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[Senate Report 113-87]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 165
113th Congress                                                   Report
                                 SENATE
 1st Session                                                     113-87

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      VETERANS' COMPENSATION COST-OF-LIVING ADJUSTMENT ACT OF 2013

               September 4, 2013.--Ordered to be printed

  Filed, under authority of the order of the Senate of August 1, 2013.

                                _______
                                

         Mr. Sanders, from the Committee on Veterans' Affairs,
                        submitted the following

                              R E P O R T

                         [To accompany S. 893]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Veterans' Affairs (hereinafter, 
``Committee''), to which was referred the bill (S. 893) to 
increase, effective as of December 1, 2013, 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, and for other purposes, having considered the same, 
reports favorably thereon, without amendment, and recommends 
that the bill do pass.

                              INTRODUCTION

    On May 8, 2013, Committee Chairman Bernard Sanders 
introduced S. 893, a bill to increase, effective as of December 
1, 2013, 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. Ranking Member Richard Burr 
and Committee Members John D. Rockefeller IV, Patty Murray, 
Sherrod Brown, Jon Tester, Mark Begich, Richard Blumenthal, 
Mazie K. Hirono, Johnny Isakson, Mike Johanns, Jerry Moran, 
John Boozman, and Dean Heller are original cosponsors of the 
bill, which was referred to the Committee upon introduction.

                           COMMITTEE HEARING

    On June 12, 2013, the Committee held a hearing on 
legislation pending before the Committee. Testimony on S. 893 
was received from: Curtis L. Coy, Deputy Under Secretary for 
Economic Opportunity, Veterans Benefits Administration, 
Department of Veterans Affairs; Ian de Planque, Deputy 
Legislative Director, The American Legion; Jeffrey Hall, 
Assistant National Legislative Director, Disabled American 
Veterans; Robert Norton, Deputy Director, Government Relations, 
Military Officers Association of America; and Ryan Gallucci, 
Deputy Director, National Legislative Service, Veterans of 
Foreign Wars of the United States.

                           COMMITTEE MEETING

    On July 24, 2013, the Committee met in open session to 
consider legislation pending before the Committee. Among the 
measures so considered was S. 893. The Committee voted by voice 
vote, without objection, to report favorably S. 893 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, 2013, 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 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 2013 will be 1.5 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 2014 
budget submission, the Department estimates that it will 
provide compensation to 4,210,582 beneficiaries (3,846,018 
veterans and 364,564 survivors) in fiscal year 2014. Among the 
veterans estimated to receive such compensation are 136,897 
World War II veterans; 140,169 Korean Conflict veterans; 
1,327,348 Vietnam era veterans; 1,546,030 veterans of the Gulf 
War era; and 695,574 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 $1,215 per 
month and, if the deceased veteran was totally disabled for 
eight years prior to death, an additional $258 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 may also 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 2014 budget submission, VA estimates 
that it will pay DIC benefits to 364,564 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 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, 2013. The rates 
would be increased by the same percentage as the Social 
Security and VA pension COLA that will take effect on that 
date.
    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 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 (hereinafter, ``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, 2013.
    The CBO, in its most recent baseline, estimated that the 
Social Security COLA affecting fiscal year 2014 payments, and 
thus the COLA provided for by the Committee bill, will be 1.5 
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 
the Committee bill would, relative to current law, increase 
spending by $0.9 million in fiscal year 2014, 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, August 8, 2013.
Hon. Bernard Sanders,
Chairman,
Committee on Veterans' Affairs,
U.S. Senate, Washington, DC.

    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 893, the Veterans' 
Compensation Cost-of-Living Adjustment Act of 2013.
    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. 893--Veterans' Compensation Cost-of-Living Adjustment Act of 2013

    As ordered reported by the Senate Committee on Veterans' 
Affairs on July 24, 2013.
    S. 893 would increase the amounts paid to veterans for 
disability compensation and to their survivors for dependency 
and indemnity compensation (DIC) by the same cost-of-living 
adjustment (COLA) payable to Social Security recipients. The 
increase would take effect on December 1, 2013.
    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. 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 $0.9 million in fiscal year 
2014. This estimate assumes that the COLA effective on December 
1, 2013, would be 1.5 percent. (The annualized cost would be 
about $1.2 billion in subsequent years. CBO previously 
estimated that the COLA change relative to current law would be 
about $2.6 billion on an annualized basis in contrast to that 
corrected figure of about $1.2 billion.)
    Enacting S. 893 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    S. 893 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.
    On May 16, 2013, CBO transmitted a cost estimate for H.R. 
357, the GI Bill Tuition Fairness Act of 2013, as ordered 
reported by the House Committee on Veterans' Affairs on May 8, 
2013. Section 12 of H.R. 357 is similar to S. 893 but includes 
a provision calling for rounding down the COLA to the next 
lower dollar; that ``round down'' provision is not included in 
S. 893. As a result of that difference, CBO estimated budgetary 
savings of $278 million over the 2014-2023 period for H.R. 357.
    On May 14, 2013, CBO transmitted a cost estimate for H.R. 
570, the American Heroes COLA Act, as ordered reported by the 
House Committee on Veterans' Affairs on May 8, 2013. H.R. 570 
would provide a permanent annual COLA to the amounts paid for 
disability compensation and DIC starting in 2015. H.R. 570 also 
would round down that adjustment to the next lower dollar. That 
difference would produce estimated savings of $1.4 billion over 
the 2015-2023 period for H.R. 570.
    The CBO staff contact for this estimate is Dwayne M. 
Wright. The estimate was approved by Peter H. Fontaine, 
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 S. 893 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 July 24, 2013, meeting. On that date, 
the Committee voted without dissent to order reported S. 893, a 
bill to increase, effective as of December 1, 2013, 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 12, 2013, Curtis L. Coy, Deputy Under Secretary for 
Economic Opportunity, Veterans Benefits Administration, 
Department of Veterans Affairs, appeared before the Committee 
on Veterans' Affairs and submitted testimony on, among other 
things, S. 893. Excerpts from this statement are reprinted 
below:

