DR. LEO S. MACKAY, JR.
DEPUTY SECRETARY OF VETERANS AFFAIRS
DEPARTMENT OF VETERANS AFFAIRS
SENATE COMMITTEE ON VETERANS' AFFAIRS
June 28, 2001
Mr. Chairman and Members of the Committee, thank you for the opportunity to testify today on several legislative items of great interest to veterans. Accompanying me today is Joseph Thompson, Under Secretary for Benefits, and John Thompson, Deputy General Counsel.
Before I discuss the many bills that the Committee is considering today, I would like to note that, as you know, much of this legislation would affect direct spending and receipts and would, therefore, be subject to pay-as-you-go ( PAYGO) rules. For all of the proposals and bills that VA will support today, that support is contingent on accommodating the proposals within the budget limits agreed to by the President and the Congress. The Administration will work with the Congress to ensure that any unintended sequester of spending does not occur under current law or the enactment of any other proposals that meet the President's objectives to reduce debt, fund priority initiatives, and grant tax relief to all income tax paying Americans.
The "Veterans' Compensation Cost-of-Living Adjustment Act of 2001," S. 1090, would authorize a cost-of-living adjustment ( COLA) for fiscal year ( FY) 2002 in the rates of disability compensation and dependency and indemnity compensation ( DIC). Section 2 of the draft bill would direct the Secretary of Veterans Affairs to increase administratively the rates of compensation for service-disabled veterans and of DIC for the survivors of veterans whose deaths are service related, effective December 1, 2001. As provided in the President's FY 2002 budget request, the rate of increase would be the same as the COLA that will be provided under current law to veterans' pension and Social Security recipients, which is currently estimated to be 2.5 percent. We estimate that enactment of this section would cost $376 million during FY 2002, $7.1 billion over the period FYs 2002-2006 and $28.5 billion over the period FYs 2002-2011. Although this section is subject to the PAYGO requirement of the Omnibus Budget Reconciliation Act of 1990 ( OBRA), the PAYGO effect would be zero because OBRA requires that the full compensation COLA be assumed in the baseline. We believe this proposed COLA is necessary and appropriate in order to protect the benefits of affected veterans and their survivors from the eroding effects of inflation. These worthy beneficiaries deserve no less.
A bill under consideration by this Committee, S. 1089, would expand temporarily the U.S. Court of Appeals for Veterans Claims ( CAVC) so as to facilitate staggered terms for judges on that court. VA defers to the CAVC with respect to the merits of this change.
The bill would also eliminate the current jurisdictional limitation on appeals to the CAVC based on the date of filing of a notice of disagreement. Currently, for the CAVC to have jurisdiction over a case, the administrative appeal underlying the action must have been initiated by a notice of disagreement filed on or after November 18, 1988. See Veterans' Judicial Review Act of 1988, PL 100-687, Div. A, § 402, 102 Stat. 4105, 4122.
The requirement for filing of a notice of disagreement on or after November 18, 1988, is continuing to be applied by the CAVC and to have an impact on the number of cases heard by that court. Additional issues could be pursued to the court in claims already pending before VA, and, in addition, there would undoubtedly be a number of cases in which claimants would challenge the finality of prior VA decisions, if the impediment of the requirement for a notice of disagreement filed on or after November 18, 1988, were removed. This would have the effect of adding to the number of claims and issues pending before the court and VA. We will advise the Committee of our position on this provision once we have had the opportunity to more fully consider its potential impact.
Another bill, S. 1063, the "United States Court of Appeals for Veterans Claims Administration Improvement Act of 2001," is designed to improve the administration of the CAVC by allowing the CAVC to impose a registration fee on active participants at judicial conferences convened pursuant to 38 USC § 7286 and by adding new administrative authority. VA defers to the CAVC with respect to the merits of this bill.
A bill under consideration by this Committee, S. 1091, would remove the 30-year limitation on the period during which respiratory cancers must become manifest to a degree of 10-percent or more in Vietnam veterans exposed to herbicides during service in the Republic of Vietnam in order for service connection to be granted on a presumptive basis. At this time, the Department of Veterans Affairs (VA) is reviewing the findings of the recent Institute of Medicine report, Veterans and Agent Orange: Update 2000, on the issue of respiratory cancer. We are considering the scientific merits of the 30-year period.
In addition, this bill would extend the presumption of exposure to herbicides provided by 38 USC § 1116 to any veteran who served in the Republic of Vietnam during the Vietnam era. Currently, there is no general presumption of exposure for all Vietnam veterans, either for purposes of compensation or health-care eligibility. Pursuant to the Agent Orange Act of 1991, VA has established presumptions of service connection for ten categories of disease. See 38 C.F.R. § 3.309(e). A veteran who was exposed to herbicides in service and who develops one of these diseases within the applicable presumption period, if any, is presumed to have incurred the disease in service, without the necessity of submitting proof of causation. In addition, 38 USC § 1116(a)(3) provides that, if a veteran served in the Republic of Vietnam during the Vietnam era and has a disease that VA recognizes as being associated with herbicide exposure, the veteran is presumed to have been exposed to an herbicide agent during service.
This bill would also extend for ten more years the period over which the National Academy of Sciences will transmit to VA reviews and evaluations of the available scientific evidence regarding possible associations between diseases and exposure to dioxin and other chemical compounds in herbicides. As additional scientific and medical evidence continues to be developed concerning the health effects of herbicide exposure, such reviews may shed light on the effects of exposure on the health of veterans. Accordingly, VA supports this provision. However, we will inform the Committee of our position on and cost estimate for this entire bill once our review is completed.
Section 1 of S. 1088 would authorize an individual to elect an accelerated payment of Montgomery GI Bill ( MGIB) benefits for pursuit of certain high-technology courses. The tuition and fees for the course would have to exceed twice the aggregate basic MGIB education benefit otherwise payable for the enrollment period in order for the individual to qualify. The amount of the accelerated payment would be the lesser of 60 percent of the established charges for the course or the aggregate amount of basic MGIB educational assistance for which the individual has remaining entitlement.
