[Senate Hearing 111-326]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 111-326
 
   REVIEW OF VETERANS' DISABILITY COMPENSATION: BENEFITS IN THE 21ST 
                                CENTURY

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

                                HEARING

                               BEFORE THE

                     COMMITTEE ON VETERANS' AFFAIRS
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 17, 2009

                               __________

       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

                   Daniel K. Akaka, Hawaii, Chairman
John D. Rockefeller IV, West         Richard Burr, North Carolina, 
    Virginia                             Ranking Member
Patty Murray, Washington             Lindsey O. Graham, South Carolina
Bernard Sanders, (I) Vermont         Johnny Isakson, Georgia
Sherrod Brown, Ohio                  Roger F. Wicker, Mississippi
Jim Webb, Virginia                   Mike Johanns, Nebraska
Jon Tester, Montana
Mark Begich, Alaska
Roland W. Burris, Illinois
Arlen Specter, Pennsylvania
                    William E. Brew, Staff Director
                 Lupe Wissel, Republican Staff Director


                            C O N T E N T S

                              ----------                              

                           September 17, 2009
                                SENATORS

                                                                   Page
Akaka, Hon. Daniel K., Chairman, U.S. Senator from Hawaii........     1
Burr, Hon. Richard, Ranking Member, U.S. Senator from North 
  Carolina.......................................................     2
Tester, Hon. Jon, U.S. Senator from Montana......................     3
Johanns, Hon. Mike, U.S. Senator from Nebraska...................     4
Brown, Hon. Sherrod, U.S. Senator from Ohio......................     5
Begich, Hon. Mark, U.S. Senator from Alaska......................    31
Burris, Hon. Roland W., U.S. Senator from Illinois...............    33

                               WITNESSES

Dunne, Patrick W., Under Secretary for Benefits, U.S. Department 
  of Veterans Affairs............................................     6
    Prepared statement...........................................     7
Kettner, George, Ph.D., President, Economic Systems, Inc.........    11
    Prepared statement...........................................    13
Scott, LTG James Terry, USA (Ret.), Chairman, Advisory Committee 
  on Disability Compensation.....................................    22
    Prepared statement...........................................    23
    Response to request arising during 
      the hearing by Hon. Daniel K. Akaka........................    38
Neas, Katy, Vice President, Government Relations, Easter Seals...    44
    Prepared statement...........................................    46
Prokop, Susan, Associate Advocacy Director, Paralyzed Veterans of 
  America........................................................    48
    Prepared statement...........................................    49
Wilson, LTC John L., USAF (Ret.), Associate National Legislative 
  Director, Disabled American Veterans...........................    55
    Prepared statement...........................................    56


   REVIEW OF VETERANS' DISABILITY COMPENSATION: BENEFITS IN THE 21ST 
                                CENTURY

                              ----------                              


                      THURSDAY, SEPTEMBER 17, 2009

                                       U.S. Senate,
                            Committee on Veterans' Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:34 a.m., in 
room 418, Russell Senate Office Building, Hon. Daniel K. Akaka, 
Chairman of the Committee, presiding.
    Present: Senators Akaka, Brown, Tester, Begich, Burris, 
Burr, and Johanns.

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

    Chairman Akaka. This hearing will come to order.
    This morning the Committee continues our work on veterans' 
disability compensation. Specifically, we will be focusing on 
issues relating to compensation payments for service-connected 
disabilities.
    Discussions about the veterans' disability compensation 
system often involve two separate but related elements of how 
the government pays compensation to those injured in military 
service. The first part is the timeliness and accuracy of 
compensation decisions, which we held a hearing on in July. 
This is an important issue which requires reforming the current 
process by which VA adjudicates claims for benefits. The 
Committee agrees that veterans deserve timely, accurate 
adjudication of their claims for benefits. We are now working 
to determine how best to meet that goal.
    The second issue relates to the factors that determine how 
much a veteran should be compensated for his or her disability. 
This is a very complex question that the Committee continues to 
consider and is a topic for today's hearing.
    There are a number of considerations that must be taken 
into account when we look at what influences how much a veteran 
is compensated for injuries related to military service. How is 
a veteran's quality-of-life affected by a disability? How do we 
calculate loss of earnings related to the disability? How 
accurate is VA's current ratings schedule? What is the role of 
rehabilitation in making a disability determination? These are 
but a few of the questions that we are addressing today.
    Calculating the appropriate level of compensation for those 
disabled in service is a complex matter. For example, there is 
data, based on comprehensive studies, suggesting that some 
veterans do not receive an appropriate level of compensation, 
while some others may be overcompensated. As a result, efforts 
designed to help some veterans could inadvertently hurt others. 
We need to be deliberate as we work to develop solutions that 
will result in appropriate reform of the disability 
compensation system.
    Again, I want to welcome everyone to today's hearing. I 
look forward to the testimony from our two panels and to 
continuing to work with the many interested parties in the 
months ahead as we seek to craft a workable reform of the VA 
disability compensation system.
    Senator Burr?

        STATEMENT OF HON. RICHARD BURR, RANKING MEMBER, 
                U.S. SENATOR FROM NORTH CAROLINA

    Senator Burr. Thank you, Mr. Chairman. Aloha.
    Chairman Akaka. Aloha.
    Senator Burr. Thank you for calling this hearing. I want to 
welcome our panel of experts and committed individuals to solve 
this.
    Mr. Chairman, the brave men and women who have served and 
sacrificed on our behalf deserve a disability system that meets 
their needs and, more importantly, a system that helps them to 
achieve full and productive lives. But in reality, the outdated 
disability system our Nation's veterans currently have may not 
be able to meet the needs of the 21st century veteran.
    As far back as 1956, the commission chaired by General 
Bradley stressed that, and I quote, ``Our philosophy of 
veterans' benefits must . . . be modernized, and the whole 
structure of traditional veterans' programs brought up to 
date.'' But no fundamental changes were made then or since, 
despite a number of reports laying out for all of us the 
system's shortcomings.
    Just last Congress, the Veterans Disability Benefits 
Commission and the Dole-Shalala Commission again stressed the 
need to update the system. Those commissions outlined many 
fundamental problems, including the fact that the purpose of 
disability compensation, and I quote, ``Is unduly restrictive . 
. . and inconsistent with current models of disability.'' They 
also found that the aim of the veterans' disability program 
should be rehabilitation, but the goal has not been met.
    Both commissions recommended updating the VA Schedule for 
Rating Disabilities to reflect modern medical criteria and 
current injuries. They recommended compensating veterans for 
loss of quality-of-life in addition to the loss of earnings 
capacity. And perhaps more importantly, they stressed the need 
to emphasize treatment and rehabilitation of injured veterans.
    In light of these commissions' reports, VA requested a 
detailed study of how the recommended changes could be made, 
and today we will hear about the results of that study. We will 
also discuss a recent report from VA suggesting maybe even more 
studies are needed before changes should be made to the 
disability system.
    Although I realize the VA may be reluctant to take on 
additional challenges at this time, it is understandable that 
many veterans, including a group in North Carolina that write 
me frequently, have quite frankly lost patience with five 
decades of studies that have not been acted on by this 
Committee or by the VA. Our Nation's veterans, particularly 
those now coming back from war with devastating injuries, 
deserve better than a system that was outdated before they were 
born.
    As we now know, their disabilities may affect all aspects 
of their lives, including community activities, household 
chores, and time spent with family. They deserve a system that 
will compensate them for the full impact of their injuries and 
will give them every opportunity to overcome their disabilities 
and succeed in civilian life.
    Mr. Chairman, I hope--I desperately hope--this is the last 
hearing we have to have on the recommendations for changes to 
our disability system. I know that Admiral Dunne, General 
Scott, Senator Dole, Secretary Shalala didn't do this just 
because it was a job or it was an offer. They did it because 
there is a problem. And many have spent countless hours 
preparing reports that, if this Committee doesn't act, will 
continue to collect dust like the studies that have come before 
them.
    At a time that we take every opportunity to talk about the 
increased investment we make in veterans services, now is not 
the time to fall short of what is tough, and that is getting 
the disability schedule right, making sure that the next 
generation of warriors understand that we understand them now, 
but more importantly that we understand their expectations. We 
are willing to make sure that they have got the tools to meet 
those expectations--not just in treatment--but in the way we 
treat the reimbursements.
    So, it is my hope that we will see today a commitment to 
move forward and I look forward to working with my colleagues 
on whatever that path is. I thank the Chair.
    Chairman Akaka. Thank you very much, Senator Burr.
    Now we will hear from Members of the Committee with their 
opening statements. Senator Tester?

                 STATEMENT OF HON. JON TESTER, 
                   U.S. SENATOR FROM MONTANA

    Senator Tester. Thank you, Mr. Chairman. I want to thank 
you for holding this hearing. Thank you for your statements; 
and I want to thank the Ranking Member for his statement, too. 
I want to thank the witnesses for being here. Admiral Dunne and 
General Scott, thank you both particularly for your service and 
thank you for your continued service to the country by being 
here today.
    I meet regularly with veterans across the State of Montana. 
I have been at homeless shelters and visited amputees. I have 
talked with men and women who have suffered from PTSD and TBI. 
I have been to Walter Reed and Bethesda Naval to see young men 
from Montana whose lives have been profoundly changed by 
serious injury in their service to this country.
    Today, I am thinking about them, and quite honestly, I am 
worried about them. I am worried about those physically and 
mentally disabled folks who suffer from injuries both invisible 
and all too visible. How do we put a price tag on traumatic 
disability and diminished quality-of-life caused by war? We 
have established commissions and committees, reorganized, 
restructured, and revamped.
    Today, we once again talk about the complexity of 
overhauling an outdated schedule for rating disabilities, and 
it seems we have been here before. In fact, General Scott, I 
believe I first met you in 2007 when you were before this 
Committee presenting your work from the Veterans Disability 
Benefits Commission. Now you are back with a new commission and 
new recommendations; and don't get me wrong, I love to see you 
here, it is good to see you again, but on this complicated 
issue, there is no doubt that we need to measure twice and cut 
once, not the other way around.
    Ultimately, we are here to get things done for the 
veterans. We all know that. They are an important part of this 
process and I want to thank the VSOs for answering the call to 
duty once again by preparing some important recommendations for 
disability claims and disability benefit reform. Those are 
voices that we need to listen to, as well, during this 
discussion.
    So thank you, Mr. Chairman. I look forward to the solutions 
that we will be offered toward getting the rating system right. 
Thank you.
    Chairman Akaka. Thank you very much, Senator Tester.
    Senator Johanns?

                STATEMENT OF HON. MIKE JOHANNS, 
                   U.S. SENATOR FROM NEBRASKA

    Senator Johanns. Mr. Chairman, thank you very much. To the 
Chairman and Ranking Member, thank you for your determination 
here. These are enormously important issues.
    I don't want to speak long, because I don't want to be 
repetitious. I could just add my words of support to so much of 
what has been said this morning, and that actually would be 
sufficient for an opening statement.
    I did want to underscore something. I was especially 
interested in the Economic Systems, Inc. report that found that 
mental disabilities are oftentimes more disabling in terms of 
the loss of earning capacity than physical ones, yet our 
disability system really doesn't mirror that. This is an area 
of significant interest for me--it was when I was the Governor 
of Nebraska, and continues to be as I am a Member of the U.S. 
Senate.
    So, my hope is that as we concentrate on what we need to do 
here, we concentrate on that mental disability aspect in a 
very, very aggressive way, because I think it has just been 
left way behind. We have so much better understanding of mental 
disability today than we did even 5 or 10 years ago. It is time 
to bring that to our age, if you will.
    So, I do appreciate your dedication. One thing I have 
especially appreciated about being on this Committee is working 
with the people who work in this area. I think they care deeply 
about the veterans, want to do the right thing, and are 
frustrated when things aren't going the way they should. And 
now we just simply have to figure out how we grab these issues 
and move them forward. My hope is that in a very bipartisan way 
we can do that. Thank you.
    Chairman Akaka. Thank you very much, Senator Johanns.
    Senator Brown?

               STATEMENT OF HON. SHERROD BROWN, 
                     U.S. SENATOR FROM OHIO

    Senator Brown. Thank you, Mr. Chairman and Ranking Member 
Burr for holding his hearing.
    Like many of my colleagues, as Senator Tester said, in 
August we went home to listen on a whole host of issues. One of 
the most productive couple of hours I spent was listening to--
really doing a roundtable with--veterans and veterans advocates 
and people who had served their country--like Admiral Dunne and 
General Scott--in Chillicothe, Ohio, in the heart of 
Appalachia.
    Chillicothe is home to a VA medical center which serves 
veterans in Southeast Ohio in its main medical center and its 
five community-based outreach clinics, which are increasingly 
important, especially in rural areas around my State and other 
States. There were 3,500 inpatient admissions last year. The 
hospital is known for its excellence in psychiatric services, 
in primary and secondary medical services, and in post-acute 
care.
    About 90,000 Ohio veterans receive monthly disability 
compensation. Many of them were in the audience that day, some 
were in the roundtable and some were watching. Each is 
affected, as we know, by the VA schedule of rating 
disabilities. Each faces a difficult task of understanding its 
complexities.
    We need to continue to dig deeper--as this Committee is 
doing, as you three are doing--into why there is not uniform 
disability compensation. A service-connected disability should 
be rated the same whether the veteran is in Dayton, Ohio, or 
Daytona Beach, Florida. These problems--the backlog in the 
rating disparities--in many ways relate back to the VA's 
schedule of rating disabilities. There must be commonalities 
with veterans at every rating level, wherever they may live, 
yet we aren't seeing that.
    I am concerned, too, about the quality-of-life component of 
disability compensation. It is a qualitative evaluation that 
produces a quantitative result. We need to be sure that this 
evaluation isn't creating arbitrary benefit differentials. 
Trust in the VA is eroded when a complicated, subjective 
formula spits out a rating and a dollar amount, leaving the 
veteran in the dark as to the process and the rationale behind 
the compensation. You could just feel that frustration in the 
hearts and minds of so many veterans that were at that 
roundtable that morning.
    VA could improve the situation by simplifying and 
rationalizing the benefits formula. More broadly, we should 
simplify the process by which veterans receive these earned 
benefits. By providing a fully-integrated system from the 
Veterans Health Administration to the Veterans Benefits 
Administration, we could make VA run more efficiently and be 
more veteran-friendly.
    There is also an information overflow problem. Veterans are 
inundated with paper. This only adds confusion to an already 
confusing system. As it stands, there is a brisk market for VA 
``how-to'' books. [Laughter.]
    The system is that complicated. One book, The Complete 
Idiot's Guide to Your Military and Veteran Benefits, is 400 
pages. Another book, The Veterans Survival Guide: How to File 
and Collect on VA Claims, is almost 300 pages. The VA's own 
guide for Federal benefits for veterans is more than 150 pages.
    If we work to modernize the payment structure, four 
principles should be followed. One, any change to the system 
must make it more fair.
    Two, transparency must be an overarching goal. Veterans 
must be able to much more easily understand the system, the 
reasons, and the amounts of their compensation.
    Third, it must reduce red tape and focus on increasing 
efficiency in order to increase timeliness of claims processing 
and payments.
    And last, the system must be designed to maximize earned 
benefits for veterans, not to minimize compensation awards or 
the size of those awards.
    I am glad we are having this hearing today. I am encouraged 
that VA and Congress are working together with veterans and 
with VSOs to find ways to modernize and bring into the 21st 
century the way that VA handles veterans disability 
compensation. And I thank all three of you for your service to 
our country.
    Chairman Akaka. Thank you, Senator Brown.
    And now we will hear from Senator Begich.
    Senator Begich. Mr. Chairman, I will pass and am anxious to 
hear from the witnesses.
    Chairman Akaka. Thank you.
    I want to welcome our principal witness from VA, the 
Honorable Patrick W. Dunne, Under Secretary for Benefits. I 
also want to welcome Dr. George Kettner, who is President of 
Economic Systems, and General James Terry Scott, who is the 
Chairman of the VA Advisory Committee on Disability 
Compensation.
    Thank you all for being here this morning. Your full 
testimony will, of course, appear in the record.
    Admiral Dunne, will you please proceed?

 STATEMENT OF PATRICK W. DUNNE, UNDER SECRETARY FOR BENEFITS, 
 VETERANS BENEFITS ADMINISTRATION, U.S. DEPARTMENT OF VETERANS 
                            AFFAIRS

    Admiral Dunne. Mr. Chairman, Ranking Member Burr, and 
Members of the Committee, thank you for inviting me here today 
to speak on the timely and important issues related to 
disability compensation for our Nation's disabled veterans.
    Compensation for service-connected disabilities is based on 
replacing the average loss in veterans' wage earning capacity. 
The Congressional directive mandates that ratings shall be 
based, as far as practicable, upon the average impairments of 
earning capacity. As a result, the VA ratings schedule was 
developed as a means to compensate veterans for the income from 
employment that they would have received if not for the 
service-connected disability.
    Recently, this approach to disability compensation has been 
challenged as inadequate because it focuses only on employment 
loss and not on the larger issue of quality-of-life loss. 
Definitions of quality-of-life loss vary and may focus on the 
domains of physical and mental health or may address the 
individual's general overall satisfaction with life.
    The Dole-Shalala Commission recommended compensating a 
veteran for: the inability to participate in favorite 
activities; social problems related to disfigurement or 
cognitive difficulties; and the need to spend a great deal of 
time performing activities of daily 
living.
    General Scott and Dr. Kettner have also overseen studies on 
quality-of-life, and I look forward to their testimony today. 
Each of these studies has provided valuable information about 
quality-of-life and has also shown there are many issues to be 
addressed. My written testimony provides written comments, and 
I would like to highlight several areas.
    First, VA does not have statutory authority to incorporate 
quality-of-life payments into its disability compensation 
scheme.
    Second, there is no universally recognized method to 
determine how to adequately and fairly compensate for the 
impact of a disability or combination of disabilities on a 
veteran's quality-of-life.
    Third, VA already has a number of special benefits that 
implicitly compensate for quality-of-life loss; among these are 
ancillary benefits, special monthly compensation, and total 
disability based on individual unemployability. Special monthly 
compensation and ancillary benefits are provided to veterans in 
addition to compensation for service-connected disabilities 
under the current rating schedule.
    Fourth, any proposal must, in our view, be administratively 
feasible and ensure consistency across decisionmakers.
    And finally, VA stands ready to work closely with this 
Committee and Congress to ensure that all veterans' benefits 
meet the criteria to care for him who has borne the battle.
    Mr. Chairman, this completes my statement, and I would be 
happy to respond to questions.
    [The prepared statement of Admiral Dunne follows:]
 Prepared Statement of Patrick W. Dunne, Under Secretary for Benefits, 
 Veterans Benefits Administration, U.S. Department of Veterans Affairs
    Mr. Chairman and Members of the Committee, Thank you for inviting 
me to speak today on the timely and important issues related to 
providing disability compensation to our Nation's disabled Veterans, 
with particular attention to issues related to loss of quality of life 
(QOL).

                        I. QUALITY OF LIFE LOSS

Background
    Compensation for service-connected disabilities provided by the 
Department of Veterans Affairs (VA) is based on replacing the average 
loss in Veterans' wage-earning capacity. The Congressional directive at 
38 U.S.C. Sec. 1155 mandates that ``ratings shall be based, as far as 
practicable, upon the average impairments of earning capacity.'' As a 
result, the VA rating schedule was developed as a means to compensate 
Veterans for the income from employment that they would have received 
if not for the service-connected disability. In recent years, this 
approach to disability compensation has been challenged as inadequate 
because it focuses only on employment loss and not on the larger issue 
of QOL loss. VA has received input on QOL loss from numerous sources. 
As a result, an effort has been made to clarify the implications for 
adopting a policy of QOL loss compensation in conjunction with the 
current average earnings loss compensation system. Those sources 
providing information and recommendations to VA include: the 
President's Commission on Care for America's Returning Wounded Warriors 
(Dole-Shalala Commission); the Veterans' Disability Benefits Commission 
(Benefits Commission); the Center for Naval Analyses (CNA); the 
National Academy of Sciences' Institute of Medicine (IOM); and Economic 
Systems, Incorporated (EconSys).
    Definitions of QOL loss vary and may focus on the domains of 
physical and mental health or may address the individual's overall 
satisfaction associated with life in general. The IOM traces the 
concept back to the Greek philosopher Aristotle's description of 
``happiness.'' The IOM uses a definition encompassing the cultural, 
psychological, physical, interpersonal, spiritual, financial, 
political, temporal, and philosophical dimensions of life. A more 
succinct definition utilized by EconSys refers to an overall sense of 
well-being based on physical and psychological health, social 
relationships, and economic factors.
Dole-Shalala Commission
    QOL loss was addressed in the 2007 Report of the President's 
Commission on Care for America's Returning Wounded Warriors, also 
referred to as the Dole-Shalala Commission. Although the report was 
primarily focused on ways to assist severely wounded servicemembers 
returning from Iraq and Afghanistan, it recommended that Congress 
should restructure VA disability payments to include compensation for 
non-work-related effects of permanent physical and mental combat-
related injuries. According to the report, this would compensate a 
disabled Veteran for the inability to participate in favorite 
activities, social problems related to disfigurement or cognitive 
difficulties, and the need to spend a great deal of time performing 
activities of daily living. As a result of the report, VA contracted 
for a study on QOL loss with EconSys, which was completed in 2008.
    In terms of existing compensation, the EconSys study agrees with 
prior studies that earnings loss is on average at least fully 
compensated under the current system and in some cases overcompensated. 
However, studies agree that certain conditions such as mental health 
are undercompensated. Prior studies found that QOL loss does exist for 
service-disabled Veterans and recommended that VA examine possibilities 
for QOL compensation, acknowledging that implementation would be 
lengthy and have significant cost implications.
Veterans' Disability Benefits Commission
    The Benefits Commission was created by the National Defense 
Authorization Act of 2004 and produced a final report in 2007 that 
provided recommendations to VA on a wide range of issues related to the 
claims process and the benefits award system. Among the issues 
addressed was QOL loss. The report included recommendations that VA 
disability compensation should account for QOL loss. In addition, it 
recognized special monthly compensation benefits and ancillary benefits 
as existing vehicles to assist with QOL loss among disabled Veterans. 
The Benefits Commission incorporated information from the CNA and IOM 
studies into its final report, agreeing with these organizations that 
QOL loss existed among disabled Veterans and that VA disability 
compensation should address it. The Benefits Commission also supported 
the idea that VA should undertake studies designed to research and 
develop QOL measurement tools or scales and ways to determine the 
degree of loss of QOL on average resulting from disabling conditions in 
the rating schedule. However, it acknowledged that QOL loss assessment 
is a relatively new field and still at a formative stage. Therefore, 
implementation would be a long-term, experimental, and costly activity.
Center for Naval Analyses
    A major study on QOL loss among Veterans was conducted by CNA at 
the request of the Benefits Commission. It focused on whether the 
current VA benefits program takes into account QOL loss. A survey was 
conducted to determine whether QOL loss existed among disabled Veterans 
and whether parity existed between the amounts of VA compensation 
received by disabled Veterans and the average earned income of non-
disabled Veterans. CNA determined that QOL loss does exist among 
disabled Veterans. It was also determined that VA generally compensated 
adequately for lost earnings and in some cases overcompensated, as with 
Veterans who enter the system at retirement age, which CNA stated 
implies a built-in QOL loss payment for these Veterans. However, CNA 
found that undercompensation occurred for younger Veterans with more 
severe disabilities and for all categories of mental disabilities 
compared to physical disabilities. It was also pointed out that, while 
QOL loss was greater among disabled Veterans than non-disabled Veterans 
and the general population, those Veterans with mental disabilities 
showed the greatest QOL loss.
Institute of Medicine
    A second QOL loss analysis incorporated by the Benefits Commission 
into its final report came from the 2007 report, A 21st Century System 
for Evaluating Veterans for Disability Benefits, produced by IOM at the 
commission's request. This lengthy review of the VA disability benefits 
process addressed QOL loss. A distinction was made by IOM between 
current VA compensation for a Veteran's work impairment and a 
compensation system based on ``functional limitations'' on usual life 
activities, which would include non-work disability. IOM concluded that 
the Veterans' disability compensation program should compensate for: 
work disability, loss of ability to engage in usual life activities 
other than work, and QOL loss. IOM also recommended that VA develop a 
tool for measuring QOL loss validly and reliably and develop a 
procedure for evaluating and rating the QOL loss among disabled 
Veterans.

