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House of Representatives
Subcommittee on Health
Committee on Veterans' Affairs,
Washington, DC.
    The subcommittee met, pursuant to call, at 10 a.m., in room 334, Cannon House Office Building, Honorable Cliff Stearns (chairman of the subcommittee), presiding.
    Present: Representatives Stearns, Smith, Chenoweth, Simpson, Doyle, Peterson, Snyder, Rodriguez, and Shows.
    Also Present: Representative Hayworth.


    Mr. STEARNS. Good morning.
    The Veterans' Affairs Subcommittee on Health will come to order. I would like to welcome all of you, and I want to thank you for being here this morning. I particularly want to thank our witnesses who have traveled some distance to attend this important hearing.
    As Chairman of the Health Subcommittee, I have closely studied the proposed VA medical budget for fiscal year 2000. It is a concern. It concerns me that this VA budget appears to be the most troubling I have seen in my tenure in Congress. It is a concern that this budget requires more than $1 billion in cuts.
    We have heard the Secretary defend this budget as providing for ''better and more accessible service to veterans.'' But, to many of us, and I think it is true on both sides of the aisle, we have a different view, and I think that Department officials have a different view. We need to be clear that the VA health care system can no longer do more with less. To quote the Non Commissioned Officers Association, ''Less is less.''
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    I regret that we did not get more candor from Secretary West in his testimony here on February 11. We heard the Secretary express ''confidence'' that this is a workable budget, yet only 3 days earlier the Under Secretary for Health had warned him that this budget would place VA in a ''precarious situation.'' Some weeks ago, we wrote to the Secretary and asked whether there was a plan to achieve the more than $1 billion in savings proposed in this budget.
    The response from him made it clear there is no such plan. Instead, we were told, ''Because of VHA's decentralized decision structure the specific management initiatives will be decided by the VISN.'' To us, one thing is clear. If we are going to understand how VA would cope with this budget we need to hear from the network directors, since they are the ones that are going to have to deal with it.
    It has become clear that this budget will pose huge problems for VAs throughout the country, so we have asked network directors from widely differing regions to testify today. To avoid having OMB write their testimony, they were not asked to prepare formal opening statements. However, I would like each one of the network directors at the outset to provide us informally a perspective on this budget.
    We are all working together. We are all trying to come up with a solution. I'd like each of you to take 4 or 5 minutes, tell us the kind of steps that you believe should be taken to get through the next fiscal year with this budget. We earnestly need your input. We need to put to rest the fiction that the VA can keep doing more with less. We need to make it clear that the VA cannot cut more than $1 billion from its budget without cutting services to veterans.
    In short, I'd like to challenge the Administration to resubmit this budget, because the budget we see today is not acceptable and we think we can do better.
    I certainly look forward to hearing from our witnesses on this critical subject, but before inviting our first panel to come up this morning I would like to welcome our Ranking Minority member, Mr. Doyle from Pennsylvania, to provide his perspective.
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    Mr. DOYLE. Thank you very much.
    I want to thank my friend, Subcommittee Chairman Stearns, for convening today's hearing to further examine the VA Medical Care Budget for fiscal year 2000 as proposed by the Administration. I also want to welcome all of my fellow colleagues who are present here this morning.
    In addition, I want to thank those of you who are here to testify before the subcommittee for taking the time to share your expertise and insight on VA medical care and related funding issues. Your efforts are greatly appreciated and will assist members of this Committee in our work to fashion budget recommendations that accurately reflect and meet the needs of all veterans.
    Before I begin my remarks, I ask unanimous consent that the testimony which was prepared and submitted by the American Federation of Government Employees be included as part of the record.
    Mr. STEARNS. Without objection.
    [The statement of Bobby L. Harnage appears on p. 57.]

    Mr. DOYLE. Thank you.
    In the interest of time, I will keep my opening comments brief and to-the-point. I think it is safe to say that there is not a whole lot to like about the Administration's overall budget for the Department of Veterans Affairs. And there's even less to like—if that is possible—about the woefully inadequate funding levels specified for medical care. As was made clearly evident in the full Committee's February 11 hearing on the overall budget, members on both sides of the aisle are particularly concerned about VA medical care programs.
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    Unlike committee dynamics you may observe elsewhere on the Hill, the concern that members of our committee have does not stem from internal bickering over obscure matters, but from our real doubts about whether we are fulfilling our commitment to our nation's veterans. And I am not talking about fulfilling our commitment in valiant terms as outlined recently by the report of the Congressional Commission on Service Members and Veterans Transition Assistance. I am talking about fulfilling the most basic of our commitments—the right of a veteran to have access to high-quality health care and to receive treatment in a timely manner.
    No matter how you look at it, the Administration's Medical Care Budget does not add up—not in terms of funding new initiatives such as treatment of Hepatitis C or even maintaining existing programs.
    In fact, it falls $1.1 billion short in terms of keeping up with the inflation and paying the salaries of hard working VA employees. I could go on in more detail, but I will reserve some of my more specific concerns for the upcoming rounds of questions.
    In good conscience, we must do everything we can to prevent the proposed funding for medical care from going unaltered. The Medical Care Budget is not just simply inadequate, but seriously compromises the professional integrity of the VA system in regards to the level of quality care that is being delivered and adequate staffing positions in various sectors. Without major overhaul, fiscal year 2000 funding levels also pose a significant danger to the long-term viability of the system.
    It is my hope that the subcommittee members will not only emerge from today's proceedings more informed about the funding levels for the Medical Care Budget and their potential implications—but more energized about the need to clearly articulate to those whose decisions will greatly affect their day-to-day lives our concern about the vets back home.
    Thank you, Mr. Chairman.
    [The prepared statement of Congressman Doyle appears on p. 55.]
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    Mr. STEARNS. I thank the Ranking Member for his supportive comments.
    We will go to the panels, unless any member feels that he or she would like to offer a particular statement.
    Mr. STEARNS. If not, we will have Panel 1 come forward, if you would.
    We have Doctor Thomas Garthwaite; Doctor Ted Galey; Mr. James Farsetta; and Ms. Laura Miller; and Mr. Thomas Trujillo. I think what we'll do is have Dr. Garthwaite first, and then I'll have Mr. Hayworth introduce Mr. Trujillo.

    Dr. GARTHWAITE. Thank you, Mr. Chairman. I have only brief remarks and have submitted a formal statement for the record.
    Just in the way of introduction, Doctor Ted Galey, is our Network Director in Portland, OR, is the neophyte of the group, appointed a little over a year ago, I believe, but has been a Chief of Staff and a Medical Center Director there in Portland. Laura Miller is our Network Director is VISN 10, which is centered in Cincinnati, Ohio, and joined the network structure when we first formed it, as did Jim Farsetta on my right, who is the Director in New York City VISN 3. Tom Trujillo you can introduce, but I know him well because he was Network Director in VISN 18, centered in Phoenix, AZ. They represent a good cross section, not only of the geography of America, but also some of the changes in the private sector, such as penetration of managed care, variation in practice patterns, as seen by analysis of Medicare data and other reasons.
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    Mr. Chairman, with your help we have made dramatic progress in transforming the Veterans Health Administration. We have been able to see more patients with documented improved quality, despite diminished budgetary buying power. The 30/20/10 goals that we labeled as stretch goals 2 years ago are in sight if we get aggressive Medicare subvention legislation soon. This budget keeps our part of the Balanced Budget Agreement.
    However, many of the assumptions on which we based our 5-year budget have changed. The external and internal pressures to avoid changing the way we do business are building and the systems remaining to engineer are fewer than when we started.
    We have been able to see more patients with improved quality, despite diminished buying power in our budget for a simple reason. We have changed how we do business. More difficult changes in how we do business will be necessary in the future.
    I will make one final point. The veterans health care system is, and has been, resource constrained. That is, there is more demand for care than resources to provide it. Within the constraints of the budget, we have attempted to give high-quality care to the maximum number of veterans in priority as defined in law. This concept is simple to state, but enormously complex to understand and difficult to administer.
    Mr. Chairman, we welcome the dialogue on some of the specific changes that might be necessary if this budget is adopted unchanged and welcome your questions at this time.
    [The prepared statement of Dr. Garthwaite appears on p. 61.]

    Mr. STEARNS. Okay. Before we go further, I would like my colleague from Arizona, Mr. Hayworth, to introduce our VISN Director.

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    Mr. HAYWORTH. Mr. Chairman, I thank you very much, and members of the subcommittee, I thank you for the courtesy and the indulgence.
    I would simply say again, as has been demonstrated by both the Chairman and the Ranking Minority Member this morning, that we should emphasize that the mission of our overall committee, as well as the various subcommittees, is truly non-partisan in nature, as we work to obtain the very best for those who have worn the uniform of our country.
    It is in that tradition that I am honored to introduce one of the very best, who coincidentally is a constituent of mine, who makes his home in Gilbert, AZ, and who recently retired after 33 years of service to the Department of Veterans Affairs.
    And, let me simply quote from a letter signed by both our Senior Senator John McCain and the Chairman of our committee here, Bob Stump, quoting now, ''For 33 years you have been one of the best advocates veterans ever had, and veterans have witnessed public service at its best.'' I speak of Tom Trujillo, who has been Director of VISN 18, who is retiring now after 33 years of service. Under his direction, VISN 18 has increased the outpatient clinics from 17 in 1996 to 27 today, three of them opening in the 6th Congressional District alone. He assisted in establishing a vet center in Chenley, AZ, the very heart of the Navajo nation, an area basically the size of the State of West Virginia. He increased health care services to Native Americans by also providing access to traditional medicine, installing telemedicare and video conferencing equipment at all facilities and several of the out-based clinics, and lest you think this is some sort of spending extravaganza, I would point out that my good friend, Tom Trujillo, received the Scissor Award for developing a process that saved approximately $400,000.00 in capital equipment funding. So, he has found consistently better ways, more effective ways, to deliver health care services to our veterans, and certainly it is no disrespect intended to other members of the panel, who also have their accomplishments that they can cite, but I do appreciate the indulgence again of the Chair, and it is my honor to introduce to you my friend, my constituent, and an effective spokesman for the veterans of this country, Tom Trujillo.
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    Mr. STEARNS. Mr. Trujillo, we are pleased and honored to hear your testimony. If you will begin.

    Mr. TRUJILLO. Thank you, Mr. Chairman. It is, indeed, an honor and a privilege to be here with you this morning.
    I did start my career in hospital finance many years ago, and I have extensive experience in medical care budgets, hospital budgets, as a financial manager and in this area as Associate Director, Director and Network Director.
    And, first of all, it is my honor to be here this morning, and I thank you so very much.
    Secondly, I am very concerned with the subject that I am being asked to comment on, and that is the fiscal year 2000 budget. Before I talk about the 2000 budget, if I may, I must mention the situation with the current year budget. Because of this increase in number of veterans being cared for by—and I am going to talk basically about our network, which, basically, also multiplies into 22 other networks, I am sure, in some form or fashion.
    The increased usage and cost of materials and supplies, the current funding level will be short by approximately $15 million in my network alone this year. However, we are taking actions to meet the budget if we, indeed, have to, which I always assume that we will. This is after having squeezed almost every efficiency we can out of VISN 18.
    We have established many economies and systems in our network, standardized pharmaceutical formularies to make sure the dollars we spend are appropriate, and maximized, we have realigned programs from inpatient to outpatient. We have consolidated procurement. We have realigned organizational structures at each facility, and we have developed a patient referral process to provide specialized services in the most efficient and effective manner.
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    Network 18 has the lowest bed base of care per 1,000 patients. Some surgical procedures are now done routinely on an ambulatory care basis. Last year alone, we treated 167,000 veterans at a cost of $3,600.00 each, the lowest in the country.
    As a quick observation, with Senior Care, the name of the Medicare provider in our area, the cost is over $6,000.00. We, in Network 18, as well as across the Veterans Health Administration, have stretched ourselves way too thin from my perspective, like the proverbial rubber band, we are, indeed, ready to snap, as has been mentioned before. And, snap we probably will in the year 2000 with the proposed budget in VISN 18, we will experience approximately a $30 million shortfall if VERA continues to move money into our network. If VERA does not continue to move money into our network, as it has in the last 2 or 3 years, and we get a straight line budget with no decrease, we will experience an approximate shortfall of $45 million in our network alone.
    And, quite frankly, Mr. Chairman, I tried to come up with a word that would be descriptive, and the only thing I could come up with is, it stinks. With $45 million, we can operate an entire medical center, such as Big Spring, AZ—I mean, Prescott, AZ, or Big Spring, TX, for an entire year.
    Because of what we have already done to economize, we can in no way come up with the arbitrary ''efficiencies'' required by the proposed budget. I would anticipate a required reduction of somewhere in the neighborhood of 600 full-time employee equivalents in our network alone, and this is without even taking into consideration the impact of required new services, such as long-term care, extended long-term care programs, emergency care, Hepatitis C, homeless programs, et cetera.
    So, what is the proposed budget 2000 going to do to the system that I have spent my life working for? I read somewhere where Congressman Evans said that this budget is like a house of cards which may work for a while, but eventually will fall. I would go even further and say that from the view of a VISN Director that administering this budget will be like trying to build that house of cards in an Oklahoma tornado.
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    Gentlemen and ladies, I would like to close with a plea to you to take care of our nation's veterans in their time of need. I am often amazed at how destiny and coincidence converge to make strong statements that seem to transcend our normal perception of life's events. In one corner of the world, American forces, once again, stand ready prepared to enforce the international community's sanctions against Iraq and preclude their ability to rebuild an arsenal of mass destruction, while at the same time it is necessary that I stand before you with my hat in hand, more or less, pleading that adequate resources be directed to preserving the health care structure to care for these veterans when they need it, and I would extend that expression to those individuals responsible for preparing or submitting the year 2000 budget.
    And, I appear before you today, as was mentioned while ago, as a private citizen. It is no longer a daily concern to my livelihood what the VA budget is. It is, however, of daily concern to my heart and my conscience, as it should be for every American.
    Throughout the century, each time the freedom and security of our shores, or that of our allies, has been endangered, America's Armed Forces have risen to the challenge and served with courage and honor. Those men and women did not stop to ask for justification, but immediately stepped into the line of battle and gave all to assure our country's freedom. The very least that we owe them in return is the assurance that when they need our help, when they need health care or social services, there will be facilities and staff ready and able to provide the best our nation has to offer. To do anything less, Mr. Chairman, would bring dishonor to the United States of America, and that is exactly what I think the country is doing with the proposed budget for veterans health care in the year 2000. We are, indeed, bringing little attention and little respect to the veterans of this country.
    I thank you for the opportunity to testify before you, and I would certainly welcome any questions.
    Mr. STEARNS. I thank you for your candid comments, and I think you set the tone.
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    [The prepared statement of Mr. Trujillo appears on p. 65.]

