[Federal Register Volume 67, Number 239 (Thursday, December 12, 2002)]
[Proposed Rules]
[Pages 76322-76326]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-31250]


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

DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 3

RIN 2900-AK77


Additional Disability or Death Due to Hospital Care, Medical or 
Surgical Treatment, Examination, Training and Rehabilitation Services, 
or Compensated Work Therapy Program

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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

SUMMARY: The Department of Veterans Affairs (VA) proposes to amend its 
adjudication regulations concerning awards of compensation or 
dependency and indemnity compensation for additional disability or 
death caused by VA hospital care, medical or surgical treatment, 
examination, training and rehabilitation services, or compensated work 
therapy (CWT) program.
    The proposed amendment provides that benefits will be payable for 
additional disability or death caused by VA hospital care, medical or 
surgical treatment, or examination only if VA fault or ``an event not 
reasonably foreseeable'' proximately caused the disability or death. It 
further provides that benefits will be payable for additional 
disability or death proximately caused by VA's provision of training 
and rehabilitation services or CWT program. This amendment reflects 
amendments to 38 U.S.C. 1151, the statutory authority for such 
benefits.

DATES: Comments must be received on or before February 10, 2003.

ADDRESSES: Mail or hand deliver written comments to: Director, Office 
of Regulations Management (02D), Room 1154, 810 Vermont Ave., NW., 
Washington, DC 20420; or fax comments to (202) 273-9289; or e-mail 
comments to [email protected]. Comments should indicate that 
they are submitted in response to ``RIN 2900-AK77.'' All comments 
received will be available for public inspection in the Office of 
Regulations Management, Room 1158, between the hours of 8 a.m. and 4:30 
p.m., Monday through Friday (except holidays).

FOR FURTHER INFORMATION CONTACT: Beth McCoy, Consultant, Regulations 
Staff, Compensation and Pension Service (211A), Veterans Benefits 
Administration, Department of Veterans Affairs, 111 W. Huron St., 
Buffalo, NY 14202, (716) 551-4842.

SUPPLEMENTARY INFORMATION: Section 1151 of 38 U.S.C. previously 
authorized the award of compensation or dependency and indemnity 
compensation for any additional disability or death of a veteran which 
did not result from the veteran's own willful misconduct but which did 
result from an injury or aggravation of an injury suffered as the 
result of hospitalization, medical or surgical treatment, or the 
pursuit of a course of vocational rehabilitation awarded under any of 
the laws administered by VA or as a result of having submitted to an 
examination under any such law. 38 CFR 3.358 and 3.800 contain the 
regulatory provisions implementing those statutory provisions.
    Effective for claims filed on or after October 1, 1997, section 
422(a) of Public Law 104-204, 110 Stat. 2874, 2926 (1996), amended 38 
U.S.C. 1151 to authorize an award of compensation or dependency and 
indemnity compensation for a veteran's ``qualifying additional 
disability'' or ``qualifying death.'' Under 38 U.S.C. 1151, as amended, 
an additional disability or death qualifies for compensation or 
dependency and indemnity compensation if it (1) was not the result of 
the veteran's willful misconduct; (2) was caused by hospital care, 
medical or surgical treatment, or examination furnished the veteran 
under any law administered by VA, either by a VA employee or in a VA 
facility; and (3) was proximately caused by carelessness, negligence, 
lack of proper skill, error in judgment, or similar instance of fault 
on VA's part in furnishing the care, treatment, or examination, or by 
an event not reasonably foreseeable. An additional disability or death 
also qualifies for benefits if it was not the result of the veteran's 
willful misconduct and was proximately caused by VA's provision of 
training and rehabilitation services as part of an approved 
rehabilitation program under 38 U.S.C. chapter 31.
    Section 303 of Public Law 106-419, 114 Stat. 1853, effective 
November 1, 2000, amended 38 U.S.C. 1151(a)(2) to further expand the 
circumstances under which benefits are payable. For claims received on 
or after November 1, 2000, additional disability or death qualifies for 
entitlement to compensation and DIC if it was not the result of the 
veteran's willful misconduct and was proximately caused by 
participation in a compensated work therapy (CWT) program under 38 
U.S.C. 1718.
    We propose to revise Sec.  3.358(b)(2) to provide that compensation 
may be paid under Sec.  3.358 for the continuance or natural progress 
of a preexisting disease or injury if VA failed to exercise reasonable 
skill and care in the diagnosis or treatment of the condition and VA's 
failure to do so resulted in additional disability or death that 
probably would have been prevented by proper diagnosis and treatment. 
This provision would apply only where VA renders medical services, such 
as hospitalization, examination, or medical and surgical treatment. It 
would not apply in the context of vocational rehabilitation training, 
which does not involve medical services provided by VA. Currently, 
Sec.  3.358(b)(2) prohibits compensation for the continuance or natural 
progress of a preexisting disease or injury under all circumstances. 
This change implements the conclusion of the VA General Counsel in 
VAOPGCPREC 5-2001. In that opinion, the General Counsel noted that a 
showing of VA fault or failure to exercise reasonable skill and care is 
ordinarily not an element of entitlement to benefits under Sec.  3.358. 
However, the General Counsel further noted that the continuance or 
natural progress of a preexisting disease or injury could not have been 
caused by VA hospitalization, treatment, or examination, unless it is 
shown that the continuance or natural progress probably would have been 
prevented by proper diagnosis and treatment.
    We propose new 38 CFR 3.361 to implement 38 U.S.C. 1151 as amended, 
new 38 CFR 3.362 to codify rules concerning the offset of benefits 
awarded under 38 U.S.C. 1151 if the beneficiary has also recovered 
damages under the Federal Tort Claims Act, and new 38 CFR 3.363 to 
consolidate regulatory provisions now contained in Sec. Sec.  3.358 and 
3.800.
    In accordance with section 422(b)(2) of Public Law 104-204, 110 
Stat. 2874, 2927, we propose to apply new Sec. Sec.  3.361 through 
3.363 only to claims received by VA on or after October 1, 1997, and to 
continue to apply Sec. Sec.  3.358 and 3.800 to claims received by VA 
before October 1, 1997. These applicability rules are reflected in 
proposed Sec. Sec.  3.358(a), 3.361(a), 3.362(a), 3.363(a), and 
3.800(a). The controlling factor is the date VA receives the claim. If 
a decision pursuant to Sec. Sec.  3.358 and 3.800 becomes final on a 
claim received before October

