request of the VA, has been conducting a nationwide survey of veterans by means of an extensive questionnaire. The Census Bureau determined that a scientific sampling of 13,000 veterans would be sufficient to support valid conclusions. As final results would not be available until later in the year, a tally of the insurance questions was made based on answers to nearly half of the questionnaires sent out. To date, of answers received from World War II and Korean conflict veterans, we find that 75 percent do not have NSLI. Further, about half of this group state that they would take out such VA insurance if it were legally possible. In addition, over 50 percent of the veterans who now have less than $10,000 of VA insurance would take out more if Congress authorized it. On the basis of the returns to date from this survey it appears that if the NSLI program is reopened as many as 7 to 8 million veterans will be interested in such insurance. With the exception of H.R. 210, and an identical bill, H.R. 2397, all of the bills on this subject pending before the committee would authorize the issue of insurance to persons in good health as well as to those who have service-connected disabilities. H.R. 210 would reopen the NSLI program only to persons who were eligible to apply for NSLI between October 7, 1940, and January 1, 1957, and who are in good health except for a service-connected disability which renders them uninsurable. It would apply to the totally disabled as well as those with serviceconnected disability less than total in degree. However, premium waiver would not be authorized for a total disability which was in effect at the time the veteran applied for issuance of insurance under the bill.

The premiums to be charged the service-disabled veteran group to cover the benefits claims cost of their insurance under H.R. 210 will be based on the old American Experience Table of Mortality and interest at the rate of 3 percent per annum. The VA has no actual experience on the particular group of serviceconnected disabled veterans (including the totally disabled) covered by these proposals. Our closest experience is with nonparticipating insurance (with the same premium rate basis) issued to persons with service-incurred disabilities less than total in degree under section 602(c) (2) of the National Service Life Insurance Act. If that experience is comparable, it is believed that the life insurance issued under H.R. 210 to the service-connected disabled group, insofar as the benefits claims cost is concerned, would be self-supporting, or nearly so, and would require little or no Government subsidy from a claims cost standpoint. It is noted, however, that under H.R. 210 the service-disabled group would not be charged for the cost of administration of their insurance. Based upon our best estimates, and considering the preliminary returns from the mentioned survey, as many as 600,000 veterans might qualify as uninsurable under the terms of the bill, and of this group around 300,000 policies might be issued.

NEW MODIFIED LIFE PLAN OF NATIONAL SERVICE LIFE INSURANCE

Both the Congress and the executive branch of the Government have long been aware of the problems of the older veterans who have paid premiums on term insurance for many years. As you know, the premiums on term insurance increase with each 5-year renewal and at the older ages are practically prohibitive. At the retirement ages when the veterans may be expected to live on a reduced income, they are confronted with the unhappy choice of either dropping their term insurance or paying these very high premiums from their reduced incomes. The modified life plan proposal contained in H.R. 220 and H.R. 2137 is designed to alleviate this problem in the national service life insurance program for World War II and Korean conflict veterans.

As you know, the modified life plan legislation passed the House of Representatives in both the 86th and 87th Congresses. The Veterans' Administration is again sponsoring the new modified life plan as part of its 1963 legislative program and I am very pleased that your committee favorably reported, and the House has passed, H.R. 220 which will accomplish this objective.

TOTAL DISABILITY INCOME BENEFITS

Section 715 of title 38, United States Code, authorizes the Administrator to include a total disability income provision in certain national service life insurance policies upon application by the insured, proof of his good health, and payment of an extra premium. Such provision is not available to persons issued servicedisabled veterans insurance under section 620 of the National Service Life Insurance Act or section 722(a) of the code. Under such provision, if the insured becomes totally disabled for a period of 6 consecutive months or more commencing after the date of application for the provision, before attaining the age of 60

and while the payment of any premium is not in default, he may receive $10 per month for each $1,000 of insurance in effect. The disability benefit is payable from the first day of the seventh consecutive month of and during the continuance of total disability. The original total disability income provision authorized for inclusion in policies under section 602 (v) of the National Service Life Insurance Act pays only $5 per month for each $1,000 of insurance in effect. Public Law 85-678, effective November 1, 1958, amended section 602 (v) to authorize inclusion in policies of a total disability income provision which pays $10 per month for each $1,000 of such insurance. Public Law 85-678 specifically provided that the new $10 coverage could not be added to a policy containing the old $5 coverage except upon surrender of the $5 coverage, proof of good health, and payment of an extra premium.

