To amend title 38, United States Code, to provide for certain improvements in the way in which health-care resources are allocated by the Department of Veterans Affairs, and for other purposes.

Amends Federal veterans' benefits provisions to: (1) consider a veteran unable to defray the expenses of necessary medical care if such costs for the previous year are in excess of seven and one-half percent of the veteran's adjusted gross income for such year; (2) increase the income threshold used to determine a veteran's ability to defray such expenses with respect to those veterans residing in a Standard Metropolitan Statistical Area; (3) include within the membership of the Committee on Care of Severely Chronically Mentally Ill Veterans members of the general public with expertise in the care of the chronically mentally ill; (4) require the Secretary of Veterans Affairs to designate at least one Center for Mental Illness Research, Education, and Clinical Activities in each service network region of the Veterans Health Administration; and (5) direct the Secretary, in applying the veterans' health care resources allocation system, to exclude from consideration programs of readjustment counseling and treatment, counseling and treatment for the mentally ill, drug and alcohol abuse and dependence, homelessness, post-traumatic stress disorder, spinal cord dysfunctions, AIDS, and geriatric and extended care.