SSA and VA Disability Programs: Re-Examination of Disability	 
Criteria Needed to Help Ensure Program Integrity (09-AUG-02,	 
GAO-02-597).							 
                                                                 
The three largest disability programs collectively provided $89.7
billion in cash benefits to 10.2 million adults in 2001. However,
the Disability Insurance (DI) program, Supplemental Security	 
Income (SSI) program, and VA disability criteria reflects neither
medical and technological advances nor the labor market changes  
that affect the skills needed to perform work and work settings. 
If these federal disability programs do not update scientific and
labor market information they risk overestimating the limiting	 
nature of some disabilities while underestimating others. Twelve 
years ago, both the Social Security Administration and the	 
Department of Veterans Affairs (VA) began reviewing relevant	 
medical advances and updating the criteria they use to evaluate  
claims. However, the amount of time the agencies are taking to	 
revise the medical criteria could undermine the very purpose of  
the update. Moreover, because of the limited role of treatment in
the statutory and regulatory design of these programs, the	 
updates have not fully captured the benefits afforded by advances
in treatment. Also, the disability criteria used by DI, SSI, and 
VA programs have not incorporated labor market changes. These	 
programs continue to use outdated information about the types and
demands of jobs needed to determine the impact that impairments  
have on individuals' earning capacity. In order to incorporate	 
scientific advances and labor market changes into the DI, SSI,	 
and VA programs, steps can be taken within the existing program  
design, but some would require more fundamental change. Agencies 
need to continue their medical updates and vigorously expand	 
their efforts to more closely examine labor market changes. At a 
more fundamental level, SSA and VA could consider changes to the 
disability criteria that would revisit the programs' basic	 
orientation.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-597 					        
    ACCNO:   A03576						        
  TITLE:     SSA and VA Disability Programs: Re-Examination of	      
Disability Criteria Needed to Help Ensure Program Integrity	 
     DATE:   08/09/2002 
  SUBJECT:   Disability benefits				 
	     Eligibility criteria				 
	     Eligibility determinations 			 
	     Employees with disabilities			 
	     Persons with disabilities				 
	     Social security benefits				 
	     Disability Insurance Program			 
	     Supplemental Security Income  Program		 

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GAO-02-597
     
Report to Agency Officials

United States General Accounting Office

GAO

August 2002 SSA AND VA DISABILITY PROGRAMS

Re- Examination of Disability Criteria Needed to Help Ensure Program
Integrity

GAO- 02- 597

Page i GAO- 02- 597 Re- Examining Disability Criteria Letter 1

Results in Brief 2 Background 4 SSA Provides Benefits to People Found to Be
Work Disabled 6 Disability Criteria Not Fully Updated to Reflect Scientific
Advances 14 Disability Criteria Not Updated to Reflect Labor Market Changes
23 Incorporating Scientific Advances and Labor Market Changes into

Disability Criteria Has Several Implications 26 Conclusions 29
Recommendations for Executive Action 30 Agency Comments and Our Response 31

Appendix I Comments from the Social Security Administration 36

Appendix II Comments from the Department of Veterans Affairs 40 GAO Comments
46

Appendix III Five- Step Sequential Evaluation Process for Determining DI and
SSI Eligibility 48

Appendix IV GAO Contacts and Staff Acknowledgments 50 GAO Contacts 50 Staff
Acknowledgments 50

Tables

Table 1: Progress of SSA?s Current Efforts to Update Medical Listings 17
Table 2: Types of Changes Made (or Proposed) to SSA?s Medical

Listings during Current Update 20 Table 3: Types of Changes Made (or
Proposed) to VA?s Schedule

for Rating Disabilities during Current Update 21 Contents

Page ii GAO- 02- 597 Re- Examining Disability Criteria Figures

Figure 1: DI, SSI, and VA Cash Payments to Adults with Disabilities, 1991-
2001 5 Figure 2: Percentage Distribution of DI Disabled Workers by

Impairment Categories, 2000 7 Figure 3: Percentage Distribution of SSI Adult
Disabled Recipients

by Impairment Categories, 2000 8 Figure 4: Percentage Distribution of
Veterans Receiving Disability

Compensation by Impairment Categories, 2000 11 Figure 5: Time Frame of VA?s
Efforts to Update the Schedule for

Rating Disabilities 19

Abbreviations

DI Disability Insurance DOT Dictionary of Occupational Titles O* NET
Occupational Information Network SGA substantial gainful activity SSA Social
Security Administration SSI Supplemental Security Income VA Department of
Veterans Affairs

Page 1 GAO- 02- 597 Re- Examining Disability Criteria

August 9, 2002 The Honorable Jo Anne B. Barnhart Commissioner of Social
Security Administration

The Honorable Anthony J. Principi Secretary of Veterans Affairs

The three largest federal disability programs providing cash assistance,
which are administered by the Social Security Administration (SSA) and the
Department of Veterans Affairs (VA), in 2001 collectively provided $89.7
billion in cash benefits to approximately 10.2 million adults with a
physical or mental condition that reduced their earning capacity. With such
an extensive cash outlay and such a large beneficiary population, it is
important to use updated scientific, workforce, and economic information to
evaluate claims for disability benefits. Over time, progress in the fields
of medicine and technology has provided a better understanding of how
disease and injury affect the ability to work. Likewise, changes in the
labor market have affected the skills needed to perform work and the
settings in which work occurs. Together, scientific advances and labor
market changes redefine the extent that physical or mental conditions affect
the ability of people with disabilities to work. If federal disability
programs do not update scientific and labor market information used in
assessing program eligibility, they risk overestimating the limiting nature
of some disabilities while underestimating others. Moreover, not keeping
abreast of this information puts federal programs at risk of undermining
their efforts to help some persons with disabilities achieve economic
independence or work to their full potential.

Although the three largest federal disability programs differ in their
underlying purpose, they face a similar underlying challenge. SSA
administers both the Disability Insurance (DI) program and the Supplemental
Security Income (SSI) program. DI provides benefits to workers with severe
long- term disabilities who have enough work history to be insured for
coverage under the program. SSI provides benefits to disabled, blind, or
aged individuals with low income and limited resources,

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 02- 597 Re- Examining Disability Criteria

regardless of their work histories. 1 VA, meanwhile, compensates veterans
for their physical or mental conditions that are service connected. 2
Despite these differences in the populations they serve and basic rules of
eligibility, these programs share the similar task of making complex and
difficult decisions about individuals with impairments and their ability to
work in today?s environment. Beneficiaries served by these programs also
have links to rehabilitation services to help them prepare for, find, and
maintain employment.

In the past, we and others have reported the DI, SSI, and VA programs as
being out- of- step with medical and technological advances and changes in
the workforce and the economy. In this report, we review the extent to which
DI, SSI, and VA?s disability criteria have been updated based on (1)
scientific advances, including medical and technological innovations; and
(2) labor market changes, including the growth in service- and knowledge-
based industries over manufacturing- based industries. We also discuss
implications of incorporating these advances and changes into the programs.
To address these issues and to consider their implications on the design of
these federal disability programs, we reviewed agency documents, SSA?s
advisory board reports, our prior reports, and other literature. In
addition, we interviewed agency officials and several experts in the field.
We conducted our work between June 2001 and July 2002 in accordance with
generally accepted government auditing standards.

The DI, SSI, and VA disability criteria have not been fully updated to
reflect medical and technological advances. About 12 years ago, both SSA and
VA began reviewing relevant medical advances and updating the criteria they
use to evaluate claims. However, both agencies are taking years to revise
the medical criteria and, consequently, the lengthy time frames could
undermine the very purpose of an update. Moreover,

1 References to the SSI program throughout this report refer to disabled or
blind, not aged, recipients who are of working age. SSI benefits are also
available to children with disabilities, although SSA uses a different
definition of disability for children than for adults.

2 In addition, VA provides a disability pension to certain veterans who are
permanently and totally disabled by non- service- connected impairments and
served during a wartime period. Under the Veterans Education and Benefits
Expansion Act of 2001, enacted on December 27, 2001, veterans who are 65
years of age or older do not have to be permanently and totally disabled to
become eligible for pension benefits, as long as they meet the other
requirements for income and military service. Results in Brief

Page 3 GAO- 02- 597 Re- Examining Disability Criteria

because of the limited role of treatment in the statutory and regulatory
design of these programs, the updates have not fully captured the benefits
afforded by advances in treatment. That is, agencies generally factor in the
effects of treatment only when an applicant has received or, for SSA, has
also been prescribed treatment. For example, the effects that medication to
control severe mental illness may have on an applicant?s ability to work are
not automatically factored into agencies? disability decision making. As a
result, people applying for benefits are not necessarily evaluated at their
fullest potential for work in their corrected condition. Likewise, efforts
to update programs? criteria have not incorporated innovations in assistive
technologies- such as advanced prosthetics and wheelchairs- because of
similar program design issues.

Also, the disability criteria used by DI, SSI, and VA programs to determine
who has a disability have not incorporated labor market changes. Programs
continue to use outdated information about the types and demands of jobs in
the economy in determining the impact that impairments have on individuals?
earning capacity. SSA uses an outdated database- last updated in 1991- for
information on the types and demands of occupations in the national economy.
The agency is working on identifying a replacement database but this
undertaking could take years to complete. VA, meanwhile, has not updated its
estimates of the effect that impairments have on earning capacity to reflect
today?s labor market. Its last update was made in 1945. Moreover, without a
current understanding of the impact of physical and mental conditions on
earnings given labor market changes, VA and SSA may be overcompensating some
individuals while denying or undercompensating other individuals because of
outdated information on earning capacity.

