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OVERSIGHT HEARING ON THE DEPARTMENT OF

VETERANS AFFAIRS LIFE INSURANCE PROGRAM

HEARING

BEFORE THE

SUBCOMMITTEE ON BENEFITS

OF THE

COMMITTEE ON VETERANS’ AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

SEPTEMBER 25, 2003

Printed for the use of the Committee on Veterans’ Affairs

Serial No. 108–23

(
COMMITTEE ON VETERANS’ AFFAIRS 

CHRISTOPHER H. SMITH, New Jersey, Chairman 

MICHAEL BILIRAKIS, Florida 

TERRY EVERETT, Alabama 

STEVE BUYER, Indiana 

JACK QUINN, New York 

CLIFF STEARNS, Florida 

JERRY MORAN, Kansas 

RICHARD H. BAKER, Louisiana 

ROB SIMMONS, Connecticut 

HENRY E. BROWN, JR., South Carolina 

JEFF MILLER, Florida 

JOHN BOOZMAN, Arkansas 

JEB BRADLEY, New Hampshire 

BOB BEAUPREZ, Colorado 

GINNY BROWN-WAITE, Florida 

RICK RENZI, Arizona 

TIM MURPHY, Pennsylvania 

LANE EVANS, Illinois 

BOB FILNER, California 

LUIS V. GUTIERREZ, Illinois 

CORRINE BROWN, Florida 

VIC SNYDER, Arkansas 

CIRO D. RODRIGUEZ, Texas 

MICHAEL H. MICHAUD, Maine 

DARLENE HOOLEY, Oregon 

SILVESTRE REYES, Texas 

TED STRICKLAND, Ohio 

SHELLEY BERKLEY, Nevada 

TOM UDALL, New Mexico 

SUSAN A. DAVIS, California 

TIM RYAN, Ohio

PATRICK E. RYAN, Chief Counsel and Staff Director 

SUBCOMMITTEE ON BENEFITS 

HENRY E. BROWN, JR., South Carolina, Chairman 

JACK QUINN, New York 

JEFF MILLER, Florida 

JEB BRADLEY, New Hampshire 

GINNY BROWN-WAITE, Florida 

MICHAEL H. MICHAUD, Maine 

SUSAN A. DAVIS, California 

SILVESTRE REYES, Texas 

CORRINE BROWN, Florida

(II) 
(III)

C O N T E N T S 

September 25, 2003

Page

Oversight Hearing on the Department of Veterans Affairs Life Insurance 

Program ................................................................................................................ 1

OPENING STATEMENTS 

Chairman Brown ..................................................................................................... 1

Hon. Michael H. Michaud ....................................................................................... 2

Hon. Jeb Bradley ..................................................................................................... 7

Hon. Susan A. Davis ................................................................................................ 8

WITNESSES 

Blake, Carl, Associate Legislative Director, Paralyzed Veterans of America ..... 11

Prepared statement of Mr. Blake .................................................................... 47

Jones, Richard, National Legislative Director, AMVETS .................................... 14

Prepared statement of Mr. Jones .................................................................... 57

Lastowka, Thomas M., Director, VA Regional Office and Insurance Center, 

Veterans Benefits Administration, accompanied by Stephen Wurtz, Deputy 

Assistant Director for Insurance, Veterans Benefits Administration; and 

Mike Tarzian, Chief, Actuarial Staff, Veterans Benefits Administration ....... 3

Prepared statement of Mr. Lastowka ............................................................. 23

Lawrence, Brian E., Assistant National Legislative Director, Disabled American Veterans ........................................................................................................ 9

Prepared statement of Mr. Lawrence ............................................................. 43

Mooney, Donald L., Assistant Director for Resource Development, The American Legion ............................................................................................................ 12

Prepared statement of Mr. Mooney ................................................................ 53

Penrod, Col. Virginia S., (USAF), Director of Compensation, Military Personnel Policy, Department of Defense ................................................................ 4

Prepared statement of Colonel Virginia Penrod ............................................ 37

MATERIAL SUBMITTED FOR THE RECORD 

Correspondence: 

Letter from Congressman Evans to Secretary Principi, re Service Disabled Veterans Insurance (SDVI), August 4, 2003 .................................... 17

Letter from Secretary Principi to Congressman Evans, re response to 

August 4 letter dealing with SDVI, September 24, 2003 .......................... 19

Statement: 

Veterans of Foreign Wars ................................................................................ 60

Written committee questions and their responses: 

Congressman Michaud to Thomas M. Lastowka ........................................... 64

Congressman Michaud to Colonel Virginia Penrod ....................................... 72

(1)

OVERSIGHT HEARING ON THE DEPARTMENT 

OF VETERANS AFFAIRS LIFE INSURANCE 

PROGRAM 

THURSDAY, SEPTEMBER 25, 2003

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON BENEFITS, 

COMMITTEE ON VETERANS’ AFFAIRS, 

Washington, DC 

The subcommittee met, pursuant to notice, at 10:30 a.m., in room 

334 Cannon House Office Building, Hon. Henry Brown (chairman 

of the subcommittee) presiding. 

Present: Representatives Brown of South Carolina, Miller, Bradley, Michaud, and Davis. 

OPENING STATEMENT OF CHAIRMAN BROWN 

Mr. BROWN. Good morning. The hearing will come to order. 

