way of previous commitments, they cannot carry on a program. Without them carrying on this program with us there just will not be a top-level medical program. The present fine medical program for the benefit of the veterans and the elevation of American medicine will rapidly deteriorate.

We have a very interesting presentation to offer now. It will be very short, and I hope this will prove to be a very interesting chart. It is related to the home town care program.

The CHAIRMAN. Will that money come out of this $5,000,000 program?

Admiral BOONE. No relief is offered in dental home town-care program under the 1953 supplemental and the backlog is growing by leaps and bounds. Here is the situation-you pay for a dental examination. Now, it may cost, we will say, $14, or whatever it is for the examination. You cannot treat the patient right away, and if you have to wait a few months before treating him, you have to have a reexamination, and you have to pay that fee again. In the meantime the pathology is changing so your cost is becoming greater. This program is a $40-million-a-year program if we can meet it, but we have had to cut back on it. I would like to ask Dr. Fauber, who is a dentist, and Assistant Chief Medical Director for Dentistry if he will present this chart, and I think the very few minutes' time he will spend on it will be very well spent.

The CHAIRMAN. Admiral, we have to go over to the floor very shortly.

There are one or two questions which I think ought to be asked of Mr. McNamara of the Budget before we go to the floor because if an amendment comes up on the floor we want to have that information, and I understand that Mr. Teague, of Texas, will probably introduce an amendment.

Mr. AYRES. Madam Chairman.

The CHAIRMAN. The gentleman from Ohio.

Mr. AYRES. Along that same line, the colonel has requested that you be asked the reasons for cutting the VA hospital request from $16.7 million to $5 million.

Mr. MCNAMARA. In order to answer that question I would have to take you back to the beginning because I do not believe that this committee can have any clear understanding of the basic problems involved here if you are not brought up to date on it and unless you understand what has been going on. If I am permitted the time to do it I would like to do so. To give you any brief answer to the question you ask would simply not give you the real picture.

Mr. AYRES. In other words, it will take some time to do it?

Mr. MCNAMARA. It will take the next 15 minutes before you go to the floor.

Madam Chairman, while I am not sure that Admiral Boone intended to imply that the Bureau of the Budget operates on the basis of a slide rule I would like to make it clear to the committee that we do not operate that way.

I feel that we have a very extensive, detailed, and thorough knowledge of all of the operations of the Veterans' Administration based upon many years of working with the agency and the continuous analysis of its various programs. In our investigations and studies and our collaboration with them we have had most intimate and close

contact, and I am happy to say from our point of view very fine relationships with all of the people throughout that organization.

Mr. EVINS. I think we will take judicial notice of that fact, Mr. McNamara.

Mr. MCNAMARA. Thank you very much, sir.

I think it would be fair to the committee, to the Bureau of the Budget, and to the Veterans' Administration, too, because I have the feeling that they are in a difficult position, if I were to review for you solely on a factual basis what has happened. This is all related to the 1953 budget requirements and requests.

This problem is related, as we see it, only to the old hospitals of the Veterans' Administration, and not funds for the new hospitals. I will try to portray the situation step by step, and if that does not adequately or fairly describe it, I would be very happy to have a representative of the Veterans' Administration point out any omissions.

After a thorough review by the Budget Bureau of the agency request for funds for the operation of its medical-care program, and after an appeal from the amount initially allowed by the Bureau was taken by the Administrator of Veterans' Affairs, first to the Budget Director and then twice to the President personally, an amount was included in the Presidential budget.

I would like to make it clear that, unlike practically any other program handled by the Bureau of the Budget in the 1953 budget, this program was reviewed in intensive detail by the Director and the Assistant Director, both of whom have intimate knowledge of the program, and it was presented to the President twice in considerable detail. So, the decision as to the amount of funds and the level of programs to be operated by the Veterans' Administration in the fiscal year 1953 was made at the highest level by the President of the United States personally.

The CHAIRMAN. That was President Truman?

Mr. MCNAMARA. Yes; President Truman.