[[Page 76323]]

1, 1997, and the claimant later reopens the claim on or after October 
1, 1997, then the stricter standards of Sec. Sec.  3.361 through 3.363 
will apply to the reopened claim.
    Proposed Sec.  3.361(b), concerning additional disability, is 
derived from current Sec.  3.358(b)(1) with appropriate changes made to 
reflect the amendments made by section 422 of Public Law 104-204, 
section 303 of Public Law 106-419, and editorial changes made to 
improve clarity. Similarly, proposed Sec.  3.361(c), concerning cause, 
is derived from current Sec.  3.358(b)(2) and (c)(1).
    As amended by section 422 of Public Law 104-204, 38 U.S.C. 
1151(a)(1) requires for entitlement that a veteran's additional 
disability or death be proximately caused either by ``an event not 
reasonably foreseeable'' or by ``carelessness, negligence, lack of 
proper skill, error in judgment, or similar instance of fault'' on VA's 
part in furnishing the hospital care, medical or surgical treatment, or 
examination that caused the additional disability or death. We believe 
that Congress, by listing several synonymous terms relating to 
negligence, intended not to provide alternative standards of liability, 
but rather to establish a single standard which would trigger 
entitlement to 38 U.S.C. 1151 benefits if not met in VA's furnishing of 
hospital care, medical or surgical treatment, or examination. We 
further believe that the single standard Congress intended to establish 
is tort-variety negligence. We recognize that there is not a single 
standard of liability governing tort claims under the Federal Tort 
Claims Act, but rather that the standard applied may vary from state to 
state. However, we also believe that Congress did not intend 
entitlement to a veterans' benefit to depend on a claimant's state of 
residence. Accordingly, we intend to apply a uniform standard in the 
adjudication of claims under 38 U.S.C. 1151.
    In tort cases, the phrase ``error in judgment'' is sometimes used 
to refer to non-negligent mistakes, such as a diagnosis which was 
reasonable and was based on the exercise of due skill and care, but 
which later proves to be incorrect. At other times, however, the phrase 
``error in judgment'' is used to refer to negligent mistakes involving 
the failure to use due skill and care in making decisions regarding 
diagnosis and treatment. Because the legislative history of Public Law 
104-204 reflects that Congress intended to authorize benefits only 
where disability or death is due to VA negligence, we conclude that the 
phrase ``error in judgment'', as used in 38 U.S.C. 1151, refers to 
errors involving negligence and does not encompass reasonable decisions 
regarding diagnosis and treatment merely because they later prove to 
have been incorrect. The remaining terms in 38 U.S.C. 1151, i.e., 
``carelessness'', ``negligence'', ``lack of proper skill'', and 
``similar instances of fault'', all unambiguously refer to 
circumstances where VA medical providers have failed to exercise due 
care in providing medical services. Therefore, in proposed Sec.  
3.361(d)(1)(i), we interpret 38 U.S.C. 1151 as providing entitlement to 
benefits if VA, in furnishing hospital care, medical or surgical 
treatment, or examination, fails to exercise the degree of care that 
would be expected of a reasonable health care provider in furnishing 
hospital care, medical or surgical treatment, or examination.
    Proposed Sec.  3.361(d)(1)(ii), concerning consent to care, 
treatment, or examination, is derived from current Sec.  3.358(c)(3). 
However, we propose to include a requirement that consent be informed, 
in accordance with 38 CFR 17.32. As reflected in proposed Sec.  
3.361(d)(2), we propose to leave to the factfinder in each claim the 
determination as to whether the proximate cause of a veteran's 
additional disability or death was an event not reasonably foreseeable, 
