[Senate Report 108-419]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 817
108th Congress                                                   Report
                                 SENATE
 2d Session                                                     108-419

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



 
               VETERANS PRESCRIPTION DRUGS ASSISTANCE ACT

                                _______
                                

               November 19, 2004.--Ordered to be printed

                                _______
                                

  Mr. Specter, from the Committee on Veterans' Affairs, submitted the 
                               following

                              R E P O R T

                             together with

                            MINORITY VIEWS 

                         [To accompany S. 1153]

    The Committee on Veterans' Affairs (hereinafter, ``the 
Committee''), to which was referred the bill (S. 1153), to 
amend Title 38, United States Code, to permit Medicare-eligible 
veterans to receive an out-patient medication benefit, to 
provide that certain veterans who receive such benefit are not 
otherwise eligible for medical care and services from the 
Department of Veterans Affairs, and for other purposes, having 
considered the same, reports favorably thereon and recommends 
that the bill, as amended, do pass.

                              Introduction

    On May 23, 2003, Committee Chairman Arlen Specter 
introduced S. 1153, the proposed ``Veterans Prescription Drugs 
Assistance Act.'' S. 1153 would create a program to allow 
Medicare-eligible veterans to obtain outpatient prescription 
medications from the Department of Veterans Affairs 
(hereinafter, ``VA'') on the order of any duly licensed 
physician. Further, it would require VA to collect a copayment 
for any medication provided under the program. And finally, the 
bill would declare that non-service connected, Medicare-
eligible veterans are ineligible to receive any other health 
care services from VA during any calendar year in which such 
veteran is enrolled in the outpatient drug program created 
under S. 1153.

                           Committee Hearings

    On June 22, 2004, the Committee held a hearing to receive 
testimony on, among other bills, S. 1153. Testimony was heard 
from: Senators Kent Conrad, Jon S. Corzine, and Hillary Rodham 
Clinton; The Honorable Tim McClain, VA's General Counsel; Dr. 
Michael J. Kussman, Acting Deputy Under Secretary for Health, 
Veterans Health Administration; Mr. Donald L. Mooney, Assistant 
Director for Resource Development, Veterans Affairs and 
Rehabilitation Commission, The American Legion; Mr. Paul A. 
Hayden, Deputy Director, National Legislative Service, Veterans 
of Foreign Wars; Mr. Adrian M. Atizado, Assistant National 
Legislative Director, Disabled American Veterans; Mr. Carl 
Blake, Associate Legislative Director, Paralyzed Veterans of 
America; and Mr. Richard Jones, National Legislative Director, 
AMVETS.

                           Committee Meeting

    After carefully reviewing the testimony from the foregoing 
hearing, the Committee met in open session on July 20, 2004, 
and by a vote of 10 yeas and 5 nays reported favorably S. 1153.

               Summary of the Committee Bill as Reported

    S. 1153, as reported (hereinafter, the ``Committee bill''), 
consists of two sections, summarized below, that would:
    1. State that this act may be cited as the ``Veterans 
Prescription
    Drugs Assistance Act''; and
    2. Authorize the Secretary to operate a program to provide 
prescription medications on the order of any duly licensed 
physician to Medicare-eligible veterans provided that the 
veteran has a service-connected disability or, in the case of 
non-service connected veteran, that he or she is enrolled in a 
separate VA prescription drug program, agrees to forgo VA 
medical care for the enrollment-year, and agrees to pay any 
applicable copayments established by the Secretary.

                       Background and Discussion


Sec. 1. Short title

    Section 1 states that this act may be cited as the 
``Veterans
    Prescription Drugs Assistance Act''.

Sec. 2. Eligibility of Medicare-eligible veterans for outpatient 
        medication benefit

