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TUESDAY, MARCH 17, 1998.








Opening Remarks

    Mr. LEWIS. The Committee will come to order.

    We are today going to take up the 1999 budget request for the Department of Veterans Affairs. The VA, this year, is requesting total budget authority of $42.8 billion and 203,849 FTEs for fiscal year 1999; a net increase of $1.5 billion and a decrease of 2,082 FTEs below fiscal year 1998.
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    It is important to note right at the beginning that the proposed increase is not discretionary appropriations. It is on the mandatory appropriations side. Mr. Secretary, these hearings will cover a wide range of issues.

    The accuracy of the estimate for medical collections, the quality of health care being provided, the shifting of medical care funds so as to achieve a more equitable distribution and resources among the hospitals, the proposed legislation to deny compensation for smoking-related disabilities, the timeliness of processing claims, and the year 2000 problems, just to name a few of the difficulties.

    For the Members that may not be aware, the Secretary and I spent some time together on more than one occasion. In terms of this specificly, we spent some time discussing the opportunities that we have this year to lay the foundation for in-depth evaluation; and not just the volume of dollars received by veterans programs over the years, but to examine the quality of the delivery of services and the use of those dollars in terms of those people for whom we suggest we hold the highest priority of regard. Men and women who have made the maximum contribution to the country deserve the best that we can give. That is what these hearings are about and what, indeed, the work of the Congress should be about in this connection.

    Before I call upon the Secretary, let me call on my friend, Louis Stokes, for any comments he might have.

    Mr. STOKES. Thank you very much, Mr. Chairman.

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    I do not have any formal opening statement. I would like to take just a moment to welcome Secretary West before our subcommittee. This is his first appearance here. We certainly welcome him.

    I had a brief opportunity to have a courtesy visit from him a couple of weeks ago. I enjoyed that very much. He has a very distinguished career.

    I think he is going to do an outstanding job in his capacity as Secretary of this very important agency. We look forward to working with you. We look forward to your testimony this morning.

    Thank you, Mr. Chairman.

    Mr. LEWIS. Mr. Stokes, thank you.

    This is the first occasion that we will have Secretary West before us. I wonder if we should not call upon our other Members, if they have any opening comments. Mr. Frelinghuysen.

    Mr. FRELINGHUYSEN. I will save my opening comments for my time.

    Mr. LEWIS. All right. Mr. Mollohan.

    Mr. MOLLOHAN. I want to thank you, Mr. Chairman. That is very gracious of you. I have nothing more than to congratulate the Secretary and welcome him to the hearing.
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    Mr. LEWIS. Mr. Secretary, your entire statement will be included in the record. You can present it all to us or summarize it as you will.

Acting Secretary West's Opening Remarks

    Mr. WEST. Thank you, Mr. Chairman.

    I will accept your invitation to summarize it briefly since I know you want to get on with the questions.

    Mr. Chairman, Mr. Stokes, and Members of this subcommittee, it is a pleasure to appear before you. I know you are aware that I appear as the Acting Secretary of Veterans Affairs. I await confirmation in the other house.

    I have been Acting Secretary for about nine weeks. I guess this is my tenth week in office. So, I believe I am a fast read. I hope I am. I am accompanied, however, just in case I am not.

    On my left, your right, the Under Secretary who heads the Veterans Health Administration, Dr. Ken Kizer, whom I know you already know. On my right, your left, the Under Secretary who heads the Veterans Benefits Administration, Joe Thompson; both a veteran and a newcomer. A veteran in that he had a distinguished career culminating as head of the New York office of the Administration and a newcomer because he is recently confirmed himself.

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    Also, present as well is the head of the other operating part of the Department. Seated just to my left, to your right, the Director of the National Cemetery System, Jerry Bowen. I acknowledge, if I might Mr. Chairman, the fact that the Ranking Member, the distinguished Member from Ohio, has announced his intent to retire at the end of this present term.

    I must acknowledge that during 30 years in Washington, he has been an ardent supporter of veterans and also, as I well know from my time as Secretary of the Army, an ardent supporter of our men and women in uniform.

    He supported them, their budgets, their needs, and their families. So, to the extent that I am able to speak for all of those constituencies, and for a whole host of others, I would like to say for the record, thank you for your service. To that Ranking Member, we will miss him.

    Mr. STOKES. Thank you very much.

    Mr. WEST. During my years of service to this country, Mr. Chairman, I had a chance to learn first-hand of the extraordinary contributions that America's men and women in uniform have made.

    I have four and a half years of traveling, both with active duty service members and with veterans. In every case, my impressions are the same; these men and women have left home and family to give of themselves for their country.

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    As the President's nominee for Secretary of Veterans Affairs and the Acting Secretary, I appreciate this opportunity to work with you on behalf of all of those veterans.

    Mr. Chairman and Members of this subcommittee, in the past five years, the Department of Veterans Affairs has, we believe, made significant progress in changing the way we provide service to veterans and their families.

    More important than even the fact of change, has been that the effort is to change for the better. I believe that our responsibility in this era of change, the delivery of services, and the benefits to veterans is not just to maintain the quality, but to improve that quality.

    I know that is the intent of the colleagues that I have identified already. Much has occurred. The fact is the processing is better today than it was five years ago, but much remains to be done.

    We have made improvements in timeliness of claims, but we look today, and you will hear about this from our Under Secretary in charge of the Veterans Benefits Administration, to improve across the board in a number of categories.

    This is the fourth year of a massive transformation in the VA health care system. It has resulted in more outpatient care and less inpatient care to include the establishment of more outpatient clinics, and the closing of unused and unneeded hospital beds.

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    Mr. Chairman, the President's fiscal year 1999 budget request for the Department of Veterans Affairs will permit us to continue to provide health care to even more veterans. It is our determination that we will provide quality health care; quality that will set the standard across the nation.

    We continue to integrate organizational elements within VA; becoming more efficient, more cost effective, and more vigilant in expending taxpayer dollars. As we move to the next millennium, I look forward not only to working with this committee, but I am prepared to expect and even demand of the Department of Veterans Affairs several things.

    First, that we improve the timeliness, dependability, and quality of the delivered benefits.

    Second, that we continue the transformation of our health care system, emphasizing quality, compassion, and effectiveness.

    Thirdly, that we master the challenges of information technology, including the looming issues of Y2K which, and I will go out on a limb here since someone has already made a statement to this effect, I think that the VA is doing very well.

    That we assure our employees in this Department a work environment that is conducive to their best efforts in order that they can better serve our veterans. The fact is, Mr. Chairman and Members of this subcommittee, we do our work through the one key tool that is available to us, our employees. They are the mechanism by which we deliver our services to our veterans. They need an environment in which they can realize their greatest potential.
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    Finally, we must continue the efforts commenced under my predecessor, Jesse Brown, to more fully integrate the Department's organizational elements. That effort is known as One VA.

    Mr. Chairman, Members of this subcommittee, the proposed fiscal year 1999 budget will permit VA to continue to keep America's promise to our veterans while building on previous successes and improving where we have not been as successful as we need to be.

    As you pointed out, Mr. Chairman, this year's budget request is $42.8 billion for mandatory and discretionary programs. Within that, the budget will call for $17.7 billion in medical care; $21.9 billion for compensation and pension payments, and $92 million for the National Cemetery System.

    Within that, we seek a 10-percent increase in funding for medical research; a 9-percent increase for our National Cemeteries, and a 7-percent increase to administer the Veterans Benefits Program.

    If this budget is approved, Mr. Chairman and Members of this subcommittee, we will open 71 new outpatient clinics. We will treat 134,000 more veterans in fiscal year 1999, than we did in 1998. That is a 4-percent increase.

    The bottom line is that we expect to provide quality health care to more than 3.4 million unique patients; an increase of 134,000, with a level of funding that supports some 695,000 inpatients at the centers, and 37 million outpatient visits.
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    Mr. Chairman, this budget reaffirms our commitment to reach our strategic goals by the year 2002. We continue to strive to reduce the per-patient cost of health care by 30-percent, increase the number of veterans served by 20-percent and to fund 10-percent of our health care budget from non-appropriated sources.

    Mr. Chairman, last year, at the request of the Administration, Congress passed legislation that would allow VA to retain all third-party collections. Essential to continuing our progress and meeting our strategic goals is to be able to fund 10-percent of our health care budget from non-appropriated sources.

    Essential to that is our proposal for Medicare subvention. This will permit VA to receive reimbursement from Medicare for health services provided to higher income, non-service connected veterans who choose VA health care.

    Legislation which will permit VA to conduct a demonstration to validate the feasibility of Medicare subvention is proposed. We will strongly support it.

    There are some new initiatives in this budget, Mr. Chairman. There is a smoking cessation program in which we request authorization to provide treatment to any honorably discharged veteran who began smoking in the military. The budget request is $87 million to establish the effort.

    We propose to increase the Montgomery-GI Bill education benefits by 20-percent. I understand that this is the largest in the history of the bill. It is a long-awaited increase. It is an increase of $191 million in 1999. The effect is to raise the active duty benefit to more than $500 per month in 1999 for full-time enrollment. The five-year cost, Mr. Chairman, is estimated at $1 billion.
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    We are also proposing an increase of $100 million for VA's Readjustment Benefits Account to reimburse the Department of Labor for programs that assist veterans to find employment.

    There is funding in this budget, Mr. Chairman and Members of this subcommittee, for four new cemeteries during the next two years. The metropolitan areas of Chicago, Illinois, Dallas, Texas, Saratoga, New York, and Cleveland, Ohio will be served by these cemeteries.

    In sum then, we believe this budget is sound. It is balanced and it touches all of the elements of needed service for our veterans and their families.

    Mr. Chairman, we believe this budget is realistic. It puts our veterans and their families first, even in an environment in which the President has proposed the first balanced budget in a generation. Our job, Mr. Chairman, mine as the acting head of this Department, is to be a part of the Administration's program, yes, but to keep foremost in our minds and in our plans that we in this Department are here to serve veterans.

    We are here to stand up for those who have stood up for America. It is true, Mr. Chairman, we are changing the way we do business. I plan to continue that course charted to ensure that we will have future successes in that respect.

    When the President announced my nomination some two months ago, he referred to a comment that he said I had made in a speech at the West Point commencement the first year of my presence as Secretary of the Army.
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    In fact, those are not my words, Mr. Chairman and Members of this subcommittee. Those are the words of my father, a high school principal. He said, and I said to those cadets, ''You teach the life you live.''

    Our veterans have taught us in this country by their lives of service and sacrifice. You, the Members of this subcommittee, have taught us all something about supporting our veterans.

    We are grateful for your support. I look forward to the opportunity to work with you. Thank you.

    [The statement of Mr. West follows:]
    "The Official Committee record contains additional material here."

    Mr. LEWIS. Thank you, Mr. Secretary, for your statement. As I indicated, it will be included in its entirety in the record.

    In order to expedite the hearing, Members, while they have their questions they wish to ask in priority, I am sure there will be other questions that will be submitted by them. We would appreciate you and your assistants in responding to those.


    First, Mr. Secretary, concern has been expressed over the adequacy of the proposed 1999 budget level for medical care. In part, this results from last year's budget agreement between the Executive and the Legislative Branches which changed the way funds are provided for medical care.
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    Instead of increasing the amount of appropriations each year, future year increases were to come from collections as well as from Medicare. What is the collection experience to -Date in 1998?

    I am sure you did not anticipate this question, but in the meantime please.

    Mr. WEST. I think that our experience, Mr. Chairman, is running roughly the same as our experience a year ago which was in the neighborhood of 20-percent to 21-percent.

    I am going to ask Dr. Kizer to correct me on this and to support me on this in a second. What I would say, of course, is that we asked this question of ourselves at an awkward point in the fiscal year. This is March. So, I think we have truly at our hands the results of the first quarter. We are just about to have the second quarter. We will know a little bit more I suspect next month. Let me just ask Dr. Kizer.

    Mr. LEWIS. Dr. Kizer, if you would, let me elaborate just a bit on the question then for you. Based on the experience to -Date, what are the chances the VA will collect the $604 million in 1998? The collections in 1997 were a little below the revised 1997 estimate which is somewhat below the original estimate.

    Dr. KIZER. I think to answer your specific question I would say the chances are good. At the end of the first quarter, if my memory serves me correctly, we were about 7-percent below the projection which is not altogether surprising at this point in the fiscal year.
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    Again, if my memory serves me correctly, our target at that point was about $127 million. I believe we were at $118 million or $119 million in collections at that point in time. There are a number of specific efforts underway to increase the collections and to get us back on target.

    I do not anticipate that at the end of the second quarter we will be on target. I am hopeful by the end of the third quarter we will either be back on target, or very close to it, and that we should end the year either there, or very close to it, and possibly exceed the target.


    Mr. LEWIS. The 1999 target is $677 million, a little larger than $98 million. You have explained efforts being made in expectancies. I know that you will keep the Committee informed if we have problems as time goes forward.

    Last year there was a great deal of concern that the estimated level of collections from third-party insurers' various co-payments would not materialize. Legislation was enacted to permit the Secretary of the Treasury to provide the difference between the amount collected and the current CBO base line minus $25 million.

    The CBO base line was $604 million. The assumption was that $579 million would be available. In the event that collections fall short, what is the amount from which the $25 million is taken?
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    Dr. KIZER. That is an adjustment that we would have to make as we move forward. I do not have a specific figure that I could give you at this time.

    Mr. LEWIS. So, nobody has done any game planning that essentially says that if we fall short and need $25 million, this is where we would take it from? I would think that some people would be a little anxious about that.

    Dr. KIZER. The anxiety is, of course, there as is the expectation that we will arrive on target. At this point in time, while there has been discussion about it, there has not been a concreteness to any scenario planning since the expectation is still that we will arrive on target.

    Mr. LEWIS. Is it last year's CBO estimate of $604 million or the current CBO base line of $579 million?

    Dr. KIZER. I am sorry?

    Mr. WEST. That is the trip wire?

    Mr. LEWIS. Yes.

    Mr. WEST. That we would be comparing ourselves to in terms of triggering the need for the assistance?

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    Mr. LEWIS. Yes.

    Mr. WEST. It is the current one.

    Mr. LEWIS. The $604 million?

    Mr. WEST. Yes.


    Mr. LEWIS. Okay. The authorizing legislation mentions using the current CBO base line. The legislation permitting the Secretary of the Treasury to make up any shortfall in collections only applies in fiscal year 1998.

    It might be described as an insurance policy. It costs us about $15 million in budget authority and $14 million in outlay. What reassurances can you give us that collections in 1999 will not fall short of the estimate of $677 million?

    Last fall, a report by the General Accounting Office concluded that the VA would succeed only if it does a dramatically better job of collecting payments. Do you see specific results that should encourage this committee?

    Dr. KIZER. Well, there are a couple of things. One, I just want to go back to something that I should have noted that I did not. We have held a $100 million reserve so that answers your question about where the $25 million would come from.
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    My comments were predicated on if it exceeded that, which we do not expect to be the case. In addition, I would note that each of the networks is holding a reserve as well.

    We are currently in the process of working with them to clarify where their expectation is as far as where they will end the year to see how much of that reserve which was previously set at 2-percent of their operating budget, how much of that we could release at this point in time, and what their expectation would be as far as continuing to hold a reserve.

    So, there is at least two layers that would have to get worked through before that trip wire, in your words, would need to be met.

    Mr. LEWIS. Thank you, Dr. Kizer. Mr. Stokes.


    Mr. STOKES. Thank you, Mr. Chairman.

    Mr. Secretary, if you see me slipping in and out of the hearings, it is because I am also on another subcommittee that is meeting next door. I have to go over there and put in an appearance also.

    There were reports last week on the results of a study conducted by the Pew Research Center for the people in the press dealing with the public's perception of government. You are probably familiar with this article, I am sure.
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    The favor of most government agencies has increased during the past years. However, numbers for the Department of Veterans Affairs are slipping. From 1986 to 1997, the percent of people who view the VA favorably declined from 68 to 59.

    The percent who view the VA unfavorably increased from 22-percent to 26-percent. Compared with the survey results from 1984, the decrease is even sharper. In 1984, 77-percent viewed the VA favorably while only 15-percent viewed it unfavorably.

    Even more troubling is that people's perception of the VA has declined, while it has increased for most other government agencies. The only agencies which have marked bigger declines in favor are the FBI and the Internal Revenue Service.

    I have several questions to pose to you relating to this trend. First, do you agree with the thrust of the numbers that I have just recited which were in this particular article?

    Mr. WEST. Well, I do not have any basis to disagree. I accept their results I guess is the best thing to say. That does not keep me from being disappointed by them.


    Mr. STOKES. Does the VA conduct any surveys of its own with reference to the public's perception of the agency?
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    Mr. WEST. I am not sure.

    Dr. KIZER. Yes, sir. We have for the last three years. We have been conducting customer satisfaction or patient satisfaction surveys. We have been able to show statistically significant increases or improvement in how our patients perceive the care.

    I cannot comment on the benefits side of the house since I do not know what they are doing. On the health side of the house, our patients view the services that they receive as better than they were three years ago.

    Mr. WEST. For fairness in advertising, the benefit could speak to that as well, sir.

    Mr. THOMPSON. We also conduct national surveys, particularly in the Disability Compensation Pension Program. We have run one. We are now in the process of running a second. So, we will have some comparisons between the base line and the current performance.

    Mr. STOKES. Just so I understand this gentleman's comments. Are you disagreeing with the particular poll that I have referenced here?

    Dr. KIZER. I do not know the methodology or the technique by which they conducted their poll. I actually, when I saw that, did jot down a note to see if we could find out how they did it.

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    Certainly my experience as an epidemiologist who has some training in how you conduct these things is that often the results one gets depends a lot on how you set-up your survey instrument; what specific questions you ask; how it is conducted; and the number of persons that you sample. There is a whole host of technical and methodological questions that I would want answered before I knew how to interpret the numbers that they cite.

    I do not disagree with the numbers that they cite, but how significant they are or what they really mean is something that one needs to understand the methodology better before you can interpret them.

    Mr. WEST. Mr. Stokes, I do not think we disagree.

    I think Dr. Kizer's survey would have been among customers of the veterans served in the Veterans Health Administration. I think the survey that Under Secretary Thompson has in mind would similarly have been among customers; veterans served and the benefits.

    I think that the Pew Research was done of Americans at large by some sampling that exceeds veterans. Although we have a substantial population of veterans, some 27 million alive in the country today, they are not by any circumstance a larger part of that subset that Pew would have been considering.

    Mr. LEWIS. Mr. Stokes, would you yield just a minute?

    Mr. STOKES. Certainly. I will be glad to yield, Mr. Chairman.

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    Mr. LEWIS. I am sorry to interrupt your thought, but Mr. Secretary, I have spent some time massaging this survey information on the medical side. I have not done so on the benefits side. Under Secretary Thompson, I would be interested in doing that.

    If you can speak to it now or provide for the record, but do you have a percentage of satisfaction expressed by the veterans?

    Mr. THOMPSON. No, I do not have it, but I can provide it.

    Mr. LEWIS. Okay.

    [The information follows:]
    "The Official Committee record contains additional material here."


    Mr. STOKES. Is VA doing anything to increase the customer and public satisfaction with the agency?

    Mr. WEST. Yes, sir. I think to some extent what you are hearing from our two Under Secretaries suggests some of the steps. First of all, we, too, are interested to learn what they have said and what our customers say and how they react.

    Secondly, we are building in, on both sides of our house, a sense that the final measure of our success is indeed customer satisfaction.
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    Mr. STOKES. One of the reasons why we have posed this question to you is because we are wondering if the budget cuts of recent years have been too severe, and if their impact has resulted not only in some decreased trust in the VA, or perhaps even worse?

    I am particularly referring to the situation at the Castle Point and Montross Medical Centers in New York with serious questions raised last year to the effect that budget reductions made pursuant to the veterans equitable resource allocation system had resulted in degraded medical care and increased mortality rates.

    Partly in response to news media reports of the request from the New York Congressional Delegation, the VA conducted an extensive investigation of the hospitals and prepared a 400- page report. First, I guess it should be noted that the report concluded mortality at two facilities were not higher than expected, however problems were certainly discovered. Are you in position to make any comment with reference to that situation?

    Mr. WEST. Surely. I suspect Dr. Kizer will want to make even more. Let me just say this, Mr. Stokes, about that. There is no doubt that the reporting of unfavorable conditions, whether that reporting is entirely accurate or not, will have an affect on the perception of our agency.

    That gives us two different responsibilities. One, to make sure those things do not happen. Secondly, to make sure that we report the good news.

    Specifically, I would point out that, that very same medical inspector's report I think you are referring to that has been characterized in the press account I thought made it clear that whatever failings the medical inspector found there, they did not relate to the VERA allocation to those hospitals. Dr. Kizer.
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    Mr. STOKES. Dr. Kizer.

    Dr. KIZER. I would add to what the Secretary has said in a couple of ways. One, going outside of the VA, as you may recall a few years ago, the tragedy of the Dana Farber Cancer Institute and then after that a succession of other medical problems were reported in the press at private institutions.

    Some polling after that also showed a dip in public perception of the medical profession and health care after that. I used that example to underscore the point that the Secretary made that when things are reported in the press, regardless of their etiology or genesis, that influences public perception.

    I would also underscore the point that he made about the medical inspector and their very extensive review of the situation at those two institutions. They did not find that the problems were due to VERA.

    Indeed, there were some longstanding problems. It appears that if anything the integration of those two facilities that the VERA has highlighted and helped facilitate the resolution of those problems.

    Mr. WEST. Mr. Stokes, may I just make a comment?

    Mr. STOKES. Sure.

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    Mr. WEST. I do not wish to be misunderstood as somehow blaming the press for the perceptions of us. I think we are responsible for the perceptions out there. So, I emphasize as well that our job is not just to improve our getting out our story, but to make sure our story is a good one.

    That we are delivering and doing the things that we need to do and that we are providing the best. I think that is the real effort we are all undertaking at the Department.


    Mr. STOKES. Let me ask you this. The 1998 appropriation of the VA Medical Care Account is $17.057 billion. The estimated medical care costs recovery collections bring the total funding available to $17.7 billion.

    For a year that reflects numerous budget increases throughout the government, the 1999 medical care request actually declines to about $17.028 billion or about $30 million less than this year. What was the VA's request to OMB for medical care?

    Dr. KIZER. The request was a part of, as I think the Chairman mentioned earlier, there was an agreement reached as a part of the balanced budget agreement last year that we would maintain our request at a certain level. So, that was the request that was put in.

    Mr. WEST. I think our request was honored.

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    Mr. STOKES. I am sorry?

    Mr. WEST. I was just saying that I think our request was honored by OMB. I was not here, but that is my impression.

    Mr. LEWIS. For the record, what was that number?

    Dr. KIZER. It was $17.027 as I recall.

    Mr. STOKES. OMB actually granted your request?

    Dr. KIZER. Yes, sir.

    Mr. STOKES. Okay. Are you satisfied at the amount then that is in the proposed budget that this will adequately take care of your needs in terms of medical care?

    Dr. KIZER. I think the budget request and what is requested for the next several years reflects a shift, if we are successful in not only getting the appropriation, but also achieving our receipts on the Medical Care Collection Fund, and importantly Medicare subvention.

    This whole balanced budget agreement was predicated on a number of factors that if all of those come to fruition, which we are still hoping that the Congress will pass the Medicare subvention piece of that, then we are optimistic that we will continue on the course that we are going of treating more veterans, and providing higher quality, and more consistently high quality throughout the system.
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    Mr. WEST. I think, Mr. Stokes, we are satisfied with the numbers. For the record, our request to OMB was $17.027 billion. We are satisfied with the number. A part of those numbers are an obligation on us to make sure our collections work, and also to get Medicare subvention.

    Mr. STOKES. Thank you very much. Thank you, Mr. Chairman.


    Mr. LEWIS. Thank you, Mr. Stokes. I might just intervene here. Mr. Stokes, the question you are asking is one that is pressing us all and we will have to focus on it over time.

    It is important to note that in 1998, there was $17.057 billion. The MCCF presumption was $688 million. That would bring the total to $17.745 billion, sharing and other reimbursements for $104 million. So, a total of $17.849 billion. We go to 1999, the projected year, to get very specific regarding your question, the appropriation would be $17.852 billion. That would remain the same through, by way of the budget agreement, 2002 each year.

    The MCCF presumption is $677 million. That gives us a total of $17.705 billion and other reimbursements are $147 million for a total of $17.852 billion. It is essentially the same as 1998. The cumulative increases over the years between now and 2002 are only slight adjustments upwards.

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    If you took in any kind of inflation, it might very well be considered to be flat at best or maybe less than flat. That is why the un-ease on the part of some service organizations.

    Mr. STOKES. Right. That was one of the reasons why we posed the question.

    Mr. LEWIS. Thank you, Mr. Stokes. Mr. Frelinghuysen.

    Mr. FRELINGHUYSEN. Good morning, Mr. Secretary.

    Mr. WEST. Good morning, sir.

    Mr. FRELINGHUYSEN. Congratulations on your new post.

    Mr. WEST. Thank you.


    Mr. FRELINGHUYSEN. All of us hold you in high regard and wish you the best. As my Chairman and other committee Members know, I have for the past three years been more than outspoken about the VERA Plan, both in substance and how it has been presented.

    Mr. Secretary, allow me to be blunt. The implementation of the VERA Plan in the northeast has been a disaster. There is now a crisis in confidence among the veterans in the northeast, a good number of whom I represented in northern New Jersey. I know what VERA is about. I agree that efficiencies can be found and that the way of doing business at the VA can be brought up to modern standards without sacrificing the quality of care for our veterans.
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    In reality, for the past three years, serious questions have been raised about the extent of what are called efficiencies and at what point they compromise the quality of care for our veterans.

