Good morning. Chairman Sanders and Ranking Member Burr, I congratulate you on calling for this hearing. I appreciate the opportunity to testify as a professional serving the elderly and individuals with disabilities and special needs, and as the President of the National Academy of
Elder Law Attorneys (NAELA).
Thank you for your interest in our views regarding legislative proposals to protect veterans and improve the quality of their lives after their service to our nation. We fully support this
Committee’s interest in protecting veterans from scammers seeking to take advantage of vulnerable veterans and their families. We agree that change in the existing VA pension rules is necessary. Senators Wyden and Burr have introduced legislation (S. 748 Veterans Pension
Protection Act) in response to the U.S. Government Accountability Office (GAO) study on improvements needed to ensure that only qualified veterans and survivors receive Veterans
Pension benefits. However, the changes proposed in S. 748 will not protect veterans from further exposure to scammers. Instead, the current changes proposed in the legislation will make it more difficult for veterans or their surviving spouses to qualify for VA pension benefits without addressing many of the problems in the existing rules.
NAELA
I am proud to serve as the President of the National Academy of Elder Law Attorneys, which is a national, non-profit association composed of more than 4,200 attorneys. NAELA provides information, education, networking, and assistance to lawyers, bar organizations, and others who deal with the many issues involved with legal services for the elderly and people with special needs.
Elder Law
Elder law is a specialized area of law that involves representing, counseling, and assisting the elderly and individuals with disabilities, including many veterans, and their families in connection with a variety of legal issues. It is a holistic approach to the practice of law that focuses on the individual client’s needs rather than a particular area of law.
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When we work with veterans on their long-term care needs, it is often as part of a larger planning process that examines the full range of long-term care options, issues and costs relevant to the client’s circumstances. In most situations, our help is sought when the need for long-term care or a health care crisis has already arrived. It usually involves spouses and children of persons who are in the need of home care, assisted living or nursing home care. Many veterans’ families may have already provided care themselves and have exhausted available local resources.
Veterans and their families seek legal advice on quality of care, aging with dignity, selfdetermination, and how to keep loved ones in their own homes and communities. They want to know how to preserve enough money to pay for all the necessities of living and good care.
Veterans and most clients do not like the idea of going on “welfare” or going on Medicaid or giving away their assets. Leaving bequests to children and grandchildren is not the driving force behind planning for veterans, nor is it a significant factor affecting veterans’ program costs.
There have been for some time exaggerated stories of millionaires on Medicaid and veterans’ benefits programs, but millionaires do not need or want such programs.
Fraud Against Our Nation’s Veterans
Mr. Chairman, veterans deserve generous and well-run benefits programs. Our most vulnerable veterans who are older, frail and/or have multiple chronic illnesses certainly deserve what they have earned. I believe our mutual goals are to protect veterans from unscrupulous scammers, and protect them from inappropriate administrative program rules and lengthy delays in receiving their benefits.
NAELA’s Public Policy Committee, Veterans Task Force, staff and members have been quite active on veterans’ issues. We have provided valued input to the Government Accountability
Office (GAO) and Consumer Financial Protection Bureau (CFPB) regarding their work to fight fraud, misinformation, and the use of inappropriate services and products for veterans. Attached are recent communications with these agencies (NAELA has not enclosed the additional attachments sent to GAO and CFPB in this document but the materials are available upon request). As the GAO report notes (
Veterans’ Pension Benefits Improvements Needed to Ensure
Only Qualified Veterans Receive Benefits ), elder law attorneys have assisted with this study and have reported their concerns regarding some current practices that put our nation’s veterans at risk. NAELA members have also been exposed to instances through their clients where individuals have been given inappropriate advice on the rules related to gifts and transfers of assets, which may result in the delay of Medicaid eligibility in order to secure VA benefits.
NAELA believes that the Special Committee on Aging’s hearing and the GAO report outline critically important issues that should be addressed through education, rulemaking and/or legislation in order to protect our most vulnerable veterans and ensure that the Department of
Veterans Affairs programs serve those in the greatest need.
