Witness Testimony of David R. McLenachen, Director, Pension and Fiduciary Service, U.S. Department of Veterans Affairs
Mr. Chairman and Members of the Subcommittee, thank you for the opportunity to present the views of the Department of Veterans Affairs (VA) on several bills of interest to Veterans and VA. Joining me today are Mary Ann Flynn, Deputy Director, Policy and Procedures, Compensation Service, and Richard Hipolit, Assistant General Counsel.
VA has not had time to develop cost estimates on H.R. 671, H.R. 733, and H.R. 894 and will provide costs on these bills for the record.
H.R. 569, the "Veterans' Compensation Cost-of-Living Adjustment Act of 2013," would require the Secretary of Veterans Affairs to increase, effective December 1, 2013, the rates of disability compensation for service-disabled Veterans and the rates of dependency and indemnity compensation (DIC) for survivors of Veterans. This bill would increase these rates by the same percentage as the percentage by which Social Security benefits are increased effective December 1, 2013. Each dollar amount increased, if not a whole dollar amount, would be rounded to the next lower whole dollar amount. The bill would also require VA to publish the resulting increased rates in the Federal Register.
VA strongly supports this bill because it would express, in a tangible way, this Nation’s gratitude for the sacrifices made by our service-disabled Veterans and their surviving spouses and children and would ensure that the value of their well-deserved benefits will keep pace with increases in consumer prices.
The cost of the cost-of-living adjustment (COLA) is included in VA's baseline budget because we assume a COLA will be enacted by Congress each year. Therefore, enactment of H.R. 569, which would extend the COLA adjustment through November 30, 2014, would not result in costs. The round-down in increased rates would result in savings of approximately $41.6 million in fiscal year (FY) 2014, $262.0 million over five years, and $573.8 million over ten years.
H.R. 570, the “American Heroes COLA Act,” would amend 38 U.S.C. § 5312 to permanently authorize the Secretary of Veterans Affairs to implement cost-of-living increases to the rates of disability compensation for service-disabled Veterans and the rates of DIC for survivors of Veterans. This bill would direct the Secretary to increase the rates of those benefits whenever a cost-of-living increase is made to benefits under title II of the Social Security Act. The rates of compensation and DIC would be increased by the same percentage as Social Security benefits. This bill would also make permanent the round-down requirement for compensation cost-of-living adjustments. The amendments made by the bill would take effect on December 1, 2014.
VA supports this bill because it would be consistent with Congress’ long-standing practice of enacting regular cost-of-living increases for compensation and DIC benefits in order to maintain the value of these important benefits, but would eliminate the need for additional legislation to implement such increases in the future. It would also be consistent with current 38 U.S.C. §§ 1104(a) and 1303(a), which provide that cost-of-living adjustments to compensation and DIC amounts, if they are made, will be at a uniform percentage not exceeding the percentage increase to Social Security benefits.
The cost of the COLA is included in VA's baseline budget because we assume Congress will enact a COLA each year. Therefore, making the annual COLA automatic would not result in costs. However, making permanent the provision to round down the COLA would result in savings of approximately $41.6 million in FY 2014, $712.5 million over five years, and $2.6 billion over ten years.
H.R. 602, the “Veterans 2nd Amendment Protection Act,” would provide that a person who is mentally incapacitated, deemed mentally incompetent, or unconscious for an extended period will not be considered adjudicated as a “mental defective” for purposes of the Brady Handgun Violence Prevention Act in the absence of an order or finding by a judge, magistrate, or other judicial authority that such person is a danger to himself, herself, or others. The bill would, in effect, exclude VA determinations of incompetency from the coverage of the Brady Handgun Violence Prevention Act. VA does not support this bill.
VA determinations of mental incompetency are based generally on whether a person, because of injury or disease, lacks the mental capacity to manage his or her own financial affairs. We believe adequate protections can be provided to these Veterans under current statutory authority. Under the [National Instant Criminal Background Check System] NICS Improvement Amendments Act of 2007, individuals whom VA has determined to be incompetent can have their firearms rights restored in two ways: First, a person who has been adjudicated by VA as unable to manage his or her own affairs can reopen the issue based on new evidence and have the determination reversed. When this occurs, VA is obligated to notify the Department of Justice to remove the individual's name from the roster of those barred from possessing and purchasing firearms. Second, even if a person remains adjudicated incompetent by VA for purposes of handling his or her own finances, he or she is entitled to petition VA to have firearms rights restored on the basis that the individual poses no threat to public safety. VA has relief procedures in place, and we are fully committed to continuing to conduct these procedures in a timely and effective manner to fully protect the rights of our beneficiaries.
Also, the reliance on an administrative incompetency determination as a basis for prohibiting an individual from possessing or obtaining firearms under Federal law is not unique to VA or Veterans. Under the applicable Federal regulations implementing the Brady Handgun Violence Prevention Act, any person determined by a lawful authority to lack the mental capacity to manage his or her own affairs is subject to the same prohibition. By exempting certain VA mental health determinations that would otherwise prohibit a person from possessing or obtaining firearms under Federal law, the bill would create a different standard for Veterans and their survivors than that applicable to the rest of the population and could raise public safety issues.
The enactment of H.R. 602 would not impose any costs on VA.
