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House of Representatives,
Subcommittee on Health,
Committee on Veterans' Affairs,
Washington, DC.
    The subcommittee met, pursuant to call, at 9:30 a.m., in room 334, Cannon House Office Building, Hon. Cliff Stearns (chairman of the subcommittee) presiding.
    Present: Representatives Stearns, Moran, Cooksey, Hutchinson, Gutierrez, Evans, Kennedy, and Peterson.

    Mr. STEARNS. Good morning. The Subcommittee on Health will be in order. We'll start with my opening statement.
    This morning's hearings provide us an opportunity to review aspects of some of VA's most important programs. One is important because of its sheer size. It is VA's Pharmacy Program. Viewed simply as a procurement effort, VA buys and dispenses more than $1 billion in pharmaceuticals. VA's entire medical care budget is some $17 billion, to put it in perspective.
    The second area is important because of the sheer size of the problem it attempts to tackle. I'm referring now to VA's efforts to assist homeless veterans. The statistics are quite remarkable. Data suggests that one third of all homeless adults are veterans.
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    We face legislative questions in both of these areas. Studies indicate that substantial numbers of those who rely on VA care are homeless or at risk of becoming homeless.
    VA has developed many specialized programs to assist homeless veterans. Significantly, several of these programs are based on statutory provisions that expire this year.
    Congress has not to my knowledge examined these programs comprehensively in some time. We have that opportunity this morning. We will also consider draft legislation that would consolidate, clarify, and strengthen these programs.
    In the pharmaceutical area, statutory provisions which have not yet been implemented as well as recent legislative proposals pose a risk of substantially raising VA drug prices.
    Given the budget pressures the VA medical system already faces, a marked increase in drug prices could have far-reaching effects, adverse effects, on veterans' care. We should examine this potential and consider whether there is a need for further legislation to help safeguard our veterans.
    I look forward to the testimony of our witnesses and to working with Mr. Gutierrez and the members of the Subcommittee in addressing these complex issues. Now I turn to my colleague for his opening statement.

    Mr. GUTIERREZ. Thank you very much, Mr. Chairman. Thank you for holding this important hearing today. We have a variety of critical issues to deal with today. And I want to make a few brief comments on each of the topics our witnesses will address and then allow the experts to speak for themselves.
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    I think the first one you have already heard, Mr. Chairman. Between 1990 and 1991, the Department of Veterans Affairs explained that Medicaid rebates caused an unanticipated $79 million pharmaceutical price increase for VA drug purchases.
    On the review of the GAO testimony and the VA's analysis, I fear that this costly situation may occur again if State and local providers are allowed to make their purchases from federal supply schedule that VA negotiates with federal pharmaceutical providers.
    I have recently been informed that legislation permitting federal providers to purchase pharmaceuticals off the supply schedule is being considered in Congress. Allow me to reiterate my basic contention.
    Based on past experience, we know that VA drug manufacturers can and most likely will raise the prices for VA and other federal health programs. I'm deeply concerned about this.
    The second issue that I want to address is the reauthorization of a number of other vital programs. I believe that the VA's comprehensive approach in treating homelessness, this highly vulnerable population, is something. More should be done.
    And I just want to make echo of the fact that one-third of all the homeless males are veterans. Assisting these individuals who served our nation is not inexpensive. The answers to their problems are very complex. However, I don't know that you can place a dollar amount on the work that needs to be done for them and with them.
    I am also pleased that we are going to receive testimony regarding the proposed legislation to implement a new grant program to establish treatment programs for Persian Gulf veterans. They have been suffering too long, and I hope that these programs see the light of day in their implementation so that we can guide the VA once again into this area of such importance.
    Once again I want to thank Chairman Stearns for convening this important hearing. And I look forward to working with you to pass these critical bills we will examine today. Mr. Chairman I would also ask unanimous consent that the entirety of my opening statement be placed in the record.
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    Thank you so much, Mr. Chairman.
    [The prepared statement of Congressman Gutierrez appears on p. 27.]

    Mr. STEARNS. Thank you. Mr. Hutchinson.

    Mr. HUTCHINSON. Thank you, Mr. Chairman. I want to express my thanks also to you for conducting this hearing. These issues that the panelists will present today are very important.
    In my District, I have a very large veterans' population. And the price of pharmaceuticals is a critical part of their daily life that they have to deal with. I am concerned about the effect or the possible effect of price increases that could be imposed on the pharmaceuticals purchased by veterans if access to the federal supply schedule is expanded. So this testimony is very important.
    And also in regard to the homeless, it's amazing to me that we have such a large veteran population that still suffers from homelessness. Certainly the veterans' programs and the homeless programs that deal with the issue are very important, but I think it's appropriate to look at the possible consolidation and make sure that they're effective.
    So I look forward to the testimony today. Mr. Chairman, I thank you.
    Mr. STEARNS. I thank my colleague.
    Mr. Peterson?
    Mr. PETERSON. I don't have a statement, Mr. Chairman, but I want to thank you for calling this hearing and for your leadership on these issues.
    Mr. STEARNS. Thank you. We'll have the first panel: the director of Health Services Quality and Public Health Issues from the GAO, Ms. Bernice Steinhardt; accompanied by: John C. Hansen, the Assistant Director of Health Services Quality and Public Health Issues, General Accounting Office. We also have John Ogden, Chief Consultant, Pharmacy Benefits Management Strategic Health Group, Department of Veterans Affairs.
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    Good morning to you. And let me welcome all of you. We're glad to hear your testimony this morning.
    Ms. STEINHARDT. Thanks very much.

    Ms. STEINHARDT. Good morning, Mr. Chairman and members of the Subcommittee. We appreciate very much the chance to be here today. If I may, I'd like to just make a couple of introductions. John Hansen was the director in charge of our work. And Joel Hamilton, who is in the audience, was the principal analyst.
    With your permission, I'd like to submit my full statement for the record and summarize my remarks here.
    Mr. STEARNS. Without objection.
    [The prepared statement of Ms. Steinhardt appears on p. 34.]

