Veterans Issues in the 105th Congress

Veterans Issues in the 105th Congress

97-266 EPW
CRS Report for Congress
Received through the CRS Web
Veterans Issues in the 105th Congress
Updated June 12, 1998
Dennis W. Snook
Specialist in Social Legislation
Education and Public Welfare Division
Congressional Research Service ˜ The Library of Congress

ABSTRACT
This report focuses on policies, programs, and benefits of interest to veterans. Included are
discussions of issues before the 105th Congress, and the current status of major legislation.
The report is updated from time-to-time to reflect developments in the issues and for actions
taken on legislation important to veterans.

Veterans Issues in the 105 Congress
th
Summary
Veterans Affairs (VA) Budget and Appropriations. P.L. 105-65 included
$40.4 billion in FY1998 appropriations for VA programs. The FY1999 VA budget
requests $42.8 for FY1999, and proposes that Montgomery GI benefits be increased
by 20%, and compensation for certain Filipino veterans in the U.S. be increased to
amounts for U.S. veterans. The Senate Budget Resolution assumes the requested
level. The estimates include $560 million in nonappropriated funds collected from
insurers of veterans to offset some of VA’s costs for their health care. The Balanced
Budget Act of 1997, P.L. 105-33 approved language for VA to retain medical care
cost recovery revenues rather than transfer the funds to the Treasury.
VA Medical Plans to Begin October 1, 1998. New VA regional health plans
will administer all medical benefits as of October 1, 1998, but despite fears of some
veterans, enrollment will be fairly easy, and can be done whenever they seek care.
Medicare Subvention. Congress gave VA authority to seek reimbursement for
some of its costs, and recycle those funds into further care. One additional idea
would combine Medicare benefits for certain veterans with their enrollment in VA
health care plans, with Medicare partially reimbursing VA for those benefits. A bill,
H.R. 3828, reported from Ways and Means would establish pilot projects.
Smoking-Related Diseases as Service-Connected. H.R. 2400, The Intermodal
Surface Transportation Efficiency Act (ISTEA), adopted by both Houses May 22,
1998, ended VA authority to approve service-connected compensation for veterans
who claimed disabilities linked to tobacco use begun during their military service.
Some savings from the bill would be used to increase other veterans benefits.
Persian Gulf War Illnesses. Recently completed studies did not find causes of
various disorders reported by Gulf War veterans. Many researchers conclude that no
single cause will explain the diverse symptoms. Notably, the studies show that these
veterans have not incurred diseases, been hospitalized, or died in unexpected
numbers. P.L. 105-114 expanded services for Persian Gulf veterans to include any
medical problem related to Gulf service.
Veterans Preferences in Federal Jobs. Some veterans believe that common
federal employment practices do not honor preference rights to which some veterans
are entitled. Legislation (H.R. 240; S. 1021) has passed the House, and is being
considered in the Senate, that would expand preferences and broaden appeal rights.
Other Issues. P.L. 105-114 extended a Native American home loan program,
strengthened VA’s ability to resolve discrimination and sexual harassment
complaints arising within VA employment, extended and expanded expiring
programs to combat homelessness (especially as affected by mental illness and
substance abuse), instructed VA to develop a mammography policy, and provided
permanent authority for noninstitutional alternatives to nursing home care. Also,
unlike many federal benefit programs, VA compensation is not automatically
adjusted for inflation each year, and a cost-of-living adjustment (COLA) of 2.1%
(P.L. 105-98) was enacted for 1998; another will be considered this year for 1999.

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Veteran Population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Organization of the Department of Veterans Affairs . . . . . . . . . . . . . . . . . . 1
Spending Trends for Veterans Programs . . . . . . . . . . . . . . . . . . . . . . . . . . 2
VA Budget and Appropriations: FY1998 and FY1999 . . . . . . . . . . . . . . . . . . . . 3
VA Cash Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Medical Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
VA Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Balanced Budget Act of 1997 (P.L. 105-33) . . . . . . . . . . . . . . . . . . . . 4
Other FY1999 VA Budget Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Other Veterans Issues Before the 105 Congress
th
. . . . . . . . . . . . . . . . . . . . . . . . 7
Persian Gulf War Illnesses and the Presumption of a Service Connection . . 7
The Effect of a Risk Presumption on Scientific Study . . . . . . . . . . . . . 8
The Benefit of the Doubt and Persian Gulf War Syndrome . . . . . . . . . 9
Authority to Provide Priority Health Care and Disability Compensation 9
Veterans Medical Services: Resource Reallocation and Cost Recovery . . . 9
VA Health Care System Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
New VISN Medical Benefit Plans Beginning October 1, 1998 . . . . . 10
Veterans Equity Resource Allocation . . . . . . . . . . . . . . . . . . . . . . . . 11
New Sources of Funds Instead of Additional Appropriations . . . . . . 11
P.L. 105-114, Medical Construction Authorizations . . . . . . . . . . . . . 14
Veterans Preferences in Federal Employment (H.R. 240; S. 1021) . . . . . . 14
Service-Connection for Smoking Related Illness . . . . . . . . . . . . . . . . . . . 15
P.L. 105-111, Revision of Veterans Benefit Decisions for Clear
and Unmistakable Error (H.R. 1090; S. 464) . . . . . . . . . . . . . . . . . . 15
P.L. 105-98, Cost-of-Living Adjustments (COLA, H.R. 2367; S. 987) . . . 16
P.L. 105-114, Veterans’ Benefits Act of 1997 (various bills) . . . . . . . . . . 16
The Veterans Benefits Act of 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Government Performance and Results Act (GPRA) . . . . . . . . . . . . . . . . . 17
Commission on Service Members and Veterans Transition Assistance . . . 17
List of Tables
Table 1. U.S. Department of Veterans Affairs Appropriations . . . . . . . . . . . . . 5

