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34–310 2008

THE IMPACT OF OPERATION IRAQI FREEDOM/ 

OPERATION ENDURING FREEDOM ON THE 

U.S. DEPARTMENT OF VETERANS AFFAIRS 

CLAIMS PROCESS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON DISABILITY ASSISTANCE 

AND MEMORIAL AFFAIRS 

OF THE

COMMITTEE ON VETERANS’ AFFAIRS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

MARCH 13, 2007 

Serial No. 110–8 

Printed for the use of the Committee on Veterans’ Affairs 

( 

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ii 

COMMITTEE ON VETERANS’ AFFAIRS 

BOB FILNER, California, Chairman 

CORRINE BROWN, Florida 

VIC SNYDER, Arkansas 

MICHAEL H. MICHAUD, Maine 

STEPHANIE HERSETH SANDLIN, South 

Dakota 

HARRY E. MITCHELL, Arizona 

JOHN J. HALL, New York 

PHIL HARE, Illinois 

MICHAEL F. DOYLE, Pennsylvania 

SHELLEY BERKLEY, Nevada 

JOHN T. SALAZAR, Colorado 

CIRO D. RODRIGUEZ, Texas 

JOE DONNELLY, Indiana 

JERRY MCNERNEY, California 

ZACHARY T. SPACE, Ohio 

TIMOTHY J. WALZ, Minnesota 

STEVE BUYER, Indiana, Ranking 

CLIFF STEARNS, Florida 

JERRY MORAN, Kansas 

RICHARD H. BAKER, Louisiana 

HENRY E. BROWN, JR., South Carolina 

JEFF MILLER, Florida 

JOHN BOOZMAN, Arkansas 

GINNY BROWN-WAITE, Florida 

MICHAEL R. TURNER, Ohio 

BRIAN P. BILBRAY, California 

DOUG LAMBORN, Colorado 

GUS M. BILIRAKIS, Florida 

VERN BUCHANAN, Florida 

Malcom A. Shorter, Staff Director 

SUBCOMMITTEE ON DISABILITY ASSISTANCE AND MEMORIAL AFFAIRS

JOHN J. HALL, New York, Chairman 

CIRO D. RODRIGUEZ, Texas 

PHIL HARE, Illinois 

SHELLEY BERKLEY, Nevada 

DOUG LAMBORN, Colorado, Ranking 

MICHAEL R. TURNER, Ohio 

GUS M. BILIRAKIS, Florida 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Veterans’ Affairs are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 

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C O N T E N T S 

March 13, 2007 

Page 

The Impact of Operation Iraqi Freedom/Operation Enduring Freedom on the 

U.S. Department of Veterans Affairs Claims Process ....................................... 1 

OPENING STATEMENTS 

Chairman John J. Hall ............................................................................................ 1 

Prepared statement of Chairman Hall ........................................................... 39 

Hon. Doug Lamborn, Ranking Republican Member ............................................. 2 

Prepared statement of Congressman Lamborn .............................................. 40 

WITNESSES 

U.S. Government Accountability Office, Daniel Bertoni, Acting Director, Education, Workforce, and Income Security Issues ................................................. 5 

Prepared statement of Mr. Bertoni ................................................................. 41 

U.S. Department of Veterans Affairs, Ronald R. Aument, Deputy Under Secretary for Benefits, Veterans Benefits Administration ..................................... 32 

Prepared statement of Mr. Aument ................................................................ 61 

Bilmes, Linda, Professor, John F. Kennedy School of Government, Harvard 

University, Cambridge, MA ................................................................................. 6 

Prepared statement of Ms. Bilmes .................................................................. 48 

Iraq and Afghanistan Veterans of America, Patrick Campbell, Legislative 

Director ................................................................................................................. 23 

Prepared statement of Mr. Campbell ............................................................. 58 

National Association of County Veterans Service Officers, Ann G. Knowles, 

President ............................................................................................................... 17 

Prepared statement of Ms. Knowles ............................................................... 51 

Veterans for America: 

Stephen L. Robinson, Director of Veterans Affairs ........................................ 19 

Prepared statement of Mr. Robinson ....................................................... 53 

Brady Van Engelen, Associate Director .......................................................... 21 

Prepared statement of Mr. Van Engelen ................................................. 57 

VoteVets.org, Jon Soltz, Co-Founder and Chairman ............................................ 25 

Prepared statement of Mr. Soltz ..................................................................... 59 

MATERIAL SUBMITTED FOR THE RECORD 

‘‘How the U.S. Is Failing Its War Veterans,’’ Newsweek Magazine, March 

05, 2007, by Dan Ephron and Sarah Childress ................................................. 66 

