VA Benefits: Other Programs May Provide Lessons for Improving	 
Individual Unemployability Assessments (27-OCT-05, GAO-06-207T). 
                                                                 
The Department of Veterans Affairs (VA) provides disability	 
compensation to veterans disabled by injuries or diseases that	 
were incurred or aggravated while on active military duty. Under 
Individual Unemployability (IU) benefit regulations, a veteran	 
can receive increased compensation at the total disability	 
compensation rate if VA determines that the veteran is		 
unemployable because of service-connected disabilities. GAO has  
reported that numerous technological and medical advances,	 
combined with changes in society and the nature of work, have	 
increased the potential for people with disabilities to work. Yet
VA has seen substantial growth of IU benefit awards to veterans  
over the last five years. In 2001 GAO reported that a growing	 
number of private insurance companies in the United States have  
focused their programs on developing and implementing strategies 
to enable people with disabilities to return to work. Our	 
testimony will describe how U.S. private insurers facilitate	 
return to work in three key areas: (1) the eligibility assessment
process, (2) work incentives, and (3) staffing practices. It will
also compare these practices with those of VA's IU eligibility	 
assessment process.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-207T					        
    ACCNO:   A40437						        
  TITLE:     VA Benefits: Other Programs May Provide Lessons for      
Improving Individual Unemployability Assessments		 
     DATE:   10/27/2005 
  SUBJECT:   Comparative analysis				 
	     Disability benefits				 
	     Eligibility criteria				 
	     Eligibility determinations 			 
	     Employment of the disabled 			 
	     Insurance companies				 
	     Persons with disabilities				 
	     Program evaluation 				 
	     Veterans disability compensation			 
	     Vocational rehabilitation				 
	     VA Individual Unemployability			 

******************************************************************
** 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-06-207T

                 United States Government Accountability Office

GAO	Testimony before the Committee on Veterans' Affairs, U.S. Senate

For Release on Delivery

Expected at 2:00 p.m. EDT VA BENEFITS

Thursday, October 27, 2005

  Other Programs May Provide Lessons for Improving Individual Unemployability
                                  Assessments

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

GAO-06-207T

[IMG]

October 27, 2005

VA BENEFITS

Other Programs May Provide Lessons for Improving Individual Unemployability
Assessments

  What GAO Found

The disability programs of the three private insurers we reported on in
2001 included the following common return-to-work practices in their
disability assessment process:

Incorporate return-to-work considerations from the beginning of the
assessment process: Private insurers integrated return-to-work
considerations early and throughout the eligibility assessment process.
Their assessment process both evaluated a person's potential to work and
assisted those with work potential to return to the labor force.

Provide incentives for claimants and employers to encourage and facilitate
return to work: These incentives included requirements for obtaining
appropriate medical treatment and participating in a return-towork
program, if such a program would benefit the individual. In addition, they
provided financial incentives to employers to encourage them to provide
work opportunities for claimants.

Strive to use appropriate staff to achieve accurate disability decisions
and successful return-to-work outcomes: Private insurers have access to
staff with a wide range of expertise not only in making eligibility
decisions, but also in providing return-to-work assistance. The three
private disability insurers told us that they selected the appropriate
type and intensity of staff resources to assess and return individuals
with work capacity to employment cost-effectively.

In comparison, VA's Individual Unemployability decision-making practices
lag behind those used in the private sector. As we have reported in the
past, a key weakness in VA's decision-making process is that the agency
has not routinely included a vocational specialist in the evaluation to
fully evaluate the applicant's ability to work. Preliminary findings from
our ongoing work indicate that VA still does not have procedures in place
to fully assess veterans' work potential. In addition, the IU
decision-making process lacks sufficient incentives to encourage return to
work. In considering whether to grant IU benefits, VA does not have
procedures to include vocational specialists from its Vocational
Rehabilitation and Education (VR&E) services to help evaluate a veteran's
work potential. By not using these specialists, VA also misses an
opportunity to have the specialist develop a return-to-work plan, in
collaboration with the veteran, and identify and provide needed
accommodations or services for those who can work. Instead, VA's IU
assessment is focused on the veterans' inabilities and providing cash
benefits to those labeled as "unemployable," rather than providing
opportunities to help them return to work. Incorporating returnto-work
practices could help VA modernize its disability program to enable
veterans to realize their full productive potential without jeopardizing
the availability of benefits for people who cannot work.