In order to incorporate scientific advances and labor market changes into
the DI, SSI, and VA programs, some steps can be taken within the existing
program design and some would require more fundamental change. Within the
context of the programs? current statutory and regulatory framework,
agencies will need to continue their medical updates and vigorously expand
their efforts to more closely examine labor market changes. At a more
fundamental level, SSA and VA could consider changes to the disability
criteria that would revisit the programs? basic orientation. As part of this
effort, agencies would consider the implications of assessing individuals
under corrected conditions for maximizing their employment in a knowledge-
and service- based economy. Moreover, under this scenario, agencies could
place a greater emphasis on assisting individuals find the appropriate
employment assistance and obtain employment. Reorienting programs in this
direction would align them with

Page 4 GAO- 02- 597 Re- Examining Disability Criteria

broader social changes that focus on building and supporting the work
capacities of people with disabilities. To this end, approaches taken from
private disability insurers and other countries offer useful insights. This
shift, however, would raise a number of significant policy issues that have
not yet been fully explored. For example, are there certain circumstances
when programs would require a beneficiary to accept interventions to enhance
work capacities as a precondition for benefits? Likewise, would the cost of
providing treatment and assistive technologies in the disability programs be
higher than cash expenditures paid over the long- term?

In light of the outmoded criteria, this report contains recommendations that
agencies use their annual performance plans to help ensure they place
greater priority on updating their disability criteria within the context of
the programs? current design. This report also recommends that SSA and VA
study the broader implications of how scientific advances and labor market
changes could affect the programs? eligibility criteria and benefits
package. Appendix I contains SSA?s comments on the draft of our report while
VA?s comments on the draft are shown in appendix II.

The DI, SSI, and VA programs are three separate federal disability programs
that differ in their underlying intent, populations they serve, and the
specific approach used by SSA and VA to assess disability. Yet, each program
provides financial assistance to individuals with a reduced capacity to work
due to a physical or mental impairment. Program beneficiaries also have a
connection to vocational assistance that can help program beneficiaries
minimize the economic loss resulting from their disabilities. Background

Page 5 GAO- 02- 597 Re- Examining Disability Criteria

All three programs have experienced growth in recent years. The amount of
cash benefits paid to program beneficiaries has increased over the past 10
years (see fig. 1). In 2001, DI provided $54.2 billion in cash benefits to
5.3 million disabled workers, SSI provided $19.0 billion in federal cash
benefits to 3.7 million disabled and blind individuals age 18- 64, and VA
provided $16.5 billion in disability compensation benefits to about 2.3
million veterans. 3 Since 1991, the cash benefits for these programs
increased by 69 percent, 55 percent, and 32 percent, respectively (adjusted
for inflation). In addition, since 1991 the number of DI, SSI, and VA
beneficiaries grew by 65 percent, 53 percent, and 6 percent, respectively.

Figure 1: DI, SSI, and VA Cash Payments to Adults with Disabilities, 1991-
2001

Source: GAO analysis of SSA and VA data.

3 These figures do not include cash benefits awarded to other eligible
groups, such as disabled widow( er) s and disabled adult children of
disabled workers (DI) and children with disabilities (SSI). Included among
the 5.3 million DI beneficiaries are about 1.1 million beneficiaries who
were dually eligible for SSI disability benefits because of the low level of
their income and resources. DI and SSI data are based on 2001 calendar year
while VA data are based on 2001 fiscal year. Programs Have Grown in

Recent Years

Page 6 GAO- 02- 597 Re- Examining Disability Criteria

The size of the programs could grow in the years ahead. In fact, DI and SSI
are expected to grow significantly over the next decade. By 2010, SSA
expects worker applications for DI to increase by as much as 32 percent over
2000 levels. In 2000, VA predicted that while the number of veterans
receiving disability benefits will decrease approximately 18 percent over
the next 10 years, the caseload will decline annually by less than 1 percent
during this time period. VA explained that veterans will likely incur more
disabilities than the past because, for example, veterans of the
allvolunteer force are older at time of discharge with longer periods of
service, and also because better outreach and access makes veterans more
aware of benefits to which they are entitled. Moreover, VA?s estimate of the
number of veterans assumed the United States would not be engaged in any
major global or regional conflict. The recent war on terrorism, however,
could affect VA?s future projections on the size of the disabled veterans
population.

SSA provides disability benefits to people found to be work disabled under
the DI or SSI program. Established in 1956, DI is an insurance program that
provides benefits to workers who are unable to work because of severe long-
term disability. In 2000, the most common impairments among DI?s disabled
workers were mental disorders and musculoskeletal conditions (see fig. 2).
These two conditions also were the fastest growing conditions since 1986,
increasing by 7 and 5 percentage points, respectively. SSA Provides Benefits

to People Found to Be Work Disabled

Page 7 GAO- 02- 597 Re- Examining Disability Criteria

Figure 2: Percentage Distribution of DI Disabled Workers by Impairment
Categories, 2000

Source: Annual Statistical Supplement to the Social Security Bulletin, 2001.

Workers who have worked long enough and recently enough are insured for
coverage under the DI program. DI beneficiaries receive cash assistance and,
after a 24- month waiting period, Medicare coverage. Once found eligible for
benefits, disabled workers continue to receive benefits until they die,
return to work and earn more than allowed by program rules, are found to
have medically improved to the point of having the ability to work, or reach
full retirement age (when disability benefits convert to retirement
benefits). To help ensure that only eligible beneficiaries remain on the
rolls, SSA is required by law to conduct continuing disability reviews for
all DI beneficiaries to determine whether they continue to meet the
disability requirements of the law.

SSI, created in 1972, is an income assistance program that provides cash
benefits for disabled, blind, or aged individuals who have low income and
limited resources. In 2000, the most common impairments among the group of
SSI blind and disabled adults age 18- 64 were mental disorders and mental
retardation (see fig. 3). Mental disorders was the fastest growing condition
among this population since 1986, increasing by 9 percentage points.

27% Mental disorders

5%

Mental retardation

10% Nervous system and sense organs 11% 

Circulatory system

23% 

Musculoskeletal system

24% 

Other

 



Page 8 GAO- 02- 597 Re- Examining Disability Criteria

Figure 3: Percentage Distribution of SSI Adult Disabled Recipients by
Impairment Categories, 2000

Source: Annual Statistical Supplement to the Social Security Bulletin, 2001.

Unlike the DI program, SSI has no prior work requirement. In most cases, SSI
eligibility makes recipients eligible for Medicaid benefits. SSI benefits
terminate for the same reasons as DI benefits, although SSI benefits also
terminate when a recipient no longer meets SSI income and resource
requirements (SSI benefits do not convert to retirement benefits when the
individual reaches full retirement age). The law requires that continuing
disability reviews be conducted for some SSI recipients for continuing
eligibility.

The Social Security Act?s definition of disability under DI and SSI is the
same: an individual must have a medically determinable physical or mental
impairment that (1) has lasted or is expected to last at least 1 year or to
result in death and (2) prevents the individual from engaging in substantial

35% Mental disorders

24%  Mental retardation

8%

Nervous system and sense organs

6%

Circulatory system

10%

Musculoskeletal system

17% 

Other

   

Page 9 GAO- 02- 597 Re- Examining Disability Criteria

gainful activity (SGA). 4 Moreover, the definition specifies that for a
person to be determined to be disabled, the impairment must be of such
severity that the person not only is unable to do his or her previous work
but, considering his or her age, education, and work experience, is unable
to do any other kind of substantial work that exists in the national
economy. (See app. III for a more complete description of SSA?s five- step
process to determine DI and SSI eligibility.)

While not expressly required by law to update the criteria used in the
disability determination process, SSA has stated that it would update them
to reflect current medical criteria and terminology. Over the years, SSA has
periodically ensured that the medical information and the structure of its
Listing of Impairments- which describe impairments that are presumed by the
agency to be severe enough to prevent a person from doing substantial
gainful activity- were both acceptable for program purposes and consistent
with current medical thinking. The last general update to the Listing of
Impairments (also known as the Medical Listings) occurred in 1985, at which
time expiration dates ranging from 3 to 8 years were inserted for individual
body systems to ensure the agency periodically reviews and if necessary,
updates the Medical Listings.

The statutes establishing the DI and SSI programs presume that disability,
for program eligibility, is long- term and based on an either- or decision.
That is, a person is either capable or incapable of engaging in substantial
gainful work. However, the Social Security Act allows beneficiaries to use a
?ticket? issued by the Commissioner of SSA to obtain free employment
services, vocational rehabilitation services, or other services to find
employment. 5 Also, Congress has established various work incentives
intended to safeguard cash and health benefits while a beneficiary tries to

4 Regulations currently define SGA for both the DI and SSI programs as
employment that produces countable earnings of more than $780 a month for
nonblind disabled individuals. The SGA level is indexed to the annual wage
index. The SGA level for DI blind individuals, set by statute and also
indexed to the annual wage index, is currently defined as monthly countable
earnings that average more than $1,300.

5 The Ticket to Work and Work Incentives Improvement Act of 1999 (Public Law
106- 170) was signed into law in December 1999. In February 2002, SSA began
sending tickets to beneficiaries living in the 13 states chosen for the
first round of implementation. SSA regulations require that to be eligible
to receive a ticket, a beneficiary must, among other factors, have a
permanent medical condition or a condition for which medical improvement is
possible but cannot be predicted (a beneficiary whose impairment is expected
to improve is not eligible to receive a ticket unless the individual has
undergone at least one continuing disability review). Participation in the
ticket program is voluntary.

Page 10 GAO- 02- 597 Re- Examining Disability Criteria

return to work. 6 Despite these provisions, few DI and SSI beneficiaries
have left the rolls to return to work, 7 although the ticket program may
have an impact on future rates. The either- or process produces a strong
incentive for applicants to establish their inability to work to qualify for
benefits, and work- related supports and services (including health
coverage) are offered only after individuals have completed the eligibility
process. Yet our past work found that DI beneficiaries believe that health
interventions- such as medical procedures, medications, physical therapy,
and psychotherapy- are primary factors in assisting them to work. 8

VA?s disability program compensates veterans for the average loss in earning
capacity in civilian occupations that results from injuries or conditions
incurred or aggravated during military service. 9 In 2000, the most common
impairment category among all disabled veterans was illness and injury to
bones and joints (see fig. 4). This impairment category also experienced the
fastest growth among the disabled veteran population since 1986, increasing
by 6 percentage points.