NAELA has analyzed S. 748, the Veterans Pension Protection Act, that was drafted in response to the GAO study. Although the intent of this legislation to ensure that limited resources are available for those most in need is laudable, the bill currently fails to address areas of concern
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raised during the senate hearing and in the GAO report. We also have concerns regarding the
Department of Veterans’ Affairs ability to administer a look-back period without increasing the already lengthy wait time and complex VA application process. However, NAELA is committed to finding reasonable solutions that will better protect aging veterans and their families from financial exploitation while preserving their access to their rightful pension.
Therefore, our testimony will address three primary areas:
1.
Concerns with S. 748 and Proposed Changes
2.
Accreditation for Representation of Veterans and Proposed Solutions
3.
How Gray Areas in Existing Pension Rules Attract “Scammers” and Proposed Solutions
Concerns with S. 748 and Proposed Changes
On April 17, 2013, Senators Burr (R-NC) and Wyden (D-OR) reintroduced a bill to establish a three-year lookback period for the VA Aid & Attendance pension program and to create a penalty period for assets transferred in this time frame. The legislation was introduced in response to a Government Accountability Office report issued in May 2012 titled “Improvements
Needed to Ensure Only Qualified Veterans and Survivors Receive Benefits.” The report identified several suggestions to strengthen the VA pension program, including better coordination with the VA’s fiduciary program and clear guidance for claims processors, but the
Wyden/Burr legislation focuses solely on establishing a lookback period.
Congress should not create unnecessary obstacles and delays that will hurt veterans and their families by preventing them from engaging in the kind of planning that individuals will normally do to ensure the future security of themselves and their family. NAELA is committed to protecting veterans from inappropriate, vague, and overly harsh administrative program rules and lengthy delays in receiving necessary benefits.
It is NAELA’s position that if a lookback period of any time frame is implemented then a number of problems will arise. In order to address these problems, NAELA has drafted changes to the current legislation to better protect veterans and their families. We will share those with the Committee upon request.
Implementation
The Department of Veterans Affairs (VA) will find implementing a lookback period of any length overwhelming and burdensome. The VA will have an extremely difficult time investigating all reported transfers. The VA does not have the staff necessary to address the current backlog. Hundreds of thousands of veterans are already waiting for determinations on benefit requests. In fact, many elderly veterans are dying before their claims are processed. For example, a NAELA member had a case where the claimant died while waiting to receive benefits. The initial application was sent in February 2012 and numerous contacts were made with the VA to determine the progress of the application. The veteran passed away after waiting
441 days. In another case, a veteran has been waiting almost 500 days for a decision since the date of his initial application. A NAELA member has had several contacts with the VA to
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determine the status of the veteran’s application and was told that a rating decision had been made in March 2012 but the veteran still has not received a notification letter. A lookback period of any length will only make the backlog problem more severe and will unfairly punish veterans and prevent them and their families from accessing their rightful pensions.
NAELA’s proposed modification to the bill includes protections for veterans if a lookback period is implemented. We would include a “Timely Determination of Eligibility” section where a claim for improved pension must be decided within 90 days (and 180 days for all other claims).
NAELA would also add a section to the bill explaining that the veteran has a duty to disclose fully and adequately relevant information. To impose a lookback period on veterans that will cause further delays to claims processing without imposing a corresponding obligation on the part of the VA to timely consider claims unduly punishes veterans who are eligible for VA pension benefits.
Penalty Period Calculation
The legislation would create inequity with the application of the penalty period, when the veteran would not be eligible to receive benefits. As written, an imposed penalty period created by a gift will only be eliminated if the entire gift is returned to the claimant. The legislation fails to address a situation where only some of the money that was transferred is returned to the claimant. NAELA’s proposed amendment to the bill recognizes “partial returns.” If an individual transfers assets for less than fair market value and a portion of those assets are returned to the individual, the individual’s penalty period should be reduced by the proportion of the assets returned. A partial return should be a “cure” of a penalty, and no new penalty should be recalculated. For example, if a veteran transfers $10,000 to a child as a gift and the child spent $5,000, only $5,000 can be returned to the veteran in an attempt to avoid a penalty period.
It is unfair to impose a full penalty of $10,000 on the veteran if the child returns $5,000 of the gift. An all or nothing rule on returns actually discourages partial restitution of funds.