                 United States Government Accountability Office

Mr. Chairman and Members of the Committee:

Thank you for inviting me to testify on how the Department of Veterans
Affairs (VA) Individual Unemployability (IU) disability assessment
practices compare with those used by private sector insurers in helping
people with severe disabilities realize their full potential to work. It
is especially fitting, with the continuing deployment of our military
forces to armed conflict, that we reaffirm our commitment to those who
serve our nation in its times of need. Therefore, ensuring the most
effective and efficient management of benefits and services to those who
incur disabilities because of military service is of paramount importance.
At the same time, many people with disabilities have indicated that they
want to work and be independent and would do so if they receive the
supports they need. Fortunately, numerous technological and medical
advances, combined with changes in society and the nature of work, have
increased the potential for people with disabilities to work.
Nevertheless, VA has seen substantial growth of unemployability benefit
awards to veterans with service-connected disabilities. From fiscal years
1999 to 2004, the number of veterans receiving unemployability benefits
has more than doubled, from 95,000 to 197,000.

To help people with disabilities achieve their full potential, the
disability programs financed by social insurance systems in other
countries focus on returning beneficiaries with disabilities to work.
Also, in recent years, a growing number of private insurance companies in
the United States have been focusing on developing and implementing
strategies to enable people with disabilities to return to work. Today I
would like to discuss how U.S. private sector disability programs
facilitate return to work in three key areas: (1) the eligibility
assessment process, (2) work incentives, and (3) staffing practices. I
will describe these three elements for U.S. private sector disability
insurers and compare these practices with those of VA's IU eligibility
assessment process.

My testimony is based primarily upon our prior work, including our 2001
report assessing the disability practices of selected private insurance
companies and other countries.1 This work involved in-depth interviews

1See SSA Disability: Other Programs May Provide Lessons for Improving
Return-to-Work Efforts, GAO-01-153 (Washington, D.C.: Jan. 12, 2001). In
this report, we evaluated the disability systems of Germany, Sweden, and
the Netherlands. We found that their disability programs are focused on
return-to-work and include practices similar to those used in the U.S.
private sector.

and document review for three private sector disability insurers:
UNUMProvident, Hartford Life, and CIGNA. In addition, we used our 1987
review of Individual Unemployability benefits2 as well as preliminary
observations from our ongoing review of these benefits.

In summary, the disability systems of the private insurers we reviewed
integrated return-to-work considerations early after disability onset and
throughout the eligibility assessment process. This involved both
determining-as well as enhancing-the ability of each claimant to return to
work. For example, private insurers used vocational specialists to help
ensure they fully assess the work capacity of claimants, identify needed
accommodations, and develop individualized plans to help those who can
return to work. In addition, these insurers provided incentives for
claimants to take part in vocational rehabilitation programs and to obtain
appropriate medical treatment. They also provided incentives for employers
to provide work opportunities for claimants. Managers of these other
programs also explained to us that they have developed techniques-such as
separating (or triaging) claims-to use staff with the appropriate
expertise to provide return-to-work assistance to claimants in a
cost-effective manner.

VA's individual unemployability decision-making practices lag behind those
used in the private sector. As we have reported in the past, a key
weakness in VA's decision-making process is that the agency did not
routinely include a vocational specialist in the evaluation to fully
evaluate an applicant's ability to work. Preliminary findings from our
ongoing work indicate that VA still does not have procedures in place to
fully assess veterans' work potential. In addition, the IU decision-making
process lacks sufficient incentives to encourage return to work. In
considering whether to grant IU benefits, VA does not have procedures to
include vocational specialists from its Vocational Rehabilitation and
Education (VR&E) services to help evaluate a veteran's work potential. By
not using these specialists, VA also misses an opportunity to have the
specialist develop a return-to-work plan, in collaboration with the
veteran, and identify and provide needed accommodations or services for
those who can work. Instead, VA's IU assessment is focused on the
veterans' inabilities and providing cash benefits to those labeled as
"unemployable," rather than providing opportunities to help them return to
work. Incorporating return

2See Veterans' Benefits: Improving the Integrity of VA's Unemployability
Compensation Program, GAO/HRD-87-62 (Washington, D.C.: Sept. 21, 1987).

Background

to-work practices could help VA modernize its disability program to enable
veterans to realize their full productive potential without jeopardizing
the availability of benefits for people who cannot work.

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

VA's Individual Unemployability Benefits

Disability compensation can be increased if VA determines that the veteran
is unemployable (not able to engage in substantially gainful employment)
because of the service-connected disability. Under VA's unemployability
regulations, the agency can assign a total disability rating of 100
percent to veterans who cannot perform substantial gainful employment
because of service-connected disabilities, even though their schedular
rating is less than 100 percent. To qualify for unemployability benefits,
a veteran must have a single service-connected disability of 60 percent or
more or multiple disabilities with a combined rating of 70 percent or
more, with at least one of the disabilities rated 40 percent or more. VA
can waive the minimum ratings requirement and grant unemployability
benefits to a veteran with a lower rating; this is known as an
extra-schedular rating.