6 For example, the DI work incentives provide for a trial work period in
which a beneficiary may earn any amount for 9 months within a 60- month
period and still receive full cash benefits. The SSI work incentives, among
other features, allow beneficiaries to earn more than the SGA level and
retain part of a cash benefit.

7 U. S. General Accounting Office, Social Security: Disability Programs Lag
in Promoting Return to Work, GAO/ HEHS- 97- 46 (Washington, D. C.: Mar. 17,
1997). 8 U. S. General Accounting Office, Social Security Disability
Insurance: Multiple Factors Affect Beneficiaries? Ability to Return to Work,
GAO/ HEHS- 98- 39 (Washington, D. C.: Jan. 12, 1998).

9 Veterans? Benefits, 38 U. S. C. sect.sect. 1110 and 1155. VA Provides Benefits to

Veterans Found to Have Reduced Earning Capacity

Page 11 GAO- 02- 597 Re- Examining Disability Criteria

Figure 4: Percentage Distribution of Veterans Receiving Disability
Compensation by Impairment Categories, 2000

Note: Percentages do not add to 100 percent due to rounding. Source: VA?s
Compensation and Pension Master File.

VA?s program is similar to the DI and SSI programs in that all three
programs provide cash benefits to persons whose physical or mental
impairments have been deemed to reduce their ability to earn a living. 10
However, VA relies upon an average reduction in earning capacity across a
group of individuals with a similar condition rather than the actual
reduction for an individual veteran applying for benefits. As a result, a
veteran with a disability is entitled to disability cash benefits whether or
not employed and regardless of the amount earned. The cash benefit level

10 We met with several veterans service organizations to discuss the issues
in this report. These organizations stated that they believe disability
compensation benefits, in addition to representing payment for economic
loss, also represent compensation for noneconomic loss due to an injury or
illness as well as service to the country.

39%  Bones and joints

21%  Mental health



6%

Muscle injuries



5%

Digestive system



8%

Heart diseases

22% 

Other

Page 12 GAO- 02- 597 Re- Examining Disability Criteria

is based on the ?percentage evaluation,? commonly called the disability
rating, that represents the average loss in earning capacity associated with
the severity of physical and mental conditions. VA uses its Schedule for
Rating Disabilities to determine which disability rating to assign to a
veteran?s particular condition. Ratings for individual diagnoses in the
schedule range from 0 11 percent to 100 percent. 12 For example, VA presumes
that the loss of a foot as a result of military service results in a 40
percent impairment in earning capacity, on average, among veterans with this
injury. All veterans who lose a foot as a result of military service,
therefore, are entitled to a 40 percent disability rating. Unlike the DI and
SSI programs, the law does not specifically require VA to conduct continuing
disability reviews to determine whether veterans continue to meet the
disability requirements of the law.

The Schedule for Rating Disabilities was first developed in 1919 and had its
last major revision in 1945. Two major studies have been conducted since the
implementation of the 1945 version of the schedule to determine whether the
schedule constitutes an adequate basis for compensating veterans with
service- connected conditions. One was conducted by a presidential
commission in the mid- 1950s and a second by VA in the late 1960s. Both
concluded, for various reasons, that at least some disability ratings in the
schedule did not accurately reflect the average impairment in earning
capacity among disabled veterans and needed to be adjusted.

The law states that VA shall, from time to time, readjust the schedule based
upon experience. Keeping the schedule current is important because cash
benefits are based on the schedule. We previously reported, however, that
VA?s rating schedule that was being used in the late 1980s had not been
adjusted to incorporate the results of many recent medical advances, and as
a result, some veterans may be undercompensated and others may be
overcompensated for their service- connected disability. 13

11 A veteran can receive a 0 percent noncompensable rating that may be
increased to a compensable rating of 10 percent or more if the veteran?s
condition worsens. A 0 percent rating generally means that VA has determined
that a veteran has a condition that can be classified as service- connected;
however, it is not severe enough to qualify for monetary compensation on the
basis of the medical criteria specified in the schedule.

12 Congress sets the specific benefit amount for each of the disability
ratings. Congress typically adjusts the benefit amount each year. In 2002,
the basic monthly amount for veterans without dependents ranged from $103
for conditions assigned a rating of 10 percent to $2, 163 for conditions
assigned a rating of 100 percent.

13 U. S. General Accounting Office, Need to Update Medical Criteria Used in
VA?s Disability Rating Schedule, GAO/ HRD- 89- 28 (Washington, D. C.: Dec.
29, 1988).

Page 13 GAO- 02- 597 Re- Examining Disability Criteria

Further, we recommended that VA (1) prepare a plan for a comprehensive
review of the rating schedule and, based on the results, revise medical
criteria accordingly and (2) implement a procedure for systematically
reviewing the rating schedule to keep it updated.

Veterans with a service- connected disability rated at 20 percent or higher
who are found by VA to have an employment handicap can receive
rehabilitation services. Eligible veterans can receive vocational
counseling, training, job search assistance, and supportive rehabilitation
services. In addition, VA offers veterans a medical benefits package that
provides a full range of outpatient and inpatient services, including
primary and specialty care as well as drugs.

Recent scientific advances in medicine and assistive technology and changes
in the nature of work and the types of jobs in our national economy have
generally enhanced the potential for people with disabilities to perform
work- related activities. Advances in medicine have afforded the scientific
community a deeper understanding of and ability to treat disease and injury.
Medical advancements in treatment (such as organ transplantations), therapy,
and rehabilitation have reduced the severity of some medical conditions and
have allowed individuals to live with greater independence and function in
settings such as the workplace. Also, assistive technologies- such as
advanced wheelchair design, a new generation of prosthetic devices, and
voice recognition systems- afford greater capabilities for some people with
disabilities than were available in the past.

At the same time, the nature of work has changed in recent decades as the
national economy has moved away from manufacturing- based jobs to service-
and knowledge- based employment. In the 1960s, earning capacity became more
related to a worker?s skills and training than to his or her ability to
perform physical labor. Following World War II and the Korean Conflict,
advancements in technology, including computers and automated equipment,
reduced the need for physical labor. The goods- producing sector?s share of
the economy- mining, construction, and manufacturing- declined from about 44
percent in 1945 to about 18 percent in 2000. The service- producing
industry?s share, on the other hand- such areas as wholesale and retail
trade; transportation and public utilities; federal, state and local
government; and finance, insurance, and real estate- increased from about 57
percent in 1945 to about 72 percent in 2000. Advances in Medicine and

Technology, Labor Market Changes, and Social Changes Have Affected Work-
Related Capabilities of People with Disabilities

Page 14 GAO- 02- 597 Re- Examining Disability Criteria

Although certain jobs in the service economy continue to be physically
demanding- a cashier in a fast food restaurant might be expected to stand
for most of his or her shift- other service- and knowledge- based jobs can
allow greater participation for persons with physical limitations. In
addition, telecommuting and part- time work provide other options for
persons with disabilities. However, some labor market trends- such as an
increasing pace of change in office environments and the need for
adaptability- can pose particular challenges for some persons, such as those
with severe mental illness and learning disabilities. Moreover, other
trends- such as downsizing and the growth in contingent workers- can limit
job security and benefits, like health insurance, that most persons with
disabilities require for participation in the labor force. Whether these
changes make it easier or more difficult for a person with a disability to
work appears to depend very much on the individual?s impairment and other
characteristics, according to experts.

Social change has promoted the goals of greater inclusion of and
participation by people with disabilities in the mainstream of society,
including adults at work. For instance, over the past 2 decades, people with
disabilities have sought to remove environmental barriers that impede them
from fully participating in their communities. Moreover, the Americans with
Disabilities Act supports the full participation of people with disabilities
in society and fosters the expectation that people with disabilities can
work and have the right to work. The Americans with Disabilities Act
prohibits employers from discriminating against qualified individuals with
disabilities and requires employers to make reasonable workplace
accommodations unless it would impose an undue hardship on the business.

The disability criteria used by the DI, SSI, and VA disability programs to
help determine who is qualified to receive benefits have not been fully
updated to reflect scientific advances. Both SSA and VA are currently in the
midst of a process that began around the early 1990s to update the medical
criteria they use to make eligibility decisions, but the progress is slow.
The updates include dropping or adding conditions that qualify one for
benefits, modifying criteria needed to establish the presence and severity
of certain medical conditions, and wording changes for clarification and
guidance in making decisions. Agencies report that they made some of these
changes due to medical advances in treatment that have reduced the severity
and occurrence of some medical conditions. Nevertheless, the statutory and
regulatory design of these programs limits the role of treatment in
determining who is disabled. Therefore, treatment advances, by definition,
have not been folded into the updates. Moreover, Disability Criteria Not

Fully Updated to Reflect Scientific Advances

Page 15 GAO- 02- 597 Re- Examining Disability Criteria

because of the statutory design of these programs, the role of assistive
technologies is not recognized in making disability decisions. Consequently,
the updates have not fully incorporated innovations in this field, such as
advanced prosthetics and wheelchair designs.

SSA?s current effort to update the disability criteria began in the early
1990s. To conduct the current update, SSA gathers feedback on relevant
medical issues from state officials who help the agency make disability
decisions. In addition, SSA has in- house expertise to help the agency keep
abreast of the medical field and identify aspects of the medical criteria
that need to be changed. SSA staff develop the proposed changes and forward
them for internal, including legal and financial, review. Next, SSA
publishes the proposed changes in the Federal Register and solicits comments
from the public for 60 days. SSA considers the public comments, makes
necessary adjustments, and publishes the final changes in the Federal
Register.

