[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
                DEPARTMENTS  OF  VETERANS  AFFAIRS  AND
                 HOUSING  AND  URBAN  DEVELOPMENT,  AND
                  INDEPENDENT AGENCIES APPROPRIATIONS
                                FOR 1998

=========================================================================

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                              FIRST SESSION
                                ________

            SUBCOMMITTEE ON VA, HUD, AND INDEPENDENT AGENCIES

                    JERRY LEWIS, California, Chairman

TOM DeLAY, Texas                     LOUIS STOKES, Ohio
JAMES T. WALSH, New York             ALAN B. MOLLOHAN, West Virginia
DAVID L. HOBSON, Ohio                MARCY KAPTUR, Ohio
JOE KNOLLENBERG, Michigan            CARRIE P. MEEK, Florida
RODNEY P. FRELINGHUYSEN, New Jersey  DAVID E. PRICE, North Carolina
MARK W. NEUMANN, Wisconsin           
ROGER F. WICKER, Mississippi         

 NOTE: Under Committee Rules, Mr. Livingston, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.

  Frank M. Cushing, Paul E. Thomson, Timothy L. Peterson, and  Valerie 
                     L. Baldwin, Staff Assistants
                                ________

                                 PART 5

 Court of Veterans Appeals........................................    1
 Department of Veterans Affairs...................................   37

                              

                                ________

         Printed for the use of the Committee on Appropriations
                                ________

                     U.S. GOVERNMENT PRINTING OFFICE
40-520 O                    WASHINGTON : 1997

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             For sale by the U.S. Government Printing Office            
        Superintendent of Documents, Congressional Sales Office,        
                          Washington, DC 20402                          







                       COMMITTEE ON APPROPRIATIONS                      

                   BOB LIVINGSTON, Louisiana, Chairman                  

JOSEPH M. McDADE, Pennsylvania         DAVID R. OBEY, Wisconsin            
C. W. BILL YOUNG, Florida              SIDNEY R. YATES, Illinois           
RALPH REGULA, Ohio                     LOUIS STOKES, Ohio                  
JERRY LEWIS, California                JOHN P. MURTHA, Pennsylvania        
JOHN EDWARD PORTER, Illinois           NORMAN D. DICKS, Washington         
HAROLD ROGERS, Kentucky                MARTIN OLAV SABO, Minnesota         
JOE SKEEN, New Mexico                  JULIAN C. DIXON, California         
FRANK R. WOLF, Virginia                VIC FAZIO, California               
TOM DeLAY, Texas                       W. G. (BILL) HEFNER, North Carolina 
JIM KOLBE, Arizona                     STENY H. HOYER, Maryland            
RON PACKARD, California                ALAN B. MOLLOHAN, West Virginia     
SONNY CALLAHAN, Alabama                MARCY KAPTUR, Ohio                  
JAMES T. WALSH, New York               DAVID E. SKAGGS, Colorado           
CHARLES H. TAYLOR, North Carolina      NANCY PELOSI, California            
DAVID L. HOBSON, Ohio                  PETER J. VISCLOSKY, Indiana         
ERNEST J. ISTOOK, Jr., Oklahoma        THOMAS M. FOGLIETTA, Pennsylvania   
HENRY BONILLA, Texas                   ESTEBAN EDWARD TORRES, California   
JOE KNOLLENBERG, Michigan              NITA M. LOWEY, New York             
DAN MILLER, Florida                    JOSE E. SERRANO, New York           
JAY DICKEY, Arkansas                   ROSA L. DeLAURO, Connecticut        
JACK KINGSTON, Georgia                 JAMES P. MORAN, Virginia            
MIKE PARKER, Mississippi               JOHN W. OLVER, Massachusetts        
RODNEY P. FRELINGHUYSEN, New Jersey    ED PASTOR, Arizona                  
ROGER F. WICKER, Mississippi           CARRIE P. MEEK, Florida             
MICHAEL P. FORBES, New York            DAVID E. PRICE, North Carolina      
GEORGE R. NETHERCUTT, Jr., Washington  CHET EDWARDS, Texas                 
MARK W. NEUMANN, Wisconsin             
RANDY ``DUKE'' CUNNINGHAM, California  
TODD TIAHRT, Kansas                    
ZACH WAMP, Tennessee                   
TOM LATHAM, Iowa                       
ANNE M. NORTHUP, Kentucky              
ROBERT B. ADERHOLT, Alabama            

                 James W. Dyer, Clerk and Staff Director











DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT, AND 
              INDEPENDENT AGENCIES APPROPRIATIONS FOR 1998

                              ----------                              

                                          Wednesday, April 9, 1997.

                UNITED STATES COURT OF VETERANS APPEALS

                                WITNESS

HON. FRANK O. NEBEKER, CHIEF JUDGE

                     Introduction--Budget Overview

    Mr. Lewis. The meeting will come to order.
    It is our pleasure to welcome Judge Nebeker and begin by 
saying that the United States Court of Veterans Appeals is 
requesting $9,379,804 and 79 FTEs in 1998, an increase of 
$150,804 above the 1997 level and a decrease of two FTEs. All 
of the funding increases is for the Pro Bono Representation 
Program, and, Judge Nebeker, I want to welcome you here and say 
one more time, as you have heard before, that your entire 
statement will be included in the record.
    If you would proceed as you wish, then we will go forward 
with questions from there.
    Judge Nebeker. Mr. Chairman, I really have nothing to add 
to my statement. You observed that our budget is flat and that 
we are doing our share of the effort to keep our expenditures 
down, and we do anticipate that there will be an increase in 
our caseload because of the increase in the number of denials 
emanating from the Board of Veterans Appeals, and it is a 
substantial increase.
    So all we can say is we will do the best we can in the 
future, but if the increase gets too great, we may have to come 
up here with an increase in our budget, but we are not doing 
that this year.
    [The statement of Judge Nebeker follows:]

[Pages 2 - 9--The official Committee record contains additional material here.]


    Mr. Lewis. That is it?
    Judge Nebeker. Yes.

                            pro bono funding

    Mr. Lewis. Good for you. Good for you.
    We suggested that the pro bono account which we discussed 
extensively before is an important item of concern to the 
Committee and the Administration. They did not request any 
funds for pro bono in 1997, as you know.
    To continue the program, the Congress provided an 
appropriation level of $700,000. This Subcommittee notes that 
the Administration's 1998 request includes $850,000 pro bono. 
Can you explain exactly what is going on there?
    Judge Nebeker. Well, I wish I could. I think that those 
folks ought, appropriately, to speak to the question 
themselves.
    Mr. Lewis. Those folks?
    Judge Nebeker. The pro bono people.
    Mr. Lewis. I understand.
    Judge Nebeker. I can't properly comment on the merits of 
their proposal.
    I do know that they were on the threshold of being closed 
out, and they had to let a lot of folks go. I do know that 
today, for them to perform their job, there is a delay in the 
processing of cases by upwards of 5 months. So they probably 
are in the need of additional people to eliminate that delay.
    Mr. Lewis. As you probably are aware, the pro bono people 
will be before the Committee when we have outside witnesses 
next month.
    In your statement, you indicate support for the Pro Bono 
Program.
    Judge Nebeker. Yes, sir.
    Mr. Lewis. Last year, because of your concern, the 
appropriations language was modified and specific earmarking 
was provided.
    Judge Nebeker. Yes.
    Mr. Lewis. Okay. Why do you continue to be concerned how 
the funding is provided since the Court no longer has any 
discretion in determining how much the Pro Bono Program 
receives?
    Judge Nebeker. Because of the potential for the appearance 
that the Court's budget, operating budget, is in some way being 
influenced by sharing the lump-sum appropriation with one side 
of the litigation that comes before us.
    I would liken it to your own State Supreme Court being told 
by your own State legislature: ``Here is an appropriation to 
run the Courts, and by the way, out of that appropriation, you 
have got to fund the Public Defender Service.''
    Mr. Lewis. I am not sure our legislatures considered that, 
but I won't take it as a recommendation.

                        vacant judicial position

    In May of 1996, Judge Mankin passed away.
    Judge Nebeker. He did.
    Mr. Lewis. Does the Administration plan to fill this 
position?
    Judge Nebeker. Well, they don't consult with me, but what I 
do know is that the FBI is doing a background check on a 
candidate.
    Mr. Lewis. What happened to the proposal you made last year 
to reduce the number of judges from seven to five?
    Judge Nebeker. Well, our sense of timing was poor. Shortly 
after we made the proposal, incidentally, that proposal was 
stimulated by inquiries----
    Mr. Lewis. Correct.
    Judge Nebeker [continuing]. From this committee, that is 
when the Board of Veterans' Appeals stepped on the accelerator, 
and they are now producing substantially more decisions, from 
6,000-odd to 10,000 denials of benefits, which are potentially 
appealable to the Court.
    That does not include, I might add, the partial denials. 
Those are, the 10,000, strictly the complete denials. We can 
get appeals from both types of denials, and so my 
recommendation at this point is to put that proposal to 
downsize on the back burner.
    Mr. Lewis. Is there savings in your budget from the 
vacancy, the current vacancy? Have you saved money as a result 
of that?
    Judge Nebeker. Oh, of course.
    Mr. Lewis. And what do you plan to do with that money?
    Judge Nebeker. We expect to return it to the Treasury.

                            case statistics

    Mr. Lewis. The number of cases filed has been increasing 
for the last few years.
    Judge Nebeker. Yes, it has.
    Mr. Lewis. The number of cases pending at the end of the 
year has also been increasing.
    Judge Nebeker. That is correct.
    Mr. Lewis. We will place a table prepared by the Court on 
the number of cases filed, terminated, and pending at the end 
of the year in the record at this point.

                                               STATISTICAL SUMMARY                                              
----------------------------------------------------------------------------------------------------------------
                                                                  Pending at     Cases       Cases    Pending at
                           Fiscal year                             beginning     filed    terminated      end   
----------------------------------------------------------------------------------------------------------------
1994............................................................        1286        1142        1264        1164
1995............................................................        1164        1279        1168        1275
1996............................................................        1275        1620        1252        1643
----------------------------------------------------------------------------------------------------------------

                              case backlog

    Judge Nebeker, do you view this increase in the backlog of 
cases pending as a cause for concern?
    Judge Nebeker. Yes, I do, and I can give you a thumbnail 
sketch as to why I believe the number of pending cases is 
increasing.
    Mr. Lewis. I understand the backlog increases from 1,164 at 
the end of 1994 to 1,275 at the end of 1995, 1,643 as of 1996.
    Judge Nebeker. Yes.
    Mr. Lewis. So it is of concern. I would like to have your 
reaction.
    Judge Nebeker. Yes. What comes in ultimately has got to go 
out. How long it takes it to be processed drives what the end-
year figure of pending cases is.
    I mentioned a moment ago the screening component of the Pro 
Bono Program is probably understaffed, and they are consuming 5 
months in screening the cases, getting the consent from the 
veteran to be represented by them and then going through the 
case to determine its relative merit.
    Of recent date, we have learned that Group VII in the 
General Counsel's office, that is their appellate shop, their 
appellate division that represents the Secretary before our 
Court, has by attrition been starved to death, or almost, and 
it takes a long time for those folks to be prepared to 
designate the record, and that is the first thing. After all, 
the Secretary has custody of the records. They have got that to 
do, and then they have got their briefs to file. They are 
causing extensive delays.
    We have brought this to the attention of the General 
Counsel by virtue of a panel order. I think that order has been 
made a part of the record here. If it has not, you will be 
interested to see it.
    My understanding is----
    Mr. Lewis. Let's make sure of that.
    Judge Nebeker. All right. My understanding is that they 
will do what they can, but I think that Group VII got pretty 
well ignored when it came to budget, and what they will be able 
to do and when is another question.
    Mr. Lewis. Do you anticipate the backlog increases to 
continue?
    Judge Nebeker. Yes, sir, I do.
    Mr. Lewis. 1996 and 1997, anticipating 1998?
    Judge Nebeker. Yes, sir, I do until they can finally beef 
up the processing that leads to putting the case at issue so 
that the Court can decide it. From that period of time, the 
point at issue to the point of decision, is a very healthy 
period. It is not too fast, and it is not too slow for a 
contemplative collegial court. It has got to take some time.
    Of course, some of the delay, you will see, is driven by 
the fact that some appeals are taken to the Federal Circuit, 
and they can languish there for a while before they are 
ultimately returned to us, and they are counted as pending 
during that particular period of time.
    A lot of factors enter into it, but I can assure you that 
from issue to decision on the main, the period of time is a 
very healthy one. The delay is getting the case at issue.
    Mr. Lewis. Would you suggest that the delay and the 
difficulty there could be significantly impacted by way of 
increasing your staff?
    Judge Nebeker. Not our staff.
    Mr. Lewis. Not yours?
    Judge Nebeker. Not our staff. As I said when I began, we 
may have to come back to you for some more staff in a couple of 
years if the increase continues to mount; that is, the increase 
of cases filed.
    Mr. Lewis. Right.
    Judge Nebeker. But the staff that has got to be built up is 
in Group VII.
    Mr. Lewis. Okay. Well, we will be communicating with you 
about that, then.
    Judge Nebeker. Good.

                              pro se cases

    Mr. Lewis. The number of pro se cases is declining. 1994, 
80 percent of the cases were pro se at initial filing and 58 
percent at termination. 1996, 74 percent were at pro se at 
initial filing, and 50 percent termination. What do you believe 
accounts for this decrease in the percentage of unrepresented 
claimants?
    Judge Nebeker. I think that it is the gradual increase of 
lawyers willing and able to take cases in our Court. There is a 
bar that is growing out there, and it is not going to grow very 
fast, but I think that is probably responsible for a great deal 
of it.
    Now, the reduction to 50-odd percent is, in great part, the 
product of the Pro Bono Program, not entirely, because there 
is, as I say, a bar building up throughout the United States 
now, and we are getting more cases where lawyers are coming in.
    So my inclination is that the growing veterans claims bar 
is the reason for the decrease.
    Mr. Lewis. Do you anticipate a continuing decrease for pro 
se cases?
    Judge Nebeker. Oh, I think it has got to plateau or, if you 
will, bottom out----
    Mr. Lewis. Yes.
    Judge Nebeker [continuing]. Sometime fairly soon. It is not 
a lucrative practice that the bar is clamoring to get into.
    Mr. Lewis. Some people are suggesting we ought to reduce 
significantly the number of law school graduates. So maybe this 
is a reflection of that.

                       length of appeals process

    The amount of time from initial filing to disposition is 
declining: 1994, 404 days; in 1995, 393; 1996, 380. Is that 
right?
    Judge Nebeker. I think that is right. I would just call it 
level. I am not sure the decline is----
    Mr. Lewis. Significant?
    Judge Nebeker [continuing]. Is significant.

                    va adjustment to judicial review

    Mr. Lewis. Last year, we discussed the VA's adjustment to 
judicial review. You indicated that the VA was making changes, 
but that it was too early to speculate.
    Judge Nebeker. Apparently, it still is. I was asked in the 
Senate after I had made my speech at the Judicial Conference 
2\1/2\ years ago what had happened, and my answer is the same 
as it will be to you. They studied it three times.
    Mr. Lewis. Does it now appear to you that the VA is making 
important improvements in its adjustment to judicial review?
    Judge Nebeker. No.
    Mr. Lewis. Is the remand rate to the Board of Veterans 
Appeals still above 50 percent?
    Judge Nebeker. Yes.
    Mr. Lewis. Judge Nebeker, in your opinion, does the VA have 
enough--do they have enough lawyers to represent their position 
before the Court?
    Judge Nebeker. No, they do not.
    Mr. Lewis. Tell me why.
    Judge Nebeker. I wish I really knew. They just got 
forgotten about within the Department. I have been told that 
when they lose people, they don't get any back. Their morale is 
pretty low because they have got more work to do than they can 
handle.
    Mr. Lewis. Their budget hasn't been decreasing, you know. 
There are agencies around where they have had budgets 
decreased.
    Judge Nebeker. I understand, but the allocation to Group 
VII, it is my understanding, wasn't forthcoming. Now, I am just 
talking about what I hear unofficially. I can't speak 
officially for the Secretary on this, on this point, but I do 
know that the morale of those people has got to have a boost.
    Mr. Lewis. I am going to ask my staff to discuss that with 
you further with me when I do some communicating in connection 
with that.
    Judge Nebeker. Sure.

                      pro bono peer review report

    Mr. Lewis. In the 1997 justifications, the peer review of 
the Pro Bono Program by Legal Services Corporation was 
mentioned. What happened to that report that they were supposed 
to come forward with?
    Judge Nebeker. Somewhere between the Legal Services 
Corporation and the program, it fell between the stools. I 
understand it is being jarred loose now.
    Mr. Lewis. They did complete their review, though, outside 
of a report?
    Judge Nebeker. I didn't think they completed it. They 
completed a review and sent a draft report to the grantees, but 
didn't complete the final report. LSC is reconstructing it now.
    Mr. Lewis. The report. That is right. I was asking about 
the review.
    Judge Nebeker. I am sorry. I didn't differentiate between 
review and report.
    Mr. Lewis. No, that is okay.
    So we don't really know when we will get that report or see 
the review of the report.
    I have a number of questions that I can ask you for the 
record, Judge Nebeker.
    Mrs. Meek?

                            judicial process

    Mrs. Meek. Thank you, Mr. Chairman.
    Thank you, Judge, for being here. I am new to this 
committee, and I am just trying to understand what is here in 
your statement. I seem to see--I see a problem as far as my 
judgment is concerned. You may need to help me understand this.
    Is it my understanding--first of all, I would like to ask, 
have you at any time received any kind of assessment from your 
clients in terms of the veterans who are asking for these 
appeals? Do you have any kind of milestone to say that so many 
of them you have assessed or you have surveyed them? What do 
they feel about this program?
    Judge Nebeker. Mrs. Meek, I can honestly say I don't know. 
Now, the reason that I would say that is this. Unlike an 
executive branch agency that would have a duty to administer a 
program, we are a court. Half the people that leave our Court 
are disappointed. The other half wins.
    As the Chairman in his question pointed out, about 50 
percent of the cases that we decide that come to issue for our 
decisions, some others drop out at a much earlier stage and 
some go back to the Board. So it is just about 50 percent of 
the appellants are winning in the sense that there was error. 
We found it and we sent it back and told the Board of Veterans' 
Appeals to correct it.
    Now, a court in doing that cannot be interested in pleasing 
everybody, and as a matter of fact, in order to be independent 
and be true to the oath of office we take, we have to 
administer justice fairly and without regard to the position in 
life of a veteran who appeals or the position in life of the 
Secretary. So----

               legal representation for pro se appellants

    Mrs. Meek. If I may go back a little further on that.
    Judge Nebeker. Yes.
    Mrs. Meek. You mentioned a very strong word. You said 
``fairly.''
    Judge Nebeker. Yes.
    Mrs. Meek. And I am trying to differentiate whether or not 
all the people who come before the Court do have fair 
representation. I am just reading your report which says many 
of them come to you unrepresented.
    Judge Nebeker. They do.
    Mrs. Meek. And then you handle that.
    Judge Nebeker. That is correct.
    Mrs. Meek. You handle that by assigning one of the persons 
from the pro bono or from legal. How do you handle that, Judge?
    Judge Nebeker. Well, we don't have the authority to compel 
a lawyer to take a case. No court really does.
    In the criminal area, it may be a little bit different. You 
have to find a lawyer----
    Mrs. Meek. That is right.
    Judge Nebeker [continuing]. Because there is a 
constitutional right to one.
    Mrs. Meek. Yes.
    Judge Nebeker. But in our kind of litigation, that is not 
so. So we can't compel a lawyer.
    We, therefore, started as a pilot project this Pro Bono 
Program. Now, it does not represent all unrepresented veterans 
before the Court. It represents only those where volunteer 
lawyers are willing to take the case, and the volunteer lawyers 
are not willing to take a case that is frivolous or near 
frivolous. Such cases do not belong in the Court in the first 
place, and some of the appeals we get are appeals brought by a 
veteran simply because he lost below and wants to appeal, not 
considering whether there is any merit to his appeal. He just 
simply files the appeal.
    The Pro Bono Program screens those cases out, and those are 
the folks that are probably left to their own devices.
    Then we have a hand-holding component of our Court which 
talks to these people on the phone, helps them understand what 
it is they must do, and they can file an informal brief, and 
they do file an informal brief. Then the Secretary files his 
brief. It is really a tough situation where you have someone 
who doesn't know the process appealing to the Court, and the 
Court winds up in a somewhat difficult position because we then 
wind up sort of being an ombudsman, not having two equally 
paired advocates before the Court. So we have to undertake our 
own review of the record to see whether there is error there.
    Given the fact that there is 50-percent error, it is a task 
that we must undertake because we recognize the rate is that 
high.
    You used the word ``fair.'' ``Fair,'' of course, is like 
beauty, in the eye of the beholder, and if the veteran loses, I 
don't blame him for thinking it is unfair, but sometimes there 
is nothing to the appeal. He has taken it probably after having 
been counseled by a veterans service organization that there is 
nothing to the appeal, but he takes it, anyway.
    Mrs. Meek. All right. I think my use of the word ``fair'' 
went beyond the connotation which I hear you talking about.
    Judge Nebeker. Okay.
    Mrs. Meek. I guess I am wondering if Government is 
providing for the veterans. I am thinking about the veterans 
now. I am not thinking a lot about the Court because I know 
that you are there and you are going to be fair in whatever 
decisions are made, but I am wondering if anyone has ever 
looked at this entire system to see whether or not there is a 
systematic way before they even get to you, Judge, which you 
probably can't answer, to see whether or not there is fair 
representation or fair discourse to make a veteran whole that 
may not be getting the amount of money that he is supposed to.

                  prohibitions on legal representation

    Judge Nebeker. Historically, it was the will of Congress 
that veterans benefits not be lawyerized, and as a result, 
there was originally a $10 limit on fee. Then came the Veterans 
Judicial Review Act, and they amended that statute a little 
bit, but still, a lawyer cannot charge a fee or accept payment 
until after a claim has been processed through the Regional 
Office to the Board of Veterans' Appeals and the Board has 
issued a final decision. Only then can a lawyer get into the 
case other than by volunteering.
    Now, there is no machinery with taxpayer money to get 
lawyers in where they can be paid. There is no, in effect, such 
thing as a public defender service in the criminal area to 
represent these veterans. If veterans can afford it, they can 
hire a lawyer, but only after they have had a final BVA 
decision denying their claim.
    Then they can get a lawyer. They can come to us, and they 
can go back to the VA with a lawyer and try to reopen the case 
and do these things that they cannot do with a lawyer at the 
initial stage.
    Mrs. Meek. This has nothing to do with your Court, but I 
think there is a two-tiered treatment here of veterans in terms 
of the way this process works in that they are being treated 
less than someone out of my district that has maybe written a 
bad check, the way I look at this.
    Judge Nebeker. Yes.
    Mrs. Meek. I wish it was so that it could be more equal for 
veterans.
    Judge Nebeker. If I were in a position to make a political 
judgment, I would change that statute I told you about----
    Mrs. Meek. Yes.
    Judge Nebeker [continuing]. But I am not.
    Mrs. Meek. I would like to help you do that. I would be 
very much interested in looking at that.
    Mr. Lewis. I can hear some consultation brought forth.
    Judge Nebeker. Indeed.
    Mrs. Meek?
    Mrs. Meek. Yes.
    Judge Nebeker. May I present this paper to you? It is a 
simple little fact sheet about what the Court is and what it is 
not. You might find it very helpful.
    [The information follows:]

[Page 18--The official Committee record contains additional material here.]


    Mr. Lewis. Hopefully, you can make that available to the 
Committee.
    Mrs. Meek. And you only have one judge and six associate 
judges?
    Judge Nebeker. I am the chief and then there are six 
others. I am the first among equals.
    Mr. Lewis. As it were.
    Do you have any additional questions?
    Mrs. Meek. My comment is off the record.

                  percentage of bva decisions appealed

    Mr. Lewis. Judge Nebeker, I am not sure. I do know that the 
Department of Veterans Affairs makes thousands of decisions 
that never appear before the Court.
    Judge Nebeker. Right.
    Mr. Lewis. I have no idea if there is a significant 
difference percentage-wise between the number of such cases 
that end up in the appeals process versus what happens in the 
traditional court, whether it is the community of the Superior 
Court, commonly used in the States around the country, but my 
guess is that probably the appeals process has not greater 
percentage volume. I don't know.
    Judge Nebeker. Maybe less.
    Mr. Lewis. Maybe less?
    Judge Nebeker. Yes. If you looked at state systems, 
strictly at the administrative law side, I don't think you can 
compare criminal law or ordinary civil law.
    Mr. Lewis. Yes, that is right.
    Judge Nebeker. But if you looked at Industrial Commission 
decisions----
    Mr. Lewis. Yes.
    Judge Nebeker. Worker's Comp decisions that ultimately get 
appealed to a court, there is probably a higher rate of appeals 
brought in the State courts than there is before us because you 
see the high volume of decisions coming out of the Board, and 
yet, what we see is a tip of the iceberg, really.
    Mr. Lewis. Yes.
    Mrs. Meek. Would the gentleman yield?
    Mr. Lewis. Yes.
    Mrs. Meek. All right. Judge, you are like the Supreme 
Court, aren't you, what you are doing in terms of appeals?
    Judge Nebeker. We are the court of last resort for 
decisions that apply facts to law. If, on the other hand, we 
simply say a statute is unconstitutional or a regulation is 
unlawful because it wasn't authorized by statute, that can be 
appealed to the U.S. Court of Appeals for the Federal Circuit 
and then, ultimately, to the Supreme Court.
    We had one case go all the way to the Supreme Court.
    Mrs. Meek. Thank you.

                                closing

    Mr. Lewis. Judge Nebeker, as I indicated, we will want to 
adjust your responses for the record, and we do appreciate your 
presence today----
    Judge Nebeker. Thank you, Mr. Chairman.
    Mr. Lewis [continuing]. And look forward to seeing you 
soon. All right. Thank you.
    Judge Nebeker. Next year, maybe?
    Mr. Lewis. If you want to.

[Pages 21 - 36--The official Committee record contains additional material here.]


                                         Wednesday, March 23, 1997.

                     DEPARTMENT OF VETERANS AFFAIRS

                               WITNESSES

HON. JESSE BROWN, SECRETARY
D. MARK CATLETT, ASSISTANT SECRETARY FOR MANAGEMENT
KENNETH W. KIZER, M.D., M.P.H., UNDER SECRETARY FOR HEALTH
JOHN R. FEUSSNER, M.D., CHIEF RESEARCH AND DEVELOPMENT OFFICER
GREGG A. PANE, M.D., CHIEF POLICY, PLANNING, AND PERFORMANCE OFFICER
C.V. YARBROUGH, CHIEF FACILITIES MANAGEMENT OFFICER
ROGER BAUER, VICE CHAIRMAN, BOARD OF VETERANS' AFFAIRS
WILLIAM MERRIMAN, DEPUTY INSPECTOR GENERAL
DENNIS DUFFY, ASSISTANT SECRETARY FOR POLICY AND POLICY
STEPHEN L. LEMONS, ACTING UNDER SECRETARY FOR BENEFITS
JERRY W. BOWEN, DIRECTOR, NATIONAL CEMETERY SYSTEM

                            Opening Remarks

    Mr. Lewis. The meeting will come to order.
    It is my pleasure to welcome one more time Secretary Brown 
for purposes of discussing the 1998 budget of the Veterans 
programs that the country and the Congress so strongly 
supports.
    Mr. Secretary, I will have opening remarks. Mr. Stokes has 
a meeting in the room next door he had to attend, and so I know 
he was here to express that to you personally, but indeed, his 
remarks will be in the record. We will move forward, then, with 
your own opening statement and proceed with questions.
    I wanted to mention, and we will probably repeat this more 
than once, but there will be a number of questions that will 
not be formally addressed at the Committee hearing that will be 
included in the record, and we would appreciate your 
responding. In the meantime, I would welcome you, following my 
opening remarks, to introduce your guests and then proceed with 
your own remarks.
    So, with that, Secretary Brown, the VA is requesting a 
total budget authority of $41.1 billion and 210,625 FTE in 
fiscal year 1998, a net increase of $1.7 billion and a decrease 
of 4,807 FTE below the 1997 level. However, the increases are 
not in discretionary appropriations. They are in mandatory 
appropriations, legislative proposals and adjustments, and 
permanent appropriations.
    The 1998 discretionary appropriations request, which is 
what the Appropriations Committee has jurisdiction over, is 
$18.7 billion, a decrease of $161 million below the 1997 level. 
That amount does not include your legislative proposal to 
permit VA to retain third-party medical collections and user 
fees. That legislative proposal would increase the amount of 
funds available for veterans health care by $468 million.
    Mr. Secretary, this hearing will cover a wide range of 
issues, the shifting of medical care funds so as to achieve a 
more equitable distribution of resources among the hospitals, 
Medicare subvention, the adequacy of the request for medical 
research and major construction, allegations of harassment, and 
the so-called Y2K, the year 2000 problem that all of us will be 
facing. That is just to name a few of the major issues that 
could be a part of this hearing, but the greatest concern is 
the legislative proposal to permit the VA to retain medical 
collection and fees.
    The proposed legislation is risky, and it may not be 
enacted. In the final analysis, if we don't get a bill for the 
entire process or this provision is not there, then, of course, 
we don't even start.
    Currently, the collections minus funds for administrative 
costs are deposited in the Treasury. The administration has 
indicated to you that the offset, that is, the legislative 
savings necessary for passage of the authorization bill to 
permit the VA to retain the receipts will not come from 
veterans programs, but it is not yet identified just where the 
offsets would come from, that is, which accounts.
    Mr. Secretary, I am very concerned about that for, indeed, 
this Subcommittee has a number of programs that are vital in 
terms of people kinds of services out there, and all of those 
agencies have been under great pressure. By that, I mean they 
have actually had to take significant reductions from past 
requests and so on.
    The veterans programs have not faced those kinds of 
reductions by way of the legislative action here, and so, to 
have offsets not come from within your existing ability to 
rethink priorities and reprogram, et cetera, it at least raises 
a number of questions in the minds of those who are concerned 
about putting pressure further on housing instead or on EPA 
instead and so on. So I hope you appreciate that as a part of 
our reality and realize that all of these programs are under 
pressure.
    The more realistic the Administration's proposed offset, 
the better chance of passage, but I would urge you to go back 
in the other direction and say we could lose a lot of support 
within the House if suddenly we are going to be closing down 
housing that might be available for children and otherwise or 
undermining EPA programs in terms of their budget further.
    I suppose that the best chance would be as a part of an 
overall budget agreement, but the possibility of that is 
unknown at this time. Some have suggested that you might even 
look at it across the board as a means of offset. I just don't 
know exactly how we deal with this.
    The Subcommittee is concerned, as I am sure you are, about 
what happens in the fall if the proposed legislation is not 
enacted. It is difficult to see how the Subcommittee could find 
close to a half-a-billion dollars in 602 allocations without 
adversely affecting the programs I have mentioned.
    Mr. Secretary, I will be pleased to hear your statement, 
and one more time, all of the questions as well as your 
comments will be included in the record, and you can proceed as 
you wish.
    I have indicated already that Mr. Stokes' statement is in 
the record, and so with that, please recognize that there are 
competing subcommittees around here. There are members who are 
very much interested in your programs, and I am sure they will 
be in and out as they can, but welcome and we are anxious to 
hear your statement.
    Mr. Secretary.

                   secretary brown's opening remarks

    Secretary Brown. Thank you so very much, Mr. Chairman.
    I have with me today Dr. Kizer, our Under Secretary for 
Health, and Mark Catlett, Assistant Secretary for Management.
    I want to thank you for allowing me to present the 
President's 1998 budget request for the Department of Veterans 
Affairs. I noticed that there are some new Members on the 
Subcommittee since I was here last year, and I am glad that the 
new Members, Representatives Wicker, Meek, and Price, are 
involved in these issues. We look forward to working with all 
of you.
    Mr. Chairman, we are requesting $17.6 billion for medical 
care, $19.7 billion for compensation and pension payments, $818 
million for VBA, $84 million for National Cemetery Services, 
$234 million for research, $79.5 million for major 
construction, and $163.3 million for minor construction.
    The details on the total are $41.1 billion and 210,625 
employees for VA programs that are contained in my written 
testimony. This is a good budget because it will allow VA to 
provide quality care and services to veterans. It builds on our 
progress in making changes needed to operate within budget 
realities. These changes and eligibility reform offer VA a 
great opportunity to expand and improve healthcare services, 
create new revenue streams, and provide value to the taxpayers.
    Our proposal will include some new tools to keep our system 
sound. I am pleased to report that VA will expand and improve 
healthcare delivery in 1998 without any appropriated increase 
above the 1997-enacted level for medical care. This is a first.
    Mr. Chairman, we have been very proactive in changing the 
way we do business, and if we are to continue, we need the help 
of Congress. We need your help.
    Critical to our strategy is our proposed legislation to 
retain all third-party collections. If this legislation 
requires an offset of $1.9 billion, the over-extenders that we 
are proposing provide savings of $3.4 billion, which means $1.5 
billion for deficit reduction.
    It is also our goal to collect Medicare reimbursements for 
higher-income, non-service-connected veterans who choose VA 
healthcare. Of course, this will require legislation 
authorizing the Medicare demonstration.
    Passage of our legislative package will permit us to 
accomplish the following: By the year 2002, we expect to reduce 
the per-patient healthcare cost by 30 percent; increase the 
number of veterans served by 20 percent; and fund 10 percent of 
VA's healthcare budget from non-appropriated revenues. These 
three goals are mutually dependent. We cannot accomplish any 
one of them alone.
    Without enactment of these legislative proposals, a 
straight-line appropriation in 1998 would force VA to treat 
fewer veterans and eliminate thousands of healthcare positions.
    We have estimated that 105,000 veterans would be denied 
care next year, and 6,600 healthcare positions may be 
eliminated. A straight-line budget in 1998 would force us to 
change VERA. Those networks that will receive increases will 
get less, and those that will lose dollars will lose more. By 
the year 2002, we will have denied care to a half-a-million 
veterans.
    Mr. Chairman, a straight-line budget will mean the 
beginning of the end of the VA's healthcare system. However, if 
our proposal is enacted, we would provide care to a half-a-
million more veterans by the year 2002. Under this budget in 
1998, we would treat 3.1 million unique patients, an increase 
of 135,000 over last year, provide 890,000 episodes of 
inpatient care, and 33.2 million outpatient visits.
    This budget also includes funds that are crucial to 
changing our benefits system through the Business Process 
Reengineering project. When completed, reengineering will allow 
most claims to be processed in less than 60 days by 2002, while 
reducing the cost for processing claims by 20 percent.
    The National Cemetery Service is continuing to experience 
growth in its workload. I am very pleased to note that funding 
is being requested for the full year of operations at the 
National Cemetery in Seattle and activation of cemeteries at 
Chicago, Dallas, and Albany.
    Mr. Chairman, this concludes my statement. I look forward 
to working with you and the Committee Members to honor the 
commitment that we have made to our veterans and their 
families. I will be happy to respond to your questions.
    [The information follows:]

[Pages 41 - 52--The official Committee record contains additional material here.]