‘‘Pomona Veteran Shares Story of Fighting for Health Benefits,’’ The Journal 

News, (Original Publication: March 13, 2007), by Hema Easley ..................... 80 

‘‘Vietnam Vet Fights for Fellow Soldiers,’’ Times Herald-Record, March 13, 

2007, by Greg Bruno ............................................................................................ 81 

‘‘Veterans Face Vast Inequities Over Disability,’’ New York Times, March 

09, 2007, by Ian Urbina and Ron Nixon ............................................................ 82 

‘‘The Economic Costs of the Iraq War: An Appraisal Three Years after the 

Beginning of the Conflict,’’ January 2006, by Linda Bilmes, Kennedy 

School, Harvard University, and Joseph E. Stiglitz, University Professor, 

Columbia University ............................................................................................ 85 

‘‘Soldiers Returning From Iraq and Afghanistan: The Long-Term Costs of 

Providing Veterans Medical Care and Disability Benefits,’’ January 2007, 

by Linda Bilmes, Professor, Kennedy School of Government, Harvard University ................................................................................................................... 108 

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(1) 

THE IMPACT OF OPERATION IRAQI FREEDOM/ 

OPERATION ENDURING FREEDOM (OIF/OEF) 

ON THE U.S. DEPARTMENT OF VETERANS 

AFFAIRS CLAIMS PROCESS 

TUESDAY, MARCH 13, 2007 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON VETERANS’ AFFAIRS, 

SUBCOMMITTEE ON DISABILITY ASSISTANCE

AND MEMORIAL AFFAIRS, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:17 a.m., in 

Room 334, Cannon House Office Building, Hon. John J. Hall 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Hall, Hare, Rodriguez, and Lamborn. 

OPENING STATEMENT OF CHAIRMAN HALL 

Mr. HALL. Okay. Now we are going to move to our hearing on 

the Impact of Operation Iraqi Freedom/Operation Enduring Freedom (OIF/OEF) Returning Veterans on the VA Claims Process. 

And if our first two panelists would like to come to the table in 

front, Dan Bertoni from the U.S. Government Accountability Office 

and Linda Bilmes from the John F. Kennedy School of Government. 

And I think I have asked Congressman Lamborn, if it is okay 

with my colleagues on this side of the aisle, we will make a brief 

statement each and then we will hear from you because that is 

where the hearing is. And then we can each make statements as 

part of our 5 minutes. We can have as many 5 minutes as we want. 

Thank you again for coming here today, and I am honored and 

at the same time troubled to be sitting here with our topic today 

and the news that has been heard and seen recently and what I 

am hearing from veterans in my district. 

Regardless of whether or not you agree or disagree with a particular policy or a particular war, all Members of Congress I have 

spoken to, and I think all Americans, believe that our young men 

and women who serve in OIF/OEF deserve the best medical care 

and all the help we can give them in transitioning from military 

to civilian life. 

Nothing bothers me more than hearing people say they support 

the troops, but seeing a cold shoulder being turned when those 

troops return home, or seeing veterans have to fight their way 

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2 

through layers of bureaucracy, or wait for months or years while 

their claims are processed. 

The purpose of today’s hearing is to ensure that the problems 

discovered at Walter Reed Army Medical Center are not the tip of 

the iceberg with respect to how prepared we are for our returning 

servicemembers. 

Since the jurisdiction of this Subcommittee is not veterans’

healthcare but veterans’ benefits, we are going to focus on the VA’s 

claims process and how it has been impacted by OIF and OEF, and 

more importantly, how it will be impacted, I think, as the wave—

I think we are only beginning to see the front end of the wave of 

returning veterans who are affected physically or psychologically. 

As an aside, I would like to say that I am sponsoring a bill to 

allow active-duty servicemembers the option of receiving medical 

treatment at their local VA hospital if they so desire without 

changing their status as active-duty Members of the military. 

In addition to looking at whether the VA is equipped to handle 

the claims of returning servicemembers, this hearing will also examine reports of discrepancies among active and reserve veterans. 

Some media reports state that Reserve and National Guard servicemembers had a greater risk of their claims being denied or lowered than their active-duty counterparts. 

I am going to skip over the rest of my statement for now. I just 

want to refer you all to, if you have not seen it already, to the 

March 5th edition of Newsweek, which I will introduce into the 

record, to see how some returning OIF and OEF veterans are falling through the cracks. 