    Ms. STEINHARDT. Thank you.
    We would like to share with you this morning what we learned about how VA and other government purchasers might be affected if the federal supply schedule for pharmaceuticals were open to State and local governments.
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    The Federal Government, as you pointed out, is a large purchaser of pharmaceuticals. We spent almost $1.3 billion on drugs purchased from the schedule in 1996.
    VA is by far the largest of these federal buyers, accounting for more than 70 percent, or over $900 million, of that total. About six percent of VA's discretionary budget went towards drug purchases last year and about seven and a half percent of its medical care budget. So any potential changes in federal drug prices can obviously have important consequences for the Department.
    Before I turn to our findings, let me just provide some background here. You may recall that FASA, the Federal Acquisition Streamlining Act of 1994, authorized GSA to establish a cooperative purchasing program with State and local governments based on the assumption that combining purchasing power would benefit both the Federal as well as State and local governments. In essence, the program was intended to give State and local governments access to the same prices that vendors give to federal purchasers under negotiated supply schedules.
    Last year in the Klinger-Cohen Act, the Congress suspended GSA's authority for this program and directed GAO to assess its potential effects on Federal agencies, State and local governments, and on industry.
    Our colleagues in GAO have reported on the overall program, but the pharmaceutical industry is unique and the Federal Government is a big purchaser of drugs. Twenty percent, in fact, of all dollars spent on supply schedule purchases last year were for drugs. That's one-fifth of all supply schedule purchases. We in the health group, therefore, took a separate look at the effects of opening the pharmaceutical schedule to non-federal purchasers.
    To sum up, we concluded that it isn't really possible to predict how federal drug prices would be affected if State and local governments were allowed to buy pharmaceuticals from the supply schedules since prices ultimately are determined by negotiations between VA, which acts as the Government's agent, and industry.
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    But the factors involved in negotiations, particularly the size of the market that would be created, has the potential to produce an upward pressure on prices. If prices were, in fact, to rise, VA and a few other federal purchasers would be somewhat protected by the Veterans Health Care Act, which sets a cap on prices for over a quarter of the drugs on the schedule.
    VA believes, however, that it could still experience increases in costs for generic drugs which are not subject to the caps and for those drugs whose prices are now below the ceiling. Other Federal agencies would not be protected at all.
    For State and local governments, there could be benefits but only to the extent that schedule prices were lower than what they could negotiate on their own. Let me just take each of these points in turn.
    First, as I said, VA's negotiations with manufacturers will ultimately determine the prices on the schedule. Up to now, VA has been able to get substantial discounts from manufacturers, in part because the Veterans Health Care Act requires it and in part because manufacturers are willing to give good prices in return for access to VA hospitals, where many of the nation's physicians receive their training.
    However, if manufacturers had to make these prices available to a larger market, they might be considerably less willing to continue to offer these prices. Currently the federal market accounted for by the FSS, the federal supply schedule, represents about one and a half percent of domestic pharmaceutical sales. Depending on how one were to define an eligible State or a local entity, though, this market could increase by at least 4.4 percent; that is, a threefold increase.
    Public Hospital Coalition, speaking for State and local government purchasers, argues that the increase would be much smaller because of restrictions in State procurement laws. But even if the increase were just a half percent, as the coalition has argued it might be, this would still be a 33 percent increase in the size of the supply schedule market.
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    While we don't know what the actual size of the increase in the market might be, we do know from historical experience that having to offer discounted prices to a larger market puts an upward pressure on drug prices. After the Medicaid rebate program was enacted in 1990, manufacturers were required to give State Medicaid programs rebates for outpatient drugs on the basis of the lowest prices they charged other purchasers. In reaction, manufacturers substantially raised the prices they charged other purchasers.
    If prices were to rise once the schedule was opened, the effects on different government purchasers would vary. For VA, DOD, the Public Health Service, and the Coast Guard, the four agencies covered under the Veterans Health Care Act, roughly one-quarter of the drugs on the supply schedule would still be subject to ceiling prices, which are currently set at about 75 percent of the average manufacturer's wholesale price.
    For VA, the drugs that come under the price caps account for about three-quarters of the Department's drug costs, but the schedule prices of some of the drugs are currently below the ceiling price. So VA has estimated that its costs for these drugs could go up almost 30 percent, or close to $70 million, a year if prices were to rise to the ceiling.
    For the non-protected drugs, which are mostly generics, VA estimates that it would have to pay almost $84 million a year more if it were paying wholesale, rather than schedule, prices. Altogether, then, VA believes that its costs could increase by over $153 million a year if schedule prices were to rise.
    Federal purchasers other than those protected by the Veterans Health Care Act would pay full schedule prices on all drugs bought from the schedule. According to the Public Hospital Coalition, State and local governments would benefit from access to the schedule because the coalition assumes there would be little effect on prices.
    They estimate that State and local government drug prices are now 17 percent higher on average than supply schedule prices. So if schedule prices were to rise, they might still be lower than what State and local governments have been accustomed to paying. On the other hand, if the schedule prices were higher, then State and local governments could try to negotiate better prices for themselves.
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    So, with that, Mr. Chairman, I will end my remarks. And I look forward to your questions. Thanks.
    Mr. STEARNS. Thank you. Mr. Ogden.

