many officials within the VA itself do not believe are cost prohibitive, I do not believe an unfavorable cost estimate should alter these priorities. I do not want to belittle the service of the Congressional Budget Office and I appreciate the advice they are able to provide the Committee. It is important information that must be reviewed alongside other important information and in light of priorities. In this case, I believe that my priority to provide comprehensive long-term care to the highest priority veterans the system treats within the $2 billion VA is already spending on long-term care outweighs the concern I have about the CBO estimate in light of the other information I have available. I believe it is more important to allow VA to respond to veterans' need for emergency care services than to consider CBO's estimate which may not have been based on accurate information. These are important choices we in Congress must make in all of our deliberations. Thank you for holding this hearing, Mr. Chairman. I have lots of questions I will hold for our witnesses. Statement of Paul N. Van de Water on the Budgetary Impact of H.R. 2116, the Veterans' Millennium Health Care Act before the Subcommittee on Health Committee on Veterans' Affairs June 30, 1999 NOTICE This statement is not available I appreciate the opportunity, Mr. Chairman, to appear before this Subcommittee to discuss the budgetary impact of H.R. 2116, the Veterans' Millennium Health Care Act. My statement will focus on conceptual issues related to Congressional Budget Office (CBO) estimates in general and how they apply to H.R. 2116 in particular. The detailed assumptions underlying our analysis of that bill are set out in CBO's cost estimate, which is appended to my statement. Enactment of H.R. 2116 would affect both discretionary and mandatory (or direct) spending. Several sections would change veterans' medical care-a discretionary program. Notably, the bill would increase access to long-term care for certain veterans and would expand reimbursement for the costs of emergency care, subject to appropriation of the necessary amounts. The bill would also give the Department of Veterans Affairs (VA) the authority to spend, without further need for appropriations, its share of any amounts that the federal government might receive from the tobacco industry for the costs of tobacco-related illnesses. DISCRETIONARY COSTS Veterans' medical care is a discretionary program whose funding is provided annually in the appropriation bill for the Departments of Veterans Affairs and Housing and Urban Development. The appropriation limits how much the VA may actually spend regardless of how much spending is authorized. Table 1 shows the annual appropriations for veterans' medical care for the past 10 years and provides additional data on the program's operations. By themselves, legislative changes such as those in H.R. 2116 authorizing 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 required under section 403 of the Congressional Budget Act, it estimates the resources that would be required to implement the bill. In doing so, CBO assumes that the necessary funding is provided and that other activities are not curtailed in order to provide the services authorized by the bill. The assumption that appropriations conform to authorizations 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, the assumption means that CBO does not have to predict which programs will be treated favorably by the appropriation process. Instead, all programs of all committees are treated alike. If CBO did not assume changes in appropriations, no authorizing legislation even one that eliminated every restriction on providing veterans' medical care-would ever be shown to increase costs. When we receive a bill for costing, we must determine what changes it would make in the law and what consequences it would have for participation in a program such as veterans' medical care. For example, expanding access to care in nursing homes could increase participation by eligible veterans-in this case, those with service-connected disabilities rated at 50 percent or more. On the one hand, the Congress could increase funding to accommodate the 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 might be forced to curtail enrollment by or certain services to some veterans who would otherwise have been served under current law. CBO's cost estimate provides relevant information for both perspectives. It informs the Congress and the appropriations committees of the likelihood of a greater demand for health care from veterans and the possible need for more money. It also informs the Congress about the extent to which some veterans could be displaced or denied care if the bill was enacted and appropriations were not increased. CBO estimates that expanding the provision of long-term care to veterans, as specified in section 101 of H.R. 2116, would ultimately increase the VA's resource requirements by about $1.0 billion a year. Similarly, expanding the department's authority to pay for emergency care, provided in section 102, would increase the VA's resource needs by about $400 million a year. Whether federal outlays would increase as a result of enacting those provisions, however, would depend on the extent to which additional appropriations were provided. MANDATORY COSTS In contrast to the provisions affecting veterans' medical care, the establishment of the veterans' tobacco trust fund under section 203 of the bill would create direct spending. If that section of the bill was enacted, no further legislation would be required to allow the VA to spend its proportional share of any funds recovered by the federal government from the tobacco industry. Because the amounts that the federal government might collect from the tobacco industry could be substantial, the spending authority created by this provision could also be significant. To develop an estimate of that authority, CBO had to answer three questions. First, what is the likelihood that the federal government will win or settle a lawsuit? Second, how much would the federal government recover if it won or settled a lawsuit? Third, what proportion of the amounts recovered would be allocated to the VA? Clearly, none of those questions can be answered with any precision, and the range of possible outcomes is large. Equally clear, however, is that the provision cannot reduce spending but only increase it. In such a situation, CBO attempts to estimate the expected value of a proposal's budgetary effect—that is, the weighted average of the cost of the proposal under a variety of circumstances, taking account of their respective probabilities. For this estimate, CBO has assumed that there is a 10 percent chance that the federal government will win or settle a lawsuit with the tobacco companies. All things considered, CBO estimates that section 203 could be expected to increase mandatory outlays by about $600 million over the 2000-2009 period. Those outlays could supplement or supplant discretionary spending for veterans' medical care. CONCLUSION In sum, CBO estimates that H.R. 2116 would have a significant budgetary impact on both spending subject to appropriation and spending that occurs outside the annual appropriation process. Assuming appropriation of the necessary amounts, CBO estimates that the bill would raise discretionary spending by about $0.2 billion in 2000 and about $1.4 billion annually by 2004. Assuming that those amounts are not appropriated, those figures are estimates of the extent to which other activities or beneficiaries would be displaced. In addition, the provision to spend the VA's proceeds from tobacco litigation would create significant authority for direct spending. |