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M21-1, Part III, Subpart iv, Chapter 8, Section D – Reductions in Awards

Overview

In This Section
This section contains the following topics:
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1.  Reductions in Compensation Under 38 CFR 3.105(e)

Introduction

 This topic contains information about reductions under 38 CFR 3.105(e), including

Change Date
September 24, 2018

III.iv.8.D.1.a.  Reducing or Terminating Compensation Awards
Under the provisions of 38 CFR 3.105(e), the rating activity prepares a proposed rating decision to reduce a combined evaluation or employability status, or terminate a running award by reason of a change in the severity of a Veteran’s service-connected (SC) disability.
Note:  38 CFR 3.105(e) is not for application when a Veteran fails to report for a routine future examination.  Follow the procedures in M21-1, Part III, Subpart iv, 8.E.1 for reductions for failure to report for a routine future examination under 38 CFR 3.655(c).
References:  For more information on the

III.iv.8.D.1.b. Evidentiary Standard for Reduction Due to Improvement 
In all rating reduction cases, to include those involving an evaluation that has not been in effect for five years or otherwise stabilized, a reduction in the evaluation may only be effectuated if the improvement
  • is shown by a thorough examination adequate for rating purposes, as required in 38 CFR 4.2 and 38 CFR 4.10, and
  • reflects an improvement in ability to function under the ordinary conditions of life, including employment.
Reference:  For more information on the evidentiary standard for reduction due to improvement, see Brown v. Brown, 5 Vet.App. 413 (1993).

III.iv.8.D.1.c.  Handling Proof of Substantially Gainful Employment
If evidence of substantially gainful employment is received but not clearly shown, refer the case to the authorization activity to develop for continued individual unemployability (IU).
If substantially gainful employment is established, take rating action under the provisions of 38 CFR 3.105(e).

III.iv.8.D.1.d.  When to Apply the Provisions of 38 CFR 3.105(e)
Apply the provisions of 38 CFR 3.105(e) only if a lower evaluation of an SC disability would result in a reduction or discontinuance of compensation payments in a running award.
Note:  When payments have previously been suspended but the evidence shows a reduction in compensation is warranted, 38 CFR 3.105(e) is not for application.  If payments have been suspended, make a reduction or discontinuance in accordance with the facts found under the authority of 38 CFR 3.500(a), as long asthe date of reduction or discontinuance does not precede the date of last payment.
References:  For more information on

III.iv.8.D.1.e.  Reductions in Staged Ratings
When a reduction is being made as part of a staged rating, compliance with the notice provisions of 38 CFR 3.105(e) is only required if there is a reduction in compensation payments currently being made to the Veteran.  See Tatum v. Shinseki, 24 Vet.App. 139, 141 (2010).
Example:  The Veteran claims original service connection (SC) for prostate cancer on May 5, 2010.  He submits medical evidence revealing he underwent a prostatectomy on February 5, 2010.  Additional Department of Veterans Affairs (VA) medical records on August 28, 2010, show the Veteran was free and clear of prostate cancer and that he awakes to void two times per night.  VA grants SC for prostate cancer at 100 percent from May 5, 2010, and 10 percent from September 1, 2010.  A notice, as required by 38 CFR 3.105(e), was not issued.
Although the diagnostic code (DC) under which the Veteran is rated, 38 CFR 4.115b, DC 7528, indicates any change in evaluation is subject to the provisions of38 CFR 3.105(e), the provisions do not apply in this case since there was not a running award at the time of the rating decision.

III.iv.8.D.1.f.  Reductions Not Affecting Combined Evaluation

When the reduction of the evaluation of one or more disabilities does not affect the combined disability evaluation, thus not resulting in a change to the benefits the Veteran is receiving, do not apply the provisions of 38 CFR 3.105(e).  When the combined disability evaluation is not reduced, apply 38 CFR 3.500(a) for the effective date of the reduction.