    Mr. STEARNS. Doctor Galey, you are next.

    Dr. GALEY. Thank you. It's a pleasure to be here, thank you for offering me the opportunity.
    From my perspective as a Physician Manager, and as a Director, and then as a VISN Director, the guidepost of 30/20/10 I found to be the first time that I had a clear vision of what it was as an organization we were trying to accomplish, I believe that it has guided us toward more efficiency, more effectiveness, more accountability, and certainly toward more patient focus.
    Under the VERA model, VISN 20 in the first 3 years of the VERA model was a so-called ''winner.'' We got increased resources and were fortunate to have those resources to do things that needed to be done for veterans in the Northwest.
    However, 2000 will be a different year. That will be the first year when we will experience significant shortfalls that I will be very glad to talk about the specifics of, but suffice it to say will be in the range of $30 to $50 million in the year 2000. If we continue, over the next several years, on the budgetary path that we have outlined in front of us, I believe we will see even larger budgetary shortfalls in VISN 20.
    The cause of this I do not believe are related to 30/20/10. I think they mostly are due to things such as unfunded mandates, a remarkable acceptance and valuing of our product with more veterans than we ever expected to see asking for our services, and the ongoing increase of inflation and the costs that are associated with new technologies, new drugs, new therapeutic interventions, which I believe veterans have every right to expect and deserve.
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    So, therefore, I'm very pleased to have the opportunity to talk today about what I see are going to be the impacts for 2000, and certainly into the future if the budgetary line is maintained.
    You asked about some specific things that I thought were going to be important for us to think about in dealing with that. One of those things is, is that we have about an $800 million a year cost that is related only to inflation and the increased cost of pay raises. That's expected, and I think it was integrated into the thinking about 30/20/10, but things like Hepatitis C, drugs like Viagra, the new treatments for a number of cancers and other therapeutic interventions that we can now bring to bear on the many maladies the veterans have, the aging population and their increased needs, are all things that are mandates for care for which 30/20/10 I do not believe covers the monetary need.
    I ask that this group and the Administration support us in the management changes that we need to make, that are going to be very difficult for us all, change is difficult for us all, and understand that we are trying to do the very best that we can for veterans in making those changes, hoping to keep them focused on patient care and patient needs, but at the same time taking advantage of every opportunity that we have to be as competitive and as efficient as any other organization.
    And, understanding that medical care technology, therapeutics are increasing rapidly, they are very effective and they are very expensive, and veterans, I believe, have the right and an expectation that we will provide those services and therapeutics, and I believe we have an obligation to provide them.
    I appreciate the opportunity and I am glad to talk about any specifics relative to budget that you would like to ask me on VISN 20.
    Mr. STEARNS. Thank you.
    We'll go to Mr. Farsetta for 5 minutes.
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    Mr. FARSETTA. Thank you for the opportunity of being here today.
    Just from a historical perspective, Network 3 has never been a network that has shied away from dealing with budgetary reductions. Under the VERA methodology, we sustained the largest net reduction of any network. We've already achieved in real dollars about $150 million worth of reductions. We have reduced our unit costs by about 20 percent. We have eliminated almost 2,700 employees.
    So, the idea of budgetary reduction is not something that is necessarily particularly troubling to Network 3. To this date, I have never been before this committee making a plea that dollars were necessary for me to maintain my operation. But, that really is not the case as we approach the year 2000.
    I think that the things that we have done in our network to be more efficient are things that have actually improved service to veterans, have actually improved the quality of service to veterans, but I am really out of what I call ''across the board'' options that we can continue to utilize. I have too much infrastructure. What I mean by infrastructure is that I question institutional viability when you down size a hospital to a point where you have very few beds and yet you must support the infrastructure to keep that institution open.
    For next year, my network is looking at a reduction in the range of about $100 million. That would probably put my total reduction over the course of 4 years at about maybe $220 or $225 million, which is probably a little bit more than 25 percent of my budget. I do not believe it is achievable without some fairly draconian things. In fact, I could not present a plan to you right now of how I would come up with $100 million. I think the idea of continuing to cut every medical center by a percent, without adversely impacting patient care, is simply not a viable solution.
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    I do not believe that I have enough management efficiencies that I can derive $50, or $60, or $70 million in the area of management efficiencies. (I think not, in all probability, of proposing facility closure, and I think the reality of the time frame that is allotted, perhaps, furloughs would be the only option that I might have available to deal with budgetary shortfalls that I think I am going to be confronting.)
    I have a whole series of other items that I could address, but I would prefer to do that in the questioning portion of the session.
    Mr. STEARNS. Thank you.
    And, the best for the last. Ms. Miller.