Mr. SECREST. Do you think there was any effort in the Bureau of the Budget or up in the higher levels of which you speak to whack down on the hospitals for the veterans and those other things in order that they might send $6 billion or $8 billion over to Europe and still come within $10 billion of a balanced budget?

Mr. MCNAMARA. I would answer this way: There were fundamental basic policies governing the development of the entire budget of the United States which were established by the then President. These policies were furnished the head of each agency in June 1952 for their guidance in formulating their budget requests. One of those policies was that no programs of the Government other than defense activities would be operated at a higher level than was provided for in the fiscal year 1952. That policy, so far as I know, was controlling on the Veterans' Administration the same as on any other agency of Government. Mr. SECREST. In other words, before you started to prepare the budget you had an order that you could not make it any bigger than the budget of the year before?

Mr. MCNAMARA. Before the Veterans' Administration started preparing its budget, it had been furnished the governing ground rules which included advice as to program levels. I want to make it clear that the policy did not restrict the level of hospital patient loads, but

only the quality or the levels of programs such as staffing patterns, unit costs, and so forth. That is one of the fundamental issues involved in this problem before you today.

The Veterans' Administration did not adhere to that basic controlling policy in the submission of its budget.

Another policy was that it would be assumed that there would be no increase in the price levels or other units of cost in program operations.

That is another minor problem.

With those guiding policies applying equally to the Budget Bureau we analyzed the budget estimate submitted by this particular agency as well as those of all the other medical-care programs of the Government.

Mr. SECREST. In that straitjacket I would say you are encircledMr. MCNAMARA. We endeavored to arrive at sound recommendations based on those guiding policies.

Mr. EVINS. How many departments got an exception to the rule? Mr. MCNAMARA. I am not qualified to answer that question, Mr. Evins. To the best of my knowledge there were none except those engaged in conducting defense programs.

On the basis of those ground rules, if I may call them such, and giving recognition to the fact that the Veterans' Administration had an increased patient load. Because it would be opening more hospitals, we endeavored to prepare a realistic estimate of what the patient load would be.

There was a disagreement between the Bureau of the Budget and the agency as there has been for the 15 years that I have been in the Bureau of the Budget, and for the 6 years that I have worked in the Veterans' Administration budget office. That has always happened, and in this instance the estimate of the Veterans' Administration was finally accepted, which was a patient load of 102,000 average daily patients in the hospitals in 1953, and the President approved that level of the program. I am speaking now only of the in-patient program because that is what you have been raising your question about. To carry on that program the budget provided for an average employment in the old hospitals, which Admiral Boone has defined, of 95,000 man-years to be carried this fiscal year. The agency, as I recall, had asked for 99,600 in its budget submission. Incidentally, the Administrator of Veterans' Affairs did not appeal that employment level but he did appeal a number of other items in the budget.

At the time the President sent his budget to Congress early in January the Veterans' Administration had on its rolls in the medical program 101,000 employees. Therefore, at that time the Veterans' Administration was already carrying 6,000 more employees than were provided for in the budget and it should have been aware of that fact. The CHAIRMAN. May I interrupt you for just a second, Mr. McNamara?

Mr. MCNAMARA. Yes, ma'am.

The CHAIRMAN. Mr. McNamara, did that patient load of 101,000 take into account the increase also due to Korean veterans?

Mr. MCNAMARA. Yes, ma'am, it provided for an estimated number of them.

The CHAIRMAN. I ask about that because that is much larger than the total anticipated.

Mr. MCNAMARA. It provided for an estimated number of Korean veterans, based upon experience. It was at the beginning of the year, 1,800, and the end of the year, 4,000.

This is the crux of the problem. The budget the President sent to Congress provided for a specific patient load. It also provided for the continuation of employment levels in the old hospitals comparable with those which actually existed in the old hospitals for the fiscal year 1952, for the year which ended last June 1951.

