[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]




                DEPARTMENTS  OF  VETERANS  AFFAIRS  AND

                 HOUSING  AND  URBAN  DEVELOPMENT,  AND

                  INDEPENDENT AGENCIES APPROPRIATIONS

                                FOR 2003

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS
                             SECOND SESSION
                                ________
            SUBCOMMITTEE ON VA, HUD, AND INDEPENDENT AGENCIES
                   JAMES T. WALSH, New York, Chairman
 TOM DeLAY, Texas
 DAVID L. HOBSON, Ohio
 JOE KNOLLENBERG, Michigan
 RODNEY P. FRELINGHUYSEN, New Jersey
 ANNE M. NORTHUP, Kentucky
 JOHN E. SUNUNU, New Hampshire
 VIRGIL H. GOODE, Jr., Virginia
 ROBERT B. ADERHOLT, Alabama        ALAN B. MOLLOHAN, West Virginia
                                    MARCY KAPTUR, Ohio
                                    CARRIE P. MEEK, Florida
                                    DAVID E. PRICE, North Carolina
                                    ROBERT E. ``BUD'' CRAMER, Jr., 
                                    Alabama
                                    CHAKA FATTAH, Pennsylvania

 NOTE: Under Committee Rules, Mr. Young, 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, Timothy L. Peterson, Dena L. Baron,
         Jennifer Miller, and Jennifer Whitson, Staff Assistants
                                ________
                                 PART 5
                     DEPARTMENT OF VETERANS AFFAIRS

                              

                                ________
         Printed for the use of the Committee on Appropriations
                                ________
                     U.S. GOVERNMENT PRINTING OFFICE
 78-873                     WASHINGTON : 2002

                                  COMMITTEE ON APPROPRIATIONS

                   C. W. BILL YOUNG, Florida, Chairman

 RALPH REGULA, Ohio
 JERRY LEWIS, California
 HAROLD ROGERS, Kentucky
 JOE SKEEN, New Mexico
 FRANK R. WOLF, Virginia
 TOM DeLAY, Texas
 JIM KOLBE, Arizona
 SONNY CALLAHAN, Alabama
 JAMES T. WALSH, New York
 CHARLES H. TAYLOR, North Carolina
 DAVID L. HOBSON, Ohio
 ERNEST J. ISTOOK, Jr., Oklahoma
 HENRY BONILLA, Texas
 JOE KNOLLENBERG, Michigan
 DAN MILLER, Florida
 JACK KINGSTON, Georgia
 RODNEY P. FRELINGHUYSEN, New Jersey
 ROGER F. WICKER, Mississippi
 GEORGE R. NETHERCUTT, Jr., 
Washington
 RANDY ``DUKE'' CUNNINGHAM, 
California
 TODD TIAHRT, Kansas
 ZACH WAMP, Tennessee
 TOM LATHAM, Iowa
 ANNE M. NORTHUP, Kentucky
 ROBERT B. ADERHOLT, Alabama
 JO ANN EMERSON, Missouri
 JOHN E. SUNUNU, New Hampshire
 KAY GRANGER, Texas
 JOHN E. PETERSON, Pennsylvania
 JOHN T. DOOLITTLE, California
 RAY LaHOOD, Illinois
 JOHN E. SWEENEY, New York
 DAVID VITTER, Louisiana
 DON SHERWOOD, Pennsylvania
   
 VIRGIL H. GOODE, Jr., Virginia     DAVID R. OBEY, Wisconsin
                                    JOHN P. MURTHA, Pennsylvania
                                    NORMAN D. DICKS, Washington
                                    MARTIN OLAV SABO, Minnesota
                                    STENY H. HOYER, Maryland
                                    ALAN B. MOLLOHAN, West Virginia
                                    MARCY KAPTUR, Ohio
                                    NANCY PELOSI, California
                                    PETER J. VISCLOSKY, Indiana
                                    NITA M. LOWEY, New York
                                    JOSE E. SERRANO, New York
                                    ROSA L. DeLAURO, Connecticut
                                    JAMES P. MORAN, Virginia
                                    JOHN W. OLVER, Massachusetts
                                    ED PASTOR, Arizona
                                    CARRIE P. MEEK, Florida
                                    DAVID E. PRICE, North Carolina
                                    CHET EDWARDS, Texas
                                    ROBERT E. ``BUD'' CRAMER, Jr., 
                                    Alabama
                                    PATRICK J. KENNEDY, Rhode Island
                                    JAMES E. CLYBURN, South Carolina
                                    MAURICE D. HINCHEY, New York
                                    LUCILLE ROYBAL-ALLARD, California
                                    SAM FARR, California
                                    JESSE L. JACKSON, Jr., Illinois
                                    CAROLYN C. KILPATRICK, Michigan
                                    ALLEN BOYD, Florida
                                    CHAKA FATTAH, Pennsylvania
                                    STEVEN R. ROTHMAN, New Jersey

                 James W. Dyer, Clerk and Staff Director

                                  (ii)

 
DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT, AND 
              INDEPENDENT AGENCIES APPROPRIATIONS FOR 2003

                              ----------                              

                                            Tuesday, March 5, 2002.

                     DEPARTMENT OF VETERANS AFFAIRS

                               WITNESSES

ANTHONY J. PRINCIPI, SECRETARY
FRANCES M. MURPHY, M.D., ACTING UNDER SECRETARY FOR HEALTH
GUY H. McMICHAEL, III, ACTING UNDER SECRETARY FOR BENEFITS
ROBIN HIGGINS, UNDER SECRETARY FOR MEMORIAL AFFAIRS
D. MARK CATLETT, PRINCIPAL DEPUTY ASSISTANT SECRETARY FOR MANAGEMENT

                       Statement of the Chairman

    Mr. Walsh. I will call the VA-HUD Subcommittee to order 
this morning. This is our first hearing of the fiscal year for 
the 2003 budget--2003, how time flies, 3 years in the new 
millennium.
    Just to take care of administrative business before we get 
to the budget, I would like to welcome the Members of the 
subcommittee back to the business of appropriations. We have a 
condensed hearing schedule in hopes that we will be able to 
hold the subcommittee markup before Memorial Day and proceed 
quickly to the floor by the end of June. I suggest to my 
colleagues on the subcommittee that we be prepared for an early 
markup.
    Today we welcome Secretary Anthony Principi and the senior 
leadership of the VA to discuss with us the 2003 budget request 
for the Department of Veterans Affairs. I would also like to 
note that the confirmation hearings for Dr. Robert Roswell to 
be Under Secretary of Veterans Health Administration and 
Admiral Daniel Cooper to be Under Secretary of the Veterans 
Benefits Administration have been postponed until March 14; but 
we look forward to their service and leadership, and we thank 
Dr. Murphy and Judge McMichael for stepping in during this 
transition.


                           budget provisions


    The fiscal year 2003 budget request for the Department of 
Veterans Affairs provides for an overall increase of $5.7 
billion for a total funding of over $56.57 billion for the 
Department, of which $30.1 billion is for mandatory programs 
and $26.4 is for discretionary. However, the $5.7 billion 
proposed increase is a little misleading. Roughly $1 billion of 
this increase is for two proposals which shift the costs of 
ongoing activities into the VA budget: a new employment program 
and the government-wide benefits shift.
    Since the purpose of this hearing is to talk specifically 
about current VA programs, I asked the Secretary to speak to 
program funding levels and increases, not the transfers.


                           claims processing


    Mr. Secretary, last year at this time you were newly 
appointed in the administration. You inherited a massive system 
that sorely needed leadership, and we were looking for changes 
and we asked that you move mountains. In the area of claims 
adjustment, you promised the committee a quick, but thorough, 
task force to identify immediate action and solutions to 
address the claims backlog. True to your word, the task force 
headed by Admiral Cooper delivered the recommendations on time, 
and later in this hearing I hope to hear what recommendations 
you are implementing and what results we can expect.


                         construction programs


    The budget includes $536 million for the various 
construction programs administered by the VA. I am pleased to 
see that the administration finally heard Congress' message and 
funded the State Home Grant program at $100 million.


                          national cemeteries


    Veterans' cemetery needs are becoming a concern as we move 
into the next decade. With scarce resources, we need to 
carefully plan and identify the areas with greatest need to 
deliver the most impact. The MIL-bill directed the VA to 
conduct a nationwide needs study, and I look forward to 
delivery of that report in April. I am pleased to note that the 
administration increased funding for the State Cemetery Grant 
program to help address those needs.


                                 cares


    Further, the budget request includes funding for the next 
phase of the CARES initiative. Last year the Congress provided 
$40 million of the $60 million for major construction for CARES 
for the construction of a sorely needed new blind and spinal 
cord injury center at the Edward Hines, Jr., Medical Campus, 
provided that the VA consolidate operations to maximize their 
capital assets. I am pleased to see the announcement that the 
VA decided on an option from the CARES study, but I have some 
questions and concerns on timing of the option implementation.


                     medical care funding proposal


    This year's budget request includes $1.4 billion in 
increases for medical care. Normally that would be good news, 
and it is good news. Instead, though, the most notable 
provision in the budget request is a proposal to create a cost-
share policy for Priority 7 veterans. Like many of my 
colleagues, I am hearing a lot of reactions to this proposal, 
and I can see why a little background and clarification is 
necessary for this initiative.
    In 1996, the Congress changed the eligibility criteria for 
treatment in VA medical facilities. Prior to 1996, only 
veterans who were service-connected or fell below VA's 
threshold were eligible for treatment in a VA facility. 
Eligibility reform opened the door to all veterans based on 
available resources and space, with the Secretary making an 
enrollment decision at the beginning of each year. Veterans are 
categorized into 7 priority groups. Priority 1 through 6 
veterans are those with service-connected conditions or below 
the income threshold, and the funds we appropriate every year 
are for taking care of those veterans; Priority 7 veterans are 
to be enrolled in the system as space is available and the 
receipts from first-and third-party payers' co-pays and 
insurance offset the cost of the services the VA provides. And 
I should remind everyone that appropriated dollars are 
allocated through VERA only for 1 through 6 category veterans; 
Priority 7 veterans are not figured into the appropriations 
equation.


                          medicare subvention


    A secondary part of the 1996 plan was the authority to bill 
private insurers and Medicare for the service VA provided to 
Medicare-eligible veterans, otherwise known as Medicare 
subvention. However, the VA was very slow in getting the 
billing operations off the ground, and the Ways and Means 
committee has not acted on the subvention part of eligibility 
reform.
    Six years later--and I am sure some of my colleagues will 
say earlier than that--we are facing a true crisis. The number 
of Priority 7 veterans in the system has grown 500 percent 
since 1996. At our urging and the VA's urging and the service 
organizations' urging, hospital directors went out to sell 
their services to veterans in hopes of keeping their hospitals 
active and new receipts coming in. The Priority 7 veterans came 
and the funding sources did not.
    I spoke with Ways and Means Chairman Bill Thomas just last 
week, and with the challenges his committee is facing, I don't 
expect any action on Medicare subvention this year. In addition 
to the flood of new customers, the VA has had to deal with an 
ambitious authorizing committee which seems to author a 
comprehensive new benefits package every year, promising 
everything to everyone.
    Mr. Secretary, I know you are a former Veterans' Committee 
staff director, and perhaps you are being visited by a curse 
muttered by appropriators during your authorizing tenure; 
however, we need to take a closer look at what comprises the 
health benefits package and what makes the best sense to help 
the most people or, at the very least, offers the best quality 
of care to the optimal number of people.


                     priority 7 cost-share proposal


    The cost-share proposal, as I understand it, would be 
applicable to Priority 7 veterans only. VA would first bill the 
veteran's identified insurance company and put any insurance 
receipt toward the $1,500 cap, dollar for dollar. The veteran 
would then be responsible for any balance of 45 percent of the 
reasonable charge.
    For example, if a veteran gets X rays costing $100, the 
veteran is charged $45 for the X rays, payable by the veteran 
or the veteran's insurance company. If the veteran receives a 
knee replacement for a nonservice-connected injury, the veteran 
is charged only $1,500, not the full $5,000 cost. In addition 
the veteran is able to make the payments over time.
    Prescriptions are not part of the cap, and the VA will 
still only charge $7 for a 30-day supply.
    VA provided some very compelling data when I asked about 
the numbers they used to arrive at these thresholds. These are 
those facts:
    Eighty-five percent of the Priority 7 veterans use $1,500 
or less in annual costs and account for only 38 percent of the 
VA's total cost of Priority 7s;
    Fifteen percent of priority 7s consumed more than $1,500 in 
care, but accounted for 62 percent of the VA's total cost for 
Priority 7s;
    Over 50 percent of Priority 7s had annual outpatient costs 
of $400 or less;
    About 50 percent of Priority 7s list at least $40,000 in 
annual income.
    Their committee has an obligation to ensure that our 
Priority 1 through 6 veterans--again, those who are service 
connected or below the income eligibility, those that are the 
VA's core mission and responsibility--have clear and consistent 
access to the VA. I am not sure that this cost-share plan is 
the final answer or that the established thresholds and caps 
are correct. However, I do believe we need to keep the dialogue 
open and give some thought to how we are going to manage the 
system and still provide for priority 1 through 6 veterans.
    Mr. Secretary, I ask that you and your staff help us and 
work with us to find a reasonable solution, and I apologize for 
the length of that statement, but I thought there were a lot of 
issues that needed to be covered, and I wanted to provide broad 
parameters for the hearings, because we have some very critical 
issues to deal with this year.
    And with that, I would call upon my good friend and 
colleague, Mr. Mollohan, the ranking member of the 
subcommittee, for his opening remarks; and then we will go to 
the Secretary for his.
    Mr. Mollohan.

                    Statement of the Ranking Member

    Mr. Mollohan. Thank you, Mr. Chairman.
    Mr. Secretary, I would like to join the chairman and 
welcome you and your excellent staff to the hearing today. I 
read your budget submission with interest, and I am pleased to 
see that it includes $1.5 billion for an increase in existing 
discretionary programs. Thus, you are implicitly acknowledging 
the rising cost of providing proper medical and other services 
to our veterans.
    While that increase is nice to see, I think the budget is 
problematic in a number of ways. In particular, I have great 
concern that your budget may be based on unrealistic 
assumptions of savings, principally in the area that the 
chairman has spent a considerable amount of time in his opening 
statement addressing.
    The $1.1 billion in savings from charging a $1,500 
deductible for Priority 7 veterans: This is a population of 
veterans who are going to be hit by an increase in the 
prescription drug copayment as well. Clearly the authorizers 
need to address this issue. Expectations have been created and 
I am not sure how easily the Appropriations Committee can deal 
with them.
    As you are well aware, the VA continues to face many of the 
same problems it has faced in previous years, such as providing 
our veterans access to timely medical care, providing timely 
appeals for benefits decisions, and ensuring that veterans are 
aware of the benefits to which they are entitled.
    Additionally, the VA continues to face the challenge of 
assisting the significant number of homeless veterans--those 
with mental health issues, those with drug problems, and those 
who need long-term care and access to home health care. Your 
service to the Department of Veterans Affairs and to veterans 
generally shows your commitment to these issues, and this 
committee has been really supportive of providing the resources 
necessary to meet the obligations of our veterans.
    I look forward to working with you and the chairman as this 
process moves forward.
    Thank you, Mr. Chairman.
    Mr. Walsh. Thank you, Alan.
    Mr. Secretary.

                Statement of Secretary Anthony Principi

    Secretary Principi. Thank you, Mr. Chairman, Mr. Mollohan, 
members of the committee.
    It is indeed a pleasure to be back before you to talk about 
our 2003 budget request. And Mr. Chairman, Mr. Mollohan, I 
think you very clearly and accurately stated both the request 
and some of the challenges that the committee faces going 
forward. So I shall be very, very brief and summarize my 
comments.
    I am very grateful to the President for this budget, $58 
billion--$30.1 billion in entitlement programs, $27.9 billion 
in discretionary funding, a $6.1 billion increase over the 2002 
enacted levels. Specifically, the increases, when you back out 
the transfers from OPM, some of the accounting transfers that 
have taken place, the $260 million proposed as part of the 
deductible, there is a real 7 percent apples-to-apples increase 
of $1.57 billion in health care; and we can talk about whether 
that is enough, or not, to meet this burgeoning demand that we 
all know about.
    There is a $17 million increase for our cemetery program. 
We are requesting a $94 million increase for the Veterans 
Benefits Administration. I would like to briefly talk about 
some of the progress we are making in addressing the backlog of 
claims. And then there is a $64 million increase in our capital 
funding, our capital program, our grant program.
    There is a $197 million transfer from the Department of 
Labor to move the Veterans Employment and Training Service over 
to VA. I think that's a very, very good proposal, and 
hopefully, we will have a chance to discuss it during the 
question-and-answer period.

                     VETERANS HEALTH ADMINISTRATION

    Our commitment to research continues to be very strong. The 
overall research program is $1.46 billion. That is a $409 
million request and direct appropriation, another $401 million 
or thereabouts subsidy for medical care appropriation, and then 
the balance comes from various Federal agencies and 
universities as part of the overall research program.
    Our medical care appropriation is $25 billion. That 
includes $1.5 billion in collections and the increase that I 
mentioned, and that will allow us to treat nearly 4.9 million 
veterans. This is a 3.3 percent increase over the number of 
patients we are going to be treating in 2002, and I think, as 
you clearly stated, the growth in workload has been nothing 
short of phenomenal.
    There are lots of reasons for that. I attribute the opening 
of 622 outpatient clinics close to veterans' homes, a very 
generous benefits package that we have for our Nation's 
veterans and, of course, improvements in quality and patient 
safety as well as fluctuations in the economy. The closing of 
Medicare HMOs has also contributed to this burgeoning workload, 
but there has been a real 38 percent average increase per year 
in veterans who are coming to us for care. And as you stated, 
when we started in 1996 with the eligibility reform, 3 percent 
of the workload was Priority 7s, and today it is 33 percent of 
our workload, and it is expected to grow to 42 percent by the 
end of the decade.
    So clearly, almost half of the workload will be in this one 
category by the end of the decade without any policy changes, 
or if we continue this system of open enrollment. Clearly, it 
is placing great strains on the system, notwithstanding a 
tremendous increase.

                       $1,500 DEDUCTIBLE PROPOSAL

    Notwithstanding the fact that we are now collecting over a 
billion dollars in medical care cost recovery, we are unable to 
make ends meet, and that is part of the reason for the request 
for the $1,500 deductible.
    I think you clearly stated how it would work, but I want to 
stress that we are very open to discussions, we are open to 
working with the members of this committee to fashion a 
solution to this problem. We certainly are not wed to $1,500 or 
45 percent of reasonable charges; we can look at various 
options. I know that appropriations are difficult, and I know 
Medicare subvention is probably out for this year. We don't 
want to close enrollment to all Priority 7s, so our options are 
few and far between. Therefore I think we need to work 
collaboratively to find the appropriate solution for this 
problem.
    Unprecedented numbers of veterans seeking care from us is a 
good problem in many respects, but at the same time, it is 
causing waiting times to increase.
    I know I am hearing from service-connected disabled 
veterans who feel they are being shortchanged. I am concerned 
that we will see degradations in quality. There are some 
warning signs on the horizon, and I think together we need to 
address them.
    I am pleased that you made known your position about the 
mandate from the authorizing committees. I think that is 
probably my curse, but indeed that is something that we have to 
look at, because I think there is somewhat a disconnect between 
the authorizers and the appropriators. Anytime we get a new 
mandate for any program, the costs have to come out of 
somewhere; and that is problematic.

                     PROCUREMENT REFORM TASK FORCE

    Let me just briefly mention, I convened a Procurement 
Reform Task Force and I have its report on my desk. I intend to 
look very seriously at their recommendations to improve our $5-
billion-a-year procurement program and I may add some 
recommendations or new ideas to their recommendations. I am 
very, very proud of the work that they performed.

                        ENTERPRISE ARCHITECTURE

    We have established an Enterprise Architecture Strategy 
Governance and Implementation Plan. Part of that plan is an 
Information Technology Board and an Enterprise Architecture 
Council. I think that will go a long way toward improving our 
investment in information technology and ending stovepipe 
design, development and procurement. Part of the plan also is a 
new oversight process that will manage our information 
technology program.

                      CLAIMS PROCESSING TASK FORCE

    The Claims Processing Task Force did a fantastic job, and I 
think we are beginning to see results. In January, we set a 
record of 62,536 decisions. That record was broken in February. 
We decided over 62,900 claims in the month of February. Those 
figures compare to 29,036 January a year ago and 28,900 
February a year ago, so we have more than doubled our decisions 
in 1 year. I credit the focus and the discipline of our new 
team under our acting Under Secretary, Guy McMichael, and of 
course, the men and women who served on the Claims Processing 
Task Force. We have a long way to go, but we now know where we 
are going and how we are going to get there. So that is real 
good news.
    Mr. Chairman and members of the committee, we face enormous 
challenges, but I think we are well positioned, and by working 
with this committee, we can overcome them.
    Thank you, sir.
    [The statement of Secretary Principi follows:]

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    Mr. Walsh. Thank you very much.
    We will proceed with questions, and I have advised the 
members that we will each have an opportunity to take 15 
minutes for questions and answers. That should give us an 
opportunity to discuss at some length and depth these important 
issues.
    First of all, achievement on claims is remarkable, and to 
you and your staff and Mr. McMichael, congratulations on that. 
That is very encouraging. That was one of the biggest issues 
you had to deal with it, and obviously you have taken it on.
    Another issue that we have discussed is the Priority 7 
issue, and as I recall, last year the Veterans' Administration 
had proposed that we cut off new applications for Priority 7s; 
and the White House, at the 11th hour, suggested that that 
wasn't the right way to go and that they would ask you to hold 
off on that decision and keep the enrollment open and they 
would, quote, ``find the additional funds''.

                          SUPPLEMENTAL FUNDING

    I read that they had said this and that there would be a 
request in a supplemental appropriation for these funds. As 
yet, I have seen no request for these funds; and I wonder if 
you have requested those additional funds, and if you could 
please provide us with the status of that shortfall.
    Secretary Principi. Yes, Mr. Chairman, I certainly have 
requested supplemental funding in the amount of $142 million, 
and I have been assured that the supplemental is forthcoming, I 
believe this month. It may be part of the DOD, supplemental 
request, but it should be here, sir, any day now. That is my 
understanding, but I have been told without any uncertainty 
that those funds are forthcoming.
    Mr. Walsh. Did they give you a sense of when the 
supplemental would be brought out?
    Secretary Principi. I heard it was very soon, Mr. Chairman. 
I don't have a precise time. I don't know if we do or not. I 
will get back with you on that.
    But I have expressed some urgency that, for the purposes of 
planning and hiring the appropriate staffing to meet this 
increased workload, it was important that we get that 
supplemental up to the Hill, and I was told that the 
supplemental will be requested.
    [The information follows:]

                         Supplemental for 2002

    The Administration sent a supplemental funding request of 
$142 million to Congress on March 21, 2002. VA can provide 
health care to an estimated 143,039 Priority 7 new enrollees 
during fiscal year 2002 with $142 million in supplemental 
funding. This will ensure VA has health care funding consistent 
with the President's decision to keep VA veterans' enrollment 
open for all eligible veterans.

