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104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     104-690
_______________________________________________________________________


 
          VETERANS' HEALTH CARE ELIGIBILITY REFORM ACT OF 1996

_______________________________________________________________________


 July 18, 1996.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

   Mr. Stump, from the Committee on Veterans' Affairs, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 3118]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Veterans' Affairs, to whom was referred the 
bill (H.R. 3118) to amend title 38, United States Code, to 
reform eligibility for health care provided by the Department 
of Veterans Affairs, having considered the same, reports 
favorably thereon without amendment and recommends that the 
bill do pass.

                              Introduction

    On July 19, 1995, the Committee received testimony about 
the need to reform health care eligibility of the Department of 
Veterans Affairs, Veterans Health Administration. Those 
testifying included the Under Secretary for Health, Kenneth W. 
Kizer, M.D., who was accompanied by Ms. Mary Lou Keener, the 
General Counsel of the Department. Also testifying were Mr. 
David P. Baine, Director, Federal Health Care Delivery, Health, 
Education and Human Services Division, the General Accounting 
Office (GAO), who was accompanied by Messrs. James Linz and 
Paul Reynolds, assistant directors of GAO. Subsequent panels of 
individuals offering testimony were Gregory A. Bresser, 
National Service Director, of the Military Order of the Purple 
Heart; Frank C. Buxton, Deputy Director for Veterans Affairs 
and Rehabilitation of The American Legion; David W. Gorman, 
Deputy Legislative Director of the Disabled American Veterans; 
Robert I. Keimowitz, M.D., Dean for Academic Affairs of the 
George Washington University School of Medicine and Health 
Sciences representing the Association of American Medical 
Colleges; James N. Magill, National Legislative Service 
Director of the Veterans of Foreign Wars; Gordon H. Mansfield, 
Executive Director of the Paralyzed Veterans of America; Larry 
D. Rhea, Deputy Director of Legislative Affairs of the Non-
Commissioned Officers Association; Lynna C. Smith, MN, RN, CS, 
ARNP, President of the Nurses Organization of Veterans Affairs; 
and Kelli R. Willard West, Deputy Director, Government 
Relations of the Vietnam Veterans of America.

    The Subcommittee on Hospitals and Health Care met on May 8, 
1996, and ordered H.R. 3118 reported favorably to the full 
Committee by unanimous voice vote.

    The full Committee also met on May 8, 1996, and ordered 
H.R. 3118 reported favorably to the House by unanimous voice 
vote.

                      Summary of the Reported Bill

    H.R. 3118 would:

    1. LWithin appropriations, authorize the VA to provide all 
needed hospital care and medical services (including preventive 
and home health care) to veterans with compensable service-
connected disabilities, former prisoners of war, veterans 
exposed to toxic substances and environmental hazards (for care 
of conditions specified in existing law), veterans meeting the 
``means test'' as provided under existing law, and veterans of 
World War I.

    2. LEliminate restrictions on VA providing prosthetic 
devices, subject to a requirement that VA furnish hearing aids 
and eyeglasses to veterans only in accordance with guidelines 
to be prescribed.

    3. LRequire VA to manage the provision of hospital care and 
medical services through an enrollment or registration system 
based on a system of priorities. Priority is assigned in the 
following order: (a) veterans 30 percent or more service-
connected disabled, (b) former POWs and veterans with service-
connected disabilities rated 10 or 20 percent, (c) veterans 
receiving aid and attendance or housebound benefits and 
otherwise eligible veterans who suffer from a catastrophic 
disability, (d) veterans who are unable to defray the cost of 
their care, and (e) all others. The VA is authorized to 
establish additional priorities within the above groups.

    4. LClarify that service-connected veterans continue to be 
eligible for any benefit for which they are eligible under 
existing law.

    5. LPermit VA to contract, pursuant to VA-prescribed 
acquisition procedures and policies, for hospital care and 
medical services for any enrolled veteran when VA facilities 
are not capable of furnishing the care or services 
economically.

    6. LExtend indefinitely VA's authority to provide services 
to dependents of active-duty members and retired servicemembers 
under contract arrangements with the Department of Defense 
(DOD) or a DOD contractor; clarify VA's authority to collect 
from insurance plans of DOD beneficiaries cared for by VA to 
the same extent as DOD recovers for care rendered to those 
beneficiaries in its facilities; and authorize VA to retain 
such funds.

    7. LExpand VA's authority to execute ``sharing'' agreements 
by permitting any medical resource to be provided under such an 
agreement; authorize the VA to develop such arrangements with 
any entity; authorize flexibility in establishment of payment 
levels; and exempt personnel involved in providing services 
under such arrangements from the otherwise applicable 
Department personnel floor.

    8. LDirect VA to maintain its capacity to provide for the 
specialized treatment and rehabilitation of disabled veterans 
within distinct programs or facilities dedicated to the 
specialized needs of those veterans.

                       Background and Discussion

                         HISTORICAL PERSPECTIVE

    The veterans medical system was first developed to provide 
needed care to veterans injured or ill as a result of service 
during wartime. At the end of World War II, the federal 
government undertook the task of increasing the number of 
Veterans Administration (VA) medical facilities to meet the 
expected demand for health care for veterans returning with 
injuries or illnesses sustained during hostilities. The primary 
focus of the expansion was to immediately tend to the medical 
needs of returning combatants for acute care and then to 
address the longer term rehabilitation needs of more seriously 
injured veterans. Within a few years after the cessation of 
hostilities, the initial demand for acute care services for 
service-connected conditions diminished and the VA initiated 
what was later to become its specialized services mission. 
Services such as spinal cord injury care, blind rehabilitation, 
and prosthetics were very limited and almost non-existent in 
the private medical market of the late 1940s.

    The VA system has evolved and expanded since World War II. 
Congress has enlarged the scope of the Department's health care 
mission and has enacted legislation requiring the establishment 
of new programs and services. Through numerous laws, some 
narrowly focused, others more comprehensive, Congress has also 
extended to additional categories of veterans eligibility for 
the many levels of care the VA now provides. No longer a health 
care system targeted just to the service-connected veteran, the 
VA has also become a ``safety net'' for the many lower-income 
veterans who have come to depend upon it. Legislative proposals 
aimed at ensuring access to comprehensive care and service 
through the VA for any veteran, or even just service-connected 
and indigent veterans, have been unsuccessful. Budget 
considerations have been a frequent brake on such legislative 
initiatives. The resulting body of VA health care eligibility 
law is one which many view as more of a patchwork than a 
rational, comprehensive system.

    The longstanding call for ``eligibility reform'' reflects 
frustration with provisions of current law which are widely 
regarded as complex, confusing, and in some respects, 
inconsistent with sound medical practice.

    With the Administration's submission in 1993 of its 
proposed national health care reform bill, the Congress was 
presented for the first time with a proposal for comprehensive 
reform of VA eligibility laws. Those proposed VA reforms were 
tied, however, to the broader goals of the legislation and did 
not survive the Health Security Act's demise. It was not until 
1995 that the VA submitted for the first time an ``eligibility 
reform'' proposal directed exclusively at veterans' law. In 
transmitting the draft legislation to the Speaker of the House, 
the Secretary of Veterans Affairs identified the following 
objectives that should be achieved by a revised eligibility 
system:

          First, the eligibility system should be one that both 
        the persons seeking care and those providing the care 
        are able to understand.
          Second, the eligibility system should ensure that the 
        VA is able to furnish patients the most appropriate 
        care and treatment that is medically needed, cost 
        effective and in the most appropriate setting.
          Third, veterans should retain eligibility for those 
        benefits that they are now eligible to receive.
          Fourth, VA management should gain the flexibility 
        needed to manage the system effectively.
          Fifth, the proposal should be budget neutral.
          Sixth, the proposal should not create any new and 
        unnecessary bureaucracy.

          VETERANS' HEALTH CARE ELIGIBLITY REFORM ACT OF 1996

    The reported bill would revise provisions of chapter 17 of 
title 38, United States Code, governing eligibility for VA 
hospital and outpatient care, and would achieve the objectives 
set forth by the Secretary. It would substitute a single 
uniform eligibility standard for the complex array of standards 
governing access to VA hospital and outpatient care. While the 
new standard is a simple one, more importantly, it would employ 
a clinically appropriate ``need for care'' test, thereby 
ensuring that medical judgment rather than legal criteria will 
determine when care will be provided and the level at which 
that care will be furnished.
Section 2. Hospital and medical services
    Section 2 of the reported bill would strike the complex 
provisions of law governing eligibility for outpatient care. 
Those provisions, set forth in section 1712(a) of title 38, 
require the VA to apply at least four different legal tests to 
distinct veteran classifications. Specifically, under section 
1712(a), the VA ``shall furnish'' comprehensive treatment to 
certain service-connected veterans, ``may furnish'' such broad 
treatment to certain other classes of veterans, and either 
``shall'' or ``may'' furnish treatment of more limited scope 
(to ``obviate'' the need of hospital admission or to complete 
treatment begun during hospitalization) to still other groups 
of veterans. In contrast, in the case of each of these groups 
(the service-connected, former prisoners of war, etc.), the VA 
is required under section 1710 of title 38 to provide needed 
hospital care for any health problem.

    Section 2 would authorize the VA to provide any needed 
hospital care and medical services (including preventive 
services and home care) to the service-connected disabled, low-
income veterans, former prisoners of war, and World War I 
veterans who enroll with VA for needed care. These changes 
would expand the array of services that VA could provide to 
many of these beneficiaries, while eliminating statutory 
barriers to providing care in the most economical manner.

    As amended, section 1710(a)(1) would qualify the 
Secretary's obligation to provide care as follows: ``to the 
extent and in the amount provided in advance in appropriations 
Acts for these purposes''. Such language is intended to clarify 
that these services would continue to depend upon discretionary 
appropriations; the Act would not require a certain level of 
appropriations. The qualifying phrase, quoted above, is 
identical to the language the Secretary of Veterans Affairs has 
employed in the legislation submitted to the Speaker of the 
House.

    While expanding the scope of services which VA would be 
authorized to provide to many of its core ``category A'' 
veterans (those described in section 1710(a)(1) of title 38), 
section 2 would not reduce any veterans' eligibility for health 
care benefits. The measure would explicitly address the status 
of a veteran with a service-connected disability which is not 
compensable in degree. In the case where such a veteran is not 
otherwise afforded eligibility for hospital and medical 
services under section 1710(a)(1), as amended in section 2 of 
the Act, new section 1706(d) would provide that such a veteran 
would continue to be eligible for health care benefits for 
which that veteran had been eligible prior to the enactment of 
the Veterans' Health Care Eligibility Reform Act of 1996. Other 
veterans--both higher-income individuals and veterans with 
special eligibility based on exposure to toxic substances--
would continue to be eligible for services under existing law.
Section 3. Prosthetics
    Section 3 would remedy a frequently cited anomaly in VA 
health care eligibility law which poses a statutory barrier to 
providing many veterans who rely on VA health care with needed 
prosthetics. The measure would eliminate a restriction in 
current law which effectively prohibits the VA from furnishing 
such needed devices to most nonservice-connected veterans 
unless the VA has hospitalized the individual. Under the 
amendment, however, VA prosthetics may be furnished only as 
part of ongoing VA care (regardless of the level at which that 
care is furnished). This would clarify that the Committee does 
not intend that the VA provide costly prosthetics to 
nonservice-connected veterans who do not otherwise rely on VA 
care and simply view the VA as a means to obtain services not 
covered by their health care insurer.
Section 4. Management of health care
    Section 4 of the Act would meet the Secretary's objective 
of gaining needed flexibility to manage VA health care 
effectively. Its provisions would both improve the VA's ability 
to plan and budget for meeting its medical care mission, and 
foster flexibility in delivering needed services.

    The provisions of this section would not only enable the VA 
to plan for treating patients in a comprehensive manner rather 
than episodically responding to acute problems, but would also 
authorize the VA to establish a system or systems of patient 
enrollment and thereby improve substantially the management of 
care delivery. Moreover, the Act would alleviate the 
restrictions currently imposed on administrators in contracting 
for veterans' treatment. In place of a body of law limiting who 
could be provided treatment from a private physician and for 
what conditions, the Act would vest the VA with authority to 
contract for hospital care and medical services on behalf of 
any enrollee described in new section 1710(a)(1) when it is 
less costly to provide needed care and services by contract. 
Further, the Act would lift restrictions which bar VA 
facilities from entering into arrangements with other 
institutions for shared use of VA resources, subject to 
reimbursement. Finally, the Act would explicitly recognize that 
the extent of the Secretary's obligations under law are limited 
by the funds made available in advance by appropriations acts.
    Enrollment.--Section 4 of the Act would in new section 1705 
of title 38 provide the VA with an important tool, the 
authority to design and manage access to care through a system 
of patient enrollment. The authority to enroll patients is a 
logical extension of the longstanding statutory requirement 
that outpatient care be provided in accordance with specified 
priorities.