    VA operates one of the most comprehensive and generous 
prescription drug programs in the nation. VA provides to all 
veterans who are enrolled for VA care appropriate prescription 
medications, at the nominal charge of $7.00 per 30-day supply. 
VA dispenses medications, however, only to those veterans who 
are enrolled for, and who actually receive, VA-provided care. 
VA does not, for example,provide medications to veterans--even 
to veterans who are enrolled for VA care--unless those medications are 
prescribed by a physician who is employed by, or under contract with, 
VA. In other words, to receive medications from VA, the patient must be 
getting care from VA. No veteran--not even a veteran who is entitled to 
priority access to care by VA--is dispensed medications based on a 
prescription which is written by an ``outside'' physician.
    Of course, in most cases, such distinctions are irrelevant; 
the typical VA enrollee receives the full range of care from VA 
and relies on no other provider for care. It is also true, 
however, an unknown number of veterans who have access to care 
by non-VA providers have enrolled for VA care not because they 
genuinely seek VA care but principally, or even entirely, to 
gain access to inexpensive (from the veteran-patient's 
perspective) prescription medications. Nothing in the past, and 
nothing currently, bars enrollment to those who have access to 
care from another provider. And prior to VA's January 17, 2003, 
decision to restrict new enrollments for VA care to 
``priority'' veterans (generally, those with service-connected 
disabilities or incomes below statutorily-established 
thresholds), the requirement that a veteran seeking inexpensive 
medications be enrolled for VA care--and actually be a VA 
patient--was, from the veteran's perspective, at worst an 
inconvenience. Such a veteran could enroll for VA care, receive 
an examination from a VA doctor, and then receive medications 
as ordered by the examining VA physician. He or she could also 
simultaneously receive overlapping or even duplicate diagnostic 
and other care by another provider.
    Following VA's January 2003 change in enrollment policy 
(which continues to this day), what had been inconvenience to 
gain access to VA-dispensed drugs became an actual impediment. 
Currently, if a non-``priority'' veteran was not enrolled for 
VA care prior to the Secretary's January 17, 2003, decision to 
restrict new enrollments, he or she cannot enroll now. As a 
consequence, a non-``priority'' veteran with access to care 
from an alternate provider, e.g., from a Medicare-reimbursed 
physician, who might have otherwise sought out overlapping care 
from VA is now precluded from doing so. The Committee bill is 
intended to provide some relief for the Medicare-eligible 
population among those veterans.
    S. 1153 would allow Medicare-eligible veterans who are not 
enrolled for care with VA to gain access to VA's prescription 
drug program at highly-advantageous prices (from the veteran's 
perspective), but at no cost to the Government. VA fills and 
distributes more than 100 million prescriptions every year to 
more than 5 million veteran-patients. VA's volume purchasing 
power, coupled with its management of a formulary program, 
places VA in a relatively favorable position when it negotiates 
prices for prescription drugs from the manufacturers and 
vendors of such products. According to the National Association 
of Chain Drug Stores, the average ``cash cost'' of a 
prescription in 2003 was $59.28. The average price paid by VA 
for a prescription medication in 2003 was, by contrast, just 
under $25. Examples of retail prices for a number of highly-
prescribed prescription medication drugs compared to VA costs 
for those drugs are provided in Table 1. The point is this: VA 
is able to secure significant discounts relative to retail 
prices--sometimes discounts approaching 90 percent or more--due 
to its negotiating power and prowess. The Committee bill would 
allow Medicare-eligible veterans to gain access to these 
significant discounts by providing to VA a written prescription 
from a duly-licensed physician, typically their Medicare-
reimbursed physician.

                                 TABLE 1
                  [Price data as of November 12, 2004]
------------------------------------------------------------------------
                                  VA's cost   drugstore.com    CVS.com
------------------------------------------------------------------------
Simvastatin (10MG), 30 tablets.        $7.80        $69.99        $78.99
Lisinopril (10MG), 30 tablets..         2.11         18.99         14.09
Aciphex (20MG), 30 tablets.....        19.60        119.99        138.99
Atenolol (50MG), 90 tablets....         1.41         10.99         16.19
Terazosin (2MG), 30 capsules...         1.48         13.99         23.89
Hydrochlorothiazide (25MG), 90          0.74      \1\ 8.99          9.99
 tablets.......................
Ranitidine (150MG), 60 capsules        19.83         32.99         38.69
Furosemide (20MG), 90 tablets..         1.22      \1\ 8.99        15.30
------------------------------------------------------------------------
\1\ 100 tablets.

