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[Senate Report 112-44]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 125
112th Congress                                                   Report
                                 SENATE
 1st Session                                                     112-44

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      VETERANS' COMPENSATION COST-OF-LIVING ADJUSTMENT ACT OF 2011

                                _______
                                

                 August 1, 2011.--Ordered to be printed

                                _______
                                

         Mrs. Murray, from the Committee on Veterans' Affairs, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 894]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Veterans' Affairs (hereinafter, 
``Committee''), to which was referred the bill (S. 894) to 
increase, effective as of December 1, 2011, 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 for other purposes, 
having considered the same, reports favorably thereon, and 
recommends that the bill do pass.

                              INTRODUCTION

    On May 5, 2011, Committee Chairman Patty Murray introduced 
S. 894, a bill to increase, effective as of December 1, 2011, 
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 for other purposes. Committee Ranking Member Richard Burr, 
Members John D. Rockefeller IV, Daniel K. Akaka, Bernard 
Sanders, Sherrod Brown, Jim Webb, Jon Tester, Mark Begich, 
Johnny Isakson, Roger F. Wicker, Mike Johanns, Scott P. Brown, 
Jerry Moran, and John Boozman are original cosponsors of the 
bill, which was referred to the Committee upon introduction.

                           COMMITTEE HEARING

    On June 8, 2011, the Committee held a hearing on 
legislation pending before the Committee. Testimony on S. 894 
was received from: Joseph Violante, National Legislative 
Director, Disabled American Veterans; Raymond Kelley, Director, 
National Legislative Service, Veterans of Foreign Wars of the 
United States; Jeff Steele, Assistant Legislative Director, The 
American Legion; and Robert L. Jesse, M.D., Ph.D., Principal 
Deputy Under Secretary for Health, Veterans Health 
Administration, Department of Veterans Affairs.

                           COMMITTEE MEETING

    On June 29, 2011, the Committee met in open session to 
consider legislation pending before the Committee. Among the 
measures so considered was S. 894. The Committee voted by voice 
vote, without objection, to report favorably S. 894 to the 
Senate.

                     SUMMARY OF S. 894 AS REPORTED

    The Committee bill contains freestanding provisions that 
would require the Secretary of Veterans Affairs to increase, 
effective December 1, 2011, the rates of certain benefits paid 
by the Department of Veterans Affairs (hereinafter, ``VA'') by 
the same percentage as the cost-of-living adjustment 
(hereinafter, ``COLA'') provided to Social Security recipients 
and VA pension beneficiaries that become 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 allowance 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 (hereinafter, 
``DIC'') rates paid to:
          (a) surviving spouses of veterans whose deaths were 
        service-connected;
          (b) surviving spouses for dependent children below 
        the age of 18;
          (c) surviving spouses who are so disabled that they 
        need aid and attendance or are permanently housebound;
          (d) surviving spouses covered under section 1318 of 
        title 38, United States Code (hereinafter, ``U.S.C.''); 
        and
          (e) 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 in 2011 will be 1.1 percent.

                       BACKGROUND AND DISCUSSION

A. Disability compensation

    The service-connected disability compensation program under 
chapter 11 of title 38, U.S.C., 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 and 
severity of the veteran's disability or combination of 
disabilities. VA rates compensable disabilities according to 
its Schedule for Rating Disabilities on a graduated scale 
ranging from 10 to 100 percent, in 10 percent increments. VA 
pays higher monthly rates (known as ``special monthly 
compensation'') to disabled veterans with certain specific, 
very severe disabilities or combinations of disabilities.
    According to VA, as set forth in its fiscal year 2012 
budget, the Department estimates that it will provide 
disability compensation to 3,588,315 veterans with service-
connected disabilities in fiscal year 2012. Among the veterans 
estimated to receive such compensation are 265,903 World War II 
veterans; 184,818 Korean-conflict veterans; 1,499,132 Vietnam-
era veterans; 1,329,508 veterans of the Persian Gulf War era; 
and 696,757 veterans who served during peacetime.
    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.

B. Dependency and indemnity compensation

    Under chapter 13 of title 38, U.S.C., VA pays DIC to the 
survivors of servicemembers 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, U.S.C., 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 on or after January 1, 1957, but 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, DIC is paid at 
a flat rate. Surviving spouses currently receive $1,154 per 
month and, if the deceased veteran was totally disabled for 
eight years prior to death, an additional $246 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 of age 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.
    Parents of deceased veterans whose incomes are below 
statutorily prescribed income thresholds are eligible for DIC 
under section 1315 of title 38, U.S.C. As previously noted, 
parents' DIC rates are adjusted automatically at the same time 
and by the same percentage as Social Security and VA pension 
benefits.
    In its fiscal year 2012 budget, VA estimates that it will 
pay DIC benefits to 388,214 survivors, a total that includes 
surviving spouses, children, and needy surviving parents.
    Under section 1318 of title 38, U.S.C., 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 five 
years from the date of discharge or release from active duty. 
VA also pays DIC benefits to the surviving spouses and children 
of veterans who were former prisoners of war who die after 
September 30, 1999, and whose deaths were not service-connected 
if the veterans had been receiving (or had been entitled to 
receive) compensation at the 100 percent rate continuously for 
not less than one year preceding death.

