[Senate Hearing 109-425]
[From the U.S. Government Printing Office]



                                                        S. Hrg. 109-425


 
  THE RISING NUMBER OF DISABLED VETERANS DEEMED UNEMPLOYABLE: IS THE 
   SYSTEM FAILING? A CLOSER LOOK AT VA'S INDIVIDUAL UNEMPLOYABILITY 
                                BENEFIT

=======================================================================

                                HEARING

                               BEFORE THE

                     COMMITTEE ON VETERANS' AFFAIRS

                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 27, 2005

                               __________

       Printed for the use of the Committee on Veterans' Affairs


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 senate



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                     COMMITTEE ON VETERANS' AFFAIRS


        .........................................................


                    Larry E. Craig, Idaho, Chairman
Arlen Specter, Pennsylvania          Daniel K. Akaka, Hawaii, Ranking 
Kay Bailey Hutchison, Texas              Member
Lindsey O. Graham, South Carolina    John D. Rockefeller IV, West 
Richard Burr, North Carolina             Virginia
John Ensign, Nevada                  James M. Jeffords, (I), Vermont
John Thune, South Dakota             Patty Murray, Washington
Johnny Isakson, Georgia              Barack Obama, Illinois
                                     Ken Salazar, Colorado


                  Lupe Wissel, Majority Staff Director
               D. Noelani Kalipi, Minority Staff Director

                            C O N T E N T S

                              ----------                              

                            October 27, 2005

                                SENATORS

                                                                   Page


Craig, Hon. Larry E., U.S. Senator from Idaho....................     1
Akaka, Hon. Daniel K., U.S. Senator from Hawaii..................     3
Murray, Hon. Patty, U.S. Senator from Washington.................     3
Salazar, Hon. Ken, U.S. Senator from Colorado, prepared statement     6
Thune, Hon. John, U.S. Senator from South Dakota.................    20
Jeffords, Hon. James M., U.S. Senator from Vermont...............    20

                                WITNESS

Statement of Hon. Daniel Cooper, Under Secretary for Benefits, 
  Department of Veterans Affairs; accompanied by Renee Szybala, 
  Director, Compensation and Pension Service; Judith Caden, 
  Director, Vocational Rehabilitation and Employment Service; and 
  Patrick Joyce, M.D., Chief of Occupational Health, Washington 
  VA Medical Center..............................................     7
    Prepared statement...........................................     9
    Response to written questions submitted by:
        Hon. Larry E. Craig......................................    12
        Hon. Daniel K. Akaka.....................................    17
        Hon. Patty Murray........................................    18
        Hon. James M. Jeffords...................................    19
Statement of Cynthia Bascetta, Director, Education, Workforce and 
  Income Security Issues, U.S. Government Accountabilty Office...    31
    Prepared statement...........................................    33
    Response to written questions submitted by Hon. Larry E. 
      Craig......................................................    41
Statement of Rick Surratt, Deputy National Legislative Director, 
  Disabled American Veterans.....................................    42
    Prepared statement...........................................    43
    Response to written questions submitted by:
        Hon. Larry E. Craig......................................    49
        Hon. Daniel K. Akaka.....................................    51

                                APPENDIX

Article, ``VA's Bad Review,'' October, 26, 2005..................    63


  THE RISING NUMBER OF DISABLED VETERANS DEEMED UNEMPLOYABLE: IS THE 
   SYSTEM FAILING? A CLOSER LOOK AT VA'S INDIVIDUAL UNEMPLOYABILITY 
                                BENEFIT

                              ----------                              


                       THURSDAY, OCTOBER 27, 2005

                               U.S. Senate,
                    Committee on Veterans' Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:04 p.m., in 
room 418, Russell Senate Office Building, Hon. Larry Craig 
(Chairman of the Committee) presiding.
    Present: Senators Craig, Thune, Isakson, Akaka, Jeffords, 
Murray, Obama, and Salazar.

           OPENING STATEMENT OF HON. LARRY E. CRAIG, 
                    U.S. SENATOR FROM IDAHO

    Chairman Craig. Good afternoon, ladies and gentlemen, and 
welcome to the Veterans' Affairs Committee.
    We have entitled this hearing ``The Rising Number of 
Disabled Veterans Deemed Unemployable: Is the System Failing?'' 
Today the Committee will take a closer look at what I would 
consider a ``benefit of last resort.'' I am, of course, 
speaking about VA's individual unemployability, or ``IU,'' 
benefit.
    With today's modern technology, individuals with 
disabilities have more opportunities than ever before to become 
productive members of society. I want to hear what VA is doing 
to make sure these opportunities are made available to the 
brave men and women who have served our country in uniform. 
This is not only good for the mental health and long-term 
financial benefit of our veterans, but for America's own 
socioeconomic vitality. We know that employment has salutary 
effects on our physical and mental health and that it improves 
our self-esteem. In a brochure published by the National Mental 
Health Association, individuals with mental illness are 
encouraged to pursue employment opportunities on their path to 
recovery. The brochure reads, and I quote, ``People who have 
recovered say that meaningful work, including volunteer jobs, 
is one of the biggest aids to their getting and staying well.'' 
Even spiritual leaders recognize the virtues of employment. 
John Paul II wrote that, ``Work is a good thing for man . . . 
something worthy . . . something that corresponds to man's 
dignity, that expresses this dignity and increases it.''
    With that understanding of what employment means to our 
health and sense of self-worth, the chart behind me represents 
what I call a worrisome trend. As you can see, there has been 
an alarming increase in the number of veterans deemed 
unemployable by VA, a 107 percent increase between 1999 and the 
year 2004. Those veterans are in receipt of a benefit that is 
based, in essence, on an undesirable life circumstance, a life 
circumstance that has no positive effect on health of mind, 
body or soul. As I said at the outset, any benefit based on 
such a life circumstance should rightly be described as a 
benefit of last resort. While the benefit may certainly be 
appropriate for some, the presumption must be that every 
individual with disabilities can overcome barriers to 
employment. A positive, employment-oriented attitude toward 
veterans with disabilities must be VA's focus, and the 
eligibility assessment of IU should reflect that attitude.
    The increase in IU beneficiaries presents the Committee 
with various questions: Does VA use its vast health and 
vocational rehabilitation resources to help veterans with 
disabilities obtain jobs and to avoid an unemployability label? 
If IU is granted, are veterans abandoned in that status, or 
does VA conduct appropriate follow-up? Does this benefit do a 
disservice to veterans by incentivizing unemployment?
    Fundamental to our inquiry is to establish an understanding 
of what the purpose of IU is and the standard VA uses in 
determining eligibility for it. One of the stunning things I 
learned in preparation for this hearing is the age demographic 
of IU beneficiaries. As you can see from the charts behind me, 
a fair number of IU recipients are well beyond traditional 
retirement ages. These charts beg a question that I think is 
clearly obvious: Why is a benefit based on unemployability 
being paid to individuals who, on account of age, would likely 
not be looking for work anyway? In other words, they are at the 
retirement age by even today's modern terms. These charts are 
reflective of what I believe is a concern.
    Fortunately, we are joined this afternoon by witnesses who 
can help us find some answers to all of these questions. On our 
first panel we are joined by the Hon. Daniel Cooper--Dan, thank 
you for being here--VA Under Secretary for Benefits. He is 
accompanied by Renee Szybala, Director of the Compensation and 
Pension Service; Judith Caden, Director of Vocational 
Rehabilitation and Employment Services; and Dr. Patrick Joyce, 
Chief of Occupational Health at the Washington VA Medical 
Center.
    On our second panel we are joined by Richard Surratt, 
Deputy, National Legislative Director of the Disabled American 
Veterans; and Cynthia Bascetta, Director of Education, 
Workforce and Income Security at the Government Accountability 
Office.
    So I want to welcome all of you this afternoon, and thank 
you for the time it has taken for you to prepare for this 
hearing.
    Before we go to our first panel, we have been joined by 
several of our colleagues. Let me turn first to the Ranking 
Member, Senator Danny Akaka.
    Senator Akaka.

         STATEMENT OF HON. DANIEL AKAKA, U.S. SENATOR 
                          FROM HAWAII

    Senator Akaka. Thank you very much, Mr. Chairman. I join 
you today in this very important hearing. As you mentioned, we 
certainly would like to know more about IU.
    I first want to add my welcome to our panelists here, as we 
will examine a very important benefit granted by the Department 
of Veteran Affairs, individual unemployability, commonly 
referred to as IU.
    Individual unemployability has existed since the beginning 
of the last century. Congress understood that the VA rating 
schedule cannot always capture the degree that an injury or 
disease impairs an individual. At the outset, let me say that I 
agree with this sentiment, because each person is unique. 
Individual unemployability is necessary to overcome the 
inadequacies of the rating schedule. We can all agree that VA 
should do everything in its power to help rehabilitate injured 
veterans.
    Currently various programs within VA such as compensation 
and pension, vocational rehabilitation and employment and 
health care, do not work together when determining ratings for 
certain claims including IU. Bringing everyone to the table 
when making IU determinations for individual veterans would 
require a major increase in funding. I want to hear more about 
this today.
    We all know about the funding shortfall VA health care had 
earlier this year. VA finally admitted it had a funding 
shortfall after months of pressure from myself and my 
colleagues as well. We do not want this repeated in the 
benefits arena. I sincerely hope that VA is provided with 
adequate funding if Congress decides to revamp IU.
    I am also concerned about VA's capability to simultaneously 
conduct its PTSD review and possibly restructure IU. Congress 
has not been provided with the funding and staffing needed for 
a PTSD review, which will be a major burden on VA resources. It 
seems ill-advised for Congress to initiate another project for 
the VA such as restructuring IU without hard facts on the PTSD 
review.
    Lastly, and perhaps most importantly, I am concerned about 
the message that changing IU would send to our veterans. The 
PTSD review has sent shockwaves through the veteran community. 
A change in IU or other veterans benefits may have a similar 
effect. I view this as the perfect storm. I question whether it 
is equitable for veterans and in the best interest of the VA to 
follow this path during a time of conflict abroad. I urge the 
VA, when discussing IU, PTSD, or any other benefit issue, to 
maintain an open dialog with veterans and Congress.
    Mr. Chairman, again, I thank you and the panelists, and 
look forward to their testimony.
    Chairman Craig. Senator, Thank you very much.
    Now let me turn to our colleague, Senator Patty Murray.
    Patty, thank you and thank you for being here.

         STATEMENT OF HON. PATTY MURRAY, U.S. SENATOR 
                        FROM WASHINGTON

    Senator Murray. Thank you very much, Mr. Chairman, and 
thank you and the Ranking Member for hosting today's hearing, 
and of course I want to thank both of our panels who will be 
here with us today.
    Mr. Chairman, I am very concerned about the need to provide 
employment services to our veterans, but there are some 
veterans who, because of their injuries, are simply unable to 
work. We need to ensure that we are taking care of them in the 
most effective way possible.
    I do not think the system is broken. We are providing the 
individual unemployability benefit we promised our severely 
disabled veterans. But I do think it is essential that we 
ensure that veterans who are receiving, or are in the process 
of receiving IU have access to medical and employment services.
    I am very concerned, Mr. Chairman, that an effort to 
increase the scrutiny placed on severely disabled veterans 
would really increase the stigma on veterans who are trying to 
access the resources that they have been promised. I am very 
concerned that this will hurt our veterans.
    I also really worry that a review will demand increasing 
the VA's discretionary budget by substantial amounts with 
little known or quantifiable benefit. I know we are here today 
to talk about veterans who have been granted IU benefits 
because their disabilities were categorized, after much 
scrutiny, by the way, at 70 percent or more. This means that 
beyond physical injuries that prevent them from participating 
in many activities, they could have trouble with mental health 
issues such as suicidal thoughts, problems with speech, near 
continuous panic or depression, impaired impulse control, and 
difficulty in adapting to stressful environments.
    It seems to me to mandate new screenings and work endlessly 
to get veterans with a 70 percent disability rating to work 
seems unnecessarily burdensome for many of our disabled 
veterans. As much as I wish that I could sit here and say they 
will easily work again, I think reality has shown us it is a 
constant and severe struggle.
    I believe in providing employment services to disabled 
veterans, but the States cannot provide services for these 
individuals, and the applicable jobs are really very few and 
far between. I question any effort to force more disabled 
veterans off IU and into the workplace when we have not worked 
to fund the services they need or to help create the jobs that 
they are fit for.
    In my home State of Washington, disabled individuals have a 
70 percent unemployment rate, and I suspect that is probably 
close to the national average. That means 14,000 people are 
waiting for vocational rehab. So when we talk about trying to 
force disabled veterans to seek employment instead of IU, we 
are talking about forcing them to compete with thousands of 
other disabled Americans.
    I want to be clear. I oppose any effort to increase the 
scrutiny of our veterans' claims solely to save money, 
especially when chances are that veterans more than 70 percent 
disabled will likely find it extremely difficult to get and 
keep employment. In fact, the proposed review of 72,000 PTSD 
cases has already increased the stigma surrounding PTSD, and on 
top of the 800,000 cases the VBA needs to review this year, 
these cases will drain limited resources and delay benefits to 
thousands of our veterans. Any review sets a dangerous 
precedent and increases the stigma against our veterans and it 
will drain limited VBA resources.
    Mr. Chairman, one veteran in New Mexico has tragically 
committed suicide due to this review. I want to enter into the 
record an article about Greg Morris. He's a Vietnam veteran who 
killed himself last week. The article states, and I want to 
quote. It says:

          On October 8th, Greg Morris, 57, was found by his wife, 
        Ginger, in their home in Chama, New Mexico. For years Morris 
        had been receiving monthly VA benefits in compensation for post 
        traumatic stress disorder. Next to his gun and purple heart was 
        a folder of information on how the VA planned to review 
        veterans who received PTSD checks to make sure those veterans 
        really deserved the money.

    I think the scrutiny needs to stop. This Committee needs to 
have a clear understanding of what the VA will get out of any 
effort to look harder at benefits before moving forward with 
another effort.
    Last week I hosted a hearing of the Employment and 
Workplace Safety Subcommittee on Enhancing Cooperation Between 
Employers and Guardsmen Reservists. That hearing clearly 
highlighted the vital need to increase resources for our Guard 
and Reserve to help them access employment after their service 
in Iraq and Afghanistan. I think instead of looking for ways to 
strip severely disabled veterans' benefits, this Committee 
ought to be examining how we can have a full hearing on USERA 
and TAP and Labor VETS and other programs that help our 
veterans get employment. I think we should analyze why the 
system is failing our Guard, Reserve and other veterans, and 
although I think efforts need to be made to provide veterans 
with employment assistance, I stbelieve we should direct our 
focus to those who are more likely to find employment.
    We have talked, Mr. Chairman, you and I, about the budget 
with the VA many times. I have to say I am very concerned about 
any proposals that are put forth here today if they would 
demand increased funding to get veterans with 70 percent 
disability fully employed. I wish that could happen, but after 
13 years working on many of these issues I think it is fair to 
say, as much as we hate to say it, that some square pegs just 
do not fit in a round hole no matter how hard you push.
    In the meantime we need to remember that we have thousands 
of Iraq veterans who are trying to get help with employment. We 
should be asking, what we are trying to do to improve services 
for them? I do not understand why we are focusing on stripping 
benefits from disabled veterans when we have thousands of Iraqi 
veterans today who need our help getting jobs.
    If we are concerned about the increased number of veterans 
who are getting IU, why are we not working harder to get those 
thousands of OIF and OEF veterans, who are coming back every 
day, jobs? Those are the questions that I will have for this 
Committee today, and I think our Nation's veterans deserve an 
answer.
    Thank you, Mr. Chairman.
    Chairman Craig. Thank you, Patty.
    Senator Salazar, Ken, do you have any opening comment 
before we turn to our panel?
    Senator Salazar. Thank you, Mr. Chairman, and Senator Akaka 
for holding this hearing. I have a statement, but I will just 
submit it for the record.
    Chairman Craig. Thank you.
    [The prepared statement of Senator Salazar follows:]
   Prepared Statement of Hon. Ken Salazar, U.S. Senator from Colorado
    Thank you, Chairman Craig and Senator Akaka, for bringing attention 
to this important issue.
    I think most of us, inside and out of VA, would agree that 
Individual Unemployability is a vital tool in VA's benefit adjudication 
process. It allows VA to look at veterans individually and provide fair 
treatment on a case-by-case basis, where the disability ratings 
schedule does not.
    Many of us would also agree that the way VA administers IU has also 
led to some significant problems. These include inconsistent 
application of IU across the country, disincentives for mental health 
treatment and for work, and in some limited cases the possibility of 
fraud and abuse.
    However, I think there is significant disagreement about what to do 
about these problems.
    The problems with IU are symptoms of the same disease that causes 
veterans to wait years for disability claim decisions and currently 
keeps 340,000 veterans in bureaucratic limbo as they wait for claims 
decisions. VBA's claims adjudication process is broken.
    One symptom of this is that tens of thousands--perhaps hundreds of 
thousands--of veterans are not getting the benefits they deserve. The 
other is that VA is unable to stop some instances of fraud and abuse. 
These two problems come from the same source.
    We cannot minimize the importance of fraud. Every dollar that goes 
to a fraudulent claim or is lost because of administrative 
inefficiencies could, in theory, be devoted to better care for 
veterans. If the VBA were able to crack down on legitimate IU fraud, it 
could save taxpayers hundreds of millions of dollars.
    However, any cure that fails to address the long waiting lists, 
deferred benefits, and underlying problems at VBA is unfair to our 
Nation's veterans.
    The VA's proposed plan to review 72,000 PTSD cases, including IU 
cases, is a perfect example of a one-sided, unfair approach. This 
review will only look at mistakes made in giving veterans full 
benefits, not at cases where veterans might be eligible for additional 
assistance. I am proud that the U.S. Senate passed legislation to put a 
check on this review. And I am proud to work with my colleagues 
Senators Obama, Akaka, Murray, Rockefeller, and Durbin to fight for 
this legislation.
    We need comprehensive and fair approaches to dealing with IU's 
problems.
    I support efforts to strengthen VA's ability to verify IU 
eligibility, so long as there are not undue burdens on applying 
veterans. I support efforts to improve the mental and physical health 
of our veterans so that they can re-enter the workforce and lead more 
fulfilling lives. However, private-sector back-to-work initiatives that 
include penalties and reduced benefits would be inhumane if applied to 
our disabled veterans. I support efforts to standardize IU ratings for 
PTSD, so long as the complexities of individual mental health cases are 
not ignored.
    The IU system can be reformed, but we have to recognize that 
Veterans benefits are not the same as private sector disability or 
unemployment insurance. Veterans have earned a special status because 
of their service to the Nation.
    Another step we need to take immediately is fixing the concurrent 
receipt problem for our IU veterans. They should not have to wait years 
for the benefits they have earned. I hope this Committee can address 
that issue soon.
    Over the long term, we need to make sure that VBA and BVA have the 
manpower, and resources to do their jobs. We also need to continue 
improving the fairness and efficiency of the system. We need to 
continue adjusting the system, from gradual small administrative 
changes, such as improving quality-control measures, to more 
significant legislative reforms, such as simplifying the appeals 
process in a way that preserves veterans' rights.
    I thank the Chair for my time and look forward to the hearing.

    Chairman Craig. Patty, I would only say, before we turn to 
the panel, this is not about round pegs in square holes. This 
is about round pegs in round holes and square pegs in square 
holes, and it is the job of this Committee for thorough and 
responsible oversight. This is not about reforming a program 
until we understand the program. And we do not understand the 
program until we open the door, shed in the light, and look at 
it. I will never step back from oversight, as critical as it 
may be perceived in the beginning, or even the results in the 
end. It is our fiduciary and responsibility to all veterans to 
make sure that the services we are paying for them get to them.
    I would hope you would view this hearing in that context, 
and not as a ``gotcha,'' but as a ``helps ya.'' That is the 
intent of this hearing.
    Senator Murray. I appreciate that, Mr. Chairman. I would 
just say, that I agree it is extremely important that we spend 
our money wisely, but we have to do it in a way that does not 
target veterans who are receiving these resources for very 
serious reasons and make them feel guilty----
    Chairman Craig. Then let us find out if that is the case. 
Thank you.
    Let us turn to our first panel. Dan, thank you very much 
for being here with your staff and those who are providing 
these services at VA. We look forward to your testimony. Please 
proceed.

    STATEMENT OF HON. DANIEL L. COOPER, UNDER SECRETARY FOR 
BENEFITS, DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY RENEE 
  SZYBALA, DIRECTOR, COMPENSATION AND PENSION SERVICE; JUDITH 
   CADEN, DIRECTOR, VOCATIONAL REHABILITATION AND EMPLOYMENT 
SERVICE; AND PATRICK JOYCE, M.D., CHIEF OF OCCUPATIONAL HEALTH, 
                  WASHINGTON VA MEDICAL CENTER

    Mr. Cooper. Thank you, sir. Mr. Chairman, Members of the 
Committee, thank you for the opportunity to review with you 
this important issue of individual unemployability. I am 
pleased to be accompanied, as you stated, by Ms. Renee Szybala, 
who is Director of the Compensation and Pension Service; Ms. 
Judith Caden, who is Director of the VA's Vocational 
Rehabilitation and Employment Service; and Dr. Patrick Joyce, 
who is Chief Physician of Compensation and Pension Program at 
the Washington, DC VA Medical Center.
    Individual unemployability, or IU, is the basis upon which 
VA pays service-connected disability compensation at the 100-
percent rate to qualified veterans with combined ratings that 
are less than 100 percent. The VA rating schedule provides for 
an award of IU benefits when the veteran is unable to secure 
substantially gainful employment or occupation as a result of 
his or her service-connected disabilities. To be eligible for 
IU benefits, the rating schedule requires that a veteran have 
either a single 60-percent disability evaluation or a combined 
evaluation of 2 or more disabilities at 70 percent, with one of 
those 2 or more being a 40-percent disability.
    The 1945 rating schedule established that age was not to be 
considered a factor in evaluating service-connected disability, 
and an entitlement to IU could not be based on advancing age or 
additional non-service-connected disability.
    The number of veterans rated totally disabled based on IU 
has more than doubled in the last 6 years. There are several 
factors that possibly have had an impact on this increase. I 
cannot evaluate the degree to which each has impacted it.
    Since 1999, the number of veterans receiving disability 
compensation on our rolls in total has increased 17 percent 
from 2.2 million in 1999 to 2.6 million today. There has also 
been an increase in the average combined evaluation over the 
same period. Advancing age, diabetes, various presumptive 
cancers, as well as a significant increase in a number of 
veterans awarded service connection for PTSD, account for a 
substantial portion of this increase. However, court decisions 
in 1999 and since, have also had a direct impact on our 
ratings. They specifically held that VA must infer a claim for 
IU if the veteran's claim for increased disability meets the 
combined evaluation criteria which I mentioned, and that there 
is evidence of inability to engage in substantially gainful 
employment due to service-connected disability.
    VA has not and does not currently require an employment 
assessment by vocation or rehabilitation staff as part of the 
IU determination. A veteran's participation in a program of 
rehabilitation, education and training does not preclude a 
total disability rating based on IU. However, every veteran who 
receives an original claim or an increase in disability will 
receive the information on our VR&E program and be strongly 
encouraged to participate in that Vocational Rehabilitation and 
Employment program.
    Veterans with IU ratings may receive vocation and 
rehabilitation benefits under the VR&E program. Our regulations 
allow a veteran who is receiving IU benefits to work 12 
consecutive months in substantially gainful employment before 
any change can be made in the IU determination.
    If the rating official finds that a medical examination is 
necessary to determine entitlement to IU, an examination or 
opinion request is then submitted. The medical examiner's 
report should describe the specific disability effect on the 
veteran's daily activities and his or her ability to work. Once 
a veteran is awarded IU benefits and until age 70, submission 
of an annual employment certification is required. This 
procedure was resumed this September after having been 
suspended for approximately 6 years.
    Veterans receiving IU benefits are subject to VA's annual 
income verification match. The income verification match uses 
Internal Revenue Service and Social Security Administration 
income records to identify IU beneficiaries with earned income 
above the earnings threshold.
    The Inspector General's recent review of compensation 
payment found that a disability payment variance among the 
various States was affected by several factors, including 
demographics, as well as the incidence of PTSD and the 
subsequent award of IU benefits based on that condition. The 
well-publicized findings of the IG, as well as a significant 
increase in the number of identified IU cases with apparent 
income above the poverty threshold, led us to examine our 
existing IU procedures and regulations to determine if changes 
were needed.
    We have reinstated the annual employment certification. We 
have also reinforced existing procedural guidelines for IU 
determinations. We will continue to work to provide additional 
training for employees and to identify ways to strengthen and 
clarify our procedural requirements to ensure the integrity and 
the consistency of this very important benefit.
    The IU benefit has a long history, going back to 1934. It 
does fill a critical gap when the ratings schedule fails to 
adequately address the impact of disability in a specific 
veteran's circumstance. We believe that IU continues to be an 
essential tool in serving America's veterans, and fulfilling 
the country's commitment to them. We will continue to work to 
ensure that those who have served the Nation are properly 
compensated for their injuries and fully assisted in returning 
to participation in society to the maximum extent possible 
permitted by their injuries.
    Thank you for this opportunity to discuss this with you, 
sir, and I am ready to answer any questions.
    [The prepared statement of Mr. Cooper follows:]

   Prepared Statement of Hon. Daniel L. Cooper, Under Secretary for 
                Benefits, Department of Veterans Affairs

    Mr. Chairman and Members of the Committee: Thank you for the 
opportunity to review with you the issue of Individual Unemployability 
(IU). I will discuss what IU is, its history, the criteria used to 
determine eligibility, the number of veterans receiving IU benefits, 
the May 2005 study by the Inspector General (IG) of State variances in 
average annual compensation, and other issues. I am pleased to be 
accompanied by Ms. Renee Szybala, Director of VA's Compensation and 
Pension Service, and Ms. Judith Caden, Director of VA's Vocational 
Rehabilitation and Employment Service.