Ranking Member Michaud and I would like to remind everyone 

that our hearing is being broadcast live throughout the world, in 

real time, over the Internet. Additionally, the hearing is being recorded and will be accessible on the committee’s award-winning 

website. The staff asked me to say that. 

Before we begin, I would like to stress the importance of receiving testimony by the date requested in the invitation letters. This 

subcommittee has, and will continue, to give witnesses at least 4 

weeks notice in anticipation of a hearing. In order for members and 

staff to properly prepare, we must have your testimony in a timely 

manner. I appreciate those who consistently meet these deadlines. 

We are meeting today to learn more about the Department of 

Veterans Affairs life insurance program and any operational or policy issues the Department faces in administering the program for 

servicemembers and their families. The Federal government first 

began issuing life insurance policies in 1914, and issued more than 

4 million policies during World War I. Today, VA’s insurance program is the seventh largest insurance program in the United 

States, with more than 7 million individuals insured for about $750 

billion. Coverage is provided to active duty servicemembers, their 

spouses and children, and veterans—disabled and non-disabled 

alike. 

I regret this is the first oversight hearing on insurance issues in 

a long, long time, aside from taking testimony on various legislative initiatives over the years that affect this program. I commend 

the Philadelphia Insurance Center for being named the recipient of 

the Secretary’s 2002 Robert W. Carey Quality Award, as well as 
2

their score of 90 on the American Customer Satisfaction Index. I 

have spent all my life in the business world and it is evident to me 

that VA’s insurance program is one of the best-managed in the 

government. 

I would like to recognize several VA insurance personnel who 

traveled from Philadelphia to observe the hearing: Mr. Joseph 

McCann, Assistant Director for Insurance; Mr. Thomas Buffington, 

Chief of Policy, Procedures and Information Technology; Mr. 

George Poole, Chief of Planning, Oversight and Actuarial Studies, 

and Ms. Ruth Berkheimer, Insurance Specialist; and Ms. Kristan 

Hoffman, Insurance Specialist. Welcome all. 

I now turn to the Ranking Member, Mr. Michaud, for his opening 

remarks. 

OPENING STATEMENT OF HON. MICHAEL H. MICHAUD 

Mr. MICHAUD. Thank you very much, Mr. Chairman. I don’t 

want to say that this hearing is unusual, but often when we hold 

hearings to review various aspects of VA benefits, we mainly hear 

a lot of complaints and concerns. So it is good to have a hearing 

that we are able to offer congratulations and compliments. I am 

pleased that you were able to schedule this hearing to review the 

operations of the Department of Veterans Affairs insurance program. By all accounts, the VA insurance program is doing an excellent job of meeting the needs of those who have paid the supreme 

sacrifice for our Nation. On behalf of more than 10,000 veterans 

with life insurance in force in Maine and their families, I want to 

thank you. 

The men and women who work in the insurance program are 

truly caring for the widows, the widowers, and orphans of our deceased servicemembers. The Servicemembers and Veterans’ Group 

Life Insurance Advisory Committee and the Program Evaluation of 

Benefits for Survivors of Veterans with Service-Connected Disabilities have offered several suggestions for improvements to the insurance program. And I note that these suggestions have not been 

incorporated in the VA’s budget request. I am also concerned that 

the severely disabled veterans may be missing out on the benefits 

of the life insurance program provided for them due to lack of timing and accurate information. 

And I want to thank you for your testimony that you will be giving today, and I look forward to hearing that testimony. 

And once again thank you very much, Mr. Chairman, for having 

this hearing today and for all that you do to help veterans across 

the country. 

Mr. BROWN. Thank you, Mr. Michaud. It is a pleasure working 

with you and the other members of this committee. And thank you 

for your support for veterans. 

At this time we will recognize our first panel if they would come 

forward. While they are testifying, you will probably hear some 

bells go off. We are expecting votes some time before 11 o’clock. 

And if that happens, we will have to recess for just a short period 

of time and then we will come back and finish testimony. 

On our panel this morning we have Mr. Lastowka. He is the Director of the VA Regional Office and Insurance Center. He is accompanied by Mr. Steve Wurtz and Mr. Mike Tarzian. Air Force 
3

Colonel Virginia Penrod is the Director of Compensation, Military 

Personnel Policy in the Office of the Deputy Under Secretary of Defense. I look forward to your testimony and any recommendations 

you may have for us to make your operations run even smoother. 

It is hard to beat 90 percent, but we certainly will keep trying. 

Thank you. 

STATEMENTS OF THOMAS M. LASTOWKA, DIRECTOR, VA REGIONAL OFFICE AND INSURANCE CENTER, VETERANS BENEFITS ADMINISTRATION, ACCOMPANIED BY STEPHEN WURTZ, 

DEPUTY ASSISTANT DIRECTOR FOR INSURANCE, VETERANS’

BENEFITS ADMINISTRATION; AND MIKE TARZIAN, CHIEF, 

ACTUARIAL STAFF, VETERANS’ BENEFITS ADMINISTRATION; 

AND COL. VIRGINIA S. PENROD, (USAF), DIRECTOR OF COMPENSATION, MILITARY PERSONNEL POLICY, DEPARTMENT 

OF DEFENSE 

STATEMENT OF THOMAS M. LASTOWKA 

Mr. LASTOWKA. Thank you, Mr. Chairman, and thank you members of the committee. I appreciate the opportunity to inform the 

committee of the current status of life insurance programs that are 

supervised and administered by the Department of Veterans Affairs. 

