Apportionments to Dependents and Payments to Fiduciaries and Incarcerated Beneficiaries, 2766-2797 [2011-228]

Agencies

• DEPARTMENT OF VETERANS AFFAIRS

[Federal Register Volume 76, Number 10 (Friday, January 14, 2011)]
[Proposed Rules]
[Pages 2766-2797]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-228]



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Part II





Department of Veterans Affairs





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38 CFR Part 5



Apportionments to Dependents and Payments to Fiduciaries and 
Incarcerated Beneficiaries; Proposed Rule

Federal Register / Vol. 76 , No. 10 / Friday, January 14, 2011 / 
Proposed Rules

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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 5

RIN 2900-AL74


Apportionments to Dependents and Payments to Fiduciaries and 
Incarcerated Beneficiaries

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: The Department of Veterans Affairs (VA) proposes to reorganize 
and rewrite in plain language regulations governing VA compensation, 
pension, burial, and related benefits, including regulations concerning 
apportionments, payments to fiduciaries, and payments to incarcerated 
beneficiaries and fugitive felons. These revisions are proposed as part 
of VA's rewrite and reorganization of all of its compensation and 
pension rules in a logical, claimant-focused, and user-friendly format. 
The intended effect of the proposed revisions is to assist claimants, 
beneficiaries, and VA personnel in locating and understanding these 
regulations.

DATES: Comments must be received by VA on or before March 15, 2011.

ADDRESSES: Written comments may be submitted through https://www.regulations.gov; by mail or hand-delivery to: Director, Regulations 
Management (02REG), Department of Veterans Affairs, 810 Vermont Ave., 
NW., Room 1068, Washington, DC 20420; or by fax to (202) 273-9026. 
Comments should indicate that they are submitted in response to ``RIN 
2900-AL74--Apportionments to Dependents and Payments to Fiduciaries and 
Incarcerated Beneficiaries.'' Copies of comments received will be 
available for public inspection in the Office of Regulation Policy and 
Management, Room 1063B, between the hours of 8 a.m. and 4:30 p.m., 
Monday through Friday (except holidays). Please call (202) 461-4902 for 
an appointment (not a toll-free number). In addition, during the 
comment period, comments may be viewed online through the Federal 
Docket Management System (FDMS) at https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: William F. Russo, Director of 
Regulations Management (02REG), Department of Veterans Affairs, 810 
Vermont Ave., NW., Washington, DC 20420, (202) 461-4902 (not a toll-
free number).

SUPPLEMENTARY INFORMATION: The Secretary of Veterans Affairs has 
established an Office of Regulation Policy and Management to provide 
centralized management and coordination of VA's rulemaking process. One 
of the major functions of this office is to oversee a Regulation 
Rewrite Project (the Project) to improve the clarity and consistency of 
existing VA regulations. The Project responds to a recommendation made 
in the October 2001 ``VA Claims Processing Task Force: Report to the 
Secretary of Veterans Affairs.'' The Task Force recommended that the 
compensation and pension regulations be rewritten and reorganized in 
order to improve VA's claims adjudication process. Therefore, the 
Project began its efforts by reviewing, reorganizing, and redrafting 
the content of the regulations in 38 CFR part 3 governing the 
compensation and pension program of the Veterans Benefits 
Administration. These regulations are among the most difficult VA 
regulations for readers to understand and apply.
    Once rewritten, the proposed regulations will be published in 
several portions for public review and comment. This is one such 
portion. It includes proposed rules regarding apportionments, payments 
to fiduciaries, and the manner in which VA reduces or discontinues 
benefit payments when beneficiaries are incarcerated or are fugitive 
felons. It also includes proposed rules regarding the adjustment and 
resumption of benefits based upon receipt of hospital, domiciliary, and 
nursing home care. After review and consideration of public comments, 
final versions of these proposed regulations will ultimately be 
published in a new part 5 in 38 CFR.

Outline

Overview of New Part 5 Organization
Overview of This Notice of Proposed Rulemaking
Table Comparing Current Part 3 Rules With Proposed Part 5 Rules
Content of Proposed Regulations

Subpart L--Payments and Adjustments to Payments

Hospital, Domiciliary, and Nursing Home Care Reductions and Resumptions

5.720 Adjustments to special monthly compensation based on the need 
for regular aid and attendance while a veteran is receiving 
hospital, domiciliary, or nursing home care.
5.721 Resumption of special monthly compensation based on the need 
for regular aid and attendance after a veteran is on temporary 
absence from hospital, domiciliary, or nursing home care or is 
discharged or released from such care.
5.722 Reduction of Improved Pension while a veteran is receiving 
domiciliary or nursing home care.
5.723 Reduction of Improved Pension while a veteran, surviving 
spouse, or child is receiving Medicaid-covered care in a nursing 
facility.
5.724 Reduction or discontinuance of Improved Pension based on the 
need for regular aid and attendance while a veteran is receiving 
hospital, domiciliary, or nursing home care.
5.725 Resumption of Improved Pension and Improved Pension based on 
the need for regular aid and attendance after a veteran is on 
temporary absence from hospital, domiciliary, or nursing home care 
or is discharged or released from such care.
5.726 Reduction of Section 306 Pension while a veteran is receiving 
hospital, domiciliary, or nursing home care.
5.727 Reduction of Old-Law Pension while a veteran is receiving 
hospital, domiciliary, or nursing home care.
5.728 Reduction of Old-Law Pension or Section 306 Pension based on 
the need for regular aid and attendance while a veteran is receiving 
hospital, domiciliary, or nursing home care.
5.729 Resumption of Section 306 Pension and Section 306 Pension 
based on the need for regular aid and attendance after a veteran is 
on temporary absence from hospital, domiciliary, or nursing home 
care or is discharged or released from such care.
5.730 Resumption of Old-Law Pension and Old-Law Pension based on the 
need for regular aid and attendance after a veteran is on temporary 
absence from hospital, domiciliary, or nursing home care or is 
discharged or released from such care.

Subpart M--Apportionments to Dependents and Payments to Fiduciaries 
and Incarcerated Beneficiaries

Determining Eligibility for Apportionments

5.770 Apportionment claims.
5.771 Special apportionments.
5.772 Veteran's benefits apportionable.
5.773 Veterans disability compensation.
5.774 Benefits not apportionable.
5.780 Eligibility for apportionment of pension.
5.781 Eligibility for apportionment of a surviving spouse's 
dependency and indemnity compensation.
5.782 Effective date of apportionment grant or increase.
5.783 Effective date of apportionment reduction or discontinuance.
5.784 Special rules for apportioned benefits on death of beneficiary 
or apportionee.

Incompetency and Payments to Fiduciaries and Minors

5.790 Determinations of incompetency and competency.
5.791 General fiduciary payments.
5.792 Institutional awards.
5.793 Limitation on payments for a child.
5.794 Beneficiary rated or reported incompetent.
5.795 Change of name of fiduciary.
5.796 Child's benefits to a fiduciary of an incompetent surviving 
spouse.
5.797 Testamentary capacity for VA insurance purposes.
5.798 Payment of disability compensation previously not paid because 
an

[[Page 2767]]

incompetent veteran's estate exceeded $25,000.