Staff at VA's regional offices make virtually all eligibility decisions
for disability compensation benefits, including IU benefits. The 57 VA
regional offices use nonmedical rating specialists to evaluate veterans'
eligibility for these benefits. Upon receipt of an application for
compensation benefits, the rating specialist would typically refer the
veteran to a VA medical center or clinic for an exam. Based on the medical
examination and other information available to the rater, the rater must
first determine which of the veteran's conditions are or are not
service-connected. For service-connected conditions, the rater compares
the diagnosis with the rating schedule to assign a disability rating.

Along with medical records, raters may also obtain other records to
evaluate an IU claim. VA may require veterans to furnish an employment
history for the 5-year period preceding the date on which the veteran
claims to have become too disabled to work and for the entire time after
that date. VA guidance also requires that raters request basic employment
information from each employer during the 12-month period prior to the
date the veteran last worked. In addition, if the veteran has received
services from VA's VR&E program or Social Security disability benefits,
the rater may also request and review related information from these
organizations.

Once VA grants unemployability benefits, a veteran may continue to receive
the benefits while working if VA determines that the work is only marginal
employment rather than substantially gainful employment. Marginal
employment exists when a veteran's annual earned income does not exceed
the annual poverty threshold for one person as determined by the U.S.
Census Bureau-$ 9,827 for 2004. Furthermore, if veterans are unable to
maintain employment for 12 continuous months due to their
service-connected disabilities they may retain their IU benefits,
regardless of the amount earned.

                              Modernizing Federal
                              Disability Programs

After more than a decade of research, GAO has determined that federal
disability programs were in urgent need of attention and transformation
and placed modernizing federal disability programs on its high-risk list
in January 2003. Specifically, our research showed that the disability
programs administered by VA and the Social Security Administration (SSA)
lagged behind the scientific advances and economic and social changes that
have redefined the relationship between impairments and work. For example,
advances in medicine and technology have reduced the severity of some
medical conditions and have allowed individuals to live with greater
independence and function in work settings. Moreover, the nature of work
has changed in recent decades as the national economy has moved away from
manufacturing-based jobs to service-and knowledge-based employment. Yet
VA's and SSA's disability programs remain mired in concepts from the
past-particularly the concept that impairment equates to an inability to
work-and as such, we found that these programs are poorly positioned to
provide meaningful and timely support for Americans with disabilities.

In contrast, we found that a growing number of U.S. private insurance
companies had modernized their programs to enable people with disabilities
to return to work. In general, private insurer disability plans

  Private Insurers Incorporate Returnto-Work Considerations from the Beginning
  of the Assessment Process

can provide short-or long-term disability insurance coverage, or both, to
replace income lost by employees because of injuries and illnesses.
Employers may choose to sponsor private disability insurance plans for
employees either by self-insuring or by purchasing a plan through a
private disability insurer. The three private disability insurers we
reviewed recognized the potential for reducing disability costs through an
increased focus on returning people with disabilities to productive
activity. To accomplish this comprehensive shift in orientation, these
insurers have begun developing and implementing strategies for helping
people with disabilities return to work as soon as possible, when
appropriate.

The three private insurers we studied incorporate return-to-work
considerations early in the assessment process to assist claimants in
their recovery and in returning to work as soon as possible.3 With the
initial reporting of a disability claim, these insurers immediately set up
the expectation that claimants with the potential to do so will return to
work. Identifying and providing services intended to enhance the
claimants' capacity to work are central to their process of deciding
eligibility for benefits. Further, the insurers continue to periodically
monitor work potential and provide return-to-work assistance to claimants
as needed throughout the duration of the claim. Their ongoing assessment
process is closely linked to a definition of disability that shifts over
time from less to more restrictive-that is, from an inability to perform
one's own occupation to an inability to perform any occupation.

After a claim is received, the private insurers' assessment process begins
with determining whether the claimant meets the initial definition of
disability. In general, for the three private sector insurers we studied,
claimants are considered disabled when, because of injury or sickness,
they are limited in performing the essential duties of their own
occupation and they earn less than 60 to 80 percent of their predisability
earnings,

3Throughout the testimony, we use the term "claimant" to refer to both a
person who submits a claim for disability insurance and a person who
receives disability benefits for the lifetime of a claim.

depending upon the particular insurer.4 As part of determining whether the
claimant meets this definition, the insurers compare the claimant's
capabilities and limitations with the demands of his or her own occupation
and identify and pursue possible opportunities for accommodation-
including alternative jobs or job modifications-that would allow a quick
and safe return to work. A claimant may receive benefits under this
definition of disability for up to 2 years.

