Veterans' Disability Benefits: Claims Processing Challenges and  
Opportunities for Improvements (07-DEC-05, GAO-06-283T).	 
                                                                 
The Chairman, Committee on Veterans' Affairs, U.S. House of	 
Representatives, asked GAO to report on the claims processing	 
challenges and opportunities facing the Department of Veterans	 
Affairs (VA) disability compensation and pension program. For	 
years, the claims process has been the subject of concern and	 
attention within VA and by the Congress and veterans service	 
organizations. Their concerns include long waits for decisions,  
large claims backlogs, and inaccurate decisions. Our work and	 
media reports of significant discrepancies in average disability 
payments from state to state have also highlighted concerns over 
the consistency of decision making within VA. In January 2003, we
designated federal disability programs, including VA's		 
compensation and pension programs, as a high-risk area because of
continuing challenges to improving the timeliness and consistency
of its disability decisions and the need to modernize programs.  
VA's outdated disability determination process does not reflect a
current view of the relationship between impairments and work	 
capacity. Advances in medicine and technology have allowed some  
individuals with disabilities to live more independently and work
more effectively.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-283T					        
    ACCNO:   A42737						        
  TITLE:     Veterans' Disability Benefits: Claims Processing	      
Challenges and Opportunities for Improvements			 
     DATE:   12/07/2005 
  SUBJECT:   Claims processing					 
	     Disability benefits				 
	     Internal controls					 
	     Pension claims					 
	     Performance measures				 
	     Program evaluation 				 
	     Veterans benefits					 
	     Veterans disability compensation			 
	     Veterans pensions					 

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GAO-06-283T

Testimony Before the Committee on Veterans' Affairs, House of
Representatives

United States Government Accountability Office

GAO

Not to Be Released Before 10:30 a.m. EST

Wednesday, December 7, 2005

VETERANS'DISABILITY BENEFITS

Claims Processing Challenges and Opportunities for Improvements

Statement for the Record by Cynthia A. Bascetta, Director, Education,
Workforce, and Income Security Issues

GAO-06-283T

Mr. Chairman and Members of the Committee:

I am pleased to have the opportunity to comment on the claims processing
challenges and opportunities facing the Department of Veterans Affairs'
(VA) disability compensation and pension programs. Through these programs,
VA provided almost $30 billion in cash disability benefits to more than
3.4 million veterans and their survivors in fiscal year 2004. For years,
the claims process has been the subject of concern and attention within VA
and by the Congress and veterans service organizations. Many of their
concerns have focused on long waits for decisions, large claims backlogs,
and inaccurate decisions. Our work and media reports of significant
discrepancies in average disability payments from state to state have also
highlighted concerns about the consistency of decision making within VA.
In January 2003, we designated modernizing VA and other federal disability
programs as a high-risk area, because our work over the past decade found
that these programs are based on concepts from the past and continue to
experience management problems. VA's disability programs have not been
updated to reflect the current state of science, medicine, technology, and
labor market conditions. In addition, VA still experiences lengthy
processing times and lacks a clear understanding of the extent of possible
decision inconsistencies.

You asked us to discuss the challenges and opportunities VA faces in
processing disability compensation and pension claims. My statement draws
on numerous GAO reports and testimonies on VA's compensation and pension
claims processing operations. (See Related GAO Products.) To update our
work, we reviewed recent claims processing performance data and VA's
fiscal year 2005 Performance and Accountability Report, but did not
perform independent verification of VA's data. We conducted our work in
November 2005 in accordance with generally accepted government auditing
standards.