I want to thank you, Mr. Chairman, for the kind words that you 

had to say to the insurance staff. And I wish to apologize for any 

role we may have played in delivering late testimony. I will convey 

your words back to the Department of Veterans Affairs. 

I will summarize my written testimony, and I would ask that the 

complete written testimony be included for the record. First, I am 

pleased to report that the VA’s insurance programs remain in a 

sound financial condition. VA insurance programs provide over 

$750 billion of coverage to over 7.5 million veterans, 

servicemembers, and family members. Nearly $15 billion in the insurance trust fund’s investments are earning an average of 6.5 percent return. Over the last 5 years, VA has returned $3.5 billion in 

dividends to policy-holders and have paid over $5 billion in debt 

claims and endowments. In addition, the Servicemembers and Veterans Group Life Insurance programs paid about $2.5 billion in 

claims during the same period. Six of the programs are administered directly by the VA while two programs are contracted with 

Prudential Life Insurance Company of America and we provide the 

management and oversight. 

In 1998, Congress charged the VA with formally evaluating its 

life insurance programs. Overall, the results were very positive. 

Three recommendations have been implemented. That is removing 

the provision terminating Veterans’ Mortgage Life Insurance at age 

70; offering SGLI coverage for spouses and children; and reducing 

VGLI premiums to make them more comparable to commercial 

rates. We are pleased that Congress passed legislation to implement the first two recommendations, and we have administratively 

reduced the VGLI premium significantly. 

Turning to our in-house programs and administered programs, 

we have capped insurance premiums at age 70 for most of our policy-holders. And for most term capped policyholders we provide a 
4

termination dividend that may be used to purchase paid up insurance. Congress has authorized the use of dividends to purchase 

paid up additional insurance. Some veterans who took advantage 

of this option early on have increased their coverage from the basic 

$10,000 to over $100,000. 

We benchmark with the Life Office Management Association, a 

life industry insurance group. VA insurance average processing 

times are far better than industry averages in nearly every major 

area. The insurance program has been recognized as an industry 

leader for customer satisfaction. And a study conducted by the University of Michigan’s School of Business, it found our customer satisfaction scores one of the highest in government or industry. 

Turning to the SGLI and VGLI programs, the maximum amount of protection has increased to $250,000. In the year 2001, Congress 

authorized family SGLI coverage. It provides servicemembers and 

spouses and children with automatic coverage. This past July, we 

reduced SGLI premiums, saving servicemembers $138 million each 

year. VA has also reduced VGLI premiums three times in the past 

4 years for an overall reduction of 40 percent. 

In addition to reducing premiums, VA has increased its outreach 

effort to separating servicemembers. We supply them with a VA 

life insurance brochure, which provides information on all VA insurance programs. We contact by letter or by phone those with a 

military disability rating of 60 percent or higher to further ensure 

that the most severely disabled are aware of their benefits. 

Prudential’s Office of Servicemen’s Group Life Insurance processes death claims in less than half the time of the industry average and provides special handling for cases resulting from Operations Enduring Freedom and Iraqi Freedom, paying most of those 

claims within 48 hours. 

Mr. Chairman, VA insurance is a valuable benefit to our uniformed services. We at VA will continue to make it our priority to 

provide the best service and lowest possible cost to the government 

and policyholders, as well as to enhance the insurance benefits for 

our veterans and servicemembers. As times require, we can assure 

that we will do all in our power to continue these efforts. 

Mr. Chairman, I would like to thank the committee. And I am 

available for any questions. 

[The prepared statement of Mr. Lastowka appears on p. 23.] 

STATEMENT OF COL. VIRGINIA S. PENROD 

Col. PENROD. Mr. Chairman, Congressman Michaud, and distinguished members of the committee, it is an honor to come before 

you to discuss the VA-managed insurance program for 

servicemembers. Together Servicemembers Group Life Insurance, 

and its derivative, Veterans Group Life Insurance, constitute an extraordinary life insurance program for people in uniform and continuing thereafter. We have a great working relationship with the 

VA Insurance Center staff. They are responsive and have often 

stepped in to help us meet our program responsibilities. We have 

nothing but praise for these fine people. 

As stated by Mr. Lastowka, Servicemembers Group Life Insurance provides automatic maximum coverage of $250,000. This 

means that no members are without full coverage unless he or she 
5

specifically chooses that condition. This may seem to be more 

insurance coverage than a young person may need. However, a 

member is free to reduce coverage to a level he or she feels is 

appropriate. 

On behalf of the servicemembers the Department thanks VA for 

the continuous reduction in the premium the member pays for coverage. The convenience and affiliated benefits make 

Servicemembers Group Life Insurance very economical. Also, the 

availability of Veterans Group Life Insurance on a lifetime basis is 

an important part of the completeness of the program. With the recent premium reductions, VGLI is getting stronger everyday. And, 

finally, the addition of coverage for spouses and children makes the 

program truly comprehensive and second to none. 

I would like to add that the Department is extremely pleased 

with the responsiveness of the Office of Servicemembers Group Life 

Insurance, which typically pays completed claims within 48 hours 

of receipt. Overall, the Servicemembers and Veterans Group Life 

Insurance program structure has proven to be one of exceptional 

strength that keeps it among the best in the business. The program 

is working well and the Department of Defense is a very satisfied 

customer. The Department also appreciates Congress’ and especially this committee’s tremendous support of this program. I will 

answer any questions that you may have. 

