reasons, never got to a decision on the merits, lack of jurisdiction, default, voluntary withdrawal, whatever. Of the remainder that went to termination on the merits, 39 percent of those the BVA decision was affirmed, 61 percent were affirmed in part—they were sent back for some reason, either all or part of the case was sent back to the VA; it was remanded.
    Mr. HUTCHINSON. You might not have this statistic, but of the unrepresented appellants, are those by and large affirmed, those denials affirmed?
    Mr. COMEAU. We have not kept those kinds of figures. I believe the pro bono, at least from their standpoint, keeps those kinds of figures.
    Mr. HUTCHINSON. I practiced, to a limited extent, before coming to Congress, before the Court of Veterans Appeals and also the Board, and just to give you the benefit of my perception being an attorney in Arkansas. We have a high veterans population. Very, very few attorneys, probably less than five in Arkansas, have ever practiced before a court of veterans' appeals or actively do it; it might even be a shorter list than that. I can see good reason why they don't. You know, I handled a number of cases, but I don't think there was ever any money made, because of the stringent rules, the intimidation factor, and basically whether you hope to have a fee at some point or not, it winds up being pro bono. I did it because I thought the veteran needed some help, but it is really not a good system. It discourages attorney representation, at least in the rural areas, such as Arkansas. Maybe they all need to go to Washington, DC to get a lawyer, but I don't think that is a good system either.
    You know, another observation is that it seems to me that you have a system that encourages veterans just to continue pursuing their case for year after year after year after year, and no one will tell them it is not a good case. To me there is a problem here, and because there are so many cases being filed, unrepresented, and they pursue them, and they keep clogging up the system, that the meritorious cases have a much more difficult time ever being heard. And, Judge, I would just like you to respond to that. I mean, am I missing the mark, totally, on this?
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    Judge NEBEKER. No, sir; you haven't. I think it is a conscious policy to discourage lawyer representation at that level. Now, whether that is a policy choice or what, I don't know. I see that that is, in fact, the case, and true, there is not a lot of money in many of these cases, but there sometimes is. By the time the lawyers get into our court, even on a pro bono basis, we do have a substantial number who get fees under the Equal Access to Justice Act. Now that requires, one, that they prevail, and two, that the position of the Secretary was not substantially justified. There is a high rate of awards of EAJA fees in our court, but you are absolutely correct, it is not lawyer friendly at all, until the lawyers get to our court.
    Mr. HUTCHINSON. Thank you, Judge.
    The CHAIRMAN. Thank you. Mr. Reyes, that is a vote, second buzzer. If you have a real quick question, perhaps we can let the judge go and not have to come back.

    Mr. REYES. Yes, just really quickly, and I wanted to apologize, but we have another—National Security is also in a hearing. I would just like to, on the one hand, associate myself with the comments of my colleagues here, because representing a veteran population of about 60,000 in El Paso, this is a very prevalent complaint that the veterans feel like they get chewed-up in the bureaucracy, and they feel like that the system is not user-friendly and it is not understanding in terms of the proportionate of what they are expected to do on their part. The issue of attorney representation is a very real one, because most attorneys simply don't want to touch it. There is nothing substantial in it for them, unless they have this pro bono interest in veterans' issues and affairs.
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    So, I would just like to ask, quickly, is there a recommendation—is there something we could be doing to address this very difficult issue with the bureaucracy?
    Judge NEBEKER. I am ill-prepared to make a recommendation to that effect. My jurisdiction, my concern is so narrow by statute that I just don't have an opinion regarding what VA ought to do, or what you all ought to do, to move this system along. I did, about 3 years ago, address the structural problems within the VA at my State of the Court address, at one of our earlier judicial conferences. I would be very happy to make that public document available to you.
    Mr. REYES. Okay, thank you.
    [The information follows:]

