VA Disability Compensation: Comparison of VA Benefits with Those of
Workers' Compensation Programs (Letter Report, 02/14/97, GAO/HEHS-97-5).

Pursuant to a congressional request, GAO compared the: (1) criteria used
by the Department of Veterans Affairs (VA) disability compensation
program and federal and state workers' compensation programs to
determine compensation; and (2) compensation individuals with selected
work-related injuries and diseases would receive under VA's disability
program and what they would receive for the same impairments under the
Federal Employees' Compensation Act (FECA).

GAO found that: (1) the VA disability compensation program and workers'
compensation programs, including FECA, differ with respect to program
goals, types of benefits provided, and eligibility requirements for
benefits; (2) most workers' compensation programs provide separate cash
payments for wages lost and permanent impairment, while VA provides
compensation only for service-connected conditions, which need not be
permanent; (3) unlike the VA program, workers' compensation programs
emphasize returning employees to work while limiting employers'
liability, and the vast majority who receive workers' compensation
receive only medical benefits, not cash awards; (4) to be eligible for
wage loss benefits under workers' compensation programs, workers must
actually lose all or a portion of their wages for a specified minimum
period of time, then they receive a portion, usually 66 and two-thirds
percent, of their actual lost wages for the duration of the period that
wages are lost; (5) to collect compensation for permanent impairments,
workers must sustain permanent loss or loss of use of a body part or
function, but they need not lose wages to receive compensation for their
permanent impairments; (6) unlike workers' compensation programs, the
amount of basic compensation veterans may receive is established by
statute and is not based on their individual wage loss or usual wages,
but it is based on the rating VA's Schedule for Rating Disabilities
assigns to that veteran's specific condition; (7) all veterans whose
conditions are assigned the same rating receive the same basic benefits
amount; (8) unlike workers' compensation for permanent impairments,
there is no limit on the length of time veterans can receive benefits or
the total amount they can receive for permanent conditions; (9) the
monthly cash benefits for permanent impairments under FECA for employees
at the GS-12, step 1, salary level tend to be higher than the benefits
under VA's disability program for the same types of conditions; (10)
this is likely to be the case for those at higher, but not lower, salary
levels under FECA because workers' compensation is based on workers'
usual wages, whereas veterans' benefits are not; and (11) unless
workers' compensation continues under the wage loss provision after the
cash awards for permanent impairment and, the amount and present value
of VA compensation could be higher than FECA's over the long term.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-97-5
     TITLE:  VA Disability Compensation: Comparison of VA Benefits with 
             Those of Workers' Compensation Programs
      DATE:  02/14/97
   SUBJECT:  Veterans benefits
             Workers compensation
             Disability benefits
             Eligibility criteria
             Persons with disabilities
             Federal employee disability programs
             Losses
IDENTIFIER:  VA Disability Compensation Program
             VA Disability Rating Schedule
             Federal Employees' Compensation Act Program
             
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Cover
================================================================ COVER


Report to the Chairman, Subcommittee on Benefits, Committee on
Veterans' Affairs, House of Representatives

February 1997

VA DISABILITY COMPENSATION -
COMPARISON OF VA BENEFITS WITH
THOSE OF WORKERS' COMPENSATION
PROGRAMS

GAO/HEHS-97-5

VA and Workers' Compensation Comparison

(105747)


Abbreviations
=============================================================== ABBREV

  FECA - Federal Employees' Compensation Act
  GS - general schedule
  VA - Department of Veterans Affairs

Letter
=============================================================== LETTER


B-274671

February 14, 1997

The Honorable Jack Quinn
Chairman, Subcommittee on Benefits
Committee on Veterans' Affairs
House of Representatives

Dear Mr.  Chairman: 

Federal and state workers' compensation programs provide economic
support for individuals who incur work-related illnesses or injuries,
while the Department of Veterans Affairs' (VA) disability
compensation program provides economic support for certain veterans
with service-connected conditions.  In fiscal year 1995, VA paid a
total of about $11.5 billion to the approximately 2.2 million
veterans on its disability rolls.  State workers' compensation
programs annually paid workers' compensation indemnity benefits
ranging from about $14.2 million for approximately 9,750 claims filed
in Rhode Island to about $4.6 billion for 350,000 claims filed in
California (see app.  I).\1 Between July 1, 1995, and June 30, 1996,
the Department of Labor paid $1.29 billion in 78,873 claims under the
Federal Employees' Compensation Act (FECA), one of three workers'
compensation programs administered by the Department of Labor. 

We prepared this report at the request of the Chairman of the former
Subcommittee on Compensation, Pension, Insurance, and Memorial
Affairs, who asked us to compare (1) the criteria used by the VA
disability compensation program and federal and state workers'
compensation programs to determine compensation and (2) the
compensation individuals with selected work-related injuries and
diseases would receive under VA's disability program and what they
would receive for the same impairments under FECA. 

To determine the difference between the criteria VA and workers'
compensation programs use to determine eligibility and compensation,
we reviewed program policies, literature, and other data compiled on
the VA, federal, state, and District of Columbia programs, as well as
conferred with officials from VA and the Department of Labor's Office
of Workers' Compensation Programs.\2 The discussion of the federal
workers' compensation program in this report refers to FECA only. 

Because the provision of FECA that provides for cash benefits for
permanent impairments is more similar to VA's compensation than the
component that provides cash benefits for wage loss, we compared the
basic cash benefits payable for six conditions that appear on both
the FECA schedule of permanent impairments and the VA disability
rating schedule.  The six impairments selected were the loss or loss
of use of (1) a foot, (2) both ears, (3) a hand, (4) an arm, (5) a
leg, and (6) an eye.  We selected these impairments because the
criteria for each were clear and similar on both schedules. 

Within the federal government, when comparisons are drawn between
military and civilian salaries, the salary for a military rank of
O-4, a Major or Lieutenant Commander, has been traditionally
considered comparable to the salary of a federal employee at grade
12, step 1, on the general schedule (GS) pay scale.\3

Therefore, as agreed with the Subcommittee staff, we based our
estimates of the benefits a Major or Lieutenant Commander would
receive under FECA at a GS-12, step 1, salary level.  To provide a
broader perspective of compensation amounts, we used the GS-7, step
1,\4 salary level to estimate the compensation someone with a
military rank of O-1, Second Lieutenant, would receive under FECA. 
In addition, we provided information on what someone would receive at
the GS-5, step 1,\5 level and the GS-15, step 10,\6 level, the
maximum amount of compensation payable under FECA.  (See app.  I for
a detailed description of our benefit calculations.)