As part of the process of assessing eligibility according to the "own
occupation" definition, insurers directly contact the claimant, the
treating physician, and the employer to collect medical and vocational
information and initiate return-to-work efforts, as needed. Insurers'
contacts with the claimant's treating physician are aimed at ensuring that
the claimant has an appropriate treatment plan focused, in many cases, on
timely recovery and return to work. Similarly, insurers use early contact
with employers to encourage them to provide workplace accommodations for
claimants with the capacity to work.

If the insurers find the claimant initially unable to return to his or her
own occupation, they provide cash benefits and continue to assess the
claimant to determine if he or she has any work potential. For those with
work potential, the insurers focus on return to work before the end of the
2-year period, when, for all the private insurers we studied, the
definition of disability becomes more restrictive. After 2 years, the
definition shifts from an inability to perform one's own occupation to an
inability to perform any occupation for which the claimant is qualified by
education, training, or experience. Claimants initially found eligible for
benefits may be found ineligible under the more restrictive definition.

The private insurers' shift from a less to a more restrictive disability
definition after 2 years reflects the changing nature of disability and
allows

4The private insurers generally define one's "own occupation" as the
occupation a person is routinely performing at onset of disability. They
generally assess how the claimant's own occupation is performed in the
national economy, rather than how the work is performed for a specific
employer or at a specific location. Moreover, two of the insurers have
expanded their "own occupation" definition of disability to include a
reasonable alternative position. These two insurers require that a
claimant who is judged able to do so accept a reasonable alternative
position-a job in the same general location as that offered by the
claimant's current employer-or risk losing cash benefits. The claimant
must be qualified to perform the work of this alternative position-which
must pay the claimant more than 60 to 80 percent of predisability
earnings, depending upon the insurer-given his or her education, training,
or experience.

a transitional period for insurers to provide financial and other
assistance, as needed, to help claimants with work potential return to the
workforce. During this 2-year period, the insurer attempts to determine
the best strategy for managing the claim. Such strategies can include, for
example, helping plan medical care or providing vocational services to
help claimants acquire new skills, adapt to assistive devices to increase
functioning, or find new positions. For those requiring vocational
intervention to return to work, the insurers develop an individualized
return-to-work plan, as needed. Basing the continuing receipt of benefits
upon a more restrictive definition after 2 years provides the insurer with
leverage to encourage the claimant to participate in a rehabilitation and
return-to-work program. Indeed, the insurers told us they find that
claimants tend to increase their efforts to return to work as they near
the end of the 2-year period.

If the insurer initially determines that the claimant has no work
potential, it regularly monitors the claimant's condition for changes that
could increase the potential to work and reassesses after 2 years the
claimant's eligibility under the more restrictive definition of
disability. The insurer continues to look for opportunities to assist
claimants who qualify under this definition of disability in returning to
work. Such opportunities may occur, for example, when changes in medical
technology-such as new treatments for cancer or AIDS-may enable claimants
to work, or when claimants are motivated to work.

The private insurers that we reviewed told us that throughout the duration
of the claim, they tailor the assessment of work potential and development
of a return-to-work plan to the specific situation of each individual
claimant. To do this, disability insurers use a wide variety of tools and
methods when needed. Some of these tools, as shown in tables 1 and 2, are
used to help ensure that medical and vocational information is complete
and as objective as possible. For example, insurers consult medical staff
and other resources to evaluate whether the treating physician's diagnosis
and the expected duration of the disability are in line with the
claimant's reported symptoms and test results. Insurers may also use an
independent medical examination or a test of basic skills, interests, and
aptitudes to clarify the medical or vocational limitations and
capabilities of a claimant. In addition, insurers identify transferable
skills to compare the claimant's capabilities and limitations with the
demands of the claimant's own occupation. This method is also used to help
identify other suitable occupations and the specific skills needed for
these new occupations when the claimant's limitations prevent him or her
from returning to a prior occupation. Included in these tools and methods
are

services to help the claimant return to work, such as job placement, job
modification, and retraining.

