STATEMENT OF
THOMAS L. GARTHWAITE, M. D.
DEPUTY UNDER SECRETARY FOR HEALTH
DEPARTMENT OF VETERANS AFFAIRS
BEFORE THE
SUBCOMMITTEE ON HEALTH
COMMITTEE ON VETERANS' AFFAIRS
U. S. HOUSE OF REPRESENTATIVES

February 24, 1999

Mr. Chairman, members of the Committee, the President’s budget for veterans medical care for Fiscal Year 2000 builds on VA’s previous accomplishments and complies with the Balanced Budget Act of 1997.

The budget provides $18.1 billion, including $749 million in medical collections, to provide medical care to eligible veterans. Highlights of this request include:

• VA will open 89 new outpatient clinics and treat 54,000 more patients in 2000 than in 1999, a 1.5 percent increase.

• We are proposing $50 million in additional funding to help homeless veterans, including $40 million in medical care and $10 million in mandatory transitional housing subsidies. This funding will allow us to support 1,385 new community-based beds and treat 12,000 more homeless veterans.

• An increase of $136 million for VA’s efforts to combat Hepatitis C.
• An increase of $106 million in VA’s long-term care alternative programs.

• While not included in the budget, the Administration will continue to seek authorization of a Medicare subvention pilot program.
• The budget includes a legislative proposal to authorize VA to cover the cost of out-of-network emergency care for enrolled veterans with compensable disabilities related to military service.

• The budget includes a legislative proposal to establish smoking cessation programs for veterans who began to smoke during military service. This program will be designed to reach veterans throughout the country by using contractors.

Mr. Chairman, the Fiscal Year 2000 request recognizes the dramatic changes that have occurred in the past four years. In that time, we have increased the number of veterans treated, improved the quality of our care, and improved customer satisfaction. At the same time, we have reduced the per-patient cost of providing care and we have changed the culture of VA healthcare.

Our goal is to provide world-class quality healthcare to as many veterans as possible. VA has successfully organized a system of coordinated healthcare delivery focused on continuous quality improvement that is patient-oriented, ambulatory care-based and results driven. We now treat patients in more appropriate settings for their problems. Veterans have embraced the use of primary care providers and care teams for their health needs.

These strategies will assure the viability of the healthcare system well into the next century. They will also prepare VA to continue to meet the diverse healthcare needs of the veteran population. We believe that the new VA system should serve as a model for future integrated healthcare systems, both public and private.

In 1998, our department committed to the goals of reducing per-patient cost for healthcare by 30 percent, serving 20 percent more veterans, and increasing alternative revenue sources to 10 percent of all Medical Care funding. VA is still committed to meeting these goals, while assuring that quality of care is maintained in our system.

VA is on track towards its long-range goals of 30/20/10. Compared to the 1997 baseline, we project the following results in 2000:

• reduce per-patient cost by 18 percent,
• serve 16 percent more veterans, and
• increasing non-appropriated funding to 5.1 percent of the Medical Care budget.

This will be accomplished in large measure by continuing to shift excess acute inpatient resources to expand and enhance outpatient care and other types of care in the most appropriate setting. Ongoing efforts to re-engineer our health care delivery structure and mechanisms and our business practice initiatives will also contribute to these goals. We will continue to insure that taxpayers receive full value for the funds they entrust to us.

Medicare subvention would allow VA to collect funds from Medicare for healthcare services provided to Medicare eligible, higher income veterans without compensable disabilities. Adoption of this demonstration program is VA’s top legislative priority.

We will not be able to obtain 10 percent of our funding from alternative revenue sources in the future if Congress does not pass the Medicare subvention pilot legislation. If this pilot proves successful in improving outcomes and lowering costs, our goal would be to open up VA reimbursement throughout the system. I ask for your support of the Administration’s proposal in this area.

VA is also proposing a change in appropriation language to provide for two-year spending availability for up to 5 percent of our resources, excluding those funds set aside due to delays in providing medical equipment.

We support this proposal because it promotes more rational spending decisions and recognizes the need for management flexibility during this period of significant change for VA healthcare.

As I mentioned earlier, the Administration is requesting authorization of a new smoking-cessation program for any honorably discharged veteran who began smoking in the military. The program would be delivered by private providers on a per capita basis. Any veterans who began smoking in the military would be eligible for this new program, to the extent resources are available. The Administration will seek authorization of this program in the near future.

Once this program is authorized, the Administration will submit a budget amendment requesting an appropriation of $56 million for this new activity. It is estimated that between 500,000 and 600,000 veterans would avail themselves of this valuable program over the next five years.

For Medical and Prosthetic Research, a total of $316 million and 2,838 employees will support more than 2,100 high priority research projects to enhance the quality of healthcare of the veteran population. This level of funding will allow us to maintain the operation of research centers in the areas of Gulf War veterans’ illnesses, diabetes, Parkinson’s disease, spinal cord injury, cancer, prostate disease, depression, environmental hazards, women’s issues, as well as rehabilitation centers and Health Service Research and Development field programs.

In these areas, no other federally supported clinical or research entity can initiate or complete such critical and ambitious research activities on behalf of America’s veterans. Our department will continue to increase the amount of non-appropriated research funding we receive from the private and public sectors.

The Balanced Budget Act of 1997, Public Law 105-33, allows VA to retain all collections from third parties, copayments, per diems, and certain torts after June 30, 1997. These collections are deposited in the Medical Care Collections Fund and are available for transfer to the Medical Care appropriation. The funds remain available to VA until they are expended.

For FY 2000, VA estimates that more than $761 million will be collected through this effort—and revenues will grow to over $1.2 billion by 2004. To accomplish this growth, we are in the process of changing our billing rates to reasonable charges for inpatient and outpatient procedures; identifying more patients having insurance; and improving our debt collection efforts.

The Medical Administration and Miscellaneous Operating Expenses, or MAMOE, activity is requesting $61.2 million in appropriations to fund 573 employees who will support VHA operations in Fiscal Year 2000. Transfers of $415,000 and $7.1 million in reimbursements will supplement these funds.

This request is somewhat different from past years in that it includes reimbursement authority for activities related to the Facilities Management Service Delivery Office. Facilities Management will begin to receive reimbursement from VHA, VBA and NCA for field-related project management.

This reimbursement will allow VA to use appropriated funds to hire additional staff in the areas of quality management and performance measurement. Capital policy activities will continue to be funded by the appropriation.

Mr. Chairman, this concludes my summary of the medical care, medical administration, and medical research budget requests. I will be pleased to respond to your questions.