In summary, VA continues to face challenges processing disability claims.
For example, as of the end of fiscal year 2005, rating-related claims1
were pending an average of 120 days, 9 days more than at the end of fiscal
year 2003, and far from VA's strategic goal of 78 days.2 During the same
period, the rating-related inventory grew by about 92,000 claims to a
total of about 346,000 claims. While VA has improved the accuracy of its
rating-related compensation decisions to 84 percent in fiscal year
2005-close to its goal of 88 percent in fiscal year 2005, it has 3 years
to reach its strategic goal of 98 percent. Further, we have identified
concerns about the consistency of decisions across VA's regional offices.
VA has begun studying one indicator of inconsistency, the wide variations
in average payments per veteran from state to state, in response to
adverse media coverage. While VA is making efforts to address these
problems, several factors may impede VA's ability to make and sustain
significant improvements in its claims processing performance. These
include the potential impacts of laws, court decisions, and continued
increases in the number and complexity of claims being filed.

1Rating-related claims are primarily original claims for disability
compensation and pension benefits, and reopened claims. For example,
veterans may file reopened claims if they believe their service-connected
conditions have worsened.

Opportunities for improvement may lie in more fundamental reform of VA's
disability compensation programs. This would include reexamining program
design and the context in which decisions are made as well as the
structure and division of labor among field offices. For example, in
recent years, GAO has found that VA and other federal disability programs
have not been updated to reflect the current state of science, medicine,
technology, and labor market conditions. The schedule on which disability
decisions are made within VA, for example, is based primarily on estimates
made in 1945 about the effect service-connected impairments have on the
average individual's ability to perform jobs requiring manual or physical
labor. In addition, our work has shown that about one-third of newly
compensated veterans could be interested in receiving a lump sum payment,
which could potentially save VA time and money associated with reopening
cases over time and could be beneficial to veterans. In addition, VA and
other organizations have identified potential changes to field operations
that could enhance productivity and accuracy in processing disability
claims. While reexamining claims processing challenges in a larger context
may be daunting, there are mechanisms for undertaking such an effort,
including the congressionally chartered commission currently studying
veterans' disability benefits.

2In its fiscal year 2005 Annual Performance and Accountability Report, VA
reports a separate strategic goal of 78 percent for rating-related
compensation claims and 65 percent for rating-related pension claims.

                                   Background

VA's disability compensation program pays monthly benefits to veterans
with service-connected disabilities (injuries or diseases incurred or
aggravated while on active military duty) according to the severity of the
disability. Also, VA pays dependency and indemnity compensation to some
deceased veterans' spouses, children, and parents and to survivors of
service members who died on active duty. The pension program pays monthly
benefits based on financial need to wartime veterans who have low income,
served in a period of war, and are permanently and totally disabled for
reasons not service-connected (or are aged 65 or older). VA also pays
pensions to surviving spouses and unmarried children of deceased wartime
veterans.

When a veteran submits a claim to any of VA's 57 regional offices, a
veterans service representative (VSR) is responsible for obtaining the
relevant evidence to evaluate the claim. Such evidence includes veterans'
military service records, medical examinations, and treatment records from
VA medical facilities and private medical service providers. Once a claim
is developed (i.e., has all the necessary evidence), a rating VSR, also
called a rating specialist, evaluates the claim and determines whether the
claimant is eligible for benefits. If the veteran is eligible for
disability compensation, the rating specialist assigns a percentage rating
based on degree of disability. Veterans with multiple service-connected
disabilities receive a single composite rating. For veterans claiming
pension eligibility, the regional office determines if the veteran served
in a period of war, is permanently and totally disabled for reasons not
service-connected (or is aged 65 or older), and meets the income
thresholds for eligibility. A veteran who disagrees with the regional
office's decision for either program can appeal sequentially to VA's Board
of Veterans' Appeals (BVA), the U.S. Court of Appeals for Veterans Claims,
and the U.S. Court of Appeals for the Federal Circuit.

In January 2003, we designated modernizing VA's disability programs, along
with other federal disability programs, as high-risk. We did so, in part,
because VA had long-standing problems with lengthy claims processing times
and lacked a clear understanding of the extent of possible decision
inconsistencies. Moreover, VA's disability programs have not been updated
to reflect the current state of science, medicine, technology, and labor
market conditions.