Payments to Incarcerated Beneficiaries

5.810 Incarcerated beneficiaries--general provisions and 
definitions.
5.811 Limitation on disability compensation during incarceration.
5.812 Limitation on dependency and indemnity compensation during 
incarceration.
5.813 Discontinuance of pension during incarceration.
5.814 Apportionment when a primary beneficiary is incarcerated.
5.815 Resumption of disability compensation or dependency and 
indemnity compensation upon a beneficiary's release from 
incarceration.
5.816 Resumption of pension upon a beneficiary's release from 
incarceration.
5.817 Fugitive felons.
Non-Inclusion of Certain Part 3 Rules in Part 5
Endnote Regarding Amendatory Language
Paperwork Reduction Act of 1995
Regulatory Flexibility Act
Executive Order 12866
Unfunded Mandates
Catalog of Federal Domestic Assistance Numbers and Titles
List of Subjects in 38 CFR Part 5

Overview of New Part 5 Organization

    We plan to organize the part 5 regulations so that most provisions 
governing a specific benefit are located in the same subpart, with 
general provisions pertaining to all compensation and pension benefits 
also grouped together. This organization will allow claimants, 
beneficiaries, and their representatives, as well as VA adjudicators, 
to find information relating to a specific benefit more quickly than 
the organization provided in current part 3.
    The first major subdivision would be ``Subpart A--General 
Provisions.'' It would include information regarding the scope of the 
regulations in new part 5, general definitions, and general policy 
provisions for this part. This subpart was published as proposed on 
March 31, 2006. See 71 FR 16464.
    ``Subpart B--Service Requirements for Veterans'' would include 
information regarding a veteran's military service, including the 
minimum service requirement, types of service, periods of war, and 
service evidence requirements. This subpart was published as proposed 
on January 30, 2004. See 69 FR 4820.
    ``Subpart C--Adjudicative Process, General'' would inform readers 
about claims and benefit application filing procedures, VA's duties, 
rights and responsibilities of claimants and beneficiaries, general 
evidence requirements, and general effective dates for new awards, as 
well as revision of decisions and protection of VA ratings. This 
subpart was published as three separate Notices of Proposed Rulemaking 
(NPRMs) due to its size. The first, concerning the duties of VA and the 
rights and responsibilities of claimants and beneficiaries, was 
published as proposed on May 10, 2005. See 70 FR 24680. The second, 
covering general evidence requirements, effective dates for awards, 
revision of decisions, and protection of VA ratings, was published as 
proposed on May 22, 2007. See 72 FR 28770. The third, concerning rules 
on filing VA benefits claims, was published as proposed on April 14, 
2008. See 73 FR 20136.
    ``Subpart D--Dependents and Survivors'' would inform readers how VA 
determines whether an individual is a dependent or a survivor for 
purposes of determining eligibility for VA benefits. It would also 
provide the evidence requirements for these determinations. This 
subpart was published as proposed on September 20, 2006. See 71 FR 
55052.
    ``Subpart E--Claims for Service Connection and Disability 
Compensation'' would define service-connected disability compensation 
and service connection, including direct and secondary service 
connection. This subpart would inform readers how VA determines service 
connection and entitlement to disability compensation. The subpart 
would also contain those provisions governing presumptions related to 
service connection, rating principles, and effective dates, as well as 
several special ratings. This subpart has been published as three 
separate NPRMs due to its size. The first, concerning presumptions 
related to service connection, was published as proposed on July 27, 
2004. See 69 FR 44614. The second, relating to special ratings and 
ratings for health care eligibility only, was published as proposed on 
October 17, 2008. See 73 FR 62004. The third, relating to service-
connected and other disability compensation, was published as proposed 
on September 1, 2010. See 75 FR 53744.
    ``Subpart F--Nonservice-Connected Disability Pensions and Death 
Pensions'' would include information regarding the three types of 
nonservice-connected pension: Old-Law Pension, Section 306 Pension, and 
Improved Pension. This subpart would also include those provisions that 
state how to establish entitlement to Improved Pension and the 
effective dates governing each pension. This subpart was published as 
two separate NPRMs due to its size. The portion concerning Old-Law 
Pension, Section 306 Pension, and elections of Improved Pension was 
published as proposed on December 27, 2004. See 69 FR 77578. The 
portion concerning eligibility and entitlement requirements, as well as 
effective dates, for Improved Pension was published as proposed on 
September 26, 2007. See 72 FR 54776.
    ``Subpart G--Dependency and Indemnity Compensation, Death 
Compensation, Accrued Benefits, and Special Rules Applicable Upon Death 
of a Beneficiary'' would contain regulations governing claims for 
dependency and indemnity compensation (DIC); death compensation; 
accrued benefits; benefits awarded, but unpaid at death; and various 
special rules that apply to the disposition of VA benefits, or proceeds 
of VA benefits, when a beneficiary dies. This subpart would also 
include related definitions, effective-date rules, and rate-of-payment 
rules. This subpart was published as two separate NPRMs due to its 
size. The portion concerning accrued benefits, death compensation, 
special rules applicable upon the death of a beneficiary, and several 
effective-date rules, was published as proposed on October 1, 2004. See 
69 FR 59072. The portion concerning DIC benefits and general provisions 
relating to proof of death and service-connected cause of death was 
published as proposed on October 21, 2005. See 70 FR 61326.
    ``Subpart H--Special and Ancillary Benefits for Veterans, 
Dependents, and Survivors'' would pertain to special and ancillary 
benefits available, including benefits for children with various birth 
defects. This subpart was published as proposed on March 9, 2007. See 
72 FR 10860.
    ``Subpart I--Benefits for Certain Filipino Veterans and Survivors'' 
would pertain to the various benefits available to Filipino veterans 
and their survivors. This subpart was published as proposed on June 30, 
2006. See 71 FR 37790.
    ``Subpart J--Burial Benefits'' would pertain to burial allowances. 
This subpart was published as proposed on April 8, 2008. See 73 FR 
19021.
    ``Subpart K--Matters Affecting the Receipt of Benefits'' would 
contain provisions regarding bars to benefits, forfeiture of benefits, 
and renouncement of benefits. This subpart was published as proposed on 
May 31, 2006. See 71 FR 31056.
    ``Subpart L--Payments and Adjustments to Payments'' would include 
general rate-setting rules, several adjustment and resumption 
regulations, and election-of-benefit rules. Because of its size, this 
subpart, except for several regulations concerning hospital, 
domiciliary, and nursing home care reductions and resumptions, was 
published in two

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separate NPRMs. The first, concerning payments to beneficiaries who are 
eligible for more than one benefit, was published as proposed on 
October 2, 2007. See 72 FR 56136. The second, concerning provisions 
applicable to payment of VA benefits and adjustments to payments, was 
published as proposed on October 31, 2008. See 73 FR 65212. The 
hospital, domiciliary, and nursing home care regulations are included 
in this NPRM.
    The final subpart, ``Subpart M--Apportionments to Dependents and 
Payments to Fiduciaries and Incarcerated Beneficiaries,'' would include 
regulations governing apportionments, benefits for incarcerated 
beneficiaries, and guardianship. This subpart is the primary subject of 
this NPRM.
    Some of the regulations in this NPRM cross-reference other 
compensation and pension regulations. If those regulations have been 
published in this or earlier NPRMs for the Project, we cite the 
proposed part 5 section. We also include, in the relevant portion of 
the SUPPLEMENTARY INFORMATION, the Federal Register page where a 
proposed part 5 section published in an earlier NPRM may be found. 
However, where a regulation proposed in this NPRM would cross-reference 
a proposed part 5 regulation that has not yet been published, we cite 
to the current part 3 regulation that deals with the same subject 
matter. The current part 3 section we cite may differ from its eventual 
part 5 counterpart in some respects, but this method will assist 
readers in understanding these proposed regulations where no part 5 
counterpart has yet been published.
    Because of its large size, proposed part 5 will be published in a 
number of NPRMs, such as this one. VA will not adopt any portion of 
part 5 as final until all of the NPRMs have been published for public 
comment.
    In connection with this rulemaking, VA will accept comments 
relating to a prior rulemaking issued as a part of the Project, if the 
matter being commented on relates to both rulemakings.

