Senate Report 108-169 - VETERANS' BENEFITS ENHANCEMENTS ACT OF 2003

[Senate Report 108-169]
[From the U.S. Government Publishing Office]

Calendar No. 316
108th Congress Report
SENATE
1st Session 108-169

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VETERANS' BENEFITS ENHANCEMENTS ACT OF 2003

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October 21, 2003.--Ordered to be printed

_______

Mr. Specter, from the Committee on Veterans' Affairs, submitted the
following

R E P O R T

[To accompany S. 1132]

The Committee on Veterans' Affairs, to which was referred
the bill (S. 1132), to amend title 38, United States Code, to
improve and enhance certain benefits for survivors of veterans,
and for other purposes, having considered the same, reports
favorably thereon with an amendment in the nature of a
substitute, and recommends that the bill, as amended, do pass.

Introduction

On May 22, 2003, Committee Chairman Arlen Specter
introduced S. 1132, a bill to improve and enhance certain
benefits for survivors of veterans. Committee Members Jim
Bunning and Lindsey Graham are original cosponsors of S. 1132.
On January 30, 2003, Senator Bill Nelson introduced S. 257,
a bill to clarify the applicability of the prohibition on
assignment of veterans' benefits to agreements regarding future
receipt of compensation, pension, or dependency and indemnity
compensation, and for other purposes. Committee Member Ben
Nelson and Senators John McCain, Jeff Sessions, Daniel K.
Inouye, Carl Levin, Jeff Bingaman, John F. Kerry, John B.
Breaux, Kent Conrad, Tim Johnson, and Mary Landrieu are
original cosponsors of S. 257. Senators Judd Gregg, Gordon
Smith, Harry M. Reid, and Joseph I. Lieberman were later added
as cosponsors.
On March 5, 2003, Committee Member Patty Murray introduced
S. 517, a bill to provide improved benefits to veterans who are
former prisoners of war. Senators Maria Cantwell, Ron Wyden,
Barbara A. Mikulski, Mark Dayton, and Richard J. Durbin were
later added as cosponsors of S. 517.
On May 22, 2003, Chairman Specter introduced S. 1131, a
bill to increase, effective as of December 1, 2003, the rates
of compensation for veterans with service-connected
disabilities and the rates of dependency and indemnity
compensation (hereinafter, ``DIC'') for the survivors of
certain disabled veterans. Committee Member Bunning is an
original cosponsor of S. 1131. Committee Member Rockefeller was
later added as a cosponsor.
On May 22, 2003, Chairman Specter introduced, at the
request of the Administration, S. 1133, a bill to improve the
authorities of the Department of Veterans Affairs (hereinafter,
``VA'') relating to compensation, dependency and indemnity
compensation, pension, education benefits, life insurance
benefits, and memorial benefits, to improve the administration
of benefits for veterans, and for other purposes.
On May 23, 2003, Chairman Specter introduced S. 1156, a
bill to improve and enhance the provision of long-term health
care for veterans by VA, to enhance and improve authorities
relating to the administration of personnel of VA, and for
other purposes.
On June 5, 2003, Committee Member Murray introduced S.
1188, a bill to repeal the two-year limitation on the payment
of accrued benefits that are due and unpaid by the Secretary of
Veterans Affairs upon the death of a veteran or other
beneficiary under laws administered by the Secretary, to allow
for substitution of parties in the case of a claim for benefits
provided by the Secretary when the applicant for such benefits
dies while the claim is pending, and for other purposes.
On June 9, 2003, Chairman Specter introduced, at the
request of the Administration, S. 1213, a bill to enhance the
ability of VA to improve benefits for Filipino veterans of
World War II and survivors of such veterans, and for other
purposes. Committee Member John E. Ensign and Senators George
Allen, Maria Cantwell, and Charles E. Schumer were later added
as cosponsors of S. 1213.
On June 11, 2003, Committee Member Craig introduced S.
1239, a bill to provide special compensation for former
prisoners of war, and for other purposes.
On June 18, 2003, Committee Ranking Member Bob Graham
introduced S. 1281, a bill to presume additional diseases of
former prisoners of war to be service-connected for
compensation purposes, to enhance the Dose Reconstruction
Program of the Department of Defense, to enhance and fund
certain other epidemiological studies, and for other purposes.
Committee Member Rockefeller was later added as a cosponsor of
S. 1281.
On June 26, 2003, Committee Ranking Member Graham
introduced S. 1360, a bill to clarify the requirements for
notices of disagreement for appellate review of Department of
Veterans Affairs activities. Committee Member Rockefeller was
later added as a cosponsor.

Committee Hearings

On July 10, 2003, the Committee held a hearing on, among
other bills, S. 257, S. 517, S. 1131, S. 1132, S. 1133, S.
1188, S. 1199, S. 1213, S. 1239, S. 1281, and S. 1360.
Testimony was heard from: The Honorable Daniel L. Cooper, Under
Secretary for Benefits, Department of Veterans Affairs; Mr.
Craig W. Duehring, Principal Deputy Assistant Secretary of
Defense for Reserve Affairs, Department of Defense; Mr. Phillip
R. Wilkerson, Deputy Manager of Operations and Training,
Veterans Affairs and RehabilitationDivision, The American
Legion; Mr. Dennis Cullinan, Director, National Legislative Service,
Veterans of Foreign Wars of the United States; Mr. Rick Surratt, Deputy
National Legislative Director, Disabled American Veterans; Mr. Carl
Blake, Associate Legislative Director, Paralyzed Veterans of America;
and Mr. Richard Jones, National Legislative Director, AMVETS.
On July 29, 2003, the Committee held a hearing on, among
other bills, S. 1156 and S. 1213. Testimony was heard from: The
Honorable Tim S. McClain, General Counsel, Department of
Veterans Affairs; Ms. Cathleen C. Wiblemo, Deputy Director of
Health Care, The American Legion; Mr. Paul A. Hayden, Deputy
Director, National Legislative Service, Veterans of Foreign
Wars of the United States; Mr. Adrian M. Atizado, Associate
National Legislative Director, Disabled American Veterans; Mr.
Carl Blake, Associate Legislative Director; Paralyzed Veterans
of America; and Mr. Richard Jones, National Legislative
Director, AMVETS.

Committee Meeting

After carefully reviewing the testimony from the foregoing
hearings, the Committee met in open session on September 30,
2003, and voted by unanimous voice vote to report favorably S.
1132, as amended to include provisions from S. 257, S. 517, S.
1132 as introduced, S. 1133, S. 1156, S. 1188, S. 1213, S.
1239, S. 1281, S. 1360, and several original provisions.

Summary of the Committee Bill as Reported

S. 1132 as reported (hereinafter, ``the Committee bill'')
contains various amendments to title 38 of U.S. Code and other
freestanding provisions that would:
(a) Provide monetary, health care, and vocational
benefits for spina bifida-afflicted children born of
veterans who served in or near the Korean demilitarized
zone in the late 1960's;
(b) Permit VA to make payment of proceeds from
National Service Life Insurance and United States
Government Life Insurance policies to alternate
beneficiaries should a primary beneficiary not be
located;
(c) Extend the period for eligibility for veterans'
survivors' education benefits to survivors who are
called to duty under title 32, U.S. Code, while serving
in the National Guard;
(d) Increase monthly educational benefits for spouses
and dependent children of veterans who have severe
disabilities or who have died as a result of service-
related causes;
(e) Repeal the two-year limitation on accrued
benefits;
(f) Permit States to receive burial plot allowances
for burial of all eligible veterans;
(g) Allow remarried surviving spouses to be buried in
national cemeteries;
(h) Make permanent the State Cemetery Grants Program;
(i) Permit VA to provide headstones or markers for
graves which already have a private marker for veterans
whose deaths occurred on or after November 1, 1990;
(j) Extend for two years the requirement to round
down to the nearest dollar compensation cost-of-living
increases;
(k) Liberalize the internment threshold for former
prisoners-of-war seeking compensation on a presumptive
basis, and add cirrhosis of the liver to the list of
diseases presumed to be caused by a prisoner of war's
internment;
(l) Repeal the 90-day minimum internment threshold
for former prisoners-of-war seeking outpatient dental
treatment;
(m) Round down to the nearest dollar annual education
cost-of-living adjustments to educational assistance
benefits;
(n) Terminate the education loan program;
(o) Terminate the manufactured housing loan program;
(p) Temporarily increase the fee charged for
``subsequent use'' home loans guaranteed by VA;
(q) Reinstate the VA vendee loan program;
(r) Remove the funding cap limiting loans made in
fiscal year 2003 under the Native American Veteran
Housing Loan Program;
(s) Make clarifying amendments relating to the
Veterans' Claims Assistance Act;
(t) Clarify the current prohibition on the assignment
of veterans' benefits;
(u) Extend for two years the authority of VA to gain
access to Internal Revenue Service records to verify
the incomes of VA beneficiaries who have applied for
``means-tested'' benefits;
(v) Require the forfeiture of benefits if
beneficiaries are convicted of certain subversive
activities;
(w) Clarify notice of disagreement requirements for
claimants who desire to initiate the VA claims
appellate process;
(x) Increase compensation and DIC payment rates to
Filipino veterans of World War II, and their eligible
survivors, residing in the United States;
(y) Increase burial benefit rates to eligible
survivors of new Philippine Scouts residing in the
United States, and make new Philippine Scouts eligible
for national cemetery burial;
(z) Extend the authority of VA to operate a regional
office in Manila, the Philippines;
(aa) Require independent oversight of the Department
of Defense (hereinafter, ``DoD'') radiation dose
reconstruction program;
(bb) Require an independent study on the disposition
of the Air Force Health Study on ``Operation Ranch
Hand'' veterans;
(cc) Authorize additional funding for the Institute
of Medicine's Medical Follow-Up Agency;
(dd) Extend for four years VA's Advisory Committee on
Minority Veterans;
(ee) Extend through 2013 VA's Advisory Committee on
Education;
(ff) Authorize a nationwide, five-year contract
medical examination pilot program; and
(gg) Make certain technical amendments.

Discussion

Section 101: Benefits for children with spina bifida of veterans of
certain service in Korea

Background
Between 1962 and 1971, the U.S. military sprayed almost 19
million gallons of herbicides over Vietnam. Those herbicides
cleared dense foliage which helped conceal enemy forces and
cleared the perimeters of U.S. base camps. A chemical
preparation known as Agent Orange was used in the majority of
the spraying. Its use was suspended in 1970 after a scientific
report concluded that chemical components of Agent Orange could
cause birth defects in laboratory animals. A 1996 report,
Veterans and Agent Orange Update 1996, published by the
Institute of Medicine's National Academy of Sciences
(hereinafter, ``NAS'') analyzed associations between exposure
to Agent Orange and the long-term health effects in exposed
veterans and their offspring. The report concluded that
``[t]here is limited/suggestive evidence of an association
between exposure to the herbicides considered in this report
and spina bifida [in the offspring of exposed veterans].''
Relying on that NAS report, Congress enacted section 421 of
Public Law 104-204 to provide special benefits to certain
children of Vietnam veterans who were born with spina bifida.
The benefits provided through VA include monetary payments
based on the severity of disability, health care, and
vocational training and rehabilitation.
Agent Orange was also used to clear foliage during the late
1960's near the Korean demilitarized zone. It is estimated that
12,056 military personnel were exposed.
Under current law, if VA determines that a veteran was
exposed to Agent Orange outside of Vietnam, and if that same
veteran has a disease on the list of diseases presumed to be
caused by herbicide exposure specified in 38 CFR Sec. 3.309(e),
VA will presume service-connection, thus entitling the veteran
to disability compensation and other VA benefits. However, VA
has no authority to provide benefits to children of veterans
exposed to herbicides outside of Vietnam who are born with
spina bifida.
Committee bill
Section 101 would extend the benefits provided to children
of Vietnam veterans born with spina bifida to the spina bifida-
afflicted children born of veterans who served in or near the
Korea demilitarized zone between January 1, 1967, and December
31, 1969, and who are determined by VA to have been exposed to
herbicides.

Section 102: Alternate beneficiaries for National Service Life
Insurance and United States Government Life Insurance

Background
Section 1917 of title 38, United States Code, gives
veterans insured under the VA's National Service Life Insurance
(hereinafter, ``NSLI'') program the right to designate the
beneficiary or beneficiaries of insurance policies maturing on
or after August 1, 1946. It also specifies the modes of payment
to beneficiaries when an insured dies, and sets forth the
procedure to be followed when a beneficiary has not been
designated or dies before the insured. Section 1949 of title 38
gives veterans insured under the United States Government Life
Insurance (hereinafter, ``USGLI'') program the right to change
beneficiaries, and sections 1950 through 1952 of title 38 set
out the modes of payment to designated beneficiaries and sets
forth the procedure to be followed when a beneficiary either
has not been designated or dies before the insured.
For these two programs, the law does not specify the course
of action VA is to take when no beneficiary can be found. At
the Committee's July 10, 2003, hearing, VA Under Secretary for
Benefits Daniel L. Cooper testified that there are
approximately 4,000 existing NSLI and USGLI policies in which
payment has not been made because VA cannot locate the primary
beneficiary.
Committee bill
Section 102 would authorize the payment of NSLI and USGLI
to alternate beneficiaries, in order of precedence and as
designated by the insured veteran, if no claim is made by the
primary beneficiary within two years of the insured veteran's
death. If four years have elapsed since the death of the
insured and no claim has been filed by a person designated by
the insured as a beneficiary, section 102 would authorize VA to
make payment to a person VA determines to be equitably entitled
to such payment.

Section 103: Applicability to certain members of the National Guard of
authority for extension of eligibility for Survivors' and
Dependents' Educational Assistance

Background
In general, beneficiaries of the Survivors' and Dependents'
Educational Assistance program (hereinafter, ``DEA'') have 10
years (if the beneficiary is a surviving spouse), and 8 years
(if the beneficiary is a surviving child), in which to use
their education benefits. Section 3512(h) of title 38, United
States Code, permits persons eligible for DEA benefits who are
called to active duty service under various provisions of title
10 (which deal with retired military and reserve component
activation in times of war, national emergencies, or other
exigencies) to have these ``delimiting periods'' extended by
the length of time such persons are called to active duty, plus
an additional four months. This protection is in place so that
DEA beneficiaries whose pursuit, or planned pursuit, of
educational opportunities was interrupted due to service to the
Nation not be penalized. DEA beneficiaries who are members of
the National Guard and who arecalled to service under section
502(f) of title 32 (which deals with National Guard activation for
training or other purposes) do not have the same delimiting period
protections.
Committee bill
Section 103 would extend to persons ordered to full-time
National Guard duty under section 502(f) of title 32 the same
delimiting period extensions that exist for DEA beneficiaries
called to active duty under title 10.

Section 104: Increase in rates of Survivors' and Dependents'
Educational Assistance

Background
The Veterans Education and Benefits Expansion Act of 2001,
Public Law 107-103, raised DEA monthly benefits from $588 to
$670 (for full-time study), from $441 to $503 (for three-
quarter-time study), and from $294 to $335 (for half-time
study). Similar percentage increases were made to benefits paid
to eligible persons--generally, spouses and dependents of
veterans with total and permanent service-connected ratings, of
veterans who died as a result of service-related injuries, or
of service members who died while on active duty--pursuing a
program of education on a less than half-time basis through
institutional courses, farm cooperative programs, by
correspondence courses, or by special restorative training or a
program of apprenticeship or other approved on-the-job training
programs. In addition, section 3511(a)(1) of title 38, United
States Code, limits the total entitlement of DEA to 45 months
(or the equivalent thereof in part-time training). Thus,
multiplying the current full-time rate ($680 after a 2002 cost-
of-living increase) by the 45 months maximum entitlement yields
a current, maximum aggregate benefit of $30,600.
Despite this recent increase, DEA benefits have not kept
pace with increases made to Montgomery GI Bill (hereinafter,
``MGIB''), educational assistance benefits paid to active duty
service members and eligible veterans. On October 1, 2003, the
maximum monthly benefit under MGIB will be $985 and the
aggregate benefit will be $35,460, almost $5,000 more than the
DEA aggregate. VA's Under Secretary for Benefits, Daniel L.
Cooper, testified at the July 10, 2003, Committee hearing that
DEA benefits once equaled and, for a time, exceeded education
benefits for veterans. Further, VA's Deputy Secretary, Dr. Leo
Mackay, in connection with a Committee hearing on June 28,
2001, stated that VA ``believe[s] it is only fair that these
benefits should be at the same level as those provided to
veterans.''
Committee bill
In combination with a planned cost-of-living increase
expected at the end of 2003, section 104 would raise monthly
survivors' and dependents' educational assistance benefits by
15.8 percent over current levels. The new rates would be set at
$788 for full-time study, $592 for three-quarter time study,
and $394 for half-time study. A 15.8 percent increase would
also be made to benefits paid to eligible persons pursuing a
program of education on a less than half-time basis, through
institutional courses, farm cooperative programs, by
correspondence courses, or by special restorative training or a
program of apprenticeship or other approved on-the-job training
programs. The increases would take effect on July 1, 2004, and
would result in the aggregate DEA benefit for full-time study
equaling the aggregate MGIB benefit of $35,460.

Section 105: Repeal of two-year limitation on payment of accrued
benefits at death

Background
Section 5121 of title 38, United States Code, provides that
VA monetary benefits to which an individual was entitled at
death under existing ratings or decisions, or those based on
evidence on file at the date of death, and due and unpaid for,
at most, two years upon the date of death (so-called ``accrued
benefits''), shall be payable to the claimant's eligible
survivor(s). An application for accrued benefits must be filed
within one year after the date of a claimant's death.
Before the United States Court of Appeals for Veterans
Claims (hereinafter, ``CAVC'') issued its decision in Bonny v.
Principi, 16 Vet. App. 504 (2002), VA interpreted section 5121
to limit the payment of accrued benefits to two years
irrespective of whether the payment was based on an existing
rating or decision or based on evidence on file at the date of
death. In Bonny, however, the Court ruled that the limitation
applies only to accrued benefits based on evidence in the file
at the date of death and not to accrued benefits due under an
individual's existing rating or decisions. In the latter case,
then, the two-year limitation does not apply; under Bonny, such
individuals are entitled to accrued benefits without regard to
that limit.
At the Committee's hearing on July 10, 2003, Under
Secretary Cooper commented as follows: ``The distinction the
Bonny decision draws between the two categories of claimants--
those whose claims had been approved and those whose
entitlement had yet to be recognized when they died--is really
one without a difference. In either case, a claimant's estate
is deprived of the value of benefits to which the claimant was,
in life, entitled.''
Chapter 18 of title 38 authorizes monthly monetary
allowances, vocational rehabilitation services, and health
care, to children born of Vietnam veterans who are suffering
from spina bifida and, in the case of children born of women
Vietnam veterans, other covered birth defects. Currently,
parents are not authorized to file claims for accrued benefits
under section 5121 which are due to children eligible for
benefits under Chapter 18 of title 38.
Committee bill
Section 105 would remove the two-year limitation on accrued
benefits. It would also authorize parents to file claims for
accrued benefits due to children eligible for benefits under
Chapter 18 of title 38.

Section 201: Burial Plot Allowance

Background
Veterans who are discharged from active service as a result
of a service-connected disability, veterans who are entitled to
disability compensation or VA pension, and veterans who die in
a VA facility, are eligible for a $300 VA ``plot allowance'' if
they are not buried in a national cemetery. Section 2303(b)(1)
of title 38, United States Code, allows State cemeteries to
receive the $300 plot allowance payment for the interment of
such veterans, and the interment of veterans of any war, if the
cemeteries are used solely for the burial of veterans. However,
states may not receive a plot allowance for burial of veterans
who die as a result of a service-connected disability and whose
survivors seek reimbursement of funeral expenses under section
2307 of title 38 (which currently authorizes a $2,000 funeral
expense benefit).
The State Cemetery Grants Program, designed to complement
VA's national cemetery system, was established in 1978 to
assist States in meeting costs associated with building,
expanding, or improving State cemeteries. Generally speaking,
States provide the land where State cemeteries will be located,
and they are responsible for funding the administration and
maintenance of State cemeteries. VA assists, by making grants,
in the construction of cemetery facilities on the State-
provided land. States typically use plot allowance money to
help defray some of their administrative and maintenance costs.
Committee bill
Section 201 would expand existing law to allow States to
receive the $300 plot allowance for the interment of veterans
who did not serve during a wartime period and for the interment
of veterans who died as a result of service-connected
disabilities and whose survivors sought reimbursement of
funeral expenses under section 2307 of title 38.

