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105th Congress                                            Rept. 105-793
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1
_______________________________________________________________________


 
            VETERANS MEDICARE ACCESS IMPROVEMENT ACT OF 1998
                                _______
                                

                October 7, 1998.--Ordered to be printed

                                _______
                                

    Mr. Archer, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 3828]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 3828) to amend title XVIII of the Social Security 
Act to improve access to health care services for certain 
Medicare-eligible veterans, having considered the same, report 
favorably thereon with an amendment and recommend that the bill 
as amended do pass.

                                CONTENTS

                                                                   Page
  I. Introduction....................................................10
        A. Purpose and Summary...................................    10
        B. Background and Need for Legislation...................    10
        C. Legislative History...................................    12
 II. Explanation of Provisions.......................................12
        A. Section 1--Short Title................................    12
        B. Section 2(a)--Improvement in Veterans' Access to 
            Services Under Medicare Program......................    12
        C. Section 2(b)--Repeal of Plan Requirement..............    21
        D. Section 2(c)--Effectiveness Contingent Upon Enactment 
            of Offsetting Outlay Reductions in VA Programs.......    21
        E. Section 2(d)--Report to Congress......................    22
III. Vote of the Committee...........................................22
 IV. Budget Effects of the Bill......................................23
        A. Committee Estimate of Budgetary Effects...............    23
        B. Statement Regarding New Budget Authority and Tax 
            Expenditures.........................................    23
        C. Cost Estimate Prepared by the Congressional Budget 
            Office...............................................    23
  V. Other Matters to be Discussed Under the Rules of the House......32
        A. Committee Oversight Findings and Recommendations......    32
        B. Summary of Findings and Recommendations of the 
            Government Operations Committee......................    32
        C. Constitutional Authority Statement....................    32
 VI. Changes in Existing Law Made by the Bill as Reported............33
VII. Dissenting Views................................................45

    The amendment is as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE; PURPOSES.

  (a) Short Title.--This Act may be cited as the ``Veterans Medicare 
Access Improvement Act of 1998''.
  (b) Purposes.--The purposes of this Act are--
          (1) to establish a program that permits medicare-eligible 
        veterans who have a service-connected disability or are 
        financially needy and for whom access to medical care of the 
        Department of Veterans Affairs has been historically deficient 
        because of geographic remoteness or inaccessibility to receive 
        their medicare benefits through a service network of providers 
        established by the Department of Veterans Affairs; and
          (2) to establish a 3-year demonstration project that permits 
        other medicare-eligible veterans to receive such benefits 
        through the Department of Veterans Affairs.

SEC. 2. IMPROVEMENT IN VETERANS' ACCESS TO SERVICES UNDER MEDICARE 
                    PROGRAM.