Overview of This NPRM

    This NPRM pertains to regulations that govern apportionments of 
benefits, as well as certain matters pertaining to fiduciaries of 
incompetent beneficiaries and minors. It also pertains to regulations 
governing incarcerated beneficiaries and beneficiaries who are fugitive 
felons. These regulations would be contained in proposed Subpart M of 
new 38 CFR part 5. This NPRM also includes eleven regulations 
concerning reductions of VA benefits based on hospitalization at 
government expense. These regulations would be contained in proposed 
Subpart L of new 38 CFR part 5.
    Although these regulations have been substantially restructured and 
rewritten for greater clarity and ease of use, most of the basic 
concepts contained in these proposed regulations are the same as their 
existing counterparts in 38 CFR part 3. However, a few substantive 
differences are proposed, as are some regulations that do not have 
counterparts in 38 CFR part 3.

Table Comparing Current Part 3 Rules With Proposed Part 5 Rules

    The following table shows the relationship between the proposed 
regulations contained in this NPRM and the current regulations in part 
3:

------------------------------------------------------------------------
                                            Based in whole or in part on
   Proposed part 5 section or paragraph       38 CFR part 3 section or
                                                      paragraph
------------------------------------------------------------------------
5.720(a)..................................  3.551(a), 3.552(b)(3),
                                             3.556(a), 3.556(f)
5.720(b)..................................  3.501(b)(1) and (2),
                                             3.552(a)(1), (b)(1),
                                             (b)(2), and (c)
5.720(c)(1)...............................  3.552(b)(2), 3.501(b)(2)
5.720(c)(2)...............................  3.552(d) and (i)
5.720(c)(3)...............................  3.552(f) and (g)
5.720(c)(4)...............................  3.552(h)
5.720(c)(5) and (6).......................  3.552(a)(3)
5.720(d)..................................  3.552(a)(1) and (2)
5.720(e)(1)...............................  New.
5.720(e)(2) and (3).......................  3.552(b)(3)
5.720(f)..................................  3.552(k)
5.721.....................................  New.
5.722(a)(1)...............................  3.551(e)(1)
5.722(a)(2)...............................  3.551(e)(1)
5.722(a)(3)...............................  3.501(i)(5)(i), 3.551(e)(1)
5.722(b)(1)...............................  3.551(a)
5.722(b)(2) and (b)(3)....................  New.
5.722(b)(4)...............................  3.551(e)(6)
5.722(c)..................................  3.551(e)(3)
5.722(d)(1)...............................  3.501(i)(5)(ii), 3.551(e)(2)
5.722(d)(2)...............................  New.
5.722(e)..................................  3.551(e)(4)
5.722(f)..................................  3.551(h)
5.722(g)..................................  3.551(e)
5.723.....................................  3.501(i)(6), 3.502(f),
                                             3.551(i)
5.724(a)..................................  3.501(b)(1), 3.552(b)(1) and
                                             (e) [third and fourth
                                             sentences]
5.724(b)..................................  3.552(a)(1) and (2)
5.724(c)..................................  3.501(i)(3), 3.552(b)(3)
5.724(d)..................................  3.552(k)
5.725.....................................  New.
5.726(a)(1)...............................  3.551(a) and (c)(1)
5.726(a)(2)...............................  3.551(g)
5.726(a)(3)...............................  3.551(c)(1)
5.726(a)(4)...............................  3.501(i)(2)(i), 3.551(c)(1)
5.726(a)(5)...............................  3.551(f)
5.726(b)(1)...............................  3.551(a)
5.726(b)(2) and (3).......................  New.
5.726(c)..................................  3.551(c)(3)
5.726(d)(1)...............................  3.501(i)(2)(iii),
                                             3.551(c)(2)
5.726(d)(2)...............................  New.
5.727(a)(1)...............................  3.551(b)(1)
5.727(a)(2)...............................  3.551(g)
5.727(a)(3)...............................  3.551(b)(1)
5.727(a)(4)(i)............................  3.501(i)(1), 3.551(b)(1)
5.727(a)(4)(ii)...........................  3.551(b)(3)
5.727(b)(1)...............................  3.551(a)
5.727(b)(2) and (3).......................  New.
5.727(c)(1)...............................  3.551(b)(2)
5.727(c)(2)(i)............................  New.
5.727(c)(2)(ii)...........................  3.551(b)(3)
5.728(a)..................................  3.501(b)(1), 3.552(b)(1),
                                             (e) and (j)
5.728(b)..................................  3.552(e)
5.728(c)..................................  3.552(b)(3)
5.729(a)..................................  3.556(a)
5.729(b)..................................  3.556(b) and (d) [third
                                             sentence]
5.729(c)..................................  3.556(c)
5.729(d)..................................  3.556(d) [first sentence]
                                             and (e)
5.730(a)..................................  3.556(a)(1)
5.730(b)..................................  3.556(b)
5.730(c)..................................  3.556(e)
5.730(d)..................................  3.556(d)
5.770.....................................  3.450
5.771.....................................  3.451
5.772(a)..................................  3.452(a)
5.772(b)..................................  3.452(b)
5.772(c)..................................  3.452(c), 3.454
5.772(d)..................................  3.452(d)
5.773.....................................  3.453
5.774.....................................  3.58, 3.458, 3.503(a)(2),
                                             3.901(c), and 3.902(c)
5.780.....................................  3.450(a)(1)(ii), 3.451, and
                                             3.460(b) and (c)
5.781(a)..................................  3.461(a)
5.781(b)..................................  3.461(b)(1)
5.782(a)..................................  3.400(e)(1)
5.782(b)(1)...............................  Introduction to 3.400(e)
5.782(b)(2)...............................  New.
5.782(b)(3)...............................  3.400(e)(2)
5.782(b)(4)...............................  3.665(f)
5.783(a)..................................  3.500(d)(1)
5.783(b)(1) and (2).......................  3.500(g) and (n)
5.783(b)(3)...............................  New.
5.783(b)(4)...............................  New.
5.784(a)..................................  3.1000(b)(2)
5.784(b)(1)...............................  3.1000(b)(1)
5.784(b)(2)...............................  3.1000(b)(3)
5.790(a)..................................  3.353(a)
5.790(b)..................................  3.353(b)
5.790(c)..................................  3.353(c)
5.790(d)..................................  3.353(d)
5.790(e)..................................  3.353(e)
5.790(f)(1)...............................  3.400(x)
5.790(f)(2)...............................  3.400(y)
5.791(a)..................................  3.850(a)
5.791(b)..................................  3.850(c)
5.791(c)..................................  3.850(b)
5.791(d)..................................  3.850(d)
5.791(e)..................................  3.400(n), 3.500(m)

[[Page 2769]]