Section 202: Eligibility of surviving spouses who remarry for burial in
national cemeteries

Background
Section 2402(5) of title 38, United States Code, authorizes
a veteran's spouse, surviving spouse, and eligible child to be
buried along with the veteran in a national cemetery. If,
however, a surviving spouse dies while he or she is remarried,
there is no provision in law which grants that spouse the same
national cemetery burial entitlement. In such cases, families
must request a waiver from VA.
Committee bill
Section 202 would extend national cemetery burial
eligibility to surviving spouses who have remarried.

Section 203: Permanent authority for State Cemetery Grants Program

Background
Section 2408(a) of title 38, United States Code, authorizes
VA to make grants to any State to assist in establishing,
expanding, or improving State veterans' cemeteries. The
Secretary's authority to make such grants expires on Oct. 1,
2004.
The State Cemetery Grants Program has proven to be an
important asset in helping VA meet the burial needs of
veterans. The program has helped to fund 49 operational state
cemeteries, and six more are now under construction. VA
indicates that demand for grants under the program is high, and
that permanently extending the program would assist in long-
term planning.
Committee bill
Section 203 would permanently authorize the State Cemetery
Grants Program.

Section 204: Provision of markers for privately marked graves

Background
Section 502 of Public Law 107-103, the Veterans Education
and Benefits Expansion Act of 2001, authorized VA to furnish a
government headstone or marker for the grave of an eligible
veteran buried in a non-veterans' cemetery irrespective of
whether the grave was already marked with a private marker. The
law applied to veterans whose deaths occurred on or after
December 27, 2001. Public Law 107-330 extended this authority
to include deaths occurring on or after September 11, 2001.
From October 18, 1979, until November 1, 1990, VA paid a
headstone or marker allowance to families who purchased a
private headstone or marker in lieu of a Government headstone
or marker. Thus, those families, like families of veterans who
died on or after September 11, 2001, have had the opportunity
to benefit from the VA-marker program regardless of whether a
veteran's grave was previously marked. Only the families of
veterans who died between November 1, 1990, and September 11,
2001, have had no such opportunity.
Committee bill
Section 204 would amend the Veterans Education and Benefits
Expansion Act of 2001 to authorize VA to furnish a government
headstone or marker for the grave of an eligible veteran buried
in a private cemetery, irrespective of whether the grave was
already marked with a private marker, for deaths occurring on
or after November 1, 1990.

Section 301: Two-year extension of round-down requirement for
compensation cost-of-living adjustments

Background
Sections 1104(a) and 1303(a) of title 38, United States
Code, mandate that yearly cost-of-living adjustments made to
rates of compensation and DIC be rounded down to the nearest
whole dollar amount. This authority expires on September 30,
2011.
Committee bill
Section 301 would extend the round down authority under
sections 1104(a) and 1303(a) through fiscal year 2013.

Section 302: Presumptions of service-connection relating to diseases
and disabilities of former prisoners of war

Background
For purposes of establishing entitlement to disability
compensation, section 1112(b) of title 38, United States Code,
contains a list of 15 disabilities and diseases which are
presumed to have been caused by the internment or detainment of
former prisoners of war (hereinafter, ``POWs''), so long as
such detainment or interment was for a period of 30 days or
more. This presumptive list includes mental and physical
diseases or disabilities which, based on available scientific
evidence, are reasonably expected to manifest if POWs are
traumatized, malnourished, or kept in unsanitary conditions for
extended periods of time.
POWs are often subjected to brutal treatment by their
captors while interned. But even if they are treated humanely,
they suffer extreme mental anguish. As Rick Jones of AMVETS
testified at the Committee's July 10, 2003, hearing: ``The
traumatic experience of meeting an enemy face-to-face, not
knowing what is going to happen next, is sufficient stress even
though a long period of incarceration does not follow.'' Thus,
the 30-day minimum internment requirement for purposes of
presumptive service-connection may be too restrictive for
certain conditions. Under Secretary of Benefits Cooper
concurred when he testified at the same hearing that ``[r]ecent
experience has indicated, however, that, despite the shorter
duration [of POW internments], the conditions of detention or
internment may be such that these former POWs may suffer from
many of the same diseases for which a presumption of service-
connection is available. * * *''
On July 18, 2003, VA published a final rule adding
cirrhosis of the liver to the list of diseases for which
entitlement to service-connection is presumed for former POWs.
VA took this action on the strength of an Institute of Medicine
study which found a significantly higher risk of cirrhosis and
cirrhosis mortality among former World War II POWs compared
with control groups. The study found that alcohol consumption
did not provide an explanation for the higher levels of
cirrhosis mortality.
Committee bill
Section 302 would divide the current presumptive list of
diseases for former POWs into two lists, and apply a different
minimum internment threshold for each. The first presumptive
list would require no minimum internment period and would
include diseases associated with mental trauma, or acute
physical trauma, which could plausibly be caused by even a
single day of captivity. The first list would include
psychosis, any of the anxiety states, dysthymic disorder (or
depressive neurosis), organic residuals of frostbite (if the
Secretary determines that a veteran was interned in conditions
consistent with the occurrence of frostbite), and post-
traumatic osteoarthritis. Recognizing that the remaining
diseases on the current presumptive list would more likely
manifest after a prolonged internment, the second list retains
the 30-day minimum internment requirement, but adds cirrhosis
of the liver to that list. With the addition of cirrhosis of
the liver, the second list would include avitaminosis,
beriberi, chronic dysentery, helminthiasis, malnutrition,
pellagra, any other nutritional deficiency, cirrhosis of the
liver, peripheral neuropathy, irritable bowel syndrome, and
peptic ulcer disease. The Committee notes that VA will
establish a Workgroup on Medical Presumptive Conditions in
Former POWs to establish procedures, guidelines, and standards
to determine whether additional diseases should be added to the
presumptive lists. The Committee expects that VA will continue
to monitor research on the health effects of POW internment
and, as with cirrhosis of the liver, make amendments to the
presumptive list, as appropriate.

Section 303: Repeal of requirement for minimum period of internment of
prisoners of war for dental care

Background
Section 1712(a)(1)(F) of title 38, United States Code,
authorizes free outpatient dental services to POWs interned for
90 days or more.
Committee bill
In recognition of the sacrifices made by POWs, and without
regard to whether a dental condition resulted from internment,
section 303 would eliminate the 90-day internment period
required for POW entitlement to outpatient dental services.

Section 304: Rounding down of certain cost-of-living adjustments on
education assistance

Background
Sections 3015(h) and 3564 of title 38, United States Code,
provide for annual cost-of-living adjustments to both the
Montgomery GI Bill and Survivors and Dependents Educational
Assistance programs. Each section specifies that percentage
increases be ``rounded to the nearest dollar.''
Committee bill
Section 304 would require annual percentage adjustments
under sections 3015(h) and 3564 to be rounded down to the
nearest dollar. This section would first apply to adjustments
made at the start of fiscal year 2005.

Section 305: Termination of education loan program

Background
VA administers an education loan program, in effect since
January 1, 1975, which makes loans of up to $2,500 per academic
year to veterans' spouses and surviving spouses who have
remaining entitlement to Survivors and Dependents Educational
Assistance benefits but who are past the ``delimiting period''
for eligibility. No loan has been issued under this program for
several years. There are currently 20 loans outstanding with a
total pending balance of less than $15,000 collectively. It
costs VA $70,000 per year to administer the program.
Committee bill
Section 305 would repeal the education loan program and
waive any existing repayment obligations.

Section 306: Termination of authority to guarantee loans to purchase
manufactured homes and lots

Background
Section 3712 of title 38, United States Code, authorizes VA
to guarantee loans for the purchase of a manufactured home and
a lot on which it is sited. Only three loans have been
guaranteed under this program since fiscal year 1995. Due to
the low loan volume, lender interest in using the VA
manufactured loan program is almost non-existent. In addition,
of the loans VA has guaranteed under the program, 38.7 percent
have gone to foreclosure over the past 30 years.
Committee bill
Section 306 would eliminate the authority of VA to
guarantee loans to purchase a manufactured home and the lot on
which it is sited. VA would continue servicing existing loans
and pay claims on those loans. The Committee notes that VA
would retain the ability to guarantee loans on manufactured
homes under the authority of section 3710(a)(9) of title 38.

Section 307: Increase in loan fee for subsequent loans closed before
October 1, 2011

Background
Under VA's home loan guaranty program, VA may guaranty a
portion of a loan made to eligible service members, veterans,
reservists, and certain unremarried surviving spouses for the
purchase (or refinancing) of houses, condominiums, and
manufactured homes. Section 3729(b)(2) of title 38, United
States Code, sets forth a loan fee table which lists funding
fees (expressed as a percentage of the loan amount) for
different types of loans. The funding fee for a beneficiary's
initial home loan varies according to the amount of down-
payment paid by the beneficiary. The funding fee for the use of
VA's loan guaranty on loans subsequent to the beneficiary's
first such loan is currently set at three percent for all
beneficiaries. On October 1, 2011, the funding fee will be
reduced to one and one-quarter percent for veterans, service
members, and surviving spouses, and reduced to two percent for
reservists.
Committee bill
Section 307 would increase, effective October 1, 2004, the
funding fee for subsequent use loans to three and one-half
percent for all eligible beneficiaries. On October 1, 2011, the
funding fee on subsequent use loans would still be reduced to
one and one-quarter percent for veterans, service members, and
surviving spouses, and two percent for reservists.

Section 308: Reinstatement of minimum requirements for sale of vendee
loans

Background
Section 3733(a) of title 38, United States Code, authorizes
VA to finance the purchase of properties it has acquired, as
guarantor, as a result of foreclosure. Until recently, this so-
called ``vendee loan'' authority was used as a tool to dispose
of properties quickly at the highest possible return to the
government.
In its fiscal year 2003 budget submission, VA announced
that it would administratively terminate the vendee loan
program effective January 31, 2003. Before the termination of
the program, VA financed approximately 60 percent of its
property sales using vendee loan financing.
The utility of vendee loans in selling properties quickly
was validated by a March 28, 2000, report to VA by the
consulting firm of Booz Allen & Hamilton. The Booz Allen report
concluded that vendee financing enables VA to get a higher
return on its properties than it could secure using ``cash-
only'' sales alone. The report stated that ``the comparison of
revenues and expenses for properties and loans over the life
cycle of VA's interest and liability indicates that properties
sold via seller financing (term sales) achieve a higher net
value to VA than do properties sold for cash (cash sales),''
and thus concluded that vendee financing ``has merit as an
option for the sale of VA property.''
Committee bill
Section 308 would reinstate the vendee loan program as a
property management tool, and would require VA to dispose of
between 50 and 85 percent of acquired properties using vendee
loans.

Section 309: Operation of Native American veteran housing loan program

Background
Subchapter V of chapter 37 of title 38, United States Code,
directs VA to establish and implement a pilot program under
which VA makes direct housing loans to Native American
veterans. Under the Native American Veteran Direct Loan Program
(hereinafter, ``NAVDLP''), loans are available for the
purchase, construction, or improvements of homes on Native
American trust lands, and for the refinancing of existing
loans. A total of 289 loans have been made under the program
from its inception in 1993 to September 30, 2002. The program
is scheduled to expire on December 31, 2005.
In a letter to Chairman Specter dated June 11, 2003, Under
Secretary for Benefits Cooper wrote that VA was compelled to
cease making loans under the NAVDLP pursuant to a statutory
limitation, placed by Public Law 108-7, on the dollar value of
new loans placed on the program. Title I of Division K of
Section 3 of that statute, the Consolidated Appropriations
Resolution of 2003, states that ``no new loans in excess of
$5,000,000 may be made in fiscal year 2003.'' According to
Under Secretary Cooper, the loan limitation was imposed due to
technical budget requirements that require a loan level ceiling
when a loan program has a negative subsidy rate. Fiscal Year
2003 was the first time the NAVDLP had a negative subsidy rate.
Because of historically low interest rates driving demand for
loan refinances, VA quickly exceeded the loan limit, and has
had to suspend loan payments to Native American veterans.
Committee bill
Section 309 would eliminate the cap on the statutory
limitation on the dollar value of new loans placed on the
NAVDLP during fiscal year 2003.

Section 310: Time limitations on receipt of claim information pursuant
to requests of Department of Veterans Affairs

Background
Section 5102(b) of title 38, United States Code, requires
that VA, in cases where it receives an application for benefits
that is not complete, notify the applicant of the information
that is necessary to complete the application for benefits.
Similarly, section 5103(a) of title 38 requires that VA, when
it receives a complete or a substantially complete application
for benefits, notify the applicant of any information or
evidence necessary to substantiate the claim. Section 5103(b)
states that if information or evidence requested under section
5103(a) is not received within one year of the date of such
notification, then no benefits may be paid by reason of that
application for benefits.
Prior to the enactment of the Veterans Claims Assistance
Act of 2000 (hereinafter, ``VCAA''), Public Law 106-475, a one-
year time window was afforded to claimants for providing
information and evidence necessary to complete an application
for benefits. VCAA created a new one-year limitation with
respect to the time claimants have to submit evidence necessary
to substantiate claims, but the statute omitted to restate the
one-year time limitation with respect to completion of an
initial application for benefits. VA has informed the Committee
that the omission could be construed to prohibit VA from ever
closing an application as abandoned.
VA has also expressed concern that VCAA's one-year time
limitation on substantiating a claim might be construed to
prohibit VA from issuing an initial decision on a claim prior
to the lapse of a one-year period beginning with the date VA
sent notice to a claimant requesting necessary information and
evidence. Under such a construction, if VA were to have
sufficient evidence to grant benefits, but it still lacked a
particular piece of evidence requested of the claimant and
previously thought necessary to substantiate the claim, VA
would be required to wait a full year from the date the
evidence was requested before it would award benefits. Such an
interpretation would not advance the interests of VA claimants.
Nor would it be consistent with VA's legitimate interests in
timely adjudicating claims and reducing claims backlogs.
Committee bill
Section 310 would require that claimants who have submitted
an incomplete application under section 5102(b) of title 38 and
who have been notified that information is required to complete
the application submit the information within one year of the
date of notification or else no benefit would be paid by reason
of the application. It would also clarify section 5103(b) by
stating that that subsection would not be construed to prohibit
VA from making a decision on a claim before the expiration of
the one-year period. The Committee emphasizes that, in cases
where VA has notified claimants of information or evidence
necessary to substantiate their claims and no information or
evidence is received within a reasonable period, VA may still,
under the Committee Bill language, make a decision on the
claim. In such cases, the one-year time period would still
enable a claimant to submit the requested information or
evidence and if benefits are granted on readjudication, assign
an effective date of award as if VA had not made the initial
decision.

Section 311: Clarification of applicability of prohibition on
assignment of veterans benefits to agreements on future receipt
of certain benefits

Background
Section 5301 of title 38, United States Code, prohibits the
assignment of VA benefits and exempts such benefits from
taxation and from the claims of creditors. Despite this
prohibition, the Committee is informed that some companies
offer up-front cash payments in return for future payments of
veterans' disability compensation. Worse, Senator Bill Nelson
testified at the Committee's July 10, 2003, hearing that such
``up-front'' payments typically amountto pennies-on-the-dollar
compared to forfeited compensation payments. The National Consumer Law
Center, in a report highlighting consumer scams targeted at veterans,
concluded that such arrangements are illegal under existing law.
Nonetheless, they apparently persist.
Committee bill
Section 311 would clarify current statutory language
prohibiting the assignment of benefits and specify that any
agreement under which a VA beneficiary might purport to
transfer to another person or entity the right to receive
direct or indirect payments of compensation, pension, or DIC
benefits shall be deemed to be a prohibited assignment. Section
311 would also make it clear, however, that such prohibitory
language would not bar loans to VA beneficiaries which might be
repaid with funds derived from VA so long as each periodic
payment made under the loan is separately and voluntarily
executed by the beneficiary at the time the payment is made.
This language is intended to make clear that the reach of
section 311 is limited, and does not hamper veterans' access to
credit from legitimate sources. The Committee expects that VA
will continue its outreach efforts to notify veterans that
benefit assignment schemes are not only inadvisable, they are
legally unenforceable.

Section 312: Three-year extension of income verification authority

Background
Section 5317 of title 38, United States Code, directs VA to
notify applicants for needs-based VA benefits--e.g., VA
pension--that information collected from the applicants may be
compared with income-related information obtained by VA from
the Internal Revenue Service and the Department of Health and
Human Services. The authority of the VA Secretary to obtain
such information expires on September 30, 2008.
Section 6103(l)(7)(D)(viii) of the Internal Revenue Code
authorizes the release of income information by the Internal
Revenue Service to VA. This authority expires on September 30,
2008.
Committee bill
Section 312 would extend until September 30, 2011, the
authority of the VA Secretary to obtain income information
under section 5317 of title 38, and the authority of the
Internal Revenue Service to share income information under
section 6103(l)(7)(D)(viii) of the Internal Revenue Code.

Section 313: Forfeiture of benefits for subversive activities

Background
Section 6105 of title 38, United States Code, provides that
individuals convicted of any of several enumerated offenses
relating to subversive activities shall forfeit their claims to
VA benefits.
Committee bill
Section 313 would expand the listing of criminal activities
in section 6105 which would give rise to the forfeiture of VA
benefits. Included would be offenses involving the use of
biological or chemical weapons, offenses involving transactions
in nuclear materials, and genocide, the use of weapons of mass
destruction, and acts of terrorism transcending national
boundaries.

Section 314: Clarification of notice of disagreement for appellate
review of Department of Veterans Affairs activities

Background
Claimants for VA benefits who disagree with an initial
decision rendered by VA may initiate an appeals process by
submitting a written notice of disagreement (hereinafter,
``NOD'') within one year after the claimant was notified of the
initial decision. Section 7105(b) of title 38, United States
Code, states that an NOD ``must be in writing and filed with
the activity which entered the determination with which
disagreement is expressed.'' Upon the timely filing of an NOD,
the VA is required to provide appellate review of its initial
benefits rating decision.
VA has promulgated regulations to implement section 7105
which state that ``while special wording is not required, the
Notice of Disagreement must be in terms which can be reasonably
construed as disagreement with the determination and desire for
appellate review.'' 38 CFR Sec. 20.201 (2002). In 2000, the
U.S. Court of Appeals for Veterans' Claims held in Gallegos v.
Gober, 14 Vet. App. 50 (2000), that VA's regulation was invalid
because it required more of the claimant than was required by
statute. However, the U.S. Court of Appeals for the Federal
Circuit reversed CVAC's decision, see Gallegos v. Principi, 283
F.3d 1309 (Fed. Cir. 2002), finding that VA was entitled to
deference in promulgating this regulation because Congressional
intent was unclear.
Committee bill
Section 314 would clarify section 7105(b) by requiring that
VA deem any written document which expresses disagreement with
a VA decision to be an NOD unless VA finds that the claimant
has disavowed a desire for appellate review. This section would
be effective with respect to documents filed on or after the
date of enactment, and with respect to documents filed before
the date of enactment and not treated by the VA as an NOD
pursuant to part 20.201 of title 38, Code of Federal
Regulations. Furthermore, a document filed as an NOD after
March 15, 2002, and rejected by the Secretary as insufficient
would, at VA motion or at the request of a claimant within one
year of enactment, be deemed to be an NOD if the document
expresses disagreement with a decision and VA finds that the
claimant has not disavowed a desire for appellate review.

Section 321: Rate of payment of benefits for certain Filipino veterans
and their survivors residing in the United States

Background
Section 107 of title 38, United States Code, specifies that
World War II service by Filipinos in the organized military
forces of the Commonwealth of the Philippines (the so-called
Philippine Commonwealth Army), including service in organized
guerilla forces under U.S. command, shall be considered to be
active service in U.S. forces for purposes of eligibility for
veterans benefits, but only as provided by law. Similarly, that
statute specifies that service as a so-called new Philippine
Scout under section 14 of the Armed Forces Voluntary
Recruitment Act of 1945 will be considered to be active service
in U.S. forces for purposes of veterans benefits, but only as
specified by law. Under the terms of section 107, WWII veterans
of the Philippine Commonwealth Army and recognized guerilla
forces (and their spouses and dependent children) are eligible
for, among other benefits, VA disability compensation and VA
dependency and indemnity compensation. For Commonwealth Army
veterans residing outside the United States, such benefits are
payable at the rate of $.50 for each dollar of benefit that
would otherwise be paid. For Commonwealth Army veterans (or
their spouses and dependent children) legally residing in the
United States, however, compensation is payable at the full
dollar rate, but DIC benefits are only payable at the $.50-on-
the-dollar rate. Veterans of the new Philippine Scouts (or
their spouses and dependent children) are also eligible for
compensation and DIC benefits under section 107, but both
benefits are paid on a $.50-on-the-dollar basis whether the
former new Philippine Scout resides in the United States or
elsewhere.
By letter dated May 12, 2003, VA Secretary Anthony J.
Principi proposed legislation (S. 1213) on behalf of the
Administration to modify the above-summarized statute, stating
as follows:

These limitations on benefit payments to certain
Filipino beneficiaries were intended to reflect the
differing economic conditions in the Philippines and
the United States. * * * Through the years, numerous
Filipino veterans and their dependents and survivors
have emigrated to this country, and many have become
permanent residents or citizens. It became evident that
the policy considerations underlying the restrictions
on payment of compensation and DIC to the affected
individuals are no longer relevant in the case of those
who reside in the United States.