    Mr. OGDEN. Yes. Good morning. Before I begin, I'd like to introduce Mr. Mel Noel. Mr. Noel is an attorney who is also an expert on the drug pricing sections of Public Law 102–585 as well as all aspects of the federal supply schedule process.
    Mr. STEARNS. Welcome.
    Mr. OGDEN. I am pleased to have this opportunity to discuss with you today the potential effect on VA of opening the pharmaceutical federal supply schedule to State and local entities.
    Currently, the Veterans Health Administration expends $1.5 billion annually on pharmaceuticals and related medical supplies. Approximately three-quarters of our drug expenditures are for pharmaceuticals for outpatient veterans. As the Veterans Health Administration reinvents itself to provide health care in a primary/ambulatory care-based model, the amount of our health care dollars expended for pharmaceuticals is anticipated to increase based on increased utilization of pharmaceuticals in the ambulatory care setting.
    Therefore, any additional increases in prices paid for pharmaceuticals caused by the potential cumulative effects of opening the FSS schedules to State and local governments could interfere with our ability to care for eligible veterans.
    No one can predict with certainty what would happen to VA's contract pharmaceutical prices if those prices became available to State and local governments. The collective concern of VA officials involved in the management of the pharmacy benefit is that opening the FSS for pharmaceuticals to non-federal entities could adversely affect the expenditures for pharmaceuticals for not only VA and other federal buyers but also the groups this action is intended to assist.
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    This concern stems from the price increases we experienced following implementation of the Medicaid rebate drug pricing provisions included in the Omnibus Budget Reconciliation Act of 1990. Specifically, the highest increases that we experienced were seen in items that were deleted from the federal supply schedule at that time by pharmaceutical manufacturers after the enactment of OBRA 1990.
    Prices for these deleted prices increased on average 80 percent. Prices of items remaining on the FSS increased 14 percent. The cost of items in VA depots at that time increased in price by 12.4 percent. Subsequently, Public Law 102–585, the Veterans Health Care Act of 1992, put an end to the steep and sudden price increases.
    Now let's fast forward a little bit today. Conversations with drug manufacturers in the recent past suggest that many non-covered items under the public law could be removed from the federal supply schedules and prices could be increased on other items not currently capped by the public law if the contracts were open to State and local government entities. The latter action alone could result in a $75 million annual increase in pharmaceutical expenditures for VA.
    The 5-year impact of Section 603, the federal drug pricing provision of the public law, has been dramatic. Section 603, federal ceiling price requirements, have resulted in a cost avoidance in pharmaceutical expenditures for VA in excess of $1 billion since its implementation in January 1993. That's VA alone.
    Additionally, we believe the following three over-arching facts support our concerns. First, virtually all manufacturers of expensive covered drugs have complied with Section 603 of the public law since its inception. There has been no formal resistance or blocking litigation, thus providing the $1 billion benefit cited earlier.
    Secondly, the same pharmaceutical manufacturers and many generic drug producers currently find the federal supply schedule pharmaceutical availability to be an efficient, favored marketing vehicle that encourages pricing which is more favorable than federal ceiling prices and even better than most favored commercial customer prices.
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    Currently, there are 1,729 covered drugs that are priced below the federal ceiling price as defined in the statute. Additionally, 80 percent of the covered drugs are now single priced by their manufacturers. By that we mean the federal ceiling prices are given to non-VA, DOD, and Public Health Service agencies that are not mentioned in the public law. These agencies benefit from this pricing strategy. Opening up the FSS to State and local entities could result in a two-tiered pricing schedule with higher costs being passed on to non-VA buyers.
    Third, as we discussed earlier, we saw that when the Medicaid rebate provisions of OBRA 1990 were enacted with no exemption of FSS sales for pharmaceuticals from the best price calculation, covered drug manufacturers sought to protect their margins whenever possible or wherever possible and removed low-priced items from their federal supply schedule contracts.
    If similar tactics are employed in 1997 in response to opening FSS pharmaceutical contracts to State and local entities, just as a new round of FSS contracts are being negotiated for the next 5 years or more, VA alone could suffer an increase in pharmaceutical costs of as much as $250 million per year.
    To balance the concerns and uncertainties just described and which echo Ms. Steinhardt's comments and also the GAO report, with the possibility of reducing prices, the administration now supports a limited pilot expansion of access to the pharmaceutical FSS schedule for a 2-year period for HIV and HIV-related therapies.
    The administration proposes that VA and HHS evaluate the impact of the pilot program and make recommendations to the administrator of the General Services Administration regarding its continued use or limit expansion to other life-threatening conditions. And, for the record, we have attached the administration's proposal.
    And, with that, I'll close my formal remarks. Thank you.
    [The prepared statement of Mr. Ogden, with attachment, appears on p. 66.]
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    Mr. STEARNS. Thank you, Mr. Ogden.
    Let me start off with questions to you. Just as a general comment, what I heard was that you presented what the administration is proposing, but I didn't hear that you endorsed it. Is that correct? Correct me if I'm wrong.
    Mr. OGDEN. You're directing that comment toward me?
    Mr. STEARNS. Yes.
    Mr. OGDEN. Yes. I think in my own personal opinion having just looked at that proposal in a cursory fashion over the last 48 hours, I can't say whether I support it or not support it. I think it has some intrigue to me personally in it in regards to what the definition of life-threatening health care conditions are and also, for example, just in the area of HIV.
    And when we're talking about treating HIV and HIV-related conditions, we're talking about health care conditions in the area of infections, cancer therapy, pain management, nutritional support, and other conditions with the upper respiratory system, GI problems, and also dermatological problems. So there's a whole bunch of ramifications here that I'd personally need to spend some more time reviewing.
    Mr. STEARNS. I appreciate your delicate answer, but wouldn't it be fair to say that if we do this experiment, as suggested by the administration, that, much like the pressure in a balloon, it's going to come out somewhere and it would increase, affect the overall pricing structure within the system? Is that a fair assumption on your part?
    Mr. OGDEN. I think that's a fair assumption.
    Mr. STEARNS. Yes. Would you agree with that, the rest of the panelists?
    Ms. STEINHARDT. Yes. Actually, I was smiling at your metaphor because it's one we've used ourselves. It is sort of like squeezing a balloon, the consequence elsewhere.
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    Mr. STEARNS. I think that's important to put on the record that it's not so much your personal feeling but your feeling that this could have larger ramifications, and that this experiment, although what it sounds like is perhaps an exploratory way to see what the immediate effect might be. That veterans in themselves might have difficulty getting drugs at the present prices is what I'm hearing.
    Mr. Ogden, would it be fair to say that as manager of the federal supply schedule, VA is probably the most knowledgeable Executive Branch office to gauge the effects of changing the rules on access to the supply schedule? If you could just give me a ''Yes'' or ''No''?
    Mr. OGDEN. Yes.
    Mr. STEARNS. Okay. Is there a substantial risk that it would result in raising VA drug prices, just ''Yes'' or ''No''?
    Mr. OGDEN. Yes.
    Mr. STEARNS. Do you believe the enactment of this legislation would be beneficial to VA or to the VA pharmacy program, ''Yes'' or ''No''?
    Mr. OGDEN. No.
    Mr. STEARNS. No? Okay. I think you've answered this already: Would the administration's proposed legislation help the VA keep its drug prices low?
    Mr. OGDEN. Would the administration's proposal——
    Mr. STEARNS. Yes. Would the administration's proposed legislation help the VA keep its drug prices low?
    Mr. OGDEN. No.
    Mr. STEARNS. Okay. Let's see. According to a letter submitting the administration's proposal to Senator Campbell yesterday, the administration's legislation is based upon the idea that more advantageous prices could be obtained through expanded buying power. Tell me in your personal opinion what you think of that idea as it applies to combined federal, state, local pharmaceutical purchasing off the federal supply schedule.
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    Do you want me to repeat the question?
    Mr. OGDEN. Yes, please.
    Mr. STEARNS. Let's see if we can adjust it for you. Tell me in your personal opinion what you think of the administration's proposal that they submitted to Senator Campbell yesterday to combine federal, state, and local pharmaceutical purchasing off the federal supply schedule.
    Have you seen Senator Campbell's proposal?
    Mr. OGDEN. Yes, I have. In a cursory fashion, I've reviewed it.
    I think the example that Ms. Steinhardt used a few minutes ago in regards to if the market, the current federal market, changes in regards to the exposure to the contracts that somehow, someway, somewhere, somebody is going to pay for increasing that market share and the federal buyers could be, we could be, affected by that pushing the balloon, in one direction, if you will—it's going to pop out in another direction. And I personally think that we may be the target of that pushing out.
    So I think the idea that the combined federal/state purchasing power could be enhanced, I think, is again an intriguing one. When you realize that the States and local entities already, many of them, have group purchasing arrangements, many of them already have contracts, many of them already have access to the Section 602 of the current statute, that's why I feel the way I feel.
    Mr. STEARNS. Okay. And my last question is directed to Ms. Steinhardt. The administration proposal would expand FSS purchasing for a broad spectrum of pharmaceuticals to, quote, ''a State and department or agency of a State and any political subdivision, including a local government,'' end quote.
    The administration proposal does not appear to limit State and local entities to purchase for their own use or for dispensing drugs in their own facility. Would you agree that the FSS market could expand many-fold under this proposal if we followed the administration's proposal and perhaps State, department, agency, State, any political subdivision, including local government, were involved?
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    Ms. STEINHARDT. Absolutely. Even if one limited it in a much more narrow way, it would still expand many fold. Even at a much narrower definition, it would expand threefold——
    Mr. STEARNS. Threefold?
    Ms. STEINHARDT (continuing). From where it is today.
    Mr. STEARNS. Well, I appreciate your frank comments.
    Mr. Evans.
    Mr. EVANS. Thank you, Mr. Chairman. I had an opening statement I'd like to put in the record, if I may.
    Mr. STEARNS. Yes, without objection.
    [The prepared statement of Congressman Evans appears on p. 30.]