[The article referenced by Chairman Hall, ‘‘How the U.S. Is Failing Its War Veterans,’’ Newsweek Magazine, March 5, 2007, by 

Dan Ephron and Sarah Childress, appears on page 66.] 

Mr. HALL. There is a story on page 33 of that magazine about 

Patrick Feges, who was wounded in October of 2004 and had to 

wait 17 months until his first VA disability check arrived. His 

mother, an elementary schoolteacher, took a second job at McDonald’s to help support him. 

Mr. Feges’ claim was only approved after Newsweek and the Veterans for America began looking into his case. I thank them both 

for their work. 

And this hearing today is to see if the 17-month delay is an 

anomaly or evidence of a systemic problem for returning OIF and 

OEF veterans. If it is the latter, I would be interested in hearing 

any and all recommendations from our witnesses on how we can 

fix the problem. 

And now I would like to recognize our Ranking Member, Congressman Lamborn, for his opening statement. 

[The prepared statement of Chairman Hall appears on page 39.] 

OPENING STATEMENT OF HON. DOUG LAMBORN 

Mr. LAMBORN. Thank you, Mr. Chairman, for recognizing me. 

And I want to thank you for holding this hearing on the claims 

backlog and how it will affect the returning servicemembers from 

the Global War on Terror. 

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As I said earlier, I congratulate you on your being appointed as 

the Chairman of this Subcommittee, and I look forward to working 

with you in a bipartisan manner to solve these problems. 

Today we are here to talk about the effect of OIF and OEF veterans on the VA claims process. I am more concerned about the effect of the VA claims process on our great veterans. And since the 

beginning of Operation Enduring Freedom, more than 150,000 

claims have been filed by OIF and OEF veterans. 

In part, this is a positive response to VA’s increased outreach, 

but now we have a responsibility to process these claims and to 

care for these veterans in a responsible manner. 

I believe the first step toward improvement for these veterans is 

to improve the overall VA claims processing system. The backlog 

of compensation and pension claims is over 632,000 claims, about 

15,000 more than a month ago according to the VA’s weekly report. 

The VA has set a goal to decide a given claim in an average of 

125 days. While more than 4 months does strain the meaning of 

the word prompt, it is not unreasonable given the complexity and 

the demands of the ‘‘Veterans Claims Assistance Act’’ and other administrative requirements, but now we need the VA to go out and 

just do it. 

I know that we in Congress bear some responsibility for all of the 

complexity. I look forward to asking Mr. Aument what we can do 

to help improve the bureaucratic process while safeguarding it for 

veterans. 

Mr. Chairman, both the budget views and estimates from the 

Committee’s Majority and the Minority recommend 1,000 new hires 

for the VBA over and above the President’s request for 457 new 

staff for compensation and pension. 

In two years when they are all hired and trained, they will indeed make a difference. The conventional approach of increased 

hiring is entirely appropriate. VBA has over the past several years 

experienced personnel shortages. 

We must also explore some innovative ways to tackle the challenge that may have even faster payoffs than the new hires. That 

is why Committee Republicans this year have recommended funding for innovative pilot programs to address the backlog as well. 

We recommended funding for a pilot program to explore the feasibility of inter-governmental and VSO partnerships with VA in the 

development of compensation and pension claims. This pilot program would build on positive findings from a 2002 project conducted between the VA’s Buffalo, New York regional office and the 

New York State Division of Veterans Affairs. 

Within six months of their collaboration, the State Veterans Division was developing claims in partnership with VA. Decisions for 

the region’s veterans came faster and accuracy improved. This kind 

of innovation holds great promise. 

Access to VBA regional offices can be difficult for many veterans. 

That is why we also recommended funding a pilot program for mobile claims offices. 

VBA staff Members in mobile offices would provide outreach, 

help veterans file their claims, and gather ombudsman feedback 

and resolution for veterans. 

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Mobile offices helping veterans with their claims could speed up 

the claims process by improving communication and access for veterans. 

To take advantage of the potential offered by technology, we recommend funding to explore a rules-based adjudication system. Software could potentially decide simple claims accurately, quickly, and 

consistently so that developers can focus on the complex cases. 

For our newest veterans returning from Afghanistan, Iraq, and 

elsewhere in the Global War, we must achieve a seamless transition from the military into the VA system. It is apparent to me 

that a seamless transition will help erase that backlog because it 

does increase the system’s overall efficiency. 

We need full inter-operable electronic health records between VA 

and Department of Defense, an electronic DD Form 214, military 

separation physicals that can also function as VA disability 

physicals, and a disability rating process that provides consistent 

ratings. 

