[Federal Register Volume 69, Number 148 (Tuesday, August 3, 2004)]
[Rules and Regulations]
[Pages 46426-46435]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17597]


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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: Final rule.

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SUMMARY: This document amends the Department of Veterans Affairs (VA) 
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. Under this amendment, benefits are 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. 
Benefits also are 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: Effective Date: September 2, 2004.

FOR FURTHER INFORMATION CONTACT: Beth McCoy, Consultant, Regulations 
Staff, Compensation and Pension Service (211A), Veterans Benefits 
Administration, Department of Veterans Affairs, 810 Vermont Avenue, 
NW., Washington, DC 20420, telephone (202) 273-7211.

SUPPLEMENTARY INFORMATION: In a document published in the Federal 
Register on December 12, 2002 (67 FR 76322), we proposed to amend the 
VA adjudication regulations concerning awards of compensation or 
dependency and indemnity compensation (DIC) 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 to comply with changes to the governing statute, 
section 1151 of Title 38, United States Code. Based on the rationale 
described in this document and in the notice of proposed rule making, 
VA adopts the proposed rules as revised in this document.
    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 DIC 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 DIC 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

[[Page 46427]]

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 CWT program under 38 U.S.C. 1718. We asked 
interested people to submit comments on or before February 10, 2003. We 
received two comments on our proposed rule: one from a veteran's 
service organization and one from another interested individual. We 
made several changes in the final rule based on these comments.

Section 3.154

    We proposed to revise 38 CFR 3.154 to state that 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 death 
benefits under 38 CFR 3.358 or 3.361, whether such communication is 
contained in a formal claim for pension, compensation, DIC, or in any 
other document.
    One commenter suggested deleting the reference to claims indicating 
an intent to request benefits under Sec.  3.358 because all claims 
received on or after October 1, 1997, seeking benefits for injuries 
covered by these rules would necessarily be claims under Sec.  3.361 
rather than Sec.  3.358. We agree. Section 3.358 applies only to claims 
that were received by VA prior to October 1, 1997. Any claims received 
in the future will be governed by Sec.  3.361. We will therefore delete 
the reference to Sec.  3.358 from this provision. In the event we 
receive a claim requesting benefits under Sec.  3.358, we would 
construe it as indicating an intent to seek benefits under Sec.  3.361.
    One commenter asserted that the proposed rule should not require 
claimants to identify the specific regulation under which they seek 
benefits or to specify that they seek benefits from the Veterans 
Benefits Administration rather than simply from VA. We believe this 
commenter misunderstands the requirements of the proposed rule. The 
rule would not require claimants to cite the governing regulation, but 
would require only that the claimant's communication indicate ``an 
intent'' to seek benefits provided by 38 CFR 3.361. In this respect, 
the rule is similar to the general rule in 38 CFR 3.155(a) governing 
informal claims, which provides that any communication indicating ``an 
intent'' to apply for VA benefits may be considered an informal claim. 
It is well established that this regulation does not require the 
claimant to cite the specific governing regulations. See Servello v. 
Derwinski, 3 Vet. App. 196, 199 (1992). A written communication 
indicating that the claimant seeks compensation or DIC for disability 
or death due to VA hospital care, medical or surgical treatment, or 
examination, VA-authorized training and rehabilitation services, or 
participation in a compensated work therapy program, would satisfy the 
requirements of the rule regardless of whether the communication 
specifically cited Sec.  3.361.
    The rule also would not require claimants to specifically state 
that they sought benefits from the Veterans Benefits Administration, 
but would require only that their communication indicate an intent to 
claim such benefits. The Veterans Benefits Administration is 
responsible for administering the compensation benefits provided by the 
statutes and regulations governing veterans' benefits, including the 
benefits provided by 38 U.S.C. 1151 and 38 CFR 3.361. See 38 U.S.C. 
7703. A communication indicating an intent to seek compensation or DIC, 
under the statutes and regulations governing veterans' benefits, for 
disability or death due to VA hospital care, medical or surgical 
treatment, examination, training and rehabilitation services, or 
compensated work therapy program, would satisfy the requirements of the 
rule regardless of whether the communication specifically references 
the Veterans Benefits Administration by name.
    We believe it is necessary to distinguish between claims that seek 
benefits from the Veterans Benefits Administration under the statutes 
and regulations governing veterans' benefits from claims seeking other 
types of payment for disability or death allegedly due to VA hospital 
care, medical or surgical treatment, examination, training and 
rehabilitation services, or compensated work therapy program. A person 
who believes he or she was injured by one of those causes has a choice 
of remedies. The claimant may seek compensation under the statutes and 
regulations governing veterans' benefits as provided in 38 U.S.C. 1151 
and 38 CFR 3.361. Such claims are decided by the Veterans Benefits 
Administration and are governed by the non-adversarial procedures 
applicable to claims for veterans' benefits. Alternatively, a claimant 
may elect to file a claim against the United States under the Federal 
Tort Claims Act, 28 U.S.C. 2671 et seq. Such claims are decided by VA 
Regional Counsels or by Federal courts, and are not governed by the 
non-adversarial procedures applicable to claims for veterans' benefits. 
A claimant may elect to pursue one or the other of those remedies, or 
may pursue both, although any benefits awarded under section 1151 would 
be offset by the amount of any tort recovery. Because a claimant has 
the option of pursuing a tort claim without simultaneously pursuing a 
section 1151 claim, we do not believe that a claim submitted to VA 
seeking damages under the Federal Tort Claims Act should routinely be 
construed by VA as a claim for benefits under 38 U.S.C. 1151 and 38 CFR 
3.361. Accordingly, we believe it is appropriate to provide that a 
claim will be construed as a claim for benefits under 38 U.S.C. 1151 
and 38 CFR 3.361 only if the veteran intended to seek those benefits as 
distinguished from monetary damages under the Federal Tort Claims Act.
    Although we disagree with the commenter's characterization of the 
proposed rule, we recognize that the language of the proposed rule may 
be confusing and that the standards governing claims for benefits under 
38 U.S.C. 1151 and 38 CFR 3.361 may be stated more simply. Accordingly, 
we are revising 38 CFR 3.154 to state that VA may accept as a claim 
``any communication in writing indicating an intent to file a claim for 
disability compensation or DIC under the laws governing entitlement to 
veterans' benefits for a disability or death due to VA hospital care, 
medical or surgical treatment, examination, training and rehabilitation 
services, or compensated work therapy program.'' This language is 
consistent with the proposed rule, but more clearly indicates that a 
claimant need not cite the governing regulation or reference the 
Veterans Benefits Administration. The requirement that the 
communication indicate an intent to apply for benefits ``under the laws 
governing entitlement to veterans'' benefits' is intended to make clear 
that claims under the Federal Tort Claims Act are not routinely 
construed as claims under 38 U.S.C. 1151 or 38 CFR 3.361, because the 
Federal Tort Claims Act is not a law governing veterans' benefits.

