H.R. 1362 AND DRAFT BILlS REGARDING THIRD 

PARTY REIMBURSEMENT AND PHYSICIANS' SPECIAL PAY PROVISIONS 

HEARING 

BEFORE THE 

SUBCOMMITTEE ON HEALTH 

OF THE 

COMMITTEE ON VETERANS' AFFAIRS 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTH CONGRESS 

FIRST SESSION 

MAY 8,1997 

Printed for the use of the Committee on Veterans' Affairs 

41--469 CC 

Serial No. 105-7 

U.S. GOVERNMENT PRINTING OFFICE 

WASHINGTON: 1997 

For sale by the U.S. Government Printing Office 

Superintendent of Documents, Congressional Sales Office, Washington, DC 20402 

ISBN 0·16·055633·3 
COMMI'ITEE ON VETERANS' AFFAIRS 

BOB STUMP, Arizona, Chairman 

CHRISTOPHER H. SMITH, New Jersey LANE EVANS, Illinois 

MICHAEL BILIRAKIS, Florida JOSEPH P. KENNEDY II, Massachusetts 

FLOYD SPENCE, South Carolina BOB FILNER, California 

TERRY EVERETT, Alabama LUIS V. GUTIERREZ, Illinois 

STEVE BUYER, Indiana JAMES E. CLYBURN, South Carolina 

JACK QUINN, New York CORRINE BROWN, Florida 

SPENCER BACHUS, Alabama MICHAEL F. DOYLE, Pennsylvania 

CLIFF STEARNS, Florida FRANK MASCARA, Pennsylvania 

DAN SCHAEFER, Colorado COLLIN C. PETERSON, Minnesota 

JERRY MORAN, Kansas JULIA CARSON, Indiana 

JOHN COOKSEY, Louisiana SILVESTRE REYES, Texas 

ASA HUTCHINSON, Arkansas VIC SNYDER, Arkansas 

J.D. HAYWORTH, Arizona 

HELEN CHENOWETH, Idaho 

RAY LAHOOD, ILLINOIS 

CARL D. COMMENATOR, Chief Counsel and Staff Director 

SUBCOMMI'ITEE ON HEALTH 

CLIFF STEARNS, Florida, Chairman 

CHRISTOPHER H. SMITH, New Jersey LUIS V. GUTIERREZ, Illinois 

MICHAEL BILIRAKIS, Florida JOSEPH P. KENNEDY II, Massachusetts 

SPENCER BACHUS, Alabama CORRINE BROWN, Florida 

JERRY MORAN, Kansas MICHAEL F. DOYLE, Pennsylvania 

JOHN COOKSEY, Louisiana COLLIN C. PETERSON, Minnesota 

ASA HUTCHINSON, Arkansas JULIA CARSON, Indiana 

HELEN CHENOWETH, Idaho 

(II) 
CONTENTS 

Page 

OPENING STATEMENTS 

Chairman Stearns ............................ ...................................................... ................. 1 

Hon. Luis V. Gutierrez . ..................... .......................................................... ............ 2 

Prepared statement of Congressman Gutierrez ............................................. 51 

Hon. Michael Bilirakis ........................................ .................................................... 54 

Hon. Mike Doyle ..................................... ............................................... ......... ......... 56 

Hon. Helen Chenoweth .............................................................. ............. ................ 57 

Hon. Lane Evans .... .......... .................... ......................... ....................................... ... 58 

WITNESSES 

Bollinger, John C., Deputy Executive Director; Paralyzed Veterans of 

America ................................................................................................................. 42 

Prepared statement of Mr. Bollinger, with attachments .............................. 132 

Burns, Chuck, National Service Director, AMVETS ............................................ 40 

Prepared statement of Mr. Burns ................................................................... 119 

Buto, Kathleen A., Associate Administrator for Policy, Health Care Financing 

Administration, Department of Health and Human Services .... ................. ..... 7 

Prepared statement of Ms. Buto ...... .............................. ...................... ...... ..... 80 

Cullinan, Dennis M., Deputy Director, National Legislative Service, Veterans 

of Foreign Wars of the United States ................................................................. 28 

Prepared statement of Mr. Cullinan, with attachment ............ ...... ........ ....... 100 

Kizer, Kenneth W., M.D., M.P.H., Under Secretary for Health, Veterans 

Health Administration, Department of Veterans Affairs; accompanied by 

Gregg Pane, Chief Policy, Planning, and Performance Officer, Department 

of Veterans Affairs, and Walter Hall, Assistant General Counsel, Department of Veterans Affairs ..................................................................................... 5 

Prepared statement of Dr. Kizer ..................................................................... 71 

Partridge, Col. Charles C., U.S. Army (ret.), Legislative Counsel, National 

Military and Veterans Alliance ........................................................................... 27 

Prepared statement of Colonel Partridge, with attachments ....................... 90 

Rhea, Larry D., Deputy Director of Legislative Affairs, Non Commissioned 

Officers Association .............. ................................................................................ 44 

Prepared statement of Mr. Rhea ............................................... ...................... 138 

Spagnolo, Samuel V., M.D., President, National Association of VA Physicians 

and Dentists . .... ........................................................ .................................... ........ 39 

Prepared statement of Dr. Spagnolo, with attachment ........... ..... .... ............. 112 

VandeWater, Paul N., Assistant Director for Budget Analysis, Congressional Budget Office ............ ............................ ................. ..... ..................... ...... ....... ........ 4 

Prepared statement of Mr. Van de Water ....................................... ................ 62 

Vitikacs, John R., Assistant Director, National Veterans Affairs and Rehabilitation Commission, The American Legion .............................. ........................... 26 

Prepared statement of Mr. Vitikacs ..................................................... ........... 86 

Wannemacher, Jr., Richard A., Associate National Legislative Director, Disabled American Veterans .................................................................................... 30 

Prepared statement of Mr. Wannemacher, with attachments ...................... 107 

West, Kelli R. Willard, Director, Government Relations, Vietnam Veterans 

of America ............................................................................................................. 41 

Prepared statement of Ms. West, with attachments ..................................... 123 

(III) 

H.R. 1362 AND DRAFT BILLS REGARDING 

THIRD PARTY REIMBURSEMENT AND PHYSICIANS' SPECIAL PAY PROVISIONS 

TIflJRSDAY, MAY 8, 1997 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HEALTH, 

COMMITTEE ON VETERANS' AFFAIRS, 

Washington, DC. 

The subcommittee met, pursuant to call, at 9:30 a.m., in room 

340, Cannon House Office Building, Hon. Cliff Stearns (chairman 

of the subcommittee) presiding. 

Present: Representatives Stearns, Cooksey, Gutierrez, Evans, 

Kennedy, Doyle, and Peterson. 

Also Present: Representative Snyder. 

OPENING STATEMENT OF CHAIRMAN STEARNS 

Mr. STEARNS. Good morning everybody. The Veterans' Health 

Subcommittee hearing on legislative proposals will convene. And to 

start off, I have an opening statement, and then I'll call on my colleagues. 

In meeting recently with representatives of major veterans organizations, the number one concern I heard was VA health care 

funding. That concern also comes across loud and clear in our committee's report to the Budget Committee on the VA fiscal year 1998 

medical care budget. 

Our expression of concern, of course, was based largely on the 

Administration's unprecedented reliance on the so-called thirdparty collections to meet its budget needs for fiscal year 1998. 

There are many problems with this concept, not the least is that 

it asks for an appropriation of some $600 million less than the Department acknowledges is needed. 

I know many of my colleagues share my frustration with that 

budget and the Administration's implicit message that Congress 

will be to blame if it does not pass legislation to allow VA to retain 

third-party collections. 

Our committee is on record as recommending that the VA medical care funding needs in the amount of $17.6 billion be met 

through appropriations. Nothing has caused us to change that position. We are also on record as supporting retention of medical care 

cost recoveries as a mechanism to provide the VA with a new revenue stream. 

With those considerations as our framework, we take up a draft 

bill today to allow VA to retain third-party collections. 

(1) 
2 

The Department has set a goal of developing sufficient new revenues so that 10 percent of its funding would come from non-appropriated funds. In that connection, we will also take testimony today 

on H.R. 1362-a bill which many of our members have co-sponsored. That bill would establish a demonstration program to test 

Medicare reimbursement for VA care provided to certain Medicare 

eligible veterans. 

Veterans have long advocated such a reimbursement plan, and 

it is time that this concept get a fair test. We welcome testimony 

on this important measure. 

As we develop legislation to help address critical VA funding issues, we take note of the many changes underway in the VA health 

care system today. Among these changes we're seeing VA shift 

from a hospital-based system to one which relies increasingly on 

outpatient care. With that, we're also seeing some very real and 

disruptive downsizing. This raises some serious personnel issues, 

and we also look forward to testimony on a draft bill to address one 

of those issues. 

We have three panels of witnesses this morning to offer views on 

these bills. But before we go on to our first panel, I'd like to recognize my friend, Mr. Gutierrez, the ranking member, for an opening 

statement. 

OPENING STATEMENT OF HON. LUIS V. GUTIERREZ 

Mr. GUTIERREZ. Thank you so much, Mr. Chairman. Thank you, 

Chairman Stearns, for convening this hearing to discuss Medicare 

and third-party reimbursements, and VA physicians' special pay 

legislation. The importance of these issues for the future of veterans' health care in our Nation cannot be overstated. 

As the members of this committee know, the Department of Veterans Affairs has identified the collection of Medicare and thirdparty reimbursements as an important source of income to meet 

the future needs of veterans throughout America. It is part of their 

30-20-10 plan. The VA intends to make up 10 percent of this funding from non-appropriated sources such as Medicare and thirdparty payments. 

I was pleased that this committee agreed that fiscal year 1998 

was too soon to depend on these reimbursements to make up for 

decreasing appropriations. However, the support of this committee, 

the Committee on Ways and Means, and both houses of Congress, 

is required for the VA to gain the authority to collect these nonappropriated resources. Prompt action is needed on the legislation 

we will discuss today. 

The Chairman and I have discussed-are both original co-sponsors of H.R. 1362, the Veterans' Medicare Reimbursement Demonstration Act. H.R. 1362 is designed to enable the VA to provide 

care to Medicare eligible veterans without further burdening the 

existing VA health care infrastructure. 

I am particularly pleased that this legislation will establish a fee 

for service structure instead of a managed care system. VA outpatient clinics are already extended beyond their designated capacity. Managed care may only contribute to more strains on the VA's 

outpatient system. The fee for service approach prevents this possi-
3 

bility while ensuring that Medicare eligible veterans may still use 

their benefits at a VA medical facility. 

In addition, this legislation may also save the Medicare Trust 

Fund 5 percent per year for services performed by the VA during 

the life of this demonstration project. This is a fact seemingly overlooked by CBO. 

While I recognize the complexities inherent to Medicare subvention, the need to find additional resources for the VA to meet 

its obligations to veterans mandates that we make this option 

work. The best way to gauge the effects of subvention is by implementing this demonstration project. Third-party reimbursements 

are vital as well. 

Currently, the VA has the authority to collect these payments, 

but is unable to retain a majority of these premiums. Instead, they 

are returned to the U.S. Treasury for deficit reduction under pay 

as you go restrictions. 

I am hopeful that this committee and the l05th Congress will realize the need to allow the VA to keep these precious dollars. If we 

are truly committed to a more efficient, cost effective, and user 

friendly VA, then we must adequately fund the system throughout 

this period of transition. This is the most important and most responsible step we can take for the men and women who served and 

sacrificed in the Nation's armed forces. 

I look forward to hearing from the panelists today addressing 

these issues. 

Thank you, Mr. Chairman. 

Mr. STEARNS. Thank you. 

Dr. Cooksey, would you have an opening statement? 

Dr. COOKSEY. No. 

Mr. STEARNS. Okay. We also welcome Dr. Snyder, if he has some 

opening comments. He is not a member, as I understand, of the 

panel, but he is certainly welcome to participate. 

Mr. SNYDER. I wanted to thank you, Mr. Chairman, for letting 

me sit in on this hearing. You even have my name here and decaf 

coffee. I'm ready to roll. Thank you very much. 

Mr. STEARNS. Thanks for your interest, and we welcome your 

participation. 

With that, we'll start with panel number 1. We have Paul 

Van de Water, Assistant Director for Budget Analysis, Congressional Budget Office. Paul, we'll start with you first. 
4 

STATEMENTS OF PAUL N. VANDEWATER, ASSISTANT DIRECTOR FOR BUDGET ANALYSIS, CONGRESSIONAL BUDGET OFFICE; KENNETH W. KIZER, M.D., M.P.H., UNDER SECRETARY 

FOR HEALTH, VETERANS HEALTH ADMINISTRATION, DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY 

GREGG PANE, CHIEF POLICY, PLANNING, AND PERFORMANCE OFFICER, DEPARTMENT OF VETERANS AFFAIRS, AND 

WALTER HALL, ASSISTANT GENERAL COUNSEL, DEPARTMENT OF VETERANS AFFAIRS; AND KATHLEEN A. BUTO, ASSOCIATE ADMINISTRATOR FOR POLICY, HEALTH CARE FINANCING ADMINISTRATION, DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

STATEMENT OF N. PAUL VANDEWATER 

Mr. VAN DE WATER. Good morning, Mr. Chairman, members of 

the subcommittee. I am pleased to represent the Congressional 

Budget Office in this morning's hearing. 

My testimony, as you indicated, will explain CBO's assessment 

of the budgetary effects of two pieces of pending legislation. The 

first is H.R. 1362, the bill to provide for Medicare subvention. The 

second is the draft legislation to allow VA to spend amounts it collects from designated third-party payments and user fees. From a 

budgetary point of view, the two proposals have several features in 

common. 

First, both proposals would allow some VA medical care to be financed through direct or mandatory spending rather than through 

annual appropriations. In the case of H.R. 1362, VA would be given 

authority to spend money it collects from Medicare. In the case of 

the other proposal, VA would be allowed to spend the money it receives from certain nongovernmental sources. 

Second, the additional mandatory resources provided to VA could 

either supplement or supplant existing discretionary spending, 

with the outcome depending on the result of future appropriation 

action. 

Third, even if the additional mandatory spending did allow for 

lower discretionary appropriations in the future, the current budget 

enforcement rules do not allow a reduction in one category of 

spending to offset an increase in the other. 

In the interest of time, Mr. Chairman, my oral remarks will 

focus on H.R. 1362, and I assume the full text of my statement will 

be printed in the record. 

One of the legislative goals of H.R. 1362 is that the demonstration project would establish not increase either VA's or Medicare's 

costs. In theory, VA would continue to pay for the care it would 

provide under current law to beneficiaries eligible for Medicare. 

And Medicare would continue to pay for people currently receiving 

care in the private sector. 

Medicare's costs would experience no net change, it is intended, 

because lower payments to private-sector providers would offset 

payments to VA. Similarly, VA's net costs would remain the same 

because the receipts from Medicare would be matched by higher 

outlays for the care it would provide to extra patients. 

In practice, however, we think that assuring budget neutrality 

for Medicare would be difficult to achieve for three reasons. 
5 

First, although VA provides some services that are not covered 

by Medicare, the bill nevertheless includes those services in calculating VA's maintenance-of-effort level. 

Second, even if that oversight were corrected, VA could understate the amount of its current and future workloads that was attributable to the targeted veterans. 

And third, adjustments to the required level of effort provided in 

the bill could allow further shifting of costs from VA to Medicare 

in later years. 

The likely outcome, therefore, would be higher Medicare costs. 

Determining how many Medicare beneficiaries receive care from 

VA is difficult enough in the short term. But that uncertainty only 

grows over time as populations change and the availability of discretionary funds varies. 

VA and HHS also face different incentives and access to information. It would be difficult for the General Accounting Office, or any 

other auditing agency, to determine the financial outcome of the 

demonstration project. It, too, would need to rely on estimates and 

assumptions about events and behavior that would have been different under current law. 

As introduced, H.R. 1362 would probably raise Medicare's costs 

by $50 million a year or more. Because VA could count services 

that are not covered by Medicare toward its maintenance of effort, 

the cost could even exceed the cap set in the bill for Medicare's expenditures. Medicare would pay to private providers or VA for the 

costs of covered services that are provided and funded through VA 

under current law. 

If the bill's language were modified to focus the maintenance-ofeffort requirements only on services covered by Medicare, the bill 

would cost roughly half as much. 

In conclusion, Mr. Chairman, both proposals would increase 

mandatory spending and would be subject to the pay-as-you-go procedures established in the Budget Enforcement Act. Those increases in mandatory spending would allow discretionary authorization to decline by the same amount. Whether discretionary savings would actually occur, however, would depend on annual appropriations action. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Van de Water appears on p. 62.] 

Mr. STEARNS. Thank you. 

Our next speaker is Dr. Kenneth W. Kizer, Under Secretary for 

Health, Veterans Health Administration, Department of Veterans 

Affairs. 

Good morning and welcome. 

STATEMENT OF KENNETH W. KIZER, M.D., M.P.H. 

Dr. KIZER. Good morning, Mr. Chairman, members of the subcommittee. I want to thank you for your efforts to advance proposals to authorize a Medicare pilot project, as well as the VA retention and use of MCCR funds. These proposals would significantly 

aid our efforts to restructure and improve the veterans health care 

system-efforts that you alluded to in your opening comments. 

The President's proposed 1998 budget would permit VA to better 

serve veterans, as well as serve somewhat more veterans over the 
6 

next five fiscal years. However, achieving these goals is contingent 

upon the legislative changes that are under consideration today. 

The President's budget includes important goals for VA: to reduce our per patient expenditures by 30 percent, increase the number of patients treated by 20 percent, and, as you noted, obtain 10 

percent of our operational budget from non-appropriated sources by 

the year 2002. And while I think most would agree that these are 

aggressive goals, we believe that they are certainly consistent with 

what is occurring in other integrated health care systems and that 

they are realistic targets. 

Assuming that Congress will enact the legislation to authorize 

Medicare reimbursement and the retention of MCCR funds, we 

really do believe that we can cut costs, treat more veterans, and 

become less dependent on appropriated funds over the next 5 

years. 

I have provided a more formal statement, which contains a more 

detailed analysis of the Subcommittee's MCCR and Medicare pilot 

proposals and the changes that we suggest might be made in those 

bills, and in the interest of time, I am going to briefly comment on 

these proposals. 

I'd also like to note here that I am not in a position to comment 

on the physicians' retirement proposal, other than in passing. 

First, your draft bill to allow VA to retain and use MCCR recoveries is very similar to the Administration's proposal, and our recommendations for change are largely technical. I understand that 

the recently concluded budget negotiations include this source of 

funding for the VA, although we haven't seen the exact language 

yet. 

Consequently, enactment of this legislation is really foundational 

to our ability to treat the number of veterans that we are projecting for fiscal year 1998 and beyond. 

Secondly, we support enactment of H.R. 1362, assuming that the 

changes that are discussed in the formal statement can be effected. 

As you know, the Department has been working with HHS and 

OMB for almost 2 years now to design a pilot project for Medicare 

reimbursement. With the strong support of the President, we transmitted to Congress in October of 1996, and again in February of 

1997, a draft bill that was acceptable to both VA and HHS. 

Since February, a working group of VA and HCFA officials has 

been negotiating a memorandum of agreement, which would specifically detail how this project would operate. And while the current draft of this agreement hasn't been formally endorsed by all 

parties, the working group has reached agreement in principle on 

all of the major issues and is currently working on a few of the 

more technical details. We're confident that agreement on this can 

be completed very soon. 

An important change that I would note here to H.R. 1362, that 

we recommend is to permit VA to obtain Medicare reimbursement 

on both a fee for service and a capitated basis. We'll be ready to 

implement a managed care demonstration project for Medicare reimbursement by January 1st of 1998, and we believe that we really 

should test both models from the outset. 

We also think that we need to have the authority to continue the 

pilot while the Administration and Congress consider the results of 
7 

that pilot, because if we didn't have that capability would almost 

certainly disrupt the individual patient care with potentially untoward consequences. Again, we thank you for moving forward on this legislation, and 

we look forward to working with you and the committee staff on 

some of the details. 

On the third measure, I would note that there are currently statutory financial penalties that discourage VA physicians and dentists from retiring before December 31, 1999, and that your draft 

language addresses this issue. I would also note that the penalties 

that currently exist do work against our efforts to restructure and 

downsize, where appropriate, VA's workforce and to optimize the 

number of primary care providers that we utilize. 

We are currently working with the Administration to review the 

draft, because this does have implications that go beyond the Department of Veterans Affairs. When that review is completed, we'll 

forward the Administration's views to the committee. 

Let me just conclude my remarks very quickly to express my 

strong disagreement with the CBO's financial analysis. We have 

been working with the Administration for over 2 years to design a 

Medicare pilot project that would not result in shifting of care covered by VA appropriations to Medicare. Your bill also has provisions that are aimed at guaranteeing that this does not occur. 

Given the very explicit language of your bill and the stated intent of all parties that have been involved in developing this proposal, it is really-I guess the best I can say-mystifying how CBO 

can assume that 100 percent of our efforts in this regard will fail, 

and that there will be a $50 million or greater increase cost due 

to the pilot project. 

Achieving this would require, in reality, that all participants involved in this effort-VA, the Department of Health and Human 

Services, OMB, the Government Accounting Office, as well as a private contractor-would basically have to violate the law. And while 

on the one hand I am flattered, in a sense, that CBO believes that 

we might actually be able to pull something like this off, I think 

it simply lacks any semblance of credibility. 

Instead of using this forum-and noting that the red light is on, 

I'm not going to point out the inadequacies and the limitations of 

the CBO analysis-which I understand that they have informally 

acknowledged-I would like to note that the VA, and I suspect 

HHS and HCFA as well, would like to work with the CBO to improve the soundness and the legitimacy of their present analysis. 

With these comments, I will conclude and look forward to working with you to gain enactment of these important proposals. 

[The prepared statement of Dr. Kizer appears on p. 71.] 

Mr. STEARNS. Thank you. 

Our next panelist is Kathleen Buto, Associate Administrator for 

Policy at the Health Care Financing Administration. 

Welcome, Kathleen. 

STATEMENT OF KATHLEEN A. BUTO 

Ms. BUTO. Good morning, Mr. Chairman, and members of the 

subcommittee. And I am very pleased to be here to discuss the 

President's legislative proposal, as Dr. Kizer has. 
8 

We call this the Medicare subvention proposal. This means that 

Medicare payment for care provided to Medicare beneficiaries will 

be recognized in federal facilities. The President has expressed 

strong support for the MedicareN A subvention demonstration that 

will provide needed-and this project will provide needed information on its effects. 

The project will be conducted by my agency, the Health Care Financing Administration, within the Department of Health and 

Human Services and the Department of Veterans Affairs jointly. 

Under this demonstration, Medicare will pay for health services in 

the VA system for certain individuals who are eligible for both 

Medicare and veterans benefits. 

We believe that we can test efficient ways to provide quality 

services for these beneficiaries at selected sites, and at the same 

time protect the Medicare Trust Funds. 

Currently, there are about three million veterans over age 65 

who meet the Category "C" requirements. They are veterans who 

have neither a service-related disability nor sufficiently low income 

to receive VA care on a high priority basis, but have dual eligibility 

from VA and Medicare. In the past, both programs have provided 

access to health care for them. We hope that a Medicare subvention 

model will increase access to quality for these individuals with administrative efficiencies for both programs. 

HCFA has been working with VA for 2 years, as Dr. Kizer noted. 

In these collaborative design efforts, we have really two imperatives from the health care financing perspective. One, protect beneficiaries, and two, protect the Medicare Trust Funds. 

As you know, the Medicare trustees have just reported that 

Medicare's hospital insurance Trust Fund will be exhausted in the 

year 2001. The Administration is committed to balancing the budget, extending the solvency of the Trust Funds, and keeping benefits 

available for all Medicare beneficiaries. Thus, the design of the 

demonstration will include strategies to prevent further depletion 

of the Trust Funds. 

HCFA and the VA are now working on the memorandum of 

agreement, which will spell out the operational details of the demonstration, including that VA must maintain its current level of financial effort rendering health services to dual eligibles before it 

can receive Medicare payment. 

Agreement has been reached on many of the details for managed 

care. After the VA has met its level of effort in a demonstration 

area, Medicare would pay a capitated amount equal to 95 percent 

of what we pay private HMOs, after excluding some of the costs 

that are not relevant in the demonstration. These excluded costs 

would be such things as medical education, disproportionate share, 

hospital payments, and capital that are already provided under 

VA's appropriation. 

Medicare would pay the fee for service sites in our demonstration 

95 percent of current fee for service rates, after removing some of 

the costs I just mentioned. At the end of each year, HHS and the 

VA would reconcile and correct any payment discrepancies, and the 

VA would allow audits by HCFA and the HSS inspector general. 

If found that Medicare costs are more than they would have been 

without the demonstration, the two departments will take correc-
9 

tive action, including, for example, repayment, adjusting payment 

rates, or terminating the demonstration. In addition, a cap would 

be placed on total Medicare payments to VA for each demonstration year. 

The demonstration will expand beneficiaries' freedom of choice. 

They can use their Medicare eligibility to obtain care from the VA, 

or they can obtain care from civilian providers. VA providers also 

must adhere to Medicare's conditions of participation for quality 

and other quality standards, and provide the complete range of 

benefits that Medicare provides in the HMO model. 

We believe that we've taken all possible steps to protect beneficiaries, the Trust Funds, and VA from harm. There will be a rigorous evaluation. I won't go into it. But we're going to answer a 

number of questions about the pilot and whether or not the impacts and costs that we anticipate really are what play out when 

we have the demonstration. 

At the end of 3 years, we will see how the coordination between 

our two programs improves efficiency, access, and quality for dually 

eligible beneficiaries. 

Mr. Chairman, the bill that you have introduced, H.R. 1362, is 

similar to the Administration's bill, but not identical. There are significant differences between our bills. First, H.R. 1362 would authorize a fee for service model demonstration in three VA regions. 

The Administration proposes to conduct both a fee for service in 

four sites-a pilot project-and a managed care model in either 

four sites or one VA region, for a total of about eight sites. Thus, 

H.R. 1362 would actually involve a much larger geographic area of 

commitment with correspondingly greater financial risk to the 

Medicare program and would not include a managed care model. 

Second, H.R. 1362 sets Medicare payment rates at 95 percent of 

amounts paid by Medicare to the private sector. Our bill sets payments at 95 percent of private sector payment, after excluding 

costs associated with direct and indirect medical education, and so 

on, as I've already described. These would be covered by the VA appropriation. 

Third, H.R. 1362 reduces the VA level of effort in future years 

to account for changes in veterans' eligibility resulting from the 

Veterans' Health Care Eligibility Reform Act of 1996, and our bill 

does not adjust the level of effort. Also, your bill calls for a report 

on the managed care demonstration by March 1, 1999, whereas we 

propose to proceed with that model. 

Recognizing that the red light is on, I'm going to conclude my remarks by just pointing out that there are similarities between our 

proposals that will allow us to work together to reach agreement. 

Thank you. 

[The prepared statement of Ms. Buto appears on p. 80.] 

Mr. STEARNS. Thank you. 

Before we start, we have the ranking member of the full committee, Lane Evans, and I certainly want to give my good friend Mr. 

Evans an opportunity for an opening statement before we start the 

questioning. 

Mr. EVANS. Mr. Chairman, I would just submit it for the record. 

[The statement of Hon. Lane Evans appears on p. 58.] 

Mr. STF.ARNR. ThAnk vou. 
10 

Let me start with my questions. Let me just start with the CBO, 

Mr. Van de Water. And I have great respect for CBO, and I look 

to them for many answers. So I'm just trying to better understand 

your opening statement. You mentioned the three ways that the veterans hospitals could 

shift costs, which would create a $50 million deficit per year, and 

you mentioned the third one was shifting VA medical costs, because they are already doing it and so they'll shift it back. The second, you said there is a workload within the VA hospitals which 

would make it. And then, the first one was what? What was the 

first reason? 

Mr. VAN DEWATER. All of the reasons, Mr. Chairman, have to do 

with identifying the current VA level of effort. They are basically 

three different ways of looking at the same thing. 

As Dr. Kizer's prepared statement indicated, and Ms. Buto's as 

well, there are significant problems in estimating current VA 

spending for the targeted veterans who are participating in these 

demonstrations. A.'1.d Dr. Kizer, in his written statement, also indicated that there are several elements of H.R. 1362-which is the 

bill we were asked to focus on-that are not in the Administration's pro~osal and that would heighten the difficulty of assessing the 

VA s current level of--

Mr. STEARNS. The real first question is: between the Administration's bill and our bill, which one would be less costly? 

Mr. VAN DE WATER. The Administration's bill goes farther than 

H.R. 1362 to address the issues that we have identified, so the Administration's bill would be less costly. 

Mr. STEARNS. But at this point, you can't say how much less costly. You just feel intuitively that the Administration's-and remember now, just for the members here, the difference between the Administration and our bill-the general intent is the same. 

It's just, as I understand it, Ms. Buto, the number of sites, and 

instead of having-you have fee for service plus HMO or managed 

care. So you have that nuance. Is that true? 

Ms. BUTO. That's true. Number of sites is one of--

Mr. STEARNS. And how many sites do you have? 

Ms. BUTO. We have a total of--

Mr. STEARNS. Eight? 

Ms. BUTO (continuing). Probably eight. 

Mr. STEARNS. Eight. And we have three. 

Ms. BUTO. Yours has three geographic areas, and we understand 

that may be a number of sites. It looked like a much broader geo- ~aphic spreading. It may be our misunderstanding, and you've 

Just intended three sites. 

Mr. STEARNS. Okay. Well, we put a cap on this. 

I think, Mr . Van de Water, what you're saying basically is the VA 

hospitals will see this demonstration as the ability to cost shift. 

Isn't that sort of the summary of your reasons? They'll figure out 

a way to---

Mr. VAN DE WATER. That could well be the result. Mr. STEARNS. Okay. So what we're doing is going to incentives 

here. Is there incentives in place to make this a cost savings? 

Now, as I understand it, Medicare is going to give a 5 percent 

discount for the VA to do these services. So isn't it in the best in-
11 

terest of the Veterans' Hospital, at least for the demonstration, to 

make this work and not cost shift? And, in fact, don't you think if 

I was an administrator, or you were an administrator, wouldn't you 

say, "golly, let's get this thing to work," you know, at least during 

the pilot project? 

Mr. VAN DEWATER. The problem isn't the lack of incentives, Mr. 

Chairman. The problem is trying to identify this maintenance of effort. As Dr. Vladeck, the administrator of HCFA, said in testimony 

that he gave before the Ways and Means Committee last year, the 

VA health care system, in his words, is not very sophisticated and 

is not very far along in being able to estimate its existing level of 

effort with regard to the targeted veterans for whom this demonstration would provide. 

As we work with VA, if we can reach some understanding as to 

what the current level of effort is, and if we think that the demonstration would assure that VA continued to provide that maintenance-of-effort level, then no costs would attach to the proposal. 

But--

Mr. STEARNS. Well, that's what we're trying to do. You're citing 

here the reasons why you think there will be a cost overrun, it will 

cost above the cap, and we're trying to find out which are the reasons that we can correct, either through the Administration's bill 

or our bill, because I think honestly that the Administration and 

Congress and the Veterans' Hospital, and the veterans, all want 

this VA subvention bill. So what we have to do is incorporate your 

ideas, if we think so. 

But when you say the VA hospitals are not sophisticated, wasn't 

that public testimony on the basis of fee for service? It was managed care they were talking about and not the fee for service, because they understand fee for service after all of these years, but 

they're not sophisticated in terms of managed care. Isn't that true? 

Mr. VAN DEWATER. VA is not collecting fees for most of the care 

that it delivers, so I wouldn't use that terminology. 

Mr. STEARNS. Ms. Buto, do you mind commenting on what specifically the CBO says is wrong with this bill in terms of how it will 

create cost overruns? 

Ms. BUTO. Yes. I actually--

Mr. STEARNS. Because what you explained in terms of your accounting measures in your administration, it sounds like you'd be 

able to monitor this pretty carefully. 

Ms. BUTO. There were two things that I think the CBO testimony pointed out that our bill directly addresses that H.R. 1362 

doesn't address or addresses in a different way. Let me just mention what they are. 

The first one has to do with removing medical education and 

some of the kind of funding that Medicare pays that are capital 

funding for facilities that are covered by the VA appropriation. We 

would take that out of our payment, so that some of the issues of, 

if you will, duplicate payment by Medicare would be removed 

under our proposal. 

The other issue which was raised, which is not particularly in 

our bill but which we are discussing in the memorandum of agreement, is that in, for example, our DOD subvention proposal and 

memorandum of agreement we do not pay for the non-covered costs 
12 

that Medicare, in a benefit package, doesn't cover, like drugs. We 

don't cover certain benefits. 

Again, we would take those out. I think CBO specifically raised 

the issue in its testimony about counting those in the level of effort 

when, in fact, they are really not comparable to what Medicare 

would be spending. So those two differences are the kinds of things 

which I think there is room for improvement as we try to work 

these numbers. They are pretty easily defined. 

The harder question is the one that Mr. Van de Water raised of 

getting good data on how much are we spending on the people who 

are going to be using the demonstration, the Category "C" eligible 

individuals. We don't have very good information on that, and that 

is going to be the reason we want to reconcile at the end of the 

year, to see what actually was spent and try to figure that out 

more precisely. That's why we have some of those requirements in 

the bill. 

Mr. STEARNS. Okay. My time has expired. We can make those 

changes, the two changes-Congress can-that the Administration 

is suggesting to get a better bill. So I thank you. 

And now I'll recognize the ranking member, Mr. Gutierrez. 

Mr. GUTIERREZ. Thank you very much. I just want to follow up, 

Chairman Steams, because I think this issue needs some clarification. 

Mr. Van de Water, you indicated in your testimony that you believe that H.R. 1362 would give the VA incentives to provide more 

uncovered, and presumably inappropriate, care to Medicare eligible 

targeted veterans, taking additional resources from Medicare Trust 

Fund beyond what this bill would authorize. Is it really CBO's contention that the VA would resort to providing unnecessary care to 

game the system by the VA? 

Mr. VAN DE WATER. Absolutely not, Mr. Gutierrez. That was certainly not our suggestion. We were focusing on the issue that Ms. 

Buto raised of distinguishing between services that VA provides 

that are covered by Medicare and those that are not. 

The services that VA provides that are not Medicare-covered 

services are surely appropriate services. But if VA were to substitute that type of service for services that are covered by Medicare, and were allowed to count that against its maintenance-of-effort requirement, then there would be a substitution of costs from 

VA to Medicare. However, there would be no issue of any inappropriate services being delivered. 

Mr. GUTIERREZ. Do you think that we can work these differences 

out so that we could come up with more certain numbers and more 

certain strategies? And what kinds of things can we do to accomplish that? 