VA supports the accelerated-payment concept and we believe the provisions of this section are a step in the right direction. For example, many educational and training programs, including technical certification programs such as those offered by Microsoft, Cisco, and others, are of extremely high cost, but short duration. Under the current benefit payment method, an individual may receive $650 to $1300 in monthly MGIB benefits for a program of a few months' duration that costs $5000 to $10,000, or more. Plainly, in such a case, the benefit pay-out is not structured in relation to course length, cost or value. Thus, the individual's educational needs when pursuing such short-term, high-cost courses frequently may not be met. The accelerated provision contained in this bill would cover a substantially greater proportion of the actual course cost to the veteran.
We have not yet estimated costs of the education-benefit enhancements in S. 1088 or certain other bills on today's agenda, but will gladly supply them for the record.
Section 2 of S. 1088 would amend the definition of "educational institution" to include any entity that provides, directly or under agreement, training required for a license or certificate in a vocation or profession in a technological field. It would become effective the date of enactment.
The law defines a "program of education" as a curriculum or combination of unit courses or subjects pursued at an educational institution which is generally accepted as necessary for the attainment of a predetermined and identified educational, professional, or vocational objective. A program of education may be offered at either an institution of higher learning or a non-college degree school. Presently, the law does not permit VA to award benefits for courses offered by commercial enterprises whose primary purposes are other than providing educational instruction. Certified Network Administrator (CNA) and Certified Network Engineer (CNE) courses offered by Novell, Microsoft, and other companies, for example, are offered either through educational institutions or by designated business centers. Although the courses are identical regardless of where offered, only those veterans pursuing the courses at an educational institution may receive educational assistance.
This bill would allow VA to award benefits to those veterans taking these courses at a business site. This would permit approval of courses offered by businesses only when the courses are needed to fulfill requirements for the attainment of a license or certificate generally recognized as necessary to obtain, maintain, or advance in employment in a profession or vocation in a technological occupation. We believe providing educational benefits for pursuit of these courses is fully consonant with MGIB purposes, and, given the bill's conditions on VA's approving the courses, adequate safeguards would exist against potential abuse. Consequently, we would support this provision of the bill.
Section 8 of S. 1093, the "Veterans' Benefits Programs Modification Act of 2001," would respond to the recent decision of the United States Court of Appeals for Veterans Claims (Ozer v. Principi) which held that the relevant statute placed no limit on the length of time an eligible spouse had to use Survivors' and Dependents' Educational Assistance under chapter 35 of title 38, United States Code. First, this section would clarify the spouse's opportunity to select the date from which his or her eligibility period for using chapter 35 benefits would commence. Such date could be any date between the effective date from which VA rated the veteran as having a total service-connected disability permanent in nature and the date VA notified the veteran of that rating. Second, the section would expressly provide that the spouse would have a fixed ten-year period, beginning on the selected date or otherwise applicable date, to use the available chapter 35 benefits.
The stated intent of Congress in establishing the chapter 35 program was to assist eligible spouses and surviving spouses in preparing to support themselves and their families at a standard of living which the veteran, but for his or her service-connected death or the total and permanent disablement from a disease or injury incurred or aggravated in the Armed Forces, could have expected to provide for his or her family. In view of the need for many spouses and surviving spouses to train for a productive place in society, Congress provided financial assistance for spouses and surviving spouses in training programs above the secondary level.
The law contemplates providing such assistance to the spouse or surviving spouse during the period following onset of the veteran's disability or death in order to timely assist the eligible spouse in adjusting to the loss of aid and support from the veteran. It is appropriate, therefore, to direct and limit the availability of this educational assistance to a period reasonably needed to achieve the statutory purposes. We note that provisions applicable to other eligible persons under chapter 35, as well as all veterans under the GI Bill and vocational rehabilitation benefit programs administered by VA limit benefit eligibility to a circumscribed period. We believe it is fair and reasonable to do so here, particularly with the flexibility that also would be afforded for the spouse to select, within an appropriate range, the date when the eligibility period would begin. Consequently, we support this section of the draft bill which would apply a ten-year period for spouses to use their Dependents' Educational Assistance benefits.
The "Veterans' Benefits Programs Modification Act of 2001," S. 1093, would limit the provision of benefits for fugitive and incarcerated veterans. Section 7 of this bill would place a limit on compensation payments for veterans incarcerated on October 7, 1980, for felonies committed before that date who remain incarcerated for conviction of that felony after the date of the enactment of this provision. Section 5313 of title 38, United States Code, currently provides for the reduction of service-connected disability compensation for veterans confined in a Federal, State, or local penal institution as a result of conviction of a felony. The law was enacted on October 7, 1980, and applies to those veterans who were convicted and incarcerated for a felony committed after the date of enactment, as well as those who were incarcerated on or after October 1, 1980, and are awarded compensation after that date. VA recently became aware of approximately 230 veterans who were incarcerated prior to enactment of the 1980 law, who remain incarcerated, and who were drawing compensation as of 1980. These veterans, who are not within the scope of the current benefit- reduction provision, are receiving some $2.5 million per year in compensation benefits. These 230 veterans also do not have in effect an apportionment of their award for support of their dependents. Payment of benefits to these veterans, in our view, is contrary to the purpose for which service-connected disability benefits are awarded, since these veterans are being supported in prison by the government and are not capable of gainful employment by reason of their incarceration.
+We estimate annual PAYGO cost savings of approximately $2.2 million would be achieved and that there would be a one-time administrative cost for the reduction of the benefits to the approximately 230 incarcerated veterans who would be affected by this provision.