H.R. 2135 would permit policyholders with service-connected disabilities less than total in degree, who cannot meet the health requirement because of such disabilities, to exchange the $5 total disability income provision which they now have in their policies (under sec. 602 (v) of the National Service Life Insurance Act) for the $10 total disability income provision authorized under present law (38 U.S.C. 715).

Under prior provisions of law (sec. 602 (v) of the National Service Life Insurance Act) the requirements of good health were waived as to any service-incurred disabilities less than total in degree which the veteran might have had, if application for inclusion in their policies of the total disability income provision was made prior to January 1, 1950. The above-mentioned bill would be a modified extension of this waiver provision. The premiums collected on the total disability income provision under the bill would be credited directly to the national service life insurance appropriation and benefits paid therefrom.

Persons who would be permitted to obtain the $10 total disability income provision under H.R. 2135 are not good insurance risks. For example, experience on the $5 total disability income provision which was issued under section 602(v) of the National Service Life Insurance Act to persons who were suffering from a service-incurred disability shows that the premium charges are only about 40 percent of those needed to bear the cost of the benefit. Hence, the premiums paid by the insureds under H.R. 2135 would be nominal, and bear little relationship to the risk incurred or to the benefits afforded. Therefore, a considerable portion of the cost of the benefits extended by the bill would be a gratuity paid for by the Government. Further, the bill would discriminate against other service-disabled veterans who do not now have the $5 rider.

The Veterans' Administration believes that disability compensation, rather than a subsidized insurance benefit as proposed by the bill, is the more appropriate program for meeting the Government's obligation to veterans for loss of income due to service disabilities. For the foregoing reasons the Veterans' Administration does not favor enactment of H.R. 2135.

SERVICE-CONNECTED COMPENSATION

We come now to the category of service-connected compensation legislation. There is a wide variety of bills on this subject pending before your committee. The chairman's letter states that considerable interest has been shown in bills proposing payment of additional compensation for dependents in the case of veterans receiving disability compensation for less than 50 percent disability, as well as proposals which would adjust the basic rates of disability compensation so as to create an exact mathematical relationship in the rates paid for disabilities from 10 to 100 percent. As you note, both of these proposals are reflected in H.R. 2582, 88th Congress, which would reduce from 50 to 10 percent the minimum disability requirement in determining eligibility of service-disabled veterans for additional compensation for dependents and would increase the basic wartime rates of compensation for disabilities from 10 through 90 percent so that they would be in direct proportion to the existing $250 monthly rate for total (100 percent) disability.

Until 1952 the basic rates of disability compensation varied in direct proportion to the degree of disability. In that year, Public Law 356, 82d Congress, increased the rates in cases rated less than 50 percent by only 5 percent, whereas the higher rates were increased by 15 percent. In discussing such differences in the percentage increases proposed by the bill that became Public Law 356, it was explained on the floor of the Senate that veterans who are disabled less than 50 percent are generally able to do a considerable amount of work and contribute substantially to their own support, but those with more serious disabilities rated

from 50 to 100 percent in many cases are so less able to work that they must rely to a much greater extent on their compensation. It was noted that persons in the latter group have difficulty in obtaining employment and, if they do so, labor at a very great disadvantage. Since 1952 the Congress has ratified this rate structure policy on three occasions by continuing to authorize greater proportionate amounts for disabilities rated 50 percent and above. The most recent of these measures was enacted last fall as Public Law 87-645. On two occasions the President stressed the particular needs of the more seriously disabled veterans and recommended to the Congress greater compensation increases for that group.

The Veterans' Administration believes that the existing concept whereby the more seriously disabled veterans are provided greater relief through payment of proportionately higher rates of compensation than those less seriously disabled is sound. We feel that to revert to the pre-1952 exact ratio among these rates of compensation, as H.R. 2582 proposes, cannot be adequately justified.

The additional compensation payable to veterans on account of dependents was first authorized by Public Law 877, 80th Congress, approved July 2, 1948. 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 benefits provided by that act to persons 60 percent or more disabled was based on the fact that veterans of this group, because of the serious nature of their disabilities, are not generally in a position 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 by section 4 of Public Law 339, 81st Congress. This requirement of eligibility has thus been maintained by the Congress for almost 14 years.