Table 1: Medical Assessment: Tasks, Tools, and Methods

Task Tools and methods

Assess the diagnosis, treatment, and Consultation of medical staff and
other duration of the impairment and begin resources, including current
medical developing a treatment plan focused on guidelines describing
symptoms, expected returning the claimant to work promptly results from
diagnostic tests, expected and safely duration of disability, and
treatment

Assess the claimant's cognitive skills Standardized mental tests

Validate the treating physician's Review of the claimant's file, generally
by a
assessment of the impairment's effect on nurse or a physician who is not
the
the claimant's ability to work and the most claimant's treating physician
appropriate treatment and accommodation

Verify the diagnosis, level of functioning, and appropriateness of
treatment

Independent medical examination of the claimant by a contracted physician

                  Evaluate the claimant's ability to function,

Home visits by a field nurse or investigator or accompanied doctor visits

determine needed assistance, and help the claimant develop an appropriate
treatment plan with the physician

Assess the claim's validity 	Home visits and interviews with neighbors or
others who have knowledge of the claimant's activities

              Source: GAO analysis of private insurers' practices.

    Table 2: Vocational Assessment and Assistance: Tasks, Tools, and Methods

Task Tools and methods

Identify transferable skills, validate restrictions on and capabilities
for performing an occupation, and identify other suitable occupations and
retraining programs

o  	Test basic skills, such as reading or math

o  Determine interests and aptitudes

o  	Evaluate functional capacities associated with an occupation, such as
lifting, walking, and following directions

o  	Compare functional capacities, work history, education, and skills
with the demands of an occupation Enhance work capabilities and help  o 
Provide resume preparation, help

develop job-seeking skills 	develop job-seeking skills, and help with job
placement

o  	Assist in obtaining physical, occupational, or speech therapy and
access to employee assistance, support groups, or state agency vocational
rehabilitation or other community services

o  	Identify and fund on-the-job training or other educational courses

Assess ability to perform own or any  o  Observe and analyze the essential
occupation, assess potential for duties of the claimant's own occupation,

accommodation, and determine whether another occupation for the same

sufficient salary is offered locally or employer, or an occupation of a

nationally for a suitable occupation prospective employer

o  	Determine the general availability and salary range of specified
occupations

o  	Identify for a specified occupation the potential employers and
related job descriptions, salary range, and openings

Reaccustom claimant to a full work  o  Provide work opportunities for the
schedule and enable claimant to claimant to gradually resume his or her
overcome impairment and return to work job duties

o  	Procure devices to assist with work or otherwise help to modify the
job

              Source: GAO analysis of private insurers' practices.

  Private Insurers Provide Incentives for Claimants and Employers to Encourage
  and Facilitate Return to Work

To facilitate return to work, the private insurers we studied employment
incentives both for claimants to participate in vocational activities and
receive appropriate medical treatment, and for employers to accommodate
claimants. The insurers require claimants who could benefit from
vocational rehabilitation to participate in an individualized
return-towork program. They also provide financial incentives to promote
claimants' efforts to become rehabilitated and return to work. To better
ensure that medical needs are met, the insurers we studied require that
claimants receive appropriate medical treatment and assist them in
obtaining this treatment. In addition, they provide financial incentives
to employers to encourage them to provide work opportunities for
claimants.

The three private insurers we reviewed require claimants who could benefit
from vocational rehabilitation to participate in a customized
rehabilitation program or risk loss of benefits. As part of this program,
a return-to-work plan for each claimant can include, for example, adaptive
equipment, modifications to the work site, or other accommodations. These
private insurers mandate the participation of claimants whom they believe
could benefit from rehabilitation because they believe that voluntary
compliance has not encouraged sufficient claimant participation in these
plans.5

The insurers told us that they encourage rehabilitation and return to work
by allowing claimants who work to supplement their disability benefit
payments with earned income.6 During the first 12 or 24 months of
receiving benefits, depending upon the particular insurer, claimants who
are able to work can do so to supplement their benefit payments and
thereby receive total income of up to 100 percent of predisability

5Although claimants may be involved in the development of the
individualized rehabilitation plans, the insurers make the final decision
about the types of rehabilitation services claimants will receive.

6The private disability insurers we reviewed told us that their benefits
generally replace 60 percent of predisability earnings, depending upon the
insurer.

earnings.7 After this period, if the claimant is still working, the
insurers decrease the benefit amount so that the total income a claimant
is allowed to retain is less than 100 percent of predisability income.

When a private insurer, however, determines that a claimant is able, but
unwilling, to work, the insurer may reduce or terminate the claimant's
benefits. To encourage claimants to work to the extent they can, even if
only part-time, two of the insurers told us they may reduce a claimant's
benefit by the amount the claimant would have earned if he or she had
worked to maximum capacity. The other insurer may reduce a claimant's
monthly benefit by the amount that the claimant could have earned if he or
she had not refused a reasonable job offer-that is, a job that was
consistent with the claimant's background, education, and training.
Claimants' benefits may also be terminated if claimants refuse to accept a
reasonable accommodation that would enable them to work.

