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House of Representatives,
Committee on Veterans' Affairs,
Washington, DC.
    The committee met, pursuant to call, at 9:30 a.m., in room 334, Cannon House Office Building, Hon. Bob Stump (chairman of the committee) presiding.
    Present: Representatives Stump, Bilirakis, Everett, Buyer, Quinn, Stearns, Moran, Cooksey, Chenoweth, LaHood, Evans, Kennedy, Filner, Gutierrez, Bishop, Clyburn, Brown, Doyle, Mascara, Peterson, Reyes, and Snyder.
    The CHAIRMAN. The meeting will please come to order.
    I'd like to welcome all those that are appearing today to testify before this committee. For the first time in recent memory, we will hear testimony concerning the budgets of the American Battle Monument's Commission and the Arlington National Cemetery.
    Our first panel is headed by our Secretary of Veterans Affairs, Jesse Brown, and we're looking forward to his statement.

    The CHAIRMAN. However, Mr. Secretary, I must tell you I am very concerned about your health care budget proposals. The administration request assumes that Congress will enact legislation this year to allow VA to keep all the fees and health insurance collections it presently deposits in the Treasury.
    It also assumes that Congress will enact Medicare subvention legislation which will produce over a billion dollars in the future years, the next 5 years. Additionally, this budget is based on an assumption that VA will lower its cost per patient by 30 percent over the next 5 years.
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    This committee will pursue Medicare subvention and retaining insurance collections as additions to our appropriated dollars, as we have done in the past. But let me remind you that the last time we tried to pass a third party collections proposal, I believe the veterans themselves came up and objected.
    Now, maybe they're more uniform this time, and I hope so. But what concerns me is what happens, and I'll get to this later, if we don't pass this legislation by some means. Then we're going to be about $590 million dollars short in health care, and I don't know how we can overcome that.
    I think it's unprecedented for VA health care spending to be conditioned on the passage of such legislation. Mr. Secretary, I'm also concerned about the veterans going to school under the Montgomery GI Bill. The GI bill has probably been the most important Federal legislation passed in the 20th century.
    It has done more to create a post World War II middle class than any other law passed by Congress. Unfortunately, it appears that the budget increases nearly every other education program while ignoring the GI bill. And we are determined to raise this issue in our budget deliberations this year.
    Mr. Secretary, I'd also like to mention two other programs: the Cemetery System and the Benefits Administration. National Cemetery Director, Jerry Bowen, recently visited Arizona and our National Memorial Cemetery in Arizona and the Post Cemetery at Fort Huachuca.
    Now, our cemetery's the tenth busiest cemetery in this country and I want to thank him for taking the time to come to see these cemeteries and also express my appreciation to you for recognizing the needs of Arizona's only open national cemetery in this year's budget.
    Mr. Secretary, you've begun the process of selecting a new Under Secretary for Benefits, and I hope you'll try to find someone who can do for the Veterans Benefits Administration what Dr. Kizer is doing for the health care system.
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    It will take someone who is willing to bring innovative ideas to the difficult task of improving timeliness and the quality of claims processing, and I hope you find such a person.
    I would now like to recognize the ranking member, Mr. Evans, for his statement.

    [The prepared statement of Chairman Stump appears on p. 97.]

    Mr. EVANS. Thank you, Mr. Chairman.
    I believe that the fiscal year 1998 budget proposed last week for the Department of Veterans Affairs is a pretty good starting point. It provides a foundation on which to construct a budget to meet the needs of our veterans.
    For example, I commend the President and the Secretary for recommending VA retain all insurance and other third party reimbursements that the VA collects. VA retention of these funds to provide veterans' health care is a proposition this committee has long supported.
    We should give this proposal full consideration. Our job is to make a fair and informed decision when the details of this proposal are made available.
    On the other hand, I am disappointed that a budget that correctly emphasizes expanding educational opportunities for our citizens does not include an increase in the VA educational benefits. The strength of our Nation's economy and national security depend on and will benefit directly from improving education.
    It is clear to me, however, that the young men and women who earn their GI bill benefits through honorable military service should be among the first to benefit from the President's commitment to improving the quality and availability of education in our country.
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    As Americans, we value our national honor and deeply respect our national commitments. If we do not keep America's promise to ''care for him who shall have borne this battle and for his widow and for his orphan,'' our integrity as a Nation is undermined.
    It will be our task and our responsibility to ensure that the budget we in Congress adopt provides the resources the VA needs to achieve excellent health care to veterans in a timely manner. The budget must provide VA the tools it needs to process claims quickly and accurately.
    The budget must be sufficient to ensure that vocational rehabilitation opportunities we provide for our disabled veterans are second to none. The budget must ensure specialized services for blinded veterans and those with spinal cord problems continue to be among the finest in the world.
    In short, the budget must be one that keeps America's promise to our veterans and their families. I look forward to working closely with you, Mr. Chairman, to achieve that goal.

    [The prepared statement of Congressman Evans appears on p. 101.]

    The CHAIRMAN. Thank you, Mr. Evans.
    Mr. Secretary, let me take a second to remind those that are not familiar with that little green light, and I'm sure you are, that—and we have requested that if possible, we—if you could keep your remarks to 10 minutes.
    Of course, as always, your entire statement will be printed in the record. And those statements of anyone testifying will be printed fully in the record.
    The members will be recognized by seniority, those first that were here as the gavel went down, alternating from side to side. And those that came in after the gavel, of course, regardless of seniority, will be recognized after the members that were here before then.
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    Mr. Secretary, let me once again welcome you; and the floor is yours, sir.


    Secretary BROWN. Thank you very much, Mr. Chairman.
    Mr. Chairman, thank you for allowing me to present the President's 1998 budget request for the Department of Veterans Affairs. I see there were several changes in the committee since I was here last year, and I would like to congratulate Congressman Evans on becoming the ranking Democrat.
    I also would like to congratulate the new leaders of the subcommittees, Congressmen Everett, which I will be seeing, I guess, in a week or two; Congressmen Quinn, Stearns, Gutierrez, Filner, and Bishop.
    Finally, I am glad to see all of the new members. We look forward to working with all of you.
    Mr. Chairman, we are requesting $17.6 billion for medical care, $19.7 billion for compensation and pension payments, $818 million for VBA, $84 million for national cemeteries, $234 million for research, $79.5 million for major construction, and $166.3 million for minor construction.
    The details on the total of $41.1 billion and 210,625 employees for VA programs are contained in my written testimony.
    I think this is a good budget because it will allow VA to continue providing quality care and services to our veterans and their families. The President's proposal is innovative and historic. It builds on our progress and makes changes needed to operate within budget realities.
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    These changes and eligibility reform offer VA a great opportunity to expand and improve health care services, attract new revenue streams, and provide value to taxpayers. Our proposal includes some new tools to keep the system alive.
    I am pleased to report that VA will expand and improve health care delivery in 1998 without any appropriated increase above the 1997 enacted level for medical care. This is unprecedented for our system.
    Mr. Chairman, we have been very proactive in changing the way we do business. And if we are to continue, we need the help of Congress. Critical to this so-called baseline strategy is our proposed legislation to retain all third party collections.
    Retaining MCCR collections will require an offset of $1.9 billion dollars. The OBRA extenders that we are proposing provide savings of $3.4 billion, which means $1.5 billion for deficit reduction.
    It is also our goal to collect Medicare reimbursement for higher income, non-service connected veterans who choose VA health care. This will require legislation authorizing the VA Medicare demonstration. Passage of our legislation package will permit us to accomplish the following:
    By the year 2002, we expect to reduce the per patient cost of health care by 30 percent, increase the number of veterans served by 20 percent, and fund 10 percent of VA's health care budget from non-appropriated revenues.
    These three goals are mutually dependent. We cannot accomplish any one of them alone. Without enactment of these legislative proposals, a straight line appropriation in 1998 would force the VA to deny care to 105,000 veterans and eliminate 6,600 health care positions.
    By the year 2002, we would have denied care to half a million veterans. However, under our proposal, we would provide care to half a million more veterans; treat 3.1 million unique patients, an increase of 135,000 over 1997; provide 890 inpatient episodes of care and 33.2 million outpatient visits.
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    Mr. Chairman, we have worked hard on this proposal. And while it is different, if we are to accomplish our goals, we must increase the number of veterans that we serve. And we must be able to collect and retain the MCCR revenues.
    We should no longer send this money to the Treasury. We should be allowed to use it to treat sick veterans.
    Mr. Chairman, this concludes my statement, and I look forward to working with you and the committee members to honor the commitment we have made to our veterans and their families. I will now be happy to respond to your questions.

    [The prepared statement of Secretary Brown appears on p. 118.]

    The CHAIRMAN. Thank you, Mr. Secretary, for that statement.
    I just have one brief question. And that is, what happens if the VA's plan for collecting these insurance monies or for us passing that bill—what happens if we don't pass that bill by the time the fiscal year starts? We're going to end up $591 million dollars short.
    And would it be your intention to maybe ask for a supplemental or just what are we going to do?
    Secretary BROWN. Well, the bottom line is that we have to have that money. What we have tried to do is look within the fiscal realities that we are dealing with. No longer are we going to enjoy the days of yesteryear when we were able to get a billion dollars each and every year.
    That's not going to happen. So we have to look forward to the future to try to figure out a way that we can continue to make our services available to our veterans. And in order to do that, that's one of the reasons why we came up with the particular approach that I described.
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    If that money is not there, then obviously we are going to have to rely on the good will of the Congress to come to our aid. The bottom line is that we must have that revenue. And I'm particularly concerned about the $600 million dollars.
    I would like to see the legislative proposal that we submitted granted because we have been working for it a long time. But certainly if it is not, I would like to see the money replaced through the appropriation process.
    And with one caveat to that, I might say, Mr. Chairman. I certainly would hope that the money won't come from other veterans within our appropriation category. I just don't believe that it is fair to take money from one group to fund another group.
    The CHAIRMAN. Mr. Secretary, I'm sure this committee agrees with you on that last point. And as you know, we've gone on record for many years favoring the collection and retention of these, along with these insurance funds, along with Medicare subvention. That may be a little harder.
    And I realize it does not have probably any impact on the first year's budget, but in the out years it does.
    Thank you very much, Mr. Secretary.
    Secretary BROWN. Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Evans?
    Mr. EVANS. Mr. Secretary, you indicate that we're talking about $600 million dollars next year in third party reimbursements, but that's less collection expenses. What amount would be left after collection expenses are taken into account?
    Secretary BROWN. The net effect for medical care would be $468 million dollars. But the reason why I talk about the $600 million, and I'm excited about that, because this legislation allows for us to keep all third party reimbursement. And we pay for the collective efforts out of total revenue.
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    We plan on reducing that. We spend now about $125 million dollars to collect about a half a billion dollars. I think that's too much. We are right now in the process of developing a business plan that will allow us to reduce our expense ratio, and I plan on using the difference to invest in additional health care for our veterans.
    Mr. EVANS. Well, the other side of the equation, how can we be assured that the VA won't be forced to reduce discretionary spending to offset third party collections that it receives? I mean, if we're totally successful on this, won't there be pressure on us essentially to see discretionary spending in the VA drop by that amount?
    Secretary BROWN. Well, in our budget—again, I would have to throw myself at the mercy and the good will of our congressional process. In our budget, we call for straight lining appropriations at the 1995 level—1997 level; with the caveat, of course, that we be able to maintain third party reimbursements and also hopefully an expansion of Medicare subvention.
    And if we interfere with that process, then the objectives that we have described—that I described in my opening statement will be severely compromised.
    Mr. EVANS. So your fall back contingency plan is to come back to us if we don't achieve our third party collection goals?
    Secretary BROWN. Yes, sir. You're the ones with deep pockets.
    Mr. EVANS. Besides the actual health care problems that we're facing, how are the needs of homeless veterans, women veterans, and minority veterans better met by the VA under the proposed budget than they are today?
    Secretary BROWN. Well, we have continued to maintain that these are high priorities within the VA. Over the last 4 years, our requests for additional appropriations for, let us say, homeless veterans—there are 250,000 that we have out on the street each and every night with no place to call home.
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    And we like to say that they do have a home, and it is called America—has increased about 100 percent. And we continue to invest. We continue to try innovative things. We are forging a close relationship with the private sector because many of them are doing different tasks and we want to try to discover what is the right combination.
    So we would want to duplicate that. That effort will continue. Through the support of this committee and the Congress, we have offices that are mandated by Congress to respond to the needs of our women veterans and our minority veterans.
    And I'm very happy that we have been out on the forefront, particularly with this issue involving sexual harassment. We are in the process, if we have not already, mailed a letter to every one of our female veterans inviting them to contact us if any of these tragic events happened to them.
    And we'll provide a full array of services to help them get on with their life.
    Mr. EVANS. All right; thank you, Mr. Secretary.
    The CHAIRMAN. Thank you. Mr. Secretary, if you'd like to introduce those at the table, your assistant secretaries, department heads, please feel free to do that at this time for the record. We'd be glad to have that.
    Secretary BROWN. Yes, Mr. Chairman; I didn't do so initially because I didn't want it to count against my 5 minutes. [Laughter.]
    The CHAIRMAN. Mr. Secretary, we gave you 10 minutes today. I thought somebody told you that.
    Secretary BROWN. We have our General Counsel, Mary Lou Keener; our Acting Under Secretary for Benefits, Steve Lemons; our Assistant Secretary for Management, Mark Catlett; Tom Garthwaite, our Deputy Under Secretary for Health; and Jerry Bowen, our Director of National Cemetery System.
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    The CHAIRMAN. Thank you. We want you to know Dr. Garthwaite did a good job the other day testifying before our hearing on Persian Gulf Illnesses.
    Secretary BROWN. Thank you.
    The CHAIRMAN. Mr. Bilirakis.
    Mr. BILIRAKIS. Thank you, Mr. Chairman.
    Mr. Secretary and members of the staff on the panel there, welcome.
    Mr. Secretary, has CBO scored your portion of the budget yet?
    Secretary BROWN. No, I think we—we're still waiting on the CBO numbers. Yes, we're still waiting on their analysis.
    Mr. BILIRAKIS. What are you anticipating?
    Mr. CATLETT. Mr. Bilirakis, we don't directly deal with CBO on this. It's an OMB issue. But we don't expect any significant changes because these proposals are the same that have been considered before.
    Both the extenders, the extension of the savings proposals that are already in law for our benefits programs, and our MCCR proposals, for which the level of collections in our proposal has already been achieved, should not be a problem.
    So we don't anticipate any major differences on those proposals.
    Mr. BILIRAKIS. Well, you know, I just wish—and I commend the Chairman for holding this hearing. It certainly is timely. But I think we all would be a heck of a lot more comfortable if we had the CBO figures. But we don't have, so we can't do much about that.
    But I know that in the past, the CBO has always scored, for instance, Medicare subvention proposals as costing Medicare a significant amount of money. And really, the only thing that we've been concerned with has been the DOD retirees, the DOD subvention, not the—all the veterans' subvention.
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    So your goal—you know, I don't think we should take the tack of throwing stones at the administration or at the administration's budget because it's a partisan thing to do or anything of that nature.
    I know that the bottom line for all of us, of course, is veterans and taking care of our veterans. And I know how you feel about that, Mr. Secretary. And I can't really believe—I mean, you've done a good job sitting there and basically telling us the party line, if you will, the administration line; but I can't believe that it comes from your heart.
    And I'm not asking for a response to that from you because it—you're throwing the whole onus basically on the Congress. Is the Congress going to pass these pieces of—these conditional legislation that you're referring to?
    You know, we have big Medicare problems. And you know that as well as everybody else here. And now we're talking about taking more out of the Medicare fund that would ordinarily go into Medicare. We're talking about taking it and switching it over into the VA.
    And that's going to be a tough nut to crack insofar as the Congress is concerned. The third party payor—I've always thought that we should—that money should inure to the benefit of the VA, not go to the general revenue fund.
    But we also have the budget to cope with now. And there's that certain amount that is a part of—that's contemplated in the budget. So now we're talking about taking that out of the budget; and that's not a sure thing, I don't think. Hopefully that will be an easier nut to crack than Medicare.
    So you've considered how the Medicare program will fund your subvention proposal—you've taken all that into consideration in the process here?
    Secretary BROWN. Yes. And Mr. Bilirakis, let me just say for the record too that you and I have known each other for a long, long time. And you described my commitment, and I could just take your words and just turn them right back because they certainly apply to you.
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    You have a strong veterans record historically, and I thank you for that.
    We thought a long time. And quite frankly, we are somewhat confused about this concept that allowing VA to charge the Medicare account for services rendered would somehow reduce the Medicare Trust Fund. From our standpoint, that is simply not true.
    First of all, we are only saying that it would only require reimbursement from high—from people that are currently locked out of the system. That's our so-called category C's, which is our high income, non-service connected veterans.
    They are already using their Medicare. They're using it in the private sector. So we are simply saying, give them an additional option. If they're spending, let's say, $4,000 a year in the private sector for care, we're simply saying let VA be on that list.
    And so it theoretically is good government because we provide care generally at a lower rate than the private sector. So it will be, I think, a value that accrues to the taxpayer.
    Mr. BILIRAKIS. Well, but you refer to the private sector. I'm talking about Medicare dollars which are now a part of the Medicare budget or the Medicare pot, if you will.
    And now—and those dollars—if that particular veteran is not using Medicare now and is using the VA instead, then those dollars are there still for the benefit of that Medicare pot. But now you're taking and switching them from there over to the VA.
    Secretary BROWN. No, no. What we are saying—we only want reimbursements for the people that are locked out of the VA. They can't get into the VA today. They simply—there is no one that we will request reimbursement for that's currently receiving care from the VA.
    Mr. BILIRAKIS. Well, but there are people, sir—there are people, sir, who would be able to get the benefit from the VA who quality under the eligibility rules who still currently might use Medicare or currently use third party——
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    Secretary BROWN. And they would not be billed. They would not be billed. Our whole philosophy and approach to this was not to request reimbursement for people that already had access to VA care. So therefore, you don't end up giving folks dual entitlement here.
    For those that we already are taking care of, we will not bill Medicare. We would only bill Medicare for those who do not have entitlement or access to the VA currently.
    So in that respect, it shouldn't cost, theoretically, Medicare one additional dime.
    Mr. BILIRAKIS. I'm not sure—you know, I may have a misunderstanding, but I'm not sure that we have a meeting of the minds on it. My time is up, but it's something that we'll be continuing to talk about.
    Secretary BROWN. Thank you.
    Mr. BILIRAKIS. Thanks, Mr. Chairman.
    The CHAIRMAN. Mr. Secretary, we're certainly going to need your help in getting this through the Ways and Means Committee.
    Secretary BROWN. Well, we're going to work hard.
    The CHAIRMAN. The gentleman from Pennsylvania, Mr. Mascara.
    Mr. MASCARA. Thank you, Mr. Chairman.
    Mr. Secretary, welcome.
    Secretary BROWN. Thank you.


    Mr. MASCARA. These are not ordinary times. I'm sure we all agree to that. And many of us have the propensity to deal in smoke and mirrors as it relates to fiscal policies.
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    And I'm not suggesting that you're doing that, but I'm—as an accountant in my former life, I'm having some problems. On page two, there's a paragraph there, and I'll cite the area that I have some concerns about.
    ''Our budget request commits us to reduce the per patient cost for health care by 30 percent, increase the number of veterans served by 20 percent, and fund 10 percent of the VA health care budget from non-appropriated revenues by the year 2002.''
    First of all, do you have any figures on what the reduction in costs would be by reducing those costs of 30 percent that you're talking about? The reduction—what would the reduction be? And what would be the increase in the cost for the 20 percent more that you're serving?
    And where do you expect the non-appropriated revenues to come from?
    Secretary BROWN. Okay, I'm going to ask Dr. Garthwaite to respond.
    But before I do, let me just simply say—as I mentioned in my opening statement, each one of the three items that you described is dependent on each other; and we can't achieve the goal without having all three of them in the process.
    And the basic concept is this: it is almost like computers. You know, when computers first came out, they were very, very high. But the more and more we produce, the prices drop. And that's because, as you know as an accountant, we're able to spread the capital costs across.
    The more people involved, the less you can charge because you're spreading your capital costs across the basis. And so, that's basically the approach we're taking when we talk about increasing our veteran population by about 20 percent. And in that process, we're going to end up actually decreasing the per patient cost by about 30 percent.
    Let me ask Dr. Garthwaite to give us a better explanation.
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    Dr. GARTHWAITE. We have a multitude of things that we can do to decrease the cost in medical care. As the Secretary pointed out, we have a significant number of fixed costs. And currently, those costs are distributed over a smaller number of patients.
    With more patients, the cost per patient goes down. Currently, because of the limited revenue streams that we get from appropriations, we have to treat the sickest patients. By bringing in some patients who aren't as sick, we not only reduce current average costs but avoid future costs. It's been shown that if you ignore health care problems and treat them at their latest stages, you spend a lot more money. We think we can decrease overall health care costs. In addition, we've taken on totally transforming the VA system.
    As was mentioned by the Chairman, under Dr. Kizer's leadership and with the great cooperation of our 190,000 people in the system, we've been able to dramatically reduce the cost for care. As an example, in VISN 3 in New York, we've already reduced $130 million dollars in costs and been able to turn that into four new Community Based Clinics and improve the quality of care.
    Based on Gallup Poll survey data, New York veterans are more satisfied. We've been able to change the way we think about providing care. Part of that is moving from inpatient to outpatient care. Part of it is being smarter about the way we buy drugs and services. Part of it is a national nursing home contract that gives us more choice and better rates.
    So we have a myriad of things that we think will continue to ratchet down the costs, especially if we bring in some patients who aren't as sick.
    In terms of the other revenue streams, we think it's critical that we introduce into the system a new variable, and that is incentive and risk. Not risk for the veteran; but in a sense, risk for the health care providers. And we believe that that is a powerful motivator.
    All our people are very excited about where we're going. Most of our people, I can't say all. In a time of change, you can't say all. But I would say the bulk of individuals we talked to, as they get to know our agenda for change and become more comfortable with the change process, have been very excited about where the VA is going and the momentum that we're building.
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    And I think that we have a real great opportunity to use that to our advantage as well.
    Mr. MASCARA. Well, that's fine. I'm still interested in knowing what kind of numbers you have assigned to each of those categories. You say you're going to serve 20 percent more and you're going to have an increase in the number of veterans that you're going to serve.
    And you're saying all of that will be absorbed by the fact that you have more people going through the system and you're going to service those people with the same staffing pattern?
    Secretary BROWN. No, it's going to be better. We are now moving—just 2 years ago—and the Chairman mentioned Dr. Kizer. Dr. Kizer is just simply brilliant not only as a physician, but also as an organizer, and an administrator.
    And we are now moving from where we were just 2 years ago when you would walk into our facility and before they would touch you, they ask you questions like are you service connected; or is that a non-service connected disability? Now we're moving toward primary health care.
    And because of your help, we're going to be able to treat the individual. Once they're enrolled, they can come in and get care for anything as long as there is a medical need. So that's the kind of care we're moving towards. So it's not going to be the same.
    Mr. MASCARA. My time has run out, but Mr. Secretary and Dr. Garthwaite, if somehow you could get to me and tell me how you're going to reduce the per patient cost and how much that 30 percent reduction means to you in your overall budget. We have percentages. We have no numbers.
    Dr. GARTHWAITE. We have a spreadsheet we can get to you.
    Mr. MASCARA. Thank you, Mr. Chairman.
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    [The information follows:]

Strip offset folios 1 to 2 here
Makes pp. 12 to 13

    The CHAIRMAN. Thank you, sir.
    The Chairman of our Oversight Committee, Mr. Everett.