    Ms. MILLER. Thank you, I appreciate the opportunity to be here and to make some informal comments.
    Like my colleagues, over the last 3 years I think we have made significant improvements in our network. We have established 14 community-based outpatient clinics. We are treating more veterans. We are doing 70 percent of our surgery on an outpatient basis. We started at somewhere around 20 percent. We have reduced bed days of care from over 3,600 per thousand to around 1,200 per thousand, and we have managed to operate more efficiently while increasing services and the numbers of veterans that we treat. We employ 500 less staff than in fiscal year 1996, and expect to continue reducing staff.
    Like some networks, we have managed to fare well under VERA because of the productivity and the low unit costs that we have had, and so this year, while we did not achieve a level of budget that was equivalent to inflation and our salary increases and so on, we are managing and will obviously continue to manage within the dollars allocated.
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    However, the horizon for fiscal year 2000 begins to reflect some of the same kinds of problems you have heard from my colleagues, I expect that, even though our concerns and issues with managing in 2000 will not be as significant as those in Network 3, as we move forward into 2001 and 2002, we will have the same kinds of problems that Mr. Farsetta is facing.
    In our network, we anticipate that we will have a significant shortfall in prosthetics dollars that I will somehow have to support in 2000, that the money funded will be short of need by around $5 million. We expect the pharmacy budget to increase from its present budgeted amount of $55 million to over $63 million. We expect personal services to increase from their present $362 to over $371 million. I expect a utilities increase of 5.7 percent that I have no control over, and a subsistence increase of around another 3 percent. In addition, using a prevalence of 10 percent as a marker for Hepatitis C, as we begin that screening, and at an annual cost of $15,000.00 per patient, there is a bill of potentially $21 million for Hepatitis C treatment.
    Given all these things we anticipate a $21.8 million shortfall, just without Hepatitis C or emergency services. Given that shortfall I have begun discussions with the directors in our network about holding off on opening more clinics, about the numbers of wards that we may have to reduce, about the numbers of FTE that we will have to reduce, about the need for targeted RIFs in some instances, and about the possibility of curtailing our contracted services for inpatients in Columbus, which is the largest city in the country without an inpatient VA presence.
    I would be most happy to answer any questions from the Committee.
    Thank you.
    Mr. STEARNS. Thank you, Ms. Miller.
    Mr. STEARNS. Doctor Garthwaite, you are probably the only one at the table that can really implement changes and be a forceful advocate here, so let me start with my questions to you.
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    You have heard the VISN Directors talk here, you know how the Paralyzed Veterans of America feel. In their testimony they imply that the VA budget has already detailed a national plan that is going to hurt the system, and they don't think you are going to right size the system. We know that Doctor Kizer has had a memo talking about how precarious the budget is. Let me just say, in the face of that criticism we are all working together for the same purpose, to try and help veterans. We are trying to come up with a budget, and we made the Secretary of Veterans Affairs a Cabinet position because we wanted to see from that position a strong advocate, somebody who is going to go out and make the case to the Administration. We don't feel it up here. You could be one of those people, you could go back to the Secretary and make the case, but in light of that criticism do you agree with Doctor Kizer's memo, do you think the veterans budget is a precarious situation?
    Dr. GARTHWAITE. Yes, I think that this budget has significant financial challenges ahead of us. I think that you hear from people in the field that they are not comfortable. I do not think we heard the same thing when we embarked on the dramatic changes we have made in the Veterans Health Administration during the last 4 years. So, to answer to the questions—Is this an easy budget to live with? Are there hard choices ahead? When the total prioritization of the entire federal budget chooses to provide this amount for veterans health care, it is for us to reconfigure our system to provide maximum care to veterans with that amount of money. Significantly hard changes are ahead, and I tried to allude to those in my brief remarks.
    Mr. STEARNS. The VVA states in their testimony that it is their understanding that one of the reasons for OMB's rejection of VA's funding request is that the VHA finished fiscal year 1998 with some $600 million in savings. Could you explain that to us?
    Dr. GARTHWAITE. Well, I think that there are several reasons why we finished the fiscal year that we went through with some carryover. For the first time we were allowed, because of the MCCF funding legislative change in the Medical Care Cost Recovery Fund, we are allowed to take some dollars forward.
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    There was an additional quarter of MCCF collections that were put into that fund. Probably most significantly, we did not know the impact of enrollment and eligibility reform, because we were just beginning to do enrollment for the first time. Our managers responded to these uncertainties and without a long-term sense of our budget, without much understanding of where eligibility reform and enrollment were going to take us, by bringing some additional dollars forward for this year. In addition, we knew, because of the 5-year budget projections, that we were going to have to make up for inflation as well, and so, with all those factors ahead we had the opportunity, and I think appropriately so, brought forward some money. We do not see that the picture is rosy at the end of 1999, there are significant challenges ahead in this particular year, including paying for the Hepatitis C treatment, so we have deferred some things that the other witnesses have already outlined.
    Mr. STEARNS. Let me talk to the rest of the panel.
    In the budget, they are talking about opening 89 new outpatient clinics to treat 54,000 new veterans. Let me ask you folks, can you do that with a flat budget? I mean, is that possible, anyone who would like to answer that.
    Mr. FARSETTA. I am not sure it is possible. I think, at least for me, it has got to be put in the context of what my actual budget is going to be. It would make little sense to me to continue expanding services, for example, if I am looking at maybe a day a month that all of my employees will not be paid.
    At some point, we need to make a decision, in terms of what segment of the veteran population can we continue to treat with the resources that we have available, and I'm not sure what message we are sending, you know, to veterans, that if we do not have the resources to provide all the care that we need to provide should we continue to expand in that area.
    Mr. STEARNS. Yes, Doctor Galey.
    Dr. GALEY. As you know, when the legislation about the CBOCs was discussed, there was an agreement that they were not being put out there to increase numbers of new veterans coming through the door, they were to provide increased access to the existent veterans.
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    The CBOCs, in our vision, are in locations which I believe do provide remarkably increased access, which is very favorable for veterans. Often times you have to travel several hundred miles to get to VA medical centers that exist right now.
    However, those veterans do have access to services in other ways within those communities, which I think in some instances is a hardship for them, but it is available. So then, what we have to do is to make a decision about what are we going to take out of one area to fund CBOCs if we make that choice, and since we believe that we are going to be hard pressed to maintain the ongoing critical services that we have in the centers that we now operate, we are putting CBOCs on hold. We believe that that, in Oregon alone, will save us about $1.6 million, when we are looking at that budgetary shortfall of $30 to $50 million we believe that that is something which to maintain the other services balances out, but it's certainly not good for the veterans and their access to care.
    Mr. STEARNS. Okay. Mr. Trujillo.
    Mr. TRUJILLO. In Network 18, we had budgeted about 43 total community-based clinics through the year 2000, but in view of the budget that we are looking at, and because we have opened the community-based clinics with dollars that we had within our system, and efficiencies that we have implemented in our system, and no additional dollars have been made available for that, we will—well, they will be taking the position of retreating and looking at those very critically and doubt that we will make any further progress in opening community-based clinics.
    Mr. STEARNS. Ms. Miller?
    Ms. MILLER. We have been tracking utilization of our clinics and find that about two thirds of the patients in our community-based clinics are not new to the system, but have been utilizing the system. We are able, in the community-based clinics, to offer those services at a lower per unit cost than we typically experience when we provide service in a tertiary care setting. So, we believe that it is a more efficient way to deliver the primary care services, and it is part of the reason that we have been able to expand the number of veterans we treat.
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    However, you get to a certain point, where taking the utilization of the resources out of the tertiary centers and the long-term care programs has to come to a standstill. Once we have reached a point where we can longer shrink utilization in these areas, and I believe by the end of this year we will be at that point then I have some concern about whether or not we can continue with the few more clinics that we have scheduled or without reductions.
    Mr. STEARNS. Now, the budget also includes $39 million to hire 197 full-time employees to expand the homeless programs. Now, when you talk about a budget, it is easy to promise things. You can promise things to everybody, but the problem is, you may not be able to deliver. Is this an example where the budget cannot deliver, hiring 197 full-time employees, spending an additional $39 million? Can you folks, under your flat budget, fund this program?
    Dr. GARTHWAITE. Certainly one of the expectations would be that if we treat more homeless veterans more comprehensively and get them out of homelessness, that their total health care needs would diminish. There is evidence in the medical literature that homeless veterans consume more resources, are sicker in general than those who are not homeless, and that by improving their nutrition, improving their exposures and so forth, that we could decrease the costs that we would otherwise have to put into treatment if they just present to our hospitals with illnesses.
    Again, we are not curing the homeless problem with this, we are making a small step to address it in a little more aggressive fashion than we have in the past.
    Mr. STEARNS. The last question I have, Doctor Garthwaite, deals with the bonuses for VISN Directors. As I understand it, VISN Directors could earn an additional $80,000.00 in addition to their present salary for doing good work. Is that accurate, and have any one of you got an additional $80,000.00 bonus?
    Dr. GARTHWAITE. No, it is not accurate. It would be good news, I suppose, to the people sitting around me.
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    Mr. TRUJILLO. Sign me up.
    Mr. STEARNS. Are you coming back?
    Dr. GARTHWAITE. Mr. Trujillo, it is too late for you. No, there is no truth to that. There are some bonuses. I would point out to you that if you compared the salary structure, certainly of our non-physician leaders, and even our physician leaders, to private sector health care leaders in integrated networks of the budgetary size and complexity that we have, we are paying a half, a third, maybe even a quarter of what the private sector is paying. These are folks making very difficult decisions, and they are doing it, really, on a relatively modest government salary, because as Tom Trujillo put it, for their love of the principle and for service of veterans.
    We do give some bonuses, the maximum amount we gave under our structure last year was $16,000.00. Only a few VISN Directors got that amount. Several got a smaller amount, and a few got Presidential Rank Awards. We have that data available if you would like to see it. For the last couple of years that money is given for demonstrable improvement in the outcomes for veteran patients, and I think that is another key piece. There are relatively few government agencies where managers have to make something change—the access, the courtesy scores, the preventive services and so forth for veterans to be considered for bonuses. Improved service is a significant factor in determining those amounts and not for cutting budgets as has been suggested by some. Of course, our managers get a budget, and they have to live with it. They get a bonus if they are able to make veterans outcomes of care, and access scores and things like that improve.
    Mr. STEARNS. Okay.
    Let me go to Mr. Doyle, Pennsylvania, the Ranking Member.
    Mr. DOYLE. Thank you, Mr. Chairman, and thank you to the panelists for being here. Tom, especially someone like yourself that has been on both sides of the fence now, we appreciate your testimony, and, Laura Miller, good to see you again, we miss you in Pittsburgh.
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    Ms. MILLER. Thank you.
    Mr. DOYLE. A couple questions, and maybe a couple comments first. Nobody on either side of this aisle likes this budget. This budget does stink. I just do not understand how we can flat line a budget since 1997 to 2004 and expect this system not to collapse. But, I want to remind my colleagues, too, that those of us that were here during the Balanced Budget Act, I would venture to say every member of this committee probably voted for that budget agreement, and in that agreement there are spending caps, and we are looking at some $30 billion of discretionary spending cuts in that budget, and those of us that sit on this committee that are asking for increases in this budget, and I am one of those people, have to be prepared to also break that budget agreement, because that is what it is going to entail. It is going to entail members of Congress who voted for those spending reductions, back when the Balanced Budget Act was there, be willing to rethink, given the fact that we are in a surplus position and that the economy is doing a lot better than it was back when we made that agreement, whether or not we are willing to bust those budget caps to provide the revenue that sits here.
    So, in defense of the Administration, and I do not like anything about this budget, I think I made that clear, but in defense of the Administration they are trying to keep their budget requests in line with the balanced budget agreement that we all voted for, and we are going to have to be willing to break those spending caps. And, I am sure, you know, Mr. Kasich, and other members of the Budget Committee, and the appropriators, are not as willing to do that as maybe some of us are, but I think, you know, in fairness to the Administration that point needs to be made.
    Doctor Garthwaite, let me ask you first, and I think my friend, Cliff Stearns, alluded to this earlier, that VHA has requested concurrence on some reductions in force and other right sizing authorities needed to get several VISNs through the current fiscal year, are you aware of where those requests are at this time and when the Secretary will review them?
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    Dr. GARTHWAITE. I can tell you what I am aware of. I know that following the hearing on February 11, the Secretary and Doctor Kizer met, discussed those budget requests, and that they are undergoing a final review by the Secretary's office. I cannot promise you a date, as it is out of my hands, but I know there has been additional discussion between the Secretary and Doctor Kizer regarding those.
    Mr. DOYLE. Does the VA—do you have a plan for managing a zero growth budget for the foreseeable future? I mean, if you could speak to us about the numbers of hospitals that would be closed, the number of patients that you would be able to treat under that scenario, the number of full-time employees that are going to lose their job in order to conform to this no growth budget for 5 consecutive fiscal years, I mean, what is that going to look like and what is your plan? I mean, we were here at a hearing February 11, and Doctor Kizer and Secretary West said that, you wonderful VISN Directors are all going to come up with a plan to implement this budget, I am very curious what your hospitals are going to look like after 5 years of consecutive no growth budgets and what that is going to mean in real terms and real people and services.
    Perhaps, each of you can address that a little bit.
    Dr. GARTHWAITE. I would just say a few words. If one just looks at the numbers and projects it out a bit, and assumes a usual percentage of our budget for personnel, which is like 76 percent or so, and considers normal inflationary increases guess at how many reductions in personnel would be necessary to live with that sort of fixed rate.
    The problem is that there are thousands of other things that are changing simultaneously, Hepatitis C comes in, you pay some more, minimally invasive surgery comes in, you save a little, outpatient drug rehabilitation becomes the standard of care, as opposed to inpatient, a dramatic change in what happens and you save, then total hip arthroplasty, you know, artificial hips comes in and more veterans need those and that costs. So at any given moment there is this continuous flux of things that save money and that cost money.
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    In addition, every network is different. It is said, all politics is local, we believe all health care is local. That is why we turn to our network directors, why we meet with them on a monthly basis, talk to them on a weekly basis or more often, and are in constant discussion and negotiation about how best to deal with these budgetary challenges.
    So, we believe it has to come from below, because it is relatively difficult to see all the nuances and impacts from far away, or to design a policy that if implemented across the entire nation would work just as well in New York City as it would in rural Oregon.
    And, for that reason, we do not have the kind of specifics you might talk about, I mean our plans are much more generic and larger in nature. I think I will stop there and let the people on the panel address your question.
    Mr. DOYLE. Yes, I would be interested to hear from the VISN Directors, and Tom, just speaking to where they see their VISNs with 5 years, five consecutive years of flat line budgets. I mean, what are your systems going to look like, and how are you going to cope with that?
    Mr. FARSETTA. I think there were probably some questions that need to be answered, or at least raised. If we assume that we will be caring for the population that we are currently caring for, I think the facilities would look one way. If we were willing system-wide to make some determinations relative to the various priority categories of veterans, those that we would elect not to provide services to, if we were to look at, for example, whether we will continue to provide long-term care, I think that is clearly going to have an impact on what the network would look like.
    But, if I were to look at my network in a 5-year straight line budget and total that up in terms of increased expenditures that I will be incurring in dollars that I will not have, it would probably equate to close to the budgets of three hospitals. So, I would not be able to provide funding for upwards of three medical centers. I'm not saying they would close, but that is what it would come to in dollars.
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    Now, for my network you have to factor in the impact of VERA, which is roughly $150 million.
    Mr. DOYLE. And, you are a VERA loser, right?
    Mr. FARSETTA. I am the VERA loser. I am not a VERA loser. So, it is quite, I believe draconian, and quite honestly without decisions I am not sure how manageable it is, and by the same token I am not sure how honestly you want to talk about things, because when you start discussing closing institutions, it has a whole secondary effect on the veteran community, most importantly, where are they going to be deriving services and on the employees in that area, and there may be other ways of dealing with it that has to do with the fact that we will simply be providing less service to less veterans. So, veterans who otherwise would have been entitled to health care won't be anymore.
    I am certainly opposed to that, I think we owe veterans whatever it is that they have done for this country, and that is the reason that we are here, but when it comes to dollars, and it comes to quality of patient care, I think tough decisions are ultimately going to have to be made.
    Mr. DOYLE. Anyone else?
    Dr. GALEY. Yes. I took the flat line budget to be related to, and in a context with, 30/20/10. My sense is that we will reach all but the 10 goal far ahead of the 2004 time frame, and if, for instance, we are going to continue to see over that time period 7 percent growth in our veterans, on the average per year, or 35 percent rather than the 20 percent we are slated for, that is, in my mind, a change in the landscape that was not expected under that agreement, and, therefore, we would require more funds for it.
    In addition to that, it considered the medical care scene as it was at that point in time, and as we know and have heard it has changed dramatically, and is continuing to change, and while we do have the offsets of things that improve our costs and decrease our costs at the same time, I believe the increased costs are winning at this point in time. So, that is a change in the landscape as well.
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    What will that have as an impact on our network? Well, we are going to see the same impacts that I believe Jim was talking about, perhaps, to a different degree. We have certain control points. We are either going to decrease the number of veterans, we are going to have to decrease the number of services that are within the package, or we are going to have to start closing centers or programs to be able to maintain that budgetary status.
    Ms. MILLER. I would basically echo Doctor Galey's comments. I think that over an extended period of flat line budgets, if we continue to have budget decreases under VERA, it would be about equivalent to one of our facility budgets, and I could see that we will have to make some program decisions that will be very unpopular, not only with the veteran community, but also with our affiliates, and I think that that is going to come in this next budget cycle.
    I also think that the policy issues regarding where we are going on long-term care need to be addressed because we cannot maintain everything.
    Mr. DOYLE. Thank you, Mr. Chairman.
    Dr. GARTHWAITE. If I could have one sentence, just to say that I think if you look at our testimony when 30/20/10 was proposed and adopted as a 5-year budget plan, it was with the proviso that you could not pull it apart, you could not just say we want the 30 and the 20, but you don't get the 10. It was with that explicit testimony.
    Thank you.
    Mr. STEARNS. Okay.
    Mr. Simpson, anything you would like? Any questions?
    Okay. Mr. Snyder, I think you are next, and I just have to run to the Floor to give a statement and I will be back, and I will ask my colleague, Mr. Simpson, to take over the chairmanship.
    Mr. Snyder.
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    Mr. SNYDER. Thank you, Mr. Chairman. Before you leave, I want to thank you for this panel. I think this is a very helpful to have these directors where, I do not want to say where the rubber meets the road, but I think that is what we are thinking, and I really appreciate them being here.
    I wanted to ask Mr. Garthwaite, picking up on what Mr. Doyle said and one of the comments you made, Doctor Garthwaite, I am sorry, you and I worked too hard for those degrees to give them away that easily, in your statement you referred to our part of the Balanced Budget Agreement, talk about that a moment, if you would. You know, the information we have, I think, is that Secretary West, or actually you all's submission to OMB was for, I think, $1.3 billion more than was in the President's budget, so you must have foreseen that your part of the Balanced Budget Agreement, at least extended another—that you were entitled to another $1.37 billion. How do you analyze what you foresee, or what you all see as the Veterans Administration's part of the Balanced Budget Agreement, how do you see that? Or, does somebody come to you and say, after you have submitted it, hey, we have got a balanced budget we have got to do, and you all are going to get cut back?
    Dr. GARTHWAITE. I think we started this year with a sense that we had 5-year projections dating back a couple years, and when we began to pull together the budget to meet those projections, I think both Doctor Kizer and Secretary West looked at the challenges that those levels would entail with regards to things that were not on the table when the Balanced Budget Act was passed, such as, the Hepatitis C issue, the sort of consensus was that the additional funds should be requested.
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    Mr. SNYDER. I understand that, but your submission was for almost $1.4 billion more.
    Dr. GARTHWAITE. Right, I think that is——
    Mr. SNYDER. Did you believe that submission, you thought you were still within the constraints of your part of the balanced budget?
    Dr. GARTHWAITE. No, I think that we felt as we looked at those additional pieces that we needed to raise that during the Administration budget discussions to put clearly on the table those particular issues and their added costs. I think the stresses envisioned was reflected by the testimony here.
    Mr. SNYDER. I have kind of gotten the impression, Doctor Garthwaite, that there are things you would probably rather be doing today than having to deal with this particular issue, carrying the water you are carrying, but Doctor Kizer's memo, which I guess probably within about 2 hours after he signed it was faxed all over the world, I was going to say the Free World, but, you know—but he actually did not say in there significant challenges, his memo says to Secretary West that there are very serious financial challenges, and the significant challenge to me is figuring out what to do about Hepatitis C for veterans. This is a kind of a different kind of a challenge.
    I like what Ms. Miller talked about, you know, the push towards more efficiency, and we always have this challenge, whether it is in business or government, the proper tension between, you know, watching the bucks, recognizing the taxpayer dollars, being as efficient as we can, versus providing the quality of care. I do not know if I want you all, I do not know if I want these, used to be four, now three people going to into this year with a serious financial challenge. I think I want their challenge to be providing quality care to veterans and meet the mandates that we are giving them. I am going to try to give you another one with regard to Hepatitis C, if I can, because I think it is real problem out there.
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    My question is, I mean would you agree, Doctor Garthwaite, that the challenge that is facing them, a very serious financial challenge is the wrong kind of challenge that we ought to be laying on your staff?
    Dr. GARTHWAITE. Well, I think—there is no easy way to do this. Obviously, our job is to take the money we are given and to turn it into the best care possible. The reason I think we brought forward the additional initiatives in the internal process was because these are very difficult management challenges to take on, To undertake a RIF takes time, it has significant repercussions, both personally for the people who are RIFed, it has significant repercussions for the people who have to go through it, and to deal with colleagues who are losing their jobs.
    Mr. SNYDER. Let me interrupt, because we, of course, the Chairman is gone, I guess we could just have as much time as we need—oh, no, we have got a new Chairman, you know, you say your job is to take the money you are given and do the best job with it, but Doctor Kizer's memo was not a memo about, we have a rare opportunity to set a model of efficiency for health care in America today. I mean, that's not the tone of the memo. The memo was, he does not say it, is that we have been screwed. I mean, that is the tone of the memo, you know, and we all know it, and you all know it, and Doctor Kizer is a doctor and he's sending word out to his medical administrators, we got screwed in the budget and if we do not to work on it we are going to be in precarious difficult times. I mean, that is a different kind of a challenge, is not it not?
    Dr. GARTHWAITE. I would think the implication is that these are very serious and difficult challenges, and we cannot wait to take action, to put us into a position to live with the budget. If we wait, the nature of our business is that it will cost more later if you do not take the administrative actions early, and you will have to take more actions later and they will be less effective and helpful, and less reasoned.
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    Mr. SNYDER. I had several other questions I wanted to ask, but maybe I will just go on a different line here. For our directors, what has been the impact, as not just this budget, but of what Ms. Miller called, you know, the push towards efficiency? One of the things I have liked about the VA, as somebody who trained at two different VAs, both in Portland and in Little Rock, is that medical education, those kinds of things, what is the potential impact on the research that is being done at these facilities, what is the impact that you see on recruitment of the kinds of physicians that you want at VA facilities?
    Dr. GALEY. Let me take a stab at that.
    First off, the research budget is a separate line item, I believe that is the correct term for it, and so I do not see an impact directly because of our medical care budget on that budget.
    However, I do see that because we are striving for increased efficiencies because we are going to be short of FTE and so forth, that the individuals that do the research, the clinical investigators, are going to certainly feel the impact of a short medical care budget.
    Mr. SNYDER. Let me, I mean I think that is an important point there, I mean, what you are telling me is in looking for efficiencies, people that you hire, physicians that you hired to be researchers are being asked to do more clinic work, I mean, they are being asked to see more patients than they were originally told, is that a fair statement?
    Dr. GALEY. Yes.
    Mr. SNYDER. So, they are doing less research.
    Dr. GALEY. Yes, that is true to an extent, and let me explain what I mean. There are some good things about that as well. First off, in the past we did not pay a whole lot of attention to the research accountability, the value of having the budgetary constraints is that now we do, and I can tell you a lot better now that our investigators are every successful at what they are doing. They are very efficient at what they do. They manage their time very well, and our research is better because of it.
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    Our clinical care activities, all of our researchers in our VISN are expected to have clinical care activities, and it is a stress on them when they have to do more. We are trying to do our very best to make sure that they have guarded time to complete their research activities.
    I mean, it is a double edge. We improve the efficiency, but it is harder when you do more things in the same length of time.
    Mr. SNYDER. My time is up. Thank you.
    Mr. SIMPSON (presiding). Mr. Rodriguez.