                           user fee proposal

    Mr. Lewis. Thank you very much, Mr. Secretary.
    I think I will move directly to the third-party collections 
question. The VA budget makes enactment of legislation to 
permit retention of third-party collections a critical 
component of its health care funding in 1998. In fact, the 
entire increase in medical care funding is to be derived from 
retaining collections from insurance carriers and copayments. 
Because those receipts minus the amount necessary for 
collection are currently deposited in the Treasury, such 
legislation requires an offset referred to as PAYGO.
    The proposal to retain these revenues is not only dependent 
on legislation, but on dollar estimates whose reliability for 
future years is uncertain. It is assumed that recoveries from 
third-party payers will continue to rise in future years.
    Let's explore some of the assumptions behind your proposal. 
With inpatient workload declining and projected to continue to 
decline in future years, how does VA plan to increase the 
amount of its collections as it is estimated that it takes 20 
outpatient billings to equal one inpatient billing?
    Secretary Brown. Well, first of all, we need to look at the 
total picture in terms of what we are requesting.
    Before I respond to that question, let me just simply say 
to you that we need a minimum of $648,000,985 to just keep 
things as they are in 1998 at the same level that we performed 
in 1997, and that is broken down. Our payroll increases, we 
have about 240,000 folks on the rolls. That comes up to $388 
million. Inflation and other uncontrollable costs is around 
$249 million. So that is around $640 million. So that is just 
to keep things primarily because of costs beyond our control.

                        management efficiencies

    Mr. Lewis. Okay. Mr. Secretary, before, then, your 
responding to my question, let me respond to that. I am a bit 
disconcerted with the reality that this Agency, of all the 
agencies coming before this Committee, has not received the 
kind of evaluation and reevaluation in terms of budget that 
others have. Others have had significant reductions in the 
overall picture relative to their requests, while the House has 
made the decision in a bipartisan way that veterans shouldn't 
be subject to those kinds of reductions.
    In the meantime, many of us were looking to the Agency by 
administrative change, new business procedures and the like, to 
reduce significantly overhead and cost.
    The HUD Department of Housing, for example, has made 
serious readjustments and new management plan efforts that have 
resulted in major savings that have not put them in a position 
of saying we have got to have an X-increase if we are just 
going to go on as we have provided the services in1997 and go 
forward in 1998.
    NASA has had very, very significant percentage reductions 
beyond standard FTE reductions, but in the meantime, you 
suggest you need $680 million just to carry forward the 
services delivered in 1997.
    Secretary Brown. I will clarify the point that I was 
making, but let me just simply say, you are comparing the 
benefits that veterans receive with NASA and that is a great 
program, with Housing, and that is a great program, but I 
don't----
    Mr. Lewis. I am not comparing--I am comparing 
administrative decisions to reorganize and provide 
efficiencies.
    Secretary Brown. Yes, but the bottom line is we are talking 
about generating savings and so forth in the whole process. 
That is really what we are talking about here, and when I am 
suggesting to you that there is a comparison there, it is that 
when we have men and women, who are carrying out the policies 
of our democratic institutions, come back home, suffering from 
all kinds of strange diseases and sick, missing arms and 
missing legs, there is no comparison between the programs, and 
I don't want to get into a debate about whose program is more 
important, VA's program.
    Mr. Lewis. I hope not.
    Secretary Brown. I don't want to do that.
    Mr. Lewis. I hope not.
    Secretary Brown. But I do want to make it clear that I 
believe that when we start talking about veterans benefits, we 
need to look at it in terms of a continuation of war. That is 
exactly what it is, and that we as a Nation have the 
responsibility to do everything that we can to make sure that 
our veterans, once they return home, have a level playing field 
in which to achieve some type of quality of life.
    Having said that, the $650 million that I was talking about 
was just to simply say to you that the cost of the vastness of 
the system, just to pay our employees a COLA, that money has to 
be there.
    If we as a Nation have the will to maintain a delivery 
system involving healthcare, benefits, and burial services to 
our veterans, we have to have those funds there to compensate 
the employees to administer those programs. That is the only 
point that I want to make there.
    Mr. Lewis. And the only point I was making is this, that 
other agencies----
    Secretary Brown. And I am going to get to that.
    Mr. Lewis. Just a moment. Just a minute. Other agencies, 
recognizing this problem, but also recognizing all of our 
commitment to balancing the budget over time, have by improved 
administrative procedures, by internal efficiencies, made sure 
they delivered their services, at the same time reduce 
significantly FTE, et cetera.
    It is our concern that this Agency has not provided that 
kind of leadership, and that is part of what I am exploring 
here.
    Secretary Brown. Mr. Chairman, that is not true. The bottom 
line is that we have reduced our FTE by 20,000 people. We are 
right now in the process of a massive reengineering of our 
healthcare delivery system.
    The fact of the matter is, for the first time, quite 
frankly, if you look at the amount of money that we actually 
need, if you use the formula that I described, in the last 
Congress, the President put a billion dollars on the table, and 
that was cut by $915 million. So we are making the necessary 
adjustments, not only in health care delivery, but also on the 
benefit side.
    Now, I guess with that, I am already--quite frankly, I 
forgot what your initial question was.
    And we are going to cut another 20,000 more. So we are in 
the process. No one should think that VA is kind of out here 
just kind of spinning its wheels. We are in the process of 
making massive changes.
    Dr. Kizer and his VISN Program, the VERA program, is 
redistributing our resources. We are in the process of just 
revolutionizing the whole concept of healthcare through our 
VISN process, where we have broken our system up into 22 
geographic areas.
    As I mentioned to you in my opening statement, we plan on 
actually becoming 30 percent more efficient. Our goal is to 
treat 20 percent more veterans, and we hopefully will be able 
to get about 10 percent of our total funding in new revenue 
streams, if we are allowed to move forward.
    So I think that we are giving our fair share, and let us 
not forget that in terms of deficit reduction, we have 
contributed through the extenders over $3.4 billion out to the 
year 2002, and so that we can pay for this 600-well, it 
actually ends up about $1.9 billion over the 4- or 5-year 
period, out of that and still end up putting over a billion 
dollars in towards deficit reduction. So we think we are paying 
our way through this process.

                      increasing mccr collections

    Mr. Lewis. With inpatient loads declining and projected to 
continue to climb in the future years, how does the VA plan to 
increase the amount of its collections as it is estimated that 
it takes 20 outpatient billings----
    Secretary Brown. Right.
    Mr. Lewis [continuing]. To equal one inpatient billing.
    Secretary Brown. Good.
    Mr. Lewis. That was a question.
    Secretary Brown. Yes, it was. Okay. What we plan on doing 
is this. First of all, let us look at the entire amount that we 
are looking at to keep. It is about 600 million. Out of that 
600 million, there are about 468 million of that, that we will 
actually realize. So that means that it costs us about $120 
some million in order just to be able to collect the entire 
amount.
    We expect to take a close look at that, and we are going to 
generate some additional savings out of that. That is the first 
thing.
    The second thing is that the way we do business right now, 
at least from my analysis of it, we are not maximizing the 
collection process. You take, for instance, a veteran can come 
in today and get a $3,000 procedure on an outpatient basis, and 
we bill the insurance company $150. That is the way it is 
locked in place right now.
    Under Dr. Kizer, we are reengineering our whole approach to 
that, and we plan on actually being able to bill for the 
services that we are able to provide. So I expect to be able to 
generate many more dollars out of this process, if we are 
allowed to keep the third-party receipts.
    Mr. Lewis. Okay. This is one of your budget documents, I 
think. Maybe you have it right before you there.
    You have generated an aside question that causes me to--
under MCCR 1998 column, there is collections of $591 million.
    Secretary Brown. Right.

                      mccr administrative expenses

    Mr. Lewis. And the administrative costs are $123 million. 
So the net that you are talking about that you would like to 
capture is $468 million.
    Secretary Brown. No, no. Yes, I guess you are right. You 
are saying that the net that I want. I really want--I want the 
whole $600 million.
    Mr. Lewis. I understand that.
    Secretary Brown. Okay.
    Mr. Lewis. But the net.
    Secretary Brown. Yes, okay.
    Mr. Lewis. The net that I am--I hadn't focused on this 
earlier, even though I read some of this stuff before coming 
here. The administrative services are $123 million. That is the 
overhead cost for the collection. Is that right?
    Secretary Brown. Yes, sir.
    Mr. Lewis. Can one of your budget officers tell me what 
percentage of the collections then go to overhead?
    Mr. Catlett. That is roughly 20 percent, sir.
    Mr. Lewis. You mean administrative costs are 20 percent in 
this Department? I can't imagine that with all the efficiency 
that the Secretary has employed, then, 20 percent goes to 
overhead?
    Mr. Catlett. Mr. Chairman, that has been the standard that 
has been in place since this program began. As the Secretary 
indicated, we hope to lower that cost. These are the 
projections for now.
    Mr. Lewis. I mean, I would suggest that overhead ought to 
be like 5 percent. I mean, my goodness, for collecting money 
from an insurance process, 20 percent? Goodness sakes.
    Secretary Brown. Well, Mr. Chairman, it is not that simple. 
It is not like we are just sending out a bill. This cost 
includes the coding, looking through the records, all of the 
process.
    Mr. Lewis. I understand that.
    Secretary Brown. Yes.
    Mr. Lewis. That is called administrative work. Is that 
right?
    Secretary Brown. But 5 percent, I think, is a little low, 
but----
    Mr. Lewis. But I think 20 percent is a little high.
    Secretary Brown. Yes, and we----
    Mr. Lewis. And that has been the response, though.
    Secretary Brown. Yes.
    Mr. Lewis. That has been the pattern throughout this 
program. Wow.
    Secretary Brown. Yes, and we are going to fix that. That is 
why we want you to help us get this money. We are going to fix 
it.
    Mr. Lewis. That is why I am wondering whether we are going 
to give you the money. If this 20 percent is a reflection 
across the board, I will be very concerned.
    Secretary Brown. Well, Mr. Chairman, let me just make this 
here point because I think this is very important in the whole 
process here. If you don't give us this money, if you don't 
allow us----
    Mr. Lewis. Wait just a minute, Mr. Secretary.
    Secretary Brown. Yes.
    Mr. Lewis. In the past, I have expressed my own view that 
such collections ought to be returned to the system; that it 
ought to be internal. For a long time, I have expressed that 
view on the public record.
    In the meantime, the Appropriations Committee ain't the 
Authorizing Committee, and so you have got to get a bill and 
get both houses to agree upon that, and if you don't have, then 
it is going to be a non-starter. I don't know how we can begin 
to do it if you don't begin to have legislative results.
    Secretary Brown. The only point that I wanted to make by 
saying that, if we don't get this money, we have got to have 
some money from somewhere else. That is the only thing.
    Mr. Lewis. Like housing?
    Secretary Brown. Oh, that is all right with me. I mean, I 
just want the--I just need the money to take care of these 
veterans.
    Mr. Lewis. Let's repeat that one more time. Like housing?
    Secretary Brown. That is all right with me. I need the 
money for our veterans and their families.
    Mr. Lewis. Mrs. Meek, would you note that for the record? 
Mr. Stokes, would you note that for the record?
    Mr. Stokes. Okay.

                 collections from fee-for-service plans

    Mr. Lewis. All right. Moving along, as more and more people 
participate in insurance plans with health maintenance 
organizations and preferred provider plans, can VA collect as 
much as it has from fee-for-service plans? The HMO and the 
preferred-provider plans generally have restrictions on who and 
how much will be reimbursed for medical services.
    Dr. Kizer.
    Dr. Kizer. I take it, you would like me to respond?
    Mr. Lewis. If you would identify yourself again for the 
record, Dr. Kizer.
    Dr. Kizer. Kenneth W. Kizer.
    The concerns that you express are certainly legitimate, 
both as far as the shift to outpatient care, as well as the 
increasing percentage of the population covered by managed 
care. I would respond to your question in a couple of ways.
    First, historically there has never been an incentive in 
the system to maximize collections in the MCCR program. By 
putting the incentive in the field, that will, in and of 
itself, encourage people to find all kinds of new ways. We have 
identified about 10 initiatives in this regard, everything from 
looking at matching our records with HCFA to better identifying 
insurance, to some utilization management measures, to putting 
in place procedures to ensure that everyone who is coded as 
service-connected is truly service-connected since we believe 
that miscoding occurs there to some extent. I will be happy to 
provide you with further details of these 10 different areas 
that we believe will increase the return through the MCCR 
program, but again, we acknowledge that there are changes and 
competing dynamics here. However, I think changing the 
incentives such that the facilities and the system have more 
incentive to achieve collections will result in identifying and 
being able to collect more, indeed significantly more, than has 
been the case in the past, where there was no incentive because 
the collection was passed directly back to the Treasury.

[Pages 59 - 60--The official Committee record contains additional material here.]


    Mr. Lewis. Okay. You are really suggesting that as these 
new plans, like HMOs and preferred providers, come forward and 
are part of the mix that there is a shifting in terms of 
administrative detail and the relative cost of collecting those 
fees.
    Dr. Kizer. I am not sure I understand your question, but 
let me try to respond to it.
    Mr. Lewis. Well, fee-for-service is kind of 
straightforward. We have been dealing with it for a long, long 
time. HMOs may have very specific restrictions on the 
provisions of their care; in other words, what they allow fees 
for. You just have to make adjustments to those.
    Dr. Kizer. That is part of it, but it means especially 
being more rigorous as far as what is billable and doing a 
better job of pricing our products that are purchased by other 
providers.

               impact of aging population on collections

    Mr. Lewis. What impact will the aging of the veterans 
population have on collections if you can't receive Medicare 
funds?
    Dr. Kizer. Well, as our population ages, the demand for 
health care is going to increase, for both outpatient care as 
well as inpatient care. As we look over the next 10, 15, 20 
years, even though the total number of veterans will decrease 
during that time, we will also be getting a tranche of people 
who are reaching the time in their life when they are going to 
require more health care services. The largest group of 
veterans that we currently provide care for, the Vietnam 
veterans, are now approaching their fifties and sixties, a time 
when demand for health care of all types significantly 
increases.

                          DSS and AICS systems

    Mr. Lewis. The Decision Support System, or DSS, and 
theAutomated Information Collection System, AICS, are both necessary to 
increase the amount of funds collected from insurance carriers. Isn't 
that correct?
    When will the DSS and the AICS systems become fully 
operational in all of the hospitals?
    Dr. Kizer. DSS, or the TSI system as it is known in the 
private sector, is currently in place in 91 facilities. We 
expect to have it in place at all facilities by the end of this 
fiscal year.
    The caveat I would put on that reflects VA's experience 
which is consistent with the experience found in the private 
sector. That is, it typically takes about 12 to 18 months once 
the system is in place for it to generate the quality of data 
that really allows it to be fully relied upon for cost 
accounting, utilization management and other things that you 
are trying to get from the system.
    So, while it may be in place in all of our facilities by 
the end of this year, I am looking at another year to a year 
and a half before we start realizing the full utility and value 
of that system.
    Mr. Lewis. Approximately how much will these new systems 
increase the amount of funds collected from insurance carriers 
for both inpatient and outpatient?
    Dr. Kizer. I can't give you a precise figure on that, but I 
will be happy to provide it for the record.
    Mr. Lewis. If you would.
    [The information follows:]

[Page 63--The official Committee record contains additional material here.]


                         Collection Incentives

    Mr. Lewis. Increasing the amount of funds collected will, 
in part, depend upon the incentives provided to each hospital. 
The current collection system does not really provide much 
incentive because the receipts go into the Treasury.
    If a hospital does not get to keep its collections, there 
will be less incentive to increase the amount collected, and 
that could significantly impact your ability to increase 
collections to an estimated $903 million by 2002.
    Dr. Kizer, do you agree generally with that statement?
    Dr. Kizer. I think the conceptual underpinnings of the 
statement are sound.
    Mr. Lewis. Any problems?
    Dr. Kizer. I think you are basically correct.
    Mr. Lewis. Okay, all right. The answer was yes, then.
    Do you intend to let each hospital keep the funds it 
collects?
    Dr. Kizer. We are currently discussing that with the 
network directors. The premise that we have started those 
discussions with, is that the majority, and indeed the large 
majority of funds, would stay with the facility.
    What we are talking about at this point is whether some 
portion of those should go to the network and/or to the overall 
system; for example, a formula that allows--and this is just 
merely for the purpose of discussion--70 percent to stay at the 
facility, 20 percent to stay with the network, and 10 percent 
to go to the overall system. How might that play out compared 
to having 100 percent stay at the facility, or somewhere in 
between. Those are the types of things that we are going back 
and forth on right now.
    Mr. Lewis. Okay. Do all VA hospitals or all networks have 
the same ability to generate collections? And of not, explain 
that to us.
    Dr. Kizer. At the current time, they don't. As with 
everything else in the system, there is a variable degree of 
penetration of development in different areas. We would expect 
that once this became the normal mode of operation--that is, 
there is an incentive to collect these funds--then we would 
hope to achieve parity in this regard over time, recognizing 
that there are socioeconomic and other differences in the 
population from which our facilities draw their patients. For 
example, and if there is less private insurance availability 
among the patients in the overall population that the facility 
is drawing its patients from, then that would be beyond the 
control of the system to affect.
    Mr. Lewis. Can you equalize any inequities in the amounts 
that each hospital or network can collect without removing 
incentives?
    Dr. Kizer. That really goes to the heart of what we were 
just talking about a moment ago, recognizing that there are 
some inequities as far as the ability of different facilities 
to generate collections, should a certain amount go to the 
network, for example, that would then be used to better 
equalize collections throughout that geographic distribution. 
That is the debate going on right now.
    Mr. Lewis. Mr. Stokes, I indicated earlier that your 
opening statement will be included in the record, but you were 
able to return sooner than I expected. So I would be happy to 
yield to that and hear your round of questions.
    Mr. Stokes. Thank you very much, Mr. Chairman. I do have a 
brief opening statement before I go onto my questions.
    Mr. Chairman, I join with you in welcoming Secretary Brown 
and his associates to the Subcommittee. With the largest 
civilian work force in the Government, one of the largest 
budgets, the Department of Veterans Affairs is continually 
faced with complex issues and interesting challenges. The list 
of issues and challenges is very long, indeed. There is 
resource allocation to try to care for more veterans in a VA 
health system during a time of steady or shrinking budgets, 
mysterious diseases appearing in Gulf War veterans, charges of 
sexual harassment against senior VA officials, the prospect of 
hiring hundreds of welfare recipients, in assisting Vietnam 
veterans' children who have spina bifida, just to name a few of 
the issues.
    Mr. Secretary, I am sure we will address these and many 
other topics during your appearance before this Subcommittee, 
and I look forward to a frank and lively exchange with you on 
these issues.

                             30-20-10 Goal

    Now, Mr. Secretary, your statement succinctly sets forth 
the challenge facing the Department of Veterans Affairs' 
medical program during the next 5 years. It is a daunting 
challenge, indeed. You say you are committed to reduce the per-
patient cost for health care by 30 percent, increase the number 
of veterans served by 20 percent, and fund 10 percent of the VA 
health care budget from non-appropriated revenues by the year 
2002.
    What is your baseline against which to measure your actions 
in this regard? That is, tell us what have you accomplished to 
date.
    Secretary Brown. Well, I think, Mr. Stokes, what we have 
accomplished, we are right now in the process of reorganizing 
so that we can, number one, redistribute the resources that we 
already have.
    One of the problems that we have in the system is some of 
our facilities, our per-unit cost, per se, is way out of line 
with the average. Let us say the per-unit cost of treating a 
veteran, I guess a regular veteran, is $2,500. Well, we have 
some facilities that it costs as much as $6,500 to treat. So 
what we need to do is to get those costs in line, and we are 
taking the difference and we are shifting it to where the 
population is going.
    At the same time, as we look at our resources, we look at 
it in terms of how do we maximize on the economies of scale in 
terms of being efficient, and by that, I mean you have certain 
fixed costs in just running a hospital.
    Let us say, for instance, you do have the cost of 
personnel. You have to pay the electric bill, the gas bill, and 
all of those kinds of costs. So what we are trying to do is to 
get ourselves in a situation that we can spread that cost out, 
and the way we spread that cost and bring down the unit cost is 
by putting more veterans into the system. It is much more 
efficient, for instance, to treat, say, 100 veterans or 200 
veterans in a hospital than it is to treat 50 veterans in a 
hospital, and so that is the basic principle that we are moving 
toward which will allow us to reduce our unit cost by 30 
percent, to increase our service to veterans by 20 percent, and 
at the same time realize or recognize what the future is in 
terms of receiving funding through the appropriations process. 
We would like to be able to develop new revenue streams.
    Mr. Stokes. Mr. Secretary, give us some idea of some of the 
major actions that you must take in order to be able to arrive 
at these type of goals.
    Secretary Brown. Well, one is--I just gave one example. It 
was the redistribution of the services of the health that we 
already have in the system.
    We have to make--in order to be efficient, we have to look 
at every system across the country. So what we did, we broke it 
down based on average cost. For the average veteran, it is 
about $2,500. If he is catastrophically disabled, it is about 
$35,000.
    So what we did, we looked at each facility, and we backed 
out things that we know that influenced the cost. For instance, 
in certain areas, the cost of education is one. In other areas, 
the cost of labor is higher, say, in the northeastern part of 
the country than it is in, say, the southern part of the 
country.
    So, once we back all of those costs out, then we force 
those facilities to become much more efficient, and we are then 
taking the difference and shifting it to other facilities 
across the country. So that is one of the things.
    I am going to ask Dr. Kizer to give you a couple of other 
examples.
    Mr. Stokes. Dr. Kizer.
    Dr. Kizer. Mr. Stokes, just very quickly, illustration of 
some of the things that have been accomplished in the last 
couple of years, we can look at a number of different measures.
    For example, if you look at effort to improve the 
efficiency of our facilities, the number of acute care 
operating beds that we currently utilize is about 15,000 fewer 
than it was a few years ago.
    Our staffing, if you compare the number of people on the 
payroll at the end of March this year, compared to the end of 
March, three years ago, is more than 20,000 fewer.
    We have done things like putting in place primary care, 
which is now universally available in the system, and we are 
now up to about 80 percent of those patients that would be 
conducive to putting in primary care enrolled in primary care.
    We are using disease management, case management, clinical 
guidelines, and a number of other modalities like that to both 
improve, first and foremost, the quality of care and, secondly, 
to achieve more appropriate utilization of our resources. We 
could probably spend quite a bit of time talking about many of 
the changes, but I think that these examples give you some 
indication of the types of things that are being put in place.

                            Strategic Plans

    Mr. Stokes. Dr. Kizer, either you or the Secretary, if you 
can tell us, in terms of developing these goals, do they 
proceed from a thorough analysis of potential savings and 
changes possible, or are they driven from the top down by 
anticipated budget shortfalls in the future? Tell us how they 
relate to the Department's strategic plan.
    Dr. Kizer. Taking, for example, the three things that were 
mentioned earlier, what is now being referred to as the 30-20-
10 strategy, I think it is important to stress that those are 
goals that have been laid out that we would like to focus on 
over the next 5 years. So they are part of a larger strategy.
    The 30-percent reduction in per-patient cost is very 
consistent with the sorts of goals and results that are being 
achieved elsewhere in health care by utilizing things such as 
case management and disease management and other ways of 
thinking about and providing care for people today. There are a 
host of examples that one could look at elsewhere in the health 
care industry where they are achieving 30-percent reductions in 
per-patient costs. Not all of those facilities have the same 
disease burden, or socioeconomic conditions, attendant to their 
patients that we do. So I think the 30-percent target over 5 
years is realistic. It may be a bit of a stretch, but we think 
it is a realistic target.
    The 20-percent increase in number of users also is 
consistent with our experience of the past few years, during 
which we have treated more patients every year than we did the 
prior year. Over the past several years, that number has 
increased about 14 or 15 percent. We think that looking at a 
20-percent increase over a 5-year period is a reasonable 
target.
    Likewise, as far as the 10-percent of our operating budget 
coming from non-appropriated sources, that also is consistent 
with what we would expect from the combination of retaining 
MCCR receipts and the results of the Medicare subvention pilots 
that are projected. So, we believe these are realistic 
estimates at this point.
    Mr. Stokes. Mr. Secretary, let me ask you this. Do you have 
a fall-back plan? Let's say if Medicare budgets stay on the 
current path and you only realize about one-half of the hope 
for efficiencies, what then will you do? How will you allocate 
the resources?
    Secretary Brown. Will you rephrase that question? Are you 
talking about the budget request that we----
    Mr. Stokes. I am talking about this whole medical health 
care plan that we have just discussed here and one Dr. Kizer 
has just referred to.
    Just assuming--he talked about comparing it to other 
medical plans, and I am saying to you, if medical care budgets 
stay on their current path and you only realize about one-half 
of your hope for efficiencies, what will you then do?
    Secretary Brown. Well----
    Mr. Stokes. How will you allocate those resources?
    Secretary Brown. We would be--let me just say this to you, 
Mr. Stokes. If you decided--if Congress decided to cut our 
budget by $2 billion, we could make that work, but the way we 
make it work is by closing our doors to veterans, and that is 
what this is really all about. Whether or not we have the 
resources to keep our doors to veterans open and to provide 
them with a broader array of professional services, that is 
really what this whole thing is about, and if we do not--all of 
these points that we make, they are independent.
    If you take one of the equations out, then we are in 
trouble. We would have to rethink the whole approach to 
achieving efficiencies, efficiencies throughout the system.
    Dr. Kizer. Mr. Stokes, I might just add that----
    Mr. Stokes. Dr. Kizer, I would like to hear--and let me 
just predicate it with this. We are really concerned here, too, 
about what your confidence level is that you can meet these 
type of goals. You have outlined some very ambitious goals 
here, and that is why I asked the question about whether or not 
there are other comparable plans that have been able to meet 
these type of goals. So, if you can respond, I would appreciate 
it.
    Dr. Kizer. Sure. And I think it is a very appropriate and 
legitimate question. Everything in health care today is in 
tremendous flux. The value of setting some long-term goals, 
though, is to orient your compass so you have some targets to 
shoot towards.
    Obviously, we are going to continuously monitor and look at 
where we are and reevaluate our plans accordingly. Frankly, I 
would be very surprised if some things didn't come along that 
would force us to rethink our plans.
    Just to give you one example, last year, when the use of 
protease inhibitor for treating AIDS came along, as the largest 
provider of AIDS care in the nation, that obviously had a very 
significant fiscal impact on us. That is not something that 
would have been necessarily predictable.
    If you look at what is happening in medical technology, 
pharmaceuticals, and other things, there are clearly going to 
be things that are going to come along and force us to 
reevaluate what we are doing, but I don't think that in any way 
militates against setting some goals and targets and shooting 
for them and continuously monitoring to see what sort of course 
corrections need to be made as we go forward. And, obviously, 
we will be in continuous dialogue with this Committee, as well 
as the rest of Congress.
    Mr. Stokes. I appreciate that.
    Mr. Secretary, the first page of your prepared statement 
addresses one of the major issues this Subcommittee will face 
this year, in development of funding recommendations for the 
VA; that is, how to deal with the Administration's proposal to 
let veterans facilities retain all third-party medical 
collections. That proposal requires actions by the legislative 
committees of jurisdiction.
    If the Appropriations Committee provides just what is 
requested, the new budget authority for the medical care 
account, and if the authorizing committees have not acted on 
the third-party collection issue, the VA will then be about 
$500-million short. What is your understanding of the 
legislative committee's reaction to the third-party collection 
proposal?
    Secretary Brown. Well, I am hopeful that we will be able to 
move forward and that we will receive favorable consideration.
    Obviously, I cannot say exactly what is going to happen as 
we move forward with the budget process, but I will say this. 
If we are not able to get that, be able to retain the third-
party, as you mentioned it is about $600 million, it would be 
devastating to VA because we would have to then pull those 
dollars out of our base. So we could end up being basically 
caught in the Catch-22 situation, and that is why all of us are 
going to have to work together to make sure that we have the 
necessary resources in order to respond to the needs of our 
veterans.
    Mr. Stokes. I pose this because, obviously, Chairman Lewis 
and I have to be very cognizant of the fact that unless the 
legislative committees here act, then it has a certain impact 
over here on what he and I can do.
    Secretary Brown. Right.
    Mr. Stokes. What will be the impact on the VA medical care 
system if the Appropriations Committee provides the 
appropriation request of $16.9 billion, but the authorizing 
committees do not act on the legislative proposal?
    Secretary Brown. Well, we would probably end up having to 
deny care to about 105,000 veterans. We would probably have to 
end up eliminating approximately 6,600 health care positions. 
These are our best-guess estimates on this, and we would--on 
our VERA, that is where we redistributed resources that I 
mentioned to you across the country. Well, the gainers will end 
up getting less, and the losers would even get even less, and 
so that will end up actually having an impact at the local 
facilities in terms of their ability to treat veterans, because 
each one of the dollars that we get translates into how much 
care we can provide to veterans.
    Mr. Stokes. Mr. Chairman, do you want to signal me the time 
frame here?
    Mr. Lewis. We are trying to stay in the 10-minute rule, and 
we have been beyond that, both you and I, but in the meantime--
--
    Mr. Stokes. Why don't I at this time--I will just yield 
back and then wait for the next turn. Thank you.
    Mr. Lewis. Thank you, Mr. Stokes.
    Mr. Frelinghuysen.
    Mr. Frelinghuysen. Thank you, Mr. Chairman.