Mr. VAN DE WATER. I think that certainly most, if not all, of 

these differences can be resolved. As Ms. Buto indicated, the issue 

of distinguishing between services covered by Medicare and those 

not covered is addressed in the memorandum of understanding 

that the Administration is developing. It was not addressed in H.R. 

1362, but that should be taken care of. 

In terms of the adjustments to the maintenance of effort that are 

allowed in H.R. 1362, those adjustments could be deleted, as they 

are in the Administration bill. 
13 

Also, in terms of determining what the current maintenance-ofeffort amount is, we would be happy to work with both VA and 

HCFA to try to clarify what that level is. But, to quote Ms. Buto, 

we don't have very good information, and that is precisely the problem. But we will work as hard as we can to get these differences 

resolved. Mr. GUTIERREZ. Dr. Kizer, well, we know that the CBO believes 

if this subvention legislation is enacted the VA will underestimate 

the level of health care that it has been providing to Medicare eligible veterans, almost so that it can shift health care expenditures 

to Medicare Trust Fund. 

I mean, sometimes I read it, and I know Mr. Van de Water would 

probably take exception, but it's almost as though the people at the 

CBO believe that you folks over at the VA are going to do some 

pretty underhanded stuff. And given your earlier comments, maybe 

you could just shed some light on what this committee should know 

about what the CBO is saying about what you're going to do, so 

that we can help clarify who is on first and who is on second, and 

just what is going on here. 

Dr. KIZER. Let me try to respond to you in a couple of ways. One, 

I think our initial reaction in reading their testimony was that we 

were considerably offended, because the absolute clear implication 

of their statement is that we would commit fraud, and that is just 

wrong! 

There is absolutely no intent to do this. And perhaps we may 

have overreacted to their words. After hearing Mr. Van de Water, 

his comments provide some level of reassurance that maybe that 

wasn't what they were saying. Maybe it was based on something 

else. But I think we need to continue these discussions. 

Second, I guess I would note that all of the points contention, or 

at least all that we understand are points of contention or disagreement, here are things that seem like technical details that we can 

work out in a way that would reassure everybody, and that would 

provide the requisite comfort level that would be necessary to pursue this. 

And just two other points. The third one is that it's our belief, 

our strong belief, that this pilot would not only be beneficial to veterans and would allow them some increased freedom of choice, but 

that it would also be salutary to the Trust Fund, because while, as 

Ms. Buto has noted, VA would be paid 95 percent less a number 

of other things, so that the net amount would probably be closer 

to 90 percent of what would be paid to the private sector. This 

would equate to a substantial savings to the Trust Fund. 

And finally, the last point I guess, is having run the Nation's 

largest Medicaid program for a long time, I have considerable confidence in the ability of the HCFA auditors, as well as GAO auditors, to uncover and find any little potential that someone might 

be claiming something that is not what they are entitled to. It certainly was never my experience running the MediCal program that 

anything at all got by the auditors. 

Mr. GUTIERREZ. Thank you. Well, I'm not going to follow up, because I know there are other people, and we've got a couple of doctors here that can helo figure this out for us also. 
14 

But I would just like to finish by stating that, Mr. Van de Water, 

certainly I know that members of the committee want to continue 

to work with you over at the CBO so that we can gain better service for health care for our veterans in terms of working on the 

numbers. And I appreciate your comments earlier in response to 

my initial question. 

You know, it wasn't only my reaction, but the reaction of the 

staff as we evaluated the comments made by the CBO in response 

to this. We kind of share the sentiments of the people at the VA 

that a reading of it can be interpreted as less than favorable in 

terms of the intentions and what they would do under circumstances. 

So thank you so much, Mr. Van de Water, for being here. I really 

look forward to working with all of you. 

Thank you, Mr. Chairman. 

Mr. STEARNS. Thank you. Dr. Cooksey. 

Dr. COOKSEY. Thank you, Mr. Chairman. 

Let me preface my remarks by saying that I have some concerns 

about this whole concept of subvention. I assume that you, Dr. 

Kizer, were in the military during the Vietnam period also. You're 

a physician. 

Dr. KIZER. That's correct on both counts. 

Dr. COOKSEY. And, you know, during that time period, the people 

in the executive branch of government, from 1963 through 1969 at 

least, at best were dishonest with the American public, and certainly with those of us in service. And possibly, at worst they were 

derelict in their duty. 

And so I am concerned about a concept where you're not appropriating the money to the veterans that they deserve. I think that 

the veterans should have the money appropriated. Period. End 

quote. And not depend upon some questionable economic device or 

mechanical device. 

But that said, it is my understanding that the Veterans Administration expected to move into a managed care concept, and you 

really haven't, as we alluded to earlier, been involved in managed 

care. Most of us that have been in the private sector have not been 

in managed care as much as you have in California. 

But how will they make this transition and make it work and 

make it, number one, provide quality of care for the veteran? 

Dr. KIZER. A couple of things. One, I would just note that the 

philosophical perspective that you advance is one that I couldn't 

disagree with. I guess part of the problem in that regard is that 

the reality and what we philosophically might both agree to may 

be in some conflict here, that is, there seems to be a conflict between philosophy and the budget realities of the future. 

From a quality of care perspective, let me say that having 

worked in the private sector and worked with large managed care 

companies, as well as overseeing the care that is provided by private hospitals, I have no doubts at all that the care that is provided in the VA is absolutely on par with what is provided in the 

private sector. 

And if you consider things like the JCAHO accreditation scores, 

you note that the VA is significantly higher than the private sector. 

That is not to say that problems don't occur, and that human er-
15 

rors don't occur, however, in the aggregate, VA care is of very high 

quality. 

Also, it is, I think, of note that some of the things that we have 

put in place in the last 2 years as far as our evolving comprehensive approach to quality care management is increasingly being 

viewed by others as really a model of what or how one should approach quality in a large system. That begins with things such as 

accreditation and credentialing, and then puts in prospective measures like clinical guidelines, and ends with detailed evaluation. 

This is a full, comprehensive approach to quality of care. And I'd 

be happy to talk with you in more detail about the specifics of this, 

should you want to. 

Dr. COOKSEY. Good. Well, you know and I know that, as physicians, quality of care should be the determining factor in the direction of health care and not cost of care. When you have quantity 

of care, the physicians are involved and you are concerned about 

the welfare of the patient. When you have quality of care, you have 

bureaucrats, you have business people, you have MBAs, and they 

don't always really understand what quality of care is. 

So I feel very strongly that it should be quality of care that is 

our criteria. When we have quality of care, it will ultimately result 

in a reduction of cost, because that is a proven principle. It's there. 

It's known. It is unquestionable in my mind. 

Another concern I haveDr. KIZER. Let me just, if I could, inteIject one thing. 

Dr. COOKSEY. Sure. 

Dr. KIZER. Because I agree with that. The one unique opportunity that the VA has here, and it's something that we're trying 

to capitalize on, is applying managed care principles in an environment where the for-profit motive is not the driving factor. 

As I think you well know, what is occurring in the private sector 

and what is of concern increasingly to the public, as well as elected 

officials, is how managed care principles are being distorted or 

taken down the wrong path, because they are being driven too 

often by a for-profit motive, which sets up a whole different 

mindset than applying those same principles in an environment 

where the driving force is quality of care. 

I think the VA has the opportunity to utilize some of these principles in an environment that is not driven by returning another 

penny of earnings to the shareholder at the end of the quarter. 

Dr. COOKSEY. One other quick question. In looking over Dr. 

Spagnolo's testimony, it is my impression that the administrators 

of the hospitals are going to have a lot of latitude to make somereally arbitrary decisionmaking in their reduction in force of their 

staff. What protections are there to protect physicians who might 

otherwise be willing to stand up and say, "Look, there is a problem 

with quality of care"? And they know that if they stand up and 

speak out and do what is best for the veterans, they may be a victim of this RIF process under this rather arbitrary decision system. 

Dr. KIZER. Well, a couple of things. One, the decisions are not arbitrary; the basis for making the decisions are really driven by 

things like needing more primary care practitioners, as opposed to 

specialists, in certain areas. As we look at merging and consolidating some of our facilities, we can get more out of some of the exist-
16 

ing workforce. And so the decisions are not in any way arbitrary. 

They are predicated on some goals and directions aimed at improving the quality of care that we provide. 

The other thing-and I think it really can't be ignored-is that 

as civil service employees, the level of protection that is afforded, 

and the rules by which reductions in force have to be accomplished, 

are very clearly specified and stated in law. The protections that 

are afforded to our employees in general, including physicians, go 

way beyond anything that you would find in any other setting. 

Dr. COOKSEY. Thank you. 

And thank you, Mr. Chairman. 

Mr. STEARNS. Thank you. 

Dr. Snyder, do you have any questions? 

Mr. SNYDER. Yes. Thank you, Mr. Chairman. 

Mr. Van de Water, you may have said this in your written statement, but do you have any opinion on this issue of should the subvention study include the capitated part of it? 

Mr. VAN DEWATER. CBO does not make recommendations for or 

against particular pieces of legislation. So---

Mr. SNYDER. Are you satisfied that if the capitated part of it is 

included that the resources are there, and the framework, to do an 

adequate study of both the capitated and the fee for service? 

Mr. VAN DE WATER. We have not seen the memorandum of understanding to which Ms. Buto referred. We would assume that the 

appropriate provisions were being made, but I can't vouch for that 

because we have not been involved in those discussions to date. 

Mr. SNYDER. Thank you. Dr. Kizer, as I talk among committee 

and staff, I think this issue of the capitation in the Medicare subvention. study is a pretty big issue with this committee. A few questions on that. 

If we don't do the capitated part of the study and just do the 

committee's bill with the fee for service, what impact down the line 

does that have on your 30-20-10 plan? 

Dr. KIZER. A priori it wouldn't have any specific impact. What 

you would lose, though, is the opportunity to do an assessment of 

that question. And I think if you're going to give the idea of subvention a fair test, you need to look at both options. 

And, of course, as Ms. Buto and, I think, I may have noted, there 

are many provisions in the agreement that should it not be working, either from a fiscal point of view or a quality of care point of 

view, we could stop the test at that point. But we do not expect 

that would happen. 

I think if you're going to adequately test Medicare subvention, 

you need to look at both models, particularly insofar as the rest of 

the country is so rapidly moving to managed care. It's something 

we need to look at. 

Mr. SNYDER. You're currently taking some third-party payments 

that go in the general treasury. Is that all fee for service, or do you 

have any capitated contracts around the country? 

Dr. KIZER. It's the reimbursement from the private payers, and 

it's essentially all on a fee for service basis. 

Mr. SNYDER. I think Mr. Gutierrez made the comment in his 

opening statement, and I've heard this criticism also and have 

talked with at least one hospital administrator, there is some con-
17 

cern that the managed care aspect of it, the capitated part of it, 

may increase the volume of patients, that it will cause some problems with higher priority veterans getting the same level of care. 

Do you have some comments on that? 

Dr. KIZER. One of the things that has been very clear, I think 

both in policy and in some of the program changes, is that we view 

our commitment and our mission to take care of those veterans 

first and foremost and above any other operating requirements. Indeed, in the new veterans equitable resource allocation methodology, the reimbursement from appropriated funds is solely targeted 

to Category "A" veterans, or those who have higher priority for access to VA health services. I think that should, and certainly for 

our administrators certainly does, send the message that Category 

"A" veterans are our first and foremost priority. I think it is important to understand that insofar as there are 

lots of fixed costs built into providing health care, and if there is 

excess capacity in some areas, then VA could take care of a certain 

number of higher income patients for very small marginal costs 

that would bring some revenues with them, and enhance our ability to take care of more of those Category "A" veterans who don't 

have access to other health care. 

So, it basically becomes a win-win for both higher income veterans who might choose to be taken care of at the VA and Category 

"An veterans who may not have access to other sources of care. 

Mr. SNYDER. If I am a VA hospital administrator, and I see this 

plan coming down the pike-and put yourself in the posture of 

you're going to be the hospital administrator-what problems is 

this study going to create for me as a hospital administrator at a 

busy VA? 

Dr. KIZER. The problems, in my mind, would largely be logistical. 

That's why, as we have worked with HCFA, in reviewing initial 

site selections we have identified facilities in our current array of 

assets that are more prepared than others to do this as far as the 

sophistication of their cost accounting systems, their billing systems, their utilization management, and other things, which are all 

essential. Those improvements are being put in place in all facilities, however, some are more advanced than others at this time. As 

part of the site selection criteria, those are the sorts of things that 

are being looked at. 

So I don't know that there are any a priori things that would 

cause me great concern, other than the fact that the level of accountability that will be required, from a quality of care as well as 

from a fiscal and other perspectives, may be ratcheted up a notch 

higher. But it's happening everywhere in the system anyway, and 

it's really just a matter of timing. 

Mr. SNYDER. Thank you, Mr. Chairman. 

Mr. STEARNS. Thank you. Mr. Peterson. Mr. PETERSON. Well, we have a vote. I apologize for being late. 

Mr. STEARNS. Okay. Mr. PETERSON. I had another--

Mr. STEARNS. That's fine. 

Mr. PETERSON. So I don't know what has been asked, so I think 

I'll just pass. 
18 

Mr. STEARNS. Well, I think what we'll do is come back after we 

vote, and we'll do another round of questioning, just for 2 minutes. 

Because, you know, I think what we're trying to do is come up with 

ways we can improve the bill, and the Administration has pointed 

out some good ways. And hearing the testimony of Ms. Buto has 

given us some ideas, too. 

So we're going to come around for another 2 minutes after we 

vote, so I appreciate your patience. 

The subcommittee is adjourned temporarily. 

[Recess.] 

Mr. STEARNS. We'll reconvene the hearing on the Subcommittee 

on Health and continue our questioning with Mr. Peterson. 

Mr. PETERSON. Thank you, Mr. Chairman, and again, I apologize 

for being late and hope that I am not rehashing some ground that 

has been covered. 

But what I am concerned about is this estimate, Mr. Van 

de Water. Could you explain to me again how you came up with 

this $50 billion? In talking to some other members, they weren't totally clear on all of the points thatMr. VAN DE WATER. Certainly, Mr. Peterson. The issues, as Dr. 

Kizer indicated shortly before the recess, are indeed somewhat 

technical. That is a good way of describing them. But they are important for determining the budgetary effect of the proposal. 

The single most important issue affecting the $50 million estimate for H.R. 1362 is defining what types of services are counted 

in assessing whether VA is meeting its maintenance of effort requirement. VA provides certain medical care services that go beyond the package of benefits that is covered by Medicare-for example, long-term care and pharmaceuticals, to name just two. 

To the extent that VA is providing those types of services to the 

targeted veterans, those should not be counted towards the maintenance of effort requirement, because they are not services that 

Medicare would have been providing to those patients. 

This is a matter that is easily rectified. Ms. Buto indicated that 

it is addressed in the draft memorandum of understanding that is 

being developed between HCFA and VA. However, it is not yet a 

provision of H.R. 1362, and we were asked to address that particular bill. 

Mr. PETERSON. So how much of the $50 million is that? 

Mr. VAN DE WATER. Probably about half of that. 

Mr. PETERSON. Okay. And you think that that can be fixed, 

meaning that there's a way--

Mr. VAN DEWATER. Yes. 

Mr. PETERSON (continuing). To fix this legislation--

Mr. VAN DE WATER. Yes. 

Mr. PETERSON (continuing). So that the cost can be eliminated? 

Mr. VAN DE WATER. Actually, I misspoke. At least half of the $50 

million is attributable to the factors that have already been identified this morning that are easily fixed. 

Mr. PETERSON. Okay. 

Mr. VAN DE WATER. The definition--

Mr. PETERSON. That was what I was trying to get at in asking 

these questions, is there a way that we can address this issue so 

we-because I think if we end up with a $50 million cost, we're 
19 

going to have problems. And we have to have some way or another 

to figure out how to get around this. 

Mr. VAN DEWATER. As I indicated earlier, Mr. Peterson, I think 

all of these problems are potentially fixable, and the Administration in the testimony this morning has already indicated ways that 

could resolve at least half of that issue. 

Mr. PETERSON. But the other half that is not--

Mr. VAN DEWATER. The other half, as I say, is potentially resolvable, but it involves further discussions in terms of these data that 

Ms. Buto indicated are not in very good shape at this point. 

Mr. PETERSON. So you can't-nobody can give us an indication of 

how we could address the other $25 million? 

Mr. VAN DE WATER. It can be resolved through discussions between HCFA, VA, and ourselves to try to clarify what the current 

level of effort is. 

Mr. PETERSON. But it's going to take some time, in other words. 

You don't have an answer right here today? 

Mr. VAN DE WATER. It can't be resolved this morning, no. 

Ms. BUTO. If I could just make a comment. I think one of the reasons for the cap in our proposal is to specifically address that. In 

other words, once expenditures reach the level that people agree is 

appropriate given the population, they would be capped. That will 

ensure that no more money, no more cost if you will, goes into the 

program. That will assure-it's like an insurance policy. 

Mr. PETERSON. One other thing-after having gone through this 

budget situation and gotten this surprise on Thursday night that 

all of a sudden CBO found $225 billion, or whatever it was, you 

know, and having sat through all of these meetings where they 

were arguing between OMB and CBO, does OMB look at bills like 

this one? And do they agree-is there an agreement between OMB 

and CBO on this bill, or not? Can anybody answer that? 

Mr. VAN DE WATER. I certainly can't speak for the Administration, but I have not seen its estimate of H.R. 1362. And indeed, I 

think your panel agrees that on some of the issues that distinguish 

H.R. 1362 from the Administration proposal--

Dr. KIZER. I would just note that OMB has been an intimate 

partner throughout the discussions with HCF A. They have looked 

at this, and everything else we do, with a very high power microscope, as far as fiscal implications. While I can't comment as far 

as their agreement with CBO, I can assure you that they have 

looked at this with a lot of resolution and are as confident as 

HCF A that there are provisions in there that will protect the Trust 

Fund. 

Ms. BUTO. Just to clarify, we do not have an administration estimate on H.R. 1362, and we don't have one on our bill until we complete the particulars that we're still working out, such as the cap, 

and so forth. Mr. PETERSON. Okay. But the net-the probable result of that 

will be that there will be some massaging of this legislation, and 

whatever the final-whatever OMB gives you is going to say that 

it's cost neutral. That's going to be the result of this. Ms. BUTO. Again, we are trying to work out the details of what 

we think the cap should be. In other words, what we project we'll 

be needing to spend for this. The issue will be, then, how it is 
20 

scored. So it is sort of a two-step process, and it will be iterative. 

Our obvious goal is to try to make it cost neutral to the Trust 

Fund, but we'll have to go through that process to find out. 

Dr. KIZER. Well, I think, to answer your question more directly, 

a basic tenet of this discussion from the outset, starting 2 years 

ago, is that it has to be budget neutral. Indeed, we believe that it 

will not only be budget neutral but that it will create savings for 

Medicare. 

Mr. PETERSON. My time is just about up. What is this cap? You 

say you're going to cap it. 

Ms. BUTO. We're going to put--

Mr. PETERSON. Is that going to have the impact of cutting some 

people out of this, or limiting it? Or what is this cap? 

Ms. BUTO. No. The cap applies to Medicare payments to the VA 

for this demonstration. And what it means is we will estimate how 

much medicare will be reimbursing the VA for these services. And 

it is sort of, as they say, an insurance policy or an upper limit for 

what we will pay. But no, people will continue to get services. 

Many of these people are ~etting services now through Medicare. 

Mr. PETERSON. But it wIll limit the amount of the people that 

can go into the demonstration project. 

Dr. KIZER. That's correct. Another way of looking at it is by setting a cap that limits the number who can participate in the pilot. 

Mr. PETERSON. Okay. Thank you. 

Thank you, Mr. Chairman. 

Mr. STEARNS. Thank you. 

Now I'll continue with just 2 minutes, another round quickly, of 

questions. 

Dr. Kizer and Ms. Buto, what are your views on the recommendations of the Non Commissioned Officers Association that 

military retirees should be a targeted priority under VA medical 

care subvention legislation? And what do you think the selection 

criteria for this demonstration project should include for the location of participating facilities? 

So you've got sort of two questions in one, if you would be so kind 

as to address that. 

Dr. KIzER. The selection criteria, as far as sites, include a whole 

host of things, such as the ability of the potential designated sites 

or the robustness of their cost accounting systems, their billing utilization management, and all of those infrastructure things that 

exist. 

It would include things such as what is the overall market, 

health care market there as far as penetration of managed care, 

other things, what are the socioeconomic demographics of the population, and what would be the demand. And there's quite a number 

of other things that we'll be happy to articulate in more detail. 

As far as the preference of one group or another, our first and 

foremost priority has been to make this an option for those persons 

who are both veterans and Medicare eligible, and meet the fiscal 

criteria that have been noted earlier. 

As far as prioritizing among those veterans who are Medicare eligible, the pilot would not do that. And indeed, I think there may 

be some philosophical reasons why that might not be appropriate 

to try to prioritize. What we'd like to do is to make it an option 
21 

and open for those who would choose to get their care at the VA 

facilities. 

Mr. STEARNS. Ms. Buto. 

Ms. BUTO. I wouldn't add very much to what Dr. Kizer said, except to say that one of the issues of the capacity of the system, that 

the system is already being taxed. And it probably is not as good 

a candidate as one which has more capacity and more ability to 

provide both outpatient and inpatient services. 

Mr. STEARNS. I'd like both of you, if you would, to submit for the 

record your site criteria, so that we have it in writing and we have 

the testimony. But if you might give us more details, Ms. Buto and 

Dr. Kizer. 

Dr. KIZER. I'd be happy to. 

Mr. STEARNS. So, Dr. Kizer, you, briefly, don't agree with the 

Non Commissioned Officers Association that military retirees 

should be the targeted priority, is that my understanding? 

Dr. KIZER. Well, I think it would not be appropriate for us to designate a veteran as-or because they belong to one organization or 

another, as having higher priority than others. We have set criteria 

as far as meeting some threshold things, income and other criteria 

such as that. 

Ms. BUTO. The other thing to mention about that is that we are 

undertaking a similar pilot project, or we intend to, with the Department of Defense involving military treatment facilities. Military retirees are obviously the group we're looking at there. So 

there will be opportunities, both in this demonstration and in the 

DOD subvention demonstration, for participation. 

Mr. STEARNS. Okay. My time is up. Dr. Cooksey. Dr. COOKSEY. Thank you, Mr. Chairman. 

Ms. Buto, we've got something going on with HCF A that is of 

concern to the medical professional's practice expense issue. Hopefully, you're not involved with that. But, you know, HCFA was 

given a mandate by the 104th Congress, our predecessor, to come 

up with a solution by January 1. 

The model that they chose-the question there, you know, was 

not responded to. There was a poor response. As a result, they have 

really chosen at one point to use what we consider a flawed model 

to determine what the solution should be. The methodology, the 

idea of saying, "Well, we don't really have an accurate way of evaluating this, but we'll do this because even though it's not accurate, 

we've got to do something by this deadline." 

Now, what can you do to assure me that nothing is going to be 

done like that for our veterans, or against our veterans, or to the 

detriment of our veterans? 

Ms. BUTO. Let me comment on that first. We do have a deadline, 

but the methodology really involved convening 15 physician panels 

to tell us what the direct cost to their practice was. We had 15 different panels, different specialties, and so on. 

The issue around the survey had to do with indirect costs, which 

were 45 percent of the payment. And almost any business, including Medicare, has to figure out indirect costs using some kind of 

a formula. What we hoped the survey would do was to help us 

make it more specialty specific, and we're looking at some ways to 

do that. 
22 

But it is achievable, we believe, in the timeframe we have. We're 

working toward that, and we hope within the next, really, few 

weeks to have a proposed rule out with plenty of time over the next 

year or so to refine the values and to look at things like whether 

we ought to make changes in them. So I think-and I know Congress is considering whether we ought to phase them in rather 

than doing them all at once. And there are a number of things 

going on to look at the issue that you raised concerns about. 

So, you know, I guess I would differ with you a little bit about 

whether or not this is a flawed process. I think the reason concern 

is around the fact that it is all happening at once. There is no transition, no phase in, as well as some of the issues of the methodology. 

On this one, on the VA subvention demonstration, we're really 

talking about well established payment system models-the inpatient payment system under the fee for service, as well as the RVS 

system, whatever fee schedule we use, and other supply systems as 

well. And our capitation method, which is based off of fee for service, will be used in the capitation or the HMO side of the demonstration. 

One of the things to point out about these different methods is 

that they are really just payment methods, so that the capitation 

method under the managed care model allows the VA to take the 

whole Medicare set of dollars, if you will, and manage those dollars 

and use them appropriately to bring in more primary care, more 

outpatient services, etcetera. 

It is hard to do that under fee for service, because most money 

gets paid for inpatient services. If you don't have an inpatient admission, the VA is not going to get dollars for that foregone admission. And so they have a hard time converting that money into 

more services. The managed care capitation approach allows them 

to use that more flexibly, and that's really the idea behind trying 

it out under the demonstration. But to answer your question, the methodologies are well established. They're what we're using now and have been using for 

many years. Dr. COOKSEY. Well, the net result, though, whether you're in the 

private sector, the public sector-and I hope it does not happen 

with the veterans-if the dollars are not there to pay the cost of 

running the system, health care is not delivered. I don't want that 

to happen to our veterans. 

Ms. BUTO. And we don't want that to happen to any Medicare 

beneficiaries, veterans or other individuals. And we do a yearly report as does the Physician Payment Review Commission, and an 

assessment and survey, to figure out where or if there are any access problems related to beneficiaries getting necessary care. Neither we nor the PPRC have found that there are access problems 

related to these payment systems as yet. 

And obviously, we need to do more in the area of managed care 

to see what is going on. We're planning to do a survey of bene- ficiaries to find out if they are satisfied in feeling like they have 

access to needed services. That is the kind of thing, and the quality 

protection we would build into the demonstration model. 

Dr. COOKSEY. Thank you. 
23 

Thank you, Mr. Chairman. 

Mr. STEARNS. I thank the member. Dr. Snyder. 

Mr. SNYDER. Thank you, once again, Mr. Chairman. 

Mr. Van de Water, a brief answer if you would, please. Following 

up on what Mr. Peterson had to say trying to resolve the second 

half of the $50 million, is it fair statement to say that what you're 

talking about is you all sitting down as analysts and researchers 

and administrators and probably through your memorandum of 

agreement being able to work out the bulk of that, not talking 

about a rewrite of the bill or major changes in the bill, is that a 

fair statement? 

Mr. VAN DEWATER. It might well be necessary to reflect some 

of.--

Mr. SNYDER. Some of that. 

Mr. VAN DEWATER (continuing). Some of this in the legislation, 

yes. 

Mr. SNYDER. Okay. Thank you. 

And, Ms. Buto, again I want to go back to this managed care aspect, the capitated part of it, because I think that is an issue for 

some members. We're talking now about extending managed care 

capitation to the VA system. But is it not a fair statement to say 

that we're still doing some struggling with Medicare capitation in 

the private sector? I mean, you must have some ongoing discussions about rates and fees. I mean, I'm certainly hearing from my 

physician friends that the facts aren't in on that yet. 

Ms. BUTO. Medicare pays HMOs and Medicare under a formula. 

We really don't get to negotiate. In fact, the President's budget essentially asks for more authority to do some of that purchasing, but 

there is a formula that is in the statute. 

The negotiation you're talking about occurs when the HMO takes 

that total capitation payment, if you will, and they say then to a 

physician group, "Okay. We're going to negotiate a fee with you." 

And there has been some dissatisfaction at that level. 

We just issued this year a regulation that talks about what kind 

of physician incentive arrangements managed care plans can have, 

what kind of indemnity or insurance they have to provide to make 

sure the physician does not feel at risk in ways that would damage 

the quality of care. These are complicated rules, but they give us 

better assurance that that relationship will be protected, the physician will be able to provide the needed care. 

There have been a number of other things put out lately, sort of 

mammography area-the breast cancer surgery area, where there 

was concern about outpatient breast cancer, and so on-these kinds 

of protections that we have supported and put into Medicare as 

well. 

Mr. SNYDER. And, Dr. Kizer, I want to give you a chance to say 

anything you want to about the managed care aspect of it. The 

issue comes up that-and maybe it's a criticism of the 20 percent 

part of the 30-20-10 plan, which is VAs are bU!lY enough, the lines 

are long enough, the waits are long enough. Won't the managed 

care part of it just exacerbate those particular problems? And then 

any other comments you have on the managed care. 

Dr. KIZER. Actually, no, I think the managed care aspect would 

enhance our abilitv to deal with that. because it reallv reinforces 
24 

the fiscal incentives to optimize the location and venue of care. 

And, you may not know, but one of the things that we have done 

over the last 18 to 24 months is put in place managed care principles in the VA. For example, we have now sited or are in the 

process of siting 90 new community-based outpatient clinics, which 

are having a very beneficial effect as far as decreasing waiting 

times and increasing access. Likewise, as we pursue other things 

like increasing the amount of surgery that is done on an ambulatory basis, we're seeing waiting times drop, productivity increase, 

and overall quality of care improve, as reflected and measured by 

rates of complications and other things. 

So again, really, the opportunity that exists here, and which we 

feel so strongly about, is being able to operationalize some of these 

principles in a way where the return on investment, if you want 

to think of it in those terms, is really the quality of care, the improved access to care, and the increased value of the health care 

that is provided. It is not driven by solely fiscal motives, but how 

we can get the most health care return out of the dollars that we 

have. 

And we think that a managed care model is certainly something 

that we need to test, as well as a fee for service model. 

Mr. SNYDER. Thank you, Dr. Kizer. I think I agree with you, by 

the way. I just wanted to give you the opportunity to make your 

cases here. 

Thank you, Mr. Chairman. 

Mr. STEARNS. I thank the member. Mr. Peterson. 

Mr. PETERSON. Well, I'm trying to figure out how this is all going 

to work. You know, we have been-our group, the blue dog Democrats, have been working on this budget and Medicare, and we 

know enough about this to be dangerous. But I have become convinced, you know, that where we need to go is get away from this 

managing things with price controls and getting to some kind of 

competition model and opening up the system and Medicare so people can have choices, and so forth. 

And apparently, we don't really know what is in the budget 

agreement. Nobody will really tell us. They say that it's along the 

lines of what the blue dogs put together, but we'll see. 

But anyway, my question is, I'm trying to understand how this 

is going to play out. If we get what was in there, you know, we're 

going to raise the AAPCC in the rural areas, and we're going to I 

think maybe set up a climate where we're going to get-actually 

get some choice and get some things happening. 

So what I'm trying to figure out listening to all of this is, how 

is this actually going to work? Beyond the demonstration, how is 

this going to phase in and how quick would we get to the point 

where the VA would be a complete choice that somebody could 

make just like an HMO or whatever else? Number one. 

And, number two, have you folks been in the loop on whatever 

is being done down there with Medicare? Are you at the table? And 

is this going to get to be part of the deal? Maybe this is above your 

pay grade. 

But, you know, we're having a meeting this afternoon, our group. 

We're not going to give up on this Medicare thing. We are going 

to-if they go off in the wrong direction, we're going to do our own 
25 

bill and try to force them back to where we think they ought to go. 

And so I'm just kind of trying to get the lay of the land here in 

kind of broad terms of how this is going to fit in, and where this 

is going, and is there some way that we could be helpful to get 

where we need to go. 

Ms. BUTO. The folks in our Department and at OMB who are 

working on the Medicare budget are working on this as well. It's 

all part of the same package. So you can be assured that everybody 

who is working on this is in the loop on the broader Medicare issues. That's why we built in so many protections, as you can tell, 

in the methodology. So there is that issue. 

We don't-on the issue of expanding choice and raising the floor 

for HMO payments, we think this is very consistent with that overall approach. That approach really goes to the question of fairness 

in the HMO payment. And we think this will-and increasing 

choice, and we think this will go very much in the same direction. . This is a pilot project, so we're not saying when it will actually 

become a regular option. That's the point of the pilot is to figure 

out how to make it work in a way that could be looked at. 

Mr. PETERSON. I guess the one concern I have is: are you putting 

so many safeguards and so many caps on it that it maybe won't 

work? 

Ms. BUTO. We don't think so. We think it's quite viable this way. 

Mr. PETERSON. Well, I hope that that is, in fact, the case. It 

sometimes--

Ms. BUTO. The alternative is that there is a bigger drain on the 

Trust Fund, and it is one that we think is not appropriate. 

Mr. PETERSON. Thank you. 

Mr. STEARNS. I thank the member. 

I want to thank panel one for your patience while we interrupted 

with a vote, and I appreciate sincerely your coming here this morning. 

And now we'll take panel number two. 

Dr. KIZER. Thank you, Mr. Chairman. 

Mr. STEARNS. Good morning to the panel number two, which includes John Vitikacs, Assistant Director of the National Veterans 

Affairs and Rehabilitation Commission, American Legion; Joe 

Violante, Deputy National Legislative Director, Disabled American 

Veterans; Richard Wannemacher, Jr., Associate National Legislative Director, Disabled American Veterans; Dennis Cullinan, Deputy Director, National Legislative Service, Veterans of Foreign 

Wars of the United States; and Colonel Charles C. Partridge, U.S. 

Army (Retired), Legislative Counsel, National Military and Veterans Alliance. 

Gentlemen, I want to welcome you, and we look forward to your 

opening statements. 
26 

STATEMENTS OF JOHN R. VITIKACS, ASSISTANT DIRECTOR, 

NATIONAL VETERANS AFFAIRS AND REHABILITATION COMMISSION, THE AMERICAN LEGION; RICHARD A. 

WANNEMACHER, JR., ASSOCIATE NATIONAL LEGISLATIVE 

DIRECTOR, DISABLED AMERICAN VETERANS; DENNIS M. 

CULLINAN, DEPUTY DIRECTOR, NATIONAL LEGISLATIVE 

SERVICE, VETERANS OF FOREIGN WARS OF THE UNITED 

STATES; AND COL. CHARLES C. PARTRIDGE, U.S. ARMY 

(RET.), LEGISLATIVE COUNSEL, NATIONAL MILITARY AND 

VETERANS ALLIANCE 

STATEMENT OF JOHN R. VITIKACS 

Mr. VITIKACS. Chairman Stearns, members of the subcommittee, 

good morning. The American Legion appreciates the efforts of the 

subcommittee for initiating measures to generate new non-appropriated revenues for the Veterans Health Administration. Topics 

under consideration today are critical to the future of the Veterans 

Health Administration. 

The American Legion supports the concepts underlying the pilot 

Medicare subvention program and the draft bill on the recovery of 

third-party receipts. The Congress must create and test new funding streams to provide creative solutions to VHA's funding predicament. The proposals under consideration present a sincere effort to 

strengthen, support, and sustain an essential national resource. 