    Mr. RODRIGUEZ. Thank you, Mr. Chairman.
    Mr. Trujillo, first of all, I think you are too young to retire.
    Tom, I think I was hearing you, where you were identifying as politics all being local, and I heard, as a Hispanic I heard about politics being loco. There is no doubt that this budget is crazy——
    Mr. TRUJILLO. No comment.
    Mr. RODRIGUEZ (continuing). In terms of trying to accomplish some of the things that we are trying to do.
    Let me—back home, I represent San Antonio in south Texas, and for the very first time in Alonistene, the last or so, we have seen an opportunity 200 miles away from San Antonio that I also represent where there was no access to, you know, they had to go all the way to San Antonio to get service, and now we have seen the possibility of some clinics and that kind of thing, so that has been real good. Although, at the same time, it seems like we have already moved to cut a lot of the rehab activities, and we are getting a lot of concern by a lot of the veterans that that is essential for some of the things that they need, the rehabilitation aspects of it, and it seems to have been identified as something that is like a luxury, when in all honesty it is something that is real serious, and I would want you to comment on that.
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    And, I also would want to get some feedback. I know we established some pilot programs regarding third party reimbursements, and at least I am under the impression that San Antonio and that region is one, because, I mean, when you go all the way to Brownsville there is nothing down there and it is almost 250 miles away from San Antonio and that region. We have one other center, which is Carville, which is north of us instead of south, and I hear that that might be closing down, and I do not know if you want to comment on that. There are four Congressmen out of San Antonio, it is not in my area, but it does service some of my veterans in my area, and I would want to get some kind of feedback from you.
    And, for my friend who was talking about VERA, let me just say that we are still fighting. Sometimes I have seen that data, there is about $1,000.00 disparity between other areas and what we have in comparison, and I know that, you know, some of my counties double in the number of population because of the winter birds that we get and a lot more veterans that come in in Zapata and Stark County and some of my lower counties on the border. And so, I wanted to see if you could comment, both on the existing cuts already on rehab activities, and secondly, on the third party reimbursements, in terms of where we are to try to move on that area.
    Dr. GARTHWAITE. Thank you, Congressman, and, clearly one of the major initiatives of our reinvention has been to put access to VA health care where veterans are, and I have used the southern Texas, Rio Grande Valley, as an example of why we have had to make changes. It is not acceptable to drive 400 miles for your high blood pressure check, and we are pleased that we are making progress in providing access locally.
    I believe rehabilitation medicine is a critical part of delivering medicine, and I was not aware that there are some perceived changes in delivering rehab medicine in that area of the country. We will take a look at that and try to get you a specific answer as to what's going on.
    What was the other part?
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    (Subsequently, the Department of Veterans Affairs provided the following information:)

    The VISN 17 budget allocation to the South Texas Veterans' Health Care System for FY99 required $9 million in budget reductions. Vertical cuts and consolidations submitted to program offices for review included consolidation of 20 acute rehab beds into a 90-bed Extended Care Center. The most common diagnoses in the acute rehab unit were acute stroke, amputation and joint replacement rehabilitation. Staff in the extended care unit is responsible for preexisting care plans for stroke and amputation patients and rehabilitation planning is still provided by Physical Medicine physicians. Staff from the consolidated acute rehab unit still performs the required therapy. In addition to this inpatient program, physical medicine runs an outpatient program that has not changed in the last year.
    Rehabilitation is also provided for substance abuse patients in a 26-bed inpatient detox and stabilization unit. A 20-bed intermediate care unit for dual diagnosis and homeless patients with substance abuse was closed November 1, 1999. These patients are currently treated in an outpatient substance abuse program with housing in a contracted halfway house. Capacity for rehabilitation services in spinal cord injury has not changed in the past year.
    Moving of the site for rehabilitation services in order to reduce staffing initially caused disruption in normal communication and referral patterns. However, this disruption has been resolved and the consolidation of rehabilitative medicine services has had no negative impact on the level or quality of rehabilitative services provided to our veterans. South Texas continues to provide a comprehensive level of service.

    Mr. RODRIGUEZ. The pilot program on third party reimbursement.
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    Dr. GARTHWAITE. Right. Third party reimbursement. We continue to fall a little bit short of our goals, which we set fairly aggressively. We increased the amount of money we are taking in with third party reimbursement and are returning that locally for care of veterans in that area, and we are pleased that we continue to produce more.
    We have significant changes to make, and to be honest with you they start at the very front end and are all the way through the billing cycle. We did not grow up as a health care system having to do billing, and so that is not built into our culture. Most other health care systems that did not do this well are currently out of business, so the private sector does this very well. We did not have to do that until the Balanced Budget Act of 1997 made those collections a part of our funding stream.
    We are at work very hard now with SWAT teams and aggressive educational efforts, and changes in structure and processes, the use of outside consultants in some places, where we are really looking very hard at how we can appropriately bill for veterans care under medical care cost recovery, and how we can take that money and then return it to the care of veterans in the area. And, I think we are making progress, I think we have significant work to do in this area. I would not say otherwise.
    Mr. RODRIGUEZ. Yes, and then just in terms of your budget, I know that we want to continue to move on those clinics. I know that Congressman Shows from Mississippi talked about—or wanted me to ask you also about the clinics, to make sure if that is going to have an impact based on the budget that you have now, and I am also very supportive of the importance of looking at the homeless veterans. There is nothing more depressing than to see a veteran that is homeless out there and that we are not doing sufficient enough, not to mention that around the border we have a large number of individuals with non-resistant tuberculosis, and that kind of thing, and, in fact, in Mexico there is some startling data of over 11,000, you know, individuals, and it is right across the border.
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    I wonder if you could make some comments as it deals with nursing homes also. Because of the fact, and I am just going to throw this caveat, one of the concerns is that you are dumping them into the nursing homes and not providing the care, and I am wondering, just how cautious are we going to be in that effort, in terms of providing alternatives such as, you know, homeless shelters, as well as nursing homes.
    Dr. GARTHWAITE. Well, certainly, and it is not our intention to dump any patients anywhere, it is our intention to place them appropriately where their care needs would dictate. We, obviously, have significant issues with regards to being able to afford all of long-term care that all veterans would like to have, and we do have a report from an outside panel being circulated for comment and a group looking at coming forward with some recommendations that we will obviously share with the committee and broadly with our stakeholders with regards to long-term care. The bottom line, of course, is that it takes a lot of money to expand services.
    We do have some modest expansions for our home-based primary care initiatives in this particular budget.
    In terms of homeless, I think we continue to be one of the major providers of hands-on care for the homeless. I think we are encouraged by our efforts and to the extent we can, we will free up new dollars to put into those efforts, because as I mentioned before we think that is the right thing to do from a lot of perspectives, most importantly, from the veteran's perspective.
    Mr. RODRIGUEZ. Mr. Chairman, can I ask one more question, real short?
    Mr. SIMPSON. Sure.
    Mr. RODRIGUEZ. Following up on Doctor Snyder's question regarding teaching, I am not sure what role we play, but I know in my area we have a teaching hospital, and we have both the Air Force and the Army participating. As it relates to the teaching aspect of it, what kind—and the talk about cutting down on hospitals, and I know we have to, you know, trim down, what kind of impact does that have on the teaching aspect of it, in terms of future physicians and nurses and everyone else?
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    Dr. GARTHWAITE. I think the specific impact the VA has, is that we have decreased the total number of residency slots over a 3-year period following recommendations from a panel chaired by the former head of the Association of American Medical Colleges.
    The biggest issue, I believe, in health care education today is that the training of doctors has traditionally been an inpatient exercise, and we have dramatically changed where we deliver care. So, if we are delivering primary care in a small community-based outpatient clinic fairly far from the tertiary medical center, we need to somehow have the medical schools and the training programs reinvision where they are going to have to deliver the training for those new doctors as they come along, and other health care providers.
    So, the big transition for medical schools is changing the educational models. They see that, in fact, in part on their own, and in part, I think, to the response to the way we are changing the health care system in the VA. I don't see that traditionally academic institutions are quick to embrace that change. These things have built up over a long period of time, and medical schools have significant other issues as well.
    So, I think we are making progress. I think that medical schools are changing. I would challenge them to change a bit faster, because we need to change the way we deliver care faster than they seem to be adapting to us, but I think they have picked up the pace more recently.
    Mr. SIMPSON. Mr. Smith.