  (a) In General.--Title XVIII of the Social Security Act, as amended 
by sections 4603, 4801, and 4015(a) of the Balanced Budget Act of 1997, 
is amended by adding at the end the following:
                ``improving veterans' access to services
  ``Sec. 1897. (a) Definitions.--In this section:
          ``(1) Administering secretaries.--The term `administering 
        Secretaries' means the Secretary of Health and Human Services 
        and the Secretary of Veterans Affairs acting jointly.
          ``(2) Program.--The term `program' means the program 
        established under this section with respect to category A 
        medicare-eligible veterans.
          ``(3) Demonstration project; project.--The terms 
        `demonstration project' and `project' mean the demonstration 
        project carried out under this section with respect to category 
        C medicare-eligible veterans.
          ``(4) Medicare-eligible veterans.--
                  ``(A) Category a medicare-eligible veteran.--The term 
                `category A medicare-eligible veteran' means an 
                individual--
                          ``(i) who is a veteran (as defined in section 
                        101(2) of title 38, United States Code) and is 
                        described in paragraph (1) or (2) of section 
                        1710(a) of title 38, United States Code;
                          ``(ii) who is entitled to hospital insurance 
                        benefits under part A of the medicare program 
                        and is enrolled in the supplementary medical 
                        insurance program under part B of the medicare 
                        program; and
                          ``(iii) for whom the medical center of the 
                        Department of Veterans Affairs that is closest 
                        to the individual's place of residence is 
                        geographically remote or inaccessible from such 
                        place.
                  ``(B) Category c medicare-eligible veteran.--The term 
                `category C medicare-eligible veteran' means an 
                individual who--
                          ``(i) is a veteran (as defined in section 
                        101(2) of title 38, United States Code) and is 
                        described in section 1710(a)(3) of title 38, 
                        United States Code; and
                          ``(ii) is entitled to hospital insurance 
                        benefits under part A of the medicare program 
                        and is enrolled in the supplementary medical 
                        insurance program under part B of the medicare 
                        program.
          ``(5) Medicare health care services.--The term `medicare 
        health care services' means items or services covered under 
        part A or B of this title.
          ``(6) Trust funds.--The term `trust funds' means the Federal 
        Hospital Insurance Trust Fund established in section 1817 and 
        the Federal Supplementary Medical Insurance Trust Fund 
        established in section 1841.
  ``(b) Program and Demonstration Project.--
          ``(1) In general.--
                  ``(A) Establishment.--The administering Secretaries 
                are authorized to establish--
                          ``(i) a program (under an agreement entered 
                        into by the administering Secretaries) under 
                        which the Secretary of Health and Human 
                        Services shall reimburse the Secretary of 
                        Veterans Affairs, from the trust funds, for 
                        medicare health care services furnished to 
                        category A medicare-eligible veterans; and
                          ``(ii) a demonstration project (under such an 
                        agreement) under which the Secretary of Health 
                        and Human Services shall reimburse the 
                        Secretary of Veterans Affairs, from the trust 
                        funds, for medicare health care services 
                        furnished to category C medicare-eligible 
                        veterans.
                  ``(B) Agreement.--The agreement entered into under 
                subparagraph (A) shall include at a minimum--
                          ``(i) a description of the benefits to be 
                        provided to the participants of the program and 
                        the demonstration project established under 
                        this section;
                          ``(ii) a description of the eligibility rules 
                        for participation in the program and 
                        demonstration project, including any cost 
                        sharing requirements;
                          ``(iii) a description of the process for 
                        enrolling veterans for participation in the 
                        program, which process may, to the extent 
                        practicable, be administered in the same or 
                        similar manner to the registration process 
                        established to implement section 1705 of title 
                        38, United States Code;
                          ``(iv) a description of how the program and 
                        the demonstration project will satisfy the 
                        requirements under this title;
                          ``(v) a description of the sites selected 
                        under paragraph (2);
                          ``(vi) a description of how reimbursement 
                        requirements under subsection (g) and 
                        maintenance of effort requirements under 
                        subsection (h) will be implemented in the 
                        program and in the demonstration project;
                          ``(vii) a statement that all data of the 
                        Department of Veterans Affairs and of the 
                        Department of Health and Human Services that 
                        the administering Secretaries determine is 
                        necessary to conduct independent estimates and 
                        audits of the maintenance of effort 
                        requirement, the annual reconciliation, and 
                        related matters required under the program and 
                        the demonstration project shall be available to 
                        the administering Secretaries;
                          ``(viii) a description of any requirement 
                        that the Secretary of Health and Human Services 
                        waives pursuant to subsection (d);
                          ``(ix) a requirement that the Secretary of 
                        Veterans Affairs undertake and maintain 
                        outreach and marketing activities, consistent 
                        with capacity limits under the program, for 
                        category A medicare-eligible veterans;
                          ``(x) a description of how the administering 
                        Secretaries shall conduct the data matching 
                        program under subparagraph (F), including the 
                        frequency of updates to the comparisons 
                        performed under subparagraph (F)(ii); and
                          ``(xi) a statement by the Secretary of 
                        Veterans Affairs that the type or amount of 
                        health care services furnished under chapter 17 
                        of title 38, United States Code, to veterans 
                        who are entitled to benefits under part A or 
                        enrolled under part B, or both, shall not be 
                        reduced by reason of the program or project.
                  ``(C) Cost-sharing under demonstration project.--
                Notwithstanding any provision of title 38, United 
                States Code, in order--
                          ``(i) to maintain and broaden access to 
                        services,
                          ``(ii) to encourage appropriate use of 
                        services, and
                          ``(iii) to control costs,
                the Secretary of Veterans Affairs may establish 
                enrollment fees and copayment requirements under the 
                demonstration project under this section consistent 
                with subsection (d)(1). Such fees and requirements may 
                vary based on income.
                  ``(D) Health care benefits.--The administering 
                Secretaries shall prescribe the minimum health care 
                benefits to be provided under the program and 
                demonstration project to medicare-eligible veterans 
                enrolled in the program or project. Those benefits 
                shall include at least all medicare health care 
                services covered under this title.
                  ``(E) Establishment of service networks.--
                          ``(i) Use of va outpatient clinics.--The 
                        Secretary of Veterans Affairs, to the extent 
                        practicable, shall use outpatient clinics of 
                        the Department of Veterans Affairs in providing 
                        services under the program.
                          ``(ii) Authority to contract for services.--
                        The Secretary of Veterans Affairs may enter 
                        into contracts and arrangements with entities 
                        (such as private practitioners, providers of 
                        services, preferred provider organizations, and 
                        health care plans) for the provision of 
                        services for which the Secretary of Health and 
                        Human Services is responsible under the program 
                        or project under this section and shall take 
                        into account the existence of qualified 
                        practitioners and providers in the areas in 
                        which the program or project is being 
                        conducted. Under such contracts and 
                        arrangements, such Secretary of Health and 
                        Human Services may require the entities to 
                        furnish such information as such Secretary may 
                        require to carry out this section.
                  ``(F) Data match.--
                          ``(i) Establishment of data matching 
                        program.--The administering Secretaries shall 
                        establish a data matching program under which 
                        there is an exchange of information of the 
                        Department of Veterans Affairs and of the 
                        Department of Health and Human Services as is 
                        necessary to identify veterans who are entitled 
                        to benefits under part A or enrolled under part 
                        B, or both, in order to carry out this section. 
                        The provisions of section 552a of title 5, 
                        United States Code, shall apply with respect to 
                        such matching program only to the extent the 
                        administering Secretaries find it feasible and 
                        appropriate in carrying out this section in a 
                        timely and efficient manner.
                          ``(ii) Performance of data match.--The 
                        administering Secretaries, using the data 
                        matching program established under clause (i), 
                        shall perform a comparison in order to identify 
                        veterans who are entitled to benefits under 
                        part A or enrolled under part B, or both. To 
                        the extent such Secretaries deem appropriate to 
                        carry out this section, the comparison and 
                        identification may distinguish among such 
                        veterans by category of veterans, by 
                        entitlement to benefits under this title, or by 
                        other characteristics.
                          ``(iii) Deadline for first data match.--The 
                        administering Secretaries shall first perform a 
                        comparison under clause (ii) by not later than 
                        October 31, 1998.
                          ``(iv) Certification by inspector general.--
                                  ``(I) In general.--The administering 
                                Secretaries may not conduct the program 
                                unless the Inspector General of the 
                                Department of Health and Human Services 
                                certifies to Congress that the 
                                administering Secretaries have 
                                established the data matching program 
                                under clause (i) and have performed a 
                                comparison under clause (ii).
                                  ``(II) Deadline for certification.--
                                Not later than December 15, 1998, the 
                                Inspector General of the Department of 
                                Health and Human Services shall submit 
                                a report to Congress containing the 
                                certification under subclause (I) or 
                                the denial of such certification.
          ``(2) Number of sites.--The program and demonstration project 
        shall be conducted in geographic service areas of the 
        Department of Veterans Affairs, designated jointly by the 
        administering Secretaries after review of all such areas, as 
        follows:
                  ``(A) Program sites.--
                          ``(i) In general.--Except as provided in 
                        clause (ii), the program shall be conducted in 
                        not more than 3 such areas with respect to 
                        category A medicare-eligible veterans.
                          ``(ii) Additional program sites.--Subject to 
                        the certification required under subsection 
                        (h)(1)(B)(iii), for a year beginning on or 
                        after January 1, 2003, the program shall be 
                        conducted in such areas as are designated 
                        jointly by the administering Secretaries after 
                        review of all such areas.
                  ``(B) Project sites.--
                          ``(i) In general.--The demonstration project 
                        shall be conducted in not more than 3 such 
                        areas with respect to category C medicare-
                        eligible veterans.
                          ``(ii) Mandatory site.--At least one of the 
                        areas designated under clause (i) shall 
                        encompass the catchment area of a military 
                        medical facility which was closed pursuant to 
                        either the Defense Base Closure and Realignment 
                        Act of 1990 (part A of title XXIX of Public Law 
                        101-510; 10 U.S.C. 2687 note) or title II of 
                        the Defense Authorization Amendments and Base 
                        Closure and Realignment Act (Public Law 100-
                        526; 10 U.S.C. 2687 note).
          ``(3) Restriction.--Funds from the program or demonstration 
        project shall not be used for--
                  ``(A) the construction of any treatment facility of 
                the Department of Veterans Affairs; or
                  ``(B) the renovation, expansion, or other 
                construction at such a facility.
          ``(4) Duration.--The administering Secretaries shall conduct 
        and implement the program and the demonstration project as 
        follows:
                  ``(A) Program.--
                          ``(i) In general.--The program shall begin on 
                        January 1, 2000, in the sites designated under 
                        paragraph (2)(A)(i) and, subject to subsection 
                        (h)(1)(B)(iii)(II), for a year beginning on or 
                        after January 1, 2003, the program may be 
                        conducted in such additional sites designated 
                        under paragraph (2)(A)(ii).
                          ``(ii) Limitation on number of veterans 
                        covered under certain circumstances.--If for a 
                        year beginning on or after January 1, 2003, the 
                        program is conducted only in the sites 
                        designated under paragraph (2)(A)(i), medicare 
                        health care services may not be provided under 
                        the program to a number of category-A medicare-
                        eligible veterans that exceeds the aggregate 
                        number of such veterans covered under the 
                        program as of December 31, 2002.
                  ``(B) Project.--The demonstration project shall begin 
                on January 1, 1999, and end on December 31, 2001.
                  ``(C) Implementation.--The administering Secretaries 
                may implement the program and demonstration project 
                through the publication of regulations that take effect 
                on an interim basis, after notice and pending 
                opportunity for public comment.
          ``(5) Reports.--
                  ``(A) Program.--By not later than September 1, 1999, 
                the administering Secretaries shall submit a copy of 
                the agreement entered into under paragraph (1) with 
                respect to the program to Congress.
                  ``(B) Project.--By not later than September 1, 1998, 
                the administering Secretaries shall submit a copy of 
                the agreement entered into under paragraph (1) with 
                respect to the project to Congress.
          ``(6) Report on maintenance of level of health care 
        services.--
                  ``(A) In general.--The Secretary of Veterans Affairs 
                may not implement the program at a site designated 
                under paragraph (2)(A) unless, by not later than 90 
                days before the date of the implementation, the 
                Secretary of Veterans Affairs submits to Congress and 
                to the Comptroller General of the United States a 
                report that contains the information described in 
                subparagraph (B). The Secretary of Veterans Affairs 
                shall periodically update the report under this 
                paragraph as appropriate.
                  ``(B) Information described.--For purposes of 
                subparagraph (A), the information described in this 
                subparagraph is a description of the operation of the 
                program at the site and of the steps to be taken by the 
                Secretary of Veterans Affairs to prevent the reduction 
                of the type or amount of health care services furnished 
                under chapter 17 of title 38, United States Code, to 
                veterans who are entitled to benefits under part A or 
                enrolled under part B, or both, within the geographic 
                service area of the Department of Veterans Affairs in 
                which the site is located by reason of the program or 
                project.
  ``(c) Crediting of Payments.--A payment received by the Secretary of 
Veterans Affairs under the program or demonstration project shall be 
credited to the applicable Department of Veterans Affairs medical care 
appropriation (and within that appropriation). Any such payment 
received during a fiscal year for services provided during a prior 
fiscal year may be obligated by the Secretary of Veterans Affairs 
during the fiscal year during which the payment is received.
  ``(d) Application of Certain Medicare Requirements.--
          ``(1) Authority.--
                  ``(A) In general.--Except as provided under 
                subparagraph (B), the program and the demonstration 
                project shall meet all requirements of Medicare+Choice 
                plans under part C and regulations pertaining thereto, 
                and other requirements for receiving medicare payments, 
                except that the prohibition of payments to Federal 
                providers of services under sections 1814(c) and 
                1835(d), and paragraphs (2) and (3) of section 1862(a) 
                shall not apply.
                  ``(B) Waiver.--Except as provided in paragraph (2), 
                the Secretary of Health and Human Services is 
                authorized to waive any requirement described under 
                subparagraph (A), or approve equivalent or alternative 
                ways of meeting such a requirement, but only if such 
                waiver or approval--
                          ``(i) reflects the unique status of the 
                        Department of Veterans Affairs as an agency of 
                        the Federal Government; and
                          ``(ii) is necessary to carry out the program 
                        or demonstration project.
          ``(2) Beneficiary protections and other matters.--The program 
        and the demonstration project shall comply with the 
        requirements of part C of this title that relate to beneficiary 
        protections and other matters, including such requirements 
        relating to the following areas, to the extent not inconsistent 
        with subsection (b)(1)(B)(iii):
                  ``(A) Enrollment and disenrollment.
                  ``(B) Nondiscrimination.
                  ``(C) Information provided to beneficiaries.
                  ``(D) Cost-sharing limitations.
                  ``(E) Appeal and grievance procedures.
                  ``(F) Provider participation.
                  ``(G) Access to services.
                  ``(H) Quality assurance and external review.
                  ``(I) Advance directives.
                  ``(J) Other areas of beneficiary protections that the 
                administering Secretaries determine are applicable to 
                such program or project.
  ``(e) Inspector General.--Nothing in the agreement entered into under 
subsection (b) shall limit the Inspector General of the Department of 
Health and Human Services from investigating any matters regarding the 
expenditure of funds under this title for the program and demonstration 
project, including compliance with the provisions of this title and all 
other relevant laws.
  ``(f) Voluntary Participation.--Participation of a category A 
medicare-eligible veteran in the program or category C medicare-
eligible veteran in the demonstration project shall be voluntary.
  ``(g) Payments Based on Regular Medicare Payment Rates.--
          ``(1) In general.--Subject to the succeeding provisions of 
        this subsection, the Secretary of Health and Human Services 
        shall reimburse the Secretary of Veterans Affairs for services 
        provided under the program or demonstration project at a rate 
        equal to 95 percent of the amount paid to a Medicare+Choice 
        organization under part C of this title with respect to such an 
        enrollee. In cases in which a payment amount may not otherwise 
        be readily computed, the Secretary of Health and Human Services 
        shall establish rules for computing equivalent or comparable 
        payment amounts.
          ``(2) Exclusion of certain amounts.--In computing the amount 
        of payment under paragraph (1), the following shall be 
        excluded:
                  ``(A) Special payments.--Any amount attributable to 
                an adjustment under subparagraphs (B) and (F) of 
                section 1886(d)(5) and subsection (h) of such section.
                  ``(B) Percentage of capital payments.--An amount 
                determined by the administering Secretaries for amounts 
                attributable to payments for capital-related costs 
                under subsection (g) of such section.
          ``(3) Periodic payments from medicare trust funds.--Payments 
        under this subsection shall be made--
                  ``(A) on a periodic basis consistent with the 
                periodicity of payments under this title; and
                  ``(B) in appropriate part, as determined by the 
                Secretary of Health and Human Services, from the trust 
                funds.
          ``(4) Cap on reimbursement amounts.--The aggregate amount to 
        be reimbursed under this subsection pursuant to the agreement 
        entered into between the administering Secretaries under 
        subsection (b) is as follows:
                  ``(A) Program.--With respect to category A medicare-
                eligible veterans, such aggregate amount shall not 
                exceed--
                          ``(i) for 2000, a total of $50,000,000;
                          ``(ii) for 2001, a total of $75,000,000; and
                          ``(iii) subject to subparagraph (B), for 2002 
                        and each succeeding year, a total of 
                        $100,000,000.
                  ``(B) Expansion of program.--If for a year beginning 
                on or after January 1, 2003, the program is conducted 
                in sites designated under subsection (b)(2)(A)(ii), the 
                limitation under subparagraph (A)(iii) shall not apply 
                to the program for such a year.
                  ``(C) Project.--With respect to category C medicare-
                eligible veterans, such aggregate amount shall not 
                exceed a total of $50,000,000 for each of calendar 
                years 1999 through 2001.
  ``(h) Maintenance of Effort.--
          ``(1) Monitoring effect of program and demonstration project 
        on costs to medicare program.--
                  ``(A) In general.--The administering Secretaries, in 
                consultation with the Comptroller General of the United 
                States, shall closely monitor the expenditures made 
                under this title for category A and C medicare-eligible 
                veterans compared to the expenditures that would have 
                been made for such veterans if the program and 
                demonstration project had not been conducted. The 
                agreement entered into by the administering Secretaries 
                under subsection (b) shall require the Department of 
                Veterans Affairs to maintain overall the level of 
                effort for services covered under this title to such 
                categories of veterans by reference to a base year as 
                determined by the administering Secretaries.
                  ``(B) Determination of measure of costs of medicare 
                health care services.--
                          ``(i) Improvement of information management 
                        system.--Not later than October 1, 2001, the 
                        Secretary of Veterans Affairs shall improve its 
                        information management system such that, for a 
                        year beginning on or after January 1, 2002, the 
                        Secretary of Veterans Affairs is able to 
                        identify costs incurred by the Department of 
                        Veterans Affairs in providing medicare health 
                        care services to medicare-eligible veteransfor 
purposes of meeting the requirements with respect to maintenance of 
effort under an agreement under subsection (b)(1)(A).
                          ``(ii) Identification of medicare health care 
                        services.--The Secretary of Health and Human 
                        Services shall provide such assistance as is 
                        necessary for the Secretary of Veterans Affairs 
                        to determine which health care services 
                        furnished by the Secretary of Veterans Affairs 
                        qualify as medicare health care services.
                          ``(iii) Certification by hhs inspector 
                        general.--
                                  ``(I) Request for certification.--The 
                                Secretary of Veterans Affairs may 
                                request the Inspector General of the 
                                Department of Health and Human Services 
                                to make a certification to Congress 
                                that the Secretary of Veterans Affairs 
                                has improved its management system 
                                under clause (i) such that the 
                                Secretary of Veterans Affairs is able 
                                to identify the costs described in such 
                                clause in a reasonably reliable and 
                                accurate manner.
                                  ``(II) Requirement for expansion of 
                                program.--The program may be conducted 
                                in the additional sites under paragraph 
                                (2)(A)(ii) and cover such additional 
                                category A medicare eligible veterans 
                                in such additional sites only if the 
                                Inspector General of the Department of 
                                Health and Human Services has made the 
                                certification described in subclause 
                                (I).
                                  ``(III) Deadline for certification.--
                                Not later than the date that is the 
                                earlier of the date that is 60 days 
                                after the Secretary of Veterans Affairs 
                                requests a certification under 
                                subclause (I) or June 1, 2002, the 
                                Inspector General of the Department of 
                                Health and Human Services shall submit 
                                a report to Congress containing the 
                                certification under subclause (I) or 
                                the denial of such certification.
                  ``(C) Maintenance of level of effort.--
                          ``(i) Report by secretary of veterans affairs 
                        on basis for calculation.--Not later than the 
                        date that is 60 days after the date on which 
                        the administering Secretaries enter into an 
                        agreement under subsection (b)(1)(A), the 
                        Secretary of Veterans Affairs shall submit a 
                        report to Congress and the Comptroller General 
                        of the United States explaining the methodology 
                        used and basis for calculating the level of 
                        effort of the Department of Veterans Affairs 
                        under the program and project.
                          ``(ii) Report by comptroller general.--Not 
                        later than the date that is 180 days after the 
                        date described in clause (i), the Comptroller 
                        General of the United States shall submit to 
                        Congress and the administering Secretaries a 
                        report setting forth the Comptroller General's 
                        findings, conclusion, and recommendations with 
                        respect to the report submitted by the 
                        Secretary of Veterans Affairs under clause (i).
                          ``(iii) Response by secretary of veterans 
                        affairs.--The Secretary of Veterans Affairs 
                        shall submit to Congress not later than 60 days 
                        after the date described in clause (ii) a 
                        report setting forth such Secretary's response 
                        to the report submitted by the Comptroller 
                        General under clause (ii).
                  ``(D) Annual report by the comptroller general.--Not 
                later than December 31 of each year during which the 
                program and demonstration project is conducted, the 
                Comptroller General of the United States shall submit 
                to the administering Secretaries and to Congress a 
                report on the extent, if any, to which the costs of the 
                Secretary of Health and Human Services under the 
                medicare program under this title increased during the 
                preceding fiscal year as a result of the program or 
                demonstration project.
          ``(2) Required response in case of increase in costs.--
                  ``(A) In general.--If the administering Secretaries 
                find, based on paragraph (1), that the expenditures 
                under the medicare program under this title increased 
                (or are expected to increase) during a fiscal year 
                because of the program or demonstration project, the 
                administering Secretaries shall take such steps as may 
                be needed--
                          ``(i) to recoup for the medicare program the 
                        amount of such increase in expenditures; and
                          ``(ii) to prevent any such increase in the 
                        future.
                  ``(B) Steps.--Such steps--
                          ``(i) under subparagraph (A)(i) shall include 
                        payment of the amount of such increased 
                        expenditures by the Secretary of Veterans 
                        Affairs from the current medical care 
                        appropriation for the Department of Veterans 
                        Affairs to the trust funds; and
                          ``(ii) under subparagraph (A)(ii) shall 
                        include lowering the amount of payment under 
                        the program or project under subsection (g)(1), 
                        and may include, in the case of the 
                        demonstration project, suspending or 
                        terminating the project (in whole or in part).
  ``(i) Evaluation and Reports.--
          ``(1) Independent evaluation by gao.--
                  ``(A) In general.--The Comptroller General of the 
                United States shall conduct an evaluation of the 
                program and an evaluation of the demonstration project, 
                and shall submit annual reports on the program and 
                demonstration project to the administering Secretaries 
                and to Congress.
                  ``(B) First report.--The first report for the program 
                or demonstration project under subparagraph (A) shall 
                be submitted not later than 12 months after the date on 
                which the Secretary of Veterans Affairs first provides 
                services under the program or project, respectively.
                  ``(C) Final report on demonstration project.--A final 
                report shall be submitted with respect to the 
                demonstration project not later than 3\1/2\ years after 
                the date of the first report on the project under 
                subparagraph (B).
                  ``(D) Contents.--The evaluation and reports under 
                this paragraph for the program or demonstration project 
                shall include an assessment, based on the agreement 
                entered into under subsection (b), of the following:
                          ``(i) Any savings or costs to the medicare 
                        program under this title resulting from the 
                        program or project.
                          ``(ii) The cost to the Department of Veterans 
                        Affairs of providing care to category A 
                        medicare-eligible veterans under the program or 
                        to category C medicare-eligible veterans under 
                        the demonstration project, respectively.
                          ``(iii) An analysis of how such program or 
                        project affects the overall accessibility of 
                        medical care through the Department of Veterans 
                        Affairs, and a description of the unintended 
                        effects (if any) upon the patient enrollment 
                        system under section 1705 of title 38, United 
                        States Code.
                          ``(iv) Compliance by the Department of 
                        Veterans Affairs with the requirements under 
                        this title.
                          ``(v) The number of category A medicare-
                        eligible veterans or category C medicare-
                        eligible veterans, respectively, opting to 
                        participate in the program or project instead 
                        of receiving health benefits through another 
                        health insurance plan (including benefits under 
                        this title).
                          ``(vi) A list of the health insurance plans 
                        and programs that were the primary payers for 
                        medicare-eligible veterans during the year 
                        prior to their participation in the program or 
                        project, respectively, and the distribution of 
                        their previous enrollment in such plans and 
                        programs.
                          ``(vii) Any impact of the program or project, 
                        respectively, on private health care providers 
                        and beneficiaries under this title that are not 
                        enrolled in the program or project.
                          ``(viii) An assessment of the access to care 
                        and quality of care for medicare-eligible 
                        veterans under the program or project, 
                        respectively.
                          ``(ix) An analysis of whether, and in what 
                        manner, easier access to medical centers of the 
                        Department of Veterans Affairs affects the 
                        number of category A medicare-eligible veterans 
                        or C medicare-eligible veterans, respectively, 
                        receiving medicare health care services.
                          ``(x) Any impact of the program or project, 
                        respectively, on the access to care for 
                        category A medicare-eligible veterans or C 
                        medicare-eligible veterans, respectively, who 
                        did not enroll in the program or project and 
                        for other individuals entitled to benefits 
                        under this title.
                          ``(xi) A description of the difficulties (if 
                        any) experienced by the Department of Veterans 
                        Affairs in managing the program or project, 
                        respectively.
                          ``(xii) Any additional elements specified in 
                        the agreement entered into under subsection 
                        (b).
                          ``(xiii) Any additional elements that the 
                        Comptroller General of the United States 
                        determines is appropriate to assess regarding 
                        the program or project, respectively.
          ``(2) Reports by secretaries on program and demonstration 
        project with respect to medicare-eligible veterans.--
                  ``(A) Demonstration project.--Not later than 6 months 
                after the date of the submission of the final report by 
                the Comptroller General of the United States on the 
                demonstration project under paragraph (1)(C), the 
                administering Secretaries shall submit to Congress a 
                report containing their recommendation as to--
                          ``(i) whether there is a cost to the health 
                        care program under this title in conducting the 
                        demonstration project;
                          ``(ii) whether to extend the demonstration 
                        project or make the project permanent; and
                          ``(iii) whether the terms and conditions of 
                        the project should otherwise be continued (or 
                        modified) with respect to medicare-eligible 
                        veterans.
                  ``(B) Program.--Not later than 6 months after the 
                date of the submission of the report by the Comptroller 
                General of the United States on the third year of the 
                operation of the program, the administering Secretaries 
                shall submit to Congress a report containing their 
                recommendation as to--
                          ``(i) whether there is a cost to the health 
                        care program under this title in conducting the 
                        program under this section;
                          ``(ii) whether to discontinue the program 
                        with respect to category A medicare-eligible 
                        veterans; and
                          ``(iii) whether the terms and conditions of 
                        the program should otherwise be continued (or 
                        modified) with respect to medicare-eligible 
                        veterans.''.
  (b) Repeal of Plan Requirement.--Subsection (b) of section 4015 of 
the Balanced Budget Act of 1997 (relating to an implementation plan for 
Veterans subvention) is repealed.
  (c) Effectiveness Contingent Upon Enactment of Offsetting Outlay 
Reductions in VA Programs through Restriction of Use of Tobacco 
Products to Qualify for Service-connected Entitlement.--(1) No payment 
may be made from the Federal Hospital Insurance Trust Fund or from the 
Federal Supplementary Medical Insurance Trust Fund for items or 
services furnished under the program or demonstration project 
established under section 1897 of Social Security Act, as added by 
subsection (a), before the date that the Director of the Office of 
Management and Budget determines that--
          (A) legislation described in paragraph (2) has been enacted; 
        and
          (B) the net amount of the reductions in expenditures achieved 
        by reason of such legislation during the 5-fiscal-year period 
        beginning with fiscal year 1999, that is available to offset 
        the net aggregate increase in outlays (if any) under the 
        medicare program under title XVIII of such Act, is not less 
        than the estimate of the amount of such net aggregate increase 
        during such period.
  (2) For purposes of paragraph (1), the legislation described in this 
paragraph is legislation that restricts entitlement to service-
connected compensation under title 38, United States Code, for a 
disability that is the result of a veteran's use of tobacco products.
  (3) The estimate described in paragraph (1)(B) shall be the estimate 
made by the Congressional Budget Office and contained in the report of 
the Committee on Ways and Means of the House of Representatives to 
accompany H. R. 3828 of the 105th Congress (the Veterans Medicare 
Access Improvement Act of 1998)), except to the extent that the 
Director of the Office of Management and Budget finds that the estimate 
is materially inaccurate.
  (d) Report to Congress on a Method To Include the Costs of Veterans 
Affairs and Military Facility Services to Medicare-eligible 
Beneficiaries in the Calculation of Medicare+Choice Payment Rates.--The 
Secretary of Health and Human Services shall report to the Congress by 
not later than January 1, 2001, on a method to phase-in the costs of 
military facility services furnished by the Department of Veterans 
Affairs or the Department of Defense to medicare-eligible beneficiaries 
in the calculation of an area's Medicare+Choice capitation payment. 
Such report shall include on a county-by- county basis--
          (1) the actual or estimated cost of such services to 
        medicare-eligible beneficiaries;
          (2) the change in Medicare+Choice capitation payment rates if 
        such costs are included in the calculation of payment rates;
          (3) one or more proposals for the implementation of payment 
        adjustments to Medicare+Choice plans in counties where the 
        payment rate has been affected due to the failure to calculate 
        the cost of such services to medicare-eligible beneficiaries; 
        and
          (4) a system to ensure that when a Medicare+Choice enrollee 
        receives covered services through a facility of the Department 
        of Veterans Affairs or the Department of Defense there is an 
        appropriate payment recovery to the medicare program.

