:STATEMENT OF HON. W. J. DRIVER, ADMINISTRATOR OF VETERANS' AFFAIRS, U.S. VETERANS' ADMINISTRATION

Mr. DORN. Mr. Driver, we are glad to have you with us.

I understand you have a statement for the record and that you would like to summarize.

Mr. DRIVER. Thank you, Mr. Chairman.

I have an extensive statement covering all the bills on the agenda by category, and I would like to submit this for the record, if I may. Mr. DORN. Without objection, it will be included in the record. (The statement referred to follows:)

STATEMENT OF THE VETERANS' ADMINISTRATION ON COMPENSATION AND RELATED BILLS

Mr. Chairman and members of the committee, as you are aware, the committee has before it for consideration some 57 bills pertaining to compensation for service-connected disability and death, and related subjects. It is understood that the bills and those Veterans' Administration reports that have been submitted thereon have been made a part of the record.

With your permission, our statement will cover the various measures under descriptive subject headings. The statement sets forth the purposes and effects of the bills, pertinent legislative history, cost estimates where made, and a brief résumé of the views of the Veterans' Administration as contained in the detailed -reports.

PRESENT COMPENSATION PROGRAM

Under laws administered by the Veterans' Administration the benefit of compensation is payable for disability or death resulting from disease or injury incurred in or aggravated by active military or naval service in line of duty. In addition to consideration of direct evidence as to whether a disability was incurred in service, the law extends to certain veterans, principally of wartime service, the benefit of certain rebuttable presumptions, such as a presumption of soundness at the time of entry into service and a presumption that certain chronic and tropical diseases manesting themselves within limited periods after separation shall be deemed to have had their inception during service. The basic rates of disability compensation in wartime cases currently range from $20 for 10 percent disability to $250 per month for total disability. An additional amount of $47 per month is payalbe for the loss or loss of use of a foot, hand, both buttocks or creative organ, blindness of one eye, complete organic aphonia or deafness of both ears. A minimum rate for arrested tuberculosis of $67 per month is provided and conditions of helplessness, blindness, multiple amputations, etc., carry rates from $340 to $525 per month. An additional allowance of $200 per month is authorized for certain severely disabled veterans who are in need of regular aid and attendance for all periods during which they are not hospitalized at Government expense. Certain seriously disabled veterans who are substantially confined to their house or immediate premises by their service-connected disabilities are eligible for a monthly rate of $290. Additional amounts are also payable to veterans 50 percent or more disabled for wife, child, or dependent parents. Death compensation is authorized for service-connected death occurring prior to January 1, 1957. The rate of wartime death compensation for a widow with no child is $87 per month; widow with one child $121 (with $29 for each additional child); no widow, one child $67; no widow, two children $94; no widow, three children $122 (with $23 for each additional child); one dependent parent, $75; two dependent parents, $40 each. All rates of peacetime disability and death compensation are 80 perecnt of the wartime rates.

The Servicemen's and Veterans' Survivor Benefits Act established the new benefit of dependency and indemnity compensation for service-connected deaths occurring on or after January 1, 1957. The standard monthly payment for widows is $120 plus 12 percent of the monthly basic pay now being received by a :serviceman whose rank and years of service are the same as those of the deceased veteran. If there is no widow entitled, the basic payment for one child is $77; two children $110; three children $143; and each additional child, $28.

Certain additional amounts are also payable to or for helpless children and those under 21 attending school.

With this brief background of the nature and extent of the compensation program, the pending bills in this and certain related fields which appear on your agenda for the current hearing will be discussed.

INCREASES IN DISABILITY COMPENSATION AND ADDITIONAL ALLOWANCES

There are a number of bills pending before the committee which propose to increase the rates of disability compensation in varying amounts. Some bills would increase these rates as well as the rates of additional compensation for dependents which are payable to veterans with service-connected disabilities 50 percent or more disabling, and one bill would increase only the rates of such additional compensation of dependents.

The rates of compensation for service-disabled veterans were last increased by Public Law 87-645, September 7, 1962, while the rates of additional compensation for their dependents were last increased by Public Law 168, 85th Congress, August 27, 1957. Reference to the Consumer Price Index of the Bureau of Labor Statistics, U.S. Department of Labor, discloses that for August 1957 the level was 98.6 points; for September 1962, 106.1 points; and for February 1965, 108.9 points (1957-59 equals 100 points). This reflects an increase of about 10.4 percent since August 1957 and about 2.6 percent since the 1962 rate increase. Identical bills, H.R. 168 and H.R. 7119, propose an approximate 11-percent increase in such rates, adjusted upward or downward to the nearest dollar. appears from their titles that the increases are designed to compensate for the difference in the rise in cost of living and the increases in compensation rates since 1933 (when the current system of disability compensation was established). During this period there has been a 141-percent rise in the cost of living and, generally speaking, a 126-percent increase in the rates of compensation. The proposed 11-percent rate increase would more closely establish comparability between these two figures. The bills' first year additional cost is estimated at approximately $159 million.