Section 6 of this bill would prohibit the payment of certain benefits for veterans who are fugitive felons. Under current law, a fugitive is generally not subject to reduction of compensation, pension, education, or vocational rehabilitation benefits under 38 USC §§ 1505, 3034, 3108, 3482, or 5313, as is the case with many incarcerated veterans. A prohibition on payment of benefits for fugitive felons would be a logical extension of the current limits on payments to incarcerated felons. VA supports this provision.
We note, however, as a technical matter, that the draft bill would not appear to authorize payment of benefits to a veteran's dependent by apportionment, as is the case with veterans whose benefits are subject to reduction by reason of incarceration. We note also that the draft bill would bar the provision of life insurance benefits and benefits under the home loan guaranty program under title 38, chapters 19 and 37, to fugitive felons, although incarcerated felons are not barred from receipt of such benefits under current law. We recommend that reference to chapter 19 and 37 benefits be deleted from section 6 of the draft bill.
Because this proposal would raise unique information-development issues, no data are available to establish cost-savings estimates. In FY 1999, VA, working with the Bureau of Prisons, identified fewer than 1,000 cases where VA beneficiaries were incarcerated and subject to an administrative reduction in their benefit payments. This translates to less than one percent of the total Federal prison population. Based on this experience, we expect that the number of fugitive felons who might be identified as VA beneficiaries will be small.
The Veterans Claims Assistance Act of 2000 ( VCAA), PL 106-475, struck out sections 5102 and 5103 of title 38, United States Code, added new sections 5100, 5102, 5103, and 5103A, and amended section 5107, relating to VA's duty to assist claimants in presenting claims for benefits. Certain of the provisions, as enacted, raise questions regarding congressional intent with respect to the handling of incomplete applications and the applicability of the new provisions to undecided claims filed prior to November 9, 2000, the date of enactment of the VCAA, and claims not finally decided prior to November 9, 2000. The issue regarding undecided claims was addressed in a precedent opinion of the VA General Counsel, VAOPGCPREC 11-2000.
With respect to incomplete applications, prior section 5103(a) provided that, if a claimant's application for benefits under the laws administered by the Secretary of Veterans Affairs was incomplete, the Secretary was required to notify the claimant of the evidence necessary to complete the application. In addition, section 5103(a) provided, in its second sentence, that, if the evidence requested was not received within one year from the date of the notification, no benefits could be paid or furnished by reason of the application. As added by section 3 of the VCAA, new section 5102(b) states that, if a claimant's application for a benefit is incomplete, the Secretary shall notify the claimant and the claimant's representative, if any, of the information necessary to complete the application. However, no provision comparable to the second sentence of former section 5103(a), regarding the effect of a failure to provide evidence to complete an incomplete application, was included in new section 5102 or elsewhere in chapter 51 as amended. Thus, if a claimant were to submit an application for benefits and receive notification from VA that the application is incomplete, it does not appear that VA would be authorized to close or deny the claim based on an applicant's failure to respond. Further, if the claimant submits the requested information at any time in the future, and if a benefit were granted, VA would be required to establish an effective date for an award of benefits based on the date the incomplete application was filed without regard to whether the applicant responded to VA's request for further information to "complete" the application in a timely fashion. We do not believe this result was intended by Congress.
Section 4 of the "Veterans' Benefits Programs Modification Act of 2001" would remove the one-year period for the submission of information from new section 5103 and restore it to new section 5102. In other words, this provision has the effect of establishing a one-year period for the submission of information necessary to complete an application, while eliminating the one-year period for the submission of information and evidence necessary to substantiate a claim. Establishing a one-year period for the completion of applications, rather than for the substantiation of claims, will allow VA to decide a claim based on a claimant's failure to respond to a request for information or evidence. This decision would be based on evidence VA has obtained on behalf of the claimant. Essentially, this provision restores the statute to its former status. This will enhance our ability to process claims in a timely manner. VA supports this modification. (We note as a technical matter that the new section 5102(c)(1), proposed to be added by section 4, contains an apparently erroneous reference to "section 5103(a)" that should be changed to "section 5102(a)".)
Section 5 of the "Veterans' Benefits Programs Modification Act of 2001" would amend section 7 of the VCAA to require VA, upon the request of a claimant or on the Secretary's own motion, to readjudicate in accordance with the VCAA claims that did not become final prior to November 9, 2000. Claimants whose claims did not become final prior to November 9, 2000, would have two years from that date to request readjudication, just as those claimants covered by current section 7(b) whose claims were finally denied as not well grounded prior to November 9, 2000.
Section 7(a) of the VCAA may be construed to create an unlimited duty on VA to locate and readjudicate claims filed before November 9, 2000, that were not finally decided by VA as of that date. Section 7(b)(4), by contrast, specifically states that VA is not obligated to locate and readjudicate claims found to be not well grounded in which VA's decision became final prior to November 9, 2000. Because section 7(a) does not contain such a limitation, this provision may be interpreted as requiring VA to locate and readjudicate all claims in which VA issued a decision that was not final prior to November 9, 2000. Because of the onerous consequences of such an interpretation, we do not believe that Congress intended to impose a duty on VA to undertake an unlimited review of these cases.
In FY 2000, VA adjudicated approximately 601,000 claims for service connection, claims to reopen based upon new and material evidence, increased rating claims, and claims alleging clear and unmistakable error. In addition, VA rendered decisions regarding issues such as dependency status, income adjustments, and eligibility for hospital care in an additional 1 million claims in FY 2000. Also, in FY 2000, VA processed 246,000 cases for purposes of appellate review, adjusting VA benefits based upon a beneficiary's receipt of Social Security benefits, review required by recently-enacted legislation, matching VA records with Social Security records on deaths of beneficiaries, and reviewing ongoing benefit awards to determine if they are correct. If such a massive review of previously-decided claims were required, VA would be unable to adjudicate claims in which a decision has not yet been issued. The ultimate consequence of such an interpretation of section 7(a) would be delayed payment of benefits to veterans and their dependents. We therefore believe that a technical amendment to section 7 to clarify Congress' intent in this regard, as included in section 5 of the draft bill, is appropriate.