                            I. INTRODUCTION

                         A. Purpose and Summary

    Current law generally prohibits other government agencies 
from receiving reimbursements for providing Medicare-covered 
services to Medicare-eligible veterans. Subvention is the term 
given to proposals which would permit the U.S. Department of 
Veterans Affairs to receive reimbursement from the Medicare 
trust funds for care provided to Medicare-eligible 
beneficiaries at VA medical facilities. H.R. 3828 would 
establish a subvention program for low-income veterans and a 
demonstration project for other veterans so that the Department 
of Veterans Affairs may offer certain veterans comprehensive 
Medicare health care services.

               B. Background and Need for the Legislation

    The Department of Veterans Affairs (VA) operates the 
nation's largest health care system, encompassing 172 
hospitals, 439 outpatient clinics, 131 nursing homes, 206 
readjustment counseling centers, and 40 domiciliaries. VA 
estimates 3.1 million individual patients were served through 
827,000 inpatient admissions and 32 million outpatient visits 
during FY1997. About 96% of the services were provided free. VA 
employed 186,000 staff in the health care system during the 
year, 73% of whom were engaged in direct care of patients. 
Congress provided spending authority of $17.6 billion for 
FY1998.
    All 26 million veterans are potentially eligible for some 
VA medical services, but in any given year, only about 10% of 
veterans receive such services. Many veterans have other health 
insurance, including Medicare, and seek medical services 
elsewhere. In FY1997, about 40% of veterans served in VA 
facilities had a service-connected condition, although their 
treatment may have been for a condition unrelated to military 
service. About 54% of all veterans receiving service qualified 
for free care because their income and assets were below VA's 
income and asset threshold.
    During 1996, VA medical care was reorganized into 22 
Veterans Integrated Service Networks (VISNs). Each VISN manages 
all resources within a region, integrating services to avoid 
duplication and increase efficiency. VA's annual efficiency 
evaluations guide the allocation of resources among and within 
VISNs. Efficiency is measured according to the cost per patient 
of services (acute hospital, rehabilitative, psychiatric, 
residential, subacute). According to VA's budget, if program 
objectives are met, services will be provided more efficiently, 
at a savings averaging 30% per patient by FY2002. The budget 
also proposed permitting medical facilities to obtain 10% of 
their funding from nonappropriated sources, and Congress has 
enacted legislation which enables the VA to retain collections 
from insurance companies for care furnished insured veterans. 
VA claims that more efficient patient delivery and the 
additional sources of funds would allow 20% more veterans to be 
served without increasing annual appropriations.
    Unlike Medicare, under which the services are provided to 
beneficiaries based on entitlement eligibility for them, VA 
medical benefits are available to veterans on the basis of a 
priority system which determines relative access to services at 
facilities in which resources may not be sufficient to provide 
services to all veterans who apply.
    Categories of veterans are referred to as Category A and 
Category C, labels which formerly specified a distinction among 
veterans in VA law, and which are often still used in 
discussions of veterans' access to VA medical services.
    Category A Veterans Defined. Veterans seeking treatment for 
service-connected conditions have the highest priority, 
followed by care for any condition for veterans with severe 
service-connected disabilities. Veterans with relatively lower 
priority, but still high enough to have a reasonable 
expectation of care are veterans with any degree of compensable 
service-connected conditions and veterans who have special, 
categorical priority, such as former prisoners-of-war.
    As much as 60% of VA medical care goes to the largest 
remaining category eligible for free VA medical services, those 
who qualify for such free care as a result of having incomes 
and assets below a means threshold. For calendar year 1998, 
that threshold is $50,000 in assets, and $22,064 in income for 
single veterans, rising to $26,480 for married veterans, and 
with a $1,476 increase in the threshold for each additional 
dependent. Veterans report upon their ability to pay when they 
apply for care (or for enrollment in a new, regionally-based VA 
health care plan), and their reported income and assets are 
subject to verification through Internal Revenue Service or 
Social Security data.
    Veterans presumed to have been exposed to environmental 
toxins, such as Agent Orange, nuclear radiation, or unknown 
disease elements in the Persian Gulf are also in Category A but 
have a priority status below the low-income veterans. Medical 
services provided to Category A veterans are often free of 
charge, with the exception of a $2 prescription co-payment 
requirement for some Category A veterans.
    All of the above priority categories fit within the broad 
definition of a Category A veteran, as defined by the bill.
    Category C Veterans Defined. The veterans who are not 
otherwise eligible and whose incomes or assets exceed the 
applicable threshold are eligible for VA medical services, if 
resources are available, and if they agree to pay applicable 
copayments and deductibles. About 3-4% of the veterans VA 
serves are in this category, although the incidence of care 
provided them is not randomly distributed across the VA medical 
care system, but is concentrated in some regions more heavily 
than others. Copayments and deductibles are similar to payments 
required of persons covered by Medicare.

                         C. Legislative History

    H.R. 3828, the Veterans Medicare Access Improvement Act of 
1998 was introduced on May 12, 1998 by the Honorable Bill 
Thomas, Chairman of the Subcommittee on Health, along with 
seventy other Members of the House. On May 12, 1998, the bill 
was ordered favorably reported by the Ways and Means 
Subcommittee on Health, as amended, by voice vote. On May 14, 
1998, the bill, as amended, was ordered favorably reported by a 
rollcall vote of 31 yeas to 1 nay (with a quorum being 
present).

                     II. EXPLANATION OF PROVISIONS

                       A. Section 1--Short Title

    The provision provides that the bill would be cited as the 
Veterans Medicare Access Improvement Act of 1998.

  B. Section 2(a)--Improvement in Veterans' Access to Services Under 
                            Medicare Program

Current law

    In general, Medicare does not pay for services furnished by 
a federal provider of services or other federal agency. An 
exception is made if the Secretary of Health and Human Services 
(HHS) makes a determination that the entity is providing 
services to the public generally as a community institution or 
agency (for example, a veterans hospitals providing end-stage 
renal disease services to non-veterans). An exception is also 
made for facilities of the Indian Health Service. The law also 
specifies that payments may not be made for services that a 
provider or supplier is obligated to furnish at public expense 
inaccordance with a law or contract of the United States.
    The law has thus generally barred payments for services 
provided to military retirees at Department of Defense (DoD) 
facilities and for services provided at VA hospitals and 
clinics.
    The Balanced Budget Act of 1997 (BBA 97, P.L. 105-33) 
authorized a 3-year demonstration project at six sites under 
which the Secretary of HHS will reimburse the Secretary of DoD 
from the Medicare trust funds for services furnished to certain 
Medicare-eligible military retirees and dependents. The 
demonstration project is to be established through an agreement 
entered into by the Secretaries. BBA 97 required the Secretary 
of HHS and VA to jointly submit to Congress a detailed 
implementation plan for a subvention demonstration project for 
veterans.

Explanation of provision

    The provision would amend Medicare law by adding a new 
Section 1897 to the Social Security Act--``Improving Veterans' 
Access to Services.''

                    New Section 1897(a)--Definitions

    The new Section 1897(a) includes definitions for a number 
of terms.
    ``Administering Secretaries'' would be defined as the 
Secretaries of HHS and VA acting jointly.
    The provision would specify two categories of ``Medicare-
eligible veterans''--Category A and Category C. A ``Category 
A'' eligible veteran would meet the following conditions:
    (1) A veteran who has been released or discharged from 
active duty in the Armed Forces under conditions other than 
dishonorable.
    (2) A veteran who has priority access to VA health care 
because of a service-connected condition, by meeting the 
definition for inclusion in one of several special groups (such 
as ex prisoners-of-war, or veterans who were exposed to 
environmental contaminants), or by qualifying for such priority 
access on the basis of inadequate income and assets. The 
Category A veteran must also be entitled to Medicare Part A and 
enrolled in Part B.
    (3) A veteran for whom the VA medical center closest to the 
veteran's place of residence is geographically remote or 
inaccessible.
    The provision would define a ``Category C'' Medicare-
eligible veteran as one who has been released or discharged 
from active duty in the Armed Forces under conditions other 
than dishonorable, and who is eligible for VA health care only 
if resources are available after serving the medical needs of 
veterans with a higher priority. Such veterans also must agree 
to pay applicable copayments and deductibles. In addition, a 
Medicare-eligible Category C veteran must also be entitled to 
Medicare Part A and enrolled in Part B.
    The provision would specify that ``program'' refers to the 
program established for Category A Medicare-eligible veterans 
and ``demonstration project'' or ``project'' refers to the 
demonstration project established for Category C Medicare-
eligible veterans.

  New Section 1897(b)(1)--Program and Demonstration Project--General 
                              Requirements

    The new Section 1897(b)(1) would establish the general 
requirements for the program and demonstration project.
    (a) In General. The new Section 1897(b)(1)(A) would 
authorize the administering Secretaries to establish a program 
under which the Secretary of HHS would reimburse the Secretary 
of VA from the Medicare trust funds for Medicare health 
services furnished to Category A Medicare-eligible veterans. 
The section would also authorize the administering Secretaries 
to establish a demonstration project under which the Secretary 
of HHS would reimburse the Secretary of VA for Medicare health 
services furnished to Category C Medicare-eligible veterans.
    (b) Agreement. The new Section 1897(b)(1)(B) would specify 
that the program and project would be established under an 
agreement entered into by the Secretaries of HHS and VA. The 
agreement would be required to include the following items at a 
minimum: (i) a description of the benefits to be provided to 
program and project participants; (ii) a description of 
eligibility rules and cost-sharing requirements for the program 
and project; (iii) a description of the program's enrollment 
process (which may to the extent practicable be administered in 
the same or similar manner as veterans are enrolled in VA 
medical plans according to a priority schedule that accepts 
Category A veterans for enrollment before veterans meeting the 
definition of Category C; (iv) a description of how the program 
and project would satisfy Medicare requirements; (v) a 
description of the program and project sites; (vi) a 
description of how the reimbursement and maintenance of effort 
requirements established under this Act would be implemented in 
the program and project; (vii) a statement that all data of 
both the VA and HHS that the two Secretaries deem necessary to 
conduct independent estimates and audits of the maintenance of 
effort, annual reconciliation and other matters required under 
the program and project would be available to the Secretaries; 
(viii) a description of any Medicare requirements the Secretary 
has waived pursuant to the requirements of the Act; (ix) a 
requirement that the Secretary of VA undertake outreach and 
marketing activities, consistent with the program's capacity 
limits, for Category A Medicare-eligible veterans; (x) a 
description of how the administering Secretaries would conduct 
the required data matching program, including the frequency of 
updates to the data match comparisons; (xi) a statement by the 
Secretary of VA that the type or amount of services furnished 
under VA to veterans who are entitled to Medicare Part A or 
enrolled in Part B, or both, would not be reduced as a result 
of the program or project.
    (c) Cost Sharing Under the Demonstration Project. The new 
Section 1897(b)(1)(C) would permit the Secretary of VA to 
establish enrollment fees and copayment requirements in order 
to maintain and broaden access to services, encourage 
appropriate use of services, and control costs. The section 
would require that enrollment fees and copayment requirements 
be consistent with Medicare+Choice requirements (except as 
waived by the Secretary of VA, as provided for under the Act). 
The enrollment fees and copayment requirements could vary by 
income.
    (d) Health Care Benefits. The new Section 1897(b)(1)(D) 
would require the Secretaries of HHS and VA to prescribe the 
minimum health care benefits to be provided under the program 
and demonstration project. The benefits would include at least 
all health care services covered under Medicare.
    (e) Establishment of Service Networks. The new Section 
1897(b)(1)(E) would authorize the Secretary of VA to enter into 
contracts with entities (including private practitioners, 
preferred provider organizations, and health care plans) to 
provide services under the program or project. The Secretary 
would be required to take into account the existence of 
qualified practitioners and providers in the areas in which the 
program or project was conducted. As part of the contract or 
arrangement, the Secretary could require the entities to 
furnish information needed to carry out the program or project. 
This provision requires the VA Secretary, to the extent 
possible, to use existing VA outpatient clinics in establishing 
service networks.
    The providers which VA may contract with include former 
Public Health Service (PHS) hospitals that have been recently 
privatized. Several of these former PHS hospitalshave a history 
of working with the Department of Defense and the Department of 
Veterans Affairs in providing care to the military and veterans 
families. Since being privatized, many of these former PHS hospitals 
continue to contract with the Department of Defense managed care 
program (TriCare). The Committee encourages the Administering 
Secretaries to consider the benefits that may be realized from 
contracting with such an entity in developing a service network under 
the program or project.
    (f) Data Match. The new Section 1897(b)(1)(F) would provide 
for the establishment of a data matching program by the 
Secretaries of HHS and VA. The program would provide for an 
exchange of information between the two agencies which is 
necessary to identify veterans entitled to Part A, enrolled 
under Part B, or both.
    The provision would require the two Secretaries, using the 
data matching program, to perform a comparison in order to 
identify veterans entitled to Part A, enrolled under Part B, or 
both. The comparison (to the extent deemed appropriate by the 
Secretaries) could distinguish among such veterans by category 
of veterans, by entitlement to Medicare or by other 
characteristics. The first comparison would have to be 
performed by October 31, 1998.
    The provision would prohibit the Secretaries of HHS and VA 
from conducting the program, unless the Inspector General of 
HHS certified to the Congress that the Secretaries had 
established the data matching program and had performed the 
required comparison. The Inspector General would be required to 
submit a report to Congress containing the certification, or 
denial of certification, by December 15, 1998.