Mr. Chairman, the measures contained within H.R. 1362 should 

be applied as appropriate to both acute hospital and chronic longterm care and community-based treatment programs. Once a veteran qualifies for VA health care, all public and private payment 

options should be considered. The American Legion suggests incorporating both fee for service and a management care model in the 

Medicare subvention program. It is important to measure patient 

satisfaction with each model and the relative cost savings. The American Legion appreciates the recent House Veterans' Mfairs Committee recommendation to include a funding increase of 

$641 million above the President's fiscal year 1998 VA medical care 

budget request. The American Legion is concerned about the uncertainty of VHA attracting sufficient new revenues to offset a no 

growth budget as proposed by the Administration for the period fiscal year 1998 through fiscal year 2002. 

Still, the issue before the subcommittee is what new proposals 

must be tested and applied to solve VHA's long-standing funding 

concerns. The American Legion urges that the final legislative recommendation also includes the concepts contained in the GI Bill of 

Health. The GI Bill of Health grasps the understanding that the 

VA health care system can no longer rely on federal appropriations 

to ensure its long-term survival. 

The GI Bill of Health, together with the Medicare subvention 

and third-party legislation, advances the goal of providing a continuum of health care services to all veterans while allowing the system to collect and retain payments for the service it renders. Concurrently with the federal appropriations process, these proposals 

can have a tremendous impact in making the VHA system financially sound. 
27 

A recent study mandated by Public Law 103445 entitled "Feasibility Study," transforming the Veterans Health Administration 

into a government corporation, arrived at many of the same conclusions and offered similar recommendations as the American Legion's GI Bill of Health. 

In addition, the American Legion strongly supports H.R. 335, a 

commission on the future of America's veterans. H.R. 335 authorizes an advisory board of experts and stakeholders to review proposals for the future of VHA and to develop a comprehensive program to test and evaluate new solutions to old problems. 

Beginning October 1 of this year, VHA plans to start a pilot enrollment program for veterans as required by the recently passed 

eligibility reform legislation. Adding two million service disabled 

veterans who are not currently using VA care to the existing 2.7 

million system users will add further concerns to an already overburdened system. It is, therefore, extremely critical that new VHA 

funding sources are approved and in place by the start of the eligibility reform enrollment system. 

With regard to the draft bill on VA physicians' and dentists' special pay issues, we request having our complete statement on this 

matter entered into the record. 

Mr. Chairman, that completes my statement. 

[The prepared statement of Mr. Vitikacs appears on p. 86.] 

Mr. STEARNS. So ordered. Colonel Partridge. 

STATEMENT OF COL. CHARLES C. PARTRIDGE 

Colonel PARTRIDGE. Thank you, Mr. Chairman. We appreciate 

the opportunity to present the views of the National Association for 

Uniformed Services and the National Military Veterans Alliance. 

We have worked on Medicare reimbursement or subvention for 

quite some time, and just to put it in perspective, it took less time 

for the Manhattan Project to produce the atomic bomb in World 

War II than it has to even get started on this. So we really appreciate you holding this hearing. 

We support Chairman Stump's H.R. 1362 to establish a demonstration project. We would prefer that we not have a demonstration and move directly into it and perhaps in phases. But given the 

constraints by the CBO and Health Care Financing Administration, this is probably the best we can hope for, and we support the 

bill. We particularly like the fee for service model that this bill represents. 

Our members look at the Medicare benefit as a benefit they've 

paid into so when they reach their appropriate age they have a 

Medicare benefit, and those who are retired have a military medical benefit. They'd like to take that Medicare benefit and use it 

wherever they can. If they want to use it downtown, fine. They 

would like also to be able to use it at the VA Hospital. So we like 

the philosophy behind that. 

Concerning the demonstration, we would like to see the evaluation periods shortened, perhaps to 6 months, so that they can-so 

it will be an ongoing evaluation. And once the kinks are worked 

out, once everybody is convinced it is going to save money-and 

we're convinced it will save money-it's going to save the Health 
28 

Care Financing Administration money, and it will help the VA do 

its job, then we could go ahead and implement it. 

The Department of Veterans Affairs estimates some 500,000 veterans die in the United States each year. Every year that we delay 

this, there are some of those veterans who are dying who could otherwise use their benefit in a VA hospital and are not able to do it. 

We also recommend that cost sharing be waived for retired veterans. Based on the point I made earlier, based on Exhibit B, which 

would be part of the record, we believe that is justified. Many of 

these veterans have Medicare Medigap policies. In that case, the 

VA would continue to bill those Medigap policies for those who 

have it. 

Regarding the third-party collection effort, we strongly support a 

bill to revise the way the third-party collection effort is being made. 

Our basic point is that the money should be collected as close to 

the point of service as possible. It should be used as close to the 

point of service as possible, and, of course, the VA should improve 

its procedures for collecting these fees. We believe fees should be 

collected for inpatient services, outpatient services and prescription 

drugs. If a capitation model is approved, of course, capitation funding should be provided. 

We believe collection on this basis would more closely resemble 

the free enterprise system which seems to work very well, and we 

would like to see-we just believe it would improve the operation 

and the energy of the VA medical facilities. And we strongly support your provision to exclude these funds from any OMB estimates 

relative to required appropriations. 

This should be rigidly enforced, and it has got to be monitored, 

because if it's not monitored somehow or other the comptrollers are 

going to take this into account and cut the appropriations. 

Thank you very much, Mr. Chairman, for the opportunity to 

present our views. 

[The prepared statement of Colonel Partridge, with attachments, 

appears on p. 90.] 

Mr. STEARNS. Thank you, Colonel. 

Next is Mr. Cullinan. 

STATEMENT OF DENNIS M. CULLINAN 

Mr. CULLINAN. Thank you very much, Mr. Chairman, and members of the subcommittee. On behalf of the 2.1 million men and 

women of the Veterans of Foreign Wars, I thank you for requesting 

our participation in today's most important legislative hearing relative to the VA health care system. 

Ai; you are aware, the VFW has played a strong and active role 

through the years toward ensuring that all of this Nation's veterans have ready and timely access to top quality VA health care. 

Thus, we are highly gratified at being included in today's hearing. 

Before addressing today's initiatives individually, allow me to unequivocally state that the VFW is committed to seeing the Congress fully fund the VA health care system. At this juncture, only 

full appropriation support can ensure sufficient funding to provide 

all eligible veterans with high quality care. Additionally, VA has 

now set about the Herculean task of transforming itself from an in-
29 

patient centered hospital system to an outpatient-oriented provider 

of modern health care. 

While the efficiencies inherent therein will certainly save tax dollars in the long term, an infusion of capital up front is needed to 

bring it about. Appropriation support must not be allowed to flag 

at this critical point in time. It is for this reason that the VFW has 

championed the causes of both Medicare subvention and retention 

of third-party insurance collections for VA, but not to take the 

place of full appropriation support. 

The rapid aging of the veteran population, together with increased utilization under eligibility reform, has made the need for 

additional non-appropriated dollars even more critical. Thus, the 

VFW enthusiastically supports the thrust of two initiatives under 

discussion today as they move towards achieving these priority 

goals. 

The first bill we will specifically address today is H.R. 1362, the 

Veterans' Medicare Reimbursement Demonstration Act of 1997. 

Calling for VA facilities to be selected from three separate geographical areas, with at least one near a closed military medical facility, this legislation takes advantage of the fact that VA is 

uniquely qualified to carry out such a demonstration project. 

With the world's largest integrated medical system, VA is a direct provider of medical care, not merely a referral agent or a payment conduit, as is the case with most other federal medical 

programs. 

While this bill would have the immediate benefit of directing desperately needed additional dollars into the VA system, it would 

also offer the most accurate picture of what effect Medicare subvention in the main would have on the Trust Fund. The VFW 

strollgly believes that cost effectiveness of VA medical care will result in significant net savings to the Medicare Trust Fund. 

H.R. 1362 represents an excellent opportunity to prove this point, 

while bolstering the VA system in the process. It enjoys strong 

VFW support. 

Next under discussion is the draft bill to provide for the retention of third-party collection by VA. While strongly supporting this 

initiative, we note it would effectively create a third-party retention 

demonstration project of limited duration. We would, of course, prefer to see the enactment of legislation making such authority 

permanent. 

We are also troubled that this proposal would have the unobligated balance remaining in the fund after the demonstration 

project's termination be deposited in the general Treasury fund as 

miscellaneous receipts to go towards deficit reduction. Given VA's 

critical need for additional dollars, and the veterans' already considerable sacrifices on the budgetary front, we hold it to be only 

prudent and fair to provide that all unobligated collections remain 

within the VA health care system. 

Last under discussion today is draft legislation to lift the application of otherwise applicable financial penalties to certain retirement eligible VA physicians and dentists who hold positions which 

would not be retained because of changes in staffing arrangements. 

The VFW concurs that this draft proposal could help VA meet its 
30 

new staffing requirements by facilitating the voluntary retirement 

of these hi~hly compensated individuals. We have no objection. 

Mr. ChaIrman, this concludes my written remarks. Once again, 

I thank you on behalf of the men and women of the Veterans of 

Foreign Wars. I'll be happy to respond to any questions you may 

have. 

[The prepared statement of Mr. Cullinan, with attachment, appears on p. 100.] 

Mr. STEARNS. I thank the gentleman. 

I'm going to go to Mr. Joe Violante, who is Deputy National Legislative Director of the DAV. And I think he'll introduce the other 

individual. 

Mr. VIOLANTE. Thank you, Mr. Chairman, members of the subcommittee. It is my pleasure this morning to introduce the newest 

member of DA V's legislative staff who will be presenting our views 

this morning. 

Richard A. Wannemacher, Jr., is a combat Vietnam veteran who 

was appointed Associate National Legislative Director in August 

1966. Dick joined the DA V's professional staff as a national service 

officer at the Buffalo, New York office in 1978, working there until 

1980 when he was transferred to the DAV office in Albany, where 

he served as supervisor. In 1995, Dick was transferred to the National Service Office in Washington, DC, where he served as assistant supervisor until his current appointment. 

A native of the suburb of Buffalo, Dick enlisted in the U.S. Navy 

in 1967. While serving in Vietnam with the Navy's River Division 

593, he received multiple shell fragment wounds to his head, chest, 

and arm, due to an enemy satchel charge explosion. He was retired 

from the Navy in 1969 due to his service-connected disability. 

Dick earned an Associate Degree in Business Administration 

from Erie Community College, a Bachelor's Degree in Environmental Studies from Buffalo State College, and pursued a graduate 

degree in studies in business at Canisius College i..1l Buffalo. Dick 

was our state commander of Department of New York in 1992 to 

1993, and he is currently a member of DA V's Chapter 4 in Silver 

Spring, MD, where he serves as chapter service officer and legislative chairman. 

Mr. Chairman, I'll now tum this over to Mr. Wannemacher. 

Thank you. 

Mr. STEARNS. Thank you, and welcome, Mr. Wannemacher. 

STATEMENT OF RICHARD A. WANNEMACHER, JR. 

Mr. WANNEMACHER. Thank you, Mr. Chairman. Members of the 

subcommittee, good morning. 

As an organization of more than one million service connected 

disabled veterans, DAV has special interest in maintaining the 

strong health care delivery system to care for veterans' medical 

needs. If the VA health care system is to remain a viable provider 

of care for this Nation's veterans, it must have adequate resources 

and must maintain and make necessary improvements to its infrastructure. 

The DAV, therefore, supports legislation to permit VA to keep 

and use collections from third parties and Medicare to strengthen 

the system and make it better able to meet the health care needs 
31 

of an aging veterans population at a time when delivery of health 

care is undergoing radical reforms throughout the private and public sector. This presents a formidable challenge for VA-one that 

would require full support from the Congress. 

It only seems logical that VA should have every incentive for optimum and efficient collection from third-party payers. It also 

seems logical that VA should be able to keep and invest these collections back into the system. Therefore, Mr. Chairman, the DAV 

fully supports your draft bill to authorize VA to retain third-party 

payments. 

Similarly, the DAV fully supports H.R. 1362, which would authorize demonstration projects for the collection and retention of 

Medicare payments. It is to be hoped that the substantial portion 

of third-party collections would revert to the collecting facility to 

ensure equitable distribution and stimulate local incentives for 

maximizing collection efforts. 

Because the VA health care system has operated with restricted 

funding levels for years, and because it must modernize as a cost 

of providing health care in the most effective, efficient, and stateof-the-art manner, these third-party and Medicare collections must 

be made available to the VA to supplement full appropriations, 

however. 

Unfortunately, this Administration's budget would use these 

funds to replace reduced appropriations. Not only is that objectionable because it will not allow VA to enhance its ability to provide 

health care in a modem setting, it is objectionable because it involves several unacceptable risks. First, VA collections have been 

falling in recent years, and projections may be too optimistic. 

Second, relying on collections to replace appropriations when the 

passage of authorizing legislation is not assured could very well 

leave VA with totally inadequate appropriations and without the 

availability of third-party collections, which would be disastrous 

under any reasonable prediction. 

The full committee's views and estimate discussed these dynamics, and the unavoidable doubts VA's plan raises. I can only say 

that DAV fully agrees with the committee's views and estimates. 

In addition, even assuming passage of the necessary legislationand that may be a large assumption-and that all elements of the 

VA plan are fully realized, the overall funding request is inadequate in our view. The Administration's budget would increase 

health care funding only 5.4 percent over 5 years. 

As the Senate Veterans' Affairs Committee observed in its views 

and estimates, even with legislation you are currently considering, 

the funding streams would not even be sufficient to cover the costof-living adjustments for VA's 225,000 plus employees, estimated 

by VA to be $387.9 million for fiscal year 1998 alone. 

Therefore, Mr. Chairman, while we fully support these bills and 

efforts within the committee to provide VA with this much needed 

funding, these monies must be in addition-not in place of-full appropriations and adequate funding for VA health care, must be assured independent of this very worthy effort. 

In closing, Mr. Chairman, I would like to say that the DAV appreciates the concern, support, and dedicated efforts this sub-
32 

committee and the full committee have shown in dealing with this 

difficult issue. 

That concludes my report, Mr. Chairman, and I would be happy 

to respond to any questions you or the members of the subcommittee might have. 

[The prepared statement of Mr. Wannemacher, with attachments, appears on p. 107.] 

Mr. STEARNS. Thank you, Mr. Wannemacher, and we are certainly delighted to have you testify. And, of course, congratulations 

on your new position. 

I think this is for all of you at this point. The question would be: 

the committee is trying to understand how much demand would be 

anticipated with this program, and maybe you might give me what 

you think. Specifically, higher income veterans have been unable to 

get care from VA in the past and have gotten care elsewhere. When 

you throw in the higher income veterans together with everybody 

else who is Medicare eligible, what do you think would be the demand we can anticipate in this demonstration program? 

And we can just start from my right and just go to the left, if 

you don't mind. 

Mr. VITlKACS. Mr. Chairman, that seems to be the hundred dollar question. I believe that there has to be-the demand is going 

to be relative to the incentives that veterans will have to come to 

the VA for their health care as opposed to the private sector. As 

I understand it, there will be-VA is going to be developing very 

specific health benefit packages, which may have some certain 

services included that would not generally be available under the 

Medicare program. In the private community, there will be a pharmaceutical benefits package as well. So it really depends, the answer to that, on 

the incentives--

Mr. STEARNS. Good point. Mr. VITlKACS. (continuing). That veterans will have to come to 

VA. 

Mr. STEARNS. If you develop an HMO package which includes all 

pharmaceutical drugs, and those individuals are pretty healthy and 

might have a high deductible, they might have access in greater 

proportions than others. Mr. VITlKACS. And I think the bottom line is what is it going to 

save the veteran out of his pocket, if anything. It's something else 

to look at. 

Mr. STEARNS. Okay. Colonel. 

Colonel PARTRIDGE. I think the first issue is going to be which 

hospitals are going to do it. There are some hospitals out there, 

such as Grand Isle, NE and others, that veterans-that retirees 

and veterans are trying to get in. And if a site is selected like that, 

I think you11 have very good response. 

I think one of the problems has been that over the years retired 

veterans have been turned away from these hospitals, so it's going 

to be a matter of attracting them back in. And I think that is 

where the publicity and the type of package come into play. I think 

the deductible and co-payment, unless they have a Medicare supplement, will help attract them in. And the pharmacy benefit will 
33 

help attract them in, because there is no pharmacy benefit under 

Medicare. 

So I think. a package something like that will be very attractive. 

Mr. VITIKACS. Mr. Chairman, if I might, I am following up on the 

gentleman's question. If these Medicare veterans do have Medigap 

insurance policies, and under the MCCR collection criteria today 

VA can forego the out-of-pocket co-payment from Medicare eligible 

veterans with Medigap insurance. So perhaps this would be an 

added incentive that that Medigap payment to VA can substitute 

for the out-of-pocket co-payment, and that would be a tremendous 

incentive. 

Mr. STEARNS. Okay. 

Mr. CULLINAN. Mr. Chairman, I would say that I would have to 

agree with Colonel Partridge that in those areas where there is a 

significant retiree population, that you'll have very good participation right off the bat. For the rest, let me say we believe that VA 

is a provider of quality health care, and there is a movement afoot 

within VA to not only improve the quality of the care it provides, 

but its image as well. 

But in order to attract the higher income insured veteran into 

the system, it is going to have to get that underway. In other 

words, the VA is going to have to be enabled to open itself up to 

these veterans, and then we believe the word will get out. As you 

put together an HMO-like package, including pharmaceuticals and 

the like, we believe veterans will tum to VA. A number already do 

for certain types of care. 

You know, VA is expert with respect to cardiology. I, too, am 

from Buffalo, New York, and I happen to know up in that area that 

if you have a problem with your heart and you can get into VA, 

you'll certainly do it, because the care level is so high. So that's a 

contributing factor as well. 

And I would add one other thing with respect to the waiver of 

co-payments and the like. The VFW is of the opinion that all veterans, everything else being equal, are equal, are alike, and we believe that they should all be treated equally regardless of duration 

of service. So we would certainly like to see any co-payment and 

the like waived, but for all veterans-all veterans participating in 

the program. 

Mr. STEARNS. Okay. Mr. Wannemacher. 

Mr. WANNEMACHER. I'd have to agree with the other three commenters as far as what the benefits package is. The Department 

of Veterans Affairs currently is developing a standard benefits 

package throughout the Nation, and it's a nice package. It includes 

pharmaceuticals, prosthetics, and all acute care, and special surgical procedures. So what is in the benefit package is paramount. 

I don't really know if we could make any estimates, though, as 

to the exact figures. We'd have to examine the whole package. But 

I think a good examination of the benefits package, and also the 

Administration's Medicare subvention program that they're looking 

at, as well as yours, Mr. Chairman, would go a long way in being 

able to get those analytical figures. 

Mr. STEARNS. Mr. Violante. 

Mr. VIOLANTE. Mr. Chairman, I don't know that I have much 

more to add to that, other than there is a lot of factors that need 
34 

to be considered, and obviously the packet is one. And 1 tend to 

agree in those areas where there are a large number of retirees, 

since our government has let them down in other ways, that they 

might be interested in using the VA facilities. Other than that, 1 

really don't have any estimates. 

Mr. STEARNS. Thank you. And my time has expired. Dr. Cooksey. 

Dr. COOKSEY. Thank you, Mr. Chairman. 

Let's say these two pitchers had the funding for the veterans. 

One of them has the funding for the veterans. Which one would 

you rather have for the funding for the veterans for next year, for 

these programs-this pitcher or this pitcher? No takers? 

Colonel PARTRIDGE. No takers. 

Dr. COOKSEY. Well, this one has nothing in it. That's my concern. You know, it looks to me that there is a very valid reason to be 

concerned that there is not-that these projected collections are 

overly optimistic. And unless we have the appropriations there, you 

know, for the veterans' hospitals, it is not going to happen. My next question: how would the veterans' group like to have the 

same health care system that the members of the bureaucracy 

have, that the postmen have? And yes, that most of the members 

of Congress have-the FEHBP as a model? 

Mr. VITlKACS. 1 presume we'll go left to right. 

That's what the 01 Bill of Health, the American Legion proposal 

addresses, and that is the VA developing a very specific defined 

health benefits plan that mandatory veterans would receive their 

care through VA if they choose through appropriated dollars. And 

the current Category "C" discretionary veterans would be able to 

utilize the VA system by bringing with them their own various 

health payment plans. 

So yes, to answer your question, veterans would enjoy having the 

knowledge of specifically what they are eligible to receive, what 

array of services, what array of benefits, and if they're not included 

in the "shall provide" category of care, that they be able to still utilize the VA health care system on a choice basis with their own 

health benefit coverage. Colonel PARTRIDGE. Military retired veterans are the only federal 

employees who lose their guaranteed benefit provided by-guaranteed by the Government at age 65. Correcting that injustice has 

been a long-time objective of ours. 

There are a couple of bills out there. Representative J.C. Watts 

and Representative Thornberry have introduced two bills that 

would resolve this problem, and we think it is a great step in the 

right direction. We believe that that is the answer for the veteran 

with 20 or more years of service who served until retirement. And 

we strongly support that. 

We think it would help the VA as well, because, once again, they 

could use that benefit in a VA hospital. Just take the plan. That 

would be very simple, to collect it just like they do other thirdparty collections. 

The CRAMPUS program, which Congress designed in 1967 to be 

the equivalent of FEHBP, has essentially been destroyed by the 

Department of Defense. They have used it as a cash cow to fund 

other programs. 

Thank you for the question. 
35 

Mr. CULLINAN. Dr. Cooksey, I would first say that the VFW very 

much appreciates your comments earlier and just now with respect 

to the appropriations pitcher. We certainly want to see one that is 

full enough to fill every glass that needs to be filled. With respect to the other part of your question, at our national 

convention often times the subject of the health benefits available 

to others-the Federal Government and, indeed, in the Congresscomes up. And I can tell you that our membership would have a 

keen interest in being afforded the same health benefits package 

as the Congress. Unfortunately, we can't usually guarantee them that that's what 

we're going to get them, but yes, indeed, they would love to have 

that. 

Mr. WANNEMACHER. Doctor, I think you have to look more at 

what the VA health care system has done for the world and for the 

veterans who became disabled in defense of a free and democratic 

America. 

The Veterans Administration health care system is the largest 

educator for health care practitioners throughout the world. The research that is provided by the VA health care system helps 

throughout the world as well. The VA also serves as a backup in 

national disaster for the Department of Defense. 

And most importantly, the Veterans Administration, in today's 

model under the direction of Dr. Kizer, provides quality, cost effective health care. And if you and your health care provider can be 

guaranteed this same package that veterans enjoy today, then 

maybe you should look at the VA health care system for health 

care. 

Dr. COOKSEY. That's a good response, and I appreciate that. 

And I, too, know that there are some veterans' hospitals and 

some veteran hospital physicians that are providing good health 

care. There are problems there in certain hospitals and certain situations, like there are in the private sector. But the ultimate goal 

is to bring the quality of care up for everyone, and particularly individuals with service connected injuries, particularly individuals 

like you. 

I mean, I saw the area where you were from the backseat of an 

F -4, and I was glad I was not down where you guys were. You 

know, and you deserve very special consideration. And I have veterans in my area that in many cases have nothing else. Veterans 

that are our age that have nothing else to turn to except to the veterans' hospital. They are either unemployed, unemployable, or, in 

a low income situation, and they need it. And I think that is an 

option. 

I do think that Chairman Stump's bill is the best we can look 

for under the current circumstances, and it's sort of the situation 

that Congressman Peterson is in. I don't know the details of this budget bill yet. I've been to a couple of meetings. But I want to make sure that the veterans that 

have service connected injuries do not get short changed in the 

budget shuftle. If they were all veterans in that budget shuftle, 

they would be better off. 

Thank you, Mr. Chairman. 

Mr. STEARNS. Thank you. I thank the member. 
36 

Mr. Gutierrez. 

Mr. GUTIERREZ. Yes. Mr. Chairman, I first wanted to apologize 

to all of the panelists for having arrived late. I'd like to ask one 

question of Mr. John Vitikacs of the National Veterans Affairs and 

Rehabilitation Commission. 

I am curious about your proposal for the VA state Medicaid subvention project. Would you tell me how you would establish such 

a project that would work? 

Mr. VITIKACS. Well, I would be more able to defme a more broad 

concept as opposed to specifics. We have many veterans today who 

are Medicaid eligible, and they are, in fact-fall into the "shall provide" care category within VA on both an inpatient and outpatient 

basis. Now, most recently, on the outpatient basis 'with eligibility 

reform. 

We're only raising the question here: is there perhaps greater cooperation possible-is greater cooperation possible between the VA 

and state governments to provide services to those who would qualify under the state Medicaid program? And without having specific 

details to address your question, primarily we'd just like to put this 

issue on the table for further review and discussion. 

We think that there is-if we're going to look at all sources of 

potential non-appropriated funding for the VA system, that this 

can be something that can be examined the same as the other proposals that we're addressing today. 

Mr. GUTIERREZ. I think, Mr. Chairman, if we might officially 

make an official inquiry to the Veterans Administration about how 

they see this working-you know, the possibility of something modeled after what we're doing at the federal level at the state level, 

just to see how they might view that-any, you know, holes thatyou know, valleys, things that we mil?'ht have to overcome. But how 

we could do that, because I think it s a great idea, and I'm going 

to go share it with some of my good friends in the state legislature. 

I think it's great. And, you know, sometimes we forget about all of 

the states and the Medicaid program. 

Thank you so much for raising the issue. I think it's a valuable 

one. 

And once again, Mr. Chairman, to you, to members of the subcommittee, and to the panelists, my apologies for having returned 

so late. Thank you so much. Mr. STEARNS. I thank the member. Dr. Snyder. 

Mr. SNYDER. Thank you, Mr. Chairman. 

Mr. Vitikacs, your statement-the American Legion makes a 

very strong statement-in fact, a very awkward one I think-in 

support of including the managed care as part of the demonstration 

project. Are most of the veterans groups in agreement with that, 

or is that a detail that has not been--

Mr. VITIKACS. I can just speak to our own organization, that we 

feel, as we heard in the testimony this morning, that to conduct a 

fair assessment of veteran preferences, patient satisfaction, as well 

as relative cost savings in a demonstration fee for service program 

versus a managed care model, that if we're going to take time and 

effort to develop a demonstration program, let's make it as broad 

as possible, and evaluate more than just one approach. 

Mr. SNYDER. Right. 
37 

Colonel Partridge, I think you made the Manhattan Project comparison. 

Colonel PARTRIDGE. Yes, sir. 

Mr. SNYDER. Do you have any comments on this managed care 

aspect? 

Colonel PARTRIDGE. We have no problem. We think it would 

probably be a good idea to test the managed care piece of this. Our 

experience has primarily been with the Department of Defense effort, where the only thing they are testing is managed care. And 

we just seem to be running head long into a managed care environment, and that's why we were delighted to see this bill had the fee 

for service piece. That's our view. We would have no objection to 

doing the other as well. 

Mr. SNYDER. And Medicare has, I think, made a very strong 

guarantee that there will always be a fee for service option. 

Mr. Cullinan, you made a comment about HMO models, so I assume that you are in support of the managed care part of it. Do 

you have any comment there? 

Mr. CULLINAN. Yes, sir. By force of national resolution, the VFW 

calls for all veterans who avail themselves of VA health care to be 

provided with a full continuum of health care. And that certainly 

embraces the managed care. 

Mr. SNYDER. So you would support the concept of the study of 

both at this point? 

Mr. CULLINAN. Both the concept, the study, and the reality. 

Mr. SNYDER. The reality. I understand. The Manhattan Project 

metaphor, once again. 

Mr. CULLINAN. Right. 

Mr. SNYDER. And I guess my concern, going back to your Manhattan Project metaphor because I like it, that if we don't do the 

managed care study now, and then 2 or 3 or 4 years down the line 

we start thinking, well maybe we need to move into managed care, 

we will have put ourselves back in another Manhattan Project 

when it may be the investment of time, recognizing that, you know, 

it may not work out. And it may be time to do it. 

Mr. Wannemacher, do you have any comments there? 

Mr. WANNEMACHER. I'd have to agree with what the others have 

said. If you're going to look at the subject, you'd better look at the 

whole subject. 

Mr. SNYDER. Yes. And then a question for the man from the 

American Legion. This discussion about if we're going to have some 

hospitals that are so busy right now that, as we increase our participation by the goal of 20 percent over 5 years, we're going to 

have some problems. I guess your thoughts-and I think the goals 

of the VA, too, about more outpatient care and some outreach facilities for better geographic access-that is going to take care of 

part of that problem down the line if we move in that direction. Is 

that--

Mr. VITlKACS. If the question is what criteria should be developed, certainly, we want to look at the rural health care facilities. 

Mr. SNYDER. Right. 

Mr. VITlKACS. We want to look at the full service facility. That's 

the urban highly affiliated tertiary care facility. We're going to 

have a broad array of VA hospitals included in the ultimate study, 
38 

as well as what other topics were mentioned this morning, and that 

is the management ability of cost accounting utilization management, socioeconomic demographics, as well as veteran demographics. So I think we need to really not exclude anything but include all of the available options. 

Mr. SNYDER. And I assume it's a fair statement to say, also, that 

you all-if this bill passes, and we all hope it does in some form, 

that you all are going to be monitoring this also from your perspective. 

If I could just make one final comment. I spoke at an American 

Legion auxiliary-the Women of the American Legion-a couple of 

weeks ago, and brought up the topic of Medicare subvention and 

mentioned the word and got a lot of heads nodding in the audience. 

So somebody has been doing their work out there. 

And I'll just make the comment, I don't know how easy a sell this 

is going to be to get these bills through Congress, but I sure hope 

you all are prepared to not just educate the Veterans' Committee, 

as I know you will be, I mean, you need to go out there and really 

work on the rest of Congress with whatever the final version. 

Thank you very much. 

Thank you, Mr. Chairman. 

Mr. STEARNS. I thank the gentleman. 

I think we are completed. 

I'm just curious, does anyone know how we got the word "subvention" for this? (Laughter.) 

I know when it first came to me and I heard it, and the veterans 

were telling me in town meeting, I went back and I said, "How did 

they come up with subvention as a word?" I mean, I could come 

up with some more appropriate terms. 

But at any rate, I want to thank--

Dr. COOKSEY. Mr. Chairman? 

Mr. STEARNS. Yes? 

Dr. COOKSEY. I can assure you it was not a physician that came 

up with that term. I bet it was a lawyer. (Laughter.) 

Mr. STEARNS. I thank the panel. 

Mr. STEARNS. We11 now welcome the third panel, Dr. Samuel 

Spagnolo, President, National Association of VA Physicians and 

Dentists; Chuck Burns, National Service Director, AMVETS; Kelli 

Willard West, Director, Government Relations, Vietnam Veterans 

of America; John Bollinger, Deputy Executive Director; Paralyzed 

Veterans of America; and Larry Rhea, Deputy Director of Legislative Affairs, Non Commissioned Officers Association. 

Let me welcome the distinguished panel, and I think we'll start 

with Dr. Spagnolo and his opening statement. And I appreciate everybody sitting through the other two panels and their patience. 

And I think you heard the same information that we did, so you 

have the benefit of what they said. 

So with that, let me open up. 
39 

STATEMENTS OF SAMUEL V. SPAGNOLO, M.D., PRESIDENT, NATIONAL ASSOCIATION OF VA PHYSICIANS AND DENTISTS; 

CHUCK BURNS, NATIONAL SERVICE DIRECTOR, AMVETS; 

KELLI R. WILLARD WEST, DIRECTOR, GOVERNMENT RELATIONS, VIETNAM VETERANS OF AMERICA; JOHN C. 

BOLLINGER, DEPUTY EXECUTIVE DIRECTOR; PARAL'YZED 

VETERANS OF AMERICA; AND LARRY D. RHEA, DEPUTY DIRECTOR OF LEGISLATIVE AFFAIRS, NON COMMISSIONED 

OFFICERS ASSOCIATION 

STATEMENT OF SAMUEL V. SPAGNOLO, M.D. 

Dr. SPAGNOLO. Thank you, Mr. Chairman, and members of the 

subcommittee. 

I, too, sat through this morning's session and found it very interesting. And actually, before I make my remarks, my only comment, 

I guess, having listened to all of that is that I'm very sure now that 

30 years ago I made the right decision to be a physician and not 

an administrator. 

But with that being said, I am honored to be here and appreciate 

the invitation. I have served the health care needs of the veterans 

for nearly 30 years. It seems like a long time, and I guess it has 

been. And I come to you today as President of the National Association of VA Physicians and Dentists. I am very proud to represent this organization. These are dedicated men and women who 

are committed to improving the health care of America's veterans, 

those veterans who have put their life at risk to serve this country. 

I also, this morning, found it somewhat interesting again to be 

receiving what seems to be a mixed message from the Administration: 'We want to bring in lots of new patients, but we also want 

to fire all of the doctors." And that seems to me a bit strange. So 

think about that a little bit. 

NAV APD is very pleased that you have put this draft bill on the 

agenda this morning and are trying to address some of the needed 

changes in Public Law 102-40. As you are well aware, this is the 

first time in the history of the VA that the VA has plans to eliminate physicians and dentists. 

This is being done under a very new directive, which has been 

titled 5111, and which gives very broad authority to hospital administrators to fire physicians and dentists. Under this new authority, there are many facilities around the country that are bracing themselves for major reductions. Long Beach, for instance, has 

been told they're going to lose 15 percent of their physicians and 

dentists across the board. At what price are we going to destroy 15 

percent of those people and destroy their careers? 

I recently wrote that this directive, 5111, and the atmosphere of 

secrecy in which these reductions in force have been planned, has 

fostered distrust and sparked a wave of rumors, all of which have 

undermined physician morale. It's a very serious situation. 

More than a year ago, I wrote Under Secretary Kizer, and I suggested to him an alternative to these firings-a very simple solution. Let's do something to suggest and improve the possibility for 

voluntary retirement. This would eliminate the need perhaps for 

all of these firings. 
40 

Let me also state that NAV APD is not necessarily opposed to the 

elimination of some positions, and we're not suggesting that some 

reduction in Title 38 personnel, at certain facilities, is unreasonable. The VA is caring for less patients. There is a lot of redundancy in the system. And there may be certain places where reduction in force may be an appropriate thing to do. We are saying that 

these things should be voluntary and not result in firings. 

The current draft legislation is a first step. We are very supportive. However, it does not include the provision of voluntary leaving. 

Simply striking Section C, under paragraph 2, would restore back 

to the physician the right to make their own retirement decisions. 

NAVAPD thinks this is a fair way to do it. In fact, we think it's 

the right thing to do. 

I appreciate the opportunity to come here. I thank you very much 

for taking a look at this critical issue for the physicians and dentists, and I'd be happy to work with you further on a draft bill. 