[[Page 46428]]

    The commenter also asserts that 38 CFR 3.154 should not require a 
claimant to indicate that he or she believes the claimed injury was 
caused by VA hospital care, medical or surgical treatment, examination, 
training and rehabilitation services, or compensated work therapy 
program. The commenter states that claimants should not be required to 
submit anything more than an application reflecting an intent to seek 
compensation or DIC. The commenter is correct that any communication 
indicating an intent to claim compensation or DIC may be accepted by VA 
as an informal claim for that benefit. This rule is expressly stated in 
38 CFR 3.155(a). Our revision of Sec.  3.154 would not alter that rule, 
nor would it preclude VA from accepting a claim for compensation or DIC 
meeting the requirements of Sec.  3.155(a) and subsequently awarding 
benefits under 38 U.S.C. 1151 and 38 CFR 3.361 if development 
establishes that the claimant is entitled to benefits under those 
provisions. Section 3.154 would, however, make clear, as current Sec.  
3.154 does, that not all claims for compensation or DIC must be treated 
as claims for benefits under 38 U.S.C. 1151 and 38 CFR 3.361. As 
explained below, this distinction is both reasonable and necessary.
    When VA receives a claim for benefits, it is required to inform the 
claimant of the information and evidence necessary to substantiate the 
claim, and to assist the claimant in obtaining such evidence. See 38 
U.S.C. 5103, 5103A. Only a small percentage of claims received for 
compensation or DIC are claims for the benefits authorized by 38 U.S.C. 
1151. The majority of claims received for compensation and DIC 
ordinarily require a determination concerning whether the claimed 
disability results from a disease or injury incurred in or aggravated 
by military service. See 38 U.S.C. 1110, 1310. Absent any indication to 
the contrary, VA will ordinarily inform the claimants of the need to 
submit information and evidence relevant to those factual issues and 
will focus its attention on those issues in developing and deciding the 
claim. Claims under section 1151 involve distinct factual 
determinations concerning whether the claimed disability was 
proximately caused by training and rehabilitation services or 
compensated work therapy or was proximately caused by VA fault in 
administering hospital care, medical or surgical treatment, or 
examination. If a claimant provides no indication that the claimed 
disability resulted from VA hospital care, medical or surgical 
treatment, examination, training and rehabilitation services, or 
compensated work therapy program, VA would have no reason to infer that 
the claimant seeks the benefits provided by 38 U.S.C. 1151 and would 
have no reason to develop or decide that issue or to notify the 
claimant of the need to submit information or evidence relating to that 
issue. For these reasons, we believe it is reasonable to require 
claimants to indicate that they are seeking benefits for disability due 
to one of the factors covered by 38 U.S.C. 1151 and 38 CFR 3.361 before 
VA incurs the duty to develop and decide the issues relevant to such 
claims.
    As stated above, this rule does not preclude VA from accepting a 
non-specific claim for compensation or DIC under 38 CFR 3.155 or from 
later granting benefits on that claim under 38 U.S.C. 1151 and 3.361 if 
circumstances warrant. It merely clarifies that a claim will not 
routinely be construed as a claim under 38 U.S.C. 1151 or 38 CFR 3.361 
unless it indicates an intent to apply for the benefits authorized by 
those provisions. To further clarify this narrow purpose, we will 
revise the introductory clause of Sec.  3.154 as proposed from ``VA may 
accept as a claim'' to ``VA may accept as a claim for benefits under 38 
U.S.C. 1151 and Sec.  3.361 of this part''. We believe this will make 
clearer that Sec.  3.154 merely explains when a claim for compensation 
or DIC will be considered a claim under section 1151 and Sec.  3.361 
and does not limit VA's authority under Sec.  3.155 to accept non-
specific claims for compensation or DIC.
    We have made one further change to Sec.  3.154 that was not raised 
by the commenters. As proposed, Sec.  3.154 stated that VA would accept 
as a claim any written communication indicating an intent to seek 
benefits under section 1151, regardless of ``whether such communication 
is contained in a formal claim for pension, compensation, dependency 
and indemnity compensation or in any other document.'' We have added 
``or'' between ``compensation'' and ``dependency and indemnity 
compensation.'' We believe this change merely improves the grammatical 
structure of the rule without altering its meaning.

