oversight

VA Disability Compensation: Actions Needed to Address Hurdles Facing Program Modernization

Published by the Government Accountability Office on 2012-09-10.

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

                 United States Government Accountability Office

GAO              Report to Congressional Committees




September 2012
                 VA DISABILITY
                 COMPENSATION
                 Actions Needed to
                 Address Hurdles
                 Facing Program
                 Modernization




GAO-12-846
                                              September 2012

                                              VA DISABLITY COMPENSATION
                                              Actions Needed to Address Hurdles Facing Program
                                              Modernization
Highlights of GAO-12-846, a report to
congressional committees




Why GAO Did This Study
VA administers one of the nation’s
largest federal disability compensation
                                              What GAO Found
programs, providing veterans with a           The Department of Veterans Affairs (VA) initiated a comprehensive effort in 2009
cash benefit based on average loss of         to revise its disability rating schedule with both updated medical and earnings
earning capacity as a result of service-      information, but faces hurdles with several key aspects. The current revision
connected disabilities. However,              effort takes a more comprehensive and empirical approach than VA’s past
concerns exist that VA’s rating               efforts. VA has hired full-time staff to revise the rating schedule’s medical
schedule—the criteria used to assign          information and plans to conduct studies to evaluate veterans’ average loss of
degree of work disability—is not
                                              earnings in today’s economy. As part of this effort, VA is considering modifying
consistent with changes in medicine
                                              the rating schedule—currently based largely on degree of medical severity—to
and the labor market. Due in part to
these types of challenges, GAO
                                              include a veteran’s ability to function in the workplace. Moving in this direction is
designated federal disability programs        more consistent with how experts conceive of disability. However, this change, in
as high risk. Consequently, GAO               part, has resulted in VA falling behind schedule. As of July 2012, VA is over 12
examined (1) VA’s progress in revising        months behind in revising criteria for the first categories of impairments. In
its rating schedule with updated              addition, VA has not developed its capacity to produce timely research on the
medical and economic information; and         impact of impairments on earnings. Moreover, VA lacks a complete plan—with
(2) the opportunities and challenges of       specific activities and updated time frames—for conducting earnings loss and
various policy approaches proposed by         related studies. VA also does not have a written strategy to address the possible
commissions and others for updating           effects that revisions may have on agency operations, including impacts on an
VA’s disability benefits structure. To do     already strained claims workload. Finally, although VA intends to conduct
this, GAO reviewed literature and VA          medical and earnings updates beyond the current effort, VA lacks a formal
documents, and relevant federal laws          mechanism to guide its commitment to do so. It is important that VA update and
and regulations, as well as interviewed       maintain its rating schedule to reflect current medical and labor market
VA officials, disability experts, and         information to avoid overcompensating some veterans with service-connected
veteran groups.                               disabilities while undercompensating others.
What GAO Recommends
Congress may wish to direct VA to             Three key approaches for modernizing VA’s disability programs recommended
conduct focused studies on various            by disability commissions and others—providing quality of life payments,
approaches to modernize disability            providing integrated vocational services with transitional cash assistance, and
benefits and, if necessary, propose           systematically factoring the effects of assistive technology and medical
relevant legislation. GAO is also             interventions into rating decisions—hold opportunity and challenges. Experts and
making several recommendations to             veteran groups GAO interviewed believe each approach holds at least some
improve VA’s capacity to revise the           opportunity for serving veterans more fairly, equitably, and effectively. However,
rating schedule now and in the future.        challenges exist. For example, they noted that it could be difficult to achieve
These include completing plans for            consensus for specific design elements among the diverse set of stakeholders.
conducting earnings loss studies and          Also, VA’s capacity to administer these approaches—which could increase the
developing a written strategy for             complexity and/or number of claims—is questionable. Importantly, costs of each
implementing revisions to the rating          approach were raised. Some interviewees also noted that two or more of the
schedule. VA agreed with the                  approaches could be combined into a comprehensive benefits package that may
recommendations and noted plans to            mitigate concerns raised by the implementation of any single approach. For
address them.                                 example, if factoring assistive technology into disability ratings resulted in lower
                                              disability compensation payment levels for some, a quality of life payment could
                                              offset that loss. VA officials told GAO they are not considering these approaches
                                              because they fall outside of VA’s legal responsibility to compensate for loss of
View GAO-12-846. For more information,        earning capacity. However, a system that maximizes equity, balances fiscal
contact Daniel Bertoni at (202) 512-7215 or   pressures, and ultimately serves individual veterans effectively will benefit from
bertonid@gao.gov.
                                              deliberations informed by more modern views about disability.
                                                                                       United States Government Accountability Office
Contents


Letter                                                                                      1
               Background                                                                   3
               VA Has Begun to Update Its Disability Criteria, but Faces Delays
                 and Lacks Complete Planning in Key Areas                                   7
               Selected Policy Approaches for Updating VA’s Benefit Structure
                 Present Both Opportunities and Challenges                                18
               Conclusions                                                                30
               Matter for Congressional Consideration                                     32
               Recommendations for Executive Action                                       32

Appendix I     Scope and Methodology                                                      36



Appendix II    Comprehensive Revisions and Other Key Updates to the VA Schedule
               for Rating Disabilities (VASRD)                                            41



Appendix III   Key Questions for Designing New Disability Compensation Programs           43



Appendix IV    Comments from the Department of Veterans Affairs                           45



Appendix V     GAO Contact and Staff Acknowledgments                                      48



Tables
               Table 1: Examples of Medical Changes to VA’s Rating Schedule
                        Being Considered during the Current Update                        10
               Table 2: Key Steps Missing from VA’s Project Planning                      17
               Table 3: Six Elements of Sound Planning Used to Evaluate VA’s
                        Efforts                                                           37
               Table 4: Experts and Veteran Groups Interviewed by GAO                     39


Figures
               Figure 1: The VA Disability Benefits Process                                 5



               Page i                                    GAO-12-846 VA Disability Compensation
Figure 2: VA’s Process for Revising the Disability Compensation
         Rating Schedule                                                                  9
Figure 3: Overview of What VA Does Now and the Modified
         Approaches                                                                       19
Figure 4: Experts’ and Veteran Groups’ Views on Potential
         Opportunities and Challenges of Providing a Quality of
         Life Payment                                                                     21
Figure 5: Experts’ and Veteran Groups’ Views on Potential
         Opportunities and Challenges of Providing Integrated
         Vocational Services along with Transitional Cash
         Assistance                                                                       24
Figure 6: Experts’ and Veteran Groups’ Views on Potential
         Opportunities and Challenges of Incorporating Assistive
         Technology and Medical Interventions into Disability
         Rating Decisions                                                                 27




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Page ii                                            GAO-12-846 VA Disability Compensation
United States Government Accountability Office
Washington, DC 20548




                                   September 10, 2012

                                   Congressional Committees

                                   The nation is committed to caring for veterans who incurred injuries
                                   during their military service. To compensate for these sacrifices, the U.S.
                                   Department of Veterans Affairs (VA) administers one of the largest
                                   federal disability compensation programs in the nation. VA’s disability
                                   compensation program provides veterans with a cash benefit based on
                                   the average loss in earning capacity in civilian occupations that result
                                   from injuries or conditions incurred or aggravated during military service.
                                   In fiscal year 2011, VA’s program provided about $39.4 billion in disability
                                   payments to nearly 3.4 million veterans with service-connected
                                   disabilities. In the years ahead, enrollment and costs could increase given
                                   the conflicts in Iraq and Afghanistan and as more Vietnam veterans—a
                                   significant proportion of the total veteran population—further age into
                                   disability-prone years. Given the large cash outlays and increasing
                                   demand for VA services, VA must be well positioned to make accurate
                                   disability decisions and ensure that veterans are appropriately and
                                   equitably compensated.

                                   In 2003, GAO designated federal disability programs, including VA’s
                                   disability program, as high risk due in part to challenges agencies face in
                                   keeping their criteria for evaluating disability and determining
                                   compensation consistent with advances in medicine, technology, and
                                   changes in the labor market and society. According to experts, VA’s
                                   disability program infers the ability to work based on an individual’s
                                   medical conditions and symptoms—a concept that originated with the
                                   creation of the schedule for rating disabilities over 65 years ago.
                                   However, experts believe that, in assessing disability, a modern practice
                                   includes considering an individual’s ability to function in their work and
                                   other environments along with their medical conditions.

                                   These concerns, in light of more modern concepts of disability, present an
                                   opportunity to reevaluate this federal program. Various reports and
                                   studies conducted by GAO, congressional- and presidential-appointed
                                   commissions (including the Veterans’ Disability Benefits Commission and
                                   the Dole-Shalala Commission), and task forces have individually
                                   suggested various approaches to address a sensitive, but critical, national
                                   issue: how to update and strengthen VA’s disability benefits structure,
                                   including the type, timing, and conditions of cash and other assistance to



                                   Page 1                                     GAO-12-846 VA Disability Compensation
ensure that veterans with service-connected disabilities receive the
compensation and services they deserve.

We have prepared this report under the Comptroller General’s authority to
evaluate government programs as part of our continued effort to assist
policymakers in determining how VA programs could more effectively
meet the needs of veterans with disabilities in the 21st Century. 1 In this
report, we (1) identify the progress that VA has made in revising the
criteria used to determine eligibility for veterans’ disability benefits with
updated medical and economic information, and (2) discuss the
opportunities and challenges associated with various policy approaches
that disability commissions and others have raised for updating VA’s
disability benefits structure.

To conduct our work, we reviewed prior GAO, disability commission and
committee reports; relevant federal laws and regulations; program
documentation, including policies, procedures, strategic goals, and
supporting project plans; and testimonies from disability groups and
commissions. We interviewed VA officials, disability experts, and
representatives of veteran groups. We also evaluated VA’s project plans
for revising its disability criteria against generally accepted project
management practices. To identify the policy approaches for our second
objective, we conducted a literature search of relevant reports by
disability commissions, task forces, committees, as well as GAO reports.
We selected policy approaches that address VA’s disability benefits
structure and which reflect more modern concepts of disability. To identify
the opportunities and challenges associated with these policy
approaches, we conducted 16 interviews with a range of informed experts
and veteran groups on the political and administrative feasibility,
effectiveness, and fiscal sustainability they believe are associated with
each approach. Of those we interviewed, most said that the policy
approaches we selected were relevant approaches for our research
purposes. Our nongeneralizable sample of experts included individuals
who participated in disability commissions, research, or congressional
testimony on the topic, or who serve in an organization that represents
veterans with disabilities. Additional information about our scope and
methodology is provided in appendix I.




1
    For Comptroller General’s authority, see 31 U.S.C. § 717(b)(1).




Page 2                                               GAO-12-846 VA Disability Compensation
                       We conducted this performance audit from August 2011 to September
                       2012 in accordance with generally accepted government auditing
                       standards. Those standards require that we plan and perform the audit to
                       obtain sufficient, appropriate evidence to provide a reasonable basis for
                       our findings and conclusions based on our audit objectives. We believe
                       that the evidence obtained provides a reasonable basis for our findings
                       and conclusions based on our audit objectives.