                                 visn 3

    Dr. Kizer, good morning.
    While our job is to look in this Committee at the budget 
numbers, and we do that well, we all know that behind the 
numbers are veterans in need, those getting older and sicker in 
VA hospitals that run on a 24-hour basis.
    There is a corresponding flood of new terminology that we 
as members of Congress are dealing with and veterans are 
dealing with, the Veterans Integrated Service Network, VISN. 
There is VERA, the Veterans Equitable Resource Allocation 
System. There are terms like ``reengineering,'' ``revenue-
generating customers,'' ``revolutionizing health care,'' 
``capitation-based model.'' Whatever the new terms, the bottom 
line for me is whether the system is helping veterans, and so I 
return, Mr. Secretary, to the questions, some of the same 
questions that I asked last year.
    I am concerned that the VA is not doing a thorough enough 
job reaching out to veterans in my State. I am within VISN No. 
3, which I believe has the sixth largest number of veterans in 
the Nation. I believe that there has not been an adequate 
reaching-out by the VA to veterans in my area to explain what 
the whole plan, VISN, means, and perhaps to put it in most 
basic terms, the terms that you employed a few minutes ago, the 
whole issue of gainers and losers, in correspondence to you and 
Dr. Kizer last year, I requested that the VA hold a public 
hearing for veterans in New Jersey served by Lyons and East 
Orange VA Medical Centers.

                   holding public hearings in visn 3

    I included, with the assistance of the Chair, report 
language in the Fiscal Year VA Appropriations Act asking you to 
hold public hearings to explain to the average veteran what 
this all means, what the VISN plan is for Area No. 3.
    As you are aware, Mr. Secretary, no public forum was held, 
and as a result of that, I am joining with Congressman Bob 
Franks, Congressman Mike Pappas, in holding a veterans forum in 
northern New Jersey at a VFW post in our area. I would like to 
know why the VA chose to ignore the report language and 
basically deny New Jersey veterans the opportunity to learn 
firsthand what is actually occurring out there. I would like to 
know why.
    Dr. Kizer. I think you misstate the record, sir. As you 
know, we have had some of this discussion before. There is a 
long list of meetings and other forums that have been held with 
the groups in your area, in particular, with regard to the 
integration of the two facilities that you mentioned. We will 
be happy to update and provide you with a repeat of that.
    Mr. Frelinghuysen. I don't think I am mistaken.
    I understand the terminology is that you ``meet with the 
stakeholders,'' which by any definition represents a select 
few, and I don't in any way mean to impugn their involvement 
and their efficacy for veterans. I am talking about the average 
veteran knowing what is occurring out there in terms of plans 
within VISN No. 3.
    I am telling you that the average veteran doesn't know what 
is occurring. They are concerned about the future of both of 
these medical centers.
    As you know VISN No. 3, the budget is scheduled for a 15-
percent reduction. That is according to your own VERA system. 
However, you are also aware, Dr. Kizer, that there is not a 
corresponding 15-percent reduction in demand for VA services in 
the region. In fact, the Veterans Health Care Eligibility 
Reform Act, which was signed by President Clinton last year, 
actually will increase the demand for VA services. Isn't that a 
fair assumption?
    Dr. Kizer. Yes, and I think you also raise a good point. 
The $158 million, or so, reduction that VISN-3 faces, which is 
the largest of all of the networks, is slated to be phased in 
over a 3-year period. However, they were actually able to 
achieve about $120 million of that last year alone, and in 
doing so they were also able to increase the number of veterans 
that they treated, and they were also able to improve or 
increase the customer satisfaction to levels that have never 
been achieved before. And, the letter was validated by our own 
internal customer feedback surveys, as well as a survey done by 
the Gallop Institute, showing that access is easier, more care 
is being provided, and efficiencies are being realized.

                     shifting resources under vera

    Mr. Frelinghuysen. Let's talk for a minute about the whole 
issue of shifting funding from VISNs in the Northeast and 
Midwest to VISNs in the South and West. It is my contention 
that whatever funding shortfalls remained seem to be 
indiscriminately taken out of our VISN areas, both Nos. 2, 3, 
and 12. I would like to know whether, in fact, that is accurate 
and what methodology you used in order to proceed with this 
funding shift, how you arrived at the figures.
    Dr. Kizer. There is--and I don't recall whether you were at 
any of the many briefings for Congress and other folks that 
have been held on this or not, or whether you have looked at 
the briefing book, but the methodology is clearly laid out 
there.
    Just very quickly, it is predicated on a user base of those 
who actually use VA facilities, and on the disproportionate 
costs that exist in some parts of the country, particularly the 
Northeast compared to elsewhere. For example, if you look at 
the actual amount that is spent, the bed days of care, and a 
number of other standard indices that are used in healthcare, 
and if you look at how, for example, New York compares with 
Arizona or Florida, you see that New York's average expenditure 
per patient is about twice what it is in other parts of the 
country.
    Mr. Frelinghuysen. You are saying costs in our part of the 
country are twice what they are in Arizona?
    Dr. Kizer. I said expenditure.
    Mr. Frelinghuysen. Pardon?
    Dr. Kizer. I said expenditure.
    Mr. Frelinghuysen. Well, that is no surprise. The cost of 
living in the Northeast is a lot higher than Arizona.
    Dr. Kizer. Well, if you actually look at the methodology, 
you will see that those things, such as cost of labor which is 
actually less expensive in New York than in, say, San 
Francisco, are considered.
    Mr. Frelinghuysen. Well, let's concentrate on the whole 
demand issue. Are you suggesting in the Northeast that there is 
less demand? I mean, if the demand is there, surely the 
resources ought to follow the demand.
    Dr. Kizer. Well, there is demand everywhere in the country, 
and this is a national system. We are trying to address the 
needs of our veterans throughout the country, and again, as I 
mentioned already, that with the efficiencies that were put in 
place last year, VISN 3 was also able to treat more veterans 
than they have ever treated before. So they are meeting more 
demand with fewer resources.
    Mr. Frelinghuysen. Mr. Secretary, on page 5 of the VA's 
business plan for VISN-3, it states, and I quote, ``VISN 3 
treats a disproportionate number of special care patients 
compared to the rest of the Nation.''
    I have met with a number of veterans service organizations, 
such as the Eastern Paralyzed Veterans of America, the DAV who 
are concerned, as I am, about the effect of these drastic cuts 
in our VISN and other VISNs will have on veterans with spinal 
cord injuries and other special care conditions.
    Did the VA take these special needs into account when they 
cut our VISN by $150 million?
    Secretary Brown. Yes, sir. As Dr. Kizer was saying, when 
you raised a valid question about the high cost-of-living and 
he responded by saying yes, we backed that out of the formula 
before we equalized it, there are a number of things we backed 
out. It was cost-of-living, education and research, and also 
what we call our catastrophically disabled. They get about 
$35,000, if I am correct, about 35-$37,000 per individual, and 
we have made--because these are expensive and you cannot 
achieve any kind of real economy here--we have made a conscious 
decision to almost fence those programs to make sure that they 
are not hurt--as we go about the business of redistributing the 
resources across the country. So, yes, they were factored into 
the formula.
    Dr. Kizer. Well, and as you well know, that is the reason 
why VISN-3 has the highest amount of funding of any network in 
the country for these special care patients.
    Mr. Frelinghuysen. But overall, the funding is going to be 
reduced by $150 million.
    Secretary Brown. Yes. Let me just say this about the 
overall funding. I don't know if I can--obviously, I can't 
explain it better than Dr. Kizer, but what we try to do is to 
look at our per-unit costs all across the country and then ask 
ourselves, once we establish that--we establish it at, let's 
say, $2,500, and then everyone that was in excess of that, we 
asked ourselves why, why does it cost you more to provide 
basically the same services than the average facility that we 
have across the country.
    When we asked that question and we made allowances for the 
things that are important, that actually influence the bottom 
line, and as I mentioned, they are labor, they are education 
and research, they are the special modalities of care such as 
AIDS population----
    Mr. Frelinghuysen. New Jersey has one of the highest AIDS 
population, as you are aware.
    Secretary Brown. And we gave more money. I think your VISN-
3, I think Dr. Kizer mentioned, received more dollars than any 
other VISN, primarily because you have more AIDS patients, you 
have more folks suffering from spinal cord injuries.
    Mr. Frelinghuysen. And one of the highest rates of cancer 
in the Nation as well.
    Secretary Brown. Yes, and we provide extra resources for 
that. So that is built right into the formula.
    Mr. Frelinghuysen. Why don't you comment on the issue? I 
know it is true of my State. The State government puts money 
into long-term care nursing facilities. The States that are now 
the new gainers, what do they do in terms of meeting the needs 
of veterans within their State? We in the Northeast--we are 
State governments providing money. Is that a factor that is 
taken into account?
    If States come up and run nursing homes and medical 
facilities, is that a factor you take into consideration in 
terms of overall allocation distributions?
    Secretary Brown. I am going to ask Dr. Kizer to respond, 
but let me say this. Under our approach, no veteran that is 
receiving care from VA would lose that care. I constantly 
mention this as I move around the country. I always say to 
folks who criticize the program, show me one veteran that has 
lost some services that we have been providing him or her as a 
result of the changes that we are making, and that has not 
happened.
    So there really--theoretically, it should not have an undue 
burden or a new burden on the States because of the changes 
that we make because we are still taking care of veterans.
    Mr. Frelinghuysen. No, that is not my point.
    I am saying that States in the Northeast, many of them, 
they use State resources for veterans care. Are the gainers in 
the overall Federal VA system and to some in the South and the 
West--are they doing something with their own State budget, or 
is it wholly Federal money?
    Secretary Brown. Okay.
    Dr. Kizer. Let me respond to a couple of those.
    Mr. Frelinghuysen. I think it is a legitimate issue, quite 
honestly.
    Secretary Brown. Sure, sure. Absolutely.
    Dr. Kizer. Of course it is a legitimate issue, although I 
don't recall whether Congress considered that when they passed 
the law requiring this or not, but we do know that, 
essentially, all States provide money for veterans care of one 
type or another.
    For example, if you look at the State veterans homes, I 
believe there are now 42 States where there are long-term care 
facilities that are partially State-financed--that is, of the 
85 or so State home facilities that exist in the country.
    Mr. Frelinghuysen. Just a last question. The bottom line 
is, and you say that you are not quite sure what the future 
holds, but that no veteran will be denied access, there is an 
overwhelming feeling that the consolidation that is occurring 
in northern New Jersey at some point in our VISN is going to 
result in the closure of facilities. Now, would you give me a 
projection as to what you feel will be the future in the New 
York-New Jersey metropolitan region?
    Secretary Brown. Yes, sir.
    Mr. Frelinghuysen. Because if you start closing facilities, 
then that sends a message which appears to be somewhat contrary 
to your statement.
    Secretary Brown. Okay. First of all, let me back up on my 
statement because you raised up another question.
    We do not plan on closing any facilities in VISN No. 3. 
However, when I said that no veteran would receive any less 
care than he or she has received before, that was contingent 
upon, of course, that we be allowed to continue receiving the 
resources that we need to continue with our plan. So, if we end 
up, for instance, not able to get this $600 million that we 
need, yes, it is going to have an impact, because that has to 
be absorbed right out of the system, and if you start 
compounding that in the out years, then it becomes a very 
serious problem.
    And as I mentioned earlier, the way we fix that or respond 
to that is by denying care to veterans, and if you start 
denying care to veterans----
    Mr. Frelinghuysen. Well, let me say for the record, whether 
this committee was headed by a Republican or Democrat, I think 
there has been a unanimous agreement that we have continued to 
give the VA more resources. I mean, that is the bottom line.
    In some of your initial comments or the reaction to the 
Chair, you were alluding to the fact that there were budget 
cuts. In reality, the record shows that on a bipartisan basis, 
this Congress has been extremely generous and supportive, as it 
always has, to the needs of veterans.
    Yes, there is this tougher issue, and I think the President 
obviously needs to make a stronger case as to exactly how all 
these third-party payments is going to make up the difference. 
There is a hell of a lot of skepticism out in the veterans 
community about what this President is proposing, and perhaps, 
by the end of this hearing, we will have a better idea of 
exactly how it is going to be achieved.
    Thank you very much.
    Secretary Brown. Thank you.
    Mr. Lewis. Mr. Secretary, you mentioned new Members of the 
Committee. One of our more attentive and also more effective 
members not just of this subcommittee, but----
    Secretary Brown. And better looking.
    Mr. Lewis. Indeed, indeed, than the both of us.
    Mrs. Meek.

                            florida veterans

    Mrs. Meek. Thank you, Mr. Chairman, and I want to welcome 
the Secretary and his associates here today. I am new to the 
Committee. I am listening very intently to your testimony and 
to the questions of my colleagues here.
    Many of the concerns that I have, have already been 
addressed by you, but I would certainly like to commend you on 
the fact that you have looked at your resource allocation in a 
way that will help certain States that have been, in my 
opinion, underfunded in the past.
    I am from Florida, and we were pretty much down, like 45 
percent, but now, with your new resource allocation, we will 
get a chance to take advantage of the system and be treated 
equitably, and I commend you for that.
    The second thing is that, as you know, Florida has a real 
growing population of elderly veterans and are very much 
interested in the way they are treated. Many of them reside in 
Florida, and I think those who have, like, 100 percent, 90 
percent, 80 percent, and you can go all the way down the line, 
I think Florida has a larger number of those elderly veterans 
than anyone else.
    So I am hoping that in your management system that there is 
some flexibility that you look at the factors when you come to 
the allocation. I have seen that in your presentation. That, I 
think, is a very good thing to do, to look at the 
characteristics of the client base, to see exactly if they are 
from Florida and are elderly. Then, certainly, there would be 
something in the formula to fit them as well. Do you do that 
now? Do you use that kind of resource allocation when you look 
at the population and try your very best across the board in 
allocation to think of those kinds of factors?
    Secretary Brown. Yes, ma'am. In fact, Florida in this whole 
scenario is a big gainer because of the very points that you 
just described.

                            medical research

    Mrs. Meek. All right. I am also interested in your research 
program. The Department of Veterans Affairs over the years has 
had to face several big, big problems which research would 
perhaps have helped in terms of how the funds are allocated, 
just what kinds of research are being conducted. I am certainly 
interested in the Gulf War diseases and those kinds of things. 
Tell me something about your research department, what 
accomplishments it has made, how forward are they going in 
research in terms of looking at some of these very diseases 
like AIDS and Gulf War illness.
    Secretary Brown. Yes, ma'am. Research is very important to 
us, not only because of the findings that come out of the 
process. VA research funding not only benefit veterans, but 
they benefit all Americans and, indeed, people all over the 
world. VA was at the front of the CAT scan. We do a lot of 
research on clinical trials that benefit everyone, but even 
more importantly than that or just as important as that, we get 
brilliant minds coming to VA that want to do research, and we 
get to use them to provide medical care to our veterans. So it 
is like a magnet for us. So it is a very important part of our 
healthcare delivery structure.
    Now, as I am sure what you are leading up to----
    Mrs. Meek. I want to know how you are utilizing your budget 
and what are you asking for relative to your need.
    Secretary Brown. Yes, ma'am. Well, we decreased research 
from $262 million to 234, which is a difference of $28 million. 
Now, let me just say this. Dollars were very scarce, and we had 
to prioritize what was important for us, and unfortunately, the 
research ended up getting cut about $28 million, but it is not 
an indication that research is not important to us. It is just 
simply we have to look at all of the things that we felt were 
important to veterans and their families and allocate those 
dollars in a way that made some sense that improved their 
qualities of life immediately, and that is the reason for that.
    Now, if I had my way and the dollars were there, we would 
have increased research, as we have done since the beginning of 
time. I cannot ever remember when research actually ended up 
being enacted at a number lower than the previous year. So I do 
not know what is going to happen here, but I do want to go on 
the record as saying this is not an indication that research is 
not as important. It is only because we simply did not have the 
dollars to do all of the things that we had to do.

                        medical research funding

    Mrs. Meek. Mr. Secretary, I think that was a very critical 
cut that you made in terms of research and development in that 
some of the medical and health-related problems that you are 
facing now probably could be reduced in terms of the amount of 
monies you happen to spend wherever, even on pensions and 
benefits, if you were doing a very adequate research program. I 
would like to really stress the fact that, hopefully, you look 
at this in a way that you can to sort of equalize the kinds of 
funds you are putting into research because it is going to help 
the quality of life of all of the veterans.
    I have a very strong concern for veterans. I get quite a 
bit of input from them. I think in the way you are facing all 
of the VA and everything that you are reaching many of those 
problems, but I think research could help a lot in that.
    Also, I have a concern that you are being cheated, 
certainly, in terms of the monies you are getting back as a 
health care provider. You are not getting what you should get 
back. It is like having a credit card that you are paying all 
interest and you are not getting anything back.
    Certainly, as a Member of this Committee, I would like to 
see some of your monies come back to you and not everything 
going into the General Fund of the U.S. Treasury. Tell me a 
little bit about that. What kind of efforts have you made with 
OMB or the other people who are making these decisions 
regarding some of that coming back to you? I know the Congress 
could help with that. I do not see them doing it right now, but 
tell me what you are thinking about that.
    Secretary Brown. Well, just one follow-up on the research 
question.
    While we cut research, we made it very clear in the budget 
language that we were taking special precautions to put a fence 
around our research on the Persian Gulf syndrome. You had 
mentioned that, so I just wanted you to know that. This----

                       gulf war illness research

    Mrs. Meek. If I may interrupt you for a moment, I think 
that is a critical issue, the Gulf War illness and what the VA 
is doing about it. The citizenry of this country felt very 
strongly about the Gulf War illness. They felt that the VA had 
not gone forth with very deliberate speed in terms of solving 
that problem. That's why I mentioned that.
    Secretary Brown. Yes, ma'am. We have over 70 research 
projects out there, and I think about half or more of them are 
VA sponsored. So we do want to do the right thing in that area, 
in all areas that have a direct impact on veterans. We think 
that research as a whole will benefit notonly veterans, as I 
mentioned, but all citizens of the world.

                       third-party reimbursements

    On the question of third party reimbursements, to me, the 
bottom line is this. As I mentioned in my opening statement, we 
need about $648 million just to pay for the COLAs of our 
employees and other uncontrollable costs. If we do not get that 
money, it's going to have to come out of our base. That is 
going to create a lot of problems for us.
    I would suggest--and I want to make this clear--that I 
don't want to get into veterans being pitted against other 
agencies. But I do believe, in my heart and soul, that the 
Nation has a special responsibility for veterans. It has a 
special responsibility. We have to make sure that we honor that 
commitment. If that means we get a little priority over other 
programs, then so be it, because it is the right thing to do 
and it's an investment that I think will pay off. The world is 
still a dangerous place.
    I give this speech all the time, that if you look at just 
the sacrifices that veterans have already made--you know, a 
million of them die, a million-and-a-half came back home 
wounded and disabled. But probably even more importantly than 
that, what we are really saying by expressing our appreciation 
to our veterans, we're saying to their children and their 
grandchildren that, if we need you in the future, we want you 
to step forward to protect our way of life, and if you do, we 
are going to make sure that we do everything that we can to 
create a level playing field for you.
    Mrs. Meek. The reason I asked you to reiterate that line of 
questioning, I thought I heard our Chairman reflect upon the 
fact that this particular issue is one of the authorizing 
committee's--is that correct, Mr. Chairman?
    Mr. Lewis. If you don't authorize the program, you----
    Secretary Brown. Yes, I understand. I understand all of 
that.
    But we know this right now, and we can't allow----
    Mrs. Meek. I didn't finish my question. I wanted to know 
what moves are you making to be sure that this kind of 
legislation is provided. It's a political question.
    Secretary Brown. Yes, it is a political question.
    We proposed the legislation and we stand behind it. We are 
asking our friends to support us on it. It's very, very 
important to us. The Chairman has pointed out that he's been in 
favor of this kind of legislation for a long time. I'm hoping 
that he can use his influence with his colleagues that have the 
responsibility for authorizing this legislation, and not allow 
this to slip through the cracks simply because we do not 
communicate between committees to do the right thing for our 
veterans.
    Mrs. Meek. Thank you.
    Mr. Chairman, I yield back.
    Mr. Lewis. Certainly the Secretary would suggest that, 
beyond that, in response to your question, he would never want 
to be considered political by anybody. [Laughter.]
    Mrs. Meek. If I may go a little bit further with that, you 
talked about depending on your friends, so you must have a lot 
of enemies, because I haven't heard----[Laughter.]
    I haven't heard very much support for that. I still qualify 
that statement by saying I'm new to this Committee. Certainly 
there are many of us who feel sympathetic to this, and I hear 
you saying that, unless you get this money, it has to come from 
somewhere, from your base. So I think I'm hearing that someone 
up here wants you to make some very drastic cuts because there 
isn't much support for going with this methodology. Do you get 
that same drift that I do?
    Secretary Brown. Yes, ma'am.
    Mr. Lewis. If the gentlelady will yield, my guess is that 
this Appropriations Committee has expressed itself on a number 
of occasions that we would support that legislation. The 
problem is that we're not the Authorizing Committee.
    Mrs. Meek. If I may just add one thing to that.
    Having been on appropriations now for almost three years, 
it never stopped us before, Mr. Chairman.
    Mr. Lewis. Mr. Knollenberg.
    Mr. Knollenberg. Thank you, Mr. Chairman.

                      veterans receiving benefits

    Thank you very much, gentlemen. Welcome. I'm glad to see 
you again, Mr. Secretary.
    First off, I want to ask just a couple of general 
questions, and if you can't supply the information, then you 
can do it in writing.
    I know that we're all concerned about the budget and we 
want to obviously take care of the veterans that deserve that 
attention. I have a couple of questions that I will ask about 
Michigan in a moment, one of which might relate a little bit to 
what Mr. Frelinghuysen was talking about. You can respond 
either now or later.
    Looking at the future of the Department of Veterans 
Affairs, I noticed the graph that you have, which kind of 
categorizes all the various veterans. From World War I, in 
which case there are very, very few, World War II, some seven 
million still about, and there are some 8.2 million Vietnam 
era, and about 1.6 million Persian Gulf. Those are the eligible 
recipients of aid, right?
    In the noncombat, nonconflict era--I'm talking about 
between the Korean conflict and the Vietnam conflict, and also 
talking about the post-Vietnam era. So it is those two areas of 
the graph.
    Could you provide how many of those people--they're 
eligible, yes, but how many of them actually receive benefits? 
If you can't do it now, maybe you can come up with the answer 
later.
    Secretary Brown. Yes, we can get that to you right away.
    Mr. Knollenberg. Actually, my basic question is, in time, 
telescoping into the future, you're going to be moving away 
from the World War II veterans, which right now are some seven 
million--I'm telescoping some ten or fifteen years into the 
future, or maybe even longer. Have you projected any long-term 
ideas about what your service numbers will be in ten years, 
fifteen years, based upon, of course, no other conflict coming 
into being?
    When we look at the scope of the military today, they keep 
talking about downsizing, that they need less manpower because 
of technology. So have you looked at that and do you have some 
projections on where we'll be in ten years based on the current 
model?

[Pages 79 - 81--The official Committee record contains additional material here.]


    Secretary Brown. Yes, we do. Dr. Kizer.
    Dr. Kizer. There are several things I would say.
    As we look towards the year 2010 or 2015, for example, as a 
target year, we will see a steady decline in the universe of 
veterans in this country, assuming there are no major conflicts 
between now and then. That would be mirrored in the smaller 
subset of patients who are functionally eligible for care in 
the VA. Recognizing that there are some 25-plus million 
veterans now, only about nine-and-a-half million veterans, or 
so, are functionally eligible for care in the veterans health 
care system.
    But recognizing that the absolute numbers will decrease, as 
we were discussing with the Chairman earlier, the demand for 
health care in that group, even though the numbers will be 
smaller, will increase. The increase in demand for services, 
both acute care, outpatient and inpatient, and long-term care, 
will increase during that interval.
    But following 2010 or 2015 or so, as those populations 
start to die off, and assuming no increase, then there should 
be a significant diminution in demand. That's one of the 
reasons why we have to look very carefully at any capital 
construction projects.

                      capital construction budget

    Mr. Knollenberg. That's what I'm coming to. That's my 
point. Does your capital construction projections then follow 
or parallel that trend that you projected?
    Dr. Kizer. That's why you notice that there are very few 
items in the capital construction budget this year, and we're 
relooking at that whole issue, because obviously, it wouldn't 
make a great deal of sense to be building facilities that we 
won't need in the future.
    Mr. Knollenberg. That's right, absolutely.
    Let me go to another question----
    Secretary Brown. Let me just kind of summarize that, just 
so you have these numbers.
    By the year 2005, we expect a decrease of about 12 percent 
in the veterans population. We also expect a corresponding 
increase in demand for services because of age, modalities, and 
that type of thing, of about 15 percent.
    As he pointed out, we are adjusting our system right now by 
contracting out a lot more of our services. We are putting 
community-based clinics in neighborhoods and so forth, in which 
we're leasing space----
    Mr. Knollenberg. I'm familiar with that, and I know that's 
in the right direction. So I just wanted to make sure that your 
entire operation does mirror what, in fact, is reality.
    Secretary Brown. Yes.

                   d.j. jacobetti state veterans home

    Mr. Knollenberg. Let me go to a question, Mr. Secretary. I 
wrote you a letter in October, October the 22nd, a letter 
singling out and complaining about the--and you're probably 
familiar with this, or Dr. Kizer is, or somebody--the D.J. 
Jacobetti [phonetic] State Veterans' Home in Michigan. As you 
know, we had requested and they did qualify for a grant in 1995 
for a problem that had to do with their heating system, 
because, frankly, it was a quality-of-life issue. It was a 
health security problem. I know that's one of the tenets of 
your whole program.
    By the way, you did respond, but not until January. I don't 
know why that timeframe, and that's a question I have, too. I'm 
going to follow up with another question on that in just a 
moment.
    The State of Michigan did, because of necessity, did decide 
that they had to do something and they couldn't wait for that 
disbursement from the Federal Government. In your letter to me 
of January 24th, you indicated that maybe the State of Michigan 
could anticipate reimbursement of the Federal matching funds--
the State put them all up--could anticipate that by fiscal year 
2000 or later.
    Is that still your stance? Is that still the situation, 
because the State has now put up all of that money. We're 
waiting.
    In your response to me, you indicated that that was the 
best you could do. You did also say--by the way, I want to 
refer to this, too, as well--that you were going to consider 
any alterations to the current prioritization, that the 
prioritization methodology will require legislative and 
regulatory changes.
    Now, that's where we come in. Is this something that maybe 
we should get involved in to speed up that process? There is 
report language, by the way, which I have a copy of--and I can 
resubmit it for the record if need be, but it's in the '97 
bill--that indicates there should be priority given to the 
health and security of the veterans.
    It says, ``The VA is to review the current funding 
prioritization system with the goal of allowing projects 
involving life or safety issues to take precedence.'' So would 
you respond to that, please, because it appears to me that that 
was overlooked in this priority formula.
    Secretary Brown. First of all, Chuck, can you tell us why 
did it take from October to January to get the Congressman a 
reply on that?
    Mr. Yarbrough. No, Mr. Secretary. I didn't respond to----
    Mr. Lewis. Would you identify yourself, Chuck, for the 
record?
    Mr. Yarbrough. C.V. Yarbrough. I'm the Chief Facilities 
Manager.
    I don't know who wrote the letter. I'm not familiar with 
it.
    Secretary Brown. Okay. We'll find out.
    The other question we need to ask, I thought there were 
some----
    Mr. Knollenberg. Let me give you this. ``KSG'', who is 
that? That may have been the person who prepared the letter, 
but that's the notation. It's under your signature.
    Secretary Brown. I thought, in dealing with your basic 
question, we do have a priority process that allows us to 
establish what projects we are going to fund first. Obviously, 
we have more projects than we have money, so we have to kind of 
do that.
    It was my understanding that we already had the flexibility 
to make special--to give special considerations, if there's 
life and safety involved. Am I wrong? Can someone----
    Dr. Kizer. That gets the highest priority.
    Secretary Brown. Yes, that gets the highest priority.
    Mr. Knollenberg. But did it in this case? Apparently it did 
not.
    Dr. Kizer. I think, instead of trying to reconstruct 
things, I know I looked at this issue recently, and I would 
rather get back to you on the record, so I can give you correct 
information.

                 veterans equitable resource allocation

    Mr. Knollenberg. Let me also, very quickly, if I can, ask a 
final question. This is a somewhat related matter, with respect 
to the fact that of the time the letter was written and the 
time we got a response.
    On the 12th of March, the entire Michigan delegation sent a 
letter, signed by all of us, of course, Democrat and 
Republican--Dave Camp and John Dingell were the co-signatories 
on the front page, but we all signed it--that requested a 
review of the kind of thing that Mr. Frelinghuysen brought up, 
about the shift from the Northeast, and Michigan was one of 
those that is losing some of that to other parts of the 
country. The concern we have, obviously, is along the lines 
that Mr. Frelinghuysen noted.
    That letter was sent on March 12, and as yet, we have not 
received any response to that. So I was going to inquire as to 
when can we expect a response to that letter, which deals with 
the specifics of the VERA and also the VISN. Could we have some 
idea from you folks on that?
    Secretary Brown. I don't want to make excuses, but let me 
just say that, obviously, I'm embarrassed by the time that it 
has taken us to respond to Members of Congress. I will 
personally look into this to find out why. Because we do have a 
pretty good record in getting back to Members of Congress. We 
don't want to let that----
    Mr. Knollenberg. How would you respond?
    Secretary Brown. Well, what I'm going to do is backtrack to 
find out exactly what happened there, if it's getting tied up 
in one area or another. But we will get back with you and let 
you know exactly what has happened.
    Mr. Knollenberg. Can you give us a timeframe, just any kind 
of an idea?
    Secretary Brown. Today.
    Mr. Knollenberg. Today?
    Secretary Brown. Yes.
    Mr. Knollenberg. Very good.
    Dr. Kizer. Actually, I thought--we need to check, but 
actually, I thought that a response had gone back on that. 
We'll check and see. Obviously, you didn't receive it.
    Mr. Knollenberg. I received a note yesterday from the 
signatories that we had not received it.
    Dr. Kizer. Okay. We'll go back, check and find out what the 
problem is there.
    I would also note that we have--because of the importance 
placed on congressional correspondence, as well as 
correspondence from other folks, at least within the Veterans 
Health Administration, we have recently effected some changes 
in the performance contracts with our managers, to try to 
improve that situation.
    Mr. Knollenberg. Thank you.
    Mr. Chairman, thank you.
    Mr. Lewis. Thank you, Mr. Knollenberg.
    Mr. Price.

                      raleigh, nc veterans center

    Mr. Price. Thank you, Mr. Chairman.
    Mr. Secretary, let me add my welcome. We are glad to have 
you and your colleagues here.
    I want to start out by thanking you--and I was able to do 
this when you were in Raleigh a few months ago--thanking you 
for the excellent cooperation we have had from your Department 
in getting our Raleigh Veterans Center working in a most 
effective way. Your cooperation with this Subcommittee, with 
Mr. Stokes' and Mr. Lewis' help, in the FY 95 bill, allowed us 
to get that veterans center set up in Raleigh, serving a large 
population, mainly of Vietnam veterans, with an array of 
counseling services. We are very pleased with the way that this 
has gone and feel like it is meeting a genuine need. We do 
appreciate your help in getting that operation underway.
    I think the veterans community in our district readily 
seconds what I'm saying about the usefulness of that facility 
to them.

                       research funding reduction

    Mr. Price [continuing]. I would like to turn to the 
research budget. I know you've already touched on that in some 
particulars with regard to medical and prosthetic research. It 
does catch our eye, of course, that the President's budget 
proposes a reduction of some ten percent, from an estimated 
$262 million in the FY 97 budget to $234 million in FY 98.
    As I understand, the number of research projects that 
you're involved in would be dropped by some 12\1/2\ percent. I 
imagine these drops are the reason for a 12 percent drop in 
medical research FTEs.
    Now, I'm aware that this budget is not absolutely final 
because of some Department of Defense reimbursements that are 
pending, but nonetheless, I would like for you to tell us, if 
you can, what effect these cuts might have on certain aspects 
of your research program.
    For example, the Research Centers of Excellence; is there 
any way to estimate whether those centers would have to be cut 
back in any significant way?
    Secretary Brown. I'm gong to ask Dr. Kizer to respond to 
the impact it would have on our research centers.
    But let me just note for the record that the funding that 
we requested, $234 million, will fund about 1,500 projects. As 
I mentioned to Congresswoman Meek, our Persian Gulf research 
will remain a high priority. We kind of fenced that off to make 
sure that we don't end up hurting any research in that area.
    The VA, as I have already stated for the record, was faced 
with some tough financial choices, and VA's highest priority is 
to deliver services to veterans. This has nothing whatsoever to 
do with our lack of commitment here. We're still totally 
committed to research. We just didn't have the dollars, Mr. 
Price. If we had the dollars, we wouldn't have made the 
recommendation. So we obviously are open to any suggestions.
    I would just hope that, if you find the money, that we 
don't take it from some other veterans program, but find it 
somewhere else.
    Mr. Price. I appreciate that statement. I would like to 
just have for the record your best estimate of what the actual 
impact would be. I think that would be very useful to us, the 
effect on the Centers of Excellence program, which, of course, 
is of particular importance, and then, while we're at it, the 
clinical trials. Are we talking about here any significant 
curtailing or cancelling of clinical trials, particularly in 
the heart disease areas?
    Dr. Kizer. There is no question that if the program is 
confronted with a ten percent reduction, or thereabouts, that 
projects won't be funded. It will have a harmful effect, a 
deleterious effect--both in the short and long term--on the 
program.
    The Secretary has spoken to the realities that were 
confronted in putting the budget together. As far as the 
specific program impact, as far as Centers of Excellence or 
specific programs that might be impacted, we have looked at a 
number of different scenarios and how that might be played out 
if this does, in fact, become a reality. What we would do in 
that case is do some further assessment and try to effect 
changes that had the least deleterious effect on the program.
    As far as what specific ongoing projects would not be 
funded, it's really not possible to answer that now. That gets 
into a number of things, such as how far an investigator is 
into the project, what other sorts of changes could be made to 
retool it, etc. That's something which we obviously have looked 
at and will continue to look at, but we would defer final 
decisions until confronted with an actual dollar amount and 
what we would have to do to meet that budget.
    Mr. Price. Is there any information you can give us on the 
clinical trials now underway or anticipated?
    Dr. Kizer. If the money was not available, that would 
result in a curtailment of some clinical trials. What specific 
ones, I couldn't tell you at this point, but it's hard to 
imagine how it would not result in, or would not necessitate, 
curtailing existing programs as well as not funding others that 
are in the pipeline.
    Mr. Lewis. Mr. Price, would you yield on this general 
question?
    Mr. Price. Yes.

                     discretinary funding decisions

    Mr. Lewis. You're raising a fundamental point as to why the 
reduction of $28 million and what impact it might have.
    The Subcommittee has heard a rumor that it was a trade-off 
with OMB for additional funding in the general operating 
expenses account for the Veterans Benefits Administration. Is 
that true, and if so, it would appear that administrative 
expenses are being given priority over research, and I know how 
strongly you feel about research, Dr. Kizer.
    Dr. Kizer. I have no information about that. I can't 
comment, because I don't know anything about such a thing. I 
would have to defer to others.
    Secretary Brown. What actually happened, Mr. Lewis, they 
gave us a total number, and we had to make the choice. With 
``x'' number of dollars, you have to make a choice on how 
you're going to use it. So we have to prioritize it. That's how 
that actually ended up happening.
    Mr. Price. This, after all, though, is your budget request, 
and presumably the $27 million didn't come from thin air. I 
mean, there must be some preliminary estimates of the effects 
of this. I think we need more to go on, if we can possibly get 
it, either now or for the record.
    Dr. Kizer. Right. We would be happy to provide that. We 
have done a number of, as I said, scenario projections as to 
exactly which specific program areas would bear the brunt of 
that reduction, and we would be happy to engage in further 
discussion in writing or verbally with you in that regard.
    Mr. Price. I think that would be helpful.
    [The information follows:]


[Pages 88 - 89--The official Committee record contains additional material here.]