Since medical improvement or recovery can also enhance claimants' ability
to work, the private insurers we studied not only require, but also help,
claimants to obtain appropriate medical treatment. To maximize medical
improvement, these private insurers require that the claimant's physician
be qualified to treat the particular impairment. Additionally, two
insurers require that treatment be provided in conformance with medical
standards for treatment type and frequency. Moreover, the insurers'
medical staff work with the treating physician as needed to ensure that
the claimant has an appropriate treatment plan. The insurers told us they
may also provide funding for those who cannot otherwise afford treatment.

The three private sector insurers we studied may also provide financial
incentives to employers to encourage them to provide work opportunities
for claimants. By offering lower insurance premiums to employers and
paying for accommodations, these private insurers encourage employers to
become partners in returning disabled workers to productive employment.
For example, to encourage employers to adopt a disability

7To illustrate, assume that Ms. Jones is a claimant with predisability
earnings of $1,000 per month and an insurance policy that replaces 60
percent of her predisability earnings. She is currently not working. Under
this scenario, her income would be limited to $600 per month in disability
benefits. However, if she returned to work, even part-time, she would have
the opportunity to increase her total income to 100 percent of her
predisability earnings or, in this instance, $1,000. If she returned to
work and earned $500 per month, the insurer would reduce her benefit
payment from $600 to $500 per month, so that her combined earnings and
benefit payment would provide a total monthly income equal to her
predisability income of $1,000.

  Private Insurers Strive to Use Appropriate Staff to Achieve Accurate
  Disability Decisions and Successful Return-to-Work Outcomes

policy with return-to-work incentives, the three insurers offer employers
a discounted insurance premium. If their disability caseload declines to
the level expected for those companies that assist claimants in returning
to work, the employers may continue to pay the discounted premium amount.
These insurers also fund accommodations, as needed, for disabled workers
at the employer's work site.8

The private disability insurers we studied have developed techniques for
using the right staff to assess eligibility for benefits and return those
who can to work. Officials of the three private insurers told us that they
have access to individuals with a range of skills and expertise, including
medical experts and vocational rehabilitation experts. They also told us
that they apply this expertise as appropriate to cost effectively assess
and enhance claimants' capacity to work.

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

8Educating employers about the size and extent of disability costs is an
important element in motivating employers to promote efforts to return
claimants to work. For example, one of the private insurers we reviewed
educates employers about the direct and indirect costs of not controlling
lost time associated with disability, which this insurer estimated to
amount to 4 to 6 percent of an employer's payroll.

9According to one insurer, disabilities with subjective diagnoses include
certain types of mental illness, fibromyalgia, chronic pain (often back
pain), and chronic fatigue syndrome.

Table 3: Responsibilities and Qualifications of Staff Employed by Private
Disability Insurers to Assess and Enhance a Claimant's Work Potential

Type of staff Responsibilities Qualifications and training

Claims managers  o  Determine disability benefit eligibility.

o  	Develop, implement, and monitor an individualized claim management
strategy.

o  	Serve as primary contact for the claimant and the claimant's employer.

o  	Focus on facilitating the claimant's timely, safe return to work.

o  Coordinate the use of expert resources.

One insurer gives preference to those with a college degree and requires
insurance claims experience and specialized training and education.

Another requires a college degree, a passing grade on an insurer-sponsored
test, and specialized training and coaching.

a

Medical and related experts  o  	Collect and evaluate medical and
functional information about the claimant to assist in the eligibility
assessment and help to ensure that claimants receive the appropriate
medical care to enable them to return to work.

o  	At one insurer, physicians also help train company staff.

Vocational rehabilitation experts  o  Help assess the claimant's ability
to work.

o  	Help overcome work limitations by identifying needed assistance, such
as assistive devices and additional training, and ensuring that it is
provided.

Medical staff include registered nurses with case management or
disability-related experience and experts in behavioral and mental issues,
such as psychologists, experienced psychiatric nurses, and licensed social
workers. Two insurers also employ board

b

certified physicians in various specialties.

Rehabilitation experts are master's-degree-level vocational rehabilitation
counselors. In addition, one insurer requires board certification and 5
years of experience.

Supervisors  o  Provide oversight, mentoring, and training. 	One insurer
gives preference to those with a college degree and requires 3 years'
disability experience, some management experience, and specialized
training. Another insurer requires a college degree, more than 12 years'
disability claims experience, and completion of courses leading to a
professional designation.

