Chairman MURKOWSKI. OK. To conclude my line of questioning before I call on my colleagues your justification is primarily the issue of equity? Mr. ALVAREZ. Yes, sir. Chairman MURKOWSKI. Is that right? Mr. ALVAREZ. Yes, sir. Chairman MURKOWSKI. As opposed to any savings? Mr. ALVAREZ. Yes, sir. Chairman MURKOWSKI. Because it is not going to be cost significant in the sense that your own increased productivity is going to take care of the additional cost. That is what you are saying. So it becomes an equity issue. The issue of equity is the basis for your request for the age 65 provision? Mr. ALVAREZ. Yes, sir. Chairman MURKOWSKI. OK, I think that has cleared up something that has been in the minds of the many of us as to just what the questions might be. Senator Mitchell. Senator MITCHELL. Thank you, Mr. Chairman. Mr. Alvarez, can you estimate the expected savings in medical care and construction budget costs if this proposal is adopted? Mr. ALVAREZ. I think Liz might be able to answer that better. But off-hand, we have not looked at those or tried to get some kind of an estimate on that because, again, this was approached purely from the basis of equity rather than cost savings. Senator MITCHELL. But on page 5 of your statement, you say, "We project that the proposal would result in a lower rate of growth in VA's medical care and construction budgets than otherwise would be needed.” Ms. QUANDT. Senator Mitchell, that savings and lower rate of growth would come two ways. The very fact that you administer a means test has a dampening effect. There are many veterans that simply would assume "I could probably not pass the means test, so I will not apply." The real Senator MITCHELL. Well, I am not asking you, Ms. Quandt, how you arrive at the savings, I am asking you what amount of savings you project? MS. QUANDT. That I know of, we have no specific savings. That is an assumption that because it is going to the equity issue that the number of 65-year-olds who would have had blanket authorization, and with the aging veterans, that we would have had a vast, let's say, balloon in people who would have had a carte blanche eligibility. That would then be changed because of the means test, which will diminish that demand. Senator MITCHELL. So the statement by Mr. Alvarez projecting lower rate of growth in the medical care and construction budgets has no substantive basis to it? MS. QUANDT. It is not a statement that we have assigned dollar figures to Senator MITCHELL. Right. MS. QUANDT [continuing]. At this point. Senator MITCHELL. All right. Now, did you attempt to estimate what number of veterans over the next 3 years will turn to Medicare to cover some part of their costs if this proposal is enacted? Ms. QUANDT. If the original proposal before you were enacted, approximately 46,000 veterans over 65 would be subject to the means test. We then believe- Senator MITCHELL. How many? Ms. QUANDT. Forty-six thousand would become subject to the means test, would have an income over the $15,000. They might then turn to Medicare for coverage. Senator MITCHELL. Forty-six thousand out of what total? Ms. QUANDT. I believe there are more than 2 million veterans who are over 65. But I would like to supply that fact for the record. Senator MITCHELL. I think it is 3 million, and it is going to be 6 million by 1990, and 9 million by the year 2000. Now, let me go into that, because it says here on page 4 of Mr. Alvarez' statement, Regulations-would establish the circumstances under which a veteran, whose income and asset value exceed the proposed twice-pension-rate standard. As I read that I understand that to be the aggregate of one's income and assets. MS. QUANDT. That is correct. Senator MITCHELL. And it would be $15,000? Ms. QUANDT. Yes, sir. Senator MITCHELL. But are you saying that out of 3 million veterans over 65, only 46,000 own their own homes? Because, obviously, anybody who owned a home would be excluded, would they not, unless you exempt that somehow. MS. QUANDT. The home is exempt. Senator MITCHELL. The home is exempt. Ms. QUANDT. Yes. Senator MITCHELL. What other assets are exempted? MS. QUANDT. His daily necessities such as the car, his personal belongings. Senator MITCHELL. How did you arrive at the figure of 46,000? Ms. QUANDT. The Veterans' Administration in doing its estimate had access to some data from the General Accounting Office. And we used that data because it was based on actual users of the system, namely, fiscal year 1981. We used those income figures and then related that back to what the pension program and the pension requirements for definition of income as the debts and net worth are. Senator MITCHELL. Can you tell me what the date of that GAO report is? Ms. QUANDT. That report I believe was recently submitted to us informally on May 3. Senator MITCHELL. Of this year? Ms. QUANDT. Yes. Senator MITCHELL. Would you provide to me and to the committee, all committee members, a detailed statement of the precise method by which you arrived at the estimate of 46,000? I must say, it sounds very low to me. But we would like to look at it so we can attempt to assess that. [Subsequently, the Veterans' Administration submitted the following information:] In estimating the probable effects of the means test, the VA utilized demographic and statistical data from its files and income data supplied from a General Accounting Office Study of 1981 VA Patient Treatment File information and 1981 Internal Revenue Service income data. (A copy of the GAO report was sent to the Senate Veterans' Affairs Committee in May of 1985). The results of this analysis indicated that 186,554 current individual users would lose their eligibility for health care at VA expense. Of that number, 46,021 would be over 65. Assuming that 90 percent of those veterans would be eligible for Medicare leads to an estimated 41,419 who would be eligible for Medicare. Senator MITCHELL. Have you made any effort to estimate what the increased cost to the Government would be of those 46,000, or whatever number of veterans, turning to Medicare? Ms. QUANDT. Assuming that all those veterans have Medicare it is my assumption from some of our data that our cost of care is less than what the average charges are that Medicare pays to the private sector. There could be an increase of approximately $100 per year for hospital care per person. There is essentially, in multibillions, a negligible increase to Medicare. Senator MITCHELL. And how did you arrive at the figure of $100? Ms. QUANDT. That was arrived at by reviewing some testimony submitted to the House Veterans' Affairs Committee by HCFA [The Health Care Financing Administration, HHS] and then going through our own 1984 cost data from our resource allocation system. Senator MITCHELL. I would like to have a written