VA Benefits: Fundamental Changes to VA's Disability Criteria Need Careful Consideration

Published by the Government Accountability Office on 2003-09-23.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                              United States General Accounting Office

GAO                           Testimony
                              Before the Committee on Veterans’
                              Affairs, U.S. Senate

For Release on Delivery
Expected at 2:30 p.m. EDT
Tuesday, September 23, 2003   VA BENEFITS
                              Fundamental Changes to
                              VA’s Disability Criteria
                              Need Careful Consideration
                              Statement of Cynthia A. Bascetta, Director,
                              Education, Workforce, and Income Security Issues

Mr. Chairman and Members of the Committee:

I am pleased to be here to discuss our past reviews of the Department of
Veterans Affairs (VA) disability programs as you consider the fundamental
issue of eligibility for benefits and the related issue of concurrent receipt
of VA disability compensation and Department of Defense (DOD)
retirement pay. Our work has addressed these issues in addition to
identifying significant program design and management challenges
hindering VA’s ability to provide meaningful and timely support to
disabled veterans and their families. It is especially fitting, with the
continuing deployment of our military forces to armed conflict, that we
reaffirm our commitment to those who serve our nation in its times of
need. Therefore, effective and efficient management of VA’s disability
programs is of paramount importance.

As you know, in January 2003, we designated VA’s disability compensation
programs, as well as other federal disability programs including Social
Security Disability Insurance and Supplemental Security Income, as high-
risk areas.1 We did this to draw attention to the need for broad-based
transformation of these programs, which is critical to improving the
government’s performance and ensuring accountability within expected
resource limits. In March 2003, we cautioned that the proposed
modification of concurrent receipt provisions in the military retirement
system would not only have significant implications for DOD’s retirement
costs but could also increase the demands placed on the VA claims
processing system. This would come at a time when the system is still
struggling to correct problems with quality assurance and timeliness.
Moreover, we testified that it would be appropriate to consider the pursuit
of more fundamental reform of the disability programs as the Congress
and other policy makers consider concurrent receipt.

Today, as you requested, I would like to highlight the findings of our
related past work on VA’s disability programs, including our 1989 report
on veterans receiving compensation for disabilities unrelated to military
service. My comments are based on numerous reports and testimonies
prepared over the last 15 years as well as our broader work on other
federal disability programs. (See Related GAO Products.)

 U.S. General Accounting Office, High-Risk Series: An Update, GAO-03-119 (Washington,
D.C.: Jan. 1, 2003).

Page 1                                                                 GAO-03-1172T
                           In summary, VA needs to modernize its disability programs. In particular,
                           VA relies on outmoded medical and economic disability criteria in
                           adjudicating claims for disability compensation. In addition, VA has long-
                           standing problems providing veterans with accurate, consistent, and
                           timely benefit decisions, although recent efforts have made important
                           improvements in timeliness. However, complex program design features,
                           including eligibility, have developed over many years, and solutions to the
                           current problems will require thoughtful analysis to ensure that efficient,
                           effective, and equitable solutions are crafted. Moreover, these solutions
                           might need to take into account a broader perspective from other
                           disability programs to ensure sound federal disability policies across
                           government programs and to reduce the risks associated with the current

                           VA provides disability compensation to veterans with service-connected
Background                 conditions, and also provides compensation to survivors of service
                           members who died while on active duty. Disabled veterans are entitled to
                           cash benefits whether or not employed and regardless of the amount of
                           income earned. The cash benefit level is based on the percentage
                           evaluation, commonly called the “disability rating,” that represents the
                           average loss in earning capacity associated with the severity of physical
                           and mental conditions. VA uses its Schedule for Rating Disabilities to
                           determine, based on an evaluation of medical and other evidence, which
                           disability rating to assign to a veteran’s particular condition. VA’s ratings
                           are in 10 percent increments, from 0 to 100 percent.

                           Although VA generally does not pay disability compensation for
                           disabilities rated at 0 percent, such a rating would make veterans eligible
                           for other benefits, including health care. About 65 percent of veterans
                           receiving disability compensation have disabilities rated at 30 percent or
                           lower, and about 8 percent are 100 percent disabled. Basic monthly
                           payments range from $104 for a 10 percent disability to $2,193 for a 100
                           percent disability.

                           In assessing veterans’ disabilities, VA remains mired in concepts from the
VA’s Disability Criteria   past. VA’s disability programs base eligibility assessments on the presence
Are Outmoded               of medically determinable physical and mental impairments. However,
                           these assessments do not always reflect recent medical and technological
                           advances, and their impact on medical conditions that affect potential
                           earnings. VA’s disability programs remain grounded in an approach that
                           equates certain medical impairments with the incapacity to work.

