VA Benefits: Fundamental Changes to VA's Disability Criteria Need
Careful Consideration (23-SEP-03, GAO-03-1172T).		 
                                                                 
This testimony discusses our past reviews of the Department of	 
Veterans Affairs (VA) disability programs as you consider the	 
fundamental issue of eligibility for benefits and the related	 
issue of concurrent receipt of VA disability compensation and	 
Department of Defense (DOD) retirement pay. Our work has	 
addressed these issues in addition to identifying significant	 
program design and management challenges hindering VA's ability  
to provide meaningful and timely support to disabled veterans and
their families. It is especially fitting, with the continuing	 
deployment of our military forces to armed conflict, that we	 
reaffirm our commitment to those who serve our nation in its	 
times of need. Therefore, effective and efficient management of  
VA's disability programs is of paramount importance. In January  
2003, we designated VA's disability compensation programs, as	 
well as other federal disability programs including Social	 
Security Disability Insurance and Supplemental Security Income,  
as high-risk areas. We did this to draw attention to the need for
broad-based transformation of these programs, which is critical  
to improving the government's performance and ensuring		 
accountability within expected resource limits. In March 2003, we
cautioned that the proposed modification of concurrent receipt	 
provisions in the military retirement system would not only have 
significant implications for DOD's retirement costs but could	 
also increase the demands placed on the VA claims processing	 
system. This would come at a time when the system is still	 
struggling to correct problems with quality assurance and	 
timeliness. Moreover, we testified that it would be appropriate  
to consider the pursuit of more fundamental reform of the	 
disability programs as the Congress and other policy makers	 
consider concurrent receipt.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-1172T					        
    ACCNO:   A08542						        
  TITLE:     VA Benefits: Fundamental Changes to VA's Disability      
Criteria Need Careful Consideration				 
     DATE:   09/23/2003 
  SUBJECT:   Disability benefits				 
	     Veterans benefits					 
	     Veterans disability compensation			 
	     Program evaluation 				 
	     Strategic planning 				 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-03-1172T

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

United States General Accounting Office

GAO For Release on Delivery Expected at 2: 30 p. m. EDT Tuesday, September
23, 2003 VA BENEFITS

Fundamental Changes to VA*s Disability Criteria Need Careful Consideration

Statement of Cynthia A. Bascetta, Director, Education, Workforce, and
Income Security Issues

GAO- 03- 1172T

Page 1 GAO- 03- 1172T

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

As you know, in January 2003, we designated VA*s disability compensation
programs, as well as other federal disability programs including Social
Security Disability Insurance and Supplemental Security Income, as
highrisk

areas. 1 We did this to draw attention to the need for broad- based
transformation of these programs, which is critical to improving the
government*s performance and ensuring accountability within expected
resource limits. In March 2003, we cautioned that the proposed
modification of concurrent receipt provisions in the military retirement
system would not only have significant implications for DOD*s retirement
costs but could also increase the demands placed on the VA claims
processing system. This would come at a time when the system is still

struggling to correct problems with quality assurance and timeliness.
Moreover, we testified that it would be appropriate to consider the
pursuit of more fundamental reform of the disability programs as the
Congress and other policy makers consider concurrent receipt.

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

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

Page 2 GAO- 03- 1172T

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

VA provides disability compensation to veterans with service- connected
conditions, and also provides compensation to survivors of service members
who died while on active duty. Disabled veterans are entitled to cash
benefits whether or not employed and regardless of the amount of

income earned. The cash benefit level is based on the percentage
evaluation, commonly called the *disability rating,* that represents the
average loss in earning capacity associated with the severity of physical
and mental conditions. VA uses its Schedule for Rating Disabilities to
determine, based on an evaluation of medical and other evidence, which
disability rating to assign to a veteran*s particular condition. VA*s
ratings are in 10 percent increments, from 0 to 100 percent.

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

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

VA*s Disability Criteria Are Outmoded

Page 3 GAO- 03- 1172T

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

In addition, VA*s disability criteria have not kept pace with changes in
the labor market. The nature of work has changed in recent decades as the
national economy has moved away from manufacturing- based jobs to service-
and knowledge- based employment. These changes have affected the skills
needed to perform work and the settings in which work occurs.

For example, advancements in computers and automated equipment have
reduced the need for physical labor. However, the percentage ratings used
in VA*s Schedule for Rating Disabilities are primarily based on
physicians* and lawyers* estimates made in 1945 about the effects that
serviceconnected impairments have on the average individual*s ability to
perform jobs requiring manual or physical labor. VA*s use of a disability
schedule that has not been modernized to account for labor market changes
raises questions about the equity of VA*s benefit entitlement decisions;
VA could be overcompensating some veterans, while undercompensating or
denying compensation entirely to others.