    Mr. Walsh. So your request would be for $142 million, and 
that is what you anticipate is the cost of adding those 
additional Priority 7s for last year?
    Secretary Principi. That is the portion of the overall 
shortfall that, without a supplemental, would have been needed 
to support the treatment costs for new Priority 7s for the 
balance of 2002; but, I don't think it is going to cover all of 
the costs. We have taken management actions to meet the 
remainder of whatever shortfall we might have.
    For example, we are realizing certain efficiencies by 
centralizing control of dollars that Dr. Murphy then 
distributes to the field. So, overall, we think with the 
efficiencies that we have made coupled with some capital 
conversion that may be necessary, we will have the dollars with 
the $142 million to meet the shortfall.
    Mr. Walsh. That is on the discretionary side, right?
    Secretary Principi. Yes, sir.

                     BENEFITS PROGRAM SUPPLEMENTAL

    Mr. Walsh. How about the mandatory side, benefits? Last 
year I know we had to go back in and put additional money in 
the supplemental for benefits. Is that going to be the case 
this year also?
    Secretary Principi. No, sir, it doesn't appear to be.

                  COSTS FOR NEWLY ENROLLED PRIORITY 7S

    Mr. Walsh. You have anticipated substantial growth in 
Priotiry 7s. What do you anticipate in 2003 will be the 
additional cost for the newly enrolled Priority 7s?
    Secretary Principi. Without the deductible----
    Mr. Walsh. Without the deductible.
    Secretary Principi [continuing]. $1.1 billion.
    Mr. Walsh. For this year's budget?
    Secretary Principi. That is correct.
    If you could speak up on that, Dr. Murphy.
    Dr. Murphy. We had projected that Priority 7 enrollees 
would go up to 2.2 million in 2003 for a total cost of over 
$2.8 billion.
    Mr. Walsh. So that would exceed the increase that has been 
proposed by the administration for health care?
    Secretary Principi. Yes, sir, without the deductible, that 
is a correct.
    Mr. Walsh. So just the increase in Priority 7's needs would 
eat up the entire increase proposed.
    We do have a big problem, and we do need to have some 
serious discussion about how to deal with this, because 
clearly, as you mentioned, the service-connected veterans will 
suffer. In terms of delays and pressure on the system, they 
will suffer, and I think we really need to make sure that we 
meet our core mission.
    Secretary Principi. That is a very true, Mr. Chairman.
    I would just add that under open enrollment, you can't 
discriminate against one or the other, so whether you are a 
Priority 1, 100 percent service-connected, or Priority 7, once 
you are in, you are in; and if you are in line first as a 
Priority 7, you get the care first. We don't have any 
prioritization. So there are some fundamental issues here that 
we have to grapple with.

                        NEW LEGISLATIVE MANDATES

    Mr. Walsh. New authorizing legislation in the past 3 years 
has broadened discretionary benefits to veterans, as well as 
mandatory. While CBO is supposed to score the cost of such 
benefits and the departmental costs of providing mandatory 
benefits, we usually don't know the true cost of service 
delivery until the program is implemented.
    What do you anticipate is the discretionary cost of 
authorizing legislation passed in the last 3 years?
    Secretary Principi. I believe that long term care, placing 
a floor on the number of VA nursing home vets and not taking 
into consideration our State veterans homes, our community 
nursing homes or noninstitutional care will cost us $300 
million in the first year, and increasing in the outyears. The 
full annual costs of emergency room care in private hospitals, 
we believe will cost in the neighborhood of $441 million a 
year.
    The CHAMPVA for Life changes that were made this past 
session will have a $56 million cost in the first year, and a 
$400 million full annual cost once fully implemented. Wonderful 
programs for the homeless, other enhancements, will cost us in 
$121 million the first year.
    Clearly some of these mandates do, in fact, have 
significant costs associated with them that we have to absorb 
for the most part out of the, again, generous appropriation 
that this committee has been able to give us, but oftentimes we 
have to cut into other programs to accomplish all of the 
mandates that are placed upon the Department.
    Mr. Walsh. We would ask you to provide us with a chart 
showing the title of the legislation and the resultant 
associated costs.
    Secretary Principi. Yes, sir.
    [The information follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
                VETERANS BENEFIT ADMINISTRATION STAFFING

    Mr. Walsh. I see from the House Committee on Veterans' 
Affairs Web page, they seem to measure their accomplishments by 
the amount of money they have authorized or increased. Over $8 
billion added to the tab in 2001. While this committee doesn't 
have the same restrictions for mandatory dollars as we do 
discretionary, the FTE needed to administer the programs are 
discretionary expenses.
    I see from your budget that more FTEs are required to 
administer benefit programs. How many FTEs are requested in 
this budget to administer the new benefits?
    Mr. McMichael. We have a very modest increase proposed in 
this budget; however----
    Mr. Walsh. That means it will not cover the new benefits 
administration?
    Mr. McMichael. That is correct. The additional FTE included 
in the FY 2003 budget is not required for administration of new 
benefits programs; rather, they are needed to support 
development of specific C&P initiatives. But to place this in 
context, you have been very generous in past years in giving us 
additional funding. We added 800 additional hires last year and 
800 the year before. So although that was directed towards 
reducing the backlog, some of those resources will have to be 
devoted to----
    Mr. Walsh. You said you have modest increases proposed. How 
short will you be, would you estimate, in terms of FTEs to 
administer these new benefit programs?
    Mr. McMichael. We would have to supply that for the record.
    Mr. Walsh. We would appreciate that.
    [The information follows:]

                       FTE to Administer Benefits

    We have not included additional FTE in the FY 2003 budget 
specifically to administer new benefits programs. We believe 
the modest FTE increase in this budget, coupled with larger 
increases in our past two budgets, provides VBA with sufficient 
FTE to perform our primary missions, including administration 
of benefits programs legislated in FY 2001.

                            VERA ALLOCATION

    Mr. Walsh. On VERA distribution, I don't want to steal Mr. 
Frelinghuysen's thunder, but maybe we can spend 15 minutes each 
on this one.
    Last year, the committee expressed some displeasure at the 
way the Veterans Health Administration handled the VERA process 
by taking money away from VISNs after it was allocated and 
giving it to four specific VISNs in the form of grants and 
loans. VA agreed that taking the money after it was allocated 
was not wise.
    This year VA again took money, $267 million, and gave it to 
five specific VISNs outside the normal VERA allocation. While 
it didn't take money directly from our hands, we and the other 
17 VISNs were robbed again.
    I know my hospital has had to make some very hard 
decisions, and they worked to increase billing receipts in 
order to keep the doors open. To hear that five VISNs are 
getting more supplementals and more loans subsidized by my VISN 
is unacceptable. In fact, ours was a very well-managed branch 
of the agency, and they are being punished for that. So I 
believe they have done their work, we have done ours.
    What are you folks doing to fix this problem?
    Dr. Murphy. We have looked at a capitation model called 
VERA to fund the networks over the past several years, and we 
believe that it is a good methodology for funding health care. 
It allows network directors to plan their budget and to 
allocate it appropriately, and it encourages them to develop 
efficiencies in the delivery of health care.
    Mr. Walsh. If I could interrupt just for a second, if it 
allows VISN directors to plan their budgets, they do that and 
then the rules are changed midstream.
    Dr. Murphy. Not all networks are created equal. The 
challenges that each of the network directors face are very 
different. There are some issues in the Northeast that make it 
difficult, frankly, for Network 1 and Network 3--and also some 
challenges out in the Midwest in the new network, Consolidated 
Network 23--that also make it difficult to manage within the 
capitated budget. For those reasons, we held aside 
approximately 1 percent of the budget, carefully identified 
what the needs were for each network if there were differential 
problems and allocated the amounts that were necessary to allow 
them to treat the patients in their network and to get through 
the year.
    We believe that CARES will help both Network 1 and Network 
3. In fact it has been projected that simply integrating the 
Boston area hospitals at West Roxbury and Jamaica Plain will 
save over $40 million a year. We also believe that there are 
infrastructure issues in Network 3 that will be addressed with 
the realignments under CARES, we hope, and will deal with some 
of the shortfall in that area.

                              VERA FORMULA

    Mr. Walsh. It seems clear that the formula isn't working, 
that if you have to go back in after you give these managers 
their budgets, you say this is your budget; and they allocate 
resources and they make plans and they formulate a budget, and 
then you go back in and change the rules, take their money away 
from them, there is not going to be any faith in the system.
    Do you anticipate doing this again in 2003, taking money 
away from those VISNs?
    Dr. Murphy. I think the system is working. It is 99 percent 
accurate. We need to adjust about 1 percent of the budget to 
allow networks to address the needs and the specific needs in 
their network.
    We do anticipate that we will need to adjust in the future, 
and it may be that next year Network 2 will need that 
adjustment.
    This isn't about bad management. It is not about not 
managing efficiently. We believe that there are going to be 
challenges, and there will need to be adjustments over time; 
but a model that is a 99 percent accurate for budgeting is 
actually pretty good.
    Mr. Walsh. My time has expired, but I want to end by 
commenting that what it creates is a situation where there is a 
public discussion of the money that is taken back by the VA and 
given to another VISN, and the local director of the VISN or 
the local hospital administrator says, well, since we are cut 
by $17 million, or whatever the case, this is what we are going 
to cut.
    It always winds up being like the public school budgets. 
When you have to cut the school budget, you cut the thing 
people want most, or at least that is what you talk about, and 
it creates a lot of furor within the veterans community, within 
the health care community in each area. So it is not a good 
practice; and if the system is working 99 percent, we need to 
do better, because it does create lots of problems for the 
administrator and for the veterans.
    Dr. Murphy. One of the--actually, two issues will be looked 
at more carefully by the VERA work groups this year; and that 
is, do we need to begin to provide partial funding for Priority 
7 veterans which are differentially distributed across the 
country and also a better risk adjustment model? If both of 
these were implemented this year, we believe the model will be 
more accurate and it will reduce the need for adjustments to 
the models in 2003 and 2004.
    Mr. Walsh. Mr. Mollohan.
    Mr. Mollohan. Thank you, Mr. Chairman.

                         PRIORITY 7 ENROLLMENT

    Mr. Secretary, I would like to talk with you more about our 
Priority 7 veterans situation here. Last year, you estimated in 
your testimony and your budget submission that a significant 
drop in enrollment of the Priority 7 veterans would occur 
despite increases in the previous 2 years.
    Why that estimate, first of all, and then what happened to 
it?
    Secretary Principi. I believe that drop in enrollment was 
attributed to the new legislation dealing with TRICARE For 
Life. And we have about 600,000 military retirees enrolled in 
our health care system, and we were projecting, Mr. Mollohan, 
that a percentage of those military retirees would opt for the 
generous TRICARE for Life program.
    Mr. Mollohan. But that would only affect those who were 
retiring presently, wouldn't it.
    Secretary Principi. No, sir. The TRICARE for Life is any 
military retiree--the millions upon millions out there would be 
now eligible at the age of 65 for TRICARE for life.
    Many of those were enrolled in our system and did not 
have----
    Mr. Mollohan. And you anticipated that they would elect 
to----
    Secretary Principi. They would go to the TRICARE for Life 
program that was just implemented October 1 I think we are 
going to see a percentage, and we are going to do a survey to 
try to get more definitive data, but I think we will see a 
percentage. I don't know how high that percentage of military 
retirees opting for TRICARE for Life will be because, again, 
they can use doctors close to their homes, the pharmacy benefit 
is more generous than the VA benefit for Category 7.
    I think there will be some changes. How significant? We 
need to do a survey to know.
    Mr. Mollohan. When you gave the chairman estimates of the 
growth trend in Priority 7s, were you factoring in the TRICARE 
for Life impact on this?
    Secretary Principi. Not really, because----
    Mr. Mollohan. Is the growth trend maybe not going to be as 
big as you are projecting?
    Secretary Principi. It is possible. I don't know.
    We are beginning to see some very preliminary signs that 
the growth in Priority 7s has slowed. That could be because of 
TRICARE for Life, but--quite honestly, I am not sure we have 
the data upon which to draw any conclusions, but we need to 
determine that.

                       PRIORTY 7 ENROLLMENT DATA

    Mr. Mollohan  When will you have that data? Would you have 
it in time for this committee to take it into consideration as 
it deals with this issue?
    Secretary Principi. Sir, let me get back to you on that. We 
have just directed our policy and planning people to begin to 
do the survey, and as soon as we have some definitive time 
lines, I will report to the committee.
    [The information follows:]

                       Priority 7 Enrollment Data

    The enrollment projections that were developed for FY 2002-
2010 did not factor in a decrease in Priority 7 enrollment as a 
result of TRICARE for Life. VA's enrollment, utilization and 
expenditure projections were developed prior to the 
implementation of TRICARE for Life, without actual data to 
consider. We continue to see an increase in the total number of 
dual eligible veterans coming to the VA for some or all of 
their health care. We hope to learn more about these veterans 
in an upcoming survey of enrolled veterans.
    VA will be conducting a survey of enrolled veterans over 
the next three months. Part of this survey will gather data on 
military retirees and TRICARE for Life. Once this survey is 
complete VA will weight the results so that they represent our 
six million enrolled veterans and analyze the data. VA expects 
to complete this analysis in July 2002.
    VA's last survey of all veteran enrollees was conducted in 
1999 and surveyed about 20,000 enrollees. The major purpose of 
the survey was to provide national and VISN level input into 
actuarial enrollment, utilization, and expenditure projections 
for use in the Secretary's annual enrollment level decision 
analyses and other policy analyses. This survey is old and 
needs to be updated.

    Mr. Mollohan. I think you said there would be 2.2 million 
Priority 7 enrollees by 2003. Is that correct?
    Secretary Principi. 2003, yes, sir 2.2 million Priority 7 
enrolless with a total cost of more than $2.8 million. The $1.1 
billion I previously mentioned was the anticipated appropriated 
savings associated with the $1,500 deductible proposal.

                      PRIORITY 7 ENROLLMENT COSTS

    Mr. Mollohan. 2003. That projection at least doesn't take 
this into consideration nor do any of the numbers regarding any 
future years, outyears, factor in that phenomenon?
    Secretary Principi. No, sir.
    Dr. Murphy. Mr. Mollohan, let me correct a statement. I 
understood that the chairman was asking for the cost of 
Priority 7s. That is not the increase. That is the cost for all 
the users of health care who are Priority 7s. The increased 
costs of these veterans are expected to be $560 million in 
2003.
    Mr. Mollohan. Okay. I thought the question related to the 
growth of----
    Mr. Walsh. That is what I asked.
    Dr. Murphy. I apologize. I misunderstood the question. I 
gave you the number for the total cost for Priority 7 Veterans, 
sir.

                         PROFILE OF PRIORITY 7S

    Mr. Mollohan. Can you talk to us a little bit about the 
profile of Priority 7s? What demographics do Priority 7 
veterans have?
    Secretary Principi. On average, their income is in the high 
$20,000 to low $30,000 range. They don't consume as many 
resources as the Priorities 1 through 6. They tend to be 
somewhat healthier.
    A significant, very significant, percentage of the Priority 
7s come to us for the pharmacy benefits. We enroll them in our 
system. We are not a drug store in the sense that they can just 
bring to us their prescription written by outside physicians. 
We believe--for continuum-of-care purposes, we must enroll 
them, and provide them with a physical examination. Then, based 
upon that examination, the doctor will write a new prescription 
or confirm the prescription given by the private physician.
    But, I tend to think the Priority 7 veterans we see are not 
as ill as veterans in other priority groups. The pharmacy 
benefit is a very important draw to them.
    Mr. Mollohan. So we are dealing with relatively moderate 
income individuals.
    Secretary Principi. Correct.

                         PRIORITY 7S ENROLLMENT

    Mr. Mollohan. Less than 5 percent of the 1999 budget was 
spent on Priority 7 veterans' care and that you project that, 
to meet demands for Priority 7 veterans, you would have to 
triple the amount spent in 5 years.
    What was the amount in 1999; and if that projection is 
still something you are holding, this information was in the 
Federal Times of February 2002, what is the base number for 
1999? And do you still hold to the projection, if this is 
accurate, for the costs to triple in 5 years?
    Dr. Murphy. Mr. Mollohan, I have the number for Priority 7 
cost for fiscal year 2000 and 2002 estimated. The Priority 7 
cost for 2000 is $1.252 billion, and we have projected that in 
2002 the Priority 7 cost will be $2.299 billion with the 
deductible in place.
    Mr. Mollohan. And for 2003, what will the cost be without 
the deductible?
    Secretary Principi. The chart I have projects those costs 
to be about $2.8 billion. But if I understand your question the 
cost of Priority 7s in 1999 was slightly less than a billion 
dollars a year. That will grow to $5 billion a year by 2007.
    The cumulative costs for Priority 7s between 2003 and 2007 
are projected to be about $20 billion, but starting in 2007, 
and based upon current projections, TRICARE for Life could 
alter that. We project about $5 billion a year beginning in 
2007; of course that would increase.

                   ALTERNATIVE DEDUCTIBLE STRATEGIES

    Mr. Mollohan. One way you have suggested addressing that is 
with this $1,500 deductible, and whether that flies or not is 
problematic. Do you have other strategies for dealing with 
this, besides doing what we should do and dealing with the 
budget resolution and taxes and authorizers?
    Secretary Principi. Well, the only options I have as 
Secretary would be to suspend enrollment. Again, Congress 
directs that I make an annual enrollment decision based upon 
the resources available to treat veterans.
    Mr. Mollohan. That has to make you feel great. Congress 
passes a tremendous benefit, advertises it, and then asks you 
to rein it in.
    Secretary Principi. Right. That is a very sobering, but----
    Mr. Mollohan. Good cop, bad cop.
    Secretary Principi. And I was prepared to do that in 2002 
to ensure that we protect quality.
    I think the VA has come a long, long way in terms of 
quality patient care and safety, and we have to manage our 
growth. We have a responsibility to ensure that waiting times 
are reasonable, responsible and consistent with good quality of 
care.
    The system was not built to care for all 25 million 
veterans. It was built to care for the service-connected and 
the poor. Priority 7s, then called Category Cs, were always 
treated on a space-available basis, but now, since open 
enrollment began, we have seen this burgeoning demand.
    Of course, open enrollment, eligibility reform and opening 
all these 600 community-based outpatient clinics was premised 
on a couple of things happening: One, Medicare subvention, 
which never happened; and two, an increase in the medical care 
cost recovery above levels that have materialized. So, we kept 
opening the clinics and opening the clinics, and no one was 
really looking at what impact it was going to have on the 
system until recently, when we began to understand the true 
implications of what had happened. And now we find ourselves in 
somewhat of a crisis and, we have to deal with it because we 
have all these expectations out there.
    Mr. Mollohan. And that is what I am trying to ask you.
    Are there any other strategies to deal with this issue 
besides the deductible or suspending enrollment?
    Secretary Principi. Apart from the obvious ones of Medicare 
subvention, which the chairman said probably would not happen; 
we will have to consider changing the benefits package. Right 
now we offer everything to everyone, and a determination could 
be made that perhaps the Priority 7s could receive a less 
generous benefits package than the Category 1s through 6s--we 
could look at that as an option.
    And, of course, with the deductible, we can look at the 
percentage of reasonable charges. Instead of 45 percent, we 
could look at 20 percent and see what that would do to the 
system. We can look at a higher income threshold for the $1,500 
deductible.
    Mr. Mollohan. Are you considering all of these?
    Secretary Principi. Yes, we are.

                         SECRETARY'S AUTHORITY

    Mr. Mollohan. Which of these require authorization and 
which of these strategies can you implement as Secretary?
    Secretary Principi. I believe--correct me if I am wrong--I 
have the authority to implement the percentage of reasonable 
charges by regulation; I could raise the income threshold. I 
think there is quite a bit I can do by regulation with regard 
to 7s.
    Can somebody correct me?
    Changing the benefits package would probably require 
legislation.

                    CHANGES TO THE BENEFITS PACKAGE

    Mr. Mollohan. Are you asking for a change in the benefits 
package?
    Secretary Principi. No, I have not yet. We are looking at 
the various options, and hopefully we can engage with Committee 
staff and talk about some of these various options to see what 
makes sense.
    Mr. Mollohan. Are you talking with the authorizers about 
this issue?
    Secretary Principi. No, not to the extent that we are 
talking with the appropriators.
    Mr. Mollohan. Does that mean that you are asking the 
appropriators to do what the authorizers should be doing?
    Secretary Principi. No. Clearly, we need to work with the 
authorizers on these issues.
    Mr. Mollohan. For the record.
    Secretary Principi. No. I think this issue is clearly tied 
to the level of appropriations. I think this is clearly 
something that we need to work through with both the 
Authorizing and Appropriations Committees.
    Mr. Mollohan. This is really a tough one.
    We have got a benefit out there that has been advertised. 
You have done your job aggressively, brought the benefit to the 
attention of veterans and invited them to participate in it; 
and now we have to consider how to rein that in? That is what 
it amounts to and that is a very difficult thing to do.
    It seems to me that whether we have the resources to 
support a benefit or not, should be a threshold question that 
ought to be thought about when we vote on budget resolutions 
and tax cuts. It is absolutely connected.
    Secretary Principi. Although I do not think Congress 
envisioned that we could care for everybody. That is why they 
directed that I would make an annual enrollment decision.

                       ANNUAL ENROLLMENT DECISION

    Mr. Mollohan. I think Congress directed you to make an 
annual enrollment decision, so that they could advertise that 
they did something for veterans and give somebody else 
responsibility for acting responsibly.
    Secretary Principi. Yes, sir.
    Mr. Mollohan. Well, you can have a more generous opinion of 
Congress. That is fine.
    Secretary Principi. Can I add one more option that we 
started to talk about? And that is, instead of having open 
enrollment 12 months of the year, we could look at what other 
organizations do and have an open enrollment season, maybe 3 
months of the year or 4 months of the year, so we could manage 
our growth better, maybe put a cap on the number of new people 
we can enroll, allocate that cap across the system. That way, 
we could allow the system to grow, but also do it in a more 
thoughtful, managed process rather than just saying, okay, 
anybody can come in at any time during the 12-month period, 
irrespective of what your income might be or whether you have 
military service connected to your disability.
    Mr. Mollohan. How does that help?
    Secretary Principi. It is a limited period of time for 
enrollment.
    Mr. Mollohan. So there won't be as many people enrolling.
    Secretary Principi. They would have to wait another year. 
It also would allow us to do it at a time of year that we can 
plan for the next fiscal year. It is just a more controlled, 
managed way for this growth that is just coming in by leaps and 
bounds.
    Mr. Mollohan. Thank you, Mr. Secretary. Thank you, Mr. 
Chairman.
    Mr. Walsh. Thank you. Mr. Knollenberg.
    Mr. Knollenberg. Thank you, Mr. Chairman.