                               WHAT IS IU

    Individual Unemployability or IU is the basis on which the 
Department of Veterans Affairs pays service-connected disability 
compensation at the rate payable for a 100-percent evaluation to 
qualified veterans with combined evaluations that are less than 100 
percent. Regional office decisionmakers assign IU ratings when veterans 
meet minimum combined evaluation criteria and, in the judgment of the 
rating official(s), are unemployable due solely to their service-
connected conditions. In exceptional circumstances, regional offices 
may refer cases that fail to meet the minimum combined evaluation 
criteria to the Director of the Compensation and Pension Service for 
consideration of an IU rating.

                               AUTHORITY

    Section 1155 of title 38, United States Code, charges the Secretary 
with responsibility for developing and applying a disability rating 
schedule that is based, ``as far as practicable,'' upon the average 
impairments of earning capacity resulting from service-connected 
disabilities. Recognizing that the intent of the rating schedule is to 
fairly compensate veterans for their disabilities to the extent to 
which they impair earning capacity of the average veteran, the schedule 
none-the-less cannot always adequately compensate an individual veteran 
in his or her particular circumstance. To address the inevitable 
situations where the schedule does not adequately address a particular 
fact pattern, the schedule adopted by the Secretary provides both IU 
and extra-schedular provisions.

                          BRIEF HISTORY OF IU

    In 1925, the Schedule for Rating Disabilities provided the first 
definition of total disability. Total disability was defined as an 
impairment of mind or body that is sufficient to render it impossible 
for the average person to follow a substantially gainful occupation.
    In 1934, total disability was expanded to provide that total 
disability ratings may be assigned without regard to the specific 
provisions of the rating schedule when the veteran is, in the judgment 
of the rating agency, unable to follow a substantially gainful 
occupation as a result of the veteran's disabilities. To be eligible 
for consideration for IU benefits, the schedule required that a veteran 
have a single 70-percent evaluation or, if the veteran had multiple 
service-connected conditions, that the minimum combined evaluation be 
80 percent with at least one disability considered 60-percent 
disabling.
    In 1941, the minimum requirements for consideration for IU 
entitlement were revised to today's standard of 60 percent for a single 
disability or a combined 70-percent evaluation with at least one 40-
percent disability.
    Throughout the rating schedule, a 60 percent evaluation or higher 
reflects significant disability. A 40-percent evaluation assigned to a 
condition generally reflects a serious handicap. Therefore, when 
multiple service-connected conditions are involved, the higher 70-
percent minimum combined evaluation is reasonable to allow for the 
interplay of multiple disabilities.
    The 1945 rating schedule established that age was not to be 
considered a factor in evaluating service-connected disability, and 
that entitlement to IU could not be based on advancing age or 
additional non-service-connected disability.
    Under VA regulations, if a veteran's earned income does not exceed 
the amount established by the U.S. Department of Commerce, Bureau of 
the Census, as the poverty threshold for one person, currently $9,570, 
the veteran is only marginally employed, and marginal employment does 
not qualify as substantially gainful employment. Also, the U.S. Court 
of Appeals for Veterans Claims held in Faust v. West that employment 
that provides annual income exceeding the poverty threshold for one 
person, irrespective of the number of hours or days actually worked and 
without regard to the veteran's annual earned income prior to the award 
of the IU rating, constitutes ``actual employability.''

                       NUMBER OF IU BENEFICIARIES

    The number of veterans rated totally disabled based on IU has more 
than doubled in the past 6 years from 97,275 veterans in 1999 to over 
221,000 veterans today.
    There is no single clear explanation for the increase in IU ratings 
over the last 6 years. However, the rise has occurred concurrent with 
other significant changes. Since September 30, 1999, the number of 
veterans receiving compensation has increased from 2,252,980 to 
2,636,979 at the end of fiscal year 2005. This increase of 383,999 
veterans represents a 17-percent rise in the number of veterans 
receiving compensation. There has also been an increase in the average 
combined disability evaluation over the same period. At the end of 
1999, 57 percent of all veterans receiving compensation had combined 
evaluations of 30 percent or less. Today it is 46 percent. The percent 
of veterans with combined evaluations of 60-percent disability or more 
has increased from 17 percent at the end of 1999 to the current 29 
percent. An interplay of advancing age, diabetes, and various 
presumptions of service connection for cancers associated with 
herbicide and radiation, as well as a significant increase in the 
number of veterans awarded service-connection for PTSD, account for a 
substantial portion of the increase.
    Recent court decisions have also had an impact on IU ratings. For 
example, in 1999, the U.S. Court of Appeals for Veterans Claims in 
Norris v. West held that VA must infer a claim for IU if the veteran 
files a claim for increased disability, meets the schedular minimum 
combined evaluation criteria, and there is evidence of inability to 
engage in substantially gainful employment due to service-connected 
disability.

     INTERPLAY WITH VOCATIONAL REHABILITATION AND EMPLOYMENT (VR&E)

    In its September 1987 report, ``Improving the Integrity of VA's 
Unemployability Compensation Program,'' the then General Accounting 
Office (GAO) recommended that VA revise its regulations to require that 
all veterans applying for a total disability rating based on IU be 
referred for a vocational rehabilitation evaluation.
    VA does not currently require an employment assessment by VR&E 
program staff as part of the IU entitlement determination. If the 
Secretary decided to require an employment assessment in connection 
with determining a veteran's entitlement to IU, VA would first 
promulgate regulations defining the scope, purpose, and criteria for 
conducting such an assessment, and the manner in which VA would 
implement such assessments.
    A veteran's participation in a program of rehabilitation, 
education, or training does not preclude a total disability rating 
based on IU. Veterans with compensable service-connected disabilities, 
including those with IU ratings, may be entitled to receive vocational 
rehabilitation benefits under the VR&E program (chapter 31, title 38, 
United States Code). VA also may not deny a veteran's IU claim on the 
basis that he or she is participating in a Veterans Health 
Administration (VHA) program of therapeutic and rehabilitative 
services, or consider therapeutic and rehabilitative activities as 
evidence of a veteran's ability to secure or follow a substantially 
gainful occupation. Our regulations allow a veteran receiving IU 
benefits to work 12 consecutive months in substantially gainful 
employment before any change is made in the IU determination.

                          ADDITIONAL BENEFITS

    A total disability rating based on IU can result in eligibility for 
additional benefits for a veteran's dependents and survivors. 
Educational benefits for the veteran's spouse and eligible children are 
available under the Survivors' and Dependents' Educational Assistance 
Program (title 38, United States Code, chapter 35). The Civilian Health 
and Medical Program of the Department of Veterans Affairs (CHAMPVA) 
provides reimbursement to eligible dependents for most medical 
expenses, provided that they are not also eligible for health care 
benefits provided by the Department of Defense. To be eligible for both 
of these benefits, the veteran's IU determination must be considered 
permanent. Permanency for eligibility to chapter 35 and CHAMPVA 
requires that there not be a future examination scheduled.

                          APPLICATION PROCESS

    In most cases, to be considered for IU benefits, a veteran must 
apply. However, in the Norris case mentioned earlier, the court held 
that a veteran need not apply for IU for a claim for IU to be inferred. 
Thus, VA is required to consider the issue in certain circumstances, 
even if the veteran did not explicitly apply for an IU rating. Recent 
guidance to the field directed that, once an IU claim is inferred, an 
application must be sent to the veteran for completion in order to 
obtain the essential information requested on the application form. The 
form asks the veteran to furnish an employment history for the 5-year 
period preceding the date on which the veteran became unemployable, as 
well as from that date to the date of application.
    As part of the development of IU claims, field stations are also 
required to solicit information from each employer during the 12-month 
period preceding the date the veteran last worked. The employer is 
asked to provide information concerning the veteran's employment 
history including the date of employment, the type of work performed, 
and if the veteran is not currently working, the reasons for 
termination of employment.

                      ROLE OF THE MEDICAL EXAMINER

    If the rating official determines that a medical examination is 
necessary to determine whether a veteran is entitled to a total 
disability rating based on IU, an appropriate examination or opinion 
request is submitted to a VHA medical facility or our contract 
examination provider.
    Medical examiners follow the appropriate worksheets to perform a 
complete and adequate examination for rating purposes, answering all 
questions and providing opinions as requested. A diagnosis is to be 
provided for every condition listed on the examination request. The 
medical examiner should describe the disability's effect on the 
veteran's daily activities and ability to work. For IU claims, the 
examiner should also obtain the veteran's occupational history (i.e., 
type of occupation, employment dates, wages for last 12 months, and 
detail any time that was lost from work in past 12-month period).

                        CONTINUED IU ELIGIBILITY

    Once a veteran is awarded IU benefits and until he or she attains 
age 70, the veteran is required to submit an annual employment 
certification. This procedure was resumed in September after having 
been suspended for approximately 6 years. The veteran must list all 
employment for the preceding 12-month period. VA uses the certification 
to verify continued entitlement to IU benefits. Failure to return the 
form will cause VA to send the veteran a contemporaneous notice of 
reduction of the monthly benefit payment to the rate justified by the 
underlying rating.
    VA may schedule a reexamination for any veteran when VA determines 
there is a need to verify the continued existence or current severity 
of a disability. Generally, VA requires re-examination if it is likely 
that a disability has improved or if evidence indicates that a 
disability has materially changed or that the current rating may be 
incorrect. Periodic future examinations are not requested if the 
disability is unlikely to improve, if symptoms have persisted without 
material improvement for a period of 5 or more years, where the 
disability is permanent in character, or in cases where the veteran is 
age 55 or older. After a veteran has received compensation at any level 
of disability for 20 years, to include total disability benefits based 
on IU, that compensation rate is protected.
    Veterans receiving IU benefits are subject to VA's annual income 
verification match (IVM). The IVM uses Internal Revenue Service (IRS) 
and Social Security Administration (SSA) income records to verify that 
IU beneficiaries remain below the earnings threshold for entitlement to 
IU benefits.

             REVIEWS OF VA CLAIMS PROCESSING RELATED TO IU

    Former Secretary Anthony J. Principi, in response to media articles 
about State-to-State variance in average compensation payments to 
veterans, requested that the VA Inspector General (IG) study the 
payment variance issue. The IG found that payment variance was affected 
by several factors including demographic factors and representation by 
veterans service organizations, as well as the incidence of PTSD and 
the subsequent award of IU benefits for that condition.
    The Government Accountability Office (GAO) also issued a report in 
2004 pointing to a need for increased analysis of the consistency of 
decisionmaking across regional offices. GAO is currently conducting a 
study of IU benefit decisionmaking.
    Based on the preliminary findings from these reviews, as well as a 
significant increase in the number of IU case referrals received in the 
latest IVM with IRS and SSA, we have been analyzing our existing IU 
procedures and regulations to determine if changes are needed. As 
discussed earlier, we have reinstated the annual employment 
certification for veterans receiving IU benefits. We have also 
reinforced existing procedural and evidentiary guidelines for IU 
determinations through conference calls with our field stations and at 
our recent Veterans Service Center Managers Conference. We will 
continue to work to provide additional training for our employees, and 
to identify ways to strengthen and clarify our long-standing procedural 
requirements and ensure the integrity of this important benefit.
    The IU benefit has a long history. It fills a critical gap when the 
rating schedule fails to fully address the impact of disability in a 
specific veteran's circumstance. We believe that during this period of 
conflict and danger for our country, IU continues to be an essential 
tool in serving America's veterans and fulfilling the country's 
commitment to them. We at VBA are fully cognizant of this as we work to 
ensure those who have served this nation are fully compensated for 
their injuries and assisted in returning to participation in society to 
the maximum extent possible permitted by their injuries.
    Thank you for this opportunity to discuss this important benefit. I 
would be pleased to address any questions you may have.

                                 ______
                                 
    Response to Written Questions Submitted by Hon. Larry E. Craig 
                        to Hon. Daniel L. Cooper

    Question 1a. Your testimony pointed out that the Government 
Accountability Office (GAO) recommended back in 1987 that VA revise its 
regulations to require all veterans applying for Individual 
Unemployability (IU) be referred for a vocational rehabilitation 
evaluation, yet nothing was done.
    Doesn't it make sense to have trained vocational counselors perform 
IU assessments?
    Answer. We believe that requiring vocational assessments may 
improve the adjudication of total disability ratings based on 
Individual Unemployability (IU) and serve as an integral part of any 
decision to award IU benefits. Trained vocational counselors may 
provide a more comprehensive picture of the veteran's current ability 
to engage in substantially gainful employment and the impact of 
training and other rehabilitation benefits on the veteran's future 
employment prospects. However, conducting vocational assessments will 
require additional Vocational Rehabilitation and Employment (VR&E) 
staff members and/or contract dollars to support this effort.
    Question 1b. Who performs the assessments now and what are their 
professional qualifications for making employability determinations?
    Answer. Medical examiners perform a complete and adequate 
examination for rating purposes according to the appropriate 
examination worksheet. In IU claims, the medical examiner must describe 
the disability's effect on the veteran's daily activities and his or 
her ability to work. The medical examiner must obtain the veteran's 
occupational history such as the type of occupation, employment dates, 
and wages from the previous 12 months, and details the time that was 
lost from work in the previous 12-month period. Examining physicians, 
psychologists, and other licensed health-care providers are experienced 
in assessing employability for various disability-determining agencies, 
including the Department of Veterans Affairs (VA) and the Social 
Security Administration.
    Question 1c. Do they take into account the impact medical treatment 
and vocational rehabilitation services would have on a veteran's 
employment potential when making these determinations?
    Answer. A VA rating decisions regarding entitlement to IU must be 
based on all the evidence of record, including medical and other 
relevant evidence, regarding whether a veteran's service-connected 
conditions preclude him or her from obtaining and maintaining 
substantially gainful employment.
    Once a veteran has received an IU rating, VA may require a 
reexamination of the veteran if: (1) It is likely that a disability has 
improved; (2) evidence indicates there has been a material change in a 
disability; or (3) evidence indicates the current rating may be 
incorrect. For example, if a veteran has just started a medical regimen 
or medications are being adjusted for better results, a future exam may 
also be warranted. VA also monitors a veteran's vocational 
rehabilitation by requiring the yearly submission of VA Form 21-4140, 
an employment questionnaire verifying whether or not the veteran is 
employed. VA also performs the Income Verification Match (IVM) yearly 
with the Internal Revenue Service (IRS) that reports wages earned for 
veterans drawing IU.
    Reduction of an IU rating requires clear and convincing evidence 
that establishes a veteran's actual employability. VA regulations 
provide that, if a veteran is undergoing vocational rehabilitation, 
education, or training, an IU rating may not be reduced for that reason 
``unless there is received evidence of marked improvement or recovery 
in physical or mental conditions or of employment progress, income 
earned, and prospects of economic rehabilitation, which demonstrates 
affirmatively the veteran's capacity to pursue the vocation or 
occupation for which the training is intended to qualify him or her, or 
unless the physical or mental demands of the course are obviously 
incompatible with total disability.'' Evidence regarding the impact of 
a veteran's medical treatment and vocational rehabilitation on the 
veteran's employment potential would be relevant in determining whether 
an IU rating should be reduced.
    Question 2a. Thirty-one percent of IU beneficiaries are over the 
age of 71. I don't understand why a benefit that is based on 
unemployability is granted to individuals who, because of their ages, 
would likely not be looking for work.
    Why is age not a factor in an IU determination?
    Answer. For more than 60 years, the Schedule for Rating 
Disabilities has stated that age may not be considered as a factor in 
evaluating service-connected disability, and that service-connected 
unemployability cannot be based on advancing age. Age may affect an 
individual's ability to perform activities necessary for employment and 
should potentially be a factor in determining whether a veteran is 
unable to engage in substantially gainful employment solely due to 
service-connected disability.
    Question 2b. If Federal unemployment statistics only include in the 
definition of ``unemployed'' those who are looking for, but can't find 
work, why shouldn't VA apply that same standard for the IU benefit?
    Response: The Bureau of Labor Statistics classifies persons as 
unemployed if they do not have a job, have actively looked for work in 
the prior 4 weeks, and are currently available for work. Persons 
counted as ``unemployed'' are unable to find work for a variety of 
reasons. Veterans are entitled to a total disability rating based on IU 
because they are ``unemployable,'' i.e., unable to engage in 
substantially gainful employment because of a service-connected 
disability.
    Question 2c. VR&E: Is age a factor when evaluating whether a 
veteran is eligible for VA's Vocational Rehabilitation and Employment 
(VR&E) program?
    Answer. There are no age prohibitions associated with the 
eligibility and entitlement requirements for the VR&E program. However, 
the age of a veteran with a disability who files a claim for VR&E 
services may be considered if it is identified as a potential 
impairment to employability.
    Question 3a. Forty-six percent of veterans who have disability 
ratings of 60 to 90 percent go on to receive IU.
    What are the characteristics of those rated 60 to 90 percent who do 
not go on to receive IU? Please include in your assessment a breakdown 
of the age, underlying disability rating, and service-connected body 
system.
    Answer. In September, 2005, of the 483,024 veterans rated 60 to 90 
percent disabled, 261,932 veterans were not rated as totally disabled 
based on IU. The following data comparing IU beneficiaries with non-IU 
beneficiaries who are also rated 60 to 90 percent disabled suggests a 
correlation between age and the level of disability with the likelihood 
that a veteran will receive IU benefits. Younger veterans and veterans 
with lower disability ratings are less likely to receive IU benefits 
compared to older veterans and veterans with higher disability ratings.
    The following chart contrasts the number of IU beneficiaries with 
non-IU beneficiaries according to their age category.

------------------------------------------------------------------------
               Age                    No IU       With IU       Total
------------------------------------------------------------------------
Below 30.........................        7,735        1,215        8,950
30-39............................       20,499        7,634       28,133
40-49............................       48,839       20,496       69,335
50-59............................       86,514       81,254      167,768
60-69............................       38,975       40,466       79,441
70-79............................       29,794       33,375       63,169
80 and up........................       29,576       36,652       66,228
                                  --------------------------------------
    Total........................      261,932      221,092      483,024
------------------------------------------------------------------------

    The following chart compares the number of IU beneficiaries with 
the number of non-IU beneficiaries based on their disability level.

------------------------------------------------------------------------
              Level of disability                  Non-IU         IU
------------------------------------------------------------------------
60 percent....................................      135,548       37,146
70 percent....................................       72,328       80,862
80 percent....................................       39,220       63,759
90 percent....................................       14,836       39,325
------------------------------------------------------------------------

    The following chart contrasts the number of IU beneficiaries with 
the number of non-IU beneficiaries based on their primary service-
connected disability.

------------------------------------------------------------------------
                  Body system                      Non-IU         IU
------------------------------------------------------------------------
Endocrine.....................................       10,888        5,933
Neurological..................................       20,052       14,223
Cardiovascular................................       21,143       22,138
Mental--Non-PTSD..............................       20,086       23,982
Mental--PTSD..................................       34,492       61,996
Musculoskeletal...............................       82,188       62,675
Respiratory...................................       20,985        6,910
Other.........................................       52,098       23,235
                                               -------------------------
    Total.....................................      261,932      221,092
------------------------------------------------------------------------

    Question 3b. What explains the differences between how these two, 
similarly rated groups of disabled veterans are treated for purposes of 
IU?
    Answer. The data above indicates that younger veterans and veterans 
with lower disability ratings are less likely to receive IU benefits 
compared to older veterans and veterans with higher disability ratings.
    Question 4. Is it true that after an individual is granted IU a 
letter is sent to encourage participation in the VR&E program? If so, 
how frequently do IU participants respond to that letter by 
participating in the program? Of those IU recipients who do 
participate, what is their rehabilitation rate?
    Answer. Information about the VR&E Program is provided to veterans 
whenever they receive a rating, get a rating increase, or receive an IU 
rating. The information provided includes VA Form 28-8890 (Important 
Information about Vocational Rehabilitation Benefits) and VA Form 28-
1900 (Disabled Veterans Application for Vocational Rehabilitation).
    For the 5-year period beginning in fiscal year 2001 and ending 
fiscal year 2005, 2,933 IU recipients completed a comprehensive 
Vocational Rehabilitation and Employment evaluation. In the same time 
period, 1,622 IU recipients were declared rehabilitated. It is 
important to note that many veterans receiving IU are rehabilitated as 
having achieved independent living goals rather than employment goals. 
For example, in fiscal year 2005, it is estimated that at least 23 
percent of the total number of IU recipients rehabilitated were 
rehabilitated after completing independent living programs rather than 
employment programs.
    Question 5. Is the VR&E program successful in helping veterans with 
service-connected ratings of 60 to 90 percent? Are the disabilities 
afflicting those who participate in the VR&E program of a fundamentally 
different nature than those afflicting IU beneficiaries who do not 
participate? If the VR&E program has a demonstrated effectiveness of 
assisting veterans rated 60 to 90 percent, and the disabilities 
afflicting non-participating IU beneficiaries and VR&E participants are 
similar, is there any reason that the VR&E program could not help move 
more veterans off the IU roles and into jobs?
    Answer. The table below provides the detailed data to answer the 
questions asked. As shown below, during the 5-year period beginning in 
fiscal year 2001 through fiscal year 2005, 10,568 veterans rated 60 
percent to 90 percent disabled were declared rehabilitated. The data 
would seem to indicate that VR&E services can assist veterans rated 60 
percent to 90 percent disabled.

[GRAPHIC] [TIFF OMITTED] T5791.001

    Question 6. Your testimony pointed out that periodic future 
examinations are not requested if an IU recipient is over age 55. Why 
is age not a factor when making an IU determination, but is a factor 
when determining whether to reevaluate an IU recipient's disability to 
determine if employment is possible? Isn't there an inconsistency here?
    Answer. Current 38 CFR Sec. 3.327 provides that VA will not 
schedule a periodic re-examination for veterans who are over 55 years 
old except under unusual circumstances. VA will reconsider this policy 
to determine whether VA should schedule periodic re-examinations for IU 
beneficiaries who are over 55 years old.
    Question 7. Is there any interface with VHA, or any other Federal 
agencies, so that appropriate follow-up care can be pursued with 
veterans receiving IU, especially if sustained treatment could help a 
veteran to be gainfully employed?
    Answer. VBA works with the Veterans Health Administration (VHA) and 
the Department of Labor (DOL) to provide appropriate follow-up care to 
veterans receiving IU.
    VHA's Compensated Work Therapy (CWT) provides a structured 
environment where veteran patients participate in vocational 
rehabilitation activities. VHA clinicians refer eligible veterans for 
treatment in CWT program. Patients must have a primary psychiatric or 
medical diagnosis and have difficulty in obtaining or maintaining 
employment as a result. Pursuant to 38 U.S.C. Sec. 1718, this VHA-run 
program has the authority to provide work skills training and 
developmental services, employment support services, and job 
development and placement services to eligible veterans.
    DOL's Veterans Employment and Training Service (VETS), offers 
employment and training services to eligible veterans. VETS provides 
intensive services to meet the employment needs of disabled veterans 
and other eligible veterans, with the maximum emphasis directed toward 
serving those who are economically or educationally disadvantaged, 
including veterans with barriers to employment. VETS employees are 
located in VA Vocational Rehabilitation and Employment offices. Local 
VETS representatives conduct outreach to employers and engage in 
advocacy efforts to increase employment opportunities for veterans, 
encourage the hiring of disabled veterans, and generally assist 
veterans to gain and retain employment.
    Question 8. Please give me a profile of the individuals who were 
first granted IU within the past year and within the past 5 years. I am 
most interested in the following information:
    (a) The age at which those veterans were first granted IU.
    Answer:

----------------------------------------------------------------------------------------------------------------
                         Age                            2001      2002      2003      2004      2005      Total
----------------------------------------------------------------------------------------------------------------
Below 30............................................       222       318       373      383,       453     1,749
30-39...............................................     1,111     1,493     1,756     1,582     1,554     7,496
40-49...............................................     2,503     3,134     3,914     3,418     3,224    16,193
50-59...............................................     7,236    11,267    15,929   14,840,    13,265    62,537
60-69...............................................     2,401     3,772     5,565     5,489     6,257    23,484
70-79...............................................     3,618     5,519     6,487     5,141     4,107    24,872
80 and up...........................................     1,889     3,421     4,618     4,424     4,297    18,649
                                                     -----------------------------------------------------------
Total...............................................    19,336    28,924    38,642    35,277    33,157   155,336
----------------------------------------------------------------------------------------------------------------

    (b) The amount of time that elapsed between IU being granted and 
when the underlying service-connected disability was rated 60 to 90 
percent.
    Answer. VA is unable to determine this information.
    (c) The amount of time that elapsed between the end of military 
service and the date the underlying service-connected disability was 
rated 60 to 90 percent.
    Answer. VA is unable to determine this information.
    (d) The underlying service-connected body system afflicting the IU 
recipients.
    Answer. The chart below details the number of veterans rated 
totally disabled based on IU from 2001 until 2005. The data reflects an 
increasing number of veterans with PTSD and other mental conditions who 
are rated totally disabled based on IU. In 2001, VA added diabetes 
mellitus to the list of diseases subject to presumptive service-
connection based on exposure to herbicides. Veterans are also entitled 
to additional compensation for complications of diabetes mellitus such 
as arteriosclerosis and nephropathy. The increase in the number of IU 
awards based on the primary service-connected conditions involving the 
endocrine, neurological, and cardiovascular systems may reflect this 
change to VA's regulations.

