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104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    104-273



October 6, 1995.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed


          Mr. Stump, from the Committee on Veterans' Affairs,

                        submitted the following

                              R E P O R T

                        [To accompany H.R. 2394]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Veterans' Affairs, to whom was referred 
the bill (H.R. 2394) to amend title 38, United States Code, to 
provide a cost-of-living adjustment in the rates of disability 
compensation for veterans with service-connected disabilities 
and the rates of dependency and indemnity compensation for 
survivors of such veterans, having considered the same, reports 
favorably thereon, without amendment, and recommends that the 
bill do pass.(insert H.R. 2394 here) deg.


    On September 25, 1995, the Chairman of the Subcommittee on 
Compensation, Pension, Insurance and Memorial Affairs, the 
Honorable Terry Everett, along with the Chairman and Ranking 
Member of the Veterans' Affairs Committee, the Honorable Bob 
Stump and the Honorable G.V. (Sonny) Montgomery, introduced 
H.R. 2394, which would provide a cost-of-living adjustment 
(COLA) in the rates of service-connected disability 
compensation and dependency and indemnity compensation (DIC), 
effective December 1, 1995.
    On September 28, 1995, the full Committee met and ordered 
H.R. 2394 reported favorably to the House by unanimous voice 

                        Summary of Reported Bill

    H.R. 2394 would:
    Increase, effective December 1, 1995, the rates of 
compensation for service-connected disabilities and the rates 
of dependency and indemnity compensation for surviving spouses 
and children of veterans who die of service-connected causes, 
the additional amounts for dependents and survivors, and the 
clothing allowances for certain veterans. The amount of 
increase would be the same as increases automatically provided 
to Social Security beneficiaries.

      Background of the Compensation and Dependency and Indemnity 
                         Compensation Programs

    There are approximately 2.23 million veterans receiving 
disability compensation as of July 31, 1995. The Department of 
Veterans Affairs expects expenditures for disability 
compensation to be $11.43 billion for fiscal year 1996. The 
basic purpose of the disability compensation program is to 
provide a measure of relief from the impaired earning capacity 
of veterans disabled as the result of their military service. 
The amount of compensation payable varies according to the 
degree of disability, which, in turn, is required by law to 
represent, to the extent practicable, the average impairment in 
earning capacity resulting from such disability or combination 
of disabilities in civil occupations.
    To be eligible to receive disability compensation, a 
veteran must have contracted a disease, suffered an injury 
which is not the result of willful misconduct, or aggravated an 
existing disease or injury in the line of duty during active 
duty service, and have been discharged under other than 
dishonorable conditions.
    The responsibility for determining a veteran's entitlement 
to service connection for a disability rests solely with the 
Department of Veterans Affairs.


    As of July 31, 1995, there were approximately 313,000 
surviving spouses and children receiving dependency and 
indemnity compensation (DIC). The VA expects DIC expenditures 
of $3.1 billion in fiscal year 1996. Widows and children of 
veterans who died of causes determined to be service connected 
are entitled to receive monthly DIC.
    The purpose of this benefit under chapter 13 of title 38 is 
to provide partial compensation to the appropriate survivors 
for the loss in financial support due to the service-connected 
death. Income and need are not factors in determining a 
surviving spouse's or child's entitlement since the Nation 
assumes, in part, the legal and moral obligation of the veteran 
to support the spouse and children.
    In 1992, Congress reformed the manner in which payments of 
DIC are made. Under current law, for deaths occurring on and 
after January 1, 1993, a base rate of $790 per month is payable 
to a surviving spouse. Such amount is increased by $173 if the 
veteran suffered from a service-connected disability which was 
rated as totally disabling for a period of eight years 
immediately preceding death and if the veteran and surviving 
spouse were continuously married during that period. For 
service-related deaths occurring prior to January 1, 1993, 
payments of DIC are made on the basis of the veteran's military 
pay grade if that would result in a higher benefit level than 
under the new payment structure. Rates for these 
``grandfathered'' surviving spouses range from $816 for the 
surviving spouse of an E-7 to $1,681 for the surviving spouse 
of an 0-10. Surviving spouses are currently entitled to an 
additional $200 per month for each child.
    There is an additional allowance of $200 monthly which is 
payable to eligible surviving spouses who are patients in a 
nursing home or who are in need of the regular aid and 
attendance of another person.
    If there is no surviving spouse receiving dependency and 
indemnity compensation benefits but there is a surviving child, 
the child is entitled to $336 monthly with additional benefits 
for other children with certain limits due to age, disability, 
and status as a student.


