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VETS' COMMISSION VOTES NOT TO RECOMMEND LUMP-SUM
BUYOUTS OF VA DISABILITY BENEFITS -- Sanity reigns as
Commissioners vote 13-0 not to consider lump-sum
buyouts as an option when making their final
recommendations to the President and Congress.
Last week, the Veterans' Disability Benefits Commission (VDBC) voted 13-0 not to consider lump-sum buyouts of veterans' disability benefits as an option when making their final recommendations to the President and Congress.
Background here... http://www.vawatchdog.org/milcom/buyingoutdisabledveterans.htm
This is incredibly good news for veterans.
The unanimous vote came after testimony from Joe Violante, National Legislative Director of the Disabled American Veterans (DAV). Violante spoke on behalf of many veterans' organizations.
Here is the final paragraph of Violante's testimony: In the final analysis, any lump-sum scheme devised would constitute a reduction in veterans’ benefits to save the Government money. The proponents of lump sums have never been veterans’ advocates who have veterans’ interests at heart. As veterans’ advocates, we are compelled to oppose any recommendation that would have the Government pay disability compensation in lump sums. We hope this Commission, in looking at the “appropriateness” of disability benefits for veterans, will also conclude that it would be highly inappropriate to use lump sums as a means to relieve the Government of its moral obligation to provide adequate resources for veterans’ programs and its responsibility to administer those programs efficiently.
According to the Commission's 8-step process, they will issue a paper on their findings on Lump-sum buyouts.
It should be noted that the Commission can re-open this issue if new and compelling evidence is presented to change their position. Insiders tell me that the chance of that is nil.
We should thank the DAV and the other VSOs for their hard work on this matter. Without their compelling testimony the Commission's decision could have been different.
VDBC web site here... http://www.vetscommission.org/index.asp
The complete written version of Joe Violante's testimony is presented below (NOTE -- Violante's oral testimony was abbreviated and limited to ten minutes.) :
---------------
Mr. Chairman and Members of the Commission:
In response to your invitation, I am pleased to present the views of the Air Force Sergeants Association, the American Legion, AMVETS, the Blinded Veterans Association, the Disabled American Veterans, the Fleet Reserve Association, the Jewish War Veterans of the USA, the Military Officers Association of America, the National Association for the Uniformed Services, the Non Commissioned Officers Association, the Paralyzed Veterans of America, and the Veterans of Foreign Wars of the United States on the question of whether the Commission should recommend that veterans’ disability compensation be paid in lump sums instead of monthly payments. In our view, a lump-sum settlement for compensation would be inadvisable for many reasons. The organizations comprising this group therefore oppose changes in the current mode of compensation payments made by the Department of Veterans Affairs (VA) to incorporate lump-sum settlements.
Various entities have from time to time suggested consideration of a lump-sum settlement in lieu of ongoing periodic payments for service-connected disability, ostensibly to improve efficiency in the delivery of benefits. The “List of All Possible Issues to Address,” compiled for the Commission by staff and presented to the Commission at its second meeting on May 9, 2005, included for consideration the issue of lump-sum disability payments. The Commission adopted the lump-sum issue as one for consideration and included among its research questions the following: “Should lump sum payments be made for certain disabilities or level of severity of disabilities? Should such lump sum payments be elective or mandatory? Consider the merits under different circumstances such as where the impairment is to quality of life and not to earnings capacity.”[1] The narrative explaining the rationale for the study of this issue states:
The option of making lump sum payments for disabilities has been debated for many years. The Veterans’ Claims Adjudication Commission (VCAC) suggested consideration of this option and discussed “pros” and “cons” without proposing policy solutions. The VCAC cited “pros” of lump-sum payments as a financial advantage at transition to civilian life, an opportunity to make long-term investments, reduction in the volume of claims, and taxpayer savings. VCAC cited “cons” as reduction in opportunity for increased ratings for worsened conditions, unwise use of the lump sum, high early years program costs, and increases in claims with little merit. DOD separates those found unable to perform their military duties but whose disabilities are 30 percent or less disabling with a lump-sum payment based on base pay and years of service. Analysis of this option in several different designs is needed to determine the appropriateness or inappropriateness of lump sums in the disability compensation program.[2]
As requested by the Commission, the Center for Naval Analyses (CNA) has prepared an analytical paper[3] reviewing and discussing the existing data on lump-sum settlements, history and terms of lump-sum buyouts in other programs, and methodologies for determining discount rates in computing lump-sum amounts.[4] The information in that preliminary paper reinforces our objections to lump-sum settlements for veterans’ disability compensation, and I will address its contents along with my broader discussion of the inappropriateness of lump-sum payments for service-connected disabilities.