In January 1997, we suggested that the Congress consider directing VA to
determine whether the ratings for conditions in the schedule correspond to
veterans* average loss in earnings due to these conditions and adjust
disability ratings accordingly. Our work demonstrated that there were
generally accepted and widely used approaches to statistically estimate
the effect of specific service- connected conditions on potential
earnings. These estimates could be used to set disability ratings in the
schedule that are appropriate in today*s socioeconomic environment. 2 In
August 2002, we recommended that VA use its annual performance plan

to delineate strategies for and progress in periodically updating labor
market data used in its disability determination process. 3 We also

2 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). 3 U. S. General Accounting Office, SSA
and VA Disability Programs: Re- Examination of Disability Criteria Needed
to Help Ensure Program Integrity, GAO- 02- 597 (Washington, D. C.: Aug. 9,
2002).

Page 4 GAO- 03- 1172T

recommended that VA study and report to the Congress on the effects that a
comprehensive consideration of medical treatment and assistive
technologies would have on its disability programs* eligibility criteria
and benefit package. This study would include estimates of the effects on
the size, cost, and management of VA*s disability programs and other
relevant VA programs and would identify any legislative actions needed to
initiate

and fund such changes. A disease or injury resulting in disability is
considered serviceconnected if it was incurred or aggravated during
military service. No causal connection between the disability and actual
military service is required. In 1989, we reported on the U. S. practice
of compensating veterans for conditions that were probably neither caused
nor aggravated by military service. 4 These conditions included diabetes
unrelated to exposure to Agent Orange 5 , chronic obstructive pulmonary
disease, arteriosclerotic heart disease, and multiple sclerosis. A review
of case files for veterans receiving compensation found that 51 percent of
compensation beneficiaries had disabilities due to injury; of these, 36
percent were injured in combat, or otherwise performing a military task.
The remaining 49 percent were disabled due to disease; of these, 17
percent had disabilities probably caused or aggravated by military
service; 19 percent probably did not have disabilities related to service;
and for 13 percent, the link between disease and military service was
uncertain. We suggested that the Congress might wish to reconsider whether
diseases neither caused nor aggravated by military service should be
compensated as service- connected disabilities.

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

4 U. S. General Accounting Office, VA Benefits: Law Allows Compensation
for Disabilities Unrelated to Military Service, GAO/ HRD- 89- 60
(Washington, D. C.: July 31, 1989). 5 In May 2001, VA issued a regulation
identifying Type 2 diabetes as a service- connected disability for
veterans who served in Vietnam, based on presumed exposure to Agent

Orange. Some Veterans Are

Compensated For Disabilities Not Related To Military Service

Page 5 GAO- 03- 1172T

future cases. In August 2003, we also identified this as an opportunity
for budgetary savings if the Congress wished to reconsider program
eligibility. 6 Because of the complexities involved in a potential change
in eligibility, the details of how such a change would be implemented and
its

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

Mr. Chairman, this concludes my prepared remarks. I would be happy to
answer any questions that you or Members of the Committee might have. For
further information, please contact me at (202) 512- 7101 or Irene Chu

at (202) 512- 7102. Greg Whitney also contributed to this statement. 6 U.
S. General Accounting Office, Opportunities for Oversight and Improved Use
of Taxpayer Funds: Examples from Selected GAO Work, GAO- 03- 1006
(Washington, D. C.: Aug. 1, 2003). Contact and

Acknowledgments

Page 6 GAO- 03- 1172T

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

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

High- Risk Series: An Update. GAO- 03- 119. Washington, D. C.: January 1,
2003.

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

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

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

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

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

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

(130324)

This is a work of the U. S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.

The General Accounting Office, the audit, evaluation and investigative arm
of Congress, exists to support Congress in meeting its constitutional
responsibilities and to help improve the performance and accountability of
the federal government for the American people. GAO examines the use of
public funds; evaluates federal programs and policies; and provides
analyses, recommendations, and other assistance to help Congress make
informed oversight, policy, and funding decisions. GAO*s commitment to
good government is reflected in its core values of accountability,
integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents at no cost
is through the Internet. GAO*s Web site (www. gao. gov) contains abstracts
and fulltext files of current reports and testimony and an expanding
archive of older products. The Web site features a search engine to help
you locate documents using key words and phrases. You can print these
documents in their entirety, including charts and other graphics.

Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as *Today*s Reports,* on its
Web site daily. The list contains links to the full- text document files.
To have GAO e- mail

this list to you every afternoon, go to www. gao. gov and select
*Subscribe to e- mail alerts* under the *Order GAO Products* heading.

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

TDD: (202) 512- 2537 Fax: (202) 512- 6061

Contact: Web site: www. gao. gov/ fraudnet/ fraudnet. htm E- mail:
fraudnet@ gao. gov Automated answering system: (800) 424- 5454 or (202)
512- 7470 Jeff Nelligan, Managing Director, NelliganJ@ gao. gov (202) 512-
4800

U. S. General Accounting Office, 441 G Street NW, Room 7149 Washington, D.
C. 20548 GAO*s Mission Obtaining Copies of

GAO Reports and Testimony

Order by Mail or Phone To Report Fraud, Waste, and Abuse in Federal
Programs Public Affairs
*** End of document. ***