    The main target of the relief that would be afforded by S. 
1153 is, of course, the Medicare-eligible veteran who is now, 
due to his or her non-``priority'' status, precluded from 
enrolling for VA care. There are a number of veterans, however, 
who now receive VA care (the precise number of such veterans is 
unknown and is, apparently, unknowable) who do not genuinely 
desire VA care and who, once an alternative means of access to 
VA-prescribed medications is available, will choose to abandon 
VA care. The Committee bill would require such veterans--if 
they are non-service-connected and if they choose to rely on VA 
as a source for prescription medications only--to agree to 
forego VA care for the year in which they choose to obtain a 
``medications-only'' benefit from VA. It has been posited that 
this requirement would require veterans to forego VA care in 
order to obtain ``cheap'' medications. That concern is 
misplaced.
    In the first place, millions of non-``priority'' veterans 
today have no choice at all insofar as access to drugs at VA-
negotiated prices is concerned. To characterize the reported 
bill as limiting choice or forcing unwelcome choices misses 
this vital point. The purpose of the Committee bill is to allow 
Medicare-eligible veteran-patients who are now locked out of VA 
and who now pay retail prices for drugs to choose to secure 
access to VA-negotiated discounts. Clearly, for those millions 
of veterans who are now shut out of VA care the value of that 
choice is clear; discounted drugs is a far superior choice to 
the retail price status quo.
    Second, the reported bill would not require any veteran to 
``disenroll'' from VA health care. Those who are enrolled today 
and enjoy the health care and prescription benefits currently 
provided by VA would be completely free to remain as enrollees 
for VA care. But, as VA itself has acknowledged, many Medicare-
eligible veterans have been forced in the past to enroll for VA 
care in order to gain access toVA-supplied drugs. Many would 
not have chosen to enroll for VA care had medications been otherwise 
available, and many do, in fact, choose to continue to see their 
Medicare-reimbursed physicians even as they simultaneously receive VA 
care. This may be wasteful, but it is in no way improper. However, many 
veterans would choose to rely solely on their Medicare doctors for care 
were they not forced to submit to VA care in order to gain access to VA 
medications--particularly when, as is provided by the reported bill, 
such a choice would not be irrevocable. Many of them still wish to see 
and in fact do see--their private providers using their Medicare 
benefit. The Committee bill would not force upon veterans any unwelcome 
choice; it cannot since it only adds to the choices now available 
without denying a veteran the opportunity to change his mind and return 
to the status quo. It does, however, grant to veterans a new, a very 
welcome, choice: a choice to rely on VA for drugs only at significant 
discounts while continuing to rely on community-based, Medicare-
reimbursed, care.
    Finally, no veteran who chooses to enroll in the new 
``prescription-drug-only'' program would be forced to forego 
any medical treatment. Under the terms of the reported bill, 
only Medicare-eligible veterans will have the option of 
participating in the new program. This simple, but important, 
fact addresses the concern that changing circumstances could 
somehow leave a veteran who chooses to enroll in the new drug 
program without access to adequate health care. All veterans 
who are given the opportunity to so choose will have guaranteed 
access to Medicare; only veterans who have access to Medicare 
will be given that choice. And all veterans who so choose will 
be able to regain access to the full range of VA-provided care.
    One additional point merits emphasis: allowing veterans to 
voluntarily enroll in a ``prescription-drug-only'' benefit may 
result in a voluntary migration of veterans who do not need VA 
care (but who need or merely want discounted prescription 
drugs) away from VA care. In that event, the day might sooner 
approach when VA is able to revoke the current bar to new 
enrollments of non-``priority'' veterans. Other suggested 
policy alternatives, e.g., fees or outright disenrollments, are 
clearly inferior to the program set forth in the Committee 
bill.
    Finally, S. 1153 is not intended to be a subsidized price 
program for veterans. As is noted above, the legislation 
requires that VA fully recover from participating veterans the 
costs it incurs in procuring drugs provided to veterans who opt 
into this program and all expenses for administration of the 
program. Veterans who have access to a prescription drug 
program under Medicare may choose, quite rationally, to 
continue receiving both health care benefits and prescription 
drug benefits through Medicare. And those who are service-
connected or poor, whether or not they are Medicare-eligible, 
will be fully able to receive all needed care from VA. But for 
many of the 9.6 million veterans who are age 65 and older and 
who live on fixed-incomes, the program created by the Committee 
bill will make life significantly easier at no expense to the 
Government. Such policy opportunities are few and far between.

                             Cost Estimate

    In compliance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate, the Committee, based on 
information supplied by the Congressional Budget Office 
(hereinafter, ``CBO''), estimates that enactment of the 
Committee bill would cost $55 million in 2005 and $1.7 billion 
over the 2005-2009 period, assuming appropriation of the 
estimated amounts. Enactment of the Committee bill would not 
affect direct spending or receipts. Further, S. 1153 contains 
no intergovernmental or private-sector mandates as defined in 
the Unfunded Mandates Reform Act (UMRA) and would have no 
direct effect on the budgets of state, local, or tribal 
governments.
    The cost estimate provided by CBO, setting forth a detailed 
breakdown of costs, follows:

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, October 27, 2003.
Hon. Arlen Specter,
Chairman, Committee on Veterans' Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office (CBO) 
has prepared the enclosed cost estimate for S. 1153, the 
Veterans Prescription Drugs Assistance Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Sam 
Papenfuss.
            Sincerely,
                                     Douglas Holtz-Eakin, Director.
    Enclosure.