Example:  The Veteran is in receipt of compensation at the 100-percent rate with additional entitlement to special monthly compensation (SMC) based on statutory housebound status for posttraumatic stress disorder evaluated as 100-percent disabling and hepatitis C evaluated as 100 percent.  A routine future examination reveals that the hepatitis C warrants a 60-percent disability evaluation, and evidence of sustained improvement is present.
The evaluation of the hepatitis C requires reduction to 60 percent.  However, the combined disability evaluation will remain 100 percent and entitlement to SMC continues to be warranted.  Therefore, no proposed rating action is required under38 CFR 3.105(e).  A rating decision is issued reducing the evaluation of hepatitis C to 60 percent effective the date facts found per 38 CFR 3.500(a), which is the date of the VA examination showing symptoms warranted a reduced evaluation.

III.iv.8.D.1.g.  Concurrent Increases and Reductions
When both increased and reduced evaluations are assigned for different disabilities, but the net result is a higher or the same combined evaluation, promulgate the rating decision without applying the provisions of 38 CFR 3.105(e).
Note:  Apply the provisions of 38 CFR 3.105(e) only if the decreased evaluation will result in a reduction of compensation payments currently being made.

III.iv.8.D.1.h.  Authorizing Reexamination
Authorize an examination if evidence, medical or otherwise, received prior to expiration of the first 60-day notice period in accordance with 38 CFR 3.105(e), establishes a reasonable basis for reexamination.
Notes:
  • Defer final rating action pending the outcome of the new examination.
  • An examination that is the basis for reduction must be as thorough as the examination that established the current rating.

III.iv.8.D.1.i.  Reviewing New Evidence and Preparing the Final Rating
Review any new evidence, including a report of reexamination, in the context of the entire record, especially in employability cases.  If a reduction is still in order, prepare the final rating decision in accordance with 38 CFR 3.105(e).
In the rating decision, cite the symptoms and the findings demonstrating
  • improvement in the context of the whole recorded history, and
  • evidence of improved ability to function under the ordinary conditions of life and work.
Notes:
  • When rating mental disorders, outline social and occupational impairment along with other evidence warranting the reduced evaluation.
  • Although decision makers should review the recorded history of a disability in order to assign a more accurate evaluation, regulations do not give past medical reports precedence over current findings per Francisco v. Brown, 7 Vet.App. 55, 58 (1994).
References:  For more information on
  • the reduction of total evaluations, including total evaluations based on IU, see 38 CFR 3.343, and
  • rating activity authority to revise proposed decisions based on receipt of new evidence after promulgation of a proposed rating decision, see M21-1, Part III, Subpart iv, 8.B.1.f and g.

III.iv.8.D.1.j.  Determining the Effective Date
After the notice of proposed adverse action has been sent and the 60-day period following that date has passed, prepare a final rating decision to reflect a lower evaluation.
The lower evaluation is effective the first day of the month following expiration of a 60-day period of time that commences the date the Veteran is notified of the final rating decision.
Reference:  For more information on the effective date of reduction, see 38 CFR 3.500(r).

2.  Reductions in Disability Evaluations Under 38 CFR 3.344

Introduction
This topic contains information about reductions in disability evaluations under 38 CFR 3.344, including

Change Date
April 20, 2018

III.iv.8.D.2.a.  Applying the Provisions of 38 CFR 3.344
Consider stabilization of a disability evaluation, under the provisions of 38 CFR 3.344, when such disability percentage has been at the same level for five or more years.
If evidence shows improvement, refer to 38 CFR 3.344(a), which describes the evidentiary requirements for reducing a disability evaluation which has been in place for five years or more.
VA clearly bears the burden of proof in reduction cases under 38 CFR 3.344 as shown in Hayes v. Brown, 9 Vet.App. 73 (1996).  If there is any doubt after consideration of all evidence of record, the rating activity will continue the rating in effect in accordance with 38 CFR 3.344(b), and will determine whether 18, 24, or 30 months will be allowed to elapse before reexamination will be made.
Important:  When reviewing a disability evaluation in light of a liberalizing change in the rating schedule, it is not necessary to consider 38 CFR 3.344 if the disability percentage in place prior to the change is continued under the liberalized criteria per VAOPGCPREC 9-1992.