                         TRANSLATIONAL RESEARCH

    Mr. Secretary, welcome. Thank you again. And thanks for 
your efforts to bring this agency in line so that it can be 
efficacious and at the same time still provide benefits to the 
people in the best possible way.
    I want to talk to you a little bit about translational 
research. I know nothing about it. I am hoping maybe you do or 
somebody does. I am familiar, and we all are, with basic 
research and also the clinical trials which would be the second 
step. And then I guess now there is--is it Dr. Feussner--that 
has introduced the transitional research which is a step above 
that. And I believe also he has put a cap of $150,000 on any 
one entity. Is that true, by the way, the $150,000?
    Dr. Murphy. No.
    Mr. Knollenberg. There is no cap? First, let's go back to--
let's find out what this thing is, translational research, 
because it is a third--I understand most recent form of 
research that has been designed or has been architected to come 
into play.
    Secretary Principi. May I invite Dr. Feussner up to the 
table?
    Mr. Knollenberg. How do you do? Briefly, can you tell me is 
this a new thing? If it is, what is it? How far does it go? If 
there is no cap----
    Dr. Fuessner. We don't have a cap, per se, on our 
translational research activities, but there is a cap on the 
biomedical investigator-initiated research projects of 
$150,000.
    Mr. Knollenberg. Like Dr. Hume at the University of 
Michigan? Would that be one of those instances?
    Dr. Fuessner. It could be. Our Parkinson's disease trial 
cost $65 million. A typical investigator-initiated research 
project would cost $150,000. So it really would depend on what 
he would submit.
    Translational research is not new, but it is a strength of 
VA. And to put it simply, it focuses on taking the research 
result and, quote, translating it, unquote, either into 
improved patient care, improved policy. So it is focusing on 
the step, if you will, of putting the research to work.
    So in Dr. Hume's particular case, if he had a novel 
strategy for treating acute renal disease, then we would be 
quite adept at assessing the effectiveness of that intervention 
and actually putting it to work for patients.
    Mr. Knollenberg. If there is not a dollar limit, then what 
amount of money in the budget are you requesting for this 
particular area, or is there a number?
    Dr. Fuessner. There isn't a number, but much of our 
cooperative studies budget and our health services research 
budget focuses on this. So I would say, we invest well in 
excess of $100 million a year in translational research.
    Mr. Knollenberg. If there is no cap,there probably has to 
be some sort of overall expenditure that could be authorized by 
you for any particular program.
    Let me go on. Thank you, Dr. Feussner.

                         RESEARCH AFFILIATIONS

    Let me go on to another area. I think Mr. Price is going to 
speak to this as well, very likely, because we have talked 
about it. That has to do with the VA versus the universities. 
We can call it a fight, but it is a difference of opinion as to 
the researcher's inventions and who has the rights to that. I 
know there are some protocols historically on--maybe there 
wasn't a protocol, but I understood there was, that did set 
down some guidelines as to how the ownership of inventions was 
taken care of. And my concern is that the VA may be claiming 
ownership of inventions of doctors affiliated with the VA, and 
there may be some unintended consequences of that.
    Let me just look at a question or two that I have about 
that. I will start with this. I am concerned that there may be 
a perceived disadvantage for researchers to become affiliated 
with the VA; this effort may push physicians to reduce or 
eliminate their role with the VA rather than subject their 
invention to some kind of co-ownership by the VA which may 
drive away private investors and university support.
    In fact, venture capitalists might be challenged here and 
suggest why should I get involved if there isn't some 
opportunity for us in this process?

                         INTELLECTUAL PROPERTY

    So there are several questions I have. But what percentage 
of research is subject to VA ownership, number one?
    Dr. Murphy. Any research that is funded by the VA and 
results in intellectual property that could generate income.
    Mr. Knollenberg. Any research? Anything?
    Dr. Murphy. Research that is funded by the VA that results 
in intellectual property that could ultimately be capitalized 
is subject to this.
    In fact, approximately 50 percent of the universities that 
we have affiliations with and do joint research with have 
signed agreements. We believe that it protects the rights not 
only of the VA to capitalize our research, but also protects 
the rights of the university and of the VA investigator.
    Mr. Knollenberg. Why don't the universities feel the same 
way about that?
    Dr. Murphy. Well, many of them do.
    Mr. Knollenberg. You said 50 percent. Of the 50 percent 
that you didn't say don't, what about them? I happen to be 
connected to or close to a university that has some problems 
with the policy, and you are probably more familiar than I am.
    Secretary Principi. If I might speak in general terms, I 
think it is a great policy long overdue, Mr. Knollenberg. We 
treat medical schools and researchers very, very generously 
under the technology transfer program established by the VA in 
our research program. But I think the time has come where the 
VA, and those who support the VA through this vast infusion of 
taxpayer dollars, begin to get some of the credit, and some of 
the benefits of the developments that occur in VA medical 
centers with VA appropriated dollars. Unfortunately, that has 
not been the case. The credit has gone to the universities, the 
medical schools and to others, and the VA is always up here 
scrambling for more research dollars.
    I think we just need to be treated fairly. This is a 
partnership between affiliated medical schools and the VA and 
all we ask for is to be treated equally and fairly as these 
inventions come into play, and that VA be recognized for its 
enormous contribution to advancements in science and 
technology. That has too often eluded us.

                      TECHNOLOGY TRANSFER PROGRAM

    Mr. Knollenberg. How much money have you spent, or maybe 
you could refer to somebody else, in the pursuit of determining 
ownership of inventions of doctors who have an affiliation with 
the VA? How much money actually is being expended, whether 
through lawsuits or just employing people, FTEs, to actually 
assess what is taking place here?
    Dr. Fuessner. I am Jack Feussner, the chief research 
officer for VA. There are two components to this, our 
technology transfer program. The first is our own internal 
staff support for this, which is about $750,000 per year. And 
then we have an arrangement with a private sector firm, a 
national technology transfer center, to help us with the 
commercial and private sector interfaces. And that is about $1 
million a year.
    Mr. Knollenberg. Let me ask you this question, Dr. 
Feussner. Presuming that there is a bit of a problem, and I 
believe that it is, is there anything being done by the VA that 
would produce a resolution for these universities who are 
thinking a lot of things, but they are thinking about 
hesitating if there is some kind of royalty, if you will, that 
would be sliced or diminished or, in fact, may be minimized.
    Dr. Fuessner. Well, I think I would agree with you and say 
there is a bit of a sting in our abilities and efforts to date, 
negotiating for example with the University of Michigan through 
the Ann Arbor VA, and we do not have a cooperative technology 
transfer agreement there as yet. We have only been doing this 
for about 2 years.
    And as Dr. Murphy has mentioned, we are about at the 50 
percent threshold. Dr. Murphy, myself, and others have met with 
members of the AAMC and their Council on Government Relations. 
And two of our staff just returned from a national meeting 
called AUTM, the Association of University Technology Managers.
    So, yes, we continue to work with our colleagues and our 
affiliates. Our goal is only to, as the Secretary mentioned, 
only to assert ownership for research activities that have been 
funded by us; and then our goal, when there are multiple 
funders, is simply to share. And I think it is fair to say that 
some of our colleagues are more willing to share with us than 
others.
    Mr. Knollenberg. In your judgment, is this the best use of 
resources and of personnel to proceed, and when you have a lot 
of other shortfalls, other problems within the VA, is this the 
best use of those resource and personnel?
    Dr. Fuessner. Absolutely, sir.
    Mr. Knollenberg. Thank you.

              JOHN DINGELL VETERANS AFFAIRS MEDICAL CENTER

    The John Dingell Veterans Affairs Medical Center, which is 
in southeast Michigan, happens to be in Detroit. And we have 
been trying very--in our best way we can--to utilize some of 
that, the space in that building. And I have been through that 
building a time or two. There is a lot of space that is never 
going to be used. And obviously the VA has tried to get outside 
parties interested. In this case, the Wayne State University 
folks were interested. Now I understand they are not.
    The reason they are not, as I understand as well, is that 
as a third party they are required by the VA--this isn't true 
in a lot of relationships with the private sector--but with the 
VA, the VA says you have got to pay for--any kind of build-up, 
any kind of changes in the construction of the building. And 
the building itself is well constructed. As you probably know 
very well, they are finding, though, that there seems to be a 
different attitude with respect to the VA, with respect to 
requiring that any kind of expense be borne by the party coming 
in to occupy the space, typically that it has worked out 
differently with other third party--with other entities. And, 
in fact, they chose not to use the VA space. They are, in fact, 
using other space that they did acquire, where they were given 
the opportunity to have the owners of the entity produce the--
or pay for those changes in the building structure.
    Is this guideline that you have in the VA, is that 
consistent with the private sector, then? That is my question. 
Apparently it is not. How would you respond to that?
    Dr. Murphy. We do have the ability to work with private 
parties through our enhanced use authority. But we don't have 
the ability to take appropriated major construction dollars to 
alter one of our facilities in order to partner with a private 
organization.

                          UNDERUTILIZED SPACE

    Mr. Knollenberg. Well, then, the question I have is since 
you can't or don't do that--I appreciate your making mention of 
that--what do you intend to do with that space? There is far 
too much space in that building--it was built at a time, I 
know, when people telescoped different thoughts into what the 
population would be and the needs would be. But we have got a 
building that I can't tell you what percentage is not used. I 
don't know if staff does or not. But is there anything--isn't 
it better to have some money than no money?
    Secretary Principi. I would certainly think so. But we have 
the CARES process ongoing now. The CARES process is to 
rationalize all of our infrastructure and make some 
recommendations with regard to how we should best utilize that 
infrastructure. And I would think that this would be one of 
them. But we will take a good hard look at that, Mr. 
Knollenberg, and get back to you.
    [The information follows:]

                  Empty Space at the John Dingell VAMC

    An examination of the best use of the excess space at the 
John Dingell VA Medical Center will be a part of the CARES 
study. According to the latest timeline that has been reviewed 
by the Strategic Management Council and the Secretary, all of 
the remaining 20 Networks (includes VISN #11) will start their 
CARES plan in April 2002, develop an interim plan and submit it 
to VA Central Office by the end of July 2002, finish their plan 
at the end of October 2002, the CARES Commission would get them 
between January and May 2003 and the Secretary would make final 
decision in June 2003.

    Mr. Walsh. Your time has expired.
    Mr. Knollenberg. My time is up? I will get into that next 
time around. Thank you.
    Mr. Walsh. Mr. Frelinghuysen.
    Mr. Frelinghuysen. Thank you, Mr. Chairman.

              Congressman Frelinghuysen's Opening Remarks

    Mr. Chairman, I am struck by how different this hearing is 
than some of the ones we have had in the past. Infinitely 
different. And I haven't been able to figure out exactly why. 
Maybe it has something to do with the Secretary's demeanor and 
past experience, which we all recognize and appreciate.
    I also think it has something to do with the fact that we 
are a Nation at war, and as we concentrate on fighting wars at 
home and abroad, there is an increasing recognition that the 
people that are fighting those wars are going to be veterans, 
and we need to do more for them.
    And I know that I speak on behalf of the entire committee 
that we are appreciative of the work you and your team continue 
to do, and there has been a real attitudinal change. I don't 
think you ever had to kowtow to OMB, but over the years here, 
we have had some pretty hot and heavy times, and I have 
participated in them.

                          MEDICAL CARE FUNDING

    I do feel that we are on a straighter course here and you 
are talking with us very frankly, bluntly and realistically, 
and I commend you for it. There are some horrendous issues that 
we have to deal with here, and there are a few hurdles that you 
have to jump and we have to deal with. I and the Chairman have 
both been advocates for increasing the medical care accounts in 
the past when your predecessors have come here, when they 
haven't put any new money in, because they always expected the 
Republicans and the Democrats would do that. They didn't have 
to worry about that.
    To your credit, and with the Chair's leadership, we have 
seen increases over the last couple of years in the medical 
care accounts. The first year I think $750 million was 
initially recommended. I think we bumped that up. And this year 
you have, what, $1.6 or $1.5 billion. Even with those 
increases--and I support them and I have supported other ones 
and pushed for increases during the past administration--those 
of us in the Northeast continue to be, I think, disadvantaged 
by the VERA formula.
    I know that the Chairman's region is a wonderful part of 
New York State, and I from what I can gather he is quite 
satisfied, or perhaps not entirely satisfied, with the issue of 
resources. But, I come from VISN 3, which if you look at the 
statistics, has had some serious problems.

                         VERA NATIONAL RESERVE

    I would like to address and have your reaction to a couple 
of those. First of all, the Chairman mentioned the whole issue 
of whether some VISNs are robbing other VISNs. In my area, we 
have a high number of people who have Alzheimer's, acute mental 
illness, and a large number of geriatric patients. I think that 
is true with a lot of facilities, certainly in the areas that I 
know.
    And I think that places huge financial burdens on my VISN. 
I can't speak of other parts of the country, but I know what is 
called, or used to be called, the ``patient mix'' has resulted 
in some incredible costs, and then you add in labor and 
supplies. In the Northeast it is pretty incredible.
    It is my understanding that when VISNs got into financial 
difficulty, you are not actually taking from other VISNs. What 
we have requested of you or your predecessors is that you have, 
as the VA Secretary, a national reserve account. Now, we have 
never--I have never written with the notion that somehow we are 
going to be taking money out of somebody else's allocation. 
Correct me if I am wrong. I thought that when there was a 
crisis and you had to make ends meet, you went to something 
called a national reserve account. And there is $120 million or 
something in there.
    Dr. Murphy. There is. We do have a national reserve that we 
keep. And the amount varies by year. We make a determination at 
the beginning of the year what the requirement will be for 
reserve, trying to predict forward what we will need for 
emergency purposes, what we may need in terms of a VERA 
adjustment and for other issues, and funding for new 
initiatives that we will need to make during the year.
    That is a routine part of the way the VHA does business.
    Mr. Frelinghuysen. So, just so I understand. When a VISN is 
short, you don't go and out to Chicago, Illinois and say, well, 
I am sorry things in the Northeast are in bad shape, we are 
going to cut your budget. I thought it came out of the national 
reserve account.
    Secretary Principi. That is true.
    Mr. Frelinghuysen. Well, correct me if I have the wrong 
impression.
    Secretary Principi. That is true. But I think it was last 
year that some money was pulled out of certain VISNs to augment 
the reserve account to meet unexpected contingencies. The 
reserve account is primarily established for that very purpose 
that you enunciated, but from time to time, based upon the 
reserve account, some dollars were pulled back into Washington, 
some carry-over dollars that had not been spent, things of that 
nature, but a relatively small amount.
    Mr. Frelinghuysen. I appreciate the clarification.
    I know that the Chairman of the authorizing committee comes 
from my State. And let me recognize the fact that you have New 
Jersey roots, which maybe has something to with your enormous 
success at this job. But you have other roots as well, and we 
appreciate it.

                              VERA FORMULA

    I think the authorizers need to go back to the drawing 
board and work on the VERA formula. From what I can gather it 
was instituted in 1996? Is that about the time it was 
instituted?
    Dr. Murphy. 1997.
    Mr. Frelinghuysen. 1997. And we need to have that formula 
based on a true medical need. What I described as a lay person 
and what may be using medical terms is ``severity of illness,'' 
recognizing where our systems are dealing with older and sicker 
people. I think we qualify for that category, and I think the 
authorizers ought to go back to the drawing boards.
    And I don't think the present VERA formula--tell me if you 
disagree--really recognizes the cost-of-living issues in the 
Northeast, and, shall we say, the density of population which 
leads to having so many veterans.
    In terms of the means threshold written into the current 
VERA formula, that level is currently set at $24,000 a year; is 
that correct?
    Secretary Principi. For a single veteran.
    Mr. Frelinghuysen. For a single veteran. Then it goes up 
to?
    Secretary Principi. $28,000 for a married veteran.
    Mr. Frelinghuysen. With different levels for dependents. 
That level was amended in 1990?
    Secretary Principi. Yes, sir.
    Mr. Frelinghuysen. Do you feel that that needs to be 
reviewed again and considered again?
    Secretary Principi. I haven't----
    Dr. Murphy. There is an adjustment to the means test level 
on an annual basis, I believe.
    Mr. Frelinghuysen. Well, what about the whole issue of a 
regional differential, taking into consideration the cost of 
living?
    Dr. Murphy. We had looked at that issue from a policy 
standpoint last year. And at this point in time, there is not a 
very good index that allows us to adjust, based on cost of 
living in different geographic areas. There was, as you know, 
legislation passed during the last session that created a 
Priority 8 based on the HUD Index. But the HUD Index is really 
not a good cost-of-living indicator.

                        ELIGIBILITY FOR SERVICES

    Mr. Frelinghuysen. Well, we need to do something. All I 
know is that your budget document, Volume 2 of 6, and I quote, 
``There is a lack of geographic adjustment to the means test 
used to determine a veteran's financial status concerning 
eligibility for services.''
    It says here that you are well aware of this issue; 
however, a change of eligibility requires congressional action. 
Knowing you are a good advocate, and that this is a problem, I 
would ask that you further engage yourself in assisting us as 
we and the authorizers look at this issue.

                              HEPATITIS C

    Changing gears here, since my time is rapidly disappearing, 
I want to get back to hepatitis C issue. For the past 4 years I 
have asked the VA about hepatitis C and what steps were being 
taken to enroll all veterans in an expeditious manner and to 
provide treatment for all who test positive and seek the 
treatment protocol. You have had an additional year under your 
belt. And this is still an area, apparent to me, with a 
tremendous need of improvement. I think by your own admission 
in your narrative you have said that.
    Despite this, your programmatic goals for 2002 as outlined 
in the budget do not contain any specific mention of the need 
to increase the number of veterans screened in order to better 
understand the depth and breadth of the rate of hepatitis C 
infection among the veterans' population.
    This year I am not alone in urging you to move forward much 
more quickly on testing and treating all enrolled veterans. The 
stakeholders have pointed out through their primary mechanism, 
the independent budget--and we certainly know that that is one 
of their vehicles for letting their views be known that the 
budget contains a provision calling on the VA to increase the 
number of veterans tested.
    Vietnam Veterans of America and others have been outspoken 
on this issue, including the American Association of Liver 
Doctors. To date, how many of the 3.5 million enrolled veterans 
have been tested for hepatitis C?
    Secretary Principi. I may have to provide the precise 
number for the record, but I think we are seeing some 
improvements, Mr. Frelinghuysen. In 2001, we screened 51 
percent of the veterans who came to us. In the first quarter of 
2002, we have increased that to 77 percent. So I believe that 
we are well on our way to our goal of screening 80 percent of 
the veterans who come to us for hepatitis C. We have increased 
the funding. We are proposing an increase in funding from $104 
million in 2002 to over $111 million in 2003.
    [The information follows:]

                          Hepatitis C Testing

    VA established the largest Hepatitis C screening and 
testing program in the United States. VA policy is to screen 
all veterans who use Veterans Health Administration services 
for risk factors associated with Hepatitis C and to perform 
blood tests on those with risk. In the past three years, over 
1.7 million veterans were screened including 1.2 million in FY 
2001 alone. In the same period, over 800,000 Hepatitis C blood 
tests were performed and over 109,000 new cases of Hepatitis C 
were identified. Recent data from systematic chart reviews 
indicate that screening rates are exceeding performance 
targets. Thus, while many veterans still need to be screened 
for Hepatitis C, the programs and policies recently implemented 
that emphasize the importance of Hepatitis C screening and 
testing are working. Newly implemented VISN performance 
measures further reinforce the importance of these activities.

    Secretary Principi. That is, of course, for screening, for 
counseling, for inpatient care, for outpatient care, and for 
antiviral drug therapy. So there is an increase in the budget, 
and we are seeing a dramatic improvement in the number of 
veterans who are screened when they come to us for care.
    Mr. Frelinghuysen. The good thing is you have a target. You 
are trying to meet the target. I think we ought to say for the 
record--I am not an expert in this--but this is a pretty deadly 
disease and it is an expensive test, isn't that correct?
    Dr. Murphy. It is about $30 for the test, sir. We actually 
screened last year over 577,000 veterans for hepatitis C. And 
this year we project that we will outstrip that. Last year, we 
performed 481,000 hepatitis C tests and 36,000 individuals 
tested positive for hepatitis C.
    We have started actually reviewing (using an external peer 
review process), a sampling of medical charts for hepatitis C 
to see how many individuals are being screened. And in the 
first quarter of 2002, I am happy to report that the percent 
being screened for hepatitis C has increased dramatically. We 
are at 77 percent of the charts, containing evidence that 
veterans were asked about risk factors for hepatitis C and 
offered testing.
    Mr. Frelinghuysen. Well, I commend you for those comments 
and for your follow-up and for implementing your plan.

                          THIRD PARTY PAYMENTS

    Lastly, relative to third party payments, your budget 
assumes over $1 billion in third party payment collections. I 
am going to assume that like in years past, the VA will not 
come close to this level. VISN 3, which includes my area, New 
York and New Jersey, has been very aggressive in collecting 
from private insurers. In one sense that may be commendable. 
However, they have been known to bill private insurers for 
treatment that should be covered and paid for by the VA.
    A former resident of my district who I believe you have met 
a number of times, Mr. Secretary, a Korean war veteran who lost 
both legs during the war, continues to have his private insurer 
charged for treatment of his service-connected disability. He 
is a pretty astute gentleman and well known in the veterans 
community. So he and I have been fighting the VA about not 
charging his private insurer for treatment related to his 
stumps.
    Secretary Principi. That is unacceptable.
    Mr. Frelinghuysen. He has PTSD and other connected 
disabilities. He is not the only case of VISN 3 billing private 
insurers for service-connected treatment. And my guess is we 
are not the only VISN to do it.
    What are we doing? Is this germane to the comments you had 
about the actions--or legal actions in your testimony; 24 
actions, do they relate to this type of situation?
    Secretary Principi. I am not sure if the 24 recommendations 
relate to this issue. Certainly we need to determine why this 
gentleman as well as others are being billed for their service-
connected disabilities. That should not be the case. We will 
look into that.
    I am pleased to tell the committee that we are 13 percent 
over plan in our medical care cost recovery collections for 
this fiscal year, and we expect at current rates we will exceed 
our expected revenues by $100 million. So we have, in fact, 
made significant improvement in our cost recovery efforts.
    I do believe, as many members of this committee believe, 
that we have a long way to go, and we are taking the steps to 
accomplish it. But we are making progress as evidenced by the 
increased collections this year.
    Mr. Frelinghuysen. Finally, on page 2 of your testimony, 
you mentioned----
    Mr. Walsh. The gentleman's time has expired.
    Mr. Frelinghuysen. Thank you very much, Mr. Chairman.
    Mr. Walsh. Thank you, Rodney. Mr. Price.
    Mr. Price. Thank you, Mr. Chairman. Mr. Secretary, I want 
to welcome you and your colleagues to the committee. We 
appreciate your testimony.
    Secretary Principi. Thank you, sir.