In our society, lump sums have customarily been used for paying damages awarded by courts in tort actions. Lump sums have not typically been deemed to be an appropriate method for dispensing disability benefits. Of course, it is not the function of the courts to administer or oversee ongoing disability benefit payments. The legislatures have created government agencies for that specific purpose. Thus, courts award damages in personal injury actions in the form of lump sums to cover past and future losses at one time, while disability programs generally pay periodic benefits to run concurrently with the disability.
Our current disability compensation program has its origins in the War Risk Insurance Act of October 6, 1917,[5] and was modeled somewhat on the then newly emerging workers’ compensation program.[6] Because of the “social insurance” purposes of workers’ compensation, awards are typically periodic payments, and tort-like settlements or commutation of payments are therefore disfavored for compensating work-related disabilities. Workers’ compensation “is part of a statutory scheme designed to cushion an injured worker during the period of his or her disability. It is the stated policy for the administration of the workers’ compensation system that it is in the best interest of the injured worker to receive benefit payments on a periodic basis. . . . The purpose of the periodic payment method is to preclude the possibility of an imprudent employee or a dependent wasting the means of support and thereby becoming a burden upon society.”[7] Under most workers’ compensation laws, lump-sum payments, when allowed, are allowed only under limited circumstances.[8] “Critics of lump-sum awards point out that periodic . . . payment of income benefits advances the important objective of ensuring that workers regularly receive income support for the duration of the disability and allows for adjustments if conditions change.”[9]
Both the disability compensation program for veterans and military disability retirement system are similar to workers’ compensation “theory and practice” insofar as they consider that the amount of compensation should be scaled according to the measured severity of loss or disability.[10] However, prior to reform of the military retirement system by the Career Compensation Act of 1949,[11] the amount of disability retired pay was not tied to the degree of disability. That legislation related the amount of compensation to the severity of the disability and established incapacity of 30 percent as the minimum which would qualify the individual for retirement. A lesser degree of incapacity would be compensated by the granting of a lump-sum “severance” pay instead of long-term retirement pay.[12] Rather than being computed to compensate for a certain degree of disability throughout the life of the member, severance pay was an amount equal to 2 months of basic pay, multiplied by the number of years of active service.[13] The thinking was that a condition rendering a member unfit for military service and rated 30 percent or more would interfere with civilian employment enough to warrant disability retirement from the military service. Such a member would be handicapped but not necessarily totally unable to work. On the other hand, those rated less than 30 percent disabled would not be so handicapped as to warrant long-term retirement pay but rather would be provided a temporary payment to tide them over until they resumed civilian careers.[14] The concept of severance pay was thought to be an “entirely new departure in military retirement” and the “idea of attaching severance pay to a disability system seem[ed] unique although perhaps not unwarranted.”[15] Because there was no limited duty in the military service, “severance pay, as conceived by the Armed Forces, was proposed as a device for disability separation” with “an immediate cash benefit.”[16] The separated service member could thereafter receive compensation from VA for the disability with a deduction of the amount of the severance pay.[17] If the disability worsens during the recoupment period, the veteran receives the differential between the initial disability and the increased disability.[18] Thus, disability severance pay was not intended to serve the purpose or take the place of compensation for the lifelong effects of disability. Though it ends the military department’s obligation to the member, it does not foreclose future compensation for the disability. Therefore, disability severance pay from the Armed Forces is not a precedent or good analogy for a lump-sum settlement of veterans’ disability compensation, notwithstanding the Bradley Commission’s suggestion to the contrary.