III.iv.8.D.2.b.  Ascertaining Sustained Improvement 
Sustained improvement is considered to have been demonstrated when a preponderance of evidence portrays an abatement or lessening of SC symptoms that has persisted consistently over time, across situation, and under the conditions of ordinary life.  It must not be circumstantial in nature or intercurrently attributable to any of the mitigating factors discussed in 38 CFR 3.344(a), including but not limited to
  • a disability’s predisposition to temporary or episodic improvement
  • temporary alleviation by prolonged rest, or
  • less thorough or complete modes of examination.

III.iv.8.D.2.c. Handling Reductions for Disabilities Which Have Not Stabilized and Are Likely to Improve 
When a disability has not stabilized and is likely to improve, reduction action will be taken without application of the provisions of 38 CFR 3.344(a) and (b) provided that the evidentiary standard for improvement has been met, as discussed in M21-1, Part III, Subpart iv, 8.D.1.b and M21-1, Part III, Subpart iv, 8.D.2.b.
  • A non-stabilized disability is one that is present but has not reached its permanent state of impairment in a Veteran who has been recently discharged, as described in 38 CFR 4.28.
  • A disability that is likely to improve is one that is subject to reexamination due to expected future changes in the level of impairment.
When a disability evaluation has continued for long periods of time—specifically five years or more—but is also subject to reexamination due to likely improvement, apply the provisions of 38 CFR 3.344(a) and (b), which, in part, require that before action is taken to reduce an evaluation
  • another reexamination occur to confirm sustained improvement, or
  • all of the evidence of record clearly warrants the conclusion that sustained improvement has been demonstrated.
Reference:  For more information on scheduling review examinations, see M21-1, Part III, Subpart iv, 3.B.2.

III.iv.8.D.2.d. Applicability of 38 CFR 3.344 at Lower Than the Current Evaluation
When considering whether the provisions of 38 CFR 3.344 apply to a potential reduced evaluation, consider the current evaluation as well as any evaluation that has been in effect prior to the current evaluation.
When the current evidence warrants a potential reduction of any evaluation that has been in place for five years or more, including an evaluation which has been incrementally increased for less than five years, apply the provisions of 38 CFR 3.344 before reducing to an evaluation lower than the evaluation which has been in place for five years or more.
Example:
  • Review of the facts of the case reveals the information below.
    • A Veteran’s disability was evaluated as 20-percent disabling and more than five years has passed since that evaluation was assigned.  However, the 20-percent evaluation is not protected under 38 CFR 3.951(b).
    • Four years after the 20-percent evaluation was assigned, the evaluation was increased to 40 percent, but the 40-percent evaluation has been in place for less than five years.
    • Current medical evidence shows that a 10-percent evaluation is now warranted.  In this case, at least a 20-percent evaluation has been in place for five years or more and the provisions of 38 CFR 3.344 must be applied to ascertain sustained improvement before reducing to the 10-percent rate.
  • Before taking any reduction action, schedule the reexamination to ascertain sustained improvement.
Important:  Ensure the medical evidence used to determine that a reduced evaluation is warranted is equally as full and complete as the examination utilized to support the higher evaluations.
References:  For more information on

III.iv.8.D.2.e.  Drafting the Rating Decision
If reduction in disability evaluation is warranted under 38 CFR 3.344(a), then include in the rating decision
  • an outline of the time period in which application of 38 CFR 3.344 is based
  • a description of the specific evidence of sustained improvement after one review examination, or a preponderance of evidence showing sustained improvement based on more than one examination, and
  • an explanation as to why it is reasonably certain that improvement will be maintained under the ordinary conditions of life.