Also, section 7(a) of the VCAA currently specifies that section 5107 as amended applies to any claim filed on or after the date of enactment of the VCAA or filed before that date but not finally decided as of that date. However, the VCAA does not address the applicability to newly filed or pending claims of the other provisions of title 38, United States Code, created by that statute. The General Counsel has concluded in a precedent opinion, VAOPGCPREC 11-2000, that all of the provisions added by the VCAA apply to claims filed on or after November 9, 2000, and to claims filed before that date but not finally decided as of that date. Nonetheless, we believe a technical amendment to section 7 to clarify Congress' intent in this regard is appropriate.
Section 9 of S. 1093 would remove the cap on the number of vocational rehabilitation participants in the "independent living services" program under chapter 31 of title 38, United States Code. The limitation of 500 veteran participants was set when the program was being evaluated as a pilot. When the merit of the program subsequently was established, Congress made it permanent. However, the limit on the number of participants was not changed. The program has proved its worth over time and we are proud of the successful independent living outcomes achieved by participants who represent some of our neediest, most deserving veterans. Consequently, we strongly support eliminating the cap so that more qualifying veterans may receive this assistance.
If the cap is lifted, we project that, even though the number of independent living cases will rise, net savings will accrue to VA and other federally funded service providers effectively achieving cost avoidance. Many of the veterans who completed programs of independent living are able to move from institutionalization back to family life or group homes. These individuals are able to maintain themselves in the community with significantly less reliance on others and community service providers.
VA estimates that, if enacted, this section would result in benefit costs of about $7.4 million in FY 2002, with 5-year PAYGO costs of about $15.6 million for FYs 2002-2006.
Section 10 of the "Veterans' Benefits Program Modification Act of 2001" would increase the maximum VA housing loan guaranty from $50,750 to $63,175. VA believes such an increase is justified and favors its enactment.
Neither the law nor regulations set a maximum principal amount for a VA guaranteed home loan, so long as the total loan amount does not exceed the reasonable value of the property securing the loan, and the veteran's present and anticipated income is sufficient to afford the loan payments. As a practical matter, requirements set by secondary market institutions limit the maximum VA loan to four times the guaranty. The guaranty increase proposed by section 10 of the bill would have the effect of increasing the maximum amount lenders are willing to finance from the current $203,000 to $252,700.
The VA guaranty has not been increased since October 1994. Housing prices have increased significantly during the past six-and-a-half years. Today, in a number of higher-cost areas, such as Atlanta, Anaheim/Santa Ana, Boston, Denver, Honolulu, Los Angeles, New York City, San Diego, San Francisco, and Seattle, the median home purchase price exceeds the effective VA maximum loan.
Increasing the effective maximum VA home loan to $252,700 is consistent with recent increases in the loan limits for other housing programs. For example, the limit for a loan insured by the Federal Housing Administration of the Department of Housing and Urban Development was increased this year to $239,250. The conventional conforming loan limit for the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac") was increased effective January 1, 2001, to $275,000.
VA estimates that, under the provisions of current law, increasing the guaranty to $63,175 would increase the loan subsidy PAYGO costs to the Veterans Housing Benefit Program Fund by $4.3 million in FY 2002, and have 10-year subsidy PAYGO costs of approximately $140.9 million. It is important to note that our cost estimate is based, in part, on the fact that certain cost-saving provisions originally enacted as part of the OBRA will expire on September 30, 2008. We fully expect that these provisions will be extended prior to their scheduled expiration. Assuming that those OBRA provisions are extended until at least September 30, 2011, the 10-year subsidy PAYGO costs of the guaranty increase would be $83.5 million.
Section 2 of the "Veterans' Benefits Programs Modification Act of 2001" would add to 38 USC § 1503(a) a new paragraph (11), which would exclude proceeds of a veteran's life insurance policy, and a new paragraph (12), which would exclude "any other non-recurring income from any source," from determinations of annual income for pension purposes. Section 3(b) of this draft bill would amend subparagraph (A) of 38 USC § 5112(b)(4) to provide that the effective date of a reduction or discontinuance of pension by reason of a change in recurring income will be the last day of the calendar year in which the change occurred, with the pension rate for the following year to be based on all anticipated countable income. Section 3(a) of this draft bill would repeal the provision of 38 USC § 5110(d)(2) that provides that the effective date of an award of death pension for which application is received within 45 days from the date of the veteran's death is the first day of the month in which the death occurred.
VA disability pension is payable to low-income wartime veterans who cannot work due to permanent and total disability. Death pension is payable to low-income surviving spouses and dependent children of wartime veterans. Both programs are based on need, and VA improved pension is offset dollar-for-dollar by income from other sources (unless specifically excluded by statute). The current statute, 38 USC § 5112(b)(4)(A), requires improved pension to be reduced or discontinued effective the last day of the month in which the beneficiary's income increased. In addition, under current 38 USC § 5110(d)(2), an award based on a claim for death pension received within 45 days of the veteran's death is effective the date of death. An award based on a death pension claim received more than 45 days after the veteran's death is effective the date of claim. This effective date provision was added by the "Deficit Reduction Act of 1984", PL 98-369, Title V, 98 Stat. 494, 854-901, as a cost-saving measure.
The practical effect of Public Law No. 98-369 in many cases has been to exclude insurance proceeds from countable income for pension claimants who file more than 45 days after the date of the veteran's death. By waiting to file claims until after receipt of insurance proceeds, those claimants can receive pension effective from the date of claim, without regard to the recently received insurance proceeds. However, claimants who receive insurance proceeds and then file pension claims within 45 days of the veteran's death have those proceeds counted as income for the following 12 months. We understand that section 3(a) of the draft bill is intended to address this issue. We understand that section 3(b) of the draft bill is intended to address the concern that the existing end-of-the-month adjustment requirements complicate beneficiary income and effective-date calculations and often result in adjudication errors. Such errors occur most often in cases involving frequent income changes and overlapping income counting periods. We further understand that section 2 of the bill is intended to reflect the principle that life insurance proceeds and other similar types of non-recurring income are most appropriately addressed by application of net worth limitations.