    When I and others from the northeast have raised these types of questions, we have received the ultimate in bureaucratic run around. Budget numbers conflict. Actual steps taken to realize cost savings are entirely unclear.

    Worst of all, reports of individual cases of substandard care are written off as isolated incidents and somehow unrelated to asset or dollar allocation issues. When the Director of Medical Operations in my own backyard, and I have two VA Hospitals in northern New Jersey, tells me he does not even know what the budget is for his facilities, something is wrong.

    The increases are cumulative increases. First, we were told that VISN Three is taking a $148 million cut. Then last year we were told that $112 million has already been cut. Now, the GAO was in my office the other day. They tell me the number is really between $63 million or $73 million, depending on how you count. On top of this, I am told that our VISN actually gave back during fiscal years 1996 and 1997 $20 million back to Washington to the VA.

    Then we hear through the media that we are facing additional cuts of $80 million over the $146 million to -Date. Which is it, Mr. Secretary? Is there anyone in the VA that can give us some straight answers, when we are told that those cuts are a result of ''accounting errors.'' That is what had appeared in the New York/New Jersey newspapers.

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    Something is wrong to those of us who represent New York and New Jersey. When the numbers never match up, something is wrong. When our own medical directors appears to have no input in their budgets, something is wrong.

    I have never heard of a budget that does not start with the particular institution. In this case, it appears that Washington decides and the institutions back in my home state find out after the fact.

    Mr. Secretary, by any definition you have your work cut out for you. The veterans in my area, I believe, are losing confidence in the VA. That alone is alarming. The statistics, budget statistics, are arguable because they are so unclear.

    After repeated attempts to get a clear picture, it is more confusing than ever. I have actually had to call on the GAO to come in and do a study of what is going on in the northeast; not only a study of the budget numbers, but more importantly than the budget numbers is whether veterans are getting the quality of care that they deserve.

    Public perception is everything. What I think the reality is that this VERA system has been very damaging to the northeast. So, I appreciate your hearing me out. I am frustrated. I would like your reaction.

    I do not think I am an isolated voice in the wilderness. I work with the so-called stakeholders that everybody holds up as the means for communication with the veterans' community.

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    Recently those stakeholders in my area have been left out of the loop too and surprised by information coming out of Washington that relates to the President's new budget submission for the VA.

    If I am out of the loop and I serve on the Committee, and the stakeholders in our medical facilities are out of the loop because the people who run the institution do not know what is going on, then we are in some deep trouble.

    So, I would like to know your view of what is going on in the northeast and whether you have heard from other Members of Congress on these types of issues.

    Mr. WEST. Thank you, Congressman, for the opportunity to respond. I have a sense, I assume you expect that. To my left is someone who would like to respond to some of the details. Let me answer your question directly to me with a little of my ten weeks' worth of wisdom.

    The easiest of your questions and comments to answer is the last one. Yes, sir, I have heard from some other Members. Yours is not the only voice. I have heard from the New York Delegation as well.

    I think that some of you may well be aware of the letters that have been fairly public. I make a couple of observations. In my comments, I said for the last several years that VA has been on a course of rather basic change in its delivery of health services.

    Although I am absolutely certain this will not satisfy you and it is not intended to. It is by way of my opening explanation. Change is not easy. Change is not easy because of its impact on people who feel it.
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    It is not easy because of the burdens it puts on us to make sure that when we do it, we do it right. We do it so that people are not left out of the loop. We do it so that our stakeholders do not lose confidence.

    We do it so that there is no perception, or more importantly, there is no reality that some section, some group, some place, some part is being unfairly treated or unfavorably penalized.

    My brief review says to me that we undertook this course because you told us to. The Congress said, you have got to reorganize the way you do it. VERA is a response to that.

    The data, I gather, is not all in on how successful VERA is. I must tell you that my initial impression is that it is well-conceived, well-constructed, and well-intended. The question is in our execution.

    I would ask you to remember also that the people who are engaged in this who are trying to work their way through budgets, trying to make explanations, trying to get things to happen the way they should, all have the same intention that you and I do.

    That is to serve our veterans, every one of them, everywhere they are located; those in your District, those in the northeast, the absolute best way that VA has within its means.

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    My understanding of the way that VERA has been put in place is that where we find we are falling short, we will add in the additional resources. We have that fail safe. So, the question for me to work through is, just where are we failing in that VISN, if indeed failing we are.

    Let me add a couple of other things. I have looked at some of the projections and the explanations of what is happening in VISN Three. I have looked at the reports of the allocations.

    It actually seems to me that the explanations, that the numbers, have been remarkably consistent. The question of an accounting shortfall or whatever it is, has been a question of the buying power in that VISN as it is affected by inflation, which is not initially calculated into the numbers that we do.

    Inflation is an added factor. I am going to ask Dr. Kizer to refer to that as well. I have seen charts which, as I understand it, have indicated all along that the Health Administration has attempted to make clear that here are the numbers, but also here is the additional impact that inflation would have.

    The bottom line though is something you said. You said that veterans in your District are losing confidence in VA and the health services. We cannot have that. I will not have that.

    I will do whatever is necessary to make sure that every veteran in your District understands what is happening and has confidence. I understand that begins with you and the Delegation.
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    Mr. FRELINGHUYSEN. I appreciate that assurance. I know your heart is in the right place. I must say, it gauls me being a veteran. I am on your side. I will be willing to advocate until the cows come home to get you more resources, most particularly for medical accounts.

    We in the northeast do not see any of those add-ons for medical care. I understand that there are constituencies in the south and west who feel that they ought to get more of these resources.

    When we go to the mat to increase those accounts and we do not see any of that reflected in our veterans hospital budgets, just take that issue. One of the hospitals that I have, and I know my time is about up here, is the largely psychiatric-based.

    When I said to Jim Farsetta and to Ken Mizerak up in my area, do you actively advocate knowing you have a specialized population which requires more care and therefore more cost? Do you specifically advocate?

    Do you speak up for the northeast, for veterans in our area who have mental illness? I got a very fuzzy non-answer. I mean, this is not a time to resign yourselves from the VISN principles and VERA principles. It is a time to be proactive.

    I do not want the men who are representing me in the northeast to be quiet if in fact we are getting the short end of the stick and that is affecting the quality of VERA. I get the feeling that they are not speaking up in the power circles that are represented in this room.
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    Mr. WEST. I only smile because I do not think I know a single medical professional, whether doctor or director of a center, who is a tongue-biter. That is not in their instincts. I say this. I know that you and I have great confidence in the talent and capability that has been brought to this by Dr. Kizer and his folks. I know that they have great confidence in that VISN Director Jim Farsetta. He does speak up. We will review our undertaking countless times. We will work with you. We will give explanation-after-explanation. We will work through every one of these issues with you. I do believe going in that the efforts with respect to that VISN have been fair and principled.

    That does not change the fact that if you have a concern, if your veterans have a concern, if your people have a concern, then we need to take those seriously.


    Mr. FRELINGHUYSEN. Just one last question. It is my understanding, and I put it in my statement because I met with the GAO, that between fiscal years 1996 and 1997, VISN Three turned back $20 million to Headquarters.

    I further understand that we were the only VISN to return money. Can you explain to me why this was done?

    Mr. WEST. You have now asked me a factual question. I get to ask my Under Secretary for help.

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    Mr. FRELINGHUYSEN. Thank you.

    Dr. KIZER. They did turn back money. I cannot, at this moment, confirm that it was $20 million or if it was a number slightly higher than that.

    Mr. FRELINGHUYSEN. Well, any amount. By any definition $20 million is a lot of money. I had the GAO come in trying to make some sort of sense out of all your budgetary charts. Why would we turn money back if we are short?

    Dr. KIZER. Actually, if it would facilitate this discussion at all, Mr. Chairman, I have a couple of charts and tables here that might help inform this discussion.

    Mr. LEWIS. I intended to be involved pretty heavily in the budget questions tomorrow. If you would try to respond specifically to him or have somebody help you with it, I would appreciate that.

    Dr. KIZER. Thank you.

    Mr. FRELINGHUYSEN. Mr. Chairman, I do have some additional questions, but thank you.

    Mr. LEWIS. If you cannot be specific regarding him, I suppose that will have to wait too.

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    Dr. KIZER. I just do not have all of those figures in my head. So, I would have to verify whether it was 20 or some other different number. It sounded about right.

    [The information follows:]


    The network initiated several management efficiency measures in FY 1997. These included actions such as consolidation of labs, dietetics, and procurement functions. With the refocus from inpatient to outpatient care, acute beds were reduced in most of the network facilities. All of these actions resulted in staffing and other savings necessary for operating within future resource levels. Most of these FY 1997 savings were reinvested for network needs. These needs included both equipment and infrastructure improvements for all facilities. Approximately $13 million of these savings were given to Montrose/Castle Point VAMCs. After all FY 1997 bona fide needs had been satisfied, the Network returned $20 million.

    The returned funds were placed in the National Reserve Fund (NRF), a contingency account maintained in headquarters and at that point lost their unique identity. During the latter part of FY 1997 almost all the funds that were in the NRF were used to enhance ADP and telecommunications infrastructure of VHA.

    Mr. LEWIS. To further his question, does it not seem kind of strange to you that they got money and they are sending it back? That is a pretty straightforward question.
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    Dr. KIZER. Obviously, there was no mandate to return the money. If they returned money, it was because they felt they were meeting their needs, and had that to return.

    Mr. LEWIS. Well then, let me further extend the question of my colleague. He is very dissatisfied, a reflection of his constituents, with the quality and the level of the service, yet his VISN has returned money.

    If they thought that the service was great, it seems to me there is a huge gap between that kind of assumption and what the experience of my colleague, who is a Members of this subcommittee, is expressing.

    Dr. KIZER. That is, obviously, the sort of thing we want to work through with Mr. Frelinghuysen. I would note that at least the information that has been provided by the network from the customer satisfaction surveys that have been done is that the patients who were being treated there have expressed a higher satisfaction level than before. Also, the VISN is treating more patients than it has ever treated before.


    Mr. FRELINGHUYSEN. Can I speak to the issue briefly?

    Mr. LEWIS. Yes.

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    Mr. FRELINGHUYSEN. Customer satisfaction is somewhat like the Secretary said a few minutes ago. It really depends what you ask people. It is like the customer satisfaction of the stakeholders. Many of the stakeholders work for the VA. So, you can be sure that they will not be publicly dissatisfied.

    None of us want to hurt the VA system. We want to work with you to increase it. So, I think it is all good, fine and good, to take customer surveys to make sure that we pay tribute to the heart, the volunteers, who make-up the stakeholder group.

    In reality, this is a group that is fearful. My job is to relieve that fear and apprehension. The bottom line, the best way to do it is this whole issue of asset allocation. We are getting the short end of the stick. Thank you, Mr. Chairman.

    Mr. LEWIS. Thank you, Mr. Frelinghuysen.

    As I indicated, Mr. Secretary, I intend to spend a good deal more time on the budget questions tomorrow, beginning with the Veteran Equitable Resource Allocation System.

    The reason why I pointed earlier at what appears to be a freezing of VA medical care between now and the year 2002 is that certainly is a reflection of a piece, a significant piece, of what appears to be a growing problem and concern being expressed by Members of the House, not just this committee.

    I expect we are going to hear a lot of it from Members, particularly in the northeast, as we go forward with this legislation. Mr. Mollohan.
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    Mr. MOLLOHAN. Mr. Secretary, congratulations and welcome again Mr. West and the other members of your panel and your fine staff at the VA. We appreciate your all's good work. At the same time, we share a lot of the concerns that have been raised by Members in their questioning forum.

    We want to understand how you can achieve level medical budgets and continue to deliver high quality health care to veterans. I have a couple of questions following up on the general questions of Mr. Frelinghuysen perhaps.

    The formula that you set forth has, as I understand it, basically three assumptions. The first is that you are going to reduce average costs for individual veterans by 30-percent; the cost of delivering care to individual veterans by 30-percent. Is that correct?

    Mr. WEST. Yes, that is.

    Mr. MOLLOHAN. That you are going to raise 10-percent from the MCCR collections.

    Mr. WEST. Yes, from third parties. That would include getting Medicare subvention, sir.

    Mr. MOLLOHAN. That in the process, you are going to serve 20-percent more veterans. So, that is your 30/20/10 goal for veterans. Is that correct?
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    Mr. WEST. I think that is a fair statement. Would you care to comment, Dr. Kizer?

    Dr. KIZER. The only thing I would add is that those three elements are three of ten goals that were laid out for 2002. The others do not deal specifically with fiscal matters and have attracted less attention than what is coming to be known as 30/20/10, sir.

    Mr. MOLLOHAN. But these drive the budget considerations, these three, do they not?

    Dr. KIZER. They are a part of the budget considerations.

    Mr. MOLLOHAN. Well, let us just talk about these that are a part of the budget consideration. What is the basis for those assumptions for each and every one of them?

    Dr. KIZER. The 30-percent is an amalgamation, if you will, of experience that has been found elsewhere as far as the ability to reduce expenditures by using clinical practice guidelines and a host of other things.

    I should say that in many of those cases where that data comes from, that 30-percent, is reported as anywhere from a 25-percent to a 45-percent reduction in expenditure, which has been achieved in one year as opposed to the five-year strategy that we are employing.
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    There are a number of references or items in that regard that I will be happy to share with you, if you would like. The 20-percent increase in users is predicated in part on the historical patterns of increasing utilization, as well as what we thought would be a realistic figure, looking five years out or down the road.

    I would note that last year the VA treated more patients than it has ever treated in its history in a year. Then the 10-percent, again, was based on some best projections. If we are able to get these three elements of the non-appropriated funding, which includes CHAMPUS and other sharing agreements that we now have in the Medical Care Collection Fund. The third element would be the Medicare subvention which, would provide a reasonable scenario to project out over five years.

    Mr. WEST. I want to add one element to that explanation. I think it is based also on what is reasonably achievable. I think those numbers could have been carried further.

    Mr. MOLLOHAN. Okay.

    Mr. WEST. I think the efforts at reducing costs could have been made even more stringent.

    Mr. MOLLOHAN. I hear you say that. What I am trying to get to is what is the basis? What rigor? What studies? What experts, not including yourselves, have looked at this to come up with these numbers?
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    You are using these numbers as a basis for projecting level funding for medical care. You obviously have confidence in the numbers. I am just inviting you to give us the confidence in the numbers.

    Frankly, looking at them and obviously not being anywhere near as familiar with how they were developed as you are, it almost appears to be a rule of thumb.

    Dr. KIZER. They are not. Again, they are based on an amalgamation of data. We will be happy to share that with you. In the latest issue of the Veterans Health System Quarterly one short note explains some of the basis for this and cites a number of specific literature citations from which this was drawn.

    We can add to that if that would be helpful to your understanding. I just do not carry all of those references in my head.

    Mr. MOLLOHAN. I would very much like for you to submit to the Committee the basis of the formula, how they were developed, and what kind of studies and computations are underlie them.

    [The information follows:]
    Offset folios 061 to 062 insert here.

    Dr. KIZER. Sure.

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    Mr. MOLLOHAN. With regard to efficiencies, if you are going to increase about 20-percent the number of patients, what efficiencies are you going to affect? Let me ask it in the context of this question.

    I know that you have had a decrease in FTEs from 1998, according to your budget submission of 183,000 FTEs. Is that the efficiency?

    I mean, obviously if you are measuring it by number of employees servicing an increasing number of veterans, I guess that is efficiency. The question is, can you do that? What is the affect on the quality of the health care delivered to veterans.

    Mr. WEST. I do not know if Dr. Kizer is going to say this, but I think the number you just gave is the total number of FTEs, not the decrease. We have decrease down to that number. I think the actual decrease is not more than about 25,000 or so. We have gone down to that level.

    Mr. MOLLOHAN. According to the fiscal year 1999 budget submissions, FTEs for medical care in fiscal year 1999 will be 180,411.

    Dr. KIZER. Right.

    Mr. MOLLOHAN. A decrease from 1998—you are right. Thank you.
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    Dr. KIZER. There are a number of things obviously that contribute to the ability to treat more patients more cheaply, not the least of which is treating more on an outpatient basis where that is appropriate.

    As you may know, in the last three years, we have closed or at least at the end of December, had closed about 43-percent of our acute care beds, reflecting the shift to treating more patients in the outpatient setting.

    For example, over the last three years, of the last three fiscal years, the number of outpatient visits had increased by about 6.6 million.

    There had been about a 26-percent increase in outpatient visits and about a 29-percent decrease in the number of inpatient beds.

    Since one can treat more patients much more cheaply on an outpatient basis there are savings to be realized. We have reinvested those in taking care of more patients.

    At the same time, if you use the standard or some of the standard indicators that are used in the private sector to measure quality of care, for example, the Health Plan Employee Data and Information Set (HEDIS) Measures that are promoted by the National Commission on Quality Assurance.

    If you look at measures that are comparable between the VA patients and non-VA patients, what you see is that over the last two years, not only has there been a dramatic improvement in those indicators among VA patients, but the average among the VA is uniformly and, in most cases, markedly higher than in non-VA patients.
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    So, the quality of care has increased, at the same time that efficiency has increased, as well as the number of patients being treated has increased.

    Mr. WEST. May I add, if I might, sir, I do not think it is so inconceivable that we can improve health care while delivering it at less cost. I just came from a place where if you take the overhead down, and that is a part of what was just described by Dr. Kizer, then you will be doing something that has no effect on the actual delivery of the health care. If you can improve the health care as well. All over America, that is what Americans are demanding, is that we deliver excellent health care but at less cost. The fact is it is simply not true, that the best health care is the most expensive health care.


    Mr. MOLLOHAN. Well, of course, we are reflecting a lot of concerns being expressed out there. Hopefully, they are concerns anticipating a diminution in health care and not experiencing it. We will just see. Who conducted your VA surveys, your opinion surveys, on the quality of health care and satisfaction with it?

    Dr. KIZER. Those are conducted by the VA's National Customer Feedback Center using an instrument that was developed by the Picker Institute in Boston. It is a standard instrument that is used in health care across the board.

    It reflects a decision to use an instrument that was common in the industry, so that one could compare results in the VA with the results found in the private sector and make what are commonly known as apples-to-apples types of comparisons of the results.
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    Mr. MOLLOHAN. Can you make those surveys and methodologies available to the Committee?

    Dr. KIZER. Of course.

    Mr. MOLLOHAN. So, you will do that automatically based upon just my questioning right here?

    Dr. KIZER. We will provide that for the record, sir.

    [The information follows:]


    The following attachments provide the 1997 patient satisfaction and opinion surveys for recently discharged inpatients and for ambulatory care.
    "The Official Committee record contains additional material here."

    Mr. MOLLOHAN. Thank you. Thank you, Mr. Chairman.

    Mr. LEWIS. Thank you, Mr. Mollohan. Mr. Price.


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    Mr. PRICE. Thank you, Mr. Chairman. Mr. West, I, too, want to congratulate you and welcome you and your colleagues here today.

    Mr. WEST. Thank you.

    Mr. PRICE. I would like to begin by asking you about a matter that I am sure you have heard from other Members about as well. It has to do with the time that it is taking to process compensation claims.

    In my region, and perhaps around the country, but it is my region that I know most about because we do receive calls every day from veterans wanting to hear some word from the office in Winston Salem and concerned about the time that it is taking to have these claims reviewed.

    North Carolina has more than 700,000 veterans and another 112,000 active duty personnel that are potential customers. At the end of 1996, it took 138 days to process original claims; an average of 138 days.

    That seems to me to be a long time. Today, we are told the situation is worse. The process today takes an average of 175 days. The information I have indicates that there are only 100 employees available to process the 14,073 pending claims.

    Now, are these numbers typical of what we would see across the country or is there some kind of special problem in North Carolina?

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    Mr. WEST. I am going to let Under Secretary Thompson respond in detail. Let me just say a word or two about that, if I may, sir.

    We have been on a line at the Department certainly that was my experience coming in that would suggest that 138, I think you mentioned, which is actually down from a high of 213 some years prior, was part of a line heading down towards even better timelines.

    That is still our purpose and our objective at this Department: to continue to drive down the time that it takes to process a claim. The fact is that benefits late delivered are benefits that our veterans have been penalized by not receiving.

    That is very important to us. At the same time, just as important is making sure we get it right the first time. As we have begun to focus on not having veterans go through numerous steps to finally get a result, I believe that the experience that you have just identified, and I am not happy to say this, is reflective across the system. It does not just identify problems in that office in my hometown.

    Let me ask Under Secretary Thompson to respond more fully.

    Mr. THOMPSON. What you said is true. The system itself has backed up. We have approximately 10.7-percent more claims pending this year at this point in time than we did last year. The goal we had scheduled originally was to hit 106 days by the end of this year. We will not achieve that goal. Today, nationwide we stand at 153 days.

    Mr. LEWIS. Excuse me, Mr. Price. Let me just clarify what you are asking here. Are you asking that the number of days to process a claim?
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    Mr. PRICE. Yes, sir.

    Mr. THOMPSON. Yes, sir.

    Mr. LEWIS. Last year, it was somewhere like 140. It is now 153?

    Mr. THOMPSON. That is correct.

    Mr. PRICE. In North Carolina, the number has gone from 138 to 175. So, the trend is even more pronounced.

    Mr. LEWIS. My veterans are kind of old. I am just wondering how many days can we afford to wait? Excuse me, Mr. Price. It is your time.

    Mr. WEST. Well, there is no doubt that, that is way too long, Mr. Chairman.

    Mr. THOMPSON. There are several things that I think are important. I think the amount of time that we spent on reviewing and re-reviewing Gulf War claims has come at a price.

    We have injected these claims several times into the process. It speaks to the processing speeds for all of our disability compensation. We are also involved in the middle of a major redesign within the Veterans Benefits Administration.
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    We traditionally have handled claims the way General Motors would have manufactured forty years ago. It was an assembly line. In order to try to change the dynamics of that system and create one that is more responsive to veterans where they can go in and know who they can talk to, and who can help them, and be able to answer their questions, and do things more quickly, we have begun the process of redesigning work processes at regional offices.

    That comes at a cost because we pull people out of production to be trained to move operations around. So, that has added time as well. I think there is a third factor. We have demanded more accurate counts from regional offices.

    Some of the performance that has been cited in the past, in fact, was not reflective of what actually took place. So, I say those three things are contributing to the increase. But I will say we will not hit the 106-day mark this year.


    Mr. PRICE. I am not certain how the reorganizing factor plays out. Is the ultimate purpose of the reorganization to achieve greater efficiency?

    Mr. THOMPSON. It is both, greater efficiency and better quality. In the past, the people that veterans spoke to worked in one part of the operation. The people that handled claims worked in another part of the operation. The communications and the way we had for moving information between those systems was not good.

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    When we brought veterans in and they either ran the surveys, or ran focus groups, they would tell you very clearly they were unhappy with our ability to answer their questions. We also found that the quality of the work we were producing was not acceptable.

    We make too many mistakes in the claims in a rush to get them done versus trying to get them done right the first time. So, in an attempt to completely reorient the system, which has been in place for many decades, it does take some time, resources, and energy. Some of that is being devoted as we speak, including in Winston Salem, during the process of changing their organization; coupled with the fact that they do have a heavy work load there.

    Mr. PRICE. Well certainly the aim at improved accuracy and improved quality of service is a worthy aim. You seem to be suggesting that the reorganization that is designed to carry that out exacerbates the problem of delay.

    My question is when will that be overcome? When will the pay-off come in efficiency as well as these qualitative standards of service?

    Mr. THOMPSON. This does get staggered through several fiscal years, on an office-by-office basis. Within a year of completing the conversion, they should see some real efficiencies and improvements in service.

    Over the system, we will stretch this out into the year 2000 at least, so that we do not load up all of the regional offices at one time.

    Mr. PRICE. Well, apart from these aggravating factors that you have identified, to what extent are we simply looking at too few people, at a lack of resources? Do we have long term problems here that this subcommittee needs to address? What are the underlying factors here that have prevented this progress that you have been wanting to make from occurring?
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    Mr. WEST. Mr. Price, let me just say, I do not want to get in the way of the expert here. So, I will say this and then step aside. It may be too early to say. The fact is that this effort to reorganize has just started. It clipped what appeared to be the progress and pushing down on the numbers right then.

    The fact is that I think you are right in your suspicions. The things that to a ten-week expert drive down the time it takes to process claims, are the things that would appear to you and me are common sense.

    Training; I think that is an organizational problem. As VBA prepares its employees to be responsible for the whole process, that takes training. When people are being trained, they cannot also process claims, temporarily increasing processing time in return for long term benefits.

    Secondly, taking advantage of technology. Lord knows we should be able to do that in this enlightened time in our country's life. And finally, resources, numbers of people that you put into it.

    I think all of that has to be looked at as we make this effort to re-wicker the way we are doing business in those centers. I suspect that we will know more as he works his way through it.


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    Mr. PRICE. Well now, you do, as I understand it, have in this proposed budget $22.6 million targeted to produce improvements in processing claims. I gather that is qualitative improvements and also improvements in the turn around time.

    How is this money going to be used? When can we expect results? Can we have assurance that this request has been carefully considered and will in fact produce the results you want?

    Mr. THOMPSON. We believe it will produce the results. The difficulty is that there is no slack in the system. The people that are being retrained, learning new roles and responsibilities, the ones that interact with the veterans are the same ones that produce the work. When we bring them off-line to train, there is that loss of productivity at that point in time. The second issue facing us within VBA right now is the amount of training it takes to get people on-line to do the most difficult decisions.