[The prepared statement of Colonel Virginia Penrod appears on 

p. 37.] 

Mr. BROWN. Thank you, Colonel. Mr. Lastowka, you have told us 

about the benefits and program enhancements that have already 

been implemented as a result of the recent program evaluation. 

Are there any other recommendations that have not yet been implemented that you might want to recommend today? 

Mr. LASTOWKA. Mr. Chairman, three recommendations that have 

not been implemented. The three unimplemented recommendations 

include increasing the maximum coverage of SDVI from $10,000 to 

$50,000, reducing SDVI premiums based on an updated mortality 

table, and increasing the current Veterans’ Mortgage Life Insurance coverage from the current maximum of $90,000 to between 

$150,000 and $200,000. We are studying the recommendations and 

alternatives to them. I’m not in a position to make a recommendation. 

Mr. BROWN. Thank you very much. And if you would put those 

in writing for us, we will certainly take a look at it. 

Mr. LASTOWKA. We will be pleased to offer technical assistance, 

sir. 

Mr. BROWN. Yes, sir, I appreciate it. Thank you. Col. Penrod, we 

certainly would like to welcome you and understand you have been 

in your current position for 2 months. 

Col. PENROD. Yes, sir. 

Mr. BROWN. And may we assume this is your first time appearing before a congressional committee? 

Col. PENROD. It is, sir. 

Mr. BROWN. Okay, well, you did a great job and thank you for 

coming. A couple of questions, please. Are the majority of our 

servicemembers insured for the maximum coverage amount? 
6

Col. PENROD. Sir, we have 98 percent that take full—excuse me, 

92 percent take full coverage and 6 percent take partial. Two percent do not take coverage. 

Mr. BROWN. How about the younger servicemembers, how do 

those figures relate? 

Col. PENROD. For younger servicemembers we have about 38 percent that take—do not take the insurance. 

Mr. BROWN. Is that right, that many, okay. 

Col. PENROD. But actually—if you think about it, of the 2 percent 

that don’t take coverage, it is 38 percent of that percent which is 

less than 1 percent. 

Mr. BROWN. I got you, okay. Well, thank you very much for coming, and I have no further questions. Mr. Michaud, do you have 

any questions of the panel? 

Mr. MICHAUD. Yes, thank you very much, Mr. Chairman. Yes, 

my question, you had mentioned about the three recommendations 

that have not been adopted and could you elaborate a little more 

of what the advantages and disadvantages of not adopting those 

recommendations might be? 

Mr. LASTOWKA. Sir, it is within the overall package of veterans’

benefits, the overall package of policy, and budget policy, there are 

some difficulties. We would have some difficulties with some of 

them and would like to look at alternatives. We simply have been 

unable to come to a package that we could convince ourselves is the 

right one to offer. 

Mr. MICHAUD. Mr. Chairman, if I might submit later additional 

questions and if you would be able to respond in writing because 

I would be interested in what the advantages of those recommendations would be for our veterans. 

Mr. LASTOWKA. Certainly we would respond to any questions 

that you would put forward, sir. 

Mr. MICHAUD. And any disadvantages as well. Without taking a 

position on it, I would be curious what those advantages and disadvantages would be. 

Colonel, what is the Department of Defense doing to make sure 

that the servicemembers who are discharged from the military 

service due to medical disability are made aware of their ability to 

convert their SGLI insurance to the VGLI program? 

Col. PENROD. Sir, when our members are discharged, they are 

provided briefings on all of their benefits upon retirement or separation. I would have to get back to you on the record whether or 

not we have a problem with that. As far as I know we do not currently have a problem. 

(The information follows:)

Page 14/Line 320 

The Services provided transition counseling to the Service member who is discharged from service due to a medical disability. This counseling include SGLI and 

VGLI. In addition, the Department of Veterans Affairs contacts each member individually to explain the Service member’s VA benefits, which includes VGLI. The 

Services report these are well-established programs and they are not experiencing 

any difficulty in providing data to the Service member. 

Mr. MICHAUD. So they are briefed on that? 
7

Col. PENROD. Yes, sir. Each service has programs for the member 

when he/she is separated, or retired on what their benefits are. 

They have transition programs. 

Mr. LASTOWKA. Mr. Michaud, if I might volunteer. The VA Insurance Program notifies each member being separated of these eligibility for VGLI and contacts by letter or phone any member separated with military disability rating of 60 percent or above who has 

not already applied for VGLI. 

Mr. MICHAUD. Okay, thank you. Thank you, Mr. Chairman. 

Mr. BROWN. Thank you, Mr. Michaud. Any other questions from 

the members? Mr. Miller? 

Mr. MILLER. Let the record show that Mr. Michaud stole my 

question. (Laughter.) 

Mr. BRADLEY. Thank you, Mr. Chairman. The question I have is 

the linking if you will, or the possible linking of SGLI to commercial underwriting practices and why that isn’t done, what would it 

take to change it, if a study was in order or if there had been consideration by DOD and the VA to move in this direction what impediments there would be? 

Mr. LASTOWKA. Congressman, currently, as you know, there is no 

underwriting for SGLI. We insure all members of the uniformed 

services. We are always open to look at alternatives. Without having a specific proposal, it would be difficult for me to comment on 

that. 