                      II. ECONOMIC SYSTEMS REPORT

    The most recent study of QOL loss was conducted by EconSys and 
reported in its Study of Compensation Payments for Service-Connected 
Disabilities, Volume III, Earnings and Quality of Life Loss Analysis, 
released in September 2008. VA tasked EconSys with analyzing potential 
methods for incorporating a QOL loss component into the current rating 
schedule and with estimating the costs for implementing these methods. 
The EconSys study proposed three methods that might be utilized by VA.
    The first and simplest method would be to establish statutory QOL 
loss payment rates based only on the combined percentage rate of 
disability. This method would ``piggy-back'' the QOL loss payment on 
top of the assigned disability evaluation under the current rating 
schedule. The amount of the payment would be determined by assigning a 
QOL score, ranging from -2 to 4, with 4 representing death and negative 
values representing an increase in the QOL of the Veteran. Although 
this method would be the easiest to administer because significant 
changes to the VA medical examination and rating process would be 
unnecessary, it raises issues of fairness. EconSys found that the 
severity of QOL loss does not mirror the severity of earnings loss 
captured in the ratings schedule. Moreover, EconSys found that QOL loss 
varies greatly both by condition and by individual, meaning that 
different Veterans with the same disability rating or the same 
condition could vary widely in their QOL. Under this method, a Veteran 
with minimal actual QOL loss could receive the same extra QOL loss 
payment as a Veteran with severe actual QOL loss. EconSys has estimated 
that additional program costs for implementing this method range from 
$10 billion to $30.7 billion annually.
    A second optional method proposed by EconSys would key QOL loss 
payment amounts to the medical diagnostic code of the primary 
disability, as well as the combined percentage rate of disability. This 
option anticipates that Congress would create a separate pay scale 
based on the Veteran's combined degree of disability and primary 
disability. This method would arguably produce more accurate QOL loss 
payments because two variables rather than one would be involved and 
previous studies have shown that some disabilities, such as mental 
disorders, are associated with greater actual QOL loss than others. 
However, implementing this would involve conducting large sample-size 
surveys to assess the average QOL loss for each of over 800 diagnostic 
codes and then factoring in the additional loss for each of the ten 
percent increments of the rating schedule up to 100 percent. No surveys 
like this have been conducted in the past as a means to assign a dollar 
value to QOL loss. Inherent in such surveys is the potential for 
inconsistency and inaccuracy because the data would involve Veterans' 
self-reported answers to subjective questions. Given the number of 
``diagnostic code-evaluation percentage'' combinations involved, a QOL 
loss scale developed under this method would be extremely complex and 
require extensive computer system modifications. In the event that this 
optional method was implemented, it would likely be subject to the same 
issues of fairness as the first method. A Veteran with a low combined 
degree of disability may receive more total compensation than a Veteran 
with a high combined degree of disability because of a difference in 
the QOL loss value assigned to different diagnostic codes. Moreover, 
the disability identified as primary for existing compensation may not 
be the primary cause of a Veteran's QOL loss. EconSys has estimated 
that this method would result in program costs of $9 to $22 billion 
annually.
    A third optional method proposed by EconSys would involve an 
individual assessment of each Veteran for QOL loss by both a VA medical 
examiner and a VA claims adjudicator. EconSys describes the process as 
involving a QOL loss assessment component to the medical examination. 
The claims adjudicator would review the medical examiner's report on 
QOL and assign a QOL rating based on the diagnosis and rating for the 
primary diagnosis. This method would involve establishing separate 
rating tables for earnings loss and QOL loss and using these in 
combination with subjective information received from the Veteran on 
perceived QOL loss. This method would arguably allow for the most 
accurate assessment of QOL loss because of its individualized nature. 
However, it would require extensive training of VA personnel to 
administer and interpret QOL loss assessment tools and then apply them 
to the rating process. Once again, issues of subjectivity and fairness 
would likely be involved. Timeliness of decisions would be negatively 
affected based on the complexity of the adjudicator's required QOL loss 
assessment. EconSys has estimated that this method would result in 
annual administrative costs of approximately $71.5 million, plus 
program costs of $10 to $25.7 billion dollars annually.

          III. IMPLEMENTING QUALITY OF LIFE LOSS COMPENSATION

VA Challenges
    Implementing a disability rating system that included compensation 
for QOL loss would involve at least two major challenges. The first 
would be to accurately and reliably determine whether, and to what 
extent, a disabled Veteran suffers from QOL loss. The second would be 
to establish equitable compensation payments for varying degrees of QOL 
loss. The first challenge has been addressed by other organizations and 
has led to the development of QOL loss assessment tools. The most well 
known of these is the RAND Corporation's Short Form 36 Health Survey 
(SF-36) and Short Form 12 Health Survey (SF-12). These are survey 
questionnaires that measure physical functioning, role limitations due 
to physical health, bodily pain, general health perceptions, vitality, 
social functioning, role limitations due to emotional problems, and 
mental health. The questionnaires yield numerical scores that are 
interpreted to measure QOL loss in relation to the non-disabled 
population.
    The CNA study conducted for the Benefits Commission utilized a 
survey instrument derived from the SF-36 and SF-12. The results showed 
that service-connected disabled Veterans were more likely to report QOL 
loss than non-disabled Veterans. However, CNA made it clear that the 
results were based on subjective self-reporting by Veterans and that, 
although survey instrument scoring showed a difference between disabled 
and non-disabled Veterans, the instruments were not able to show how 
much difference in QOL loss existed between the two groups. This is 
problematic because the second challenge of assigning a dollar value 
for compensation purposes depends on distinguishing different degrees 
of QOL loss among disabled Veterans. VA is unaware of whether this 
problem has been addressed by other 
organizations.
    As EconSys stated in its study, users of existing QOL loss 
assessment instruments seek to make comparisons of QOL loss between 
different groups or to measure improvements in QOL loss as a result of 
treatment interventions. However, they are not trying to attach a 
dollar value to these differences. For example, the CNA study indicated 
a greater QOL loss among disabled Veterans compared to non-disabled 
Veterans, but it does not provide a model to measure the extent of 
differences and provide fair compensation accordingly.
    The EconSys study, described above, provides options for 
implementing a compensation procedure for QOL loss among Veterans, but 
is not specific about how new assessment instruments would be 
developed. For example, in the second option offered by EconSys, part 
of the QOL loss payment would be tied to the medical diagnostic code 
for which the Veteran is service-connected. This is based on the 
assumption that certain medical disabilities generally produce greater 
QOL loss than others. To implement this option, VA would be required to 
develop new survey instruments that target specific diagnostic codes 
and minimize variations in reporting due to subjectivity. Surveys now 
in use, such as the SF-36 and SF-12, are generic and would be of little 
help. The burden of establishing appropriate QOL loss compensation 
would remain with VA and Congress.
    VA would face many additional problems in the attempt to implement 
QOL loss compensation. Among them would be the potential for a change 
in the Veteran's QOL loss. Since a major goal of VA is successful 
treatment and rehabilitation for disabilities, it is likely that the 
mental and physical health of some Veterans would improve over time and 
QOL loss would be reduced. On the other hand, a Veteran's circumstances 
may lead to an increase in QOL loss. Therefore, the issue of how to 
adjust compensation payments for changes in a Veteran's QOL loss over 
time would need to be addressed.
    An additional concern presented by two of the EconSys options is 
the potential for appeals of Veterans' ratings. In options two and 
three, it is highly likely that Veterans with similar conditions of 
similar severity would receive different ratings and awards. This 
inconsistency introduces an equity issue that could lead to additional 
appeals and therefore a more frustrating process for Veterans.
Current VA Compensation
    Most of the organizations that have provided input to VA on QOL 
have stated that VA already has a number of special benefits that 
implicitly, if not expressly, compensate for QOL loss. Among these are 
ancillary benefits, special monthly compensation, and total disability 
based on individual unemployability. Special monthly compensation and 
ancillary benefits are provided to Veterans in addition to compensation 
for service-connected disabilities under the current rating schedule.
    Ancillary benefits include the extensive programs of Home Loan 
Guaranty and Vocational Rehabilitation and Employment Services. Certain 
ancillary benefits are intended to provide assistance to Veterans with 
special needs due to exceptional handicaps that result from service-
connected disabilities. One major ancillary benefit, authorized by 38 
U.S.C. Sec. 3902, is assistance with the purchase of an automobile or 
other conveyance with adaptive equipment necessary to ensure that the 
Veteran can safely operate the vehicle. Another ancillary benefit 
provides assistance with housing needs for certain severely disabled 
Veterans. Authorization for providing assistance to Veterans in 
acquiring housing with special features and residential adaptations is 
provided by 38 U.S.C. Sec. 2101(a) and (b). Additionally, a yearly 
clothing allowance is authorized by 38 U.S.C. Sec. 1162 when a service-
connected disability requires a Veteran to use a prosthetic or 
orthopedic appliance, including a wheelchair, which tends to wear out 
or tear the Veteran's clothing. A clothing allowance is also authorized 
when a physician prescribes medication for a service-connected skin 
condition that causes irreparable damage to a Veteran's outer garments.
    In addition to these benefits, special monthly compensation, 
authorized by 38 U.S.C. Sec. 1114, provides a range of special monthly 
payments over and above the current rating schedule disability 
compensation for Veterans with service-connected disability who are 
housebound, in need of aid and attendance from others to accomplish 
daily living activities, have severe hearing loss or visual impairment, 
or have loss, or loss of use, of extremities or reproductive organs. In 
addition, VA is authorized to pay special monthly compensation to 
female Veterans for breast tissue loss.
    VA regulations authorize a rating of total disability based on 
individual unemployment if a Veteran is unable to obtain, or maintain, 
substantially gainful employment because of service-connected 
disabilities. This is an extra-schedular benefit resulting in 
compensation paid at the 100-percent schedular rate for Veterans who 
have been awarded a single 60-percent or a combined 70-percent 
disability rating and are unable to work as a result of their service-
connected disability. The benefit is also available based on a VA 
administrative review, if the schedular requirements are not met.

                             IV. CONCLUSION

    This testimony attempts to outline some of the issues and 
challenges that VA would face if authorized to provide QOL loss 
compensation. If VA is to provide QOL loss compensation consistent with 
the proposed options in the EconSys study, statutory changes would be 
required. Additional administrative costs for training VA personnel and 
reconfiguring VA computer systems, as well as the costs for providing 
additional benefits to Veterans, would be considerable. The 
implications for adopting such a policy are significant for VA. This 
testimony also illustrates how, in addition to compensation provided 
under the rating schedule, VA provides special monthly compensation, 
ancillary benefits, and extra-schedular ratings to Veterans with 
certain service-connected disabilities, which multiple studies have 
recognized as existing tools to promote the QOL of Veterans.

    As always, VA maintains its dedication to fairly and adequately 
serving the disabled Veterans who have sacrificed for our country.

    Chairman Akaka. Thank you very much, Admiral Dunne.
    Dr. Kettner, your testimony, please.

        STATEMENT OF GEORGE KETTNER, Ph.D., PRESIDENT, 
                     ECONOMIC SYSTEMS, INC.

    Mr. Kettner. Chairman Akaka, Ranking Member Burr, and 
Members of the Committee, thank you for the opportunity to 
appear before you today.
    I served as Project Director of a recent study of lost 
earnings and loss of quality-of-life for veterans with service-
connected disabilities, and a transition benefit for veterans 
undergoing vocational rehabilitation. We compared veterans with 
service-connected disabilities to a matched group of veterans 
without service-connected disabilities.
    We found that, overall, actual earnings plus disability 
compensation for veterans with service-connected disabilities 
was 7 percent above the earnings of the respective comparison 
group without service-connected disabilities. On average, 
veterans rated 30 percent or less did not experience serious 
wage loss. Approximately 55 percent of 2.6 million veterans 
receiving disability compensation are rated at 30 percent or 
less. Veterans rated 40 to 90 percent experienced wage loss, 
but their VA disability compensation more than made up for the 
loss. For veterans rated at 100 percent, their earnings and 
disability compensation was 9 percent less than expected and, 
hence, did not fully compensate for lost earnings.
    We also found considerable differences in earnings loss 
across different diagnoses for a given rating level, resulting 
in serious inequity in the disability payment system. Several 
of the most prevalent diagnostic codes are candidates for 
changes to the rating schedule because there is no earnings 
loss associated with those diagnoses at the 10 percent or 20 
percent rating levels. Examples include arthritis, hemorrhoids, 
tinnitus, and diabetes.
    We found that mental health disorders, in general, have a 
much more profound impact on employment and earnings than do 
physical disabilities. Adjustments to the ratings criteria 
could overcome much of this disparity, but not for those 
already rated 100 percent, unless the benefit amount for the 
100 percent rating were increased, as well.
    Veterans receiving disability compensation have, on 
average, 3.3 rated disabilities. VA uses a look-up table for 
combining individual disability ratings into a combined degree 
of disability rating. The earliest known table dates from 1921 
and has changed very little since then. These formulas result 
in ratings that overcompensate veterans for lost earnings, 
particularly when combining multiple disabilities with loss 
ratings.
    Special monthly compensation is a series of awards for loss 
of limbs, organs, or functional independence. SMCs are not 
awarded to compensate for average loss of earnings capacity and 
can be viewed as payments for loss of quality-of-life. The 
amount of SMC monthly payments above the regular scheduled 
payment for the 100 percent rating ranges from about $600 to 
$1,900 for the most severely disabled veterans. SMC payments 
are not made for PTSD and other mental health conditions.
    Certain SMCs are paid to veterans for assistance with 
activities of daily living. For example, SMC-L provides $618 
per month above the normal 100 percent amount, and SMC-S for 
housebound veterans provides $302. Survey results indicate that 
the monthly cost of hiring an assistant ranges from about $500 
to $11,000, depending on how many hours of care are provided. A 
recent study estimated the lost wages and benefits of family 
caregivers of severely injured and active duty servicemembers 
at $2,800 per month. The current amount of the SMCs for 
assistance is well below these estimated costs.
    The literature generally defines quality-of-life as an 
overall sense of well-being based on physical and psychological 
health, social 
relationships, and economic factors. We found that quality-of-
life loss occurred for veterans at all levels of disability. We 
also found that loss of quality-of-life increases as disability 
increases, but there are wide variations in the loss of 
quality-of-life with each disability rating.
    QOL is an individualized perception and people adjust to 
disability differently. About half of those individuals with 
severe disabilities report relatively high degrees of life 
satisfaction. We also found that veterans receiving individual 
unemployability and SMC payments report significantly greater 
QOL loss, as well as greater earnings loss. Veterans with 
mental disabilities rated 100 percent show much greater 
quality-of-life loss than veterans with physical disabilities 
rated at 100 percent.
    Putting an economic value on quality-of-life is subjective 
and value-laden. Hence, we developed different options for 
quality-of-life loss payments, ranging from an average amount 
of $100 a month to almost $1,000 a month, depending on the 
benchmark for measuring loss of quality-of-life. Examples of 
benchmarks include veteran self-assessment, societal views, 
awards made by foreign governments, SMC payments, and 
Individual Unemployability benefits for veterans over the age 
of 65.
    We identified options for payment of living expenses for 
disabled veterans participating in vocational rehabilitation 
and employment. Options include monthly payment for core living 
expenses of about $1,900 to $3,000 for veterans living alone, 
or with two dependents to cover housing, food, and 
transportation. Additional daily living costs, such as apparel 
and services, could be provided for about $500 to $935 per 
month.
    A major issue to be decided in providing a transition 
benefit is which VR&E participants would be eligible depending 
on severity of disability, medical discharge, and time since 
discharge. Options presented range from as few as 3,400 
applicants per year to as many as 29,000 applicants.
    Mr. Chairman, I thank you for the opportunity to appear 
before you today. I welcome any questions you or the Committee 
Members may have.
    [The prepared statement of Mr. Kettner follows:]

        Prepared Statement of George Kettner, Ph.D., President, 
                         Economic Systems, Inc.

    Chairman Akaka, Ranking Member Burr, and Members of the Committee, 
thank you for the opportunity to appear before you today to present the 
major results of Economic Systems' Study of Compensation Payments for 
Service-Connected Disabilities completed last year for VA. This study 
was requested largely as a follow on to the President's Commission on 
Care for America's Returning Wounded Warriors, known as the Dole-
Shalala Commission.

                VA DISABILITY COMPENSATION RATING SYSTEM

    The VA Disability Compensation Program provides monthly benefit 
payments to veterans who become disabled as a result of or coincident 
with their military service. Payments generally are authorized based on 
an evaluation of the disabling effects of veterans' service-connected 
physical and/or mental health impairments. Monthly payments are 
authorized in percentage increments from 10% ($117 in 2008) to 100% 
($2,527 in 2008). The process for determining ratings for disability 
compensation benefits uses the VA Schedule for Rating Disabilities 
(VASRD) to assign the level of severity of the disabilities.
    The VASRD contains over 700 diagnoses or disability conditions, 
each of which may have up to 11 levels of medical impairment. The 
lowest level of impairment starts at 0% then increases in 10% 
increments up to a maximum of 100%. Disability compensation, as 
determined by the VASRD, is intended to replace average impairment in 
earnings capacity.
    Eligibility requires that a determination be made that the 
condition is a service-connected disability. Service-connected means 
that the condition occurred during or was aggravated by military 
service, is one of several ``presumed'' conditions, or, for chronic 
conditions, became evident within one year of discharge from the 
military. It does not require that the disability be work related or be 
caused by conditions in the work environment. In this regard the VA 
Disability Compensation Program combines elements of both disability 
insurance voluntarily provided by employers and workers' compensation 
programs mandated by government.
    Claimants with a combined rating between 60 to 90% who are 
determined to be unemployable solely as a result of service-connected 
conditions qualify for Individual Unemployability (IU). Claimants 
determined to be entitled to IU receive the same benefit payment amount 
as those rated at the 100% disability level. Conditions or 
circumstances that result in the claimant not being employable override 
the medical impairment rating. IU is similar to the Social Security 
Disability Insurance (SSDI) program in that both provide payments 
because the beneficiary is deemed to be unemployable.
    Special monthly compensation (SMC) is a benefit paid in addition to 
or instead of the VASRD-based benefits. Examples include: loss of or 
loss of use of organs, sensory functions, or limbs; disabilities that 
confine the veteran to his/her residence or result in the need for 
regular aid and attendance; a combination of severe disabilities that 
significantly affect mobility; and the existence of multiple, 
independent disabilities each rated at 50% or higher.
    We were asked by VA to address three major areas in our analysis: 
earnings loss resulting from service-connected disabilities, the impact 
of those disabilities on quality of life, and a possible transition 
benefit for veterans engaging in VA's vocational rehabilitation and 
employment program. Some of our most significant findings relate to the 
following topics:

     Adequacy of Disability Compensation
     Disabilities Without Earnings Loss
     Additional Diagnostic Codes
     Earnings Loss for Veterans with Post Traumatic Stress 
Disorder (PTSD), Other Mental Health Disorders, and Traumatic Brain 
Injury (TBI)
     Methodology Used to Calculate Combined Degree of 
Disability
     Individual Unemployability Benefits
     Special Monthly Compensation
     Quality of Life Payment Options
     Transition Benefit Options.

                  ADEQUACY OF DISABILITY COMPENSATION

    A crucial part of the loss of earnings analysis is determining the 
wages that the veteran would have received if he or she had not 
experienced a service-connected disability (SCD). The estimates of 
these potential earnings depend on tracking the actual earnings of 
individuals in a comparison group who did not have SCDs but who were 
otherwise matched to the disabled veterans on personal characteristics. 
The personal characteristics used to match the disabled veterans and 
the veterans without SCDs were age, gender, education at the time of 
entry into the service, and status as an officer or enlisted person 
when discharged from active duty. The analysis of loss of earnings was 
primarily based on comparisons of the earnings in 2006 of veterans with 
SCDs and without SCDs as provided to the study by the Social Security 
Administration.
    Assessment of the adequacy of disability compensation in relation 
to earnings loss requires determining if the payments are equitable 
vertically and horizontally. Vertical equity means that actual earnings 
loss should increase in proportion to increases in disability ratings 
and that compensation should offset that earnings loss. We found that 
overall, veterans with service-connected disabilities have earnings 
plus disability compensation 7 percent above their average expected 
earnings. The average was higher at each rating level except at the 
100% rating level where the combined earnings and compensation was 9 
percent less than expected. On average, veterans with a 30% or less 
combined disability rating did not experience serious wage loss. 
Approximately, 55% of 2.6 million veterans receiving disability 
compensation in 2007 were rated at 30% or less. Earnings losses for 
veterans with 40% to 90% combined rating did have wage losses, but 
their VA disability compensation more than made up the loss. In 
contrast, actual earnings losses plus disability compensation for 
veterans with 100% combined rating fall short of average expected 
earnings by about 9%. In 2007, 9.1 percent of veterans receiving 
disability compensation had a combined rating of 100%, up from 7.5 
percent in 2001. Thus, vertical equity is not fully achieved.
    Horizontal equity means that actual earnings loss should be the 
same or similar for the same disability ratings but with different 
types of disabilities. We found considerable differences in earnings 
loss across different diagnoses for a given rating level, resulting in 
serious inequity in the payment system. For example, for veterans with 
a 50% combined rating, the range was from no earnings losses for 
genitourinary or endocrine medical conditions to over 40 percent 
earnings losses for non-PTSD mental conditions. Veterans with PTSD, 
Other Mental Disorders, and infectious diseases experience greater 
earnings losses than veterans diagnosed with other medical conditions 
rated at the same level. Thus, horizontal equity is not achieved.
    One factor that is important to understanding the results of our 
earnings analysis is that it concentrates on veterans discharged since 
1980. Our results, therefore, differ from the previous study conducted 
by CNA Corporation for the Veterans' Disability Benefits Commission as 
that study included veterans discharged before 1980. Our study does not 
include veterans of World War II, Korea, and Vietnam (relatively few) 
because they are largely past or approaching retirement age and because 
data on their essential demographic and human capital characteristics 
are not available from the Department of Defense (DOD) for analysis. We 
believe that this focus on more recent veterans is more appropriate for 
policy considerations for the future. More detailed discussion of the 
differences between our study and the study for the Veterans' 
Disability Benefits Commission (VDBC) is provided later.

                   DISABILITIES WITHOUT EARNINGS LOSS

    In addition to examining the broad comparisons cited above, our 
analysis identified several diagnostic codes that are candidates for 
changes to the rating schedule because the impact of these conditions 
on earnings is not commensurate with the level of the rating. In 
particular, for several of the most prevalent diagnostic conditions, 
there is no earnings loss at the 10% or 20% combined rating levels. 
Examples of these diagnoses include: arthritis; lumbosacral strain; 
arteriosclerotic heart disease; hemorrhoids; and diabetes mellitus. The 
rating schedule criteria for the rating of these conditions could be 
adjusted so that a rating of zero percent instead of 10% or 20% would 
be assigned in the future to reflect that no earnings loss occurs at 
this level for these conditions.

                      ADDITIONAL DIAGNOSTIC CODES

    We were asked to identify diagnostic codes that could be added to 
the over 700 existing codes in the rating schedule. Analogous codes are 
currently used in 9 percent of all cases. By sampling 1,094 cases in 
which analogous codes were used, we identified 33 ICD-9 codes that were 
used often enough to warrant addition to the rating schedule. These 
include disturbance of skin sensation, mononeuritis of lower limb, and 
unspecified hearing loss.

                 PTSD, OTHER MENTAL DISORDERS, AND TBI

    Our analysis and previous studies conducted by the Bradley 
Commission in 1956, the Economic Validation of the Rating Schedule in 
1972, and the Veterans' Disability Benefits Commission in 2007, are 
consistent in finding that mental health disorders in general have a 
much more profound impact on employment and earnings than do physical 
disabilities. We found that earnings loss for PTSD is 12 percent for 
veterans rated 10% and up to 92 percent for those rated 100%. For other 
mental disorders (other than PTSD), the earnings loss is 14 percent for 
those rated 10% and 96 percent for those rated 100%. Earnings loss for 
TBI rated 100% is similar at 91 percent.
    A policy option for consideration is to adjust the VA Schedule of 
Rating Disabilities to eliminate rating PTSD at 10% and use the rating 
criteria for 10% to rate 30%, 30% to 50%, 50% to 70%, and combine the 
criteria for 70% and 100% at 100%. We note that this will not eliminate 
the deficiency at 100%; veterans rated 100% will still be receiving 
less in disability compensation and earnings combined than their 
expected level of earnings. We also note that these changes, especially 
if also made for mental health disorders in general, would have a 
significant impact on the issue of Individual Unemployability (IU). 
Veterans whose primary diagnosis is PTSD made up 32 percent of IU cases 
on the rolls in 2007 and 47 percent of new IU cases during the period 
2001-2007. Including PTSD with all mental disorders, 44 percent of IU 
cases on the rolls in 2007 were mental disorders and 58 percent of new 
IU cases from 2001-2007 had mental disorders. Since the criteria for 
rating mental disorders at 100% require veterans to be unemployable, it 
is not clear why veterans with mental disorders who are unemployable 
are not rated 100% instead of IU.

