[Budget of the United States Government, Fiscal Year 1999]
[Page 233-237]
[DOCID: f:1999_bud.bud26.wais]
From the Budget of the U.S., FY 1999 Online via GPO Access

[[Page 233]]

                   26.  VETERANS BENEFITS AND SERVICES


                   Table 26-1.  FEDERAL RESOURCES IN SUPPORT OF VETERANS BENEFITS AND SERVICES                  
                                            (In millions of dollars)                                            
               Function 700                   1997   -----------------------------------------------------------
                                             Actual     1998      1999      2000      2001      2002      2003  
  Discretionary Budget Authority..........    18,908    18,973    18,941    18,939    18,925    18,927    19,584
  Mandatory Outlays:                                                                                            
    Existing law..........................    20,705    24,010    24,409    25,391    26,742    30,820    31,904
    Proposed legislation..................  ........  ........      -188      -356      -915    -4,311    -3,903
Credit Activity:                                                                                                
  Direct loan disbursements...............     1,341     1,950       174       220       198       154       112
  Guaranteed loans........................    24,287    24,844    23,440    22,895    23,399    22,786    23,287
Tax Expenditures:                                                                                               
  Existing law............................     2,966     3,136     3,310     3,505     3,710     3,930     4,160

  The Federal Government provides benefits and services to veterans (and 
their survivors) of conflicts as long ago as the Spanish-American War 
and as recent as the Gulf War, recognizing the sacrifices of wartime and 
peacetime veterans during their military service. The Federal Government 
spends over $40 billion a year on veterans benefits and services, and 
provides over $3 billion in tax benefits, to compensate veterans and 
their survivors for service-related disabilities, provide medical care 
to low-income and disabled veterans, and help returning veterans prepare 
for reentry into civilian life through education and training. In 
addition, veterans benefits provide financial assistance to needy 
veterans of wartime service and their survivors.
  About six percent of veterans are military retirees, who can receive 
both military retirement from the Department of Defense (DOD) and 
veterans benefits from the Department of Veterans Affairs (VA). Active 
duty military personnel are eligible for veterans housing benefits, and 
they can contribute to the Montgomery GI Bill (MGIB) program for 
education benefits that are paid later. VA employs about 20 percent of 
the non-Defense workforce of the Federal Government--almost 250,000 
people, about 217,000 of whom deliver or support medical services to 
  VA's mission is ``to administer the laws providing benefits and other 
services to veterans and their dependents and the beneficiaries of 
veterans. To serve America's veterans and their families with dignity 
and compassion and be their principal advocate in ensuring that they 
receive medical care, benefits, social support, and lasting memorials 
promoting the health, welfare and dignity of all veterans in recognition 
of their service to this Nation.''
  The veteran population is declining, with most of the decline among 
draft-era veterans, meaning that a rising share of veterans comes from 
the All-Volunteer Force (see Chart 26-1). Thus, the types of needed 
benefits and services will likely change. Further, as the veteran 
population shrinks and technology improves, access to, and the quality 
of, service should continue to improve.

Medical Care

  VA provides health care services to 3.1 million veterans through its 
national system of 22 integrated health networks, consisting of 172 
hospitals, 439 ambulatory clinics, 131

[[Page 234]]


nursing homes, 40 domiciliaries <SUP>1</SUP>, and 206 readjustment 
counseling centers. VA is an important part of the Nation's social 
safety net because over half of its patients are low-income veterans who 
might not otherwise receive care. It also is a leading health care 
provider for veterans with substance abuse problems, mental illness, 
HIV/AIDS, and spinal cord injuries because private insurance usually 
does not fully cover these conditions.
  \1\ Domiciliaries serve homeless veterans and veterans who require 
short-term rehabilitation.
  VA's core mission is to meet the health care needs of veterans who 
have compensable service-connected injuries or very low incomes. The law 
makes these ``core'' veterans the highest priority for available Federal 
dollars for health care. However, VA may provide care to lower-priority 
veterans if resources allow and if the needs of higher-priority veterans 
have been met.
  In recent years, VA has reorganized its field facilities from 172 
largely independent medical centers into 22 Veterans Integrated Service 
Networks, charged with giving veterans the full continuum of care. 
Recent legislation eased restrictions on VA's ability to contract for 
care and share resources with Defense Department hospitals, State 
facilities, and local health care providers.
  To move further toward improving the health care of our Nation's 
veterans, VA will continue to enhance the efficiency, access, and 
quality of care. Through 2002, VA will pursue its ``30/20/10'' goal:
<bullet>   reduce the cost per patient by 30 percent (and by 11 percent 
          in 1999);
<bullet>   increase the number of patients treated by 20 percent (and by 
          nine percent in 1999); and
<bullet>   increase resources from outside sources to 10 percent (and by 
          five percent in 1999).
  In addition, VA has formed a national partnership with the American 
Hospital Association, the American Medical Association,

[[Page 235]]

the American Nurses Association, and other national associations to 
ensure patient quality of care.
  By 2003, VA plans to:
<bullet>   increase the number of patients with high volume common 
          disease entities who are treated using clinical guidelines to 
          90 percent (and to 60 percent in 1999);
<bullet>   increase the scores on the Chronic Disease Index to 95 
          percent (and to 91 percent in 1999); and
<bullet>   increase the scores on the Prevention Index to 95 percent 
          (and to 87 percent in 1999).