    For a disability rating specialist, it takes two years of training at a minimum, after having mastered claims processing, which usually takes several years itself. So, those are the things that face us.

    We will use that $22 million to bring about this change in the regional offices. Some of it is for infrastructure. Some of it is for training. Some of it is for technology. The reality is, is that we are operating at capacity right now.


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    Mr. PRICE. Thank you. Thank you, Mr. Chairman.

    If I might, now that Mr. Stokes has returned, could I just take one further minute?

    Mr. LEWIS. Go right ahead.

    Mr. PRICE. In Secretary West's presence, I want to thank the Department and to thank the Chairman and Mr. Stokes for the cooperative effort we have had to put this veterans center in Raleigh after many years of struggle to get the center established, to get this center operating, and offering mental health services to veterans so effectively.

    We really do appreciate that support. Mr. Stokes, when he was Chairman of this committee, took a trip to Raleigh and saw the need first-hand. He helped us write into an appropriations bill a few years ago a directive that, that center be established. With Mr. Stokes' retirement coming this year, I know the folks in Cleveland are going to miss his presence here, but I also want him and the Committee to know that the veterans in Raleigh, North Carolina owe him a debt of gratitude as well.

    So, I am glad you came back in, Mr. Stokes, because I did want to express that, and of course to thank the Department for their continuing efforts in Raleigh and in these veterans counseling centers all over the country. I think it is an important vital arm of the health care that you proved. Thank you, Mr. Chairman.

    Mr. STOKES. Thank you very much.
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    Mr. LEWIS. Thank you, Mr. Price. Mr. Walsh.


    Mr. WALSH. Thank you, Mr. Chairman. Mr. Secretary, welcome and congratulations on your appointment. I expect you will be appointed.

    I have two questions. One, I would like to follow on and associate myself with the remarks of Mr. Frelinghuysen. I think he put our concerns about as well as they can be put. New York State in this bureau process has really, we feel, our veterans feel, we Representatives feel, been hurt by the reduction in the support for our hospitals.

    The estimates are as high as $266 million. Your predecessor, Secretary Brown, pledged that VERA would not result in any negative care to any veteran in the country. It was a relatively bold statement in light of the reductions that we have talked about; the expanded length of processing applications, and so forth.

    Realistically, how can this magnitude of reduction be achieved without negatively impacting veterans' care or without significant reductions to VA services in New York State? What actions are you taking to address specifically the legitimate concerns of New York veterans?

    Mr. WEST. I will let Dr. Kizer answer in greater detail, but let me just say again. Secretary Jesse Brown's statement may have been bold, but it is absolutely on point. There is no way that Veterans Affairs, this Department, can ever back away from that. There is no way this country can back away from that.
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    We cannot allow the quality or the delivery of our health services to our veterans, or any of our benefits as far as veterans, take a step backwards.

    If we find out that what we are doing under VERA is having that affect in an area, I believe the Department is already on record as committing itself to go and look at that and make that adjustment there.

    I think that we are still sorting out whether the fact that there is being some negative impact on the delivery of health services in that VISN and in New York is in fact a true fact.

    There is no debate over whether if it is true, it is undesirable. We would agree with you. I believe that we all believe that at this point, we are still able to provide insurances that we are delivering quality health care to veterans; I will bet to even more veterans than we had before in that VISN.

    We have always retained, and even I know this in my ten weeks, the guarantee that if we find that there is a deleterious effect there, we will go in and deal with that. Now, I may have said too much. Let me let Dr. Kizer speak.

    Mr. WALSH. Thank you. I appreciate your comments. I look forward to hearing from Dr. Kizer. My veterans advisory and other veterans organizations I am sure will hear your words. They will hold you and this subcommittee to those words and make sure that we maintain that high level, that high standard of care.
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    Mr. WEST. Sir, that VISN is getting a lot of attention from us. I have been here for ten weeks. That is the only VISN I have been to twice already.

    Dr. KIZER. I would just underscore what the Secretary has said that if we find methodologically or otherwise the ways to improve VERA, we certainly are committed to do that. I would also note that while a great deal of attention, both this morning and otherwise, has been focused on the reductions that are occurring in Network Three, it is probably worthwhile to also note that as far as full and complete information that when VERA is fully implemented, veterans in New York will still receive 27-percent more per patient than the average elsewhere in the system.

    Indeed, I was afraid Mr. Price was going to ask me why the veterans in North Carolina will receive 40-percent less than those in New York when VERA is fully implemented.

    Mr. LEWIS. Do you want to revise next time, Mr. Price?

    Mr. WALSH. If I could just comment on that statement. There is a feeling that the people who are of retirement age and are veterans, who have the ability to go south from the New York winters. They do it.

    North Carolina is one of our favorite places to visit, as is Florida, Georgia, and so forth. The people who are real sick, just cannot leave. That is one of the reasons their costs are so high.

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    Mr. WALSH. I think just to probably summarize that when VERA is fully implemented, the amount that is allocated will address all of the things that can be explained, all of what you are talking about.

    That is, indeed, why the veteran users in New York will have a 27-percent higher expenditure than veterans elsewhere in the country. Those are things that we can explain. The VERA accounts for that. The things that we cannot explain are really what VERA is targeted at.

    Mr. WALSH. Would you explain how you got from 27-percent to 50-percent higher? If you take the veterans in Phoenix in Network 18, when VERA is fully implemented, their averaged expenditure will be about $3,800 per person versus New York where it will be $5,700.

    Mr. WALSH. There is anecdotal information that you cannot compare costs between the two. I think that certainly our VA in Syracuse has done a terrific job of getting costs down. I think good management goes a long way. I would suggest the model that Phil Thomas has developed there to any of the hospitals.

    Still in all, the cost of living is much higher in New York. As I said, we have older, sicker veterans who just cannot get away. That is where they are going to be. So, there are some problems unique to the northeast that I think mitigate for those higher costs.

    Dr. KIZER. I think that is what is reflected in VERA. The fact that New York does get a higher expenditure than any other place in the country and that is a reflection of those costs.
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    Mr. WALSH. Let me just ask along another vein on Medicare application subvention. Many veterans advocates have suggested that veterans' should be reimbursed for non-service connected care that the Veterans Administration provides to veterans who are also covered by Medicare.

    This concept is referred to as Medicare subvention, would transfer funds from Medicare to the VA to cover the cost of the VA services to an existing case load of patients who are also covered by Medicare.

    Critics of Medicare subvention have argued that this would lead to an increase in federal spending authority. Proponents feel that savings could be achieved because the Department of Veterans Affairs could provide veterans with that care less expensively than under Medicare, enabling the VA to employ under-utilized capacity in many of their facilities.

    I know you support a Medicare subvention demonstration program. Can you comment about the feasibility of implementing a Medicare subvention program and address the cost implications of this and its impact on VA medical care and the VA medical care budget?

    Dr. KIZER. Well, what you have said, does indeed reflect our thinking. That one, from a philosophical point of view, it is somewhat ironic that the only people in this country who are discriminated against in their ability to use their Medicare benefit are veterans. It is an irony that is pretty hard to explain.
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    Mr. WALSH. I have not be able to explain it too.

    Dr. KIZER. We would hope that the Congress would see fit to correct that problem this year. From a pragmatic or a programmatic point of view, again, we agree with your comments and those of your constituents that the VA can provide care that is not only less expensive, but also higher quality throughout the system.

    Just to put that in some perspective, under VERA, for about 96-percent of our patients, the average expenditure would be about $2,600 or $2,700 per year. Now, if you compare that basic care cost with the Medicare which is running somewhere between $5,600 and $5,700 under a managed care HMO model, you can see that there is room there to provide not only the Medicare scope of benefits, but an expanded scope of benefits for less cost.

    That is why we are agreeable in the statute or in the potentially authorizing statute to accept a lower rate of reimbursement than would be provided to private Medicare providers.

    Mr. WALSH. Mr. Chairman, I do not have any questions at this point, but I may submit for the record, if it will be all right.

    Mr. LEWIS. Fine, Mr. Walsh.

    I just want to interpose this. A statement was made that the only group in this country that might be discriminated against for the Medicare availability are veterans.
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    For the record, it should be noted that if a veteran were to choose to use Medicare services, he, like any other citizen, can go to the marketplace and get those services.

    There are some people who would suggest that the veteran might be better off going somewhere else and using that other option. So, I do not want it to be suggested that we are suggesting against veterans here.

    By way of this, just because the Department of Veterans Affairs provides government medical care does not necessarily mean that a veteran would not have other options under Medicare.

    Mr. WEST. Well, I guess the point, Mr. Chairman, is that the veteran does not have complete freedom of choice. A veteran could not go and use that in a VA hospital where the veteran may feel more comfortable, where the hospital bears his name ''Veterans.''

    Mr. LEWIS. Be very careful, Mr. Secretary. I may be suggesting a lot more if we want to carry this conversation on further.

    Mr. WEST. I accept your caution.

    Mr. LEWIS. To the Gentle Lady who is the recipient of all of these veterans' activities from New Jersey and New York, and otherwise the Gentle Lady from Florida.
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    Ms. MEEK. Thank you, Mr. Chairman. I am wearing my set pattern, green today. So, I am in a fairly good mood.

    Welcome, Mr. Secretary and members of your group. I have concerns about what your Department is thinking in terms of veterans-specific census data. In that a lot of the problems that we are having now came from inaccurate census data. I am just wondering if the Department is in any mode of predictability in terms of census data. Will you be involved with the Census Bureau in this regard?

    Mr. WEST. Your question takes me by surprise. I do not know what our interface is with respect to that data. Someone from my staff is here, Assistant Secretary Duffy. May I offer him to respond?

    Ms. MEEK. Thank you, Mr. Secretary.

    Mr. WEST. Mr. Chairman, could he answer?

    Ms. MEEK. My rationale for that, Mr. Secretary, is that in the past the VA has not been very good in extrapolating these data and using it, in terms of the size of veterans' populations.

    In the 1990 census data in Florida, we were about 10-percent low. In 1980, we were about 5-percent low. So, I am just wondering whether or not I would like to urge the Bureau to get a handle on this to be sure that there is more accuracy.
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    If you do that, you will be doing better than the government. I hope that you would get a handle on this. Thank you.

    Mr. WEST. Dennis Duffy is Assistant Secretary of the Department of Veterans Affairs. Can you add something?

    Mr. DUFFY. Congresswoman Meek, we do in fact interface with the Bureau of the Census. Members of my staff and the Office Policy and Planning who are professional demographers work with them in ensuring that indeed veterans are one of the subsets identified in the population and looked at in the decennial census.

    Indeed my staff at the present time is in the process of updating the estimates and projections from the 1990 census. Every couple of years we try to refine our estimates of the number of veterans located in various states and counties throughout the nation and include in those projections and estimates such factors as migration, which has a huge impact on Florida.

    It is my understanding that our projections are within approximately one-percent, plus or minus, of what the actual numbers are. That is based on the best calculations that we have available to us.

    Ms. MEEK. Thank you. That leads me to think that no matter how magnanimous you may be in your budget, if the people are there, if the veterans are there, you should have the facility to do many of the things that we would like to see you do.
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    So, it is extremely important that, that count is accurate so that you would not have an under-count in the veterans because that means lack of funding for the resources. Thank you so much. I will go on with my questions.

    The main concern is your having the ability to extrapolate those figures and being sure that your contact with the Census is good and an accurate one.


    My second question has to do with research. I asked about this the last time you came to the hearing. I am so concerned about VA research in that over the years, anyone as old as I am would know that the Department of Veterans Affairs had a propensity for doing excellent research.

    We have seen perhaps a diminution of that in recent years. I would like to ask you, just what plans do you have for good medical research? I think it came to my attention more persistently with the Gulf War kind of problem.

    I would like to feel a little bit more strongly about the kinds of research you are doing. I notice your budget request asks for an increase in that particular area. Would you comment on that?

    Mr. WEST. You are correct. Our budget does ask, I think for a 10-percent increase in research funding. We are glad about that. I am going to ask Dr. Kizer to talk about our research program.
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    Ms. MEEK. All right. Thank you.

    Dr. KIZER. I think what I would like to do is perhaps provide some information for the record.

    [The information follows:]


    Of the total increase of $28 million, $9 million is for current services. The additional $19 million will allow the start of three major new research initiatives that exploit VA's unique assets in clinical research, including: 1) outcomes research; 2) rehabilitation research; and 3) large scale cooperative studies of new therapies. These areas capitalize on our focus within a large integrated health care system. The first of the three initiatives includes VA's new outcomes research initiative on quality of care—the Quality Enhancement Research Initiative (QUERI) which establishes unprecedented collaboration among research, patient care, policy and performance, and informatics. Presumptive target conditions for this initiative include such prevalent conditions as prostate disease including cancer, coronary heart disease, heart failure, diabetes, mental illness such as depression and schizophrenia, cerebrovascular disease, AIDS and chronic spinal cord injury. This initiative will cost approximately $9 million. Secondly, we propose to invest an additional $2 million on Rehabilitation Research initiatives, especially in the areas of vision and hearing, aging with a disability and prosthetics. Also, we propose to add a new research center of excellence in Acute Brain Injury. Thirdly, in the area of large scale clinical trials we plan to initiate major new cooperative studies, costing $8 million, on Parkinson's Disease—$5 million will be devoted to research focused on the evaluation of surgical treatments (pallidotomy) and $3 million will be focused on diagnostic Single Positron Emission Computed Tomography (SPECT) imaging studies. In all these areas, no other federally supported clinical or research entity can initiate or complete such critical and ambitious research activities on behalf of America's veterans.
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    Dr. KIZER. Actually, the last three years provide a very good story as far as our ability to increase the number of projects that are funded and increase the number of investigators that are being funded, increase the number of collaborative studies that are being done to establish some new centers and to partner with non-VA entities.

    Since there are numbers in that regard, I would hazard to cite all of those at this point. So, I would like to provide that for the record. I would only note that I think as you have so generously commented that the VA has an excellent and indeed a very stellar history of producing research that not only benefits veterans, but benefits everybody in the nation.

    I think in the last three years, we have built on that significantly. I know with the increase in funding that is proposed, we will do even a better job.


    Ms. MEEK. Thank you. The VA is extremely important to my State. I am from Florida. From 1980 to 1990, the census data showed that 47-percent of all veterans relocated to another state during the decade.

    In that decade, they moved to Florida. They moved there and they remained there. The net gain of veterans to Florida in the last decade alone, was about 349,000 people, from my own figures, was greater than the overall veterans population in 22 states. Florida is the home of the nation's second largest population, other than my Chairman's state of California.
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    We are home to that many veterans. These are veterans that come into Florida's programs and they remain there. The only areas where I have had complaints had to do, number one, with the slowness of claims and, of course, all of the other Members mentioned that.

    My second reason for mentioning these data is to say to you that when you begin to manage the funding that this committee will give you in VERA, that is why VERA was initiated in the first place, so you could use these data as a basis for allocating funds.

    I am sure you must have some other things that you can fold in. We used to call those things equalizers in certain formulas that you can help the other areas. My main statement is do not forget the basic figures.

    The statistics are there. Of course, you certainly want equal treatment, as well as you can, of all the other veterans. So, I would implore you to do the same thing as you have always done and make sure that you follow the regulatory and the statutory effects of VERA.

    Mr. WEST. We will. Certainly, we realize the importance of what you say. I think you would agree with us that every single Veteran is important to us.


    Ms. MEEK. Yes. My last question has to do with cemeteries. I said that because that will be the last one that lets you down. I understand that our budget—I am so comical at times.
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    You need a little comic relief on this committee, I think. Your budget supports the opening of four new cemeteries during the next two years, more than any time since the end of the Civil War. Can you tell me how these new cemeteries will be financed; both for construction and operations?

    Mr. WEST. We have them in the budget.

    Ms. MEEK. You put them in the budget. That is right.

    Mr. WEST. I am going to let Jerry Bowen who is the Director of the National Cemetery System be more specific on that question.

    Ms. MEEK. Thank you.

    Mr. LEWIS. Mr. Bowen.

    Mr. BOWEN. Yes, most of the increase in our budget of 9-percent will be directed towards bringing on-line four additional cemeteries before the year 2000. So, we are planning for that. We also have under way a $6 million construction project to expand the Florida National Cemetery at Bushnell.

    We also have $6 million in the 1999 budget request for the construction of a columbarium for the burial of cremated remains at Ft. Rosecrans National Cemetery in California.

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    Ms. MEEK. All right. I asked that question to lead to my last question. It has to do with the fact that many of the veterans in south Florida say to me that they would certainly like to be buried close to home in south Florida.

    Is there any chance that there maybe somewhere between now and, well I do not know, I will just say agamemnon, a national cemetery coming to south Florida?

    Mr. BOWEN. Yes. In 1987, Congress directed the VA to do a study to identify the ten areas of the country that were in most need of a new national cemetery. That was strictly based on veteran demographics; the number of veterans that would live within 75 miles of a particular site.

    One of those ten areas was Miami. We encountered some problems in finding suitable land in and around Miami. Number one, we like to go for high ground for our cemeteries, and the high water table in that area is a problem.

    Second, finding a sufficient number of acres that are available for development is also a problem. The cost would be prohibitive due to the topography of the land and the water table as I mentioned.

    So, what we are going to explore now, because the cremation rate in our national cemeteries has been rising consistently and is now approaching 30-percent, is building a memorial park for the burial of cremation remains only. Thus we would not have casket burials available in and around Miami.
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    However, we still would have casket burials at Florida National Cemetery in Bushnell. So, this would be an additional burial option that the veterans would have available to them.

    Ms. MEEK. Thank you. Would you, for the record, keep me apprised of how that is going in terms of your research that would validate you are looking for the type of crematorium or memorial park that you are interested in?

    Mr. BOWEN. We would be glad to do that.

    [The information follows:]


    Miami/Fort Lauderdale was one of the locations documented in 1987 and 1994 Reports to Congress identifying large veteran population areas not served by a national or state veterans cemetery. In evaluating the feasibility of establishing a national cemetery in the area, a need of at least 200 acres was identified and the region was canvassed for appropriate sites. The five best sites were analyzed for environmental and gravesite development feasibility. In general, it was found that due to the high water table poor soils and poor drainage, construction of a traditional cemetery with casketed gravesites would be very difficult, at best. Those sites which offered the best conditions would be very expensive to develop. With the experience in recent years of a significant increase in the number of cremation burials, the National Cemetery System will evaluate the potential establishment of a cremation only cemetery in the Miami/Fort Lauderdale area as part of its strategic planning process. This would likely involve the construction of columbariums only, therefore requiring much less acreage.
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    Ms. MEEK. Thank you, sir. Thank you, Mr. Chairman.

    Mr. LEWIS. Thank you, Ms. Meek.


    Mr. Secretary, you may have noted that Ms. Meek has a unique capability to bring us very close to the rough.

    The 1999 budget assumes $17 billion saved over five years, if legislation denying compensation for certain smoking related disabilities is enacted. Similar legislation was proposed last year.

    For the benefit of those who may not be familiar with this matter, would someone briefly explain how we have come to be in the situation we now find ourselves in regard to the payment of compensation for certain smoking-related disabilities?

    Mr. WEST. I will make a brief effort, Mr. Chairman. I certainly have enough experts with me to catch me when I am wrong.

    Until quite recently, compensation for a disability which did not manifest itself in service and for which the only service connection was tobacco use while in service, did not exist.

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    We did not provide compensation for a smoking-related disability, nor did we provide health care as if it were service connected. Two decisions by the General Counsel; one a few years ago and one much more recently, I think in 1997, have changed that. If you would like to hear more from him on their rationale, I see that he is here.

    Essentially, the General Counsel's opinions left us with this position: if a veteran could establish that he or she had smoked while on active duty, and then developed a disability from smoking, that the veteran had demonstrated sufficient service connection to obligate us to pay compensation for that disability.

    The legislation to which you refer simply negates that conclusion and says that we will not make that compensation. It also affects an obligation to provide health care that would have flowed from such a presumption, of service connection.

    Mr. LEWIS. Mr. Secretary, do you support this legislation?

    Mr. WEST. I do. The fact is you referred to the savings over five years. I think that is a savings of over five years.

    Mr. LEWIS. I understand the savings, Mr. Secretary.

    Mr. WEST. Okay.

    Mr. LEWIS. I asked if you support it. Let me ask further, do you think such a legislative proposal is fair to our veterans?
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    Mr. WEST. I think so. I was about to say that as best we can determine, there would be a number of veterans affected by this.

    Mr. LEWIS. Can you imagine some Philadelphia lawyer arguing that this 17-year-old seeing this delightful Camel pack next to his C rations recalled years later was, by way of imagination, tempted to smoke? I can—anyway.

    Mr. WEST. That is at least one of the failings of such a broad brush approach as is forced on the Department by our legal interpretation. We are talking about folks from World War II who may or may not have had the reaction you have described.

    Today's young 17 or 18-year-old who goes in with full awareness of all the programs, of all the advertising, of all of the statements from medical professionals that say smoking can kill you, indeed, smoking mostly likely will kill you and it will kill those around you too.

    My sense is that, that is more than the American public is prepared to have its government do. It is very important to us to maintain the confidence in our system of compensation that does not flow from such a broad approach as that.


    Mr. LEWIS. I must say, Mr. Secretary, and one could dwell on this a lot. I do note in the President's budget which is, of course, his submission of a balanced budget there is a nice non-specified off-set from these savings of somewhere between $15 billion and $17 billion for other veterans programs. I am not a smoker myself, but I scratch my head at that. What is the estimated number of claims that would be filed over a five-year period if the proposed legislation is not enacted?
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    Mr. WEST. Well, I think if we are looking at something that assumes that—I think this is all very iffy. We have had a very small 6,000 or 7,000 claims so far. I think those have all been in the environment in which there has been an assumption that we are just not going to be granting them.

    Now, with hearings and all of the publicity, I do not know how many claims might fall in. I assume right now that the estimate that assumes that savings of $17 million assumes about half a million, 500,000 claims over a five-year period.

    Mr. LEWIS. I have some questions along those lines, but I think I will pass them for the moment. There is an anticipated increase claim in connection with this. How much time would be needed to process original compensation claims increase, to how many days, if the proposed tobacco-related legislation is not enacted?

    Mr. WEST. Do you mean how would our average number of days in which the process claims balloon?

    Mr. LEWIS. Yes.

    Mr. WEST. Like if we assume it is at 150 now, where do we go to?

    Mr. LEWIS. Yes.

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    Mr. WEST. I do not know. Do you?

    Mr. THOMPSON. No. It would be driven strictly by the number that came in the door. We are operating at capacity right now. Tobacco claims would be among the most complex. It will contribute significantly if we receive somewhere on the order of 50,000 to 60,000 claims next year. It would significantly increase, perhaps up to a fourth of the total, the amount of time it takes to do a claim.

    Mr. LEWIS. Although this, from my perspective, has to relate to what it will cost and how many people are involved. So, would $30 million or so and 500 FTE be in the ballpark if the processes ceases to handle this expansion?

    Mr. WEST. I will bet that is not at all out of the question, sir. Certainly if you use the assumptions that 500,000 claims and what maybe 6 FTE per thousand or something like that, that sounds like that would be very close to a ballpark in an environment in which we really cannot tell what the claims experience will be.

    Mr. THOMPSON. Mr. Chairman, if I could add one thing to what the Secretary said. The important consideration is it is not for us. It is not just a staffing issue should the legislation not pass. It is a training issue as well. We need significant lead time.

    Mr. LEWIS. Yes. I had asked the question, how much additional administrative money, as well as FTEs, would the benefit program need in 1999 to process this?

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    Mr. THOMPSON. I guess what I am saying is even with the additional monies, it would still delay claims processing. We would not be able to hold our own because we would not get the people in the right jobs. We could not add that many people into making disability evaluations because of the lead time it takes to train them for that.

    Mr. LEWIS. Okay. I do have some clarification that I need for the record here. I will ask those questions and if you will respond. I will be with you in just a moment, Mr. Stokes. Just one more line here, if that is all right with you.

    The way this legislative proposal is handled in the 1999 budget is somewhat out of the ordinary. The traditional method of preparing a budget is to base your request on existing legislation. Is that not correct?

    Mr. WEST. I will accept your judgment on that, Mr. Chairman.

    Mr. LEWIS. I would think that it would be based upon the laws as we see it and not a guesstimate that maybe we are going to have a law.

    Mr. WEST. If we did that, we would be basing it on an existing General Counsel opinion I guess.

    Mr. LEWIS. I guess that is right. Everybody has to do their own thing. Why did you not include in your 1999 general operating expense appropriation request the administrative funds, which are discretionary, necessary to process the smoking-related claims which are paying under existing law?
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    Mr. WEST. I think all things considered, Mr. Chairman, we probably would not have included a single cent in our budget on the assumption that the legislation was going to pass. The claims amount that you see reflected there is there because our sense is that must be reflected there by law.

    This other discretionary amount is not reflected there because the Administration's position is simply fairly straightforward. We simply should not be paying those claims.

    Mr. LEWIS. Well, it is very, very close to the edge of a budgetary flem-flam. Earlier, I was going to ask you, what do you think the prospects of this legislation really is?

    You are too new on the job to be getting involved in predicting legislative success or a lack of success. It does not take much to say it has got a ways to go. Have you got all of the VSOs on board?

    Mr. WEST. I would think not.

    Mr. LEWIS. Do they influence this process at all? What is the prospect that this legislation will be passed?

    Mr. WEST. Well, we are still very hopeful for it, Mr. Chairman because the alternatives are not good. The alternatives of the Department trying to sort this out are not good ones. The philosophy, and I understand you differ with me.
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    Mr. LEWIS. I do not differ with you.