Certain aspects of the proposed amendments raise technical issues with respect to income determinations. We would be pleased to work with Committee staff on the technical aspects of these provisions to develop mutually acceptable language.
S. 131, the "Veterans' Higher Education Opportunities Act of 2001," would provide for an increase in the education assistance benefit rate under the MGIB to take effect on October 1, 2001. This measure would provide that an MGIB participant whose obligated period of service is three or more years would receive an education benefit under that program equal to the average monthly costs of tuition and expenses for a commuter student at a public college that awards baccalaureate degrees. Service members with an obligated period of less than three years would receive 75 percent of that amount.
VA would determine not later than September 30th each year the average monthly costs of tuition and expenses for the succeeding fiscal year based upon information obtained from the College Board provided in its annual survey of institutions of higher education.
The President strongly supports the MGIB benefits program and acknowledges its great importance to veterans and the Nation. The President's FY 2002 Budget includes the annual cost-of-living increase for education benefits for veterans and service members, but does not include an additional MGIB benefit rate increase. However, the President would support MGIB program improvements, to include a reasonable increase in rates, if those improvements can be accommodated within the overall budget limits agreed to by the President and Congress. In this regard, the Secretary recently testified before the House Veterans Affairs Subcommittee on Benefits that VA supports, within the framework of those spending limits, the stepped increases contained in H. R. 1291. Our preliminary cost estimate indicates that S. 131, if enacted, would result in PAYGO costs of about $777 million in FY 2002, with a 5-year cost of about $4.6 billion for FYs 2002-2006 and a 10-year projection of $12.4 billion.
S. 228 would make permanent the direct loan program for Native American veterans living on trust lands. VA strongly supports this program, which currently has a sunset of December 31, 2001. We would recommend, however, that the current program be extended until September 30, 2005, rather than being made permanent.
The Native American veteran direct loan program, which was enacted in October 1992, has enjoyed limited success. VA has made over 200 loans under this program to Native American veterans. The majority of these loans have been to Native Hawaiians.
VA recently participated in the Executive Branch's One-Stop Mortgage Initiative, which was an effort to develop a more consistent approach to delivering home ownership opportunities to Native Americans. VA is hopeful that this initiative will increase opportunities and remove barriers to participation in the VA loan program for Native American veterans living on trust lands. VA is also aware of efforts by the Federal National Mortgage Association to increase private-sector lender willingness to make loans on tribal lands.
VA believes a four-year extension of the Native American veteran direct loan program would give both the Executive Branch and the Congress an opportunity to see how various initiatives regarding Native American housing loans affect the ability of these veterans to obtain VA financing, and whether further program modifications are indicated.
In addition, we urge the Committee to amend S. 228 to make the following three changes to current law.
First, we recommend modifying the law to permit VA to make loans to members of a Native American tribe that has entered into a memorandum of understanding (MOU) with another Federal agency if that MOU contemplates loans made by VA and the MOU conforms to the requirements of the law governing the VA program. Current law requires a tribe to enter into an MOU with VA before we can make loans to members of that tribe.
We also suggest modifying the current requirement that all VA loan and security instruments contain, on the first page of each such document, in letters two-and-a-half times the size of the regular type face used in the document, a statement that the loan is not assumable without the approval of VA. We recommend that the law require that this notice appear conspicuously on at least one instrument (such as a VA rider) under guidelines established by VA in regulations.
Those two amendments would implement recommendations by the One-Stop Initiative. These changes would reduce the administrative burden on Indian housing authorities and bring more uniformity in federal loan program processing procedures. Eliminating the requirement for a separate MOU between each tribe and VA should expand the number of Native American veterans eligible for VA financing. The extremely strict loan assumption notice requirement in the current law has prevented VA from approving the use of uniform loan instruments now used in FHA, "Fannie Mae," and "Freddie Mac" transactions.
Finally, we recommend repealing the requirement that VA outstation, on a part-time basis, Loan Guaranty specialists at tribal facilities if requested to do so by a tribe. We have consolidated loan processing and servicing operations from 46 regional offices to nine Regional Loan Centers, and do not have the resources to outstation loan personnel at various tribal locations. VA continues to make periodic outreach visits to all tribes, and provides training to tribal housing authorities. We believe that we can provide all necessary services to Native American veterans seeking VA housing loans without outstationing employees in remote tribal locations.
We would be pleased to work with your staff in drafting language to implement our suggested amendments.
We estimate that enactment of S. 228 would not require any additional appropriation of loan subsidy. Public Law No. 102-389 appropriated $4.5 million "to remain available until expended" to subsidize gross obligations for direct loans to Native American veterans of up to $58.4 million. We estimate that sufficient funds would be available to cover projected Native American veteran loan volume until at least FY 2005.
S. 409, or the "Persian Gulf War Illness Compensation Act of 2001," would modify provisions in 38 USC §§ 1117 and 1118 governing compensation for certain Gulf War veterans. We oppose the enactment of this bill.
Currently, 38 USC § 1117 provides that the Secretary of Veterans Affairs may pay compensation to any Gulf War veteran suffering from a chronic disability resulting from an undiagnosed illness (or combination of undiagnosed illnesses) that became manifest during active service in the Southwest Asia theater of operations during the Gulf War or became manifest to a compensable degree within a presumptive period (currently ending on December 31, 2001) as determined by regulation. Section 1118 of title 38 provides for the establishment of presumptive service connection for diagnosed and undiagnosed illnesses associated with Gulf War service.
