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                                                       Calendar No. 585
104th Congress                                                   Report
                                 SENATE

 2d Session                                                     104-367
_______________________________________________________________________


 
      VETERANS' COMPENSATION COST-OF-LIVING ADJUSTMENT ACT OF 1996

                                _______
                                

               September 9, 1996.--Ordered to be printed

_______________________________________________________________________


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

                              R E P O R T

                          [To accompany 1791]

    The Committee on Veterans' Affairs, to which was referred 
the bill (S. 1791) to increase, effective December 1, 1996, the 
rates of disability compensation for veterans with service-
connected disabilities and the rates of dependency and 
indemnity compensation for survivors of certain service-
connected disabled veterans, and for other purposes, having 
considered the same, reports favorably thereon and recommends 
that the bill do pass.

                             committee bill

     The text of the 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 1996''.

SEC. 2. INCREASE IN COMPENSATION RATES AND LIMITATIONS.

    (a) In General.--(1) The Secretary of Veterans Affairs 
shall, as provided in paragraph (2), increase, effective 
December 1, 1996, the rates of and limitations on Department of 
Veterans Affairs disability compensation and dependency and 
indemnity compensation.
    (2) The Secretary shall increase each of the rates and 
limitations in sections 1114, 1115(1), 1162, 1311, 1313, and 
1314 of title 38, United States Code, that were increased by 
the amendments made by the Veterans' Compensation Cost-of-
Living Adjustment Act of 1995 (Public Law No. 104-57; 109 Stat. 
555). This increase shall be made in such rates and limitations 
as in effect on November 30, 1996, and shall be by the same 
percentage that benefit amounts payable under title II of the 
Social Security Act (42 U.S.C. 401 et seq.) are increased 
effective December 1, 1996, as a result of a determination 
under section 215(I) of such Act (42 U.S.C. 415(I)).
    (b) Special Rule.--The Secretary may adjust 
administratively, consistent with the increases made under 
subsection (a)(2), 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.
    (c) Publication Requirement.--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 1996, the Secretary shall 
publish in the Federal Register the rates and limitations 
referred to in subsection (a)(2) as increased under this 
section.

                              Introduction

    On May 22, 1996, Committee Chairman Alan K. Simpson and 
Ranking Minority Member John D. Rockefeller IV introduced S. 
1791, the proposed ``Veterans' Compensation Cost-of-Living 
Adjustment Act of 1996.'' S. 1791 would provide for a December 
1, 1996, cost-of-living adjustment (COLA), equal to the 
December 1, 1996, COLA in Social Security benefits, in the 
rates of compensation for veterans who have service-connected 
disabilities and in the rates of dependency and indemnity 
compensation (DIC) for the survivors of those who died from 
service-connected causes.
    On May 23, 1996, the Committee held a hearing, chaired by 
Senator Simpson, to receive testimony on the compensation COLA 
and on other bills pending before the Committee. The Committee 
received testimony on the bill from Charles L. Cragin, 
Chairman, Board of Veterans' Appeals, Department of Veterans 
Affairs (VA), and representatives of The American Legion, 
Veterans of Foreign Wars, Disabled American Veterans, Paralyzed 
Veterans of America, and Vietnam Veterans of America. Testimony 
was also submitted for the record of the hearing by the Gold 
Star Wives of America, the Non Commissioned Officers 
Association of the United States, and by the Military Coalition 
(representing the views of the Air Force Association; Army 
Aviation Association of America; Association of Military 
Surgeons of the United States; Association of the United States 
Army; Chief Warrant Officer and Warrant Officer Association, 
United States Coast Guard; Commissioned Officers Association of 
the United States Public Health Service; Enlisted Association 
of the National Guard of the United States; Fleet Reserve 
Association; Jewish War Veterans of the United States; Marine 
Corps League; Marine Corps Reserve Officers Association; 
National Military Family Association; National Order of 
Battlefield Commissions; Naval Enlisted Reserve Association; 
Navy League of the United States; Reserve Officers Association; 
The Military Chaplains Association of the United States; The 
Retired Enlisted Association; The Retired Officers Association; 
United Armed Forces Association; United States Army Warrant 
Officers Association; and the USCG Chief Petty Officers 
Association).
    All of the witnesses at the Committee's May 23, 1996, 
hearing who addressed the issue expressed support for the 
Committee bill. VA testified that it ``wholeheartedly 
endorse[s] a COLA for recipients of compensation and dependency 
and indemnity compensation.''