and for the factfinder, in making that determination, to apply the 
standard of what a reasonable health care provider would have foreseen. 
Proposed Sec.  3.361(d)(3), concerning proximate cause by the provision 
of rehabilitation and training services and, for claims received on or 
after November 1, 2000, by participation in a CWT program, is derived 
from current Sec.  3.358(c)(5) with appropriate changes made to reflect 
the amendments made by section 422 of Public Law 104-204, section 303 
of Public Law 106-419, and editorial changes made to improve clarity.
    The definition of ``Department employee'' in proposed Sec.  
3.361(e)(1) is derived from 5 U.S.C. 2105(a), which defines 
``employee'' for title 5 (Government Organization and Employees) 
purposes, modified to refer only to VA employees who are engaged in the 
furnishing of health care services. The definition of ``Department 
facility'' in proposed Sec.  3.361(e)(2) reflects a provision of 38 
U.S.C. 1151(a) as amended by section 422 of Public Law 104-204. 38 
U.S.C. 1151(a)(1) refers to ``a Department facility as defined in 
section 1701(3)(A)'' of title 38, United States Code. Section 
1701(3)(A) defines ``facilities of the Department'' as facilities over 
which the Secretary has direct jurisdiction. We therefore propose to 
define ``Department facility'' in the same way.
    Proposed Sec.  3.361(f)(1) excludes hospital care or medical 
services furnished pursuant to a contract made under 38 U.S.C. 1703 
because, under section 1703's terms, such care or services are 
furnished in a non-Department facility, and the day-to-day operations 
of such a facility's employees are not subject to the Secretary's 
supervision. The exclusion in proposed Sec.  3.361(f)(2) of nursing 
home care furnished under 38 U.S.C. 1720 is derived from current Sec.  
3.358(c)(6). Proposed Sec.  3.361(f)(3) excludes hospital care or 
medical services provided under 38 U.S.C. 8153 in a facility over which 
the Secretary does not have direct jurisdiction because care or 
services under section 8153 are not provided by VA employees but may or 
may not be furnished in a VA facility. Proposed Sec.  3.361(f)(3) would 
exclude only such care and services in fact not provided in a VA 
facility. Proposed Sec.  3.361(g) is derived from current Sec.  
3.800(b).
    Proposed Sec.  3.362(b), concerning the amount of a tort recovery 
to be offset from a veteran's compensation awarded under 38 U.S.C. 
1151(a), is derived from current Sec.  3.800(a)(2). Proposed Sec.  
3.362(c), concerning the amount of a tort recovery to be offset from a 
survivor's dependency and indemnity compensation (DIC) awarded under 38 
U.S.C. 1151(a), is derived from Sec.  3.800(a)(2) and the Office of the 
General Counsel precedent opinion (VAOPGCPREC) 79-90. That opinion held 
that the amount to be offset from a DIC award under 38 U.S.C. 1151 
depends on the nature of the damages recovered by the claimant under 
the Federal Tort Claims Act. Amounts recovered by a claimant as damages 
under a typical ``wrongful-death statute'' may be offset from a DIC 
award under 38 U.S.C. 1151, even if the damages are paid to a nominal 
party as trustee for the veteran's survivors. Each survivor receiving 
such damages is subject to offset of DIC under 38 U.S.C. 1151 to the 
extent of sums included in the tort claim's judgment, settlement, or 
compromise to compensate for harm suffered by that survivor. On the 
other hand, amounts recovered by a claimant, acting as personal 
representative of a decedent veteran's estate, as damages under a 
``survival statute'' may not be offset from a DIC award under 38 U.S.C. 
1151.
    Proposed Sec.  3.362(d), concerning offset of structured 
settlements, is derived from the principles espoused in VAOPGCPREC 79-
90. Structured settlements are settlements or compromises in which the 
Government,