Mr. BRADLEY. Well, maybe you could. Just comment then in a 

more general sense. The existing practices for general members of 

society for life insurance depends on their age, depends on their income level, and then their packages are generally pegged off of 

that. Whereas, my understanding, at least for members of the services, it is a one size fits all, something that may not work for a lot 

of people. And so in a general way why are you not looking at more 

standardized practices for life insurance underwriting for the rest 

of the public? 

Mr. LASTOWKA. Congressman, right now we have a very successful SGLI program based on universal coverage. We have discussed 

within the SGLI Servicemembers’ Group Life Insurance Advisory 

Council the possibility of say wage-based insurance. And generally 

the consensus is that we prefer to insure at one set amount. Generally most VA insurance programs have come into existence when 

there has been no alternative in the private sector. When we have 

looked at those people within the military needing higher amounts 

of insurance, we have found that that has been available. And we 

are reluctant as a group to upset the success of the program. Nonetheless, we are more than willing to look at different approaches. 

As I have testified, we are always looking to enhance the program. 

And if we thought that we could enhances, we would gladly consider it. 

Mr. BRADLEY. Thank you. 

Mr. BROWN. Isn’t it true that they pay about $200 a year for 

$250,000 coverage? 

Mr. LASTOWKA. Right they are paying $16.25 a month. So that 

is less than $200 a year. 

Mr. BROWN. Yes, right, that is pretty cheap coverage. 
8

Mr. LASTOWKA. We work hard to administer the SGLI program 

with almost no overhead. Currently, over 98 percent of premiums 

go directly to insurance benefits for our veterans. 

Mr. BROWN. That is pretty amazing. Ms. Davis, do you have a 

question? 

OPENING STATEMENT OF HON. SUSAN A. DAVIS 

Mrs. DAVIS. Thank you, Mr. Chairman and Mr. Michaud. And 

thank you very much for being here. I know that you are providing 

very effective leadership, and I appreciate that very much. I come 

from San Diego and our housing prices are pretty high. So we hear 

from veterans about their issues around that. And you referenced 

mortgage life insurance and the interest I think in trying to increase that. I also know that there are some issues around trying 

to find some offsets to do that. 

Could you maybe share just a little bit more information about 

how hopeful you are that perhaps we will be able to increase that 

in the future. Are there mechanisms that we perhaps haven’t explored for doing that? How do we get that to the point that certainly I know Congressman Filner has been working on this issue? 

Mr. LASTOWKA. Well, there is no mechanism for increases in coverage in the Veterans’ Mortgage Life Insurance Program which is 

for severely disabled, basically wheelchair-bound veterans. So there 

is no automatic mechanism. Obviously, one of the ways of addressing that is to look at what is possible under the program evaluation’s recommendations. But I am not in a position to give a specific proposal on that today, Congresswoman. I am sorry. 

Mrs. DAVIS. Is there generally support for moving in that direction if we could find the wherewithal to do it or is there concern, 

perhaps a feeling that that might not be what we want to do? 

Mr. LASTOWKA. I think the only way I could honestly answer that 

with what I know is to say when you look at the whole package 

of veterans’ benefits and the whole budget of the United States, 

that we haven’t come to an adequate program for that yet. 

Mrs. DAVIS. Okay, and we are certainly talking about a relatively 

small population. 

Mr. LASTOWKA. A very small population. There are approximately 2,800 veterans covered under the Veterans’ Mortgage Life 

Insurance Program. And only 1,800 of them would be affected by 

an increase in coverage limits. 

Mrs. DAVIS. Okay, I appreciate that. For those this obviously is 

an important issue and if we can move forward and at least work 

with some of those issues that would be very helpful. 

I wanted also just to ask about the evaluation of the SDVI program recommended basing premiums on the 1980 actuarial tables? 

Mr. LASTOWKA. That is correct, ma’am. 

Mrs. DAVIS. Have they been updated? 

Mr. LASTOWKA. No, they have not. This recommendation would 

require legislation. There has been legislation offered by Members 

of Congress on this issue but none of the bills have become law at 

this time. 

Mrs. DAVIS. Do you think we will likely see that change, that 

shift to more current tables? I guess what is holding that up, why 

aren’t we doing that? 
9

Mr. LASTOWKA. Again, Congresswoman, I would have to say in 

terms of my understanding we would have to look at the entire 

budget for veterans’ benefits as well as for the United States of 

America and determine if this proposal an be implemented within 

these budget limits. 

Mrs. DAVIS. Okay. And the American Legion has recommended 

that veterans be given an opportunity to obtain a long-term care 

policy similar to that provided to federal employees. And I am wondering would the VA insurance program be able to operate such a 

program? 

Mr. LASTOWKA. I am here. I am competent to address proposals 

concerning long tern insurance. 

Mrs. DAVIS. Does anybody have any other thoughts about that? 

Okay. Thank you. Thank you very much. 

Mr. BROWN. Thank you, Ms. Davis. And thank you, panel. It is 

certainly evident that we do have a government program that 

works, and we appreciate you all coming and sharing this good information with us today. And we will certainly take a look at those 

issues that, Mr. Lastowka, and see if legislatively we can do something about it. Thank you all for being here. 

Mr. LASTOWKA. Thank you, Mr. Chairman. 

Mr. BROWN. Thank you, Colonel. Glad to have you as your first 

witness before the Congress. Thank you. 

The next panel will now come forward. 