It

H.R. 169 would grant a $75 monthly rate increase to totally disabled wartime veterans with an essentially proportionate increase for veterans whose disabilities are from 10 to 90 percent disabling. The latter increases would range from $1 per month for the 10-percent disabled to $29 per month for the 90-percent cases. The first year's cost of H.R. 169 would be about $195 million.

H.R. 170 would increase disability compensation by 8 percent rounded off to the nearest dollar. If enacted, it would cost some $123 million the first year. H.R. 171 appears to have a twofold purpose. First, the increases proposed would alleviate some of the disparity between past disability compensation rate increases and the increased cost of living. Second, it would establish more equivalent intervals between disabilities of 10 to 40 percent and disabilities of 50 to 90 percent. This would give recognition to the 50-percent level as the critical level of severe disability. Presumably in recognition of the gravity of the disability of those veterans who are totally disabled, it would provide the greatest increase to the 100-percent disabled. In other words, the bill would graduate payments for 10- to 40-percent disability from $20 to $80 per month; for the more serious disabilities (50-90 percent) it would graduate the rates, to the extent possible, from $110 to $191; and for total disability it would provide a rate of $300 per month. It is noted, howver, that the bill would not provide any increase in the compensation rates payable for cases rated as 10-, 80-, and 90-percent disabled.

H.R. 171 also proposes (sec. 2) an approximate 10-percent increase in the amounts of additional compensation for dependents payable to veterans 50 percent or more disabled. This would generally reflect the increase in the cost of living since the 1957 adjustment of these rates. It is estimated that the cost of this proposal would be $102 million the first year.

H.R. 172 would provide a 2-percent increase in the disability compensation rates and is thus designed (and the title so states) to cover the approximate rise in the cost of living since the last rate increase in October 1962. This proposal, unlike the other bills, would not round off the rates to an even dollar figure. This feature is objectionable since our experience in the past demonstrated that dollars-and-cents awards create administrative and clerical difficulties. This cost-of-living increase would result in additional expenditures of about $29 million the first year.

H.R. 176 proposes to increase only the rates of compensation for dependents payable to veterans 50 percent or more disabled, at a cost of $11.5 million the first year. It is identical with section 2 of H.R. 171, discussed above.

H.R. 3225 is designed to grant an across-the-board 15-percent increase in the rates of disability compensation and additional compensation for dependents. It would cost $234 million the first year.

H.R. 540 proposes an 11-percent increase in the rates of disability compensation and additional compensation for dependents as well as in the rates of death compensation for widows, children, and dependent parents.

Under existing law (ch. 13, title 38), eligible survivors of veterans dying from service-connected causes on or after January 1, 1957, are entitled to dependency and indemnity compensation. These benefits supersede the old death compensation program.

Survivors of veterans who died before January 1, 1957, who were entitled to death compensation may elect to receive the new benefits or may continue to receive death compensation. The election to receive dependency and indemnity compensation once validly made is irrevocable. It appears from the election provision that the law contemplated death compensation would become a declining program. We doubt that it was expected that such benefits would thereafter be increased or extended.

The Veterans' Administration feels that enactment of this bill, which would increase the monthly death compensation rates would be a distinct departure from the original concept of the dependency and indemnity compensation program. Accordingly, we do not believe that such a proposal should receive favorable consideration.

The disability compensation rate increases proposed by H.R. 5060 range from 10 percent for the lower basic rates to 15 percent for the higher basic and statutory rates. H.R. 5653 proposes an increase of at least 15 percent of all basic and statutory rates of disability compensation and a roughly 30-percent increase in the rates of additional compensation payable to veterans for their dependents. It would also reduce from 50 percent to 30 percent the minimum disabiltiy requirement in determining the eligibility of service-disabled veterans for such additional compensation. This proposed liberalization is discussed hereafter in connection with H.R. 177.