Section 3.361(c)(2)

    Section 1151 authorizes compensation for disability that was caused 
by VA hospital care, medical or surgical treatment, or examination. 
Proposed Sec.  3.361(c)(2) states that ``[h]ospital 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.'' One commenter suggested that the term 
``proximately caused'' should be changed to ``proximately worsened.'' 
We disagree. Proposed Sec.  3.361(c)(2) reflects principles stated in a 
precedent opinion of VA's General Counsel, designated as VAOPGCPREC 5-
2001, dated February 5, 2001. The General Counsel stated that VA 
medical care ordinarily could not be viewed as ``causing'' disability 
that results from the ordinary course and progression of a preexisting 
disease. However, the General Counsel also noted that under 
longstanding principles of causation in the context of tort law, 
medical treatment could be considered to have caused the natural 
progress of a preexisting disease in the limited circumstance where the 
physician negligently fails to properly diagnose and treat a disease. 
In such cases, the finding of causation is not based on a determination 
that the treatment made the disease worse than it would have been 
without treatment, but on the premise that the physician's negligence 
``caused'' the natural progress of the disease by failing to prevent it 
in circumstances where a physician exercising due skill and care would 
have prevented such natural progress from occurring. We believe the 
commenter's suggestion would create the misleading impression that the 
physician's actions must have made the progress of the disease worse 
than it would have been in the absence of any treatment. Accordingly, 
we make no change based on this comment. Circumstances where VA 
negligence worsens a preexisting disease are clearly covered by 38 
U.S.C. 1151 and proposed 38 CFR 3.361(b), which provide for 
compensation where a veteran incurs ``additional disability'' as a 
result of such negligence. Proposed Sec.  3.361(c)(2) is intended to 
address the narrower circumstance where a claimant seeks compensation 
under section 1151 for the natural progress of the preexisting disease.

Section 3.361(d)(1)

    Section 1151 authorizes benefits for disability or death resulting 
from VA hospital care, medical or surgical treatment, or examination if 
the proximate cause of the disability or death was ``carelessness, 
negligence, lack of proper skill, error in judgment, or similar 
instance of fault'' on the part of VA, or ``an event not reasonably

[[Page 46429]]