 
5.792(a)..................................  3.852(a)
5.792(b)..................................  3.852(b), 3.852(d) [first
                                             sentence]
5.792(c)..................................  3.852(d) [second sentence]
5.792(d)..................................  3.852(c)
5.792(e)..................................  3.401(d)
5.792(f)..................................  3.501(j)
5.793.....................................  3.403(a)(2), 3.854
5.794(a)..................................  3.855(a)
5.794(b)(1)...............................  3.855(b)(1)
5.794(b)(2)...............................  3.855(b)(2)
5.794(b)(3)...............................  3.855(b)(3)
5.795.....................................  3.856
5.796.....................................  3.857
5.797.....................................  3.355
5.798.....................................  3.853(c)
5.810(a)..................................  3.665(b)
5.810(b)..................................  New.
5.810(c)..................................  3.665(a) and introduction to
                                             3.666
5.810(d)..................................  New.
5.810(e)..................................  3.665(a) and introduction to
                                             3.666
5.810(f)..................................  3.665(a) and introduction to
                                             3.666
5.811(a)..................................  3.665(a) and (c)
5.811(b)..................................  3.665(j)(3)(ii) and (k)
5.811(c)..................................  3.665(d)(1) and (2) and (j)
5.812(a)..................................  3.665(a) and (c)
5.812(b)..................................  3.665(d)(3)
5.812(c)..................................  3.665(l)
5.812(d)..................................  3.665(k)
5.813(a)..................................  Introduction to 3.666
5.813(b)..................................  3.666(d)
5.814(a)(1)...............................  3.665(a)
5.814(a)(2)...............................  3.665(h)
5.814(b)..................................  3.665(e)
5.814(c)..................................  3.666(a)(1), (a)(2), and
                                             (a)(3)
5.814(d)..................................  3.666(b)(1), (b)(2) and
                                             (b)(4)
5.814(e)..................................  3.665(f), 3.666(a)(4) and
                                             (b)(3)
5.815(a)..................................  3.665(i)
5.815(b)..................................  3.665(i)(1) and (i)(3)
5.815(c)..................................  3.665(i)(2) and (i)(3)
5.815(d)..................................  3.665(m)
5.816.....................................  3.666(c)
5.817(a)..................................  3.665(n)(1) and 3.666(e)(1)
5.817(b)..................................  3.665(n)(2) and (3);
                                             3.666(e)(2) and (3)
------------------------------------------------------------------------

    Readers who use this table to compare the proposed provisions with 
the existing regulatory provisions and observe a substantive difference 
between them should consult the text that appears later in this 
document for an explanation of significant changes in each regulation. 
Not every paragraph of every current part 3 section regarding the 
subject matter of this rulemaking is accounted for in the table. In 
some instances, other portions of the part 3 sections that are 
addressed in these proposed regulations will appear in subparts of part 
5 that are being published separately for public comment. For example, 
a reader might find a reference to paragraph (a) of a part 3 section in 
the table, but no reference to paragraph (b) of that section because 
paragraph (b) will be addressed in a separate NPRM. The table also does 
not include provisions from part 3 regulations that will not be 
repeated in part 5. Such provisions are discussed specifically under 
the appropriate part 5 heading in this preamble. Readers are invited to 
comment on the proposed part 5 provisions and also on our proposals to 
omit those part 3 provisions from part 5.

Content of Proposed Regulations

Subpart L: Payments and Adjustments to Payments

Hospital, Domiciliary, and Nursing Home Care Reductions and Resumptions
    We propose to rewrite current Sec. Sec.  3.551, 3.552, and 3.556, 
by dividing the disability compensation and pension provisions in those 
sections into separate sections. Each section would address different 
VA benefits.
Section 5.720 Adjustments to Special Monthly Compensation Based on the 
Need for Regular Aid and Attendance While a Veteran Is Receiving 
Hospital, Domiciliary, or Nursing Home Care
    Proposed Sec.  5.720 includes provisions for discontinuing special 
monthly compensation (SMC) that is payable because a veteran is in need 
of regular aid and attendance or a higher level of care while receiving 
hospital, domiciliary, or nursing home care.
    In proposed Sec.  5.720(a), we would define the terms ``hospital 
care'', ``domiciliary or nursing home care'', ``temporary absence'', 
and ``regular'' and ``irregular'' discharge or release for purposes of 
Sec. Sec.  5.720 through 5.730. Current 38 CFR 3.551(a) defines the 
terms ``hospitalized'' and ``hospitalization'' to include ``[h]ospital 
treatment in a Department of Veterans Affairs hospital or in any 
hospital at Department of Veterans Affairs expense'' and 
``[i]nstitutional, domiciliary or nursing home care in a Department of 
Veterans Affairs institution or domiciliary or at Department of 
Veterans Affairs expense.'' We propose to not include the terms 
``institution'' or ``institutional'' in the definition of ``hospital 
care'' in Sec.  5.720(a)(1) or elsewhere in Sec. Sec.  5.720-5.730 
because, with respect to specific types of VA care or facilities, the 
terms are obsolete. In 1978, Congress amended 38 U.S.C. 3203(a)(1), the 
precursor to 38 U.S.C. 5503(a), in part by replacing a reference to 
``hospital treatment, institutional, or domiciliary care'' with 
references to ``domiciliary care'' and ``hospital or nursing home 
care.'' See Veterans' and Survivors' Pension Improvement Act of 1978, 
Public Law 95-588, section 307, 92 Stat. 2497, 2510. Despite this 
change of terminology in the authorizing statute applicable to Improved 
Pension, VA kept references to ``institutional'' care in its part 3 
regulations on hospitalization adjustments because the statutes 
applicable to Section 306 Pension and Old-Law Pension still refer to 
institutional care and do not refer to nursing home care. However, VA 
has interpreted ``institutional care'' in these statutes to include 
``nursing home care''. Accordingly, as stated in Sec.  3.551(a), VA 
applies the definition of ``hospitalized'' that includes ``nursing home 
care'' to Sec. Sec.  3.551 through 3.556, including to those provisions 
pertaining to Section 306 Pension and Old-Law Pension. Therefore, in 
keeping with current 38 U.S.C. 5503(a), we have not included any 
reference to institutional care in proposed Sec. Sec.  5.720-5.730.
    Current 38 CFR 3.556(f) defines a ``regular'' discharge as one 
which ``is granted because of having received maximum hospital 
benefits.'' To further clarify the definition, in proposed Sec.  
5.720(a)(3), we would define the term ``regular discharge or release'' 
to mean ``a veteran, surviving spouse, or child is discharged or 
released at the order of a medical professional based on that 
professional's opinion that there is no medical reason to continue 
care.'' VA's regulations on reduction of pension benefits refer only to 
veterans and surviving spouses. We propose to add ``child'' to 
paragraphs (a)(3)-(a)(5) to make these definitions consistent with 
Veterans' Benefits Act of 2010, Public Law 111-275, section 606, 124 
Stat. 2886.
    Proposed Sec.  5.720(a)(4), defining ``irregular discharge or 
release,'' is derived from current Sec.  3.556(f), which defines the 
term specifically, and current Sec.  3.552(b)(3), which implicitly 
defines the term as it applies to readmissions to hospital, 
domiciliary, or nursing home care. Proposed Sec.  5.720(a)(4) defines 
the term to mean a discharge or release from a period of hospital, 
domiciliary, or nursing home care for any of the following reasons: 
refusal to accept treatment, neglect of treatment, obstruction of 
treatment, disciplinary reasons, refusal to accept transfer to another 
facility, leaving a facility against medical advice, or failure to 
return from unauthorized or authorized absence. The current rules do 
not explicitly address those patients who leave hospital, domiciliary, 
or