    While an enrollment mechanism has not previously been 
specifically authorized by law, the VA has clearly embraced 
that concept in its recent planning and has begun to employ it. 
A directive issued by the Office of the Under Secretary for 
Health in October 1994, Guidance for the Implementation of 
Primary Care in the Veterans Health Administration (VHA), for 
example, includes among facilities' responsibilities in 
instituting a primary care program the responsibility to 
``define the patient population . . . to be treated'' and to 
ensure that ``every patient enrolled in primary care must have 
a primary care provider.'' As currently instituted at many VA 
facilities, an enrollment system does not involve a contractual 
relationship between the VA and the enrollee or otherwise 
guarantee the enrollee that the VA will necessarily deliver all 
needed care. Enrollment, however, would help the VA plan more 
effectively, so that facilities can better calculate and 
dedicate the resources needed to provide the care its enrollees 
require.

    The Act would direct the Secretary, in providing for the 
care of ``core'' veterans (described in new section 1710(a)(1) 
of title 38), to establish and operate a system of annual 
patient enrollment and require that veterans be enrolled in a 
manner giving relative degrees of preference in accordance with 
specified priorities. At the same time, it would vest 
discretion in the Secretary to determine the manner in which 
such enrollment (or registration) system would operate. For 
example, the VA would be able to establish a system which 
simply registers patients throughout all or part of a fiscal 
year, or could employ a time-limited registration period. 
Significantly, the Act would permit the Secretary to set 
priorities within the specified priority classifications 
established in the Act. The Secretary could, for example, 
establish a policy which, within any priority classification, 
gives veterans who have previously been ``enrolled'' as VA 
patients priority over new applicants. However, the Committee 
expects any enrollment system to be designed and administered 
to assure that any veteran with a service-connected condition 
would receive priority treatment for that condition whether or 
not that veteran had enrolled for VA care.

    The relative priority classifications in new section 1705, 
which assigns highest priority to veterans with service-
connected disabilities rated 30 percent or greater, are derived 
substantially from the prioritization requirement in current 
law at section 1712(i) of title 38. In refining that 
prioritization requirement, the measure would make noteworthy 
changes. First, the measure would elevate to a second tier the 
priority of former prisoners of war, who under current law 
occupy a third priority tier. And second, it would create a 
category of priority for those otherwise eligible veterans 
under a new section 1710(a) who are catastrophically disabled, 
such as veterans with spinal cord injuries. Such veterans would 
be included in a third tier priority with other profoundly 
disabled nonservice-connected veterans who receive increased 
pension based on a need of regular aid and attendance or 
permanent housebound status.

    Contracting for services.--In providing a new statutory 
framework to assist the VA in meeting the nation's commitment 
to provide health care services to its most deserving veterans, 
the Act for the first time would lift rigid limits on which 
patients can receive VA-sponsored care through contract 
arrangements with community providers. In the context of the 
broad policies of the Act, such limits on contracting are 
unnecessary constraints. They serve, at best, as a crude means 
of limiting expenditures; in their place, the Act would 
authorize, but not require, the VA to contract for hospital 
care and medical services when VA facilities cannot furnish 
such care and services economically. Such a provision is also 
intended to encourage VA facilities to assess the relative 
costs of in-house and contractor-provided services, with an eye 
to contracting where significant savings can be achieved at 
comparable quality of service.
    The Act in new section 1706 of title 38 would also vest the 
Secretary with broad discretion to make such rules and 
regulations regarding acquisition procedures and policies as 
deemed necessary to provide needed care and services. This 
provision is intended to enable the Secretary to tailor 
contracting policies and process to the unique needs of cost-
effective care delivery and to free contracting officials from 
cumbersome procedures which would impede that objective.

    While it would generally ease restrictions in current law, 
the Act would limit the Secretary in some respects. For one, it 
would provide that in designing an enrollment system and 
providing care, the VA may not enroll or otherwise attempt to 
treat so many patients as to result either in diminishing the 
quality of care to an unacceptable level or unreasonably 
delaying the timeliness of VA's care delivery.

    Specialized services.--The Act would further limit the VA's 
discretion as it relates to the Department's important mission 
of providing for the specialized treatment and rehabilitative 
needs of disabled veterans. While provisions of the Act would 
otherwise vest considerable discretion in the Secretary, 
considerations unique to the VA's specialized treatment 
programs would require a far more prescriptive response, in the 
Committee's view.

    The provision of specialized services, identified generally 
in the Act as the VA's service capacity to provide for the 
specialized treatment and rehabilitative needs of disabled 
veterans (including veterans with spinal cord dysfunction, 
blindness, amputations, and mental illness), constitutes a 
vital core of the VA's health care mission. The development and 
refinement over decades of specialized treatment and 
rehabilitation programs to serve these disabled populations has 
greatly enhanced veterans' lives. The scope and quality of 
those programs is not matched in the private sector, where, 
because of the great expense associated with such care, there 
has generally been little incentive to tailor programs for 
these chronic conditions.

    Budgetary pressures and an ongoing reorganization within 
the Veterans Health Administration (VHA) raise concern on the 
Committee's part that the VA's costly specialized programs may 
be particularly vulnerable and disproportionately subject to 
budget-cutting. On April 6, 1995, a hearing before the 
Subcommittee on Hospitals and Health Care on the proposed VHA 
reorganization produced testimony on this issue. In the 
Committee's view, neither the Department's testimony nor 
subsequent actions have altogether alleviated the widespread 
concern that a newly decentralized organization, under budget 
pressures and focused heavily on instituting new primary care 
programs, will not respond to these pressures at the expense of 
the very programs on which some of the Department's most 
vulnerable beneficiaries depend.

    To avoid erosion of its specialized capacities, the Act 
would require the Secretary to ensure that the Department's 
systemwide capacity to provide for the needs of this disabled 
population would be maintained. In setting this requirement, 
the Committee does not seek or discourage the development of 
new or refined treatment modes that may change the mix of VA 
services, or in any way discourage an appropriate shift of care 
from inpatient to outpatient settings, but only to ensure that 
the resource levels devoted to these services remain at least 
stable.

    Given the importance of permitting programs and treatment 
methods to evolve, the Committee has not sought to identify or 
catalogue specific ``programs'' in either the Act or in this 
discussion. Its intent is to ensure that specialized treatment 
and rehabilitation continue to be available to serve unique 
populations who suffer from the kind of profound, costly-to-
treat disabilities cited in the Act. The Committee notes that 
the Department has from time to time employed terms like 
``special programs'' which are more inclusive than the Act's 
provision and may employ the term ``special'' for reasons 
unrelated to the profound nature of a disability. Such 
``special'' programs are not necessarily within the ambit of 
this provision.

    Impact of the Act.--Although the Act would revise 
substantially the body of law governing VA health-care 
eligibility, its impact would be less far-reaching in practice 
than it appears on its face. While the Committee believes the 
revision of law proposed in the Act is necessary and overdue, 
it appears that many VA medical facilities have, on their own, 
instituted changes in delivery practice that largely mirror 
changes proposed in the Act.

    To test this thesis, the Committee's ranking member 
requested that the Veterans Health Administration conduct a 
survey of VA medical centers. The survey, conducted in 
September 1995, was intended to explore the possible impact of 
eligibility reform legislation. The survey sought to document 
the extent to which the VA facilities were already providing 
primary care to patients and to obtain some current measure of 
demand for care which might be sparked by enactment of reform 
legislation.

    In that regard, the Committee took note of a 1995 analysis 
prepared by the Congressional Budget Office (CBO). For example, 
in trying to estimate the costs associated with a legislative 
initiative which would have expanded the scope of outpatient 
care for service-connected veterans rated 30 percent and 40 
percent disabled, CBO analysts, in attempting to derive an 
estimate of minimum costs, ``assumed that the number of 
veterans refused outpatient care equals the number turned down 
for inpatient care.'' The analysts cited data derived from the 
1992 Survey of Veterans to the effect that ``about 61,000 
veterans were denied inpatient care who should have received 
care'' and concluded that number would rise to almost 70,000 in 
1996. CBO continues to cite the 1992 survey data in estimating 
additional costs deemed to arise from an extension of 
outpatient care.

    The VHA survey posed the following questions:

        a. LHas your facility instituted a primary care program 
        (i.e., a clinic which includes at least intake and 
        initial assessment, treatment/management of acute 
        conditions, patient education/health promotion, 
        continuity of care, and access to other components of 
        VA-provided or sponsored health care)?
        b. LIf so, please estimate the percentage of total 
        facility unique patients enrolled in primary care.
        c. LPlease identify any classes of ``category A'' 
        veterans who are not currently enrolled or being 
        enrolled in a primary care program.
        d. LDuring the period of FY 1994, did your facility 
        find it necessary because of limited resources to turn 
        away (or provide only one-time, limited treatment to) 
        any category A veterans who needed hospital or 
        outpatient care?
        e. LIf so, please estimate by needed level of care the 
        numbers turned away.

    The VA survey indicated that with respect to needed 
hospital care, only six of 162 facilities either turned away 
category A veterans or provided one-time, limited treatment to 
such individuals. With respect to outpatient treatment, only 22 
facilities denied treatment or provided only one-time 
treatment, according to the survey.

    As GAO noted in testimony, only veterans with service-
connected disabilities rated at 50 percent or more--about 
450,000 veterans--are entitled to comprehensive outpatient 
treatment. (Another GAO report, profiling veterans who used VA 
medical centers in 1991, stated that of veterans receiving VA 
care in 1991, only 300,000 were 50 percent service-connected 
disabled.) GAO noted that ``eligibility rules impede the 
provision of efficient health care to other veterans in that 
they may not be eligible for preventive services or treatment 
of medical conditions until such conditions, if left untreated, 
warrant hospital care or specialized outpatient treatment.''

    The survey showed, however, that despite the limited 
numbers entitled to routine outpatient treatment, VA facilities 
are providing routine care to substantial percentages of their 
patients. For example, of the 162 facilities responding to the 
survey, 62 reported that 60 percent or more of their patients 
had been enrolled in primary care programs; 25 facilities 
reported that 80 percent or more of their patients were 
enrolled. In most instances these programs are relatively new 
and were established pursuant to the above-cited October 1994 
VA directive, Guidance for the Implementation of Primary Care 
in the Veterans Health Administration. In expressing a ``need 
to implement primary care throughout VHA,'' the directive cited 
a 1993 survey which ``revealed that VA does not currently 
provide primary care to a large number of veterans.'' The new 
policy pronouncement expressly directed that ``[t]he VHA will 
implement the Primary Care Program to provide primary care to 
all eligible veterans requiring coordinated care.'' The policy 
did not define the term ``eligible veterans'', but in 
identifying the need to implement primary care, cited ``the 
development of eligibility reform proposals, the managed care 
task force report, and . . . the VA National health care reform 
report Meeting the Challenge of Health Care Reform.''

    In essence, a health care system often criticized in prior 
years for its failure to provide routine outpatient care is 
undergoing a much-needed reform and is increasingly delivering 
care at the least costly level. The change in practice has 
resulted in widespread anticipation of a change in law.
Section 5. Improved efficiency in health care resource management
    Title II of Public Law 102-585 authorized an expansion of 
the cooperative arrangements between VA and DOD facilities 
instituted under Public Law 97-174. P.L. 102-585 authorized the 
Departments to enter into agreements under which VA facilities 
could provide medical services to beneficiaries of DOD's 
CHAMPUS program. Under this new authority, the VA has begun to 
provide care to dependents of active-duty members and retirees. 
Section 5 would repeal section 204 of P.L. 102-585, under which 
expanded VA/DOD sharing authority would have expired.

    Section 5 of the reported bill would in new section 207 of 
Public Law 102-585 also clarify VA's authority to recover or 
collect from the insurance plans (including so-called ``CHAMPUS 
supplemental'' plans) of CHAMPUS beneficiaries cared for by the 
VA to the same extent as DOD recovers for care rendered to 
these beneficiaries in its facilities. This section would also 
direct that all funds received by the VA from insurance plans 
of CHAMPUS beneficiaries be credited to the VA facility that 
furnished the care.
Section 6. Sharing agreements for health care resources
    While revising VA law governing health care eligibility, 
the Act would help the VA achieve greater efficiencies inherent 
in shifting more care from costly hospital beds to outpatient 
clinics and also would help the VA achieve greater economies 
through improved resource utilization.

    Under existing law, the VA may, subject to reimbursement, 
enter into agreements with specified health care entities for 
the mutual use or exchange of use of ``specialized medical 
resources,'' a narrowly defined term. Among the changes 
proposed by the reported bill, section 6 would authorize VA 
facilities to enter into such ``sharing agreements'' not only 
with health care facilities but with health insurers or any 
other entity or individual and would expand to include, for 
example, support services, the scope of resources which might 
be sold or purchased under such a contract to any health care 
entity. The Committee contemplates that the Department would 
broadly construe this new authority.