With the exception of H.R. 3225 and H.R. 5653, none of the foregoing bills propose to increase the existing $47 per month statutory allowance payable under 38 U.SE.C. 314 (k) for certain specified anatomical or other losses or losses of use and the $67 minimum monthly rate authorized by 38 U.S.C. 314(q) for veterans whose active tuberculous disease has reached a condition of complete arrest. (One other pending bill, H.R. 1583), proposes to grant a 12-percent increase in these two rates only. It is estimated that, if enacted, it would affect some 133,800 cases at an additional cost of $10.8 million during the first year.)

The variations in the proposed rates of disability compensation contained in these bills point up the many factors that may be considered or employed in determining what constitutes an adequate system of compensation for serviceconnected disabilities. We believe that in the light of the country's rising economy the existing rate structure is not adequate to compensate the serviceconneced disabled as a group for the impairment of their earning capacity. Data currently available indicate that the totally disabled veterans are the least well compensated for the economic impairment resulting from their disabilities. Currently available data do not furnish a basis for a definitive judgment as to the economic impairment flowing from percentage ratings less than total. These veterans retain an industrial capacity which may vary from tht anticipated, depending upon a complexiy of factors such as diagnosis, experience, age, education, and rehabilitation training. As the committee is aware, the Veterans' Administration is currently engaged in a study designed to economically validate the schedule for rating disabilities. This study should furnish us valuable data on the average economic impairment flowing from each disability percentage level as well as the economic impairment resulting from the residuals of the various diseases and injuries. The results of this study, however, will not be available for quite some time. In any event, the rise in the cost of living has affected disabled veterans in varying degrees depending on their disability evaluations. In the light of all of the foregoing, the Veterans' Administration has reached the following conclusions. The modest increases in the additional allowances for dependents proposed by H.R. 176 are fully justified by the rise in living costs since these rates were last increased in 1957, and we therefore endorse this proposed

increase of such allowances. As noted above, we question the necessity or desirability of increasing the rates set out in 38 United States Code 314 (k) and (q), as H.R. 3225 would do. From the standpoint of drafting, H.R. 172 is objectionable in that it would return to disability compensation awards of other than even dollar amounts. Our experience in the past has demonstrated that dollar and cents awards create administrative and clerical difficulties.

As was stated heretofore, while there is a lack of data available with respect to disabilities less than total, there are well established data showing that the totally disabled veterans are clearly undercompensated. H.R. 171 recognizes this fact by proposing to increase their compensation rate by $600 annually.

Over the years increases of rates payable for lesser percentages have been effected generally by means of an across-the-board percentage increase roughly equal to the increase in the cost of living since the preceding rate increase. This, coupled with the rounding off of rates to even dollar amounts, has tended to distort certain of these rates. This is illustrated by the fact that since 1946 the rate of compensation payable for 10 percent disability has been increased by approximately 45 percent whereas the rate for 20 percent disability has risen only 38 percent. H.R. 171 would preserve the equal dollar intervals between ratings from 10 to 40 percent by increasing the amounts payable for 20-, 30-, and 40-percent ratings so as to bring them up to the 45-percent increase already granted to the 10-percent category. It would thus achieve a comparability of rate increases for the 10- to 40-percent disability ratings during the period from 1946 to the present.

H.R. 171 would also preserve the greater $30 interval between the rates payable for 40- and 50-percent disability; thus recognizing the concept established by the Congress in 1952 that the 50-percent level constitutes the critical level of severe disability. The bill would provide a uniform interval of $20 between disability levels from 50 through 80 percent and continue a $21 interval between the 80 and 90 percentages.

Data available to the Veterans' Administration shows that from 1946 to the present time the Consumer Price Index of the Bureau of Labor Statistics has risen 37.4 points and during the same period the purchasing power of the dollar has decreased 52.2 points. The average increase proposed by H.R. 171 seems generally to be equated with the change in these two indexes since 1946.

Of the bills discussed above, the Veterans' Administration believes that H.R. 171 most acceptably provides necessary increases for the service-connected disabled veterans. Accordingly, we would have no objection to the favorable consideration of this bill by your committee.

ELIGIBILITY FOR ADDITIONAL ALLOWANCES FOR DEPENDENTS

H.R. 177. Under existing law, any veteran entitled to compensation at wartime rates for disability incurred in or aggravated by active service and whose disability is rated not less than 50 percent is entitled to additional compensation for dependents. While totally disabled, the amounts range from $15 per month for no wife, one child only, to $100 per month for a wife, three children and two dependent parents, with $12 more for each additional child. Lesser proportionate amounts are payable to partially disabled veterans (not less than 50 percent) and 80 percent of all these rates are payable to otherwise eligible veterans entitled to compensation at peacetime rates.