  Medical Research: VA's research program provides about $300 million to 
conduct basic, clinical, epidemiological, and behavioral studies across 
the entire spectrum of scientific disciplines, seeking to improve 
veterans medical care and health and enhancing our knowledge of disease 
and disability. VA is reorganizing its research to ensure that all 
projects clearly relate to the health care of veterans. In 1999, VA will 
focus its research efforts on aging, chronic diseases, mental illness, 
substance abuse, sensory loss, trauma related impairment, health systems 
research, special populations (including Persian Gulf veterans), and 
military occupational and environmental exposures.
<bullet>   At least 99 percent of funded projects will be relevant to 
          VA's mission in 1999, achieving the VA's goal.

  Health Care Education and Training: The Veterans Health Administration 
is the Nation's largest trainer of health care professionals, with about 
107,000 students a year who get some or all of their training in VA 
facilities through affiliations with over 1,000 educational 
institutions. The program trains medical, dental, nursing, and 
associated health professions students to ensure an adequate supply of 
clinical care providers for veterans and the Nation as a whole. The 
program will continue to realign its academic training and update its 
curriculum, focusing more on primary care to better meet the needs of 
the Veterans Health Administration and its patients, students, and 
academic partners.
<bullet>   In 1999, VA will train 44 percent of its residents in primary 
          care and, in 2003, increase that figure to 48 percent.

Veterans Benefits Administration (VBA)

  VBA processes veterans claims for benefits in 58 regional offices 
across the country. Its workload peaked in 1993 and 1994, when it needed 
214 days to process a claim. As the veteran population declines, the 
number of new claims and appeals will also likely decline. In 1997, the 
number of days to process a new claim averaged 133. VBA is developing a 
comprehensive strategic plan to further improve processing performance. 
Its current strategic goals include:
<bullet>   improving responsiveness to customer needs and expectations;
<bullet>   improving service delivery and benefit claims processing;
<bullet>   ensuring best value for the available taxpayers' dollar; and
<bullet>   ensuring a satisfying and rewarding work environment.

Income Security

  Several VA programs help veterans and their survivors maintain their 
income when the veteran is disabled or deceased. The Federal Government 
will spend over $21 billion for these programs in 1999, including the 
funds Congress approves each year to subsidize life insurance for 
veterans who are too disabled to get affordable coverage from private 
insurance. Veterans can receive these benefits along with the income 
security that goes to all Americans, such as Social Security and 
unemployment insurance.

  Compensation: Veterans with disabilities resulting from, or coincident 
with, military service receive monthly compensation payments, based on 
the degree of disability. The payment does not depend on the veteran's 
income or age, or on whether the disability is the result of combat or a 
natural-life affliction. It does, however, depend on the average fall in 
earnings capacity that the Government presumes for veterans with the 
same degree of disability. Survivors of veterans who die from service-
connected injuries receive payments in the form of dependency and 
indemnity com

[[Page 236]]

pensation. Benefits are indexed annually by the same cost-of-living 
adjustment (COLA) as Social Security, which is an estimated 2.2 percent 
for 1999.
  The number of veterans and survivors of deceased veterans receiving 
compensation benefits will total an estimated 2.7 million in 1999. While 
the veteran population will decline, the compensation caseload will 
remain relatively constant due to changes in eligibility and better 
outreach efforts. COLAs and increased payments to aging veterans will 
increase compensation spending by about $3 billion from 1999 to 2003.
<bullet>   In 1999, VA will process original compensation claims in 106 
          days, dropping to 53 days in 2002.

  Pensions: The Government provides pensions to lower-income, wartime-
service veterans, or veterans who became permanently and totally 
disabled after their military service. Survivors of wartime-service 
veterans may qualify for pension benefits based on financial need. 
Veterans pensions, which also increase annually with COLAs, will cost 
over $3 billion in 1999. The number of pension recipients will continue 
to fall from an estimated 673,000 in 1999 to less than 600,000 in 2003, 
as the number of veterans drops.
<bullet>   In 1999, VA will process original pension claims in 80 days, 
          dropping to 29 days in 2002.