                           pacemaker program

    Mr. Price. Let me ask about a related matter. This comes to 
me from some very fine leaders in the veterans hospital in my 
own area.
    They tell me they are performing a good deal of surgery 
implanting pacemakers. In fact, they're doing a good deal more 
of that this year than last. I think they've implanted 30 
pacemakers this year, all of which, of course, has been 
reimbursed by the VA.
    For reasons that are not clear to me, and I think not clear 
to them, they believe that the VA in Washington is going to 
stop funding these operations in May or June for the balance of 
the fiscal year. Can that possibly be accurate?
    Dr. Kizer. It does not comport with anything I know about.
    Mr. Price. So it sounds totally implausible to you?
    Dr. Kizer. I can see no reason why that would occur.
    Secretary Brown. Let us get back with you on that. We can't 
see how that would occur based upon some action that we are 
taking here, policy-wise. But something may be happening at the 
local facility, so give us a chance to find out exactly what is 
going on and what's driving that rumor and we'll get back with 
you on it.

                           Pacemaker Program

    There is no policy change, however, Headquarters is 
considering a proposal that would transfer total funding for 
Automated Implantable Cardiovascular Defibrillator (AICD) to 
the Networks. If this transfer is made, funding for 
defibrillators would be the responsibility of the Networks and 
VAMCs. Network fiscal officers are aware of this potential 
change.

    Mr. Price. All right. I would be happy for you to do that. 
I appreciate your cooperation.
    Thank you, Mr. Chairman.
    Mr. Lewis. Thank you, Mr. Price.
    Mr. Stokes.

                 formal submission of user fee proposal

    Mr. Stokes. Thank you, Mr. Chairman.
    Mr. Secretary, has the administration formally transferred 
this new legislative proposal to the authorizing committees 
yet?
    Secretary Brown. Yes, sir. We have written to both the 
House and Senate Veterans' Affairs Committees urging them to 
act in time for this subcommittee, and the House has scheduled 
hearings on the third-party reimbursement issue for May the 
7th.

                      mccr administrative expenses

    Mr. Stokes. According to the Administration's budget, gross 
third party collections of an estimated $591 million would be 
offset by administrative expenses of $123 million, to provide a 
net total of $468 million.
    Administrative expenses of 20 percent appear to be rather 
high. Tell us why it costs so much to accommodate third-party 
collections?
    Secretary Brown. Well, I can't tell you exactly why, but we 
do agree that it is extremely high, and in a way I'm kind of 
glad that it is high. Because if you allow us to keep this 
money, we plan on using some of that, once we fix that system 
and reduce the cost, so that would end up adding to our net of 
$468 million.
    Mr. Lewis. What he's saying is he's sandbagging. 
[Laughter.]
    Mr. Catlett. Mr. Stokes, I believe the Chairman raised this 
before you came in, and certainly it is a legitimate issue, one 
that we've looked at.
    As I said to the Chairman, that was a standard that was set 
when this program began. We're not satisfied with that and, as 
the Secretary says, if we can lower that cost, that's money the 
VA will retain.
    We will have a private sector contract in place this year 
to pilot and test to see if we can get it done more cheaply. 
Clearly, we are committed to get that cost down, and if we find 
the private sector does it more cheaply than we do, that's 
where we'll move over time. We know that we have to compare.
    It's not just the billing function. We have to generate the 
bill, we have to do that better. But we're in the process of 
making those changes and we are going to undertake a private 
sector comparison beginning this year.

                          VETERAN DEMOGRAPHICS

    Mr. Stokes. Mr. Secretary, tell us what you know about the 
demographics of veterans covered by other insurance.
    Secretary Brown. We know quite a bit about that, but I'm 
not privy to--unless you want to add something.
    Dr. Kizer. Well, there are a number of things we can say 
about it. We know they are healthier, they're younger, they're 
more educated, and they're more likely to be employed. There's 
a host of things about veterans who have insurance that are 
different than our primary service population which, by any 
number of indices, has a higher disease burden. He/she is more 
likely to be unemployed, less educated, more likely to be 
homeless, and more likely to have mental illness, as well as 
substance abuse and multiple other medical diagnoses. We take 
care of a very difficult population.
    Mr. Stokes. You're saying to me you have already done a 
study that has given you this type of data?
    Dr. Kizer. There's a variety of data available in this 
regard, yes. It's not just one, but a number of different 
studies have been done in this regard.
    Mr. Stokes. You've not done a study; you've made yourselves 
available to several other resources, is that what you're 
saying?
    Secretary Brown. No, sir. We did a national survey--we have 
a national survey of veterans. I have Dennis Duffy here. 
Dennis, can you give us the background on the information that 
we've collected?
    Mr. Duffy. Mr. Stokes, in 1992 we did a survey of veterans 
nationwide, which includes both users and nonusers of VA 
programs. One of the specific areas we questioned regarded 
health care utilization, both those who have used VA and those 
who have private insurance or public providers--Medicaid and 
Medicare. We can provide you with that information for the 
record.

[Pages 92 - 97--The official Committee record contains additional material here.]


    There are very significant differences in utilization rates 
between those who are and are not covered by private or other 
health care programs, in terms of utilization rates within VA. 
We also have a significant proportion of veterans who use both 
VA and non-VA providers. That, of course, is of some interest 
to us as well. We would be happy to provide that to you for the 
record.
    Also, there are other external data sources. The National 
Survey of Health Care Expenditures, for example, which is 
conducted by HHS, also sheds quite a bit of light on that 
issue.
    Dr. Kizer. In addition to the two data bases which Mr. 
Duffy referred to, there are also quite a number of other 
studies that have been published in the medical literature that 
look at either selected or more global aspects of the question 
that you ask.
    Mr. Stokes. Can you tell me, then, how has the VA's 1998 
budget and budget projections through 2002 taken these 
demographics into account?
    Dr. Kizer. Insofar as those future projections are 
predicated on our past experience, we take that past experience 
as to the costs and the conditions, the demographic factors, et 
cetera, that are involved in taking care of our population, and 
they are factored into where we would hope to be in the future 
as well.

                        VETERANS COVERED BY HMOS

    Mr. Stokes. Do you know how many veterans are covered by 
health maintenance organizations?
    Dr. Kizer. I don't have that number on the tip of my 
tongue. We do have some information that recognizes the 
incredibly rapid shift that is occurring in many markets around 
the country. Any number you got in that regard would be limited 
to a point in time.
    You know, we're seeing all parts of the country shift from 
being primarily fee-for-service to managed care within a one- 
or two-year timeframe, so certainly the data that is available, 
say from the 1992 survey of veterans, is out of date and would 
understate the case at this point in time.

          Veterans Covered by Health Maintenance Organizations

    The table shows that almost 69 percent of the veteran 
population indicated in 1993 that they had a private or group 
health insurance plan which was a health maintenance 
organization (HMO) or similar organization.

----------------------------------------------------------------------------------------------------------------
                                               All Ages                 Under 65               65 or Older      
----------------------------------------------------------------------------------------------------------------
All Veterans.........................  27.4 million...........  20.0 million...........  7.4 million.           
Percent of Veterans with HMO Plans     68.6%..................  70.4%..................  63.8%.                 
 \1\.                                                                                                           
----------------------------------------------------------------------------------------------------------------
\1\ Veterans who self-reported that they had a private or group health insurance plan which was a health        
  maintenance organization (HMO) or similar organization.                                                       
                                                                                                                
Source: National Survey of Veterans; interviews conducted in 1993.                                              

    Mr. Stokes. Will increased participation in HMOs pose 
difficulties as the VA tries to recover costs?
    Dr. Kizer. As we were discussing earlier with the Chairman, 
it adds a further challenge to recouping third party payments 
in this regard. It is something that we're aware of. There are 
a number of initiatives underway to heighten our return of 
receipts in this regard. It's just something that will have to 
be dealt with.

                            PROVIDER CHARGES

    Mr. Stokes. Mr. Secretary, will the Medical Care Cost 
Recovery program encounter difficulties in determining 
differences in provider charges from one region to anotherand 
from one insurer to another?
    Secretary Brown. I don't think that it will--Certainly, 
it's a challenge. But I believe that it is not of a magnitude 
that will prevent us from making sure that we recoup the funds 
for the actual services that we provide. I don't really see 
that as a problem.
    As Mr. Catlett mentioned, one of the things I insisted on 
was that we get the private sector involved, not only maybe to 
test what we're doing on our side--because we're doing our own 
research on how to deal with this question--but also I wanted 
to get the private sector involved because they have so much 
experience all over the country. So we are not reinventing the 
wheel here. We're just trying to catch up with modern methods 
of recouping payment.
    Mr. Stokes. Mr. Chairman, I'm ready to move into another 
area, so I can defer questions until a later time.

                   MEDICARE SUBVENTION DEMONSTRATION

    Mr. Lewis. Thank you, Mr. Stokes.
    I would like to round out one question area as well before 
we recess for lunch. So, very briefly, I would like to go to 
another of your legislative proposals.
    In future years, VA intends to collect medicare 
reimbursements from higher income, nonservice veterans who 
choose VA health care. Although no medicare funds are assumed 
to be collected in 1998, your budget estimates $557 million in 
reimbursements in 2002. This assumes authorization of the 
medicare subvention demonstration, successful pilot testing, 
and an authorization to expand nationwide.
    Has this legislation been submitted yet? If not, when does 
the administration plan to submit it?
    Secretary Brown. Yes, it has been.
    Dr. Kizer. Legislation was submitted last year in this 
regard. There are also, I think, at this point, four other 
congressionally-introduced measures in this regard. We are in 
the final throws of negotiating a memorandum of understanding 
with HCFA and OMB that we expect would probably alter the 
current legislation that has been submitted and probably would 
alter some of the other proposals. This is something that is 
being worked on as fast as possible, and we do expect that 
we'll have a final proposed bill in the not too distant future.
    Mr. Lewis. Mr. Secretary, have you talked to Chairman 
Archer and other appropriate members of the Ways and Means 
Committee about this very important resource matter, and if 
not, do you plan to? Frankly, I would strongly recommend that 
you do so, if you have not.
    Secretary Brown. I have not, but I'm going to take your 
suggestion and I will.
    Dr. Kizer. I have met with some of their staff, as well as 
some members.
    Mr. Lewis. It's very important that they be part of this 
process, if you look at it longer range. That is not a standard 
pattern, you know, in terms of the way we've been doing 
business, but in these areas they are very important players.
    Mr. Stokes and my colleagues, I would propose that we 
recess for a lunch break and come back, instead of at 2:00 
o'clock, make it 1:30, if that's all right. We would then move 
as quickly as possible this afternoon. I had hoped, but frankly 
doubt, that we would be able to complete our work by 4:00 
o'clock this afternoon.
    We are going to have a full Committee meeting tomorrow 
morning relative to the supplemental, so it will be impossible 
for us to meet in the morning, so it is likely that we'll come 
back at 2:00 o'clock tomorrow afternoon.
    With that, the subcommittee is in recess until 1:30.
    [Whereupon, at 12:00 noon, the subcommittee recessed, to 
reconvene at 1:30 p.m. the same day.]

        GRANTS FOR THE CONSTRUCTION OF STATE VETERAN CEMETERIES

    Mr. Lewis. Mr. Secretary, the VA is proposing modifications 
to the grants for construction of state veterans cemeteries 
program. The proposal is to increase the Federal share from 50 
percent to 100 percent, plus provide 100 percent for initial 
equipment costs. As is now the case, the states would provide 
for operational and maintenance costs.
    Is this proposal for the state grant program intended as a 
replacement for the current program of building new national 
cemeteries?
    Secretary Brown. Yes, sir.
    Mr. Lewis. The question of whether or not to continue 
funding of new national cemeteries is not one the 
administration can make unilaterally. It is really a question 
of whether or not the Congress wishes to provide funds for new 
national cemeteries, isn't that right?
    Secretary Brown. Yes.

                       YEAR 2000 COMPUTER PROBLEM

    Mr. Lewis. Okay, as long as that's a part of the record. It 
is conceivable that there may be, if a legislative bill moves 
forward, some of that discussion that you might want to pursue 
as well.
    There have been a number of articles in the press on what 
is known as the Year 2000 computer problem, sometimes known as 
Y2K. I've never known it as that, but nonetheless, as I 
understand it, the Veterans Benefits Administration represents 
the biggest challenge to the VA to become Year 2000 compliant; 
is that right?
    Secretary Brown. Yes, sir.
    Mr. Lewis. For the benefit of those who may not be familiar 
with this problem, briefly explain the Y2K issue.
    Secretary Brown. Well, as you know, Mr. Chairman, when the 
computers were designed, they were not designed in a way that 
would allow them to recognize any action which took place on or 
after the year 2000. The way we are going to fix that, from the 
VA's standpoint--we actually have two approaches to deal with 
that.
    The first one, primarily, we will just go in, like most all 
other industry leaders and people that are interested in it, 
and modify the code. We expect that to be completed in December 
of 1998, and we expect to have it fully worked out by June of 
1999. By the way, that's what we call our old Honeywell system. 
It's yesteryear's technology.
    Concurrent with that, we are going to move forward with a 
new generation of computers and architecture that's in the 
process of being built now. It will be located in Austin, TX. 
What we will be doing is to gradually take the programs that we 
are running under the old system and place them under the new 
system, which we refer to as VETSNET.
    We expect, quite frankly, that that system should be up and 
running somewhere around June of 1999. But we're not 
necessarily relying on that in order to make us 2000 compliant. 
So we are very, very optimistic about making sure that the 
checks get out on time by the year 2000.
    Mr. Lewis. We're really speaking about the Veterans 
Benefits Administration so far, but are there any other parts 
of the VA that have significant problems with Y2K?
    Secretary Brown. Yes, sir. Right now we are looking at 
that. There are a lot of biomedical operations that rely on 
chip technology in order to continue to function, so we are 
taking a complete look across the system to make sure that we 
identify every computer entity that will require some 
modification, in order to make sure that we are still able to 
function on and after the year 2000.
    Mr. Lewis. Mr. Secretary, you have indicated your concern 
and the planning process that you have been discussing here 
relative to making certain that people receive their checks, et 
cetera. Obviously, the potential for crisis is very real there. 
I appreciate your focus on this matter.
    I am wondering, once your new program and system is in 
place, if you plan to run crises tests; that is, actually 
presume the worst, presume checks haven't gone out, and then 
how would you react to those circumstances? Ofttimes we don't 
do that, and I'm just wondering if you----
    Secretary Brown. We have real professionals on this. This 
is our bread and butter, so we are going to be testing this 
system. We have established our own guidelines that will allow 
us to proceed, to make sure we're where we think we should be 
at each phase of it. We plan on keeping the Congress involved 
and informed as we go along. So I'm not worried about it at 
all.
    In fact, I visited Hines, IL, and actually watched them 
change the code. I was kind of fascinated on how they were 
going to fix this, so I went through it. I have all the 
confidence in the world that we're going to be able to deal 
with this.
    Mr. Lewis. I can't emphasize how important I feel that kind 
of exercise is.
    You know, in the military, one of the things that has 
occurred in the last couple of decades is that we have 
developed, best known in the world ever, training facilities, 
where they can have real, live war games. Pilots get the 
experience of dropping live bombs. We have troops on rotation 
retraining and training in live circumstances. Schwarzkopf said 
that that training was more important than anything you could 
imagine, in terms of the Middle Eastern war, for example.
    Well, this is one of those circumstances that justifies 
that kind of priority, so I very much appreciate your response 
and urge you to go forward with that. If there are ways we can 
provide input or interchange, I would appreciate it.
    Secretary Brown. Yes, sir.

                       ``zero tolerance'' policy

    Mr. Lewis. More than four years ago, in response to a 
sexual harassment case at the Atlanta VA Medical Center, the 
Secretary developed a ``zero tolerance'' policy regarding 
sexual harassment and other forms of discrimination in the 
workplace. It now appears that some people no longer have faith 
in the policy of ``zero tolerance''.
    Last week, the legislative committee held a hearing on this 
subject. The case that precipitated the hearing were the 
allegations that the Director of the Fayetteville VA Medical 
Center engaged in sexual harassment.
    Did the VA's Inspector General verify any of the 
allegations raised by the women who accused the Director?
    Secretary Brown. The IG found that there were--I have the 
IG here now--that there was probably sexual harassment in one 
of the three cases. I think that's right. Isn't that right, 
Bill?
    Mr. Merriman. That's correct.
    Secretary Brown. They found harassment in one of the three 
cases. The other two cases, they did not feel that the 
evidence, in and of itself, justified concluding that there 
was, indeed, sexual harassment.
    Mr. Lewis. Has the VA made any settlements with any of the 
women who accused the Fayetteville Director?
    Secretary Brown. No.
    Mr. Lewis. Mr. Secretary, what are you doing to convince VA 
employees, especially women, that the Department is truly 
pursuing a ``zero tolerance'' policy?
    Secretary Brown. I have not lost faith in our ``zero 
tolerance'' policy. In fact, I want to go on record as saying 
that I believe it is the toughest policy in government. I think 
you would find it very difficult to even find an organization 
in the private sector that has a tougher policy than VA has 
established.
    We have changed our policies. We have established a sexual 
harassment and discrimination ``hotline''. Reprisal complaints 
at a facility are required to be sent to network and area 
directors for higher level review. Performance standards for 
senior executives must now address sexual harassment 
prevention. VA's table of penalties now includes sexual 
harassment as a specific offense. Sexual harassment charges 
against senior officials are sent to headquarters for review.
    There are a couple of other things. With respect to 
training, we have mandated four hours of training for every 
employee. That includes the Secretary, Deputy Secretary, all 
the way down, all 240,000 employees. Two years after they 
receive that training, they have to take two hours of refresher 
training.
    We have sent out over one million letters since 1993 to our 
employees, and over one million other communications, via pay 
stubs, e-mail, and speeches that we have delivered. So I 
believe that we have a strong zero tolerance policy in effect.
    Obviously, when you have a workforce that is as large as 
the VA, we're not going to be able to weed out all the bad 
apples. There's nothing we can do about that, except to 
continue to work hard at it.
    At the same time, I would have to say to you that it also 
does not mean that every time someone raises a question about 
sexual harassment, that that is, in fact, the case.
    Much was made of the fact that we have 14 percent of the 
sexual harassment claims in government. But the bottom line is, 
we don't look at that as something that's bad. We think the 
reason why our complaints are so high is because we have done 
so much to bring this issue to the forefront: four hours of 
training, the subsequent two hours of refresher training, the 
millions of letters we sent. We did a survey that involved 
30,000 people. So that brought the issue to the forefront. We 
think that accounts for the reason why our percentage is a 
little higher than others. But let's look behind that 14 
percent. Let me share some information with you.
    In 1995, 142 sexual harassment complaints were filed with 
VA. 39 complaints (27 percent) were resolved. That means the 
parties got together and they worked it out. These are sexual 
harassment cases.
    In 19 percent of the complaints, no discrimination was 
found. Thirty-seven percent were dismissed because of 
procedural problems. In one percent, or one case, 
discrimination was found. We have 38 cases pending, or 27 
percent. So we think we have a strong policy.
    What we have to do is continue to make information 
available to all of our employees, and let them know that if 
they engage in unacceptable conduct, there will be 
consequences, strong consequences.
    Mr. Lewis. Mr. Secretary, while my question was related to 
sexual harassment, you have broadened it to include 
discrimination questions. I appreciate that. I personally 
support the zero tolerance policy. It's very important that we 
be able to send a clear message out there to ouremployees, as 
well as those who would be employees, to our supervisors as well as our 
line personnel. So the Committee supports that view and I certainly 
want to let you know the Chairman does.
    Secretary Brown. Thank you.
    Mr. Lewis. With that, I yield to my colleague, Mr. Stokes.
    Mr. Stokes. Thank you, Mr. Chairman.

                   minority researchers institutions

    Mr. Secretary, during our hearing this year on the National 
Science Foundation's budget, we heard some rather discomforting 
information. Although millions of dollars have been devoted to 
several NSF programs during the past decade designed to 
increase minority representation in math and science 
disciplines, the hard data indicated very little overall 
improvement.
    During our hearing last year with the Veterans' 
Administration, in discussing the VA Research Minority Health 
Professions program, I specifically asked, can you tell us if 
we're making any progress in this area, and whether the VA has 
collected any data about not only the number of scientists and 
institutions who have participated, but any significant 
evaluation of the actual research being carried out.
    The responses, both during the hearing and for the record, 
were extremely brief. I'm asking the same question of you again 
this year. And in addition to the number of minority 
researchers and institutions involved, I would like to hear 
more about the science funded, and especially about the VA's 
efforts to expand minority participation in the normal research 
programs. That is, I would like for you to tell us exactly what 
are you doing to increase participation by minorities in 
research and other medical activities, and how you're measuring 
the results.
    Secretary Brown. Let me just say that I will get that 
information in detail for you, and it will not be brief. I will 
make sure that it's comprehensive.
    Dr. Kizer, do you have any responses?
    Dr. Kizer. No. I think, instead of trying to cite things 
from memory here, it would be better to answer for the record.
    I think, though, your initial comments about the problems 
at NSF, i.e., increasing the skill levels and the people who 
have the appropriate background in science and math to do this 
research, means in many ways that we're victims of that. 
Insofar as VA research is peer reviewed and looked at from the 
point of view of the merits of the studies, not necessarily as 
to who the investigators are, and insofar as the pool of 
minority researchers is limited, then the numbers of minority 
investigations will reflect the inherent limitations in that 
regard, as well. I don't think we're performing as well as we 
would like to, and part of that is just the larger societal 
problem.
    I think we could respond in more depth in our followup.
    Mr. Stokes. I hope that this year you will expand on this 
issue in the record for me to a much larger degree than you 
have in the past.
    [The information follows:]

                          Minority Reseachers

    Of those investigators disclosing their ethnicity for our 
data base, 768 have coded themselves as minorities. Because the 
ethnicity of the investigator does not directly affect the 
scientific merit of our research projects, our ethnicity data 
is collected in aggregate form and is not linked to individual 
projects. Except for our Minority Recruitment Initiatives (see 
attached documentation), we would expect minorities to 
participate at all levels of our program, including 
Investigator Initiated research, Career Development, 
Cooperative Studies, and Centers of Excellence.

                   minorities in executive positions

    Mr. Stokes. Mr. Secretary, while I'm at it, you and I have 
had some discussions on the record--
    Mr. Lewis. I was going to ask you to yield on that, but 
proceed and then I'll ask it.
    Mr. Stokes. Okay, Mr. Chairman. I think you know where I'm 
going.
    We've had some discussions about the inclusion of 
minorities in the upper echelons, as well as other categories, 
throughout the Department of Affairs Veterans. I have to tell 
you, a couple of weeks ago when HUD was before us with their 
budget, the Chairman noted how much of their personnel in this 
room looked so much like America, as contrasted to some of the 
other agencies that come before this subcommittee.
    When I look at your contingent here, I have to say to you 
that it doesn't look very much like America to me. I don't see 
women, I don't see other minorities. You know, it's too bad, in 
1997, to have to raise questions like this, questions I've been 
raising on this Subcommittee for more than 20 years now. But 
it's a fact of life and we have to deal with it.
    I would be interested in your comments relative to what 
progress, if any, you are having in trying to make this agency 
look like America.
    Mr. Lewis. Before you respond, Mr. Secretary, let me say 
that while there are obvious exceptions in the audience, 
nonetheless, among the agencies that we've been dealing with, 
as Mr. Strokes and I address this question, this audience looks 
less like America, in terms of variety and mix of minorities, 
the numbers of women, et cetera. No offense to anybody who 
happens to be in the room, but I would think, of all the 
agencies around, where we have the potential pool available, 
that a different kind of job might have been done.
    Secretary Brown. I guess you're right, if you look around 
this room.
    I think, if you look at the top echelon of my 
administration, where I have the most flexibility, it reflects 
America. I have tried to look at the entire picture and to make 
changes since 1993, since I have been here.
    We had a total workforce of SES of 360 in 1993. That is 
down now to 331. In 1993, there were 34 women in SES. Now there 
are 43, so we're making progress there. In 1993, there were 
only 19 African-Americans in SES. We now have 24. Hispanics, we 
dropped a little bit. In 1993 there were four, and now we have 
three. For all other minorities, we went from four in 1993 to 
nine now. So I think, all-in-all, we are making progress. This 
is not to say that there is no room for improvement.
    I will say this. Within the Federal structural guidelines, 
any change has to come very slowly. I don't have the 
flexibility of just changing the personnel in the Federal 
Government because there are protections there, and there 
should be protections. But where we do have the flexibility, I 
think we look pretty good.
    Mr. Stokes. I would appreciate it if you would expand on 
this issue for me for the record also.
    [The information follows:]

[Pages 106 - 114--The official Committee record contains additional material here.]


    Mr. Stokes. I understand there are some protective aspects 
as to why you cannot do what should be done, but I also know 
that this Administration has been in office for five years now. 
You tell me about African-Americans being appointed, and you 
cite there are four. We're talking about one per year. That, to 
me, is not progress, and I don't think you want to stress to me 
that progress is being made in areas such as that.
    I think I know the commitment that this President has made, 
in terms of wanting his administration to look like America, 
and by that, I think he means also he wants, throughout his 
agencies and his administration, to look like America.
    Mr. Lewis. Mr. Stokes, it strikes me that perhaps even the 
First Lady might think there might be more women available 
than----
    Mr. Stokes. I would think so. Fifty percent of the country 
today is female and I would think that ought to be reflected in 
our government. So while people may not like to hear this, I 
don't like to have to raise the question. But as long as I'm 
here, I'm going to raise the question, until I see the kind of 
progress that I think ought to be made.
    Secretary Brown. I think you're absolutely right.
    I did give you some bad information. I was giving you 
numbers for the end of 1995. Let me run through it again to 
make sure it is correct.
    At the end of 1996, the total SES workforce 332, so we 
actually end up losing 28. We have a smaller top management 
workforce now. The SES women went from 34 in 1993 to 44 now. 
Five of them are African-American women. SES African-Americans, 
were 24 in 1993, and now there are 22. So that makes me look 
even worse.
    On the Hispanics, the record is a little bit better. In 
1993, it was four, and now it is four, rather than the three 
that I mentioned before. All others minorities went from four 
in 1993 to ten. So those are the correct numbers.

                  contracts with minority contractors

    Mr. Stokes. While we're in this area, another area we have 
talked about are contracts for minority contractors, in terms 
of the agency's business. Of course, this is an area where, 
throughout the government, we find oftentimes small or minority 
contractors have not gotten their fair share of federal 
contracts.
    Again, we're talking about a sizeable number of minorities 
when we talk about veterans in this country. So again, this is 
another area--do you want to tell us how you're doing in that 
area?
    Secretary Brown. Let me get back with you for the record on 
that. Okay, here we are.
    Mr. Stokes. You people know I'm going to ask these 
questions every year, so I would imagine that you would have 
the stats.
    Secretary Brown. We have them.
    In 1996, VA awarded $1.5 billion to small business, or 39 
percent of the total procurement. Government-wide, it is 24 
percent. Awarded to minority-owned firms, it was up from 3.15 
to 3.37. The Government-wide average was 3.8. The increase in 
awards to women-owned firms went from 4.8 to 5.72.
    The goal for 1997, minority-owned is 9 percent, women-owned 
is 6 percent, and veterans-owned is 8 percent.
    Mr. Stokes. Those are goals.
    Secretary Brown. Yes, sir.
    Mr. Stokes. Thank you, Mr. Secretary.
    Thank you, Mr. Chairman.
    Mr. Lewis. Thank you, Mr. Stokes.
    Mr. Frelinghuysen.

                       drug abuse by va employees

    Mr. Frelinghuysen. Thank you, Mr. Chairman.
    Mr. Secretary, while you're scrambling for some statistics, 
I have a few statistics that I would like to request from you.
    Could you provide the Committee with an idea of how many 
actions have been taken to date in any of our VA medical 
centers that relate to the whole issue of drug use among VA 
personnel, how many job actions have been taken? Can you give 
me some overall statistics that relate to that issue?

                       Drug Abuse by VA Workforce

    For the period from October 1, 1994 to September 30, 1995, 
the VA took the following job actions:

Written reprimands.............................................       8
Suspensions less than 15 days..................................      11
Suspensions 15 days or more....................................       3
Indefinite suspensions.........................................       3
Demotions......................................................       2
Removals/separations...........................................      24

    Statistics for the succeeding year (October 1, 1995 to 
September 30, 1996) are currently being compiled.

                             patient abuse

    I would like to know if there are instances of physical 
abuse to patients, whether statistics are kept relating to 
those instances, and more importantly, in both these areas, 
what steps the VA takes to eradicate the problem. It's somewhat 
akin to Mr. Stokes' question in terms of these types of 
statistics.
    Even though the subject matter may be awkward, I would like 
to know whether statistics exist, and more importantly, what 
happens to people.
    Secretary Brown. Can you give us a chance to respond to 
that for the record, so we can check to see if we actually have 
that kind of data? If we do, we will certainly make it 
available to you.
    Mr. Frelinghuysen. My feeling is that the public obviously 
has a right to know.
    Secretary Brown. Oh, absolutely. One of the reasons why I'm 
a believer on how well we're doing in delivering goods and 
services, particularly in our hospitals, is simply because the 
public has a right to know. We have everybody looking at us. We 
have our own IG, oversight by the Congress, the veterans 
organizations, the media. Anyone can come into VA and ask for 
information. So that's one of the reasons why we have to live 
up to a higher standard, and that is good for our veterans.
    I believe that if we were able to compare, apples to 
apples, on how well we perform compared to the private sector, 
we would do extremely well, probably much, much better than the 
private sector, because the public has a right to know.
    Mr. Frelinghuysen. You're suggesting, without having the 
statistics at hand, that your record is better than the private 
sector relative to these issues?
    Secretary Brown. Oh, I'm not just talking about these 
issues. You asked for specific data, and we're going to find 
out if we have that. I'm just talking about across the board, 
in terms of healthcare delivery.
    I hear all the time where VA's healthcare is sub-standard 
to the private sector. Well, that's simply not true. And the 
reason----
    Mr. Frelinghuysen. Let me comment on that. I think most of 
the veterans in my area are pleased with the health care they 
get at Lyons and East Orange.
    But veterans vote with their feet. Let's be quite blunt 
here. Most of the veterans that I know tend to go to private 
sector entities to get their health care. So while I'm 
supportive of what you're doing, and I'm worried about the 
shift of money out of the Northeast, let's be blunt. Veterans 
have begun to tip their hand as to where they want to seek 
their medical care, by and large. That may not be true in all 
parts of the country.
    I say that as supportive of what you're doing, and 
obviously, the institutions are in my own back yard. But at 
your earliest convenience, I would like to get those 
statistics.
    [The information follows:]

                             patient abuse

    Incidents concerning patients, such as falls alleged 
patient abuse, or medical misadventures are categorized as 
``sentinel events.'' A sentinel event is one which has the 
potential for adverse patient outcomes. It requires intensive 
investigation and usually leads to action at the local or 
central level. Each sentinel event should be the subject of a 
root-cause analysis by the medical center, such as a Board of 
Investigation (BoI).
    In FY 1994, there were 1,158 BoIs reported to the Office of 
the Medical Inspector (OMI). Sentinel events involving patient 
abuse (alleged or sustained) accounted for 67.8 percent of all 
BoI. Alleged patient abuse accounted for 42.1 percent with 487 
incidents. Sustained abuse accounted for 25.7 percent with 298 
incidents. Of these 298 sentinel events of sustained patient 
abuse, 291 were attributed to a practitioner. Practitioner 
misconduct accounted for 285 of the sustained patient abuse 
cases. The OMI did not track any data on the employees against 
whom patient abuse was sustained. The OMI has no data beyond FY 
1994, the last year the OMI received the BoI.
    As recommended in a report to the Deputy Under Secretary 
for Health from the Acting Medical Inspector (September 25, 
1995), a special task force on the identification and 
prevention of patient abuse was appointed April 2, 1996. This 
task force developed a proposal for analyzing the apparent 
increase in patient abuse that had occurred in VA medical 
facilities in recent years to determine if it was an actual 
increase in patient abuse or other variables causing the 
appearance of an increase. The elements of the proposal include 
literature search; analysis of existing data; a field survey; 
and site visits to selected facilities. The proposal to study 
this issue was funded on January 17, 1997, and report is 
expected by September 30, 1997.

                   management efficiencies at visn 3

    Mr. Frelinghuysen. If I may, Mr. Chairman, I would like to 
return to some of the areas that I raised this morning relative 
to VISN No. 3.
    Mr. Secretary, you said earlier this morning that VISN No. 
3, which is in the New York/New Jersey metropolitan area, has 
already realized $125 million in savings, out of the $148 
million to be cut by the VERA plan.
    Again, looking back at the VISN No. 3 business plan from 
only this past December, it states, on page 5, that ``During 
fiscal year '96, VISN No. 3 reduced its budget by $36.8 
million.''
    Can you tell me, and does this mean--does this tell me that 
VISN No. 3 has, in the four-month period since the plan was 
released, realized more than $80 million in savings?
    Secretary Brown. I'm going to ask Dr. Kizer to respond to 
that. But let me say this before he does.
    Mr. James Farsetta, our VISN Director there, is very, very 
aggressive. We set a goal, which I think was a five-year goal, 
from 1995 to the year 2000, of how much savings had to be 
generated in those areas where their per unit cost, per patient 
cost, was out of line with the norm. We basically put a cap, a 
five percent cap, on each year.
    But he, being as creative as he is, he was able to find his 
savings primarily already. I think he has only about--you 
mentioned, and I will accept the numbers that you talked 
about----
    Mr. Frelinghuysen. What I want to do is verify that those 
savings have actually occurred. He is very creative, he is very 
well spoken, and I think people have a lot of confidence. I 
just want the actual evidence.
    According to your business plan, savings were to be 
realized by--and I'll give you a few examples--closing 160 
mental health beds, for a savings of $6.5 million; closing 597 
long-term beds, for a $26 million savings; consolidating 
procurement for $2 million; reducing the number of nursing home 
beds by $6.3 million; reducing the average length of stay per 
patient by more than 50 percent for $11.6 million.
    I mean, according to the business plan, there were certain 
savings to be realized. I would like to know where we stand 
relative to those goals. Have they been achieved?
    Dr. Kizer. Let me try to respond to that, in part, and what 
I will do is cite some numbers that Mr. Farsetta provided to 
the New York delegation in the latter part of February, when he 
was briefing the delegation on this matter.
    Just to quote from the information that was provided at 
that forum, in VISN 3, between October 1, 1995, and January 10 
of 1997, there was a reduction of 2,035 FTE for an annualized 
savings of $107.6 million; they eliminated 534 acute care 
hospital beds, and yet maintained their occupancy rate at about 
80 percent. They increased their ambulatory surgery from 35 
percent of the total number of surgeries performed to 46 
percent of the total. They have done a number of other things 
and perhaps, instead of taking the time this afternoon to read 
through all of this, we will be happy to provide you with more 
details, and/or have Mr. Farsetta, who you know quite well, to 
provide you with more of the specific details and the dollar 
amounts associated with some of the savings that they have 
effected over the last 15 months or so.