Background
VA’s Disability        VA’s disability program compensates veterans with a service-connected
Compensation Program   disability by providing a monthly cash benefit. As required by statute, the
and Related Services   benefit is based upon an average reduction in earning capacity across a
                       group of individuals with a similar physical or mental impairment. 2 Thus,
                       the benefit is not based on the loss of individual earnings or noneconomic
                       losses. A veteran with a service-connected disability receives the benefit
                       whether or not employed and regardless of the amount of income he or
                       she is earning.

                       The level of cash benefit is determined in part through the Veterans
                       Affairs Schedule for Rating Disabilities (VASRD or rating schedule). The
                       rating schedule is based on the extent to which the veteran’s disability
                       limits average earning capacity. VA staff use the rating schedule to assign
                       disability ratings to veterans. 3 The rating schedule contains medical
                       conditions or injuries categorized into 15 body systems, with a level of
                       severity ranging in 10 percent increments up to 100 percent. For
                       example, the removal of three ribs is rated as a 30 percent impairment in
                       earning capacity, or $389 per month, and cash benefits are increased for
                       veterans with spouses and dependents. 4 A veteran must be rated at least


                       2
                        38 U.S.C. § 1155 provides that the “ratings shall be based, as far as practical, upon the
                       average impairments of earning capacity resulting from such injuries in civil occupations.”
                       3
                         According to a VA-commissioned report, although significant differences exist between
                       state worker compensation programs and VA’s disability compensation program, both
                       compensate for total disability as well as the permanent consequences of injuries or
                       diseases that are not totally disabling. In contrast, SSA’s disability programs compensate
                       individuals whose disabilities prevent them from engaging in any substantial gainful
                       activity and have lasted or are expected to last at least 1 year or result in death.
                       4
                         Congress sets the amount of veteran disability compensation for each percentage
                       disability rating, and this amount is subject to annual cost-of-living adjustments.




                       Page 3                                              GAO-12-846 VA Disability Compensation
10 percent to receive cash benefits. For veterans with multiple
impairments, VA uses a table that applies a formula for combining ratings
into a single rating. 5

Besides cash assistance, VA provides health care, housing, vocational
rehabilitation, and other employment-related services to eligible
veterans. 6 These services are provided through multiple administrations
and programs within VA, such as the Veterans Health Administration and
Vocational Rehabilitation and Employment program. In many instances, a
veteran must first receive a disability rating from the Veterans Benefits
Administration (VBA) and then apply for these services at the discretion of
the veteran, as shown in figure 1.




5
 For a description of the procedures used to calculate combined disability ratings, see
GAO, Veterans’ Disability Benefits: VA Should Improve Its Management of Individual
Unemployability Benefits by Strengthening Criteria, Guidance, and Procedures,
GAO-06-309 (Washington, D.C.: May 30, 2006).
6
 Generally, veterans with a disability rating of 20 percent or higher (who have an
employment handicap) and veterans with a disability rating of 10 percent (who have a
serious employment handicap) are eligible to receive vocational rehabilitation services.




Page 4                                             GAO-12-846 VA Disability Compensation
Figure 1: The VA Disability Benefits Pocess




                                         Note: This figure is intended to present a basic overview of VA’s disability compensation program. For
                                         clarity purposes, we omitted some steps, processes, and legal options.


Concerns about VA’s Disability           Various commissions, expert panels, and our prior work have raised a
Program in Light of Modern               variety of concerns about the soundness of the rating schedule and about
Approaches                               VA’s basic disability benefits structure. The following were among these
                                         concerns:

                                         •    VA’s modifications of the medical information in the disability criteria
                                              have been slow and have not fully incorporated advances in
                                              technology and medicine. Moreover, the rating schedule has not been
                                              adjusted since its creation in 1945 to reflect ongoing changes in the
                                              labor market. Past studies evaluated veterans’ with service-connected




                                         Page 5                                                   GAO-12-846 VA Disability Compensation
     disabilities average loss of earnings and found that not all veterans
     were being equitably compensated. 7
•    VA faces continuing challenges in the area of disability claims
     processing, contributing to a large backlog of initial compensation
     claims and appeals. 8
•    VA focuses too singularly on compensation without adequate focus on
     rehabilitation to maximize a veteran’s recovery and reintegration. This
     issue was raised by the Bradley Commission and Dole-Shalala
     Commission. 9 Also, a small proportion of veterans participate in VA’s
     vocational services. 10
•    VA’s various disability benefits and services need to be better
     integrated to serve individual veterans.

To address these and other concerns, GAO, commissions, committees,
and expert panels made a range of recommendations that generally
reflect modern concepts of disability. These modern concepts are
reflected in the International Classification of Functioning, Disability, and
Health (ICF), which is the World Health Organization’s framework for
health and disability. 11 This framework takes into account the interaction
between an individual’s medical condition or impairment and intervening
factors, such as their physical and social environment. 12 That is, rather


7
 For example, two studies, conducted by CNA and Economic Systems Inc., respectively,
suggested that veterans with mental health impairments were being undercompensated.
8
 See GAO, High-Risk Series: An Update, GAO-11-278 (Washington, D.C.: February
2011).
9
  The President’s Commission on Veterans’ Pensions (also known as the Bradley
Commission) was presidentially chartered in 1955 to carry out a comprehensive study of
the laws and policies pertaining to veterans. The President’s Commission on Care for
America’s Returning Wounded Warriors (also known as the Dole-Shalala Commission)
was also presidentially charged to study the needs of the current generation of “wounded
warriors” in 2007.
10
   We also have reported on employment and training programs for veterans with
disabilities and made recommendations to improve program coordination and
measurement of performance. See GAO, Disabled Veterans’ Employment: Additional
Planning, Monitoring, and Data Collection Efforts Would Improve Assistance,
GAO-07-1020 (Washington, D.C.: Sept. 12, 2007).
11
  All 191 World Health Organization member states in 2001 endorsed the use of the ICF
as the international standard to describe and measure health and disability.
12
   Several modern frameworks of disability include the degree that an individual is unable
to participate in life activities. These frameworks include the ICF, the Institute of Medicine
model, and the Abridged Verbrugge and Jette Model of Disability.




Page 6                                               GAO-12-846 VA Disability Compensation
                               than predominately viewing disability as a medical condition (e.g., loss of
                               an arm), modern concepts of disability focus on an individual’s functional
                               ability. Under these concepts, two people with the same impairment and
                               symptoms, for a variety of reasons, might have different degrees of
                               disability. For example, some individuals with post-traumatic stress
                               disorder (PTSD) may experience symptoms such as anxiety, depression,
                               and insomnia that make maintaining employment very difficult. However,
                               other individuals with PTSD may be able to mitigate these symptoms
                               through medication or other therapies and perform adequately in a work
                               environment. Some frameworks of disability also distinguish work
                               participation from other consequences of injuries or diseases that have a
                               broader impact on a person’s quality of life. Examples include difficulty
                               interacting with family and friends and managing personal finances.



VA Has Begun to
Update Its Disability
Criteria, but Faces
Delays and Lacks
Complete Planning in
Key Areas

VA Has Begun a                 In response to a directive from the Secretary, VA initiated an effort in
Comprehensive Update of        2009 to comprehensively revise all 15 body systems in its disability rating
Its Disability Criteria with   schedule. 13 This comprehensive revision will update the two major
                               components of the rating schedule: (1) the medical criteria, and (2)
Medical and Earnings
                               earnings loss information. In 1989, VA took steps to conduct a
Information                    comprehensive revision of the medical criteria, but it did not complete




                               13
                                 The law states that VA shall adjust the rating schedule from time to time based on
                               experience. 38 U.S.C. § 1155. In addition, the Advisory Committee on Disability
                               Compensation was established by law to provide advice to VA on the maintenance and
                               periodic readjustment of the rating schedule. 38 U.S.C. § 546.




                               Page 7                                           GAO-12-846 VA Disability Compensation
revisions for all body systems. 14 Since then, VA has updated portions of
its medical criteria primarily in response to congressional or stakeholder
requests. (See app. II for more information about previous updates to the
rating schedule.) According to VA, while the agency has conducted
economic earnings loss studies, it has never adjusted the rating schedule
based on the findings from these studies. 15 According to VA, the purpose
of the current initiative to update the medical and earnings loss
information is to ensure the rating schedule is as accurate and
modernized as possible to meet the needs of veterans in the 21st
century. 16

VA is using a multiphase process to comprehensively revise the medical
and earnings information for each body system. This process is led by
VBA—which hired six full-time medical officers to lead the revisions—in
consultation with the Veterans Health Administration. Phase 1 involves a
2-day public forum to solicit updated medical information from various
stakeholders, and the process ends with the publication of revisions as
final rules in the Federal Register, as shown in figure 2.




14
   GAO, 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). Although
VA initiated a medical update of its rating schedule in 1989, in 2002, we found that the
updates generally took more than 5 years to complete for each body system. VA also did
not complete revisions for all body systems, including the musculoskeletal system. This
body system is the most common impairment category among all veterans receiving
disability compensation by the end of fiscal year 2011.
15
   Earnings loss studies include VA’s Economic Validation of the Rating Schedule
(ECVARS) published in the late 1960s; CNA’s Final Report for the Veterans’ Disability
Benefits Commission: Compensation, Survey Results, and Selected Topics published in
2007; and Economic Systems Inc.’s A Study of Compensation Payments for Service-
Connected Disabilities, published in 2008.
16
   VA documents also state that a goal of the rating schedule revisions is to improve the
efficiency of the disability claims process.




Page 8                                             GAO-12-846 VA Disability Compensation
Figure 2: VA’s Process for Revising the Disability Compensation Rating Schedule




                                        To conduct the medical updates, the workgroups evaluate all impairments
                                        in the current rating schedule and make recommendations to add or
                                        remove impairments, update medical and diagnostic terminology, and
                                        clarify impairments that cannot be easily identified. For example, as part
                                        of the current updates, VA workgroups proposed adding a new body
                                        system, “rheumatic diseases.” See table 1 for examples of changes being
                                        considered to existing body systems. In addition to specific updates and
                                        clarifications, the medical workgroups consider broader concepts such as
                                        how VA measures pain for the purposes of evaluating claims.




                                        Page 9                                    GAO-12-846 VA Disability Compensation
Table 1: Examples of Medical Changes to VA’s Rating Schedule Being Considered
during the Current Update

 Body system                       Medical change being considered
 Digestive/nutritional             Add new criteria for liver transplants
 disorders                         Update criteria for malnutrition and Celiac disease
 Dental and oral                   Revise criteria for hard and soft tissue impairments
 conditions
 Skin                              Use color photographs in the evaluations of dermatological
                                   disorders
Source: GAO analysis of VA presentations on rating schedule updates.