Veterans Issues in the 105th Congress
Introduction
Federal policy toward veterans recognizes the importance of their service to the
nation, and the effect that service may have had on their subsequent civilian lives.
The Department of Veterans Affairs (VA) administers, directly or in conjunction
with other federal agencies, programs that provide compensation for disabilities
sustained in military service; pensions for disabled, poor war veterans; cash payments
for certain categories of dependents and/or survivors; medical care for conditions
sustained during military service, and for other conditions under a priority system that
results in most care being provided to low income veterans; education, training,
rehabilitation, and job placement services to assist veterans upon their return to
civilian life; loan guarantees to help them obtain homes; life insurance to enhance
financial security for their dependents; and burial assistance, flags, grave-sites, and
headstones when they die.
The Veteran Population
There were about 25.9 million veterans as of July 1, 1996, of whom 19.9 million
had served during at least one period defined as wartime. The number of veterans
is declining, and the average age increasing. The median age of veterans was 57
years and 35% were over 65 years of age; about 4.6% were female. The VA projects
a decline of about 26% in the number of veterans between 1990 and 2010, down
from one of four men in 1994 to one of eight in 2010, 40% of whom will be over age
65.
Declines in the size of military forces, and the corresponding effect that decline
has on the number of persons entering veterans status, means relatively stable
numbers of compensated veterans and fewer veterans seeking readjustment for
postservice education and training. The number of disabled wartime veterans
receiving pensions is declining because of the death of existing beneficiaries and
because veterans who might once have depended upon VA pensions as a social safety
net now have other sources of social insurance, primarily Social Security, that bring
their incomes above the VA pension eligibility levels. The increasing average age
of veterans means additional demands for medical services from eligible veterans,
as aging brings on chronic conditions needing more frequent care and lengthier
convalescence.
Organization of the Department of Veterans Affairs
The VA is divided into three administrative structures: The Veterans Benefit
Administration, the Veterans Health Administration, and the National Cemetery
System. VA programs are funded through 24 appropriations (including seven

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revolving funds that have appropriations), 10 revolving funds that do not have
appropriation funding, an intragovernmental fund and seven trust funds.
The cash benefit programs, i.e., compensation and pensions (and benefits for
eligible survivors); readjustment benefits (education and training, special assistance
for the disabled); home loan guarantees; and veterans insurance and indemnities are
mandatory (entitlement) spending, although required amounts are annually
appropriated. Requested appropriations are equal to the expected payments, and final
appropriations are based on the latest available reestimates. The remaining programs,
primarily those associated with medical care, facility construction, and medical
research are annual discretionary appropriations, as are funds for the costs of
administering the VA programs.
Spending Trends for Veterans Programs
For FY1997, federal appropriations for veterans programs under VA
administration totaled $40.1 billion. VA spending (outlays in current dollars)
increased 103% during the period FY1977-96. As a proportion of total federal
spending, VA costs are going down. In FY1977, VA spending was 5% of total
federal spending and 11% of spending for social welfare; in FY1996, that percentage
was down to 2.5%, 5% of social welfare. Compared to the 98% increase in VA
income security spending over the period, federal spending for all other income
security programs increased by 284%. While VA health care costs rose by 269%,
other federal health program costs increased by 792% over the 20-year period.1
VA Entitlement Spending. Veterans entitlement benefits, primarily for
compensation for service-connected disabilities and deaths, means-tested pensions
for disabled and needy wartime service veterans, loan guarantees, and readjustment
benefits (primarily education) constitute 54% of total VA spending. Veterans
entitlement benefits were once increasing rapidly, but now are a relatively stable
federal obligation to a declining population of eligible beneficiaries.
VA Discretionary Spending. Unlike the ratio of entitlement spending to
discretionary spending in the rest of the federal budget, the entitlement portion
(income security, mostly for disability compensation, pensions, and education
benefits) of VA is declining as a percent of total VA spending. In FY1976,
entitlements constituted 73% of VA’s budget, with the remaining 27% discretionary
appropriations for health care and VA administration, including construction of VA
facilities. By FY1996, VA discretionary spending for health and VA administrative
costs had risen to 47% of VA’s total budget. For the entire federal budget, about
one-third of spending is discretionary.
1 Historical spending (outlays) data are from the Historical Tables, Budget of the United
States Fiscal Year 1998. Social Welfare is defined as budget function categories Education,
Training, Employment, and Social Services; Health; Medicare; Income Security; Social
Security; and Veterans Benefits and Services. Health is defined as the total for budget
categories Health and Medicare.

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VA Budget and Appropriations: FY1998 and FY1999
Congress enacted P.L. 105-65, an appropriations bill for the Departments of
Veterans Affairs and Housing and Urban Development (HUD) and several
independent agencies. The Act provides $40.438 billion for veterans programs in
FY1998. In its FY1999 Budget Submission for VA, the Administration estimates
that VA spending FY1998 will actually be nearer to $42.4 billion, after adjustments
for reestimated entitlement spending, and for budget authority that reflects income
to VA from sources other than appropriations.
VA Cash Benefits. FY1998 appropriations included $22.8 billion for VA cash
entitlement benefits. Spending for the VA cash benefit programs is mandatory, and
the amounts requested by the budget are based on projected caseloads. Definitions
of eligibility and benefit levels are in law. About 2.3 million veterans will draw an
average of $478 in monthly compensation for service-connected disabilities; about
307,000 of their survivors will average about $890 in monthly payments. Pensions
for 410,000 veterans will average about $485 monthly; 304,000 survivors of veterans
pensioners will average about $210 monthly.
For FY1999, the Administration estimates that VA entitlement programs will
require $23.3 billion in mandatory appropriations. The Budget proposes to increase
by 20%, readjustment education benefits payable under the voluntary participation
program, the Montgomery GI bill. Currently, these participants, who contribute $100
monthly during their first 12 months on active duty, are eligible for education
assistance cash payments of as much as $439.85 monthly for full-time enrollment for
up to 36 months in an approved course of study. The estimated cost for this benefit
liberalization is $190.6 million in FY1999, and $1 billion over 5 years.
Medical Care. VA operates the largest health care system in the nation,
encompassing 172 hospitals, 175 nursing home and long-term care facilities, and 439
outpatient clinics. The FY1998 caseload is expected to increase by 135,000 veterans
served, with the number of different patients served by VA reaching 3.1 million. VA
health care continues to place increasing emphasis on outpatient care: the inpatient
caseload will decline by nearly 83,000 patients to 827,000 while outpatient visits will
increase by 2.5 million to 32 million, according to VA’s budget documentation.
FY1998. Congress appropriated $17.0 billion in funds for VA medical care for
FY1997, and the Administration’s FY1998 budget requested a freeze at that level
through FY2002. The Administration contended that VA could increase its patient
2
load by 20% over the period, paid for by efficiency savings and nonappropriated
sources of funds not then available to VA for medical care spending. The
Administration proposed, and Congress enacted a proposal that net receipts of the
Medical Care Cost Recovery (MCCR) fund remain available to VA for medical
services to veterans rather than be transferred to the Treasury as under current law.
The provision was included in the Balanced Budget Act of 1997 (P.L. 105-33),
which renamed the fund the Medical Care Collections Fund (MCCF). (For further
2 Legislation (P.L. 104-262) in 1996 capped medical care spending for FY1998 at $17.9
billion.