----------------------------------------------------------------------------------------------------------------
                     Body system                        2001      2002      2003      2004      2005      Total
----------------------------------------------------------------------------------------------------------------
Endocrine...........................................       223     1,091     1,596     1,370     1,355     5,635
Neurological........................................       942     1,415     1,963     1,861     1,785     7,966
Cardiovascular......................................     1,780     2,860     4,370     3,822     3,737    16,569
Mental--Non-PTSD....................................     2,148     2,870     3,818     3,573     3,594    16,003
Mental--PTSD........................................     6,274     8,929    12,064    11,766    10,905    49,938
Musculoskeletal.....................................     5,373     7,907     9,364     7,465     6,652    36,761
Other...............................................     2,596     3,852     5,467     5,420     5,129    22,464
                                                     -----------------------------------------------------------
Total...............................................    18,980    28,924    38,642    35,277    33,157   154,980
----------------------------------------------------------------------------------------------------------------

    (e) The total number of veterans rated 60 to 90 percent, whether IU 
was granted or not.
    Answer:

----------------------------------------------------------------------------------------------------------------
                                                                                   Totals
         Combined degree of disability (percent)          ------------------------------------------------------
                                                              2001       2002       2003       2004       2005
----------------------------------------------------------------------------------------------------------------
60.......................................................    126,788    138,378    151,443    161,050    172,694
70.......................................................    193,913    107,097    123,951    138,548    153,190
80.......................................................    156,945     67,583     80,545     91,526    102,979
90.......................................................     26,908     32,897     40,339     46,818     54,161
                                                          ------------------------------------------------------
Total....................................................    304,554    345,955    396,278    437,942    483,024
----------------------------------------------------------------------------------------------------------------

    (f) The number of IU recipients who participated in the VR&E 
program.
    Answer:

----------------------------------------------------------------------------------------------------------------
                                                               Snapshot of IU participants as of:
                  Case status                  -----------------------------------------------------------------
                                                 9/30/00    9/30/01    9/30/02    9/30/03    9/30/04    9/30/05
----------------------------------------------------------------------------------------------------------------
Applicant.....................................         85        107        160        170        128         68
Evaluation and planning.......................        111        182        276        413        374        376
Extended evaluation...........................         16         25         52         42         50         72
Independent living............................        187        361        407        447        395        426
Rehab. to employability.......................        173        230        228        229        216        222
Employment services...........................         20         16         19         23         24         24
Interrupted...................................        123        126        189        156        176        196
                                               -----------------------------------------------------------------
    Total.....................................        715      1,047      1,331      1,480      1,363      1,384
----------------------------------------------------------------------------------------------------------------

    Question 9. What are the total costs associated with the IU 
benefit? Has VA done any projection of the future financial liability 
associated with the IU benefit? If so, please provide the Committee 
with that information?
    Answer. For 2005, we estimate that $6.16 billion was paid to 
213,002 IU recipients at an average of $28,907 per year. Of this 
amount, we estimate that an average of $15,901 per year was paid 
exclusively for the lU rating (excluding the schedular rating) for a 
total of $3.39 billion in 2005. Our budget model does not forecast 
compensation payments specifically for IU; rather it incorporates IU 
payments into the average payment made for each degree of disability 
(along with other factors affecting average payments such as 
dependency, special monthly compensation, etc.). We are unable to 
provide a budget forecast specifically for these other categories, 
including IU payments.
    Response to Written Questions Submitted by Hon. Daniel K. Akaka 
                        to Hon. Daniel L. Cooper
    Question 1. How many additional staff will VA need to undertake the 
PTSD review, and for Vocational Rehabilitation and Employment staff to 
help to determine Individual Unemployability (IU)?
    Answer. On November 10, 2005 the Department of Veterans Affairs 
(VA) announced that it would not conduct a review of 72,000 post-
traumatic stress disorder cases. VA will complete its review of the 
2,100 cases that were reviewed by the Office of Inspector General for 
its May 2005 report, but this will not require additional staff.
    Question 2. Can Vocational Rehabilitation and Employment absorb 
evaluating veterans who have applied for Individual Unemployability 
without cutting services to those who are currently using those 
services?
    Answer. VA does not currently require an employment assessment by 
VR&E program staff as part of the IU entitlement determination. If the 
Secretary decided to require an employment assessment in connection 
with determining a veteran's entitlement to IU, VA would first 
promulgate regulations defining the scope, purpose, and criteria for 
conducting such an assessment, and the manner in which VA would 
implement such assessments. Once such assessment guidelines were 
established, VR&E would be in a position to determine whether 
additional resources, new efficiencies, increases in workload, or a 
combination of the three would be required.
    Question 3. What can VA do in order to force compliance from the 
Regional Offices in sending out the employment certification form?
    Answer. The regional offices are not responsible for sending out 
the employment questionnaire. VA's Benefits Delivery Center at Hines 
automatically generates the employment questionnaire, which is sent to 
the veteran annually on the anniversary of the IU grant. Once released 
by VA's centralized computer system, appropriate controls are 
automatically set by the system to assure the form is returned.
    Question 4. Recently the Disability Benefits Commission, a panel 
tasked with evaluating the appropriateness and level of veterans 
compensation, by a near unanimous margin, voted to remove age as a 
factor in evaluating the benefits' package. Do you agree with this 
decision?
    Answer. It is our understanding that the Veterans' Disability 
Benefits Commission has decided to exclude age as a factor in its 
review of benefits provided under current Federal laws to compensate 
veterans and their survivors for disability or death attributable to 
military service. The Veterans Benefit Administration does not have a 
position on decisions of the Commission.

     Response to Written Questions Submitted by Hon. Patty Murray 
                        to Hon. Daniel L. Cooper

    Question 1. How long does the average vocational rehabilitation 
case take to close?
    Answer. The average number of days from the point of entering the 
evaluation/planning phase to the determination that the veteran has 
achieved rehabilitation is 933 days.
    Question 2. What kinds of jobs are these veterans being placed in 
and what are the average salary levels?
    Answer. The top five categories of positions veterans are 
rehabilitated into are:
     Professional, Technical, Managerial
     Clerical
     Services
     Structural (Building Trades)
     Machine Trades
    The average salary of a suitably employed rehabilitated veteran in 
fiscal year (FY) 2005 was $39,600.
    Question 3. How many full-time Vocational Rehabilitation counselors 
does the agency currently have?
    Answer. The Vocational Rehabilitation and Employment (VR&E) Program 
as of September 30, 2005, have a total of 625 vocational rehabilitation 
counselors and counseling psychologists.
    Question 4. On average, how many cases does a Vocational 
Rehabilitation counselor manage?
    Answer. The average workload per counselor is 150 cases.
    Question 5. How many new cases were brought to VA in fiscal year 
2005?
    Answer. In fiscal year 2005, 34,038 favorable entitlement 
determinations were made. Of that number, 25,400 entered a plan of 
rehabilitation. The remainder either decided not to pursue the program 
at this time or were unable to do so because the extent of their 
injuries or disabilities make it currently infeasible for them to 
achieve a vocational objective.
    Question 6. Did the agency seek a budget increase for fiscal year 
1906 to help reduce the backlog of cases in the Vocational 
Rehabilitation system? And if not, why not?
    Answer. The fiscal year 2006 budget submission for VR&E requested 
an additional 15 positions in fiscal year 2006 above the cumulative 
full time employees (FTE) for fiscal year 2005.
    Question 7. Does VA plan to seek additional congressional 
appropriations to help reduce their case backlog in its fiscal year 
1907 budget request?
    Answer. As of today's date, final decisions about the fiscal year 
2007 budget have not been made.
    Question 8. Does VA partner with Federal, State and local 
Vocational Rehabilitation and Workforce Investment Act programs to 
leverage and maximize training and re-employment resources? If so, how? 
If not, why not?
    Answer. VA does partner with the Department of Labor's Veterans 
Employment and Training Service (VETS), the Rehabilitation Services 
Administration's network of State rehabilitation agencies, and Career 
One-Stop Workforce agencies (operated by State and private contractors) 
to leverage resources that increase employment opportunities for 
veterans with disabilities.
    The Department of Labor currently has 71 Disabled Veterans Outreach 
Program Representatives (DVOPs) and Local Veterans Employment 
Representatives (LVERs) co-located in 35 VA Regional Offices and 26 
out-based locations. Additionally, there are four VR&E employees co-
located in two Department of Labor offices in Louisville, Kentucky and 
St. Petersburg, Florida. DVOPs and LVERs stationed or co-located with 
VR&E field stations have the opportunity to access the same resources 
available to VR&E staff. This access can help DVOPs and LVERs become 
more efficiently integrated into the initial vocational evaluation and 
the delivery of employment services. DVOPs and LVERs, working in 
partnership with VR&E staff, help disabled veterans reach their 
employment goals by:
     Using the Job Resource Labs for accessing and obtaining 
labor market information, job seeking/interviewing skills preparation, 
resume preparation, and job openings,
     Advising veterans on their Uniformed Services Employment 
and Reemployment Rights if they plan to return to their former 
employers,
     Acting as liaison and central point of contact with 
statewide DVOPs and local State workforce agencies, and Reviewing 
successful rehabilitation outcomes periodically with VR&E staff to 
assess best practices for State or national emulation.
    VR&E and VETS signed an updated Memorandum of Agreement on October 
3, 2005, that establishes three joint work groups with the goal of 
improving the quality of employment services and suitable job 
placements for veterans with disabilities. Each work group will have an 
established list of roles and responsibilities that will direct their 
efforts. The work groups are:
     Performance Measures for Assessment of Partnership Program 
Results
     National Veterans' Training Institute: Curriculum Design
     Joint Data Collection, Analysis, and Reports
    The VR&E Service is conducting training for VR&E field staff who 
coordinate the provision of employment services. VETS staff and six 
regional Department of Labor administrators have been invited to both 
attend and make presentations at this training conference, scheduled 
for December 15 to December 18, 2005 at the National Veterans'. 
Training Institute in Denver, Colorado.

 Response to Written Questions Submitted by Hon. James M. Jeffords to 
                         Hon. Daniel L. Cooper

    Question 1. Admiral Cooper, I understand that the Disability 
Benefits Commission is examining compensation ratings and considering 
whether adjustments should be made to these ratings. This Commission is 
scheduled to report its finding in September of 2007. Will the 
Commission be taking individual unemployability into consideration in 
its review? Aren't these two issues closely related?
    Answer. VA regulations provide for total-disability ratings for 
compensation purposes based upon individual unemployability (1U). 
However, VA does not know if the Commission will study or report on IU 
as part of its review of compensation ratings.
    Question 2. Admiral Cooper, can you tell me what percentage of 
veterans receive both IU and Social Security disability benefits? I'm 
curious, what are the differences between these two sets of criteria: 
IU and SSDI?
    Answer. VA does not have the data to determine the number of 
veterans who are receiving both IU and Social Security disability 
benefits.
    There are significant differences between VA's IU rating and a 
finding of disability for purposes of Social Security Disability 
Insurance (SSDI):
     Entitlement to SSDI is based on whether a claimant is 
unable to engage in any substantial gainful activity by reason of any 
medically determinable physical or mental impairment. Entitlement to IU 
is based on whether a veteran is unable to secure and follow a 
substantially gainful occupation by reason of service-connected 
disabilities only.
     SSDI entitlement requires that the impairment can be 
expected to result in death or . . . has lasted or can be expected to 
last for a continuous period of not less than 12 months.'' There is no 
such requirement for entitlement to IU.
     SSDI entitlement may depend upon whether a claimant can 
adjust to work other than his or her past work, given the claimant's 
age, education, past work experience, and any transferable skills. VA 
regulations require that advancing age be disregarded when determining 
whether a veteran is unemployable for compensation purposes.
    SSDI has separate rules for entitlement based on blindness, the 
rules differ depending on whether the claimant is under 55 years of 
age, and the amounts of earnings that indicate a blind person's ability 
to engage in substantial gainful activity differ from those amounts for 
non-blind claimants. Entitlement to IU does not depend on the nature of 
a disability, only on whether it is service connected and its severity.
     The monthly SSDI benefit amount is based on the Social 
Security earnings record of the insured worker. The amount payable for 
IU is the same as the amount payable for a scheduler total rating, 
which is set by statute.
    Disability for purposes of SSDI terminates in the month in which 
the beneficiary demonstrates the ability to engage in substantial 
gainful activity (following completion of a trial work period, where 
applicable). If a veteran with an IU rating begins to engage in a 
substantially gainful occupation, the IU rating may not be reduced 
solely on the basis of having secured and followed such occupation 
unless the veteran maintains the occupation for a period of 12 
consecutive months. Furthermore, for VA to reduce an IU rating, actual 
employability must be established by clear and convincing evidence.
    SSDI can be terminated if a claimant or beneficiary unreasonably 
refuses to follow prescribed treatment that would be expected to 
restore the ability to engage in substantial gainful activity. IU 
entitlement does not depend on whether a veteran follows prescribed 
treatment; it cannot be terminated based on a veteran's following of a 
prescribed treatment or rehabilitation program.
     Generally, continued entitlement to SSDI must be reviewed 
periodically. There is no requirement that entitlement to IU be 
reviewed periodically.

    Chairman Craig. Admiral, thank you very much. We have been 
joined by two other of our colleagues on the Committee. I will 
ask them if they have any opening comments before we turn to 
questions of you and those who accompany you.
    Senator Thune, do you have any opening comment?

          STATEMENT OF HON. JOHN THUNE, U.S. SENATOR 
                       FROM SOUTH DAKOTA

    Senator Thune. Mr. Chairman, thank you for holding this 
hearing. I appreciate the opportunity to better understand the 
individual unemployability benefit for our veterans, and I want 
to thank the panelists for being here today, and I look forward 
to, as we discuss this issue, learning more about things that 
we might be able to do to advance policies that will help to 
improve the quality of lives of our disabled veterans and also 
the employment opportunities with more and more veterans coming 
home from Iraq and Afghanistan, and particularly those who are 
disabled. We really want to make every effort possible to do 
that.
    So I applaud you for holding this hearing, and I want to 
thank our panelists, and I look forward to participating in the 
questions and answers. Thank you.
    Chairman Craig. John, thank you.
    Senator Jeffords, Jim?

 STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR FROM VERMONT

    Senator Jeffords. Thank you, Mr. Chairman. Examining 
compensation for veterans who have been injured in the course 
of their service is a very important issue, and it is 
critically important that we provide compensation for those 
veterans who cannot work on account of their disabilities. I am 
pleased the Chairman is concerned about these issues. I know he 
is. And I welcome the opportunity to learn more from today's 
witnesses.
    However, I must emphasize that by examining this system, 
veterans should not feel that we are bringing the validity of 
their claims into question. That is not it. This Committee must 
stand by the right of every veteran to receive the compensation 
to which he or she is entitled. I trust the VA is ever mindful 
of its obligation to the veterans in this regard.
    Thank you, Mr. Chairman.
    Chairman Craig. Jim, thank you very much.
    We will do 5-minute rounds and stay with you all, as long 
as we have questions. So, again, thank you for being here.
    As I stated in my opening remarks, with today's modern 
technologies, individuals have more opportunities than ever 
before to become productive members of society. The Government 
Accountability Office, the GAO, will later provide testimony 
that I think you may have seen that makes the following 
observation: VA's IU assessment is focused on the veterans' 
inabilities and providing cash benefits to those labeled as 
unemployable, rather than providing opportunities to help them 
return to work. Contrast GAO's observation with VA's 
Department-wide strategic goal, which is to restore the 
capability of veterans with disabilities to the greatest extent 
possible.
    With that, are we failing disabled veterans by simply 
granting IU and then forgetting them and not returning to them 
on a regular basis or causing them to seek the kind of training 
that they may be capable of receiving to enter the workforce?
    Mr. Cooper. I would answer that by saying that we take very 
seriously our mission, which is to help deserving disabled 
veterans. We were very concerned 2 or 3 years ago with our 
vocational rehabilitation program. We felt it was not 
emphasizing employment, and so as a result we have, as you may 
be aware, had a very strong study done, and they came up with 
several recommendations.
    We have since strengthened our vocational rehabilitation to 
a great extent. We also make sure that every veteran, as I 
indicated in my statement, whenever they are rated for a 
particular claim or if they ever have an increase in their 
disability, they are given the information necessary and 
strongly encouraged to go to the vocational rehabilitation 
program, get an evaluation and let us try to help them. 
Vocational rehab has also worked very closely with the 
Department of Labor. It has signed some agreements with various 
companies around the country, and VA in general is working on 
employment of veterans.
    So, I would say to you, we are doing a lot in that 
direction. Are there things we can do better? Maybe, but we are 
certainly looking very hard at what can be done with precisely 
the type of thing that you are talking about.
    Chairman Craig. Returning to the charts behind me, does not 
the evidence over the past 6 years though support GAO's 
observation that more focus has been given to granting cash 
benefits than helping veterans return to a full and productive 
life?
    Mr. Cooper. I am not sure that I can agree completely, Mr. 
Chairman, because as you pointed out, the graphs back there 
pointed--the very large majority are 55-56 years-old and above. 
And many of those people are in fact at the retirement age. We 
do give them access. We do allow them and encourage them to 
come in. We are interested in doing everything we can for 
employable young veterans, and as you know, Secretary Nicholson 
has very strongly emphasized that we want to do everything we 
can to help these young veterans not get in the position of not 
feeling good about themselves and having meaningful 
participation in society.
    We feel exactly the same way, and slightly different way of 
going about it, but I do say that that graph gives a very 
peculiar picture because the large majority of people we have 
seen coming in the last several years have in fact been older 
veterans, and I believe--and I cannot give you a figure right 
now--many of them from Vietnam.
    Chairman Craig. Well, I would go into another line of 
questions. I will return.
    Danny, we will turn to you. Pursue this, please.
    Senator Akaka. Thank you very much, Mr. Chairman.
    Admiral, I am concerned with the message that veterans with 
PTSD may be getting, as a result of the PTSD review, coupled 
with this inquiry into the state of VA's individual 
unemployability determinations. The question is: What is VA 
doing to send a unified message to veterans about the rationale 
behind the PTSD review?
    Mr. Cooper. As you know, the reason that we are doing any 
review at all is as a result of what was found to be the 
variance between States as far as what the average income per 
veteran in that State was. I frankly do not think that was a 
very valid reason to have the outcome it did, but that is not 
germane. As they looked, they found that we had a variance in 
States and primarily in the PTSD arena, at least that is what 
they focused on in the short time they looked at it. As a 
result, the IG stated that we should do these reviews.
    What we have done is to look at and very precisely go after 
the same reviews that they did, which happens to be 2,100 
cases. We are doing those. We are doing those in a very 
meticulous fashion to find out if we in fact agree with what 
the IG said, and some of the things we have found we do not 
agree. Our intention is to look at that very carefully, and 
then make sure we know exactly what we are doing before we 
start into the next review. We are trying to do it as carefully 
as we can. I have specifically and personally directed my 
regional office directors to work carefully with VSOs to work 
with individual veterans. And by the way, out of the 2,100, 
only 700 of the claims need to be looked at.
    We are trying to avoid going to the veteran themselves 
until we know we need some information from them, and then I 
have said we have got to work in a very understanding fashion 
with not only the veteran, but with the VSO, the person who has 
the POA, the power of attorney, and ensure we do it in 
absolutely the best way we possibly can.
    Senator Akaka. As I have mentioned several times this year, 
VA has great difficulty absorbing new court decisions and 
legislative changes. What happens if, in addition to the PTSD 
review, one more event occurs that requires VA to absorb an 
increased workload?
    Mr. Cooper. What happens is that we will continue doing 
everything we can, trying to go across the board. Our job has 
several facets. One of it is public contact. One of it is the 
main claims. Part of it are the appeals because X percent of 
all the people who do not get their claims will come back with 
appeals. So we have a broad range of things that we have to do.
    My job is to ensure we do not focus too much on a single 
thing, but we do it across the board, and quite frankly, what 
that means is if we get tasked with more tasks, if we get more 
things that we have to do, then obviously the time to do each 
one of those will increase. But I have to ensure we do things 
across the board and try to do them as professionally as 
possible.
    Senator Akaka. Time is not the only concern, but also 
staffing. How many additional staff will VA need to undertake 
the PTSD review and for vocational rehabilitation and 
employment staff to help determine individual unemployability?
    Mr. Cooper. There are many factors or many assumptions I 
have to make on that. I cannot give you an answer. I will take 
that question for the record if I may, sir.
    Senator Akaka. Fine.
    Well, Mr. Chairman, I have questions and my time is up.
    Chairman Craig. We will come back to another round. Thank 
you very much.
    Now let me turn to Senator Murray.
    Patty.
    Senator Murray. How many vets currently participate in the 
VA's vocational rehab program, do you know?
    Mr. Cooper. I would like to turn to Ms. Caden, if I may, to 
answer that. She is my Director for Voc Rehab.
    Ms. Caden. Thank you. Right now we have about 95,000 
participating in the program in different stages.
    Senator Murray. And what are their placement rates?
    Ms. Caden. This past year we rehabilitated a little over 
12,000, and that means they either obtained suitable employment 
and maintained it for a period of time, or they achieved their 
independent living goals.
    Senator Murray. So 12,000 out of 95,000.
    Mr. Cooper. But the 95,000, let me add, that can be over a 
4-year period.
    Ms. Caden. That is right. They are in different stages of 
the program.
    Senator Murray. Can you describe for us what kind of 
physical injuries or mental health conditions some of these 
veterans have that you are working with?
    Ms. Caden. In the Voc Rehab program? The vast majority of 
the veterans in the Voc Rehab program are in the orthopedic 
difficulty area. We do have about 21 percent that have mental 
health issues. Some of that would be PTSD and other things.
    Senator Murray. So many of them face tremendous challenges 
in their own personal lives, I would take it?
    Ms. Caden. Yes.
    Senator Murray. How difficult is it for these veterans as 
they go out and try and find a job? I imagine they may have 20, 
30, 40, 50 interviews?
    Ms. Caden. I cannot really tell you that. I mean it is very 
individualized. It would depend on what their goals are, what 
their field is and what they are looking for their training in.
    Senator Murray. Is there a backlog of veterans trying to 
get into the Voc Rehab program?
    Ms. Caden. No.
    Senator Murray. There is none.
    Mr. Cooper. Could I elaborate on one thing?
    Senator Murray. Yes.
    Mr. Cooper. Each individual veteran is put on a very 
specific individualized program with a person overseeing what 
he or she is doing. Many of those people end up going to 
college as part of their program. I think about 55 or so 
percent end up going to college. But each of them--and as a 
result of this study that I mentioned earlier, we have set up 
five tracks to get the individual to employment, so it 
specifically depends on what that individual wants to do, what 
his or her qualifications are, and what we can do to help them 
best.
    Senator Murray. And you mentioned many of them are older, 
suffering from serious effects of diabetes or orthopedic 
injuries or other causes, which would make it very difficult 
for employment, I would take it?
    Mr. Cooper. I am sorry. I cannot quite answer the question 
because they have a variation of problems. We try to take into 
account the specific problems they have or the degree to which 
they have problems so that we can acclaim it to that. And as 
Ms. Caden stated, many of them we get to independent living. It 
is not a matter of employment, but it is a matter what can we 
do to help them live better in independent----
    Senator Murray. In which case they would still qualify for 
the IU benefit.
    Mr. Cooper. Ma'am?
    Senator Murray. And they would still qualify for the IU 
benefit.
    Mr. Cooper. Absolutely. One of the things--I am sorry, let 
me add one more thing. If they have qualified for IU and they 
are now in the system, and let us say they go to college or 
whatever and then get employment, they will continue to draw IU 
until they have been in employment for at least 1 year.
    Senator Murray. Right. And as I said, the unemployment rate 
for disabled in my home State is 70 percent. Is that a pretty 
similar figure for veterans?
    Mr. Cooper. I am sorry, I cannot answer that.
    Senator Murray. I would assume it is somewhere around that.
    Mr. Cooper. I would assume. I just do not know.
    Senator Murray. Well, Mr. Chairman, I know you questioned 
the tone of my opening statement. I would just say to you that 
I take this really personally. This is an issue that touches 
very close to my home.
    My father was a disabled veteran. He served in World War 
II, came home with a Purple Heart, and he was a disabled 
veteran. I know how difficult it was when he was in a 
wheelchair, and if his Government came back and said, ``You do 
not deserve getting these benefits any more and we want you out 
there looking for a job,'' he would face the humility of going 
to job interview after job interview and not being hired. I 
think he served his country. I think he deserved these 
benefits, and I do not want any veteran out there thinking that 
we question their ability to get this insurance at this time. 
That is where I'm coming from.
    Chairman Craig. Patty, once again, I should not respond, 
but I will. I am not questioning the veteran. I am questioning 
the system. Is the system serving the veteran? In your father's 
case, absolutely, but is there a veteran out there who is 
getting the benefit today that if the system were performing as 
we think it should, would have the dignity of work?
    Senator Murray. And I would say every veteran probably 
wants the dignity of work.
    Chairman Craig. And we want to make sure they get it.
    Senator Murray. I have no doubt that they do.
    But I think that we have to be very careful when we pursue 
things, just like going after veterans who get PTSD. If they 
believe this is a stigma--these are our Americans, they went 
and fought for us. They feel strongly about this country. I 
know them. They care deeply about their own personal dignity, 
and I think we have to be careful in anything we pursue that 
makes them feel that they are taking advantage of their country 
or anything else. I think we have to be very careful how we 
pursue these kind of issues.
    Chairman Craig. I hope we can be. Thank you very much.
    Senator Murray. Thank you.
    Chairman Craig. Let me turn to Senator Thune. Any 
questions, John?
    Senator Thune. Thank you, Mr. Chairman. I share the 
concerns both of you have voiced about, one, making sure that 
the message that we are sending to the veterans of this 
country, those who have sacrificed and served, is the correct 
one, and also at the same time performing the job that we have 
when it comes to oversight of the system that serves them, to 
make sure that it is doing its job in the most efficient way 
possible, and that we are getting the desired policy objective 
to support and provide benefits to our veterans, and at the 
same time to help them find ways to transition into the 
workplace.
    So, again, I appreciate the very strong feelings that are 
being shared both by my colleagues, and I hope that we can do a 
better job of improving the quality of life for our veterans, 
and also helping find good employment opportunities for them. I 
think that is what we hope that the VA can assist with as well.
    Question for the panel and Mr. Cooper. Do you know what in 
terms of the new generation of veterans that are returning home 
from Iraq and Afghanistan, how many of those or what percentage 
of those are using the IU benefit?
    Mr. Cooper. I will get that for the record. I just do not 
know what percentage. But we certainly, as we talk particularly 
to the seriously wounded as they come back, as we talk to the 
Reserves and National Guard, and we try to talk to every one of 
them as groups, we put forth this benefit as being there. I 
cannot tell you right now what the participation is. I will 
take that for the record.
    Senator Thune. OK. I would be interested in knowing that. 
The reason I ask it is because this war, more so than any other 
previous conflict, we are seeing folks who are losing limbs, 
and part of it is the protective----
    Mr. Cooper. Could I come back? Let me just say that the 
emphasis we have tried to have with all of them coming back is 
to try to find work. And I mentioned a couple agreements that 
we have had with specific companies, that the VA in general 
under the H.R. group is pushing very hard to find employment. 
So as an outfit we are doing a lot to help them find 
employment. I just cannot tell you the specific number that 
might be in the program.
    Senator Thune. I appreciate that. In looking at the charts, 
and I assume most of those are 30 and under, but my guess is 
that may not be reflective of what we are going to experience 
as we have more and more folks coming into the system.
    Mr. Cooper. What you will find, if I may say, on the charts 
there you see the very large bar, I believe, if I am correct, 
is at about age 50, is that correct?
    Chairman Craig. Fifty-one to sixty, yes.
    Mr. Cooper. At 51, the very large bar, so the ones to the 
left are the ones that are the younger.
    Senator Thune. And I understand that, and my point simply 
is that both with respect to health care, which I think is 
going to be a continued ongoing need for our soldiers as they 
come back from Iraq and Afghanistan, because of the types of 
injuries that they are experiencing there, in the same way I 
would expect to see these numbers grow on the left side of the 
chart as a result, because you are getting more and more. I 
think people are coming home who are disabled.
    In light of that, I guess my question would be, do you have 
policy changes or suggestions or tweaks or anything that you 
could recommend to ensure that the IU benefit is assisting our 
veterans in continuing to have productive civilian careers? I 
know that is a fairly wide open question, but are there things 
that we could be, as a matter of policy, doing differently?
    Mr. Cooper. I think as far as the IU benefit goes, if in 
fact they become eligible for IU, it is sort of automatic. But 
what I would stress is we are also doing everything we can to 
help them become employed if they want to or can, and if they 
cannot, then get them into this vocational rehabilitation 
program to get them into independent living.
    Along with that we work with our loan guarantee housing 
program to get specially adapted housing and use the money that 
Congress has allocated to us to help the individuals in the 
ILS, independent living, to also get special adapted housing. 
So we are trying to do a lot of things as needed by the 
individual, trying to treat as much as possible the individual 
through the various programs we have.
    Senator Thune. Again, I think it is really important that 
the message be sent that we appreciate and are grateful for the 
service that our veterans have performed for their country, and 
that is why the tone of things that we say and the things that 
we do here is really important too in reflecting that spirit. 
But I also, again, as a matter of--I think the chairman is 
trying to get at the fundamental issue of what can we do, if 
anything, to improve the job that the VA does in reaching out 
to these veterans and providing them opportunities at 
productive employment and civilian careers and that sort of 
thing. So we would certainly welcome your suggestions and input 
in that regard.
    I hope that as we see more of our soldiers coming back from 
the current theaters of operation, that they will come home to 
a welcome sign and to a country that is grateful, and to a 
system that is working and functioning effectively and doing 
the things that we want to see it do to support them.
    So I thank you, Mr. Chairman.
    Chairman Craig. Thank you.
    Senator Jeffords.
    Senator Jeffords. Admiral Cooper, I am under the impression 
that the list of recognized disabilities has increased 
significantly in recent years, and am I correct in assuming 
that this is partly responsible for the increase in the number 
of veterans who receive compensation?
    Mr. Cooper. I am not sure, Senator, that I understood the 
first part of your question. I apologize.
    Senator Jeffords. My question is: I understand a list of 
recognized disabilities has increased significantly in recent 
years. Am I correct then in assuming that this is partly 
responsible for the increase in the number of veterans who are 
receiving compensation?
    Mr. Cooper. I do not think necessarily. I think the number 
or the specific disabilities that have been prevalent over the 
years, I think the main ones are still the prevalent ones where 
there is musculoskeletal or whether it is joints, whether it is 
hearing, PTSD. We have a list of let us say 13 or so--we have 
many more--but 13 that sort of represent the majority, and I 
think from year to year it goes up or goes down. I do think, 
and I do not have any facts for this, but what you read in the 
paper, we are seeing a lot more loss of limbs due to the other 
types of protection, the body protection we have. But as far as 
the general types of disabilities, I do not think they vary a 
lot from time to time. I could be wrong, but that is off the 
top of my head.
    Senator Jeffords. Thank you. I am under the impression that 
improvements in the veterans benefit claim system and the 
application of the quote, ``duty to assist'' requirement have 
resulted in fewer veterans falling through the cracks, and more 
of them receiving the benefits to which they were entitled?
    Mr. Cooper. Senator, I hope that is the right answer, but 
every day new things crop up. We are certainly working on it. 
We have increased dramatically I think the number of claims we 
adjudicate each year, and are continuing to do that. But 
everybody is an individual and so everybody is different and it 
is a fascinating job. I am glad I have it, but there are days 
it is more fascinating than others.
    [Laughter.]
    Senator Jeffords. Thank you. Is age not an important factor 
here too, and could not the overall aging of our veterans 
population, particularly Vietnam veterans, count in part for 
the increase as well?
    Mr. Cooper. Yes, I think that is the case, and again, going 
to this bar chart up there, I think a lot of those men and 
women are those who were in the Vietnam conflict, and for 
whatever reason, the PTSD or whatever disabilities they have, 
have increased, and as a result then as they get the 70 
percent, as I indicated earlier, the Norris decision in 1999 
said anybody who comes in with any kind of a claim and gets to 
70 percent total, then you automatically infer that they have 
also submitted a claim for IU. And so no matter what the claim 
is that comes in, we have to infer, and therefore, adjudicate a 
claim for IU, and so all of that has worked together to 
increase the number that we see there.
    Senator Jeffords. Mr. Cooper, I also am under the 
impression that the improvements in the veterans benefit claims 
system and the application of the duty to assist requirement 
have resulted in fewer veterans falling through the cracks and 
more of them receiving the benefits to which they are entitled. 
Does this also account for part of the rise in the numbers of 
veterans receiving disability ratings?
    Mr. Cooper. Oh, absolutely.
    Senator Jeffords. And also is age not an important factor 
here too, and could not the overall aging of our veterans 
population, particularly Vietnam veterans, account in part for 
this increase?
    Mr. Cooper. I am sure it does, yes, sir.
    Senator Jeffords. But that is an appropriate use of the 
system, is it not?
    Mr. Cooper. Oh, yes, absolutely. It is not a matter that 
they are not justified in getting those. They are perfectly 
justified and we have to accommodate to that.
    Another thing I will mention is, of all the claims we get 
in a given year, approximately 58.5 percent are in fact 
veterans coming back in because their disability has increased, 
so almost two-thirds of the claims that we get each year are in 
fact claims from veterans who have already gotten some kind of 
disability and because it has gotten worse or an ancillary 
disability has developed, which can be service connected, it 
will come back to us.
    Senator Jeffords. Thank you, Mr. Chairman.
    Chairman Craig. Jim, thank you very much.
    We have been joined by Senator Obama.
    Questions, Senator?
    Senator Obama. Thank you very much, Mr. Chairman.
    Thank you to the panel for taking the time to be here. I 
apologize. I was speaking on the floor and so I came in a 
little bit late. Some of the questions that I have may have 
already been asked. I am happy for you to let me know if that 
is the case, and I can always get some additional written 
information.
    I hope that we all agree that individual unemployability or 
IU determinations provide veterans with an important benefit 
that they have earned and that they deserve. I am happy to have 
this panel and the commission that has been formed to figure 
out how we can make sure the system is more equitable and 
efficient, and I think that is a goal that we should strive for 
in all our veterans claims.
    I share Senator Murray's concern that in our rush to make a 
system more efficient, we risk making the system more efficient 
simply by lopping off veterans who deserve benefits or 
restricting them in some way. I am not suggesting that that is 
what the VA is doing. I am just saying that we need to be 
cautious. Also, we must remember the fact that, for example, a 
program is being utilized more, as Senator Jeffords just 
indicated, does not necessarily mean that it is being abused. 
It may simply mean that we are now having more people who need 
access to these very important services.
    I would just note, as I understand it at least, in 
information that was provided to me--and correct me Admiral 
Cooper, if I am wrong about this--that VA regulations list the 
impairments the veterans should have in order to receive a 
rating for PTSD, which I think has been the source of some 
controversy, and people think that maybe abuses in that area 
are also contributing to higher costs in the IU area, but I 
just think it is important to make sure that we understand what 
this means.
    For a veteran to receive a 70 percent rating, which I 
understand you need a fairly high rating to receive IU, the 
veteran must have occupational and social impairments which 
include excessive rituals, near continuous panic or depression 
affecting the ability to function independently, speech that 
may be obscured or illogical, impaired impulse control, neglect 
of hygiene, difficulty in adapting to stressful situations, and 
so on.
    For a veteran to receive a total disability rating of 100 
percent the veteran must have gross impairment in thought 
processes or communication, persistent delusions, grossly 
inappropriate behavior, persistent danger of harm to others, et 
cetera.
    I read that into the record just because I think it is 
important to recognize that we are not talking about people who 
are just feeling kind of blue as a consequence of coming back 
home. We are talking about veterans who must demonstrate that 
they suffer severe impairments that presumably would prevent 
gainful employment.
    So I know, Under Secretary Cooper, you have been focused on 
this. I have been focused on it because there was some 
indication that the discrepancies in disability payments in my 
State, Illinois, were in part due to differences in IU rating 
practices.
    So let me now turn to a question then. In the report on 
State variances in VA disability compensation payments, the IG 
recommended that the VA conduct a review of the IU rating 
practices. Your testimony, as I understand it, indicates that 
the VA has been analyzing its procedures and regulations with 
respect to IU. The IG recommended that, quote, ``at minimum 
such reviews should consist of data analysis, claims filed 
review and onsite evaluation of rating and management 
practices.''
    So I am curious, what exactly has the VA been reviewing in 
its analysis of IU processes, and what has been the cost of 
this analysis? Again, I apologize I came late. This may have 
already been answered.
    Mr. Cooper. I cannot exactly talk to the cost, but what we 
have done so far is looked at the 2,100 cases that the IG had 
looked at in order to come up with their opinions. And we are 
looking at these. And we have looked at these one time 
centrally so that we have very qualified people take all of 
those in, look to find out to see if we agree or disagree, and 
on those cases where we did not agree, we have sent them back 
to the regional offices, and we are carefully monitoring this 
and trying to learn what it is we should be doing, what it is 
we can do better, wherein we should be doing better training, 
and if in fact all of the mistakes that the IG felt had been 
made, if in fact they had been made as described.
    Senator Obama. So far, just preliminarily, have you seen 
consistency in terms of IU determinations across the States?
    Mr. Cooper. Pretty essentially, yes, consistently.
    Senator Obama. For the most part you have?
    Mr. Cooper. Correct.
    Senator Obama. I understand that the VA has reinstated the 
policy requirement that a veteran receiving IU benefits must 
submit an annual employment certification until he or she 
attains the age of 70. I am wondering, No. 1, how is the policy 
working? Are the veterans adhering to the new requirements? And 
part of the original change and eliminating this requirement, 
if I am not mistaken, had to do with the concern that perhaps a 
large number of veterans were unaware of or were not accessing 
these benefits because of the paperwork and the complexities 
involved. I am just wondering whether veterans are able to 
abide by this new requirement. You know, obviously, a lot of 
the people who potentially might be qualified for this, may be 
in the category of homeless veterans?
    Mr. Cooper. Absolutely.
    Senator Obama. People who may have difficulty filling out 
forms.
    Mr. Cooper. I do not think you will find that that is a 
problem at all. We have only been doing this for 2 months. 
Eight years ago, 6 years ago, sometime long before I got here, 
somebody decided that this form was not necessary. And what it 
does is makes sure that the individual who is getting IU is not 
also working and getting money. For instance, the cutoff when 
we started getting our first reports back--excuse me. When we 
did this Voc Rehab study we were doing, I got an indication 
from the chairman of that study that they had a list of people 
who were making $50,000 a year and still getting IU.
    And that is absolutely the wrong way to do it. And so I 
said, ``We have got to do it so we are consistent in what we 
are doing and we are doing it properly.'' And so therefore, I 
pretty much personally am the one that required that we go back 
to this form.
    What the form does, it goes to the veteran and it says, 
``Tell us what wages you have gotten from employment.'' It does 
not talk about anything else. If they are retired, does not 
talk about retired income. It merely talks about wages they 
get. Out of the 390 that we have looked at very carefully, we 
found about 40 that in fact were getting the money. And so we 
go to them and we say, ``OK, we are now going to stop the 
payment.'' If they want to appeal, then we go through that 
process. We try to do it as very carefully and professionally 
as we can.
    Senator Obama. I substantially went over time, Mr. 
Chairman. I apologize for that, and I would just reiterate the 
point that I want standardization. I want consistency across 
the system, and our resources are finite, and so we must make 
sure that benefits are going to the people who need them most. 
I applaud you for anything that can be done in that regard.
    I also want to make certain though that, as we are striving 
for these efficiencies, that there is extraordinary caution, 
and I think at least--and this is true with respect to PTSD 
evaluations and the IU system--that our starting position or 
our default position should be giving our veterans the benefit 
of the doubt as opposed to assuming fraud, abuse and so forth. 
I would rather see us err somewhat on a few people gaming the 
system, then I would a system in which people who really need 
it are being left behind.
    Mr. Cooper. May I say that I vehemently agree.
    Chairman Craig. Senator, thank you very much. We have just 
been notified that we--it has not yet started. I think we have 
two votes at 3, stacked. There are many more questions I would 
like to ask, and I will submit for this panel, submit mine in 
writing, and I would hope our colleagues would do the same.
    We, I believe, can get through the testimony of the second 
panel before we go vote, and then we can come back and do some 
questions of that panel.
    So let me thank all of you for your time and your due 
diligence in this area. I will follow up with a set of 
questions that are a bit more probative as it relates to what 
you are doing and the breakout that I think our colleagues are 
concerned about, as am I. Thank you all very much. Admiral, 
thank you.
    Mr. Cooper. A pleasure.
    Chairman Craig. Let me welcome our second panel. Cynthia 
Bascetta, Director, Education, Workforce and Income Security, 
the Government Accountability Office; and Rick Surratt, Deputy 
National Legislative Director, Disabled American Veterans. 
Again, let me thank you for the time that it takes to prepare 
and for being here today.
    Cynthia, we will start with you.

 STATEMENT OF CYNTHIA BASCETTA, DIRECTOR, EDUCATION, WORKFORCE 
     AND INCOME SECURITY ISSUES, UNITED STATES GOVERNMENT 
                     ACCOUNTABILITY OFFICE

    Ms. Bascetta. Thank you, Mr. Chairman, and Members of the 
Committee. We appreciate being here today to discuss our work 
as it relates to VA's IU benefit. Our work spans more than 15 
years and covers both the design and administration of 
disability programs in the public and private sectors, as well 
as other countries.
    As you requested, my remarks today will focus on our 
comparison of the IU and private insurer decisionmaking 
processes. Our findings have implications for modernizing VA's 
concept of unemployability and for strengthening program 
integrity by shoring up the basis for unemployability 
decisions.
    As you know, GAO designated Federal disability programs as 
high risk in 2003. Our work showed that VA and the Social 
Security Administration programs are mired in concepts from the 
past, most notably that ``impairment'' equates with inability 
to work. Consequently, we believe these programs are poorly 
positioned to provide meaningful support to Americans with 
disabilities including our Nation's veterans. Our ongoing work 
on IU benefits illustrated some of our concerns.
    To date our work shows that VA does not have procedures in 
place to fully assess veterans' work potential. Without these 
procedures, VA cannot assure that its unemployability 
determinations are adequately supported, which is especially 
troubling in light of the steep increase in IU awards.
    Because VA does not systematically utilize its vocational 
specialists to help evaluate work potential, it misses an 
opportunity to collaborate with veterans on return-to-work 
plans where they are appropriate. These plans could identify 
and provide needed accommodations or services, including 
medical treatment. Instead, the design of IU benefits is 
focused on providing cash benefits to veterans labeled as 
unemployable and provides no incentives to encourage maximizing 
work potential.
    How can this be improved? We believe VA could look to 
private insurer practices to make sounder determinations of 
work potential and modernize its approach. First, and perhaps 
most important, insurers intervene early after the onset of 
disability and immediately set up the expectation that 
claimants with work potential will be supported in their 
efforts to do so. They stay involved with these claimants to 
arrange for medical care, vocational services, assistive 
devices, and other supports customized to the claimant's needs.
    Second, insurers aim incentives at both claimants and 
employers to improve work outcomes. They work with employers to 
show the effectiveness of workplace accommodations for 
claimants. They mandate claimant participation in vocational 
rehabilitation programs. They encourage rehabilitation and 
return to work by allowing claimants to supplement disability 
benefits with earned income. Ultimately they can reduce or 
terminate benefits if they determine that a claimant is able 
but unwilling to work.
    Third, insurers assess disability and manage claims by 
bringing expertise to bear. They have multi-disciplinary teams 
of claims managers, medical and vocational experts. For cost-
effective results, they triage claims so that managers can 
concentrate their time and resources on claimants who have work 
potential. They spend a minimum level of resources to monitor 
the medical conditions of claimants who are unlikely or much 
less likely to be able to return to work.
    In summary, insurer approaches, such as incentives and 
early intervention with return-to-work assistance, offer useful 
insights for improving IU's program design. At the same time, 
these approaches raise key policy issues in the domain of the 
Congress, the Department, veterans service organizations, and 
other stakeholders. For example, to what extent should or could 
VA require a veteran seeking IU benefits to accept vocational 
assistance or appropriate medical treatment? Nonetheless, we 
believe that including vocational expertise in the IU 
decisionmaking process could help VA make needed improvements 
in the integrity of its unemployability determinations, as well 
as modernize its IU benefit.
    More importantly, this would enable veterans to realize 
their full productive potential without jeopardizing the 
availability of benefits for those who cannot work.
    This concludes my remarks, and I would be happy to try to 
answer any questions you have.
    [The prepared statement of Ms. Bascetta follows:]

Prepared Statement of Cynthia Bascetta, Director, Education, Workforce 
   and Income Security Issues, U.S. Government Accountability Office

    Mr. Chairman and Members of the Committee:
    Thank you for inviting me to testify on how the Department of 
Veterans Affairs (VA) Individual Unemployability (IU) disability 
assessment practices compare with those used by private sector insurers 
in helping people with severe disabilities realize their full potential 
to work. It is especially fitting, with the continuing deployment of 
our military forces to armed conflict, that we reaffirm our commitment 
to those who serve our Nation in its times of need. Therefore, ensuring 
the most effective and efficient management of benefits and services to 
those who incur disabilities because of military service is of 
paramount importance. At the same time, many people with disabilities 
have indicated that they want to work and be independent and would do 
so if they receive the supports they need. Fortunately, numerous 
technological and medical advances, combined with changes in society 
and the nature of work, have increased the potential for people with 
disabilities to work. Nevertheless, VA has seen substantial growth of 
unemployability benefit awards to veterans with service-connected 
disabilities. From fiscal years 1999 to 2004, the number of veterans 
receiving unemployability benefits has more than doubled, from 95,000 
to 197,000.
    To help people with disabilities achieve their full potential, the 
disability programs financed by social insurance systems in other 
countries focus on returning beneficiaries with disabilities to work. 
Also, in recent years, a growing number of private insurance companies 
in the United States have been focusing on developing and implementing 
strategies to enable people with disabilities to return to work. Today 
I would like to discuss how U.S. private sector disability programs 
facilitate return to work in three key areas: (1) The eligibility 
assessment process, (2) work incentives, and (3) staffing practices. I 
will describe these three elements for U.S. private sector disability 
insurers and compare these practices with those of VA's IU eligibility 
assessment process.
    My testimony is based primarily upon our prior work, including our 
2001 report assessing the disability practices of selected private 
insurance companies and other countries.\1\ This work involved in-depth 
interviews and document review for three private sector disability 
insurers: UNUMProvident, Hartford Life, and CIGNA. In addition, we used 
our 1987 review of Individual Unemployability benefits\2\ as well as 
preliminary observations from our ongoing review of these benefits.
    In summary, the disability systems of the private insurers we 
reviewed integrated return-to-work considerations early after 
disability onset and throughout the eligibility assessment process. 
This involved both determining--as well as enhancing--the ability of 
each claimant to return to work. For example, private insurers used 
vocational specialists to help ensure they fully assess the work 
capacity of claimants, identify needed accommodations, and develop 
individualized plans to help those who can return to work. In addition, 
these insurers provided incentives for claimants to take part in 
vocational rehabilitation programs and to obtain appropriate medical 
treatment. They also provided incentives for employers to provide work 
opportunities for claimants. Managers of these other programs also 
explained to us that they have developed techniques--such as separating 
(or triaging) claims--to use staff with the appropriate expertise to 
provide return-to-work assistance to claimants in a cost-effective 
manner.
    VA's individual unemployability decisionmaking practices lag behind 
those used in the private sector. As we have reported in the past, a 
key weakness in VA's decisionmaking process is that the agency did not 
routinely include a vocational specialist in the evaluation to fully 
evaluate an applicant's ability to work. Preliminary findings from our 
ongoing work indicate that VA still does not have procedures in place 
to fully assess veterans' work potential. In addition, the IU 
decisionmaking process lacks sufficient incentives to encourage return 
to work. In considering whether to grant IU benefits, VA does not have 
procedures to include vocational specialists from its Vocational 
Rehabilitation and Education (VR&E) services to help evaluate a 
veteran's work potential. By not using these specialists, VA also 
misses an opportunity to have the specialist develop a return-to-work 
plan, in collaboration with the veteran, and identify and provide 
needed accommodations or services for those who can work. Instead, VA's 
IU assessment is focused on the veterans' inabilities and providing 
cash benefits to those labeled as ``unemployable,'' rather than 
providing opportunities to help them return to work. Incorporating 
return-to-work practices could help VA modernize its disability program 
to enable veterans to realize their full productive potential without 
jeopardizing the availability of benefits for people who cannot work.

                               BACKGROUND

    VA pays basic compensation benefits to veterans incurring 
disabilities from injuries or diseases that were incurred or aggravated 
while on active military duty. VA rates the severity of all service-
connected disabilities by using its Schedule for Rating Disabilities. 
The schedule lists types of disabilities and assigns each disability a 
percentage rating, which is intended to represent an average earning 
impairment the veteran would experience in civilian occupations because 
of the disability. All veterans awarded service-connected disabilities 
are assigned single or combined (in case of multiple disabilities) 
ratings ranging from 0 to 100 percent, in increments of 10 percent, 
based on the rating schedule; such a rating is known as a schedular 
rating. Diseases and injuries incurred or aggravated while on active 
duty are called service-connected disabilities.

                VA'S INDIVIDUAL UNEMPLOYABILITY BENEFITS

    Disability compensation can be increased if VA determines that the 
veteran is unemployable (not able to engage in substantially gainful 
employment) because of the service-connected disability. Under VA's 
unemployability regulations, the agency can assign a total disability 
rating of 100 percent to veterans who cannot perform substantial 
gainful employment because of service-connected disabilities, even 
though their schedular rating is less than 100 percent. To qualify for 
unemployability benefits, a veteran must have a single service-
connected disability of 60 percent or more or multiple disabilities 
with a combined rating of 70 percent or more, with at least one of the 
disabilities rated 40 percent or more. VA can waive the minimum ratings 
requirement and grant unemployability benefits to a veteran with a 
lower rating; this is known as an extra-schedular rating.
    Staff at VA's regional offices make virtually all eligibility 
decisions for disability compensation benefits, including IU benefits. 
The 57 VA regional offices use nonmedical rating specialists to 
evaluate veterans' eligibility for these benefits. Upon receipt of an 
application for compensation benefits, the rating specialist would 
typically refer the veteran to a VA medical center or clinic for an 
exam. Based on the medical examination and other information available 
to the rater, the rater must first determine which of the veteran's 
conditions are or are not service-connected. For service-connected 
conditions, the rater compares the diagnosis with the rating schedule 
to assign a disability rating.
    Along with medical records, raters may also obtain other records to 
evaluate an IU claim. VA may require veterans to furnish an employment 
history for the 5-year period preceding the date on which the veteran 
claims to have become too disabled to work and for the entire time 
after that date. VA guidance also requires that raters request basic 
employment information from each employer during the 12-month period 
prior to the date the veteran last worked. In addition, if the veteran 
has received services from VA's VR&E program or Social Security 
disability benefits, the rater may also request and review related 
information from these organizations.
    Once VA grants unemployability benefits, a veteran may continue to 
receive the benefits while working if VA determines that the work is 
only marginal employment rather than substantially gainful employment. 
Marginal employment exists when a veteran's annual earned income does 
not exceed the annual poverty threshold for one person as determined by 
the U.S. Census Bureau--$ 9,827 for 2004. Furthermore, if veterans are 
unable to maintain employment for 12 continuous months due to their 
service-connected disabilities, they may retain their IU benefits, 
regardless of the amount earned.

