79–010

Calendar No. 788

106TH CONGRESS REPORT

2d Session " ! SENATE 106–398

VETERANS’ COMPENSATION COST-OF-LIVING ADJUSTMENT

ACT OF 2000

SEPTEMBER 5, 2000.—Ordered to be printed

Mr. SPECTER, from the Committee on Veterans’ Affair,

submitted the following

REPORT

[To accompany S. 3011]

The Committee on Veterans’ Affairs reported an original bill (S.

3011), to increase, effective as of December 1, 2000, the rates of

compensation for veterans with service-connected disabilities and

the rates of dependency and indemnity compensation for the survivors of certain disabled veterans, and recommends that the original bill do pass.

COMMITTEE BILL

The text of the original bill as reported is as follows:

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘Veterans’ Compensation Cost-of-Living Adjustment

Act of 2000’’.

SEC. 2. INCREASE IN RATES OF DISABILITY COMPENSATION AND DEPENDENCY AND INDEMNITY COMPENSATION.

(a) RATE ADJUSTMENT.—The Secretary of Veterans Affairs shall, effective on December 1, 2000, increase the dollar amounts in effect for the payment of disability

compensation and dependency and indemnity compensation by the Secretary, as

specified in subsection (b).

(b) AMOUNTS TO BE INCREASED.—The dollar amounts to be increased pursuant to

subsection (a) are the following:

(1) COMPENSATION.—Each of the dollar amounts in effect under section 1114

of title 38, United States Code.

(2) ADDITIONAL COMPENSATION FOR DEPENDENTS.—Each of the dollar amounts

in effect under sections 1115(1) of such title.

(3) CLOTHING ALLOWANCE.—The dollar amount in effect under section 1162 of

such title.

(4) NEW DIC RATES.—The dollar amounts in effect under paragraphs (1) and

(2) of section 1311(a) of such title.

(5) OLD DIC RATES.—Each of the dollar amounts in effect under section

1311(a)(3) of such title.

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(6) ADDITIONAL DIC FOR SURVIVING SPOUSES WITH MINOR CHILDREN.—The dollar amount in effect under section 1311(b) of such title.

(7) ADDITIONAL DIC FOR DISABILITY.—The dollar amounts in effect under sections 1311(c) and 1311(d) of such title.

(8) DIC FOR DEPENDENT CHILDREN.—The dollar amounts in effect under sections 1313(a) and 1314 of such title.

(c) DETERMINATION OF INCREASE.—(1) The increase under subsection (a) shall be

made in the dollar amounts specified in subsection (b) as in effect on November 30,

2000.

(2) Except as provided in paragraph (3), each such amount shall be increased by

the same percentage as the percentage by which benefit amounts payable under

title II of the Social Security Act (42 U.S.C. 401 et seq.) are increased effective December 1, 2000, as a result of a determination under section 215(i) of such Act (42

U.S.C. 415(i)).

(3) Each dollar amount increased pursuant to paragraph (2) shall, if not a whole

dollar amount, be rounded down to the next lower whole dollar amount.

(d) SPECIAL RULE.—The Secretary of Veterans Affairs may adjust administratively, consistent with the increases made under subsection (a), the rates of disability compensation payable to persons within the purview of section 10 of Public

Law 85–857 (72 Stat. 1263) who are not in receipt of compensation payable pursuant to chapter 11 of title 38, United States Code.

SEC. 3. PUBLICATION OF ADJUSTED RATES.

At the same time as the matters specified in section 215(i)(2)(D) of the Social Security Act (42 U.S.C. 415(i)(2)(D)) are required to be published by reason of a determination made under section 215(i) of such Act during fiscal year 2001, the Secretary of Veterans Affairs shall publish in the Federal Register the amounts specified in subsection (b) of section 2, as increased pursuant to that section.

INTRODUCTION

The Committee on Veterans’ Affairs (hereinafter, the ‘‘Committee’’) hereby reports an original bill to increase, effective as of

December 1, 2000, the rates of compensation for veterans with

service-connected disabilities and the rates of dependency and indemnity compensation (hereinafter, ‘‘DIC’’) for the survivors of certain disabled veterans.