Thank you very much. 

[The prepared statement of Dr. Spagnolo, with attachment, appears on p. 112.] 

Mr. STEARNS. I thank you. 

And Chuck Bums is next. 

STATEMENT OF CHUCK BURNS 

Mr. BURNS. Thank you, Mr. Chairman. I'll be very brief. I am not 

going to gild the lily with anything additional. I think it is obvious 

that all of the VSOs are strongly supportive of this legislation. 

AMVETS, in conjunction with the independent budget, DAV, 

PVA, VFW, has been supporting and calling for initiatives such as 

these for several years. We support the idea that VA has to evolve 

to meet the needs in a new health care environment. Medicare reimbursement, retention of third-party collection, and user fees meet 

the objective of supplementing VA's budget. 

We are adamantly opposed, however, to these dollars being used 

to offset federal appropriations that are required to cover the cost 

of anticipated increase in workload at VA. They should not be used 

as substitute funding by OMB as contained in the Administration's 

request to straight line VA appropriations through the year 2002. 

By straight lining the VA appropriations, we feel the Administration is, in essence, gambling with the health and well being of millions of veterans. 

Regarding Medicare reimbursement, obviously, we are in agreement with our fellow VSOs in that this is a good idea. It would 

offer low priority veterans an opportunity to use Medicare to reimburse their VA care, thereby saving federal tax dollars. The only 

thing keeping this optimal program from taking effect is the complicated rules for scoring such legislation, as we heard earlier this 

morning. 

Retention of third-party collections, obviously, again VA should 

be allowed to retain the additional revenues veterans bring into the 

9ystem. We believe that VA headquarters should eliminate its centralized medical care cost recovery office and authorize VA 

networking directors to contract for their cost recovery efforts as in 

the private sector. 
41 

We believe that allowing VA to retain the cost of care from third 

parties will ensure a fully supported recovery effort. With the additional funds, VA would be able to enhance care for current users 

and increase access for low priority veterans. 

AMVETS is also supportive of the notion that if VA is permitted 

to collect and retain third-party funds, it could begin treating the 

veterans' adult dependents. Obviously, additional people in the VA 

system would provide additional resources and would enhance care 

available to high priority veterans. It also creates choice. 

And we believe that this should be examined as a new business 

opportunity under which VA could control treatment of dependents 

and ensure their ability to pay before service was rendered. We 

caution that this should not be done so as it reduces services or 

quality of care to veterans. 

We strongly urge Congress to authorize Medicare reimbursement 

for higher income veterans and their dependents, and retention of 

third-party reimbursement for current veteran users, new veteran 

users, and veterans' dependents. VA must change to survive, and 

we view some recommendations and prescription for changes as 

proof that VA concurs with many of our past recommendations. 

Mr. Chairman, I would ask that my written statement on lifting 

the application for certain retirement eligible veterans be made 

part of the record. 

This concludes my statement, and I appreciate the opportunity 

to testify. 

[The prepared statement of Mr. Burns appears on p. 119.] 

Mr. STEARNS. So ordered. Thank you. 

Mr. West? Ms. Kelli, excuse me. 

Ms. WEST. That's quite all right. 

Mr. STEARNS. Ms. Kelli West. 

STATEMENT OF KELLI R. WILLARD WEST 

Ms. WEST. Right. Good morning, Mr. Chairman, and members of 

the subcommittee. On behalf of Vietnam Veterans of America, I appreciate the opportunity to be here and discuss these very important issues. 

We believe that the Medicare reimbursement bill and the MCCR 

reimbursement bills are, in combination with eligibility reform 

passed in the last Congress, probably the most important health 

care legislation. coming before this committee in recent history. 

We support both of the bills, and in the interest of being brief, 

I'll just raise a couple of comments about the bills. 

With regard to the MCCR reimbursement legislation, we would 

recommend that the committee, either in the legislative language 

or in committee report language, make some recommendations to 

the VA about how reimbursement and collections should be split 

between the local facilities and/or the VISN and VA's nationa1 

objectives. 

I don't have any specific percentage in mind as to what we fee1 

should be kept at the local level. But we do feel very strongly that 

a large portion, as large as possible, be retained at the local leve1 

so that incentives for improving services and collecting the reimbursements will be in place. 
42 

With regard to the Medicare reimbursement legislation, there 

are two provisions that we feel could be improved upon. We're concerned that excluding high income Medicare eligible veterans is, 

first of all, restricting their choices, and also may not give an accurate read on the pilot project. Similarly, imposing a $50 million per 

year restriction on the Medicare payments may exclude some veterans from participating in the project and may, again, skew the data 

on costs and participation. 

We do want to raise, in this forum, a concern we have raised before regarding how all of these changes are affecting specialized 

services, including post traumatic stress disorder and substance 

abuse treatments. We don't disagree entirely with VA's objectives 

of shifting these to more outpatient-based treatment modalities, 

but we are concerned that inpatient treatment should not be totally 

eliminated. There are certain veterans for whom that kind of therapeutic setting will be the only method appropriate for treating their 

complex multiple problems. 

A case in point is the homeless veteran population. If a homeless 

veteran has a substance abuse problem, in combination with a post 

traumatic stress disorder situation, they don't have anywhere to 

serve as a respite while they are receiving only outpatient treatment. So we're pleased that this subcommittee has put on your 

oversight agenda monitoring those changes, and we urge you to be 

very vigilant, as we intend to be. 

In closing, I'd just like to, as many of my colleagues have done, 

commend the House Veterans' Affairs Committee for your foresight 

and caution with regard to the budget recommendations of the Administration. We agree wholeheartedly that if this legislation 

passes to bring the new revenue streams into the VA, these revenue streams should not be used to offset the federal appropriation. 

The core purpose of the VA serving service connected disabled 

veterans and low income veterans has to maintain federal priority, 

and that can only be done with secure funding. 

I'd be happy to respond to any questions. Thank you. 

[The prepared statement of Ms. West, with attachments, appears 

on p. 123.] 

Mr. STEARNS. I thank you. John Bollinger. 

STATEMENT OF JOHN C. BOLLINGER 

Mr. BOLLINGER. Thank YQu, Mr. Chairman. I'll be brief and 

would request that my written statement be included in the record. 

Mr. STEARNS. So ordered. 

Mr. BOLLINGER. PVA strongly supports the proposed legislation 

that is before us today. We think it's a good idea, and we have encouraged passage of legislation like this for some time now. 

We have heard a couple of times this morning that the general 

intent of both the Administration's bill and this legislation is the 

same. I think maybe it would be helpful to you as you proceed with 

this legislation if I could perhaps tell you at least a couple of our 

concerns in regards to the Administration's bill. 

First, we would hope that this pilot project that you're proposing 

wouldn't lead to legislation beyond H.R. 1362 that would be used 

to replace appropriated dollars for VA health care. And I think Dr. 

Cooksey said it extremely well earlier on today. In our support over 
43 

the years for this kind of legislation, it has always been with the 

caveat that these collections would supplement and not be used to 

replace an adequate appropriation for VA medical care. 

As we testified earlier this year, we are very concerned with the 

Administration's proposal, which banks very heavily on funds from 

reimbursements instead of using appropri~ted funds. This is extremely troubling when you consider that Congress hasn't passed 

such legislation in the past. 

It is troubling when you consider that the proposed cuts in appropriated funds will extend up through fiscal year 2002, and that 

it comes at a time when VA will be treating an increasingly elderly 

population, and also at a time when these funds are going fromalready scarce funds are going from the northeast down to the 

south at a time when VA is trying to restructure itself. So there 

are a lot of things coming together here that makes this very worrisome from our point of view. 

The other thing I'd like to say is that the-just in regards to the 

current status of the budget negotiations. It has really rlaced us 

in kind of a worst case scenario, because on one hand, i VA does 

get legislation to keep third-party payments as recommended by 

the Administration, we have been asked to consider covering that 

loss to the deficit reduction by agreeing to accept several billions 

of dollars in cuts in other programs for disabled veterans. And we 

find that .pretty difficult. 

Two qUlck other things. I think one of our concerns is VA's ability to collect this money-I think, historically, the track record 

hasn't been very good. Collections have actually fallen. I know that 

the incentives aren't there, but collections have actually fallen in 

the last couple of years, and the costs of collection have risen. So 

no question, we think it's a gamble to rely solely on that money to 

support VA health care. 

And finally, just let me say that, Mr. Chairman and members, 

that PVA members use this system. This is a system we rely on. 

It's not like going down to the doctor on the comer and getting a 

prescription. We use the VA for pharmaceuticals, for over-thecounter supplies, rehab., sustaining care, long-term care, acute 

care. The majority of our members use the VA. We rely on it to get 

up in the moming, to go to work, to take our kids to school, to do 

all of those things that perhaps a lot of people take for granted. 

So it's a system very important to us, and it's a system that we 

don't want to gamble on as far as these third-party and Medicare 

reimbursements are concerned. So we support that proposal, but 

we want to see the appropriated money there to ensure that the 

VA is able to deliver quality care. 

Thanks. 

[The prepared statement of Mr. Bollinger, with attachments, appears on p. 132.] 

Mr. STEARNS. I thank the gentleman. 

We are going to temporarily recess and reconvene after-I have 

a car downstairs, so we11 be back shortly. 

[Recess.] 

Mr. STEARNS. Well, thank you for your patience. I think we'll reconvene the Subcommittee on Health, and we have Larry Rhea is 

next on the panel number three. 
44 

And, Larry, thank you for waiting. 

STATEMENT OF LARRY D. RHEA 

Mr. RHEA. Thank you very much, Mr. Chairman. I appreciate 

your patience and attention to this issue this morning. It is encouraging to all of us. 

We are pleased to be included among the list of witnesses asked 

to provide comment and testimony on these measures today, and 

we thank you very much for having us here to do just that. 

In short, Mr. Chairman, the Non Commissioned Officers Association supports the two measures that deal with health care receipts 

for VA. And since the association does not have a position on the 

physician pay draft legislation that you're taking a look at, we decline any comment on that particular bill. 

I think it is important though that I say NCOA supports H.R. 

1362, and I could leave it there. But I think there is one or two 

things that I maybe need to comment upon. First of all, I wish Dr. 

Cooksey was here. I certainly would like to thank him for his comments relative to the appropriations. They're right on the mark 

with what NCOA has said for many, many years. 

And that is, if veterans have earned VA health care as a result 

of their military service, then we shouldn't have to be going 

through all of these gimmicks as far as funding and everything 

else. If they, in fact, have earned it as a result of military services, 

appropriate and adequate appropriations should be provided, and 

we shouldn't have to rely on Medicare or third-party receipts, or 

charging some veterans and not charging the others. It doesn't 

make any sense to us. 

But the other compliment that I would like to extend is also to 

Dr. Cooksey and Dr. Snyder here. Even before we left for the short 

break there, Mr. Chairman-and to get to this point of being anchor on the last panel, you usually have only the Chairman and the 

ranking member present. Okay? Now, I know that is out of necessity and required, but it is also as part of an interest on the part 

of you particularly. 

The Non Commissioned Officers Association, Dr. Snyder, and to 

Dr. Cooksey, even though he is not here now, your presence here 

for the length of this hearing indicates a real interest in this issue, 

and for that we are sincerely grateful and we appreciate it very 

much. 

Also, Mr. Chairman, I want to thank you for your question to Dr. 

Kizer and Ms. Buto in relation to the military retired veterans. And I think Dr. Kizer's response was something along the lines 

that it would be inappropriate to set priorities for the demonstration's project. Ms. Buto brought up the point that there was a similar demonstration project planned for the Department of Defense 

that would, in effect, take care of the military retired veterans. 

And I noticed a lot of heads in the room at that time shaking up 

and down in agreement when, in fact, they should have been shaking in disagreement with what those two individuals said. And 

frankly, I was disappointed in Dr. Kizer's response, because it ignores several things. 

The entire VA health care system is, in fact, a system of priorities. H.R. 1362 that we're discussing this morning specifically tar-
45 

gets certain individuals. And it seemed pretty clear to the Non 

Commissioned Officers Association that somebody who was responsible for drafting the legislation had in mind the military retired 

veteran in the selection of site facilities for the project, because the 

measure specifically states that one of the sites selected shall be in 

the vicinity or within the catchment area of a military treatment 

facility that was closed as a result of base closure and realignment. 

So it seems to me that somebody had given some thought to the 

military retired veteran in this particular bill, and we appreciate 

that because surely our view recognizes the plight that these veterans have been suffering for a long, long time. 

In regards to Ms. Buto's comments, though, that the DOD piece 

on Medicare reimbursement would take care of the military retired 

veterans is simply incomplete at best. Today, only about 25 percent 

of military retired veterans have access to military treatment facilities. Under the proposed DOD legislation, less than one-third of the 

military retiree veterans would benefit from that. 

So our request of you was simply, in view of the fact that BRAC 

was included, and it appeared to us that the retired veteran was 

a target, we are simply asking you to make that explicit in this legislation. 

We included in our testimony comments on the cost recovery 

draft legislation, and the requested waiver of co-payments. Our 

comments are in our written statement, which you have indicated 

would be a part of the record. I would ask that your attention be 

devoted to that request of ours. 

And I thank you very much, Mr. Chairman. 

[The prepared statement of Mr. Rhea appears on p. 138.] 

Mr. STEARNS. Thank you, Mr. Rhea. And as you pointed out, it 

will be a part of the record. And any questions that the members 

wish to answer can be put in the record and given to the panel, 

and then replies can also be returned. 

And I think we asked the question, you know, about military retirees being priority, because we wanted to hear for the record 

what they had to say. 

I think we're finished with the panels. Both myself and the other 

members will proceed with our questions. 

I have a general question for all of you, which is: deciding where 

to locate these particular sites. Dr. Spagnolo had mentioned one 

particular hospital he is concerned about. Maybe the priority 

should be for us to look at hospitals. Maybe that is one priority. 

As I say, which hospitals should the demonstration project be located at which would benefit a hospital that perhaps is suffering 

some downgrading? I mean, I don't know. 

But let me just start from right to left with Mr. Rhea, if you 

would comment on that, on how you think the site selection should 

occur. 

Mr. RHEA. I think one site was mentioned. I believe it was Mr. 

Partridge from the National Military and Veterans Alliance mentioned a hospital in Nebraska where veterans, including military 

retired veterans, are pushing the doors down to try to get in. 

Selection of a site such as that might not work to our advantage, 

and I say that because even under this legislation these veterans 

that we are trying to attract are the lowest priority as far as treat-
46 

ment within VA. So I would suggest that we would look at facilities 

that would have the capacity. 

Maybe some that are not utilized to their full capacity right now, 

look at facilities that have a capacity to handle increased people. 

Because if this is an option, the first time one of these people 

comes there, endures a long waiting line, or waits 2 months for an 

appointment, I simply don't think that they are going to stay with 

it too long when they have other alternatives. 

Mr. STEARNS. Mr. Bums. 

Mr. BURNS. I'll agree with what has been said earlier in terms 

of siting these demonstration facilities and just emphasize the fact 

that wherever they are, they have got to be a full service facility. 

It can't just be an outpatient clinic. It can't just be a cardiology 

unit. It has got to be a full service facility capable of treating the 

needs of all of the veterans in that area. 

And I think, if I heard Dr. Kizer's response this morning, the one 

element that he left out that I was amazed to hear was the veterans ropulation in a certain area. I didn't hear that at all. I think 

rura health care, the VA consideration, definitely needs to be demonstrated. 

I know in my home state of Tennessee we're fortunate to have 

four VA facilities there, and an excellent facility in Nashville that 

is affiliated with Vanderbilt University, and another one just 30 

miles down the road in Murfreesboro that literally they are knocking the doors down in the rural areas of Tennessee to get into. 

And again, I would like to put in a plug for at least one of these 

areas being in a rural area of the country. 

Mr. STEARNS. Dr. Spagnolo. 

Dr. SPAGNOLO. Well, I would agree with the comments already 

expressed. We haven't looked at this critically within our organization. We'd be delighted to go back and take a look at this. But I 

think if you're going to do these demonstrations, you're going to 

have to look at infrastructure and need, so we would be happy to 

come back to you with some more information if you'd like. 

Mr. STEARNS. It would be nice to have the perspective of the National Association of VA Physicians and Dentists for the record, if 

you don't mind. That would be good. 

Dr. SPAGNOLO. I'd be happy to. 

Mr. STEARNS. Ms. West. 

Ms. WEST. Sure. Vietnam Veterans of America doesn't have specific recommendations on which sites should be selected. But I 

would suggest that the broadest diversity of types of facilities be 

utilized. As my colleague from AMVETS indicated, test rural, 

urban, highly concentrated veteran populations, perhaps less concentrated veteran populations, areas where there are high levels of 

older veterans and also younger veterans. 

I think the broader experience we can glean from the demo. 

projects, the more useful the data will be for future planning. Mr. STEARNS. Thank you. Mr. Bollinger. 

Mr. BOLLINGER. Mr. Chairman, thank you. My recommendation 

would be for the three sites to cover the range of all specialized 

services that the VA provides now. So blind rehab., spinal cord injury, mental health, post traumatic stress, all of those specialized 

services, so that you're sure that you cover all of those. For exam-
47 

pIe, there are 22 spinal cord injury centers, so I would hope that 

at least one, if not two, of the sites would include spinal cord injury 

facilities along with the tertiary care that supports them in this 

project. 

Mr. STEARNS. Thank you. 

Dr.·Spagnolo, just a quick question on the physician pay bill. Do 

you feel the bill, as it is structured now, denies retirement eligible 

physicians the right to retire? In other words, do you feel, as the 

bill is written now, it should be improved? 

Dr. SPAGNOLO. Yes. As I noted in my comments, it primarily permits those physicians who get targeted for being fired the option, 

then, to retire without losing their benefit. 

Mr. STEARNS. So if--

Dr. SPAGNOLO. We would like to strike that and just let any of 

the physicians who are eligible to retire, just let them retire. That's 

our concern. 

Mr. STEARNS. Okay. All right. My time has expired. 

Mr. Gutierrez. 

Mr. GUTIERREZ. Thank you, Mr. Chairman. 

Well, first, I'd like to just state my belief that enabling local VA 

medical facilities or VISNs to retain a percentage of the Medicare 

and third-party reimbursements that they collect is something that 

I think the subcommittee should seriously consider. I think it is an 

important part of building greater efficiency and local control, certainly incentives into the system. 

Ms. West raised the issue and I'd like to just state for the record 

that I am pleased that she did so. 

And then I have one question to Dr. Spagnolo. I'd, first of all, like 

to assure you that this committee recognizes some of the serious 

concerns about physician and dentist morale, and the implication 

it has for quality of VA care. And I wanted to differ with you on 

one point, however. 

The legislation would allow VA to use voluntary separations as 

a means of reducing the physician workforce. Tenure would protect 

many of the physicians and dentists that this legislation would affect. Voluntary separations could alleviate the need for reductions 

in workforce for those with less tenure, in particular, services of facilities that require downsizing. In other cases, physicians or dentists would still have to choose retirement but will receive the benefits of special pay. 

What we don't want to have happen, I think, is our most valued 

and experienced physician staff taking a retirement option when 

the VA still needs them. And so I just wonder, maybe you could 

share with us your view on how we can adjust the legislation to 

ensure that the VA retains the physicians that it needs in the 

areas and the specializations that it needs them in and the experience. 

Dr. SPAGNOLO. Well, I'm not sure how to answer that very 

straightforwardly and simply, because there seems-there were 

about five different kinds of questions there. And I don't think any 

of them have a real simple answer. I just think that we need to 

make this workable, clean, doable, and rapidly doable-because we 

don't have time, frankly, to argue over the next 6 or 8 months. I've 
48 

already waited a year just to get this far, and when Dr. Kizer could 

have probably done this easily a year ago. 

I don't think you are going to lose the most valuable people in 

the system, provided you make it a system in which they want to 

work. But the way this is being done is making it a system where 

nobody wants to work, and you're going to have trouble recruiting 

people if you continue to do this. 

So let those people, who want to retire, retire. As far as I know, 

there are no other government agencies in which if you've put in 

30 years of service in the Government-some of our physicians 

have 40 years in with the Government-that you can't retire, because you don't meet the 15-year requirement in the special pay 

law. So they have only 13 years perhaps in with the VA, and they 

can't retire. It doesn't make any sense. You have your 30 years in, 

and you want to retire, let's allow them to retire. 

When the original bill was made, the original law 8 years ago, 

these provisions were slipped in. It's not clear why they were even 

put in at that time. They didn't belong there, and they really, I 

don't think, had much to do with recruitment and retention. So 

let's make it clean. Let's make it simple. Let's get it done. And let's 

move on, then, to really doing what we're all here to do, and that's 

improve the quality of care for the veterans. The more this drags 

out, the more I fear that that is going to be in jeopardy. 

Mr. GUTIERREZ. Thank you, Dr. Spagnolo. 

And thank all of the members of the panel. I really appreciate 

your patience and waiting through the morning to give your very 

valued testimony. 

Thank you very much, Mr. Chairman. 

Mr. STEARNS. I thank the member. And Dr. Cooksey. 

Dr. COOKSEY. Let me ask you, does anybody know, are there any 

tentative lists, proposed lists, of three areas, three regions for the 

facilities? Does anybody know? That answers my question. 

Dr. Spagnolo, how many MDs, DOSs, DOs, are in the system 

that you are representing? 

Dr. SPAGNOLO. Well, as you know, there are more than 15,000 

physicians and dentists in the whole system. We represent, at the 

moment, nearly 3,000 of those people, in terms of paying members. 

We feel we represent them all, but some pay--

Dr. COOKSEY. So 15--

Dr. SPAGNOLO (continuing). Some pay their dues and others don't 

pay their dues. 

Dr. COOKSEY. Okay. So 15 percent of 15,000. That's all. Thank you, Mr. Chairman. 

Mr. STEARNS. I thank you. Dr. Snyder. 

Mr. SNYDER. Thank you, Mr. Chairman. 

The same question I asked before, please, for Mr. Bollinger and 

Ms. West and Mr. Rhea and Mr. Burns-the issue of capitation. As 

you know, I think almost everyone on our committee, on the full 

Veterans' Committee, is a co-sponsor of 1162. But it does not have 

a provision in there for the study, including the capitation part of 

it. 

And I think we've had 100 percent agreement from the other 

VSOs today that we need to include that. If you all could make a 

comment on that, please. 
49 

Mr. RHEA. Certainly, the Non Commissioned Officers Association 

would have no objection at all to including it in there. And it probably would be very valuable to do so. 

Mr. SNYDER. Thank you. 

Mr. BURNS. I'll go along with that, and just state that AMVETS 

believes that you cannot have a viable demonstration project without including some caritation in it. 

Dr. SPAGNOLO. No. have no comment on that. 

Ms. WEST. I'd agree with my colleagues that we're going to be 

able to gain the most valuable information from the demonstration 

project if it looks at a whole range of issues, including managed 

care capitation. 

Mr. BOLLINGER. And we'd be interested in that analysis as well. 

Mr. SNYDER. Thank you, Mr. Chairman. 

Mr. STEARNS. Thank you, Dr. Snyder. 

I want to thank all of the panelists for their patience to wait 

through our votes and wait through panels one and two. And we 

look forward to taking and looking and reading your testimony, 

and see if we can incorporate some of your ideas. 

And I just hope that under the 105th Congress we can move this 

forward. You can see some of the controversy here, and we're going 

to have to convince our colleagues at CBO, in the case of the Medicare subvention, that there is a way to solve some of their concerns. And we're going to work on that. 

So with that, without any further testimony, the subcommittee 

is adjourned. 

[Whereupon, at 12:59 p.m., the subcommittee was adjourned.] 

APPENDIX 

Statement by Rep. Luis V. Gutierrez 

Subcommittee on Health 

Committee on Veterans Affairs 

U.S. House of Representatives 

May 8, 1997 

THANK YOU, CHAIRMAN STEARNS FOR CONVENING THIS 

IMPORTANT HEARING TO DISCUSS MEDICARE AND THIRD-PARTY 

REIMBURSEMENTS AND VA PHYSICIANS SPECIAL PA Y 

LEGISLATION. 

THE IMPORTANCE OF THESE ISSUES FOR THE FUTURE OF 

VETERANS HEALTH CARE IN OUR NATION CANNOT BE 

OVERSTATED. 

AS THE MEMBERS OF THIS COMMITTEE KNOW, THE 

DEPARTMENT OF VETERANS AFFAIRS HAS IDENTIFIED THE 

COLLECTION OF MEDICARE AND THIRD-PARTY REIMBURSEMENTS 

AS AN IMPORTANT SOURCE OFINCOME TO MEET THE FUTURE 

NEEDS OF VETERANS THROUGHOUT AMERICA. 

AS PART OF THE THEIR 30-20-10 PLAN, THE VA INTENDS TO 

MAKE UP 10 PERCENT OF THEIR FUNDING FROM NONAPPROPRIATED SOURCES SUCH AS MEDICARE AND THIRD-PARTY 

PAYMENTS. 

I WAS PLEASED THAT THIS COMMITTEE AGREED THAT FISCAL 

YEAR 1998 WAS TOO SOON TO DEPEND ON THESE 

REIMBURSEMENTS TO MAKE UP FOR DECREASING 

APPROPRIA TIONS. 

HOWEVER, THE SUPPORT OF THiS COMMITTEE, THE COMMITTEE 

ON WAYS AND MEANS AND BOTH HOUSES OF CONGRESS IS 

REQUIRED FOR THE VA TO GAIN THE AUTHORITY TO COLLECT 

THESE NON-APPROPRIATED RESOURCES. 

(51) 
52 

PROMPT ACTION IS NEEDED ON THE LEGISLATION WE WILL 

DISCUSS TODAY. 

THE CHAIRMAN AND I ARE BOTH ORIGINAL CO-SPONSORS OF HR 

1362, THE VETERANS MEDICARE REIMBURSEMENT 

DEMONSTRATION ACT. 

HR 1362 IS DESIGNED TO ENABLE THE VA TO PROVIDE CARE TO 

MEDICARE ELIGIBLE VETERANS WITHOUT FURTHER BURDENING 

THE EXISTING VA HEALTH CARE INFRASTRUCTURE. 

I AM PARTICULARLY PLEASED . THAT THIS LEGISLATION WILL 

ESTABLISH A FEE-FOR-SERVICE STRUCTURE INSTEAD OF A 

MANAGED CARE SYSTEM. 

VA OUTPATIENT CLINICS ARE ALREADY EXTENDED BEYOND 

THEIR DESIGNATED CAPACITIES. MANAGED CARE MAY ONLY 

CONTRIBUTE TO MORE STRAINS ON THE VA'S OUTPATIENT 

SYSTEM. 

THE FEE-FOR-SERVICE APPROACH PREVENTS THIS POSSIBILITY, 

WHILE ENSURING THAT MEDICARE ELIGIBLE VETERANS MAY 

STILL USE THEIR BENEFITS AT VA MEDICAL FACILITIES. 

IN ADDITION, THIS LEGISLATION MAY ALSO SAVE THE MEDICARE 

TRUST FUND FIVE PERCENT PER EACH SERVICE PERFORMED BY 

THE VA DURING THE LIFE OF THIS DEMONSTRATION PROJECT. 

THIS IS A FACT SEEMINGLY OVERLOOKED BY THE 

CONGRESSIONAL BUDGET OFFICE. 

WHILE I RECOGNIZE THE COMPLEXITIES INHERENT TO MEDICARE 

SUBVENTION, THE NEED TO FIND ADDITIONAL RESOURCES FOR 

THE VA TO MEET ITS OBLIGATIONS TO VETERANS MANDATES 

THAT WE MAKE THIS OPTION WORK. 

THE BEST WAY TO GAUGE THE AFFECTS OF SUBVENTION IS BY 

iMPLEMENTING THIS DEMONSTRATION PROJECT. 
53 ' 

THIRD-PARTY REIMBURSEMENTS ARE VITAL AS WELL. 

CURRENTLY, THE VA HAS THE AUTHORITY TO COLLECT THESE 

PAYMENTS BUT IS NOT ABLE TO RETAIN A MAJORITY OF THESE 

PREMIUMS. 

INSTEAD, THEY ARE RETURNED TO THE U.S. TREASURY FOR 

DEFICIT REDUCTION UNDER PAYGO RESTRICTIONS. 

I AM HOPEFUL THAT THIS COMMITIEE AND THE 105TH 

CONGRESS WILL REALIZE THE NEED TO ALLOW THE VA TO KEEP 

THESE PRECIOUS DOLLARS. 

IF WE ARE TRULY COMMITTED TO A MORE EFFICIENT, COSTEFFECTIVE AND USER FRIENDLY VA THAN WE MUST 

ADEQUATELY FUND THE SYSTEM THROUGHOUT THIS PERIOD OF 

TRANSITION. 

THIS IS THE MOST RESPONSIBLE STEP WE CAN TAKE FOR THE 

MEN AND WOMEN WHO SERVED AND SACRIFICED IN OUR 

NATION'S ARMED SERVICES. 

I AM LOOKING FORWARD TO HEARING FROM ALL OUR 

WITNESSES TODAY AS WE TRY TO FIND THE BEST WAY TO 

ADDRESS THESE IMPORTANT ISSUES. 

THANK YOU AGAIN. 
, 54 

THE HONORABLE MICHAEl BllIRAKIS 

SUBCOMMITTEE ON HEALTH 

MAY 8, 1997 

HEARING ON PENDING LEGISLATION 

Thank you, Mr. Chairman. 

First, I want to commend you for scheduling this hearing on several 

important bills, 

H.R. 1362, the Veterans' Medicare Reimbursement Demonstration Act 

of 1997, calls for the VA and HHS to establish a three-year 

demonstration project in three of VA's geographic service areas . Under 

the bill, VA could collect and retain Medicare payments for services 

provided to certain Medicare-eligible veterans. 

As a veteran and the representative of a congressional district with a 

large veterans population, I strongly believe that this proposal deserves 

further examination . As the Chairman of one of the congressional 

subcommittee's with jurisdiction over the Medicare program, I must 

also take into account the impact that subvention could have on the 

Medicare trust fund which is facing severe financial difficulties. 

In this regard, I am anxious to hear from our witnesses about potential 

benefits and costs of H.R. 1362. 80th the VA health care system and 

the Medicare program stand to benefit if a budget neutral subvention 

demonstration program can be devised, and I look forward to working 

with my colleagues and the veterans organizations on this important 

issue. 
55 

- 2 -

With regard to the draft bill to allow the VA to retain medical care cost 

recoveries (MCCR)' I also believe that third-party reimbursement is 

another issue which deserves to be examined by our Committee. 

Although I strongly disagree with the Administration's budget proposal 

which relies on the enactment of legislative initiatives to meet the VA's 

medical care funding needs, I support the use of third party 

reimbursements as a supplemental funding source for the VA health 

care system. The draft legislation we are considering today will provide 

the VA with added incentives to increase their reimbursements from 

third party insurers. 

As always, I look forward to working with my colleagues on this 

Subcommittee on the issues we are considering today. I am anxious to 

learn of any recommendations our witnesses may have on ways we can 

improve the legislation we will be discussing. 

Thank you, Mr. Chairman. 
56 

Statement of the Honorable Mike Doyle [PA-18] 

Hearing of the Subcommittee on Health 

of the Committee on Veterans' Affairs 

to consider legislation affecting veterans' health care 

May 8,1997 

I would like to thank our Subcommittee Chairman, Mr. Stearns, and Ranking Member, 

Mr. Gutierrez, for holding this hearing on these important measures affecting veterans 

health care. This is a critical time for health care provided by the Department of 

Veterans Affairs (DVA), as service networks across the nation are making significant 

changes in the way they provide medical services to our veterans. These changes are 

especially important in the Pittsburgh area, which includes 3 DV A medical facilities 

and one of the largest population of veterans in the nation. 

I would specifically like to address the bipartisan Medicare subvention legislation we 

are considering today, which I am pleased to have cosponsored. This legislation, H.R. 

1362, establishes a demonstration project under which the DV A would be reimbursed 

by Medicare for the services it provides to some Medicare-eligible veterans. 

Enactment of this measure would allow more veterans the option of receiving medical 

care in DV A facilities. Many veterans, because of funding shortfalls and low priority 

status, are currently excluded from acquiring this care within the DV A. 

This Medicare subvention legislation, as well as the Medical Care Cost Recovery 

(MCCR) proposal being discussed this morning, have the potential of allowing DV A to 

tap into non-appropriated revenue sources. While I continue to have concerns about the 

feasibility of meeting the goals included in the Administration's "30-20-10" plan for 

DV A health care, which includes both of these initiatives, I do believe that the DV A 

should be allowed to look past appropriated dollars to ensure its ability to provide 

sufficient health care to our nation's veterans into the next century. 
57 

Statement of Representative Helen Chenoweth 

5/8/97 

Mr. Chairman, I have received hundreds of letters from retired military 

personnel over age 65 who feel deeply betrayed by the VA and by their 

country because they are having difficulty accessing health care. Many 

veterans, who fought bravely for this country, have been turned away from 

Mountain Home Air Force Base -- where they had received care for many 

years -- just because they became eligible for Medicare. To make matters 

worse, finding a physician, in a sparsely populated rural area, who is willing 

to take on new Medicare patients has proved extremely difficult. With 

additional reductions in Medicare reimbursements for doctors on the 

horizon, I fear that this problem will only grow worse. 