  Insurance: VA has provided life insurance coverage to service members 
and veterans since 1917 and now directly administers or supervises eight 
distinct programs. Six of the programs are self-supporting, with the 
costs covered by premium payments from the policyholders and earnings 
from investments in Treasury securities. The other two programs, 
designed for service-disabled veterans, require annual congressional 
appropriations to meet the costs of claims. Together, these eight 
programs will provide $488 billion in insurance coverage to over 4.7 
million veterans and service members in 1999. The program is designed to 
provide insurance protection and best-in-class service to veterans who 
can't purchase commercial policies at standard rates because of their 
service-connected disabilities. To reach this goal, the program is 
designed to provide disbursements (death claims, policy loans, cash 
surrenders) quickly and accurately, meeting or exceeding customer 
<bullet>   In 1999, VA will pay insurance claims in three and a half 
          days, dropping to 2.8 days in 2002.

Veterans Education, Training, and Rehabilitation

  Several Federal programs support job training and finance education 
for veterans and others. The Labor Department runs several programs just 
for veterans. In addition, several VA programs provide education, 
training, and rehabilitation benefits to veterans and military personnel 
who meet specific criteria, including the Montgomery GI bill (the 
largest of these programs), the post-Vietnam-era education program, the 
Vocational Rehabilitation program, and the Work-Study program. Spending 
for all VA programs in this area will total an estimated $1.5 billion in 

  The Montgomery GI Bill: The Government originally created MGIB as a 
test program, with more generous benefits than the post-Vietnam-era 
education program, to help veterans move to civilian life as well as to 
help the armed forces with recruitment. Service members who choose to 
enter the program have their pay reduced by $100 a month in their first 
year of military service. The VA administers the program, paying basic 
benefits once the service member leaves the military. Basic benefits now 
total over $16,000 (about 13 times the original reduction in the service 
member's pay).
  MGIB beneficiaries receive a monthly check based on whether they are 
enrolled in school on a full- or part-time basis. They can get 36 months 
worth of payments, but they must certify monthly that they are in 
school. DOD may provide additional benefits to help recruit certain 
specialties and critical skills. Nearly 310,000 veterans and service 
members will use these benefits in 1999. The MGIB also provides 
education benefits to reservists while they are in service. DOD pays 
these benefits, and the VA administers the program. In 1999, over 76,000 
reservists will use the program. Over 90 percent of MGIB beneficiaries 
use their benefits to attend a college or university. The Administration 
will propose

[[Page 237]]

legislation to enact a one-time, 20-percent rate increase for all MGIB 
beneficiaries, dependents, and survivors.
<bullet>   In 1999, VA will increase the participation rate of eligible 
          veterans in the MGIB from its current 37 percent to 45 
          percent, and increase the figure to 69 percent in 2003.

Veterans Housing

  Along with the mortgage assistance that veterans can get through the 
Federal Housing Administration insurance program, the VA-guaranteed loan 
program in 1999 will help an estimated 222,000 veterans get mortgages, 
totaling almost $24 billion. The Federal Government will spend an 
estimated $264 million on this program in 1999, reflecting the Federal 
subsidies implicit in loans issued during the year. Slightly over 40 
percent of veterans who have owned homes have used the VA loan guaranty 
program. To increase veteran home ownership and the program's 
efficiency, VA will cut its administrative costs.
<bullet>   In 1999, VA will reduce the servicing cost of each loan to 
          $193, from its 1997 level of $334.

National Cemetery System

  The VA provides burial in its National Cemetery System for eligible 
veterans, active duty military personnel, and their dependents--with the 
VA managing 115 national cemeteries across the country. VA will spend 
over $90 million in 1999 for VA cemetery operations, excluding 
reimbursements from other accounts. Over 73,000 veterans and their 
family members were buried in National Cemeteries in 1997. The system is 
working to ensure that all eligible veterans have reasonable access to a 
burial option. The program will complete construction of four new 
national cemeteries, expand existing cemeteries, develop more effective 
use of available burial space, and encourage States' participation in 
the State Cemetery Grants Program.
<bullet>   In 1999, VA will increase the percentage of veterans served 
          by a burial option within a reasonable distance to 75 percent.

Related Programs

  Many veterans get help from other Federal income security, health, 
housing credit, education, training, employment, and social service 
programs that are available to the general population. In addition, a 
number of these programs have components specifically designed for 
veterans. Some veterans also receive preference for Federal jobs. 
Starting in 1999, the children of Vietnam veterans will receive 
compensation if they are afflicted with spina bifida, which the 
Government will presume was caused by a veteran parent's exposure to 

Tax Incentives

  Along with direct Federal funding, certain tax benefits help veterans. 
The law keeps all cash benefits that the VA administers (disability 
compensation, pension, and GI bill benefits) free from tax. Together, 
these three exclusions will cost about $3 billion in 1999. The Federal 
Government also helps veterans obtain housing through veterans bonds 
that State and local governments issue, the interest on which is not 
subject to Federal tax. In 1999, this provision will cost the Government 
an estimated $75 million.