We did our work from July to November 1996 in accordance with
generally accepted government auditing standards. 


--------------------
\1 Most recent annual reporting periods for state workers'
compensation programs vary, as shown in app.  I. 

\2 Our comparison of VA's compensation program and workers'
compensation programs is limited to the programs' general objectives,
design, eligibility requirements, and benefits. 

\3 In 1996, an annual salary of $41,926. 

\4 In 1996, an annual salary of $23,634. 

\5 In 1996, an annual salary of $19,081. 

\6 In 1996, an annual salary of $90,090. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

The VA disability compensation program and workers' compensation
programs, including FECA, differ with respect to program goals, types
of benefits provided, and eligibility requirements for benefits. 
Both programs provide cash awards--VA for conditions incurred or
aggravated by military service, and workers' compensation for
work-related injuries or illnesses.  Most workers' compensation
programs provide separate cash payments for (1) wages lost and (2)
permanent impairment, while VA provides compensation only for
service-connected conditions, which need not be permanent.  Unlike
the VA program, workers' compensation programs emphasize returning
employees to work while limiting employers' liability, and the vast
majority who receive workers' compensation receive only medical
benefits, not cash awards. 

To be eligible for wage loss benefits under workers' compensation
programs, workers must actually lose all or a portion of their wages
for a specified minimum period of time.  Then they receive a portion
(usually 66-2/3 percent) of their actual lost wages for the duration
of the period that wages are lost.  To collect compensation for
permanent impairments, workers must sustain permanent loss or loss of
use of a body part or function, but they need not lose wages to
receive compensation for their permanent impairments.  They receive a
portion of their usual wages (again, often 66-2/3 percent) for the
period specified by law. 

Unlike workers' compensation programs, the amount of basic
compensation veterans may receive is established by statute and is
not based on their individual wage loss or usual wages.  It is based
on the rating VA's Schedule for Rating Disabilities assigns to that
veteran's specific condition.  This rating represents the average
impairment in earning capacity that VA determines veterans in general
experience with that condition.  All veterans whose conditions are
assigned the same rating receive the same basic benefit amount. 
Unlike workers' compensation for permanent impairments, there is no
limit on the length of time veterans can receive benefits or the
total amount they can receive for permanent conditions. 

The monthly cash benefits for permanent impairments under FECA for
employees at the GS-12, step 1, salary level tend to be higher than
the benefits under VA's disability program for the same types of
conditions.  This is likely to be the case for those at higher, but
not lower, salary levels under FECA because workers' compensation is
based on workers' usual wages, whereas veterans' benefits are not. 
Unless workers' compensation continues under the wage loss provision
after the cash awards for permanent impairment end, the amount and
present value of VA compensation could be higher than FECA's over the
long term.  This is because VA benefits are not limited in either the
length of time or the total amount that can be paid. 


   BACKGROUND
------------------------------------------------------------ Letter :2

Each of the 50 states and the District of Columbia has a workers'
compensation program.  These programs vary by state, as each is
authorized by its own state law.  There are three federal workers'
compensation programs including the one authorized by FECA, which
covers federal employees.  Federal and most state workers'
compensation programs were initially enacted in the first part of the
20th century.  VA's disability compensation program, which was based
to some extent on state workers' compensation programs, was
substantially overhauled with the enactment of the War Risk Insurance
Act of 1917.  The act directed VA to establish a schedule to
compensate veterans for the average impairment in earning capacity
resulting from injuries or diseases incurred during military service. 


   DIFFERENCES IN PROGRAM
   OBJECTIVES, DESIGN, AND
   ELIGIBILITY
------------------------------------------------------------ Letter :3

The FECA program and other workers' compensation programs differ in
purpose and design from VA's disability compensation program (see
table 1).  Cash benefits under FECA and the workers' compensation
programs and those provided under VA's disability compensation
program are provided for different purposes.  FECA and other workers'
compensation programs primarily focus on compensating workers for
their actual lost wages and permanent impairments resulting from
occupational diseases or injuries.  In contrast, VA's disability
program focuses on compensating veterans for the average reduction in
earning capacity they are expected to experience as a result of
service-connected conditions.  An overall goal of workers'
compensation programs is to return injured employees to work, and in
some workers' compensation programs, benefits are terminated if the
worker does not participate in vocational rehabilitation.  VA's
disability compensation program focuses on providing monetary
compensation for service-connected conditions.  VA also provides
other services, such as vocational rehabilitation, to eligible
veterans.  However, veterans are not required to participate in
vocational rehabilitation in order to receive compensation. 



                                     Table 1
                     
                     Comparison of VA Disability Compensation
                        and Workers' Compensation Programs

                           VA disability
                           compensation               Workers' compensation
-------------------------  -------------------------  --------------------------
Objectives                 To compensate veterans     To provide adequate
                           for physical or mental     benefits to workers who
                           conditions incurred or     sustain work-related
                           aggravated during          injuries or diseases,
                           military service, based    limit employers'
                           on the average economic    liabilities to workers'
                           losses that are expected   compensation payments, and
                           to result.                 return the injured worker
                                                      to work.

Types of benefits          Cash benefits for          Cash benefits for wage
                           service-connected          loss.
                           conditions.
                                                      Cash benefits for
                           Special monthly            permanent impairments,
                           compensation for loss or   that is, "schedule awards"
                           loss of use of             for permanent loss or loss
                           procreative organs, or     of use of body parts or
                           body parts or functions.   functions.\a

                           Allowances for clothing,   Survivors' and, in some
                           attendant, or other        programs, dependents'
                           special needs.             benefits.

                           Dependents' and            Payment of medical
                           survivors' benefits.       expenses for work-related
                                                      injuries or illnesses.
                           Eligibility for medical
                           care in VA hospitals and   Vocational rehabilitation.
                           all expenses for
                           vocational
                           rehabilitation, including
                           stipends.

