Veterans' Disability Benefits: Processing of Claims Continues to 
Present Challenges (13-MAR-07, GAO-07-562T).			 
                                                                 
The Subcommittee on Disability Assistance and Memorial Affairs,  
House Veterans' Affairs Committee, asked GAO to discuss its	 
recent work related to the Department of Veterans Affairs' (VA)  
disability claims and appeals processing. GAO has reported and	 
testified on this subject on numerous occasions. GAO's work has  
addressed VA's efforts to improve the timeliness of decisions on 
claims and appeals and VA's efforts to reduce backlogs. 	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-562T					        
    ACCNO:   A66787						        
  TITLE:     Veterans' Disability Benefits: Processing of Claims      
Continues to Present Challenges 				 
     DATE:   03/13/2007 
  SUBJECT:   Appeals process					 
	     Claims						 
	     Claims processing					 
	     Disability benefits				 
	     Performance appraisal				 
	     Program evaluation 				 
	     Veterans benefits					 
	     Veterans disability compensation			 

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GAO-07-562T

   

     * [1]Background
     * [2]VA Continues to Face Challenges in Improving Its Claims Proc
     * [3]Opportunities for Improvement May Lie in More Fundamental Re
     * [4]Contact and Acknowledgments
     * [5]GAO's Mission
     * [6]Obtaining Copies of GAO Reports and Testimony

          * [7]Order by Mail or Phone

     * [8]To Report Fraud, Waste, and Abuse in Federal Programs
     * [9]Congressional Relations
     * [10]Public Affairs

Testimony before the Subcommittee on Disability Assistance and Memorial
Affairs, Committee on Veterans' Affairs, House of Representatives

United States Government Accountability Office

GAO

For Release on Delivery Expected at 10:00 a.m. EDT
Tuesday, March 13, 2007

VETERANS' DISABILITY BENEFITS

Processing of Claims Continues to Present Challenges

Statement of Daniel Bertoni, Acting Director
Education, Workforce, and Income Security Issues

GAO-07-562T

Mr. Chairman and Members of the Subcommittee:

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 about $34.5 billion in cash disability benefits to more than
3.5 million veterans and their survivors in fiscal year 2006. For years,
the claims process has been the subject of concern and attention by VA,
the Congress, and veterans service organizations, due in large part
because of long waits for decisions and large claims backlogs. Veterans of
the conflicts in Iraq and Afghanistan, and survivors of servicemembers who
have died in those conflicts, are facing these same issues as they seek VA
disability benefits. In January 2003, we designated modernizing VA and
other federal disability programs as a high-risk area, because of these
service delivery challenges, and because our work over the past decade has
found that these programs are based on outmoded concepts from the past.

You asked us to discuss VA's disability claims process, in light of the
ongoing conflicts in Iraq and Afghanistan. My statement draws on a number
of prior GAO reports and testimonies, (see related GAO products), and
information we have updated to reflect the current status of VA claims
processing and initiatives.

In summary, VA continues to face challenges in improving service delivery
to veterans. Between fiscal years 2003 and 2006, the inventory of
rating-related claims grew by almost half to a total of about 378,000, in
part because of increased filing of claims, including those filed by
veterans of the Iraq and Afghanistan conflicts.^1 During the same period,
the average number of days these claims were pending increased by 16 days,
to an average of 127 days. Meanwhile, appeals resolution remains a lengthy
process. In fiscal year 2006, it took an average of 657 days to resolve
appeals. Several factors may be affecting VA's claims-processing
performance. These include the potential impacts of laws and court
decisions, continued increases in the number and complexity of claims
being filed, and difficulties in obtaining the evidence needed to
adjudicate claims in a timely manner, such as military service records. To
help improve claims-processing performance, VA has taken a number of
steps, including requesting funding for additional staff and undertaking
initiatives to reduce appeal remands. The President's fiscal year 2008
budget requests an increase of over 450 full-time equivalent employees to
process compensation claims. Through training and information sharing, VA
is also working to reduce appeals processing times by decreasing the
number of cases sent back from the appeals level for further development.

^1 Rating-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.