The Bradley Commission conducted no analysis of it own on the feasibility and advisability of lump-sum payments for veterans’ disability compensation, and it fell short of outright recommending lump-sum settlements itself, but it did raise the issue in recommending that “[c]onsideration should be given to discharge of the Government’s obligation in static cases rated at 10 and 20 percent by an appropriate lump-sum or short-term settlement.”[19] It cited programs in Canada and Great Britain as a precedent for this approach and observed the provisions for disability severance pay in our own military retirement system:
The payment of monthly benefits to persons who are disabled only slightly, if such benefits are not justified in terms of medical criteria, actuarial data, or material loss of earning capacity, presents an important area for possible improvement. Such improvement is significant not only in terms of benefit expenditures but also administrative outlays, since the cases in the 10- and 20-percent categories constitute 57 percent of all the cases on the Veterans’ Administration rolls. The soundest course of action would appear to be to find some method of discharging the obligation to such cases once and for all, and to remove them from the monthly payment files. This is especially true of the many thousands of static cases where small monthly payments on a lifetime basis would otherwise be made for healed muscle wounds or losses of toes or fingers.
The most satisfactory way to do this would appear to be to make a realistic assessment of the actual extent of disability and to terminate the Government’s responsibility by making a reasonable lump-sum settlement. Precedent for this approach is to be found in countries like Canada and Great Britain. Furthermore, under our military disability retirement system (since 1949), provision has been made for severance pay for personnel who are disabled less than 30 percent, if they cannot qualify on the basis of age and length of service. This modification should serve no hardship on the present beneficiaries of the Veterans’ Administration rolls, particularly since their earning capacity on the average is not significantly impaired by their disabilities. In some conditions, for example, those of a psychiatric nature, final settlement of a claim might even be beneficial in assisting the recovery of a patient.
Experience with settlements for industrial accidents shows that the lump-sum arrangement in cases where the degree of disability is substantial has proven unwise because many of the recipients tend to squander their settlement money. In view of this experience, it would not be desirable to extend the lump-sum approach to other than the small disabilities. It should also be recognized that some of the conditions may be progressive in nature. Therefore, in cases where lump sums were paid and the disability worsened, protection to the veteran should be provided by allowing him to requalify for compensation on a monthly basis.[20]
As I will discuss later, the CNA analysis casts doubt on the wisdom and practicality of this approach to reducing “benefit expenditures” and “administrative outlays” by “discharging the [Government’s] obligation” to “slightly” disabled veterans “once and for all,” and we certainly questions the fairness of this goal.
VETS' COMMISSION VOTES NOT TO RECOMMEND LUMP-SUM
BUYOUTS OF VA DISABILITY BENEFITS -- Sanity reigns as
Commissioners vote 13-0 not to consider lump-sum
buyouts as an option when making their final
recommendations to the President and Congress.
Last week, the Veterans' Disability Benefits Commission (VDBC) voted 13-0 not to consider lump-sum buyouts of veterans' disability benefits as an option when making their final recommendations to the President and Congress.
Background here... http://www.vawatchdog.org/milcom/buyingoutdisabledveterans.htm
This is incredibly good news for veterans.
The unanimous vote came after testimony from Joe Violante, National Legislative Director of the Disabled American Veterans (DAV). Violante spoke on behalf of many veterans' organizations.