                MODERNIZING FEDERAL DISABILITY PROGRAMS

    After more than a decade of research, GAO has determined that 
Federal disability programs were in urgent need of attention and 
transformation and placed modernizing Federal disability programs on 
its high-risk list in January 2003. Specifically, our research showed 
that the disability programs administered by VA and the Social Security 
Administration (SSA) lagged behind the scientific advances and economic 
and social changes that have redefined the relationship between 
impairments and work. For example, advances in medicine and technology 
have reduced the severity of some medical conditions and have allowed 
individuals to live with greater independence and function in work 
settings. Moreover, the nature of work has changed in recent decades as 
the national economy has moved away from manufacturing-based jobs to 
service- and knowledge-based employment. Yet VA's and SSA's disability 
programs remain mired in concepts from the past--particularly the 
concept that impairment equates to an inability to work--and as such, 
we found that these programs are poorly positioned to provide 
meaningful and timely support for Americans with disabilities.
    In contrast, we found that a growing number of U.S. private 
insurance companies had modernized their programs to enable people with 
disabilities to return to work. In general, private insurer disability 
plans can provide short- or long-term disability insurance coverage, or 
both, to replace income lost by employees because of injuries and 
illnesses. Employers may choose to sponsor private disability insurance 
plans for employees either by self-insuring or by purchasing a plan 
through a private disability insurer. The three private disability 
insurers we reviewed recognized the potential for reducing disability 
costs through an increased focus on returning people with disabilities 
to productive activity. To accomplish this comprehensive shift in 
orientation, these insurers have begun developing and implementing 
strategies for helping people with disabilities return to work as soon 
as possible, when appropriate.

  PRIVATE INSURERS INCORPORATE RETURN-TO-WORK CONSIDERATIONS FROM THE 
                  BEGINNING OF THE ASSESSMENT PROCESS

    The three private insurers we studied incorporate return-to-work 
considerations early in the assessment process to assist claimants in 
their recovery and in returning to work as soon as possible.\3\ With 
the initial reporting of a disability claim, these insurers immediately 
set up the expectation that claimants with the potential to do so will 
return to work. Identifying and providing services intended to enhance 
the claimants' capacity to work are central to their process of 
deciding eligibility for benefits. Further, the insurers continue to 
periodically monitor work potential and provide return-to-work 
assistance to claimants as needed throughout the duration of the claim. 
Their ongoing assessment process is closely linked to a definition of 
disability that shifts over time from less to more restrictive--that 
is, from an inability to perform one's own occupation to an inability 
to perform any occupation.
    After a claim is received, the private insurers' assessment process 
begins with determining whether the claimant meets the initial 
definition of disability. In general, for the three private sector 
insurers we studied, claimants are considered disabled when, because of 
injury or sickness, they are limited in performing the essential duties 
of their own occupation and they earn less than 60 to 80 percent of 
their predisability earnings, depending upon the particular insurer.\4\ 
As part of determining whether the claimant meets this definition, the 
insurers compare the claimant's capabilities and limitations with the 
demands of his or her own occupation and identify and pursue possible 
opportunities for accommodation--including alternative jobs or job 
modifications--that would allow a quick and safe return to work. A 
claimant may receive benefits under this definition of disability for 
up to 2 years.
    As part of the process of assessing eligibility according to the 
``own occupation'' definition, insurers directly contact the claimant, 
the treating physician, and the employer to collect medical and 
vocational information and initiate return-to-work efforts, as needed. 
Insurers' contacts with the claimant's treating physician are aimed at 
ensuring that the claimant has an appropriate treatment plan focused, 
in many cases, on timely recovery and return to work. Similarly, 
insurers use early contact with employers to encourage them to provide 
workplace accommodations for claimants with the capacity to work.
    If the insurers find the claimant initially unable to return to his 
or her own occupation, they provide cash benefits and continue to 
assess the claimant to determine if he or she has any work potential. 
For those with work potential, the insurers focus on return to work 
before the end of the 2-year period, when, for all the private insurers 
we studied, the definition of disability becomes more restrictive. 
After 2 years, the definition shifts from an inability to perform one's 
own occupation to an inability to perform any occupation for which the 
claimant is qualified by education, training, or experience. Claimants 
initially found eligible for benefits may be found ineligible under the 
more restrictive definition.
    The private insurers' shift from a less to a more restrictive 
disability definition after 2 years reflects the changing nature of 
disability and allows a transitional period for insurers to provide 
financial and other assistance, as needed, to help claimants with work 
potential return to the workforce. During this 2-year period, the 
insurer attempts to determine the best strategy for managing the claim. 
Such strategies can include, for example, helping plan medical care or 
providing vocational services to help claimants acquire new skills, 
adapt to assistive devices to increase functioning, or find new 
positions. For those requiring vocational intervention to return to 
work, the insurers develop an individualized return-to-work plan, as 
needed. Basing the continuing receipt of benefits upon a more 
restrictive definition after 2 years provides the insurer with leverage 
to encourage the claimant to participate in a rehabilitation and 
return-to-work program. Indeed, the insurers told us they find that 
claimants tend to increase their efforts to return to work as they near 
the end of the 2-year period.
    If the insurer initially determines that the claimant has no work 
potential, it regularly monitors the claimant's condition for changes 
that could increase the potential to work and reassesses after 2 years 
the claimant's eligibility under the more restrictive definition of 
disability. The insurer continues to look for opportunities to assist 
claimants who qualify under this definition of disability in returning 
to work. Such opportunities may occur, for example, when changes in 
medical technology--such as new treatments for cancer or AIDS--may 
enable claimants to work, or when claimants are motivated to work.
    The private insurers that we reviewed told us that throughout the 
duration of the claim, they tailor the assessment of work potential and 
development of a return-to-work plan to the specific situation of each 
individual claimant. To do this, disability insurers use a wide variety 
of tools and methods when needed. Some of these tools, as shown in 
tables 1 and 2, are used to help ensure that medical and vocational 
information is complete and as objective as possible. For example, 
insurers consult medical staff and other resources to evaluate whether 
the treating physician's diagnosis and the expected duration of the 
disability are in line with the claimant's reported symptoms and test 
results. Insurers may also use an independent medical examination or a 
test of basic skills, interests, and aptitudes to clarify the medical 
or vocational limitations and capabilities of a claimant. In addition, 
insurers identify transferable skills to compare the claimant's 
capabilities and limitations with the demands of the claimant's own 
occupation. This method is also used to help identify other suitable 
occupations and the specific skills needed for these new occupations 
when the claimant's limitations prevent him or her from returning to a 
prior occupation. Included in these tools and methods are services to 
help the claimant return to work, such as job placement, job 
modification, and retraining.

         Table 1.--Medical Assessment: Tasks, Tools, and Methods
------------------------------------------------------------------------
                   Task                           Tools and methods
------------------------------------------------------------------------
Assess the diagnosis, treatment, and        Consultation of medical
 duration of the impairment and begin        staff and other resources,
 developing a treatment plan focused on      including current medical
 returning the claimant to work promptly     guidelines describing
 and safely.                                 symptoms, expected results
                                             from diagnostic tests,
                                             expected duration of
                                             disability, and treatment.
Assess the claimant's cognitive skills....  Standardized mental tests.
Validate the treating physician's           Review of the claimant's
 assessment of the impairment's effect on    file, generally by a nurse
 the claimant's ability to work and the      or a physician who is not
 most appropriate treatment and              the claimant's treating
 accommodation.                              physician.
Verify the diagnosis, level of              Independent medical
 functioning, and appropriateness of         examination of the claimant
 treatment.                                  by a contracted physician.
Evaluate the claimant's ability to          Home visits by a field nurse
 function, determine needed assistance,      or investigator or
 and help the claimant develop an            accompanied doctor visits.
 appropriate treatment plan with the
 physician.
Assess the claim's validity...............  Home visits and interviews
                                             with neighbors or others
                                             who have knowledge of the
                                             claimant's activities.
------------------------------------------------------------------------
Source: GAO analysis of private insurers' practices.


    Table 2.--Vocational Assessment and Assistance: Tasks, Tools, and
                                 Methods
------------------------------------------------------------------------
                   Task                           Tools and methods
------------------------------------------------------------------------
Identify transferable skills, validate       Test basic skills,
 restrictions on and capabilities for        such as reading or math.
 performing an occupation, and identify      Determine interests
 other suitable occupations and retraining   and aptitudes.
 programs.                                   Evaluate functional
                                             capacities associated with
                                             an occupation, such as
                                             lifting, walking, and
                                             following directions.
                                             Compare functional
                                             capacities, work history,
                                             education, and skills with
                                             the demands of an
                                             occupation.
Enhance work capabilities and help develop   Provide resume
 job-seeking skills.                         preparation, help develop
                                             job-seeking skills, and
                                             help with job placement.
                                             Assist in obtaining
                                             physical, occupational, or
                                             speech therapy and access
                                             to employee assistance,
                                             support groups, or state
                                             agency vocational
                                             rehabilitation or other
                                             community services.
                                             Identify and fund
                                             on-the-job training or
                                             other educational courses.
Assess ability to perform own or any         Observe and analyze
 occupation, assess potential for            the essential duties of the
 accommodation, and determine whether        claimant's own occupation,
 sufficient salary is offered locally or     another occupation for the
 nationally for a suitable occupation.       same employer, or an
                                             occupation of a prospective
                                             employer.
                                             Determine the
                                             general availability and
                                             salary range of specified
                                             occupations.
                                             Identify for a
                                             specified occupation the
                                             potential employers and
                                             related job descriptions,
                                             salary range, and openings.
Reaccustom claimant to a full work           Provide work
 schedule and enable claimant to overcome    opportunities for the
 impairment and return to work.              claimant to gradually
                                             resume his or her job
                                             duties.
                                             Procure devices to
                                             assist with work or
                                             otherwise help to modify
                                             the job.
------------------------------------------------------------------------
Source: GAO analysis of private insurers' practices.

  PRIVATE INSURERS PROVIDE INCENTIVES FOR CLAIMANTS AND EMPLOYERS TO 
                ENCOURAGE AND FACILITATE RETURN TO WORK

    To facilitate return to work, the private insurers we studied 
employment incentives both for claimants to participate in vocational 
activities and receive appropriate medical treatment, and for employers 
to accommodate claimants. The insurers require claimants who could 
benefit from vocational rehabilitation to participate in an 
individualized return-to-work program. They also provide financial 
incentives to promote claimants' efforts to become rehabilitated and 
return to work. To better ensure that medical needs are met, the 
insurers we studied require that claimants receive appropriate medical 
treatment and assist them in obtaining this treatment. In addition, 
they provide financial incentives to employers to encourage them to 
provide work opportunities for claimants.
    The three private insurers we reviewed require claimants who could 
benefit from vocational rehabilitation to participate in a customized 
rehabilitation program or risk loss of benefits. As part of this 
program, a return-to-work plan for each claimant can include, for 
example, adaptive equipment, modifications to the work site, or other 
accommodations. These private insurers mandate the participation of 
claimants whom they believe could benefit from rehabilitation because 
they believe that voluntary compliance has not encouraged sufficient 
claimant participation in these plans.\5\
    The insurers told us that they encourage rehabilitation and return 
to work by allowing claimants who work to supplement their disability 
benefit payments with earned income.\6\ During the first 12 or 24 
months of receiving benefits, depending upon the particular insurer, 
claimants who are able to work can do so to supplement their benefit 
payments and thereby receive total income of up to 100 percent of 
predisability earnings.\7\ After this period, if the claimant is still 
working, the insurers decrease the benefit amount so that the total 
income a claimant is allowed to retain is less than 100 percent of 
predisability income.
    When a private insurer, however, determines that a claimant is 
able, but unwilling, to work, the insurer may reduce or terminate the 
claimant's benefits. To encourage claimants to work to the extent they 
can, even if only part-time, two of the insurers told us they may 
reduce a claimant's benefit by the amount the claimant would have 
earned if he or she had worked to maximum capacity. The other insurer 
may reduce a claimant's monthly benefit by the amount that the claimant 
could have earned if he or she had not refused a reasonable job offer--
that is, a job that was consistent with the claimant's background, 
education, and training. Claimants' benefits may also be terminated if 
claimants refuse to accept a reasonable accommodation that would enable 
them to work.
    Since medical improvement or recovery can also enhance claimants' 
ability to work, the private insurers we studied not only require, but 
also help, claimants to obtain appropriate medical treatment. To 
maximize medical improvement, these private insurers require that the 
claimant's physician be qualified to treat the particular impairment. 
Additionally, two insurers require that treatment be provided in 
conformance with medical standards for treatment type and frequency. 
Moreover, the insurers' medical staff work with the treating physician 
as needed to ensure that the claimant has an appropriate treatment 
plan. The insurers told us they may also provide funding for those who 
cannot otherwise afford treatment.
    The three private sector insurers we studied may also provide 
financial incentives to employers to encourage them to provide work 
opportunities for claimants. By offering lower insurance premiums to 
employers and paying for accommodations, these private insurers 
encourage employers to become partners in returning disabled workers to 
productive employment. For example, to encourage employers to adopt a 
disability policy with return-to-work incentives, the three insurers 
offer employers a discounted insurance premium. If their disability 
caseload declines to the level expected for those companies that assist 
claimants in returning to work, the employers may continue to pay the 
discounted premium amount. These insurers also fund accommodations, as 
needed, for disabled workers at the employer's work site.\8\

 PRIVATE INSURERS STRIVE TO USE APPROPRIATE STAFF TO ACHIEVE ACCURATE 
      DISABILITY DECISIONS AND SUCCESSFUL RETURN-TO-WORK OUTCOMES

    The private disability insurers we studied have developed 
techniques for using the right staff to assess eligibility for benefits 
and return those who can to work. Officials of the three private 
insurers told us that they have access to individuals with a range of 
skills and expertise, including medical experts and vocational 
rehabilitation experts. They also told us that they apply this 
expertise as appropriate to cost effectively assess and enhance 
claimants' capacity to work.
    The three private disability insurers that we studied have access 
to multidisciplinary staff with a wide variety of skills and experience 
who can assess claimants' eligibility for benefits and provide needed 
return-to-work services to enhance the work capacity of claimants with 
severe impairments. The private insurers' core staff generally includes 
claims managers, medical experts, vocational rehabilitation experts, 
and team supervisors. The insurers explained that they set hiring 
standards to ensure that the multidisciplinary staff is highly 
qualified. Such qualifications are particularly important because 
assessments of benefit eligibility and work capacity can involve a 
significant amount of professional judgment when, for example, a 
disability cannot be objectively verified on the basis of medical tests 
or procedures or clinical examinations alone.\9\ Table 3 describes the 
responsibilities of this core staff of experts employed by private 
disability insurers, as well as its general qualifications and 
training.

   Table 3.--Responsibilities and Qualifications of Staff Employed by
   Private Disability Insurers To Assess and Enhance a Claimant's Work
                                Potential
------------------------------------------------------------------------
                                                          Qualifications
        Type of staff              Responsibilities        and training
------------------------------------------------------------------------
Claims managers.............   Determine         One insurer
                               disability benefit         gives
                               eligibility.               preference to
                               Develop,           those with a
                               implement, and monitor     college degree
                               an individualized claim    and requires
                               management strategy.       insurance
                               Serve as primary   claims
                               contact for the claimant   experience and
                               and the claimant's         specialized
                               employer.                  training and
                               Focus on           education.
                               facilitating the          Another
                               claimant's timely, safe    requires a
                               return to work.            college
                               Coordinate the     degree, a
                               use of expert resources.   passing grade
                                                          on an insurer-
                                                          sponsored
                                                          test, and
                                                          specialized
                                                          training and
                                                          coaching.
Medical and related            Collect and       Medical staff
 experts\1\.                   evaluate medical and       include
                               functional information     registered
                               about the claimant to      nurses with
                               assist in the              case
                               eligibility assessment     management or
                               and help to ensure that    disability-
                               claimants receive the      related
                               appropriate medical care   experience and
                               to enable them to return   experts in
                               to work.                   behavioral and
                               At one insurer,    mental issues,
                               physicians also help       such as
                               train company staff.       psychologists,
                                                          experienced
                                                          psychiatric
                                                          nurses, and
                                                          licensed
                                                          social
                                                          workers. Two
                                                          insurers also
                                                          employ board-
                                                          certified
                                                          physicians in
                                                          various
                                                          specialties.\2
                                                          \
Vocational rehabilitation      Help assess the   Rehabilitation
 experts.                      claimant's ability to      experts are
                               work.                      master's-
                               Help overcome      degree-level
                               work limitations by        vocational
                               identifying needed         rehabilitation
                               assistance, such as        counselors. In
                               assistive devices and      addition, one
                               additional training, and   insurer
                               ensuring that it is        requires board
                               provided.                  certification
                                                          and 5 years of
                                                          experience.
Supervisors.................   Provide           One insurer
                               oversight, mentoring,      gives
                               and training.              preference to
                                                          those with a
                                                          college degree
                                                          and requires 3
                                                          years'
                                                          disability
                                                          experience,
                                                          some
                                                          management
                                                          experience,
                                                          and
                                                          specialized
                                                          training.
                                                          Another
                                                          insurer
                                                          requires a
                                                          college
                                                          degree, more
                                                          than 12 years'
                                                          disability
                                                          claims
                                                          experience,
                                                          and completion
                                                          of courses
                                                          leading to a
                                                          professional
                                                          designation.
------------------------------------------------------------------------
\1\ At one company, the medical experts are employees of a company
  subsidiary but are often colocated with the insurer's employees.
\2\ One company, for example, employs 85 part- and full-time physicians,
  including psychiatrists, doctors of internal medicine, orthopedists,
  family practice physicians, cardiologists, doctors of occupational
  medicine, and neurologists.
Source: GAO analysis of private insurers' practices.

    The three disability insurers we reviewed use various strategies 
for organizing their staff to focus on return to work, with teams 
organized to manage claims associated either with a specific impairment 
type or with a specific employer (that is, the group disability 
insurance policyholder). One insurer organizes its staff by the 
claimant's impairment type--for example, cardiac/respiratory, 
orthopedic, or general medical--to develop in-depth staff expertise in 
the medical treatments and accommodations targeted at overcoming the 
work limitations associated with a particular impairment. The other two 
insurers organize their staff by the claimant's employer because they 
believe that this enables them to better assess a claimant's job-
specific work limitations and pursue workplace accommodations, 
including alternative job arrangements, to eliminate these 
limitations.\10\ Regardless of the overall type of staff organization, 
each of the three insurers facilitates the interaction of its core 
staff--claims managers, medical experts, and vocational rehabilitation 
experts--by pulling these experts together into small, 
multidisciplinary teams responsible for managing claims. Additionally, 
one insurer engenders team interaction by physically colocating core 
team members in a single working area.
    To provide a wide array of needed experts, the three disability 
insurers expand their core staff through agreements or contracts with 
subsidiaries or other companies. These experts--deployed both at the 
insurer's work site and in the field--provide specialized services to 
support the eligibility assessment process and to help return claimants 
to work. For instance, these insurers contract with medical experts 
beyond their core employee staff--such as physicians, psychologists, 
psychiatrists, nurses, and physical therapists--to help test and 
evaluate the claimant's medical condition and level of functioning. In 
addition, the insurers contract with vocational rehabilitation 
counselors and service providers for various vocational services, such 
as training, employment services, and vocational testing.
    The private insurers we examined told us that they strive to apply 
the appropriate type and intensity of staff resources to cost-
effectively return to work claimants with work capacity. The insurers 
described various techniques that they use to route claims to the 
appropriate claims management staff, which include separating (or 
triaging) different types of claims and directing them to staff with 
the appropriate expertise. According to one insurer, the critical 
factor in increasing return-to-work rates and, at the same time, 
reducing overall disability costs is proper triaging of claims. In 
general, the private insurers separate claims by those who are likely 
to return to work and those who are not expected to return to work. The 
insurers told us that they assign the type and level of staff necessary 
to manage claims of people who are likely to return to work on the 
basis of the particular needs and complexity of the specific case (see 
table 4).

   Table 4.--Staff Assignment for Claims Management by Triage Category
------------------------------------------------------------------------
                                                      Types of return-to-
        Triage category             Staff assigned       work services
                                                           provided
------------------------------------------------------------------------
Likely to return to work:
Condition requires medical       Medical specialist    Recommend
 assistance and more than 1                            improvements in
 year to stabilize medically.                          treatment plan to
                                                       treating
                                                       physician.
                                                       Refer
                                                       claimant for more
                                                       specialized or
                                                       appropriate
                                                       medical services.
                                                       Ensure
                                                       frequency of
                                                       treatment meets
                                                       standards for
                                                       condition.
Condition requires less than a   Claims manager        Monitor
 year to stabilize.                                    medical
                                                       condition.
                                                       Maintain
                                                       contact with
                                                       employer and
                                                       physician to
                                                       ensure return to
                                                       work.
                                                       Obtain
                                                       input from
                                                       medical and
                                                       vocational
                                                       specialists as
                                                       needed.
Condition is stabilized, and     Multidisciplinary     Evaluate
 claimant needs rehabilitation    team including--     claimant's
 or job accommodation to return   Vocational   functional
 to work.                         expert               abilities for
                                  Medical      work.
                                  expert               Customize
                                  Claims       return-to-work
                                  specialist           plan.
                                  Other        Arrange
                                  specialists as       for needed return-
                                  needed               to-work services.
                                                       Monitor
                                                       progress against
                                                       expected return-
                                                       to-work date.
Unlikely to return to work:
Claimant is determined unable    Claims manager        Review
 to return to work.                                    medical condition
                                                       and level of
                                                       functioning
                                                       regularly.
------------------------------------------------------------------------
Source: GAO analysis of private insurers' practices.

    As shown in table 4, claimants expected to need medical assistance, 
such as those requiring more than a year for medical stabilization, are 
likely to receive an intensive medical claims management strategy. A 
medical strategy involves, for example, ensuring that the claimant 
receives appropriate medical treatment. Claimants who need less than a 
year to stabilize medically are managed much less intensively. For 
these claims, a claims manager primarily monitors the claimant's 
medical condition to assess whether it is stable enough to begin 
vocational rehabilitation, if appropriate. Alternatively, a claimant 
with a more stable, albeit serious, medical condition who is expected 
to need vocational rehabilitation, job accommodations, or both to 
return to work might warrant an intensive vocational strategy. The 
private disability insurers generally apply their most resource-
intensive, and therefore most expensive, multidisciplinary team 
approach to these claimants. Working closely with the employer and the 
attending physician, the team actively pursues return-to-work 
opportunities for claimants with work potential.
    Finally, claimants who are likely not to return to work (or 
``stable and mature'' claims) are generally managed using a minimum 
level of resources, with a single claims manager responsible for 
regularly reviewing a claimant's medical condition and level of 
functioning.\11\ The managers of these claims carry much larger 
caseloads than managers of claims that receive an intensive vocational 
strategy. For example, one insurer's average claims manager's caseload 
for these stable and mature claims is about 2,200 claims, compared with 
an average caseload of 80 claims in the same company for claims managed 
more actively.

VA'S INDIVIDUAL UNEMPLOYABILITY RETURN-TO-WORK EFFORTS LAG BEHIND OTHER 
                                PROGRAMS

    Unlike disability compensation programs in the private sector, VA 
has not drawn on vocational experts for IU assessments to examine the 
claimant's work potential and identify the services and accommodations 
needed to help those who could work to realize their full potential. In 
our 1987 report, we found that VA had not routinely obtained all 
vocational information needed to determine a veteran's ability to 
engage in substantially gainful employment before it granted IU 
benefits. Without understanding how key vocational factors, such as the 
veteran's education, training, earnings, and prior work history, affect 
the veteran's work capacity, VA cannot adequately assess the veteran's 
ability to work. To perform this analysis, VA officials told us that 
the agency has vocational specialists who are specially trained to 
perform this difficult analysis. Skilled vocational staff can determine 
veterans' vocational history, their ability to perform past or other 
work, and their need for retraining. By not collecting sufficient 
information and including the expertise of vocational specialists in 
the assessment, VA did not have an adequate basis for awarding or 
denying a veteran's claim for unemployability benefits.
    Preliminary findings from our ongoing work indicate that VA still 
does not have procedures in place to fully assess veterans' work 
potential. In addition, the IU decision-making process lacks sufficient 
incentives to encourage return to work. In considering whether to grant 
IU benefits, VA does not have procedures to include vocational 
specialists from its VR&E services to help evaluate a veteran's work 
potential. By not using these specialists, VA also misses an 
opportunity to have the specialist develop a return-to-work plan, in 
collaboration with the veteran, and identify and provide needed 
accommodations or services for those who can work. Instead, VA's IU 
assessment is focused on the veterans' inabilities and providing cash 
benefits to those labeled as ``unemployable,'' rather than providing 
opportunities to help them return to work.