    Mr. EVANS. I commend you for holding this important hearing on a variety of issues and commend you specifically for holding the panel on homeless veterans. This is clearly an important issue that has not received as much attention as it should have in the last few years.
    I just have one question for the VA. Will VA be able to sustain potential increases, which its own analysis said could result due to allowing state or local purchasers access to the federal supply schedule? And what will it do to either improve its negotiations or find savings to accommodate price increases?
    Mr. OGDEN. In regards to or in response to your first question about sustaining our situation, I think obviously if our expenditures for pharmaceuticals go up dramatically, as we are now moving patients and treating patients in an ambulatory care setting, this action will effect our ability to care for eligible—and I'll just give you some numbers.
    In fiscal year 1995, the average outpatient drug cost per patient per year was $392; in fiscal year 1996, the average outpatient drug cost per patient per year was $430. We anticipated that kind of increase, as we moved patients from inpatient to outpatient care. And it's going to continue because as we treat patients in an ambulatory care setting, we're going to use pharmaceuticals to treat them. So we anticipate, notwithstanding an increase in prices caused by opening schedules, that we are going to spend more money for pharmaceuticals.
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    In regards to improving our negotiating capability, again, it goes back to expanding the market share. If the market share goes up for the entire federal sector, including DOD and IHS and the other federal buyers, somehow, someway, somebody has got to pay for that affecting the bottom lines of the pharmaceutical industry.
    So my guess is it's not going to improve our negotiating capability. It could hinder our negotiating capability.
    Mr. EVANS. So, in essence, you anticipate an increase in per-capita user of——
    Mr. OGDEN. Right. And so if we also had an increase in pharmaceutical prices just because of the contractual issues, that may mean and that may equate to us being able to treat fewer eligible veterans.
    Mr. EVANS. All right. Thank you, Mr. Chairman.
    Mr. STEARNS. Thank you, Mr. Evans.
    Mr. Moran.
    Mr. MORAN. Mr. Chairman, thank you. I appreciate the opportunity of attending these hearings, but I have no opening statement and no questions at this time. Thank you.
    Mr. STEARNS. Well, thank you. I want to thank the first panel. Appreciate your time. And now we'll go to the second panel.
    Mr. STEARNS. We have Dr. Thomas Garthwaite, Deputy Under Secretary for Health, Department of Veterans Affairs. And I understand Dr. Horvath is not here.
    Dr. GARTHWAITE. Right.
    Mr. STEARNS. And then you will introduce the other people.
    Dr. GARTHWAITE. Right.
    Mr. STEARNS. We welcome you to the Committee, and we look forward to your opening statements.
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    Dr. GARTHWAITE. Thank you very much, Mr. Chairman and members of the Subcommittee. My complete testimony has been submitted. I have just a few summary comments.

    Dr. GARTHWAITE. I am pleased to be here to discuss the legislation that will extend authorities and improve the functioning of VA's homeless program and special programs for Persian Gulf veterans.
    At the Subcommittee's request, Mr. John Ogden has discussed issues with regard to the procurement of pharmaceutical products. Dr. Robert Rosenheck will follow this panel and discuss the effectiveness of the homeless programs. With me here at the table are Gay Korber, who is the Associate Chief of our Mental Health Strategic Health Group; and Mr. Richard Robinson, General Counsel's Office, who are knowledgeable in these areas.
    We appreciate and strongly support your efforts to consolidate and clarify authority for several VA homeless activities. Your proposal would provide clear authority for VA to furnish care and services to veterans with serious mental illness, many of whom are also homeless, and would replace a patchwork of currently existing program authority. Dr. Rosenheck will discuss the effectiveness of these programs and why they're critical to our continuing efforts to address the needs of homeless veterans.
    Another provision of the draft bill would extend VA's homeless provider grant and per diem payment program for 2 years, require VA to formally evaluate the effectiveness of programs established using the grants, and lift caps on the number of grants VA may make to homeless providers for use in funding new service center projects and for the purchase of vans. We strongly support these changes.
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    This program has been successful in assisting public and nonprofit entities to establish new programs, to furnish supportive services and housing for homeless veterans. We would urge the Subcommittee to consider adding provisions to the draft bill that would allow VA to recapture grant funds from recipients if they cease to continue using facilities established with grant funds for the purpose of assisting homeless veterans.
    We also support permanently authorizing VA to furnish veterans with noninstitutional care as an alternative to nursing home care. VA currently uses this authority to furnish many veterans with health-related services through contracts with appropriate public and private agencies. This enables many veterans to continue living in their homes when they would otherwise have to receive care in a much more expensive nursing home setting.
    The draft bill also includes provisions pertaining to the care of Persian Gulf war veterans, which we support. It would create a new program under which VA would fund demonstration projects that use novel approaches to treat Persian Gulf veterans with undiagnosed and ill-defined disabilities.
    The legislation would authorize demonstrate projects involving up to ten geographically disbursed VA medical centers, specify general treatment approaches for a number of these projects, and establish a process for the selection of these sites.
    At present we generally treat Persian Gulf veterans' unexplained illness symptomatically in accordance with accepted medical standards and practice given the limits of scientific and medical knowledge in this area. We agree, however, that some non-traditional modes of medical treatment may indeed play a valuable role in the care and treatment of these veterans.
    Importantly, the proposed legislation would provide congressional sanction for use of medical care funds to provide non-traditional, innovative, but scientifically and ethically sound medical treatments to expand and improve our clinical understanding and handling of these patients' complex medical conditions.
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    The draft bill would clarify VA's authority to provide treatment to Persian Gulf War veterans for conditions that might be associated with the veteran's service. And, finally, a draft bill would clarify VA's obligation to verbally inform and counsel Persian Gulf War veterans concerning the registry examination results themselves.
    As I mentioned earlier, we support enactment of these provisions. And we appreciate the Committee's advancing all of these proposals, including the Committee's draft bill.
    This concludes our remarks, and we look forward to answering your questions.
    [The prepared statement of Dr. Garthwaite appears on p. 44.]