    It is traditional for the Chief Judge to give a state of the Court address. What I am about to say today is my own personal view. I do not purport to speak for my colleagues, who may or may not agree with everything I have to say.
    In addition, what I am about to say applies both to the past and to the current administration of the Department of Veterans Affairs. I will speak to you about my view of the state of the Court and the scope of authority within the veterans' benefits system.
    Let us remember that Board mistakes and inconsistent results were deemed to warrant review and oversight on a case-by-case basis where the results were adverse to the claimants. Hence, the Court was created and began its operation five years ago today, or yesterday, the 16th. The reason that I remember that date is that it is also my wife's birthday. Each helps me to remember the other.
    Before the advent of judicial review, the benefts system, as now, functioned in a two-tiered operation: agencies of original jurisdiction and the Board of Veterans' Appeals. Whether the former were within the direct chain of authority under the Board or acted as a separate surrogate to the Secretary seemed of no concern for many years. Now, I respectfully suggest, it is highly important.
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    The problem is not with the current statutory scheme, at least in theory, but relates to the statutory scheme in its actual implementation within the Department.
    I am reminded of that line from Will Rogers, ''All I know is what I read in the newspaper.'' An article last week in The Washington Post reported congressional enactment of a bill which would enable Gulf War veterans to receive compensation for ''ailments that doctors have been unable to diagnose.'' The article noted that the Senate Veterans' Affairs Committee had initially thought such legislation unnecessary because, in the committee's view, the Secretary already had more than sufficient statutory authority to provide such compensation.
    However, the article observed, the Senate acquiesced when it became clear that the Secretary would not act without specific legislation. In the words of Senator Rockefeller, the Senate Veterans' Affairs Committee was ''forced to act on legislation to ensure that benefits would become a reality.''
    Five years of the Court's operation have demonstrated, at least in my view, that there is a vast gap between the theory and the practice of judicial review, and it is the gap which appears to be frustrating the original intent behind the enactment of the Veterans' Judicial Review Act and full implementation of the goals of meaningful judicial review.
    Although Senator Rockefeller was speaking in a different context last week, his words may well apply to judicial review, and Congress may well be ''forced to act on legislation to ensure that benefits,'' and, I interpolate, of judicial review, ''would become a reality.''
    To apply the point to the goals of judicial review keep in mind one thing. In addition to being responsible for the overall control, direction, and management of the Department, the Secretary is responsible for deciding all questions of law and fact necessary to a decision by the Secretary under a law which affects the provision of benefits by the Secretary to veterans or the dependents or survivors of veterans. That, of course, is the familiar language from section 511(a) of title 38.
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    What does that say? Well, I guess it says ''of the Secretary, by the Secretary, and for the Secretary,'' a bit Lincolnesque in its phrasing, but perhaps quite accurate. Although the Secretary may and has delegated authority for these decisions to the Undersecretary for Benefits, the Secretary remains ultimately responsible, and the Undersecretary is responsible to him for those decisions. In summary, therefore, the Secretary is one who is on the hook legally, if not factually.
    Similarly, the responsibility and authority for deciding initial appeals is also a matter of statute. All questions in a matter which under section 511 of this title are subject to decision by the Secretary shall be subject to but one appeal to the Secretary. Final decisions of such appeals shall be made by the Board. And, of course, that's familiar language from section 7104(a) of title 38.
    Under present law and a tried but true caveat that you can delegate your authority but you cannot delegate your responsibility, the Secretary bears the ultimate statutory responsibility both for agency of original jurisdiction operations, and decisions, as well as for BVA decisions. He may and has delegated the authority to carry out these functions to the VBA—the Veterans Benefits Administration—and to the Board, respectively. But the responsibility continues to rest with him. He is, in law at least, ubiquitous. He is the trial, the Department's appellate court, and the advocate before the Court of Veterans Appeals. He also just happens to be the down-side party to each case in the Court.
    Since the Court has the express power to affirm, modify, or reverse a decision of the Board, or to remand the matter, as appropriate, as well as ''such assistance in the carrying out of the Court's lawful writ process, order or rule, decree or command, as is available to a court of the United States,'' it is indeed at least arguable, if not conclusive, that no additional legislation is required.
    The past five years of the Court's operation, I believe, affords sufficient time and experience to give credibility to what I am about to recommend.
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    I ask that you join me in an exercise of our collective imagination. We will deal with a hypothetical situation, a political one. Imagine if you will the creation of a new government in a state of our union or one in the world of emerging nations. In that state, there is an executive and a supreme court and a court of appeals. At the local level, however, there are adjudicative bodies which initially resolve all disputes. But the constitution leaves the supreme court and the court of appeals with no direct authority over the local adjudicators.
    It is only when the executive can be persuaded to issue the proper order that these local adjudicators must obey. Thus, the locals make determinations quite independent of the courts. They decide when and how they will decide matters before them.
    I dare say none of you know a viable republican form of government with such a system, and it is not hard to see that it would not work well.
    I believe my message is clear. There is, I suggest, no system with judicial review which has within it a component part free to function in its own way, in its own time, and with one message to those it disappoints: ''Take an appeal.''
    That is, I am afraid, what we have today in many of the Department's agencies of original jurisdiction around the country. Neither the Court, through the Board, the Board, nor the General Counsel has direct and meaningful control over the agencies of original jurisdiction. Indeed, it is also clear that the VHA, the Veterans Health Administration, often ignores directives to provide specific medical opinions when they have been asked to do so. And this is resulting in unconscionable delays.
    Let us examine judicial review. Remember, the Court and the Board do not make policy. The Secretary and the Congress make policy. The Court simply identifies error made below by a failure to adhere, in individual cases, to the Constitution, statutes, and the regulations themselves which reflect policy, a policy often freely ignored by many initial adjudicators whose attitude is, ''I haven't been told by my boss to change. If you don't like it, appeal.''
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    There is no question that a recommendation to place the Department's AOJs directly within the chain of authority, if adopted, would disrupt the status quo in those agencies.
    I agree that, aside from the organizational change, training in a wholly different philosophy and method of operation will be necessary. Such change has been necessary for five years, and now many, including myself, see that the 1988 goal of judicial review is not complete. Too many of the Court's precedent opinions must focus on law clearly stated in statutes or regulations, but ignored below. Indeed, the rate of adjudication error is far too high for a healthy system.
    Most importantly, though, these opinions should serve to guide future adjudications in similar cases. Why permit the initial adjudicators to ignore these decisions simply because their operational head ignores them and doesn't issue directives and provide training to follow them.
    In the last five years, the Court has in various cases remanded matters to the Board with directions of one sort or another to bring about action at the regional office. Sometimes the Board, in its discretion, remands to the regional offices. There appears, however, to be no direct authority in the Board over the RO. Many ROs appear to do what they think they must when they get around to it.
    In fact, recent examples show that attorneys in the General Counsel's staff, too, have little leverage to require cooperation when they attempt to obtain information concerning cases so they can meet their obligation to report to the Court on the status of particular cases.
    The attitude in at least some of the ROs seems to be, ''I don't care what the Court says the law is. I only care what my boss says it is.''
    Since the Secretary is before the Court in every appeal, it is possible for the Court, in the event it or the Board remands for RO action, to direct the Secretary independent of the Board to perform timely and complete RO action. Indeed, the Court has done so recently. But such a case-by-case approach does not solve the systemic problem created by a lack of contiguous chain of command.
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    To be sure, there are arguments to maintain the status quo. But I respectfully submit, one, that after five years of judicial review, they are not persuasive; they are quite defective and outmoded. And, two, I submit that they are nothing but an effort by those in particular positions to preserve administrative turf in a changed time. They are reflective of an institutional attitude which places the job, the position, first in the very government agency that by its history and policy is dedicated to putting veterans first.
    I urge the Secretary and recommend that he use his authority to place the Department's agencies of original jurisdiction within the chain of authority established by law in order fully to effectuate the purpose of judicial review of decisions which are adverse to claimants. Make them responsible for prompt compliance with remand directions issued by the BVA as addressed in 38 C.F.R. 19.38.
    Section 511 of title 38 exempts proceedings before the Court from the statute's general preclusion of judicial review of actions by the Secretary. It is possible that amendment of section 511 to require that the Secretary comply with the Court's decisions in all adjudications and appeals would emphasize this duty.
    While statutory authority already exists, perhaps as in the case of the benefits for veterans in the Gulf War, Congress may have to act. Given the unique nature of our situation and the Secretary's ubiquitous position, the Court should—could give serious consideration to directing all future remands to the Secretary, as opposed to the Board, for proceedings consistent with the opinion and fulfillment of his statutory responsibilities.
    Then, of course, the Court, if it was forced to, could ''compel action of the Secretary unlawfully withheld or unreasonably delayed.'' And that is, of course, the language from section 7261(a)(2) of the Veterans' Judicial Review Act.
    Mr. Secretary, as an individual, you have devoted decades of your life to putting veterans first. Several years ago, then acting General Counsel Bob Coy likened the Department to an ocean liner being required to change course on the high seas. One thing is certain: The orders to change course, to follow the Court, must come from the captain of the ship, the Secretary himself.
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    I ask you, Mr. Secretary, to make unequivocal use of the power vested in your office to give that order, thus to ensure that precedent opinions are followed and that judgments in specific cases are met with full and prompt compliance—all of this, I submit, to the end of reinventing government.
    Thank you. That concludes my State of the Court address, and it is now my duty and pleasure to recognize Judge Ivers for the next aspect of our program.