Between 1991 and 1993, SSA published for public comment the changes it was
proposing to make to 7 of the 14 body systems in its Medical Listings. 14 By
1994, the proposed changes to 5 of these 7 body systems were finalized,
although SSA told us that changes to 2 systems were relatively minor. SSA?s
efforts to update the Medical Listings were curtailed in the mid- 1990s due
to staff shortages, competing priorities, and lack of adequate research on
disability issues. Since the mid- 1990s, we, SSA?s Office of the Inspector
General, and the Social Security Advisory Board have expressed concern that
SSA was not updating the Medical Listings regularly but simply extending the
expiration dates that were originally developed by SSA so as to ensure that
it would conduct the updates. In fact, the Office of the Inspector General
15 recommended that SSA develop a performance measure of its update
activities for inclusion in SSA?s annual performance plan. 16 SSA did not
agree with the recommendation, responding that revisions to the Medical
Listings are

14 Our analysis excludes SSA?s changes to the childhood- related Medical
Listings.

15 Office of the Inspector General, Social Security Administration, Status
of the Social Security Administration?s Updates to the Medical Listing, A-
01- 99- 21009 (Washington, D. C., 2000).

16 The Government Performance and Results Act of 1993, Public Law 103- 62,
requires SSA to develop performance indicators that assess the relevant
service levels and outcomes of each program activity. Slow Process to Update

Medical Criteria Jeopardizes Progress Already Made

Page 16 GAO- 02- 597 Re- Examining Disability Criteria

subject to some factors not fully in their control (e. g., progression of
scientific advances, input from experts and the public, and shifting
congressional priorities), which can affect timing and prioritization of
effort. In our view, these uncertainties- in addition to the size and costs
of the programs- in fact elevate the need for establishing a time frame to
ground SSA in its efforts and help keep the agency on track. Moreover, SSA
is allowed to revise performance measures in its annual plans. 17

SSA resumed updating the Medical Listings in 1998. Since then, SSA has taken
some positive steps in updating portions of the medical criteria it uses to
make eligibility decisions, although progress is slow. As of early 2002, SSA
has published the final updated criteria for 1 of the 9 remaining body
systems not updated in the early 1990s (musculoskeletal) and a portion of a
second body system (mental disorders). SSA also plans to update again the 5
body systems that were updated in the early 1990s. In addition, SSA has
asked the public to comment on proposed changes for several other body
systems. During the course of our work, SSA initially indicated to us that
the agency planned to publish proposed changes for all body systems by 2002
and submit changes to the Office of Management and Budget for final
clearance by 2003. Recently, the new administration at SSA (a new
commissioner was confirmed in November 2001) reviewed the schedule and
timing for the revisions. The results of this review pushed back the
completion date for publishing proposed changes for all remaining body
systems to the end of 2003. 18 The revised schedule, as of May 2002, is
shown in table 1.

17 Agencies are permitted to revise the performance targets in their
performance plans- based upon congressional action, the occurrence of
unanticipated exigencies, consideration of actual performance data from the
prior year, and other reasons- under the Government Performance and Results
Act of 1993 as implemented by OMB Circular No. A- 11, Part 2: Preparation
and Submission of Strategic Plans, Annual Performance Plans, and Annual
Program Performance Reports (Washington, D. C., 2000).

18 Social Security Administration, ?Semiannual Unified Regulatory Agenda,?
Federal Register 67, no. 92 (13 May 2002): 34016 - 34038.

Page 17 GAO- 02- 597 Re- Examining Disability Criteria

Table 1: Progress of SSA?s Current Efforts to Update Medical Listings

Action Body system Date of current update Date of previous update

Updates finalized Mental disorders (partial system update) 2000 1985
Musculoskeletal 2002 1985 Updates in process Proposed changes published

for comment in the Federal Register

Hemic and lymphatic Nov. 2001 1985 Malignant neoplastic diseases Nov. 2001
1985 Digestive Nov. 2001 1985 Skin Dec. 2001 1979

Plan to submit proposed changes to OMB Multiple body systems Oct. 2002 1993
Genitourinary Nov. 2002 1985 Cardiovascular Dec. 2002 1994 Endocrine Jan.
2003 1993 Respiratory Jan. 2003 1993 Special senses and speech Mar. 2003
1985 Neurological Aug. 2003 1985 Immune Sept. 2003 1993 Mental disorders
(remaining portion) Nov. 2003 1985

Source: GAO Analysis of SSA documents.

SSA?s slow progress in completing the updates could undermine the purpose of
incorporating medical advances into its medical criteria. For example, the
criteria for musculoskeletal conditions- a common impairment among persons
entering DI- were updated in 1985. Then, in 1991, SSA began developing new
criteria and published its proposed changes in 1993 but did not finalize the
changes until 2002; therefore, changes made to the musculoskeletal criteria
in 2002 were essentially based on SSA?s review of the field in the early
1990s. SSA officials told us that in finalizing the criteria, they reviewed
the changes identified in the early 1990s and found that little had taken
place since then to warrant changes to the proposed criteria. However, given
the advancements in medical science since 1991, it may be difficult for SSA
to be certain that all applicable medical advancements are in fact included
in the most recent update. Similarly, we are concerned about the time frames
for completing the full update on the criteria for another major impairment
category- mental disorders. While SSA finalized in 2000 a portion of the
changes for mental disorders first proposed in 1991, the agency deferred
action on the

Page 18 GAO- 02- 597 Re- Examining Disability Criteria

remaining portion pending further review. SSA recently announced plans to
publish these proposed changes by November 2003.

Keeping to a set schedule and making necessary updates could help SSA
minimize the use of outmoded criteria in a large number of disability
decisions. For example, SSA used the criteria for musculoskeletal conditions
that were developed in 1985 until 2001. This means that in the year prior to
the update- 2000- SSA allowed 222, 750 adults to enter the DI or SSI program
on the basis of medical criteria that were 15 years old.

VA has made more progress than SSA in updating the medical criteria used to
evaluate its disability claims, but overall the process is slow. In 1989, VA
hired a contractor to bring together practicing physicians to review and
develop updated criteria for several of the body systems contained in the

Schedule for Rating Disabilities. The practicing physicians, who were
organized by teams according to specific body systems, were tasked with
proposing changes that were consistent with modern medical practice and
stated in a manner that could be easily interpreted by rating personnel. The
results of the teams? efforts were reviewed by VA in- house staff. After
making necessary adjustments, the proposed changes were forwarded to various
VA offices for review. Proposed changes were published in the

Federal Register and opened for a 60- day comment period. As of March 2002,
VA had finalized the criteria for 11 of 16 body systems. VA is currently
reviewing the remaining body systems.

VA has generally taken more than 5 years to complete the update for each
body system (see fig. 5). VA has not yet completed updating the medical
criteria for several important body systems. For example, criteria used for
evaluating orthopedic impairments were last updated in 1986. Yet the number
of veterans with a disabling orthopedic condition has risen significantly in
the past decade, outpacing the number of veterans receiving benefits under
any other single disability group. Therefore, veterans with an orthopedic
impairment who applied for VA disability benefits since 1996 were evaluated
with medical criteria that were at least 10 years old.

Page 19 GAO- 02- 597 Re- Examining Disability Criteria

Figure 5: Time Frame of VA?s Efforts to Update the Schedule for Rating
Disabilities

a VA has not published an advance notice or proposed criteria. Further
action is pending following the completion of updates for disc disease.
Source: GAO analysis of VA data.

We found two factors contributing to the amount of time to update VA?s
medical criteria. First, the review given to the proposed changes is
lengthy. VA?s legal counsel as well as other entities within VA, such as the
Veterans Health Administration, Office of Congressional and Legislative
Affairs, and Office of Inspector General, review all proposed changes to the
Schedule

Year 16 Body systems Time to update Advance notice of proposed rule making
published in Federal Register

Proposed criteria published in Federal Register Final criteria published in
Federal Register Not finished In process 1

2 3

Genitourinary Oral/ dental Hemic/ lymphatic Gynecological and breast
Endocrine Systemic Respiratory Mental disorders Cardiovascular Ear and other
sense organs

Muscle injuries Orthopedics - Disc disease

- Digit ankylosis - Spine* Eye Skin Neurologic Digestive - Liver disabilites
4 years, 5 months 2 years, 1 month 4 years, 4 months 4 years, 8 months 6
years, 3 months 5 years, 6 months 5 years, 8 months 5 years, 4 months 7
years, 10 months 8 years

6 years, 7 months NF NF NF NF NF NF

9 months

'89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02

1 23 1 23 1 23 1 2 3

1 2 3 1 2 3

1 2 1 3 2

1 2 1

2 2 3

1 2 3 2

2 3 1 23

1 23 1 1 1

Legend

NF

Page 20 GAO- 02- 597 Re- Examining Disability Criteria

for Rating Disabilities. The Office of Management and Budget also reviews
the changes. This entire review process can take up to 3 years. Second, the
number of staff assigned to coordinate the updates at VA also contributes to
the lengthy time to complete the updates. For example, one staff person is
assigned less than half time to coordinate the update efforts.

VA does not have a well- defined plan to conduct the next round of medical
updates. Although VA provided us with a statement acknowledging the need to
re- review the medical criteria in the future, it had neither a strategy nor
time frame for completing the task.

SSA has made various types of changes to the Medical Listings thus far. As
shown in table 2, these changes, including the proposed changes released to
the public for comment, add or delete qualifying conditions; modify the
criteria for certain physical or mental conditions; and clarify and provide
additional guidance in making disability decisions. In addition, SSA has
made a number of editorial changes.

Table 2: Types of Changes Made (or Proposed) to SSA?s Medical Listings
during Current Update Type of change Examples Rationales

Revise qualifying conditions Remove peptic ulcer. a

Add inflammatory bowel disease by combining two existing conditions already
listed: chronic ulcerative and regional enteritis.

Advances in medical and surgical management have reduced severity.