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information on the proposal to retain MCCR receipts within VA, see Medical Care
Cost Recovery in the section, Access to VA medical services, below.)
FY1999. For FY1999, the Administration has again proposed a near freeze to
medical care appropriations (various unobligated balances and carryover budget
authority make estimations of frozen appropriation levels somewhat imprecise). The
VA budget estimates the MCCF collections will fall slightly (from $688 million in
FY1998 to $677 million in FY1999). Otherwise, the Administration will continue
in its efforts to achieve greater efficiencies, thereby increasing the number of veterans
for whom it could provide medical services, according to VA budget documents.
The Senate Budget Resolution. The Senate Budget Resolution for FY1999
assumes $42.8 in VA appropriations. The Resolution assumed no new construction
projects for FY1999, but does assume $1 billion in renovation funds. The Resolution
also assumes that language negating the effects on VA of its General Counsel’s
ruling that current law requires awarding compensation to veterans who incur
disabilities linked to nicotine addiction that originated with tobacco use begun during
military service. Passage of the Intermodal Surface Transportation Efficiency Act
(ISTEA, H.R. 2400) effectively ends VA authority to grant compensation for
tobacco-related compensation claims. (More on this issue can be found under the
heading Service-Connection for Smoking Related Illness, below.)
VA Construction. Construction appropriations for VA major and minor
construction projects over the 10-year period FY1987-FY1996 averaged around $600
million per year. During FY1997, these construction appropriations totaled $426
million (including $32.1 million for a replacement hospital at Travis, California).
FY1998. For FY1998, Congress appropriated $352 million in new construction
funds, and redirected the $32.1 million that had been approved for constructing the
Travis hospital to outpatient access projects in California. VA canceled the Travis
project. Congress appropriated funds for construction of ambulatory care additions
at Asheville, North Carolina and Lyons, New Jersey; and for environmental
improvements at Omaha, Nebraska and Waco, Texas. Also funded was a renovation
at the facility in Pittsburgh, Pennsylvania.
FY1999. The Administration’s FY1999 budget requests $238 million in new
construction spending, including $73 million for correcting earthquake damage in
San Juan, Puerto Rico and Long Beach, California, and $69 million for increasing
outpatient access in various locations.
Balanced Budget Act of 1997 (P.L. 105-33). P.L. 105-33 extended several
savings provisions; most originated with the Omnibus Reconciliation Act of 1993
(OBRA 93) and were expiring at the end of FY1998. The provisions improve loan
collections, continue cost-sharing for some veterans receiving VA health care,
recover costs from veterans’ private health plans, limit pensions for nursing home
residents, and match income reported on pension and health care means-tests with
data from IRS and Social Security. These proposals were included in Administration
budgets and in Congressional Budget Resolutions for FY1996-FY1998, and were
included in the 1995 Reconciliation bill that passed Congress, but vetoed for reasons
unrelated to the VA savings package.

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Table 1 shows final appropriations for VA programs for FY1997, enacted
appropriations for FY1998, and requested appropriations for FY1999.
Table 1. U.S. Department of Veterans Affairs Appropriations
($ in millions)
FY1997
FY1998
FY1999
Program
(request)
Income security
Compensation; pensions; burial
$19,599
$20,483
$21,857
Insurance and indemnities
39
51
46
Education, training, and rehabilitation
Readjustment benefits
1,377
1,366
1,175
Misc. loan accnts.; admin. exp.
1
1
1
Housing programs
Current
139
160
159

Indefinite
417
875
264
Medical programs
Medical care
17,013
17,057
17,028
Transfer from MCCFa
688
677
Medical research
262
272
300
Medical admin. and misc.
61
60
60
Construction
Major constructionb
251
177
97
Minor construction
175
175
141
Parking garage fund
12
0
0
Other
General Operating Expenses
828
786
850
Office of Inspector General
31
31
33
Const. grants, state nursing. homes
47
80
37
Const. grants, state cemeteries
1
10
10
National Cemetery System
77
84
92
Total mandatory (entitlements):
21,433
22,775
23,342
Total discretionary (without MCCF)
18,898
18,894
18,808
Total discretionary (with MCCF)
18,898
19,582
19,484
Total VA Appropriation
(rounded-may not add)
$40,331
$42,357
$42,827
Source: Department of Veterans Affairs, FY1999 Budget Submission.

a The Medical Care Collections Fund, which receives reimbursement from private insurers who share
coverage of certain veterans with VA; also the fund receives copayments and deductibles for
which some veterans are obligated.