VA is committed to serving our Nation’s Veterans by accurately adjudicating claims based on military sexual trauma (MST) in a thoughtful and caring manner, while fully recognizing the unique evidentiary considerations involved in such an event. Before addressing the specific provisions of H.R. 671, it would be useful to outline those efforts, which we believe achieve the intent behind the bill. The Under Secretary for Benefits has spearheaded the efforts of the Veterans Benefits Administration (VBA) to ensure that these claims are adjudicated compassionately and fairly, with sensitivity to the unique circumstances presented by each individual claim.
VA is aware that, because of the personal and sensitive nature of the MST stressors in these cases, it is often difficult for the victim to report or document the event when it occurs. To remedy this, VA developed regulations and procedures specific to MST claims that appropriately assist the claimant in developing evidence necessary to support the claim. As with other posttraumatic stress disorder (PTSD) claims, VA initially reviews the Veteran’s military service records for evidence of the claimed stressor. VA's regulation also provides that evidence from sources other than a Veteran's service records may corroborate the Veteran's account of the stressor incident, such as evidence from mental health counseling centers or statements from family members and fellow Servicemembers. Evidence of behavior changes, such as a request for transfer to another military duty assignment, is another type of relevant evidence that may indicate occurrence of an assault. VA notifies Veterans regarding the types of evidence that may corroborate occurrence of an in-service personal assault and asks them to submit or identify any such evidence. The actual stressor need not be documented. If minimal circumstantial evidence of a stressor is obtained, VA will schedule an examination with an appropriate mental health professional and request an opinion as to whether the examination indicates that an in-service stressor occurred. The Veteran’s lay statement during this examination can establish occurrence of the claimed stressor.
With respect to claims for other disabilities based on MST, VA has a duty to assist in obtaining evidence to substantiate a claim for disability compensation. When a Veteran files a claim for mental or physical disabilities other than PTSD based on MST, VBA will obtain a Veteran's service medical records, VA treatment records, relevant Federal records identified by the Veteran, and any other relevant records, including private records, identified by the Veteran that the Veteran authorizes VA to obtain. VA must also provide a medical examination or obtain a medical opinion when necessary to decide a disability claim. VA will request that the medical examiner provide an opinion as to whether it is at least as likely as not that the current symptoms or disability are related to the in-service event. This opinion will be considered as evidence in deciding whether the Veteran's disability is service connected.
VBA has also placed a primary emphasis on informing VA regional office (RO) personnel of the issues related to MST and providing training in proper claims development and adjudication. VBA developed and issued Training Letter 11-05, Adjudicating Posttraumatic Stress Disorder Claims Based on Military Sexual Trauma, in December 2011. This was followed by a nationwide Microsoft Live Meeting broadcast on MST claims adjudication. The broadcast focused on describing the range of potential markers that could indicate occurrence of an MST stressor and the importance of a thorough and open-minded approach to seeking such markers in the evidentiary record. In addition, the VBA Challenge Training Program, which all newly hired claims processors are required to attend, now includes a module on MST within the course on PTSD claims processing. VBA also provided its designated Women Veterans Coordinators with updated specialized training. These employees are located in every VA RO and are available to assist both female and male Veterans with their claims resulting from MST.
VBA worked closely with the Veterans Health Administration (VHA) Office of Disability Examination and Medical Assessment to ensure that specific training was developed for clinicians conducting PTSD compensation examinations for MST-related claims. VBA and VHA further collaborated to provide a training broadcast targeted to VHA clinicians and VBA raters on this very important topic, which aired initially in April 2012 and has been rebroadcast numerous times.
Prior to these training initiatives, the grant rate for PTSD claims based on MST was about 38 percent. Following the training, the grant rate rose and at the end of February 2013 stood at about 52 percent, which is roughly comparable to the approximate 59-percent grant rate for all PTSD claims.
In December 2012, VBA’s Systematic Technical Accuracy Review team, VBA’s national quality assurance office, completed a second review of approximately 300 PTSD claims based on MST. These claims were denials that followed a medical examination. The review showed an overall accuracy rate of 86 percent, which is roughly the same as the current national benefit entitlement accuracy level for all rating-related end products.
In addition, VBA’s new standardized organizational model has now been implemented at all of our ROs. It incorporates a case-management approach to claims processing. VBA reorganized its workforce into cross-functional teams that give employees visibility of the entire processing cycle of a Veteran’s claim. These cross-functional teams work together on one of three segmented lanes: express, special operations, or core. Claims that predictably can take less time flow through an express lane (30 percent); those taking more time or requiring special handling flow through a special operations lane (10 percent); and the rest of the claims flow through the core lane (60 percent). All MST-related claims are now processed in the special operations lane, ensuring that our most experienced and skilled employees are assigned to manage these complex claims.
Under Secretary Hickey’s efforts have dramatically improved VA’s overall sensitivity to MST-related PTSD claims and have led to higher current grant rates. However, she recognized that some Veterans’ MST-related claims were decided before her efforts began. To assist those Veterans and provide them with the same evidentiary considerations as Veterans who file claims today, VBA is planning to advise Veterans of the opportunity to request that VA review their previously denied PTSD claims based on MST. Those Veterans who respond will receive reconsideration of their claims based on VA’s heightened sensitivity to MST and a more complete awareness of evidence development. VBA will also continue to work with VHA medical professionals to ensure they are aware of their critical role in processing these claims.