                           Page 2                                                           GAO-03-1172T
Moreover, advances in medicine and technology have reduced the severity
of some medical conditions and allowed individuals to live with greater
independence and function more effectively in work settings. Also, VA’s
rating schedule updates have not incorporated advances in assistive
technologies—such as advanced wheelchair design, a new generation of
prosthetic devices, and voice recognition systems—that afford some
disabled veterans greater capabilities to work.

In addition, VA’s disability criteria have not kept pace with changes in the
labor market. The nature of work has changed in recent decades as the
national economy has moved away from manufacturing-based jobs to
service- and knowledge-based employment. These changes have affected
the skills needed to perform work and the settings in which work occurs.
For example, advancements in computers and automated equipment have
reduced the need for physical labor. However, the percentage ratings used
in VA’s Schedule for Rating Disabilities are primarily based on physicians’
and lawyers’ estimates made in 1945 about the effects that service-
connected impairments have on the average individual’s ability to perform
jobs requiring manual or physical labor. VA’s use of a disability schedule
that has not been modernized to account for labor market changes raises
questions about the equity of VA’s benefit entitlement decisions; VA could
be overcompensating some veterans, while undercompensating or denying
compensation entirely to others.

In January 1997, we suggested that the Congress consider directing VA to
determine whether the ratings for conditions in the schedule correspond
to veterans’ average loss in earnings due to these conditions and adjust
disability ratings accordingly. Our work demonstrated that there were
generally accepted and widely used approaches to statistically estimate
the effect of specific service-connected conditions on potential earnings.
These estimates could be used to set disability ratings in the schedule that
are appropriate in today’s socioeconomic environment.2

In August 2002, we recommended that VA use its annual performance plan
to delineate strategies for and progress in periodically updating labor
market data used in its disability determination process.3 We also

 U.S. General Accounting Office, VA Disability Compensation: Disability Ratings May
Not Reflect Veterans’ Economic Losses, GAO/HEHS-97-9 (Washington, D.C.: Jan. 7, 1997).
 U.S. General Accounting Office, SSA and VA Disability Programs: Re-Examination of
Disability Criteria Needed to Help Ensure Program Integrity, GAO-02-597 (Washington,
D.C.: Aug. 9, 2002).

Page 3                                                                   GAO-03-1172T
                      recommended that VA study and report to the Congress on the effects that
                      a comprehensive consideration of medical treatment and assistive
                      technologies would have on its disability programs’ eligibility criteria and
                      benefit package. This study would include estimates of the effects on the
                      size, cost, and management of VA’s disability programs and other relevant
                      VA programs and would identify any legislative actions needed to initiate
                      and fund such changes.

                      A disease or injury resulting in disability is considered serviceconnected if
Some Veterans Are     it was incurred or aggravated during military service. No causal
Compensated For       connection between the disability and actual military service is required.
                      In 1989, we reported on the U.S. practice of compensating veterans for
Disabilities Not      conditions that were probably neither caused nor aggravated by military
Related To Military   service.4 These conditions included diabetes unrelated to exposure to
                      Agent Orange5, chronic obstructive pulmonary disease, arteriosclerotic
Service               heart disease, and multiple sclerosis. A review of case files for veterans
                      receiving compensation found that 51 percent of compensation
                      beneficiaries had disabilities due to injury; of these, 36 percent were
                      injured in combat, or otherwise performing a military task. The remaining
                      49 percent were disabled due to disease; of these, 17 percent had
                      disabilities probably caused or aggravated by military service; 19 percent
                      probably did not have disabilities related to service; and for 13 percent, the
                      link between disease and military service was uncertain. We suggested
                      that the Congress might wish to reconsider whether diseases neither
                      caused nor aggravated by military service should be compensated as
                      service-connected disabilities.

                      In March 2003, the Congressional Budget Office (CBO) reported that,
                      according to VA data, about 290,000 veterans received about $970 million
                      in disability compensation payments in fiscal year 2002 for diseases
                      identified by GAO as neither caused nor aggravated by military service.
                      CBO estimated that VA could save $449 million in fiscal years 2004 through
                      2008, if disability compensation payments to veterans with several
                      nonservice-connected, disease-related disabilities were eliminated in

                        U.S. General Accounting Office, VA Benefits: Law Allows Compensation for Disabilities
                      Unrelated to Military Service, GAO/HRD-89-60 (Washington, D.C.: July 31, 1989).
                       In May 2001, VA issued a regulation identifying Type 2 diabetes as a service-connected
                      disability for veterans who served in Vietnam, based on presumed exposure to Agent

                      Page 4                                                                     GAO-03-1172T
                  future cases. In August 2003, we also identified this as an opportunity for
                  budgetary savings if the Congress wished to reconsider program

                  Because of the complexities involved in a potential change in eligibility,
                  the details of how such a change would be implemented and its
                  ramifications are important to the Congress, VA, veterans, and other
                  stakeholders. For example, serviceconnection is linked with eligibility for
                  other VA benefits, such as health care and vocational rehabilitation.
                  Moreover, efforts to change VA disability programs, including eligibility
                  reform, would benefit from consideration in the broader context of
                  fundamental reform of all federal disability programs.