S. 1153--Veterans Prescription Drugs Assistance Act

    Summary: S. 1153 would require the Department of Veterans 
Affairs (VA) to provide prescription drugs to veterans 
receiving disability compensation and certain other veterans 
even if those drugs are notprescribed by a doctor employed by 
VA. Additionally, the bill would require VA to operate a prescription 
drug program for veterans who are eligible for Medicare. This program 
would charge enrollment fees and copayments and VA would be required to 
run the program such that those fees and copayments would cover the 
cost of providing the prescription drugs to those veterans.
    CBO estimates that implementing S. 1153 would cost $55 
million in 2005 and $1.7 billion over the 2005-2009 period, 
assuming appropriation of the necessary amounts. Enacting the 
bill would not affect direct spending or receipts.
    S. 1153 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would have no direct effect on the budgets of state, local, 
or tribal governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 1153 is shown in the following table. 
The costs of this legislation fall within budget function 700 
(veterans benefits and services).

----------------------------------------------------------------------------------------------------------------
                                                               By fiscal year, in millions of dollars--
                                                     -----------------------------------------------------------
                                                        2004      2005      2006      2007      2008      2009
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION

Spending Under Current Law for Veterans' Medical
 Care:
    Estimated Authorization Level \1\...............    27,957    28,888    29,706    30,608    31,117    32,104
    Estimated Outlays...............................    27,141    28,334    29,293    30,210    30,846    31,756
Filling Prescriptions from Non-VA Doctors:
    Estimated Authorization Level...................         0        64       274       443       476       511
    Estimated Outlays...............................         0        57       252       424       469       505
Medical Care Collections Fund:
    Estimated Net Authorization Level...............         0         0         0         0         0         0
    Estimated Net Outlays \2\.......................         0        -2        -6        -6        -2        -1
        Total Changes:
            Estimated Authorization Level...........         0        64       274       443       476       511
            Estimated Outlays.......................         0        55       246       418       467       504
Spending Under S. 1153:
    Estimated Authorization Level...................    27,957    28,952    29,980    31,051    31,593    32,615
    Estimated Outlays...............................    27,141    28,391    29,545    30,634    31,315    32,261
----------------------------------------------------------------------------------------------------------------
\1\ The 2004 level is the amount appropriated for that year. No full-year appropriation has yet been provided
  for fiscal year 2005. The current-law amounts for the 2005-2009 period assume appropriations remain at the
  2004 level with adjustments for anticipated inflation.
\2\ These are net amounts reflecting both collections and the spending of those collections.

    Basis of estimate: For the purposes of this estimate, CBO 
assumes that S. 1153 will be enacted before the end of calendar 
year 2004 and that the necessary amounts for implementing the 
bill will be appropriated each year.

Filling prescriptions from non-VA doctors

    S. 1153 would require VA to provide prescription drugs to 
veterans who are receiving disability compensation and veterans 
who are receiving an increased pension because they are 
housebound or need regular aid and attendance even if the 
veteran has a prescription from a doctor not employed by VA. 
Under current law, VA only provides prescription drugs to 
veterans who have received a prescription from a doctor 
employed by VA. If veterans bring in prescriptions from a 
doctor in private practice, the department requires the 
veterans to receive an examination from VA doctors who write a 
new prescription before it will fill the prescription.
    Using information from VA, CBO estimates that about 2.5 
million veterans would be affected by this new requirement, 
though most of them (about 2.1 million) are enrolled to receive 
health care from VA. Because most of these enrolled veterans 
are likely to receive the majority of their health care from 
VA, CBO expects this proposal would not affect how VA provides 
prescription drugs to this population. However, those veterans 
who do not currently receive health care services from VA could 
now fill their prescriptions at a VA facility without receiving 
any other health care from the department. Under current law, 
veterans who have a disability rating of 50 percent or higher 
or who qualify because of low income receive all of their 
prescription drugs at no cost. Veterans who receive a 
prescription for a service-connected condition also receive 
that prescription at no cost, but must make a copayment, 
currently $7, if they receive a prescription for a condition 
that is not service-related.
    Because the bill would authorize a generous prescription 
drug benefit, CBO assumes that, under S. 1153, about 90 percent 
of the veterans not currently enrolled with VA to receive 
health care would now choose VA to fill their prescriptions. 
Based on information from VA, CBO estimates that the average 
per capita cost of providing prescription drugs to these 
veterans would be about $920 in 2005. Assuming it would take 
about three years before veterans take full advantage of the 
program, CBO estimates that implementing S. 1153 would cost 
about $60 million in 2005 before growing to more than $400 
million by 2007. We estimate costs of $1.7 billion over the 
2005-2009 period, assuming appropriation of the necessary 
amounts.