I think we are all here today because we believe this is an 

unconscionable state of affairs, and that Medicare subvention may offer a 

viable solution. As a cosponsor of H.R. 1362, I am delighted to have this 

opportunity to hear Mr. Van de Water, Ms. Buto, Mr. Vitikacs, and all of the 

panelists who are here to share their observations. I look forward to working 

with each of you to devise a demonstration that meets the needs of 

Medicare-eligible veterans without adding to the deficit or burdening the 

Medicare trust fund. 
58 

STATEMENT OF THE HONORABLE LANE EVANS 

RANKING DEMOCRATIC MEMBER 

COMMITTEE ON VETERANS AFFAIRS 

OPENING STATEMENT 

MAY 8, 1997 

THANK YOU, MR. CHAIRMAN, WE ARE HERE TODAY TO DISCUSS 

AN ISSUE THAT IS CRITICAL TO VA'S FUTURE: ALLOWING VA TO 

COLLECT AND KEEP PAYMENTS FROM THIRD-PARTIES AND 

VETERANS' COST SHARING FOR SERVICES PROVIDED TO 

VETERANS, THE CLINTON ADMINISTRATION AND VA HAVE 

REQUESTED THIS OPPORTUNITY TO TREAT NEW VETERAN 

PATIENTS AND TO PROVE THAT VA CAN BECOME A "PROVIDER OF 

CHOICE" FOR VETERANS WITH THE MEANS TO OBTAIN THEIR 

HEALTH CARE ELSEWHERE, THIS INITIATIVE HAS ALSO BEEN 

IDENTIFIED AS PART OF VA'S LONG-TERM STRATEGY, THE "30-20-

10" PLAN, CONTAINED IN ITS BUDGET SUBMISSION FOR FY 1998, 

IN PARTICULAR, THIS COMMITTEE HAS WORKED HARD TO 

IDENTIFY A PLAN TO ALLOW VA TO COLLECT AND RETAIN 

MEDICARE FUNDING. WE BELIEVE WE HAVE WRITTEN A BILL THAT 

WORKS TO EVERYONE'S ADVANTAGE -MEDICARE'S, VA'S AND 

VETERANS'-AND WE HAVE CONFIDENCE THAT H.R. 1362 WILL DO 

SO. THE GREAT SUPPORT CHAIRMAN STUMP AND I HAVE 

RECEIVED ON THIS BILL FROM OUR COLLEAGUES ON THE 
59 

VETERANS AFFAIRS COMMITTEE INDICATES THE PRIORITY WE 

GIVE ENACTMENT OF THE "VETERANS MEDICARE 

REIMBURSEMENT DEMONSTRATION ACT OF 1997". THROUGH THIS 

BILL, WE HAVE RESPONDED TO THE VETERANS AND THEIR 

SERVICE ORGANIZATIONS WHO SAID THEY WANTED THE CHOICE 

OF USING THEIR MEDICARE BENEFITS IN VA. 

MOST OF YOU, WHO SUPPORT THE IDEA OF MEDICARE 

SUBVENTION, KNOW IT WILL ENCOUNTER SKEPTICISM IF NOT 

OPPOSITION. IT:S NOW OUR DUTY TO LET OUR COUNTERPARTS 

ON THE WAYS AND MEANS COMMITTEE, WHO HAVE PRIMARY 

JURISDICTION OVER THE BILL, KNOW WE WANT THIS LEGISLATION 

ENACTED. 

WE BELIEVE THAT OUR BILL CREATES OPPORTUNITIES FOR 

EVERYONE INVOLVED TO BENEFIT. THE MEDICARE TRUST FUNDS 

HAVE A CHANCE TO SAVE MONEY BECAUSE VA WILL RECEIVE 

LESS OF THE REIMBURSEMENT FROM MEDICARE FOR THE NEW 

MEDICARE-ELIGIBLE VETERANS IT WILL TREAT THAN THEY WOULD 

PAY TO OTHER PROVIDERS. SPECIFICALLY, MEDICARE WOULD 

RECEIVE A MANDATORY 5-PERCENT DISCOUNT ON ITS 

REIMBURSEMENT FOR SERVICES PROVIDED TO ELIGIBLE 

VETERANS IN VA. FOR THIS REASON, IT IS OUR STRONG VIEW 

THA T THIS BILL WILL PRODUCE SA VINGS FOR THE MEDICARE 

TRUST FUNDS. VA WILL BENEFIT BY OPENING ITS DOORS TO CARE 
60 

FOR NEW VETERANS. MOST IMPORTANTLY, VETERANS WILL 

BENEFIT BY HAVING A NEW CHOICE OF HEALTH CARE PROVIDER. 

TODAY THIS SUBCOMMITTEE WILL ALSO DISCUSS DRAFT 

LEGISLATION BASED ON VA'S PROPOSAL FOR RETAINING THIRDPARTY REIMBURSEMENT. WE UNDERSTAND THAT THE BUDGET 

AGREEMENT ANNOUNCED LAST FRIDAY WILL ALLOW VA TO 

RETAIN ITS USER FEES. WE LOOK FORWARD TO WORKING WITH 

THE BUDGET COMMITTEE TO ENSURE THAT VA MEDICAL CARE IS 

FUNDED ADEQUATELY. I WANT TO MAKE IT CLEAR THAT I DO NOT 

VIEW THIS BILL AS A MEANS OF LETTING CONGRESS OFF THE 

HOOK FOR FUNDING VA PROPERLY AND WE, ON THIS COMMITTEE, 

MUST NOT ALLOW OUR PEERS TO PERCEIVE ANY PROPOSAL TO 

RETAIN PAYMENTS FROM VETERANS AND VETERANS HEALTH 

INSURERS THAT WAY. VETERANS HAVE EARNED THEIR HEALTH 

CARE FROM VA THROUGH SERVICE TO THEIR COUNTRY. WE 

ULTIMATELY HAVE THE RESPONSIBILITY TO MAKE SURE THAT VA'S 

RESOURCES ARE ADEQUATE TO MEET VETERANS' NEEDS. WE 

ALSO HAVE A DUTY TO VETERANS TO ENSURE THAT, BECAUSE VA 

WILL NOW HAVE A FINANCIAL INCENTIVE TO TREAT VETERANS 

WITH OTHER PAYMENT SOURCES, THAT THOSE WITH MEDICARE 

OR PRIVATE HEALTH INSURANCE DO NOT TAKE PRECEDENCE 

OVER THOSE VA HAS ALWAYS TREATEn 
61 

FINALLY, A DRAFT BILL TO ALLOW VA TO WAIVE SOME PHYSICIANS 

AND DENTISTS' REQUIREMENTS FOR RETIRING WITH THEIR 

SPECIAL PAY WILL BE DISCUSSED. WE WANT TO ENSURE THAT VA 

HAS THE FLEXIBILITY TO RESTRUCTURE ITS WORKFORCE IN THE 

MOST CONSTRUCTIVE WAY POSSIBLE. ENCOURAGING 

VOLUNTARY RETIREMENTS IS ONE WAY OF DOING THIS, BUT IT 

MUST BE DONE IN SUCH A WAY THAT THE DOCTORS WE STILL 

NEED ARE NOT ENCOURAGED TO LEAVE. 

I AM LOOKING FORWARD TO TODAY'S TESTIMONY AND THE 

COMMENTS AND OPINIONS TO BE GIVEN TO OUR COMMITTEE. 

THANK YOU. 

41-469 97 - 3 
62 

Statement of 

Paul N. Van de Water 

Assistant Director 

for 

Budget Analysis 

Congressional Budget Office 

on 

Medicare Subvention and 

Other Pending Legislation 

before the 

Subcommittee on Health 

Committee on Veterans' Affairs 

U.S. House of Representatives 

May 8,1997 
63 

Mr. Chainnan and Members of the Committee, I am pleased to represent the 

Congressional Budget Office (CBO) at this morning's hearing. My testimony 

will explain CBO's assessment of the budgetary effects of two pieces of 

pending legislation. The first proposal is H.R. 1362, a bill to provide Medicare 

reimbursement for services furnished to targeted veterans who are eligible for 

Medicare-a proposal commonly termed Medicare subvention. The second 

is draft legislation that would allow the Department of Veterans Affairs (VA) 

to spend amounts it collects from designated third-party payments and user 

fees. From a budgetary point of view, the two proposals share several features 

in common. 

First, both proposals would allow some VA medical care to be financed 

through direct, or mandatory, spending rather than by annual appropriations. 

In the case ofH.R. 1362, VA would be given authority to spend the amounts 

it received from Medicare. In the case of the other proposal, VA would be 

allowed to spend the amounts it received from certain nongovernmental 

sources. 

Second, the additional mandatory resources provided to the V A health 

care system could either supplement or supplant discretionary spending, with 

the outcome depending on the results of future appropriation action. The 

receipts from Medicare subvention are intended to finance the care of veterans 

who would otherwise not have access to VA facilities, but that result cannot 

be assured. 

Third, even if additional mandatory spending allows for lower 

discretionary appropriations, the current budget enforcement rules do not allow 

a reduction in one category of spending to offset an increase in the other. 
Mandatory spending is governed by pay-as-you-go procedures, which require 

increases in mandatory spending to be paid for by reductions in other 

mandatory programs or by increases in receipts. Discretionary spending is 

limited by statutory caps on budget authority and outlays. 

MEDICARE SUBVENTION 

H.R. 1362 would establish a demonstration project in which Medicare would 

reimburse VA for the care that VA provides to certain veterans who are also 

eligible for Medicare. The demonstration project would have the following 

characteristics: 

o The project would be conducted during the 1998-2000 period in up to 

three geographic service areas where there would be a high dernand for 

the program; 

o Medicare would reimburse VA at 95 percent of the rate paid to private 

providers for care given to certain veterans. Those veterans would have 

to be eligible for Medicare, participate in Medicare Part B, have no 

service-connected disability, and have an annual income of between 

one and three times the threshold for veterans medical care. Such 

veterans receive care from VA if resources are available and if the 

veteran pays a share of the costs. 

o VA would be responsible for maintaining a basic level of effort in order 

to be eligible for reimbursement by Medicare. The required level of 

2 
65 

effort would be based on VA's estimate of how much it spent for 

eligible veterans in 1997. That amount would then be adjusted for 

increases or decreases in appropriations for medical care, any shortfall 

between the rates of growth in the appropriation and the cost of medical 

care, and reductions in the priority of eligible veterans stemming from 

recent legislation; 

o VA and the Department of Health and Human Services (HHS), in 

consultation with the General Accounting Office, would monitor 

Medicare's expenditures in an attempt to ensure that it spent no more 

than it would have without the demonstration; and 

o Medicare's payments under the demonstration would be limited to 

$50 million a year. 

One of the legislative goals is that the demonstration project not 

increase either VA's or Medicare's costs. In theory, VA would continue to pay 

For the care that it would provide under current law to beneficiaries eligible for 

~edicare, and Medicare would continue to pay for people currently receiving 

:are in the private sector. Medicare's costs would experience no net change 

>ecause lower payments to private-sector providers would offset payments to 

" A. VA's net costs would remain the same because the receipts from 

vtedicare would be matched by higher outlays for the care it would provide to 

:xtra patients. 

Assuring budget neutrality for Medicare would be difficult to achieve 

11 practice, however, for three reasons. First, although V A provides some 
66 

services (for examples, drugs and long-term care) that are not covered by 

Medicare, the bill nevertheless includes those services in calculating VA's 

effort. Second, even if that oversight were corrected, VA could understate the 

amount of its current workload that is attributable to targeted veterans. Third, 

adjustments to the required level of effort could allow further shifting of costs 

from VA to Medicare in later years. 

Under the bill, the required maintenance-of-effort level is based on the 

total amount of VA medical expenditures for targeted veterans in 1997. 

However, Medicare does not cover all medical services that VA provides. If 

VA increased its noncovered services and decreased its provision of covered 

services by the same amount, it would shift costs to Medicare without reducing 

its level of effort. 

But again, even if that problem was corrected, VA could still shift costs 

to Medicare by underestimating the level of care that it has been providing. 

Data for 1997 are not yet available, but VA informally estimates that in 1996 

it saw fewer than 35,000 targeted veterans who were eligible for Medicare and 

provided about one-third of the total health care services that those veterans 

received. If those figures were correct, assuring budget neutrality would 

require that the maintenance-of-effort level equal about 22 percent of the 

Medicare-covered services provided to those veterans. CBO's analysis of data 

from the 1992 Survey of Veterans and the 1997 Patient Treatment Files 

indicates, however, that VA provides about 52 percent of covered services for 

targeted veterans who are eligible for Medicare. 
67 

The provisions for adjusting VA's maintenance-of-effort amount could 

also lead to higher spending for Medicare. According to CBO estimates, the 

services VA provides to targeted veterans would not fall in proportion to any 

drop in appropriations as specified in the bill. CBO also expects that the 

services provided to targeted veterans would decline less than VA would 

estimate as a result of changes in their priority for services. Those adjustments 

enable V A to reduce its required level of effort for targeted veterans and 

thereby increase its payments from Medicare. 

As Table I shows, the likely outcome would be higher Medicare costs. 

Knowing how many Medicare beneficiaries will receive care from VA is 

difficult enough to determine in the short term. But that uncertainty only 

grows over time as populations change and the availability of discretionary 

funding for VA's health care programs varies. VA and HHS also face different 

incentives and access to information. 

s 
68 

TABLE 1. MONETARY FLOWS UNDER MEDICARE SUBVENTION 

Medicare (Health Care 

Financing Administration) 

Payments to V A under subvention 

Legislative Goal 

Less: forgone payments to private providers 

care 

Equals: no net change in Medicare costs 

Likely Outcome 

Payments to VA under subvention 

Plus: unintended payments to VA 

because of: 

o Uncertainty of VA's workload 

under current law 

o Asymmetric infonnation and 

incentives 

Less: forgone payments to private providers 

Equals: net increase in Medicare spending 

SOURCE: CongmsionaI Budact 0fIIa:. 

NOTE: VA-~ofV_Affain. 

Department of 

Veterans Affairs 

Receipts from Medicare 

Less: outlays for incremental medical 

Equals: no net change in VA's spending 

Receipts from Medicare 

Less: outlays for incremental medical 

care 

Less: outlays for other purposes 

Equals: no net change in V A's 

spending 

As a result, VA would have an advantage in the negotiations with 

HHS over the base level of care that would work against budget neutrality. 

Because annual discretionary appropriations currently limit V A's health care 

funding, the department would have to eliminate personnel or otherwise 

reduce its program in the face of losses from an inaccurate base level 

(alternatively, it could expand its programs ifit can shift costs to Medicare). 

However, HHS pays Medicare costs from a permanent and indefinite 

appropriation that is very large and would not readily reveal a loss stemming 

from a demonstration program such as this one. It would not be easy for the 

General Accounting Office or any other auditing agency to determine the 

6 
69 

financial outcome of the demonstration: it, too, would have to rely on 

estimates and assumptions about events and behavior that would have been 

different under current law. 

As introduced, the bill would probably raise Medicare's costs by 

$50 million or more. Because VA could count services that are not covered 

by Medicare toward its maintenance-of-effort, the costs could exceed the cap 

set in the bill for Medicare's expenditures. Under that scenario, VA's 

expenditures to care for targeted veterans may equal the maintenance of effort, 

but Medicare would not cover that care. Medicare would pay to private 

providers or V A the costs for covered services that are provided and funded 

through VA under current law. If the bill's language was modified to focus the 

maintenance-of-effort requirements on services covered by Medicare, the bill 

would cost roughly half as much. 

SPENDING FROM FEES AND COLLECTIONS 

The Committee also asked CBO to address the budgetary impact oflegislation 

to give VA the authority to spend amounts that it collects from third parties 

and user fees. Under current law, VA's net collections are estimated to total 

$485 million in 1998, but only about $300 million a year after that because the 

collections authorized by the Omnibus Budget Reconciliation Act of 1993 will 

expire. 

Through 1998, VA will collect per diem payments for hospital stays 

and copayments for outpatient visits and prescription drugs, but it has DO 

7 
70 

authority to spend those funds. After 1998, VA will continue to collect about 

$400 million a year from third parties, and it will spend about $100 million a 

year from those receipts to cover the related costs of administration. Thus, the 

costs ofiegislation giving VA the authority to spend whatever it collects would 

be $485 million in 1998 and about $300 million a year after that. 

CONCLUSION 

Both proposals would increase mandatory spending and would be subject to 

the pay-as-you-go procedures established in the Budget Enforcement Act. 

Those increases in mandatory spending would allow discretionary 

authorizations to decline by the same amount. Whether discretionary savings 

would actually occur, however, would depend on annual appropriation actions. 
T1 

S'l'A'1'BNBII'l' 01' 

KBlOIBTB If. lUZD, M.D., M.P.B. 

UNDER SECRETARY FOR BBALTB 

DEPAR'l'MBNT OF VETERANS AI'FAl:RS 

ON DIVERSIFYING I'UNDING SOUIlCBS !!'OR 

VETERANS' BBALTB CARE 

BBroU THE SUBCOMMITTEE ON BBALTB 

CoteaTTEE ON VETERANS APTAIRS 

BOUSB OF UPIU!lSENTATIVBS 

MAY 8, 1997 

Mr. Chairman and Members of the Subcommittee: 

I appreciate the Subcommittee's consideration of 

the legislative proposals before it today. 

It is very important that Congress enact legislation 

authorizing a Medicare reimbursement demonstration and 

retention of MCCR collections. As you know, the President's 

proposed 1998 budget would permit VA to serve more veterans 

over the next five fiscal years; however, achievi,ng that 

objective is contingent upon the legislative changes before 

you today. The President's budy~t also includes the goals 

of reducing per patient cost by 30 percent, increasing 

patients treated by 20 percent, and obtaining 10 percent of 

our health-care budget from nonappropriated sources by 2002. 

To accomplish this, we must be able to retain all insurance 

payments, patient copayments, and other third-party 

reimbursements, and to obtain Medicare reimbursements. Over 

the next five years, we believe we can cut costs, treat more 

veterans, and become less dependent on appropriated funds. 

Enactment of authority for us to retain MCCR collections and 
72 

obtain Medicare reimbursement is requisite to meeting these 

goals. 

COMMENTS ON SPECIFIC PROPOSALS 

1. R.visinq Authoriti •• for Us. of VA Medical Car. Receipts 

We generally support this draft bill, which we are 

pleased to note is similar to the Administration's proposal 

to allow VA to retain our medical care collections to help 

fund the provision of quality health care to eligible 

veterans. 

Both the Subcommittee's draft, and the Administration's 

proposal, would replace VA's current Medical Care Cost 

Recovery (MCCR) Fund with a new special receipt account in 

the Treasury. 

As you know, under current law, VA's third party 

recoveries and prescription copayment receipts are deposited 

in the MCCR Fund and are available to VA only for the 

necessary expenses of identification, billing, and 

collection of VA health-care charges. In January of each 

year, the unobligated balance remaining in the Fund from the 

preceding fiscal year is deposited into the Treasury as 

miscellaneous receipts. 

Under both the Administration's and Subcommittee's 

proposals, VA would deposit in the new special receipt 

account all copayments, deductibles, and third-party 

collections and recoveries under chapter 17 of title 38, 

United States Code, as well as recoveries under the Federal 

Medical Care Recovery Act (42 U.S.C. 2651 et seq . ) for VA 
73 

furnished medical care and services. Those receipts would 

be specifically earmarked for VA's use in providing medical 

care and services under chapter 17 and for reimbursing VA 

for the costs of identifying, billing, auditing, and 

collecting amounts owed for VA care and services provided. 

The two proposals do differ, however, as to the process 

by which amounts from the new fund will be made available to 

the Department. The Administration's proposal would make 

availability subject to an annual appropriation. Thus, 

following enactment of our proposal, VA would request that 

its Medical Care appropriation include language to 

appropriate "such sums" ·as VA collects for medical care, and 

to provide that receipt amounts remain "available until 

expended." 

Availability of fund receipts under the Subcommittee's 

proposal would be independent of the appropriation process. 

Nevertheless, funds would be available during any fiscal 

year only for the same purposes and under the same 

conditions "as apply to amounts appropriated that fiscal 

year for medical care." 

We would prefer the Administration bill's approach in 

this regard, and we reiterate our desire that (1) amounts 

deposited in the new fund would be available without fiscal 

year limitation, and (2) those receipt amounts could be 

.transferred between the new fund and VA component accounts. 

This would give us the flexibility we need to make the most 

effective use of these funds. 

We also note that the Subcommittee's draft contains a 

provision, not found in the Administration's proposal, that 
74 

would amend VA's third-party collection authority to base 

the liability of those parties on "reasonable charges," in 

lieu of the current "reasonable cost" of VA's provision of 

medical care and services. We favor this provision. It 

would provide VA needed flexibility, meshes well with our 

sharing authority initiatives, and is consistent with VA's 

objective of putting our health-care operations on a more 

businesslike basis. 

2. B.R. 1362, Medicare Reimburs_ent 

As you know, the Department has been working with HHS 

and OMB for almost two years to design a pilot project for 

Medicare reimbursement. With the strong support of the 

President, we transmitted to Congress, in October 1996 and 

February 1997, a draft bill acceptable to both VA and HHS. 

The draft bill contemplates negotiation of an agreement 

between the Secretaries of VA and HHS prior to initiation of 

the project. Since February, a working group of VA and HHS 

officials has been negotiating a Memorandum of Agreement 

specifically detailing how this project will operate. 

Although the current draft of the agreement has not 

been formally concurred with by both parties, the working 

group has reached agreement in principle on all major issues 

and is currently working on technical details. The working 

group has also been negotiating the site selection process. 

Once the selection process is agreed upon, the sites will be 

identified and specified in the agreement. We are confident 

that we will have the site selection process and the details 

of the agreement completed very soon. 
75 

We have carefully reviewed H.R. 1362, the draft bill 

which the subcommittee is considering today. We Support its 

enactment with some changes. We look forward to working 

with you and the other appropriate committees of Congress to 

enact a measure to permit category C veterans to use their 

Medicare benefits at VA facilities. 

We strongly believe that VA must be permitted to test 

the feasibility of obtaining Medicare reimbursement on both 

a fee-for-service and capitated basis. H.R . . 1362 would 

limit the demonstration to fee-for-service reimbursements 

and delay consideration of the implementation of a 

capitation model. VA is moving quickly to provide care to 

veterans on a managed care basis, and the recently 

implemented Veterans Equitable Resource Allocation (VERA) 

methodology is predicated on a capitation model. We expect 

to be ready to implement a managed care demonstration 

project for Medicare reimbursement by January 1, 1998. 

Thus, we strongly urge that the legislation be revised to 

authorize us to test both models from the outset. 

The Administration is concerned that H.R. 1362's 

"maintenance of effort" or "level of effort" provisions may 

not adequately protec t the Medicare trust fund from 

incurring new costs. Maintenance of effort refers to a sum 

of money which represents the appropriations that VA 

currently receives to ·care for category C veterans who would 

also be eligible to participate in the project. To avoid 

shifting the burden onto Medicare of caring for these 

veterans f o r whom VA already has received medical care 

appropriations, the maintenance of effort must be subtracted 

from the Medicare payments to VA under this project. The 

maintenance of effort provisions of H.R. 1362 would have 
76 

this sum computed each year to account for changes occurring 

in VA as a result of eligibility reform and implementation 

of the VERA methodology. This is inconsistent with the 

Administration's proposal which would not adjust the 

maintenance of effort to account for changes resulting from 

eligibility reform or other changes in the VA system, other 

than changes in the budget. H.R. 1362 would reduce the 

maintenance of effort if medical care appropriations 

increase less than the medical care inflation rate and if VA 

cares for fewer category C veterans due to changed resource 

allocations or eligibility reform. While these provisions 

would provide us with greater flexibility, they also may 

pose a greater risk to the Medicare trust fund. For the 

purposes of the demonstration, we prefer the level of effort 

mechanism provided in the Administration bill. 

We also urge that the demonstration be opened to all 

Medicare-eligible category C veterans residing within the 

pilot sites' catchment areas. As you know, category C 

veterans have no compensable service-connected disability, 

have income and assets above the specified income threshold, 

and currently have the lowest statutory priority for VA 

care. As a result, many of them are not able to obtain VA 

care. H.R. 1362 would permit these veterans to participate 

in this project only if their income is below a threshold of 

three times the "means test threshold." Single veterans 

with incomes over $64,830, and married veterans with incomes 

over $77,805, would not be allowed to participate. This 

provision runs counter to equity and our goal of increasing 

access to care for both category A and category C veterans. 

We recommend revising H.R. 1362 to permit all Medicareeligible category C veterans to participate in the project. 
77 

One of the strong points of H.R. 1362 is that it 

provides VA with authority to care for certain Medicareeligible category C veterans who might not otherwise be able 

to receive care under chapter 17 of title 38, United States 

Code. Let me point out, however, that the category C 

veterans treated at our Medicare pilot sites would not 

displace any higher priority veterans. Rather, they would 

permit us to make optimal use of our physical assets and 

other resources and could make it possible for us to treat 

more category A veterans. 

Another change we consider necessary in H.R. 1362, is 

to delete the requirement that veterans' participation in 

the project be voluntary. That could mean that we might not 

have any participating veterans. The copayments which VA 

r~gularly charges category C veterans are much lower than 

those which VA would charge under the Medicare project. If 

we must give these veterans who seek care at a participating 

site a choice between receiving their care under the 

Medicare project and outside that project, many will likely 

choose to receive care outside the project. That is why the 

Administration's proposal requires all Medicare-eligible 

category C veterans to obtain care under the Medicare 

program at the participating sites. 

H.R. 1362 would permit VA to conduct the demonstration 

project at sites within three ~geographic service areas.- A 

geographic service area could equate to a VA network. The 

number of facilities participating, thus, could be more than 

the number permitted by the Administration-proposed bill. 

In addition, H.R. 1362 would require that Medicare 

reimbursements be deposited into the Medical Care 

appropriation while the Administration draft bill would 
78 

require that they be deposited in a revolving fund specially 

established for this project. 

We recommend that you delete the requirement that at 

least one participating VA facility be in the same catchment 

area as a closed military medical facility. We are very 

willing to c onsider this criterion but believe it should be 

a site selection factor instead of a statutory requirement. 

Any legislation on this issue should include a 

provisio n to extend the demonstration for up to two 

additional years by the mutual agreement of the Secretaries 

of VA and HHS. The Administration's bill provides such 

authority. Veterans participating in the pilot project 

should not be faced with the termination of their VA care 

while Congress and the Administration deliberate whether to 

end, continue, or expand the project 

We anticipate that a demonstration project which 

permits category C veterans to use their Medicare 

eligibility at VA facilities would enable us to provide care 

to more veterans, both category A and category C. We also 

believe it would stimulate the VA health-care system to be 

more efficient. We a lso believe such a demonstration 

project would save money f or the Medi c are trust funds. We 

thus support enactment of H.R. 1362 contingent upon the 

changes I have discussed. 

3. ELIMl:NATl:ON OF SPECl:AL SERVXCZ REQUl:REMBNTS FOR ALLOWl:NG 

PHYSICIAN AND DENTl:ST SPECl:AL PAY TO BE CREDl:TED FOR 

RETl:REMENT PURPOSES 

The Subcommittee is also considering a bill that would 
79 

eliminate the statutory financial penalties to VA physicians 

and dentists who would retire before December 31, 1999--

i.e., they would retire if it were not for those penalties. 

Currently, physicians and dentists must complete 15 years of 

service in VHA for special pay to count toward retirement, 

and they must complete 8 years of service in VHA for special 

pay received since 1991 to count fully toward retirement. 

Current law provides for 25 percent of the increase in 

special pay authorized by Public Law 102-40 to be counted 

for retirement computations for every two years of VHA 

service since 1991. 

The proposed bill also affects the Office of Personnel 

Management and thus is currently being reviewed within the 

Executive branch. Upon conclusion of this review, the 

Administration's position will be transmitted to the 

Subcommittee. 

Conclusion 

Mr. Chairman, thank you and the Subcommittee for the 

opportunity to present the Administration's views on these 

proposals. We look forward to working with you to resolve 

the concerns that we have raised. Enactment of legislation 

authorizing a Medicare reimbursement demonstration and 

retention of MCCR collections is important and will 

significantly aid VA's efforts to improve the veterans' 

healthcare system. 
80 

STATEMENT OF 

KATHLEEN A. BUTO 

ASSOCIATE ADMINISTRA TORF 

HEALTH CARE FINANCING 

orl 

"THE MEDICARE SUBVENTION DEMONSTRATION" 

TSEFORE 

THE HOUSE COMMITTEE ON VETERANS AFFAIRS 

SUBCOMMITTEE :)N HEALTH 

MAY81~7 
81 

Good morning, Mr. Chairman and members of the Subcommittee on Health, [ am pleased to 

appear before you to discuss the President's legislative proposal to demonstrate Medicare 

subvention involving our nation's veterans. This project will be conducted by the Health Care 

Financing Administration (HCFA) within the Department of Health and Human Services (DHHS) 

and the Department of Veterans' Affairs (VA). Under this demonstration, Medicare will pay for 

certain dual-eligible MedicareIV A beneficiaries in the V A system. In developing this program, 

we believe that we can test a project which will provide quality service to these dual-eligible 

beneficiaries and, at the same time, preserve and protect the Medicare Trust Fund for all 

Americans. 

President Clinton has indicated his strong support oi a demonstration which will provide needed 

information regarding the effects of the subvention. The term "subvention" refers to Medicare 

paying for care provided at federal facilities to Medicare beneficiaries. Currently, Medicare is 

precluded by statute from doing this. However, the proposed demonstration will provide HCF A 

. with the opportunity to assess the effects of coordination on improving efficiency, access, and 

quality of care for dual-eligible beneficiaries in a selected number of sites. 

HCF A has been working with the V A for the past two years to design a V AlMedicare subvention 

demonstration program. Under this demonstration, the Medicare program would reimburse the 

V A for health services provided at selected VA facilities to certain Medicare-eligible veterans. 

There would be both fee-for-service and managed care (HMO) model sites in the demonstration. 

Currently, there are approximately three million veterans over age 6S who meet Category C 

requirements. This category applies to veterans who have neither a service-connected disability 

nor sufficiently low-income status but are dually-eligible to receive health care through the 

Department of Veterans' Affairs and the Medicare program. Over the years, the VA and 

Medicare have separately provided access to care for these dual-eligible beneficiaries. It is our 

hope that a MedicareIV A subvention model could allow for increased access to quality care, with 

administrative efficiencies to both programs. 
82 

As HCF A arid the V A collaborated to design this demonstration, we at HCF A kept our eyes on 

two imperatives: we must protect beneficiaries and we must protect the Medicare Trust Fund. As 

you know, the Medicare trustees have just reponed that, absent legislation, Medicare's Hospital 

Insurance Trust Fund, which pays for hospital, skilled nursing facility, and hospice services. is 

scheduled to become insolvent in 200 I. The Administration has expressed its concern about the 

solvency of the Trust Fund, and has proposed measures to strengthen it each year since coming 

into office. The Administration is committed to a balanced budget, extending Medicare's 

solvency, and working to ensure that Medicare benefits are available for all beneficiaries. As we 

work on the design of this program, we are developing strategies to prevent further depletion of 

the Trust Fund. 

HCF A and the V A have agreed to incorporate a number of provisions in the demonstration design 

in order to assure that beneficiaries receive quality care, while protecting the two Federal 

programs from any unexpected cost impacts. In order to meet th;~ objective, we are currently 

working with the VA to achieve a Memorandum of :\greenJ~nt which will spell out the 

operational details of the demonstration. 

The Medicare Trust Funds will be protected against the risks of cost-shifting. First and foremost, 

V A will receive Medicare payments only after it surpasses its current level of effon, which refers 

to the dollar amount VA now spends rendering health care services to dual-eligible beneficiaries in 

V A facilities participating in the demonstration sites. This level of effort will be updated for each 

year of the demonstration. 

In the HMO sites, after the V A meets its level of effort in the area covered by the demonstration, 

Medicare will reimburse the VA on a capitated basis equal to a percentage of the Adjusted 

Average Per Capita Cost (AAPCC) applicable to the beneficiaries enrolled in the demonstration. 

The AAPCC is defined as the estimated amount that Medicare would have paid in a geographic 

area if HMO enrollees had received services in the fee-for-service sector. We have agreed to 

adjust the applicable AAPCC to exclude some of the costs associated with capital, indirect and 

direct graduate medical education (GME), and the disproportionate share hospitals (OSH). OSH 
83 

refers to additional Medicare payments to hospitals treating a disproportionately large share of 

low-income patients. These payments are believed to be outside the purview of the 

demonstration because these activities are already covered by VA's appropriations. After making 

these adjustments, the reimbursement rate will be set at 95 percent of what Medicare pays risk 

HMOs. At this time, this would be 90.25 percent of the AAPCc. 

In the fee-for-sen.;ce sites. Medicare would pay 95 percent of the current fee-for-service rates. 

after removing some of the costs associated with the four factors mentioned above. At the end of 

each year, the Department of Health and Human Sen.·ices (DHHS) and the VA will reconcile any 

payment discrepancies and correct for any mistaken overpayments. 

We have designed this demonstration so that there will not be an increase in the total costs of 

Medicare. If it is found that Medicare costs are more than costs would have been without the 

demonstration, the two departments have agreed to take any necessary corrective action. For 

example, the VA may reimburse HCFA; we may suspend or terminate the demonstration; or, we 

may adjust payment rates. These are some of the most significant steps that we have taken to 

limit the payment risk to the Medicare Trust Funds. To further insulate Medicare from cost 

growth due to the demonstration, a "cap" will be placed on the total Medicare reimbursement to 

V A for each demonstration year. We are working to develop a cap which accounts for estimated 

demand and facility capacity. Furthermore, the V A has agreed to open its facilities to audits by 

HCFA and the DHHS' Inspector General. 

This demonstration will protect, indeed expand, beneticiaries' freedom of choice --they can use 

their Medicare benefits to obtain care from the V A. or they can obtain care from civilian 

providers. Beneficiaries' quality of care will be protected because VA will adhere to Medicare's 

conditions of participation and quality standards, and provide the complete range of Medicare 

benefits in the HMO model. 
84 

Thus, we strongly believe that we have taken all possible steps to protect beneficiaries. the Trust 

Funds, and the V A from harm. Will we succeedry The answer will lie in the rigorous evaluation 

of this demonstration by an independent evaluator. Over the demonstration's three years, the 

independent evaluator will monitor performance and collect data to answer these crucial 

questions: 

o Is there an impact on the costs to either the Medicare Trust Funds or V A ry 

o Do beneficiaries experience improved access to health care? 

o Is there any change in quality of care provided to the demonstration population? 

o Is there any effect on local health care providers and other Medicare beneficiaries in the 

surrounding communityry 

At the end of three years, we will see how coordination between our two programs improves 

efficiency, access, and quality of care for dual-eligible beneficiaries. If Congress should decide on 

a GAO study of the demonstration, both VA and DHHS have agreed to jointly assist GAO with 

that review and report. In the meantime, we have put the necessary safeguards in place to protect 

beneficiaries and protect the Medicare Trust Funds, and the VA. 

Mr. Chairman, the bill which you have introduced, H.R. 1362, the "Veterans Medicare 

Reimbursement Demonstration Act of 1997," is very similar to the Administration's MedicareN A 

subvention bill submitted to Congress on February 7. 1997 While both bills would authorize a 

demonstration of Medicare!V A subvention with common goals. there are a number of significant 

differences. First, H.R. 1362 authorizes a fee-for-service model demonstration with three sites. 

The Administration proposes to conduct both a fee-for-service model (four sites) and a managed 

care model (four sites or one V A region). Second, I' . R. 13 ' 2 sets Medicare payments at 95 

percent of amounts paid to the private sector. The Administration bill sets the payment at 95 

percent of the private sector, after excluding some of the costs associated with direct and indirect 

graduate medical education, capital, and disproportionate share hospitals. Third, H.R. 1362 
85 

reduces the level of effort in future demonstration years to account for changes in the V A 

eligibility resulting from the Veterans' Health Care Eligibility Reform Act of 1996. The 

Administration bill does not include any adjustments to the level of effort based on eligibility 

reform. Lastly, your bill calls for a report on a managed care demonstration by March I, 1999. 