[Pages 119 - 120--The official Committee record contains additional material here.]


    Mr. Frelinghuysen. I think it is important to get an idea, 
since your business plan promised one thing, in terms of 
savings, and, of course, the issue to veterans is, just taking 
this list--you know, here's another one. Reducing the number of 
physicians in the New York/New Jersey metropolitan area by 10 
million; consolidating pharmacy services.
    I mean, the signal sent to veterans is that while you may 
be sending a budgetary signal that you're meeting your goals, 
the signal sent to area veterans is that they are, in the 
overall scheme of things, losing out. I think I share some of 
that concern.
    Dr. Kizer. Let me try to----
    Mr. Frelinghuysen. Where are you going to get the rest of 
the savings?
    Dr. Kizer. You made the point a minute ago that veterans 
are voting with their feet, and I suppose that's why VISN 3 is 
treating more veterans now than it did a year ago. Through 
these savings, they have substantially reduced their waiting 
times, they have increased their expenditures for home care by 
2.3 million; they have opened new community-based outpatient 
clinics at Staten Island and Harlem, in Rockland County and 
Trenton, Fort Dix----
    Mr. Frelinghuysen. I know that you have five planned in New 
Jersey. I think you've opened three.
    I mean, the word on the street there is that, while I know 
you're trying to get your numbers up, that that sort of gives 
to some of the veterans a strong suspicion that the outreach, 
in fact, is going to, at some point in time, signal the 
potential closing of an institution. That is certainly 
something which alarms alot of people.
    I understand that you're trying to get your figures up and 
you're trying to get people in to register their social 
security numbers. I think that's all fine and good. But the 
general feeling is that this is leading to some catastrophic 
development which is going to limit access in their traditional 
locations where they receive the service.

                        prostate cancer research

    Shifting to the whole area of cancer research, from what I 
can gather from looking at your budget, there is less money for 
research. The committee has always had a great deal of interest 
in VA medical research activities, as witnessed by some of the 
earlier questions.
    I have a particular interest in prostate cancer research. 
If you look at the veterans population you serve, I believe 
about 95.3 percent of that population are men. So my question 
is--and I recently requested information from you on prostate 
cancer research and learned that your 1996 appropriation of 
$250 million included less than $9.5 million for prostate 
cancer research. That, from what I can gather, is less than 
four percent of your overall budget. I understand you get some 
money from other sources outside the VA for cancer research.
    Given the high rate of incidence of prostate cancer, which 
I think for most men is certainly inevitable, why aren't we 
doing more? And using the money we have, how effectively has it 
been spent?
    Dr. Kizer. I'm going to say a couple of things and then ask 
Dr. Jack Feussner, the chief of our research program, to 
respond in part to that.
    I would note, as a general comment, that by the time men 
get to their early seventies about 10 or 11 percent will have 
developed prostate cancer--that's certainly something that all 
males can eventually look forward to I would also note that 
there are a whole lot of men who don't get to the age of 70 
because they die of heart disease or other forms of cancer, as 
well as lots of other diagnoses, that we're also spending money 
on to conduct research. The plate, as far as conditions that 
affect our veteran population that need to have research done, 
includes a lot of things, with perhaps some having statistics 
even more compelling than prostate cancer alone.
    Let me ask Dr. Feussner to perhaps comment on at least the 
latter part of your question as to what the plans are for 
prostate cancer research and at least his judgment as to the 
effectiveness of the research that's currently being done.
    Mr. Frelinghuysen. Maybe you could stand up and give us 
your name for the record.
    Dr. Feussner. Sure. My name is John Feussner and I'm the 
Chief Research Officer for VA.
    We have provided you with some information about the VA in 
the research portfolio for prostate cancer over the past 
several years.
    Last year, the number you quote is correct. We spent $9.2 
million, a threefold increase over 1995. Our estimate for 1997 
is approximately $12.8 million, which is a 400 percent increase 
from 1995.
    In addition to the prostate cancer research that we're 
doing internally, we have three major activities that are 
relatively new. The first is that the VA, in collaboration with 
the National Cancer Institute, is conducting the largest 
clinical trial--I should say the only clinical trial in the 
world--looking at the effectiveness of radical surgery, radical 
prostatectomy, for prostate cancer, as a joint venture between 
VA and the National Cancer Institute, with the VA providing 
about 95 percent of the money and about 97 percent of the 
patients.
    We have entered into discussions with Capcare which is a 
private foundation, and have met with their leadership, looking 
for joint ventures that deal with managing metastatic prostate 
cancer. And we have an RFA that will be coming out this 
quarter, representing the joint venture that the Congress 
recommended between the Department of Defense and VA, that also 
looks at prostate cancer.
    We have recently received a grant proposal for a new 
initiative called ERICs, Epidemiological Research Information 
Centers. We got ten proposals, ten center proposals, and we're 
in the process of reviewing six of those ten proposals--six of 
those ten center applications are specifically focusing on 
prostate cancer.
    I agree with you. It's certainly the most common cause of 
cancer mortality in men. It's a tough problem. There are no 
cures. We're working on it both in the clinical arena with 
human studies, looking at treatment efficacies, but the RFA 
with DOD will also investigate issues relating to the basic 
biology of prostate cancer.
    Mr. Frelinghuysen. Well, I wanted to give you the 
opportunity to ``blow your horn'', and obviously, look at the 
dollar amount, whether, in fact, the dollar amount is 
sufficient and how well it's being spent.
    I'm sure you have to follow the book here, and perhaps 
would not suggest you need a lot more money. But you're 
basically endorsing the notion that the money we are spending 
now is being well spent?
    Dr. Feussner. Yes, sir.

            radioimmune detection and therapy collaboration

    Mr. Frelinghuysen. If you would, could you comment briefly 
on the whole radioimmune detection and radioimmune therapy as 
effective tools in the early detection and treatment? I'm sure 
you're familiar with those efforts, and I understand you're 
doing some collaborative work. Could you comment on that?
    Dr. Feussner. Yes. These represent potentially novel 
diagnostic strategies. The best diagnostic strategy available 
for prostate cancer at the moment is a PSA test.
    We are working two separate avenues of potential 
collaboration. First is with an organization in Jersey that has 
novel radiodiagnostic testing potentially available. We are 
working with that group. We have had discussions with the 
National Cancer Institute, but we're specifically working with 
the group in New Jersey to identify VA investigators such that 
we can plan either single site or, more likely, national mutli-
site trials with the group.
    The Chairman has also met with this group and has 
recommended some collaborators at Loma Linda and Cleveland, I 
believe. We have recommended some collaborators in East Orange 
and Philadelphia, and another investigator, who is a potential 
collaborator, is in St. Louis.
    On one side of the issue we are pursuing doing diagnostic 
pathologies, and on the other side we are pursuing leads, new 
technologies, that would be particularly useful for the 
diagnosis of prostate cancer. Because of our PIVOT trial, we 
might have the opportunity, although General Electric has not 
manufactured this technology yet, to investigate an emerging 
technology in the context of our PIVOT trial where some of the 
patients have the prostate gland excised surgically, so that we 
would be able to evaluate the technology while it is in the 
patient, while the prostate is in the patient and then evaluate 
the technology post-surgery.
    Mr. Frelinghuysen. So, in terms of the radio-immune 
detection and radio-immuno therapy, you are moving ahead on 
that and now that there is a California connection, I am sure 
it will be moving with a little more rapidity, is that correct?
    Dr. Feussner. I do not know the answer to the latter part 
of your question.
    Mr. Frelinghuysen. I am sure with the Chair's oversight, 
maybe we will move along here.
    Dr. Feussner. But there are two areas of potential common 
interest with the New Jersey group. One is prostate cancer, 
that is correct, the other is lung cancer and we have provided 
the group investigator contacts. And we have actually provided 
the group with contacts that are potential collaborators who 
actually might be willing to share successful grant 
applications. We felt conflicted in providing successful grant 
applications ourselves.
    But, yes, my impression is that we are moving forward 
positively and productively with these groups.
    Mr. Frelinghuysen. Well, thank you very much.

                           diabetes research

    And, lastly relative to diabetes, there was a diabetes 
initiative. Could somebody bring me up to date as to where that 
stands; whether there has been progress? Is that your 
bailiwick, as well?
    Secretary Brown. Dr. Feussner is doing such a great job 
here, I am just going to let him finish. [Laughter.]
    Dr. Feussner. Thank you. Yes. As a matter of fact, I think 
we are moving forward in the diabetes research with rather 
amazing success with the caveat that we have not achieved the 
Juvenile Diabetes Foundation goal in identifying the cure. You 
may have seen the report last summer from a VA cooperative 
study showing the successful use of implantable insulin pump 
technology in patients with Type II diabetes, a VA cooperative 
study that was done in collaboration with investigators at 
Johns Hopkins.
    Our hope is that as that technology becomes smaller, more 
amenable to human use that we will have quite novel therapy for 
diabetes.
    Specifically about what we are doing at the moment, we, in 
collaboration with the Juvenile Diabetes Foundation, recently 
funded three new diabetes centers of excellence in Nashville, 
Iowa City and San Diego. With an intensely competitive 
activity, we are recompeting those centers of excellence with 
the intention of funding three additional diabetes research 
centers, either later this year or early next fiscal year. All 
of those activities are ongoing with the Juvenile Diabetes 
Foundation.
    Finally, we are in the late stages of preparing or rolling 
out a request for application for our cooperative studies 
program that specifically deals with issues relevant to Type II 
diabetes. We convened an expert panel led by John Colwell from 
Charleston that included representatives from the National 
Institute, private sector groups, as well as VA investigators.
    The RFA that we will roll out, literally momentarily, will 
focus on application, prevention and intensive treatment in 
diabetes. I do not know what kind of response to expect from 
that RFA but given the prevalence of diabetes, the importance 
of it and the recent success with managing, at least with 
insulin dependent Type I diabetes, we are pretty optimistic.
    Mr. Frelinghuysen. Thank you for all the information.
    In your free time and for the record, would you be good 
enough to provide the Committee with a breakdown of research 
money by disease and statistics on incidents in the overall VA 
population?

[Pages 125 - 127--The official Committee record contains additional material here.]


    Dr. Feussner. We will do it.
    Mr. Frelinghuysen. Thank you.
    Dr. Feussner. You are welcome.
    Mr. Frelinghuysen. Thank you very much, Mr. Chairman.

                            research funding

    Mr. Lewis. Thank you very much, Mr. Frelinghuysen.
    You might as well stand up again, doctor, I would like to 
just follow through on some of those questions by my colleague.
    As has been discussed here, we have a number of questions 
regarding the level of research dollars, the number of dollars 
available, the reduced pattern of research dollars. I would 
guess that between now and the time we get through conference 
there will be some considerable examination and re-examination 
of all that, as the Congress considers its priorities versus 
the Administration's priorities.
    But having said that, there is a very unique opportunity 
from the Chair's perspective as it relates to the Department of 
Veterans Affairs' work. The population that we serve is 
relatively a controlled population where we can follow people 
over a considerable period of time.
    Where they are associated, in many cases around the 
country, with medical research universities there is a unique 
experimental opportunity--prostate cancer being reflective of 
that. At Loma Linda, there is a proton therapy that has shown 
great promise and coordinating with the Veterans hospital is 
logical as the world. That same hospital and others are doing 
pretty important break-through research on breast cancer where 
a proton therapy may apply and the control group, again, would 
logically provide a source that would allow us to measure 
effectively the impact and progress.
    I might mention that a good deal of discussion is taking 
place as dollars become tighter in the general budget about 
what is happening in terms of total volume of dollars and 
percentage of dollars in various categories of care. I might 
mention this carefully, for as a new member of this Committee 
some years ago I played a role in putting the first $200,000, I 
believe it was--that is correct--in research for an unknown 
problem area then, 1981 I believe, known as AIDS. And today, 
people are talking about AIDS research dollars dominating the 
whole scene. Certainly the volume is far greater than all of 
breast cancer, lung cancer, prostate cancer combined, and the 
dollar increases in the projected budget for 1998 are 
considerably larger.
    We are going to have to be examining and re-examining these 
questions very carefully, but I would emphasize again that it 
is really important for the Department of Veterans Affairs to 
consider the value of this control group that your constituency 
reflects. And where we can coordinate with excellent research 
being done in private and public universities, medical centers, 
I think all the better.
    Dr. Feussner. I would agree.
    Mr. Lewis. Thank you.

         reallocation of the board of veterans' appeals funding

    Last year the Board of Veterans' Appeals requested $37.7 
million and 527 FTE for 1997. This was an increase of $4.6 
million and 50 FTE above the 1996 levels and was to improve the 
timeliness of Board decisions. The Committee agreed with the 
requested increase because of the backlog of appeals.
    Now, the VA plans to reallocate approximately $1 million 
from BVA to other activities. The plan is to spend $714,000 for 
management and technical support in the information technology 
program and $250,000-$300,000 for overtime costs in the Office 
of General Counsel.
    Mr. Secretary, why are these other activities more 
important than further reducing the backlog of appeals?
    Secretary Brown. They are not more important, but I am 
going to ask Mark Catlett to respond.
    Mr. Lewis. I was kind of anxious to get to you, Mark.
    Mr. Catlett. Thank you, sir.
    As the Secretary said, it is not more important. It is a 
matter of managing the staffing across-the-board, across more 
than one year. We have, as you noted, an increase projected in 
1997 in the budget request that was appropriated.
    Fitting that with our 1998 request now, the Board will not 
reach that FTE level we had originally projected in 1997. So, 
there are funds that are available for these other purposes. 
And the two activities that we have designated are very 
important. The General Counsel requirement is an extension of 
that Board activity and the work they do representing the VA 
before the Court of Veterans Appeals.
    And, the second item deals with the information technology 
that we are trying to provide for VA. The Secretary spoke this 
morning about that future system that we need in order to 
provide data to veterans, and to our employees who provide it 
to our veterans in a much better way, a much faster way, and we 
can do our work faster.
    We are retaining the services of a contractor at the 
insistence of the Secretary to do a better job. I mean he 
frankly has said to us, to me specifically and to those of us 
who are involved with information technology, get some outside 
help to design that system and that is what this contract 
focuses on.
    Mr. Lewis. Same question, kind of in a different way and 
maybe Mr. Bauer will have something to say. Why did the VA 
state that it needed 527 FTE for the Board of Veterans' Appeals 
last year and now believes that 500 FTE is adequate?
    Mr. Catlett. Well, the point is that we have to manage 
across the fiscal years. We are in a range there. We have been 
increasing them for some time. And now with our 1998 budget, 
fitting in with our total requirements we are proposing to 
level off the Board's FTE.
    When we reached final decisions on the 1998 President's 
budget, we were at a certain level for 1997. And there was no 
way we could or can hire up and live within that 1997 estimate. 
We do not want to hire up and then have to let people go in 
1997.
    Mr. Lewis. Just to round this out, we will place in the 
record at this point a table from the VA on the workload of the 
Board of Veterans' Appeals and then if we have additional 
questions, we will ask them for the record.
    [The information follows:]

[Page 130--The official Committee record contains additional material here.]


                     reduction in number of appeals

    Mr. Lewis. Mr. Secretary, last year the VA estimated that 
41,200 appeals would be decided by the Board in 1997. The 1998 
justifications indicate that the Board will only make decisions 
on 38,000 appeals in 1997. Is the reduction in the number of 
appeals to be decided in 1997 a result of your decision not to 
increase the FTE level above 500?
    If these other two activities are really important have you 
looked at other areas for possible off-sets?
    Secretary Brown. I am going to have Roger answer that.
    Mr. Lewis. Identify yourself for the record, Roger.
    Mr. Bauer. Yes, Roger Bauer, Acting Chairman of the Board 
of Veterans' Appeals. Basically what has happened is that the 
Board has been very successful in its efforts to increase its 
productivity. In addition, there have been a slightly lesser 
number of appeals that have come forward which has reduced the 
number of cases that we will have to decide. This has improved 
our response time.
    And through that, with the reduction that we are having, we 
will still be able to produce more decisions than there will be 
incoming appeals. Now, this does not mean that we will take 
care of our backlog completely, but we will be eating into it.
    Mr. Lewis. Thank you.

                           eligibility reform

    Mr. Secretary, the Veterans Health Care Eligibility Reform 
Act of 1996 established two categories of veterans who are 
eligible for care: the shalls and the mays.
    The VA will furnish any needed hospital or outpatient care 
to the shall group of veterans but only to the extent and in 
the amount that Congress appropriates funds to provide the 
care. What happens in the event that the number of veterans in 
the shall category seeking medical care from the VA exceeds the 
amount of resources available? How would the VA propose to 
handle this type of situation?
    Secretary Brown. Dr. Kizer and I had a long conversation 
about that yesterday, I am going to ask him to respond to it.
    Mr. Lewis. Dr. Kizer.
    Dr. Kizer. We have had a number of conversations about this 
and how that process, or that unlikely potentiality, might be 
addressed. We think it is unlikely with the rolling enrollment 
scheme that is proposed.
    In the unlikely event that it did occur, we would first 
look at all those other areas that one might achieve economies, 
whether it is deferral of equipment purchases or other sorts of 
things by which some savings could be achieved temporarily to 
continue the patient care. In a further unlikely event, that 
the situation required more savings, then we would start in 
general terms at the lowest priority, or at the bottom of the 
priority scheme.
    As you know, there is a seven-tier priority scheme. We 
would start with those having the lowest priority and work 
upwards, if that actually did come to pass. And as far as the 
specific process that that would occur, that is something that 
we are continuing to work through to make sure that it is based 
on a sound ethical and operational basis.

                           patient enrollment

    Mr. Lewis. That law requires the VA to establish and 
operate a system of annual patient enrollments. What does 
enrollment really mean? It is not a contractual agreement, is 
it?
    Dr. Kizer. Let me answer as a lay person, as opposed to a 
lawyer who I am sure would probably give a much more erudite 
explanation. For all intents and purposes, when one is enrolled 
in care that means that the provider, VA in this case, will 
provide care within the scope of services that it provides. In 
VA, that is a very broad benefit package.
    And, so, when the enrollment actually comes about in 
October 1998 as mandated by the law, we must have an enrollment 
system in place. It means that those persons who are not 
enrolled would not be able to get their care at VA, with some 
exceptions.
    We expect to put in place a pilot enrollment program 
beginning in October of this year to give us some actual 
experiential base in doing this, before it becomes mandatory. 
Also, we are trying to design the enrollment process so that 
users not beexcluded from it.
    For example, recognizing that active duty personnel come 
off active duty throughout the year so having a time limited 
enrollment period--as for example, your private insurance plan 
does for a 30 or 60 day period at a given time in the year--
really would not be conducive to the sort of patient population 
that we care for where there are new people being added to it 
throughout the year.
    Again, that is why we are looking at what is called a 
rolling enrollment that would allow people to enroll throughout 
the year, and their beneficiary period would then extend for a 
year subsequent to their actual enrollment date.
    Mr. Lewis. Just to make sure that I understand this. What 
would happen to a veteran seeking health care who has not 
enrolled after Fiscal Year 1998? Would those in the shall 
category who are not automatically enrolled not receive 
treatment?
    Dr. Kizer. Well, at this point it would be our intention 
that the rolling enrollment system would need to accommodate 
those veterans. Any service disabled veteran would be enrolled 
when he/she came for care. Furthermore, the law states that any 
veteran will continue to be treated for a service connected 
condition without having to enroll and no service disabled 
veteran with a disability rated 50 percent or greater is 
required to enroll although we would like them to. We are 
organizing this as a departure from half a century of 
experience with this system. Not everyone may get the word 
despite the outreach efforts that will be undertaken. But we 
certainly want to accommodate anyone in that shall category 
even though they may not have been be enrolled automatically. 
We are trying to design a system that will accommodate those 
eventualities as we shift the culture and do other things.
    Mr. Lewis. Okay.
    Secretary Brown. I think that is absolutely true. I think 
the questions you ask are very, very important because we want 
to make sure that the system is there for the individuals it 
was designed to protect. And number one on that list, of 
course, are our service-connected veterans. So, we have to make 
sure that they can get into the system any time that they need 
to and that they are not locked out because of a procedural 
barrier.

               30 percent goal to lower per-patient cost

    Mr. Lewis. One of the new initiatives is the so-called, 30, 
20, 10 goal. That goal assumes the enactment of both the third-
party collection and Medicare subvention legislation. This plan 
is to reduce the per-patient cost for health care by 30 percent 
by 2002, increase the number of veterans treated by 20 percent 
and fund 10 percent of the VA health care budget from non-
appropriated funds.
    That is a laudable but a very ambitious goal. What does 30 
percent lower unit costs per-patient mean and will the cost of 
treating a patient drop by 30 percent or is this more of a 
statistical computation where the average cost per patient 
decreases by 30 percent
    Dr. Kizer. The target of 30 percent, as we were discussing 
earlier today, is something that is very consistent with what 
is occurring in other health care plans as new modalities of 
treatment are put in place, things like disease management, and 
more intensive case management, providing care in out-patient 
settings as opposed to inpatient, ambulatory surgery, and many 
of the things we have talked about before.
    So, we would expect that the majority of that 30 percent 
per patient reduction would come from actual efficiencies and 
providing care in a different setting. We are, though, as any 
health care provider, locked into a certain amount of fixed 
costs. If you are maintaining a facility and staffing it 
appropriately, whether you take care of 10 patients or 40 
patients, your fixed costs are going to be the same.
    And, so, we expect that if we could get to better utilize 
some of the excess capacity that exists in the system and 
generate some additional revenue, i.e., the 10 percent part of 
the 30-20-10 strategy then we will be able to amortize the cost 
over a larger base.
    The bulk of the savings or the reduction in per patient 
cost would actually come from efficiencies and doing a better 
job of providing more efficient care, but there also would be 
some spreading of the base if we increase the number of 
patients being taken care of.

           anticipated 20 percent goal to treat more veterans

    Mr. Lewis. I would like to finish this category of 
questioning and then move on to my colleague.
    Will the anticipated 20 percent expansion of patients by 
2002 be mainly in the basic care category?
    Dr. Kizer. We have targeted that and would hope to achieve 
the 20 percent by increasing the number of Category A veterans, 
i.e., those who are most in need of care, throughout the 
system.
    I think given that we are looking at a five-year target and 
there are several things on the horizon, it would probably not 
be wise to lock us into saying that the 20 percent would 
exclusively be Category A. There may well be a portion of that 
20 percent that could be some other patients that are currently 
not able to get their care in the system.

                        achieving 30-20-10 goals

    Mr. Lewis. Is the 30, 20, 10 goal achievable without the 
enactment of third-party and Medicare legislation?
    Dr. Kizer. Well, by definition, the 10 percent could not be 
achieved because currently all of our funding or, for all 
intents and purposes, 100 percent of our funding comes from an 
appropriation. And if statutory authority is not obtained that 
would allow us to develop these third-party revenue streams 
then the 10 percent would not be possible and that would impact 
other parts of the goal as well.
    Mr. Lewis. How many unique patients do you estimate would 
receive medical care from the VA in 1998 if the third-party 
collection legislation is not enacted.
    Dr. Kizer. At this point, I would defer. There are so many 
things going on in the system right now that whatever number I 
gave you would be a best guess and not something that I would 
have a strong evidentiary base for giving you.
    If it is not enacted and we have to take not only an 
inflation-driven reduction but also an actual reduction in 
funding, then it is hard to imagine that would not 
significantly impair our ability to take care of patients and 
would cause a significant reduction in the number of patients 
that could be cared for.
    Mr. Lewis. Asking you what you think, would you estimate?
    Secretary Brown. I will.
    Mr. Lewis. Okay.
    Secretary Brown. If third-party collection legislation is 
not enacted, 2.832 million unique patients would receive care.
    Mr. Lewis. Would that estimate be higher than the 
$2,937,000 estimated for 1997?
    Secretary Brown. No, the estimate is lower than the 1997 
estimate by 105,000 unique patients.
    Mr. Lewis. I think that is right.
    Secretary Brown. Yes, that is correct.
                     future unique patients and fte

    Mr. Lewis. Provide for the record a table indicating the 
number of unique patients to be treated each year from 1998 
through 2002, if you would? Assuming that neither of the 
legislative proposals are enacted.
    Secretary Brown. How about if both are?
    Mr. Lewis. You can expand whatever you put in the record, I 
would appreciate it. Also provide information for average 
employment, if you would, for the record.
    [The information follows:]

[Pages 136 - 149--The official Committee record contains additional material here.]


                    funding for michigan under vera

    Mr. Lewis. Mr. Knollenberg.
    Mr. Knollenberg. Mr. Chairman, thank you very much.
    Mr. Secretary, I want to thank you for your response to my 
question this morning. Your letter is dated April 23, that is 
today, so, I appreciate it. [Laughter.]
    Mr. Knollenberg. Let me make sure I understand the----
    Secretary Brown. Well, when you speak, I move. [Laughter.]
    Mr. Knollenberg [continuing]. Well, let me make sure I 
understand your response. I have to understand what it is you 
said here. Allow me to try to phrase this in a question that 
may be answered in the body of this. But in our letter to you 
and I think you have got a copy of it? If not, we can supply 
one.
    Again, it was that shift from the northeast and the midwest 
to the south and maybe southwest, I am not sure, but at least 
out of the northeast and out of the north. In the fourth 
paragraph of that letter we state that we fear that cutting $16 
million from VISNs, 11 and 12 in Michigan as it turns out, that 
serve Michigan veterans, would be highly detrimental.
    We request that the VA detail us, provide us with detailed 
information on the means by which you will assure that veterans 
in Michigan will not experience a decline in the quality of 
care in the face of the new allocation.
    Now, I believe you are answering that in this paragraph. 
You are saying that--I think Dr. Kizer might have touched on 
this, too, and it is in conjunction with some of what we have 
heard already--that the VA has developed a new system for 
allocating funds to the Veterans Integrated Service Network 
that will eliminate funding inequities.
    Now, is one of those funding inequities the concerns that 
we have with respect to our concern about Michigan and 
Michigan's veteran population? Is that some crafting of an 
arrangement to allow for or provide the quality and level of 
services that are needed?
    Secretary Brown. Funding inequities from our perspective 
are when you spend more money than the average for the same 
services without any reasonable justification for it. That is a 
funding inequity and that is what this model is designed to do. 
I think I gave an example.
    That if the average cost of providing for a veteran across 
the country is $2,500 and you have a facility or a VISN where 
it is $6,500 after we make the adjustments--like high labor 
costs, research, special modalities of care--when you pull all 
of those things out and it still deviates by 200-or-300 percent 
that is a funding inequity.
    And, so, what we wanted to do is since we cannot justify 
why you are getting four or five times what the normal facility 
would receive, we are forcing those facilities to come in line 
and we are taking those savings and then we are putting them 
where more veterans can benefit from them.
    Mr. Knollenberg. If I understand what you are saying then 
the alarming part of the letter that we sent to you is this $16 
million that would be cut from the total. You are saying that 
if you look at it in just that sphere alone or that arena alone 
that it does not tell the whole story.
    There is still a way to get quality services to the 
individual veterans without worrying about that $16 million 
being depleted from the Michigan targeting, is that what you 
are saying? Are we still going to get those kinds of services 
that we did before?

             shifting services from inpatient to outpatient

    Dr. Kizer. They will still get the services. They may, 
consistent with changes in how health care is being provided 
everywhere, get them in a different way. And let me just give 
you a very specific example based on the VA's experience in 
Fiscal Year 1996--with a little preface.
    In the community, or in general in health care today, about 
65 percent, and in some cases more, of surgery is done on an 
outpatient basis. At the beginning of Fiscal Year 1996 only 
about 35 percent of the surgery in the VA was being done on an 
outpatient basis. We set a target to increase that to 50 
percent.
    At the end of the year we were up to 52 percent of 
surgeries being done on an outpatient basis, for a 33 percent 
increase over that 12-month period.
    It is obviously far cheaper to perform those types of 
surgeries that are amenable to being done on an outpatient 
basis in an outpatient setting than inpatient. Now, during that 
same period of time if you compared the statistics for the 
numbers of surgeries that were being done in the first quarter 
versus the fourth quarter of the year when more was being done 
on an outpatient basis, we saw that we had increased our 
productivity by 10 percent. So, in the first quarter of the 
year some 81,000 surgeries were done in the VA, in the fourth 
quarter over 89,000 were being done.
    Also, during that time period, not inconsistent with what 
is being seen elsewhere, the surgical-related complications and 
mortality related to surgery had dropped by 12 percent. So, not 
only had a significant savings been achieved because it was 
being done on an outpatient basis, but more people were getting 
their surgery and because we were able to accommodate more 
there were shorter waits and the complications had decreased.
    So, quality of care had improved and efficiency had 
improved and access had improved.
    Mr. Knollenberg. So, if I were to like summarize, I could 
say to my people that quality of care has not been degraded or 
lessened?
    Dr. Kizer. It has actually been improved.

                  d. j. jacobetti state veterans' home

    Mr. Knollenberg. That is something we are going to check 
very closely. The other thing that in regard to my first 
question which had to do with a letter that I sent to you, and 
that has to do with the Jacobetti Home, you were going to get 
back to me.
    Secretary Brown. I have the answer for you.
    Mr. Knollenberg. You do?
    Secretary Brown. You sent the letter in October and you did 
not get an answer until January?
    Mr. Knollenberg. Yes.
    Secretary Brown. You raised a very--I do not know if I want 
to call it a legal question but--a very thought-provoking 
question on whether or not there was, indeed, an emergency, a 
life-threatening situation or maintenance.
    And, so, there was a lot of discussion between many 
elements within the VA on exactly what it was and, obviously, 
they ultimately decided that it was maintenance as opposed to 
an emergency situation why they did not go with it. But they 
tried very hard to try to get a favorable answer to you. So, it 
involved a lot of back and forth communications with various 
folks and the elements that developed the letter.
    Mr. Knollenberg. Does that compromise then, Mr. Secretary, 
the reimbursement of the matching funds from the Feds?
    Secretary Brown. I am sorry?
    Mr. Knollenberg. Does it compromise the State of Michigan 
and their getting the matching funds? If you are saying it was 
a maintenance problem and it was not a quality of life problem?
    Secretary Brown. That is right. It is a lower priority now, 
that is exactly right.
    Mr. Knollenberg. That I have to communicate to my people 
because I was not aware that you had made that determination. 
When was that determination made?
    Secretary Brown. That was in the letter, was it not?
    Mr. Knollenberg. Well, the letter you sent me?
    Secretary Brown. Yes.
    Mr. Knollenberg. You said in the letter that it was Fiscal 
Year 2000 or later that they would, we might anticipate a 
reimbursement.
    Secretary Brown. Yes. But that is based on that it would 
have been a maintenance problem and that would have put you in 
on the priority list.
    Mr. Knollenberg. But it is based upon what?
    Secretary Brown. Based on a conclusion that it was a 
maintenance problem. See, if it had been an emergency 
situation, life threatening, then it would have gone to the top 
of the list.
    Mr. Knollenberg. All right, so, this letter says, 
maintenance, is what it is saying.
    Secretary Brown. Yes. That is right and that means that it 
went down to the bottom of the list.
    Mr. Knollenberg. Now, we do have the report language, 
nonetheless, in that Bill still. So, that will be abided by 
continuously? We can discuss that with the Chairman.
    Let me get a couple of more quick questions, if I can, if 
that is okay, Mr. Chairman?
    Mr. Lewis. You have got the time.