[[Page 2770]]

nursing home care without authorization from the staff and fail to 
return. VA's practice is to treat such an absence as an irregular 
discharge or release even if the patient is not formally discharged or 
released at the time of departure. Accordingly, proposed Sec.  
5.720(a)(4), defining ``irregular discharge or release'' would include 
situations in which a veteran, surviving spouse, or child fails to 
return from unauthorized absence.
    Proposed Sec.  5.720(a)(5) would define ``temporary absence'' to 
mean ``a veteran, surviving spouse, or child is placed on non-bed care 
status or authorized absence.'' The definition derives from current 
Sec.  3.556(a). We would also clarify that a temporary absence is not a 
discharge or release.
    In proposed Sec.  5.720(c), describing how to calculate the reduced 
rate of SMC, we have identified the benefits to be reduced and the new 
rates by referring to the appropriate part 5 regulations as a 
convenience for the reader. Identification by implementing regulation 
is not a substantive change from current Sec.  3.552, which identifies 
a given benefit by the benefit's authorizing statute and verbal 
description. More specifically, in proposed Sec.  5.720(c)(4), derived 
from current Sec.  3.552(h), we identify the benefit to be reduced as 
SMC under Sec.  5.326(i). Because the reference to Sec.  5.326(i) 
signifies only SMC payable under 38 U.S.C. 1114(m) for blindness in 
both eyes leaving a veteran so significantly disabled as to need 
regular aid and attendance, Sec.  5.720(c)(4) identifies the same 
benefit as Sec.  3.552(h) does, and it is unnecessary to state in 
proposed Sec.  5.720(c)(4) that vision must be better than light 
perception only. Such language is necessary in Sec.  3.552(h) because 
SMC under section 1114(m) may be paid for either blindness in both eyes 
having only light perception or for blindness in both eyes leaving the 
veteran so significantly disabled as to be in need of regular aid and 
attendance. Only SMC based on the latter condition is reduced based on 
hospital, domiciliary, or nursing home care, and only SMC based on the 
latter condition is payable under Sec.  5.326(i); therefore, further 
clarification is unnecessary in Sec.  5.720(c)(4).
    In proposed paragraphs (c)(1) and (f)(1), we have clarified that 
SMC paid under 38 U.S.C. 1114(r) is discontinued or not payable while a 
veteran is receiving hospital care that is provided at United States 
Government expense. We also specify that the discontinuance required by 
paragraph (c)(1) is made only for the receipt of hospital care and is 
not made for the receipt of domiciliary or nursing home care. Both of 
these clarifications are based upon the plain language of the 
authorizing statute, 38 U.S.C. 5503(c).
    In proposed Sec.  5.720(c)(2)(ii), we have referred to a veteran 
who ``has been awarded the intermediate or next higher rate based on 
additional disability that is independently ratable.'' Although current 
Sec.  3.552(i) refers more specifically to ``disability independently 
ratable at 50 percent or 100 percent'', such specificity is 
unnecessary. The reference in Sec.  5.720(c)(2)(ii) to proposed Sec.  
5.331(d)(1) and (e)(1) implies that the veterans described are those 
with disability independently ratable at 50 percent or higher (under 
Sec.  5.331(d)(1)) or 100 percent (under Sec.  5.331(e)(1)). Further, 
if the proposed rule was specific, it is possible that it would be 
misconstrued to exclude veterans with disability independently ratable 
at 60, 70, 80, or 90 percent.
    Proposed Sec.  5.720(d) restates in plain language exceptions 
contained in Sec.  3.552(a)(1) and (a)(2). As we have proposed 
elsewhere in part 5, we would substitute the phrase ``loss of use'' for 
the current term ``paralysis''. See 73 FR 62004, 62013, 62023 (Oct. 17, 
2008) (pertaining to proposed Sec.  5.330(d)). The term ``paralysis'' 
is not defined for VA purposes. It is a term most commonly associated 
with inability to move or have sensation in a body part as a result of 
an injury or of a disease of the nervous system. This is a narrow 
definition that does not address disabilities resulting from muscle or 
bone damage. The phrase ``loss of use'' is used extensively by VA 
personnel in rating disabilities involving the extremities and 
therefore is an appropriate substitute term. The phrase ``loss of use'' 
will be clearer to the reader.
    Proposed Sec.  5.720(e)(1) is a new provision that states 
explicitly a rule that is implicit in current Sec.  3.552(b)(3). Under 
Sec.  3.552(b)(3), from which Sec.  5.720(e)(2) and (3) are derived, VA 
will, in certain circumstances, immediately reduce a veteran's rate of 
SMC if the veteran is readmitted to hospital, domiciliary, or nursing 
home care after a prior period of care for which VA had reduced or 
discontinued the veteran's SMC. That rule applies if the veteran was 
given an irregular discharge or release from the prior period of care 
and the readmission is less than 6 months thereafter. In contrast, 
proposed Sec.  5.720(e)(1) provides that a readmission to care 
following a regular discharge from a prior period of care will be 
treated as if it were an initial admission (i.e., the reduction will 
not be immediate). Under 38 U.S.C. 5503(c), VA is authorized to 
immediately reduce benefits only if the readmission follows an 
irregular discharge, not a regular discharge. The new provision 
explicitly states current VA practice and is favorable to veterans.
    Proposed Sec.  5.720 includes references to several SMC 
regulations--Sec. Sec.  5.323, 5.324, 5.326, 5.328, 5.330, 5.331, 
5.332, and 5.333--which were published as proposed on October 17, 2008. 
See 73 FR 62004.
Section 5.721 Resumption of Special Monthly Compensation Based on the 
Need for Regular Aid and Attendance After a Veteran Is on Temporary 
Absence From Hospital, Domiciliary, or Nursing Home Care or Is 
Discharged or Released From Such Care
    There is no regulation in current 38 CFR part 3 or any statute in 
38 U.S.C. regarding resumption of benefits after a veteran whose 
special monthly compensation based on the need for regular aid and 
attendance was reduced due to hospital, domiciliary, or nursing home 
care is discharged or released from such care. Proposed Sec.  5.721 
would fill this gap. We have modeled this section on the rules in 
current Sec.  3.556, ``Adjustment on discharge or release'', which 
concerns resumptions of pension benefits upon discharge or release from 
hospital, domiciliary, or nursing home care. VA has applied these 
provisions to thousands of veterans' awards over more than 20 years. VA 
staff can administer them efficiently, and they result in fair and 
consistent adjustments of veterans' benefits.
    Section 5.721(b) would incorporate language from current Sec.  
3.556(e), which sets out the rules for resuming benefits following 
regular discharge or release from hospital, domiciliary, or nursing 
home care. Section 3.556(e) states that the award resuming benefits 
``will be based on the most recent rating''. The intent of this 
provision is to ensure that the veteran is paid the proper amount upon 
discharge or release. For consistency, we have also inserted similar 
language in Sec. Sec.  5.725(c)(1) and (2), 5.729(d), and 5.730(c) and 
(d). Throughout Sec.  5.721(b) and these other sections, instead of 
using the phrase ``based on the most recent rating'', we would state, 
``Payment will be resumed at the rate in effect before the reduction 
based on [receipt of such care], unless the evidence of record shows 
that a different rate is required.'' The use of this broader language 
throughout these regulations would also encompass beneficiaries whose 
benefits are not based on a rating decision, such as Improved Pension 
recipients 65 years of