    Mr. EVERETT. Thank you, Mr. Chairman.
    Mr. Secretary, it's certainly good to see you, and I do look forward to your visit to Montgomery. I hope you have some time to go by Selma. I think you know both Alabama and Selma are very proud of the distinguished service that you've given to this country over the years.
    Having said that,——
    Mr. EVERETT (continuing). I also share some serious concerns about this budget. This budget, in all honesty, appears to me to be a budget that has built in shortfalls in the out years. And those are pretty obviously recognized. I recognize them right off the bat.
    As an example, the 1998 budget indicates that the MCCR collections jump from $557 million in 1996 to $903 million in 2002. Considering the fact that that indicates almost an 80 percent increase in your collections, how do you explain that you're going to be able to do that?
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    I don't want to see a situation develop where we recognize and know that there are shortfalls there, and yet the administration comes back and says well, the Congress wouldn't give us more money when they built the shortfalls into the budget to start with.
    Secretary BROWN. Well, one of good things that's come out of this whole process, and obviously I personally have not necessarily agreed with the end result; but what has come out of it is a desire—not a desire. It's a situation which has forced us to look for every opportunity of efficiency.
    And let me just—and you mentioned the MCCR. Now, when we look at that—and I mentioned as one example that we—that I gave. It cost us $125 million dollars to collect $500 million dollars—$545 million or so a year.
    And that's with no incentive. No incentive whatsoever. None. So there are two things right there that we can look at. Number one, I don't want to spend $125 million to collect that. The private sector probably is doing it much cheaper, which we are looking at.
    We are looking at bringing that cost down. I'm looking at somewhere around, quite frankly, about $50 million—$50 to $75 million to collect that money. That's one thing. So we will take the difference and just add it to that number.
    Another thing is this. The VA—we've got a kind of a crazy system in—when a bill comes in, we could just—no matter what the cost is, we charge a flat rate, $150. We are moving away from that. We are going to look at what our actual cost is.
    And I think that that's going to have a significant impact on the amount of revenues that are generated. So those are some of the things that—the reason why we are very confident that we can achieve the goals that are contained in the budget proposal.
    Mr. EVERETT. Well, I think rather than pursuing that topic, the Oversight Committee will have additional hearings on this, and we look forward to discussing it with you.
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    Let me switch just a minute. The veteran population continues to age, as you know, rapidly. Yet this year, the administration is again requesting a decrease in funding for the State Extended Care Grants Program. I think that's not working in favor of the veterans.
    Secretary BROWN. Well, let me tell you, you're absolutely right. I don't disagree with you on that. I think that's one of our most efficient programs in terms of our cost efficiency that accrued to the Federal Government or to the Federal taxpayer.
    But I have a real major problem. I only have so much money. And so we had to prioritize what was important to the veterans and their families. I would have liked to have, for instance, a straight line increase on each and every account. I would—it hurt me to my heart that I had to reduce research.
    You know, so there are many things that I would have liked to have done. But looking at the fiscal realities of it, it just was not enough resources to do what I wanted to do. So we had to make the best judgement that we could.
    Mr. EVERETT. I appreciate your concern about reducing research also in light of the Persian Gulf situation that we're currently facing.
    Mr. Secretary, as always, I enjoy our conversations. They're always interesting, and I do look forward to seeing you in Montgomery.
    Thank you, Mr. Chairman.
    Secretary BROWN. Mr. Everett, on the issue of Persian Gulf, I do want you to know in our research there's certain things that we fenced off, and Persian Gulf research would be protected. It will certainly not suffer.
    I'm sure that it will probably continue to grow as a larger percentage of any research dollars that are available.
    Mr. EVERETT. Mr. Secretary, I'm pleased and I know the committee is pleased, to hear that. Thank you.
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    The CHAIRMAN. The gentleman from Texas, Mr. Reyes, is recognized.


    Mr. REYES. Thank you, Mr. Chairman.
    Mr. Secretary, it is always a pleasure to see you, and I too appreciate all the work—the hard work that you do on behalf of our veterans. I have just a couple of questions.
    The first one I have is, from the district that I represent, there are a number of unique issues that come up with minority veterans. And specifically, well, as an example, the development of diabetes and things like that.
    Are there specific programs that the VA is engaged in to address those unique issues as they pertain to minority veterans?
    Secretary BROWN. Yes, sir. Because of the support of this committee and the Congress in general, we have a minority veterans' program under the direction of Willie Hensley, who happens to be a retired colonel. He is doing an outstanding job at recognizing the unique needs of minority veterans and developing close relationships with various components of our Department to try to find resolutions to them.
    So he is doing a great job on that side, and Joan Furey is doing a great job on the women veterans side to address those kinds of concerns.
    Mr. REYES. Thank you. Just switching—because I'll tell you, there is a large segment of the minority veteran population that lives along the border, specifically down in the Rio Grande Valley, where accessibility to VA health care is—use the word impractical since they have to travel over 200 miles to the closest facility.
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    And I notice in the budget that you were forced to take a 543 FTE cut. And it's mentioned that this will be offset by streamlining and restructuring and doing other things that will make the VA much more effective.
    In lights of the needs that we specifically have in those Minority populated areas, is it practical—and I believe we understand the situation you're in; but is it practical to take a 543 FTE cut, with areas that are under served like that?
    Secretary BROWN. Sir, the 543 cut that you refer to is VBA. That's our Veterans Benefits Administration. So it has nothing to do with health care. But with respect to health care, what we're doing is really much more exciting.
    We're going to have some cuts in health care that we are proposing. I think we're proposing in the 1998 budget about a 1,700 FTE reduction. But what's exciting is, the savings that are being generated. One example is our inpatient bed census is going down and our outpatient episodes are going up, which represent a tremendous savings.
    We are taking that money and we are reinvesting it in access. We're developing—we're going to have hundreds of new Community Based Clinics all around the country so veterans will be able to go and get their primary health care.
    That's going to be very cheap, very cost effective because we can just come to, say, Dr. Bishop and say Dr. Bishop, you, for all intents and purposes, will be a VA community based clinic. We're going to send all of our patients to you. You will take care of them.
    If they need sophisticated tests, then you will send them to a VA hospital. Of if they need hospitalization, they'll go to a VA hospital. If there's an emergency nature, we'll have a sharing arrangement already established with the local facilities.
    So these are the kinds of things that we—what's in our plan to allow us to increase the veterans we treat by 20 percent—that we are describing in this particular budget. So we think it's really good news in the long run; but we have to keep the package together, or otherwise it falls apart.
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    Mr. REYES. Thank you, Mr. Chairman.
    The CHAIRMAN. Thank you. The gentleman from Arkansas, Dr. Snyder, is recognized.


    Dr. SNYDER. Thank you, Mr. Chairman. I'm sorry I had to step outside.
    I wanted to go back to Congressman Mascara's concern about the—what I call government by base ten number system; you know, 30 percent and 20 percent and 10 percent. Because it seems like, as time goes by, if instead of, you know, that 10 percent, it turns out to be a 3 percent, and a 30 percent turns out to be an 18.7 percent, and a 20 percent turns—we don't pass it, or whatever; you know, something happens, and suddenly you're billions and billions of dollars behind.
    So I would be interested in seeing the written evaluation too of how you came at those numbers. Tell me, when you look at your per patient cost over the last decade, what has your—do you know off hand what you per patient cost has done?
    Secretary BROWN. Yes, it's about——
    Dr. SNYDER. Has it been going up like everything else has?
    Secretary BROWN. Yes. It's about 43—the average across to the country is about $4,300. One of the things that we're doing is we're looking at pulling—well, that's the average. We're looking on the positive side of the average where some of the facilities are as high as 40 percent—40 percent higher.
    So we're forcing them to come closer in line, making adjustments for things like higher labor costs, special treatment modalities, education, research, and that type of thing. So we're squeezing that.
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    Dr. SNYDER. What has your cost done the last 5, 10 years? Has that——
    Dr. GARTHWAITE. In constant dollars, it's been going down.
    Dr. SNYDER. It has been going down?
    Dr. GARTHWAITE. Constant dollars, yes.
    Dr. SNYDER. So do you know in what—are we talking one or two percent a year, or——
    Dr. GARTHWAITE. Yes, about that range.
    Dr. SNYDER. Okay, so you're anticipating—so a 30 percent reduction over 5 years, you're looking to increase what you're doing now by 20 percent or so or—I guess that's not a fair way of looking at it.
    Have you had any independent folks look at your numbers that have been kind of involved in the delivery of medical care in terms of coming—helping—giving you a truth check on these numbers? And are they—or are they just going to be kind of numerical goals like all these lofty things we're going to accomplish by the year 2000 and the year 2001 we're going to——
    Dr. GARTHWAITE. We have had significant outside input, especially at the network level. Several of the networks have contracted with the Meidcal Advisory Board, others have used Ernst & Young.
    Dr. SNYDER. Did you have any of your consultants that you looked at or talked to or people you brought in, kind of the minority side of things, that said no way are you going to make these goals; why are you even throwing these out there?
    Dr. GARTHWAITE. Not that I'm aware of.
    Dr. SNYDER. Okay.
    Dr. GARTHWAITE. I think it's been reviewed by many people in different places, and we've just gotten the network plans in.
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    Dr. SNYDER. I won't ask any further questions. But I would like to see the break down. I'm interested in what Congressman Mascara was, was 2 percent percent related to what, and was 2.7 percent—how we got to a total of 30 and 20 and 10.
    Dr. GARTHWAITE. We agree with you that these are stretch goals. But we also believe that the best organizations in the world set stretch goals and stretch targets to achieve the best.
    Dr. SNYDER. Thank you. Appreciate that.
    The CHAIRMAN. The ranking member on the Benefits Subcommittee, Mr. Filner.


    Mr. FILNER. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary, for welcoming us back. We are pleased to see you again and very glad you are continuing to serve as Secretary of Veterans Affairs. You have maintained excellent communication with the veterans of San Diego and across the country. You are doing an incredible job, and we thank you.
    To quote Mr. Everett, ''. . . having said that . . .'', we know the budget pressures you work under. Nonetheless, many of us are disappointed in some aspects of the proposed VA budget for fiscal year 1998, as I know you are. I am particularly disappointed in the veterans' education programs funding. Obviously the Montgomery GI Bill benefits have not kept up with the ever-rising costs of higher education—which creates significant pressures for our veteran students. To highlight that issue, I am introducing a bill, and I invite all the members of our Committee to join me, which would provide a 10 percent increase in Montgomery GI Bill benefits. I believe this is the minimum level of increase we should be talking about.
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    My bill would also increase education benefits provided for the children and surviving spouses of those who die while on active duty or are permanently and totally disabled as a result of their military service. The benefits paid under this program haven't been increased for 7 years—and the costs of education have soared during these years.
    I want to help you out with this issue, and I hope my bill will at least spotlight the needs that are there. With your fabled ability to get what the VA needs from the President, I was surprised, the budget didn't include increases in veterans' education programs. Given the President's emphasis on education in his State of the Union address, and your long commitment to providing meaningful education assistance to veterans, I'm surprised the benefits paid under the Montgomery GI Bill and other education programs administered by the VA were not increased.
    I hope you can build on that with the President in further budget considerations—and that you can point out to him that he left out one very important group when developing his education improvements. So, I look forward to working with you to accomplish what I know is our shared goal.
    Secretary BROWN. With respect to your comment about the increase in the educational benefits to include Chapter 35, I would only ask that any increase not come from another veterans' program. Let us look somewhere else for that adjustment.
    I don't want to get into a situation that we're taking from widows and sick veterans to fund an educational adjustment. And likewise, in the opposite direction, I wouldn't want to take from people that are receiving education benefits to do the same thing.
    And so I would like to see new money come into the process. And with respect to asking the——
    Mr. FILNER. So moved.
    Secretary BROWN (continuing). With the President to consider a new emphasis in his educational agenda, next time I see him, I'm certainly going to bring that to his attention.
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    Mr. FILNER. Thank you. I understand and share your concerns about taking from one VA program to give to another. We have other concerns with the budget and, as we discuss them, I hope we can somehow find additional resources. I think you know that whether it's the transition assistance program, the benefits programs, or the health care programs, we want to do more in all these areas. As you know, you have a lot of allies on this Committee, and we all want to help you in every way possible. We look forward to working closely with you.
    Thank you, Mr. Chairman.
    The CHAIRMAN. The Chair recognizes the ranking member on the Health Subcommittee, Mr. Gutierrez.


    Mr. GUTIERREZ. Thank you, Mr. Chairman.
    Chairman Stump and ranking member Evans and Mr. Secretary, all of your staff, I'm happy that we're here to discuss the fiscal year 1998 budget for the Department of Veterans Affairs.
    As we all know, the process of change and reform at the DVA has picked up speed dramatically during the past year. Nowhere is this more evident than in President Clinton's budget request for fiscal year 1998.
    It seems to me that while overall, funding has not decreased from the 1997 level, the already scarce resources available to the VA will be allocated in a different manner than in years past. A number of service networks will face significant shortfalls this year and may be forced to consolidate and eliminate some services in their regions.
    The ramifications of the new VA resource allocation framework will be profound. In my review of VISN 12 based around Chicago area, we will lose approximately $57 million dollars. VISN 1 in Boston will lose $52 million dollars, and VISN 3 in the Bronx will lose $148 million dollars.
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    The question the members of this committee must ask, and we are certainly seeking your answer, is how will these cuts affect veterans? Now, I'm not quite sure how we're going to take a reduction in 30 percent of care costs for patients and offer 20 percent more to veterans and have 10 percent more overall VA health care funds to do that with.
    It sounds remarkable, and I hope that the VA can obviously achieve this goal. However, in Chicago and in many areas facing similar reduction, will the VA be able to provide more care with so few resources? This committee must find answers to these important questions with you, Mr. Secretary.
    It's our obligation in this committee to guarantee that veterans throughout our Nation receive the best care available and that VA restructuring does not take from some veterans, as you have suggested will not happen earlier.
    I am sure that this is not the intended goal. But I think it's something that we really need to examine very, very, very closely. As the ranking member on the subcommittee on health, I intend to pursue this issue vigorously in conjunction with Chairman Stearns, obviously.
    I look forward to working on that issue with him and with you, Mr. Secretary.
    Let me just ask one question because I know it's been asked before here this morning, but maybe I could just get a little more clarity. The notion veterans will be better served through more efficiency while VA employment is reduced has been a premise in many past VA budget proposals.
    Why is this year's version, the so-called 30-20-10 Health Care Plan, more likely to succeed than failed past similar proposals, reduce patient care costs by 30 percent reduction, offer health care to 20 percent more veterans, obtain 10 percent of VA health care funds from sources other than appropriations?
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    The 30-20-10 Health Care Plan has been called a gamble. What do you feel, Mr. Secretary, are the odds for its success; and what is the future of the VA health care system if the gamble fails?
    Secretary BROWN. Well, thank you so very much for those observations. Let me just respond.
    With respect to VISN 12, the 1997 reduction that we are targeted at is about $8 million. The number that you use is—I think it's a 3 year total. And to give you an idea of what we hope to achieve when we assign these target reductions, the hospitals there, Lakeside, Westside, and Hines, are all very closely related.
    In fact, Westside and Lakeside is about 6 miles from each other. And as a result, we asked ourselves some basic questions. Why should we have two separate personnel departments? We only need one. We asked ourselves why do we need two separate directors, assistant directors, and assistants to the assistant directors?
    We only need one. So those are the kinds of things that we use to force the region to become more efficient. So that's a reflection of what we see in these numbers.
    Now, with respect to why do you think that we're going to—why do we think we're going to be successful, I can only tell you that certainly any business plan, there is risk involved. But we have a lot of smart people working at the VA, and the history shows us that we're moving in the right direction.
    For instance, already we have cut about 7 percent and increased patient load about 5 percent. So it's moving in the direction that we have to move in if we are going to survive. I personally don't want to be on the ship, let alone leading the ship as captain of the ship, if—to start closing down—wholesale closing down hospitals.
    So in order to keep this system alive so that it can be there to take care of our World War II veterans that I'm really concerned about, our career war veterans that I'm concerned about, little less our Vietnam—because they're still pretty young and they can make adjustments.
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    But I'm really worried about World War II and Korean War veterans. I want to make sure that system is there so that it can respond to their needs when they do not have the capacity to respond to their individual needs. They can't go out and get another job that has lifetime health care.
    So in order to do that, I've got to look at the entire system to make sure that we maximize the resources that have been made available to us by the American tax people through our democratic processes and so that we can honor the commitment that we made to them. And that is our only goal.
    If we fail, we revisit this each and every year. And since we have so many friends here in Congress, I know they are not going to let the ship sink.
    Mr. GUTIERREZ. Mr. Secretary, thank you for being here with us this morning. Look forward to meeting with you with the Illinois delegation. I know I talked to Senator Durbin. He gave me a call. We look forward in a kind of Washington, DC setting to talk to you and get some answers about what's happening in our own visit.
    I'm sure that you'll probably get a call from the Massachusetts delegation now to meet with them and the other delegations. But knowing that you meet with everybody, I look forward to that meeting so we can start getting some answers and working with you.
    Thank you so much.
    Secretary BROWN. Thank you, sir.
    Mr. GUTIERREZ. We're always proud you're from Chicago.
    Secretary BROWN. Thank you so very much, sir.
    The CHAIRMAN. The Chairman of our Benefits Subcommittee, Mr. Quinn, is recognized.

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    Mr. QUINN. Thank you, Mr. Chairman.
    And Mr. Secretary and your team, welcome back. We've seen a lot of each other these last couple of days, and I want to thank you for your interest and your sharing of information.
    Mr. Gutierrez makes a good point about your willingness to share information. Those of us in the New York delegation met with you and your staff yesterday. A follow up meeting in my office right after that with some of your staff was very, very helpful.
    And one of the things that I said at our meeting yesterday with the New York delegation might be worth repeating today. And it was, I think, a mild criticism, but one that also is a pat on the back. I would suggest to all of our members that the Secretary and his staff are doing some great things out there.
    You explained to the New York delegation some of those cost savings and how you're actually seeing more veterans at a cheaper price. Mr. Snyder—Dr. Snyder has left. When you talk about that $4,300 per patient number, that is going to go down a little bit; and you're actually seeing more veterans.
    It sounds impossible, but it's actually happening because of some things that you and your staff are doing. The problem is, it's one of the best kept secrets around. And I'll tell you, for one, the New York delegation learned a great deal yesterday, as will the Chicago and Massachusetts and others.
    And I would only encourage you, as I did yesterday—maybe in some strong terms yesterday—but suggest to you that you ought to tell that story. And that those of us on this committee need to hear it, and that's our responsibility to go out and hear that as well.
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    Communication is a two way street. But it will help us answer those questions. And I appreciate you doing that yesterday. Those numbers, in our vision up in New York and other places, we still have to work on. But don't keep it a secret. You know it. Let this committee know it so we can let other parts of the country.
    And most importantly, so we can let our veterans know back in our districts. And we can prepare them for some changes. We can also tell them the good news when we sometimes have to deliver some bad news too.
    So that went very, very well, and I think a lot of what's been talked about earlier this morning heads in that direction.
    Some specific questions. Dr. Garthwaite, you mentioned yesterday and again today that theoretically some of these numbers are going to go from 30 and 20 and 10, and you talked about being able to get to 10 percent of non-appropriated funds in the year 2002.
    All of that Medicare subvention and these things are new. Let me ask a general question only. Sometimes we need to walk before we run. Have we given any thought to some test sites for some of these new ideas, some of these new plans, before we do it all at once?
    And that might be helpful to see how it works in some areas before we change the whole system.
    Secretary BROWN. Mr. Quinn, that is exactly what the proposed legislation would accomplish. It's a test project. It's not—it does not—at least the proposal does not request that we implement the program. It's simply to test it to see if it will work. Quite frankly, to answer the questions that you just asked.
    Mr. QUINN. You talk about 10 percent of non-appropriated funds by the year 2000 or 2002. How much right now are you using of non-appropriated funds?
    Mr. CATLETT. Less than one percent. Less than a half a percent actually. It's only $75 million dollars in this year.
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    Dr. GARTHWAITE. If you would include MCCR which now goes into the Treasury, it would be up to about 4 percent. So the ten percent goal included what we're already billing, plus our CHAMPUS and other things.
    Mr. QUINN. Okay.
    Dr. GARTHWAITE. So we do have pilots in CHAMPUS, and we're working with the Tricare providers to provide some care to DOD beneficiaries. And we've had pilots with CHAMPUS for quite a long time.
    We briefed Ways and Means yesterday on our proposal for Medicare, and we're trying to work with them to provide assurances both that we will not make a run on the Trust Fund, which is a concern; and in addition, to make sure that we provide adequate data to demonstrate that we're cost effective and efficient in delivering that care.
    So we have proposed two specific pilots.
    Mr. QUINN. Well, that's absolutely heading in the right direction then for 2002. And I think Dr. Snyder has some excellent observations in that area.
    Dr. Lemons, I talked to Ms. Moffit yesterday. Mr. Filner and I are going to be working—it's great to have you all here. There's so many questions, the 5 minute rule doesn't allow enough time. I just want to let you know that we'll be looking forward to working with you to maybe streamline the compensation claims processing system a little.
    Just an observation, not a question. And then finally, as time runs out here, again to pick up on something Mr. Filner said, in terms of education money and the President's thrust generally for education and the treatment of the Montgomery Bill here and your response about new money, I don't think we should forget that the President of the United States is a player in this discussion—a big player.
    And I think that when you say you're going to mention some of this to him, I think we can get more formal than that. I think that maybe we can help you as members on both sides of the aisle of this committee to get the President's attention to get some new money for the Montgomery GI Bill.
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    I mean, we don't receive the budget, do our little things in absence of the President. This is budget. It's your budget. It's his budget. It' going to be our budget, the budget for the veterans of this country. We shouldn't discuss, we shouldn't argue and compromise without the administration being involved.
    So I would encourage you to do that. I would encourage our chairman to include this committee in our efforts to get the President to pay attention to this as well.
    Thank you, Mr. Chairman.
    The CHAIRMAN. Thank you, sir.
    The gentleman from Indiana, Mr. Buyer, is recognized.