                  Mr. Chairman, this concludes my prepared remarks. I would be happy to
                  answer any questions that you or Members of the Committee might have.

                  For further information, please contact me at (202) 512-7101 or Irene Chu
Contact and       at (202) 512-7102. Greg Whitney also contributed to this statement.

                   U.S. General Accounting Office, Opportunities for Oversight and Improved Use of
                  Taxpayer Funds: Examples from Selected GAO Work, GAO-03-1006 (Washington, D.C.:
                  Aug. 1, 2003).

                  Page 5                                                               GAO-03-1172T
Related GAO Products

             Opportunities for Oversight and Improved Use of Taxpayer Funds:
             Examples from Selected GAO Work. GAO-03-1006. Washington, D.C.:
             August 1, 2003.

             Department of Veterans Affairs: Key Management Challenges in Health
             and Disability Programs. GAO-03-756T. Washington, D.C.: May 8, 2003.

             High-Risk Series: An Update. GAO-03-119. Washington, D.C.: January 1,

             Major Management Challenges and Program Risks: Department of
             Veterans Affairs. GAO-03-110. Washington, D.C.: January 1, 2003.

             Veterans’ Benefits: Quality Assurance for Disability Claims and Appeals
             Processing Can Be Further Improved. GAO-02-806. Washington, D.C.:
             August 16, 2002.

             SSA and VA Disability Programs: Re-Examination of Disability Criteria
             Needed to Help Ensure Program Integrity. GAO-02-597. Washington, D.C.:
             August 9, 2002.

             Veterans’ Benefits Claims: Further Improvements Needed in Claims-
             Processing Accuracy. GAO/HEHS-99-35. Washington, D.C.: March 1, 1999.

             VA Disability Compensation: Disability Ratings May Not Reflect Veterans’
             Economic Losses. GAO/HEHS-97-9. Washington, D.C.: January 7, 1997.

             VA Benefits: Law Allows Compensation for Disabilities Unrelated to
             Military Service. GAO/HRD-89-60. Washington, D.C.: July 31, 1989.

             Page 6                                                       GAO-03-1172T
This is a work of the U.S. government and is not subject to copyright protection in the
United States. It may be reproduced and distributed in its entirety without further
permission from GAO. However, because this work may contain copyrighted images or
other material, permission from the copyright holder may be necessary if you wish to
reproduce this material separately.
                         The General Accounting Office, the audit, evaluation and investigative arm of
GAO’s Mission            Congress, exists to support Congress in meeting its constitutional responsibilities
                         and to help improve the performance and accountability of the federal
                         government for the American people. GAO examines the use of public funds;
                         evaluates federal programs and policies; and provides analyses,
                         recommendations, and other assistance to help Congress make informed
                         oversight, policy, and funding decisions. GAO’s commitment to good government
                         is reflected in its core values of accountability, integrity, and reliability.

                         The fastest and easiest way to obtain copies of GAO documents at no cost is
Obtaining Copies of      through the Internet. GAO’s Web site (www.gao.gov) contains abstracts and full-
GAO Reports and          text files of current reports and testimony and an expanding archive of older
                         products. The Web site features a search engine to help you locate documents
Testimony                using key words and phrases. You can print these documents in their entirety,
                         including charts and other graphics.
                         Each day, GAO issues a list of newly released reports, testimony, and
                         correspondence. GAO posts this list, known as “Today’s Reports,” on its Web site
                         daily. The list contains links to the full-text document files. To have GAO e-mail
                         this list to you every afternoon, go to www.gao.gov and select “Subscribe to e-mail
                         alerts” under the “Order GAO Products” heading.

Order by Mail or Phone   The first copy of each printed report is free. Additional copies are $2 each. A
                         check or money order should be made out to the Superintendent of Documents.
                         GAO also accepts VISA and Mastercard. Orders for 100 or more copies mailed to a
                         single address are discounted 25 percent. Orders should be sent to:
                         U.S. General Accounting Office
                         441 G Street NW, Room LM
                         Washington, D.C. 20548
                         To order by Phone:     Voice:    (202) 512-6000
                                                TDD:      (202) 512-2537
                                                Fax:      (202) 512-6061

To Report Fraud,
                         Web site: www.gao.gov/fraudnet/fraudnet.htm
Waste, and Abuse in      E-mail: fraudnet@gao.gov
Federal Programs         Automated answering system: (800) 424-5454 or (202) 512-7470

                         Jeff Nelligan, Managing Director, NelliganJ@gao.gov (202) 512-4800
Public Affairs           U.S. General Accounting Office, 441 G Street NW, Room 7149
                         Washington, D.C. 20548