    Mr. WEST. The VSOs may differ with me. The philosophy is not good as well. I do not think the American people expect us to pay compensation, disability compensation, for someone for a smoking-related disease when the sole connection to military service is that he or she began smoking on active duty.

    Mr. LEWIS. Mr. Stokes, this is not exactly fun, but I could see a circumstance where they really work hard, get legislation passed, you know, it would be pretty far out, but then all of the VSOs would be marching around the White House and the President would veto the bill. I can see that happening.

    Mr. Stokes, I will yield to you.

    Mr. STOKES. Mr. Chairman, I notice that it is about noon now. If you would like, I can just be first up this afternoon, if you would rather.

    Mr. LEWIS. You know, frankly, I think probably that would be smart, because we have some other commitments down the hall.

    Mr. STOKES. Sure.

    Mr. LEWIS. I appreciate your saying that.

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    You Gentlemen and Ladies can take a break. I am sure you do not feel you need one. We will come back at 2:00 p.m. We will be in session for approximately two hours.

    At that time, I could get to some of those budget questions this afternoon rather than tomorrow.

    Mr. LEWIS. The Committee will come to order.

    Mr. Secretary, the committee reports for the last few years have admonished the VA to improve customer service and quality of care.

    Veterans deserve, as we have discussed, the best health care possible. I believe that Dr. Kizer is on the right track, but the system does need to deliver better service, at least the perception of better service, if not more than that.

    For example, how long does a veteran wait to be seen at outpatient clinics? How does that compare to two or three years ago? How often do patients carry around their own records as they go about from clinic to clinic?

    Why do we not start with that?

    Dr. KIZER. The waiting times have decreased substantially, both waiting times in the sense of how long one has to wait to get in to see a care giver once they have arrived at a facility or clinic for care, as well as the amount of time that one has to wait to schedule either a primary care appointment or a specialty clinic appointment. There is and continue to be heterogeneity in those times. We are working to bring the system wide consistency to that, just as we are in a number of other areas.
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    If it will be helpful to you, I certainly can provide you with some specifics as far as the exact intervals of time for the most recent data collection, as well as prior to that so you can make your own judgment about the amount of change that has occurred.

    Mr. LEWIS. I am very interested for the record.

    The question is specific about outpatient but it is more generally as well. I would like to add some detail about the waiting lengths of time and what the pattern is. What has changed? What direction are we going in?

    [The information follows:]


    According to the April 1997 Primary Care Survey, the average wait for a new patient appointment was 19 days. We are confident that the date being collected is more accurate now than when we started the first survey. The field staff recognize the value of good data gathering and documentation. It allows them to monitor their own progress and their progress in comparison with other VISNs/facilities. We anticipate that over-time the number of days until a new patient appointment will decrease.

    Data from previous Primary Care Surveys indicate the following average number of days for a new patient appointment:

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Table 1


    Mr. LEWIS. What is the status of converting to electronic patient records?

    Dr. KIZER. There are a few facilities that have made that conversion overall. In all candor, the VA is probably well-ahead of where the rest of health care is.

    I think one of the things that is of particular note in this regard, and I believe something of considerable interest to you, Mr. Chairman, is the fact that we recently announced our intention to work with DOD to develop a common electronic medical record that would serve both the active duty personnel, as well as veterans. I think frankly that would go a long way in addressing many of the informatic issues and concerns that have been a problem for the past 50-plus years.

    Mr. LEWIS. Mr. Stokes, you may not recall this, perhaps you do, but because of concern about these sorts of questions, some time ago on several occasions, I had different Members of my staff in my District as though they were family members, travel with my veterans to the local hospital and go around with them.

    One of the things that was most disconcerting to them, but amazing to me was to have, you know, an older person, perhaps not well, toting around his or her, usually his, records from location-to-location. Now, physicians are noted to be the finest of businessmen I know.
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    For God sakes, to have those records handed off and sometimes disappear, it would seem to me that the Veterans Department only talks about the fact that we were early on in the computer business.

    Supposedly we were becoming aware of their value to now expect to be able to walk in a hospital, particularly a well-established long-term hospital, and ''bang'' have records come up electronically instead of expecting that individual to carry all of their medical records. I mean, long waits are ridiculous. That sort of paper-dependent organization—it is almost laughable. There is not a hospital in the country that would not go broke if they allowed every patient to walk in and carry their records around.

    It seems to me that at least in a modeling way, we ought to know where the best illustrations are in the country, one or two clinics or hospitals where the modern era is being taken advantage of and then maybe we could just see how we could replicate that elsewhere.

    I would like to see a proposal that says this is what it would cost to take the best model and move it to another hospital. Maybe we can move it from some other hospital to mine and see what happens.

    When we are delivering the finest care to the most important patient group in the country. To be in the 1990s and operating medical facilities this way is just ludicrous, if not plain outrageous. So, I would like to see what we can do about that goal. I will ask the same question next year. I will be looking for some of those models.

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    Mr. Stokes was kind to let us go out to lunch. He did that with the assurance that I let him be up first. Sorry, Mr. Stokes. I appreciate your patience. I have turned just as red as you are.


    Mr. STOKES. Do not worry about it, Mr. Chairman.

    I have made some of the same mistakes when I was in the Chair. I understand. So, I can empathize with you. Thank you, Mr. Chairman.

    Mr. Secretary, the independent budget endorsed by more than 50 veteran service organizations estimates that the 1999 current services amount, that is the amount needed in 1999 to maintain the level of services provided in 1998 is $18.3 billion.

    Their recommended funding level for 1999, including third-party collections is $19.5 billion or nearly $2 billion more than the amount requested by the Administration. In a press release issued at the time that their budget was presented, leaders of four national service organizations stated, and I want to quote them:

    ''Chronic under-funding and staff shortages facing the Department of Veterans Affairs could result in a catastrophe for Veterans seeking VA health care.'' My question to you is how can you convince these groups and the Congress that this budget will not degrade the level of care provided our nation's veterans?

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    Mr. WEST. The first part of the answer, Mr. Stokes, in terms of how we will convince the groups, is I think, with a great deal of attention to detail, with a great deal of openness and candor about what we are trying to do.

    Also, with a great deal of attention to the concerns they are voicing. Obviously, we have disagreement with respect to the independent budget versus the President's budget. To some extent, that is not so terribly unusual. An independent budget takes a different point of view. It takes a different approach.

    It has far less confidence in some of the efficiencies that we are proposing. Some of the ways in which we are proposing, especially in the health care arena, to do our jobs. We have to instill some of that confidence in them and, incidently in the process, that confidence in you as well.

    The best I think that we can do to instill that confidence is to explain very carefully the assumptions we have. I think that Dr. Kizer has done some of that already this morning.

    We will continue to do so, to explain why it is that we believe that with a combination of appropriated funds requested in this appropriation, third-party payments, and with the efficiencies that we are going to undertake, and that we are undertaking, that we can do it. Also, to show the progress.

    I think that some of our answers that you heard from us this morning already show that we believe there are reasons to be encouraged about our success in what is after all a very wide ranging change in the way we are delivering these services.
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    Remember the points of encouragement. We are seeing more veterans, providing more medical care to more veterans than ever before in this system. I do not think we can discount the responses that our veterans have given about the health care when we have surveyed them.

    Those are the kinds of assurances I would give them. I do not know if Dr. Kizer wants to add to it or not. I do not think we can get away with saying, ''trust me,'' obviously, but I think we can show the things we are doing.

    Mr. STOKES. Dr. Kizer, did you want to add something?

    Dr. KIZER. Well, I understand it and appreciate the concern expressed by the independent budget and certainly appreciate the support of the VSOs for the system. I think that the dialogue needs to occur around what Mr. Secretary has said what the data are.

    We are treating more veterans than every before. The quality of care indicators from a number of different areas show that care is getting better, using the same instruments that are used to judge care in the private sector.

    Our waiting times are down. The cost effectiveness of the care is greater. I think we need to continue to let the data speak for itself.

    While there is not the uniformity or the consistency throughout the system that I would like to see at this point, I think we have made it clear that that is our goal. We are making progress towards that goal.
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    Mr. STOKES. Would you not say the services are getting better? Would you also include in that category the compensation claims? Are you putting those in the same category?

    Mr. WEST. Well, let me take that up, since that is not Dr. Kizer's area. Mr. Stokes, I believe we are undergoing in the compensation and pension area a change that is almost as great as what we are seeing in health care.

    Under Secretary Thompson spoke about reorganization and retraining. We are essentially putting in place, and actually we are retraining the people who are there, personnel that will be accountable for what I will call in my laymen's terms the whole claim, not just process a little piece here, and then someone else here and there, but to take responsibility for the whole claim.

    That gives a great deal more accountability to the individual for the quality of what he or she is doing. Also, a great deal more sense of responsibility by that individual. We think that will take, I heard Under Secretary Thompson say that it will take, about a year to have all of that kick in. So, yes, I think we are on the road to improvement.

    I have great confidence in the balanced score card approach of the VBA right now, but it is new. It is just starting. It will take a little bit to show improvements.

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    We are trying to do something that I think has not been attempted in this Department, which has existed as a part of the United States Government for a long time, that has not been attempted many times before. Wholesale change in the two largest operating divisions to improve the way we deliver services to veterans.

30–20–10 GOAL

    Mr. STOKES. My next question, I understand while I was out of the room, was touched upon by Mr. Mollohan, although I think he may not have gotten into it quite the same way that I want to get into it.

    It has to bear on the fact that last year, Secretary Brown had testified before our committee. I just want to quote him,

    ''The passage of our legislative package will permit us to accomplish the following:

    ''By the year 2002, we expect to reduce the outpatient health care cost by 30-percent; increase the number of veterans served by 20-percent; fund 10-percent of VA's health care budget from non-appropriated revenues. These three goals are mutually dependent. We cannot accomplish any of them alone.

    ''Without enactment of these legislative proposals, straight line appropriation in 1998 would force VA to treat fewer veterans and eliminate thousands of health care positions.''
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    It appears that the Agency is not meeting last year's estimates for the amount of non-appropriated funding, much less increasing the amount to 10-percent.


    Tell us, Mr. Secretary, what is the status of your legislative proposal and how you are doing towards the goals of reducing costs and increasing the number of veterans served?

    Mr. WEST. As to the status of the proposal, of course, we are still hopeful that the Congress will approve Medicare subvention, the pilot program.

    Getting through the pilot program and then eventually into Medicare subvention is going to be a significant part of how the whole picture works in terms of financing health care now and in the foreseeable future.

    In terms of the part that we, as an Agency, essentially control, that is the other third-party payments, I think Dr. Kizer has already testified that we are making encouraging progress. I will let him say again, so that I do not misstate them, how the progress looks.

    I had said I thought we were running roughly the same. He says we are about 6-percent or 7-percent below collections last time after the first quarter. We have not seen the second quarter results.
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    I think he says that he believes that by the third quarter, we should see a pretty good indication. Why do you not speak to this.

    Mr. STOKE. Sure, Dr. Kizer. Please feel free to add whatever you would like.


    Dr. KIZER. Right. The points that the Secretary made, in essence, restated what I testified earlier to a question that at the end of the first quarter, we were, as I recall, about 7-percent below on the MCCF collections target. A number of efforts were being made to increase collections. While I do not expect that we will be back on target by the end of the second quarter, I am hopeful and optimistic that by the end of the third quarter, we will be very close and will be on target at the end of the year.

    As far as the overall package which I think you asked about, we are just beyond the first quarter of a five-year plan. I think at this point it would be premature to judge the progress on where we are as far as achieving those five-year goals.

    Mr. WEST. Let me say one other word. I think a fair amount of the skepticism, if there is skepticism in terms of the funding plan, Mr. Stokes, could focus on whether or not we will be successful in meeting our targets for third-party collections. It seems to me that is a big part of the real question.

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    I asked the question yesterday. My sense of that, again, from a bit of a laymen's point of view is that, that is driven by a couple of things. One is what is the universe of collections?

    Have we out there potential third-party payments that we have been so unsuccessful in getting a significant portion of in the past that we have room to expand our success. The answer, I guess, is yes.

    There is expansion out there to be achieved. Well, then the next drive it seems to me is are we taking steps that in a more business like fashion assure that we will actually make the contact, put the call through, get to the third party, and make the collection?

    I think that is the package of activities that VHA has underway right now to have a realization of success on that. I guess we will have to wait and see how our experience is through this year.

    I think there is a reasonable expectation. We will know a lot better when we get a couple more quarters under our belt that we could do it. That, I think, is what we are pointed towards.

    We certainly do not yet, and this is an unfortunate standard to use, but I think we ought to need to be reminded of it. We certainly do not yet have indications to the contrary. We do not have signs of some great failure occurring here. We only have the results from the first quarter.

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    Mr. STOKES. As you look out at your picture, when we are talking about goals, have you set, say, some interim goals that you would like to reach before the year 2002 in terms of reducing the costs and increasing the number of veterans to be served?

    Mr. WEST. I think so.

    Dr. KIZER. We have essentially prorated that over four years. So, for example, if you take the easiest one, a 20-percent increase in the number of veterans at the end of fiscal year 1998, we would hope to be at 4-percent above where we were at the beginning of the year. You could also do the 10-percent of the operating budget coming from non-appropriated funds. We would hope that at the end of fiscal year 1998, we would have about 2-percent. Again, basically dividing those five-year goals by five for each year.


    Mr. STOKES. Let me take you a little further into it with this. Again, I want to quote Secretary Brown last year. I do not want to be unfair to you, Mr. Secretary at all. This is a part of the record.

    I think in all fairness we have to look at the record and pose questions to you relative to the record, even though you were not the secretary at that time. Secretary Brown stated last year, and I quote him:

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    ''We have estimated that 105,000 veterans will be denied care next year, and 6,600 health care positions may be eliminated. A straight line budget in 1998 would force us to change the veterans equitable resource allocations.

    Networks that will receive increases would get less. Those that will lose dollars will lose more. By the year 2002, we will have denied care to half a million veterans.''

    I guess what I am asking you is can you assure the Committee that all eligible veterans are receiving care in the VHA and that at the present time, at least, there is no rationing of care?

    Mr. WEST. I have an assurance I want to give you, but let me ask Dr. Kizer to answer you sir. Then I will speak to you about the future.

    Mr. STOKES. Dr. Kizer.

    Dr. KIZER. We are certainly providing more care today and treating more patients than ever before. We are doing that thanks to the Congress allowing us to provide it in a much more rational way with the eligibility reform legislation that was passed in 1996.

    The reason I am hesitating a little bit in the answer, I mean, we also know that of the approximately 9.5 million Category A veterans that are the most needy of our veteran population, that we are not treating all of them. A part of the whole strategy of Medicare subvention and others is to allow us to provide care to more veterans than we are able to do with just an appropriated funding amount. So, we know that there is unmet need, if you will, out there that we would like to try to do a better job of addressing and that we cannot through the appropriated funds we have to -Date.
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    Mr. STOKES. Just one follow-up question. How confident are you that there will be no rationing of health care in the VA health system through 2002, given the Administration's budget projections?

    Dr. KIZER. There is nothing that at this point would make me think that we would be rationing care. I actually have significant philosophical problems with the idea of rationing care. If we cannot provide what a patient needs, then we should not embark upon taking care of them. The issue in my mind comes down to if we do not believe we can provide the full amount of care that, the patient will need over the course of the year, then we should not start to take care of them.

    That is in the eligibility reform scheme. A part of what we are going through right now is to try to figure out exactly how many we think we can take care of in fiscal year 1999 when eligibility reform kicks in, based on the tentative enrollment figures that we will have this year. So, it is certainly not our intent. It would be our stronger aversion to doing anything that would appear to be rationing care.

    Mr. WEST. I said I wanted to say a word about the future. I want to be careful about the answers we are giving. I think you asked for an assurance that all eligible veterans are receiving health care.

    I assume one part of that is there are probably eligible veterans out there we are not reaching. I think one of the things that comes through very strongly from Dr. Kizer's testimony is that we are reaching more eligible veterans than we ever have in the past.
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    My view about the future is we will continue. That, of course, as you all know is the purpose for the outpatient clinics. The effort to take health care to veterans and to reach more. We will continue doing that.

    Continue expanding our efforts to reach as many veterans as possible. Continue to have that number grow, not to have that number diminish.

    Mr. STOKES. I think you will realize that the thrust of our questions is to gain assurance from our perspective that the type of appropriation that you are proposing will in fact do precisely what we are discussing. That is provide adequate health care to all of our veterans.

    Thank you very much, Mr. Chairman.


    Mr. LEWIS. Thank you, Mr. Stokes. Mr. Frelinghuysen.

    Mr. FRELINGHUYSEN. Thank you, Mr. Chairman.

    Appropo Mr. Stokes' comments, I think there is a public perception that the VA is rationing health care. I think it is somewhat demonstrated through the Pew Study. I think to a certain extent, it may well be reflected, and you are welcome to correct me if I am wrong.
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    It may be reflected in your annual surveys of customer satisfaction. I made a note, Dr. Kizer, when you spoke earlier. When you talked about the VA system, you said, ''The VA system is well-ahead of where other types of medical care are nationally.''

    Well, the public perception is that non-medical VA care is mired in health management issues. The public perception of health management organizations is not particularly positive. What we may have developing here is that the model that you are pushing forward here, even with Congressional concurrence, VERA, the VISN Program is just a managed care health model in a veterans health care package.

    I would like to get your reaction to that. We are not in the business, hopefully, of rationing health care. We would state for the record, I am sure you would, that veterans have served their country.

    So, they are in fact a class of citizen that deserves, by its very definition, some extra special attention. So, I am sure we are all on that waive length.

    Dr. KIZER. On two things I would comment. They are different in nature. If you go to any textbook on managed care and you look at what are viewed as examples of managed care systems, VA is cited. So, I find it somewhat ironic that in some of the press today cite VA as adopting managed care principles when most of the references cite us as an example of one of the longest standing managed care organizations.

    That does not necessary require any further comment or discussion. That is just one of those ironies. The second, and I think perhaps much more important and responsive to your question has a lot to do with the incentive of these managed care principles. They are very different. In VA, when we apply some of these principles, whatever savings may accrue go back into taking care of more patients or doing a better job taking care of those that we have.
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    There is no return to shareholder. There is no quarterly dividend paid. They do not go into executive salaries, or perks, or other things of that nature, which is what I think is reflected in much of the public perception.

    The concern today about managed care, particularly as health care and managed care organizations have increasingly moved to a for-profit mode, is that savings somehow then get redirected and go back to shareholders or to executive salaries, et cetera, et cetera, as opposed to being reinvested into care. Our measure of success is going to be how well we take care of our patients.

    So, whatever we can do as far as taking care of more patients and doing a better job of it, that is how we use whatever savings that accrue. It is a very different dynamic than what you are seeing certainly in the for-profit private sector.


    Mr. FRELINGHUYSEN. It is a different dynamic, but in reality many veterans are wondering where all of these savings, these so-called efficiencies, you know, to what bottom line are they going to and how in fact are those so-called efficiencies affecting quality health care?

    Dr. KIZER. Well, let me give you one example. As this committee knows that over the last two years, we have established or are in the process of establishing 188 new community-based outpatient clinics.
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    All of those clinics have come from redirected savings. They all have come from efficiencies that we have achieved. There are no new taxpayer dollars going into any of those clinics and access is much better than it was.

    Mr. FRELINGHUYSEN. For the record, and we all come from somewhere, the stakeholders in our neck of the woods say that you are drawing away from the base operation of the hospital to fund these new outreach centers. I am not saying they are not good.

    They have obviously signed up a lot of people. Heretofore, it had never been a part of the process. I think that is admirable. That means we are capturing more people. You are looking after their needs.

    There are some who argue you are in some way lessening the hospital-based delivery system. I am sure you have an answer for that as well, and well you should. Some would say that you are taking doctors away from seeing patients in the hospital.

    Dr. KIZER. No. This is part of the area where communication is important and where you can also be very helpful in increasing the understanding.

    People marvel at what health care can do today. That we can monitor people from long distance. That we can use tele-medicine. That there are all kinds of these advances in health care.

    To think that it would be delivered in the same way that it was 30 years ago, somehow, the connection is not made. That all of these advances that have occurred in health care, such as, new drug delivery systems allow us to do things in ways that have never been done before, indeed, are forcing us to provide care in different ways. So, when you talk about, I think you used the term erosion of the hospital, what it really reflects is that the hospital as an institution of the late 20th Century is dramatically changing.
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    Mr. FRELINGHUYSEN. I understand that. In our area, management has made some tough choices. Congressman Walsh made reference to some tough choices in upper state New York. But having made all of the painful choices about some degree of consolidation, lay-offs, program elimination, slimming down of bed slots; all of those tough measures.

    Then it is almost that we pay a greater penalty under this VERA program for having made all of those decisions. I hate to be parochial here, but if somebody is not parochial from where you come from, you will find somebody else replacing you.

    In reality, having tightened our belt in the Northeast and maybe you feel that we have not done it to enough degree, we are actually being penalized over and above what we have already done in terms of strengthening our management cutting costs. That is why we are hollering.

    Mr. WEST. I think one of things I would say as my contribution here, Congressman, is I see several principles at play. One of them, as Dr. Kizer has described, is how best we utilize the advances in the way of delivering health care so that we can do the job, in this case, for your and our veterans, the veterans that are there in your state and in your District.

    I do think also that the community-based outpatient clinics have meant that some veterans may miss or may be concerned about the erosion at the hospital. More of your veterans are quite likely receiving health care. More of the eligible veterans who want it.
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    That is a very significant imperative for us at VA. It is one that I think Dr. Kizer and the Veterans Health Administration have taken on. I think it is one we are going to continue to drive at.

    Yes, that may say something about the traditional operation of a large medical center. We are trying to expand. We are expanding and we are getting to more. I think the other thing that we have had to be concerned about is the importance of the hospital, the big center.

    That is the sense that any patient would have, I, you, and that is that because it is bigger, there we have more services available. There are the specialties and the things that can be done for our veterans. We are cognizant of that.

    We are attentive to that. The fact is that the developing difference in balance between outpatient clinics and the sort of main hospital we view as a very healthy one. It is not just a sign of the times. I think it is a sign of the times to come.

    Mr. FRELINGHUYSEN. My point and what I want to have on the record is having made all of these management decisions, consolidating, lay-offs, program elimination, all of which you need to do which is happening in the private care market, I think we are paying a larger price on top of that because of the way this formula is calculated. This indeed is a formula. Is not VERA a formula-based program?

    Dr. KIZER. In a sense, yes.
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    Mr. WEST. But not applied so rigidly that it does not take into account the particular circumstances.

    Mr. FRELINGHUYSEN. It is difficult for us as lay people. Maybe it is designed to be complex so we cannot understand it. For us to understand having made all of the tough decisions and slimming down the work force, this and that, in terms of the consolidation why you would have to pay a higher price.

    It may get back to the earlier issue of the fact that health care in the Northeast is a lot more expensive than it is in the South and West. It is more than the issue of just the sickest people, but to a certain extent that may be true.

    It is a higher degree of unionization. It is a higher degree of costs of all sorts of medical devices and services. I will suspect there are a hell of a lot more expensive in the Northeast, maybe not justified, than they would be in other parts of the country.

    So, I yield back, but I have plenty more questions. Thank you, Mr. Chairman.

    Mr. LEWIS. Thank you Mr. Frelinghuysen. Mr. Price.


    Mr. PRICE. Thank you, Mr. Chairman. Before I start with my final round of questions which has to do with your research budget, I would like to note the presence in the room with us today of some veterans leaders from my home State of North Carolina. Mr. Wally Tyson who is the Adjutant for the Disabled American Veterans; Barry I. Souders, the State Commander with is wife, Barbara; and Gerald A. Jones, the Past-State Commander.
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    They are in town for their legislative meeting. I invited them to come by and witness this hearing. Welcome.

    Mr. LEWIS. Glad you could be with us.

    Mr. WEST. I am glad to see my fellow North Carolina veterans here, sir.

    Mr. PRICE. Yes. Well, we know we have a North Carolinian in the Secretary's Chair now. We feel very fortunate because of that, Mr. Secretary.

    I am pleased today to be able to note that the medical and prosthetics research budget that you are proposing is a relatively generous one, compared to some of the proposals in the past.

    The research funding for fiscal year 1997 was $262 million. We had an Administration request last year cutting that to $234 million. Instead, we enacted a slight increase to $272 million. The Congress worked its will in this matter.

    Now, we are looking at a Presidential request for fiscal year 1999 of $300 million. So, I am pleased that you have been able to make that kind of 10-percent increase request. I know that the increase is based in part on assumptions about a tobacco settlement which may or may not occur. I hope that our subcommittee can work to ensure that this kind of increase happens, even if the tobacco settlement does not. Of course, we are going to be working along on that front.
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    Mr. WEST. I might just point out that I know because I saw it in my written testimony that was submitted that we have linked this research to, I think it is called, a Research Fund for America which is tied in some way to the tobacco issues.

    In fact, that is misleading. Our budgetary proposal will be there. The increase is there with or without the settlement. I apologize for the misleading effect of what we said.


    Mr. PRICE. Well, that is reassuring.

    Last year when we were faced with the prospect of a reduction, I asked Secretary Brown to enter into the record an estimate of what those cuts might mean specifically for the research program.

    Rather than go into the detail of that here today, I would like to ask you, Mr. Secretary, to refer to that report on pages 88 and 89 of last year's hearing. For the record, submit an update because of course, those cuts did not occur.

    On the other hand, a slight increase did occur. There are a number of areas of concern which were highlighted in that brief report. I wonder if you could just update that so that we have that kind of follow-up for the record.

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    Dr. KIZER. All right, sir.