foreseeable.'' Proposed Sec.  3.361(d)(1) states that, to establish 
carelessness, negligence, lack of proper skill, error in judgment, or 
similar instance of fault on the part of VA, a claimant must show that 
``VA failed to exercise the degree of care that would be expected of a 
reasonable health care provider'' or that ``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.'' In the notice of proposed rule making, we explained 
that VA interprets the reference in section 1151 to ``carelessness, 
negligence, lack of proper skill, error in judgment, or similar 
instance of fault'' as reflecting ordinary common-law principles of 
negligence and that the provisions of proposed Sec.  3.361(d)(1) are 
intended merely to restate, more simply and clearly, the standards 
governing determinations of negligence.
    One commenter disagreed with our interpretation of the statutory 
language ``carelessness, negligence, lack of proper skill, error in 
judgment, or similar instance of fault'' as reflecting general 
principles of common-law negligence. The commenter asserted that the 
statutory reference to ``fault'' simply implies a cause-and-effect 
relationship between VA action and the resulting disability or death. 
We disagree. The term ``fault'' is commonly understood to refer to 
negligence or other deviation from a legal duty. Black's Law 
Dictionary, 608 (6th ed. 1990). As explained in the notice of proposed 
rule making, the language in section 1151 referring to ``carelessness, 
negligence, lack of proper skill, error in judgment, or similar 
instance of fault'' reflects terms and concepts commonly associated 
with common-law negligence, and thus supports the conclusion that the 
statutory reference to ``similar instance of fault'' is intended to 
refer to circumstances that would likewise support a finding of 
negligence. The history of section 1151 makes clear that the term 
``fault'' is not intended merely to connote a cause-and-effect 
relationship. Section 1151 was enacted in response to the Supreme 
Court's decision in Brown v. Gardner, 513 U.S. 115 (1994), which 
construed an earlier version of that statute to require only a cause-
and-effect relationship between VA treatment and resulting disability 
or death, and rejected the Government's claim that the statute required 
a showing of VA fault. In response to that decision, Congress revised 
section 1151 in 1996 to expressly require a showing of VA 
``carelessness, negligence, lack of proper skill, error in judgment, or 
similar instance of fault.'' Pub. L. 104-204, Sec.  422(a), 110 Stat. 
2874, 2926 (1996). To conclude that the term ``fault'' connotes only a 
cause-and-effect relationship would improperly deprive the 1996 
amendment of any effect. The legislative history makes clear that the 
purpose of the amendment was to add a requirement for a showing of 
fault or negligence in addition to the causation requirement in the 
statute. See H.R. Rep. 812, 104th Cong., 2nd Sess. 84 (1996) 
(characterizing the statute as ``requiring that there be an element of 
fault as a precondition for entitlement to compensation''); 142 Cong. 
Rec. H10182, 10183 (Sept. 11, 1996) (statement of Rep. Stokes) 
(indicating that the statute was intended to overturn the Gardner 
decision and allow payment only if there is evidence that VA was at 
fault); 142 Cong. Rec. S9875, 9879 (Sept. 5, 1996) (statement of Sen. 
Daschle) (stating that the statute ``requires that veterans wishing to 
file liability claims against the VA show negligence, as is done in the 
private sector, to be entitled to benefits'').
    The commenter also points to the fact that section 1151 authorizes 
compensation for the results of ``an event not reasonably foreseeable'' 
as evidence that Congress did not intend to impose a fault requirement. 
We believe the language of section 1151 makes clear that Congress 
intended to authorize compensation for disability proximately caused 
either by VA fault or by an event not reasonably foreseeable. The fact 
that the statutory provisions relating to events not reasonably 
foreseeable contain no fault requirement does not suggest that the 
distinct provisions expressly referencing VA fault may be construed to 
contain no fault requirement. Accordingly, we will make no change based 
on this comment.
    One commenter suggested that we add a provision explaining that 
compensation is payable for negligent errors in judgment but is not 
payable for ``non-negligent'' errors in judgment. The same commenter 
also suggested that we explain what constitutes a ``non-negligent error 
in judgment.'' This comment refers to our discussion of the proposed 
rules in the Federal Register of December 12, 2002 (67 FR 76323). We 
explained that we construed the statutory phrase ``carelessness, 
negligence, lack of proper skill, error in judgment, or similar 
instances of fault on the part of the Department'' to refer to the 
standards used to establish liability for negligence under the common 
law of torts. We noted that courts applying tort law have sometimes 
used the phrase ``error in judgment'' to refer to non-negligent 
actions, such as a choice among diagnoses or treatment options that 
accorded with professional standards of care when made, but which in 
hindsight may have been less accurate or favorable than other 
reasonable alternatives. At other times, courts use that phrase to 
refer to decisions by health care providers regarding diagnosis or 
treatment that are negligent because they are not based on the exercise 
of due skill and care. We explained that we interpreted the phrase 
``error in judgment'' as used in section 1151 to refer to decisions 
that are based on the lack of due skill and care and that, therefore, 
meet the common law definition of negligence.
    We believe it is unnecessary to include a provision in the rules 
distinguishing negligent errors in judgment from non-negligent errors 
in judgment. As noted above, the operative distinction between those 
two types of actions depends upon whether the health care provider's 
decision was based on the exercise of due skill and care. This 
principle is reflected in Sec.  3.361(d)(1)(i) of the proposed rules, 
which refers to circumstances where ``VA failed to exercise the degree 
of care that would be expected of a reasonable health care provider.'' 
We believe this general standard provides a sufficient basis for VA 
adjudicators to determine whether the alleged error, whether an error 
of judgment or some other type of error, establishes a basis for 
compensation under section 1151. A specific discussion of the 
distinction between negligent and non-negligent errors or decisions 
relating to diagnosis and treatment would be merely duplicative of the 
general standard and would thus be unnecessary. Further, although the 
discussion of negligent and non-negligent errors of judgment in our 
notice of proposed rule making was necessary to explain the seemingly 
inconsistent judicial usage of the phrase ``error in judgment,'' we 
believe that inserting references to ``negligent errors of judgment'' 
and ``non-negligent errors of judgment'' into these rules would be 
unnecessarily confusing to readers and may detract attention from the 
operative standard in Sec.  3.361(d)(1)(i).
    A number of courts and legal commentators have noted that the 
judicial use of the phrase ``error in judgment'' to describe non-
negligent choices among reasonable alternative diagnoses or treatment 
options is confusing and inaccurate. See Joseph H. King, Jr., 
Reconciling the Exercise of Judgment and the Objective Standard of Care 
in Medical Malpractice, 52 Okla. L. Rev. 49, 60-62 (1999); Francouer v. 
Piper, 776 A.2d 1270, 1274-75 (N.H.