Committee bill
Sections 321 would make Commonwealth Army veteran spouses
and dependent children who are legally residing in the United
States eligible for DIC at the full dollar rate. It would also
make new Philippine Scout veterans (and their spouses and
dependent children) who are legally residing in the United
States eligible for compensation and DIC at the full dollar
rate.

Section 322: Burial benefits for new Philippine Scouts residing in the
United States

Background
As is discussed above, WWII veterans of the Philippine
Commonwealth Army, recognized guerilla forces, and former new
Philippine Scouts are eligible for some--but not all--VA
benefits. Commonwealth Army and guerilla force veterans are
eligible for burial in VA national cemeteries; former new
Philippine Scouts are not. Similarly, Commonwealth Army and
guerilla force veterans are eligible for VA monetary burial
benefits (at a full dollar rate if they were residing, at
death, in the U.S.; otherwise, at a $.50-on-the-dollar rate);
former new Philippine Scouts are not.
Committee bill
Section 322 would grant to former new Philippine Scouts who
are residents of the United States at death eligibility for
national cemetery burial. In addition, it would grant to former
new Philippine Scouts who legally reside in the United States
eligibility for cash burial benefits at the full dollar rate.

Section 323: Extension of authority to operate regional office in the
Philippines

Background
Section 315(b) of title 38, United States Code, authorizes
VA to maintain a regional office in the Republic of the
Philippines until December 31, 2003. VA has determined that it
would be more costly, and less effective, to administer
veterans' assistance activities in the Philippines through a
Federal Benefits Unit attached to the Department of State than
to maintain a VA regional office.
Committee bill
Section 323 would authorize VA to maintain a regional
office in the Republic of the Philippines until December 31,
2008.

Section 331: Dose reconstruction program of Department of Defense

Background
Section 3.311 of title 38, Code of Federal Regulations,
sets out procedures for the adjudication of claims by VA for
benefits premised on a veteran's exposure to ionizing radiation
in service. For veterans who claim radiation exposure due to
participation in nuclear atmospheric testing from 1945 through
1962, or due to occupation duty in Hiroshima and Nagasaki prior
to July 1, 1946, dose data are requested from DoD. DoD's
Defense Threat Reduction Agency (hereinafter, ``DTRA'') pays a
private contractor to estimate radiation exposure through a
process called radiation dose reconstruction. VA relies on
radiation dose reconstruction estimates to determine
whetherdiseases suffered by radiation-exposed veterans are plausibly
related to given levels of radiation exposure.
Section 305 of Public Law 106-419 mandated that the
Secretary of Defense contract for a report from the NAS to
assess the accuracy of dose reconstruction estimates provided
by DTRA and the overall validity of the radiation dose
reconstruction process. The report, released on May 8, 2003,
concluded that the radiation dose reconstruction program often
underestimates exposure due to faulty or questionable
assumptions about troop location and average dose readings
contained on film badges. The report also determined that the
contractor which provides the estimates for DTRA could benefit
from the implementation of a quality control program. Finally,
the report recommended the creation of an independent oversight
system in order to monitor the radiation dose reconstruction
program.
Committee bill
Section 331 would require VA and DoD to review, and report
on, the mission, procedures, and administration of the
radiation dose reconstruction program. It would also require VA
and DoD to establish an advisory board to oversee the program.
It is not the Committee's intent that VA and DoD duplicate the
work of the NAS study. It does intend, however, that the
agencies implement corrective actions recommended by the NAS
report, and put into place an ongoing oversight and review
program.

Section 332: Study on disposition of Air Force Health Study

Background
In the late 1970's, Congress urged the DoD to conduct an
epidemiologic study of veterans of ``Operation Ranch Hand,''
the activity responsible for aerial spraying of herbicides
during the Vietnam War. In response, the Air Force Health Study
(hereinafter, ``AFHS'') was initiated in 1982 to examine the
effects of herbicide exposure and health, mortality, and
reproductive outcomes in veterans of Operation Ranch Hand. The
study will conclude in 2006.
Over the course of Operation Ranch Hand study, numerous
medical documents, biological samples, and computer records
have been collected on Ranch Hand participants and their family
members. It is anticipated that these records and samples will
no longer be maintained once the study is concluded.
Committee bill
Section 332 would direct VA to enter into an agreement with
NAS under which NAS would to report on the following: (1) the
scientific merit of retaining AFHS data after the Ranch Hand
study is terminated; (2) obstacles to retaining the AFHS data
which may exist; (3) the advisability of providing independent
oversight of the data; (4) the advisability and prospective
costs of extending the study, and the identity of an entity
which would be suited to continue the study; and (5) the
advisability of making lab specimens from the study available
for independent research.

Section 333: Funding of Medical Follow-Up Agency of Institute of
Medicine of National Academy of Sciences for Epidemiological
Research on members of the Armed Forces and Veterans

Background
The Medical Follow-Up Agency (hereinafter, ``MFUA'') is a
panel of the Institute of Medicine which researches military
health issues. MFUA studies are relied upon by VA to evaluate
whether specific environmental exposures during service might
have long-term health effects, and whether such effects might
suggest a need for veterans' benefits, new treatments, or
further research. Public Law 102-585 requires that VA and DoD
each contribute $250,000 in annual core funding to MFUA for a
period of 10 years.
At the Committee's July 10, 2003, hearing, VA Under
Secretary Cooper was very direct about the importance of MFUA's
studies to VA and veterans. He stated as follows: ``In short,
the MFUA is a critical asset for VA.''
Committee bill
Section 333 would mandate VA and DoD funding for MFUA, at
current levels, from fiscal year 2004 through 2013.

Section 341: Four-year extension of advisory Committee on Minority
Veterans

Background
Section 544 of title 38, United States Code, mandates that
VA establish an Advisory Committee on Minority Veterans. The VA
Secretary must, on a regular basis, consult with and seek the
advice of the Advisory Committee with respect to issues
relating to the administration of benefits for minority group
veterans. The Secretary must also consult with and seek the
advice of the Committee with respect to reports and studies
pertaining to such veterans, and the needs of such veterans for
compensation, health care, rehabilitation, outreach, and other
benefits and programs administered by the VA. The Advisory
Committee is required to submit an annual report providing its
assessment of the needs of minority veterans, VA programs
designed to meet those needs, and any recommendations the
Advisory Committee considers appropriate. The authorization for
the Advisory Committee expires on December 31, 2003.
Committee bill
Section 341 would extend the authorization of the Advisory
Committee on Minority Veterans until December 31, 2007.

Section 342: Veterans' Advisory Committee on Education

Background
Section 3692 of title 38, United States Code, authorizes
the establishment in VA of the Veterans' Advisory Committee on
Education, and specifies that Advisory Committee members shall
include veterans representative of each war and peacetime era
beginning with World War II. The authorization for the Advisory
Committee is scheduled to expire on December 31, 2003.
Committee bill
Section 342 would extend the Advisory Committee's
authorization through the year 2013. Section 342 would also
maintain the existing requirement that the Advisory Committee's
membership include veteran-representatives drawn from each war
and peacetime era, but only as practicable.

Section 343: Temporary authority for performance of medical
disabilities examinations by contract physicians

Background
In order that VA might determine the type and severity of
disabilities of veterans filing for VA compensation or pension
benefits, VA often requires thorough medical disability
examinations. Because these exams form the basis of disability
ratings, their accurate and timely completion is essential. The
majority of the approximately 400,000 disability exams
requested yearly are performed by staff of VA's Veterans Health
Administration (hereinafter, ``VHA'').
In order that the effectiveness of the private sector's
ability to perform specialized disability examinations might be
gauged, section 504 of Public Law 104-275 authorized a contract
disability examination pilot program to be carried out through
ten VA regional offices. Currently, one contractor--QTC
Management, Inc.--performs all of the examinations under the
pilot program. About half of the examinations performed at the
ten regional offices are performed by contract physicians; the
other half are performed by VHA staff.
The pilot program has been judged a successful complement
to VHA-provided examinations. The 2001 report issued by the VA
Claims Processing Task Force entitled VA Claims Processing Task
Force: Report to the Secretary of Veterans Affairs (October
2001), gave high marks to the contractor's performance and
recommended that the contract disability examination pilot
program be expanded. The report stated as follows: ``The
quality of QTC Management exams has been reported to exceed a
99 percent adequacy rate, and the Task Force found high
approval from Regional Office employees. Reported medical
examination timeliness was within contract compliance with
positive feedback in customer service surveys.'' Id. at 70.
Veterans groups are also pleased with the program's
performance. The Independent Budget for Fiscal Year 2004, a
product of four major veterans' service organizations--AMVETS,
Disabled American Veterans, Paralyzed Veterans of America, and
the Veterans of Foreign Wars--stated the following regarding
the pilot program:

Experience gained from a pilot project and a contract
authorized by Public Law 104-275 demonstrates that a
private contractor can economically provide adequate
and timely disability examinations to veterans at
locations near their homes with a high level of veteran
satisfaction. Authority for contract examinations at
all its regional offices would allow VA to improve
claims processing nationwide.

The Independent Budget for Fiscal Year 2004: A Comprehensive
Budget and Policy Document Created by Veterans for Veterans
(2003) at 27. The American Legion, in testimony given by Ms.
Cathleen Wiblemo at the Committee's hearing on July 28, 2003,
also expressed its desire to see the contract medical
examination authority expanded and made permanent.
Committee bill
Section 343 would authorize VA, using funds subject to
appropriation, to contract for disability examinations from
non-VA providers at all VA regional offices. Such examinations
would be conducted pursuant to contracts entered into and
administered by the Under Secretary for Benefits. The
Secretary's authority under this section would expire on
December 31, 2009. No later than four years after the section's
enactment, the Secretary would be required to submit a report
assessing the cost, timeliness, and thoroughness of disability
examinations performed under this section. VA's existing
authority to contract for medical exams at ten regional
offices, paid out of the compensation and pension account,
would continue in force notwithstanding the enactment of
section 343.
The Committee expects that the expanded contract authority
specified in this provision would serve as a complement to, and
not a substitute for, examinations performed by VHA staff. The
Committee is aware of the tremendous backlog of patients
seeking medical care at many VA medical centers and clinics and
views the expanded contract authority provided by this section,
if used judiciously, as one way VA may free VHA resources to
focus on the provision of direct medical care to veterans.

Section 344: Technical amendment

Background
Section 403 of the Homeland Security Act of 2002, Public
Law 107-296, transferred the functions, personnel, assets, and
liabilities of the United States Coast Guard from the
Department of the Transportation to the newly-created
Department of Homeland Security.
Section 1974(a)(5) of title 38, United States Code,
specifies the officials who shall be members of VA's Advisory
Council onServicemembers' Group Life Insurance. Among the
officials listed is the Secretary of Transportation. As was stated in
H. Report No. 91-1025 at 3 accompanying the legislation, Public Law 91-
291 (1970), which added The Department of Transportation to the listing
of agencies specified in section 1974, ``the Secretary of
Transportation [is added] to the Advisory Council of SGLI since that
official now has responsibility for the Coast Guard.''
Committee bill
Section 344 of the Committee bill substitutes ``Secretary
of Homeland Security'' for ``Secretary of Transportation'' in
38 U.S.C. Sec. 1974(a)(5). The Secretary of Homeland Security
now has responsibility for the Coast Guard.

Cost Estimate

In compliance with paragraph 11(a) of rule XXVI of the
Standing Rules of the Senate, the Committee, based on
information supplied by the Congressional Budget Office
(hereinafter, ``CBO''), estimates that enactment of the
Committee bill would reduce direct spending for veterans
programs by $346 million in 2004, increase direct spending by
$2 million over the 2004-2008 period, and reduce direct
spending by $7 million over the 2004-2013 period. In addition,
CBO estimates that implementing the Committee bill would cost
$129 million in 2004 and almost $1.4 billion over the 2004-2008
period, assuming appropriation of necessary amounts. Enactment
of the Committee bill would not affect the budgets of state,
local, or tribal governments.
The cost estimate provided by CBO, setting forth a detailed
breakdown of costs, follows:
U.S. Congress,
Congressional Budget Office,
Washington, DC, October 16, 2003.
Hon. Arlen Specter,
Chairman, Committee on Veterans' Affairs,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office (CBO)
has prepared the enclosed cost estimate for S. 1132, the
Veterans' Benefits Enhancements Act of 2003.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Sunita
D'Monte.
Sincerely,
Douglas Holtz-Eakin,
Director.
Enclosure.

Veterans' Benefits Enhancements Act of 2003

Summary: S. 1132 would affect several veterans programs,
including housing, readjustment benefits, compensation,
pensions, burial, and health care. CBO estimates that enacting
this legislation would reduce direct spending for veterans
programs by $46 million in 2004, increase direct spending by $2
million over the 2004-2008 period, and reduce direct spending
by $7 million over the 2004-2013 period. In addition, CBO
estimates that implementing S. 1132 would cost $129 million in
2004 and almost $1.4 billion over the 2004-2008 period,
assuming appropriation of the necessary amounts.
S. 1132 contains no intergovernmental or private-sector
mandates as defined by the Unfunded Mandates Reform Act (UMRA)
and would impose no costs on state, local, or tribal
governments.
Estimated cost to the Federal Government: The estimated
budgetary impact of S. 1132 is shown in Table 1. This estimate
assumes that the legislation will be enacted by the end of
calendar year 2003. The costs of this legislation fall within
budget functions 700 (veterans benefits and services), and 050
(national defense).

TABLE 1.--ESTIMATED BUDGETARY IMPACT OF S. 1132
[By fiscal year, in millions of dollars]
----------------------------------------------------------------------------------------------------------------
2004 2005 2006 2007 2008
----------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING \1\

Estimated Budget Authority......................................... -46 * 18 22 7
Estimated Outlays.................................................. -46 * 18 22 7

CHANGES IN SPENDING SUBJECT TO APPROPRIATION \1\

Estimated Authorization Level...................................... 130 300 312 325 334
Estimated Outlays.................................................. 130 282 303 323 333
----------------------------------------------------------------------------------------------------------------
\1\ Five-year costs in the text differ slightly from a summation of the annual costs listed here because of
rounding.

Note.--* = Savings of less than $500,000.

Basis of estimate: S. 1132 would increase direct spending
by $2 million over the next five years, and would cost about
$1.4 billion in new discretionary spending, assuming
appropriation of the necessary amounts.

Direct spending--summary

S. 1132 would affect direct spending in veterans' programs
for housing, readjustment benefits, compensation, pensions, and
burial. Table 2 summarizes those effects, and the individual
provisions that would affect direct spending are described
below. In total, CBO estimates that enacting this legislation
would reduce direct spending for veterans programs by $46
million in 2004, increase direct spending by $2 million over
the 2004-2008 period, and reduce direct spending by $7 million
over the 2004-2013 period.

Direct spending--housing

Three sections of the bill would affect direct spending on
veterans' housing programs. Together, CBO estimates that
enacting these provisions would lower direct spending by $68
million in 2004, $257 million over the 2004-2008 period, and
$480 million over the 2004-2013 period. (Higher savings would
occur in 2004 than in later years because of lower interest
rate assumptions for that year compared to those projected for
the 2005-2013 period.) In preparing this estimate, CBO
accounted for the interactions between the individual
provisions; savings could be lower if only one or two of these
provisions were enacted. Costs or savings for each individual
provision, estimated as if they were enacted alone, are
described below.

TABLE 2.--ESTIMATED CHANGES IN DIRECT SPENDING UNDER S. 1132
[By fiscal year, outlays in millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
HOUSING

Spending Under Current Law.................................... 567 552 535 547 560 572 588 601 917 938
Proposed Changes.............................................. -68 -54 -42 -45 -48 -50 -50 -53 -34 -36
Spending Under S. 1132........................................ 499 498 493 502 512 522 538 548 883 902

VETERANS' READJUSTMENT BENEFITS

Spending Under Current Law.................................... 2,575 2,749 2,923 3,100 3,259 3,406 3,543 3,696 3,820 3,947
Proposed Changes.............................................. 10 42 48 49 49 50 50 50 50 51
Spending Under S. 1132........................................ 2,585 2,791 2,971 3,149 3,308 3,456 3,593 3,746 3,870 3,998

COMPENSATION, PENSION, AND BURIAL BENEFITS \1\

Spending Under Current Law.................................... 29,796 34,353 32,288 29,992 33,121 33,621 34,170 37,661 33,048 36,743
Proposed Changes.............................................. 12 12 12 18 6 6 -3 -7 -9 -27
Spending Under S. 1132........................................ 29,808 34,365 32,300 30,010 33,127 33,627 34,167 37,654 33,039 36,716

Total Proposed Changes \1\.................................... -46 * 18 22 7 6 -3 -10 7 -12
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Five- and 10-year costs in the text differ slightly from a summation of the annual costs shown here because of rounding.

Note.--* = Savings of less than $500,000.

Reinstatement of Vendee Home Loan Program. Section 308
would reinstate the vendee home loan program which was
discontinued by the Department of Veterans Affairs (VA) on
January 31, 2003. Before that date, when a veteran defaulted on
his mortgage and the home went into foreclosure, VA often
acquired the property and issued a new direct loan when the
property was sold. These loans are called vendee loans. CBO
estimates that reinstating the program would save VA $357
million over the 2004-2013 period, or roughly $35 million a
year. The bill also would require VA to finance between 50
percent and 85 percent of such sales through the vendee loan
program. Before the program was terminated, VA financed roughly
60 percent of such sales with vendee financing and CBO
estimates that it would continue to do so under the bill. The
estimated savings for this provision is the net effect of three
individual program effects (two with savings and one with
costs), as explained below.
Based on historical data, CBO estimates that under the bill
roughly 14,000 vendee loans would be made each year with an
average loan amount of $98,000. Vendee loans lower the subsidy
cost of the VA home loan program in two ways. First, VA
receives more money for homes sold with vendee financing than
those sold with other financing (16 percent more in 2002).
Since the proceeds from these home sales are considered
recoveries of losses from the guaranteed loans that were
foreclosed, enacting this section would increase recoveries and
therefore lower subsidy costs in the guaranteed loan portfolio.
CBO estimates that VA would save an average of $68 million a
year in guaranteed loan subsidies over the 2004-2013 period.
Second, because vendee loans have lower prepayment and default
rates than other direct loans made by VA, this provision also
would lower subsidy costs for direct loans by an average of $28
million a year over the 2004-2013 period. Finally, before the
program was terminated in 2003, VA sold most vendee loans on
the secondary mortgage market and guaranteed their timely
repayment; CBO estimates that it would continue to do so under
the bill. Based on historical data, CBO estimates that VA would
sell an average of $1.2 billion in vendee loans annually, at a
subsidy cost of roughly $60 million a year.
Increases in Loan Fees. Section 307 would increase the fee
charged for repeated use of the home loan benefit (when a
veteran uses the benefit more than once) by 50 basis points for
the 2005-2011 period. CBO estimates that this provision would
reduce direct spending by $20 million in 2005 and $139 million
over the 2005-2011 period.
Loans for Manufactured Homes and Lots. Under current law,
VA has the authority to guarantee loans for the purchase of
manufactured homes or for the purchase of lots for existing or
new manufactured homes. Section 306 would terminate this
authority on December 31, 2003. In the last five years, VA has
guaranteed only one loan for a manufactured home at a subsidy
cost of a few hundred dollars. CBO estimates this provision
would reduce direct spending by less than $500,000 a year over
the 2004-2013 period.

Direct spending--veterans' readjustment benefits

S. 1132 contains several provisions that would affect
direct spending for education benefits for veterans and their
survivors and dependents, and for other readjustment benefits
(see Table 3). Together these provisions would increase direct
spending by about $10 million in 2004, $200 million over the
2004-2008 period, and $450 million over the 2004-2013 period.