    Section 6, developed with an eye to both the difficult 
budget environment and the dynamic marketplace within which the 
VA health care facilities are operating, reflects a belief that 
these facilities need far greater flexibility than existing law 
affords them to work out contractual arrangements with other 
providers, institutions, and entities to ``share'' health care 
resources. Both veterans organizations and the Department have 
cited the importance such expanded VA sharing authority holds 
to achieve efficiencies and new revenues.
Section 7. Personnel furnishing shared resources
    The provisions of section 7 are companion provisions to 
sections 5 and 6, and are intended to overcome disincentives in 
existing law to initiate or maintain arrangements to ``share'' 
resources, and thus, to achieve needed efficiencies. Under 
current law, VA facilities have operated under employment 
ceilings conforming to section 712 of title 38. Such ceilings 
have created a dilemma for many medical center directors 
because they have often forced a choice between dedicating 
staff solely to internal service delivery, regardless of the 
level of efficiency of such service, or to providing as well 
some level of service delivery to other entities under the 
auspices of efficiency-driven ``sharing'' agreements. Faced 
with such a choice, many directors have opted not to embark on 
any new sharing agreements or have questioned the merits of 
maintaining those in place. This tension can easily lead 
facilities to operate inefficiently simply to avoid the 
perverse impact of an employment ceiling. Section 7 would 
remedy this problem by exempting from the applicable personnel 
ceiling those staff involved in providing services under 
sharing agreements.

                           Section-By-Section

    Section 1 would provide that this title may be cited as the 
``Veterans' Health Care Eligibility Reform Act of 1996.''

    Section 2 would: (1) amend sections 1710 and 1712 of title 
38, United States Code, to establish medical need as the sole 
criterion of eligibility for VA hospital care and medical 
services for any veteran who (a) has a compensable service-
connected disability, (b) is a former prisoner of war, (c) is 
unable to defray the cost of care, or (d) is a veteran of World 
War I; (2) provide that such care shall be furnished subject to 
the availability of appropriations; and (3) recodify other 
veterans' eligibility for care in accordance with existing 
criteria.

    Section 3 would: (1) amend the definition of medical 
services in chapter 17 of title 38, to strike language 
conditioning certain veterans' eligibility for prosthetics on 
the individual's being hospitalized; (2) provide that a veteran 
may be furnished such devices in the course of his or her VA 
care or treatment; and (3) require that eyeglasses and hearing 
aids may only be furnished in accordance with guidelines to be 
prescribed by VA.
    Section 4 would first add a new section 1705 applicable to 
managing delivery of care under new section 1710(a)(1) to: (1) 
require the VA to administer care-delivery through an annual 
patient enrollment, with a veterans' ability to enroll to be 
governed by the availability of appropriations and by reference 
to a system of listed priorities; (2) require that the size of 
the enrollment pool be governed by the requirement that 
provision of care to enrollees be timely and acceptable in 
quality; (3) require that the VA promote cost-effective 
delivery of care in the most clinically appropriate setting; 
and (4) require the VA to maintain its capacity to provide for 
the specialized treatment needs of disabled veterans; and 
second add a new section 1706 which would (1) permit VA to 
contract for care when its facilities cannot furnish care and 
services economically; (2) strike other limitations in current 
law on contracting for care of a veteran; and (3) require that 
any service-connected veteran is provided all benefits to which 
that individual had been eligible before the Act's enactment.

    Section 5 would repeal section 204 of Public Law 102-585 
under which VA's authority to provide care and services through 
contract arrangements to Department of Defense beneficiaries 
under chapter 55 of title 10, United States Code, would have 
expired, and would clarify VA's authority to recover or collect 
from insurance plans of CHAMPUS beneficiaries cared for by the 
VA.

    Section 6 would amend provisions of subchapter IV of 
chapter 81, title 38, to: (1) expand both the range of health 
care resources which can be the subject of mutual use or 
exchange of use contracts, and the kind of entities with which 
VA may so contract; (2) provide that VA may execute such 
contracts involving any health care resource, and may contract 
with any individual or entity, including a health plan; (3) 
provide greater flexibility as to when a VA facility may enter 
into such a contract, and what payment requirements it may 
negotiate in selling services, while conditioning the 
circumstances under which VA furnishes services to non-veterans 
to those (a) that would not delay or deny veterans' care and 
(b) that would result in improving the care of veterans, or is 
necessary to maintain an acceptable level or quality of service 
at that facility; and (4) clarify that the VA is to be 
reimbursed when it provides services under a ``sharing 
agreement'' to a Medicare-covered patient.

    Section 7 would amend section 712 of title 38, to provide 
that for purposes of determining the minimum number of 
positions to be maintained in the Department of Veterans 
Affairs during a fiscal year, the number of positions in the 
Department in any fiscal year (to be reduced under existing law 
by reference to specified categories of positions) is to be 
further reduced by the number of positions in that fiscal year 
held by persons involved in providing health care resources 
under ``sharing agreements'' executed under section 8111 (as 
expanded by section 201 of Public Law 102-585) or section 8152 
of title 38.

                           Oversight Findings

    With respect to clause 2(l)(3)(A) of rule XI of the Rules 
of the House of Representatives, this legislation results from 
hearings and other oversight activities conducted by the 
Committee pursuant to clause 2(b)(1) of rule X. The Committee's 
oversight findings are generally contained in the Background 
and Discussion portion of the bill report. The relevant 
oversight activities of the Committee have included the 
following:

    On February 24, 1995, the Committee held a hearing on the 
Administration's fiscal year 1996 budget request and its 
deficit reduction proposals;

    On April 6, 1995, the Subcommittee on Hospitals and Health 
Care of the Committee held a hearing on the reorganization of 
the Veterans Health Administration;

    On July 19, 1995, the Committee held a hearing on health 
care eligibility reform;

    On March 21, 1996, the Subcommittee on Hospitals and Health 
Care held a hearing on VA medical care and construction 
priorities;

    On March 29, 1996, the Committee held a hearing on the 
Administration's fiscal year 1997 budget request.

    With respect to clause 2(l)(3)(B) of rule XI of the Rules 
of the House of Representatives and section 308(a)(1) of the 
Congressional Budget Act of 1974, this legislation does not 
include any new spending or credit authority, nor does it 
provide for any increase or decrease in tax revenues or 
expenditures. The bill does, however, authorize appropriations.

 Oversight Findings of the Committee on Government Reform and Oversight

    No oversight findings have been submitted to the Committee 
by the Committee on Government Reform and Oversight.

                        Committee Cost Estimate

    H.R. 3118 would substitute a single, streamlined 
eligibility provision--based on clinical need for care--for the 
complex array of disparate rules currently governing veterans' 
eligibility for hospital and outpatient care. In so doing, it 
would lift restrictions on VA's providing ambulatory treatment. 
Those restrictions currently tie many veterans' eligibility for 
outpatient treatment to determinations that the care would 
either ``obviate the need for hospital admission'' or provide 
services needed to complete treatment initiated during 
hospitalization. The application of these medically indefinable 
standards has contributed substantially, in the Committee's 
view, to relative disparities veterans experience in different 
areas of the country in gaining access to VA care.

    An analysis of the budgetary impact of H.R. 3118 should 
take account of two components: potential costs stemming from 
anticipated new demand for outpatient care, and potential 
savings from an anticipated shift in delivery patterns from 
inappropriately furnished inpatient care to ambulatory 
treatment. In reviewing this bill, the Congressional Budget 
Office expressed the view that the costs associated with ``new 
demand'' for care ``would far outweigh'' the savings. (CBO's 
cost estimate follows the Committee's cost estimate.)

    CBO's estimate of July 15, 1996, states that the costs 
associated with the reported bill's proposed changes to VA 
eligibility law ``are very uncertain''. Yet CBO offers 
estimates of cost. There is little in the way of a methodology 
for those estimates and seemingly little more than speculation 
supporting its projections. In the Committee's view, CBO's 
estimate reflects a fundamental misunderstanding of the scope 
of services VA is already providing, the savings it has 
achieved through changes in medical practice, and the demand 
for VA services from those not now served.

    In CBO's estimation, ``demand-for-VA-outpatient-care'' has 
two elements. First, by lifting the major restriction on VA's 
providing veterans outpatient treatment (that is, eliminating 
the eligibility requirement applicable to many veterans that 
treatment must be necessary to ``obviate the need of hospital 
admission''), VA might experience an increase in the number of 
outpatient visits by current users for treatment previously 
barred under the ``obviate'' requirement. Second, with a 
revision of eligibility law, veterans not now receiving VA care 
might turn to VA in greater numbers.

    The Committee finds that neither component of demand is 
likely to increase dramatically. First, the hypothesis that 
lifting statutory restrictions on outpatient care would cause 
VA to expand substantially the services it provides to current 
patients has little evidentiary support. That hypothesis, 
however, is central to CBO's analysis, which begins as follows:

        Currently, nearly 10 million veterans are eligible for 
        outpatient care only if it involves pre- or post-
        hospitalization visits or if it obviates the need for 
        inpatient care. Section 2 of H.R. 3118 would remove 
        current restrictions and would enable VA to provide 
        these veterans with a full range of outpatient 
        treatments. As a result, a substantial number of 
        veterans who have been denied access to outpatient 
        care, or have been discouraged from seeking treatment 
        at VA outpatient clinics, could demand care.

    That hypothesis assumes that existing statutory 
requirements have in fact been a major barrier to clinicians 
and administrators, and have resulted in VA's not providing 
veterans needed services. Though not well documented by VA, all 
indications are that VA facilities have for some time been 
meeting patients' medical needs--sometimes hospitalizing 
patients, but most frequently providing care on an ambulatory 
basis. The growth annually in the volume of VA-provided 
outpatient care (as reflected in the steady increase in 
outpatient visits from some 22 million in fiscal year 1991 to 
an estimated 28 million in fiscal year 1996) calls into 
question the view that existing law is a major barrier to VA 
provision of outpatient treatment.

    There appear to be differing views as to the precise 
breadth of VA's outpatient authority, but little to suggest 
that eligibility law has been a complete obstacle to category A 
veterans receiving needed outpatient services. Recent General 
Accounting Office (GAO) testimony at an April 24, 1996 hearing 
before the Subcommittee on Hospitals and Health Care on 
``Efforts to Improve Veterans' Access to Primary Care 
Services'' reflects a narrow reading of the law, but, more 
importantly, effectively rebuts CBO's central premise that 
because the law restricts many veterans' eligibility to ``pre-, 
post-, and obviate'' care, VA must be denying these veterans 
outpatient care which is outside the ``pre-,post-, obviate'' 
limits. GAO, in fact, explicitly recognizes that VA is 
providing outpatient care without regard to the very 
restrictions CBO assumes are in place:

        VA is not adhering to statutory limitations that govern 
        what services VA may provide and who may be served. As 
        a result veterans are receiving more services than 
        current statutes allow.

    In contrast, as the Congressional Budget Office noted in 
analyzing H.R. 901 (101st Congress), a bill which would have 
required the VA to provide needed outpatient care to all 
``Category A'' veterans, ``[t]here is very little medically 
necessary outpatient care that cannot be viewed as obviating 
the need for inpatient care.'' (House Report 101-107.) CBO's 
estimate on H.R. 3118 stands in striking contrast to its 1989 
cost estimate of H.R. 901, for which it projected annual costs 
ranging from $40 million in the first year to $60 million in 
the fifth. Of this bill, CBO states that it ``estimates that 
the new benefit for outpatient care would entail net costs of 
about $3 billion each year.''

    CBO now projects that increased outpatient costs would 
arise both from expanded benefits provided to existing users as 
well as demand from new users. With respect to the question of 
``new demand'', the CBO's 1989 estimate on H.R. 901--a more 
expansive bill than H.R. 3118--is illustrative. Of H.R. 901, 
CBO reasoned that ``[t]he fact that these [category A] veterans 
would now be entitled to care and the publicity surrounding the 
change could draw veterans to VA facilities who might otherwise 
have sought non-VA care.'' However, CBO projected only a 
relatively slight increase in workload associated with new 
demand, pointing to the fact that ``[w]hen Category A veterans 
were granted entitlement to inpatient care in P.L. 99-272, the 
Consolidated Omnibus Budget Reconciliation Act of 1985, an 
increase of about 1.5 percent in the number of inpatient 
episodes of these veterans appears to have resulted from the 
change in law.''

    In contrast to H.R. 901, which CBO characterized as an 
entitlement to outpatient care, H.R. 3118 specifically and 
substantially limits VA's obligations to provide care. The 
scope of VA's mandate reaches only ``to the extent and in the 
amount provided in advance in appropriations Acts for these 
purposes.'' Moreover, unlike H.R. 901, under which category A 
veterans could seek and expect to receive services, whether 
comprehensively or simply on an episodic basis, H.R. 3118 
creates no such expectation. The ``new demand'' which CBO 
projects does not assure every veteran access to care. In fact, 
the bill specifically requires the VA, in managing care 
delivery, to establish and operate a system of annual patient 
enrollment, with enrollment to be managed in accordance with 
specified statutory priorities and within any additional 
priority classifications in the specified priorities which VA 
may promulgate. With respect to ``new demand'', therefore, the 
reported bill gives VA new tools both to limit demand 
consistent with available funding and to discourage veterans 
from seeking VA care simply to fill an occasional need not met 
by a private health plan.