                        CONCLUDING OBSERVATIONS

    Return-to-work practices used in the U.S. private sector reflect 
the understanding that people with disabilities can and do return to 
work. The continuing deployment of our military forces to armed 
conflict has focused national attention on ensuring that those who 
incur disabilities while serving in the military are provided the 
services needed to help them reach their full work potential. 
Approaches from the private sector demonstrate the importance of using 
the appropriate medical and vocational expertise to assess the 
claimant's condition and provide appropriate medical treatment, 
vocational services, and work incentives. Applying these approaches to 
VA's IU assessment process would raise a number of important policy 
issues. For example, to what extent should the VA require veterans 
seeking IU benefits to accept vocational assistance or appropriate 
medical treatment? Such policy questions will be answered through the 
national policymaking process involving the Congress, VA, veterans' 
organizations, and other key stakeholders. Nevertheless, we believe 
that including vocational expertise in the IU decision-making process 
could provide VA with a more adequate basis to make decisions and 
thereby better ensure program integrity. Moreover, incorporating 
return-to-work practices could help VA modernize its disability program 
to enable veterans to realize their full productive potential without 
jeopardizing the availability of benefits for people who cannot work.
    Mr. Chairman, this concludes my prepared statement. I would be 
pleased to respond to any questions you or Members of the Committee may 
have.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Larry E. Craig 
                        to Cynthia A. Bascettta

    Question 1. As we discussed at the hearing, the Department of 
Veterans Affairs does Not consider age in making an individual 
unemployability determination. Should age be a factor in these 
determinations?
    Answer. Concerns about the extensive growth of Individual 
Unemployability (IU) benefits have raised questions about the use of 
age as a factor in decisionmaking. The purpose of IU benefits is to 
replace veterans' average loss in earnings because service-connected 
impairments leave them unable to work. To determine compensation to a 
veteran, Department of Veterans Affairs' (VA) rating specialists use a 
rating schedule to assign a degree of severity to the disability (known 
as a schedular rating) that determines the veteran's basic 
compensation. However, if a veteran does not receive a 100 percent 
schedular rating, but is found to have service-connected disabilities 
that make the veteran unemployable (not able to engage in substantially 
gainful employment), the veteran can be awarded IU benefits that 
increase his or her compensation benefits to the 100 percent level. To 
help ensure that IU benefits are provided only to veterans who cannot 
work because of service-connected disabilities, VA's rating specialists 
are expected to identify and isolate the effects of various factors not 
connected to military service, such as age, nonservice injuries, and 
voluntary withdrawal from the labor market. VA, however, does not 
consider age in its decisionmaking and can grant benefits to veterans 
of any age, if the agency finds that their service-connected 
impairments make them unemployable. For example, an 80-year-old veteran 
who has a 60 percent or higher schedular rating and no earnings could 
be determined unemployable and receive IU benefits.
    Although we are not taking a position on whether age should be a 
factor in IU decisionmaking, we believe that in evaluating its possible 
inclusion, Congress has several key issues to consider. These issues 
would require careful analysis and input from VA, veterans' 
organizations, and other key stakeholders. For example, Congress may 
want to examine the purpose of IU benefits to evaluate whether 
incorporating age into IU determinations would enhance or detract from 
their purpose. In addition, it may want to evaluate the options for 
including age as a criterion and the benefits and costs of those 
options. For example, the Social Security Administration's (SSA) 
disability programs consider age when evaluating an individual with a 
severe impairment that does not meet or equal the agency's Listing of 
Impairments and who cannot perform a prior job. To evaluate whether the 
individual can perform another job in the national economy, SSA takes 
into consideration the individual's age, along with prior work 
experience, functional limitations, and education. For example, 
individuals who are age 50 or older and have very limited work 
experience with no transferable skills, functional capacities limited 
to performing only sedentary or light work, and less than a high school 
education are generally found eligible for disability benefits. 
Conversely, if these individuals had transferable skills or a high 
school education or better that allowed them to perform skilled work, 
they would generally be found ineligible. SSA incorporates age into its 
decision-making process because it believes that advancing age, along 
with other severe functional and educational limitations, restricts an 
individual's ability to adapt to and perform a new job.
    Congress may also want to consider whether there should be an age 
cutoff for applying for IU benefits. Unlike VA's disability 
compensation program, SSA's Old-Age, Survivors and Disability Insurance 
program does not grant disability benefits to individuals after SSA's 
normal retirement age, but it may provide them with retirement 
benefits. According to VA, in the past 20 years the number of veterans 
at or beyond retirement age granted IU benefits has grown 
substantially. In evaluating an age cutoff for awarding IU 
compensation, Congress may also want to consider how disability 
compensation fits within the broader spectrum of disability and 
retirement benefits to ensure that veterans with disabilities receive 
adequate compensation.
    GAO will be issuing a report in late spring, 2006 that will address 
in more detail the age of IU beneficiaries, the value of their 
benefits, and VA's management of initial and ongoing IU eligibility 
determinations.

    Chairman Craig. Cynthia, thank you very much.
    Rick.

    STATEMENT OF RICK SURRATT, DEPUTY NATIONAL LEGISLATIVE 
              DIRECTOR, DISABLED AMERICAN VETERANS

    Mr. Surratt. Mr. Chairman, thank you for the opportunity to 
address the issue of whether the rising number of disabled 
veterans deemed unemployable is an indication that the benefit 
system is failing.
    As you know, veterans with service-connected disabilities 
that prevent them from working are totally disabled for 
compensation purposes. Provisions for total disability ratings 
on the basis of individual unemployability are entirely 
consistent with the purpose and essential to the fulfillment of 
the disability compensation program, which is to provide 
benefits proportionate to the level of disability.
    An increased number of veterans rated totally disabled on 
the basis of unemployability does not itself necessarily 
suggest systemic fault or failure because there very well may 
be other reasons. These reasons may indeed suggest a proper 
working of the system. The increase may be a proper response to 
and reflection of changing conditions. The increase in the 
number of unemployable veterans coincides with a comparable 
increase in the number of veterans with more severe 
disabilities and higher schedule ratings, from 60 to 90 
percent. The increase in the number of unemployable veterans is 
consistent with the national trend of an increase in the number 
of disabled persons, particularly an increase in disabled 
persons on the Social Security rolls, which is attributed to an 
aging general population. As with the general population, we 
have an aging veteran population, and we know that many 
disabilities progress and their effects become worse with age.
    Judicial review of VA decisions on unemployability has 
forced closer adherence to the law and better reasoned 
decisions, and that almost assuredly accounts for some of the 
increase in unemployability ratings.
    Perhaps one of the most responsible factors is the 
increasing prevalence of mental disorders, particularly post 
traumatic stress disorder among veterans, along with a rating 
formula for mental disorders under which many unemployable 
veterans cannot possibly qualify for a 100 percent scheduler 
evaluation, and must therefore be rated individually 
unemployable.
    Mr. Chairman, today here in Washington, in Government, we 
see, for example, paralyzed veterans, blind veterans and 
veterans with loss of both lower extremities working. So we 
might ask, if all those veterans who would be 100 percent under 
the rating schedule are working, why do we see an increase in 
veterans with seemingly less disability on the individual 
unemployability rolls?
    First of all, we probably would not see the same thing in 
the towns and rural areas that make up much of America with 
their predominantly manufacturing and agricultural jobs. We can 
safely conclude that technology, accessibility and 
accommodation have made it possible for the paralyzed and blind 
to work in structured settings. For veterans with mental 
disorders, chronic pain or generalized weakness, the 
competitive workplace may not be as hospitable, and the 
inherent nature of these kinds of disabilities may be more of a 
hindrance in work and even rehabilitation because they 
interfere with the ability to reason, concentrate, interact 
with others, cope with the pressures of the workplace, and meet 
production demands, et cetera.
    Nonetheless, if we reviewed a sample of VA's allowances of 
individual unemployability ratings for the purpose of finding 
fault with some of them, we probably could. At the same time, 
we might also find an equal or greater number of erroneous 
denials.
    We have pointed to some reasons for the increase in 
individual unemployability ratings, but we certainly do not 
claim to know precisely all the causes. Information on the 
predominant kinds of disabilities affecting those with 
unemployability ratings would provide greater understanding. We 
should also have information on whether veterans with certain 
types of disabilities like PTSD are typically less successful 
in attempts at vocational rehabilitation.
    Without a better understanding of factors such as these, 
the DAV believes we can draw no firm conclusions on the 
questions raised in today's hearing. At this point, we see no 
factual basis for concluding that faulty claims adjudication is 
responsible for the increase in veterans rated unemployable.
    That includes my statement, Mr. Chairman. I would be happy 
to answer any questions the Committee may have.
    [The prepared statement of Mr. Surratt follows:]

    Prepared Statement of Rick Surratt, Deputy National Legislative 
                  Director, Disabled American Veterans

    Mr. Chairman and Members of the Committee:
    In response to your invitation to testify, I am pleased to appear 
before the Committee to present the views of the Disabled American 
Veterans (DAV) on the question of how well the system of veterans 
benefits of the Department of Veterans Affairs (VA) is serving veterans 
deemed to be unemployable. In this regard, the Committee observes that 
VA's Departmental Strategic Goal 1 is to ``[r]estore the capability of 
veterans with disabilities to the greatest extent possible, and improve 
the quality of their lives and that of their families.'' In view of the 
trend of increasing numbers of veterans deemed totally disabled by 
reason of unemployability, the Committee indicates it will examine this 
component of the compensation program as well as address the question 
of whether the VA's Vocational Rehabilitation and Employment Program is 
being used to its optimum.
    For those veterans who are in fact unable to work because of 
service-connected disabilities but whose disabilities do not meet the 
requirements for a total rating under VA's regular rating schedule 
criteria, VA has special provisions for awarding total disability 
ratings. Such ratings are said to be ``extra-schedular.''
    Congress delegated to the Secretary of Veterans Affairs the 
authority to adopt and apply a schedule for rating disabilities.\12\ 
For purposes of compensation payments, the schedule provides for 
gradation of disability in increments of 10 percent, ranging from 10 
percent to 90 percent for partial disability, with 100 percent for 
total disability.\13\ The ratings are to be based, ``as far as 
practicable, upon the average impairments of earning capacity'' in 
civil occupations resulting from disability.\14\ ``Total disability 
will be considered to exist when there is present any impairment of 
mind or body which is sufficient to render it impossible for the 
average person to follow a substantially gainful occupation.'' \15\ 
However, it is the ``established policy of [VA] that all veterans who 
are unable to secure and follow a substantially gainful occupation by 
reason of service-connected disabilities shall be rated totally 
disabled.'' \16\ Therefore, ``[t]otal disability ratings for 
compensation may be assigned, where the schedular rating is less than 
total, when the disabled person is, in the judgment of the rating 
agency, unable to secure or follow a substantially gainful occupation 
as a result of service-connected disabilities.'' \17\ Accordingly, 
total ratings are authorized ``for any disability or combination of 
disabilities for which the Schedule for Rating Disabilities prescribes 
a 100 percent evaluation or, with less disability'' that renders the 
veteran, in his or her individual circumstances, unable to follow a 
substantially gainful occupation.\18\ In short, VA may find a veteran's 
disability to be total either on a schedular basis or due to individual 
unemployability (IU or sometimes TDIU).
    The distinction between total disability on a schedular basis and 
total disability based on IU is that total disability on a schedular 
basis is founded on an ``average person'' standard, as are all regular 
schedular ratings, while unemployability ratings are based on the 
impact of the disability in the individual's own circumstances.
    Average earning capacity, or average person, is a standard or a 
single value used to represent a broad universe of persons. Like an 
average, or arithmetic mean, it is approximately the middle position in 
a data set or intermediate between the two ends or extremes on a scale. 
Thus, roughly half of workers have lower earning capacity and roughly 
half have higher earning capacity than the average, and earning 
capacity is tied primarily to educational and vocational backgrounds. 
Consequently, while the concept of average impairment in earning 
capacity is the basis underlying the various percentage evaluations 
provided for given levels of disability in the rating schedule, 
unemployability determinations are not based on average impairment and 
must, therefore, take into account the disability as it affects the 
individual's ability to follow a substantially gainful occupation\19\ 
in light of his or her attained work skills and educational background. 
Unemployability ratings recognize that individuals may be totally 
disabled for work with less disability than that which would be 
necessary to totally disable the average person. Sometimes, the extent 
of disability depends more largely upon the affected individual than 
upon the character of the disability. For example, the loss of both 
legs might totally disable a common laborer with little education while 
it would have relatively less effect upon the earning capacity of an 
accountant.
    Though IU is an exception to the average person standard in that 
the average person would be deemed totally disabled when the 100 
percent schedular criteria are met, IU is not available for unusual 
circumstances only. An IU rating is based upon a regular variation in 
the effect of disability given the veteran's educational and vocational 
background. Given that roughly half of all disabled veterans will be 
more impaired by a disability than the average veteran, it is 
understandable that many will be totally disabled by diseases or 
injuries rated less than 100 percent under schedular criteria. In 
addition, many disabilities that can be totally disabling for some have 
maximum schedular ratings of less than 100 percent.\20\
    The number of veterans rated totally disabled for IU has increased 
over the past several years, but that is somewhat consistent with a 
pattern of higher numbers of more seriously disabled veterans in the 
veteran population. As a prerequisite for an IU rating, a veteran 
generally must have disability rated 60 percent or higher under the 
terms of the rating schedule.\21\ During fiscal years (FYs) 2000 to 
2004, the number of veterans with 60 percent ratings increased by 31 
percent. The number of veterans rated 70 percent increased by 60 
percent; veterans rated 80 percent increased by 75 percent; and 
veterans rated 90 percent increased by 91 percent. During the same 
period, veterans rated total due to IU increased 78 percent. In fiscal 
year 2004, approximately 438,000 veterans were seriously disabled 
enough to meet the schedular prerequisite for an IU rating, compared 
with approximately 286,000 in fiscal year 2000.\22\
    In addition to higher numbers of veterans potentially eligible for 
IU, an aging veteran population also may account in part for increased 
numbers of veterans who are unemployable. Progressive or degenerative 
conditions worsen with age. Disabled Vietnam veterans, who make up our 
largest single group of disabled veterans by period of service and 
whose disabilities are on average rated higher than their counterparts 
from other periods of service,\23\ had an estimated median age of 57.4 
years at the end of fiscal year 2004.\24\
    According to a review of studies conducted under VA contract by 
Economic Systems, Inc., the increase in the number of veterans on the 
compensation rolls is consistent with a national trend of an increase 
in the number of disabled persons.
    Most sources indicate that the number of disabled in the U.S. 
general population has been increasing as the U.S. population is aging. 
For example, the number of disabled workers and their dependents 
receiving [benefits from the] Social Security Administration's (SSA) 
Social Security Disability Insurance (SSDI) program increased 
significantly from 2.7 million in 1970 to 7.6 million in 2003. This is 
important as SSDI has a restrictive definition of disability (i.e., 
only those workers who are unable to perform any substantial gainful 
activity are eligible). Meanwhile, SSDI disability rates among the 
adult population (16 to 64 years old) have almost doubled from 2.2 
percent in 1970 to 4.0 percent in 2003.
    The total number of veterans receiving disability compensation 
payments from VA has increased only slightly from 2.07 million in 1955 
to 2.09 million in 1970 to 2.49 million in 2003. However, the 
percentage of veterans receiving VA disability compensation has risen 
from 7.6 percent in 1970 to 10.0 percent in 2003. Compared to the 
percent of U.S. population 16 to 64 years of age on SSDI rolls (4 
percent in 2003), [the] VA disability rate, in absolute terms, is 
higher, but in terms of the rate of increase in disability rate from 
1970 to 2003, it is the same as SSDI.
    According to the 1990 Census, there were 12.8 million individuals 
(aged 16-64) with work related disability (i.e., limitation in a 
person's ability to work due to a chronic health condition or 
impairment). Slightly over one-half (51.5 percent) of them reported 
themselves severely disabled (LaPlante, 1993). There was a significant 
increase in both figures in the 2000 census. Of the 21.3 million who 
reported to have a work related disability 65.8 percent claimed a 
severe disability (Census 2000).\25\
    Of course, the comparison above is between totally disabled workers 
and all disabled veterans.
    An increasing prevalence of service-connected post-traumatic stress 
disorder (PTSD) and other mental disorders among veterans may also 
account for the increase in IU ratings. Under its ``General Rating 
Formula for Mental Disorders,'' the VA rating schedule provides for 6 
different evaluations: 0 percent, 10 percent, 30 percent, 50 percent, 
70 percent, and 100 percent.\26\ To be rated 100 percent on a schedular 
basis under this formula, a veteran must meet the pertinent criteria 
from among the following:
    Total occupational and social impairment, due to such symptoms as: 
gross impairment in thought processes or communication; persistent 
delusions or hallucinations; grossly inappropriate behavior; persistent 
danger of hurting self or others; intermittent inability to perform 
activities of daily living (including maintenance of minimal personal 
hygiene); disorientation to time or place; memory loss for names of 
close relatives, own occupation, or own name.
    Needless to say, a person who has a mental condition meeting these 
criteria would have impairment well beyond a level that would remove 
any possibility working. Such person would be profoundly disabled and 
nearly helpless. Few veterans will meet these criteria.
    Now consider the criteria a disabled a veteran must meet to be 
rated 70 percent, the only rating that meets the schedular prerequisite 
for IU:
    Occupational and social impairment, with deficiencies in most 
areas, such as work, school, family relations, judgment, thinking, or 
mood, due to such symptoms as: suicidal ideation; obsessional rituals 
which interfere with routine activities; speech intermittently 
illogical, obscure, or irrelevant; near continuous panic or depression 
affecting the ability to function independently, appropriately and 
effectively; impaired impulse control (such as unprovoked irritability 
with periods of violence); spatial disorientation; neglect of personal 
appearance and hygiene; difficulty in adapting to stressful 
circumstances (including work or a work like setting); inability to 
establish and maintain effective relationships.
    Few veterans will be able to work with such marked symptoms. If 
they are to be adequately compensated, IU is their only resort. Under 
the general rating formula in effect prior to the total restructuring 
in 1996, any veteran unable to work because of a service-connected 
mental disorder was deemed totally disabled under the schedular 
criteria. Section 4.16(c) of title 38, Code of Federal Regulations, 
provided that the IU provisions of Sec. 4.16(a) did not apply to mental 
disorders:
    The provisions of paragraph (a) of this section are not for 
application in cases in which the only compensable service-connected 
disability is a mental disorder assigned a 70 percent evaluation, and 
such mental disorder precludes a veteran from securing or following a 
substantially gainful occupation. In such cases, the mental disorder 
shall be assigned a 100 percent schedular evaluation under the 
appropriate diagnostic code.
    Paragraph (c) was removed with the promulgation of the new general 
rating formula for mental disorders.\27\ Because that is no longer the 
rule under the current rating formula, all the ratings that would have 
been 100 percent on a schedular basis under this special rule now are 
on the basis of IU, which naturally caused an increase in the number of 
veterans rated IU. That effect is magnified by the increasing 
prevalence of mental disorders among veterans.\28\ PTSD accounts for 
44.6 percent of all service-connected mental disorders.\29\
    Among all veterans, PTSD is the seventh most prevalent service-
connected disability.\30\ Among the group most affected, Vietnam 
veterans, it is the second most prevalent disability.\31\
    The availability of judicial review of VA decisions has also 
probably been a factor in the number of allowances of claims for IU. 
The Court of Appeals for Veterans Claims, formerly the Court of 
Veterans Appeals, has been particularly critical of adjudication 
practices that led to arbitrary denials of IU. The Court has also held 
that VA cannot ignore the issue of entitlement to IU when it is 
presented in the record. The Court has rejected as arbitrary VA's 
practice of denying IU on the catchall unsupported conclusion that, 
despite severe disabilities, the veteran ``can perform some kind of 
work.'' \32\ The Court has rejected denials based on inadequately 
developed records.\33\ The courts have also held that, where the record 
in a claim for increased compensation includes evidence of 
unemployability due to the service-connected disability, the law 
requires VA to consider entitlement to IU though the veteran may not 
have expressly claimed a total rating on that basis.\34\
    The availability of IU ratings for the many veterans who do not fit 
into the ``average'' mold is essential to a fair and complete 
compensation system. The rules must be designed and the decisions must 
be made in a manner to result in a fair disposition of this question. 
As the Court stated, ``[i]t is clear that the claimant need not be a 
total `basket case' before the courts find that there is an inability 
to engage in substantial gainful activity. The question must be looked 
at in a practical manner, and mere theoretical ability to engage in 
substantial gainful employment is not a sufficient basis to deny 
benefits. The test is whether a particular job is realistically within 
the physical and mental capabilities of the claimant.'' \35\ 
Inherently, IU determinations must necessarily rely heavily on 
subjective data, particularly those involving mental disorders. 
However, that is unavoidable in the assessment of disability as it 
affects the individual because, as stated, the same medical condition 
will affect different individuals quite differently, not only from the 
standpoint of physical or mental functioning, but also in light of 
innumerable variables relating to vocational and educational 
attainments.
    A 60 percent or greater disability under the terms of the schedule 
necessarily means that, for veterans with more demanding occupations, 
the affected veteran is approaching that minimum level of efficiency or 
tolerance for the demands or stresses or strains of work which is 
acceptable to an employer who must confront the realities of a profit-
driven, competitive economy. A veteran may struggle and be able to 
barely satisfy an employer's needs for years and then suddenly be 
unable to continue meeting those minimum needs due to a gradual 
progression of his or her disability. A subtle change in the veteran's 
physical or mental capacity may reduce work attendance or performance 
to a level that is unacceptable to an employer. It is to be expected 
that many of these veterans will become unemployable as their 
disabilities worsen with age. Age itself is not a factor in the 
determination, however.\36\
    The average impairment standard treats all veterans equally, and 
although IU is based on the effect of disability on the individual, it 
too does not discriminate on basis of age. If the total rating is based 
on IU, ``it must be determined that the service-connected disabilities 
are sufficient to produce unemployability without regard to advancing 
age.'' \37\ The adjudicator is required to determine, without regard to 
age, whether it is service-connected disability that renders the 
veteran unemployable.\38\ Age must be ignored because compensation is 
paid for the effects of service-connected disability, not the effects 
of age.
    Unlike VA pension benefits and Social Security disability insurance 
benefits where age is appropriately considered in determining 
entitlement, consideration of age as a factor of entitlement in a 
veteran's compensation claim would be inappropriate. The purpose of 
veterans' pensions is ``relieving distress from disability or 
destitution among the aging veteran population.'' \39\ Pension is by 
definition a benefit paid to a veteran ``because of service, age, or 
non-service-connected disability.'' \40\
    Insurance against disability from any cause is to be distinguished 
from compensation for disability from military service. Age is a factor 
in determining entitlement to disability insurance benefits under 
Social Security laws on the principle that, where a person is unable to 
perform his or her customary work, the effects of advancing age reduces 
a person's ability to adjust to other work for which the person has the 
necessary skills, education, and physical or mental abilities. The rule 
states: ``we will consider your chronological age in combination with 
your residual functional capacity, education, and work experience. We 
will not consider your ability to adjust to other work on the basis of 
your age alone. In determining the extent to which age affects a 
person's ability to adjust to other work, we consider advancing age to 
be an increasingly limiting factor in the person's ability to make such 
an adjustment. . . .'' \41\
    Because the purpose of compensation is to make up for the effects 
of service-connected disability, it should not be tied to factors 
extraneous to the character of the disability. It would be 
inappropriate to pay different levels of compensation based on age. It 
would be inappropriate to deny IU to a younger veteran on the basis of 
age and award it to an older veteran with the same level of disability, 
or vice versa.
    Total compensation for IU is not a retirement benefit, however. 
Just as it should not be denied because of age, it should not be 
awarded because of age. Properly applied, the rules require a factual 
showing that the disability is such as to be incompatible with 
substantially gainful employment, irrespective of age. Today, many 
people work well beyond what was once considered normal retirement age. 
Typically, VA awards the benefit when disability forces the veteran to 
terminate employment.\42\ To award IU to a veteran age 64 and deny it 
to a veteran age 66, for example, would be unfair discrimination, 
disparate treatment of veterans similarly situated, and wholly 
unjustified from an equitable standpoint. Nonetheless, if Congress or 
VA chose to make a fundamental change in this compensation principle to 
allow for the consideration of age in IU claims, as with Social 
Security disability benefits, such change should make it easier for 
most veterans to qualify for IU because veterans of service in Vietnam 
and all earlier periods would be of advanced age. The Social Security 
Administration's rule provides with respect to a ``person of advanced 
age,'' ``We consider that at advanced age (age 55 or older), age 
significantly affects a person's ability to adjust to other work. We 
have special rules for persons of advanced age and for persons in this 
category who are closely approaching retirement age (age 60-64).'' \43\
    Under current rules, which do not complicate the decision by 
applying different rules to different age groups, if a veteran's 
functional limitations become such that they are incompatible with 
continuing performance of the veteran's job activities, a factual 
finding to that effect can be made with an adequately developed record. 
For decisions on IU, VA should look at the medical evidence, employment 
evidence, and any available relevant records from the Social Security 
Administration and VA's Vocational Rehabilitation and Employment 
Service. Experience has shown that, in many instances, there can be a 
valid purely medical conclusion that a veteran's disabilities are so 
severe in their effect upon ``ordinary activity'' as to obviously be 
incompatible with all work activities as generally understood and 
within common knowledge.\44\
    Though they are imperfect and have been criticized by the Court of 
Appeals for Veterans Claims and though VA is in the process of revising 
its rules on IU, we believe the current rules, for the most part, 
prescribe consideration of the appropriate factors. These decisions do 
require careful examination of the facts and the exercise of well-
informed and well-reasoned judgments. We suspect that most veterans 
prefer to work if they are able, and experience has shown that VA 
adjudicators are not particularly liberal in awarding total ratings on 
the basis of IU. This is reflected in the many discussions of arbitrary 
VA denials by the courts.
    For these several reasons, the increase in numbers of IU veterans 
does not signal a failure or fault in the compensation program.
    While compensation is an age-neutral benefit, common sense suggests 
that age should be a factor in determining whether vocational 
rehabilitation is feasible, for reason that the effects of age diminish 
human faculties. In addition to making successful rehabilitation for a 
new vocation more improbable for elderly veterans, the infirmities of 
age, along with the effects of disabilities 60 percent or greater in 
degree, may very well cause the veteran to be a hazard to himself or 
herself and others in some training environments. In addition, unlike 
the evaluation of disability for compensation purposes where the 
effects of nonservice-connected disabilities must be disregarded, 
assessment of a veteran's potential for rehabilitation must take into 
account the effects of all impairments.
    To expect an elderly disabled veteran to embark upon a new career 
in his or her final years of life is unrealistic. The demands of 
training may only make the disability worse. To refuse IU to a veteran 
who uses the good judgment not to undertake such an unwise course would 
contradict the purpose of veterans benefits. We therefore believe that 
mandating or pressuring veterans of advanced age to attempt vocational 
rehabilitation would be ill-advised and would quite probably result in 
a waste of resources. The option should be left open, to a reasonable 
age, for those whose individual circumstances make vocational training 
and regained employability feasible, however.
    Rehabilitation potential for younger veterans is a different 
matter. We suspect that most younger veterans resent the loss of 
independence and being forced into the role of being disabled. Current 
law encourages IU veterans to pursue vocational rehabilitation. The law 
requires VA to notify a veteran awarded total disability for IU of the 
availability of vocational rehabilitation; the law requires VA to offer 
the veteran counseling services and the opportunity for evaluation as 
to whether the achievement of a vocational goal is feasible.\45\ 
Although a veteran might have the potential to perform substantially 
gainful employment in the future upon successful completion of 
vocational rehabilitation training, current law recognizes that the 
veteran and his or her family cannot survive on the level of 
compensation paid for the existing percentage rating assigned for 
partial disability while the veteran is training to become employable. 
Therefore, entry into a program of vocational rehabilitation, by 
itself, does not cause a termination of TDIU benefits.\46\ A veteran 
who undertakes a program of vocational rehabilitation is not considered 
``rehabilitated to the point of employability'' unless he or she has 
been ``rendered employable in an occupation for which a vocational 
rehabilitation program has been provided under [chapter 31, of title 
38, United States Code].'' \47\
    In conjunction with its enactment of provisions requiring VA to 
notify an IU veteran of the availability of vocational rehabilitation, 
Congress included provisions for a period of ``trial work,'' in which a 
TDIU rating would not be reduced where a veteran secures and follows a 
substantially gainful occupation unless the veteran maintains such an 
occupation for a period of 12 consecutive months.\48\ Congress 
indicated that it considered ``it desirable to provide every reasonable 
opportunity and encouragement for disabled veterans--including those 
with very serious handicaps and those determined to be unemployable--to 
return to work.'' \49\
    Under VA's Departmental Strategic Goal 1, the first ``objective'' 
of VA's Vocational Rehabilitation and Employment program is to 
``[p]rovide all service-disabled veterans with the opportunity to 
become employable and obtain and maintain suitable employment, while 
providing special support to veterans with serious employment 
handicaps.'' \50\ VA's objective to provide ``all'' service-connected 
disabled veterans with the opportunity to become employable is 
laudable, but it must be viewed in light of the realities of the 
challenges associated with retraining veterans of advanced age to a 
status of ``rehabilitated to the point of employability.'' According to 
VA, achieving that status is challenging even for veterans younger than 
those with advanced age: ``Achieving suitable employment at age 40 and 
above is, in itself, a considerable challenge for anyone. Moreover, 
veterans with disabilities must typically compete for employment 
against young college graduates, age 22 to 25, who often have not 
served in the military, who have no dependents, and who have no 
disabilities.'' \51\ ``The average age of a program participant is 41 
years for male veterans and 37 years for female veterans, while the 
average age of disabled male and female veterans who complete a VA 
vocational rehabilitation program by achieving suitable employment is 
45 and 39 years respectively.'' \52\
    VA should be able to provide the Committee more information about 
the numbers of older veterans who complete a course of vocational 
rehabilitation and achieve suitable employment. We suspect it is 
relatively few.
    It is unfortunate that the number of unemployable veterans is 
rising, and perhaps more could be done to keep a portion of these 
veterans working as they would probably prefer, but the rising number 
itself does not appear to be a symptom or sign of failure. Rather, it 
is a reflection of the makeup of the veteran population, the nature and 
effect of the more prevalent service-connected disabilities, and, 
perhaps, the improved responsiveness of the claims adjudication system.
    We appreciate the Committee's interest in ensuring the 
effectiveness of programs for disabled veterans, and we appreciate the 
opportunity to present DAV's views.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Larry E. Craig 
                            to Rick Surratt