COMMITTEE HEARING

On July 20, 2000, the Committee held a hearing on legislation

pending before the Committee. Among the measures on which the

Committee received testimony was a draft bill to increase, effective

as of December 1, 2000, the rates of compensation for veterans

with service-connected disabilities and the rates of DIC for the survivors of certain disabled veterans. The Committee received testimony from, among others, representatives of the Department of

Veterans Affairs (hereinafter, ‘‘VA’’), and from representatives of

The American Legion, the Veterans of Foreign Wars, the Disabled

American Veterans, AMVETS, and the Paralyzed Veterans of

America. The Committee also received written statements for the

record from a number of organizations, including the Vietnam Veterans of America.

COMMITTEE MEETING

On July 27, 2000, the Committee met in open session to consider

legislation pending before the Committee. Among the measures so

considered was an original bill (hereinafter, the ‘‘Committee bill’’)

to increase, effective as of December 1, 2000, the rates of compensation for veterans with service-connected disabilities and the

rates of DIC for the survivors of certain disabled veterans. The

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Committee voted by unanimous voice vote to report the Committee

bill favorably to the Senate.

SUMMARY OF THE COMMITTEE BILL AS REPORTED

The Committee bill contains freestanding provisions that would

require the Secretary of Veterans Affairs to increase, effective December 1, 2000, the rates of and limitations on certain benefits

paid by VA by the same percentage as the cost-of-living adjustment

(hereinafter, ‘‘COLA’’) provided to Social Security recipients and VA

pension beneficiaries that becomes effective on the same date. The

COLA would apply to:

1. Basic compensation rates for veterans with service-connected disabilities and the rates payable for certain severe disabilities;

2. The allowances for spouses, children, and dependent parents paid to service-connected disabled veterans rated 30 percent or more disabled;

3. The annual clothing allowance paid to veterans whose

compensable disability requires the use of a prosthetic or orthopedic appliance (including a wheelchair) that tends to tear

or wear out clothing, or requires the use of a medication prescribed by a physician for a service-connected skin condition if

the medication causes irreparable damage to the veteran’s

outer garments; and

4. The dependency and indemnity compensation rates paid

to:

(a) surviving spouses of veterans whose deaths were

service connected;

(b) surviving spouses for dependent children;

(c) surviving spouses who are so disabled that they need

aid and attendance or are permanently housebound; and

(d) the children of veterans whose deaths were service

connected if no surviving spouse is entitled to DIC, the

child is age 18 through 22 and attending an approved educational institution, or the child is age 18 or over and became permanently incapable of self-support prior to reaching age 18.

The Congressional Budget Office (hereinafter, ‘‘CBO’’) currently

estimates that the COLA to be provided to Social Security recipients will be 2.4 percent.

BACKGROUND

Disability compensation

The service-connected disability compensation program under

chapter 11 of title 38, United States Code, provides monthly cash

benefits to veterans who have disabilities incurred or aggravated

during active duty in the Armed Forces.

The amount of compensation paid depends on the nature of the

veteran’s disability or combination of disabilities and the extent to

which the disability impairs earning capacity. VA rates compensable disabilities according to its Schedule for Rating Disabilities

on a graduated scale ranging from 0 to 100 percent, in 10-percent

increments. VA pays higher monthly rates (known as ‘‘special

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monthly compensation’’) to totally disabled veterans with certain

specific, very severe disabilities or combinations of disabilities.

As of March 31, 2000, VA was providing disability compensation

to 2,298,737 veterans with service-connected disabilities. Among

the veterans receiving such compensation were 61 World War I veterans; 522,015 World War II veterans; 172,567 Korean-conflict veterans; 737,798 Vietnam-era veterans; and 302,572 veterans of the

Persian Gulf War era.

A veteran with a disability rated at 30 percent or more may receive additional compensation on behalf of the veteran’s spouse,

children, and dependent parents. These dependents’ allowances are

prorated according to the percentage of disability. As of March 31,

1999, 730,642 veterans received additional compensation on behalf

of 1,110,711 dependents.

Dependency and indemnity compensation

Under chapter 13 of title 38, VA pays dependency and indemnity

compensation to the survivors of service members or veterans who

died on or after January 1, 1957, from a disease or injury incurred

or aggravated during military service. Survivors eligible for DIC include surviving spouses, unmarried children under the age of 18,

children age 18 or older who are permanently incapable of self-support, children between the ages of 18 and 22 who are enrolled in

school, and certain needy parents. Under section 5312 of title 38,

parents’ DIC rates are adjusted automatically at the same time

and by the same percentage as Social Security and VA pension

benefits. Surviving spouses, children, and parents who are receiving death compensation based on deaths before January 1, 1957,

may elect to receive DIC instead of death compensation.