    The view of VA being besieged by a large wave of new 
enrollees for VA care is unrealistic. Studies and focus groups 
indicate that health care consumers tend to seek out and select 
health care plans which cover themselves and family members, 
and do not tend to switch plans simply because another 
alternative exists or becomes available. In that regard, GAO's 
estimate that nine out of ten veterans have some form of health 
care coverage is noteworthy. In the absence of data suggesting 
that large numbers of veterans are being denied VA outpatient 
services, the view that many new category A veterans would seek 
to enroll for VA care is at odds with studies on health 
consumers' behaviors, formal surveys of veterans, and focus 
group studies.

    Focus groups conducted by GAO, for example, led GAO to the 
conclusion that ``veterans, other than those without health 
insurance, seem to use VA only for certain services such as the 
treatment of service-connected disabilities, rather than 
relying on VA for all their care. (Hearing before the 
Subcommittee on Oversight and Investigations of the Committee 
on Veterans Affairs on ``Veterans Perceptions of VA Health 
Care'', April 20, 1994). Even if H.R. 3118 enticed some 
veterans who had not previously sought VA care to enroll, GAO 
and other focus group studies would lead one to conclude that 
VA would attract relatively few ``new users''. At the 
Committee's April 1994 hearing on veterans' perceptions on VA 
care, the Paralyzed Veterans of America (PVA) testified on the 
findings of the 14 focus groups they conducted in six 
locations. The PVA study attempted to look at several cross-
sections of the veterans' community, including veterans who had 
never used the VA system and others who had used the system but 
had ceased to do so. PVA found that:

        Like VA, we found that VA's best potential market is 
        those who have the most familiarity with the system--
        that is, those currently using the system and, perhaps 
        also, their dependents. Some veterans who have fallen 
        away from the system because of access issues are also 
        eager to regain access to the system--in our groups 
        this was particularly true of rural veterans (we 
        happened to choose a community that was distraught over 
        the recent closure of its VA satellite clinic.) 
        Regardless of past utilization, veterans without other 
        insurance options were receptive to the idea of 
        enrolling in VA health plans. Other veterans from our 
        studies were not anxious to enroll. By and large, our 
        discussions with lapsed users indicated that they were 
        the least favorably disposed to enrolling in VA. Non-
        users did not have much familiarity with VA one way or 
        the other, but negative portrayals of VA in the press 
        seem to have hurt its image with these individuals . . 
        . Most often, resistance to the idea of using VA 
        services came from the fact that it was not likely they 
        would be able to choose their own physician. Choice of 
        physician was of the utmost importance to veterans and 
        this importance increased with veterans' ages . . . 
        Many veterans had established bonds with their 
        community physicians that would be difficult to break. 
        Many veterans claimed that even with significant 
        financial incentives . . . they would not be parted 
        from their physicians.

    VA's National Survey of Veterans, published in 1995, 
provides further support for the view that there does not exist 
a large unmet demand for VA care. Most veterans have other 
alternatives to VA care. The survey data ``indicate that a 
large proportion of veterans would rather go to a non-VA 
facility for their medical care if given a choice.'' Thus, when 
the survey asked veterans who had been hospitalized in a non-VA 
facility in 1992 the reason for not choosing a VA hospital for 
needed care, 78.4 percent responded that they had adequate 
health insurance.

    In its ongoing efforts to effect a shift in VA practices 
from bed-based care to still greater reliance on ambulatory 
care, VA has apparently induced some additional demand for 
services in creating ``new access points''. In testifying 
before the Subcommittee on Hospitals and Health Care on April 
24, 1996, on efforts to improve access to primary care, GAO 
stated that VA, in establishing its first fifteen community-
based ``access-points'', had enrolled nearly 5,000 veterans 
(representing unspecified numbers of both current and new 
users). As discussed in that hearing, however, VA's policy on 
the establishment of new community-based clinics is evolving. 
But VA's testimony made it clear that one key aspect of that 
policy is firm--that the development and activation of new 
community clinics (whether a VA-established clinic or 
contractual arrangement with a community provider) must be 
``within available resources'' (VHA Directive 10-95-017, 
February 8, 1995). Whatever theoretical level of demand could 
be induced by the presence of a VA facility or ``access 
point'', availability of funding will necessarily limit the 
number of ``access points'' VA can open, and thus the level of 
demand VA would experience.

    CBO further suggests that there might be substantial new 
demand from potential new users who might seek to avail 
themselves of services not covered under their health benefit 
plans. It is hypothesized, for example, that veterans might 
turn to the VA to get prosthetic devices. The suggestion that 
``eligibility reform'' would provoke heightened demand from 
those seeking prosthetic devices is unfounded. It is critical 
to note that H.R. 3118, like existing law, would not permit the 
VA simply to serve as a veterans' ``drug store'', providing 
medications, prosthetic devices, or other medical supplies 
prescribed by a private physician who has no affiliation or 
contractual relationship with the VA.

    CBO's projections regarding ``new demand'' also fail to 
take account of veterans who cease to use VA services. For 
example, there is evidence that as veterans reach age 65 a 
significant percentage cease to rely on VA health care 
benefits. A 1993 VA Statistical Brief shows that approximately 
10 percent of VA system users elect to receive their care 
through Medicare providers upon reaching the age of 65. That VA 
analysis projected a decline in VA usage continuing for those 
over 65 at an estimated rate of 4 to 6 percent. It is 
conceivable that such factors as improved customer service 
might diminish the attrition rate of such veterans from the VA 
to Medicare providers, but one cannot with any degree of 
confidence project that H.R. 3118 would produce any significant 
increase in demand for VA services on the part of Medicare-
eligible veterans.

    H.R. 3118 does not assume that the VA system would remain 
static. To the contrary, it assumes that system reforms the VA 
has adopted in recent years, documented in hearings conducted 
by the Subcommittee on Hospitals and Health Care as well as the 
full Committee, would continue and accelerate with the 
enactment of the reported bill. The VA has made significant 
progress in developing a primary care capacity within existing 
budget levels, even in the face of statutory ambiguities. The 
expansion of the VA's ambulatory care capacity and resultant 
increased volume of VA-provided outpatient care has been funded 
by redirecting resources. The funds which the VA has deployed 
to outpatient care have stemmed from such management 
initiatives as hospital ``mergers'', ward closures, and 
establishment of managed-care practices, such as telephone 
triage systems, increased use of physician extenders, and 
diminished reliance on physician specialists. The enactment of 
H.R. 3118 would enable VA to expand such practices and achieve 
additional efficiencies to offset further expansion of its 
ambulatory care capacity.

    The VA has advised the Committee of its projection that the 
enactment of H.R. 3118 would result in a 5 percent reduction in 
the number of episodes of inpatient care in the first year 
after enactment. The VA further projects that the bill would 
yield its full impact in terms of a shift in care, with a 15 
percent reduction in inpatient care in the second year after 
enactment. This 20 percent shift over two years is projected to 
represent a reduction of approximately 1.2 million days of bed-
care and, thus, a reduction of more than $700 million. The 
savings associated with these reductions would be partially 
offset by the shift in such care to the far less costly 
outpatient arena with a resultant increase in total outpatient 
care costs. The VA's analysis assumes that each inpatient 
episode which is ``shifted'' to outpatient care would result in 
an increase in VA outpatient costs representing 70 percent of 
the inpatient episode, for a total of some $500 million.

    The Committee concludes that the approximately $200 million 
in annual savings associated with these anticipated shifts in 
workload under the reported bill would be largely absorbed by 
the additional demand for VA care, primarily from ``new 
users''. Most of this new demand would arise from VA 
establishment of new community-based clinics which would 
provide convenient access for category A veterans in currently 
underserved areas. The Committee expects that the numbers and 
capacities of such clinics would be managed to maintain 
expenditures, including expenditures for inpatient services, 
within available resources, as provided under the bill. As a 
result, the Committee estimates, pursuant to clause 7 of rule 
XIII of the Rules of the House of Representatives, that H.R. 
3118 would be budget neutral for annual outlays in fiscal year 
1996 and in each of the five following fiscal years.

               Congressional Budget Office Cost Estimate

    The following letter was received from the Congressional 
Budget Office concerning the cost of the reported bill:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 15, 1996.
Hon. Bob Stump,
Chairman, Committee on Veterans' Affairs,
House of Representatives, Washington, DC.

    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3118, the 
Veterans' Health Care Eligibility Reform Act of 1996, as 
ordered reported by the House Committee on Veterans' Affairs on 
May 8, 1996. The bill would affect direct spending and is 
subject to pay-as-you-go procedures under section 252 of the 
Balanced Budget and Emergency Deficit Control Act of 1985.

    The bill contains no intergovernmental or private-sector 
mandates as defined in Public Law 104-4 and would impose no 
direct costs on State, local, or tribal governments.

    If you wish further details on this estimate, we will be 
pleased to provide them.

            Sincerely,
                                           June E. O'Neill,
                                                          Director.

    Attachment

               Congressional Budget Office Cost Estimate

    1. Bill number: H.R. 3118

    2. Bill title: Veterans' Health Care Eligibility Reform Act 
of 1996

    3. Bill status: As ordered reported by the House Committee 
on Veterans' Affairs on May 8, 1996.

    4. Bill purpose: The bill would expand eligibility for 
veterans outpatient care and prosthetics and authorize certain 
management practices.

    5. Estimated cost to the Federal Government:
Expanding eligibility for outpatient services would ultimately 
increase the cost of veterans medical care by about $3 billion 
a year, assuming appropriation of the necessary amounts. The 
bill's provisions affecting direct spending would have no net 
budgetary impact.

    6. Basis of estimate:
The estimate assumes enactment of the bill and appropriation of 
the authorized amounts for each fiscal year.
Spending subject to appropriations action
    The bill contains several sections that would be subject to 
annual appropriations action.
            Hospital care and medical services
    Currently, nearly 10 million veterans are eligible for 
outpatient care only if it involves pre- or post-
hospitalization visits or if it obviates the need for inpatient 
care. Section 2 of H.R. 3118 would remove current restrictions 
and would enable VA to provide these veterans with a full range 
of outpatient treatments. As a result, a substantial number of 
veterans who have been denied access to outpatient care, or 
have been discouraged from seeking treatment at VA outpatient 
clinics, could demand care

    The budgetary impact of this provision has two parts--
savings from shifting the current workload from unauthorized 
inpatient care to outpatient care, and costs from the increased 
demand for outpatient care. Anecdotal evidence suggests that 
some VA hospitals admit some veterans as inpatients to 
circumvent the restrictions on outpatient care. VA estimates 
suggest that shifting the currently unauthorized inpatient 
workload to the less costly outpatient setting would save about 
$214 million annually. CBO estimates that new demand for 
outpatient care, accompanying new demand for inpatient care, 
and additional costs from long-term care would far outweigh 
these savings. CBO estimates that expanding eligibility for 
outpatient care would raise VA's costs by about $3 billion for 
1997 if the bill took full effect in that year.

    The costs of this section, however, are very uncertain. 
Many factors influence a veteran's decision on where to seek 
medical care, including income, insurance, special health 
needs, personal tastes, and, in this case, eligibility for care 
and distance from a VA facility. Although the population of 
veterans is getting smaller, older veterans have greater health 
care needs, and may seek services from VA that are not provided 
under Medicare or other insurance programs. These factors are 
major sources of uncertainty for estimates of veterans medical 
programs.

    Which Veterans Would Be Affected? H.R. 3118 would provide a 
new benefit for outpatient care to certain veterans, mostly 
those with service-connected disabilities rated less than 50 
percent and those with annual incomes below thresholds set in 
law. (The threshold for 1996 is $21,001 for a single veteran.) 
Thus, the bill would allow nearly 10 million veterans who now 
have very limited access to VA outpatient facilities to receive 
unrestricted outpatient care. Many would turn to VA for care, 
although some would continue to use their current sources of 
medical care based on economic considerations and personal 
tastes.

    How Many Veterans would Use the New Benefits? CBO estimates 
that about 1.2 million additional veterans would be drawn to VA 
for medical care each year by the new benefit. This estimate 
reflects the pattern of usage among more severely disabled 
veterans who now have unlimited outpatient benefits. According 
to the 1992 Survey of Veterans (SOV), 43 percent of these 
veterans who used health care services and were eligible for VA 
outpatient benefits received at least some of their care from 
VA.

    Based on the 1992 survey, CBO estimates that the bill would 
make approximately 10 million veterans eligible for outpatient 
benefits based on their income or disability. Of this number, 
approximately 5.2 million used health care services in 1992, 
including 1.1 million who received at least some care from VA. 
Under H.R. 3118, the number of these veterans seeking health 
care from VA would double to about 2.3 million, if newly 
eligible veterans sought care from VA and non-VA sources in the 
same proportions as the more severely disabled veterans 
currently eligible for outpatient care. An additional 0.9 
million veterans would seek only outpatient services, 0.2 
million would seek both outpatient and inpatient care, and 
fewer than 0.1 million more would seek care only in VA 
hospitals.

    Costs of the New Benefit. CBO estimates that the new 
benefit for outpatient care would entail net costs of about $3 
billion each year. The new benefit would allow VA to treat some 
veterans as outpatients that it now sees as inpatients, saving 
about $0.2 billion a year. But the new benefit would also lead 
these and other veterans to come to VA for outpatient care they 
receive from other sources under current law. The related 
increase in costs has three parts--the cost of extra outpatient 
visits, the cost of additional hospital admissions that would 
stem from those visits, and the cost of additional long-term 
care.