                         INTELLECTUAL PROPERTY

    Mr. Price. I would like to pick up initially on the issue 
of intellectual property that Mr. Knollenberg raised, and ask 
you to follow up on the answers you gave in somewhat greater 
detail. I understand that the VA is seeking greater public 
recognition and wants to increase its funding base through 
aggressive pursuit of intellectual property generated by VA 
research. I think that is understandable and commendable. But 
the situation has strained relationships, as you well know, 
between many universities and their affiliated VA hospitals. 
That is true of the University of Michigan, and I can assure 
you it is true of Duke University, which is affiliated with the 
Durham VA Medical Center.
    I think it is fair to say that research universities like 
Duke fully support the principle of giving their research 
partners a fair share of revenues arising from inventions to 
which they have contributed.
    Dr. Fuessner said a minute ago that the issue was a 
willingness to share. With all due respect, I don't think that 
is the issue. There is a willingness to share. It is only fair 
that the revenues, the proceeds, be shared.
    The universities, however, are not entirely new to this 
kind of process. The universities have in place a generally 
accepted standard procedure to assign intellectual property 
rights on the basis of each participant's relative contribution 
to research through salary, facilities, research resources, or 
funding. It is that assignment on the basis of relative 
contributions that I believe they find lacking or find 
contradicted by the Cooperative Technology Administrative 
Agreement they are being asked to sign.
    The VA is asking affiliated academic institutions to sign 
an agreement that differs from their customary procedures by, 
in many respects, simply requiring a 50-50 split of the 
research share brought in by a given inventor who is duly 
appointed, a 50-50 split of the pooled amount for site 
payments. Maybe I am missing something in terms of the 
subtleties of this, but it does appear to me that in many, if 
not most of these areas, a 50-50 formula is being imposed 
regardless of the relative contribution that is being made.
    Now the quarrel, as I understand it, is not giving VA full 
credit and a full return on the relative contribution of VA 
researchers. I think that is only fair, and we could readily 
agree on that. The problem seems to be with departing from that 
principle of relative contribution and imposing a one-size-
fits-all formula that may or may not do justice to the relative 
contribution.
    At an institution like Duke, unlike a lot of the other 
institutions, there are hundreds of researchers who are jointly 
affiliated, as I understand it. This is an important 
distinction. In some cases, the VA role might be quite minimal. 
In other cases, quite major. But why should it be standardized? 
What is wrong with the procedures the universities already have 
in place for determining relative contribution?
    Dr. Murphy. Remember, sir, that we are talking about 
research that is, in fact, funded by the VA or carried out in 
VA laboratories. We are not asking for, you know, the 
universities' research to be shared in that way. And, in fact, 
we have a process to work through agreements with the 
universities so that they can understand that we do want to 
share in an equitable way.
    But, in fact, when VA funds research, where the research is 
done at a VA facility, we do believe that there should be an 
equitable sharing of any capitalization of that intellectual 
property.
    Mr. Price. Let me make sure I understand. Are you saying 
that the VA is not asserting any rights to research not 
conducted at the VA facility?
    Secretary Principi. Or with VA dollars.
    Mr. Price. Well, let's get the facility straight first. 
Research that is not conducted at a VA facility, the VA has no 
intention of claiming a share of the proceeds. Is that true?
    Dr. Fuessner. That is correct, Dr. Price.
    Mr. Price. That certainly has not--at least in my 
conversations--that has not been made clear to the 
participating institutions, at least in their view. So that is 
an interesting clarification.

                        SHARING RESEARCH RIGHTS

    Now, the second issue about some portion of VA funding. 
Does $1 of VA funding of the research then trigger the 
requirement for this 50-50 sharing, or are you talking about 
research that is totally VA funded, or what are we talking 
about?
    Dr. Fuessner. Well, Dr. Price, as a former professor at the 
institution that you are discussing, I can assure you that we 
have had numerous conversations with our colleagues at Duke.
    Number one, when the VA does not participate in a research 
in any way, the VA makes absolutely, categorically, no claims 
of any kind to that research.
    Mr. Price. I understand that.
    Dr. Fuessner. Now, when the research is conducted with VA 
dollars and in VA facilities, then the VA does attempt to share 
credit and share any revenues that might come out of that 
discovery. So, for example, if we did not fund the research or 
it was not done in our laboratory, then we would make no claim 
to that.
    Mr. Price. However, those are not exhaustive categories. 
What about the research that is partially funded? Does any 
portion of VA funding trigger this requirement?
    Dr. Fuessner. The answer to your question is, I think, yes. 
That if the VA is involved in the process, the requirement that 
currently exists is that the investigator must disclose the 
discovery to the VA.
    The VA general counsel will then make a determination 
whether VA has made a--with help from the research enterprise--
whether VA has made a significant contribution or not. In a 
significant minority of those cases, VA makes no claim, because 
our feeling is that we have not made a significant 
contribution.
    Mr. Price. You can understand why an institution looking 
prospectively at this might get rather nervous, not knowing how 
you are defining ``significant,'' what the threshold is, 
whether it is 5 percent, 20 percent, 40 percent.

           COOPERATIVE TECHNOLOGY TRANSFER AGREEMENTS (CTTAS)

    Dr. Fuessner. Well, except that the--yes, I can understand 
that. That is actually one of the reasons that many of our 
affiliations, Stanford, Wharf at the University of Wisconsin, 
for example, have found the cooperative technology transfer 
agreement so attractive, because it is a simple sharing 
arrangement. Our affiliates are not required by us to sign 
cooperative technology transfer agreements. We propose that as 
a way to facilitate the partnership, but if an institution 
doesn't choose to do that, that is not a problem on the one 
hand. On the other hand, we will continue to assert our 
ownership rights and ask for attribution and credit for the 
discovery when our research dollars are involved.
    Mr. Price. And you would do that on the same basis as the 
CTTAs articulate, or are you willing to abide by the standard 
practices that the universities have gone by for all of these 
years?
    Dr. Fuessner. I think in the absence of a CTTA, we would 
negotiate on a case-by-case basis.
    Mr. Price. All right. What you are saying, I gather, is 
that there is not a definite time frame within which you are 
requiring that the CTTAs be signed; that you continue the 
relationships with these universities in the absence of such an 
agreement.
    Dr. Fuessner. Absolutely. Yes, sir.
    Mr. Price. Well, that is good to know. I know that you have 
had conversations--you say in your recent report--that you have 
had conversations with the American Association of Medical 
Colleges, and the Council on Government Relations expressed 
general support of the CTTA, but, quote, ``has asked the VA to 
consider authorizing variations from the model CTTA as 
circumstances amongst research universities dictate.''
    And then I think your report is a bit ambiguous as to the 
extent to which you are willing to authorize variations. You 
have agreed to modify and enhance your Web site with an 
expanded and improved CTTA section. Does that mean that you 
expect to authorize variations in the CTTA with particular 
institutions, or are you telling me that is a matter of less 
consequence since you are not going to be pressing every single 
institution to sign an agreement in any case?
    Dr. Fuessner. Your latter comment, I think, is the 
pertinent one; that an affiliation is not required to sign a 
CTTA with us. So if they choose not to do that, then we can 
deal with them on an individual case-by-case basis for the 
institutions that are willing to sign a CTTA with us--and we 
would prefer to go that route, because it is so much less work.
    In the case--let me make another statement, Dr. Price. In 
the case where we do have CTTAs with affiliates, we will 
oftentimes, overwhelmingly the rule rather than the exception, 
defer the management of the CTTA to the affiliated institution, 
and thereby will rely on the customary practices of the 
affiliate institution to determine commercialization, marketing 
costs, dealing with the additional revenues to the inventor, et 
cetera. So we feel like even within the context of the CTTA the 
arrangement is quite flexible.
    Mr. Price. Well, given the advantages, and I think they are 
apparent to the VA and to the participating institutions for 
having these kinds of agreements, I wonder how realistic the 
offer you have just extended to work individually with 
institutions who don't want to sign, I wonder how attractive 
that will be.
    I would hope that you continue to work with the Association 
of Medical Colleges and with the institutions, particularly 
those that have a great deal of work going on with the VA, to 
figure out if there is not some kind of flexibility that can be 
built into these agreements so that we are not facing a rigid 
50-50 standard, so there is not a whole lot of uncertainty 
about de minimis situations leading to extravagant claims.
    I think until there are some assurance along those lines, 
some of these institutions are going to have a hard time 
signing on the dotted line and feeling that they have carried 
out their responsibilities in doing so.
    I would appreciate for the record a complete list of the 
partner institutions, if I might, who have executed a CTTA, and 
remaining institutions who you think require a CTTA and that 
have not signed. If you could provide that for the record, I 
think that would be helpful.
    [The information follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
                           CLAIMS PROCESSING

    Mr. Price. Let me switch to the question of benefit review, 
waiting times, the time limits of the claims processing, and 
the quality of the claims processing. We raise this every year 
in these hearings, and sometimes the news is encouraging and 
sometimes it underscores the need for further improvement. But 
I commend you, Mr. Secretary, for establishing the Claims 
Processing Task Force late last year. I understand that the 
results of that task force have been presented to you and you 
are in the process of implementing these recommendations.
    I wonder if you could briefly describe the recommendations 
that you have received, what you are doing to implement them, 
and maybe comment on this recently instituted effort to resolve 
81,000 of the oldest compensation and pension claims.
    Then I would like to move a little more specifically to our 
southeastern situation in the Winston-Salem office.
    Secretary Principi. Certainly, Mr. Price.
    I am very pleased with the progress we are making to reduce 
this very large backlog of claims. First, with regard to the 
aging veterans, veterans over the age of 70 whose claims have 
been languishing for over a year, we created a Tiger Team in 
Cleveland, Ohio, supported by nine other centers around the 
country. In the first four months of their existence, they have 
adjudicated and decided over 13,000 claims. The letters I 
received from veterans 75, 82, 85 years old, are very 
complimentary of the people who are working on the Tiger Teams, 
so we are making great progress.
    We signed a memorandum of understanding with the St. Louis 
Records Processing Center so that we can get military medical 
and personnel records in a more timely manner. We have reduced 
the backlog of requests for records by over 10,000 since the 
MOU was signed, and requests pending over a year have been 
reduced from 6,000 to 3,700. And as I stated earlier, we have 
doubled our productivity in January and February of this year, 
deciding in the neighborhood of almost 29,000 claims a month 
compared to 63,000 this year.
    Indeed, our folks throughout the system are focused and are 
disciplined in bringing down this backlog. Some of the more 
important recommendations of the Claims Processing Task Force 
deal with triaging and specialization, so that when claims come 
in, we now triage them to ensure that the ones that are ready 
for rating go into a certain pile and those that require some 
claims development work go in another.
    We are coupling that with specialization, where people are 
specializing in certain types of claims they are very 
proficient in. Most importantly, we are bringing some 
accountability and performance standards to our work.
    We are putting performance standards in place for all of 
our people to meet. We have production goals. And at the same 
time, we are mindful of quality. Quality is at an all-time high 
of 81 percent accuracy. We have been able to reduce the 
backlog, begin to bring it down, while maintaining high 
quality. I think the credit really goes to the people in the 
field. Under Guy McMichael's leadership, that progress is 
finally beginning to be made.
    Mr. Price. I commend you for your attention to the backlog. 
On the next round, I would like to bring this a little closer 
to home with respect to the Winston-Salem performance.
    Mr. Walsh. Thank you. Ms. Kaptur.

                 Congresswoman Kaptur's Opening Remarks

    Ms. Kaptur. Mr. Secretary and members of your team, welcome 
back before our subcommittee here and thank you for your 
exemplary service and devotion to the people of our country and 
to our veterans. The last time I looked, you still operate the 
largest hospital and health care system in the world, with 
enormous responsibilities.
    I wanted to just make the observation that in the budget 
and the tax proposals that the OMB and the President submitted 
to us, companies like Enron would have received over $350 
million in additional tax cuts. I know my colleagues on the 
other side of the aisle voted for that. I didn't. And when I 
think about who is getting money and who isn't getting money in 
this country, and who is having to sacrifice and who is paying 
the price, I don't like the looks of this playing field. So I 
just want to begin with that statement.
    If we are at war, then everyone has to sacrifice. And the 
ones who are sacrificing the most are our veterans and their 
families. And this is a time when the American people want to 
do what is right. So I would just urge you, in the strongest 
way I can, to be the voice I know you can be inside the 
administration for our veterans, for those who have served and 
for those who are serving and will need your services when they 
come home. And the administration has got to do better than the 
budget that we have been presented.

                          MEDICAL CARE FUNDING

    Now, on the medical care side, according to the numbers I 
have been given, the request is for $25 billion for medical 
care. But then as I tried to understand what is happening, some 
of that request includes something like $1.28 billion in 
offsets for such things as inflation, higher pharmaceutical 
prices, pay raises--this is not exactly going into direct 
patient care. In addition, the way I look at the numbers, there 
is $793 million that would pay the cost of shifting the accrued 
retirement and health benefits to the Department from the 
Office of Personnel Management.
    So my first question to you really has to do with what 
exactly is the increase you are requesting over last year for 
medical care, discounting these administrative costs and so 
forth? It is not clear to me. I only pointed out two of the 
major categories; there are other ones.
    Secretary Principi. Yes. I will look at the real increase, 
the real apples-to-apples increase as you indicated, 
Congresswoman Kaptur, to be $1.57 billion. In looking at a real 
increase, I don't believe you can count, as you said, an 
accounting transfer to cover health care costs, retirement 
accrual, things of that nature, which would be close to around 
$800 million. I didn't even include the $260 million for the 
deductible, although historically, all revenues collected have 
been included in the real increase. I see the increase as $1.57 
billion, taking all of the other items out.
    Ms. Kaptur. Taking all of the other things out.
    Secretary Principi. Yes, ma'am. I am referring to the 
accounting transfers and the deductible increase.
    Ms. Kaptur. Okay. That doesn't include the Priority 7 
copayment.
    Secretary Principi. No, ma'am, it doesn't.
    Ms. Kaptur. So this would just be hard dollars for medical 
care?
    Secretary Principi. Right. The whole increase, if you will, 
was around $2.7 billion. But if you back out the accounting 
transfers and the copayment, the deductible for the Priority 
7s, you come down to $1.57 billion.
    Ms. Kaptur. All right. Now, what percent is that over the 
prior year?
    Secretary Principi. Seven percent.

                       MEDICAL CARE FUNDING NEEDS

    Ms. Kaptur. That is a 7 percent increase. How does that 
correlate with your actual need for medical care costs within 
the VA?
    Secretary Principi. Again, if you back out the deductible 
that we talked about, and you maintain open enrollment, anybody 
comes into the system irrespective of their status or income, 
then I would think you would need an additional $1.1 billion.
    So if you said to me, Mr. Secretary, no deductible, no 
Medicare, no change in the benefit package, and that each year 
I would have to make an enrollment decision, and that I would 
make an open enrollment decision for anyone of the 25 million 
to come into the system, I would project we would need $1.1 
billion more.

                         WELFARE REFORM IN OHIO

    Ms. Kaptur. Thank you. I wanted to just give you a 
perspective from the Midwest. Over the past year, my district 
office which maintains a very rigorous analysis of the cases of 
our constituents. I have to tell you that veterans is the 
number one category. It hasn't always been. Social Security is 
generally number one. But over the past year, in my part of the 
country veterans has been number one.
    And I am going to describe some of the reasons to you. Part 
of it relates to welfare reform. What happened in a State like 
Ohio, single males were cut off of welfare a couple of years 
ago. So that means that they get no support from the State of 
Ohio. Since then, they have been flocking into our Veterans 
Service Commissions that have no money left. Also the changes 
in this Medicare prescription program under the VA, where 
veterans have to pay--more for prescriptions--Our veterans, by 
the way, average 10 prescriptions per month. So on average with 
the $7 copay, that is amounts to $70 a month. That is what is 
going on in my region of Ohio right now.
    It has created a very confusing system for our vets. And we 
are seeing many more veterans going through our feeding 
kitchens. In Ohio, unfortunately, we have done the worst job of 
any urban State in dealing with work force training. And so the 
dollars that should be there for those that can be reemployed 
have not been properly applied for over 3 years. So in our 
State, for veterans the situation has dramatically changed for 
the worst.
    And I am saying this to you because some of the proposals 
you are making have to do with job training programs at Labor 
that you would like to shift over to the Department of Veterans 
Affairs, but also because of the way that TANF kicked in. And I 
just wanted to inform you of that in hopes that as you speak 
with the Secretary of Health and Human Services, that as we 
proceed through TANF reauthorization, that veterans are not 
forgotten in the equation, and that veterans who seek 
employment are given attention. I can't believe Ohio is the 
only State that isn't measuring up--maybe it is--but all I know 
is what is happening in my district and in my region.

                      PRESCRIPTION COPAY INCREASE

    Now I want to turn to the prescription medicine copayment 
increase, because the prescription issue is probably the major 
reason people are coming to us already even before this 
increase.
    I would like to know what type of analysis went into the 
determination to raise the copayment to $7, and if most of our 
veterans average 10 prescriptions a month, how is that being 
considered in whatever any given veteran is being asked to pay?
    Secretary Principi. During my first year, I have tried to 
get around the system to as many States as possible. I have 
hop-scotched across the Midwest and I have seen the great 
demands for VA health care, and you are absolutely right.
    I think the good news is that the VA has opened 622 
outpatient clinics that did not exist in 1993 and 1994 that 
have been opened since 1995, 1996.
    Ms. Kaptur. Can you yield? I think when I came to Congress 
we had about 270.
    Secretary Principi. Now we have 622. We have grown, on 
average, 38 percent per year in the number of veterans who are 
treated. We are almost up to 5 million veterans. We are 
breaking new ground and the quality has never been better, so 
there is an awful lot of good that is happening. With all that 
has happened, expectations have risen exponentially, and that 
is why we find ourselves in this very, very difficult situation 
of infinite demand and finite resources.
    I might also add that I note my commitment and your 
commitment to the homeless veterans of this Nation. We are 
dedicating a great deal of resources, Congresswoman Kaptur, to 
the plight of the homeless veteran population, not only with 
transitional housing programs, and compensated work therapy 
programs, but also to trying to address some of the underlying 
behavioral issues that lead to homelessness, drug and alcohol 
abuse, PTSD and, employment problems.
    I think we have a real record of success in the integrated 
programs that we have put together. Shortly we will kick off a 
new advisory committee, Secretary's Advisory Committee on 
Homelessness. I think I have brought together some really 
dedicated people and fine minds and subject matter experts in 
homelessness to form this team to advise me and the Department 
on ways to improve our programs for them.
    Secretary Principi. With regard to the $7 pharmacy co-
payment, it has never been raised before. It started out at $2; 
it has remained at $2 for the past 10 years. Meanwhile our 
pharmacy budget has grown from $750 million to close to $2.5 
billion just for ingredients alone and then about another $600 
million for managing our entire pharmacy program. In our 
analysis we looked at proposals for $9 and $10. There were some 
proposals for $5. In the final analysis I made the decision on 
$7. I linked it to a reduction in the copayments for outpatient 
care. I felt that we shouldn't be charging veterans who come to 
us for preventive health care, vaccinations, certain preventive 
health care measures, and that a primary care visit should be 
limited to $15, not $50.
    So I tried to look at it as a package, if you will, in 
putting that together, and that is basically how we did it. 
There is also an $840 annual cap on the amount of money a 
veteran has to spend on prescriptions. That is to address the 
situation where veterans have multiple 10 prescriptions per 
month.
    Ms. Kaptur. An $840 cap?
    Secretary Principi. $840 a year is correct.

                        PRESCRIPTION DRUG POLICY

    Ms. Kaptur. Is there any income judgment made about the 
veterans coming in, as you are talking about, the nonservice-
connected Priority 7 veterans--in terms of the prescriptions, 
are you taking a similar look at people who are coming in? And 
I realize you have got the $840 cap, but from the calls we are 
getting, my sense is that there is a lot of discomfort among a 
segment of the population where that is a very large amount of 
money.
    Secretary Principi. I know it is a significant increase 
over the $2 that has been in effect for a long time, but I 
believe it is still a very, very generous package. Service-
connected conditions are exempt from payment of that copayment. 
Nor does the $1,500 deductible apply to pharmacy co-pays, and 
given the cost of pharmaceuticals and prescriptions in the 
private sector, I think we are offering our veterans still a 
very, very good benefit.
    Again, I know $7 for some people is a lot of money, and I 
am not trying to downplay that, but you have also given us the 
authority to keep those dollars at the medical center so that 
those dollars can be used to increase the reach of health care. 
We don't send them to the Treasury. They stay with us as 
revenues to be used for health care, and I think that is a very 
important issue so that we can buy more pharmaceuticals, 
provide more health care to more people.
    Mr. Walsh. The gentlelady's time has expired.
    Ms. Kaptur. Do I have 30 seconds just to----
    Mr. Walsh. I will be counting.
    Ms. Kaptur. I would urge the Secretary to conduct a study 
to see how this cost of prescription drugs within the VA is 
weighing on some segments of the veterans population very 
heavily. Thank you.
    [The information follows:]

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    Mr. Walsh. Mr. Cramer.
    Mr. Cramer. Thank you, Mr. Chairman.

                              PRIORITY 7S

    Mr. Secretary, welcome back before the committee, and to 
your staff as well. I am going to try to build on many of the 
questions that other Members have brought up and try to fill in 
some of the detail. I want to say to you, though, that I think 
for most of us the most frustrating work for us and our staff 
is involved with is interacting with veterans that are trying 
to cope with the medical care system, with the claims process 
system, including the appeals system. Those situations are the 
most troubling and frustrating situations that I face in doing 
this job, especially on the constituent level.
    I want to get into this Priority 7 medical care users. I 
think Mr. Mollohan was asking, questions about that. Are your 
traditional core patients those with service-connected 
disabilities and lower incomes? That is your core there?
    Secretary Principi. That is correct.
    Mr. Cramer. But the growth of Priority 7 medical care users 
is extraordinary. Regarding the difference between the 
percentage growth and the cost there, that must be consuming up 
a lot of the budget increases that we try to maintain for you.
    Secretary Principi. That is absolutely correct.
    Mr. Cramer. In your statement, your goal is for veterans to 
receive nonurgent appointments for primary and specialty care 
in 30 days or less while being seen within 20 minutes of their 
scheduled appointment, and I applaud that goal, but are the 
veterans with service-connected disabilities in your highest 
priority group?
    Secretary Principi. Yes, that is correct.
    Mr. Cramer. Do they receive a higher priority when it comes 
to scheduling appointments or for other services?
    Secretary Principi. No.
    Mr. Cramer. So Priority 7, service-connected disabilities, 
they are all in the same category?
    Secretary Principi. Once you are enrolled, you are all in 
the same category statutorily. Now, that doesn't mean that we 
may not want to take a look at that to ensure that the service-
connected do, in fact, receive a higher priority in terms of 
getting an appointment, but right now one needs to question 
whether the current system is equitable, because if you lose 
your anatomy or leave part of your anatomy in Vietnam, and you 
go down to Florida to enroll in the system, and you are treated 
no differently than a Priority 7, and I really question whether 
we should continue to give every enrollee equal status. We can 
look at a more thoughtful approach for the service-connected 
disabled.
    Mr. Cramer. My position would be your traditional core 
patients, those with service-connected disabilities and lower 
incomes, deserve that first priority approach. I hate that we 
are having to evaluate between veterans and classes of 
veterans, but I would hope that would be something that you 
could take into consideration.
    Secretary Principi. We have done that as long as I can 
remember. We had what we call a Category C veteran. They were 
the nonservice-connected veterans with higher income. Although 
we have moved to a new construct with seven separate 
categories, I think we have always recognized the need to look 
at the service-connected as opposed to the nonservice-connected 
with higher income.