New Section 1897(b)(2)--Program and Demonstration Project--Program and 
                             Project Sites

    The new Section 1897(b)(2) would establish the requirements 
for program and project sites. The provision would specify that 
both the program and project would be conducted in geographic 
service areas of VA, designated jointly by the Secretaries of 
HHS and VA after review of all the areas.
    The provision would specify that the program could not be 
conducted in more than three sites with respect to Category A 
Medicare-eligible veterans. However, in a year beginning on or 
after January 1, 2003, the program could be conducted in 
additional areas designated jointly by the Secretaries of HHS 
and VA. Designation of additional sites would be permitted only 
if the Inspector General of HHS had made a certification to 
Congress that the Secretary of VA had improved its information 
management system so that the Secretary was able to identify 
costs incurred by the VA in providing Medicare health services 
to Medicare-eligible veterans.
    The provision would limit the number of project sites to 
three with respect to Category C Medicare-eligible veterans. At 
least one of these would encompass the catchment area of a 
military medical facility which was closed pursuant to either 
the Defense Base Closure and Realignment Act of 1990 or Title 
II of the Defense Authorization and Base Closure and 
Realignment Act.

 New Section 1897(b)(3)--Program and Demonstration Project--Restriction

    The new Section 1897(b)(3) would specify that funds from 
the program or project could not be used for the construction 
of any VA treatment facility or the renovation, expansion, or 
other construction at such facility.

  New Section 1897(b)(4)--Program and Demonstration Project--Duration

    The new Section 1897(b)(4) would specify the durational 
requirements for the program and project. The program would 
begin on January 1, 2000 at the designated sites. If the 
required certification had been made by the HHS Inspector 
General, the program could be conducted at additional sites in 
years beginning on or after January 1, 2003. If in a year 
beginning on or after January 1, 2003, the program was 
conducted only at the original three sites, the aggregate 
number of Category A Medicare-eligible veterans provided 
services under the program could not exceed the number of 
veterans covered under the program on December 31, 2002.
    The provision would specify that the demonstration project 
would begin on January 1, 1999 and end on December 31, 2001. 
The provision would permit the Secretaries of VA and HHS to 
implement the program and project through the publication of 
regulations that take effect on an interim basis after notice 
and opportunity for public comment have been provided.

 New Sections 1897(b) (5) and (6)--Program and Demonstration Project--
                                Reports

    The new Section 1897(b)(5) would require the Secretaries of 
HHS and VA to submit to Congress, by September 1, 1998, a copy 
of the agreement establishing the program and project entered 
into by the two Secretaries. The Secretaries are to submit to 
Congress by September 1, 1999, a copy of the agreement 
establishing the program.
    The new Section 1897(b)(6) would prohibit the Secretary of 
VA from implementing the program at a designated site unless 
the Secretary had submitted a report to the Congress and the 
Comptroller General containing certain information. The 
required information would be a description of the operation of 
the program at the site as well as steps taken by the Secretary 
of VA to prevent a reduction in the type or amount of health 
services furnished in the geographic service area by VA to 
veterans entitled to Part A, enrolled under Part B, or both. 
The report would be required at least 90 days before the 
implementation date and would be periodically updated.

               New Section 1897(c)--Crediting of Payments

    The new Section 1897(c) would specify that payments 
received by the Secretary of VA under the program or project 
would be credited to the applicable VA medical care 
appropriation (and within that appropriation). Any payment 
received during a fiscal year for services provided during a 
prior fiscal year could be obligated by the Secretary of VA 
during the year the payment was received.

       New Section 1897(d)--Application of Medicare Requirements

    The new Section 1897(d) would specify that the program and 
demonstration project would be required to meet all 
requirements applicable to Medicare+Choice plans and related 
regulations and other requirements relating to Medicare 
payments. However, the prohibition on payments to federal 
providers of services would not apply.
    The provision would authorize the Secretary of HHS to waive 
any of these Medicare requirements or approve equivalent or 
alternative ways of meeting a requirement, but only if the 
waiver or approval reflected the unique status of VA as a 
federal agency and was necessary to carry out the program or 
project.
    The provision would require the program and demonstration 
project to comply with Medicare+Choice requirements relating to 
beneficiary protections and other matters to the extent not 
inconsistent with the program's enrollment process established 
under the agreement between the two Secretaries. The 
requirements include those relating to: enrollment and 
disenrollment, nondiscrimination, information provided to 
beneficiaries, cost-sharing limitations, appeal and grievance 
procedures, provider participation, access to services, quality 
assurance and external review, advance directives, and other 
areas of beneficiary protections that the two Secretaries 
determine were applicable to the program or project.

                 New Section 1897(e)--Inspector General

    The new Section 1897(e) would specify that nothing in the 
agreement between the two Secretaries could limit the HHS 
Inspector General from investigating any matters regarding the 
expenditure of Medicare funds for the program and project, 
including compliance with Medicare requirements and all other 
relevant laws.

              New Section 1897(f)--Voluntary Participation

    The new Section 1897(f) would state that participation of 
either a Category A or Category C Medicare-eligible veteran in 
the program or project would be voluntary.

 New Section 1897(g)--Payments Based on Regular Medicare Payment Rates

    The new section 1897(g) would provide that the Secretary 
would reimburse the Secretary of VA for services provided under 
the program or project at a rate equal to 95% of the amount 
paid to a Medicare+Choice organization with respect to that 
enrollee. The Secretary would establish rules for computing 
equivalent or comparable payment amounts in cases where payment 
amounts could not otherwise be readily computed. The payment 
would exclude adjustments for direct and indirect medical 
education and disproportionate share payments. Also excluded 
would be a percentage of hospital capital payments as 
determined by the two Secretaries.
    The provision would provide that payments would be made on 
a periodic basis, consistent with the periodicity of Medicare 
payments. They would be made in appropriate part, as determined 
by the Secretary of HHS, from the Medicare trust funds.
    The provision would place an aggregate limit on the 
reimbursement amounts. With respect to Category A Medicare-
eligible veterans, the amount would be $50 million in 2000, $75 
million in 2001, and $100 million in subsequent years. However, 
if new sites were added in any year beginning January 1, 2003 
or later, the cap would not apply in that year. The aggregate 
limit under the reimbursement project with respect to Category 
C Medicare-eligible veterans would be $50 million a year in 
1999, 2000, and 2001.

               New Section 1897(h)--Maintenance of Effort

    The new Section 1897(h) would include maintenance of effort 
provisions. The provision would require the Secretaries of HHS 
and VA, in consultation with the Comptroller General, to 
closely monitor the expenditures made under Medicare overall 
for Category A and C Medicare-eligible veterans over the 3 year 
period beginning January 1, 1999. The monitoring requirement 
would continue to apply for Category A Medicare-eligible 
veterans in each subsequent year the program was conducted. The 
monitoring would compare expenditures for such veterans to 
those which would have been made if the program and project had 
not been conducted.
    As specified under the general requirements for the 
agreement under new section 1897(b)(1), the Secretaries are to 
describe how the maintenance of effort requirement would be 
implemented in the program and project. The Act's maintenance 
of effort requirement reflects a recognition that the VA 
currently provides health care services to many Medicare-
eligible veterans. To the extent that VA provides such 
individuals with Medicare-covered services, it subsidizes the 
Medicare Trust Funds. Projecting that level of effort involves 
estimating the amount by which Medicare spending would increase 
if the VA ceased to provide health care services to Medicare-
eligible veterans. It is recognized that this calculation 
involves uncertainty associated with predicting future demand 
and accounting for well documented factors such as continued VA 
productivity improvements (including the ongoing trend of 
declining hospital admissions and increased number of 
outpatient visits) associated with outyear budget projections 
and the provisions of title I of Public Law 104-262, under 
which Congress revised VA law governing eligibility for care, 
and established an annual veteran-enrollment (and enrollment-
prioritization) system to govern access to VA care. At the same 
time, the calculation must take account of the central concern 
underlying a maintenance of effort requirement--that the 
Medicare trust funds not subsidize the VA.
    The Secretary of VA would be required to improve its 
information management system by October 1, 2001. The improved 
system would allow the Secretary of VA, for any year beginning 
on or after January 1, 2002, to identify costs incurred by VA 
in providing Medicare health care services to Medicare-eligible 
veterans for purposes of meeting the maintenance of effort 
requirement under the agreement between the two Secretaries. 
The Secretary of HHS would provide such assistance as needed 
for the Secretary of VA to determine which health care services 
furnished by VA qualify as Medicare health care services.
    The provision would permit the Secretary of VA to request 
the Inspector General of HHS to make a certification to 
Congress that the Secretary has improved its management 
information system so that the Secretary is able to identify 
costs attributable to providing Medicare health care services 
in a reasonably reliable and accurate manner.
    The provision would permit the program for Category A 
Medicare-eligible veterans to be conducted in additional sites 
and cover additional Category A Medicare-eligible veterans only 
if the Inspector General made the certification. The Inspector 
General would be required to submit a report to Congress 
containing the certification (or denial of certification) 
within 60 days after requested by the Secretary of VA or June 
1, 2002, whichever was earlier.
    The provision would require the Secretary of VA, within 60 
days of entering the agreement with the Secretary of HHS, to 
submit a report to Congress and the Comptroller General 
explaining the methodology used and the basis for calculating 
the VA level of effort under the program and project. Not later 
than 180 days after submission of this report, the Comptroller 
General would be required to submit to Congress and the 
Secretaries of HHS and VA a report on the Comptroller General's 
findings, conclusion, and recommendations with respect to the 
report. The Secretary would be required to submit a response to 
Congress within 60 days.
    The provision would also require the Comptroller General to 
submit an annual report during each year the program and 
demonstration project were in operation. The report, to be 
submitted by December 31 of each year, would be submitted to 
the Congress and the Secretaries of HHS and VA. The report 
would specify the extent, if any, to which costs under Medicare 
increased during the preceding fiscal year as a result of the 
program or demonstration project.
    The provision would require the Secretaries of HHS and VA 
to take certain steps if they found, based on the information 
obtained above, that Medicare expenditures increased, or were 
expected to increase, during a fiscal year because of the 
program or project. They would be required to take such steps 
as needed to recoup for Medicare the amount of the increase in 
expenditures and to prevent future increases. This would 
include payment of the amount of the increase by the Secretary 
of the VA from the current VA medical care appropriation to the 
Medicare trust funds. It would also include lowering the amount 
of payments made under the program or project. Further, the 
demonstration project could be suspended in whole or in part.

              New Section 1897(i)--Evaluation and Reports

    New Section 1897(i) would require the Comptroller General 
to conduct an evaluation of the program and an evaluation of 
the demonstration project. The Comptroller General would be 
required to submit annual reports on each to the Secretaries of 
HHS and VA and to the Congress. The first report for the 
program orproject would be submitted within 12 months after the 
date on which the Secretary of VA first provided services under the 
program or project, respectively. A final report on the demonstration 
project would be submitted not later than 3\1/2\ years after the date 
of the first report on the project.
    The provision would provide that the required evaluation 
and reports would include an assessment of a number of items, 
based on the agreement between the Secretaries of HHS and VA. 
An assessment would be made of: (i) savings or costs to 
Medicare resulting from the program or demonstration project; 
(ii) the cost to VA of providing care to Category A Medicare-
eligible veterans under the program or Category C Medicare-
eligible veterans under the demonstration project, 
respectively; (iii) an analysis of how the program or project 
affects the overall accessibility of medical care through VA 
and a description of unintended effects (if any) on the patient 
enrollment system under VA; (iv) compliance by VA with Medicare 
requirements; (v) the number of Category A Medicare-eligible 
veterans or Category C Medicare-eligible veterans, 
respectively, opting to participate in the program or project 
instead of receiving benefits through another health insurance 
plan (including Medicare); (vi) a list of health insurance 
plans and programs that were primary payers for Medicare-
eligible veterans during the year prior to their participation 
in the program or project and the distribution of their 
previous enrollment in such plans and programs; (vii) any 
impact of the program or project on private health care 
providers and Medicare beneficiaries not enrolled in the 
program or project; (viii) an assessment of the access to care 
and quality of care for Medicare-eligible veterans under the 
program or project; (ix) an analysis of whether, and in what 
manner, easier access to VA medical centers affects the number 
of Category A Medicare-eligible veterans or Category C 
Medicare-eligible veterans receiving Medicare health services; 
(x) any impact of the program or project on access to care for 
Category A or Category C Medicare-eligible veterans who did not 
enroll in the program or project and for other individuals 
entitled to Medicare; (xi) a description of the difficulties 
(if any) experienced by VA in managing the program or project; 
(xii) any additional elements specified in the agreement 
entered into between the two Secretaries; and (xiii) any 
additional elements that the Comptroller General determined 
appropriate regarding the program or project.
     The provision would require the Secretaries of HHS and VA 
to submit a report to Congress, within 6 months of submission 
of the final report by the Comptroller General on the 
demonstration project. The report would contain their 
recommendations as to whether there is a cost to Medicare in 
conducting the demonstration project; whether to extend the 
project or make it permanent; and whether the terms and 
conditions should otherwise be continued (or modified) with 
respect to Medicare-eligible veterans. When the report was 
submitted on the demonstration project, the Secretaries would 
also be required to submit a report to Congress on the program. 
The report would contain their recommendations as to whether 
there was a cost to Medicare in conducting the program, whether 
to discontinue the program with respect to Category A Medicare-
eligible veterans; and whether the terms and conditions of the 
program should otherwise be continued or modified with respect 
to Medicare-eligible veterans.

Reason for change

    To provide Medicare-eligible veterans an option to receive 
coordinated Medicare-covered services through VA medical 
facilities.

              C. Section 2(b)--Repeal of Plan Requirement

Current law

    Section 4015(b) of BBA 97 required the Secretaries of HHS 
and VA to submit to Congress a detailed plan for the 
implementation of a Medicare subvention demonstration project 
for veterans.

Explanation of provision

    The provision would repeal Section 4015(b) of BBA 97.

Reason for change

    Implementation of H.R. 3828 would make the detailed plan 
unnecessary.

D. Section 2(c)--Effectiveness Contingent Upon Enactment of Offsetting 
                    Outlay Reductions in VA Programs

Current law

    No provision.

Explanation of provision

     This provision would specify that the effectiveness of the 
Act would be contingent upon enactment of offsetting reductions 
in VA programs. Specifically, no payment could be made from 
Medicare trust funds for items and services furnished under the 
program or demonstration project before the date the Director 
of the Office of Management and Budget made a determination 
that federal legislation had been enacted that restricts 
entitlement to service-connected compensation for a disability 
that is the result of a veteran's use of tobacco products. The 
net amount of the reduction in outlays for VA programs for 
fiscal years 1999-2003 could not be less than the estimate of 
the aggregate increase in Medicare outlays attributable to the 
program and project.
    The determination by the Director of the Office of 
Management and Budget would be based on estimates made by the 
Congressional Budget Office (CBO), except to the extent the 
Director found them materially inaccurate. The estimate of the 
aggregate increase in outlays would be determined by the CBO 
and included in the report by the House Committee on Ways and 
Means on this Act.
    As part of its FY99 budget request, the Administration 
submitted a legislative proposal to reverse an internal VA 
decision which extended VA compensation for tobacco-related 
illnesses. As a result of a 1997 decision by the VA General 
Counsel, VA began paying service-connected disability 
compensation for tobacco-related illnesses. The General 
Counsel's decision held that, if a disease or death can be 
shown to be a result of nicotine addiction acquired in military 
service, service-connected compensation is warranted. OMB 
estimated that the reversal of the VA General Counsel's 
decision would save $16.9 billion over the next five years. The 
Congressional Budget Office estimates savings from enacting 
such legislation to be only $10 billion over five years.

Reason for change

    Funding for subvention is subject to OBRA90 ``pay-as-you-
go'' procedures (also known as ``Pay-Go'') which require that 
increases in mandatory spending (such as subvention funding) 
must be paid for by equal reductions in other mandatory 
programs or by increases in receipts.

                  E. Section 2(d)--Report to Congress

Current law

    No requirement.