In recognition of medical advances and current research on disability, VA
is considering revising its criteria to reflect a more modern view of
disability that gives greater consideration to a veteran’s ability to function
with a service-connected disability. 17 According to VA officials, a common
theme emerging from the workgroups is the need to shift from the current
symptom-based rating criteria to one that incorporates a veteran’s ability
to function in the workplace. Subject-matter experts involved in the
workgroups have suggested that, while symptoms determine diagnosis,
the best indicator of impairment in earnings is the translation of symptoms
into functional impairment. 18 To develop the indicators of functional
impairment, VA conducted research and determined that four functional
domains directly impact one’s ability to secure and maintain gainful
employment. These include interacting with others, developing and




17
  This view is consistent with the ICF framework. As noted earlier, the ICF focuses on
ability to function despite a medical impairment, including taking into account the impact of
environmental factors, such as products and technology, public attitudes, and support
services.
18
   In July 2012, VA officials told us that the agency is moving forward with revisions to the
mental health body system that incorporate measures of functional impairment. For the
other body system revisions, VA is also considering changes that give greater
consideration to a veteran’s ability to function.




Page 10                                                                GAO-12-846 VA Disability Compensation
maintaining a routine or schedule, managing workload demands, and
completing tasks that require mental skills. 19

While VA is considering a number of different elements to update its
medical criteria, it is giving only limited consideration to the role that
supports—such as assistive technology and medical interventions—can
play in enhancing a veteran’s earning capacity. In 2002, we reported that
VA’s program was not designed to factor in the potential benefits of
treatment, corrective devices, and assistive technology when evaluating a
veteran’s service-connected disability. 20 Assistive devices and other
supports can play a critical role in a veteran’s capacity for work, according
to the ICF framework. VA officials told us that, while they plan to consider
how medical advances have decreased the severity and duration of some
conditions, they do not plan to change the way assistive technology and
medical interventions are considered when making individual disability
determinations for a number of reasons. 21 Specifically, according to VA
officials, including the effects of assistive technology in evaluations of
disabilities would overlook the severity of the disability itself and focus on
the individualized adaptation to an assistive device, and the statute for
VA’s disability compensation program is based on the average reduction
in earning capacity across a group of individuals with a similar physical or
mental impairment. 22

Concurrent with the medical updates, VA also plans to obtain updated
information on the average earnings loss associated with service-
connected disabilities. VA officials stated that conducting earnings loss



19
   During recent updates to its medical criteria, SSA has also taken steps to include an
assessment of an individual’s functional abilities. For example, as part of SSA’s
comprehensive revisions to the immune system criteria, the agency included several
functional measures, such as completing tasks in a timely manner despite deficiencies in
concentration or persistence. See GAO, Modernizing SSA Disability Programs: Progress
Made, but Key Efforts Warrant More Management Focus, GAO-12-420 (Washington,
D.C.: June 19, 2012).
20
     GAO-02-597.
21
   Section two of this report provides further details on VA’s consideration of assistive
technology and medical interventions.
22
  Medical interventions and assistive devices are currently incorporated into the rating
schedule for some medical diagnoses, according to VA officials. For example, prosthetic
implants are rated within the anatomical locations and degree of residual effects of a
prosthesis.




Page 11                                              GAO-12-846 VA Disability Compensation
analyses are necessary to make knowledge-based adjustments to the
rating schedule, a practice consistent with recommendations from expert
panels and our prior work. 23 An important aspect of the earnings updates
are validation studies to confirm the findings of the earnings loss analyses
and to verify the accuracy of proposed changes to the rating schedule.
The validation studies will be conducted through separate contracts.
Specifically, VA plans to update all 15 body systems as follows:

•    For the first three body systems—the mental health, hemic/lymphatic,
     and endocrine systems—VA plans to use the results from a 2008
     earnings loss report to inform any adjustments to the level of
     compensation associated with these various impairments. 24
•    For the remaining 12 body systems, VA plans to contract with external
     organizations to conduct earnings loss studies and validation studies.
     However, VA’s first contracted earnings study with a university for the
     musculoskeletal system is pending termination as of August 2012,
     according to VA.
For each earnings loss study, the contractor will identify the average
lifetime earnings loss incurred by veterans with specific service-
connected disabilities. To do this, the studies will compare the earnings
levels of veterans with various service-connected disabilities to veterans
without a disability as well as with the nonveteran population. Contractors
will identify differences between veterans’ average earnings losses and
VA disability compensation levels (i.e., the extent that veterans are being
over- and undercompensated) and suggest improvements to the current
system.




23
   In 1997, we reported that there are generally accepted and widely used approaches to
statistically estimate the effect of specific service-connected conditions on veterans’
average earnings. See GAO, VA Disability Compensation: Disability Ratings May Not
Reflect Veterans’ Economic Losses, GAO/HEHS-97-9 (Washington, D.C.: Jan. 7, 1997).
In addition, in more recent reports, the Institute of Medicine and CNA recommended that
VA routinely assess the impact of impairments on earnings.
24
   VA will use data from the 2008 Economic Systems Inc. report because the report’s
findings reflect the findings of other independent studies related to the mental health
diagnoses and do not require further validation. In addition, the relatively noncomplex
nature of the hemic/lymphatic and endocrine body systems combined with the minimal
findings in the 2008 Economic Systems Inc. report require no additional independent data,
according to VA’s project management plan.




Page 12                                           GAO-12-846 VA Disability Compensation
VA’s Revision Process   VA has experienced delays in revising its disability rating schedule.
Faces Delays and        Specifically, VA planned to publish final rules in the Federal Register
Additional Hurdles      (phase 5) for the first three body systems by June 2011. VA has not,
                        however, met this goal. As of July 2012, VA has completed public forums
                        for all 15 body systems (phase 1) and has working drafts of revisions for
                        nine body systems (phase 3). However, VA has not issued any proposed
                        or final rules (phases 4 and 5). Moreover, as of July 2012, VA was more
                        than a year behind in completing the first earnings loss study for the
                        musculoskeletal body system and has yet to complete studies for the
                        remaining eleven body systems. According to VA officials, they now
                        expect to issue proposed rules for all body systems by 2016, but they
                        have moved the original project completion date from 2016 to an
                        unspecified future date.

                        VA officials noted various reasons for the delays, including a lengthy
                        drafting and review process for the potential medical revisions. VA
                        officials told us that giving greater consideration to functional impairment
                        represents a significant change to VA’s current disability criteria. As a
                        result, VA workgroups and staff have taken longer to draft and review
                        revisions than originally planned. Furthermore, VA took additional steps to
                        solicit comments from stakeholders about these changes. For example,
                        VA held a rating schedule status summit in June 2012 to publically share
                        the draft revisions for nine body systems before the publication of
                        proposed rules in the Federal Register in an effort to promote
                        transparency and solicit comments.

                        VA also is experiencing delays because it has had difficulty obtaining the
                        data it needs to study earnings loss. Specifically, to conduct these
                        studies, VA needs earnings data from the Social Security Administration
                        (SSA) and the Internal Revenue Service (IRS), among other data
                        sources, as well as VA data on veterans with service-connected
                        disabilities. VA officials stated that the coordination between the various
                        federal agencies took much longer than expected, in part, because
                        federal law generally prohibits the release of certain individual
                        information. 25 VA officials also stated that VBA contractors must work


                        25
                           See 26 U.S.C. § 6103. Early in the update project, VA sought wage data on individual
                        veterans from SSA and IRS. However, VA now plans to use aggregate earnings data like
                        prior earnings loss studies. For example, to conduct their analyses in 2008, Economic
                        Systems Inc. reported that SSA released only aggregate earnings information on groups
                        of at least five veterans. The Veterans Disability Benefits Commission also cited this
                        challenge.




                        Page 13                                          GAO-12-846 VA Disability Compensation
very closely with SSA to process, analyze, and transmit earnings data. As
of July 2012, VA had not obtained the aggregate data from SSA or the
IRS needed to conduct the first earnings loss study. In addition, VA
officials described hurdles obtaining internal agency data in a timely way.
For example, VBA has experienced challenges coordinating with another
VA office to obtain data needed to evaluate veterans’ earnings losses.
VBA recently received this data 12 months after first requesting it. To
address this hurdle and streamline the process, VBA is implementing a
system that will allow VBA staff to more independently access and
analyze internal data. However, as of July 2012, VBA had not fully
implemented this new system.

In addition to delays in obtaining data, VA faces other hurdles related to
the earnings loss studies. For example, VA currently relies on external
organizations that produce studies one body system at a time. Experts we
interviewed, including members of VA’s Advisory Committee on Disability
Compensation, said this process is inefficient and may not best facilitate
the agency’s goal to measure earnings loss on an ongoing basis. As one
expert noted, to contract with an external organization, VA must complete
market research and evaluate and select a contractor, among other tasks.
Once a contractor is selected, they must then perform a number of start-
up tasks, including applying for security clearances and authorization to
use VA data, reviewing the methodology of previous earnings studies,
and identifying and gathering needed data from various federal agencies
to create a study group of veterans with service-connected disabilities
and a comparison group. To avoid repeating these tasks for each
contract, several experts we interviewed suggested that VA should build
its internal research capacity to more seamlessly conduct these studies.
For example, VA could develop more in-house resources for conducting
these types of analyses or establish long-term partnerships with research
organizations. VA has explored methods to build their research capacity,
but it has yet to adopt an approach for doing so.

According to some experts we interviewed, even after the earnings loss
studies are completed, VA’s revision initiative may face an additional
hurdle: gaining acceptance from a diverse group of stakeholders. Various
experts and veteran groups have raised concerns about the changes




Page 14                                   GAO-12-846 VA Disability Compensation
                            being considered. 26 Some experts and veteran groups we interviewed
                            raised concerns about incorporating measures of functional impairment
                            into the rating schedule. They stated that assessing a veteran’s function
                            may result in a more prolonged disability claims process and questioned
                            VA’s ability to successfully implement new functional criteria. In addition,
                            one veteran group raised concerns that the earnings loss studies may not
                            adequately capture the complex nature of a veteran’s impaired earning
                            capacity. For example, measuring veterans’ average lifetime earnings
                            losses due to a service-connected injury or illness—the aim of the current
                            studies—may not capture lost opportunities to pursue a more lucrative or
                            fulfilling career. At the same time, several experts did not agree with the
                            methodology of the current earnings loss studies. 27 Other experts said
                            that these studies are a good way to measure average earnings loss. In
                            addition, several veteran group representatives told us that the rating
                            schedule in its present form generally represents an equitable method for
                            determining disability compensation.