[[Page 46430]]

2001); Rogers v. Meridian Park Hospital, 772 P.2d 929, 932-33 (Or. 
1989). As an initial matter, a decision among diagnoses or treatment 
options that accords with established standards of care would not 
constitute an ``error in judgment'' within the ordinary meaning of that 
term, even if the choice may ultimately lead to an unfavorable result. 
The term ``error'' is commonly defined to mean ``an act or condition of 
often ignorant or imprudent deviation from a code of behavior.'' 
Webster's Third New International Dictionary 772 (unabridged 1976). 
Accordingly, as some courts have noted, if a physician's decision does 
not breach the accepted standards of care, ``he or she by definition 
has committed no error of judgment.'' Rogers, 772 P.2d at 933. Courts 
have also noted that the term ``error in judgment'' is confusing 
because decisions that were reasonable and therefore not erroneous when 
made may nevertheless appear erroneous in hindsight simply because they 
did not have the anticipated outcome. See Hirahara v. Tanaka, 959 P.2d 
830, 834 (Haw. 1998). These ambiguities have led numerous courts in the 
past two decades to conclude that the phrase ``error in judgment'' 
should not be used in jury instructions in malpractice cases and that 
juries should be instructed that the determinative issue is whether the 
physician used due skill and care in making determinations and 
rendering treatment. See, e.g., Hirahara,, 959 P.2d at 463 n.2 (citing 
cases from several courts); Day v. Morrison, 657 So.2d 808, 812 (Miss. 
1995) (same).
    In view of the ambiguity and potential for confusion inherent in 
the phrase ``error of judgment,'' we do not believe it would be helpful 
to reference or explain that term in these rules. We believe it is 
clearer to explain that the determinative issue is whether the health 
care provider exercised the degree of skill and care expected of a 
reasonable health care provider, and we believe this standard provides 
a sufficient basis for deciding claims under 38 U.S.C. 1151 in all 
cases, including those based on alleged errors in judgment. 
Accordingly, we will make no change based on this comment.

Section 3.361(d)(2)

    Section 1151 authorizes compensation for disability or death due to 
VA hospital care, medical or surgical treatment, or examination in 
cases where the proximate cause of the injury is either VA fault or 
``an event not reasonably foreseeable.'' Proposed 38 CFR 3.361(d)(2) 
would state that whether the proximate cause of a disability or death 
is ``an event not reasonably foreseeable'' will be determined in each 
claim based upon what a reasonable health care provider would have 
foreseen.
    One commenter suggested that VA clarify what constitutes an event 
not reasonably foreseeable. The commenter referenced a 1990 opinion by 
VA's General Counsel discussing the term ``accident,'' as previously 
used in 38 U.S.C. 1151, and equating that term with an event that is 
not reasonably foreseeable. The commenter suggested that we incorporate 
principles stated in that opinion (designated as VAOPGCPREC 99-90) into 
this rule. Among other things, the opinion stated that almost no 
medical event is totally unforeseeable and suggested that VA 
determinations should not turn solely upon whether a risk is 
foreseeable in any measure, but on whether the result is one that is 
truly unexpected or not ``reasonably'' foreseeable in relation to the 
treatment provided, as distinguished from a clearly recognized risk of 
such procedure.
    Terms such as ``clearly recognized risk'' and ``truly unexpected 
results'' are themselves ambiguous and subject to varying 
interpretations. It is not possible in our view, to state a 
comprehensive definition of ``an event not reasonably foreseeable,'' 
and we do not believe the clarity of this rule would be improved by 
introducing additional qualitative but ambiguous terms. We believe it 
may be helpful, however, to explain that the risk need not be 
completely unforeseeable or unimaginable. Accordingly, we are adding a 
sentence stating that the event need not be completely unforeseeable or 
unimaginable but must be one that a reasonable health care provider 
would not have considered an ordinary risk of the treatment provided.
    We also believe it may be helpful to state that, in determining 
whether an event was reasonably foreseeable, VA will consider whether 
it was the type of risk that a reasonable health care provider would 
have disclosed in connection with the informed consent procedures of 38 
CFR 17.32. Section 17.32 provides that, before rendering treatment, VA 
must disclose ``reasonably foreseeable associated risks, complications, 
or side effects'' of the treatment. Because the requirements of 
informed consent require VA health care providers to assess reasonably 
foreseeable risks, we believe reference to the informed consent 
requirements will provide a helpful framework for adjudicators in 
seeking medical opinions and considering the issue of what constitutes 
an event not reasonably foreseeable. Accordingly, we will add a 
sentence to Sec.  3.361(d)(2) stating that, in determining whether an 
event was reasonably foreseeable, VA will consider whether the risk of 
that event was the type of risk that a reasonable health care provider 
would have disclosed in connection with the informed consent procedures 
of 38 CFR 17.32.
    One commenter suggested that we state that compensation is not 
payable for the results of ``high-risk'' medical treatment, but may be 
payable for adverse outcomes in ``low-risk'' procedures. The commenter 
further suggested that we establish a baseline risk threshold by 
stating, for example, that, if a medical procedure has a 5 percent or 
greater known risk of complications and such complications result, they 
will be deemed foreseeable. We do not believe such standards would be 
helpful. The risk of an event may be reasonably foreseeable by medical 
standards even if the event occurs in only a small percentage of cases. 
At the same time, an event that is not reasonably foreseeable may occur 
even in a high-risk procedure. We therefore make no change based on 
this comment.
    The commenter also suggested that we add a statement, based on 
VAOPGCPREC 99-90, dated December 24, 1990, explaining that, if the only 
treatment that can possibly arrest a life-threatening condition 
involves a high risk of additional injury, such additional injury 
should be considered to result from the disease itself, rather than 
being classified as an event not reasonably foreseeable. We believe it 
is unnecessary to include this statement. We believe the statute and 
the proposed rule make it sufficiently clear that well-known risks of 
necessary treatment, if they materialize, would not constitute 
reasonably unforeseeable events. This rule is intended to state general 
rules governing a wide variety of possible factual scenarios, and we 
see no need to explain the application of the general rule to a 
specific and limited set of facts, such as those involving necessary 
treatment for life-threatening injuries. Insofar as the referenced 
statement from VAOPGCPREC 99-90 suggests that the results of well-known 
risks of necessary treatment should be considered results of the 
condition for which the treatment was sought, that suggestion is not 
directly relevant to these rules. An existing VA regulation at 38 CFR 
3.310 provides for service connection of disability that is proximately 
due to a service-connected disease or injury. We therefore make no 
change based on this comment.

