November 7, 1979
Page 31247
Mr. CRANSTON. Mr. President, all my colleagues, and especially the distinguished chairman (Mr. MUSKIE) and ranking minority member (Mr. BELLMON) of the Budget Committee know that I have always been a staunch advocate for the budget process, including a reconciliation procedure when necessary. I would not vote against a conference report on a budget resolution without the most compelling justification. Moreover, I would always give great weight to the desirability of supporting the Senate conferees when there is disagreement in a budget conference.
Thus, I deeply regret that I am unable to vote for the conference substitute on the second concurrent resolution on the budget for fiscal year 1980 — Senate Concurrent Resolution 36 — because I am strongly opposed to that portion of the reconciliation instructions directing the Veterans' Affairs Committees to reduce spending on veterans' programs by $100 million in budget authority and outlays and because there is no agreement between the Houses on the reconciliation instructions.
Mr. President, I recognize that a reconciliation process is a. necessary part of the budget process. I believe it should be used, when agreement between the Houses has been reached on the budget levels for a second or subsequent budget resolution and both Houses agree that, in order to bring spending for the fiscal year within the agreed-upon totals, it is necessary to instruct one or more committees to determine and recommend changes. Under such circumstances, reconciliation is a necessary and useful part of the budget process and may be essential to insure that the budget process works.
However, Mr. President, there is no agreement on reconciliation at this point. The conferees are in disagreement on the instructions; and, even if the Senate agrees to them, the chairman of the House Budget Committee has announced that he will, on the floor of the House, move that the Senate amendment be agreed to without the reconciliation instructions. It is clear to me that the House is not going to agree to the reconciliation instructions. In this context, the strong objections that I have to the proposed instructions to the Veterans' Affairs Committees clearly override any support for the conference substitute that my basic support for the budget process might otherwise engender. Rather, in the absence of House-Senate agreement on reconciliation, my position on those reconciliation instructions compels my vote against the conference substitute.
Mr. President, were it necessary to discipline the Veterans' Affairs Committee for some act of fiscal irresponsibility or to impose fiscal discipline upon it, there might be some justification for this attempt by the Senate conferees, even in the absence of agreement by the House conferees, to impose instructions on our committee. But, I am proud to say, the Veterans' Affairs Committee has acted responsibly and with restraint, consistent with our responsibility to insure adequate funding for veterans' programs.
Our committee has taken cost-conscious actions to eliminate unnecessary spending and waste and abuse in veterans' programs, and I have repeatedly and continually pointed out that there is no justification for additional reductions. Forcing the Veterans' Affairs Committees into proposing ill-conceived and unwarranted cuts in veterans' programs would betray the solemn commitment made to our Nation's veterans.
Mr. President, I emphasize that the instructions are based on unwarranted and unrealistic assumptions made by the Senate Budget Committee that are not shared by the House conferees.
In this connection, on behalf of the Veterans' Affairs Committee, the ranking minority member (Mr. SIMPSON) and I wrote to the chairman and ranking minority member of the Budget Committee on July 27 urging that the Budget Committee not adopt unrealistic cost-savings assumptions that it was then considering with respect to veterans' programs. Subsequently, on September 25, I wrote to the chairman and each member of the Budget Committee to stress my disagreement with those assumptions and with the reconciliation instructions directed at the Veterans' Affairs Committees. The enclosure to that letter detailed the 11 cost-savings and cost-containment provisions that our committee had already acted on.
I ask unanimous consent that those letters be printed in the RECORD at the conclusion of my remarks.
Mr. President, I would like to point out that I very much appreciate the extent to which the Senate conferees agreed to move toward the House-passed figures for veterans' programs. As a result, the conference substitute includes $250 million more in budget authority and $200 million more in outlays in function 700, veterans' benefits and services, than the Senate-passed resolution.
Although these function 700 figures are less than I urged in my September 25 letter, these figures alone would not cause me to vote against the conference substitute.
However, Mr. President, there is no justification for the imposition in this Congress of reconciliation instructions on the Veterans' Affairs Committees.
For these reasons, I oppose this conference substitute.
There being no objection, the letters were ordered to be printed in the RECORD, as follows:
U.S. SENATE,
Washington, D.C.,
July 27, 1979.
