[Federal Register Volume 66, Number 85 (Wednesday, May 2, 2001)]
[Rules and Regulations]
[Pages 21871-21874]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-11028]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 3

RIN 2900-AJ99


Review of Benefit Claims Decisions

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This document concerns the Department of Veterans Affairs' 
(VA) adjudication regulations. We are adding new provisions to allow 
any claimants who file a timely Notice of Disagreement to obtain a de 
novo review of their claims at the Veterans Service Center level before 
deciding whether to proceed with the traditional appeal process. This 
is intended to provide a more efficient means for resolving 
disagreements concerning claims.

DATES: Effective Date: June 1, 2001.

FOR FURTHER INFORMATION CONTACT: Bill Russo, Attorney-Advisor, 
Compensation and Pension Service, or John Bisset, Jr., Consultant, 
Compensation and Pension Service, Regulations Staff, Veterans Benefits 
Administration, 810 Vermont Avenue, NW., Washington, DC 20420, 
telephone (202) 273-7210 and (202) 273-7213, respectively.

SUPPLEMENTARY INFORMATION: On February 18, 2000, VA published in the 
Federal Register (65 FR 8329-8330), a proposed rule which would 
establish provisions at 38 CFR 3.2600 to allow any claimants who file a 
timely Notice of Disagreement to obtain a de novo review (a new and 
complete review with no deference given to the decision being reviewed) 
by Veterans Service Center personnel before deciding whether to proceed 
with the traditional appeal process. We received written comments from 
American Veterans of WWII, Korea and Vietnam (AMVETS), Florida 
Department of Veterans' Affairs, National Organization of Veterans 
Advocates, Paralyzed Veterans of America, Veterans of Foreign Wars 
(Department of Maine), three VA employees and two concerned private 
individuals.

Potential Changes to the Traditional Appeal Process

    We proposed to establish a new de novo review procedure that would 
be available to any claimant who files a Notice of Disagreement with a 
decision on a claim governed by 38 CFR part 3. We did not, and do not, 
intend the new de novo review procedure to change the procedures or 
rights involved with appealing such claims decisions to the Board of 
Veterans' Appeals. We intend it to be an additional, optional procedure 
to be conducted, if at all, between a claimant's filing a Notice of 
Disagreement and VA's issuance of a Statement of the Case. If de novo 
review under Sec. 3.2600 is not requested with the Notice of 
Disagreement or after the Notice of Disagreement is filed but within 60 
days after VA mails notice of the right of such review to the claimant, 
then the appeal will proceed in accordance with the traditional appeal 
process. However, a claimant may not pursue de novo review and the 
traditional appeal simultaneously. A traditional appeal is suspended 
until de novo review is complete. Otherwise, there would be a risk of 
duplicative development and inconsistent decisions made in the same 
claim.
    Two commenters stated that the proposed regulations are unclear as 
to whether they change existing procedures regarding filing and 
processing of the Notice of Disagreement and the issuance of the 
Statement of the Case.
    The final rule does not modify the procedures of the traditional 
appeal process. To make this clear, we are amending the proposed rule 
in two respects. At the end of Sec. 3.2600(b), we are adding language 
that provides that if a claimant fails to timely request de novo review 
under Sec. 3.2600, VA will proceed with the traditional appellate 
process by issuing a Statement of the Case. For clarity, we are also 
adding a sentence to Sec. 3.2600(b) to preclude any extension of the 
time limit. Section 3.109(b) allows for a good cause extension of time 
limits within which a claimant is required to act to perfect a claim or 
challenge an adverse VA decision. Since the de novo review process is 
an optional procedure, not a required one, Sec. 3.109(b) does not apply 
to the period during which a claimant may request the de novo review 
process. Moreover, VA believes that a 60-day time limit, without the 
possibility of extension, is a reasonable amount of time for a claimant 
to decide whether to opt for the de novo review process.