    Mr. STEARNS. Thank you, Dr. Garthwaite.
    Do you mind just introducing the two people that have accompanied you?
    Dr. GARTHWAITE. Gay Korber from our Mental Health Strategic Health Care Group and Rich Robinson from our Office of General Counsel.
    Mr. STEARNS. Welcome. The first question I have for you is I appreciate, first of all, your positive statement on our draft bill. Given the budget pressures that the VA faces—and we do this every year up here—what kind of impact would additional drug costs of up to $250 million or even $150 million have on the VA?
    Dr. GARTHWAITE. That would have a profound effect on the number of veterans we could treat.
    Mr. STEARNS. Can you give percentages?
    Dr. GARTHWAITE. Just do relatively simple mathematics. The complete care on average for an ill veteran over the course of a year is around $5,000.
    So if I did the calculations on the effects of the previous drug legislation, that $75 million range that it cost us before the correcting legislation, we're talking about 15,000 veterans not being able to get care. So for a larger number, it's a larger number of veterans.
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    Mr. STEARNS. This is a more difficult question: If we had a $250 million increase in additional drug costs, what would that mean per veteran? I mean, is there any way you can put this to a down-home personal level to a veteran? I mean, what kind of additional costs would the average veteran——
    Dr. GARTHWAITE. That's 50,000 veterans essentially we would be unable to give care to.
    Mr. STEARNS. So 50,000 veterans we would be unable to give care to?
    Dr. GARTHWAITE. These would be sick veterans because that's our average cost for the veterans that we are treating. Since it's an average cost, it would have a significant effect.
    Mr. STEARNS. Very significant. Without putting words into your proposal today, my observation is that you're basically not fully supportive of this demonstration program. Would that be, in effect, an accurate statement on my part?
    Dr. GARTHWAITE. I think the way I look at this is that we have articulated the view from the VA perspective.
    Mr. STEARNS. That's a better way of putting it.
    Dr. GARTHWAITE. We have articulated the view and the effect on veterans and the view from the VA Department. The administration looks at a much broader picture that includes others. My concern is the presumed savings from an enactment of such a bill——
    Mr. STEARNS. Presumed.
    Dr. GARTHWAITE (continuing). Would go to someone else. And if there were actual increases, they would come to the VA.
    You know, if part of the savings then from the savers came to the VA to offset any increases, then I think that's a different story. But if the net result is that money leaves our pockets and savings are accrued somewhere else, the people that are affected are those 50,000 veterans who don't get care or whatever number that might be. And that's our concern.
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    If the view from a different place is that overall there might be savings to the Government, that's a different perspective. And we are pleased that this is limited to an experiment of smaller proportion of possible pharmaceuticals so that the number of veterans potentially affected by this would be minimal.
    Mr. STEARNS. To your knowledge, how extensive an opportunity did VA have to study the specific proposal on which Mr. Ogden testified before it was adopted as the administration policy? Do you know anything about that?
    Dr. GARTHWAITE. If you're talking about the language from the administration recently, we've not had an extensive opportunity to review and comment. As you're aware, it's a very complex issue.
    Mr. STEARNS. Oh, I understand.
    Dr. GARTHWAITE. And so we've had, really, I think, the language only a couple of days.
    Mr. STEARNS. I'm going to follow a little further by saying it. Isn't it OMB's policy to obtain agency comments on administration legislation before it is submitted to Congress? In other words, that's the procedure we understood.
    Dr. GARTHWAITE. Usually, yes.
    Mr. STEARNS. Yes, usually might be. And if you had been, let's say, fully informed regarding the contents of this proposal and its implications, which you've pointed out and which you've heard from our first panel, would you have advised the Under Secretary for Health or the Acting Secretary? Wouldn't you have given some comments on this legislation?
    Dr. GARTHWAITE. I think we have consistently commented from the VA point of view. So I think we've been fairly consistent for a long period of time about our concerns, as Mr. Ogden, I think, very well-articulated in the previous panel.
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    So I think my answer to you is that we have consistently tried to make people aware of the concerns we have with the effect on veterans. However, we recognize there are other views when you factor in other departments and other parts of government.
    Mr. STEARNS. You know, this is just for the record perhaps. This is the opinion of the Chairman. I also think that the price hikes that we've been talking about might result in the States not getting favorable prices either.
    Having been in this position—and this is the first position I got elected to—I have seen these types of things, like we pointed out, like a balloon, in which it just goes up and down. And I think one of the things we have some concern about is the implications it would have for the States and the prices that would be affected. You might want to comment on that.
    Dr. GARTHWAITE. Well, I am certainly not the expert on all of this, but in several conversations over the last couple of years and especially more recently, I don't think there's anybody that begins to discuss this issue with experts who doesn't walk away with the belief that this is an extraordinarily complex issue.
    There are complex interrelationships in law. There are complex interrelationships in the marketplace. There are complex interrelationships in government policies. Predicting if you push here which ones will play out which way I think is very difficult.
    We keep going back to the fact that we have one significant experience which was relatively negative to the tune of about $75 million. So that's what's made us especially cautious.
    Mr. STEARNS. Thank you. Mr. Gutierrez.
    Mr. GUTIERREZ. No questions.
    Mr. STEARNS. I want to thank the panel. Appreciate your time. And now we'll go to the third panel.
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    Mr. STEARNS. We have Dr. Robert Rosenheck, Director, Northeast Program Evaluation Center, Department of Veterans Affairs; accompanied by: Paul Errera, Professor Emeritus, Psychiatry, West Haven VA Medical Center; Robert Piaro, Chairman, Veterans Organizations Homeless Council; and Linda Boone, Executive Director, National Coalition for Homeless Veterans. So we're——
    Mr. GUTIERREZ. Mr. Chairman?
    Mr. STEARNS. Yes?
    Mr. GUTIERREZ. I have to go out and get on a bus to go to the White House to meet with the Vice President. That's why I left a moment ago since some people from the White House wanted to speak to me before I went to the White House. I have to go get on the bus.
    So I apologize sincerely since I have to leave. I apologize for not being able to be here.
    Mr. STEARNS. Well, thank you for your courtesy and remarks. We will continue.
    We want to welcome each of you here. You're our third panel, and you've heard a little bit about what the other two panels have indicated. So at this point let me open it up to you for your comments. Dr. Rosenheck, we'll start with you.
    Dr. ROSENHECK. Thank you.

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    Dr. ROSENHECK. I'm Robert Rosenheck, Director of VA's Northeast Program Evaluation Center. I'm Professor of Psychiatry at Yale.
    Since 1987, I have been responsible for evaluating the several hundred specialized VA programs that provide assistance nationwide to veterans who are homeless and mentally ill. During the past decade, these programs have treated over 200,000 veterans, over 30,000 in the last year.
    These programs are unique. They reach out to homeless veterans in places that VA professionals have avoided in the past. For example, in the last 12 months alone, 20,000 veterans have been contacted in shelters and soup kitchens, under bridges, and in airport terminals and bus stations. These programs have widespread impact, increasing interest and concern throughout the VA system for the plight of homeless veterans.
    But we do not work alone. Shoulder to shoulder with community partners, VA clinicians are breaking down the mistrust of VA felt by many non-VA agencies. A special program, the CHALENG program, has brought over 3,700 non-VA representatives to work with VA professionals to develop new programs.
    The services we provide are diverse. We offered over 6,000 episodes of residential treatment in the last year in over 1,000 VA domiciliary beds and 120 homelike residential treatment facilities.
    Just this week, one of the major national mental health journals published a research study showing that over 60 percent of severe alcoholic patients in VA's Compensated Work Therapeutic Residence Program were totally sober during the first 3 months after discharge, their most vulnerable period. The study showed that what helped those veterans stay sober were those elements of the treatment program that required them to take responsibility for themselves, that required them to work, to pay rent, to have their urine tested for substance use. And these programs are low-cost. At only $19 a day, they are the lowest residential treatment programs in our repertoire.
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    On an average day, there are 600 VA employees who are graduates of these programs. They have worked their way back into the labor force and joined the VA.
     Now, in addition to my job with the VA and as part of it, I'm a Yale professor. And for the past decade, I've been applying the tools of science to the enterprise of helping homeless veterans.
    The Congress wrote my job into Public Law 100–6 10 years ago. You did not ask VA just to develop programs for homeless veterans. You asked for programs that work. And every year we publish a report card that goes to every medical center in the country that has one of these programs. It includes 21 measures which address the core performance areas. Every program in the country knows where they stand on these measures.
    In our first reports, we showed you that 50 to 60 percent of the seriously mentally ill veterans who completed these programs were well-situated with housing, jobs, and health care when they completed that part of the treatment. And that record has improved over the years. Last year, 45 percent were employed or in training and over 70 percent showed improvement in substance abuse.
    In an intensive study published 2 years ago, we followed up 400 veterans with detailed interviews every 3 months for a full year. And we showed that the improvements are long-lasting. We saw 25 percent reductions in psychiatric symptoms, 40 percent reduction in substance abuse, and a doubling of employment.
    After the first 2 years of running this program, we summarized our scientific data and brought in a panel of independent outside experts to review our work. They recommended that we strengthen our ties with community providers and with other Federal agencies.
    In response, we joined with HUD to develop the largest supported housing program in the nation, linking experienced VA case managers with HUD Section 8 vouchers. And our evaluation shows that this program works, even better then the standard VA program. What we call the HUD VA-Supported Housing Program, HUD-VASH, has 50 percent better housing outcomes than our standard programs.
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    With the Social Security Administration, we developed a special outreach program for veterans who are ineligible for VA benefits but who qualified for SSI. We increased the award and application rates and cut decision times. And, furthermore, we showed that these desperately needed monetary benefits do not increase substance abuse, even among veterans with severe alcohol and drug programs, but that they do increase the good housing outcomes.
    We established a grant and per diem program that received 350 applications from non-VA providers and distributed $17 million to help community providers in 32 States and the District of Columbia expand their programs. These funds will support 1,700 new, supported housing units, 8 service centers, and 3 mobile treatment units. We have expanded our performance-monitoring system so that our community partners, along with us, can track their results as well, scientifically generating objective documentation that the job they do is well-done.
    The homeless problem has not gone away. In 1996, we saw 4,500 more homeless veterans than in 1995. The techniques of modern managed care that you hear so much about will not do for homeless people with severe mental illness.
    Behavioral health care firms have not been dealing with homeless mentally ill veterans or with homeless non-veterans, for that matter. In most places, they have left this difficult work exclusively to VA and to our community partners. The practice of clinic-based primary care will just not work for people who sleep on steam grates and who come to the hospital needing so much more than prescriptions and stitches.
    I believe we have demonstrated the effectiveness and the high level of accountability that goes with these VA programs. I cannot tell you why, but I can tell you for sure that the triumphs of Wall Street are not changing the situation of homeless veterans on Main Street or Market Street or Broadway.
    We are proud of our accomplishments during the past decade and are prepared for the challenge of the next decade. I want to thank you both personally and on behalf of the veterans who have been helped for your commitment to them and for your determination that this job be done and done well. Thank you.
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    [The prepared statement of Dr. Rosenheck appears on p. 52.]