Source: GAO analysis of private insurers' practices.

aAt one company, the medical experts are employees of a company subsidiary
but are often colocated with the insurer's employees.

bOne company, for example, employs 85 part-and full-time physicians,
including psychiatrists, doctors of internal medicine, orthopedists,
family practice physicians, cardiologists, doctors of occupational
medicine, and neurologists.

The three disability insurers we reviewed use various strategies for
organizing their staff to focus on return to work, with teams organized to
manage claims associated either with a specific impairment type or with a
specific employer (that is, the group disability insurance policyholder).
One insurer organizes its staff by the claimant's impairment type-for
example, cardiac/respiratory, orthopedic, or general medical-to develop
in-depth staff expertise in the medical treatments and accommodations
targeted at overcoming the work limitations associated with a particular

impairment. The other two insurers organize their staff by the claimant's
employer because they believe that this enables them to better assess a
claimant's job-specific work limitations and pursue workplace
accommodations, including alternative job arrangements, to eliminate these
limitations.10 Regardless of the overall type of staff organization, each
of the three insurers facilitates the interaction of its core staff-
claims managers, medical experts, and vocational rehabilitation experts-
by pulling these experts together into small, multidisciplinary teams
responsible for managing claims. Additionally, one insurer engenders team
interaction by physically colocating core team members in a single working
area.

To provide a wide array of needed experts, the three disability insurers
expand their core staff through agreements or contracts with subsidiaries
or other companies. These experts-deployed both at the insurer's work site
and in the field-provide specialized services to support the eligibility
assessment process and to help return claimants to work. For instance,
these insurers contract with medical experts beyond their core employee
staff-such as physicians, psychologists, psychiatrists, nurses, and
physical therapists-to help test and evaluate the claimant's medical
condition and level of functioning. In addition, the insurers contract
with vocational rehabilitation counselors and service providers for
various vocational services, such as training, employment services, and
vocational testing.

The private insurers we examined told us that they strive to apply the
appropriate type and intensity of staff resources to cost-effectively
return to work claimants with work capacity. The insurers described
various techniques that they use to route claims to the appropriate claims
management staff, which include separating (or triaging) different types
of claims and directing them to staff with the appropriate expertise.
According to one insurer, the critical factor in increasing return-to-work
rates and, at the same time, reducing overall disability costs is proper
triaging of claims. In general, the private insurers separate claims by
those who are likely to return to work and those who are not expected to
return to work. The insurers told us that they assign the type and level
of staff necessary to manage claims of people who are likely to return to
work on

10All three insurers, however, have behavioral care specialists
specifically for managing psychiatric claims.

the basis of the particular needs and complexity of the specific case (see
table 4).

       Table 4: Staff Assignment for Claims Management by Triage Category

Types of return-to-work services Triage category Staff assigned provided

Likely to return to work

Condition requires medical assistance and

 Medical specialist  o  Recommend improvements in treatment more than 1 year to
                              stabilize medically.

plan to treating physician

o  	Refer claimant for more specialized or appropriate medical services

o  	Ensure frequency of treatment meets standards for condition

Condition requires less than a year to stabilize.

Claims manager  o  Monitor medical condition

o  	Maintain contact with employer and physician to ensure return to work

o  	Obtain input from medical and vocational specialists as needed

  Condition is stabilized, and claimant needs Multidisciplinary team including

o  	Evaluate claimant's functional abilities for work

o  Customize return-to-work plan

o  	Arrange for needed return-to-work services

o  	Monitor progress against expected return-to-work date

rehabilitation or job accommodation to return to work.

o  Vocational expert

o  Medical expert

o  Claims specialist

o  Other specialists as needed

                           Unlikely to return to work

Claimant is determined unable to return to Claims manager  o  Review
medical condition and level of work. functioning regularly

Source: GAO analysis of private insurers' practices.

As shown in table 4, claimants expected to need medical assistance, such
as those requiring more than a year for medical stabilization, are likely
to receive an intensive medical claims management strategy. A medical
strategy involves, for example, ensuring that the claimant receives
appropriate medical treatment. Claimants who need less than a year to
stabilize medically are managed much less intensively. For these claims, a
claims manager primarily monitors the claimant's medical condition to
assess whether it is stable enough to begin vocational rehabilitation, if
appropriate. Alternatively, a claimant with a more stable, albeit serious,
medical condition who is expected to need vocational rehabilitation, job
accommodations, or both to return to work might warrant an intensive
vocational strategy. The private disability insurers generally apply their
most resource-intensive, and therefore most expensive, multidisciplinary
team approach to these claimants. Working closely with the employer and

  VA's Individual Unemployability Return-to-Work Efforts Lag behind Other
  Programs

the attending physician, the team actively pursues return-to-work
opportunities for claimants with work potential.