    The CHAIRMAN. Judge, thank you very much. It is necessary for the committee to stand at recess until we complete this vote. Mr. Kennedy did you have a question for Judge Nebeker? Have you voted?
    Mr. KENNEDY. No, I haven't.
    The CHAIRMAN. Well, we'll have to; we don't have but a few minutes left. If you have a question, we will ask the judge to stay over.
    Mr. KENNEDY. No.
    The CHAIRMAN. All right, Judge, thank you very much, and we look forward to working with you on that other bill.
    The CHAIRMAN. The committee will please come to order. Our next witness is the Assistant Secretary of Labor for Veterans' Employment and Training, Mr. Al Borrego. Mr. Borrego is making his first appearance in his capacity as Assistant Secretary, a post for which he was confirmed last fall. However, he is no stranger to this committee and its hearings on veterans' and employment issues, and we welcome you this morning, Mr. Secretary. Your statement will be printed in its entirety in the record. If you would care to summarize, you may do so. We will proceed in any way you want.
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    Mr. BORREGO. Thank you. Good morning, Mr. Chairman, Mr. Evans.
    I appreciate the opportunity to present the fiscal year 1999 Department of Labor budget request for veterans' employment and training programs. Before I begin to discuss our budget request, I would like to say that it is a personal honor for me to be the first Assistant Secretary for Veterans' Employment and Training Service to come before this committee to present our funding in the context of a government-wide balanced budget submission. I want to acknowledge the dedicated efforts of this committee, the Congress, and the administration for working together to achieve this important goal. I want to assure you that the employment and training needs of America's veterans will be well-served by our 1999 appropriations request.
    Bipartisan congressional support for the needs of America's veterans in the civilian labor force, along with strong support from other government agencies and the Veterans' Service Organizations, has enabled us to achieve some notable successes. With our partners in the State employment agency, more than 510,000 veterans had found jobs when the program year ended on June 30, 1997. Of these, over 41,000 were veterans with some form of physical or psychological disability. Our overall placement rate was close to 25 percent of the just over 2 million veterans who registered for assistance. That compares very well to the non-veteran placement rate of just over 16 percent. That means we are continuing to meet our legislative mandate that veterans do better than non-veterans and receive priority of services. Helping veterans find quality jobs also means we are increasing our efforts to ensure that Federal contractors, the source of numerous employment opportunities, meet their lawful obligation to list their jobs with the Public Employment Service, and file their VETS 100 report describing their efforts to employ Vietnam era and special disabled veterans.
    Our grants under JTPA IV–C to 12 States showed that 2,824 eligible veterans received services and 1,612, more than 57 percent, entered employment. Funding for the National Veterans' Training Institute allowed almost 2,600 veteran service providers to sharpen old skills and hone new ones. Under USERRA, VETS closed 1,261 cases, more than 80 percent of them within 90 days of the claim being filed. To better serve our customers, we developed a user-friendly computer program, now available on the Internet, which will explain the most common rights and responsibilities under USERRA. It can easily be found on VETS home page, which is part of the Labor Department's Internet address.
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    These are some of my agency's accomplishments, but I believe that this is not the time to rest on our successes; it is an opportunity to build on them, and that is what our 1999 fiscal year budget is designed to do. We used the requirements of the Government Performance Results Act to carefully examine where VETS is going as an agency, and how the changing needs of veterans fit into our strategic plans, program goals, and outcome measures.
    Before I discuss the specific impact of our fiscal year 1999 budget request on VETS' ongoing program activities, I would like to present to this committee a dramatic new veterans employment initiative. President Clinton intends to introduce legislation that will increase funding for the educational entitlement programs of the Department of Veterans Affairs. The legislation will include reimbursement to VETS to support training and employment programs for older veterans, dislocated veteran workers, homeless veterans, and veterans on public assistance. The remainder of our appropriations request supports programs at funding levels comparable to our 1998 budget. Grants to States for DVOPs and LVERs total $157 million, the same as provided in fiscal year 1998. Seven point three million dollars is requested for JTPA IV–C grants. Our request for $2.5 million for the Homeless Veterans' Reintegration Project will allow us to award and monitor up to 20 grants with service providers. We hope to serve about 4,000 homeless veterans and find jobs for about 2,200. Twenty-three point six million dollars is requested to pay the salaries and benefits of the 254 members of our staff. Two million dollars is requested for the continued funding of the National Veterans' Training Institute, so it can conduct more than 60 classes and train more than 1,400 service providers. Both of these funding requests are substantially unchanged from their 1998 levels.
    Before I conclude my statement, I would like to discuss two agency initiatives, whose importance is not reflected in specific monetary outlays. Much of the work to achieve these goals will be accomplished by old-fashioned sweat equity on the part of both national office staff and field staff.
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    The first concerns our efforts to make sure that veterans don't miss out on the chance to move quickly into good jobs because of lengthy, extensive certifications and licensure requirements to qualify for the same job they did in the military. Making armed services training translate to the private sector work force is a key to one of Secretary Herman's goals for the Labor Department, that every American worker is provided with the assistance and tools needed to achieve success in today's job market, and in the job market of the 21st century.
    The second initiative concerns section 4311 of USERRA. Section 4311 prohibits an employer from discriminating in employment or taking any adverse employment action against a person because of his or her past, present, or future military obligations.
    I appreciate the opportunity to give this committee some of the highlights of the fiscal year 1999 budget request. I look forward to working with the committee on behalf of our Nation's veterans, and would be pleased to answer any questions that you might have.
    [The prepared statement of Mr. Borrego appears on p. 106.]

    The CHAIRMAN. Thank you, Mr. Secretary. Mr. Evans.
    Mr. EVANS. Mr. Chairman, I have a number of questions I would like to submit for the record, and would ask that the answers and the questions be made part of the record.
    The CHAIRMAN. Without objection, certainly.
    (See pp. 229 and 249.)

    The CHAIRMAN. Mr. Rodriguez, no questions?
    Mr. Secretary, let me ask you—the President has proposed to transfer $100 million from Veterans' to Department of Labor to fund additional joint training partnership, backed—I believe it is under title IV–C.
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    Mr. BORREGO. Yes, sir.
    The CHAIRMAN. This program is now funded at $7.3 million. Can you tell us, briefly, what IV–C does, and can you really effectively and wisely use that $100 million in the first year?
    Mr. BORREGO. Yes, sir; our JTPA IV–C is the money that we get to provide training for veterans. In discussions I think what the Veterans Administration's—I think this arises out of our work with them and an understanding of the importance of employment for many of the veterans receiving veterans' benefits. We have those e.g., the Montgomery GI bill, but the ultimate goal is job placement.
    I was just over at the VA talking with them on Monday. We are in the process of putting together an interagency VA/VETS task force to take a look at structuring this. This would be money that we could place in every State, so that every State would have the opportunity to provide training for the veterans in that State. There is a lot of flexibility in the IV–C, and that is one of the reasons that the $100 million was put into the IV–C program.
    The CHAIRMAN. Thank you, Mr. Secretary. We thank you for your appearance here today, and I apologize for the lack of members.
    Our next panel: representatives of the Independent Budget, if you would come up please. Let me just say, while you are on your way up, that I am not apologizing, but there are three committees. I know that Armed Services and Agriculture and this committee's meeting, in addition to being on the floor. But I think it is inevitable that we are going to be forced into this kind of attendance, because we have fewer than 60 legislative days left in this year. So, scheduling is going to be near impossible, but we are trying the best we can.
    The third panel consists of the four veterans' service organizations, who have prepared the Independent Budget. Gentleman, we appreciate the effort you have put into the preparation of this document and the cooperative spirit which this document represents. It is used—believe me, we use it, and we appreciate the work you have done.
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    Each of you may have 5 minutes, if you would, to explain your part of it, and we can proceed in any way you wish. Unless somebody wants to take the initiative, I will go down the list here, but does anybody want to start out?