Veterans with disabilities rated less than 50 percent are generally able to supplement their compensation payments with other income. In view of the basic justification for the additional allowances for dependents, we do not believe that these veterans, as a group, need the supplemental assistance from the Government proposed by section 2 of H.R. 2582.

PEACETIME GI BILL

You also requested my views with respect to the legislative proposals which would establish a peacetime GI bill.

A number of such bills have been introduced in the House and referred to your committee. All of them would extend an education and training benefit modeled upon that provided for Korean conflict veterans by the Veterans' Readjustment Assistance Act of 1952. A substantial number of the bills would also provide loan guarantee and direct loans. A few would extend other benefits. In most cases the eligible service period would be extended back to January 31, 1955, the end of the Korean conflict period. At least one bill, however, would start the eligibility period with January 1, 1962, and confine the benefit to persons who served in a combat zone as would be defined by the bill.

To place these proposals in proper perspective, let me recall that during the last few years substantial gain has been achieved in equalizing wartime and peacetime benefits for servicemen who suffer an injury or disease as a result of their service. Vocational rehabilitation was made available to post-Korean veterans by Public Law 87-815, enacted last year. This law provides vocational counseling and the appropriate education and training to assist peacetime veterans with service-connected disabilities to qualify for suitable employment. We had recommended such a program for several years and were exceedingly gratified to see it become law. In addition, other laws enacted in the 87th Congress provided that hospital and medical care for service-connected disabilities, both at home and abroad, were to be made available to persons now serving in the military services on the same basis as had heretofore been provided for the wartime group. Looking back a little further, dependency and indemnity compensation for the widows, children, and dependent parents of veterans dying from service-connected causes makes no distinction between peacetime and wartime service. In 1958 an unemployment compensation program was established for peacetime exservicemen as they are termed in that act, and in 1960 war orphans' educational assistance was extended to the post-Korean group for so long as selective service is in operation.

Thus, the principal benefits not now available to veterans of current service are the readjustment or so-called GI benefits which would be authorized by the

bills I have previously mentioned. Letters reaching us at the Veterans' Administration from servicemen and veterans manifest principal interest in an educational benefit.

The Veterans' Administration has opposed bills providing peacetime veterans' educational benefits on the ground that this type of benefit should be limited to situations where wartime service sharply disrupted career planning and called for special Government aid to ease the transition from wartime service back to civilian life. We have pointed out that service under current conditions does not present on a widespread basis the same rigors and hazards as does wartime service; that the specific period of service is known in advance and generally is of shorter duration than service during wartime; and that it has a much less disruptive effect upon the veteran's educational plans and his career than did extended wartime service with its many uncertainties. We consider particularly significant the fact that the impact of selective service is minimized by draft procedures which are designed to promote a reasonable integration of schooling or training plans with military service.

An education and training program for veterans generally, or on the basis of hardships and dangers for those serving in "hot spots," would not, in our opinion, be consistent with the traditional readjustment principle underlying the Korean and World War II programs.

I think in our consideration of this question that we must keep in mind we are only talking of individuals who are not disabled in service.

Prior to last year, we could provide a full range of benefits for the service disabled, with the exception of vocational rehabilitation; i.e., hospital and medical care, and in extrahazard and combat cases, disability compensation at the full wartime rates. This range of benefits for the service disabled has now been completed, as I mentioned earlier, by the enactment of Public Law 87-815. At the present time, after hospital and medical care have made training feasible for the veteran, we can provide educational and vocational counseling to determine what steps are needed to restore him to employability by providing at Government expense up to 4 years of schooling (longer if we find additional training necessary) and can supplement his compensation by a subsistence allowance while he is pursuing training.

Under all the circumstances, I do not believe that a readjustment education and training program is needed at the present time.

I believe the following cost estimates will also be helpful to your committee in evaluating the proposals before you:

To extend the full range of education and training benefits provided for Koreanconflict veterans to peacetime veterans, from February 1, 1955, onward, would result in a first fiscal year cost of approximately $291 million and a first 5-year total of nearly $2.164 billion. On the other hand, the first year cost of H.R. 2637, again using a beginning date of February 1, 1955, would approximate $119 million with a first 5-year total of approximately $859 million.