TABLE 3.--ESTIMATED CHANGES IN DIRECT SPENDING FOR VETERANS' READJUSTMENT BENEFITS UNDER S. 1132
[By fiscal year, outlays in millions of dollars]
----------------------------------------------------------------------------------------------------------------
Description of provisions 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
----------------------------------------------------------------------------------------------------------------
Survivors' and Dependents' Education 10 43 50 53 55 57 59 61 63 65
Assistance............................
Education Cost-of-Living Adjustments... 0 -1 -2 -4 -6 -7 -9 -11 -13 -14
Other Provisions....................... * * * * * * * * * *
------------------------------------------------------------------------
Total Changes in Veterans' 10 42 48 49 49 50 50 50 50 51
Readjustment Benefits...........
----------------------------------------------------------------------------------------------------------------
Note.--* = Less than $500,000.

Survivors' and Dependents' Education Assistance. Effective
July 1, 2004, section 104 would increase the survivors' and
dependents' education benefit to $788 a month, an increase of
13 percent over the current rate. Based on our analysis of the
effects of previous benefit increases, CBO assumes this hike in
the benefit level would increase the number of beneficiaries
from an average of 53,000 a year over the 2004-2013 period to
54,000, and would enable more of these students to attend
school full time rather than part time. CBO estimates enacting
this provision would increase direct spending for readjustment
benefits by $10 million in 2004, $211 million over the 2004-
2008 period, and $516 million over the 2004-2013 period.
Education Cost-of-Living Adjustments (COLA). Section 304
would reduce outlays for education benefits by changing the
method for calculating the monthly stipends paid under the
Montgomery GI Bill and Survivors' and Dependents' Education
Assistance programs. Under current law, the benefit amounts are
rounded to the nearest dollar. Under section 304, after
calculating the annual COLA increase, the monthly rates would
each be rounded down to the next lower whole dollar. There
would be no savings in 2004, as the benefit rates for this year
have already been set. Based on our projections of the number
of beneficiaries and the number of payments made each year, CBO
estimates that enacting this section would result in direct
spending savings of $13 million over the 2005-2008 period and
$67 million over the 2005-2013 period.
Other Provisions. The following provisions would have an
insignificant budgetary impact on direct spending for
readjustment benefits:
Section 103 would extend the period of eligibility
for survivors and dependents education benefits for those
members of the National Guard who are ordered involuntarily to
full-time National Guard duty under section 502(f) of Title 32
of the U.S. Code. This expanded eligibility would be
retroactive toSeptember 11, 2001. Based on information from VA
and Department of Defense (DoD), CBO estimates that very few National
Guard members would be affected by this change and that the cost would
be less than $500,000 over the 2004-2013 period.
Section 305 would repeal the Education Loan Program and
forgive any remaining debts owed to the fund. No loans have
been made through this fund in 10 years and the currently
outstanding debt is about $100,000. Forgiving the remaining
debt would constitute a loan modification, which would increase
direct spending by less than $100,000 (in fiscal year 2004, the
assumed year of enactment).

Direct spending--compensation, pensions, and burial benefits

Several sections of the bill would affect spending for
veterans' disability compensation, pensions, and burial
benefits (see Table 4). Some provisions affecting burial
benefits or disability compensation would increase direct
spending while other provisions would reduce such spending. On
balance, CBO estimates that enacting those provisions would
increase direct spending by $12 million in 2004, $61 million
over the 2004-2008 period, and $24 million over the 2004-2013
period.
Extension of Provision to Round-Down COLA. Section 301
would extend through 2013 a provision of law that requires the
increased monthly rates due to the COLA to be rounded down to
the next lower whole dollar. This provision of law applies to
both disability compensation and dependency and indemnity
compensation payments. These provisions are currently due to
expire at the end of 2011. Based on projections of the number
of beneficiaries and number of payments made each year, CBO
estimates that this section would result in direct spending
savings of $50 million over the 2012-2013 period.
Disability Benefits for Filipino Veterans. Section 321
would expand benefits for Filipino veterans who served in the
Philippine Commonwealth Army and the New Philippine Scouts, and
their survivors. In sum, CBO estimates that enacting section
321 would cost $4 million in 2004, $20 million over the 2004-
2008 period, and $44 million over the 2004-2013 period.
Dependency and Indemnity Compensation (DIC). Under current
law, surviving spouses and dependents of Filipino veterans who
served in the Philippine Commonwealth Army or the New
Philippine Scouts during World War II and live in the United
States are eligible to receive half the amount of the DIC
payment that survivors of veterans of the U.S. armed forces
receive. Section 321 of the bill would require that these
survivors be paid at the full DIC rate.

TABLE 4.--ESTIMATED CHANGES IN DIRECT SPENDING FOR VETERANS' COMPENSATION, PENSIONS, AND BURIAL BENEFITS UNDER
S. 1132
[By fiscal year, outlays in millions of dollars]
----------------------------------------------------------------------------------------------------------------
Description of provisions 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
----------------------------------------------------------------------------------------------------------------
Extension of Provision to Round Down 0 0 0 0 0 0 0 0 -16 -34
Cost-of-Living Adjustments...........
Disability Benefits for Filipino 4 4 4 4 4 4 5 5 5 5
Veterans.............................
Extension of Income Verification...... 0 0 0 0 0 -5 -10 -14 0 0
Alternate Beneficiaries............... 0 0 0 11 1 6 1 1 1 1
Markers for Privately Marked Graves... 7 7 7 2 0 0 0 0 0 0
Repeal of Limitation on Payments of 1 1 1 1 1 1 1 1 1 1
Accrued Benefits.....................
Burial Plot Allowance................. * * * * * * * * * *
Spina Bifida Benefits................. * * * * * * * * * *
Disability Benefits for Former * * * * * * * * * *
Prisoners of War.....................
-------------------------------------------------------------------------
Total Changes in Compensation, 12 12 12 18 6 6 -3 -7 -9 -27
Pensions, and Burial Benefits*.
----------------------------------------------------------------------------------------------------------------
\1\ Five- and 10-year costs in the text differ slightly from a summation of the annual costs shown here because
of rounding.

Note.--* = Less than $500,000.

Based on information provided by VA, CBO estimates that
about 420 survivors of Filipino veterans who served in the
Philippine Commonwealth Army or the New Philippine Scouts
currently receive DIC payments at the 50 percent rate and that
about 120 additional survivors would become eligible for these
payments over the 2004-2013 period. CBO assumes that the
survivors of these Filipino veterans received about half of the
average DIC payment in fiscal year 2002. (The average DIC
payment in fiscal year 2002 was $12,244.) After adjusting for
cost-of-living increases, CBO estimates that, under the bill,
the average DIC payment to these survivors would be $15,157 for
2004, an increase of $7,578. After accounting for the expected
mortality of these veterans and their eligible survivors, CBO
estimates that enacting this provision would raise direct
spending for DIC by about $3 million in 2004, $18 million over
the 2004-2008 period, and about $40 million over the 2004-2013
period.
Disability Compensation Benefits. Under current law, former
New Philippine Scouts residing in the United States are
eligible to receive half the amount of disability compensation
currently available to veterans of the U.S. armed forces.
Section 321 would increase disability compensation for these
veterans to the full rate. Based on information provided by VA,
CBO estimates that there are currently about 100 former New
Philippine Scouts residing in the United States today. In
fiscal year 2002, the average disability compensation payment
was $7,334. CBO assumes that eligible former New Philippine
Scouts received about half that amount. After adjusting for
cost-of-living increases, CBO estimates that the average
disability compensation payment to these veterans would total
$8,531 for fiscal year 2004, an increase of $4,265 from what
they would receive under current law. After accounting for
expected mortality rates, CBO estimates that enacting this
provision would increase direct spending for veterans'
disability compensation by less than $500,000 in 2004, about $2
million over the 2004-2008 period, and about $3 million over
the 2004-2013 period.
Extension of Income Verification. Section 312 would extend
authorities under current law that allow VA to acquire
information on income reported to the Internal Revenue Service
(IRS) to verify income reported by recipients of VA pension
benefits. The authorization allowing the IRS to provide income
information to VA is scheduled to expire on September 30, 2008,
and the authorization allowing VA to acquire the information is
also scheduled to expire on that date. Section 312 would extend
these authorities through September 30, 2011, for both the IRS
and VA.
According to VA, the department saved approximately $4
million in pension benefit overpayments from verifying
veterans' incomes in 2002 and an average of $5 million over the
1997-2002 period. Using that information, CBO estimates that
enacting section 312 would result in direct spending savings of
$29 million over the 2009-2011 period.
Alternate Beneficiaries. Section 102 would allow payments
of proceeds to alternate beneficiaries of certain VA life
insurance policies. U.S. Government Life Insurance (USGLI) and
National Service Life Insurance (NSLI) are programs that were
established during World War I and World War II to provide life
insurance coverage to servicemembers, many of whom could not
afford the high premiums associated with commercial policies.
Under current law, there is no time limitation within which a
named beneficiary is required to file a claim. Because these
policies are old, VA sometimes has great difficulty finding the
individuals to whom the proceeds should be paid. Moreover, an
alternate beneficiary cannot be paid unless VA determines that
the principal beneficiary died before the policyholder. VA is
required to hold the unclaimed funds indefinitely as a
liability to honor any possible future claims.
Section 102 would allow VA to pay USGLI or NSLI proceeds to
a named alternate beneficiary if the principal beneficiary has
not made a claim within two years after the death of the
policyholder or October 1, 2004, whichever is later. If no
claim has been made by any named beneficiary within four years
of the policyholder's death or bill enactment, the Secretary
may pay the proceeds to any person deemed entitled to the
funds.
VA estimates there are currently about 4,000 policies with
no locatable primary beneficiary. VA also predicts that an
additional 200 policies will require settlement each year where
the primary beneficiaries cannot be found. According to VA, the
current policies have an average face value of $5,750 and new
policies would have an average face value of $9,600. CBO
assumes that VA will be able to find another beneficiary for
two-thirds of the policies and that two-thirds of these will be
paid after two years with the other third paid after four
years. CBO estimates the cost of section 102 would be $11
million in 2007, $12 million over the 2007-2008 period, and $22
million over the 2007-2013 period. (CBO also estimates that
implementing this section would increase spending subject to
appropriation by less than $100,000 a year over the 2004-2008
period, assuming appropriation of the estimated amounts. CBO's
estimate of those costs is discussed below under the heading of
``Spending Subject to Appropriation.'')
Markers for Privately Marked Graves. Under current law,
veterans buried in a private cemetery may receive a second
commemorative headstone or marker from VA if the veteran died
on or after September 11, 2001. Veterans buried in national or
state veterans' cemeteries automatically receive a
commemorative headstone or marker. Under current law, this
provision would expire on December 31, 2006. Section 204 would
allow veterans who died on or after November 1, 1990, and are
buried in a private cemetery, to receive a second commemorative
headstone or marker from VA.
Based on data from VA regarding the number of veterans who
died between November 1, 1990, and September 11, 2001 (about
6.4 million veterans), and the estimated number of veterans who
receive casket burials (almost 67 percent), CBO estimates that
about 230,000 requests for markers would be made over the next
five years. The estimate reflects information from a VA study
that showed only 27 percent of private cemeteries allow second
markers and an assumption that only 20 percent of those
eligible would request a marker. With an average cost of about
$100 for each marker, CBO estimates that this provision would
increase direct spending for burial benefits by $7 million in
2004 and $23 million over the 2004-2007 period.
Repeal of Limitation on Payment of Accrued Benefits. Under
current law, when an individual applies for benefits
administered by VA, any benefits that are awarded are paid
retroactive to the date of application. If the applicant dies
before receiving his or her retroactive benefits, certain
survivors can apply to receive up to two years' worth of the
unpaid benefits. VA refers to these benefits that are due but
unpaid to deceased applicants as ``accrued benefits.''
Before December 2002, VA applied the two-year limit on
accrued benefits to all cases in which the applicant died
before receiving payment. On December 10, 2002, the United
States Court of Appeals for Veterans Claims (CAVC) decided in
Bonny v. Principithat the two-year limit applies differently to
the following two groups:
Applicants who die before VA makes the final
decision on the application, and
Applicants who die after VA makes the final
decision on the application but before receiving
payment.
CAVC ruled that if the applicant dies before receiving
payment but after VA approves the claim, eligible survivors
should receive the entire amount of the award due to the
applicant. Survivors of applicants who die during the
processing of the claim but before VA makes a final decision,
however, are eligible for only two years of accrued benefits.
Section 105 would add surviving parents of children with
spina bifida who claimed benefits according to definitions set
forth in chapter 18 of Title 38, to the list of eligible
survivors and would eliminate the two-year limit on accrued
benefits for all eligible survivors, regardless of whether VA
has made a final decision on the claim. Based on information
provided by VA, CBO estimates that VA awards accrued benefits
payments to about 3,700 survivors a year and that, under
current law (reflecting the Bonny decision), about 18 percent
or 670 of these cases would be paid the full amount. Based on
information provided by VA, CBO estimates that no more than 10
percent of the roughly 3,000 remaining accrued benefits
payments would reflect more than two years of unpaid benefits.
VA only tracks data on the number of claims processed for
accrued benefits payments and is unable to identify the number
of claims it approves, the type of benefit approved, or the
amount of the average payment. Absent this information, CBO
assumes that all accrued benefits payments would be for
veterans disability compensation because the majority of
applications for VA benefits are for such payments. We also
assume that all accrued benefits would be paid at an average
disability rating of 30 percent, consistent with average
benefit payments for new compensation cases, and that, on
average, each of these 300 cases would receive an extra six
months worth of payments.
According to data provided by VA, in 2002 the average
annual compensation payment for a disability rating of 30
percent was $4,092. Such payments are adjusted annually for
increases in the cost of living. Thus, CBO estimates that
enacting section 105 would increase direct spending by about $1
million in 2004, $3 million over the 2004-2008 period, and $7
million over the 2004-2013 period.
Burial Plot Allowance. Section 201 would extend eligibility
for up to a $300 burial plot allowance to veterans who are
buried in state-owned cemeteries and served in the military
during peacetime and veterans who were discharged from active
military, naval, or air service for a service-connected
disability. Under current law, veterans are eligible for this
benefit if the veteran:
Dies in a VA facility,
Is eligible for compensation or pension
payments when he or she dies,
Was discharged from active duty for an
injury incurred or aggravated on duty,
Has no reachable next of kin or resources to
provide for burial, or
Is a veteran of any war.
According to VA, the department paid a burial plot
allowance for about 11,000 veterans who were buried in state-
owned cemeteries in 2002. Using information from VA on the
projected number of veteran deaths over the 2004-2013 period
and the number of veterans buried in state-owned cemeteries who
did not qualify for this benefit under current law, CBO
estimates that an additional 1,400 veterans on average would
qualify for the benefit under section 201. Thus, CBO estimates
that enacting this section would increase in direct spending by
less than $500,000 in 2004, about $2 million over the 2004-2008
period, and about $4 million over the 2004-2013 period.
Spina Bifida Benefits. Exposure to certain herbicides used
by DoD during the Vietnam War from 1962 to 1971 has been
associated with a range of diseases from cancer to birth
defects. Under current law, children with spina bifida who were
born to veterans of the Vietnam War are entitled to monetary
allowances, vocational rehabilitation benefits, and medical
benefits administered by VA. Section 101 would expand
eligibility for these benefits to children with spina bifida
who were born to veterans who served in the demilitarized zone
(DMZ) in the Republic of Korea between January 1, 1967, and
December 31, 1969.
According to DoD, herbicides were used in the DMZ in Korea
in those years. DoD estimates that up to 78,000 veterans may
have served in the demilitarized zone during that time period,
but that the number of veterans exposed could be much lower.
According to VA, under current law the department provides
benefits to about 1,100 children born to Vietnam veterans out
of a total of about 3.1 million veterans who served within the
borders of Vietnam. In 2002, the costs of benefits provided by
VA to children with spina bifida born to Vietnam veterans
ranged, depending on the severity of the disease, from $2,736
to $16,248 a year per child for disability compensation and, on
average, about $11,300 a year per child for medical benefits.
Based on VA's experience with benefits for children with
spina bifida born to Vietnam veterans, CBO estimates that less
than 15 children with spina bifida born to veterans who served
in the DMZ between January 1, 1967, and December 31, 1969,
would begin to receive benefits under section 101. CBO
estimates that the increase in direct spending resulting from
enacting section 101 would be less than $200,000 in 2004, about
$1 million over the 2004-2008 period, and about $2 million over
the 2004-2013 period. (CBO estimates that implementing this
section also would increase spending subject to appropriation
by about $1 million over the 2004-2008 period, assuming
appropriation of the estimated amounts. CBO's estimate of those
costs is discussed below under the heading of ``Spending
Subject to Appropriation.'')
Disability Benefits for Former Prisoners of War (POWs).
Under current law, VA generally deems a disability or disease
to be service-connected for the purposes of disability
compensation based onmilitary medical records and physical
examinations. Prior to July 18, 2003, for former POWs who were held
captive for 30 days or more, VA followed a list of 15 diseases and
disabilities that the department assumed were service-connected.
Military medical records do not cover periods of captivity and may not
provide adequate documentation for eligibility for disability
compensation benefits. On July 18, 2003, VA issued a regulation
amending Part 3 of Title 38 of the Code of Federal Regulations to
include cirrhosis of the liver to the list of diseases for which
entitlement to service-connection is presumed for former POWs.
Section 302 also would add cirrhosis of the liver to the
list of presumed service-connected disabilities for former POWs
who were held captive for 30 days or more. Since the regulation
has already taken effect, this portion of the provision would
have no cost.
Section 302 also would eliminate the requirement that a POW
be held prisoner for 30 days or more to qualify for presumed
service-connection for five of the 16 presumed service-
connected disabilities included under current law--
specifically, psychosis, any of the anxiety states, dysthymic
disorder (or depressive neurosis), organic residuals of
frostbite, and post-traumatic osteoarthritis. Based on
information provided by VA, CBO estimates that of the 39,000
living former POWs, no more than 400 were held captive for less
than 30 days. About 70 percent, or around 280, of these former
POWs are already receiving disability compensation based on
their eligibility as a veteran. Due to the small number of
former POWs who would become eligible for the new benefit and
the fact that many are already receiving disability
compensation, CBO estimates that the increase in direct
spending from eliminating the 30-day requirement for these five
disabilities would be less than $100,000 a year over the 2004-
2013 period.
Clarification of Notice of Disagreement. Section 314 would
clarify that a notice of disagreement for appellate review of
VA activities must be filed within one year of when VA mailed
the notification of the results of its initial review or
determination to the veteran and must satisfy two
requirements--the notice must be in writing and filed with the
agency of original jurisdiction; and the notice must be filed
by the claimant, the claimant's legal guardian, or legal
representative. CBO cannot estimate the savings associated with
enacting this provision because we have no basis on which to
predict the number of veterans that might become ineligible to
file for appellate review under this provision.
Other Provisions Affecting Spending for Compensation,
Pension, and Burial Benefits. The following provisions would
have an insignificant budgetary impact on direct spending for
compensation, pension, and burial benefits:
Section 310 would allow VA to close claims after a
year if the veteran had not cooperated in providing needed
information to continue a claim after being given notification
by VA of incomplete or missing information. This provision
would be effective as if enacted on November 9, 2000. CBO
estimates that any savings in direct spending that would result
from closing claims early would be insignificant.
Under current law, a veteran who commits certain
criminal acts loses eligibility for veterans' benefits that he
or she would otherwise be due. Section 313 would include
additional criminal acts to the list of crimes that would cause
a veteran to lose eligibility for veterans' benefits--
specifically, criminal acts involving chemical, biological, or
nuclear weapons, genocide, and the murder of U.S. citizens
outside of the United States. CBO estimates that any savings in
direct spending that would result from not paying veterans who
commit these crimes would be insignificant.
Under current law, veterans who die of service-
connected disabilities are eligible for a $2,000 burial
benefit. Veterans who receive compensation or pension benefits
but die of a nonservice-connected condition are eligible for a
$300 burial and funeral expenses benefit and another $300
allowance if the veteran is not interred in a cemetery that is
under U.S. government jurisdiction. Veterans of the New
Philippine Scouts are currently eligible for half of the burial
benefit amounts provided to veterans of the U.S. armed forces.
Under section 322, veterans of the New Philippine Scouts would
receive burial and plot allowances at the full rate if they are
naturalized U.S. citizens living in the United States. Based on
information provided by VA, CBO estimates that only a handful
of these veterans would become eligible for the increase in
burial benefits each year. Thus, CBO estimates that enacting
section 322 would have no significant effect on direct spending
over the 2004-2013 period.