    Question 1a. You noted in your testimony that the individual 
unemployability (IU) benefit is not a retirement benefit. Yet, 
statistically, more than 30 percent of IU recipients are well-past any 
normally accepted retirement age.
    Is IU really an ``unemployability'' benefit when it does not take 
into account whether the recipient would seek work in the absence of 
the underlying service-connected disability?
    Answer. We acknowledge the difference between a person who is not 
working because he or she cannot work and a person who is not working 
because he or she chooses not to work. However, if a veteran is in fact 
shown to be unable to work because of service-connected disabilities, 
he or she is undeniably unemployable regardless of whether he or she 
would choose to work absent the disabilities. It is irrelevant whether 
the veteran would work if able. Whether the veteran would work if able 
is a moot point because the fact remains that the veteran is unable. 
Like all questions of legal entitlement to a benefit, the decision on 
individual unemployability rests on affirmative evidence of existing 
and known facts rather than speculation about what would occur in the 
absence of those facts or in some other alternative hypothetical 
scenario. It would depart from principles of valid reasoning if we were 
to have a sequential adjudication in which, upon finding a veteran 
unemployable, the adjudicator then would have to also attempt to look 
into the veteran's mind to determine if the veteran would work were he 
or she not disabled. Such a process would not meet any test of 
reasonableness. Yes, IU is really an unemployability benefit.
    Question 1b. If this benefit is instead serving as a pension for 
those beyond working age, would it be preferable to call it service 
pension and set criteria that make sense for that type of benefit?
    Answer. Under section 101(13) of title 38, United States Code, 
disability ``compensation'' means a monthly payment made to a veteran 
``because of service-connected disability.'' Individual unemployability 
is the basis of a benefit paid to a veteran because of service-
connected disability. Age and other ``criteria'' are irrelevant as a 
matter of law. Under section 101(15), ``pension,'' as it pertains to 
veterans, means a monthly or other periodic payment made to a veteran 
because of service, age, or nonservice-connected disability. Individual 
unemployability is not paid as a ``service pension'' or based solely on 
attainment of a specified age or because of non-service-connected 
disability. Individual unemployability compensates a veteran for 
service-connected disability total in degree. It would be the ultimate 
insult to the men and women who have sustained such serious 
disabilities in service to their country to designate their 
compensation as a ``pension.'' Because the compensation laws enacted by 
Congress rightfully exclude age and other irrelevant factors from 
entitlement criteria, the fact that more than 30 percent of IU 
recipients are well past any normally accepted retirement age has no 
bearing on, or reflection on the propriety of the benefit. Many 
veterans with amputations, blindness, paralysis, and mental disorders 
rated 100 percent under the rating schedule are beyond normal 
retirement age also, but it would be unconscionable to terminate or 
reduce their compensation, or convert it to pension. Just as many of 
these veterans with 100 percent scheduler ratings became totally 
disabled before they reached ``any normally accepted retirement age,'' 
many of the veterans receiving an individual unemployability rating 
quite probably became unemployable before normal retirement age, 
whatever normal retirement age is. We do not suggest that a veteran 
should automatically be awarded individual unemployability upon 
``normal'' retirement, but a veteran of any age should be awarded 
individual unemployability if forced to terminate substantially gainful 
employment because of service-connected disability. As a society, we 
should have no rule that discourages working upon attainment of a 
specified age. There should be no disincentive against working to 
whatever age an individual chooses and is able.
    Question 2. As you pointed out, the IU benefit is designed to take 
into account an individual's particular circumstances, as opposed to 
VA's rating schedule which is based on ``average'' impairment. But, at 
present, IU ratings are assigned without consideration of some 
individual circumstances, such as age, retirement status, and non-wage 
income. If the TV benefit is meant to account for the specific 
circumstances of an individual veteran, shouldn't it take into account 
all of the individual's circumstances?
    Answer. Compensation should pay a veteran for service-connected 
disability. It should neither be paid nor denied because of age. The 
benefit should compensate solely for the effects of service-connected 
disability, and veterans should not be treated differently because of 
differences in their socioeconomic status. To means test compensation 
would reduce it to a welfare benefit, again the ultimate insult to 
those veterans who suffer from some of the most debilitating service-
connected disabilities. A member of today's military should not fear 
that our government will conveniently renege on its obligation to 
compensate him or her for service-connected disabilities if, as a 
veteran, he or she inherits money or independently has holdings or 
assets gained through family or individual enterprise. To reduce a 
veterans disability compensation because of assets or non-wage income 
from other sources would, in effect, have the veteran individually bear 
the costs of war after he or she has already paid a very high price by 
virtue of service to the Nation. Penalizing a veteran because of income 
or assets that result from good fortune unrelated to the Government 
would be wholly unfair. It would be unfair that a veteran would lose 
his or her compensation, independence, and perhaps dignity, because he 
or she has a successful spouse whose earnings would require forfeiture 
of the compensation. Means testing would destroy the compensatory 
nature and purpose of compensation by transforming it into a mere 
gratuity based on need. Means testing compensation would simply offend 
fundamental principles of fairness.
    Question 3. You note in your testimony that, ``VA adjudicators are 
not particularly liberal in awarding total ratings on the basis of IU. 
Yet, the number of IU recipients compared to the number of veterans 
rated 60 to 90 percent suggests that nearly 1 out of every 2 veterans 
rated 60 to 90 percent receives IU. Can you explain how your assessment 
of VA's adjudication standards squares with those statistics?
    Answer. We understand that 3,339 appeals to the Board of Veterans' 
Appeals during fiscal years 2004-05 involved the issue of individual 
unemployability. Of that total, the Board allowed 270 appeals and 
remanded for additional action another 2,379. Inasmuch as the Board 
allowed or remanded 79 percent of the appeals seeking individual 
unemployability, we believe that reflects somewhat on the propriety of 
regional office decisionmaking on this issue. If regional offices had 
properly denied most of these cases, the percentage of allowed and 
remanded cases would not be so high. In our testimony, we simply noted 
that our experience has shown VA is not ``particularly liberal'' in 
awarding individual unemployability ratings, observing that this is 
also reflected in the criticism of VA decisions on this issue by the 
Court of Appeals for Veterans Claims. According to our calculations, 
the number of veterans with individual unemployability ratings in the 
year 2000 was 39 percent of the veterans with ratings from 60-90 
percent. In 2001, that percentage was 41 percent, and it grew every 
year, to 46 percent in 2004. (Pursuant to section 4.16(b) of title 38, 
Code of Federal Regulations, some small number of veterans rated 
unemployable might have schedular ratings lower than 60 percent). 
Certainly, the numbers, standing alone, show that a substantial portion 
of veterans with the more severe disabilities are rated individually 
unemployable. The increased percentage of veterans rated unemployable 
also suggests that, with age, the disabilities of our largest group of 
veterans, i.e., Vietnam veterans, are becoming worse, as we suggested 
in our testimony. The median age of Vietnam veterans is 58.3; the 
median age of all veterans is 59.3. Though the numbers your question 
cites are at least suggestive, they alone provide no factual basis from 
which to draw inferences as to whether VA adjudicators are or are not 
liberal in granting individual unemployability ratings. To answer that 
question, we would have to know what portion are in fact unemployable, 
or least have a reason for assuming what portion would be expected to 
be unemployable. As we noted in our testimony, an increased prevalence 
of mental disorders, primarily posttraumatic stress disorder, among 
veterans, principally among the largest group, Vietnam veterans, is 
known to account for much of the increase in veterans rated 
unemployable. Consider again the requirements for a 70 percent rating 
for a mental disorder:
    Occupational and social impairment, with deficiencies in most 
areas, such as work, school, family relations, judgment, thinking, or 
mood, due to such symptoms as: suicidal ideation; obsessional rituals 
which interfere with routine activities; speech intermittently 
illogical, obscure, or irrelevant; new continuous panic or depression 
affecting the ability to function independently, appropriately and 
effectively; impaired impulse control (such as unprovoked irritability 
with periods of violence); spatial disorientation; neglect of personal 
appearance and hygiene; difficulty in adapting to stressful 
circumstances (including work or a work like setting); inability to 
establish and maintain effective relationships.
    Because symptoms of this magnitude are likely to make virtually any 
veteran unemployable, 100 percent of the veterans with mental disorders 
rated 70 percent arguably should be in receipt of individual 
unemployability benefits. According to VA data, 35 percent of the 
veterans rated individually unemployable have mental disorders, of 
which 25 percent have PTSD. Thus, while the raw numbers of veterans 
rated individually unemployable as a percentage of all veterans with 
ratings from 60 to 90 percent do not provide any basis from which to 
draw conclusions about the liberality with which adjudicators grant 
total ratings based on individual unemployability, numbers such as 
those pertaining to veterans with PTSD do provide a basis from which to 
infer that large percentages of veterans with certain disabilities 
should rightfully be rated unemployable. VA certainly attributes much 
of the increase in individual unemployability ratings to PTSD. It also 
may well be that adjudicators find it more difficult to justify denials 
of individual unemployability for mental disorders--given the extent of 
disability required to meet the 70 percent rating criteria--than they 
do in the cases of veterans with disabilities other than mental 
disorders. It is just as likely that the percentage of 60 to 90 percent 
veterans currently in receipt of individual unemployability ratings 
suggests that adjudicators allow too few of these claims as it is that 
they suggest liberality in granting the benefit.
    Question 4. It is my understanding that your organization was 
founded partially in response to prejudices against disabled World War 
I veterans that prevented them from reintegrating into the civilian 
workforce. In light of that history, I would be interested to know 
whether you agree with my assessment that employment is a positive 
outcome and that ``totally disabled'' or ``unemployable'' should be 
findings of last resort?
    Answer. The DAV was founded in reaction to high unemployment and 
woefully inadequate programs for disabled veterans of the first World 
War. In his June 27, 1922, address to the DAV's second National 
Convention, DAV National Commander Judge Robert S. Marx reflected on 
the situation:

          Frequently during the past year we have had to fight for our 
        comrades, but personally I do not mind a fight and there is no 
        cause in the world for which I would rather fight than that of 
        the Disabled Veterans of the World War. We have had to fight 
        for more hospitals and better hospitals. We have had to fight 
        for real vocational training. We have had to fight for just 
        compensation. We have had to fight against red tape, 
        inefficiency and indifference. . . .

    It seems that some things never change. Despite his explanation of 
the necessity for advocacy on behalf of disabled veterans, Judge Marx 
later explained that veterans fought for their country and the American 
goal of world peace rather than to become disabled veterans and to 
receive veterans' benefits:

          [W]e did not fight this war in order to secure benefits for 
        our comrades. We did not fight the war in order to obtain money 
        from Congress nor to provide work for the builders of hospitals 
        or the surgeons of the Nation. These things are the sad 
        incidents that follow as the necessary aftermath of every war. 
        . . . We have said that the war is not over for the men who 
        gave their limbs and lungs, their eyes and their health to make 
        a realization of these ideals possible.

    Today, DAV's ``Statement of Policy'' begins with the following: 
``The Disabled American Veterans was founded on the principle that this 
Nation's first duty to veterans is the rehabilitation and welfare of 
its wartime disabled.'' DAV National Service Director Edward R. Reese, 
Jr., was a member of the VA Vocational Rehabilitation and Employment 
Task Force that recently conducted a ``top-to-bottom'' review and 
evaluation of the program and made comprehensive recommendations for 
improvement. The DAV's first priority is the well being of disabled 
veterans. The DAV believes in responsible, honest advocacy for them. We 
support effective vocational rehabilitation programs. Of course we 
agree that employment is a positive outcome. The DAV is a strong 
supporter of employment programs for veterans. However, some veterans 
are simply unable to work, and a veteran does not become totally 
disabled or unemployable at a time of his or an adjudicator's choosing. 
It is not a matter that is subject to willful control or timing. It is 
therefore not a matter of a ``finding of last resort.'' In our 
experience, persons who possess the personal drive to serve in the 
Armed Forces and willingness to put aside their personal interests and 
make extraordinary sacrifices for their country also possess a strong 
work ethic. Most want to work if they are truly able. Moreover, most 
would probably not find the relatively modest disability compensation 
paid to totally disabled veterans an enticement to feign total 
disability. Consequently, we think our Nation's disabled veterans will 
find the suggestion that they are not working out of laziness or for 
some other reason of personal choice offensive and insulting.

    Response to Written Questions Submitted by Hon. Daniel K. Akaka 
                            to Rick Surratt

    Question 1. Mr. Surratt, as someone working for a veterans service 
organization, you are in constant contact with veterans throughout this 
country. What message do you think veterans with PTSD may be getting as 
a result of the PTSD Review coupled with this inquiry into the state of 
VA's Individual Unemployability determinations?
    Answer. The Department of Veterans Affairs (VA) routinely conducts 
quality reviews of its rating decisions. The DAV believes these quality 
reviews should be more comprehensive. Though a reviewer might 
occasionally find a questionable allowance, we suspect erroneous 
denials are more of a problem. Also, VA conducts routine future reviews 
of disability ratings in those cases where improvement in the 
disability is likely. Of course, such reviews are entirely proper, and 
they are usually expected by veterans whose disabilities have not 
stabilized. Veterans understand the purposes and necessity for such 
routine reviews of decisions for quality assurance and reevaluation. 
Unlike the PTSD review, these routine reviews do not single out 
specific groups of veterans because of the nature of their disabilities 
or type of rating. Moreover, VA does not widely publicize these routine 
reviews in an attempt to appease critics or influence the court of 
public opinion, as it has with the PTSD review. In our view, VA 
needlessly caused additional anxiety among a group of veterans whose 
disabilities already make them anxious, insecure, and highly vulnerable 
to heightened worry about perceived personal threats to the disability 
benefits they and their families rely on for the necessities of life. 
Mistrust of Government among this group of veterans can only be made 
worse by such missteps. Because VA has authority to sever service 
connection only in the case where the grant was completely devoid of a 
factual basis, absolutely contrary to law, or obtained through fraud, 
VA would have had reason to contact very few of these veterans and 
alert them to the review in connection with an effort to substantiate 
the claim. Most of these veterans could have been spared the increased 
distress caused by the highly publicized plan of review. Veterans' 
suspicions that this review would be a ``witch hunt'' were fueled by 
knowledge that the Office of Inspector General review and the planned 
Veterans Benefits Administration review appeared one sided in that only 
allowed cases were to be scrutinized. State-to-State variations in 
average compensation payments therefore seemed only a pretext for 
embarking on a campaign of second-guessing earlier adjudicative 
judgments with a view toward reducing the compensation rolls, for, if 
VA had truly been interested in variations and their causes, it would 
need to review both allowances and denials. Fortunately, VA has wisely 
made a decision not to proceed with the PTSD review. Unfortunately, 
veterans with individual unemployability ratings, many of whom suffer 
from mental disabilities, are now being subjected to the same kind of 
worry. We do not in any way question the Committee's oversight 
responsibility, but an increase in the number of veterans awarded total 
disability ratings on the basis of unemployability does not by itself 
necessarily suggest that something is amiss within the system. Had the 
hearing not approached the issue from a perspective of that suspicion, 
veterans would not have become as concerned that its motives were not 
pure. Had we sought to learn more about the dynamics of the increase in 
unemployable veterans before suggesting changes, veterans may have been 
more trusting. Personally, I do not believe the approach of the profit-
driven commercial insurance industry would be an appropriate model for 
veterans' programs, but the seemingly serious reception that idea 
received is understandably a matter of concern for disabled veterans. 
Suggestions of means testing compensation or discriminating in 
individual unemployability ratings on the basis of age no doubt causes 
disabled veterans to see these actions as threats to their benefits. 
Had the hearing merely been an inquiry into the causes for the increase 
in individual unemployability ratings, rather than making a statement 
of doubt about the propriety of the benefit, it would not have sent the 
negative signal it did. Now that this issue has already been given such 
a high profile, we feel compelled to assure our members that we are 
following developments and are prepared to deal with the matter 
appropriately, where we would have no need to accentuate awareness 
otherwise. As an example of how worries about these reviews burden 
disabled veterans and their families, I quote this statement from a 
message of concern we recently received:

          So, here is my question, like a nightmare my husband is 100 
        percent service connected. If he loses his benefits, I don't 
        know what will become of us. We will lose everything. We are 
        both ill, of course, we live out away from people, he is your 
        prime example of PTSD, and to know that he's honorably served 
        his country, he has air medals, purple heart, army commendation 
        medal, I really don't know what they all are, he won't talk 
        about it. He says it just brings back a time he prefers to 
        forget, as he relives some part of it everyday.
          Can they really just take your only source of income away 
        from you? We are worried, my husband is well, let's just say, 
        he's awfully upset. Can you elaborate on just how this will 
        effect people like us all veterans. They deserve better than 
        this. My husband is in his late 50's, I'm lucky to still have 
        him. I'm just sick about all this news.

    Question 2. Mr. Surratt, is the ability to plan for retirement 
different for the average worker than for a severely injured veteran 
receiving VA compensation?
    Answer. Working persons often have retirement plans. Workers who 
become disabled and receive social security disability insurance 
benefits do not actually lose their benefits at normal retirement age. 
The benefit merely changes from the disability insurance benefit to the 
retirement benefit. It would be expected that a disabled veteran would 
not have the same ability to have a retirement plan or to build an 
estate as a non-disabled person. In theory, partially disabled veterans 
would not have a capacity equal to a non-disabled person to build an 
estate and save for retirement. Obviously, some veterans would be 
totally disabled upon military discharge, while others may not become 
totally disabled until later years. The compensation program does not 
distinguish between all of these variables and nuances. Compensation 
has always been a lifelong benefit because paralysis, blindness, 
amputations, permanent injuries, and chronic diseases cause lifelong 
disabilities. Until recently, we had never seen anyone seriously 
question the principle that disability compensation is a lifelong moral 
obligation of the Government. Congress enacted what is now Sec. 1318 of 
title 38, United States Code, to authorize dependency and indemnity 
compensation for survivors of veterans who died after a long period of 
total disability in recognition that disabled veterans do not generally 
have the same ability to build an estate as non-disabled persons. After 
discussing the effect of a veteran's death upon dependent survivors 
where the veteran was totally disabled, Congress observed:

          In many, if not most of these situations, the surviving 
        spouse is middle-aged or older. At such an age, it is very 
        difficult for the surviving spouse (almost all of them widows) 
        to become self-sufficient, and the veteran's estate is likely 
        to be inadequate for her support.

S. Rep. No. 95-1054, at 28 (1978).

    Referring to a bill similar to the one reported, this Committee 
stated:

          Such proposed legislation is based, as is this provision in 
        the Committee bill, on the premise that the presence of a 100-
        percent service-connected disability may reduce normal life 
        expectancy and, even more importantly, so overwhelm a family as 
        to prevent the normal accumulation of an estate sufficient to 
        provide for the survivors.

Id. at 31.

    If the cessation of income from compensation due to the veteran's 
death would create a hardship for a survivor, the termination of 
compensation during a veteran's lifetime would quite probably have a 
much more devastating effect upon the veteran and his or her family, as 
is explained in the correspondence we quote above.