 

3.  Reductions in Disability Ratings Under 38 CFR 3.343

Introduction
This topic contains information about reductions in disability evaluations under 38 CFR 3.343, including

Change Date
June 12, 2015

III.iv.8.D.3.a.  Applying the Provisions of 38 CFR 3.343
Under the provisions of 38 CFR 3.343(a), total SC disability ratings, to include IU, will not be reduced, in absence of clear error, without medical evidence showing material improvement in physical or mental condition.  This does not include total disability ratings under

III.iv.8.D.3.b.  Considering the Facts of Record
Evaluate examination reports showing material improvement in conjunction with all the facts of record.
Give particular consideration to whether the
  • improvement was attained under the ordinary conditions of life while working or actively seeking work, or
  • symptoms have been brought under control by prolonged rest or generally by following a regimen which precludes work.
Note:  When symptoms have been brought under control and the Veteran is employed, do not consider reduction from a total disability rating without a reexamination conducted three to six months following a period of employment.

III.iv.8.D.3.c.  Drafting the Rating Decision
Discuss in the rating decision how 38 CFR 3.343 was applied whenever a total disability rating is discontinued.
Cite clear and convincing evidence of actual employability when discontinuing a total rating based on IU.
Reference:  For more information on consideration of 38 CFR 3.343(a), see VAOPGCPREC 6-1992.

4.  Reductions Requiring Consideration of IU Under 38 CFR 4.16

Introduction
This topic contains information about reductions requiring consideration of IU under 38 CFR 4.16, including

Change Date
March 22, 2016

III.iv.8.D.4.a.  Applying the Provisions of 38 CFR 4.16
Use the table below to determine appropriate rating action and end product (EP) control when a reduction is warranted in a Veteran’s total schedular evaluation to a level meeting the IU requirements of 38 CFR 4.16.
If the evidence shows …
Then the rating activity …
EP Control
a reasonably raised claim for entitlement to IU exists
Reference:  For more information on reasonably raised claims for entitlement to IU, seeM21-1, Part IV, Subpart ii, 2.F.2.m.
  • Rating EP remains pending for the deferred IU issue.
  • Establish a separate EP 600 to control for the proposed reduction of the schedular 100-percent evaluation.
a reasonably raised claim for IU does not exist
takes no further action on the issue of entitlement to IU.
  • Clear the rating EP, if otherwise warranted, and
  • establish EP 600 for the proposedreduction.

III.iv.8.D.4.b.  Determining the Effective Date for IU
The effective date for IU must take into account the date of reduction from the schedular 100 percent.
Under Bradley v. Peake, 22 Vet.App. 280 (2008), VA may potentially consider an IU claim for a particular SC disability even when a schedular 100-percent rating is already in effect for another SC disability in order to determine the Veteran’s eligibility for housebound benefits under 38 U.S.C. 1114(s).
Note:  The effective date for an IU rating in this case may overlap a period where a 100-percent schedular rating was already established, so long as all other requirements for that separate rating and effective date were met.
Other factors to consider in assigning the IU effective date are
  • the earliest date the evidence shows IU, if a claim is received within one year from such date, or
  • the date of claim, provided that the evidence shows entitlement as of that date and it is not prior to August 1, 1975.
References:  For more information on

5.  Changes in Veterans Pension Entitlement Under 38 CFR 3.105(f)

Introduction
This topic contains information about changes in Veterans pension entitlement under 38 CFR 3.105(f), including

Change Date
June 12, 2015

III.iv.8.D.5.a.  Applying the Provisions of 38 CFR 3.105(f)
Use the table below to apply the provisions of 38 CFR 3.105(f), subject to the protection afforded under 38 CFR 3.951(b).
If the evidence of record …
Then prepare a rating decision proposing …
supports the conclusion that the Veteran no longer meets the requirements of 38 CFR 4.17
discontinuance of the benefit. List the medical issues and proposed evaluations in the narrative, but do not change evaluations on the codesheet.
indicates that a beneficiary is no longer entitled to special monthly pension (SMP)
discontinuance of SMP without modification of the codesheet.
If relevant to the decision, list the medical issues and proposed evaluations in the narrative.

III.iv.8.D.5.b.  Judging Ability to Maintain/Sustain Employment
Do not automatically conclude that employability has been regained in cases of serious illness or psychiatric disability.  It is important that there be demonstrated an ability to obtain and maintain/sustain employment.
Rationale:  An untimely decision that employability is regained could result in an early loss of Veterans pension even though a continuing ability to remain gainfully employed has not been shown.