                           CLAIMS PROCESSING

    Mr. Cramer. I want to now switch over to the claims 
process. You set a goal for 100 days to process rating related 
claims, and that you hope to achieve that by the summer of 
2003; is that correct? Are you on schedule?
    Secretary Principi. Not quite. I think we are a little bit 
behind schedule, but we are making progress. I think it is 
still achievable.
    Mr. Cramer. In my district in Alabama, my case workers and 
the veterans themselves say the delays at the regional office 
in Montgomery are getting longer. So I would ask you to review 
and to evaluate the situation.
    Do you expect all offices to reach that goal by a certain 
time, or are you starting with a priority of certain offices in 
the country?
    Secretary Principi. No. We want that to be a national 
average timeline for processing claims.
    Mr. Cramer. I want to talk to you about the appeals 
process. Last year I brought up the specific case of James 
McCulley, and he still is awaiting a decision, a very 
complicated situation that involves a service-related injury, 
radiation exposure. Also this case involves the efforts you are 
making, which I applaud, to make sure your ability to gather 
information from other bureaus, in one case an office in St. 
Louis.
    In this man's case there had been a great deal of trading 
of information within the Defense Threat Reduction Agency and 
their denial that they have certain things that we know, in 
fact, we provided them. Then when we communicated with you, and 
you said that you did not have the information from the Defense 
Threat Reduction Agency. We are supplying them to you; you 
can't get the information from the other agency. That needs to 
be straightened out as well. We have been waiting a year for an 
answer to this man's situation.
    Secretary Principi. I would like to get the specific 
information on that.
    Mr. Cramer. We will get it to you.
    Secretary Principi. I apologize, and we will get on top of 
that right away.
    Mr. Cramer. I am jumping in with a situation that would be 
impossible for you to remember. I do this to bring up the 
appeals process as well. I hope you will take a look at that 
and make sure that those veterans get a fair shot and the 
response time is shortened. I want to work with you. It is a 
very difficult matter for all of you who are trying very hard 
to make this process better for our veterans, and I want to 
assure you we want to work with you and not just criticize you. 
Thank you.
    Secretary Principi. Thank you, Mr. Cramer.
    Mr. Walsh. Thank you for your efficiency, Mr. Cramer.
    Mr. Sununu.
    Mr. Cramer. Shocking, isn't it?
    Mr. Walsh. Not for you, not at all.
    Mr. Sununu. Thank you, Mr. Chairman.

                     OPEN ENROLLMENT OF PRIORITY 7S

    Welcome, Mr. Secretary. I do want to talk about open 
enrollment Priority 7, but I have some comments, and I will let 
you repeat some of the good things that have happened at the 
end, and I will leave room for that.
    You were good enough to meet with a number of members from 
the New England delegation just a couple weeks ago to talk 
about the effect that open enrollment has had and the increase 
in Priority 7s in New England, where we have had a much higher 
level of Priority 7s come into the system under an open 
enrollment than a lot of other regions in the country, and 
while it has affected funding nationwide, I think it has placed 
a more severe burden on the network in New England. In that 
discussion you indicated that you were reviewing modifications 
and changes to the formula, and I just wanted to make clear 
whether it was your intention to take into consideration the 
Priority 7s as part of any proposed changes that you might 
make.
    Secretary Principi. That is under consideration.
    Mr. Sununu. And it was also indicated that your timing for 
proposing the changes was in the late April or May time frame. 
Is it fair to say you are still on track for meeting that 
target, and we can expect to hear from you then?
    Secretary Principi. Yes, we are.

                        THIRD-PARTY COLLECTIONS

    Mr. Sununu. Third-party collections, you talked about your 
24 actions that you have put together for improving third-party 
collections. I think that will continue to be an important part 
of supporting the VA as you bring more people into the system 
if there are services or treatment that are appropriately 
covered under a third party. I very much want the VA to be able 
to collect those funds notwithstanding any questions about some 
of the services that might not be appropriately covered under 
third parties that Mr. Frelinghuysen noted.
    I would like to hear a little bit more about the 24 actions 
and progress that has been made to date on specific actions, 
and also which of the 24 you might not have achieved as much 
progress on as you would have liked.
    Secretary Principi. There are so many aspects to 
collections, I would point out at the outset that, the largest 
insurance company, Medicare, is off limits to us. We also 
experience enormous difficulty receiving reimbursements from 
HMOs. We are looking at a legislative proposal that may assist 
us in that regard.
    Mr. Sununu. Why? Can you be a little more specific about 
the kinds of difficulty that they present?
    Secretary Principi. Many veterans are enrolled in HMOs, and 
they come to us for the care, primarily the pharmacy benefit. 
We may not be part of the HMOs provider plan, therefore we are 
not reimbursed. Perhaps Dr. Murphy has more specific instances 
of why we are not doing as well with HMOs, but I think that is 
indeed the case.
    The issue of medical care cost recovery has many aspects we 
need to look at. We need to find ways to identify, at the time 
of enrollment, whether veterans have insurance. We find that a 
significant number of veterans do not tell us whether they have 
insurance. We also need to look at the our enrollment forms to 
make sure that veterans know that the information being 
provided must be, in fact, true and correct.
    Secondly, there is the ongoing challenge of getting doctors 
to document medical care they are provided. Doctors at 
university medical centers, who don't document, don't get paid. 
Basically it is from those billings that physicians receive 
their income.

                         BILLING DOCUMENTATION

    Mr. Sununu. Why would documentation be a greater problem in 
the VA than it might in the private sector?
    Secretary Principi. Because there is no incentive in the VA 
to ensure thorough documentations. Providers get paid whether 
they document or not, and we need to incentivize our physicians 
to ensure that they do their documentation. We also need to 
hold them accountable for the documentation as well so that we 
can code it properly and then bill and collect it.
    Documentation is a challenge that we are working on to 
ensure that we get the level of cooperation from our 
physicians, even part-time physicians who go back to the 
university hospital, to make sure they complete the important 
documents.
    We are looking at increasing the compensation rates for 
coders because coders are very, very valuable and we lose a 
number of coders to the private sector. Clearly coding is 
important.
    Mr. Sununu. Are these, information collection, 
documentation coding--are these areas that you feel you have 
made progress on or----
    Secretary Principi. Yes.
    Mr. Sununu [continuing] Or are these areas that progress 
has been limited?
    Secretary Principi. I think progress has been limited in 
all fields. We clearly are making progress, but there is much 
more we need to do.
    Mr. Sununu. But you are running 13 percent ahead of your 
plan; so does that mean you are setting the bar low, or are 
there areas of the actions that have proved more fruitful?
    Secretary Principi. Well, I think that is a good point. I 
am not sure whether the bar is set too high or too low. I hate 
to see it set so low that it becomes a self-fulfilling prophecy 
that we achieve our goal or exceed it. But I think we are 
clearly doing better. There is a realization now that the 
appropriations cavalry cannot continually march over the hill 
and bail us out year after year, and that we have to make our 
own resources through greater efficiency and effectiveness. 
Medical care cost recovery is one way that you have given to us 
to keep those dollars in the system.

                  STATUTORY CHANGES TO COST RECOVERIES

    Mr. Sununu. You have alluded to statutory change regarding 
managed care recovery. Are there any other statutory changes 
that you would encourage us at least to look at relating to 
cost recovery third party?
    Secretary Principi. No, not that I am aware of right now, 
sir. The billing and collection end of it, considered back-of-
house functions, are an area of great concern. Culturally and 
historically we were not very good at billing and collection. 
We tend to be too decentralized. We have billing and collection 
efforts in medical centers in some VISNs, we have them 
consolidated to VISNs in other parts of the country.
    We need to take a good hard look at our billing and 
collections processes because our accounts receivable are very, 
very weak; our accounts receivable over 90 days are very, very 
high; our cost to collect every dollar is very high. I don't 
know if contracting out is the solution, but we need to take a 
good, hard look at our back-of-house functions and see how we 
can consolidate those and do a better job of staying on top of 
third-party collections. With first-party billings we do very 
well.

                        THIRD PARTY COLLECTIONS

    Mr. Sununu. It is my understanding that on third-party 
collections, all of the funds collected remain within the VISN. 
And could you further comment on the degree to which the 
collections remain at the facility where they were collected, 
and if they all remained at that facility, wouldn't that help 
to provide the incentive for some of the documentation in other 
issues that are important to a working system?
    Secretary Principi. I think that varies around the system. 
Again, that has been decentralized, and several VISN directors 
do, in fact, allow those dollars to stay at the medical center. 
Others consolidate those collections and then distribute the 
money based upon some set formula.
    Mr. Sununu. It is exclusively at the discretion of the VISN 
director; is that correct?
    Secretary Principi. I believe so.
    Dr. Murphy. It is at the discretion of the VISN director at 
this point. And there needs to be the ability of the network 
director to appropriately distribute the funds across that 
region. Remember that at a tertiary care facility you may be 
able to get a higher collection for subspecialty services and 
diagnostic tests, and yet the majority of the veterans' care 
may occur back at their hospital or CBOC. So there isn't the 
necessity to make some judgments about where the money needs to 
go to provide care for veterans.

                           CLAIMS PROCESSING

    Mr. Sununu. Fair enough. Finally, we repeat ourselves once 
in a while so that we can make sure we are clear on a 
particular point, or perhaps from time to time Members have 
interests in the same areas, but I want to give you a chance to 
repeat yourself. You talked about progress that was made on 
claims, and I think that is important. I think it is important 
from the standpoint of just giving fair and reasonable service 
to those that have legitimate claims, but, frankly, it is also 
important because it really makes a difference in the attitude 
and the goodwill that you generate within the veterans 
community and the goodwill that we see this building back home. 
So I wanted to literally have you repeat the progress that has 
been made.
    You mentioned a reduction in the backlog of 10,000 claims. 
Does that mean we have moved from 81,000 with the Tiger Teams 
down to 60- or 70,000? Can you repeat the progress that has 
been made there and let us know what else we might do to help 
you continue to make this kind of progress?
    Secretary Principi. It is a moving target because each day 
more claims reach a year in age, and veterans reach the age of 
70, adding to the backlog; however, those cases are assigned to 
the Tiger Team. In the four months or so since the Tiger Team 
was established 13,000 claims have been decided. These cases 
were very complex. Obviously they have been sitting on 
someone's desk for over a year. They were referred to as the 
dogs, but our Tiger Team handled them, and veterans have been 
the beneficiaries. I wish you could read some of the letters 
that I have received on behalf of the Tiger Team. They are 
quite emotional.
    Nationwide we are making great progress, and I think what 
we need to do is stay the course. We have embarked on a course, 
and we need to continue to have production goals and continue 
to monitor our quality at the same time.
    Mr. Sununu. Your key goal is a hundred-day processing time?
    Secretary Principi. Yes, a hundred-day processing time in 
the latter part of 2003. To accomplish that we need to have 
work in progress of around 250,000 claims. Today we are well 
over 650,000, but based upon the track we are on now of making 
62,000 plus decisions a month, I expect to see that backlog to 
start coming down rather dramatically.

                     PROGRESS IN CLAIMS PROCESSING

    Mr. Sununu. What has been more important to the success, 
adding personnel or using technology and computerization more 
effectively?
    Secretary Principi. I think adding personnel and refining 
our business management processes have been important factors. 
Regrettably information technology systems have been somewhat 
of a disappointment given the amount of money we have invested 
in them. They tended to slow down the process, believe it or 
not, in some cases. The system that was brought online in the 
past year was so burdensome and un-user-friendly that it caused 
our productivity to drop. Each rating specialist who was doing 
maybe four to five claims a day; and found themselves doing one 
or two a day with the new technology. Obviously you would hope 
that the new technology would help you to be more efficient. In 
this case at least over the long term, because you are 
inputting so much data, but in the short term it was a 
disaster, in my opinion.
    Mr. Sununu. I look forward to your recommendations for 
modifications to VERA. I especially hope they will take into 
consideration regions like New England that have seen some of 
the sharpest increase during the open enrollment period. I 
certainly hope you continue to exceed your targets on the 
third-party reimbursement, and I want to emphasize that from a 
personal standpoint, an anecdotal standpoint, the goodwill that 
has been created by success on the claims really makes a 
difference for us as Members of the Congress and for the 
veterans back home. Thank you.
    Mr. Walsh. Thank you, John.
    Mrs. Meek.
    Mrs. Meek. Thank you, Mr. Chairman.

                    ANTIBIOTIC-RESISTANT INFECTIONS

    I would like to welcome the Secretary and his entire 
administrative team. I have listened intently to the other 
Members asking questions of great benefit to me. I have one or 
two things I would like to ask you. One, during last year's 
2001 conference report, the committee strongly urged VA 
hospitals to develop and implement some very innovative 
antibiotic use practices to reduce the antibiotic-resistant 
infections that were found to exist at that time. I would like 
to know what progress the VA has made in this regard since that 
time.
    Dr. Murphy. We try to use the medication that is best for 
individual veterans' treatments that will provide the most 
effective treatments in the most cost-effective way. We also 
try to make sure that we don't use antibiotics inappropriately 
so that we actually promote development of antibiotic 
resistance.
    Mrs. Meek. Are you using your computer databases to do that 
so that you can track this?
    Dr. Murphy. We have an emerging pathogens database that is 
managed out of Cincinnati, and, in fact, that database has been 
very helpful in managing a number of programs including the 
drug-resistant pathogens program, the hepatitis C program and 
other emerging infectious disease issues.
    Mrs. Meek. So that model does enable the VA to work against 
this problem of these antiresistant bacteria?
    Dr. Murphy. That is one of the uses of that database.
    Mrs. Meek. Thank you.

                 MINORITIES IN VA LEADERSHIP POSITIONS

    My second question has to do with I must say to the 
Secretary that I would like to compliment him on the 
administrative staff that I see. When I first came to this 
committee, there were very few women on the administrative 
staff. You have improved that. I am trying to look for some 
more minorities, and I am not quite that nearsighted, but I 
don't see very many other minorities, and I would like you to 
speak to that, Mr. Secretary.
    Secretary Principi. The VA in general has a long way to go 
in the placement of minorities in positions of responsibility 
and leadership. We are making some progress, but I won't 
pretend to tell you that we are anywhere close. We need to do a 
better job. I am very proud of the minorities that I have 
brought--women and minorities that we have brought into 
positions of leadership in the office of the Secretary.
    Yes, we are making some progress, but in our associate 
director and director programs for medical centers and regional 
offices, we need to have succession plans that ensure that 
minorities are in positions to increase their leadership 
responsibilities. We have a ways to go.
    Mrs. Meek. Is there anything in your strategic plan that 
will lend itself toward your goals?
    Secretary Principi. Indeed. We have a work force success 
plan, and we just had a senior level meeting at the Department 
a few weeks back to discuss how we can increase the number of 
minorities in positions of leadership throughout the VA. In 
programs like Leadership VA, which is a wonderful program, we 
have increased the number of minority participants in that 
program to include black Americans, Hispanic Americans and 
women. We are, in fact, making it a part of our strategic plan.
    Mrs. Meek. Thank you, Mr. Secretary. I don't need to tell 
you this, that this world is really changing, and of course the 
VA, like every other agency of government, has to adjust to 
that change. When you look around, you see all kinds of 
ethnicities and people of all colors and creeds, and I would 
certainly like to see the VA look a little more like the 
population in terms of your administrative structure. That is 
not to say you would take a hammer and kill everybody else that 
is in there or try to----
    Secretary Principi. The Active Duty component of the 
military force is comprised of an increasing number of women, 
black Americans and Hispanic Americans. That is another reason 
VA should replicate the makeup of the military force.
    Mrs. Meek. Right.

                  SPECIALIZED REHABILITATIVE SERVICES

    Now, I wanted to ask you a question about some of your 
specialized rehabilitative services. You do have those in the 
VA, like the blind rehabilitation programs. I do get inquiries 
from blind veterans and veterans who have taken advantage of 
the specialized services. How has your budget affected these 
services?
    Secretary Principi. We have certainly increased our funding 
for our specialized program in blind rehabilitation. We have 
increased the estimate of blind veterans we expect to receive 
by over 3,000 from 2002 to 2003. In 2002, we estimate we will 
care for 12,671 blinded veterans, so we are increasing the 
numbers across the board.
    In spinal cord injury, blind rehabilitation, seriously 
mentally ill, post-traumatic stress disorder, we are doing an 
awful lot to ensure that we maintain strong viable specialized 
programs.
    Mrs. Meek. We get a lot of not criticism, but inquiries 
regarding your outpatient clinics and your primary care system. 
How would you assess your ability of your primary care programs 
for veterans? The clinics are very important to them.
    Secretary Principi. They really are, and I think they are, 
generally speaking, doing very, very well. Unfortunately, in 
places like Florida we have wide variations in waiting times to 
get into clinics, and in Florida the wait times tend to be a 
lot longer than in other parts of the country. On average, for 
an individual who is enrolled in the VA, they usually can get 
into a primary care clinic within 30 to 45 days for specialized 
treatment. For specialized care, the wait is a little bit 
longer.
    It is the new enrollees that we are beginning to look at 
differently and break out to ensure we are measuring what the 
true waiting time is for that population. In some parts of the 
country you can get in almost the same day that you make your 
appointment. In other parts of the country, we see this 
phenomenon that it is taking a long time, and we need to 
address that.
    Mrs. Meek. Mr. Secretary, I don't think there is anything 
that is too good for our veterans, and certainly this committee 
is extremely supportive of what you are doing. I am hoping that 
as a person who sits in an administrative seat, that you would 
think first of the veterans regardless of what we think and 
regardless of what the administration thinks. You would be the 
person that will fall on the sword, and that is extremely 
important to us, and I thank you for being here.
    Secretary Principi. I thank you, and I can assure you, 
Congresswoman Meek, that that is the only thing I care about.
    Mrs. Meek. Thank you, Mr. Chairman.
    Mr. Walsh. Thank you, Mrs. Meek.
    I would like to associate myself with her remarks in terms 
of more minority hiring in the Veterans Administration and 
others. I think we as a party need to go farther, the 
Republican Party needs to go farther in that respect, and I 
would offer to Mrs. Meek if she would help us to get more 
minorities into the Republican Party, I would go out of my way 
to help them get jobs in the administration.
    Mrs. Meek. I will take you up on that.
    Mr. Walsh. Thank you, Mr. Secretary.
    We are going to break now and come back at 1:30.
    [Recess.]
    Mr. Walsh. The subcommittee will come to order. This is the 
second tranche of this hearing, about 3 hours this morning. I 
would like to thank the Secretary and his team for handling our 
questions quite well this morning. And we will give you another 
chance to do that this afternoon. I think we will try to keep 
members to 5 minutes. That way we will be able to cover more 
issues in less depth or some new issues that we didn't get to 
this morning.

                                 CARES

    So I would like to welcome you all back. And I would like 
to begin with questions on the CARES initiative. I notice that 
VISN 12, Chicago, accepted supplemental funding of $20.8 
million this year. And that seems ironic since VISN 12 has been 
the poster child for demonstrating the need for a CARES process 
for a number of years. I am encouraged by the final decision on 
the VISN 12 CARES options, but I am little concerned about the 
timing of implementation.
    Can you tell the committee your plans in milestones for 
implementation of the CARES study?
    Secretary Principi. We have an implementation plan being 
worked on at this time, Mr. Chairman. I look forward to seeing 
that implementation plan in the near future. Perhaps Dr. Murphy 
can add some specificity to that. It is my intent to move as 
rapidly as we can, thoughtfully but rapidly, to the 
implementation of the VISN 12 CARES decision.
    I don't want to see a degradation in quality and service at 
the Lakeside facility. As people know, at some point it is 
going to be closed down and we are going to be migrating over 
to Westside. That move involves an expansion of the Westside 
Bed Tower to accommodate the beds that we are shutting down at 
Lakeside, and the opening of an outpatient clinic in downtown 
Chicago. We have some work cut out for us, but it is my hope 
that we can move along with deliberate speed here in the 
implementation.
    Mr. Walsh. Is there any concern if we let this linger, the 
failure to implement the CARE study, that some will find other 
reasons to keep this facility going?
    Secretary Principi. I think that is always a possibility. 
The longer it takes----
    Mr. Walsh. If that is the case, it will be much harder to 
implement any further CARES analysis and conclusions.
    Secretary Principi. I agree, sir.
    Mr. Walsh. So what are we going to do about that?
    Dr. Murphy. We actually intend to move out very 
aggressively in getting an implementation developed. The 
network is working on that as we speak, and we expect to see 
that within several months.
    We would like to begin to look at getting the renovation 
started at the Westside facility so that we can transition out 
of the Lakeside VA and move all of the inpatient care inside 
the city of Chicago to Westside. We believe that that is 
possible. We actually have some initial architect drawings on 
the SCI and blind rehab center at the Hines facility. And we 
recognize that we need to have the initiation of CARES Phase 2 
prior to beginning that construction.
    But we are looking at options for locating the SCI and the 
blind rehab center together on the Hines campus. In addition, 
the VA-DOD Executive Council appointed a task force to look at 
immediate sharing that could go on between North Chicago and 
the Great Lakes Naval Facility. And in the next month we expect 
to see the final report from that group which will give us a 
recommendation on how North Chicago VA and the Great Lakes 
Naval Center can share the inpatient facility at North Chicago. 
So we expect to move out aggressively.
    Mr. Walsh. Once you have implemented recommendations, will 
VISN 12's excess infrastructure expenses have been eliminated?
    Secretary Principi. Yes, they will be eliminated.
    Dr. Murphy. As you know, we have a number of historic 
properties on the Milwaukee VA Medical Center campus, and that 
will present some specific challenges. I will be meeting with 
the Historic Trust this week, looking at how we can work with 
them and their board of directors to give us some advice on 
potential for developing those historic properties, hopefully 
for enhanced use opportunities that will allow us to get some 
resources that we can put back into health care and stop 
maintaining unused, underutilized facilities.
    Mr. Walsh. Thank you. Mr. Mollohan.