    The Committee annually 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 annually to provide a cost-of-living adjustment 
(COLA) in compensation and DIC benefits. The Congress has 
provided annual increases in these rates for every fiscal year 
since 1976.

                    Discussion of the Reported Bill

                         INDEMNITY COMPENSATION

    H.R. 2394 would direct the VA to compute and provide 
increases in the monthly rates of compensation and DIC, 
effective December 1, 1995. The rates would be increased by the 
same percentage as the Social Security COLA that will take 
effect on that date. If the increase does not result in a whole 
dollar amount, it shall be rounded down to the next lower whole 
dollar amount.
    The bill will provide a full COLA for both old- and new-law 
DIC recipients, by the flat rate amount determined applicable 
for new-law survivors.
    The Administration's proposed fiscal year 1996 budget 
request, submitted on February 6, 1995, recommended that a 3.1 
percent rate increase be given to all compensation 
beneficiaries, including reform DIC spouses and children, 
effective December 1, 1995. In addition, the Administration 
requested old-law DIC recipients to receive one-half of the 
increase in the base rate provided to new-law DIC recipients. 
All benefits would be rounded down to the nearest dollar. The 
estimated cost of a 3.1 percent COLA in 1996 is $340 million. 
The Administration's current estimate is a 3.0 percent 
increase, for a total cost of $311.5 million. This is the 
expected increase in the Consumer Price Index and is the same 
increase estimated for Social Security benefits.
    The Committee is following its recent practice of setting 
the COLA by reference to the yet to be determined Social 
Security increase.

                      Section-by-Section Analysis

    Section 1 would be cited as the ``Veterans' Compensation 
Cost-of-Living Adjustment Act of 1995''.
    Section 2(a) would authorize the Secretary of Veterans 
Affairs to increase, effective December 1, 1995, the dollar 
amounts in effect for the payment of disability compensation 
and dependency and indemnity compensation.
    Section 2(b) would specify the programs to receive 
increased dollar amounts: compensation, additional compensation 
for dependents, clothing allowance, new DIC rates, old DIC 
rates, additional DIC for disability, DIC for dependent 
    Section 2(c)(1) would increase the dollar amounts for those 
specified in subsection (b) based on the amount in effect on 
November 1, 1995.
    Section 2(c)(2) would specify that each amount should be 
increased by the same percentage by which benefits are paid 
under title II of the Social Security Act (42 U.S.C.).
    Section 2(c)(3) would round down to the next lower dollar 
amount all compensation and DIC benefits, when the amount is 
not a whole dollar amount.
    Section 2(c)(4)(A) would specify that the old-law DIC rates 
shall be increased by the amount by which the new-law DIC rate 
is increased.
    Section 2(c)(4)(B)(i) and (ii) would define old- and new-
law DIC rates by section number within title 38, U.S.C.
    Section 2(d) would provide a special rule authorizing the 
Secretary of Veterans Affairs to 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, who are not in 
receipt of compensation payable pursuant to chapter 11 to title 
38, U.S.C.
    Section 2(e) would require the Secretary of Veterans 
Affairs to publish in the Federal Register the amounts 
specified in subsection (b), as increased pursuant to 
subsection (a).

                           Oversight Findings

    No oversight findings have been submitted to the Committee 
by the Committee on Government Reform and Oversight.