    Mr. STEARNS. Thank you.
    Dr. Errera, you were kind enough to come. I want to just give you an opportunity if you want to say any other comments in reference to your colleague's opening statement.
    Dr. ERRERA. I'd like to thank you, Mr. Chairman. It was the House Veterans Affairs Committee and your Senate counterparts that created these programs. And you're now helping them mature. All of us are very grateful for that.
    Mr. STEARNS. Thank you.
    We have now Robert Piaro.
    Mr. PIARO. Thank you, Mr. Chairman.

    Mr. PIARO. I am presently the Chair of the Veterans Organizations Homeless Council. And at this hearing, I am representing the following veterans' service organizations, which include the Vietnam Veterans of America, AMVETS, The American Legion, The Blinded Veterans Association, Jewish War Veterans, Paralyzed Veterans of America, and the Veterans of Foreign Wars.
    VOHC has met over the last 2 years with the common goal of improving the situation of homeless veterans throughout the United States. VOHC endorses programs and legislation designed to help improve the lives of an estimated more than 250,000 homeless men and women who have served their country in times of peace and war.
    As a member of the council, I am exposed to many reports concerning the plight of homeless veterans. Many of these reports deal with the limitations on services either from public social services, or for those veterans who do not have service-connected disabilities, the U.S. Department of Veterans Affairs.
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    I am also President and Chief Executive Officer of Veterans Assistance Foundation, a nonprofit (c)(3) that was founded in 1994. The VAF currently receives funds from Wisconsin Department of Veterans Affairs to operate three full-service programs within that State. In this capacity, I and my staff have direct contact on any given day with 90 homeless veterans to provide them shelter, meals, limited counseling, and full-time, nonclinical case management services.
    Since accepting the first contract with the Wisconsin Department of Veterans Affairs, our VAF staff have worked in some capacity with more than 2,500 homeless veterans and provided residential services to over 500 veterans at our 3 assistance centers.
    As a disabled veteran myself, I have received treatment from various VA centers in nearly 30 years. I have seen the VA system and level and quality of care to the veterans change over the years. I truly wish I could say that all the changes I've witnessed have been for the better. Good and bad programs have come and gone, as have good and bad doctors, medical staff, and so forth. We need to take time to see how the newest change, the VISN networks, will work in the overall program.
    Those hit the hardest by the latest changes may be those who were once targeted as high-priority cases: the homeless. Included are veterans who cannot establish a service-connected disability as well as veterans who suffer from chronic substance abuse problems, the lingering effects of PTSD and other mental illness, or a host of other minor physical ailments.
    I have been asked to provide testimony on homeless chronically mentally ill, compensated work therapy/transitional residence, the homeless providers and per diem grant, and the VA's contract halfway house program for substance abuse problems.
    The foundation runs a program in Madison that has a very close relationship with the Community Support Program, which is called CSP, a facility which is operated under the HCMI Program. The VAF and the CSP staff have worked very closely since the foundation opened in 1996. In fact, the CSP staff has provided office space to VAF since the date of the opening. Likewise, CSP clinicians have provided support services for veterans eligible under HCMI criteria that have been residents in the Veterans Assistance Program. Additionally, CSP staff have provided the means for our staff to access computers regarding veterans as non-compensated VA employees.
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    The association between CSP and the VAF staff and residents is truly ''seamless,'' a term used in many partnerships between VA and non-VA personnel providing services to disadvantaged veterans. The HCMI staff in Madison is a compassionate group dedicated to helping improve the lives of veterans who place themselves within their care. This program has had nothing but a positive influence on the many veterans it has served, homeless or otherwise, who suffer from chronic mental illness.
    Stepping into the other program, which is run by VAF at Fort McCoy, WI, we actively participate at the VAMC Tomah CWT/TR programs. From the beginning, our involvement has been nothing but a continuing success story on how this program has worked and how it has been getting better every day. The work experience that CWT/TR gives these veterans only helps reinforce their work habits, which leads to gainful employment for the veteran.
    There is a continuing need for this program to be funded in order for the veterans to transition into mainstream America with gainful employment. I have no dealings with the VA Transitional Program. So I am unable to address this issue at this time but do support the program for funding.
    The homeless provider per diem grant has truly been the one homeless veterans' money available to homeless veteran providers around the country. Each year U.S. DVA is working on making the grant user-friendly, but the biggest worry in our country is the funding of this program. Each year it has declined, down in 1997 to 3.8 million from 5.5 in 1997. This money has made possible community-based organizations and the U.S. Department of Veterans Affairs to perform partnerships all around the country which have proven that they work.
    The homeless veterans provider grant per diems are the only truly homeless-specific monies left in America. The funding of this program is the lifeline of the homeless veterans in America.
    The DVA's contract program for a halfway house for veterans with substance abuse problems has been a successful program. VAF has seen the effectiveness of this program and has a very good relationship with the VA contract halfway houses. We believe that operation of the VA contract halfway house is a very positive factor in the lives of the homeless veterans in America.
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    In summary, the above-mentioned programs I have discussed in this testimony should receive recommendations for continued funding and additional funding from the House. There are many veterans in America that depend on these programs.
    I very much appreciate the opportunity to provide the testimony in these areas, Mr. Chairman. Thank you for your time.
    [The prepared statement of Mr. Piaro appears on p. 58.]

    Mr. STEARNS. Thank you.
    Our next panelist is Linda Boone. Linda, welcome.
    Ms. BOONE. Yes.

