[Federal Register Volume 81, Number 76 (Wednesday, April 20, 2016)]
[Proposed Rules]
[Pages 23228-23232]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08937]
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DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 3
RIN 2900-AP48
Extra-Schedular Evaluations for Individual Disabilities
AGENCY: Department of Veterans Affairs.
ACTION: Proposed rule.
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SUMMARY: The Department of Veterans Affairs (VA) proposes to amend its
adjudication regulation pertaining to extra-schedular consideration of
a service-connected disability in exceptional compensation cases. In a
recent decision, the United States Court of Appeals for the Federal
Circuit (Federal Circuit) held that VA's regulation, as written,
requires VA to consider the combined effect of two or more service-
connected disabilities when determining whether to refer a disability
evaluation for extra-schedular consideration. VA, however, has long
interpreted its regulation to provide an extra-schedular evaluation for
a single disability, not the combined effect of two or more
disabilities. This proposed amendment will clarify VA's regulation
pertaining to exceptional compensation claims such that an extra-
schedular evaluation is available only for an individual service-
connected disability but not for the combined effect of more than one
service-connected disability.
DATES: Comments must be received on or before June 20, 2016.
ADDRESSES: Written comments may be submitted through
www.Regulations.gov; by mail or hand-delivery to Director, Regulation
Policy and Management (02REG), Department of Veterans Affairs, 810
Vermont Avenue NW., Room 1068, Washington, DC 20420; or by fax to (202)
273-9026. Comments should indicate that they are submitted in response
to ``RIN 2900-
[[Page 23229]]
AP48--Extra-schedular evaluations for individual disabilities.'' Copies
of comments received will be available for public inspection in the
Office of Regulation Policy and Management, Room 1068, between the
hours of 8:00 a.m. and 4:30 p.m., Monday through Friday (except
holidays). Please call (202) 461-4902 for an appointment (This is not a
toll-free number). In addition, during the comment period, comments may
be viewed online through the Federal Docket Management System (FDMS) at
www.Regulations.gov.
FOR FURTHER INFORMATION CONTACT: Stephanie Li, Chief, Regulations Staff
(211D), Compensation Service, Department of Veterans Affairs, 810
Vermont Avenue NW., Washington, DC 20420, (202) 461-9700 (This is not a
toll-free telephone number).
SUPPLEMENTARY INFORMATION: The United State Court of Appeals noted in
Menegassi v. Shinseki that Congress has given VA the authority to
interpret its own regulations under its general rulemaking authority,
citing 38 U.S.C. 501. 638 F.3d 1379, 1382 (Fed. Cir. 2011). Currently,
38 CFR 3.321(b)(1) provides that, ``[t]o accord justice . . . to the
exceptional case where the schedular evaluations are found to be
inadequate,'' the Under Secretary for Benefits (USB) or the Director of
the Compensation and Pension Service is authorized ``to approve . . .
an extra-schedular evaluation commensurate with the average earning
capacity impairment due exclusively to the service-connected disability
or disabilities. The governing norm in these exceptional cases is: A
finding that the case presents such an exceptional or unusual
disability picture with such related factors as marked interference
with employment or frequent periods of hospitalization as to render
impractical the application of the regular schedular standards.''
In Johnson v. McDonald, the Court explained that the plain language
of Sec. 3.321(b)(1) using the plural forms of the ``schedular
evaluations'' and ``disabilities'' is unambiguous and requires that VA
consider the need for extra-schedular review by evaluating the
collective impact of two or more service-connected disabilities, in
addition to evaluating the effect of a single service-connected
disability. 762 F.3d 1362, 1365-66 (Fed. Cir. 2014)., that Id. at 1365-
66.
The history of 38 CFR 3.321(b)(1) reveals that Federal Circuit's
interpretation does not accurately reflect VA's intent in issuing the
regulation. Since 1936, VA has interpreted Sec. 3.321(b)(1) to provide
for an extra-schedular evaluation for each service-connected disability
for which the schedular rating is inadequate based upon the regulatory
criteria. Section 3.321(b)(1) was originally promulgated as R & PR
1307, instructing that correspondence from a field office to the
Director of the Compensation Service alleging that the rating schedule
provides inadequate or excessive ratings in an individual case will
contain a statement of facts indicating as clearly as possible the
extent to which the reduction in actual earnings is due to the service-
connected disability and the extent to which this reduction would
probably affect the average worker, in occupations similar to the
claimant's preenlistment occupation, suffering a similar disability. R
& PR 1307(B) and (C)(1930).