Explanation of provision

    The Secretary of Health and Human Services shall report to 
Congress by not later than January 1, 2001, on a method to 
phase-in the costs of military facility services furnished by 
the Department of Veterans Affairs or the Department of Defense 
to Medicare-eligible beneficiaries in the calculation of an 
area's Medicare+Choice capitation payment rates.

Reason for change

    The report is necessary to assess the impact of these 
facilities on Medicare+Choice payment rates.

                       III. VOTE OF THE COMMITTEE

    In compliance with clause 2(l)(2)(B) of rule XI of the 
Rules of the House of Representatives, the following statements 
are made concerning the votes of the Committee on Ways and 
Means in its consideration of the bill H.R. 3828.

                       motion to report the bill

    The bill, H.R. 3828, as amended, was ordered favorably 
reported by a rollcall vote of 31 yeas to 1 nay (with a quorum 
being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
        Representatives             Yea       Nay     Present    Representatives      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Archer.....................        X   ........  .........  Mr. Rangel.......        X   ........  .........
Mr. Crane......................        X   ........  .........  Mr. Stark........  ........        X   .........
Mr. Thomas.....................        X   ........  .........  Mr. Matsui.......        X   ........  .........
Mr. Shaw.......................        X   ........  .........  Mrs. Kennelly....  ........  ........  .........
Mrs. Johnson...................        X   ........  .........  Mr. Coyne........        X   ........  .........
Mr. Bunning....................        X   ........  .........  Mr. Levin........  ........  ........  .........
Mr. Houghton...................        X   ........  .........  Mr. Cardin.......        X   ........  .........
Mr. Herger.....................        X   ........  .........  Mr. McDermott....        X   ........  .........
Mr. McCrery....................        X   ........  .........  Mr. Kleczka......        X   ........  .........
Mr. Camp.......................        X   ........  .........  Mr. Lewis........  ........  ........  .........
Mr. Ramstad....................        X   ........  .........  Mr. Neal.........        X   ........  .........
Mr. Nussle.....................        X   ........  .........  Mr. McNulty......        X   ........  .........
Mr. Johnson....................  ........  ........  .........  Mr. Jefferson....  ........  ........  .........
Ms. Dunn.......................        X   ........  .........  Mr. Tanner.......        X   ........  .........
Mr. Collins....................        X   ........  .........  Mr. Becerra......  ........  ........  .........
Mr. Portman....................        X   ........  .........  Mrs. Thurman.....        X   ........  .........
Mr. English....................        X   ........  .........
Mr. Ensign.....................        X   ........  .........
Mr. Christensen................        X   ........  .........
Mr. Watkins....................        X   ........  .........
Mr. Hayworth...................        X   ........  .........
Mr. Weller.....................        X   ........  .........
Mr. Hulshof....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

                     IV. BUDGET EFFECTS OF THE BILL

               A. Committee Estimate of Budgetary Effects

    In compliance with clause 7(a) of rule XIII of the Rules of 
the House of Representatives, the following statement is made: 
The Committee agrees with the estimate prepared by the 
Congressional Budget Office (CBO) which is included below.

    B. Statement Regarding New Budget Authority and Tax Expenditures

    In compliance with clause 2(l)(3)(B) of rule XI of the 
Rules of the House of Representatives, the Committee states 
that the provisions in the Committee bill, if enacted, would 
increase Medicare spending by approximately $470 million over 
the budget period Fiscal Years 1999-2003.

      C. Cost Estimate Prepared by the Congressional Budget Office

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, May 29, 1998.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3828, the Veterans 
Medicare Access Improvement Act of 1998.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Tom Bradley.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

H.R. 3828--Veterans Medicare Access Improvement Act of 1998

    Summary: H.R. 3828 would require the Secretaries of Health 
and Human Services (HHS) and Veterans Affairs (VA) to establish 
two systems--a program and a demonstration project--in which 
Medicare pays the VA on a capitated basis for Medicare-covered 
services furnished to certain veterans who are entitled to 
Medicare. The program would involve veterans who are entitled 
to certain types of free health care from the VA (Category A 
veterans), and the Demonstration project would involve veterans 
who are not entitled to free health care from VA (Category C 
veterans).
    CBO estimates that H.R. 3528 would increase Medicare 
spending by about $20 million in fiscal year 1999 and by about 
$500 million during the 1999-2003 period. Because the proposal 
would affect direct spending, pay-as-you-go procedures would 
apply. The bill does not contain any intergovernmental or 
private-sector mandates as defined in the Unfunded Mandates 
Reform Act.

Demonstration project and program

    Both the demonstration project and program would operate in 
up to three geographic areas for a period of three years. The 
demonstration project would begin on January 1, 1999, and the 
program would begin on January 1, 2000. During these three-year 
periods, Medicare payments to VA would be subject to annual 
caps, with a cumulative limit of $150 million for the 
demonstration project and $225 million for the program.
    The demonstration project for Category C veterans would be 
discontinued after 2001. The program for Category a veterans 
may be continued after 2002, with Medicare payments to VA 
capped at $100 million a year. However, the program may be 
expanded to additional sites, without caps on payments to VA, 
if the HHS Inspector General certifies that VA has established 
and is using a data system that can reliably and accurately 
measure the costs incurred by VA in providing Medicare-covered 
services to Medicare-eligible veterans

Participating sites

    The bill defines a site as a geographic service area of the 
Department of Veterans Affairs, which CBO interprets to mean a 
Veterans Integrated Services Network (VISN). The Secretaries 
would jointly designate three sites to participate in the 
program and three sites to participate in the project. The same 
or different VISNs may be selected for the program and the 
project. At least one of the VISNs selected as a project site 
must include the catchment area of a military medical facility 
that was closed pursuant to a base closure and realignment act.
    In general, VA sites participating in the program or 
demonstration project would be required to qualify as 
Medicare+Choice plans. However, the Secretary of HHS would be 
allowed to waive such requirements if the waiver reflects the 
unique status of VA and is necessary to carry out the program 
or demonstration project.

Eligibility and enrollment rules

    Veterans must be enrolled in both Part A and Part B of 
Medicare to be eligible for either the program or the 
demonstration project. To participate in the program, a 
Category A veteran must live in an area that is geographically 
remote from the closest VA hospital.
    Enrollment in either the program or the demonstration 
project would be voluntary. As with other Medicare+Choice 
plans, CBO assumes that veterans who enroll in the program or 
demonstration project would give up the ability to have 
Medicare pay for services furnished by providers outside the 
network established by VA.

Basis of payments

    Medicare's payments to VA would equal 95 percent of the 
applicable payment to a Medicare+Choice plan, less amounts 
related to Medicare's medical education payments, 
disproportionate share payments, and part of capital-related 
payments to hospitals for inpatient services.

Maintenance of effort

    The proposal is intended to have no net effect on Medicare 
spending. It would require the Secretaries to specify how VA's 
health care efforts for Medicare-eligible veterans would be 
monitored. The proposal would also require several analyses of 
VA's level of effort and the effect of the program and 
demonstration project on Medicare spending. If the Secretaries 
conclude that the program or demonstration project has caused 
Medicare spending to increase, the proposal would require VA to 
pay Medicare for increased spending already incurred by 
Medicare, and would require adjustment of the capitation rates 
paid to VA to avoid future increases in Medicare spending.
    The proposal would require VA to develop data systems to 
measure the Medicare-covered services that VA furnishes to 
Medicare-eligible veterans. The first step would be the 
identification by October 31, 1998, of veterans who are 
eligible for Medicare. By October 1, 2001, VA would be required 
to develop a data system that would be able to identify the 
costs VA incurs in furnishing Medicare-covered services to 
Medicare-eligible veterans. The caps on the number of program 
sites and on annual Medicare payments to VA would be eliminated 
if the HHS Inspector General certified by June 1, 2002, that VA 
is able to identify those costs in a reasonably reliable and 
accurate manner.

Relation to compensation for use of tobacco

    The bill makes implementation of the program and 
demonstration project contingent on enactment of legislation 
that restricts entitlement to VA service-related compensation 
for a disability that is the result a veteran's use of tobacco 
products and on a determination by the Director of the Office 
of Management and Budget that available savings from that 
legislation are sufficient to offset the increase in Medicare 
spending.
    The restriction on entitlement to VA service-related 
compensation that is necessary to permit implementation of H.R. 
3828 is included in H.R. 2400, the Transportation Equity Act 
for the 21st Century, which has been passed by both the House 
and Senate.
    Estimated budgetary impact: CBO estimates that the proposal 
would increase Medicare spending through two mechanisms:
          Favorable selection--that is, Medicare capitation 
        payment rates for enrollees in the VA program or 
        demonstration project that would be higher than what 
        Medicare would spend if the participants received all 
        of their care from non-VA providers; and
          Changes in VA's level of health care efforts for 
        Medicare-eligible veterans that result in higher 
        Medicare spending for services furnished by providers 
        eligible for Medicare payment.
    The combined effect of favorable selection and changes in 
VA's level of effort would increase Medicare spending by about 
$10 million in fiscal year 1999, $500 million during the 1999-
2003 period, and $1.8 billion over ten years. Changes in VA's 
level of effort would contribute more to higher Medicare 
spending than would favorable selection. (See Table 1.)
    The estimate of the increase in Medicare spending due to 
favorable selection is based on the assumption that, compared 
to Medicare payments for enrollees in the fee-for-service 
sector, selection in VA plans would be at least as favorable as 
selection in Medicare+Choice plans.
    The conclusion that Medicare spending would rise due to 
erosion of VA's level of effort is based on the inherent 
tension between VA's mission and satisfaction of the 
maintenance of effort requirement, the inability to establish a 
reliable measure of effort during the base period, the lack of 
an effective mechanism to monitor and enforce compliance with 
that requirement. Because measured effort is likely to exceed 
the level-of-effort target, the proposal would permit a 
substantial increase in Medicare spending while enabling the 
Secretaries to find that the level of effort criteria have been 
met. Erosion of VA's level of effort would be slowed, however, 
following implementation of a new data system to measure the 
costs VA incurs in furnishing Medicare-covered services to 
Medicare-eligible veterans.
    Va has been unable to provide relevant data on the cost to 
VA of the Medicare-covered services furnished to Medicare-
eligible veterans in the base year. CBO's estimate assumes that 
the base-period cost was $8 billion, or about half of the VA's 
health appropriation, and that, under current law, this cost 
would remain constant throughout the projection period. The 
estimate also assumes that VA initially would reallocate from 
its core mission nearly all (90 percent) of the incremental 
resources necessary to maintain its level of effort in the 
preceding year but that this proportion would decline in 
subsequent years. The estimate assumes that the proportion of 
incremental resources allocated to maintenance of the previous 
year's level of effort would return to 90 percent following 
implementation of the new data system.

                          TABLE 1.--INCREASES IN MEDICARE SPENDING DUE TO FAVORABLE SELECTION AND EROSION OF VA LEVEL OF EFFORT
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      By calendar years, in millions of dollars--
                                                             -------------------------------------------------------------------------------------------
                                                               1999   2000   2001   2002   2003   2004   2005   2006   2007   2008  1999-2003  1999-2008
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increase in Medicare Spending due to:
    Favorable Selection.....................................  ( \1\
                                                                  )     10     10     10     10     20     30     50     70    110        40        320
    Erosion of Level of Effort..............................     20     60    100    150    190    200    210    210    220    220       510      1,580
Total:
    By Calendar Year........................................     20     60    110    160    200    220    240    260    290    330       550      1,890
    By Fiscal Year..........................................     10     50    100    130    190    210    250    230    280    320       480      1,780
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Less than $5 million.
Note.--Numbers may not add to totals because of rounding.

    The cost of this legislation fall within budget function 
570 (Medicare).
    Basis of estimate: The following sections elaborate on 
CBO's analysis of the effect of this proposal on Medicare 
spending. This analysis uses calendar years.

Costs of favorable selection

    The estimate assumes that Medicare+Choice payment rates 
would be adjusted to remove half of the capital-related 
component, and that the resulting payment rates would average 
92 percent of rates normally paid to Medicare+Choice plans. 
Average capitation payment rates for participating veterans 
would grow from about $5,500 in 1998 to $9,200 in 2008. (See 
Table 2.)

TABLE 2.--SUMMARY OF PROJECTED ENROLLMENT AND MEDICARE SPENDING IN PROPOSED VA PROGRAM AND DEMONSTRATION PROJECT
----------------------------------------------------------------------------------------------------------------
                                                    By calendar years, in millions of dollars--
                                 -------------------------------------------------------------------------------
                                   1999    2000    2001    2002    2003    2004    2005    2006    2007    2008
----------------------------------------------------------------------------------------------------------------
Spending Cap:
    Category A Program..........       0      50      75     100   (\2\)   (\2\)   (\2\)   (\2\)   (\2\)   (\2\)
    Category C Demonstration
     Project....................      50      50      50       0       0       0       0       0       0       0
Average Capitation Rate
 (Dollars)......................   5,500   5,700   6,000   6,300   6,700   7,200   7,700   8,200   8,700   9,200
Enrollment (Thousands):
    Category A Program..........       0       9      13      16      23      33      50      80     110     160
    Category C Demonstration
     Project....................       5       8       8       0       0       0       0       0       0       0
                                 -------------------------------------------------------------------------------
      Total Enrollment..........       5      17      20      16      23      33      50      80     110     160
Total Capitated Payments to VA..      30      95     122     100     150     240     390     640     970   1,450
Change in Medicare Spending due
 to Favorable Selection.........   (\1\)      10      10      10      10      20      30      50      70     110
----------------------------------------------------------------------------------------------------------------
\1\ Less than $5 million.
\2\ The $100 million cap on annual Medicare payments to VA would be removed if the HHS Inspector General
  certifies that VA can reliably and accurately calculate cost of Medicare-covered services furnished to
  Medicare-eligible veterans.
Note.--Details may not add to totals due to rounding.