Turning to the specifics of H.R. 671, the "Ruth Moore Act of 2013," section 2(a) would add to 38 U.S.C. § 1154 a new subsection (c) to provide that, if a Veteran alleges that a "covered mental health condition" was incurred or aggravated by MST during active service, VA must "accept as sufficient proof of service-connection" a mental health professional's diagnosis of the condition together with satisfactory lay or other evidence of such trauma and the professional’s opinion that the condition is related to such trauma, provided that the trauma is consistent with the circumstances, conditions, or hardships of such service, irrespective of whether there is an official record of incurrence or aggravation in service. Service connection could be rebutted by "clear and convincing evidence to the contrary." In the absence of clear and convincing evidence to the contrary, and provided the claimed MST is consistent with the circumstances, conditions, and hardships of service, the Veteran’s lay testimony alone would be sufficient to establish the occurrence of the claimed MST. The provision would define the term "covered mental health condition" to mean PTSD, anxiety, depression, "or other mental health diagnosis described in the current version" of the American Psychiatric Association Diagnostic and Statistical Manual of Mental Disorders that VA "determines to be related to military sexual trauma." The bill would define MST to mean "psychological trauma, which in the judgment of a mental health professional, resulted from a physical assault of a sexual nature, battery of a sexual nature, or sexual harassment which occurred during active military, naval, or air service."
Section 2(a) of the bill would require VA to accept as proven the occurrence of MST or a PTSD stressor without what we consider the minimal threshold evidence that is needed to maintain the integrity of the claims process. It would permit a Veteran's lay testimony alone to establish the occurrence of claimed MST, and service connection for a covered mental health condition would be established if a mental health professional diagnoses a covered mental health condition and opines that the such condition is related to the MST. This would occur whether or not the mental health professional had access to the Veteran’s service records or was otherwise able to evaluate the claimant’s statements regarding the occurrence of the claimed in-service stressor or event.
Through VA’s extensive, recent, and ongoing actions, we are ensuring that MST claimants are given a full and fair opportunity to have their claim considered, with a practical and sensitive approach based on the nature of MST. As noted above, VA has recognized the sensitive nature of MST-related PTSD claims and claims based on other covered mental health conditions, as well as the difficulty inherent in obtaining evidence of an in-service MST event. Current regulations provide multiple means to establish an occurrence, and VA has initiated additional training efforts and specialized handling procedures to ensure thorough, accurate, and timely processing of these claims.
VA’s regulations reflect the special nature of PTSD. Section 3.304(f) of title 38 Code of Federal Regulations, currently provides particularized rules for establishing stressors related to personal assault, combat, former prisoner-of-war status, and fear of hostile military or terrorist activity. These particularized rules are based on an acknowledgement that certain circumstances of service may make the claimed stressor more difficult to corroborate. Nevertheless, they require threshold evidentiary showings designed to ensure accuracy and fairness in determinations as to whether the claimed stressor occurred. Evidence of a Veteran’s service in combat or as a prisoner of war generally provides an objective basis for concluding that claimed stressors related to such service occurred. Evidence that a Veteran served in an area of potential military or terrorist activity may provide a basis for concluding that stressors related to fears of such activity occurred. In such cases, VA also requires the opinion of a VA or VA-contracted mental health professional, which enables VA to ensure that such opinions are properly based on consideration of relevant facts, including service records, as needed. For PTSD claims based on a personal assault, lay evidence from sources outside the Veteran’s service records may corroborate the Veteran’s account of the in-service stressor, such as statements from law enforcement authorities, mental health counseling centers, family members, or former Servicemembers, as well as other evidence of behavioral changes following the claimed assault. Minimal circumstantial evidence of a stressor is sufficient to schedule a VA examination and request that the examiner provide an opinion as to whether the stressor occurred.
The regulatory provisions at 38 C.F.R. §§ 3.303 and 3.304(f) have established equitable standards of proof and of evidence for corroboration of an in-service injury, disease, or event for purposes of service connection. Further, 38 U.S.C. § 1154 requires consideration of the places, types, and circumstances of service when evaluating disability claims and provides for acceptance of lay statements concerning combat-related injuries, provided evidence establishes that the Veteran engaged in combat. H.R. 671 would expand section 1154 to require VA to accept lay statements as sufficient proof of in-service events in all MST claims involving covered mental health conditions, based solely on the nature of the claim and without requiring the objective markers, such as combat service, that are essential to the effective operation of section 1154. Without the requirement of any evidentiary threshold for the mandatory acceptance of a lay statement as sufficient proof of an occurrence in service, this bill would eliminate, for discrete groups of Veterans, generally applicable requirements that ensure the fairness and accuracy of claim adjudications.
In summary, while we appreciate the intent behind this legislation, we would prefer to continue pursuing non-legislative actions to address the special nature of claims based upon MST.
Section 2(b) would require VA, for a 5-year period beginning December 1, 2014, to submit to Congress an annual report on claims covered by new section 1154(c) that were submitted during the previous fiscal year. Section 2(b) would also require VA to report on the: (1) number and percentage of covered claims submitted by each sex that were approved and denied; (2) rating percentage assigned for each claim based on the sex of the claimant; (3) three most common reasons for denying such claims; and (4) number of claims denied based on a Veteran’s failure to report for a medical examination; (5) number of claims pending at the end of each fiscal year; (6) number of claims on appeal; (7) average number of days from submission to completion of the claims; and (8) training provided to VBA employees with respect to covered claims.
VA does not oppose section 2(b).
Section 2(c) would make proposed section 1154(c) applicable to disability claims "for which no final decision has been made before the date of the enactment" of the bill. H.R. 671 does not define the term "final decision." As a result, it is unclear whether the new law would be applicable to an appealed claim in which no final decision has been issued by VA or, pursuant to 38 U.S.C. § 7291, by a court.