      METHODOLOGY USED TO CALCULATE COMBINED DEGREE OF DISABILITY

    VA has used certain formulas over the years to assign a Combined 
Degree of Disability (CDD) when veterans have more than one service-
connected disability. Veterans receiving disability compensation have 
on average 3.3 disabilities that they are rated for. The earliest known 
formula dates from 1921 and has changed very little since then. The CDD 
determines the amount of the disability compensation payment. The table 
below provides examples of how various individual ratings are combined 
using the four formulas. The formulas do not take into account the 
types of disabilities being combined.


----------------------------------------------------------------------------------------------------------------
                     Rating Schedule                          1921        1930        1933      1945 to Present
----------------------------------------------------------------------------------------------------------------
Two 10% Ratings..........................................         19          19          20                 20
Three 10% Ratings........................................         28          19          30                 30
Four 10% Ratings.........................................         37          19          30                 30
----------------------------------------------------------------------------------------------------------------
Five 10% Ratings.........................................         46          19          40                 40
One 30% and four 10%.....................................         58          58          50                 50
One 70% and four 10%.....................................         82          82          80                 80
----------------------------------------------------------------------------------------------------------------

    A claimant who has three disabilities with each disability rated at 
10%, receives a combined rating of 30%. A veteran with two service-
connected disabilities, one rated 60% and one rated 10%, receives 
compensation only at the 60% rate. The current formula for combining 
additional ratings gives greater weight to multiple 10% ratings. The 
effect of additional 10% ratings is diminished if the primary diagnosis 
has a high rating. Having multiple low ratings increases the payment 
dramatically for a veteran whose primary diagnosis has a low rating; it 
has a negligible or much smaller effect for veterans who have a single 
condition with a high rating such as 80%.
    In our analysis we found that actual earnings, on average, were 
higher for veterans with more disabilities at a given rating level such 
as 30%. This paradoxical result suggests that the rating for the first 
medical condition captures most of the impact of the veteran's overall 
medical conditions on his or her potential earnings. The ratings for 
the second, third, or additional medical conditions increase the CDD 
but the additional conditions do not further affect the veteran's 
earning capacity. The formula for combining disabilities results in 
ratings that over compensate veterans for lost earnings.
    An option to the current single lookup table is to replace the 
current table with tables that reflect specific combinations of 
different disabilities. This will require conducting additional 
analysis of the impact of combinations of disabilities on earnings. The 
tables could be programmed for ease of use rather than manually applied 
as is the current practice. Such programmed tables could actually 
reduce the burden on raters.
    Medical science has established for many years that certain 
diseases are prevalent together, examples of which include PTSD and 
major depressive disorder, and diabetes and cardiovascular diseases. It 
is quite likely that there are many diseases that are present together 
in individuals and that they cause a greater impact on the individual's 
earning capacity than would be the case with multiple unrelated minor 
ailments. Additional analysis of the impact of multiple diseases or 
disabilities could result in an enhanced approach to ratings for 
combinations of diagnoses. For example, nearly 30,000 service-connected 
veterans have a diagnosis of traumatic brain disorder and some 4,600 of 
these (15 percent) also have a service-connected diagnosis of PTSD and 
almost 800 (3 percent) also have a diagnosis of major depressive 
disorder. Likewise, of some 307,000 veterans with a service-connected 
diagnosis of PTSD, some 5,200 (1.7 percent) also have a service-
connected diagnosis of major depressive disorder. Further analysis 
could determine if these diagnoses in combination have a greater or 
lesser impact on earnings.

                  INDIVIDUAL UNEMPLOYABILITY BENEFITS

    The number of IU cases has grown from about 101 thousand in 
September 2001 to 190 thousand cases in September 2007, an increase of 
almost 90 percent. PTSD cases constituted about one-third of the IU 
cases in 2007 and one-half of new IU cases between 2001 and 2007. 
Forty-four percent of the IU cases in 2007 were for veterans age 65 and 
older; 64 percent for veterans age 55 and older.
    Although age is clearly related to employment, it is not considered 
in IU determinations. While IU is not intended for veterans who 
voluntarily withdraw from the labor market because of retirement, new 
awards are often made to veterans who are near or past normal 
retirement age for Social Security. In light of these circumstances it 
appears that IU determinations are made for veterans approaching or 
past retirement age based on providing retirement income or in 
recognition of loss of quality of life rather than for employment loss.
    IU determinations depend on decisions about substantially gainful 
employment. In order to further facilitate the decisionmaking process 
for IU determinations, a work-related set of disability measures would 
be worth assessing. Consideration of this could supplement the medical 
impairment criteria in the VASRD.
    An option for consideration would be for VA to adopt a patient-
centered, work disability measure for IU evaluations. As with the 
current IU evaluation, assessments would address the individual's work 
history but also consider other factors including motivation and 
interests. Work disability evaluations would include relevant measures 
of impairment, functional limitation, and disability. Particular care 
should be taken to include measures of physical, psychological, and 
cognitive function. Assessments would evaluate the individual in the 
context of his or her total environment.

            SPECIAL MONTHLY COMPENSATION FOR QUALITY OF LIFE

    Special Monthly Compensation (SMC) is a series of awards for 
anatomical loss or loss of functional independence. These awards are 
evaluated outside of the Rating Schedule. SMCs are known by the letter 
designations K, L, M, N, O, P, R, and S. SMC K is the only award that 
can be made to veterans who are rated less than 100% and can be awarded 
one, two, or three times with each award $91 per month (2008 rates). 
SMC K is paid in addition to the amount paid for the Combined Degree of 
Disability rating. As of December 1, 2007, there were 188,747 veterans 
receiving SMC K awards. SMCs other than K are paid instead of the 
amount payable for 100% ratings, not in addition to the amount paid for 
100% ratings. Since SMCs are not awarded with the intent of 
compensating for average loss of earnings capacity, they can be thought 
of as payments for the impact of disability on quality of life.
                           smc for assistance
    Four different SMCs can be paid to veterans for assistance: L, S, 
R1, and R2. SMC L can be awarded either for loss of or loss of use of 
limbs or organs or to veterans rated 100% without such loss if they are 
in need of regular Aid and Attendance; in other words, if they need 
assistance with activities of daily living. In 2007, 48 percent of 
13,928 veterans receiving SMC L were receiving that award because they 
needed assistance, rather than for loss of or loss of use of organs or 
limbs. SMC S can also be awarded to veterans rated 100% if they are 
housebound but do not meet the required level of assistance for SMC L. 
SMC R1 and R2 are awarded to catastrophically injured veterans, 
primarily to those with spinal cord injuries, who need the highest 
levels of assistance. The table below depicts the number of veterans 
receiving SMCs other than K and the amount of the award that is above 
the normal amount paid to veterans rated 100% without SMC. In the case 
of R1 and R2, the veteran must be awarded SMC O or P due to the 
severity of disability in order to qualify for the additional 
assistance provided by R1 or R2. Thus, if a veteran receives SMC L for 
assistance, the veteran is receiving only $618 per month above the 
normal 100% amount; and a veteran receiving SMC S for housebound is 
receiving only $302 above the 100% amount.
    In 2007, 45,773 veterans received SMC L, S, R1, or R2 for 
assistance and $30,223,540 above the amount paid for the 100% rating. 
This was an average of $660 per month.

                     Special Monthly Compensation Rates Compared with Schedular 100% Rating
----------------------------------------------------------------------------------------------------------------
                                    Veteran    Amount for 100%   Increased Amount   Number of
             SMC Code                Alone        or SMC O/P          for SMC        Veterans    Monthly Benefit
----------------------------------------------------------------------------------------------------------------
Quality of Life
  L..............................     $3,145             $2,527              $618        5,355        $3,309,390
  L\1/2\.........................     $3,307             $2,527              $780        1,887        $1,471,860
  M..............................     $3,470             $2,527              $943        1,839        $1,734,177
  M\1/2\.........................     $3,709             $2,527            $1,182        1,650        $1,950,300
  N..............................     $3,948             $2,527            $1,421          477          $677,817
  N\1/2\.........................     $4,180             $2,527            $1,653          250          $413,250
  O/P............................     $4,412             $2,527            $1,885        2,661        $5,015,985
                                  ------------------------------------------------------------------------------
    Total........................                                                       14,119       $14,572,779
----------------------------------------------------------------------------------------------------------------
Assistance
  L..............................     $3,145             $2,527              $618        4,944        $3,055,392
  L\1/2\.........................     $3,307             $2,527              $780        1,742        $1,358,760
  S..............................     $2,829             $2,527              $302       31,361        $9,471,022
  R1.............................     $6,305             $4,412            $1,893        5,576       $10,555,368
  R2.............................     $7,232             $4,412            $2,820        2,151        $6,065,820
                                  ------------------------------------------------------------------------------
    Total........................                                                       45,773       $30,506,362
----------------------------------------------------------------------------------------------------------------
Source: Department of Veterans Affairs, Special Monthly Compensation, 12/1/07

    Using the results of surveys conducted by the National Alliance for 
Caregiving and the American Association of Retired Persons and by the 
Veterans' Disability Benefits Commission, we estimated monthly costs of 
hiring assistance ranging from $520 for 8 hours of caregiving per week 
to $10,800 for full time, around the clock 24/7 care. The CNA 
Corporation issued a report for the Department of Defense in September 
2008 on the average earnings and benefits loss of caregivers of 
seriously wounded, ill, and injured active duty servicemembers and 
estimated those losses as $33,500 annually or $2,800 per month. 
Regardless of which estimates are used, the current amount of the SMCs 
for assistance is well below either the cost of hiring such care or of 
the lost earnings and benefits of family caregivers.

                    QUALITY OF LIFE PAYMENT OPTIONS

    Our review of the literature led us to define quality of life (QOL) 
for veterans as an overall sense of well-being based on physical and 
psychological health, social relationships, and economic factors. Our 
in-depth analysis of the data from the Veterans' Disability Benefits 
Commission's survey of more than 21,000 disabled veterans found that 
QOL loss occurred for veterans at all levels of disability and for all 
40 diagnostic codes for which sufficient responses were available. We 
also found that loss of QOL increases as disability increases, but it 
does not increase as sharply as disability does, and that there is wide 
variation in the loss of quality of life at each disability rating. QOL 
is an individualized perception, and people adjust to disability. About 
one-half of individuals with severe disabilities report high degrees of 
life satisfaction.
    The quality of life loss analysis paralleled the earnings loss 
analysis in many regards. In particular, we found that veterans 
receiving Individual Unemployability benefits and those receiving SMC 
payments report mental and physical QOL loss significantly greater than 
for other service-connected veterans. Fewer severe disabilities are 
associated with a greater loss of quality of life than a greater number 
of less severe conditions at a given level of combined disability.
    Three broad options were presented to VA for implementing a QOL 
payment:

    1. Statutory rates for QOL payments by combined degree of 
disability
    2. Separate, empirically-based normative rates for QOL loss
    3. Individual clinical and rater assessments plus separate 
empirically-based rates for QOL loss.

    All three options would require periodic surveys to assess QOL 
impact. Option 3 would be the most complex and costly to implement and 
would require clinical and rater assessments each time a claim is 
filed. Options 1 and 2 would not be subject to veteran appeal if 
Congress approves the rate scale. However, in conjunction with 
implementing any QOL options, the criteria and benefits contained in 
the VA Schedule for Rating Disabilities should be adjusted to reflect 
average actual lost earnings, to ensure an overall equitable system.
    Payment rates for QOL would have to be set by policy or statute and 
placing an economic value on QOL would be subjective and value laden. 
Options that use empirical data are provided in our report as examples 
of how such rates could be established. The monthly amounts depicted in 
the options range from $99 to $974. Volume III of our report contains 
an extensive description of the findings of the QOL analysis and of the 
possible rationales or bases for setting the amounts.
    Foreign countries that award QOL payments link them closely to 
impairment and consider the circumstances of the individual veteran. 
QOL payments are considered the primary disability benefit and earnings 
loss payments are made only for actual earnings loss or a specified 
loss of earnings capacity. A veteran in Canada, for instance, must 
demonstrate inability to work in order to receive an earnings loss 
payment in addition to a QOL payment and must complete three years of 
vocational rehabilitation that results in unemployment before receiving 
ongoing earnings loss payments.
    VA could structure its disability benefits like the foreign 
programs so that they are based primarily on QOL. QOL could be inferred 
from impairment, or it could be measured directly, with earnings loss 
paid only when an actual earnings loss occurred.
    The systems used in both the United Kingdom (UK) and Canada pay QOL 
in lump sum payments and have several low rating levels for QOL 
payments. While making QOL payments in all 15 of its ratings, the UK 
system does not pay for earnings loss in the 4 lowest ratings of its 
15-point rating scale. The Canadian schedule increases proportionally 
so that in 2008, after the 10% rating, each 5% rating increase in 
Canada has a payment increase of $12,909. The UK payments do not 
increase with a multiplicative constant. For instance, the highest 
payment is $565,000, the second highest payment is $399,000, the third 
highest is $228,000. The lowest pain and suffering payment in UK is 
$2,080. These payment schedules reflect their societies' view that 
severe disability merits very high QOL payments and low levels of 
disability merit recognition payments. These benchmarks suggest great 
flexibility in establishing payment levels for U.S. veterans.
    Although our study focused on monetary compensation for QOL, the 
literature review and the analysis of the survey data indicates that 
greater QOL is supported by a strong family or social network and that 
employment is associated with a better quality of life. QOL of service-
connected veterans may be improved by programs aimed at family members 
to help them to understand and support the disabled veteran, through 
case management directed to the holistic needs of the veteran, and 
employment assistance programs.
    Our earnings analysis found that on average veterans' earnings plus 
disability compensation exceeds the expected earnings level by 7 
percent. There are exceptions such as for mental health and TBI and 
those rated 100% where earnings plus compensation is significantly less 
than expected earnings. Some SMC payments can be thought of as payment 
for QOL. Taken together, a judgment could be made that veterans are 
currently compensated for QOL.

                       TRANSITION BENEFIT OPTIONS

    Disabled veterans face a number of living expenses during their 
transition to civilian life before and during their participation in 
the VA Vocational Rehabilitation and Employment (VR&E) Program.
    Providing transition assistance payments offset the foregone cost 
of earnings (time spent in rehabilitation and not working), which in 
turn increases the likelihood of entry and completion of 
rehabilitation. Providing transition assistance benefits to caregivers 
and family members could reduce the levels of stress and depression for 
veterans and caregivers, which in turn could raise the overall quality 
of life for both the patient and family members and caregivers. 
Providing and aligning financial incentives with successful completion 
of specific rehabilitation tasks could increase the likelihood that 
patients enter and successfully complete rehabilitation.
    In order to estimate what an appropriate level of transition 
benefit should be, we selected housing, food, and transportation 
expenses to comprise a core group of living expenses that one would 
expect a living expense benefit to cover. We also considered additional 
``menu items'' such as apparel and services, health care (for 
dependents of disabled veterans not rated 100%), personal care products 
and services, household operations, and child care. Based on 
statistical analysis of average living expenses, the core living 
expense option would be $1,898 for the veteran alone or $2,981 for a 
veteran with two dependents. This includes the average monthly housing 
allowance paid by DOD in the 11 most populous veteran population 
centers, the same rates that would be paid under the Chapter 33 
Education program. The payment for additional expenses would be $511 
for the veteran alone or $935 for a veteran with two dependents. A new 
transition benefit would be in lieu of the current subsistence 
allowance and precede the start of permanent disability compensation 
benefit. The 2007 monthly subsistence allowance was $521 (no 
dependents) and $761 (two dependents).
    We identified several groups of veterans who could be eligible for 
such payments based on medical discharges, severity of disability, and 
time since discharge. Defining the purpose of a transition benefit is 
essential: would it be intended to ease the transition from military 
service to civilian life? If so, it is important to realize that 
veterans participating in the VR&E program fall into three groups: 
those who applied from just before discharge to two years after 
discharge (39 percent), those who applied from three years to ten years 
after discharge (29 percent), and those who applied more than 10 years 
after discharge (32 percent).
    The possible eligibility groups would range from a small group 
consisting of severely injured/ill who are medically discharged with 
ratings of 70% or higher who enter rehabilitation within two years of 
discharge, to a much larger group that would include all veterans 
currently eligible for VR&E. The most limited option would include 
3,400 applicants per year and the most inclusive option would include 
approximately 29,000 each year.
    Important policy decisions would need to be made in order to 
determine which veterans participating in VR&E would be eligible for a 
transition benefit.

            METHODOLOGY DIFFERENCES WITH THE PREVIOUS STUDY

    As discussed previously, our methodology differed in significant 
ways from the approach taken by the CNA Corporation in 2007 for the 
Veterans' Disability Benefits Commission (VDBC). Our study focused on 
service-connected and non service-connected veteran populations 
discharged since 1980. Data from the Defense Manpower Data Center 
(DMDC) is reliable for veterans discharged since that time and provides 
important demographic or human capital characteristics for individuals 
such as education level at time of entry into the military, gender, and 
officer or enlisted status. These characteristics can be used to ensure 
that the observed differences in earnings are due to the service-
connected disabilities and not some demographic differences.
    The study for the VDBC also used earnings data for non service-
connected veterans from the Current Population Survey (CPS) which were 
self reported, in comparison with the actual earnings of service-
connected veterans discharged prior to 1980. We conducted a thorough 
analysis of the CPS data and concluded that it was not reliable for 
this purpose for several reasons. Self-reported earnings are not as 
accurate as actual Social Security Administration earnings data and the 
CPS sample has 50 percent fewer veterans than the general population. 
Post 1980 veterans have better health, fewer limitations from 
disabilities, and higher rates of employment. Thus we focused on 
comparing earnings of veterans discharged since 1980. Although we 
obtained actual earnings data from the Social Security Administration 
on the entire population of 2.6 million veterans receiving disability 
compensation, we limited our analysis to the 1,062,809 service-
connected disabled veterans discharged since 1980 and a demographically 
selected sample of 432,947 non service-connected veterans also 
discharged since 1980. These two populations were compared to determine 
the impact of service-connected disabilities on earnings. Actual 
earnings were compared, thus avoiding the use of survey data. A 
detailed explanation of why CPS data is not reliable for this 
comparison is provided in pages 132-136 of Volume III of our report. We 
believe that this comparison of veterans discharged since 1980 enables 
policymakers to focus more on veterans that VA rates today and will be 
rating in the future.
    Another difference between our analysis and the CNA analysis was 
that we conducted a more detailed analysis of rating levels using the 
entire range of rating levels (10% through 100%, in 10% increments) 
while CNA used four groupings of ratings (10%, 20-40%, 50-90%, and 
100%). We did this so as to be able to analyze all ten rating levels 
individually. We also used individual diagnostic codes to the maximum 
extent possible within the restrictions on release of individual-level 
data. The over 700 codes in the Rating Schedule were grouped into 240 
similar diagnoses so as to avoid the possibility of individual veterans 
being identified. In contrast, the CNA study aggregated veterans into 
the 15 body systems with PTSD the only individually analyzed diagnosis. 
We also placed emphasis on analysis of veterans receiving Special 
Monthly Compensation and Individual Unemployability. Finally, we used 
2006 earnings without estimating lifetime earnings while CNA used 2004 
earnings to estimate lifetime earnings. We obtained annual earnings for 
veterans since 1951 but time constraints prevented including this 
information in our analysis as we would have preferred.
    We realize that limiting the earnings analysis to veterans 
discharged since 1980 excludes 1.6 million of the 2.6 million veterans 
receiving disability compensation, especially most Vietnam veterans. 
However, demographic and human capital data available from DMDC is not 
considered accurate on veterans discharged prior to 1980. Therefore, it 
is not possible to identify a sample of non service-connected veterans 
from DMDC data closely matched on human capital characteristics to 
serve as a comparison group in an analysis of the impact of disability 
on earnings. It could be possible to randomly select a sample of non 
service-connected veterans from either the DMDC data or from the VA 
Beneficiary Identification and Records Locator Subsystem (BIRLS) 
matched on a more limited set of known characteristics such as age, 
military rank, and date of discharge. This sample would lack key 
characteristics such as education level, military occupational series, 
and Armed Forces Qualification Test scores as is available on the post 
1980 group and may not be as well matched to the service-connected 
veteran population. This limitation would need to be recognized.
    In addition, if more time were available for the analysis, more 
detailed analysis of the earnings data for veterans discharged prior to 
1980 and since 1980 could be completed, especially an analysis of 
lifetime earnings. Social Security Administration retains annual 
earnings for individuals from 1951. These annual earnings were captured 
last year but there was not sufficient time to analyze that data.
    We note that of the estimated seven million living Vietnam Era 
veterans, 28.4 percent are age 65 or older and 44.6 percent are age 60 
to 64 and thus are nearing the normal retirement age. Thus, the 
earnings of Vietnam Era veterans are likely to be already diminishing 
or very limited already.
    For those already service-connected, it is unlikely that benefits 
would be reduced in any way. We suggest that the focus of policy or 
statutory adjustments should be on future earnings and that the 
emphasis of future analysis should be on veterans discharged since 1980 
so that more precise comparisons can be made, even if veterans 
discharged prior to 1980 are also analyzed.

                           CONCLUDING REMARKS

    In closing, our study completed last year provides a great deal of 
information on the adequacy of disability compensation and ways in 
which the program can be improved to better serve veterans. There are 
clear indications that overall the amount of compensation exceeds the 
average expected earnings loss yet it is inadequate for mental health 
and for those rated 100%. The methodology used to assign the overall 
combined degree of disability, and hence the amount of compensation 
paid, results in over compensating many veterans, especially at the 
lower rating levels. There are several diagnoses that either do not 
result in loss of earnings or the rating is higher than necessary. It 
could be concluded that quality of life is somewhat compensated by the 
amount compensation exceeds expected earnings loss and by some SMC 
payments. SMC payments for assistance are not equal to either the cost 
of hiring assistance or the lost earnings and benefits of family 
caregivers.
    While the findings cited in this testimony provide accurate and 
reliable information upon which to base policy decisions, the timeframe 
for that study (seven months) did not permit a thorough analysis of 
certain aspects of the disability compensation program and of the 
inter-related nature of the findings. We would recommend that 
additional analyses be conducted. Restrictions intended to safeguard 
the privacy of individuals prevented the Social Security Administration 
from providing earnings at the individual veteran level. This meant 
that we could not analyze the impact on earnings of combinations or 
comorbidities of disabilities. We have discussed this issue with the 
Social Security Administration and believe a methodology could be used 
that safeguards the privacy of individuals yet enables such analysis. 
For the long term, we agree with the recommendation of the VDBC that VA 
and DOD should be granted statutory authority to collect and study 
appropriate data from the Social Security Administration and the Office 
of Personnel Management, namely earnings data, only for the purpose of 
assessing the appropriateness of benefits.\1\
---------------------------------------------------------------------------
    \1\ Veterans' Disability Benefits Commission, 2007, pp. 318 and 
320.
---------------------------------------------------------------------------
    Additional demographic or human capital characteristics could be 
analyzed in future studies to ensure that the impact on earnings is not 
due to factors such as education level at discharge, military 
occupational series, or Armed Forces Qualification Test scores. Also, 
consideration of such factors as time in service, period of service, 
and timing of diagnosis could shed additional light on the impact of 
disability on earnings.
    In addition to analysis of earnings at the individual veteran 
level, earnings and quality of life results should be integrated so as 
to see the overall impact of disability on veterans. This could include 
assessing how comorbidities and the timing of the diagnoses as 
indicated by the date of original service-connected disability impact 
earnings and QOL. A technique called shadow pricing could also be used 
to measure the economic impact on quality of life.

    Mr. Chairman, I thank you for the opportunity to appear before you 
today and would welcome any questions you or the Committee members may 
have.

    Chairman Akaka. Thank you very much, Dr. Kettner.
    And now we will receive testimony from General Scott.