                     GRANTS FOR VETERANS EMPLOYMENT

    Mr. Mollohan. Thank you, Mr. Chairman. Mr. Secretary, the 
administration is proposing the establishment of a Grants for 
Veterans Employment program. Do you support this 
recommendation?
    Secretary Principi. Yes, Congressman Mollohan, I strongly 
support this recommendation. The current program has not been 
effective in finding suitable and permanent employment for a 
significant segment of the veteran population.
    Mr. Mollohan. The current program is in the Department of 
Labor?
    Secretary Principi. Yes. It is the systems, not the 
program. There are some very dedicated people who work in the 
Disabled Veterans Outreach Program as Local Veterans Employment 
Representatives. They are very, very fine people.
    But you look at the statistics, and the age group of 20-24 
for veterans who have been recently discharged from the 
military, and they have a 9.6 percent unemployment rate 
compared with 4.2 percent for the average American the same 
ages. Twenty States placed fewer than 11 percent of the 
veterans who went to the employment agency looking for a job. 
We have about 550,000 veterans who are unemployed; 33 percent 
have been unemployed for more than 15 weeks.
    I think VA can do a very, very good job with this program. 
We provide a continuum of services for veterans--educational 
and vocational rehabilitation. Employment is really the door to 
a successful life, and I would like to have an opportunity to 
bring this program over to VA. Working with our people, I think 
we can fashion a new program for the 21st century.
    Mr. Mollohan. Some would say that this is more Labor's 
mission than your mission. What would be your response to that?
    Secretary Principi. The same argument can be made about 
education, that we have about 450,000 veterans in higher 
education. Should that go to Department of Education? Health 
care, should that go to HHS? And on and on and on. I think we 
do a good job. I think that we have one focus. Our focus is 
veterans, and employment is an important part of veterans' 
benefits.
    And so, no, I think the program belongs at VA. It would fit 
in very, very well with the continuum of services we provide to 
veterans, disabled veterans and those who are not disabled.
    Mr. Mollohan. How would the veteran, be benefited if this 
program were run out of the Veterans Administration?
    Secretary Principi. Instead of making it process oriented--
that is, just handing out grants to the States and, to the 
employment agencies--I would make it a more outcome-focused 
program with performance standards. The money should go to the 
Governors of each of the States, and the Governors should make 
a determination of how that money should be used, whether it 
should go to the Veterans Affairs Office, or to the State, 
Department of Labor office. People should be held accountable 
for the outcomes: The number of veterans who are employed, and 
the number of veterans with serious employment handicaps who 
have found suitable and permanent employment.
    I would put a big focus on reaching out to corporate 
America to point out the benefits that veterans bring to the 
workplace. I would make outreach to the larger companies, not 
the McDonalds or the Burger Kings of the world, but, to the 
larger corporations, and try to get veterans placed in that 
way.
    I would do an awful lot of Internet-based Information Age-
based outreach, for veterans seeking employment in the private 
sector. I would change the focus, and I would certainly make it 
outcome-and performance-based.
    Mr. Mollohan. In terms of getting this done, assuming it is 
the right thing to do, is the Department of Labor agreeing to 
and cooperating with this move?
    Secretary Principi. They are cooperating very, very well. 
We have received tremendous support and cooperation. We are 
working together. I would also form a task force and put 
leaders of some of our veterans' organizations, employers, and 
Department of Labor people together to come up with some 
recommendations as to how the program should be reformed and 
how it should be changed.
    Having a Secretarial task force to look at this program 
would be an important component of what we do, because I want 
to get the input from the stakeholders in any changes to the 
program.
    Mr. Mollohan. You don't need any authorization to do this?
    Secretary Principi. Yes, we do, sir. We do need 
authorization.
    Mr. Mollohan. You are working on that?
    Secretary Principi. Yes, sir.
    Mr. Walsh. Mr. Knollenberg.

                    NATIONAL CEMETERY IN DETROIT, MI

    Mr. Knollenberg. Chairman, thank you. One quick question 
about the cemetery in Detroit, which I think should be on its 
way, but in the 2003 budget I believe there is money, is there 
not? Is there a site as yet? Have you picked a site?
    Secretary Principi. I believe we have design funds 
allocated in the 2003 budget request. I will ask Under 
Secretary Higgins to comment about the site selection.
    Ms. Higgins. We are just about ready to select the 
preferred site. I will make the recommendation to the Secretary 
this month. As you probably know, a site in Oakland County is 
where we have been conducting our environmental assessment.
    Once we do that, we have money to proceed to buy the 
property, which was in the 2002 budget. And the design funding, 
of course, is in the 2003 budget request.
    Mr. Knollenberg. What is the timetable for completion?
    Ms. Higgins. Well, if things go according to plan, we will 
design and build and open the cemetery as soon as we can. One 
of the things that we started doing, beginning with the Fort 
Sill cemetery, is to open a fast track, a small portion of the 
cemetery, even before the contract for construction was let. So 
we opened Ft. Sill in November, and the contract has just been 
let. We hope to be able to do the same kind of thing in 
Detroit.

                            EXCESS PROPERTY

    Mr. Knollenberg. Look forward to that. Mr. Secretary, as 
you may remember, the Ford Motor Company gave the VA property 
in Allen Park, MI back in 1937. That property, that facility, 
obviously has aged and is of no real value right now, 
particularly with the other assets that they have in the 
community.
    But what I wonder is, and last year I think you mentioned 
that you were negotiating terms for the demolition, which is 
the issue here, and the environmental remediation of the site 
before it can actually be transferred back to Ford Motor. What 
is the status of those contract negotiations?
    Secretary Principi. Anytime we are ready to excess 
property, we look at the deed to see if there are any 
reversionary clauses in there, and sometimes we think if we 
excess a piece of property, the money will stay with the VA. We 
learned that many of the hospitals that we have are built on 
grounds of land that was donated to us, and if we cease using 
them as VA medical centers, they revert back to the donor, as 
is the case with Ford Motor Company.
    Working with your office, and with Congressman Dingell's 
office, we have been able to overcome a lot of the concerns 
with regard to the historic preservation of that property and 
worked out a mutual agreement with Ford Motor Company on the 
sharing of the costs of demolition, which totaled about $25 
million. We are sharing that cost.
    Mr. Knollenberg. You negotiated a sharing of the expenses 
of that remediation; is that right?
    Secretary Principi. Yes. A very, mutually agreeable 
arrangement has come about.
    Mr. Knollenberg. And you expect that demolition to be 
completed by?
    Secretary Principi. Very soon. I think we are on track to 
get that moving.

          PUBLIC HEALTH RESEARCH AND EDUCATION CENTERS (PHREC)

    Mr. Knollenberg. Thank you. Let me very quickly--I have a 
couple of minutes, I think--touch on the GRECC----
    Secretary Principi. The Geriatric Research----
    Mr. Knollenberg. Yes. I am all for what you are attempting 
to do here. Maybe it is beyond just attempting, but the fact 
that you are succeeding in getting information out that would 
at least have people think about prevention as opposed to just 
going in for treatment whenever something happens as you gather 
more information.
    Have you talked with a lot of interested parties in regard 
to this issue around the country? It doesn't have to be a long 
answer----
    Dr. Murphy. I am sorry, sir. Can you tell me which issue 
you are talking about?
    Mr. Knollenberg. I am talking about--this is the first time 
I have pronounced it, too. PHREC, Public Health Research and 
Education Centers. I probably slammed it or maligned it. But it 
is the issue of prevention of disease as opposed to treating 
cancer or heart disease or whatever it might be. This is to 
instill a new logic, I guess, in the vocabulary of the VA, so 
now they are looking at preventing problems rather than just 
treating problems.
    Dr. Murphy. Over the past several years, we have been 
putting a lot more emphasis on health promotion and disease 
prevention. We actually have a Center for Health Promotion and 
Disease Prevention in Durham.
    Mr. Knollenberg. That is one location, right?
    Dr. Murphy. Right. That is correct. As part of VA's ongoing 
performance measures, we make sure that every network is 
meeting certain prevention index measures, making sure that our 
elderly veterans get immunizations, the pneumococcal vaccine 
and their influenza vaccine on a regular basis, also our 
chronic lung patients, that we do cancer screenings. That is 
part of the routine clinical care.
    But we feel that we also need to put our research energy 
and our education energies into making sure that our staff has 
the latest information developed through research, and also 
that we have educated them on the latest information about how 
to prevent diseases in the veteran population.
    Mr. Knollenberg. I will have some follow-up in the next 
round. But I do want to get back to this issue.
    Mr. Walsh. I thank the gentleman. Ms. Kaptur.

                     GRANTS FOR VETERANS EMPLOYMENT

    Ms. Kaptur. In terms of Mr. Mollohan's questioning on the 
transfer of programs from Labor to the VA, my only remaining 
question is, if that occurs, does your authorizing legislation 
propose veterans' preference would be maintained, the 
employment preference?
    Secretary Principi. Yes, employment preference is separate, 
and responsibility for enforcing it is not part of the proposed 
transfer. I think that is a separate statute that will be 
protected and enhanced, I certainly support veterans' 
preference. I will look into that to make sure.
    Ms. Kaptur. All right. I am not with you yet on your 
proposal. I am guarded.

                           PRESCRIPTION DRUGS

    Let me just also reemphasize this morning, Mr. Secretary, 
we talked about the cost of prescriptions within the VA. And I 
would just urge you to consider a sliding scale, perhaps, that 
would adjust based on the veteran's income.
    I can tell you--in my district--even with the cap of $840 
for many veterans it is too expensive. This morning I did 
suggest looking at what is happening to veterans' with regards 
to prescription drugs and so I would just reemphasize that. You 
are so open to suggestions and your consideration is truly 
appreciated.
    Secretary Principi. We will do that, Ms. Kaptur.

                           HOMELESS VETERANS

    Ms. Kaptur. I wanted to move on to one of my continuing 
interests, which is homeless veterans. Studies show about 
250,000 of homeless in this country have served in the armed 
services, and about 43 percent of those have a severe and 
persistent mental illness, with many complicating factors of 
substance abuse as well.
    Could you or one of your able associates inform me if one 
looks at this 250,000 persons, how well are we doing in terms 
of finding them, gaining treatment for them, finding shelter 
for them? How well are we working with HUD in terms of an 
allocation of certificates and vouchers?
    I just ran into the budget officer for HUD and I said, I am 
going to ask the Secretary this question, and I will ask you 
the same question when you come before us. What is really 
happening? Can you serve those 250,000 individuals who remain 
out there unserved, and how many are we serving currently?
    Secretary Principi. I think we are doing a great deal. I am 
not saying it is enough, but I think that we have placed a 
great deal of emphasis on homeless veterans. From an outreach 
perspective, we operate our vet center program in many, many 
communities around the country, and they certainly provide 
outreach to homeless veterans, veterans with PTSD, particularly 
from the Vietnam War, to get them in, get them referred to a VA 
medical center where they can get some of those underlying 
behavioral clinical issues addressed, as well as chronic mental 
illness and substance abuse.
    We have our compensated work therapy programs, which are 
wonderful programs where we not only address veterans' physical 
and mental needs, but we also try to provide them with 
meaningful work to get them rehabilitated, and get them back in 
the work force. Our grant and per diem program is a great 
program where nonprofits receive grants for transitional 
housing programs, rehabilitation programs, and mobile van 
programs.
    Last year, VA awarded $10.5 million in grants. We provide 
per diem payment for every veteran who is in a transitional 
housing program. Our domiciliary program is primarily for 
homeless veterans. I think we are doing a lot for homeless 
veterans. I think we need to identify the programs that have 
been very successful and begin to direct more funding to those 
successful programs. I think they are wonderful, wonderful 
examples of successful programs.
    The New England Shelter for the homeless veterans is a 
great example, a shining example of what can be done. And there 
are many, many across the Nation, the stand-down program done 
in conjunction with the VA medical centers.
    As far as the number that we are reaching, can you answer 
that, Dr. Murphy?
    Dr. Murphy. Yes. Let me give you some specifics. As you 
know, VA is really the only Federal agency that does hands-on 
work with homeless veterans. And one of the statistics that we 
are particularly proud of is that nearly a quarter of the 
homeless veterans say that they have used VA's homeless 
services.
    About 57 percent have accessed our health care programs. So 
we really are getting out to a large number of homeless 
veterans. The other--let me give you some specific statistics 
for some of our individual programs. VA's health care for 
homeless veterans program, we work with over 250 community-
based residential programs. This year, the program assessed 
over 40,000 homeless veterans and provided residential 
treatment to 5,000 veterans. In the domiciliary care program, 
nearly 5,500 homeless veterans were treated this past year.
    You have already heard about the activities in outreach and 
in our readjustment counseling services and in our homeless 
programs. It is estimated that about 10 percent of the vet 
center clientele are homeless. So they do have a very big role 
and have been doing a lot of outreach to that population.
    We have put a lot of resources into stand-downs and see 
tens of thousands of veterans in that program every year. We 
have drop-in centers. The compensated work therapy program is a 
very important component of the program. And we have 54 
community-based group homes with more than 425 beds.
    About 62 percent of those utilizing CWT programs are 
homeless veterans. So there is a very large component of 
resources that goes into these programs.
    Ms. Kaptur. I am going to interrupt you, because I know 
that my time will be called here, if it isn't already.
    Mr. Walsh. It is.
    Ms. Kaptur. One thing that would be very helpful for us, if 
you could provide for the record, if you take the number of 
250,000 nationally, and divide it into those that are homeless 
and those that are chronically mentally ill, and if you want to 
put substance abuse in the third category with all of the sum 
of programs you just described.
    Mr. Walsh. Please put that response in writing.
    [The information follows:]

                           Homeless Programs

    About one-third of the adult homeless population have 
served their country in the Armed Services. On any given day, 
as many as 250,000 veterans (male and female) are living on the 
streets or in shelters, and perhaps twice as many experience 
homelessness at some point during the course of a year. Many 
other veterans are considered near homeless or at risk because 
of their poverty, lack of support from family and friends, and 
dismal living conditions in cheap hotels or in overcrowded or 
substandard housing.
    Almost all homeless veterans are male (about three percent 
are women), the vast majority are single, and most come from 
poor, disadvantaged backgrounds. Homeless veterans tend to be 
older and more educated than homeless non-veterans. But similar 
to the general population of homeless adult males, about 45% of 
homeless veterans suffer from mental illness and (with 
considerable overlap) slightly more than 70% suffer from 
alcohol or other drug abuse problems. Roughly 56% are African 
American or Hispanic.

    Ms. Kaptur. What percent of the need have we met and what 
remains.

           ADDITIONAL CEMETERIES FOR THE STATE OF NEW JERSEY

    Mr. Walsh. Mr. Frelinghuysen.
    Mr. Frelinghuysen. Thank you, Mr. Chairman. Mr. Secretary, 
your summary volume in the fiscal year 2003 budget lists VA's 
cemeteries nationally. Of the 119 cemeteries nationally, two 
are in my State of New Jersey, Beverly and Finns Point. Both 
cemeteries are no longer accepting burials, only cremations.
    As you may note, we have the second largest, second oldest 
veterans' population after Florida in the Nation, with an 
estimate of, some say, between 1,300 and 1,500 World War II 
veterans dying each day. There is a greet need for cemeteries.
    Are there any plans to build additional cemeteries in New 
Jersey or in the northern part of my State, to provide a 
resting place for veterans in the New York, New Jersey and 
Pennsylvania metropolitan areas?
    Secretary Principi. I have not seen New Jersey on any of 
the lists for national cemeteries in the near future. Robin, 
could you respond.
    Mr. Frelinghuysen. Madam Secretary, before you begin, let 
me take this opportunity. I had the privilege of being with 
Chairman Young of the full committee at the Pearl Harbor 
ceremonies marking 60 years. And your remarks--there were a lot 
of people with chief of this, chief of that--your remarks were 
the most poignant and remarkable. I want to commend you for 
that.
    Ms. Higgins. Thank you.
    Mr. Frelinghuysen. And for your service, and for your 
personal sacrifice. Your remarks were absolutely fantastic. And 
I was listening intently to see who was measuring up. VA was 
front and center in your capable hands.
    Ms. Higgins. Thank you, sir. It was a great honor for me to 
be there. And probably that was reflected in the passion of my 
remarks. Thank you.
    We do have some good news to report for New Jersey. We have 
recently approved a $3 million grant to expand the very active 
Brigadier General William C. Doyle State Cemetery. As you know, 
we believe the State cemeteries in our system are co-equal 
partners and as important a part of the overall system of 
providing burial benefits for our veterans as are our national 
cemeteries. So we were very pleased to do that, and will 
continue to work with that cemetery.
    We are looking forward to one of the three of the 
Millennium Act reports coming out. The report in April will be 
the one that looks at the future burial needs based upon the 
demographics of where the veterans are and where their needs 
are unmet. So we will be looking forward to that report which 
will help us to map out a plan for national and State 
cemeteries and perhaps some other options for expanding our 
currently existing cemeteries.

                  EMERGENCY READINESS AND PREPAREDNESS

    Mr. Frelinghuysen. Thank you. We will look forward to 
seeing what the recommendations of that plan are. There has 
been, Mr. Secretary, quite a lot of discussion or some 
discussion about the VA's fourth mission, what is described to 
provide backup support to the military medical care system in 
times of war or disaster.
    Could you talk a little bit about the VA's role last 
September and thereafter, and what might be under consideration 
in the future in terms of your needs, monetary, as well as some 
of the other things that you may be considering.
    Secretary Principi. Well----
    Mr. Frelinghuysen. I assume that you have good cooperation 
with DOD and FEMA and like agencies. Some comments, please?
    Secretary Principi. Indeed. I felt that our team responded 
magnificently to the acts of terrorism in New York City. Our 
entire Department, primarily our health care system, responded 
and was prepared to provide whatever was required of us. 
Regrettably, there were many more deaths than injuries as a 
result of the September 11 attacks. Nonetheless, we were there, 
and we treated a significant number of patients. Our regional 
office provided very valuable support at the emergency center 
created by Mayor Giuliani, and our cemetery people were also 
very, very helpful. All in all, we responded very, very well.
    I believe that we have the capability to play a very 
important role in emergency preparedness and emergency 
management. We are behind the scenes, so to speak, with HHS 
taking the lead. But VA, being the largest health care system 
completely under Federal control and with facilities in most 
communities of this country, is well-suited and well-placed to 
be a major source of care in the event of a man-made or natural 
disaster.
    We have been working closely with HHS, with FEMA, with 
Homeland Security, and with Defense. Obviously, much of this 
takes additional funding. We have not received all of the 
funding that we think is necessary to maintain a high state of 
readiness and preparedness. I have a meeting with Secretary 
Thompson next week to discuss our role in homeland security, 
and I am optimistic that we will continue to have a high degree 
of cooperation in this regard.
    Mr. Frelinghuysen. Thank you very much.
    Mr. Walsh. Thank you. Mr. Price.
    Mr. Price. Thank you, Mr. Chairman.

                 CLAIMS PROCESSING IN WINSTON-SALEM, NC

    Mr. Secretary, I commend you for your work in expediting 
claims processing. You described that initiative this morning. 
And, as promised, I would like to follow up and get down to 
some specifics, both with the turnaround times nationally and 
with our particular regional situation in Winston-Salem. I have 
made this inquiry annually for some time, and appreciate your 
updating the figures that we have.
    Last year we were told that in 2000, compensation and 
pension-related, rating-related actions took an average of 173 
days to process in Winston-Salem. That is an increase, 
unfortunately, from 166 days in 1999.
    Can you report on the current average for initial claims in 
Winston-Salem and compare that to the national average, and 
then could you comment on the wait times in the Winston-Salem 
office for reopened compensation cases, original disability 
pension reviews, reopened pension reviews and the overall 
waiting time for all benefit reviews?
    Then, finally, I know that speed is not the only factor, 
accuracy is also critical; and we are striving for both. I 
understand the national accuracy rate for core rating work in 
2000 was 59 percent. Is that correct? What kind of progress are 
we making in this area? What is the current accuracy rate 
nationally and how does the accuracy rate in Winston-Salem 
compare to the national average?
    Secretary Principi. If I may, Congressman Price, let me 
defer to Judge McMichael who is our acting Under Secretary for 
Veterans Benefits, with more of the specifics that you have 
requested. With regard to the quality, I am pleased to report 
that our overall quality as defined by rating accuracy, has 
increased from 59 percent in 2000 to 81 percent. But Judge 
McMichael may have the specifics.
    Whatever we don't have, we will certainly provide it to 
you.
    Mr. Price. Before you turn to Mr. McMichael, that is a 
remarkable increase; is that a 1-year increase?
    Mr. McMichael. It is a 1-year increase.
    Mr. Price. I see. The 59 percent applies to what year then?
    Mr. McMichael. It applied to 2000.
    Mr. Price. And the 88 percent applies to what year?
    Mr. McMichael. It is the 2001 level.
    Mr. Price. What is the 2002 figure?
    Mr. McMichael. Eighty-one percent, is the 2001 figure. 
Reviews for 2002 are not yet complete.
    Mr. Price. That is still a good improvement.
    Mr. McMichael. I will get you all of the statistics 
specifically with respect to Winston-Salem--I think the 
accuracy rate is about the same for Winston-Salem. Our current 
average processing time right now is 213 days in Winston-Salem 
and 219 days nationally.
    Let me just say one thing about average processing time. 
That is a lagging indicator. As we proceed to finalize cases 
that have been pending for a long period of time, that adds to 
our cumulative average. So that for a period of time you will 
see the average processing days continue to rise.
    But as we begin to clear out these cases, that will then 
begin to go down. The more cases we produce, ultimately you 
will have a downward trend. But for a while you are going to 
see an increase in average processing time, because we are 
getting to old cases that have been around for a long period of 
time. When you add that in, that adds to the average of your 
cumulative processing time.
    Mr. Walsh. The gentleman's time has expired.
    Mr. Price. For the record, I would appreciate the figures 
for the additional categories of claims that I mentioned. I 
will also have some questions for the record about the Durham 
VA Medical Center.
    [The information follows:]

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    Secretary Principi. To expand for just a second on what 
Judge McMichael said, we have had a lot of cases of those 
elderly veterans that have been sitting in the queue for years. 
Until such time as a decision is rendered on those claims, they 
don't count toward your timeliness. Now that we are beginning 
to address the plight of the aging veteran and get those claims 
taken care of, it has tended to increase the processing time 
because they are now getting decided. It is kind of a mixed 
blessing, but we are doing the right thing.
    Mr. Price. I do understand that, and I do wait for the day 
when those numbers turn around. I appreciate your continuing to 
press on that matter.