Appearing before us in the second panel is Mr. Brian Lawrence, 

representing the Disabled American Veterans; Mr. Donald Mooney 

is with The American Legion; Mr. Richard Jones is representing 

AMVETS, and Mr. Carl Blake is representing Paralyzed Veterans 

of America. Your written statements will be included in the printed 

record of the hearing, and I would ask that you limit your testimony to 5 minutes. Thank you for that. Mr. Lawrence. 

STATEMENTS OF BRIAN E. LAWRENCE, ASSISTANT NATIONAL 

LEGISLATIVE DIRECTOR, DISABLED AMERICAN VETERANS; 

DONALD L. MOONEY, ASSISTANT DIRECTOR FOR RESOURCE 

DEVELOPMENT, THE AMERICAN LEGION; RICHARD JONES, 

NATIONAL LEGISLATIVE DIRECTOR, AMVETS; AND CARL 

BLAKE, ASSOCIATE LEGISLATIVE DIRECTOR, PARALYZED 

VETERANS OF AMERICA 

STATEMENT OF BRIAN E. LAWRENCE 

Mr. LAWRENCE. Good morning, Mr. Chairman and members of 

the subcommittee. On behalf of the Disabled American Veterans, 

we thank you for the opportunity to testify on the VA life insurance 

program. The 1.2 million members of the DAV are veterans who incurred injuries or illnesses during their military service to our 

Nation. 

Many disabled veterans rely on the VA as their only source of 

life insurance. So it is important that the VA life insurance program is fulfilling its intended purpose, which is to provide coverage 

to service-disabled veterans who cannot purchase commercial insurance at standard rates. The DAV is very pleased with the VA 

Regional Office and Insurance Center in Philadelphia. Though 

faced with a daunting level of responsibility, the Insurance Center 
10

fulfills its many responsibilities in a very efficient manner. Policies 

for RH insurance are normally approved or disapproved within 1 

to 3 months of application. The time frame for approval or disapproval of an application for supplemental RH is within one 

month. VMLI is effective immediately upon approval of specially 

adapted housing and the Insurance Center pays death claims within 3 days. 

Over the past 12 months 95 percent of veterans responding to 

surveys conducted by the Insurance Center rated its performance 

as satisfactory or better. The insurance Center deserves the highest 

praise for its consistent and impressive record of efficiency. 

But despite the efficient operation at the Insurance Center, problems have occurred in the delivery of insurance benefits. VA regional offices have in the past failed to code award letters properly 

and thousands of veterans were not notified of their eligibility for 

VA insurance. This error was identified by the insurance center 

and corrective measures were taken. However, the DAV would like 

to ensure that no veterans were overlooked. If it has not already 

been accomplished, we recommend that action be taken to notify 

any such veterans of their eligibility. 

Administrative errors will inevitably occur in a bureaucracy as 

large as the VA. Such problems can be handled with corrective policy measures. However, fundamental flaws require the hand of 

Congress and it is clear that the VA insurance program is fundamentally flawed. The program falls far short of delivering the 

protection it was originally intended to provide. Government life insurance programs have limited basic coverage to $10,000 since 

their inception under the War Risk Insurance Act of 1917. In 1917, 

they were an excellent benefit. More than 93 percent of military 

members adopted the maximum coverage because they knew that 

in the event of their death, their family members would have the 

financial resources available to pay for the cost of a home and also 

to cover the cost of living for a considerable amount of time. 

The Sears & Roebuck Company sold pre-fabricated houses in the 

early 1900’s. Its 1920 catalogue featured 80 models ranging in price 

from $4,900 to $6,000. So obviously $10,000 went much further in 

1917 than it does in 2003. According to the United States Census 

Bureau, median housing costs in 2001 were in excess of a $1,000 

per month. At such levels, a VA insurance claim would be grossly 

insufficient as a source of security income. A surviving spouse and 

dependents would not be able to afford housing for even one year. 

Clearly, the original intent of VA insurance has been almost entirely forgotten. 

In 1998, the VA issued a report stating that the basic coverage 

is inadequate. The report also noted the SDVI premiums are much 

higher than standard commercial rates because they are based on 

outdated mortality tables. In order to address these concerns, the 

report recommended that legislation be proposed to increase the 

coverage to $50,000 and to lower premiums by basing them on the 

2001 CSO mortality table. 

Legislation should be enacted to amend Title 38 to increase the 

amount of basic insurance under SDVI. Year after year delegates 

to our national convention have adopted resolutions supporting 

such an amendment. The DAV supports increasing the face value 
11

along with basing premiums on current mortality tables. DAV 

members believe that our Nation owes a great debt to veterans, especially those who are so disabled by service-connected conditions 

that they cannot qualify for life insurance. It is our government’s 

responsibility to ensure that injuries related to military service are 

fully compensated. 

My written testimony includes additional recommendations. But 

for the sake of brevity I will mention them and not elaborate. They 

include increasing Veterans’ Mortgage Life Insurance from $90,000 to $150,000, excluding life insurance benefits from income determinations for other government programs, and to provide an extended period to apply for SDVI. 

Mr. Chairman, thank you very much for your consideration of 

our testimony and thank you for the opportunity to provide our 

views. 

[The prepared statement of Mr. Lawrence appears on p. 43.] 

Mr. BROWN. Thank you, Mr. Lawrence, for coming and sharing 

this information with us. We all are very concerned about the quality of life for our veterans and we appreciate your advocacy. 

Mr. LAWRENCE. Thank you, sir. 

Mr. BROWN. Mr. Blake, are you prepared to go next? 