    CBO assumes that VA would establish a separate 
Medicare+Choice plan in each region. Because of the caps on 
total capitated payments to VA, CBO also assumes that Medicare 
would waive the minimum enrollment requirement (5,000 enrollees 
for Medicare+Choice plans in urban areas) for at least the 
first four years of operation. CBO assumes that enrollment in 
the program for Category A veterans would grow from about 9,000 
in 1999 to about 160,000 in 2008. CBO assumes that enrollment 
in the Category C project would rise from about 5,000 in 1999 
to about 8,000 in 2001. CBO assumes that enrollment of Category 
C veterans would not be impeded by the prospect of the 
demonstration ending, because VA and many Category C veterans 
would act on the expectation that the project would be 
continued and expanded after 2001.
    CBO assumes that selection of enrollees would be at least 
as favorable as selection in other Medicare+Choice plans under 
current law.\1\ The increase in Medicare spending due to 
favorable selection would increase from less than $5 million in 
1999 to about $110 million in 2008.
---------------------------------------------------------------------------
    \1\ Enrollees in Medicare risk plans have been estimated to cost 10 
percent to 12.4 percent less than Medicare enrollees with similar 
demographic characteristics who remain in the fee-for-service sector. 
See R.S. Brown, et al., The Medicare Risk Program for HMOs--Final 
Summary Report on Findings from the Evaluation, Princeton, N.J.: 
Mathematica Policy Research, Inc., February 1993; and G. Riley, et al., 
``Health Status of Medicare Enrollees in HMOs and the Fee-for-Service 
Sector in 1994'', Health Care Financing Review, 17(4), Summer 1996. 
Selection tends to be substantially more favorable for new enrollees in 
Medicare risk plans. In the six months before joining an HMO, new HMO 
enrollees have been estimated to cost Medicare only 63 percent as much 
as beneficiaries who remained in the fee-for-service sector. See 
``Geographic Adjustment of Medicare Payments'', Annual Report to 
Congress, Physician Payment Review Commission, 1996.
---------------------------------------------------------------------------

Erosion of level of effort

    Three factors contribute to CBO's conclusion that Medicare 
spending would rise due to erosion of VA's level of effort: an 
inherent tension between VA's mission and satisfaction of the 
maintenance of effort requirement, the inability to establish a 
reliable measure of effort during the base period, and the lack 
of an effective mechanism to monitor and enforce compliance 
with that requirement. Despite these impediments, CBO assumes 
that VA will allocate substantial resources to maintain its 
level of effort. In addition, the estimate assumes that erosion 
of VA's level of effort would be slowed substantially following 
implementation of a new data system.
    Tension Between VA's Mission and Satisfaction of the 
Maintenance of Effort Requirement. According to VA, ``The 
mission of the veterans healthcare system is to serve the needs 
of America's veterans. It does this by providing specialized 
care for service-connected veterans, primary care and related 
medical and social support services. To accomplish this 
mission, VHA (Veterans Health Administration) needs to be a 
comprehensive, integrated healthcare system that provides 
excellence in healthcare value, excellence in service as 
defined by its customers, and excellence in education and 
research, and needs to be an organization characterized by 
exceptional accountability and by being an employer of 
choice.''
    VA does not have sufficient resources to satisfy the health 
care demands of all eligible veterans. To carry out its mission 
within the resources available, the Congress and VA have 
established seven priority groups to specify the order in which 
veterans may stake a claim to VA health care services. The VA 
also allocates care by determining which services it offers, 
where it offer them, and the quantity it offers. Only by 
managing the set of services VA provides, and by managing the 
distribution of those services across the veteran population 
can VA best serve the needs of America's veterans within the 
constraint's imposed by limited resources.
    The VA provides a full spectrum of medical care. However, 
some veterans have medical needs that are not well served by 
community providers. To satisfy these needs, the VA has 
developed special expertise in certain areas, including 
provision of low-cost pharmaceuticals and, for patients with 
chronic disabilities, rehabilitation and substance abuse/mental 
health service.\2\
---------------------------------------------------------------------------
    \2\ In general, the services in which the VA has developed 
expertise are not covered by Medicare. Medicare does cover some 
services in which VA has developed special expertise, and Medicare does 
not cover some services in which VA has not developed such expertise. 
The estimate refers to services in which VA has developed special 
expertise as Medicare-noncovered services.
---------------------------------------------------------------------------
    To improve the VA's ability to carry out its mission, the 
Veterans Health Administration is pursing a ``30-20-10'' 
strategy: to increase efficiency by 30 percent, to increase the 
number of veterans served by 20 percent, and to generate 10 
percent of funding from non-appropriated sources.
    One method by which VA intends to carry out its mission is 
by allocating more resources to those services in which it has 
special expertise. If the proposal did not require that VA 
maintain a level of effort out of nonMedicare funds, Medicare 
payments for Medicare-covered services would enable VA to 
redistribute some appropriated funds to provide more of the 
services in which VA has special expertise. Medicare spending 
would increase as Medicare pays VA or community providers for 
the Medicare-covered services that would no longer be funded 
out of VA appropriations.
    By contrast, implementation of an effective mechanism to 
enforce maintenance of a level of effort out of nonMedicare 
funds would require that VA shift resources away from the 
services in which VA has special expertise to pay for providing 
additional Medicare-covered services to Medicare-eligible 
veterans who do not participate in the program or project. 
Because of the resulting tension between carrying out VA's 
mission and satisfaction of the maintenance-of-effort 
requirement, CBO believes it is unlikely that a fully effective 
maintenance of effort mechanism could be implemented.
    Level of Effort during the Base Period and in Baseline. The 
level of VA outlays for Medicare-covered services furnished to 
Medicare-eligible veterans is currently unknown. VA staff have 
guessed that it is in the range of one-third to two-thirds of 
VA health outlays. CBO used the midpoint of this range as the 
basis for estimating that VA outlays for Medicare-covered 
services finished to Medicare-eligible veterans were about one-
half of the $17 billion in VA health outlays in 1997, or about 
$8 billion. Under current law, CBO assumes that these outlays 
will be constant during the 1998 through 2008 period.
    On a per-person basis, CBO assumes that VA will shift more 
of its appropriated resources to pay for the services in which 
VA has special expertise. However, this change in the 
allocation of VA's effort between Medicare-covered and 
noncovered services will be offset by growth in the share of 
veterans eligible for Medicare. The proportion of veterans who 
are at least 65 is projected to increase from 36 percent in 
1997 to 41 percent in 2008.
    Although CBO assumes that VA will spend $8 billion on 
Medicare-covered services furnished to Medicare-eligible 
veterans in 1998, the estimate assumes that Medicare would 
spend less than $8 billion if those veterans were to receive 
all Medicare-covered services from nonfederal providers 
eligible for payment by Medicare. CBO estimates that the value 
to Medicare of each dollar of VA outlays for Medicare-covered 
services furnished to Medicare-eligible veterans is about 85 
cents in 1998. This assumption is based on research findings 
that VA delivers a substantial amount of nonacute care in 
relatively high-cost acute care settings.\3\ CBO assumes that 
the gap between VA outlays and the value of Medicare of those 
outlays will close over six years, as VA implements its 
strategy to increase efficiency by 30 percent. Thus, CBO 
projects that the value to Medicare of VA outlays will increase 
from $6.8 billion in 1998 to $8 billion per year in 2004 
through 2008.
---------------------------------------------------------------------------
    \3\ A recent VA study found that 38 percent of admissions to acute 
medical and surgical services were nonacute, and that 32 percent of 
inpatient days of care in these acute settings were for nonacute 
patients. (Smith, et al., ``Overutilization of Acute-Care Beds in 
Veterans Affairs Hospitals'', Medicare Care, 34(1), 1996, pp. 85-96.) 
These findings are consistent with the results of earlier studies. See, 
for example: Booth, et al., ``Nonacute Inpatient Admissions to 
Department of Veterans Affairs Medical Centers'', Medical Care, 28 (8 
supp.), 1991, pp. AS40-AS50; and General Accounting Office, Better 
Patient Care Practices Could Reduce Length of Stay in VA Hospitals, 
GAO/HRD-85-92, 1985.
---------------------------------------------------------------------------
    Measuring, Monitoring and Enforcing Level of Effort. The 
proposal attempts to avoid increasing Medicare's costs by 
establishing a requirement that VA maintain a level of effort 
for Medicare-covered services furnished to Medicare-eligible 
veterans. The mechanism intended to achieve budget neutrality 
for Medicare requires that VA compensate Medicare for any 
change in Medicare spending for veterans compared to the amount 
of Medicare would have spent for such veterans if the program 
and demonstration project had not been conducted. However, this 
change in Medicare spending cannot be measured.
    CBO assumes that the agreement between the Secretaries 
would establish a mechanism for approximating VA's level-of-
effort during the 1999 though 2003 period. CBO also assumes 
that the VA would develop a data system that would be able to 
identify the costs VA incurs in furnishing Medicare-covered 
services to Medicare-eligible veterans, and that this data 
system would be used to recalculate the base level of effort 
during 2002 and to monitor compliance with the level of effort 
requirement in 2003 and subsequent years.
    Until the new data system is implemented, attempts to 
measure level of effort would be hampered by weakeness in VA 
data systems. In addition, using existing VA data systems for 
monitoring compliance with the level of effort requirement--a 
purpose for which they were not initially designed--would 
produce substantial ``measurement creep,'' that is, a tendency 
for measured effort to grow faster than real effort.
    Weaknesses in VA Data System. Based on extensive 
discussions with staff from VA, HHS, and the General Accounting 
Office, CBO has concluded that VA does not have and could not 
quickly develop and implement data systems that would permit 
reliable measurement and monitoring of VA's level of effort. 
Without reliable measures of VA's effort, budget neutrality for 
Medicare cannot be enforced.
    VA is only beginning to convert to industry-standard 
systems of categorizing many of the services and procedures it 
furnishes. Thus, VA cannot reliably distinguish the services 
that would be covered by Medicare from those that would not be 
covered. In many situations, VA would use the setting in which 
a service is furnished as a proxy for whether the service is 
Medicare-covered. In some settings, the costs of services are 
estimated using methods designed to allocate budgets. This 
cost-estimating methodology, in conjunction with VA's inability 
to categorize services adequately, prevents VA from measuring 
the costs of those services reliably.
    Measurement Creep. Until the new data system is 
implemented, the Secretaries would use existing data systems as 
the basis for measuring, monitoring, and enforcing VA's level 
of effort, and for generating and justifying Medicare payments 
to VA. Data that are not required to generate payments are 
reported less completely than data that are audited and used 
for payment. When those data begin to be used for payment, the 
elements that qualify for higher payment will be reported more 
completely than when the data system was developed. Thus, the 
reported output will grow more rapidly than actual output. 
Based on Medicare's experience with ``DRG creep'' following 
introduction of the prospective payment system for hospital 
inpatient services in fiscal year 1984, CBO assumes that 
measurement creep would inflate VA's level of effort by 3 
percent in 1999 but that the rate of inflation would gradually 
decline to 0.5 percent in subsequent years. This measurement 
creep would permit VA to satisfy level of effort requirements 
with little or no need to reallocate appropriated resources 
away from the Medicare noncovered services central to its 
mission.
    Despite the inherent tension between carrying out VA's 
mission and satisfying the maintenance of effort requirement, 
and despite the contribution of measurements creep to reducing 
or eliminating the apparent need for VA to satisfy that 
requirement by reallocating appropriated resources away from 
services not covered by Medicare, CBO assumes that VA would 
reallocate substantial resources from its core mission to 
provide Medicare-covered services to Medicare-eligible veterans 
who do not participate in the program or demonstration project. 
Initially, VA would reallocate from its core mission 90 percent 
of the resources necessary to maintain the level of effort. In 
subsequent years, however, measuredeffort would substantially 
exceed the level-of-effort target, and VA would gradually reduce to 50 
percent the reallocation of resources necessary to maintain the 
previous year's level of effort. After implementation of the new data 
system, VA would again reallocate from its core mission 90 percent of 
the resources necessary to maintain the level of effort. How erosion of 
VA's level of effort would affect Medicare spending is summarized in 
Table 3.

                          TABLE 3.--CHANGES IN VA LEVEL OF EFFORT AND MEDICARE SPENDING
----------------------------------------------------------------------------------------------------------------
                                                    By calendar years, in billions of dollars--
                                 -------------------------------------------------------------------------------
                                   1999    2000    2001    2002    2003    2004    2005    2006    2007    2008
----------------------------------------------------------------------------------------------------------------
VA Level of Effort, Baseline:
    Cost to VA..................     8.0     8.0     8.0     8.0     8.0     8.0     8.0     8.0     8.0     8.0
    Value to Medicare...........     6.8     7.0     7.2     7.4     7.6     7.8     8.0     8.0     8.0     8.0
Relative Value of VA Effort to
 Medicare (Percent).............    85.0    87.5    90.0    92.5    95.0    97.5   100.0   100.0   100.0   100.0
Measurement Creep (Percent).....     3.0     2.5     2.0     1.5     1.0     1.0     0.8     0.6     0.5     0.5
Proportion of Increment in
 Measured Effort Used to
 Maintain Effort (Percent)......      90      80      70      60      50      90      90      90      90      90
VA Level of Effort, Proposed
 Law:
    Cost to VA..................     8.2     8.4     8.5     8.6     8.6     8.7     8.8     8.8     8.8     8.9
    Value to Medicare...........     7.0     7.1     7.3     7.5     7.6     7.8     7.8     7.8     7.8     7.8
Increase in Medicare Spending
 due to Erosion of VA Effort....   (\1\)     0.1     0.1     0.1     0.2     0.2     0.2     0.2     0.2     0.2
----------------------------------------------------------------------------------------------------------------
\1\ Less than $50 million.
Note.--Details may not add to totals due to rounding.

    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act establishes pay-as-you-go 
procedures for legislation affecting direct spending or 
receipts. The projected changes in direct spending under H.R. 
2912 are shown in the table below for fiscal years 1999-2008. 
For purposes of enforcing pay-as-you-go procedures, however, 
only the effects in the current year, budget year, and the 
succeeding four years are counted.

                                        SUMMARY OF PAY-AS-YOU-GO EFFECTS
----------------------------------------------------------------------------------------------------------------
                                                          By fiscal years, in millions of dollars--
                                           ---------------------------------------------------------------------
                                             1999   2000   2001   2002   2003   2004   2005   2006   2007   2008
----------------------------------------------------------------------------------------------------------------
Change in outlays.........................     10     50    100    130    190    210    250    230    280    320
Change in receipts........................                              Not applicable
----------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: H.R. 3828 does 
not contain any intergovernmental or private-sector mandates as 
defined in the Unfunded Mandates Reform Act and would impose no 
costs on state, local, or tribal governments.
    Estimate prepared by: Federal Cost: Tom Bradley. Impact on 
State, Local, and Tribal Governments: Marc Nicole. Impact on 
the Private Sector: Pete Welch.
    Estimate approved by: Paul N. Van de Water, Assistant 
Director for Budget Analysis.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

          A. Committee Oversight Findings and Recommendations

     With respect to clause 2(l)(3)(A) of rule XI of the Rules 
of the House of Representatives, the Committee states that the 
Committee believed this action is necessary due to its 
oversight of the Medicare program. The Subcommittee on Health 
held a number of general hearings on health care options for 
seniors, including: a hearing on February 13, 1997 regarding 
Medicare Provisions in the President's Budget; a hearing on 
February 25, 1997 regarding Medicare HMO Payment Policies; a 
hearing on April 29, 1997 regarding Coordinated Care Options 
for Seniors; a hearing on January 29, 1998 regarding Preparing 
the Health Care Financing Administration for the 21st Century; 
a hearing on February 26, 1998 regarding Assessing Health Care 
Quality; and finally a hearing on March 3, 1998 regarding 
Medicare Payment Policies.

B. Summary of Findings and Recommendations of the Government Operations 
                               Committee

    With respect to clause 2(l)(3)(D) of rule XI of the Rules 
of the House of Representatives, the Committee states that no 
oversight findings or recommendations have been submitted by 
the Committee on Government Reform and Oversight regarding the 
subject of the bill.

                 C. Constitutional Authority Statement

    With respect to clause 2(l)(4) of rule XI of the Rules of 
the House of Representatives, relating to Constitutional 
Authority, the Committee states that the Committee's action in 
reporting the bill is derived from Article I of the 
Constitution, Section 8 (``The Congress shall have power to lay 
and collect taxes, duties, imposts and excises, to pay the 
debts and provide for the common defense and general welfare of 
the United States. * * * '').