In November 2003, the Congress established the Veterans' Disability
Benefits Commission to study the appropriateness of VA disability
benefits, including disability criteria and benefit levels. The commission
held its first public hearing in May 2005.

      VA Continues to Face Significant Challenges in Processing Disability
                              Compensation Claims

VA continues to experience challenges processing veterans' disability
compensation and pension claims. These include large numbers of pending
claims and lengthy processing times. While VA made progress in fiscal
years 2002 and 2003 in reducing the size and age of its inventory of
pending claims, it has lost ground since the end of fiscal year 2003. As
shown in figure 1, pending claims increased by over one-third from the end
of fiscal year 2003 to the end of fiscal year 2005, from about 254,000 to
about 346,000. During the same period, claims pending over 6 months
increased by about 54 percent, from about 47,000 to about 72,000.

Figure1: Rating-Related Claims Pending at End of Period, Fiscal Years
2000-2005

Similarly, as shown in figure 2, VA reduced the average age of its pending
claims from 182 days at the end of fiscal year 2001 to 111 days at the end
of fiscal year 2003. Since then, however, average days pending have
increased to 120 days at the end of fiscal year 2005. This is also far
from VA's strategic goal of an average of 78 days pending by the end of
fiscal year 2008. Meanwhile, the time required to resolve appeals remains
too long. While the average time to resolve an appeal dropped from 731
days in fiscal year 2002 to 622 days in fiscal year 2005, VA was still far
from its fiscal year 2005 goal of 500 days.

Figure 2: Average Days Pending for VA Compensation and Pension
Rating-Related Claims, Fiscal Years 2000-2005

In addition to problems with timeliness of decisions, VA acknowledges that
the accuracy of regional office decisions needs further improvement. VA
reports that it has improved the accuracy of decisions on rating related
compensation claims from 80 percent in fiscal year 2002 to 84 percent in
fiscal year 2005, close to its 2005 goal of 88 percent.3

VA also faces continuing questions about its ability to ensure that
veterans receive consistent decisions-that is, comparable decisions on
benefit entitlement and rating percentage regardless of the regional
offices making the decisions. The issue of decision-making consistency
across VA is not new. In May 2000 testimony4 before the House Subcommittee
on Oversight and Investigations, Committee on Veterans' Affairs, we
underscored the conclusion made by the National Academy of Public
Administration in 19975 that VA needed to study the consistency of
decisions made by different regional offices, identify the degree of
subjectivity expected for various medical issues, and then set consistency
standards for those issues. In August 2002, we drew attention to the fact
that there are wide disparities in state-to-state average compensation
payments per disabled veteran. We noted that such variation raises the
question of whether similarly situated veterans who submit claims to
different regional offices for similar conditions receive reasonably
consistent decisions.6 We concluded that VA needed to systematically
assess decision-making consistency to provide a foundation for identifying
acceptable levels of variation and to reduce variations found to be
unacceptable. Again, in November 2004, we highlighted the need for VA to
develop plans for studying consistency issues.7 VA concurred in principle
with our findings and recommendation in the August 2002 report, agreed
that consistency is an important goal, and acknowledged that it has work
to do to achieve it. However, VA was silent on how it would evaluate and
measure consistency. Subsequently, VA concurred with our recommendation in
the November 2004 report that it conduct systematic reviews for possible
decision inconsistencies.

3We are currently reviewing the reliability of VA's claims processing
accuracy data.

4GAO, Veterans Benefits Administration: Problems and Challenges Facing
Disability Claims Processing, GAO/T-HEHS/AIMD-00-146 (Washington, D.C.:
May 18, 2000).