    [The information follows:]


    The President's proposed VA Research and Development budget of $234,374,000 for FY 1998 was 11% below the FY 1997 appropriation of $262,000,000. Because of the actual appropriation of $272,000,000, the anticipated reductions described on pages 88 and 89 of the report did not occur. Appointments to the Career Development have not been delayed and the number in FY 1998 will show an increase to 135 from the FY 1997 level of 88. Medical Research Service will fund 315 investigator initiated projects in FY 1998 instead of the earlier projection of 188. The two new Rehabilitation Research and Development Centers that were threatened by the proposed decrement budget are now fully funded, bringing the total number these centers to six. The two multi-hospital clinical trials—SMART (Specialized Medical and Revascularization Therapy) and CARP (Coronary Artery Revasculariztion Prophylaxis)—are on track to start this fiscal year. Instead of facing a 15–20 percent reduction in investigator initiated projects, the Health Services Research and Development Service actually shows an increase in projects being funded.


    Mr. PRICE. One reason I want to ensure that this increase occurs is to reverse the decline in the number of VA-funded merit reviewed medical research programs. I understand that it is this component of the VA's research program that arguably has the most impact on veterans care.
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    It certainly needs some increased support. Ten years ago, there were more than 2,350 of these programs. Today, I understand more like 1,375. Now, is a substantial amount of the increase in this account going to support more merit-reviewed medical research programs? Do you feel more resources could effectively be used by this program?

    Dr. KIZER. I would preface I would like to ask Dr. Feussner, the Chief of our Research and Development Officer, if it is agreeable with the Chairman to comment on this.

    I would note that over the past three years despite the constrained funding, we actually have quite, I think, a good story to tell as far as increasing the number of projects that have been funded, increasing the number of investigators, corporative studies, and a number of other things. Dr. Feussner, I know, has those numbers on the tip of his tongue, if it is agreeable.

    Mr. WEST. Mr. Chairman, is it all right if we have Dr. Feussner speak to this issue?

    Mr. LEWIS. Yes. Dr. Feussner.

    Dr. FEUSSNER. Yes, sir. I think there are two answers to that question. The short answer is yes. We are absolutely committed to the investigator-initiated component of our research program. We feel that is really the heart and soul of the creativity and innovation that we bring to the Department. We have not been able to achieve a funding level in the mid-2000 projects yet.
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    With the budget over the past two years, we have increased the investigator-initiated funding within medical research while holding the investigator-initiated research stable in rehab research.

    We have improved it slightly in health services research. Specifically, since fiscal year 1995, we have maintained our rehab pay line at about 40-percent. We have improved our medical research pay line for investigator initiated research from about 20-percent to almost 35-percent of meritorious projects.

    We have improved the health services research pay line slightly from the high 20-percent to about 30-percent. So that we feel that we have been able to improve slightly. This new budget will certainly help us improve further, but we have not been able to fund yet up to the level that we did, for example, in 1985.

    Mr. PRICE. Do you expect to reach that late 1980's level of funding? Is that possible or desirable?

    Dr. FEUSSNER. Yes. I think that is very desirable. I think that it is possible, depending on what the out-year budgets look like. We might be able to refine that pay line.

    Mr. PRICE. Well, I would appreciate your presenting for the record, if you will, maybe a tabular version of what you just summarized; the trend lines and the number of studies that we are funding. Perhaps, if you have some figures on the percentage of eligible or meritorious proposals that you are able to support.
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    Dr. FEUSSNER. Yes. Those were really the numbers. The numbers that I gave you in terms of the pay line are the proportion that we are funding; 40-percent rehab, about 35-percent in medical research, and about 30-percent in health services research. In our Cooperative Studies Program, we have no projects that have been approved and not funded.

    Mr. PRICE. All right. If you could furnish that for the record and give us some sense of where we have been, what the trend lines look like, and what the implications are of this current fiscal year 1999 budget proposal.

    [The information follows:]


    Using the FY 1987 total of 2,353 as the base year for comparison, the following table shows the total number of VA Research and Development funded projects from FY 1995 through the estimated number of projects for FY 1999:

Table 2

    In the most recent merit review rounds, Medical Research Service funded approximately 35% of the applications submitted, Health Services Research and Development funded approximately 30% of the applications submitted and Rehabilitation Research and Development funded approximately 40% of the applications submitted. In general, all of these figures are higher than the percent funded during the last four years.

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    Mr. PRICE. Now, I know you have been working with outside partnerships in research on various illnesses that affect veterans. In particular, I am aware that the Juvenile Diabetes Foundation has been working with both the VA and NIH on diabetes research.

    I know Type II Diabetes affects thousands of veterans and is a high research priority for you. I wonder if you could specifically say something about how this particular partnership works either orally or for the record; this partnership with the Diabetes Foundation.

    [The information follows:]


    VA Research and the Juvenile Diabetes Foundation have a very workable partnership and one that typifies in many ways the VA's willingness to leverage its Research appropriation to the mutual benefit of both parties. It is true that Type II diabetes affects thousands of veterans and is of high priority for the VA's Research program. The Juvenile Diabetes Foundation is focussed on Type I Diabetes because it is the form of Diabetes manifesting itself primarily in children. While the interests appear divergent, there is enough common ground in the science of Diabetes and its clinical management for the two partners to come together and share resources.

    The Juvenile Diabetes Foundation has agreed to fund half of the core cost of six VA Diabetes Research Centers for a period of five years. This is a total commitment of $7.5 million ($250,000 × 6 center × 5 years). The first solicitation of centers applications has resulted in the initiation in FY 1997 of three VA Diabetes Centers at Nashville, TN, Iowa City, IA and San Diego, CA. The VA and the Juvenile Diabetes Foundation jointly fund the centers at Nashville and Iowa City because of the mutual interest of the research programs. While the center in San Diego did not meet the programmatic needs of the Juvenile Diabetes Foundation, its science was so excellent that VA Research funded it. The second round of solicitation is under review at this time and three new centers should result from the review. As this partnership proceeds into the future, it will allow the VA to double its investment in centers of excellence devoted to the study of Diabetes. A win for the VA. It also allows the Juvenile Diabetes Foundation to participate in research that it could not otherwise support. A win for the Juvenile Diabetes Foundation.
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    Mr. PRICE. Then tell us, if this is a promising model. Are there other examples of the VA partnering with non-governmental organizations to increase research resources? Is this a model we can expect to see the VA using more to extend your leverage?

    Dr. KIZER. We are very interested in partnering with both other governments and non-government entities and have effected a number of agreements in that regard in the last two or three years.

    Specifically in response to your question about the Juvenile Diabetes Foundation (JDF) Agreement, the essence of how that works is that they match us dollar-for-dollar so that every dollar that we put in, they will also put a dollar on the table. These funds go to centers of excellence in diabetes research conducted at VA facilities by VA investigators. It is certainly in our judgment a win-win for all involved. Basically, we committed $7.5 million over five years and so have they. So, it is a $15 million, five-year project. We are only into the second year at this point. We will look to see whether it makes sense to continue. Certainly at this point, it looks like it would be a good thing to do.

    We have also had discussions, but have not finalized anything with some other entities. We have also been talking with industry as far as we believe that certainly the way the VA is organized now, that we provide some unique opportunities for industry to fund research that would be done in VA. We have recently consummated a deal with one of the large pharmaceutical companies to look at the use of a particular psychotropic agent. We are talking with some others as well. These are all ways that would increase funding to support the VA research program.
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    Mr. PRICE. Finally, if I could just ask about the career development aspect of your research program. I know that is an important goal in making certain that there will always be investigators trained to do research on conditions prevalent in the veterans population.

    The opportunity for this kind of funding was a major factor in many young physician investigators' decision to seek employment at the VA or to stay at the VA to pursue a research career.

    What portion of this fiscal year 1999 increase in medical research do you plan on providing to reinvigorate career development programs or other innovative strategies to attract young investigators to the VA and to keep them there?

    Dr. KIZER. Let me just say two brief things and then ask Dr. Feussner to respond directly to that. One of the differences in the VA compared to the private sector is that about a 70-percent or so of our physicians are involved in some way or other with investigator research. This is a much higher percentage than you would find anyplace else in health care. Secondly, we also, I think, over the last two or three years have made progress in increasing support in this area. I will ask Dr. Feussner to fill in the blanks with some numbers.

    Dr. FEUSSNER. Yes, we agree. In the past several years, one of the parts of the VA research program that suffered the most was the research career training.
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    When Dr. Kizer appointed the Research Realignment Advisory Committee, one of the recommendations that committee made to us was that we invest up to 10-percent of our budget in research career development.

    We started at a little over 3-percent. We moved up to 4-percent in 1997. We moved beyond that to 5-percent in 1998. The commitment that we have made to the field is to fund all research career investigators who pass the merit review system. Actually, I feel like we have taken some significant first steps in revitalizing the program. In addition to the research career pathway that we have had in medical research and health services research, in the past there had never been a research career pathway in rehab research.

    Last year, in fiscal year 1997, we began a research pathway in rehab and started on a small scale funding approximately six, I think, career awardees, but funded all of the awardees that passed the merit review system.

    So, we are quite committed to growing that. We are trying to reach that 10-percent target.

    Mr. PRICE. Thank you. Thank you, Mr. Chairman.


    Mr. LEWIS. Thank you, Mr. Price.

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    So that Members of the panel and also others will know that I am getting close, at least to the close of general questions. The bulk of those that remain will be a part of the record. I do have a couple of questions that I do want to ask now, then I will be handing the gavel over to Mr. Frelinghuysen who in turn will recognize Ms. Meek. The Secretary and I have conflicting meetings here. If you would, Mr. Secretary, just a moment.

    Last year the VA proposed modifications to the grants for construction of state veterans cemetery programs. That proposal was to increase the federal share from 50-percent to 100-percent, plus provide 100-percent of initial equipment costs.

    The 1999 request assumes enactment of this legislation. Mr. Secretary, is it your intention that this proposal for the state grant program be a replacement for the current program of building new national cemeteries?

    Mr. WEST. I would think not, Mr. Chairman. I would think that the reinvigorated state program that we hope will result from this will be a complement.

    I believe the National Cemetery System is here to stay. That is our national obligation.


    Mr. LEWIS. One might draw that conclusion since the President used a line item veto for $900,000 in 1998 appropriations for planning a new national cemetery in Oklahoma. Does the 1999 budget request assume any planning funds for a new national cemetery? If so, would you explain?
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    Mr. WEST. This is the Director of the National Cemetery System, Jerry Bowen. May he speak to the question?

    Mr. LEWIS. Yes, sir.

    Mr. BOWEN. No, sir, it does not. The reason there was a veto of the planning funds for the construction of a new national cemetery in Oklahoma was because of the five new cemeteries that we were bringing on-line in a period of only three years.

    We brought one of those on-line in Seattle in 1997. We have three others under construction this year. In 1998, we have the authorization and the construction funds for a new national cemetery near Cleveland.

    Quite frankly, our plate was full. We started with a list of ten sites in 1987. We only completed one new cemetery up until 1992. In 1997, we completed the second one. Now we have four more planned prior to the year 2000.

    Mr. LEWIS. Presuming that your plate is not so full, then we will just produce the money, the $900,000—yes or no?

    Mr. WEST. Why do you not let me.

    Mr. LEWIS. Yes or no?

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    Mr. WEST. I do not think we are making an assumption one way or the other, Mr. Chairman. I encourage you not to make an assumption either that as we complete the full plate now, that we will not then look to the needs to see where our path goes. We will do that.

    Mr. LEWIS. I assume we will be discussing this more between now and then, whenever then is out there.

    Mr. WEST. Yes, sir.


    Mr. LEWIS. In the 1999 budget, it contains a proposal to reclassify veterans programs to the defense function. Mr. Secretary, how do you feel about this proposal?

    Mr. WEST. Well, it is an interesting topic for discussion. I do not think it holds any real prospect for doing the nation's business, Mr. Chairman.

    The VA, the Department, the government and veterans need an Agency that will focus on their mission of tending to the needs of our veterans.

    I think that we can best analyze the budget, analyze the mission, do the job that way. I suppose I can understand the desire of OMB to want to have us look at this as an element of the overall cost of the nation's defense.
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    I encourage us all not to lose sight of the very real and very unique focus of this Department and it has to remain so.

    Mr. LEWIS. I imagine those are very interesting discussions indeed.

    Mr. WEST. I have not been a part of them.

    Mr. LEWIS. Mr. Frelinghuysen, I am going to ask you to take the gavel, if you will. Hershel Gober, the Deputy Secretary, is going to come up. The Secretary and I have, as I suggested, conflicting meetings here. So, if you will excuse us.

    Mr. WEST. Thank you, Mr. Chairman.

    Mr. LEWIS. Thank you all.

    Mr. FRELINGHUYSEN. Thank you, Mr. Chairman.

    The Gentle Lady from Florida is recognized. Thank you for your patience.


    Mrs. MEEK. Thank you, Mr. Frelinghuysen.

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    Mr. Gober, my question has to do with the Spinal Cord Injury Center at Tampa, Florida. Since you have already established yourselves as the number one system in the nation in terms of spinal cord injuries and the help for these kinds of patients, recently the James Haley Medical Center in Tampa was given the title of a ''Center of Excellence'' in spinal cord injury care.

    It was made in spite of the fact that this center is long overdue, according to my reports, for a replacement. It has space inefficiencies, no patient privacy, and even barriers to the handicapped.

    Treatment areas are split between floors, which is against VA's own SCI treatment regulations. Now, it has also been reported to me that for nearly 20 years, the VA has moved forward and moved back to the drawing board trying to find a way to replace this facility.

    This facility serves veterans from all over Florida, and even Georgia and Alabama. This committee has already appropriated $6 million for advanced planning and design funds for this project. The first phase of the project, a power plant is nearly completed.

    Yet, we were concerned when we did not see funding for the actual construction of the SCI Center which you estimated at $26 million in the Administration's fiscal year 1999 budget request.

    I understand that plans have been completed for the 100-bed replacement structure. My question is, is VA ready to move forward with construction of the SCI center if the funds are secured?
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    Mr. GOBER. Yes, ma'am. I will answer that question first and then let Dr. Kizer chime in when he wants to. There is no doubt that a new facility that is needed in Tampa because treatment areas are currently split between two levels.

    We treat spinal cord injury as well as people that need other types of therapy. The 1999 budget already contained one large construction project earmarked for VISN 8 in Puerto Rico where we had to make seismic corrections.

    As you know, our capital budget, in the past few years has been relatively small and will be for the foreseable future. We recognize there is a need. Based on our current thinking, this project will probably be the number one project in that VISN for the fiscal year 2000 budget.

    We do agree with you that we need a single floor where we can provide veterans with treatment and where it is more efficient for our staff. Then we will take the other building that, I understand is abandoned, and convert it, to provide some other type of clinical services.

    So, I will let Dr. Kizer come in, but I think to answer your question, there needs to be a facility there. We are doing a study right now to determine what size we need.

    As you know, it was originally planned to have more than 100 beds; now, we are planning only 100 beds. What we need to do is decide exactly what type and size of facility we need. That, to my understanding, will be done within 90 days. Is that right, Dr. Kizer?
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    Dr. KIZER. Right. The only thing I would add is just in the overall budget development process, because there were some questions. This did not rise to the level that it was proposed in the budget. In part, because there are a number of other changes underway as well, there were some questions that still need to be answered. We are having ongoing dialogue with OMB and others in this regard.

    Mrs. MEEK. So, your answer is probably unless OMB says yes, we still may ask you this same question in another year?

    Mr. GOBER. No. We agree we need a facility there. Tampa has done a good job. The hospital there has done a good job with its SCI.

    We also need a new SCI unit. So, when we receive the plan and decide exactly what we need, and are reasonably sure that we can be successful, we will request to build that project. We will be glad to keep you informed, as well as Mr. Bilirakis who is very interested in it also.

    I visited down there. We are not wasting the money. Some people say, well, you are wasting the money if you do not build the second part of the project, but that is not true. We needed the energy plant. We are taking a very serious look at this.

    Mrs. MEEK. It is a question that comes up each time when you come before this committee.

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    Mr. GOBER. Yes, ma'am.

    Mrs. MEEK. It is really important to us. I know that having to wait until the year 2000, in terms of my particular assessment, that is a pretty good distance away. I wish it were so that you would not have to do too many more studies. You have already studied it, to the extent that you have been able to ask for funding. I do hope that Dr. Kizer and the rest of the staff will look at this more closely in terms of the time frame needed to begin construction in the hospital.

    Dr. KIZER. I think a part of the issue there is that there is a need for increased ambulatory care space. How can we fold these things together and address as many needs as possible with the fewest number of construction dollars.


    Mrs. MEEK. All right. I have another concern from Florida. I think it becomes repetitive for me to keep mentioning about Florida being the home to so many veterans. It does have the oldest mean age of any veterans group in the nation.

    Many of these veterans are severely disabled, as you know. They live there. I have said that in the last session. My home county is Dade County, and the county next to me is Broward County; two very large counties.

    They have the largest number of veterans in the entire State of Florida. The standard 75-mile service area includes 386,000 veterans. Yet, there is not a veterans nursing home within 75 miles of these veterans.
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    In fact, there are only two other veterans nursing homes in the State of Florida. Now, our State Department of Veterans Affairs has proposed to locate a new state veterans nursing home in Broward County.

    This is a 120-bed facility. It will be a county, state, federal partnership, hopefully. They are asking for $4.3 million local and $8.1 million federal. When will they be seeing funding for this needed facility in your budget as it emanates from you to OMB and the President?

    Mr. GOBER. Well, the way we do our funding for the state veterans home is they go on a priority list. Florida is one of those states where for years and years they have needed an increase in state veterans homes.

    State veterans homes are one of the best buys. It is one of the best programs that we have. We pay 65-percent of the construction cost. The state government pays the rest. The taxpayers get a good deal.

    Plus, the veterans are housed in an environment where they are with their comrades and they are treated with dignity and respect. It is very good treatment. I think it is in August when we will make the awards for our contracts.

    It is August when we will come up with our list. I have not seen the list, but I would assume that Florida, with its strong need there, would be on that list. I will be glad to get back with you and tell you where it stands.
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    Mrs. MEEK. Thank you.

    [The information follows:]


    The State of Florida has selected Pembroke Pines, Broward County, Florida, as the site for its third State Veterans Home. The application is identified as FAI 12–004 and ranks number 62 of 89 projects on the FY 1998 Priority List of Pending State Home Construction Grant Applications. The priority list is established once each year, as of August 15th. The application ranked lower on the FY 1998 priority list because the State did not certify its matching funds prior to August 15, 1997. To qualify for ranking in Prioirty Group 1, the State must legislatively approve the home and certify matching funds. If the State of Florida is successful with obtaining its State matching funds before August 15, 1998, the project will probably rank within the top 10 applications. The President's budget proposal will be enough to fund approximately 3–4 new applications and the remainder of one partially funded application from FY 1998.

    Additional Florida Veterans Home Issue: On February 25, 1998, VA awarded the State of Florida a construction grant totaling $7,763,683 (65 percent of the construction costs) to build a 120-bed nursing home for veterans in Land O'Lakes (Pasco County), Florida.

    Mr. GOBER. We fully support state veterans homes. That is a good program. No doubt about it, Florida, needs those veterans homes.
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    Mrs. MEEK. Thank you. Somewhere in the back of my mind, a rumor keeps circulating. I thought I heard this. I do not want this on the record, Mr. Chairman.

    Mr. FRELINGHUYSEN. We are off the record.


    Mr. FRELINGHUYSEN. We are back on the record for good news.

    Mr. GOBER. Florida is number two on the list for construction of a state veterans home. Barring somebody's veto, this list should be approved in August.


    Ms. MEEK. All right. Thank you very much. That is good news. My last question is one that is related to one that I asked the Secretary this morning.

    The answer that I received from the staff, from this gentleman, regarding your new census estimates of veterans populations in the states. Could you please—all of you all look alike.

    Mr. FRELINGHUYSEN. I can see why Mr. Lewis left me in charge. Will you be good enough, the two people who were identified to identify yourselves?

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    Mrs. MEEK. Could you please provide for the record the latest veterans populations estimates when you get them, perhaps categorized by states, the age, and service connected disability; whether the disability is 90-percent to 100-percent or 60-percent to 90-percent, et cetera. Could you do that?

    Mr. DUFFY. We would be pleased to.

    [The information follows:]


    Please not that Mrs. Meek's request was clarified in subsequent conversations between Mr. Dennis Duffy and Mrs. Meek's staff. It was confirmed that she was seeking figures for Florida, not for all states as the transcript wording would appear to suggest.
    "The Official Committee record contains additional material here."

    Mrs. MEEK. All right. Thank you, sir.


    Thank you, Mr. Chairman. Those are all of my questions.

    Mr. FRELINGHUYSEN. Thank you, Ms. Meek.

    Before recognizing Mr. Stokes, I just have a couple of questions. The gave me a list of 100 questions. I have my own list of 100. So, I am going to do mine first.
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    Mr. Secretary, soon after the President delivered his budget to Capitol Hill, I believe that was about February 9th, all hell broke loose up in VISN Three in the northeast. I sort of want to get back to some of our discussion this morning.

    I happen to pick up the phone and called the medical director for the hospitals in my neck of the woods. It surprised me in my discussion with them, I said, are you aware of the budget figures that the President has in his package and how they will affect northern New Jersey and New York.

    He said he had not seen any figures. It was déja vu. We had some difficulty over the last two or three years actually getting a handle on exactly what the VA's budget is in VISN Three.

    It has been difficult at times to understand how great the cuts are. It really depends on who you talk to. The VA gives you one figure. The GAO gives you another figure. There are other groups that come up with their own figures based on their own inclination and information base.

    I worry that somebody in a position like that would have such a high level of uncertainty as to the dollars that he would be working for, for the two institutions in question.

    I would like to know quite simply, to what degree are medical directors involved? When I served in the state legislature, and many members come from the state legislature, budgets are usually built from the ground up.
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    Is there something going on with VA in terms of its budget structure which would suggest an imposition from Washington or indeed budgets, do they grow from the ground up?

    Mr. GOBER. Mr. Chairman, I will answer a part of that and then I am going to ask Dr. Kizer to finish. Our budget has grown from the ground up. When we work on the budget after we get the figures from the field and do all of the budget work, then we work with OMB and work with the Administration.

    That budget then is embargoed. So, it is not unusual that the director would not know what he is going to get, because until the President announces his budget, there is no budget information avaialble that can be shared.

    That is how we handle that. Dr. Kizer will be glad to tell you how it starts and works its way up.

    Mr. FRELINGHUYSEN. I do not want to mischaracterize the way you described the system. So, because there is an embargo, and obviously the President has the first shot in terms of announcing the budget, and I can respect that.

    There has to be a unified front. How does anybody in the field know how much money they have to deal with. It seems almost like some good guesswork.

    Dr. KIZER. Actually, to the contrary. Indeed, one of the beauties of the VERA system is that they should know very well what their budget is within a very small amount because it is predicated on the average number of users for the three preceding years, according to whether they fall into what would be a basic VERA or a special VERA category.
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    About 96-percent of patients are basic care; most of the routine sorts of things; whether they be hernias, or gallbladders, or heart attacks, or whatever. Then the 4-percent is special care for things like spinal cord injury, and long-term care, and advanced AIDS, or things that are much more complicated and require more prolong intense care.

    So, it is hard for me to understand the response that you say you got because the principles of VERA are very straightforward. They are very simple. I must say that it is hard for me to understand the response.


    Mr. FRELINGHUYSEN. I made the point that if we are to have any credibility with the stakeholders, somebody ought to have a handle on exactly the amount of money in all likelihood the institution is going to be working with.

    Maybe this gets to a general series of questions I would like to direct to you, Dr. Kizer, perhaps more than to Deputy Secretary Gober. How do you actually calculate your budget numbers? Do they include all VA medical care appropriations in the calculation?

    Dr. KIZER. I am not sure what you asked there.

    Mr. FRELINGHUYSEN. How do you put your budget together? Do you calculate the overall budget numbers? Do you include all VA medical care appropriations in the calculation? Do you include calculation for prosthetics?
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    Do you include inflation, adjustments? Do you include expected revenues from third-party payments and the so-called increased ''efficiencies?'' What makes up your budget calculations?

    Dr. KIZER. If I understand your question correctly, all of those things go into the calculation.


    Mr. FRELINGHUYSEN. Have I left any out?

    Dr. KIZER. Well, you have left a lot out because certainly it is fundamentally predicated on the number of veterans that we are taking care of, as well as increased revenues and other things. A part of what I think you are asking as well is how has that money been returned to the networks which are the basic operating units of the organization? Most of that money, indeed, about 90-percent, is returned through the VERA model.

    There are some programs that are funded centrally. For example, the GREC, the Geriatric Research and Education Centers are funded centrally. The prosthetics are still funded centrally. There are certain things that are funded from Headquarters, like Readjustment Counseling as opposed to going into the VERA model.

    The overwhelming majority of funds, as I say, about 90-percent go into the VERA model and then is passed back to the networks who then allocate to the facilities within their networks.
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    Mr. FRELINGHUYSEN. In the VA's projections of reductions in future allocations to VISN Three, which is my VISN, does the VA include increased efficiencies that may off-set declines in purchasing power resulting from inflation? If not, why not?

    Dr. KIZER. Under the VERA formulation, and as you recall from our prior discussions on this, the decision was made that no network would take more than a 5-percent reduction under the VERA model. That is why Network Three, which is unique in the sense that it will take four fiscal years, given that VERA was implemented in mid-fiscal year 1997. So, VISN Three will not achieve its new level until the year 2000 as opposed to most other networks which will achieve their new level this year. There are a couple which will achieve their new homeostasis next year. VISN Three is the only one that will stretch out to the fourth fiscal year. In that, a certain amount is targeted under the VERA reduction. That changes a small amount each year. Since the base changes, the actual dollar amount changes a small amount, but it is not a huge amount. Those numbers have been discussed at a number of other forums. If you like, we can give you a table which list those for current year and future years.