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Other FY1999 VA Budget Issues. Other issues raised in the FY1999 VA
budget concern increasing benefits for certain Filipino veterans who served with U.S.
Armed Forces during World War II, and shifting some of the planning for future VA
spending to the Department of Defense (DoD). The budget also renews a request that
Congress enact a limitation on the extent to which disability compensation can be
considered service-connected, if the claim is based on a smoking-related condition
that is traceable to tobacco use begun during active duty. (For further information
on smoking as a basis for disability claims, see Service-Connection for Smoking
Related Illness, below.)
Increases for Filipino Veterans Residing in the U.S. During World War II,
Filipino citizens in the military forces of the Army of the Commonwealth of the
Philippines were drawn into that War under authority of U.S. Armed Forces, on the
basis of legislation enacted in 1934 preparatory to Philippine independence. Some
of these soldiers were disabled during the course of their service under U.S. Armed
Forces command, and became eligible for service-connected compensation from VA.
Because of differences between the economies of the U.S. and the Commonwealth
of the Philippines, the compensation payments were provided, under federal law, to
these disabled Filipino veterans at a rate equivalent to 50 cents for each dollar that
would be paid to a similarly disabled veteran in the U.S. Armed Forces, regardless
of whether the Filipino veteran resided in the U.S. or the Philippine Islands.
The disparity in payments for U.S. residents entitled to VA compensation has
been a recurring issue since that time. Initially, it was argued before the Congress by
proponents of the lower payments, that the distinction was necessary to prevent the
benefits from becoming an inducement to seek residence in the U.S. solely for that
purpose. Some also argued that the Commonwealth would reach political stability
more easily if these disabled veterans remained in the Philippines during the post-war
period. In recent years, Filipino advocates have pointed to the large number of
Filipino veterans in the U.S. as legal residents, and have called for legislation to
address their claims for full benefits. The Administration’s FY1999 Budget calls for
legislation to pay disabled Filipino veterans and their survivors residing in the U.S.
the full rate, at a cost of $5 million during FY1999, and $25 million over 5 years.
Advance Funding for VA Benefits. The Administration has proposed that the
DoD budget begin to reflect the full cost of military forces, by incorporating into the
defense budget the estimated future costs of long-term entitlement obligations
entailed by current military service. According to the Budget, this would make the
true cost of defense more evident to taxpayers.
For example, the budget estimates that current military forces will accrue
roughly $4 billion in future disability compensation from service attributable to
FY1999, or about 11.6% of the pay granted to military personnel. The total for all
VA entitlement benefits attributable to FY1999 duty would be 16.9% of pay, or $5.8
billion in long-term obligations, according to Budget documents. The Administration
hopes to work with Congress on consideration of ways to transfer long-term VA
obligations to DoD, including transferring accruing costs to the Defense budget.

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Other Veterans Issues Before the 105 Congress
th
Persian Gulf War Illnesses and the Presumption of a Service
Connection
Modern Warfare in the Persian Gulf. American experience with the Persian
Gulf War differed from previous large-scale military operations of the 20 Century.
th
Instead of manpower provided through conscription, our forces were comprised of
mostly volunteer soldiers. Regular active-duty personnel were supplemented by a
large contingent of reservists drawn from their civilian lives on fairly short notice.
The usual stresses of warfare were intensified by factors such as desert deployment
in a country with a radically different culture, an order of battle that elevated
technical sophistication to new heights, unseen adversaries from microscopic
organisms to distant rocket launchers, and infrequent relief from the stench of oil
well fires. Personnel were exposed to strong chemicals to ward off irritating and
potentially dangerous insects, given drugs (pyridostigmine bromide) to provide a
measure of protection against possible nerve-gas attack, and subjected to a steady
dose of propaganda by the foe that, in spite of the apparent odds against them, victory
would inevitably belong to Iraq.
Since returning from service in the Gulf, many veterans have complained of a
illnesses that they thought might be attributable to their service there. Commonly
reported symptoms included fatigue, muscle and joint pain, severe headaches, and
memory loss. Media reports began to characterize the array of symptoms as the Gulf
War Syndrome, although no single illness with the multitude of symptoms has been
diagnosed, and no common characteristics of the veterans’ circumstances have been
identified other than Persian Gulf service, on land or at sea. Although a majority of
ill veterans have been diagnosed with a recognized disease, a significant number
remain undiagnosed, and appear to be suffering from multiple illnesses with
overlapping symptoms and causes.
Congress provided for all illness claims of Persian Gulf War veterans to be
examined at VA medical facilities, illnesses diagnosed whenever possible, symptoms
treated if necessary, and a data-base created to facilitate further research into causes.3
More than 100 federally-funded research studies pertaining to Gulf War illnesses are
underway. To date, clinical studies have not found an unexplained increase in
deaths, hospitalizations, or diagnosed diseases among the Gulf War veteran
population. No evidence has been found of a new or unique disease connected to
Gulf War service.
Evidence steadily emerges that Gulf War veterans were in a complex
environment, contaminated by multiple chemical substances, some of which had
been introduced to improve the safety and comfort of friendly forces. Perhaps as
many as 25,000 American soldiers may have been exposed to chemical weapons;
while they were not actually used in combat, some believe the destruction of the
3 The DoD Medical Registry and the VA Persian Gulf Health Registry have had some
clinical evaluation contact with about 100,000 of the nearly 700,000 Gulf War veterans.

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weapons released toxins that may have caused illnesses with delayed symptoms. So
far, no evidence has been presented that would support a conclusion that Persian Gulf
War illnesses are related to chemical weapons, but studies of the possible effects of
multiple chemical exposure, including the effects of low-level exposure to chemical
weapons are underway.
The Presidential Advisory Committee on Gulf War Veterans’ Illnesses.
Finding that “[m]any veterans clearly are experiencing medical difficulties connected
to their service in the Gulf War,” the Advisory Committee reviewed numerous
studies of Gulf War veterans and their health complaints. The Advisory Committee’s
report, dated December 31, 1996, concluded that scientific evidence had not
produced “a causal link between symptoms and illnesses reported by Gulf War
veterans and exposure [to] pesticides, chemical warfare agents, biological warfare
agents, vaccines, pyridostigmine bromide, infectious diseases, depleted uranium, oil-
well fires and smoke, and petroleum products.” Nevertheless, the Advisory
Committee recommends further research in several areas, including the medical risks,
especially long-term risks, that might be related to multichemical exposure, low-level
exposure to chemical warfare agents, and other toxic substances with recognized
carcinogenic potential that were known to present in the Persian Gulf War. Finally,
the report of the Advisory Committee emphasizes the need to examine closely the
relationship between wartime stress and “the broad range of physiological and
psychological illnesses currently being reported by Gulf War veterans.”
4
The Broader Issue of Presumptive Service-Connections. Health services and
potential cash payments may be given to veterans who experience disabilities
traceable to a period of military service. However, with some disorders, evidence of
a service-connection is inconclusive. Congress has sometimes granted a presumption
of a service-connection, so that veterans can be treated, and given appropriate
compensation while scientific studies attempt to determine whether a correlation can
be found between risks encountered during military service and the subsequent
manifestation of a disorder.
Current concern that latent illnesses could be related to toxic exposure during
Gulf War service was preceded by similar concern that certain diseases could be
related to exposure to Agent Orange or other herbicides in Vietnam. That concern
was preceded by concerns that certain diseases could be related to exposure to
nuclear radiation during World War II or during atomic testing in the 1950s. In these
cases, policy objectives were based on the rationale that veterans should be given the
benefit-of-the-doubt as to the treatment of illnesses potentially traceable to military
service: (1) these veterans were sick with serious diseases needing treatment; (2)
they did serve their country, often in a wartime combat zone; and (3) capacity to
provide the services existed if they were given high-priority access.
The Effect of a Risk Presumption on Scientific Study. When concern
mounted that exposure to herbicides in Vietnam could have posed a health risk, the
Department of Defense examined its records to determine which personnel may
actually have been exposed and what level of exposure they may have experienced.
4 Report of the Presidential Advisory Committee on Gulf War Veterans’ Illnesses. p 125.