The legislation appears to create a disparity in the application of the penalty period between single veterans and married veterans, as well as between veterans and surviving spouses and dependent children of veterans. The maximum pension rate for each type of claimant (i.e. single, married, veteran, or surviving spouse) is different, thus, creating a longer penalty period for certain claimants versus others, even though the amount of the transfer was the same. For example, if a veteran gives his son a gift of $10,000 and then applies for pension benefits, he would be assessed a penalty period of ten months ($10,000 divided by $1,038). If the veteran’s surviving spouse gave her son a gift of $10,000 and then applied for pension benefits, her penalty period would be fourteen months ($10,000 divided by $696).
Further, the legislation provides that if the veteran’s spouse makes any gifts during the veteran’s lifetime, the penalty is to be assigned to both the veteran and his spouse and such penalty survives the death of the veteran. What this means is that if the veteran and his or her spouse together give their son $10,000 and the veteran then applies for pension benefits, they will receive a penalty of ten months. If the veteran dies before the end of the penalty period, the spouse will have the penalty period transferred to her should she apply for benefits. There is no time limit or end date to this provision. So, if the veteran dies in 2013, leaving a nine-month
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penalty period and the spouse does not apply for benefits until many years later, for example
2033, the spouse will still have the nine-month penalty period of ineligibility. It should also be noted that, if the veteran’s spouse applied for benefits in less than three years, it is unclear whether the VA could assess a penalty for the $10,000 gift as part of the lookback process, plus transfer the remaining penalty from the veteran’s claim to her.
NAELA would propose to change the method of calculating the penalty period in order to better reflect the cost of long-term care for veterans and their families. NAELA suggests that the value of all covered resources disposed of by the veteran should be divided by the greater of either twice the amount of improved pension or the national average cost of care. This option decreases the devastating financial impact of a penalty period and reflects the reality that veterans will have to pay for the cost of care during the penalty period.
We feel that this change will have a lesser impact on veterans and their families because the cost of long-term care is an important element of eligibility for the VA pension benefit. This benefit helps elderly and chronically ill veterans and their families pay for much-needed long-term care.
This is because, in order to be eligible for the full pension benefit of $1,038 per month, a veteran needs to have a monthly income of $0 or less. The VA regulations provide that unreimbursed medical costs (such as the cost of long-term care) can be subtracted from the gross income for
“income for VA purposes.” By tying the penalty period to the cost of care, rather than the amount of the monthly benefit, which other benefits programs such as Medicaid already do, the penalty period reflects the basic reality that the vast majority of those eligible are only eligible because they have significant care costs. This change will protect veterans because the national average cost of care is much higher than the pension benefit.
The highest pension benefit for a single veteran is $1,732 per month. The average cost of in-home homemaker care in the United States is $18 per hour. The highest pension benefit, reserved for those who need the regular aid and attendance of another person for their activities of daily living, will pay for only just over 3 hours of care per day or 22 hours per week (1732 divided by 18 divided by 30 days). When you consider that, in most states, someone who needs that much care would not qualify for Assisted Living (average cost: $3,450 per month) and would generally need nursing home care (average cost: $6,210 per month), to penalize veterans and their surviving spouses at the rate of benefit results in them having to pay the high costs of long-term care out of pocket for a greater amount of time.
Lack of Clarity and Guidance
The current draft of S.748 lacks clarity and guidance on what assets and transfers are exempt from determining the veteran’s net worth. In order for veterans to adequately plan for their families’ long-term health and financial needs, veterans need to understand how a potential lookback will treat certain assets and transfers. The bill as drafted does not include an adequate discussion on the treatment of trusts and annuities.
In order to protect veterans and their loved ones, NAELA identifies certain transfers that should be exempt from penalty. Transfers made for fair market value or for other valuable consideration are exempt. Also exempt are transfers made exclusively for a purpose other than
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to qualify for benefits. Our proposal includes a non-exhaustive list of transfers that are presumptively transfers for a purpose other than to qualify for benefits, such as:

To help a family member pay for education expenses, medical expenses, for a financial crisis;

To contribute to a religious organization or charity;

Transfers resulting from alleged financial fraud or abuse against the claimant;

Transfers made by individuals with dementia who are unable to provide documentation or explanations of the transfers;
 Transfers made to a third party solely to benefit the veteran’s spouse.