VA’s Project Planning       To guide the revision initiative, VA developed a project management plan
Reflects a Number of        and operating plan that contain many elements of sound planning but lack
Sound Practices but Lacks   complete and updated information in key areas. 28 In our previous work,
                            we have identified elements of sound planning that facilitate effective
Key Information
                            project management. Sound planning practices include identifying and
                            documenting specific activities needed to achieve project goals. They
                            also include documenting when work activities will occur, how long they
                            will take, and how they are related to one another. 29 VA’s project plans


                            26
                               Under federal law, adjustments to the rating schedule generally cannot result in a
                            reduction of a veteran’s disability rating. 38 U.S.C. § 1155. Thus, if a recommended
                            update would result in a decrease in rating levels and senior VA officials approve the
                            change, veterans already in the system would not see a decrease in their compensation.
                            Increases, if warranted, are allowable.
                            27
                               Two experts we interviewed said that measuring earnings loss one body system at a
                            time may not accurately capture the impact of multiple impairments on veterans’ earnings.
                            28
                                VA’s project management plan is designed to document the organizational,
                            developmental, and supporting processes that will result in the successful revision of the
                            rating schedule. VA also developed an operating plan to consider the entire program
                            lifecycle—initiating, planning, executing, monitoring and controlling, and closing.
                            29
                               In addition, it is important that agencies establish policies, procedures, and mechanisms
                            that enforce management’s directives and clearly document activities, particularly with
                            ongoing, long-term projects. See GAO, Internal Control: Standards for Internal Control in
                            the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).




                            Page 15                                             GAO-12-846 VA Disability Compensation
include key elements of sound planning, such as clearly stating the
purpose and strategy, including the goals and objectives, of the revision
project. However, VA has not taken several key steps that may be critical
to completing and maintaining an updated rating schedule, such as
planning for earnings loss and validation studies, developing a strategy
for implementing revisions, and adopting a formal policy for regular
updates in the future (see table 2). Regarding an implementation strategy,
for example, if revisions to the mental health rating criteria resulted in
upward adjustments of the ratings, VA would re-rate those veterans with
mental health disabilities, according to VA officials. As noted previously,
the earnings study being used by VA to update the mental health rating
criteria showed the veterans with those conditions are likely
undercompensated. As of the end of fiscal year 2011, 878,417 or 6.7
percent of those disabilities for which veterans received benefits were
mental health conditions. Any effort to re-rate those cases likely
represents a significant workload increase. Some experts we interviewed
recommended that VA immediately develop a written strategy for
implementing these revisions to help ensure that veterans do not
experience any negative service-delivery consequences, such as
increased wait times for disability benefits.




Page 16                                   GAO-12-846 VA Disability Compensation
Table 2: Key Steps Missing from VA’s Project Planning

Information in key
areas                     Steps not taken                                                                Why is this important?
Earnings loss updates     VA does not have a complete plan—containing specific                           VA officials stated that conducting earnings loss
                          activities and time frames—for conducting earnings loss                        analyses are necessary to make knowledge-
                          studies for all body systems in the rating schedule.                           based adjustments to the rating schedule, a
                          VA’s project plans are missing details and updated time                        practice consistent with recommendations from
                          frames associated with a number of critical steps, such                        expert panels and our prior work.
                          as finalizing contracts with research organizations.                           VA officials said that validation studies are an
                          VA project plans are also missing descriptions of the                          integral part of the earnings update process.
                          activities and time frames for conducting validation
                          studies.
Implementation strategy   VA has not developed a written strategy for addressing                         VA should be proactively assessing potential
                          the full range of effects that revisions to the rating                         impacts of any revisions and developing plans
                          schedule may have on agency operations, which may                              for implementation, according to some experts
                          include increased staff and resource needs,                                    we interviewed. VA officials told us they
                          reconfiguring staff duties, and developing a plan for                          recognize the need to do this.
                          training and developing new procedures.                                        If the current revisions resulted in higher
                          VA has not yet assessed possible effects of revisions on                       disability ratings for conditions affecting a
                          agency operations or documented activities that need to                        significant number of veterans, this could
                          occur, according to VA officials.                                              negatively impact VA’s claims processing
                                                                                                         workload. VA’s disability claims system already
                                                                                                         has a substantial backlog, and changes to the
                                                                                                         rating schedule may pose an administrative
                                                                                                         burden.a
                                                                                                         It is important that agencies clearly document
                                                                                                         activities, particularly to help manage change to
                                                                                                         cope with shifting environments and evolving
                                                                                                         demands and priorities.b
Regular updates           Although VA intends to continue comprehensive                                  Many experts and veteran groups we
                          revisions beyond the completion of the current project, it                     interviewed said it is important that VA continue
                          lacks a formal policy, procedure, or mechanism                                 to update the rating schedule in the future.
                          committing itself to doing so.c                                                Several commission reports, including the
                          VA has not established a policy—through regulation,                            Institute of Medicine’s, recommended that VA
                          policy manual, or other means—for the continuation of                          update the rating schedule at regular intervals
                          the revision project in the future.                                            to serve veterans with disabilities more
                          VA officials told us they intend to use lessons learned                        effectively and equitably.
                          from the current process to guide future efforts, but are                      It is important that agencies establish policies,
                          not currently documenting these to inform a formal                             procedures, and mechanisms that enforce
                          policy.d                                                                       management’s directives.
                                            Source: GAO analysis of VA documents, interviews with VA officials and experts, and GAO guidance and prior work related to internal
                                            controls.
                                            a
                                             In 2010, we found that VA’s disability claims and appeals processing had improved in some aspects
                                            and worsened in others. In recent years, the number of claims completed annually by VA has
                                            increased but not by enough to keep pace with the increasing number of compensation claims
                                            received, resulting in more claims awaiting a decision. GAO, Veterans’ Disability Benefits: Further
                                            Evaluation of Ongoing Initiatives Could Help Identify Effective Approaches for Improving Claims
                                            Processing, GAO-10-213 (Washington, D.C.: Jan. 29, 2010).
                                            b
                                             See GAO, GAO/AIMD-00-21.3.1.




                                            Page 17                                                                   GAO-12-846 VA Disability Compensation
                        c
                         In 2002, we found that VA did not have a well-defined plan to conduct future medical criteria
                        updates. At the time, VA provided us with a statement acknowledging the need to re-review the
                        medical criteria in the future, but had neither a time frame nor strategy for completing the task. See
                        GAO, 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).
                        d
                         In July 2012, VA stated that they are taking steps to update their current project management plan to
                        include future reviews of each body system every 5 years.




                        Three key approaches for modernizing VA’s disability programs—as
Selected Policy         recommended by disability commissions and others—present
Approaches for          opportunities and challenges. These approaches are (1) providing quality
                        of life payments, (2) providing integrated vocational services with
Updating VA’s Benefit   transitional cash assistance, and (3) factoring the effects of assistive
Structure Present       technology and medical interventions systematically into rating decisions.
Both Opportunities      See figure 3 for an overview of what VA does now and what these
                        approaches would do. Those we interviewed said to varying degrees that
and Challenges          the approaches could provide more equitable compensation and that
                        approaches two and three could better help veterans integrate into the
                        workforce and society. At the same time, however, experts and veteran
                        groups identified administrative, political feasibility, and cost challenges,
                        among others. Nevertheless, some experts said that combining the
                        approaches could create a more integrated, comprehensive benefits
                        package and could also mitigate challenges associated with any one
                        approach. When considering such large-scale policy changes, we have
                        previously identified strategies for policymakers to use to develop specific
                        policy proposals. In translating broad policy approaches or concepts—
                        including the three outlined below—into specific proposals, policymakers
                        will need to define key design features (e.g., eligibility requirements and
                        the type and timing of payments). For a summary of key questions raised
                        during our discussions with experts and veteran groups about the
                        possible design of the approaches, see appendix III.

                        When assessing these policy approaches, one must keep in mind that
                        VA’s disability compensation program is a statutory scheme with
                        parameters set forth in federal law. This statutory scheme restricts the
                        extent to which VA can reform its disability program, as there are many
                        actions VA cannot take without Congress amending the relevant laws.
                        For example, under 38 U.S.C. § 1155, VA is required, as far as is
                        practicable, to base its disability ratings on the average impairments of
                        earning capacity resulting from various types of injuries. This provision
                        essentially prohibits VA from basing disability ratings (or a portion of the
                        ratings) on a loss of quality of life, thus making the first policy approach
                        discussed below legally impossible without a statutory change.



                        Page 18                                                   GAO-12-846 VA Disability Compensation
Figure 3: Overview of What VA Does Now and the Modified Approaches




                                      Note: Regarding the integrated vocational services with transitional cash assistance approach, the
                                      Dole-Shalala Commission stated that the goal of VA’s disability program should be to return veterans
                                      to normal activities, if feasible, as quickly as possible. The commission recommended integrating
                                      vocational rehabilitation with transition payments into the VA disability compensation system.
                                      According to VA officials, Congress and VA have made efforts to address issues related to the timing
                                      and incentives for rehabilitation for wounded servicemembers. For example, according to VA, the
                                      National Defense Authorization Act for Fiscal Year 2008 established Vocational Rehabilitation and
                                      Employment eligibility for severely injured active duty individuals before a VA rating is issued. In
                                      addition, VA is initiating the Integrated Disability Evaluation System (IDES) that provides Vocational
                                      Rehabilitation and Employment outreach and transition services to active duty servicemembers at 48
                                      IDES installations. This outreach includes a mandatory meeting with a Vocational Rehabilitation and
                                      Employment counselor.




                                      Page 19                                                   GAO-12-846 VA Disability Compensation
Selected Policy
Approaches Hold
Opportunities, but Would
Present Challenges

Quality of Life Payments   According to several of the experts and veteran groups we interviewed,
                           quality of life payments could better align VA’s compensation program
                           with more current thinking about disability while simultaneously providing
                           greater equity to VA’s disability compensation program. 30 In general,
                           experts and veteran groups we interviewed said that a payment for quality
                           of life held more opportunity than the other proposed approaches to
                           update the nation’s veteran benefits program. However, they also cited
                           challenges relating to its implementation and fiscal sustainability, as
                           shown in figure 4.




                           30
                              Several commission reports addressed the definition of quality of life. Economic
                           Systems Inc. defined quality of life for veterans as an overall sense of well-being based on
                           physical and psychological health, social relationships, and economic factors. See
                           Economic Systems Inc., A Study of Compensation Payments for Service-Connected
                           Disabilities (Falls Church, VA: September 2008). The Institute of Medicine defined quality
                           of life as including the cultural, psychological, physical, interpersonal, spiritual, financial,
                           political, temporal, and philosophical dimensions of a person’s life. See Institute of
                           Medicine, A 21st Century System for Evaluating Veterans for Disability Benefits
                           (Washington, D.C.: 2007).