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However, deployment records and troop movement data could not pinpoint exposure
with accuracy, and the conclusion was drawn that exposure to Agent Orange (or to
other herbicides, regardless of their toxicity) at sufficient levels to be potentially
disease-causing had to be presumed, given the widespread use of herbicides.
Because exposure to toxic herbicides was presumed for any military personnel who
served in Vietnam during the period in which Agent Orange was used, science need
only provide evidence of an association between a particular disease and exposure
to herbicides in any setting and at any level of exposure in order to validate a
presumption that the disease is service-connected.
The Benefit of the Doubt and Persian Gulf War Syndrome. In the absence
of firm scientific evidence to the contrary, Congress has given veterans of the Persian
Gulf War the benefit-of-the-doubt that their ailments may be connected to their
military service. However, the basis for establishing scientifically a link between an
exposure to risk and the incidence of a disease could be further eroded. Persian Gulf
War veterans were potentially exposed to a large number of toxins, and are now
authorized to receive priority treatment for a virtually unlimited list of symptoms.
Researchers caution that it may be impossible to identify the causes of illness in
many Gulf War veterans because of the absence of baseline data on the health of
military personnel, and the lack of reliable data on levels of exposure to potential
risks in their wartime environment. In effect, because both exposure to a toxic risk
and the presence of a disorder are presumed, the statistical relationship between the
risk level for one and the incidence of the other may be indeterminable.
Authority to Provide Priority Health Care and Disability Compensation.
Authority to provide high-priority medical care for Vietnam veterans with diseases
presumed linked to herbicide exposure expires December 31, 2002. Authorization
for priority health care for veterans with diseases presumed linked to radiation
exposure has been made permanent.
Federal Research. The DoD, VA, and HHS, through the Persian Gulf
Veterans’ Coordinating Board, have established a comprehensive research program
to provide information about the prevalence, distribution, and causes of illnesses
among Gulf War veterans. According to a GAO report, federal agencies spent a total
of $37 million on research on Gulf War veterans’ illnesses through FY1996, and
several additional projects are currently underway. (For additional information on
federal research, see CRS Report 98-21, Gulf War Veterans’ Illnesses: Federal
Research and Legislative Mandates.)
Veterans Medical Services: Resource Reallocation and Cost
Recovery
The 104 Congress saw significant changes to the structure of the VA medical
th
system. Before reform of the rules governing access to VA health care, many
veterans had a right to acute care but not to basic services, arguably resulting in
inefficient use of resources. Substantial evidence existed that demands for VA health
care differed from one region to another, and resource allocations did not match that
demand. The objective of reform was to treat more veterans with the same resources:

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inefficient uses of inpatient care would shift to outpatient access, and from underused
venues to underserved locales.
The 105t Congress continues to oversee the effect of these changes. A ne
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system for distributing medical resources, called the Veterans Equitable Resource
Allocation (VERA), will shift resources according to a methodology that identifies
underutilization and rewards efficiency.
VA Health Care System Reform. The combination of administrative
reorganization and passage of P.L. 104-262 yielded five fundamental changes to the
approach taken toward veterans health care:
! Veterans eligibility rules were changed so that veterans could be served in
whatever treatment venue was medically indicated. Most medical care will
be provided to veterans enrolled in new VA health plans. While care
continues to be assured for service-connected conditions, most care will still
go to veterans who qualify because of low incomes.
! The VA health care system itself was reorganized. VA medical facilities had
operated with considerable autonomy within a structure centered at
Department headquarters. A more decentralized, regional structure, called
Veterans Integrated Service Networks, (VISNs) replaced that administrative
design.
! Numerous projects to improve and increase ambulatory services were
proposed, authorized, and funded.
! Spending for VA medical programs was “capped” to prevent increased
outpatient access from substantially increasing costs. The spending cap for
FY1997 was $17.25 billion, about $24 million more than appropriated. For
FY1998, VA health care spending is capped at $17.9 billion.
! A method for measuring demands met with efficient performance, based on
per capita unit costs, was instituted that will permit integration, coordination,
and reallocation of resources from one specialty or subservice to another
within a facility, from one facility to another within a VISN, and from one
VISN to another.
If service demands increase beyond the levels supported by appropriations and
efficiency savings, rationing could occur. Rationing makes scarce resources evident,
but also makes facilities where rationing does not occur subject to greater scrutiny.
Eligibility reform, with costs constrained by spending caps, and resource efficiency
measured through VA’s unit-cost methodology, could force reductions in inpatient
capacity in some regions to improve outpatient access in other regions.
New VISN Medical Benefit Plans Beginning October 1, 1998. The new
health benefit plans through which VA medical services will be administered
beginning on October 1, 1998 are intended to more effectively measure the cost of
resources given to veterans in various regions. Veterans are also expected to have
a greater understanding of the benefits for which they are eligible, and VA staff