Hon. EDMUND S. MUSKIE,
Chairman,
Hon. HENRY BELLMON,
Ranking Minority Member,
Committee on the Budget,
U.S. Senate,
Washington, D.C .
DEAR ED AND HENRY: We are writing, on behalf of the Committee on Veterans' Affairs, in response to your letter of July 23 pertaining to legislation under the First Concurrent Resolution on the Budget for Fiscal Year 1980 (FCR). In that letter you asked for information regarding the Veterans' Affairs Committee's plans with respect to legislation having cost implications in order to assist the Budget Committee in its deliberations on the Second Concurrent Resolution (SCR).
You specifically asked about the prospects for cost-savings legislation that your Committee has assumed would be enacted. First, with respect to S. 759, health-insurance reimbursement legislation, estimated by the Congressional Budget Office (CBO) at the time of your report to result in savings of $0.2 billion in budget authority and outlays in fiscal year 1980, Committee staff has conducted an extensive review of the complex issues involved, has met with VA, CBO, Congressional Research Service, and health insurance industry representatives, and has scheduled a further meeting for August 15 with representatives of the same organizations, staff of your Committee and other Congressional Committees, and White House staff. Hearings will be held on S. 759 on September 12. In light of the difficult constitutional and policy issues that this legislation presents, we are not now in a position to predict what action will be taken in our Committee.
There has been no movement on counterpart legislation in the House of Representatives, and the House Committee on Veterans' Affairs has clearly indicated that It will not take any action on it this year.
In any event, even if it is assumed that such legislation would be enacted (which seems most unlikely this year), we believe strongly that the estimated cost-savings should not be deducted, just as we have previously urged they should not be deducted in connection with the FCR, from amounts otherwise allocable to the Appropriations Committee for the first fiscal year following enactment of the legislation.
Our reasons for this are primarily based on the fact that collections of reimbursements under this measure would not be available to the VA until toward the end of fiscal year 1980; and any reduction of appropriations premised on the enactment of this legislation would, to the extent of such a reduction, force the VA to operate at a reduced program level for much of that year — perhaps for the entire fiscal year in the event that estimated collections later in the year do not materialize in the amounts forecast. In our Committee's view, this would be a most unsatisfactory result, and an alternative method of accounting for the estimated savings is clearly necessary.
We would also note that on July 6, 1979, we received an informal CBO estimate (copy enclosed) of cost-savings (collections) of only $107 million in fiscal year 1980, based on an optimistic assumption of an effective date of January 1, 1980; this is a reduction of $58 million from the previous CBO estimate dated April 19, 1979.
Second, with regard to legislation to eliminate or reduce certain veterans' burial benefits, the enactment of which your Committee assumed would result in cost savings of $0.1 billion in fiscal year 1980, no such legislation has been introduced either in the House or the Senate. In our view, it is totally unrealistic to expect the Congress to reduce these benefits; and we have no plans to consider such legislation. Thus, we urge that the estimated savings be restored in the SCR.
Third, with regard to legislation to reduce the period of eligibility for GI Bill — educational assistance — benefits, in connection with which your Committee assumed cost savings of $0.1 billion in budget authority and outlays, as in the case of burial benefits. no such legislation has been introduced in either House. In our view, there is no basis whatever for assuming enactment; and we have no plans to consider such legislation. Thus, we recommend that the estimated savings be restored in the SCR.
Fourth, with regard to legislation to eliminate GI Bill benefits for flight and correspondence training, as proposed in Administration-requested legislation, S. 870, and assumed to result in cost-savings of $57.8 million at the time your Committee reported the FCR, the Veterans' Affairs Committee, after very careful study and with the benefit of preliminary data from a General Accounting Office report on these two programs, will not recommend such legislation but rather has ordered reported legislation (S. 870) to tighten administration of the flight and correspondence programs and reduce payments for flight training by requiring greater cost sharing by the trainee. According to CBO, fiscal year 1980 estimate cost savings of $31 million in budget authority and outlays would result from the enactment of the provisions that our Committee has approved.
With respect to other legislation, there are several matters on which we would like to give you our views. First, our Committee plans to report legislation making improvements in the GI Bill, including a targeted extension of the period of GI Bill eligibility and those who could benefit from on-job training to acquire needed job skills, all of which, when taken into account together with the above mentioned cost-savings, will result in net costs that are within our crosswalk under the FCR for Mission 2 of Function 700 — $2.2 billion in budget authority and $2.3 billion in outlays. As soon as we have a CBO estimate of the costs of this bill, we will make certain that you also have copies.