What good is a separation exam and health records from DoD if 

the veteran has to repeat the whole process all over again with the 

VA? 

Mr. Chairman, I am sure you agree no veteran should have to 

wait 6 months to a year for their claim to be decided and then endure an appeal possibly that adds another year or two. For some 

veterans, this is not merely inconvenient, it is financial and potentially emotional disaster. 

Every one of these claims is an American veteran and his or her 

family awaiting a decision. Every veteran deserves to have their 

claim adjudicated quickly and accurately. 

One thing is certain. If we do not fix this problem now, our legacy will be an intolerable backlog regrettably endured by this generation of veterans and inexcusably bequeathed to a future generation. I firmly believe no one in this room wants such an outcome. 

I want to thank the witnesses for their service and for their testimony. I look forward to hearing it and I look forward to our continued discussion today. 

Mr. Chairman, I yield back. 

[The prepared statement of Congressman Lamborn appears on 

page 40.] 

Mr. HALL. Thank you, Mr. Lamborn. Some good ideas there, and 

we will be taking close looks at them as we go forward. 

If our other Members would be content to submit opening statements to the record, then we will move straight to the testimony. 

And if we could start with you, Mr. Bertoni. Daniel Bertoni, the 

Acting Director of Education, Workforce, Income Security Issues for 

the GAO. 

Welcome, Mr. Bertoni. 

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STATEMENTS OF DANIEL BERTONI, ACTING DIRECTOR, EDUCATION, WORKFORCE, AND INCOME SECURITY ISSUES, U.S. 

GOVERNMENT ACCOUNTABILITY OFFICE; AND LINDA J. 

BILMES, PROFESSOR, JOHN F. KENNEDY SCHOOL OF GOVERNMENT, HARVARD UNIVERSITY, CAMBRIDGE, MA 

STATEMENT OF DANIEL BERTONI 

Mr. BERTONI. Mr. Chairman, Members of the Subcommittee, 

good morning. I am pleased to be here to discuss the Department 

of Veterans Affairs disability claims process in the context of the 

wars in Iraq and Afghanistan. 

Last year, VA provided nearly $35 billion in benefits to 3.5 million veterans and survivors. For years, the claims process has been 

the subject of attention by VA, the Congress, and others due to untimely decisions, large backlogs, and other weaknesses. 

In 2003, we designated VA and other Federal disability programs 

high risk because these programs were based on outmoded concepts 

and continue to experience management and operational problems. 

And since that time, we have issued numerous reports with recommendations for change. 

My testimony today is based on our prior work and focuses on 

three areas, service delivery challenges facing VA, actions taken to 

better serve applicants, and areas where fundamental reform may 

be needed to further improve performance in the future. 

In summary, several factors have created service delivery challenges for VA. In general, the growth in disability claims has 

strained operations. Since 2000, the number of annual claims, including those filed by veterans of Iraq and Afghanistan, have risen 

steadily from about 579,000 to over 800,000 last year. 

While VA has had success in the past reducing its claims inventory, it is now losing ground. Since 2003, pending claims have increased almost 50 percent to nearly 400,000. Those pending over 6 

months also increased more than 75 percent to over 80,000. 

And the time required to resolve appeals also remains problematic. The current average processing time of 657 days is far from 

VA’s stated goal of 1 year. 

Other factors affecting performance include court decisions requiring VA to assist veterans in developing claims, laws and regulations which have expanded benefit entitlement, increasing caseload complexity as more veterans claim multiple disabilities, difficulties obtaining key evidence in a timely manner, and VA’s increased outreach to veterans and servicemembers. 

VA is also receiving more claims for new and complex disabilities 

related to combat overseas, including traumatic brain injuries, as 

well as posttraumatic stress disorder cases as well, which are generally hard to evaluate. 

In light of these considerable challenges, we have noted that continuing to devise new ways to work smarter and more efficiently 

will be essential to VA’s productivity. VA has taken steps to improve claims process. Its 2008 budget requests over 450 additional 

claims processing staff, a 6 percent increase over last year. 

Other productive initiatives include increasing overtime, using 

retired staff as trainers, and piloting a paperless benefits delivery 

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and discharge process where servicemembers’ disability claim and 

medical records are captured electronically prior to separation. 

VA has also enhanced internal training and information sharing 

to reduce the number of cases sent back by the Board of Appeals 

due to errors or incomplete evidence. 

VA also recently announced a new initiative to provide priority 

processing of all OIF and OEF disability claims. 

It is imperative that VA continue to address weaknesses and bottlenecks in its system to expedite case processing, increase 

decisional accuracy, as well as consistency. 