[[Page 76324]]

rather than simply paying to a plaintiff a sum, in settlement or 
compromise of a claim under the Federal Tort Claims Act, buys an 
annuity or otherwise funds payments, which may differ in total amount 
from the amount expended by the Government, to be made to the plaintiff 
at some future time. We propose to offset from a DIC award only the 
veteran's or survivor's proportional share of the Government's cost of 
such a settlement, including the veteran's or survivor's proportional 
share of attorney fees. Furthermore, the offset is to begin as soon as 
compensation or DIC payments would be made after the settlement becomes 
final, not when the settlement payments are actually made to the 
beneficiary.
    The requirement in paragraphs (b), (c), and (d)(1) of proposed 
Sec.  3.362 that offset of benefits under section 1151 include the 
claimant's proportional share of attorney fees is derived from the 
Office of General Counsel precedent opinion 7-94. That opinion held 
that, when an individual is awarded a judgment or enters into a 
compromise of a tort claim for a disability or death covered by section 
1151, future benefits under section 1151 must be offset by the entire 
amount of the judgment or settlement proceeds, including the amount of 
attorney fees paid out of such proceeds.
    Proposed Sec.  3.363, concerning a bar to benefits due to 
alternative recoveries before December 1, 1962, is derived from current 
Sec.  3.800(a)(3).
    We propose to revise 38 CFR 3.154, which identifies the types of 
communications that may be accepted as a claim for benefits under 38 
U.S.C. 1151. The revised Sec.  3.154 would clarify that the 
requirements of that rule apply to claims under either 38 CFR 3.358 or 
proposed 38 CFR 3.361. The revised Sec.  3.154 would also more clearly 
state the requirements under current Sec.  3.154 and 38 CFR 3.1(p) that 
a communication must be in writing and must indicate an intent to claim 
benefits under 38 U.S.C. 1151 in order to be accepted as a claim for 
such benefits. Additionally in Sec.  3.154, we propose to clarify that 
the format or the way in which a claimant files for benefits under 
Sec. Sec.  3.358 or 3.361 is not critical; rather, the controlling 
factor is some showing that the claimant is seeking disability or death 
benefits from the Veterans Benefits Administration.
    We are also proposing to revise several cross references to 38 
U.S.C. 1151, Sec.  3.358 and/or Sec.  3.800 to be consistent with the 
proposed changes. These cross references are paragraph (i) of Sec.  
3.400, paragraph (a)(4) of Sec.  3.708, and paragraph (c) of Sec.  
3.807.

Executive Order 12866

    This proposed regulatory action has been reviewed by the Office of 
Management and Budget 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, at 2 U.S.C. 1532, 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 rule would have no 
consequential effect on State, local, or tribal governments.

Regulatory Flexibility Act

    The Secretary hereby certifies that this regulatory amendment will 
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. This amendment would not directly affect any small 
entities. Only VA beneficiaries could be directly affected. Therefore, 
pursuant to 5 U.S.C. 605(b), this amendment is exempt from the initial 
and final flexibility analysis requirements of sections 603 and 604.
    The Catalog of Federal Domestic Assistance numbers are 64.104 and 
64.109.

List of Subjects in 38 CFR Part 3

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

    Approved: October 7, 2002.
Anthony J. Principi,
Secretary of Veterans Affairs.
    For the reasons set forth in the preamble, we propose to amend 38 
CFR part 3 as follows:

PART 3--ADJUDICATION

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

    1. The authority citation for Part 3 continues to read as follows:

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

    2. Section 3.154 and the Cross References at the end of the section 
are revised to read as follows:


Sec.  3.154  Injury due to hospital treatment, etc.