    Mr. BUYER. Thank you, Mr. Chairman.
    Mr. Secretary, I'm trying to go through the numbers play here. I think you can conclude by—from all the members here that we have some skepticism. I guess it's a skepticism because of over the years, we've had administrations where the Republican even come here and they give expectations that aren't fulfilled.
    And we're also seeing that now. And the numbers are extremely important. So, you know, I have a responsibility on the National Security Committee. I've got—in my subcommittee over there, I've got the whole military health delivery system, so I understand when terms get thrown around.
    You know, we've got $4,800 cost per beneficiary in the Medicare system. You threw out that you have $4,300 cost per beneficiary. I've seen many about the private systems around $2,000. The military health delivery system is around $1,600.
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    It's very easy for us on this whole Medicare subvention issue to sell it with regard to the retired military retirees because if—you know, bringing them in to the military health delivery systems when it's at the $1,600 cost per beneficiary as opposed to paying out $4,800 makes good business sense.
    I'm uncomfortable though when you come here and say but ours is less than what we're paying out in Medicare. I'd like to know from you specifically when you calculate your figure, your $4,300, does it include your capital costs, capital improvements, your personnel and the benefits?
    Secretary BROWN. Yes. The answer—the answer to that is yes.
    But before you—before I make another statement, let me back up just a little bit to say that the $4,300, sir, is an average. We have within that some of our facilities as far down—I remember a number like $2,200.
    And we have to keep in mind that it's not fair to compare the military with the VA because the military, they're young, they're healthy, they have a mix of women who are healthy, they have young folks, children. And in our delivery of——
    Mr. BUYER. Time out. I'm not comparing. I just threw out that we do have different type of systems out there at relatively different costs.
    Secretary BROWN. Oh, okay.
    Mr. BUYER. I understand about the military health delivery system.
    Secretary BROWN. Okay.
    Mr. BUYER. What I want to try to get at so I can understand the numbers—I'm going to yield to my friend over here, if you'd like to. You're on the right path. I'm not an accountant. It's the numbers—it's the numbers that don't lie. It's the numbers that are very real.
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    That's what we have to deal with. I think you are on the right path, and I want to yield to you because you ran out of your time. If you want to explore it further, I'd yield to the gentleman from Pennsylvania.
    Secretary BROWN. We're going to get you what you want.
    Mr. BUYER. Well, no; I want him to—see, I don't want him to let you off the hook that easily. [Laughter.]
    Because the accountant over here knows the numbers, and I think he still has some questions.
    Mr. MASCARA. Well, first of all, Mr. Secretary, I don't mean to be contentious. I did take the time last night to review the material that was supplied to me, your complete statement. And those matters jumped out at me.
    I have another question about modeling. What type of modeling did you do to arrive at the 30-20-10 calculation? Did you use some model, or was—did you pick that out of the air, or did you use some past statistics that you might have had?
    Dr. GARTHWAITE. I think the easiest answer is that Dr. Kizer is in Chile and we don't have his ability to get into his mind. As I said, those are stretch goals. But I think there's some realism to them.
    There are a lot of assumptions, models are based on assumptions. You can have any number of models. We believe that it's critical for us to bring in some additional patients to allow us to spread our fixed costs, which we can't get rid of unless we start closing hospitals, and start down a very steep slope for closure of the VA system.
    We need to have the kind of patient base that justifies keeping all those fixed costs in place, and provide care effectively and efficiently and give the taxpayer good value for their money, that's what this is all about.
    So the answer to your question is we use models to project; but in a sense, these are stretch goals that really are to stimulate our creativity.
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    Mr. MASCARA. And one last question. If, in future years, you cannot collect Medicare—and I think your response, Mr. Secretary, was we'll come back for more appropriations. If the 30-20-10 doesn't work out, do you have a contingency plan? Where are you going to go?
    Secretary BROWN. Well, one good thing about that. This process is reviewed each and every year, so we have a—kind of like a built in tracking and evaluation process that will let us know where we are at all times. So it's not as if we're going to be bush whacked and all of a sudden we find that we are not going to be able to achieve our goals.
    So we think we have a real handle on that. We don't expect anything, whether it's positive or negative, to just all of a sudden come up on us one day. We will know what's going on each and every day, and we'll be able to make appropriate requests.
    Mr. BUYER. Mr. Mascara, can I reclaim my time?
    Mr. Chairman, you know, we're being asked here to make a very serious gamble on some assumptions out there that I think needs to be scrubbed through CBO. I think there's some members—all of us here are really a little uncomfortable at the moment. But I wanted to share that with you.
    Thank you, Mr. Chairman.
    The CHAIRMAN. The Chairman of our Health Subcommittee, Mr. Stearns, is recognized.
    Mr. STEARNS. Good morning and thank you, Mr. Chairman.
    And good morning, Mr. Secretary.
    Secretary BROWN. Good morning.
    Mr. STEARNS. I have a great deal of respect for you. Last year I asked you to sort of a difficult question about the Clinton administration's budget for veterans, and you took the unusual step of saying that you thought it wasn't high enough and big enough.
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    So after that, I've sort of notched you up very high in my estimation, so I sort of feel that you're—usually you come up here straightforward and speak right to the point and are working very hard for veterans.
    With that in mind, I wanted to talk to you a little bit about the Medical Care Cost Recovery Program. Just for members here, I'd like to just give its mission—it is to maximize the recovery of funds due VA for the provisions of health care services to veterans, dependents, and others using the VA system.
    I have a couple of questions. And if you would indulge me perhaps just with a short answer, if you could. Maybe yes or no would be helpful. And this is both for my benefit as a new chairman of the health subcommittee and also for our staff so we can better understand this area.
    Isn't it true that you lack a methodology to accurately estimate the collection of potential VA MCCR program?
    Secretary BROWN. Yes.
    Mr. STEARNS. Okay. Since you project that VA will continue to shift more and more care away from high cost inpatient stays to low cost outpatient care, isn't it quite possible that that will adversely affect your third party collections?
    Secretary BROWN. No.
    Mr. STEARNS. Okay. In that regard, are you aware that VA must generate about 20 outpatient bills to get the same recovery of a single inpatient bill?
    Secretary BROWN. Well, ask that—make the statement again.
    Mr. STEARNS. Are you aware that the VA must generate about 20 outpatient bills to get the same recovery of a single inpatient bill?
    Secretary BROWN. Yes.
    Mr. STEARNS. Okay. Since more and more people are joining HMO's—we see it everywhere—which do not cover care provided outside that HMO, isn't it possible, quite possible, that these HMO's will adversely affect your third party collections, make it more difficult?
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    Secretary BROWN. No.
    Mr. STEARNS. Let me let you elaborate on that. [Laughter.]
    Secretary BROWN. But you said yes and no. [Laughter.]
    The reason why I said no to that is because we believe that there is inherent within our collection process a lot of potential. I think before you came in, I mentioned, for instance, on an outpatient basis—I think it's an outpatient where we just charge a flat $150.
    Now, we could have actually performed $3,000 worth of work, and we bill the insurance company $150. So what we're looking at is that we are going to have to develop a collection process that actually reflect the value in which we provide to the veteran.
    And so within that, I think that there is a tremendous amount—and that's one of the reasons why I'm willing to take this risk. I'm willing to take this risk because I think that we are not getting the kind of returns on the services that we provide simply because we don't have the sophistication and mechanism to identify what it is and ask for it.
    So that's the reason why I made those statements, even though they seem a little bit odd.
    Mr. STEARNS. Okay. Isn't it true that the VA in recent years has applied more stringent eligibility criteria and no longer provides treatment to many of its former higher income patients who are the patients with the highest level of insurance coverage?
    Secretary BROWN. Yes.
    Mr. STEARNS. Okay. Absent authority to recover from Medicare and given higher income veterans' low treatment priority, isn't it possible—in fact, quite possible—that that trend will continue and adversely affect third party collections?
    Secretary BROWN. Will you say that again?
    Mr. STEARNS. Absent the authority to recover from Medicare and given higher income veterans' low treatment priority, isn't it quite possible that that trend will continue and ultimately adversely affect the third party collections on which you're making your assumption?
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    Secretary BROWN. No.
    Mr. STEARNS. Mr. Chairman, whenever he says something that I don't agree with, I'm going to let him explain. [Laughter.]
    Secretary BROWN. Your time is out. [Laughter.]
    When you say—the way it is right now, very few people understand that we only basically treat two categories of veterans, and they are our service connected veterans and our low income veterans. Everyone else is locked out of the system.
    Although there are a few facilities that are treating the people that you described, higher income veterans. I guess about what, one or two percent? Two percent in the whole country. So that's basically nothing.
    So what we want to do is to create an environment that—where all of these thousands and maybe millions of higher income veterans—and now, when I talk about higher income, sir, I'm talking about an individual that makes $21,000 a year or $22,000 a year.
    We want to create an environment so that they can come to the VA and get their care, and they pay for it with their insurance payments or they pay for it with their Medicare entitlement.
    Mr. STEARNS. Thank you, Mr. Chairman.
    The CHAIRMAN. Thank you. The Chair is pleased to recognize the newest member of our committee, the gentleman from Illinois, Mr. LaHood.


    Mr. LAHOOD. Thank you, Mr. Chairman.
    Mr. Secretary, I want to raise a parochial issue with you, and I don't expect you to know the answer; but I would appreciate it if you or your staff could get back to me. I met with the—I'm from Illinois, and I represent a district right in the middle of the state.
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    Peoria is my home town. We have a very fine VA clinic there and the people there do a marvelous job. My district adjoins Mr. Evans' district, and I look forward to working with him on veterans' issues.
    I met with a group of people from the University of Illinois yesterday. There's a study going on by GAO to look at the relationship between the University of Illinois Medical School and the hospitals in Chicago, primarily in Mr. Gutierrez's district and Mr. Davis's district.
    The people at the University of Illinois have a great deal of heartburn about the way that they're being treated by your regional staff. Before the study is complete, they are beginning to cut off some services, some relationships, and they have asked our delegation to send you a letter to see if you would intercede so that the relationships that have been established can continue until the GAO study is complete.
    So I'm going to raise that issue with you. You will anticipate a letter from our delegation outlining these concerns, and I hope that you will be able to respond to us at least to the extent of persuading your staff at the regional office to wait until the study is done before they begin to discontinue relationships that have been developed.
    The University of Illinois is providing good medical care and they have a relationship with Hines and a couple of these other facilities, including Lakeside and Westside. So if you can indulge us with at least reading our letter and listening to our concerns and then persuading your regional people that we ought to wait until the study is complete before they discontinue some of these relationships, I would appreciate it.
    And I know that Congressman Davis and Congressman Gutierrez and certainly others in that part of the state would be very grateful to you.
    Thank you very much.
    Secretary BROWN. Thank you.
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    The CHAIRMAN. The ranking member on the Oversight Committee, Mr. Bishop, is recognized.


    Mr. BISHOP. Thank you very much, Mr. Chairman.
    As the ranking member of the investigations of oversight, I look forward to working with Mr. Everett whose district adjoins me just across the Chatahoochie River in the State of Alabama to looking into a lot of the areas of VA administration which concern our veterans populations.
    But I want to first associate myself with all of the very laudatory remarks that have been made about you and your advocacy—and effective advocacy, I might add—for veterans. I know that the people in Georgia are very appreciative of the work that you and the VA has done and the efforts that you have made to lift up the needs and the concerns of veterans.
    But as has been said, however, we are still concerned as we listen to the administration's proposals in this budget about how you will actually be able to do more with less. It almost seems as if you're going to perform magic.
    Certainly you've come forth with some creative and some very innovative approaches to delivering veterans' health care services, and you've streamlined some of the programs and the services. And I'm very, very pleased that you're going to have monitoring each year.
    But I'm still concerned, as is Mr. Gutierrez and Mr. Mascara, about things such as how, with the projected budget, we're going to continue to reduce pending compensation claims with less resources to do that.
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    How are we going to really—how are you going to know that you're going to provide more benefits for our veterans when, for example, there's a decrease of $6 million dollars in the level of funding for grants for state homes which provide a number of services for our elderly veterans?
    These concerns are nagging for us, and we're just concerned as to how you're going to be able to perform magic.
    Can you kind of address that? I've heard the proposals, and there is some skepticism; and certainly we wish you success. God knows we want success because it means a better service for our veterans.
    Can you just sort of address that? And I have one other question. I'll ask it quickly. And it relates to the co-location of VA and DOD facilities for surveying veterans who are not very, very close to VA facilities.
    For example, Mr. Everett and I represent areas of Alabama and Georgia in the Southwest portion and the middle portion of Georgia that requires veterans to travel a great distance in order to get even primary health care service from a VA facility.
    Secretary BROWN. Yes; thank you, Mr. Bishop.
    I would like to—before I respond to your questions, to thank you for the strong advocacy that you have historically shown on behalf of our veterans and their families. You not only represent the veterans of Georgia very, very well; but also through your role in this committee, you have shown great honor to the veterans all across our Nation.
    With respect to your last question, we are right now looking at a number of projects. Number one, we have a couple of joint ventures where we are actively working with DOD and providing care using sharing resources to take care of the folks that are on active duty and also veterans and active duty personnel.
    That's actually physically happening in New Mexico and—where else? Nellis is one. And so—and in fact, any new project which we don't expect to have any place—would be something we'd have to look at that concept because it is a good concept.
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    Mr. BISHOP. That's a little bit far from Georgia though.
    Secretary BROWN. I know, but I was just talking about concept, that we are actually—that we are applying it. We also, as Dr. Garthwaite mentioned, we have a project where we are looking at allowing people who are retired from the military to use their CHAMPUS entitlement to come to the VA and we provide care to them.
    I mean, this is very, very important as we downsize and as hospitals close and various retirement communities. So the issues that you raised, we are looking at; and I will get back with you to see if we actually have any projects or any community based clinics that we plan on opening up in your area across the river and Mr. Everett's area.

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

    We have recently approved the development of a new community based outpatient clinic in Dothan, AL. We anticipate this access point to be functioning by May, 1997. The Atlanta Network is completing proposals for two new community based outpatient clinics to be located in Macon and Albany, GA. These proposals will start the approval process in the Veterans Health Administration within the next few weeks. Opening these three new access points will decrease the travel time to less than an hour for veterans to receive primary care.

    The Central Alabama Veterans Health Care System is also in the process of increasing the number of primary care providers at the existing Columbus, GA community based clinic. The goal is to improve timeliness and effectiveness of care at this very busy outpatient clinic.

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    With respect to the two areas that are programs that you talked about, health care—how we're going to provide more with less—basically we have to do that in order to, as has already been stated, to be able to spread our capital costs.
    If we don't do that, then the next alternative is we have to close it down. If we—the bottom line is that we have a hospital today where—a system where we had about—just about 10 years ago, we had about 90,000 authorized beds. I think now there's about 50,000 that we have, and they continue to go down.
    But what doesn't continue to decrease at the same rate as our bed census, is the capital costs. We still have to pay the air condition costs, we have to pay the heating costs, we have to pay the physicians and so forth. So in order to be able to spread that cost out, we have to open the system up to more veterans in order to remain efficient.
    So that's really what we're being forced to do as opposed to starting to close down facilities. And we're doing that and paying for it by actually looking for opportunities to save. One that was mentioned here today is lowering our inpatient census and increasing our outpatient census.
    That's a tremendous savings. Another one, as Mr. Gutierrez was talking about, has to do with eliminating duplications. We are asking ourselves some critical questions in areas to include the private sector. Why do we need two MRI's? If the private sector has one, we should use it.
    If we have it, they can use ours and pay us. So those are the kinds of savings that we're looking for in order to be able to pay for the expansion of service; and at the same time, reducing the per patient costs.
    And another important factor that we don't give a lot of credence to and something Dr. Garthwaite said, and that is when we attract healthier people into the system, we theoretically get paid for those healthier people and don't end up having to pay out as much.
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    So those are the kinds of things and those are the advantages we get shrinking the system and opening it up.
    On the adjudication side, here we have a wonderful opportunity to use the advantages of modern technology. We haven't done as good as we would have liked to, and Mr. Everett knows a lot about that. But we now I think clearly are on track, and we feel very comfortable with the estimates that we have made and projected out to the year 2002.
    Mr. BISHOP. Thank you, Mr. Secretary. I think my time has expired.
    The CHAIRMAN. I thank the gentleman.
    The gentleman from Minnesota, Mr. Peterson, is recognized.
    Mr. PETERSON. Thank you, Mr. Chairman.


    Mr. Secretary, from the veterans of Minnesota, we very much appreciate your leadership and your willingness to come out and visit with us, not only the veterans but our good VA stuff out there.
    Mr. BROWN. Thank you.
    Mr. PETERSON. Glad to listen to your testimony this morning. I'm kind of the new kid on the block here. I'm trying to get up to speed on what is going on and trying to digest all of this. I think I somewhat grasp what you're trying to do, and I think agree with where you're trying to go here.
    I think, from what I can tell, you are trying to become part of the mix. If there's going to be choices for HMOs, or all of those other things, you'd like the VA to be a choice that people can select kind of on a level playing field. That's where you're trying to get.
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    Mr. BROWN. And get paid for it.
    Mr. PETERSON. Right. Yes, and get paid for it. So that's where you're trying to get, and I think that is the right direction and is probably the only way you're going to be able to make this work.
    You know, last year our group, Blue Dog Democrats, did our own budget and we did some things a little bit different. One of the things we had in our budget last year was we had subvention, which nobody else had. We didn't get a lot of credit for it, but, you know, we found a way to pay for it, and so forth. So I think that there are ways that this stuff could be done.
    I guess my question is: you have taken some action, you've got some pilot programs to try to move in that direction. But isn't a lot of what you need to do dependent on us changing legislation to allow you to do this?
    Mr. BROWN. Absolutely. Without your support, our whole concept falls apart, and the only thing that would keep it afloat is that you replace the dollars that we requested hopefully from sources outside our category, or that we requested in our budget.
    Mr. PETERSON. But even if we replace the dollars, if you can't make the fundamental reforms, you're going to have big problems.
    Mr. BROWN. Absolutely.
    Mr. PETERSON. I mean, it's the same thing when we went through this Medicare debate last year. I mean, you know, the issue in Medicare is not the amount of dollars. The issue is we need fundamental reform in the Medicare system to put choice into that system, so that people that are accessing it can make choices and let the market work.
    And I think that's what we need to do in the VA is we need to give you the ability to get into the marketplace and compete. And right now, you've got too much bureaucracy. You've got too much law locking you, so you can't do what needs to be done. And, you know, so I guess what I'm getting at, is the legislation that you need, is it drafted? Where is it? Is that—maybe it's in here and I haven't read it yet.
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    Mr. BROWN. Mary Lou.
    Ms. KEENER. I can respond to that, Congressman Peterson. The Medicare subvention bill has gone back to Congress in the same form that it was in last year. As far as we know, the legislation that we need is up there. Now we need your help.
    Mr. PETERSON. And to some extent, it's the Authorizing Committee that has to make some of these changes. Some of it probably has to be dealt with in Appropriations, I assume. Some of it probably has to be dealt with in the Budget Reconciliation. Okay. So I'm just trying to get a handle on where this all is.
    We are going to be, as I say, finalizing our budget for this year, and so I will do what I can to try to get some of this stuff into what we're doing on our side, and hopefully we can all work together and give you the tools to do what you need to do, you know? Because I think you're on the right track. You're heading in the right direction.
    And I very much commend you for stepping up and providing leadership and thinking this through, because there is just too much bureaucracy in the system now. We've got to cut out the underbrush.
    Mr. BROWN. Mr. Peterson, I just wanted to say before the meeting is adjourned that I'm really delighted that you're on this committee. I've followed your career for a long time, and having the opportunity to have worked with you and the veterans in Minnesota, I know that we really have a champion that is going to look out for us. And I'm so glad that you——
    Mr. PETERSON. We want you to get back up to Minnesota, but we won't invite you this month. It's 10 below there this morning.
    Mr. BROWN. Thank you so much for that.
    Mr. PETERSON. And we 15-foot snow drifts at the VA hospital in St. Cloud there, so you probably—unless you bring your skis, you know, it——
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    Mr. PETERSON (continuing). But we'll bring you up there when the weather is nice.
    Mr. BROWN. Okay.
    Mr. PETERSON. Thank you very much, Mr. Secretary.
    Thank you, Mr. Chairman.
    The CHAIRMAN. Yes. Mr. Peterson, Mr. Evans and I signed a letter to both Secretary Brown and the Secretary of HHS asking them to address the concerns of the Ways and Means Committee before it got up here, and hopefully we can get into that, because it is going to be a problem.
    We testified last year on behalf of this Medicare subvention, but neither our committee, nor the Armed Services Committee, were successful.
    The gentleman from Pennsylvania, Mr. Doyle, is recognized.
    Mr. PETERSON. Mr. Chairman, I just would say that we did have subvention in the Blue Dog budget, so when it comes up this year, if we can keep it in there, why don't you all look at that and maybe you can support the Blue Dog budget and we'll get——
    The CHAIRMAN. The gentleman from Pennsylvania, Mr. Doyle.
    Mr. DOYLE. Thank you, Mr. Chairman. And I'll try to be brief. I have a statement which I'd like to submit for the record.
    Mr. Secretary, welcome back. We're glad you're here and hope you stay with us 4 more years, and the veterans in Pittsburgh, PA, are glad that you're back at the helm.
    Let me just first reiterate a concern that I think my colleague, Mr. Mascara, has and several members of this committee have. And, you know, we look at this budget, and at the end of 5 years we're going to treat more patients with fewer staff, with the same budget resources that we have today.
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    And it sort of reminds me of a line from a movie that's popular right now—you know, ''show me the money.'' We're sort of concerned that you don't put yourself into a box. I mean, I think this is a worthy thing you're trying, and I've learned a new word today—stretch goals. We get to learn a lot of new buzz words up here on the Hill, and that's the new one today—stretch goals.
    And I want to say that, while expressing concerns, we don't want to—I don't want you to misinterpret it that we're saying this is never going to work and don't try it. We're saying go ahead and try it, but, you know, when you put out these stretch goals, let's not get ourselves into a box 5 years from now that we can't get out of, because we are in an era of dwindling resources.
    And when we get to the outyears of this balanced budget agreement that we're all cruising down, this glide path, you know, all of the stuff hits the fan in the outyears—you know, fifth, sixth, seventh year. I'd hate to see us be put in a situation where veterans are put at risk because we weren't able to meet some of these rather ambitious goals. And that's just a concern.
    But I have a question that hasn't been touched on today that I'd like to get your reaction to. You know, with the new VISN initiative that is taking place, we're giving VISN directors all over this country a great deal of latitude to run their VISNs and to achieve some efficiencies. And I think that's good.
    I had a conversation with a VISN director who told me that he doesn't think veterans should even be in the service care delivery business, that his vision for VISN would be to see us—there wouldn't be any more veterans hospitals, that veterans would become a health care plan, just like the many other private health care plans out there in the private sector. And that sort of struck me; I was very concerned at that statement.
    I wonder, do you share a vision, or do you see coming down the road where some day there won't be any more veterans hospitals, and that this Veterans Administration is going to become another health care plan?
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    [The prepared statement of Congressman Doyle appears on p. 115.]

    Mr. BROWN. I'm not going to ask you for the VISN director's name. [Laughter.]
    But he's——
    Mr. DOYLE. And I'll gladly give it to you in private.
    Mr. BROWN. I'm afraid what I might do with it, so I'm not going to ask you.
    He or she certainly does not share our view. We believe that the VA is very, very important to our society. We recognize that it is costly, but that is part of the continuation of the cost of war. And the only reason why I would even support the VA going out of business is because we've run out of veterans.
    And quite frankly, philosophically, I hope that one day that we won't have a need for veterans, that we won't have a need to place our young folks—our best and our brightest—at risk. And as a result, we won't have a need to have VA hospitals to respond to the hazards associated with military service.
    So that's my statement on that. And as long as we are placing our young people at risk, we've got to have an institution that responds to their needs when they come home, because you've got to realize this here, sir. Most people don't realize that many of the problems that our young folks have when they come home are really unique problems.
    You just take the question of Persian Gulf. If all 700,000 of those young folks were sick, it would not be in the private sector's best interest to invest millions and millions in research to find a solution, because they could never recoup their investment. There's not enough—the market share is just not there.
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    But at the same time, because they did what we asked them to do, we have a responsibility to make that investment. And that is a good example on why we must continue to protect the VA, that we make it efficient but continue to let it thrive and exist and respond to the needs of our citizen soldiers.
    Mr. DOYLE. Mr. Secretary, I knew that was the answer you were going to give, but I think it's important that we say that, that people understand that we serve a population—veterans hospitals—that is different from the general population in many aspects. And I hope we don't ever go down that path of thinking that we can just become another health care plan, that veterans hospitals will always be around.
    We don't want to abandon the principle either that we fully fund veterans programs during this appropriations process. And I want you to set goals, and I want you to look for efficiencies, but let's not put ourselves in a position 3 or 4 years from now where, because of the way we're going budget-wise, that we put veterans at risk.
    I look forward to continuing working with you.
    Thank you, Mr. Chairman and Mr. Secretary.
    Mr. BROWN. Thank you, sir.
    The CHAIRMAN. The gentleman from Massachusetts, Mr. Kennedy.