                           Page 20                                               GAO-12-846 VA Disability Compensation
Figure 4: Experts’ and Veteran Groups’ Views on Potential Opportunities and Challenges of Providing a Quality of Life
Payment




                                         In terms of opportunities, a payment for veterans’ loss in quality of life
                                         might help align the program with more current thinking about disability by
                                         recognizing the impact of illness or injury beyond loss in earnings. Along
                                         these lines, many experts and veteran groups said that loss in earnings
                                         and quality of life should be explicitly integrated into the compensation
                                         program to recognize the overall impact of disability on veterans. For
                                         example, veterans who lose a hand may be able to work in today’s
                                         economy, but the injury could prevent them from tossing a football with
                                         their children or engaging in other life activities. Most of those we
                                         interviewed agreed with commissions and experts who concluded that a
                                         modern program should compensate veterans with disabilities for losses
                                         beyond their earnings, even though the current program is designed to
                                         compensate based on economic losses.

                                         According to several experts, VA has an opportunity to develop a
                                         systematic approach to more equitably award quality of life
                                         compensation. According to these experts, VA currently provides implicit
                                         quality of life benefits to some veterans with service-connected disabilities




                                         Page 21                                        GAO-12-846 VA Disability Compensation
but not others. 31 For example, several experts argued that some veterans
may receive compensation for impairments in the rating schedule that
have little, if any, associated earnings loss. 32 Several experts added that,
in considering a quality of life payment, VA needs to determine the
degree to which the rating schedule already includes consideration of the
effect of a disability on quality of life. Two experts we interviewed said that
benefits currently provided to veterans outside of the rating schedule,
such as enhanced monthly compensation payments, could be viewed as
compensation for loss in quality of life. 33

While this approach presents opportunities, it could prove challenging
because it would require a change in law and could create a more
complex system, according to several of those we interviewed. Congress,
they noted, would likely need to revise the statute to expand the purpose
of disability compensation to include quality of life. And if the program’s
purpose is expanded, VA would need to determine how to make fair,
timely, and accurate payments but not exacerbate the existing claims
backlog, according to several experts and veteran groups we interviewed.
Specifically, adding a quality of life assessment might require additional
time to assess claims and create another avenue for appeals. Further, VA
would need to address how to adjust compensation for any changes in a
veteran’s quality of life loss over time, according to VA.

Another implementation challenge is how to measure quality of life—a
subjective judgment—and assign a dollar value to different degrees of
these losses. Two veterans with the same service-connected illness or
injury may experience pain, social difficulties, and other intangible
impacts that, depending on their circumstances and characteristics, may
result in different degrees of losses in quality of life. According to several



31
   The Institute of Medicine noted that that Congress and VA have added conditions in the
rating schedule that have little if any effect on ability to work. However, the expansions of
conditions have been ad hoc and may not address the full range or extent of impacts of
injuries on quality of life. See Institute of Medicine, A 21st Century System for Evaluating
Veterans for Disability Benefits (Washington, D.C.: 2007).
32
   For example, in the rating schedule, a higher evaluation is assigned for an amputation
of an extremity that prevents the use of a prosthetic device as compared to an evaluation
of an extremity at the same location, which allows for a prosthetic device. According to VA
officials, this higher evaluation could be argued as a quality of life benefit.
33
   Enhanced compensation is provided to veterans with disabilities who are housebound
or who are in need of aid and attendance from others.




Page 22                                             GAO-12-846 VA Disability Compensation
                                  experts and veteran groups, a number of tools exist to make the process
                                  more objective. For example, CNA surveyed veterans with and without
                                  service-connected disabilities to show differences in quality of life loss
                                  between the two groups. While losses in quality of life can be measured,
                                  a process to attach a dollar value will need to be developed and refined,
                                  according to several experts and veteran groups, because none of the
                                  existing tools are intended to determine levels of compensation. Also,
                                  several experts suggested that VA could use benchmarks, such as the
                                  compensation provided by other countries’ programs.

                                  Finally, many experts added that quality of life payments would increase
                                  program costs. In the short term, VA would likely need additional funds to
                                  cover the costs of researching and developing assessment tools and for
                                  training staff on new procedures. In the long term, according to experts
                                  and veteran groups, veterans may receive increased levels of
                                  compensation, which could also affect the program’s long-term cost. Any
                                  increased costs would need to be considered in the context of our
                                  nation’s current and future fiscal challenges. However, several experts
                                  noted that quality of life payments could offset any reduced compensation
                                  for service-connected conditions that have no associated earnings loss,
                                  subsequently resulting in total compensation remaining level.

Providing Integrated Vocational   Several of the experts we interviewed stated that a key goal for VA should
Services with Transitional Cash   be helping veterans with disabilities return to the workforce. Moreover,
Assistance                        they identified this approach as an opportunity to provide early assistance
                                  to help veterans achieve their full work potential. However, experts and
                                  veteran groups suggested that moving forward with this approach would
                                  present challenges, such as gaining consensus for the approach and its
                                  potential cost, as shown in figure 5.




                                  Page 23                                   GAO-12-846 VA Disability Compensation
Figure 5: Experts’ and Veteran Groups’ Views on Potential Opportunities and Challenges of Providing Integrated Vocational
Services along with Transitional Cash Assistance




                                         According to several experts we interviewed, the goal of VA’s disability
                                         program should be to build a veteran’s capacity to work rather than
                                         mainly providing income support or cash benefits. 34 These experts said
                                         that participation in work leads to better integration into civilian life and
                                         other intangible benefits like greater satisfaction and self-esteem. In
                                         addition, several experts suggested that, if vocational assistance
                                         increases a veteran’s earning capacity, VA should consider that when
                                         determining losses in earnings. That is, veterans should be rated after
                                         they reach maximum medical improvement. 35 However, several cautioned
                                         that VA should maintain protections for veterans with service-connected
                                         disabilities who may not succeed at work even after extensive assistance.




                                         34
                                            In 2004, the VA Vocational Rehabilitation and Employment Task Force reached a
                                         similar conclusion, stating that VA had reduced its focus on the ultimate mission of
                                         returning veterans with service-connected disabilities to the workforce and stressed the
                                         preeminent role of vocational rehabilitation in achieving that goal. See VA Vocational
                                         Rehabilitation and Employment Task Force, Report to the Secretary of Veterans Affairs:
                                         The Vocational Rehabilitation and Employment Program for the 21st Century Veteran
                                         (Washington, D.C.: March 2004).
                                         35
                                           A 2008 study commissioned by VA noted that a useful distinction is to separate the
                                         temporary disability period from the permanent disability period. The temporary disability
                                         period begins when the veteran is first affected by a service-connected disability and ends
                                         on the date when the veteran reaches maximum medical improvement. See Economic
                                         Systems Inc., A Study of Compensation Payments for Service-Connected Disabilities
                                         (Falls Church, VA: September 2008).




                                         Page 24                                            GAO-12-846 VA Disability Compensation
According to many experts we interviewed, this policy approach could
enhance veterans’ capacity to work by providing earlier vocational
assistance after the onset of disability rather than after a veteran has
been rated for disability compensation. Experts we interviewed cited
several benefits of early vocational assistance. For example, they said
that it improves the likelihood that veterans with service-connected
disabilities will obtain and retain employment after injury.

At the same time, achieving consensus for this approach may be difficult.
Several of those we interviewed suggested that the approach does not
provide much additional incentive to participate in rehabilitation. For
example, veterans already have access to employment and training
services, and many veterans work with or without these services. 36 While
veteran groups we spoke with said they support rehabilitation services,
they would not favor this policy shift if it means that a veteran’s disability
payment may be reduced because of increased vocational capacity. They
maintained, in fact, that a veteran whose work potential was increased or
who completed the program should receive the same level of
compensation he or she would have received had he or she not received
services. Officials from two veteran groups also said that these services
should not be mandatory. In addition, while this approach would target
veterans of working age, several of the experts’ and veteran groups’
views differed on whether the approach should target veterans at any
point after military discharge and/or veterans shortly after discharge,
particularly those with no or little civilian work history. 37



36
   VA and others offer a range of employment and training programs. For example, as
previously discussed, VA’s Vocational Rehabilitation and Employment program provides
rehabilitative services as well as training toward degrees and certifications. VA, the
Department of Labor, and the Department of Defense also offer transitioning
servicemembers with short-term vocational assistance through the Disabled Transition
Assistance Program and Transition Assistance Program (TAP). TAP, for example,
provides 3-day employment workshops at military installations to servicemembers up to 6
months before they separate from the military (e.g., job searches, career decision making,
current occupational and labor market conditions, etc.). In addition, veterans are given
priority for Department of Labor-funded federal workforce employment and training
programs through a streamlined delivery system, called the one-stop system, required by
federal law.
37
   The basic period of eligibility for Vocational Rehabilitation and Employment program
services is generally the 12 years after the date of separation from active military service.
The basic period of eligibility may be extended in certain circumstances, such as if it is
determined that a veteran is in need of services to overcome a serious employment
handicap.




Page 25                                              GAO-12-846 VA Disability Compensation
                                  Several veteran groups and experts also expressed concerns about VA’s
                                  capacity to administer this approach. For example, they said that VA does
                                  not have sufficient numbers of staff capable of assessing a veteran’s
                                  vocational capacity or providing work supports through its current
                                  vocational program. Moreover, others noted that this reform could divert
                                  resources from current VA management initiatives, such as efforts to
                                  expedite the delivery of VA benefits to servicemembers and veterans.

                                  This approach also would likely have cost implications. In the short term,
                                  VA would need to estimate costs, pilot the approach while running VA’s
                                  current programs, and then implement the program, according to several
                                  of those we interviewed. Others said that there could also be long-term
                                  cost implications if this approach required resources in addition to those
                                  being expended under the current program. According to two of those we
                                  interviewed, the ultimate costs would depend on who is eligible for the
                                  services. For example, limiting eligibility to veterans shortly after
                                  discharge would be less costly than making services available to veterans
                                  at any point in time after discharge.

Systematically Incorporate        According to experts we interviewed, systematically incorporating the
Assistive Technology and          effects of assistive technology and medical interventions into rating
Medical Interventions in Rating   decisions affords an opportunity to more accurately assess veterans’
Decisions                         impaired earning capacity, including the loss of functioning in the
                                  workplace. Assistive technology and medical interventions include, for
                                  example, a prosthetic device for walking, a device to assist with a vision
                                  impairment, and medications for pain. However, they suggested that
                                  implementing this approach would present challenges, such as its
                                  acceptability among veterans and other stakeholders, as shown in figure
                                  6.




                                  Page 26                                   GAO-12-846 VA Disability Compensation
Figure 6: Experts’ and Veteran Groups’ Views on Potential Opportunities and Challenges of Incorporating Assistive
Technology and Medical Interventions into Disability Rating Decisions




                                         According to several experts we interviewed, factoring in these advances
                                         may result in more accurate assessments of veterans’ average earnings
                                         losses. Advances in assistive technology and modern medicine can help
                                         veterans with service-connected disabilities increase their earnings by
                                         helping them more fully integrate into the workplace. While assistive
                                         devices and medications can play a critical role in an individual’s ability to
                                         function, VA does not always consider them in its assessment of
                                         disability. According to several experts we talked with, accurately
                                         measuring veterans’ ability to function with personal and environmental
                                         supports may result in less compensation for certain veterans. However,
                                         a couple of experts said that this may allow VA to target resources to
                                         those with the greatest earnings losses.

