periodic increases in disability compensation and DIC benefits when needed to insure that our programs recognize changing economic conditions. In fiscal year 1974 compensation benefits were increased by 17 percent. Effective August 1, 1975, they were increased by approximately 10 percent or 12 percent (depending on the degree of disability), and effective October 1, 1976, they were increased by approximately 8 percent. The widows and children of veterans who die of service-connected causes have received similar increases. The rates of DIC payable to them were increased by approximately 12 percent effective August 1, 1975, and 8 percent effective October 1, 1976.

The basic purpose of the disability compensation program (ch. 11, title 38, United States Code), throughout its history has been to provide relief for the impaired earning capacity of veterans disabled as the result of their military service. The amount payable varies according to the degree of disability which, in turn, is required by the law (38 U.S.C. 355) to represent, to the extent practicable, the average impairment in earning capacity resulting from such disability or combination of disabilities in civilian occupations. Additional compensation for dependents is payable to any veteran entitled to basic compensation for disability rated at not less than 50 percent.

Under chapter 13 of the stated title 38, DIC payments are made to surviving spouses and certain parents and children of veterans who die of a service-connected cause. For surviving spouses, the monthly rates are geared to the pay grade of the deceased veteran, ranging from $260 for the surviving spouse of an E-1, to $644 for the surviving spouse of an O-10. The applicable surviving spouse's rate is increased by $31 for each child of the veteran under age 18. An additional amount of $78 is payable where the surviving spouse is (1) a patient in a nursing home, or (2) helpless or blind or so nearly helpless or blind as to need or require the regular aid and attendance of another person.

For children, where no surviving spouse is entitled, the monthly rates range from $131 for one child to $243 for three children (plus $49 for each additional child). In the case of certain children specified under 38 U.S.C. 414(a) who are permanently incapable of self-support, the applicable basic rate is increased by $78 for each child. Under 38 U.S.C. 414(b) and (c), in cases wherein a surviving spouse is receiving benefits, monthly amounts of $131 and $67 are respectively paid separately to certain children of the veteran who are (1) permanently incapable of self-support, or (2) attending school while between 18 and 23 years of age.

The President's fiscal year 1978 budget revisions, submitted last February, included provision of a cost-of-living increase in Veterans' Administration disability compensation and DIC programs to keep these programs responsive to changing economic conditions. It is the Veterans' Administration's position that increases designed to offiset the decline in purchasing power due to inflation should be based on changes in the Consumer Price Index (C.P.I.) Since these benefits were last increased on October 1, 1976, the cost of living has risen approximately 2.6 percent through February 1977, as measured by the C.P.I. In furtherance of this policy, we have submitted a legislative proposal to the Speaker which would increase disability compensation rates and rates of DIC for surviving spouses and children consistent with the anticipated C.P.I. on October 1, 1977.

In preparing our legislative proposal, we proceeded on the basis of an assumption that the C.P.I. would increase by 4.9 percent for the period October 1, 1976, to October 1, 1977, and have used this figure in our budget estimate for fiscal year 1978. Should this assumption prove to be inaccurate, we would support a change in rates consistent with an updated anticipated C.P.I. figure on the effective date of the increase. We recommend favorable consideration of our legislative proposal rather than H.R. 1862.

Turning now to H.R. 1864, this bill would extend entitlement to an automobile assistance allowance and automotive adaptive equipment to veterans of World War I under the same conditions as veterans of service on or after September 16, 1940, who are now eligible. In addition, the bill would entitle an otherwise ineligible veteran to adpative equipment if the veteran has a service-connected disability not less than 30 percent disabling, and which constitutes a permanent loss or impairment of the use of an anatomical part and impairs the ability to operate an automobile or other conveyance.

The automobile allowance was established as a rehabilitative benefit, principally as a means of assisting certain disabled veterans in their employment endeavors. While originally limited to wartime-service veterans, entitlement to this

benefit has been extended a number of times, most recently to cover service between September 16, 1940, and World War II under Public Law 94-433. The extensions to date have been to veteran groups of working age and thus could be viewed as consistent with the program's primary purpose of enhancing employability.