    Mr. KENNEDY. Thank you, Mr. Chairman.
    Mr. Secretary, welcome, and welcome to the members of your staff.
    Mr. BROWN. Thank you.
    Mr. KENNEDY. Mr. Secretary, a couple of sort of concerns. I had an opportunity to meet with Dr. Fitzgerald up in Massachusetts a month or so ago, and we had a meeting about his VISN plans. And obviously, seeing such large cuts in the budget up in that part of the country, I think just raises some questions in terms of not only whether or not there is sort of equitable cuts going on in terms of our region versus some of the other regions of the country. And at some point, maybe we could have a little more definitive get together on that issue.
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    But there was also I think a series of concerns that came up in our discussion, and so I want to make clear that I'd like to come back and get together, maybe in your office or something like that, where we can go over some of the comparisons.
    Obviously, you're going to need to go and make reductions in terms of duplicity and that type of thing, and nobody wants to see you waste money. On the other hand, I think we want to have a sense that there's a balance in terms of the various regions, so that any particular region isn't being singled out for cuts well above other parts of the country.
    So I'd like to be able to come back to you on that.
    Mr. BROWN. Yes, sir.
    Mr. KENNEDY. I think it also raises some of the questions about the concerns once those cuts become more public, as to how the veterans groups that depend on certain facilities have come to utilize certain services, and the like, are going to be able to have input in terms of their own convenience and the kinds of disruptions that are going to take place.
    As you are aware, when we have faced those issues in the past, because in some cases how the VA went about trying to make some of those changes, it has had to pull back. And so I think it's very, very important that when you go through that change process that it is explained, and that the VSOs and others are brought in, and that the veterans that actually use particular facilities, that that's going to change dramatically or give an opportunity to get their input. And I wonder whether or not you have a comment about how that is going to go.
    I also have another question, so I'd like to—if you can make it reasonably brief, I'd like to come back to you.
    Mr. BROWN. First of all, Mr. Kennedy, I basically do nothing without running it by the VSOs. I take a position; I don't want members of Congress, and I don't want our VSOs to read about an initiative that we have in the paper. So they are part of the process.
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    Mr. KENNEDY. That's the local, as well as the nationals.
    Mr. BROWN. Well, I'm talking about the local—I mean, the national now. But with respect to the local part of the implementation, we have left it up to the VISN directors. And we have made it very, very clear that in order for any change to take place, they are going to have to include an implementation plan where members of Congress, their staff at least, and VSOs are at the table.
    If you're telling me that that has not happened in VISN 1, then I certainly will look into that because that should have been part of the process.
    Mr. KENNEDY. I didn't mean to imply that it has. I don't think it has as yet, Mr. Secretary. I don't think that would be—you know, I think they're still in the formulation plan in terms of where they're headed, you know, with their reorganization. What I'm trying to suggest to you is that I have seen very clearly when the VA had determined that it was in their interest to close certain clinics and change around how people were going to move.
    And they topped that on—they said they checked with folks. But, I mean, believe me, they hadn't checked with tens of thousands of veterans that had come to use those facilities. And, you know, I've seen the whole thing just blow up in the VA's face.
    So I wasn't specifically being critical of Dr. Fitzgerald and what his plan was. It's very hard for me, as a layperson, sitting there listening to a guy tell me how much duplicity exists in the system, and therefore he's going to close this, that, and the other thing, and he's going to save you a whole stack of money, and then be able to make some assessment as to how that's going to actually affect a lot of the veterans groups.
    But I think that if there is a very important issue here in terms of making certain that local input—I don't think that just saying that they—that leaving it up to the local VISN director to say, ''Well, yeah, I hope you're going to check with the local folks to make sure it's okay,'' I think it's got to probably go much deeper than that.
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    Mr. BROWN. Mr. Kennedy, I think we even have a checklist that we mandated them to use that we said before you do anything, and particularly on closing and anything controversial, they have to come to us. In fact, in one case, we started putting veterans out of hospitals in your state, and Boston, and we found out about it. And he didn't check with us, and when I went there at Senator Kerry's invitation, we reversed that.
    So we have a checklist that says that these are some of the things that you have to do before you make any major changes. And on that checklist is to make sure that you have all interested parties at the table before it happens.
    Mr. KENNEDY. Maybe you could submit that checklist for the record, Mr. Secretary.
    Mr. BROWN. Sure. We'd be happy to.

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

    The attached memorandum from the Under Secretary for Health provided guidance concerning required reviews for Program Restructuring efforts at the VISN level. Also, the attached checklist guides facilities that are integrating management and functions.

"The Official Committee record contains additional material here."

Strip offset folio 3 here

Strip offset folios 4 to 6 here
Makes pp. 37 to 39
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    Mr. KENNEDY. I also—we didn't get to the whole issue of eligibility reform, which I wanted to come to. But maybe we'll have a chance to catch up on that.
    There was some confusion, I must say, Mr. Secretary, in the VISN director's mind about what was intended by this committee in terms of our eligibility reform. And I think it's well worthwhile exploring that at a further date.
    But I do think that it's just very important that we get some very, very, you know, important input from the local community in terms of how veterans are going to view these kinds of changes. And I'm concerned that that's not, in fact—that that might not, in fact, go on. So I look forward to the list and to working with you.
    Mr. BROWN. Thank you. And I agree with you.
    Mr. KENNEDY. Thank you, Mr. Chairman.
    The CHAIRMAN. Thank you.
    The gentlelady from Florida is recognized.


    Ms. BROWN. Thank you, Mr. Chairman. Thank you for holding this important hearing today. I've been on this committee for 5 years, and one of the highlights always is when the Secretary comes to this committee. He is a champion and an advocate for the brave men and women who have served this country.
    I think I'm supposed to also thank you, because each year you come we talk about Florida, and we talk about the formula for Florida. And I understand that we just put a new program into play yesterday, and can you explain a little bit about the program? I understand that at last that the funds will be following the veterans. For example, the Minnesota veterans today is in Florida. So they're being serviced in Florida, and so we're going to get some reimbursement in Florida. Could you explain that a little bit?
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    Mr. BROWN. Congresswoman Brown, I love you, but you sure put me in an awkward situation with that question. [Laughter.]
    Yes, we are now in the process—and we have already—for two reasons. Number one, simply because it is the right thing to do; but in addition to that, as a direct result of mandate of law, we have initiated a program where we are making sure that the funds follow the veterans. And so that has something to do with what Mr. Kennedy was talking about, where we are looking at average costs and forcing those that deviate, for no apparent reason, far from the average to get more in line. And we are taking those dollars and putting them in areas where veterans are moving to.
    Out of this whole process, in our 22 regions there are 16 winners. And, of course, Florida is a big winner in that process.
    Ms. BROWN. Thank you.
    Mr. BROWN. And there are six losers. But we don't like to think of the losers as actually losers. It's allowing them to become more efficient, and we are giving them the incentives to do so.
    Ms. BROWN. I just want to thank you, Mr. Secretary. I mean, you know the strain that we have experienced in Florida over the 5 years that I've been here and before. I guess one other question that I always have to ask is: what has happened to the central Florida veterans with Brevard Hospital? And I saw that the President didn't include it in his budget, and so where are we?
    Mr. BROWN. Well, as you can tell, Ms. Brown is in there fighting for our veterans. When I first met her, she was mad at me about a clinic and came to my office and just ran me up one wall and down the other. So I'm really glad that I've been able to respond to some of your concerns, because your concerns were clearly valid.
    With respect to Brevard, as you know, we are under mandate of law to have a study, and at this particular time we have not—I have not received the study results. But as soon as I do, I will make sure that you get a copy of it and then we can talk about what is our next course of action.
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    Ms. BROWN. Thank you, and welcome back.
    Mr. BROWN. Thank you so much, ma'am.
    The CHAIRMAN. Thank you, Ms. Brown.
    The gentleman from Louisiana, Dr. Cooksey, is recognized.


    Dr. COOKSEY. Thank you, Mr. Chairman.
    We are glad to have you here, Mr. Secretary.
    Mr. BROWN. Thank you, sir.
    Dr. COOKSEY. As a freshman Congressman, I'm spending a lot of time running between various meetings. But as a veteran, and as a physician, I appreciate your coming here.
    I have gone to the trouble to visit my veterans hospital, and I think the people there are doing a good job, and they are moving in the right direction and moving from the system that all of the hospitals were in, the ones that I worked in as a physician, to the changes that are more cost efficient but yet put quality as the criteria, quality of care above cost of care. I think that's still important.
    I would add that I have used all of the veterans services. After I got out of the Air Force, during the Vietnam period, I did use my GI bill. Much to the chagrin of my opponents in my race, I have not had to use your cemetery services. [Laughter.]
    Mr. BROWN. If you did, I would have been the first one out of here. [Laughter.]
    Dr. COOKSEY. But anyway, as a physician, I am trying to find solutions to problems, as opposed to my colleagues in the legal profession who are trying to find fault. And we are here to help you. I am here to help you, and I think that we can all work together and do a lot of the right things.
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    I personally, quite frankly, had some major problems with your budgetary assumptions. In fact, we were looking it over between 7:30 and 8:00 this morning, and I understand from my staff person that those questions were asked and answered, and you've touched on them again. So I'll keep my fingers crossed and hope that it does work this year.
    Mr. BROWN. Thank you.
    Dr. COOKSEY. If not, we'll see you next year.
    Mr. BROWN. Thank you.
    Dr. COOKSEY. Thank you, Mr. Secretary.
    Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Secretary, I believe Mr. Evans has another question to follow up.
    Mr. EVANS. Actually, I wanted to direct it to the General Counsel.
    I understand that there have been a number of requests for extensions before the Court of Veterans Appeals by the so-called Group VII, the group that represents the VA before the court. Is this true? And has that been caused by a lack of funding for Group VII?
    Ms. KEENER. I'm not aware of the numbers on that, Congressman. I can get them for you and let you know. I am not aware that a decrease in funding has caused an increase in those numbers, but I can tell you that a decrease in the GOE funding has caused us to look at, the loss of approximately 35 attorneys in 1998. Several of whom will come from Group VII.
    I have two groups in particular that I am very concerned about staffing levels, and one of those is Group VII. As the 1998 budget is currently projected, we anticipate that it is not going to get better. It is going to get worse.
    Mr. EVANS. Okay. If you could submit the numbers of extensions——
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    Ms. KEENER. Yes, sir.
    [The information follows:]

Strip offset folios 7 to 11 here
Makes pp. 43 to 47

    Mr. EVANS (continuing). I'd appreciate it.
    Mr. Chairman, I also ask unanimous consent that all members that have written questions, that they be allowed to submit those for the record, and the answers to those questions to be a part of the record.
    The CHAIRMAN. Without objection.
    Mr. Secretary, if you would respond to those as expeditiously as possible, we'll make them part of the record.
    Mr. BROWN. Yes, sir.
    The CHAIRMAN. We want to thank you for taking the time to be here with us. And I just want you to know that one of the perks and the joys of being the chairman and the ranking member is that we get to sit here through the lunch hour and hear nine more witnesses. [Laughter.]
    Thank you, Mr. Secretary.
    Mr. BROWN. Thank you, Mr. Chairman.
    The CHAIRMAN. If those that are leaving could exit the room as promptly as possible, we'll get to Judge Nebeker here in a minute.
    The CHAIRMAN. The meeting will please come to order.
    Judge, we appreciate your patience, and we welcome you here this morning. You may proceed in any way you choose.
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    Judge NEBEKER. Thank you, Mr. Chairman.
    I had come prepared to give a brief outline of where the court came from, why it exists, and what it does, because I recognize that there are members of this committee who are new and probably have not heard of the court before. That intention may be misplaced, because it doesn't appear as though there is anyone here who is a novice about the court. That being the case, I will hardly consume but a minute of your time this morning.
    On behalf of the court, I state that I have three purposes in being here. The first is to urge the passage of Title II of the legislative proposal, which is still before the committee having been submitted over a year ago. Title I is a totally different matter, but Title II is something that is, I think, quite justified in its purpose. And I would urge that favorable action be undertaken on it as soon as possible.
    My second point is, again, to assert and request that the pro bono representation program be separated from the court's budget, and that to that end they ought to be authorized by the Congress as a separate entity. And then we can work out—I hope we can work out, a way by which the court's operating budget does not fund one side of a substantial number of appellants that appear before the court.
    The third request that I would make is that based upon our written testimony and the budget that we have submitted, that we could command the support of this committee with a favorable recommendation, respecting our appropriation request for the ensuing year, to the Appropriations Committee.
    And with that, I have nothing further to add, other than what, of course, is in my written testimony.
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    [The prepared statement of Judge Nebeker, with attachments, appears on p. 127.]

    The CHAIRMAN. Thank you, Judge, and I apologize for the attendance. Perhaps with your cooperation, we could schedule a meeting later on specifically for the newer members that have not had the benefit of knowing the workings of the court.
    Judge NEBEKER. Thank you. I would welcome that opportunity.
    The CHAIRMAN. All right, sir. I have one quick question.
    Judge NEBEKER. Surely.
    The CHAIRMAN. I believe a year or so ago you advocated reducing the associate justices from six to four, and perhaps as late as this month still thought you would do that. Is that still going to be the case?
    Judge NEBEKER. Not really, sir. The caseload of the court is driven by the dispositions of the Board of Veterans Appeals. The chairman has reported recently, and perhaps mentioned it to you this morning, the denials of benefits, outright flat denials of benefits, has increased in the last year from some 6,000 plus to some 10,000 plus. That means the caseload in our court will soon be reflective of that increase.
    Some of the veterans service organizations, I understand, opposed the downsizing of the court. Some took a more cautious approach of wait and see. Well, they may have been vindicated, because it looks as though our caseload is on the increase. And as you know, we are now but six judges, five associate judges and myself, because of the untimely death of Judge Hart Mankin.
    The CHAIRMAN. Thank you, Judge. I think that while we're all interested in saving money, we're probably more interested in expediting these hearings.
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    I would turn to Mr. Evans for any questions.
    Mr. EVANS. Thank you, Mr. Chairman. I think it's a good idea to have another meeting with the Judge, and I'd suggest maybe we do it down at the Court of Veterans Appeals, so members know where it is.
    Judge NEBEKER. You would be welcome to come.
    Mr. EVANS (continuing). Maybe meet some of the other judges as well.
    Judge, some critics have said that the court has become a policymaking body and also lengthened the appellate process. Would you care to comment on those views?
    Judge NEBEKER. Well, of course the court is not a policymaking body. The court is a creature of this Congress and the legislation that it passed in 1988. We are an appellate court, independent of the Department of Justice—I'm sorry, the Department of Veterans Affairs. That takes me back a few years, that slip.
    Our role is limited. Our scope of review is limited. And our job basically is to see to it that the Board does things in accordance with the statutes and the regulations adopted by the Secretary. And we do find quite a number of instances in which that complex set of regulations has in some aspect been forgotten about, ignored, or misapplied.
    And so we are there to correct those papers. That is not, by any objective standard, policymaking. The court fully recognizes policy is made here, and policy is made in the Secretary's office. I am sure those who are the recipients of reversals or remands deem what we do, from their vantage point, to be making policy. But I think they lack an understanding as to what the purpose of an appellate court is.
    Insofar as delay is concerned, I can report that, as an appellate court ought to be, we are about as current as should be. There is delay before the cases are submitted for a decision, and I would be remiss if I didn't bring it to your attention and seek your help in solving the problem. It is not the problem of the court, except that it impacts upon the court's ability to get to the cases faster.
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    I am referring to the necessity of the general counsel's office, who represents the Secretary before the court, to expeditiously bring those cases to the court by designating the record and then by filing a brief. Group VII, the group of attorneys that represents the Secretary before our court, has been understaffed, has been decimated by illness and a few other things, and it is my understanding has also been hurt with respect to the current appropriations process for this fiscal year, and that they are understaffed, and that morale is a problem.
    Now, that does rub off on the court. It may sound as though it's none of the court's business, but it really gets to be if the problem isn't solved. It is not something that the court is in a position to do a thing about.
    Thank you, sir.
    The CHAIRMAN. Judge, thank you very much. We look forward to working with you. And I apologize again, and next time we'll take better care in scheduling. We will separate the Secretary out from the rest of you that have to testify later. But due to the outstanding attendance we had this morning, we ran a little longer than we anticipated.
    Thank you very much.
    Judge NEBEKER. Thank you, Mr. Chairman. I look forward to getting together with the members at their convenience.
    The CHAIRMAN. Thank you. We'll work that out.
    The CHAIRMAN. If the third panel would come up, please—Mr. Taylor, Mr. Herrling, and Mr. Lancaster.
    Mr. Secretary, we'll start off with you. Let me properly introduce you. Honorable Preston Taylor, the Assistant Secretary for Veterans' Employment and Training of the U.S. Department of Labor. Your entire statement will be inserted in the record. Any way you wish to summarize, please proceed, and we'll recognize the other two later.
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    Mr. TAYLOR. Good morning. I appreciate the opportunity to submit for the record the fiscal year 1998 Department of Labor budget request for the Veterans' Employment and Training Service. First, I want to acknowledge the efforts of this committee and others in Congress who provided the resources that made it possible for VETS and our state partners to continue to meet the needs of our customers in fiscal 1997.
    My vision for VETS in 1998, and into the 21st century, is that we continue to evolve into a world-class organization, providing employment, training, and enforcement services to our nation's veterans. I expect our staff to keep pace with the demands and rewards of putting our customers, veterans, and their prospective employers first. This will give each veteran a chance for real employment security in a rapidly changing world economy.
    The agency's 1998 budget request is designed to promote the maximum employment and training opportunities for veterans, particularly those who still suffer from higher-than-average unemployment rates—the disabled, the special disabled, minority, female veterans, young veterans, and recently separated veterans. To better serve veterans, we are streamlining, shifting resources, and making better use of electronic tools.
    The quality of jobs available through the state employment service system is improving. Federal contractors—and that means many of the nation's leading companies—can now place job openings electronically on America's job bank. Many of these are better-paying and career-building jobs. I intend to make sure that DVOPs and LVERs have the knowledge and tools necessary to access these jobs and place our veterans into them.
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    The only significant increase in our 1998 budget submission is a $2.5 million request for the homeless veterans reintegration project—an important program reauthorized by Congress last year. These funds will allow us to competitively award 20 grants to help homeless veterans move into unsubsidized employment. VETS is the only government agency directly working to put homeless veterans into jobs.
    The bulk of our budget, just over $157 million, is for grants to our state partners to fund DVOP and LVER positions. We plan to emphasize and protect the LVER program, which supports the direct services to veterans, and functional supervision of priority of services to our state agency partners.
    We are working with the state employment security agencies to make sure that the efficiencies generated by this emphasis will enable DVOPs to give more time and attention to those veterans who are not job ready, or when they leave military service and have need for more targeted, intensive assistance.
    This emphasis will not adversely affect our services to any of our veteran customers. In fact, it will allow DVOPs to concentrate more of their efforts on case managing, and those disabled veterans who require specifically tailored services to make them job ready.
    Our request for JPTA IV(c) is the same as last year, $7.3 million. These, too, will be competitive grants awarded to state entities through the governors' offices. A small amount of the funds will be used at my discretion for research and demonstration projects.
    The $22.8 million request for administration of the agency will support 254 employees, six fewer than we currently have on board. I intend to reach this staffing level through attrition. Our administrative funds will also support the transition assistance program, TAP, for about 160,000 separating service members and their spouses.
    Finally, $2 million is requested to continue funding the National Veterans' Training Institute, which provides quality training services to federal and state personnel charged with helping veterans.
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    This is a tight and responsible budget. I appreciate the opportunity to present its highlights to you and look forward to working closely with the committee on behalf of our nation's veterans. I'll be glad to answer any questions you may have, sir.

    [The prepared statement of Mr. Taylor appears on p. 150.]

    The CHAIRMAN. Thank you, Mr. Secretary. I do have one question. What is the effect of not having a separate funding line for the transition assistance program?
    Mr. TAYLOR. I have looked at this. I've been in this job now just about 3 1/2 years, and that was one of the first questions I asked when I got here. I recently looked at it again, and I have determined that there is no adverse impact at all. And there really is no advantage to pulling the TAP funds out of the administrative costs and making it a separate line.
    The CHAIRMAN. Thank you, Mr. Secretary.
    Next we have Major General John P. Herrling, Secretary of the American Battle Monuments Commission. General Herrling?

    General HERRLING. Good morning, Mr. Chairman.
    On behalf of the chairman of the American Battle Monuments Commission, General Fred Warner, I am pleased to appear before you today.
    Let me begin by thanking you, Mr. Chairman, and the members of this committee for the support you have provided to our commission over the years. The special nature of the American Battle Monuments Commission places it in a unique and highly responsible position with the American people. The manner in which we care for our Honored War Dead is, and should remain, a reflection of the high regard in which we as a nation memorialize their service and sacrifices.
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    As you know, the American Battle Monuments Commission, established by Congress in 1923, is a small, one-of-a-kind agency responsible for commemorating the services of American armed forces, where they have served since April of 1917, through the erection of memorial shrines, monuments, and military burial grounds.
    The American Battle Monuments Commission administers, operates, and maintains 24 permanent memorial cemeteries, and 28 monuments, memorials, and markers, in 15 countries around the world. We have eight World War I and 14 World War II cemeteries located in Europe, the Mediterranean, North Africa, and the Philippines. All of these cemeteries are closed to burials. In addition, we are responsible for the American cemeteries in Mexico City and Panama.
    Interred in these cemeteries are approximately 31,000 World War I service members, 93,000 from World War II, and 750 from the Mexican War, for a total of approximately 125,000.
    Also, we have approximately 5,000 American veterans and others buried in the cemetery in Panama. In addition, we have honored another 94,000 service members on the walls of the missing, dedicated to those who are missing in action and those lost and buried at sea.
    The care of these cemeteries and memorials requires a significant annual program of maintenance and repair of facilities, equipment, and grounds. Care and maintenance of these facilities is exceptionally labor intensive. Therefore, personnel costs account for 72 percent of our budget in fiscal year 1998. The remaining 28 percent is required to fund our operations—our engineering maintenance, utilities, horticultural supplies, equipment, and administrative costs. Also, we operate with fixed assets. We do not have the option of closing or consolidating cemeteries or memorials. In light of this, we have increased our efforts to achieve greater efficiency and effectiveness, through automation, in the operation and financial management areas.
    In addition to our overseas mission, we have been mandated by the Congress to construct two memorials here in Washington, DC.
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    On July 27, 1995, President Clinton and President Kim Young Sam of the Republic of Korea dedicated the Korean War Veterans Memorial. Last week, on February 6th, we opened the Korean War Veterans Memorial information kiosk. This kiosk houses the Korean War veterans honor roll, which allows friends and relatives to query a database containing the names and information about those who died during the Korean War. With the opening of the kiosk, the Korean War Veterans Memorial is now complete.
    In May of 1993, Congress authorized the American Battle Monuments Commission to build a national World War II Memorial. The Rainbow Pool site on the mall was dedicated on November 11, 1995, by President Clinton. Since that time, a national design competition for the memorial was held, with over 400 preliminary designs submitted. Six finalists were selected for the final stage of the competition. On January 17, 1997, President Clinton announced the winning design for that competition.
    In the packet that you and the other members of this committee have been provided is additional information and the renderings of the winning design. As directed by Congress, the project will be funded through private donations. The American Battle Monuments Commission is working closely with the Presidentially-appointed World War II Memorial Advisory Board to raise the funds to build the memorial.
    Our greatest challenge, Mr. Chairman, for fiscal year 1998 will be in dealing with aging facilities and equipment. Our cemetery memorials range in age from approximately 50 to 80 years, with the Mexico City cemetery being over 140 years old. The permanent structures and plantings which make these facilities among the most beautiful memorials in the world are aging and require prioritized funding to maintain them at the current standards. In addition, much of our equipment is aging and rapidly reaching the end of its useful life.
    In summary, Mr. Chairman, since 1923, the American Battle Monuments Commission's cemeteries and memorials have been held to a high standard in order to reflect America's continuing commitment to its Honored War Dead, their families, and the U.S. national image. This commission intends to continue to fulfill that sacred trust. Our appropriation request for fiscal year 1998 is $23,897,000.
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    Sir, this concludes my statement, and I will be pleased to respond to your questions.