Committee bill

    The Committee bill would direct VA to compute and provide 
increases in the monthly rates of compensation and DIC, 
effective December 1, 2011. 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. In 
2003, this provision was extended until 2013 by section 706 of 
Public Law 108--183.
    The increases in DIC would automatically result in 
identical percentage increases in benefits paid at DIC rates 
under section 1318 of title 38, U.S.C., 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 (1) 10 years, (2) five 
years from the date of discharge from active duty, or (3) one 
year if the veteran was a former prisoner of war who died after 
September 30, 1999, and whose death was not service-connected 
if the veteran had been receiving (or had been entitled to 
receive) compensation at the 100 percent rate continuously for 
not less than one year preceding death.
    Under section 156(e)(1)(A) of Public Law 97-377, the DIC 
increases also would automatically result in the same 
percentage increases in Social Security benefits that were 
terminated by section 2205 of the Omnibus Budget Reconciliation 
Act of 1981 (herein-after, ``OBRA 1981'') (Public Law 97-35). 
Prior to OBRA 1981, those Social Security 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, the Further Continuing Appropriations Act 
of 1993, to restore the benefits eliminated by OBRA 1981. The 
DIC increase also would apply to these restored benefits, 
effective December 1, 2011.
    The CBO, in its most recent baseline, estimated that the 
Social Security COLA affecting fiscal year 2012 payments, and 
thus the COLA provided for by the Committee bill, will be 1.1 
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.

                      COMMITTEE BILL 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 the CBO, estimates that enactment of S. 
894 would, relative to current law, increase spending by $475 
million in fiscal year 2012 and by $630 million annually in 
subsequent years, but that such increases in spending are 
assumed in the budget resolution baseline and thus will have no 
budgetary effect relative to the baseline. Enactment of the 
Committee bill would not affect the budget of state, local, or 
tribal governments.
    The cost estimate provided by CBO, setting forth a detailed 
breakdown of costs, follows:

                               Congressional Budget Office,
                                      Washington, DC, July 5, 2011.
Hon. Patty Murray,
Chairman, Committee on Veterans' Affairs,
U.S. Senate, Washington, DC.
    Dear Madam Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 894, the Veterans' 
Compensation Cost-of-Living Adjustment Act of 2011.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Dwayne M. 
Wright.
            Sincerely,
                                      Douglas W. Elmendorf,
                                                          Director.
    Enclosure.

S. 894--Veterans' Compensation Cost-of-Living Adjustment Act of 2011

    S. 894 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 take effect on December 1, 2011, and the 
resulting adjustment would be rounded to the next lower dollar.
    The COLA that would be authorized by this bill is assumed 
in CBO's baseline, consistent with 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 extended by the Veterans Benefits 
Act of 2003 (Public Law 108-183).
    Because the COLA is assumed in CBO's baseline, the COLA 
provision would have no budgetary effect relative to the 
baseline. Relative to current law, CBO estimates that enacting 
this bill would increase spending for those programs by $475 
million in fiscal year 2012. (The annualized cost would be 
about $630 million in subsequent years.) This estimate assumes 
that the COLA effective on December 1, 2011, would be 1.1 
percent.
    S. 894 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    Enacting S. 894 would not affect direct spending or 
revenues relative to CBO's baseline projections; therefore, 
pay-as-you-go procedures do not apply.
    On May 16, 2011, CBO transmitted a cost estimate for H.R. 
1407, the Veterans' Compensation Cost-of-Living Adjustment Act 
of 2011, as ordered reported by the House Committee on 
Veterans' Affairs on May 12, 2011. S. 894 contains language 
similar to that in section 2 of H.R. 1407 and the estimated 
costs are the same.
    The CBO staff contact for this estimate is Dwayne M. 
Wright. The estimate was approved by Theresa Gullo, Deputy 
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 has made an 
evaluation of the regulatory impact that would be incurred in 
carrying out S. 894. The Committee finds that S. 894 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(b) 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 June 29, 2011, meeting. On that date, 
the Committee voted without dissent to order reported S. 894, a 
bill to increase, effective as of December 1, 2011, 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 for other purposes.

                             AGENCY REPORT

    On June 8, 2011, Robert L. Jesse, M.D., Ph.D., Principal 
Deputy Under Secretary for Health, Veterans Health 
Administration, Department of Veterans Affairs, appeared before 
the Committee on Veterans' Affairs and submitted testimony on, 
among other things, S. 894. Excerpts from this statement are 
reprinted below:

   STATEMENT OF ROBERT L. JESSE, M.D., PH.D., PRINCIPAL DEPUTY UNDER 
 SECRETARY FOR HEALTH, VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT 
                          OF VETERANS AFFAIRS

    Good Morning Chairman Murray, Ranking Member Burr and 
Members of the Committee: Thank you for inviting me here today 
to present the Administration's views on several bills that 
would affect Department of Veterans Affairs (VA) benefits 
programs and services.

           *       *       *       *       *       *       *

  s. 894, veterans' compensation cost-of-living adjustment act of 2011

    S. 894, the ``Veterans' Compensation Cost-of-Living 
Adjustment Act of 2011,'' would mandate a cost-of-living 
adjustment (COLA) in the rates of disability compensation and 
dependency indemnity compensation payable for periods beginning 
on or after December 1, 2011. The COLA would be the same as the 
COLA that will be provided under current law to Social Security 
benefit recipients, which is currently estimated to be an 
increase of 0.9 percent. This increase is identical to that 
proposed in the President's fiscal year 2012 budget request to 
protect the affected benefits from the eroding effects of 
inflation. VA supports the bill and believes that our Veterans 
and their dependents deserve no less. VA estimates that 
enactment would result in benefit costs of $329 million for 
fiscal year 2012, $2.1 billion over five years, and $4.6 
billion over ten years. However, because COLA costs are assumed 
in the baseline for Compensation and Pensions each year, 
enactment of this bill does not result in PAYGO costs.

           *       *       *       *       *       *       *

                        CHANGES IN EXISTING LAW

    Because 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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