                                         While many of those we interviewed acknowledged the benefits of
                                         assistive technology and medicine, many of those we interviewed and VA
                                         officials expressed concerns with factoring assistive technology into
                                         disability rating decisions, including the following:

                                         •   The effectiveness of assistive technology and medication is difficult to
                                             demonstrate, or research is incomplete.
                                         •   The interventions affect individuals differently and may not work for
                                             everyone. Also, the effectiveness of assistive technology varies over
                                             the lifetime of an individual—for example, as a person ages and



                                         Page 27                                       GAO-12-846 VA Disability Compensation
                                   experiences changes in musculature, their ability to compensate using
                                   a prosthetic decreases. Others described assistive technology that did
                                   not perform as expected.
                               •   The incorporation of assistive technology into rating decisions could
                                   introduce a disincentive for veterans to use such tools and supports.

                               Many experts and veteran groups discussed challenges similar to those
                               raised with the other policy approaches, such as potentially needing to
                               administer new assessments and the associated upfront costs. In
                               particular, individually assessing veterans would add complexity to a
                               ratings process that already faces challenges with making timely and
                               accurate rating decisions. For example, VA may need to determine
                               whether veterans are making good faith efforts to use interventions when
                               making disability assessments, according to two of those we interviewed.
                               In addition, to assess a veteran’s ability to function while using these
                               interventions, VA would need to hire staff with necessary skills. To
                               address some of these challenges, several experts said that VA’s
                               planned studies to measure earnings loss would automatically factor in
                               the average economic benefits of assistive technology use without
                               needing a new assessment. However, one expert cautioned that this
                               approach might not be as precise as an individual assessment.

Experts and Veteran Groups     According to several of those we interviewed, policymakers could create
Discussed Combining Selected   a comprehensive benefits package for individual veterans by integrating
Policy Approaches              compensation with vocational training and treatment. Several experts
                               outlined a sequence for implementing the approaches to improve the
                               timing of benefits and provide seamless support to veterans. Initially, VA
                               would provide financial support during a temporary medical and
                               vocational rehabilitation period to maximize a veteran’s recovery. This
                               temporary period would be followed by long-term compensation for any
                               reduced earnings loss. In conjunction with these payments, veterans
                               would receive an explicit quality of life payment.

                               Several of the experts we talked to described potential benefits of
                               combining approaches. Specifically, VA may be able to




                               Page 28                                   GAO-12-846 VA Disability Compensation
                              •    provide more equitable compensation and services to veterans by
                                   examining the interactive effects of existing and new approaches, 38
                              •    clarify the distinction between compensation for earnings loss and the
                                   other impacts of living with a disability, and/or
                              •    mitigate potential adverse effects associated with any single
                                   approach. For example, if payments for average earnings loss were
                                   reduced because the impact of assistive devices was incorporated,
                                   adding an offsetting quality of life payment could ensure that future
                                   veterans get sufficient compensation.
                              Several experts and veteran groups, however, did not necessarily support
                              combining the three approaches. Finally, if a comprehensive program
                              was targeted to new enrollees, VA may need to administer dual
                              programs.


Key Strategies to Consider    Although we and others have identified a need to reexamine federal
in Updating VA’s Disability   disability programs to meet the challenges and expectations of the 21st
Program for the 21st          Century, VA officials said they are not currently considering the three
                              policy approaches discussed in this report. VA officials said they have,
Century                       however, kept abreast of all studies and recommendations arising from
                              the various commissions and reports. Further, they said they have taken
                              into consideration many of the recommendations made in these studies.
                              For example, VA is implementing recommendations to comprehensively
                              revise the rating schedule. Moreover, in 2008 VA contracted with a
                              private consultant to study disability compensation, loss in quality of life,
                              transition benefits for rehabilitation, assistive technology, and other areas
                              raised by the disability commissions and our work. While their report
                              proposed many specific policy options to address these issues, it stated
                              that the Congress and VA needed to decide on the key goals of the
                              approaches. 39 Doing so would help further specify how to design and
                              implement a new approach. According to VA officials, they currently are
                              not acting on these approaches because they fall outside the VA’s


                              38
                                Our previous work suggests some weaknesses in communication and coordination
                              among various VA disability programs. Overall, we have noted that federal programs
                              should be structured in a manner that collectively allows them to provide coherent and
                              seamless support to people with disabilities. For example, see GAO, Federal Disability
                              Assistance: Wide Array of Programs Needs to be Examined in Light of 21st Century
                              Challenges, GAO-05-626 (Washington, D.C.: June 2, 2005).
                              39
                                Economic Systems Inc., A Study of Compensation Payments for Service-Connected
                              Disabilities (Falls Church, VA: September 2008).




                              Page 29                                           GAO-12-846 VA Disability Compensation
              statutory requirement to compensate veterans for average earnings loss.
              VA officials said they will further consider new policy approaches at the
              request of the Congress.

              As our high-risk series notes, however, continued attention by the Office
              of Management and Budget (OMB) and concerted efforts by agencies, as
              well as sustained congressional attention, are critical to fully resolve high-
              risk areas, which include federal disability programs. 40 Should the
              Congress choose to pursue fundamental changes to the disability
              compensation program, with assistance from VA, we have identified key
              reexamination strategies that should be considered, 41 such as

              •      building support within the Congress, the Administration, the agency,
                     and the broader public to justify a reexamination of the program.
              •      identifying the most important goals for the program and developing
                     specific policy proposals to meet those goals.
              •      choosing reexamination methods to guide the process and help
                     evaluate potential changes. 42


              The nation has a long-standing commitment to compensate veterans for
Conclusions   injuries or illnesses incurred during their military service. After decades of
              recurring criticism that VA’s rating schedule is out of date, VA is now
              demonstrating a commitment to comprehensive revision of its disability
              criteria and consideration of a more modern approach to determining
              disability. VA faces challenges, however, that may impede its ability to
              complete and implement the revisions. Specifically, without sufficient
              capacity to conduct research on earnings loss, VA may be unable to
              make fact-based and timely revisions to its rating schedule. Moreover,
              incomplete plans for conducting earnings loss and related studies could
              jeopardize project outcomes and result in a rating schedule that remains,



              40
                   GAO, High-Risk Series: An Update, GAO-11-278 (Washington, D.C.: February 2011).
              41
                 Several overarching components are necessary for the reexamination strategies,
              including (1) sustained leadership to champion program changes; (2) broad-based input
              from a range of stakeholders; (3) empirically based research to assess alternative
              approaches; and (4) clear and transparent processes for engaging the broader public in
              the debate over recommended changes. See GAO, 21st Century Challenges:
              Reexamining the Base of the Federal Government, GAO-05-325SP (Washington, D.C.:
              February 2005).
              42
                   Ibid.




              Page 30                                           GAO-12-846 VA Disability Compensation
in the end, outdated. In addition, without a written strategy for
implementing the revisions, VA might not be adequately positioned to
mitigate possible increases to the disability claims backlogs. This could
increase veterans’ wait times for disability benefits, which runs counter to
one of the desired outcomes of the revision goal of improving claims
efficiency. Finally, in the absence of sustained, ongoing revisions and
adjustments, VA’s rating schedule is increasingly at risk of not reflecting
advances in medicine and changes in the labor market. Without a formal
policy for conducting regular updates in the future, VA may experience
extended gaps in its efforts to revise the rating schedule. Consequently,
some future veterans may not receive the appropriate level of
compensation. We recognize that adjusting the rating schedule and
making changes to veterans’ disability benefits can be contentious.
Stakeholders have different views about how to define disability, measure
the loss of earning capacity, and even the purpose of veterans’ disability
compensation. Nevertheless, without a rating schedule that reflects
advances in medicine and changes in the labor market, VA may continue
to overcompensate some veterans while undercompensating others.

As underscored by the policy approaches recommended by previous
commissions and other experts, current thinking on disability has
outpaced consideration of updates to VA’s disability compensation
benefits structure. Changes in our understanding of disability and the
economy create a compelling case for the Congress, VA, and
stakeholders to reexamine the goals of VA’s disability compensation
programs and how to best serve veterans with service-connected
disabilities. This examination would raise important, but difficult,
questions: Should veterans with disabilities be compensated for more
than loss of earning capacity? Should the discussion of disability benefits
structure be intertwined with efforts to build a veteran’s capacity to work
and provide work supports? Should some compensation be considered
temporary? Should any proposed disability compensation changes apply
to existing and/or future veterans? VA officials are giving little attention to
these larger issues, and the trade-offs involved. However, a system that
maximizes equity, balances fiscal pressures, and ultimately serves
individual veterans effectively will benefit from deliberations informed by
more modern views about disability. VA has signaled that, absent further
direction from the Congress, it will focus its efforts within its current
framework. Without a broader perspective, VA may miss the opportunity
to be an agent in its own transformation to the benefit of those it serves.




Page 31                                      GAO-12-846 VA Disability Compensation
                      To the extent that Congress wishes to consider various options to
Matter for            modernize VA’s disability benefits program, Congress could direct the VA
Congressional         to conduct focused studies on these or other policy approaches and, if
                      necessary, propose relevant legislation for congressional consideration.
Consideration         For example, providing explicit quality of life payments, or some other
                      combination of policy changes, to veterans with service-connected
                      disabilities may help to modernize VA’s program, but such changes need
                      further study to determine their feasibility and fiscal impact.


                      Based on our review, we are making three recommendations.
Recommendations for
Executive Action      1. To ensure that decisions about veteran disability compensation
                         benefits are informed by current earnings loss information, we
                         recommend that the Secretary of Veterans Affairs

                      •   take necessary steps to increase research capacity to determine the
                          impact of impairments on earnings in a timely manner and
                      •   develop a more complete plan for conducting earnings loss and
                          validation studies for the entire rating schedule.
                      2. To ensure that VA is positioned to seamlessly implement revisions to
                         the rating schedule, we recommend that the Secretary of Veterans
                         Affairs develop a written implementation strategy. This strategy could
                         include steps to mitigate the possible effects of rating schedule
                         revisions on agency operations, including an increase in the number
                         of claims received.
                      3. To ensure the rating schedule revisions are sustained beyond the
                         current update project, we recommend that the Secretary of Veterans
                         Affairs establish a formal policy, procedure, or mechanism to revise
                         the rating schedule—with updated medical and earnings loss
                         information—at regular intervals.


                      We provided a draft of this report to VA for review and comment. VA
Agency Comments       concurred with our recommendations and indicated it will take steps to
and Our Evaluation    address them by a target completion date of August 31, 2013. Its written
                      comments are reproduced in appendix IV. VA also provided technical
                      comments that we incorporated, as appropriate.