    Savings from shifting workload.--VA expects that expanding 
eligibility for outpatient care would allow it to shift some of 
its inpatient workload to less costly care on an outpatient 
basis. Under current law, some VA facilities admit veterans to 
hospitals even though outpatient care would be more efficient 
because eligibility rules prohibit the less costly means of 
care. CBO cannot independently measure the extent that this 
takes place, and thus uses VA's estimate of the savings--about 
$0.2 billion a year--for purposes of this estimate.

    Added costs for outpatient care.--H.R. 3118 would cost 
about $1.5 billion each year for outpatient visits alone. CBO 
estimates that about 1.1 million veterans would expect 
outpatient care from VA each year under the bill. Based on 
budgetary information obtained from VA, the estimate assumes 
that 435,000 veterans would visit an outpatient facility 10 to 
12 times a year at a cost of about $189 a visit. Another 
630,000 veterans who now come to VA for some of their 
outpatient care would increase their use of VA, but they would 
also continue to receive care from non-VA sources. In both 
cases, the additional outpatient visits would also lead to a 
greater number of hospital admissions, which would cost 
additional sums.

    Added costs for induced inpatient care.--Additional 
hospital admissions would also cost about $1.5 billion each 
year. Veterans who would be drawn to VA for outpatient care by 
the bill could also be expected to add to the workload in VA 
hospitals. Under current law, many such veterans would be 
admitted to a non-VA hospital, but by going to VA for their 
outpatient care they would be more likely to enter a VA 
hospital. CBO estimates that an additional 115,000 veterans 
would be admitted to a VA hospital during a year for an average 
of about 13 days. Another 95,000 veterans would add to the 
workload of VA hospitals by a smaller amount because VA already 
meets some of their need for hospital care.

    Long-term care.--This estimate does not include any added 
costs for long-term care because most new users of VA under the 
bill would have low incomes, and Medicaid would tend to cover 
those costs under current law. CBO assumes VA would continue 
its current policy of helping Medicaid- and Medicare-eligible 
veterans apply for these benefits and also find appropriate 
long-term care. However, it seems plausible that there would be 
some new users whom VA would have to place in nursing homes or 
non-institutional care programs at its expense.
            Prosthetics
    VA currently furnishes prosthetic devices-including 
artificial limbs, braces, orthotics, eye glasses, hearing aids, 
and wheel chairs--to veterans only as part of their inpatient 
care. Section 3 would make prosthetics available on an 
outpatient or ambulatory care basis and would direct VA to 
issue new regulations to reflect this expanded access within 30 
days.

    Because insurance coverage for assistive technology in the 
private and public sectors is not generous, and because the 
costs to consumers are high, this change would increase the 
demand on VA to provide prosthetics and other aids. CBO used 
the 1987 National Medical Expenditure Survey to determine the 
need for eyeglasses, orthotic devices, hearing aids, and other 
assistive technology by veterans in various age groups. CBO 
estimates that this provision would cost about $50 million in 
1997 and $62 million in 2002 if eligibility for outpatient care 
is expanded at the same time. Costs of this provision would 
grow faster than prices for prosthetic devices because the 
veteran population is aging and the incidence and severity of 
disabilities increase with age.
            Management of health care
    Section 4 would require that VA establish a patient 
enrollment system for hospital care and medical services, and 
it would define priorities for which veterans should receive 
care when resources are scarce. It would not, however, 
authorize any copayments or cost sharing that would affect 
veterans' demand for health care or the costs of providing that 
care.
            Sharing agreements with the Department of Defense
    Section 5 would extend indefinitely an expansion of sharing 
agreements between VA and the Department of Defense (DOD) that 
enable the two agencies to treat patients eligible for each 
other's programs. Because current agreements cover a relatively 
small number of beneficiaries, this provision by itself would 
probably involve relatively low costs. But sharing agreements 
could ultimately make it easier to treat veterans who do not 
use their benefits under current law and those who would become 
eligible under section 2 of the bill.
            Sharing agreements for health care resources
    Section 6 would allow VA to agree to share equipment and 
other resources with a broad range of individuals and entities. 
These agreements would allow the resources to be used more 
efficiently and lead to budgetary savings or costs depending on 
the extent that VA would otherwise purchase or forgo the 
resource. CBO cannot estimate the budgetary impact of this 
provision.
            Personnel furnishing shared resources
    Under section 7, personnel furnishing services under 
sharing agreements would no longer be counted under employment 
ceilings. This section would allow VA to employ more people 
under sharing agreements and to employ more regular VA workers 
to the extent that VA currently employs and counts these 
personnel against its ceilings. The necessary data, however, 
for a specific estimate are not available.
Direct spending
    Section 5 of the bill would allow VA medical facilities to 
continue to treat certain beneficiaries of the Department of 
Defense's health care program; these costs would be subject to 
appropriations action. This section would also allow VA to bill 
third party insurers of these beneficiaries and to spend the 
proceeds. The receipts and the outlays would constitute direct 
spending but would offset each other over time and would have 
no net budgetary impact.

    Section 6 would grant VA broad authority to share resources 
with other entities and individuals. These sharing agreements 
would allow VA to collect and spend receipts derived from 
allowing nonveterans to use its equipment, facilities, or 
services. This spending would not be subject to appropriations 
action. Like the previous section, this section would have no 
net budgetary impact in the long run.

    7. Pay-as-you-go considerations:
The Balanced Budget and Emergency Deficit Control Act of 1985 
sets up pay-as-you-go procedures for legislation affecting 
direct spending or receipts through 1998. The bill would have 
the following pay-as-you-go impact:

                                                                        
                [By fiscal years, in millions of dollars]               
------------------------------------------------------------------------
                                                 1996     1997     1998 
------------------------------------------------------------------------
Change in outlays............................        0        0        0
Change in receipts ..........................        Not applicable     


    8. Estimated cost to State, local, and tribal governments:
CBO estimates that this bill would impose no intergovernmental 
mandates as defined by Public Law 104-4 and would have no 
direct budgetary impact on State, local, or tribal governments.

    9. Estimated impact on the private sector:
CBO estimates that H.R. 3118 would impose no private-sector 
mandates as defined in Public Law 104-4.

    10. Previous CBO estimate: None.

    11. Estimate prepared by:

      Federal cost estimate: Michael Groarke and Mary Helen 
            Petrus. Ellen Breslin Davidson and Nathan Stacy.

          Impact on State, local, and tribal governments: Marc 
        Nicole.

          Impact on private sector: Ellen Breslin Davidson.

    12. Estimate approved by: Paul N. Van de Water, Assistant 
Director for Budget Analysis.

                     Inflationary Impact Statement

    Pursuant to clause 2(l)(4) of rule XI of the Rules of the 
House of Representatives, the Committee concludes that the bill 
would have no inflationary impact.

                  Applicability to Legislative Branch

    The reported bill would not be applicable to the 
legislative branch under the Congressional Accountability Act, 
Public Law 104-1, because it would apply only to certain 
Department of Veterans Affairs programs and benefits 
recipients.

                     Statement of Federal Mandates

    Pursuant to section 423 of Public Law 104-4, this 
legislation contains no federal mandates with respect to state, 
local, and tribal governments, nor with respect to the private 
sector. Similarly, the bill provides no federal 
intergovernmental mandates.

                      Views of the Administration

    The following letter was received from the Department of 
Veterans Affairs concerning the reported bill:

                    Department of Veterans Affairs,
                                Under Secretary for Health,
                                       Washington, DC, May 7, 1996.
Hon. Bob Stump,
Chairman, Committee on Veterans' Affairs,
House of Representatives, Washington, DC.

    Dear Mr. Chairman: We have reviewed the Committee's VA 
health care eligibility reform legislation, H.R. 3118. A 
principal objective of the legislation is to make the delivery 
of health care to eligible veterans more rational by 
eliminating the current ``pre-, post-, and obviate'' 
restrictions on outpatient care. In that respect, H.R. 3118 is 
consistent with VA's Reinventing Government II initiative and 
with the following objectives which we consider essential to 
beneficial reform:

     First, the eligibility system should be 
understandable to the ordinary person. Both the persons seeking 
care and those providing the care should be able to understand 
what is covered and what is not.

     Second, the eligibility system should provide 
incentives to ensure that practitioners and health care 
managers provide patients the most medically appropriate care 
in the most economical setting.

     Third, veterans should retain eligibility for 
those benefits they are now eligible to receive.

     Fourth, VA management should be given the 
flexibility needed to manage the system effectively.

     Fifth, the new system should not cost taxpayers 
more; that is, the reform proposal should be budget neutral.

     Sixth, the new system should not create any new or 
unnecessary bureaucracy.

    According to the costing methodology we applied to the 
Administration's eligibility reform proposal and to the 
Committee's proposed bill, VA believes that H.R. 3118 is indeed 
budget neutral. A copy of that methodology is enclosed.

    I hope this information is helpful to the Committee. If we 
can provide additional information or assistance, please let us 
know.

            Sincerely,
                            Kenneth W. Kizer, M.D., M.P.H.,
                                        Under Secretary for Health.
    Attachments:

           REFORMING VA HEALTH CARE ELIGIBILITY AND TREATMENT

    As yet VA has no experience with eligibility reform on 
which to base reasonable cost estimates. Therefore, a formula 
has been developed which includes significant assumptions and 
results in rough estimates based on these assumptions. The 
operating premise for the formula and the VA proposal is that 
eligibility reform will be budget neutral.

    Overall, eligibility reform will assist VA in achieving 
greater efficiencies through effective management of the care 
of the veteran patients. The proposed action does not alter the 
definition of the mandatory category (``Core'' or Category A) 
of veterans. As a result of the application of a variety of 
managed care practices, in combination with the removal of the 
statutory barriers to effecting managed care, VA expects that 
there will be a shift in workload from inpatient to outpatient. 
The attached analysis depicts the application of the formula 
and the related assumptions. Since full efficiency should not 
be expected in the first year, it is roughly estimated that 
approximately 5 percent of VA inpatient workload will be 
shifted to outpatient care in year one, and an additional 15 
percent will be shifted in year two. This 20 percent shift over 
two years could equate to a reduction of roughly 1.2 million 
inpatient days of care and an inpatient cost avoidance of $761 
million which would be applied to the increased costs of 
outpatient care. For purposes of estimating, VA has assumed 
that for every ``shifted'' inpatient episode, outpatient care 
will increase by 70 percent of the average cost of the shifted 
inpatient admissions. This ``guesstimate'' results in a total 
increase over the two years of roughly $533 million in 
outpatient costs. In addition to the deferred inpatient 
dollars, VA estimates that 10 percent of current contract fee 
care and 10 percent of beneficiary travel will also be avoided 
as a result of improved access to VA outpatient services. These 
additional ``saving'' are roughly estimated at $39 million. 
Applying the total of the ``savings'' from the shifted 
inpatient care, reduced contract fee care, and reduced 
beneficiary travel to the new outpatient cost estimate, $268 
million over two years may possibly be available for new 
outpatient workload (and concomitant inpatient workload), new 
non-institutional care, and greater access to primary care. 
Therefore, VA expects this proposal to be budget neutral and it 
does not affect adjustments for pay and inflation through the 
year 2000.


