    [Economic Outlook, Highlights from FY 1994 to FY 2001, FY 2002 Baseline Projections]
    [III. Major Functions of the Federal Government]
    [16.  Veterans Benefits and Services]
    [From the U.S. Government Printing Office, www.gpo.gov]

    [[Page 177]]

                       16.  VETERANS BENEFITS AND SERVICES

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

                       Table 16-1.  Federal Resources in Support of Veterans Benefits and Services
                                              (Dollar amounts in millions)
    ----------------------------------------------------------------------------------------------------------------
                                                                                                            Percent
                                    Function 700                                     1993        2001       Change:
                                                                                    Actual     Estimate    1993-2001
    ----------------------------------------------------------------------------------------------------------------
    Spending:
      Discretionary budget authority............................................     16,235      22,512         39%
      Mandatory outlays.........................................................     19,848      22,918         15%
    Credit Activity:
       Direct loan disbursements................................................      2,211       1,709        -23%
       Guaranteed loans.........................................................     35,434      29,548        -17%
    Tax expenditures............................................................      1,980       3,490         76%
    ----------------------------------------------------------------------------------------------------------------

      ----------------------------------------------------------------------
      The Federal Government provides benefits and services to veterans and
    their survivors of conflicts as long ago as the Spanish-American War and
    as recent as the Gulf War, recognizing the sacrifices of wartime and
    peacetime veterans during military service. The Federal Government
    spends over $45 billion a year on veterans benefits and services, and
    provides over $3 billion in tax benefits to compensate veterans and
    their survivors for service-related disabilities; provides medical care
    to veterans including lower-income and disabled veterans; and helps
    returning veterans prepare to reenter civilian life through education
    and training. In addition, veterans benefits provide financial
    assistance to needy veterans of wartime service and their survivors.
    Along with direct Federal funding, certain tax benefits help veterans.
    The law keeps all cash benefits that the Department of Veterans Affairs
    (VA) administers (i.e., disability compensation, pension, and Montgomery
    GI Bill benefits) free from tax.
      About seven percent of veterans are military retirees who can receive
    either military retirement from the Department of Defense (DOD) or
    veterans benefits from the VA. Active duty military personnel are
    eligible for veterans housing benefits, and they can contribute to the
    Montgomery GI Bill (MGIB) program for education benefits that are paid
    later. VA employs 21 percent of the Federal Government's non-DOD
    civilian 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).
    These demographic shifts result in changes in the types of benefits and
    services needed by veterans. Further, as technology improves, access to,
    and the quality of service improves.

    Veterans Health Administration (VHA)

      Over the last eight years, VA has undergone sweeping reform that
    enabled its health care delivery system to provide medical care in a
    more efficient, outpatient-oriented system emphasizing continuity of
    care. VA provides health care services to 3.5 million veterans through
    its national system of 22 integrated health networks, consisting of 172
    medical centers, 766 ambulatory clinics, 134 nursing homes, 40
    domiciliaries, and 206 veteran centers. VA is an important part of the
    Nation's social safety net because over half of its patients are lower-
    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

    [[Page 178]]

    because private insurance usually does not fully cover these conditions.
      Despite obstacles, VHA has dramatically transformed itself into a more
    efficient health care provider, with increased emphasis on quality and
    continuity of care. Early in the Clinton-Gore Administration, VHA began
    realigning 172 separate hospital campuses into 22 Veterans Integrated
    Service Networks (VISNs). This reorganization provided a new framework
    for management and change. The 22 network directors were empowered and
    held accountable to provide improved access and quality to needed health
    care services, while eliminating redundancy. In 1996, the Administration
    worked with the Congress to enact the Eligibility Reform Act. This
    allowed for the dramatic modernization of the system by allowing VA to
    treat patients in the most appropriate care setting, prioritizing
    veterans for eligibility, and allowing liberal contracting and sharing
    authorities (e.g., VA provides medical care services to DOD active duty
    military on a contract basis). Prior to eligibility reform, VA had to
    provide care as defined in statute. In many cases, it could only provide
    care on an inpatient basis. This requirement proved to be extremely
    costly, inefficient, and burdensome to VA and its veteran patients. Even
    simple procedures were being performed in hospitals. The shift from
    inpatient to outpatient care has allowed VHA to evolve into a more
    responsive health care delivery system.
      Under this Administration, VA has aggressively shed unnecessary
    personnel and replaced them with direct patient care services, expanded
    contract services and sharing agreements, and centralized procurement to
    capitalize on its buying power. In addition, VA has implemented national
    pharmaceutical formularies, realigned clinical support services, and
    consolidated, privatized, or franchised some ancillary services, such as
    laundry,