Here is the final paragraph of Violante's testimony: In the final analysis, any lump-sum scheme devised would constitute a reduction in veterans’ benefits to save the Government money. The proponents of lump sums have never been veterans’ advocates who have veterans’ interests at heart. As veterans’ advocates, we are compelled to oppose any recommendation that would have the Government pay disability compensation in lump sums. We hope this Commission, in looking at the “appropriateness” of disability benefits for veterans, will also conclude that it would be highly inappropriate to use lump sums as a means to relieve the Government of its moral obligation to provide adequate resources for veterans’ programs and its responsibility to administer those programs efficiently.
According to the Commission's 8-step process, they will issue a paper on their findings on Lump-sum buyouts.
It should be noted that the Commission can re-open this issue if new and compelling evidence is presented to change their position. Insiders tell me that the chance of that is nil.
We should thank the DAV and the other VSOs for their hard work on this matter. Without their compelling testimony the Commission's decision could have been different.
VDBC web site here... http://www.vetscommission.org/index.asp
The complete written version of Joe Violante's testimony is presented below (NOTE -- Violante's oral testimony was abbreviated and limited to ten minutes.) :
---------------
STATEMENT OF
JOSEPH A. VIOLANTE
NATIONAL LEGISLATIVE DIRECTOR
DISABLED AMERICAN VETERANS
ON BEHALF OF
THE AIR FORCE SERGEANTS ASSOCIATION ● THE AMERICAN LEGION AMVETS ● THE BLINDED VETERANS ASSOCIATION
THE DISABLED AMERICAN VETERANS ● THE FLEET RESERVE ASSOCIATION THE JEWISH WAR VETERANS OF THE USA ● THE MILITARY OFFICERS ASSOCIATION OF AMERICA ● THE NATIONAL ASSOCIATION FOR THE UNIFORMED SERVICES ● THE NON COMMISSIONED OFFICERS ASSOCIATION THE PARALYZED VETERANS OF AMERICA ● AND THE VETERANS OF FOREIGN WARS OF THE UNITED STATES
BEFORE THE
VETERANS’ DISABILITY BENEFITS COMMISSION
OCTOBER 19, 2006
JOSEPH A. VIOLANTE
NATIONAL LEGISLATIVE DIRECTOR
DISABLED AMERICAN VETERANS
ON BEHALF OF
THE AIR FORCE SERGEANTS ASSOCIATION ● THE AMERICAN LEGION AMVETS ● THE BLINDED VETERANS ASSOCIATION
THE DISABLED AMERICAN VETERANS ● THE FLEET RESERVE ASSOCIATION THE JEWISH WAR VETERANS OF THE USA ● THE MILITARY OFFICERS ASSOCIATION OF AMERICA ● THE NATIONAL ASSOCIATION FOR THE UNIFORMED SERVICES ● THE NON COMMISSIONED OFFICERS ASSOCIATION THE PARALYZED VETERANS OF AMERICA ● AND THE VETERANS OF FOREIGN WARS OF THE UNITED STATES
BEFORE THE
VETERANS’ DISABILITY BENEFITS COMMISSION
OCTOBER 19, 2006
Mr. Chairman and Members of the Commission:
In response to your invitation, I am pleased to present the views of the Air Force Sergeants Association, the American Legion, AMVETS, the Blinded Veterans Association, the Disabled American Veterans, the Fleet Reserve Association, the Jewish War Veterans of the USA, the Military Officers Association of America, the National Association for the Uniformed Services, the Non Commissioned Officers Association, the Paralyzed Veterans of America, and the Veterans of Foreign Wars of the United States on the question of whether the Commission should recommend that veterans’ disability compensation be paid in lump sums instead of monthly payments. In our view, a lump-sum settlement for compensation would be inadvisable for many reasons. The organizations comprising this group therefore oppose changes in the current mode of compensation payments made by the Department of Veterans Affairs (VA) to incorporate lump-sum settlements.