Despite the steps VA is taking, opportunities for significant performance
improvement may lie in more fundamental reform of VA's disability
compensation program. This would include reexamining program design as
well as the structure and division of labor among field offices. For
example, we found that VA's and other federal disability programs have not
been updated to reflect the current state of science, medicine,
technology, and labor market conditions. For example, the criteria for
disability decisions are based primarily on estimates made in 1945 about
the effect of service-connected impairments on the average individual's
ability to perform jobs requiring manual labor. In addition, VA and other
organizations have identified potential changes to field operations that
could enhance productivity in processing disability claims. While major
reexamination may be daunting, there are mechanisms for undertaking such
an effort. For example, the congressionally chartered commission on
veterans' disability benefits has been studying a number of program design
issues and will report to the Congress later this year.

Background

VA pays monthly disability compensation 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. VA also pays compensation to some spouses, children, and
parents of deceased veterans and servicemembers. VA's pension program pays
monthly benefits based on financial need to certain wartime veterans or
their survivors.^2

When a veteran submits a claim to any of the Veterans Benefits
Administration's (VBA) 57 regional offices, a veterans service
representative 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 has all the
necessary evidence, 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. A veteran who disagrees with the
regional office's decision can appeal to VA's Board of Veterans' Appeals,
and then to U.S. federal courts. If the Board finds that a case needs
additional work, such as obtaining additional evidence or contains
procedural errors, it is sent back to the Veterans Benefits
Administration, which is responsible for initial decisions on disability
claims.

^2 Veterans qualify for pensions if they have low income, served in a
period of war, and are permanently and totally disabled for reasons not
service-connected (or are age 65 or older).

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
is scheduled to report the results of its study to the Congress in October
2007.

VA Continues to Face Challenges in Improving Its Claims Processing

Several factors are continuing to create challenges for VA's claims
processing, despite its steps to improve performance. While VA made
progress in fiscal years 2002 and 2003 reducing the size and age of its
pending claims inventory, it has lost ground since then. This is due in
part to increased filing of claims, including those filed by veterans of
the Iraq and Afghanistan conflicts. Other factors include increases in
claims complexity, the effects of recent laws and court decisions, and
challenges in acquiring needed evidence in a timely manner. VA's steps to
improve performance include requesting funding for additional staff and
undertaking initiatives to reduce appeal remands.

VA's inventory of pending claims and their average time pending has
increased significantly in the last 3 years, in part because of an
increase in the number of claims. The number of pending claims increased
by almost one-half from the end of fiscal year 2003 to the end of fiscal
year 2006, from about 254,000 to about 378,000. During the same period,
the number of claims pending longer than 6 months increased by more than
three-fourths, from about 47,000 to about 83,000 (see fig. 1).

Figure 1: Rating-Related Claims Pending at End of Period, Fiscal Years
2000-2006

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. However, by the end of fiscal year 2006, average days
pending had increased to 127 days. Meanwhile, the time required to resolve
appeals remains too long. The average time to resolve an appeal rose from
529 days in fiscal year 2004 to 657 days in fiscal year 2006.

Figure 2: Average Days Pending for VA Compensation and Pension
Rating-Related Claims, Fiscal Years 2000-2006

The increase in VA's inventory of pending claims, and their average time
pending is due in part to an increase in claims receipts. Rating-related
claims, including those filed by veterans of the Iraq and Afghanistan
conflicts, increased steadily from about 579,000 in fiscal year 2000 to
about 806,000 in fiscal year 2006, an increase of about 39 percent. While
VA projects relatively flat claim receipts in fiscal years 2007 and 2008,
it cautions that ongoing hostilities in Iraq and Afghanistan, and the
Global War on Terrorism in general, may increase the workload beyond
current levels. VA also attributes increased claims to its efforts to
increase outreach to veterans and servicemembers. For example, VA reports
that in fiscal year 2006, it provided benefits briefings to about 393,000
separating servicemembers, up from about 210,000 in fiscal year 2003,
leading to the filing of more original compensation claims. VA has also
noted that claims have increased in part because older veterans are filing
disability claims for the first time.