Through our ongoing work, we will continue to monitor and assess VA’s near-term initiatives to ensure that VA balances the need 

for improved case processing, that they need to protect the veterans’ due process rights. 

Going forward, there also may be opportunities for more fundamental reform that could dramatically improve the program in the 

longer term. 

In designating VA’s disability program high risk, we noted that 

its processes did not reflect the current state of science, medicine, 

technology, and the national economy which has moved away from 

manual labor to service and knowledge-based employment. 

We recommended that VA reassess its disability criteria to better 

align with changes in the national economy and that it place a 

greater emphasis on early intervention and rehabilitation services. 

We have also reported that VA’s field structure may impede efficient operations. Despite limited efforts to consolidate some processes and workloads, VA has not changed its basic field structure 

for processing claims at 57 regional offices which have experienced 

large variations in productivity, accuracy, and consistency. 

While reexamining claim processing challenges can be daunting, 

key efforts are underway. In 2003, the Congress established the 

Veterans Disability Benefits Commission to study many of the 

issues discussed today, including VA claims processing operations 

and the location and number of processing centers. 

The Commission is scheduled to report to Congress by October 

of 2007. And like you, we look forward to the findings and recommendations. 

Mr. Chairman, this concludes my remarks. I am happy to answer 

any questions that you or the Members of the Subcommittee may 

have. Thank you. 

Mr. HALL. Thank you, Mr. Bertoni. And your written testimony 

as submitted will be added to the record. 

[The prepared statement of Mr. Bertoni appears on page 41.] 

Mr. HALL. And before we go to questions, we would like to hear 

the statement of Professor Linda J. Bilmes from the Kennedy 

School of Government at Harvard University. 

Professor Bilmes. 

STATEMENT OF LINDA J. BILMES 

Ms. BILMES. Thank you, Mr. Chairman, Mr. Lamborn, Members 

of the Subcommittee. Thank you for inviting me to speak to you 

today on this important topic. 

I am Professor Linda Bilmes, a faculty member of the Kennedy 

School of Government where I teach budgeting and public finance. 

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Just by way of background, last year, I co-authored with Nobel 

Laureate Professor Joe Stiglitz a paper that analyzed the economic 

cost of the Iraq War. One of the long-term costs we identified is the 

cost of providing lifetime disability benefits and medical care for 

veterans. 

[The paper referenced above, ′′The Economic Costs of the Iraq 

War: An Appraisal Three Years after the Beginning of the Conflict,’’ appears on page 85.] 

Today I would like to focus on the projected number of veterans’ claims, the capacity of the Department of Veterans Affairs to process those claims, and the cost of providing benefits to returning 

OIF/OEF soldiers. 

This was the subject of my second paper written this year which 

specifically looked at the cost of providing care and disability benefits to veterans in Operation Iraqi Freedom and Enduring Freedom. The paper has been entered into the record. 

[The second paper referenced above, ‘‘Soldiers Returning From 

Iraq and Afghanistan: The Long-Term Costs of Providing Veterans 

Medical Care and Disability Benefits,’’ appears on page 108.] 

I would like to discuss five key areas of concern and then to recommend five changes that I believe would significantly streamline 

the process. 

First, the areas of concern. First, the VBA is currently overwhelmed with the volume of claims it is receiving, leading to a 

huge backlog. In 2006, the VBA received over 800,000 claims. 

Secretary Nicholson testified last month that he expects to receive 1.6 million additional claims in the next 2 years. My own projections show that between 250,000 and 400,000 of these claims 

will be new, unique applications from soldiers currently serving in 

Iraq and Afghanistan. The number of pending claims and paperwork has risen from 69,000 in 2001 to more than 600,000 as of 

today. 

Second, the claims process itself is extremely long, cumbersome, 

and paperwork intensive. As noted, the VBA takes an average of 

about 6 months to process an initial claim and an average of about 

2 years to process an appeal. By contrast, the private sector medical insurance settles 30 million insurance claims, including the appeals, within an average of 89.5 days. 

The process for ascertaining whether a veteran is suffering from 

a disability and rating the percentage level of a veteran’s disability 

is far too complex. After a veteran applies to one of the 57 regional 

offices, a claims adjudicator evaluates the veteran’s service-connected impairments and assigns a rating for the degree to which 

the veteran is disabled. 

Claims specialists determine the percentage of disability for each 

condition in increments of ten. However, you would think that 

would be complicated enough, but conditions are not scaled 

monotonically from zero to a hundred. 