Finally, claimants who are likely not to return to work (or "stable and
mature" claims) are generally managed using a minimum level of resources,
with a single claims manager responsible for regularly reviewing a
claimant's medical condition and level of functioning.11 The managers of
these claims carry much larger caseloads than managers of claims that
receive an intensive vocational strategy. For example, one insurer's
average claims manager's caseload for these stable and mature claims is
about 2,200 claims, compared with an average caseload of 80 claims in the
same company for claims managed more actively.

Unlike disability compensation programs in the private sector, VA has not
drawn on vocational experts for IU assessments to examine the claimant's
work potential and identify the services and accommodations needed to help
those who could work to realize their full potential. In our 1987 report,
we found that VA had not routinely obtained all vocational information
needed to determine a veteran's ability to engage in substantially gainful
employment before it granted IU benefits. Without understanding how key
vocational factors, such as the veteran's education, training, earnings,
and prior work history, affect the veteran's work capacity, VA cannot
adequately assess the veteran's ability to work. To perform this analysis,
VA officials told us that the agency has vocational specialists who are
specially trained to perform this difficult analysis. Skilled vocational
staff can determine veterans' vocational history, their ability to perform
past or other work, and their need for retraining. By not collecting
sufficient information and including the expertise of vocational
specialists in the assessment, VA did not have an adequate basis for
awarding or denying a veteran's claim for unemployability benefits.

Preliminary findings from our ongoing work indicate that VA still does not
have procedures in place to fully assess veterans' work potential. In
addition, the IU decision-making process lacks sufficient incentives to
encourage return to work. In considering whether to grant IU benefits, VA
does not have procedures to include vocational specialists from its VR&E

11The insurers review these claims on a regular basis, ranging from every
6 months to every 3 years, depending upon the insurer and the
characteristics of the claim.

Concluding Observations

services to help evaluate a veteran's work potential. By not using these
specialists, VA also misses an opportunity to have the specialist develop
a return-to-work plan, in collaboration with the veteran, and identify and
provide needed accommodations or services for those who can work. Instead,
VA's IU assessment is focused on the veterans' inabilities and providing
cash benefits to those labeled as "unemployable," rather than providing
opportunities to help them return to work.

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

Mr. Chairman, this concludes my prepared statement. I would be pleased to
respond to any questions you or members of the committee may have.

For future contacts regarding this testimony, please call Cynthia Bascetta
at (202) 512-7215. Carol Dawn Petersen, Julie DeVault, and Joseph
Natalicchio also made key contributions to this testimony.

Related GAO Products

21st Century Challenges: Reexamining the Base of the Federal Government,
GAO-05-325SP (Washington, D.C.: February 2005).

High-Risk Series: An Update, GAO-05-207 (Washington, D.C.: January 2005).

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

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).

SSA Disability: Other Programs May Provide Lessons for Improving
Return-to-Work Efforts, GAO-01-153 (Washington, D.C.: Jan. 12, 2001).

SSA Disability: Return-to-Work Strategies May Improve Federal Programs,
GAO/HEHS-96-133 (Washington, D.C.: July 11, 1996).

Veterans' Benefits: Improving the Integrity of VA's Unemployability
Compensation Program, GAO/HRD-87-62 (Washington, D.C.: Sept. 21, 1987).

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.

GAO's Mission

Obtaining Copies of GAO Reports and Testimony

The Government Accountability 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 GAO's Web site (www.gao.gov). Each weekday, GAO posts newly
released reports, testimony, and correspondence on its Web site. To have
GAO e-mail you a list of newly posted products every afternoon, go to
www.gao.gov and select "Subscribe to Updates."

Order by Mail or Phone 	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. Government Accountability 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

To Report Fraud, Contact:

Waste, and Abuse in Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: [email protected] Programs Automated answering system: (800)
424-5454 or (202) 512-7470

Gloria Jarmon, Managing Director, [email protected] (202)
512-4400Congressional U.S. Government Accountability Office, 441 G Street
NW, Room 7125 Relations Washington, D.C. 20548

Public Affairs 	Paul Anderson, Managing Director, [email protected] (202)
512-4800 U.S. Government Accountability Office, 441 G Street NW, Room 7149
Washington, D.C. 20548

                           PRINTED ON RECYCLED PAPER
*** End of document. ***