Report No: 533
Date: 12/07/2000

OMB COST ESTIMATE
FOR PAY-AS-YOU-GO CALCULATIONS

1. LAW NUMBER: P.L.106-419 (S. 1402)
2. BILL TITLE: Veterans Benefits and Health Care Improvement Act of 2000
3. BILL PURPOSE: (1) Increases the rates of educational assistance under the Montgomery GI Bill and the survivors' and dependents' program; (2) modifies procedures for the adjustment of rates of pay for nurses, employed by the Department of Veterans Affairs (VA); and (3) makes other changes in veterans educational assistance, health care, and benefits programs, and for other purposes.
4. OMB ESTIMATE: P.L. 106-419 expands educational assistance and various other veterans' benefits. The law increases the basic monthly Montgomery GI Bill educational benefits by 21 percent in FY 2001 (over FY 2000 rates) and allows participants to make additional contributions to earn higher monthly benefits. The law also increases educational benefits for survivors and dependents by 21 percent in FY 2001 (over FY 2000 rates) and provides annual cost-of-living adjustments. OMB estimates that these educational provisions will cost $1.3 billion over the 2001-2005 period. Various other increases, including an increase to the limitation on benefit payments to incompetent institutionalized veterans, are estimated to cost $0.1 billion over the five years. In order to partially offset the cost of these increases, the law extends for FYs 2003-2008 certain expiring savings provisions relating to VA housing, income verification with the Internal Revenue Service, and the authority to limit VA pension benefits to certain Medicaid-eligible recipients. These extensions save $1.1 billion in total over the 2003-2005 period.

	(Fiscal years; in millions of dollars)
	2000	2001	2002	2003	2004	2005
Net costs...............	0	219	260	-77	-45	-22

5. CBO ESTIMATE:

	(Fiscal years; in millions of dollars)
	2000	2001	2002	2003	2004	2005
Net costs...............	0	154	277	-103	-86	-91

6. EXPLANATION OF DIFFERENCES BETWEEN OMB AND CBO ESTIMATES:

OMB estimates higher education benefit outlays than CBO in FY 2001 due to different assumptions about the number of trainees and benefit usage. However, CBO estimates higher education benefit costs over FYs 2002-2005 as a result of assuming that larger amounts of the benefits will be used at a faster pace due to the rate increases that take effect in FY 2001. The differences in FYs 2003-2005 result largely from CBO's higher estimate of net savings from extending the authority to limit VA pension benefits to certain Medicaid-eligible recipients, which more than offsets CBO's higher estimate of education benefit costs. In particular, CBO estimates that lower costs will be shifted to Medicaid as a result of extending this provision.

7. CUMULATIVE EFFECT OF DIRECT SPENDING AND REVENUE LEGISLATION ENACTED TO DATE:

	(Fiscal years; in millions of dollars)
	2000	2001	2002	2003	2004	2005
Outlay effect..............	34	1,372	2,444	7,074	7,807	8,002
Receipt effect............	-8	-689	-808	-870	-922	-924
Net costs....................	42	2,061	3,252	7,944	8,729	8,926

NOTE: The cumulative effect of direct spending and revenue legislation enacted to date is currently estimated to result in an end-of-session sequester. The Administration looks forward to working with the Congress to ensure that an unintended sequester does not occur.

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