For deaths prior to January 1, 1993, surviving spouses received

DIC at rates determined by the pay grade (service rank) of the deceased veteran. For deaths on or after January 1, 1993, surviving

spouses currently receive $881 per month and, if the deceased veteran was totally disabled for 8 years prior to death, an additional

$191 per month. Surviving spouses who had been receiving benefits

under the prior DIC program are paid under whichever program

will pay the higher benefit.

A surviving spouse who is so disabled as to be housebound or in

need of regular aid and attendance is eligible to receive an additional amount. A surviving spouse also may receive additional allowances on behalf of the veteran’s surviving children.

Children are entitled to DIC if there is no surviving spouse, if

they are 18 years or older and became permanently incapable of

self-support before reaching age 18, or if they are 18 to 22 years

old and pursuing an approved course of education.

As of June 30, 2000, VA was paying DIC benefits to, or on behalf

of, 286,866 surviving spouses, 31,803 children, and 10,670 needy

surviving parents.

Under section 1318(b) of title 38, VA pays benefits at DIC rates

to the surviving spouses and children of veterans whose deaths are

not service connected if the veteran, immediately prior to his or her

death, had been receiving (or had been entitled to receive) compensation at the 100-percent rate continuously for 10 or more years

or for at least 5 years from the date of discharge or release from

active duty.

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History of cost-of-living increases

The Committee periodically reviews the service-connected disability compensation and DIC programs to ensure that the benefits

provide reasonable and adequate compensation for disabled veterans and their families. Based on this review, the Congress acts

periodically to provide a cost-of-living adjustment in compensation

and DIC benefits. In fact, the Congress has provided annual increases in these rates for every fiscal year since 1976. The following table shows the percentage increases since 1975.

HISTORY OF SERVICE-CONNECTED DISABILITY COMPENSATION INCREASES, 1975 TO PRESENT

Fiscal year Effective date Increase

(percent)

Cumulative

(1969=$100)

1976 ................................................................. August 1975 .................................................... 11.8 158.55

1977 ................................................................. October 1976 ................................................... 8.0 171.23

1978 ................................................................. October 1977 ................................................... 6.6 182.53

1979 ................................................................. October 1978 ................................................... 7.3 195.86

1980 ................................................................. October 1979 ................................................... 9.9 215.25

1981 ................................................................. October 1980 ................................................... 14.3 246.03

1982 ................................................................. October 1981 ................................................... 11.2 273.58

1983 ................................................................. October 1982 ................................................... 7.4 293.82

1984 ................................................................. April 1983 ........................................................ 3.5 304.11

1985 ................................................................. December 1984 ................................................ 3.2 313.84

1986 ................................................................. December 1985 ................................................ 3.1 323.57

1987 ................................................................. December 1986 ................................................ 1.5 328.42

1988 ................................................................. December 1987 ................................................ 4.2 342.22

1989 ................................................................. December 1988 ................................................ 4.1 356.25

1990 ................................................................. December 1989 ................................................ 4.7 372.99

1991 ................................................................. December 1990 1 ............................................. 5.4 393.13

1992 ................................................................. December 1991 ................................................ 3.7 407.68

1993 ................................................................. December 1992 ................................................ 3.0 419.91

1994 ................................................................. December 1993 ................................................ 2.6 430.83

1995 ................................................................. December 1994 2 ............................................. 2.8 442.89

1996 ................................................................. December 1995 2 ............................................. 2.6 454.41

1997 ................................................................. December 1996 ................................................ 2.9 467.59

1998 ................................................................. December 1997 2 ............................................. 2.1 477.41

1999 ................................................................. December 1998 2 ............................................. 1.3 483.62

2000 ................................................................. December 1999 2 ............................................. 2.4 495.23

2001 ................................................................. December 2000 2 ............................................. 3 2.4 3 507.12

1 Payment of the December 1990 increase was delayed until January 1992 by section 8005(b) of Public Law 101–508.

2 December 1994, 1995, 1997, 1998, 1999, and 2000 increases are rounded to the next lower dollar amount pursuant to sections 2(c)(2) of

Public Law 103–418 and Public Law 104–57, and section 8031 of Public Law 105–33. 3 Estimate.