In December 2004, the media drew attention to the wide variations in the
average disability compensation payment per veteran in the 50 states and
published VA's own data showing that the average payments varied from a
low of $6,710 in Ohio to a high of $10,851 in New Mexico. Reacting to
these media reports, in December 2004, the Secretary of Veterans Affairs
instructed the agency's Inspector General to determine why average
payments per veteran vary widely from state to state.8 The Inspector
General found that compensation payments are affected by many factors and
that some disabilities are inherently more susceptible to variations in
rating determinations. The Inspector General made eight recommendations to
improve the consistency of rating decisions, including recommending that
VBA conduct a study of the major influences on compensation payments and
use the results to detect, correct, and prevent unacceptable payment
patterns. Also, VA's Veterans Benefits Administration began a study in
March 2005 of three disabilities believed to have potential for
inconsistency: hearing loss, post-traumatic stress disorder, and knee
conditions. VA assigned 10 subject matter experts to review 1,750 regional
office decisions. After completing its analysis of study data, VA planned
to develop a schedule for future studies of specific ratable conditions
and recommend a schedule for periodic follow-up studies of previously
studied conditions.

5National Academy of Public Administration, Management of Compensation and
Pension Benefits Claim Processes for Veterans (Washington, D.C.: August
1997).

6GAO, Veterans' Benefits: Quality Assurance for Disability Claims and
Appeals Processing Can Be Further Improved, GAO-02-806 (Washington, D.C.:
Aug. 16, 2002).

7GAO, Veterans Benefits: VA Needs Plan for Assessing Consistency of
Decisions, GAO-05-99 (Washington, D.C.: Nov. 19, 2004).

8Department of Veterans Affairs Office of Inspector General, Review of
State Variances in VA Disability Compensation Payments, Report No.
05-00765-137 (Washington, D.C.: May 19, 2005).

Recent history has shown that VA's claims processing workload and
performance are being affected by several factors, including the impacts
of laws and court decisions and the filing behavior of veterans. For
example, court decisions in 1999 and 2003 related to VA's duty to assist
veterans in developing their benefit claims, as well as legislation in
response to those decisions, significantly affected VA's ability to
produce rating-related decisions. VA attributes some of the worsening of
inventory level and pending timeliness since the end of fiscal year 2003
to a September 2003 court decision that required over 62,000 claims to be
deferred, many for 90 days or longer. Also, VA notes that legislation and
VA regulations have expanded benefit entitlement and as a result added to
the volume of claims. For example, presumptions of service-connected
disabilities have been created in recent years for many Vietnam veterans
and former Prisoners of War. Also, VA expects additional claims receipts
based on the enactment of legislation allowing certain military retirees
to receive both military retirement pay and VA disability compensation.

In addition, VA continues to receive increasing numbers of rating-related
claims, from about 586,000 in fiscal year 2000 to about 788,000 in fiscal
year 2005. VA projects 3 percent increases in claims received in fiscal
years 2005 and 2006. VA notes that claims received are increasing in part
because older veterans are filing disability claims for the first time.
One reason for this increase could be that older veterans have incentives
to file disability claims because obtaining a service-connected disability
rating is a gateway to VA health care. According to VA, the complexity of
claims is also increasing because veterans are citing more disabilities in
their claims than in the past. Because each disability needs to be
evaluated, these claims can take longer to complete. VA planned to develop
baseline data on average issues per claim by the end of calendar year
2005.

In November 2004, we reported that VA would have to rely on productivity
improvements to achieve its claims processing performance goals in the
face of increasing workloads and decreased staffing levels.9 However, its
fiscal year 2005 budget justification did not provide information on
claims processing productivity or how much VA expected to improve
productivity. VA's fiscal year 2006 budget justification provides
information on actual and planned productivity, in terms of rating-related
claims decided per direct full-time equivalent (FTE) employee, and
identifies a number of initiatives that could improve claims processing
performance. These initiatives include technology initiatives, such as
Virtual VA, involving the creation of electronic claims folders;
consolidation of the processing of Benefits Delivery at Discharge (BDD)
claims at two regional offices; and collaboration with the Department of
Defense (DOD) to improve VA's ability to obtain evidence, such as evidence
of in-service stressors for veterans claiming service-connected
Post-Traumatic Stress Disorder.

