    [Budget of the United States Government]
    [III. Creating a Better Government]
    [16. Veterans Benefits and Services]
    [From the U.S. Government Publishing Office, www.gpo.gov]

                       16.  VETERANS BENEFITS AND SERVICES

      ----------------------------------------------------------------------

                       Table 16-1.  Federal Resources in Support of Veterans Benefits and Services
                                                (In millions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                                   Estimate
                   Function 700                   2000   -----------------------------------------------------------
                                                 Actual     2001      2002      2003      2004      2005      2006
    ----------------------------------------------------------------------------------------------------------------
    Spending:
      Discretionary Budget Authority..........    20,904    22,463    23,469    23,996    24,533    25,085    25,651
      Mandatory Outlays:
        Existing law..........................    26,330    23,004    28,142    29,725    31,319    35,407    34,054
        Proposed legislation..................  ........  ........        19       -24       -55       -87      -117
    Credit Activity:
      Direct loan disbursements...............     1,451     1,712     1,724     1,923     1,962     2,008     2,045
      Guaranteed loans........................    20,159    29,548    28,969    29,577    30,198    30,838    31,458
    Tax Expenditures:
      Existing law............................     3,280     3,490     3,670     3,860     4,050     4,260     4,470
    ----------------------------------------------------------------------------------------------------------------
      ----------------------------------------------------------------------

      The Federal Government provides benefits and services to veterans and
    their survivors of conflicts as long ago as the Spanish-American War
    recognizing the sacrifices of wartime and peacetime veterans during
    military service. The Federal Government spends over $51 billion a year
    on veterans benefits and services, including medical care to low-income
    and disabled veterans and education and training for veterans reentering
    civilian life. In addition, veterans benefits provide financial
    assistance to needy veterans of wartime service and their survivors, and
    over $3 billion in tax benefits to compensate veterans and their
    survivors for service-related disabilities.
      The Department of Veterans Affairs' (VA's) mission is ``to care for
    him who shall have borne the battle and for his widow and his orphan.''
    The spirit of these words, spoken by President Lincoln over 100 years
    ago, is ingrained in the Department's statutory mandate ``to administer
    the laws providing benefits and other services to veterans and the
    dependents and the beneficiaries of veterans.'' The mandate sets forth
    VA's role as the principal advocate for veterans and charges it with
    ensuring that veterans receive the medical care, benefits, social
    support, and lasting memorials they deserve in recognition of their
    service to this Nation.
      Active duty military personnel are eligible for veterans housing
    benefits, and they can contribute to the Montgomery GI Bill program for
    education benefits that are paid later. VA employs 21 percent of the
    Federal Government's non-Department of Defense (DOD) work force--
    approximately 220,000 people, about 195,000 of whom deliver or support
    medical services to veterans.
      The veteran population continues to decline and age (see Chart 16-1).
    The types of benefits and services needed by veterans likely will change
    as the population ages. Further, as the veteran population shrinks and
    technology improves, access to quality services should continue to
    improve. The Administration will work to provide veterans with the kind
    of efficient and effective service, which has been lacking.

    Veterans Health Administration (VHA)

      VA provides health care services to over four million veterans through
    its national system of 22 integrated health networks, consisting of 172
    medical centers, 781

    [[Page 122]]

    outpatient clinics, 135 nursing homes, 43 domiciliaries, and 206 vet
    centers. VA is an important part of the Nation's social safety net
    because over 42 percent of its patients are low-income veterans who
    might not otherwise receive care. It also is a leading health care
    provider for veterans with substance abuse problems, mental illness,
    HIV/AIDS, and spinal cord injuries.
      VA's core mission is to meet the health care needs of veterans who
    have compensable service-connected injuries or very low incomes. By law,
    these core veterans are the highest priority for available Federal
    dollars for health care. The Veterans Health Care Eligibility Reform Act
    of 1996 allowed VA, for the first time, to treat all veterans
    ``enrolled'' in the system. VA was able to enroll all veterans that its
    funding level would allow. Previously, VA could provide care to lower-
    priority veterans (non-disabled, high-income) only on a space-available
    basis. Many people claim that these lower-priority veterans pay for
    themselves through co-payments and insurance collections; however, VA's
    collections total only $0.6 billion annually for all categories of
    veterans--a figure that has not substantially changed over the last five
    years despite the fact that 21 percent of its users are lower-priority
    patients. VA will emphasize increasing collections from lower-priority
    veterans so that this population will eventually pay for itself.
      As a result of past problems in delivering timely, quality care, VA
    will emphasize its service and access initiative. This multi-year effort
    sets the standard to provide patients with primary and specialty care
    appointments within 30 days, and to ensure patients are seen within 20
    minutes of their scheduled appointment at a VA health care facility.
      Currently, more than 700,000 military retirees are enrolled in both
    the Department of Defense (DOD) and the VA health systems and may use
    either whenever they choose. As a result, DOD and VA encounter problems