Eligibility criteria       For cash and other         For cash benefits related
                           benefits, existence of a   to wage loss, worker must
                           service-connected          have actually lost wages
                           condition.                 because of work-related
                                                      injury or illness. Some
                           Eligibility is not         programs require
                           contingent on individual   participation in
                           veteran's ability to       vocational rehabilitation
                           work, amount earned or     if it is necessary for the
                           earning capacity, or       person to obtain
                           participation in           employment again.
                           vocational
                           rehabilitation.            For cash benefits related
                                                      to permanent impairments,
                                                      worker must have lost or
                                                      lost use of certain body
                                                      parts or functions due to
                                                      work-related injury.
                                                      Workers may be eligible to
                                                      receive cash benefits for
                                                      both wage loss and
                                                      permanent impairment for
                                                      the same injury, but not
                                                      concurrently.

                                                      For payment of medical
                                                      expenses, worker must have
                                                      a work-related injury or
                                                      illness.

Basis for compensation     Based on the disability    For wage loss, amount is
amounts                    rating (percentage         based on a percentage
                           evaluation of 10-100%)     (usually 66-2/3% without
                           assigned to a veteran's    dependents) of the actual
                           specific condition by      wages lost by the
                           VA's Schedule for Rating   individual worker as a
                           Disabilities.              result of the work-
                                                      related injury or
                           The dollar amount for      illness.
                           each disability rating
                           level is set by law, and   For permanent impairments
                           all veterans with          (schedule awards), amount
                           conditions assigned the    is based on a percentage
                           same disability rating     (usually 66-2/3% without
                           receive the same basic     dependents) of the
                           compensation amount.       worker's usual wages.

Compensation limits        No limit on the total      For wage loss, benefits
                           dollar amount or time      can be paid for the
                           period over which          duration of the wage loss,
                           veterans can receive       but many states limit the
                           compensation.              maximum weekly
                                                      compensation amounts.

                                                      For permanent impairments
                                                      (schedule awards), limits
                                                      are placed on the maximum
                                                      length of time benefits
                                                      are payable and the total
                                                      amount payable.

                                                      Workers may be eligible to
                                                      apply for wage loss
                                                      benefits if they are still
                                                      unable to work after the
                                                      schedule award payments
                                                      are exhausted.
--------------------------------------------------------------------------------
\a Workers' compensation programs use a schedule to help determine
monetary benefits for selected permanent impairments.  Awards
appearing on the schedule are referred to as "schedule awards."


      WORKERS' COMPENSATION
      PROGRAMS
---------------------------------------------------------- Letter :3.1

Workers' compensation programs attempt to provide adequate benefits
to injured workers while limiting employers' liabilities strictly to
workers' compensation benefits.  These programs provide cash benefits
to employees for wage loss and permanent impairments.  For selected
permanent impairments, the programs use a schedule to determine
monetary benefits, which are referred to as "schedule awards."
Workers' compensation also provides medical care benefits and
vocational rehabilitation to help employees return to work.  In some
programs, workers who refuse vocational rehabilitation services when
these services are necessary for the person to be employed again may
forfeit their right to receive wage-loss benefits.  In addition, if
an employee dies from a job-related injury or illness, the employee's
dependents can receive survivors' benefits. 

The compensation benefits that are paid to workers depend on the
nature and extent of their injuries and the ability of injured
employees to earn their usual wages.  Employees whose injuries are
not serious may only receive reimbursement for medical care for
work-related injuries or illnesses.  Many workers' compensation
claims result only in payment for medical care rather than in
monetary awards for lost wages or permanent impairments. 

Employees whose injuries or illnesses result in lost wages may be
entitled to receive wage-loss benefits.  Employees whose injuries or
illnesses result in the permanent loss or loss of use of certain body
parts or functions are entitled to compensation for permanent
impairments.  The majority of the monetary benefits that are paid to
workers are for wages lost as opposed to permanent impairment.  Often
wage-loss benefits are paid for temporary disabilities, which may
last a relatively short period of time.  For example, according to
the Department of Labor, for the claims submitted under FECA in
fiscal year 1994 for which wage-loss benefits were paid during the
first year after submission, the median amount paid was about $4,000. 
The median time period for which benefits were paid was about 70
days.\7

No two workers' compensation programs are exactly alike.  Despite the
various differences among state, FECA, and the District of Columbia
programs, to be eligible for benefits under any of these laws,
workers' injuries or occupational diseases must arise out of and
occur in the course of employment.  These criteria, though used
somewhat differently among jurisdictions, generally mean that a
worker's illness or injury must occur in the course of performing his
or her job in order to be compensable.  To be eligible for monetary
benefits under workers' compensation, workers must experience an
actual loss in wages or a permanent impairment. 

Most states and the District of Columbia require that employees be
out of work during a waiting period ranging from 3 to 7 days before
benefits for lost wages can be paid.\8 FECA requires a 3-day waiting
period that begins after the expiration of any "continuation of pay"
to which the worker may be entitled.  Continuation of pay is a unique
feature of FECA whereby FECA authorizes federal agencies to continue
paying employees who are absent from work because of work-related
traumatic injuries their regular salaries for up to 45 days before
the 3-day waiting period begins.  Continuation-
of-pay benefits are not payable in occupational disease cases.  Under
state workers' compensation programs, if an employee is absent from
work continuously for 5 to 42 days after the date of injury, he or
she is entitled to wage-loss benefits retroactive to the date of
injury.\9 Under FECA, an employee absent for 14 days after
continuation of pay ends is eligible for restoration of benefits
withheld during the 3-day waiting period. 


--------------------
\7 The mean amount for this period was about $6,700.  The mean length
of time, about 100 days. 

\8 Workers' Compensation:  Selected Comparisons of Federal and State
Laws (GAO/GGD-96-76, Apr.  3, 1996). 

\9 All statutes except Montana's provide for wage-loss benefits
retroactive to the date of injury. 


      VA'S DISABILITY COMPENSATION
      PROGRAM
---------------------------------------------------------- Letter :3.2

While workers' compensation programs attempt to protect the interests
of both workers and employers, VA's disability compensation program
focuses on economic support for veterans.  It is designed to provide
cash benefits to veterans for physical or mental service-connected
conditions.  The benefits paid to veterans depend on the degree to
which their specific conditions or injuries are believed to reduce
the average earning capacity of veterans in general with that
condition. 