We believe that an extension of eligibility for the automoblie allowance to veterans who served in World War I is inconsistent with the purpose of the program. The veterans who gain eligibility, veterans of service in 1917-1918 are well beyond normal working age and thus are highly unlikely to benefit from the allowance in terms of rehabilitation, readjustment, or employability.

We also do not favor that part of the bill (section 3) which would provide adaptive equipment to certain veterans with a service-connected disability 30 percent or greater. The current criteria for establishing entitlement to adaptive equipment are realistically based on the nature and severity of specific disabling conditions. The loss and loss of use standards, that now exist, do indeed make it necessary for a veteran so disabled to require adaptive equipment. A veteran less severely disabled is generally able to make use of public transportation facilities. Where a private conveyance is needed, these needs are usually met by automatic transmission, power steering and power brakes. These generally are now standard equipment on automobiles. By providing the adaptive equipment, we are in effect, subsidizing the purchase of what might be considered standard equipment for a group not meeting a specific equipment need. H.R. 1864 would dilute the current criteria and tend to create a need for adaptive equipment based on varying and subjective degrees of impairment in the operation of an automobile. Historically, the furnishing of adaptive equipment has been directly related to eligibility for the automobile assistance allowance. Weakening this basic thrust of the law by authorizing adaptive equipment for veterans not eligible for the automobile grant would complicate an already intricate process and set a costly precedent.

In this connection it should be noted that questions have recently arisen about possible misuse or mismanagement of the program. To answer these questions the Administrator has just ordered a thorough examination of operation of the automobile adaptive equipment program. We thus believe it prudent to defer consideration of amended eligibility for adaptive equipment until these questions have been answered to the satisfaction of both the Administrator and the Congress.

It is estimated that the total five-year cost of H.R. 1864, if enacted, would be $96.3 million. This can be broken down as follows: $1.7 million for World War I veterans (benefit cost), $91.8 million for the 30 percent or more disabled veterans (benefit cost), and $2.8 million for administrative cost.

As to H.R. 1866, the proposal would amend section 360 of title 38, United States Code to provide that where a veteran has suffered the loss or loss of use of one hand or one foot as the result of a service-connected disability, and has suffered the loss or loss of use of the other hand or foot as the result of a nonservice-connected disability, not the result of his own willful misconduct, the veteran shall be paid the applicable rate of compensation as if the loss of "paired limbs" were the result of service-connected disability.

Currently, section 360 of title 38, United States Code provides that a veteran who has suffered (1) service-connected blindness in one eye and then suffers blindness in the other eye as a result of non-service-connected disability not due to his own willful misconduct, or (2) service-connected loss or loss of use of one kidney and then suffers such severe involvement of other other kidney as to cause total disability not the result of his own willful misconduct, or (3) service-connected total deafness in one ear and then suffers total deafness in the other ear as the result of a non-service-connected disability not the result of his own willful misconduct, the veteran shall be paid the applicable rate of compensation as if his blindness in both eyes or bilateral kidney involvement or total deafness in both ears were the result of service-connected disability.

Section 360 came into being with enactment of P.L. 87-610 in August 1962. Prior thereto, the law and Schedule for Rating Disabilities provided that, where a veteran had entered service with blindness in one eye or the absence of function of one kidney, and as a result of service incurred blindness in his other eye or loss of the other kidney (or severe impairment thereof), he was entitled to that statutory rate of compensation payable for service-connected total disability. P.L. 87-610 was enacted to provide the same benefit where the initial visual or renal

function loss was sustained by reason of service, and the remaining loss was incurred thereafter by reason of non-service-connected disability. It was realized that in either case the service-connected blindness or kidney loss was a direct causative factor in the veteran's total blindness or loss of renal function, disabilities which are infinitely more severe and hardly comparable to a unilateral loss. Section 360 was amended in October 1965 (P.L. 89-311) by adding the provision for deafness, a perfectly rational extension.