Spending subject to appropriation

Table 5 shows the estimated effects of S. 1132 on
discretionary spending for veterans' programs. CBO estimates
that implementing S. 1132 would increase discretionary spending
for veterans benefits by $130 million in 2004 and almost $1.4
billion over the 2004-2008 period, assuming appropriation of
the necessary amounts.

TABLE 5.--ESTIMATED CHANGES IN SPENDING SUBJECT TO APPROPRIATION UNDER
S. 1132
[By fiscal year, in millions of dollars]
------------------------------------------------------------------------
Description of provisions 2004 2005 2006 2007 2008
------------------------------------------------------------------------
Examinations by Contract
Physicians:
Estimated Authorization 125 261 272 284 296
Level......................
Estimated Outlays........... 125 261 272 284 296
State Cemetery Grants:
Estimated Authorization 0 33 34 35 35
Level......................
Estimated Outlays........... 0 15 25 33 34
Regional Office in Manila,
Philippines:
Estimated Authorization 3 4 4 4 1
Level......................
Estimated Outlays........... 3 4 4 4 1
Spina Bifida Benefits:
Estimated Authorization * * * * *
Level......................
Estimated Outlays........... * * * * *
Other Provisions:
Estimated Authorization 1 1 1 1 1
Level......................
Estimated Outlays........... 1 1 1 1 1
Total Changes 1:
Estimated Authorization 130 300 312 325 334
Level......................
Estimated Outlays........... 130 282 303 323 333
------------------------------------------------------------------------
\1\ Five-year costs in the text differ slightly from a summation of the
annual costs shown here because of rounding.

Note.--* = Less than $500,000.

Examinations by Contract Physicians. Section 342 would
temporarily allow VA to contract with non-VA physicians to
conduct examinations to determine the medical disabilities of
veterans applying for compensation benefits. The authority
would expire on December 31, 2009. Under current law, VA has
the authority to contract with non-VA physicians to conduct
these examinations at 10 benefit centers and VA expects to
spend about $50 million in 2003 for these examinations. The
spending under current law for those examinations is considered
direct spending.
Under the bill, VA would be allowed to contract with non-VA
physicians for these exams at all of the 47 remaining centers,
but all spending for these new contracts would be subject to
appropriation. CBO assumes that the average cost for the new
centers would be similar to the average cost for the 10 centers
that currently contract with non-VA physicians. Assuming that
the new contracts take effect in April 2004, CBO estimates that
implementing this proposal would cost about $125 million in
2004 and $1.2 billion over the 2004-2008 period, assuming
appropriation of the estimated amounts. If VA were to use non-
VA physicians to conduct exams to determine the degree of
disability in veterans seeking compensation benefits, VA
physicians would be able to treat more veterans seeking medical
care at VA facilities. Thus, CBO does not expect that using
non-VA physicians to conduct those exams would result in any
discretionary savings.
State Cemetery Grants. Current law authorizes VA to make
grants to build and improve state veterans' cemeteries through
fiscal year 2004. Section 203 would extend this authority
indefinitely. CBO estimates that implementing this section
would cost $107 million over the 2005-2008 period, assuming
appropriation of the necessary amounts.
Regional Office in Manila, Philippines. Section 323 would
authorize VA to maintain the regional office located in Manila,
through December 31, 2008. Under current law, the authorization
for this regional office will expire on December 31, 2003.
Based on information provided by VA, CBO estimates that
implementing section 323 would cost $3 million in 2004 and $16
million over the 2004-2008, assuming appropriation of the
necessary amounts.
Spina Bifida Benefits. Under current law, children with
spina bifida who were born to veterans of the Vietnam War are
entitled to medical benefits administered by VA. Section 101
would expand eligibility for these benefits to children with
spina bifida who were born to veterans who served in the
demilitarized zone in the Republic of Korea between January 1,
1967, and December 31, 1969. Based on VA's experience with
benefits for children with spina bifida born to Vietnam
veterans, CBO estimates that less than 15 children with spina
bifida would begin to receive benefits under section 101.
According to VA, the average annual cost for providing medical
benefits to these children was about $11,300 per child in 2002.
Assuming appropriation of the estimated amounts, CBO estimates
that implementing section 101 would cost less than $200,000 in
2004 and about $1 million over the 2004-2008 period.
Other Provisions. Other provisions in the bill would have
an insignificant impact on discretionary spending. Taken
together, CBO estimates that implementing all of them would
cost about $1 million a year over the 2004-2008 period, subject
to the availability of appropriated funds.
a. Section 102 would allow payments of proceeds to
alternate beneficiaries of certain VA life insurance policies.
Under current law, there is no time limitation within which a
named beneficiary is required to file a claim. Because these
policies are old, VA sometimes has great difficulty finding the
individuals to whom the proceeds should be paid. Moreover, an
alternate beneficiary cannot be paid unless VA determines that
the principal beneficiary died before the policyholder. VA is
required to hold the unclaimed funds indefinitely as a
liability to honor any possible future claims. Based on data
provided by VA, CBO estimates that VA would need to hire two
additional employees to handle the larger caseload associated
with paying claims to alternate beneficiaries of these
insurance policy proceeds. Since the surplus from the insurance
trust funds would cover almost all of the costs of new hires,
CBO estimates this provision would cost less than $10,000 a
year.
b. Under current law, surviving spouses of veterans lose
eligibility for burial in a national cemetery if they remarry.
Survivingspouses can only regain eligibility if the subsequent
remarriage ends in death of the subsequent spouse or divorce. Section
202 would change the eligibility requirements for surviving spouses so
that remarriage would not affect their eligibility for burial in a
national cemetery. This provision would apply to deaths occurring on or
after the date of enactment of this act. CBO estimates that the
potential increase in costs resulting from an increased number of
burials in national cemeteries would be insignificant.
c. Section 303 would allow all former prisoners of war to
receive free dental care from VA regardless of the length of
their internment. Under current law, only those prisoners of
war who were interned or detained for 90 days or more are
eligible for free dental care from VA. Using data from VA and
DoD, CBO estimates that in 2004 there will be about 36,000
former prisoners of war and of those about 5,000 were interned
for less than 90 days. Many of those former prisoners of war
are already eligible for dental care because of their service-
connected disabilities. Accounting for those veterans, and
based on the number of former prisoners of war who currently
receive dental care from VA, CBO estimates that about 1,000
former prisoners of war would receive dental care from VA under
this provision. Based on information from VA about the cost of
providing dental care, CBO estimates that implementing this
provision would cost less than $500,000 in 2004 and would total
about $1 million over the 2004-2008 period, assuming
appropriation of the estimated amounts.
d. U.S. veterans are eligible for burial in a national
cemetery if they were discharged or separated from active duty
under conditions other than dishonorable. Members of the armed
forces who die on active duty and spouses and minor children of
veterans are also eligible. Section 322 would extend this
eligibility to veterans of the New Philippine Scouts and their
dependents. Based on information provided by VA, CBO estimates
that only a handful of these veterans and their dependents
would request burial in a national cemetery each year. Thus,
CBO estimates that this new eligibility would not lead to a
significant increase in the number of burials in national
cemeteries.
e. Section 333 would require both VA and DoD to make
available $250,000 in each fiscal year through 2013 to the
National Academy of Sciences for the purposes of
epidemiological research on members of the Armed Forces and
veterans. CBO estimates that implementing this provision would
cost $500,000 in 2004 and $2.5 million over the 2004-2008
period, assuming appropriation of the authorized amounts.
f. Section 341 would modify the charter of the Advisory
Committee on Minority Veterans so that the committee would
continue to operate until December 31, 2007. Under current law,
the committee would cease to exist after December 31, 2003.
Based on information from the General Services Administration's
Federal Advisory Committee Database, CBO estimates that
implementing this provision would cost about $120,000 a year
over the 2004-2008 period, assuming the availability of
appropriated funds.
g. Section 342 would modify the charter of the Veterans'
Advisory Committee on Education so that the committee would
continue to operate until December 31, 2013. Based on
information from the General Services Administration's Federal
Advisory Committee Database, CBO estimates that implementing
this provision would cost less than $100,000 a year over the
2004-2013 period, assuming the availability of appropriated
funds.
Intergovernmental and private-sector impact: S. 1132
contains no intergovernmental or private-sector mandates as
defined in UMRA and would impose no costs on state, local, or
tribal governments.
Previous CBO estimates: On July 14, 2003, CBO transmitted a
cost estimate for H.R. 2297, the Veterans Benefits Act of 2003,
as ordered reported by the House Committee on Veterans' Affairs
on June 26, 2003. Several sections of S. 1132 are similar or
identical to sections of H.R. 2297 and would have similar
costs.
On May 19, 2003, CBO transmitted a cost estimate for H.R.
1460, the Veterans Entrepreneurship and Benefits Improvement
Act of 2003, as ordered reported by the House Committee on
Veterans' Affairs on May 15, 2003. Section 308 of S. 1132 is
similar to section 5 of H.R. 1460, and the estimated savings
are identical.
On March 20, 2003, CBO transmitted a cost estimate for H.R.
241, the Veterans' Beneficiary Fairness Act of 2003, as
introduced on January 8, 2003. Section 105 of S. 1132 is
similar to H.R. 241, and the estimated savings are identical.
Estimate prepared by: Federal Costs: Compensation: Melissa
E. Zimmerman and Dwayne M. Wright; Health Care: Sam Papenfuss;
Housing: Sunita D'Monte; Readjustment Benefits: Sarah T.
Jennings; Impact on State, Local, and Tribal Governments:
Melissa Merrell; and Impact on the Private Sector: Allison
Percy.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.

Regulatory Impact Statement

In compliance with paragraph 11(b) of rule XXVI of the
Standing Rules of the Senate, the Committee on Veterans'
Affairs has made an evaluation of the regulatory impact that
would be incurred in carrying out the Committee bill. The
Committee finds that the Committee bill would not entail any
regulation of individuals or businesses or result in any impact
on the personal privacy of any individuals and that the
paperwork resulting from enactment would be minimal.

Tabulation of Votes Cast in Committee

In compliance with paragraph 7 of rule XXVI of the Standing
Rules of the Senate, the following is a tabulation of votes
cast in person or by proxy by members of the Committee on
Veterans' Affairs at its September 30, 2003, meeting. On that
date, the Committee, by unanimous voice vote, ordered H.R.
1132, a bill to amend title 38, United States Code, to improve
and enhance certain benefits for survivors of veterans, and for
other purposes, as amended, reported favorably to the Senate.

Agency Report

On July 10, 2003, VA Under Secretary for Benefits, the
Honorable Daniel L. Cooper, appeared before the Committee on
Veterans' Affairs and submitted testimony on, among other
things, S. 1132 as introduced and also on the following
additional bills from which provisions in S. 1132, as amended,
are derived: S. 257, S. 517, S. 1133, S. 1188, S. 1213, S.
1239, S. 1281, and S. 1360. In addition, VA's General Counsel,
the Honorable Tim S. McClain, appeared before the Committee and
submitted testimony on, among other things, Section 304 of S.
1156, a provision relating to VA authority to contract with
outside entities for disability examinations in connection with
the adjudication of claims for veterans benefits, that has been
added to S. 1132, as amended. Excerpts from these statements
are reprinted below:

Statement of Daniel L. Cooper, Under Secretary for Benefits, Department
of Veterans Affairs

Mr. Chairman and Members of the Committee, thank you for
the opportunity to testify today on several bills of great
interest to veterans.

* * * * *

s. 257

S. 257, the ``Veterans Benefits and Pensions Protection Act
of 2003,'' would amend VA's anti-assignment statute, 38 U.S.C.
Sec. 5301, by adding language to prohibit certain agreements,
as well as collateral security arrangements, between persons
receiving monetary VA benefits and third parties. Third parties
use these agreements to acquire for consideration rights to
receive monetary benefits paid to VA beneficiaries. Besides
prohibiting these agreements and arrangements, S. 257 would
subject third parties who enter into such agreements or
arrangements to penalties of fine, imprisonment, or both. The
bill would also require VA to ``carry out a program of
outreach'' to inform veterans and other beneficiaries of the
prohibition and would authorize $3,000,000 in appropriations
for such outreach for FY 2004 through 2008.
Let me first assure the Committee that, because 38 U.S.C.
Sec. 5301 generally bars assignment of VA benefits, VA regional
offices have not and do not honor such agreements.
Nevertheless, once funds are paid to a beneficiary, VA lacks
the ability to oversee how those funds are used, unless the
beneficiary has been found mentally incompetent. While we would
certainly counsel veterans, their dependents, and survivors to
very carefully consider the full ramifications of assigning
their benefits, we believe they should be free to decide how
best to manage their own personal finances. Therefore, we do
not support enactment of S. 257.

s. 517 and s. 1281

POWs--Minimum Confinement Periods
Section 2(a) and (b) of S. 517 would eliminate the current
requirements that a former prisoner of war (POW) be detained or
interned for at least thirty days in order to be eligible for a
presumption of service connection for certain diseases, and at
least ninety days in order to be eligible to receive VA care
and treatment for a dental condition or disability.
VA supports section 2(a) and (b) of S. 517, which are
virtually identical to provisions in a draft bill we recently
submitted to Congress. Currently, 38 U.S.C. Sec. 1112(b)
provides a presumption of service connection for certain
diseases for former POWs who were detained or interned for at
least thirty days. Also, 38 U.S.C. Sec. 1712(a)(1)(F) provides
eligibility for VA outpatient dental care services and
treatment, and related dental appliances for dental conditions
or disabilities of former POWs who were detained or interned
for at least ninety days. Recent military engagements involving
the United States instruct that, because of our Nation's
advanced technology and superior warfare capability, actual
combat may end in a far shorter period of time than in previous
wars. As a result of this phenomenon, American soldiers who are
detained or interned by the enemy are likely to be held for
less than 90 days, or even 30 days, as was the case with the
United States soldiers held as POWs during Operation Iraqi
Freedom. Recent experience has indicated, however, that,
despite the shorter duration, the conditions of detention or
internment may be such that these former POWs may suffer from
many of the same diseases for which a presumption of service
connection is available pursuant to section 1112(b) and from
dental conditions or disabilities for which dental care and
treatment is currently available pursuant to section
1712(a)(1)(F) for former POWs who were held for longer periods.
We believe it would be equitable to eliminate the requirement
of a particular duration of detention or internment so that all
former POWs would be eligible for the presumption of service
connection for the diseases specified in section 1112(b) and
for dental care and treatment pursuant to section
1712(a)(1)(F). We estimate that enactment of section 2(a) and
(b) would have mandatory costs of $3.3 million in FY 2004 and
$61 million over ten years.
POWs--Diseases Presumed Service Connected
Section 2(c) of S. 517 would add heart disease, stroke,
liver disease, diabetes (type 2), and osteoporosis to the list
of diseases for which a presumption of service connection is
available pursuant to 38 U.S.C. Sec. 1112(b). Section 2 of S.
1281 would add cardiovascular disease (heart disease),
cerebrovascular disease (stroke), and chronic liver disease,
including cirrhosis and primary liver carcinoma, to the
presumptive diseases in section 1112(b).
Section 2(c) of S. 517 would also authorize the Secretary
to promulgate regulations creating a presumption of service
connection for any other disease which the Secretary determines
has a ``positive association with the experience of being a
[POW].'' A ``positive association'' would exist ``if the
credible evidence for the association is equal to or outweighs
the credible evidence against the association.'' In deciding
whether to promulgate such a regulation, the Secretary would be
required to consider the recommendations of the Advisory
Committee on Former POWs and any other available sound medical
and scientific information and analyses. VA would have 60 days
from receipt of an Advisory Committee recommendation to make a
determination as to whether a presumption of service connection
is warranted, and then another 60 days to publish in the
Federal Register either proposed regulations, if VA determines
that a presumption is warranted, or a notice explaining the
scientific basis for a determination that a presumption is not
warranted.
VA continues to investigate the long-term health
consequences of the conditions of POW internment or detention,
such as malnutrition, vitamin deficiency, and exposure to
parasitic and infectious diseases. In severe forms, such
conditions of internment or detention could likely be
associated with the conditions specified in section 2(c) of S.
517 and section 2 of S. 1281. It is also true that many POWs
suffered physical and mental torture and maltreatment, which
could lead to long-term stress and anxiety, which in turn have
been shown to have adverse effects on the health of many
individuals. VA is committed to properly compensating former
POWs for the disabilities resulting from their service to our
Nation. In light of the potential connection between the POW
experience and the diseases listed in the subject bills, we
could support enactment of section 2(c) of S. 517 and section 2
of S. 1281 only if the Committee can identify offsetting
savings, since most of these costs are not in the President's
FY 2004 Budget. We estimate that enactment of all of the S. 517
provisions, i.e., elimination of the minimum confinement period
and additional diseases presumed to be service connected, would
result in benefit costs of $29.4 million in FY 2004 and $517.3
million over the ten-year period FY 2004 through FY 2013. If S.
517 were enacted, the most significant presumptions of S. 1281
would be addressed. If the S. 517 presumptions were not
enacted, we estimate the benefit costs of S. 1281 would be
$20.9 million in FY 2004 and $364.7 million over ten years.
We also note that, in its December 20, 2002 report, the
Advisory Committee on Former POWs recommended to VA that
cardiovascular disease be established as a presumptive
condition. In response to this and previous recommendations by
the Advisory Committee to add presumptive conditions, VA is
establishing a Workgroup on Medical Presumptive Conditions in
Former POWs to establish procedures, guidelines, and standards
to determine whether a disease should be designated by VA as
presumptively service connected in former POWs. We contemplate
that the Workgroup will be comprised of representatives of the
Under Secretaries for Benefits and Health, General Counsel, and
Chairman of the Advisory Committee on Former POWs. The
activities of this Workgroup will assist VA in determining
whether scientific and medical evidence supports further
expansion of the list of conditions presumed to be service
connected in former POWs. In our view, these activities will
render unnecessary the procedures for establishment of new
presumptions based on consideration of recommendations from the
Advisory Committee on Former POWs, as proposed in section 2(c)
of S. 517.
Review of Dose Reconstruction Program of Department of Defense
Section 3 of S. 1281 would require the Secretary of Defense
and the Secretary of Veterans Affairs to conduct a joint review
of the mission, procedures, and administration of the DoD Dose
Reconstruction Program for preparing radiation dose estimates
and to report to Congress on their findings within 90 days
after the bill is enacted. The bill would also require the
Secretaries to provide for ongoing independent review and
oversight of the Dose Reconstruction Program and would require
establishment of an advisory board as one method of providing
such ongoing review. VA does not support this provision.
DoD has statutory responsibility for preparing radiation
dose estimates. VA uses those dose estimates in adjudicating
some claims for service-connected benefits filed by veterans
exposed to radiation in service or their family members. A
recent review by the National Research Council (NRC) of the
National Academy of Sciences identified several concerns
regarding certain methods and assumptions employed by DoD that
may have caused underestimation of the upper-bound limits of
exposure in some cases. We understand that DoD is presently in
the process of revising its Dose Reconstruction Program to
address the concerns identified by the NRC. Correspondingly, VA
is working to identify claims previously decided based on dose
reconstructions from DoD. Once we have identified those claims,
we intend to seek revised dose estimates from DoD, if the
claimant potentially could benefit from a revised dose
estimate.
We believe the provisions of this legislation requiring VA
and DoD to jointly review and report on the Dose Reconstruction
Program would be superfluous in view of the comprehensive NRC
report. The committee of highly qualified experts assembled by
the NRC spent more than two years reviewing the Dose
Reconstruction Program. The NRC report discusses in detail the
specific concerns identified in the Dose Reconstruction Program
and provides a clear framework for DoD's current efforts to
revise its program. We do not believe that a further review of
the same matters by VA and DoD would provide any significant
additional information to aid in identifying and correcting any
problems in the Dose Reconstruction Program. The oversight
responsibilities that would be required by this legislation
would unnecessarily divert VA resources from the task of
identifying and reviewing potentially affected claims.
Dose estimates prepared by DoD are often an important piece
of evidence VA must consider in adjudicating claims for
benefits based on radiation exposure. In view of the importance
of this information and the difficult and sensitive nature of
the adjudicative issues involved in such claims, we consider it
important to avoid even the appearance that VA is influencing
DoD's procedures and methods of preparing the dose estimates.
Assigning VA an oversight role in matters affecting the
creation of such evidence may result in a perception among some
veterans that the estimates lack objectivity.
For these reasons, we do not support this provision. We
estimate that this provision, if enacted, would result in
approximately $350,000 in annual costs to VA.
Disposition of Ranch Hand Study
Section 4 of S. 1281 would require VA, not later than 60
days after the date of the enactment of this Act, to contract
with the National Academy of Sciences (NAS), or other
appropriate organization, to determine the appropriate
disposition of the Air Force's well-known ``Ranch Hand''
epidemiologic study when it terminates in 2006. Among other
things, the NAS would be required to address, and ultimately
report on, the advisability of extending the study and the
disposition of the specimens, medical records, and other data
collected in the course of this long-term study.
VA generally supports the suggestion for independent review
of the merits of the Ranch Hand study, as proposed. VA has
never been involved in the funding, conduct, or direction of
DoD's ``Ranch Hand'' study. As a result, VA cannot provide
close oversight of the NAS contract, as proposed in section 4
of the bill. Were VA required to enter into the contract
required by section 4, we estimate the costs associated with
enactment of this provision to be $1.5 million, which would be
redirected from veterans' Medical Care funds.
Section 5 of the bill would require both VA and DoD to make
available to NAS in each of fiscal years 2004 through 2013,
$250,000 each from their respective appropriations for the
Medical Follow-Up Agency (MFUA). MFUA would use these funds for
epidemiological research on members of the Armed Forces and
veterans.
We support the continued funding of the MFUA whose
independence and outstanding scientific reputation lend a high
degree of credibility to critical studies that have a direct
bearing on VA health care and compensation policies. As you
know, the MFUA has been essential to VA for conducting a number
of critical studies on veterans' health issues, including a
study on Shipboard Hazard and Defense (SHAD) veterans, studies
on actual hepatitis rates among veterans, and a congressionally
mandated study on hearing loss among military personnel. In
short, the MFUA is a critical asset for VA.