    Mr. FRELINGHUYSEN. I think we need a clear table because certainly to the lay person, the VISN Three resources have been reduced since the implementation of VERA. I think it would be good for us to know what those reductions would mean five years out from now.

    Dr. KIZER. Those numbers are essentially the same numbers that were provided beginning in fiscal year 1997 and what the networks have used to build their business plans and calculate their future budgets.
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    We are happy to provide them to you again. I would just make the point, as we had some discussion this morning as well, that when this is all done and the new homeostasis is reached, that VISN Three will still be 27-percent higher than the average in the system.

    [The information follows:]


    Please refer to the attached table, titled ''VISN 3 Funding Analysis,'' which comes from the VISN 3 FY 1998 business plan. This table shows that when VERA and projected non-appropriated revenues are accounted for, the VISN 3 budget dollar decreases over six years—FY 1997 to FY 2002—is projected to be $4 million. That is, the VISN 3 budget goes from $1.024 billion in 1996—the pre-VERA baseline year—to $1.020 billion in 2002. During the same period, inflation is projected to reduce VISN 3's buying power by approximately $35 million per year, with the specific projected annual amounts being $32.3 million in FY 1997, $32.6 million in FY 1998, $36.7 million in FY 1999, $36.1 million in FY 2000, $33.5 million in FY 2001, and $39.3 million in FY 2002. It is important to emphasize that these are network-wide projections; they are not facility-specific.

    It is probably also relevant to reiterate in more detail what has been noted previously—that in the short run, 1996 through 1998, the VISN 3 budget is essentially frozen. This is due to two factors: increased funds from non-appropriated revenues, and $134 million that Congress—$98 million—and VHA—$36 million—put into the VERA model in 1998. The VISN 3 budget in FY 1996 was $1.024 billion, and for FY 1998 it is $1.026 billion. While dollar-wise a small increase, this is, for all intents and purposes, a freeze, requiring that VISN 3 manage only the reduced buying power that results from inflation by using its resources more efficiently.
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    "The Official Committee record contains additional material here."

    Mr. FRELINGHUYSEN. That sticks in my craw because quite honestly the cost of living up in the Northeast is much higher than the rest of the country. Quite honestly, I am not sure that is good enough.

    I know that others can argue from the south and west that we are taking too much out of the system, but I think that there are some unique characteristics in the VA's population in the northeast that may be severely impacted, if in fact those reductions are as high as you may be providing in the way of your projections.


    One just last question before just recognizing Mr. Stokes. The inflation adjustment issue; has that inflation adjustment always been a part of the picture? In my discussions with the GAO they had not identified that inflation adjustment in the way that you have done it for the first time in this budget cycle.

    Dr. KIZER. I cannot comment on what GAO has done. The inflation has always been a part of our calculation. As you may recall from a prior discussion we had, the figure of 5-percent was set because we knew that inflation would be on top of that.

    So, whatever amount was set in VERA, the network would take an additional 2-percent, or 3-percent, or 4-percent, depending on the year, inflation reduction or reduced buying power, in addition to whatever occurred under VERA.
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    The judgment was made that a reduction of 7-percent, or 8-percent, or 9-percent, while it would be certainly challenging, was do-able.

    Mr. FRELINGHUYSEN. All right. Thank you. I am pleased to recognize the Gentleman from Ohio, the Ranking Member.


    Mr. STOKES. Thank you very much, Mr. Chairman.

    Mr. Secretary, there continues to be a dramatic increase in outpatient care throughout the health care system. This is, of course, true for VA facilities as well. Last year, the VA hospital for northern Ohio treated in its ambulatory care unit 10,000 additional patients; a 25-percent increase in work load.

    The over-crowding has violated local and state safety codes, as well as regulations of the Joint Commission on Accreditation of Hospitals. The over-crowding has caused an unbearable situation with patients and medical staff.

    In the FY 1999 OMB budget, VA requested $76 million for major construction of three ambulatory care units. Cleveland was given the highest priority. I understand that the Office of Management and Budget has eliminated the three projects and substituted two of its own which were of lower priority on the VA list. The reason given was that the VA does not need more hospital space.
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    My question to you is for you to inform us of the criteria that VA used in setting its construction priorities, and the criteria used by OMB.

    Additionally, how will you respond to the ever present danger that over-crowding may cause in the Cleveland VA Medical Center.

    Mr. GOBER. If you do not mind, Mr. Stokes, Dr. Kizer will answer the question.

    Mr. STOKES. Dr. Kizer, sure.

    Dr. KIZER. Let me actually ask Mr. Yarbrough who I believe is right here. He is in charge of Facilities Management and can speak to the construction criteria.

    Mr. STOKES. Sure. Mr. Yarbrough, do you want to come down and have a seat.

    Mr. YARBROUGH. Yes, thank you, Mr. Stokes, I cannot speak to OMB's criteria, but I can describe ours. We have used a system for a number of years that has been significantly revised in the last two years. It is not yet a mature replacement system, but it incorporates a number of different factors that were not previously considered net present value, the return on investment, what the alternatives were that were considered and so forth. We went through a lengthy and very detailed process in order to come up with a list to submit through the budget process. In fact, Cleveland was on the list. I cannot, again, speak to OMB's reasons for coming up with a slightly different set of projects.
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    Mr. STOKES. Are you in position to be able to address my question relative to the danger of over-crowding?

    Mr. YARBROUGH. In part, I believe I can, yes.

    We have criteria about fire safety, over-crowding, hygiene and so forth that all medical and outpatient clinics that are renovated or constructed must meet. We build new facilities so those criteria can in fact be satisfied.

    When we renovate facilities, those characteristics are included in the design. In the case of the Cleveland situation, if the project is funded the design will alleviate the over-crowding and other criteria shortfalls.

    Mr. GOBER. Mr. Stokes, I have visited many of our clinics. It sounds like the Cleveland Clinic is doing a good job. They have increased their number of patients that they are seeing by 25-percent. That is pretty substantial.

    There are a lot of competing projects. Dr. Kizer is doing a great job in putting in these other outpatient clinics. Cleveland was on our list. For some reason, it did not make the final cut. It is something that we are concerned about.

    We are concerned about over-crowding. We are concerned about veterans having to wait too long. We are concerned about all of these problems. There is not an easy answer. Are we concerned about it? Yes, sir, we are concerned about it.
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    Mr. STOKES. You have mentioned that you visited some other hospitals. What is the condition of the VA outpatient facilities?

    Mr. GOBER. Well, we have some beautiful outpatient facilities. I have been to the one in Las Vegas. I have been to the one in Los Angeles. I have been to several other ones. Many of them are doing a great job. We have some that are co-located with veteran centers.

    They appear to be serving the veteran very well. I have seen an increase in the satisfaction of the veterans in the five years that I have been in this job. In the majority of the outpatient clinics, the veterans are so happy to have them because it is convenient to them.

    When they go in there, there is very little waiting time. In most places you go in, they will have a sign that says, ''we guarantee you are not going to wait to be seen by someone.'' If you do, talk to the receptionist.

    Now, there are exceptions. This is a big system and there are places where we are not up to standards, as we all realize. It is not because our people are not trying to do it or are not compassionate or do not want to do it.

    Mr. STOKES. When you say to us that there are exceptions, give us some understanding. You already said that everything is happy-go-lucky in so many places. Then you are saying there are exceptions. Paint a picture for us. You know the system.
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    Mr. GOBER. Yes, sir.

    Mr. STOKES. We have to try and judge what is best from our perspective. You tell us in terms of when you say ''exceptions,'' is that just minimal or is it greater than minimal? Tell us what it is.

    Mr. GOBER. Being a country boy from Arkansas, I think I am being sucked in here, but I will take a stab at it.

    Mr. STOKES. From an old trial lawyer, when the other lawyer says that, I know I am in trouble. When he goes to being a country boy, I am in trouble.

    Mr. GOBER. I will be glad to address that because we do have exceptions where clinics are over-crowded, where you walk into the waiting rooms and some of these clinics were built in the 1950s. The architecture is old. The rooms are small. They are not well lit. They are not airy.

    There are too many people in there. It is too crowded. We have some clinics like that. We still have some hospitals that are like that. Our newer clinics, the ones that we have opened up, they are roomy. They are spacious.

    Veterans can find their way around easier. They are much more handicap accessible. So, there has been a dramatic change in the five years that I have been here. It is not even the same VA.
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    As a matter of fact, we have a saying, this is not your daddy's VA. It is different, it is changing. We have gone through some dramatic changes. We are not there yet, we still make mistakes and there are things that we need to do better, but we are working hard to do that.

    So, overall, I think VA has done a remarkable job. The people that work for VA have done a tremendous job in the last five years that I have been here.


    Mr. STOKES. I appreciate that. I think I understand what you are saying. Can you give me some idea of the extent of the waiting list for services and/or over-crowding in the rest of the VA health care system. I have talked about Cleveland. I am interested in what happens nationally.

    Dr. KIZER. I do not know if I can give you a specific answer to that. Do you want a percentage or something? We discussed this morning and we were going to provide for the record some further, more detailed information on the specific waiting times; waiting times as far as how long to make an appointment, and how long to get in to see a care giver after an appointment is made, those sorts of things.

    So, I think that we will address your questions through the additional information that will be provided for the record. If it is helpful, I would also note that VA physical plant structures in many ways mirror health care elsewhere in the country in that we have some very modern, very state-of-the art facilities and we have some facilities that go back to the turn of the century and before. The average age of VA facilities is about 35 years. So, recognizing that some facilities have only come on line in the last two or three years, that, I think, gives you some indication that some have been around for quite a long time.
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    Mr. STOKES. Okay, well feel free to expand on that in the record. Perhaps you have answered my question on that matter.

    Mr. GOBER. If we could, we will take a look at the Cleveland Clinic.

    Mr. STOKES. I would appreciate it if you will do that.

    [The information follows:]


    The ambulatory care facilities at Cleveland have several notable shortcomings that cause congestion and confusion in their operations. The facility lacks a formal and efficient entry, corridors are narrow, waiting space is insufficient, and clinical functions are scattered into several areas of the building. Crowding therefore occurs at many and varied locations in the treatment process. Aging building systems further contribute to the discomfort of building occupants.

    The Cleveland Ambulatory Care Addition and Renovations Project was submitted as the highest priority project by the Veterans Integrated Service Network for Fiscal Year 1999 budget consideration. The project received the third highest score by the Under Secretary for Health's Construction Advisory Board and was submitted to the Secretary's Capital Investment Board (CIB). The CIB rated the Cleveland project as the VA's fourth highest capital assets initiative and the project was included in the budget submission to the Office of Management and Budget, but was deleted during budget deliberations.
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    Mr. STOKES. Mr. Secretary, let me get into an area that is of great concern to me. I had hoped to get into this with Secretary West before he left. I did not realize he was going to leave so soon.

    Consequently, I did not get a chance to pose my questions relative to it. I have now sat on this particular subcommittee for more than 20 years. I sat on the Appropriations Committee itself for 28 years.

    During the time I have sat on this subcommittee as well as other subcommittees, one of my major concerns has been the whole question of diversity and the degree to which taxpayer funds are utilized by federal agencies.

    In that respect, of course, I very much applaud President Clinton who has stated that a part of his Administration's goals will be to see that federal agencies and his Administration look like America.

    This is one of the agencies I have great concerns about in terms of both the diversity within the agency itself and then diversity in terms of its contractual relationships with contractors, utilizing taxpayer dollars, and funds of that sort.

    My intention with your agency, of course, has been focused by posing questions to your various secretaries over the years. Secretary Brown and I went into this rather extensively every time he appeared before me.
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    I had intended to get into this with Secretary West today. So, I want to take a few moments and go over it with you and also Mr. Hensley who recently was quoted in the newspaper with reference to this particular subject in a speech that he had made somewhere.

    I have asked, if he is present, that he be given the opportunity to respond to me too. I am sure you are aware of my concerns from the record.

    First, I would like for you to tell me how is this agency doing in terms of its minority employment?

    Mr. GOBER. Mr. Stokes, if I could ask Mr. Hensely to come forward and he could answer the second part of the question.

    Mr. STOKES. Sure. I would like to have him come around.

    Mr. GOBER. Let me say this, I totally agree with and support the President when he said that he wanted the government to look like America. We have made a very honest attempt in this agency to make sure that we do have such diversity.

    I like to think that we have done better than anybody before. Of course, I always want to think that. I think that there is still much we need to do. I think that we have to be really active in seeking out diversity.

    I know that when we started looking for candidates for high positions, we very aggressively looked for minorities and women to put in those slots, of course, with always the same basic requirement that they be qualified for the job.
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    Everyone wants that. They are out there. You really have to seek hard. I think that sometimes we get a little lazy. We need to be more diligent in doing this. Having said that, I will ask Mr. Hensley to comment.


    Mr. STOKES. Mr. Hensley, before you make your remarks, I had mentioned your name earlier. I do not know whether you were quoted accurately or not. You can tell me whether you were quoted accurately.

    You were quoted in a newspaper article as saying, ''Minority gains are being made, but not without problems. There is a new high-tech sophisticated form of discrimination. I think there is still some catching up to be done.''

    As I said, I do not know whether you were quoted accurately or not or in context. I do think it is important that this committee have an honest candid picture of what is occurring at this Agency.

    From the position that you hold as National Director of the Center for Minority Veterans, is that correct?

    Mr. HENSLEY. That is correct.

    Mr. STOKES. Then I would think you are perhaps in a uniquely qualified position to be able to shed some insight on this.
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    Mr. HENSLEY. Sure. Mr. Stokes, the article is partially correct in that I was quoted in my address to veterans and employees at Lebanon about Black History Month.

    My comments were particularly in reference to the gains minorities have made in the military; looking back at the positions that they were not able to hold; looking at the ranks that they were not able to make, and comparing that to the strides and the gains we have made today.

    The article tried to address that, but not fully. We are concerned, as Mr. Gober mentioned, about employment in the VA. I think we have made great progress in that arena. We do need to realize that there are some areas, however, where the representation of minorities is not as great as we would like.

    For example, with Hispanics and Asian Americans. We are actively seeking qualified candidates for those positions. In my role as Director of the Center, we are playing an advocate role in trying to find minorities to fill positions as vacancies occur.

    As a matter of fact, I would like to also state that Dr. Kizer's office sends me a copy of all vacancies in his office. In taking a look at that, I am able to send those out to various sources that we have contact with in an effort to recruit qualified candidates for those positions.

    Mr. STOKES. Does that include the SES positions?

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    Mr. HENSLEY. Yes, sir. It sure does.

    Mr. STOKES. Highest level?

    Mr. HENSLEY. Yes, it does.


    Mr. STOKES. I would quite agree with the statements that you have made in your address to the military personnel at Lebanon. As someone who serve in World War II in America's segregated Army, I am very much aware of what it was to serve in the military in those days and what it is to serve in the military today.

    This country has made great strides from what it was when I was an 18-year-old youth. Do you have anything at all to do in terms of contracting with minority contracting firms? Can you give us any information in that area?

    Mr. HENSLEY. While I do not have anything to do with the actual awarding of contracts, we do partnership with the VA Office of Small and Disadvantages Businesses to do business seminars around the country.

    Our focus there is to attract minority veterans to the VA, minority veteran business owners to the VA, so that they will know what business opportunities exist.

    Those seminars are designed to educate veterans, to let them know what kinds of procurement contracts are available, and to make sure that they have an opportunity to compete for those contracts once they are open.
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    We did a successful business seminar in Los Angeles, California this past summer. We have another scheduled I think the 21st of April in Houston, Texas. Our focus is veterans who are business owners, minority veterans who are business owners and getting them into the VA proper.

    Mr. STOKES. I would appreciate it if, relative to all of these questions, if you would expand upon this for me in the record. Feel free to provide any statistical data you have relative to this whole question.

    Along with it, I know Ms. Meek is wanting me to also include what you are doing in terms of women and females. She has already made an observation here today about all of the males here looking alike. I hate to ask her what she thought about the lack of women in this room today.

    So, if you would also expand upon what is being done in terms of recruitment of women and inclusion of them in terms of diversity, I would appreciate it.

    Mr. HENSLEY. We will provide the data, sir.

    [The information follows:]
    "The Official Committee record contains additional material here."

    Mr. STOKES. Thank you very much.

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    Thank you, Mr. Chairman. I have got to get back to the other subcommittee.

    Mr. FRELINGHUYSEN. Thank you, Mr. Stokes.

    I am sure if Mr. Lewis was here, he would second your questions, both yours and Ms. Meek's observations. I have heard him do it on many other occasions.

    Mr. STOKES. He has been extremely supportive in this respect and has often times taken the lead in terms of posing these types of questions. Both Ms. Meek and I are very appreciative of the type of support that Chairman Lewis has give us.

    Mr. FRELINGHUYSEN. It has been a lesson to me as a relatively new Member of this subcommittee to listen to you and hear what you have to say. I knew of your military career, but certainly your career in Congress in many ways—even match that. We thank you for your service to our country.

    Mrs. Meek, would you like a parting shot?

    Mrs. MEEK. No, Mr. Chairman. Thank you.


    Mr. FRELINGHUYSEN. I have a couple of quick questions and then we will move towards the recess for tomorrow at 10:00 a.m.

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    Relative to third-party payments, Mr. Secretary, in the third party-payments that you are assuming in your budget, what is the breakdown by VISN for each third-party payment? Can we get that information?

    Mr. GOBER. Yes, we can provide that for the record.

    [The information follows:]
    "The Official Committee record contains additional material here."


    Mr. FRELINGHUYSEN. Dr. Kizer, earlier today you referred to a national budget reserve of $100 million that would be used in the event that third-party collections did not meet anticipated levels.

    You stated at that time that each VISN has a reserve. Could you tell us what each VISN has as a reserve? How do those budget numbers fit into your overall budget calculations?

    Dr. KIZER. Again, we can provide a VISN-by-VISN delineation of the numbers. If it is helpful, basically the reserve was set at 2-percent of their operating budgets. So, whatever their given operating budget is, it would be 2-percent of that.

    We are now going through the process of working with the VISNs to see about releasing some of those funds into their operations so they do not have to hold it in reserve. Based on prior history, at this point in the fiscal year, we have a pretty good idea as to what the expected work load will be for the rest of the year. So, as we move forward through the second quarter and into the third quarter, it should be possible to release those funds into their general operating budget.
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    [The information follows:]


    The Headquarters maintains a contingency reserve of $100 million. In addition, the newtworks have reserved the following amounts ($ in 000s):

Table 3


    Mr. FRELINGHUYSEN. Thank you. Relative to prostate cancer research, we had a brief discussion last year about the alarming rate of prostate cancer, the fact that the VA, I understand, has made a commit in fiscal years 1997 and 1998 to spend approximately $12.8 million.

    Relating to that spending, what do you have in terms of plans for fiscal year 1999? How much of the previous fiscal year's funds have been expended?

    Dr. KIZER. Let me ask Dr. Feussner to comment specific on that.

    Mr. FRELINGHUYSEN. Dr. Feussner, welcome back to the microphone. When you are about to sit down, if you could also give us an idea where the money has gone; to institutions, and to whom?

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    Dr. FEUSSNER. Well, I can not give you that level of detail straight away, but I could provide that level of detail for the record. You are quite correct. Our funding stream for prostate disease including cancer has gone up substantially from 1995. Our projections for this year are about $13 million. That projection seems to have leveled.

    You will recall that the 1995 figure was $3 million. We have increased that dramatically over the ensuing years. We have reached a leveling point. What we have done to be sure that we have saturated the system versus not is three things.

    As a matter of fact this morning there was a meeting at Headquarters with representatives from medical oncology, urology, et cetera, to develop a program announcement for additional treatment trials in prostate cancer. Hopefully, that program announcement will come out sometime this quarter and simulate additional treatment trials. We have met several times now with the American Urological Association to see if there are treatment issues, surgical treatment issues, that are not being addressed by research.

    As you know, we have a collaborative relationship with DOD. I think the number is about $3 million in the prostate diseases. That is all prostate diseases, including cancer.

    We have also developed our epidemiological research capacity, we have funded additional studies in the epidemiology of prostate cancer focusing primarily on two issues; early stage disease and the role of race and ethnicity in the natural history of prostate cancer.

    Mr. FRELINGHUYSEN. I commend you for your efforts. As time permits, if you could let us know what institutions the dollars have gone and whether they go to individual research efforts or whether they are all institutional-based.
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    [The information follows:]
    "The Official Committee record contains additional material here."

    Mr. FRELINGHUYSEN. Have all of the dollars we have given you been spent?

    Dr. FEUSSNER. Yes, sir. The overwhelming majority of the dollars go to individual investigators. I can provide a listing of what institutions the money has been disbursed to.

    Mr. FRELINGHUYSEN. Thank you for your response.

    If there will be no further questions, I want to thank you Gentlemen, for your active participation this morning and this afternoon. The Committee stands in recess until 10:00 a.m. tomorrow morning.

    Thank you very much.
Wednesday, March 18, 1998.



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    Mr. LEWIS. The hearing will come to order.

    Mr. Gober, we will proceed with budget questions. I thought we were going to get through yesterday. I guess you had an entertaining time while I was away.

    There has been a good deal of discussion about the Veterans Equitable Resource Allocation, VERA, as I mentioned yesterday, in the past year. To address certain concerns, the conference committee asked the General Accounting Office to study and report on the effects of Veterans Equitable Resource Allocation, or VERA processes and their implementation.

    That report has not been ready until this summer, but I am sure that you had plenty of questions regarding that yesterday from a variety of interested members. To follow up on some of that, how many of the 22 networks do you anticipate will actually receive less funding at the end of the four year period during which resources will be shifted?
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    Dr. KIZER. As I recall, it was seven.

    I might, Mr. Chairman, if it is of interest note that we also have contracted with an outside consultant who looked at the methodology and other aspects of it to help inform us as well.

    Mr. LEWIS. Yes.

    Dr. KIZER. And when that report is done, which we expect before very long, we will, of course, share it with the Committee.

    Mr. LEWIS. To say the least, that pot is stirring out there. We have heard a lot so far from members who are concerned about veterans who are moving out of their territory, and that impacts services available and dollars available.

    I hear on the other side of that, in the West, I hear from people who are receiving the benefit of all these arrivals, that is, the numbers of veterans that need to be serviced, and people are wondering where the rest of their money is.

    So this is not a problem that is going to go away.

    Dr. KIZER. We have tried to strike a balance. It was interesting in the dialogue yesterday, that Mr. Frelinghuysen was commenting about the age and severity of illness in his patients. Mrs. Meek was commenting that hers were worse than his.
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    We are trying to strike a balance, and we have, on the one hand, as you say, people who are receiving increased funds who want it yesterday, and those who are losing, who do not want it ever to go away. And I think the course that we have charted is an appropriate one that addresses the needs, and will not disrupt the care. But certainly it is challenging for some networks, and we realize it may not be quick enough for others, but we think it is an appropriate and rational approach.

    Mr. LEWIS. I would hope that all in the audience who have an interest, as well as the panel itself, would note with particular interest that this problem may be creating more difficulty, not simply because people are becoming aware of veterans moving, but because of the history and tradition of veterans medical care programming. It used to be every year we just said how much more money do we need, not necessarily how can we evaluate how the money is being spent, but how much more do we need.

    And in this current environment, we do not have that opportunity, and as we have noted already, essentially freezing out through 2002 means that this challenge is going to become more complicated, there will be more heat. It comes under the category that I often describe as sometimes it is nice to be wanted, but we can only be wanted so much.

    In this case you will be hearing from folks.

    Mr. GOBER. I think, too, Mr. Chairman, if I may, that had we not gone to VERA we would be in really dire straits. I think we would not be treating the number of veterans we are treating. States like Florida, California, and Arizona would be hurting.
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    Because what we have done is, and you stated it very eloquently, given money to a hospital year after year after year. Now the money goes to the veteran. At $2,600 a year, or $36,000 a year for the special needs veteran, the funding follows that veteran.

    And eventually it will be just like the credit card. Wherever that veteran goes, that money will go with him or her.

    Mr. LEWIS. Do you hear that, Mrs. Meek? Eventually it will be like the credit card. I am not sure the medical community totally understands that. We were talking about Medicare yesterday, and these things have a way of running right over themselves over time.


    Nonetheless, let us move on. What does VA estimate medical inflation will be over the three or four year period in which funds are being shifted?

    Dr. KIZER. At this point, we expect it will run between 3 and 4 percent.

    Mr. LEWIS. Medical inflation costs will be at 3 and 4 percent? That is very conservative. Other figures I have heard——

    Dr. KIZER. I was just going to follow up and say that this year will probably be a watershed year in determining what that will be. As you may recall, in 1997, medical inflation was very low. It was inordinately low.
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    The early results from 1998 from the private sector suggests that medical costs may rise 8 percent of more this year. So while the projections, what I cited for you are the projections that have been used, based on the most recent years, but if health care expenses take off this year much more dramatically than they have over the past four or five years, then that inflation rate will follow as well. So I put a cautionary or clarifying note on what I said.

    Mr. LEWIS. A follow up question would relate to costs shifts and the impact, affected by factors other than inflation, such as the value of real purchasing power, once you have offsets like increases in efficiency, shifting of care from inpatient settings, versus contracting, et cetera.

    I mean, do you anticipate real savings that are meaningful there that can essentially increase the purchasing power of the dollar?