    [The prepared statement of General Herrling, with attachment, appears on p. 157.]

    The CHAIRMAN. Thank you, General. You mentioned the aging facilities and equipment. Are you sure that your budget request for 1998 properly or adequately covers these? Are you satisfied that it does, or——
    General HERRLING. Sir, I am somewhat satisfied, as we have had to carefully prioritize our maintenance requirements. And like most other organizations of the federal government, I have a fairly sizeable deferred maintenance program. With the money I have been given this year, I will be able to make some in-roads into that deferred maintenance program. But it's not all that I would like, or it's not all that the program requires.
    The CHAIRMAN. When you made mention of the fact that you could not consolidate or close a national cemetery, would that be of help to you? Or when you say ''close,'' do you mean just lock it up, or just continue on with maintenance and if you have no more burials in that area?
    General HERRLING. Sir, all of our World War I and World War II cemeteries are closed to burials, with the exception of those War Dead whose remains may be discovered on old battlefields. What I meant was that we could not close and disinter the remains in one cemetery and move them to another cemetery, thereby reducing the number of cemeteries we are responsible for. Nor could we close the gates and just walk away from one of our cemeteries. Our cemeteries need to be maintained in perpetuity by this country to honor the commitment we have made to the War Dead and their families.
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    The CHAIRMAN. I didn't mean it for that. I just meant the management. Of course, you do that now, I guess.
    General HERRLING. We do.
    The CHAIRMAN. Thank you, General.
    Mr. Evans, do you have any questions of the General?
    Mr. EVANS. No questions, Mr. Chairman. I just look forward to working with all of our friends, and it's particularly good to see Martin Lancaster back with us. He was chairman of the Veterans in Congress Caucus for a period of time.
    And we miss you here, Martin, and are glad to see you again.
    Mr. LANCASTER. Thank you.
    The CHAIRMAN. Okay. We'll listen to the Honorable Martin Lancaster, the Assistant Secretary of the Army. We're pleased to have a colleague here, Martin, and we look forward to your testimony.

    Mr. LANCASTER. Thank you, Mr. Chairman. It is my first opportunity to testify before your committee since you assumed the chairmanship and since Mr. Evans became the ranking member. And I'm looking forward to working with you on Arlington National Cemetery Soldiers' and Airmen's Home National Cemetery, which come under my jurisdiction.
    I appreciate the opportunity to testify today in support of the fiscal year 1998 budget for those cemeteries. The deputy superintendent of Arlington, Mr. Thurman Higginbotham, and my deputy for management and budget, Steve Dola, accompany me and will be available for questions after my testimony.
    With your permission, I will summarize my testimony and request that my full statement be submitted for the record at this point.
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    The request for fiscal year 1998 is $11,815,000. This amount will finance operations at both Arlington and the Soldiers' and Airmen's Home National Cemeteries. It supports the workforce, will assure adequate maintenance of the buildings and grounds, and will permit the superintendent to acquire necessary supplies and equipment.
    Major new construction projects proposed for fiscal year 1998 include replacement of the historic Custis Walk, which is approximately 2,500 feet long and is about 75 percent affected by heaving and cracking which requires visitors to exercise additional care and presents a true safety hazard on the grounds of the cemetery.
    Also, access roads at the Columbarium complex will be constructed, which will allow full utilization of the new inurnment courts currently under construction. Additionally, $200,000 is being applied to further expand contracts that enhance the appearance of the cemetery while implementing government-wide streamlining plans and staff reductions.
    Our total personnel strength is declining from 128 authorized in fiscal year 1996, to 121 in 1997, to 117 in fiscal year 1998. However, at the same time, we plan to perform the same work contractually that previously was performed by civil service personnel. And we have directed those contractors to take on additional tasks that need to be accomplished.
     Ground maintenance, tree and shrub maintenance, custodial services, guide services, and informational receptionists, and headstone setting, realignment, and cleaning are all major functions now performed by contract personnel.
    The $11,815,000 requested are divided into three programs—operations and maintenance, administration, and construction. The O&M program, totaling $8,779,000, will provide for the cost of daily operations necessary to support an average of 28 inurnments and interments per day, and for maintenance of approximately 630 acres. This program supports 111 of the cemetery's total 117 full-time permanent positions.
    The administration program, $599,000, provides for essential management and administrative functions, to include staff supervision of Arlington and Soldiers' and Airmen's Home National Cemeteries.
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    The construction program, $2,437,000, provides $1,175,000 to replace the Custis Walk, $810,000 to construct the Columbarium access roads, and $350,000 to continue the graveliner program and other minor items.
    In fiscal year 1996, there were 3,325 interments and 1,733 inurnments; 3,500 interments and 1,900 inurnments are estimated for both fiscal years 1997 and 1998.
    Arlington National Cemetery is the nation's principal shrine to honor the men and women who served in the armed forces. In addition to the thousands of funerals with military honors held each year, hundreds of other ceremonies are conducted to honor those who rest in the cemetery and those who served.
    The 11,286 niche capacity of the Columbarium Phase III currently under construction will bring the total niches in the Columbarium complex to 31,286. Phase I completed in 1984, and Phase II completed in 1991, each provide 10,000 niches. The additional niche capacity was achieved by increasing the square footage or footprint of each of the Phase III courts by 10 percent.
    In addition to providing more niches, the larger footprint permits the inclusion of a needed rest room and mechanical storage areas.
    That completes my summary, Mr. Chairman, and I will be pleased to answer your questions.

    [The prepared statement of Mr. Lancaster appears on p. 191.]

    The CHAIRMAN. Thank you. We look forward to working with you on this contracting out. I know when the national director was out in Arizona he expressed some concern as to just how far you could go on some of this contracting out, and we look forward to working with you.
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    Let me ask you, to your overall land acquisition plan for Arlington, and is there land available to fit the master plan?
    Mr. LANCASTER. Well, certainly, the master plan, which has now been presented to the Secretary for his consideration, does envision the acquisition of additional property. Part of the property acquisition is now in the works, in the study process, and that is the 24-acre tract known as section 29, which is across Sherman Drive from the Custis-Lee Mansion.
    A study is now underway with the Department of Interior to determine which of the 12 acres indentified as the Preservation Zone are appropriate to transfer to us with the 12 additional acres identified as the Interment Zone, coming to us following that study. That study will be sensitive to the historical nature of the site of the mansion and the backdrop that this area provides for that historic structure.
    The master plan, which is now before the Secretary, would also envision other acquisitions. But until that is reviewed by the Secretary and released by him, it probably would not be appropriate for us to discuss what those plans are. But very clearly, without additional acquisition of property adjacent to the existing Arlington National Cemetery, at some point the burial space will be exhausted.
    We now have sufficient graves to carry us through, I believe, 2025. But with acquisition of section 29 lands, in the near term, and the potential acquisition of other lands evaluated in the master plan, along with implementation of projects to better utiilize existing lands, the master plan in place, I believe that would go to 2050. And then, if there is other land available, that would extend the life of the cemetery even farther, but that is not included in the master plan that is before the Secretary for his approval.
    The CHAIRMAN. Thank you. Mr. Evans.
    Mr. EVANS. No questions, Mr. Chairman. Thank you.
    The CHAIRMAN. Gentlemen, thank you, and we apologize again for the attendance. And thank you very much, and your statements will be made a part of the record in their entirety.
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    The CHAIRMAN. You gentlemen from the Independent Budget, if there is no objection, the Chair would be more than happy to reschedule your meeting, if it doesn't work too much of an imposition, so that we will have more of the members here. I really would like for them to hear it.
    Now, unless I hear some objection, if that meets with your approval, I think we will do that. I can give you a possible—perhaps the latter part of the last week of this month, is that—or if you want to continue on, we're perfectly willing to sit here and——
    Mr. GORMAN. Well, Mr. Chairman, I appreciate the offer. I think we will take you up on that, and maybe you can——
    The CHAIRMAN. All right, sir.
    Mr. GORMAN (continuing). Sit down with staff and try to get a date that's convenient for all of us toward the end of the month?
    The CHAIRMAN. If you would contact—work with Carl here, we'll certainly accommodate you. And I apologize and appreciate your doing that.
    Mr. GORMAN. Thank you.
    The CHAIRMAN. All right, sir.
    I think that's all, then, isn't it?
    I'd like for the record to show that Chairman Spence was holding a meeting, the National Security Committee meeting, and couldn't be with us today.
    [Whereupon, at 11:58 a.m., the committee was adjourned.]

House of Representatives,
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Committee on Veterans' Affairs,
Washington, DC.
    The committee met, pursuant to call, at 9:30 a.m., in room 334, Cannon House Office Building, Hon. Bob Stump (chairman of the committee) presiding.
    Present: Representatives Stump, Evans, Smith, Kennedy, Bilirakis, Gutierrez, Everett, Bishop, Buyer, Quinn, Doyle, Stearns, Peterson, Cooksey, Snyder and Chenoweth.
    The CHAIRMAN. The meeting will please come to order. I would like to welcome all the witnesses who will be presenting testimony today, and especially those that so graciously agreed to return when we ran out of members last week, and I appreciate that very much.
    This, of course, is a follow-on hearing of the February 13 budget, and at that hearing many people asked questions of Secretary Brown that we didn't get around to the rest of them, so he we rescheduled them for today.
    Today we are going to hear from the Honorable Frank Nebeker, Chief Judge of the U.S. Court of Veterans Appeals; the Independent Budget Panel, consisting of the Disabled Veterans, Veterans of Foreign Wars and Paralyzed Veterans; as well as American Legion Noncommissioned Officer Association and the Vietnam Veterans Association.
    Before we begin with our first witness Judge Nebeker, I would like to recognize Ranking Member Mr. Evans for an opening statement. Lane.
    Mr. EVANS. Thank you Mr. Chairman.
    I thank all the members coming back to hear Judge Nebeker and the veterans' service organizations about the Independent Budget. I think it is very important to have as many members as we possibly can have to hear from the VSOs in particular.
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    I would be remiss in not mentioning the American Legion. The Legion has performed an invaluable service to this community over the years in providing its perspective on budgetary needs.
    We need to look at your views on the budget and your continuing efforts to put veterans first as we consider VA initiatives ranging from VA health care reform to giving our ailing Persian Gulf veterans the answers they deserve.
    I know this will be some of the new members' first exposure to Court of Veterans Appeals. It has been one of my proudest accomplishments to help enact the legislation that created the court, and we are very pleased that Judge Nebeker is able to give us testimony today before these new members.
    Thank you, Mr. Chairman.
    The CHAIRMAN. Thank you Mr. Evans.
    Judge, I don't know whether to apologize or not. We rescheduled this mainly for the benefit of the freshman members to hear the workings of the Court of Veterans Appeals, and now, unfortunately, not having any votes today except perhaps one procedure vote and the fact that we have the president of Chile on the Floor at 10 o'clock, we are still short. But we are going to proceed anyway.
    I understand you have left a statement for each Member, a fact sheet, and we appreciate that. Your entire statement, of course, will be inserted in the record, and you may proceed at any way you see fit. Judge.


    Judge NEBEKER. Thank you, Mr. Chairman. I appreciate the opportunity to acquaint the committee and its staff with the court. I recognize that there are some who may not know much about the court.
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    First of all, you might legitimately want to know where I come from. I will tell you. I have 45 years of service to the government. I began in 1953 working in the White House. When I passed the bar, I went to the Department of Justice and finally the U.S. Attorney's Office, where I served for 9 years. I was then appointed in 1969 to the DC Court of Appeals. That is the equivalent of a State supreme court. I served there until 1987, when I was appointed to be the director of the Office of Government Ethics in the executive branch. And after the transition to the Bush administration, I was asked if I would take the job I presently hold. They were looking for somebody who could be a chief judge of the brand new court. And now to the court:
    It is a new court. Judicial review was not permitted regarding denial of veterans' benefits prior to 1988. The court was apparently in a 10-year to 15-year gestation period during which time there was deliberation here in the Congress as to whether there should be judicial review, and if so, what kind. They finally settled upon, in 1988, the Court of Veterans Appeals, a seven-judge court that can hear appeals from decisions adverse to veterans by the Board of Veterans' Appeals. That is the sole jurisdiction of the court.
    Some of our decisions are reviewable in the U.S. Court of Appeals for the Federal Circuit—not all, but some are—where we interpret a statute, the Constitution or regulation of the Veterans Department. We incidentally are batting a thousand in the Supreme Court. We had one case go to the Supreme Court. You probably all heard of it, Gardner, and we were affirmed, as was the Federal Circuit, by unanimous decision of the Supreme Court. That is the only case where there has been certiorari granted to the Federal Circuit through our court.
    Now I notice that in your oversight plan there is an indication that the court is viewed as a court in the executive branch. That is not particularly important, but I would like to invite some facts to your attention.
    Unlike executive branch agencies, our judges file their financial disclosure statements with the Judicial Conference of the United States. That is by an act of Congress that we do so. Also, by an act of Congress, we are subject to the Code of Judicial Conduct of Judges of the U.S. Courts. In addition to that factor, the disciplinary machinery, ethics and disciplinary machinery, for the judges of our court is an integral part of that which is established in the Judicial Conference of the United States. All that is by statute. So when you look at it, we seem to be pretty much integrated into the judicial branch of government, albeit, that the court was created under Article I as a tribunal inferior to the Supreme Court. That is the language of the pertinent provision in Article I of the Constitution.
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    As I say, we sit here in the District. As I have informed many members, we have also sat across the country. We have the authority to do so, but we don't exercise that authority very often.
    We have a very unique situation within the court, one that the Congress ought to be proud of. It is the wave of the future. Here is an appellate court that can sit single judge, in panels of three, or en banc. It is the single-judge authority that is the wave of the future. It has to be the wave of the future in the State appellate courts because they, likewise, are inundated with frivolous or near frivolous cases.
    There are those who would say that the single-judge dispositional authority is devoid of collegiality in the decision-making process. That is simply a misunderstanding on their part. Briefly, here is the way it works: When a case is at issue, it is assigned at random to a single judge. That judge makes the decision whether the case is one that requires an opinion of the court for precedent purposes, or whether it is absolutely controlled by existing statute or decision and the outcome is not debatable. If that decision is made, the opinion is circulated to the rest of the judges. If any judge says, I think it ought to go before a panel, it is pretty well a foregone conclusion that it will go before a panel. So there is collegial input at that stage.
    Once the decision is out, the single-judge decision is out, there is the authority under our rule to petition for panel review. That automatically involves two more judges, who then look at the opinion again and look at the record and decide whether to grant panel review. If panel review is denied, the single-judge opinion stands. If it is granted, the single-judge opinion disappears, is vacated, and a new opinion will appear.
    There is more collegiality in that kind of a disposition than there is in so many of these busy appellate courts where you have in name three judges on the panel, but in reality a one-judge decision because it is too much for the court to handle.
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    I have urged throughout the United States to the appellate judges of the country that they seek single-judge authority. It is a way of conserving judicial resources, and it does not sacrifice the collegiality of the court.
    We have one other unique factor on our court. Almost all appellate courts have a central legal staff that helps narrow the issues, and get the record on appeal together where there is a dispute as to what ought to be in the record on appeal. Our central legal staff does that; but they do more. Since we do not have retired judges, as most State courts do, and they use retired judges for alternative dispute resolution called presettlement—or prehearing settlement conferences, where at the appellate level cases are settled out, we have been able to use our central legal staff for that purpose.
    There is a wall between them, when they are conducting settlement conferences, and the judges. The judges never learn a thing about what went on in the settlement conference. And, you know, they are settling a lot of cases, which means that there is a disposition that is accomplished often before briefs are even filed. So this process is disposing of the cases where they ought to go back to the Board because of Board error, and these cases don't have to wait in queue to come before the court for disposition.
    We continue on the court to have a pretty high pro se, that is represent yourself, rate. Of late it has been 70 percent, a slight decline, but it is still far higher than any other Federal court. Unfortunately, the cases that come before the court for disposition have about a 50 percent error rate requiring remand. That is high. I know they have got a terrible job at the Board level. They have got a lot of cases. But the court's function is to comb those records for error that affects substantial rights. That is what we are doing, and we are finding it in about 50 percent of the cases that come before the court.
    I will go back to the single-judge disposition that I mentioned just a moment ago. In those cases by single-judge action that are sent back, there is prejudicial error found. The single-judge technique is not limited to affirming near-frivolous or frivolous appeals. It is used, I would guess, perhaps 40 percent of the time to remand cases because there was error in them.
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    That concludes my presentation to you on what I am and what the court is. I would be happy to entertain questions.
    The CHAIRMAN. Judge, thank you very much, and we appreciate your willingness to appear before this committee.

    [The prepared statement of Judge Nebeker, with attachment, appears on p. 201.]

    The CHAIRMAN. Mr. Evans? No questions.
    Mr. Everett? No questions.
    Mr. Kennedy.
    Mr. KENNEDY. Just a very brief question, Mr. Chairman.
    Judge, when you were describing the process where a individual that has a case before the single judge that might object to the single-judge ruling, you described a situation where if it is a clear ruling of law, and it would be sort of automatically referred to a four-judge panel or something like that.
    Judge NEBEKER. No, three.
    Mr. KENNEDY. Three-judge panel.
    Would the veteran or the veteran's attorney be able to bring to the attention of that three-judge panel any disagreement that he or she may have, or is that just up to the judges themselves to make that determination?
    Judge NEBEKER. No, that is the purpose of a motion for panel review of the single-judge decision, so that they may come in and make the arguments that they want to make to persuade the court that the single-judge decision is in error.
    Mr. KENNEDY. I see. Well, it sounds like a reasonable system, Judge.
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    Judge NEBEKER. It works beautifully.
    Mr. KENNEDY. Have you found many of the attorneys objecting to the system that is in place in terms of providing them grounds for dealing with controversial issues? I mean, are you getting a lot of complaints that this system is not working because of the way the system has been set up?
    Judge NEBEKER. No. We have received no complaints as such from members of the bar. I understand there is an institutional concern among some veterans' services organizations that the system is not to their liking, and I submit it is because they don't understand how it works. That is why I appreciate the opportunity to lay it on the record here to demonstrate that it does involve collegial reaction.
    Mr. KENNEDY. Thank you very much, Your Honor.
    And if any of the VSOs do have a particular complaint, I would be happy to talk to them and maybe drop up a note and let you know what their specific concerns are. I am not aware what they are, so if there are some that haven't come to light, I would be happy to try to follow up.
    Judge NEBEKER. I appreciate that.
    The CHAIRMAN. Judge, let me follow. Is it accurate that the court finds the pro bono system to be of assistance to the courts?
    Judge NEBEKER. Yes, not only the court, but I think the veterans do. They are hanging out there with no ability to really take care of themselves before the court. It is an adversarial process all of a sudden, and it helps them as much if not more than it helps the court.
    The CHAIRMAN. Is it also accurate to say your budget remains the same except for the pro bono program?
    Judge NEBEKER. Yes.
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    The CHAIRMAN. Thank you, sir. Mr. Stearns.
    Mr. STEARNS. Thank you, Chairman. I have a question that is perhaps a little far from your field. Does the fact that this budget we are putting together and its priorities affect you and your Department at all? In other words, do you feel any impact from the budget, veterans' budget?
    Judge NEBEKER. You mean the Department of Veterans Affairs budget?
    Mr. STEARNS. Yes.
    Judge NEBEKER. No, we are totally independent of that. Our budget is submitted to the Office of Management and Budget, but the executive branch has no power to cut it. Fortunately when the court was created, we were given that type of judicial independence, if you will, and that is why I appear to justify the court's budget, because it is not something that is handled through the executive branch.
    Mr. STEARNS. Okay, thank you.
    The CHAIRMAN. Mr. Gutierrez.
    Mr. GUTIERREZ. Thank you very much, Judge, for being with us here this morning. You describe in your written testimony the significant increase in appeal cases seen before your court in the past 2 fiscal years. If you could, would you explain in greater detail why this pattern is occurring and why you believe it will continue as we move toward the end of the century?
    Judge NEBEKER. Surely. The caseload in our court is directly driven by the dispositional rate at the Board of Veterans' Appeals. The chairman of the Board has informed us lately that their dispositional denials, outright denials, have gone from 6,000 odd to 10,000. That of necessity means a greater percentage—a greater number will come to our court, although not all 10,000 of them. We have learned that there is not that 100 percent ratio of appeals.
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    Many of those who have had their claims denied consult with veterans' service organizations or others and learn that there is nothing that they can do, that an appeal would be fruitless. But we still get a number of appeals just because the right of appeal exists, and so we do get an increase whenever the door is opened at the Board level.
    Incidentally, sir, it isn't just the complete denial, flat denial, that is appealable. The Board can sometimes award benefits for one thing and deny for another, and then we get that denial, and that is not included in the 10,000.
    Mr. GUTIERREZ. Excuse me, Judge. And you believe it is going to continue, that the increase in the——
    Judge NEBEKER. Yes, sir.
    Mr. GUTIERREZ (continuing). In the number of cases?
    Judge NEBEKER. Yes, sir.
    Mr. GUTIERREZ. What leads you to believe that there is going to be a continued increase in denial?
    Judge NEBEKER. Because the chairman of the Board has been successful within the Department in his endeavor to increase his staff, and they have had marked increases in their capability. This is one of the problems that we are experiencing right now because on the other end of the belt, the Group VII lawyers in the General Counsel's Office that represent the Secretary before our court have not had incremental increases. In fact, they have gone the other way, and it is causing problems.
    Mr. GUTIERREZ. So, Judge, they can get more work done, which ultimately leads to more appeals.
    Judge NEBEKER. To more appeals for us, that is correct.
    Mr. GUTIERREZ. Thank you for being with us here today, Judge. I appreciate it.
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    The CHAIRMAN. Mr. Snyder.
    Mr. SNYDER. Thank you, Mr. Chairman.
    Judge, you know this is the first term row right here, so I am going to start with the basics here. Could you give me the thumbnail of what key points you see in this year's budget request that I need to know?
    Judge NEBEKER. You mean for the court?
    Mr. SNYDER. For the court. It had some points about the pro bono.
    Judge NEBEKER. Well, our operating budget is a flat budget, and we are continuing to meet the demands that were imposed a year ago to cut back on government through the National Performance Review. But we are maintaining a flat budget with no increases except where by law we have to give pay raises. And there is no pay raise for judges. We are not anticipating an entitlement for pay raises there. So our budget is flat.
    Mr. SNYDER. Do you want it to be flat?
    Judge NEBEKER. We can get by with it, yes.
    Mr. SNYDER. I notice you have cut out your annual conferences. Is that a good thing?
    Judge NEBEKER. We have. It isn't that expensive a thing. We don't travel. We have them right here at Fort Myer, and it is something that the Article III Federal courts have done as well.
    Mr. SNYDER. What, gone to every 2 years?
    Judge NEBEKER. Every 2 years, yes. And we have done it because obviously others involved have to spend money, too. The Board puts out a lot of money to come to the conference, and the decision was made that it is good enough to do it every 2 years. It is fun to do it every year, but we don't have to.
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    Mr. SNYDER. So you are satisfied with the budget being flat?
    Judge NEBEKER. I am satisfied with our operating budget this year being flat, yes. The aggregate budget, of course, is not, but I offer no comment on the pro bono's portion of that budget.
    Mr. SNYDER. In terms of the amount?
    Judge NEBEKER. In terms of the amount.
    Mr. SNYDER. Now your statement makes comment about where it ought to be. Would you explain or give me a 30-second summary the point you made in your statement?
    Judge NEBEKER. You see, out of our operating budget we are funding a substantial portion of one side of the litigants that appears before the courts. There is a problem of objectivity. There is a problem of appearance that the court is perhaps in a position where it has to sacrifice its own function for the purpose of litigants on one side, and as a result impartiality could be questioned. At least the appearance of it could be questioned. It is for that reason that we would like to see the program, which we support—It is a fine program—We would like to see it authorized and separately funded in some way.
    Mr. SNYDER. You made this point last year.
    Judge NEBEKER. We did.
    Mr. SNYDER. That argument didn't carry today apparently.
    Judge NEBEKER. It did not.
    Mr. SNYDER. Why was that you think?
    Judge NEBEKER. Well, it was not authorized. The program was not authorized, and as I understand it, there is a problem with whose apportionment, the money comes from. We thought it would be a good idea to let it go to the Legal Services Corporation, but that gets it into a totally different appropriations subcommittee, and that is a turf problem, a jurisdictional problem, and I gather it is creating a problem.
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    Ideally this program, which was a pilot program, ought to be funded privately. I don't oppose it being funded by public funds, but it was a pilot program when we got it started. It is a roaring success, quite frankly. The folks that are working in it have done tremendous work, and they are continuing to do it. And if they can just in some way be funded beyond the appearance of the court sacrificing over here in order to run a program over here, we would be very happy.
    Mr. SNYDER. And then another point in your statement you talk about survivors' benefit change. Am I understanding that right?
    Judge NEBEKER. Yes. There is title 2 of this legislative proposal which we submitted last year, the so-called downsizing proposal. Title 1, the downsizing proposal, as Mr. Gutierrez's question points out, we have got an increase in caseload now, so we ought to leave that thing alone. But title 2 deals with bringing the retirement and the annuity system for survivors up to a par with what is in existence elsewhere within the judicial branch of government, the Tax Court, what used to be the Court of Military Appeals, and the Article III Courts. And we urged that that provision, that title, be enacted into law. We understand that veterans' service organizations support that effort.
    Mr. SNYDER. Thank you, Judge.
    Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Quinn.
    Mr. QUINN. Thank you, Mr. Chairman.
    Judge, thank you for being with us today. I want to get back to the pro bono program for a minute that the chairman mentioned before.
    Judge NEBEKER. Sure.
    Mr. QUINN. You mentioned your positive reaction to that. Do you have any measurement to gauge that positive reaction, that it is working, that it is helpful? Is there anything formal in place that gives you some feedback, or is it just a sense?
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    Judge NEBEKER. No, there is something rather formal, if you want to call it that. We start out with about 70, 75 percent pro ses when they come in the door. By the time they go out, it is down to 50. A lot of that change is as a result of the program.
    The other thing that is significant is that the program screens these cases so that these volunteer attorneys are not taking the frivolous cases, they are taking a case that the screeners think has got some merit to it, and their rate of success, i.e., their winning the case before the court, is very high. So those are two factors that I say demonstrate the program is a success.
    Mr. QUINN. How about feedback from the veterans themselves?
    Judge NEBEKER. We don't get any.
    Mr. QUINN. Do you think you need any?
    Judge NEBEKER. No, we don't get any accolades, and we don't want any from the litigants that appear before the court. Our job is to decide the case. If they are pleased, they are pleased; if they are not, they are not. That is the way it has to be in the court. You may hear about it.
    Mr. QUINN. I agree we hear about it.
    The CHAIRMAN. Mr. Bilirakis. No questions. Mr. Buyer.
    Mr. BUYER. Judge, as I figure, you make 50 percent happy, somebody.
    Judge NEBEKER. Sometimes neither is happy because we rule against the position the Secretary has taken, and he still wins the case, or part of the case.
    Mr. BUYER. I don't have any other questions.
    The CHAIRMAN. Mr. Cooksey.
    Mr. COOKSEY. No questions.
    The CHAIRMAN. Mr. Doyle.
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    Mr. DOYLE. No questions.
    The CHAIRMAN. Mr. Evans.
    Mr. EVANS. I would like unanimous consent to submit written questions and ask that the answers to those questions and the questions themselves be made part of the record.
    The CHAIRMAN. Certainly.
    Judge, there may be some questions from staff. If you would respond for the record—or from other members—we would appreciate it.
    Judge NEBEKER. We will be happy to do that.
    The CHAIRMAN. Thank you very much, sir.
    Judge NEBEKER. Thank you for indulging me.