* * * * *

s. 1132

Mr. Chairman, S. 1132, the ``Veterans' Survivors Benefits
Enhancements Act of 2003,'' contains several provisions that
would improve benefits for survivors and certain dependents of
veterans under the Department's various programs.
Specifically, section 2 of this bill would increase
educational assistance benefits under the chapter 35 VA's
Survivors' and Dependents' Educational Assistance program by
44.8 percent, from $680 to $985 per month for full-time course
pursuit, from $511 to $740 for three-quarter time pursuit, and
from $340 to $492 per month for half-time pursuit, effective
for months of course pursuit on or after October 1, 2003. It
would also raise the basic monthly rate payable for Special
Restorative Training (SRT) to $985. Similarly, the optional
supplement to the SRT basic rate would be increased to pay the
amount of tuition and fee charges that, on a monthly basis,
would exceed $307 for FY 2004.
Given this benefits increase, the measure would suspend the
statutory annual Consumer Price Index-based adjustment in
chapter 35 educational assistance rates for FY 2004.
Chapter 35 benefit rates earlier equaled rates payable
under the Vietnam Era GI Bill to a veteran with no dependents
and, for a time, exceeded chapter 30 Montgomery GI Bill (MGIB)
rates. In more recent years, however, chapter 35 benefits have
lost ground. The current $680 chapter 35 monthly rate is
significantly below the MGIB rate payable to eligible veterans
with 3 years or more of service, which will be $985 per month
in FY 2004 under legislation already enacted. Section 2 of S.
1132 would remedy this, ensuring that chapter 35 spouses,
surviving spouses, and children would receive educational
assistance equal to that of veterans receiving such educational
assistance under the MGIB. Mr. Chairman, although we appreciate
your efforts to restore this balance, the President's FY 2004
Budget does not include this proposal.
VA estimates the effect of the rate increase in section 2
of this measure could raise obligations by approximately $1.4
billion over the 10-year period FY 2004 through FY 2013.

* * * * *

Section 5 would amend 38 U.S.C. Sec. 2402(5) to make a
veteran's surviving spouse who marries a non-veteran after the
veteran's death eligible for burial in a VA national cemetery
based on his or her marriage to the veteran. This provision is
similar to a VA proposal sent to Congress on April 25, 2003.
Our full rationale and justification for this proposal, as well
as our cost estimates, are contained in Secretary Principi's
April 25, 2003 letter to the President of the Senate.
Unlike VA's proposal, section 5 of S. 1132 would make the
burial eligibility of remarried surviving spouses of veterans
retroactive to deaths occurring on or after January 1, 2000. We
estimate that the additional costs associated with this
retroactivity would be negligible. Although it is difficult to
determine how many families of already deceased, and presumably
interred, remarried surviving spouses of veterans would want to
disinter their loved ones and then re-inter them with their
veteran spouses in a national cemetery, we believe the number
of such families would not be significant.
Section 6 would amend chapter 18 of title 38, United States
Code, to authorize VA to provide a monetary allowance and other
benefits to a person suffering from spina bifida who is natural
child, regardless of age or marital status, of a veteran who
served in the active military, naval, or air service in or near
the Korean demilitarized zone (DMZ) between January 1, 1967,
and December 31, 1969, if the person was conceived after such
service began and if the veteran is determined by VA, in
consultation with the DoD, to have been exposed to a herbicide
agent during such service. The term ``herbicide agent'' would
be defined as a chemical in a herbicide used in support of
United States and allied military operations in or near the
Korean DMZ, as determined by VA in consultation with DoD during
the specified period.
VA is still formulating its views and cost estimates on
this provision. As soon as those views and estimates are
cleared for transmittal, we will provide them to the Committee.

s. 1133

Mr. Chairman, we very much appreciate your courtesy in
introducing S. 1133 at the Department's request. Our full
rationale and justification for these proposals, as well as our
cost estimates, are contained in Secretary Principi's April 25,
2003 letter to the President of the Senate and will not be
repeated here. Several of this bill's provisions are also
covered in other bills that are on the agenda for today's
hearing.
All of the provisions in VA's proposal are significant to
the programs administered by VA and the veterans served by
those programs. Among the important proposals in S. 1133 that
have not been otherwise introduced in the Senate are:
Sections 3 and 4, which would repeal the 45-day rule for
effective dates of death pension awards and exclude lump-sum
life insurance proceeds from determinations of annual income
for pension purposes. These changes are necessary to eliminate
unequal treatment of death pension applicants and to uphold one
of the fundamental principles of the pension program--insuring
that those with the greatest need receive the greatest benefit.
Section 6, which would authorize VA to pay unclaimed
National Service Life Insurance and United States Government
Life Insurance proceeds to an alternative beneficiary. This
proposal would allow VA to ensure that the proceeds of
insurance policies are paid to an appropriate beneficiary and
to avoid adding to the approximately 4,000 existing policies in
which payment has not been made due to the fact that we cannot
locate the primary beneficiary, despite extensive efforts.
Section 7, which would clarify VA's authority both to
declare a claim abandoned where it is not completed within one
year of VA's notice of what is required to complete it, and to
decide claims before the end of the one year the claimant has
to provide the evidence to substantiate the claim. Such early
adjudications are subject to revision based on evidence
submitted within the year, and the effective date of any
decision so revised will be the earlier date on which the claim
was made.
Section 11, which would make permanent the State Cemetery
Grants Program, an important supplement to the National
Cemetery system. This program authorizes VA to make grants to
states to assist them in establishing, expanding, or improving
state veterans' cemeteries.
Section 15, which would extend the date on which
eligibility for education benefits ends for individuals ordered
to full-time National Guard service under title 32 of the
United States Code in the same manner the delimiting date is
now extended for those who are activated under title 10.
All of the proposals in S. 1133 would improve veterans
programs and their administration, and we commend them to the
Committee's careful consideration.

s. 1188

S. 1188, the ``Veterans' Survivor Benefits Act of 2003,''
would, in section 2, eliminate a discrepancy regarding the
limitation on the period for which retroactive benefits due and
unpaid a claimant may be paid to others after the claimant's
death. In the interest of fairness, we support enactment of
this provision.
Under 38 U.S.C. Sec. 5121, periodic monetary benefits to
which an individual was entitled at death under existing
ratings or decisions or based on evidence on file with VA at
the date of death are paid upon the individual's death to
specified classes of survivors according to a prescribed order
of preference. Before a recent court decision, VA had construed
section 5121 to limit the payment of any benefits under that
section to the retroactive period specified in the statute,
regardless of whether the payment was based on an existing
rating or decision or on evidence on file at the date of death.
The retroactive payment period, originally one year, was
extended to two years by Public Law 104-275, the ``Veterans'
Benefits Improvements Act of 1996.''
On December 10, 2002, the United States Veterans Court
issued its decision in Bonny v. Principi, 16 Vet. App. 504
(2002). The court held that 38 U.S.C. Sec. 5121(a) specifies
two kinds of benefits: benefits that have been awarded to an
individual in existing ratings or decisions but not paid before
the individual's death, and benefits that could have been
awarded based on evidence in the file at the date of death. The
court held that, in the case of the first type of benefits, the
statute requires that an eligible survivor is to receive the
entire amount of the award; only the latter type of ``accrued''
benefits is subject to section 5121(a)'s two-year limitation.
The court based its interpretation of the statute primarily on
section 5121(a)'s punctuation.
The Veterans Court's Bonny decision has resulted in
differing entitlements under section 5121 based on the status
of the deceased's claim at the date of his or her death. S.
1188 would eliminate this discrepancy by eliminating the two-
year limitation on payment of retroactive benefits for all
classes of beneficiaries under that statute.
The distinction the Bonny decision draws between the two
categories of claimants--those whose claims had been approved
and those whose entitlement had yet to be recognized when they
died--is really one without a difference. In either case, a
claimant's estate is deprived of the value of benefits to which
the claimant was, in life, entitled. Section 2 of S. 1188 would
remove this inequitable distinction, and we support its
enactment.
We note that section 2 of S. 1188 would also add a new
class of claimants eligible for accrued benefits. Chapter 18 of
title 38, United States Code, authorizes monetary benefits for
Vietnam veterans' children with birth defects. This provision
would ensure that, upon the death of a child entitled to
benefits under chapter 18, the child's surviving parents would
be eligible for accrued benefits.
In addition, we note one technical change needed in section
2 of S. 1188 should it be enacted. The comma in current section
5121(a) following ``existing ratings or decisions'' should be
deleted to clarify, for purposes of 38 U.S.C. Sec. Sec. 5121(b)
and (c) and 5122, that the term ``accrued benefits'' includes
both benefits that have been awarded to an individual in
existing ratings or decisions but not paid before the
individual's death, as well as benefits that could be awarded
based on evidence in the file at the date of death.

* * * * *

VA estimates that enactment of these provisions of S. 1188
could result in benefit costs of $16.1 million for FY 2004 and
$62.5 million for the period FY 2004 through FY 2013 and
administrative costs of $661,000 in FY 2004 and $2.6 million
for the period FY 2004 through FY 2013.

* * * * *

s. 1213

S. 1213 would amend title 38, United States Code, to
improve benefits for Filipino veterans of World War II, and
their survivors, who lawfully reside in the United States, by
expanding their eligibility for VA health care, compensation,
DIC, and burial benefits. S. 1213 would also extend VA's
authority to maintain a regional office in the Philippines
through 2008. This bill reflects proposed legislation submitted
by the Secretary of Veterans Affairs to the President of the
Senate by letter dated May 12, 2003, and we greatly appreciate
the Chairman's courtesy in introducing S. 1213. The full
rationale and justification for this proposed legislation, as
well as our cost estimates, are contained in the Secretary's
May 12th letter. For the reasons stated in that letter, VA
strongly supports this legislation and recommends that Congress
approve S. 1213 as introduced.

s. 1239

* * * * *

Dental Care for Former Prisoners of War
Section 4 of S. 1239 would require VA to provide outpatient
dental services and treatment, and related dental appliances,
for any non-service-connected dental condition or disability
from which a veteran who is a former POW is suffering.
Currently, a veteran who is a former POW may receive dental
benefits for non-service-connected dental conditions or
disabilities only if the veteran was incarcerated for 90 days
or more. By eliminating the 90-day requirement, section 4 would
authorize VA to treat all former POWs the same, regardless of
their length of captivity, with respect to dental care for a
non-service-connected condition or disability. It would also
make the eligibility rules for dental benefits for former POWs
the same as for other health-care services for former POWs.
This provision is identical to VA's recent proposal, and we
strongly support its enactment.
Costs resulting from enactment of this provision would be
insignificant.

* * * * *

s. 1360

Section 1(a) of S. 1360 would amend 38 U.S.C. Sec. 7105(b)
to provide, in effect, that a writing filed by a claimant, a
claimant's legal guardian, an accredited representative,
attorney, or authorized agent, or a legal guardian expressing
disagreement with a decision of an agency of original
jurisdiction shall be recognized as a notice of disagreement
(NOD). The amendment made by section 1(a) would apply to any
document filed on or after the date of enactment of S. 1360 and
any document filed prior to the date of enactment that was not
rejected as an NOD by VA as of that date. Section 1(b) of S.
1360 would provide that, if a document filed as an NOD between
March 15, 2002, and the date of enactment of S. 1360 meets the
requirements of section 1(a) for an NOD, but VA determined that
it did not constitute an NOD pursuant to 38 C.F.R. Sec. 20.201,
VA would have to treat the document as an NOD if the claimant
makes a request, or VA makes a motion, within one year after
the date of enactment, to treat it as a NOD.
S. 1360 would overturn the decision of the United States
Court of Appeals for the Federal Circuit in Gallegos v.
Principi, in which that court held that 38 C.F.R. Sec. 20.201,
defining an NOD as a writing expressing a desire for appellate
review, is a reasonable and permissible construction of 38
U.S.C. Sec. 7105, which sets forth the necessary steps for
appellate review by the Board. Defining a writing as an NOD
irrespective of whether it expresses a desire for appellate
review would represent a major change in the statutory scheme
of 38 U.S.C. Sec. 7105, which refers to an NOD only in the
context of initiating an appeal to the Board.
It does not serve veterans to initiate appeals of their
claims against their wishes. However, requiring VA to treat any
document disagreeing with an initial VA determination or
decision on a claim as an NOD, without regard to whether it
expresses a desire for appellate review, would impose a
substantial burden on the VA claims adjudication system and
hinder us in achieving our objective of improving the
efficiency of claim adjudications and reducing the time
necessary to resolve claims. VA is inundated on a daily basis
by myriad correspondence from claimants and their
representatives. Under the proposed amendment, in any case in
which such correspondence could be construed as expressing
disagreement with an initial claim decision, VA would be
required to initiate a time-consuming, multi-step process under
which it is obligated to reexamine the claim and determine if
additional review or development is warranted and, ultimately,
prepare a statement of the case summarizing the evidence,
citing applicable laws and explaining their affect, and
providing the reasons for making the determination in question.
This process would apparently be required even in cases where,
although a claimant has expressed disagreement with a VA
decision, it is quite plain from the claimant's submission that
the claimant has no desire for appellate review of the
decision.
VA opposes S. 1360 and believes that the goal of the bill
can better be achieved by amending VA's procedures to assure
that VA ascertains the intent of a claimant who expresses
disagreement with an initial VA claim decision.
That concludes my statement, Mr. Chairman. I would be happy
now to entertain any questions you or the other members of the
Committee may have.

* * * * *

Statement of Tim S. McClain, General Counsel, Department of Veterans
Affairs

Good afternoon Mr. Chairman and Members of the Committee. I
am pleased to be here to present the Administration's views on
six bills that pertain primarily to the veterans health-care
system.

* * * * *

Section 304 of S. 1156 would broaden the authority of the
Veterans Benefits Administration to contract with outside
entities for disability examinations in connection with the
adjudication of claims for veterans benefits. Current law
allows VBA to do so at no more than 10 regional offices on a
pilot basis. Section 304 would remove the 10-office limitation.
The pilot has been a success, however, there are funding issues
and we do not yet have cleared views and estimates on this
provision. We will supply them when they are available.

* * * * *

Changes in Existing Law Made by the Committee Bill, as Reported

In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
the Committee bill, as reported, are shown as follows (existing
law proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):

TITLE 26--UNITED STATES CODE

* * * * * * *

Sec. 6103. Confidentiality and disclosure of returns and return
information

* * * * * * *

(l) Disclosure of Returns and Return Information for
Purposes Other Than Tax Administration.--
(1) * * *

* * * * * * *

(7) Disclosure of return information to Federal,
state, and local agencies administering certain
programs under the Social Security Act, the Food Stamp
Act of 1977 or title 38, United States Code, or certain
housing assistance programs.--
(A) * * *

* * * * * * *

(D) Programs to which rule applies.--The
programs to which this paragraph applies are:
(i) * * *

* * * * * * *

Only return information from returns with respect to net
earnings from self employment and wages may be disclosed under
this paragraph for use with respect to any program described in
clause (viii)(IV). Clause (viii) shall not apply after
September 30, [2008] 2011.

* * * * * * *

TITLE 38--UNITED STATES CODE

* * * * * * *

CHAPTERS OF TITLE 38

* * * * * * *

PART II--GENERAL BENEFITS

Chapter Section
11. * * *
* * * * * * *
18. Benefits for children of Vietnam Veterans [who are
1802born with spina bifida] and certain other veterans......

* * * * * * *

Sec. 107. Certain service deemed not to be active service

* * * * * * *

(b) Service in the Philippine Scouts under section 14 of
the Armed Forces Voluntary Recruitment Act of 1945 shall not be
deemed to have been active military, naval, or air service for
the purposes of any of the laws administered by the Secretary
except--
(1) with respect to contracts of National Service
Life Insurance entered into (A) before May 27, 1946,
(B) under section 620 or 621 of the National Service
Life Insurance Act of 1940, or (C) under section 1922
of this title; and
(2) chapters 11 [and], 13 (except section 1312(a)),
23, and 24 (to the extent provided for in section
2402(8)) of this title.
[Payments] Except as provided in subsection (c) or (d),
payments under such chapters shall be made at a rate of $0.50
for each dollar authorized, and where annual income is a factor
in entitlement to benefits, the dollar limitations in the law
specifying such annual income shall apply at a rate of $0.50
for each dollar.
(c) In the case of benefits under subchapters II and IV of
chapter 11 of this title and subchapter II of chapter 13
(except section 1312(a)) of this title paid by reason of
service described in subsection (a) or (b) to an individual
residing in the United States who is a citizen of, or an alien
lawfully admitted for permanent residence in, the United
States, the second sentence [of subsection (a)] of the
applicable subsection shall not apply.
(d)(1) With respect to benefits under chapter 23 of this
title, in the case of an individual described in paragraph (2),
the second sentence of subsection (a) or (b), as applicable,
shall not apply.
(2) Paragraph (1) applies to any individual whose service
is described in subsection (a) and who dies after November 1,
2000, or whose service is described in subsection (b) and who
dies after the date of enactment of the Veterans' Benefits
Enhancements Act of 2003, if the individual, on the
individual's date of death--
(A) is a citizen of, or an alien lawfully admitted
for permanent residence in, the United States;
(B) is residing in the United States; and
(C) either--
(i) is receiving compensation under chapter
11 of this title; or
(ii) if the individual's service had been
deemed to be active military, naval, or air
service, would have been paid pension under
section 1521 of this title without denial or
discontinuance by reason of section 1522 of
this title.

* * * * * * *

Sec. 315. Regional Offices

* * * * * * *

(b) The Secretary may maintain a regional office in the
Republic of the Philippines until December 31, [2003] 2008.

* * * * * * *

Sec. 544. Advisory Committee on Minority Veterans

* * * * * * *

(e) The Committee shall cease to exist December 31, [2003]
2007.

* * * * * * *

Sec. 1104. Cost-of-living adjustments

(a) In the computation of cost-of-living adjustments for
fiscal years 1998 through [2011] 2013 in the rates of, and
dollar limitations applicable to, compensation payable under
this chapter, such adjustments shall be made by a uniform
percentage that is no more than the percentage equal to the
social security increase for that fiscal year, with all
increased monthly rates and limitations (other than increased
rates or limitations equal to a whole dollar amount) rounded
down to the next lower whole dollar amount.