[[Page 46431]]

Section 3.361(f)

    Section 1151 authorizes benefits for disability or death due to 
hospital care, medical or surgical treatment, or examination that, 
among other things, was administered ``either by a Department employee 
or in a Department facility.'' Proposed 38 CFR 3.361(e)(2) defines the 
term ``Department facility'' to mean a facility over which the 
Secretary of Veterans Affairs has direct jurisdiction. Proposed Sec.  
3.361(f) identifies activities that would not constitute services 
furnished by a Department employee or in a Department facility, 
including ``[h]ospital care or medical services furnished under a 
contract made under 38 U.S.C. 1703,'' and ``[h]ospital 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.''
    One commenter asserted that the proposed rules are ambiguous as to 
whether hospital care or medical services that are provided in a 
facility over which the Secretary has direct jurisdiction but are 
administered by non-VA personnel pursuant to a contract would be 
covered by section 1151. We do not agree that the regulations are 
ambiguous in this regard. Section 1151 itself provides that the 
disability or death must result from hospital care or medical services 
administered ``either by a Department employee or in a Department 
facility'' may be covered. The terms ``either'' and ``or'' 
unambiguously provide that hospital care or medical services provided 
in a Department facility may be covered regardless of whether they are 
also administered by a Department employee. Nothing in the proposed 
rules suggests otherwise. Proposed Sec.  3.361(f)(1) provides that 
hospital care or medical services provided pursuant to a contract under 
38 U.S.C. 1703 are not services furnished by a Department employee or 
in a Department facility. Section 1703 refers to ``[c]ontracts for 
hospital care and medical services in non-Department facilities.'' 
Because proposed Sec.  3.361(f)(1) applies only to services in non-VA 
facilities, it cannot be construed to exclude services rendered in VA 
facilities by non-VA employees. Proposed Sec.  3.361(f)(3) provides 
that hospital care or medical services provided pursuant to a contract 
under 38 U.S.C. 8153 ``in a facility over which the Secretary does not 
have direct jurisdiction'' are not services furnished by a Department 
employee or in a Department facility. Because proposed Sec.  
3.361(f)(3) excludes only services provided in non-VA facilities, it 
cannot be construed to exclude services rendered in VA facilities by 
non-VA employees. Accordingly, we make no change based on this comment.
    One commenter suggested that the rules clarify that an injury to a 
patient due to accidents or errors caused by non-health care workers, 
such as janitors, police, engineers, or administrators, is not 
compensable under 38 U.S.C. 1151. Proposed Sec.  3.361(e)(1) defines a 
``Department employee'' for purposes of section 1151 as a person who 
is, among other things ``engaged in furnishing hospital care, medical 
or surgical treatment, or examinations under authority of law.'' The 
terms ``hospital care,'' ``medical or surgical treatment,'' and 
``examinations,'' refer to activities of a medical nature. Because non-
health care workers generally would not be engaged in furnishing such 
medical services under authority of law, we believe the proposed rules 
sufficiently provide that injuries due to the actions of non-health 
care workers generally are not within the scope of the rules. We 
believe it is more consistent with the language of section 1151 to 
refer to the types of medical activities the VA employees were engaged 
in, rather than the employees' occupational classifications. 
Accordingly, we will make no change based on this comment.

Additional Changes to Proposed Rules

    In addition to the changes made in response to public comments, we 
have made certain other changes in these final rules for the reasons 
set forth below.