    The CHAIRMAN. Our second panel consists of four veterans' service organizations who have prepared the Independent Budget.
    Gentlemen, we appreciate all the efforts you have put in the preparation of this document and the cooperative spirit which this document represents.
    Each witness this morning will be recognized for 5 minutes, and when you are ready, you may proceed in any order that you see fit.
    I might say to the new members that the Independent Budget is put together by the organizations that you see represented before you, not in conjunction with but in contrast to what the Department asked for. So it is there for our assistance, and it is of great value, I think, in helping the members decide which is the right amount.
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    Mr. GORMAN. Good morning, Mr. Chairman. My name is David Gorman, and I have the honor of being this year's chairman of the Policy Council of the Independent Budget. And with your permission and your indulgence, what I would like to do is to introduce each member at the table today and member of the Independent Budget and have them proceed with their area of responsibility for putting the document together.
    The CHAIRMAN. That will be fine, and their entire statements will be made part of the record.
    Mr. GORMAN. On my right-hand side is John Bollinger, the Deputy Executive Director for the Paralyzed Veterans of America; to my far left Mike Naylon, the Executive Director of AMVETS, who will be doing the National Cemetery System portion of the Independent Budget; and to my immediate left Ken Steadman, the Executive Director of the VFW, who will be doing the constructive portion of the budget; and I will be doing the benefit section of the Independent Budget, Mr. Chairman.
    I would like to start with Mr. Bollinger if we could.
    The CHAIRMAN. Mr. Bollinger.
    Mr. BOLLINGER. Thank you, Mr. Chairman. Good morning to you and members of the committee. I will focus my comments on the medical care portion of the budget.
    First of all, let me commend you and many of the members for their remarks a couple weeks ago when this hearing got started. We share your concerns with regard to this budget. We see the administration's budget as a gamble. It is a gamble that is going to result in some actions taken that will directly affect the very real health care needs of veterans.
    When all is said and done, the administration's budget in appropriated dollars is $55 million less than it is this year. When you take those kinds of budget cuts, project them to the year 2002, and coming at a time when the VA is going to be treating an increasingly elderly population you have a real problem. It is going to come at a time when already scarce resources are going to be moved from the Northeast to the South and the Southwest. It is going to come at a time when more veterans are going to use the system.
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    The increase that the administration is talking about is, we think, a big risk. The increase relies on legislative proposals to make up for the reduction in appropriated dollars, legislative proposals that are not sufficiently tested, proposals that have not been accepted by this Congress in years past, and proposals that are being used to replace rather than to supplement what we believe is the government's obligation to ensure quality care for veterans.
    To be clear on this, in years past we have championed the idea of VA keeping outside funding sources from private insurers and Medicare, but this has always been done hand in hand with what we believe to be sufficient appropriations. To make these kinds of cuts at this point in time, just when the VA is trying to wrestle with the whole restructuring issue is the wrong time to do it. It is pulling the rug out from under the VA when they are trying to make these big changes in the way they deliver health care.
    During the past 3 fiscal years, the VA medical budget has increased, while workload has been fairly static, except for outpatient clinics. VA has just been able to keep its head above water over the past few years with funding increases. We find it pretty difficult to accept that they will be able to greatly increase the number of patients in years ahead without appropriated dollar increases.
    As you will see in the Independent Budget, we have recommended a $1.5 billion increase over current services, which we believe would accommodate the increased workload that is being projected by VA.
    Also included in our recommendation is an increase in the research component of the budget. The administration's budget recommendation is an unprecedented $28 million decrease in research funding. If enacted, this decrease will be devastating to VA's research expertise. When you look out at the horizon, you see some of the wonderful things that VA research is doing right now in regards to multiple sclerosis, spinal cord injury medicine and so on. In the case of SCI, we know very well that the question these days is not if a cure can be found, but when it can be found. The only thing that stands in the way of that day is resources, time and effort, continuity, consistency and all the other things that go with research. So we hope you will take a hard look at that part of the budget and restore appropriate funds.
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    We urge you not to let anyone gamble with VA health care. For many of our members across the country, VA health care is really a part of their daily lives. It is not a matter of going down to the family doctor next door. It is a matter of going to the VA and getting expert care on specialized services, whether it be spinal cord injury, blind rehab, amputation, post-traumatic stress.
    Those areas are fields that the VA excels in. They are largely unmatched oftentimes in the private sector. For many of our members across the country, it is the only game in town. So we would urge you to restore the appropriated funds to VA's budget and again not let the administration gamble on health care.
    It appears to us that they have basically thrown up their hands, and they say this is the best we can do and very clearly placed the problem on your doorstep. So I hope you can handle it. Thank you.

    [The prepared statement of Mr. Bollinger, with attachments, appears on p. 206.]

    The CHAIRMAN. Thank you, Mr. Bollinger.
    I think we will go ahead and proceed with all members of the panel and then reserve questions.

    Colonel NAYLON. Mr. Chairman, I am Michael Naylon. I represent more than 200,000 AMVET men and women, both veterans and currently serving U.S. military personnel. I appreciate the opportunity to testify before you and the committee today.
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    On February 11 at the Veterans of Foreign Wars Voice of Democracy dinner held here in Washington, DC, a young high school student from Bronx, New York, ended her $25,000 scholarship-winning essay with the words, democracy is a journey, not a destination. In following remarks, Senator Daschle spoke of how Congress and society will be measured not by how many battle monuments we carve names and inscriptions into, but by how we carve our laws and legislation on behalf of the veterans that we represent here today.
    The journey that the winning essayist spoke of, democracy, ends for many veterans at the gates of a national cemetery. Depending on how the Congress carves the budgetary authority for the Department of Veterans Affairs for this coming fiscal year will determine whether those same veterans will be given the final entitlement they were promised as they took up arms on our behalf.
    The National Cemetery System has a long and proud history of service to Americans and their families. Despite their continued high standard of service, and despite the administration's proposal for a $7 million increase in budgetary authority over fiscal year 1997 levels, the system continues to be underfunded.
    Current and future requirements of the cemetery system are not being adequately funded to meet current or anticipated demands. Based on 1990 census data, annual veteran deaths are expected to peak at 620,000 in the year 2008. The cemetery system's capability will fall far short of requirements to provide burial spaces for those veterans seeking burial in a national cemetery given current and projected death rates.
    Currently 57 of the 114 national cemeteries remain open with in-ground burial plots. By the year 2000, it is projected that only 53 cemeteries will be accepting full-casket interments.
    The Independent Budget is a factual analysis of the realistic funding required by the VA to adequately carry out the roles and missions designed to meet the needs of American veterans. We urge the Congress to support the VA's efforts at reorganization and refocusing its health care delivery system. Spare the agency and veteran, however, from funding reductions in order to balance the budget. The President's budget represents somewhere between 468 and $600 million reduction in appropriated funds from fiscal year 1997 levels, and it is dependent on a legislative proposal to retain earnings from the medical care cost recovery program.
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    Failure to fund the VA at last year's fiscal year 1997 level will result in a reduction in services to veterans. That shortfall could indirectly impact the cemetery system. We urge you to take the necessary action and prevent this potential reduction in services to veterans from occurring.
    While we support the concept of retention of copayment or payments from the veterans' health care insurers, it is necessary to allow the Department of Veterans Affairs to meet the obligation to provide health care to the Nation's sick and disabled veterans at the same level as last year.
    With respect to the cemetery systems, our recommendations are to add at least 60 more full-time employee equivalents to cover incremental workload increases, to provide an additional $4 million in funding to reduce NCS equipment maintenance backlog, begin a feasibility study to promote a second national cemetery to ease the demand for space at Arlington Cemetery, aggressively pursue an open cemetery in each State, expand existing cemeteries where possible, and recommit to a policy of an open national cemetery within 75 miles of 75 percent of America's veterans.
    Our Independent Budget recommendations with respect to the National Cemetery System represent approximately a $1,370,000 increase over the fiscal year 1998 budget request.
    Mr. Chairman, that concludes my remarks.
    [The prepared statement of Colonel Naylon, with attachment, appears on p. 214.]
    The CHAIRMAN. Thank you sir.

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    Mr. STEADMAN. Mr. Chairman, members of the committee, first let me thank you for rescheduling this hearing. We are proud to be a coauthor of the veterans' Independent Budget, and I will confine my remarks to the VA's construction program.
    The Independent Budget coauthors believe the VA's construction program should emphasize expanding primary care access, making facilities more modern and attractive, and increasing long-term care capacity in noninstitutional and institutional settings. We recommend that the minor construction project spending be adjusted annually for inflation.
    Prompt expansion of VA's ambulatory care program is crucial if VA is to be an effective care provider. VHA must open more clinics in areas convenient to veterans. We support creating private sector points of entry into the system to meet the needs of veterans remote to VA services. We do not, however, support mainstreaming this system.
    The aging veteran population can be expected to place increased demands on the system that will require rapid expansion of VA long-term care alternatives. VA must continue to increase access to community and home-based alternatives for long-term care. In addition, the need for institutional long-term term care also exists.
    VA has continued to delegate leasing authority to the networks and medical centers through its simplified lease acquisition process and the delegated authority to negotiate leases. Expedited lease acquisition is also important. The IB authors strongly support permanent legislative authority for VA's enhanced-use leasing program, which currently expires on December 31, 1997, and eliminating the five-project-per-year limitation. The Independent Budget coauthors believe VA should use a balanced mix of the facility development options available to meet veterans' needs. These include major and minor construction, leasing, and expanding the enhanced-use authority.
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    With respect to major construction, the Independent Budget recommends a $391.5 million major construction appropriation for fiscal year 1998. This is $312 million more than the President's request. Less funding in fiscal year 1998 would be catastrophic given the rapidly changing clinical requirements and the existing plants' age.
    The Independent Budget coauthors believe the VA must consider acquisition and conversion projects as alternatives to new construction.
    Most of the Independent Budget recommendations pertain to leases for outpatient clinics and nursing homes. The Independent Budget funding recommendation accommodates the annual cost of leasing seven new nursing homes and annual leasing costs for 24 new outpatient clinics.
    With respect to minor construction, the fiscal year 1998 Independent Budget recommends a $299.9 million appropriation. This is $134 million more than the President's request. The funding reflects our growing concern about VA facilities' urgent need for update and repair.
    VA should allocate funding in the minor construction account to convert unused and unneeded hospital beds to nursing home care. The Independent Budget coauthors emphasize conversion as the principal means to make nursing home care available to veterans. This is the only way we feel the VA can keep pace with the demands of the rapidly aging veteran communities.
    Congress should encourage and fund grants for the construction of State extended care facilities wherever States will participate. For fiscal year 1998, the Independent Budget recommends an $80 million appropriation for these grants, $39 million more than the President's request.
    Mr. Chairman, members, this concludes my testimony.

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    [The prepared statement of Mr. Steadman, with attachment, appears at p. 220.]

    The CHAIRMAN. Thank you, Mr. Steadman. Mr. Gorman.