    Mr. STEADMAN. Mr. Chairman, members of the committee, on behalf of the 58 organizations who make up the Independent Budget, we want to thank you for the opportunity to present our views. We would request our executive summary of the Independent Budget be placed in its entirety in the record.
    The CHAIRMAN. Certainly will.
    Mr. STEADMAN. I am Ken Steadman, the executive director of the VFW's Washington office. I am joined up here by the executive directors and the National Service Director of the foreign major veterans' organizations that comprise the Independent Budget.
    On my far right, Mr. Gordon Mansfield, the executive director of the Paralyzed Veterans Association, on my left, Dave Gorman, the executive director of the Disabled American Veterans, Chuck Burns, next to me on the right, the National Service Director of AMVETS. Mr. Chairman, with your approval, perhaps we could begin with testimony from Gordon Mansfield, PVAs executive director to address medical care and programs.
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    Mr. MANSFIELD. Mr. Chairman, and members of the committee it is a pleasure to be here this morning. I am Gordon Mansfield, the executive director of PVA. My primary focus today, will be to discuss the Independent Budget's view of the fiscal year 1999 budget for veterans' health care. I would like to submit a statement for the record.
    The administration has proposed a VA health care appropriation of $17.028 billion, a decrease of $29 million over this year's level. Even including the estimated collection of third party receipts, total resources available for medical care are estimated to be $40 million less. Total outlays are estimated to be $140 million below this year's level. This would be the third year in a row that the appropriation will have been frozen at this level with no increases for the effects of inflation or to cover a needed new program, and this freeze is to continue over the next several years.
    It comes at a time when the effects of VA reorganization have not yet been seen, whatever decreasing resources are being transferred under VERA, and it comes at a time when, under upcoming enrollment rules, the actual number of dollars available to a medical facility will determine which veterans get into a hospital. The freeze comes at a time when PVA members, and all veterans, are increasingly concerned about the protection of specialized services, such as spinal cord injury care.
    The Independent Budget warned last year of the serious uncertainty in relying only on receipts from third-party payers to provide increases for health care support. The proposal undermines the traditional responsibility of the Federal Government as being the sole provider in caring for those who have defended this nation. Collections, historically, have been inconsistent. Insurance companies are not always willing partners responding to calls for reimbursement from the VA. Increasing numbers of sick and disabled veterans continue to need quality health care. Our question is, Who is going to be there to pay for it? The Congress, or Blue Cross and Blue Shield? Third-party reimbursements should be used to enhance appropriated dollars, not substitute for them.
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    The Independent Budget recommends that Congress appropriate $18.838 billion for VA medical care for fiscal year 1999. This figure represents a core appropriation of $18.178 billion, an amount that was carefully calculated to have the appropriation keep pace with inflation and meet the administration's own proposed workload-based targets. Only after these appropriated levels are met do we add in the third-party reimbursements to reach the $18.8 billion level that I mentioned earlier.
    The third-party reimbursements are clearly earmarked in our proposal for needed improvements to the system—for the most part, enhanced long-term care services. The Independent Budget's position is that the administration's request is $1.1 billion less than our core appropriation and $1.8 billion less than the core appropriation with the reimbursement.
    The administration has requested $60 million for the medical administration and miscellaneous operating expenses account. The Independent Budget recommends $66 million to add vitally-needed staff. Now is not the time to further reduce staff used to monitor and ensure quality of care throughout the system. The President has required VA to comply with the Health Care Consumer Bill of Rights. There is an ever-increasing need for comprehensive approaches to quality issues in the VA. MAMOE must be provided with the necessary resources. The committee must make quality a major issue during this Congress, including patient protections, guaranteeing access to services, confidentiality, and appropriate individual choice for veterans using the VA in changes to title 38.
    We want to congratulate Chairman Stump and Representative Bill Thomas for making progress in developing a Medicare subvention proposal for the VA. This is a major initiative in the Independent Budget, and Mr. Chairman, we look forward to working with you on this proposal.
    Finally, we are greatly concerned by the administration's proposal to deny service connection and health care to veterans for disabilities associated with addiction to tobacco. It is especially outrageous that the proposal would terminate providing service-connected benefits to certain veterans, and then only use a meager portion, $1.5 billion out of $17 billion, of these ''savings'' for veterans in programs that serve them. It is clearly indicative of the anti-veteran bias expressed in this budget proposal. We strongly urge the committee to reject this scheme.
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    We, likewise, call on the committee to exert its influence to see that the VA health care system can receive its just share in any settlement with the tobacco industry to help cover the dramatic cost of caring for tobacco related illnesses.
    Mr. Chairman, as we have in the past, we are looking to you, this committee, and this Congress to set this veterans' budget back on the right track. We look forward to working with you and assisting you in every way possible to see that this is done.
    That concludes my testimony. I would be happy to answer any questions that I can.
    [The prepared statement of Mr. Mansfield appears on p. 119.]

    The CHAIRMAN. Thank you, Gordon.
    Mr. STEADMAN. Mr. Chairman, he will be followed by Mr. Dave Gorman, of the Disabled American Veterans.
    The CHAIRMAN. Mr. Gorman.