[[Page 2771]]

age or over (to whom proposed Sec.  5.725(c)(2) might apply).
    We use the same language in the proposed regulations that govern 
the resumption of benefits following an irregular discharge. Similar 
language is not contained in current Sec.  3.556(d), which covers 
irregular discharge or release. VA regulations originally made no 
distinction between regular and irregular discharges or releases; the 
award of benefits following either type of discharge or release was to 
be based on ``the last valid rating.'' Vet. Reg. No. 6(c), Instruction 
No. 2, para. IV(e) (Oct. 18, 1934). When VA amended its regulations to 
distinguish between these types of discharges or releases, VA 
inadvertently failed to provide for the resumption of the rate in 
effect prior to the period of care that ended with the irregular 
discharge or release. See R&PR 1256(A) (Mar. 4, 1947).
Section 5.722 Reduction of Improved Pension While a Veteran Is 
Receiving Domiciliary or Nursing Home Care
    Proposed Sec.  5.722 addresses the reduction of Improved Pension 
while a veteran is receiving domiciliary or nursing home care.
    In proposed Sec.  5.722(a), we would clarify that the requirement 
that VA reduce Improved Pension being paid to a veteran who receives 
domiciliary or nursing home care for three full calendar months applies 
only if such care is continuous. This is consistent with long-standing 
VA practice.
    Proposed Sec.  5.722(b) would provide that VA will not reduce a 
veteran's Improved Pension if any one of the exceptions listed applies. 
Although current Sec.  3.551 provides exceptions to the reduction of 
pension, the current regulation is not complete. It is important to 
clearly state when VA will not reduce Improved Pension payable to a 
veteran who is receiving domiciliary or nursing home care. Therefore, 
we have added provisions in proposed paragraphs (b)(2) and (3) to 
expand upon the rules carried forward from current Sec.  3.551. The 
additions are exceptions for veterans maintained in a State soldiers' 
home or receiving domiciliary or nursing home care in a State home and 
the only payment made by VA to the State for the State home is the per 
diem rate under 38 U.S.C. 1741. The provisions reflect VA's long-
standing practice not to reduce benefits when one of the described 
situations occurs. Regarding veterans receiving care in a State home, 
such practice is mandated by 38 U.S.C. 1741. Section 1741(e) 
specifically provides that per diem payments to a State may not be 
considered a liability of a third party or otherwise be used to offset 
or reduce any other payment made to assist veterans.
    Although proposed Sec.  5.722 generally pertains to veterans who 
have no spouse for VA purposes, the law provides for apportionment of 
pension benefits to a veteran's spouse in certain situations. See 38 
U.S.C. 5503(a)(2). We have included in proposed paragraph (c) a cross 
reference to proposed Sec.  5.772(c)(2)(ii), which provides the 
specific provision relating to such apportionments. The maximum amount 
that may be apportioned to the spouse is the difference, if any, 
between $90 and the amount that the veteran would be entitled to 
receive if he or she were being paid as a married veteran. That 
information is contained in current Sec.  3.454(b)(3) and its part 5 
counterpart, Sec.  5.772(c)(2)(ii). We have not included the 
information about the rate payable to a married veteran in Sec.  
5.722(c), even though it is contained in its part 3 counterpart, 
current Sec.  3.551(e), which refers to 38 U.S.C. 1521(c). By 
eliminating the redundant material, proposed Sec.  5.722(c) is easier 
to read and understand than current Sec.  3.551(e).
    Proposed Sec.  5.722(d)(1) is based on current Sec. Sec.  
3.501(i)(5)(ii) and 3.551(e)(2), which govern payments when a veteran 
is readmitted within 6 months after a period of domiciliary or nursing 
home care for which Improved Pension was reduced. Proposed paragraph 
(d)(2) is a new provision, which provides that, if a veteran is 
readmitted 6 months or more after a period of domiciliary or nursing 
home care for which Improved Pension was reduced, the readmission will 
be considered a new admission. This new provision, based on a long-
standing VA procedure, would make Sec.  5.722 more explicit and easier 
to apply than current Sec.  3.551.
    Proposed Sec.  5.722(f) would address veterans who are provided 
nursing home care as part of a prescribed program of rehabilitation 
under 38 U.S.C. chapter 17. The provisions are derived from current 
Sec.  3.551(h) with a few changes. The reference to ``Chief Medical 
Director'' is outdated because Congress has changed the title ``Chief 
Medical Director'' to ``Under Secretary for Health.'' Public Law 102-
405, section 302(a), 106 Stat. 1972, 1984 (1992). We use the current 
title.
    Proposed Sec.  5.722(g) would state that, ``If a veteran becomes 
entitled to Improved Pension while receiving domiciliary or nursing 
home care, VA will reduce pension, or pay a reduced rate of pension, in 
accordance with this section.'' This rule is implicit in both the 
statute, 38 U.S.C. 5503(a), and current Sec.  3.551(e), but is explicit 
in part 5 to reflect current VA practice regarding new awards of 
Improved Pension.
    We have intentionally not included the provisions in current Sec.  
3.551(d) applicable to reduction of Improved Pension for veterans 
receiving care before February 1, 1990. The current paragraph provides 
that if a veteran without spouse or child was receiving hospital, 
domiciliary, or nursing home care before February, 1, 1990, VA will 
reduce the veteran's pension during such care. With the passage of 
time, these provisions are now unnecessary. It is unlikely that VA 
would now retroactively reduce a veteran's Improved Pension because of 
care provided more than 20 years in the past. Consequently, we have 
also not included current Sec.  3.501(i)(4), which contains effective 
dates for reductions under Sec.  3.551(d).
    Similarly, we also propose to omit the provisions of current Sec.  
3.551(e)(5), which provide that effective February 1, 1990, Improved 
Pension is no longer reduced because of hospital care unless the 
veteran is receiving Improved Pension based on the need for regular aid 
and attendance. Such language is unnecessary because proposed Sec.  
5.722 is limited to domiciliary or nursing home care. Provisions 
related to hospital reductions before February 1, 1990, would not be 
included in part 5.
Section 5.723 Reduction of Improved Pension While a Veteran, Surviving 
Spouse, or Child Is Receiving Medicaid-Covered Care in a Nursing 
Facility
    Proposed Sec.  5.723 concerns situations in which a veteran, 
surviving spouse, or child is receiving Medicaid-covered nursing 
facility care. It is a plain language rewrite of current Sec. Sec.  
3.501(i)(6), 3.502(f), and 3.551(i), except that we have added 
``child'' to make the rule consistent with Veterans Benefits Act of 
2010, Public Law 111-275, section 606, 124 Stat. 2886.
    We propose to use the term ``nursing facility'' instead of the term 
``nursing home'', which is used in the current regulation, because the 
authorizing statute, 38 U.S.C. 5503(d), uses the term ``nursing 
facility''. Proposed Sec.  5.723(a) includes an exception that is 
contained in 38 U.S.C. 5503(d)(1)(B) that is not contained in part 3. 
For veterans receiving care in a State home to which VA makes per diem 
payments under 38 U.S.C. 1741, VA does not reduce benefits under this 
section.
    In proposed Sec.  5.723(b), we have updated the reference to Sec.  
3.103(b)(2), contained in current Sec. Sec.  3.501(i)(6)(i) and 
3.502(f)(1), to refer instead to its proposed part 5 counterpart, Sec.  
5.83(b), ``Right to notice of decisions and