                      VA agreed with our recommendation to take necessary steps to increase
                      its research capacity to determine the impact of impairments on earnings
                      in a timely manner and develop a more complete plan for conducting
                      earnings loss and validation studies for the entire rating schedule. VA


                      Page 32                                  GAO-12-846 VA Disability Compensation
stated that it is exploring the option of engaging in research partnerships
to conduct more than one earnings loss study at a time. After exploring
this and any other appropriate options, we encourage VA to take all
necessary actions to ensure it conducts earnings loss studies in a timely
manner, now and in the future. In addition, VA stated that it will expand its
current project management plan to include milestones, deliverables, and
the designation of a sub-program manager to manage the earnings loss
and validation studies.

VA also agreed with our recommendation to develop a written
implementation strategy that could include steps to mitigate the possible
effects of rating schedule revisions on agency operations, including an
increase in the number of claims received. VA stated that, going forward,
it will develop a formal plan that establishes cross-functional teams
representing all business processes and procedural functions involved in
the rating schedule changes. VA acknowledged that now is the time to
standardize a process for implementing the rating schedule revisions.

Finally, VA agreed with our recommendation to establish a formal policy,
procedure, or mechanism to revise the rating schedule with updated
medical and earnings loss information at regular intervals. According to
VA, it is currently formulating a plan that evaluates the rating schedule
revision process, which will allow VA’s Compensation Service to establish
a formal, continuous revision policy that is efficient, traceable, and
transparent to produce a rating schedule that reflects up-to-date medical
information.


We are sending copies of this report to the appropriate congressional
committees; the Secretary of Veterans Affairs; and other interested
parties. In addition, the report is available at no charge on the GAO
website at http://www.gao.gov.




Page 33                                    GAO-12-846 VA Disability Compensation
If you or your staff have any questions about this report, please contact
me at (202) 512-7215 or bertonid@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made key contributions to this
report are listed in appendix V.




Daniel Bertoni
Director, Education, Workforce,
and Income Security Issues




Page 34                                   GAO-12-846 VA Disability Compensation
List of Committees

The Honorable Patty Murray
Chairman
The Honorable Richard Burr
Ranking Member
Committee on Veterans’ Affairs
United States Senate

The Honorable Darrell Issa
Chairman
Committee on Oversight and Government Reform
House of Representatives

The Honorable Jeff Miller
Chairman
The Honorable Bob Filner
Ranking Member
Committee on Veterans’ Affairs
House of Representatives




Page 35                             GAO-12-846 VA Disability Compensation
Appendix I: Scope and Methodology
                    Appendix I: Scope and Methodology




                    In this report, we (1) identified the progress that the Department of
                    Veterans Affairs (VA) has made in revising the criteria used to determine
                    eligibility for veterans’ disability benefits with updated medical and
                    economic information, and (2) discussed the opportunities and challenges
                    associated with selected policy approaches that disability commissions
                    and others have raised for updating VA’s disability benefits structure.
                    Overall, we reviewed prior GAO, disability commission, and committee
                    reports; relevant federal laws and regulations; program documentation,
                    including policies, procedures, strategic goals, and supporting project
                    plans; and congressional testimonies from disability groups and
                    commissions. We also interviewed VA officials, key stakeholders,
                    disability experts, and representatives of veteran groups.

                    To address our first reporting objective, we reviewed VA’s strategic goals,
                    plans, policies, Federal Register notices, and other relevant program
                    documentation and interviewed VA officials. We also reviewed VA’s
                    Advisory Committee on Disability Compensation reports,
                    recommendations, and meeting minutes and presentations on the rating
                    schedule updates. In addition, we interviewed several Advisory
                    Committee on Disability Compensation members and reviewed reports
                    and interviewed experts from relevant organizations—such as the
                    Institute of Medicine—and veteran disability commissions—such as the
                    Veterans Disability Benefits Commission. We also evaluated VA’s project
                    planning documents using established elements for sound planning.


Elements of Sound   To determine the extent to which VA’s project plans to revise its disability
Planning            criteria included elements of sound planning, we relied on project
                    management practices in A Guide to Project Management Body of
                    Knowledge, our guidance on internal controls, and the Government
                    Performance and Results Act of 1993 (GPRA). 1 We also considered
                    recent GAO work that evaluated federal planning efforts. Through these
                    efforts, we identified six elements for sound planning. Although there is no
                    established set of requirements for all project plans, we determined that
                    these elements of sound planning help decision makers effectively shape
                    policies, programs, priorities, and resource allocations intended to help
                    achieve desired results and ensure accountability. While these elements
                    may be organized in a variety of ways and use different terms, for the



                    1
                        Pub. L. No. 103-62, 107 Stat. 285.




                    Page 36                                   GAO-12-846 VA Disability Compensation
                                         Appendix I: Scope and Methodology




                                         purposes of this report, we grouped them into six categories, from plan
                                         conception through implementation, that represent sufficiently broad,
                                         higher-level criteria that may apply to a wide variety of project plans and
                                         priorities. (See table 3.)

Table 3: Six Elements of Sound Planning Used to Evaluate VA’s Efforts

Problem, goals, and methodology      In establishing the problem, goals, and methodology, the agency identifies the problem to be
                                     addressed and the causes of the problem, as well as the strategy, including goal and
                                     objectives, and the methodology for achieving these goals and objectives.
Activities and timelines             An agency should identify and document the specific activities that must be performed to
                                     complete the project. The agency should develop a schedule that defines, among other
                                     things, when work activities will occur, how long they will take, and how they are related to
                                     one another, as well as interim milestones and checkpoints to gauge the completion of the
                                     project.
Resources                            The agency should identify the sources and types of resources or investments needed (e.g.,
                                     budgetary, human capital, information technology, research and development, contracts) to
                                     complete project activities. If resource availability cannot be assured, the agency will need to
                                     establish alternate plans. The agency should develop a reliable estimate of the costs of these
                                     resources.
Coordination                         The agency should identify stakeholders—individuals and organizations that are involved in
                                     or may be affected by project activities—and ensure that they are included in developing and
                                     executing the project plan, allowing them to contribute appropriately. In addition to internal
                                     communications, management should ensure there are adequate means of communicating
                                     with, and obtaining information from, external stakeholders that may have a significant impact
                                     on the agency achieving its goals.
Risk                                 Risk assessment generally includes estimating the significance of risks from both external
                                     and internal sources, assessing the likelihood of its occurrence, and deciding how to manage
                                     the risk.
Performance evaluation               The agency should describe how goals will be achieved and establish performance indicators
                                     to be used in measuring or assessing the relevant outputs, service levels, and outcomes of
                                     each program activity, and identify a process to monitor and report on progress.
                                         Source: GAO analysis based on the Program Management Institute Information, the Government Performance and Results Act of
                                         1993, and selected GAO reports.



Selection and Expert                     To address our second reporting objective, we identified policy
Assessment of Policy                     approaches that could update VA’s disability benefits structure by
Approaches                               conducting a literature search for relevant reports by disability
                                         commissions, task forces, committees, and GAO. We selected
                                         approaches from the following reports:

                                         •     Advisory Committee on Disability Compensation, Biennial Report
                                               dated 27, July 2010; Interim Report dated 7 July, 2009;
                                         •     CNA, Final Report for the Veterans’ Disability Benefits Commission:
                                               Compensation, Survey Results, and Selected Topics (August 2007);
                                         •     Economic Systems Inc., A Study of Compensation Payments for
                                               Service-Connected Disabilities (September 2008);


                                         Page 37                                                                GAO-12-846 VA Disability Compensation
                       Appendix I: Scope and Methodology




                       •   GAO, SSA and VA Disability Programs: Re-Examination of Disability
                           Criteria Needed to Help Ensure Program Integrity, GAO-02-597
                           (August 2002);
                       •   Institute of Medicine, Committee on Medical Evaluation of Veterans
                           for Disability Compensation, A 21st Century System for Evaluating
                           Veterans for Disability Benefits and PTSD Compensation and Military
                           Service (2007);
                       •   President’s Commission on Care for America’s Returning Wounded
                           Warriors (Dole-Shalala Commission), Serve, Support, Simplify: Report
                           of the President’s Commission on Care for America’s Returning
                           Wounded Warriors (July 2007); and
                       •   Veterans’ Disability Benefits Commission, Honoring the Call to Duty:
                           Veterans’ Disability Benefits in the 21st Century (October 2007).

                       These sources offered numerous recommendations intended to improve
                       VA’s disability benefits structure. We assumed that these high-level
                       commissions and review groups had identified many of the major policy
                       approaches to update VA’s disability benefits structure. We limited
                       selection of policy approaches to those that address more broadly
                       focused updates to VA’s current disability benefits structure, such as
                       changes to the type, timing, or conditions of disability benefits (e.g., levels
                       of benefits and changes in legislative authorities) and those that align with
                       modern concepts of disability. For example, policy approaches of relevant
                       scope would be those that facilitate the participation of people with
                       disabilities in the workforce and society by evaluating and addressing
                       environmental factors that can hinder employment and other activities.
                       For this review, we excluded recommendations aimed at VA’s
                       organizational structure, administrative processes, and management
                       operations (e.g., developing and using performance metrics and
                       improving processes for communicating with veterans).

                       Applying these criteria, we identified three relevant policy approaches: (1)
                       providing quality of life payments, (2) providing integrated vocational
                       services with transitional cash assistance, and (3) systematically factoring
                       assistive technology and medical interventions into rating decisions. To
                       identify other policy approaches, we asked 16 experts and veteran groups
                       what other policy approaches, if any, might improve VA’s disability
                       benefits structure. Of those we interviewed, most said that the policy
                       approaches we selected were the relevant approaches for our research
                       purposes.

Selection of Experts   To obtain information from experts and veteran groups on the
                       opportunities and challenges associated with each approach, we



                       Page 38                                     GAO-12-846 VA Disability Compensation
Appendix I: Scope and Methodology




developed a list of semi-structured interview questions. We conducted
several pretests of the interview questions to validate its structure and
ensure the clarity and logical sequence of the questions asked. During
each semi-structured interview, we obtained information from experts and
veteran groups on several topics, including their general assessments of
the fiscal sustainability, political and administrative feasibility, and
effectiveness of each approach. In addition, we obtained experts’ and
veteran groups’ views on design features—such as eligibility criteria and
the type and duration of payments—that could be considered part of each
policy approach. We also obtained experts’ and veteran groups’
perspectives on the need, if any, to combine two or more policy
approaches. Finally, we analyzed the information obtained from experts
and veteran groups to identify underlying opportunities and challenges
associated with each policy approach.

We selected a nongeneralizable sample of experts who had participated
in disability commissions, research, or a congressional hearing on the
topic, or who serve in an organization that represents veterans with
disabilities. In addition, we selected a group of experts to help ensure a
range of viewpoints. Although many points of view were represented by
our experts, they may not represent the complete range of opinions on
the policy approaches. Table 4 identifies the experts and veteran groups
we interviewed, including their respective title and professional affiliation.