Section 3(a) of the bill would establish a statutory presumptive period under 38 USC § 1117 extending to December 31, 2011. The Secretary of Veterans Affairs would be authorized to extend that date by regulation. Section 3(b) would amend 38 USC § 1117 by adding a new subsection to clarify that the term "undiagnosed illness" for purposes of presumption of service connection includes "poorly defined" illnesses such as fibromyalgia, chronic fatigue syndrome, autoimmune disorder, and multiple chemical sensitivity. Section 3(c) would amend 38 USC § 1118 to reflect the modification of the meaning of the term "undiagnosed illness."
In our view, the current provision of 38 USC § 1117(b) authorizing the Secretary to prescribe by regulation the presumptive period for undiagnosed illnesses associated with Gulf War service is appropriate and should be retained. The Secretary's determinations regarding the presumptive period are made following a review of any available credible medical or scientific evidence and the historical treatment afforded disabilities for which manifestation periods have been established and take into account other pertinent circumstances regarding the experiences of veterans of the Gulf War. We plan to consider whether the current presumptive period should be extended administratively based on these factors.
With regard to fibromyalgia, chronic fatigue syndrome, and autoimmune disorder, as referenced in section 3(b) of this bill, under current law, service connection may be established on a direct basis for disability resulting from one of these conditions. With regard to multiple chemical sensitivity, this condition is not recognized under VA's schedule for rating disabilities. VA has adequate authority under existing law to establish presumptions for these conditions should we conclude that scientific and medical evidence support such action. Under current 38 USC § 1118, the Secretary may determine and prescribe in regulations which diagnosed and undiagnosed illnesses warrant such a presumption of service connection. Accordingly, we do not support the inclusion of reference to these conditions in 38 USC §§ 1117 and 1118.
S. 457 would amend 38 USC § 1112 to establish a presumption of service connection for certain veterans suffering from hepatitis C. We oppose the enactment of this bill.
S. 457 would add a new subsection (d) to 38 USC § 1112, providing a presumption of service connection for certain veterans who suffer from hepatitis C to a degree of disability of 10 percent or more, notwithstanding that there is no record of such disease during the period of active military, naval, or air service. The presumption would apply where a veteran experienced one of the following during service: (1) transfusion of blood or blood products before December 31, 1992; (2) blood exposure on or through the skin or a mucous membrane; (3) hemodialysis; (4) needle-stick accident or medical event involving a needle, not due to the veteran's own willful misconduct; (5) unexplained liver disease; (6) unexplained liver dysfunction value or test; or (7) service in a health-care position or specialty.
We recognize that, because there is such a prolonged period between acute hepatitis C virus infection, which is typically asymptomatic or results in mild illness, and the development of symptomatic liver disease, it is difficult, in the absence of a medical history, to determine the source of infection for hepatitis C. However, epidemiologic research establishes that the highest incidence of hepatitis C infection occurs in persons who placed themselves at risk through destructive lifestyle choices. A May 1999 Centers for Disease Control and Prevention ( CDC) fact sheet, "Hepatitis C Virus and Disease," reports that injecting drug use accounts for about 60 percent of hepatitis C cases. According to an October 16, 1998, CDC report, "Recommendations for Prevention and Control of Hepatitis C Virus ( HCV) Infection and HCV-Related Chronic Disease," 47 Morbidity and Mortality Weekly Report 5 (Oct. 16, 1998) (hereinafter " CDC Report"), injection of drugs currently accounts for a substantial number of hepatitis C transmissions and may have accounted for a substantial proportion of hepatitis C infections in the past. According to the CDC report, after 5 years of injecting drugs, as many as 90 percent of users are infected with hepatitis C. Although the contemplated presumptions would be rebuttable, in practice it would be unlikely in most cases that reliable evidence of past intravenous drug abuse would be readily available.
We feel strongly that veterans' disability compensation should not be paid to individuals who incurred hepatitis C infection through drug abuse. Yet creation of presumptions as contemplated by S. 457 would certainly result in payment of compensation to persons who most likely incurred hepatitis C infection in that manner.
The CDC report indicates that there is a very low risk of infection associated with certain of the risk factors included in proposed new subsection (d)(2) of 38 USC § 1112. New subsection (d)(2)(B) would provide a presumption of service connection if a veteran who has hepatitis C was "exposed to blood on or through the skin or a mucous membrane." New subsection (d)(2)(G) would establish a presumption based on service in a health-care position or specialty. The CDC report indicates that hepatitis C is transmitted primarily through large or repeated direct percutaneous, i.e., through the skin, exposures to blood. According to the CDC, the prevalence of hepatitis C infection among health-care workers, including orthopedic, general, and oral surgeons, who are at risk for being infected as a result of exposure to blood, is no greater than the general population. In addition, the CDC reports that there are no incidence studies documenting transmission associated with mucous membrane or nonintact skin exposures, although transmission of hepatitis C from blood splashes to the conjunctiva (membrane lining the eyelid) have been described. Thus, it appears likely that hepatitis C infection would only occur if blood permeated a veteran's skin, such as through an open wound or skin puncture. Based upon this CDC data, we believe that the risk of hepatitis C infection for veterans based upon exposure to blood on or through the skin or a mucous membrane is so small as to make a presumption on this basis unnecessary.
New subsections (d)(2)(E) and (d)(2)(F) would provide a presumption of service connection for hepatitis C based on unexplained liver disease or unexplained liver dysfunction value or test. We are unaware of any evidence showing that, since testing became available for hepatitis C, unexplained liver disease diagnosed during service or unexplained liver dysfunction value or test performed during service would indicate a veteran had an hepatitis C infection which was not diagnosed while the veteran was on active service. We believe that serology testing is routinely performed when a service member is diagnosed with unexplained liver disease or has an unexplained liver dysfunction value or test and that that testing would reveal at the time whether the service member was infected with hepatitis C. As a result, a presumption of service connection for unexplained liver disease or liver dysfunction value or test is not warranted.