    Chairman Craig. Thank you very much. We are in the tail end 
of a vote. We had better get there or they may close us out. 
Our leader is trying to create a new discipline in the Senate, 
timely voting.
    We are going to stand in recess for a few moments. I 
certainly will return, and I believe others will, to question 
you in some of your comments. Again, thank you for being here.
    The Committee will stand in recess.
    [Recess.]
    Chairman Craig. The Committee will be back in order. Again, 
thank you all very much for your patience. I have a set of 
questions here, and I think Senator Akaka will attempt to 
return with some questions as we probe both of your testimonies 
just a little bit. And, again, thank you for being here.
    Cynthia, your testimony makes it clear that the private 
insurer GAO analyzed makes the up-front investment necessary to 
help individuals with disabilities return to work; whereas, 
VA's approach may be best described--well, I guess the term 
that I am using here is pound-wise and penny-foolish.
    Is that a fair characterization of VA's efforts? Am I being 
overly harsh?
    Ms. Bascetta. I wish I had harder data to answer the 
question more concretely, but my guess is that it is not overly 
harsh. I say that because we do not know what VA's actual costs 
are to adjudicate the claims, and we do not know what those 
costs are in relation to the benefits paid out. But what we do 
know is that in the private sector, insurers looking at what 
could be potentially a very large stream of future benefits 
have made the decision that it is costeffective to make a 
significant up-front investment, both in assuring that their 
determinations of who they are going to get back to work are 
well supported and that they invest in that person to assure 
that there is a successful work outcome.
    I guess another way of looking at it is that we do not 
think enough attention is being paid to the opportunity costs 
of not making that up-front investment.
    Chairman Craig. Should the VA be well positioned to exceed 
the help private insurers provide because of its vast health 
and vocational rehabilitation resources?
    Ms. Bascetta. Yes, and, in fact, in many ways VA is very 
well positioned. I used to do Social Security work and was 
frustrated by the fact that the Social Security Administration 
cannot pull together the VR services because they are in the 
Department of Education or the Health Care Services because 
they are in CMS or the private sector. But VA has under its own 
roof not only the rating specialists, but physicians, other 
medical specialists, and vocational specialists who can all 
pull together to both assess a person and manage their return-
to-work process.
    They do not have the case manager piece, although under the 
seamless transition effort, as you know, they have a model 
where they would have a case manager who would be in charge of 
tracking that complex set of benefits that a servicemember 
would need to transition back to civilian life. So they have a 
concept that they could bring over to the IU side of the house 
or to the return-to-work processes.
    Chairman Craig. Some may argue that a comparison between 
private disability insurance beneficiaries and VA IU 
beneficiaries is not valid because veterans' disabilities are 
of a fundamentally different nature. How would you respond to 
such an argument?
    Ms. Bascetta. Well, first of all, I would make the point 
that VA's goal is to restore the capability of veterans with 
disabilities to the greatest extent possible, and that is 
entirely consistent at the level of a goal with what we have 
seen in the private insurers that we have looked at. What is 
starkly different is the contrast between the goals that they 
have and the practices that they apply to achieve those goals.
    Having said that, though, we know that--and as I said in my 
written statement and in my oral remarks, there are important 
differences between Government programs and the private sector, 
and none of these changes, should we decide that they are 
appropriate, would happen overnight. They would at a minimum 
require regulatory change, but they could require legislative 
change as well.
    Chairman Craig. If the model of the private insurer 
industry were adopted by VA, would it work on veterans with 
disabilities of the type and severity seen in the IU 
beneficiary population?
    Ms. Bascetta. That is a good question. One of the 
frustrations that we have is that we do not believe that VA's 
data is always good enough to know exactly the conditions of 
those who are on the rolls, both in terms of the severity of 
the condition or their demographics. And in this case, clearly 
the comparison that we would make is that the private sector 
does, in fact, deal with claimants who are very seriously 
disabled. For example, claimants who have sustained traumatic 
injuries in car accidents or other kinds of accidents or who 
have chronic disabling diseases would be very similar to the 
veteran population, and they do not in any way shy away from 
the severely disabled.
    In addition, with regard to IU in particular, we know that 
those claimants are coming in with a 60-percent rating, not a 
100-percent rating. So this is where it becomes difficult, 
because of data limitations and because of the difficulty with 
the rating schedule to make accurate comparisons in severity of 
disability.
    But if the thrust of your question is, are the private 
insurers that we looked at dealing with people who are very 
severely disabled, the answer is yes.
    Chairman Craig. Your testimony states that private insurers 
are in close contact with a claimant's treating physician to 
ensure that the claimant has an appropriate treatment plan 
focused, in many cases, on timely recovery and return to work. 
Could you contrast this approach with the level of involvement 
the Veterans Health Administration has with individuals whom 
the Veterans Benefit Administration has deemed unemployable?
    Ms. Bascetta. We have not completed our work on this, but 
what we know, so far, is that the VHA physicians typically are 
compensation and pension examiners, special physicians in VHA 
who do the disability assessment, but not necessarily the 
treating physician. But I cannot say that in all cases there is 
not a link between VBA and the VHA treating physician if, in 
fact, the claimant's treating physician is in the department.
    What is important to remember is that in the private 
sector, the reason that this link is so essential is to assure 
that the medical treatment that is integral to the return-to-
work success actually happens, and those claims managers 
monitor that, in fact, the person is getting the appropriate 
treatment that is designated in their plan.
    Chairman Craig. With the inclusiveness of the capability of 
the VA, as you expressed in another response to a question, is 
it fair in this instance to say that the right hand knows what 
the left hand is doing in the context of VA and physician 
tracking?
    Ms. Bascetta. We have not evaluated that yet. It would not 
be fair for me to make that comment at this time, although I 
think there probably is not enough integration between VBA and 
VHA on this issue.
    Again, with regard to the seamless transition, they are 
working together there, so they have figured out in that 
situation that there is a model they can be using to pull 
together the resources of both sides of the house.
    Chairman Craig. OK. Your testimony points out that private 
insurers use highly qualified staff to perform benefit 
assessment. Can you contrast for us the qualifications of VA 
staff who make IU determinations with those of the private 
insurer?
    Ms. Bascetta. Yes. The VA staff, of course, have physicians 
who do not make the employability decision, but who are highly 
qualified to provide the input that is important to make that 
decision. And they have VR staff who would be qualified to make 
the vocational assessment.
    We think part of the problem is the vocational specialists 
on the VR staff are not an integral part of the decision, and 
it is the claims adjudicator who is making the decision. Those 
folks are not well enough trained to make an employability 
assessment.
    Chairman Craig. Is it a question that the skill sets needed 
for an effective return-to-work approach do not exist at VA or 
that they are simply misplaced or not effectively used?
    Ms. Bascetta. I think they do, in fact, exist at VA. They 
need to do a better job bringing to bear the resources and 
expertise that they have.
    Chairman Craig. OK. Thank you. We appreciate your 
testimony.
    Rick, let us turn to you. Cynthia has testified that in 
GAO's view, VA's IU program lags behind other unemployment and 
disability programs. You, on the other hand, testified that the 
VA system does not appear to be failing. Would you help us with 
that conclusion based on these other observations?
    Mr. Surratt. Well, I think I said that we cannot determine 
from what we have that there is a failure responsible for the 
increase in IU awards. The increase itself is not necessarily 
suggestive of some failure.
    The second part of your question, I believe, is her remarks 
regarding private insurers versus VA?
    Chairman Craig. Yes.
    Mr. Surratt. Well, VA is, I guess, probably the largest 
disability determination agency in the world, maybe, certainly 
in the U.S., probably larger than these private insurers. And I 
do not know much about private insurers' practices. And I agree 
with Cindy to the extent that perhaps the vocational 
rehabilitation people could play a greater role in the 
adjudication process, but beyond that, I think many of these 
veterans--and you have heard the criteria on mental disorders--
if you have a 70-percent rating, I think most people would 
agree it is highly unlikely you are going to be able to 
function in a work setting, not even in a vocational 
rehabilitation setting.
    So these people that assess these disabilities on a daily 
basis look at them from how they function in daily life, and 
they can determine that their remaining functional capacities 
are so narrow that they are simply incompatible with the 
regular demands of work, meeting work schedules, being there 
for 8 hours, interpersonal interaction with co-workers and 
supervisors and customers and so forth. And so I think they 
have a general understanding and a general knowledge of those 
things and probably do a pretty good job of making the 
decisions on those bases.
    Chairman Craig. OK. An IU recipient currently receives 
about $26,000 per year in disability compensation, which is 
obviously far less than the median household income in this 
country. Do you believe the current system may actually be 
suppressing disabled veterans by encouraging dependency on a 
minimum benefit rather than empowering veterans to move out 
into the workplace where they might prosper at a higher level?
    Mr. Surratt. I would just have to answer that based on my 
experience. I have represented veterans some 18 years in 
claims, and I think that most veterans would prefer to be 
working if they were truly able. You are going to find 
exceptions. I think most veterans would not want that $26,000 
if they were truly able to work and would be pursuing gainful 
employment.
    Chairman Craig. OK. Let me turn to Senator Akaka.
    Danny.
    Senator Akaka. Thank you very much, Mr. Chairman.
    Mr. Surratt, in your testimony, you note that progressive 
or degenerative conditions worsen with age and that an aging 
veteran, one from Vietnam in particular, could account for 
increased numbers of veterans who are unemployable.
    My question to you is: Can you tell me whether or not you 
think that age should be made a factor when making IU 
determinations?
    Mr. Surratt. If, Senator, you are saying should there be a 
point at which we would no longer grant unemployability, I can 
answer that question, I think. Yes, sir.
    Senator Akaka. Yes, whether age should be made a factor in 
determining IU?
    Mr. Surratt. I think that would be unfair and unwise. Let 
me give you an example. Let's say we have a veteran with a very 
severe disability, who struggles and despite his severe 
disabilities works beyond the normal retirement age, works to--
let's say that we set a rule that beyond age 65 you could not 
claim unemployability, and let's say this veteran worked to age 
68 and he was an unusual veteran and he worked despite severe 
disabilities. And he comes into the VA and they say, sorry, Mr. 
Veteran, due to your unusual determination and your 
perseverance and the fact that you worked despite all these 
obviously serious conditions you have, we are going to penalize 
you, and we are not going to grant unemployability. Now, had 
you come in at age 64, given the severity of your disabilities 
we would have probably granted IU. That is unfair.
    Now let me get to the unwise aspect of that. Same scenario. 
You have a rule that says that we do not grant unemployability 
beyond age 65. I am this veteran and I am in the same 
condition. I am struggling, but I want to hang on. I take pride 
in work, and I want to work as many years as I can. And maybe I 
could work 2 or 3 more years, despite the advancement of my 
disability. But I realize that if I work beyond age 65, I 
cannot claim IU. So I may very well decide to just give it up 
now.
    So you are thereby creating an incentive for veterans to 
stop working earlier and costing the Government more money than 
you would otherwise if they worked to later years.
    So, no, I do not think an age limitation is fair or wise 
for those reasons.
    Senator Akaka. Mr. Chairman, I have just one more question, 
and I want to direct it to Ms. Bascetta of GAO. Do you believe 
that vocational rehabilitation and compensation and pension can 
absorb taking on a greater role for determining IU without 
sacrificing the level of service they currently give to their 
clients? For example, has GAO determined the costs of 
vocational rehabilitation and employment taking on a greater 
role in determinations of individual unemployability?
    Ms. Bascetta. No, we have not done that, and we have not 
done it with respect to this program and we have not done it 
with respect to our broader concerns about all Federal 
disability programs and whether or not they need to be 
fundamentally reformed. It is a very important question. I 
think there are legitimate concerns that, in fact, the costs of 
providing return-to-work assistance could exceed the benefits 
that are paid out now. In other words, simply providing cash 
benefits may be the least expensive option. But if that is 
true, it probably is not the one that best serves the veterans 
or anybody with a disability.
    Senator Akaka. Mr. Surratt, as someone working for a 
veterans service organization, you are in constant contact with 
veterans throughout this country. Are you concerned with the 
message that veterans with PTSD may be getting as a result of 
the PTSD review, coupled with this inquiry into the state of 
VA's individual unemployability determinations?
    Mr. Surratt. I think truly that these reviews are being 
well publicized and they are causing a great deal of anxiety in 
the veteran public. I understand the Chairman's position that 
we do have to monitor these programs to see that they're 
operating properly. I again would caution, as I did in my 
statement, that I do not think we should jump to any 
conclusions that they are operating improperly just because we 
have an increase in people on the disability rolls.
    I think VA should be very cautious about the way they 
contact particularly mentally disabled veterans. We heard in a 
hearing last week in the House that we had a suicide, and we 
heard that perhaps some of the VA offices had sent veterans 
letters asking for information prematurely and so forth.
    So, yes, there has to be a balance. You have to uphold your 
responsibility in running Government programs properly, but you 
have to be very careful, particularly with PTSD veterans and 
veterans on unemployability. I think they are scared and I 
think they do perceive that there is an effort to cut back on 
the rolls to save money and so forth.
    Senator Akaka. Thank you very much, Mr. Chairman.
    Chairman Craig. Danny, thank you.
    Rick, let me pursue a couple more questions. Maybe if I am 
hung up on an issue, maybe it is terminology. The Congressional 
Research Service--and it is a fairly well-known fact--will tell 
you that with men age 65 and older, only about 19 percent 
continue to pursue work in the workplace in today's figures. 
And you are right, you have given exceptions or you have spoken 
to a type or a personality with a phenomenal work ethic. And 
they are out there. There is no question about it. I lost a 
father this summer who worked up until 6 months before his 
death, and he died at 87. He had a work ethic that got him up 
every morning and moved him out, and he would have done so, 
almost if he had to crawl to work. That is the character of the 
individual.
    But having said that, you know, when I hear the term 
``unemployability,'' it is like workmen's compensation or it is 
to compensate somebody who cannot work versus somebody who now 
is in an age who will not--I should not say ``will not'' work--
is not working, retired. And yet that benefit continues in that 
terminology. Is it a terminology issue? I am not sure.
    I guess my frustration, if there is one--and the reason we 
pursue this--is maybe said better in this statement. Your 
testimony suggests that in assessing unemployability, VA should 
focus on a veteran's disabilities. I think that the 
Disabilities Act and all that we have come to be as a country, 
and appropriately so, would suggest something else.
    For instance, your position that the loss of both legs 
might totally disable a common laborer with little education. 
To me that seems contrary to the modern model, the view that we 
should focus on the abilities rather than the disabilities. You 
were probably in the room the day we had the young Black Hawk 
operator here with both legs off, determined to get back in her 
helicopter and fly. And she is getting there.
    So with many young servicemen returning from Iraq and 
Afghanistan with traumatic injuries, I believe it is critical 
that we provide them with the tools they need to live 
independently and to prosper if they can.
    Question: Especially for those young veterans, do you agree 
that VA should assess a veteran's remaining capabilities and 
the possibility of achieving a vocational goal before deeming a 
veteran unemployable?
    Mr. Surratt. No. I think that if a veteran is unemployable 
currently, they should be so rated because they cannot live off 
of--let's say they are 60 percent and they are unemployable and 
they have a family. And you are going to require them to go 
through vocational rehabilitation, the evaluation and that 
process, and rehabilitate before they start earning wages, I 
mean, there is going to be a serious shortfall in their income 
in the meantime.
    So if they are, in fact, unemployable in their present 
circumstances, they should be so rated and certainly VA should 
aggressively pursue vocational rehabilitation. And as you have 
heard, they can go through the vocational rehabilitation 
without losing their IU rating. They could have a period of 
trial work up to a year without losing that IU rating.
    Senator, if I may, earlier in that question, you asked what 
I perceived to be a separate question, and that is----
    Chairman Craig. Process, yes.
    Mr. Surratt. Why do we pay unemployability to people who 
are of retirement age? Well, first of all, many times the 
unemployability is granted while they are still at working age, 
and we see by the chart that that is true. And these people do 
not earn money like other people throughout their life and put 
away retirement nest eggs. Compensation is a lifelong benefit, 
going back to the amputee with both legs. We don't cutoff his 
compensation at 65. He has that for the rest of his life.
    Well, unemployability is the same thing. And you are 
correct. If a veteran is beyond normal working age, whatever 
that might be given this day and time and given your father's 
experience and so forth, then certainly VA should look harder 
at the case and make sure that the veteran just has not decided 
to stop working and coincidentally claims IU. I mean, there 
should be a factual basis for determining that his disability 
is of such a severity--again, you have to focus on disability 
here--to be incompatible with what we know is required in work 
out there in the competitive world.
    Chairman Craig. OK. Though you and I are probably going to 
disagree a little bit on that, I absolutely agree with you as 
to the transitional time involved here and the compensation 
necessary during those periods of time. But in a situation 
you--do you believe that it would be a better outcome if VA 
were to provide those veterans with the educational training 
necessary to perform the work rather than to simply label them 
as veterans unemployable? I see a transition time here--and I 
think you speak to it well--when those determinations are being 
made, whereas in the private sector there is an insistence, if 
not a requirement, that if you are capable, you go out and seek 
the education and the training to get back into that workforce. 
While we monitor, we provide, we do not require. That is one 
question.
    I think the other thing I have concern about in light of 
resources and resource management, you are right, someone who 
has lived at the $26,000 level or below most of their life, was 
not able to establish a nest egg, I believe the only 
qualification we have is earned income. We have no other 
assessment of total capability of retirement or continuing 
life, if you will, even though they maybe have a substantially 
large inheritance and they may have a substantial income flow. 
We do not know that because we do not ask that question because 
there is no means test, in my understanding, beyond earned 
income.
    You know, I am in the business of making sure that we cover 
as much as we can cover with the few dollars we have. Should 
there be a broader test than earned income at a certain point 
in time, 65 years of age and older?
    Mr. Surratt. Well, if you do that, you are changing the 
fundamental nature of compensation, which compensates for the 
disability irrespective of your fortune or misfortune 
otherwise. And if I happen to inherit, have a large 
inheritance, that should not----
    Chairman Craig. You said disability, but the term we are 
using is ``unemployability.''
    Mr. Surratt. Well, maybe we could find a better term. I do 
not know what it would be because that is the essential fact to 
that rating, that your disabilities are such that they keep you 
from working. And I would have no objection to changing the 
term, but I think the term represents the concept.
    Chairman Craig. OK. Well, to both of you, thank you very 
much for your time and your due diligence in this area, and 
obviously, Rick, your service to our disabled is beyond 
question. And, Cynthia, you know, we all know there are 
differences in comparisons, but there is a basis from which we 
have to look to make judgments to make sure that we have this 
system operating as effectively and as efficiently as it can. 
And I tie the two together, effectiveness for our veterans, 
efficiency for our veterans, because I think it means the right 
things in both instances.
    We will continue to monitor and watch this very closely as 
we work with the Admiral and his staff and people within the VA 
to make sure that we have a program that obviously benefits the 
veterans, but I really want this program to assess the 
capability while we are assessing the disability.
    I see a generation of young people today coming home 
substantially impaired, but with high hopes that they are going 
to be back out into the private sector, out into their own 
lives again, being productive citizens. And I think that 
technologies today and a lot of other assets out there can 
allow that to happen, and we ought to be optimizing our ability 
to serve them to cause those goals to be reached.
    To both of you, thank you very much for your time here 
today.
    Mr. Surratt. Thank you.
    Ms. Bascetta. Thank you.
    Chairman Craig. The Committee will stand adjourned.
    [Whereupon, at 4:04 p.m., the Committee was adjourned.]


                             A P P E N D I X

                              ----------                              


                     [From the Salon, Oct 26, 2005]

                         The V.A.'s Bad Review

                           (By Mark Benjamin)

(Early this month, a vet in New Mexico took his life. At his side was 
the agency's plan to question benefits for mental trauma.)

    On Oct. 7, the remains of eight American Vietnam veterans were laid 
to rest in a single casket at Arlington National Cemetery, after lying 
in the jungle in Vietnam for over 35 years. Their unit was overrun by 
two enemy regiments on May 10, 1968.
    John M. Garcia fought in Vietnam with the 4th Infantry Division in 
1969 and 1970. He came all the way from New Mexico to Northern Virginia 
for the burial because he once knew a Marine whose body was now in that 
casket. Bringing those veterans home and giving them the respect they 
deserve was the right thing to do. ``It is a beautiful story,'' Garcia 
said.
    Garcia is the cabinet secretary of the New Mexico Department of 
Veterans Services, a state agency that aids veterans and helps them get 
Federal benefits from the Department of Veterans Affairs in Washington. 
The Federal agency provides veterans medical care after their service 
and sends disabled veterans monthly checks if needed, up to $2,000 a 
month.
    When Garcia got back to his office the following Monday, his phone 
rang. Another Vietnam veteran needed to be buried. But this one had 
died by his own hand. ``I was stunned,'' Garcia said in a telephone 
interview from Santa Fe. ``And I was even more stunned at why.''
    On Oct. 8, Greg Morris, 57, was found by his wife, Ginger, in their 
home in Chama, N.M., an old mining town of 1,250 in the Rocky 
Mountains. Lying at Morris' side were a gun and his Purple Heart medal. 
For years, Morris had been receiving monthly V.A. benefits in 
compensation for post-traumatic stress disorder. Next to his gun and 
Purple Heart was a folder of information on how the V.A. planned to 
review veterans who received PTSD checks to make sure those veterans 
really deserved the money.
    Last spring, the V.A. began to quietly draw up plans to take 
another look at nearly 72,000 veterans who from 1999 to 2004 had been 
classified as disabled and unemployable because of mental trauma from 
war. The V.A. plan, about which Salon was the first to report on Aug. 
9, would review previous decisions to grant disability benefits to 
veterans incapacitated by PTSD.
    Veterans advocacy groups are irate, charging the department with 
trying to save money at the expense of the men and women traumatized by 
war. They say mentally troubled veterans will be shocked, hurt and 
afraid of losing their monthly checks.
    Many veterans said the review was bound to trigger suicides. ``It 
is my educated opinion that [the V.A.] will kill some people with 
this,'' Ron Nesler told me on Aug. 24. ``They will either kill 
themselves or die from stroke.''
    Nesler served in Vietnam in 1970 and 1971 and is coincidentally 
from New Mexico. His traumatic memories include a Claymore mine 
blasting a busload of civilians near his artillery base. He has been 
getting disability checks for PTSD for years.
    On Aug. 11, he received a letter from the V.A. saying that his file 
was one of those in its review. He said the letter left him shocked, 
angry and afraid. The letter warns that ``confirmation'' of his mental 
wounds ``had not been established'' and that his file at the V.A. 
``does not establish that the event described by you occurred nor does 
the evidence in the file establish that you were present when a 
stressful event occurred.'' (The V.A. recently determined, again, that 
Nesler's claims are legitimate.)
    The letters themselves generated considerable controversy. ``It was 
like Russian roulette,'' Garcia said. ``You are dealing with lives. You 
don't do that. You don't just send out information to people who are 
suffering from some sort of mental stress saying, `We are going to take 
these benefits away.' ''
    Morris was a member of AMVETS, a service organization for veterans, 
whose issues were close to his heart. He was also one veteran who sent 
a clear message back to the V.A. ``The evidence indicated that he 
committed suicide because he was frustrated and afraid that the V.A. 
was going to take his benefits away,'' Garcia said. By all accounts, he 
was a troubled veteran who had attended counseling. And medical studies 
have shown that people with PTSD often suffer intense suicidal or 
homicidal rage. ``People will say, `Well, he's got problems,' Garcia 
said. ``Well, that was just enough to push him over the edge.''
    Morris did not receive a review letter from the V.A., but the 
prospect clearly upset him. ``He was greatly shaken by the announcement 
of the V.A. review,'' Rep. Tom Udall, D-N.M., said in a statement 
calling for a halt to the review. Udall also said Morris ``frequently 
inquired whether he would be losing the support he did receive'' before 
he committed suicide. ``He believed, as so many veterans do, that he 
was being forced to prove himself yet again. It is that belief that 
makes veterans so angry and so frustrated with this process.''
    Recently, Garcia was contacted by the wife of another Vietnam 
veteran who did get a letter from the V.A. ``As a result of this 
letter, I have spent the last three nights watching him walk the floor, 
scared his benefits are going to be cutoff,'' the wife wrote. ``This 
morning, I went to work, and when I called my husband to inform him 
that I was safe at work, he told me he was going to `fix everything.' I 
left work, and when I returned home, he had called his brother to pick 
[up] the two guns he owns.''
    Garcia said that when the wife got home, the veteran ``had his 
rifles out and they were fully loaded. His family arrived in time to 
prevent him from doing it.'' Garcia told me the V.A. review has to be 
stopped. ``We lost a veteran because of it,'' he said, adding, ``I 
don't know how many more have tried'' suicide.
    The V.A. inaugurated the review after the department's inspector 
general issued a report last May that showed the agency had been 
inconsistent in granting full disability benefits to veterans with 
PTSD. The report found that the likelihood of a veteran getting the 
maximum payment varied widely in regions across the country, calling 
into question the evaluation procedures.
    V.A. statistics show that in 2004 an average of 9 percent of vets 
in New Mexico, Maine, Arkansas, West Virginia, Oklahoma and Oregon 
received a 100 percent disability rating, entitling them to the maximum 
payment. In contrast, an average of 3 percent of vets received the 
maximum payment rating in Indiana, Michigan, Connecticut, Ohio, New 
Jersey and Illinois. The review will ultimately cover 72,000 veterans 
but has started with a group of 2,100. There is a lot of money at 
stake. PTSD benefits have soared from $1.7 billion in 1999 to $4.3 
billion in 2004, as more veterans learn about the condition and the 
V.A. benefits for it.
    ``We have a responsibility to preserve the integrity of the rating 
system and to ensure that hard-earned taxpayer dollars are going to 
those who deserve and have earned them,'' Daniel L. Cooper, the V.A.'s 
undersecretary for benefits, told Salon in a written statement last 
summer. (A V.A. spokesman did not return calls seeking comment on 
Morris or the current state of the review.)
    The original inspector general's report warned that 2.5 percent of 
veterans getting 100 percent disability checks for PTSD might be 
``potentially fraudulent.'' It noted ``an abundance of Web sites'' that 
were ``offering ways to compile less than truthful evidence'' to get 
monthly checks. It also said one Web site was selling a fake Purple 
Heart for $19.95.
    Concern about fraud may be ill-founded. According to an Oct. 19 
letter from seven Senate Democrats to their colleagues, arguing in 
favor of an amendment to halt the V.A. review, no cases of fraud have 
been identified. ``At a time when service members are returning from 
war and straining an already burdened system, this review raises 
serious questions of costs and efficiencies,'' the letter stated.
    Some lawmakers have launched an all-out effort to halt the V.A. 
review. In September, the Senate passed an amendment to block it. 
Drafted by Sens. Patty Murray, D-Wash.; Barack Obama, D-Ill.; Dick 
Durbin, D-Ill.; and Daniel Akaka, D-Hawaii; the amendment was attached 
to a Senate bill that funds the V.A.
    Conferees from the House and Senate must now decide if the final 
bill that lands on the President's desk will contain a prohibition on 
the review of 72,000 PTSD claims.
    On Oct. 14, a bipartisan group of 54 House members led by Rep. 
Peter DeFazio, D-Ore., wrote to key conferees to urge them to adopt the 
Senate ban on the review. ``It just sends a terrible message to those 
who are serving in the military today for the VA to attack and question 
whether those who served before are entitled to receive the benefits 
the VA itself previously approved,'' the letter said.
    Last week, the House Committee on Veterans' Affairs held a hearing 
on the review. Before Garcia left for Washington to testify, he called 
Morris' widow. ``She said she was happy'' that her husband's suicide 
and the V.A. review would be brought up in Congress, Garcia said, 
``because maybe then his death would mean something.''