[[Page 2772]]

proposed adverse actions'', which was published as proposed on May 10, 
2005. See 70 FR 24680, 24687.
    Proposed Sec.  5.723(d) is a new provision that states, ``If a 
veteran, surviving spouse, or child described in paragraph (a) of this 
section becomes entitled to Improved Pension while receiving Medicaid-
covered care in a nursing facility, then VA will not pay more than $90 
per month while the veteran, surviving spouse, or child receives such 
care.'' This rule is implicit in both 38 U.S.C. 5503(d) and current 
Sec.  3.551(i), but is explicit in part 5 to reflect current VA 
practice regarding new awards of Improved Pension under these 
circumstances.
Section 5.724 Reduction or Discontinuance of Improved Pension Based on 
the Need for Regular Aid and Attendance While a Veteran Is Receiving 
Hospital, Domiciliary, or Nursing Home Care
    Proposed Sec.  5.724 includes provisions for reduction of Improved 
Pension based on the need for regular aid and attendance while a 
veteran is receiving hospital, domiciliary, or nursing home care. It is 
a plain language rewrite of applicable provisions involving Improved 
Pension in current Sec. Sec.  3.501 and 3.552.
    Proposed Sec.  5.724(b) is based on current Sec.  3.552(a)(1) and 
(2) and 38 U.S.C. 5503(b). Section 5503(b) prohibits the reduction of 
any type of VA pension (including Improved Pension based on the need 
for regular aid and attendance) for VA hospital, institutional, or 
domiciliary care for Hansen's disease. We have included similar 
language regarding VA hospital, domiciliary, or nursing home care for 
Hansen's disease in both Sec.  5.724(b)(2) and Sec.  5.728(b)(2).
    Current Sec.  3.552(a)(2) states that Improved Pension based on the 
need for regular aid and attendance will not be reduced if the 
``pensionable disability is blindness (visual acuity 5/200 or less) or 
concentric contraction of visual field to 5 degrees or less.'' The term 
``pensionable disability'' used in Sec.  3.552(a)(2) is imprecise 
because more than one disability may serve as the basis for pension 
entitlement. The description of blindness in Sec.  3.552(a)(2) is based 
on the description in Sec.  3.351(c)(1), which provides that a veteran 
or surviving spouse with that level of blindness will be considered to 
be in need of regular aid and attendance. Therefore, ``pensionable 
disability'' as used in Sec.  3.552(a)(2) refers to the disability 
causing the need for regular aid and attendance, in this case, 
blindness of the level described in Sec.  3.351(c)(1). (The part 5 
equivalent to current Sec.  3.351(c)(1) is Sec.  5.390(b)(1) or (2), 
which was published as proposed on September 26, 2007. See 72 FR 54776, 
54794.) We have drafted proposed Sec.  5.724(b)(1)(iii) to state the 
intended concept in plain language.
Section 5.725 Resumption of Improved Pension and Improved Pension Based 
on the Need for Regular Aid and Attendance After a Veteran Is on 
Temporary Absence From Hospital, Domiciliary, or Nursing Home Care or 
Is Discharged or Released From Such Care
    Current Sec.  3.556, ``Adjustment on discharge or release'', is the 
only regulation in current 38 CFR part 3 regarding resumption of 
pension benefits after a veteran is discharged or released from 
hospital, domiciliary, or nursing home care. However, much of Sec.  
3.556 refers to Old-Law and Section 306 Pensions. In proposed Sec.  
5.725, we would use Sec.  3.556 as the basis for a new rule regarding 
resumptions of Improved Pension and Improved Pension based on the need 
for regular aid and attendance. Based on VA's experience in applying 
Sec.  3.556, this new rule will result in fair, consistent adjustments 
of Improved Pension and Improved Pension based on the need for regular 
aid and attendance.
Section 5.726 Reduction of Section 306 Pension While a Veteran Is 
Receiving Hospital, Domiciliary, or Nursing Home Care
    Proposed Sec.  5.726, based on the portions of current 38 CFR 3.551 
that pertain to Section 306 Pension, provides for reduction of Section 
306 Pension when a veteran is receiving hospital, domiciliary, or 
nursing home care.
    Proposed Sec.  5.726(a)(2), regarding proof of dependents, is based 
on current Sec.  3.551(g) as it applies to Section 306 Pension. We 
propose to omit from part 5 the first two sentences of current Sec.  
3.551(g), which read, ``The veteran will be considered to have neither 
spouse, child nor dependent parent in the absence of satisfactory 
proof. Statements contained in the claims folder concerning the 
existence of such dependents will be considered a prima facie 
showing.'' The first sentence is superfluous because there must be 
satisfactory proof of every fact to be proven in a veteran's claim. The 
second sentence guides VA staff to refrain from seeking evidence of 
dependents if such evidence is already of record. This guidance is more 
appropriately contained in internal VA procedures or training 
publications.
    Proposed Sec.  5.726(a)(4) is based on current Sec.  3.551(c)(1), 
which applies the same effective date of reduction for domiciliary care 
as for hospital or nursing home care. However, Sec.  3.501(i)(2), which 
is based on Sec.  3.551(c), provides two different effective dates of 
reduction for Section 306 Pension recipients, one for domiciliary care 
(Sec.  3.501(i)(2)(i)) and a later one for hospital or nursing home 
care (Sec.  3.501(i)(2)(ii)). The effective date under Sec.  
3.551(c)(1) for all three types of care is the same as the date used in 
Sec.  3.501(i)(2)(i) for domiciliary care. The basis for the conflict 
between the two current rules, Sec. Sec.  3.551(c)(1) and 
3.501(i)(2)(ii), began in 1979, when both Sec. Sec.  3.501 and 3.551 
were amended to implement section 307 of Public Law 95-588, 92 Stat. 
2497, 2510 (amending former 38 U.S.C. 3203(a), currently section 5503). 
44 FR 45930, 45940-41 (Aug. 6, 1979). Prior to being amended, 
Sec. Sec.  3.501(i)(2) and 3.551(c) provided for the reduction in 
pension to begin after two full calendar months of VA-furnished 
hospital, domiciliary, or nursing home care. 38 CFR 3.501(i)(2) and 
3.551(c) (1978). With regard to VA-furnished hospital and nursing home 
care, section 307 of Public Law 95-588 delayed the reduction by one 
full month. 92 Stat. at 2510. VA applied this liberalization to both 
Improved Pension and Section 306 Pension. 44 FR at 45940-41. However, 
in VAOPGCPREC 19-90, 55 FR 40990 (Oct. 5, 1990), VA's General Counsel 
held that the liberalizations made to the limitation contained in 
former 38 U.S.C. 3203(a) were not intended to apply to Section 306 
Pension. Therefore, in February 1991, VA proposed amendments to Sec.  
3.551 to comply with VAOPGCPREC 19-90. 56 FR 7630, 7632 (Feb. 25, 
1991). When the final rule was published in December 1991, VA also 
amended Sec.  3.501(i), purportedly ``to conform with the newly adopted 
amendments to [Sec.  3.551].'' 56 FR 65848 (Dec. 19, 1991). However, 
amended Sec.  3.501(i)(2)(ii) did not conform with Sec.  3.551(c)(1). 
Id. at 65849, 65850. Accordingly, Sec.  3.551(c)(1), as amended, is 
consistent with former 38 U.S.C. 3203(a)(1) and VAOPGCPREC 19-90, but 
Sec.  3.501(i)(2)(ii) is not. Therefore, we propose not to include any 
equivalent to Sec.  3.501(i)(2)(ii) in part 5.
    The second sentence of Sec.  3.551(f) uses the phrase, ``exclusive 
of authorized absences in excess of 96 hours.'' The phrase is redundant 
of the reference to authorized absences in the first sentence of 
paragraph (f), so we propose not to include it in part 5.
    Current Sec.  3.551(f) also contains a reference to a 90-day period 
of hospitalization. However, paragraph (f) refers solely to calculating 
hospitalization periods under paragraph

[[Page 2773]]