    VA may accept as a claim any communication in writing indicating an 
intent to file a claim with the Veterans Benefits Administration for 
disability or for death benefits under Sec.  3.358 (due to 
hospitalization, medical or surgical treatment, examination, or 
vocational rehabilitation training) or under Sec.  3.361 (due to 
hospital care, medical or surgical treatment, examination, training and 
rehabilitation services, or compensated work therapy program) whether 
such communication is contained in a formal claim for pension, 
compensation, dependency and indemnity compensation or in any other 
document.

(Authority: 38 U.S.C. 1151)

    Cross References: Effective dates. See Sec.  3.400(i). Disability 
or death due to hospitalization etc. See Sec. Sec.  3.358, 3.361 and 
3.800.
    3. In Sec.  3.358, the authority citation at the end of the 
paragraph (a) is removed and paragraphs (a) and (b)(2) are revised to 
read as follows:


Sec.  3.358  Compensation for disability or death from hospitalization, 
medical or surgical treatment, examination, or vocational 
rehabilitation training (Sec.  3.800).

    (a) General. This section applies to claims received by VA before 
October 1, 1997. If it is determined that there is additional 
disability resulting from a disease or injury or aggravation of an 
existing disease or injury suffered as a result of hospitalization, 
medical or surgical treatment, examination, or vocational 
rehabilitation training, compensation will be payable for such 
additional disability. For claims received by VA on or after October 1, 
1997, see Sec.  3.361.
    (b) * * *
    (2) Compensation will not be payable under this section for the 
continuance or natural progress of a disease or injury for which the 
hospitalization, medical or surgical treatment or examination was 
furnished, unless VA's failure to exercise reasonable skill and care in 
the diagnosis or treatment of the disease or injury caused additional 
disability or death that probably would have been prevented by proper 
diagnosis or treatment. Compensation will not be payable under this 
section for the continuance or natural progress of a disease or injury 
for which vocational rehabilitation training was provided.
* * * * *
    4. Section 3.361 is added to read as follows:

[[Page 76325]]

Sec.  3.361  Benefits under 38 U.S.C. 1151(a) for additional disability 
or death due to hospital care, medical or surgical treatment, 
examination, training and rehabilitation services, or compensated work 
therapy program.