    Mr. SMITH. Thank you very much, Mr. Chairman.
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    Sorry I am late, but I will look at the testimony, and I just have a couple of questions, and, Mr. Farsetta, thank you for your help in the past and your availability to meet with me and my staff over concerns about our local health care facilities, including the Brick Clinic. And, I was just wondering if you could tell us if the President's Fiscal Year 2000 budget were to be passed, as you know we are trying to add back those specialty care items that have been lopped off, what would be the impact on the Brick Clinic, and, specifically, what would be the impact on your region generally?
    Mr. FARSETTA. It is hard for me to comment specifically on the impact on the Brick Clinic. I mean, the Brick Clinic is a productive clinic, it provides various central services to veterans in the central and southern part of New Jersey. It is a fairly efficient clinic, and it really is a direction that the VA is moving in, so I can't tell you specifically what is going to happen to the Brick Clinic.
    But, in the overall context of the budget, I identify between VERA and budgetary absorptions of numbers close to $100 million. A $100 million reduction in a network that has already experienced a reduction in purchasing power of about $150 million is really a staggering amount of money.
    The ability to continue to effect reductions across the board, meaning every hospital, for example, the New Jersey hospitals constitute roughly 22 percent of our budget, to think that I could get $22 million additionally out of Lyons and East Orange, when I have taken out $25 million this year, is very difficult to ask, without thinking about some alternatives, and that would encompass the whole network. That has to do with shedding some infrastructure, and shedding infrastructure means, in all honestly, either changing mission of hospitals or closing hospitals.
    So, I put it in the context of what has happened historically and what is being asked now, and what may be asked, in point of fact, in the future, because I am looking beyond 2000, I need to look at 2001 and 2002.
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    The other issue, that the idea of generating significant dollar savings for next fiscal year, since 70 percent or 75 percent of our dollars are tied into people, to begin to generate savings quickly is really not something that is very probable, because even if we go through a RIF process, which I think is a horrible thing because you are really affecting the livelihood of a lot of people, RIFs don't come without expense, and a RIF will probably cost us at least $30,000.00 to $40,000.00 per employee. So, even if the employee were to leave, because you identified a RIF, somebody is still going to be paying for that for the better part of, perhaps, a year. It really is a product of how long the employee has worked.
    So, as I told the panel earlier, I do not have a good answer, because right now I am not sure that there really is a good answer.
    Mr. SMITH. Is it not true, though, that VISN 3 has really taken it on the chin, perhaps, disproportionately, vis-a-vis the rest of the other areas?
    Mr. FARSETTA. We can hold another hearing on that. I do think that VISN 3 has had the most substantial loss under the VERA model, and while I think part of that is justifiable relative to inefficiencies in the VERA, I think the other part of that is a product of our case mix, the kinds of patients that we take care of, and the way our network was constructed.
    As an example, we have the largest percentage of AIDS patients in the entire VA system. A problem that—and, as expensive as that has been with the funding of Hepatitis C we will have a much more substantial population at risk. So, while other networks may be talking about $20 or $21 million to deal with Hepatitis C, I am looking at probably $71 or $72 million over the course of 18 or 24 months. So, we are looking at—and that, basically, is just my case mix, it has nothing to do with whether my people are efficient or inefficient, it has to do with the population that present itself at our institutions.
    Mr. SMITH. Doctor Garthwaite, knowing that our case mix, perhaps, is a bit different than other VISNs, will that be taken into consideration if there—especially if there are add backs by this committee and by the Appropriations Committee, because our concern is, and we went through this exercise last year as we were talking about putting back a substantial amount of money, it looked as though, and, perhaps, is so, that we get very little of that. And, we do have a very, you know, unique mix of veterans. Mr. Farsetta talked about the number of AIDS patients, and I think Hepatitis C will be another. We do also have one of the few spinal cord injury——
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    Mr. FARSETTA. Three
    Mr. SMITH (continuing). Not one, three,
    Dr. GARTHWAITE. He reminds us of that.
    Mr. SMITH. And, Alzheimer's disease, I mean we have—there has been a real responsiveness to the real problems of our area.
    Dr. GARTHWAITE. I would just say that we recognize that several VISNs have been challenged, perhaps, out of proportion to others. There are three that have been exceptionally challenged by the VERA model, those are 1, 3 and 12.
    I do not think it's just AIDS, because we account for AIDS in a special category of funding that I think probably is fairly reasonable and provides the resources to account for that. I think there are a couple things that as I have looked at that are relatively unique between the networks that are the largest VERA disadvantaged, if you will. One is, and, perhaps, the primary one, is that we had in the past, in our rush to affiliate with medical schools, tried to match VA facilities with medical schools in the area. In those three cities, Chicago, Boston and New York, six medical schools are within a 1-hour driving distance of a central point. That leads to duplication of services. It leads to competition among the medical schools and the private sectors that carries over into the VA and so forth. We are working hard with our partners in academic medicine to try to restructure how we deliver care, and to look at redundancies of programs, and whether we are just keeping programs alive because we have always done it, or whether we have to look for ways for them to partner to have a meaningful and efficient neurosurgery program, cardiovascular surgery program and a variety of others. I think those are some of the real challenges that are also in the budget.
    We have some hospitals that, frankly, could be combined, and that we are going to have to look at, in those three areas as well. We have a lot of extra floor space. We have a proposal in the budget of ways to deal with some of that excess space as well, yet to retain those funds for the service of veterans.
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    So, I think there are complex reasons why Jim's network comes out with most of the numbers as relatively inefficient, certainly not something that anyone has set out to do, but there is a lot of history, a lot of what we have built, a lot of expectations. I think in the past we made a trade off between the longer lines in the south and having several affiliations in one city, but I think we are going to have to face down some of those challenges in the next several years as well.
    Mr. SMITH. Okay, thank you. I see my time is up.
    Mr. SIMPSON. We have sufficient time for another round of questions.
    Mr. Doyle?
    Mr. DOYLE. Thank you, Mr. Chairman.
    And, I think Doctor Snyder alluded to this, too, you know, the exact wording from Doctor Kizer, he said he believes we are in a serious and precarious situation. If we don't institute these difficult changes in a timely manner, we face the very real prospect of more problematic decisions. For example, mandatory employee furloughs, severe curtailment or elimination of programs, and possible unnecessary facility closures. And then he asks that we establish this protocol very quickly, so that they can do this right sizing.
    A couple of quick questions. Have any of you VISN Directors submitted any recommendations as we speak to the Secretary for these types of restructurings that Doctor Kizer alludes to? And, two other questions, too. I don't know if anyone has asked about—I'd like you all to comment on waiting times in your VISNs. We hear stories throughout different VA networks of 4 months to a year waiting time for patients to get care. If someone has to wait a year for an appointment, that is, to me, like just a denial of care, and is that occurring in your VISNs?
    And then lastly, we hear suggestions that nurses are being routinely asked to work double shifts in the hospital. Is that occurring in your VISNs? How valid is that type of information we are getting?
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    Mr. FARSETTA. I will try to respond. I do have a request in to the Department for a RIF for two of my institutions that would total close to 400 employees, and we are awaiting the status of it. We know it is in, we know it is being approved, it has not been approved.
    Waiting times, by and large, have gotten worse, but as it relates to the specialty care we are still, by and large, within 30 days. As it relates to primary care, we've seen a significant increase in the wait for primary care, but by the same token, every one of our hospitals has what we call an ''urgi-care'' center, so anybody who needs to see a physician quickly, that would not be regarded as a routine appointment, is able to access a provider, either a primary care provider or a specialty provider.
    Mr. DOYLE. What would you say the average wait is? I mean, you say——
    Mr. FARSETTA. The average wait for primary care is 17 days and for specialty care it is about 27 days.
    And, as it relates to nurses working double shifts, I can only go by my overtime numbers. My overtime numbers in most of my institutions are relatively stable, but that doesn't mean that there are not times where it is felt that because—generally, it is because somebody calls in sick, or somebody decides to take emergency annual leave, that the coverage you need requires that there be an additional nurse there.
    I do not have evidence that that necessarily is going on, but it is not unusual in hospitals for someone to call in and you need to provide coverage, and that coverage is usually done on an overtime basis.
    Ms. MILLER. I would like to also make a comment. We have no pending RIF requests at present. I anticipate that in 2000 we will need to have some targeted small RIFs in various program areas.
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    We just had a Joint Commission review of our network, and one of the issues that that Joint Commission looked at was whether or not we were meeting the 30-day time line for appointments across the whole network. They found that in about 12 percent of the clinics we weren't within that 30-day time line. We are seeing some increase in waiting times.
    Some of those are not related to budget issues. Some of those are related to the fact that we are having a difficult time getting certain types of physicians on staff, for instance dermatology, very hard to find and very hard to buy in the community. We continue to experience waits in some areas not related to budgetary issues.
    However, I would also like to point out that when there is a need for a patient to be seen, if it is urgent or emergent, we have a system for over-booking, so that it is not a problem to get a patient in who needs to be seen without that wait.
    We have no waiting times that I am aware of for inpatient, and right now our overtime is stable, and I am not aware of nurses routinely working double shifts.
    Mr. DOYLE. Thank you.
    Dr. GALEY. We have similar situations in our VISN. Let me speak specifically about RIFs and staffing adjustments. None are on the books right now. Next year, depending on which of the unfunded mandates we are going to have to deal with, and I am referring specifically to emergency care, if that is added on it significantly changes what we expect we will have to down size to.
    Currently, with the plans that we have on the table, we are looking at someplace between a 300 and 500 FTE reduction within our VISN. If we add ER into the mix, we are probably going to be up closer to 800, so that is what we would be looking for in the year 2000 to reduce as far as RIFs and staffing adjustments go.
    Waiting times, we are starting to see an increase, even though we have invested heavily into primary care clinicians and providers, and to specialty care providers we are seeing increasing waiting times. Primarily in the primary care area, we are seeing waiting times that were in the 30 to 50-day range going upwards to 150 days in some instances. That is to the next appointment, and that is because of the very large numbers of veterans that we are seeing that are now asking for services that have their access point through our primary care clinics.
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    We have planned for a 3 percent growth per year to reach 20 percent, we are seeing 7 percent plus per year, and that is without any advertising or any trying to increase those numbers. So, that is the reason for those waiting times.
    People who are urgently or emergently ill get in to be seen immediately.
    And, your last question was about nursing staff. We are starting to see problems, especially in specialty care nurses, ICU-trained nurses, just because of the ability to recruit them and retain them within all of our medical centers in our metropolitan areas in the northwest. This is not just the VA problem. So some of those individuals are working double shifts.
    Mr. DOYLE. All right, thank you, Mr. Chairman.
    Mr. STEARNS (presiding). I thank my colleagues. Mr. Snyder.
    Mr. SNYDER. Thank you, Mr. Chairman, just three or four, I think, fairly quick questions.
    Doctor Galey, you made a comment in your opening statement about you having more veterans coming into your system over the last couple of years than anticipated, but, you know, I visited with administrators a couple years ago about the 30/20/10 thing, when I was a first month member, you know, I was told at the time it was not going to work, it was going to be a real problem, that veterans were going to come but the resources were not there to take care of them. So, in a way, I mean, it kind of rings a little hollow with me as, I do not want to say an excuse, I understand it is a real challenge, but this was part of the plan, was to attract more veterans. Is it the problem that Doctor Garthwaite referred to, that the third party reimbursement and all that has not kept pace with the number of veterans coming in?
    Dr. GALEY. Well, that is certainly part of it, but the idea of bringing in 20 percent is something that we will far exceed within the time frames we are talking about.
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    Mr. SNYDER. I see, so you met that part of your goal——
    Dr. GALEY. We are going to reach that 20——
    Mr. SNYDER (continuing). You made that part of your goal fairly quickly.
    Dr. GALEY (continuing). This year or midway through next year, and that is with—I mean, we have not put up walls, but we are not encouraging them to come through the door. We have places where we are seeing ten and 15 percent increases in the veterans that are coming through the door. We have a very, very robust product in a very competitive environment for very highly penetrated managed care, and when they look at what they get from the managed care organizations, and they look at what they get from the VA, we are a better plan.
    Mr. SNYDER. I understand.
    I want to ask Mr. Trujillo and Mr. Farsetta just for a quick answer if you would, and we appreciate you being here. Within this process that resulted in the budget that occurs year after year, do you all feel, and did you, Mr. Trujillo, feel at the time you were working that you have ample opportunity to express your needs, and your opinions, and feedback on budgets, and you can this thing ain't going to work, I mean, do you feel it is a fairly free system for you to express yourself?
    Mr. TRUJILLO. I believe so, within the system we have that opportunity. As Doctor Garthwaite mentioned, as network directors, we met on a monthly basis and had communication on a weekly basis, and more often than that, and I felt very free to express our concerns.
    Mr. SNYDER. Mr. Farsetta?
    Mr. FARSETTA. I feel exactly the same way, and I think that what I expressed today Doctor Garthwaite has heard me say on many occasions in many sessions.
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    Mr. SNYDER. He did not look shocked.
    And, Ms. Miller, I have an interest in this Hepatitis C issue, and you made a comment about it, could you give me the 30-second summary of what you see as the magnitude of the potential challenge out there for the veterans health care system over the next few years?
    Ms. MILLER. I would be glad to, although, it is certainly from a layman's terms, and there are others who may be more appropriate from a clinical perspective to address it. But, we anticipate a prevalence in our network somewhere between 8 and 10 percent. We have a very urban network for the most part, with just one portion of the state that is an exception to that. We have talked about the screening process. We have set up internally a mechanism for how we will deal with screening and the referral of tests. Our concern is whether we have an adequate number of specialists for the patients we identify, and then what will be the consequences as we move forward, vis-a-vis advanced liver disease, transplants, et cetera.
    So, there are many issues that are out there that we are just beginning to get experience with. We have put together a work group within our network to outline the policy and the approach involving the clinical experts, but I think we have a lot of unanswered questions that until we get into the screening process, and have a better feel for numbers of veterans, that we would not be able to answer.
    Mr. SNYDER. Yes, and I think in some ways the VA system is ahead of the curve on this, compared to the rest of the world or the rest of the country. So, when you say you have got a lot of unanswered questions, I do not want our audience to think that somehow everybody else has the answers and you do not, because this is new terrain for us.
    Doctor Garthwaite, my last question, first a comment, and I asked Doctor Kizer when he was here a couple weeks ago if he would provide in written form to the committee an analysis of the 30/20/10 and how you—you know, what your baseline was, where you see you are at right now, where you see you are in the future. You had a reference to it in your written statement, but I would like to see the numbers a little better, how you get at that point.
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    But, my final question is, you know, I hear criticism of this budget from different people, that this Administration does not care about veterans, and where I hear the phrase Administration, I mean, you are part of the Administration, but you care about veterans, Mr. West is a part of the Administration, he cares about veterans, the President is part of the Administration, he cares about veterans, but somewhere along this process, you know, it gives the impression it does not care about veterans. I mean, that's the—when you see the budget numbers, you know, I think it is a reasonable thing for somebody to say, somehow this process did not work this time.
    And so, my questions are two, everyone, where did the process break down, and, number two, how do we get out of it? Are you just—are you, as the Administration, just counting on Congress to add dollars and save your bacon? All in the spirit of candor today.
    Dr. GARTHWAITE. Right.
    Yes, clearly we care about veterans, and I think when we said there are some changes from the 5-year budget agreement that we had to put forward, we did that in the spirit of saying, we wanted to give the maximum amount of care to the maximum number of veterans and these issues needed to be addressed.
    The whole budget process looks across all of government and tries to weigh numerous very difficult choices, and, you know, that is not a process that, at least in my level of Veterans Health Administration, we are in control of. We can say what we can do if you give us additional money, and we can try to convince you that with the money that we got we worked as hard as we could to put it to the best use to serve the most veterans.
    But, it is simply not, I do not believe, my position to do other than to advocate to tell you very clearly what we can do, have done in the name of veterans. I think we can point very specifically to 300,000 to 400,000 additional veterans getting care in VA facilities with minimal and, in fact, decreased buying power in our budget. I think that is a wonderful story that demonstrates commitment of many, many people to change their lives and to change how they do business for a good reason.
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    The total number of dollars, I do think is really a political process. I think our best role is in making best use of those dollars and in advocating by saying what we could do if we have additional dollars, what additional needs of veterans we might be able to meet.
    Mr. STEARNS. Thank you, Mr. Chairman, we are just going to finish up with Mr. Smith of New Jersey.
    Mr. SMITH. Thank you very much, Mr. Chairman.
    Mr. STEARNS. Then the panel will be finished and we will go to the second panel when we get back after the vote.
    Mr. SMITH. Doctor Garthwaite and the other leaders of their various VISNs, you know, there is talk of unfunded mandates and what that could do in terms of wreaking havoc on your own budget, so at a time when we have got less and to demand more seems, on its face at least, ludicrous and not a wise use of money.
    At the last hearing with the Secretary, I raised the issue, and I was joined by Chairman Stump and many others who are concerned about this, that the apparent proposal to include in vitro fertilization as an infertility which was expressly prescribed by Section 106A of Public Law 102–585, relating to health care services for women, is contrary to congressional intent, both the spirit and the letter of the law, and yet it would appear the Administration may want to provide that anyway, notwithstanding a clear proscription in the law.
     Could you tell us exactly where is the impetus for this coming from, especially given our absolutely scarce resources? What impact might this have on the VISNs? This is very controversial and an extremely expensive procedure, rife with controversial ethical issues about what you do with embryos that are routinely poured down the drain. I mean, even if you take the ethics issue out of it, it still becomes a very expensive and the efficacy of it is in question in terms of how often it succeeds.
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    In recent years, there have been serious questions about in vitro clinics, methodology employed, the cryogenic freezing of these individuals, who do they belong to, are they property? You know, there is a host—there's a myriad of ethical questions that seem endless, and yet this controversial step seems about to be taken, which will cause, I can assure you, a major, major fight in this committee, and on the Floor, and everywhere else, that seems unnecessary at a time when we want a consensus to grow the budget for veterans.
    So, I just ask you, if you could, where did this come from? Why break the law?
    Dr. GARTHWAITE. We have no intention of breaking the law. We have a group that is struggling with some of the very issues that you suggested, and trying to see whether we can put forward a reasonable policy that we can have reviewed by General Counsel with regards to all statutes, and that would be of service to veterans.
    I would only say, in terms of why do this, two things that I think are really important. First, there are service-connected veterans who, as a result of their service, may be unable to conceive, and so the question is if the role of the Veterans Health Administration is to treat their service-connected disabilities or things that rise out of their service-connected disability, I think we owe them that.
    And, the second is that if you are a health care provider now, eligibility reform asks us to provide health care that veterans need. Then you have to make the decision as to what is included in your benefit package and what is not, and I think that is the kind of debate that we are having.
    This is one particularly challenging area in which to have that debate, and we are at a point where we do not have final policy to put forward to our lawyers to review in that regard. We heard your statements on the 11th and appreciate them.
    Mr. SMITH. Oh, I do appreciate that, and I would just encourage you to consider that this is something that the committee has looked at, carefully considered, and the Congress clearly proscribed it in the statute.
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    The concern that I have on a larger basis has been, there has been, and Donna Shalala did this yesterday, or at least reiterated it, with the whole issue of stem cell research under the auspices of NIH, completely contrary to the spirit and the letter of the law on the use of embryos for research, and yet some tortured configuration of law has been applied by the General Counsel over at HHS. The same thing happened at AID on the subcommittee that I chair, where money that had been clearly proscribed for the use to organizations that co-managed forced abortion policies, all of a sudden was rewritten after it was a clear, almost a starry decisis type of situation where the Bush and Reagan Administration had a clear understanding of what the language meant, only to have that completely reinterpreted by the General Counsel over at AID. I'm sorry I see a pattern.
    And, I hope this is not true here at the veterans, where we have always been all about consensus. When you trip over each other on the Democrat and the Republican side to do more for veterans, this is the ultimate consensus breaker, this and abortion, so I would hope that you would carefully reconsider.
    Dr. GARTHWAITE. We will.
    Mr. SMITH. Thank you.
    Mr. STEARNS. I thank my colleague, and I thank the panel for their time and efforts, and we appreciate your coming, and we will now adjourn temporarily while we go vote, and then reconvene with panel number two.
    Mr. STEARNS. The Health Subcommittee will reconvene, and we will have panel two. We have Mr. Nick Bacon, Mr. Dennis Cullinan, Ms. Jacqueline Garrick and Mr. Richard Wannemacher, Jr., and we welcome all of you, and at this point if there is no objection we will move right to your opening statements, and we would like you to stay within the 5-minute period, so we will start off with Mr. Bacon.
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    Mr. BACON. Thank you, Mr. Chairman, distinguished members of the subcommittee. I appreciate the opportunity to address the Administration's VA Health Care 2000 Budget.
    The veterans of this country continue to be slapped in the face and ignored by this Administration. At a time when we ask our military to give more and more, with less and less, at a time when our leaders scratch their heads and wonder why we cannot retain our soldiers and sailors, at a time when costly well-trained pilots exit our Air Force faster than we can train them, we ask what is wrong as we cut deeper into the VA Health Care Budget.
    In my opinion, sir, our servicemen and women look at how they are treated, look at how our veteran heroes are treated, compare it to the hundreds of freely offered benefits that continue to get funded, and say, ''Goodbye, Uncle Sam, who needs you?''
    This Administration in short does not understand anything about the military or about our veterans, and I believe, sir, could care less.
    This proposed budget is not only unrealistic, it is totally unjust. The budget contains $18.1 billion for medical care. This requires third party medical collections of $749 million—this is just smoke and mirrors. In fact, the President's Budget calls for over $1 billion in cuts.
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    The Administration says they are going to open 89 new outpatient clinics and treat 54,000 more patients in fiscal year 2000, an additional $40 million to assist homeless veterans, $250 million to combat Hepatitis C, and I understand by many health care professionals this could cost as much as $600 million, and another $106 million to fund long-term care programs. Also included in the budget are 440 full-time claims positions, new cemeteries, VA construction programs, $50 million in nurse education initiative programs, and so much more. Where is the money? To quote an old commercial, ''Where's the Beef?''
    Mandates without funding, that is what we continue to see—open enrollment, veterans scream, great! No funding. New clinics, a wonderful idea. No funding. RIFs and hiring freezes continue. resources to support the federally mandated national emergencies and our Armed Forces during a time of war is, I guess, totally forgotten. Expanding uniform benefits to include maternity—not funded. This list goes on and on. The VA is going to do this, they are going to do that, and my in box is always full of news releases, day after day, it looks got, but ''Where's the Beef?''
    If you very carefully read the small print on page 3–52 of volume 5, Fiscal Year 2000 budget, you will see increases and decreases of some areas. But most of all you will please note the FTE reduction of 6,949, if you were to add back 699 for Hepatitis C programs, extended care and homeless, you have an employee reduction of 6,250. Of course, that is the real money that pays for this Budget 200, rob Peter and pay Paul.
    By the way, who is going to pay for the cost of living increases to the employees? What about the added costs for prosthetics? I would just like to add there for a moment, you know, when we opened up this enrollment and offered prosthesis to non-service connected veterans, that cost when really way up, especially with hearing aids and such. The increase of drugs alone has risen about 10 percent a year, while we have been on a straight line budget for the last 4 years, correcting my presentation here, I have 3 years in here, actually this would be the fourth year. To fight the increase of drug cost and inflation, VA went to the National formulary System of buying drugs, limiting the types of medication available to VA doctors and no choice at all for our veterans. While the rest of the world enjoys the new medical science pharmacy breakthroughs, our veterans cannot even get normal desired drugs. Is something wrong with this picture? Hello out there! Mr. President, is anyone home? We have worked on Doctor Kizer's 30/20/10 plan. We have stretched the rubber band as far as it will go! We are treating 20 percent more veterans.
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    As medical costs continue to increase, how can VA Medical Centers do what no other medical system can do, and that is cut their costs 30 percent? And, for the 10 percent collections from third party reimbursement, that is as much of a joke today as it was 3 years ago when I sat here with the National Association of State Directors and we addressed that issue to Doctor Kizer when they were more than 75 percent below their objectives, and still we've had no answer.
    The Department of Veterans Affairs has cut more than 20,000 jobs, cut more than half its hospital beds, and cut nursing home care, putting more and more burdens on the states, and still they want to cut thousands or more health professionals. If it were not for the wonderful health care Administrators that we have in the system, and the professional staff of the VA health care, we would have already been put out of business. They have overcome every objective, every obstacle put in front of them, and now they need our help badly.
    In conclusion, Mr. Chairman, the American veterans around this country salute you and the Subcommittee on your ongoing concern for American veterans, particularly, for those older World War II veterans who need our help now more than ever. There is over 6 million World War II and Korean War veterans in this country who need care more today than they ever have. So, please, sir, let us not bury them while they are still living.
    Again, thank you for allowing me the opportunity to address the Subcommittee on behalf of all veterans everywhere. God bless America.
    Mr. STEARNS. Mr. Bacon, thank you very much. It is customary for a witness' Congressman to make a few comments, and you have a fine one in Mr. Snyder. It is my apologies to him for not asking him to speak first in introducing you. It is customary to do that. It is my fault.
    Mr. BACON. Thank you, Mr. Chairman.
    Mr. SNYDER. Well, thank you, Mr. Chairman. I appreciate the opportunity. I would just want to say, Mr. Bacon obviously knows these issues well and has studied them well. He has known it for a long time.
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    What you may not know is, Nick is a Medal of Honor winner, and because of that, and because of just the man he is, people that work in the veterans hospital and veterans trust Nick Bacon. And so, I can assure you that his comments reflect a great deal of the thoughts from people he hears from back home.
    Appreciate you being here, Nick.
    Mr. BACON. Thank you, sir.
    Mr. STEARNS. Thank you, Mr. Snyder.
    [The prepared statement of Mr. Bacon appears on p. 72.]