    STATEMENT OF CURTIS L. COY, DEPUTY UNDER SECRETARY FOR ECONOMIC 
   OPPORTUNITY, VETERANS BENEFITS ADMINISTRATION, U.S. DEPARTMENT OF 
                            VETERANS AFFAIRS

    Good morning, Mr. Chairman and Members of the Committee. I 
am pleased to be here today to provide the views of the 
Department of Veterans Affairs (VA) on pending legislation 
affecting VA's programs, including the following: Sections 101, 
102 and 103 of S. 6, S. 200, S. 257, S. 262, S. 294, S. 373, 
S. 430, sections 5, 6, 7, and 8 of S. 495, S. 514, S. 515, 
S. 572, S. 629, S. 674, S. 690, S. 695, S. 705, S. 748, S. 893, 
S. 894, S. 922, sections 103, 104, 201, 202, 301, 302, 303, 
304, and 305 of S. 928, and S. 939. VA has not had time to 
develop cost estimates for S. 514 and S. 894 and but will work 
to provide them. VA has not had time to develop views and costs 
on the other sections of S. 928. I cannot address today views 
and costs on S. 735, S. 778, S. 819, S. 863, S. 868, S. 889, 
S. 927, certain sections of S. 928, S. 930, S. 932, S. 935, 
S. 938, S. 944, S. 1039, S. 1042, and S. 1058, but, with your 
permission, we will work to provide that information. Other 
legislative proposals under discussion today would affect 
programs or laws administered by the Department of Labor (DOL), 
Department of Homeland Security (DHS), Department of Defense 
(DOD), the Office of Personnel Management (OPM), and the 
General Services Administration (GSA). Respectfully, we defer 
to those Departments' views on those legislative proposals. 
Accompanying me this morning are Thomas Murphy, Director, 
Compensation Service, Veterans Benefits Administration; Richard 
Hipolit, Assistant General Counsel; and John Brizzi, Deputy 
Assistant General Counsel.

           *       *       *       *       *       *       *

                                 s. 893

    S. 893, the ``Veterans' Compensation Cost-of-Living 
Adjustment Act of 2013,'' would require the Secretary of 
Veterans Affairs to increase, effective December 1, 2013, the 
rates of disability compensation for service-disabled Veterans 
and the rates of dependency and indemnity compensation (DIC) 
for survivors of Veterans. This bill would increase these rates 
by the same percentage as the percentage by which Social 
Security benefits are increased effective December 1, 2013. The 
bill would not, however, account for the expiration at the end 
of this fiscal year of the feature in current law that rounds 
down to the next lower whole dollar amount those increases not 
in whole dollars. The bill would also require VA to publish the 
resulting increased rates in the Federal Register.
    VA strongly supports annual cost-of-living adjustments 
(COLA) for these important compensation programs because they 
express, in a tangible way, this Nation's gratitude for the 
sacrifices made by our service-disabled Veterans and their 
surviving spouses and children and would ensure that the value 
of their well-deserved benefits will keep pace with increases 
in consumer prices. However, VA recommends the current ``round 
down'' statutory provisions be extended. We recommend amending 
sections 1303(a) and 1104(a) of title 38, United States Code, 
to provide a 5-year extension of the round-down provisions of 
the computation of the COLA for service-connected disability 
compensation and DIC. Public Law 108-183 extended the ending 
dates of these provisions to 2013. The extension for the COLA 
round down provision beyond the 2013 expiration date results in 
cost savings. The benefit savings to round down the FY 2014 
COLA are estimated to be $41.6 million in FY 2014, $712.5 
million for 5 years, and $2.3 billion over 10 years as a result 
of the compounding effects of rounding down the COLA in 
subsequent years.

           *       *       *       *       *       *       *

                        CHANGES IN EXISTING LAW

    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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