VA's disability compensation program, like workers' compensation
programs, provides survivors' benefits and vocational rehabilitation. 
Unlike most workers' compensation programs, vocational rehabilitation
is optional under VA.  Both programs cover medical care, but VA
generally provides care for veterans through the Veterans Health
Administration.  VA's program, however, does provide for additional
compensation for dependents; special needs related to a veteran's
condition; and special monthly compensation--statutory awards--for
the loss or loss of use of certain body parts or functions, or
procreative organs.  VA also provides stipends to veterans in its
vocational rehabilitation program in addition to monthly disability
compensation. 

To be eligible for compensation under VA's disability compensation
program, veterans must incur or aggravate injuries or diseases in the
line of duty or during a period of active military service.  Such
illnesses and injuries are considered service-connected.  Unlike
workers' compensation programs, a veteran's injury or illness need
not occur because of or in the course of actually performing his or
her military-related duty to be compensable.  Members of the military
are covered 24 hours a day with respect to diseases or injuries they
incur, because they are considered on duty 24 hours a day. 

A veteran does not have to experience an actual reduction in earning
capacity or loss in wages to be eligible for disability compensation. 
Thus, like workers' compensation for permanent impairments, veterans
can receive compensation even if they are working and regardless of
the amount they earn. 


   DETERMINING COMPENSATION
------------------------------------------------------------ Letter :4

Workers' compensation programs base compensation on workers' wages
prior to their injury or the onset of occupational disease.  Workers
are paid a percentage of their wages or the wages they lose as a
result of their work-related injury or disease, depending on whether
they are being compensated for lost wages or permanent impairments. 
For selected permanent impairments, workers' compensation programs
use a schedule to determine monetary benefits, or "schedule awards."
For permanent impairments that do not appear on a schedule, programs
may use one or more of three methods to determine compensation.  In
contrast, VA uses its Schedule for Rating Disabilities to determine
the degree of impairment in earning capacity presumed to be
associated with specific temporary and permanent conditions.  This
degree of impairment determines the basic amount of compensation
veterans are eligible for.  An individual veteran's actual earnings
lost as a result of a condition have no bearing on the compensation
amount. 


      DETERMINING MONETARY AWARDS
      FOR LOSS OF WAGES UNDER
      WORKERS' COMPENSATION
---------------------------------------------------------- Letter :4.1

If employees are unable to earn their usual wages because of
work-related disabilities, they are compensated for their lost wages. 
The amount of monetary compensation a worker receives under workers'
compensation is calculated by taking a specified percentage--in many
jurisdictions, 66-2/3 percent--of the worker's actual wage loss. 
Thus, the amount of compensation different employees receive for the
same disability varies on the basis of their particular wage loss. 
Most states and the FECA program, however, place minimum and maximum
limits on the weekly compensation amounts an individual can receive. 
Most programs compensate for lost wages for the duration of the wage
loss.  Workers who become permanently and totally disabled generally
receive benefits for life. 

An employee in Arizona, for example, who earns $600 a week and loses
wages as a result of a work-related injury should theoretically
receive $400 (66-2/3 percent x $600) a week in compensation. 
However, this employee would actually receive $323.10 a week because
this is the maximum weekly benefit amount Arizona allows for wage
loss.  Under the FECA program, the same employee also would receive
66-2/3 percent (75 percent if the employee has dependents) of his or
her lost wages.  However, the employee would receive the full $400
because the weekly maximum FECA allows for wage loss is $1,299.38. 
This same worker would also receive the full $400 in the District of
Columbia, which limits maximum weekly benefits to $723.34. 


      DETERMINING WORKERS'
      COMPENSATION AWARDS FOR
      "SCHEDULED" PERMANENT
      IMPAIRMENTS
---------------------------------------------------------- Letter :4.2

For certain permanent impairments, workers' compensation programs use
a schedule to determine the maximum amount of compensation that can
be awarded.  As of January 1995, the FECA, District of Columbia, and
most state workers' compensation programs each maintained a schedule
that specified the maximum number of weeks of compensation a worker
under their jurisdiction could receive for specific permanent
impairments that result in the total loss or loss of use of certain
members (such as a hand, arm, or foot), organs, and functions of the
body.  Benefits for these permanent impairments are called "schedule
awards." Permanent partial loss or loss of use of members, organs, or
body functions listed on federal or state schedules is also
compensable, but for less than the maximum number of weeks.  The
maximum amount of money and period of time during which compensation
may be paid for specific functional losses are authorized by statute
and vary by program.  Table 2 shows the variation in the maximum
number of weeks of compensation and dollars payable for certain
permanent impairments among selected states and the FECA program. 
The maximum amount and weeks for the states we selected cover the
range of these maximum limits across all states.  However, the actual
amount employees are paid is based on their salaries, so many
employees receive less than the maximum. 



                                                                       Table 2
                                                       
                                                          Maximum Benefit Payments and Time
                                                            Periods for Selected Permanent
                                                       Impairments for Selected States and FECA