    (a) Claims subject to this section. This section applies to claims 
received by VA on or after October 1, 1997. This includes original 
claims and claims to reopen or otherwise readjudicate a previous claim 
for benefits under 38 U.S.C. 1151 or its predecessors. The effective 
date of benefits is subject to the provisions of Sec.  3.400(i). For 
claims received by VA before October 1, 1997, see Sec.  3.358.
    (b) Determining whether a veteran has an additional disability. To 
determine whether a veteran has an additional disability, VA compares 
the veteran's condition immediately before the beginning of the 
hospital care, medical or surgical treatment, examination, training and 
rehabilitation services, or compensated work therapy (CWT) program upon 
which the claim is based to the veteran's condition after such care, 
treatment, examination, services, or program has stopped. VA considers 
each involved body part or system separately.
    (c) Establishing the cause of additional disability or death. 
Claims based on additional disability or death due to hospital care, 
medical or surgical treatment, or examination must meet the causation 
requirements of this paragraph and paragraph (d)(1) or (d)(2) of this 
section. Claims based on additional disability or death due to training 
and rehabilitation services or compensated work therapy program must 
meet the causation requirements of paragraph (d)(3) of this section.
    (1) Actual causation required. To establish causation, the evidence 
must show that the hospital care, medical or surgical treatment, or 
examination resulted in the veteran's additional disability or death. 
Merely showing that a veteran received care, treatment, or examination 
and that the veteran has an additional disability or died does not 
establish cause.
    (2) Continuance or natural progress of a disease or injury. 
Hospital care, medical or surgical treatment, or examination cannot 
cause the continuance or natural progress of a disease or injury for 
which the care, treatment, or examination was furnished unless VA's 
failure to timely diagnose and properly treat the disease or injury 
proximately caused the continuance or natural progress. The provision 
of training and rehabilitation services or CWT program cannot cause the 
continuance or natural progress of a disease or injury for which the 
services were provided.
    (3) Veteran's failure to follow medical instructions. Additional 
disability or death caused by a veteran's failure to follow properly 
given medical instructions is not caused by hospital care, medical or 
surgical treatment, or examination.
    (d) Establishing the proximate cause of additional disability or 
death. The proximate cause of disability or death is the action or 
event that directly caused the disability or death, as distinguished 
from a remote contributing cause.
    (1) Care, treatment, or examination. To establish that 
carelessness, negligence, lack of proper skill, error in judgment, or 
similar instance of fault on VA's part in furnishing hospital care, 
medical or surgical treatment, or examination proximately caused a 
veteran's additional disability or death, it must be shown that the 
hospital care, medical or surgical treatment, or examination caused the 
veteran's additional disability or death (as explained in paragraph (c) 
of this section); and
    (i) VA failed to exercise the degree of care that would be expected 
of a reasonable health care provider; or
    (ii) VA furnished the hospital care, medical or surgical treatment, 
or examination without the veteran's or, in appropriate cases, the 
veteran's representative's informed consent. To determine whether there 
was informed consent, VA will consider whether the health care 
providers substantially complied with the requirements of Sec.  17.32 
of this chapter. Minor deviations from the requirements of Sec.  17.32 
of this chapter that are immaterial under the circumstances of a case 
will not defeat a finding of informed consent. Consent may be expressed 
(i.e., given orally or in writing) or implied under the circumstances 
specified in Sec.  17.32(b), as in emergency situations.
    (2) Events not reasonably foreseeable. Whether the proximate cause 
of a veteran's additional disability or death was an event not 
reasonably foreseeable is in each claim to be determined based on what 
a reasonable health care provider would have foreseen.
    (3) Training and rehabilitation services or compensated work 
therapy program. To establish that the provision of training and 
rehabilitation services or a CWT program proximately caused a veteran's 
additional disability or death, it must be shown that the veteran's 
participation in an essential activity or function of the training, 
services, or CWT program provided or authorized by VA proximately 
caused the disability or death. The veteran must have been 
participating in such training, services, or CWT program provided or 
authorized by VA as part of an approved rehabilitation program under 38 
U.S.C. chapter 31 or, for claims received on or after November 1, 2000, 
as part of a CWT program under 38 U.S.C. 1718. It need not be shown 
that VA approved that specific activity or function, as long as the 
activity or function is generally accepted as being a necessary 
component of the training, services, or CWT program that VA provided or 
authorized.
    (e) Department employees and facilities. (1) A Department employee 
is an individual--
    (i) Who is appointed by the Department in the civil service under 
title 38, United States Code, or title 5, United States Code, as an 
employee as defined in 5 U.S.C. 2105;
    (ii) Who is engaged in furnishing hospital care, medical or 
surgical treatment, or examinations under authority of law; and
    (iii) Whose day-to-day activities are subject to supervision by the 
Secretary of Veterans Affairs.
    (2) A Department facility is a facility over which the Secretary of 
Veterans Affairs has direct jurisdiction.
    (f) Activities that are not hospital care, medical or surgical 
treatment, or examination furnished by a Department employee or in a 
Department facility. The following are not hospital care, medical or 
surgical treatment, or examination furnished by a Department employee 
or in a Department facility within the meaning of 38 U.S.C. 1151(a):
    (1) Hospital care or medical services furnished under a contract 
made under 38 U.S.C. 1703.
    (2) Nursing home care furnished under 38 U.S.C. 1720.
    (3) Hospital care or medical services, including examination, 
provided under 38 U.S.C. 8153 in a facility over which the Secretary 
does not have direct jurisdiction.
    (g) Benefits payable under 38 U.S.C. 1151 for a veteran's death--
(1) Death before January 1, 1957. The benefit payable under 38 U.S.C. 
1151(a) to an eligible survivor for a veteran's death occurring before 
January 1, 1957, is death compensation. See Sec. Sec.  3.5(b)(2) and 
3.702 for the right to elect dependency and indemnity compensation.
    (2) Death after December 31, 1956. The benefit payable under 38 
U.S.C. 1151(a) to an eligible survivor for a veteran's death occurring 
after December 31, 1956, is dependency and indemnity compensation.

(Authority: 38 U.S.C. 1151)


[[Page 76326]]


    5. Section 3.362 is added to read as follows:


Sec.  3.362  Offsets under 38 U.S.C. 1151(b) of benefits awarded under 
38 U.S.C. 1151(a).

