The bill contains several provisions that would have a significant budgetary impact, including provisions to increase access to long-term care for certain veterans, allow the Department of Veterans Affairs (VA) to reimburse veterans or providers for the cost of emergency care, extend medical benefits to combat-injured veterans, and permit VA to spend some of the money that the United States might receive from litigation with tobacco companies. Assuming appropriation of the necessary amounts, CBO estimates that the bill would entail discretionary costs of about $138 million in 2000 and about $1.4 billion in 2004. In addition, the provisions to spend proceeds from tobacco litigation would raise direct spending by about $20 million in 2003, $30 million in 2004, and $170 million in 2009. Because the bill would affect direct spending, pay-as-you-go procedures would apply. H.R. 2116 contains intergovernmental and private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA). The costs to state, local, and tribal governments as a result of the mandates would not exceed the threshold specified in the act ($50 million, adjusted annually for inflation). Similarly, costs of the private-sector mandate are unlikely to exceed the corresponding threshold specified in UMRA ($100 million, adjusted annually).

ESTIMATED COST TO THE FEDERAL GOVERNMENT

The estimated budgetary impact of H.R. 2116 is shown in the following table. The costs of this legislation fall within budget function 700 (veterans' affairs).

Spending Subject to Appropriation

Extended Care Services. Spending for veterans' medical care is limited by discretionary appropriations. An enrollment system ensures that care is provided to veterans with the highest priority. These priorities established in law require VA to treat veterans with service-connected disabilities before other beneficiaries. The law states that VA shall provide medical services such as hospital and outpatient care and may provide nursing home care. Thus, VA has discretion whether to provide nursing home care to high-priority beneficiaries or to use its resources to provide additional hospital or outpatient care to other

veterans.

VA currently provides nursing home care to about 34,000 veterans each day. In total, it provides nursing home or other long-term care to approximately 65,800 veterans a day at an annual cost of about $2.6 billion. Of the veterans who receive long-term care from VA on any given day, about 11,000 have service-connected disabilities of 50 percent or greater even though about 535,000 veterans in total are disabled to that degree.

The need for long-term care by veterans is very large because many veterans are disabled or elderly. According to the Federal Advisory Commission on the Future of VA Long-Term Care about 610,000 veterans a day needed some form of long-term care in 1997. Among the veterans with higher priority for medical care from VA, so-called Category A veterans, the daily need totaled an estimated 295,000. (Category A veterans are those with serviceconnected disabilities, those who fall into special categories (such as former prisoners of war), and those with incomes below a certain threshold. Most Category A veterans have relatively low incomes, and low-income veterans comprise most of the roughly 3 million veterans who enroll with VA for health care).

Section 101 of H.R. 2116 would limit the discretion allowed to VA under current law by requiring that extended care be available for veterans whose service-connected disabilities are rated 50 percent or greater or who require long-term care because of a service-connected disability. The program of care would include geriatric evaluations, nursing home care (in VA and community-based facilities), domiciliary services, respite care, and adult day health care. CBO estimates that this section would take three to four years to implement and would eventually cost about $1.0 billion a year in fiscal year 2000 dollars.

CBO's estimate relies on data from VA, the 1992 National Survey of Veterans, and the National Long-Term Care Survey (NLTCS). CBO determined the probability of a person being institutionalized as a function of his age, marital status, and number of limitations in activities of daily living one indicator of an individual's need for long-term care. Applying those probabilities to a distribution of veterans with service-connected disability ratings of 50 percent or higher, CBO estimates that by 2010 about 45,000 additional veterans would receive care in nursing homes for an annual cost of $1.2 billion. This method of estimation takes into account that spouses often act as caregivers within the home to veterans who might otherwise require a nursing home stay. In the near term, demand for nursing home care through the VA would be lower because some veterans currently rely on Medicaid, private insurance, relatives, and certain Medicare-funded services to provide or finance their care. Initially, those veterans might not want to change their arrangements with providers. CBO assumes that eventually veterans with ratings of 50 percent or higher who enter nursing homes would turn to the VA for their care because, unlike other private or public insurance programs, it would be free to them. CBO expects that most nursing home patients would be placed in community nursing homes for an average stay of 179 days and at a cost of about $152 a day per patient (in 2000 prices). (Nursing homes owned and operated by VA are almost twice as expensive as privately operated homes.)

