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Washington, DC. The subcommittee met, pursuant to notice, at 10 a.m., in room 334, Cannon House Office Building, Hon. Cliff Stearns (chairman of the subcommittee) presiding.

Present: Representatives Stearns, Gutierrez, Doyle, Carson, Snyder, Rodriguez and Shows. Also Present: Representatives Evans, Buyer and Reyes.

OPENING STATEMENT OF CHAIRMAN STEARNS Mr. STEARNS. Good morning. The Subcommittee on Health of the Veterans' Affairs Committee will come to order.

After a spirited discussion at our markup last week, the full Committee deferred action on H.R. 2116, the Veterans' Millennium Health Care Act, to permit members to hear testimony on the cost implications of the bill.

By way of background, let me note that Chairman Stump wrote to CBO on May 12 and requested an estimate by June 1. Prior to markup last week, CBO had verbally given committee staff its estimates of the bill's major cost items. I understand that members' staff have been briefed on those estimates. But we did not receive anything in writing, however, until the morning of the markup, and the estimate was still marked "preliminary”.

All of us have had somewhat of a frustration with the delay in getting a timely cost estimate. The important point, though, is that we have an opportunity today for members to review cost estimates with CBO and the Veterans' Administration.

The references to the cost of this bill require comment. As CBO acknowledges, the major provisions of H.R. 2116 are subject to the availability of appropriations. Nothing in the bill requires the Appropriations Committee to provide any particular level of funding.

As understand CBO's testimony, they are essentially saying that, if VA had unlimited money to spend, it could spend up to $1.4 billion in fiscal year 2004 under this bill. Now, that is a very huge "if". VA has never had unlimited money to spend on medical care, so we should be clear that these are not real costs.

There is, however, a real question about the reliability of these CBO figures. CBO's track record on VA costs is certainly not good. CBO says VA could spend up to one billion by the year fiscal year 2004 on a provision that we believe would require a small fraction of that amount. That provision directs VA to furnish needed longterm care to 50 percent service-connected veterans. But these veterans are already VA's highest priority and VA is providing them care.

To suggest that VA is not already largely meeting the needs of severely disabled service-connected veterans is questionable. We will hear from a VA expert this morning who has estimated that the annual cost of this provision would be less than $ 150 million, and that the cost would be largely offset by a new co-payment under the bill.

My colleagues, we may leave this room this morning with different views on whether the potential cost of this provision is closer to CBO's numbers or closer to VA's. But whatever the number, this committee should have no hesitation about a provision aimed at serving 50 percent service-connected veterans. These certainly are America's most deserving.

CBO also assigns a very high cost to another provision of the bill. That provision authorizes but does not require VA payments for emergency care for certain uninsured veterans. Whether or not its cost for that provision is on target, I am troubled that CBO fails to project any offsetting revenues from other copayment provisions of the bill from pharmaceuticals and other high-cost medical items.

How reliable can CBO's cost estimate be when it treats the grant of authority to start a program as a cost, but ignores the grant of authority to offset these costs? Let me repeat that. How reliable can CBO's cost estimate be when it treats the grant of authority to start a program

as a cost, but ignores the grant of authority to offset these costs? Clearly, we have many questions to ask.

Before calling our first witnesses, let me acknowledge, with regret, the news that Dr. Ken Kizer yesterday asked the President to withdraw his nomination for a second term as VA Under Secretary for Health. Dr. Kizer has been an exceptional leader and has done a great deal to transform the VA health care system. There is more to be done, obviously, for the VA and our veterans, and I'm sure my colleagues join with me in pledging to work in that effort. Certainly moving our Millennium Health Care Act is an important part of this pledge.

With that, let me invite the ranking member of the full committee, Lane Evans, my colleague, to make an opening statement.



Mr. EVANS. Thank you, Mr. Chairman. I appreciate your willingness to hold this hearing today. I'll keep my remarks as brief as possible so that we can have time for all our members to speak.

Last week we began to mark up this Millennium Health Care Act. Unfortunately, the Congressional Budget Office did not have an estimate ready in time for members to fully consider it. I want to reiterate the importance of timely estimates for congressional consideration. I know we have requested estimates on bills that have languished at CBO for a year without an estimate.

CBO will testify that VA is funded by appropriations. So, to the extent that Congress does not appropriate the necessary funds, they will obviously not be spent. CBO also assumes that nothing in Veterans Health Administration operations will change as a result of reprioritization of activities.