We also recommend that Mission 1 of Function 700 be increased to provide for the 11.1-percent cost-of-living increase in service-connected disability compensation rates which our Committee has favorably reported in S. 689.
Also, as our Committee had previously urged in our March 15, 1979, report of views and estimates for the fiscal year 1980 budget, we strongly recommend that the SCR include provision for a "capped" 7-percent cost-of-living increase in GI Bill benefits, estimated to result in costs of $275 million in budget authority and outlays in fiscal year 1980. (Although your Committee had assumed enactment of such a cost-of-living increase in making its recommendation on the FCR, various cost-savings proposals for Function 700 entitlement programs that your Committee had assumed would be enacted, but will not be enacted — together with the fact that the cost-of-living increase in the compensation legislation has become more costly than had been expected — ultimately resulted in a crosswalk that realistically left no room for any cost-of-living increase.) If the SCR. makes provision for this badly needed increase, our Committee will shortly thereafter recommend the enactment of this legislation.
With respect to Mission 3 of Function 700, we recommend that provision be made in the SCR for appropriations for VA accounts that are included in H.R. 4392 as reported by the Appropriations Committee plus $30.1 million, which would consist of an additional $25.1 million for the medical care account for the implementation of the Veterans' Health Care Amendments of 1979 (Public Law 96-22), which was enacted on June 13, 1979, and an additional $5 million for the grants to State extended-care facilities account to maintain the veterans' State home construction assistance program in fiscal year 1980 at the same $10 million level of appropriations provided in the current fiscal year. Senator Cranston will propose an amendment to H.R. 4392 for the $25.1 million increase; and Senator Randolph, for the $5 million increase.
Finally, we would like to clarify on behalf of the Veterans' Affairs Committee one aspect of our Committee's crosswalk report (S. Rept. No. 96-244) under the FCR. Our Committee, in subdividing among major programs the allocations to it of $14.1 billion in budget authority and outlays, allocated $11.7 billion in budget authority and $11.6 billion in outlays to "Income security" and $0.2 billion in budget authority and outlays to "Burial benefits". The Committee's intention regarding this subdivision is that the only programs included in the "Income security" category are the disability compensation and pension programs; and "Burial benefits" includes all other non-direct spending programs in Mission 1 of Function 700 — for which $211 million in budget authority and outlays (in unrounded figures) were included.
With respect to the projections you requested for fiscal years 1981 through 1984, we are unable to provide you with firm estimates for those years because of the very uncertain prospects for S. 759, the health insurance reimbursement measure discussed above, and the complexities involved in forecasting legislative activities in future years. However, if you require further information in this regard to update the projection included in the attachment to our Committee's March 15 report to your Committee (pages 51-52), we would ask that you have a member of the Budget Committee staff contact Edward Scott, General Counsel of the Veterans' Affairs Committee, for whatever analysis or data, that is needed and that our Committee staff can provide with respect to those years.
We hope that you find this response helpful in your Committee's deliberations on the SCR for fiscal year 1980.
Sincerely,
ALAN CRANSTON,
Chairman.
ALAN K. SIMPSON,
Ranking Minority Member.
Enclosure.
MEMORANDUM
July 6, 1979.
To Ed Scott.
From Steven Crane.
Attached is an informal estimate of S. 759 on a cash basis, reflecting a January 1, 1980 effective date, as you requested in your letter of June 4, 1979.
If you have any questions, please let me know.
[Informal Draft]
COST ESTIMATE
July 6, 1979.
1. Bill number: S. 759.
2. Bill title:
A bill to amend title 38, United States Code to provide for the right of the United States to recover the costs of hospital, nursing home or outpatient medical care furnished by the Veterans Administration (VA) to veterans for non-service-connected disabilities to the extent that they have health insurance or similar contracts or rights with respect to such care, or have entitlement to private medical care under workers' compensation or automobile accident reparation statutes of any State, and for other purposes.
3. Bill status:
As introduced by the Senate Committee on Veterans Affairs, March 26, 1979.