    Mr. STEARNS. Mr. Cullinan.

    Mr. CULLINAN. Thank you very much, Mr. Chairman, and members of the subcommittee.
    On behalf of the men and women of the Veterans of Foreign Wars, I express our deep appreciation for inviting our participation in this most important hearing today. Securing sufficient funding for VA Medical Care has now taken on such a note of urgency that if we fail in this regard, its continuing existence as a viable health care provider for veterans is seriously in doubt.
    The Administration's proposed budget for the Department of Veterans Affairs is devastating to this nation's veterans. This proposed budget will seriously undermine VA's ability to provide quality, timely, accessible care for veterans.
    The VFW hears daily complaints of increased waiting times for veterans to see a specialty provider, such as an orthopedic doctor or a dermatologist. This is happening throughout the country.
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    Worse in the specific, however, is the 1-year wait for hip replacement surgery in Ann Arbor, and the 1-year wait for dentures in Maine, and the 1-year wait for a dermatology appointment in New Orleans. These are only a few of the examples of the tragic nationwide epidemic, an epidemic of increasing waiting times and delays in getting appointments, which, in these examples, can only be interpreted as a denial of care, and will only get worse this year and next, because of the proposed budget.
    This funding proposal is unrealistic and unfair, and will not meet the needs of America's veterans. It is unfair in that in the presence of the largest budget surplus in recent history, while other federal agencies have double digit increases, veterans are being asked to once again sacrifice with what is, essentially, a negative growth budget, a budget that, indeed, threatens the very existence of veterans health care.
    Mr. Chairman, I would thank you for your remarks earlier today regarding the testimony of Secretary West at the full committee hearing on the 11th. The VFW was deeply disappointed and disturbed, in the face of overwhelming evidence to the contrary, the Secretary asserted that the funding level was sufficient for fiscal year 2000. Clearly, this funding level results in cuts, curtailments and even elimination of services. We can even foresee the possibility of veterans—needy veterans being pushed out of the system altogether.
    It is also clear to us that veterans are not a priority with this Administration. With respect to our expectations of the Secretary of Veterans Affairs, we expect this: we expect compassion, not callousness; we call for candor, not circumlocutions; and we demand advocacy, not capitulation.
    Mr. Chairman and members of the subcommittee, we pledge to work together with you to right this budgetary wrong for the sake of America's veterans in need.
    Thank you.
    [The prepared statement of Mr. Cullinan appears on p. 75.]
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    Mr. STEARNS. Thank you. Ms. Garrick.

    Ms. GARRICK. Mr. Chairman and members of the Committee, good afternoon. The American Legion is thankful for the opportunity to be here today and submit its full testimony for the record on the Fiscal Year 2000 VHA Budget. The intention of this statement will be to focus on solutions to the existing and projected budgetary problems of VHA.
    During site visits last year, the American Legion witnessed the negative impact the Balanced Budget Agreement is having on service delivery throughout many of the networks across the country. Network Directors spoke very earnestly about their ability to provide care into fiscal year 2000 under the current budget constraints, and I believe they did the same thing here today.
    The American Legion has been briefed on the possibility of the shortfalls that would force VHA to choose between patient safety and facility closures, which is exactly what looms gloomily on the horizon if VHA decreases by another 7,000 FTE.
    In addition, VHA has identified new demands that will be placed on the system that were not previously considered when the Balanced Budget Agreement was crafted. These items are Hepatitis C, long-term care, emergency services, the additional 54,000 veterans being treated, 89 new outpatient clinics, new initiatives for homelessness, Medicare inflation and pay raises.
    A children's story teaches us that it is time to say the emperor has no clothes. A no-growth budget will not allow VHA to meet these objectives, and if VHA continues on its current course it will be forced to continue reductions in direct patient care. The American Legion cannot help but wonder, is this in the best interest of our veterans?
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    Mr. Chairman, congressional support for VHA programs and services must be provided for the next fiscal year, and a long-term strategy must be developed to safeguard the veterans health care system.
    In fiscal year 2000, the American Legion proposes an increase in direct appropriations of $1.4 billion for VHA. This amount will raise VHA funding to $19.5 billion to provide expanded clinical initiatives, cover medical inflation and employee cost of living, and ensure care for aging veterans. To do anything less is unconscionable.
    As a long-term solution to the VHA budget, the American Legion has proposed the GI Bill of Health, which addresses the issues most significant to the American Legion regarding the current and future VA health care system. These concerns are for quality, access to special programs, such as mental health, and funding. The GI Bill of Health is a blueprint for preparing VHA to meet the health care needs of veterans and their eligible dependents in the 21st Century.
    Under the proposal, all veterans and their dependents would have access to the VA health care system. All priority veterans would receive health care treatment at no cost to them, all other veterans and dependents would identify a payor for care. VA would retain and expand access, and strengthen specialized treatment programs. VA would offer defined benefits packages on a premium basis to all eligible veterans and their dependents. VA would bill, collect and retain all appropriate third party reimbursements, co-pays, deductibles and premiums. VA would create a health plan network consisting of public, private and providers. VA would open access to more health care facilities within local communities through sharing agreements and contracts with public health providers.
    The American Legion predicts the GI Bill of Health will follow a similar course of incremental reform, as has been the experience of the private sector, since certain components of the GI Bill of Health have already been implemented. However, there are three key components of the GI Bill of Health that still need to be enacted. These components are for VHA to gain the authority to treat veterans' dependents, Medicare subvention and the creation of a premium-based plan. The enactment of the GI Bill of Health would direct VA to offer veterans and their families, on a premium basis, a choice of standardized benefits packages. Beyond this, VA or private insurance companies could offer additional benefits, each with its own configuration of co-payments and deductibles. Premium supported packages would offer an additional range of benefits to eligible veterans and their families and provide VHA with a means to pay for medical care.
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    Mr. Chairman, in the spirit of lessons learned from incremental reform, and based on your recommendation during the 105th Congress, the American Legion proposes that the next component of the GI Bill of Health that should be considered is expanding access to VHA services to veterans' dependents as a test pilot under the CHAMPVA provisions of Title 38, USC 1713.
    As a nation, we care for families while the service member is on active duty or retires under TriCare. The Veterans Benefits Administration provides benefits to family members, but the Veterans Health Administration turns a blind eye to disabled veterans whose families need health care. Ultimately, we discriminate against veterans who are married and may have children. How then can we ask the men and women to defend this country, but then give them no means to protect their own families?
    In a study conducted by VA, researchers found that 83 percent of the spouses reported that they would choose to receive their medical care at VA, if allowed to do so. The research group concluded, spouses of male veterans represented a sizeable group that could be incorporated into the VA system. These are the partners VA depends on.
    It is the vested interest of VA to ensure these care givers are healthy and well supported, if it intends to shift to an outpatient model. Wives also tend to be younger and healthier than their male counterparts, and are usually the decision-makers in the family. VA needs these people.
    Currently in the private sector, managed care succeeds because they avoid adverse selection by maintaining a younger, healthier enrollee pool that offsets the costs of the more medically-needy patients. Managed care organizations profit as their risk pools grow. In VA, this profit could be reinvested back into the health care delivery system. VA needs this influx of healthy dollars to increase its buying power.
    Doctor Kizer has supported the notion that it makes sense for VHA to treat veterans' dependents. He has stated in our magazine that there is no reason why the same physician could not treat the wife and husband as well. VHA has the capacity and structure to do this, and if it could retain the funds. Several network directors have already come forward to volunteer for this project.
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    Mr. Chairman, the final vital step for survival of VHA supported by the Legion is Medicare subvention. VA can provide quality care to medically-eligible veterans at a reduced rate, because of its infrastructure, economy of scale and purchasing power.
    In conclusion, funding for VA medical care is dangerously low. The results of insufficient funding over the past several years have greatest impact during fiscal year 2000. The Administration proposes to reduce FTE by 7,000 positions, if this happens VHA facilities will be cutting into the bone, as there is no fat left to trim. Veterans will have no where to go.
    Congress can no longer merely react to VHA's funding problems, it must act. The VHA health care system cannot be left teetering on the bring of collapse for the new millennium.
    Mr. Chairman, the American Legion recommends three crucial steps be taken to protect veterans. First is for Congress to adopt the fiscal year 2000 budget request that the American Legion has submitted. Second, Congress should closely examine the GI Bill of Health and commit to test piloting its key components, beginning with dependents. Third, Congress must move forward with Medicare subvention and, in turn, VA must improve on its MCCF collections. Veterans deserve more than they are currently getting, and these steps need to be taken to protect the duly-earned health care rights of this nation's veterans. It is our turn to save Private Ryan.
    Mr. Chairman, that completes the statement, and I will be happy to answer any questions.
    [The prepared statement of Ms. Garrick appears on p. 82.]

    Mr. STEARNS. Thank you. Mr. Wannemacher.