DEPENDENCY AND INDEMNITY COMPENSATION

The rate of dependency and indemnity compensation payable to widows is geared to basic active service pay. The widow is paid at a monthly rate equal to $112 plus 12 percent of the basic pay of her deceased husband. As the service pay is increased, the widows' rates under this program are automatically increased. The basic service pay was last increased June 1, 1958 (Public Law 85422). This automatic adjustment is not applicable to the specific monthly rates for parents and children.

The analysis of the pending military pay bill, which the Department of Defense estimates would provide increases in the rates of basic military pay averaging 14.4 percent, indicates that it would result in increases in widows' rates averaging about 2.9 percent. This would result in a first year's additional cost for widows of $5.9 million. The proposed increase added to the 1958 increase in widows' rates would result in an average of 4.1 percent since the inception of the program, ranging in individual cases from 0 percent to over 20 percent. As you know, we have recommended favorable action on H.R. 211 which would provide a cost-of-living increase in dependency and indemnity compensation rates for parents and children commensurate with the increase in the costof-living since the inception of the program. It is apparent that if the proposed pay legislation is enacted in its present form, the resulting widows' rates will not have been increased in all cases in keeping with the increased cost-of-living since the program began. It thus appears that an increase in the dependency and indemnity compensation rates payable to widows is in order.

In my opinion the bill (H.R. 5250) recently introduced by your chairman appropriately provides the needed increase. It proposes to increase to $120 the $112 which is the constant factor in each rate. It would thus have the effect of increasing all widows' rates by approximately $100 annually. We estimate that the first year's cost of the increase would be approximately $11 million.

LEGISLATION ON COMMITTEE APPROVAL OF HOSPITAL PROJECTS

In conclusion, Mr. Chairman, I want to mention specially the bill, H.R. 4347, which you recently introduced and which would call for a considerable change in the procedure for planning and constructing our hospitals. This would require us to submit a copy to your committee of any plan, survey, or study concerning construction, modernization, renovation, or major repair of any hospital or similar facility at the time it is submitted to the Bureau of the Budget. Before the actual beginning of such construction activity, we would be required to submit an additional report to the committee. If the committee adopted a resolution during a 90-day period thereafter of continuous session of the Congress disapproving the use of appropriated funds for such construction, the bill would prohibit use of any existing or future appropriation to carry out the construction project. I have furnished my report to the committee on H.R. 4347, and will be glad to discuss this matter in the light of that report. While I fully appreciate the deep interest of your committee in the location of our hospitals for veterans, I have concluded that this legislation would be detrimental to our mutual objective of providing the most effective hospital system which can be developed.

I want the committee to know, however, that I have no desire to withhold from the committee information concerning projects which have been approved by the President so that the committee will be fully apprised of what is proposed. If that is desired, I am sure that we can work out a mutually satisfactory arrangement for providing this information.

I shall be pleased to present my report in further detail at this time if the committee wishes, and to answer any questions with respect to my position on the matter.

Mr. Chairman and members of the committee, I wish again to thank you for this opportunity, and I shall be glad to discuss with you any questions which you have in connection with the items of particular interest to the committee in this hearing.

Mr. GLEASON. I am extremely pleased that H.R. 211 has become law. As reported by your committee and approved by the Congress and the President, it increases by 10 percent the monthly rates of dependency and indemnity compensation payable for children and parents. Although H.R. 211 did not give an increase to widows, there are identical bills before your committee (H.R. 5250 and H.R. 5488) which would do this. They propose to increase to $120 the $112 which is the constant factor in each widow's dependency and indemnity compensation rate. As you know, the other factor is a percentage of the deceased husband's basic military pay.

H.R. 5555 (the proposed Uniformed Services Pay Act of 1963), which would increase basic rates of military pay, passed the House of Representatives on May 8, 1963, and is now pending before the Senate Committee on Armed Services.

The increase proposed by H.R. 5250 and H.R. 5488, when added to (a) the increase stemming from the 1958 Service Pay Act, and (b) the increase which would automatically result from H.R. 5555, if enacted with the rates prescribed in the bill as passed by the House, would total an average increase in widows' rates of approximately 10 percent since the inception of the dependency and indemnity compensation program.

This increase is commensurate with the cost-of-living increase resulting from the enactment of H.R. 211. It is estimated that this measure would benefit approximately 122,700 widows the first year at a cost of $11,779,000.