[[Page 21872]]

    In addition, we are using the last sentence of the proposed 
Sec. 3.2600(b) to begin a new Sec. 3.2600(f). This new paragraph 
provides that review under Sec. 3.2600 does not limit the appeal rights 
of a claimant, and, if the claimant does not withdraw his or her Notice 
of Disagreement as a result of this review process, VA will proceed 
with the traditional appellate process by issuing a Statement of the 
Case.
    One commenter suggested that the proposed Sec. 3.2600 be amended to 
make clear that claimants who have filed a Notice of Disagreement may 
present additional evidence.
    This final rule does not modify existing procedures for submission 
of evidence. Under current regulations, any claimant may present 
additional evidence after filing a Notice of Disagreement (38 CFR 
19.37, 20.304 and 20.1304). Furthermore, Sec. 3.2600(c) allows the 
reviewer to obtain additional evidence. We therefore make no change 
based on this comment.
    Two commenters expressed concern that this rulemaking would limit 
the right of a claimant to have a hearing at some point following this 
new review process.
    This final rule doesn't place any limitations on existing rights: 
38 CFR 3.103(c) states, ``Upon request, a claimant is entitled to a 
hearing at any time on any issue involved in a claim within the purview 
of part 3 of this chapter, subject to the limitations described in 
Sec. 20.1304 of this chapter with respect to hearings in claims which 
have been certified to the Board of Veterans['] Appeals for appellate 
review.'' In fact, proposed Sec. 3.2600(b) specified that review under 
Sec. 3.2600 ``does not limit the appellate rights of a claimant.'' For 
these reasons, we make no change based on these comments.

Management and Personnel Matters

    One commenter predicted that implementation of the de novo review 
process that VA proposed would increase the backlog of pending claims 
because VA would assign its most productive adjudicators to this new 
review process. This same commenter predicted that implementation of 
this review process will cause a decline in the quality of VA claims 
decisions, for this same reason, and because there would be 
insufficient oversight of decisions made during this review process. 
Another commenter expressed concern that no benefit would be gained 
from the de novo review process unless Veterans Service Centers are 
authorized to hire additional personnel to conduct the de novo review.
    VA believes that there is no evidence that implementation of the de 
novo review process will increase the backlog of pending claims. In 
addition, VA believes that any increase in the backlog of pending 
claims which might occur as the de novo review program begins, will be 
offset by a greater long-term reduction in pending appeals. At the 
twelve VA Veterans Service Centers that have participated in the pilot 
test of the Decision Review Officer program since December 1997, there 
has been a significant decline in the number of substantive appeals 
filed. VA also believes that there will be no decline in the quality of 
VA decisions due to the de novo review program. There has been no such 
decline at the twelve pilot Service Centers. Moreover, decisions 
rendered under the de novo review process will be subject to VA Central 
Office oversight under VA's Systematic Technical Advisory Review 
(STAR), just like other Service Center decisions. VA believes there 
will be significant efficiency benefits gained through the de novo 
review program: We believe it will reduce the number of cases that go 
to the Board of Veterans' Appeals, which will in turn reduce the number 
of claims which must be readjudicated on remand from the Board of 
Veterans' Appeals. We therefore make no changes based on these 
comments.
    One commenter suggested that the Decision Review Officers should be 
placed outside the chain of command of the Veterans Service Center 
Manager and report directly to the Director of their VA Regional Office 
to ensure that the Decision Review Officer is independent.
    VA believes that it is not necessary to remove the Decision Review 
Officers from the chain of command of the Veterans Service Center 
Manager in order for them to function independently. Under the final 
rule, a Service Center Manager has no authority, other than the 
existing clear and unmistakable error authority under Sec. 3.105(a) or 
the difference of opinion authority under Sec. 3.105(b) (which must be 
approved by VA Central Office), to overturn a Decision Review Officer's 
decision. We therefore make no change based on this comment.
    This same commenter suggested that attorneys perform de novo 
reviews under Sec. 3.2600, since attorneys are most familiar with the 
statutes, regulations and adjudication manual provisions regarding 
veterans benefits.
    VA believes that other staff besides attorneys are qualified to 
serve as Decision Review Officers. For example, staff which are 
currently working as Hearing Officers or Master Rating Specialists have 
extensive knowledge of statutes, regulations and adjudication manual 
provisions regarding veterans benefits, and are well qualified to serve 
as Decision Review Officers. We therefore make no change based on this 
comment.

Representation for Claimants

    Two commenters urged that the de novo review process include a 
claimant's duly appointed representative, and that the proposed 
Sec. 3.2600 be amended for that purpose.
    Nothing in this final rule excludes or discourages the 
participation of claimants' representatives. Furthermore, Sec. 3.103(e) 
states, ``Subject to the provisions of Secs. 14.626 through 14.637 of 
this title [concerning recognition of veterans service organizations 
and accreditation of individual representatives], claimants are 
entitled to representation of their choice at every stage in the 
prosecution of a claim.'' Therefore, we believe that VA regulations 
make it clear that a claimant is allowed to have representation during 
this new review process, and we make no change based on these comments.