Mental conditions, for example, are rated zero, ten, thirty, fifty, 

seventy, or a hundred. Coronary artery disease ratings are ten, 

thirty, sixty, and one hundred. Spinal conditions are rated ten, 

twenty, thirty, forty, fifty, one hundred. A huge amount of time and 

effort is devoted to making these determinations and then on the 

veteran’s side, to appealing the decision. 

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There is wide disparity in efficiency between individual VBA offices. Regional offices are inconsistent in how they rate disabilities. 

GAO found that the days needed to process a claim range from 99 

days in the Salt Lake City VA to 237 in Honolulu. Currently some 

of the States providing the most soldiers for the war are suffering 

the longest delays in claims adjudication. 

In addition, the claims themselves are more complicated than in 

previous conflicts. Vietnam-era claims cited on average three disability conditions. Gulf War veterans filed four. For GWOT veterans, the average claim includes five separate disability issues. 

One-quarter of the new claims filed this year cited eight or more 

disabilities. And then since each item within a claim is treated separately, there is a great deal of opportunity for duplication and 

delay. 

The VBA has more than 9,000 claims specialists. Many of them 

are themselves veterans, and they generally do a good job and they 

try very hard to help veterans. But they are under an enormous 

strain. They are required to assist the claimant in obtaining evidence in accordance with hundreds of arcane VBA regulations, policies, procedures, and guidelines. They have to rate the claims, establish files, authorize payments, conduct in-person and telephone 

interviews, process appeals, and generate various notification documents through the process. New employees require about 18 

months to become trained. 

For all these reasons, I believe that the agency as currently 

structured is simply not capable of settling the current and projected volume of claims in a timely manner. 

My third point is that the projected number of claims from the 

wars in Iraq and Afghanistan will rapidly turn this disability 

claims problem into a crisis. The current conflict has the highest 

incidence of nonmortal casualties in U.S. military history, a ratio 

of 16 woundings or injuries per fatality. 

To date, of the more than 1.4 million U.S. soldiers who have been 

deployed, about 631,000 have been discharged and one-third have 

already been treated and diagnosed at VHA hospitals and clinics. 

About 180,000 have applied for disability benefits. 

If returning GWOT soldiers claim benefits at the same rate as 

veterans from the first Gulf War, we can expect anywhere from 

638,000 to 869,000 unique, new first-time claims from the GWOT 

in the next 5 years. If all the troops return home sooner, if they 

all return home by 2008, there are likely to be more than 400,000 

new claims by the end of 2009 alone. 

Fourth, the cost of providing disability benefits to GWOT veterans is projected to be between 70 billion and 150 billion in 2007 

dollars. The cost is not the only issue here, but it is yet another 

major cost of war that has not been anticipated by the Administration. 

The eventual cost will depend on several factors, including the 

total number of troops deployed and the length of time they are deployed, the rate of claims and utilization of benefit programs by returning troops, and the cost of living adjustments in their benefits. 

Fifth, it is important to understand that the disability process 

and the health process are inter-related. The growing number of 

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ical examinations. This is adding to pressure on the veterans 

health facilities. 

The current system, as Mr. Lamborn pointed out, does not guarantee that all soldiers receive complete physicals in the military 

upon discharge and even if they do, they cannot automatically 

transfer that information from DoD to VA. 

Consequently newly discharged veterans who intend to file a disability claim are seeking medical examinations from VHA health 

facilities in order to document their disabilities. Some of the backlog at the veterans health facilities is from veterans who are seeking appointments not necessarily because they require immediate 

treatment but they have to verify a disabling condition, even in 

cases where it was already documented upon discharge from the 

military. 

Recommendations. To address the immediate backlog, the proposal from Secretary Nicholson is to hire 457 additional claims specialists, to increase the claims processed per specialist from 98 to 

101, and to make training manuals more readily available. 

He projects that this will cut the length of time it takes to process a veteran’s claim by 32 days by 2008. I am not at all optimistic 

that a few hundred inexperienced new staffers, even assuming that 

they can be hired quickly, will produce a 22 percent improvement 

in claims processing time during a period in which the agency faces 

a huge influx of complex claims. 

Indeed, it is conceivable that the task of training and integrating 

a large number of inexperienced new hires will in the short term 

actually lengthen claims processing times and increase the number 

of appeals. And this problem is compounded by the fact that like 

many Federal agencies, many experienced VBA personnel will be 

retiring over the next 2 to 5 years. 

Therefore, I believe that finding an answer to the claims problem 

requires us to think outside the box, and I would like to offer several proposals that do this. 