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would have clear authorization to provide services in the most efficient venue
possible. Also, data developed through the plans would be more uniform, thereby
facilitating analysis of the effectiveness of various procedures.
Some veterans have mistakenly concluded that their benefits will be cut off on
the October 1 date unless they are enrolled in the plans, and have contacted
congressional offices to express their concerns. Veterans will not be denied services
because of the plans; some are enrolled automatically, including those receiving
services in the months before the October date. Most veterans will enroll at the time
they apply for services, and many veterans are exempt from enrollment altogether.
Veterans Equity Resource Allocation. The reallocation system is called
Veterans Equity Resource Allocation (VERA). VERA has generated considerable
inquiries to Congress from constituencies opposing or favoring resource shifts.
VERA is intended to support resource reallocation from underutilized inpatient
facilities toward outpatient demands; it follows that outpatient clinics in Sunbelt
regions would receive resources and World War II era hospitals in population centers
in the northern regions would lose resources. VERA also takes into account
“snowbirds” who receive care through more than one VISN during the year, as they
temporarily move to warmer locales during the colder months. According to VA, 16
of 22 VISNs will have increased funding during FY1998 if the VERA distribution
method is followed. About $200 million will be reallocated in FY1998, and the full
reallocation is expected to be phased in over 3 years. As resource allocations begin
to be understood, various affected interests could begin to pressure the Congress to
mitigate, or accelerate their effect.
New Sources of Funds Instead of Additional Appropriations. To make up
the difference between appropriated funds and projected increases in medical care
costs, the Administration’s FY1998 budget (repeated in the FY1999 budget) assumed
revenues from new sources of funds. VA estimated that by FY2002, about 10% of
the medical care budget could be derived from cost recovery, Medicare
reimbursement, and revenue from leases and service agreements. Together with
individual patient efficiency savings of 30%, VA estimates that the reforms could
permit serving a 20% increase in caseload without an increase to annual
appropriations.
Medical Care Collections Fund (MCCF). Veterans whose nonservice-
connected conditions are treated by VA, and who are not eligible for free care5 for
5 Under current law, VA provides care free to all but about 3-4% of the patients it serves.
Care for the treatment of for all service-connected conditions is free. Care for nonservice-
connected conditions is free for veterans meeting certain criteria, and most veterans with
service-connected conditions can receive free care for nonservice-connected conditions as
well. The largest category of veterans eligible for free, nonservice-connected care (but
subject to resource limitations) have limited assets (below $50,000) and income below an
annually adjusted standard (in 1998, $22,064, single; $26,480, one dependent; $1,476 each
additional dependent). Veterans with incomes above $8,665 in 1998 are expected to pay $2
for each monthly outpatient prescription filled through the VA pharmacy system.

CRS-12
such conditions are obligated to pay copayments and deductibles.6 Also, third-party
insurers who would be obligated for at least a portion of the costs of a veteran’s
medical care costs if the veteran were to be treated by providers outside the VA
system are obligated to pay VA for the cost of that care.
In the past, VA’s MCCF fund (previously called the Medical Care Cost
Recovery fund) received all medical care cost collections. At the end of each year,
VA transferred the funds to the Treasury, after subtracting the cost of administering
the collection procedures. Some analysts believed that this approach had an adverse
administrative incentive: VA was able to pass onto the MCCR whatever personnel
costs it could justify as necessary to the operation of the MCCR program; and, VA
could not keep any funds it collected.
To enforce discipline on the program, and to encourage VA medical facilities
to be more aggressive in the pursuit of funds VA had the authority to collect, the
Balanced Budget Act of 1997 requires VA to bear the costs of MCCF collections, but
lets the VA medical program keep the funds. The FY1999 budget estimates that
$688 million in FY1998, and $677 million in FY1999 will be available to the VA
medical care account, as a result of collection efforts.
Medicare “Subvention”. Many veterans advocates have suggested that VA
should also be reimbursed for nonservice-connected care VA provides veterans who
are also covered by Medicare. (Medicare subvention, meaning a transfer or subsidy
from the Medicare trust funds, is the term by which this proposal is known.)
If Medicare were to transfer funds to cover the cost of VA’s services to its
existing caseload of patients who are also covered by Medicare, Medicare costs
would increase, and VA would experience an increase in spending authority, leading
to an overall increase in federal spending. On the other hand, if VA served
additional veterans whose care is currently paid by Medicare, and if VA provided
that care less expensively than providers who would otherwise be reimbursed through
Medicare, then real savings could be possible, both to taxpayers and to Medicare.
Offset against this potential savings would be any costs accrued by VA for services
to additional patients, and for benefits that VA provides that Medicare does not cover
for its participants, such as prescription drugs.
The FY1998 Budget (and repeated in the FY1999 budget) proposed a Medicare
subvention demonstration, a pilot study that would attempt to determine an
appropriate sharing of responsibilities between VA and Medicare for jointly covered
veterans. Legislation to establish a pilot project at 12 locations passed the House in
1997 (H.R. 1362). A similar version was included in the Senate version of the 1997
reconciliation bill (The Balanced Budget Act of 1997), but was dropped in
conference.
6 For inpatient care, the amount is equivalent to the Medicare cost-sharing schedule. For
1998, veterans pay a copayment of $764 for the first 90 days of hospital care during any 365
day period, plus $10 per day; each additional 90 days requires a copayment of ½ that initial
copayment, plus $10 per day; the nursing home charge is equal to the full deductible, plus
$5 per day. Outpatient visits are $45.80.

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Legislation (H.R. 3828) to authorize a pilot project at 3 locations for 3 years
was ordered reported on May 14, 1998 by the House Committee on Ways and Means.
The pilot project would permit veterans in those 3 locations, whose priority status
requires them to share in the cost of their medical care (called Category C veterans
in the bill), to enroll in a VA plan and have their Medicare benefits provided through
that plan. Medicare would then pay VA the same rate, per covered person, that it
would pay for those persons to enroll in a similar private prepaid plan approved by
Medicare. The bill would also permit veterans with high-priority access to VA health
care (called Category A veterans in the bill), who are also covered by Medicare, to
receive their Medicare benefits through one of VA’s VISN health plans.7