COMMITTEE BILL

The Committee bill would direct VA to compute and provide increases in the monthly rates of compensation and DIC, effective

December 1, 2000. The rates would be increased by the same percentage as the Social Security and VA pension COLA that will take

effect on that date. In accordance with section 8031 of the Balanced

Budget Act of 1997 (Public Law 105–33), amounts of compensation

so computed that are not even multiples of $1 will be rounded

down to the next lower whole dollar amount.

The increases in DIC automatically would result in identical percentage increases in benefits paid at DIC rates under section

1318(b) of title 38 to the surviving spouses and children of veterans

who had a service-connected disability at the time of death for

which they continuously were rated totally disabled for at least either (1) 10 years, or (2) 5 years from the date of discharge from

active duty.

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Under section 156(e)(1)(A) of Public Law 97–377, the DIC increases also automatically would result in the same percentage increases in Social Security benefits that were terminated by section

2205 of the Omnibus Budget Reconciliation Act of 1981 (hereinafter, ‘‘OBRA 1981’’) (Public Law 97–35). Prior to OBRA 1981,

those benefits had been paid to certain surviving spouses of those

who died on active duty or from a service-connected disability on

behalf of their children under 18 and children over age 19 who

were secondary-school students; OBRA 1981 reduced the eligibility

cutoff age from 18 to 16 years old.

Section 314 of Public Law 100–322 amended section 156(a)(1) of

Public Law 97–377 to restore the benefits eliminated by OBRA

1981. The DIC increase also would apply to these restored benefits,

effective December 1, 2000.

CBO, in its most recent baseline, estimated that the fiscal year

2001 Social Security COLA, and thus the COLA provided for by the

Committee bill, will be 2.4 percent. The actual Social Security

COLA could differ from this estimate. Rather than selecting any

particular percentage adjustment at the time the Committee ordered the bill reported, the Committee followed its prior practice of

setting the COLA by reference to the Social Security increase. The

Committee believes this is the most equitable means of providing

increases in these important service-connected benefits.

COST ESTIMATE

In compliance with paragraph 11(a) of rule XXVI of the Standing

Rules of the Senate, the Committee, based on information supplied

by CBO, estimates that, compared to the CBO baseline, there

would be no costs or savings resulting from enactment of the Committee bill.

The cost estimate provided by CBO follows:

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, August 3, 2000.

Hon. ARLEN SPECTER,

Chairman, Committee on Veterans’ Affairs,

U.S. Senate, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for the Veterans’ Compensation

Cost-of-Living Adjustment Act of 2000.

If you wish further details on this estimate, we will be pleased

to provide them. The CBO staff contact is Michelle Patterson, who

can be reached at 226–2840.

Sincerely,

DAN L. CRIPPEN,

Director.

Enclosure.

Veterans’ Compensation Cost-of-Living Adjustment Act of 2000

The bill would increase the amounts paid to veterans for disability compensation and to their survivors for dependency and indemnity compensation by the same cost-of-living adjustment

(COLA) payable to Social Security recipients. The increase would

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take effect on December 1, 2000, and the results of the adjustment

would be rounded to the next lower dollar.

The COLA that would be authorized by this bill is assumed in

the budget resolution baseline, pursuant to section 257 of the Balanced Budget and Emergency Deficit Control Act, and savings from

rounding it down were achieved by the Balanced Budget Act of

1997 (Public Law 105–33). As a result, the bill would have no

budgetary effect relative to the baseline. Relative to current law,

CBO estimates that enacting this bill would increase spending for

these programs by about $349 million in 2001 and $465 million a

year thereafter. This estimate assumes that the COLA effective on

December 1, 2000, would be 2.4 percent.

This bill contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would

impose no costs on state, local, or tribal governments.

On July 21, 2000, CBO prepared a cost estimate for H.R. 4850

as ordered reported by the House Committee on Veterans’ Affairs.

Section 101 of H.R. 4850 would provide the same COLA as this bill

would. The estimated costs of this bill and section 101 of H.R. 4850

are the same.

The estimate was prepared by Michelle Patterson, who can be

reached at 226–2840. It was approved by Robert A. Sunshine, Assistant Director for Budget Analysis.

REGULATORY IMPACT STATEMENT

In compliance with paragraph 11(b) of rule XXVI of the Standing

Rules of the Senate, the Committee on Veterans’ Affairs has made

an evaluation of the regulatory impact that would be incurred in

carrying out the Committee bill. The Committee finds that the

Committee bill would not entail any regulation of individuals or

businesses or result in any impact on the personal privacy of any

individuals and that the paperwork resulting from enactment

would be minimal.