Timing of VA Notice of Right to De Novo Review

    One commenter said that the proposed regulation fails to make it 
clear when the VA will send the claimant notice of the right to the de 
novo review.
    Based on this comment, we have specified in Sec. 3.2600(b) that VA 
will send the notice ``upon receipt of the Notice of Disagreement.''

Timing of Claimant's Request for De Novo Review

    Two commenters said the proposed rule was unclear as to whether a 
request for a de novo review, filed at the same time as the Notice of 
Disagreement, would be considered valid.
    VA concurs. We have amended Sec. 3.2600(b) to provide that a 
claimant may request review under Sec. 3.2600 with his or her Notice of 
Disagreement or after the Notice of Disagreement is filed but not later 
than 60 days after VA mails notice of the right to de novo review.

Time Limits for VA Action

    One commenter suggested that this rulemaking include a provision to 
require VA to respond to a Notice of Disagreement within 30 days. We 
believe the intent of the comment is to require, by regulation, that VA 
furnish notice of the right to a review under Sec. 3.2600 within 30 
days of the receipt of the Notice of Disagreement. This

[[Page 21873]]

commenter felt that this would improve VA's accountability to 
claimants.
    VA believes that it would be inadvisable to set a deadline for VA 
to furnish this notice. Instances arise where VA must ask the claimant 
to clarify some aspect of the Notice of Disagreement. This would make 
it impracticable for VA to furnish the notice within a specified time 
period. We therefore make no change based on this comment.
    One commenter suggested that this rulemaking strictly limit the 
time VA has to conclude the de novo review, for example, within 30-60 
days.
    We believe that it would be inadvisable to set time limits on the 
review process. Due to factors such as VA's workload or illness of the 
claimant, there may be unavoidable delays in scheduling an informal 
conference or obtaining additional relevant evidence. We therefore make 
no change based on this comment.

Clear and Unmistakable Error

    One commenter stated the rulemaking is unclear as to whether the 
reviewer will have independent authority to revise decisions based on 
clear and unmistakable error, or whether the Veterans Service Center 
Manager must approve such decisions.
    Section 3.2600(e) clearly authorizes the reviewer to reverse or 
revise prior decisions based on clear and unmistakable error under 
Sec. 3.105(a) without obtaining the approval of any other VA official. 
We therefore make no change to Sec. 3.2600 based on this comment. 
However, VA has amended Sec. 3.104 to make clear that not only 
Sec. 3.105 but also new Sec. 3.2600 are valid bases for revision of 
decisions on the same factual basis as the initial decision by the 
agency of original jurisdiction.
    One commenter stated the rulemaking is unfair because it gives the 
reviewer authority to revise decisions based on clear and unmistakable 
error in a manner unfavorable to the claimant, without any prior notice 
to the claimant. This same commenter stated that the rulemaking should 
be amended to allow a claimant to obtain de novo review of a clear and 
unmistakable error. This commenter also stated that the potential for 
clear and unmistakable error review of prior, final decisions may be a 
disincentive to seeking a review under Sec. 3.2600.
    As stated in Sec. 3.2600(e), the reviewer will have the same clear 
and unmistakable error authority as any other VA adjudicator under 
Sec. 3.105(a). However, we note that Sec. 3.103(b) and Sec. 3.105(e) 
and (f) do already require advanced notice of proposed reductions or 
terminations of benefits. With respect to clear and unmistakable error 
claims filed by claimants, under Sec. 3.2600, if such claims are 
denied, the claimant may file a Notice of Disagreement, and will then 
be notified of his or her right to the de novo review process, just as 
with any other claim governed by 38 CFR part 3. The potential for clear 
and unmistakable error review is not unique to the de novo review 
process under Sec. 3.2600. It applies to any claim filed subsequent to 
a final VA decision. We therefore make no change based on this comment.

Date of Implementation

    One commenter said that the proposed regulations fail to make it 
clear which claimants will be eligible for the de novo review (i.e. 
those with appeals pending on the effective date of the regulation, or 
those filing claims on or after the effective date).
    To clarify this issue, we have added to proposed Sec. 3.2600 a new 
paragraph (g), which states: ``This section applies to all claims in 
which a Notice of Disagreement is filed on or after June 1, 2001.'' 
This will provide claimants with a date certain on which the de novo 
review will be available. We believe that including claims which are 
pending at various stages of the appellate process would be 
administratively difficult because the de novo review is designed to 
occur prior to the traditional appellate process.