A careful consideration of H.R. 1866 discloses that its enactment would constitute a significant departure from the theory of compensation which gave rise to § 360. Loss of eyesight, renal function or hearing is irreplaceable. The function of the paired organs currently covered by this section cannot in any way be restored by prosthetic appliances. The function of a lost hand or foot, however, can generally be partially restored by prosthetic appliances. Of course, in those rare instances in which the function of both arms is lost at the shoulder level, or function of both legs lost at hip level, the use of prostheses may be totally impossible. In such rare cases an analogy would exist; however, in the majority of instances involving loss of use of paired extremities, a reasonable degree of function can be regained, in one or both, through properly fitted prostheses. Levels and degrees of loss vary widely. They may extend only to the hand or foot (where quite effective restoration of function by prosthetic devices is possible) or to any combination of losses affecting intermediate joints such as wrists and elbows, or ankles or knees, and on up to hip or shoulder level.

The weakening of the concept of service connection by authorizing the payment of compensation as if a disabling condition were service connected, contrary to fact applies only to profound disabilites such as loss of sight, hearing and bilateral kidney involvement. The two eyes, two ears and two kidneys each act in tandem in performing a necessary body function. Paired extremities, however, act as separate and distinct functioning agents of the human body, and are separately repairable.

It has always been the basic purpose of disability compensation, except in the very limited areas, covered by 38 United States Code 360, to compensate veterans for disabilities actually incurred in or aggravated by military service, either directly or presumptively. The enactment of H.R. 1866, particularly as now constituted, would be a further departure from this long accepted concept. It would be precedential for demands for like treatment by veterans suffering from all manner of service-connected and non-service-connected disabilities, who contend that the interaction of one upon the other, or the combination of both are such that they are rendered totally disabled.

For these reasons, the Veterans Administration opposes enactment of H.R. 1866. It is our estimate that the cost of H.R. 1866, if enacted, would be approximately one million dollars per year.

In summary, Mr. Chairman, the Veterans Administration opposes the enactment of H.R. 1864 and 1866. We recommend favorable consideration of our legislative proposal to increase disability compensation and DIC rates rather than H.R. 1862.

Mr. Chairman, this completes my formal presentation. My associates and I will be pleased to answer any questions.

Mr. PECKARSKY. Well, let me say then, Mr. Chairman, that, as you have summarized, the cost of living has gone up 2.6 percent since the last compensation increase on October 1. The administration firmly supports the principle that the compensation rates, representing our most significant disability program-probably the most significant program in the VA-should keep pace with increase in the cost of living.

The President, in his fiscal 1978 budget revisions submitted last February a cost-of-living increase provision on compensation which would raise the rates by 4.9 percent, based on the assumption that the Consumer Price Index would increase by 4.9 percent for the period from last October 1 to October 1, 1977.

... We've used this figure in our budget for fiscal year 1978. Should this assumption prove to be inaccurate we would support a change in rates

consistent with an updated anticipated Consumer Price Index figure on the effective date of the increase.

So at this point, since 4.9 percent is our best experience, we favor consideration of our legislative proposal. But as I said, should we turn out to be wrong we would favor whatever the cost-of-living increase is on October 1, 1977.

Turning now to H.R. 1864, the bill that would extend automobile assistance allowance to veterans of World War I and also allow them automotive adaptive equipment.

The history of the automobile allowance program shows that it was initially based on rehabilitation. The first allowance was predicated on a loss of use of a foot, which would impair operation of an automobile without special adaptive equipment.

Initially the allowance was limited to veterans who required the operation of the car themselves, and who had to provide proof that they had a driver's license before an automobile was provided..

The prosthetic aspects of the automobile program have changed significantly since that time. Automobiles were extended to blinded verterans on the premise that somebody would operate the car for them, but the rehabilitative nature that is the fact that the automobile had to be used in some measure to assist the veteran either in a vocation or an occupation-has persisted in the law, even with the amendments that extended the program to veterans with service commencing in 1940.