Section 3.361(a) and (d)(3)

    We have revised Sec.  3.361(a) and (d)(3) to clarify that the 
provisions of Sec.  3.361 apply to claims alleging disability or death 
due to compensated work therapy if such claims were either pending 
before VA on November 1, 2000, or were received by VA after that date. 
This change reflects VA's interpretation of existing statutory 
requirements and therefore does not require additional notice and 
comment procedures under 5 U.S.C. 553 prior to adoption. Moreover, this 
change is a relatively minor departure from the proposed rules and will 
be beneficial to claimants.
    Proposed Sec.  3.361(a) stated that Sec.  3.361 would apply to 
claims received by VA on or after October 1, 1997. Our notice of 
proposed rule making, however, stated that the rule would apply to 
claims based on disability or death due to CWT only if such claims were 
received by VA on or after November 1, 2000. Further, in proposed Sec.  
3.361(d)(3), we stated that benefits for injury or death due to 
training, rehabilitation services, or CWT could be paid only if the 
veteran had participated in such activity as part of a program 
authorized under 38 U.S.C. chapter 31 (pertaining to training and 
rehabilitation services), or ``for claims received on or after November 
1, 2000, as part of a CWT program under 38 U.S.C. 1718.''
    The referenced dates of October 1, 1997, and November 1, 2000, 
correspond to two distinct statutes that amended 38 U.S.C. 1151. The 
first statute, Public Law 104-204, revised section 1151, effective 
October 1, 1997, to require a showing of VA fault in order to establish 
entitlement to benefits under that statute. Neither the preexisting 
statute, nor the amendments made by Public Law 104-204, applied to 
claims involving disability or death allegedly due to CWT. Section 303 
of Public Law 106-419, however, revised section 1151, effective 
November 1, 2000, to authorize benefits for disability or death due to 
participation in a CWT program. The proposed rules reflect the view 
that the restrictive changes made by Public Law 104-204 apply to all 
claims filed on or after October 1, 1997, but that the liberalizing 
changes made by Public Law 106-419 apply only to claims filed on or 
after November 1, 2000. We believe the significance of those two dates 
should be stated more clearly, however, by referencing both dates in 
Sec.  3.361(a), rather than in the separate provisions of Sec.  
3.361(a) and (d)(3).
    We have also determined that the proposed rule was too restrictive 
insofar as it would have authorized benefits based on CWT only in 
claims filed on or after November 1, 2000. We have determined that the 
provisions of Public Law 106-419 authorizing benefits for disability or 
death due to CWT are applicable not only to claims that were filed on 
or after November 1, 2000, but also to claims that were filed prior to 
that date but had not yet been finally decided by VA as of that date. 
This determination is based on VA's interpretation of Public Law 106-
419 and the statutes and judicial rules governing the retroactive 
effect of new statutes.
    Pursuant to 38 U.S.C. 5110(g) and 38 CFR 3.114(a), VA may not pay 
benefits for any period prior to the effective date of a new statute 
authorizing the benefit in question. Accordingly, the provisions of 
Public Law 106-419 authorizing VA to pay benefits for disability or 
death due to CWT must be construed to permit benefit payments only for 
periods beginning on or after the date of its enactment on November 1, 
2000.

[[Page 46432]]

However, the prohibition on payment for periods prior to November 1, 
2000, does not compel a prohibition on considering claims that were 
filed before that date. VA could consider claims filed before November 
1, 2000, and award benefits to the claimant for periods after that 
date, if warranted.
    Under established rules of statutory construction, new statutes are 
presumed not to operate retroactively unless their language requires 
that result. See Landgraf v. USI Film Products, 511 U.S. 244 (1994). 
However, a statute does not operate retroactively merely because it is 
applied to a claim filed before the statute was enacted. Id. at 269. 
Rather, a statute would have a disfavored retroactive effect only if it 
impairs previously established rights, imposes new duties with respect 
to transactions already completed, or imposes some similar alteration 
with respect to past events. Id. at 280. A new provision that merely 
authorizes prospective benefits is not retroactive simply because it is 
applied to a claim filed before the statute was enacted. Id. at 273. 
Accordingly, because section 303 of Public Law 106-419 affects only 
entitlement to prospective benefits for periods after the date of its 
enactment, we conclude that it may be applied to claims that were filed 
before the date that statute was enacted and which remained pending 
before VA on that date.
    For the foregoing reasons we are revising proposed Sec.  3.361(a) 
to state that the provisions of that rule apply generally to claims 
that were received by VA on or after October 1, 1997, subject to the 
exception that, in claims based on disability or death allegedly caused 
by participation in a CWT program, the provisions of Sec.  3.361 will 
apply only to claims that were pending before VA on November 1, 2000, 
or were received by VA after that date. We are also including a 
sentence noting that the effective date of any benefits awarded under 
that provision will be subject to 38 CFR 3.114(a) and 3.400(i), but may 
not be earlier than November 1, 2000. Further, we are removing the 
reference in proposed Sec.  3.361(d)(3) to ``claims received on or 
after November 1, 2000,'' because that limitation, as modified, will 
now be stated in the paragraph (a) of Sec.  3.361. Because this change 
merely reflects VA's interpretation of the governing statutes and 
judicial rules, it is an interpretive rule and is not subject to the 
notice-and-comment requirements under 5 U.S.C. 553.