Reflect advances in medical terminology. Revise evaluation and diagnostic
criteria Expand the types of allowable imaging

techniques. Reduce from three to two in the number of difficulties that must
be demonstrated to meet the listings for a personality disorder. b

The Medical Listings previously referred to x- ray evidence. With
advancements in imaging techniques, SSA will also accept evidence from, for
example, computerized axial tomography (CAT) scan and magnetic resonance
imaging (MRI) techniques.

Specific rationale not mentioned. Clarify and provide additional guidance
Remove discussion on distinction between

primary and secondary digestive disorders resulting in weight loss and
malnutrition.

Expand guidance about musculoskeletal

?deformity.?

Distinction not necessary to adjudicate disability claim. Clarify that the
term refers to joint deformity due to any cause.

Agencies Have Changed Several Aspects of Disability Criteria

Page 21 GAO- 02- 597 Re- Examining Disability Criteria

a A condition removed from the Medical Listings means that SSA no longer
presumes the condition to be severe enough to ordinarily prevent an
individual from engaging in substantial gainful activities. However, an
individual with a condition removed from the Medical Listing could still be
found eligible under other considerations in the evaluation process as
described in appendix III. b The criteria for a personality disorder are met
when (a) the individual has certain behaviors defined in

the Medical Listings and (b) those behaviors result in at least two of the
following: (1) marked restriction of activities in daily living; (2) marked
difficulties in maintaining social functioning; (3) marked difficulties in
maintaining concentration, persistence, or pace; or (4) repeated episodes of
decompensation (as specified in the Medical Listings).

Source: GAO analysis of SSA publications appearing in Federal Register.

In recognition of medical advances, VA has also made several types of
changes to its Schedule for Rating Disabilities during the current update.
As shown in table 3, the types of changes have been quite similar to changes
made by SSA. Revisions generally consist of (1) adding, deleting, and
reorganizing medical conditions in the Schedule for Rating Disabilities; (2)
revising the criteria for certain qualifying conditions; and (3) wording
changes for clarification or reflection of current medical terminology. VA
also has made a number of editorial changes.

Table 3: Types of Changes Made (or Proposed) to VA?s Schedule for Rating
Disabilities during Current Update Type of change Examples Rationales

Revise schedule Add pneumoconiosis as a qualifying disease under
interstitial lung diseases.

Create new category for ?schizophrenia and other psychotic disorders.?

Allows for a more complete representation of this disease category.

New category is in accordance with terminology used in the standard medical
texts. Revise criteria Evaluation of anemia should include clinical

findings and not be based solely on hemoglobin levels.

Under certain conditions, varicose veins developed after leaving the service
can be considered as service- connected.

Provides a more accurate measure. Specific rationale not mentioned. Wording
change for clarification or reflection of current medical terminology

Replace ?frequent? with ?twice per year? when assessing frequency of
surgical therapies for recurring stone formation in the ureter.

Change ?new growth? to ?neoplasm.?

Standardizes the term for more precise evaluations.

Improve technical accuracy. Source: GAO analysis of VA publications
appearing in the Federal Register.

Page 22 GAO- 02- 597 Re- Examining Disability Criteria

Program design issues have limited the extent that advances in medicine and
technology have been incorporated into the DI, SSI, and VA?s disability
decision making. SSA has indicated that the updates are being made in
recognition of medical advances in treatment and technology, and we found
examples in SSA?s publications in the Federal Register of this occurring.
Our methodology for this study, however, does not allow us to determine the
extent of SSA?s efforts to incorporate medical advances into the Medical
Listings. Nevertheless, the design of these programs limits the role of
treatment in deciding who is disabled. SSA?s regulations require that in
order to receive benefits, claimants must follow treatment prescribed by the
individual?s physician if the treatment can restore his or her ability to
work. 19 The implication of this regulation is that if an individual is not
prescribed treatment, SSA does not consider the possible effects of
treatment in the disability decision, even if the treatment could make the
difference between being able and not being able to work. Moreover, the
programs do not require individuals to receive nonprescribed treatment
before or during the time they are assessed for eligibility. Thus,
treatments that can help restore functioning to persons with certain
impairments may not be factored into the disability decision for some
applicants. This limited role of treatment means, by definition, the updates
have not fully captured the benefits that treatments can provide to persons
with certain impairments. For example, medications to control severe mental
illness, arthritis treatments to slow or stop joint damage, total hip
replacements for severely injured hips, and drugs and physical therapies to
possibly improve the symptoms associated with multiple sclerosis are not
automatically factored into SSA?s decision making for determining the extent
that impairments affect people?s ability to work. Additionally, this limited
approach to treatment raises an equity issue: Applicants whose treatment
allows them to work could be denied benefits while applicants with the same
condition who have not been prescribed treatment could be allowed benefits.

While some of VA?s changes to the Schedule for Rating Disabilities reflect
advances in medicine, the changes have generally not incorporated the
potential benefits of treatment. While treatment can improve an individual?s
ability to function in the workplace, the program is not designed to factor
in the potential benefits of treatment when evaluating a

19 SSA does not consider the effects of treatment that has been prescribed
but not received under certain circumstances, such as when the treatment is
contrary to the established teaching and tenets of the individual?s
religion. Design Issues Have

Limited the Incorporation of Treatment, Corrective Medical Devices, and
Assistive Technologies into Criteria

Page 23 GAO- 02- 597 Re- Examining Disability Criteria

veteran?s service- connected disability. That is, veterans applying for
disability benefits- much like, for example, workers applying for DI
benefits- are not required to undergo treatment before or after they are
given a disability rating. Moreover, the VA program does not, unlike DI and
SSI, factor in the potential effect of prescribed treatment on an
applicants? abilities.

As with treatment, the benefits of innovations in assistive technologies-
such as advanced prosthetics and wheelchair designs- have not been fully
incorporated into DI, SSI, and VA disability criteria because the statutory
design of these programs does not recognize these advances in disability
decision making. That is, programs are not designed to assess an applicant?s
ability to work under corrected conditions. Conceivably, using innovations
such as a prosthetic device could reduce the limiting nature of an
applicant?s impairment and could also reduce, if programs were designed
differently, eligibility for or the amount of cash benefits. And some
technologies may not involve sophisticated electronics. For example, a
factory worker with a back impairment who works on an assembly line could
benefit from an ergonomic stool or chair and matting that would cushion the
floor and reduce fatigue. According to VA, technological advances, such as
voice recognition devices- which can help people who do not have the use of
their hands to interact with a computer- are not considered during the
rating process to determine the extent to which technology could improve a
veteran?s earning capacity.

The disability criteria used by DI, SSI, and VA programs for determining who
is disabled have not incorporated labor market changes. In determining the
effect that impairments have on individuals? earning capacity, programs
continue to use outdated information about the types and demands of jobs in
the economy. Given the nature of today?s economy, which offers varied
opportunities for work, agencies? use of outdated information raises
questions about the validity of disability decisions. Disability Criteria
Not

Updated to Reflect Labor Market Changes

Page 24 GAO- 02- 597 Re- Examining Disability Criteria

For an applicant who does not have an impairment that SSA presumes is severe
enough ordinarily to prevent an individual from engaging in substantial
gainful activity, SSA evaluates whether the individual is able to work
despite his or her limitations. 20 Individuals who are unable to perform
their previous work and other work in the national economy are awarded
benefits. SSA relies upon the Department of Labor?s Dictionary of
Occupational Titles (DOT) as its primary database to make this
determination; however, Labor has not updated DOT since 1991 and does not
plan to do so. Since 1993, Labor has been working on a replacement for the
DOT called the Occupational Information Network (O* NET). It contains
information on about 970 occupational categories, while DOT had 13,000
occupational titles.

Labor and SSA officials recognize that O* NET cannot be used in its current
form in the DI and SSI disability determination process. The O* NET, for
example, does not contain SSA- needed information on the amount of lifting
or mental demands associated with particular jobs. The agencies have
discussed ways that O* NET might be modified or supplemental information
collected to meet SSA?s needs, but no definitive solution has been
identified. SSA officials have indicated that an entirely new occupational
database could be needed to meet SSA?s needs, but such an effort could take
many years to develop, validate, and implement. Meanwhile, as new jobs and
job requirements evolve in the national economy, SSA?s reliance upon an
outdated database further distances the agency from the current market
place.

The percentage ratings used in VA?s Schedule for Rating Disabilities are
still primarily based on physicians? and lawyers? estimates made in 1945
about the effects that service- connected impairments have on the average
individual?s ability to perform jobs requiring manual or physical labor.
Although VA is revising the Schedule for Rating Disabilities? medical
criteria, the estimates of how impairments affect veterans? earnings have
generally not been reexamined. As a result, changes in the nature of work
that have occurred in the past 57 years- which potentially affect the extent
to which disabilities limit one?s earning capacity- are overlooked

20 SSA refers to this level of ability to work despite physical and mental
limitations as a residual functional capacity. Specifically, SSA evaluates
whether the applicant has an impairment that prevents him or her from
performing previous work or considering his or her age, education, and work
experience, performing any other kind of substantial work that exists in the
national economy. SSA Relies upon Outdated

Labor Market Information to Assess Impact of Impairments on Capacity to
Perform Work

VA Relies upon Outdated Information in Estimating Economic Loss Resulting
from Physical and Mental Impairments

Page 25 GAO- 02- 597 Re- Examining Disability Criteria

by the program?s criteria. For example, in an increasingly knowledgebased
economy, one could consider whether earning capacity is still reduced, on
average, by 40 percent for loss of a foot.

VA recognizes that there have been significant changes in the nature of
work, but does not believe that these changes need to be reflected in the
disability ratings. One official noted that a disability rating is
essentially an indication of medical severity: the more severe the medical
condition, then the higher the rating. Moreover, it was stated, changes in
the nature of work are captured in the types of vocational rehabilitation
services offered to veterans (e. g., veterans could receive computer skills
training). Finally, the official noted that disability compensation should
not be adjusted if an individual veteran is able to work despite a disabling
condition.