Various entities have from time to time suggested consideration of a lump-sum settlement in lieu of ongoing periodic payments for service-connected disability, ostensibly to improve efficiency in the delivery of benefits. The “List of All Possible Issues to Address,” compiled for the Commission by staff and presented to the Commission at its second meeting on May 9, 2005, included for consideration the issue of lump-sum disability payments. The Commission adopted the lump-sum issue as one for consideration and included among its research questions the following: “Should lump sum payments be made for certain disabilities or level of severity of disabilities? Should such lump sum payments be elective or mandatory? Consider the merits under different circumstances such as where the impairment is to quality of life and not to earnings capacity.”[1] The narrative explaining the rationale for the study of this issue states:
The option of making lump sum payments for disabilities has been debated for many years. The Veterans’ Claims Adjudication Commission (VCAC) suggested consideration of this option and discussed “pros” and “cons” without proposing policy solutions. The VCAC cited “pros” of lump-sum payments as a financial advantage at transition to civilian life, an opportunity to make long-term investments, reduction in the volume of claims, and taxpayer savings. VCAC cited “cons” as reduction in opportunity for increased ratings for worsened conditions, unwise use of the lump sum, high early years program costs, and increases in claims with little merit. DOD separates those found unable to perform their military duties but whose disabilities are 30 percent or less disabling with a lump-sum payment based on base pay and years of service. Analysis of this option in several different designs is needed to determine the appropriateness or inappropriateness of lump sums in the disability compensation program.[2]
As requested by the Commission, the Center for Naval Analyses (CNA) has prepared an analytical paper[3] reviewing and discussing the existing data on lump-sum settlements, history and terms of lump-sum buyouts in other programs, and methodologies for determining discount rates in computing lump-sum amounts.[4] The information in that preliminary paper reinforces our objections to lump-sum settlements for veterans’ disability compensation, and I will address its contents along with my broader discussion of the inappropriateness of lump-sum payments for service-connected disabilities.
In our society, lump sums have customarily been used for paying damages awarded by courts in tort actions. Lump sums have not typically been deemed to be an appropriate method for dispensing disability benefits. Of course, it is not the function of the courts to administer or oversee ongoing disability benefit payments. The legislatures have created government agencies for that specific purpose. Thus, courts award damages in personal injury actions in the form of lump sums to cover past and future losses at one time, while disability programs generally pay periodic benefits to run concurrently with the disability.
Our current disability compensation program has its origins in the War Risk Insurance Act of October 6, 1917,[5] and was modeled somewhat on the then newly emerging workers’ compensation program.[6] Because of the “social insurance” purposes of workers’ compensation, awards are typically periodic payments, and tort-like settlements or commutation of payments are therefore disfavored for compensating work-related disabilities. Workers’ compensation “is part of a statutory scheme designed to cushion an injured worker during the period of his or her disability. It is the stated policy for the administration of the workers’ compensation system that it is in the best interest of the injured worker to receive benefit payments on a periodic basis. . . . The purpose of the periodic payment method is to preclude the possibility of an imprudent employee or a dependent wasting the means of support and thereby becoming a burden upon society.”[7] Under most workers’ compensation laws, lump-sum payments, when allowed, are allowed only under limited circumstances.[8] “Critics of lump-sum awards point out that periodic . . . payment of income benefits advances the important objective of ensuring that workers regularly receive income support for the duration of the disability and allows for adjustments if conditions change.”[9]
Both the disability compensation program for veterans and military disability retirement system are similar to workers’ compensation “theory and practice” insofar as they consider that the amount of compensation should be scaled according to the measured severity of loss or disability.[10] However, prior to reform of the military retirement system by the Career Compensation Act of 1949,[11] the amount of disability retired pay was not tied to the degree of disability. That legislation related the amount of compensation to the severity of the disability and established incapacity of 30 percent as the minimum which would qualify the individual for retirement. A lesser degree of incapacity would be compensated by the granting of a lump-sum “severance” pay instead of long-term retirement pay.