Testimony 

Before the Committee on Veterans’ 

Affairs, U.S. Senate

United States Government Accountability Office

GAO 

For Release on Delivery 

Expected at 2:00 p.m. EDT 

May 26, 2005 VETERANS’ DISABILITY

BENEFITS 

Claims Processing 

Problems Persist and Major 

Performance Improvements 

May Be Difficult 

Statement of Cynthia A. Bascetta 

Director, Education, Workforce and Income Security 

GAO-05-749T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-749T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Cynthia A. 

Bascetta at (202) 512-7215 or 

bascettac@gao.gov. 

Highlights of GAO-05-749T, a testimony to 

Committee on Veterans’ Affairs, U.S. 

Senate 

May 26, 2005

VETERANS’ DISABILITY BENEFITS

Claims Processing Problems Persist and 

Major Performance Improvements May Be 

Difficult 

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. 

Rating-Related Claims Pending at End of Period, Fiscal Year 2000 through March 2005 

0

50

100

150

200

250

300

350

400

450

Claims pending (in thousands)

2000

57

228

172

421

122

346

47

254

67

321

75

340

2001 2002 2003 2004 2005

First half

Source: VA data.

Pending over 6 months Total pending

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 
Page 1 GAO-05-749T 

Mr. Chairman and Members of the Committee: 

I am pleased to be here today to discuss claims processing issues in 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 

recent media reports of significant discrepancies in average disability 

payments from state to state has also highlighted concerns over the 

consistency of decision-making within VA. In January 2003, we designated 

modernizing federal disability programs as a high-risk area, in part 

because of VA’s continuing challenges to improving the timeliness and 

consistency of its disability decisions. 

You asked us to discuss the current state of VA’s disability claims process 

and factors that may impede VA’s ability to improve performance. My 

testimony today 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, VA’s fiscal year 2006 budget justification, 

and VA’s fiscal year 2004 Performance and Accountability Report. We did 

not perform independent verification of VA’s data. We conducted our work 

in May 2005 in accordance with generally accepted government auditing 

standards. 

In summary, VA continues to have disability claims processing problems. 

For example, as of the end of March 2005, rating-related claims1

 were 

pending an average of 119 days, 8 days more than at the end of fiscal year 

2003, and far from its strategic goal of 78 days. During the same period, the 

rating-related inventory grew by about 86,000 claims to a total of about 

340,000 claims. While VA has improved the accuracy of its decisions to 

87 percent in fiscal year 2004, it is still below its strategic goal of 

96 percent in fiscal year 2008. Further, we have identified concerns about 

the consistency of decisions across VA’s regional offices. VA has begun 

 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. 
Page 2 GAO-05-749T 

studying one indicator of inconsistency, the wide variations in average 

payments per veteran from state to state, in response to adverse media 

coverage. 

We identified factors that may impede VA’s ability to improve its disability 

claims processing performance. The impacts of laws, court decisions, and 

the filing behavior of veterans can significantly affect VA’s ability to decide 

claims, as well as the volume of claims received. Also, VA’s ability to 

improve the productivity of its claims processing staff may affect its ability 

to improve performance. More dramatic gains in timeliness and inventory 

reduction might require fundamental changes in the design and operations 

of VA’s disability programs. 

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 

Background 
Page 3 GAO-05-749T 

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. 

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. 

Problems in Claims 

Processing Continue 
Page 4 GAO-05-749T 

Figure1: Rating-Related Claims Pending at End of Period, Fiscal Year 2000 through 

March 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 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. 

0

50

100

150

200

250

300

350

400

450

Claims pending (in thousands)

2000

57

228

172

421

122

346

47

254

67

321

75

340

2001 2002 2003 2004 2005

First half

Source: VA data.

Pending over 6 months Total pending
Page 5 GAO-05-749T 

Figure 2: Average Days Pending for VA Compensation and Pension Rating-Related 

Claims, Fiscal Year 2000 through March 2005 

In addition to problems with timeliness of decisions, VA acknowledges 

that the accuracy of regional office decisions needs to be improved. While 

VA reports2

 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 testimony3

 before the Subcommittee on 

Oversight and Investigations, Committee on Veterans’ Affairs, House of 

Representatives, we underscored the conclusion made by the National 

 2

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

3

GAO, Veterans Benefits Administration: Problems and Challenges Facing Disability 

Claims Processing, GAO/T-HEHS/AIMD-00-146 (Washington, D.C.: May 18, 2000). 

0

20

40

60

80

100

120

140

160

180

200

2000 2001 2002 2003 2004 2005

First half

Stategic 

goal Fiscal year

Days pending

Source: VA data.

138

182

174

111

118 119

78
Page 6 GAO-05-749T 

Academy of Public Administration in 19974 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.5

 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.6

 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.7

 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 

 4

National Academy of Public Administration, Management of Compensation and Pension 

Benefits Claim Processes for Veterans (Washington, D.C.: Aug. 1997). 

5

GAO, Veterans’ Benefits: Quality Assurance for Disability Claims and Appeals 

Processing Can Be Further Improved, GAO-02-806 (Washington, D.C.: Aug. 16, 2002). 

6

GAO, Veterans Benefits: VA Needs Plan for Assessing Consistency of Decisions, 

GAO-05-99 (Washington, D.C.: Nov. 19, 2004). 

7

On May 19, 2005, the Office of Inspector General issued the report of its review of state 

variations in disability compensation payments. Department 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).
Page 7 GAO-05-749T 

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. 

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. 

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 

Factors That May 

Impede VA’s Ability to 

Improve Claims 

Processing 

Performance 

Laws, Court Decisions, and 

Filing Behavior of Veterans 

Impact Workload and 

Performance 
Page 8 GAO-05-749T 

to develop baseline data on average issues per claim by the end of 

calendar year 2005. 

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.8

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 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 Commission9

 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 

 8

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). 

9

Veterans’ Claims Adjudication Commission, Report to Congress (Washington D.C.: 

Dec. 1996). 

Ability to Improve 

Productivity May Affect 

Future Performance 

Improvements 

Program Design and 

Regional Office Structure 

May Limit Performance 

Improvements 
Page 9 GAO-05-749T 

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 

Assistance10 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 claimsprocessing 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. 

 10Report of the Congressional Commission on Servicemembers and Veterans Transition 

Assistance (Washington, D.C.: Jan. 14, 1999). 
Page 10 GAO-05-749T 

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. 

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.

Concluding 

Observations 

GAO Contact and 

Acknowledgments 
Page 11 GAO-05-749T 

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. 

Related GAO 

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Page 12 GAO-05-749T 

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