                           Foot             Both ears                Hand               Arm at shoulder           Leg at hip              Eye
                    ------------------  ------------------  -----------------------  ----------------------  --------------------  ------------------
                     Maximum   Maximum   Maximum   Maximum      Maximum     Maximum     Maximum     Maximum     Maximum   Maximum   Maximum   Maximum
                     benefit    number   benefit    number      benefit   number of     benefit   number of     benefit    number   benefit    number
Jurisdiction          amount  of weeks    amount  of weeks       amount       weeks      amount       weeks      amount  of weeks    amount  of weeks
------------------  --------  --------  --------  --------  -----------  ----------  ----------  ----------  ----------  --------  --------  --------
Arizona              $55,896       173   $84,006       260      $70,113         217     $84,006         260     $70,113       217   $42,003       130
Colorado              15,600       104    20,850       139       15,600         104      31,200         208      31,200       208    20,850       139
Delaware              57,150       160    62,508       175       78,581         220      89,297         250      89,297       250    71,438       200
District of          148,284       205   144,668       200      176,494         244     225,682         312     208,321       288   115,734       160
 Columbia
Georgia               37,125       135    41,250       150       44,000         160      61,875         225      61,875       225    41,250       150
Illinois             117,879       155   152,102       200      144,496         190     228,153         300     209,140       275   121,681       160
Kansas                40,750       125    35,860       110       48,900         150      73,350         225      65,200       200    39,120       120
Maine                 71,442       162    88,200       200       94,815         215     118,629         269      94,815       215    71,442       162
Maryland             134,865       333   134,865       333      134,865         333     162,000         400     162,000       400   134,865       333
Pennsylvania         131,750       250   137,020       260      187,085         355     216,070         410     216,070       410   144,925       275
Texas                 42,200       125    50,400       150       50,400         150      67,200         200      67,200       200    33,600       100
Virginia              60,000       125    48,000       100       72,000         150      96,000         200      84,000       175    48,000       100
Washington            52,566        \a    60,076        \a       67,585          \a      75,095          \a      75,095        \a    30,038        \a
Wisconsin             42,250       250    36,504       216       67,600         400      84,500         500      84,500       500    46,475       275
Wyoming               28,600       100    22,880        80       34,892         122      42,900         150      38,610       135    26,844        94
FECA                 266,373       205   259,876       200      317,049         244     405,407         312     374,221       288   207,901       160
-----------------------------------------------------------------------------------------------------------------------------------------------------
\a Law provides for payment of fixed sums for specified injuries in
monthly or lump-sum payments, under certain circumstances. 

Source:  U.S.  Department of Labor, Employment Standards
Administration, Office of Workers' Compensation Programs, State
Workers' Compensation Laws (Washington, D.C.:  Department of Labor,
Jan.  1996). 

For the types of impairments included on a workers' compensation
schedule, whether total or partial, the injured or disabled worker is
awarded a percentage of his or her usual wages for no greater than
the number of weeks specified on the schedule.  For example, under
FECA, an employee may receive 66-2/3 percent of his or her salary or
wages if there are no dependents (75 percent if there are) for up to
a maximum of 312 weeks for the total loss or loss of use of an arm. 
Accordingly, the loss or loss of use of an arm provides the same
number of weeks of benefits to all injured federal workers, but
workers with lower wages will receive a lesser amount of monetary
benefits.  If a worker loses 50-percent use of an arm, he or she
would likely receive 66-2/3 percent of his or her salary or wages for
156 weeks, which is 50 percent of the maximum number of weeks
allowed.  Workers with permanent partial impairments continue to
receive compensation for their loss until they receive the full
amount they are eligible for, even if they are working.  If the
worker is unable to return to work or earn his or her usual wages
after receiving the maximum amount allowable, the worker may apply
for wage-loss benefits.  Under FECA, workers cannot collect
compensation for wage loss and permanent impairment concurrently. 


      DETERMINING WORKERS'
      COMPENSATION AWARDS FOR
      "NONSCHEDULED" PERMANENT
      IMPAIRMENTS
---------------------------------------------------------- Letter :4.3

For permanent impairments that are not included in the schedule,
commonly called "nonscheduled" or "unscheduled" injuries, one or more
of three methods may be used to determine the compensation amount. 
Nonscheduled injuries are normally injuries to the trunk, internal
organs, nervous system, and other body systems that are not included
in the list of injuries found in District of Columbia or state
statutes that address workers' compensation.  FECA does not provide
schedule awards for permanent impairments that do not appear on its
schedule.  The states and the District of Columbia may base awards
for nonscheduled injuries on (1) functional limitation or impairment,
(2) wage loss, (3) loss of wage-earning capacity, or (4) some
combination of these three. 


         IMPAIRMENT METHOD
-------------------------------------------------------- Letter :4.3.1

The impairment approach compares the worker's condition with that of
a person with no impairment or with that of someone at the opposite
end of the scale--a "totally disabled" person--and produces a rating
of impairment as a percentage.  Thus, it is basically an extension of
the schedule applied to injuries not listed.  For example, in a state
that equates a person with no impairments to 500 weeks of benefits, a
worker determined to have a 25-percent impairment may receive a
percentage of his or her usual wages for 125 weeks (25 percent x
500). 

Under this method, workers with the same permanent impairment receive
the same number of weeks of compensation, even if the impairment is
more or less disabling for different individuals.  The same type of
back injury, for example, would provide the same number of weeks of
benefits to a professor and a carpenter, even though the professor is
able to return to work and suffers only a temporary loss of wages,
while, by contrast, the carpenter may be unable to return to work and
suffers a permanent loss in wages.  However, when a worker suffers a
permanent loss of wages, he or she may apply for wage-loss benefits
under workers' compensation. 


         WAGE-LOSS METHOD
-------------------------------------------------------- Letter :4.3.2

Under the wage-loss method, workers are compensated for a percentage
of the actual loss of earnings that stems from their work-related
illness or injury.  The amount of benefits paid to workers depends
upon the extent to which postinjury earnings are affected by the
impairment or condition.  The degree of functional impairment alone
has little or no bearing on the amount of benefits paid. 


         LOSS-OF-WAGE-EARNING-CAPACITY
         METHOD
-------------------------------------------------------- Letter :4.3.3

This approach compensates the worker for the anticipated or projected
loss of earning capacity as a result of his or her permanent
disability.  This is similar to what VA's schedule conceptually does. 
However, VA's schedule reflects the impact a condition is presumed to
have on the average earning capacity among all veterans with that
condition as opposed to its impact on each individual veteran's
earnings.  States using this approach assess the seriousness of the
worker's medical condition; consider such factors as prior education,
work experience, and other personal characteristics that affect one's
ability to obtain and retain employment; and estimate the worker's
loss in earning capacity in percentage terms.  States normally
express total earning capacity in terms of a specified number of
weeks.  For example, in a state that equates total loss of earning
capacity with 600 weeks of benefits, a worker with a 20-percent loss
of earning capacity would receive a percentage of his or her
projected earning capacity for 120 weeks (20 percent x 600). 