Benefit costs associated with H.R. 671 are estimated to be $135.9 million in FY 2014, $2.0 billion over five years, and $7.1 billion over ten years. Costs for information technology and general operating expenses will be provided for the record.
H.R. 679, the "Honor America's Guard-Reserve Retirees Act," would add to chapter 1, title 38, United States Code, a provision to honor as Veterans, based on retirement status, certain persons who performed service in reserve components of the Armed Forces but who do not have service qualifying for Veteran status under 38 U.S.C. § 101(2). The bill provides that such persons would be "honored" as Veterans, but would not be entitled to any benefit by reason of the amendment.
Under 38 U.S.C. § 101(2), Veteran status is conditioned on the performance of "active military, naval, or air service." Under current law, a National Guard or Reserve member is considered to have had such service only if he or she served on active duty, was disabled or died from a disease or injury incurred or aggravated in line of duty during active duty for training, or was disabled or died from any injury incurred or aggravated in line of duty or from an acute myocardial infarction, a cardiac arrest, or a cerebrovascular accident during inactive duty training. H.R. 679 would eliminate these service requirements for National Guard or Reserve members who served in such a capacity for at least 20 years. Retirement status alone would make them eligible for Veteran status.
VA recognizes that the National Guard and Reserves have admirably served this country and in recent years have played an even greater role in our Nation's overseas conflicts. Nevertheless, VA does not support this bill because it represents a departure from active service as the foundation for Veteran status. This bill would extend Veteran status to those who never performed active military, naval, or air service, the very circumstance which qualifies an individual as a Veteran. Thus, this bill would equate longevity of reserve service with the active service long ago established as the hallmark for Veteran status.
VA estimates that there would be no additional benefit or administrative costs associated with this bill if enacted.
H.R. 733, the “Access to Veterans Benefits Improvement Act,” would add a new section 5906 to chapter 59 of title 38, United States Code. Proposed section 5906(a)(1) would require VA to provide a “covered employee” with access to the “case-tracking system” to provide a Veteran with information regarding the status of the Veteran’s claim, regardless of whether the covered employee is acting under a power of attorney executed by the Veteran. Proposed section 5906(d) would define the term “covered employee” to mean an employee of a Member of Congress or an employee of a State or local government agency who, in the course of carrying out the responsibilities of such employment, assists Veterans with VA benefit claims and would define the term “case-tracking system” to mean “the system of [VA] that provides information regarding the status of a claim submitted by a veteran.”
Proposed section 5906(a)(2) would require VA to ensure that such access would not allow the covered employee to modify the data in the case-tracking system and would not include access to medical records. Proposed section 5906(b) would prohibit VA from providing case-tracking system access to a covered employee unless the employee has successfully completed a certification course on privacy issues provided by VA. Proposed section 5906(c) would essentially create a new exception to the Privacy Act and the Health Insurance Portability and Accountability Act of 1996 (HIPAA) by deeming such access to be a covered disclosure under 5 U.S.C. § 552a(b) and a permitted disclosure under regulations promulgated under section 264(c) of HIPAA.
VA does not support this bill. It would significantly lessen the personal privacy protections currently enjoyed by our Nation’s Veterans. In addition, the purpose of the bill is already satisfied through existing means by which Veterans may secure assistance for their claims. The measure would create conflicts with other statutory provisions that would be unchanged by the bill. Finally, it would impose on VA a substantial burden to accommodate the access contemplated by the bill through its current operating systems.
National Veterans service organizations are already an integral part of VA’s efforts to assist Veterans. VA provides the individual members of these organizations with special training and certification to ensure familiarization with VA claim processing and VA computer systems. Training and certification are also available for state and county employees representing Veterans. Additionally, Members of Congress and their employees are already provided access to claim status information when authorized by a Veteran constituent or when they have proper authority to conduct oversight. Each VA RO has a congressional liaison who may be contacted for claim information. Finally, any qualified representative authorized by a Veteran has access to the status of that Veteran’s claim information, within statutory guidelines.
With the exception of medical records, the bill would not limit the type of information in the case-tracking system to which the Secretary would be required to provide access. VA tracking systems contain a wide variety of information, some of it confidential and imbued with a high degree of personal privacy. Providing access to VA’s case-tracking system would compromise the privacy of Veterans’ personal information.
Proposed section 5906(a)(2)(A)(ii) would require VA to ensure that access is not provided to medical records, yet proposed section 5906(c)(2) would provide that access to such information shall be deemed to be a permitted disclosure under HIPAA. If the Secretary is precluded from providing access to protected health information, the provision concerning a permitted disclosure pursuant to the HIPAA Privacy Rule promulgated by the Department of Health and Human Services is superfluous. Furthermore, VA claims are inextricably intertwined with medical information, so it would be very difficult to allow access to claims information without access to the information concerning medical conditions involved in a claim.
Case-tracking information is also protected by 38 U.S.C. § 5701 (the statute protecting the confidentiality of Veterans’ records and the records of their dependents). Section 5701 provides no exception for disclosure of names and addresses to covered employees without consent or a power of attorney. The bill contains no exception for disclosure of information protected by section 5701 to covered employees without consent or a power of attorney. Thus, the bill would be inconsistent with the longstanding protections provided by section 5701.
This bill also appears to be inconsistent with 38 U.S.C. § 7332, which protects from unauthorized disclosure records of drug abuse, alcoholism or alcohol abuse, sickle cell anemia, and infection with HIV. For example, if a Veteran has established service connection for one of these conditions, then records of treatment for the condition would appear in a case-tracking system.