STATEMENT OF CARL BLAKE 

Mr. BLAKE. Certainly, Mr. Chairman. Mr. Chairman, Ranking 

Member Michaud, and members of the subcommittee, PVO would 

like to thank you for the opportunity to testify today concerning the 

VA’s life insurance program. The life insurance program is vital to 

the long-term stability of disabled veterans and their families who 

would not otherwise be able to afford insurance. 

As a beneficiary of the VA’s life insurance program, I can attest 

to the value of this benefit. Due to the severity of my disability, the 

cost of regular life insurance from a private insurance company 

would be very costly. And the same could be said for our military 

servicemembers. They often face high costs for private insurance 

from private companies because they are not so willing to insure 

individuals who are in high-risk professions. This is why it is important that the VA maintain a viable life insurance program for 

veterans and severely disabled veterans. 

I would just like to reiterate a couple of the points made by my 

colleague from the Disabled American Veterans on behalf of the 

independent budget. The first is that the service-disabled veterans 

insurance needs to be increased from its current level of $10,000 

to $50,000. The current SDVI benefit does not begin to cover the 

cost of living that would provide a meaningful income replacement 

for the families of deceased and severely-disabled veterans. 

PVA would also like to recommend that the premiums be—the 

premium table be changed within the veterans’ insurance program 

because it does not accurately reflect the current mortality tables 

that most private insurance companies recognize. 

I would also like to talk about the Veterans’ Mortgage Life Insurance program. It is very close to PVA’s heart because of its tie directly to the specially-adapted housing grant, which our members 

are the highest users of, both the insurance and the grant program. 

Without the adapted housing grant, many of our members would 
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be unable to purchase or build a home that is suitable for their special needs. We believe that the amount of the VMLI program 

should be increased from the current level of $90,000 to $150,000. 

This would more accurately reflect the always changing and ever 

increasing values of homes, particularly accessible homes that are 

being built today. 

I would also like for you to consider the value of government life 

insurance policies as income or assets. The independent budget 

states, ‘‘For nursing home care under Medicaid, the government 

forces veterans to surrender their government life insurance policies and apply the amount received from the surrender for cash 

value toward nursing home care before Medicaid will cover the related expenses of needy veterans.’’ PVA is concerned that veterans are forced to give up one benefit 

just to receive another. In accordance with the recommendations of 

the independent budget, PVA urges this committee and Congress 

to enact legislation that would exempt the cash value dividends 

and proceeds of VA life insurance from consideration as income 

when a veteran is seeking benefits from other federal programs. 

PVA believes that the benefits of the life insurance programs administered by the VA are not equitable to the needs that disabled 

veterans and their families have. That is not to say that this is not 

a successful program. It certainly is. It is time to bring these benefits to a level consistent with the original intent of these programs. 

As we continue to add new military men and women to the ranks 

of our disabled veterans, we must not fail to improve the benefits 

that they will depend on. 

PVA would like to thank you for the opportunity to testify today, 

and I would be happy to answer any questions that you might 

have. 

[The prepared statement of Mr. Blake appears on p. 47.] 

Mr. BROWN. Thank you, Mr. Blake. Mr. Mooney. 

STATEMENT OF DONALD L. MOONEY 

Mr. MOONEY. Good morning, Mr. Chairman, and members of the 

subcommittee. The American Legion appreciates this opportunity 

to share its views on the Department of Veterans Affairs life insurance programs for veterans, active duty members, and their 

dependents. 

Initially, Mr. Chairman, during this time of a national trial, the 

American Legion would like to express its appreciation to VA for 

the special efforts they are taking to ensure 48-hour payment of 

casualty claims arising out of operations in the Middle East and 

South Asia. 

The American Legion recognizes the VA Insurance Center in 

Philadelphia as an exemplary operation with few parallels in either 

government or the private sector. Comparisons show the Center’s 

costs are lower than the private sector and much lower than the 

Prudential unit in Newark, which runs the SGLI and VGLI programs. Improved performance is also seen on the American customer satisfaction index, an insurance industry benchmark. VA’s 

score of 90 compared to the private sector score of 71 and the Federal government’s overall score of 69 reflects excellence in the performance of the Department. For that reason, the American Legion 
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believes that even better service would result if SGLI and VGLI 

were moved to VA’s Philadelphia Center. 

In response to an American Legion program proposal, VA now 

provides outreach to those servicemembers being discharged on a 

disability retirement at a rating of 60 percent or greater to ensure 

they are fully aware of the availability and requirements for coverage. This outreach involves direct phone calls, personal letters, 

new brochures, and interactive websites and has resulted in a 20 

percent increase in enrollment. 

Mr. Chairman, the American Legion has nothing but good to say 

about life insurance. However, we do, as always, have suggestions. 

The American Legion fully supports the VA recommendation to increase the current 1 year free SGLI total disability extension to 2 

years. This would give some added leeway to severely disabled veterans who are often precluded by their disabilities from proper financial planning and will improve VA’s outreach programs. The 

American Legion would like to see a federal subsidy for a portion 

of the VGLI premium costs. We do not believe active duty personnel should subsidize premium costs for service-disabled veterans as is now the case. 