In 1936, R & PR 1307 was recodified as R & PR 1142, requiring a
submitting agency to provide a recommendation concerning service
connection and evaluation of every disability, under the applicable
schedules as interpreted by the submitting agency. Then in 1954, this
sentence was deleted from the regulation but later incorporated in the
Department of Veterans Benefits Administration (VBA) Manual 8-5
Revised, para. 47.j. (Jan. 6, 1958). Thus, for 28 years following
promulgating R & PR 1307(B) and (C), the VA predecessor regulations to
Sec. 3.321(b)(1) and the Manual provided for an extra-schedular
evaluation based upon the effects of a single ``disability,'' not
``disabilities''.
In 1961, VA recodified R & PR 1307(B) and (C) as 38 CFR 3.321(b)(1)
and added a sentence authorizing an extra-schedular evaluation
commensurate with the average earning capacity impairment due
exclusively to the service-connected disability or disabilities. The
VBA Manual provision regarding extra-schedular evaluations remained
virtually the same from 1992 through June 30, 2015, when it was revised
to implement Johnson. In 1992, the Manual was revised by adding the
word ``individual'' before the word ``disability(ies)'' in paragraph
3.09, Submission For Extra-Schedular Consideration. M21-1, Part VI,
para. 3.09 (Mar. 17, 1992). As amended, paragraph 3.09 required
preparation of a memorandum to be submitted to Central Office whenever
the schedular evaluations are considered to be inadequate for an
individual disability(ies).
VBA Manual M21-1, Part III, Subpart iv, chpt. 6, Sec. B, para. 4
(Aug. 3, 2011), stated in pertinent part:
a. Extra-Schedular Evaluations in Compensation Claims
Consider the issue of entitlement to an extra-schedular
evaluation in compensation claims under
38 CFR 3.321(b)(1) only where
* * * * *
-- there is evidence of exception or unusual circumstances
indicating that the rating schedule may be inadequate to compensate
for the average impairment of earning capacity due to disability
(for example, marked interference with employment or frequent
periods of hospitalization)
* * * * *
c. Submitting Compensation Claims for Extra-Schedular Consideration
Submit compensation claims to C&P Service for extra-schedular
consideration under 38 CFR 3.321(b)(1) or 38 CFR 4.16(b) if
the schedular evaluations are considered to be inadequate
for an individual disability
* * * * *
See Thun v. Shinseki, 572 F.3d 1366, 1369 (Fed. Cir. 2009) (referring
to this Manual provision as VA's interpretation of 38 CFR 3.321(b)(1)),
aff'd 22 Vet. App. 111 (2008). Thus, VA's interpretation of section
3.321(b)(1) as manifested by the VBA Manual was consistent for 22
years, until the Johnson decision.
In addition, a 1996 General Counsel precedent opinion regarding the
applicability of the regulation reads that ``[s]ection 3.321(b)(1)
applies when the rating schedule is inadequate to compensate for the
average impairment of earning capacity from a particular disability.''
VAOPGCPREC 6-96, para. 7, Add. 7. The opinion instructs that ``when a
claimant submits evidence that his or her service-connected disability
affects employability in ways not contemplated by the rating schedule,
the Board should consider the applicability of section 3.321(b)(1).''
Id.
In 2013, VA published a proposed revision to 38 CFR 3.321(b)(1) as
part of its Regulation Rewrite Project. 78 FR 71042, 71217 (Nov. 27,
2013). Consistent with VA's long-standing interpretation, that revision
proposes to clarify that extra-schedular evaluations may be assigned
for a specific service-connected disability, as distinguished from the
combined effects of multiple disabilities. Id. However, that proposed
rule was published before the Johnson decision. We are therefore
proposing a version of Sec. 3.321(b)(1) in this rulemaking that
differs from the 2013 proposed rule in order to respond specifically to
the Federal Circuit's analysis of the plain language of the current
regulation. VA proposes to amend Sec. 3.321(b)(1) to clarify that
[[Page 23230]]
Sec. 3.321(b)(1) provides an extra-schedular evaluation for an
individual service-connected disability that is so exceptional or
unusual due to factors such as marked interference with employment or
frequent periods of hospitalization as to render evaluation under the
rating schedule impractical.