In keeping with our goal of moving toward managed care options for all Americans, the 

Administration has included a managed care option in the original demonstration. While 

differences exist between these two bills, we believe there are enough similarities, and mutual 

interests, to allow for an agreement that would benefit the dual eligible population. 

The President strongly supports this demonstration. We are hopeful that this demonstration will 

succeed, and that through it the beneficiaries we share in common with V A will receive enhanced 

choices and improved services -- the true "bottom line" in this effort. We look forward to 

working with the Subcommittee and other interested members of Congress as we seek to improve 

health care services available to our nation's veterans. 
86 

STATEMENT OF 

JOHN R. VlTIKACS, ASSISTANT DIRECTOR 

NATIONAL VETERANS AFFAIRS AND 

REHABILITATION COMMISSION 

THE AMERICAN LEGION 

BEFORE THE 

SUBCOMMITTEE ON HEALTH 

COMMITTEE ON VETERANS AFFAIRS 

UNITED STATES HOUSE OF REPRESENTATIVES 

MAY 8. 1997 

Mr. Chainnan and Members of the Subcommittee: 

The American Legion appreciates the opportunity to offer its views on legislation 

related to the Department of Veterans Affairs (VA) medical care system. The topics 

under consideration today are critical to the future well-being of the Veterans Health 

Administration (VHA). The American Legion thanks the leadership of the Veterans 

Affairs Committee for initiating the measures to generate new VHA revenue streams as a 

follow-on to Public Law 104-262. 

H.R. 1362, would establish a demonstration project to provide for Medicare 

reimbursement for health care services provided to certain Medicare-eligible veterans in 

selected facilities of the Department of Veterans Affairs. The proposal is named the 

"Veterans Medicare Reimbursement Demonstration Act of 1997." 

~ of the bill directs the Secretary of Veterans Affairs and the Secretary of 

Health and Human Services to jointly carry out a demonstration project under which the 

Secretary of Health and Human Services (HHS) provides VA with reimbursement from 

the Medicare program for health care services to targeted Medicare-eligible veterans in or 

through facilities of the VA. The Secretaries shall conduct the project during the threeyear period beginning January 1, 1998. To the extent necessary to carry out the 

demonstration project, HHS may waive any requirement of Part B of title XI of the Social 

Security Act, title XVIII of that Act, or a related provision oflaw. 

The Secretary of VA shall designate up to three geographic service areas from 

which facilities are selected to participate in the project. The selection plan shall favor 

those facilities that are suited to serve Medicare-eligible veterans. At least one facility 

selected must be in the same catchment area as a military medical facility which was closed 

pursuant to the Defense Base Closure and Realignment Act of 1990; or Title II of the 

Defense Authorization Amendments and Base Closure and Realignment Act. 

Participation of targeted Medicare-eligible veterans in the project shall be 

voluntary, subject to the capacity and funding limitations of participating facilities. The 

Secretary shall establish cost-sharing requirements for veterans participating in the 

demonstration project. Those requirements shall be the same as the requirements that 

apply to targeted Medicare-eligible patients at non-governmental facilities. 

Section 3 of the bill provides that the Secretary of HHS shall reimburse the 

Secretary of Veterans Affairs for services provided at a rate equal to 95 percent of the 

amounts that otherwise would be payable under the Medicare program on a non-capitated 

basis. In cases in which a payment amount may not otherwise be readily computed, the 

Secretaries shall establish rules for computing equivalent or comparable payment amounts. 

The amount paid to the Department of Veterans Affairs for any year for the demonstration 

project may not exceed S50 million. 

The bill requires the Secretaries, in consultation with the Comptroller General, to 

closely monitor the expenditures made under the Medicare program for targeted 

Medicare-eligible veterans compared to the expenditures that would have been made for 

such veterans during that period if the demonstration project had not been conducted. If 
87 

2 

the Secretaries find that the expenditures increased (or are expected to increase) during a 

fiscal year because of the project, the Secretaries sha1I take steps as may be needed: 

• to recoup for the Medicare program the amount of such increase in expenditures; and 

• to prevent any such increase in the future. 

~ of the bill requires the Secretaries to arrange for an independent entity 

with expertise in the evaluation of health services to conduct an ongoing evaluation of the 

demonstration project. The entity shall submit a report on the project jointly to the 

Secretaries and to the appropriate committees of the Congress not later than March 1 

following each year during which the project is conducted. 

Each report shall include an assessment of each of the following: 

• the cost to the Department of Veterans Affairs of providing care to veterans under the 

project. 

• compliance of participating facilities with applicable measures of quality of care, 

compared to such compliance for other Medicare-participating facilities. 

• a comparison of the costs of facilities participation in the program with the 

reimbursements provided for services of such faci1ities. 

• any savings or costs to the Medicare programs from the project. 

• any changes in access to care or quality of care for targeted Medicare-eligible veterans 

participating in the project. 

• any effect of the project on the access to care of veterans who did not participate in 

the project and of targeted Medicare-eligible veterans. 

For the purpose of this Act, Section 5 of the bill defines "Geographic Service 

Area" as a field component of the Veterans Health Administration; and "Targeted 

Medicare-Eligible Veteran" means an individual: 

• who is a veteran (as defined in section 101(2) of Title 38, United States Code) 

described in section 171O(a) (3) of Title 38, United States Code; 

• who is entitled to hospital insurance benefits under part A of the Medicare program 

and enrolled in the supplementary medical insurance program under part B of the 

Medicare program; and 

• whose annual income is an amount between the applicable income threshold under 

section 1722(b) of Title 38, United States Code, and the amount equal to three times 

the amount of such applicable income threshold. 

Mr. Chairman, The American Legion supports the concept of the Medicare 

subvention program. The Congress must test new ideas to provide creative solutions to 

VHA's funding predicament. H.R. 1362 is a legitimate and necessary effort to strengthen, 

support and sustain an essential national resource. 

Veterans deserve guaranteed access to a full continuum of health care services. In 

addition to the measures contained in H.R. 1362, there may be additional resourceful uses 

of Medicare subvention for many VHA programs and services. For example, if VHA 

manages a veteran's rehabilitation care in the community, why should VA provide for the 

total cost of that care? The Medicare subvention program should not be limited to acute 

hospital care but could include chronic and long-term community care programs. The 

American Legion also recommends conducting a trial VA-State Medicaid subvention 

program. Once a veteran qualifies for VHA care, whether acute or long-term care, all 

public and private payment options should be considered. 

Mr. Chairman, it is often cited that VA care is less expensive than comparable 

private sector care. If that is accurate, and the dual intention of the Medicare 

demonstration program is to provide a new revenue source for VHA and to help save the 

Medicare trust fund precious resources, The American Legion must respectfully ask how 

the 95 percent Medicare reimbursement rate was determined. Is it possible that further 

Medicare savings can be achieved, while providing VHA additional resources, at an even 

lower reimbursement rate? Taxpayers expect the best returns on their investments. 
88 

3 

The American Legion suggests incorporating both fee-for-service and a managed 

care model in the Medicare subvention program. It is important to measure patient 

satisfaction within each model and the relative cost savings. To not include a managed 

care model in the Medicare demonstration program denys the trends in health care today 

toward Medicare HMOs. 

The Medicare demonstration program is scheduled to last three years. After a 

sufficient period of data coUection and analysis, the results of the prospective 

demonstration program, if successful, should be implemented in all Veterans Integrated 

Service Networks. 

The American Legion recognizes that the Medicare demonstration program 

presents a large risk to the future maintenance of the Veterans Health Administration. 

That is why it is appropriate to test various. revenue generating proposals. The American 

Legion recommends that the legislative initiative under consideration also include the 

veterans' health care enroUrnent concepts contained in The American Legion's GI Bill of 

Health on a limited pilot basis. The GI Bill of Health recognizes that the VA health care 

system can no longer totally rely on Federal appropriations to ensure its long-term 

survival. The GI Bill of Health, together with the Medicare subvention and the third-party 

reimbursement legislation, advances the goal of providing a continuum of health care 

services to all veterans, while allowing the VA system to coUect and retain payments for 

the service it renders. Concurrently, with the federal appropriations process, these 

proposals can have a tremendous impact in making the VHA system financially sound. 

With regard to the draft bill on the recovery of third-party receipts by the 

Department of Veterans Affairs, The American Legion believes the proposal will create a 

critical pool of additional non-appropriated revenues for VHA's medical care programs. 

However, it must be cautioned that the proposals to use third-party insurance receipts and 

the Medicare subvention bill represent a significant departure from past funding practices. 

The American Legion does not support the President's budget request for VA 

medical care for the period FY 1998-2002. The American Legion is concerned about the 

uncertainty of whether VHA will attract sufficient new revenues to offset a no real growth 

budget. The Veterans Health Administration must develop an open enrollment program, 

offer defined health benefit packages to all enroUees, and offer a VA Health Plan to all 

discretionary care veterans on a premium basis. 

The American Legion appreciates the efforts of the Subcommittee to address 

continuing VA health care funding concerns. The GI Bill of Health offers new solutions 

to old problems and provides a comprehensive framework for the future of the VA health 

care system. That is why The American Legion supports H.R. 335 -- a Commission on 

the Future for America's Veterans. H.R. 335 authorizes an advisory board of experts and 

stakeholders to review various proposals for the future of VHA and to develop a 

comprehensive pilot program to test and evaluate new solutions to VHA's constant 

funding concerns. 

Both the Medicare subvention program and the third-party insurance proposal 

represent significant new thinking with regard to VHA's future. It is uncertain that these 

proposals alone will provide access to all veterans who wish to receive health care through 

the Department of Veterans Affairs or provide sufficient new revenues to compensate for 

medical care inflation, employee pay increases, and other uncontroUable cost increases. 

The American Legion invites the Subcommittee to meet the challenge of reinventing the 

VA health care system by incorporating the innovative concepts contained in the GI Bill of 

Health, along with the legislative proposals before the Subcommittee; and to consider the 

utility of authorizing a Commission on the Future for America's Veterans, as outlined in 

H.R.335. 

A recent study mandated by Public Law 103-445, Section 1104, entitled 

Feasibility Study: Transforming the Veterans Health Administration into a 

Government Corporation arrived at many of the same conclusions and offered similar 
89 

4 

recommendations as does The American Legion's GI Bill of Health. This study was 

conducted by a non-federal entity with no formal input by The American Legion. 

The next draft bill under consideration would amend title 38, United States Code, 

to provide that special pay paid to certain physicians and dentists of the Veterans Health 

Administration retiring before October 1, 1999, shall be considered to be basic pay for 

retirement purposes. 

Mr. Chairman, The American Legion appreciates the unique set of circumstances 

that have created the impetus for this bill. The VA physician and dentist special pay law 

created in 1991 did not anticipate the shift from a hospital-based to an ambulatory carebased system. In that regard, many VA physicians and dentists are delaying retirement to 

qualify for the applicable length-of-service requirements. This is placing unique pressures 

on managers to rely on reductions-in-force to right-size medical staffs. 

The American Legion has no objections to the bill. There is a possibility that the 

Subcommittee will need to review the applicability of extending the retirement date 

prescribed in the bill at a 1ater time. Additionally, other professional employees that have 

received simi1ar specia1 pay considerations should be extended the same courtesy as the 

VA physicians and dentists. 

Mr. Chairman, that concludes my statement. 
90 

NATIONAL ASSOCIATION fOR UNIfORMED SERVICES 

SOCIETY Of MILITARY WIDOWS 

H 15 HEMPSTEAD WAY 

SPRINGFIELD. VIRGINIA 22151·4094 

''TAr Mn"Kn..n.kr} y.,n.;" G ___ t" 

Est.NisW/9t18 

STATEMENT 

BEFORE TIlE 

SUBCOMMITTEE ON 

REALTII 

COMMITTEE ON VETERANS' AFFAIRS 

U.S. HOUSE OF REPRESENTATIVES 

BY 

COLONEL CHARLES C. PARTRIDGE, U.s. ARMY (RETIRED) 

NATIONAL ASSOCIATION FOR UNIFORMED SERVICES 

8 MAY 1m 

VA HEAL TIl CARE ALTERNATIVES 
91 

CUrriculum Vitae and Organizational Disclosure statements 

Charles C. Partridge 

Legislative Counsel 

Na t i onal Association for Uniformed Servi ces 

Colonel Partridge, US Army, Retired, has been the Legislative Counsel 

for NAUS since May 1984. 

Colonel Pa r tridge's military career spanned 31 years of enlisted and 

commissioned service in the reserve and active forces. He served in 

Vietnam, Germany, Korea and in several installations in the United 

States. Colonel Partridge served three tours in the Pentagon as a 

staff officer dealing in personnel matters. He also served as the 

Chief of Staff of the Army Intelligence and Security Command, 

Arlington, Virginia and as the Executive, Office of the Chief, 

Legislative Liaison, Secretary of the Army, the Pentagon. He is a 

graduate of the Army War College, the Army Command and General Staff 

College, and has a Masters in Public Administration from Pennsylvania 

State University . 

The National Association for Uniformed Services (NAUS) has not 

received a grant (and/or subgrant) or a contract (and/or subcontract) 

with the federal government for the past three fiscal years. 
92 

INTRODUcnON 

Mr. Chairman and distinguished members of the Committee. the National 

Association for Uniformed Services (NAUS) and the National Military and Veterans 

Alliance would like to express its appreciation to you for holding these important 

hearings. The testimony provided here represents the coUective views of our memben. 

The National Association for Uniformed Services (NAUS) was founded in 1968 to 

support legislation to uphold the security of the United States, sustain the morale of 

the Armed Forces, and provide fair and equitable consideration for all members of 

the uniformed services: active, reserve, National Guard, veteran, retired, and their 

spouses, widows and widowers. The Society of Military Widows (SMW) became 

affiliated with NAUS in 1984. Our nation-wide membership is now over 160,000. 

NAUS represents all grades, ranks, components, and branches of the uniformed 

services: Army, Navy, Marines, Air Force, Coast Guard, Public Health Service, and 

National Oceanic and Atmospheric Administration, their families and survivors. 

The National MilitaryNeterans Alliance represents over 3,500,000 

members of the seven uniformed services, officer and enlisted, active duty, reserve, 

Natioaal Guard, retired and other veterans pius their families and survivon. AIIiaDce 

members which support this statement are listed below: 

Air Force Sergeants Association 

American Military Retirees Association 

American Retirees Association 

Korean War Veterans Association 

Military Order of the Purple Heart 

National Assn for Uniformed Services 

Naval Enlisted Reserve Association 

Naval Reserve Association 

Non Commissioned Officers Assn 

Society of Medical Consultants 

to the Armed Forces 

Tragedy Assistance PI'OI for Survivors 
93 

Surveys of military personnel and their families consistently show that medical 

care is the top concern of the military community. This comes as no surprise and 

closely mirrors the concerns of Americans at large. As changes are proposed to the VA 

health care system, we ask that all changes be made to improve care, not purely for 

budgetary purposes. NAUS and the Alliance agree with the co-authors of the 

Independent Budget for Veterans Programs that no group is on the whole more 

deserving of assistance and medical care than those who have made personal sacrifices 

in our Nation's defense. 

BACKGROUND 

NAUS believes that the answer to providing quality medical care for veterans, 

including retired veterans, involves aU avenues of care, particularly the Veterans 

Administration's hospitals near where military beneficiaries reside. As the total eligible 

veteran population declines and as the VA shifts its focus from inpatient to outpatient 

care, military retirees and their families are a logical choice to increase patient loads 

and to bring additional funding with them from DoD and Medicare. At this point, we 

must say that we are unalterably opposed to directly billing military retirees for 

medical services rendered them. Honorable service over an extended period of time 

(20+ years) and a productive lifestyle should afford these distinguished veterans the 

opportunity to use VA and military medical facilities at no cost. This is an eamed, 

promised benefit - not welfare or charity. HR 1362 would complete a key part of the 

NAUSmilitary health care plan summarized at Exhibit A. 

Oa our recent visits across the United States to VA hospitals, NAUS staff 

members have fonnd an eagerness and an urgency on the part of the VA 

Administrators to start caring for military retirees and other vete..... Tbe VA does 
94 

not have the same conflict of interest in providing health care that DoD has since the 

VA's primary mission is to care for veterans. Retired military along with disabled 

veterans are the ultimate veterans who have earned a lifetime of medical care. 

Secretary of Veterans AfTairs, Jesse Brown, says the idea is to "expand the 

choices for many veterans, particularly some World War II (and Korean War) 

veterans who would like to come to the VA but are unable to get care because of budget 

constraints and strict eligibility criteria." Funding must accompany these words. H.R. 

1362 would provide funding for care in V A medical facilities of Medicare eligible 

veterans who are now disenfranchised. 

Medicare Reimbursement 

The Alliance supports Chairman Stump's bill, HR 1362, to establish a 

demonstration project to authorize Medicare reimbursement for heath care services 

provided to Medicare-eligible veterans in selected facilities of the Department of 

Veterans AfTairs. The Alliance also supports Representative Joel Hefley's bills, H.R. 

192 which would set up a three year Medicare reimbursement demonstration project at 

up to five military medical treatment facility sites and H.R. 414 which would implement 

fully Medicare reimbursement We understand that Senator Phil Gramm plans to 

introduce Medicare reimbursement legislation to DoD in the Senate soon. We would 

like to see fuU Medicare reimbursement legislation passed promptly for both VA and 

DoD. If that cannot be done we would support a demonstration project. However, the 

longer we delay fuU implementation the greater the injustice to military retirees and 

eligible veterans. 

We are gratified that there is a growing understanding that ofTeriDg 

discretionary veterans an opportunity to use Medicare to reimburse their VA care 
95 

creates additional access and can actually save Federal tax dollars. The Alliance 

believes Chis is a commonsense proposal and deserves immediate enactment. It is 

consistent with efforts to streamline and share Federal resources, it is politically 

feasible, and is an excellent way of identifying savings for the Medicare Trust Fund. 

Study after study bas shown that military and V A medical facilities provide significant 

savings over commercial medical providen which the vetenns would otherwise use. 

Some features which we recommend be incorponted into VA Medicare 

reimbursement include: 

• Demonstntion Phase. Authority to expand the test after each 6 month period 

should be incorponted into the bill. The Department of Vetenns Affain Statistical 

Brief, Projections of the US Vetenn Population: 1990 to 2010, states that an 

estimated 500,000 vetenns die in the United States each year. Deaths of U. S. 

World War II vetenns presently account for almost 3 of every 4 vetenn deaths and 

are projected to peak at 380,000 in 2001. A three year demonstntion, then a 

lengthy review, could result in a delay of up to five yean or more before a 

nationwide Medicare reimbursement prognm is in place. That is too late for these 

older vetenns. They need help now. As quickly as cost savings are determined, the 

prognm should be expanded. 

• Cost Sharing. We strongly recommend that cost sharing be waived for retired 

vetenns. These vetenns who served to retirement, many through 3 wan and the 45 

year Cold War, were promised free lifetime medical care in exchange for a lifetime 

of service (See Exhibit B). With the closure of over 58 military hospitals, downsized 

clinics, a chronically underfunded Defense Health Prognm, and cutbacks in 

personnel, hundreds of thousands of retired vetenns have been abandoned by their 

employer, the Department of Defense. These vetenns are the only fedenl retirees 
96 

who lose their guarantee of employer provided health care at age 65. Many of these 

veterans have purchased "Medigap" policies. The VA has the authority to bill these 

policies and we do not object to that. However, to require this category of veteran to 

cost-share is wrong and should not be done. If the retired veteran has a "Medigap" 

or other policy, continue the current practice of 3"' party coUections; but if he does 

not have a policy, then the only party billed should be Medicare, not the retired 

veteran. 

Third Pam Couections 

We strongly support a bill to revise the authorities relating to third party 

coUectioos. We support aUowing the DVA to keep the amounts coUected for services 

provided by DV A medical facilities. CoUections should be made at the level closest to 

the point of service for which the charge is made and the funds coUected, in general, 

should remain there. This would provide an incentive to the facilities to provide 

service, attract patients and to collect for their services. The free enterprise system has 

been proven to be the most efficient means of allocating goods and services, certainly 

far more efficient than top down command economics. Collecting funds at, or close to, 

the point of service and leaving most of them there to help fund these services, would 

energize local DV A medical facilities, reward efficiency and performance, provide 

incentives that mirror the best results of free enterprise and gready increase the 

efficiency of and patient satisfaction with the DV A hospital system and reduce 

administrative costs. The provisions in the draft bill to exclude these funds from any 

OMB estimates relative to required appropriations is absolutely essentiaL should be 

rigidlv enforced, and requires constant vigilance. 

Finally, the MilitaryNeterans Alliance thanks this committee for its support 

of Medicare reimbursement, for holding this hearing and its interest and concern 

for our service members, their families and survivors. 
97 

-------~-----.. ~-----

"D~ s..,.'s" Cllarac'lfl..ua. 01 DUD Pin lor ... IMII. Rill ... .,..l1li Core 

"The Sheep Pen" 

... --~--~~-~ ----------

The \.:urrcnt military medit:al prohlem i~ charat.:terizcd hy many retired sokliers (non-commissioned offi~cl-s (NCOs.)) as a "Sheep Pen" 

with milil~l"'Y retirees being kepi wOliting for rationed care as shown here. 

Some of the problems military ~nefKiaries encounter an: 

• Sp<k:1! available care only • medical budget & pt:rsonnel CUlS • reductions in prescription drugs available ·58 military hospitals closed ·26 

:"tatcs ha\'C no major MTF • Medicare eligibles t;annOl enroll in TRJCARE • Medicare has no pres.:ription drug coverage • DoD has no plan 

to care for all beneficiaries 10 TRICARE will Ci.lR: for only 50-60% • Medicare reimburscmenl wIll care for only about 113 

DI)D c{lnlfols CI'sls oy limiting the number tlf retirees who obtain DoD sponsored care through the TRICARE and MTF gates and 

Inadequate fundins. fur TRlCARE Standard (CHAMPU5). Most of the older. si(;ker Mcoic:arc eligible ~neticiaries arc pushed Ihrough 

the Medi;:arc ):!3t:: at tiO I,;l)~l hI I)( . .ID but at high cosl.;; to the benefK:iary. 

NAUS Health Care Plan 

NAU5 has proposed a health care 

plan thJ.t would allow DoD to provide 

health cltre tor all K5 million benetit.:iaric~ without ~t:cping military "'=nciiciaries in a "~hecp pen" waiting for 

rationed carc which is oudmcd herc. 

PrfnwY .....,..., Care PnwIders 

Military Treatment Facilities 

(MTF.) - Space available care provided to aU t:iigiblc bcndK:iariL"S. 

Medicare and ~"EHap would reimbur!lie MTf~ for (.'arc llf bcneficiancs 

~ for training. 

\., .I 

"",--- _~_ VA_ /./' 

____________ "...,..(RHIIP) ~~ 

~-.------.. -----.------------

TRICARE PrimelExnlSl8ndard . TRICARE Standard 

mUSl . be rc~torcd to its original Blue CR)Ss/Bluc Shit:ld High 

Option lc\d standard. Medicare eligibles ("ould participate in 

TRICARE Prime with Medicare reimbursement. 

SeconcIerv MedICI! en ProyIdm 

FednI ~ tt.IIh a..IIs PragIwn (FEHBP) 

0pII0n - FEHBP would he offered as an option for all ..,tired 

mililaty beneliciaries who «;annot be guaranteed nrc within 

MTFs and lRIC ARE networks. Un""r age 65 retirees would 

Uniformed Service!! Joumal. M"rch/ApriI1997 

he offered FEHBP or a high quality re'lOred lRlCARE 

Standard option. 

VA FIICIIIties - Military heneficiaries near VA hospitals could 

receive can: then: with reimbur.;cmc:nt by Medicare and other 

third J*1Y poyers including FEHBP. 

This plan would allow DoD 10 provide promised. guaranteed. 

accessible health care to all mi5tary beneficiaries whiie pr0viding the necessary palicnts to M1Fs for bolllerlCld n:adiness 

training. Any ad<iitional cost should not he Fal bee....., the 

cost would he offset by reslriL-ling individuals to one primary or 

secondary medical pnwider. Military retirees should be offorded (;ompar'.lbk health care with dvilian government retirees. 

EXltlSIT -\ 7 

i 
~ 

;; 

::::i 

co 

BENEFITS 

ARMY BENEFITS 

HEALTH CARE, HOUSING, SHOPPIN

AND SCHOOLING 

Superh Health Care. Health 

care is provided to you and your 

fami ly members while you are in 

the Army. and for the rest of 

your life if you serve a minimum 

of 20 ~ar' of acti ve Fcueral 

service to earn your retiremen!. 

.... - HO/lsillg, .\·hopping. SdlOOlillg and recreationa

fadlities. The Arm)" provides them all - plus 

excellent pay - to give you a high standard 

of living in an attractive and who e~omc 

environment. 

Maybe the mO.'I1 per,w}fIally rewardinx Army fea

of all is the special pride you'll feel pe!formin

a valuable service for your COUll1ry. 
99 

MILITARY MEDICAL CARE PROMISES 

Army Recruiting Brochure. "Superb Hea lth Care. Health care 15 provlded to OU a nd ~'our famIly memo 

hen; \vhile you are In the Arm:.', and for the rest of your !tfe d" ~'OU serye a mInImUm of:;O years of actIve 

(-'ederal sernce to earn your reurement.' [RPI ~09, :\o\'ember 1991 L·.S.G.P.O. 1992 643·711[ 

Life in the M.rine Corps. p. 36. "Benet'its ",should )'OU deCIde to make a career of the Corps, the benefits don't stop when you retire. In addition to medical and commlssary priYileges. you'll receive excellent 

reured pay ... " 

Guide for Educ.tors .nd Advisors of Student M.rines. p. :35. "Retired ~Iannes are generally eligi· 

ble to receive any type of health and de ntal care at those facilities pro\"ided for active duty personnel." 

Nevy Guide for Retired Personnel .nd Their F.milies. p. 51, "Covered under the Uniformed Services 

Health Benefits Program (USHBP) are retired members, dependents of retired members and survivors of 

deceased active duty 0:: retired membel·S. This care IS available an~'where In the world either in a uniformed services medical facility (meaning Army. Navy. Air Force and cenain Public Health Service facilities) nnd under the part of the USHBP called CHAMPUS," [NAVPERS 15891D :\o\'ember 1974J 

The Bluejacltets Manual, p. 257. ··\\'hat ~a\ y Reurement means to you - pay. Continued medical care 

for you and your dependents in govern'ment facilities.·' [19691 

Air Force Preretirement Counseling Guide, Chapter 5 Medical Care 5·2f.. "One very Important point, 

you never lose your eligibility for treatment in mIlitary hospitals and clinics," [1 April 1986J 

Air Force Guide for Retired Personnel. Chapter I. "Treatment authorized, Eligible retired members 

will be furnished required medical and dental care." [I AprIl 19621 

United Stat .. Coas1 Gu.rd C.reer Inform.tion Guida. USGPO, "Retirement...You continue to 

receive free medical and dental treatment for yourself plus medical care for dependents," (19911 

U.S. Coas1 Guard P .... phlet Be Part of the Action. "Reap the Rewards ... You can earn retirement 

benefits· like retirement income",Plus medical. dental care ... " [1993J 

Hearin". on CHAMPUS alld Military He.lth C ..... HASC No. 93-70. 93rd Con"res ...... the gov· 

ernment has a clear moral obligation to provide medical care to retired personnel and their depen· 

dents ... thi. Committee has found numerous examples of recruitment and retention literature which 

pledged ... medical care for the man and hi. family following retirement: [Oct·Nov 1974) 
VETERANS OF FOREIGN WARS OF THE UNITED STATES 

Statement of 

Dennis M. Cullinan, Deputy Director 

National Legislative Service 

Veterans of Foreign Wars of the United States 

Before The 

Subcommittee on Health 

Committee on Veterans Affairs 

U.S. House of Representatives 

May 8, 1997 

MR. CHAIRMAN AND MEMBERS OF THE SUBCOMMITTEE: 

On behalf of the 2.1 million men and women of the Veterans of 

Foreign Wars, I thank you for requesting our participation in today's most 

important legislative hearing relative to the V A health care system. As you 

are aware, the VFW has played a strong and active role through the years 

toward ensuring that all of this nation's veterans have ready and timely access 

to top quality VA health care. Thus we are gratified to take part in today's 

deliberations. 

Of the three bills under discussion here, two pertain to issues which we 

believe to be of paramount importance in allowing VA to transform itself into 

the health care provider of choice for this nation's veterans. These are 

legislative proposals to provide V A with desperately needed nonappropriated dollars. Also to be addressed is a draft proposal to grant the 

Veterans Health Administration additional latitude with respect to special pay 

for certain physicians and dentists . 

.. W"SIU:-.: l':\( fn\ ~_ '" 

\TW )'H: 1n1 \1 ~!'IU11:-';G . 21,Q )'I AN\'I J\;-': 11 A\T:-':'"":. S E • ,\ :\:-iil :>,, · r, ,'. il' : •. ,;" .: ' 

Ak F.A ('( I\)t-: "! ::;' ~ ; .• :':' .', . ,." •. 
101 

Before addressing these initiatives individually, allow me to 

unequivocally state that the VFW is committed to seeing Congress fully fund 

the V A health care system. At this juncture, only full appropriation support 

can ensure sufficient funding to provide all eligible veterans with high quality 

care. Additionally , VA has now set about the Herculean task of transforming 

itself from an inpatient centered hospital system to an outpatient oriented 

provider of modem health care. While the efficiencies inherent therein will 

certainly save tax dollars in the long term, an infusion of capital up front is 

needed to bring it about. Appropriations support must not be allowed to flag 

at this critical point in time. 

Having said this, I would also convey our belief that VA health care's 

likely funding levels in upcoming years will not be sufficient to properly 

provide for a rapidly expanding case load even as the system prepares for the 

future. The recently completed framework for achieving a balanced federal 

budget by 2002, while certainly commendable, signals that the already 

meager flow of discretionary dollars into the V A system will be constricted 

even more. Couple this with the damage to the system already wrought by 

years of inadequate budgets, and the need for additional revenue streams is 

clearly evident. 

It is for this reason that the VFW has championed the causes of both 

Medicare Subvention and Retention of Third Party Insurance collections for 

VA. The rapid aging of the veteran population together with increased 

utilization under Eligibility Reform, PL 104-262, has made the need for 

additional, non-appropriated dollars even more critical. Thus the VFW 

enthusiastically supports the thrust of the two initiatives under discussion 

today as they move toward achieving these priority goals. 

The first bill we will specifically address today is H.R. 1362, the 

Veterans Medicare Reimbursement Demonstration Act of 1997. Introduced 

by the Chairman of the Veterans Affairs Committee, Congressman Bob 

Stump, this initiative provides for Medicare reimbursement to selected VA 

facilities for care provided to certain Medicare-eligible veterans. Calling for 

V A facilities to be selected in three separate geographical areas, with at least 

one near a closed Military Medical Facility, this legislation takes advantage 

of the fact VA is uniquely qualified to carry out such a demonstration project. 

With the world's largest integrated medical system, VA is a direct provider 

of medical care, not merely a referral agent or payment conduit as is the case 

2 
102 

with most other federal medical programs. While this bill would have the 

immediate benefit of directing desperately needed additional dollars into the 

V A system, it would also offer the most accurate picture of what effect 

Medicare subvention in the main would have on the Trust Fund. The VFW 

strongly believes the cost effectiveness of VA medical care will result in 

significant net savings to the Medicare Trust Fund. H.R. 1362 represents an 

excellent opportunity to prove this point while bolstering the VA system in 

the process. It enjoys strong VFW support. 

Next under discussion is a draft bill to establish, over a set period of 

time, a Treasury fund to be known as the "Department of Veterans Affairs 

Medical Care Collections Fund." Therein is to be deposited Third Party 

collections to VA for the provision of health care services to certain veterans. 

This draft proposal would then make Fund amounts, subject to the same 

limitations as appropriations, available to the Secretary for furnishing medical 

care and services along with defraying the cost of collection. 

As you may be aware, a key VFW objective during this Congress is the 

enactment of legislation authorizing VA to collect and then retain all thirdparty payments for the care it provides insured non-service-connected 

veterans. We also insist that there be no consequent reduction in VA's annual 

appropriations support. Since 1982 VA's cumulative contribution toward 

deficit reduction is some $7 billion. Veterans have already done more than 

their fair share in service of bringing this nation's fiscal house in order. 

We note that the draft bill under discussion would effectively create a 

third-party retention demonstration project oflirnited duration. We would, of 

course, prefer to see the enactment of legislation making such authority 

permanent. We are also troubled that this proposal would have the 

unobligated balance remaining in the Fund after the demonstration project's 

termination be deposited in the General Treasury Fund as miscellaneous 

receipts for deficit reduction. Given VA's critical need for additional dollars 

and veteran's already considerable sacrifices on the budgetary front, we hold 

it to be only prudent and fair to provide that all unobligated collections remain 

with the VA health care system. 

Last under discussion today is draft legislation to lift the application of 

otherwise applicable financial penalties on certain retirement eligible V A 

physicians and dentists who hold positions which would not be retained 

3 
103 

because of changes in facility staffing arrangements. The VFW notes that in 

1991 the Congress enacted special pay authority legislation to help V A 

remedy problems it was then experiencing in recruiting and retaining 

physicians and dentists. This "special pay" law's provisions also imposed set 

time in service and special pay duration stipulations for such pay to be fully , 

credited toward retirement. As VA now shifts to an ambulatory care base 

system staffing requirements have changed dramatically. Doctors and 

dentists who would now otherwise retire are holding off based on the 

economics of the "special pay" law. The VFW concurs that this draft 

proposal could help V A meet its new staffing requirements by facilitating the 

voluntary retirements of these highly compensated individuals. We have no 

objection. 

Mr. Chairman, this concludes my written remarks. Once again, I thank 

you on behalf of the men and women of the Veterans of Foreign Wars for 

conducting this hearing today in the service of America's veterans. I will be 

happy to respond to any questions you may have. 