NAELA’s approach also allows for the recognition of special needs trusts to help protect the veteran’s family members who have a disability. For example, a disabled child in the veteran’s household can receive Medicaid and have a special needs trust to help improve the quality of the child’s life but as currently drafted, the assets in the special needs trust would count against the veteran’s ability to obtain needed assistance from the VA. This is not what Congress intended.
The changes suggested also help protect veterans and their families by exempting Medicaidcompliant annuities as an asset. Because the VA pension benefit is usually significantly less than the cost of long-term care, yet a claimant is limited in the amount of assets they are allowed to have and still qualify for VA benefits, having a source of income to make up the cost of care is a critical factor for veterans and their families who want to remain out of Medicaid-covered nursing home care. A Medicaid-compliant annuity has no cash value, but is a source of income the veteran can use to pay for the cost of long-term care and delay the need for Medicaid. This change will help delay or even avoid the need for veterans and their spouses to receive Medicaidcovered nursing home care -- ultimately saving significant costs for the Federal government as a whole.
The current draft of the bill fails to include crucial definitions that would help veterans and their families adequately plan for their long-term care needs. NAELA’s suggests adding a definition section to the bill that would include definitions for fair market value, resources, disabled, trust, annuity, and transfer.
Veterans and their families deserve protections from unjustifiably harsh eligibility restrictions.
NAELA’s suggestions to the bill work to correct the current problems in the legislation and are necessary if a lookback period of any length is instituted.
Accreditation for Representation of Veterans and Solutions
As of June 23, 2008, all persons who engage in the representation of a claimant before the
Department of Veterans’ Affairs with the preparation, presentation, and prosecution of a claim for benefits must be accredited by the VA. To become accredited, the individual must submit
VA Form 21a, Application for Accreditation as a Claims Agent or Attorney. If an attorney, the application permits self-certification of being a current member in good standing with the bar of the highest court of a state or territory of the United States. The General Counsel will presume an attorney’s character and fitness to practice before VA based on State bar membership in good
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standing unless the General Counsel receives credible information to the contrary. If the applicant is a non-attorney, the applicant must also take and pass a written examination.
The purpose of requiring accreditation was to ensure that claimants for veterans’ benefits have responsible, qualified representation. The sole purpose of the VA’s accreditation examination for non-lawyers is to determine objectively whether an agent has the qualifications necessary to provide competent representation before the Department. The examination was developed to fairly express the minimum practice before the Department.
The additional requirement for accreditation is that the accredited individual must obtain no less than three hours of qualifying CLE within the first 12 months of accreditation and then another three hours within every 24 months thereafter.
The problems with accreditation and proposed solutions:
(1) (a) Problem: The VA has stated that it has neither the authority nor jurisdiction to sanction non-accredited agents from assisting claimants with claims before the VA. The standard response is: (i) for non-lawyers, report them to the state bar for unauthorized practice of law (which is not successful if it is a financial advisor selling financial products) and (ii) for lawyers, if they are not accredited “then there is nothing we can do.”
(b) Solution: The VA needs statutory authority to issue (a) injunctive orders and (b) cease and desist orders. The VA can collaborate with other federal agencies to minimize abuse of non-accredited agents from assisting claimants, such as (i) state insurance commissioners, (ii) state bars, and others. In addition, Veteran Service Organizations (VSOs), attorneys, and others should be allowed to file requests for investigation to the VA General Counsel’s office. Thus, when a person files a complaint to the VA, the VA can enlist the assistance of the other agencies to investigate whether the practices the individual employed were appropriate for the client and situation or if alternative action is necessary.
(2) (a) Problem: The VA does not have the staff or resources to verify attorneys are members in good standing of a state bar upon initial accreditation or upon annual re-certification.
(b) Solution: Hire three full time employees or independent contractors to verify the standing of lawyers on an annual basis. This can be verified by going directly to the state bar websites or calling the bar. Also, the VA can collaborate with the state bars to receive a list each year of attorneys who have been reprimanded, suspended or disbarred.