    [[Page 179]]

    food preparation, payroll/human resource administration, and fire
    protection.
      VA's quality of care, based on industry standards, is very high and
    continually improving. VA has become a leader in such patient-safety
    techniques as bar-coding, which ensures that patients receive the
    correct drugs, and a comprehensive medical-error reporting system that
    helps find common errors and develop prevention processes. Over the last
    four years, VA has completely shifted to coordinated care by
    establishing clinical teams--consisting of physicians, nurses,
    pharmacists, etc.--to provide care in a more consistent and thorough
    manner. Prior to 1997, patients were randomly assigned to available
    medical staff. Today, each veteran is assigned to a team and continually
    sees the same providers, improving continuity of care and patient
    satisfaction.
      VA also 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 measures VA physicians' adherence to established industry practice
    guidelines for key diseases affecting veterans. It has increased from 44
    percent to 90 percent over the past six years. Similarly, the Prevention
    Index measures adherence to disease prevention and screening guidelines
    and has seen an increase from 34 percent to 81 percent over the past six
    years.
      In summary, the reengineering of VA health care has resulted in
    significant reductions in the cost per patient while quality of care
    increased. This included restructuring veterans' health care to include
    the organizational, financial, and management change associated with the
    VISNs, shifting care to more appropriate care settings with an emphasis
    on primary care, and implementing clinical and administrative
    efficiencies including consolidations and integrations. More
    specifically, since 1993:
      patients treated per year increased by over 35 percent (from
              2.8 to 3.8 million). Further, 107 percent more homeless
              patients were treated in 2000 compared to 1993;
      annual inpatient admissions decreased 38 percent (317,688
              fewer admissions) by 2000 while ambulatory care visits
              increased by 56 percent to 39.3 million (14.1 million
              increase);
      approximately 1,300 sites of care delivery have been organized
              under 22 Veterans Integrated Service Networks; and,
      over 350 new community-based outpatient clinics have been
              established.

    Veterans Benefits Administration (VBA)

      VBA processes veterans' claims for benefits in 57 regional offices
    across the country. These benefits include compensation for service-
    connected disabilities, pensions for low-income veterans, vocational
    rehabilitation, education, home loans, and life insurance. Since 1993,
    VBA has realigned 57 regional offices into nine service delivery
    networks. It has established nine Regional Loan Centers for housing
    loans 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, which 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 awarding disability benefits claims
    through measures of accuracy, customer satisfaction, processing
    timeliness, and unit cost.

      Disability 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 decline

    [[Page 180]]

    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 as Social Security. While the veteran
    population is declining, the compensation caseload is currently
    remaining relatively constant due to changes in eligibility, better
    outreach efforts, and increasingly complicated disabilities as veterans
    age.
      Since 1993, compensation benefits have been expanded for Gulf War- and
    Vietnam-era veterans. Initially, VA established six ``presumptive''
    service-connected disabilities for Vietnam veterans for herbicide
    exposure under the Agent Orange Act; there are currently nine
    presumptive conditions. The development of presumptive disabilities
    makes it easier for disabled veterans to obtain compensation benefits by
    eliminating the burden to prove that the disabling event occurred during
    military service. In 1994, VA designed and implemented criteria for the
    first time to compensate veterans with chronic disabilities resulting
    from undiagnosed illnesses (otherwise known as Gulf War Syndrome). In
    1997 and 2000 respectively, the Administration worked with the Congress
    to impart monetary benefits, heath care, and vocational rehabilitation
    to the children of Vietnam veterans who suffered from spina bifida or
    birth defects--extending benefits to children for the first time.

      Education Benefits: The Government originally created the 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. Since 1994, the benefit
    automatically increases each year in relation to the general inflation
    rate. Moreover, the Veterans Benefits and Health Care Improvement Act of
    2000 allows servicemembers to increase their benefits by up to $150 over
    the basic monthly amount by contributing an additional $600.
      MGIB beneficiaries receive a monthly check based on whether they are
    enrolled as full-time 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. The MGIB also provides education
    benefits to members of the Selected Reserves. DOD funds these benefits,
    and VA administers the program. Over 90 percent of MGIB beneficiaries
    use their benefits to attend a college or university. Basic benefits
    available now total over $23,400 per recipient, compared to $12,600 in
    1992 (an 86-percent increase).

    National Cemetery Administration (NCA)

      VA provides burial in its national cemeteries for eligible veterans,
    active duty military personnel, and their dependents. VA manages 119
    national cemeteries across the country. In addition, VA has jointly
    funded 47 State veterans cemeteries through its State Cemetery Grants
    Program. Since 1993, NCA has expanded service by opening five new
    national cemeteries (Kent, Washington; Schuylerville, New York; Elwood,
    Illinois; Dallas, Texas; Rittman, Ohio), provided grants to States to
    establish 25 new State veteran cemeteries, and acquired 3,000 acres of
    land to meet burial demands. NCA improved service by installing 24
    information kiosks and by encouraging non-VA national and State veterans
    cemeteries to place headstone orders on-line. In addition, VA will
    establish six additional national cemeteries in areas of the United
    States in which the need for burial space is greatest. Those areas are:
    Atlanta, Georgia; Detroit, Michigan; Miami, Florida; Sacramento,
    California; Pittsburgh, Pennsylvania; and, Oklahoma City, Oklahoma.