4 
104 

Resolution No. 601 

REFORM OF ELIGmn..ITY FOR ACCESS TO VA HEALTH CARE 

WHEREAS. the existing laws governing eligibility to access V A health care are clearly illogical 

and virtually ensure that VA is unable to provide a full continuum of care to veteran patients. 

contrary to sound medical practice; and 

WHEREAS, the United States Code, establishes eligibility for V A medical care and a clear 

statement of obligation by the government to pay for that care is conspicuously absent, a 

circumstance which places the Department of Veterans Affairs in the position of perpetual 

supplicant in the matter of obtaining funds to carry out the mandates of the law; and 

WHEREAS, VA is required by law to collect payments from third-party health insurers and such 

collections, other than for administrative costs, do not remain within V A and are instead 

deposited into the General Treasury Fund; and 

WHEREAS, it is our position that all honorably discharged veterans should have a mandated 

entitlement by law to access the full continuum of V A health care which is defined as ranging 

from preventive through nursing home care, and which recognizes V A as "case manager" for the 

full range of ancillary services as well; and 

WHEREAS. we further believe that eligibility to exercise that mandated entitlement is satisfied by 

all veterans who are service-connected from 0 to 100 percent as well as those veterans in receipt 

of V A pension. and those non-service connected veterans whose lower incomes currently qualifY 

them for limited access on a discretionary basis; and 

WHEREAS, the remaining veterans could establish their eligibility by some form 

of payment option, such as third-party insurance. Medicare. out-of-pocket or even by 

payment of medical insurance premiums directly to V A; now, therefore 

BE IT RESOLVED, by the Veterans of Foreign Wars of the United States, that the Congress 

enact legislation bringing order to the present chaos affecting eligibility of V A health care by 

providing all veterans with mandated access to the full continuum of V A health care; and 

BE IT FURTHER RESOLVED, that the Congress and the Administration take appropriate 

action to ensure that third-party collections by V A remain with that agency and not be offset from 

its annual appropriation and that Medicare reimbursement to VA be authorized for care provided 

to veterans again without any offset from its appropriated funds; and 

BE IT FURTHER RESOLVED, that specific appropriations support be established for any 

medical programs directed by the Congress to be provided to veterans both now and in the future. 

Adopted by the 97th National Convention of the Veterans of Foreign Wars of the 

United States held in Louisville. Kentucky, August 17-23, 1996 
105 

Resolution No. 603 

THE DEPARTMENT OF VETERANS AFFAmS BUDGET 

WHEREAS, there are presently more than 27 million living veterans of whom over ten million 

have reached an age where they require increased health care including long-term care, and 

WHEREAS, the Department of Veterans Affairs' budget has fallen from 4,3 percent of federal 

budget outlays in 1970 to an estimated 2.4 percent in FY '95; and 

WHEREAS, the laws administered by the Department of Veterans Affairs authorizing benefits for 

veterans. their dependents and survivors are classified into the following general categories: 

compensation for service-connected disabilities and death, pension for income maintenance of 

veterans and survivors, educational and training assistance and loans, servicemen's life insurance, 

veterans life insurance, hospital and medical care service, nursing home and domiciliary care, 

including state veterans home construction funds, health manpower training. medical and 

prosthetic research and burial benefits; and 

WHEREAS, it appears that the facilities which the Department of Veterans Affairs presently 

operates will not accommodate by any measure the anticipated demand for services over the next 

20 years; and 

WHEREAS. the Department of Veterans Affairs has stated that by the year 2000. an increase in 

hospital beds will be needed with special geriatric evaluation units at each medical center, and that 

outpatient clinics should be able to support 26 million visits with the appropriate prevention, 

geriatric and specialized services; and that additional Geriatric Research Education and Clinical 

Centers (GRECCs) be established; and 

WHEREAS, veterans who served honorably in our Armed Forces during periods of war or 

hostility have rendered a very special service to our great nation; and if in need of health care, 

should be timely provided the finest care by the Department of Veterans Affairs; now. therefore 

BE IT RESOLVED, by the Veterans of Foreign Wars of the United States. that we urge the 

Congress of the United States to pass a budget and appropriations for the Department of 

Veterans Affairs which will fully fund and maintain the integrity of the benefits and entitlements 

programs and enhance Department of Veterans Affairs health care system. 

Adopted by the 97th National Convention of the Veterans of Foreign Wan of the 

United States held in louisville. Kentucky. August I';·..!j. 1996 
106 

Resolution No. 655 

VA MEDICARE SUBVENTION 

WHEREAS, the VFW views it as essential that the VA health care system be enabled to provide 

all veterans access to a full continuum of care; and 

WHEREAS, the Department has suffered from years of chronic under-funding. limiting its ability 

to properly care for even its current caseload; and 

WHEREAS. it is now absolutely essential that VA be authorized to capture and retain federal 

dollars in addition to its annual appropriation so as to revamp and revitalize its health care system; 

and 

WHEREAS, a large number of V A's potential patients, especially among the ranks of our military 

retirees. are Medicare eligible; now, therefore 

BE IT RESOL YEO, by the Veterans of Foreign Wars of the United States. that we suppon the 

swift enactment into law of legislation authorizing V A to collect and retain Medicare dollars. 

Adopted by tile 97111 Natio ... Coavetltion of tile Velma .. of Foreip Wan of IIIe 

V.ited States lIeId iD Louisville. Knt_clty. Alilast '7-23 •• 996 
107 

STATEMENT OF 

RICHARD A WANNEMACHER, JR. 

ASSOCIATE NA TWNAL LEGISLA TIVE DIRECTOR 

OF THE 

DISABLED AMERICAN VETERANS 

BEFORE THE 

COMMITTEE ON VETERANS AFFAIRS 

UNITED STA TES HOUSE OF REPRESENTATIVES 

SUBCOMMITTEE ON HEALTH 

MAY8,1997 

MR. CHAIRMAN AND MEMBERS OF THE SUBCOMMITTEE: 

On behalf of the more than one million members of the Disabled American Veterans 

(DA V) and its Auxiliary, I am pleased to present our views on the subject of health care delivery 

by the Department of Veterans Affairs (VA) to this Nation's 26 million veterans. 

The DAVis especially interested in additional revenue sources for the V A medical 

facilities to enhance medical care delivery in a quality-assured. timely manner to sick and 

disabled veterans, especially those who became disabled as a consequence of military service. 

In the invitatiotl to appear before this Subcommittee, it was requested that we address 

three separate legislative initiatives. The first two would open additional funding streams for the 

V A while the third initiative would allow certain V A physicians and dentists to receive 

additional retired pay by considering "special pay" to be basic pay for retirement purposes. 

Mr. Chairman, the DAV is very appreciative of your efforts on behalf of America's 

veterans, especially your continued commitment to those who became disabled in defense of 

America's freedoms -- freedoms shared by all Americans and many other individuals around the 

world. We also appreciate the Subcommittee's interest in the financial well-being of those 

professionals who chose careers that help meet the health needs of those who became disabled in 

the U.S. Armed Forces. 

As you know, the combined views of DAV, AMVETS, PYA and VFW are provided in 

the Independent Budget (IB) we publish each year. The co-authors of the IB appreciate the 

recognition our collective views have received from this Subcommittee in the past. We hope that 

our analysis of the VA's funding needs will be helpful to you. We believe our recommendations 

accurately reflect the resources necessary to enable V A to provide an acceptable level of benefits 

and services for our Nation's veterans and their dependents and survivors. 
108 

Many of the veterans V A currently serves have few resources to contribute to their own 

medical care. Some veterans have private health insurance or are Medicare-eligible. Currently. 

these veterans are low on the priority ladder and cannot access V A medical care due to space and 

resource allocation restrictions. We believe legislation allowing VA to retain private health 

insurance payments (H.R. 1125) and Medicare receipts from the demonstration project (H.R. 

1362) will enable the V A to enhance and expand services to meet its mission now and into the 

next century. 

Mr. Chairman, VA's health care system is undergoing dramatic change. Last year. 

Congress enacted legislation that enabled V A to begin the process of transforming its health care 

system from a hospital-based system into one that is capable of providing health care in the most 

cost-efficient setting. The DA V appreciates the efforts of this Subcommittee to help make this 

critical change a reality. Health care eligibility reform was a good "first step." and DA V looks 

forward to working with this Subcommittee and the Veterans' Affairs Committees of the House 

and Senate to ensure that VA has the necessary legislative tools to provide quality. timely and 

accessible health care for American's service-connected disabled veterans and other deserving 

categories of sick and disabled veterans. 

Proper funding of VA's health care system is critical if we. as a Nation. are to meet our 

obligation to care for sick and disabled veterans. Recently. President Clinton sent to Congress 

his proposal to fund veterans health care for fiscal year (FY) 1998. While we do appreciate the 

President's and V A Secretary Jesse Brown's commitment to care for America' s veterans. we are. 

nonetheless, concerned that VA's FY 1998 health care budget puts that commitment at risk. 

While V A projects that service will not suffer with the recommended staffing reductions in the 

Veterans Health Administration. the depth of these cuts cause us concern that V A may be overly 

optimistic; especially considering the existing strains on the system. 

We commend and fully support the efforts of the House Veterans' Affairs Committee to 

restore necessary funding and employee levels in the Committee's views and estimates for the 

FY 1998 budget. 

".R.1l2S 

Introduced by Representative English, this measure allows V A medical centers to bill 

third-party health insurance carriers for the treatment of non service -connected disabilities and 

retain the costs incurred of providing care or services at the treating facility . 

DAV supports the retention of third-party collections in order to provide additional 

revenues to enable VA to provide enhanced services to our Nation's veterans. We do not support 
109 

3 

the President's proposal to use these collections in order to relieve the Federal Government of its 

obligation to adequately fund V A health care. 

The delegates to our most recent National Convention adopted Resolution No. 270. 

"Supporting the Provision of Comprehensive Department of Veterans Affairs Health Care 

Services to Entitled Veterans." In paraphrasing the resolution (attached). it is stated that 

guaranteed funding through adequate appropriations. third-party reimbursement and "start up" 

transition funding is necessary in order to establish entitlement to V A health care services for a 

clearly defined category of veterans. The cost of treating sick and disabled veterans must remain 

the responsibility and obligation of the Federal Government. The Administration 's proposal 

amounts to an abdication of that responsibility. 

H.R. 1362 

Introduced by Chairman Stump. this measure allows for the establishment of a three-year 

demonstration project to provide for Medicare reimbursement for V A health care services 

provided to certain Medicare-eligible veterans. 

The VA's ability to participate clinically as a Medicare provider would serve two 

important purposes. Medicare payments would be an additional source of revenue for the VA. 

and it could result in potential savings for Medicare. Since we believe V A generally provides 

health care in a more cost-effective manner than the private sector, Medicare would receive an 

additional discount on services provided to eligible veterans treated by VA. The Government 

and the taxpayers, would benefit from the tax dollars saved. 

The DA V supports a Medicare reimbursement pilot program as long as service-connected 

patient care is not compromised at these pilot sites. 

DRAFT LEGISLATION 

This legislative proposal will amend title 38. United States Code, to provide that special 

pay received by certain physicians and dentists of the Veterans Health Administration (VHA) 

retiring before October I, 1999, shall be considered to be basic pay for retirement purposes. 

The DAV is unaware of the impact this draft legislation has on the VA health care 

system, nor do we have a mandate on this issue. but we are not opposed to its enactment. 

This concludes my statement, Mr. Chairman. I would be happy to respond to any 

questions you or members of the Committee may have. 
110 

Curriculum Vitae 

for 

Richard A. Wannemacher, Jr. 

Office Address 

807 Maine Avenue S. W. 

Washington, D.C. 20024 

202-554-3501 

Biographical Data 

Birth Date: September 30, 1948 

Place of Birth: Erie County, New York 

Military Service 

U.S. Navy 

Enlisted May 1967 and Disibility Retired November 1969 

Education 

AAS Business Administration 

BS Environmental ConsunlLr Studies 

Graduate Studies Businen Administration 

Relevant Experience 

Associate Legislative Director, Disabled American Veterans (DA 11, August 1996 to 

present 

Assistant Supervisor DAV National Service Office Washington DC January 1995 

through July 1996 

Supervising National Service Officer DAV National Service Office Albany New York 

November 1910 through December 1995 

DAV New York State Legislative Chairman June 1981throll/1h December 1995 

Associate National Service Officer DAV National Service Office Buffalo New York October 

1978 through October 1980 
111 

NATIONAL SERVICE and LEGISLATIVE HEAOQUARTERS 

807 MAINE AVENUE, S.w. 

WASHINGTON, D.C. 20024 

(202) 554-3501 

DISCLOSURE OF FEDERAL GRANTS OR CONTRACTS 

The Disabled American Veterans (DAV) does not currently receive any money from any 

federal grant or contract. 

During fiscal year (FY) 1995, DA V received $55,252.56 from Court of Veterans Appeals 

appropriated funds provided to the Legal Service Corporation for services provided by DA V to 

the Veterans Consortium Pro Bono Program. In FY 1996, DAV received $8,448.12 for services 

provided to the Consortium. Since June 1996, DA V has provided its services to the Consortium 

at no cost to the Consortium. 
112 

National Association of VA • Physicians and Dentists ----------------NMR1 

t.t .. Prine. StrHt 

Suite Z02 

AIe.and ... VA 2231. 

(70SI 54&-0280 

F.. (703) 5-\8-8024 

Testimony of 

Samuel V. Spagnolo, M.D. 

on behalf of the 

National Association of VA Physicians and Dentists 

before the 

Subcommittee on Health 

Committee on Veterans' Affairs 

U. S. House of Representatives 

May 8,1997 
113 

Mr. Chairman and Members of the Conuninee, I am Samuel V. Spagnolo, M.D. I am 

Professor of Medicine at George Washington University School of Medicine and Health 

Sciences, where I have been on the faculty for 25 years. I am also Anending Physician 

at the George Washington University Medical Center and at the Veterans Affairs 

Medical Center in Washington, DC. I have served the health care needs of our nation's 

veterans within the Veterans Health Care System for nearly three decades. I come 

before you today as the President of the National Association of V A Physicians and 

Dentists (NA V APD). NAV APD is the only professional Association representing the 

nearly 15,000 Title 38 physicians and dentists who work in the VHA. I am proud to 

represent these dedicated men and women who are conunitted to improving the health 

of America's veterans. 

NA V APD is encouraged that the subconunittee is giving consideration to making 

changes in Public Law 102-40, the so-called special pay law. In doing so you are 

acknowledging that certain of the provisions enacted by P.L. 102-40 in 1991, when the 

V A was in desperate need to enhance the recruitment and retention of outstanding 

physicians and dentists, may no longer be appropriate in a VHA in a downsizing mode. 

Further it demonstrates your awareness of the significant negative financial impact in 

retirement that the current spate of staff adjustments can have on Title 38 doctors. 

Before I present to the conunittee the Association's position on the draft bill, I would 

like to comment on the current staff adjustment situation within the VHA; on the effect 

that it is having now on staff morale; and on the impact it is presently having, and is 

likely to have in the future , on quality of the care veterans receive within the V A health 

care system. This topic is relevant to the scope of this hearing , I believe, because the 

draft legislation before the subcommittee is itself limited to the context of downsizing; 

that is, the changes the bill proposes would apply only to those Title 38 physicians and 

dentists whose positions the V A is abolishing . 

NAVAPD is clearly on record as opposing the VA's current approach to staff 

reductions within its medical facilities. As the Members of the conunittee know, the 

elimination of doctors within V A Medical Centers throughout the country is being 

carried out under the guidance put forth in March 1996 in a Directive from V A Under 

Secretary for Health, Dr. Kenneth Kizer. That transmittal, Directive 51ll, gives broad 

latitude to individual medical facility directors to make far reaching staffing changes, 

based not on uniform national criteria but on locally-developed standards. 

NAVAPD strongly opposes VHA Directive 5111 and believes it should be rescinded. I 

wrote to Under Secretary Kizer in March 1996, just after the issuance of the directive, 

and made our positions known. At the time I told him NAVAPD believed that 5111 
114 

would seriously dampen morale among Title 38 doctors and that it might lead to serious 

disruptions within the V A health care system. Time and experience have confirmed 

that to be the case. Doctors at many facilities characterize the VHA as a system in 

crisis in which there is tremendous uncertainty both about the future of employment and 

about adequate staffing levels within the various medical services. 

In my letter to Dr. Kizer, I made the case to the VA that I will now make to you. It is 

a simple proposition --special pay policy can be utilized as effectively to induce 

volUnlary separation as it has been used under P. L. 102-40 to recruit and retain 

physicians and dentists. Reasonable changes to P. L. 102-40 can foster such voluntary 

separations, and such changes should be viewed as a positive alternative to Directive 

5111. 

In his response to my letter in June 1996, Dr. Kizer indicated the Department's 

essential agreement with a fundamental principle that NA V APD had aniculated - that 

voluntary separations are preferable to downsizing effons. He also indicated that 

changes to the special pay law, similar to those NAVAPD proposed and which I will 

describe in more detail in a moment, could provide the V A with additional flexibilities 

that could obviate the need for many involuntary separations of Title 38 doctors. 

Specifically, Dr. Kizer wrote, " The Veterans Health Administration is willing to 

explore a legislative initiative which would eliminate the requirement for special pay 

agreements, and the service obligations for special pay to fully count toward retirement. 

Such changes would provide additional flexibilities allowing large numbers of 

physicians and dentists to voluntarily leave V A without any financial penalties and 

reduce the need for involuntary separations resulting from downsizing initiatives. The 

proposals you have submitted are reasonable ... " 

Let me stress that NA V APD was not suggesting then, nor are we implying now, that 

some reduction in the number of Title 38 physicians and dentists at certain facilities is 

either necessarily unreasonable or unwarranted. We are simply arguing that voluntary 

separations are better than firings - better for employees, better for patients and better 

for the VA. 

The draft bill before you today apparently fails to recognize the value of voluntary 

separation, a point on which NAV APD, Dr. Kizer and Secretary Brown apparently 

agree. Neither does it view special pay law changes as an alternative to the VA's 

current staff adjustment policy. On the contrary, it ties the elimination of current 

special pay law restrictions specifically to the elimination of jobs, confining it to 

involuntary separations. Otherwise retirement-eligible doctors would not be given the 

opportunity to make their own retirement choices. All decisions concerning 

2 
115 

employment would remain entirely with the VA. Doctors would not be given the 

opportunity to leave the service on a voluntary basis under the provisions of the draft 

bill. 

It has long been the position of this Association that the most effective and desirable 

way to accomplish the goal of reducing the number of Title 38 physicians and dentists 

within the V A is simply to remove from the law entirely the three financial obstacles to 

voluntary retirement associated with special pay. They are these: first, the 15 year VA 

service requirement; second, the requirement of 8 years of obligated service from the 

effective date of the law; and, third, the requirement that years of service covered under 

written special pay agreements be measured from the anniversary date of the agreement 

or result in an individual's being required to refund to the V A a designated percentage 

of his special pay for that year. 

An environment in which job security is uncertain, on the one hand, and the employees' 

ability to participate in retirement decisions is abridged, on the other, is not likely to 

attract bright, young talent in the future . The impact of such a flawed policy decision 

will likely influence the quality of future care for our nation's veterans. 

Again, I commend you, Mr. Chairman, for convening a hearing to examine this 

important issue. But I would also respectfully request that the subcommittee amend the 

draft legislation, as I have outlined in my testimony, to eliminate entirely the outdated 

obstacles to retirement that P.L. 102-40 imposes. 

In doing so, you will restore the right to make their own retirement decisions to 

hundreds of individuals who have ably and dutifully served our nation's veterans for 

decades. More than that, we believe it will be investing in the future excellence of the 

V A health care system. 

We regard this hearing as the initial round in a serious debate on one of the most 

important issues facing the V A health care system this year, we appreciate the 

opportunity to participate in it, and we look forward to continuing to work with you as 

the committee develops final legislation to address it . 

• • • • 

The National Association of V A Physicians and Dentists (NA V APD) has received no 

Federal grants or contracts during the current or orevious two fiscal years. 

3 
116 

BIOGRAPHIC SKETCH 

Dr. Samuel V. Spagnolo is Professor of Medicine at George Washington University School of Medicine and 

Health Sciences and Allending Physician at George Washington University Medical Center & the Department 

of Veterans Affairs Medical Center in Washington DC. He is the immediate past Director of the Division of 

Pulmonary Diseases and Allergy at George Washington University Medical Center and Chief of the Pulmonary 

Disease Section at the Department of Veterans Affairs Medical Center in Washington, DC. from 1975 to 1994. 

As Director of these various activities, Dr. Spagnolo was responsible for all of the clinical, teaching, 

administrative and research activities of these programs. He is also President of the International Lung 

Foundation. 

Dr. Spagnolo has made signifICant contributions in a variety of fields: 

As a teacher, he has personally led the training of #70 pulmonary and critical care specialists 

and is an active lecturer on the subject of pulmonary and critical care medicine 

As a researcher, he has been active in a variety of areas including the diagnosis and 

treatment of tuberculosis, clinical uses of laser in lung cancer, supportive care for lung cancer 

patient, the use of new antimicrobial agents, and the use of fine needle lung biopsy for the 

diagnosis of chest x-ray abnormalities. These research efforts have resulted in the publication 

of more than 40 scientific papers to date, plus numerous scientifIC exhibits and three 

textbooks. Among his scientifIC reports were the first major review of patient outcome during 

the early development of medical intensive care units, and the first, 1980, report of 

pneumocystis Carinii pneumonitis (now an AIDS related disease) in patients with lung 

canoer. More than #200 scientifIC articles were published by the division's faculty while under 

Dr. Spagnolo's direction 

As a clinician, Dr. Spagnolo has a worldwide reputation as a therapist and consultant. In 

these roles be serves an international patient community in Europe and the Middle East. In 

1981, when President Ronald Reagan was shot by a would-be assassin, Dr. Spagnolo served 

as the medical chest consultant. His involvement was reviewed in Mortal Presidency by 

Robert Gilbert, Basic Books, New York, NY, 1992. 

He is the recipient of numerous honors and frequently responds to requests from the public media and 

professional organizations. In addition to bis memberships in various professional societies, he has served as 

President of the District of Columbia Thoracic Society, President of the National Association of Veterans 

Affairs Physicians & Dentists, and is the immediate past Governor of the District of Columbia for the 

American College of Chest Physicians having served in that position for flYe years .. 

Dr. Spagnolo is listed in the 1996 Golden Anniversary 50tb Edition of Marquis "Who's Who in America" as 

well as Medical Sciences International Who's Who (Sth ed). He has served as advisor to various organizations 

and a consultant to the White House Medical Unit, Walter Reed Medical Center and the Will Rogers 

Institute. In 1991, he established the International Lung Foundation (ILF) for the purpose of helping 

overcome the serious deficiencies present in the clinical diagnosis, treatment, and the prevention of lung 

diseases. 

Education: Washington and Jefferson College, BA; Temple University School of Medicine. M.D. 
117 

NARRATIVE 

I am currently Professor of Medicine and Attending Physician at George Washington University Medical 

Center and Attending Physician at the Veterans Affairs Medical Center Washington D.C From 1976 to 1994, 

I served as the Director of the Division of Pulmonary Diseases and Allergy at the George Washington 

University School of Medicine and Health Care Sciences and Chief of the Pulmonary Section at the Veterans 

Affairs Medical Center, Washington, DC 

Prior to my appointment (1976) as Director of the Division of Pulmonary Diseases and Allergy, I served on 

the faculty of the Department of Medicine at the George Washington University in various positions. From 

1972 to 1975, I was an Assistant Professor of Medicine and the Assr..tant Chief of the Medical Service at the 

Veterans Administration Medical Center, Washington, D.C, and subsequently from 1975 to 1976, I was an 

Associate Professor and the Acting Chief of the Medical Service at the same institution. In 1976, I accepted 

the appointment as director of the respective pulmonary divisions. I became Professor of Medicine in 1981. 

In addition to my pulmonary responsibilities, from 1986 to 1989, I was also Associate Chairman of the 

Department of Medicine. During my more than 20 years at George Washington University Medical Center, 

I have been a member of numerous committees and chairman of several major committees. 

As Director of the Division of Pulmonary Diseases and Allergy until September 1993, I was responsible for 

the clinical, teaching ant! research functions of the division, the pulmonary faculty practice within the division 

and all aspects related to the pulmonary fellowship education program. I was actively involved with both the 

full-time and part-time pulmonary and allergy faculty and was responsible for providing the leadership for the 

division, which included the respiratory care section and the pulmonary function laboratories of the medical 

center. Along with these duties, I carried similar duties and responsibilities at the Veterans Affairs Medical 

Center. Individuals reporting directly to me included members of the full-time pulmonary faculty at both 

institutions, as well as the chiefs of respiratory care and the pulmonary physiology laboratories. 

In addition to my adminr..trative duties, I have published numerous papers and am the editor of three 

textbooks; 1) Handbook of Pulmonary Emergencies: 2) Air Pollution and Lung Diseases in Adults: 3) 

Handbook of Pulmonary Drug Therapv. I have been involved in numerous research protocols and continue 

to provide leadership and encouragement to faculty to pursue their own research interest. Under my direction 

more than #200 articles were published by the division's faculty. My own research interest has been in the 

general area of clinical pulmonary disease with emphasis on tuberculosis and physiology. Even while director 

of both institutions, I devoted a significant portion of my time in the practice of pulmonary diseases including 

caring for patients with critical care pulmonary and medical problems. I am an active lecturer on the subjects 

of pulmonary disease and internal medicine and I spend a considerable portion of my time involved with 

teaching medical students, residents and fellows. Seventy pulmonary disease specialists completed their training 

under my direct supervision and guidance. 

Along with the activities noted above, I have been active in various professional societies, serving as President 

of the District of Columbia Thoracic Society from 1981 to 1983 and Secretary, Vice President, and President 

of the National Association of V.A. Physicians & Dentists. In 1989, I was appointed Governor of the District 

of Columbia, Counsel of Governors for the American College of Chest Physicians. I have given numerous 

invited lectures and have made multiple appearances on radio and television program. I currently serve as a 

consultant in pulmonary diseases to various foundations and medical institutions. In 1981 , I served as the 

medical chest consultant in the care of President Ronald Reagan following the attempted assassination. This 

involvement was reviewed in Mortal Presidency by Robert Gilbert, Basic Books, New York. 1992. During the 

Presidency of George Bush, I was a consultant to the White House Medical Unit on numerous occasions. I 

am listed in Medical Sciences International Who's Who (5th ed), and in the Golden Anniversary 50th Edition 

of Marquis Who's Who in America. I am a Fellow of the American College of Medicine and a Fellow of the 

American College of Chest Diseases. 
Samuel V. Spagnolo, M.D. 

Narrative 

Page 2 

118 

Born and raised in Pittsburgh, Pennsylvania, I reoeived my Bachelor of Arts Degree from Washington and 

Jeffenon College and a Doctor of Medicine from Temple University. I served from 1966 to 1968 as a 

Commissioned Offioer with the United States Public Health Servioe, assigned to the National Communicable 

Disease Center in Atlanta, Georgia. I completed my medical residency training in internal medicine in Boston 

at the Boston City Hospital and at the Veterans Administration Hospital where I was the Chief Resident in 

Medicine. Subsequently, my medical training was completed as a Harvard Oinical and Research Fellow in 

Pulmonary Diseases at the Massachusetts General Hospital. 

1 joined the faculty at the George Washington University School of Medicine and Health Care Sciences in 

1972. 

I have three children: Samuel John, a 1984 Summa Cum Laude, Phi Beta Kappa graduate of Lehigh University 

and a systems engineer with Maxxus, a San Francisco based computer software company and subsidiary of 

Sterling Software Corporation, Dallas, Texas; Brad, a lst,.,ar resident and 1995 graduate of Temple University 

School of Medicine; and Gregg, a 1993 graduate of the University of California at San Diego and mechanical 

engineer with Hayes, Seay, Mattern &. Mattern an engineering and design corporation in Rockville, Maryland. 
SERVING 

WITH 

PRIDE 

AMVETS 

XATIONAL 

HEADQt:ARTF.RS 

464; Forbe!' &JUle~' rd 

Lanham. nd 

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119 

Statement of 

Chuck Burns 

AMVETS National Service Director 

before the 

Subcommittee on Health 

of the 

Committee on Veterans Affairs 

U. S. House of Representatives 

Thursday, May 8, 1997 

Room 340 

Cannon House Office Building 
120 

Mr. Chairman. I am Chuck Burns. National Service Director of AMVETS. The 

American Veterans of World War II. Korea and Vietnam. We are grateful to you 

and the committee for this opportunity to testify before you today. Neither 

AM VETS. nor myself. have recieved any federal grants or contracts during FY 

97 or in the previous two fiscal years. 

Mr. Chairman and members of the committee. AMVETS is pleased to present our 

views on the following proposals: 

o Legislation to establish a demonstration project to provide that the 

Department of Veterans Mfairs may receive Medicare 

reimbursement for health care services provided to certain 

Medicare-eligible veterans; 

o Legislation to provide that V A retain third-party collections and user 

fees in the medical care appropriation; and 

o Legislation to lift the application of otherwise applicable financial 

penalties on certain retirement -eligible VA physicians and dentists 

who hold positions which would not be retained because of changes in 

facility staffing arrangements. 

AMVETS in conjunction with the Independent Budget. DA V. PV A and VFW has 

been supporting and calling for initiatives such as these for several years. It is a 

known fact that the Department of Veterans Affairs is drastically under- funded 

and unable to provide either the quality or the quantity of health care intended by 

the Congress and a grateful nation. 

AMVETS has supported the idea that V A must evolve to meet the needs of the 

new health care environment. Establishing and nurturing new funding streams is 

a way of supplementing its budget. Medicare reimbursement. retention of thirdparty collections and user fees meet this objective. 

We strongly oppose. however. these dollars being used to offset federal 

appropriations that are required to cover the cost of anticipated increases in 

workload. 

They should not be used as substitute funding by the Office of Management and 

Budget as contained in the Administration's request. to straight-line V A 

appropriations through the year 2002. We believe it is unrealistic for the V A to 

realize the purported gain from these reimbursements. even if Congress approves 

legislation providing the authority this year. They are in essence gambling with 

the health and well-being of millions of veterans. 

Medicare reimbursement for health care services provided to certain medicareeligible veterans. 

Ash stands right now. the V A does not receive any funding from the Health Care 

Financing Administration(HCF A). which administers Medicare even though 

many of the veterans served by the V A are also eligible for Medicare/Medicaid. 

1 
121 

Two things must happen to correct the Medicare/Medicaid/VA problem. 

Congress, must fund the VA so that it can take care of both "low and high" 

priority veterans. Then Congress must authorize (HCF A) to pay back the funds 

for these veterans to the VA. 

Offering low priority veterans an opportunity to use Medicare to reimburse their 

V A care creates access and can save federal tax dollars. Funding, at a discounted 

rate, could simply go to the V A rather than to private-sector providers. 

The only thing keeping this optimal program from taking effect is Congress' 

complicated rules for scoring such legislation. We are hoping that hearings like 

the one today will help educate members about the benefits of this non-partisan 

legislation. It's a win-win situation for everyone. 

V A retain third-party collections and user fees in the medical care appropriation. 

Congress should allow VA to retain the additional revenues veterans bring into 

the system. We also believe that Headquarters should eliminate its' centralized 

Medical Care Cost Recovery office and authorize V A networking directors to 

contract for their cost-recovery efforts, as in the private sector. 

By our estimates, V A is now spending about 17 cents for every dollar it collects. 

Some of the problems V A encounters in collecting third-party funds include fee 

schedules that are incompatible with other payers, failure to seek authorization 

for payment of care before service is rendered, and practice standards that are 

different from private sector providers -for example, longer average lengths of 

stay and more. 

We believe that allowing V A to retain the costs of care from third-parties will 

ensure a fully -supported recovery effort. With the additional funds, V A would be 

able to enhance care for current users and increase access for low priority 

veterans. 

We also believe that if the VA healthcare system were able to collect and retain 

these funds. it could begin treating the veteran's adult dependents. Additional 

people in the V A system would provide additional resources and would enhance 

care available to high priority veterans. It also creates a new choice for adult 

dependents who wish to use V A healthcare services alongside their mothers. 

fathers and spouses. This is not a new idea. A couple of years ago, the 

Congressional Budget Office(CBO) examined this proposal. They believed that 

each dependent would cost the Federal government. We believe this should be 

examined as a new business opportunity, under which VA could control treatment 

of dependents and ensure their ability to pay before service was rendered. We 

caution that this should not be done so as it reduces services or quality of care to 

veterans. 

Legislation to lift the application of otherwise applicable financial penalties on 

certain retirement eligible VA physicians and dentists who hold positions which 

would not be retained because of changes in facility staffing arrangements. 

This bill will help V A meet its staffing needs by facilitating voluntary 

retirements, and thus lessening the need to rely on reductions-in-force. by lifting 

2 
122 

the otherwise applicable length of service requirements. in the case of retirement 

eligible physicians and dentists who hold positions. which the V A believes are no 

longer needed. This change would lead numbers of these clinicians to retire up-to 

two years earlier than what is expected under the current law. The employees win 

because it cancels the need for a RIF and the V A wins because it will achieve some 

savings. The bill also calls for the V A to reimburse the Federal retirement 

system from those savings for the additional costs it would likely incur. 

We strongly urge Congress to authorize Medicare reimbursement for higher 

income veterans and dependents and retention of third -party reimbursement for 

current veteran users. new veterans' users and veterans' dependents. 

Va must change to survive and we view some recommendations in prescription for 

changes as proof that VA concurs with many of our past recommendations. 

Mr. Chairman. this concludes my testimony. 
123 

m 122-i 1\1 S!Tl'CI. N\V. \Va"hillllIOIl. I)(' 20fH):" ~IX \ 

:: 1..,;,-"."."-,,. 

Statement of 

VIETNAM VETERANS OF AMERICA 

Presented By 

KELLI R. WILLARD WEST 

DIRECTOR OF GoVERNMENT RELATIUNS 

Before The 

House Veterans' Affairs Subcommittee on Health 

Regarding 

IJrn!t legi.</ation regarding Medical Care Co .• t RecOI'ery (MCCR) 

H.R 1362, the Jleterall$ Medicare Reimbursemellt Demoll.trotioll Act,if 1997 

Draft legislatioll regarding Physician's Special Pay 

May 8, 1997 
124 

Introdu~tion 

Mr. Chairman and members of the committee, Vietnam Veterans of America (VVA) is 

pleased to have an opportunity to share our perspectives on the legislation being considered by the 

committee today. These bills, in combination with the eligibility reform measure passed in the I04th 

Congress, are quite possibly the most important veterans health-care legislation to be considered by 

Congress in recent history. 

Without passage of innovative MCCR collection and Medicare pilot bills, which will 

dramatically change the funding mechanisms and business practices for the V A, the system is surely 

doomed to fail at perfonning its mission of caring for our nation's veterans, and may well not even 

survive. Federal budgets and available annual appropriations will be ever more restrictive and will 

continue to reduce services to veterans, many of which are special needs cases for which VA is the 

only available provider. Passage of this legislation would provide the veterans health-care system a 

chance to accomplish what almost seems impossible -- improve the access, quality and timeliness of 

services; provide care to more veterans; improve efficiency; and do so at lower costs and without 

creating an increasing demand for federal appropriated funds. 