statement on that, too. That seems extraordinary. That is less than 1 day per year in the hospital for each of these veterans who are, by definition, the very poorest and therefore the least likely to have received adequate health care prior to that. And you are estimating that all of those veterans going on Medicare would have total hospitalization expenses averaging less than 1 day per year? [Subsequently, the Veterans' Administration submitted the following information:] The Veterans' Administration has not yet been able to get adequate data to compare full costs of Medicare payments, including parts A and B, in order to make such a comparative study with Medicare. Such data will soon be available. A study of comparative costs using 1982 reimbursement data from the State of Maryland shows VA costs to be comparable to those of Maryland when adjusted by DRG's for casemix. According to the Health Care Financing Administration (HCFA), the average reimbursement per person served by the Medicare program in 1984 was $5,174 for inpatient hospital services and $710 for physician services—a total of $5,884. Including the one-day deductible of $356, this would make the average Medicare case $6,240. The VA estimates its costs per person hospitalized at $6,003 for 1984, including physician costs. The Medicare cost of $5,884 covers inpatient hospitalization and supplementary medical insurance (Medicare parts A and B), which includes physician and other medical services. The VA cost estimate of $6,003 is an all inclusive figure that covers inpatient and outpatient care as well as physician costs. It also includes an additional 9 percent of VA per-person cost for "debt financing" so as to make VA costs more comparable to those of the private sector, which has to pay the cost of borrowing money. Dr. GRONVALL. I believe the figure that Ms. Quandt gave was our estimate of the difference of the cost to the Federal Government of providing the care in the VA as compared to providing the care through the Medicare Program and HCFA. Senator MITCHELL. Oh, all right. Then I misunderstood that. Dr. GRONVALL. It was not a total cost to Medicare. It was a difference between the VA and the Medicare Program. Mr. ALVAREZ. That is correct. Dr. GRONVALL. You may want to clarify that. Senator MITCHELL. The increase, you estimate it would increase to the Government? Ms. QUANDT. Yes, because I- Senator MITCHELL. The difference to the Government? Ms. QUANDT [continuing]. I am saying that it is $100 less per the case for us to care for the veteran. Senator MITCHELL. All right. So you have no estimate of savings and you do have an estimate of increased cost to the Government. So it is fair for one to conclude from the testimony here today that this proposal will increase overall costs to the Federal Government for health care, based on what you have just told us? Does anybody disagree? You are here saying this is an equity issue, it is not a cost savings issue. Mr. ALVAREZ. That is correct, sir. Senator MITCHELL. And so I am just trying to find out. So we may conclude based upon the testimony you have given here today that if this proposal is implemented total costs to the Federal Government will rise for such health care? Mr. ALVAREZ. We felt, well, in that context it would rise. But we also feel that that is a, given the total impact, it is a negligible impact. Senator MITCHELL. I understand that. I understand that. But so that we may make a determination on what we are doing. Mr. ALVAREZ. Sure. And again, I would like to point out that there are, as we see, cost avoidances in the outyears in terms of the decreased demand in the outyears and in decreased rate of growth of our facility construction and what have you. So in essence, you know, I am talking very broadly here, but I think that we are looking at these things that result directly from the fairness issue, which is our primary concern right now. Senator MITCHELL. Yes. Well, I understand that. But at the same time, in the outyears as the number of veterans over 65 triples before the end of this century the increase based on their transfer from the VA health-care system to the Medicare system will rise as well? Mr. ALVAREZ. That is right. Senator MITCHELL. And that is the only figure you are able to give us? I mean in terms of estimating savings and costs? What you have said is you cannot estimate the savings? You think there will be some. You cannot estimate the increased costs, and you have given us that figure here. So what Chairman MURKOWSKI. Senator Mitchell, you are going to have a chance to address questions to the witnesses from ČBO, who have indicated that they have a different conception of what the cost savings would be. I would ask that you wind up your questions at this time. I have not put a time limit on, but we have a lot of witnesses to hear from and I am going to have to ask you to complete your questions, at least on this particular subject. Senator MITCHELL. All right then, Mr. Chairman. Thank you. Senator MITCHELL. Mr. Chairman, I have a number of other questions. I will submit them in writing for the record. Chairman MURKOWSKI. Thank you. Senator CRANSTON. Mr. Chairman, I would like to say that I respect the 10-minute rule; I think that is very appropriate. But I have questions for the VA that I think will take more than 10 minutes. So I will take 10 minutes now and then subside. Chairman MURKOWSKI. Thank you. Senator CRANSTON. But I would like to pursue the matter. OMB insists on checking on or editing written responses to questions, so we do not get the VA's response when we ask them that way directly. In light of the confusion about the cost implications of the means test I am deeply concerned about the degree to which the VA has been involved in recent negotiations relating to the agency's budget for fiscal year 1986, most particularly in the negotiations between the administration and the Senate Republican leadership that led up to the so-called White House-Senate Republican leadership agreement. In my April 12, 1985, letter to Administrator Walters I requested specific detailed information on the impact of the White House-Republican leadership agreement on the agency's budget submitted to Congress in January. None of this information was provided in the Administrator's May 7 reply. I also asked for a detailed description of Administrator Walter's involvement in the decisionmaking processes which led up to the final agreement. Administrator Walters' reply totally ignored that matter. Mr. Chairman, I ask unanimous consent that a copy of this exchange of correspondence be printed in the record at this point. Chairman MURKOWSKI. Without objection. [The April 12, 1985, letter to Administrator Walters and his May 7, 1985, response thereto, referred to above, follow:] |