STATEMENT OF LIEUTENANT GENERAL JAMES TERRY SCOTT, USA (RET.), 
    CHAIRMAN, ADVISORY COMMITTEE ON DISABILITY COMPENSATION

    General Scott. Chairman Akaka, Ranking Member Burr, Members 
of the Committee, it is a real pleasure to be with you today 
representing the Advisory Committee on Disability Compensation.
    The Committee is charged by the Secretary of Veterans 
Affairs under the provision of 38 U.S.C. Section 546 in 
compliance with Public Law 110-389 to advise the Secretary with 
respect to the maintenance and periodic readjustment of the VA 
Schedule for Rating Disabilities. Our charter is to assemble 
and review relevant information relating to the needs of 
veterans with disabilities, provide information relating to the 
character of disabilities arising from services in the Armed 
Forces, provide ongoing assessment of the effectiveness of the 
VA's schedule for rating disabilities, and provide ongoing 
advice on the most appropriate means of responding to the needs 
of veterans relating to disability compensation in the future.
    The Committee has met ten times and has forwarded an 
interim report to the Secretary that addresses our efforts as 
of July 7, 2009. Copies of this interim report were furnished 
to majority and minority staff in both Houses of Congress, and 
I can provide additional copies for the record if so desired.
    Our focus is in three areas of disability compensation: 
requirements and methodology for reviewing and updating the 
VASRD; adequacy and sequencing of transition compensation and 
procedures for servicemembers transitioning to veteran status, 
with special emphasis on seriously ill or wounded 
servicemembers; and disability compensation for non-economic 
loss, often referred to as quality-of-life.
    You asked me to present the views of my committee on the 
structure of payments for disability compensation and what 
reform, if any, the Advisory Committee recommends. Our efforts 
to date have addressed the structure of payments for disability 
compensation in the following ways.
    We believe that an updated and clarified ratings schedule 
will enable rating, examining, and reviewing officials to make 
a more accurate and timely assessment of a veteran's disability 
and its effect on average earnings loss. An updated and 
clarified ratings schedule should improve first-time accuracy 
and reduce the number of appeals and backlog that the appeals 
create. The Updated Rating Schedule should address the 
recognized inconsistencies in the mental versus physical 
disabilities and in the differences in age at entry into the 
disability system. Any remaining discrepancies between mental 
and physical disabilities could be addressed via the SMC 
system.
    Recent studies by the Veterans Disability Benefits 
Commission, the Institute of Medicine, the Government 
Accountability Office, and the others have consistently 
recommended a systematic review and update process for the 
VASRD. The Congress has repeatedly demanded the same. I believe 
that the case for such a system is made and that sufficient 
data currently exists to proceed with a review and update.
    My committee has informally recommended to the Secretary 
that the Deputy Secretary be tasked with oversight of the VASRD 
systematic review and update process to ensure that the VBA, 
VHA, and General Counsel are fully integrated into the process. 
We are also offering a proposed level of permanent staffing in 
both VBA and VHA to ensure that all 15 body systems are 
reviewed and updated as necessary in a timely way. We are 
proposing a priority among the body systems that takes into 
account the following: body systems that are at greater risk of 
inappropriate evaluation; 
body systems that are considered problem-prone; and relative 
numbers of veterans and veterans' payments associated with each 
body system.
    At a previous hearing, I was asked if I thought the review 
and update of the VASRD could be done by contract. If the VA is 
unable to devote the entire resources to accomplish a timely 
review and update, contract assistance is a possibility. 
However, I believe that the expertise and background knowledge 
of the VA professionals are critical in this process and I 
encourage the VA to accomplish this very high priority task 
internally.
    Regarding disability compensation for non-economic loss, 
also referred to as quality-of-life, we are reviewing the 
special monthly compensation program as a potential model for a 
quality-of-life system and we are analyzing options for the 
forms of compensation beyond a monetary stipend. One of our 
concerns is to avoid a compensation system for economic loss 
that encourages seeking increasingly higher levels of 
compensation. Our current view is that the quality-of-life 
compensation should be limited to clearly defined and very 
serious disabilities.
    Regarding disability compensation related to the transition 
from servicemember to veteran status, we are reviewing the many 
recent changes and improvements to the transition program to 
determine if and where gaps in coverage and assistance may 
remain for veterans and families. We are also reviewing the 
vocational rehabilitation and education program as it relates 
to transition for disabled veterans.
    In summary, our committee's work is progressing on a broad 
front. The parameters of our charter offer us the opportunity 
to look at all aspects of disability compensation and we are 
doing so. The committee has excellent access to the Secretary 
and his staff. The VA staff is responsive and helpful to the 
committee's request for information. It is our intent to offer 
interim reports to the Secretary semi-annually and to provide 
copies to the Veterans' Committees of both Houses.
    Mr. Chairman, this concludes my statement and I welcome 
comments or questions.
    [The prepared statement of General Scott follows:]

   Prepared Statement of James Terry Scott, LTG USA (RET), Chairman, 
             Advisory Committee on Disability Compensation

    Chairman Akaka, Ranking Member Burr, and Members of the Committee: 
It is my pleasure to appear before you today representing the Advisory 
Committee on Disability Compensation. The Committee is chartered by the 
Secretary of Veterans Affairs under the provisions of 38 U.S.C.  546 
in compliance with Public Law 110-389 to advise the Secretary with 
respect to the maintenance and periodic readjustment of the VA Schedule 
for Rating Disabilities. Our charter is to ``(A)ssemble and review 
relevant information relating to the needs of veterans with 
disabilities; provide information relating to the character of 
disabilities arising from service in the Armed Forces; provide and on-
going assessment of the effectiveness of the VA's Schedule for Rating 
Disabilities; and provide on-going advice on the most appropriate means 
of responding to the needs of veterans relating to disability 
compensation in the future.''
    The Committee has met ten times and has forwarded an interim report 
to the Secretary that addresses our efforts as of July 7, 2009, to 
date. (Copies of this interim report were furnished to majority and 
minority staff in both Houses of 
Congress.)
    Our focus is in three areas of disability compensation: 
Requirements and methodology for reviewing and updating the VASRD; 
adequacy and sequencing of transition compensation and procedures for 
servicemembers transitioning to veteran status with special emphasis on 
seriously ill or wounded servicemembers; and disability compensation 
for non-economic loss (often referred to as quality of life).
    You asked me to present the views of my Committee on the structure 
of payments for disability compensation, and what reform, if any, the 
Advisory Committee 
recommends.
    The Committee's efforts to date have addressed the structure of 
payments for disability compensation in the following ways:

    1. An updated and clarified Rating Schedule will enable examining, 
rating and reviewing officials to make a more accurate and timely 
assessment of a veteran's disability and its effect on his or her 
average earnings loss. An updated and clarified Rating Schedule should 
improve first time accuracy and reduce the number of appeals and the 
backlog that appeals create. The updated Rating Schedule should address 
the recognized inconsistencies in mental versus physical disabilities 
and in differences in age at entry into the disability system.
    Recent studies by the Veterans Disability Benefits Commission, the 
Institute of Medicine, the General Accounting Office and others have 
consistently recommended a systematic review and update process for the 
VASRD. The Congress has repeatedly demanded the same. I believe that 
the case for such a system is made and that sufficient data currently 
exists to proceed with a review and update. My Committee has informally 
recommended to the Secretary that the Deputy Secretary be tasked with 
oversight of the VASRD systematic review and update process to insure 
that the VBA, VHA and General Counsel are fully integrated into the 
process. We are also offering a proposed level of permanent staffing in 
both VBA and VHA to insure that all fifteen body systems are reviewed 
and updated, as necessary, in a timely way. We are proposing a priority 
among the body systems that takes into account the following: body 
systems that are at greatest risk of inappropriate evaluations; body 
systems are considered problem prone, and relative number of veterans 
and veterans' payments associated with each body system.
    At a previous hearing, I was asked if I thought the review and 
update of the VASRD could be done by contract. If the VA is unable to 
devote the internal resources to accomplish a timely review and update, 
contract assistance is a possibility. However, I believe that the 
expertise and the background knowledge of the VA professionals are 
critical in the process and I encourage the VA to accomplish this very 
high priority task internally.
    2. Regarding disability compensation for non-economic loss, also 
referred to as quality of life, we are reviewing the Special Monthly 
Compensation program as a potential model for quality of life system 
and we are analyzing options for forms of compensation beyond a 
monetary stipend. One of our concerns is to avoid a compensation system 
for non-economic loss that encourages seeking increasingly higher 
levels of compensation. Our current view is that quality of life 
compensation should be limited to clearly defined and very serious 
disability.
    3. Regarding disability compensation related to transition from 
servicemember to veteran status, we are reviewing the many recent 
changes and improvements to the transition programs to determine if and 
where gaps in coverage and assistance may remain for veterans and 
families. We are also reviewing the Vocational Rehabilitation and 
Education program as it relates to transition for disabled veterans.

    In summary, our Committee's work is progressing on a broad front. 
The parameters of our charter offer us the opportunity to look at all 
aspects of disability compensation and we are doing so. The Committee 
has excellent access to the Secretary and his staff. The VA staff is 
responsive and helpful to the Committee's requests for information. It 
is our intent to offer interim reports to the Secretary semi-annually 
and to provide copies to the Veterans Committees of both Houses of 
Congress.

    Mr. Chairman, this concludes my statement. I welcome any comments 
or 
questions.

    Chairman Akaka. Thank you very much, General Scott.
    I would like to open with a question to all witnesses.
    If we are going to act as a Committee, as some of our 
colleagues suggest, what would you suggest as the highest 
priority, or what would you suggest we tackle immediately here? 
Let me start with Admiral Dunne.
    Admiral Dunne. Sir, I wouldn't be so bold as to tell the 
Committee what responsibilities they should take on. We are 
working as quickly as we can to work on the recommendations 
that have been given to us.
    Specifically, just to give you an example, General Scott 
talked about personnel, et cetera. We have already hired two 
clinicians to work on modifying the schedule. We are 
coordinating with VHA to set up a committee that will be 
working very closely with the folks in VBA who are working on 
changing the schedule, and we have already done some 
preliminary work over the past couple of months to start in the 
mental health part of the rating schedule. By coincidence, 
tomorrow is the first all-day meeting with the VHA and VBA 
experts to start looking at mental health, to include review of 
PTSD, sir.
    Chairman Akaka. Thank you.
    Dr. Kettner?
    Mr. Kettner. Well, I would agree with what Admiral Dunne 
just said. I think the burden is really on VA to work at 
adjusting, revising the rating schedule. I would say that over 
the past several decades, the rating schedule has never really 
been based on an economic analysis of lost earnings. It has 
been based on medical criteria and decisions made by medical 
practitioners, but the underlying benefit amounts linked to 
different criteria have never really been based on economic 
analysis of lost earnings. So this would be an opportunity, for 
the first time, to really integrate the economic loss analysis 
into revising the schedule along with reviewing and revising 
medical criteria.
    Chairman Akaka. General Scott?
    General Scott. Well, I certainly agree that the VASRD 
should be the initial priority because it, if done properly, 
accurately, and on a timely basis, will address many of the 
anomalies that we face and many of the concerns that the 
Members of this Committee have expressed in their opening 
statements, to include timeliness, accuracy, the backlog, et 
cetera. So, I really believe that a concerted effort by the VA 
to update and revise, as necessary, the 15 body systems that 
make up the VASRD will go a long way toward solving a number of 
these issues.
    I think that both the Economic Systems studies and the 
study done by CNA, chartered by the Veterans Disability 
Benefits Commission, indicate that there is a solid economic 
basis for the VASRD in terms of average loss of earnings. 
Arguably, there are pluses and minuses and puts and takes in 
there that need to be looked at, and I believe that most of 
them can be addressed in the revision of the VASRD.
    As I commented, I think that we might have to look at 
something extra-schedular, so to speak, for the 100 percent 
mentally disabled--something along the lines of an SMC--if we 
can't get the VASRD to address that.
    But I believe the data is there to validate the VASRD as a 
measure of average economic loss, and that we should proceed 
with the revisions to try to fix the different problems that 
have come up and have been cited in terms of percentage--
particularly for mental disability and the like--and age of 
entry. I think we are ready to go with that and we should move 
out with it.
    I think the quality-of-life assessment, as a system, is a 
second but close-behind priority. Again, we are looking now at 
something that might be modeled on the SMC system so that it 
addresses the loss of quality-of-life at the extreme levels of 
disability and does not burden VA with a grafted system or some 
sort of a need for a totally different analysis to come up with 
a quality-of-life assessment for each veteran.
    As you know, sir, as well as anybody else, the VA struggles 
with the administrative load as presently constituted in terms 
of processing claims on a fair, equitable, and timely basis.
    Then I believe the third thing is--as has been pointed out 
in the Dole-Shalala Commission and others--that the transition 
from servicemember to veteran needs a continuing look. 
Particularly, the emphasis that was made in one of the opening 
statements that the goal should be to return the veteran to, as 
nearly as possible, full membership in society, and the VR&E 
program is a great opportunity for improvement to accomplish 
that end. Thank you, sir.
    Chairman Akaka. Thank you very much.
    We will have other rounds here, so let me call on Senator 
Burr for his questions.
    Senator Burr. Thank you, Mr. Chairman.
    Admiral Dunne, in July you were here and I discussed with 
you my desire that the reports from the Disability Benefits 
Commission and from Dole-Shalala not become part of that 
repository that everything else has. I asked you specifically 
to discuss it with General Shinseki and specifically what the 
next steps were in moving forward on their recommendations. 
Have you had an opportunity to do that?
    Admiral Dunne. Yes, sir. I discussed with the Secretary my 
evaluation of the Economic Systems report in terms of the 
action that we would take within VA to respond. We first 
discussed evaluations and if we compensate too much, too 
little, et cetera. While I recognize that Dr. Kettner and his 
group had a very short period of time to work with and only 1 
year's worth of data, I was not prepared to recommend any 
changes based solely on 1 year's worth of data.
    I was not about to recommend that all of our veterans who 
are currently receiving compensation for tinnitus should go to 
zero percent disability ratings immediately, because as you 
know, you can only get a 10-percent disability ratings for 
tinnitus. So, if you are receiving disability compensation for 
that right now, if we were to follow this recommendation, no 
one would be receiving compensation for that anymore, so----
    Senator Burr. The Secretary was in agreement with your 
conclusions?
    Admiral Dunne. With my discussion, yes, sir.
    Senator Burr. And would it be safe for me to make the 
statement that VA feels that further studies are required 
before they could make any changes, act on any of the 
recommendations out of this----
    Admiral Dunne. No, sir. I can give you a few examples. 
First off, in the transition benefits area, there is already an 
additional study going on, which actually Economic Systems is 
performing for us, to take a look at the rehabilitation program 
that we currently have. As you know, there are some 
recommendations in there about levels of potential compensation 
during a transition period. We want to get the results from 
that study, which should be available by late spring next year 
and provide additional information on veterans' reaction to the 
VR&E program----
    Senator Burr. What was the VA's expectations of Dr. 
Kettner's 6-month study?
    Admiral Dunne. That there would be some options presented, 
sir.
    Senator Burr. And those options all require further study 
to refine, is sort of the way I interpret everything. Is that 
accurate?
    Admiral Dunne. No, sir, I----
    Senator Burr. Most of them?
    Admiral Dunne. In----
    Senator Burr. Most of them require further study?
    Admiral Dunne. Most of them, yes, sir, require more 
evaluation.
    Senator Burr. Let me just ask Dr. Kettner, was it your 
understanding that you were going to do a study that had 
recommendations that required additional study or 
recommendations that were--is this indicative of the study, the 
6-month study?
    Mr. Kettner. Yes. That is our report right there.
    Senator Burr. And in your estimation, does that lack the 
specificity needed to make a determination?
    Mr. Kettner. Well, I think where the issue lies on this is 
the level of analysis we were able to perform in the 7-month 
study that we did. We were hindered to a certain degree in not 
being able to analyze data at the individual level.
    Senator Burr. Was that discussed at----
    Mr. Kettner. Oh, yes. Right.
    Senator Burr [continuing]. At the preliminary review, did 
you share with the VA----
    Mr. Kettner. Absolutely. Yes, sir.
    Senator Burr. We are not provided this information. We are 
not going to be able to give you specific recommendations that 
you can act on?
    Mr. Kettner. Well, I may differ in assessing which options 
might be more practical to act on versus other options we 
presented. I think that where we had the most difficulty in our 
analysis was in looking at different combinations of 
disabilities. We were not able to sort out exactly what were 
the combinations in terms of identifying exactly what was 
second or third disability, and----
    Senator Burr. I am trying to better understand for the 
Committee. Listen, I am not trying to play ``gotcha'' on any of 
this. I am trying to figure out, what did they share with you 
that they wanted to accomplish from a standpoint of the 
information that came out of your study? Because other than 
compiling in these books information that was available and 
making recommendations off of it, the recommendations don't 
seem to have the basis proven in them to move forward. They 
require additional studies. I am trying to figure out, why did 
we do this?
    Mr. Kettner. We asked for and were not able to get earnings 
data at the individual level.
    Senator Burr. And was that discussed during the review----
    Mr. Kettner. Yes.
    Senator Burr. Before the review?
    Mr. Kettner. Before, during, and after.
    Senator Burr. So what was the answer before the review? If 
you said, we can't get to it----
    Mr. Kettner. The answer is that the Social Security 
Administration, which is the source of our data, does not 
release data at the individual level. We have recommended that 
we obtain the data at the individual level so that we can do a 
more detailed analysis.
    Senator Burr. And before this process started to take 
place, that one thing triggered you that you would not get the 
degree of clarity that would trigger VA to say, we need to move 
forward?
    Admiral Dunne. Senator, I had the privilege of being 
involved in setting up the statement of work for this study in 
a prior job. We realized after we got into it that we would be 
unable to get the data from Social Security in the timeframe to 
enable Dr. Kettner to finish the study within the amount of 
time that was available to do it. We are continuing to pursue 
that.
    One of the things that we need to do to be able to maintain 
a viable rating schedule, is to get this data routinely--almost 
on an annual basis from Social Security--so that we can process 
it in-house every year and be able to recommend or evaluate 
where the disparities exist over a period of time.
    Senator Burr. I am going to get into the annual update of 
the rating schedule in the next pass, and the Chairman and the 
Members have been very accommodating to me to let me run over.
    Let me just ask one last question. How much did this study 
cost?
    Admiral Dunne. I would have to get you that answer for the 
record, sir. I don't recall.
    Senator Burr. Dr. Kettner, do you know how much you charged 
for it?
    Mr. Kettner. Approximately $3 million.
    Senator Burr. Three million dollars. I find it incredible 
that we knew before it started that we couldn't access the 
information we needed to conclusively come to a determination 
and we invested $3 million in a product that would do little 
more than trigger additional studies. I would only say that I 
guess my expectations shouldn't have been different because we 
do have five decades of this.
    I will only say to my colleagues and to those from the VA, 
I am not going to let this out of my teeth. I don't care who I 
insult as I go through it, but we are going to get to the 
bottom of this and we are either going to move forward or we 
will find another avenue to use within or outside of the VA to 
accomplish it. It is not a promise to veterans out there that 
they are going to get a windfall check or that they are going 
to lose something. But we can come to a determination as to how 
broken this is, and more importantly, how we fix it. Then we 
can get on a pathway to fixing it and quit studying the thing.
    I thank the Chair.
    Chairman Akaka. Thank you, Senator Burr.
    Now, Senator Tester, your questions.
    Senator Tester. Yes. Thank you, Mr. Chairman. I am going to 
follow up a little bit on Senator Burr's questions.
    The answer you gave indicated to me that if you would have 
had the information from Social Security, the wage information, 
then you could have come forth with recommendations. Is that 
accurate?
    Mr. Kettner. Well, we were not asked to provide 
recommendations. We were asked to provide options, and that is 
what we did. We pointed out where there was economic loss and 
where there was not economic loss. So, for example----
    Senator Tester. OK. I appreciate that, and I don't mean to 
cut you off. But what you are saying is when it comes to 
quality-of-life issues, based around what kind of compensation 
they are going to get, your study based it off of wages?
    Mr. Kettner. We conducted two separate studies within our 
study: one on earnings loss; and another on quality-of-life 
loss. The two were very separate and distinct from each other.
    Senator Tester. OK. So what went into the quality-of-life 
loss?
    Mr. Kettner. We analyzed loss of quality-of-life based on a 
sample of 21,000 veterans. The survey of that information was 
conducted by a previous contractor. We took that study. We 
analyzed the----
    Senator Tester. Do you remember the criteria that was used? 
In other words, what were you using for criteria to determine 
quality-of-life lost? What were they using?
    Mr. Kettner. The survey was based on a series of questions 
that get a loss of quality-of-life. The instruments--the 
questions--were largely based on a set of questions developed 
by RAND Corporation many years ago and have been repeatedly 
used by many organizations in assessing loss of quality-of-
life.
    Senator Tester. But what are those issues? I mean, I know 
they asked----
    Mr. Kettner. They cover a variety of different dimensions, 
loss of functional independence; the ability to walk or climb 
stairs; quality-of-life in terms of self-perception----
    Senator Tester. OK.
    Mr. Kettner [continuing]. One's satisfaction----
    Senator Tester. OK. That is good. So, when you make your 
recommendations for further study, how do you dovetail wage 
loss in with some of those quality-of-life things? Did you make 
any recommendation on that, because from my perspective, you 
have got two issues that are very distinct. You have got one, 
the ability to make a few bucks, and then the other one, the 
ability to actually do things like go fishing or go swimming. I 
am an outdoors kind of guy, so those are the kinds of things I 
relate to; whereas for somebody else it might be the ability to 
read books or something like that.
    Mr. Kettner. Right.
    Senator Tester. So, were you able to make a recommendation 
on how you value those?
    Mr. Kettner. We presented a range of different options for 
payments for loss of quality-of-life. There is--it is a very 
subjective kind of thing to make judgment on, and the judgments 
could rest on the veteran's self-perception of loss of quality-
of-life, SMCs, or other criteria.
    Senator Tester. All right. I think you stated in your 
testimony, I think both you and Dr. Kettner stated that the 
studies agree that certain mental health conditions in 
particular are undercompensated. Are they undercompensated 
because of the rating system, because of a bias in the rating 
system, or because of a bias somewhere else?
    Mr. Kettner. I believe that where the VASRD is off the mark 
is simply for the reason that the criteria and the benefit 
amounts are linked to specific criteria which have never been 
based on economic analysis. If you don't do the economic 
analysis, you are never going to hit your target.
    Now, is the VASRD in the general ballpark? Perhaps, yes. 
But within the ballpark, it is totally misaligned in terms of 
certain codes----
    Senator Tester. OK. It wasn't based on economic analysis. 
Was it based on quality-of-life analysis?
    Mr. Kettner. No. The economic loss analysis is totally 
separate from the quality-of-life analysis.
    Senator Tester. I would like you to give your opinion on 
that same question, Admiral Dunne. Is the rating system 
deficient in the things that Dr. Kettner talked about or is it 
something else?
    Admiral Dunne. Sir, in the mental health area, the rating 
schedule has been called into question as to whether it 
adequately compensates the veteran, and we are determined to 
investigate that. As I mentioned to the Chair earlier, we are 
into that already. There is a meeting tomorrow with experts to 
take a look at it and to evaluate the current rating schedule 
and see if it needs----
    Senator Tester. Do you have a timeline for that?
    Admiral Dunne. As soon as possible, sir; and I don't mean 
to say that flippantly, sir. I have learned from the TBI reg--
which we did modify last year--that when we get these experts 
in the room and get them talking and consulting about the 
impact of these disabilities and how it should be evaluated and 
subsequently compensated, I can't really put a clock on it. 
They have to talk it out until they are able to reach consensus 
because that is really what we need in order to go forward.
    Senator Tester. First of all, I, like the Ranking Member, 
don't want to be critical on anything that is being done 
because you have got a difficult job--make no mistake about it. 
I would hope that part of that group of experts that you get in 
the room are some of the fighting men and women that have come 
back, because quite honestly, as I went around Montana--and I 
don't think Montana is any different than anywhere else--they 
are not afraid to give you their opinion. They also understand 
when people deserve the benefits and they understand when 
people don't deserve the benefits, and they are willing to tell 
it straight up both ways. So, I hope that you do use the VSOs 
or whatever method you want to use, but get the information 
from the folks that are receiving the benefits because I think 
it is critically important.
    Admiral Dunne. Sir, one thing I might add to that. When we 
do get to a proposed rating schedule on mental health or any 
other area, we publish it in the Federal regulations for 
comments from anyone, and we will address those comments, sir.
    Senator Tester. This is my opinion, you guys have to do 
your business, but I will push for this. I would bring them 
into the process much more than after the fact. I would bring 
them in early. I could make a lot of comparisons to what 
happens in offices; but if you bring them in early, you get 
their perspective early and it is more likely to be included in 
the final analysis that is put out for publication and still 
have them comment.
    Chairman Akaka. Senator Begich?