Other Comments

    One commenter suggested that VA conduct de novo review in every 
claim in which a Notice of Disagreement is filed, unless claimants 
specifically state they do not want to go through this review process.
    As was stated in proposed Sec. 3.2600(b), ``This [de novo] review 
does not limit the appellate rights of a claimant.'' We believe the 
suggestion made by this commenter would interfere with the traditional 
appeal process by requiring claimants who want only the traditional 
process (and not the de novo process) to file an extra document which 
makes that statement. We also believe that the de novo review process 
should be optional for claimants, not mandatory. We therefore make no 
change based on this comment.
    One commenter suggested that a favorable decision resulting from 
the de novo review process need not contain a citation to the pertinent 
laws.
    We believe that requiring all decisions issued under the de novo 
review process to contain the items listed in Sec. 3.2600(d) will 
provide more consistent, uniform decisions. This will benefit both 
claimants and the Board of Veterans' Appeals (if the claim is 
ultimately appealed there). We therefore make no change based on this 
suggestion.
    One commenter urged that VA allow claimants whose cases have been 
remanded to the Veterans Service Center by the Board of Veterans' 
Appeals to obtain review under Sec. 3.2600 at that stage.
    Nothing in this final rule modifies the post-remand VA claims 
process. We note, however, that no existing regulations or policies 
prohibit a Veterans Service Center from assigning whatever staff they 
deem appropriate (including the Decision Review Officer) to review a 
case following a remand by the Board of Veterans' Appeals. Review by a 
Decision Review Officer following remand from the Board would not, 
however, be made under Sec. 3.2600 procedures because, as we stated 
above, the de novo review under Sec. 3.2600 is designed to occur prior 
to the traditional appellate process. We therefore make no change based 
on this suggestion.
    One commenter suggested that the proposed Sec. 3.2600 be revised to 
give the reviewer authority to grant entitlement to non-service 
connected pension on an extra-schedular basis under 38 CFR 3.321(b)(2).
    This final rule is not intended to modify the procedure or 
authority established by Sec. 3.321(b)(2), which authorizes only 
Adjudication Officers to grant pension on an extra-schedular basis if 
schedular percentage standards are not met. That procedure and 
authority is intended to function as a rare exception to the general 
requirement in Sec. 4.17 that a claimant must meet certain minimum 
disability rating percentage criteria to be entitled to pension 
benefits. VA believes that the Adjudication Officer (now called 
Veterans Service Center Manager in certain VA Regional Offices) is 
capable of deciding all such claims. We therefore make no change based 
on this comment.
    One commenter suggested that VA should discuss the applicability of 
the U.S. Court of Appeals for the Federal Circuit decisions in Hayre v. 
West, 188 F.3d 1327 (Fed. Cir. 1999), and Brown v. West, 203 F.3d 1378 
(Fed. Cir. 2000), but did not elaborate.
    These cases have no applicability to the subject of this 
rulemaking, which is de novo review of certain appealed decisions, so 
we make no change based on this comment. We note, however, that the de 
novo review process will be available in any claim for which a Notice 
of Disagreement has been filed on or after the effective date of this

[[Page 21874]]

regulation, including claims for an earlier effective date (e.g., 
Hayre) and clear and unmistakable error (e.g., Brown).
    Finally, we are making one other change from the proposed rule. We 
proposed to add a new subpart D to part 3 and a new Sec. 3.2100, which 
would have governed the scope of applicability of provisions in subpart 
D. After the proposed rule was published, VA published another final 
rule that added subpart D and new Sec. 3.2100. Accordingly, we do not 
include either subpart D or Sec. 3.2100 in this final rule.

Executive Order 12866

    The Office of Management and Budget has reviewed this final rule 
under Executive Order 12866.

Paperwork Reduction Act

    This document contains no provisions constituting a collection of 
information under the Paperwork Reduction Act (44 U.S.C. 3501-3520).

Unfunded Mandates

    The Unfunded Mandates Reform Act requires (in section 202) that 
agencies prepare an assessment of anticipated costs and benefits before 
developing any rule that may result in an expenditure by State, local, 
or tribal governments, in the aggregate, or by the private sector of 
$100 million or more in any given year. This final rule will have no 
consequential effect on State, local, or tribal governments.

Regulatory Flexibility Act

    The Secretary hereby certifies that the adoption of this final rule 
would not have a significant economic impact on a substantial number of 
small entities as they are defined in the Regulatory Flexibility Act, 5 
U.S.C. 601-612. The final rule does not directly affect any small 
entities. Only VA beneficiaries are directly affected. Therefore, 
pursuant to 5 U.S.C. 605(b), these amendments are exempt from the 
initial and final regulatory flexibility analysis requirements of 
sections 603 and 604.