    Ms. BOONE. Mr. Chairman, the National Coalition for Homeless Veterans is committed to assisting the men and women who have served our nation well to have decent shelter, adequate nutrition, and acute medical care when needed. NCHV is committed to doing all we can to help ensure that organizations, agencies, and groups who assist veterans with the most fundamental human needs receive the resources adequate to provide these services to perform this task.
    NCHV believes that there is no generic or separate group of people who are homeless veterans as a permanent characteristic. Rather, NCHV takes the position that there are veterans who have problems that have become so acute that a veteran becomes homeless for a time. In a great many cases, these problems and difficulties are directly traceable to the individual's experience in military service or his or her return to civilian society.
    It is clear that the present way of organizing the delivery of vitally needed services has failed to assist the 250,000 veterans who are so overwhelmed by their problems they find themselves homeless.
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    The transmutation of the Veterans Health Administration from a traditional hospital facility-based system into a services-oriented system that is organized into the 22 divisions has produced significant reduction in services needed by many veterans, particularly homeless veterans.
    NCHV recognizes the significant effort that the VA has demonstrated in addressing the needs of the homeless veterans in the past few years. We know of many extremely dedicated employees within the VA that go well beyond their normal workday to volunteer in community activities and often provide leadership to expand services to homeless veterans.
    The reduction and curtailment of services are perhaps the most drastic in neuropsychiatric care, which concerns NCHV. Inpatient care for post traumatic stress disorder has been drastically reduced in both duration and availability. Many mental health and substance abuse treatment programs have been eradicated, effectively eliminated, or drastically truncated. For example, in VISN I, the New England area, a substance abuse inpatient program went from 21 days to an outpatient 5-day, 8 hours per day program.
    NCHV strongly supports the portion of this bill requiring each medical center to make an assessment of needs and services available. We would further request establishment of specific requirements or expectations for each vision to participate in homeless veterans initiatives.
    A February 7, 1996, report on the fiscal year 1995 end-of-the-year survey in homeless veterans in VA inpatient and domiciliary care programs done by the NEPEC organization within the VA found 23 percent of all inpatients had been homeless at the time of their admissions. Currently, with the exception that each medical facility have a homeless coordinator, participation by the individual VA medical centers is voluntary for homeless initiatives. This seems a gross neglect of almost one-fourth of the patients in the VHA.
    Additionally, as further noted in the NEPEC report, this population is more likely to need inpatient care admission to get their treatment started.
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    With these significant cuts occurring throughout the nation, we urge this Committee to examine the strategy of reinvestment of the perceived savings achieved through the reordering of the way health care services are delivered. Specifically, we would like to see language to assure that a portion of those resources saved are reinvested to meet the unmet needs of homeless veterans, not simply reassigned to some other type of care. We believe a required percent reinvestment should be set forth in the program dollars that have already been cut and will be cut in each division.
    Many community-based organizations, or CBOs, have a strong record of performance in the delivery of services to homeless veterans and could do a great deal more in patient care if resources were available to meet those unmet needs of veterans. CBOs are a vital link in any continuum of care chain, particularly in an era where there is such concern toward finding the most cost-effective means possible for meeting the vital needs of veterans in each community while preserving the highest standard of quality care.
    Traditionally, the VA has been reluctant to contract out delivery of health care services. However, it is clear that the old paradigms do not apply in this rapidly changing environment. The VHA must do what it does best: providing front-line clinical support and channeling resources to the CBOs to do what they can do best. Therefore, we support this portion of the bill that allows contracting with community-based organizations for services.
    Additionally, the management assistance committees, the MACs, and the VISNs must include representatives from the community-based organizations that provide direct services on a regular daily basis to veterans who are homeless.
    NCHV also supports the continuation of the Homeless Veterans Comprehensive Services Act, which is the grant per diem as proposed in this bill. This program has provided the needed resources for programs to get started that might never have had an opportunity otherwise. We would like to see authorization language that sets an amount to be granted each year delineating the separate amounts for the housing acquisition and amounts for supportive services.
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    NCHV agrees with the intent of this legislation, and we look forward to working with this Committee and the staff securing needed resources for veterans that are homeless.
    Thank you, Mr. Chairman.
    [The prepared statement of Ms. Boone appears on p. 62.]