         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (existing law proposed 
to be omitted is enclosed in black brackets, new matter is 
printed in italics, existing law in which no change is proposed 
is shown in roman):

                      TITLE 38, UNITED STATES CODE

          * * * * * * *

                       PART I--GENERAL PROVISIONS

          * * * * * * *

                          CHAPTER 7--EMPLOYEES

          * * * * * * *

Sec. 712. Full-time equivalent positions: limitation on reduction

  (a) * * *
  (b) In determining the number of full-time equivalent 
positions in the Department of Veterans Affairs during a fiscal 
year for purposes of ensuring under section 5(b) of the Federal 
Workforce Restructuring Act of 1994 (Public Law 103-226; 108 
Stat. 115; 5 U.S.C. 3101 note) that the total number of full-
time equivalent positions in all agencies of the Federal 
Government during a fiscal year covered by that section does 
not exceed the limit prescribed for that fiscal year under that 
section, the total number of full-time equivalent positions in 
the Department of Veterans Affairs during that fiscal year 
shall be the number equal to--
          (1) the number of such positions in the Department 
        during that fiscal year, reduced by
          (2) [the sum of--] the sum of the following:
                  (A) [the] The number of such positions in the 
                Department during that fiscal year that are 
                filled by employees whose salaries and benefits 
                are paid primarily from funds other than 
                appropriated funds[; and].
                  (B) [the] The number of such positions held 
                during that fiscal year by persons involved in 
                medical care cost recovery activities under 
                section 1729 of this title.
                  (C) The number of such positions in the 
                Department during that fiscal year held by 
                persons involved in providing health-care 
                resources under section 8111 or 8152 of this 
                title.
          * * * * * * *

                       PART II--GENERAL BENEFITS

          * * * * * * *

   CHAPTER 17--HOSPITAL, NURSING HOME, DOMICILIARY, AND MEDICAL CARE

                          subchapter i--general

Sec.
1701.  Definitions.
1702.  Presumption relating to psychosis.
[1703.  Contracts for hospital care and medical services in non-
          Department facilities.]
1703.  Annual report on furnishing of care and services by contract.
     * * * * * * *
1705.  Management of health care: patient enrollment system.
1706.  Management of health care: other requirements.
     * * * * * * *

                         SUBCHAPTER I--GENERAL

Sec. 1701. Definitions

  For the purposes of this chapter--
  (1) * * *
          * * * * * * *
  (6) The term ``medical services'' includes, in addition to 
medical examination, treatment, and rehabilitative services--
          (A)(i) surgical services, dental services and 
        appliances as described in sections 1710 and 1712 of 
        this title, optometric and podiatric services [(in the 
        case of a person otherwise receiving care or services 
        under this chapter)], preventive health services, and 
        [(except under the conditions described in section 
        1712(a)(5)(A) of this title),] (in the case of a person 
        otherwise receiving care or services under this 
        chapter) wheelchairs, artificial limbs, trusses, and 
        similar appliances, special clothing made necessary by 
        the wearing of prosthetic appliances, and such other 
        supplies or services as the Secretary determines to be 
        reasonable and necessary, except that the Secretary may 
        not furnish sensori-neural aids other than in 
        accordance with guidelines which the Secretary shall 
        prescribe, and (ii) travel and incidental expenses 
        pursuant to the provisions of section 111 of this 
        title; and
          * * * * * * *

[Sec. 1703. Contracts for hospital care and medical services in non-
                    Department facilities]

Sec. 1703. Annual report on furnishing of care and services by contract

  [(a) When Department facilities are not capable of furnishing 
economical hospital care or medical services because of 
geographical inaccessibility or are not capable of furnishing 
the care or services required, the Secretary, as authorized in 
section 1710 or 1712 of this title, may contract with non-
Department facilities in order to furnish any of the following:
          [(1) Hospital care or medical services to a veteran 
        for the treatment of--
                  [(A) a service-connected disability;
                  [(B) a disability for which a veteran was 
                discharged or released from the active 
                military, naval, or air service; or
                  [(C) a disability of a veteran who has a 
                total disability permanent in nature from a 
                service-connected disability.
          [(2) Medical services for the treatment of any 
        disability of--
                  [(A) a veteran described in section 
                1712(a)(1)(B) of this title;
                  [(B) a veteran described in paragraph (2), 
                (3), or (4) of section 1712(a) of this title, 
                for a purpose described in section 
                1712(a)(5)(B) of this title; or
                  [(C) a veteran described in section 
                1712(a)(3) (other than a veteran who is a 
                former prisoner of war) of this title if the 
                Secretary has determined, based on an 
                examination by a physician employed by the 
                Department (or, in areas where no such 
                physician is available, by a physician carrying 
                out such function under a contract or fee 
                arrangement), that the medical condition of 
                such veteran precludes appropriate treatment in 
                Department facilities.
          [(3) Hospital care or medical services for the 
        treatment of medical emergencies which pose a serious 
        threat to the life or health of a veteran receiving 
        medical services in a Department facility or nursing 
        home care under section 1720 of this title until such 
        time following the furnishing of care in the non-
        Department facility as the veteran can be safely 
        transferred to a Department facility.
          [(4) Hospital care for women veterans.
          [(5) Hospital care, or medical services that will 
        obviate the need for hospital admission, for veterans 
        in a State (other than the Commonwealth of Puerto Rico) 
        not contiguous to the contiguous States, except that 
        the annually determined hospital patient load and 
        incidence of the furnishing of medical services to 
        veterans hospitalized or treated at the expense of the 
        Department in Government and non-Department facilities 
        in each such noncontiguous State shall be consistent 
        with the patient load or incidence of the furnishing of 
        medical services for veterans hospitalized or treated 
        by the Department within the 48 contiguous States and 
        the Commonwealth of Puerto Rico.
          [(6) Diagnostic services necessary for determination 
        of eligibility for, or of the appropriate course of 
        treatment in connection with, furnishing medical 
        services at independent Department out-patient clinics 
        to obviate the need for hospital admission.
          [(7) Outpatient dental services and treatment, and 
        related dental appliances, for a veteran described in 
        section 1712(b)(1)(F) of this title.
          [(8) Diagnostic services (on an inpatient or 
        outpatient basis) for observation or examination of a 
        person to determine eligibility for a benefit or 
        service under laws administered by the Secretary.
  [(b) In the case of any veteran for whom the Secretary 
contracts to furnish care or services in a non-Department 
facility pursuant to a provision of subsection (a) of this 
section, the Secretary shall periodically review the necessity 
for continuing such contractual arrangement pursuant to such 
provision.]
  [(c)] The Secretary shall include in the budget documents 
which the Secretary submits to Congress for any fiscal year a 
detailed report on the furnishing of contract care and services 
during the most recently completed fiscal year under [this 
section, sections] sections 1710, 1712A, 1720, 1720A, 1724, and 
1732 of this title, and section 115 of the Veterans' Benefits 
and Services Act of 1988 (Public Law 100-322; 102 Stat. 501).
          * * * * * * *

Sec. 1705. Management of health care: patient enrollment system

  (a) In managing the provision of hospital care and medical 
services under section 1710(a)(1) of this title, the Secretary, 
in accordance with regulations the Secretary shall prescribe, 
shall establish and operate a system of annual patient 
enrollment. The Secretary shall manage the enrollment of 
veterans in accordance with the following priorities, in the 
order listed:
          (1) Veterans with service-connected disabilities 
        rated 30 percent or greater.
          (2) Veterans who are former prisoners of war and 
        veterans with service connected disabilities rated 10 
        percent or 20 percent.
          (3) Veterans who are in receipt of increased pension 
        based on a need of regular aid and attendance or by 
        reason of being permanently housebound and other 
        veterans who are catastrophically disabled.
          (4) Veterans not covered by paragraphs (1) through 
        (3) who are unable to defray the expenses of necessary 
        care as determined under section 1722(a) of this title.
          (5) All other veterans eligible for hospital care, 
        medical services, and nursing home care under section 
        1710(a)(1) of this title.
  (b) In the design of an enrollment system under subsection 
(a), the Secretary--
          (1) shall ensure that the system will be managed in a 
        manner to ensure that the provision of care to 
        enrollees is timely and acceptable in quality;
          (2) may establish additional priorities within each 
        priority group specified in subsection (a), as the 
        Secretary determines necessary; and
          (3) may provide for exceptions to the specified 
        priorities where dictated by compelling medical 
        reasons.

Sec. 1706. Management of health care: other requirements

  (a) In managing the provision of hospital care and medical 
services under section 1710(a) of this title, the Secretary 
shall, to the extent feasible, design, establish and manage 
health care programs in such a manner as to promote cost-
effective delivery of health care services in the most 
clinically appropriate setting.
  (b) In managing the provision of hospital care and medical 
services under section 1710(a) of this title, the Secretary--
          (1) may contract for hospital care and medical 
        services when Department facilities are not capable of 
        furnishing such care and services economically, and
          (2) shall make such rules and regulations regarding 
        acquisition procedures or policies as the Secretary 
        considers appropriate to provide such needed care and 
        services.
  (c) In managing the provision of hospital care and medical 
services under section 1710(a) of this title, the Secretary 
shall ensure that the Department maintains its capacity to 
provide for the specialized treatment and rehabilitative needs 
of disabled veterans described in section 1710(a) of this title 
(including veterans with spinal cord dysfunction, blindness, 
amputations, and mental illness) within distinct programs or 
facilities of the Department that are dedicated to the 
specialized needs of those veterans in a manner that (1) 
affords those veterans reasonable access to care and services 
for those specialized needs, and (2) ensures that overall 
capacity of the Department to provide such services is not 
reduced below the capacity of the Department, nationwide, to 
provide those services, as of the date of the enactment of this 
section.
  (d) In managing the provision of hospital care and medical 
services under section 1710(a) of this title, the Secretary 
shall ensure that any veteran with a service-connected 
disability is provided all benefits under this chapter for 
which that veteran was eligible before the date of the 
enactment of this section.

 SUBCHAPTER II--HOSPITAL, NURSING HOME OR DOMICILIARY CARE AND MEDICAL 
                               TREATMENT

Sec. 1710. Eligibility for hospital, nursing home, and domiciliary care

  [(a)(1) The Secretary shall furnish hospital care, and may 
furnish nursing home care, which the Secretary determines is 
needed--
          [(A) to any veteran for a service-connected 
        disability;
          [(B) to a veteran whose discharge or release from the 
        active military, naval, or air service was for a 
        disability incurred or aggravated in line of duty, for 
        any disability;
          [(C) to a veteran who is in receipt of, or who, but 
        for a suspension pursuant to section 1151 of this title 
        (or both such a suspension and the receipt of retired 
        pay), would be entitled to disability compensation, but 
        only to the extent that such veteran's continuing 
        eligibility for such care is provided for in the 
        judgment or settlement described in such section, for 
        any disability;
          [(D) to a veteran who has a service-connected 
        disability rated at 50 percent or more, for any 
        disability;
          [(E) to any other veteran who has a service-connected 
        disability, for any disability;
          [(F) to a veteran who is a former prisoner of war, 
        for any disability;
          [(G) to a veteran exposed to a toxic substance, 
        radiation, or environmental hazard, as provided in 
        subsection (e) of this section;
          [(H) to a veteran of the Mexican border period or 
        World War I, for any disability; and
          [(I) to a veteran for a non-service-connected 
        disability, if the veteran is unable to defray the 
        expenses of necessary care as determined under section 
        1722(a) of this title.
  [(2) In the case of a veteran who is not described in 
paragraph (1) of this subsection, the Secretary may, to the 
extent resources and facilities are available, furnish hospital 
care and nursing home care to a veteran which the Secretary 
determines is needed for a nonservice-connected disability, 
subject to the provisions of subsection (f) of this section.]
  (a)(1) The Secretary shall, to the extent and in the amount 
provided in advance in appropriations Acts for these purposes, 
provide hospital care and medical services, and may provide 
nursing home care, which the Secretary determines is needed to 
any veteran--
          (A) with a compensable service-connected disability;
          (B) whose discharge or release from active military, 
        naval, or air service was for a compensable disability 
        that was incurred or aggravated in the line of duty;
          (C) who is in receipt of, or who, but for a 
        suspension pursuant to section 1151 of this title (or 
        both a suspension and the receipt of retired pay), 
        would be entitled to disability compensation, but only 
        to the extent that such veteran's continuing 
        eligibility for such care is provided for in the 
        judgment or settlement provided for in such section;
          (D) who is a former prisoner of war;
          (E) of the Mexican border period or of World War I;
          (F) who was exposed to a toxic substance, radiation, 
        or environmental hazard, as provided in subsection (e); 
        and
          (G) who is unable to defray the expenses of necessary 
        care as determined under section 1722(a) of this title.
  (2) In the case of a veteran who is not described in 
paragraph (1), the Secretary may, to the extent resources and 
facilities are available and subject to the provisions of 
subsection (f), furnish hospital care, medical services, and 
nursing home care which the Secretary determines is needed.
          * * * * * * *
  (e)(1)(A) Subject to paragraphs (2) and (3) of this 
subsection, a veteran--
          (i) who served on active duty in the Republic of 
        Vietnam during the Vietnam era, and
          (ii) who the Secretary finds may have been exposed 
        during such service to dioxin or was exposed during 
        such service to a toxic substance found in a herbicide 
        or defoliant used in connection with military purposes 
        during such era,
is eligible for [hospital care and nursing home care] hospital 
care, medical services, and nursing home care under [subsection 
(a)(1)(G) of this section] subsection (a)(1)(F) for any 
disability, notwithstanding that there is insufficient medical 
evidence to conclude that such disability may be associated 
with such exposure.
  (B) Subject to paragraphs (2) and (3) of this subsection, a 
veteran who the Secretary finds was exposed while serving on 
active duty to ionizing radiation from the detonation of a 
nuclear device in connection with such veteran's participation 
in the test of such a device or with the American occupation of 
Hiroshima and Nagasaki, Japan, during the period beginning on 
September 11, 1945, and ending on July 1, 1946, is eligible for 
[hospital care and nursing home care] hospital care, medical 
services, and nursing home care under [subsection (a)(1)(G) of 
this section] subsection (a)(1)(F) for any disability, 
notwithstanding that there is insufficient medical evidence to 
conclude that such disability may be associated with such 
exposure.
  (C) Subject to paragraphs (2) and (3) of this subsection, a 
veteran who the Secretary finds may have been exposed while 
serving on active duty in the Southwest Asia theater of 
operations during the Persian Gulf War to a toxic substance or 
environmental hazard is eligible for [hospital care and nursing 
home care] hospital care, medical services, and nursing home 
care under [subsection (a)(1)(G) of this section] subsection 
(a)(1)(F) for any disability, notwithstanding that there is 
insufficient medical evidence to conclude that such disability 
may be associated with such exposure.
  (2) Hospital and nursing home care and medical services may 
not be provided under [subsection (a)(1)(G) of this section] 
subsection (a)(1)(F) with respect to a disability that is 
found, in accordance with guidelines issued by the Under 
Secretary for Health, to have resulted from a cause other than 
an exposure described in subparagraph (A), (B), or (C) of 
paragraph (1) of this subsection.
          * * * * * * *
  [(f)](g)(1) The Secretary may not furnish medical services 
under subsection (a) of this section (including home health 
services under section 1717 of this title) to a veteran who is 
eligible for hospital care under this chapter by reason of 
[section 1710(a)(2) of this title] subsection (a)(2) of this 
section unless the veteran agrees to pay to the United States 
the amount determined under paragraph (2) of this subsection.
  (2) A veteran who is furnished medical services under 
subsection (a) of this section and who is required under 
paragraph (1) of this subsection to agree to pay an amount to 
the United States in order to be furnished such services shall 
be liable to the United States, in the case of each visit in 
which such services are furnished to the veteran, for an amount 
equal to 20 percent of the estimated average cost (during the 
calendar year in which the services are furnished) of an 
outpatient visit in a Department facility. Such estimated 
average cost shall be determined by the Secretary.
  (3) This subsection does not apply with respect to home 
health services under section 1717 of this title to the extent 
that such services are for improvements and structural 
alterations.
  (4) Amounts collected or received by the Department under 
this subsection shall be deposited in the Treasury as 
miscellaneous receipts.
  [(g)] (h) Nothing in this section requires the Secretary to 
furnish care to a veteran to whom another agency of Federal, 
State, or local government has a duty under law to provide care 
in an institution of such government.
          * * * * * * *