                STATEMENT OF HON. MARK BEGICH, 
                    U.S. SENATOR FROM ALASKA

    Senator Begich. Thank you, Mr. Chairman. I am going to 
follow up a little bit on Senator Tester and Senator Burr and 
your comments, Mr. Chairman.
    First, again, not to be critical, but you spend 
$3+ million, you expect some steps that will be pretty 
aggressive. But let me put that aside.
    I am going to take what Senator Tester has said and go one 
more step, and that is my father-in-law is a retired veteran 
receiving disability. He doesn't read the Federal Register. I 
would venture to say most veterans aren't sitting around 
pulling out the Federal Register. You must engage them in the 
beginning of the process, not after. I have seen this Federal 
process where they do the 30-day notification, and then once it 
is done, they check the box and they say they are done. 
Honestly, that is unacceptable.
    So, I would ask you to take what Senator Tester has said 
and make it a real step. Do it early. Engage them and not the 
Federal process way of posting it in the Federal Register. I 
mean, if I called my father-in-law right now and asked, have 
you looked at the Federal Register today, I know what he would 
say to me. I bet you if I called my brother-in-law and asked 
him the same thing--he was active--he would say the same thing. 
I would just encourage you to step it up to a little different 
level; not just consider it, but do it, to be very frank with 
you. You run the show, and I am just giving you my two bits 
here.
    Admiral Dunne. Senator, I have no problem with including 
veterans in the process, and we will find a way to do it.
    Senator Begich. Thank you very much.
    I am trying to figure out your response in regards to the 
questions with the rating system. Mr. Dunne, I know you are 
doing an analysis, because we have heard more about it today, 
but do you think, personally, there is a problem with the 
system? Do you?
    Admiral Dunne. I believe that we need to go through and 
evaluate the rating schedule and determine how we can improve 
it. We need to bring the appropriate experts together to take 
each of the disabilities, pull it apart, look at it, update it, 
and make that presentation. I do believe that.
    Senator Begich. So, if you--I don't want to put words in 
your mouth--do you think there is room for improvement?
    Admiral Dunne. Yes, sir. There is always room for 
improvement.
    Senator Begich. Here is the difficulty, Dr. Kettner and Mr. 
Dunne, you have the economic analysis and then you have the 
quality-of-life. I am not an attorney and wish no disrespect to 
any attorneys, but if I was a trial lawyer, they would argue 
economic damage and punitive damages. The punitive is always 
very difficult based on the circumstances. I mean, you see 
juries all the time kind of trying to figure that out.
    I would imagine as you get to whatever proposal or 
recommendation that you recognize to put a finite number on 
that quality-of-life will be very difficult, and creating a 
range may be more reasonable, because the conditions can vary 
based on the person. I mean, you see juries going through this 
all the time. So, as you described, when you get a bunch of 
consultants in a room, I can only visualize what that is like. 
As a former mayor, I have experienced that many times. Yet, 
sometimes you have got to just pull the trigger and say, this 
is what we are doing, here is the range, move forward and see 
how it works.
    I would hope that at some point, maybe both or either one 
could respond to this, that that would be kind of the 
objective, that we--to find a perfect system will be very 
difficult, but finding a system that we can move forward to 
start getting realistic results out of knowing the system needs 
to be improved is what should be the goal. Any comment? Mr. 
Dunne?
    Admiral Dunne. Well, yes, sir. I agree that we need to 
evaluate things and we need to move forward, but exactly how 
that is structured, I don't think is defined yet. There is no 
definitive decision on if quality-of-life should be an element 
of the compensation process. We are still struggling with that 
and trying to figure out the right answer. You can see I have 
one recommendation for quality-of-life. I have another 
recommendation to take it out of the SMC tables.
    Senator Begich. Right.
    Admiral Dunne. I want to do the right thing for veterans. I 
don't want to jump into this fast, and I want to get the 
benefit of the Advisory Committee which the Secretary has set 
up, as well as the consideration of the work that Dr. Kettner 
has done, before I make any recommendations on something that 
impacts the lives of our veterans.
    Senator Begich. I appreciate that.
    My time is up, and I heard your response to Senator Tester 
on the timing. I know it is difficult to give some sort of 
timeline, and as you said, as soon as possible. I would ask, 
can you be a little bit more definitive? The reason I ask is, I 
have never known anyone in the military to not be able to have 
a time schedule with a goal and target. So, is it within 6 
months? Three months? A year? I mean, when will we see a reform 
to the system----
    Admiral Dunne. Sir----
    Senator Begich [continuing]. Whatever that reform might be?
    Admiral Dunne. Our estimate is that if you take an 
individual body system of the rating schedule, take that apart, 
and build that back up again, that is a year process.
    Senator Begich. OK. Thank you very much. Thank you all 
three for your testimony.
    Chairman Akaka. Senator Burris?

              STATEMENT OF HON. ROLAND W. BURRIS, 
                   U.S. SENATOR FROM ILLINOIS

    Senator Burris. Thank you, Mr. Chairman.
    Interesting. Interesting testimony. I want to follow up on 
Senator Burr's question. Dr. Kettner, were you a sole source or 
did you do this competitively?
    Mr. Kettner. It was competitively awarded--full and open 
competition.
    Senator Burris. Full and open competition?
    Mr. Kettner. Yes.
    Senator Burris. Can you tell us how many--maybe Admiral 
Dunne can tell us--how many contractors were there, or you 
weren't there at the time----
    Admiral Dunne. Sir, I don't recall that I ever knew the 
answer to that, but I can find that out.
    Senator Burris. OK. I assume, now, we are saying that there 
are further studies, so this will follow the Federal guidelines 
for dealing with contracting; and I would assume that there are 
some budget dollars for these. Do you have any idea what your 
allocation is for these studies?
    Admiral Dunne. I do not, sir. My office is not supervising 
that contract.
    Senator Burris. Is not supervising the contract.
    Admiral Dunne. I will also find that answer out, sir.
    Senator Burris. I would appreciate that.
    I am concerned with some of my other colleagues' questions, 
too, because I am looking at TBI. I wanted you to talk about 
the challenges in rating TBI and how is the VA attempting to 
improve diagnosis, diagnostics of some of the signature 
diseases of this war. I mean, there is going to be something 
else coming up. So, can you give me some insight on how we are 
attempting to improve diagnosis of Traumatic Brain Injuries?
    Admiral Dunne. Senator, I have no medical background and do 
not supervise the medical portion of VA, but I can certainly 
make arrangements for a briefing for you from our medical 
experts.
    Senator Burris. OK, because that seemed to be the latest 
thing, PTSD, which is really the biggest thing on our veterans, 
then TBI, which is very hard to diagnose. So, I would assume 
that there are just different levels for different individuals 
because individuals are going to react differently to various 
circumstances. I would assume, Dr. Kettner, that those are some 
of the problems that would come out in your study, would they 
not? How do you really get a norm in reference to what would be 
applicable to a compensated situation for a person. I would 
assume all of these criteria come into effect, you know, age 
and education, family life. Are some of those criteria what you 
put into your analysis?
    Mr. Kettner. Yes. We controlled for human capital 
differences, such as education, age, whether or not the veteran 
was an officer versus an enlisted, and to the best of our 
ability, we controlled for those differences.
    I might also mention that we did analyze TBI as a separate 
diagnosis and found that they were being--in those instances, 
there was undercompensation for TBI cases.
    Senator Burris. I assume, or I understand I heard General 
Scott say that most of those were underestimated, is that 
correct? A lot of those compensated amounts are just off-
kilter. I get all these veterans coming to me saying that they 
are not really receiving enough money for what they really 
suffered. Is that what you said in your testimony, General 
Scott?
    General Scott. The analysis that was done for the VDBC 
regarding average earnings loss would indicate that the average 
earning loss for mental disabilities does not--that the average 
loss is in excess of the compensation. And the second part--the 
study that Dr. Kettner referred to that was done also for the 
VDBC regarding quality-of-life--clearly indicated that the 
quality-of-life for those veterans suffering from mental 
disabilities was markedly lower than the quality-of-life 
suffered for those with physical disabilities. So yes, sir. I 
think the answer to your question is yes in both cases.
    Senator Burris. Now, help me out here, because I am new to 
the Senate and I wasn't here when Senator Burr and our 
distinguished Chairman were here, but you mentioned something 
about Social Security and having to get the data from Social 
Security. So, is there an offset? If you are getting Social 
Security or some disability under Social Security, is there an 
offset for the veterans compensation? What does Social Security 
data have to do with the veterans?
    Mr. Kettner. We simply use the Social Security 
Administration earnings data for purposes of our earnings loss 
analysis. We went to that source because it provides a 
relatively accurate source of data on earnings as opposed, for 
example, to using survey data or self-reported data. You don't 
get data as accurate. But when you----
    Senator Burris. Pardon me, Doctor. You mean you are not 
going to Social Security to see whether or not these veterans 
are collecting Social Security, but you are just trying to get 
basic information and the Social Security Administration 
wouldn't give you that basic information for you to continue 
your study? Is that what you are saying?
    Mr. Kettner. They gave us data aggregated to a certain 
level. We couldn't get the data at the individual level for 
privacy reasons. Now, since our study was----
    Senator Burris. Pardon me. Why would you need----
    Mr. Kettner. We have uncovered another possibility of 
getting at this data, which would be that we could instruct 
the--we could give instructions to the Social Security 
Administration on exactly how to run the analysis at the 
individual level and thereby that would be an avenue that could 
be taken to circumvent the problem we have talked about--the 
Social Security Administration not 
releasing----
    Senator Burris. Well, I am still not clear on why you need 
Social Security data, and my time has expired, Mr. Chairman. I 
don't know whether I am going to have time to pursue that or 
not, but I am not clear on the need for the Social Security 
data for comparison. It is not--may I have a couple extra 
minutes, Mr. Chairman?
    Chairman Akaka. If you pursue that, yes.
    Mr. Kettner. OK. Let me try this again.
    Senator Burris. Please.
    Mr. Kettner. We measure the actual earnings of veterans 
with disabilities and compare them to the earnings of veterans 
without disabilities, OK. So, the veteran over here, he has a 
disability, he makes $20,000 a year. Another veteran over here 
that we have matched in terms of the same education level and 
age and other characteristics, his income is $30,000 a year. 
His earnings are $30,000 a year. So that is a difference of 
$10,000. That is what we are trying to find out.
    We go to the Social Security Administration because we know 
they have accurate data. It has to be accurate. It is reported. 
The earnings data is reported by employers to the Social 
Security 
Administration.
    Senator Burris. Wouldn't the IRS have the same data?
    Mr. Kettner. Well, yes, IRS is another possibility, but 
there are certain issues involved as to how best to get the 
data. There are bureaucratic obstacles always involved in 
getting the data. We only had 7 months for our study and we had 
to move very quickly on this, so we took certain courses to----
    Senator Burris. Well, I am with Senator Burr. I don't see 
how you could have 7 months and not know that you are going to 
need this, then get caught up and now there has got to be 
another study which you may have to spend another $3 million.
    Mr. Kettner. Well, part of the study was discovery. We 
didn't know all of this at the beginning. We did ask for 
individual data at the beginning, so we knew from the beginning 
that we would be facing a certain obstacle. But in the course 
of our study, we discovered more things than we knew when we 
first started.
    We feel very confident in a lot of our studies. For 
example, on tinnitus, tinnitus is a 10-percent rating. I can 
say unequivocally that there is no earnings loss for tinnitus 
veterans. Whether or not you want to--we are just reporting our 
result, our statistical result. Whether or not you want to 
change their rating from 10 percent to 0 percent, that is a 
value judgment that others in government have to make. We are 
not making that judgment. We are just reporting on the 
statistical results.
    At the same time, we can say that those veterans rated at 
100 percent are not getting enough compensation. They are, on 
average, 9 percent below what they should be getting. We are 
very confident about that. We would not say we need to do more 
studying for that.
    Where our confidence starts to decline is when we have to 
look at different combinations of disabilities. We have 
tinnitus there, hemorrhoids, and diabetes. When you put them 
all together, you get a certain combined rating. We are very 
confident that the VA is overcompensating at the lower levels, 
but you would have to look at--to get even more accurate, you 
would have to look at what are the exact combinations of 
different disabilities to really fine-tune this as accurately 
as possible, and that is where our hands are tied behind our 
back in terms----
    Senator Burris. Thank you, Doctor. My time has expired. 
Thank you, Doctor. Thank you, Mr. Chairman.
    Chairman Akaka. Thank you very much, Senator Burris.
    Dr. Kettner, the question of whether to compensate for loss 
of quality-of-life has the potential to change veterans 
disability compensation considerably. Let me ask you this 
question, and I am going to ask General Scott to also comment 
on this. Do you believe that VA should work on changes to the 
rating schedule before addressing whether loss in quality-of-
life should also be compensated?
    Mr. Kettner. Absolutely. They should get the VASRD in 
better alignment before adding on quality-of-life, because you 
could be compounding current inequities in the system right 
now.
    When we look at quality-of-life, you know, there is a 
tremendous amount of variation across ratings. It jumps around 
quite a bit. We believe part of the reason is that the rating 
schedule itself--the regular schedule ratings schedule--is so 
misaligned that when you try to line up quality-of-life loss 
analysis, it is more of a random kind of thing, and there is 
more variation than you would expect to see. So, we strongly 
recommend fixing the VASRD first before taking on quality-of-
life.
    Chairman Akaka. Thank you for that. When I asked about what 
are your priority of any change, you mentioned the rating 
schedule.
    General Scott?
    General Scott. Sir, you did indeed ask for a priority and 
that is what each of us gave you. I think it is a good thing in 
terms that we all have the same priority when we talk about it.
    I guess my perspective on working quality-of-life would be 
that an assessment of the different models for determining how 
to compensate for quality-of-life can go on in parallel with 
the updating and revision of the VASRD. But the application of 
dollars, if you will, to a quality-of-life model might want to 
wait until we had been through the VASRD and the updated 
revision done.
    So, that may be an equivocal statement, sir, but I think 
that you can work the model, which I believe is what the VA is 
doing. They are working--they are taking the input from us, 
they are taking the input from the studies that have been done 
and from the other advisory efforts that are ongoing to try to 
develop a model or models for quality-of-life compensation, and 
I think that can go on in conjunction with updating the VASRD. 
But again, you might want to wait to put the dollars against it 
until the VASRD is updated. Thank you, sir.
    Chairman Akaka. Admiral Dunne and General Scott, last year, 
Congress passed the Veterans' Benefits Improvement Act of 2008, 
which became law. It was Public Law 110-389. This law required 
VA to establish an Advisory Committee on Disability 
Compensation. Congress intended that the committee would be 
composed of individuals with experience with VA's disability 
compensation system or who are leading experts in fields 
relevant to disability 
compensation.
    My question to both of you is how are the requirements of 
the Congressionally-chartered committee met by the Advisory 
Committee that General Scott now chairs? Stated differently, 
which members are experts in which fields of expertise? General 
Scott, will you begin, and I will ask Admiral Dunne to comment.
    General Scott. Well, let me start by saying that I will 
send you the bio sketches of the members of the committee for 
the record. The previous Secretary selected the current Members 
of the Committee. The legislation offered the opportunity, as I 
recall, for 18 members; and the Secretary at the time chose not 
to fill it entirely, leaving the opportunity for the new 
Secretary or the Veterans Committees in the House and Senate to 
offer candidates.
    The legislation, as I recall, requires the Committee to 
report out to the Congress on a biennial basis, and in my 
statement, I told you that we are submitting interim reports to 
the Secretary twice a year, semi-annually, and that we are 
obviously providing copies to the Committees. So, we are 
probably over-reporting in terms of what the law required, but 
not in terms of what we think we should be doing in terms of 
keeping both the Secretary and you 
informed.
    As a matter of fact, I remarked to Admiral Dunne this 
morning that this committee is reaching its 1-year anniversary 
next month; that he and the Secretary might want to consult 
with you and the House to offer some additional recommendations 
for putting more people on it so that we don't all expire at 
the same time next year, at the end of the 2-year mark. The 
appointments of the people that are on it now were for 2 years 
and so far no one has indicated they weren't going to serve out 
the 2 years. What I would propose to do is, again, at the end 
of the 2 years, is have the Secretary ask the Committees if 
they would have recommendations regarding what should occur.
    In response to one of the staffers who asked essentially 
the same question, was there proper expertise there and all 
that. At the time, my answer was I really don't know, because I 
haven't gotten to know the members that well. I also told them 
that if the Committees wanted to make changes, it was available 
in terms of adding people now. So that would be my basic 
response to your 
question.
    I will say this. There are some distinguished members on 
that committee. I don't necessarily include myself in that, but 
there is a former Surgeon General who is a true expert in the 
transition from military to veteran and who thoroughly 
understands the medical side. There is a medical doctor whose 
background is psychiatry who is very, very helpful. There is 
also a Ph.D. from Johns Hopkins on it.
    So, this is a committee made up of people with a wide 
variety of experiences and talents, and as I said, sir, at the 
beginning, I will furnish copies of the bio sketches of all the 
members, and perhaps your staff can take a look at them. Then, 
I believe, sir, that the Committee can make up its own mind of 
whether the people that you more or less intended or 
anticipated would be involved are on it or not; and then the 
opportunity is there to change the make-up of the committee as 
we go along, sir.

Response to Request Arising During the Hearing by Hon. Daniel K. Akaka 
 to LTG James Terry Scott, Chairman, Advisory Committee on Disability 
                              Compensation








    Chairman Akaka. Thank you, General. I would like the 
Committee to have your request and would also like to know what 
else you may need for the record.
    General Scott. Yes, sir.
    Chairman Akaka. Admiral Dunne?
    Admiral Dunne. Mr. Chairman, first, I would offer that 
General Scott is one of the distinguished members of the 
Advisory Committee. Beyond that, I would say that the 
circumstances as he presented them are as I understand them, 
and I have nothing to add, sir.
    Chairman Akaka. Thank you.
    Let me pass it on to Senator Burr for his questions.
    Senator Burr. Thank you, Mr. Chairman. And Admiral, I don't 
think you took my last comments personally. I hope you didn't. 
They were not intended to be personally directed to you. I 
don't suggest to you or to the VA that we move on important 
decisions before we have all the information we need to get it 
right.
    But I do want to try to present for you why there is a 
level of frustration on my part. You very clearly said in your 
testimony--being critical of the study for several reasons, you 
said, and I quote, ``It did not provide the detail and 
longitudinal analysis to warrant significant policy changes,'' 
yet my interpretation of Dr. Kettner's testimony reflects that 
the information that he provided is reliable and accurate 
enough to be the basis for policy decisions.
    So, I hope that VA, company, contractor, will have some 
conversations that better lay out what the clarity is we need 
to make the important policy decisions before we begin the next 
study.
    Now, the VA report on the Economic Systems study, and I 
quote, said ``consideration could be given'' to addressing the 
loss of quality-of-life for additional disabilities through 
special monthly compensation, and you mentioned it, as well. 
There are currently 260,000 veterans that receive special 
monthly compensation. Is the VA planning to send the Congress 
proposed legislation to expand special monthly compensation?
    Admiral Dunne. As we look through the ratings schedule and 
come up with changes, if legislation is required to implement 
that, sir, we certainly would do that. I have been talking with 
the folks at Compensation and Pension Service right now on the 
mental health side. There is some discussion about mental 
health versus coverage under SMC. What I am not certain of 
right now is modifications to that. If we determine they are 
necessary, can we make them simply through regulation, or is 
legislation required? So, we may have the capability to do it 
right now.
    Senator Burr. But we are in agreement, mental health is not 
currently covered under special monthly compensation and it is 
just a question of whether we need to make some changes 
legislatively----
    Admiral Dunne. Yes, sir----
    Senator Burr [continuing]. Correct?
    Admiral Dunne. I am not an expert in SMC, but to the best 
as I understand it----
    Senator Burr. That is my understanding. I may be wrong, 
but----
    Admiral Dunne. Yes, sir. To the best of my understanding, 
it is not covered right now.
    Senator Burr. I think we all agree that the VA rating 
schedule is probably the cornerstone of the entire disability 
compensation system. In its first report to the Secretary, the 
Advisory Committee on Disability Compensation indicated that 
the VA has not dedicated sufficient full-time employees to 
keeping the VA Schedule for Rating Disabilities up to date. 
Would I take it that the comment you made about the addition of 
two new clinicians is part of that review process?
    Admiral Dunne. Yes, sir, that is correct. As we go through 
this, there may be the need to have different experts, 
depending upon which part of the ratings schedule we are 
looking at. So, in some cases, we are contracting for an expert 
for a period of time to support that.
    Senator Burr. Admiral, how many full-time employees are 
hired to continually look at this rating schedule and update 
it?
    Admiral Dunne. I would have to get you the exact number, 
sir. I am aware of the addition of two, and I know several of 
the senior members of Compensation and Pension Service work on 
it periodically, but are not dedicated to it 100 percent of 
their time. However, those individuals, in my mind, are key and 
essential to making this happen. For instance, the Director and 
the Deputy Director, who will be involved all day tomorrow, are 
not working on it 100 percent of the time, but they are 
essential to the success of tomorrow's event.
    Senator Burr. How important do you believe keeping this 
schedule up to date is?
    Admiral Dunne. Very important, sir. I am not sure how to--
--
    Senator Burr. You know, clearly, I think it is. I think 
that is part of the problem, that we haven't regularly updated 
it. Until I know the number of folks, I couldn't make an 
assessment as to where it shows the level of commitment to 
continuing. To me, two new clinicians is not a major additional 
commitment. It may be if there are 500 people that look at it 
all the time--if there are two people that look at it all the 
time and we are doubling, two to four, then we might both look 
at it and say that is not indicative of the type of commitment 
that we should have.
    What role do you believe the Advisory Committee on 
Disability Compensation should play in making sure that the 
rating schedule is updated?
    Admiral Dunne. Sir, they have the opportunity to, first 
off, look at and evaluate what we are doing. General Scott and 
the Director of Compensation and Pension Service are in routine 
communication. The committee looks at what we are doing and 
makes recommendations based on that, and we try to act on those 
recommendations.
    Senator Burr. Now, the VA report on the Economic Systems 
study, and again I quote, said, ``We believe that recurring 
studies of earning loss relationships should be conducted on a 
regular schedule to ensure that the changes to the ratings 
schedule accurately compensate to the extent practical, for 
earnings loss.''
    Admiral, do you know of any significant study that has been 
done since the 1970s on that earnings loss relationship?
    Admiral Dunne. I am aware of a study which is referred to 
as the ECVARS study, which I believe was done in the early 
1970s. I have not read that, sir, but I believe it took a look 
at the economic parameters of the ratings schedule.
    Senator Burr. But there hadn't been a--General, do you have 
anything to add that you might be able to shed some light on 
that from the standpoint of how long it has been?
    General Scott. The Center for Naval Analysis did a study 
for the Veterans Disability Benefits Commission that 
essentially validated the relationship between the average 
earnings loss and the compensation schedule, broadly speaking. 
Now, with the exceptions that we discussed off and on here 
today--age of entry, seriously disabled, mental versus 
physical, et cetera.
    So, in the sense that has any economic validation been 
done, I would say that the ECVARS study, which was mentioned by 
Admiral Dunne, is one. The CNA study done on behalf of the VDBC 
is a second one. And significant parts of the study done by 
Economic Systems recently all address sort of the economic 
foundation of the VASRD.
    Now, one can conclude that it is generally on the mark, but 
has variations that should be fixed and can be fixed mostly in 
the VASRD; or one can conclude that it is off by some small 
percentage and more studying should be done to determine 
exactly what and exactly how. I am of the view that sufficient 
information has been provided by those three studies to enable, 
as I mentioned before, the continuing revision and updating of 
the VASRD, which should fix a lot of these problems. So yes, 
sir, I think that those three studies are relevant.
    Senator Burr. But to dig just a little bit deeper, are you 
at odds with the VA relative to the conclusion you have come to 
that there exists enough data to proceed with review and 
update, or is there less light in between the two of you than I 
interpret?
    General Scott. I think you will have to ask the VA 
representative whether the VA believes that adequate economic 
analysis had been done, but clearly from my comments, I think 
we can proceed with what we have here.
    Senator Burr. Admiral?
    Admiral Dunne. Sir, I don't think there is disagreement on 
the fact that we need to take a look at the mental health part 
of the ratings schedule. But I would disagree with saying, just 
based on 2006 data, that we should do something specifically 
like take a 10 percent disability rating to a 0 percent 
disability rating. I would want to go back and take a look at 
more years' worth of data to see what it is.
    I believe we need to take a look at it. We need to evaluate 
it. I am just not ready to say that every conclusion in here is 
one that should be acted on precisely.
    Senator Burr. General, one last question. The Chairman has 
been incredibly accommodating to me this morning. You stated 
that you felt that updating the ratings schedule was a very 
high priority task. Do you believe that the VA agrees with that 
being a very high priority task?
    General Scott. Well, I believe that they agree that it is a 
high priority task. I am not sure that the level of concern 
that I have regarding how quickly we need to move on it is 
reflected in what I have seen come out of the VA so far. But 
again, you have obviously read this report that we submitted to 
the Secretary where we--in no uncertain terms--not only told 
them what they should do, but probably in too much detail told 
them how to do it. We may have been a bit out of bounds by 
saying they should hire nine people to do this, et cetera.
    But the point was, we felt--the committee felt that it was 
important that the VA focus full-time effort on updating the 
ratings schedule and we fully understand that it will take 
about a year to do a body system. The committee's position is 
that we ought to be doing about three or four of these at a 
time so that it doesn't take 15 years to get from 1 through 15.
    I can't speak to whether the VA agrees with that approach 
or not, but that is the committee's recommendation, unanimous 
as a committee, to forward that to the Secretary and suggest 
that that is the way we should go on it. So, we believe it is a 
very high priority and it will fix so many of the small things 
that we talk about--not small in terms of impact on veterans, 
but all the second- and third-order issues that we are all 
confounded by, in my judgment, can be fixed inside that.
    Senator Burr. I thank you for your observations, and more 
importantly, your involvement on the Advisory Committee. I hope 
all of you understand that what I am trying to do is establish 
points that we can begin to move forward from. If we can't do 
it on all of them, we can't. Let us know that up front. If we 
can, then let us find the agreement to move forward. I tend to 
look at agency issues in 4-year segments. There are some 
natural things that cause me to do that, and I know that when 
you get on the downhill side of the 4 years, you are less 
likely to get agencies to make major changes because all of a 
sudden you have individuals that have been there a long time 
that say all I have to do is wait out until this happens and I 
don't have to go through the tough decisions and the tough 
work.
    So, we have a very short window to accomplish high priority 
tasks. And I hope if you, as chair of the Advisory Committee, 
see it as a high priority task, then I want to understand up 
front, is that where the VA sees it or is it seen as a lesser 
task, and if there is a difference, can we work this out to all 
come up with a common timeline. I think my expectations and 
hopes are that we are not talking about 15 years to accomplish 
many of these things. Hopefully we are looking at studies in 
the future that don't require follow-up studies, because I 
think it does play into the hands of some that would prefer to 
see this carried from 4 years to 4 years to 4 years.
    Admiral, Doctor, General, thanks.
    Chairman Akaka. Thank you very much, Senator Burr.
    I want to thank Admiral Dunne, Dr. Kettner, and General 
Scott for your responses. We continue to look to working 
together with you in trying to resolve this as quickly as we 
can. So, thank you very much for your time.
    [Pause.]
    Chairman Akaka. I want to welcome our second panel this 
morning. Our first witness is Katy Neas, who is Vice President 
of Government Relations for Easter Seals; Susan Prokop, who is 
Associate Advocacy Director for the Paralyzed Veterans of 
America; and retired Air Force Colonel John L. Wilson, who is 
Associate National Legislative Director for the Disabled 
American Veterans.
    Thank you all for being here this morning. Your full 
testimony will be, of course, in the record.
    Ms. Neas, will you please present your testimony first.