The definition of the term “covered employee” in proposed section 5906(d)(2) is quite broad, including a widespread universe of individuals, employees of Members of Congress and State and local government employees, including Veterans service officers (an undefined term), who have, as one of their responsibilities, the provision of assistance to Veterans with claims for VA benefits. VA’s release of Veterans’ information outside of VA always removes to some degree the protections afforded under Federal privacy laws and regulations and has the potential to undermine Veterans’ trust of VA.
This bill would also impose on VA a substantial administrative burden. Under 38 U.S.C. § 5723(f), users of VA information and information systems already must comply with all VA information security program policies, procedures, and practices. They must attend security awareness training at least annually, immediately report all security incidents to the Information Security Officer of the system, comply with orders from the Assistant Secretary for Information and Technology when a security incident occurs, and annually sign an acknowledgement that they have read, understand, and agree to abide by the VA National Rules of Behavior. Under the bill, “covered employees” would fall within the scope of section 5723(f) as users of VA information and information systems. Considering the potentially vast number of covered employees that could be granted access by the bill, training and oversight by VA would be extremely burdensome and time consuming. Monitoring changes in duties among covered employees would be another burden. These administrative burdens are not justified when VA prefers to direct its resources to providing more timely and accurate claims decisions and eliminating the claims backlog.
The goal of H.R. 733 is to provide Veterans with status updates on the processing of their claims. Processing claims involves gathering and evaluating evidence and providing VA medical examinations when needed. VA currently informs Veteran claimants of these steps in writing as they occur. Additionally, the self-service features of eBenefits allow claimants and their representatives to determine the status of their claims at any time, day or night. VBA is also implementing the Stakeholder Enterprise Portal, a secure web-based access point for VA’s authorized business partners. This portal provides the ability for Veterans service officers and other approved external VA business partners to represent Veterans quickly, efficiently, and electronically. Providing covered employees with access to the same information for duplicative communication with Veteran claimants would result in an unjustified drain on VA resources that could result in reduced timeliness in claim processing.
H.R. 894, a bill to improve the supervision of fiduciaries of Veterans under laws administered by VA, would make several changes to VA’s administration of its fiduciary program for beneficiaries who cannot manage their own VA benefits. VA appreciates the interest in improving VA’s fiduciary program, but finds several provisions of the bill problematic, as set out in detail below. Although VA does not support those measures, VA shares the desire to improve oversight of fiduciaries and has already taken steps to clarify VA’s and fiduciaries’ roles in the program and improve oversight. Among other things, VA consolidated its fiduciary activities to six regionally-aligned hubs to increase efficiency of operations and improve quality of service, rewrote all of its fiduciary regulations, implemented a new field examiner training program, and designed a new information technology system for the program. VA welcomes the opportunity to discuss these improvements and the goals of, and intent behind, this bill with you or your staff. VA has just proposed a measure through last week’s budget submission that would allow more effective oversight of fiduciaries through enhanced access to financial records. We would welcome discussion of that idea as well.
Section 1(a) of the bill would amend 38 U.S.C. § 5502 governing payments to and supervision of fiduciaries. Section 1(a) would permit a beneficiary whom VA has determined is mentally incompetent for purposes of appointing a fiduciary to appeal VA’s determination and would permit a beneficiary for whom VA has appointed a fiduciary to request, at any time, that VA remove the fiduciary and appoint a new fiduciary. VA would have to comply with the request unless VA determines that "the request is not made in good faith." VA would have to ensure that removal of a fiduciary or appointment of a new fiduciary does not delay or interrupt the beneficiary's receipt of benefits. Section 1(a) would specify that a VA-appointed fiduciary must operate independently of VA to determine the actions that are in the beneficiary’s interest.
The provisions concerning appeals of incompetence determinations and replacement of fiduciaries generally codify current VA policy. Under current VA policy, a beneficiary may appeal an incompetency determination and may at any time for good cause shown request the appointment of a successor fiduciary. Accordingly, VA does not oppose these provisions, except for the “not made in good faith” provision, which could disrupt the fiduciary program by requiring VA to frequently replace fiduciaries for Veterans who are dissatisfied with oversight of funds under the program.
However, VA opposes the provision that would require VA to ensure that any removal or appointment of a new fiduciary does not delay or interrupt the beneficiary’s receipt of benefits. If a fiduciary is removed and a successor fiduciary is being appointed, VA’s objective is to ensure the continuation of benefits to the beneficiary. However, in some cases, benefit payments get delayed or interrupted when a fiduciary is being replaced, for reasons beyond VA’s control. Under current law, VA must conduct the inquiry or investigation prescribed by Congress in 38 U.S.C. § 5507 when it replaces a fiduciary, and sometimes VA encounters an uncooperative beneficiary or beneficiary's representative. Some delay may be unavoidable in these cases. Consequently, VA opposes this provision to the extent that it would prohibit, without exception or qualification, any delay in the delivery of benefits upon removal of a fiduciary.
Section 1(a) would permit a Veteran to "predesignate a fiduciary" by providing VA with written notice of the predesignated fiduciary or submitting a VA form for such purpose and would require VA, if VA appoints a fiduciary other than the one designated by the beneficiary, to notify the beneficiary of the reason for not appointing the designated individual and of the beneficiary’s ability to request a change in the appointed fiduciary. In appointing a fiduciary for a beneficiary who has not designated one, VA would, to the extent possible, have to appoint the beneficiary’s relative, a court-appointed guardian, or a person authorized to act on the beneficiary’s behalf under a durable power of attorney.