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    Mr. WANNEMACHER. Thank you, Mr. Chairman, and the Subcommittee members that are here, I am pleased to appear before you and present the views of more than 1 million members of the Disabled American Veterans and our Women's Auxiliary, on the Administration's Fiscal Year 2000 Health Care Budget.
    The VA is faced with a dilemma of increasing demand and medical inflation, rising medical care costs, and perennially inadequate decremental budget.
    The DAV was one of the national veterans service organizations that have called on the VA to release its plans to furlough employees, severely curtail or eliminate medical services, and a list identifying VA Medical Centers that could unnecessarily closed under the Administration's flat lined Fiscal Year 2000 Budget proposal.
    You heard VISN 3 director Mr. Farsetta this morning indicate that furloughs would have to be considered as well as the closure of up to 3 facilities. You also heard first hand how the VISN Directors are going to have to react to this budget. As the IB pointed out, the current situation is bigger than just VHA alone, the Administration has let veterans down and it is now time for Congress to stand up for America's veterans and provide VHA with the financial support necessary to meet the needs of America's sick and disabled veterans.
    The current budget proposal is more than $3 million less than what is needed to adequately serve the health care needs of America's sick and disabled veterans. That is 15 percent less than what is needed to keep up with the demand for care and the equivalent of shutting down 26 VA hospitals.
    Along with the flat line proposal, are estimates as to the amount of additional revenues that could be obtained from third party reimbursement for care for non-service connected conditions. You heard Doctor Garthwaite state that they are falling behind this year's recovery, look what we are faced with for the year 2000.
    Thankfully, the full Committee, under the leadership of Chairman Stump, and the Subcommittee under your leadership, saw through the rhetoric last year and provided $278.025 million above the Administration's Fiscal Year 1999 proposal. This year the Administration's proposed budget for VHA totals $18.1 billion; however, this is not the real number either. The actual appropriated dollar amount VHA will receive is $17.306 billion the same level as that appropriated last year.
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    To generate savings and to be able to afford the care for its patient work load, the VA plans a staffing reduction of 7,830 employees. This reduction in staff results in reduction of critical staff to patient ratio. This is particularly troubling for the DAV because studies have shown a direct correlation between quality of care and patient staffing levels. It is the vigilance of the professional nursing staff that prevents complications. Quality is achieved when health care providers are given the freedom and resources to practice the most effective and scientifically proven medicine available.
    DAV is currently conducting an independent survey of VA Medical Centers. We have asked our 189 hospital service coordinators (HSCs) stationed throughout the nation to give us a monthly assessment of what is going on out there. The survey indicates that the VA health care is suffering from long-term effects of economic asphyxiation.
    The survey shows veterans are having to wait longer, to see a VA health care professional for services, some must wait months for a specialty clinic appointment—a fact well emphasized on February 11 when we heard from a member of this Committee how she was faced with having to react to a veteran constituent who had a lump and could not get into the VA health care system for 6 months.
    The budget inadequacies will also cause the rationing of prosthetics and durable goods in order to keep pace with the inadequate funding levels. The current prosthetics policy, based on budget constraints, requires that VHA now use a preferred vendor, who must provide services at or below the Medicare rate. You heard from Laura Miller, Director of VISN 10, state that she was already facing a $500 million prosthetics budget shortfall. And that she did not know how she was going to be able to face it.
    Our question is, since when does Medicare set the standard for VA care? Since when do the clinical needs of veterans fall below those of other segments of our society, especially when providing quality health care to combat disabled veterans?
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    The DAV was recently contacted by a veteran from your district, Mr. Chairman, who went to the VA hospital to get a prosthetic device, which was prescribed to him. He was told, we have to go below the Medicare rate, if your provider will provide your prosthesis at a cost below the Medicare rate, then he can do the services. That is wrong! This veteran is 100 percent service-connected double amputee, and he is going to have to stand in line and get what he feels is an inferior product, and that's just blatantly wrong.
    Mr. Chairman, the continued flat line, inadequate budget, is already negatively impacting the nation's sick and disabled veterans. Clinicians may or may not be making the appropriate efforts to develop community support programs for veterans who are suffering mental illness, but we are seeing that it is the fiscal departments that are making the staffing and program decisions, it is not the clinicians. Clinicians are being told, this veteran has to go because we cannot afford to keep him or her within our system.
    The Administration's Fiscal Year 2000 Budget discriminates even within the veterans population when we are talking about emergency services. The President's Patient Bill of Rights said that every American was going to have access to emergency care. He forgot to say that veterans were not included as persons who were going to be provided emergency health care.
    The budget reflects that one of the most critical needs VA is facing is Hepatitis C. As was mentioned earlier, there is no money for Hepatitis C, the treatment policy must come out of existing resources. The VA estimates that it is going to cost $135.7 million in fiscal year 2000. It is hard to understand, in light of today's robust economy, and large surpluses, that the Administration could have this callous disregard for those who have served.
    Before closing, I just want to say that yesterday the committee heard from former Senator Dole and the Transition Commission. We support many of the goals that the Transition Commission has. But, one of the recommendations that was brought to light was that they want to allow the Department of Defense to pass to the private sector the cost of health care for service-connected disabilities. That is exactly the same reason that the DAV did not support Medicare subvention last year. Recently, we were advised that the Veterans Administration has a new accounting system that is going to be able to identify and cost account health care expenditures. With this new found ability, DAV is willing to agree to a pilot program for Medicare subvention. We wish also to point out that a pilot program for Medicare subvention is not going to alleviate the immediate needs VHA is facing today.
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    We will be glad to sit down and work with the Committee, and with VHA, while continuing to voice our opposition to allow third party payers to pay for service-connected disabilities.
    Thank you very much for the opportunity.
    [The prepared statement of Mr. Wannemacher appears on p. 93.]

    Mr. STEARNS. Thank you, and I think we will say amen to what all you folks have said.
    My colleague from Pennsylvania had mentioned the budget caps, and I think he has made a very good point, but we are not here to say that it cannot be done, because we on this Committee think it can be done. When I am down in my district, no one ever complains of the Federal Employee Benefits Program. It is a program that the employees enjoy. They never complain about it, but I hear complaints from veterans.
    Now, the government employees did not have a contract with the government, and were not told by the recruiter that, we will take care of your health care if you stay in the service 20 years and you get disabled. Why is it that the Federal Employee Health Program is without any blemish, or at least does not have a problem, yet we are continually talking about veterans.
    So, I have told the staff here that we want something bold, we want to do something different. So, when the Administration comes back and presents its budget, all of us get frustrated.
    Now, they say there is not enough money because of the budget caps, but I submit that some of the money that the President is proposing in new spending, how can he justify new spending when we are not even reaching the commitment for the veterans? And, we know that there are some Americans who are getting health care from the United States government where it is working, so I submit that we have got to convince the White House to resubmit another budget, and I will tell you something else. The Department of Energy has a budget, as I recollect, almost comparable to what we have for veterans. Now, the price of oil was $72.00 a barrel when we had an oil crisis, so we developed the Department of Energy.
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    The budget has continually gone up, and up, and up, and yet now the price of oil is $14.00. I spoke to the Edison Electrical Institute this morning. They picked me up in an electric car. It was made by General Motors. Toyota picked up the rest of my staff in a Toyota electric car, and I just submit that the money we are spending on other programs, like the Department of Energy, could be reallocated to veterans. I think we are spending about $38 billion in the Department of Energy. It is a huge building, tons of employees, lots of policy statements, all the time generated. They come to the Commerce Committee I serve with their testimony.
    But, I submit the President could go back and have made a little redistribution from some of these programs that, in my opinion, are not important, almost obsolete, and put them here and make the commitment.
    So, you know, I think whatever side of the aisle we are on, we are asking the President to, if you are talking about new spending programs, hold it, hold it. I think the comment, ''Hello, Mr. President, is anyone home,'' we have got to have the commitment for veterans.
    So, I am committed in the 106th Congress with my colleagues on both sides of the aisle to do something bold here, something to make not just the suggestions that the American Legion are making, but try and come up with a system here so that all of us when we go out we don't hear complaints. We want it like the Federal Employee Health Benefit, the people are satisfied. They are getting timely service, and it is efficient and there's not waste, fraud and abuse.
    I am going to ask each of you a real tough question, and then I will go on to my colleague. Assuming Congress cannot meet its full goals that they have identified, would you give higher priority to preserving current programs than to the new commitments, for example, like covering emergency care? It is tough, tough, because let us say the President does not come back and we are sitting here fighting this out. Where do you come down with higher priority, to preserving current programs or new commitments like emergency care?
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    Mr. BACON. Well, personally, I do not think we can increase or utilize new mandates if we cannot take care of the programs that are in place. We have tried every initiative that I can see in local hospitals, at least in our VA center, to generate additional funds. We have this partnership with other facilities. We built a female veterans clinic, and to my way of thinking at that time we had no real need for that clinic, it would have been much cheaper, I believe, on the hospital to have just farmed that out. But, instead now, we bring other female patients into the hospital to generate dollars, especially for the unutilized equipment that, obviously, is female oriented. And, why do we create new programs when we cannot fund old ones, is my question.
    Mr. CULLINAN. Mr. Chairman, speaking on behalf of the VFW, I would have to say that providing treatment for Hepatitis C, and providing emergency room care really are not new programs. They are extensions of VA's current statutory obligation to provide a continuum of care.
    Having said that, the onus really is upon all of us to secure those additional dollars. I could not agree with you more when you said earlier, there seems to be money for other programs but not for veterans. We well understand the discretionary cap. There is a movement afloat to get that lifted, brought up a little bit, but even if that does not happen there seem to be dollars for these other programs, and they should be channeled into veterans.
    Ms. GARRICK. I think the statement of the VFW reflects sort of what the Legion has been thinking, in terms of, these are new initiatives, they are not new programs. They are designed to bolster already existing programs, so it is not like the VA has gone off in a totally new direction. The programs that are already there needed improving and I think there needs to be a constant and ongoing evaluation of the programs that are ongoing, and then some of these new initiatives and how they fit in, where they fit in, and if they replace some of the other programs.
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    But, I agree that things like Hepatitis C, and emergency services, and homeless veterans, these are things the VA has always had within its system. I think it is looking at ways to better deal with those things, and I think the budget surplus should be looked at as a way of encouraging that, and we do need to look at the VA budget, not as pinning old programs against new programs, but rather, reinforcing what the VA is trying to do to build a health care system.
    Mr. WANNEMACHER. I would agree with the previous two speakers, that Hep C is not a new program, it is just a newly discovered blood borne infection. Blood Screening for Hepatitis C was not done until the 1980s, and now they found it is prevalent in the Vietnam veteran community. Compensation has always been available for direct service connection and health care goes along with it when the causal relationship is established.
    When you asked us to choose between emergency services and something else, you know, when the President says everybody else gets it but veterans do not, that is where you have the complaints, where, you know, what am I, a second class citizen?
    But, I just want to say thing, Mr. Stearns, and Congressman Doyle mentioned it earlier today, when we lift the caps, there was no problem in this Congress last year when you lifted the caps on transportation, and there should be a commitment to lift the caps on veterans programs also, to enable the Veterans Administration to do more and to do it more efficiently.
    Mr. STEARNS. Yes, sir.
    Mr. BACON. Mr. Chairman, could I make one more statement?
    Mr. STEARNS. Yes.
    Mr. BACON. Sometimes VA creates their own problems, and it is not done directly by planning it, it happens because of cutbacks and things of that nature. For an example, we used to have in-house drug and alcohol programs, well, one of the first—when we started closing beds in the hospitals the first wards to go was inpatient programs for alcohol and drug abuse, and things of that nature.
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    At another time, we turned right around and dumped the domiciliaries and the nursing homes back on the states, I should say, Medicaid. And, what happens there, we have created a lot of these homeless folks that we are looking at now with priorities by simply downsizing our own system. We have to be very careful, when I say I vote for protecting the old programs first, as the gentleman on the end submitted, you know, if they are service connected for those disabilities, and assuming they would be, especially for Hepatitis C, there is no reason VA should not fund that anyway, as a special program to set up a research center on the East Coast and one on the West Coast, I do not see why we are separating monies here and saying we are going to d this new program at X number of dollars, and we are looking at taking that out of the existing resources, thus reducing health care professionals again, creating even a larger burden.
    So, that is where I was trying to make my differences, not that I do not support new programs, if you want to call them that, but responsibilities to the veteran.
    Mr. STEARNS. All right.
    Now, Mr. Doyle.
    Mr. DOYLE. Thank you, Mr. Chairman.
    Thanks for being here today, and please know that we share your frustration and concern over this budget.
    Really, just a couple of comments, Mr. Chairman. I have, you know, watched lots of presidential budgets be dead on arrival over in this place, and I just think that we need to keep the pressure. This committee, I think you are going to see, take action to increase this budget and to put something out of this committee that will have a much higher authorization than what we are seeing in this budget.
    The battleground is going to be with the appropriators, and we ought not to let them weasel out of their responsibilities by saying, well, the Administration did not ask for this money, so why should we give it to you, because that is what is happening here each year.
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    And then, the other thing that happens is, people try to trade programs against another program. We get bills on the floor saying, you know, let us cut a billion dollars out of this program and put it over to veterans, and then we start breaking people up depending on where they are from, and we get the shaft every year.
    I think the Veterans Administration has done their fair share in the efforts to balance this budget. I think that is totally clear, and I think we need to keep the pressure on everybody, Democrats and Republicans, appropriators and all members of Congress, this year, this time, when we ask for that higher authorization to put that money in there, and we are going to need your help. I mean, the VSOs are really, without you it does not happen. I mean, it is going to be the pressure that is done at the grassroots level, with members of Congress, not so much in this committee, I think you are preaching to the choir here, but outside of this committee we are going to need some support, first from these appropriators, and then on the Floor, to get this budget done.
    There is just no way in the world that this system can continue being flat lined, and everybody knows that. To watch members of the Administration and the VA here try to put a good face on this, and they are in a difficult position, you know, they are this catch–22, that, you know, you cannot hide them lying eyes, there is not anybody here that can convince us that this thing works.
    So, we are going to make the effort out of this committee, we are going to need your help at the grassroots level to put the pressure on these members of Congress.
    Thank you for being here.
    Mr. STEARNS. Mr. Snyder.
    Mr. SNYDER. Thank you, Mr. Chairman.
    I wanted to ask our three VSO representatives, I am trying to understand how this process works in the budgetary, you go through your own cycles I know, and each year things come along, do you have the opportunity, or is there an opportunity to have direct input to OMB?
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    Mr. CULLINAN. In a sense, we endeavor in a way vicariously. We work, of course, with VA, because they are the ones who have the direct interaction on the passback function, and, of course, we try to influence to the best of our ability. We have met with the OMB Director. We have met with the Assistant OMB Director, and we agitate VA.
    Mr. SNYDER. Each year you personally meet with OMB personnel?
    Mr. CULLINAN. Yes, together with the Independent Budget, we as a group have gone there.
    Mr. SNYDER. Did you do that this year?
    Mr. CULLINAN. Yes, we did, our Executive Directors did it.
    Mr. SNYDER. And, I do not mean to inquire if these are meetings that you would sooner not talk about, were your meetings with them prior to the number coming out?
    Mr. CULLINAN. Yes, they were.
    Mr. SNYDER. So, you did not have any way of—I mean, you did not expect to see that number come out that low, given what Secretary West requested then?
    Mr. CULLINAN. Our meetings were cordial, but I would have to say that they were not overly productive. You know, we were informed that the top priority is saving Social Security and, of course, no one could argue with the necessity of doing that, but on the other hand there did not seem to be any flexibility with funneling money into VA and the veterans programs.
    Mr. SNYDER. At the time of your meetings, had the VA submitted their budget request, were you working with that number, the $1.37 million more?
    Mr. CULLINAN. I am sure that they had. I am sure that they had done it at that point. And, we know, we know from the hearing of the 11th, that there was movement back and forth, that there was an initial proposal which was about $1.4 billion more than we wound up getting.
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    Mr. SNYDER. Yes.
    Mr. CULLINAN. So, all of that was taking place.
    During that period, of course, we were holding our meetings and doing what we could by working with VA.
    Mr. WANNEMACHER. What OMB said was that the VA gave a credible argument on Hepatitis C, but there is no additional money. OMB, also set the Independent Budget VSOs up by saying, this is what your numbers are. With these numbers, what programs do you think we can cut. Doctor Kizer has just announced enrolling all seven priorities, do you really think that VA can care for all seven priorities with these numbers? And, there were was some discussions, and then OMB came back and said the VSOs were opposed to Doctor Kizer for enrolling all seven. That is just not true nor what was said.
    Mr. CULLINAN. No, and that is not a single event either, that is a trend. We have met, you know, it is an annual event now that we march over there and conduct these meetings, but we have not gotten anywhere.
    Mr. SNYDER. Meetings can kind of become habits more than productive experiences. There is a breakdown in this process somewhere, and I am new here.
    Mr. Bacon, appreciate your being here.
    Mr. BACON. Thank you, sir.
    Mr. SNYDER. Thank you for coming.
    Thank you, Mr. Chairman.
    Mr. STEARNS. Well, I want to thank the panel very much for coming, and we know how busy you are, like we are, and we appreciate your time, and my staff has been writing down your comments. It is a battle, but there is no reason we have to compromise, because we have made a commitment, and it is like Social Security. We made a commitment, we have to obligate it, and the veterans are the same way, and this system has got to work in a way that has enough funding, it is efficient enough, and the people say I am very, very satisfied on a universal basis, and that's what we are working towards.
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    So, thank you very much.
    Mr. STEARNS. I will call up now panel number three. We have Mr. Harley Thomas, Ms. Veronica A'zera and Mr. George Duggins. Appreciate your patience in waiting. We started this at 10 a.m., and you folks have stood by and helped us. We saved the best for last, so with this why not start out with Mr. Harley Thomas, if you will start with your opening statement and we will work across.