The bill proposes to reduce from 50 to 40 percent the minimum disability requirement in determining eligibility of service-disabled veterans for additional compensation for dependents. As noted above, H.R. 5653, among other things, proposes to reduce this requirement to 30 percent.

The additional compensation for dependents was first authorized by Public Law 877, 80th Congress. That act was the product of extensive study and consideration by the Congress on the subject of payment of additional benefits because of dependents to veterans entitled to disability compensation. The legislative history indicates that one of the reasons for limiting the benefits provided by that act to persons 60 percent or more disabled was based on the fact that this group of veterans because of the serious nature of their disabilities are less able to supplement their compensation payments by income from steady employment. Upon further consideration of this subject in 1949, the necessary degree of disability for entitlement to additional compensation was reduced to 50 percent (Public Law 339, 81st Cong.).

It is estimated that reducing to 40 percent the disability requirement for payment of additional compensation for dependents would affect approximately 126,700 cases the first year at an additional cost of approximately $27,389,000.

Veterans wtih disabilities rated less than 50 percent are generally more able to supplement their compensation payments with other income. In view of the basic justification for the additional allowance for dependents, we do not believe that these veterans as a group need such supplemental assistance from the Government to the extent proposed by the bill. Accordingly, the Veterans' Administration does not recommend favorable consideration of H.R. 177, or the provision of H.R. 5653 here involved.

EQUALIZATION OF PEACETIME-WARTIME DISABILITY COMPENSATION RATES

H.R. 7851. Under existing law the monthly rates of compensation for disability incurred in or resulting from military service during peacetime (and the amounts of additional compensation payable for dependents of veterans disabled by peacetime service) are 80 percent of those authorized for comparable wartime service. H.R. 7851, which was introduced at the request of the Veterans' Administration, proposes to remove this disparity and thus authorize the same rates of compensation, and amounts of additional compensation, whether the service of the veteran concerned was during wartime or peacetime.

The general pension law of July 14, 1862, provided pension (now designated compensation) for service-connected disability or death and made no distinction between service in time of war and peacetime service. The amendment of October 6, 1917, to the War Risk Insurance Act was the first law which recognized a distinction for compensation purposes between peacetime and wartime service in that it established a new compensation program for veterans of World War I. This separate compensation program was restated and continued under the World War Veterans' Act, 1924. Meanwhile peacetime veterans were eligible only for lesser compensation rates under the general pension law, The so-called Economy Act in 1933 repealed most of the then existing veterans' laws, including the World War Veterans' Act, 1924, and established certain broad guidelines for a new compensation program. Among such guidelines was a recognition of a distinction between wartime and peacetime service. The President was authorized to promulgate by Executive orders detailed provisions for eligbility. Under this authority Veterans Regulation No. 1(a) established basic rates for compensation with the peacetime rates generally 50 percent of the wartime rates. By 1939 this differential was narrowed to 75 percent, and in 1948 the peacetime rates were set at 80 percent of the wartime rates, where they remain today.

This compensation rate differential has apparently been maintained in view of the historical policy running through several benefit programs that war veterans should be accorded preferential treatment. Such policy is also reflected in more liberal criteria for establishing service connection applicable to war veterans.

Peacetime veterans are entitled, however, to receive wartime rates of compensation if the disability is found to have resulted from an injury or disease received in line of duty "as a direct result of armed conflict" or "while engaged in extrahazardous service, including such service under conditions simulating war" (38 U.S.C. 336 and 343).

A major change in the established policy in the service-connected benefit programs was made by the Congress in 1956 following an extensive study and recommendations made by the House Select Committee on Survivor Benefits. A new program of dependency and indemnity compensation was authorized by the Servicemen's and Veterans' Survivor Benefits Act, August 1, 1956, for all serviceconnected deaths occurring on or after January 1, 1957, with a right of application for persons otherwise eligible for the old death compensation benefit. Under this new program for service-connected deaths, no distinction in the rates payable is made between peacetime and wartime service.

In connection with the evaluation of disability for disability compensation purposes, the law for many years has required that the Administrator of Veterans' Affairs adopt and apply a schedule of ratings of reductions in earning capacity from specific injuries or combination of injuries. This provision (now 38 U.S.C. 355) provides that the "rating shall be based, as far as practicable, upon the average impairments of earning capacity resulting from such injuries in civil occupations."

We believe that there may well be ample justification for continuing the more liberal eligibility criteria applicable to war veterans and we do not recommend any change in such criteria. It seems quite apparent, however, that a veteran who has suffered a disability as the result of peacetime military service has the