               Congressional Budget Office Cost Estimate

    The following letter was received from the Congressional 
Budget Office concerning the cost of the reported bill:

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 29, 1995.
Hon. Bob Stump,
Chairman, Committee on Veterans' Affairs,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate of H.R. 2394, the Veterans' 
Compensation Cost-of-Living Adjustment Act of 1995, as ordered 
reported by the House Committee on Veterans' Affairs on 
September 28, 1995.
    The bill would affect direct spending and thus would be 
subject to pay-as-you-go procedures under section 252 of the 
Balanced Budget and Emergency Deficit Control Act of 1985.
    If you wish further details on this estimate, we will be 
pleased to provide them.
                                           June E. O'Neill,


    1. Bill number: H.R. 2394.
    2. Bill title: Veterans' Compensation Cost-of-Living 
Adjustment Act of 1995.
    3. Bill status: As ordered reported by the House Committee 
on Veterans' Affairs on September 28, 1995.
    4. Bill purpose: The bill would round down 1996 cost-of-
living adjustments (COLAs) for veterans with service-connected 
disabilities and for survivors of certain disabled veterans.
    5. Estimated cost to the federal government:

                                    [By fiscal year, in millions of dollars]                                    
                                                              1995     1996     1997     1998     1999     2000 
                                                 DIRECT SPENDING                                                
Spending Under Current Law:                                                                                     
  Estimated Budget Authority..............................   14,176   14,835   15,395   15,976   16,594   17,018
  Estimated Outlays.......................................   14,422   13,675   15,312   15,928   16,543   18,241
Proposed Changes:                                                                                               
  Estimated Budget Authority..............................        0      -19      -24      -24      -25      -26
  Estimated Outlays.......................................        0      -17      -23      -24      -25      -28
Spending Under Proposals:                                                                                       
  Estimated Budget Authority..............................   14,176   14,816   15,371   15,952   16,569   16,992
  Estimated Outlays.......................................   14,222   13,658   15,289   15,904   16,518   18,213

    6. Basis of estimate: As specified in the Balanced Budget 
Act, CBO's baseline assumes that monthly rates of disability 
compensation paid to veterans and of dependency and indemnity 
compensation (DIC) paid to their survivors are increased by the 
same cost-of-living allowance (COLA) payable to Social Security 
recipients, and the results of the adjustments are rounded to 
the nearest dollar.
    This provision would change current law in two ways. First, 
it would round down to the next lower dollar adjustments to 
disability compensation in 1996. Second, the provision would 
change the 1996 COLA provided to DIC recipients. The Dependency 
and Indemnity Compensation Reform Act of 1992 redefined the DIC 
benefit to be a constant amount in contrast to previous law 
that varied the benefit based on the military rank of the 
recipient's spouse. Beneficiaries at the time of the act could 
continue to receive their existing payment if it was higher 
than the new benefit. Under CBO baseline assumptions, 
grandfathered beneficiaries receive COLAs that are computed as 
a percentage of their benefit. This bill, however, would make 
the COLA a flat amount equal to the adjustment in the flat DIC 
benefit under the 1992 act and this bill.
    CBO estimated the savings from this provision using the 
current table of monthly benefits, the number of beneficiaries 
assumed in the CBO baseline, and the inflation assumptions of 
the budget resolution. The COLA assumed to take effect on 
December 1, 1995, is 3.1 percent.
    7. Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act of 1985 sets up pay-as-you-go 
procedures for legislation affecting direct spending or 
receipts through 1998. The bill would have the following pay-
as-you-go impact:

                [By fiscal years, in millions of dollars]               
                                        1995     1996     1997     1998 
Change in outlays...................        0      -17      -23      -24
Change in receipts .................            Not applicable          

    8. Estimated cost to state and local governments: None.
    9. Estimate comparison: None.
    10. Previous CBO estimate: None.
    11. Estimate prepared by: Mary Helen Petrus.
    12. Estimate approved by: Paul N. Van de Water, Assistant 
Director for Budget Analysis.

                     Inflationary Impact Statement

    The enactment of the reported bill would have no 
inflationary impact.

                  Applicability to Legislative Branch

    The reported bill would not be applicable to the 
legislative branch under the Congressional Accountability Act, 
Public Law 104-1, because the bill would only affect certain 
Department of Veterans Affairs benefits recipients.

                     Statement of Federal Mandates

    The reported bill would not establish a federal mandate 
under the Unfunded Mandates Reform Act, Public Law 104-4.