    Mr. THOMAS. Thank you, Mr. Chairman.
    I have here a copy of an open letter of appeal to all members of the House and the Senate, drafted by the Independent Budget authors, and I would like to submit this for the record, if I could.
    Mr. STEARNS. Without objection, so ordered.
    [The statement of the Independent Budget appears on p. 103.]

    Mr. THOMAS. Mr. Chairman, members of the subcommittee, on behalf of the Paralyzed Veterans of America I am honored to be present and submit our views on the Administration's Fiscal Year 2000 Medical Budget for DVA.
    Mr. Chairman, the Administration's Fiscal Year 2000 Budget ''ignores the increasing cost of caring for veterans, especially the aging veterans of World War II who depend on the VA health care.'' By once again proposing a straight-lined appropriation, the President is ignoring the true cost of health care for veterans, especially the more-costly care needed by our older veterans, our poorer veterans, and our veterans in need of specialized services, such as spinal cord dysfunction.
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    This budget ignores the very real cost of medical care inflation, and the increased costs associated with caring for an aging veteran population.
    Last year, the Under Secretary for Health was quoted in the Washington Post as saying, that without additional funding, the VA health care system would ''hit the wall.'' In his February 8, 1999, memo to Secretary West, Doctor Kizer announced his intention to begin massive cut backs in staffing and resources now to prepare for even larger cuts imposed by the disastrous 2000 budget.
    Realistically, veterans don't stop needing health care just because OMB has decided they should not have a hospital to go to. Based on Independent Budget projections, the first step in this process would be to close the equivalent of 26 VA hospitals, including a reduction of nearly 8,000 health care staff, and erosion in the missions of scores of other facilities. Based on current law, VA can only provide health care to the number of veterans it has funding to care for. Under this scenario, thousands of veterans seeking earned health care benefits will be turned away.
    Obviously, VA already has its plan, as Doctor Kizer wrote in his February 8th memo—the plan to ''right size'' the VA system. Rather than keeping this plan a secret, we believe the veterans of this nation and the Congress have a right to see it. How many hospital beds are going to be shut down? How many doctors, nurses and health care providers are going to be fired? Above all, which hospitals are going to close? Where are these closures going to take place—in what areas of the country? In whose state? And, even better, in whose congressional district?
    Last year, Doctor Kizer said he wanted to have VA be able to admit all veterans to the VA health care system. Clearly, under the proposed budget this is not going to happen. We want to see the ''triage plan'' showing just who is going to get into a VA hospital and who is going to be turned away at the door.
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    Mr. Chairman, as you are no doubt aware, PVA has continually expressed concerns regarding the VA's provision of specialized services, specifically care and treatment for veterans with spinal cord dysfunction. Beginning last summer, we raised the issue of declining capacity and what we perceived as the VA's lack, of emphasis for specialized services. The full House Committee on Veterans' Affairs responded to our concerns by requiring VA to continue reporting on the maintenance of capacity for an additional 2 years, and included statutory language establishing performance standards for VA managers regarding the provision of specialized services. For these efforts, we thank you and the Congress for your responsiveness. Doctor Kizer also reacted to this issue we raised, and on October 23, 1998, transmitted his proposal for the VA spinal cord injury/disorders program to Secretary West, who also concurred in them.
    Of major importance, among other important improvements to SCI programs, the Under Secretary has agreed to centralize decisions regarding staffing and bids. This is a favorable step forward.
    Mr. Chairman, members of the subcommittee, today PVA must question whether these efforts and commitments are in vain, due to the shortfalls in the VA health care that we envision in the President's budget. No matter what agreements are made, no matter what laws are passed, or the sincerity of promises, all will be negated by the anticipated absence of necessary resources if the President's budget proposal is not substantially altered.
    We recognize that this subcommittee does not appropriate dollars, but we do know that you can authorize them. The authorization process must recognize the real resources requirements of the VA. We look to you and your expertise in veterans issues to help us carry this message forward to your colleagues in the Budget Appropriations Committee and to the public. This year, more than ever, we need your help.
    Mr. Chairman, I thank you for this opportunity to present our views, and I will be available for any questions.
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    Mr. STEARNS. Thank you, Mr. Thomas.
    [The prepared statement of Mr. Thomas appears on p. 106.]

    Mr. STEARNS. Veronica A'zera.

    Ms. A'ZERA. Yes.
    Mr. Chairman, I am Veronica A'zera. I am the national legislative director for AMVETS, and we appreciate the opportunity to join with our distinguished colleagues from the veterans' community to provide testimony to the House Veterans Affairs Subcommittee on Health regarding the Department of Veterans Affairs medical care budget request for fiscal year 2000.
    I am not going to spend a lot of time repeating what you already know, and as Mr. Doyle said, we are preaching to the choir. But, to quote the VISN 18 Director, ''This budget stinks.'' We agree with that. The Clinton/Gore Administration proposed budget for Department of Veterans Affairs for Fiscal Year 2000 is $3 billion less than is needed to adequately address the health care needs of our nation's veterans.
    The budget shortfall is so significant that it imperils the health and benefits of millions of veterans. Given the Administration's proposal, this situation will continue to worsen.
    You know it, we know it, and now with the infamous Kizer memo we know VA knows it. The VA budget plan proposes new health care initiatives but provides no new dollars. VA is expanding health care and other benefits to veterans suffering from Hepatitis C-related illnesses, veterans in need of emergency care, and long-term care, yet the budget proposal cuts 8,000 VA health care staff and hundreds of millions of existing budget dollars to pay for these initiatives.
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    If I can, I can probably clear up a little bit more about what Mr. Snyder was asking for as far as our budget process. We did meet with OMB, I was present at all those meetings, and I can tell you that this year we presented a Critical Issues document for the first time as a part of the IB, to address OMB directly, and to let them know what we felt were the important critical needs of the VA to address. And, as my colleagues mentioned before, it was a deaf ear.
    So, no, I was not surprised when I saw the budget, but I was surprised by their candor to us that it was not a priority.
    There is a list of the critical issues that we informed OMB on and the Clinton/Gore Administration, and I also want to tell you that we have requested a meeting with Vice President Gore and the White House several times and we were not able to do that at all. They did not grant us with a meeting. But, all the issues that we addressed are part of my written testimony and also in our Independent Budget document.
    In closing, I want to thank the committee and the Veterans' Affairs Committee, the Full Committee, for helping us out in previous years. I think it was really ironic that the same week the movie, ''Saving Private Ryan,'' was re-released the Clinton/Gore Administration's detrimental budget was also released.
    We join with you in the battle to save Private Ryan's health care, it's a battle we have been fighting since the Balanced Budget Act of 1997 froze discretionary spending for the 5-year period.
    And, as someone else also mentioned earlier, that that has already been busted, so we do not see a reason why it cannot be changed for the VA also.
    The Private Ryan veteran population is rapidly aging and in need of ongoing treatment for complex chronic conditions. According to the VISN Directors we heard from this morning, this budget crisis comes at a time when the need for VHA services has never been greater.
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    Thank you again for this opportunity, and we look forward to working with you, and we do have plans, Mr. Doyle, of talking to the appropriators. Last year, we held town hall meetings, which a lot of the members here were a part of, and we will be holding those again around the country to bring these issues up and meet personally with the appropriators to explain to them and to educate them on the critical issues.
    We thank you for this opportunity.
    [The prepared statement of Ms. A'zera appears on p. 119.]

    Mr. STEARNS. Thank you. Mr. Duggins.

    Mr. DUGGINS. Thank you very much, Mr. Chairman.
    I am George Duggins, National President of Vietnam Veterans of America, and my oral comments will echo my colleagues. I know our Government Relations Director is sitting back there pulling his hair out right now. But, as a twin-tour Vietnam vet, I just wanted to talk to you, and it is the system.
    I was sitting here this morning listening to the first panel. The VA was saying that they were having a problem doing third party billing. The third party billing is not a rocket science. I mean, my company does it every day, and the people who do it are on the low end of the pay scale. So, while it's not a rocket science, it (the problem) is the system.
    If the VA system had to compete with a private system, this system would fail every time. It is the system. We have to get into the system, look at it. No matter how many dollars we know that the $17 billion is not enough. We know that there needs to be more, but how are those dollars going to be used? Are we going to get the best bang for the buck? I do not think so, and we will be sitting back here next year saying the same thing over and over. It is the system, we just have to look at this system.
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    You can recognize a wound from a guy who has had his arm blown off or he is missing a leg, and the VA addressed that real well, but how do you put a Band-Aid on a mental illness? Today, I heard very little. I heard a lot of budget figures thrown out, but no one has talked about the ''wellness'' of veterans, and the bottom line of this thing is that veterans get well.
    You know, if we have to give this veteran a voucher and let him go somewhere to get well, the bottom line is that the veteran gets well, and I have not heard that addressed today. I have heard numbers, we are putting a price tag on veterans health, and you cannot do that, it is not right to say that, okay, we are going to spend $300.00 and that is your limit. If you do not get well with that—it (the problem) is the system.
    Something has to be done to really, truly look at how the system operates. When a veteran has a mental problem, and he goes to the VA hospital and the system tells him, ''okay, you have to come back in 6 months for an appointment,'' it is the system. That is wasting the veteran's time, it is going to aggravate him, he is going to do something probably to himself or to his family. We have to look at the ''system.'' The system is failing the veterans, and we are pleading with Congress to restore some type of sanity to the VA system.
    Dollars may not necessarily be the answer that we are looking for here. I tell you, sir, it is the system, and thank you very much for listening to me.
    [The prepared statement of Mr. Duggins appears on p. 124.]

    Mr. STEARNS. Mr. Duggins, thank you very much. I think we would all agree that the culture within the veterans delivery system has to be changed, too, and dollars is one thing, but the efficiency, the general procedure has to be sort of revolutionalized so that we look at veterans as a complete system that we take care of.
    Mr. DUGGINS. I agree with you, sir, and you said it yourself, that the other government health care agencies are working fine.
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    Mr. STEARNS. Working fine.
    Mr. DUGGINS. Again, it is the VA system.
    Mr. STEARNS. And, none of those folks had the commitment like the veterans did.
    Mr. DUGGINS. I work in the private health care industry, and, you know, with $17 billion we can treat an awful lot of veterans.
    Mr. STEARNS. Oh, sure.
    Mr. DUGGINS. And, we can do it well, and that is what I am not seeing at VA, is the bottom line that the veterans getting well, is to get someone in the system, get him out of the system, and he becomes a functional person again. That should be the bottom line.
    Mr. STEARNS. Well, we are going to try with legislation this year, and I hope my colleagues will support me, to boldly step forward here and try to do something different here, so that some day a member of Congress can go back to his district and get no complaints, like the Federal Employee Health Benefits Program, and that we are not faced with a budget shortfall, and that both the Executive Branch and the Legislative Branch are committed to funding this.
    Mr. DUGGINS. But, do you agree with me when the first panel sat here and said that, you know, we are having problems doing third party billing, I have a real problem with that. People do it every day, and it is not rocket science.
    Mr. STEARNS. The third party billing.
    Mr. DUGGINS. Right.
    You know, it is like, what is the problem with doing third party billing? I just do not understand why. How much is it going to cost for them to do something of that nature? That money could be used to treat veterans with.
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    Mr. STEARNS. Well, I agree, and that is an area we are going to look at, and I think it is an area we can address. I think Ms. Veronica A'zera indicating in the movie ''Private Ryan,'' when it came out and sort of the irony of it, saving Private Ryan, and here we are in Congress, we have to save veterans, so I am in complete agreement.
    Are there any questions from my colleagues?
    If not, we want to thank you very much for your patience in waiting this whole time, and we want to thank you again for your comments, and together we will work. And, I think if you could work through the appropriations process that would help, too.
    Thank you.
    And, the Subcommittee of Health is adjourned.
    [Whereupon, at 1:02 p.m., the subcommittee was adjourned.]