In the past, we suggested to Congress that it may wish to consider directing
VA to determine whether VA ratings correspond to veterans? average loss in
earning capacity and adjust disability ratings accordingly. 21 VA responded
to us that the schedule, as constructed, represents a consensus among
Congress, VA, and the veteran community, and that the ratings generally
represent an equitable method to determine disability compensation. In
conducting the work for our present assignment, VA told us that they believe
the consensus remains and the ratings continue to generally represent an
equitable approach. We continue to believe, however, that changes in the
nature of work afford some veterans with a disability the opportunity to
become more fully employed and that the current estimates of the average
reduction in earning capacity should be reviewed. Further, we believe that
updating disability criteria is consistent with the law.

21 U. S. General Accounting Office, VA Disability Compensation: Disability
Ratings May Not Reflect Veterans? Economic Losses, GAO/ HEHS- 97- 9
(Washington, D. C.: Jan. 7, 1997).

Page 26 GAO- 02- 597 Re- Examining Disability Criteria

Incorporating scientific advances and labor market changes into DI, SSI, and
VA programs can occur within the existing program design and at a more
fundamental level. Within the context of the programs? existing statutory
and regulatory design, agencies will need to continue updating the criteria
they use to determine which applicants have physical and mental conditions
that limit their ability to work. As we noted above, agencies began this
type of update in the early 1990s, although their efforts have focused much
more on the medical portion than labor market issues. In addition to
continuing their medical updates, SSA and VA need to vigorously expand their
efforts to more closely examine labor market changes. SSA?s results could
yield updated information they use to make decisions about whether or not
applicants have the ability to perform their past work or any work that
exists in the national economy. VA?s results could yield updates to the
average loss in earning capacity resulting from service- connected injuries
and conditions.

More fundamentally, SSA and VA could consider the impact that scientific
advances and labor market changes have on the programs? basic orientation.
Whereas programs currently are grounded in assessing and providing benefits
based on incapacities, fully incorporating the scientific and labor market
issues we highlight in this report implies that agencies would assess
individuals with physical and mental conditions under corrected conditions
for employment in an economy increasingly different from that which existed
when these programs were first designed. Factoring medical and technological
advances more fully into the DI, SSI, and VA programs implies that some if
not many applicants would receive up- front assistance- including help in
finding and maintaining employment- to help agencies evaluate individuals
under their fullest potential to work. In fact, the types of beneficiaries
who currently might have benefited from such assistance but have not
received either timely medical or vocational assistance (for example, DI
beneficiaries during the 24- month wait period for Medicare benefits) could
get a package of upfront service under a new approach. Moreover, reorienting
programs in this direction is consistent with increased expectations of
people with disabilities and the integration of people with disabilities
into the workplace, as reflected in the Americans with Disabilities Act.
However, for people with disabilities who do not have a realistic or
practical work option, long- term cash support is likely the best option.

In reexamining the fundamental concepts underlying the design of the DI,
SSI, and VA programs, approaches used by other disability programs may offer
some valuable insights. For example, our prior review of three private
disability insurers shows that they have fundamentally reoriented
Incorporating

Scientific Advances and Labor Market Changes into Disability Criteria Has
Several Implications

Page 27 GAO- 02- 597 Re- Examining Disability Criteria

their disability systems toward building the productive capacities of people
with disabilities, while not jeopardizing the availability of cash benefits
for people who are not able to return to the labor force. 22 These systems
have accomplished this reorientation while using a definition of disability
that is similar to that used by SSA?s disability programs. 23 However, it is
too early to fully measure the effect of these changes. In these private
disability systems, the disability eligibility assessment process evaluates
a person?s potential to work and assists those with work potential to return
to the labor force. This process of identifying and providing services
intended to enhance a person?s productive capacity occurs early after
disability onset and continues periodically throughout the duration of the
claim. In contrast, SSA?s eligibility assessment process encourages
applicants to concentrate on their incapacities, and return- towork
assistance occurs, if at all, only after an often lengthy process of
determining eligibility for benefits. SSA?s process focuses on deciding who
is impaired sufficiently to be eligible for cash payments, rather than on
identifying and providing the services and supports necessary for making a
transition to work for those who can. While cash payments are important to
individuals, the advances and changes discussed in this report suggest the
option to shift the disability programs? priorities to focus more on work.

We recognize that re- examining the programs at the broader level raises a
number of significant policy issues, including the following:

 Program design and benefits offered. Agencies would need to consider the
impact on program design, including fundamental issues of basic eligibility
structure and benefits and services provided. Would the definition of
disability change? To what extent would programs

22 U. S. General Accounting Office, SSA Disability: Other Programs May
Provide Lessons for Improving Return- to- Work Efforts, GAO- 01- 153
(Washington, D. C.: Jan. 12, 2001). This report also addresses the
reorientation of the social insurance systems of Sweden and The Netherlands
toward a return- to- work focus. In addition, this report addresses the
German social insurance system, which has had a long- standing focus on the
goal of rehabilitation before pension.

23 In general, for the three private insurers that we studied, claimants are
initially considered eligible for disability benefits when, because of
injury or sickness, they are limited in performing the essential duties of
their own occupation and they earn less than 60 to 80 percent of their
predisability earnings, depending upon the particular insurer. After 2
years, this definition generally shifts from an inability to perform one?s
own occupation to an inability to perform any occupation for which the
claimant is qualified by education, training, or experience. It is this
latter definition that is most comparable to the definition used by SSA.

Page 28 GAO- 02- 597 Re- Examining Disability Criteria

require some beneficiaries to accept assistance to enhance work capacities
as a precondition for benefits versus relying upon work incentives, time-
limited benefits, or other means to encourage individuals to maximize their
capacity to work? Would persons whose work potential is significantly
increased due to medical and technological assistance receive the same cash
benefits that are currently provided? Would criteria need to be established
to identify persons whose severity presumes a basis for permanent cash
benefits? Would program recipients with earned income above a certain level
still be eligible for no- cost assistance or do they begin to help pay for
the support? To change program design, what can be done through the
regulatory process and what requires legislative action?

 Accessibility. Agencies would need to address the accessibility of medical
and technological advances for program beneficiaries. Are new mechanisms
needed to provide sufficient access to needed services? In the case of DI
and SSI, what is the impact on the ties with the Medicare and Medicaid
programs? For VA, accessibility issues may not be as critical because of
existing links to health and vocational rehabilitation benefits provided by
VA.

 Cost. Agencies would need to address cost implications, including the
issue of who will pay for the medical and assistive technologies (will
beneficiaries be required to defray costs?). For example, would the cost of
providing treatment and assistive technologies in the disability programs be
higher than cash expenditures paid over the long- term? The cost to provide
medical and technological treatment could be quite high for some program
recipients, although much less for others. Moreover, net costs would need to
be considered, as some expenditures could be offset with cost savings by
paying reduced benefits.

 Integration with other program components. Agencies would need to address
how to integrate a new emphasis on medical and technological assistance when
making disability determinations with the health care and vocational
assistance already currently available to program beneficiaries. Notably,
VA?s program components of cash assistance, vocational rehabilitation, and
medical care may uniquely position the agency to develop an integrated model
and evaluate the results. During our work, VA officials pointed out that
vocational rehabilitation services are already available to veterans to help
them return to work and that such services include incorporating the
advances and changes addressed in this report. Yet, the restorative benefits
of medical, technological, or vocational interventions are not

Page 29 GAO- 02- 597 Re- Examining Disability Criteria

considered when VA makes an initial assessment of the economic losses that
result from a condition or injury. With a limited amount of program funding,
integrating these program components may help VA to equitably distribute
program funds among veterans with disabilities.

Agencies? research efforts could help address these broader policy issues.
In fact, SSA is beginning to conduct a number of studies that recognize that
medical advances and social changes require the disability programs to
evolve. SSA?s 2002 annual performance plan contains a strategic objective to
promote policy change based on research, evaluation, and analysis. SSA has
funded a project to design a study that would assess the extent to which the
Medical Listings are a valid measure of disability, and began work to design
a study for SSA to identify the most salient job demands in comparison to
applicants? residual functional capacity. Additionally, SSA is sponsoring
the National Study of Health and Activity, a project intended to enable SSA
to estimate how many adults live in the United States who meet the
definition of disability used by SSA and to better understand the
relationship between disability, work, health care, and community. Also, SSA
has funded a study to examine the impact and cost of assistive technology on
employment of persons with spinal cord injuries and the associated costs.
Finally, SSA had planned to conduct a demonstration project to determine the
impact of medicine and therapy on beneficiaries with mood disorders such as
major depressive disorder and bipolar disorder in returning them to work.
The project was partly in response to evidence found by SSA that some
beneficiaries with mood disorders had not received promising treatment. SSA
has placed the project on hold while it reconsiders the purpose of the
project.

Such research projects could provide important insight into ways that
medical and technological advances can help persons with disabilities work
and live independently. The research could also begin to provide important
information about the cost and outcomes of program changes that bring up-
front help to individuals receiving or applying for disability benefits.
Nevertheless, individually, these studies do not directly or systematically
address many of the implications of factoring in medical advances and
assistive technologies more fully into the DI and SSI programs.

Given the large size of the DI, SSI, and VA programs, it is incumbent that
they remain current with medical advances and the changes in the demands and
opportunities in the world of work. Updating disability criteria within
existing program structures is prudent, not only as a means Conclusions

Page 30 GAO- 02- 597 Re- Examining Disability Criteria

to best ensure program integrity, but also for agencies to meet their
fiduciary responsibilities for public funds. We recognize the challenge to
updating disability criteria. Yet we have concerns that while agencies are
making some progress, their commitment to this effort appears to be
inconsistent with the stakes involved: medical updates have been slow and
there are few written strategies for performing timely updates in the years
ahead. Moreover, these agencies have done little to better take into
consideration the implications of labor force changes on the ability of
persons with disabilities to earn a living. To the extent that SSA and VA do
not update criteria used to reach disability decisions, they cannot ensure
their disability decisions are valid.