    Dr. KIZER. Inflation, whatever level it is, erodes the purchasing power. However, we can purchase more with the dollars we have by using those dollars more wisely, and I think that we can.

    Mr. LEWIS. Presumably, if you are involving yourself in contracting, et cetera, you are doing that for a reason. Maybe that saves money, et cetera. That is really the point.

    Dr. KIZER. We think we can use the appropriated dollars that we have in more prudent ways than we have in the past, and we think there is still room to achieve more there, although some point in the future you cannot do any more with what you have.
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    And we have had some of this discussion in the past.


    Mr. LEWIS. Yes. One of the greatest concerns heard from those who anticipating losing funding is that quality of care is declining of will decrease. This is for you, Dr. Kizer. Should the quality of care decline at those hospitals that may lose funds over the three or four year allocation period?

    Dr. KIZER. The quality of care——

    Mr. LEWIS. You heard a lot about that yesterday, I would guess.

    Dr. KIZER. Should there be any instance that there is a decrease in quality of care, or that the quality of care has historically not been up to what we believe it should be, then obviously we need to dissect the reasons for that. If one of the reasons should be that they need more staffing, or they need more funding, or equipment, money to buy, et cetera, then that will be made available. If it turns out that it is some other reason, then that needs to be addressed.

    I think that it is overly simplistic, at a minimum, to think that dollars equates with high quality care, and particularly if those dollars are going just for inpatient care.

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    Mr. LEWIS. It strikes me, that at least for Members of the Committee, where, to say the least, the focus is a little different intensity, you may want to help us with some of the pros and cons of the complaints out there.

    Because there are people in the regions where shifts have taken place where they distinctly think dollars relate to quality of care.

    Dr. KIZER. We would be more than happy to meet one on one, meet as a group, meet with whoever to try to facilitate an understanding. And particularly the understanding of what the specific concerns of the members might be, and what the issues are that we can better address.

    Mr. LEWIS. The interesting thing about this issue is I can already more than sense that this is a concern that does not know partisan lines. Democrats and Republicans in Florida and California are going to have one concern and view, and people in the Northeast are going to have the reverse side of the coin. Massaging both ends, I think, is going to be needed.


    Despite concerns about the level of resources, the number of unique patients continues to increase, from 2,937,000 in 1996 to 3,142,000 in 1997, to 3,278,000 in 1998, to 3,400,000 plus in 1999.

    Numbers for 1997 and 1998 are above those estimated last year. So what caused the number of uniques in 1997 to increase by 205,000 that was estimated in 1997?
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    Dr. KIZER. I think in brief, at the time the budget is developed those figures are projected and have lagged behind the rapidity of the change that is occurring in the system. We have actually been able to make progress faster, in shifting care from an inpatient to an outpatient basis, and frankly doing this better than what was projected in the budget.

    Mr. LEWIS. Do the actual numbers in 1998 indicate that you will exceed your current estimate?

    Dr. KIZER. I am somewhat optimistic that we will exceed the estimates this year, although I say that with some trepidation.

    Mr. LEWIS. Do you believe that the emphasis to increase the numbers of patients that receive health care that may have inadvertently had an adverse impact on the quality of care?

    Dr. KIZER. No, I do not. If we cannot deliver quality care to those folks, then we have no business taking care of them. And that message, I think, has been very clearly articulated. This is not a numbers game. Indeed, it goes back to some of the discussion that we had yesterday. There is no incentive to enroll more people if we cannot provide the care. We do not get more premium. I mean, our appropriation is fixed. So, unlike in the private sector, where you make more money if you get more patients in, it does not apply here.

    Mr. LEWIS. We would appreciate your including some of those numbers and tables in the record so we can focus in our own special way.
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    [The information follows:]


    The actual number of uniques in 1997 increased by 205,000 over the original estimate for 1997. More than 91,000 of the 250,000 increase represented an improvement in our ability to count unique patients. For the first time, the 1997 actual count of unique patients includes CHAMPVA—40,000—and Readjustment Counseling—51,000—patients not previously counted or reflected in previous budget estimates. The remaining increase of 114,000 is mainly due to increased primary care patients treated on an outpatient basis. Early indications from our current data are that the 1998 estimate of unique patient workload continues to increase and we expect to meet our estimates. However, we do not anticipate that we will significantly exceed that estimate.

    Table reflects the number of basic and special care unique patients:

Table 4

    Table reflects the number of veteran and non-veteran unique patients.

Table 5


    Mr. LEWIS. The concern has been expressed that VHA has not yet developed a nation-wide plan for community based outpatient clinics. A nation-wide plan would also provide an estimate of the total number of community based organizations planned. The VA currently has 22 individual network plans.
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    Does VA plan in the future to develop one national plan of CBOCs?

    Dr. KIZER. I know the Congress has asked for that, and we will certainly make every effort to comply. I think you need to understand, though, that you are asking something that is exceedingly difficult, given the rapidity of change, not only in the Veterans health care system, but in the private sector.

    What happens in a given community as far as managed care, as far as the location of their hospitals, where there are mergers, et cetera, going on in the private sector bears directly on our opportunities to contract for care or to site a clinic.

    So whatever we can provide to comply with the request of the Congress we will but I think it has to be understood that it needs to be a flexible plan, and one that takes, or is cognizant of the many forces of change that come to bear on it, only some of which we are in control of.

    Mr. LEWIS. Nonetheless, as we are trying to get a handle on this, 22 individual plans does not a national plan begin to make. Some help in evaluating and reevaluating what flexibility really means or should mean would be helpful.

    Dr. KIZER. I think to date we have been cognizant of the need for equity and assuring that over a year or a period of time that there is some evenness throughout the country as far as where these are sited, and in the numbers and other things. And I think by and large that is being recognized.
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    Mr. LEWIS. Speaking just for the West, even the most flexible plans when designed inside the Beltway do not understand some factors. For example, in my desert you can put four Eastern States.

    Dr. KIZER. You know, these people back here, they just don't understand California. [Laughter.]

    Mr. LEWIS. They may understand North Carolina, but not California, right?

    Both the enrollment process required by the eligibility reform legislation to be implemented on October 1, and the establishment of new CBOCs have and will increase demand for health care services.


    Does VA have a plan to insure that the demand for health services does not exceed the amount of resources available?

    Dr. KIZER. That concern is a principle reason why we are going through this year what some people have characterized as a dry run for the eligibility to try to get a better fix on exactly how many individuals within the different priority levels that are set in law that we should expect when we implement. Those numbers will become more solid in the late spring or early summer. Then we can do some projections as to how far down realistically we expect to go in that priority scheme, and where we will need to set the level to live within the budget that we have.
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    Mr. LEWIS. The follow up is somewhat obvious. Would you stop establishing new CBOCs if at sometime in the future you believed demand for services would exceed the supply of available resources?

    Dr. KIZER. If it is apparent that those CBOCs would increase the demand that would not be offset by ability to provide care in a cheaper manner. In other words one of the strategies for using the CBOCs is to take care of existing patients, not only in a more accessible way, but in a more cost effective way.

    So I cannot say that we would just stop it, because some of those may allow us to do more with the dollars that we have, depending on the specific reasons why it was being established, and where it was being established. So, indeed, it could be that establishing another CBOC to take care of only existing patients—no new patients; you could put caveats on it—would allow us then to do more with the money that we have.

    Mr. LEWIS. But if the demand would happen to exceed the funds available, would you cease services?

    Dr. KIZER. We would have to look at that situation. That is why I have insisted that we hold a $100 million reserve, and why we have the networks hold a reserve, as well. So that if as we get to mid-year and we have a fairly good idea of what the numbers are going to be at the end of the year, we will know whether we can use those reserves of not.

    Mr. LEWIS. Thank you. Mr. Stokes.
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    Mr. STOKES. Thank you, Mr. Chairman.

    Mr. Secretary, the Spinal Cord Injury Unit of the Cleveland VA Medical Center serves as the hub for five States—Pennsylvania, Kentucky, Indiana, Michigan and Ohio. However, as an SCI center, it draws from all over the Nation, and sometimes from abroad.

    There appear to be several problems with the SCI unit there. Among these is a severe shortage of doctors. The Operations Manual, that is the VA Manual for Spinal Cord Patients, indicates that the ratio is to be 1 to 10 for inpatient care. I understand it is presently 1 to 42.

    I also understand the current waiting list for non-emergency visits, like annual check ups, is two years. The manual also indicates that no new patients may be accepted without a spinal cord chief. The unit has three MDs in residence. The chief was transferred in December to become chief of orthopedics, and the vacancy has not yet been filled.

    Although technically the hospital does have a chief in residence, I understand that he neither does site visits nor apparently supervises the SCI unit.

    I suppose the question that I want to pose to you is how common is this shortage of medical personnel throughout the VA health system?

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    Mr. GOBER. If I may, sir, I would like Dr. Kizer to answer that.

    Mr. STOKES. Dr. Kizer.

    Dr. KIZER. Two things I would say is that, one, I need to check on some of your numbers. Those do not jive with my understanding of the situation there, and I am not going to dispute them. Because what I would like to do is go back and find out from the facility whether that is, indeed, the case, but that is not my understanding.

    The other point is that SCI medicine, as you know, is not a specialty, per se. It is not recognized. We are actually trying to get that recognized as a specialty. So there is a shortage everywhere in the country of physicians who are trained in spinal cord injury medicine.

    There are a number of different types of specialists, urologists, orthopedists, neurologists, neuro-surgeons, who have an interest and training and some expertise in this area. But because it is such a small area, there is always a shortage of physicians who are trained and knowledgeable in this area.

    Some of the difficulties that we have are the same difficulties that are shared in the private sector as far as getting physicians with the special expertise that is needed.

    One thing that might be of interest in this regard is that we have just finished, and are in the process of distributing a continuing medical education program to all of our physicians in the VA on spinal cord injury and the particular medical concerns and special considerations for spinal cord injury patients.
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    This is unique in the country. It is something that we are going to ask all of our physicians and other clinicians to take and become more knowledgeable in.

    Mr. STOKES. Okay. I would appreciate it if you would check it out for yourself and then provide me a response in the record.

    Dr. KIZER. Certainly.

    [The information follows:]


    The Spinal Cord Injury and Dysfunction (SCI/D) program office and the Chief of Staff at Cleveland are concerned and dealing with the Spinal Cord Injury (SCI) physician shortages. There has been a turnover of personnel due to the stepping down of the Service Chief and the retirement of the assistant chief. The SCI physician providing services had an unexpected medical leave in early March but is now back at work. Two Board-eligible internists and a geriatrics fellow provide additional staffing. Additional specialized services are provided by an orthopedist, urologist and physiatrist, all experienced their respective Spinal Cord injury specialty areas. The SCI Chief from San Antonio was detailed to Cleveland to provide interim care and to further assess coverage capabilities. His opinion is that there is sufficient staffing to safely manage patient care. There is no curtailment in admissions to the unit.

    The average daily census for Cleveland's SCI program was 33 patients during FY 1997; it is 36 patients thus far this fiscal year. The Department of Veterans Affairs Special task Force on SCI Programs in 1993 recommended physician staffing of one physician per 10 initial rehab patients; 1 physician per 15 sustaining care patients; and 1 physician per 40 long term care patients. Although not incorporated in policy, these numbers do serve as a guideline when reviewing SCI Center staffing levels. Recruitment is underway for a Service Chief and a full-time physician.
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    The question was raised of the shortage of medical personnel throughout the VA health care system, presumably related to spinal cord injury. Recruitment is underway to fill several service chief vacancies and finding the best leaders for these key positions has been a challenge. At this point in time, overall SCI physician staffing is adequate. The VA has recognized and supported the training of SCI physicians through the SCI fellowship program. Fifty-two individuals have completed such training.


    Mr. STOKES. Mr. Secretary, please bring the Committee up to date on any new developments related to the Gulf War illness syndrome, and also address the recent report issued by three advocacy groups that raises the question about the possibility that some of the illnesses could have been caused by exposure to depleted uranium weapons.

    Has the VA performed any research on the linkage to depleted uranium exposure, and potential ill effects?

    Dr. KIZER. The answer is yes. At the Baltimore VA we have a physician who is overseeing this program. I have read the newspaper accounts of the report that you cite. I do not think that we are in a position at this point to comment. We have not been able to assess it. The report was only released a week or two ago, something like that.

    Obviously we are very interested in their thesis, and what they say and what it is based upon. We will look at it very carefully.
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    Mr. STOKES. Last year's medical research appropriation of $272 million included a Congressional increase of $10 million for research on Parkinson's disease. What is the status of that effort?

    Dr. KIZER. I am going to ask, if it is agreeable with the Chairman, for Dr. Feussner to comment on that. As you know, we have a considerable interest in doing it. It has become a bit complicated, and unfortunately does not have a real short answer, if that is okay.

    Mr. STOKES. Sure.

    Mr. LEWIS. You have 30 seconds. [Laughter.]

    Mr. STOKES. And the Chairman is being lenient. [Laughter.]

    Dr. FEUSSNER. I tried to answer that question briefly once, and did not succeed. What I thought I would do is break the answer down into three discrete parts. The first is what we are actually funding. The second is what we have initiated since the meeting that the Chairman scheduled with Congressman McDade and Skeen last June.

    And then the third part is what is on the table today.

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    Now, the first part is what we are actually funding. Our current funding is about the same as it was last year, at roughly $1.2 million. What is not included in that is two projects that we funded recently.

    One is an epidemiological research proposal that came through our normal merit review process, and was approved for funding last week. This is a project in Texas that focuses on looking at minority issues in Parkinson's disease. Specifically the differences between white, African-Americans and Hispanic-Americans.

    That's a $609,000 project.

    The award for that will go out either this week or next week.

    The second proposal that came through the normal research pathway is one of the Presidential Early Career Awards. This is a scientist in the Bronx. We had two Presidential Awards in VA. His research relates to energy metabolism. It leads to neuronal cell death, and he is a neurologist with an interest in Parkinson's. That is about a $500,000 project.

    Now, clearly these numbers do not add up to the mark that the Committee set for us last year, and we did not think that we could get to that mark with our usual grant practices. The size of each one of our grants is about $150,000. We would essentially need to have coming into our office ten new proposals a week for an entire year.

    So what we did is take a much more direct approach. I believe the meeting that the Chairman had set up was June 12th, and essentially within two weeks of that meeting we started on the following pathway.
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    I met with the American College of Surgeons, June 26th, I believe. Doctors Hoffman and Booz, who were at the meeting, met with the American Academy of Neurology. We have met with the National Institutes of Health, the genetics branch. We have met with one of the—and continue to meet with one of the investigators who was at the meeting that Mr. Lewis convened, specifically Dr. Fahn.

    And then we have been in contact with the pharmaceutical industry about neuro-protective agents.

    Now, what has come from all of that? What has come from all of that is two new research efforts, and this gets fairly technical, but I am going to explain it as best I can.

    One research effort is a collaboration between the Department and the American College of Surgeons. This is a project that is a new treatment trial. It looks at a surgical procedure called pallidotomy. It is a destructive surgical procedure. That is, it destroys the part of the brain that is causing the Parkinson's symptoms that are refractory to medical management.

    And it will compare the surgical treatment to a new, FDA-approved deep brain stimulator, that is a non-destructive surgical procedure to see if we can help patients with refractory Parkinson's disease.

    Now, this project is in the planning phase. There are two principal investigators. There is a neuro-surgeon from the Iowa City VA, an investigator from Chicago, and the coordinating center for this trial is also out of Hines in Chicago.
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    We expect this to involve 15 VA hospitals, approximately 200 patients, and take us three years. The mark for this trial, very conservative mark in my opinion, is about $4.5 million.

    Mr. LEWIS. If I could interrupt.

    Mr. STOKES. Mr. Chairman, I yield to you.

    Mr. LEWIS. I am not sure if you and I discussed this at the time, but you recall we had a day long session with a cross section of experts across the country in this subject area because of interest that has developed on our committee.

    Mr. STOKES. Right.

    Mr. LEWIS. Dr. Feussner participated in that, and I must say enthusiastically participated. The interesting piece to me, among other things, was that we had all these fabulous people, and several of them walked away, scratching their heads, saying, gosh, we have never talked to each other before.

    And it really is rather phenomenal what happens when you bring brain power together. And some of what we are hearing here is a reflection of that. So excuse me.

    Mr. STOKES. Well, I appreciate your leadership in this area, Mr. Chairman.
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    Dr. FEUSSNER. So that, sir, is a treatment trial. As best I can tell, a treatment trial of this scope and this complexity has never been undertaken in the United States. We are proposing to undertake it.

    The other major study is not a treatment trial. It is a diagnostic study, and we expect the mark on that, the conservative mark on this is about $3.5 million. That is a study that is being planned out of the West Haven VA Medical Center, in affiliation with Yale, and involves the positron emission tomography scanning.

    That is currently proposed as a five year study. As I say, the conservative mark on that is $3.5 million, but the cost of the scans alone in this study will be at least $3 million.

    So we have a major treatment trial. If we are able to implement this treatment trial, it will set the standard of care for the treatment of patients with refractory Parkinson's disease in the United States, and will be the first time this FDA approved device has actually been formally tested in a clinical trial like this.

    The spect scanning study out of West Haven is somewhat more complicated. It can only be done in two places in the United States, that is, our facility at West Haven, and the facility in Bethesda, at the National Institutes of Health. So this also involves about 240 patients, and in that case all of the patients are going to have to come, have to be flown to West Haven at least twice.

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    The first study looks at refractory Parkinson's disease. The second study looks at early Parkinson's disease, and the research technique actually may allow us to observe the abnormalities as they develop in the brain. Some of the chemicals that will be labeled are the chemicals that are absent or not being used properly in Parkinson's disease.

    So there are substantial studies. The preliminary estimates coming in for their cost is about $8 million. I think that is a very low estimate. We have not made the mark for funding this year that the committee recommended, but I think the amount of action that has ensued after the June meeting has been remarkable.

    Mr. STOKES. You do not think, however, you will make the $10 million mark. Is that what you are saying?

    Dr. FEUSSNER. I do not believe I will be able to make the $10 million mark this year. But I think with these activities we will probably exceed that mark.

    But again, the difficulty with these large trials is that they are multi-year studies. For example, in the case of the first study, even engaging 15 hospitals simultaneously, they estimate it still is going to take three years from beginning to end to identify whether the treatments are effective and how effective.

    Mr. STOKES. Obviously it is a very ambitious undertaking, and very promising from what you are relating to us. I appreciate very much your testimony.

    Thank you, Mr. Chairman.
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    Mr. LEWIS. Thank you. Mrs. Meek.

    Mrs. MEEK. Thank you, Mr. Chairman.

    Good morning.

    Mr. GOBER. Good morning.


    Mrs. MEEK. I would like to follow up on some of the questions that I asked yesterday regarding the Spinal Cord Injury Center at the Medical Center in Tampa.

    Yesterday the VA testified that it agrees that the facility is needed, and one of you said it will probably be a first priority in the year 2000 budget, but that the plans had to be further viewed because there is a need for ambulatory care, and to assure the best use for the taxpayers' money.

    That was not very specific. I was not able to grasp an answer from that. I would like a little more specificity in how you think you will go forward on this. This issue has been really bouncing around VA for ten years.

    And I just thought, suppose that it is delayed long enough, and the time and needs change, and what you may have thought back then is not what is needed now, I am just wondering whether or not I am in trouble with this particular project at this medical center.
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    First, I would like to know the context of the number one rating priority. What does that mean? Is this number one in our VISN 8? Or number one in the VA system-wide?

    Dr. KIZER. It is certainly the top or number one priority for VISN 8. At this point it is certainly right up there at the top, if not the top priority for VA.

    The other thing—I would just digress for a moment—when I commented yesterday about the issue of ambulatory care, that may or may not be in here. That is one of the issues that they are looking at. They are also looking at the sizing of the unit, and whether the original plan for 100 beds is, indeed, the right number. So there is more than just the one issue as far as the specific plans for the project. But it is certainly a high priority for the Department.

    Mrs. MEEK. Second, just a little bit more clarification. Can we finally expect to see that replacement of the Spinal Cord Injury Center at Tampa in your fiscal year 2000 budget, in that it is not in this budget?

    Dr. KIZER. As I said, it is a very high priority for the Department. I do not know that I can project what will be in the President's budget, but certainly we will advocate very strongly for it.

    Mrs. MEEK. So that means it will be in the budget that you give to OMB for the year 2000?

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    Dr. KIZER. As we sit here right now, we expect it will be, yes.

    Mrs. MEEK. You have not been very specific, Doctor.

    Dr. KIZER. Are any doctors?

    Mrs. MEEK. I hope you are more precise in your medical practice.

    Mr. GOBER. If I may, Congresswoman, it is very difficult, because there are a lot of projects that will come in. And this is a very high priority, but we do not know what will happen between now and the time we get our final budget.

    But as we sit here, and I think this is what Dr. Kizer is saying, as we sit here we are telling you it is a very high priority, and would most likely be in our budget for the year 2000.

    Mrs. MEEK. All right. I could not tie them down, Mr. Chairman. But I will keep going.


    I understand that your fiscal year 1998 budget for research and development was $272 million. Can you tell me what your proposed figure may be for fiscal year 1999?
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    Dr. KIZER. $300 million is what is in the proposed budget. A $28 million increase.


    Mrs. MEEK. Thank you. One of the methodologies proposed by this subcommittee, particularly in the housing part of it, and space utilization, is the use of Federal funds in one agency to leverage funds in other agencies, or levels of government and non-profit organizations and private sources.

    Can you tell us if the VA is using this approach for its research and development efforts?

    Dr. KIZER. There are a number of activities that we are doing. I may ask Dr. Feussner to come forward again, but we are working with the National Institute of Drug Abuse, the Agency for Health Care Policy and Research, the Federal Bureau of Prisons, and a whole bunch of other agencies doing either work for them on a contractual basis, or in joint investigative projects with them.

    Would you like Dr. Feussner to comment further?

    Mrs. MEEK. Yes, thank you.

    Dr. FEUSSNER. Yes, ma'am. We have been very successful with several of the Institutes at the NIH. We have met with almost all of them over the past year. We do not think we should confine our partnering to the borders of our country.
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    And one of the studies that Congressman Price asked about yesterday is our SMART trial. That is a three way partnership between the Department of Veterans Affairs, contributing about $10 million, the private sector contributing hopefully somewhere between $12-15 million, and the Canadian Medical Research Council contributing $3 million.

    So that the answer to the question is, with multiple institutes within NIH, with the Department of Defense, with the AHCPR, the Agency for Health Care Policy and Research, with private foundations like Juvenile Diabetes Foundation, we are finding common ground wherever we can find common ground with these other research entities and capitalizing on our mutual research interests.

    Mrs. MEEK. Thank you. And you think that makes your research and development program stronger?

    Dr. FEUSSNER. Yes, ma'am.

    Mrs. MEEK. Thank you.

    Mr. LEWIS. Will the Gentle Lady yield on that point?

    Mrs. MEEK. Yes.

    Mr. LEWIS. I might mention, perhaps Dr. Feussner may or may not be aware of this, but one area where the VA is doing very significant work is calcium retention and bone strength. NASA is beginning a proposed experiment in connection with the VA's work there.
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    Currently they are talking about a flight where one of our colleagues may go up, and indeed we may be looking at bone retention questions there. That sort of collaboration, indeed, can extend research.

    Mrs. MEEK. That is fine.

    Mr. LEWIS. I just thought I would mention that.

    Mrs. MEEK. Thank you. I am very concerned about the area of research and development. And I do hope it is not integrated with other functions in such a way that it does not really exist. That was one of my concerns. I am hoping that the VA is taking advantage of the leveraging with other agencies, but being sure that your concepts or your desires are met through that research.

    Dr. KIZER. Mrs. Meek, if I could just follow up on that. One of the strategies that we have been pursuing for the last three years, because I think it is an unrealized potential, is that the Government has this health care system, the largest health care system in the country, and it provides an incredible laboratory to address all kinds of questions in health services delivery, as well as basic science questions and clinical questions.

    And we have been pushing with other Government agencies, as well as outside of the Government, that this is a laboratory that should be used, and the Government should view it as something where it can investigate problems that may not have some of the complicating factors that outside you would see outside.
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    For example, it does not have some of the financial incentives that can create perverse behavior at times. And there are a number of other things that really provide a unique opportunity to look at problems.


    Mrs. MEEK. Thank you. Some of my veterans groups, Mr. Secretary, have contacted me in support of Readjustment Counseling Services. Can you explain to us what the VA does in this program?

    Dr. KIZER. The Readjustment Counseling Service provides basically counseling for veterans. We have 206 of these counseling centers across the country. It is done in a typically or historically a non-medical mode, which has been a positive, or is viewed by the clients as a positive way. And basically it has been a very successful program.

    One of the things that we are exploring more and is seemingly meeting with a good response, is providing more primary care services at those facilities. And late last year, we funded for 20 of the Vet Centers to expand, or have available on site primary care resources in addition to the counseling services that are provided.

    Mrs. MEEK. Thank you. What kinds of veterans are targeted for these services at the readjustment centers?

    Dr. KIZER. Well, the genesis of the program was with the Vietnam era veterans, and they are probably the largest users, but over the years the user population has increased, and certainly includes more recent veterans, Gulf era veterans, and others since Vietnam, as well as Korean War veterans and even World War II veterans.
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    Mrs. MEEK. Thank you, Mr. Chairman.

    Mr. LEWIS. Thank you, Mrs. Meek. Mr. Neumann.


    Mr. NEUMANN. Thank you, Mr. Chairman. I would like to bring up a very specific issue and it was brought to me by a constituent, and if you are not familiar with it, I would certainly understand and then just request the information on it.