We acknowledge that accurate serologic testing was not available until 1992. However, many causes of liver dysfunction value or test in patients whose serologic tests are negative for hepatitis A and hepatitis B are non-viral. These non-viral causes include liver toxins (e.g., alcohol, prescription and non-prescription drugs), non-viral infections (e.g., malaria, rickettsia), environmental factors (e.g., heatstroke), and malignancies.
The Seattle VA Epidemiologic Research Institute has initiated a study involving 4000 veterans who receive care at 20 VA medical centers that will allow a better understanding of the risk factors associated with hepatitis C. Results of this study are expected in the summer of 2002.
We oppose S. 457 because it is overbroad and would undoubtedly result in the payment of compensation to many individuals whose hepatitis C infection resulted from drug abuse. Moreover, establishment of a presumption of service connection for hepatitis C infection based on certain risk factors identified in S. 457 cannot currently be supported by medical or epidemiologic data. VA is committed to the careful and compassionate adjudication of these claims, to include assistance in the development of evidence to establish benefit eligibility. Case-by-case determinations of entitlement based on the merits of individual claims continue to be, with respect to hepatitis C cases, preferable to adopting the broad presumptions called for by S. 457.
We do not currently have a cost estimate for S. 457, but would be pleased to provide one to the Committee for the record. However, based on a similar proposal, we estimate that PAYGO costs would be $168 million over the period FYs 2002-2006, at a minimum.
S. 662 would authorize the Secretary of Veterans Affairs to furnish headstones or markers for marked graves of certain individuals and to allow placement at a location other than a gravesite. We oppose the enactment of S. 662.
Section 1(a) of the bill would amend 38 USC § 2306, to require the Secretary of Veterans Affairs to furnish, upon request, a Government headstone or grave marker for placement at the grave of a veteran or other eligible individual, or at another area appropriate for the purpose of commemorating the individual, regardless of whether the individual's grave is currently marked with a privately purchased headstone or marker. Under current law, Government headstones or markers are furnished only for the unmarked graves of veterans and certain other eligible individuals. Pursuant to section 1(b) of the bill, the new requirement would be made applicable to burials occurring "on or after November 1, 1990."
We are particularly concerned with the concept of placing a marker at an "area appropriate for the purpose of commemorating" an individual. This provision represents an unwarranted departure from the longstanding policy of providing headstones and markers for the "graves" of veterans. This purpose is reflected in 38 USC § 2306(a), which requires VA to furnish, upon request, appropriate headstones or markers at Government expense for the unmarked "graves" of various classes of individuals. An exception to this policy is reflected in 38 USC § 2306(b)(1), which authorizes the provision of a headstone or marker in a case in which the remains of an individual are unavailable for interment. Pursuant to this authority, if the remains of an individual are unavailable, an appropriate memorial headstone or marker will be furnished for placement in a national cemetery area reserved for that purpose, in a veterans' cemetery owned by a State, or, for veterans only, in a State, local, or private cemetery. In the context of this bill, we believe the requirement that a marker be provided for placement in an "area appropriate for the purpose of commemorating the individual" could be interpreted to include areas not located at grave sites, or even within cemeteries, which would be inconsistent with the current longstanding policy regarding the provision of headstones and markers. We believe that an individual's grave site is the appropriate area in which to memorialize an individual by placement of a headstone or marker and that a cemetery is the appropriate place to memorialize an individual whose remains are unavailable.
We estimate the cost of enactment of S. 662, which includes removing the "unmarked" restriction and is retroactive to November 1990, to be $6.6 million in FY 2002 and $20.7 million during the period FY 2002-2006. Because this bill would affect direct spending and receipts, it is subject to PAYGO requirements.
S. 781 would extend the sunset for housing loan entitlement currently granted to persons whose only qualifying service was in the Selected Reserve, including the National Guard. Currently, housing loan entitlement for reservists expires on September 30, 2007. This bill would extend the expiration date until September 30, 2015. We favor the enactment of this bill.
Extending home loan benefits to reservists recognized the important role the Reserves play in our National Defense. Reservists are often called upon to perform vital and dangerous missions all around the world. The availability of these benefits serves as an important recruiting incentive for the National Guard and Reserves.
Because reserve entitlement is now set to sunset in six years, persons entering reserve service today have no assurance these benefits will still be available once they have fulfilled their six years of qualifying service. Therefore, an extension of the sunset at this time is justified.
S. 912, the "Veterans Burial Benefits Improvement Act of 2001," would increase the amount payable for several burial benefits for veterans. Section 2(a) of the bill would amend 38 USC §§ 2302(a) and 2303(a)(1)(A) by increasing the burial and funeral-expense allowance for nonservice-connected deaths from $300 to $1,135, and amend 38 USC § 2307 by increasing the burial and funeral-expense allowance for service-connected deaths from $1,500 to $3,713. Section 2(b) would amend 38 USC § 2303(b) by increasing the plot allowance payable for veterans buried in State or private cemeteries from $150 to $670. Section 2(c) would add a new section 2309, which would index these amounts based on the percentage increases of the Consumer Price Index. The initial increases in the various rates would be applicable to deaths occurring on or after the date of enactment of this legislation.
S. 912 would immediately increase expenditures for this program by more than three-fold. In total the bill would increase spending by $680 million in FYs 2002-2006 and $1.5 billion over ten years. VA cannot support this bill at this time. We believe that increases should correlate to the overall burial program, and VA is conducting a program evaluation and analyzing the report on burial benefits that was submitted to Congress last February. Once this evaluation is complete, we will offer further comment on increases to the burial program.