VA proposes to retain the first sentence of current Sec.
3.321(b)(1), which states that ratings will be based on the average
impairments of earning capacity and that the Secretary shall
periodically readjust the rating schedule, because it explains the
limited scope of section 3.321(b)(1). Pursuant to 38 U.S.C. 1155, VA is
authorized to ``adopt and apply a schedule of rating of reductions in
earning capacity from specific injuries or combination of injuries. The
ratings shall be based, as far as practicable, upon the average
impairments of earning capacity in civil occupations,'' rather than
consideration of a veteran's actual wages or income. Based upon section
1155, the United States Court of Appeals for Veterans Claims (Veterans
Court) rejected the argument that an inadequacy in the rating schedule
for purposes of 38 CFR 3.321(b)(1) can be established solely by showing
an asserted gap between a veteran's income and the income of similarly
qualified workers in the same field. Thun v. Peake, 22 Vet. App. 111,
116 (2008). The Veterans Court explained that extra-schedular
consideration cannot be used to undo the approximate nature that
results from the rating system based on average impairment of earning
capacity authorized by Congress. Id. Consistent with section 1155 and
Thun, VA's proposed rule is not intended to authorize personalized
ratings as a routine matter but only to provide for limited discretion
in cases where the schedule is inadequate to compensate for average
impairment of earning capacity.
VA proposes to revise the second sentence of 38 CFR 3.321(b)(1) to
specify that extra-schedular consideration is available if ``the
schedular evaluation is inadequate to rate a single service-connected
disability.'' We have added this language to explain that section
3.321(b)(1) would apply only to a single disability rather than upon
consideration of multiple service-connected disabilities as the Federal
Circuit held in Johnson. We have also deleted the phrase ``or
disabilities'' at the end of the second sentence for the same purpose.
VA also proposes to revise the last sentence of the regulation to
clarify that the governing norm is a finding that ``application of the
regular schedular standards is impractical because the referred
disability is so exceptional or unusual due to such related factors as
marked interference with employment or frequent periods of
hospitalization.''
Other parts of the current Sec. 3.321(b)(1) have been rewritten
for clarity, including the heading of Sec. 3.321(b), but the concepts
remain unchanged. VA proposes to delete the reference to the Under
Secretary for Benefits (USB) in current Sec. 3.321(b)(1). Although the
regulation has long allowed for referral for USB extra-schedular
consideration, in practice VA service centers refer these claims to the
Director of the Compensation Service. This revision brings authority in
line with actual practice. The Director of the Compensation Service may
delegate to other Compensation Service personnel the authority to
approve extra-schedular ratings and, currently, such authority has been
given to certain personnel in the Policy Staff of the Compensation
Service. This is consistent with the established principle that VBA
personnel are authorized to carry out such functions as may be assigned
to them for purposes of administering VA benefits. See 38 CFR
2.6(b)(1), 3.100(a).
VA's proposed rule is logical and consistent with the regulatory
scheme for evaluating disabilities. Individual disabilities are
evaluated under criteria in VA's rating schedule describing the effects
of specific diseases and injuries. See 38 CFR 4.71-4.150. The ratings
assigned for individual conditions are combined into a single
``combined evaluation'' under a uniform formula set forth in a table.
38 CFR 3.323(a), 4.25. There is plainly a difference between the
application of the diverse schedular criteria relating to specific
conditions, and the application of a uniform formula for combining
individual disability ratings. VA's proposed revision to Sec.
3.321(b)(1), clarifying that that the regulation pertains to a single
disability, is consistent with this distinction.