                         INFORMATION TECHNOLOGY

    Mr. Walsh. Mr. Secretary, you had spoken earlier about 
information technology. And you had some rather skeptical 
comments about the information technologies that have been 
implemented at VA. The problem with IT is not unique to the 
Veterans Administration, certainly. I know when I first came 
here, and I served on the Agriculture Committee, I remember the 
Secretary of Agriculture talking about the need to get all of 
the computer systems at USDA talking together.
    And when we had our hearings 2 weeks ago, Secretary Veneman 
came in and told us about the need for getting all of the 
computers at USDA to talk to each other. That was 13 years in 
between those speeches. So there is no art to this. In any 
event, you have some problems.
    I think that if you could tell us--I know that there are 
different initiatives underway at the VA regarding IT. Can you 
tell us where you are headed with this? Is it a tool to help 
you to improve management and to speed up claims processing, or 
is it something that we should not consider funding so 
massively as we have done in the past?
    Secretary Principi. No, it cuts across all of our 
administrations and our staff offices. What we have tried to do 
is come to grips with how we plan and design our information 
technology infrastructure. The first thing we did was to build 
an enterprise architecture, build a new approach to managing 
our vast investment in information technology. That was the 
basis for this enterprise architecture strategy governance and 
implementation plan for determining precisely how we were going 
to go about investing in IT in the future.
    We put that plan into place, and we have established an 
information technology board that will review all of the new 
investments we make in information technology to ensure they 
are in compliance with the enterprise architecture. We have a 
new process established by our CIO and Assistant Secretary for 
Information Technology, Dr. John Gauss, to ensure that we are 
monitoring the progress of each of the developments and the 
implementation of our new investments.
    We have taken some concrete steps to bring all of the key 
players in IT together from around the VA to have a coordinated 
and disciplined approach to this investment.
    Some examples have been very significant. The computerized 
patient record in the VA is the finest in the Nation, if not 
the world. It is an example of a real success story. Other it 
initiatives, like our investment in a human resources 
technology program called HRLINK$ have been a dismal failure. 
VETSNET also has been very slow and somewhat disappointing, 
given the investment in that project.
    Therefore, we are redefining how we go about this. We have 
got a good plan in place and the right people in place, and I 
am very excited about some of the things that we are doing in 
this regard. You can be assured that any investment that this 
committee makes in IT for the VA, will be well spent and the 
process will be well monitored.

                             CYBER SECURITY

    Mr. Walsh. Let me ask you one specific area that you have 
been working on. That is cybersecurity. I am advised that there 
is a duplicate effort at Veterans Benefits and also Veterans 
Health Administration. Both are looking at cybersecurity 
independently of each other.
    The Office of Inspector General at NASA has developed some 
very good technology. Why not just take theirs, save yourself 
the trouble. If theirs works, why not put it to work at the VA 
rather than spending time and money and manpower to develop it 
yourself?
    Secretary Principi. Yes, sir. Dr. Gauss.
    Mr. Gauss. I am John Gauss, the Chief Information Officer. 
Cybersecurity falls within my purview. What you have identified 
is duplication that had existed about a year ago. We have 
reconciled the roles and missions of what the administrations 
do as it relates to cybersecurity. We certainly will look at 
the NASA model.
    Mr. Walsh. So that is no longer the case?
    Mr. Gauss. We have reconciled the work distribution between 
the central office and the administrations on how to implement 
cybersecurity across the Department.
    Mr. Walsh. So that is no longer the case; there are no 
longer duplicate efforts ongoing?
    Mr. Gauss. As we speak. This is recent. We have fought this 
issue hard since last August. In fact, the final issue to 
deconflict it was resolved last week.
    Mr. Walsh. Thank you. Mr. Mollohan.

                     HOMELESSNESS AND MENTAL HEALTH

    Mr. Mollohan. Thank you, Mr. Chairman. Mr. Secretary, you 
are treating a lot of homeless veterans. You are treating a lot 
of veterans with mental health issues. And you are treating a 
lot of veterans who are addicted to drugs. I see those three 
issues as being related.
    I wonder if you could talk about to what extent veterans 
who have one of those problems also have one or more of the 
others, and how you are dealing with that strategically.
    Secretary Principi. It is indeed a real tragedy. We play a 
very, very important role in this country in mental health. The 
need for mental health programs cannot be overstated. There are 
very important programs. I know it has been a struggle to 
maintain those services. There are those who feel that we have 
not done enough in the area of mental health. Many beds have 
been shut down as we have moved into non-institutional 
settings. For examples, the use of atypical psychotics and 
other wonderful medications allows veterans with mental illness 
to live enjoyable, productive lives at home as long as the non-
institutional continuum of care and the community support base 
are there. I think we need to continually address that issue.
    Mr. Mollohan. Could you first give me some sort of sense of 
scale? What are we dealing with here, and to what extent do 
those three problems present themselves in the same individual? 
What percent of individual veterans who any one of them have 
this condition?
    Dr. Murphy. Maybe it is easier to start from the homeless 
veteran population. There are 250,000 homeless veterans, it has 
been estimated through various survey instruments. Forty-five 
percent of those have a chronic mental illness. About 72 
percent have a substance abuse problem, either alcohol or drug 
abuse.
    Mr. Mollohan. The last percentage was?
    Dr. Murphy. Seventy-two percent.
    Mr. Mollohan. Seventy-two percent of homeless veterans are 
addicted veterans.
    Dr. Murphy. So the number with dual diagnosis, both mental 
illness and substance abuse----
    Mr. Mollohan. There is the word I wanted, ``dual 
diagnosis.''
    Dr. Murphy. We have got a very comprehensive approach to 
veterans with mental illness, with substance abuse, and with 
homeless programs. It takes a team approach. And we have to 
provide a full continuum of care for those veterans. We need to 
make sure that we have got good outpatient programs, inpatient 
programs, or residential programs for those who need them. And 
when they are ready for it, we need to have compensated work 
therapy to get them back into the work force.

                                OUTREACH

    Mr. Mollohan. Talk to me a little bit about to what extent 
we really are reaching these people. Your budget justification 
states that the Health Care for Homeless Veterans program in 
2001 treated 57,854 homeless veterans. Is reaching the homeless 
veteran the entry point for dealing with mental health issues? 
Or are those veterans you categorize as having mental health 
issues also those veterans who are addicted?
    Dr. Murphy. The health care for homeless veterans program 
is focused on those with chronic mental illness. But we try to 
help veterans with the full continuum--with the full range of 
their health problems. If they need health care----
    Mr. Mollohan. I am sure you do try to help the ones you 
get. What I am trying to get at is how many of them are you 
reaching? Let's see--this isn't an accusation, it is trying to 
get information--If there are 250,000 homeless veterans and you 
treat about 57,000 of them, you are reaching a little more than 
1 in five. Is that accurate? Could we be reaching out to 
homeless veterans better than that?
    Dr. Murphy. I think we can do better with our outreach 
programs. We have put additional resources into outreach to 
homeless veterans. And we also need to make sure that we 
monitor the outcomes of those programs. We need to make sure 
that we are effectively bringing those who are ready to 
participate in our programs into the programs. And we need to 
make sure that we are monitoring their mental health outcomes 
and how well they are doing with their substance abuse 
treatment.
    Recidivism and substance abuse is a problem. We do track 
the veterans who come out of our homeless programs to make sure 
that they are being placed in non-institutional settings as 
they leave.
    Mr. Mollohan. Okay. Well, I am going to follow up in my 
next line of questioning. Thank you.
    Mr. Walsh. Thank you. Mr. Knollenberg.

          PUBLIC HEALTH RESEARCH AND EDUCATION CENTERS (PHREC)

    Mr. Knollenberg. Mr. Chairman, thank you. I am going to 
come back to where I left off before. Dr. Murphy, or Mr. 
Secretary, in regard to the PHRECs and the prevention program 
that you envision that you are architecting to deal with the 
problems of the veterans. By the way, in the report language in 
the Senate conference report, it does refer to this--there they 
call it Veterans Health Promotions Centers. It is the same 
thing. There is a call for a report from you by March of 2002 
with respect to this idea.
    Now, is that something on your radar screen, or is there 
something that we can expect?
    Dr. Murphy. We will have to provide that for the record, 
sir.
    [The information follows:]

          Public Health Research and Education Centers (PHREC)

    VHA is unaware of any proposals to develop Public Health 
Research and Education Centers that would conduct research, 
education, and outreach on health promotion and disease 
prevention activities for veterans. While scientific 
cooperation is always stimulating and often leads to new ideas, 
there is a robust mechanism already in place within the VA to 
address research, education, and health promotion initiatives 
in Prevention. Spearheaded by the National Center for Health 
Promotion and Disease Prevention (NCHPDP), as well as the 
Public Health & Environmental Hazards Office, VHA capitalizes 
on cooperative efforts with numerous Prevention-oriented 
assets, whether in-house in the VA, or with other governmental 
agencies, national task forces, and academic facilities. As a 
result, the most current, evidenced-based, preventive services 
are quickly identified and instituted within VHA. However in 
order to facilitate information sharing between VHA and schools 
of public health we plan to begin a formal dialog within the 
Association of Schools of Public Health to pursue the 
possibility of a mutually beneficial relationship. The required 
report is in preparation and should be delivered by the end of 
March 2002.

    Mr. Knollenberg. In fact, I would like to see that done 
because it is--this is March. It is ready, so we would like to 
see that report. I wanted to focus on--would you agree that the 
vast majority of the expenditures for veterans health care at 
the VA is for the care of veterans after they begin suffering 
from various diseases? The majority or the vast majority of 
expenditures are for those who are treated after the disease 
has manifested itself?
    Secretary Principi. Yes, sir.
    Mr. Knollenberg. So there is only 5 percent that escape 
that. I guess the question is, do you know what percent? Is it 
about 90 or 95 percent, in that range?
    Secretary Principi. I would think so.

                          PREVENTIVE MEDICINE

    Mr. Knollenberg. While proven preventative services don't 
necessarily come out cost neutral, they are cost effective. How 
do we get around, for example, the dilemma where you only have 
so much money to spend. And, for example, resources, $500,000 
spent on smoking cessation counseling obviously could prevent a 
lot of heart attacks or certainly could reduce the potential 
for that. I know there is a trade-off.
    How do you do this, in your judgment? How do you manage to 
deal with the fact that by getting people off of the smoking 
habit, you actually increase their health, their lifetime, 
their years of living, and how do you--how do you deal with 
this cost-effective on a per-dollar basis? You don't deal with 
that only, but how do you balance these balls?
    Dr. Murphy. We make sure that when a veteran accesses the 
VA health care system for primary care, as part of that primary 
care visit, our health care providers are asked to screen them 
for tobacco use. And if they are smokers, offer them smoking 
cessation programs. They are asked to screen for substance 
abuse.
    On a yearly basis a woman veteran is offered a Pap smear, a 
mammogram, and immunizations for pneumococcal vaccine and 
influenza, as appropriate. We also do screening for other 
cancer prevention; for instance, prostate screening in men. 
Those are part of the prevention index or the set of 
performance measures that we measure each of our managers at 
the facility level and the network level.
    And so by doing that, we ensure that every veteran gets 
good preventative health care on a yearly basis. So it is 
worked into our routine care.
    Mr. Knollenberg. So this is something brand new, or have 
you always done this?
    Dr. Murphy. It has been going on for the past 3 years.
    Mr. Knollenberg. So it is relatively new?
    Dr. Murphy. Yes, sir.
    Mr. Knollenberg. The focus is on prevention. There are two 
other groups. Merit is one, and the third one is the Geriatric 
Research Educational Clinical Center Programs. Those two are 
not up to full speed, though, are they? They are not considered 
in the same emphasis that the PHREC is; is that true?
    Dr. Murphy. The Geriatric Research Education and Clinical 
Centers have been in existence for several years now, and, in 
fact, we have GRECCS in all but three networks. There are 
smaller numbers of Mental Illness Research Education and 
Clinical Centers, but they are well-developed programs. And we 
have increased the number over the past several years.
    Mr. Knollenberg. I bet my time has concluded, and I am 
going to defer to the Chairman now for the recognition of the 
next individual. Thank you.
    Mr. Walsh. I believe it is Ms. Kaptur's time.
    Ms. Kaptur. Thank you, Mr. Chairman.

                             MENTAL ILLNESS

    I want to continue questioning on this area of mental 
illness. And, Mr. Secretary, I can remember at one point I 
asked the question, what percentage of your beds on a given day 
are occupied by people who have mental illness, substance 
abuse? And the figure was over half. Does that still remain 
true--your inpatient beds?
    Dr. Murphy. I don't have that statistic right at the tip of 
my tongue. But that is approximately right. We have very large 
mental health and substance abuse programs.

                        MENTAL ILLNESS RESEARCH

    Ms. Kaptur. Thank you. And then to what extent do your 
research programs parallel the usage of your facilities? And to 
what extent do your research panels reflect and peer review 
groups reflect people skilled in these fields? In the past, the 
figure for psychiatric-related research was probably less than 
10 percent. I don't know what it is today.
    But it has been very interesting for me over the years to 
see the disjuncture between your patient load and your 
research. Could you comment on that?
    Secretary Principi. Yes. Mental illness has received 16.1 
percent of the research funding at the VA. Dollars allocated 
for mental illness in 2003 are estimated to be $58 million 
700,000.
    Ms. Kaptur. Which is quite a divergence from the patient 
load in any given month of the VA.
    Dr. Murphy. Well, in terms of inpatient load, yes, but 
about 8.5 percent of unique VA patients are categorized as 
seriously mentally ill, and an additional 11.5 percent have 
received some kind of treatment for a mental illness. So it is 
not up to 50 percent of unique individuals in the VA health 
care system.
    The other part of your question was how many 
neuropsychiatrists or neurological or mental health 
professionals serve on our peer review panels, and I am told 
that 10 of the 22 peer review panelists have a background in 
neuropsychiatry.
    Ms. Kaptur. I just think this is so important because we, 
as a country, are learning more about this set of illnesses, 
and I still believe the VA really can help our country and the 
world in this arena once we devote the proper amount of 
resources. The independent budget report indicates that in the 
area of mental illness, the VA should be devoting an additional 
$478 million and my point here is to simply illustrate the 
divergence between the need and where we are placing resources.
    We recognize and understand the immediate need for health 
care; in terms of research, we have made a few improvements 
over the years, but we are nowhere near where we need to be. In 
fact, even in the dispensing of psychotropic drugs or 
neuropharmacologicals, the VA was even prescribing drugs that 
arguably were not the most appropriate, but they may have been 
the least expensive. We raised that issue in last year's 
hearings.
    So, Mr. Secretary, I want to draw your attention to this 
set of illnesses. And often they are complicated by substance 
abuse because people are--I suppose in some ways they are self-
treating because they can't find an answer, but I think a lot 
of the work that has been done on clozapine, for example, has 
been very, very helpful, and we need more neuropharmaceutical 
breakthroughs through at VA, and I think additional attention 
needs to be devoted there.

                    DOD/VA JOINT HEALTH CARE COUNCIL

    I also wanted to make a comment about the interagency 
committee you are working now between the Department of Defense 
and the VA--and to talk about coordination between the two 
departments' health care system.
    Last year, when you were a new Secretary, we mentioned to 
you that it would be very important to work with the Department 
of Defense where many of these illnesses' onset and the 
behavior of the Department of Defense is to discharge; and that 
is okay from their standpoint. There has to be a better 
understanding by our society that when those illnesses onset in 
the late teens and early 20s that at that point we need to 
offer treatment and help, so that when they are 40 or 50 they 
are not resistant and on substance abuse and worse off from 
everything else that happens in those intervening years. So I 
just hope that will be an issue that will be discussed with the 
DOD as part of your efforts.
    Secretary Principi. It certainly will, Congresswoman 
Kaptur. I feel equally strong about it. We do have a DOD/VA 
Joint Council now, and clearly we need to begin to identify 
those diseases early on because of the latency effect--they 
don't manifest themselves for 10 or 15 years after service. 
Building a clinical database early on would be very helpful to 
us to identify whether those diseases have their onset in 
service and in a particular part of the world.
    We have much more to learn, but I believe we are beginning 
to learn the hard lessons of Vietnam and, of course, ionizing 
radiation from World War II. The modern battlefield has many 
risks associated with it, not the least of which is the fact 
that you could be exposed to environmental hazards. We have a 
responsibility to take care of those people.
    Mr. Walsh. The gentlelady's time has expired.
    Mr. Frelinghuysen.

               DEINSTITUTIONALIZATION OF MENTAL PATIENTS

    Mr. Frelinghuysen. Thank you, Mr. Chairman. Let me assure 
you, Mr. Secretary, that the interest in this issue is 
bipartisan or nonpartisan, and like Ms. Kaptur and others on 
the committee, we have been involved with mental health 
associations, the National Alliance for the Mentally Ill, and 
the concerns we have are ones that we all share.
    Maybe this isn't a very politically correct way to say it 
but, there has been what we call quite a lot of 
deinstitutionalization going on in the VA since I have been on 
this committee, and a long time before I got here, in terms of 
what we are doing relative to geriatric patients, closing down 
of beds; and certainly there appears to be a continuation of 
deinstitutionalization of people with mental illness.
    I recognize out in our community there are some people who 
don't want any help at all for whatever reasons. It may be a 
suspicion of anything to do with government. But the question 
has always been asked, if you look at your budget and as I look 
at your budget, we are reducing the number of inpatients for 
psychiatric services, which must mean they are going somewhere.
    There used to be an expression in the mental health 
community, ``Are the dollars following the patients?'' you have 
given us some assurances that they are and that we continue to 
have community-based outpatient clinics. While from time to 
time there seem to be quite high emotions in this independent 
budget and obviously a fair amount of finger-pointing, I think 
that aspect of the independent budget that focuses on mental 
health services points up the fact that where there are 
outpatient services--some may be vans, some may be outpatient 
clinics--if you look at the percentage of what is spent in 
those settings, and maybe it has something to do with the 
patients themselves, the percentages are pretty low.
    So I have some concerns and I am not sure whether it is 
just all dollars and cents. Any additional comments?
    Secretary Principi. I do. I have no problem with 
deinstitutionalization as long as it is accompanied by an 
adequate noninstitutional base and support programs for the 
mentally ill.
    California, my most recent home State, went through a lot 
of deinstitutionalization, and I think the effects became very 
clear back in the 1960s and 1970s. I have seen a report that 
was sent to me not too long ago by our advisory committee on 
mental health that seemed to indicate that we maybe falling 
short on a noninstitutional portion of our commitment.
    Mr. Frelinghuysen. I think that is called theCommittee on 
the Care of Severely, Chronically and Mentally Ill Veterans.
    Secretary Principi. That is correct.
    I was alarmed by that report, and we need to do some work 
in that area.
    Again, modern medicine allows us to have veterans, 
individuals with chronic mental illness, serious mental 
illness, live at home and function well at home, provided they 
are supported and they have the right medication.
    Mr. Frelinghuysen. That have the right to medication, but 
oftentimes, not to defend your operation, but if there isn't 
somebody supervising the taking of those medications and they 
are in our society without somebody ``looking over their 
shoulder, and maybe they don't want anyone looking over their 
shoulder,'' we have some real problems.
    Secretary Principi. Correct. I am aware of it, and 
concerned about it and we need to ensure that we have the right 
programs in place.
    Mr. Frelinghuysen. Thank you, Mr. Chairman.
    Mr. Walsh. Thank you.
    Mr. Price.
    Mr. Price. Thank you, Mr. Chairman.

                                STROKES

    Mr. Secretary, I have one additional health care question, 
and I will submit it for the record. It has to do with the 
priority you give to dealing with strokes, the leading cause of 
disability in the U.S. I would like to know what kind of 
programs you have to diagnose, promptly treat, and rehabilitate 
stroke patients and what the VA is doing to prevent the 
occurrence of stroke in its patient population.
    I would appreciate your providing information on that 
topic.
    Secretary Principi. Yes, sir.
    [The information follows:]

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                    MEDICAL AND PROSTHETIC RESEARCH

    Mr. Price. Let me use my remaining time to ask you to 
elaborate on the implications of your budget for medical and 
prosthetic research. This committee is a strong supporter of 
your research program. I think we realize the research that is 
done in the VA would not necessarily be done elsewhere if the 
VA were not doing it; and we are aware of the advances in 
prevention, treatment, cures, and conditions such as prostate 
cancer, diabetes, heart disease, Parkinson's disease, mental 
health, spinal cord injury, age-related diseases--all of this 
is part of a very proud history of VA research.
    The administration's fiscal 2003 budget includes a $38 
million increase for medical research, an increase of 10 
percent over the current funding level of $371 million.
    I am sorry; my figure is wrong. The current figure is $371 
million. The new figure is----
    Secretary Principi. $409 million.
    Mr. Price. $409 million. I am sorry. It is a $38 million 
increase up to a total of $409 million.
    However, this request includes a shift from the Office of 
Personnel Management to the VA of $15 million in accrued 
government health and retirement benefit funds. So 
consequently, as I read it, the administration's budget 
proposes a $23 million increase in research program funds plus 
$15 million in benefit expenses previously paid by the OPM 
account.
    My first question is how does the VA intend to use these 
additional program funds? Secondly, I would like to inquire 
about the consistency of funding?
    The 2003 request is notable since it is the first time in 
many years that such a proposal includes funding sufficient to 
maintain VA's current effort in advancing treatment for 
conditions particularly prevalent in the veteran population. I 
think it is important that our commitment to this research 
continues to grow, and so I am pleased with the 
administration's request.
    Do you believe that this year's request will put the VA 
medical and prosthetic research program on track to maintain a 
more consistent and more sustainable growth rate?
    Secretary Principi. I believe it will, and I need to point 
out that that figure is a little misleading in that it does not 
represent our entire commitment to medical and prosthetic 
research.
    Our total commitment is $1.46 billion in spending on 
research at the VA. Now, that is comprised of different 
categories. It is the direct appropriation that you just 
mentioned, Congressman Price. It includes a subsidy from the 
medical care appropriation of approximately $400 million, and 
then it includes funding from various sources--DOD, HHS, and 
universities and other Federal agencies--that is given to the 
VA in the form of grants for our VA researchers and physicians 
and investigators to undertake research.
    We have a large and robust research program, one that 
augments our medical care program, allows us to recruit and 
retain high-quality physicians and researchers in the VA, and 
facilitates our partnership with medical schools.
    It is a large program, and I would hope that it would 
remain on track and be more consistent over the years.