Sec. 1712. Eligibility for outpatient services

  [(a)(1) Except as provided in subsection (b) of this section, 
the Secretary shall furnish on an ambulatory or outpatient 
basis such medical services as the Secretary determines are 
needed--
          [(A) to any veteran for a service-connected 
        disability (including a disability that was incurred or 
        aggravated in line of duty and for which the veteran 
        was discharged or released from the active military, 
        naval, or air service);
          [(B) for any disability of a veteran who has a 
        service-connected disability rated at 50 percent or 
        more;
          [(C) to any veteran for a disability for which the 
        veteran is in receipt of compensation under section 
        1151 of this title or for which the veteran would be 
        entitled to compensation under that section but for a 
        suspension pursuant to that section (but in the case of 
        such a suspension, such medical services may be 
        furnished only to the extent that such person's 
        continuing eligibility for medical services is provided 
        for in the judgment or settlement described in that 
        section); and
          [(D) during the period before December 31, 1996, for 
        any disability in the case of a veteran who served on 
        active duty in the Southwest Asia theater of operations 
        during the Persian Gulf War and who the Secretary finds 
        may have been exposed to a toxic substance or 
        environmental hazard during such service, 
        notwithstanding that there is insufficient medical 
        evidence to conclude that the disability may be 
        associated with such exposure.
  [(2) The Secretary shall furnish on an ambulatory or 
outpatient basis medical services for a purpose described in 
paragraph (5) of this subsection--
          [(A) to any veteran who has a service-connected 
        disability rated at 30 percent or 40 percent; and
          [(B) to any veteran who is eligible for hospital care 
        under section 1710(a) of this title and whose annual 
        income (as determined under section 1503 of this title) 
        does not exceed the maximum annual rate of pension that 
        would be applicable to the veteran if the veteran were 
        eligible for pension under section 1521(d) of this 
        title.
  [(3) The Administrator may furnish on an ambulatory or 
outpatient basis medical services which the Secretary 
determines are needed--
          [(A) to any veteran who is a former prisoner of war;
          [(B) to any veteran of the Mexican border period or 
        of World War I; and
          [(C) to any veteran who is in receipt of increased 
        pension or additional compensation or allowances based 
        on the need of regular aid and attendance or by reason 
        of being permanently housebound (or who, but for the 
        receipt of retired pay, would be in receipt of such 
        pension, compensation, or allowance).
  [(4) Subject to subsection (f) of this section, the Secretary 
may furnish on an ambulatory or outpatient basis medical 
services for a purpose described in paragraph (5) of this 
subsection to any veteran who is eligible for hospital care 
under section 1710 of this title and who is not otherwise 
eligible for such services under this subsection.
  [(5)(A) Medical services for a purpose described in this 
paragraph are medical services reasonably necessary in 
preparation for hospital admission or to obviate the need of 
hospital admission. In the case of a veteran described in 
paragraph (4) of this subsection, services to obviate the need 
of hospital admission may be furnished only to the extent that 
facilities are available.
  [(B) In the case of a veteran who has been furnished hospital 
care, nursing home care, or domiciliary care, medical services 
for a purpose described in this paragraph include medical 
services reasonably necessary to complete treatment incident to 
such care. Such medical services may not be provided for a 
period in excess of 12 months after discharge from such care. 
However, the Secretary may authorize a longer period in any 
case if the Secretary finds that a longer period is required by 
reason of the disability being treated.
  [(6) In addition to furnishing medical services under this 
subsection through Department facilities, the Secretary may 
furnish such services in accordance with section 1503 of this 
title.
  [(7) Medical services may not be furnished under paragraph 
(1)(D) with respect to a disability that is found, in 
accordance with guidelines issued by the Under Secretary for 
Health, to have resulted from a cause other than an exposure 
described in that paragraph.]
  [(b)] (a)(1) Outpatient dental services and treatment, and 
related dental appliances, shall be furnished under this 
section only for a dental condition or disability--
          (A) * * *
          * * * * * * *
  [(c)] (b) Dental services and related appliances for a dental 
condition or disability described in paragraph (1)(B) of 
subsection (b) of this section shall be furnished on a one-time 
completion basis, unless the services rendered on a one-time 
completion basis are found unacceptable within the limitations 
of good professional standards, in which event such additional 
services may be afforded as are required to complete 
professionally acceptable treatment.
  [(d)] (c) Dental appliances, wheelchairs, artificial limbs, 
trusses, special clothing, and similar appliances to be 
furnished by the Secretary under this section may be procured 
by the Secretary either by purchase or by manufacture, 
whichever the Secretary determines may be advantageous and 
reasonably necessary.
  [(f)(1) The Secretary may not furnish medical services under 
subsection (a) of this section (including home health services 
under section 1717 of this title) to a veteran who is eligible 
for hospital care under this chapter by reason of section 
1710(a)(2) of this title unless the veteran agrees to pay to 
the United States the amount determined under paragraph (2) of 
this subsection.
  [(2) A veteran who is furnished medical services under 
subsection (a) of this section and who is required under 
paragraph (1) of this subsection to agree to pay an amount to 
the United States in order to be furnished such services shall 
be liable to the United States, in the case of each visit in 
which such services are furnished to the veteran, for an amount 
equal to 20 percent of the estimated average cost (during the 
calendar year in which the services are furnished) of an 
outpatient visit in a Department facility. Such estimated 
average cost shall be determined by the Secretary.
  [(3) This subsection does not apply with respect to home 
health services under section 1717 of this title to the extent 
that such services are for improvements and structural 
alterations.
  [(4) Amounts collected or received by the Department under 
this subsection shall be deposited in the Treasury as 
miscellaneous receipts.]
  [(h)] (d) The Secretary shall furnish to each veteran who is 
receiving additional compensation or allowance under chapter 11 
of this title, or increased pension as a veteran of a period of 
war, by reason of being permanently housebound or in need of 
regular aid and attendance, such drugs and medicines as may be 
ordered on prescription of a duly licensed physician as 
specific therapy in the treatment of any illness or injury 
suffered by such veteran. The Secretary shall continue to 
furnish such drugs and medicines so ordered to any such veteran 
in need of regular aid and attendance whose pension payments 
have been discontinued solely because such veteran's annual 
income is greater than the applicable maximum annual income 
limitation, but only so long as such veteran's annual income 
does not exceed such maximum annual income limitation by more 
than $1,000.
  [(i) The Secretary shall prescribe regulations to ensure that 
special priority in furnishing medical services under this 
section and any other outpatient care with funds appropriated 
for the medical care of veterans shall be accorded in the 
following order, unless compelling medical reasons require that 
such care be provided more expeditiously:
          [(1) To a veteran (A) who is entitled to such 
        services under paragraph (1) or (2) of subsection (a) 
        of this section, or (B) who is eligible for counseling 
        and care and services under section 1720D of this 
        title, for the purposes of such counseling and care and 
        services.
          [(2) To a veteran (A) who has a service-connected 
        disability rated at less than 30-percent disabling or 
        (B) who is being examined to determine the existence or 
        severity of a service-connected disability.
          [(3) To a veteran (A) who is a former prisoner of 
        war, or (B) who is eligible for hospital care under 
        section 1710(e) of this title.
          [(4) To a veteran eligible for medical services under 
        subsection (a)(3)(B) or (a)(3)(C) of this section.
          [(5) To a veteran not covered by paragraphs (1) 
        through (4) of this subsection who is unable to defray 
        the expenses of necessary care as determined under 
        section 1722(a)(3) of this title.]
  [(j)] (e) In order to assist the Secretary of Health and 
Human Services in carrying out national immunization programs 
under other provisions of law, the Secretary may authorize the 
administration of immunizations to eligible veterans who 
voluntarily request such immunizations in connection with the 
provision of care for a disability under this chapter in any 
Department health care facility. Any such immunization shall be 
made using vaccine furnished by the Secretary of Health and 
Human Services at no cost to the Department. For such purpose, 
notwithstanding any other provision of law, the Secretary of 
Health and Human Services may provide such vaccine to the 
Department at no cost. Section 7316 of this title shall apply 
to claims alleging negligence or malpractice on the part of 
Department personnel granted immunity under such section.
          * * * * * * *

            PART VI--ACQUISITION AND DISPOSITION OF PROPERTY

          * * * * * * *

   CHAPTER 81--ACQUISITION AND OPERATION OF HOSPITAL AND DOMICILIARY 
    FACILITIES; PROCUREMENT AND SUPPLY; ENHANCED-USE LEASES OF REAL 
                                PROPERTY

      subchapter i--acquisition and operation of medical facilities

Sec.
8101.  Definitions.
     * * * * * * *

subchapter iv--sharing of medical facilities, equipment, and information

[8151.  Statement of congressional purpose.]
[8152] 8151.  Definitions.
[8153] 8152.  Specialized medical resources.
[8154] 8153.  Exchange of medical information.
[8155] 8154.  Pilot programs; grants to medical schools.
[8156] 8155.  Coordination with health services development activities 
          carried out under the National Health Planning and Resources 
          Development Act of 1974.
[8157] 8156.  Joint title to medical equipment.
[8158] 8157.  Deposit in escrow.
     * * * * * * *

     SUBCHAPTER I--ACQUISITION AND OPERATION OF MEDICAL FACILITIES

Sec. 8110. Operation of medical facilities

  (a) * * *
          * * * * * * *
  (c)(1) * * *
          * * * * * * *
  (3) The provisions of paragraph (1) of this subsection do not 
apply--
          (A) to a contract or agreement under chapter 17 or 
        section 8111, 8111A, or [8153] 8152 of this title or 
        under section 1535 of title 31; or
          * * * * * * *

     SUBCHAPTER IV--SHARING OF MEDICAL FACILITIES, EQUIPMENT, AND 
                              INFORMATION

          * * * * * * *

[Sec. 8151. Statement of congressional purpose

  [It is the purpose of this subchapter to improve the quality 
of hospital care and other medical service provided veterans 
under this title, by authorizing the Secretary to enter into 
agreements with medical schools, health-care facilities, and 
research centers throughout the country in order to receive 
from and share with such medical schools, health-care 
facilities, and research centers the most advanced medical 
techniques and information, as well as certain specialized 
medical resources which otherwise might not be feasibly 
available or to effectively utilize other medical resources 
with the surrounding medical community, without diminution of 
services to veterans. Among other things, it is intended, by 
these means, to strengthen the medical programs at those 
Department hospitals which are located in small cities or rural 
areas and thus are remote from major medical centers. It is 
further the purpose of this subchapter to improve the provision 
of care to veterans under this title by authorizing the 
Secretary to enter into agreements with State veterans 
facilities for the sharing of health-care resources.]

Sec. [8152.] 8151. Definitions

  For the purposes of this subchapter--
          (1) The term ``research center'' means an institution 
        (or part of an institution), the primary function of 
        which is research, training of specialists, and 
        demonstrations and which, in connection therewith, 
        provides specialized, high quality diagnostic and 
        treatment services for inpatients and outpatients.
          (2) The term ``specialized medical resources'' means 
        medical resources (whether equipment, space, or 
        personnel) which, because of cost, limited 
        availability, or unusual nature, are either unique in 
        the medical community or are subject to maximum 
        utilization only through mutual use.
          (3) The term ``health-care resource'' includes 
        hospital care, medical services, and rehabilitative 
        services, as those terms are defined in paragraphs (5), 
        (6), and (8), respectively, of section 1701 of this 
        title, any other health-care service, and any health-
        care support or administrative resource.
          (4) The term ``hospital'', unless otherwise 
        specified, includes any Federal, State, local, or other 
        public or private hospital.