We can take two views of CBO estimates for discretionary funds. We can choose to view them as largely "advisory"—that is, they give us some sense of the magnitude of spending required to fully implement the initiative if the organization makes no other changes to accommodate it or we can accept the "high" CBO estimates as prohibitive of congressional priorities it deems to be too expensive. We can argue about the credibility of these estimates, but when we're talking about appropriated funds, our action or inaction boils down to how we choose to use them.

I choose to view CBO's estimates as advisory. The fact that I do not subscribe to nor fully understand its assumptions based on the report makes them even more so.

CBO estimates are an important information tool that must be reviewed alongside other important information, such as estimates of VA officials, and in light of congressional priorities. In this case, I believe that my priority to mandate comprehensive long-term health care to the highest priority veterans the system treats, and to allow VA to respond to veterans' needs for emergency care services, outweighs the priority I would give a CBO estimate based on unknown methodology. These are important choices we in Congress must make in all of our deliberations.

Mr. Chairman, thank you for holding the hearing, and I look forward to working with you on this issue.

(The prepared statement of Congressman Evans appears at p. 29.)

Mr. STEARNS. I thank my colleague.

In calling up our witnesses, it is my understanding that the VA has no formal statement this morning. But after we hear from the CBO, I would like to ask the VA's long-term care expert, Dan Schoeps, to briefly discuss his cost estimate on section 101, how it differs from the CBO's estimate, and to comment on any major flaws in the CBO long-term care analysis.

Dan, please also explain your work with the VA's Advisory Committee on Long Term Care and your consultations with members of that committee on your estimate.

What we are going to do is allow both the CBO witnesses and the members from the Department of Veterans Affairs each have an opening statement of ten minutes, so that you have a full opportunity to explain your position. We understand you are accompanied by two folks, too. So I will start with Paul Van de Water, the Assistant Director for Budget Analysis, Congressional Budget Office, for your opening statement.

Good morning.




Mr. VAN DE WATER. Thank you, Mr. Chairman. I appreciate the opportunity to appear before your subcommittee to discuss our estimate of H.R. 2116, the Veterans' Millennium Health Care Act.

As you indicated, I am accompanied this morning by Dr. Michael Miller, who is the Chief of our Defense, International Affairs, and Veterans' Affairs Cost Estimates Unit.

My statement will focus on the conceptual issues relating to our estimates in general and how they apply to our estimate for H.R. 2116 in particular. The detailed assumptions underlying our analysis of the bill are set forth in CBO's cost estimate, which is appended to my written statement.

Enactment of H.R. 2116 would affect both discretionary and mandatory spending. Several sections, as you noted, would change veterans' medical care, which is a discretionary program. Notably, the bill would increase access to long-term care for certain veterans and, as you noted, would expand reimbursement for the costs of emergency care—subject, of course, to the appropriation of the necessary amounts. The bill would also give the VA authority to spend, without the need for further appropriations, its share of any amounts that the Federal Government might receive from the tobacco industry for the costs of tobacco-related illnesses.

Let me turn first to the discretionary portions of the bill. By themselves, the legislative changes in H.R. 2116 that authorize long-term and emergency care for veterans do not raise Federal outlays because funding for them is subject to appropriation. However, when CBO estimates the budgetary impact of an authorizing bill—as we are required to do under section 403 of the Budget Act—we estimate the resources that would be required to implement the bill. We assume that the necessary funding is provided and that other activities are not curtailed.

The assumption that appropriations are provided is useful for at least two reasons. First, it gives the Congress a sense of how much more funding it could be asked to provide because of the authorizing bill. Second, it does not require CBO to make any assumptions about which programs would be treated favorably in the appropriation process.

When we receive a bill for costing, we must determine what changes it would make in law and what consequences it would have for participation in a program such as veterans' medical care. In this case, for example, expanding access to care in nursing homes would increase participation by eligible veterans—that is, those with service-connected disabilities rated at 50 percent or more. On the one hand, the Congress could increase funding to accommodate that greater participation and leave the rest of the program to be funded as under current law. On the other hand, if no additional funding was provided, the VA would be forced to curtail enrollment or services provided to other veterans.

CBO's cost estimate provides information that is relevant for both perspectives. It informs the Congress of the likelihood of a

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