TABULATION OF VOTES CAST IN COMMITTEE

In compliance with paragraph 7 of rule XXVI of the Standing

Rules of the Senate, the following is a tabulation of votes cast in

person or by proxy by members of the Committee on Veterans’ Affairs at its July 27, 2000, meeting. On that date, the Committee,

by unanimous voice vote, ordered an original bill to increase, effective as of December 1, 2000, the rates of compensation for veterans

with service-connected disabilities and the rates of dependency and

indemnity compensation for the survivors of certain disabled veterans reported favorably to the Senate.

AGENCY REPORT

On July 20, 2000, the Honorable Joseph Thompson, Under Secretary for Benefits, Department of Veterans Affairs, appeared before the Committee and submitted testimony on, among other

things, a draft bill to increase, effective as of December 1, 2000, the

rates of compensation for veterans with service-connected disabilities and the rates of dependency and indemnity compensation for

the survivors of certain disabled veterans. Excerpts from this statement are reprinted below:

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STATEMENT OF JOSEPH THOMPSON, UNDER SECRETARY FOR

BENEFITS, DEPARTMENT OF VETERANS AFFAIRS

INTRODUCTION

Mr. Chairman and Members of the Committee, thank

you for the opportunity to testify today on the Department

of Veterans Affairs (sic) disability claims processing. I am

pleased to be here with you to provide a status report on

the adjudication of these claims and to discuss the efforts

the Department has made to improve claims processing.

* * * * * * *

LEGISLATION

Mr. Chairman, you have also asked that we comment on

several bills, including S. 1810, S. 2264, S. 2544, S. 2637,

S. 2827, and 3 draft bills which your staff provided late

last week. In view of the short amount of time available

for the formulation of this testimony, we are unable to

present the Department’s views with respect to certain

provisions of the bills and draft proposals. However, we

will be pleased to provide our formal written views concerning them at a later date once the necessary executive

branch coordination is completed.

Draft Bill [0:/ARM1/ARM00.242—June 16, 2000]—Compensation Cost-of-Living Adjustment

Mr. Chairman, this draft proposal is perhaps the most

important matter on today’s agenda. It would direct the

Secretary of Veterans Affairs to increase administratively

the rates of compensation for service-disabled veterans and

of dependency and indemnity compensation (DIC) for the

survivors of veterans whose deaths are service related, effective December 1, 2000. On February 15, 2000, the Secretary transmitted to Congress similar draft legislation

proposing a cost-of-living adjustment (COLA) for compensation and DIC recipients at the same rate of increase

as the COLA that will be provided under current law to

veterans’ pension and Social Security recipients. We currently estimate that this year’s Social Security adjustment

will be 2.5 percent. We believe this proposed COLA is necessary and appropriate in order to protect the affected benefits from the eroding effects of inflation. Therefore, we

strongly support this proposal.

We estimate enactment of the proposed COLA would

cost $345 million during fiscal year (FY) 2001 and $6.3 billion over the period FYs 2001–2005. However, this increase is already assumed in the baseline as required by

the Omnibus Budget Reconciliation Act of 1990 (OBRA);

therefore, the proposal would have a zero pay-as-you-go

(PAYGO) impact.

Mr. Chairman, I would also like to take this opportunity

to urge your favorable consideration of another Administration proposal. Our draft legislative proposal of February

15 also included a provision to repeal a provision of the

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Balanced Budget Act of 1997 that would require VA to

defer until October 2, 2000, making veterans-benefit payments which would otherwise be delivered by mail or

transmitted for credit to the payee’s account by Friday,

September 29, 2000. We strongly believe that veterans

should not be financially burdened by this provision and

ask that you take action to correct this situation. This proposal is subject to the PAYGO requirements of the OBRA.

The PAYGO effect will be an increase in outlays of $1.8

billion in FY 2000, with a corresponding decrease in FY

2001.

* * * * * * *

CHANGES IN EXISTING LAW MADE BY THE COMMITTEE BILL, AS

REPORTED

Since the Committee bill would not repeal or amend any provisions of current law, this report does not contain the material described in clauses (a) and (b) of paragraph 12 of Rule XXVI of the

Standing Rules of the Senate.

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