    [[Page 123]]

    in allocating the necessary resources due to their difficulty estimating
    the number of people that will obtain health care services in each of
    the systems. The budget includes appropriations language for DOD that
    will require military retirees to choose either DOD or VA as their
    health delivery system--providing continuity of care and a more
    efficient use of resources.
      In the mid-1990s, VA reorganized its field facilities from 172 largely
    independent medical centers into 22 Veterans Integrated Service Networks
    (VISNs), charged with providing veterans the full continuum of care.
    During the same time, legislation was passed that eased restrictions on
    VA's ability to contract for care and share resources with DOD
    hospitals, State facilities, and local health care providers.
      VA's efforts in reengineering its health care program have resulted in
    significant reductions in the cost per patient treated while quality of
    care increased. Reengineering efforts within VHA included restructuring
    veterans' health care (to include the organizational, financial, and
    management change associated with the VISNs), shifting to a primary care
    delivery system, and implementing clinical and administrative
    consolidations and integrations. However, VA still lags behind the
    private sector in some respects. The significant changes were:
       patients treated per year increased by over 37 percent (from
              2.8 to 3.8 million--includes veterans and non-veterans);
       annual inpatient admissions decreased 38 percent (347,894
              fewer admissions) in 2000 while ambulatory care visits
              increased by 56 percent to 39.2 million (14 million increase);
              and
       approximately 1,150 sites of care delivery have been
              organized under 22 VISNs.
      Because of VHA's increased emphasis on service delivery and access,
    the following specific performance goals have been developed:
       increase the percentage of patients who receive a non-urgent
              patient appointment with their primary care or other
              appropriate provider within 30 days (baseline will be 2001;
              strategic goal is 90 percent);
       increase the percentage of patients who receive a non-urgent
              appointment with a specialist within 30 days of the date of
              referral (baseline will be 2001; strategic goal is 90
              percent); and
       increase the percentage of patients who are seen within 20
              minutes of their scheduled appointment to 75 percent in 2002
              (1997 baseline is 55 percent; strategic goal is 90 percent).
      Also, VA formed partnerships with the National Committee on Quality
    Assurance, the American Hospital Association, the American Medical
    Association, the American Nurses Association, and other national
    associations to ensure quality patient care. The Chronic Disease Care
    Index II measures VA physicians' adherence to established industry
    practice guidelines for key diseases affecting veterans. Similarly, the
    Prevention Index II measures adherence to disease prevention and
    screening guidelines. VA plans to:
       increase the scores on the Chronic Disease Care Index II to
              78 percent by 2002 (strategic goal is 82 percent); and
       increase the scores on the Prevention Index II to 76 percent
              by 2002 (strategic goal is 85 percent).

      Medical Research: VA's research program provides $360 million to
    conduct basic, clinical, epidemiological, and behavioral studies across
    the spectrum of scientific disciplines, seeking to improve veterans
    medical care and health and enhance our knowledge of disease and
    disability. If all funding sources are included, VA spends more than $1
    billion on research. In 2002, VA will focus its research efforts on
    aging, chronic diseases, mental illness, substance abuse, sensory loss,
    trauma-related impairment, health systems research, special populations
    (including Persian Gulf War veterans), and military occupational and
    environmental exposures.
      VA will increase to 60 percent the degree of Institutional
              Review Board compliance with National Committee for Quality
              Assurance accreditation (strategic goal is 100 percent).

    [[Page 124]]

      Health Professions Education and Training: VA conducts education and
    training programs to enhance the quality of care provided to patients
    within the health care system. Education and training efforts for health
    profession students and residents are accomplished through partnerships
    with affiliated academic institutions. Title 38 U.S.C. mandates that VA
    assist in the training of health professionals for its own needs and for
    those of the Nation. Building on the long-standing, close relationships
    between VA and the country's academic institutions, VA plays a
    leadership role in defining the education of future health care
    professions to help meet the rapidly changing needs of the Nation's
    health care delivery system. Each year, approximately 85,000 medical and
    other students receive some or all of their clinical training in VA
    facilities through affiliations with over 1,200 educational
    institutions, including 107 medical schools. Many of these trainees have
    their health professions degrees and contribute substantially to VA's
    ability to deliver cost-effective and high-quality patient care during
    their advanced clinical training at VA.
       In 2002, VA will increase medical residents' and other
              trainees' scores to 81 on a VA survey assessing their clinical
              training experience (strategic goal is 85 out of a possible
              100).