The bill would require VA and the Department of Health and Human Services
(HHS) to coordinate the collection of data, which would be analyzed to make sure
that no veteran receives less in Medicare benefits through VA than would be received
directly from Medicare, and that reimbursements to VA from Medicare do not exceed
the limits established by the bill. Medicare may reimburse VA for up to $50 million
in the year 2000, $75 million in 2001, and $100 million in subsequent years for care
provided to Category A veterans, and $50 million for each of 3 years for the Category
C veterans.
Provisions of H.R. 3828 prohibit the bill from becoming effective unless
Congress adopts language prohibiting VA from paying service-connected
compensation based on tobacco-use traceable to military service, and Congress has
passed such legislation (For more information, see Veterans and Smoking-Related
Illnesses: Congress Enacts Limits to Compensation, CRS Report 98-373). However,
the bill’s costs were to be offset by some of the savings from the limitations on
tobacco-related claims, and H.R. 3828 may require amendment because those savings
were otherwise allocated under terms of H.R. 2400. (See Service-Connection for
Smoking Related Illnesses, below.)
Sharing Arrangements and Enhanced Use Leases. VA medical centers have
the authority to enter into sharing agreements with other health care providers in the
communities in which they are located. VA is authorized to obtain services by
contract whenever such contracts would be more efficient than for VA to provide the
services directly. In some instances, specialized services are available from VA that
other community providers seek, and VA is authorized to collect and retain fees for
those services. This authority extends to support services, and some VA facilities
partially offset their costs by selling such laundry or ambulance services to other
health care providers.
In addition, VA has temporary authority (until December 31, 2001) to enter into
“enhanced use” leases, in which VA facilities can be contracted by other entities.
After taking into consideration how the leasing arrangement would affect local
7 There is no Category B, in keeping with a common practice in veterans health care
discussions of dividing veterans into 2 categories, roughly reflecting whether the veterans
have access to free VA care, or are required to share in costs. Although the categories are
not found in VA law, some years ago VA law did contain the categorization, which at that
time, also included a Category B designation.

CRS-14
commercial and community interests, VA can enter into the leases if it determines
that the activities would not interfere with VA programs, and would in some way
serve the interests of veterans. These leases may be additional sources of revenue to
the facilities, and may serve to increase the use of capacity that would otherwise be
underused.
In the FY1998 and FY1999 budgets, the Administration has asserted that by
FY2002, the combination of Medicare subvention, other MCCR collections
(copayments and deductibles from veterans, reimbursement from third-party insurers,
and receipts from VA service-sharing arrangements with nonfederal health care
providers), together with more efficient operations would support a level VA medical
budget that provides services to 20% more of the veteran population. MCCR
collections would fund 10% of VA’s medical care budget in that year (according to
the projections), and cost efficiencies are assumed to reduce the average cost for
individual patients served by 30%. VA’s documentation claims that these projections
are reasonable if the expansion of services is conducted according to the VA
efficiency guidelines, but the basis for those assumptions is not shown in the VA
documents.
P.L. 105-114, Medical Construction Authorizations. Congress enacted
construction authorization language that would continue the trend toward expanding
outpatient access. Funds that had been approved for the construction of a hospital
at Travis, California to replace one destroyed by an earthquake would be redirected
to outpatient access in California. The Administration dropped its plans for the
hospital; the legislation authorizes $55 million for major construction projects and
$16 million for leases. In addition, the legislation authorizes $35 million for seismic
corrections at the Memphis, Tennessee VA medical center.
For more on VA medical care issues, see CRS Report 97-786, Veterans Medical
Care: Major Changes Underway.
Veterans Preferences in Federal Employment (H.R. 240; S. 1021)
Veterans advocates have argued that the preference rights under federal
employment practices to which some veterans are entitled are often not properly
honored in hiring and retention decisions made in federal agencies. Some suggest
that the “earned” rights of veterans are treated as less important than the “bestowed”
rights of individuals claiming instances of discrimination. Individuals who believe
that they have been victims of discrimination in the workplace can seek to resolve
their complaints through various administrative remedies, but until they are actually
hired, veterans do not now have administrative recourse if they believe their
preference rights have been improperly ignored.
Legislation addressing these concerns (H.R. 240), passed the House April 10,
1997. A similar bill, S. 1021 is under consideration in the Senate. The bills would
expand access to jobs, provide veterans with some additional rights during agency
downsizing, extend veterans preference rights to some employment now exempted,
establish new procedures for veterans to appeal decisions, and designate the
circumvention of veterans preferences as a prohibited personnel practice.

CRS-15
For further information on this issue, see Veterans Preferences: Current Law
and Proposed Legislation, CRS Report 98-493.
Service-Connection for Smoking Related Illness
Both the FY1998 and FY1999 VA budget requests proposed to preclude claims
that a service-connection exists for “disabilities or deaths based solely on their being
attributable, in whole or in part, to veteran’s use of tobacco products during service.”
The issue surfaced in 1993, when the VA General Counsel determined that under VA
law — which conditions veterans compensation on disabilities traceable to military
service — diseases linked to tobacco use that began during military service are
service-connected disabilities. After several years of study, in 1997 the VA
Undersecretary for Health concluded that nicotine addiction is a disease, and the
General Counsel reaffirmed the 1993 decision.
The President’s FY1999 budget estimated the savings to be $16.9 billion over
5 years. The Congressional Budget Office (CBO), using a slower rate in the growth
of claims estimated the change would save $10.5 billion over the period. Conferees
on ISTEA used the Administration’s savings estimate, committing $15.4 billion to
offset costs of ISTEA; the remaining funds were used to improve various veterans
benefits (see The Veterans Benefits Act of 1998, below).
For further information on this issue, see Veterans and Smoking-Related
Illnesses: Congress Enacts Limitations to Compensation, CRS Report 98-373.
P.L. 105-111, Revision of Veterans Benefit Decisions for Clear and
Unmistakable Error (H.R. 1090; S. 464)
Instead of passively receiving and adjudicating benefit claims, the VA actively
assists veterans during each step of the application process. A decision contrary to
the interest of the veteran can be appealed simply by stating the veteran’s
disagreement; a claim can be reopened anytime the veterans asserts that new
evidence is available for presentation. Given these reapplication and appeal
opportunities, no decisions are absolutely final.
Initial claims decisions are made by VA Regional Offices in which the claim
was filed. Appeals can be made to the Board of Veterans Appeals (BVA) in
Washington, D.C., and its decisions are subject to a motion to the BVA Chairman for
reconsideration. If the Chairman grants the motion, a panel reviews the basis for the
decision, issuing a finding that affirms the decision, allows the claim, or remands it
to the Regional Office for further development. If the Chairman does not submit the
claim for reconsideration by BVA, that round of decisions with respect to the claim
are ended.
P.L. 105-111 makes decisions of the Regional Office and the Board, including
denial of the motion for reconsideration by the Chairman, reversible in cases in
which the veteran claims that the decision was based on a “clear and unmistakable
error.” It should be noted that the words clear and unmistakable error are a simple
statement of the premise in most appeals, and not a finding achieved through an