[12] Rather than being computed to compensate for a certain degree of disability throughout the life of the member, severance pay was an amount equal to 2 months of basic pay, multiplied by the number of years of active service.[13] The thinking was that a condition rendering a member unfit for military service and rated 30 percent or more would interfere with civilian employment enough to warrant disability retirement from the military service. Such a member would be handicapped but not necessarily totally unable to work. On the other hand, those rated less than 30 percent disabled would not be so handicapped as to warrant long-term retirement pay but rather would be provided a temporary payment to tide them over until they resumed civilian careers.[14] The concept of severance pay was thought to be an “entirely new departure in military retirement” and the “idea of attaching severance pay to a disability system seem[ed] unique although perhaps not unwarranted.”[15] Because there was no limited duty in the military service, “severance pay, as conceived by the Armed Forces, was proposed as a device for disability separation” with “an immediate cash benefit.”[16] The separated service member could thereafter receive compensation from VA for the disability with a deduction of the amount of the severance pay.[17] If the disability worsens during the recoupment period, the veteran receives the differential between the initial disability and the increased disability.[18] Thus, disability severance pay was not intended to serve the purpose or take the place of compensation for the lifelong effects of disability. Though it ends the military department’s obligation to the member, it does not foreclose future compensation for the disability. Therefore, disability severance pay from the Armed Forces is not a precedent or good analogy for a lump-sum settlement of veterans’ disability compensation, notwithstanding the Bradley Commission’s suggestion to the contrary.
The Bradley Commission conducted no analysis of it own on the feasibility and advisability of lump-sum payments for veterans’ disability compensation, and it fell short of outright recommending lump-sum settlements itself, but it did raise the issue in recommending that “[c]onsideration should be given to discharge of the Government’s obligation in static cases rated at 10 and 20 percent by an appropriate lump-sum or short-term settlement.”[19] It cited programs in Canada and Great Britain as a precedent for this approach and observed the provisions for disability severance pay in our own military retirement system:
The payment of monthly benefits to persons who are disabled only slightly, if such benefits are not justified in terms of medical criteria, actuarial data, or material loss of earning capacity, presents an important area for possible improvement. Such improvement is significant not only in terms of benefit expenditures but also administrative outlays, since the cases in the 10- and 20-percent categories constitute 57 percent of all the cases on the Veterans’ Administration rolls. The soundest course of action would appear to be to find some method of discharging the obligation to such cases once and for all, and to remove them from the monthly payment files. This is especially true of the many thousands of static cases where small monthly payments on a lifetime basis would otherwise be made for healed muscle wounds or losses of toes or fingers.
The most satisfactory way to do this would appear to be to make a realistic assessment of the actual extent of disability and to terminate the Government’s responsibility by making a reasonable lump-sum settlement. Precedent for this approach is to be found in countries like Canada and Great Britain. Furthermore, under our military disability retirement system (since 1949), provision has been made for severance pay for personnel who are disabled less than 30 percent, if they cannot qualify on the basis of age and length of service. This modification should serve no hardship on the present beneficiaries of the Veterans’ Administration rolls, particularly since their earning capacity on the average is not significantly impaired by their disabilities. In some conditions, for example, those of a psychiatric nature, final settlement of a claim might even be beneficial in assisting the recovery of a patient.
Experience with settlements for industrial accidents shows that the lump-sum arrangement in cases where the degree of disability is substantial has proven unwise because many of the recipients tend to squander their settlement money. In view of this experience, it would not be desirable to extend the lump-sum approach to other than the small disabilities. It should also be recognized that some of the conditions may be progressive in nature. Therefore, in cases where lump sums were paid and the disability worsened, protection to the veteran should be provided by allowing him to requalify for compensation on a monthly basis.[20]
As I will discuss later, the CNA analysis casts doubt on the wisdom and practicality of this approach to reducing “benefit expenditures” and “administrative outlays” by “discharging the [Government’s] obligation” to “slightly” disabled veterans “once and for all,” and we certainly questions the fairness of this goal.
