GENERAL STATEMENT Mr. Whittier, do you have a statement for us? Mr. WHITTIER. Yes; I do, Mr. Chairman. It has been made available to members of the committee. Without reading it exactly, perhaps I can run down the major items. We are asking for supplemental appropriations in the amount of $294,319,800. The biggest item is for "Compensation and pensions." Note the table on the front page. That basically is divided into two things. Last year you may remember Congress cut those amounts for payments authorized by law and we must have a supplemental to make up a deficit of around, I think it is $129 million. In addition to that, at the last session, Congress passed additional legislation which will require $127 million more. Mr. THOMAS. How badly did we miss our guess, about $130 million? Mr. WHITTIER. Yes. Mr. THOMAS. Proceed. Mr. WHITTIER. So that makes a total of $256 million, for compensation and pensions. Basically, readjustment benefits are the same fundamental story. On servicemen's indemnity we missed our guess and there is about two and a quarter million dollars additional needed there. In-patient care, which is the first item, is about $6 million. It is just a little different situation. The first two items for in-patient care and operation of supply depots, are due to wage board increases which have to be paid. There is an offset in the requirement for in-patient care due to a downward trend in the patient load, and we are applying that saving to the total needed. In addition to that there were some increased costs for various commodities in the hospitals. They absorbed that by cutting down on personnel, but we would like to restore that personnel for the remainder of the year and the net figure putting those things together, adds up to the $6,032,000 for in-patient care. Mr. THOMAS. To summarize what you said, the Veterans' Administration is seeking a supplemental for fiscal year 1958 of $294,319,800 and it is made up of 5 items: In-patient care, $6,032,000; maintenance and operation of supply depots, $37,800; compensation and pensions, $256 million; readjustment benefits, $30 million; and servicemen's indemnities, $2,250,000. IN-PATIENT CARE Mr. Reporter, insert in the record at this point pages IC-1, IC-2, IC-3, and IC-4. (The information is as follows:) IN-PATIENT CARE For an additional amount for "In-patient care," $6,032,000; the limitation under this head in the Independent Offices Appropriation Act, 1958, on the amount available for expenses of travel of employees, is increased from "$366,500" to "$416,500." Provided, That notwithstanding the last proviso under this head in the Independent Offices Appropriation Act, 1958, in-patient care and treatment may be furnished to an average of 140,490 beneficiaries during the current fiscal year without any proportionate reduction in expenditures. IN-PATIENT CARE, VETERANS' ADMINISTRATION, $6,032,000 Additional funds in the amount of $6,032,000 will be required during fiscal year 1958 for operation of the in-patient care program. The $6,032,000 requested is the net amount required to pay fiscal year 1958 costs of wage rate increases with effective dates prior to December 16, 1957, salary increases for professional engineers and scientists, partial restoration of treatment staff losses resulting from absorption of price increases, and to compensate for the decline in reimbursement. collections after decreasing the gross amount required therefor by $400,000 estimated savings for reduction of 310 beneficiary load-100 in State homes and 210 in VA hospitals. Explanations of the need for the additionally requested amounts: are as follows: Wage rate increases, $4,484,000 On August 28, 1955, as a result of Public Law 763, 83d Congress, the labor forces or annual Classification Act salary scales in VA hospitals and domiciliaries were covered into the wage program. The Classification Act requires that wage-board employees receive wage rates which "shall be fixed and adjusted from time to time as nearly as is consistent with the public interest in accordance with the prevailing rates. During fiscal year 1957, the $130,045,064 in-patient care cost of wage-rate payments exceeded the $123,606,000 amount originally budgeted therefor by $6,439,064. This increased cost of wage adjustments was financed as follows: Provided by reduction in beneficiary load_. Absorbed by reduction in in-patient care employment_ Total cost of wage-rate increases_ $2, 333, 000 1, 000, 000 3, 106, 064 6, 439, 064 The fiscal year 1958 in-patient care appropriation did not include funds for payment of wage-rate increases having effective date after December 31, 1956. The costs of wage-rate adjustments approved during the 111⁄2 months period January 1 through December 15, 1957, amount to $4,484,685 for fiscal year 1958. Based on this experience, it is estimated that the