Table 4: Experts and Veteran Groups Interviewed by GAO

Name and title                        Current affiliation
Carl Blake, National Legislative      Paralyzed Veterans of America
Director
Lonnie R. Bristow, Former President   American Medical Association
John F. Burton, Jr., Professor        Rutgers University and Cornell University
Emeritus
Edward Eckenhoff, Founder and         National Rehabilitation Hospital Network
President Emeritus
Bob Epley, Independent Consultant     VA Advisory Committee on Disability
                                      Compensation
Howard H. Goldman, Professor of       University of Maryland, School of Medicine
Psychiatry
Barry A. Jesinoski, Executive Director Disabled American Veterans
George Kettner, President             Economic Systems Inc.
Michael McGeary, Senior Program       Institute of Medicine
Officer
Lori Perkio, Assistant Director       The American Legion



Page 39                                         GAO-12-846 VA Disability Compensation
Appendix I: Scope and Methodology




 Name and title                      Current affiliation
 Sally Satel, Resident Scholar       American Enterprise Institute
 David Stapleton, Senior Fellow      Mathematica Policy Research
 Tom Tarantino, Deputy Policy        Iraq and Afghanistan Veterans of America
 Director
 Rick Weidman, Executive Director for Vietnam Veterans of America
 Policy and Government Affairs
 Ray Wilburn, Senior Analyst         CNA
 Gail R. Wilensky, Senior Fellow     Project HOPE
Source: GAO.




Page 40                                        GAO-12-846 VA Disability Compensation
Appendix II: Comprehensive Revisions and
                                             Appendix II: Comprehensive Revisions and
                                             Other Key Updates to the VA Schedule for
                                             Rating Disabilities (VASRD)


Other Key Updates to the VA Schedule for
Rating Disabilities (VASRD)

                                                         Most recent
                           Most recent                   noncomprehensive revision to
                           comprehensive body            diagnostic codes (since last
                           system update                 comprehensive update)
Body system                (Final rule source)            (Final rule source)         Nature of noncomprehensive change
Musculoskeletal            1945a                         2005                              Reference to conditions to be rated
                                                         (70 Fed. Reg. 75,399, Dec. 20,    analogously to diagnostic code for
                                                         2005)                             atrophic rheumatoid arthritis was revised
Muscle Injuries Section    1997                          Not applicable (n/a)              n/a
                           (Major Revision - 62 Fed.
                           Reg. 30,235, June 3, 1997)
Digestive                  1945                          2001                              Revision of diagnostic codes for residuals
                                                         (66 Fed. Reg. 29,486, May 31,     of injury and cirrhosis of the liver and
                                                         2001)                             revision to weight loss regulation


Neurological Conditions 1961                             2011                              Revised rating criteria for amyotrophic
and Convulsive                                           (76 Fed. Reg. 78,824, Dec. 20,    lateral sclerosis
Disorders                                                2011)
Dental and Oral            1994                         1997                               Relocated portions pertaining to
Conditions                 (59 Fed. Reg. 2530, Jan. 18, (62 Fed. Reg. 8201, Feb. 24,       noncompensable conditions to Part 3
                           1994)                        1997)
Genitourinary              1994                         1994                               Note regarding entitlement to Special
                           (59 Fed. Reg. 2523, Jan. 18, (59 Fed. Reg. 46,339, Sept. 8,     Monthly Compensation (SMC) for
                           1994)                        1994)                              deformity of the penis with loss of erectile
                                                                                           power, testis atrophy and removal
Gynecological              1995                          2002                              Entitlement to SMC for loss of a breast
Conditions/                (60 Fed. Reg. 19,851, April   (67 Fed. Reg. 6874, Feb. 14,
Disorders of the Breast    21, 1995)                     2002; corrected by 67 Fed. Reg.
                                                         37,695, May 30, 2002)
Hemic/Lymphatic            1995                          2012                              Diagnostic code for AL amyloidosis
                           (60 Fed. Reg. 49,227, Sept.   (77 Fed. Reg. 6467, Feb. 8,       (primary amyloidosis) was added
                           22, 1995)                     2012)
Mental Health              1996                          2009                              Post-traumatic stress disorder
                           (71 Fed. Reg. 52,695, Oct. 8, (74 Fed. Reg. 18,467, Apr. 23,    nomenclature change
                           1996)                         2009)
Endocrine                  1996                          n/a                               n/a
                           (61 Fed. Reg. 20,446, May
                           7, 1996)
Infectious Diseases,       1996                          n/a                               n/a
Immune Disorders and       (61 Fed. Reg. 39,875, July
Nutritional Deficiencies   31, 1996)




                                             Page 41                                             GAO-12-846 VA Disability Compensation
                                           Appendix II: Comprehensive Revisions and
                                           Other Key Updates to the VA Schedule for
                                           Rating Disabilities (VASRD)




                                                             Most recent
                         Most recent                         noncomprehensive revision to
                         comprehensive body                  diagnostic codes (since last
                         system update                       comprehensive update)
Body system              (Final rule source)                  (Final rule source)         Nature of noncomprehensive change
Respiratory System       1996                                2006                                                  Substantive revisions to the evaluation
                         (61 Fed. Reg. 46,720, Sept.         (71 Fed. Reg. 52,457, Sept. 6,                        criteria for certain respiratory and
                         5, 1996)                            2006)                                                 cardiovascular conditions, hypertension
                                                                                                                   with heart disease; amended provisions
                                                             (71 Fed. Reg. 28,586, May 17,                         pertaining to tuberculosis for those entitled
                                                             2006)                                                 on August 19, 1968
Cardiovascular           1997                                2006                                                  Substantive revisions to the evaluation
                         (62 Fed. Reg. 65,207, Dec.          (71 Fed. Reg. 52,460, Sept. 6,                        criteria for respiratory and cardiovascular
                         11, 1997)                           2006)                                                 conditions, hypertension with heart
                                                                                                                   disease
Impairment of Auditory   1999                                2003                                                  Amendment on the evaluation of tinnitus
Acuity                   (64 Fed. Reg. 25,210, May           (68 Fed. Reg. 25,822, May 14,
                         11, 1999)                           2003)
Skin                     2002                                2008                                                  Modified evaluation of scars
                         (67 Fed. Reg. 49,590, July          (73 Fed. Reg. 54,708, Sept. 23,
                         31, 2002; corrected by 67           2008; corrected by 77 Fed. Reg.
                         Fed. Reg. 58,448, Sept. 16,         2910, Jan. 20, 2012)
                         2002)
Organs of the Special    2008                                n/a                                                   n/a
Sense                    (73 Fed. Reg. 66,543, Nov.
                         10, 2008)
                                           Source: GAO analysis of VA information and Institute of Medicine report, verified by VA officials.
                                           a
                                            According to the Institute of Medicine report, the “Spine” section was comprehensively updated in
                                           2003 (68 Fed. Reg. 51,454, Aug. 27, 2003).




                                           Page 42                                                                       GAO-12-846 VA Disability Compensation
Appendix III: Key Questions for Designing
              Appendix III: Key Questions for Designing New
              Disability Compensation Programs



New Disability Compensation Programs

              Transforming broad policy approaches into specific programs requires
              that design features be defined. In reference to VA’s disability program for
              veterans, the features relate to the form, amount, and eligibility for the
              payments and services. The following summarizes key questions raised
              during our discussions with experts and veteran groups about the
              possible design of programs for providing quality of life payments,
              providing integrated vocational services with transitional cash assistance,
              and factoring the effects of assistive technology and medical interventions
              systematically into rating decisions.

              Quality of life payments

              •   Should existing veterans be eligible for quality of life payments or just
                  new enrollees?
              •   Should veterans have the opportunity to opt in or out of a new
                  program that provides quality of life payments?
              •   Should quality of life payments supplement earnings loss payments
                  for veterans with low, high, or all disability ratings levels?
              •   Should disability compensation be based primarily on quality of life,
                  with earnings loss payments being made only when actual earnings
                  loss occurs?
              •   How frequently should quality of life payments be provided to veterans
                  (e.g., one-time lump sum, monthly annuity)?
              •   What system should be used to determine payment levels (e.g.,
                  individual assessments or an average loss in quality of life across a
                  group of veterans)?
              •   Should quality of life be inferred from impairment or measured
                  directly?
              •   For veterans receiving quality of life payments and earnings loss
                  payments, should the earnings loss payments end at retirement age?
              Integrating vocational rehabilitation services with disability compensation

              •   Should all veterans be eligible for the program or just veterans shortly
                  after discharge?
              •   Should the program be available for veterans at all disability rating
                  levels or for veterans with lower or higher degrees of disability?
              •   Should the program focus on veterans with certain kinds of
                  impairments?
              •   Should the payments be provided while the veteran participates in
                  vocational rehabilitation, education, or training programs (i.e., for a
                  longer rehabilitative period)? Or, should the payments also be
                  provided on a short-term basis to support a veteran’s return to the
                  community?



              Page 43                                         GAO-12-846 VA Disability Compensation
Appendix III: Key Questions for Designing New
Disability Compensation Programs




•   Should the loss of earnings be periodically reassessed following a
    temporary rehabilitation period?
Assistive technology and medical interventions

•   Should VA assess the effects of assistive technology and medical
    interventions during the disability examination process?
•   Should an assessment of the effects of assistive technology and
    medical interventions only be considered for future
    enrollees/veterans?
•   Should VA incorporate the anticipated effects of assistive technology
    and medical interventions only when a veteran actually uses them?
•   Should VA incorporate the estimated effects of assistive technology
    and medical interventions?
•   Should VA limit the incorporation of the effects of assistive technology
    and medical interventions to those with empirically-based
    demonstrations of their effectiveness?




Page 44                                         GAO-12-846 VA Disability Compensation
Appendix IV: Comments from the
             Appendix IV: Comments from the Department
             of Veterans Affairs



Department of Veterans Affairs




             Page 45                                     GAO-12-846 VA Disability Compensation
Appendix IV: Comments from the Department
of Veterans Affairs




Page 46                                     GAO-12-846 VA Disability Compensation
Appendix IV: Comments from the Department
of Veterans Affairs




Page 47                                     GAO-12-846 VA Disability Compensation
Appendix V: GAO Contact and Staff
                  Appendix V: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  Daniel Bertoni, (202) 512-7215 or bertonid@gao.gov.
GAO Contact
                  In addition to the contact named above, individuals making key
Staff             contributions to this report were Brett Fallavollita, Assistant Director;
Acknowledgments   Alison Grantham; Mark Ward; and James Whitcomb. In addition, key
                  support was provided by James Bennett, Tim Carr, David Chrisinger, Alex
                  Galuten, Kristen Jones, Jean McSween, Patricia Owens, and Almeta
                  Spencer.




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                  Page 48                                  GAO-12-846 VA Disability Compensation
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