Despite these and other measures, we noted in May 2005 that it is still
not clear whether VA will be able to achieve its planned improvements.10
In our May 2005 testimony we noted that VA's fiscal year 2006 budget
justification assumes that it will increase the number of rating-related
claims completed per FTE from 94 in fiscal year 2004 to 109 in fiscal year
2005 and 2006, a 16 percent increase. For fiscal year 2005, this level of
desired productivity translates into VA completing almost 826,000
rating-related decisions. In actuality, VA completed about 763,000
decisions in fiscal year 2005.

        Opportunities for Improvement May Lie in More Fundamental Reform

While VA is taking a number of actions to address its claims processing
challenges, there are opportunities for more fundamental reform, that
could dramatically improve decision making and processing. These include
reexamining program design and the context in which decisions are made as
well as the structure and division of labor among field offices. For
example, in designating federal disability programs as high risk in 2003,
GAO noted that VA's and the Social Security Administration's (SSA)
disability programs have not been updated to reflect the current state of
science, medicine, technology, and labor market conditions. In addition,
our work has shown that about one-third of newly compensated veterans
could be interested in receiving a lump sum payment, potentially saving VA
time and money associated with reopening cases over time. Moreover, VA and
other organizations have identified potential changes to field operations
that could enhance productivity and accuracy in processing disability
claims.

9GAO, Veterans' Benefits: More Transparency Needed to Improve Oversight of
VBA's Compensation and Pension Staffing Levels, GAO-05-47 (Washington,
D.C.: Nov. 15, 2004).

10GAO, Veterans' Disability Benefits: Claims Processing Problems Persist
and Major Performance Improvements May Be Difficult, GAO-05-749T
(Washington, D.C.: May 26, 2005).

After more than a decade of research, GAO has determined that federal
disability programs are 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 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 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. We also
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 benefits 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.

Another area of program design that could be examined is the option of
providing a lump sum payment in lieu of monthly disability compensation.
In 1996, the Veterans' Claims Adjudication Commission noted that most
disability compensation claims are repeat claims-such as claims for
increased disability percentage-and most repeat claims were from veterans
with less severe disabilities.11 According to VA, about 65 percent of
veterans who began receiving disability compensation in fiscal year 2003
had disabilities rated 30 percent or less. The commission questioned
whether concentrating claims processing resources on these claims, rather
than on claims by more severely disabled veterans, was consistent with
program intent. The commission asked Congress to consider paying less
severely disabled veterans compensation in a lump sum. According to the
commission, the lump sum option could have a number of benefits for VA as
well as veterans. Specifically, the lump sum option could reduce the
number of claims submitted and allow VA to process claims more
quickly-especially those of more seriously disabled veterans. Moreover, a
lump sum option could be more useful to some veterans as they make the
transition from military to civilian life. In December 2000, we reported
that about one-third of newly compensated veterans could be interested in
a lump sum option.

In addition to program design changes, external studies of VA's disability
claims process have identified the regional office structure as
disadvantageous to efficient operation. Specifically, in its January 1999
report, the Congressional Commission on Servicemembers and Veterans
Transition Assistance found that some regional offices might be so small
that their disproportionately large supervisory overhead unnecessarily
consumes personnel resources.12 Similarly, in its 1997 report, the
National Academy of Public Administration found that VA could close a
large number of regional offices and achieve significant savings in
administrative overhead costs.

Apart from the issue of closing regional offices, the Congressional
Commission on Servicemembers and Veterans Transition Assistance
highlighted a need to consolidate disability claims processing into fewer
locations. VA has consolidated its education assistance and housing loan
guaranty programs into fewer than 10 locations, and the commission
encouraged VA to take similar action in the disability programs. In 1995
VA enumerated several potential benefits of such a consolidation. These
included allowing VA to assign the most experienced and productive
adjudication officers and directors to the consolidated offices;
facilitating increased specialization and as-needed expert consultation in
deciding complex cases; improving the completeness of claims development,
the accuracy and consistency of rating decisions, and the clarity of
decision explanations; improving overall adjudication quality by
increasing the pool of experience and expertise in critical technical
areas; and facilitating consistency in decision making through fewer
consolidated claims processing centers. VA has already consolidated some
of its pension workload (specifically, income and eligibility
verifications) at three regional offices. Also, VA has consolidated at its
Philadelphia regional office dependency and indemnity compensation claims
by survivors of service members who died on active duty, including those
who died during Operation Enduring Freedom and Operation Iraqi Freedom.