III.iv.8.D.5.c.  Preparing the Final Rating Decision
Refer the case to the rating activity for reconsideration, 60 days following release of the notice of proposed adverse action, or when all development associated with a personal hearing is completed.
Consider all evidence submitted after issuance of proposed rating decision and specifically discuss such evidence in the final rating decision.
If the final decision affirms the proposed action, the effective date shall be the end of the month in which the rating decision will be promulgated.

III.iv.8.D.5.d.  Handling by the Authorization Activity
Authorization will take action to continue, reduce, or terminate Veterans pension benefits as appropriate based on final rating action.
Authorization will send the beneficiary a notice of proposed adverse action upon receipt of a rating proposing to discontinue entitlement to Veterans pension or SMP.  If the final decision affirms the proposed action, this notice must include the citation of 38 CFR 4.17.
Note:  If authorization action cannot be completed in time to prospectively implement the effective date shown on the rating decision, the case is returned to the rating activity for a new decision with an amended effective date.

III.iv.8.D.5.e.  Entitlement to Both Veterans Pension and Compensation
If a Veteran is entitled to both Veterans pension and compensation, and the Veterans pension must be discontinued, then amend the award to authorize compensation.
Prepare the rating under 38 CFR 3.105(f) with a proper evaluation for compensation and termination of Veterans pension entitlement.
References:  For more information on

III.iv.8.D.5.f.  Handling Nursing Home Discharge
Consider entitlement to aid and attendance (A&A) or housebound benefits on a facts-found basis if
  • A&A was authorized under 38 CFR 3.351(c)(2) without a rating, and
  • notice of nursing home discharge is subsequently received, negating the legal basis for the prior award.

III.iv.8.D.5.g.  Determining the Effective Date of Termination of A&A Following Nursing Home Discharge
Use the table below to determine the effective date for termination of A&A following nursing home discharge.
If …
Then the effective date …
there is no entitlement to either A&A or housebound benefits
of termination of SMP is the end of the month in which it is anticipated that award action will be accomplished by authorization 60 days after notice of the proposed adverse action is mailed.
housebound status is to be awarded
is the end of the month in which it is anticipated that award action will be accomplished by authorization 60 days after notice of the proposed adverse action is mailed.

III.iv.8.D.5.h.  Preparing the Rating Decision After Nursing Home Discharge
Include the following statement in the rating decision following nursing home discharge:
The authorization activity previously awarded the beneficiary A&A benefits effective[date], based on his/her status as a nursing home patient.

6.  Reductions or Terminations Requiring Consideration of Continued Entitlement to Chapter 31 Benefits

Introduction
This topic contains information on the effect of reductions or terminations of SC disability on the receipt of Chapter 31 benefits, including

Change Date
June 12, 2015

III.iv.8.D.6.a.  Effects of a Reduction or Severance on Chapter 31  Benefits
Entitlement to Vocational Rehabilitation and Employment (VR&E) benefits, also referred to as Chapter 31 benefits, may change as the result of a reduction in an SC disability’s evaluation or the severance of SC.

III.iv.8.D.6.b.  Preventing an Overpayment
Refer to the table below to prevent improper payments and to speed internal communication.
When …
Then …
the rating activity adjudicates a final severance of SC or reduction of an SC evaluation to zero percent
conduct a search of the corporate record to determine if the Veteran has an active Chapter 31 flash.  If discovered, notify the authorization activity of the existence of an active Chapter 31 flash.
the authorization activity
  • recognizes a reduction or severance in a rating decision, or
  • receives instructions from the rating activity to notify VR&E of a reduction or severance of SC
provide a copy of the pertinent rating decision to VR&E.
Reference:  For more information on VR&E eligibility, see M21-1, Part IX, Subpart i, 1.A.
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in Chapter 8 Competency, Due Process and Protected Ratings, Part III General Claims Process, Subpart iv General Rating Process
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