                            RESEARCH FUNDING

    Mr. Price. Can you say something about these specific 
increases and how you would anticipate they would allow you to 
expand your efforts?
    Secretary Principi. Yes, sir. I will let Dr. Murphy.
    Dr. Murphy. VA's top qualities are quality of care, chronic 
disease management, including stroke research, special 
populations research, veteran-related illnesses and also 
diseases of the brain like Alzheimer's disease and Parkinson's 
disease.
    In addition, we will be putting out a request for proposals 
for multiple sclerosis centers, and--it will go out this week, 
and we will be looking to increase our investment in that area 
of research. We will also be investing in microtechnology, 
chronic viral diseases, cancer and patient outcomes and 
rehabilitative care.
    Secretary Principi. A focus of mine, too, is war-related 
illnesses and war-related diseases. We cannot lose sight of the 
fact that the VA is the agency charged with caring for people 
who have borne the battle, and as we talked about, the modern 
battlefield creates a lot of dangers and risks. We have had 
some research dealing--that showed a twofold increased risk of 
being diagnosed with ALS after serving in the Persian Gulf 
between 1990 and 1991. Therefore, I want to see our research 
program focused even more on finding the causes, treatments, 
and cures for men and women who were on the battlefield and who 
contract these diseases.
    We do a lot of research. A lot of it is driven by the 
medical schools, but our focus has to be on things like finding 
a cure for spinal cord injuries. On behalf of those who take a 
shot to the spine and become paralyzed, VA has a responsibility 
to ensure that we are devoting adequate resources to finding a 
cure, a regeneration of the spinal cord to correct the 
dysfunction.
    That is not to say veterans don't contract Alzheimer's and 
other diseases; indeed they do and indeed we have to have a 
research program. But our focus, our mission, is people who 
have been in battle; and I think we have to continually ensure 
that we are putting the dollars to those programs.
    Mr. Price. Thank you, Mr. Chairman.

                       BOARD OF VETERANS' APPEALS

    Mr. Walsh. I guess this begins the next round. I have a 
question on the Veterans Board of Appeals. The budget 
justification lists the proposed FTE levels for the Board of 
Appeals down 13 positions, but the justification also describes 
an effort to handle a greater number of cases in a growing 
workload.
    Would you explain the efficiencies you have gained there?
    Secretary Principi. The workload is way down. The appeals 
have not been forthcoming from the regional offices. I think 
that is caused by a combination of factors. Judge McMichael may 
have some comments on steps that are being taken to assist the 
regional offices in getting the statements of the case written 
so that these appeals can be sent to Washington.
    We are also seeing that our decision review officers are 
having an impact and getting cases settled without the need for 
appeal. I am pleased----
    Mr. Walsh. Excuse me, Mr. Secretary. Have you found a way 
to drive those decisions down to the regional boards?
    Secretary Principi. Yes, exactly. There is an effort 
underway at the Veterans Benefits Administration to establish 
the Decision Review Officer program as a means to get a case 
resolved without the necessity of having to perfect an appeal. 
I created a new unit at the Board of Veterans' Appeals so that 
remands will not be going back to the regional offices and 
therefore coming back to the board. We are going to try to get 
all these cases settled at the board level.
    We are taking steps to control the workload but perhaps 
Judge McMichael may have something to add.
    Mr. McMichael. Clearly, the Decision Review Officer program 
has been effective, but another major factor has been the 
Veterans Claims Assistance Act. We have had so many claims that 
we had to re-review before we presented them that the number of 
cases going forward to the Board of Veterans' Appeals has been 
delayed. We now expect that to pick up somewhat. But up until 
now, we have had a drop-off in the number of appeals going to 
the Board.
    Mr. Walsh. Then aren't you going to be caught short if all 
of a sudden this caseload increases dramatically and FTEs are 
down? How are you going to handle that workload?
    Mr. McMichael. We believe that the decision review officer 
program will take care of a good deal of those cases. We hope 
that we are going to keep the appeal rates down. We are going 
to try to do what we can.
    Right now, we don't see that kind of impact on the boards. 
The boards are taking up the slack by helping us to develop 
certain cases. If we did get that kind of run, I suppose we 
would have to take a look at how many cases they would be 
reworking at the board.
    Mr. Walsh. All right.

                      OFFICE OF INSPECTOR GENERAL

    My next question regards the Office of Inspector General. 
What is the statutory floor for the VA in terms of FTEs for 
this office?
    Secretary Principi. I believe it is 417.
    Mr. Walsh. Four hundred seventeen, all right. The budget 
request accommodates 402, so we are almost there.
    Last fall you asked the IG with the nationwide--you tasked 
the IG with a nationwide review of regional offices in light of 
the fraud scandal that erupted at the Atlanta regional office. 
In addition, the IG was tasked with creating a methodology for 
detecting fraud in the Philippines, as described in the 2003 
budget documents.
    I would assume that those two significant tasks would put a 
fairly substantial demand on the personnel and the travel 
resources of the IG. Is that a correct assumption?
    Secretary Principi. That is correct. Plus, I have asked the 
IG to undertake a more aggressive role in the audits of our 
medical centers, our regional offices in both management and 
accounting, financial audits.
    Mr. Walsh. So you have given them some additional 
responsibilities, but not the FTEs.
    Secretary Principi. Believe me, I will be pleased to give 
them whatever FTE is necessary to ensure that we have a cycle 
of audits that allows us to be assured that our financial 
systems and our management systems are working well. I think it 
is an investment well made.
    The CFO tells me that we have a 12 percent increase over 
2002 in the Office of the IG. But be that as it may, you are 
right. They assist us in ensuring we do not have this type of 
fraud in the regional offices.
    They have been involved in the Philippines, identifying 
some issues there. They worked aggressively on the combined 
assessment program. They are undertaking a lot of work, and I 
consider them a partner in this effort to improve management.
    Mr. Walsh. Is this an area the subcommittee should look 
pretty closely at in terms of FTEs when we move forward with 
this appropriation?
    Secretary Principi. Yes.
    Mr. Walsh. Thank you, Mr. Secretary.
    Mr. Mollohan.
    Mr. Mollohan. Thank you, Mr. Chairman.

                           HOMELESS VETERANS

    Mr. Secretary, I would like to talk a little bit more about 
homeless veterans, if I might.
    You have 250,000 homeless veterans you are estimating, 72 
percent addicted and 45 percent with mental illness. I have no 
illusions about the success rate in dealing with the homeless 
veterans problem, if it is true that 72 percent of homeless 
veterans are addicted. And I wouldn't be surprised if it were 
higher than that, actually, because the addiction, in and of 
itself, is going to make the homelessness horribly hard to 
treat. I think you have to treat the addiction before you ever 
get to the homelessness problem.
    But having said that, in 2001, it is reflected that you 
have treated 57,854 homeless veterans, which was a 34 percent 
increase over 2000; so you did a great job, in increasing 
treatment for homeless veterans.
    But you are asking in the account that deals with homeless 
veterans for only a 13 percent increase. The issue is that 
while, again, I have no illusions about your success rate in 
treating the addictions, the issue is reaching veterans. And if 
you treated 57,854 in 2001 and you are asking for a 13 percent 
increase, you are not going to reach the other veterans if this 
is the only way you are getting to them.
    It is an incredible problem out there. I would like for you 
to speak to that.
    Secretary Principi. Let me see if I can answer your 
question, Mr. Mollohan.
    Mr. Mollohan. In other words, it appears that you are not 
asking for enough.
    Secretary Principi. Right.
    I see that in 2003 we estimate treating slightly under 
400,000 veterans for either serious mental illness, which 
comprises the largest percentage; PTSD homeless, which is a 
separate category; and substance abuse, alcohol and drug abuse. 
So we have 299,000 seriously mentally ill, 13 percent increase 
in homeless, and PTSD is 58,000 and substance abuse is 93,000-
plus. And I would think that in treating the substance abuse, 
the 93,000, it may not be in the homeless budget, per se, but 
we are treating individuals, many of whom probably are 
suffering with homelessness.
    Mr. Mollohan. I would just like to note that I think the 
request is inadequate; and I look forward to working with you 
on it.
    Secretary Principi. Why don't we do that, yes, sir.

                     MINOR CONSTRUCTION LIMITATION

    Mr. Mollohan. A question about the limit on the amount that 
can be spent on minor construction projects. It has been at $4 
million for 5 years, and I guess preceding that it was $2 
million for 10 years.
    Would you please speak to that? It seems to me that is too 
low and that it should be higher.
    Secretary Principi. Thank you. I very much appreciate the 
question.
    I would urge the committee to consider raising the minor 
construction threshold to $12 million. I know that probably 
sounds like a lot of million dollars, but in the world of 
medical construction, whether it be patient ward renovation or 
whatever, that is really not a lot of money.
    All minor construction requests come to the committee for 
sign-off. It is not like we are using minor construction to 
bypass the committee; we send our minor construction request to 
the committee. I think it helps to facilitate a lot of these 
minor construction programs.
    There is so much need in the field, in our medical centers 
and our clinics, and collocations, getting our regional offices 
out of high rent space and onto the grounds of medical centers. 
We can do a lot more, again with the committee's consent, 
without having to go through the major construction of $50-, 
$100-million-type programs.
    Your giving us more flexibility to deal with these minor 
construction issues would be very much appreciated. I think it 
would help us get some of these projects going.
    Mr. Mollohan. I wonder if you apply the inflation factor to 
the $2 million that existed 15 years ago, I wonder what that 
number would be?
    Secretary Principi. We will get that for you. Thank you 
sir.
    [The information follows:]

                     Minor Construction Limitation

    Based on inflation it would take $3,118,000 to replace the 
$2 million investment of 1987 in 2002. For the $4 million in 
1995, it would take $4,414,000 in 2002 to replace it. Costs of 
infrastructure modernization have risen since the $4 million 
limit was established in the mid-1990's. In addition, the types 
of enhancements to inpatient and outpatient spaces and 
supporting functional areas are complex and costly. It has made 
delivering a fully functional project within the funding 
limitations problematic. Increasing the limitation beyond the 
$4 million would increase flexibility for finding solutions to 
these complex facilities challenges.

    Mr. Walsh. Thank you.
    Mr. Frelinghuysen.

               NUMBER OF VETERANS USING VA HEALTH SYSTEM

    Mr. Frelinghuysen. Thank you. I know it always borders on 
heresy, but I like to raise this issue every year, every other 
year. The vast majority of our veterans don't use the VA system 
at all. What are the statistics?
    In other words, we are all supporters of the VA health care 
system, but in reality most veterans have chosen, of their own 
volition, to use other hospitals. What are the figures these 
days? I know we have been building up our enrollment, but maybe 
you could paint a picture for the committee.
    Secretary Principi. Almost 5 million are using the system 
out of 25 million, so it's a growing percentage.

                           EMERGENCY SERVICES

    Mr. Frelinghuysen. It still tells us something here, and I 
think there are some lessons to be learned. I am not sure this 
is the time and place for it, but I think it is important for 
us to internalize those types of numbers and examine why people 
go where they go. Under the Veterans Millennium Health Care 
Act--this is from your budget document, page 121, veterans 
eligible for reimbursements of emergency services at non-VA 
facilities are defined as individuals enrolled in the health 
care system and receiving care within the 24-month period 
preceding the furnishing of such emergency treatment.
    To translate that into English, Congress did give, through 
this Millennium Health Care Act, the ability of veterans to go 
to emergency rooms.
    Some of those veterans, I would think, would be the very 
veterans that some of us have been talking about here. Some may 
be World War II, but some of them may be duly diagnosed, some 
with serious mental illness where they need psychiatric 
treatment on an emergency basis.
    What do we pay for those types of accounts?
    Secretary Principi. Well, the emergency care issue came 
about as a result of an authorization, and the costs have to be 
borne by the VA. We are second payer to Medicare in that case, 
so that if a veteran is in need of emergency care and can't get 
to a VA medical center and goes to a private hospital, we will 
pick up the percentage of the cost of that care that is not 
covered by Medicare.
    Mr. Frelinghuysen. But if they are not Medicare-eligible, I 
thought, in looking over the budget document--and maybe 
somebody can tell me--I see a budgeted figure of 441 million 
for non-VA-related emergency.
    Secretary Principi. Right.
    Dr. Murphy. The actuarial analysis said that the full cost 
of that program would be about $441 million. We think it will 
take several years to get up to that amount. This is a benefit 
that covers veterans who have been enrolled in the system and 
have used VA health care within the past 24 months.
    Mr. Frelinghuysen. So those are the only people enrolled in 
our VA system?
    Dr. Murphy. Yes.
    Mr. Frelinghuysen. It wouldn't mean that a veteran who is a 
bona fide veteran could go to an emergency room in that 
hospital and could see reimbursement from the VA?
    Dr. Murphy. You have to be enrolled in the VA system and 
have been a user of VA health care within the past 24 months, 
and we are the last payer. So if they have other insurance or 
are Medicare-eligible, VA would not pick up the bill.
    Mr. Frelinghuysen. Okay. Thank you for that clarification.
    Thank you, Mr. Chairman.
    Mr. Walsh. Thank you.
    Ms. Kaptur.

                             MIRECC FUNDING

    Ms. Kaptur. Thank you, Mr. Chairman. I listened carefully, 
Mr. Secretary, when you talked about your commitment on spinal 
cord injury as an area of VA research; and very clearly, if 
someone has a bullet through the spine, the necessity of, 
hopefully, some day finding an answer for that bundle of nerves 
and the bone that surrounds it. And I saw your passion on that.
    I would just posit to you that if you are the victim of 
artillery shelling and, for whatever reason, your nervous 
system begins to become fractured in a way that medical science 
doesn't completely understand and those nerves can't 
communicate with one another in a normal way because perhaps 
your brain is flooded with dopamine or serotonin or the lack 
thereof, it is just as serious a break as a spinal cord. 
Medical science didn't understand that, hasn't understood it 
for decades and decades. We now understand a little bit more.
    So I just wanted to say that I get passionate about that 
type of injury, as well, even though it isn't quite as visible 
on an X ray, but it is absolutely just as debilitating.
    In that regard I would ask on the MIRECC, the Mental 
Illness Research, Education and Clinical Centers, your budget 
proposes an additional $788,000. Could you please inform us, is 
that for a new MIRECC center or would this be for increases in 
existing centers, please?
    Dr. Murphy. It is for increases in existing centers. We 
have not had the resources this year to increase the number of 
MIRECCs, and we would not propose doing that in the future.
    We do have a strong commitment to mental health research, 
and I share your concern that we really do not understand the 
effects of stress in combination with other factors in our 
combat veterans, and we do need to invest in those programs.
    Ms. Kaptur. Thank you, Doctor, very much.
    Let me ask you, in terms of funding and continuation of the 
Committee on the Care of Severely, Chronically and Mentally Ill 
Veterans, at what level does the administration propose funding 
this committee in fiscal year 2003?
    The purpose of this was to carry out, and I quote, ``a 
continuing assessment of the capability of the department to 
meet effectively the treatment and rehabilitation needs of 
mentally ill veterans.''
    Dr. Murphy. The funding level in 2003 is $101,000, and we 
are also investing $75,000 in support of the PTSD special 
committee.
    Ms. Kaptur. Thank you, Doctor.

                           HOMELESS PROGRAMS

    And on the homeless veterans front, how much does the 
budget for fiscal 2003 provide over 2002 for the homeless 
programs themselves?
    Secretary Principi. An increase of 12 percent, which 
amounts to $156 million.
    Ms. Kaptur. Thank you for that.
    And may I ask if anybody out there on your staff knows if 
there is a plan to establish a new community outpatient clinic 
in northwest Ohio, is that still in the plans or not?
    Secretary Principi. It is one of the two new clinics that 
are being considered, I am told.
    Ms. Kaptur. All right.

                        MENTAL ILLNESS RESEARCH

    And perhaps from your Director of Research, what percentage 
again of your research portfolio this coming fiscal year will 
be spent researching topics related to mental illness?
    Dr. Feussner. The Secretary's number was correct.
    Mr. Walsh. Identify yourself please, sir.
    Dr. Fuessner. I am sorry.
    Mr. Walsh. I know who you are, but the recorder doesn't.
    Dr. Feussner. I am Jack Feussner, the chief researcher.
    The Secretary's number is correct.
    Ms. Kaptur. Is that an increase or flat line over the past 
fiscal year?
    Dr. Feussner. It has been approximately the same for the 
last 2 years.
    Ms. Kaptur. All right.
    I will submit my remaining questions for the record, and I 
thank our witnesses very much. And we look forward to 
continuing this dialogue as the year progresses.
    Thank you, Mr. Chairman.
    Mr. Walsh. Thank you.
    Are there any other questions of the witnesses?
    If not, we will thank you very much for your comments and 
your responses and your thoughts and your time. And we would 
ask that the questions that have been submitted to you, if you 
would return those with responses in writing as quickly as 
possible, we would greatly appreciate it.
    And thank you----
    Secretary Principi. Thank you, Mr. Chairman, Mr. Mollohan.
    Mr. Walsh. Thank you. The meeting is adjourned.
    

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                               I N D E X

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                     Department of Veterans Affairs

                                                                   Page
$1,500 Deductible Proposal.......................................6, 146
    Alternative Deductible Strategies............................    30
    Copayment Increase for Higher Income Non-Service Connected 
      (Priority 7) Veterans......................................   155
Medical Deductible for Priority 7 Veterans.......................   136
Annual Enrollment Decision.......................................    31
Antibotic-Resistant Infections...................................    58
Atlanta Fraud....................................................    92
Atypical Antipsychotic Medications...............................   156
Benefits Program Supplemental....................................    18
Billing Documentation............................................    55
Board of Veterans' Appeals.......................................84, 96
Budget...........................................................   129
Budget Provisions................................................     1
Budget Submission................................................   167
    Volume 1 Benefits Programs...................................   167
    Volume 2 Medical Programs....................................   345
    Volume 3 Construction Programs...............................   585
    Volume 4 Departmental Administration.........................   700
    Volume 5 Summary.............................................  1142
    Volume 6 Departmental Performance Plan.......................  1385
Capital Asset Realignment for Enhanced Services (CARES)..........2, 11,
 60, 104, 137
    Facility Planning and the CARES Capital Planning System......   129
Changes to the Benefits Package..................................    31
Claims Processing...........................2, 46, 53, 56, 94, 131, 138
    Claims Processing Delays.....................................   145
    Claims Processing in Winston-Salem, NC.......................69, 71
    Claims Processing Task Force.................................     7
    Progress in Claims Processing................................    57
Community Based Outpatient Clinics...............................   155
Congressman Frelinghuysen's Opening Remarks......................    36
Congresswoman Kaptur's Opening Remarks...........................    47
Construction Programs............................................     2
    Major and Minor Construction Programs........................    12
    Minor Construction Limitation................................    87
Cooperative Technology Transfer Agreements (CTTAs)...............34, 43
Cyber Security...................................................    73
Deinstitutionalization of Mental Patients........................    78
DoD/VA Joint Health Care Council.................................    78
DoD/VA Cooperation...............................................   136
Durham VA Medical Center.........................................   162
Eligibility for Services.........................................    39
Elimination of the Offset Between Military Retired Pay and 
  Disability Compensation........................................   157
Emergency Readiness and Preparedness.............................    68
Emergency Services...............................................    88
Empty Space at the John Dingell VAMC.............................    36
Enterprise Architecture..........................................     7
Express Property.................................................    63
Fair Distribution of VA Resources--Kentucky......................   144
Grants for Veterans Employment..........................14, 61, 65, 128
Hepatitis C......................................................    39
Homeless:
    Homeless Programs............................................67, 90
    Homeless Veterans.......................................65, 86, 133
    Homelessness and Mental Health...............................    73
    VA/HUD Coordination on Homeless Veterans.....................   156
Improving Financial Performance--Erroneous Payments..............   153
Information Technology...........................................    72
Intellectual Property...................................33, 41, 45, 140
John Dingell Veterans Affairs Medical Center.....................    35
Management Improvements..........................................    15
Marriage and Family Therapists...................................   142
Medical and Prosthetic Research........................11, 83, 132, 155
    Affiliations.................................................    33
    Funding......................................................    84
    Sharing Research Rights......................................    42
    Transitional Research........................................    32
Medical Care:
    Fiscal Year 2002 Supplemental Funding........................17, 91
    Funding...................................................8, 36, 47
    Funding Needs................................................    48
    Funding Proposal.............................................     2
Medicare Subvention..............................................     3
Mental Illness...................................................    77
    Research.....................................................77, 90
    Mental Illness Research, Education and Clinical Centers 
      (MIRECC) Funding...........................................    89
    National Mental Health Improvement Project...................   156
    Veterans with Serious Mental Illness.........................   143
Miami VA Utility Plant and Electrical Distribution Repairs.......   158
Millennium Health Care Act.......................................   132
Monorities in VA Leadership Positions............................    58
Mortgage Life Insurance Limitation...............................   127
National Cemeteries Administration...........................2, 15, 120
    Additional Cemeteries for the State of New Jersey............    67
    National Cemetery in Detroit, MI.............................    63
    South Florida National Cemetery..............................   158
New Legislative Mandates.........................................    18
    Veterans Health Administration...............................    20
    Veterans Benefits Administration.............................    23
    National Cemetery Administration.............................    24
Number of Veterans Using VA Health System........................    88
Office of Information Technology.................................   105
Office of Inspector General.....................................85, 104
Office of Operations, Security and Preparedness..................   124
Outreach.........................................................    74
Outsourcing......................................................   134
Overuse of Antibiotics and Antibiotic Resistant Infection........   158
Physician Assistants.............................................   135
Prescription Co-pay Increase.....................................    49
    Co-pay Increase..............................................    51
    Prescription Drug Policy.....................................50, 65
Preventive Medicine..............................................    76
Priority 7s...................................................... 3, 52
    Costs for Newly Enrolled Priority 7s.........................    18
    Cost-Share Proposal..........................................    27
    Enrollment...................................................    28
    Enrollment Costs.............................................    28
    Enrollment Data..............................................    29
    Open Enrollment of Priority 7s...............................    54
    Profile of Priority 7s.......................................    29
Procurement Reform Task Force....................................     7
Public Health Research and Education Centers (PHREC)........64, 75, 140
Questions Submitted for the Record...............................    91
Recent Legislation Costs.........................................    92
Safety of DVA Facilities.........................................   134
Secretary's Authority............................................    31
Specialized Rehabilitative Services..............................    59
Statement of Secretary Anthony Principi..........................     5
Statement of the Chairman........................................     1
Statement of the Ranking Member..................................     4
Strep............................................................   127
Strokes.....................................................79, 81, 164
Third Party Collections..........................................54, 56
    Collections Pilot Program....................................   116
    Payments.....................................................    40
    Statutory Changes to Cost Recoveries.........................    55
Underutilized Space..............................................    36
VERA:
    Allocation...................................................    25
    Distribution.................................................    97
    Formula......................................................26, 38
    National Reserve.............................................    37
Veterans Benefits Administration................................12, 162
    FTE to Administer Benefits...................................    25
    Staffing.....................................................    25
Veterans Health Administration...................................     5
Virtual Colonoscopy..............................................   127
Waiting Times....................................................   118
    Waiting Periods for Non-Urgent Care..........................   153
Welfare Reform in Ohio...........................................    48
Widow/Dependent Accrued Benefits Limitation......................   127

                                
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