         COMBINATION OF METHODS
-------------------------------------------------------- Letter :4.3.4

States can also use some combination of the three basic methods.  For
example, Texas pays workers benefits for permanent disabilities on
the basis of their functional impairment for a limited number of
weeks.  However, workers can also receive additional benefits for
loss of wages after their impairment benefits are exhausted.  Only
workers whose functional impairment is rated at least at 15 percent
or higher are eligible for these supplemental benefits.  Wisconsin
also pays impairment benefits on the basis of loss of functional
capacity for permanent disabilities for a limited number of weeks. 
However, if the worker does not return to work by the end of this
period at the preinjury earnings level, additional benefits are based
on loss of wage-earning capacity. 


      DETERMINING DISABILITY
      COMPENSATION AMOUNTS UNDER
      VA'S PROGRAM
---------------------------------------------------------- Letter :4.4

The amount of compensation veterans are awarded for their
service-connected conditions is based on a percentage evaluation,
commonly called the disability rating, which VA's Schedule for Rating
Disabilities assigns to a veteran's specific condition.  The veteran
receives the specific benefit amount the law sets for that disability
rating level.  Unlike workers' compensation, VA does not base
compensation on each individual veteran's salary or wage loss, nor
does it base compensation on how each veteran's earning capacity is
actually affected by his or her service-connected condition. 
Veterans with the same condition at the same level of severity
usually receive the same basic cash benefit. 

The rating schedule contains medical criteria and disability ratings. 
The medical criteria consist of a list of diagnoses, organized by
body system, and a number of levels of medical severity specified for
each diagnosis.  The schedule assigns a disability rating to each
level of severity associated with a diagnosis.  These disability
ratings, which are supposed to reflect the average impairment in
earning capacity associated with each level of severity, range from
10 percent to 100 percent\10 and correspond to specific dollar
amounts of compensation set by law. 

For example, VA has determined that the loss of a foot during
military service results in a 40-percent impairment in earning
capacity, on average, among all veterans with this injury.  These
veterans, therefore, are entitled to a 40-percent disability rating
whether this injury actually reduces their earning capacity by more
than 40 percent or does not reduce it at all.  In 1996, all veterans
having conditions with a disability rating of 40 percent received
basic compensation of $380 per month.\11 In 1996, under VA's
disability program, a veteran received basic compensation of $91 per
month, or $1,092 annually, for a condition rated at 10 percent, and
up to $1,870 per month, or $22,440 annually, for a condition rated at
100 percent (see table 3). 

In contrast to many workers' compensation programs, VA's program does
not place any limits on the total amount of monetary benefits
veterans can receive or the time period for which they can receive
these benefits.  Veterans can receive disability compensation for
their service-connected conditions for life. 



                                Table 3
                
                       1996 VA Compensation Rates

                                                                Monthl
Disability (percent)                                            y rate
--------------------------------------------------------------  ------
10                                                                 $91
20                                                                 174
30                                                                 266
40                                                                 380
50                                                                 542
60                                                                 683
70                                                                 862
80                                                                 999
90                                                               1,124
100                                                             1,870\
                                                                     a
----------------------------------------------------------------------
\a Additional amounts may be paid when eligible veterans who are
rated at 100-percent disability have conditions that are so severe
they require special assistance or aid, such as in-home care. 

Source:  VA, Federal Benefits for Veterans and Dependents, 1996 ed.,
VA pamphlet 80-96-1 (Washington, D.C.:  VA, 1996). 


--------------------
\10 A veteran can also receive a 0-percent noncompensable rating that
may be increased to a compensable rating of 10 percent or more if the
veteran's condition worsens.  A 0-percent rating generally means that
VA has determined that a veteran has a condition that can be
classified as service-connected, but it is not severe enough to
qualify for monetary compensation on the basis of the medical
criteria in the schedule.  Some veterans with a 0-percent rating
receive special monthly compensation under the VA disability program. 
On the basis of 1994 data, VA estimated there were about 1.2 million
veterans who were rated at 0 percent and were not receiving
disability compensation. 

\11 This does not include the special monthly compensation a veteran
would be entitled to for loss or loss of use of a body part. 


      CASH BENEFIT COMPARISONS
---------------------------------------------------------- Letter :4.5

Monthly benefits for workers with higher earnings under FECA for
selected scheduled permanent impairments will likely be higher than
VA's monthly disability compensation because schedule award amounts
for permanent impairments under the workers' compensation programs
are based on workers' wages.  FECA monthly cash benefits for workers
with lower salaries may not be higher, however, than VA cash
benefits.  For example, for the total loss or loss of use of an arm,
a federal employee without dependents at a GS-12, step 1, salary
level would receive about $2,341 a month for a maximum of 72 months
(312 weeks) under FECA.  Under VA's disability compensation program,
this same person would receive $1,124 a month.  However, a federal
employee at the GS-5, step 1, salary level would receive about $1,065
a month (see table 4). 



                                     Table 4
                     
                         Monthly Compensation Payable for
                     Selected Permanent Impairments Under VA
                        and FECA at Specific Salary Levels

                                                        FECA compensation
                                                  ------------------------------
                                                                           GS-
                                                   GS-     GS-     GS-     15,
                                                    5,      7,     12,     step
                                                  step 1  step 1  step 1    10
                                                  ($19,0  ($23,6  ($41,9  ($90,0
                                                    81      34      26      90
                                                  annual  annual  annual  annual
                                            VA     ly)     ly)     ly)     ly)
----------------------------------------  ------  ------  ------  ------  ------
                                          Monthl
                                               y  Monthl  Monthl  Monthl  Monthl
Permanent impairment (loss or loss of     amount       y       y       y       y
use of)                                       \a  amount  amount  amount  amount
----------------------------------------  ------  ------  ------  ------  ------
Foot                                        $380  $1,065  $1,320  $2,341  $5,030
Both ears                                  1,870   1,065   1,320   2,341   5,030
Hand                                         862   1,065   1,320   2,341   5,030
Arm at shoulder                            1,124   1,065   1,320   2,341   5,030
Leg at hip                                 1,124   1,065   1,320   2,341   5,030
One eye                                      380   1,065   1,320   2,341   5,030
--------------------------------------------------------------------------------
\a Based on the rating VA's schedule assigns to the highest level of
severity for each condition. 