    Veterans Benefits Administration (VBA)

      VBA processes veterans' claims for benefits in 57 regional offices
    across the country. As the veteran population declines, generally the
    number of new compensation and pension claims and appeals from veterans
    is expected to decline. VBA anticipates a slight increase in new claims
    from survivors and claims for burial benefits. Since 1993, VBA has
    realigned 57 regional offices into nine service delivery networks. It
    has established nine Regional Loan Centers and four Regional Processing
    Offices for education claims in an effort to improve efficiency and
    quality of services to its customers. VBA has also taken steps to
    integrate information technology into claims processing to improve
    timeliness and quality of service delivery. It has also implemented a
    ``balanced scorecard,'' a tool that has helped management to weigh the
    importance of and measure progress toward meeting VBA's strategic goals.
    These include improving responsiveness to customers' needs and
    expectations, improving service delivery and benefit claims processing,
    and ensuring best value for the available taxpayers' dollar.
      VBA monitors its performance in deciding disability benefits claims
    through measures of accuracy, customer satisfaction, processing
    timeliness, and unit cost. Performance remains noticeably off track in
    the timeliness and accuracy of processing claims for disability
    compensation and pensions. Claims processing has become increasing
    complex as a result of an increased number of disabilities per claim as
    veterans age. Moreover, workload suddenly increased in 2001 as the
    result of new legislation and regulatory changes. The recent duty-to-
    assist-veterans legislation and the agent-orange diabetes presumption
    regulation will generate a workload increase of more than 20 percent in
    2001. In light of these changes, performance will substantially decline
    in the near term. Improving benefits delivery is a top priority of this
    Administration, so considerable attention and resources will be expended
    to ensure that this temporary setback will be overcome.
      In 2002:
      VA will process rating-related disability claims in 273 days
              (from 173 days in 2000; strategic goal is 74 days); and
      VA's rating accuracy (for core rating work) will be 75 percent
              (from 59 percent in 2000; strategic goal is 96 percent).

    Income Security

      Several VA programs help disabled veterans and their survivors
    maintain their income. The Federal Government will spend over $24
    billion for these programs in 2002, including the funds the Congress
    approves each year to subsidize life insurance for veterans who are too
    disabled to obtain affordable coverage from private insurers. Veterans
    may receive these benefits in addition to the income security benefits
    available to all Americans, such as Social Security and unemployment
    insurance. VBA is developing outcome goals for the compensation and
    pension programs.

    [[Page 125]]

      Compensation: Veterans with disabilities resulting from, or coincident
    with, military service receive monthly compensation payments based on
    the degree of disability. The payment does not depend on a veteran's
    income or age or whether the disability is the result of combat or a
    natural-life affliction. It does depend, however, on the average fall in
    earnings capacity that the Government presumes for veterans with the
    same degree of disability. Survivors of veterans who die from service-
    connected injuries receive payments in the form of dependency and
    indemnity compensation. Compensation benefits are indexed annually by
    the same cost-of-living adjustment (COLA) as Social Security, which is
    an estimated 2.5 percent for 2002.
      The number of veterans and survivors receiving compensation benefits
    will total an estimated 2.7 million in 2002. While the veteran
    population will decline, the compensation workload is expected to
    increase due mainly to numerous changes in eligibility such as the new
    duty-to-assist legislation and the agent-orange diabetes presumption.
    COLAs and increased payments to aging veterans will increase
    compensation spending by more than $5 billion from 2002 to 2006.

      Pensions: The Government provides pensions to lower-income, wartime-
    service veterans or veterans who became permanently and totally disabled
    after their military service. Survivors of wartime-service veterans may
    qualify for pension benefits based on financial need. Veterans'
    pensions, which also increase annually with cost-of-living adjustments,
    will cost nearly $3 billion in 2002. The number of pension cases will
    continue to fall from an estimated 587,000 in 2002 to less than 522,000
    in 2006 as the number of veterans declines.
      Insurance: VA has provided life insurance coverage to service members
    and veterans since 1917 and now directly administers or supervises eight
    distinct programs. Six of the programs are self-supporting, with the
    costs covered by policyholders' premium payments and earnings from
    Treasury securities investments. The other two programs, designed for
    service-disabled veterans, require annual congressional appropriations
    to meet the claims costs. Together, these eight programs will provide
    $554 billion in insurance coverage to over 4.2 million veterans and
    service members in 2002. The program provides insurance protection to
    veterans who cannot purchase commercial policies at standard rates
    because of their service-connected disabilities. The program is designed
    to provide disbursements (e.g., death claims, policy loans, and cash
    surrenders) quickly and accurately, meeting or exceeding customers'
    expectations.

    Veterans' Education, Training, and Rehabilitation

      Several Federal programs support job training and finance education
    for veterans and others. The Department of Labor runs several programs
    for veterans. In addition, several VA programs provide education,
    training, and rehabilitation benefits to veterans, military personnel,
    reservists, and survivors and dependents who meet specific criteria.
    These programs include the Montgomery GI Bill--which is the largest--the
    post-Vietnam-era education program, the Vocational Rehabilitation and
    Employment (VR&E) program, and the Work-Study program. Spending for all
    these VA programs will total an estimated $2.4 billion in 2002.
       In 2002, VA will increase to 67 percent the percentage of
              VR&E participants who acquire and maintain suitable employment
              and are considered to be rehabilitated (from the 2000 level of
              65 percent; strategic goal is 70 percent).