4. Bill purpose:
To amend title 38, U.S.C., to give the United States the right to recover the cost of hospital, nursing home, and outpatient care provided by the VA to veterans with non-service connected disabilities to the extent that such veterans have health insurance or similar coverage for such care.
5. Cost estimate:
Estimated authorization/costs
[By fiscal years, in millions of dollars]
1980 107
1981 302
1982 364
1983 -391
1984 -420
Total 5-year savings -1584
The costs/savings of this bill fall within budget function 700.
6. Basis of estimate:
According to information published in the 1977 VA Annual Report and the Fiscal Year 1980 VA budget justification document, approximately 70 percent of VA hospital discharges are veterans under 65 years of age who have been treated for non-service-connected disabilities. A recent survey conducted by the VA indicates that about 16 percent of such veterans have some type of medical insurance coverage. This survey did not collect information concerning the depth of coverage of these policies, or whether the policies had remaining coverage. It may be true that same veterans with private insurance utilize VA care only after such coverage has been exceeded or has temporarily lapsed, or have policies that cover only a limited number of services. In the absence of additional information, CBO assumes that the average policy would cover 88 percent of inpatient charges and 60 percent of outpatient charges, based on a 1978 study by the Health
Insurance Association of America of group medical insurance coverage. CBO further assumes that all veterans who reported private coverage in the VA study had valid policies that on the average would reimburse the above percentage of charges.
The proposed legislation would allow the U.S. to recover the costs of care from private health insurers according to the terms of agreement between the insured person and the insurer. In most cases, insurers are liable for only those costs which are deemed to be "reasonable or customary" for a particular episode of care. A number of studies have indicated that VA hospitals in general have lengths of stay that are approximately twice as long as stays for similarly aged persons treated in community hospitals for similar diagnoses. According to the VA, preliminary discussions with major private insurers have indicated that carriers would likely not reimburse at least some portion of these additional days of care in VA facilities if medical need could not be demonstrated. Although it is presently unclear what proportion of a VA hospital stay carriers would consider reasonable, CBO assumes that for most types of care private insurance would cover two-thirds the normal VA length of stay for reimbursement purposes.
Enactment of the proposed legislation would require the VA to establish a formal billing system to collect reimbursement from the insurance carriers. Although there has been some controversy as to how quickly the VA could implement such a system, the VA presently claims that a collection system could be made operational within three months. The proposed system would bill carriers on an inclusive per diem rate, which would be based on average cost information which is currently collected by the VA. In addition, a recent VA study indicates that patient record keeping would require only minor modification to accommodate such billing. According to the VA, preliminary discussions with several major carriers suggest that the proposed system would be acceptable to most insurers and could be implemented within several months.
Based on the VA claim CBO assumes that collection could begin 90 days after enactment of the proposed legislation. CBO further assumes that administrative costs would amount to about 2.5 percent of the amount collected, based on experience with the medicare program. Administrative costs are assumed to represent a higher percentage of collections in the first year as the program is phased in. Because the proposed legislation would apply only to insurance policies that are written, revised, or renewed after the law becomes effective, the first year's collections would be considerably less than succeeding years. The VA presently defines a policy revision or renewal to include changes in the premium rate. Based on information from the insurance industry, CBO assumes that all polices of the affected veterans population are normally rewritten or revised every year, and that these revisions are distributed evenly throughout the year. Therefore, only about half the amount of collections could be made the first year as could be made during succeeding years.
According to information provided by the Congressional Research Service and private insurance companies, the average lag in cash payments to hospitals following a patient's release is about 3-4 weeks. Hospitals require about seven working days to prepare the claim and present it for reimbursement; carriers require about the same period of time to process the claim and provide payment. CBO assumes that during the first year of the program, the cash lag for the VA would average about six weeks as the billing system is developed and perfected. In the following years, CBO assumes an average lag of four weeks.
Based on the above assumptions and analysis, CEO estimates the VA could collect a net of $1.07 million in FY 1980, assuming a January 1, 1980 effective date. Five year collections are estimated to total about $1.6 billion. The outyear estimates reflect CBO's assumptions of inflation in the general economy. Although the proposed legislation includes private reimbursement for nursing home care, CBO estimates savings for such care to be insignificant.