Sec. [8153.] 8152. Specialized medical resources

  (a)(1) To secure certain specialized medical resources which 
otherwise might not be feasibly available, or to effectively 
utilize certain other medical resources, the Secretary may, 
when the Secretary determines it to be in the best interest of 
the prevailing standards of the Department medical care 
program, make arrangements, by contract or other form of 
agreement for the mutual use, or exchange of use, of--
          (A) [specialized medical resources] health-care 
        resources between Department health-care facilities and 
        [other health-care facilities (including organ banks, 
        blood banks, or similar institutions), research 
        centers, or medical schools] any medical school, 
        health-care provider, health-care plan, insurer, or 
        other entity or individual; and
          (B) health-care resources between Department health-
        care facilities and State home facilities recognized 
        under section 1742(a) of this title.
  (2) The Secretary may enter into a contract or other 
agreement under paragraph (1) [only if (A) such an agreement 
will obviate the need for a similar resource to be provided in 
a Department health care facility, or (B) the Department 
resources which are the subject of the agreement and which have 
been justified on the basis of veterans' care are not] if such 
resources are not, or would not be, used to their maximum 
effective capacity.
  (b) Arrangements entered into under this section shall 
provide for [reciprocal reimbursement based on a methodology 
that provides appropriate flexibility to the heads of the 
facilities concerned to establish an appropriate reimbursement 
rate after taking into account local conditions and needs and 
the actual costs to the providing facility of the resource 
involved.] payment to the Department in accordance with 
procedures that provide appropriate flexibility to negotiate 
payment which is in the best interest of the Government. Any 
proceeds to the Government received therefrom shall be credited 
to the applicable Department medical appropriation and to funds 
that have been allotted to the facility that furnished the 
resource involved.
  (c) Eligibility for hospital care and medical services 
furnished any veteran pursuant to this section shall be subject 
to the same terms as though provided in a Department health 
care facility, and provisions of this title applicable to 
persons receiving hospital care or medical services in a 
Department health care facility shall apply to veterans treated 
under this subsection.
  (d) When a Department health care facility provides hospital 
care or medical services, pursuant to a contract or agreement 
authorized by this section, to an individual who is not 
eligible for such care or services under chapter 17 of this 
title and who is entitled to hospital or medical insurance 
benefits under title XVIII of the Social Security Act (42 
U.S.C. 1395 et seq.), such benefits shall be paid, 
notwithstanding any condition, limitation, or other provision 
in that title which would otherwise [preclude such payment, in 
accordance with--
          [(1) rates prescribed by the Secretary of Health and 
        Human Services, after consultation with the Secretary, 
        and
          [(2) procedures jointly prescribed by the two 
        Secretaries to assure reasonable quality of care and 
        services and efficient and economical utilization of 
        resources,
to such facility therefor] preclude such payment to such 
facility for such care or services or, if the contract or 
agreement so provides, to the community health care facility 
which is a party to the contract or agreement.
  (e) The Secretary may make an arrangement that authorizes the 
furnishing of services by the Secretary under this section to 
individuals who are not veterans only if the Secretary 
determines--
          (1) that such an arrangement will not result in the 
        denial of, or a delay in providing access to, care to 
        any veteran at that facility; and
          (2) that such an arrangement--
                  (A) is necessary to maintain an acceptable 
                level and quality of service to veterans at 
                that facility; or
                  (B) will result in the improvement of 
                services to eligible veterans at that facility.
  [(e)] (f) The Secretary shall submit to the Congress not more 
than 60 days after the end of each fiscal year a report on the 
activities carried out under this section. Each report shall 
include--
          (1) an appraisal of the effectiveness of the 
        activities authorized in this section and the degree of 
        cooperation from other sources, financial and 
        otherwise; and
          (2) recommendations for the improvement or more 
        effective administration of such activities.

Sec. [8154.] 8153. Exchange of medical information

  (a) The Secretary is authorized to enter into agreements with 
medical schools, hospitals, research centers, and individual 
members of the medical profession under which medical 
information and techniques will be freely exchanged and the 
medical information services of all parties to the agreement 
will be available for use by any party to the agreement under 
conditions specified in the agreement. In carrying out the 
purposes of this section, the Secretary shall utilize recent 
developments in electronic equipment to provide a close 
educational, scientific, and professional link between 
Department hospitals and major medical centers. Such agreements 
shall be utilized by the Secretary to the maximum extent 
practicable to create, at each Department hospital which is a 
part of any such agreement, an environment of academic medicine 
which will help such hospital attract and retain highly trained 
and qualified members of the medical profession.
  (b) In order to bring about utilization of all medical 
information in the surrounding medical community, particularly 
in remote areas, and to foster and encourage the widest 
possible cooperation and consultation among all members of the 
medical profession in such community, the educational 
facilities and programs established at Department hospitals and 
the electronic link to medical centers shall be made available 
for use by the surrounding medical community (including State 
home facilities furnishing domiciliary, nursing home, or 
hospital care to veterans). The Secretary may charge a fee for 
such services (on annual or like basis) at rates which the 
Secretary determines, after appropriate study, to be fair and 
equitable. The financial status of any user of such services 
shall be taken into consideration by the Secretary in 
establishing the amount of the fee to be paid. Any proceeds to 
the Government received therefrom shall be credited to the 
applicable Department medical appropriation.
  (c) The Secretary is authorized to enter into agreements with 
public and nonprofit private institutions, organizations, 
corporations, and other entities in order to participate in 
cooperative health-care personnel education programs within the 
geographical area of any Department health-care facility 
located in an area remote from major academic health centers.

Sec. [8155.] 8154. Pilot programs; grants to medical schools

  (a) The Secretary may establish an Advisory Subcommittee on 
Programs for Exchange of Medical Information, of the Special 
Medical Advisory Group, established under section 7312 of this 
title, to advise the Secretary on matters regarding the 
administration of this section and to coordinate these 
functions with other research and education programs in the 
Department of Medicine and Surgery. The Assistant Under 
Secretary for Health charged with administration of the 
Department of Medicine and Surgery medical research program 
shall be an ex officio member of this Subcommittee.
  (b) The Secretary, upon the recommendation of the 
Subcommittee, is authorized to make grants to medical schools, 
hospitals, and research centers to assist such medical schools, 
hospitals, and research centers in planning and carrying out 
agreements authorized by section [8154] 8153 of this title. 
Such grants may be used for the employment of personnel, the 
construction of facilities, the purchasing of equipment when 
necessary to implement such programs, and for such other 
purposes as will facilitate the administration of this section.
  (c)(1) There is hereby authorized to be appropriated an 
amount not to exceed $3,500,000 for fiscal year 1976; 
$1,700,000 for the period beginning July 1, 1976, and ending 
September 30, 1976; $4,000,000 for fiscal year 1977; $4,000,000 
for fiscal year 1978; and $4,000,000 for fiscal year 1979 and 
for each of the three succeeding fiscal years, for the purpose 
of developing and carrying out medical information programs 
under this section on a pilot program basis and for the grants 
authority in subsection (b) of this section. Pilot programs 
authorized by this subsection shall be carried out at 
Department hospitals in geographically dispersed areas of the 
United States.
  (2) Funds authorized under this section shall not be 
available to pay the cost of hospital, medical, or other care 
of patients except to the extent that such cost is determined 
by the Secretary to be incident to research, training, or 
demonstration activities carried out under this section.
  (d) The Secretary, after consultation with the Subcommittee 
shall prescribe regulations covering the terms and conditions 
for making grants under this section.
  (e) Each recipient of a grant under this section shall keep 
such records as the Secretary may prescribe, including records 
which fully disclose the amount and disposition by such 
recipient of the proceeds of such grant, the total cost of the 
project or undertaking in connection with which such grant is 
made or used, and the amount of that portion of the cost of the 
project or undertaking supplied by other sources, and such 
records as will facilitate an effective audit.
  (f) The Secretary and the Comptroller General of the United 
States, or any of their duly authorized representatives, shall 
have access, for the purpose of audit and examination, to any 
books, documents, papers, and records of the recipient of any 
grant under this section which are pertinent to any such grant.

Sec. [8156.] 8155. Coordination with health services development 
                    activities carried out under the National Health 
                    Planning and Resources Development Act of 1974

  The Secretary and the Secretary of Health and Human Services 
shall, to the maximum extent practicable, coordinate programs 
carried out under this subchapter and programs carried out 
under part F of title XVI of the Public Health Service Act (42 
U.S.C. 300 et seq.).

Sec. [8157.] 8156. Joint title to medical equipment

  (a) Subject to subsection (b), the Secretary may enter into 
agreements with institutions described in section [8153(a)] 
8152(a) of this title for the joint acquisition of medical 
equipment.
  (b)(1) The Secretary may not pay more than one-half of the 
purchase price of equipment acquired through an agreement under 
subsection (a).
  (2) Any equipment to be procured under such an agreement 
shall be procured by the Secretary. Title to such equipment 
shall be held jointly by the United States and the institution.
  (3) Before equipment acquired under such an agreement may be 
used, the parties to the agreement shall arrange by contract 
under section [8153] 8152 of this title for the exchange or use 
of the equipment.
  (4) The Secretary may not contract for the acquisition of 
medical equipment to be purchased jointly under an agreement 
under subsection (a) until the institution which enters into 
the agreement provides to the Secretary its share of the 
purchase price of the medical equipment.
  (c)(1) Notwithstanding any other provision of law, the 
Secretary may transfer the interest of the Department in 
equipment acquired through an agreement under subsection (a) to 
the institution which holds joint title to the equipment if the 
Secretary determines that the transfer would be justified by 
compelling clinical considerations or the economic interest of 
the Department. Any such transfer may only be made upon 
agreement by the institution to pay to the Department the 
amount equal to one-half of the depreciated purchase price of 
the equipment. Any such payment when received shall be credited 
to the applicable Department medical appropriation.
  (2) Notwithstanding any other provision of law, the Secretary 
may acquire the interest of an institution in equipment 
acquired under subsection (a) if the Secretary determines that 
the acquisition would be justified by compelling clinical 
considerations or the economic interests of the Department. The 
Secretary may not pay more than one-half the depreciated 
purchase price of that equipment.

Sec. [8158.] 8157. Deposit in escrow

  (a) To facilitate the procurement of medical equipment 
pursuant to section [8157] 8156 of this title, the Secretary 
may enter into escrow agreements with institutions described in 
section [8153(a)] 8152(a) of this title. Any such agreement 
shall provide that--
          (1) the institutions shall pay to the Secretary the 
        funds necessary to make a payment under section 
        [8157(b)(4)] 8156(b)(4) of this title;
          (2) the Secretary, as escrow agent, shall administer 
        those funds in an escrow account; and
          (3) the Secretary shall disburse the escrowed funds 
        to pay for such equipment upon its delivery or in 
        accordance with the contract to procure the equipment 
        and shall disburse all accrued interest or other 
        earnings on the escrowed funds to the institution.
  (b) As escrow agent for funds placed in escrow pursuant to an 
agreement under subsection (a), the Secretary may--
          (1) invest the escrowed funds in obligations of the 
        Federal Government or obligations which are insured or 
        guaranteed by the Federal Government;
          (2) retain in the escrow account interest or other 
        earnings on such investments;
          (3) disburse the funds pursuant to the escrow 
        agreement; and
          (4) return undisbursed funds to the institution.
  (c)(1) If the Secretary enters into an escrow agreement under 
this section, the Secretary may enter into an agreement to 
procure medical equipment if one-half the purchase price of the 
equipment is available in an appropriation or fund for the 
expenditure or obligation.
  (2) Funds held in an escrow account under this section shall 
not be considered to be public funds.
          * * * * * * *
                              ----------                              


                    VETERANS HEALTH CARE ACT OF 1992

          * * * * * * *

TITLE II--HEALTH-CARE SHARING AGREEMENTS BETWEEN DEPARTMENT OF VETERANS 
                   AFFAIRS AND DEPARTMENT OF DEFENSE

          * * * * * * *

[SEC. 204. EXPIRATION OF AUTHORITY.

  [The authority to provide services pursuant to agreements 
entered into under section 201 expires on October 1, 1996.]
          * * * * * * *

SEC. 207. AUTHORITY TO BILL HEALTH-PLAN CONTRACTS.

  (a) Right To Recover.--In the case of a primary beneficiary 
(as described in section 201(2)(B)) who has coverage under a 
health-plan contract, as defined in section 1729(i)(1)(A) of 
title 38, United States Code, and who is furnished care or 
services by a Department medical facility pursuant to this 
title, the United States shall have the right to recover or 
collect charges for such care or services from such health-plan 
contract to the extent that the beneficiary (or the provider of 
the care or services) would be eligible to receive payment for 
such care or services from such health-plan contract if the 
care or services had not been furnished by a department or 
agency of the United States. Any funds received from such 
health-plan contract shall be credited to funds that have been 
allotted to the facility that furnished the care or services.
  (b) Enforcement.--The right of the United States to recover 
under such a beneficiary's health-plan contract shall be 
enforceable in the same manner as that provided by subsections 
(a)(3), (b), (c)(1), (d), (f), (h), and (i) of section 1729 of 
title 38, United States Code.
          * * * * * * *

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