        VI. 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 italic, existing law in which no change is 
proposed is shown in roman):

                SECTION 1897 OF THE SOCIAL SECURITY ACT


                 improving veterans' access to services


  Sec. 1897. (a) Definitions.--In this section:
          (1) Administering secretaries.--The term 
        ``administering Secretaries'' means the Secretary of 
        Health and Human Services and the Secretary of Veterans 
        Affairs acting jointly.
          (2) Program.--The term ``program'' means the program 
        established under this section with respect to category 
        A medicare-eligible veterans.
          (3) Demonstration project; project.--The terms 
        ``demonstration project'' and ``project'' mean the 
        demonstration project carried out under this section 
        with respect to category C medicare-eligible veterans.
          (4) Medicare-eligible veterans.--
                  (A) Category a medicare-eligible veteran.--
                The term ``category A medicare-eligible 
                veteran'' means an individual--
                          (i) who is a veteran (as defined in 
                        section 101(2) of title 38, United 
                        States Code) and is described in 
                        paragraph (1) or (2) of section 1710(a) 
                        of title 38, United States Code;
                          (ii) who is entitled to hospital 
                        insurance benefits under part A of the 
                        medicare program and is enrolled in the 
                        supplementary medical insurance program 
                        under part B of the medicare program; 
                        and
                          (iii) for whom the medical center of 
                        the Department of Veterans Affairs that 
                        is closest to the individual's place of 
                        residence is geographically remote or 
                        inaccessible from such place.
                  (B) Category c medicare-eligible veteran.--
                The term ``category C medicare-eligible 
                veteran'' means an individual who--
                          (i) is a veteran (as defined in 
                        section 101(2) of title 38, United 
                        States Code) and is described in 
                        section 1710(a)(3) of title 38, United 
                        States Code; and
                          (ii) is entitled to hospital 
                        insurance benefits under part A of the 
                        medicare program and is enrolled in the 
                        supplementary medical insurance program 
                        under part B of the medicare program.
          (5) Medicare health care services.--The term 
        ``medicare health care services'' means items or 
        services covered under part A or B of this title.
          (6) Trust funds.--The term ``trust funds'' means the 
        Federal Hospital Insurance Trust Fund established in 
        section 1817 and the Federal Supplementary Medical 
        Insurance Trust Fund established in section 1841.
  (b) Program and Demonstration Project.--
          (1) In general.--
                  (A) Establishment.--The administering 
                Secretaries are authorized to establish--
                          (i) a program (under an agreement 
                        entered into by the administering 
                        Secretaries) under which the Secretary 
                        of Health and Human Services shall 
                        reimburse the Secretary of Veterans 
                        Affairs, from the trust funds, for 
                        medicare health care services furnished 
                        to category A medicare-eligible 
                        veterans; and
                          (ii) a demonstration project (under 
                        such an agreement) under which the 
                        Secretary of Health and Human Services 
                        shall reimburse the Secretary of 
                        Veterans Affairs, from the trust funds, 
                        for medicare health care services 
                        furnished to category C medicare-
                        eligible veterans.
                  (B) Agreement.--The agreement entered into 
                under subparagraph (A) shall include at a 
                minimum--
                          (i) a description of the benefits to 
                        be provided to the participants of the 
                        program and the demonstration project 
                        established under this section;
                          (ii) a description of the eligibility 
                        rules for participation in the program 
                        and demonstration project, including 
                        any cost sharing requirements;
                          (iii) a description of the process 
                        for enrolling veterans for 
                        participation in the program, which 
                        process may, to the extent practicable, 
                        be administered in the same or similar 
                        manner to the registration process 
                        established to implement section 1705 
                        of title 38, United States Code;
                          (iv) a description of how the program 
                        and the demonstration project will 
                        satisfy the requirements under this 
                        title;
                          (v) a description of the sites 
                        selected under paragraph (2);
                          (vi) a description of how 
                        reimbursement requirements under 
                        subsection (g) and maintenance of 
                        effort requirements under subsection 
                        (h) will be implemented in the program 
                        and in the demonstration project;
                          (vii) a statement that all data of 
                        the Department of Veterans Affairs and 
                        of the Department of Health and Human 
                        Services that the administering 
                        Secretaries determine is necessary to 
                        conduct independent estimates and 
                        audits of the maintenance of effort 
                        requirement, the annual reconciliation, 
                        and related matters required under the 
                        program and the demonstration project 
                        shall be available to the administering 
                        Secretaries;
                          (viii) a description of any 
                        requirement that the Secretary of 
                        Health and Human Services waives 
                        pursuant to subsection (d);
                          (ix) a requirement that the Secretary 
                        of Veterans Affairs undertake and 
                        maintain outreach and marketing 
                        activities, consistent with capacity 
                        limits under the program, for category 
                        A medicare-eligible veterans;
                          (x) a description of how the 
                        administering Secretaries shall conduct 
                        the data matching program under 
                        subparagraph (F), including the 
                        frequency of updates to the comparisons 
                        performed under subparagraph (F)(ii); 
                        and
                          (xi) a statement by the Secretary of 
                        Veterans Affairs that the type or 
                        amount of health care services 
                        furnished under chapter 17 of title 38, 
                        United States Code, to veterans who are 
                        entitled to benefits under part A or 
                        enrolled under part B, or both, shall 
                        not be reduced by reason of the program 
                        or project.
                  (C) Cost-sharing under demonstration 
                project.--Notwithstanding any provision of 
                title 38, United States Code, in order--
                          (i) to maintain and broaden access to 
                        services,
                          (ii) to encourage appropriate use of 
                        services, and
                          (iii) to control costs,
                the Secretary of Veterans Affairs may establish 
                enrollment fees and copayment requirements 
                under the demonstration project under this 
                section consistent with subsection (d)(1). Such 
                fees and requirements may vary based on income.
                  (D) Health care benefits.--The administering 
                Secretaries shall prescribe the minimum health 
                care benefits to be provided under the program 
                and demonstration project to medicare-eligible 
                veterans enrolled in the program or project. 
                Those benefits shall include at least all 
                medicare health care services covered under 
                this title.
                  (E) Establishment of service networks.--
                          (i) Use of va outpatient clinics.--
                        The Secretary of Veterans Affairs, to 
                        the extent practicable, shall use 
                        outpatient clinics of the Department of 
                        Veterans Affairs in providing services 
                        under the program.
                          (ii) Authority to contract for 
                        services.--The Secretary of Veterans 
                        Affairs may enter into contracts and 
                        arrangements with entities (such as 
                        private practitioners, providers of 
                        services, preferred provider 
                        organizations, and health care plans) 
                        for the provision of services for which 
                        the Secretary of Health and Human 
                        Services is responsible under the 
                        program or project under this section 
                        and shall take into account the 
                        existence of qualified practitioners 
                        and providers in the areas in which the 
                        program or project is being conducted. 
                        Under such contracts and arrangements, 
                        such Secretary of Health and Human 
                        Services may require the entities to 
                        furnish such information as such 
                        Secretary may require to carry out this 
                        section.
                  (F) Data match.--
                          (i) Establishment of data matching 
                        program.--The administering Secretaries 
                        shall establish a data matching program 
                        under which there is an exchange of 
                        information of the Department of 
                        Veterans Affairs and of the Department 
                        of Health and Human Services as is 
                        necessary to identify veterans who are 
                        entitled to benefits under part A or 
                        enrolled under part B, or both, in 
                        order to carry out this section. The 
                        provisions of section 552a of title 5, 
                        United States Code, shall apply with 
                        respect to such matching program only 
                        to the extent the administering 
                        Secretaries find it feasible and 
                        appropriate in carrying out this 
                        section in a timely and efficient 
                        manner.
                          (ii) Performance of data match.--The 
                        administering Secretaries, using the 
                        data matching program established under 
                        clause (i), shall perform a comparison 
                        in order to identify veterans who are 
                        entitled to benefits under part A or 
                        enrolled under part B, or both. To the 
                        extent such Secretaries deem 
                        appropriate to carry out this section, 
                        the comparison and identification may 
                        distinguish among such veterans by 
                        category of veterans, by entitlement to 
                        benefits under this title, or by other 
                        characteristics.
                          (iii) Deadline for first data 
                        match.--The administering Secretaries 
                        shall first perform a comparison under 
                        clause (ii) by not later than October 
                        31, 1998.
                          (iv) Certification by inspector 
                        general.--
                                  (I) In general.--The 
                                administering Secretaries may 
                                not conduct the program unless 
                                the Inspector General of the 
                                Department of Health and Human 
                                Services certifies to Congress 
                                that the administering 
                                Secretaries have established 
                                the data matching program under 
                                clause (i) and have performed a 
                                comparison under clause (ii).
                                  (II) Deadline for 
                                certification.--Not later than 
                                December 15, 1998, the 
                                Inspector General of the 
                                Department of Health and Human 
                                Services shall submit a report 
                                to Congress containing the 
                                certification under subclause 
                                (I) or the denial of such 
                                certification.
          (2) Number of sites.--The program and demonstration 
        project shall be conducted in geographic service areas 
        of the Department of Veterans Affairs, designated 
        jointly by the administering Secretaries after review 
        of all such areas, as follows:
                  (A) Program sites.--
                          (i) In general.--Except as provided 
                        in clause (ii), the program shall be 
                        conducted in not more than 3 such areas 
                        with respect to category A medicare-
                        eligible veterans.
                          (ii) Additional program sites.--
                        Subject to the certification required 
                        under subsection (h)(1)(B)(iii), for a 
                        year beginning on or after January 1, 
                        2003, the program shall be conducted in 
                        such areas as are designated jointly by 
                        the administering Secretaries after 
                        review of all such areas.
                  (B) Project sites.--
                          (i) In general.--The demonstration 
                        project shall be conducted in not more 
                        than 3 such areas with respect to 
                        category C medicare-eligible veterans.
                          (ii) Mandatory site.--At least one of 
                        the areas designated under clause (i) 
                        shall encompass the catchment area of a 
                        military medical facility which was 
                        closed pursuant to either the Defense 
                        Base Closure and Realignment Act of 
                        1990 (part A of title XXIX of Public 
                        Law 101-510; 10 U.S.C. 2687 note) or 
                        title II of the Defense Authorization 
                        Amendments and Base Closure and 
                        Realignment Act (Public Law 100-526; 10 
                        U.S.C. 2687 note).
          (3) Restriction.--Funds from the program or 
        demonstration project shall not be used for--
                  (A) the construction of any treatment 
                facility of the Department of Veterans Affairs; 
                or
                  (B) the renovation, expansion, or other 
                construction at such a facility.
          (4) Duration.--The administering Secretaries shall 
        conduct and implement the program and the demonstration 
        project as follows:
                  (A) Program.--
                          (i) In general.--The program shall 
                        begin on January 1, 2000, in the sites 
                        designated under paragraph (2)(A)(i) 
                        and, subject to subsection 
                        (h)(1)(B)(iii)(II), for a year 
                        beginning on or after January 1, 2003, 
                        the program may be conducted in such 
                        additional sites designated under 
                        paragraph (2)(A)(ii).
                          (ii) Limitation on number of veterans 
                        covered under certain circumstances.--
                        If for a year beginning on or after 
                        January 1, 2003, the program is 
                        conducted only in the sites designated 
                        under paragraph (2)(A)(i), medicare 
                        health care services may not be 
                        provided under the program to a number 
                        of category-A medicare-eligible 
                        veterans that exceeds the aggregate 
                        number of such veterans covered under 
                        the program as of December 31, 2002.
                  (B) Project.--The demonstration project shall 
                begin on January 1, 1999, and end on December 
                31, 2001.
                  (C) Implementation.--The administering 
                Secretaries may implement the program and 
                demonstration project through the publication 
                of regulations that take effect on an interim 
                basis, after notice and pending opportunity for 
                public comment.
          (5) Reports.--
                  (A) Program.--By not later than September 1, 
                1999, the administering Secretaries shall 
                submit a copy of the agreement entered into 
                under paragraph (1) with respect to the program 
                to Congress.
                  (B) Project.--By not later than September 1, 
                1998, the administering Secretaries shall 
                submit a copy of the agreement entered into 
                under paragraph (1) with respect to the project 
                to Congress.
          (6) Report on maintenance of level of health care 
        services.--
                  (A) In general.--The Secretary of Veterans 
                Affairs may not implement the program at a site 
                designated under paragraph (2)(A) unless, by 
                not later than 90 days before the date of the 
                implementation, the Secretary of Veterans 
                Affairs submits to Congress and to the 
                Comptroller General of the United States a 
                report that contains the information described 
                in subparagraph (B). The Secretary of Veterans 
                Affairs shall periodically update the report 
                under this paragraph as appropriate.
                  (B) Information described.--For purposes of 
                subparagraph (A), the information described in 
                this subparagraph is a description of the 
                operation of the program at the site and of the 
                steps to be taken by the Secretary of Veterans 
                Affairs to prevent the reduction of the type or 
                amount of health care services furnished under 
                chapter 17 of title 38, United States Code, to 
                veterans who are entitled to benefits under 
                part A or enrolled under part B, or both, 
                within the geographic service area of the 
                Department of Veterans Affairs in which the 
                site is located by reason of the program or 
                project.
  (c) Crediting of Payments.--A payment received by the 
Secretary of Veterans Affairs under the program or 
demonstration project shall be credited to the applicable 
Department of Veterans Affairs medical care appropriation (and 
within that appropriation). Any such payment received during a 
fiscal year for services provided during a prior fiscal year 
may be obligated by the Secretary of Veterans Affairs during 
the fiscal year during which the payment is received.
  (d) Application of Certain Medicare Requirements.--
          (1) Authority.--
                  (A) In general.--Except as provided under 
                subparagraph (B), the program and the 
                demonstration project shall meet all 
                requirements of Medicare+Choice plans under 
                part C and regulations pertaining thereto, and 
                other requirements for receiving medicare 
                payments, except that the prohibition of 
                payments to Federal providers of services under 
                sections 1814(c) and 1835(d), and paragraphs 
                (2) and (3) of section 1862(a) shall not apply.
                  (B) Waiver.--Except as provided in paragraph 
                (2), the Secretary of Health and Human Services 
                is authorized to waive any requirement 
                described under subparagraph (A), or approve 
                equivalent or alternative ways of meeting such 
                a requirement, but only if such waiver or 
                approval--
                          (i) reflects the unique status of the 
                        Department of Veterans Affairs as an 
                        agency of the Federal Government; and
                          (ii) is necessary to carry out the 
                        program or demonstration project.
          (2) Beneficiary protections and other matters.--The 
        program and the demonstration project shall comply with 
        the requirements of part C of this title that relate to 
        beneficiary protections and other matters, including 
        such requirements relating to the following areas, to 
        the extent not inconsistent with subsection 
        (b)(1)(B)(iii):
                  (A) Enrollment and disenrollment.
                  (B) Nondiscrimination.
                  (C) Information provided to beneficiaries.
                  (D) Cost-sharing limitations.
                  (E) Appeal and grievance procedures.
                  (F) Provider participation.
                  (G) Access to services.
                  (H) Quality assurance and external review.
                  (I) Advance directives.
                  (J) Other areas of beneficiary protections 
                that the administering Secretaries determine 
                are applicable to such program or project.
  (e) Inspector General.--Nothing in the agreement entered into 
under subsection (b) shall limit the Inspector General of the 
Department of Health and Human Services from investigating any 
matters regarding the expenditure of funds under this title for 
the program and demonstration project, including compliance 
with the provisions of this title and all other relevant laws.
  (f) Voluntary Participation.--Participation of a category A 
medicare-eligible veteran in the program or category C 
medicare-eligible veteran in the demonstration project shall be 
voluntary.
  (g) Payments Based on Regular Medicare Payment Rates.--
          (1) In general.--Subject to the succeeding provisions 
        of this subsection, the Secretary of Health and Human 
        Services shall reimburse the Secretary of Veterans 
        Affairs for services provided under the program or 
        demonstration project at a rate equal to 95 percent of 
        the amount paid to a Medicare+Choice organization under 
        part C of this title with respect to such an enrollee. 
        In cases in which a payment amount may not otherwise be 
        readily computed, the Secretary of Health and Human 
        Services shall establish rules for computing equivalent 
        or comparable payment amounts.
          (2) Exclusion of certain amounts.--In computing the 
        amount of payment under paragraph (1), the following 
        shall be excluded:
                  (A) Special payments.--Any amount 
                attributable to an adjustment under 
                subparagraphs (B) and (F) of section 1886(d)(5) 
                and subsection (h) of such section.
                  (B) Percentage of capital payments.--An 
                amount determined by the administering 
                Secretaries for amounts attributable to 
                payments for capital-related costs under 
                subsection (g) of such section.
          (3) Periodic payments from medicare trust funds.--
        Payments under this subsection shall be made--
                  (A) on a periodic basis consistent with the 
                periodicity of payments under this title; and
                  (B) in appropriate part, as determined by the 
                Secretary of Health and Human Services, from 
                the trust funds.
          (4) Cap on reimbursement amounts.--The aggregate 
        amount to be reimbursed under this subsection pursuant 
        to theagreement entered into between the administering 
Secretaries under subsection (b) is as follows:
                  (A) Program.--With respect to category A 
                medicare-eligible veterans, such aggregate 
                amount shall not exceed--
                          (i) for 2000, a total of $50,000,000;
                          (ii) for 2001, a total of 
                        $75,000,000; and
                          (iii) subject to subparagraph (B), 
                        for 2002 and each succeeding year, a 
                        total of $100,000,000.
                  (B) Expansion of program.--If for a year 
                beginning on or after January 1, 2003, the 
                program is conducted in sites designated under 
                subsection (b)(2)(A)(ii), the limitation under 
                subparagraph (A)(iii) shall not apply to the 
                program for such a year.
                  (C) Project.--With respect to category C 
                medicare-eligible veterans, such aggregate 
                amount shall not exceed a total of $50,000,000 
                for each of calendar years 1999 through 2001.
  (h) Maintenance of Effort.--
          (1) Monitoring effect of program and demonstration 
        project on costs to medicare program.--
                  (A) In general.--The administering 
                Secretaries, in consultation with the 
                Comptroller General of the United States, shall 
                closely monitor the expenditures made under 
                this title for category A and C medicare-
                eligible veterans compared to the expenditures 
                that would have been made for such veterans if 
                the program and demonstration project had not 
                been conducted. The agreement entered into by 
                the administering Secretaries under subsection 
                (b) shall require the Department of Veterans 
                Affairs to maintain overall the level of effort 
                for services covered under this title to such 
                categories of veterans by reference to a base 
                year as determined by the administering 
                Secretaries.
                  (B) Determination of measure of costs of 
                medicare health care services.--
                          (i) Improvement of information 
                        management system.--Not later than 
                        October 1, 2001, the Secretary of 
                        Veterans Affairs shall improve its 
                        information management system such 
                        that, for a year beginning on or after 
                        January 1, 2002, the Secretary of 
                        Veterans Affairs is able to identify 
                        costs incurred by the Department of 
                        Veterans Affairs in providing medicare 
                        health care services to medicare-
                        eligible veterans for purposes of 
                        meeting the requirements with respect 
                        to maintenance of effort under an 
                        agreement under subsection (b)(1)(A).
                          (ii) Identification of medicare 
                        health care services.--The Secretary of 
                        Health and Human Services shall provide 
                        such assistance as is necessary for the 
                        Secretary of Veterans Affairs to 
                        determine which health care services 
                        furnished by the Secretary of Veterans 
                        Affairs qualify as medicare health care 
                        services.
                          (iii) Certification by hhs inspector 
                        general.--
                                  (I) Request for 
                                certification.--The Secretary 
                                of Veterans Affairs may request 
                                the Inspector General of the 
                                Department of Health and Human 
                                Services to make a 
                                certification to Congress that 
                                the Secretary of Veterans 
                                Affairs has improved its 
                                management system under clause 
                                (i) such that the Secretary of 
                                Veterans Affairs is able to 
                                identify the costs described in 
                                such clause in a reasonably 
                                reliable and accurate manner.
                                  (II) Requirement for 
                                expansion of program.--The 
                                program may be conducted in the 
                                additional sites under 
                                paragraph (2)(A)(ii) and cover 
                                such additional category A 
                                medicare eligible veterans in 
                                such additional sites only if 
                                the Inspector General of the 
                                Department of Health and Human 
                                Services has made the 
                                certification described in 
                                subclause (I).
                                  (III) Deadline for 
                                certification.--Not later than 
                                the date that is the earlier of 
                                the date that is 60 days after 
                                the Secretary of Veterans 
                                Affairs requests a 
                                certification under subclause 
                                (I) or June 1, 2002, the 
                                Inspector General of the 
                                Department of Health and Human 
                                Services shall submit a report 
                                to Congress containing the 
                                certification under subclause 
                                (I) or the denial of such 
                                certification.
                  (C) Maintenance of level of effort.--
                          (i) Report by secretary of veterans 
                        affairs on basis for calculation.--Not 
                        later than the date that is 60 days 
                        after the date on which the 
                        administering Secretaries enter into an 
                        agreement under subsection (b)(1)(A), 
                        the Secretary of Veterans Affairs shall 
                        submit a report to Congress and the 
                        Comptroller General of the United 
                        States explaining the methodology used 
                        and basis for calculating the level of 
                        effort of the Department of Veterans 
                        Affairs under the program and project.
                          (ii) Report by comptroller general.--
                        Not later than the date that is 180 
                        days after the date described in clause 
                        (i), the Comptroller General of the 
                        United States shall submit to Congress 
                        and the administering Secretaries a 
                        report setting forth the Comptroller 
                        General's findings, conclusion, and 
                        recommendations with respect to the 
                        report submitted by the Secretary of 
                        Veterans Affairs under clause (i).
                          (iii) Response by secretary of 
                        veterans affairs.--The Secretary of 
                        Veterans Affairs shall submit to 
                        Congress not later than 60 days after 
                        the date described in clause (ii) a 
                        report setting forth such Secretary's 
                        response to the report submitted by the 
                        Comptroller General under clause (ii).
                  (D) Annual report by the comptroller 
                general.--Not later than December 31 of each 
                year during which the program and demonstration 
                project is conducted, the Comptroller General 
                of the United States shall submit to the 
                administering Secretaries and to Congress a 
                report on the extent, if any, to which the 
                costs of the Secretary of Health and Human 
                Services under the medicare programunder this 
title increased during the preceding fiscal year as a result of the 
program or demonstration project.
          (2) Required response in case of increase in costs.--
                  (A) In general.--If the administering 
                Secretaries find, based on paragraph (1), that 
                the expenditures under the medicare program 
                under this title increased (or are expected to 
                increase) during a fiscal year because of the 
                program or demonstration project, the 
                administering Secretaries shall take such steps 
                as may be needed--
                          (i) to recoup for the medicare 
                        program the amount of such increase in 
                        expenditures; and
                          (ii) to prevent any such increase in 
                        the future.
                  (B) Steps.--Such steps--
                          (i) under subparagraph (A)(i) shall 
                        include payment of the amount of such 
                        increased expenditures by the Secretary 
                        of Veterans Affairs from the current 
                        medical care appropriation for the 
                        Department of Veterans Affairs to the 
                        trust funds; and
                          (ii) under subparagraph (A)(ii) shall 
                        include lowering the amount of payment 
                        under the program or project under 
                        subsection (g)(1), and may include, in 
                        the case of the demonstration project, 
                        suspending or terminating the project 
                        (in whole or in part).
  (i) Evaluation and Reports.--
          (1) Independent evaluation by gao.--
                  (A) In general.--The Comptroller General of 
                the United States shall conduct an evaluation 
                of the program and an evaluation of the 
                demonstration project, and shall submit annual 
                reports on the program and demonstration 
                project to the administering Secretaries and to 
                Congress.
                  (B) First report.--The first report for the 
                program or demonstration project under 
                subparagraph (A) shall be submitted not later 
                than 12 months after the date on which the 
                Secretary of Veterans Affairs first provides 
                services under the program or project, 
                respectively.
                  (C) Final report on demonstration project.--A 
                final report shall be submitted with respect to 
                the demonstration project not later than 3\1/2\ 
                years after the date of the first report on the 
                project under subparagraph (B).
                  (D) Contents.--The evaluation and reports 
                under this paragraph for the program or 
                demonstration project shall include an 
                assessment, based on the agreement entered into 
                under subsection (b), of the following:
                          (i) Any savings or costs to the 
                        medicare program under this title 
                        resulting from the program or project.
                          (ii) The cost to the Department of 
                        Veterans Affairs of providing care to 
                        category A medicare-eligible veterans 
                        under the program or to category C 
                        medicare-eligible veterans under the 
                        demonstration project, respectively.
                          (iii) An analysis of how such program 
                        or project affects the overall 
                        accessibility of medical care through 
                        the Department of Veterans Affairs, and 
                        a description of the unintended effects 
                        (if any) upon the patient enrollment 
                        system under section 1705 of title 38, 
                        United States Code.
                          (iv) Compliance by the Department of 
                        Veterans Affairs with the requirements 
                        under this title.
                          (v) The number of category A 
                        medicare-eligible veterans or category 
                        C medicare-eligible veterans, 
                        respectively, opting to participate in 
                        the program or project instead of 
                        receiving health benefits through 
                        another health insurance plan 
                        (including benefits under this title).
                          (vi) A list of the health insurance 
                        plans and programs that were the 
                        primary payers for medicare-eligible 
                        veterans during the year prior to their 
                        participation in the program or 
                        project, respectively, and the 
                        distribution of their previous 
                        enrollment in such plans and programs.
                          (vii) Any impact of the program or 
                        project, respectively, on private 
                        health care providers and beneficiaries 
                        under this title that are not enrolled 
                        in the program or project.
                          (viii) An assessment of the access to 
                        care and quality of care for medicare-
                        eligible veterans under the program or 
                        project, respectively.
                          (ix) An analysis of whether, and in 
                        what manner, easier access to medical 
                        centers of the Department of Veterans 
                        Affairs affects the number of category 
                        A medicare-eligible veterans or C 
                        medicare-eligible veterans, 
                        respectively, receiving medicare health 
                        care services.
                          (x) Any impact of the program or 
                        project, respectively, on the access to 
                        care for category A medicare-eligible 
                        veterans or C medicare-eligible 
                        veterans, respectively, who did not 
                        enroll in the program or project and 
                        for other individuals entitled to 
                        benefits under this title.
                          (xi) A description of the 
                        difficulties (if any) experienced by 
                        the Department of Veterans Affairs in 
                        managing the program or project, 
                        respectively.
                          (xii) Any additional elements 
                        specified in the agreement entered into 
                        under subsection (b).
                          (xiii) Any additional elements that 
                        the Comptroller General of the United 
                        States determines is appropriate to 
                        assess regarding the program or 
                        project, respectively.
          (2) Reports by secretaries on program and 
        demonstration project with respect to medicare-eligible 
        veterans.--
                  (A) Demonstration project.--Not later than 6 
                months after the date of the submission of the 
                final report by the Comptroller General of the 
                United States on the demonstration project 
                under paragraph (1)(C), the administering 
                Secretaries shall submit to Congress a report 
                containing their recommendation as to--
                          (i) whether there is a cost to the 
                        health care program under this title in 
                        conducting the demonstration project;
                          (ii) whether to extend the 
                        demonstration project or make the 
                        project permanent; and
                          (iii) whether the terms and 
                        conditions of the project should 
                        otherwise be continued (or modified) 
                        with respect to medicare-eligible 
                        veterans.
                  (B) Program.--Not later than 6 months after 
                the date of the submission of the report by the 
                Comptroller General of the United States on the 
                third year of the operation of the program, the 
                administering Secretaries shall submit to 
                Congress a report containing their 
                recommendation as to--
                          (i) whether there is a cost to the 
                        health care program under this title in 
                        conducting the program under this 
                        section;
                          (ii) whether to discontinue the 
                        program with respect to category A 
                        medicare-eligible veterans; and
                          (iii) whether the terms and 
                        conditions of the program should 
                        otherwise be continued (or modified) 
                        with respect to medicare-eligible 
                        veterans.
                              ----------                              