            STATEMENT OF KATY NEAS, VICE PRESIDENT, 
               GOVERNMENT RELATIONS, EASTER SEALS

    Ms. Neas. Sure. Certainly. Thank you, Mr. Chairman. It is 
an honor to be here today to give Easter Seals' perspective on 
the Department of Veterans Affairs' disability compensation 
system.
    Easter Seals is a 90-year-old organization that works with 
all people of all ages with all types of disabilities and our 
goal is to help them live, learn, work, and play in their 
communities. We work with each individual in the context of 
their families and in the context of their communities and we 
can't address each individual's needs in isolation.
    My goal today is to provide some insights on Federal policy 
affecting people with disabilities that hopefully can inform 
you as you consider your work ahead.
    Americans with disabilities have made great strides over 
the past three decades and it is essential that the VA build on 
these gains. I would like to list just three of the main 
victories we have witnessed.
    In 1973, thanks to Section 504 of the Rehabilitation Act, 
all programs funded by the Federal Government need to be 
accessible and usable by people with disabilities. In 1975, 
with the passage of the Education for All Handicapped 
Children's Act, children with disabilities secured the right to 
an appropriate public education. And in 1990, all children and 
adults with disabilities won the right to be free from 
discrimination in employment services provided by State and 
local governments, public accommodations, transportation, and 
telecommunications, thanks to the passage of the Americans with 
Disabilities Act.
    As a result of these important laws, people with 
disabilities expected to be fully included in their families 
and in their communities and have the supports they need to 
live the lives that they choose. There is a rallying cry within 
the disability rights movement about ``Nothing about us without 
us,'' and I think, if anything we learned from the first panel, 
that that is something that we hope the VA takes to heart. 
Again, nothing about us without us.
    I would like to provide some specific recommendations about 
how veterans with disabilities should be helped by the VA. Most 
importantly, veterans with disabilities and their lives need to 
be considered holistically. A veteran with a disability is 
likely to have increased expenses through their years beyond 
medical and therapeutic care. For instance, they may have 
additional out-of-pocket expenses such as assistive technology, 
transportation, home modification, and other supports to 
maintain their independence.
    One of the things that was racing through my mind during 
the first panel was an individual's quality-of-life is 
something that only that individual can determine for 
themselves. Some people like to play rugby. I am not a rugby 
player. If you see people who play wheelchair rugby, they are a 
different breed of person who like risks and things. There are 
a lot of other people that we have served that are farmers that 
simply want a lift on their tractor so they can go back to 
work, or a home modification.
    A lot of our folks come from rural areas, and as Senator 
Tester commented, they just want to go fishing. That is all 
they really want to do. That is what they enjoyed in life 
before their service and when they go home after their service, 
they want to go fishing. Can they get into their boat? Is there 
a dock that will accommodate their wheelchair? Can they do the 
things that they wanted to do before they acquired their 
injury? I think those are the kinds of things that only an 
individual can say for themselves, and no rating system can be 
complete if it doesn't accommodate that individual's 
perspective on what is important to them as an individual.
    I would like to ask you to keep in mind some basic 
disability policy precepts that affect certainly our work and 
the work that we try to have Congress consider, that whenever 
you make a decision, that those decisions are based on fact, 
objective evidence, state-of-the-art science, and a person's 
needs and preference, not based on administrative convenience 
and generalizations, stereotypes, fear, and ignorance. Again, a 
quality-of-life is something that is very personal.
    I have met thousands of families over the 20 years I have 
been working in this field. When they have a child with a 
disability, at the beginning, they think their world has ended. 
And if you ask them at a later point in their life, they will 
tell you having that child was the best thing that ever 
happened to them because that child gave them perspective they 
wouldn't have otherwise had.
    I think a person who acquires a disability through their 
service to our country needs to be afforded that opportunity to 
determine for themselves what is important for them and not 
have the rest of us dictate what their life should be all 
about.
    I think providing the supports for a person to have 
independent living skills--what is it going to take for them to 
go back to their homes and their families, to go back to being 
a dad or a brother or a son? Those things need to be 
accommodated.
    We need to allow people to be in the most inclusive setting 
based on what they want. We need to recognize economic self-
sufficiency as a legitimate outcome of public policy. And we 
need to provide support systems for employment-related 
supports.
    In conclusion, Easter Seals recommends that revisions of 
the disability compensation system should take into account the 
totality of a person's potential ability as well as future 
supports that they may need to maintain independence. Thank you 
very much for the opportunity to be here today.
    [The prepared statement of Ms. Neas follows:]

           Prepared Statement of Katy Neas, Vice President, 
                   Government Relations, Easter Seals

    Good morning Chairman Akaka, Ranking Member Burr, and Members of 
the Committee. I am indeed honored to be here today to provide Easter 
Seals' perspective on the Department of Veteran's Affairs (VA) 
disability compensation system. Thank you for the opportunity to speak.
    My goal today is to provide some insights on Federal policy 
affecting people with disabilities that can inform how you consider 
compensation for veterans with disabilities. Americans with 
disabilities have made great strides over the past three decades, and 
it is essential that the VA build on these gains. I'd like to list just 
three of the main victories we have witnessed:

    1. In 1973, thanks to section 504 of the Rehabilitation Act, all 
programs funded by the Federal Government needed to be accessible to 
people with disabilities.
    2. In 1975, with the passage of the All Handicapped Children's 
Protection Act, children with disabilities secured the right to an 
appropriate public education.
    3. In 1990, all children and adults with disabilities won the right 
to be free from discrimination in employment, services provided by 
state and local governments, public accommodations, transportation and 
telecommunications, thanks to the passage of the Americans with 
Disabilities Act.

    As a result of these important laws, America has a new outlook on 
where people with disabilities belong. People with disabilities expect 
to be fully included in their families and in their communities and 
have the supports they need to live, learn, work and play.
    Military servicemembers and veterans are a major focus for Easter 
Seals. In communities nationwide, Easter Seals is being asked to help 
meet the needs of America's military servicemembers and veterans with 
disabilities and their families. Our goal is to promote their successes 
by helping them attain their personal and family goals while becoming 
full participants within their own communities. We have utilized our 
nationwide network of accessible camps to provide therapeutic 
recreation and camping experiences to veterans with disabilities and 
their families. Easter Seals has also partnered with the National 
Military Family Association to host week-long Operation Purple 
experiences for children of deployed parents at five Easter Seals 
affiliate camp sites. Later this year, the partnership will stage 
Operation Purple Healing Adventure for servicemembers and veterans with 
disabilities and their families at Easter Seals Camp ASCCA in Alabama. 
And finally we provide a significant amount of adult day services and 
other supports to the Nation's older veterans through the Nation's 
largest network of adult day service centers.
    In addition to these nationwide efforts, in our headquarters city 
of Chicago, with generous funding from the McCormick Foundation, Easter 
Seals has launched two programs that benefit servicemembers, veterans 
and their families:

     Operation Employ Veterans provides training to employers 
on effective methods to recruit, employ, and retain veterans with 
disabilities.
     Community OneSource provides information, system and 
resource navigation and personalized follow-up supports for 
servicemembers, mobilized Guard and Reserves and veterans with 
disabilities and their families as they reintegrate back into their 
home communities. This is an initiative we hope to take national very 
soon.
    For 90 years, Easter Seals has been the leading non-profit provider 
of services for individuals with autism, developmental disabilities, 
physical and mental disabilities, and other special needs. Through 
therapy, training, education and support services, Easter Seals creates 
life-changing solutions so that people with disabilities can live, 
learn, work and play in their communities. Based on this wealth of 
experience, we are able to make some recommendations today about how 
veterans with disabilities should be viewed by the Department of 
Veterans Affairs when calculating compensation.
    First, veterans with disabilities and their lives need to be 
considered holistically when considering compensation.
    Calculations of potential lost earnings do not account for the 
reality of many veterans with disabilities lives. A veteran with a 
disability is likely to have increased expenses through the years 
beyond medical and therapeutic care. For instance, they may need 
assistive technology, transportation, housing modification and other 
supports to maintain health and independence. In most cases many of 
these expenses, even when subsidized, are out-of-pocket expenses that a 
veteran without a disability would not have.
    In addition, a veteran with a disability may be able to work with 
supports like those listed above and may not have as much in lost 
earning, but the increased costs of the supports needed could still 
financially devastate the veteran. For instance, advances in prosthetic 
technology help veterans with lost limbs do work related tasks that 
were not conceivable when compensations policies were set so earnings 
potential can be very different for this generation of veterans with 
disabilities. However, even a veteran with a disability who is a 
relatively high earner could still be devastated financially by the 
supports needed to remain independent.
    As decisions are made about potential changes to disability 
compensation systems and other decisions affecting veterans with 
disabilities, I urge you to keep in mind some of the basic disability 
policy precepts that we in the broad disability community always try to 
infuse into legislation:

    A. Equality of Opportunity
           Individualization--Make decision affecting an 
        individual based on facts, objective, evidence, state-of-the 
        art science and a person's needs and preferences; not based on 
        administrative convenience and generalizations, stereotypes, 
        fear and ignorance.
           Effective and Meaningful Opportunity--Focus on 
        meeting the needs of all persons who qualify for services and 
        supports, not just the ``average'' person by providing 
        reasonable accommodations and reasonable modifications to 
        policies, practices, and procedures.
           Inclusion and Integration--Administer programs in 
        the most integrated setting appropriate for the individual 
        (i.e., the presumption is that a person who qualifies for a 
        public program must receive services in an inclusive setting 
        with necessary support services and the burden of proof is on 
        the government agency to demonstrate why inclusion is not 
        appropriate to meet the unique needs of the individual) and 
        administer programs to avoid unnecessary and unjustified 
        isolation and segregation (i.e., do not make a person give up 
        his/her right to interact with nondisabled persons in order to 
        receive the services and supports).

    B. Full Participation
           Provide for active and meaningful involvement of 
        persons with disabilities and their families in decisions 
        affecting them specifically as well as in the development of 
        policies of general applicability i.e., at the systems/
        institutional level. (``Nothing about us without us'')
           This means policies, practices, and procedures must 
        provide for real, informed choice; self-determination, 
        empowerment; self-advocacy; person-centered planning and 
        budgeting.

    C. Independent Living
           Recognize independent living as a legitimate outcome 
        of public policy.
           Provide for independent living skills development.
           Provide necessary long-term services and supports 
        such as assistive technology devices and services and personal 
        assistance services.
           Provide cash assistance.

    D. Economic Self-Sufficiency
           Recognize economic self-sufficiency as a legitimate 
        outcome of public policy.
           Support systems providing employment-related 
        services and supports.
           Provide cash assistance with work incentives.

    In conclusion, Easter Seals recommends that revisions of the 
disability compensation system should take into account the totality of 
a person's potential ability as well as future supports that may be 
needed to maintain independence. Thank you very much for this 
opportunity to testify today.

    Chairman Akaka. Thank you very much, Ms. Neas.
    Ms. Prokop?

    STATEMENT OF SUSAN PROKOP, ASSOCIATE ADVOCACY DIRECTOR, 
                 PARALYZED VETERANS OF AMERICA

    Ms. Prokop. Thank you, Mr. Chairman. On behalf of the 
Paralyzed Veterans of America, we appreciate this opportunity 
to share with you some observations about Federal disability 
policy as it affects veterans with disabilities.
    As you requested, our testimony today focuses on several 
areas of Federal disability policy affecting our members as 
people with disabilities: Social Security; employment; and 
housing. You have the details in our written statement. Though 
not intended as exhaustive, this information should, we hope, 
prompt you and other policymakers to ask in future disability 
policy deliberations, how might this affect veterans with 
disabilities.
    What I will do in my remarks this morning is highlight 
several principles recently expressed by the National Council 
on Disability for evaluating disability programs and how the VA 
disability system stacks up against those principles.
    NCD urges the Federal Government to ensure that its 
programs and services for people with disabilities are 
consistent with the overarching goals of the ADA, promoting 
equality of opportunity, full participation, independent 
living, and economic self-sufficiency. NCD criticizes policies 
that force individuals with disabilities to impoverish 
themselves, give up jobs, and otherwise limit their freedom in 
order to obtain the basic necessities of life.
    As you know, veterans with service-connected disabilities 
receive a wide array of services and supports from the VA. The 
same can be said for veterans with catastrophic non-service-
connected disabilities. All of these benefits are provided 
regardless of income. Compare these VA benefits to those 
available to non-veteran people with disabilities on SSDI or 
SSI in which benefits are limited by earnings and many services 
and supports are provided only under certain restricted 
circumstances. What separates veterans with disabilities who 
receive Social Security benefits from their non-veteran 
counterparts is their access to the VA health care system and 
its ancillary supports and services, regardless of their 
income.
    As PVA has stated in past testimony, VA compensation is 
meant to offset more than economic loss. It reflects the fact 
that even if a veteran works, the disability doesn't stay at 
the office when he or she goes home at the end of the day. In 
many respects, VA compensation and its ancillary benefits, and 
even the benefits for veterans with non-service-connected 
catastrophic disabilities, reflect many of the standards 
embodied in the first principle outlined by NCD.
    NCD's second principle says that ensuring sound fiscal 
policy in disability programs should be based on long-term 
human costs and benefits. Here, NCD cautions against policies 
that fail to take into account the overall cost to society or 
to other programs when cost shifting occurs. A case in point is 
the VA pension program cash cliff, which limits the ability of 
low-income veterans to reenter the workforce, unlike their 
counterparts on SSI.
    A related perverse aspect of public policy involves VA 
benefits interaction with civilian disability systems. As noted 
in our statement, some married veterans eligible for 
compensation and pension elect to receive only pension because 
their service-connected benefits would knock their spouses off 
SSI and cost them their 
Medicaid.
    Third, NCD notes that there are gaps between many Federal 
programs where there should be bridges. According to this 
standard, veterans who clearly meet SSA's criteria for 
disability should not have to undergo a second disability 
determination after receiving their 100 percent rating from the 
VA, nor should low-income veterans deemed permanently and 
totally disabled by the VA have to obtain a separate doctor's 
note attesting to their disability to receive assistance from 
HUD.
    The foregoing positive description of VA benefits is not 
meant to dismiss the many challenges still facing the VA 
system. It is merely to suggest that policymakers may want to 
look to the VA system as a model that at least breaks the chain 
between health care and poverty for people with disabilities. 
Indeed, compared to other Federal disability programs and 
systems, the VA system recognizes that there are factors beyond 
someone's earnings capacity that call for ongoing supports and 
services in order to maintain a decent quality-of-life.
    I appreciate this opportunity to testify and would be happy 
to answer any questions you may have. Thank you.
    [The prepared statement of Ms. Prokop follows:]

   Prepared Statement of Susan Prokop, Associate Advocacy Director, 
                     Paralyzed Veterans of America

    Mr. Chairman and Members of the Committee--on behalf of Paralyzed 
Veterans of America, I thank you for asking PVA to share with you some 
observations about Federal disability policy as it affects veterans 
with disabilities. As the only Congressionally-chartered veterans' 
service organization solely devoted to representing veterans with 
spinal cord injury and/or dysfunction (SCI/D), PVA is uniquely 
qualified to speak to these issues because our members include those 
with service-connected disabilities as well as those who sustained 
spinal cord injuries or illnesses after their discharge from the 
military. Maximizing ``the quality of life for its members and all 
people with spinal cord injury/dysfunction'' has been part of PVA's 
mission since its founding. As part of that mission, PVA has been a 
longstanding participant in coalitions to advance the larger cause of 
disability rights and to improve government programs and policies that 
support and assist Americans with disabilities.
    Our testimony today focuses on three areas of Federal disability 
policy that affect our members as people with disabilities--Social 
Security, employment and housing. Each of these areas has been the 
subject of considerable debate within disability policy circles over 
the past several years. Yet, when policy debates arise or when changes 
are proposed concerning programs affecting Americans with disabilities, 
veterans with disabilities are often overlooked. Moreover, seldom is 
attention given to the interaction between veterans' benefits and those 
they receive from other Federal disability programs. These comments are 
not meant to be exhaustive of the many ways VA and other Federal 
disability programs relate to one another. Perhaps some of the 
information presented here may stir enough interest so that 
policymakers in future deliberations on disability policy might ask--
how will this affect veterans with disabilities?

             VETERANS WITH DISABILITIES AND SOCIAL SECURITY

    Veterans with significant disabilities are very often Social 
Security disability beneficiaries as well.
    According to the Social Security Administration's (SSA) latest 
Annual Statistical Supplement--in 2007, there were 434,000 Social 
Security beneficiaries who were service-connected disabled veterans 
rated 70-100% under age 65. Another 153,000 beneficiaries of Social 
Security were non-service-connected disabled veterans under age 65. 
There were also 1,540,000 service-connected disabled veterans under age 
65 whose disabilities were rated below 70%. These latter individuals 
likely have other non-service related conditions or disabilities that 
qualify them for Social Security disability benefits.
    Veterans with disabilities on Social Security can fall into one of 
several categories. They can be service-connected disabled veterans 
getting compensation and Social Security Disability Insurance (SSDI). 
They might be getting compensation and be eligible for SSDI but their 
earnings are too high to receive Social Security disability benefits. 
They might be veterans with catastrophic non-service-connected 
disabilities--like spinal cord injury--which will qualify them for SSDI 
as long as their earnings are limited. They can be low income veterans 
with non-service-connected disabilities who are eligible for 
supplemental security income--or SSI--under Social Security; or they 
might be veterans who had a modest earnings record and who may receive 
a small SSDI check supplemented by VA Pension. It's even possible that 
a veteran, if injured before age 22, could get Social Security 
Childhood Disability benefits based on his/her parents' earnings 
records--if the veteran's parents are retired, disabled or deceased.
    VA Compensation and Social Security Disability Insurance--There is 
no offset between SSDI and Compensation benefits--nor should there be. 
Compensation is earned through military service and SSDI is an earned 
benefit based on a person's work record and payment of FICA taxes. Once 
a veteran receives SSDI and compensation, few if any complications 
arise between those two benefit programs. However, the process by which 
veterans with significant disabilities obtain SSDI could be improved 
through better coordination between SSA and the Department of Veterans 
Affairs (VA).
    While the Department of Defense and VA have taken steps to smooth 
the processes between their disability systems, veterans with severe 
disabilities must still undergo a second disability determination to 
apply for SSDI. The Veterans Disability Benefits Commission has 
reported that only 54% of veterans rated 100% are receiving SSDI and 
has stated ``either these veterans do not know to apply for SSDI or are 
being denied the insurance.''
    Granted, some of those veterans may not be receiving SSDI because 
they are working above the earnings limit for that program. 
Nevertheless, PVA finds it mystifying that veterans with 100% 
disability ratings from the VA and the requisite quarters of coverage 
should have to go through another application process to receive SSDI. 
Some policymakers contend that the reason for the two disability 
determinations is related to the differing definitions of disability 
used by SSA versus the VA. The Social Security Administration's Wounded 
Warrior Program has been making efforts to reach out to newly-injured 
servicemembers to inform them of and expedite applications for their 
SSDI benefits. However, this SSA initiative applies only to 
servicemembers injured after October 1, 2001 and resources often limit 
the extent to which SSA can make its presence known in the VA system. 
Legislation has been introduced in Congress to allow automatic 
qualification for SSDI to 100% service-connected disabled veterans. 
While there may be details that still require attention, PVA supports 
this move and hopes Congress can find a way to advance this policy.
    VA Pension, Supplemental Security Income and other low income 
support programs--Typically, a low income veteran with a significant 
non-service-connected disability--and without an adequate work record 
to qualify for SSDI--may qualify for Supplemental Security Income or 
SSI. As an income-tested program, SSI carries with it limits on other 
income and assets or resources--but these are generally less generous 
than the VA pension program. As a result, it benefits a veteran in 
these circumstances to be on pension. Veterans' spouses, who meet 
appropriate criteria, can also receive pension payments from the VA.
    Some veterans may have had low paying jobs or not had an extensive 
earnings history but receive a small SSDI benefit based on that work 
record. These DI benefits will offset any VA pension payments up to the 
allowed pension level. This dual eligibility can have ramifications for 
the veteran if he or she attempts work, as described in the next 
section.
    Among the most complicated public policy interactions are those 
involving VA pension and other Federal income assistance programs. As a 
means-tested program, VA pensions count all income to reduce--or even 
eliminate--the pension payment. However, the VA does not count as 
income for pension purposes SSI, welfare, food stamps, Medicaid and 
housing aid. On the other hand, SSI, welfare, and other Federal 
disability programs do count VA pension as income. As a result, a 
veteran can get in trouble with those programs if the VA pension is not 
reported accurately. The VA Aid and Attendance payments that accompany 
some pension benefits as well as homebound benefits are not counted as 
income by Social Security. Unfortunately, sometimes these benefits are 
questioned as income by Social Security offices causing major headaches 
for the veteran on pension.
    Although Federal policies sometimes make it difficult for veterans 
with disabilities to navigate the programs to which they are entitled, 
there have been occasions where Congress did account for veterans' 
circumstances in larger programmatic changes. The Medicare 
Modernization Act was one of those few times that policymakers 
remembered veterans in crafting a piece of non-VA related legislation. 
Medicare--as you know--is a benefit available to those on Social 
Security. Individuals on SSDI get Medicare after a two year waiting 
period. When Medicare Modernization passed, the law declared that VA 
prescription drug coverage would be considered creditable coverage for 
those not signing up for the Part D benefit right away. Thus coverage 
under the VA immunizes a veteran from the late sign up penalty for Part 
D.

