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. ***