aggregate costs of wage-rate increases, including increases that will be approved in the remaining 612-month period, December 16, 1957, through June 30, 1958, will be at least. $6 million for fiscal year 1958. Supplemental funds to pay the wage rate increases for the remaining period will not be requested until such costs can be assessed more accurately. Financial data relating to the additional amount presently requested is as follows: Actual fiscal year 1958 cost of wage increases approved Jan. 1, 1957, to Dec. 15, 1957 Neuropsychiatric hospitals_ Tuberculosis hospitals.. General medical and surgical hospitals. Domiciliaries__. Total__ Salary increases for professional engineers and scientists, $42,000 $1, 378, 943 398, 067 2, 497, 506 210, 169 4, 484, 685 United States Civil Service Commission Departmental Circular No. 793, Supplement No. 33 dated December 9, 1957, established new minimum pay rates under section 803 (a) of the Classification Act of 1949 as amended for professional engineers and certain scientists through grade GS-17. This action has resulted in an additional cost to the in-patient care appropriation of $42,000for payment of the new salary rates to 165 field personnel in the subject categories. for the period December 29, 1957, through June 30, 1958. Distribution of the $42,000 increase by type of program is as follows: Neuropsychiatric hospitals, $10,000; tuberculosis hospitals, $5,000; general medical and surgical hospitals, $24,000; and domiciliaries, $3,000. Partial restoration of treatment staff losses resulting from absorption of commodity and service cost increases, $250,000 For the past several years the inpatient care medical program of the VA has been confronted with steadily rising costs of equipment, commodities, utilities, and commercial services. As published by the Bureau of Labor Statistics, the 20957-58- -12 Wholesale Price Index has shown the following increases from July 1956 through June 1957: All commodities__ Farm products__. All other_.. Percent 3.0 1.0 3.8 18. 8 3. 1 These increasing costs are occurring at a time when advances in medical treatment techniques call for increasing the VA hospital ratio of employees to patients. However, the VA hospital managers have had no option but to pay the increasing costs for foods, drugs, supplies, and services within their available inpatient funds. In order to do so, managers have been forced to curtail treatment staff below essential requirements. Mr. THOMAS. I note from this language that you are seeking now for inpatient care that is your first item $6,032,000, and the limitation under this heading for travel is increased $50,000, if my written figures are correct. REDUCTION IN FISCAL YEAR PATIENT LOAD Why is that necessary? It says: Provided, That, notwithstanding the last proviso under this head in the Independent Offices Appropriation Act, 1958, inpatient care and treatment may be furnished to an average of 140,490 beneficiaries during the current fiscal year without any proportionate reduction in expenditures. In other words, what is your patient load going to be? Mr. WHITTIER. We are cutting the patient load by 310, to this figure, which is 140,490. Mr. THOMAS. A 310 reduction. Do you want this limitation taken off? Mr. KELSEY. Reduced to that extent, Mr. Chairman. Mr. THOMAS. Dollarwise, what does it do when you take it off? Mr. KELSEY. It reduces the amount of the supplemental required by $400,000. Mr. THOMAS. How do you arrive at that? Mr. KELSEY. That is arrived at from different types of patients, some of which are in State homes. Mr. THOMAS. But this limitation is dealing with dollars and cents on bed occupancy, this 140,490. In other words, your inpatient care money is based upon this many beneficiaries, this many people in bed during that year, and if it is a less amount then your inpatient care, dollars and cents, is supposed to be less in proportion. Now, what happens if you are going to reduce that by 310? Mr. WHITTIER. $400,000 is the savings. Mr. THOMAS. The language in the 1958 Independent Offices Act reads: Provided further, That the foregoing appropriation is predicated on furnishing inpatient care and treatment to an average of 140,800 beneficiaries during the fiscal year 1958, including members in States or Territorial homes, and if a lesser number is experienced such appropriation shall be expended only in proportion to the average number of beneficiaries furnished such care and treatment. Mr. WHITTIER. The money amount which would be deducted because of those 310 patients would be $400,000. Mr. THOMAS. How do you arrive at the $400,000? Mr. WISE. Of the 310 total, 100 are in the State home program, where the Federal reimbursable rate is not to exceed $700 per year. Now for the remaining 210, who are predominantly TB patients because of the decline we are now experiencing