(c) Solution: Enlist one accredited attorney from each state to do a year-end status report of all accredited attorneys in the state.
(3) (a) Problem: The application for VA accreditation is unclear as to whether a member in good standing of a state bar would be stripped of accreditation if the member had a reprimand on his or her record. Specifically, question 20 directly asks about reprimands; however, an attorney may receive a reprimand and still be a member in good standing of his or her bar.
(b) Solution: (i) clarify whether a reprimand would be cause for losing accreditation; (ii) if so, when the annual verification in (1)(b) is implemented, then verify this information as well;
(iii) if not, then remove the question as it relates to “reprimand” from the application for accreditation.
(4) (a) Problem: Financial advisors are permitted to take the accreditation exam. Once accredited, they are permitted to assist with the preparation, presentation, and prosecution of claims (for free). Many of the abusers creating harm to veterans are financial advisors, both accredited and non-accredited, who sell the claimant inflexible financial products that then have
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a probability of making it difficult or impossible for the veteran to afford long-term care in a skilled nursing home. The financial advisor tells the claimant he or she will “do the application for free” but the claimant must invest all their assets with the advisor’s company, wherein the advisor receives commissions or fees from the management of assets.
(d) Solution: Do not allow any financial advisors or insurance sales professionals to become accredited agents.
(5) (a) Problem: Many people “help” claimants with their applications under the guise of
“education” about the process, but do not actually assist with the preparation of the application or represent the person before the VA. These “helpers” are not accredited and do not believe they need to be because they are only “educating” the claimant on how to fill out a claim, but are not actually completing the claim.
(b) Solution: Add a question on the VA application forms, such as, “If you are not using a Veteran Service Organization (VSO) or accredited lawyer as your 21-22a Representative, list all persons who gave you information or assisted you in any way with the preparation of your
VA application process for benefits.”
(6) (a) Problem: To maintain accreditation, only 3 hours of continuing legal education is required within the first 12 months, and then only 3 hours thereafter every 24 months. Three hours is barely sufficient to learn the basics of complicated VA claims issues regarding applications and appeals.
(b) Solution: Most state bars require a certain number of continuing legal education credits. Increase the number of hours required on an annual basis to be no less than three hours annually (instead of bi-annually).
Case Scenarios
It has been questioned why claimants need to seek the advice from an attorney when filing a claim for benefits, specifically, improved pension. Pointedly, can’t the claimants get the assistance they need from available Veteran Service Organizations (VSO’s)? NAELA recognizes that VSOs are helpful and necessary to the veteran population; however, there are more claimants than can be adequately served by VSOs. Moreover, VSOs appear to be trained to assist service connected veterans with claims and appeals, and many are not fully trained in or fully informed about the improved pension program. Further, elder law attorneys are also knowledgeable about other benefits programs, such as Medicaid, and can advise clients when other programs may be more appropriate for the client, or on the interplay between programs.
Listed below are just a few real situations that show the importance and necessity for accredited, trained lawyers to be available and of assistance to veterans, particularly with regard to the improved pension benefit.
1. Overall, VSOs are great with appealing service-connected disability claims. However, they are widely unaware of the Improved Pension program and often will either tell a possible claimant that benefits do not exist or give information that will actually harm the claimant. In the best case scenario, they are application compilers who then forward the applications to the
VA.
2. VSO advised client who was applying for VA Improved Pension with A&A that the spouse’s income did not have to be reported. Result: overpayment by the VA, demand repayment.
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3. VSO advised client that the sale of a home place would not jeopardize VA Improved Pension with A&A. Result: Sale of the home place created excess assets and claimant’s benefits were terminated.
4. VSO not being aware of the VA Fast Letter issued October 2012 regarding treatment of unreimbursed medical expenses. Result: Claimant did not provide sufficient medical evidence to verify the need. Claim denied due to excess income (due to the VA not counting permissible medical deductions).
5. VSO advised an elderly veteran (over age 65) who was healthy and independent, but had a spouse living in a nursing home, that there were no benefits available to the veteran. Result: Loss of $1,359 per month ($16,340 per year) of income from the VA to help offset the cost of the veteran’s spouse’s nursing home costs (Improved Pension).