11Veterans' Claims Adjudication Commission, Report to Congress (Washington
D.C.: December 1996).

12Report of the Congressional Commission on Servicemembers and Veterans
Transition Assistance (Washington, D.C.: Jan. 14, 1999).

VA is also is in the process of consolidating decision-making on Benefits
Delivery at Discharge claims, which are generally original claims for
disability compensation, at the Salt Lake City and Winston-Salem regional
offices. VA established this program to expedite decisions on disability
compensation claims from newly separated service members. A service member
can file a BDD claim up to 180 days before separation; VA staff performs
some development work on the claim before separation. VBA actually decides
the claim after the service member is separated and the official discharge
form (DD Form 214) is received. Under the consolidation, regional offices
and VBA's 142 BDD sites will accept and develop claims, but will send the
developed claims to Salt Lake City or Winston-Salem for decision. VBA
expects this consolidation to help improve decision efficiency and
consistency. Consolidation began in December 2004 and is expected to be
completed by March 2006.

While reexamining claims processing challenges in a larger context may be
daunting, there are mechanisms for undertaking such an effort, including
the congressionally chartered commission currently studying veterans'
disability benefits. In November 2003, the Congress established the
Veterans' Disability Benefits Commission to study the appropriateness of
VA disability benefits, including disability criteria and benefit levels.
The commission was to examine and provide recommendations on (1) the
appropriateness of the benefits, (2) the appropriateness of the benefit
amounts, and (3) the appropriate standard or standards for determining
whether a disability or death of a veteran should be compensated. As of
October 2005, the commission had established 31 potential research
questions for study. Questions include how well do disability benefits
meet the congressional intent of replacing average impairment in earnings
capacity, should lump sum payments be made for certain disabilities or
level of severity of disability, and how does VA's claims processing
operation compare to other disability programs, including the location and
number of processing centers. These issues and others have been raised by
previous studies of VBA's disability claims process.

                          Contact and Acknowledgments

For further information, please contact Cynthia A. Bascetta at (202)
512-7215. Also contributing to this statement were Cristina Chaplain,
Irene Chu, and Martin Scire.

Related GAO Products

Veterans' Disability Benefits: Improved Transparency Needed to Facilitate
Oversight of VBA's Compensation and Pension Staffing Levels. GAO-06-225T.
Washington, D.C.: November 3, 2005.

VA Benefits: Other Programs May Provide Lessons for Improving Individual
Unemployability Assessments. GAO-06-207T. Washington, D.C.: October 27,
2005.

Veterans' Disability Benefits: Claims Processing Problems Persist and
Major Performance Improvements May Be Difficult. GAO-05-749T. Washington,
DC.: May 26, 2005.

VA Disability Benefits: Board of Veterans' Appeals Has Made Improvements
in Quality Assurance, but Challenges Remain for VA in Assuring
Consistency. GAO-05-655T. Washington, D.C.: May 5, 2005.

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

Veterans Benefits: VA Needs Plan for Assessing Consistency of Decisions.
GAO-05-99. Washington, D.C.: November 19, 2004.

Veterans' Benefits: More Transparency Needed to Improve Oversight of VBA's
Compensation and Pension Staffing Levels. GAO-05-47. Washington, D.C.:
November 15, 2004.

Veterans' Benefits: Improvements Needed in the Reporting and Use of Data
on the Accuracy of Disability Claims Decisions. GAO-03-1045. Washington,
D.C.: September 30, 2003.