                           committee meeting

    After carefully reviewing the testimony from the May 23 
hearing, the Committee met in open session on July 24, 1996, 
and voted by unanimous voice vote to report S. 1791, as 
introduced, favorably to the Senate.

                     summary of s. 1791 as reported

    S. 1791 (hereinafter referred to as the ``Committee bill'') 
contains freestanding provisions that would require the 
Secretary of Veterans Affairs to increase, effective December 
1, 1996, the rates of and limitations on compensation paid to 
veterans with service-connected disabilities and the rates of 
dependency and indemnity compensation (DIC) paid to certain 
service-connected-disabled veterans' survivors by the same 
percentage as the COLA provided to Social Security recipients 
and VA pension beneficiaries that becomes effective on that 
same date. The Congressional Budget Office (CBO) currently 
estimates that the FY 1997 COLA will be 2.8 percent.
    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 DIC 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 Committee bill would require the Secretary of Veterans 
Affairs to increase the rates of and limitations on 
compensation paid to veterans with service-connected 
disabilities and the rates of dependency and indemnity 
compensation (DIC) paid to survivors of certain service- 
disabled veterans effective December 1, 1996. The adjustment 
would be the same percentage increase as the FY 1997 COLA for 
Social Security and VA pension benefits and would take effect 
on the same date as those increases. CBO's most recent estimate 
was that the COLA will be 2.8 percent; the Office of Management 
and Budget has also estimated that the COLA will be 2.8 
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 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 monthly compensation'') to totally disabled 
veterans with certain specific, very severe disabilities or 
combinations of disabilities.
    As of June 1, 1996, VA was providing disability 
compensation to 2,247,654 veterans with service-connected 
disabilities. Among the veterans receiving such compensation 
were 430 World War I veterans; 662,493 World War II veterans; 
187,536 Korean-conflict veterans; 710,966 Vietnam-era veterans; 
and 159,930 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, 1996, 664,570 veterans received 
additional compensation on behalf of 1,001,449 dependents.

Dependency and indemnity compensation

    Under chapter 13 of title 38, VA pays dependency and 
indemnity compensation (DIC) 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, certain helpless 
children age 18 or older, 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 receive $790 per month and, if the 
deceased veteran was totally disabled for 8 years prior to 
death, an additional $177 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 1, 1996, VA was paying DIC benefits to, or on 
behalf of, 279,315 surviving spouses, 35,230 children, and 
16,212 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.