Medical care collections fund

    As described above, those veterans who have a disability 
rating less than 50 percent and who do not qualify by reason of 
low income, have a copayment of $7 when they fill a 
prescription at VA for a condition that is not service-
connected. These copayments are deposited in the Medical Care 
Collections Fund (MCCF). Subject to annual appropriation, VA 
can spend the money in the MCCF to provide medical care for 
veterans. As specified in law, any receipts to that fund are 
treated as offsets to discretionary spending to the extent that 
they are made available for expenditure in appropriation acts. 
Assuming that appropriations of the new collections are 
provided, estimated collections and new spending authority 
would offset each other exactly. Outlays would lag behind 
collections somewhat, so implementing this provision would 
result in small net discretionary savings over the near term.
    Based on information from VA, CBO estimates that about 
280,000 veterans would be required to make copayments for 
prescriptions from non-VA physicians that VA would be required 
to fill under S. 1153. Assuming that 75 percent of 
prescriptions filled forthese veterans are for conditions that 
are not service-connected and that it takes three years before veterans 
take full advantage of this new benefit, CBO estimates that 
implementing this provision would increase collections by $6 million in 
2005 and $125 million over the 2005-2009 period. Thus, CBO estimates 
that net outlays for the MCCF would decline by $2 million in 2005 and 
$17 million over the 2005-2009 period, assuming appropriation actions 
that allow the spending of all the additional collections.

Prescription drug program for Medicare-eligible veterans

    S. 1153 also would require VA to operate a prescription 
drug program for those veterans who are eligible for Medicare. 
Under the program, veterans could enroll to receive 
prescription drugs from VA, but if they enrolled those veterans 
could not receive any other type of health care from the 
department. We do not expect that many veterans who are already 
enrolled to receive health care from VA would enroll in the new 
program. VA would be required to charge enrollment fees and 
copayments such that the program would cover all of its costs 
including administrative, dispensing, and pharmaceutical costs. 
Thus, CBO estimates that implementing this program would have 
no net cost.
    One reason veterans would enroll despite the enrollment 
fees and copayments is that, under current law and practice, VA 
is able to receive significant discounts for the 
pharmaceuticals it purchases and would be able to pass those on 
to enrolled veterans. However, CBO expects that as the number 
of veterans enrolled in this program increases that VA's cost 
of pharmaceuticals also would increase. CBO cannot estimate the 
extent of that increase because it would depend on both the 
number of veterans enrolled in the new program and the manner 
in which pharmaceutical companies change their pricing systems. 
(The private companies could choose to raise prices across the 
board, to raise prices only for VA, or to raise prices for non-
VA purchases.) If prices were raised for VA, the increased drug 
prices would affect both the new program, which must cover its 
costs, and VA's regular health care system, which is paid for 
with annual appropriations.
    Intergovernmental and private-sector impact: S. 1153 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would have no direct effect on the budgets 
of state, local, or tribal governments.
    Estimate prepared by: Federal Costs: Sam Papenfuss. Impact 
on State, Local, and Tribal Governments: Melissa Merrell. 
Impact on the Private Sector: Heidi Golding.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                      Regulatory Impact Statement

    In compliance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee on Veterans' 
Affairs has made an evaluation of the regulatory impact that 
would be incurred in carrying out the Committee bill. The 
Committee finds that the Committee bill would not entail any 
regulation of individuals or businesses or result in any impact 
on the personal privacy of any individuals and that the 
paperwork resulting from enactment would be minimal.

                 Tabulation of Votes Cast in Committee

    In compliance with paragraph 7 of rule XXVI of the Standing 
Rules of the Senate, the following is a tabulation of votes 
cast in person or by proxy by members of the Committee on 
Veterans' Affairs at its July 20, 2004, meeting. On that date, 
the Committee, by a vote of 10 yeas and 5 nays, ordered S. 
1153, a bill to amend title 38, United States Code, to permit 
Medicare-eligible veterans to receive an out-patient medication 
benefit, to provide that certain veterans who receive such 
benefit are not otherwise eligible for medical care and 
services from the Department of Veterans Affairs, and for other 
purposes, reported favorably to the Senate.

                             Agency Report

    On June 22, 2004, Deputy Secretary of Veterans Affairs, the 
Honorable Gordon H. Mansfield, appeared before the Committee on 
Veterans' Affairs and submitted testimony on, among other 
things, S. 1153. Excerpts from this statement are reprinted 
below:

   Statement of Gordon H. Mansfield, Deputy Secretary, Department of 
                            Veterans Affairs

    Good afternoon Mr. Chairman and Members of the Committee.
    I am pleased to be here to present the Administration's 
views on six bills that pertain primarily to the veterans 
health-care system.