    Apparently in February of 1947, the U.S.S. Brush was moored in the Marshall Islands, and apparently there were 44 ships moored within 150 yards. Are you familiar with this situation?

    Dr. KIZER. That was before I was born. [Laughter.]

    Mr. NEUMANN. Me, too, I might add. The 44 ships had apparently been the targets of a Bikini atomic bomb test, and therefore contained radioactive substances. The members on the U.S.S. Brush—there were 340 of them, of which 30 are still alive today, apparently were moored within 150 yards of these ships.

    There has recently been information released in documents that verifies their claim to this situation. Apparently the men from the U.S.S. Brush were allowed to go aboard some of these other ships that had been used as targets, and they are now claiming that there is radioactive repercussions from what they did at that point in time.
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    I will give you a name or two of the folks we are working with. Two of the 30 currently have cancer related injuries. One is Harold Kolb of California. The other is Quinton Miller of Mississippi. Ted Ovorak of Kenosha, Wisconsin, is the constituent who brought this to my attention, and I certainly respect the fact that you would not be up to speed on an issue like this being brought to you.

    But I would request that you get back to me with information. First, can we verify that this actually took place? Second, can we verify the men that were on the ships? Third, have there been any studies done to indicate to us what the condition is of these 340 men who were in this situation, assuming they were in the situation?

    I would like you to take a look at it for us, and get back to me with information on what the status is.

    Dr. KIZER. We will be happy to do that. Just in the way of interest, I have been to the Marshall Islands and been to Bikini, and know the area. We will be happy to look into it. I do not know the specific situation, and if it would be possible for us to get a copy of the document that you are reading from so we could have that information, that would facilitate our response.

    Mr. NEUMANN. Apparently the Department of Energy's Coordination and Information Center in Las Vegas, Nevada just declassified some papers that assisted these people who have been claiming this for quite some time, in verifying their claim.

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    And at this point what they have been trying to do is get the Veterans Affairs Department to take a look at their claim, and apparently they have been struggling with that particular aspect of it.

    So I would sure appreciate your taking a look into it. If we cannot get there, I would ask the Chairman to include some language in this year's appropriations bill directing it. But I would just as soon we do it ahead of time, if we possibly can.

    Dr. KIZER. We will facilitate that response.

    Mr. NEUMANN. Thank you.

    [The information follows:]


    Operation Crossroads, the first post-World War II atmospheric nuclear weapons test series, was conducted In Bikini Lagoon in 1946. During Shot Baker, a number of target ships were contaminated with radioactivity following an underwater detonation in Bikini Lagoon. The USS Brush did not participate during the actual test but later was anchored near target ships taken to Kwajalein for less than 48 hours between February 25–27, 1947.

    The Defense Special Weapons Agency (DSWA) has confirmed that the three veterans cited during the hearing (one of whose name was misspelled) were on the Brush during the period when the ship was anchored in Kwajalein. There is no documentation to confirm that the men went aboard the target ships. The DSWA has estimated a worse-case scenario dose for one of these veterans of 0.010 rem. The other two veterans did not provide specific information regarding their boarding of target ships.
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    In 1996, the Medical Follow-up Agency (MFUA) of the Institute of Medicine, National Academy of Sciences, published a report on the mortality of veterans who participated in the Crossroads Nuclear Test. The MFUA included a cohort of Brush crew members in the ''control'' group to compare to actual Crossroads participants. As of January, 1993 the mortality data for the 196 crew members of the Brush included in the study were similar to that of other control ships and did not show any unexpectedly large numbers of leukemia or cancer.


    Mr. NEUMANN. I have just a couple of other issues. Can you briefly, from your perspective, explain to me exactly what the President's proposal is in terms of taking away smoking related benefits from veterans and your position on that?

    Mr. GOBER. I will take a crack at that. There are several issues, and the first issue has to do with the fact that the way it works now, a veteran can file a claim, and we have had over 6,000 claims filed, based on the VA General Counsel's opinion that a claim can be filed for tobacco related injuries or addiction that occurred in service.

    We proposed legislation that would remove the right of those veterans to file for those claims. Under the legislation, if a veteran develops a tobacco related illness while on active duty, or in a presumptive period, a year or so afterwards, then they would be cared for.

    But for at veterans that smoked when they were in the military for two years, or less, 50 years ago, to come forward now and to file a claim, we do not honestly feel it is the Government's responsibility to provide benefits for those people.
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    We provide medical care. I have been told that almost a third of our budget for medical care goes for treating people with tobacco related illnesses.

    Mr. NEUMANN. So under this proposal, the medical care would still be provided for the veterans.

    Mr. GOBER. That is correct.

    Mr. NEUMANN. So would you describe exactly what the President is proposing to take away from the veterans?

    Mr. GOBER. We would not pay benefits or compensation to a veteran that came in and filed a claim and says he started smoking when he was on active duty ten years, twenty years, or thirty years ago and says he became addicted in the military.

    I, myself, served in the military altogether about 23 years, and the argument has always been that, well, they gave us C-rations that had cigarettes in them. Sure they did, and I gave mine away.

    And the other concern that we have, a very basic concern that I have, and we have, is the fact that——

    Mr. LEWIS. You want the record to show that you gave yours away.
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    Mr. GOBER. Yes, sir. I gave mine away. And every once in a while I would smoke one. But obviously I did not become addicted, and I do not criticize those people that did.

    But the other basic concern I have is that VA has an obligation to care for the men and women who served this country. If something happened to them while serving on active duty, I think American taxpayers would expect us to care for those heroes that served this country.

    I do not think that the average taxpayer would want us to spend billions of dollars compensating people for smoking.


    Mr. NEUMANN. Again, forgive my ignorance in this area, but would you just walk me through exactly what benefits you are talking about? Are you talking about disability benefits, then?

    Mr. GOBER. Absolutely. We probably have some cases like this, where we are paying 100 percent compensation for a disability that could be attributed to tobacco related illness.

    Mr. NEUMANN. And that would translate into a monthly payment of some sort?
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    Mr. GOBER. For a single veteran it would be roughly $1,900 a month for the rest of their lives. It could also involve paying entitlements to widows of veterans who passed away who were service connected for tobacco related illness.

    Mr. NEUMANN. And that would be tax free.

    Mr. GOBER. That is correct. And our basic concern is that we not bankrupt the system. I want the veterans, and VA to survive for years and years to come and to take care of those men and women that we have to take care of. But I think to lay something like that on the Government is not right, I must also tell you this, that there is a lot of disagreement on this issue from the veterans service organizations.

    Mr. NEUMANN. So if a veteran walks in and they are 65 or 68 years old and they say I was addicted to smoking back then and I now have cancer because of that, you would provide the health care for that veteran?

    Mr. GOBER. The health care is provided.

    Mr. NEUMANN. But what this debate is about——

    Mr. GOBER. I'm sorry?

    Mr. NEUMANN. Go ahead.

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    Mr. GOBER. If they are being provided health care now it would be provided for them. And we are doing that.

    Mr. NEUMANN. Are there situations where they are not being provided health care now that they would then be denied health care?

    Mr. GOBER. That is a possibility, because under the enrollment system, we do not know how many veterans are going to come seeking care, but a veteran, yes, could conceivably come in and say I want to get in the system, and we may not be able to treat him.

    Mr. NEUMANN. So it is possible that a World War II veteran develops cancer, has been smoking all these years, started in the service or what have you, from C-rations, it is possible that this veteran develops cancer and comes in now—he is 69, 70 years old—and we would not provide that senior with health care benefits.

    Mr. GOBER. If the veteran falls into a category, for example, what used to be called Category A, and is classified as a service connected veteran for another reason, and is being treated by us now, or is a veteran with an income so low that it falls into Category A where he does not have the funds to pay for his own medical care we will treat him. We established an income threshold which is somewhere around $21,000 a year. A veteran below that falls into a category where we would be able to treat him or her.

    Mr. NEUMANN. I want to make sure for my understanding, it seems to me that there might be two different issues that should be debated here as we look at this presidential proposal. One might be the providing of health care to this veteran. The second issue is those monthly cash benefits that we are talking about, and that might be two different issues.
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    Mr. GOBER. There are two issues.

    And if the veteran is a Category A veteran, like I said, he does not make over $21,000 a year, the veteran could be treated for these smoking related illnesses in our hospital.

    If the veteran is a Category C veteran, which is above $21,000, they still might be treated if they had third party insurance, or if we had room in our facility. Because that is one of those categories that falls down to Priority Group 6 and 7. So if we can treat all the way down to Priority Group 7 in a specific area, they might be able to be treated.

    I realize this is a little bit confusing. But the bottom line is if the veteran is being treated now in our VA hospitals, or is a Category A veteran, or falls into one of the other categories—ex-POW for example—they can be treated currently.

    But if they were in a category that, like I say, Category C, which has above $21,000 a year income, they could not be treated in our hospital.

    Mr. NEUMANN. Is there some way that you could break out with the President's numbers and what he is proposing to save here, would you break out for me the difference between the health care costs provisions versus the cash payment provision?

    Mr. GOBER. The health care provision is not in the $17 billion. That is strictly for compensation.
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    Mr. NEUMANN. That is all cash payments.

    Mr. GOBER. Yes, sir.

    Mr. NEUMANN. When was this provision providing this benefit to veterans first included in our appropriations process?

    Mr. GOBER. There was a General Counsel decision in 1993 that said we had to pay these veterans. And it was the former secretary that did not want to do that. And another General Counsel opinion in 1997 reaffirmed that we should do it, so we started processing claims in 1997.

    And thus far I think we have had 6,000 claims filed, and of those 6,000 claims, I think 214 of them have been allowed. And 2,000 or so have been denied, which means that they will probably be coming back to us on appeal. They will have to develop more information before it comes back to us on appeal.

    Mr. NEUMANN. Perhaps we should consider ways to make sure that the health care itself is provided, and we separate that discussion somehow in our discussions from the cash portion of this discussion or the cash benefits.


    The only other issue that I wanted to raise, and again I do not want to get into it a whole lot, is on Gulf War syndrome. And I understand this was discussed yesterday. I just would add my concern on the Gulf War syndrome issue, and especially the issue of potentially uranium, as I understand it, and the exposure to it.
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    And we are very concerned about the issue.

    Thank you, Mr. Chairman.

    Mr. LEWIS. Thank you, Mr. Neumann.

    Mr. Hobson.


    Mr. HOBSON. Thank you, Mr. Chairman.

    I have just three questions that I will ask for the record, sir. One of these has been, I think, discussed a little bit, but I want to go back to it a little bit. I have to go down to the AMVETS this Saturday and discuss some things with them. They announced a meeting without telling me, so I have to show up. It is a State-wide meeting. I am a life member of that particular place.

    I have a VA Medical Center in my District, in Chillicothe, and I understand that overall in the medical centers, and VISN 10, which includes my District, have been unable to recover as much as anticipated in 1997 due to unexpected complications. This is from the third party payers.

    And I want to know what the VA is doing to improve the collection from the insurance companies. Does the VA need to become more aggressive about collecting, or perhaps more precise in detecting veterans who have private insurance? I mean, this is something that everybody has wanted to do.
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    Mr. LEWIS. You are off your normal line of questions.

    Mr. HOBSON. I know. I am not going to do those today.

    Mr. LEWIS. We asked those kinds of questions yesterday.

    Mr. HOBSON. I know. Well, they were partially asked. I want to go back over it, because I have to go down there Saturday, and I want to be able to say I asked you about this.

    Dr. KIZER. If it would facilitate the time management here, the answer is yes. We need to, and we are becoming more aggressive, and we are doing a number of things as far as better identification of insurance, better claims processing, better utilization of management.

    And if it would be helpful for you, and recognizing your time line here, we can provide you with a listing of about ten different areas, and a number of things within each of those areas that we are specifically doing in this regard, and I will try to have that to you by the end of the day.

    [The information follows:]
    "The Official Committee record contains additional material here."

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    Mr. HOBSON. The second question, when I was in the legislature I did a lot with nurses, and nurse practices. And I am concerned about recent reports that VA hospital nurses are underpaid.

    And anybody who has ever been in a hospital knows, if you have been a patient, you become a real fan of nurses fast. And VA nurses in certain areas of the country are falling behind their GS equivalent staff, and have been behind the nurses in their communities.

    Since 1991, VA nurses have been under a salary system separate from other VA employees. The reason for the separate system was to give hospital directors more authority to set nurse's pay so it was compatible to those of non-VA nurses in the same community.

    Question: Do you think the Nurse Pay Act of 1990 is being applied correctly? Secondly, is the law appropriate to enhance recruitment and retention? What are the pros and cons of this pay system since it was enacted, and does the VA plan to create a new pay system for nurses or modify the current system?

    Dr. KIZER. Let me answer you in three ways, which I think address your questions. One is that we have concerns, as you do, about the current pay system, and its ability to recruit and retain individuals. Because of that, we did an internal study that was recently provided to a number of members of Congress who have been interested in this. I do not specifically recall whether you got it, but I would be happy to provide that to you as well.

    Based on that study, two things emanated from it. One was we are relooking right now internally to insure that our facilities and networks are using all of the flexibility that they have within the existing law to make sure that the pay is not an issue in retention and recruitment of nursing.
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    Secondly, we are hiring an outside entity, consultant group to look at the databases, as far as the comparability of pay. There are a host of questions that arose as far as what the data is that the pay is being compared to. We are going to hire a consultant to go out and acquire the data so we can then come back and decide whether the law does need to be changed, whether we need to do something else.

    So I cannot answer part of your question, because it is premature. We need to get the results of that survey, and we also need to finish the assessment of our own internal use before I could answer that.


    Mr. HOBSON. I think it is important for all of us, and certainly important to your clients.

    I have a somewhat parochial question which I guess all of us always do. We are trying to establish another veterans home in Ohio, in the southern part of the State.

    But one of the things that seems to be a problem is this percentage per diem that is being paid, which is 33.5 is the national average, cost of providing long term care, with the State and the resident also contributing 33.5 each of the cost.

    According to the VA Office of Geriatrics and Extended Care in 1997 the VA per diem payment was 29 percent of the national daily average cost. I note that the VA will increase payments to the State veterans homes in 1999. With this increase, will the VA reach the 33.5 percent goal?
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    Mr. GOBER. Mr. Hobson, if I could address that. Before I came to Washington, I ran a veterans home in the State of Arkansas. I was one of the people that always thought the Government got a good deal from the States because they pay such a small amount to keep them there, even though we pay a 65 percent grant towards building the home.

    Because of this belief I have been pushing to get increased per diem funding. We have made a commitment to the National Association of State Veterans Homes that we are going to get to the 33 and a third. It may take us three years, but this year is the first increase towards that.

    We now are at 30 percent with the budget just passed by Congress as it is currently submitted.

    Mr. HOBSON. Thank you very much. The other thing I would like to say, and I do not want to hurt this person by saying this, but you have a very wonderful, professional person in Laura Miller, running VISN 10 right now.

    She is probably the best professional. I used to be the Chairman of Health in the State of Ohio, and was on that committee for eight years, and I have been on a hospital board. But she is a true professional, and is willing to stand up, take a position, and get it done.

    And it is so pleasant or wonderful to find people like that within the system. And I hope you encourage other Laura Millers around the country.
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    Mr. GOBER. I assure you that will not hurt her career, and we appreciate those comments.

    Mr. HOBSON. Thank you, Mr. Chairman.

    Mr. LEWIS. Thank you, Mr. Hobson.


    Mr. Hobson took me very close to the edges of a question I wanted to ask earlier, relative to the pay and the impact that pay may have upon retention, continuing services, et cetera.

    In the research area, where we are going to be spending more money on research. We are at the $300 million level, yet research that goes forwards oftentimes requires people who are very unusual, very high quality people, et cetera.

    Do our pay schedules allow us to effectively retain those high quality researchers within the system? Do GS levels limit our capability, et cetera?

    Dr. KIZER. The researchers are like everybody else in that they would like to get paid more. The issue that I think you are addressing had to do with the promotion of some of our——

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    Mr. LEWIS. I was not talking just about doctors.

    Dr. KIZER. Well, we do not get paid enough. [Laughter.]

    But there was an issue that has been resolved about the promotion of research scientists through the Grade 14 and 15 level, and that issue has been addressed and resolved, and we are actually, I think, making progress in that area, and addressing some of those concerns.


    Mr. LEWIS. I was going to ask questions relative to the overhead costs of collection. You have done this before, and you can do that for the record.


    Mr. LEWIS. I have additional questions for the record that relate to the whole subject area of smoking cessation. I will ask those for the record, as well, if you could focus upon them, specifically a program that is taking place in the West, that I would like to have your interaction on.


    Mr. LEWIS. Last year's conference report urged VA to utilize part of the increased 1998 minor construction appropriations for converting inpatient space to outpatient activities use.
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    The committee is pleased to note that the VA has allocated an even greater amount for such activities in 1998. When does the VA expect that each hospital will be able to provide at least two examining rooms per health care provider. Having only one examining room per doctor does not appear to be efficient.

    Dr. KIZER. I cannot give you a specific date on that. The point is well taken, and this has been one of my questions, wherever I visit places, is how many examining rooms. Because one examining room per physician is inefficient, and two or more is often a much better use of time. We can try to get back to you for the record on that. But that is something that will stretch out over several years as individual facilities change, and we change the way the care is provided in those facilities.

    [The information follows:]


    Since the early 1990's VHA facilities have been converting inpatient spaces to outpatient activity uses, and moving to provide multiple exam rooms per health care provider. An especially large number of conversions have occurred since Dr. Kizer's VISN for Change concept was adopted in 1995. Network Directors are emphasizing these conversions and developing Network Strategic Plans to accomplish even more in the next five years.

    Mr. LEWIS. Well, it certainly seems to me that there are many locations where just minor reorganization, including using different floors, would make all the difference in the world.
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    Dr. KIZER. All of our facilities are under that pressure, if you will. We are looking at that. I just do not have a date that I could realistically tell you that this is when we will be there.

    Mr. GOBER. We have done a lot of that, Mr. Chairman. We have moved administrative space off the first floor, up into one of the closed wards or some place else, so that the patients——

    Mr. LEWIS. Wait a minute. What?

    Mr. GOBER. We have moved administrative space.

    Mr. LEWIS. Really?

    Mr. GOBER. Yes, sir.

    Mr. LEWIS. That's outrageous.

    Mr. GOBER. I know.

    Mr. LEWIS. That is not for the record. Well, it is. That is all right.

    Mr. GOBER. Well, we have done that in several locations. And like Dr. Kizer says, everywhere I go, I ask, how many rooms do you have. But the problem comes where we have so many of these old facilities.
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    Mr. LEWIS. Look, I will put this on the record, too. I mean, if you think I am being critical, just wander around the Rayburn Building and look at many of the Capitol view site locations. Most of them are held by staff. Something screwy is going on here. [Laughter.]


    Mr. LEWIS. Nonetheless, last year you estimated that medical care FTE levels would be 189,000 in 1997. The actual FTE level was 186,000. What caused the 1997 FTE level for medical care to be nearly 3,000 below the estimate of last year?

    Dr. KIZER. In a word, what we have tried to do is to manage it, our personnel, so that we start the year as close as possible to where we think we need to be, recognizing that if we start above that, the personnel system is such that you may end up having to cut deeper if you are going to make your target at the end of the year, because of the way the personnel system works, and the requirements attendant to that.

    If Mr. Grams or Mr. Catlett wanted to comment further, they may help elucidate that.

    Mr. CATLETT. The only other thing I would note is that we utilized the buy out provision in 1997, and in 1998 as well. We will be under our original 1998 projection, because of the buy outs given in the first quarter of FY 1998.

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    So we utilized that option one last time.

    Mr. LEWIS. It certainly would not appear that such a reduction should be the result of a lack of funds for salaries.

    Mr. CATLETT. No, sir.

    Mr. LEWIS. Could more veterans have received health care from VA if staffing levels had been higher?

    Dr. KIZER. I do not think so, no.

    Mr. LEWIS. Could you explain that any further? If staffing levels are higher, some people would suggest that more people could be served, and some others would suggest that the quality might even be better.

    Dr. KIZER. Well, what happened then is that if we have these targets, then it results in discontinuous care, and it results in more chaos. What we have tried to do is to manage this in a way that slowly gets down to where we need to be, that does not involve big swings one way or the other, which end up disrupting care and creating more problems.

    And if we can plan and predict where we are going to be, then we can plan care accordingly.

    Mr. LEWIS. The people who were discussing this with you in some depth yesterday would suggest that if you actually had a little more money in the budget and you brought more bodies, in the Northeast, they would not have the problems that they have with continuity, or quality of care.
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    Dr. KIZER. Well, I think the continuity of care there goes right to the heart of it, that if you have those bodies doing it, and then you have to get to a certain level, at a certain point in time you suddenly cut off care, that that is not good. It disrupts care.


    Mr. LEWIS. It has been suggested that what you did with that money in the pool was to put it all in equipment instead of worrying about more bodies, if, as some suggested, you needed more bodies.

    Did you put it all in equipment?

    Mr. CATLETT. The funds, I would not say it is all in equipment.

    Mr. LEWIS. A sizable amount.

    Mr. CATLETT. My perspective on this, Mr. Chairman, is that we are driving towards 30, 20, 10. Nonetheless, that is not the only driver here. Quality is important as well. There are seven other measures in his measures of changing the way we provide health care.

    But in moving towards a 30 percent efficiency, complemented by 20 percent more patients, our personnel costs are 60 percent of our costs to provide health care. There is no question in achieving these efficiencies over this five year time frame that we have set we will have to do it with fewer people.
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    And, again, efficiency, as Dr. Kizer said, efficiency does not mean it is going to reduce quality.

    Mr. LEWIS. I am going to ask the next question, and then we will wander off and vote and give you a break here. But we will have to come back here probably during the lunch hour.

    But I am asking or suggesting that because I really want Mrs. Meek to listen to this question. I know that she might want to chew on this while we are voting, and perhaps ask it in a different way later.

    It appears that the savings in salaries, because of lower FTE level, was used to purchase additional equipment. I have suggested that.

    Last year you estimated $567 million for equipment in 1997, and ended up actually spending $876 million for equipment in 1997.

    Why was more than $300 million above what you had estimated for equipment spent in 1997? As I suggest, it might very well be personnel dollars that were used for equipment instead.

    What type of equipment was bought, and was this a centralized decision, or the result of 22 different networks making individual decisions?

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    Dr. KIZER. If it is agreeable to the Chair, I would like Mr. Grams to comment on that.

    Mr. LEWIS. Come right ahead, Mr. Grams.

    Mr. GRAMS. It was the decision by the 22 networks. This was not directed from central office. It was adding up the actions on the part of all the 22 networks. During the year they made decisions to reduce staff and to put those funds into equipment.

    Mr. LEWIS. Is that described as flexibility?

    Mr. GRAMS. Yes, sir. At the local level. I would also add that this committee a couple of years ago did something that gave us a great deal of flexibility. You lifted an age old requirement that set an FTE floor on the system. When you lifted that, it gave the networks the flexibility to hire at the staffing levels that they believe are appropriate. And I think in part what you are seeing here is the networks gravitating to what they believe is the best staffing level to provide health care which also, within a fixed budget, affects how much they can have available for equipment.


    Mr. LEWIS. I hear through my staff that part of those funds were given to FedSIMS, GSA, which is a computer equipment center, as I understand it. Is there any truth to such a rumor, and if so, would you explain that?

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    Mr. GRAMS. The money for FedSIMS came out of the reserve that Dr. Kizer had referred to that we have this year. We had a similar reserve last year. As the fiscal year proceeded, Dr. Kizer checked with the network directors frequently, and about three quarters of the way through the year when all 22 said we are not going to need any of that reserve, he then set into a place a plan to spend that in a planned fashion.

    Our CIO had identified numerous needs in the area of Information Technology (IT), and it was decided in working with the Department that the best investment of those funds was to not quickly spend them at the end of the year, but put them in the FedSIMS because that gives us greater flexibility in terms of how they can be spent in the future.

    Mr. LEWIS. As we are defining and redefining flexibility, whether it is central flexibility or 22 different locations, it makes it pretty difficult for the Committee to effectively evaluate the way funds are being spent, how much might be needed in these various categories et cetera.

    It is an item that I bring to your attention, because this is a very tough year, and we are just learning that maybe we are going to have to offset much of that which we do in this bill, and problems like this, or circumstances like this just put all the more pressure on budgets like this.

    Dr. KIZER. Let me just make one general comment in reference to what was said before, to underscore the criticality of our information management capabilities. I think we have discussed it in this committee, and certainly in other committees before, that the success of any health care system in the 21st century is going to be largely predicated on their ability to manage information.
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    This is particularly so in the VA. I think Mrs. Meek commented yesterday, as did others on the mobility of our patients across the system. And they may spend part of the year in New York, part of the year in Florida, or elsewhere.

    We have to have the information management infrastructure so we can track those patients, and when the patient shows up in the Bronx versus Miami we can punch up on a computer, their medical record is.

    And enhancing our information management capability is a major strategic goal of the Department. I think you commented yesterday about the essentiality of things like the electronic medical record, and other things.

    Mr. LEWIS. We will be discussing that an awful lot more with you, I am sure. In the meantime, I just wanted you to have a chance to chew on that while we go and vote.

    We will be in recess. We hope to come back right after these votes.


    Mr. LEWIS. The committee will come to order, very briefly.

    I had forgotten a meeting that is with the Speaker at noon that I cannot avoid, and other Members who were here, planning to be here, are going to submit questions for the record. So if you would pay very careful attention to the questions for the record, including my own, we will give you a long lunch.
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    Mr. GRAMS. That's fine, sir.

    Mr. LEWIS. With that, this meeting is adjourned.

     "The Official Committee record contains additional material here."