    Mr. GORMAN. Good morning, Mr. Chairman. My remarks today will focus on the DAV's primary area of responsibility of the Independent Budget, and the corresponding areas in the President's budget, that being benefit programs and general operating expenses.
    The President's budget recommends a cost-of-living increase for compensation and dependency compensation to be effective December 1, 1998. Benefit rates must be adjusted annually to keep pace with the rise in the cost-of-living, and this proposal agrees with our recommendation in the Independent Budget. The President's budget recommends increases in the Montgomery GI bill and the Survivors and Dependents Educational Assistance Program. We also recommended increases for these programs in this year's Independent Budget.
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    The case for increased allowances in both is compelling in both programs. Although the law provides for automatic annual adjustments in the Montgomery GI bill, the adjustments have either been withheld or reduced in annual legislation over the years. We, therefore, recommend an increase sufficient to make up for the consequent erosion in the value of these benefits.
    Congress once regularly adjusted the allowance rates for the Survivors' and the Dependents' Educational Assistance Program, commonly referred to as chapter 35. However, that program last saw an increase in 1989, over 9 years ago. Therefore, while the costs of higher education have continued to increase, the rates under chapter 35 have remained the same for nearly a decade.
    Mr. Chairman, Congress should not only adjust the rate of the chapter 35 allowance to make up for the loss and value during this period, Congress should also change the law to provide for automatic annual adjustments in this benefit to keep if from continually eroding year after year.
    On the subject of the necessity to regularly adjust benefit rates, let me also point out that the grants for specially-adapted housing and specially-equipped automobiles have, likewise, not been raised since 1988. Considering the substantial rise in real estate and construction costs, over this 10-year period, there is little question what the effect of this has been on disabled veterans. The current $38,000 grant is only a fraction of the cost of specially-adapted housing today. Similarly, the current $5,500 grant for specially-equipped automobiles is also insufficient. Historically, the allowance was initially intended to cover the full cost of an automobile. Today's grant represents but 25 percent of the average cost of a new automobile, without the special equipment. We urge you to make appropriate adjustments in these grants, and to provide for future automatic annual adjustments.
    Mr. Chairman, going back to the Montgomery GI bill and chapter 35 programs for a moment, let me say, as pleased as we are that the President's budget recognizes the need for increases, we are, at the same time, extremely disappointed that the President's budget holds these meritorious raises hostage to a change in law to prohibit service connection for tobacco-related illnesses. This, Mr. Chairman, is one of the most disturbing proposals in the President's budget, and we strongly oppose it. In the Independent Budget, and in my prepared statement, we have discussed that for several reasons this proposal is unfair, in our judgment. Here, I would just point out that VA is the only Government agency that would penalize customers, that being veterans, and the victims of the addictive and harmful effects of tobacco use.
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    A necessary premise of liability of the tobacco companies to the Government is that, because the tobacco companies concealed the addictive and injurious properties of tobacco, they are responsible for the adverse effects on the population, not the smokers themselves. Yet, the President, Mr. Chairman, would blame veterans, and hold them personally responsible, unlike the rest of the general public. This abruptly reverses VA policy, which previously has held that tobacco use is not deemed willful misconduct.
    Even more objectionable, I think, is that only $1.5 billion of the proposed $17 billion in savings would be invested back into veterans' programs. Let me repeat that, Mr. Chairman: of the $17 billion in savings, but $1.5 billion would be put back into veterans' programs. Obviously, the administration has other agendas in mind for this money, and veterans do not appear on their agenda.
    We urge you to reject this proposal, Mr. Chairman. Foremost, because it is without merit, but also because the administration would unscrupulously sacrifice veterans' programs for some other motive. That the President's budget would divert funds away from veterans' benefits and services is only one indicator of the lack of appreciation for the priority and the needs of veterans' programs.
    Again, we are extremely disappointed at the recommended funding and staffing levels for the Veterans Benefits Administration. To keep and get the claims of backlog under control, staffing levels for the compensation service need to be increased substantially, by 500, at least. The new training and transition for re-engineered work processes VA is undertaking require a short-term increase in human resources to attain long-term quality improvements and increased efficiencies. To maintain an acceptable level of services in the other benefit programs, Mr. Chairman, staffing levels should be maintained at fiscal year 1998 levels. The President's budget requests only 7 FTE—7 more FTE for the C&P service, and proposes to reduce other VBA staffing by 132. For the reasons I have stated, Mr. Chairman, this is inadequate.
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    That concludes my statement, Mr. Chairman. I would be glad to try to respond to any questions that you may have at a later time.
    [The prepared statement of Mr. Gorman appears on p. 125.]

    The CHAIRMAN. Thank you, David.

    Mr. STEADMAN. Mr. Chairman, members of the committee, the VFW is proud to be a co-author of the Independent Budget. Our contribution lies in the construction portion. In my prepared testimony, I outlined a number of the VFWs special concerns for health care for the budget and for smoking, and I will omit those to my written statement in the interest of time, and move directly to the construction projects, if I may.
    More VA construction—most VA construction activities are funded through the major construction appropriation, or the minor construction appropriation, a third appropriation finances the Parking Garage Revolving Fund. Veterans Health Administration construction accounts for most expenditures falling within these three appropriations. VA also provides grants for constructing State extended-care facilities and State veterans' cemeteries.
    The creation of the VA's Veterans' Integrated Service Network, the VISN system, comes at a time when congressional appropriations for major and minor construction will be minimal. As VISNs reconfigure programs and shift resources in an effort to integrate networks efficiently, the risk of local shortages and service capacity increases. We recommend that network directors be given the authority and flexibility to alter their priority lists of proposed major construction projects without fear of losing construction dollars. Network directors must also develop 5-year construction plans, taking into consideration the impact on capital requirements of mission changes, the Veterans' Equitable Resource Allocation, and, of course, eligibility reform.
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    We believe that VA's construction program must emphasize expanding primary care access, making facilities more modern and attractive, and increasing long-term care capacity in non-institutional and institutional settings. The need for enhanced outpatient and extended-care facilities and infrastructure improvements has replaced the need for additional hospital beds. Unfortunately, many renovation projects are threatened because cost will exceed the minor construction project ceiling of $4 million. Therefore, the Independent Budget recommends that the minor construction cost ceiling be adjusted annually, using an inflation-adjusted matrix, so funding shortfalls due solely to inflation do not continue to occur.
    We also ask the committee to urge the Appropriations Committee to provide the remaining $20 million required to complete the 100-bed Tampa, Florida Replacement Spinal Cord Injury Center. This committee has supported that endeavor, and has helped to get the $26 million that has already been spent on the project. It should not suffer any further delays.
    The Enhanced Use Leasing Program seems to be an extremely useful asset management tool. It allows VA to acquire needed facilities, goods and services, that would otherwise be unavailable or not affordable. We recommend that Congress make the Enhanced Use Leasing Program permanent. We also recommend that VA require all such leasing projects to fully comply with the stated mission, and, therefore, benefit veterans by improving both access to and the quality of patient care.
    Additional community-based outpatient clinics are needed to reach veterans, who would otherwise travel long distances to obtain VA health care. VHA must ensure that eligible veterans have equal access to timely, quality health care throughout the nation.
    Thank you, sir.
    [The prepared statement of Mr. Steadman appears on p. 132.]