In addition, veterans who have disability ratings of 50 percent or more may need long-term, personal care short of that provided in a nursing home, often in their own home. CBO estimates that 62,000 such veterans would require home-based care at an annual cost of $0.1 billion (an average of 2-1/2 hours of care per week at an hourly cost of $18).

The bill would require copayments from veterans receiving long-term care if the veteran does not have a service-connected disability rated at 50 percent or greater. VA would be allowed, without further appropriation, to spend these amounts on providing long-term care. VA would be required to base the copayment on the assets and income of the veteran and spouse. The maximum monthly copayment would allow for protecting the spouse from financial hardship and for the veteran to retain a monthly personal allowance.

CBO estimates that collections from copayments would amount to $0.3 billion in 2010. The estimate assumes that veterans with no service-connected disability or with a disability rating less than 50 percent would be charged copayments on about 69,000 stays at VA nursing homes, community nursing homes, and VA domiciliaries if that stay were longer than 21 days. CBO also assumes that single veterans would keep a minimum personal allowance of $1,000 per year, while those with a living spouse would retain at least $13,000 per year. Based on VA's Patient Treatment Files, the vast majority of the 69,000 stays would be lowincome veterans who would be unable to defray the full cost of their care. If VA were to require veterans to draw down their personal assets or if it pursued estate recoveries, copayment revenues might be higher.

Reimbursement for Emergency Care. Section 102 would significantly expand VA's authority to reimburse veterans and institutions for emergency care. It would allow VA to pay for care stemming from life- or health-threatening emergencies involving a veteran who is enrolled with VA for care, has no other coverage for emergencies, and has received care

from VA within the 12 months preceding the emergency. CBO estimates that this provision would increase spending by about $80 million in 2000 about $400 million a year by 2004, assuming appropriation of the necessary amounts. Those costs would stem from the costs of emergency room care and any subsequent hospital care

Of the 3 million veterans enrolled with VA, CBO estimates that about 750,000 are uninsured and would be eligible for benefits under the bill. Emergency room care represents about 3 percent of the costs of private health plans. Emergency room costs would be two to three times greater for veterans covered by the bill, however, based on their generally poorer health. Thus, CBO estimates that the immediate costs of emergencies would amount to about $155 million annually (in 2000 dollars).

CBO estimates that two-thirds of all visits to the emergency room would be urgent and that 16 percent of those visits would lead to admitting the veteran for an inpatient stay. For veterans under 65 years of age, the average hospital stay would cost about $7,000. For veterans 65 years old or older, Medicare would cover the hospital costs, but VA would pay physicians' costs for those veterans without Part B coverage; CBO estimates that those costs would average about $1,000 for the small fraction of veterans who lack Part B coverage. The costs of the subsequent hospital stay would raise the annual bill to VA under this provision by about $195 million (also in 2000 dollars).

Care for Combat-Injured Veterans. VA currently accords highest priority to veterans with service-connected disabilities that are rated at least 50 percent disabling. The lowest priority is given to veterans without such disabilities and with incomes over a certain threshold. Section 103 would raise the priority status for medical care of combat-injured veterans. Because medical care is a discretionary program, available appropriations limit the number of veterans who receive care, and this bill would make it more likely that VA would provide care to a combat-injured veteran who does not receive a high priority under current law. CBO estimates that this provision would raise the costs of veterans' medical care by about $20 million a year, assuming that additional appropriations would allow VA to treat the new beneficiaries as well as veterans who would receive care under current law.

For this estimate, CBO assumes that the population of combat-injured veterans is about as large as the number of individuals who have been awarded a Purple Heart. According to data from the Military Order of the Purple Heart, about 550,000 veterans with the award were still living in 1995. Roughly half of those veterans already qualify for priority-level care based on service-connected disabilities or income, according to data from VA.