7. Estimate comparison:
A cost estimate prepared by the VA for this bill shows savings of $170 million in fiscal year 1980 and five-year savings of $1.1 billion. In formulating their estimate, the VA assumed that 74 percent of inpatient charges would be reimbursable by the average private insurance policy, and only 28 percent of outpatient charges. In addition, the VA apparently did not include psychiatric care as a reimbursable service. Finally, the VA assumed that 75 percent of full-year savings could be realized in fiscal year 1980, which reflects an implicit assumption that a higher proportion of insurance policies turn over during the first part of the fiscal year than the latter part. The five-year savings do not reflect the impact of inflation in the general economy.
8. Previous CEO estimate:
CBO prepared an estimate of S. 759 on April 19, 1979. The estimate assumed an October 1, 1979 effective date, a shorter cash lag, and lower assumptions about inflation of medical care costs in the outyears.
9. Estimate prepared by Steven Crane (225-7766).
10. Estimate approved by:
COMMITTEE ON VETERANS' AFFAIRS,
Washington, D.C.,
September 25, 1979.
Hon. EDMUND S. MUSKIE,
Chairman,
Committee on the Budget,
Washington, D.C.
Dear Ed: I am writing to clarify certain matters in connection with the September 17 debate on my amendment to the Second Concurrent Resolution on the Budget for Fiscal Year 1980 (SCR) and to urge your favorable consideration, during the Senate-House conference, of the $21.5 billion in budget authority ($100 million less than in the pending House resolution) that I had sought in the Senate and the $20.851 billion in outlays in the pending House resolution for Veterans' Benefits and Services (Function 700). Of course, with Function 700 levels set at these levels, no reconciliation instructions to the Veterans' Affairs Committees would be appropriate; and I urge that such instructions be deleted in conference.
I believe these recommendations are entirely in keeping with your own efforts to maintain fairness in the distribution of our increasingly scarce fiscal resources while also maintaining the budget discipline that our nation and its economy require. I have the greatest admiration for the steadfast and effective manner in which you have exercised your duties as Chairman of the Budget Committee. Your activities in this area are invaluable to the Senate and the nation as a whole.
Although I have no wish to rehash all of the many issues covered in the course of our September 17 debate, there are a few matters of particular significance that, I believe, clearly require clarification.
1. You stated that the "real issue is whether this committee, the Veterans' [Affairs] Committee, beyond all others, should be exempted from any and all responsibility to hold down the cost of Government" (CONGRESSIONAL RECORD, September 17, page S. 12760). The record of the Veterans' Affairs Committee efforts to hold down Federal spending, which I detailed during the debate, totally rebuts this suggestion. During this Congress, our Committee has favorably reported 11 different cost-savings and cost-containment provisions — with total fiscal year 1980 cost savings of $68.4 million and 5-year savings of $378 million. In addition, our Committee plans a floor amendment to S. 870, the proposed "GI Bill Amendments Act of 1979", that would, by improving VA debt collection efforts, save an additional $10 million in fiscal year 1980 and $70 million over the next 5 fiscal years. I have enclosed a chart showing the Committee's cost-savings and cost-containment recommendations and the current status of each.
We believe that this record clearly demonstrates that the Committee has acted with fiscal responsibility and discipline and has sought no such exemption..At the same time, it is also our duty to assure that the Congress acts responsibly with regard to veterans' programs.
2. You argued for maintaining in the SCR the same assumptions on which the First Concurrent Budget Resolution (FCR) had been based because there had been no floor amendment proposed "to change the numbers" in the FCR as reported last spring (CONGRESSIONAL RECORD, September 17, page 24810) .
The FCR as reported by your Committee "assumed" an 8.3-percent cost-of-living increase in service-connected disability compensation benefits (S. Rept. No. 96-68, page 214): That assumption was based on the January CBO projection of inflation for the 12 months ending in September, 1979. At the time the FCR was passed by the Senate, our Committee had no reason to disagree with that assumption because, as stated in our March 15 Report of Budget Views and Estimates (pages 18-19), we were planning to base the compensation cost-of-living increase on the actual increase in the Consumer Price Index for the 12 months ending in July, 1979, which was also then projected to be 8.3 percent. Your Committee, in developing the SCR as reported, updated — with the exception of that 8.3-percent increase — the assumptions that it had previously made in reporting the FCR through the extensive use of reestimates and new projections to take into account changed economic conditions and caseload estimates. Despite the facts that in July — nearly a full month before your Committee completed its markup of the SCR — CBO had revised its projection of inflation for the 12 months ending in September 1979 to 10.9 percent and that our Committee in its July 27, 1979, letter reviewing its March 15 letter recommended that provision be made for an 11.1-percent increase, the Budget Committee chose to make an exception for service-connected compensation from its general policy of updating its FCR assumptions and thus did not incorporate that new projection or our recommendation in the SCR as reported (S. Rept. No. 95-311, page 92) .