How Gray Areas in Existing Pension Rules Attract “Scammers”
As stated earlier, NAELA fully supports this committee’s interest in protecting veterans from scammers and agree that change in the existing VA pension rules is necessary. Rather than making it more difficult for veterans or their surviving spouses to qualify (and in addition to the suggestions that we have made regarding accreditation), we suggest changes to the existing VA pension rules that will eliminate “gray areas” that allow scammers to take advantage of veterans.
By eliminating these confusing provisions, you will be addressing the root of the problem. The following are examples within the existing VA pension rules that we consider “gray areas” or
“problem areas” that should be corrected.
Problem Area 1: There is currently no limit on the amount of assets a veteran or surviving spouse can own and yet qualify for VA pension. Instead, a subjective test is used, the criteria of which are not published, to determine whether the claimant has sufficiently few assets to qualify for help from the VA.
The applicable rules defining net worth are as follows: 38 CFR §3.274 which states, “Pension shall be denied or discontinued when the corpus of the estate of the veteran and veteran’s spouse are such that, when considering annual income, it is reasonable that some part of the corpus be consumed for the veteran’s maintenance.”
38 CFR §3.275, which defines corpus of the estate as, “Market value, less mortgages or other encumbrances, of all real and personal property owned by the claimant, except the claimant’s dwelling, including a reasonable lot area, and personal effects consistent with claimant’s reasonable mode of life.”
This type of vague definition of net worth leaves veterans and their surviving spouses with no clue about what level of assets would allow them to be eligible for a VA pension. This, in turn, leaves them vulnerable to unscrupulous scammers wishing to take advantage of unclear rules, perhaps resulting in the veteran purchasing a financial product that may or may not be exempt as an asset, or being convinced to invest more money into a financial product than they can really afford. Moreover, the vague definition of net worth exacerbates the backlog problem because those claimants with excess resources, if they knew what the excess resource limit was, would
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not prematurely or unnecessarily apply for benefits. The result would be fewer claims being filed and quicker adjudication of eligible claims.
Solution: Set an appropriate limit on assets for an unmarried veteran or surviving spouse, and an appropriate limit on assets for a married veteran.
Problem Area 2: Specific assets that may be countable (because they are outside the exemptions mentioned in 38 CFR §3.275) are not defined anywhere in the United States Code or
Code of Federal Regulations. For example, retirement assets are currently treated as income and as an asset by Pension Management Centers, despite no current regulation that supports this position. Annuities that have no principal value but are paying out a set amount of income and principal each month are being treated as an asset, although there is no current rule or regulation to support this position. As a result of this type of ambiguity in the rules, veterans or their surviving spouses cannot readily verify information provided to them by outside sources, thus making them vulnerable to unscrupulous scammers.
Solution 2: Provide clear definitions of countable and non-countable assets within the United
States Code and Code of Federal Regulations.
Problem Area 3: Unless a veteran or surviving spouse was aware of and knew how to obtain
General Counsel Opinions, he or she would have no knowledge of the fact that a self-settled special needs trust is considered a countable asset by the VA for pension purposes. Likewise, he or she would have no knowledge of the fact that a life estate interest in real property will be ignored for VA pension purposes. A self-settled special needs trust and a life estate interest in property are commonly-used tools in estate planning, but can be very harmful to the unknowing veteran or surviving spouse given the current position of the VA.
Solution 3: Consider a rule that will make a properly drafted self-settled special needs trust for a disabled person an exempt resource for VA purposes. Also, add an additional provision (perhaps as part of Solution 2) that makes it clear in the federal regulations and United States Code that a life estate interest in property will be counted as a fee simple interest.
Conclusion
In conclusion, we commend this committee for recognizing and working to eliminate fraud against veterans. S.748 does not address the core problems with the program, but NAELA has thoughtfully analyzed and proposed alternatives that will strengthen the bill for veterans if a lookback period of any time frame is included. That language, along with the solutions proposed above, will greatly lessen the potential for financial abuse of veterans and surviving spouses of veterans.
Thank you.
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