There were two actions taken on this budget both of which have contributed to the situation which ultimately faced the Veterans' Administration, as we see it. One was to reflect the decision that all agencies of the Government would be expected to reflect in its budget a certain portion of the savings of the Federal Employees Leave Act which was enacted by the Congress in 1951. The President had indicated to Congress that if the Congress enacted that legislation there would result a sizable across-the-board manpower savings which would be absorbed by the executive departments. In applying that policy to the Veterans' Administration the manpower requested by the Veterans' Administration in its 1953 budget was reduced by approximately 2,300 man-years of employment in the medical program. That meant that the Veterans' Administration would have to reduce its employment in old hospitals below its 1952 experience by at least that number. Failure to do so explains in part why it was already 5,600 positions over the 1953 budget when the President sent his budget to Congress. As of the beginning of the fiscal year the Veterans' Administration had not adjusted itself to meet that necessary reduction of 2,300.

In addition, it was overemployed by approximately that same number for another reason. I want to make it clear in saying that I am not being critical of the Veterans' Administration. I am only pointing out factually that in relation to the budget the President sent to Congress the agency had on duty approximately another 2,500 employees or slightly more than that. So that, at the beginning of the fiscal year, while the budget contemplated the employment of 96,500 in old hospitals the Veterans' Administration had on the first day of the fiscal year 100,400 employees in old hospitals, or, in round figures, 4,000 more than the budget would support.

Now, the historical record points out that even though the House had acted in late March, or the 1st of April, to reduce the President's budget, the Veterans' Administration maintained employment at approximately the same level until the beginning of the fiscal year which, obviously, puts the Veterans' Administration in a very difficult position.

You now have a picture of the situation in which the agency placed itself as it entered the fiscal year with a very substantially higher employment over what had been programed in the President's budget and specifically approved by him because this issue had been carried to him.

It was not until August 4, when the Director of the Bureau of the Budget felt that he was obligated to approve the apportionment for the medical program requested by the agency on the basis of its dis

tribution of the reduction made by the Congress in the President's budget, that initial action was taken by VA to reduce employment by freezing current employment. In approving the apportionment, the Administrator was advised that no deficiency or supplemental appropriation was contemplated.

The agency had one of two courses, and that was to reduce employment or incur a deficiency because it was already not following the program level that the budget contemplated.

Well, you know the rest of the history. The agency did not take action to reach the budgetary level at the beginning of the fiscal year. It did not do so until the President denied a supplemental appropriation estimate of $16,123,000 in late September, which would have been required at that time to continue the excess employment. The Administrator was forced into the position, if he was not to violate the antideficiency law, of making a drastic reduction in employment which might have been avoided if prompt action had been taken when the situation was so clearly apparent the 1st of July when Congress reduced this appropriation $40 million.

Now, Mr. Ayres, going to your direct question as to why the Bureau of the Budget approved only $6 million, and this $5 million supplementary estimate is actually equivalent to $6 million. As explained yesterday the income from collections has amounted to at least $1 million more than contemplated in the President's budget. So it is $6 million in effect. That was the amount the agency finally requested.

I will try to condense the picture substantially. I will summarize the way we arrived at the conclusion that the $6 million would be sufficient on the basis of the President's budget.

Subsequent to the submission of the President's budget, which was based on the operation of a given number of beds, and the opening of a definite number of new hospitals during the year, the construction program of the Veterans' Administration very seriously slowed down to the extent of an average delay of 6 months in the completion of the new hospitals which were scheduled to be opened during the fiscal year 1953.

The budget was based on a construction program which was published in August of 1951. That was the latest schedule we had. By the time Congress had enacted the appropriation and the fiscal year had arrived the construction schedule of May 1952, showed that a large number of scheduled hospital beds would not become available at all as contemplated by the budget. It is our computation that the savings which would accrue by reason of these beds not becoming available, and, therefore, they would not be able to operate them, amount to $15 million.

I will state this, and I was asked this morning why I did not state it yesterday, that had the Congress not reduced the appropriation of the Veterans' Administration the Bureau of the Budget probably would have been obligated to place in reserve at least $15 million of the funds that had been included in the President's budget because that amount would not be needed for beds that would not come into operation. The construction program has further slipped since that schedule which was published in May of 1952.

Now, that is $15 million of the $31 million which the agency allocated to the medical program out of the full amount which had been taken by the Congress from the President's budget. Next, the budget