    The CHAIRMAN. Thank you, Ken.
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    Mr. BURNS. Mr. Chairman, my name is Chuck Burns. I am the national service director for AMVETS. We appreciate the opportunity to be here this morning.
    We will focus on our area of concern, the National Cemetery System. We feel that, despite the continuing high standard of service rendered by NCS and the administration's proposal for an $8 million increase in budget authority for fiscal year 1999, we feel the system has been, and continues to be, underfunded.
    Since 1973, the annual burial rate within the NCS has almost doubled to 73,000. Most World War II veterans are in their mid-seventies now; even us Vietnam veterans, the average age is now 50; none of us is getting any younger. The overall projected veterans' death rate is expected to peak in the year 2008 with more than 620,000 deaths. Already, as is well-known, the average monthly death rate of World War II veterans is 36,000. And, even with the projected completion of new cemetery projects in Chicago, Cleveland, Albany, Seattle, and Dallas-Fort Worth, and the projected expansion of six other existing cemeteries, NCS will be hard-pressed to meet the demands—meet the growing demand for space. We join with this committee in encouraging the administration to consider adding even more cemeteries to meet the growing demand for burial in a national cemetery.
    Historically, only about 10 percent of eligible veterans opt for interment in an NCS facility. Despite this seemingly low demand rate, if funding is not forthcoming for new acquisitions and development of existing land, the legal entitlement will be an empty promise, as veterans are denied access based on non-availability. A truly National Cemetery System must have the unqualified budgetary support of both the Executive and Legislative branches to ensure that all eligible veterans, who so choose, have the right to interment is a national cemetery. We repeat our call for a national cemetery, or State supported cemetery within 75 miles of 75 percent of the veteran population.
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    National Cemetery System is faced with a number of serious challenges, not the least of which being chronic underfunding. It is the most serious and presents the greatest challenge. Some of the other areas of concern, again, include the inadequate burial space. We would recommend that Congress ensure that adequate burial space be available for all eligible veterans and their families who desire burial in a national cemetery. Funding for the State Grant Program must be adequate to cover all State funding requests.
    Additionally, we recognize the need for dignified burials for deceased veterans. Citing budgetary constraints, the military services have not been providing Honor Guard for veterans' funerals beyond the single representative of the Department of Defense, who presents the flag to the deceased veteran's family. We feel that this denial of appropriate honors is particularly shameful during this time when so many World War II veterans are being buried in a national cemetery.
    We would recommend that Congress enact legislation guaranteeing all veterans being buried in national cemeteries receive appropriate military honors. Further, Congress should direct a transfer of funding from the Department of Defense to VA that would be sufficient for VA to contract for these appropriate services.
    Lastly, regarding Quantico National Cemetery, originally opened in 1983, it was viewed as the alternative site for burial for Arlington National Cemetery. Presently, less than 6 percent of Quantico's 790 acres have been developed for burial. Because of its large inventory of available, yet undeveloped land, Quantico holds the potential of becoming the largest of all the national cemeteries. We would recommend that VA develop, and Congress support, an aggressive marketing strategy and major construction plan to make Quantico National Cemetery a desirable and well-utilized alternative to burial in Arlington.
    Obviously, any remarks on our National Cemetery System cannot be finished without focusing, without making mention of Arlington. Mr. Chairman, your earlier announcement this morning regarding introduction of your legislation to tighten regulations for Arlington burials is most welcome, and we look forward to reviewing your legislation when it is available to us.
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    We would urge the Congress, and we did so in the Independent Budget, to enact legislation that would require all waivers for burial be subject to an apolitical uniform process that ensures objectivity, and guarantees the integrity of current regulations regarding burial in Arlington.
    Our recommendations to ensure the integrity of the National Cemetery System for fiscal year 1999 cost out at approximately $99.9 million, an increase of $13 million in budget authority over fiscal year 1998, and includes the cost for our recommendation of an additional 275 full-time employee equivalents to meet current and future staffing needs.
    Mr. Chairman, this concludes my statement. I would be happy to answer any questions you, or any of the members of the committee, may have.
    [The prepared statement of Mr. Burns appears on p. 135.]

    Mr. MANSFIELD. Mr. Chairman, also we would like to recognize Mr. Robert Carbonneau, executive director of AMVETS, who is not here with us today. He has served as the chairman of the policy committee and its budget project for this year's effort. He has been a firm, yet fair leader, in guiding us to the production of this Independent Budget proposal.
    The CHAIRMAN. Thank you, Mr. Mansfield.
    Several of you have mentioned the Arlington Cemetery, and that bill will be introduced today. We invite you to take a copy of the draft before you leave here. We intend to act on that very soon, and we welcome your input.
    As far as Arlington itself, we are in the process of looking at some surrounding land that we may be able to tie up for future expansion of Arlington, but on a restricted basis. For other veterans, I think that Quantico is about the closest one around here.
    The Chair recognizes the ranking member Mr. Evans.
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    Mr. EVANS. Thank you, Mr. Chairman. I want to thank the panel for the excellent testimony that they have given us this morning. It is a valuable service as we look at the budget to have your recommendations. I know many of us are concerned about the VA not going after their fair share of the tobacco settlement money, and the other issue of cutting off veterans who were addicted to tobacco when they were in the armed forces and now they are suffering as disabled veterans at this point. So, we thank you very much for your information.
    I am going to ask that my questions be entered into the record and that the responses to those questions be made part of the record.
    (See pp. 260 and 266.)