This bill would extend an automobile allowance and the equipment to veterans of World War I with an average age of 82.

There veterans have long since left the active labor market, and neither on the principle of rehabilitation or prosthesis, nor on the principle of assistance in a livelihood or occupation, could the extension of the automobile be justified.

Therefore, we would oppose this extension at this time.

Another portion of H.R. 1864 would extend the allowance of adaptive equipment to those with a service-connected disability, not less than thirty percent disabling, which constitutes a loss or an impairment in the use of an anatomical part and impairs the ability to operate an automobile or other conveyance.

It is difficult to contemplate any type of prosthetic device, Mr. Chairman, which could be helpful to this group, other than automatic transmission, power brakes, and power steering, which are standard equipment on most automobiles.

The extension of the adaptive equipment allowance to this group would constitute a bonus for having a disability-which is inconsistent with the nature and the basic purpose of compensation-it would present administrative problems, in determining who was entitled to what sort of adaptive equipment that would unduly complicate an already fairly complicated program.

We do not favor extension of adaptive equipment for those with 30 percent disability.

The last bill that's subject for comment at this time is H.R. 1866. The proposal would amend section 360 of title 38 to provide that where a veteran has suffered the loss or loss of use of a hand or a foot as a result of service-connected disability, and has suffered the loss or loss

of use of the other hand or foot as the result of non-service-connected disability not the result of his own misconduct, we would pay him the rate as if both impaired limbs were service connected.

This is an extension of the principle now provided in section 360 of title 38 that permits us to pay for paired eyes, ears, or kidneys.

However, the premise on which this extension would be constructed, differs greatly from the current provisions of law.

Eyes, ears, and kidneys operate as paired organs. The loss of the second eye after the first service-connected eye is catastrophic. There is no prosthesis, there is no rehabilitative device, there is no repair that can restore the sight that is lost.

The determination of which is the eye that contributed to this total catastrophic disability impels the conclusion that they ought to be treated as one organ. Therefore, paying the service-connected rate for the two, even though only one of them initially was incurred or agravated in service, is logical.

The same is true of hearing, and the same is true of kidneys. A man can function very well with one kidney, but the loss of both is a total catastrophic loss of all kidney function.

This is not true in the case of paired arms or paired legs. Each extremity operates independently. Each can be independently restored through the use of prosthesis.

What the bill amounts to is an extension of a principle that I think should be carefully avoided, and that is to pay compensation-which is a service-connected benefit-for non-service-connected disabilities. Once the premise of paying only for service-connected disabilities is breached, it is difficult to tell where to draw the line and where to stop this particular proliferation.

For that reason, Mr. Chairman, we do not favor enactment of H.R. 1866.

Basically this concludes my statement, and we will be glad to answer any questions you may have.

Mr. MONTGOMERY. Thank you very much for that testimony. Mr. Wylie.

Mr. WYLIE. Thank you, Mr. Chairman. Speaking to H.R. 1862 first, the Consumer Price Index has indicated a rise of 3.7 percent through March, and in March alone the increase was 1.1 percent.

Now of course we're all hopeful that this trend will reverse itself, but we have to be realistic about it.

With this kind of an increase, how can the Administration say that 4.9 percent is an adequate cost-of-living increase in compensation benefits?

Mr. PECKARSKY. Mr. Wylie, at the time that the President amended his budget in February the cost of living had not risen by as much as 2.6 percent, which was the increase at the end of February.

At that time, the best estimates that we had were that a 4.9-percent increase from last October to October 1, 1977, could reasonably be anticipated, and that was the percentage increase recommended by the President.

We are firmly committed to the principle of a cost-of-living increase. for compensation. It is our current posture that 4.9 percent still looks fairly reasonable to us.

However, should the cost-of-living increase exceed that, we would be glad to go along with whatever the cost-of-living increase is from