in the TB patient load, the savings will run about $1,500 per patient per year. Mr. THOMAS. How many did you say are in the State home program? Mr. WISE. Of the 310 reduction, a total of 100 are in the State home program. The reimbursable rate is about $700 per annum for each of the State home members, actually $690. Mr. THOMAS. What is that decrease in State homes due to? Mr. WISE. Actually, the original estimate projected that the Millidgeville, Ga., State Home would be approved for the entire year; however the Comptroller General did not approve payment there as legal until along toward November or December, and the effective date on which the Federal payment was to commence was January 1, 1958. That served to reduce the agency's earlier estimate of some 9,300 members in the State home to the revised figure of 9,200. Mr. THOMAS. You say a reduction of 310 beneficiaries is 100 in the State homes and the remainder of 210 predominantly TB patients. Next is the wage board increases of $4,484,000. WAGE BOARD INCREASES HOSPITALS During fiscal year 1957 the $130,045,064 inpatient care cost of wage rate payments exceeded the $123,606,000 amount originally budgeted therefor by $6,439,064. This increased cost of wage adjustments was financed as follows: Provided by reduction in beneficiary load, $2,333,000. Provided by supplemental appropriation, $1,000,000. Absorbed by reduction in inpatient care employment, $3,106,064. How was that absorption made? Was it in closing of beds or turnover in personnel? Mr. WHITTIER. Personnel. Mr. THOMAS. Voluntary separation or what? Mr. WISE. By not filling vacancies. Mr. THOMAS. Was that by a Bureau of the Budget order, or whose order was it? Mr. WHITTIER. It was due to the increase in costs which we absorbed. We wanted to stay within the appropriation-the increased cost as indicated on page IC-4. We had to find the money, and we found it by not filling the vacancies, by attrition. SALARY INCREASES FOR PROFESSIONAL PERSONNEL Mr. THOMAS. Next is an item of $42,000 for salary increases for professional engineers and scientists, as follows: Neuropsychiatric hospitals, $10,000; Tuberculosis hospitals, $5,000; General medical and surgical hospitals, $24,000; and Domiciliaries, $3,000. What is the actual number of employees? Mr. WHITTIER. The salary rates are for 165 field personnel in such categories. Mr. THOMAS. For the payment of new salaries for 165. That is all field personnel. Is there any in the District? Mr. WISE. Not under this appropriation. The agency is absorbing those costs. INCREASED COSTS Mr. THOMAS. The next item is $250,000 for partial restoration of treatment staff losses resulting from absorption of commodity and service cost increases. For the past several years the in-patient care medical program of the VA has been confronted with steadily rising costs of equipment, commodities, utilities, and commercial services. *** Recently, a survey was made to determine the extent that experienced increases in prices affected the operation of the hospitals and domiciliaries. The following chart shows the compilation of the increased costs between 1956 and 1957, as reported by managers of the VA hospitals and domiciliaries: Mr. Reporter, insert that chart at the top of page 5. (The chart is as follows:) The Veterans' Administration hospitals and domiciliaries were required to finance these increased costs in fiscal year 1957, as well as a substantial portion of the wage board increases by reducing employment nearly 1,000 below the number of employees required to render proper care and treatment to the experienced beneficiary load. The fiscal year 1959 inpatient care budget estimate being forwarded to Congress provides $3,773,000 to restore a portion of these staffing losses. SHORTAGE IN ANTICIPATED REIMBURSEMENTS How much money did not come in that you thought you were going to collect? Mr. WHITTIER. On the reimbursements? Mr. THOMAS. You say that collections cannot be expected to exceed $5 million and you thought it would be how much? Mr. WHITTIER. $6,656,000. Mr. THOMAS. And you are short $1,656,000. Mr. WHITTIER. That is the estimate. Mr. THOMAS. Below the figure specified in the appropriations act. This continued decline in collections is due to the practice of many insurance companies refusing payments to tax-supported institutions, and so specifying in their contracts. You can't do anything about it if they don't pay you? Mr. TURNER. Mr. Chairman, in December 1956, the Eighth Circuit Court of Appeals ruled against us in the St. Paul Mercury Indemnity case, and, after that decision, many of these third parties against whom claims were asserted, whether they were insurance companies or simply tort feasors or anybody else who might be responsible for injuries received by a veteran, would cite the St. Paul Mercury Indemnity case, and decline to pay. |