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additional appellate level. The new law adds a further review of decisions adverse
to veterans’ claims, but would not alter the basis for their adjudication, nor would it
create a new level of adjudication authority. The new law simply requires further
review and documentation of the findings of that review. The Administration
opposed a similar bill in the 104 Congress because VA argued that it would add to
th
claims backlog. Advocates of the bill argued that it would codify a review step
necessary to properly adjudicate claims in which an error may have been made.
P.L. 105-98, Cost-of-Living Adjustments (COLA, H.R. 2367; S. 987)
With the exception of service-connected disability and survivors programs,
veterans cash programs are fully and automatically adjusted each year for changes in
the cost of living. An adjustment of 2.1% for 1998 was applied beginning with
checks received in January. P.L. 105-98 was enacted to provide the same COLA for
the service-connected disability compensation programs. Similar legislation can be
expected to provide a COLA for 1999.
P.L. 105-114, Veterans’ Benefits Act of 1997 (various bills)
Congress combined several bills before enacting P.L. 105-114. One bill (H.R.
2206), extended two expiring laws authorizing small programs that Congress created
and VA administers to serve homeless veterans, especially homeless veterans
afflicted with mental illness. A program providing drug and alcohol treatments
through contracts with local treatment facilities was replaced by a range of services,
many of which could be provided through VA medical facilities no longer needed for
acute medical care. A provision authorizing grants to local homeless assistance
programs that expired on September 30, 1997 was extended until September 30,
1999, provisions that allow VA to provide direct loans to Native Americans who are
unable to secure home mortgages for residences on tribal land were extended through
2001. P.L. 105-114 also provides for comprehensive services to be provided to
veterans suffering from undiagnosed disorders related to service in the Persian Gulf,
and for other environmental hazards that veterans might have encountered during
their military service. In addition, the new law makes permanent VA authority to
provide noninstitutional alternatives to nursing home care. VA is instructed by the
new law to develop a mammography policy, with specifications as to how often
screening should be done, and for whom. Finally, P.L. 105-114 adopted provisions
of H.R. 1703, which established methods for alleviating problems of employment
discrimination in VA facilities.
The Veterans Benefits Act of 1998
As a separate section under H.R. 2400, the Intermodal Surface Transportation
Efficiency Act (ISTEA), several amendments were made to veterans benefits. Under
pay-as-you-go spending rules, these changes were funded from savings achieved by
prohibiting VA from approving most service-connected compensation claims for
tobacco-related illnesses. The improvements include the following, effective October
1, 1998:

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! The basic rate for determining education benefits payable under the
Montgomery GI Bill program was raised by 20%.
! Amounts VA can spend for adapting a house for a severely disabled veteran
was raised from $38,000 to $43,000; for adapting a car, the amount was raised
from $5,500 to $8,000.
! Maximum rates of means-tested pensions for totally-disabled wartime
veterans in need of full time aid and attendance was raised by $600 annually
(the total amount payable depends on dependents, assets, and other income).
! Benefits were restored for the surviving spouses of veterans who died of
service-connected disabilities, for cases in which a subsequent marriage of the
surviving spouse ended in divorce or death.
Government Performance and Results Act (GPRA)
In 1993, Congress enacted P.L. 103-62, the Government Performance and
Results Act, to encourage greater efficiency, effectiveness, and accountability in
federal spending. To accomplish this objective, federal departments, agencies, and
programs were required to develop comprehensive plans within guidelines that
permitted assessment of goals, performance toward those goals, and the
interrelationship between federal operations with the same general missions. The
basic method by which federal agencies are to comply with the provisions of GPRA
is through the strategic plans and performance measures. A seven-year timetable was
established, with 5-year strategic plans and measurable performance goals first being
specified with the FY1999 budget.
Commission on Service Members and Veterans Transition
Assistance
The 104 Congress established a commission to study programs designed t
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help with readjustment problems encountered by personnel reentering civilian life
after military service. Under current law, various federal agencies, among them the
Departments of Veterans Affairs, Defense, and Labor, and the Small Business
Administration, administer programs to assist military personnel in their transition
from active duty to civilian life. Programs include education assistance, job training,
vocational rehabilitation (for disabled veterans), job placement and counseling, home
loans, and small business consultations. Veterans seeking employment with the
federal government may also be eligible for certain preferences in hiring and
retention (see also the above section, Veterans Preferences in Federal Employment).
The Commission is examining “the adequacy, effectiveness, and
appropriateness of transition and assistance programs,” and make recommendations
to Congress for changes to VA law to improve federal efforts to assist veterans
readjust to civilian life. The Commission is reviewing the allocation of the programs
among federal agencies, and “determine the feasibility and desirability of
consolidating such programs in one department or agency.” The Commission’s
report is scheduled for completion in August of 1998.
One issue receiving scrutiny by the Commission is the primary education
program, the Montgomery GI Bill (MGIB). The MGIB provides monthly benefits

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for up to 36 months for participating veterans entering approved education programs,
primarily college. Payments are adjusted annually for inflation, and in 1998 are
$439.85 for personnel who complete 3 or more years of active duty. Participants are
required to pay $100 per month for the first 12 months of active duty, and the money
is not refundable. The Administration’s FY1999 budget has requested that the
Montgomery GI bill payments be increased by 20%, an increase enacted as part of
H.R. 2400, the Intermodal Surface Transportation Efficiency Act (ISTEA).
Although initial participation in the program is high (95% in 1996), those who
do not participate make an irrevocable decision that can be ill-considered, due to their
ages or financial circumstances at their point of their enlistment. Also, completion
rates for veterans entering approved programs after their active duty is not as high as
veterans advocates believe they should be. About 37% of veterans do enter degree-
granting institutions after leaving military service; although education benefits are
payable for 36 months of schooling, only one of four eligible veterans remain in
school to earn a degree. The Commission is examining ways to improve on the
number of veterans receiving degrees, certificates or other evidence of successful
completion.