Although the remaining veterans-roughly 250,000-would be eligible for priority care, it is likely that only a small portion would seek VA services-only about 2 percent of all veterans in the lowest priority category used VA's medical services in 1996. We assume that the same percentage of such veterans who were injured in combat currently seek care from VA and would use VA's medical services a bit more intensively under this bill. We also assume that another 2 percent of those veterans would become new users of VA care under the bill. CBO assumes the average cost of care for combat-injured veterans would be the same as that of other veterans in the same priority grouping.

Extension and Revision of Authorities. Section 205(a) would extend the eligibility of Vietnam-era veterans for readjustment counseling from January 1, 2000, through January 1, 2003. Vietnam-era veterans currently account for 19 percent of the patients in this program and an estimated 15 percent of the program's total costs-about $70 million in 1999. CBO estimates that this provision would cost about $8 million in 2000 and $34 million over the 2000-2004 period.

Section 205(d) would amend the Homeless Veterans Comprehensive Service Programs Act and would extend the program's ability to make grants through fiscal year 2002, from its current deadline at the end of fiscal year 1999. Based on recent experience in this program, CBO expects annual grants to construct shelters for homeless veterans in the amount of $6 million over the 2000-2002 period. These grants would lead to a stream of payments to operate the shelters in subsequent years. The construction and operating expenses would total $37 million through 2004.

Section 205(e) would allow the Homeless Veterans Program to subsidize the purchase of vans for the purpose of outreach to homeless veterans. Based on the number of vans purchased in earlier years, CBO estimates annual expenditure of $520,000 to assist in the purchase of 20 vans a year for four years.

Other Provisions. CBO does not have enough information to estimate the budgetary impacts of some provisions in the bill. Section 104 would allow VA to provide medical care to certain military retirees on a priority basis and be reimbursed by the Department of Defense (DoD) at the rate that DoD would have paid to a contractor under TRICARE. For the most part, the payments by DoD to VA would not add to the costs of TRICARE, but the provision could lead to somewhat greater use of medical benefits and thus higher overall payments by DoD. DoD would incur extra expenses to the extent that retirees increase their use of medical care because VA's copayments are less than under TRICARE.

Section 106 would authorize VA to conduct a three-year pilot program to provide medical care for certain dependents of enrolled veterans. The provision would require payment of a reasonable charge by the dependent or the dependent's parent or guardian. CBO estimates that this provision would probably raise costs to VA but by a small amount. Most enrolled veterans have low incomes, and although ability to pay would be a criterion for care, it is likely that some of the dependents would be unable to make the payment.

Section 107 would require VA to establish a program designed to improve access to and utilization of medical centers. Under current law, the Secretary already has broad powers to allocate resources to facilities and to lease, renovate, and close facilities. CBO estimates this provision would have little or no budgetary impact.

Section 108 would extend by one year a counseling and treatment program for veterans who have experienced sexual trauma. The program would be extended from December 31, 2001, to December 31, 2002, and would probably cost a few million dollars.

Section 207 would expand VA's program of enhanced-use leases. Such leases provide VA with cash or other items of value in exchange for the right to use assets of the department. Under current law, these arrangements usually result in barter instead of cash payments to VA because cash proceeds must be returned to the Treasury. The bill would allow VA to spend any proceeds from enhanced-use leases; thus, VA would be more likely to accept cash payment. Although the increase in receipts would equal the increase in spending, using the proceeds from the leases could offset an equal amount of discretionary appropriations.

Direct Spending

Veterans' Tobacco Trust Fund. Section 203 of the bill would give VA direct spending authority over any amounts the federal government receives on its behalf from the tobacco industry for recovery of costs associated with tobacco-related illnesses. CBO estimates that the additional resources available to VA would total $80 million over the 2000-2004 period and $0.8 billion over the 2000-2009 period. Because of normal lags in spending this