    Mr. EVANS. And I will supply you with one question that deals with a section of the larger budget, a bill that came out regarding the relationship between DOD's budget and the VA's budget, and I would like that question answered as well in the record.
    Mr. MANSFIELD. I could answer that one right now, and say no.
    The CHAIRMAN. Thank you.
    Mr. EVANS. You're referring to page 154?
    Yes, sir.
    Mr. MANSFIELD. The answer from PVA is no.
    The CHAIRMAN. Mr. Peterson, we are up to you, if you would like to ask a question before you leave?
    Mr. PETERSON. No; I am going to the agriculture committee.
    The CHAIRMAN. All right, sir. The Chair recognizes the gentleman from Louisiana, Dr. Cooksey.
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    Mr. COOKSEY. Thank you, Mr. Chairman.
    We are always glad to have all of you here today to make your presentations, and I hope that we are able to fund you as fully this year as we did last year. I understand there has been some concern about the committee not being tenacious enough on the tobacco settlement. We had two or three meetings last week, and I chaired the meeting, this meeting last week, because everyone else was at another meeting; they were worried about Saddam Hussein. And I stated this position then; I feel that—I am a physician you know, and I think that two of the biggest problems in this country today are tobacco and trial lawyers. I think this whole tobacco settlement is a farce, and I think there are too many people putting too much—setting their expectations too high that we are going to get all this money out of the tobacco industry. All that comes from the tobacco industry is going to be coming from insurance companies, and if it comes from insurance companies, who pays insurance premiums? We pay insurance premiums. So, it is just recirculating the money, and you know, as usual, the trial lawyers get an obscene portion of it. I think that cigarette smoking is devastating. I know it is devastating.
    I am an eye surgeon; I did general practice before I did eye surgery, but my patients, before I got this day job, as I call it, were our elderly patients. And I have a lot of old patients. I have patients—I operated on a man 2 years ago that was 113; he is 115 now, but I don't see any 90-year-olds who are smokers or overweight. They just don't exist; they have already been buried.
    Smoking is absolutely devastating. But, since 1964, there has been a warning message on cigarette packages that smoking was bad for you, and people should not smoke. I drive a car too fast; I'm willing to pay a price for that—I actually already have, but I will do it again. But, when you do something like that, you have got to accept some responsibility for doing dumb things like driving cars too fast sometimes and smoking. And, I just don't think that we can expect to solve all the funding problems for VA with a tobacco settlement.
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    I feel very strongly that this Nation owes a great debt and a great responsibility to all veterans, and I think that we need to fund the Veterans Administration with real dollars from this—from the taxpayers of this country and don't put the whole budget up on some questionable settlement.
    Thank you, Mr. Chairman.
    Mr. GORMAN. If I could respond, Mr. Chairman?
    The CHAIRMAN. Yes, just briefly, because I think it is an issue that can go on for a long time.
    Mr. GORMAN. I think we can all agree that the tobacco industry for sure will not fund veterans' programs, because not anything is going into veterans' programs from this tobacco settlement with the exception of that small amount of—not from the tobacco settlement itself, but from the withholding of service connection.
    But the issue of addiction and the issue of veterans being treated on a parity with the rest of the population, it is not the tobacco settlement per se that rises or raises so much ire in at least the DAV's position; it's the way the administration is taking one cohort of citizen, that being those who—whether they do or they don't, and that remains to be seen—benefit from the outcome of any tobacco settlement that ever is agreed to or reached, but they take the general public and say it is going to be good enough for you because the tobacco industries have been these bad people all these years; they have concealed, they have misled, all those kinds of things. So, we are going to take care of paying back the health care costs to the States and the individuals to address the very issues you are raising.
    But, on the other hand, when you look at it, what do veterans get out of this? It is not that the veterans are holding themselves out like we should get something out of it, but what is being taken away. Veterans are being penalized for the mere fact that they are veterans, and that is where we draw the line. Although—and you get into the minutiae of all of this, I think the issue—but the fact of the matter that, perhaps warning labels appeared on cigarettes as early as the mid-1960's, but if you were in Vietnam in the late 1960's, as I was, Gordon was, and many others in this room were, those labels didn't appear on any cigarettes that we received.
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    So, there is an addiction issue; there is also treating two groups of citizens differently and disparately, and in this case, it is veterans that are getting, not only the short end of the stick, they are not getting any of the stick. And, they are being penalized for the mere fact of being veterans. That is where we take the exception, because on the one hand you have a philosophical view that the tobacco settlement—again, if it ever is reached, should do this—you also have a brand-new philosophical view from the same administration that says, but we are not going to do it for these veterans. We are going to penalize them for the very behavior that we are now holding a third party, being the tobacco industry, responsible for. That is where, at least from DAV's perspective, that is where the inequity lies.
    Mr. COOKSEY. I accept that point. But, I think there are too many people expecting to get this great tobacco settlement, and I think this administration is planning half of their budget on the tobacco settlement, which may not ever materialize. It may, I don't know.
    The CHAIRMAN. Thank you, doctor. Mr. Evans, any other comment?
    There is going to be a fight on the tobacco question or issue. There is no question about it. I would simply say that I don't know of any other American that is being compensated, other than this proposal to compensate veterans. And, it is going to be a tough decision, whether the American people are going to be willing to accept compensation for any tobacco-related illness, which in fact could be probably construed to almost any illness now, if you smoked long enough. But those are some fights we are going to have to face and decisions we are going to have to make. You can rest assured, as we have in the past, we are going to increase this budget that has been proposed by the administration. We have in the past, and we certainly will now.
    Mr. Mansfield, did you have any——
    Mr. MANSFIELD. Just a comment and maybe a question. You mentioned that you don't know anybody else that is being compensated. You might ask your counsel to check and see if individual American citizens who are disabled by reason of tobacco-related diseases are receiving social security disability income or SSI.
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    The CHAIRMAN. I will check into that. Any additional comments?
    Mr. GORMAN. Could I make one, Mr. Chairman?
    The CHAIRMAN. Certainly.
    Mr. GORMAN. I don't want to hold anything up——
    The CHAIRMAN. That is all right.
    Mr. GORMAN. The issue was raised of the so called page 154 in the budget document that comes out of the big budget book, not the VA section, but the Federal budget itself, and titled accurately ''recognizing and reporting veterans' benefits,' and it is very distasteful, in my opinion anyway—the statement about how they treat—how the Government should treat veterans' issues. But, there is one particularly offensive statement in here, and this is the administration's document, and it says: ''without defense,'' meaning the Department of Defense, ''veterans' programs would not exist.'' I don't think any of us have ever used as an incentive to go into the military that we would want to take advantage of the VA's disability compensation program some years later.
    And, I would say that, without veterans, we probably would not be sitting here discussing these very issues today, nor would the country be enjoying the prosperity that it is enjoying today, or the freedoms it is enjoying. So, it is an offensive statement to me, personally. It is to the Disabled American Veterans and the million members of my organization that have gone off to war and lost life, limb, and sometimes minds—or, the ultimate sacrifice—in defense of this country. I just wanted to make that point.
    The CHAIRMAN. Mr. Gorman, I am sure this committee agrees with you, and that certainly was not a motivation, in my opinion, for anyone that ever went into the service, so that he could get those benefits. Dr. Cooksey?
    Mr. COOKSEY. I agree with you. I was in the Air Force in 1967, 1968, and 1969, and there was a war going on, and I agree with you. Where was that statement? I would like to see it.
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    Mr. MANSFIELD. Page 154, it's in the entire Federal budget. I am not sure of the document's title. I would be more than happy to give you a—or print you a copy.

    Mr. COOKSEY. Sure.
    Mr. STEADMAN. Mr. Chairman, if I may speak for the Independent Budget, we certainly applaud your statement with respect to providing an adequate budget for veterans.
    The CHAIRMAN. Thank you. No further comments?
    Gentlemen, thank you, very much. If we could have the fourth panel, please.
    Good morning, our fourth, and final panel consists of Carroll Williams, American Legion, and Larry Rhea of the NCOA, testifying on behalf of the Military Veterans' Alliance.
    Gentlemen, we appreciate you waiting, and we appreciate your work. You are recognized to proceed in anyway you see fit.

    Mr. WILLIAMS. Thank you very much, Mr. Chairman. I would like to wish you and this committee a pleasant morning, and I would also like to inform you that it is a pleasure to be present this morning to present the American Legion's views on the President's proposed fiscal year 1999 budget for the Department of Veterans Affairs.
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    In the American Legion's judgment, the proposal includes some recommendations that agreeably exceed our expectations and our recommendations that—there are other recommendations that failed to meet certain basic requirements. The American Legion presents is fiscal year 1999 budget recommendations for key VA programs in its prepared testimony.
    Mr. Chairman, the American Legion is supportive of the re-engineering efforts currently underway within the Veterans Health Administration, and the Veterans Benefits Administration. With many of the objectives already attained or in progress, these and future changes will greatly benefit the Department and its beneficiaries. However, the Department will not be able to achieve all of its objectives solely through the re-engineering process. A consistently reliable level of funding and staffing is needed to ultimately make the VA modernization efforts successful.
    Over the past 3 years, the Veterans Health Administration has been evaluating and reinventing the way it provides services to maximize limited dollars and resources. The VHA is in the second year of its 5-year 30–20–10 plan. The American Legion closely monitors the impact of the recent changes within VHA. We are aware of both progresses and problems.
    Mr. Chairman, there is a great amount of uncertainty over how the Veterans Health Administration will deliver health care in the year 2002 and beyond. The American Legion is concerned the VHA could reduce its core programs and services too much in its zeal to become more cost-efficient. The recent VHA Office of Medical Inspector Report on two New York medical centers, primarily Montrose and Castle Point, is a testimony to how reality sometimes conflicts with the preferred outcome. The Veterans' Equitable Resource Allocation, or VERA, model is an attempt to provide fair and consistent access to care throughout the VHA system. However, regardless of how the medical care budget is distributed, the annual budget allocations do not adequately cover unavoidable medical care cost increases and inflation.
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    In brief, the American Legion believes the VHA system requires further reform and needs to establish specific interim objectives, as well as identify the ultimate goal of its strategic plan. As this committee is aware of, the American Legion offers the GI Bill of Health as a workable solution to preserving and improving the Veterans Health Administration well into the 21st century. And, we look forward to this committee holding timely hearings on this proposal.
    Mr. Chairman, for a variety of reasons, the American Legion does not share the administration's views or conclusions concerning tobacco-related illness claims. Regardless of whether the estimates of the potential number of claims and benefits costs involved are reasonably accurate, or overstated, the solution to the Veterans Benefits Administration funding dilemma should not be predicated on the arbitrary elimination of the benefit or a failure to make an adequate request for resources.
    The American Legion is strongly opposed to the legislation currently pending to prohibit any future tobacco-related claims as being fundamentally unfair to veterans who become ill or die of an illness related to their military service. The American Legion is also adamantly opposed to the principles of taking away those benefits earned by one group of veterans to fund benefits for other veterans.
    Mr. Chairman, the American Legion urges the administration and the Congress to protect veterans and the current VA disability and medical benefits by pursuing a comprehensive Federal settlement with the tobacco companies.
    Mr. Chairman, in summary, the Department of Veterans Affairs promises to improve the timeliness and quality of services of both the Veterans Health Administration and the Veterans Benefits Administration with vastly fewer resources. Based on the fiscal year 1999 budget request for medical care and the benefit claims program, as well as future year projections, it is undetermined whether the VA will be able to deliver on its promises.
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    Mr. Chairman, that completes my statement, and I will be glad to answer any questions that you may see fit to ask. Thank you, very much, sir.
    [The prepared statement of Mr. Williams appears on p. 139.]