            SECTION 4015 OF THE BALANCED BUDGET ACT OF 1997

SEC. 4015. MEDICARE SUBVENTION DEMONSTRATION PROJECT FOR MILITARY 
                    RETIREES.

  (a) * * *
  [(b) Implementation Plan for Veterans Subvention.--Not later 
than 12 months after the start of the demonstration project, 
the Secretary of Health and Human Services and the Secretary of 
Veterans Affairs shall jointly submit to Congress a detailed 
implementation plan for a subvention demonstration project 
(that follows the model of the demonstration project conducted 
under section 1896 of the Social Security Act (as added by 
subsection (a)) to begin in 1999 for veterans (as defined in 
section 101 of title 38, United States Code) that are eligible 
for benefits under title XVIII of the Social Security Act.]

                         VII. DISSENTING VIEWS

    Of course I want to provide the best care for our nation's 
disabled and low-income Veterans.
    I also want to preserve the Medicare Trust Fund.
    This bill does not provide the best care for Veterans in a 
cost effective manner, and it does drain the Medicare Trust 
Fund.
    Basically, the Category A program sets up Veterans 
Department HMOs (mostly in rural areas), and Medicare will pay 
the providers who see these Veterans less than Medicare would 
normally pay. You get what you pay for, and if you pay less 
than what Medicare pays, you are likely to get less good care.
    The bill basically would put disabled and ill Veterans in 
an HMO. Starting in 2002, Veterans will be locked into these 
plans for half a year, and in 2003 and thereafter, locked in 
for nine months of the year. Yet there is data that civilian 
HMOs don't always do a good job with the chronically and 
seriously ill--that they are underserved compared to fee-for-
service Medicare. What makes the Members think that a 
government-run HMO under budget pressure will be any better 
than the rest of the HMOs--and that it may be hard for a 
Veteran to get a referral from a VA hospital to a private 
sector Center of Excellence?
    The argument is made that the Veterans Department HMO will 
be able to offer more comprehensive benefits for little or no 
cost to the Veteran--just like many Medicare HMOs currently 
offer Medicare beneficiaries.
    Good! I certainly want full coverage for our low-income and 
disabled Veterans, but is this the most efficient way? Look at 
the Congressional Budget Office analysis printed in this 
report. CBO notes that over ten years we will be paying about 
$330 million extra to the VA from Medicare, because the people 
who are likely to sign up for this program will be healthier 
than the average Medicare patient. The CBO also does not 
believe that the DVA will maintain its level of effort,\1\ and 
thus Medicare Trust Fund money will be used to offset 
Appropriated funds. Under this bill, Medicare will be spending 
about $6,000 extra per enrollee. [For the exact amount in a 
particular year, use the CBO table, and divide the change in 
Medicare spending by the number of enrollees.] But Medicare is 
already covering these Veterans with the basic Medicare 
package. What does the Veteran get for all this extra Medicare 
expenditure besides being locked into an HMO? For the services 
that Medicare does not provide, we could buy a private 
comprehensive medigap policy for about $1,500 a year that would 
provide pharmaceuticals, copays, deductibles, etc., and the 
Veteran would be completely free to seek care anywhere they 
wanted, not just from a VA's HMO facility.
---------------------------------------------------------------------------
    \1\ To the extent the DVA does maintain effort, yet under the bill 
is providing care to thousands of new Medicare patients, its ability to 
serve its existing patient base will be stretched and compromised. For 
current DVA beneficiaries, this is not a good bill.
---------------------------------------------------------------------------
    In sum, there are much cheaper ways to provide the 
additional coverage that the VA HMOs will provide.
    The bill does drain the Medicare Trust Fund of about $1.8 
billion over the next ten years. It is ``funded'' with a pure 
budget gimmick (which by the way, has already been ``spent'' by 
others in other ways). The bill is contingent on legislation 
undoing a new entitlement to DVA care for smoking-related 
diseases. Undoing that entitlement ``saves'' the DVA from 
future mandatory obligations, but it does nothing to restore 
money to the Medicare Trust Funds.
    As Members know, I have been the author of legislation to 
expand Medicare-type coverage to every American. I am the House 
lead sponsor of the Medicare Early Access Act (which would let 
people buy into Medicare at age 55). I would be happy to extend 
Medicare protection to all Veterans of all ages. But this bill 
is a wasteful inefficient way to improve health care coverage. 
Instead of building on the vast, under-utilized capacity of the 
private sector, it subjects Veterans to HMOs of questionable 
quality.
    This bill is just a way to help the DVA bureaucracy grow. 
There are better ways to help and honor our nation's Veterans.

                                                        Pete Stark.