                            Pro-Bono Program

    Mr. Knollenberg. I think the Chairman broke into this and 
if I missed part of it then I apologize, but it seems to me 
thinking back to 1996 that I raised the question about the 
appeals situation, the backlog and that kind of thing.
    Mr. Lewis. I did.
    Mr. Knollenberg. I know you raised that issue but this is 
my question. We were told last year that there were going to be 
41,200 appeals decided in the year 1997. Apparently there were 
38, is that right? And I think a gentleman from the audience 
spoke that the incoming appeals are down and they are getting 
to them and they are being able to beat them back because the 
in-flow is not as much as the cases closed.
    Is there not a pro-bono program that was tried? Is that 
still in place and did that help you get to the bottom of some 
of these?
    Secretary Brown. It does not help us. Primarily the pro-
bono is associated with the Court of Veterans Appeals. It does 
not help us. That has nothing do with providing representation 
to the Board. The numbers that we have here are the Court or 
even if you have pro-bono representation before the Board it, 
would get us the case but these numbers reflect how fast we 
process the case.
    Mr. Knollenberg. Why did you not hit your goal? What was 
the reason for that?
    Secretary Brown. Primarily because the numbers, there was 
less of a lowering in the number of appeals that we had 
expected. Historically, we have always expected and received 
somewhere around 40,000, is that right?
    Mr. Bauer. Yes. I might say at the current rate we probably 
will meet that goal. This was a projection made earlier, nine 
months ago, based upon the information at that time. We are 
currently because of the efficiencies we have introduced into 
the system doing better. I expect we will hit 41,000 decisions.
    Mr. Knollenberg. Thank you.

                           veteran population

    And a final question and this is really going back to a 
question raised this morning about those categories of people, 
the First World War, the World War II, the Vietnam War, et 
cetera. I happen to have been in the service between the Korean 
conflict and the Vietnam War and I did ask a question that I 
know you are going to get the information on.
    What I am wondering because we do have in the latter 30-
some odd years, we have individuals who served in the military 
who might have been involved in both the Vietnam War and in the 
Persian Gulf War, is there any double counting that goes on 
there? How do you categorize and count these people? Are we 
talking about, as it says here, 1.6 million people in the 
Persian Gulf War and we are talking about 8.2 in the Vietnam 
War; is there any overlap or double counting that could occur?
    Secretary Brown. I would imagine, yes, there is some 
overlapping. But they would overlap in terms of who is a 
Vietnam Veteran? A Vietnam Veteran could actually be a World 
War II veteran, Korea and Vietnam.
    Mr. Knollenberg. He could?
    Secretary Brown. He could be. So, you always have that 
overlapping particularly with the folks who spend 30 years in 
the military. But that does not bother us too much because 
there is no overlapping in the services that we provide.
    Mr. Knollenberg. But do you service three people in that 
instance or do you service one?
    Secretary Brown. One. With us it is one body. We call them 
unique, Social Security Numbers or in our case a claim number 
and so forth.
    Mr. Knollenberg. That concludes my questions.
    Thank you.
    Mr. Lewis. Thank you, Mr. Knollenberg.
    Mr. Frelinghuysen.

                 veterans equitable resource allocation

    Mr. Frelinghuysen. I just want to get back to the whole 
issue of the shifting of medical funds between regions.
    It seems to me that when you talk about the northeast, you 
are talking about promoting more efficiencies and, thereby, 
realizing considerable amounts of savings and it has yet to be 
determined exactly what you have been able to wring out of the 
system, although there are certain amounts that appear to be 
identified.
    I do not get any feeling that these types of efficiencies 
are following other VA medical facilities around the country. I 
mean is it just that the average unit costs are so high in the 
northeast and that there has been a tradition of inefficiency? 
I mean what reassurances can you give me that the money that is 
shifting to Florida and other States that the facilities there 
are the model of efficiency?
    I mean with all due respect, when you link efficiency and 
Government it is somewhat of an oxymoron, but I am just 
wondering.
    Secretary Brown. We can provide you with a formula that we 
applied in each case. First of all, we did not identifyeach 
hospital by name to determine whether they would be losers or gainers. 
The numbers actually did that for us.
    So, what we could do is to supply you with the actual 
methodology that we are using and you could see exactly why we 
chose those hospitals because they were way, way out of line. 
We had to give them an incentive in order to be much more 
efficient and at the same time we took the savings and provided 
them to those hospitals that were extremely efficient and 
providing more services.
    Dr. Kizer. Let me add to that some.
    Mr. Frelinghuysen. I just wondered because in that major 
article in January in the Washington Post which sort of 
highlighted for the first time, certainly in the new year, the 
whole funding shift out of the northeast into the south and the 
west. I am not saying that you necessarily agree with it.
    I quote, ``Regions losing money will not be able to cut 
services to veterans but will be expected to make up the short-
fall by becoming more efficient.''
    Then it goes on to say VA Under Secretary Dr. Kenneth 
Kizer, says that, ``he is confident that savings could be 
achieved, pointing that the hospitals already have saved $30 
million in two years by consolidating operations.''
    All I want is the assurances that if this money is going 
south, so to speak, that those facilities will be under the 
same degree of scrutiny of their operations, as we are 
currently feeling in terms of our consolidations?
    Mr. Brown. Absolutely.
    Dr. Kizer. There is no inequity as far as the pressure 
being put upon networks and facilities throughout the system, 
throughout the country, to achieve more efficiency wherever 
possible.
    The reality that exists, and certainly existed prior to 
implementation of VERA though, is that some parts of the 
country were markedly less efficient in providing care. For 
example, in New York City the average bed-days of care for a 
patient might be 3,400, but in southern California it is 1,700 
for patients having the same condition, and the same severity 
of illness.
    Those providers and those facilities in southern California 
have been able to provide equally good care, equal access, 
equal quality of care, but have already achieved substantial 
efficiencies compared to facilities located in some other 
areas, for example, in the eastern part of the country.
    But the answer to your basic question is that there is a 
consistent pressure for facilities and for networks throughout 
the country to become more efficient. And one other thing I 
should add is the VERA system is designed only to achieve the 
average performance of the overall system. For example, in the 
case of the New England or upper midwest networks they are 
being asked only to achieve the performance of the average 
system. That means that there are still a lot of other 
facilities and networks that are providing care of equal 
quality and equal access much more efficiently. They are only 
being asked to achieve an average, which other facilities have 
already surpassed.
    Mr. Frelinghuysen. I think that is an interesting 
distinction.
    Secretary Brown. Did you receive our pamphlet?
    Mr. Frelinghuysen. We may have that book. Yes, we have 
that.
    Secretary Brown. The questions that you raise are good 
questions and I want to make sure you get----
    Mr. Frelinghuysen. Well, I hope you will revisit that 
issue. I understand and I hope this is accurate. You mean there 
are a number of States, Dr. Kizer mentioned it, but there are a 
number of States that provide State money for veterans.
    I understand the State of Texas does not have any State 
veterans facilities. And if, in fact, we are going to see a 
shift out of the northeast it would be nice to know that some 
States are doing what at least the States I am familiar with in 
the northeast, what their State dollars have traditionally been 
doing for veterans. I do think that is a legitimate factor. It 
is basically putting your money where your mouth is. I am not 
sure all States do it. I would be interested in knowing what 
statistics exist relative to State support, State budget 
support that works in collaboration or partnership with Federal 
dollars.
    These are matching programs and it is important to point 
out that those States that don't put money in, they do not get 
any Federal dollars to match that in either case, but most 
States do, and there is some matching that goes on with that.
    I just want to make one other point that I think is 
important for the committee to understand, and it may be 
something that is already understood, and it is that while we 
believe that the VERA methodology is sound, it has been looked 
at by a variety of people and represents, I think, a very good 
approach to this at this time, we do not view it as something 
that is written or carved in granite or perhaps even sandstone; 
that as new information becomes available, as the situation 
changes, if someone can point out a better way of doing it, we 
are certainly open to modifying and relooking at it.
    We think it is a good product, but if there are ways of 
making it better, we are certainly open to looking at it and 
making it better.
    Mr. Frelinghuysen. And we need to get that message to the 
rank-and-file that are veterans. I know you have your so-called 
stakeholders who work and are actively involved in the 
different VA hospitals, but there are a lot of other veterans 
out there that are totally oblivious to this health care 
revolution that has been occurring in the VA system, if, 
indeed, it is a revolution.

                    federal acquisition streamlining

    I would like to shift gears, if I could, Mr. Chairman.
    As you know, Mr. Secretary, the Federal Acquisition 
Streamlining Act, enacted in 1994, authorizes the General 
Services Administration to prevent State and local government 
entities to purchase from Federal supply schedules.
    There is a moratorium, as I understand it, on the 
implementation of this policy pending a complete analysis by 
the GAO, but that work is nearing, from what I can gather, its 
completion.
    Mr. Secretary, you wrote the GSA in June of 1995 that if 
this policy is implemented for the pharmaceutical schedule, the 
result would be ``dramatically increased Federal supply 
schedule prices for these products or reduced FSS participation 
by pharmaceutical vendors.'' Is that still the VA's position?
    Secretary Brown. Yes.
    Mr. Frelinghuysen. Your letter to the GSA noted the VA 
estimated that the adverse impact to the Veterans Health 
Administration would be approximately $153 million annually. Is 
there an updated estimate?
    Secretary Brown. We would have to check and see if that 
number has changed. We think it still holds, but we will check 
and see.

                  Pharmaceutical Purchasing Under FASA

    VA's position has not changed regarding pharmaceuticals and 
Federal Acquisition Streamlining Act (FASA). If VA's position 
is not supported, then the following may occur. First, all 
pharmaceutical companies would eliminate favorable Federal 
Supply Schedule (FSS) pricing where they could legally do so. 
Second, all covered drugs would be sold at the mandated Federal 
Ceiling Price, none lower. Third, pharmaceuticals not covered 
under Public Law 102-585 were dropped from FSS, VA might be 
forced to purchase these products at open market prices. One 
estimate of the expected dollar impact if VA's position is not 
supported is an annual increase in drug expenditures from $100 
to $200 million. VA has performed little contingency planning 
for this presumed change due to the fact that, to date, all 
indications have been that pharmaceuticals will be excluded 
from FASA implementation.

    Mr. Frelinghuysen. All right. Although the public hospital 
advocates believe that the opening for FSS for pharmaceuticals 
would be beneficial for them, the VA disagreed in your June 
letter to the GSA. Given the negative effects on the VA, isn't 
it likely that this expansion of the FSS for pharmaceuticals 
would do more harm than good?
    Secretary Brown. I would think so, but obviously, when we 
look at it, we look at it from our standpoint on how it affects 
our ability to purchase pharmaceuticals for the folks that we 
serve.
    Mr. Frelinghuysen. Well, you are a huge consumer----
    Secretary Brown. Absolutely.
    Mr. Frelinghuysen [continuing]. Of not only medical 
devices, but pharmaceuticals. So could you give me a little 
more of a definitive answer?
    Secretary Brown. Yes.
    Mr. Frelinghuysen. You are saying yes.
    Has the VA taken into account in the fiscal year 1998 
budget request these proposed changes to the FSS budget?
    Mr. Catlett. If I understand, the answer is no to that. We 
are not assuming that the pharmaceutical schedule would be open 
to State and local entities. So, no, we have not assumed that. 
We assumed that the moratorium or exemption----
    Mr. Frelinghuysen. But is that the direction?
    Mr. Catlett. Well, that is what we support. We do not have 
the final call on that, but that is the VA's recommendation to 
GSA who has to make this decision ultimately that the 
pharmaceutical schedule might be open to others for the pricing 
that we negotiate.
    Mr. Frelinghuysen. Well, are you going one way and the 
administration going in the other, or are you in lock step with 
the administration, OMB?
    Mr. Catlett. I will have to get to OMB and GSA to get you 
that answer. I am not sure of their position at this point. I 
do not know of any changes. I do not expect any changes.
    Mr. Frelinghuysen. The reason I have this line of question 
is because I sort of get word that perhaps you are going in one 
direction and OMB is going in another. Are you both going in 
the same direction?
    Dr. Kizer. As far as we know, there has been no change in 
position, and so there would be no change in direction.
    Mr. Frelinghuysen. All right. Thank you, Mr. Chairman.
    Mr. Lewis. Thank you, Mr. Frelinghuysen.

                         medical care staffing

    Mr. Secretary, last year, the medical care request 
estimated staffing would total 191,000 in 1997. This year's 
budget indicates that medical care staffing in 1997 will be 
189,000. What caused medical care staffing to decrease 2,000 
below the level estimated last year?
    Secretary Brown. Dr. Kizer.
    Dr. Kizer. We are trying to do things better and more 
efficiently, and there is less money to go around. So there are 
fewer staff.
    Mr. Lewis. The appropriation was not reduced below the 
level requested. In fact, there was a small increase.
    All right.
    Mr. Catlett. Could I reply?
    Mr. Lewis. If you want to add to that, sure.
    Mr. Catlett. Excuse me, Mr. Chairman. I would just add that 
the buyout authority which came available this year, which we 
were unaware of when we presented the 1997 budget, was 
something that the VHA used earlier this year.
    Mr. Lewis. Okay. According to the information from the VA, 
the medical care staffing is running about 185,000, and it has 
been at approximately that level since the use of the buyout 
authority at the end of calendar year 1996. The current 
employment level is 4,000 below the revised 1997 estimate and 
more than 2,000 below the level assumed in 1998 medical care 
requests.
    Does the VA intend to raise the 1997 medical care staffing 
level to at least the 1998 requested level? If not, would you 
explain that?
    Dr. Kizer. At this point, the answer would be no. We expect 
to continue to achieve efficiencies wherever we can, and we do 
expect to see some continued drop in our staffing level over 
time.
    Mr. Lewis. Does a reduction in medical care staffing mean 
that fewer veterans will receive health care from the VA?
    Dr. Kizer. If it can be done in an orderly, logical and 
thoughtful way, it should not, depending on what sorts of 
numbers and parameters you are putting around that.

                            unique patients

    Mr. Lewis. Considering the reduction of employment from the 
level estimated in 1987, does the VA believe that it will still 
provide health care to 2,937,000 unique patients in 1997? If 
you can answer yes, just answer yes.
    Secretary Brown. You said 2 million?
    Mr. Lewis. 2,937,000.
    Secretary Brown. Yes.
    Mr. Lewis. Will there be any savings in salary costs in 
1997 resulting from this decreased employment level?
    Secretary Brown. Yes. We like to call them efficiencies.
    Mr. Lewis. If so, how much, and what do you plan to do with 
the savings?
    Secretary Brown. Well, what we normally do with the savings 
is that--this whole approach, as you mentioned, if you look at 
what is happening here, our FTE--our personnel staffing levels 
are going down. What we are trying to do is not to allow that 
to affect a number of veterans that we plan on treating. For 
instance, as shown in our 1998 budget, we like to treat 3.1 
million. I mean, that is up from 1997.
    The savings that we are capturing are being used to do 
basically two things; number one, to provide better care. With 
eligibility reform, we are now providing a comprehensive health 
care package. We are providing primary care to our veterans. 
That costs more. So we are using these savings to do that.
    We want to also broaden access to the care. We have already 
mentioned the new community-based clinics that we are opening 
up all across the country. So we are using those savings to 
continue to provide better care to more people, even in spite 
of the fact that we are going to have less dollars and less 
FTEs to support the program.
    Dr. Kizer. Let me just add one thing there. I think there 
is an important dynamic to understand here, and sometimes it 
makes it confusing from a pure budgetary point of view.
    As we provide care in different venues, i.e., more 
outpatient care than inpatient care, there are direct 
implications on staffing. For example, you need fewer 
staffoften to provide care in an outpatient setting than an inpatient 
setting, but on the other hand, you will see increases in other parts 
of your budget. For example, pharmaceutical costs will almost certainly 
go up as you do more in that area. What we really have to focus on is 
the global or total cost of providing care and try to manage that total 
cost as opposed to just one component of the cost.
    It would not be at all surprising, as I say, to see 
expenditures in some areas of care go up. Home care 
expenditures, as we do more, is going to go up, even though 
aggregate costs may go down. So the total amount is what we 
have to focus on, being mindful of the component costs as well.
    Mr. Lewis. The total cost, total number served.
    Dr. Kizer. Right.

                           1997 buyout costs

    Mr. Lewis. What has been the cost of the buyouts in fiscal 
year 1997?
    Secretary Brown. We will get that for you, Mr. Chairman, 
the total cost of the buyout for 1997.
    Mr. Lewis. Provide it for the record, then.
    Secretary Brown. We will provide it for the record.
    [The information follows:]

                           1997 Buyout Costs

    The cost of buyouts under VA's 1997 buyout authority is 
$91,295,263.

    Mr. Lewis. What was the cost of buyouts in fiscal year 
1996? Do we know that?
    Secretary Brown. We will provide it for the record.
    Mr. Lewis. All right.
    [The information follows:]

                           1996 Buyout Costs

    VA did not have authority to offer buyouts during 1996. 
However, the cost of buyouts authorized in 1994 and 1995 was 
$58,804,449.

                          vha buyout strategy

    Mr. Lewis. Dr. Kizer, how far have you advanced towards the 
goal of getting the right people with the right skills in the 
right places? That was what you were attempting to achieve 
through the use of buyouts, wasn't it?
    Dr. Kizer. I don't know quite how you answer that from a 
numerical or other point of view. I think we are making 
progress, and we are making changes. We are moving in the right 
direction.
    Have we gotten there? No. There are still other changes 
that need to be made. We still need to continue in the 
direction that we are going, but I think very substantive 
progress has been made.
    Mr. Lewis. We do need to know for the record a little more 
than that sum evaluation, compare 1996 to 1997, where we are 
going. It will help us as we look forward as well.
    Dr. Kizer. I would be happy to.
    [The information follows:]

[Pages 160 - 161--The official Committee record contains additional material here.]


                        medical care employment

    Mr. Lewis. The table on pages 1 through 5 of the 
justification indicates that medical care employment in 1998 
will be 187,317, a decrease of 1,683 below the 1997 level.
    On the apples-to-apples basis, is that the real decrease in 
employment proposed in 1998?
    Mr. Catlett. Mr. Chairman, no, to your question. There are 
2,000 people in the MCCR that are identified in that 187,000. 
Our proposal, which would bring those resources in, would bring 
the staffing in as well. So the apple-to-apple between 1997 and 
1998 for the folks called medical care would be about a 4,000 
drop because 2,000 of that 187,000 are the MCCR staff that we 
are proposing to become a part of the medical care account when 
the receipts become part of the funds that we use to pay for 
care.
    Mr. Lewis. Shouldn't the 2,295 FTE devoted to medical care 
cost--shouldn't those 2,295, the right to the recovery efforts 
in 1997, be included in that?
    Mr. Catlett. Yes, sir. They are in the 187,000 that we had. 
Yes.
    Mr. Lewis. Correct. That would make the decrease 3,978.
    Mr. Catlett. Yes, sir.
    Mr. Lewis. If one were to consider the 2,000 FTE reductions 
the VA unilaterally made in the 1997 program, the total would 
be nearly 6,000?
    Mr. Catlett. Yes.

                       outpatient visits in 1997

    Mr. Lewis. The number of medical outpatient visits in 1997 
is estimated to decrease by approximately 1 million visits, 
from 32 million estimated last year to the current estimate of 
31 million.
    According to the footnote on page 241, you are using a 
revised method of accounting, but the original 1997 budget 
estimate has been adjusted to account for the change. Why are 
you estimating that the number of outpatient visits in 1997 
will decrease by 1 million below last year's estimate?
    Secretary Brown. That is news to me.
    Can you tell us why? Can you explain that?
    Mr. Klein. I think so.
    Mr. Lewis. Mr. Klein, would you identify yourself for the 
record?
    Mr. Klein. Art Klein from VHA Budget.
    In last year's budget, we included an estimate for some 
community based outpatient visits. Unfortunately, our 
accounting system hasn't caught up with our ability to count 
for these visits. So, at least for now, we want the budget to 
be consistent with our accounting, and in the future we will 
add these visits to the budget when the system picks them up.
    Dr. Kizer. It is more of an accounting problem than a 
change in the amount of care that is being provided.
    Mr. Lewis. I have a number of other questions that relate 
to outpatient numbers, and I think I will have you expedite 
this process, respond to those for the record as well. I want 
to look at them, but in the meantime, if you could do that for 
the record.

[Page 163--The official Committee record contains additional material here.]


    And in the meantime, let me yield to Mr. Walsh, my 
colleague from New York.

                medicare subvention pilot demonstration

    Mr. Walsh. Thank you, Mr. Chairman.
    Good to see you all again. I have a couple of questions 
regarding Medicare subvention. I know you have had some 
questions. I do not want to be repetitive, but I was wondering 
if you could explain this pilot project that I understand you 
are about to undertake for Medicare, receiving Medicare 
payment, third-party payment and so forth.
    Secretary Brown. I will just kind of give a brief overview 
of it and ask Dr. Kizer to give us a little bit more detail on 
it.
    Basically, what we want to be able to do is to open this 
system up to higher-income, non-service-connected veterans. 
Presently, today, we only provide care to service-connected 
veterans and what we call poor veterans, those who are making 
about $21,000 a year. Everyone else is locked out. So we want 
to open it up to them, let them bring their dollars in with 
them.
    We believe that this, quite frankly, is cost-neutral, but 
when you look at the global aspects of it, we believe that it 
actually ends up as a cost savings to the taxpayer because what 
we are basically saying is that we are not going to request 
reimbursement from the trust fund for individuals that we 
already take care of. We are only going to request 
reimbursement from veterans who are now locked out of the 
system, but spend their Medicare dollars elsewhere. We want to 
give them a choice. They can go to the providers in their local 
communities, or they can bring their dollars and get care at 
the VA.
    We believe that by this new infusion of revenue, it will 
allow us to continue with our plan by decreasing the unit 
cost--I hate to say unit cost, but patient cost by 30 percent. 
At the same time, it would contribute to expanding our patient 
base by 20 percent, and it will, of course, be part of, as we 
envision it, the 10-percent revenue from the appropriated 
funds.
    Dr. Kizer.
    Dr. Kizer. Of course, whether we go forward or not on the 
demonstration or pilot will depend on Congress and whether they 
authorize the pilot or not. We are in the final throws of 
negotiating the agreement and some of the specific details with 
HCFA and OMB.
    So, as far as laying out some of the details, those are 
still being negotiated, but in brief, what we would be looking 
at is providing services on a couple of models, the fee-for-
service model, as well as a managed care global rate model for 
patients of the higher income. Medicare-eligible patients at a 
defined number of locations with some caps on the amount of 
monies the trust fund might be liable for.
    Mr. Walsh. This would encompass only Medicare age, 
Medicare-qualified patients?
    Dr. Kizer. It would be the higher-income veterans who are 
Medicare-eligible.
    Mr. Walsh. Okay. So the people who are earning a steady 
income who certainly weren't being served by the VA now, but 
were not Medicare age, would not be included at least at this 
point?
    Dr. Kizer. That is correct, unless they qualify for 
Medicare income of the categories that include people other 
than senior citizens. So, conceivably, it could include some 
others, but they would have to be Medicare-eligible, as a 
threshold requirement, to be a part of that pilot.
    Mr. Walsh. And obviously, they would have to be veterans?
    Dr. Kizer. Yes.
    Mr. Walsh. If this, indeed, were enacted, let me just jump 
ahead, and you felt it was successful, what sort of an impact 
do you estimate that would have on the VA medical system?
    Dr. Kizer. The specific dollar impact is something that 
would be continually looked at over time. We think that there 
would be a benefit to the Medicare trust fund insofar as we 
would be reimbursed at a rate less than what private providers 
would be reimbursed, and we think that would also have a 
salutory affect on VA since we have some excess capacity and 
have to pay fixed costs regardless of how many patients we 
treat. If we can use some of that excess capacity to generate 
some revenue, that would help us provide care to more of the 
Category A veterans--i.e., those who the appropriation could 
not support. With some additional revenue, we could provide 
more care for them. It becomes a win-win for everybody.
    Secretary Brown. We anticipate that by the year 2002, we 
should be able to generate about $557 million.
    Mr. Walsh. Just through the Medicare subvention?
    Secretary Brown. Yes, sir.
    Mr. Walsh. Again, assuming it is successful and you do 
realize those sorts of increasing in funding or in patient care 
and the result in Montgomery County payments, is the next 
logical step then to accept private health care insurance?
    Secretary Brown. We are already doing that. We collect 
about $600 million a year from private insurance on third-party 
reimbursement. That is the other part of the legislative 
package.
    Mr. Walsh. Okay.
    Secretary Brown. That money, all with the exception of a 
little small administrative fee, goes directly into the 
Treasury.
    Mr. Walsh. The General Fund as opposed to back into the VA 
medical system fund.
    Secretary Brown. Yes, sir.

                            pilot locations

    Mr. Walsh. Okay. Now, you anticipate in this plan--how many 
pilot locations would there be?
    Dr. Kizer. That is actually one of the final points of 
discussion with HCFA. We are looking for somewhere in the range 
of four to eight, probably on the lower end of that range. It 
will depend on how many are fee-for-service as opposed to how 
many are capitated or under a managed care model. Part of the 
reason there is still a discussion is the VA has changed and we 
are going to network based care and service lines and multiple 
facilities providing care all of which facilitate a managed 
care approach.
    The historical role of what an individual facility does and 
may encompass is changing. So it is a bit of a moving target in 
some cases, depending on the model.
    Mr. Walsh. Would you look to impact on a medical centeror 
an area, geographical area where you had high or low utilization? It 
would seem to me if you had low utilization, you would want to impact 
on that, or would that be germane to the decision on which area you 
would go?
    Dr. Kizer. Utilization by whom?
    Mr. Walsh. Well, vets occupancy.
    Dr. Kizer. That is one of the factors. There is about 10 or 
so different factors that would be considered.
    Mr. Walsh. What might be some of the other factors?
    Dr. Kizer. Let me ask Dr. Pane to comment.
    Some of the things include the cost-accounting system that 
is in place, the market penetration that currently exists for 
the veterans, what are the utilization rates, what is the 
access to care or the availability of other care and some other 
things.
    What are some of the other ones?
    Dr. Gregg Pane, who oversees the Office of Policy, 
Planning, and Performance, has had a lead role in this.
    Dr. Pane.. Those are most of the key factors. I think one 
of the factors he brought up related to the level of effort 
that we said that we would continue providing care where we are 
already getting an appropriation. So that would be looked at.
    I think another key factor is who is out there, what is the 
market in the surrounding area. Are there veterans who are 
Medicare-eligible who might want to come to us? We would want 
to look at that as well. How we are performing, as Dr. Kizer 
pointed out, we are going over those things right now with HCFA 
and OMB, and they have expressed a lot of interest in how we 
select sites and what factors we are looking at.
    Mr. Walsh. So performance is important?
    Dr. Kizer. Absolutely.
    Mr. Walsh. In the case of individual locations, if they 
have a high-performance rate, efficiency, if it is a well-run 
hospital, that enhances that?
    Secretary Brown. I think ``performance'' probably is a 
pretty good term to use, but basically, what we really want to 
do--this is a demonstration project that, hopefully, we can 
glean information from that will allow us to determine if we 
should proceed, and if we are to proceed, how best to do that, 
so that we can do it in a way that brings about credit to the 
whole concept that we are trying to put in place.

                      veterans organizations views

    Mr. Walsh. What have the national veterans organizations' 
comments been on this thus far?
    Secretary Brown. I think, historically, they have supported 
it, reimbursement from the Medicare trust fund. I think many of 
them are very concerned about the third-party reimbursement. 
They are not sure that we will be able to collect the money, 
but I think that they will tell you. They will say that to you. 
At the same time, they probably will say to you, if you can't 
provide the funding through this third-party mechanism, then we 
need those extra dollars through the appropriated process.
    So, while they are a little bit concerned about if we will 
be able to, number one, collect the $600-plus million in 1998, 
all the way out to about $800 million in the year 2000, I think 
it is--$900 million in 2002. So they are a little nervous about 
that. We feel more optimistic about it. We are closer to it, 
but certainly, I can understand their concern about it.
    So I would anticipate that they would say to you that we 
are nervous about that and that if you do not make that 
particular VA available to the VA, then you probably should go 
ahead and make the funds available through the appropriated 
process.
    Mr. Walsh. Thank you, Mr. Secretary.
    I would just end by saying I think that is a good idea to 
take a look at it, to get the best data that you can from the 
test, and hopefully, it will have a positive impact on the 
veteran. I think that is what this is ultimately all about, 
making sure that those people are comfortable with the VA 
medical centers who want to use them. Medicare would be a good 
way to allow that to happen.
    Secretary Brown. Thank you so much for that, sir.
    Mr. Walsh. You are welcome.
    Secretary Brown. I appreciate that.
    Mr. Lewis. Thank you, Mr. Walsh.
    Mr. Frelinghuysen.
    Mr. Frelinghuysen. Are you looking to conclude, Mr. 
Chairman? I have a number of questions for the record, if that 
is the case.
    Mr. Lewis. Well, it looks as though the rate we are moving 
along here, assuming we keep our questions short and our 
response reasonable, that we might get through today.
    Mr. Frelinghuysen. Is that an open invitation to ask some 
more questions?
    Mr. Lewis. If you feel compelled to, but it is certainly 
not a requirement.
    Mr. Frelinghuysen. Your call, Mr. Chairman.
    Mr. Lewis. Mr. Frelinghuysen, if you have questions that 
you do want to ask at this time, feel free.
    Mr. Frelinghuysen. I will do it for the record. Thank you.
    Mr. Lewis. Thank you very much.
    Then, Mr. Secretary--hello, Mr. Stokes.
    Mr. Stokes. Hello, Mr. Chairman.
    Mr. Lewis. I will be with you in just a moment.
    Mr. Stokes. I am back again.

                             waiting times

    Mr. Lewis. Within the past year, one of the staff took his 
father to one of the VA medical centers for an outpatient 
examination. They had to wait nearly 3 hours for a scheduled 
appointment, and it appears that that is a fairly normal wait 
for a scheduled appointment at that facility as he was told it 
happens every time his father has had such an appointment. He 
kind of got acquainted with some people during the wait or had 
similar time frames, and they were all talking about what they 
considered to be standard or normal, similar intervals.
    Is more than 3 hours a reasonable period of time to have to 
wait for scheduled outpatient appointments?
    Secretary Brown. Absolutely not. That is way, way, way out 
of line. I have visited tons and tons of hospitals, and their 
waiting time is all within half-hour or less. So, I would 
appreciate it if you would give me the individual's name and 
the hospital so we can do some investigation on that because 
that is totally unacceptable.
    Mr. Lewis. We will make certain, at least I think probably 
my staff will make certain that you know some of those details.
    Does the VA know what percentage of the time a veteran has 
to wait more than 3 hours for a scheduled appointment?
    Secretary Brown. Yes, sir. For a scheduled appointment and 
unscheduled appointment and to include how much time you have 
to wait to get your pharmaceuticals and so forth, we have that 
information available.
    Mr. Lewis. And where there are problems, you will make sure 
that we know what you will be doing to reduce such times and so 
on?

[Pages 169 - 170--The official Committee record contains additional material here.]


    Secretary Brown. Absolutely.

                 Medical Care Funds Devoted to Research

    Mr. Lewis. All right. I appreciate that.
    Last year, the VA estimated that of the total amount of 
budgetary resources available for the research program in 1997, 
$396 million would come from the medical care appropriation. 
This year's justifications indicate that $328 million of the 
1997 total will come from the medical care account.
    Why are fewer medical care funds now estimated to be 
devoted to research in 1997? The same thing occurred in 1996.
    Dr. Kizer. I think part of the reason is just tracking this 
line item. Historically, before a year ago or so, no one paid 
too much attention. We have tried to better define exactly what 
research support funds are, as well as what the actual cost of 
providing education is. Beyond that, I would, again, perhaps 
ask Dr. Feussner, if he is still here, if he has anything to 
add to that.
    Dr. Feussner. No.