First, for the next 2 years, the VBA should accept and pay all 

disability claims by returning GWOT soldiers at face value and 

then audit a sample of them. In other words, what we should do 

is essentially what the IRS does with taxes, accept the claims and 

then audit them. 

I would not see this as being a long-term solution, but as a shortterm solution. This would ensure that new returning veterans do 

not fall through the cracks and it would shift the focus while the 

VBA reforms its process. 

Second, the VBA should replace the cumbersome zero to one hundred scale for disabilities with a simple four-level ranking, zero disabled, low disability, medium disability, and high disability. This 

would immediately streamline the process, reduce discrepancies between regions, and likely cut the number of appeals. 

The VBA should create a short form for returning veterans using 

this four-level ranking and set a goal of processing all claims within 60 days of receipt. This new system should be up and running 

within 2 years, including retraining the workforce and developing 

necessary guidelines and appeals procedures. 

Third, all soldiers serving in the GWOT should receive a mandatory full medical examination at discharge from DoD with all 

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records from this examination made available electronically to the 

VBA immediately, and then the VBA should be able to use these 

records to grant disability, to spot check and audit claims, and to 

assist veterans and to relieve some of the pressure on VBA. 

Moreover, if veterans are discharged without full medical examinations, they should be reimbursed to receive such an examination 

from any fully accredited physician within 90 days of discharge, 

and this record should be used by VBA for making claims. 

Fourth, VBA should shift some of its focus away from claims 

processing onto more rehabilitation and reintegration of veterans. 

In other words, the VBA staff should be used more as a strategic 

asset. More of them should be placed in neighborhood veteran centers, health centers, and assisting in benefits at discharge systems. 

Fifth and finally, Congress should enact what is a bill now in the 

Senate, Senate Bill 117, the Lane Evans ‘‘Veterans Healthcare and 

Benefits Improvement Act,’’ co-sponsored by Senators Obama and 

Snowe. This is an excellent piece of legislation that would improve 

data collection, improve monitoring of claims, improve access to 

mental healthcare, and improve the benefits and level the playing 

field for Guards and Reservists. 

Thank you very much for your time and attention, and I would 

be pleased to answer any questions you have. 

[The prepared statement of Ms. Bilmes appears on page 48.] 

Mr. HALL. Thank you, Professor Bilmes. 

Excellent presentations from both of our witnesses. 

I will keep my questions short for now, and say there have been 

a number of instances you both have brought up and Congressman 

Lamborn has also mentioned the redundancy of having a discharge 

physical from DoD and then an evaluation physical from the Department of Veterans Affairs. 

I had a visit yesterday in my district with a soldier, a Vietnam 

veteran, who had repeated physicals for a prostate diagnosis when, 

in fact, he had prostate cancer. He already had scans showing that 

it was in his bones already and he went 5 years before getting his 

claims recognized and the bills paid. 

And I will submit a couple stories about that into the record, but 

he was complaining not just that he was going back for redundant 

physicals, but the time the doctor was taking on his could have 

been used for somebody who actually needed a physical who had 

not been diagnosed already with a more high-tech means. 

[The articles referenced by Chairman Hall, ‘‘Pomona Veteran 

Shares Story of Fighting for Health Benefits,’’ The Journal News, 

(Original Publication: March 13, 2007), by Hema Easley, ‘‘Vietnam 

Vet Fights for Fellow Soldiers,’’ Times Herald-Record, March 13, 

2007, by Greg Bruno, appear on pages 80 and 81.] 

And it seems that obviously there are some procedural guidelines, the simplification that you speak of in terms of categories, 

but also in terms of certain conditions, what the doctors and the 

staff are required to do, maybe to cover their own backs so that 

they can show a paper trail and not be questioned later. 

Which would you suggest, and this can be for both of our witnesses, that we accept the DoD’s separation physical, we make that 

mandatory? And you were saying it did not always occur, but that 

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we make that mandatory and make that the equivalent of a VA 

evaluation entry physical or vice versa. 

And a more radical thought, what would you think of—it has 

been suggested recently to me—what would you think of the Department of Veterans Affairs being folded into the Department of 

Defense so that the true cost of war and of the use of our soldiers 

is evaluated in the long term and seen as part of the same budget? 

Ms. BILMES. Shall I comment first? First of all, in terms of the 

discharge issue, I think there are three parts to it. First, all soldiers should have a mandatory physical on discharge from the military, you know, while they are there in the military. 

And if you think about the private sector analogy, you cannot 

imagine most employers dumping the entire cost and responsibility 

on to their insurers, which is sort of the VA, for the care of their 

employees. 