      The Montgomery GI Bill (MGIB): The Government originally created MGIB
    as a test program, with more-generous benefits than the post-Vietnam era
    education program, to help veterans move to civilian life and to help
    the Armed Forces with recruitment. Service members who choose to enter
    the program have their pay reduced by $100 a month in their first year
    of military service. VA administers the program and pays basic benefits
    once the service member becomes eligible. Legislation enacted in 2000
    dramatically increased these benefits by more than 20 percent and
    authorized MGIB payments to active-duty personnel to supplement their
    military tuition assistance. Basic benefits available now total over
    $23,000 per recipient, and program participants may receive additional
    benefits if they contribute more of their own pay.

    [[Page 126]]

      MGIB beneficiaries receive a monthly check based on whether they are
    enrolled as full-or part-time students. They can get 36 months worth of
    payments, but they must certify monthly that they are in school. DOD may
    provide additional benefits to help recruit certain specialties and
    critical skills. VA estimates that nearly 650,000 veterans and service
    members will use these benefits in 2002. The MGIB also provides
    education benefits to reservists while they are in service. DOD pays
    these benefits, and VA administers the program. In 2002, more than
    70,000 reservists will use the program. Over 90 percent of MGIB
    beneficiaries use their benefits to attend a college or university.
       In 2002, VA will increase the MGIB usage rate by eligible
              veterans to 60 percent (from 55 percent in 2000; strategic
              goal is 70 percent).

    Veterans' Housing

      In 2002, VA will guarantee an estimated 240,000 loans totaling $28.9
    billion. Approximately 80 percent of these loans will have no
    downpayment, with over half going to first-time homebuyers. The Federal
    Government will spend an estimated $197 million in 2002 on this program.
    This amount represents the subsidy necessary to help offset costs due to
    foreclosures, as well as administrative expenses.
      Avoiding foreclosure is critical to VA and veterans. VA's goal is to
    reduce the likelihood of foreclosure through aggressive intervention
    actions when loans are referred to VA as a result of three payments in
    default. Costs to the Government are reduced when VA is able to pursue
    an alternative to foreclosure. Veterans are helped either by saving
    their home or avoiding the expense and damage to their credit rating
    caused by foreclosure.
       In 2002, of the loans headed for foreclosure, VA will be
              successful 34 percent of the time in ensuring that veterans
              avoid foreclosure.
      As part of a continuing effort to reduce administrative costs, in
    addition to restructuring and consolidations, VA is conducting a study
    of the property management function to determine whether it would be
    more cost effective to contract this activity. The study will be
    completed in 2001. The Administration proposes to eliminate the vendee
    home loan program--a program unrelated to VA's mission. Vendee loans are
    awarded to the general public when purchasing a home acquired by the
    Federal Government after a veteran defaults on a VA-guaranteed home
    loan.

    National Cemetery Administration (NCA)

      VA provides burial in its national cemetery system for eligible
    veterans, active duty military personnel, and their dependents. VA
    manages 119 national cemeteries across the country and will spend over
    $121 million in 2002 for VA cemetery operations, excluding
    reimbursements from other accounts. Over 82,700 veterans and their
    family members were buried in national cemeteries in 2000. In addition,
    VA has jointly funded 45 State veterans cemeteries through its State
    Cemetery Grants Program. In 2000, VA provided 327,514 headstones and
    markers for eligible veterans, who were buried in national, State, and
    private cemeteries. In addition, NCA installed 24 information kiosks and
    encouraged non-VA national and State veterans cemeteries to place
    headstone orders on-line.
      In 2002, VA will increase the percentage of veterans served by
              a burial option within a reasonable distance of the veteran's
              place of residence to 77 percent (from the 2000 level of 75
              percent; strategic goal is 88 percent).

    Related Programs

      Many veterans get help from other Federal income security, health,
    housing credit, education, training, employment, and social service
    programs that are available to the general population. The
    Administration inherited some duplication and often redundant Government
    programs, but it will work to reduce these inefficiencies wherever
    possible. A number of these programs have components specifically
    designed for veterans. Some veterans also receive preference for Federal
    jobs.

    [[Page 127]]

    Tax Incentives

      Along with direct Federal funding, certain tax benefits help veterans.
    All cash benefits that VA administers (i.e., disability compensation,
    pension, and MGIB benefits) are excluded from taxable income. Together,
    these three exclusions will cost nearly $4 billion in 2002, and over $20
    billion between 2002 and 2006.