The Government has responded to veterans' burial needs in recent years by establishing several new national cemeteries and by significantly enhancing the grant program under which state veterans cemeteries are established. The State Cemetery Grants Program now provides up to 100 percent of the costs of construction associated with the establishment, expansion, or improvement of state veterans cemeteries. This partnership between VA and the states ensures meeting our goal that 88 percent of veterans will live within seventy-five miles of a burial option by 2006. Since the 1988 enactment of Public Law No. 105-368, which in effect increased the permissible grant amount from 50 to 100 percent of construction costs, there has been an increased interest from the states in the program, as reflected in the increased number of pre-applications received.
Given the expanding availability of burial options within both national and state veterans cemeteries, and the competing demands for scarce VA resources, we can at this time support only an increase to $2,000 in the burial and funeral-expense allowance for service-connected deaths. The last increase (from $1,000 to $1,500) occurred in 1988. The greatest obligation is owed to the families of those who have paid the ultimate price for their service, and we believe such an increase is warranted in their case. Once VA's evaluation and analysis is complete, we will be able to comment further on other burial benefit increases.
The Secretary previously expressed support for the $2,000 increase in his testimony before the House Veterans' Affairs Committee on H.R. 801. We estimate the new burial allowance would cost $5.3 million in FY 2002 and $31.7 million over the 2002-2006 period. The new benefit would increase direct spending and under the PAYGO provision of the 1990 Omnibus Budget Reconciliation Act would trigger a sequester if not fully offset. Assuming offsetting savings are found to prevent a sequester, VA would support this alternative increase.
S. 937, the "Helping Our Professionals Educationally (HOPE) Act of 2001," provides for several significant improvements to the MGIB. This bill would permit service members to transfer MGIB entitlement to their spouse and/or children, allow for accelerated payment of MGIB benefits, make MGIB benefits available for technological occupations, and permit certain members of the Selected Reserve to use MGIB benefits after separation from the Reserve. Section 2 of S. 937 would amend the MGIB to permit certain service members to elect to transfer up to one-half of their entitlement to their dependent spouse and/or children. The implementation of this provision would be at the discretion of the Secretary of the military department concerned.
Service members who have a critical military skill, or are in specialties requiring critical military skills and who agree to serve four or more years could make an election to transfer no more than 18 months of entitlement. Individuals selected to use this option would designate to whom and how much of the entitlement would be transferred.
Subject to the applicable delimiting date, a transfer of entitlement could be made while the service member is on active duty or after the individual's release from that duty. The terms of the transfer could be modified or revoked by the service member at any time. The spouse could use the transfer after the service member completes six years of active duty. In the case of a child, the transfer could be used after the service member completes ten years of service and the child completes the requirements for a secondary school diploma or equivalency certificate, or the child attains age 18. A transfer to a child would end upon that child attaining the age of 26.
Further, under section 2 of S. 937, the dependent would receive the same MGIB basic benefit as the veteran and the death of that veteran would not interfere with the use of the transfer. The dependent and the individual making the transfer would be jointly liable for overpayments. If the individual failed to complete the terms of the agreement, the amount of transferred entitlement used by the dependent would be treated as an overpayment, unless the individual died or was released from active duty for medical reasons.
Section 2 further would require that the Secretary of the military department concerned approve transfers of entitlement only to the extent that appropriations are available in a fiscal year and would furnish an annual report on the use of such transfers to Congress. The Department of Defense ( DOD) would fund MGIB payments made to dependents under this section and prescribe regulations for this purpose.
VA has not yet developed a PAYGO cost estimate for this bill, but we will gladly supply one for the record, in conjunction with DOD. Since this provision involves matters within DOD's jurisdiction and would be funded by that Department, VA defers to DOD's views on this section.
Section 3 of S. 937 would permit the election of an accelerated MGIB payment in a lump-sum amount equal to the lesser of the initial month plus the allowance for the succeeding four months; or the amount payable for the entire quarter, semester, or term; or where applicable for the entire course. VA favors accelerated payment of MGIB benefits. However, we prefer a broader provision covering high-cost, short-term courses.
VA estimates section 3 of S. 937, if enacted, would result in PAYGO costs of approximately $307 million in the first year with no additional costs in the out years.
Section 4 would amend section 3452(c) of title 38, United States Code, to include in the term "educational institution" any entity that provides directly or under an agreement with another entity, a course to fulfill the requirements for the attainment of a required license or certificate. This provision would become effective October 1, 2001.
This provision is similar to section 2 of S. 1088, which VA supports. However, we suggest that the definition of "educational institution" found in section 3501(a)(6) be included in this amendment, as it is in section 2, so that the new definition could work to the advantage of individuals receiving Dependents' Educational Assistance under chapter 35.
Our preliminary estimate is that section 4 of S. 937 would result in PAYGO costs of about $3.4 million in FY 2002, with 5-year costs of about $17.6 million for FYs 2002-2006.
Section 5 of the bill contains an amendment to the chapter 1606 MGIB-Selected Reserve program that would extend the amount of MGIB entitlement an individual who continues to serve in the Selected Reserve would receive. Under current law, MGIB entitlement for an individual in the Selected Reserve commences on the date the individual makes a commitment to serve 6 years and expires at the end of a ten-year period following the date of that commitment or the date the individual is separated from the Reserve, whichever first occurs. This section provides that the individual's entitlement would expire 5 years after the individual is honorably separated from the Selected Reserve. VA has not developed a PAYGO cost estimate for this bill, but we will gladly supply one for the record, in conjunction with DOD. Since this provision involves matters within DOD's jurisdiction and would be funded by that Department, VA defers to DOD's views on this section.
The Veterans Benefits Administration estimates that enactment of H.R. 3256 would result in an annual cost of $2.1 million during fiscal year ( FY) 2001 and $10.5 million over the period FYs 2001-2005. The Veterans Benefits Administration estimates that enactment of H.R. 3256 would result in an annual cost of $2.1 million during fiscal year ( FY) 2001 and $10.5 million over the period FYs 2001-2005. Mr. Chairman, this concludes my statement.