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 (COLA) 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                
----------------------------------------------------------------------------------------------------------------
                                                                                       Increase     Cumulative  
                   Fiscal year                              Effective date             (percent)    (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.....................     \3\ 2.8          467.13
----------------------------------------------------------------------------------------------------------------
\1\ Payment of the December 1990 increase was delayed until January 1992 by section 8005(b) of Public Law 101-  
  508.                                                                                                          
\2\ December 1994 and 1995 increases were rounded to the next lower dollar amount pursuant to sections 2(c)(2)  
  of Public Law 103-418 and Public Law 104-57 respectively.                                                     
\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, 1996. 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 automatically would result in 
identical percentage increases in benefits paid at DIC rates 
under section 1318 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.
    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 (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 the 
OBRA 1981. The DIC increase also would apply to these restored 
benefits, effective December 1, 1996.
    CBO, in its most recent (May 1996) baseline, estimated that 
the FY 1997 Social Security COLA, and thus the COLA provided 
for by the Committee bill, will be 2.8 percent. The Office of 
Management and Budget's corresponding estimate was 2.8 percent. 
The actual Social Security COLA could differ from these 
estimates. 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 costs of the Committee 
bill compared to current law would be $335 million in budget 
authority and $308 million in outlays in FY 1997; $402 million 
in budget authority and $396 million in outlays in FY 1998; 
$414 million in budget authority and $413 million in outlays in 
FY 1999; $426 million in budget authority and $458 million in 
outlays in FY 2000; $439 million in budget authority and $404 
million in outlays in FY 2001; and $452 million in budget 
authority and $451 in million outlays in FY 2002.
    The cost estimate provided by CBO follows:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 25, 1996.
Hon. Alan K. Simpson,
Chairman, Committee on Veterans' Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
reviewed S. 1791, the Veterans' Compensation Cost-of-Living 
Adjustment Act of 1996, as ordered reported by the Senate 
Committee on Veterans' Affairs on July 24, 1996. The bill would 
increase the rates of disability compensation for veterans and 
dependency and indemnity compensation for survivors of veterans 
by a cost-of-living allowance (COLA). Because the COLA is 
assumed in the CBO baseline prepared under section 257 of the 
Balanced Budget and Emergency Deficit Control Act of 1985, this 
bill would have no cost relative to that baseline.
    The bill would affect a direct spending program 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, although the pay-as-you-go costs would equal zero in each 
year.
    S. 1791 contains no intergovernmental or private-sector 
mandates as defined by Public Law 104-4 and would not affect 
the budgets of state, local, or tribal governments.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Mary Helen 
Petrus.
            Sincerely,
                                         June E. O'Neill, Director.

                      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 24, 1996, meeting. On that date, 
the Committee, by unanimous voice vote, ordered S. 1791 
reported favorably to the Senate.

                             agency report

    On May 23, 1996, Charles L. Cragin, Chairman, Board of 
Veterans' Appeals, Department of Veterans Affairs, submitted 
testimony on, among other things, S. 1791, as introduced. An 
excerpt from that testimony is reprinted below:

 Statement of Charles L. Cragin, Chairman, Board of Veterans' Appeals, 
                     Department of Veterans Affairs

    Mr. Chairman and Members of the Committee: I am pleased to 
be here today to present the views of the Department of 
Veterans Affairs (VA) on several bills. Those bills are:
    Legislation to provide a cost-of-living adjustment in rates 
of disability compensation and dependency and indemnity 
compensation;
          * * * * * * *

            VETERANS' COMPENSATION COST-OF-LIVING ADJUSTMENT

    One of our Nation's most important obligations to veterans 
and their survivors is to see that they are appropriately 
compensated for service-connected disabilities and deaths. A 
high priority of this Administration is to ensure that this 
compensation keeps pace with rising costs.
    The President's Fiscal Year 1997 budget proposal calls for 
cost-of-living adjustments (COLA's) in both disability 
compensation and dependency and indemnity compensation rates 
effective December 1, 1996. The rate increases would be of a 
percentage equal to that by which VA pension and Social 
Security benefits are adjusted on that date, currently 
estimated to be 2.8 percent. Consistent with the Fiscal Year 
1996 compensation COLA, the Administration proposes that all 
increased compensation and dependency and indemnity 
compensation rates, if not a multiple of one dollar, be rounded 
to the next lower whole-dollar amount.
    We wholeheartedly endorse a COLA for recipients of 
compensation and dependency and indemnity compensation. We 
estimate Fiscal Year 1997 costs of the COLA as contemplated in 
the Administration's budget proposal to be $288.7 million and 
six-year costs (Fiscal Years 1997-2002) to be $2.01 billion. 
Because the Omnibus Budget Reconciliation Act of 1990 requires 
that the compensation COLA be assumed in the baseline, the 
paygo effect of veterans' compensation COLA legislation is 
usually zero. However, because this proposal would require all 
benefit levels to be rounded down to the next lowest whole 
dollar, it would reduce direct spending by $17 million in 
Fiscal Year 1997 and by a total of $397 million during Fiscal 
Years 1997 through 2000.
          * * * * * * *

          Changes in Existing Law Made by s. 1791, 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.