Section 3.361(d)(1)(ii)

    The proposed rule stated that a patient's informed consent may be 
``expressed (i.e., given orally or in writing) or implied.'' We believe 
the language of the proposed rule makes clear that the term 
``expressed'' was intended as an adjective referring to clearly-
conveyed communications of consent, as distinguished from the implied 
communications of consent referenced later in the same sentence. 
However, the commonly-used adjectival form of that word is ``express'' 
rather than ``expressed.'' Accordingly, we have changed that word to 
``express'' in the final rule in order to eliminate confusion. This 
grammatical change does not alter the meaning of the proposed rule.

Section 3.807

    Section 3.807(c) discusses the types of ``service-connected'' 
disability that will establish entitlement to dependents' educational 
assistance under chapter 35 of title 38, United States Code. The last 
sentence of current Sec.  3.807(c) states that chapter 35 benefits are 
not payable in ``[c]ases where eligibility for the service-connected 
benefits is established under Sec.  3.800.'' Section 3.800 is one of 
two VA regulations--the other being Sec.  3.358--that implemented the 
provisions of section 1151 as it existed prior to October 1, 1997.
    We proposed to revise the last sentence of Sec.  3.807(c) to refer 
to ``[c]ases where eligibility for the service-connected benefits is 
established under Sec. Sec.  3.358, 3.361.'' We are now revising that 
sentence to refer to ``[c]ases where eligibility for the service-
connected benefits is established under Sec.  3.358, 3.361, or 3.800.'' 
This would fix the obvious grammatical defect in the proposed rule and 
would also result in retaining the reference in the current regulation 
to Sec.  3.800. Although reference to that provision may be unnecessary 
because Sec.  3.800 merely authorizes the same benefit authorized by 
Sec.  3.358, we believe it is preferable to refer to both of those 
provisions to eliminate any ambiguity. In view of the proximity of 
Sec.  3.800 and Sec.  3.807 in the Code of Federal Regulations, we 
believe it may be helpful to retain the reference to Sec.  3.800. This 
change would not alter the meaning of the proposed rules because Sec.  
3.800 authorizes the same benefit as Sec.  3.358. Because the retention 
of the reference to Sec.  3.800 is consistent with the current 
regulation as well as the proposed regulation, there is no requirement 
for an additional notice and comment period with respect to this 
change.

Executive Order 12866

    This document 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. 3501-3521).

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 will have no such 
effect on State, local, or tribal governments, or the public sector.

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 will 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 regulatory 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, Veterans.

    Approved: May 20, 2004.
Anthony J. Principi,
Secretary of Veterans Affairs.

0
For the reasons set forth in the preamble, 38 CFR part 3 is amended as 
follows:

PART 3--ADJUDICATION

0
1. The authority citation for Part 3 continues to read as follows:

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

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

0
2. Section 3.154 and the Cross References at the end of the section are 
revised to read as follows:

[[Page 46433]]

Sec.  3.154  Injury due to hospital treatment, etc.

    VA may accept as a claim for benefits under 38 U.S.C. 1151 and 
Sec.  3.361 any communication in writing indicating an intent to file a 
claim for disability compensation or dependency and indemnity 
compensation under the laws governing entitlement to veterans' benefits 
for disability or death due to VA 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, or 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.

0
3. In Sec.  3.358, the authority citation at the end of 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.
* * * * *

0
4. Section 3.361 is added to read as follows:


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--(1) General. Except as provided 
in paragraph (2), 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.
    (2) Compensated Work Therapy. With respect to claims alleging 
disability or death due to compensated work therapy, this section 
applies to claims that were pending before VA on November 1, 2000, or 
that were received by VA after that date. The effective date of 
benefits is subject to the provisions of Sec. Sec.  3.114(a) and 
3.400(i), and shall not be earlier than November 1, 2000.
    (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 express 
(i.e., given orally or in writing) or implied under the circumstances 
specified in Sec.  17.32(b) of this chapter, 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. The event need 
not be completely

[[Page 46434]]

unforeseeable or unimaginable but must be one that a reasonable health 
care provider would not have considered to be an ordinary risk of the 
treatment provided. In determining whether an event was reasonably 
foreseeable, VA will consider whether the risk of that event was the 
type of risk that a reasonable health care provider would have 
disclosed in connection with the informed consent procedures of Sec.  
17.32 of this chapter.
    (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 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)


0
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)


0
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)


0
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.) * 
* *
* * * * *

[[Page 46435]]

Sec.  3.708  [Amended]

0
8. In Sec.  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.''

0
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.
* * * * *

0
10. In Sec.  3.807, the last sentence of paragraph (c) is revised to 
read as follows:


Sec.  3.807  Dependents' educational assistance; certification.

* * * * *
    (c) * * * Cases where eligibility for service-connected benefits is 
established under Sec.  3.358, 3.361, or 3.800 are not included.
* * * * *

[FR Doc. 04-17597 Filed 8-2-04; 8:45 am]
BILLING CODE 8320-01-P