To amend title 38, United States Code, to revise and improve eligibility for medical care and services under that title, and for other purposes.

Revises Federal veterans' benefits provisions to require the Secretary of Veterans Affairs to furnish hospital care, and to allow the Secretary to furnish nursing home care, to a veteran who is catastrophically disabled (a veteran whose expenditures for such care exceeded 7.5 percent of his or her gross adjusted income for the preceding year).

(Sec. 2) Makes eligible for medical services on an ambulatory or outpatient basis, notwithstanding that there is insufficient medical evidence to conclude that such disability may be associated with the described exposure, any disabled veteran who the Secretary finds: (1) may have been exposed to dioxin or was exposed to a toxic substance found in a herbicide or defoliant used for military purposes during the Vietnam era while serving on active duty in Vietnam; (2) was exposed while serving on active duty to ionizing radiation from the detonation of a nuclear device in connection with such veteran's participation in the test of such a device or with the American occupation of Hiroshima and Nagasaki, Japan, from September 11, 1945, through July 1, 1946; or (3) may have been exposed to a toxic substance or environmental hazard while serving on active duty in Southwest Asia during the Persian Gulf War. Prohibits the provision of such medical services: (1) for any disability that is found to have resulted from a cause other than the exposure described; or (2) after December 31, 1996. Repeals a provision regarding the order of priority for furnishing ambulatory or outpatient medical services for veterans.

(Sec. 3) Directs the Secretary to furnish nursing home, domiciliary, or long-term care to qualifying disabled veterans where necessary for medical purposes or to obviate the need for hospital care.

(Sec. 4) Authorizes the Secretary to furnish hospital and nursing home care to any adult dependent of a veteran which the Secretary determines is needed for a disability if such dependent agrees to pay a specified amount representing a portion of the costs of care. Makes such amounts collected or received by the United States for hospital, nursing home, and domiciliary care available to the Secretary for payment of the costs of such care, without fiscal year limitation.

(Sec. 5) Revises the definition of covered "medical services" for purposes of veterans' benefits provisions to include: (1) primary health care services which include initial diagnostic services, treatment services, referral to specialized care or services, and long-term followup care or services for certain chronic conditions, and routine services regarding disabilities that are provided by physicians who specialize in such disabilities; and (2) medical equipment and prosthetic appliances that are prescribed by a physician based on specific medical needs.

(Sec. 7) Repeals a requirement that the Secretary include in the budget documents submitted to the Congress for any fiscal year a detailed report on contract care and services furnished.

Authorizes the Secretary to furnish primary health care or preventive health services to veterans who reside in locations that are more than 50 miles or one hour traveling time from a Department of Veterans Affairs facility by or through contract with non-Department facilities under specified circumstances.

(Sec. 8) Modifies provisions regarding prosthetic appliances and seeing eye dogs. Directs the Secretary to furnish medical equipment or a prosthetic appliance (equipment) as well as necessary fitting and training to any veteran who is entitled to such equipment.

Authorizes the Secretary to repair or replace any reasonably necessary equipment belonging to the veteran which is damaged or destroyed by an accident caused by a service-connected disability for which the veteran is in receipt of, or would, but for the receipt of retirement pay, be entitled to, disability compensation. Authorizes the Secretary to provide eligible veterans: (1) training in a Department facility or by contract, including certain travel and incidental expenses; (2) special clothing made necessary by the wearing of equipment; (3) seeing-eye or guide dogs trained to aid the blind and devices for aiding individuals in overcoming blindness, plus training, including travel expenses; and (4) devices for assisting in overcoming deafness, including telecaptioning decoding devices for television receivers.

(Sec. 9) Revises provisions regarding the Department of Veterans Affairs Medical-Care Cost Recovery Fund to make specified amounts available to the Secretary for payment of the costs of furnishing hospital care and medical services, including the costs of Department personnel salaries.

(Sec. 10) Grants authority for reimbursement by Medicare of certain health care services provided by Department facilities.

(Sec. 11) Directs the Secretary to ensure that the Department maintains its capacity to provide for the specialized treatment and rehabilitative needs of disabled veterans, including veterans with spinal cord dysfunction, blindness, and mental illness, in a manner that: (1) affords reasonable access to care and services for those specialized needs; and (2) ensures that overall Department capacity to provide such services is not reduced below its capacity to provide such services as of the date of enactment of this Act.