VA opposes the provision that would permit predesignation of a fiduciary. As a result of VA's increased outreach and collaboration with the Department of Defense, many individuals complete their initial benefit application early in their lifetime when they have no need for fiduciary services. Designating a fiduciary decades before any actual need for a fiduciary would likely render the initial designation stale. Also, VA's current appointment policy gives preference to the beneficiary's choice and family members' or guardian's desires as expressed at the time of the field examination, which VA believes is the best available and most relevant information for purposes of making a best-interest determination. Such determination should not be based upon stale information.
VA also opposes the provision that would give priority in appointment consideration to individuals holding a beneficiary's durable power of attorney (POA). Based upon experience, VA does not favor giving a person holding a beneficiary's POA priority over other candidates based only on the existence of the POA. Veterans and other beneficiaries in the fiduciary program can be extremely vulnerable and easily coerced into signing documents. Additionally, a POA can be executed and revoked by the beneficiary at any time. If an individual is holding a POA, VA would have no way of determining whether the POA is still in effect or if the beneficiary had the capacity to execute a legally enforceable POA under State law at the time. Implementing policies and procedures related to the assessment of POAs would needlessly complicate and delay the fiduciary-appointment process.
Also, under current law, VA has a duty to appoint, based upon a field examination and consideration of the totality of the circumstances, the individual or entity that is in the beneficiary's best interest. Although VA might conclude that appointment of an individual who holds the beneficiary's POA is in the beneficiary's interest, VA strongly opposes statutory imposition of a preference to an individual named in a POA. Under current law, VA appoints the person or entity who will provide the least restrictive fiduciary relationship. Thus, VA first considers the beneficiary's preference, followed by a spouse, another family member, or a friend or other individual who is willing to serve as fiduciary without a fee. Such appointments constitute the overwhelming majority of VA's fiduciary appointments. Nonetheless, under this provision of the bill, if a beneficiary has not designated a fiduciary and a relative is not available, VA would be required to consider the beneficiary's court-appointed guardian or an individual who holds the beneficiary's durable POA. It would require priority consideration for more restrictive arrangements, contrary to current VA policy.
VA also opposes the provision mandating preference for the beneficiary's court-appointed guardian because of possible effects on VA's most vulnerable beneficiaries. Court appointment of a guardian often is the most restrictive method of payment and the most costly. Under current law, a VA-appointed fiduciary may collect a maximum fee of 4 percent of the VA benefits paid to the beneficiary each year. Further, under VA’s interpretation of the law, a fee may not be based upon retroactive, lump-sum, or other one-time payments or upon accumulated funds under management. However, under State law, guardians may collect fees in excess of the 4-percent Federal limit. Although the fee structure varies from State to State, basic fees range between 5 percent of all income received by the guardian to as high as 10 to 15 percent of all income and funds under management by the guardian. Additionally, courts often allow extraordinary fees in excess of the standard fee. The appointment of a guardian often results in the guardian incurring the cost of attorney fees for filing motions and annual court accountings. These fees and costs can be as much as thousands to tens of thousands of dollars per year and are paid from the beneficiary's VA benefits. Also, because the fee structure varies from State to State, VA cannot conduct consistent and effective oversight of guardians appointed by courts, resulting in undesirable disparate treatment for vulnerable beneficiaries depending upon the beneficiaries’ State of residence. VA believes that Congress established the fiduciary program for the express purpose of ensuring a nation-wide, Federal standard for beneficiaries who cannot manage their own benefits.
Section 1(b) of the bill would make several changes with respect to the commission payable for fiduciary services. It would: (1) limit a monthly commission to the lesser of 3 percent of the monthly monetary benefits paid or $35; (2) prohibit a commission based on any beneficiary award regarding “back pay or retroactive benefits payments”; (3) prohibit a commission if VA determines that the fiduciary misused a benefit payment; and (4) permit VA to revoke the appointment if VA determines that a fiduciary has misused any benefit payment.
VA opposes the provision limiting monthly commissions to a maximum of 3 percent of benefits paid or $35. Payment of a suitable fee is necessary if there is no other person who is qualified and willing to serve as a fiduciary without a fee. In some instances, a beneficiary's interests can be served only by the appointment of a qualified paid fiduciary. As of March 31, 2012, VA had identified and appointed fiduciaries willing to serve without a fee for more than 92 percent of its beneficiaries needing fiduciaries.
Under current VA policy, fiduciaries are more than mere bill payers. VA's emerging view is that fiduciaries should remain in contact with the beneficiaries they serve and assess those beneficiaries’ needs. Without such an assessment, fiduciaries who serve VA's most vulnerable beneficiaries would be unable to fulfill their obligation to determine whether disbursement of funds is in the beneficiary's interest. As noted above, for the overwhelming majority of beneficiaries needing fiduciaries, a relative or close personal friend will perform the duties without cost to the beneficiary. However, there are difficult cases in which VA has no alternative but to turn to an individual or entity that is willing to serve Veterans and their survivors for a suitable fee. Reducing the allowable fee when VA is attempting to strengthen the role of fiduciaries in the program would create a disincentive for serving these vulnerable beneficiaries. VA strongly opposes such a reduction because it would harm beneficiaries and needlessly hinder the program, which has a clear preference for volunteer service but recognizes the need for a pool of paid fiduciaries who are willing to accept appointment for a suitable fee in some of VA's most difficult cases. However, VA supports the prohibition on deriving commissions from back pay or retroactive payments, which would codify VA's current policy regarding limitations on fees, and VA has no objection to the remaining fee and revocation provisions because they essentially restate current law.