                                s. 1153


    Mr. Chairman, I will next address S. 1153, a bill that you 
introduced to provide all Medicare-eligible veterans with a new 
prescription drug benefit through the VA. As we know, the 
availability of prescription drugs to our seniors has been an 
extremely important issue for America, and one that was debated 
extensively last year by the Congress.
    Your bill would provide Medicare-eligible veterans with a 
compensable service-connected disability this new benefit in 
addition to the health care benefits they are currently 
eligible to receive from VA. Those who do not have a 
compensable service-connected disability could choose to 
receive the new prescription drug benefit in lieu of all other 
VA health care benefits. The bill would require that these 
veterans make an irrevocable election of drug or health 
benefits for each calendar year. The costs for this bill could 
be defrayed by any combination of annual enrollment fees, co-
payments, and charges for the actual cost of the medication.
    In December 2003, the President signed the Medicare 
Prescription Drug, Improvement and Modernization Act of 2003 to 
add a prescription drug benefit to Medicare. Starting in 2006, 
seniors without coverage will be able to join a Medicare-
approved plan that will cut their yearly drug costs roughly in 
half, in exchange for a monthly premium of about $35. Under 
this new law, every Medicare beneficiary will be able to choose 
from at least two drug coverage options, and Medicare-approved 
prescription drug plans also will be able to offer their 
enrollees supplemental insurance to further enhance their 
coverage. It is not clear how the expanded VA benefit proposed 
in S. 1153 would interact with this new Medicare benefit, and 
we are concerned that this proposal could have significant 
effects on other public and private health care programs by 
jeopardizing the current discount prices VA receives on 
pharmaceuticals. While we appreciate your novel approach and 
share your concern that veterans and all Americans have access 
to affordable prescription drugs, we cannot support this bill.

           *       *       *       *       *       *       *

    That concludes my prepared statement. I would be pleased to 
answer any questions you may have.

    Changes in Existing Law Made by the Committee Bill, as Reported

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the Committee bill, as reported, are shown as follows (existing 
law proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

TITLE 38, UNITED STATES CODE

           *       *       *       *       *       *       *


CHAPTER 17--HOSPITAL, NURSING HOME, DOMICILIARY, AND MEDICAL CARE

           *       *       *       *       *       *       *



                         Subchapter I--General


Sec. 1707. Limitations

    (a) * * *
    (c) Notwithstanding any other provision of law, a veteran 
who makes an election authorized by section 1710C(b) of this 
title (other than a veteran covered by paragraph (4)(B) of that 
section) shall not, for the period of such election, be 
eligible for care and services under this chapter, except as 
provided in that section.

           *       *       *       *       *       *       *


   Subchapter II--Hospital, Nursing Home, or Domiciliary and Medical 
Treatment

           *       *       *       *       *       *       *


Sec. 1710.  * * *
Sec. 1711.  Care during examinations and in emergencies.
Sec. 1712.  Dental Care [drugs and medicines for certain 
    disabled veterans; vaccines.]

           *       *       *       *       *       *       *


Sec. 1710C

    (a)(1) The Secretary shall furnish to each veteran who is 
receiving additional compensation or allowance under chapter 11 
of this title, or increased pension as a veteran of a period of 
war, by reason of being permanently housebound or in need of 
regular aid and attendance, such drugs and medicines as may be 
ordered on prescription of a duly licensed physician as 
specific therapy in the treatment of any illness or injury 
suffered by such veteran.
    (2) The Secretary shall continue to furnish such drugs and 
medicines ordered under paragraph (1) to any such veteran in 
need of regular aid and attendance whose pension payments have 
been discontinued solely because such veteran's annual income 
is greater than the applicable maximum annual income 
limitation, but only so long as such veteran's annual income 
does not exceed such maximum annual income limitation by more 
than $1,000.
    (b)(1) Any medicare-eligible veteran may elect to be 
furnished by the Secretary, on an out-patient basis, such drugs 
and medicines as may be ordered on prescription of a duly 
licensed physician as specific therapy in the treatment of any 
illness or injury suffered by such veteran.
    (2) In this subsection, the term ``medicare-eligible 
veteran'' means any veteran who
          (A) is entitled to or enrolled in hospital insurance 
        benefits under part A of title XVIII of the Social 
        Security Act (42 U.S.C. 1395 et seq.); or
          (B) is enrolled in the supplementary medical 
        insurance program under part B of such title (42 U.S.C. 
        1395j et seq.).
    (3) The Secretary shall furnish to any veteran who makes an 
election under paragraph (1), on an out-patient basis, such 
drugs and medicines as may be ordered on prescription of a duly 
licensed physician as specific therapy in the treatment of any 
illness or injury suffered by such veteran.
    (4)(A) Notwithstanding any other provision of law and 
except as provided in subparagraph (B), a veteran who makes an 
election under paragraph (1) shall not be eligible for care and 
services under this chapter during the year covered by the 
election.
    (B) Subparagraph (A) shall not apply with respect to any 
veteran who has a compensable service-connected disability.
    (5) The furnishing of drugs and medicines under this 
subsection shall be subject to the provisions of section 
1722A(b) of this title.
    (6)(A) An election under paragraph (1) shall be for a 
calendar year, and shall be irrevocable for the year covered by 
such election. An election may be renewed.
    (B) The Secretary shall prescribe the form, manner, and 
timing of an election.
    (7) Before permitting a veteran to make an election under 
paragraph (1), the Secretary shall provide the veteran such 
educational materials and other information on the furnishing 
and receipt of drugs and medicines under this subsection as the 
Secretary considers appropriate to inform the veteran of the 
benefits and costs of being furnished drugs and medicines under 
this subsection, including materials and information on the 
consequences of making an election under paragraph (1) and on 
the fees, copayments, or other amounts required under section 
1722A(b) of this title for drugs and medicines furnished under 
this subsection.
    (c)(1) In order to assist the Secretary of Health and Human 
Services in carrying out national immunization programs under 
other provisions of law, the Secretary may authorize the 
administration of immunizations to eligible veterans who 
voluntarily request such immunizations in connection with the 
provision of care for a disability under this chapter in any 
Department health care facility.
    (2) Any immunization under paragraph (1) shall be made 
using vaccine furnished by the Secretary of Health and Human 
Services at no cost to the Department. For such purpose, 
notwithstanding any other provision of law, the Secretary of 
Health and Human Services may provide such vaccine to the 
Department at no cost.
    (3) Section 7316 of this title shall apply to claims 
alleging negligence or malpractice on the part of Department 
personnel granted immunity under such section.