Updating the disability criteria within the context of current program
design will not fully capture the work- enhancing opportunities afforded by
recent scientific advances and labor market changes. That is, current
program design does not assess individuals under corrected conditions. To
fully capture these advances and changes, policymakers would need to
comprehensively re- examine some fundamental aspects of the DI, SSI, and VA
programs, including the type, timing, and conditions of providing assistance
to persons with physical and mental conditions. Such an examination is a
complex but increasingly important undertaking. Indeed, Congress? approach
to these issues could be quite different given the unique characteristics of
each program. But nevertheless, without a comprehensive analysis about
alternatives and their impacts, it is likely that little progress will be
made.

To further advance the discussion of issues raised in this report, we
recommend that the Commissioner of Social Security take the following
actions:

 Use SSA?s annual performance plan to delineate strategies for and progress
in periodically updating the Medical Listings and labor market data used in
its disability determination process.

 Study and report to Congress the effect that a comprehensive consideration
of medical treatment and assistive technologies would have on the DI and SSI
programs? eligibility criteria and benefit package. The analysis should
estimate the effects on the size, cost, and management of these and other
relevant programs and identify the legislative action, if any, necessary to
initiate and fund such change. Recommendations for

Executive Action

Page 31 GAO- 02- 597 Re- Examining Disability Criteria

To further advance the discussion of issues raised in this report, we
recommend that the Secretary of Veterans Affairs take the following actions:

 Use VA?s annual performance plan to delineate strategies for and progress
in periodically updating the Schedule for Rating Disabilities

and labor market data used in its disability determination process.

 Study and report to Congress the effect that a comprehensive consideration
of medical treatment and assistive technologies would have on the VA
disability programs? eligibility criteria and benefit package. The analysis
should estimate the effects on the size, cost, and management of the program
and other relevant VA programs and identify the legislative action, if any,
necessary to initiate and fund such change.

We sent a draft of this report to SSA, VA, and the Department of Labor for
comments. SSA and VA submitted comments to us, which are reproduced,
respectively, in appendixes I and II. Our responses to their comments appear
below. In addition, technical comments and clarifications from these two
agencies were incorporated as appropriate.

SSA concurred with our recommendation to use its annual performance plan to
delineate strategies for, and progress in, periodically updating the

Medical Listings and labor market data used in its disability determination
process, and it cited the strategic objective in its 2003 performance plan
to promote policy changes that take account of changing needs based on
medical, technological, demographic, job market, and societal trends.
However, the performance goals associated with this objective do not refer
specifically to updating either the Listings

or labor market data. We believe such specific measurable goals are needed
in light of the many years that have passed since DI and SSI disability
criteria have been fully updated.

In addition, SSA provided several other comments on our findings concerning
the agency?s efforts to update the disability criteria. First, SSA mentioned
it is unable to determine why our report concludes that the DI and SSI
updates do not reflect medical advances, citing their published commitment
to do so and our recognition in the report of the agency?s efforts to
incorporate some medical updates into the Listings. We do not dispute SSA?s
contention, which is similar to a point also made by VA, that the agency
considers the effects of treatment, medication, and assistive technologies
in some if not many updates to the Listings. However, the issues we raise
are at a more fundamental level. Our report specifically Agency Comments

and Our Response SSA?s Comments and Our Response

Page 32 GAO- 02- 597 Re- Examining Disability Criteria

states that, under the statutory and regulatory design of these programs,
SSA does not automatically evaluate individuals applying for benefits under
corrected conditions. Thus, it is our belief that the programs themselves
have not been fully updated to reflect scientific advances, because
interventions that could enhance individuals? productive capacities are not,
by design, factored into the disability decision- making process. Second,
SSA commented that the DOT, even though it has not been revised since 1991,
remains the most complete and up- to- date source of comprehensive
occupational information. While characterizing the database in this manner
may be technically accurate, the database was generally recognized as
outdated by SSA and Labor officials we interviewed, and we note that Labor
does not plan to update the database. Similarly, SSA commented that creating
a new database on jobs in today?s economy for DI and SSI decision making is
only one alternative (and, as SSA notes, an unlikely and undesirable one).
In our view, absent a significant change in the decision- making process,
SSA has only a few options: it will need to either modify the database that
Labor developed to replace the DOT, modify the DOT, or develop a new
database. Each option could require substantial effort, and regardless of
which approach the agency selects, it will need to update the job- related
information it uses.

Regarding our recommendation that SSA study and report to Congress the
effect that a comprehensive consideration of medical treatment and assistive
technologies would have on DI and SSI?s eligibility criteria and benefit
package, SSA again states that it already considers in its Listings

the effect that new medical treatment and assistive technologies would have
on these two disability programs. Moreover, it states, the agency is not
reluctant to promulgate regulatory changes or to suggest any legislative
changes it considers appropriate as the need for change arises. We do not
agree that SSA currently meets our recommendation. Our recommendation
underscores the need to move beyond updating the disability decision- making
process within the existing program design. Instead, SSA needs to make a
more systematic study of options that would maximize an individual?s work
potential by focusing on early and appropriate supports and interventions
that take advantage of the advances and changes we identify in this report.
As we note in the report, SSA has several research studies that could
provide useful information in consideration of the larger design issues. Yet
these studies do not directly or systematically address many of the
implications of factoring in medical advances and assistive technologies
more fully into the DI and SSI programs. The agency needs to lay out a
master plan to systematically explore these larger policy and design issues.

Page 33 GAO- 02- 597 Re- Examining Disability Criteria

VA did not concur with our recommendation to use its annual performance plan
to delineate strategies for and progress of periodically updating the
Schedule for Rating Disabilities and labor market data used in its
disability determination process. VA stated that developing timetables for
future updates to the Schedule for Rating Disabilities is inappropriate
while its initial review is ongoing. We continue to believe that VA needs to
include measurable goals about how and when it will complete the current
round of medically- focused updates as well as future updates. VA should
incorporate this information into its plan because portions of the Schedule
for Rating Disabilities still remain to be updated and the agency has taken
years to update individual body systems. In addition, VA should now begin to
develop strategies for the next round of updates because portions of the
Schedule for Rating Disabilities updated during the current round were
completed about 8 years ago and were based on expert input collected about
12 years ago. As such, it is important to begin planning for the next cycle
of review. VA?s annual performance plan can help the agency hold itself
accountable for ensuring that disability ratings are based on current
information.

VA also did not concur with our recommendation to use its annual performance
plan to discuss strategies and progress on updating the

Schedule for Rating Disabilities because the agency does not plan to
initiate an economic validation study or a revision of the Schedule for
Rating Disabilities based on economic factors. The agency stated that prior
attempts to change the Schedule for Rating Disabilities by conducting an
economic validation were met with dissatisfaction among Congress, the
veteran community, and VA. Moreover, VA noted that it believes the Schedule
for Rating Disabilities is medically based; represents a consensus among
Congress, VA and the veteran community; and has been a valid basis for
equitably compensating America?s veterans for many years. We do not disagree
that validating the Schedule for Rating Disabilities could lead to
significant if not controversial changes, and the Schedule for Rating
Disabilities does have a medical component and has been used as a basis for
disability compensation for years. However, our analysis of the extent to
which the VA- as well as DI and SSI- disability criteria were updated was
grounded in the current law that authorizes this program. The law states
that veterans are entitled to compensation for the average reduction in
earning capacity for injuries incurred or aggravated while in service.
Because earning capacity is clearly linked to the types and demands of jobs
in the economy, and given that the economy has changed over time, updating
the Schedule for Rating Disabilities based on labor market changes is sound
administrative policy. Moreover, the concept of disability has changed
significantly since the economic data assumptions in the Schedule for Rating
Disabilities were VA?s Comments and Our

Response

Page 34 GAO- 02- 597 Re- Examining Disability Criteria

last updated in 1945, further supporting the need to keep current with
workforce requirements and opportunities.

In addition, VA did not agree with our finding that VA disability criteria
have not been fully updated based on medical advances, noting that
disabilities are commonly evaluated based on disabling effects while on
treatment. We do not dispute VA?s contention that it recognizes the effects
of treatment, medication, and assistive technologies that have been received
by veterans in some, if not many, of its disability ratings. Much like our
response to a similar comment made by SSA, our conclusion is based on the
overall design of the program rather than on whether specific ratings have
been updated to reflect treatment options. VA does not automatically
evaluate a veteran?s average reduction in earning capacity under corrected
conditions when making a decision about benefit eligibility and as such, a
veteran not receiving a medical intervention or assistive technology that
could increase work capacity is not evaluated according to his or her
potential or actual capacity to work. Again, although VA?s current approach
is consistent with program design, it also downplays the role that medical
and technological advances can play in helping enhance work capacity.
Consequently, we conclude that the program is not fully aligned with medical
and technological advances.

Finally, VA did not concur with our recommendation that it study and report
to Congress the effect that such a comprehensive consideration of medical
treatment and assistive technologies would have on the program. VA believes
moving in this direction would present a radical change from the current
program, and the agency raised questions about whether Congress and the
veteran community would support the idea. We believe that our society is
very different from the times when VA and SSA disability programs were first
designed. In addition to scientific advances and economic changes,
expectations for people with disabilities are different. We believe more
information is needed about the effects of a fuller consideration of these
advances and changes on the program. VA should systematically study the
implications of such changes and provide the results to Congress to
facilitate future decision making.

Copies of this report are being sent to appropriate congressional committees
and other interested parties. The report is also available at no charge on
the GAO Web site at http:// www. gao. gov. If you have any

Page 35 GAO- 02- 597 Re- Examining Disability Criteria

questions about this report, please contact me at (202) 512- 9889. Other
contacts and staff acknowledgments are listed in appendix IV.