The Budget Committee's retention, for SCR purposes, of the outdated, inadequate assumption of an 8.3-percent increase was inconsistent with your general approach to the SCR and clear Congressional policy over many years. The Budget Committee thus appeared to consider as a discretionary matter, with respect to which cost savings could and should be made, the granting of a realistic cost-of-living increase in compensation benefits for service-connected disabled veterans and the survivors of those who have died from service-connected causes.
3. On the floor, having apparently dropped the Budget Committee's insistence on the outdated assumption of an 8.3-percent costof-living increase for service-connected compensation benefits, you stated that, in your substitute amendment, "we reduced the savings responsibility of the Veterans' Affairs Committee by $100 million in order to provide the full 11.1-percent cost-of-living increase for disabled veterans" (Congressional Record, September 17, page 24810)
I do not believe that this statement is correct. As we compute the figures, an 11.1-percent increase in compensation rates would require $181 million more in budget authority and $166 million more in outlays than the 8.3-percent increase that the Budget Committee had assumed in reporting the SCR. Thus, I do not understand how an increase of only $100 million and in outlays alone could possibly fulfill the purpose that you outlined.
4. Also in this regard, in a September 15 Budget Committee press release, you stated that the $100-million increase in outlays in veterans' programs "symbolize[s] that . . . veterans programs need not be examined or reduced as a result of this reconciliation process. The savings will need to be achieved from other programs." That statement overlooks the fact that your substitute included reconciliation instructions to the Veterans' Affairs Committee to reduce entitlement spending by $100 million, did not (as discussed in item 3 above) include sufficient provision for the compensation cost-of-living increase as passed by the Senate, and was premised on a $0.2 billion reduction in the level of VA health-care appropriations provided in the conference report on H.R. 4394. I believe that the press release was thus very misleading on this point.
5. During the debate you indicated your belief that it was inappropriate for me to include provision for VA health care programs (Mission 3 of Function 700) in my amendment, that my purpose in doing so was to evoke the "political . . . or emotional clout of veterans' health care benefits," and that, if my amendment were adopted, the "Appropriations Committee then will be pressured to acknowledge the $200 million increase in health care for veterans in the appropriations instructions" (Congressional Record, September 17, page 24813 ). I do not understand the bases for any of those assertions. Since the Function 700 totals include veterans' health care programs (Mission 3) and those programs are within the legislative and oversight jurisdiction of our Committee, I believe that I have the clear responsibility to try to assure that appropriate funding for them is provided for in the Congressional Budget. Your SCR Committee report clearly assigned only $6.1 billion to Mission 3 whereas the pending conference report on H.R. 4394 provides $6.3 billion for this purpose. Thus, my amendment would not have resulted in any effort or pressure to increase VA health-care appropriations; it would have simply made provision in the SCR for the level of health-care appropriations on which the H.R. 4394 conferees have already agreed, which is less than the Senate approved in passing H.R. 4394.
Thus, my amendment was an honest attempt to make the Function 700 totals realistic and in keeping with the necessary and likely level of appropriations for VA health care.
Thus, I believe that the SCR as passed by the Senate would require reductions in Function 700 beyond what many Senators had been led to believe that it should or would require. Moreover, based on the arguments that I presented during the SCR debate regarding the needs of veterans' programs, I continue to be convinced that the minimum budget requirements necessary to maintain those programs at levels consistent with the nation's and the Congress' commitment to those who served are $21.5 million in budget authority and $20.9 million in outlays for fiscal year 1980. Therefore, I strongly urge you to give consideration to seeking conference agreement at the budget authority level that I sought in the Senate ($21.5 billion) and the House Committee outlay level ($20.851) for Function 700.
With best wishes,
Cordially,
ALAN CRANSTON,
Chairman.