(c), which only refers to 60-day periods. The ``90-day'' reference is 
another artifact of the 1979 amendments, discussed above, and is no 
longer necessary. Therefore, we propose not to include the reference in 
part 5.
    Proposed Sec.  5.726(b) would state the circumstances in which VA 
will not reduce Section 306 Pension while the veteran is receiving 
hospital, domiciliary, or nursing home care. The paragraph would 
incorporate current Sec.  3.551(a) and add two other exceptions that 
are based on long-standing VA practice, that is, veterans receiving 
care in a State soldiers' home or in a State home. See the discussion 
earlier in this NPRM related to proposed Sec.  5.722(b)(2) and (3) for 
more information concerning these exceptions to the general reduction 
rule.
    Provisions regarding apportionment of Section 306 Pension benefits 
to the veteran's spouse are included in proposed Sec.  5.726(c). We 
have included a cross reference to proposed Sec.  5.772, which provides 
the specific rules relating to such apportionments.
    Proposed Sec.  5.726(d)(2) provides that if a veteran is readmitted 
6 months or more after a period of hospital, domiciliary, or nursing 
home care, the readmission will be considered a new admission. This 
provision, based on a long-standing VA procedure, has been added to 
increase the clarity of the rule stated in current Sec.  3.551.
Section 5.727 Reduction of Old-Law Pension While a Veteran Is Receiving 
Hospital, Domiciliary, or Nursing Home Care
    Proposed Sec.  5.727 addresses veterans receiving Old-Law Pension 
and the reduction of such benefits while the veteran is receiving 
hospital, domiciliary, or nursing home care.
    Proposed Sec.  5.727(a)(1) is based on current Sec.  3.551(b)(1). 
Current Sec.  3.551(b)(1) unnecessarily contains the term ``dependent 
parent'' as it refers to dependents of a veteran who is in receipt of 
Old-Law Pension. Prior to being amended in 1972, 38 CFR 3.551(b) 
applied to reductions of disability compensation and pension. Whereas a 
veteran receiving disability compensation may receive an additional 
allowance for dependent parents, payment of Old-Law Pension is neither 
adjusted nor otherwise affected because of a dependent parent. See 38 
U.S.C. 503, 521, 522 (1958) (providing the statutory authority for Old-
Law Pension, as in effect June 30, 1960, prior to amendment by Pub. L. 
86-211). When Sec.  3.551(b) was amended in 1972 to apply only to 
pension, the term was nevertheless retained. See 37 FR 19132, 19133 
(Sept. 19, 1972). In addition to being unnecessary, the use of 
``dependent parent'' in Sec.  3.551(b) is potentially misleading 
because it implies that a veteran receiving Old-Law Pension could have 
a dependent parent. Therefore, in proposed Sec.  5.727(a)(1), we are 
not including the term.
    Proposed Sec.  5.727(a)(2), regarding proof of dependents, is based 
on current Sec.  3.551(g) as it applies to Old-Law Pension.
    In proposed Sec.  5.727(a)(4)(i), we clarify that VA excludes any 
month (other than the month of admission) that contains an authorized 
absence from its calculation of the effective date. This rule is not 
stated in current Sec.  3.551(b)(1) but is based on current Sec.  
3.551(b)(3), which pertains to veterans who have been irregularly 
discharged and then readmitted prior to the effective date of the 
reduction. To the extent that this clarification is not explicit in 
part 3, including it in part 5 is favorable to veterans. To apply the 
rule excluding periods of authorized absence only when a veteran has 
been irregularly discharged would be unfair to veterans who have 
complied with their care.
    Proposed Sec.  5.727(a)(4)(ii) describes the effect of an irregular 
discharge that occurs prior to the initial reduction of Old-Law 
Pension. The first sentence is based on Sec.  3.551(b)(3) and provides 
that the reduction is effective without regard to the irregular 
discharge if the readmission occurs before the general effective date. 
The second sentence of proposed Sec.  5.727(a)(4)(ii) provides that if 
the veteran is readmitted after the first day of the seventh calendar 
month after the month of admission to hospital, domiciliary, or nursing 
home care, the readmission will be considered a new admission. Although 
this provision is not explicitly stated in part 3, it is based on 
current VA practice and is favorable to veterans.
    Proposed Sec.  5.727(b) would state the circumstances in which VA 
will not reduce Old-Law Pension while the veteran is receiving 
hospital, domiciliary, or nursing home care. The paragraph would 
include language from current Sec.  3.551(a) and add two other 
exceptions based on long-standing VA practice. See the discussion above 
related to proposed Sec.  5.722(b)(2) and (3) for more information 
concerning these exceptions to the general reduction rule.
    Proposed Sec.  5.727(c)(2)(i) is a new provision based on paragraph 
(a)(1) of 38 U.S.C. 3203 (the predecessor to current 38 U.S.C. 5503) as 
in effect on June 30, 1960, which provides that if a veteran is 
readmitted to VA hospitalization following an irregular discharge from 
a prior VA hospitalization during which Old-Law Pension was reduced, 
Old-Law Pension will be reduced effective from the date of readmission. 
See Public Law 85-857, 72 Stat. 1105, 1234 (1958). That paragraph, as 
it pertains to Old-Law Pension, was amended by section 3 of Public Law 
89-362, 80 Stat. 30 (1966), to limit the rule to readmissions that are 
within 6 months of the date of irregular discharge or release from the 
prior hospitalization.
Section 5.728 Reduction of Old-Law Pension or Section 306 Pension Based 
on the Need for Regular Aid and Attendance While a Veteran Is Receiving 
Hospital, Domiciliary, or Nursing Home Care
    Proposed Sec.  5.728 would provide for reduction of Old-Law Pension 
or Section 306 Pension based on the need for regular aid and attendance 
while a veteran is receiving hospital, domiciliary, or nursing home 
care. It is a plain language rewrite for clarity of the Old-Law Pension 
and Section 306 Pension provisions in current 38 CFR 3.501 and 3.552. 
VA intends no substantive change by this rewording.
    As discussed above regarding Sec.  5.724(b), the term ``the 
pensionable disability'' used in Sec.  3.552(a)(2) refers to the 
disability for which the veteran is receiving regular aid and 
attendance under Sec.  3.351(c)(1). There is no part 5 equivalent to 
Sec.  3.351(c)(1) for either Old-Law Pension or Section 306 pension. 
Therefore, Sec.  5.728(b)(1)(iii) would simply state the blindness 
criteria.
    Current Sec.  3.552(e) and (j) in part refer to a reduced rate of 
Section 306 Pension based on the need for regular aid and attendance 
that applies ``if the veteran was age 78 or older on December 31, 
1978.'' There are no beneficiaries who fit this category as they would 
be at least 109 years old. Accordingly, similar references do not need 
to be carried forward to part 5.
Section 5.729 Resumption of Section 306 Pension and Section 306 Pension 
Based on the Need for Regular Aid and Attendance After a Veteran Is on 
Temporary Absence From Hospital, Domiciliary, or Nursing Home Care or 
Is Discharged or Released From Such Care
    We propose to separate the provisions of current 38 CFR 3.556 into 
two new sections, Sec.  5.729 for Section 306 Pension and Sec.  5.730 
for Old-Law Pension. We intend no substantive changes as a result of 
the separation. This would provide readers with a clear and organized 
description of the rules governing the resumption of Section 306

[[Page 2774]]

Pension and Old-Law Pension after the monthly pension rates are reduced 
under Sec.  5.726, ``Reduction of Section 306 Pension while a veteran 
is receiving hospital, domicili