    The CHAIRMAN. Thank you, Mr. Williams. Mr. Rhea.

    Mr. RHEA. Thank you very much, Mr. Chairman. Good morning. I am Larry Rhea of the Non Commissioned Officers Association, and I am pleased to present testimony this morning on the fiscal year 1999 VA budget on behalf of the National Military and Veterans Alliance.
    The Alliance is composed of nationally-prominent military and veterans' organizations that collectively represent more than 3 million members of the seven uniformed services. That includes officers and enlisted individuals, people on active duty, people serving in the National Guard and Reserve, retirees, veterans, plus their families and survivors.
    In our prepared testimony, Mr. Chairman, the alliance mentioned several areas of this budget that we support; for example, the cost-of-living adjustment, the 10 percent increase in medical research. We are pleased that the administration is, again, backing the idea of Medicare subvention, and we are greatly appreciative for the activation money for the four national cemeteries in Chicago, Dallas, Saratoga-New York, and Cleveland-Ohio.
    The Alliance does, however, have several areas of concern and outright objection in this budget. We, like others, are concerned that the administration is placing too much reliance on third-party recoveries for veterans' health care. We, like others, believe that VA should be allowed to collect and retain third-party reimbursements, with that money being used to improve the delivery of health care to veterans. Collecting reimbursements, and then offsetting appropriations in an equal or near equal amount, is a zero-or negative-sum proposition. It is a shell game that will never allow VA to make up the ground lost in earlier budgetary cycles.
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    While the $92 million in fiscal year 1999 for the National Cemetery System represents an $8 million increase over the fiscal year 1998 level, this budget proposal does not address at all the longstanding and growing list of requirements for maintenance and equipment replacement. This committee is aware of that backlog in this area confronting the National Cemetery System, and the Alliance is hopeful that this will be the year that we start to address this problem.
    When one looks at VA's intentions, beyond opening the four cemeteries I mentioned earlier, there are no plans for the National Cemetery System. Yet, even with the addition of those four new cemeteries, the system is not adequate to meet the burial needs of the World War II population alone. When this area of the budget was briefed, the VA briefer stated that they have adopted a wait-and-see attitude. Wait and see in this area, Mr. Chairman, is not good enough. A properly-funded plan needs to be in place that will accommodate future requirements—a plan that includes the National Cemetery System, complimented by the States' Veteran Cemetery Program. It appears, though, that VA wants the State Cemetery Grants Program to ultimately take over what should be part of the National Cemetery System.
    The Alliance was pleasantly surprised with the proposal for a 20 percent increase in the education benefit for the Montgomery GI bill. That elation turned to disappointment, and then to anger and frustration, when we learned of the conditions attached. I will remind the chairman and the members of this committee that in last year's budget debate, and in the Balanced Budget Act, the veterans' education benefit was completely ignored, even though more than $100 billion in combined increases and tax incentives for non-veteran education was approved.
    I would respectfully suggest to the chairman and the committee, that if Congress can find $100 billion, as was done last year and another $26 billion, as is proposed this year for non-veteran education, then the Alliance believes that Congress can find, and has the moral obligation to do so, a substantial increase to the Montgomery GI bill benefit, and do so without any conditions or strings attached.
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    The Alliance is opposed, like everyone else here this morning, to disallowing compensation benefits for tobacco-related illnesses. The Alliance believes, quite frankly, that VA is making this an issue where one might not exist. According to VA, the very integrity of their system is at stake on this one issue. If that is the case, Mr. Chairman, if their integrity is at issue on smoking, they would have moved a long, long time ago to discontinue some of the practices that they still do. Somehow, VA does not object to spending massive amounts of money on alcoholics, drug addicts, and veterans with AIDS, but somehow now a veteran who smoked is a threat to their otherwise pristine system.
    And the alliance believes that the evidence is more persuasive to establish service connections for some tobacco-related illnesses and for some veterans than for any or all of the aforementioned conditions. In the strongest possible terms, Mr. Chairman, the Alliance urges you to reject the administration's proposal.
    The Alliance is also opposed to the $25 fee on the VA program. Because, here again, that represents another chipping away at a benefit that does absolutely nothing to add value to the home loan program.
    Perhaps one of the most interesting proposals with long-term implications in the administration's budget is in the DOD portion regarding the current budgetary treatment of veterans' programs. In a measure that the administration claims will more accurately measure the true cost of national defense and better serve veterans, they want to create an accrual accounting program for VA benefits in the military personnel accounts of DOD.
    Mr. Chairman, this proposal could seriously diminish the value of regular military compensation. Additionally, it would vest funding responsibility in an agency that has no requirement to provide services. DOD does not have responsibility for VA programs, and the Alliance does not believe that veterans would be afforded the priority and the advocacy they deserve. The alliance would support accrual accounting and funding of VA programs within the VA budget. VA is the appropriate place to address this initiative, not DOD.
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    In conclusion, Mr. Chairman, Mr. Evans had it right in his opening remarks. We simply believe that this committee has an obligation to advocate funding for veterans' programs and benefits without linking any increases to additional fees, conditioning increases to outside sources, or repeal of the tobacco payment authority. We believe that we can do better for veterans, and that veterans have earned more than the uncertainty and the questionable things that this budget offers.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Rhea appears on p. 150.]

    The CHAIRMAN. Thank you. Mr. Evans had some questions that he wanted to submit for the record, if you would, please.
    (See pp. 260 and 266.)

    The CHAIRMAN. And, let me assure you this committee shares your frustrations over the shortcoming in the administration's budget request. We expressed our disappointment to the Secretary the other day on the lack of effort, I think, in collecting third-party collections, and whether it was anticipated, whether it was a case of over-projecting, or whether it was a case of not being diligent enough, and that we will resist any attempt to try to offset this budget with those funds. That was not the purpose of us seeking that third-party collection and being able to retain it, and we are going to fight it.
    I guess, since I am the only one here, I have no more questions. I thank you, gentlemen, for waiting, and look forward to working with you, and thank all of you for all of the effort you have put in.

    [Whereupon, at 11:20 a.m., the committee adjourned subject to the call of the Chair.]
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