    The Catalog of Federal Domestic Assistance program numbers are 
64.100, 64.101, 64.104, 64.105, 64.106, 64.109, 64.110, and 64.127.

List of Subjects in 38 CFR Part 3

    Administrative practice and procedure, Claims, Disability benefits, 
Health care, Pensions, Veterans, Vietnam.

    Approved: February 15, 2001.
Anthony J. Principi,
Secretary of Veterans Affairs.

    For the reasons set forth in the preamble, 38 CFR part 3 is amended 
as follows:

PART 3--ADJUDICATION

Subpart A--Pension, Compensation, and Dependency and Indemnity 
Compensation

    1. The authority citation for part 3, subpart A continues to read 
as follows:

    Authority: 38 U.S.C. 501(a), unless otherwise noted.


Sec. 3.104  Amended

    2. In Sec. 3.104, paragraph (a), the second sentence is amended by 
removing ``Sec. 3.105'' and adding, in its place, ``Sec. 3.105'' and 
adding, in its place, ``Sec. 3.105 and Sec. 3.2600''.


Sec. 3.105  Amended

    3. In Sec. 3.105, paragraph (b) is amended by adding, as the last 
sentence, ``However, a decision may be revised under Sec. 3.2600 
without being recommended to Central Office.''

Subpart D--Universal Adjudication Rules That Apply to Benefit 
Claims Governed by Part 3 of this Title

    4. The authority citation for part 3, subpart D continues to read 
as follows:

    Authority: 38 U.S.C. 501(a), unless otherwise noted.


    5. A new undesignated center heading and Sec. 3.2600 are added to 
subpart D to read as follows:

Revisions


Sec. 3.2600  Review of benefit claims decisions.

    (a) A claimant who has filed a timely Notice of Disagreement with a 
decision of an agency of original jurisdiction on a benefit claim has a 
right to a review of that decision under this section. The review will 
be conducted by an Adjudication Officer, Veterans Service Center 
Manager, or Decision Review Officer, at VA's discretion. An individual 
who did not participate in the decision being reviewed will conduct 
this review. Only a decision that has not yet become final (by 
appellate decision or failure to timely appeal) may be reviewed. Review 
under this section will encompass only decisions with which the 
claimant has expressed disagreement in the Notice of Disagreement. The 
reviewer will consider all evidence of record and applicable law, and 
will give no deference to the decision being reviewed.
    (b) Unless the claimant has requested review under this section 
with his or her Notice of Disagreement, VA will, upon receipt of the 
Notice of Disagreement, notify the claimant in writing of his or her 
right to a review under this section. To obtain such a review, the 
claimant must request it not later than 60 days after the date VA mails 
the notice. This 60-day time limit may not be extended. If the claimant 
fails to request review under this section not later than 60 days after 
the date VA mails the notice, VA will proceed with the traditional 
appellate process by issuing a Statement of the Case. A claimant may 
not have more than one review under this section of the same decision.
    (c) The reviewer may conduct whatever development he or she 
considers necessary to resolve any disagreements in the Notice of 
Disagreement, consistent with applicable law. This may include an 
attempt to obtain additional evidence or the holding of an informal 
conference with the claimant. Upon the request of the claimant, the 
reviewer will conduct a hearing under Sec. 3.103(c).
    (d) The reviewer may grant a benefit sought in the claim 
notwithstanding Sec. 3.105(b), but, except as provided in paragraph (e) 
of this section, may not revise the decision in a manner that is less 
advantageous to the claimant than the decision under review. A review 
decision made under this section will include a summary of the 
evidence, a citation to pertinent laws, a discussion of how those laws 
affect the decision, and a summary of the reasons for the decision.
    (e) Notwithstanding any other provisions of this section, the 
reviewer may reverse or revise (even if disadvantageous to the 
claimant) prior decisions of an agency of original jurisdiction 
(including the decision being reviewed or any prior decision that has 
become final due to failure to timely appeal) on the grounds of clear 
and unmistakable error (see Sec. 3.105(a)).
    (f) Review under this section does not limit the appeal rights of a 
claimant. Unless a claimant withdraws his or her Notice of Disagreement 
as a result of this review process, VA will proceed with the 
traditional appellate process by issuing a Statement of the Case.
    (g) This section applies to all claims in which a Notice of 
Disagreement is filed on or after June 1, 2001.

(Authority: 38 U.S.C. 5109A and 7105(d))

[FR Doc. 01-11028 Filed 5-1-01; 8:45 am]
BILLING CODE 8320-01-U