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would as a result suffer any reduction in VA pension payments. However, social security increases beyond those required for the cost-of-living would reduce benefits although never reducing total income available to the veteran or widow.

It is interesting to note that when Rufus Wilson, Chief Benefits Director of the Veterans Administration, was testifying for the Administration on this bill, he supported the basic approach adopted by the Committee; however, he testified that because of the Administration's then current policy of limiting increases to 5 percent the Administration was "unable to endorse the Committee's pension reform proposals at this time." 22/

Many bills have been introduced which would modify the existing pension program, rather than completely "reform" the system. Some of the less comprehensive measures follow.

Income Exclusions

Under 38 USC 503, the pension program is a needs-based program designed to provide income assistance to those persons whose incomes fall below a specified level. To fulfill this function most equitably, payment of the pension should be based on whatever income is available to the veteran to meet the needs of daily living without losing a work incentive.

The current law contains eighteen exlusions.

Certain of these exclusions

are logical in that they represent a discounting of income that is not available for the necessary expenses of day to day living.

Insurance payments which replace

a loss sustained or extraordinary medical expenses are such exclusions.

However,

22/ For a more detailed discussion of the Senate bill and the Administration's position, see: U.S. Congress. Senate Report No. 94-532, Veterans and Survivors Pension Reform Act, Report of the Committee on Veterans Affairs to accompany S. 2635.

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there are other exclusions which have been considered inequitable and which are

costly. Elimination of these could reduce costs and increase equity.23/

The 10% disregard of social security benefits is a costly feature of the present program that will increase over time. It has been argued that the exclusion is a substitute for recoupment of the veterans own payments into the Social Security system. The earlier notion of recoupment was based on the tax law principle that an individual should not be charged twice for the same income. The 10% exclusion was designed to replace a recoupment feature that was contained in an earlier pension law. However, it results in a seemingly inequitable situation in which individuals with identical incomes receive differing amounts of pension depending upon whether their income includes social security benefits. Elimination of this disregard, or many of the 17 others specifically listed in 38 USC 503, could result in substantial savings. On the other hand, it has been argued that those people who have contributed to the Social Security system should get a higher benefit since they have had a portion of their earlier salaries withheld, ostensibly for their later years.

Under current law, pension payments are denied when the corpus of the veteran's estate is such that it is reasonable to expect that part of the estate is consumed for the veteran's maintenance. There is no set limitation. To increase equity and reduce cost, it has been proposed to consider the estate of the spouse as well as that of the veteran. It is also argued that it would be more equitable to set a definite resource limitation in the statute, rather

23/ The entire list of income exclusions are to be found in Title 38, United States Code, Section 503.

33-893 - 78 - 23

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than to allow the VA complete discretion. A set asset limitation would prevent over-compensating those with high resources and would result in similarly situated persons being treated equally. Again, however, the concept of veterans pensions being a "needs" program has been challenged by many and some critics have argued that pensions are instead "rights".

- Wives' Income

Current law provides that in determining annual income, where a veteran is living with his spouse, all income of the spouse which is reasonably available to or for the veteran is considered as income of the veteran with two exceptions: $1,200 or the total earned income of the spouse, whichever is greater.

24/

In June 1973, the VA reported that a sample indicated that the average income of a veteran pensioner's wife was $3,702. Elimination of the disregard of wives' earned income would reduce costs substantially. This disregard has been criticized by some as a costly and extremely inequitable feature, the cost of which will increase over time. If wives' earned income were counted, substantially all veterans with working wives would lose all pension payments and almost all married veterans with wives having any income would have reduced pensions. Legislation would arguably be such, however, that those on a fixed income wouldn't suffer. Those pensioners currently on the rolls could be "grandfathered" so that this provision would only affect future recipients.

Currently, 126,294 veterans and 55,737 widows receive an aid and attendance allowance. A veteran is considered in need of regular aid and attendance if he is a patient in a nursing home or is bedridden or is nearly helpless or blind

24/ 38 United States Code 521 (f)(1).

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so as to need or require the regular aid and attendance of another person. Under current law, a particular problem often develops when a veteran accrues enough income in a particular year to lose the last dollar of regular pension. In this situation, he also loses the entire aid and attendance allowance in a lump sum as a result (currently the rates are $133 per month has been argued that this "notch" should be eliminated.

$1,596 annually). It

Accounting Procedures

A veteran's countable income is determined by a declaration method which requires him to fill out an annual income questionnaire. The VA generally accepts

these statements without further verification or investigation.

This is so in

spite of the fact that, at one point in time, there was some evidence that some

veterans understated their income and resources. 25/ More stringent verification

procedures could reduce costs as well as enhance the credibility of the program, but at the risks and costs usually associated with benefit program policing.

After two consecutive years on the pension rolls, a veteran over the age of 72 is no longer required to complete an annual income questionnaire. As of June 30, 1974, 448,289 veteran pensioners (44% of the veteran pensioners) were over the age of 75. It has been argued that to require income reporting for this group might also reduce costs, though presumably to no great degree. Traditionally, earnings for those over 72 do not increase substantially, since few people enter the labor market or make significant career advancements at that age.

It has also been argued that quarterly accounting, rather than the annual accounting, would be more responsive to the individual recipient. Under current law the effective date of a reduction or discontinuance of pension by reason of a change in income or assets is the last day of the calendar year in which the

25.

United States General Accounting Office, Need for Improved Procedures to Minimize Overpayments of Non-Service-Connected Disability and Death Pensions, Report to the Congress (December 28, 1967).

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changes occurs. Costs could be reduced by requiring that such reductions and

termination be effective the last day of the calendar quarter (or month) in which

A veteran is considered disabled for pension purposes if he is found to be "permanently and totally disabled." However, in fact, the disability need not be total. If, under the VA's disability rating schedule, a veteran's disabilities do not add up to 100%, employability and age become a consideration. If a veteran under age 55 is found to be unemployable by reason of disability, the required disability rating is 60%, or one disability rated at 40% plus one or more disabilities combining to a rating of 70% in order to be defined as total disability and to qualify the veteran for pension. A combined rating of 60% at age 55 or 60 or a combined rating of 50% at 60 to 65 is also considered total disability. At age 65 a veteran is presumed to be totally disabled based on age alone.

The disability definition could be tightened by changing the above formulae as well as making substantive changes in the rating schedule, and requiring more

frequent re-evaluation of disability.

Annual Cost-of-Living Increases

Under the current law, there is no provision for annual cost-of-living increases. Presently, each time there is a social security increase, the Congress also increases veterans benefits by some amount. However, the legislated increase is usually not

the same percentage as that of the social security increase. Enacting a provision for annual cost-of-living increases equal to those authorized under the Social Security Act would remove the need for Congress to act in response to claims that VA pensions will go down. Such a provision in conjunction with a one-variable system would aid in solving the problem of VA benefits being reduced when social