           *       *       *       *       *       *       *


Sec. 1712. Dental care [drugs and medicines for certain disabled 
                    veterans; vaccines]

    (a) * * *
    [(d) The Secretary shall furnish to each veteran who is 
receiving additional compensation or allowance under chapter 11 
of this title, or increased pension as a veteran of a period of 
war, by reason of being permanently housebound or in need of 
regular aid and attendance,such drugs and medicines as may be 
ordered on prescription of a duly licensed physician as specific 
therapy in the treatment of any illness or injury suffered by such 
veteran. The Secretary shall continue to furnish such drugs and 
medicines so ordered to any such veteran in need of regular aid and 
attendance whose pension payments have been discontinued solely because 
such veteran's annual income is greater than the applicable maximum 
annual income limitation, but only so long as such veteran's annual 
income does not exceed such maximum annual income limitation by more 
than $1,000.
    [(e) In order to assist the Secretary of Health and Human 
Services in carrying out national immunization programs under 
other provisions of law, the Secretary may authorize the 
administration of immunizations to eligible veterans who 
voluntarily request such immunizations in connection with the 
provision of care for a disability under this chapter in any 
Department health care facility. Any such immunization shall be 
made using vaccine furnished by the Secretary of Health and 
Human Services at no cost to the Department. For such purpose, 
notwithstanding any other provision of law, the Secretary may 
provide such vaccine to the Department at no cost. Section 7316 
of this title shall apply to claims alleging negligence or 
malpractice on the part of Department personnel granted 
immunity under such section.]

           *       *       *       *       *       *       *


  Subchapter III--Miscellaneous Provisions, Relating to Hospital and 
Nursing Home Care and Medical Treatment of Veterans

           *       *       *       *       *       *       *



Sec. 1722A. Copayment for medication

    (a)(1) Subject to paragraph (2), the Secretary shall 
require a veteran (other than a veteran covered by subsection 
(b)) to pay the United States $2 for each 30-day supply of 
medication furnished such veteran under this chapter on an 
outpatient basis for the treatment of a non-service-connected 
disability or condition. If the amount supplied is less than a 
30-day supply, the amount of the charge may not be reduced.