Comparisons of initial monthly benefit payments alone under FECA and
VA do not provide a complete picture of the differences in
compensation amounts, for several reasons.  FECA payments for
schedule awards are limited to 6 years or less, whereas VA disability
payments are made to disabled veterans for the duration of the
impairment, so the payment of several decades' worth of benefits is
not uncommon.  FECA payments and VA disability payments can be--and
usually are--increased over time.  A dollar paid to a recipient today
is worth more than a dollar paid at some future date, in terms of
both value to the recipient and cost to the government, because a
dollar received today can be invested to provide more than a dollar's
benefit in the future.  For these reasons, a comparison of the
present value, also known as the lump-sum equivalent, of potential
total payment under each program provides a better indication of the
relative value of benefits under these two programs (see app.  II for
a detailed description of benefit calculations). 

In the long run, at the GS-12, step 1, salary level and below,
compensation under VA's disability program is generally higher than
FECA compensation for selected permanent impairments.  For example,
the schedule award benefit for the total loss or loss of use of an
arm for an employee at the GS-12, step 1, salary level is limited to
a maximum of $186,203\12 ($540 x 312 weeks, adjusted for
cost-of-living allowance) under FECA.\13 The present value, or
lump-sum equivalent, of this amount would be $158,561.  Assuming that
a veteran is compensated for the loss or loss of use of an arm for 30
years, using the 1996 compensation levels and adjusting for future
increases in benefits, the veteran would receive $756,474, and the
present value would be $289,365. 

In general, for selected permanent impairments, the maximum amount of
benefits a federal worker at the GS-15, step 10, salary level would
receive also would be lower than the benefits received under VA. 
However, the present value of benefits at this salary level would be
higher under FECA for some of the impairments we looked at (see
tables 5 and 6). 



                                                                       Table 5
                                                       
                                                       Maximum Amount of Benefits for Permanent
                                                         Impairments Under FECA for Selected
                                                                    Salary Levels

                                           GS-5, step 1         GS-7, step 1 ($23,634         GS-12, step 1 ($41,926       GS-15, step 10 ($90,090
                                        ($19,081 annually)            annually)                     annually)                     annually)
                                        ------------------  -----------------------------  ----------------------------  ----------------------------
Permanent            Maximum number of
impairment (loss              weeks of   Maximum   Present        Maximum                       Maximum                       Maximum
or loss of use of)        compensation    amount     value         amount   Present value        amount   Present value        amount   Present value
------------------  ------------------  --------  --------  -------------  --------------  ------------  --------------  ------------  --------------
Foot                               205   $53,482   $48,646        $66,309         $60,313      $117,399        $106,784      $252,408        $229,585
Both ears                          200    52,098    47,504         64,593          58,897       114,362         104,277       245,878         224,195
Hand                               244    64,666    57,358         80,175          71,114       141,949         125,907       305,191         270,699
Arm at shoulder                    312    84,826    72,233        105,170          89,558       186,203         158,561       400,335         340,907
Leg at hip                         288    77,642    67,015         96,264          83,088       170,435         147,107       366,435         316,279
One eye                            160    41,029    38,366         50,870          47,568        90,065          84,219       193,639         181,070
-----------------------------------------------------------------------------------------------------------------------------------------------------
Note:  All benefit amounts are for beneficiaries without dependents. 



                                Table 6
                
                 Long-term VA Compensation Payable for
                 Selected Service-Connected Conditions

                                Disabi
                                 lity
                                rating
                                  \a
Permanent impairment (loss or   (perce
       loss of use of)           nt)     Compensation   Present value
------------------------------  ------  --------------  --------------
                                            30      40      30      40
                                         years   years   years   years
------------------------------  ------  ------  ------  ------  ------
Foot                                40  $255,7  $433,3  $97,82  $117,3
                                            47      16       8      30
Both ears                          100  1,258,  2,132,  481,41  577,38
                                           546     373       8       9
Hand                                70  580,14  982,94  221,91  266,15
                                             3       4       6       5
Arm at shoulder                     90  756,47  1,281,  289,36  347,05
                                             4     704       5       1
Leg at hip                          90  756,47  1,281,  289,36  347,05
                                             4     704       5       1
One eye                             40  255,74  433,31  97,828  117,33
                                             7       6               0
----------------------------------------------------------------------
Note:  Amounts do not include special monthly compensation,
allowances for dependents, or any other monetary benefits to which
veterans may be entitled. 

\a These ratings represent the disability rating VA's rating schedule
assigns to the highest level of severity for each condition. 


--------------------
\12 The maximum compensation any federal worker without dependents
can receive under FECA for this impairment is $400,335 (66-2/3
percent of a GS-15, step 10, weekly salary ($1,161) for 312 weeks,
adjusted for cost-of-living allowance). 

\13 If a worker is unable to work or earn his or her usual salary
after receiving the maximum amount payable for his or her permanent
impairment, the worker, under FECA and in most states, also may be
eligible for wage-loss benefits for the duration of the wage loss. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :5

In commenting on a draft of this report, VA stated that comparisons
of VA's disability compensation program with other workers'
compensation programs are not meaningful because the programs are so
dissimilar.  VA also stated that its compensation program is the best
method for providing monetary benefits to people disabled during
military service.  Throughout this report we have recognized the
differences and, in some cases, the similarities among the VA
disability and workers' compensation programs' objectives,
components, and characteristics.  VA's comments are included as
appendix III.  VA also provided technical comments on the draft
report, which we incorporated as appropriate. 

The Department of Labor also reviewed a draft of this report and
provided technical comments, which we have also included as
appropriate. 


---------------------------------------------------------- Letter :5.1

We are sending copies of this report to the Subcommittee's Ranking
Minority Member, other interested congressional committees and
subcommittees, and the Secretaries of Veterans Affairs and Labor. 
Copies will also be made available to others upon request. 

This report was prepared under the direction of Clarita A.  Mrena,
Assistant Director.  Other GAO contacts and staff acknowledgments are
listed in appendix IV.  If you have any questions about this report,
please contact me on (202) 512-7101 or Ms.  Mrena on (202) 512-6812. 