Moreover, according to VA, the complexity of claims is also increasing.
For example, some veterans are citing more disabilities in their claims
than in the past. Because each disability needs to be evaluated
separately, these claims can take longer to complete. Additionally, VA
notes that it is receiving claims for new and complex disabilities related
to combat and deployments overseas, including those based on environmental
and infectious disease risks and traumatic brain injuries. Further, VA is
receiving increasing numbers of claims for compensation for post-traumatic
stress disorder, which are generally harder to evaluate, in part because
of the evidentiary requirements to substantiate the event causing the
stress disorder.

Since 1999, several court decisions and laws related to VA's
responsibilities to assist veterans in developing their benefit claims
have significantly affected VA's ability to process claims in a timely
manner. VA attributes some of the increase in the number of claims pending
and the average days pending 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 added to the volume of claims. For example, in recent
years, laws and regulations have created new presumptions of
service-connected disabilities 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.

Additionally, claims-processing timeliness can be hampered if VA cannot
obtain the evidence it needs in a timely manner. For example, to obtain
information needed to fully develop some post-traumatic stress disorder
claims, VBA must obtain records from the U.S. Army and Joint Services
Records Research Center (JSRRC), whose average response time to VBA
regional office requests is about 1 year. This can significantly increase
the time it takes to decide a claim. In December 2006, we recommended that
VBA assess whether it could systematically utilize an electronic library
of historical military records rather than submitting all research
requests to JSRRC. VBA agreed to determine the feasibility of regional
offices using an alternative resource prior to sending some requests to
JSRRC.

VA has recently taken several steps to improve claims-processing. In its
fiscal year 2008 budget justification, VA identified an increase in
claims- processing staff as essential to reducing the pending claims
inventory and improving timeliness. According to VA, with a workforce that
is sufficiently large and correctly balanced, it can successfully meet the
veterans' needs while ensuring good stewardship of taxpayer funds. The
fiscal year 2008 request would fund 8,320 full-time equivalent employees
working on compensation and pension, which would represent an increase of
about 6 percent over fiscal year 2006. In addition, the budget
justification cites near-term initiatives to increase the number of claims
completed, such as using retired VA employees to provide training and the
increased use of overtime.

Even as staffing levels increase, however, VA acknowledges that it still
must take other actions to improve productivity.^3 VA's budget
justification provides information on actual and planned productivity, in
terms of claims decided per full-time equivalent employee. While VA
expects a temporary decline in productivity as new staff are trained and
become more experienced, it expects productivity to increase in the longer
term. Also, VA has identified additional initiatives to help improve
productivity. For example, VA plans to pilot paperless Benefits Delivery
at Discharge, where servicemembers' disability claim applications, service
medical records, and other evidence would be captured electronically prior
to discharge. VA expects that this new process will reduce the time needed
to obtain the evidence needed to decide claims.

To resolve appeals faster, VA has been working to reduce the number of
appeals sent back by the Board of Veterans' Appeals for further work such
as obtaining additional evidence and correcting procedural errors. To do
so, VA has established joint training and information sharing between
field staff and the Board. VA reports that it has reduced the percentage
of decisions remanded from about 57 percent in fiscal year 2004 to about
32 percent in fiscal year 2006, and expects its efforts to lead to further
reductions. Also, VA reports that it has improved the productivity of the
Board's judges from an average of 604 appeals decided in fiscal year 2003
to 698 in fiscal year 2006. The Board attributes this improvement to
training and mentoring programs and expects productivity to improve to 752
decisions in fiscal year 2008.

Opportunities for Improvement May Lie in More Fundamental Reform

While VA is taking 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, as well as the structure and division of labor
among field offices.

After more than a decade of research, we have determined that federal
disability programs are in urgent need of attention and transformation,
and we placed modernizing federal disability programs on our 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. Because of this, and
because of continuing program administration problems, such as lengthy
claims-processing times, we found that these programs are poorly
positioned to provide meaningful and timely support for Americans with
disabilities.

^3See GAO, Veterans' Benefits: More Transparency Needed to Improve
Oversight of VBA's Compensation and Pension Staffing Levels, [11]GAO-05-47
(Washington, D.C.: Nov. 15, 2004).

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.