                      Parkinson's Disease Research

    Mr. Lewis. In the 1997 report, the committee strongly 
suggested that VA increase its research in Parkinson's disease.
    I think I will give that question to Mr. Stokes, and I will 
yield to Mr. Stokes.
    Mr. Stokes. All right. Which question? Oh, Parkinson's. 
Okay.
    Mr. Lewis. Just tell them where you have just been.
    Mr. Stokes. The reason he is doing this is because we have 
just--you have seen me going in and out of the hearing room. 
Next door is the Labor, Health, Human Services, and Education 
Subcommittee on Appropriations, of which I am also a member, 
and this afternoon, we had Mohammed Ali testifying on 
Parkinson's disease, and so that has been part of the reason 
you have seen me going in and out this afternoon.
    Mr. Stokes. All right. In the 1997 report, the Committee 
strongly suggested that the VA increase its research on 
Parkinson's disease. In 1996, $2.3 million was spent on 
Parkinson's disease from VA and other sources. The VA estimates 
spending at least $2.3 million from all sources in 1997. How 
much of the VA resources was spent in 1996 on research on 
Parkinson's disease?
    I might say that the legislation, Mohammed Ali, and also 
Moe Udahl's wife was present, and Moe Udahl, one of the great 
members of this body, suffers from Parkinson's, and Fred Upton, 
a member here of the House, has a bill which would put $100 
million into research for Parkinson's disease, and that was the 
basis of the hearings for Mr. Young's subcommittee this 
afternoon, but the question to you at this time is, first, how 
much of these resources was spent in 1996 on research on 
Parkinson's disease?
    Mr. Lewis. You might explain the report that we requested 
as well and what its status is.
    Dr. Feussner. First, to answer the first question, the 1996 
dollar amount is approximately $1.3 million, and the total 
amount is approximately $2.6 million for Parkinson's disease. 
We would estimate that about .5 to 1 percent of our patient 
population suffers from Parkinson's disease.
    We are looking at this. This is actually a difficult 
problem, and we are looking at this in a variety of ways. We 
have a number of grants, VA-funded activities, and also NIH-
funded activities. For the most part, those are grants that are 
initiated by investigators.
    As a result of the suggestions from the Committee, we have 
formally made contact with the NINDS, the National Institute of 
Neurological Disease and Stroke, to find some common ground 
where we might engage in national trials of Parkinson's 
disease.
    As yet, we haven't identified specific issues that we could 
partner with NINDS and pharmaceutical houses at the national 
level.
    We have a couple of studies, but only a couple, looking at 
investigational agents from two pharmaceutical companies. The 
American Academy of Neurology meeting was recently held in 
Boston on April 16th. Our chief of Medical Research in VA is 
himself a neurologist.
    He met with about 30 neurologists at the Academy meeting in 
Boston looking for research initiatives and ideas. We are in 
the process of assembling those. If we get some interesting 
issues to follow on, we will. If we don't get some interesting 
issues to follow on, which is possible, then our intention is 
to put out a program announcement or request for applications 
and specifically see if we can't, using that mechanism, 
identify common ground in collaboration with the NIH and with 
the pharmaceutical industry, but at the moment, we are still 
very much struggling with trying to identify more than just--
and it is not to demean the investigator-initiated efforts, but 
more than just the current level of investigator-initiated 
efforts that are going on in this system.
    There are some differences about our population of patients 
that would make us attractive partners for the pharmaceutical 
sector and the National Institutes of Health. There is a 
greater proportion of our patient population with Parkinson's 
disease that represent minorities that is generally the case. 
So, if we can work some of these collaborations, then we, as a 
VA entity, can actually bring some added value to the table in 
terms of the fundamental nature of our patient population.

                    Funding for Parkinson's Disease

    Mr. Stokes. I appreciate that very comprehensive response 
to the question, and let me just follow through with another 
question that the Chairman had on his list, and that was, how 
much of the VA's resources do you estimate we spent in 1997 and 
1998 on research on Parkinson's?
    Dr. Feussner. Well, in 1997, the number is approximately 
stable, not going up. Yes, sir, it is approximately the same. 
VA, $1.3 million, in total, $2.6 million, that has not 
increased substantially.
    If we achieve some success with these activities within 
NINDS, with the pharmaceutical companies, et cetera, then that 
figure could go up fairly dramatically. If we fail in those 
endeavors, then the level of committed funding is likely to be 
approximately stable.
    At the moment, with our current level of appropriations, 
there are no scientifically credible projects that I am aware 
of that are wanting or that are unfunded because of budget 
issues, in current fiscal year----
    Secretary Brown. No, no. He asked for the number for 1997.
    Mr. Stokes. The estimate.
    Dr. Feussner. Yes. I thought I said I can't answer that 
quite yet.
    Dr. Kizer. You asked one other question, Mr. Chairman, on 
what the status of the report is. We anticipate having that to 
you in June.
    Mr. Lewis. That report that has to do with coordinating 
with the Department of Defense and NIH?
    Dr. Kizer. For Parkinson's disease, yes.
    Mr. Lewis. This is a very high priority. It is a very 
complex disease. Obviously, there is a lot of interest here in 
the House.
    I appreciate that, Mr. Stokes.
    Mr. Stokes. No, thank you, Mr. Chairman.

                           Homeless Veterans

    Mr. Secretary, let me touch on an area that I think has 
been touched on somewhat, but not from the perspective I want 
to bring to it.
    Certain studies have indicated as many as one-third or more 
of the Nation's homeless population of veterans are in many 
older metropolitan centers within the Veterans Integrated 
Service Networks, especially in the North and the East regions 
of the country.
    The VA medical centers are too often sanctuary for those 
at-risk veterans, those who suffer from alcoholism, drug abuse, 
mental illness, AIDS, and other afflictions that contribute to 
the homelessness problem. One of the major ways the VA hopes to 
save funds in the future is by reducing inpatient services and 
increasing outpatient services.
    As resources are reallocated in this manner, how will 
special programs for veterans at risk be affected?
    Secretary Brown. We are proceeding very carefully to make 
sure that we do not end up placing programs, such as our 
homeless initiatives, at risk as a result of our 
reorganization.
    Now, at the same time, I do have to tell you, we are 
looking very carefully at some of our substance abuse programs, 
how we provide care. In many cases, historically, just like 
everything else we did, it was on an inpatient basis. We have 
done studies which show that the outcomes of treating these 
individuals in an outpatient modality provides a greater 
benefit than on an inpatient, and of course, the savings is 
substantial. So we are moving ahead in that area at many of our 
locations across the country.
    I am not aware of any situation where our homeless 
veterans, per se, are placed at risk as a result of something 
we have changed. If they need inpatient care, they have full 
access to it. If they need to be in domiciliaries, we still 
have that up and running. Over the last 4 years, we have 
increased our homeless account by 100 percent. So we think that 
we are doing everything that we can to try to deal with this 
very difficult issue.

                  Alcohol and Drug Addiction Treatment

    Mr. Stokes. Mr. Secretary, let's take alcohol and drug 
addiction, and give us an idea of how you manage programs of 
that sort without clinical evaluation and treatment on an 
inpatient basis.
    Secretary Brown. Well, we do all of the clinical assessment 
that is necessary, and I will ask Dr. Kizer to give a further 
example.
    Dr. Kizer. Yes. I think some of the confusion there is just 
how it is being done differently. I pulled out this table 
because I thought you might be interested in it.
    As opposed to the traditional inpatient bed, we have 
another option that has developed over the last 3 years. It is 
called the Psychiatric Residential Rehabilitation Treatment 
Program. You can easily see the increase in the number of beds 
that are being used in the program. It is different than the 
traditional acute care hospital bed, but it does provide some 
limited clinical support and the housing function which is 
often the most important part of maintaining the patient in a 
therapeutic environment.
    So it is just that the venue, or the manner, in which the 
care is being provided has changed. We are trying to tailor it 
to just the right amount of care that is needed and not treat 
everybody in just one or two ways. Historically you were either 
treated as an inpatient or an outpatient. Now we are trying to 
do is have a full menu of options and tailor their care so that 
the patient gets the care, but just the right amount of care 
and with the right amount of resources. This means that it may 
be in a different setting than what was done before.
    Mr. Stokes. Well, let me ask you, then, about mental 
illness. How can mental illness as an underlying cause for 
alcoholism and drug abuse and consequently for homelessness be 
adequately treated if the veteran departs an outpatient 
facility every day and returns to the community in which the 
risk is prevalent?
    Dr. Kizer. Those are the sorts of judgments that have to be 
made on an individual basis. That is, for each patient their 
physician has to judge whether it is appropriate to send the 
patient back. In the case of mental illness, there is also the 
matter of whether they have adequate, or therapeutic, drug 
levels; those have to be determined on a case-by-case basis.
    If the patient continues to need inpatient treatment and if 
that is the preferred way to deal with them, then that option 
is still available.
    Mr. Stokes. Let me ask you this, Dr. Kizer. Is there an 
inherent bias in the methodology against Veterans Integrated 
Service Networks that balance a need for increased outpatient 
access with managing special inpatient programs with lower 
resource levels?
    Dr. Kizer. If I understand your question, I would say no. 
The system, historically, has been incredibly biased towards 
taking care of everything on an inpatient basis, and much of 
what we are seeing now is VA catching up with where the rest of 
the health care is by providing the right mix of treatment. 
Yes, inpatient care is provided for those where it is most 
appropriate, but for those who can be taken care of in an 
outpatient setting and where there are resources or facilities 
to do that, that would be the preferred venue or site that the 
care is provided.
    There is a certain amount of catch-up, though, that needs 
to be done if we are going to compare our system with what 
would be considered standard in other health care settings or 
other health care systems.

                 Hiring and Training People on Welfare

    Mr. Stokes. Mr. Secretary, press reports recently have 
indicated the Department of Veterans Affairs will be very much 
involved in one of the Administration's latest initiatives, 
that being the hiring and training of people currently on 
welfare. It has been reported that the VA will be given a 
target to hire 800 people in the next few years, a figure 
surpassed only by the Department of Defense and the Department 
of Commerce.
    First, is that figure accurate?
    Secretary Brown. Yes, sir, 814. We expect to do 414 in1997 
and about another 400 in 1998.
    Mr. Stokes. All right. Now, tell us what those people will 
be doing.
    Secretary Brown. First of all, Mr. Stokes, I have to tell 
you, I am really excited about this program because, unlike 
other programs, we plan on hiring 800 veterans. So we are 
looking at our veterans that are on welfare, and we are going 
to move them from welfare to work in the Department of Veterans 
Affairs. They will be on probation for about 3 years, and at 
the end of that 3-year period, we will make a decision to make 
them permanent or help them find some other employment, but 
they will start their career with the VA, and we would like to 
think it as starting a career, an entry level job, basically 
GS-1's, 2's, janitors, clerks, dieticians, and jobs like that.
    We plan on giving them full support through this whole 
process. We are going to help them with their transportation 
needs. We are going to help them with child care.
    By the way, on this child care and transportation, what we 
are going to do, maybe a little bit different from what other 
agencies are, as opposed to just setting this aside for 800 
people, we are going to be looking at everybody there as a GS-1 
and a GS-2 level.
    So, if we provide transportation for veterans going from 
welfare to work that are a GS-1, for those employees that are 
already on board, if they are a GS-1, we are going to do the 
same thing for them. We think that that is the right thing to 
do. That keeps them from becoming welfare recipients.
    So we are pretty excited about this project. It gives us a 
chance, again, to do something for our citizen soldiers.
    Mr. Lewis. Mr. Stokes, I started to talk about SES 
employees. I presume in this category of 800 and some, we could 
see that looking an awful lot like America.
    Mr. Stokes. Yes, I am sure.
    Mr. Lewis. They can probably even anticipate questions 
about that when we come back.
    Mr. Stokes. A word to the wise.
    Secretary Brown. Don't be mean to me.

               Veterans Benefit Administration Employment

    Mr. Stokes. You are all right, Mr. Secretary. We just want 
to see you do right.
    Let me ask you this. I note, Mr. Secretary, in your budget 
proposal that FTEs in the Veterans Benefit Administration 
declined by 543 from 1997 to 1998; that in addition to a drop 
of 660 from 1996 to 1997, thus, in 2 years, FTEs in the VBA 
decreased by 1,200, or nearly 10 percent. At the same time, 
FTEs for the National Cemetery System increased by 52 in 1998 
on top of an increase of 36 in 1997. Of course, we are just 
wondering if everything is in balance. It is very important to 
take care of our veterans after they are deceased, but if we 
don't provide good and swift service while they are alive, we 
may be hastening the process somewhat.
    Are you completely confident that the VBA can meet its 
goals with a significantly reduced work force?
    Secretary Brown. I think so. Obviously, these are goals. 
Stephen Lemons has done a great job in his reengineering 
project that he has ongoing, and hopefully, we will be able to 
make our target by the year 2002.
    We expect, for instance, the timeliness standards to 
deteriorate a little bit in the 1998 budget, but that is 
primarily because of the eligibility rules, which basically 
said that a zero-percent veteran would not be eligible for 
care. So those individuals are going to come in and try to get 
at least a dime. So we expect to have generated more business 
that way.
    Also, we had to re-adjudicate all of our Persian Gulf 
claims. It is things like that that cause that blip, but we 
think that with this reengineering project that we have, 
basically what that is going to be, we are going to squeeze out 
all of the people within the project--within the process, and 
there are going to be basically three positions that will do 
most of the work in dealing with our veterans.
    They are going to be a veterans service representative, a 
rating-veterans service representative and a post-decision 
review officer. The review officer will have a de novo review 
on the cases, and they can actually make decisions right there.
    Right up under there, you are going to have what we call a 
rating-veterans service representative, and that individual 
will be able to do a lot of things that are similar.
    Then, the line person will be a veterans service 
representative. He or she will have direct contact with the 
veteran. So you are going to have a team that is designed to 
help the veteran through the whole process that can make 
decisions. There will be what are currently known as 
adjudicators and hearing officers and rating board personnel 
all in one little team, and we expect with that approach to 
include, hopefully, the benefits that we are going to get out 
of VETSNET, which is a wonderful operation.
    I was mentioning to you earlier, I was in Hines and had a 
chance to look at some of the things that they are working on. 
We think even with the lowered FTE level that we are committing 
ourselves to that we will be able to meet those standards in 
the out years.
    Mr. Stokes. Mr. Chairman, I yield back to you.
    Mr. Lewis. Thank you, Mr. Stokes.
    Mr. Walsh?
    Mr. Walsh. I have no further questions, Mr. Chairman, at 
this time.
    Mr. Lewis. Mr. Frelinghuysen, you have indicated--then I 
will proceed. Mr. Stokes, we are moving right along here.
    Mr. Stokes. All right.

                         Osteoporosis Research

    Mr. Lewis. Mr. Secretary, the 1997 conference report urged 
the VA to prepare a long-term strategy for research on 
osteoporosis and related bone diseases, including the 
coordination of such efforts with the Department of Defense, 
the National Institutes of Health. What is the status of that 
suggestion?
    Dr. Kizer. I know it is under way.
    Do you know the exact status?
    Dr. Feussner. Yes. Osteoporosis and bone disease. It is 
typically thought that this is a problem in men. We have a 
rehabilitation center.
    Mr. Lewis. In women or men?
    Dr. Feussner. Women. Thank you. It has been a long day.
    Secretary Brown. You are thinking of prostate, right?
    Dr. Feussner. I will start over. Our current activities in 
osteoporosis include an expenditure for about $4 million for 
bone research, much of it being basic research and biomedical 
aspects of bone remodeling, but also through to trials that 
deal with, as a matter of fact, the trials that we are planning 
right now that looks at estrogen replacement therapy and the 
role of new micronized progesterones in that process.
    We have a center in Palo Alto Rehabilitation ResearchCenter 
that collaborates with NASA. As you know, weightlessness contributes to 
osteoporosis, and osteoporosis is a significant problem for veterans 
who have spinal cord dysfunction. So much of our activity in 
osteoporosis is nested in those issues.
    What we will do with the report that we will generate for 
you is enumerate the 10 pharmaceutical companies that we are 
collaborating with, with a whole variety of agents trying to 
manage osteoporosis, and we have several activities ongoing 
with the NIH, the several institutes, especially the Arthritis 
Institute.
    Currently, that basically summarizes the activity. The only 
new activity is the National Institutes of Health has had a 
recent RFA, a Request for Application, on osteoporosis 
prevention, and our coordinating center in Palo Alto is 
collaborating with Stanford and UCSF investigators. This is a 
specific osteoporosis issue relating to women.
    Finally, we have begun discussions with the three major 
bone societies, the Osteoporosis Foundation, the Padgett 
Foundation, et cetera, about sharpening our osteoporosis 
research mission.
    Mr. Lewis. This question really goes back to an exposure I 
had in my own district where a former member of Congress and a 
member of Congress participated in a program some years ago, 
maybe a decade ago, as it relates to men and women, any 
incidence of osteoporosis and bone density questions, and it 
turned out that just exactly the opposite of that, which they 
expected, occurred.
    Upon testing, the women had a better retention of calcium 
and bone density was better, and the men were at a much lower 
level, one of them having to have pretty serious treatment as a 
result of that examination.
    I have learned that there is quite a project going on at 
that VA hospital there. I am not sure whether it is directly 
the hospital or whether it is just a local physician who is a 
specialist who has worked on it a long time, working in 
veterans space, but it is in coordination with the Lomo Medical 
Hospital as well.
    I am really curious, and it is important that we follow 
through on this and making sure that we are tapping all of 
those resources, and in this case, the proximity is there, and 
apparently actual space in the VA hospital is being used. So we 
will continue this conversation.

                     Mamoe Management Efficiencies

    The management efficiencies initiated in the medical and 
miscellaneous operating expenses account anticipates savings of 
$3,983,000 and 45 FTE in 1998. The justification indicates the 
specific identification of these efficiencies is not currently 
available, but will be identified in the near future.
    The justifications were prepared several months ago. Have 
you identified the specific efficiencies by office yet?
    Dr. Kizer. We don't have a complete list yet. There are a 
number of things we are continuing to try to identify exactly 
what those efficiencies will relate to.
    Mr. Lewis. In view of that, would you then supply 
information for us? We really need this information before the 
1998 bill is marked up. So we would appreciate that.
    [The information follows:]


[Page 179--The official Committee record contains additional material here.]


                  Construction, Major Projects Funding

    Mr. Lewis. The VA is requesting $79.5 million for the 
construction, major projects appropriations in 1998. This is 
the smallest request that we can remember for this account. 
What has caused the 1998 budget request for major construction 
accounts to be so small, and was it strictly budgetary 
considerations?
    Secretary Brown. Strictly budgetary considerations. That is 
really the bottom line.
    Mr. Lewis. I might note for the record, we had quite a 
conversation over the last two conferences regarding this 
matter, a very high priority in your request was a hospital in 
Brevard County, another hospital in northern California. Then, 
last year, that was repeated, and I remember saying very 
specifically to the Secretary, ``Mr. Secretary, be careful of 
what you ask for.''
    In the meantime, I see us moving away from requests of that 
nature, at least of the major hospital in Florida. There is 
nothing in your budget request regarding the northern 
California circumstance. That may be because of the legislation 
that was a part of the bill last year, but nonetheless, I see 
our moving in that direction.
    Secretary Brown. Mr. Chairman, that has always been the 
plan. The two projects that you talked about were on the books 
for many, many, many years in planning, but I think you are 
right when you talk about the future. All we need to do is just 
look out in out years. Clearly, the pattern of health care is 
based upon a model that is very similar to the one that Dr. 
Kizer has designed for us to follow, to include buying lots of 
services from the private sector to opening up community-based 
clinics, to continue to drive our inpatient census down and our 
outpatient census up. So that is the way we are going. It is 
the way the world is going, and we want to be right there as we 
get ready to move into the 21st century.
    Mr. Lewis. I think that that pattern that we have discussed 
before is not just part of the real world. It most likely 
provides a better opportunity for more service without long 
delays, even----
    Secretary Brown. Yes.
    Mr. Lewis [continuing]. But a value of better service for 
our patients, in view of the changing population, but also our 
budgetary circumstances.
    Secretary Brown. Well, I think another thing that is--you 
are absolutely right there, but one thing that is driving this 
even, I think, more so than that, that is the advancements that 
have been made in medical technology.
    Mr. Lewis. Correct, that is right.
    Secretary Brown. It is no longer necessary to go into the 
hospital to have someone look at your knee. They do all that 
kind of stuff on an outpatient basis, and so we just have to be 
prepared to be able to do that.
    Mr. Lewis. I appreciate that very much.
    There has been a good deal of discussion even at this 
hearing, but at other hearings relative to the difficulty, 
indeed, the pain that is a part of shifting populations, 
thereby shifting relative dollars available from one region to 
another. Over time, we may find ourselves in a circumstance 
where you will be even forced to talk to us about closing some 
hospitals.
    I don't know that you will ever quite get to that cliff, 
but, you know, in the past, we have had a Base Closure 
Commission in which it was take all or none because of the 
difficulty there.
    Somewhere down the line, we are going to face tough 
questions like that, and we are beginning to get some pretty 
serious indication of the pain that is felt and, thereby, heard 
by members in their own regions, and it is not a simple 
business.

              Relocation of St. Petersburg Regional Office

    The Congress appropriated $24 million to relocate the St. 
Petersburg, Florida Regional Office to the grounds of the Bay 
Pines VA Medical Center. This project was due to be completed 
in 1996, but did not occur. Briefly explain the problem with 
the skylight and other delays.
    Secretary Brown. Yes. We have had a number of problems with 
the contractor and some other problems in terms ofthe 
management of that whole project, and I am going to ask Chuck to kind 
of give us a brief summary of where we are, to include the skylight, 
and there was another issue. Oh, yes, the foundation, too.
    Mr. Yarbrough. Chuck Yarbrough, the Chief Facilities 
Management Officer.
    We hired an architectural engineer for the design of these 
various projects.
    Mr. Lewis. Right.
    Mr. Yarbrough. We have what I would term as a foolproof 
process. So it is not subject to any kind of tinkering. We 
hired one of the best AE firms in the Southeast to design this. 
Nonetheless, having said that, it was designed with some 
structural flaws that weren't discovered until last fall. The 
skylight was the first part of the problem. Ultimately, that 
tested out to be within the limits, but other structural 
problems involving steel and cement, the footings and so forth.
    We calculated that in early November, the costs of 
changing, of putting out change orders for each of the flaws 
that were detected, came to $517,000 at that point and still 
counting. We billed the AE firm, and so far, we have gotten 
three checks from them, one for $200,000, one for $222,000, and 
just this week, one for $79,000. So they have actually paid us 
without litigation and, frankly, without argument. They have 
acknowledged the flaws. The checks are in response to letters 
sent to them saying here are the reasons why we think you still 
owe us some money. So they have paid us $501,000, and we have 
rebilled them a little bit more. So it is up $525,000.
    We are getting a lot of help from the General Counsel. We 
intend to pursue it, in the court if we need to.
    Mr. Lewis. As you probably know, that question really comes 
from one of my colleagues on our Committee who has a special 
interest here, and we have some other questions that we would 
ask for the record in connection with that, and I would 
appreciate your responding there.
    We also have a couple of other similar questions, Brevard 
County being one of them, that I would ask for the record and 
appreciate your response.

                construction of a shared service center

    The threshold for VA construction projects is $3 million. 
Those projects costing $3 million or more are decided on an 
individual basis in the major construction account. Those 
projects estimated to cost less than $3 million are funded in 
the minor construction account.
    The VA is given total discretion as to the type and 
location of minor projects. The VA plans two minor construction 
projects to cover demolition, renovation costs for the shared 
service center. Each project would cost under $3 million, but 
together, they would exceed $3 million. Such a proposal would 
effectively circumvent the minor construction limitation of $3 
million.
    Why has the VA proposed to proceed with this project in 
this fashion? It was never really intended that the minor 
construction account be used to fund a project where the costs 
exceeded $3 million.
    Mr. Catlett. Mr. Chairman, that is a project that I have 
undertaken with the Assistant Secretary for Human Resources and 
Administration. It is an important project in terms of us 
achieving some of the efficiencies we discussed today. We hope 
to achieve a 30-percent reduction in the folks that do 
personnel and payroll work for the VA, and we hope to lower our 
unit cost by selling that service to other Government agencies 
because we think we are putting in a state-of-the-art system 
that will give us that advantage.
    We are anxious to move on that. The discretion that you 
have addressed that we have exercised here is one that I 
believe we have exercised over time at the VA. The criteria we 
have applied is that the projects have to stand alone and have 
to be independent.
    We have proposed two projects. The first project will 
renovate the space for the specialized call center that will be 
used by the customer service representatives who will use the 
modern information technology system. The second is for the 
remaining SSC Human Resources and Payroll area, and that 
project is independent. If we don't have sufficient funds, this 
second project will have to compete separately for funding in a 
future year, in 1998 or 1999. So it is quite possible that this 
second project won't be funded. It is on a list of projects to 
be considered, and again, we have approached it. We want to get 
the immediate work we have to have done in order to have the 
specialized call center opened. Then a second project would be 
considered for the SSC Human Resources and Payroll functions 
that will be moved to the SSC, but if we don't have that second 
project, we will open that building with just that one minor 
project.
    Mr. Lewis. Would you provide us for the record a little 
more information?
    Mr. Catlett. Certainly.
    Mr. Lewis. For example, a table indicating by year, 
station, project----
    Mr. Catlett. Yes, be glad to.
    Mr. Lewis [continuing]. With similar occurrences.
    Mr. Catlett. I am sorry. Of similar occurrence?
    Mr. Lewis. Yes.
    Mr. Catlett. I would be glad to do that.
    [The information follows:]

[Page 184--The official Committee record contains additional material here.]


    Mr. Lewis. Mr. Stokes.
    Mr. Stokes. Just a couple.
    Mr. Lewis. Okay.
    Mr. Stokes. A couple more, Mr. Chairman.

                    cleveland vamc parking structure

    Mr. Secretary, I would like to address two Ohio projects 
for a moment. The first is the parking facility for the 
ambulatory care project at the Cleveland VA Medical Center. As 
you know, funding was included in last year's VA HUD 
Appropriations Act for this purpose.
    I suppose because the project appears in the parking 
revolving fund account instead of in the regular construction 
account, it inadvertently was not separately authorized last 
year. Since it is our understanding that the VA cannot proceed 
with the construction until there is specific authorization, we 
have included language providing such authority in the pending 
1997 supplemental appropriations bill which we acted on by the 
full Appropriations Committee tomorrow morning.
    Is it accurate or am I accurate that once such language 
becomes law, the VA will proceed expeditiously with the 
construction of the parking facility?
    Secretary Brown. Yes.
    Mr. Stokes. Okay. Thank you.
    Mr. Yarbrough. Mr. Secretary, the parking garage is 
completely designed, but your description is entirelyaccurate, 
Mr. Stokes. We cannot proceed until it is authorized.
    Mr. Stokes. Thank you very much.

               phase i development of cleveland cemetery

    The second project is the Cleveland Area National Cemetery 
Phase I Development. Planning and design funds have been 
previously provided. The 1998 request includes $12,642,000 for 
construction. That amount will complete Phase I development of 
the first 53 acres of a total of a 274-acre site. Is that 
correct?
    Secretary Brown. Yes, sir.
    Mr. Stokes. What is the VA's current plan regarding 
development of additional acres at the cemetery?
    Secretary Brown. Jerry.
    Mr. Bowen. My name is Jerry Bowen. I am Director of VA 
National Cemetery System.
    Mr. Stokes. Mr. Bowen.
    Mr. Bowen. In phase I, we develop a sufficient number of 
gravesites for an estimated 10-year service period. Sometimes 
it is 8 years, sometimes it is 12 years before Phase I 
gravesites are actually depleted. Before that time, we will go 
forward with another major expansion to develop additional 
acreage for another 10 year service period.
    Mr. Stokes. Thank you.

                     persian gulf syndrome research

    Mr. Secretary, last month, you recommended, and President 
Clinton approved it, an extension until December 31, 2001 for 
the period during which the VA will presume service connection 
for undiagnosed illnesses of Persian War veterans. I applaud 
that action, and I share what must be considerable frustration 
on your part to get to the root of these problems.
    As you noted in your letter to the President, there 
currently are nearly 100 research projects underway to try to 
determine the cause of some of the maladies experienced by Gulf 
War veterans. Tell us about some of the more promising research 
efforts underway, and if you would also indicate how much 
funding the VA plans to devote to understanding and identifying 
undiagnosed illnesses in 1998 and also how much has been spent 
for this purpose since the Gulf War.
    Secretary Brown. I am going to ask Dr. Kizer to respond to 
that, but before I do, I do want you to know that one of the 
problems that we had in terms of managing this whole research 
has been to make sure that we looked at everything as opposed 
to just concentrating on that which was sexy or that which was 
in the public's eye. So, we looked at this very, very carefully 
to make sure that we have people looking at copper, depleted 
uranium, the hazards associated with the burning of the oil 
wells, reproductive outcomes--just all across the board, 
everything that could possibly have happened to these young 
folks that are over there. I am going to ask Dr. Kizer to give 
us kind of a brief synopsis of it.
    Mr. Stokes. Sure. Dr. Kizer.
    Dr. Kizer. I think the Secretary made the most salient 
point--i.e., that the research agenda covers the whole spectrum 
of conditions, everything from the effect of the various 
neurotoxins, including chemical warfare agents, to the role of 
stress, to more accurately defining the actual extent and 
nature of the illness among Persian Gulf veterans as opposed to 
veterans of the same era, but did not serve in the Gulf as 
opposed to the general population. There are projects 
specifically looking at depleted uranium, and again, a whole 
host of issues there.
    As far as the specific dollar amounts, by year, we will 
provide that for the record.
    Mr. Stokes. Okay. Thank you very much.
    Mr. Chairman, I have a number of other questions which I 
will submit for the record, and in that category, I have some 
specific questions dealing with the contracting and other 
minority issues that we had earlier discussed, and that will be 
included in the ones I submit for the record.
    Mr. Lewis. Okay. Thank you, Mr. Stokes, and I know you can 
respond to those for the record.
    Secretary Brown. Absolutely.
    [The information follows:]

                         Persian Gulf Research

    Research on Persian Gulf veterans' illnesses began in 
earnest in FY1994. The following is a breakdown of funding a 
Persian Gulf veterans' illnesses research by fiscal year. The 
dollars cited are from appropriated funds for research and do 
not reflect the indirect costs of research provided by the 
Medical Care appropriation.
    Fiscal Year 1994--$760,300.
    Fiscal Year 1995--$2,064,500.
    Fiscal Year 1996--$3,624,400.
    Total--$6,449,200.
    These figures do not reflect the $250,000 per year used to 
fund the Institute of Medicine review of the health 
consequences of service in the Persian Gulf War.
    Funding for FY1997 will be at least at the level of FY1996, 
but a final figure awaits complete budget estimates on 
expenditures in FY1997 for the VA National Survey of Persian 
Gulf Veterans.

           medical exams for compensation and pensions claims

    Mr. Lewis. Let's turn briefly to the Veterans Benefits 
Administration, VBA. The budget request, a total of 
$817,635,000 for VBA in 1998. This is an increase of 
$55,593,000 and is primarily attributed to $68 million being 
requested for medical exams for compensation and pension claims 
in the general operating expense account instead of the medical 
care account.
    Last year, Congress passed legislation which authorizes a 
pilot program to contract for compensation and pension physical 
exams at 10 regional offices in 1997. Currently the VA provides 
these medical exams.
    Has the pilot program begun and if it has not, what is the 
hold up?
    Secretary Brown. Steve.
    Mr. Lemons. I am Steve Lemons, the Acting Under Secretary 
for Benefits. The pilot program is under development right now 
and a request for proposals is being developed which will be 
released early next month. Until that solicitation is complete 
we are not able to move forward on the pilot exam itself.
    Mr. Lewis. Does the VBA believe that it will be less 
expensive and the service will be faster if these medical exams 
are conducted by people outside the VA?
    Mr. Lemons. Our primary focus is in areas where either 
because of the unique nature of the specialty exam that 
isrequired not being available in many locations or veterans residing 
in a rural area where VA medical facilities are not available, we want 
to explore the potential for using private sector examiners.
    But we do not at this point have an accurate assessment of 
whether it will be more cost effective for us but we will be 
developing criteria to evaluate that aspect.
    Mr. Lewis. Is there a reason not to wait until the pilot 
test is finished and the results are in to switch funding of 
the medical exams to the general operating expense account?
    Mr. Lemons. It is my opinion that the nature of the request 
and the funding available for the request is not sufficient to 
be able for us to totally engage in that area and the nature of 
enhancements in quality that Dr. Kizer and I have worked toward 
in the switching of the funding control from VHA to VBA such 
that if it is not either a timeliness being met accurately or 
the quality of the exam process itself being satisfactory from 
both our perspectives, the servicing VA medical center will not 
be reimbursed for that exam.
    That is the real pressure point that is useful when you 
transfer the funding authority from VHA to VBA.
    Mr. Lewis. Thank you for that.

                     processing compensation claims

    The justification indicates that the time to process 
compensation and pension claims will improve especially with a 
full implementation of your BPR initiatives. How long is it 
taking now to process original compensation claims?
    Secretary Brown. Original claims in 1996 was 144 days. We 
estimate that in 1997 it will be 118 days. By the year 2002 we 
estimate that it will be 53 days.
    Mr. Harris. What is it now?
    Secretary Brown. It is 144. You have got a new number?
    Mr. Lemons. Yes. Because of the increased work load that 
the Secretary spoke to earlier, in regard to the intensive 
review of the Persian Gulf cases and the schedule changes, 
there has been some slippage in the timeliness. We are 
currently processing at 132 days.
    We do believe that we will have some shortfall in that area 
and at the end of FY 1997 we will be at 130 days. But we 
believe that we can get back on track in Fiscal Year 1998 
towards reversing that trend and moving towards the 106-day 
goal into Fiscal Year 1998.
    Mr. Lewis. Okay. Keep us informed as we go forward from 
here, if you will.
    Do you want to add to that, Mr. Secretary?
    Secretary Brown. No. Other than that I think that these 
goals that we have here are achievable. Here, again, I think it 
is also important to point out that is exactly what they are, 
goals, but they are goals that we believe that we can achieve.
    Mr. Lewis. Is there overtime involved?
    Secretary Brown. Well, one of the things about overtime 
that we do when our numbers get out of line, to answer your 
question is, yes, there is overtime. We use overtime to try to 
control the timeliness to get it within a manageable situation. 
So, we always look for that. We did that, I know, in 1996.
    Mr. Lemons. I have recently authorized an additional $2.5 
million worth of overtime toward achieving these goals.
    Mr. Lewis. Well, you know, that overtime may provide a 
short-term solution but for many reasons long-term it is not. 
And, so, we need to know a little more.
    Secretary Brown. What is reflected in our out-years are 
long-term solutions. The overtime is to control this spike that 
we have primarily as a result of the new legislation, 
eligibility reform, the Persian Gulf initiative, where we had 
to redo the claims and so forth.
    Mr. Lewis. I am looking for a clarification of that in the 
record. That will be helpful.
    [The information follows:]

 Clarification of Short and Long Solutions to Processing Compensation 
                                 Claims

    The use of overtime and brokered work are near-term 
solutions that provide quick action to address the build-up of 
pending work in a few specific areas of focused effort. For the 
long-term, our Business Process Reengineering (BPR) initiative 
envisions a claims processing environment where, by the year 
2002, the workforce is made up of highly trained decision 
makers using information technology to provide faster service. 
We will be able to provide high quality claims decisions to 
veterans in a much more timely manner that utilizes fewer human 
resources. Further, the BPR claims processing environment will 
be more responsive to veterans' needs by improving our 
communications and outreach efforts to them.