           VETERANS WITH DISABILITIES AND EMPLOYMENT PROGRAMS

    Typically, discussions about veterans' employment center on 
veteran-specific programs operated by the VA, Small Business 
Administration or Department of Labor. Understandably, this is due to 
the fact that most veterans, even those with modest service-connected 
disabilities, are eligible for the VA's Vocational Rehabilitation and 
Employment (VR&E) Program. For veterans with non-service-connected 
disabilities, the DOL offers programs and services through its Veterans 
Employment and Training Administration and SBA hosts a number of 
programs tailored to veteran small business owners and service-disabled 
veteran small business owners. PVA, through The Independent Budget, has 
offered numerous recommendations for improvements to the VR&E and other 
VA employment programs that need not be repeated in this testimony.
    State vocational rehabilitation programs--Veterans with significant 
disabilities are also eligible for and often seek services from state 
vocational rehabilitation (VR) agencies. Many state VR agencies have 
memoranda of understanding with their state department of veterans' 
affairs to coordinate services to veterans with disabilities. Some 
state agencies have identified counselors with military backgrounds to 
serve as liaisons with the VA and veterans' groups.
    There are significantly more state VR counselors than there are 
VR&E counselors around the Nation. These numbers of vocational experts 
can amplify the assistance available to veterans with disabilities if 
appropriate outreach and partnerships are established and training 
provided to improve cross-agency coordination.
    For some veterans with service-connected disabilities, establishing 
eligibility for state VR services may prove challenging. While most 
veterans with ratings at 40 percent and below are unlikely to qualify 
for state VR services, those with ratings between 50 percent and 70 
percent might qualify depending on a state's admission criteria and the 
ability of VR professionals to assess appropriately a veteran's 
functional capacity.\1\ Participants at a May 2008 Department of 
Education symposium on VR and returning veterans suggested that, 
because of differing eligibility criteria among state VR systems, the 
potential exists for veterans in some states to be bounced between 
state VR & VR&E. One way to address this concern would be for the VA to 
work with the Rehabilitation Services Administration (RSA) to establish 
consistent criteria for state agencies' acceptance of veterans with 
service-connected disability ratings.
---------------------------------------------------------------------------
    \1\ Proceedings of the 34th Institute on Rehabilitation Issues, U. 
S. Department of Education Rehabilitation Services Administration, May 
5-6, 2008.
---------------------------------------------------------------------------
    Social Security Work Incentives and VA Pension ``Cash Cliff''--The 
Social Security Administration offers a variety of work incentives to 
enable SSDI and SSI disability beneficiaries to go to work. The Ticket 
to Work program provides beneficiaries with vouchers to buy vocational 
services of their own choosing and rewards vocational service providers 
for helping SSDI and SSI recipients reduce their reliance on benefits. 
PVA realized that many of the veterans being served by its vocational 
rehabilitation program were on SSDI. So, a little over a year ago, our 
program became an employment network under Ticket to Work in order to 
take advantage of the payments offered by SSA for successful 
beneficiary employment outcomes.
    Other Social Security policies enable those on SSI to gradually 
work themselves off of benefits by reducing the amount of their 
disability benefits as earned income rises. Although the VA pension is 
often likened to SSI, unlike that latter program, VA pensioners face a 
``cash cliff'' similar to that experienced by beneficiaries on SSDI in 
which benefits are terminated once an individual crosses an established 
earnings limit. Because of a modest work record, many of these veterans 
or their surviving spouses may receive a small SSDI benefit that 
supplements their VA pension. If these individuals attempt to use SSA's 
work incentives to increase their income, not only is their SSDI 
benefit terminated but their VA pension benefits are reduced dollar for 
dollar by their earnings.
    Over twenty years ago, under P. L. 98-543, Congress authorized the 
VA to undertake a four year pilot program of vocational training for 
veterans awarded VA pension. Modeled on SSA's trial work period, 
veterans in the pilot were allowed to retain eligibility for pension up 
to 12 months after obtaining employment. In addition, they remained 
eligible for VA health care up to three years after their pension 
terminated because of employment. Running from 1985 to 1989, this pilot 
program achieved some modest success. However, it was discontinued 
because, prior to VA eligibility reform, most catastrophically-disabled 
veterans were reluctant to risk their access to VA health care by 
working.
    The VA Office of Policy, Planning and Preparedness examined the VA 
pension program in 2002 and, though small in number, seven percent of 
unemployed veterans on pension and nine percent of veteran spouses on 
pension cited the dollar-for-dollar reduction in VA pension benefits as 
a disincentive to work.\2\ Now that veterans with catastrophic non-
service-connected disabilities retain access to VA health care, work 
incentives for the VA pension program should be re-examined and 
policies toward earnings should be changed to parallel those in the SSI 
program.
---------------------------------------------------------------------------
    \2\ Evaluation of VA Pension and Parents' DIC Programs--VA Pension 
Program Final Report, ORC Macro, Economic Systems, Inc., Hay Group, 
Dec. 22, 2004, www1.va.gov/op3/docs/pension.pdf
---------------------------------------------------------------------------
    Other Efforts to Improve Disability Work Incentives--Proposals to 
modify SSI income, asset and resource limits to encourage work and 
savings illustrate another way in which veterans with disabilities are 
left out of public disability policy discourse. Many policy strategies 
have been discussed over the years to raise resource limits under SSI 
so that beneficiaries would be encouraged to work and save enough to 
purchase a home, for retirement, or to open a business. Because low 
income veterans with disabilities are likely to be on VA pension--with 
its own asset/resource limitations--rather than SSI, they would not 
benefit from such proposals. If efforts are made in the future to 
remove work disincentives for low income people with disabilities, low 
income veterans with disabilities should be part of the conversation.

                 HOUSING AND VETERANS WITH DISABILITIES

    Obviously, accessible housing is vitally important to PVA members. 
Unlike other people with disabilities, our members are fortunate to 
have access to the VA's home modification grants that help overcome 
architectural barriers in housing. At the same time, they also benefit 
from the same fair housing laws that protect other Americans with 
disabilities and from the same provisions in the Rehabilitation Act 
that call for federally-assisted multi-family housing to serve people 
with disabilities. Like other people with disabilities, they are also 
adversely affected when the Federal Government fails to properly 
enforce existing housing accessibility laws and regulations.
    Low Income Housing Policy and Veterans with Disabilities--For low 
income veterans with disabilities, however, Federal housing policy is 
sometimes at odds with their status as veterans. A 2007 Government 
Accountability Office (GAO) report noted that, in 2005, some 2.3 
million veteran renter households were considered low income. Of those 
households, 39 percent had at least one veteran member with a 
disability. GAO reported that neither the VA nor other housing agencies 
were reporting on specific housing conditions and costs of veterans who 
rent.\3\
---------------------------------------------------------------------------
    \3\ Rental Housing--Information on Low-Income Veterans' Housing 
Conditions and Participation in HUD's Programs, GAO-07-1012, August 
2007
---------------------------------------------------------------------------
    Veterans who meet income and other eligibility criteria for HUD can 
receive housing assistance, if they meet HUD's criteria for elderly 
households or households with a member with a disability. In most 
respects, HUD's treatment of various veterans' benefits in determining 
household income and subsidy amounts is quite generous. Yet, even 
though a veteran must be determined permanently and totally disabled by 
the VA to qualify for VA pension, HUD will not accept documentation 
from the VA attesting to a veteran's permanent and total disability. 
Instead, veterans must obtain additional evidence of disability from a 
medical doctor before they can be qualified for housing assistance. HUD 
issued a notice on Dec. 13, 2004 indicating plans to reevaluate this 
issue but has never followed up on that notice.

              THE VA'S PLACE IN NATIONAL DISABILITY POLICY

    ``Quality of life'' has become the latest catch-phrase in 
disability policy circles throughout government, academia and private 
industry. In its annual communication to Congress this year, the 
National Council on Disability (NCD) said that its report ``focuses on 
the current quality of life of people with disabilities in America and 
the emerging trends that should be factored into both the design and 
evaluation of the Federal Government's disability policies and programs 
in the coming years.''\4\
---------------------------------------------------------------------------
    \4\ National Disability Policy: A Progress Report, National Council 
on Disability, March 31, 2009
---------------------------------------------------------------------------
    Describing future policy directions, NCD outlines several 
principles that should ``guide the review of existing government 
programs, as well as to serve as a road map for the design of new 
government programs.'' These principles offer one framework within 
which to evaluate VA disability policy and how it fits into the overall 
disability paradigm.
    Ensure that Federal Government programs and services for people 
with disabilities are consistent with the overarching goals of the 
ADA--promoting equality of opportunity, full participation, independent 
living, and economic self sufficiency. NCD criticizes policies that 
force individuals with disabilities to impoverish themselves, give up 
jobs and otherwise limit their freedom in order to obtain the basic 
necessities of life.
    As this Committee knows, veterans with service-connected 
disabilities receive a wide array of services and supports from the 
Department of Veterans Affairs. Veterans with the most significant 
disabilities receive disability compensation, highest priority 
admission to the VA health care system, the VA prescription drug 
program, durable medical equipment and prosthetics; home modification 
grants, VA vocational rehabilitation and employment services; vehicle 
modifications; and aid and attendance benefits.
    Veterans with non-service-connected disabilities deemed 
``catastrophic'' get high priority access to the VA health system; 
smaller home modification grants; certain automobile modifications; and 
aid and attendance benefits.
    All of these benefits are provided regardless of income.
    Compare these benefits to those available to non-veteran people 
with disabilities on SSDI or SSI. For those on SSDI, Medicare is 
available--after a lengthy waiting period during which their health may 
have deteriorated. Durable medical benefits under Medicare that would 
otherwise allow a person with a disability to live independently are 
covered only if limited to a person's home. Personal attendant services 
are available only to those on Medicaid and only if a state offers 
those benefits under its state plan. Otherwise, a person with a 
significant disability is consigned to a nursing home in order to 
receive attendant care. And to receive services under Medicaid, a 
person must be poor and have few if any assets or resources. Some 
states have enabled working people with disabilities to buy into their 
Medicaid program but they have to live in the right state to access 
this opportunity. And as for home and vehicle modifications and other 
long term services and supports that would enable people with 
disabilities to live independently, fully participate in society and 
seek economic self-sufficiency--these are sometimes--but not always--
available through inadequately funded public programs.
    What separates veterans with disabilities who receive Social 
Security benefits from their non-veteran counterparts is their access 
to the VA health care system and its ancillary supports and services--
regardless of their income. Veterans with even modest service-connected 
disabilities gain access to VA medical centers, outpatient clinics, 
home health care services, durable medical equipment and pharmaceutical 
benefits. Veterans with non-service-connected ``catastrophic'' 
disabilities are also eligible for VA health care. However stressed and 
under-funded the Veterans Healthcare Administration may be, it is 
available to most veterans with disabilities no matter how low or high 
their income.
    A December 2007 article in the American Journal of Public Health 
examined numbers of uninsured veterans from 1987 to 2004. In 
recommending expansion of VA eligibility to address this problem, the 
authors note that the VA health system ``appears to offer more 
equitable care of equivalent or higher quality compared with that of 
private sector alternatives.''\5\ The article goes on to state that the 
VA ``accounts for much of the advantage in insurance coverage that 
veterans enjoy compared with non-veterans.''\6\
---------------------------------------------------------------------------
    \5\ Lack of Health Coverage Among US Veterans from 1987 to 2004, 
December 2007, Vol. 97, No. 12, American Journal of Public Health, 
Himmelstein et al, p. 4
    \6\ Ibid
---------------------------------------------------------------------------
    As PVA has stated in past testimony, disability compensation is 
intended to do more than offset the economic loss created by a 
veteran's inability to obtain gainful employment. It also takes into 
consideration a lifetime of living with a disability and the every day 
challenges associated with that disability. It reflects the fact that 
even if a veteran holds a job, when he or she goes home at the end of 
the day, that veteran does not leave the disability at the office.
    In many respects, VA compensation and its ancillary benefits--and 
even the benefits for veterans with non-service-connected catastrophic 
disabilities--reflect many of the standards embodied in the first 
principle outlined by NCD.
    Protect the cost benefits of government programs or policies for 
people with disabilities based on long term human costs and benefits. 
Here, NCD cautions against policy decisions based mainly on costs and 
which fail to take into account the overall costs to society or to 
other programs when cost shifting occurs.
    As outlined in this testimony, elements of the VA pension program 
are obviously grounded in cost control rather than the long term well 
being of low income veterans with disabilities. A case in point is the 
cash cliff imposed on recipients of VA pension unlike their 
counterparts in SSI and which limits their ability to reenter the 
workforce.
    Another perverse aspect of public policy related to this principle 
involves VA benefits and their interaction with civilian disability 
systems. Some veterans are married to spouses whose only access to 
health care coverage comes through Medicaid. At last year's training 
conference for PVA's service officers, a senior benefits advisor 
related how some married veterans eligible for compensation and pension 
elect to receive only pension. Even though their benefits are 
consequently lower, they decline the service-connected benefits to 
which they are entitled because compensation would knock their spouses 
off SSI and cost them their Medicaid. As NCD states in its report, 
policies such as this force ``otherwise self-sufficient people to 
resort to public safety nets.''
    Build program bridges. NCD notes that there are gaps between many 
Federal programs ``where there should be bridges'' and challenges 
government agencies to ``work together to create seamless transitions 
into and out of their programs, for example, by establishing 
presumptive eligibility, transferring application records and 
eliminating arbitrary waiting periods.''
    According to this standard, veterans who clearly meet SSA's 
criteria for disability should not have to undergo a second disability 
determination after receiving their 100% rating from the VA. In 
addition, veterans who are deemed permanently and totally disabled by 
the VA should not be required by HUD to obtain a separate doctor's note 
attesting to their disability.
    The foregoing positive description of VA benefits is not meant to 
dismiss the variety of changes PVA believes are needed to improve the 
VA system. It is merely to suggest that policymakers may want to look 
to the VA system as a model that, at least, breaks the chain between 
health care and poverty for people with disabilities.
    The VA disability system recognizes that there are factors beyond 
someone's earnings capacity that call for ongoing supports and services 
in order to maintain a decent quality of life. Rather than trying to 
diminish the VA compensation program, it should be held up as a gold 
standard for improving the inadequacies of other Federal disability 
systems.

    Thank you again for this opportunity to testify. I would be happy 
to answer any questions you may have.

    Chairman Akaka. Thank you very much, Ms. Prokop.
    Colonel Wilson?

 STATEMENT OF LIEUTENANT COLONEL JOHN L. WILSON, USAF (RET.), 
  ASSOCIATE NATIONAL LEGISLATIVE DIRECTOR, DISABLED AMERICAN 
                            VETERANS

    Colonel Wilson. Thank you, sir. Mr. Chairman, Ranking 
Member Burr, and Members of the Committee, I am pleased to have 
this opportunity to appear before this Committee this morning 
on behalf of Disabled American Veterans to address the report 
by the Advisory Committee on Disability Compensation.
    The Advisory Committee focused on three general parts. Part 
one, the necessity and methodology of updating the Veterans 
Administration Schedule of Rating Disabilities, or VASRD. Part 
two, physician compensation adequacy and sequencing for 
servicemembers moving to veteran status. And finally, part 
three, quality-of-life compensation.
    In reference to part one, we agree with the importance of a 
systematic review and update of the VASRD as it is the source 
of all disability compensation ratings. It has a ratings scheme 
that addresses illnesses and conditions that run into the 
hundreds and should reflect the most recent medical findings in 
each and every case.
    DAV agrees with the Advisory Committee's assessment that a 
systematic process is lacking and one is a necessity. We also 
agree with the Committee's recommendations that, one, the 
Deputy Secretary of the VA provide oversight of the VASRD 
process with the VHA and Office of General Counsel fully 
integrated into this VBA process.
    Two, immediately increase staff at the VBA to nine full-
time employees, per the committee's specifications.
    And three, VHA must be allowed to establish a permanent 
administrative staff for this VASRD review. At least one 
permanent party medical expert must be on this team and have 
authority to liaise with VBA, assign VHA medical staff to 
participate in VBA body system reviews and to coordinate with 
medical experts. The experiential expertise that VHA 
professionals will bring to the discussion should prove 
invaluable and well worth the additional staffing.
    We also agree with the Committee's body systems 
prioritization, beginning with mental health disorders. It is 
essential that different criteria be formulated to evaluate the 
various mental disorders under appropriate psychiatric 
disorders. Criteria for evaluating mental disorders under Title 
38, Code of Federal Regulations, Section 4.130 are very 
ambiguous. One veteran service-connected for schizophrenia and 
another veteran service-connected for another psychiatric 
condition, such as an eating disorder, should not be evaluated 
using the same general formula.
    Moving to part two, transition compensation adequacy and 
sequencing for servicemembers moving to veteran status. DAV 
supports legislation that offers limited dual entitlement to 
vocational rehabilitation and employment under Chapter 31 and 
the Post-
9/11 Education Assistance Program under Chapter 33 to ensure 
disabled veterans are not forced to choose the lesser of two 
benefits. Such a disparity will ultimately force service-
connected disabled veterans with employment handicaps to either 
utilize less financially supportive programs than their non-
disabled counterparts; or even more tragically, opt out of 
vocational rehabilitation for the more financially beneficial 
Post-9/11 G.I. Bill.
    An area where Congress could act now without having to wait 
on the next study is by providing increased funding for the 
Transition Assistance Program and Disabled Transition 
Assistance Program, TAP and DTAP, respectively. TAP and DTAP 
were created with the goal of furnishing separating 
servicemembers with vocational guidance to aid in obtaining 
meaningful civilian careers. Their continuation is essential to 
easing some of the problems associated with transition. 
Unfortunately, the level of funding and staffing is inadequate 
to support the routine discharges of all the services in a 
given year.
    Congress could enact legislation to eliminate employment 
barriers impeding the transfer of military job skills to the 
civilian labor market by requiring the DOD to take appropriate 
steps to ensure that servicemembers be trained, tested, 
evaluated, and issued any licensure or certification that may 
be required in the civilian workforce.
    Last, part three addressed quality-of-life compensation. 
Although close family members are often willing to bear the 
burden of being primary caregivers for severely disabled 
veterans, thus relieving VA of that obligation or the cost of 
institutionalization, they seldom receive sufficient support 
services or financial assistance from the government. The DAV 
believes these informal caregivers should receive a 
comprehensive array of support services, to include respite 
care, financial compensation, vocational counseling, basic 
health care, relationship, marriage, and family counseling, and 
mental health care to address multiple burdens they face.
    A caregiver tool kit should be provided to family 
caregivers to include a concise recovery road map to assist 
families in understanding and maneuvering through the complex 
systems of care and Federal, State, and local resources 
available to them. Policy and planning to better service such 
caregivers could include statistically representative data from 
a periodic national survey and individual assessments of family 
caregivers of severely injured and disabled veterans to address 
their quality-of-life concerns.
    There are other action items that are listed in the 
Advisory Committee's work. We look forward to working with the 
VA and Members of Congress on them.
    It has been a pleasure to appear before this honorable 
Committee today, sir.
    [The prepared statement of Colonel Wilson follows:]

 Prepared Statement of John L. Wilson, Assistant National Legislative 
                  Director, Disabled American Veterans

    Mr. Chairman, Ranking Member and Members of the Committee. I am 
pleased to have this opportunity to appear before you on behalf of the 
Disabled American Veterans (DAV), to address the report to the 
Secretary of the Department of Veterans Affairs (VA) by the Advisory 
Committee on Disability Compensation.
    The Advisory Committee focused on the necessity and methodology of 
updating the VA's Schedule of Rating Disabilities or VASRD; transition 
compensation adequacy and sequencing for servicemembers moving to 
veterans' status; and quality of life compensation.
    The importance of a systematic review and update of the VASRD, in 
our view, is a priority, as it is the source of all disability 
compensation ratings. It is a rating scheme that addresses illnesses 
and conditions that run into the hundreds, and as such, should reflect 
the most recent medical findings in each and every case. DAV agrees 
with the Advisory Committees' assessment that a systematic process is 
lacking and that one is a necessity. The Committee offered the 
following recommendations, with all of which we agree:

    (1) The Deputy Secretary of the VA should be tasked with providing 
oversight of the VASRD process, and of ensuring that the Veterans 
Health Administration (VHA) and Office of the General Counsel (OGC) are 
fully integrated in the Veterans Benefits Administration's (VBA's) 
process;
    (2) Immediately increase staff at the VBA to 9 full-time employees 
(FTE) for the purpose of continuously reviewing and updating the VASRD. 
The staff should include a coordinating administrative person and two 
sub-teams comprised of one medical expert, two legal specialists, and 
one administrative support staff each. This staff should be assigned to 
the Compensation and Pension Service (C&P) for administrative purposes; 
and
    (3) As part of its new role as full partner in the VASRD review 
process, VHA must establish a permanent administrative staff to 
participate in VASRD review. The VHA administrative staff should 
include at least one permanent party medical expert. This staff member 
should have the authority to liaise with VBA, assign medical staff from 
VHA to participate in VBA body system reviews, and to coordinate with 
other medical experts as appropriate.