In addition to program design, VA's regional office claims processing
structure may be disadvantageous to efficient operations. VBA and others
who have studied claims processing have suggested that consolidating
claims processing into fewer regional offices could help improve
claims-processing efficiency and save overhead costs. We noted in December
2005 that VA had made piecemeal changes to its claims-processing field
structure. VA consolidated decisionmaking 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
also consolidated in-service dependency and indemnity compensation claims
at the Philadelphia regional office. These claims are filed by survivors
of servicemembers who die while in military service.^4 VA consolidated
these claims as part of its efforts to provide expedited service to these
survivors, including servicemembers who died in Operations Iraqi Freedom
and Enduring Freedom. However, VA has not changed its basic field
structure for processing compensation and pension claims at 57 regional
offices, which experience large performance variations. Unless more
comprehensive and strategic changes are made to its field structure, VBA
is likely to miss opportunities to substantially improve productivity,
especially in the face of future workload increases. We have recommended
that VA undertake a comprehensive review of its field structure for
processing disability compensation and pension claims.

While reexamining claims-processing challenges 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 is 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. The commission held its first
public hearing in May 2005, and in October 2005, the commission
established 31 research questions for study. These questions address such
issues as how well disability benefits meet the congressional intent of
replacing average impairment in earnings capacity, and how VA's
claims-processing operation compares 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. The commission is scheduled to report to the Congress by October
1, 2007.

Mr. Chairman, this concludes my remarks. I would be happy to answer any
questions that you or other members of the subcommittee may have.

^4VBA also provides dependency and indemnity compensation to survivors of
certain deceased disability compensation beneficiaries.

Contact and Acknowledgments

For further information, please contact Daniel Bertoni at (202) 512-7215.
Also contributing to this statement were Shelia Drake, Martin Scire, Greg
Whitney, and Charles Willson.

Related GAO Products

Veterans' Disability Benefits: Long-Standing Claims Processing Problems
Persist. [12]GAO-07-512T . Washington, D.C.: March 7, 2007.

High-Risk Series: An Update. [13]GAO-07-310 . Washington, D.C.: January
31, 2007.

Veterans' Disability Benefits: VA Can Improve Its Procedures for Obtaining
Military Service Records. [14]GAO-07-98 . Washington, D.C.: December 12,
2006.

Veterans' Benefits: Further Changes in VBA's Field Office Structure Could
Help Improve Disability Claims Processing. [15]GAO-06-149 . Washington,
D.C.: December 9, 2005.

Veterans' Disability Benefits: Claims Processing Challenges and
Opportunities for Improvements. [16]GAO-06-283T . Washington, D.C.:
December 7, 2005.

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

VA Benefits: Other Programs May Provide Lessons for Improving Individual
Unemployability Assessments. [18]GAO-06-207T . Washington, D.C.: October
27, 2005.

Veterans' Disability Benefits: Claims Processing Problems Persist and
Major Performance Improvements May Be Difficult. [19]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. [20]GAO-05-655T . Washington, D.C.: May 5, 2005.

Veterans Benefits: VA Needs Plan for Assessing Consistency of Decisions.
[21]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. [22]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. [23]GAO-03-1045 .
Washington, D.C.: September 30, 2003.

Department of Veterans Affairs: Key Management Challenges in Health and
Disability Programs. [24]GAO-03-756T . Washington, D.C.: May 8, 2003.

Veterans Benefits Administration: Better Collection and Analysis of
Attrition Data Needed to Enhance Workforce Planning. [25]GAO-03-491 .
Washington, D.C.: April 28, 2003.

Veterans' Benefits: Claims Processing Timeliness Performance Measures
Could Be Improved. [26]GAO-03-282 . Washington, D.C.: December 19, 2002.

Veterans' Benefits: Quality Assurance for Disability Claims and Appeals
Processing Can Be Further Improved. [27]GAO-02-806 . Washington, D.C.:
August 16, 2002.

Veterans' Benefits: VBA's Efforts to Implement the Veterans Claims
Assistance Act Need Further Monitoring. [28]GAO-02-412 . Washington, D.C.:
July 1, 2002.

Veterans' Benefits: Despite Recent Improvements, Meeting Claims Processing
Goals Will Be Challenging. [29]GAO-02-645T . Washington, D.C.: April 26,
2002.

