[Senate Report 105-341]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 593
105th Congress                                                   Report
                                 SENATE

 2d Session                                                     105-341
_______________________________________________________________________


 
      VETERANS' COMPENSATION COST-OF-LIVING ADJUSTMENT ACT OF 1998

                                _______
                                

               September 21, 1998.--Ordered to be printed

_______________________________________________________________________


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

                              R E P O R T

                         [To accompany S. 2273]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Veterans' Affairs, to which was referred 
the bill (S. 2273) to increase, effective December 1, 1998, 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, as amended, do pass.

                          Committee Amendment

    The amendment is as follows:
    On page 3, line 12, strike out ``1998,'' and insert in lieu 
thereof ``1999,''.
    Thus, the text of the bill (strike out the material in 
brackets and insert the material in italics) as reported is as 
follows:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Veterans' Compensation Cost-of-
Living Adjustment Act of 1998''.

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, 1998, 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 Rate Amendments of 1997 (Public Law No. 105-98; 
111 Stat. 2155). This increase shall be made in such rates and 
limitations as in effect on November 30, 1998, 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, 1998, as a result of a determination under section 215(i) of such 
Act (42 U.S.C. 415(i)).
    (3) In the computation of increased dollar amounts pursuant to 
paragraph (2), any amount which as so computed is not an even multiple 
of $1 shall be rounded to the next lower whole dollar amount.
    (b) Special Rule.--The Secretary may 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 (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 [1998,] 1999, 
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 July 8, 1998, Committee Chairman Arlen Specter 
introduced S. 2273, the proposed ``Veterans' Compensation Cost-
of-Living Adjustment Act of 1998.'' S. 2273 would provide for a 
December 1, 1998, cost-of-living adjustment (COLA), equal to 
the December 1, 1998, 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.

                           Committee Meeting

    On July 28, 1998, the Committee met in open session and 
voted by unanimous voice vote to report S. 2273, as introduced, 
favorably to the Senate.

                     Summary of s. 2273 as Reported

    S. 2273 (hereinafter referred to as the ``Committee bill'') 
contains freestanding provisions that would require the 
Secretary of Veterans Affairs to increase, effective December 
1, 1998, 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 
survivors of certain deceased veterans who had had service-
connected disabilities. 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 compensation, allowances, and 
DIC paid by the same percentage as the COLA provided to Social 
Security recipients and VA pension beneficiaries that becomes 
effective on December 1, 1998. The Congressional Budget Office 
(CBO) estimates that the FY 1999 COLA will be 1.6 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 July 1, 1998, VA was providing disability 
compensation to 2,273,999 veterans with service-connected 
disabilities. Among the veterans receiving such compensation 
were 168 World War I veterans; 584,054 World War II veterans; 
179,297 Korean-conflict veterans; 728,340 Vietnam-era veterans; 
and 233,808 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, 1998, 692,501 veterans received 
additional compensation on behalf of 1,048,985 dependents.

Dependency and indemnity compensation

    Under chapter 13 of title 38, VA pays dependency and 
indemnity compensation 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 currently receive $850 per month 
and, if the deceased veteran was totally disabled for 8 years 
prior to death, an additional $185 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 August 1, 1997, VA was paying DIC benefits to, or on 
behalf of, 281,157 surviving spouses, 33,054 children, and 
13,083 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 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.....................          2.9          467.59
1998...........................................  December 1997 \2\.................          2.1          477.41
1999...........................................  December 1998 \2\.................      1.6 \3\     485.05 \3\
----------------------------------------------------------------------------------------------------------------
\1\ Payment of the December 1990 increase was delayed until January 1992 by section 8005(b) of Public Law 101-
  508.
\2\ December 1994, 1995, 1997 and 1998 increases are rounded to the next lower dollar amount pursuant to
  sections 2(c)(2) of Public Law 103-418 and Public Law 104-57, and section 8031 of Public Law 105-33.
\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, 1998. 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.
    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, 1998.
    CBO, in its most recent baseline, estimated that the fiscal 
year 1999 Social Security COLA, and thus the COLA provided for 
by the Committee bill, will be 1.6 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 believesthis 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 cost estimate provided by CBO follows:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 30, 1998.
Hon. Arlen Specter,
Chairman, Committee on Veterans' Affairs, U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office (CBO) 
has prepared the enclosed cost estimate for S. 2273, the 
Veterans' Compensation Cost-of-Living Adjustment Act of 1998.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Charles 
Riemann.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

S. 2273--Veterans' Compensation Cost-of-Living Adjustment Act of 1998

    S. 2273 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, 1998, and the results 
of the adjustment would be rounded to the next lower dollar. 
However, the COLA is assumed in the baseline, pursuant to 
section 257 of the Balanced Budget and Emergency Deficit 
Control Act of 1985, and savings from rounding it down were 
achieved by the Balanced Budget Act of 1997 (Public Law 105-
33). As a result, the bill would have no budgetary effect 
relative to the baseline. Relative to current law, enacting 
this bill would increase spending for these programs by about 
$316 million in 1999 and about $415 million a year thereafter.
    The bill 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.
    This estimate was prepared by Charles Riemann. This 
estimate was approved by Robert A. Sunshine, 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 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 28, 1998, meeting. On that date, 
the Committee, by unanimous voice vote, ordered S. 2273 
reported favorably to the Senate.

          Changes in Existing Law Made by S. 2273, 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.