    Mr. STEARNS. Thank you, Ms. Boone.
    Let me just go to sort of the end of your opening statement. The draft bill we have under discussion awards grants to contract with and work in partnership, partnership with community-based organizations. Would it be fair to say that you support the bill and you don't have any fundamental problems with our bill?
    Ms. BOONE. There are some technical issues that we're working on and we're going to be submitting to the staff, but in general we support the intent of this, yes.
    Mr. STEARNS. So there are some technical things that you would like to work with our staff on?
    Ms. BOONE. Right.
    Mr. STEARNS. Dr. Rosenheck, this may be a question for you. You've heard Ms. Boone's testimony that veterans would be better served if VA limited its direct efforts and channeled more money to community organizations to provide services to the homeless. I'd be curious what your response would be.
    Dr. ROSENHECK. We have worked for the past 10 years to develop the partnership, and we have succeeded in that. One of the problems that has been well-known for the past 30 years is service system fragmentation, that if you have separate funding streams to the housing agency, to the public support agency, to nonprofits, to VA, totally independent, you get everybody operating as an independent operator. And you get chaos for the clients because they have to get one thing from the VA, one thing from the community provider.
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    What we have constructed over the past 10 years is teamwork. By channeling funds through VA—and a large proportion of our budget goes to CBOs—we have developed teamwork. And so the fact that we do outreach shoulder to shoulder along with the CBOs strengthens the work of both groups.
    So my sense is that what we have developed is a team with complementary roles, but we also have overlapping roles. And the teamwork is one of the great accomplishments of this effort.
    Mr. STEARNS. Well, you heard Ms. Boone's testimony that the VA's, quote, ''present way of organizing delivery of services has failed to assist'' at least the 400,000 veterans who are homeless for at least part of the year. You know, I think that's a pretty clear statement on her part.
    Dr. ROSENHECK. Yes. I think there are two issues. Of course, funding limitations mean that we can't treat all of these veterans. The ones we have treated we have demonstrated scientifically are getting effective treatment.
    That there is need for additional resources, that there are under-served veterans, severely disabled, there is no question. But I would strongly reject the conception of the community-based organizations operating in opposition or in alternative to the VA and emphasize the achievement that we have enjoyed in the partnership with the national coalition, which has been vastly strengthened in the last 5 years so that we are working together on these problems, enhancing each other's effectiveness and efficiency.
    Mr. STEARNS. Dr. Errera?
    Dr. ERRERA. Yes. I would like to elaborate on that. I was surprised by Ms. Boone's comment because we have worked well together.
    I want to emphasize that most of these veterans have chronic illnesses: medical, psychiatric, substance abuse. Those that don't, many of them have serious behavior problems, anger management. And these need to be addressed by professional people.
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     There are many facets of the work that can be done and are best done by community-based organizations. Mr. Piaro described the kind of collaboration that they have. And Ms. Boone knows of the collaboration that takes place.
    So I would strongly disagree that we haven't been able to do it. I think we do do it together. And this is what VA does best, is work with chronic illnesses.
    Mr. STEARNS. Ms. Boone, do you reject partnership arrangements with the VA?
    Ms. BOONE. No. Some of our membership has had very successful relationships with the VA in some of their homeless programs. The problem is that the VA is perceived in the community as being everything to all veterans. And our veterans get turned away from community-based services on a daily basis because the myth is that the VA takes care of veterans. And they can't take care of all of the veterans. They don't have those resources.
    And the VA only has 172 hospitals and I don't know how many clinics now. So they can't be everywhere, but they certainly have the resources and the charge to help veterans.
    So we would like to see them working in expanding the services. And that certainly does take more resources in some cases. But what we're real concerned about is that veterans are not being served because people perceive that the VA takes care of them.
    When Dr. Rosenheck talked about they served 30,000 veterans last year, well, that doesn't quite cut it when there are 275,000. So we would like to see some stepped-up effort to really end this problem.
    Mr. STEARNS. You know, in your testimony you mentioned many community-based organizations have a strong record of performance. Do you have any documentation that you could provide us with results?
    Ms. BOONE. I guess what I would ask is when the VA compares the cost analysis for services rendered, if they've done any comparisons in the communities. We have not done any major studies. We don't have the resources to do those kinds of studies. So we have not done that.
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    On an isolated basis, our members do do some of that data collection, but we have not compiled it in a reportable form.
    Mr. STEARNS. Mr. Piaro?
    Mr. PIARO. Yes?
    Mr. STEARNS. Do you wish to comment?
    Mr. PIARO. Yes. I understand some of Ms. Boone's concerns, but I believe a lot of this basically when she's making some statement that the general public does perceive the VA to be all to all veterans, which it is not.
    But, again, too, I don't think laying that back on the U.S. Department of Veterans Affairs is a true statement. That is a job of the community-based organization to access those services that the VA can't do for that veteran. To lay it all on them I think is impractical.
    In our times, we can't expect one agency to foot the bill on everything. You know, it's a collaborative partnership between the communities, State, Federal, and that.
    And in my experience in the programs that I have run, it has been very successful. Yes, there have been problems, but there are always going to be problems. But the main thing is as long as we can have an open-door policy, which we have had with the U.S. Department of Veterans Affairs, with HUD and all of these other agencies, it seems to work out. It seems to work out very well.
    Mr. STEARNS. So in your opinion, the present situation, status quo is acceptable in terms of how we fund homeless veterans?
    Mr. PIARO. Yes except for lack of enough.
    Mr. STEARNS. Ms. Boone, how do you feel? You think we should change the process of funding homeless veterans the way we do it?
    Ms. BOONE. Right. I think that what the organization believes is that the VA should do more contracting when it makes sense to do that when it can be done. If they can do it in a more cost-effective method, then they should do it. But if a community-based organization can do it in a more cost-effective method and reach more veterans, then they ought to do it.
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    Mr. STEARNS. Well, that's all the questions I have unless, Dr. Rosenheck, you wanted to follow up with anything.
    Dr. ROSENHECK. No. Just to reiterate what we've said, that I think the implication is we would all agree—and I am comfortable speaking for my panelists—that to reach the full extent of the population, we need more funds for the VA as well as one would need more funds for the CBOs. My belief is that the current mix has had a very positive effect on both groups of organizations.
    Mr. STEARNS. Well, I thank you.
    The staff of the ranking member, any one or two questions you would like to ask before we close? Dr. Cooksey, we'll be glad to hear any questions you may have, too.
    Ms. EDGERTON. On a different track, Dr. Rosenheck, if you would answer one question I have about the effects of decentralization? How have your programs' efforts to track spending for the chronically mentally ill been affected by decentralization of both the funding and the management of the VA health care system? And if they have been affected, do you have any thoughts about how you can assure the accountability of mental health programs in this new decentralized era?
    Dr. ROSENHECK. The current shift in the VA to a community-oriented system of care, rather than a hospital system of care, is long overdue. As with all transitions, there are dangers. The huge progress we are making is in shifting resources from inpatient units to more efficient outpatient programs that if their intensity is maintained, we have shown scientifically that community-based programs can maintain a high level of outcomes and a high level of efficiency for severely disabled patients.
    But there is a risk in any time of change. And the risk is greatest for those who are most vulnerable for those patients who can least speak for themselves and who often are least able to have their needs heard.
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    We believe that the decentralization holds great promise, but what it has meant is that, instead of the funds being fenced, instead of the funds having to go for these programs, there is latitude to spend them on other programs for other patients.
    Now, it is also reasonable, because situations may vary from locality to locality, that there should be decision-making at the local levels, but the only way to assure that the vulnerable do not fall through the cracks in this modified system is to hold the localities accountable.
    There are two ways of doing that, two pieces of doing that. One is to continue to collect comprehensive accountability data, which we are doing. But two is to have clear policy from Washington that the localities are responsible for preserving services for the most vulnerable and for preserving high-cost services because in many cases the homeless and the chronically mentally ill need a greater intensity of services, even if it's not hospital services.
    So far we have seen substantial commitment from headquarters to support these programs. And so far the data are showing that the programs are largely staying intact.
    Some of the issues that Ms. Boone raised, in fact, I think are not problems. She did describe the fact that we are having shorter length of stay in our PTSD programs and that we are having less alcohol inpatient programs, but the PTSD changes came after careful scientific studies that showed that reducing those lengths of stays, shifting those resources to outpatient would not adversely impact the veterans.
    These studies need to be ongoing. We need to look to see if veterans are going away from the VA because of these changes. We don't see any evidence of that. So I would say that the moves are constructive, but they need to be carefully monitored. And the values need to be firmly promulgated that these vulnerable populations are special to the VA. And their needs must be addressed.
    Ms. EDGERTON. I just have a follow-up question for you. Because you did mention beds, I want to make sure that I understand this. You say 31 percent of those that are receiving inpatient mental health programs are homeless. How can they receive effective treatment if they don't have a supportive living environment while they're receiving outpatient or community-based services?
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    Dr. ROSENHECK. Well, in fact, they can get some help there because we go to those shelters. Our health care professionals go to those shelters and will bring the veterans personally to the VA.
    At the same time, the way we can provide alternative services is by case management, residential treatment, our contracts with our CBO partners, by doing the kinds of programs that we have been running.
    Ms. EDGERTON. Thank you, Mr. Chairman. That concludes my questions.
    Mr. STEARNS. Well, thank you.
    Dr. Cooksey has indicated that——
    Dr. COOKSEY. Just 30 seconds. I'm old enough that as I was finishing medical school we were going through that transition when the thorazine and thorazine-like drugs were just coming out and they were opening up all of the mental institutions and turning people out on the streets. Now Prozac is the medication. I feel that there are a lot people out there who need more supervision than just giving them a pill and turning them loose.
    My overriding concern is the homeless veterans. And there is no question that a lot of the homeless are veterans. And my other concern is that too often the different agencies work to protect their own fiefdom and don't overlap and help each other more so to the ultimate benefit of the veterans.
    We've got to go vote. So thank you.
    Mr. STEARNS. I thank my colleague and will indicate that anyone on the panel who wishes to submit questions who is not here is welcome to do so. We thank all of the witnesses for coming today. We know how valuable their time is, their candor and dedication to the VA. And, of course, all of the organizations are doing just very important work.
    The subcommittee is adjourned.
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    [Whereupon, at 10:52 a.m., the subcommittee was adjourned.]