Sincerely yours,

David P.  Baine
Director, Veterans' Affairs and
 Military Health Care Issues


TOTAL CLAIMS FILED AND CASH
BENEFITS PAID UNDER WORKERS'
COMPENSATION, BY STATE, FOR TIME
PERIOD SPECIFIED
=========================================================== Appendix I

                                       Total
                                      claims  Total amount
                                       filed       of cash
                                    for cash      benefits
State           Time period         benefits          paid
--------------  ------------------  --------  ------------
Alabama         10/1/94 to 9/30/      33,854  $203,684,515
                 95
Alaska          1/1/93 to 12/31/       9,398    57,195,670
                 93
Arizona         7/1/94 to 6/30/95         \a            \a
Arkansas        1/1/95 to 12/31/      18,556    75,194,516
                 95
California      7/1/94 to 6/30/95    350,000  4,560,000,00
                                                         0
Colorado        7/1/94 to 6/30/95     44,392           \\a
Connecticut     7/1/94 to 6/30/95     58,494            \a
Delaware        1/1/93 to 12/31/       4,800            \a
                 93
Florida         7/1/94 to 6/30/95         \a   547,073,870
Georgia         1/1/94 to 12/31/      52,313   197,072,414
                 94
Hawaii          1/1/94 to 12/31/          \a   197,579,662
                 94
Idaho           7/1/93 to 6/30/94         \a    81,606,749
Illinois        7/1/93 to 6/30/94         \a            \a
Indiana         7/1/92 to 6/30/93         \a            \a
Iowa            7/1/94 to 6/30/95         \a            \a
Kansas          7/1/94 to 6/30/95         \a            \a
Kentucky        7/1/94 to 6/30/95         \a            \a
Louisiana       1/1/94 to 12/31/      24,293   295,800,000
                 94
Maine           1/1/94 to 12/31/       7,237            \a
                 94
Massachusetts   7/1/93 to 6/30/94         \a            \a
Michigan        1/1/94 to 12/31/      88,804   956,022,370
                 94
Minnesota       1/1/94 to 12/31/      37,100   514,400,000
                 94
Mississippi     1/1/93 to 12/31/      19,417    96,345,077
                 93
Missouri        7/1/92 to 6/30/93         \a            \a
Montana         7/1/94 to 6/30/95         \a    92,243,679
Nebraska        7/1/94 to 6/30/95     16,538    77,202,313
Nevada          7/1/93 to 6/30/94         \a            \a
New Hampshire   7/1/94 to 6/30/95     12,087            \a
New Jersey      1/1/94 to 12/31/          \a   452,500,000
                 94
New Mexico      1/1/94 to 12/31/       7,172    70,737,374
                 94
New York        4/1/93 to 3/31/94         \a  1,500,746,00
                                                         0
North Carolina  7/1/94 to 6/30/95     94,053   234,379,982
North Dakota    7/1/93 to 6/30/94      3,745    40,314,979
Ohio            1/1/95 to 12/31/      69,564  1,099,770,67
                 95                                      7
Oklahoma        1/1/94 to 12/31/          \a            \a
                 94
Oregon          1/1/94 to 12/31/      31,530   232,230,000
                 94
Pennsylvania    1/1/94 to 12/31/          \a  1,707,243,69
                 94                                      1
Rhode Island    1/1/93 to 12/31/       9,752    14,230,000
                 93
South Carolina  7/1/94 to 6/30/95     18,612   223,988,480
South Dakota    7/1/93 to 6/30/94         \a            \a
Tennessee       1/1/93 to 12/31/      41,248            \a
                 93
Texas           1/1/94 to 12/31/      64,586            \a
                 94
Utah            7/1/94 to 6/30/95     13,585            \a
Vermont         7/1/93 to 6/30/94         \a    65,000,000
Virginia        1/1/94 to 12/31/          \a            \a
                 94
Washington      7/1/94 to 6/30/95     74,219   840,330,000
West Virginia   7/1/94 to 6/30/95     19,613  386,665,344\
                                                         b
Wisconsin       1/1/94 to 12/31/      73,941   196,880,772
                 94
Wyoming         7/1/94 to 6/30/95         \a    33,219,687
----------------------------------------------------------
\a Not available. 

\b Includes self-insured amounts, that is, pay orders issued. 

Source:  U.S.  Department of Labor, Employment Standards
Administration, Office of Workers' Compensation Programs, State
Workers' Compensation Administration Profiles (Washington, D.C.: 
U.S.  Government Printing Office, Oct.  1995). 


ASSUMPTIONS UNDERLYING THE
COMPARISON OF BENEFITS UNDER FECA
AND THE VA DISABILITY COMPENSATION
PROGRAM
========================================================== Appendix II

This appendix presents the specific assumptions that we adopted to
estimate the present value, or lump-sum equivalent, benefits of FECA
and VA disability compensation for this report. 

BENEFIT ESCALATION RATE

The monthly amount of benefits paid under FECA and VA are adjusted
periodically in order to compensate partially or fully for the
effects of inflation.  We were told by a VA official that recent
increases in VA benefits have been consistent with Social Security
Administration cost-of-living increases.  Accordingly, we assumed
that VA disability benefits will increase at an annual rate of 4
percent.  This is consistent with the Social Security
Administration's long-range projections of the annual increases in
the Consumer Price Index.  We also assumed that FECA benefits would
increase at the same annual rate. 

DISCOUNT RATE

Consistent with standard practice, we used a discount rate of 6.6
percent.  This represents the cost of borrowing to the federal
government (that is, the 30-year Treasury rate) as of December 1996. 




(See figure in printed edition.)Appendix III
COMMENTS FROM THE DEPARTMENT OF
VETERANS AFFAIRS
========================================================== Appendix II


GAO CONTACTS AND STAFF
ACKNOWLEDGMENTS
========================================================== Appendix IV

GAO CONTACTS

Clarita Mrena, Assistant Director, (202) 512-6812
Shelia Drake, Evaluator-in-Charge, (202) 512-7172

STAFF ACKNOWLEDGMENTS

Connie D.  Wilson, Senior Evaluator, collected a major portion of the
evidence presented, and Timothy J.  Carr, Senior Economist, provided
the present value calculations of FECA and VA benefit payments.  Ed
Tasca, Senior Evaluator, provided technical assistance on workers'
compensation programs. 


*** End of document. ***