Section 1(c) of the bill would clarify the statutory definition of “fiduciary” in 38 U.S.C. § 5506. It would clarify that the term “person” in that definition includes a State or local government agency whose mission is to carry out income maintenance, social service, or healthcare-related activities; any State or local government agency with fiduciary responsibilities; or any nonprofit social service agency that VA determines regularly provides fiduciary services concurrently to five or more individuals and is not a creditor of any such individual. It would also require VA to maintain a list of State or local agencies and nonprofit social service agencies that are qualified to act as a fiduciary.
VA opposes this provision because it is unnecessary and could cause confusion regarding the applicability of other statutes. Current 38 U.S.C. § 5507 requires VA to conduct an inquiry or investigation of any "person" to be appointed as a fiduciary to determine the person’s fitness to serve as a fiduciary. Defining the term “person” to include State and local government and nonprofit social service agencies would imply that VA must conduct the inquiry or investigation required by section 5507 to determine such agency’s fitness to serve as a fiduciary. However, some provisions of section 5507, such as those requiring VA to obtain a credit report and to request information concerning criminal convictions, cannot be made applicable to agencies. VA already appoints such agencies under current law if VA determines that it is in a beneficiary's interest. However, VA does not consider such agencies "persons" for purposes of completing the inquiry and investigation requirements of section 5507.
VA also opposes the provision that would require VA to compile and maintain a list of State or local and nonprofit agencies qualified to serve as a fiduciary for beneficiaries because it would divert limited resources away from the primary program mission. There are as many as 3,009 counties, 64 parishes, 16 boroughs, and 41 independent municipalities in the United States. In addition, there are over 19,000 municipal governments and more than 30,000 incorporated cities in the Nation. The resources needed to compile and maintain such a list would exceed by far any benefit for VA beneficiaries in the fiduciary program. VA currently appoints fiduciaries according to an order of preference, which begins with the beneficiary's preference and otherwise seeks to appoint family members, friends, or other individuals who are willing to serve without a fee. Rarely does VA need to appoint a State, local, or nonprofit agency as a fiduciary for a beneficiary.
Section 1(d) of the bill would revise 38 U.S.C. § 5507, the statute governing qualification of fiduciaries. It would add to the list of items required to form the basis of a fiduciary appointment adequate evidence that the person protects the beneficiary’s "private information.” VA supports this provision because VA agrees that information security is important and that a VA-appointed fiduciary must safeguard such information. With respect to face-to-face interviews of proposed fiduciaries, section 1(d) would strike the phrase “to the extent practicable” from current statutory language requiring such interviews and would require VA to conduct an interview not later than 30 days after beginning the inquiry or investigation. VA opposes requiring a face-to-face interview with every proposed fiduciary because it does not account for the circumstances actually encountered by VA in the administration of the program, would needlessly delay some initial fiduciary appointments, and thus could harm affected beneficiaries. In some cases, a face-to-face interview of a proposed fiduciary is not practicable and should be waivable. For example, a face-to-face interview would not be practicable for natural parents of minor children or certain persons who already manage funds for multiple beneficiaries. VA has not been able to discern a need for a face-to-face interview to be conducted within 30 days after beginning a fitness inquiry or investigation. Therefore, VA does not support this provision.
Section 1(d) would require a background check of a proposed fiduciary to determine whether the proposed fiduciary has been convicted of any offense under Federal or State law, without regard to the length of resulting imprisonment. VA supports this provision. Section 1(d) would also require VA to determine whether the proposed fiduciary will serve the beneficiary’s best interest, including by conducting a credit check and by checking records VA would be required to maintain of persons who have previously served as fiduciaries and had their fiduciary status revoked by VA. It would require VA to conduct the criminal history and credit history background check at no cost to the beneficiary and each time a person is proposed as a fiduciary, regardless of whether he or she is serving or has served as a fiduciary.
Section 1(d) of the bill would also remove the current statutory authority permitting VA, in conducting an inquiry or investigation on an expedited basis, to waive any inquiry or investigation requirement with respect to certain classes of proposed fiduciaries and would add to the list of proposed fiduciaries, the investigation of whom may be conducted on an expedited basis, a person who is authorized under a durable power of attorney to act on a beneficiary’s behalf. VA opposes removal of the waiver provision because it would needlessly delay certain fiduciary appointments, such as appointments of legal guardians and certain parents, for whom one or more of the inquiry or investigation requirements are not needed. In the case of a beneficiary’s immediate family members seeking to provide fiduciary services, the proposal would result in greater intrusion into family matters with no real benefit for beneficiaries. VA does not oppose permitting VA to expedite the inquiry or investigation regarding any proposed fiduciary, including a person holding a beneficiary’s durable POA.
Section 1(d) would require VA, in requiring the furnishing of a bond, to ensure that the bond is not paid using any beneficiary funds and to consider the care a proposed fiduciary has taken to protect the beneficiary’s interests and the proposed fiduciary’s capacity to meet the financial requirements of a bond without sustaining hardship. Section 1(d) would also require each RO to maintain a list of the name and contact information for each fiduciary, the date of each fiduciary’s most recent VA background check and credit check, the date any bond was paid, the name and contact information of each beneficiary for whom the fiduciary acts, and the amount that the fiduciary controls for each beneficiary.