           *       *       *       *       *       *       *

    (b)(1) In the case of a veteran who is furnished 
medications on an out-patient basis under section 1710C(b) of 
this title, the Secretary shall require the veteran to pay, at 
the election of the Secretary, one or more of the following:
          (A) An annual enrollment fee in an amount determined 
        appropriate by the Secretary.
          (B) A copayment for each 30-day supply of such 
        medications in an amount determined appropriate by the 
        Secretary.
          (C) An amount equal to the cost to the Secretary of 
        such medications, as determined by the Secretary.
    (2)(A) In determining the amounts to be paid by a veteran 
under paragraph (1), and the basis of payment under one or more 
subparagraphs of that paragraph, the Secretary shall ensure 
that the total amount paid by veterans for medications under 
that paragraph in a year is not less than the costs of the 
Department in furnishing medications to veterans under section 
1710C(b) of this title during that year, including the cost of 
purchasing and furnishing medications, and other costs of 
administering that section.
    (B) The Secretary shall take appropriate actions to ensure, 
to the maximum extent practicable, that amounts paid by 
veterans under paragraph (1) in a year are equal to the costs 
of the Department referred to in subparagraph (A) in that year.
    (3) In determining amounts under paragraph (1), the 
Secretary may take into account the following:
    (A) Whether or not the medications furnished are generic 
medications or brand name medications.
          (B) Whether or not the medications are furnished by 
        mail.
          (C) Whether or not the medications furnished are 
        listed on the National Prescription Drug Formulary of 
        the Department.
          (D) Any other matters the Secretary considers 
        appropriate.
    (4) The Secretary may from time to time adjust any amount 
determined by the Secretary under paragraph (1), as previously 
adjusted under this paragraph, in order to meet the purpose 
specified in paragraph (2).
    [(b)] (c) The Secretary, pursuant to regulations which the 
Secretary shall prescribe, may--
          (1) increase the copayment amount in effect under 
        subsection (a); and
          (2) establish a maximum monthly and a maximum annual 
        pharmaceutical copayment amount under subsection (a) 
        for veterans who have multiple outpatient 
        prescriptions.
    [(c)] (d) Amounts collected under this section shall be 
deposited in the Department of Veterans Affairs Medical Care 
Collections Fund.

           *       *       *       *       *       *       *


1729A. Department of Veterans Affairs Medical Care Collections Fund

    (a) * * *
    (b)(1) * * *
    (4) Subsection (a) or (b) of [S]section 1722A of this 
title.

           *       *       *       *       *       *       *


              MINORITY VIEWS OF SENATOR GRAHAM OF FLORIDA

    This legislation is an important step forward to reduce the 
impediments to access for VA prescription drugs and to 
eradicate the duplication of government-provided health care 
services. TheChairman is to be applauded for introducing this 
legislation as it recognizes that VA's strong drug purchasing power 
should be extended to all Medicare-eligible veterans.
    Where this legislation falls short, however, is that it 
prohibits all non-service connected veterans who elect the drug 
coverage under S. 1153 from seeking VA health care for one 
year.
    Let me present my concerns.
    First, and most importantly, this prohibition on care is 
both punitive and superfluous. Second, the views of the 
Veterans Service Organizations were not clearly understood at 
the Committee's markup.

The prohibition on care is punitive and superfluous

    S. 1153 is predicated on the fact that veterans only want 
access to prescription drugs. If this is truly the case, I fail 
to see the harm in allowing veterans the opportunity to seek 
care. Indeed, the veterans in question are those covered by 
Medicare who are already receiving care from community 
physicians. They are seeking improved access to VA prescription 
drugs so as to avoid seeing a VA doctor for a condition which 
is concurrently being treated by a Medicare provider.
    If non-service connected veterans do continue to come for 
VA care after access to prescription drugs is improved, it 
suggests that their other health care needs are not being met 
by community providers. An example is VA specialty mental 
health care which is unparalleled in the community. Because the 
prohibition on care could impact nearly 2 million low-income 
veterans, it is particularly punitive to ask these veterans to 
pay large out of pocket expenses for health care services which 
could be provided more economically from VA.
    The Chairman argued that the prohibition on care was needed 
to eliminate ``double dipping'' between the Medicare and VA 
programs. Yet, logic holds that veterans would only use the VA 
system for health care services which are wholly unrelated to 
their prescription drug medication. No ``double dipping'' would 
occur. Veterans would receive care they needed from the source 
that they choose to meet those needs.
    On the issue of cost, the VA Inspector General estimated 
that VA could save $1 billion a year by obviating the need for 
VA to re-diagnose and re-issue prescriptions written by outside 
doctors. Again, these savings are derived from eliminating 
unnecessary doctor visits and tests related to a prescription 
medication. The IG said nothing about precluding visits for 
other health care concerns in order to generate these savings.

Views of the Veterans Service Organizations (VSOs)

    During the course of the markup there was some confusion 
about the position of the VSOs on this legislation, and I 
believe we need a clarification of where the various 
constituent organizations stand on this important question. Of 
the VSOs who testified before the Committee on July 22, 2004, 
only two groups support S. 1153, and both of these groups--the 
Veterans of Foreign Wars and AMVETS--specifically oppose the 
prohibition on access to health care for certain Medicare-
eligible veterans.
    In summary, the question before the Senate is: do we want 
to exclude veterans from seeking the health care they have 
earned? As the VFW testified at the Committee's legislative 
hearing, ``Veterans are unique in that they have an entitlement 
to Medicare by way of a financial contribution and have also 
earned the right to VA health care through virtue of their 
service to this nation. They must not be forced to give up 
their rights to either.''
    The Committee rejected an amendment I offered that would 
have struck the prohibition on health care in S.1153. When this 
legislation is considered in the Senate, I intend to seek 
consideration of my amendment de novo.

                                  
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