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

Veterans Benefits Administration: Better Collection and Analysis of
Attrition Data Needed to Enhance Workforce Planning. GAO-03-491.
Washington, D.C.: April 28, 2003.

Veterans' Benefits: Claims Processing Timeliness Performance Measures
Could Be Improved. GAO-03-282. Washington, D.C.: December 19, 2002.

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

Veterans' Benefits: VBA's Efforts to Implement the Veterans Claims
Assistance Act Need Further Monitoring. GAO-02-412. Washington, D.C.: July
1, 2002.

Veterans' Benefits: Despite Recent Improvements, Meeting Claims Processing
Goals Will Be Challenging. GAO-02-645T. Washington, D.C.: April 26, 2002.

Veterans Benefits Administration: Problems and Challenges Facing
Disability Claims Processing. GAO/T-HEHS/AIMD-00-146. Washington, D.C.:
May 18, 2000.

(130540)

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Highlights of GAO-06-283T, a statement for the record to the Committee on
Veterans' Affairs, U.S. House of Representatives

December 7, 2005

VETERANS'DISABILITY BENEFITS

Claims Processing Challenges and Opportunities for Improvements

The Chairman, Committee on Veterans' Affairs, U.S. House of
Representatives, asked GAO to report on the claims processing challenges
and opportunities facing the Department of Veterans Affairs (VA)
disability compensation and pension program. For years, the claims process
has been the subject of concern and attention within VA and by the
Congress and veterans service organizations. Their concerns include long
waits for decisions, large claims backlogs, and inaccurate decisions.

Our work and media reports of significant discrepancies in average
disability payments from state to state have also highlighted concerns
over the consistency of decision making within VA. In January 2003, we
designated federal disability programs, including VA's compensation and
pension programs, as a high-risk area because of continuing challenges to
improving the timeliness and consistency of its disability decisions and
the need to modernize programs. VA's outdated disability determination
process does not reflect a current view of the relationship between
impairments and work capacity. Advances in medicine and technology have
allowed some individuals with disabilities to live more independently and
work more effectively.

The Department of Veterans Affairs continues to experience challenges
processing veterans' disability compensation and pension claims including
large numbers of pending claims and lengthy processing times. While VA
made progress in fiscal years 2002 and 2003 reducing the size and age of
its inventory of pending claims, it has lost ground since the end of
fiscal year 2003. For example, pending claims increased by over one-third
from the end of fiscal year 2003 to the end of fiscal year 2005.
Meanwhile, VA faces continuing questions about its ability to ensure that
veterans get consistent decisions across its 57 regional offices. GAO
recommended in August 2002 that VA study the consistency of decisions made
by different regional offices, identify acceptable levels of
decision-making variation, and reduce variations found to be unacceptable.
Several factors may impede VA's ability to significantly improve its
claims processing performance. These include the potential impacts of
laws, court decisions, and increases in the number and complexity of
claims received.

Rating-Related Claims Pending at End of Period, Fiscal Years 2000-2005

Opportunities for improvement may lie in more fundamental reform in the
design and operation of disability compensation and pension claims
programs. This would include reexamining program design and the context in
which decisions are made as well as the structure and division of labor
among field offices. For example, in recent years, GAO has found that VA
and other federal disability programs have not been updated to reflect the
current state of science, medicine, technology, and labor market
conditions. The schedule on which disability decisions are made within VA,
for example, is based primarily on estimates made in 1945 about the effect
service-connected impairments have on the average individual's ability to
perform jobs requiring manual or physical labor. In addition, our work has
shown that about one-third of newly compensated veterans could be
interested in receiving a lump sum payment, potentially saving VA time and
money associated with reopening cases over time. In addition, VA and other
organizations have identified potential changes to field operations that
could enhance productivity and accuracy in processing disability claims.
While reexamining claims processing challenges in a larger context may be
daunting, there are mechanisms for undertaking such an effort, including
the congressionally chartered commission currently studying veterans'
disability benefits.
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