                             pension claims

    Mr. Lewis. While the processing time for original 
compensation claims seems to get the greatest attention, it is 
not the only type of claim being processed. There are pension 
claims, both original and reopened. Are you currently 
processing the other types of compensation and pension claims 
according to your 1997 estimate of timeliness? And, if not, let 
me know why.
    Secretary Brown. We are looking real good on pension. We 
are especially excited about that. On original pension or 
reopened pension in 1996 it was 27 days and by the year 2000 it 
is going to be seven.
    There are some cases that can be done in a day. People can 
walk in, in a regional office and get it taken care of, 
particularly the DIC, those that are income-dependent and so 
forth. So, this is one area where we can really achieve some 
very noticeable results.
    Mr. Lewis. What do the shortfalls for 1997 portend for your 
1998 estimates of the average amount of time needed to process 
claims?
    Secretary Brown. The shortfalls?
    Mr. Lewis. Right.
    What do the shortfalls portend for your 1998 estimates, 
your 1997 shortfalls?
    Mr. Lemons. Well, as I said, I believe that with the 
additional overtime and the additional work we are offering and 
the change in the mix of employees that we are pursuing we will 
be back on track.

                     educational assistance claims

    Mr. Lewis. In the educational assistance program section, 
it is noted that the average number of days it takes to 
complete claims is increasing. It goes from 20 days in 1996, to 
24 in 1997, to 33 in 1998. This is reflected on pages 2-89. Why 
do you estimate that the amount of time it takes to complete 
educational assistance claims will increase?
    Mr. Lemons. Actually at the time of the budgetary 
requirement when we were factoring in the available resources 
those numbers reflected what we felt would be the shortfall in 
the education programs. We actually have, because of greater 
efficiencies, got that back on track to where the average time 
is 12 days in processing the education. We will give you an 
update on that, for the record, also.

                     Educational Assistance Claims

    The resource allocation process for 1997 led us to believe 
that an education staffing level of 490 (based upon the results 
from 1996) would allow us to complete claims in an average of 
15 days. Indeed, FY 1997 began with 462 staff in the four 
processing sites dedicated solely to education. This 
represented an increase from the previous year and with the 
continued growth expected, the targets appeared reasonable.
    Allocations for 1997 were revised in January to accommodate 
the President's 1998 Budget request. The education FTE 
allotment for 1997 was adjusted to 410 in the field, a 
reduction of 52 from the beginning of the year and 80 less than 
needed based upon projected growth and the 15-day goal. Given 
the projected growth and the reduced resources, timeliness 
estimates were recalculated at that time.
    We have not yet completed the staffing reduction required 
for FY 1997. Further, we are now realizing the full effects of 
consolidation which was completed in FY 1996. In addition, 
completed work through March is approximately two percent below 
last year's results at the same point in time and backlogs have 
not been a factor. Accordingly, we have been able to maintain 
an average of just under 13 days processing time. We anticipate 
completing FY 1997 with better timeliness in claims processing 
than estimated in the budget. Of course, staffing levels and 
workload increases are two variables which can always impact 
our goals if significant changes occur in either.

    Mr. Lewis. All right, thank you.

                    vba outyear workload projections

    For the compensation and pension section, the workload 
estimates go to the year 2002. However, the other parts of the 
VBA, the estimates only go to 1998. Why were the workload 
estimates for educational assistance and other parts of the VBA 
not projected to the year 2002?
    Mr. Lemons. Mr. Chairman, I became famous in Washington for 
this debate with the Office of Management and Budget. In every 
one of our program areas we are engaging in extensive redesign 
of our work processing area. As such, the long-range 
implications for workload management are changing.
    The Office of Management and Budget wanted to work with us 
and with our stakeholders because of the policy implications 
for the out-year estimates in all of these areas and requested 
that we pull back our out-year estimates until we had a chance 
to have that kind of detailed discussion in a GPRA environment 
and we are in the process of engaging both with the House and 
with the Office of Management and Budget in that detailed 
discussion.
    Mr. Lewis. I am sure you want to have us fully informed. 
So, we will appreciate your providing tables for the record 
showing the workload estimates to the year 2002.
    Mr. Lemons. Absolutely.
    [The information follows:]

[Pages 191 - 197--The official Committee record contains additional material here.]


                           blocked call rate

    Mr. Lewis. The blocked call rate represents the percentage 
of incoming calls that are never accepted in the queue due to a 
lack of available lines and VA employees to handle the 
telephone traffic. That rate is increasing. What is VA doing to 
reduce the number of blocked calls?
    Mr. Lemons. Before I left my prior position as Director of 
Central Area, and in consideration of some changes we are 
making at the St. Paul regional office and insurance center, we 
instituted a pilot project to specifically address the blocked 
call problem.
    This pilot project installed enhanced technology to allow 
us to handle over-flow, blocked calls throughout the Central 
Area in a manner that resulted in a reduction of the blocked 
calls made from some 24 percent down to 1 percent. This is a 
pilot project that we put in place. It has been a very 
successful pilot project and as we are able to continue and 
complete our evaluation, we anticipate exporting this elsewhere 
in the country.
    Mr. Lewis. Thank you.

                   vba information technology buyouts

    Late last year, VBA utilized the buy-out authority. A VBA 
memo on Y2K risk assessment, dated January 28, 1997, indicated 
that three key individuals involved with the Year 2000 project 
had been permitted to take buy-outs.
    What happened here? Buy-outs were not supposed to be 
offered to key individuals. The buy-outs were to be used 
selectively for restructuring and without any adverse impact.
    Secretary Brown. Mr. Chairman, why do we not ask the man 
who authored that?
    Mr. Lewis. The gentleman in the front of the house, I 
guess.
    Mr. Lemons. We did establish 10 categories of employees to 
be offered buy-outs. Some of those were supervisory employees, 
some of those were SES employees. We do not believe that we let 
any critical individuals go in regard to buy-outs. We 
authorized some 474 buy-outs to allow us to bring our staffing 
down.
    And, while it is true that three individuals who at the 
time of the buy-out were involved in Year 2K activities, they 
were supervisory individuals and were not working directly on 
the Year 2K activities. We do not believe that they were 
critical to either our ongoing progress in that area, nor were 
they critical to our successful planning or achievement of the 
Year 2K compliance.
    Secretary Brown. Mr. Chairman, I understand your concern 
and I will ask Newell Quinton, who actually wrote the memo, to 
tell us why he did it.
    Mr. Lewis. Can you identify yourself for the record?
    Mr. Quinton. Yes, sir. I am Newell Quinton, Chief 
Information Officer, VBA. And as Dr. Lemons said, we were 
moving to a position of reducing the number of supervisory 
positions in our whole IT arena.
    The positions that were involved in the buy-out were not 
considered direct labor in changing the code. This did not 
result in a negative impact on our ability to be Year 2000 
compliant. We will continue and have continued to redirect that 
program toward our plan to focus 30 FTE in direct labor in 
fixing the Year 2000 issue on the payment systems.
    And that continues and it follows the description of our 
effort that the Secretary talked about earlier this morning in 
terms of being able to be Year 2000 compliant by December 1998.
    So, our focus there is that there will be no reduction in 
the people actually producing the code but we will continue to 
shift the management issues and build teams to address each one 
of those payment systems as we go throughout this process.
    Mr. Lewis. We will ask you to look at our review of the 
memo we received from you regarding these matters so we can 
make sure that we are rounding out that question we have in 
this subject area. But beyond that, what is the cost of the 
buy-outs?
    Mr. Lemons. The net cost was just short of $1 million.

                            vba buyout plans

    Mr. Lewis. Okay. Does VBA plan to offer buy-outs in the 
fall of 1997?
    Mr. Lemons. We hope to achieve our attrition goals without 
offering buy-outs but we do have the potential, depending on 
the available funding for Fiscal Year 1998 for VBA, for the 
opportunity and may need to choose the option of exercising a 
buy-out in the first quarter of 1998.
    Mr. Lewis. If you do, I presume you have criteria that 
would be used and, if so, I would like to have those for the 
record.
    Mr. Lemons. Absolutely.
    [The information follows:]

                      VBA Buyouts in 1997 and 1998

    Over the past several years, the Veterans Benefits 
Administration (VBA) has made periodic changes and adjustments 
in our organization and processes. In order to continue 
providing quality and timely service to our Nation's veterans, 
we developed a comprehensive strategic plan that provides 
guidance and direction for reengineering our business 
processes. A critical part of our business processing 
reengineering and consolidation efforts is the flexibility to 
use the Voluntary Separation Incentive Payment (VSIP) necessary 
to achieve the right mix of personnel while accomplishing 
strategically targeted reductions.
    When we implemented the buyout in early 1997, we 
successfully separated 474 employees who met the criteria 
contained in VBA's strategic buyout plan. We anticipate 
offering another buyout in the first quarter of Fiscal Year 
1998 to further assist us in improving how we administer 
veterans benefits programs and service and in a manner that 
achieves fiscal savings. For example, we are hopeful of 
strategically targeting certain positions at the management 
level, occupations within Loan Guaranty, Information 
Technology, administrative and support, and some veterans 
benefits positions. The specific criteria that would be used in 
a 1998 buyout would be developed in late 1997. The criteria 
will be based on staffing and resources at that time. Once the 
criteria is finalized, we will be happy to share it with the 
Committee.
    The actual direct costs of the buyout, compared to 
alternative methods of achieving the needed reorganization and 
reductions, are not a barrier to implementing the program. To 
achieve the right mix of personnel and resources without buyout 
authority would result in major disruption in the organization 
and service we provide as we would have to resort to reduction 
in force, a management tool we do not wish to use.

                 Loan Guaranty restructuring initiative

    Mr. Lewis. Loan guaranty operations are being restructured. 
Loan processing and loan service and claims functions will be 
consolidated from 47 offices to the eight regional loan 
centers.
    A colleague is concerned with the proposed consolidation in 
the southeast, specifically the plan to move loan guaranty 
activities from St. Petersburg to Atlanta. What were the 
criteria used in reaching the decision to locate certain loan 
guaranty activities to Atlanta?
    Secretary Brown. I am going to ask Steve again to give us 
that criteria.
    Mr. Lemons. Mr. Chairman, this is one of our most 
successful restructuring initiatives. It will result in from 20 
percent--30 percent reduction in the actual loan processing and 
loan servicing claims personnel.
    We did a nationwide analysis of our 45 loan guaranty 
operations on 17 criteria, everything from the quality of the 
loan processing activities, to loan service activities, to the 
direct labor effectiveness of those two activities, to the 
actual staffing and the training, including the availability of 
mortgage bankers who work with us in direct support of the 
program and such issues as indirect costs and non-program 
specific criteria.
    The two offices you asked about, St. Petersburg and 
Atlanta, both came up very high in the criteria but the Atlanta 
office, in actuality, was the top office in the country. And 
even in the most recent evaluation of productivity, Atlanta for 
Fiscal Year 1996 was operating at 138 productivity and St. 
Petersburg at 132.
    In addition, Atlanta is centrally located within the 
jurisdiction of the consolidation. It has the highest 
concentration of mortgage bankers of any city with a VA office 
in the same city. And it is the location for a Department of 
Housing and Urban Development Homeownership center for 
processing of FHA loans which will allow us to partner up with 
HUD in offering government-wide focus on housing.
    And I might also say that the St. Petersburg regional 
office, the office in which the work will be moving, is in 
essence our largest independent operation in the country and it 
is the focal point for our VETSNET redesign. So, the St. 
Petersburg regional office continues to play a critical role 
and will play a critical and expanding role in overall 
operations in support of veterans benefits.
    Mr. Lewis. This line of questioning comes from one of our 
colleagues in the Appropriations Committee who is concerned 
about the St. Petersburg circumstance and he would ask 
initially why should not this consolidation take place at St. 
Petersburg instead?
    I would appreciate your addressing a number of questions 
that relate to the answering of that involving when would this 
move be finalized and what would the cost savings or 
differentials be, et cetera, so, that we can help you evaluate 
further the line of questioning that is taking place here.
    Secretary Brown. Mr. Chairman, are you going to give us the 
questions you want answered?
    Mr. Lewis. Yes, we will provide those questions for the 
record and I am sure the responses will all work out.
    [The information follows:]

[Pages 201 - 202--The official Committee record contains additional material here.]


                   Vocational Rehabilitation Program

    Mr. Lewis. A recent GAO report found fault with the 
vocational rehabilitation program. The GAO found that about 41 
percent of veterans dropped out of the program and that only 8 
percent of the participants got jobs. Does VA find anything 
wrong with this program and the low-rate of job placement and, 
if so, what do you plan to do about it?
    Secretary Brown. Well, basically we had a disagreement with 
GAO's interpretation of the data. However, we accepted the 
basic spirit, particularly that part of the report that talks 
about rehabilitating individuals without making sure that they 
had employment.
    We now have a policy in place that they will not be 
rehabilitated, certified as rehabilitated until they have a 
job. So, I think something good did come out of that.
    Mr. Lewis. So, I assume the 41 percent, for example, that 
they point to as the dropout figures are different than the one 
you are thinking about?
    Secretary Brown. Steve, why do you not give us an 
interpretation of that?
    Mr. Lemons. I can tell you that we had strong disagreement 
with the specific numbers used by GAO and I provided those 
objections to GAO. And I believe they might have been 
incorporated into their response. However, I would say that we 
are already engaged in a major redesign and refocus of the 
vocational rehabilitation program incorporating many of the 
concerns raised by GAO.
    In addition, specific to the issue about employment 
assistance, we have redoubled our efforts on joint training, 
and out-placing of veterans employment and training employees 
of the Department of Labor in VA vocational rehabilitation 
facilities to assist us in this area.
    So, it is an area of significant concern for us.
    Mr. Lewis. I want you to know it is of significant concern 
to Mr. Stokes and myself, as well. I would really like to 
personalize the response to those questions that we have here. 
There are others for the record. What we are really getting at 
when you talk about various priorities in your whole process is 
the question of, is the program worth the $300 million that was 
spent on it in 1995?
    Secretary Brown. It is definitely worth it.
    Mr. Lewis. You help make sure we understand that.
    Mr. Lemons. As the first Director of the Vocational 
Rehabilitation Counseling Service in VA I would tell you I 
believe it is a critical program for VA.

                            Closing Remarks

    Mr. Lewis. Mr. Secretary, that is really the end of our 
questioning for the record. I think you understand that in the 
last Congress I was very concerned about an atmosphere in which 
pre-election, at least a lot of our colleagues thought that 
some members, within the Secretariat, were spending an awful 
lot of time out in the countryside making speeches that came 
very close to the edge of political speeches versus speeches 
that were designed just to further veterans programs.
    Now, whether that interpretation was accurate or not there 
was a lot of concern about it and you and I discussed it and we 
discussed it in the record last year, as well. We are well 
beyond that at this point. This hearing and process has been a 
very positive process, I believe.
    I feel very, very strongly that in this environment, where 
dollars are mighty dear, that we need bipartisan interest and 
support in seeing your programs go forward on as positive a 
plane as possible. And that is the spirit, I think, of Hershey, 
that Mr. Stokes and I participated in where most of us 
recognize that very few of our solutions, at least, let alone 
our problems with veterans have to do with partisan politics.
    I think it is very important that we kind of expand that 
sort of view and attitude and exchange within this room but 
also in our day-to-day communications. I want you to know that 
I am very interested in seeing us move forward on that plane 
and do appreciate both your responses today and your 
cooperation, as well.
    Secretary Brown. Yes. I thank you so much, Mr. Chairman, 
for those comments. Like you, I am very pleased that we are 
past the elections of last year. It was a very difficult 
period, one of the most difficult periods in my life.
    Obviously, there are always two sides to interpretation. I 
like to think that it was not partisan on my part. I was doing 
what I feel that I have a mandate to do; and that is to try to 
make sure that veterans are treated fairly. And at the same 
time, not to do so in a way that would suggest that other folks 
do not have the same goal in mind, but maybe a different 
approach.
    But, having said that, I am very, very happy and excited 
about the aspects of working with you in the future. We are 
still in a transition, sir, a very difficult transition. You 
have heard Dr. Kizer describe his vision for change. You have 
heard Dr. Lemons talk about his reengineering project. I think 
we are all right in cemetery service.
    But all of this is going to require a lot of support, a lot 
of oversight, a lot of help and if we are to achieve our 
ultimate goal of providing clearly efficient service. I am not 
talking about that phony efficiency that we used to talk about, 
but I am talking about real efficiency where you are actually 
improving services for veterans--we are going to have to be 
able to work together to do that.
    I hope that I can continue to count on you, as I have even 
during that difficult period last year. You have always been a 
good friend of veterans and I hope that you will continue to 
help us and to look out for us particularly with respect to 
third-party reimbursement and the Medicare subvention.
    Mr. Lewis. Well, we look forward to working together. Mr. 
Stokes and I have prided ourselves upon our being able to 
handle the whole portfolio of very difficult accounts and do so 
in a manner that had us working hand-in-hand together in the 
final analysis. So, we do appreciate your participation.
    Mr. Stokes, any comment?
    Mr. Stokes. Mr. Chairman, I just would say that you have 
very accurately stated what I think is the case and what I am 
proud to be a part of in terms of the bipartisan way in which 
we try to approach the very difficult job we have here on this 
subcommittee. I appreciate it.
    Mr. Lewis. Thank you, Mr. Stokes.
    You will be relieved to know that that finishes our 
hearings on veterans affairs for now for 1998 and we will not 
have to extend this meeting into tomorrow. The Committee will 
stand adjourned until 9:55 on Wednesday, April 30th, when we 
will take testimony from Congressional and public witnesses on 
the Fiscal Year 1998 budget request for miscellaneous programs 
under the Subcommittee's jurisdiction.
    Secretary Brown. Before we close, for the record, Mr. 
Chairman, I just want to thank Mr. Stokes for his long, long, 
history of supporting veterans and their families. I appreciate 
it and I know the veterans, not only in the State of Ohio and 
your congressional district, but the veterans all throughout 
the nation, appreciate what you do for them, sir.
    Mr. Stokes. Thank you, Mr. Secretary, thank you very much.
    Mr. Lewis. The meeting is adjourned.
    Thank you very much, Mr. Secretary.

[Pages 206 - 1330--The official Committee record contains additional material here.]







                           W I T N E S S E S

                              ----------                              
                                                                   Page
Bauer, Roger.....................................................    37
Bowen, J.W.......................................................    37
Brown, Hon. Jesse................................................    37
Catlett, D.M.....................................................    37
Duffy, Dennis....................................................    37
Feussner, J.R....................................................    37
Kizer, K.W.......................................................    37
Lemons, S.L......................................................    37
Merriman, William................................................    37
Nebeker, F.O.....................................................     1
Pane, G.A........................................................    37
Yarbrough, C.V...................................................    37









                               I N D E X

                              ----------                              

                       Court of Veterans Appeals

                                                                   Page
Introduction--Budget Overview....................................     1
Statement of Honorable Frank Q. Nebecker.........................     3
Pro Bono Funding.................................................    10
Vacant Judicial Position.........................................    10
Case Statistics..................................................    11
Statistical Summary (Table)......................................    11
Case Backlog.....................................................    11
Pro Se Cases.....................................................    13
Length of Appeals Process........................................    13
VA Adjustment to Judicial Review.................................    13
Pro Bono Peer Review Report......................................    14
Judicial Process.................................................    14
Legal Representation for Pro Se Appellants.......................    15
Prohibitions on Legal Representation.............................    16
Fact Sheet.......................................................    18
Percentage of BVA Decisions......................................    19
Closing..........................................................    19
Budget Estimate..................................................    21

                     Department of Veterans Affairs

Witnesses........................................................    37
Benefits Programs...............................................47, 287
    Part I: Benefits.............................................   289
    Part II: Veterans Housing Benefit Program Fund...............   375
    Part III: Insurance Appropriation/Funds......................   414
    Part IV: Debt Management.....................................   441
Construction Programs..........................................597, 718
    Capital Construction Budget..................................    82
    Cleveland Cemetery, Phase I Development of...................   185
    Cleveland VAMC Parking Structure.............................   185
    Grants for the Construction of State Extended Care Facilities
                                                                51, 709
        D.J. Jacobetti State Veterans Home.......................
          82, 151................................................
    Grants for the Construction of State Veteran Cemeteries....51, 100, 
                                                                    714
    Grants to the Republic of the Philippines....................   716
    Major Construction..........................................51, 601
        Funding..................................................   180
    Major Medical Facility Project and Lease Authorizations......   719
    Minor Construction..........................................51, 693
    Parking Revolving Fund.......................................   705
    St. Petersburg Regional Office, Relocation of................   181
    Shared Service Center, Construction of.....................182, 184
Departmental Administration:
    Affirmative Action Programs:
        Minorities in Executive Positions........................
          104, 106...............................................
        Minority Contractors, Contracts with.....................   115
        Minority, Hiring of......................................
          107, 109, 114..........................................
    Buyout Costs, FY 1997 and FY 1996............................   159
    Drug Abuse by VA Employees...................................   116
    Federal Acquisition Streamlining.............................   156
    General Operating Expenses..................................49, 742
        Board of Veterans Appeals................................
          50, 980................................................
            Funding Reallocation.................................   128
            Reduction in Number of Appeals.......................   131
            Workload Estimates...................................   130
            Pro Bono Program.....................................   152
        General Administration...................................
          50, 960................................................
        Government Performance and Results Act (GPRA)............ 1,324
        Veterans Benefits Administration.........................
          49, 752................................................
            Claims Processing:
                Blocked Call Rate................................   198
                Compensation Claims, Processing..................   187
                Educational Assistance Claims....................   189
                Pension Claims...................................   189
                Short and Long Solutions to Processing 
                  Compensation Claims, Clarification of..........   188
            Employment...........................................   175
                Buyout Plans in 1997 and 1998....................   199
                Information Technology Buyouts...................   198
            Loan Guaranty Restructuring Initiative...............   199
                Productivity Measures of St. Petersburg and 
                  Atlanta Loan Guaranty Offices..................   201
            Medical Exams for Compensation and Pension Claims....   187
            Outyear Workload Projections and Performance.........
              190, 191...........................................
            Vocational Rehabilitation Program....................   203
    Management Efficiencies......................................    53
    Sexual Harassment:
        ``Zero Tolerance'' Policy................................   102
    Summary Volume...............................................  1125
    Veterans Population.........................................78, 153
        Combat Veterans..........................................    77
        Covered by Health Maintenance Organizations (HMOs), 
          Veterans...............................................    98
        Covered by Insurance, Veterans...........................    92
            Type of Insurance....................................    94
            Type of Insurance by Age.............................    94
            Type of Insurance Race/Ethnicity.....................    95
            Type of Insurance by Service-Connected Disability 
              Status.............................................    95
            Type of Insurance by Family Income...................    96
            Type of Insurance by Employment......................    96
            Type of Insurance by Self-Described Health Status....    97
        Demographics.............................................    91
        Veterans Receiving Benefits..............................    77
    Welfare, Hiring and Training People on.......................   175
    Year 2000 Computer Problem...................................   100
Medical Programs...........................................44, 446, 448
    Alcohol and Drug Addiction Treatment.........................   173
    Eligibility Reform...........................................   131
        Patient Enrollment.......................................   132
    Health Professional Scholarship Program......................   566
    Homeless Veterans............................................   173
    Medical Administration and Miscellaneous Operating Expenses..   546
        Management Efficiencies..................................
          178, 179...............................................
    Medical Care................................................44, 453
        DSS and AICS Systems.....................................
          61, 63.................................................
        Future Unique Patients and FTE...........................
          136-149................................................
        Goals, 30-20-10..........................................    65
            20 Percent Goal to Treat More Veterans, Anticipated..   133
            30 Percent Goal to Lower Per-Patient Cost............   133
            Achieving 30-20-10 Goals.............................   134
            Clerk's Note: If Third Party Legislation is Not 
              Enacted............................................   135
            Strategic Plans......................................    66
        Medicare Subvention Pilot Demonstration..................
          99, 164................................................
            Pilot Locations......................................   165
            Veterans Organizations Views.........................   166
        Outpatient Services:
            Shifting Services from Inpatient to Outpatient.......   151
            Visits in 1997.......................................
              162, 163...........................................
        Pacemaker Program........................................    90
        Patient Abuse............................................   116
        Raleigh, NC Veterans Center..............................    85
        Staffing.................................................
          157, 162...............................................
            Buyout Strategy, VHA.................................
              159, 160...........................................
        Unique Patients..........................................
          141, 158...............................................
        Veterans Equitable Resource Allocations System (VERA)....
                                                          84, 154
            Florida Veterans.....................................    74
            Michigan Under VERA, Funding for.....................   150
            Shifting Resources Under VERA........................    70
        Veterans integrated Service Networks (VISN) 3............    69
            Holding Public Hearings in VISN 3....................    69
            Mangement Efficiencies--VISN 3.......................   119
        Waiting Times............................................
          167, 169...............................................
    Medical Collections.........................................46, 553
        Administrative Expenses, MCCR............................
          56, 90.................................................
        Collections:
            Aging Population on Collections, Impact of...........    61
            Fee-For-Service Plans, Collections From..............    57
            Incentives, Collection...............................    64
            Increasing MCCR......................................
              55, 59.............................................
            Provider Charges.....................................    99
        Third-Party Reimbursements...............................    76
        User Fee Proposal........................................53, 90
    Medical and Prosthetic Research.........................46, 74, 532
        Deferred Research Projects...............................    88
        Diabetes Research........................................   124
        Funding..................................................
          75, 128................................................
            Medical Care Funds Devoted to Research...............   171
            Reduction, Research Funding..........................
              85, 86.............................................
        Deferred Research Projects...............................    88
        Gulf War Illness Research................................
          76, 185................................................
        Minority Researchers Institutions........................   103
        Osteoporosis Research....................................   177
        Parkinson's Disease Research.............................
          171, 172...............................................
        Prostate Cancer Research.................................   121
        Radioimmune Detection and Therapy Collaboration..........   123
        Research Budget by Disease Entity, Percentage of.........   125
            Table 1: VA Inpatient Utilization and Costs by 
              Diagnosis-Related Groups, FY 1994..................   125
            Table 2: Medical Research Service Funding for 
              Selected Diseases and Disorders, FY 1996...........   126
    Other Medical Analysis.......................................   589
    Revolving and Trust Funds....................................   567
National Cemetery System.......................................50, 1064
    Cleveland Cemetery, Phase I Development of...................   185
Office of Inspector General....................................51, 1090
Remarks:
    Closing Remarks..............................................   203
    Opening Remarks..............................................    37
    Secretary of Veterans Affairs Statement......................39, 41
Questions for the Record:
    Congressman Lewis:
        Construction:
            1997 Projects Listing................................
              227, 228...........................................
            Major Construction Projects, Status Report on........
              225, 226...........................................
            Brevard County, FL, Outpatient Clinic................   225
            Chilicothe, OH, VA Medical Center, Ambulatory Care 
              Facility at........................................   210
            Syracuse VA Medical Center, Renovate Outpatient Space 
              at.................................................   210
            Travis Air Force Base, CA, Proposed Hospital at......   225
        Government Performance and Results Act (GPRA)............   234
            Annual Performance Plans.............................   236
            Congressional Consultation...........................   240
            Implementing GPRA....................................   238
            Inter-Agency Coordination............................   239
            Linking Strategic and Annual Performance Goals.......   237
            Results-Oriented Performance Measures................
              237, 240...........................................
            Stakeholders.........................................   239
            Strategic Plans......................................   235
        Veterans Benefits:
            Debt Management......................................   233
            Employmetnt..........................................   230
            Systems Modernization Efforts........................   232
        Veterans Health Care:
            ADP Activities, Medical..............................   224
            Activation Costs.....................................   218
            Capitation Funding...................................   211
            Career Development of Clinician-Scientists...........   219
            Career Development Program...........................   219
            Clinical Research vs. Basic Research.................   222
            Community-Based Outpatient Clinic in Alamogordo, NM..   206
            Diabetes Research and Treatment......................   220
            Feasibility of Transforming VA into a Government 
              Corporation........................................   218
            Flexible Sigmoidoscope...............................   209
            Health Professional Education........................   217
            Hepatitis C Treatment................................   230
            International Collaboration on Research..............   223
            Medical Care Appropriation Language, Proposed Change 
              to.................................................   216
            Medical Care--Budgetary Resources....................   212
            Medicare Pilot Demonstration Project.................   210
            Office of Veterans Affairs Technology and 
              Commercialization, Establishing an.................   209
            Outpatients Visits...................................   214
            Polypropylene Prosthetic Technology..................   223
            Prioritizing Research................................   222
            Prostate Cancer Research.............................
              220, 222...........................................
            Prosthetic Research..................................   242
            Psychology Internship Program........................   206
            VA Health Care Trend Data............................   213
            Veterans Counseling in Williamsport, PA..............   206
            Veterans Equitable Resource Allocation System........   214
    Congressman Knollenberg:
        Combat Veterans..........................................   246
            Table 4: Projected Number of Veterans by Combat 
              Status: 2010, 2015.................................   246
        Veterans Population......................................   243
            Table 1: Veterans, Dependents of Veterans and 
              Survivors of Deceased Veterans Receiving Benefits 
              from VA, 1996......................................   244
            Table 2: Living Veterans Who Have Received Benefits..   245
            Table 3: Living Veterans Who Have Received Veterans 
              Benefits by Specific Periods of Services...........   245
    Congressman Frelinghuysen:
        Community-Based Outpatient Clinics in New Jersey.........   247
        Community-Based Clinics Nationwide, Development of.......   247
        Federal Supply Schedules.................................   256
        Lyons and East Orange, Future Plans for..................   250
        Morristown Outpatient Clinic.............................   247
        Nursing Home Care........................................   248
        Radioimmunodection and Radioimmunotherapy................   257
        Research Funding by Disease..............................   257
        State Home Program.......................................   250
        Surgical Procedures at VISN 3, Ratio of..................   250
        Tertiary Care Within VISN 3..............................   249
        Veterans Equitable Resources Allocation (VERA), ``Hold 
          Harmless Provisions on the Implementation of...........   251
        VISN 3...................................................
            Achievements.........................................   253
            Employment...........................................   252
            Funding Allocations..................................   260
    Congressman Hobson:
        Chilicothe VAMC..........................................   263
        Medical Programs.........................................   262
        Persian Gulf Syndrome....................................   263
        Rents and Utilities, Decrease in.........................   264
    Congressman Stokes:
        Grants for the Construction of State Extended Care 
          Facilities.............................................   267
        Minority Business Contracts..............................   269
        National Cemetery System.................................   266
        Persian Gulf Syndrome Research...........................   267
        Spina Bifida Provision...................................   270
        Veterans Equitable Resource Allocation (VERA) Methodology   265
        Women and Minorities Employed by VA......................   269
    Congresswoman Kaptur:
        Agent Orange.............................................   273
        ``Category C'' Veterans..................................   275
        Health Professional Scholarship Program..................   277
        Itemized Billing/Third-Party Billing.....................   275
        Medical Research, VA.....................................   274
        Mental Illness Research..................................
          278-285................................................
        Mental Illness Research and Education Centers............   286
        Military Retirees Over 65................................   276
        National Cemetery System.................................   272
        Taxing Veterans..........................................   272