    Staffing within the VHA and VBA must be allocated toward this task. 
It is a positive step to include the medical expertise from the VHA 
into this process. Although previous sources of expertise such as the 
Institute of Medicine contributed to this body of work, the 
experiential expertise that VHA professionals will bring to the 
discussion, with a decades-long role in providing medical care to 
veterans, should prove invaluable to this endeavor and well worth the 
additional staffing.
    The various stakeholders must also have a voice in this process. 
Such a collaborative effort by all parties helps to dispel any 
misperceptions and missteps.
    Additionally, VA's leadership must ensure oversight and successful 
implementation of this important recommendation. It was anticipated 
that VA's commitment to the systematic updating of the VASRD would have 
carried forward and been reflected in its strategic plan. Is not the 
VASRD the key source of all disability ratings? However, a search of 
VA's fiscal year (FY) 2006-2011 Strategic Plan finds no mention of the 
VASRD. The need for an update of the VASRD is instead referenced in the 
FY 2008 Performance and Accountability Report, as a result of a U.S. 
Government Accountability Office (GAO) update to its High-Risk Series 
(GAO-07-310), GAO High-Risk Area #1: Modernizing Federal Disability 
Program.\1\ The VA would be well served to add the very language of 
this section of the Advisory Committee's report to its Strategic Plan 
as its map for the systematic updating of the VASRD.
---------------------------------------------------------------------------
    \1\ High-Risk Series (GAO-07-310), GAO High-Risk Area #1: 
Modernizing Federal Disability Program, pages 307 and 309.
---------------------------------------------------------------------------
    As noted earlier, while we agree that a rewrite of sections of the 
VASRD is appropriate, DAV would oppose an approach that required a 
complete revamping of the 1945 Rating Schedule. Generally, the VASRD 
has served America's disabled veterans quite adequately. It 
incorporates a policy of ``average impairment,'' and that policy has 
treated all veterans with like disabilities equally and fairly, in 
spite of age, education or work experience. It also encourages disabled 
veterans to seek vocational rehabilitation training in order to become 
a more productive wage earner without penalty for doing so. 
Understandably, the VASRD has been modified and upgraded many times 
when advances in medical science dictates a change in a particular 
disability rating might be necessary, or additions to the Schedule have 
been incorporated to cover injuries, infirmities and illnesses unique 
to some theatre of operations.\2\ We agree with the Advisory Committee 
that the VASRD be updated in a systematic fashion, based on sound 
medical principles, provided there are no wholesale changes and, when 
change is necessary, it is based on the above principles.
---------------------------------------------------------------------------
    \2\ DAV Legislative Program 2010, DAV Resolution No. 098, Oppose A 
Complete Revamping of the 1945 Rating Schedule.
---------------------------------------------------------------------------
    We also agree with the body system prioritization the Committee 
offers, beginning with mental health disorders. It is essential that 
different criteria be formulated to evaluate the various mental 
disorders under the appropriate psychiatric disorder.\3\ Criteria for 
evaluating mental disorder under title 38, Code of Federal Regulations, 
Section 4.130, are very ambiguous. For example, schizophrenia and other 
psychotic disorders, delirium, dementia, and amnestic and other 
cognitive disorders, anxiety disorders, dissociative disorders, 
somatoform disorders, mood disorders, and chronic adjustment disorders, 
are all evaluated using the same general rating formula for mental 
disorders. The Diagnostic and Statistical Manual for Mental Disorders 
(DSM IV) specifically lists different symptoms for Post Traumatic 
Stress Disorder, schizophrenia, and other psychiatric disorders. One 
veteran service-connected for schizophrenia and another veteran 
service-connected for another psychiatric disorder should not be 
evaluated using the same general formula. Therefore, the DAV supports 
amendment of title 38, Code of Federal Regulations, section 4.130, to 
formulate different criteria to evaluate the various mental disorders 
under the appropriate psychiatric disorder and is pleased to see the 
Advisory Committee place mental disorders as the first to be considered 
in this systematic review.
---------------------------------------------------------------------------
    \3\ DAV Legislative Program 2010, DAV Resolution No. 135, Support 
Amendment of Title 38, Code of Federal Regulations, Section 4.130, 
Schedule of Ratings, to Formulate Different Criteria to Evaluate the 
Various Mental Disorders Under the Appropriate Psychiatric Disorders.
---------------------------------------------------------------------------
    The next area the Advisory Committee addressed was Quality of Life 
(QOL). While the VASRD focuses its ratings and subsequent compensation 
as a result of loss of income when compared to civilian contemporaries, 
QOL is a separate but related category. The Advisory Committee's 
recommended definition of ``An overall sense of well-being based on 
physical and psychological health, social relationships, and economic 
factors,'' is acceptable. Given an acceptable definition, the next 
question is should a loss of QOL be compensated? We believe the answer 
is yes. A veteran's quality of life generally decreases as the severity 
of their disabilities increases. The Advisory Committee reasons that 
the VA's providing additional monetary assistance through Special 
Monthly Compensation (SMC) is, at a minimum, an inferred QOL 
compensation program.
    SMC is a rate paid in addition to disability compensation (i.e., 
SMC (K)). And this compensation can be viewed as an inferred payment 
for a decrease in quality of life. To qualify, a veteran must be 
disabled beyond a combined degree percentage or due to special 
circumstances such as the loss or loss of use of specific organs or 
extremities. SMCs are referred to by the letters (K) through (R.2). 
These alphabetic designations follow the paragraph numbering system in 
title 38, United States Code Sec. 1114.
    While following the Advisory Committee's recommendation to change 
the reference from ``Quality of Life'' to ``non-economic loss,'' 
clarifying the definition may prove helpful, DAV agrees that additional 
benefits/compensation should be provided to veterans. Eligibility 
criteria for non-economic loss should be clear, precise, and objective 
in order to reduce uncertainty about the benefit's purpose, 
inconsistent application of eligibility criteria and perceptions of 
unfairness. We look forward to working with VA and Congress to create 
legislation and a framework for controlled growth of this program.
    The Advisory Committee has also recommended the use of 
International Classification of Diseases (ICD) codes being added to the 
VASRD where there is a direct correlation between an ICD code and a 
VASRD diagnostic code. The DAV has no resolution on this issue.
    The next area for future study has to do with reporting on the 
inadequacies of the Vocational Rehabilitation and Employment Program. 
According to a January 2009 GAO report, the ``program [has] not 
fulfilled its primary purpose, which is to ensure that veterans obtain 
suitable employment.''
    The GAO Report summary noted:

          ``In 2004, the Veterans Affairs' Vocational Rehabilitation 
        and Employment (VR&E) program was reviewed by a VR&E Task 
        Force. It recommended numerous changes, in particular focusing 
        on employment through a new Five-Track service delivery model 
        and increasing program capacity. Since then, VR&E has worked to 
        implement these recommendations. To help Congress understand 
        whether VR&E is now better prepared to meet the needs of 
        veterans with disabilities, GAO was asked to determine (1) how 
        the implementation of the Five-Track Employment Process has 
        affected VR&E's focus on employment, (2) the extent to which 
        VR&E has taken steps to improve its capacity, and (3) how 
        program outcomes are reported. GAO interviewed officials from 
        VR&E, the 2004 Task Force, and veteran organizations; visited 
        four VR&E offices; surveyed all VR&E officers; and analyzed 
        agency data and reports.''
          ``By launching the Five-Track Employment Process, VR&E has 
        strengthened its focus on employment, but program incentives 
        have not been updated to reflect this emphasis. VR&E has 
        delineated its services into five tracks to accommodate the 
        different needs of veterans, such as those who need immediate 
        employment as opposed to those who need training to meet their 
        career goal. However, program incentives remain directed toward 
        education and training. Veterans who receive those services 
        collect an allowance, but those who opt exclusively for 
        employment services do not. While VR&E officials said they 
        believed it would be helpful to better align incentives with 
        the employment mission, they have not yet taken steps to 
        address this issue. VR&E has improved its capacity to provide 
        services by increasing its collaboration with other 
        organizations and by hiring more staff, but it lacks a 
        strategic approach to workforce planning. Although there have 
        been staff increases, many of VR&E's regional offices still 
        reported staff and skill shortages. The program is not 
        addressing these workforce problems with strategic planning 
        practices that GAO's prior work has identified as essential. 
        For example, VR&E officials have not fully determined the 
        correct number of staff and the skills they need to serve 
        current and future veterans. VA does not adequately report 
        program outcomes, which could limit understanding of the 
        program's performance. Specifically, it reports one overall 
        rehabilitation rate for veterans pursuing employment and those 
        trying to live independently. Computing each group's success 
        rate for fiscal year 2008, GAO found a lower rate of success 
        for the majority seeking employment and a higher rate of 
        success for the minority seeking independent living than the 
        overall rate. GAO also found that VR&E changed the way it 
        calculates the rehabilitation rate in fiscal year 2006, without 
        acknowledgments in key agency reports. VA noted the change in 
        its fiscal year 2006 performance report, but did not do so for 
        its fiscal year 2007 and 2008 reports, or for its fiscal year 
        2008 and 2009 budget submissions. Such omissions could lead to 
        misinterpretation of program performance over time.'' \4\
---------------------------------------------------------------------------
    \4\ VA Vocational Rehabilitation and Employment: Better Incentives, 
Workforce Planning, and Performance Reporting Could Improve Program, 
GAO-09-34 January 26, 2009.

    While VA has contracted a study with Economic Systems, Inc. to 
review the VRE program and plans to complete a study workforce planning 
study in FY 2010, DAV and others have commented previously that the 
VR&E subsistence allowance is insufficient, which causes veterans to 
avoid entering the program or exiting it prematurely.
    DAV supports legislation that offers limited dual entitlement to 
vocational rehabilitation and employment chapter 31, and the post-9/11 
education assistance program under chapter 33 in order to ensure that 
disabled veterans are not forced to choose the lesser of two 
benefits.\5\ Our nation established veterans' programs to repay or 
reward veterans for their extraordinary service and sacrifices on 
behalf of their fellow citizens, especially those veterans disabled as 
a result of military service. These programs include the VR&E program 
for service-connected disabled veterans with employment handicaps as 
well as the post-9/11 GI Bill under title 38, United States Code, 
chapter 33 (GI Bill). The GI Bill currently provides a more financially 
lucrative subsistence allowance than does the current VR&E Chapter 31 
program. Such a disparity will ultimately force service-connected 
disabled veterans with employment handicaps to either utilize a program 
less financially supportive to them and their families than their non-
disabled counterparts, or opt out of vocational rehabilitation for the 
more financially beneficial post-9/11 GI Bill.
---------------------------------------------------------------------------
    \5\ DAV Legislative Program 2010, DAV Resolution No. 002, Support 
For Limited Dual Entitlement To Vocational Rehabilitation And 
Employment Chapter 31, And The Post-9/11 Education Assistance Program 
Under Chapter 33 In Order To Ensure That Disabled Veterans Are Not 
Forced To Choose The Lesser Of Two Benefits.
---------------------------------------------------------------------------
    Subsistence allowances must be comparable, regardless of program, 
to ensure maximum participation and maximum benefit, whether it is 
assisting veterans in finding employment, participation in vocational 
rehabilitation or other services. The basis of that decision must never 
be based on its financial incentives when compared to various VA 
programs.
    The issue of the transition from active duty status to veteran 
status is also a subject of future study and we look forward to 
participating in these discussions as well. DAV notes that there are 
existing programs that prove invaluable during this transition period, 
but are in need of additional funding. An area where Congress could act 
now is by providing increased funding for the Transition Assistance 
Program (TAP) and the Disabled Transition Assistance Program (DTAP).\6\ 
The transition from military service to civilian life is very difficult 
for most veterans, who must overcome many obstacles to successful 
employment. TAP and DTAP were created with the goal of furnishing 
separating servicemembers with vocational guidance to aid them in 
obtaining meaningful civilian careers and their continuation is 
essential to easing some of the problems associated with transition. 
Unfortunately, the level of funding and staffing is inadequate to 
support the routine discharges per year from all branches of the Armed 
Forces.
---------------------------------------------------------------------------
    \6\ DAV Legislative Program 2010, DAV Resolution No. 258, Provide 
Increased Funding for the Transition Assistance Program and the 
Disabled Transition Assistance Program
---------------------------------------------------------------------------
    Additionally, Congress could enact legislation supporting licensure 
and certification of active duty personnel.\7\ The Department of 
Defense (DOD) provides some of the best vocational training in the 
Nation for its military personnel. DOD establishes, measures, and 
evaluates performance standards for every occupation within the Armed 
Forces. There are many occupational career fields in the Armed Forces 
that can easily translate to a civilian occupation but there are many 
occupations in the civilian workforce that require a license or 
certification. The Armed Forces occupational standards meet or exceed 
the civilian license or certification criteria yet many former military 
personnel, certified as proficient in their military occupational 
career, are not licensed or certified to perform a comparable job in 
the civilian workforce. This situation creates an artificial barrier to 
employment upon separation from military service. A study by the 
Congressional Commission on Servicemembers' and Veterans' Transition 
Assistance identified several military professions in which civilian 
credentialing is required for employment in the private sector. 
Congress could enact legislation to eliminate employment barriers that 
impede the transfer of military job skills to the civilian labor market 
by requiring the DOD to take appropriate steps to ensure that 
servicemembers be trained, tested, evaluated, and issued any licensure 
or certification that may be required in the civilian workforce. 
Simultaneously, Congress could amend legislation and make GI Bill 
eligibility available to pay for all necessary civilian license and 
certification examination requirements, including necessary preparatory 
courses to increase the civilian labor market's acceptance of the 
occupational training provided by the military.
---------------------------------------------------------------------------
    \7\ DAV Legislative Program 2010, DAV Resolution No. 046, Support 
Licensure And Certification Of Active Duty Service Personnel
---------------------------------------------------------------------------
    Another area for Congressional action could come with modification 
of the Omnibus Budget Reconciliation Act of 1982 (Public Law 97-253, 
now title 38, United States Code 511), which currently prohibits 
disability compensation payments until the first day of the second 
month after the VA grants a disability rating. A rewrite would allow 
the newest veterans to receive disability compensation at the end of 
the first month after discharge.
    In reference to family care-giver support, the Advisory Committee 
noted the Veterans Disability Benefits Commission (VDBC) cited gaps in 
services when servicemembers leave active duty and transfer to VA under 
title 38, United States Code. The VDBC recommended that Congress should 
authorize and fund VA to establish and provide support services for the 
families of severely injured veterans similar to those provided by DOD. 
In a separate but related issue, under the issue heading Services as a 
Disability Benefit, it noted that VA could directly provide respite 
services for family members of severely disabled veterans who provide 
daily aid and attendance and indirectly provide services such as seed 
or grant money to encourage individuals, groups, and/or non-profit 
organizations to develop and implement programs for veterans and their 
families. Additionally, VA could establish a clearinghouse for 
identification, referral, and support of existing and newly emerging 
programs.
    DAV supports legislation to create a comprehensive program through 
which family members of severely wounded veterans can receive VA 
training, certification, counseling, respite, a family allowance and 
health coverage under CHAMP VA. The Advisory Committee is focusing on 
two aspects of disability compensation as it pertains to family care-
giving. These are the impact on families when the servicemember 
transfers from DOD to VA, and the long-term roles and needs of family 
caregivers.
    DAV has testified before the House Veterans' Affairs Subcommittee 
on Health on June 4, 2009 \8\ and on February 28, 2008 \9\ regarding 
the issue of family caregivers. Informal caregivers play a critical 
role in facilitating recovery and maintaining the veteran's 
independence and quality of life while residing in their community, and 
are an important component in the delivery of health care by the VA. 
These family members, relatives, or friends are motivated by empathy 
and love, but the very touchstones that have defined their lives--
careers, love relationships, friendships, and their own personal goals 
and dreams--have been sacrificed, and they face a daunting lifelong 
duty as caregivers. Research has found that all too often the role of 
informal caregiver exacts a tremendous toll on that caregiver's health 
and well-being.
---------------------------------------------------------------------------
    \8\ Meeting the Needs of Caregivers, Statement of Adrian Atizado, 
Assistant National Legislative Director of the Disabled American 
Veterans before the Subcommittee on Health Committee on Veterans' 
Affairs, U.S. House Of Representatives June 4, 2009
    \9\ Providing care, support and mental health programs for 
caregivers of seriously disabled veterans, Statement of Joy J. Ilem, 
Assistant National Legislative Director of the Disabled American 
Veterans before the Subcommittee on Health Committee on Veterans' 
Affairs, U.S. House Of Representatives, February 28, 2008
---------------------------------------------------------------------------
    Family caregiving has been associated with increased levels of 
isolation, depression and anxiety, higher use of prescription 
medications, compromised immune function, poorer self-reported physical 
health, and increased mortality. Research also suggests that caregiver 
support services can help to reduce adverse health outcomes arising 
from caregiving responsibilities and can improve overall health status.
    Despite these documented physical and psychological hardships and 
knowledge of effective interventions against caregiver burden, family 
caregivers of disabled veterans receive little support from VA, 
compromising their ability to provide care to their loved one. 
Accordingly, the delegates to our most recent National Convention, held 
in Denver, Colorado, August 22-25, 2009, approved a resolution calling 
for legislation that would provide comprehensive supportive services, 
including but not limited to financial support, health and homemaker 
services, respite, education and training and other necessary relief, 
to immediate family member caregivers of veterans severely injured, 
wounded or ill from military service.\10\
---------------------------------------------------------------------------
    \10\ DAV Legislative Program 2010, Resolution No. 242, Support 
Legislation to Provide Comprehensive Support Services for Caregivers of 
Severely Wounded, Injured and Ill Veterans
---------------------------------------------------------------------------
    The last area to be addressed has to do with the relationship 
between level of Individual Unemployability (IU) and VR&E. Modern 
concepts of disability largely preclude the concept of ``unemployable'' 
except in the case of the most catastrophically disabled. For that 
reason, the Committee is considering whether a finding of IU should 
occur only after or in conjunction with some level of the VR&E 
services. DAV's position is that determinations of IU are the province 
of medical professionals familiar with their patients' history. VR&E 
personnel, although skilled in their areas of expertise, do not have 
the medical perspective essential to the proper determination as to 
whether a veteran should be diagnosed as unemployable.

                               CONCLUSION

    DAV looks forward to a continuing dialog on the issues of the 
necessity and methodology of updating the VASRD, transition 
compensation adequacy and sequencing for servicemembers moving to 
veteran status and QOL compensation that were the focus of the Advisory 
Committee. As we move forward it is a necessity that a transparent 
process be set in place to address each of these sensitive issues. We 
should not have to offer reminders this late in the game about the 
important perspective that veterans service organizations bring to 
discussions on topics such as these. Talking openly and discussing 
potential changes will help resolve the understandable angst about 
these complex and important questions. The time to act is now--our 
Nation's veterans deserve no less than our best effort.

    Thank you, Mr. Chairman and Members of the Committee for allowing 
DAV to share our views on this critical topic.

    Chairman Akaka. Thank you very much, Colonel.
    You heard General Scott state that the Advisory Committee 
is now of the opinion that quality-of-life loss should be 
limited to those with serious disabilities. I am posing this to 
all of our witnesses on this panel. Quality-of-life loss should 
be limited to those with serious disabilities. Do you agree? 
Let me ask Ms. Neas to begin.
    Ms. Neas. You won't be surprised that I don't agree. I 
think we have seen with these last conflicts that people with 
Traumatic Brain Injury and PTSD have had very challenging times 
returning to the workforce. In our own work at Easter Seals, we 
are working with employers to help them understand what it 
means to have these conditions and how it affects the veteran's 
work. Someone who may have lost several limbs might be 
considered as having a much more significant disability than 
one who had a brain injury.
    I also think that from our experience in working with 
returning veterans--those that didn't have a formal diagnosis 
of brain injury, because so many of these individuals have been 
exposed to explosions that have affected their brains, for lack 
of a more likely term--that we are going to see more people 
needing help down the line who may not have had a formal 
diagnosis of a brain injury but who, in fact, have had a brain 
injury.
    So, I think limiting these to people who have what is only 
considered at a moment in time a serious disability would be 
very inappropriate.
    Chairman Akaka. Thank you.
    Ms. Prokop?
    Ms. Prokop. I think--well, I would echo Ms. Neas's comments 
and note that the exchange that occurred earlier about asking 
the veterans themselves for a perspective of what their 
consideration of quality-of-life is is probably a key 
ingredient in ascertaining that. I got the impression that that 
sort of came late in the process in this study in terms of 
actually--and echoing the ``Nothing about us without us'' 
philosophy of the broader disability movement, that you would 
really need to talk to or gain a sense from a wide variety of 
veterans with disabilities as to what exactly they feel 
quality-of-life loss is for them, because it can be very 
subjective.
    Chairman Akaka. Colonel Wilson?
    Colonel Wilson. Thank you, Senator. I would have to say 
that Ms. Neas certainly said it quite well, I think, and I 
would agree with her comments. I think the current situation of 
economic loss that deals with things such as how this is going 
to impact your capability to earn a living over an extended 
period of time does not--the quality-of-life loss--does not 
deal with the current economic compensation; and it does not 
factor in pain and suffering, changes in lifestyle as a result 
of being placed into a wheelchair, having to have hooks now in 
order to manipulate a door, to drive a vehicle, to play 
baseball, or fishing with my child.
    I think Senator Tester was absolutely correct. You ask a 
number of veterans and they will tell you exactly what they 
think about an appropriate level of compensation or what is 
not; and they should be actively involved in the process from 
the very beginning.
    Chairman Akaka. Thank you.
    Colonel Wilson. Yes, sir.
    Chairman Akaka. This next question is for everyone on the 
panel. Do you have any suggestions for outside expertise that 
VA should engage with while contemplating reform of the system? 
Ms. Neas?
    Ms. Neas. Absolutely. I think our three organizations, 
which are in communities working with individuals every day, 
are people who should be involved in this, though first and 
foremost, veterans and their families. They know what they 
need. They are the only ones who can dictate the quality of 
their lives. They are the only ones who can tell you what it 
was like to try to get a job and be turned down because you 
look different or you act different than you did before you 
were injured.
    One of the things that has been wonderful about working for 
Easter Seals all these years is many of the families that come 
to us have been told by a variety of different systems and 
professionals what they can't do. Until they came to us, no one 
was asked what they want to do and have us figure out a way to 
make it happen. I think that is a perspective that is really 
important to have go forward with this. Let us not talk to you 
about all the things you are never going to be able to do, 
because quite frankly, no-
body knows what that is. What we need to do is help veterans 
figure out what they want to do and what is going to be 
necessary to get them there. And unless you talk to them 
directly and know the communities from which they come, we are 
not going to be 
successful.
    Chairman Akaka. Thank you.
    Ms. Prokop?
    Ms. Prokop. One of the benefits that PVA has is that it has 
joined Easter Seals and other disability advocacy organizations 
in a broader coalition, the Consortium for Citizens with 
Disabilities, that enables us to see disability issues from a 
broader perspective, and from that coalition we are able to 
talk with our allies in the disability community and learn from 
them about quality-of-life issues and studies and evaluations 
of disability programs that are often tailored to or focused on 
the Social Security disability system, but at the same time 
raise many of the same issues that were being talked about in 
this context.
    So, there are studies, there are reports and evaluations--
such as from the National Council on Disability and elsewhere--
that speak to broader disability program features and issues 
that the VA committee might be able to learn from, as well.
    Chairman Akaka. Thank you.
    Colonel Wilson?
    Colonel Wilson. Just briefly, sir, I would think that the 
Veterans Health Administration professionals who have been 
doing such a fine job of taking care of veterans for these past 
many decades certainly have an excellent perspective to 
provide. They will be beneficial to updating the VASRD and 
moving this whole process forward. And, of course, the Veterans 
Service Organizations are pleased. We look forward to working 
with this particular committee and the VA to move ahead on this 
particular process.
    Chairman Akaka. Thank you.
    This question is also for all of the panelists. The 
question of whether to compensate for loss of quality-of-life 
has a potential to change veterans disability compensation 
considerably. Do you believe that VA should work on changes to 
the rating schedule before addressing whether loss of quality-
of-life should also be 
compensated?
    Colonel Wilson. If I could, Mr. Chairman, I would say, 
absolutely, yes. The first priority is to address the VASRD, 
look at it. The Disability Committee offered a viable option on 
how to go about doing this. I would like to see it adopted as 
soon as possible. I will believe that the VA is serious about 
moving ahead on this particular issue once I see it appear in 
their strategic plan. Being 33 years in the military, I find 
them very useful to determine where an organization is going. I 
look for that; I will review it.
    The new administration has inherited this product from 
previous years, but I have yet to see this issue--which has 
been discussed by this Committee in other studies that the 
Ranking Member talked about earlier--but has never been 
incorporated into a change plan. There is no mention of the 
VASRD being reviewed in the strategic plan. There is no 
tactical application of how to go about doing this strategic 
business to the tactical level of making it happen at all, 
despite the many discussions, despite the many committee 
hearings, despite the many publications. Once I see that 
happen, then I know the leadership--and this new 
administration, I am sure, will move in that direction--will be 
moving properly to update the VASRD, followed closely by the 
quality-of-life issues.
    Chairman Akaka. Any other comments? Ms. Prokop?
    Ms. Prokop. Mr. Chairman, I don't feel qualified to answer 
that question because that is an issue that many of my other 
colleagues at PVA have dealt with and worked on over many, many 
years. If there is something specific you would like us to 
answer on that question, we would be happy to do so in writing.
    Ms. Neas. Yes. And Mr. Chairman, I don't feel qualified to 
answer that question, either.
    Chairman Akaka. Thank you. This question, again, is for the 
panel. If VA compensation is modified to incorporate a specific 
element for quality-of-life, do you believe that each disabled 
veteran would require an individual assessment that was 
mentioned, or would it be feasible to develop averages for the 
impact on quality-of-life of specific disabilities? Ms. Neas?
    Ms. Neas. I think you really--quality-of-life is such a 
personal issue. I don't know how you could do that without 
having maybe some broad criteria from which you could gain that 
information. But, I think really making that determination 
would have to be left up to each individual.
    Chairman Akaka. Ms. Prokop?
    Ms. Prokop. Based on what I have heard from our folks in 
PVA's Veterans Benefits Department, I suspect they would say 
that would need to be an individual assessment--that you really 
do need to consider each person's specific circumstances.
    Ms. Neas. Mr. Chairman, if I could add, I used to work for 
a Member of the Senate who had a brother who was deaf. His 
brother was told that deaf people could only be printers, 
cobblers, or bakers, because at the time when he went to our 
State School for the Deaf, that was what was determined for 
someone who was deaf; those were the choices that were 
appropriate to that disability.
    I use that sort of extreme example because we don't want to 
have the VA have a system that says, if you have a spinal cord 
injury or if you have Traumatic Brain Injury, the only things 
you can do or the only things you should consider being 
available to you are a limited set of jobs or circumstances or 
support. So, I really do think it needs to be individualized 
and we don't need to go back to those days where, if you had a 
specific disability or condition, that that put you on a track 
that you could never otherwise get off.
    Chairman Akaka. Colonel Wilson?
    Colonel Wilson. I will be glad to provide a comment in 
writing on that rather complex question, sir.
    Chairman Akaka. Thank you.
    I want to thank you for your responses. As you know, we 
specifically asked you to join us here in this hearing so that 
we could get responses from groups outside of VA, and I want to 
thank you very much for providing responses from your 
experiences. So, thank you very much for appearing today.
    We know that there are many challenges to providing 
disability benefits in the 21st century. Deciding how to best 
compensate our Nation's disabled veterans is a sensitive and 
complicated issue. We heard many options on how to calculate 
and implement disability compensation for the future and we can 
all agree that reforming the current system is imperative.
    My goal is to ensure that this is done in an accurate and 
timely manner.
    The Committee, along with the administration and those who 
advocate on behalf of veterans, intend to do all we can to 
improve the current system. To bring optimal change to a 
process as complicated and important as this, we must be 
deliberative, focused, and open to input from all who are 
involved in this process.
    The Committee has held a number of hearings on this matter 
in the past and will continue to work diligently until this 
issue is resolved.
    I want to again thank you all for being here today. This 
hearing is adjourned.
    [Whereupon, at 11:42 a.m., the Committee was adjourned.]
      

                                  
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