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 incomes, 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 treatment records from 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 still experiences lengthy processing times and lacks a  clear understanding of the extent of possible decision inconsistencies. We  also designated VA’s disability programs as high-risk because our work  over the past decade found that VA’s disability programs are based on  concepts from the past. 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.

	Problems in Claims Processing Continue

VA continues to experience problems 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 some ground since the end of fiscal year 2003.  As shown in figure 1, pending claims increased by about one-third from  the end of fiscal year 2003 to the end of March 2005, from about 254,000 to  about 340,000. During the same period, claims pending over 6 months  increased by about 61 percent from about 47,000 to about 75,000.
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 119 days at the end of March 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 529 days in fiscal year 2004, close to its fiscal year 2004  goal of 520 days, but still far from VA’s strategic goal of 365 days by fiscal  year 2008.
In addition to problems with timeliness of decisions, VA acknowledges  that the accuracy of regional office decisions needs to be improved. While  VA reports that it has improved the accuracy of decisions on rating  related claims from 81 percent in fiscal year 2002 to 87 percent in fiscal  year 2004—close to its 2004 goal of 90 percent. However, it is still below  its strategic goal of 96 percent in fiscal year 2008.
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 a May 2000 testimony before the Subcommittee on  Oversight and Investigations, Committee on Veterans’ Affairs, House of  Representatives, we underscored the conclusion made by the National  Academy of Public Administration in 1997 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. 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. VA  concurred in principle with our findings and recommendation in the  August 2002 report and 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.
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 instructed the  Inspector General to determine why average payments per veteran vary  widely from state to state. Also, VA’s Veterans Benefits Administration  began another 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 plans to develop a schedule for future studies of specific ratable  conditions and recommend a schedule for periodic follow-up studies of  previously studied conditions.

	Factors That May Impede VA’s Ability to Improve Claims Processing Performance

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 the filing behavior of  veterans; VA’s ability to improve claims processing productivity; and  program design and structure.

		Laws, Court Decisions, and Filing Behavior of Veterans Impact Workload and Performance

Recent history has shown that VA’s workload and performance is affected  by several factors, including the impacts of laws and court decisions  expanding veterans’ benefit entitlement and clarifying VA’s duty to assist  veterans in the claims process, and the filing behavior of veterans. These  factors have affected the number of claims VA received and decided. 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, the filing behavior of veterans impacts VA’s ability to improve  claims processing performance. VA continues to receive increasing  numbers of rating-related claims, from about 586,000 in fiscal year 2000 to  about 771,000 in fiscal year 2004. 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. Also, according to VA, the complexity of claims, in terms of the  numbers of disabilities claimed, is increasing. Because each disability  needs to be evaluated, these claims can take longer to complete. VA plans  to develop baseline data on average issues per claim by the end of  calendar year 2005.

		Ability to Improve Productivity May Affect Future Performance Improvements

In November 2004, we reported that to achieve its claims processing  performance goals in the face of increasing workloads and decreased  staffing levels, VA would have to rely on productivity improvements.  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 2 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.
It is still not clear whether VA will be able to achieve its planned  improvements. 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 productivity translates into VA  completing almost 826,000 rating-related decisions. Midway through fiscal  year 2005 VA had completed about 373,000 decisions.

		Program Design and Regional Office Structure May Limit Performance Improvements

Program design features and the regional office structure may constrain  the degree to which improvements can be made in performance. For  example, 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. 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.
In addition to program design, 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. 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 Commission  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 decisionmaking 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  servicemembers who died on active duty, including those who died during  Operation Enduring Freedom and Operation Iraqi Freedom.

	Concluding Observations

VA has had persistent problems in providing timely, accurate, and  consistent disability decisions to veterans and their families. To some  extent, program design features that protect the rights of veterans have  also increased the complexity of and length of time needed to process  their claims. In addition, expanding entitlements have increased VA’s  workload as more veterans file claims. As a result, major improvements in  disability claims processing performance may be difficult to achieve  without more fundamental change. We have placed VA’s disability  programs on our high-risk list along with other federal disability programs.  Modernizing its programs would give VA the opportunity to address many  longstanding problems. At the same time, VA could integrate any changes  to disability criteria and benefit levels that the Veterans’ Disability Benefits  Commission may propose. This is important because significant changes  in the benefits package and disability criteria are major factors affecting  VA’s disability claims process and its claims processing performance.
Mr. Chairman, this concludes my remarks. I would be happy to answer any  questions you or the members of the committee may have.

	GAO Contact and Acknowledgments

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

	Related GAO Products

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.
Major Management Challenges and Program Risks: Department of  Veterans Affairs. GAO-03-0110. Washington, D.C.: January 1, 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.
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Summary:
Why GAO Did This Study

The Chairman, Committee on Veterans' Affairs, U.S. Senate, asked GAO to testify on the current state of VA's disability claims process and factors that may impede VA's ability to improve performance. 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 the accuracy of decisions. Our work and recent 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, GAO 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.

What GAO Found

The Department of Veterans Affairs (VA) continues to experience problems 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 some ground since the end of fiscal year 2003. For example, pending claims increased by about one-third from the end of fiscal year 2003 to the end of March 2005. Meanwhile, VA faces continuing questions about its ability to ensure that veterans get consistent decisions across its 57 regional offices. GAO has highlighted the need for VA to study the consistency of decisions made by different regional offices, identify acceptable levels of decision-making variation, and reduce variations found to be unacceptable. Also, reacting to media reports of wide variations in average disability benefit payments from state to state, the Secretary of Veterans Affairs instructed VA's Inspector General in December 2004 to determine why these variations were occurring. Several factors may impede VA's ability to make significant improvements in its disability claims processing performance. Recent history has shown that VA's workload and performance is affected by factors such as the impacts of laws and court decisions affecting veterans' benefit entitlement and the claims process, and the filing behavior of veterans. These factors have affected the number of claims VA received and decided. Also, to achieve its claims processing performance goals in the face of increasing workloads without significant staffing increases, VA would have to rely on productivity improvements. GAO believes that fundamental reform might be necessary to achieve more dramatic gains in performance.