* * * * * * *

Sec. 1112. Presumptions relating to certain diseases and disabilities

* * * * * * *

(b)(1) For the purposes of section 1110 of this title and
subject to the provisions of section 1113 of this title, in the
case of a veteran who is a former prisoner of war [and who was
detained or interned for not less than thirty days, the disease
of]--
[(1) avitaminosis,
[(2) beriberi (including beriberi heart disease),
[(3) chronic dysentery,
[(4) helminthiasis,
[[(5) malnutrition (including optic atrophy associated with
malnutrition),
[(6) pellagra,
[(7) any other nutritional deficiency,
[(8) psychosis,
[(9) any of the anxiety states,
[(10) dysthymic disorder (or depressive neurosis),
[(11) organic residuals of frostbite, if the Secretary
determines that the veteran was interned in climatic conditions
consistent with the occurrence of frostbite,
[(12) post-traumatic osteoarthritis,
[(13) peripheral neuropathy except where directly related
to infectious causes,
[(14) irritable bowel syndrome, or
[(15) peptic ulcer disease,
[which became manifest to a degree of 10 percent or more after
active military, naval, or air service shall be considered to
have been incurred in or aggravated by such service,
notwithstanding that there is no record of such disease during
the period of service.]
(A) a disease specified in paragraph (2) which became
manifest to a degree of 10 percent or more after active
military, naval, or air service shall be considered to
have been incurred or aggravated by such service,
notwithstanding that there is no record of such disease
during the period of service; and
(B) if the veteran was detained or interned as a
prisoner of war for not less than thirty days, a
disease specified in paragraph (3) which became
manifest to a degree of 10 percent or more after active
military, naval, or air service shall be considered to
have been incurred in or aggravated by such service,
notwithstanding that there is no record of such disease
during the period of service.
(2) The diseases specified in this paragraph are the
following:
(A) Psychosis.
(B) Any of the anxiety states.
(C) Dysthymic disorder (or depressive neurosis).
(D) Organic residuals of frostbite, if the Secretary
determines that the veteran was detained or interned in
climatic conditions consistent with the occurrence of
frostbite.
(E) Post-traumatic osteoarthritis.
(3) The diseases specified in this paragraph are the
following:
(A) Avitaminosis.
(B) Beriberi (including beriberi heart disease).
(C) Chronic dysentery.
(D) Helminthiasis.
(E) Malnutrition (including optic atrophy associated
with malnutrition).
(F) Pellagra.
(G) Any other nutritional deficiency.
(H) Cirrhosis of the liver.
(I) Peripheral neuropathy except where directly
related to infectious causes.
(J) Irritable bowel syndrome.
(K) Peptic ulcer disease.

* * * * * * *

Sec. 1303. Cost-of-living adjustments

(a) In the computation of cost-of-living adjustments for
fiscal years 1998 through [2011] 2013 in the rates of
dependency and indemnity compensation payable under this
chapter, such adjustments (except as provided in subsection
(b)) shall be made by a uniform percentage that is no more than
the percentage equal to the social security increase for that
fiscal year, with all increased monthly rates (other than
increased rates equal to a whole dollar amount) rounded down to
the next lower whole dollar amount.

* * * * * * *

Sec. 1712. Dental care; drugs and medicines for certain disabled
veterans; vaccines (a)(1) Outpatient dental service
and treatment, and related dental appliances, shall
be furnished under this section only for a dental
condition or disability--

(A) * * *

* * * * * * *

(F) from which a veteran who is a former prisoner of
war [and who was detained or interned for a period of
not less than 90 days] is suffering.

* * * * * * *

CHAPTER 18--BENEFITS FOR CHILDREN OF VIETNAM VETERANS AND CERTAIN OTHER
VETERANS

* * * * * * *

Subchapter III--Children of Certain Korea Service Veterans Born With
Spina Bifida

1821. Benefits for children of certain Korea service veterans born with
spina bifida

Subchapter [III] IV--General Provisions

[1821] 1831. Definitions.
[1822] 1832. Applicability of certain administrative provisions.
[1823] 1833. Treatment of receipt of monetary allowance and other
benefits.
[1824] 1834. Nonduplication of benefits.
* * * * * * *

Sec. 1811. Definitions

In this subchapter:
(1) The term ``eligible child'' means an individual
who--
(A) is the child (as defined in section
[1821(1)] 1831(1) of this title) of a woman
Vietnam veteran; and
(B) was born with one or more covered birth
defects.
(2) The term ``covered birth defect'' means a birth
defect identified by the Secretary under section 1812
of this title.

* * * * * * *

Subchapter III--Children of Certain Korea Service Veterans Born With
Spina Bifida

Sec. 1821. Benefits for children of certain Korea service veterans born
with spina bifida

(a) Benefits Authorized.--The Secretary may provide to any
child of a veteran of covered service in Korea who is suffering
from spina bifida the health care, vocational training and
rehabilitation, and monetary allowance required to be paid to a
child of a Vietnam veteran who is suffering from spina bifida
under subchapter I of this chapter as if such child of a
veteran of covered service in Korea were a child of a Vietnam
veteran who is suffering from spina bifida under such
subchapter.
(b) Spina Bifida Conditions Covered.--This section applies
with respect to all forms and manifestations of spina bifida,
except spina bifida occulta.
(c) Veteran of Covered Service in Korea.--For purposes of
this section, a veteran of covered service in Korea is any
individual, without regard to the characterization of that
individual's service, who--
(1) served in the active military, naval, or air
service in or near the Korean demilitarized zone (DMZ),
as determined by the Secretary in consultation with the
Secretary of Defense, during the period beginning on
January 1, 1967, and ending on December 31, 1969; and
(2) is determined by the Secretary, in consultation
with the Secretary of Defense, to have been exposed to
a herbicide agent during such service in or near the
Korean demilitarized zone.
(d) Herbicide Agent.--For purposes of this section, the
term ``herbicide agent'' means a chemical in a herbicide used
in support of United States and allied military operations in
or near the Korean demilitarized zone, as determined by the
Secretary in consultation with the Secretary of Defense, during
the period beginning on January 1, 1967, and ending on December
31, 1969.

Subchapter [III] IV_General Provisions

[1821] Sec. 1831. Definitions.

In this chapter:
(1) The term ``child'' means [an individual,
regardless of age or marital status, who] the
following--
(A) [is the natural child of a Vietnam
veteran; and] For purposes of subchapters I and
II of this chapter, an individual, regardless
of age or marital status, who--
(i) is the natural child of a Vietnam
veteran; and
(ii) was conceived after the date on
which that veteran first entered the
Republic of Vietnam during the Vietnam
era.
(B) [was conceived after the date on which
that veteran first entered the Republic of
Vietnam during the Vietnam era.] For purposes
of subchapter III of this chapter, an
individual, regardless of age or marital
status, who--
(i) is the natural child of a veteran
of covered service in Korea (as
determined for purposes of section 1821
of this title); and
(ii) was conceived after the date on
which that veteran first entered
service described in subsection (c) of
that section.

* * * * * * *

Sec. [1822] 1832. Applicability of certain administrative provisions.

* * * * * * *

Sec. [1823] 1833. Treatment of receipt of monetary allowance and other
benefits.

* * * * * * *

Sec. [1824] 1834. Nonduplication of benefits.

(a) Monetary Allowance.--In the case of an eligible child
under subchapter II of this chapter whose only covered birth
defect is spina bifida, a monetary allowance shall be paid
under subchapter I of this chapter. In the case of an eligible
child under subchapter II of this chapter who has spina bifida
and one or more additional covered birth defects, a monetary
allowance shall be paid under subchapter II of this chapter. In
the case of a child eligible for benefits under subchapter I or
II of this chapter who is also eligible for benefits under
subchapter III of this chapter, a monetary allowance shall be
paid under the subchapter of this chapter elected by the child.

* * * * * * *

Sec. 1917. Insurance maturing on or after August 1, 1946

* * * * * * *

(f)(1) Following the death of the insured and in a case not
covered by subsection (d)--
(A) if the first beneficiary otherwise entitled to
payment of the insurance does not make a claim for such
payment within two years after the death of the
insured, payment may be made to another beneficiary
designated by the insured, in the order of precedence
as designated by the insured, as if the first
beneficiary had predeceased the insured; and
(B) if, within four years after the death of the
insured, no claim has been filed by a person designated
by the insured as a beneficiary and the Secretary has
not received any notice in writing that any such claim
will be made, payment may (notwithstanding any other
provision of law) be made to such person as may in the
judgment of the Secretary be equitably entitled
thereto.
(2) Payment of insurance under paragraph (1) shall be a bar
to recovery by any other person.

* * * * * * *

Sec. 1952. Optional settlement

* * * * * * *

(c)(1) Following the death of the insured and in a case not
covered by section 1950 of this title--
(A) if the first beneficiary otherwise entitled to
payment of the insurance does not make a claim for such
payment within two years after the death of the
insured, payment may be made to another beneficiary
designated by the insured, in the order of precedence
as designated by the insured, as if the first
beneficiary had predeceased the insured; and
(B) if, within four years after the death of the
insured, no claim has been filed by a person designated
by the insured as a beneficiary and the Secretary has
not received any notice in writing that any such claim
will be made, payment may (notwithstanding any other
provision of law) be made to such person as may in the
judgment of the Secretary be equitably entitled
thereto.
(2) Payment of insurance under paragraph (1) shall be a bar
to recovery by any other person.

* * * * * * *

Sec. 1974. Advisory Council on Servicemembers' Group Life Insurance

(a) There is an Advisory Council on Servicemembers' Group
Life Insurance. The council consist of--
(1) the Secretary of the Treasury, who is the
chairman of the council;
(2) the Secretary of Defense;
(3) the Secretary of Commerce;
(4) the Secretary of Health and Human Services;
(5) the Secretary of [Transportation] Homeland
Security; and
(6) the Director of the Office of Management and
Budget.
Members of the council shall serve without additional
compensation.

* * * * * * *

Sec. 2303. Death in Department facility; plot allowance

* * * * * * *

(b) In addition to the benefits provided for under section
2302 of this title and subsection (a) of this section, in the
case of a veteran who is eligible for [a burial allowance under
such section 2302, or under such subsection, who was discharged
from the active military, naval, or air service for a
disability incurred or aggravated in line of duty, or who is a
veteran of any war] burial in a national cemetery under section
2402 of this title and who is not buried in a national cemetery
or other cemetery under the jurisdiction of the United States--
(1) * * *
(2) if such veteran [(other than a veteran whose
eligibility for benefits under this subsection is based
on being a veteran of any war)] is eligible for a
burial allowance under section 2302 of this title or
under subsection (a) of this section, or was discharged
from the active military, naval, or air service for a
disability incurred or aggravated in line of duty, and
such veteran is buried in a cemetery, or a section of a
cemetery, other than as described in clause (1) of this
subsection, the Secretary shall pay a sum not exceeding
$300 as a plot or interment allowance to such person as
the Secretary prescribes, except that if any part of
the plot or interment costs of a burial to which this
clause applies has been paid or assumed by a State, an
agency or political subdivision of a State, or a former
employer of the deceased veteran, no claim for such
allowance shall be allowed for more than the difference
between the entire amount of the expenses incurred and
the amount paid or assumed by any or all of the
foregoing entities.

* * * * * * *

Sec. 2402. Persons eligible for interment in national cemeteries

Under such regulations as the Secretary may prescribe and
subject to the provisions of section 6105 of this title, the
remains of the following persons may be buried in any open
national cemetery under the control of the National Cemetery
Administration:
(1) * * *

* * * * * * *

(5) The spouse, surviving spouse (which for purposes
of this chapter includes [an unremarried surviving
spouse who had a subsequent remarriage which was
terminated by death or divorce] a surviving spouse who
had a subsequent remarriage), minor child (which for
purposes of this chapter includes a child under 21
years of age, or under 23 years of age if pursuing a
course of instruction at an approved educational
institution), and, in the discretion of the Secretary,
unmarried adult child of any of the persons listed in
paragraphs (1) through (4) and paragraph (7).

* * * * * * *

(8) Any individual whose service is described in
section 107(a) or (b) of this title if such individual
at the time of death--
(A) was a citizen of the United States or an
alien lawfully admitted for permanent residence
in the United States; and
(B) resided in the United States.

Sec. 2408. Aid to States for establishment, expansion, and improvement
of veterans' cemeteries

(a)[(1)] Subject to subsection (b) of this section, the
Secretary may make grants to any State to assist such State in
establishing, expanding, or improving veterans' cemeteries
owned by such State. Any such grant may be made only upon
submission of an application to the Secretary in such form and
manner, and containing such information, as the Secretary may
require.
[(2) There is authorized to be appropriated such sums as
may be necessary for fiscal year 1999 and for each succeeding
fiscal year through fiscal year 2004 for the purpose of making
grants under paragraph (1).]

* * * * * * *

(e) [Sums appropriated under subsection (a) of this
section] Amounts appropriated to carry out this section shall
remain available until expended. If all funds from a grant
under this section have not been utilized by a State for the
purpose for which the grant was made within three years after
such grant is made, the United States shall be entitled to
recover any such unused grant funds from such State.

* * * * * * *

Sec. 3015. Amount of basic educational assistance

* * * * * * *

(h) With respect to any fiscal year, the Secretary shall
provide a percentage increase (rounded down to the nearest
dollar) in the rates payable under subsections (a)(1) and
(b)(1) equal to the percentage by which--
(1) the Consumer Price Index (all items, United
States city average) for the 12-month period ending on
the June 30 preceding the beginning of the fiscal year
for which the increase is made, exceeds
(2) such Consumer Price Index for the 12-month period
preceding the 12-month period described in paragraph
(1).

* * * * * * *

Sec. 3462. Time limitations for completing a program of education

DELIMITING PERIOD FOR COMPLETION

(a)(1) Subject to paragraph (4) of this subsection, no
educational assistance shall be afforded an eligible veteran
under this chapter beyond the date 10 years after the veteran's
last discharge or release from active duty after January 31,
1955; except that, in the case of any eligible veteran who was
prevented from initiating or completing such veteran's chosen
program of education within such time period because of a
physical or mental disability which was not the result of such
veteran's own willful misconduct, such veteran shall, upon
application made within one year after (A) the last date of the
delimiting period otherwise applicable under this section, (B)
the termination of the period of such mental or physical
disability, or (C) October 1, 1980, whichever is the latest, be
granted an extension of the applicable delimiting period for
such length of time as the Secretary determines, from the
evidence, that such veteran was so prevented from initiating or
completing such program of education. When an extension of the
applicable delimiting period is granted a veteran under the
preceding sentence, the delimiting period with respect to such
veteran will again begin running on the first day following
such veteran's recovery from such disability on which it is
reasonably feasible, as determined in accordance with
regulations which the Secretary shall prescribe, for such
veteran to initiate or resume pursuit of a program of education
with educational assistance under this chapter.
[(2)(A) Notwithstanding the provisions of paragraph (1) of
this subsection, any veteran shall be permitted to use any of
such veteran's unused entitlement under section 3461 of this
title for the purposes of eligibility for an education loan,
pursuant to the provisions of subchapter III of chapter 36 of
this title [38 USCS Sec. Sec. 3698 et seq.], after the
delimiting date otherwise applicable to such veteran under such
paragraph (1), if such veteran was pursuing an approved program
of education on a full-time basis at the time of the expiration
of such veteran's eligibility.
[(B) Notwithstanding any other provision of this chapter
[38 USCS Sec. Sec. 3451 et seq.] or chapter 36 of this title
[38 USCS Sec. Sec. 3670 et seq.], any veteran whose delimiting
period is extended under subparagraph (A) of this paragraph may
continue to use any unused loan entitlement under this
paragraph as long as the veteran continues to be enrolled on a
full-time basis in pursuit of the approved program of education
in which such veteran was enrolled at the time of expiration of
such veteran's eligibility (i) until such entitlement is
exhausted, (ii) until the expiration of two years after
November 23, 1977, or the date of the expiration of the
delimiting date otherwise applicable to such veteran under
paragraph (1) of this subsection, whichever is later, or (iii)
until such veteran has completed the approved program of
education in which such veteran was enrolled at the end of the
delimiting period referred to in paragraph (1) of this
subsection, whichever occurs first.]
[(3) [Repealed]]
[(4)] (2) For purposes of paragraph (1) of this subsection,
a veteran's last discharge or release from active duty shall
not include any discharge or release from a period of active
duty of less than 90 days of continuous service unless the
individual involved is discharged or released for a service-
connected disability, for a medical condition which preexisted
such service and which the Secretary determines is not service
connected, for hardship, or as a result of a reduction in force
as described in section 3011(a)(1)(A)(ii)(III) of this title.

* * * * * * *

Sec. 3485. Work-study allowance

(a)(1) * * *

* * * * * * *

(e)(1) Subject to paragraph (2) of this subsection, the
Secretary may, notwithstanding any other provision of law,
enter into an agreement with an individual under this section,
or a modification of such an agreement, whereby the individual
agrees to perform services of the kind described in clauses (A)
through (E) of subsection (a)(1) of this section and agrees
that the Secretary shall, in lieu of paying the work-study
allowance payable for such services, as provided in subsection
(a) of this section, deduct the amount of the allowance from
the amount which the individual has been determined to be
indebted to the United States by virtue of such individual's
participation in a benefits program under this chapter, chapter
30, 31, 32, 35, or 36 [(other than an education loan under
subchapter III)] of this title, or chapter 106 of title 10
(other than an indebtedness arising from a refund penalty
imposed under section 2135 of such title).

* * * * * * *

Sec. 3512. Periods of eligibility

(a) * * *

* * * * * * *

[(f) Any eligible person (as defined in section
3501(a)(1)(B), (C), or (D) of this chapter) shall be entitled
to an additional period of eligibility for an education loan
under subchapter III of chapter 36 of this title beyond the
maximum period provided for in this section pursuant to the
same terms and conditions set forth with respect to an eligible
veteran in section 3462(a)(2) of this title.]

* * * * * * *

Sec. 3512. Periods of eligibility

* * * * * * *

(h) Notwithstanding any other provision of this section, if
an eligible person, during the delimiting period otherwise
applicable to such person under this section, serves on active
duty pursuant to an order to active duty issued under section
688, 12301(a), 12301(d), 12301(g), 12302, or 12304 of title 10,
or is involuntarily ordered to full-time National Guard duty
under section 502(f) of title 32, such person shall be granted
an extension of such delimiting period for the length of time
equal to the period of such active duty plus four months.

* * * * * * *

Sec. 3532. Computation of educational assistance allowance

(a)(1) The educational assistance allowance on behalf of an
eligible person who is pursuing a program of education
consisting of institutional courses shall be paid at the
monthly rate of [$670] $788 for full-time, [$503] $592 for
three-quarter time, or [$335] $394 for half-time pursuit.
(2) The educational assistance allowance on behalf of an
eligible person pursuing a program of education on less than a
half-time basis shall be paid at the rate of the lesser of (A)
the established charges for tuition and fees that the
educational institution involved requires similarly
circumstanced nonveterans enrolled in the same program to pay;
or (B) [$670] $788 per month for a full-time course[, whichever
is the lesser].
(b) The educational assistance allowance to be paid on
behalf of an eligible person who is pursuing a full-time
program of education which consists of institutional courses
and alternate phases of training in a business or industrial
establishment with the training in the business or industrial
establishment being strictly supplemental to the institutional
portion, shall be computed at the rate of [$670] $788 per
month.
(c)(1) * * *

* * * * * * *

(2) The monthly educational assistance allowance to be paid
on behalf of an eligible person pursuing a farm cooperative
program under this chapter shall be [$541] $636 for full time,
[$406] $477 for three-quarter-time, or [$271] $319 for half-
time pursuit.

* * * * * * *

Sec. 3534. Apprenticeship or other on-job training; correspondence
courses.

* * * * * * *

(b) Any eligible spouse or surviving spouse shall be
entitled to pursue a program of education exclusively by
correspondence and be paid an educational assistance allowance
as provided in section 3686 (other than subsection (a)(2)) of
this title and the period of such spouse's entitlement shall be
charged with one month for each [$670] $788 which is paid to
the spouse as an educational assistance allowance for such
course.

* * * * * * *

Sec. 3542. Special training allowance

(a) While the eligible person is enrolled in and pursuing a
full-time course of special restorative training, the eligible
person shall be entitled to receive a special training
allowance computed at the basic rate of [$670] $788 per month.
If the charges for tuition and fees applicable to any such
course are more than [$210] $247 per calendar month, the basic
monthly allowance may be increased bythe amount that such
charges exceed [$210] $247 a month, upon election by the eligible
person to have such person's period of entitlement reduced by one day
for each such increased amount of allowance that is equal to one-
thirtieth of the full-time basic monthly rate of special training
allowance.

* * * * * * *

Sec. 3564. Annual adjustment of amounts of educational assistance

With respect to any fiscal year, the Secretary shall
provide a percentage increase (rounded down to the nearest
dollar) in the rates payable under sections 3532, 3534(b), and
3542(a) of this title equal to the percentage by which--
(1) the Consumer Price Index (all items, United
States city average) for the 12-month period ending on
the June 30 preceding the beginning of the fiscal year
for which the increase is made, exceeds
(2) such Consumer Price Index for the 12-month period
preceding the 12-month period described in paragraph
(1).