    Mr. GORMAN. Thank you, Mr. Chairman. I would like to join with my colleagues in expressing our overall appreciation to you, Mr. Chairman and the committee, for reconvening the hearing today to be able to allow us to present our views so you can learn a little bit more about where we are coming from as far as overall veterans' benefits are coming.
    As I said earlier, Mr. Chairman, my remarks will focus principally on the area of the budget. As an organization of more than 1 million service-connected disabled veterans, the DAV has a special interest in the effectiveness of the benefit programs and in their delivery. The administration's budget will maintain the benefit programs intact and provide for a cost-of-living adjustment for compensation while proposing to permanently extend several of the OBRA measures to achieve additional savings. The DAV appreciates, Mr. Chairman, the administration's support for veterans, as do we this committee's.
    However, we do oppose making these cost-saving measures permanent, as the administration would propose, especially the proposal to permanently round down compensation COLAs.
    We are also concerned about proposals to make more deep cuts in staffing during fiscal year 1998, a reduction of 543 in VBA and 2,135 in VHA. VA's resources are already strained, and the loss of this many more employees will quite likely impact on the quality and time limits of services to veterans.
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    Mr. Chairman, the DAV does not support the administration's proposal that would prohibit service-connected disability benefits in which smoking may be a factor. To do so, in our judgment, would be unfair under many circumstances such as where the young servicemen began smoking during service at a time and in a climate that fully condoned or even encouraged such behavior. And those of us who have had the pleasure of receiving C Rations on a daily basis know that cigarettes were a part of that daily life.
    We also fear that a history of smoking could be a basis for the denial of service connection for respiratory conditions and diseases, especially cancer, although smoking may not necessarily have been the primary cause or even a substantial contributor to the condition.
    The DAV believes that, at the very least, this committee should hold hearings on this type of proposal which would alter the service-connected disability compensation program, in our view, before taking any action on it.
    Mr. Chairman, we are also concerned about the proposed funding for medical care. First, as everyone else has, we question the principle of robbing Peter to pay Paul, in which the third-party collections will not be made available to VA to help it raise its level and quality of service, but rather will be used to replace the real reductions in the health care appropriation.
    Second, we question the expectation that VA can maintain an acceptable level of services, much less improved services, with a health care budget that increases only 5 4/10 percent over a span of 5 years.
    A related concern is that because of these third-party collections that are already committed to deficit reduction under OBRA, there might be those that would seek their replacement from VA's funding to the detriment of benefits and services to veterans.
    Mr. Chairman, I would invite the committee's attention to our written statement for the details of our full recommendations and for improvements in the benefit programs.
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    For the general operating expenses portion of the budget, we have supported the VA's concept of reengineering of its business processes to achieve more efficiency in the claims adjudication system, an undisputed area of concern for all of us in recent years.
    This is an area, Mr. Chairman, where we have been critical of the lack of decisive and meaningful action on VA's part, but we believe now the VA has identified and acknowledged the real causes for its claims processing difficulties and has, in fact, a good preliminary plan for correcting those problems. We believe that VA's plan follows from an objective, thorough analysis of its performance and a candid acknowledgment that the current situation is primarily the product of an emphasis on quantity rather than quality and an absence of incentives and accountability for quality.
    We do observe that many of the details for implementation of the plan are yet to be formulated, and we caution that the criteria by which quality is to be measured must be built primarily around factual and legal accuracy and completeness of adjudicative actions. We also caution that accountability must start with the employee responsible for the decision and must continue appropriately with those who have supervisory responsibility over the decisionmaker.
    The concept as presented by VA is a sound one, however, and we urge the committee to support VA's strategy for improving their claims processing.
    I would again invite the committee's attention to our written statement for our recommendations for each of the other business lines for the Veterans' Administration.
    Mr. Chairman, the Independent Budget is in the process of being printed, and we hope to have that back from the printer and available very shortly. And, of course, when we do, we will make copies available to you and to all members of the committee. With that, I am sure I will be happy to answer any questions that you or the committee may have.
    [The prepared statement of Mr. Gorman, with attachments, appears on p. 228.]
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    The CHAIRMAN. Thank you, Mr. Gorman, and thank all of you for agreeing to be rescheduled today.
    I know you stated the position of the DAV, and Mr. Naylon and Bollinger touched on this question of third-party collections that some of us have a dim view of. But I would like to ask each one of you if you actually support the administration's proposal for collecting the insurance as part of our budget, which could leave us, if we fail to pass this bill, about $460 million short I think has been mentioned. Mr. Bollinger?
    Mr. BOLLINGER. Mr. Chairman, we certainly do favor that proposal, and we have historically always advocated for the VA to be able to go after these third-party payments and also to be able to retain them.
    However, having said that, we have also been very strong in our proposal that these funds be used to supplement, not take the place of, appropriated money. That is where we see this administration proposal coming up far short. It is clearly far short in appropriated dollars, and, as I said in my opening remarks, it is a gamble to assume this other money is going to be available.
    Mr. GORMAN. Mr. Chairman, I would certainly agree with that. I think for years the Independent Budget has championed that issue of we should be going out. The VA is treating these patients, and they are taking out appropriations. Whatever money comes back should feasibly and fairly go back to the VA. So we support the concept of that.
    But to replace, substitute appropriated dollars, there is a real need for those dollars out there to take care of that workload. With the expectation that Congress and this committee may act favorably to the request to the detriment of veterans being treated on a daily basis is something that we are very, very concerned about.
    The CHAIRMAN. Mr. Steadman.
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    Mr. STEADMAN. Mr. Chairman, we have historically supported that view as well, but we are also very deeply concerned that this funding program would provide no additional appropriations for health care over the previous fiscal year, and we think it—we deem it unsatisfactory that the additional health care dollars come from a plan which requires separate legislative action, the gamble as was mentioned before, and would not be appropriated directly.
    Colonel NAYLON. Mr. Chairman, I could add little to that other than to say when I was in the service, we used to refer to this as betting on the come, so we can't support it in that fashion.
    The CHAIRMAN. I know we all probably support this, but in the past it has died and never been able to make it through the Congress, and I am just afraid at the last minute we are going to come up short, and who is going to get the blame for it. It should have been based on supplemental dollars if we are successful in collecting money. Mr. Evans.
    Mr. EVANS. Thank you, Mr. Chairman. I think I would ask all the panel members how realistic they think the VA goals for a 30 percent reduction in health care treatment cost, 20 percent increase in the number of veterans served, and funding 10 percent of the medical care budget from nonappropriated sources, how realistic is that during the next few years?
    Mr. GORMAN. If I could start, Mr. Evans, I think the discussion we just had puts in a lot of question that leads to the latter, the 10 percent.
    The 30 percent reduction, I think the VA probably has a good plan to start that ball rolling. There is probably a lot of things that can be done, a lot of things that have been done to try to reduce the operating cost, capital investment being one, moving primary care away from inpatient care and so forth.
    I would be concerned that they do not jump right away into until all of a sudden assuming that these costs can be reduced without the necessary processes being put in place first to enable that to happen. And some of that may very well have to do with some current dollars being maintained and a gradual entry into some of these programs they want to change to in the longer term to reduce some of those costs.
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    I think concomitant with that is again moving away from the inpatient care setting and more to a primary care. I don't know if the 20 percent is going to be accurate, but certainly there is going to be able to be seen an increase in the number of patients seen primarily on an outpatient basis. I think that is the goal we have all held to, and I think they are starting to move in that direction.
    Mr. EVANS. I want to ask all the VSOs: Do you feel that your organization is being fairly treated by the VA as stakeholders in the consolidation options that are being discussed within the divisions themselves?
    Mr. BOLLINGER. Mr. Evans, think we have come—I don't want to say a long way. But I think we have come a part of the way since all this got started about a year ago. Things are moving very quickly. We have extremely important issues to deal with, capitation, enrollment, specialized services, contracting services, all those kinds of things as the VA positions to report back to your committee not too long from now.
    Of course, there are the MACs, the management advisory committees, that we are a part of. We are working closely with the Department of Veterans Affairs to try to make that process work better. We would always like to be involved sooner in the process, and I would encourage this committee that if it has the opportunity do any oversight hearings in the future, to put that very issue on the agenda.
    Mr. EVANS. Any other comments?
    Mr. STEADMAN. Mr. Evans, if we could go back to your previous questions about the VA goals. Their goals might exceed their grasp, but I think they are moving in the right direction, especially bringing more veterans into the system.
    Colonel NAYLON. Mr. Evans, I am with AMVETS, and I would like to say although I have been in my current position for a relatively short period of time, and I speak only for myself, I have found from my own experience the VA to be extremely cooperative with our organization in attempting to keep us at the national level informed as to their activities. I cannot comment with respect to the input at the State or post level with respect to the divisions that you asked.
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    Mr. EVANS. If you could monitor that situation, I am concerned about our situation in Illinois and the Chicago area, and I know many of the other members of the committee are concerned that Members of Congress don't know what input veterans' service organizations are getting into the process, so we value your eyes and ears out there in the future.
    Let me ask one more question. Can each one of you give us your views on how long the presumptive period for compensation for Gulf War veterans suffering from undiagnosed illnesses should be extended?
    Mr. GORMAN. Mr. Evans, the DAV feels it should be an open-ended presumptive period right now until science comes up with some kind of a conclusion.
    Mr. STEADMAN. The VFW agrees.
    Mr. BOLLINGER. I concur.
    Colonel NAYLON. We concur, as well.
    Mr. EVANS. Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Everett.
    Mr. EVERETT. Thank you, Mr. Chairman.
    I appreciate the efforts gone into this. To pick up on Mr. Evans' question, let me put a proposal to you that Secretary Brown has used. Assuming that we have veterans serving in the Persian Gulf now, and when that veteran gets to be 80 years old, he has a problem with his joints, how do we tell—and as you know, at this present time we have no indication that these veterans over there now are exposed to anything that would cause some problems. How would we tell if that was a claim that should be denied or should be granted?
    Mr. GORMAN. Perhaps we never can, Mr. Everett. But I think as we go down this road, we have a situation where, and aside from all of the things that have been going on with the Department of Defense as far as them not being on board and them not being up front with what has been going on, aside from all of that issue, I think the principal issue we have to deal with is how do we take care of the disabled veteran, and whether that is being through health care and through compensation purposes.
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    I think it is premature to say we don't know what this is, we don't know what it is caused from, we don't know how you got it, we don't know how many of you have it, and to say you only have 2 years to show that it is going to be present. Until science can come up with or until medicine can come up with some kind of evidence that is going to rule these disabilities or conditions out or to link them to something that we are sure may have happened to our servicemembers in the Gulf, I think we have to give—the benefit of doubt has to flow with the veteran. And the situation that you described hopefully by that time will have some conclusive evidence one way or the other that can relate whether this veteran's disability is the result of some kind of environmental exposure or hazard, or perhaps it was a direct link where service connection can be granted for the veterans serving in the Gulf directly.
    Mr. EVERETT. Most folks 80 years old don't have those kinds of problems, and by law we could not deny that grant.
    Let me ask you this, get your viewpoints on this, all of you. What would be wrong with a 10-year extension, and as you know, we have a number of studies going on, and if we find out that we needed to extend the presumption period further than that, do it again?
    Mr. GORMAN. I think certainly the 10-year presumptive period would be far better than what we have now, and that being the 2-year. And we may have some legitimate science by that time. But I think at the same time that perhaps in a more compressed period of time that maybe some things come back, and I think we can somehow equate this to what has been going on with Agent Orange over the years.
    Once something has been put into law where there was definite presumptives and there was a likelihood or an association with certain disabilities to possible exposure, I think that narrowed the gap a little bit and made it a lot easier for VA to deal with these claims for service connection. And I would envision perhaps the same kind of scenario playing out with Persian Gulf veterans.
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    But I think again it goes back to the fact that I do not think we can write off a veteran who unquestionably is disabled. They are sick, a lot of them to the point where they are unable to support themselves and their families. I don't think we should arbitrarily write them off simply by virtue of a set period of years.
    Mr. EVERETT. And, of course, none of us on this panel would do that either, but I would maintain that that is not the situation that I am talking about.
    Does anybody else have any views on that?
    Mr. STEADMAN. Mr. Everett, I think if you were to extend that to 10 years, it would send a strong message of support to veterans. You would send an even stronger message if you would make it an open-ended period.
    Colonel NAYLON. Sir, I would just say that it would be difficult for me to try to identify any cut-off period. Your question seems to be linked to the Persian Gulf Syndrome.
    Mr. EVERETT. Yes, uh-huh.
    Colonel NAYLON. And until we have some more definitive answers as to the nature or causes of that syndrome, I would think it would be presumptive to attempt to establish any point in time where the presumptive period would end.
    We need to get the answer to the first question first, which is what is the cause of this problem that the veterans are having.
    Mr. EVERETT. Thank you, Mr. Chairman.
    I have some additional questions for the record.
    The CHAIRMAN. If you gentlemen would kindly answer, we will make them part of the record. Dr. Snyder.
    Mr. SNYDER. Thank you, Mr. Chairman.
    Mr. Naylon, this one sentence on page 6 of your statement you said, ''VA should seek relief from historic preservation requirements at the facilities.'' Would you tell me, I am just curious, what that is all about?
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    Colonel NAYLON. If, for example, I can say that a case over at Henderson Hall where there is a structure that belongs to, I believe, the City of Arlington, and for reasons unknown to me the U.S. Marine Corps is unable to do anything with the structure that sits within their property because of the fact that it belongs to the City of Arlington, and there are historic preservation issues with that structure; therefore they are unable to either demolish it or do anything to capture that land space.
    The same situation would apply with respect to the cemetery system. If there are local issues, historic preservation issues, that prevent the VA from either expanding into a land space, then we would urge that they seek relief from that.
    Mr. SNYDER. I guess my premise would be that you would come asking for more money so that you could comply with the very good requirements of historic preservation of cemeteries. I mean, I go to Arlington for a variety of reasons, one of them because of the historic significance of what that was, and preservation that has gone on in our cemetery in Little Rock, as you know, started as a Confederate cemetery, but there is a lot of historic significance there. Both Union and Confederate soldiers began the cemetery, and it has now been expanded. But this is, I guess, coming from the same problem, a different perspective.
    I want to ask, going back to the issue of the third-party reimbursements and medicare, and we talk about wanting it to be supplemental, and I understand that. But, I mean, aren't we setting ourselves all up for both financial and fiscal problems and political problems, both me who would support this and you with your membership? Because isn't it just unrealistic to expect, you know, the VA and this Congress and all this type of budget constraints, that we have a big flood of third-party money coming in, not to take that into consideration in the overall budget scheme?
    I mean, 10 years from now let's suppose that VA members, the vets, are like me and Lane, and there are others. We like going there. And it is up 25 percent, and we are getting all this third-party money. I mean, isn't it unreasonable to not expect the government to take into consideration as a total of money and not just say, we have got the VA budget, and now we have got this third-party pool sitting out here, and never can we consider how well they are doing in attracting third-party money in determining the VA budget?
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    My own feeling is we will come out ahead. There is some kind of splitting of the difference there. Because I think you all are going to have to go back and explain to your members the first time you do that and the budget has dropped down a little bit, it dropped down $5 because the third-party payments have gone up $10. Well, you come out $5 ahead, but it was not supplemental, it took into consideration the whole pot of dollars.
    I would just like your comments.
    Mr. BOLLINGER. We definitely need to take it into consideration. What we are being asked to accept for fiscal year 1998 is something that takes into consideration some very questionable assumptions, some untested assumptions. The bottom line is at this point in time we are just not willing to say, Mr. President, or the administration, you have come to us with an appropriated budget $55 million less than it is this year, when in years past increased budgets have just enabled the VA to keep its head above water. Now you are asking us to accept that and also assume that these third-party reimbursements are going to be taken into consideration and are going to give the VA enough money they need to provide quality care for veterans. Maybe 10 years from now we can say that, but we sure can't say it for this next fiscal year.
    Mr. SNYDER. But we are going to have that problem every year, aren't we? I mean, at some point if we are going to do this, we have got to enthusiastically get behind it in order for it to happen and then make it work. At some point those budgets are going to have to be included.
    Mr. BOLLINGER. And I think we have addressed that in the Independent Budget as far as the numbers are concerned. We definitely want to consider those third-party reimbursements, but it is clear for the next year, based on what the VA's projections are, that they are going to need more appropriated dollars to get all of this started.
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    Mr. GORMAN. If I could add just one comment, and just as a clarifying point, when you are talking about third-party reimbursements and medicare reimbursements, I think we need to remain clear to the fact that this is not for every veteran that walks through the VA doors. Service-connected VA veterans, those, quote, ''Category A'' veterans who the VA has historically treated, should continue to be treated with appropriated dollars. It is the Government's responsibility to take care of service-connected disabled veterans in the system that was designed to take care of service-connected disabled veterans. And insurance parties, third-party insurers, medicare, should not have to assume that responsibility. That responsibility, in our view, should always be that of the Federal Government. I just wanted to make that point so we are not lumping all veterans into this question of reimbursements.
    Mr. SNYDER. Thank you, Mr. Chairman.
    The CHAIRMAN. I think it only applies to nonservice-connected disabled, and that is what the proposal is. Mr. Stearns.
    Mr. STEARNS. Thank you, Mr. Chairman.
    I just wanted to clarify again, and I think Mr. Evans touched upon it, this 30/20/10 formula that the administration had. Would it be fair to say that you are skeptical that that could work?
    Mr. GORMAN. I think—at least right now I think that maybe a gradual move with that, that could be achieved somewhere down the road. To say that it is going to happen in 1998, 1999 or 2000, I think that is very, very optimistic.
    Mr. STEARNS. So for the moment you don't endorse that idea?
    Mr. GORMAN. Perhaps the goal—obviously, reducing the cost of treatment and operating expenses and treating more patients was a goal we all would like to see conceptually happen.
    Mr. STEARNS. One key difference between your Independent Budget and the administration's is construction. You propose an appropriation of more than 390 million while the VA requests only 79.5 million, and that is quite a bit more difference. Would you comment on the VA's request and then explain your own just briefly? I have a couple more questions, too, and in your answer could you also tell us what kind of projects that you would recommend the VA undertake that are not in the VA's budget.
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    Mr. STEADMAN. Thank you Mr. Stearns. This is a good question. We note that our budget, which has been consistent over the last few years, is considerably more than the VA's budget, and we think that is necessary for several reasons.
    One, if the VA plan is to work, its reorganization/restructuring is to work, you have to increase access to primary care facilities, you have to make the facilities more attractive to attract the type of patients who can pay with their third-party insurance. Quality care requires quality facilities. And thirdly, we have got aging facilities, very rapidly aging facilities, some of them reaching the point of obsolescence. I think for years this has been overlooked, or at least a decade has been overlooked, and while we are trying to catch up somewhat, we are also looking ahead to additional access to primary care.
    Mr. STEARNS. What specific projects would you propose? Can you be specific? When you talk about 390 versus roughly 80, you are talking about four times as much. Can you give specific examples where you would put the money?
    Mr. STEADMAN. Nursing home beds, conversion to long-care nursing facilities would be priorities.
    Mr. STEARNS. Would you take existing hospitals and do that, or would they be new construction?
    Mr. STEADMAN. We have recommended some additional construction. We have recommended grants to the States, and we have recommended that those hospital with underused capacity be refurbished for that purpose.
    Mr. STEARNS. So besides nursing homes——
    Mr. STEADMAN. A balanced mix is what we are looking for.
    Mr. STEARNS. What does that mean, ''balanced mix''; you mean between existing facilities and nursing homes?
    Mr. STEADMAN. Yes.
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    Mr. STEARNS. Does that include any care for people, psychiatric people with long-term mental illness that has resulted from the war?
    Mr. STEADMAN. Yes, sir. With improved existing VA facilities.
    Mr. STEARNS. Separate from a nursing home, but it would be sort of an advanced care. Well, that seems to me be a major difference between you and the administration.
    Mr. STEADMAN. Yes, sir, you are correct. The Independent Budget proposes a significant increase for Dr. Kaiser's headquarters budget. OMB, on the other hand, proposes to cut it still further. Is there reason to put money into administration rather than directly into medical care, or would it be better to merge these two budgets?
    Mr. BOLLINGER. Clearly the provision of direct medical care to veterans is our priority, but what we propose is to ensure that the VHA, the Veterans Health Administration, headquarters can provide the necessary leadership and guidance in this period of time going through the restructuring. So I don't think it is an unreasonable amount of money, but it will give Dr. Kaiser the workforce he needs to get the job done over the next couple of years.
    Mr. STEARNS. You are saying bureaucracy is leadership—I mean, administration is leadership is what you are saying? You know, OMB obviously doesn't agree with you, so I am just saying that might be an area you might want to look at.
    Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Quinn.
    Mr. QUINN. Thank you, Mr. Chairman.
    Mr. Naylon, you reported on the cemetery. Let me begin by saying, as the new chairman of the new Subcommittee on Benefits, I just received as part of my indoctrination or brainstorming or whatever you want to call it—brainwashing I guess—with compensation, pensions, insurance, housing, education committee, and I am overwhelmed with some of the information, but we are getting there, and Mr. Filner and I both will be involved as much as we can in the coming weeks and coming months.
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    Mr. Naylon, you talked about the cemeteries a little bit earlier. The VA proposes that they would significantly increase funding for State veterans' cemeteries as well as some additional money for operating expenses. How do the VSO's feel about the State veterans' cemetery situation?
    Colonel NAYLON. The administration calls for about a $10 million level of funding for the State cemetery grant program. For the past 5 years I think the expenditures in that category have averaged about $5 million, so it is about a $5 million increase per year in the grant program.
    If one considers the anticipated increased death rates and the increased demands for burial spaces on the VA, then we would support that. We do support that. We are concerned, however. We—all the VSOs are concerned that increases in the State grant program don't represent a shift in responsibilities from the VA to the States and so we have that concern. We are anxious that the VA and the National Cemetery System remain responsible for the overall administration of the system.
    With respect to operating expenses, the increase in operating expenses for the cemetery program is about 80 percent, I believe, of the $7 million. About 80 percent of that goes to cemeterial programs. About 15 to 18 percent is consumed in administration. So we feel that is fairly acceptable.
    Mr. QUINN. Thanks very much.
    I just talked yesterday in one of my sessions on housing and the Independent Budget recommendations—and maybe I can't get an answer today; but, if we can't, maybe somebody can get to me on this later.
    Mr. Chairman, the Independent Budget recommendation is a reinstatement of the adjustable rate mortgage program. Some of the data that we have for the pilot program indicates that the foreclosure rate on this program is about 25 percent higher than some of the other mortgage programs. CBO says this is one of those pay-go situations. It might cost $30 million to restart the program, when we are in a time—all of us have talked about limited resources and shrinking dollars. Any general comments today on why that would be important or are there some ways to get at these foreclosures?
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    Mr. GORMAN. Well, if we could take you up on your offer and provide something further in writing, we would appreciate that. However, the concept of adjustable rate mortgages is one that allows some entry-level buyers into the market than otherwise would be able to.
    Mr. QUINN. The success of this mortgage program for veterans, as I am learning here and learned yesterday in a 2-hour session, is very, very important. I just want to make certain that, because of the big start-up cost and the pay-go situation, that we don't end up leaving some veterans out of the housing market or mortgage market because it is going to cost us more money and we are worried about those forecloses at a later date.
    Thank you. If you could provide that at least to me—the chairman of the subcommittee needs it.

    One last question while the light is still green. I want to get back to the pro bono question that I asked the judge. Now I realize I probably asked the wrong person.
    We talked about that pro bono program and the need for additional funding. The judge talked about it. Another member here on the committee brought it to light. It seems to me that the VSOs would want to see this program flourish and become important and active and successful.
    Two questions. I will ask the question I tried to ask the judge. What kind of feedback do you all get from our constituents, the veterans, on the success need for the program? First question.
    Second part of it would be, is there any way that the VSOs should be financially involved in this program rather than all of the onus on the Federal government?
    Mr. GORMAN. If I could answer the second part first.
    DAV has historically been involved in that program. We have over there now a trained National Services Officer who has a history with employment issues and has been around the Veterans' Committee for a long, long time; and he has been assigned over to the pro bono consortium on a full-time basis and to review cases and screen those for the attorneys the judge was talking about.
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    Mr. QUINN. Let me interrupt you and see if others can answer that question.
    Mr. BOLLINGER. Yes, we are involved as well. I might go on to say that we consider this to be an extremely valuable program. I think they have a win record of about 80 percent.
    In addition to that, you should know that the donated value of time from attorneys doing this kind of work is around $9 million. So it is pretty significant.
    Mr. QUINN. Mr. Steadman or Mr. Naylon.
    Mr. STEADMAN. We are involved, and we support the program as well.
    Colonel NAYLON. We are not involved, and I cannot tell you why we are not.
    Mr. QUINN. I will talk to you soon.
    Is the involvement for the other three gentlemen all time and people rather than money for the most part? I mean, not that people aren't money.
    Mr. GORMAN. Time and people are money.
    Mr. QUINN. Mr. Naylon, we can talk maybe at a later date.
    The first part of the question was—I will get to it later. Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Bilirakis, we are pushed for time here because we are going to be running up against a vote pretty soon.
    Mr. BILIRAKIS. Thank you, Mr. Chairman.
    Gentlemen, I want to commend you. I want to commend you, first of all, for a really good document. It always is. I think the way you set it up this year might even be better than usual. And, of course, the way you set it up here, Mr. Gorman, where you each take certain parts of it rather than repeating basically the same sort of things, which is something we have had in the past.
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    I also commend you for the work that you do for the veterans, all the VSOs, you four and the three that testify afterwards and others that are not on the program here today. I boast about you all the time back home, and I mean that.
    But, at the same time, we all know that the real ammunition, the real power behind everything that we do up here are the folks back home, the rank and file. I asked Becky just a few minutes ago, have we received any telephone calls regarding the administration's budget, regarding the point that Mr. Gorman raised, which I know is darn important to our veterans, the smoking end of it—and this comes from a nonsmoker, by the way—and she said, no.
    I have also talked with a leading person in the veterans' hierarchy in Florida who doesn't see any problems in general with the President's budget. I just wonder if the folks back home, the rank and file, the troops, really understand that budget.
    We have gotten your opinions. They are very strong opinions. We have our strong opinions up here. Dr. Snyder has asked pretty darn intelligent, profound questions. But the folks back home, I just don't know that they understand it.
    Do they understand, for instance, that if the President's budget is enacted without the accompanying legislative proposals—Mr. Naylon mentioned the ''the on the come.'' It is a gambling term. You used the word, John, gamble. There is not only that gamble, but the gamble also is the receipts anticipated in the budget may not be forthcoming in spite of the fact that we may have the legislative proposal to allow the third party payor, which I think we all agree with, the receipts that are expected to come in to substitute for those lesser dollars may not come in.
    So that is a hell of a gamble. But if it is enacted without accompanying proposals or even if the legislative proposals take place and the receipts are not what is being anticipated, this request would violate, I guess, the Veterans Healthcare Eligibility Reform Act of 1996, last year's bill, which requires the VA to maintain its capacity in current level of services for specialized services such as spinal cord dysfunctional medicine, etc.
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    So do the rank and file know about this?
    Also keeping in mind in your answer to me, what is it, that only about 20 percent of the veterans, maybe less, are members of the veterans' organizations. The rest of them are being served by all of your guys, all of your efforts benefit them, too; but they are not members of veterans organizations.
    Some responses. Do you understand my question?
    Mr. GORMAN. I think so, or hope so.
    Mr. BILIRAKIS. I say to you that if your answer is not yes or your answer, is, well, they may not be aware as yet of what is happening up here but we are going to make sure that they are aware—if that is not your answer, things are going to be pretty darn tough. Because they control what we do up here, whether they realize it or not.
    Mr. GORMAN. This also gives me an opportunity that I didn't have before to respond to one of Mr. Evans' questions about communication and inclusion.
    We do our level best, through a variety of mechanisms, to keep our membership involved and aware of what is going on; and I think we all know what those are through mailouts, magazines, bulletins, the whole nine yards.
    In about 3 weeks we will be having our midwinter conference here in Washington, and you will see at that time, as you see every year when we come in town, a number of DAV members canvassing the halls up here and trying to talk to their members and their delegations about key points that are germane and important to our organization.
    We all have similar issues; and we, some of us, have different issues at the same time. The key and the part of Mr. Evans' question that I didn't get a chance to respond to that fits, I think, hand in glove with yours is that the VA does an enormous job about trying to include the national organizations in Washington about what is going on in order to make this system work; and principally I am talking about the healthcare system and the changes that are going on.
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    You don't have to necessarily sell it to us, I don't think. You do on the policy level. But when a veteran goes to the doctor and can't see a doctor, only then does that veteran, he or she, know this budget has had an impact on that facility or that things are changing.
    Mr. BILIRAKIS. Then it is too late, isn't it?
    Mr. GORMAN. It very well could be too late. We do our level best to keep our members involved, but I think the VA needs to do a much better job in communicating from Washington down to the local level and make sure that the veterans' organizations in the local level—local facilities are all included and not excluded. And by included I don't mean they are being talked to all the time; I mean they are not being thrown papers and documents to look at; I mean maybe are being made a part of the process.
    Mr. BILIRAKIS. But the VA is not going to tell them this is a hell of a gamble, and particularly in the outyears there might be shortfalls because of the fact what is anticipated did not come in terms of receipts, even if the third party payor is successful.
    Well, the red light is on. But the message is, get the veterans involved. The message is always get the veterans involved, but in this particular case I think more than anything else, more than any other time.
    Mr. BILIRAKIS. Thank you, Mr. Chairman. My time is up.
    The CHAIRMAN. Thank you, sir.
    There is a scheduled vote but not until 11:45. However, the Fleet Reserve Association is having a luncheon in here at noon, and we need to try and get out of here before 11:30 if we can for their benefit. Dr. Cooksey.
    Mr. COOKSEY. Thank you, Mr. Chairman.
    I have some questions just for information. I will comment on third party payments.
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    I am a physician, as is Dr. Snyder, and I know that in my private practice that I used to have, third party payments oftentimes are delayed; and I am concerned that this is a pie-in-the-sky concept.
    That is part of the reason that I ran for Congress, because I discovered when I had all my applicants for—2,000 applicants for 15 positions, that no one in Washington has ever taken an accounting course and very few even know what a balance sheet is. That is the reason there is a lot of hocus-pocus with numbers; and I think it exists in the executive branch, apparently. I have had a couple accounting courses, but I am not an accountant.
    Mr. Steadman, my question, we have a new veterans' nursing home in my town, Monroe, Louisiana, that we are very pleased with and proud of. But yesterday I had some nursing home owners from Louisiana in from across the State, and they said that there are a lot of empty nursing home beds in these privately owned nursing homes, that they would like to have veterans there.
    What is the veterans organizations' position on that? Would the veterans like to be in these private nursing homes? They say they can accommodate people for less cost than what they would have in a veterans' nursing home.
    Mr. STEADMAN. There are several points of view on that.
    Number one, we support the VA in leasing some of that where there is unmet need, yes. But we wouldn't want to see that as part of the mainstream at this point in time—and I will be honest with you—because we are worried about the quality of care. Maybe that veteran is not going to get the best care available that someone coming through the Traveler's Insurance would.
    Mr. COOKSEY. As a physician, quality care should be the issue and not cost of care; and I agree with you.
    Mr. BOLLINGER. If I may add to that from a very parochial point of view from the Paralyzed Veterans of America dealing with patients that have spinal cord injury, we are very concerned about that. Because there are no standards of care in private nursing homes for people with spinal cord injury. It is a multi-disciplinary field that requires very extensive expertise in the area of how one takes care of a patient with that kind of catastrophic disability. We are convinced that the private sector nursing home community is not in a position to provide that care.
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    Mr. COOKSEY. Good. That answers the question then. I will convey that message to them.
    Another question: We have a veterans' clinic in our area and have an outstanding physician who just left for the private sector because he was working too hard. But do you want more access to private sector medicine for veterans? Because this one physician is not able to take care of all of the people that want to be seen in our area. Would you like to be able to go to more private physicians for primary care?
    I am specifically talking about areas—in rural areas where there is not a veterans' hospital or areas like I am in where we have a clinic but we only have one physician serving a 300,000 patient population area—general patient population area.
    Mr. BOLLINGER. Again, our concern is the specialized care need, whether it is spinal cord injury or amputation or any of the fields that the VA specializes in right now. I think what we would like to see—and this would apply to nonspecialty care VA facilities—is a good referral system so that when a doctor in a rural area is unable to treat a certain condition, they know through guidelines that there are—through other procedures to refer that veteran to a spinal cord injury center. That has got to be a part of this whole restructuring process.
    Mr. COOKSEY. Sure. So the answer to both of my questions is that your preference is still to VA hospitals, VA nursing homes and VA private care, generally speaking?
    Mr. STEADMAN. Yes.
    Mr. COOKSEY. Okay. Thank you, Mr. Chairman.
    The CHAIRMAN. Mrs. Chenoweth.
    Mrs. CHENOWETH. Thank you, Mr. Chairman. I have no questions.
    The CHAIRMAN. Mr. Peterson.
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    Mr. PETERSON. Thank you, Mr. Chairman.
    I apologize for being late, and this may have been answered. But looking through your budget here, I see that the veterans' housing benefit program under this is decreased; and I was looking through here to try to figure out why that is. I can't find it in here. Could you explain to me why that is——
    Mr. GORMAN. Because, Mr. Peterson, the benefit hasn't kept pace with inflation since I think 1989 was the last time it was increased, that together with the automobile allowance. And we are calling for an increase that is going to be able to keep pace with inflation.
    Mr. PETERSON. Well, no. Unless I am reading this wrong, it says that this year's appropriation is $503 million, I guess, and that you are asking for $352 million, so it is a decrease, if I am reading this right. So there is a $150 million decrease, and I am just wondering why that is.
    Mr. GORMAN. I will get back to you with more details in writing, an answer in writing.
    Mr. PETERSON. I was reading through the explanation, and maybe it is there, but I couldn't find it.
    Mr. GORMAN. I apologize. I was referring to another proposal we have regarding specially adapted housing for the severely disabled veterans, but we will get you an answer in writing.
    Mr. PETERSON. Okay. Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Bishop.
    Mr. BISHOP. Thank you very much, Mr. Chairman.
    Let me thank you gentlemen for coming and doing what you always do so well and that is to lift up the standards that we deserve to reach for our veterans.
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    I am reminded of what my minister always said about trying to reach the high standards. He always set the lights as what we should be reaching for, and I think we should reach for the ceiling, and I think that what you do is to keep us focused on that.
    As we are working to do more with less, it is important that we spend our resources where they will benefit the greater numbers of veterans. Therefore, I would be interested in knowing what your thoughts are about the proposed veterans' equitable resource allocation system, which, according to VA, will guarantee that funding is distributed so that the eligible veteran population is receiving care.
    Do you think it is effective? Do you think it is just a wish, a pie in the sky, so to speak? Or do you think it can actually work as it has been proposed with the limited resources that we are facing in these budgetary times?
    Mr. GORMAN. I think, Mr. Bishop, that the VA is a system; and, as such, it should be treated as a system and funded as a system.
    Our concern—yet it is not a tested system yet, this VRA. We are encouraged that it can work and not at the detriment of—we have don't want to see any veterans lose eligibility or be able to lose healthcare and the veterans ultimately suffer because funds have been pulled away from one facility to go to another geographic area of the country. So we will be looking closely at that.
    Mr. BOLLINGER. I may answer you and Mr. Bilirakis at the same time on that question, because a lot of it has to do with the rank and file and getting the message out.
    I think some of our members in the Southwest and in the South are kind of rubbing their hands, thinking this great wealth is going to come their way. On the contrary. When you look at what is going to happen in the Northeast and in the Midwest, these already scarce funds are going to flow in that top-right, bottom-left direction.
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    And I think it is almost a double whammy, if you will, for the northeast; and for the Southwest and those in the South it is going to be a case of keeping your head above water, especially true if the third party reimbursement and medicare reimbursement doesn't become reality.
    Mr. BISHOP. Can I just follow up on that? With regard to those legislative needs Mr. Bilirakis referred to, that is going to increase, I think, the need for you to educate your membership so that we can make sure that the Congress does, in fact, pass those.
    It is a necessary ingredient. It is in the President's budget. While we probably ought not to be depending on it and we ought to be looking at it as a supplement, the fact is, if we are going to balance the budget and if all of the various parties and interests are going to be met, that this is a necessary ingredient. So we need to make sure and we need your help in making sure that you keep the pressure on the Congress to make sure that the legislative needs are met as they are proposed in the President's budget.
    Can we get your commitment to help us do that?
    Mr. GORMAN. Certainly can.
    Mr. BISHOP. Thank you.
    Mr. STEADMAN. We have been in favor of medicare subvention for some time. As that moves forward, you can count on us to push that.
    Mr. BISHOP. Thank you very kindly.
    The CHAIRMAN. Thank you, Mr. Bishop.