Robert E. Robertson, Director Education, Workforce, and

Income Security Issues

Appendix I: Comments from the Social Security Administration

Page 36 GAO- 02- 597 Re- Examining Disability Criteria

Appendix I: Comments from the Social Security Administration

Note: GAO incorporated technical comments, as appropriate.

Appendix I: Comments from the Social Security Administration

Page 37 GAO- 02- 597 Re- Examining Disability Criteria

Now on pp. 14 and 15.

Appendix I: Comments from the Social Security Administration

Page 38 GAO- 02- 597 Re- Examining Disability Criteria

Now on p. 26. Now on p. 22.

Appendix I: Comments from the Social Security Administration

Page 39 GAO- 02- 597 Re- Examining Disability Criteria

Now on p. 24. Now on p. 24.

Now on p. 8.

Appendix II: Comments from the Department of Veterans Affairs

Page 40 GAO- 02- 597 Re- Examining Disability Criteria

Appendix II: Comments from the Department of Veterans Affairs

Note: GAO comments supplementing those in the report text appear at the end
of this appendix.

Appendix II: Comments from the Department of Veterans Affairs

Page 41 GAO- 02- 597 Re- Examining Disability Criteria

See comment 1.

Appendix II: Comments from the Department of Veterans Affairs

Page 42 GAO- 02- 597 Re- Examining Disability Criteria

See comment 2.

Appendix II: Comments from the Department of Veterans Affairs

Page 43 GAO- 02- 597 Re- Examining Disability Criteria

Now on p. 25. See comment 4. See comment 3.

Appendix II: Comments from the Department of Veterans Affairs

Page 44 GAO- 02- 597 Re- Examining Disability Criteria

See comment 6. See comment 5.

Appendix II: Comments from the Department of Veterans Affairs

Page 45 GAO- 02- 597 Re- Examining Disability Criteria

See comment 2.

Appendix II: Comments from the Department of Veterans Affairs

Page 46 GAO- 02- 597 Re- Examining Disability Criteria

1. VA cites the 1955 President?s Commission on Veterans? Pensions (commonly
called the Bradley Commission) as support that VA?s disability ratings
represent noneconomic factors, such as pain and suffering, in addition to
average loss of earnings. However, as we reported in 1997, 1 ?the
Commission?s overall recommendation with regard to the Schedule was that it
should be revised thoroughly on the basis of factual data to ensure that it
reflects veterans? average reduction in earning capacity, as required by
law. The Commission stated that the basic purpose of the program is economic
maintenance and, therefore, it is appropriate to compare periodically the
average earnings of the working population and the earnings of disabled
veterans?? Even if the ratings are intended to reflect noneconomic factors,
this does not negate the need for updating the schedule due to changes in
the labor market. The extent to which, if at all, disability compensation
reflects noneconomic factors is a policy issue which lies beyond the scope
of this report.

2. We recognize that veterans who are paid disability benefits can also be
receiving various types of treatment and assistance. Our recommendation
reflects the need for more information on the implications of integrating
the effects of treatment and assistance into the disability determination
process, including the process to determine (1) the impact of physical and
mental conditions on earnings and (2) the appropriate type and timing of
benefits- such as cash, medical, and vocational assistance- to minimize the
reduction of earnings associated with the disabilities.

3. We recognize that the link between medical impairments and the ability to
work is complex and difficult to measure and can be affected by other
factors like social support and individual motivation. Yet the VA program,
by legislative design, compensates for loss in earning capacity that results
from injuries or medical conditions. Thus, we believe, it is important to
maintain good data on the skills and demands in the labor market to provide
the best estimate of loss in earning capacity that is reasonably associated
with particular injuries and conditions. In our 1997 report, we lay out
options for the design and methodology for estimating loss in earnings among
veterans with disabilities. 2 But VA?s comment underscores the larger point
we are making: Past assumptions that underlie these programs are

1 See GAO/ HEHS- 97- 9, p. 15. 2 See GAO/ HEHS- 97- 9. GAO Comments

Appendix II: Comments from the Department of Veterans Affairs

Page 47 GAO- 02- 597 Re- Examining Disability Criteria

increasingly outmoded as the confluence of scientific, economic, and social
forces are redefining the relationship between impairments and abilities.
Additional information on how programs can take advantage of this change
will help Congress make better- informed decisions on disability policy.

4. We recognize that veterans can work and still receive disability
compensation benefits. In fact, at the beginning of fiscal year 2002, two-
thirds of veterans had a rating at 30 percent or less, implying that many
veterans receiving disability compensation are working. Moreover, we
recognize that VA?s use of an ?average? reduction in earnings capacity
implies that some veterans rated at 100 percent are employed, including
those without an actual reduction in earnings. See comment 1 for our
response to VA?s point that benefits may be partially compensated on
noneconomic factors.

5. See the third paragraph of our response to VA comments in the body of the
letter (p. 33).

6. As we report in 1997, VA conducted the Economic Validation of the Rating
Schedule (ECVARS) in the 1960s in response to the Bradley Commission
recommendations and recurring criticisms that ratings in the schedule were
not accurate. This study was designed to estimate the average loss in
earning capacity among disabled veterans by calculating the difference
between the earnings of disabled veterans, by condition, and the earnings of
nondisabled veterans, controlling for age, education, and region of
residence. On the basis of the results, VA concluded that of the
approximately 700 diagnostic codes reviewed, the ratings for 330
overestimated veterans? average loss in earnings due to their conditions,
and about 75 underestimated the average loss among veterans.

Appendix III: Five- Step Sequential Evaluation Process for Determining DI
and SSI Eligibility

Page 48 GAO- 02- 597 Re- Examining Disability Criteria

To determine whether an applicant qualifies for DI or SSI disability
benefits, SSA uses a five- step sequential evaluation process. In the first
step, an SSA field office determines if an applicant is working at the level
of substantial gainful activity and whether he or she meets the applicable
nonmedical eligibility requirements (for example, residency, citizenship,
Social Security insured status for DI, and income and resources for SSI). An
applicant who is found to be not working or working but earning less than
the substantial gainful activity level (minus allowable exclusions), and who
meets the nonmedical eligibility requirements, has his or her case forwarded
to a state Disability Determination Service (DDS) office. Applicants who do
not meet these requirements, regardless of medical condition, are denied
benefits. DDS offices gather medical, vocational, and other necessary
evidence to determine if applicants are disabled under the Social Security
law.

In step two, the DDS office determines if the applicant has an impairment or
combination of impairments that is severe and could be expected to last at
least 12 months. According to SSA standards, a severe impairment is one that
significantly limits an applicant?s ability to do ?basic work activities,?
such as standing, walking, speaking, understanding, and carrying out simple
instructions; using judgment; responding appropriately to supervision; and
dealing with change. The DDS office collects all necessary medical evidence,
either from those who have treated the applicant or, if that information is
insufficient, from an examination conducted by an independent source.
Applicants with severe impairments that are expected to last at least 12
months proceed to the third step in the disability determination process;
applicants without such impairments are denied benefits.

At step three, the DDS office compares the applicant?s condition with the
Listing of Impairments (the Medical Listings) developed by SSA. The

Medical Listings describe medical conditions that, according to SSA, are
severe enough ordinarily to prevent an individual from engaging in
substantial gainful activity. An applicant whose impairment is cited in the

Medical Listings or whose impairment is equally as severe or more severe
than those impairments in the Medical Listings and who is not engaging in
substantial gainful activity is found to be disabled and awarded benefits.
An applicant whose impairment is not cited in the Medical Listings or whose
impairment is less severe than those cited in the Medical Listings

is evaluated further to determine whether he or she has vocational
limitations that, when combined with the medical impairment( s), prevent
work. Appendix III: Five- Step Sequential Evaluation

Process for Determining DI and SSI Eligibility

Appendix III: Five- Step Sequential Evaluation Process for Determining DI
and SSI Eligibility

Page 49 GAO- 02- 597 Re- Examining Disability Criteria

In step four, the DDS office uses its physician?s assessment of the
applicant?s residual functional capacity to determine whether the applicant
can still perform work he or she has done in the past. For physical
impairments, residual functional capacity is expressed in certain demands of
work activity (for example, ability to walk, lift, carry, push, pull, and so
forth); for mental impairments, residual functional capacity is expressed in
psychological terms (for example, whether a person can follow instructions
and handle stress). If the DDS office finds that a claimant can perform work
done in the past, benefits are denied.

In the fifth and last step, the DDS office determines if an applicant who
cannot perform work done in the past can do other work that exists in the
national economy. 1 Using SSA guidelines, the DDS considers the applicant?s
age, education, vocational skills, and residual functional capacity to
determine what other work, if any, the applicant can perform. Unless the DDS
office concludes that the applicant can perform work that exists in the
national economy, benefits are allowed. At any point in the sequential
evaluation process, an examiner can deny benefits for reasons relating to
insufficient documentation or lack of cooperation by the applicant. Such
reasons can include an applicant?s failure to (1) provide medical or
vocational evidence deemed necessary for a determination by the examiner,
(2) submit to a consultive examination that the examiner believes is
necessary to provide evidence, or (3) follow a prescribed treatment for an
impairment. Benefits are also denied if the applicant asks the DDS to
discontinue processing the case.

1 By definition, work in the national economy must be available in a
significant amount in the region where the applicant lives or in several
regions of the country. It is inconsequential whether (1) such work exists
in the applicant?s immediate area, (2) job vacancies exist, or (3) the
applicant would actually be hired.

Appendix IV: GAO Contacts and Staff Acknowledgments

Page 50 GAO- 02- 597 Re- Examining Disability Criteria

Kay E. Brown, Assistant Director (202) 512- 3674 Brett S. Fallavollita,
Analyst- in- Charge (202) 512- 8507

The following people also made important contributions to this report:
William A. McKelligott, Barbara W. Alsip, and Daniel A. Schwimer. Appendix
IV: GAO Contacts and Staff

Acknowledgments GAO Contacts Staff Acknowledgments

(130050)

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