* * * * * * *

CHAPTER 36--ADMINISTRATION OF EDUCATIONAL BENEFITS

Subchapter I--State Approving Agencies

Sec.
3670 * * *
* * * * * * *

[Subchapter III--Education Loans]

[3698. Eligibility for loans; amount and conditions of loans; interest
rate on loans.
[3699. Revolving fund; insurance]

* * * * * * *

Sec. 3687. Apprenticeship or other on-job training

(a) * * *

* * * * * * *

(b)(1) * * *

* * * * * * *

(2) The monthly training assistance allowance of an
eligible person pursuing a program described under subsection
(a) shall be [$488] $574 for the first six months, [$365] $429
for the second six months, [$242] $285 for the third six
months, and [$122] $144 for the fourth and any succeeding six-
month period[s] of training.

* * * * * * *

Sec. 3692. Advisory committee

(a) There shall be a Veterans' Advisory Committee on
Education formed by the Secretary which shall be composed of
persons who are eminent in their respective fields of
education, labor, and management and of representatives of
institutions and establishments furnishing education to
eligible veterans or persons enrolled under chapter 30, 32, or
35 of this title and chapter [106] 1606 of title 10. The
committee shall also, to the maximum extent practicable,
include veterans representative of World War II, the Korean
conflict era, the post-Korean conflict era, the Vietnam era,
the post-Vietnam era, and the Persian Gulf War. The Assistant
Secretary of Education for Postsecondary Education (or such
other comparable official of the Department of Education as the
Secretary of Education may designate) and the Assistant
Secretary of Labor for Veterans' Employment and Training shall
be ex officio members of the advisory committee.
(b) The Secretary shall consult with and seek the advice of
the committee from time to time with respect to the
administration of this chapter, [chapter] chapters 30, 32, and
35 of this title, and chapter [106] 1606 of title 10. The
committee may make such reports and recommendations as it
considers desirable to the Secretary and the Congress.
(c) The committee shall remain in existence until December
31, [2003] 2013.

* * * * * * *

[SUBCHAPTER III--EDUCATION LOANS]

[Sec. 3698. Eligibility for loans; amount and conditions of loans;
interest rate on loans]

[(a)(1) Subject to paragraph (2) of this subsection, each
eligible veteran shall be entitled to a loan under this
subchapter (if the program of education is pursued in a State)
in an amount determined under, and subject to the conditions
specified in, subsection (b)(1) of this section if the veteran
satisfies the requirements set forth in subsection (c) of this
section and the criteria established under subsection (g) of
this section.
[(2) Except in the case of a veteran to whom section
3462(a)(2) of this title is applicable, no loan may be made
under this subchapter after September 30, 1981.
[(b)(1) Subject to paragraph (3) of this subsection, the
amount of the loan to which an eligible veteran shall be
entitled under this subchapter for any academic year shall be
equal to the amount needed by such veteran to pursue a program
of education at the institution at which the veteran is
enrolled, as determined under paragraph (2) of this subsection.
[(2)(A) The amount needed by a veteran to pursue a program
of education at an institution for any academic year shall be
determined by subtracting (i) the total amount of financial
resources (as defined in subparagraph (B) of this paragraph)
available to the veteran which may be reasonably expected to be
expended by such veteran for educational purposes in any year
from (ii) the actual cost of attendance (as defined in
subparagraph (C) of this paragraph) at the institution in which
such veteran is enrolled.
[(B) The term ``total amount of financial resources'' of
any veteran for any year means the total of the following:
[(i) The annual adjusted effective income of the
veteran less Federal income tax paid or payable by such
veteran with respect to such income.
[(ii) The amount of cash assets of the veteran.
[(iii) The amount of financial assistance received by
the veteran under the provisions of title IV of the
Higher Education Act of 1965.
[(iv) Educational assistance received by the veteran
under this title other than under this subchapter.
[(v) Financial assistance received by the veteran
under any scholarship or grant program other than those
specified in clauses (iii) and (iv).
[(C) The term ``actual cost of attendance'' means, subject
to such regulations as the Secretary may provide, the actual
per-student charges for tuition, fees, room and board (or
expenses related to reasonable commuting), books, and an
allowance for such other expenses as the Secretary determines
by regulation to be reasonably related to attendance at the
institution at which the veteran is enrolled.
[(3) The aggregate of the amounts any veteran may borrow
under this subchapter may not exceed $ 376 multiplied by the
number of months such veteran is entitled to receive
educational assistance under section 3461 of this title, but
not in excess of $2,500 in any one regular academic year.
[(c) An eligible veteran shall be entitled to a loan under
this subchapter if such veteran--
[(1) is in attendance at an educational institution
on at least a half-time basis and (A) is enrolled in a
course leading to a standard college degree, or (B) is
enrolled in a course, the completion of which requires
six months or longer, leading to an identified and
predetermined professional or vocational objective,
except that the Secretary may waive the requirements of
subclause (B) of this clause, in whole or in part, if
the Secretary determines, pursuant to regulations which
the Secretary shall prescribe, it to be in the interest
of the eligible veteran and the Federal Government;
[(2) enters into an agreement with the Secretary
meeting the requirements of subsection (d) of this
section; and
[(3) satisfies any criteria established under
subsection (g) of this section.
[No loan shall be made under this subchapter to an eligible
veteran pursuing a program of correspondence, or apprenticeship
or other on-job training.
[(d) Any agreement between the Secretary and a veteran
under this subchapter--
[(1) shall include a note or other written obligation
which provides for repayment to the Secretary of the
principal amount of, and payment of interest on, the
loan in installments
[(A) over a period beginning nine months
after the date on which the borrower ceases to
be at least a half-time student and ending ten
years and nine months after such date; or
[(B) over such shorter period as the
Secretary may have prescribed under subsection
(g) of this section;
[(2) shall include provision for acceleration of
repayment of all or any part of the loan, without
penalty, at the option of the borrower;
[(3) shall provide that the loan shall bear interest,
on the unpaid balance of the loan, at a rate prescribed
by the Secretary, at the time the loan is contracted
for which rate shall be comparable to the rate of
interest charged students at such time on loans insured
by the Secretary of Education, under part B of title IV
of the Higher Education Act of 1965, but in no event
shall the rate so prescribed by the Secretary exceed
the rate charged students on such insured loans, and
shall provide that no interest shall accrue prior to
the beginning date of repayment; and
[(4) shall provide that the loan shall be made
without security and without endorsement.
[(e)(1) Except as provided in paragraph (2) of this
subsection, whenever the Secretary determines that a default
has occurred on any loan made under this subchapter, the
Secretary shall declare an overpayment, and such overpayment
shall be recovered from the veteran concerned in the same
manner as any other debt due the United States.
[(2) If a veteran who has received a loan under this
section dies or becomes permanently and totally disabled, then
the Secretary shall discharge the veteran's liability on such
loan by repaying the amount owed on such loan.
[(f) Payment of a loan made under this section shall be
drawn in favor of the eligible veteran and mailed promptly to
the educational institution in which such veteran is enrolled.
Such institution shall deliver such payment to the eligible
veteran as soon as practicable after receipt thereof. Upon
delivery of such payment to the eligible veteran, such
educational institution shall promptly submit to the Secretary
a certification, on such form as the Secretary shall prescribe,
of such delivery, and such delivery shall be deemed to be an
advance payment under section 3680(d)(4) of this title for
purposes of section 3684(b) of this title.
[(g)(1) The Secretary shall conduct, on a continuing basis,
a review of the default experience with respect to loans made
under this section.
[(2)(A) To ensure that loans are made under this section on
the basis of financial need directly related to the costs of
education, the Secretary may, by regulation, establish (i)
criteria for eligibility for such loans, in addition to the
criteria and requirements prescribed by subsections (c) and (d)
of this section, in order to limit eligibility for such loans
to eligible veterans attending educational institutions with
relatively high rates of tuition and fees, and (ii) criteria
under which the Secretary may prescribe a repayment period for
certain types of loans made under this section that is shorter
than the repayment period otherwise applicable under subsection
(d)(1)(A) ofthis section. Criteria established by the Secretary
under clause (i) of the preceding sentence may include a minimum amount
of tuition and fees that an eligible veteran may pay in order to be
eligible for such a loan (except that any such criterion shall not
apply with respect to a loan for which the veteran is eligible as a
result of an extension of the period of eligibility of such veteran for
loans under this section provided for by section 3462(a)(2) of this
title.
[(B) In prescribing regulations under subparagraph (A) of
this paragraph, the Secretary shall take into consideration
information developed in the course of the review required by
paragraph (1) of this subsection.
[(C) Regulations may be prescribed under subparagraph (A)
of this paragraph only after opportunity has been afforded for
public comment thereon.]

* * * * * * *

[Sec. 3699. Revolving fund; insurance]

[(a) There is hereby established in the Treasury of the
United States a revolving fund to be known as the ``Department
of Veterans Affairs Education Loan Fund'' (hereinafter in this
section referred to as the ``Fund'').
[(b) The Fund shall be available to the Secretary, without
fiscal year limitation, for the making of loans under this
subchapter.
[(c) There shall be deposited in the Fund (1) by transfer
from current and future appropriations for readjustment
benefits such amounts as may be necessary to establish and
supplement the Fund in order to meet the requirements of the
Fund, and (2) all collections of fees and principal and
interest (including overpayments declared under section 3698(e)
of this title) on loans made under this subchapter.
[(d) The Secretary shall determine annually whether there
has developed in the Fund a surplus which, in the Secretary's
adjustment, is more than necessary to meet the needs of the
Fund, and such surplus, if any, shall be deemed to have been
appropriated for readjustment benefits.
[(e) A fee shall be collected from each veteran or person
obtaining a loan made under this subchapter for the purpose of
insuring against defaults on loans made under this subchapter;
and no loan shall be made under this subchapter until the fee
payable with respect to such loan has been collected and
remitted to the Secretary. The amount of the fee shall be
established from time to time by the Secretary, but shall in no
event exceed 3 percent of the total loan amount. The amount of
the fee may be included in the loan to the veteran or person
and paid from the proceeds thereof.]

* * * * * * *

Sec. 3712. Loans to purchase manufactured homes and lots

(a)(1) * * *

* * * * * * *

(m) The authority of the Secretary to guarantee loans under
this section shall expire on December 31, 2003.

* * * * * * *

Sec. 3729. Loan fee

* * * * * * *

(b) Determination of Fee.--(1) The amount of the fee shall
be determined from the loan fee table in paragraph (2). The fee
is expressed as a percentage of the total amount of the loan
guaranteed, insured, or made, or, in the case of a loan
assumption, the unpaid principal balance of the loan on the
date of the transfer of the property.
(2) The loan fee table referred to in paragraph (1) is as
follows:

LOAN FEE TABLE
------------------------------------------------------------------------
Active duty Other
Type of loan veteran Reservist obligor
------------------------------------------------------------------------
(A)(i) Initial loan described in 2.00 2.75 NA
section 3710(a) to purchase or
construct a dwelling with 0-
down, or any other initial loan
described in section 3710(a)
other than with 5-down or 10-
down (closed before October 1,
2011............................
(A)(ii) Initial loan described in 1.25 2.00 NA
section 3710(a) to purchase or
construct a dwelling with 0-
down, or any other initial loan
described in section 3710(a)
other than with 5-down or 10-
down (closed on or after October
1, 2011.........................
(B)(i) Subsequent loan described [3.00] [3.00] NA
in section 3710(a) to purchase
or construct a dwelling with 0-
down, or any other subsequent
loan described in section
3710(a) (closed before October
1, 2011)........................
(B)(ii) Subsequent loan described 1.25 2.00 NA
in section 3710(a) to purchase
or construct a dwelling with 0-
down, or any other subsequent
loan described in section
3710(a) (closed on or after
October 1, 2011)................
(C)(i) Loan described in section 1.50 2.25 NA
3710(a) to purchase or construct
a dwelling with 5-down (closed
before October 1, 2011).........
(C)(ii) Loan described in section 0.75 1.50 NA
3710(a) to purchase or construct
a dwelling with 5-down (closed
on or after October 1, 2011)....
(D)(i) Initial loan described in 1.25 2.00 NA
section 3710(a) to purchase or
construct a dwelling with 10-
down (closed before October 1,
2011)...........................
(D)(ii) Initial loan described in 0.50 1.25 NA
section 3710(a) to purchase or
construct a dwelling with 10-
down (closed on or after October
1, 2011)........................
(E) Interest rate reduction 0.50 0.50 NA
refinancing loan................
(F) Direct loan under section 1.00 1.00 NA
3711............................
(G) Manufactured home loan under 1.00 1.00 NA
section 3712 (other than an
interest rate reduction
refinancing loan)...............
(H) Loan to Native American 1.25 1.25 NA
veteran under section 3762
(other than an interest rate
reduction refinancing loan).....
(I) Loan assumption under section 0.50 0.50 0.50
3714............................
(J) Loan under section 3733(a)... 2.25 2.25 2.25
------------------------------------------------------------------------

* * * * * * *
Sec. 3733. Property management

(a)(1) Of the number of purchases made during any fiscal
year of real property acquired by the Secretary as the result
of a default on a loan guaranteed under this chapter for a
purpose described in section 3710(a) of this title, not more
than [65] 85 percent, nor less than 50 percent, of such
purchases may be financed by a loan made by the Secretary. [The
maximum percentage stated in the preceding sentence may be
increased to 80 percent for any fiscal year if the Secretary
determines that such an increase is necessary in order to
maintain the effective functioning of the loan guaranty
program.]
[(2) After September 30, 1990, the percentage limitations
described in paragraph (1) of this subsection shall have no
effect.]
[(3)] (2) The Secretary may, beginning on October 1, 1990,
sell any note evidencing a loan referred to in paragraph (1)--
(A) with recourse; or
(B) without recourse, but only if the amount received
is equal to an amount which is not less than the unpaid
balance of such loan.
[(4)] (3)(A)--Except as provided in subparagraph (B) of
this paragraph, the amount of a loan made by the Secretary to
finance the purchase of real property from the Secretary
described in paragraph (1) [of this subsection] may not exceed
an amount equal to 95 percent of the purchase price of such
real property.
(B)(i) The Secretary may waive the provisions of
subparagraph (A) of this paragraph in the case of any loan
described in paragraph [(5) of this subsection] (4).
(ii) A loan described in subparagraph (A) of this paragraph
may, to the extent the Secretary determines to be necessary in
order to market competitively the property involved, exceed 95
percent of the purchase price.
[(5)] (4) The Secretary may include, as part of a loan to
finance a purchase of real property from the Secretary
described in paragraph (1) [of this subsection], an amount to
be used only for the purpose of rehabilitating such property.
Such amount may not exceed the amount necessary to rehabilitate
the property to a habitable state, and payments shall be made
available periodically as such rehabilitation is completed.
[(6)] (5) The Secretary shall make a loan to finance the
sale of real property described in paragraph (1) [of this
subsection] at an interest rate that is lower than the
prevailing mortgage market interest rate in areas where, and to
the extent, the Secretary determines, in light of prevailing
conditions in the real estate market involved, that such lower
interest rate is necessary in order to market the property
competitively and is in the interest of the long-term stability
and solvency of the Veterans Housing Benefit Program Fund
established by section 3722(a) of this title.

* * * * * * *

Sec. 5102. Application forms furnished upon request; notice to
claimants of incomplete applications

(a) * * *

* * * * * * *

(c) Time Limitation.--(1) If information that a claimant
and the claimant's representative, if any, are notified under
subsection (b) is necessary to complete an application is not
received by the Secretary within one year from the date of such
notification, no benefit may be paid or furnished by reason of
the claimant's application
(2) This subsection shall not apply to any application or
claim for Government life insurance benefits.

* * * * * * *

Sec. 5103. Notice to claimants of required information and evidence

* * * * * * *

(b)(1) * * *

* * * * * * *

(3) The limitation in paragraph (1) shall not be construed
to prohibit the Secretary from making a decision on a claim
before the expiration of the period referred to in that
subsection.

* * * * * * *

Sec. 5121. Payment of certain accrued benefits upon death of a
beneficiary

(a) Except as provided in sections 3329 and 3330 of title
31, periodic monetary benefits (other than insurance and
servicemen's indemnity) under laws administered by the
Secretary to which an individual was entitled at death under
existing ratings or decisions[,] or those based on evidence in
the file at date of death (hereinafter in this section and
section 5122 of this title referred to as ``accrued benefits'')
and due and unpaid [for a period not to exceed two years],
shall, upon the death of such individual be paid as follows:
(1) * * *

* * * * * * *

(4) Upon the death of a child, to the surviving
children of the veteran who are entitled to death
compensation, dependency and indemnity compensation, or
death pension; [and]
(5) Upon the death of a child claiming benefits under
chapter 18 of this title, to the surviving parents; and
[5] (6) In all other cases, only so much of the
accrued benefits may be paid as may be necessary to
reimburse the person who bore the expense of last
sickness and burial.

* * * * * * *

Sec. 5301. Nonassignability and exempt status of benefits

(a)(1) Payments of benefits due or to become due under any
law administered by the Secretary shall not be assignable
except to the extent specifically authorized by law, and such
payments made to, or on account of, a beneficiary shall be
exempt from taxation, shall be exempt from the claim of
creditors, and shall not be liable to attachment, levy, or
seizure by or under any legal or equitable process whatever,
either before or after receipt by the beneficiary. The
preceding sentence shall not apply to claims of the United
States arising under such laws nor shall the exemption therein
contained as to taxation extend to any property purchased in
part or wholly out of such payments. The provisions of this
section shall not be construed to prohibit the assignment of
insurance otherwise authorized under chapter 19 of this title,
or of servicemen's indemnity. [For the purposes of this
subsection, in any case where a payee of an educational
assistance allowance has designated the address of an attorney-
in-fact as the payee's address for the purpose ofreceiving a
benefit check and has also executed a power of attorney giving the
attorney-in-fact authority to negotiate such benefit check, such action
shall be deemed to be an assignment and is prohibited.]
(2) For the purposes of this subsection, in any case where
a payee of an educational assistance allowance has designated
the address of an attorney-in-fact as the payee's address for
the purpose of receiving a benefit check and has also executed
a power of attorney giving the attorney-in-fact authority to
negotiate such benefit check, such action shall be deemed to be
an assignment and is prohibited.
(3)(A) This subsection is intended to clarify that, in any
case where a beneficiary entitled to compensation, pension, or
dependency and indemnity compensation enters into an agreement
with another person under which agreement such other person
acquires for consideration the right to receive payment of such
compensation, pension, or dependency compensation, as the case
may be, whether by payment from the beneficiary to such other
person, deposit into an account from which such other person
may make withdrawals, or otherwise, such agreement shall be
deemed to be an assignment and is prohibited.
(B) Notwithstanding subparagraph (A), nothing in this
subsection is intended to prohibit a loan to a beneficiary
under the terms of which the beneficiary may use some of the
benefits to repay the loan, so long as each of the periodic
payments made to repay the loan is separately and voluntarily
executed by the beneficiary at the time such periodic payment
is made.
(C) Any agreement or arrangement for collateral for
security for an agreement that is prohibited under subparagraph
(A) is also prohibited and is void ab initio.

* * * * * * *

Sec. 5317. Use of income information from other agencies: notice and
verification

* * * * * * *

(g) The authority of the Secretary to obtain information
from the Secretary of the Treasury or the Secretary of Health
and Human Services under section 6103(l)(7)(D)(viii) of the
Internal Revenue Code of 1986 expires on September 30, [2008]
2011.

* * * * * * *

Sec. 6105. Forfeiture for subversive activities

* * * * * * *

(b) The offenses referred to in subsection (a) of this
section are those offenses for which punishment is prescribed
in--
(1) sections 894, 904, and 906 of title 10 (articles
94, 104, and 106 of the Uniform Code of Military
Justice);
(2) [sections 792, 793, 794, 798, 2381, 2382, 2383,
2384, 2385, 2387, 2388, 2389, 2390, and chapter 105 of
title 18] sections 175, 229, 792, 793, 794, 798, 831,
1091, 2332a, 2332b, 2381, 2382, 2383, 2384, 2385, 2387,
2388, 2389, 2390, and chapter 105 of title 18;
(3) sections 222, 223, 224, 225, and 226 of the
Atomic Energy Act of 1954 (42 U.S.C. 2272, 2273, 2274,
2275, and 2276); and (4) section 4 of the Internal
Security Act of 1950 (50 U.S.C. 783).

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Sec. 7105. Filing of notice of disagreement and appeal

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(b)(1) * * *

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(3) A document that meets the requirements of the second
sentence of paragraph (1) and the first sentence of paragraph
(2) shall be recognized as a notice of disagreement for
purposes of this section unless the Secretary finds that the
claimant has disavowed a desire for appellate review.

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