    The CHAIRMAN. Mr. Smith.
    Mr. SMITH. Thank you very much, Mr. Chairman.
    I want to thank the VSOs and the very able representatives for their testimony and the good work that you provide to us and the guidance you provide.
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    I just have one question, because most of the other questions I think you have answered either in your testimony or in answer to my colleagues. While the VA's research budget represents only a small fraction of the medical care budget, the administration has repeatedly proposed to cut this budget. As you know, this year they are looking at something on the order of $228 million, down from the 262, and you want to push it up about $30 million.
    I was just wondering if you could tell us—and if it wasn't for the bipartisan efforts of this committee and the appropriations committee to get that back up, the research part of the budget would fall. Would it make more sense, in your view, to reconstitute the medical care appropriation to include research dollars as a means of providing more predictability and stability for this program? Or should we always come to the rescue every year to try to save it? What is your feeling on that?
    Mr. BOLLINGER. Mr. Smith, I am John Bollinger of Paralyzed Veterans of America. I am not sure I can answer the mechanics of that question. I will be happy to provide that for you.
    Bottom line for us is that the administration's budget, as it is being proposed now, will have a drastic effect on research. There is no doubt in our mind about this. In fact, even the administration's Secretary Brown said before the Senate committee yesterday, or actually before your committee a couple weeks ago—that it breaks his heart—and Dr. Kaiser mentioned it yesterday in his testimony—that this is clearly an area of the budget that they don't feel real good about.
    You know, as I said, it breaks our hearts, too; but it is going to be more than figuratively breaking the hearts of veterans out there who are catastrophically disabled who would otherwise benefit from this type of research. So we hope that your committee will do everything in its power to restore those funds.
    Mr. SMITH. I would appreciate that if you would provide that for the record.
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    (See p. 432.)

    Mr. SMITH. Would any of you want to comment on the research side of the budget? You may have earlier, but I was detained over on the House Floor.
    Mr. GORMAN. I don't think we have, Mr. Smith.
    I would just agree with what Mr. Bollinger had to say and also that a research budget, an adequate one, certainly serves as incentive for cream of the crop, if you will, to be able to look at VA as a place to go and practice medicine and be able to do research also.
    I think the VA is trying to target, as they had not in the past, research projects that are very germane and specific to veterans-related illnesses, such as the special disabilities that we are all talking about. So that part is encouraging. The dollar part is very discouraging at this point, and we are going to work hard to get the budget back to where it should be.
    Mr. SMITH. Thank you very much. I yield back the balance.
    The CHAIRMAN. Thank you. There may be other questions of staff if you gentlemen would kindly respond for the record, please.
    Any other questions?
    Thank you gentlemen very much.
    Our third and last panel for today: The American Legion, Non Commissioned Officers Association, and Vietnam Veterans of America. If you would come to the table, please.
    Each of you will be recognized for 5 minutes. Of course, your entire statements will be made part of the record; and you may proceed any way you decide among yourselves.
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    Mr. VITIKACS. Good morning, Mr. Chairman, members of the committee.
    The American Legion commends the Department of Veterans Affairs for striving to maintain a consumer-centered health care delivery system. The VA medical care system is truly at a crossroads in its history, and many important issues need to be resolved regarding its future.
    Mr. Chairman, the American Legion is concerned that the President's proposed fiscal year 1998 through fiscal year 2002 discretionary budget appropriation for VA medical care provides no inflationary corrections and relies upon unproven assumptions to provide necessary funding increases.
    The VA's proposed 30–20–10 plan to deal with expected revenue shortfalls has a challenging goal. We are troubled that there is no draft backup proposal should the plan prove to be unattainable.
    The flat appropriation level proposed in the fiscal year 1998 through 2002 medical care budget is far beyond what the system can absorb without jeopardizing the quality, quantity, timeliness and access to care.
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    According to VHA's calculations, it expects to raise approximately $3.1 billion over the next 5 years through third party health insurance collections and medicare reimbursements. This revenue would otherwise be sought through the normal process. It is unclear that VA could obtain this amount of alternative funding even if authorized by Congress.
    Additionally, it is questionable if current VHA reorganization efforts will yield sufficient savings to substitute for proposed shortfalls.
    Mr. Chairman, there is a need to examine the potential for increasing health care resources through nontraditional means. This effort is a logical extension to the Veterans' Health Care Eligibility Reform Act of 1996. Without a sufficient combination of appropriations and other alternative revenues, the propensity to downsize and reduce the scope of VHA-provided services will continue.
    If additional funding sources are not available, the promises of VHA's vision for change will be jeopardized and the VA health care system will be destined to a static future, at best, and one of continuing erosion.
    The American Legion believes the GI bill of health is the blueprint to managed change within the veterans' health administration. The proposal was designed to redirect veterans health resources to the VA medical care system while safeguarding the annual appropriations process.
    The VA medical system is now on a fast track to change its decades-old health care practices. The American Legion supports the vision reorganization and the concept underlying the veterans' equitable resource allocation methodology. However, before untested changes occur, it would be reasonable to investigate and evaluate various strategies to help preserve and strengthen the VA medical care system.
    In this regard, the American Legion supports H.R. 335, the Commission on the Future for America's Veterans and encourages the Congress to enact the proposal.
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    Mr. Chairman, the American Legion is also concerned about the fiscal year 1998 budget proposals for medical and prosthetic research services, the minor construction program and the construction program for State extended-care facilities. We urge this committee to carefully review these programs in the course of your budget deliberations.
    We would also like to direct the committee's attention to our prepared statement regarding the fiscal year 1998 budget request for the Veterans' Benefits Administration, the proposed cuts to the Compensation and Pension Service staffing and the reengineering plans for the Vocational Rehabilitation and Counseling Service.
    The American Legion believes that the committee should request more detailed justification for the fiscal year 1998 BVA budget request in order to fully and fairly evaluate the level of and quality of services being provided to disabled veterans.
    Mr. Chairman, that completes my statement.

    [The prepared statement of Mr. Vitikacs, with attachments, appears on p. 239.]

    The CHAIRMAN. Thank you sir. Ms. West.

    Ms. WEST. Good morning, Mr. Chairman and members of the committee.
    VVA is pleased to present recommendations on the fiscal year 1998 budget. Since this is our first opportunity to appear before the 105th Congress, we wish to extend a special welcome to the new members of this committee. We look forward to working with each of you.
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    In the interest of time, I will limit my oral remarks to a few key topics; and I will be pleased to elaborate on any point during the question-and-answer period.
    Health care has been covered pretty thoroughly by my colleagues, so I won't go into significant detail on VVA's position. VVA does agree with the objective and supports the enactment of legislation to retain third party reimbursements and medicare payments, but we are very cautious about the President's budget proposal because it does seem extraordinarily optimistic.
    Given the fact that nowhere near 10 percent of VA's current health care budget is being collected by third party reimbursements, it seems unlikely that the incentives, the appropriate billing mechanisms and the customer base can be generated quickly enough to meet these targets. We could be looking at a catastrophic budget shortfall.
    And if we assume that the system is ready for this monumental shift, VA would have to be very aggressive in collecting payments from veterans and their insurance companies. A wholly dollar-driven VA healthcare system is a frightening proposition, particularly for the service-connected veterans who are dependent upon resource-intensive specialized services. These are the veterans that are VA's primary mission.
    VVA feels that protections must be incorporated into any authorizing legislation—for retention of third party and medicare dollars—to ensure that Congress does not subsequently reduce the VA's budget and appropriation by the amount of its receipts. It is critical that the Federal appropriation be maintained at a level high enough to sustain services to core group veterans.
    As we examine the proposed budget, Mr. Chairman, it becomes evident that VA must update its practices, and passage last year of the eligibility reform measure will be an instrumental tool. For this, we again commend your leadership.
    VVA is encouraged that this committee plans to do oversight on assistance programs for homeless veterans. It is generally accepted that approximately one-third of the nation's homeless population are veterans. Yet HUD controls over 75 percent of all Federal homeless dollars, and HUD fails to ensure that the State and local communities distributing these grants do so in a manner that addresses veterans' specific needs. VVA supports legislation which will soon be introduced by Representative Jack Metcalf to correct this inequity.
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    Investing in comprehensive programs to assist homeless veterans is fiscally responsible. Many of these women and men are ready and able to work and again become productive, tax-paying citizens.
    Regarding the Court of Veterans Appeals, VVA applauds the decision by the Chief Judge to withdraw the proposal to downsize the court. VVA opposed this recommendation when it was originally put forward last year, in part because the case load was growing due to increased decisions at the Board of Appeals. We urge full funding for the court.
    I would like to make a couple of comments about Agent Orange and Persian Gulf War illnesses particularly. In order to more conclusively determine what conditions are or are not related to service in Vietnam or in the Gulf, we recommend that additional government funded but independently conducted research be done on these issues. We continue to propose research in Vietnam on the Vietnamese population. This committee's support for that kind of research would be instrumental.
    This is a challenging time for the veterans community, and fiscal considerations are forcing VA to develop new ways of doing business. These innovations often improve services while at the same time enhancing efficiency, but veterans are very cautious because they have seen budget-driven changes in the VA restrict services through the years.
    Recognizing fiscal realities, the veterans community no longer expects that the VA be all things to all veterans. And not all veterans want or need VA services. But veterans do expect that the VA will maintain a necessary level of services for core group veterans, and Congress must provide an appropriate level of funding for this.
    Thank you for the opportunity to present VVA's views on the fiscal year 1998 budget. I would be happy to answer any questions.
    [The prepared statement of Ms. West, with attachment, appears on p. 251.]
    The CHAIRMAN. Thank you. Mr. Rhea.
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    Mr. RHEA. Thank you, Mr. Chairman and good morning.
    Mr. Evans, good morning to you, sir, and to the other members of the committee.
    Since we are bumping up against your 11:30 hour, I will not repeat anything or try to not repeat anything that has been said that concerns VA health care. That has been covered pretty well in depth this morning, and NCOA certainly shares those concerns.
    I will only comment on it in this respect, though. Two days ago, a rather high-ranking VA official himself admitted—and I wrote the words down so I won't misquote anyone—that ''These are almost outlandish targets,'' followed up by a second quote, ''which there is no margin for error in this budget.'' Whether that individual would admit that to this committee or not I don't know, but that was stated.
    What troubles NCOA is that we have been down a very similar path with the Department of Defense beneficiaries. Third party billings have been in effect there for a long, long time; and we can see the result there. And I would just urge the committee to be very careful here if we are going to place greater and greater reliance upon third party recoveries—which I think have been grossly overstated anyway. We have got to know where it is leading us.
    I think the whole message of this budget to veterans as far as health care is this: It will be there somehow in the future if you find a way to pay for it, okay? And much like what we have seen in the DOD system, maybe that core Federal obligation that we have held sacred for so long might not be totally dishonored, but it will be chipped away to something that we don't recognize.
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    Today we have addressed concerns in our statement, Mr. Chairman, on the cemetery system. Your attention to that would also be appreciated.
    But I could not walk away from this table this morning if I didn't say something about the post-services education benefit. We are incensed at the nonproposal by this administration on post-services education benefits for veterans. And I would think that somewhere in a 1.7 trillion dollar Federal budget, in a $51 billion education budget in which we are proposing to spend record levels as far as education, that we could have found something to improve the veteran education benefit. And unless I misread the budget, there was not one cent proposed to do anything relative to the GI bill.
    As I put it in my statement, and I make no apology at all in stating it to you now, the Commander in Chief of Education went AWOL.
    With that, I would be happy to respond to your questions.
    [The prepared statement of Mr. Rhea appears on p. 242.]
    The CHAIRMAN. Thank you, Mr. Rhea.
    Thank all of you for your testimony today and for all the hard work that you do, not only for your organization but in helping us out.
    I am sure I can speak for all the members of this committee when I say that we all support the retention of third-party collection, but we certainly think that should be in the form of supplemental dollars and not to replace appropriated dollars as proposed in this budget. I thank you once again. Mr. Evans.
    Mr. EVANS. Thank you, Mr. Chairman. I agree.
    I would just ask this panel where their organizations stand on keeping the eligibility for Persian Gulf veterans—unlimited eligibility or limited time eligibility?
    Mr. VITIKACS. The American Legion, I believe we are on record at this time of supporting an open-ended eligibility period.
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    Mr. EVANS. Ms. West?
    Ms. WEST. The VVA has endorsed your bill which would extend the presumptive period to 10 years. We feel that at this point in time this would be an appropriate time period. It would allow for everyone who is experiencing illnesses now and anyone who becomes sick within the next 3 or 4 years to be accommodated. And ideally science and medicine can come up with some answers in that time frame.
    If we reach that point and there are no answers about causes, then we would recommend that it be further extended. But the 10 years seems to be an appropriate time.
    Mr. EVANS. Larry.
    Mr. RHEA. I think the real question, sir, is not whether it is 5 years or 10 years. I think what we are recognizing here is that two years was rather arbitrarily said, and we certainly support that being extended. We could go with 5 years or 10 years, but I think what we are all recognizing at this point is that 2 years was not the right decision when we made it.
    Mr. EVANS. Thank you.
    The Chairman and I have written to the administration concerning the GI bill increase. We are of the opinion that, as we rightfully increase money for education, that the first beneficiaries ought to be those that contributed to the defense of our country; and it is a bipartisan effort on our part as committee members.
    Mr. RHEA. Appreciate that, sir.
    The CHAIRMAN. Thank the gentleman. Mr. Bilirakis.
    Mr. BILIRAKIS. Mr. Chairman, just a very brief statement in the interest of time.
    You were in the room when I made my comments earlier. I did not use the word precedent, but, boy, what a precedent this would be establishing or the attempt is to establish in this particular case where we are saying that the usual dollars that should go for these services, health care and whatnot are in the future going to be on the come. We may get them or we may not get them.
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    That is a temporary, I believe, precedent; and I, for one, am pretty put out that we picked the veterans to try to create this precedent on.
    Again, it is in your hands. I am a member of the NCOA and American Legion, obviously, and some of the other groups; but it is really in your hands to help us to help you. I don't know how this is going to go. I don't know whether we have a reading yet as far as members are concerned in terms of this idea. But you can see, I think, how most members of the committee, maybe all of the members of the committee feel. But we can't do it without you, so we need your help with your rank and file.
    They have got to contact us. Your members and all those who would qualify to be members but who are not have got to contact us and say, we don't want this to take place.
    Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Smith.
    Mr. SMITH. Thank you, Mr. Chairman.
    I would just like to ask one question with regard to third party receipts and where they should ultimately end up. Have your organizations given much thought to how much, all or part, of those receipts ought to go to the individual VA medical centers themselves as an additional incentive?
    Of course, there could be some disparities if that were 100 percent deal with those with heavily insured people obviously getting more receipts than an inner city medical center, but I wonder if you have given any thought to those local VA medical centers holding on to some of those monies?
    Mr. VITIKACS. Mr. Smith, the American Legion has looked at this issue, and we believe a good starting point at least would be a 75 or 80 percent retention at the facility, providing the Chair with the balance of that money being deposited in a system-wide trust account for distribution of needs throughout the system.
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    Ms. WEST. VVA has not come up with a percentage figure, but we absolutely do agree that there needs to be a balance between monies being retained at the local level and the overall needs of the system. If no monies are retained at the local level, then there is very little incentive for those facilities to go out and serve the patients and collect the money.
    Mr. RHEA. I don't have a magic formula for you either, sir. We certainly have to cross that first hurdle, allow the monies to be retained within VVA, and we would hope that that could happen. There are merits both ways that I think you have to consider, whether it is retained at the vision level or at the actual medical center level, and it will probably end up with a balance there some way.
    Mr. SMITH. I appreciate that, and as you develop further recommendations on that I would ask that of the other VSOs as well. It would be helpful, I think. Because as this goes forward, I think it ought to be a package deal. And even though the numbers could be tinkered with down the line, it seem to go me—and I agree with Mrs. West—incentives make the world go around. If there is the right incentive and right mix, it will enhance medical care locally and also maximize collection efforts. So I thank you.
    The CHAIRMAN. Thank you. And thank you once again, the panel and those here that just testified.
    I am sorry. The gentlelady from Idaho, Mrs. Chenoweth. I apologize.
    Mrs. CHENOWETH. Thank you, Mr. Chairman. I just—one question that I wanted to ask Mr. Vitikacs.
    I am really concerned that the administration proposes to reduce Federal support for the VA State Home Program at a time when there are $192 million worth of pending projects for which the States have already provided funds. So we are really leaving the States on the hook there, including one in my home district. So I am very personally concerned about that.
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    How does the Independent Budget address this issue, and do you have any further suggestions?
    Mr. VITIKACS. Well, the American Legion is not part of the Independent Budget; and I have not looked at that from their perspective.
    In our view, this program has been underfunded year after year. VA today is moving more away from long-term care, the provision of long-term care; and our view is that the State Veterans Home Programs would be an excellent complement inventory asset to the VA in this regard.
    The Congress over the years has provided more funds than have been requested for this particular program, and we see their being an urgent need for the Congress to really examine this issue and come up with an adequate appropriation, much above the level that the administration is requesting.
    Mrs. CHENOWETH. Thank you very much. And I just also wanted to add my appreciation to all of you for your comments. Thank you.
    The CHAIRMAN. Thank you, Mrs. Chenoweth. I apologize again.
    And thank you, ladies and gentlemen, once more.
    The Chair does have one more question. There is always the inevitable post-conference—if you could take those down the hall so the crew can get in here and set up for lunch, it would be very much appreciated.
    Thank you all very much. The meeting stands adjourned.
    [Whereupon, at 11:30 a.m., the committee was adjourned.]