With respect to evaluation of individual conditions, the rating
schedule criteria identify the predominant disabling features of the
condition. For example, if VA determines that the condition produces
significant disabling effects that are not contemplated by the rating-
schedule criteria for that condition, VA may find that the rating-
schedule criteria are inadequate in that case. In contrast, no criteria
in the rating schedule provide for determining the ``adequacy'' of an
overall combined evaluation that derives from several disabilities and
their associated symptoms.
When VA assigns disability ratings for two or more individual
disabilities, those ratings are combined by applying a standard formula
provided in 38 CFR 4.25. There are no provisions in the rating schedule
describing impairments that would be associated with a particular
combination of disabilities determined by using this formula.
Accordingly, there are no applicable standards to determine whether the
combined rating is adequate to compensate for the combined effects of
those disabilities. Indeed, in view of the vast number of potential
combinations of disabilities that could arise, it is not feasible to
formulate standards. In the absence of any applicable objective
standards for evaluating the ``adequacy'' of an overall combined rating
for multiple disabilities, requiring adjudicators to consider the
adequacy of combined ratings would lead to inconsistent and highly
subjective determinations. Accordingly, consistent with our long-
standing interpretation, VA has determined that consideration of extra-
schedular ratings is most logically done only at the level of
individual disabilities. Any extra-schedular ratings assigned for
individual disabilities may then be combined under the standard formula
for combining ratings. The proposed language for section 3.321(b)(1)
requiring consideration of the adequacy of the schedular evaluations in
VA's rating schedule is consistent with the evaluation of individual
conditions.
In addition, statutes and VA's implementing regulations provide
additional compensation for the combined effect of more than one
service-connected disability. Under 38 U.S.C. 1114(k)-(s), a veteran is
entitled to special monthly compensation, in addition to the
compensation payable under the VA rating schedule, for certain
combinations of disabilities, e.g., anatomical loss or loss of use of
both buttocks, both feet, or one hand and one foot, deafness in both
ears or blindness in both eyes. See 38 CFR 3.350. In addition, 38
U.S.C. 1160(a) provides that if a veteran has suffered loss of certain
paired organs or extremities as a result of service-connected
disabilities and non-service-connected disabilities, VA must assign and
pay the veteran the applicable rate of compensation as if the
combination of disabilities were the result of service-connected
disability. See 38 CFR 3.383. Accordingly, in cases where Congress or
VA has determined that special rating consideration is warranted based
on the combined effects of multiple disabilities, they have
[[Page 23231]]
expressly specified the manner of considering these combined effects.
Finally, VA regulations authorize a rating of total disability
based on individual unemployability for veterans whose disabilities
meet certain criteria. Under 38 CFR 4.16(a), an adjudicator may assign
a total disability evaluation based upon individual unemployability
rating for compensation purposes, without referral to any other
official, if, in cases of multiple service-connected disabilities, a
veteran has one service-connected disability rated at least 40-percent
disabling and a combined rating of at least 70 percent and is unable to
secure or follow a substantially gainful occupation as the result of
such disability or disabilities. Under 38 CFR 4.16(b), if a veteran's
service-connected disabilities do not meet the percentage requirements
of section 4.16(a), but the veteran is unable to secure and follow a
substantially gainful occupation by reason of such service-connected
disability, the rating board must submit the case to the Director of
the Compensation Service for consideration of entitlement to a total
disability based on individual unemployability rating. VA has thus
prescribed a uniform standard for considering whether the combined
effects of multiple disabilities produce total impairment of earning
capacity. However, in instances where the inability to secure and
follow a substantially gainful occupation is not shown, VA believes
that, to ensure fair and consistent application of rating standards,
consideration of extra-schedular ratings should be conducted with
respect to individual disabilities rather than the combined effects of
multiple disabilities.
Executive Orders 12866 and 13563
Executive Orders 12866 and 13563 direct agencies to assess the
costs and benefits of available regulatory alternatives and, when
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, and other advantages; distributive impacts;
and equity). Executive Order 13563 (Improving Regulation and Regulatory
Review) emphasizes the importance of quantifying both costs and
benefits, reducing costs, harmonizing rules, and promoting flexibility.