Veterans Benefits Administration: Problems and Challenges Facing
Disability Claims Processing. [30]GAO/T-HEHS/AIMD-00-146 . Washington,
D.C.: May 18, 2000.

(130649)

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Highlights of [38]GAO-07-562T , a testimony before the Subcommittee on
Disability Assistance and Memorial Affairs, Committee on Veterans'
Affairs, House of Representatives

March13, 2007

VETERANS'DISABILITY BENEFITS

Processing of Claims Continues to Present Challenges

The Subcommittee on Disability Assistance and Memorial Affairs, House
Veterans' Affairs Committee, asked GAO to discuss its recent work related
to the Department of Veterans Affairs' (VA) disability claims and appeals
processing.

GAO has reported and testified on this subject on numerous occasions.
GAO's work has addressed VA's efforts to improve the timeliness of
decisions on claims and appeals and VA's efforts to reduce backlogs.

VA continues to face challenges in improving service delivery to veterans,
specifically speeding up the process of adjudication and appeal, and
reducing the existing backlog of claims. For example, as of the end of
fiscal year 2006, rating-related compensation claims were pending an
average of 127 days, 16 days more than at the end of fiscal year 2003.
During the same period, the inventory of rating-related claims grew by
almost half, in part because of increased filing of claims, including
those filed by veterans of the Iraq and Afghanistan conflicts. Meanwhile,
appeals resolution remains a lengthy process, taking an average of 657
days in fiscal year 2006. However, several factors may limit VA's ability
to make and sustain significant improvements in its claims-processing
performance, including the potential impacts of laws and court decisions,
continued increases in the number and complexity of claims being filed,
and difficulties in obtaining the evidence needed to decide claims in a
timely manner, such as military service records. VA is taking steps to
address these problems. For example, the President's fiscal year 2008
budget requests an increase of over 450 full-time equivalent employees to
process compensation claims. VA is also working to improve appeals
timeliness by reducing appeals remanded for further work.

Rating-Related Claims Pending at End of Period, Fiscal Years 2000-2006

While VA is taking actions to address its claims-processing challenges,
opportunities for significant performance improvement may lie in more
fundamental reform of VA's disability compensation program. This could
include reexamining program design such as updating the disability
criteria to reflect the current state of science, medicine, technology,
and labor market conditions. It could also include examining the structure
and division of labor among field offices.

References

Visible links

  11. http://www.gao.gov/cgi-bin/getrpt?GAO-05-47
  12. http://www.gao.gov/cgi-bin/getrpt?GAO-07-512T
  13. http://www.gao.gov/cgi-bin/getrpt?GAO-07-310
  14. http://www.gao.gov/cgi-bin/getrpt?GAO-07-98
  15. http://www.gao.gov/cgi-bin/getrpt?GAO-06-149
  16. http://www.gao.gov/cgi-bin/getrpt?GAO-06-283T
  17. http://www.gao.gov/cgi-bin/getrpt?GAO-06-225T
  18. http://www.gao.gov/cgi-bin/getrpt?GAO-06-207T
  19. http://www.gao.gov/cgi-bin/getrpt?GAO-05-749T
  20. http://www.gao.gov/cgi-bin/getrpt?GAO-05-655T
  21. http://www.gao.gov/cgi-bin/getrpt?GAO-05-99
  22. http://www.gao.gov/cgi-bin/getrpt?GAO-05-47
  23. http://www.gao.gov/cgi-bin/getrpt?GAO-03-1045
  24. http://www.gao.gov/cgi-bin/getrpt?GAO-03-756T
  25. http://www.gao.gov/cgi-bin/getrpt?GAO-03-491
  26. http://www.gao.gov/cgi-bin/getrpt?GAO-03-282
  27. http://www.gao.gov/cgi-bin/getrpt?GAO-02-806
  28. http://www.gao.gov/cgi-bin/getrpt?GAO-02-412
  29. http://www.gao.gov/cgi-bin/getrpt?GAO-02-645T
  30. http://www.gao.gov/cgi-bin/getrpt?GAO/T-HEHS/AIMD-00-146
  38. http://www.gao.gov/cgi-bin/getrpt?GAO-07-562T
*** End of document. ***