    (a) Claims subject to this section. This section applies to claims 
received by VA on or after October 1, 1997. This includes original 
claims and claims to reopen or otherwise readjudicate a previous claim 
for benefits under 38 U.S.C. 1151 or its predecessors.
    (b) Offset of veterans' awards of compensation. If a veteran's 
disability is the basis of a judgment under 28 U.S.C. 1346(b) awarded, 
or a settlement or compromise under 28 U.S.C. 2672 or 2677 entered, on 
or after December 1, 1962, the amount to be offset under 38 U.S.C. 
1151(b) from any compensation awarded under 38 U.S.C. 1151(a) is the 
entire amount of the veteran's share of the judgment, settlement, or 
compromise, including the veteran's proportional share of attorney 
fees.
    (c) Offset of survivors' awards of dependency and indemnity 
compensation. If a veteran's death is the basis of a judgment under 28 
U.S.C. 1346(b) awarded, or a settlement or compromise under 28 U.S.C. 
2672 or 2677 entered, on or after December 1, 1962, the amount to be 
offset under 38 U.S.C. 1151(b) from any dependency and indemnity 
compensation awarded under 38 U.S.C. 1151(a) to a survivor is only the 
amount of the judgment, settlement, or compromise representing damages 
for the veteran's death the survivor receives in an individual capacity 
or as distribution from the decedent veteran's estate of sums included 
in the judgment, settlement, or compromise to compensate for harm 
suffered by the survivor, plus the survivor's proportional share of 
attorney fees.
    (d) Offset of structured settlements. This paragraph applies if a 
veteran's disability or death is the basis of a structured settlement 
or structured compromise under 28 U.S.C. 2672 or 2677 entered on or 
after December 1, 1962.
    (1) The amount to be offset. The amount to be offset under 38 
U.S.C. 1151(b) from benefits awarded under 38 U.S.C. 1151(a) is the 
veteran's or survivor's proportional share of the cost to the United 
States of the settlement or compromise, including the veteran's or 
survivor's proportional share of attorney fees.
    (2) When the offset begins. The offset of benefits awarded under 38 
U.S.C. 1151(a) begins the first month after the structured settlement 
or structured compromise has become final that such benefits would 
otherwise be paid.

(Authority: 38 U.S.C. 1151)

    6. Section 3.363 is added to read as follows:


Sec.  3.363  Bar to benefits under 38 U.S.C. 1151.

    (a) Claims subject to this section. This section applies to claims 
received by VA on or after October 1, 1997. This includes original 
claims and claims to reopen or otherwise readjudicate a previous claim 
for benefits under 38 U.S.C. 1151 or its predecessors.
    (b) Administrative award, compromises, or settlements, or judgments 
that bar benefits under 38 U.S.C. 1151. If a veteran's disability or 
death was the basis of an administrative award under 28 U.S.C. 1346(b) 
made, or a settlement or compromise under 28 U.S.C. 2672 or 2677 
finalized, before December 1, 1962, VA may not award benefits under 38 
U.S.C. 1151 for any period after such award, settlement, or compromise 
was made or became final. If a veteran's disability or death was the 
basis of a judgment that became final before December 1, 1962, VA may 
award benefits under 38 U.S.C. 1151 for the disability or death unless 
the terms of the judgment provide otherwise.

(Authority: 38 U.S.C. 1151)

    7. In Sec.  3.400, the section heading of paragraph (i) is revised 
to read as follows:


Sec.  3.400  General.

* * * * *
    (i) Disability or death due to hospitalization, etc. (38 U.S.C. 
5110(c), (d); Public Law 87-825; Sec. Sec.  3.358, 3.361, and 3.800).* 
* *


Sec.  3.708  [Amended]

    8. Section 3.708, paragraph (a)(4) is amended by removing ``or 
training.'' and adding, in its place, ``or hospital care, training, or 
compensated work therapy program. See Sec. Sec.  3.358 and 3.361.''
    9. Section 3.800 is amended by adding introductory text to read as 
follows:


Sec.  3.800  Disability or death due to hospitalization, etc.

    This section applies to claims received by VA before October 1, 
1997. For claims received by VA on or after October 1, 1997, see 
Sec. Sec.  3.362 and 3.363.
* * * * *
    10. In Sec.  3.807, the last sentence of paragraph (c) is amended 
by removing ``Sec.  3.800'' and adding, in its place, ``Sec. Sec.  
3.358, 3.361''.
* * * * *
[FR Doc. 02-31250 Filed 12-11-02; 8:45 am]
BILLING CODE 8320-01-P