At the outset we wish to commend the leadership and all members of the House Veterans' 

Affairs Committee for exercising appropriate caution and foresight in its recommendations to the 

Budget Committee regarding FY 1998 medical care expenditures of$17.6 billion. The committeepassed budget figures have been embraced by the veterans community, rather than the 

Administration's budget request, because the system is in such a massive state of transition that 

gambling with the Congress' passage of enacting legislation and VA's ability to meet ambitious 

collection targets is far too risky. VV A thanks the Committee members for this perspective. 

Draft legislation regarding Medical Care Cost Recovery (MCCR) 

VV A agrees with the objective and supports the enactment of legislation to permit V A to 

retain third-party reimbursements. From our review, we believe the draft bill being considered by the 

committee will accomplish this objective, and we support swift passage of this legislation. The 

current system which requires most insurance and copayment revenues to be directed to the Treasury 

in effect robs one group of veterans in order to pay for services to another group. This is because 

each dollar spent on discretionary-category (Cate!" ' V C) veterans cannot be spent on care for a 

service-connected disabled or indigent veteran (Categ • A). Allowing V A to relain these collections 

will go a long way toward stabilizing V A medical care funding. 

The veterans community, including VV A, has long advocated that VA should retain these 

non-appropriated monies not only to recoup its expenditures on discretionary-category veterans, but 

also to supplement infrastructure and overhead expenditures which will benefit core group veterans. 

Without bringing alternative revenue sources into the VA system, it questionable that the U.S. can 

sustain the veterans health-care system. Without additional monies, many veterans may be denied 

services by an ever-shrinking VA health system. 

Though the legislation does not specifically address how these collections should be 

reallocated among tbe facility, the VISN and the broader VA health-care system, VV A urges the 

committee to make recommendations to VA in report language. VV A recommends that a significant 
125 

portion of the MCCR collections should be retained by the local facilities or at the VISN level. This 

is essential because these incentives will encourage the facilities to supplement services, to do 

outreach to its potential patient-base and to collect the insurance and copayments. We do not have 

a specific percentage in mind regarding such a local-national split on the revenues, but believe it is 

important that Congress' intent be stated for the record, if not within the bill language itself 

B.R. 1362, VA Medicare-Reimbursement Demonstration Legislation 

Likewise, VV A supports the passage of legislation to establish a pilot project to examine 

Medicare-reimbursement at discounted rates for eligible veterans who seek care at the VA. For the 

reasons stated above, it is desirable and logical that non-service connected veterans and those who 

do not meet the means test eligibility should have the option of bringing their health care coverage 

dollars to the VA - even if that coverage is the federal Medicare program. There are potential cost 

savings for the Medicare program. This would allow V A to provide better care to more veterans by 

supplementing its annual appropriation and spreading overhead and infrastructure costs over a larger 

patient popUlation. And Medicare-eligible veterans would have enhanced choice of providers. 

VV A recognizes that political realities and negotiations among various agencies and 

committees of jurisdiction have resulted in some legislative provisions of H.R. 1362 which we all 

might prefer be changed. VV A would like to comment on two issues which could be improved upon. 

These recommendations do not reflect shortcomings in the bill which would preclude VV A support 

for the legislation. Rather, these are simply for the committee's consideration and perhaps discussion 

among your colleagues on the other committees with jurisdiction. 

It seems short-sighted and restrictive to preclude veterans with liunily incomes exceeding 

three times the means test level from participating in the demonstration project. VV A 

advocates that lIil Medicare-eligible veterans be allowed to participate. It does not seem 

necessary, appropriate or desirable to restrict provider choices for the highest-income 

veterans. 

Should the $50 million annual Medicare payment limit be reached, what happens to the 

veterans seeking care at the VA under this program? Will these veterans be denied care 

within the V A because Medicare will not pay? Will V A be forced to take a loss on care 

provided to eligible veterans in excess of $50 million per year? Imposing such a restriction 

may preclude the demonstration project from getting appropriate and accurate usage and cost 

data. VV A recommends that a mechanism be developed to provide the agencies and 

Congress with advanced warning if the demonstration project approaches the annual limit. 

Congress should then make a determination based upon preliminary program evaluation 

whether to provide an exemption to the annual limit. 

Draft Bill on Physician Pay 

VV A does not have a position supporting or opposing the physician pay draft legislation. The 

makeup, qua1ifications and performance of the medical-care provider workforce are certainly issues 

which the Veterans Health Administration needs to examine as it changes the way it does business. 

An overabundance of specialists is not conducive to VA's goal of shifting toward outpatient primary 

care modalities oftreatrnents. Also, the VA does need to have maximum ability to make workforce 

2 
126 

adjustments at this time of significant change. The service needs of the veteran population and the 

manner of providing health-care services have changed nationwide. In general, we agree with the 

goal of this legislation to provide VHA with greater flexibility in hiring and retaining health-care 

professionals to better match service capacity with the needs of patients. 

General Concerns Regarding Specialized Programs 

Having stated that V A needs flexibility in changing its health-care delivery structure, VV A 

wishes to state for the record our concern that an appropriate level of inpatient capacity -- both beds 

and staffing - be maintained in each VISN to accommodate V A' s specialized services. We continue 

to be very alarmed by trends within the last 18 months to shift general mental health, PTSD and 

substance abuse programs to a completely outpatient basis. A letter I sent to Dr. Kizer nearly a year 

ago is attached for your reference. The concerns VV A raised at that time remain valid today. 

We are very pleased that this subcommittee has made these wlnerable special disability 

programs an important part of the oversight agenda. We agree with the subcommittee's assessment 

that mental-health care programs are at risk in the current budget environment. This is true not only 

within the V A, but throughout our nation's public and private-sector care providers. VV A does 

agree that many patients can be effectively and efficiently treated for mental health and substance 

abuse conditions on an outpatient basis. But many veterans have extraordinarily complex physical 

and mental health problems which only can only be addressed adequately in a controlled therapeutic 

environment. V A must maintain a capacity to provide this this inpatient care in some manner -- either 

within the V A itself or through contract, sharing or purchase arrangements with non-VA providers. 

Similar changes throughout the mental health field will complicate both supply and demand 

for these types of services. As access to non-VA inpatient mental health and substance abuse 

programs is further and further restricted, it is only logical that demand for these intensive services 

within the VA will increase accordingly. Many of these veterans have priority VA eligibility based 

upon service-connected disability or income. If V A has very restrictive inpatient capacity to treat 

severely mentally-ill or substance abusing veterans, many will fall through the cracks leaving their 

lives destroyed and abrogating VA's responsibility to care for this population. 

VV A does not evaluate program quality, performance and capacity based solely on funding, 

bed capacity and staffing levels. But these figures do partially demonstrate the VA's commitment -

or Jack thereof as the case may be - to provide these intensive therapeutic services to veterans. VV A 

reiterates our recommendation to have this subcommittee conduct rigorous oversight regarding the 

changes to these and all of the VA's specialized programs. Additionally, we urge you to work very 

closely with the appropriators to ensure that funding for V A health care is maintained at an 

appropriate level to ensure services for core-group veterans and specialized programs such as PTSD 

and Substance Abuse units. We urge the subcommittee to examine the VA's homeless programs in 

the same manner, because resources for these programs also fall far short of the needs of this unique 

and under-served population. 

Conclusion 

VV A agrees with the overall objectives of developing alternative funding streams for V A to 

supplement the federal appropriation. And we urge swift passage of these bills, so V A can make 

3 
127 

additional progress in the transition that is unfolding. The VISN reorganization, VERA and eligibility 

reform are well underway. The resolution of these funding issues is the next step in providing VA 

with the authority to evolve into a modern, efficient health-care provider. 

VV A remains concerned that the Office of Management and Budget (OMB) and/or Congress 

may be tempted to reduce the VA's budget and appropriation by the amount of its MCCR and 

Medicare receipts in the future. It is critical that the federal appropriation be maintained at a level 

high enough to sustain services to core-group veterans. Service-connected and indigent veterans are 

the federal government's responsibility -- not insurance companies. 

We are also discomforted by real and perceived threats to the viability of VA's specialized 

care programs, in particular mental health, PTSD and substance abuse programs. VERA does 

provide financial incentives to VISN directors to l:III:llIl specialized care veterans. But ~ to these 

resource-intensive specialized services still seems to be restrictive. VV A strongly recommends that 

additional protections and rigorous oversight of VA's core mission of providing specialized care to 

veterans be implemented. 

Thank you for the opportunity to present VV A' s views on these important bills. This 

concludes our statement. We would be pleased to respond to any questions. 

4 
128 

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------. 

Dr. Kenneth W. Kizer (10) 

Under Secretary for Health 

Department of Veterans Affairs 

810 Vermont Avenue, N.W. 

Washington, DC 20420 

Dear Dr. Kizer: 

. . - .---.-.. ---.--.-... ------

June 7, 1996 

On behalf of Vietnam Veterans of America, I wish to call to your attention our concerns 

with contemplated closures of VA inpatient PTSD and substance abuse units, which have been 

prompted by a number of recent calls from VVA members around the country. 

VVA does recognize that some changes in the way hospital-based PTSD and substance 

abuse treatments are provided are necessary to achieve greater efficiency and improved service --

even in these "specialized services" for which VA is a recognized national health-care leader. 

I want to be very clear that we are 110t opposed to making changes. per say . Through greater 

efficiency, it is hoped that more veterans will have access to these VA services. VVA is simply 

concerned that these closures -- as currently presented -- might negatively impact patient care. 

VVA has and continues to support your reorganization plan outlined in "Vision for 

Change," which aims to provide health care services to veterans in a more appropriate, costeffective and convenient manner. We have noted in the past that as long as no existing services 

are denied to veterans or disrupted with the reorganization, the changes should actually enhance 

care. Additionally, we have done some preliminary review of "Prescription for Change" and are 

generally supportive of your blueprint for implementation of this reorganization. It seems, 

however, that the well-laid plans of your central office staff are not being wholly embraced by 

administrators in the field. 

The comments VVA is hearing from around the country regarding the sudden and 

proposed closures of VA inpatient PTSD and substance abuse programs are that: 

a) It does not seem that these closures are thoroughly planned out, in terms of making 

program alternatives, substitutions or accommodations available in order to prevent 

disruption of service to the local veteran population; and 

b) Even assuming that the alternatives, substitutions and accommodations are properly 
129 

Dr. Kizer - Page 2 

addressed in !he planning. the public - and particularly veteran consumer groups -- hasn't 

been adequately or appropriately informed. thus raising significant. unnecessary 

misunderstanding and alarm among veterans. 

PTSD and substanee abuse treatments are readily identified as part of VA's core mission 

of caring for the special needs of combat veterans. There are very often no comparable privatesector alternatives for veterans seeking these types of services/care. There are certain PTSD and 

substance abuse patients for which acute-care, inpatient medical treatment of this sort is critically 

important. And dlese needs must be accommodated. It is critical that the unique nature and the 

clinical integrity of these programs are protected and maintained. 

VVA's recommendations for addressing this very serious problem are as follows: 

ApprOJlriate Alternatives 10 Current Inpatient Care Models 

VVA acknowledges that inpatient programs for PTSD and/or substance abuse may be 

costly and sometimes not the best method of providing care. At the same time, for many veterans 

suffering from these conditions, an outpatient program will not meet their clinical needs -- a safe, 

supervised, therapeutic-setting, overnight accommodation is critical, particularly for veterans on 

medications, veterans who reside a considerable distanee from the V AMC, and homeless/indigent 

veterans whose day-to-day life circumstance would hinder recovery. An additional factor to 

consider is the rural versus urban setting -- forcing veterans with these particular conditions to 

travel from relatively safe rural settings to a V A facility perceived to be in a dangerous urban area 

can be detrimental to treatment. 

Certainly there are alternatives to the up to $800-a-day acute-care hospital bed that could 

meet both the objectives of patient care and cost savings. There are many options. Domiciliary 

or nursing home-style care could be an appropriate model. Also, VVA has long advocated for 

community-based organizations, such as the VVA- and VA-supported homeless programs in 

Wisconsin and Connecticut, in which V A establishes sharing or contract relationships with 

community providers to maximize use of all available resources. 

Again, VVA is not directly opposed to VHA's efforts to enhance efficiency by shifting 

inpatient PTSD and substance abuse programs to alternative care settings. We are very 

concerned, however, that these alternatives be put into place I!Iil!t to the closure of hospital-based 

inpatient units. I would note that VVA strongly urges our leaders to work with program 

administrators to identify and implement appropriate program efficiencies for VA's inpatient 

PTSD and substance abuse programs. We urge VA at all levels to consult with the veterans 

commurtity on these issues as well. 
130 

Dr. Kizer - Page J 

Adyanced PR Regarding Program Changes 

In many locations, we believe, proper planning and accommodation of veterans with 

special needs for inpatient PTSD and substance abuse units is taking place. Our strategy for 

addressing these location-by-Iocation issues has been to put local veteran advocates in contact with 

appropriate local V A officials to work toward the resolution of such issues. Often this type of 

communication seems 10 resolve the concerns. By gelling more information to the local veterans 

community, VA can alleviate many fears and defensive posturing. 

It is very important that the veterans community leadership -- consumers _. be involved 

in and informed of VA's decisions to change the way care is provided prior to changes taking 

place. This is particularly true of PTSD programs where the local veterans community takes a 

very real, personal stake in program quality and continuity. By involving VSO leaders in these 

discussions of how best to shift inpatient PTSD and substance abuse care to a more cost-effective 

setting, VA will be able to educate the public about the purposes and goals of these changes, and 

will be able to identify additional community resources which may be of use. 

The issue of inpatient PTSD and substance abuse program closures seems to be a 

·systemic" problem, with similar concerns cropping up in various locations. This is why we are 

contacting you directly on this maUer, Dr. Kizer, in addition to having VVA local leaders work 

with VA program officials at the local level. 

VVA would appreciate any information you may provide regarding which sites around the 

country are contemplating these kinds of changes to VA inpatient PTSD and substance abuse 

unilS, including the alternatives considered and the substitute services to be provided. This will 

allow us to better respond to our members' inquiries. 

Thank you for your assistance in this matter. We look forward to working with you to 

ensure that the best possible medical services are provided to our nation's veterans. 

Sincerely, 

Kelli Willard West 

Director of Government Relations 
131 

Vietllam Veteralls of All/Hit-a. /Il('. 

In.J M Slree!. N\\'. Wa_hinglon.I)(· 211IKI:' ·.'IX3 

" NtI(-For-I'n~/il \ '('(t'IWI,'" S" /Tin' (" gani;-tlli"" ( 'ho"'Of'd hy Ih,' ( ""ilf''/ Stlill'S (·OIl,I(/"{·,\';'; 

KELLI WILLARD WEST 

Diredor of Government Relations 

KeJli Willard West joined the VVA government relations department in 1993. after serving 

in the U.S. House of Representatives as Legislative Assistant to Representative Dave Nagle from her 

home state of Iowa. As VV A Legislative Assistant and subsequently Deputy Director for 

Government Relations, her areas of responsibility included health care, Agent Orange, PTSD and 

related issues. In October 1995, she was promoted to her current position as Director of Government 

Relations. 

West is responsible for coordinating VVA government relations and legislative activities; 

advising W A leaders on strategy; overseeing and training VV A's nationwide network of legislative 

coordinators in support of national W A advocacy goals; and keeping the general VV A membership 

informed through reports in The VVA Veterall. 

Kelli received her BA in Global Studies from the University of Iowa. She resides in 

Washington, D.C., with her husband Rich, who is a graduate student at American University. 

FUNDING STATEMENT 

May 8, 1997 

The national organization Vietnam Veterans of America, Inc. (VV A) is a non-profit veterans 

membership organization registered as a 501(c)(19) with the Internal Revenue Service. VVA is also 

appropriately registered with the Secretary of the Senate and the Clerk of the House of 

Representatives in compliance with the Lobbying Disclosure Act of 1995. 

VVA is not currently in receipt of any federal grant or contract, other than the routine 

allocation of office space and associated resources in VA Regional Offices for outreach and direct 

services through its Veterans Benefits Program (Service Representatives). This is also true of tile 

previous two fiscal years. 

For Further Information, Contact: 

Director of Goverrunent Relations 

Vietnam Veterans of America, Inc. 

(202) 628-2700, extension 127 
132 ' 

STATEMENT OF 

JOHN C. BOLLINGER, DEPUTY EXECUTIVE DIRECTOR 

PARALYZED VETERANS OF AMERICA 

BEFORE THE 

HOUSE COMMITTEE ON VETERANS' AFFAIRS, 

SUBCOMMITTEE ON HEALTH 

CONCERNING 

H.R. 1362, "THE VETERANS MEDICARE REIMBURSEMENT DEMONSTRATION 

ACT OF 1997" 

DRAFT THIRD-PARTY COLLECTIONS LEGISLATION 

AND 

DRAIiT V A PHYSICIAN AND DENTIST LEGISLATION 

MAYS, 1997 

Mr. Chairman, Ranking Democratic Member Gutierrez, and members of the Subcommittee, the 

Paralyzed Veterans of America (PVA) is honored to present testimony today regarding the 

legislative proposals being considered by this Subcommittee. 

PVA h", .l1"",,ys supportel allowing the Department 0[" Veterans Albirs (V .. \1 10 rdain t!w,1. 

part'" collec tions and allo,,"ing the VA to establish a Medicare subYCntioll demonstrati on project 

that ultimatel," could be expanded to include the entire VA medical system" \\ "c support the se 

measures today. but ,,"ith a caveat: The monies collected from these "alternati ve fu nding streams" 

must be a supplement to. not a substitute for. an adequate core-appropriation for V A medical 

care. 

Last Congress. PV A supported H.R. 4068. a measure that was similar to H"R. 1362. PV A 

testified accordingly for the record before all committees of jurisdiction lasl year. We reiterate 

our support for the crealion of a demonstration project to explore the feasibility of allowing the 

V A to relain Medicare reimbursements for health care provided 10 ::. "h -gmllp Medicare 

eligible Yc!eralls. 
133 

Th.· 'cecnt release of the report of the Medicare Trustees demonstrating that. without corrective 

legislation. the Hospital Insurance Trust Fund would be depleted in the year 2001, highlights 

another benefit arising from enactment of H.R. 1362. Enactment of H.R. 1362, the "Veterans 

Medicare Reimbursement Demonstration Act of 1997." would help strengthen the Medicare trust 

funds. Under the provisions of H.R. 1362. the Health Care Financing Administration would 

reimburse the V A at a rate of 95 percent of regular Medicare payment rates. Allowing new 

veteran users into the system would also lower the aggregate cost of care for all veterans. 

Enactment ofH.R. 1362 would be a "win-win-win" situation: The Medicare Trust Funds would 

save vitally needed dollars while the V A would be able to realize efficiencies leading to lower 

health care costs and veteran users would be provided additional health care choices. In addition. 

'vledicare stli'vention would also initialize for the VA " 'hat is.t gr"xing lrcnd ill "II I :deral health 

systems. including Medicare and Medicaid. This trend coordinates benefits and sharing among 

these systems in order to bring better health care to beneficiaries at reduced cost. 

PYA believes that Medicare subvention will result in ultimate cost-savings to American 

taxpayers while ensuring the best possible care for veterans, especially those veterans in need of 

specialized services, but we recognize that the data to support these contentions are scarce. That 

is why we support the demonstration project as established in H.R. 1362. At the same time we 

are not willing to gamble with the health and lives of our members and all veterans if the 

estimated receipts from Medicare subvention and retention of third-party reimbursements prove 

chimerical. 

PVA is distressed by the Administration's attitude as evidenced by its Fiscal Year 1998 Budget 

for VA medical care. User fees and alternative funding streams must never take the place of a 

federal commitment to the men and women who served in the Armed Forces. Veterans served 

this Nation. and the health care they earned should not be predicated on monies received from 

insurance companies. This federal commitment is perpetuated by an adequate core appropriation 

for V A medical care. PV A is concerned that even with passage of H.R. 1362 and legislation 

allowing the V A to retain tlnd-party reimbursements before the start of the fiscal year. a 
134 

possibility that lIlust trunkly be vicwed as over-optimistic. that estimates dcri\ ~d I'n m thc 

Administration regarding the monies to be received by the V A. are merely that -- estimates. 

Cld 'ections 01' the \ k, ieal Care Cost Rcco\'ery I \ 1(' ::R) Program ha\'c fullen . \\·I.ilc collection 

costs haw risen over the last few fiscal years. Total collections for FY 1997 are estimated to be 

$41 million less than total collections for fY 1995. At the same time. the percentage costs of 

collections havc risen Ii-om 17.8 percent to an estimated 22.4 percent over this same period 

(Source: Budget of the United States Government. Fiscal Year 1997. and Fiscal Year 1998). 

While the trend in collections is downward. and the costs of these collections increases. the 

Administration's FY 1998 budget estimates that these trends will be magically reversed. The 

Administration estimates that collections for FY 1998 will be $58 million more than those 

estimated for FY 1997. and collection costs are estimated to fall from 22.4 percent to 20.8 

percent. Is there any wonder why we are skeptical of the Administration's tenuous estimates and 

shaky financing schemes for V A medical care" 

As we stated earlier. monies collected from alternative funding streams should be supplements 

to. not substitutes for. an adequate core appropriation for VA medical care. To guard against the 

use of monies collected from the proposed Department of Veterans Affairs Medical Care 

Collections Fund as a substitute for an adequate core appropriation. PYA supports the inclusion 

of language in this legislation mandating that monies collected not be used in lieu of appropriated 

dollars. Only this will keep faith with the men and women who answered this Nation's call to 

service. 

p''';\ has no objccup!" to the drati Iegislau(l'; ", Iili the applicatioll "I "therwise applicable 

financial penalties on certain retirement-eligible VA physicians and dentists who hold positions 

which would not be retained because of changes in facility staffing arrangements. 

I would be happy to answer any questions that you may have. Thank you again for this 

opportunity to testify before this Subcommittee. 
135 

DEPARTMENT OF VETERANS AFFAIRS 

MEDICAL CARE COST RECOVERY (MCCR) PROGRAM 

/In millions) 

FISCAL YEAR FY1995 FY1996 FY1997 (est.) FY1998 (est.) 

COLLECTIONS 574 557 533 591 

COSTS 102 119 120 123 

DEFICIT 472 438 413 468 

REDUCTION 

% COST 17.8% 21.3% 22.4% 20.8% 

(soun:e. AdminillrltiOn Budget lor FISCal V .... 11197 lind 1_) 

The Administration budget for VA collection is out of line with historical attempts at 

collections and costs. The FY1998 budget overestimates the collections and 

underestimates the administrative costs associated with these collections. 

801 Eighteenth Street. NW * Washington. DC 20006·3517 

1202) 872·1300 * 12021416·7622 tdd * 12021 785·4452 fax * www.pva.org 
136 

Pursuant to House Rule XI 2(g) (4) the following information is provided regarding federal grants 

and contracts: 

Fiscal Year 1995 

Department of Justice - Joint venture to produce procedures implementing the Americans with 

Disabilities Act (ADA) through certification of building codes $25.000.00 

Department of Veterans Affairs - donated space for veterans' representation $869.519.26· 

Court of Veterans Appeals. administered by the Legal Services Corporation - National Veterans 

Legal Services Project $240.286. 

Fiscal Year 1996 

General Services Administration - Preparation and presentation of seminars regarding 

implementation of the Americans with Disabilities Act (ADA) $25. 000 

Federal Elections Commission - Survey accessible polling sites resulting from the enactment of the 

Voting Access for the Elderly and Handicapped Act of 1984. PL 98-435 $10,000 

Department of Veterans Affairs - donated space for veterans' representation $897,522.48 • 

Court of Veterans Appeals. administered by the Legal Services Corporation - National Veterans 

Legal Services Program $200.965. 

Fiscal Year 1997 

Architectural and Transportation Barriers Compliance Board (ATBCB) - Develop illustrations for 

an Americans with Disabilities Act (ADA) technical compliance manual $10,000 

Department of Veterans Affairs - donated space for veterans' representation $224380.62 (as of 

12/31) • 

Court of Veterans Appeals. administered by the Legal Services Corporation - National Veterans 

Legal Services Program $37.125 (as of 12/3 I). 

* This space is authorized by title 38 U.S.C. § 5902. These figures are estimates and were derived by calculating 

square footage and associated utilities costs. It is our belief that this space does nol fall under the definition of 

federal grants and contracts. 
137 

CURRICULUM VITA 

JOhD BoUiDger 

Home: 

Office: 

Education 

Fort Washinatou. MD 

ParaI)'2ed VeteraDs of America 

80 I 18th Street, NW 

Washington, DC 20006 

BA Economics, Muskingum College, 1968 

1992 - present 

1990 -1992 

1987 - 1990 

1986 -1987 

1972 -1986 

Organizations 

Deputy Exec:ulive Director 

Paralyzed VeteraDs of America 

Na1ioaaJ Advocacy DiJector 

Pmalymd Vetenms of America 

Associate DiRCtor ofLegisJation 

Paralyad Veter3Ds of America 

AssisIaIIt to tile AcbuinisUaIor ofVcteraus A1faUs 

Department ofVctcnDs AfIiIirs 

Vetera/IS B-nts Depmtmmt 

Depanment ofVeteraos AfIiIirs 

Truslee - Paralyad Veterms of America Spiml Cord R.-n:h Folllldalion (SeRF) 

Board Member -Paralyzed Vetetans of America Education and Trainina Foundation (ETF) 

Member ofExec:ulive Board - President's Committee on Employment of People with Disabilities (pCEPD) 

Board Member - National Spinal Cord Il!iwy Hotline 

Mallory 

Uni1ed States Navy, retired in 1970 
138 

Non Commissioned Officers Association of the United States of America 

225 N. Washington 5t ... ", • Alenndria, Virginia 22314 • Telephone (703) 549-0311 

STATEMENT OF 

LARRY D. RHEA 

DEPUTY DIRECTOR OF LEGISLATIVE AFFAIRS 

BEFORE THE 

SUBCOMMITTEE ON HEALTH 

COMMITTEE ON VETERANS AFFAIRS 

U.S. HOUSE OF REPRESENTATIVES 

ON 

H.R. 1362, VETERANS MEDICARE REIMBURSEMENT 

DEMONSTRATION ACT OF 1997 

AND 

DRAFT LEGISLATION ON VA MEDICAL-cARE RECEIPTS 

MAY 8, 1997 

Chartered by the United States Congress 
139 

Non Commissioned Officers Association of the United States of America 

225 N. Washington Street • Alexandria, Virginia 22314 • Telephone (?O3) 549-0311 

DISCLOSURE OF FEDERAL GRANTS OR CONTRACTS 

The Non Commissioned Officers Association of the USA (NCQA) does not currently 

receive, nor has the Association ever received, any federal money for grants or contracts. 

All of the Association's activities and servkes are accomplished completely free of any 

federal funding. 

Chartered by the United States Congress 
140 

The Non Commissioned Officers Association of the USA (NCOA) considers it appropriate to 

begin by expressing to the Distinguished Chairman of the Subcommittee our sincere appreciation 

for this opportunity to testify of these Important issues relating to veterans health care. The 

Association trusts our comments today will be helpful to the Subcommittee Members. Your 

consideration of our testimony, therefore, is deeply appreciated. 

H.R.1362 

VETERANS MEDICARE REIMBURSEMENT ACT OF 1997 

NCOA enthusiastically endorses this legislation. The Association thanks the Distinguished Chairman 

of the Subcommittee for your efforts In crafting this bill and for your leadership In conducting this 

hearing. The bipartisan support which H.R. 1362 enjoys, both among original co·sponsors and 

others, Is testimony to the need for this legislation. Further, the Association Is pleased this 

Subcommittee and the full Committee on Veterans Affairs plan to act quickly with mark-up 

scheduled in the very near future. NCOA Is hopeful the House will follow suit with prompt floor 

action on this measure. 

As indicated, NCOA supports H.R. 1362 and this Association, probably like most other veterans 

organizations, would like to see a larger demonstration project undertaken. Nonetheless, NCOA 

understands the reasons - primarily, assuring no increase in cost to the MEDICARE program - for 

the limitations within H.R. 1362. Notwithstanding our wish for a larger project, the Association's 

support for H.R. 1362 is not diminished. 

NCOA is particulariy pleased this legislation recognizes the health care plight of military retired 

veterans. Specifically, the Association is grateful that at least one facility selected for the 

demonstration project shall be in the same catchment area as a military medical facility closed as 

a result of Base Closure and Realignment (BRAC). 

Although it appears that the Intent of the above Is to give a measure of priority under the 

demonstration project to military retired veterans affected by BRAe, the legislation does not 

specifically state such. 

2 
141 

NCOA requests, In the strongest possible tenns, that MEDICARE eligible military 

retired veterans be targeted explicitly as a priority by this legislation. The 

Association believes this certainly should be the case for the facility selected pursuant 

to the BRAC provisions. NCOA asks that MEDICARE eligible military retired 

veterans be made a priority for the entire demonstration project for the following 

reasons. 

Military retired veterans are the only category of federal retirees that lose virtually all of their health 

care options as age 65. The Defense Department's most recent solution, TRICARE, is not available 

to these over 65 veterans nor is It even available to those under age 65 who do not live near a 

military treatment facility. Further, In support of the Association's request to make MEDICARE 

eligible military retired veterans a targeted priority In this legislation, NCOA reminds the 

Subcommittee of the following facts: 

> 58 military hospitals have been closed 

> I 7 more military hospitals are scheduled to be down-sized and down-graded to clinics 

> 26 states - more than half - have no major military treatment facilities whatsoever 

> Space available care In military treatment facilities for non-active duty beneficiaries Is near 

non-existent - for the over age 65 military retired veteran, It is not an exaggeration to say 

that availability Is non-existent 

> IE MEDICARE reimbursement were passed for the Department of Defense, less than onethird of MEDICARE eligible military retirees would benefit and, then only those living near 

a military treatment facility. 

It is important to also remind the Subcommittee of the following: NCOA supported and actively 

worked for passage of last year's health care eligibility reform measure. To help ensure it's passage, 

the Association was asked to temporarily set aside one very Important issue so as not to delay or 

derail the legislation before Congress last year. The Association did so on the condition and 

assurance that the Issue of co-payments for health care provided to military retired veterans within 

VA would be addressed following passage of last year's bill. 

3 
142 

last year's eligibility reform measure has been enacted and Is being Implemented. Including 

military retired veterans as a specifically targeted priority within the demonstration to be conducted 

by H.R. 1362 would be a clear signal that the Committee Intends to fulfill the assurances given to 

this Association Just last year. NCOA urges the Subcommittee to do so. 

DRAFT LEGISLATION ON 

VA MEDICAL-CARE RECEIPTS 

As with the previous bill on MEDICARE reimbursement, allowing VA to retain third party receipts 

recovered from the private Insurance of veterans and other sources, has been a high priority of 

NCOA for several years. Therefore, NCOA supports the draft legislation on VA medical-care 

receipts that Is being considered today by the Subcommittee. 

This draft legislation, too, provides a great opportUnity for the Veterans Affairs Committee to fulfill 

the assurances made to NCOA last year regarding military retired veterans. Notwithstanding the 

recent eligibility reform measure, military retired veterans remain an unwanted commodity with the 

V A health care system unless they bring cash or a checkbook. 

Even with the passage of last year's measure, the overwhelming bulk of medical care provided by 

the OVA will continue to be provided for non-service connected conditions and without cost to 

the Individual veteran. The only exception to the above reality and current practice is the way 

OVA views the military retired veteran. Somehow, collecting deductlbles and co-payments from 

a non·servlce connected military retired veteran for treatment within V A Is both fashionable and 

encouraged. For other non-service connected veterans, It not only Is unthinkable, It Is condemned. 

V A continues to routinely waive co-payments for non-service connected treatment even when 

third-party Insurance Is involved except for the military retired veteran. 

Mr. Chairman, It Is always Interesting to listen to testimony and conversations regarding veterans 

and the health care they have "eamed.· It Is painfully obvious that the category of longest serving 

veterans - the military retiree - has • earned" little. DOD has no plan to fulfill Its obligation and Its 

as though a military retired veteran within VA Is a creature of a lesser order. It Is a collective 

4 
143 

failure of the entire Congress, DOD and OVA that there is an Inability and unwillingness to work 

together to fulllll promises that were indeed made to military retired veterans, 

NCOA has no quarrel with OVA collecting payments from MEDICARE, CHAMPUS, TRICARE 

or any other third party. NCOA does however have very strong and principled objections with 

requiring co· payments from the veteran beneficiary who served the longest and under a very clear, 

distinct promise. Even under current DOD and OVA Memoranda of Understanding and 

Agreement, military retired veterans have only earned the privilege of paying deductlbles and co· 

payments for health care while other categories of veterans, even tho.Jgh no promise was made or 

even Implied, are extended the privilege of OVA medical care for life, cost free. 

The draft legislation on V A medlcal·care receipts provides a grand opportunity for 

Congress to start honoring the federal commitment made to military retired veterans 

and NCOA asks the Distinguished Chairman and Members of this Subcommittee to 

take the lead. The Association strongly asks that you Include language In the bill that 

would waive any co-payments· from MEDICARE, CHAMPUS, TRICARE, or any 

other thlrd·party payer· for treatment provfded by V A to a military retired veteran, 

Mr. Chairman, this Is an Issue of equity amonr veterans. NCOA belIeves NOW Is 

the time to grant mIIIury retired veterans equal, cost free access on a priority basis 

to a OVA system that Is, after all, theirs too. It Is blatantly WfOIlI • moraly and on 

prtnclpal - to vfew military retirees as the cash cow to fund health care for other non· 

service connected veterans.. 

If Contrm believes It has an undisputable obllaation to provide V A health care for non-servlce 

connected veterans, then NCOA suaests Conaress has a concomitant obIlaation to fund It througll 

adequate annual appropriations. MIlItary retired veterans should not be viewed as the deep pockets 

to meet: any pel'(eIved nodon Nt Conaress nuy have In this reeard. Therefore, dn*YEe NIX and 

all CQ-oayments for health gre Droy!ded In i federil PVA facility to mlHtarv retired vewins. 

5 
144 

PHYSICIANS SPECIAL PAY 

NCOA does not have a position on special pay for VA physicians; therefore, the Association 

refrains from commenting on the draft bill relating to this Issue. 

CONCLUSION 

In closing, NCOA salutes the sponsors, co-sponsors and the Distinguished Chairman for the 

initiative that all of you have displayed on both H.R. 1362 and the draft of the third-party receipts 

bill. NCOA's comments relative to both bills were strong because the Association believes strongly 

in the concept of equity. Therefore, the Association asks that H.R. 1362 be amended to reflect 

our eartler request. NCOA also requests that language be Inserted In the draft V A medical-receipts 

that would waive co-payments for military retired veterans. 

Thank you. 

o 
ISBN 0-16-055633-3 

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