Executive Order 12866 (Regulatory Planning and Review) defines a
``significant regulatory action,'' requiring review by the Office of
Management and Budget (OMB), unless OMB waives such review, as ``any
regulatory action that is likely to result in a rule that may: (1) Have
an annual effect on the economy of $100 million or more or adversely
affect in a material way the economy, a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local, or tribal governments or communities; (2)
Create a serious inconsistency or otherwise interfere with an action
taken or planned by another agency; (3) Materially alter the budgetary
impact of entitlements, grants, user fees, or loan programs or the
rights and obligations of recipients thereof; or (4) Raise novel legal
or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in this Executive Order.''
The economic, interagency, budgetary, legal, and policy
implications of this proposed rule have been examined, and it has been
determined not to be a significant regulatory action under Executive
Order 12866. VA's impact analysis can be found as a supporting document
at http://www.regulations.gov, usually within 48 hours after the
rulemaking document is published. Additionally, a copy of this
rulemaking and its impact analysis are available on VA's Web site at
http://www.va.gov/orpm/, by following the link for ``VA Regulations
Published From FY 2004 Through Fiscal Year to Date.''
Regulatory Flexibility Act
The Secretary hereby certifies that this proposed rule 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 proposed rule would directly affect only
individuals and will not directly affect small entities. Therefore,
pursuant to 5 U.S.C. 605(b), this rulemaking is exempt from the initial
and final regulatory flexibility analysis requirements of sections 603
and 604.
Unfunded Mandates
The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C.
1532, that agencies prepare an assessment of anticipated costs and
benefits before issuing any rule that may result in the expenditure by
State, local, and tribal governments, in the aggregate, or by the
private sector, of $100 million or more (adjusted annually for
inflation) in any one year. This proposed rule would have no such
effect on State, local, and tribal governments, or on the private
sector.
Paperwork Reduction Act
This proposed rule contains no provisions constituting a collection
of information under the Paperwork Reduction Act of 1995 (44 U.S.C.
3501-3521).
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance number and title for the
program affected by this document is 64.109, Veterans Compensation for
Service-Connected Disability.
Signing Authority
The Secretary of Veterans Affairs, or designee, approved this
document and authorized the undersigned to sign and submit the document
to the Office of the Federal Register for publication electronically as
an official document of the Department of Veterans Affairs. Robert D.
Snyder, Chief of Staff, approved this document on April 11, 2016, for
publication.
List of Subjects in 38 CFR Part 3
Administrative practice and procedure, Claims, Disability benefits,
Veterans.
Dated: April 13, 2016.
Jeffrey Martin,
Office of Regulation Policy & Management, Office of the General
Counsel, Department of Veterans Affairs.
For the reasons set out in the preamble, the Department of Veterans
Affairs proposes to amend 38 CFR part 3 as follows:
PART 3--ADJUDICATION
Subpart A--Pension, Compensation, and Dependency and Indemnity
Compensation
0
1. The authority citation for part 3, subpart A, continues to read as
follows:
Authority: 38 U.S.C. 501(a), unless otherwise noted.
0
2. Amend Sec. 3.321 by revising the heading of paragraph (b).,
revising paragraph (b)(1), and adding an authority citation at the end
of paragraph (b).
The revisions and additions read as follows:
Sec. 3.321 General rating considerations.
* * * * *
(b) Extra-schedular ratings in unusual cases. (1) Disability
compensation. Ratings shall be based, as far as practicable, upon the
average impairments of earning capacity with the additional proviso
that the Secretary shall from time to time readjust this schedule of
ratings in accordance with experience. To accord justice to the
exceptional case where the schedular evaluation is inadequate to rate a
single
[[Page 23232]]
service-connected disability, the Director of the Compensation Service
or his or her delegatee, upon field station submission, is authorized
to approve on the basis of the criteria set forth in this paragraph
(b), an extra-schedular evaluation commensurate with the actual
impairment of earning capacity due exclusively to the referred
disability. The governing norm in these exceptional cases is a finding
by the Director of the Compensation Service or delegatee that
application of the regular schedular standards is impractical because
the referred disability is so exceptional or unusual due to such
related factors as marked interference with employment or frequent
periods of hospitalization.
* * * * *
(Authority: 38 U.S.C. 501(a), 1155)
[FR Doc. 2016-08937 Filed 4-19-16; 8:45 am]
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