Following a 2001 study, several proposals for improvement of VA 

service-disabled programs were developed. The study concluded 

that the present SDVI program was inadequate due to an insufficient $10,000 face value, severe time limits, and eligibility requirements, and a continuing lack of awareness of the program on the 

part of disabled veterans. Only unemployable disabled veterans 

under 65 qualify for supplemental SDVI for which they must pay 

full premiums. One proposal would provide veterans up to $50,000 

of level premium term insurance up to age 70 at which point the 

amount of insurance would reduce to a paid up policy of 20 percent 

face value. A standard disability premium waiver would apply. And 

total coverage under all programs would not exceed $50,000. 

While the American Legion has long been in favor of this enhancement to SDVI, we favor a longer eligibility period than the 

10 years following release. We also believe that disabled veterans 

who receive increases in their evaluations to the required 60 percent should be eligible to apply. And this provision should be extended to the regular SDVI program. 

The American Legion suggests increasing the maximum amount 

of supplemental SDVI from $20,000 to $40,000 for those who are 

already insured and for those who qualify but are outside the enrollment period. We suggest offering a new enrollment period for 

veterans outside the current period and that period should be at 

least one and preferably 2 years. 

Veterans’ Mortgage Life Insurance provides coverage to certain 

disabled veterans who receive grants for specially-adapted housing. 

The current maximum amount of VMLI is $90,000. While the VA 

home loan guarantee limit is $252,500. VMLI coverage is clearly 

inadequate for most areas of the country. 

Finally, we support excluding government life insurance policies 

from being considered assets when determining eligibility for federally-funded programs, primarily Medicare and Medicaid. Currently, 

VA policies are included for purposes of determining an individual’s 

resources, often disqualifying that individual from other federal 
14

benefits. As a result, some insured surrender their policies to reduce their assets. The forced surrender of these policies defeats 

congressional intent in providing them. 

Finally, Mr. Chairman, the American Legion would like to address an area of veterans’ benefits that could well be served by a 

new program of VA insurance. 

Mr. BROWN. Mr. Mooney, let me get your attention just a minute. 

You heard some noise in the background a while ago. That was a 

call to vote. I apologize for cutting you off but I know we want to 

give Mr. Jones a little bit of time. 

Mr. MOONEY. Okay. 

Mr. BROWN. And, Mr. Jones, if you wouldn’t mind summarizing. 

I know a lot of these issues have been repeated two or three times. 

If you have got some new issues that you want to bring forward, 

if you wouldn’t mind doing that. And, Mr. Mooney, if you have got 

some points that you want to conclude in a short, brief moment because we are going to have to move over to vote. 

Mr. MOONEY. Mr. Chairman, my remarks about long-term care 

are in much greater detail in my written submission. 

Mr. BROWN. Okay, if you would submit that in writing for us and 

we will certainly take it under consideration as we look at the 

other concerns. 

Mr. MOONEY. Thank you, Mr. Chairman. 

[The prepared statement of Mr. Mooney appears on p. 53.] 

Mr. BROWN. Thank you very much, too. 

Mr. Jones, I hate to do this to you. It is just not part of our control to be able to direct when the votes are going to come, and I 

apologize. But if you could just wrap it up pretty quick for us. 

STATEMENT OF RICHARD JONES 

Mr. JONES. Chairman Brown, AMVETS fully understands your 

responsibilities, which is why we so much appreciate the opportunity to come by and speak to you, Ranking Member Michaud, 

Representative Miller, and Representative Bradley. AMVETS is 

pleased to be here. And we know that this hearing is being broadcast to such a potentially large audience. We think that is a great 

opportunity for all Americans to hear how important these issues 

are. 

The issues that we bring to this panel today have been spoken 

of already. We think that home ownership is a great American 

dream. It is part of the American fabric. We want to support it in 

every way. We do think there are some positions that currently 

need to be attended to. We think the VMLI, the Veterans’ Mortgage Life Insurance program, sir, does need some updating. We do 

need to make sure that these folks can negotiate a good home. And 

the other issues that have been brought up are innovative and appropriate. We ask that you take a close look at our independent 

budget, of which AMVETS is a proud author, and see several of the 

issues there that we recommend be reformed by either Congress or 

the administration. 

Again, Chairman Brown, we recognize your responsibilities. We 

thank you for your service. And we very much appreciate this opportunity today for AMVETS to come by. And on behalf of our com-
15

mander, John Sisler, and our nationwide membership, we all thank 

you very much for what you do for veterans and their families. 

[The prepared statement of Mr. Jones appears on p. 57.] 

Mr. BROWN. Okay, gentlemen, thank you very, very much for 

coming today and being part of this. We have got the folks from 

Philadelphia in the room that heard the concerns. And we are 

grateful for your advocacy for such a great cause and such a great 

group of men and women that made America safe. I thank you. I 

don’t have any questions. But, Mr. Michaud, do you have a statement? 

Mr. MICHAUD. I have no questions, just a written question I will 

submit in writing plus correspondence from Mr. Evans to the Secretary of the VA, I would like to include in the record that is dealing with the SDVI for me. 

Mr. BROWN. Okay, without objection. 

(See pp. 17, 19 and 64.) 

Mr. BROWN. Thank you, gentlemen. Thank you all for coming. 

Colonel, glad to have you here. We will conclude this meeting today 

and we will have to run and go vote. Thank you so much. 

[Whereupon, at 11:15 a.m., the subcommittee was adjourned.] 

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A P P E N D I X 
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WRITTEN COMMITTEE QUESTIONS AND THEIR RESPONSES 

CONGRESSMAN MICHAUD TO THOMAS M. LASTOWKA
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