VA strongly opposes the provisions that would require fiduciaries to pay annual surety bond premiums. Requiring the fiduciary to pay the annual premium would be a disincentive for both volunteer and paid fiduciaries and would significantly impair VA’s ability to find qualified fiduciaries in some of its most difficult cases. Most fiduciaries are family members or friends who may not have the funds needed to meet the cost of the bond premium. With respect to paid fiduciaries who agree to take some of VA's most difficult cases, the cost of a bond premium might consume the entire nominal fee authorized by Congress. It is standard practice in the guardianship industry to allow for payment of surety bond premiums out of estate funds. If this provision is enacted, VA anticipates a dramatic increase in the number of fiduciaries who are also court appointed. Courts will allow the deduction of the cost of the bond and a substantial fee, in many cases between 5 and 15 percent of estate value, from the beneficiary’s funds. VA cannot support the inequitable treatment of, and significant harm to, beneficiaries that would likely result from the enactment of this provision.
Section 1(e) would mandate that VA require a fiduciary to file an annual report or accounting and that VA transmit the report or accounting to the beneficiary and any legal guardian of the beneficiary. It would also require that a report or accounting include for each beneficiary the amount of benefits that accrued during the year, the amount spent, and the amount remaining and an accounting of all sources of benefits or other income other than VA benefits that are overseen by the fiduciary.
VA opposes these provisions because they would burden fiduciaries, most of whom are volunteer family members or friends, but would not significantly improve VA's oversight of fiduciaries. Under current policy, which is based upon VA's experience in administering the program, VA generally requires fiduciaries to submit an annual accounting in cases in which: (1) the beneficiary’s annual VA benefit amount equals or exceeds the compensation payable to a single Veteran with service-connected disability rated totally disabling; (2) the beneficiary’s accumulated VA funds under management by the fiduciary equals $10,000 or more; (3) the fiduciary was appointed by a court; or (4) the fiduciary receives a fee. These accountings are comprehensive and must be supported by financial documentation that identifies all transactions during the accounting period. VA audits more than 30,000 accountings each year.
VA currently pays benefits to more than 17,000 spouse fiduciaries, many of whom are also caring for severely disabled or infirm Veterans. Countless other beneficiaries receive only $90 each month and reside in the protected environment of a Medicaid-approved nursing home. Many other beneficiaries are cared for by family members who, due to the beneficiaries’ recurring needs, expend all available VA benefits each month for the beneficiaries’ care. The additional burden of documenting income and expenditure annually for the majority of our beneficiaries would be an undue hardship and would not result in any benefit to the beneficiary or the program. VA does not otherwise oppose the provisions, which restate current law or codify current VA policy regarding the information that must be included in an accounting.
VA opposes the provision that would require VA to conduct annual, random audits of paid fiduciaries. Under current policy, VA requires all paid fiduciaries to submit annual accountings. VA audits every accounting that it receives. This provision would add to VA's administrative burden by also requiring a random, annual audit of each paid fiduciary. VA already has authority to conduct any additional oversight it deems necessary based upon a case-by-case determination. Experience administering the program has not identified a need to randomly audit paid fiduciaries.
VA opposes the provision which would require VA to ensure that the bill’s requirements do not interfere with the care provided to a beneficiary by a VA fiduciary who is also the beneficiary’s care-giver. This provision is vague with regard to the definition of “care” and other matters. It would require VA personnel to conduct additional burdensome oversight to somehow determine whether fiduciary requirements affect care. It is unclear how VA would implement this provision.
As it is unclear how this bill would be implemented, VA cannot estimate the cost associated with enactment of H.R. 894.
H.R. 1405 would require VA to provide, with notice of each decision on a claim for benefits, a form that may be used to appeal the decision. VA supports this bill as it would improve the timeliness and quality of processing notices of disagreement (NODs), which initiate the VA appellate process.
Currently, VA accepts as an NOD any "written communication from a claimant or his or her representative expressing dissatisfaction or disagreement with an adjudicative determination by the agency of original jurisdiction [(AOJ)] and a desire to contest the result.” If an AOJ receives a timely filed written communication expressing disagreement, but cannot clearly identify that communication as expressing an intent to appeal, or cannot identify which claims the claimant wants to appeal, then the AOJ will contact the claimant orally or in writing to request clarification of his or her intent. If the claimant is contacted in writing, then he or she must respond to the clarification request within the later of 60 days from the date of the contact or the remainder of the one year period from the date of mailing of the notice of the AOJ decision. This clarification process can consume substantial time.
Providing claimants with a standardized appeal form would reduce the time it takes an AOJ to recognize or clarify the nature of a claimant’s response to an AOJ decision. In addition, it would simplify the VA appellate process for claimants. Also, an appeal form would reduce errors in identifying NODs that can delay resolution of claims. For example, in Fiscal Year 2011, the Board of Veterans' Appeals (Board) remanded 1,554 issues to AOJs because the Board identified timely filed NODs for which the AOJs had not issued a statement of the case.
Providing claimants with a form on which to submit their initial disagreement with an AOJ decision would clarify what action claimants must take to initiate an appeal of an AOJ decision. This in turn would improve VA’s ability to identify NODs when they are received and would eliminate the need to contact a claimant to clarify whether he or she intended to initiate an appeal and, if so, of exactly which decisions. This would help speed up the early steps of the appellate process.
VA estimates that enactment of H.R. 1405 would not result in significant benefit or administrative costs.
This concludes my statement, Mr. Chairman. I would be happy to entertain any questions you or the other Members of the Subcommittee may have.