So, I would recommend that they should have a mandatory examination, and it is very important that the information be then 

useable, that the files be electronically immediately available to 

people in the VA and that they not be sort of at the mercy of the 

fax machine to be trying to locate documents from the DoD, and 

finally that this examination be allowable within the VA for benefits. 

You know, those are three different things that need to be accomplished at the same time. But I strongly feel it would be very helpful. 

Secondly, regarding the more radical idea of folding the VA into 

DoD, I would not be in favor of that at this time. I think that generally the culture in the VA is very much an empathetic culture 

that favors the veteran, that cares about the veteran. 

Certainly when you speak to people who run the polytrauma 

units and some of these units, they are wonderful people. They 

really, care about the veterans and there is sort of an inherent conflict in putting some of those people into a military fighting machine. 

However, there has to be a much better transition between the 

DoD and the VA, and GAO has certainly documented many cases 

of a lack of sharing of information between DoD and VA. 

So what typically happens now is a veteran has to scramble 

around, having already fought for his country, to get hold of a blood 

test or something like that was already taken in DoD. It takes a 

huge amount of time and effort just to get the most basic information that DoD already has. 

So this kind of lack of sharing of DoD medical records and medical information with VA simply has got to be stopped. 

Mr. HALL. Thank you, Professor. 

My time has expired, and I will turn to Ranking Member 

Lamborn. 

Mr. Lamborn. 

Mr. LAMBORN. Thank you, Mr. Chairman. 

Mr. Bertoni, what do you think about the feasibility of the VA 

using a rules-based computer system to automate some of the 

claims decisions that do not require complex interpretations? 

Mr. BERTONI. I think for some straightforward maladies, disabilities, that is a possibility. There can be deviations even for those 

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and perhaps a rules-based system would not work. There would 

have to be, I think, an escape hatch where you would go to another 

process if it did not apply. 

But certainly the concept for applying that technology or that approach to more straightforward—I do not want to say simple—but 

more straightforward conditions, there is a potential. 

But we have not looked at that. We would be happy to explore 

that further in the future though. But conceptually it is possible to 

use. 

Mr. LAMBORN. Thank you. 

And, Professor Bilmes, in your study, you propose a change in 

the disability rating system to four levels that you just described 

to us. 

What would be the compensation levels for each of those four categories? 

Ms. BILMES. Sir, you know, I have not studied what would be the 

compensation levels for those four levels, but I have discussed this 

proposal with a number of veterans organizations as well as Cynthia Bascetta at GAO. And I believe that it is something that 

should be studied. I mean, I think it could be designed to be a better and fairer system. 

Mr. LAMBORN. Okay. Thank you. 

And which VSOs were you just referring to? 

Ms. BILMES. I have been in contact over the course of the last 

6 months on all of the research I have done with the American Legion, the Veterans of Foreign War, the Paralyzed Veterans of 

American, the Vietnam Veterans of America, the Veterans for 

America, the Disabled Veterans of America, the Iraq and Afghanistan Veterans, as well as other groups of veterans, the university 

veterans organizations, you know, with basically a full range of the 

veterans organizations. 

Mr. LAMBORN. Thank you, Professor. 

Ms. BILMES. Indeed, I want to point out the reason I wrote this 

paper is that veterans from the Legion, the VFW, and Veterans for 

America approached me and asked if I would look at this. 

Mr. LAMBORN. Okay. Thank you. 

Mr. BERTONI. Mr. Chairman, could I respond to your first question——

Mr. HALL. Yes. Certainly. 

Mr. BERTONI [continuing]. With regard to the exit physical? I believe an exit physical, regardless of whether it is at DoD or VA, 

makes good sense in terms of establishing a baseline whether that 

person ultimately never even enters the disability system or whether they do shortly thereafter. 

But I think it is a good idea to have. We think it is a good idea 

to have that baseline. And certainly when you look at the VA’s 

Benefits Delivery at Discharge Program, that is an avenue where 

you are getting pretty comprehensive medical information, historical information up front where you can use that in the event of 

a claim. And to the extent that that is electronic, it can be transferred electronically, that is even better. 

Mr. HALL. Okay. Thank you, Mr. Bertoni, Professor Bilmes. 

I will now recognize for his questions Congressman Rodriguez for 

5 minutes. 

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Mr. RODRIGUEZ. Thank you very much, and thank you for your 

testimony. 

And let me just make a couple of comments and ask you for your 

comments. First of all, you know, the recommendations that you 

have made with the exception of the first one, are good. 

And I think the idea of the Ranking Minority Member about trying to get an assessment on some of the individuals who are almost 

assured through a computer process, that they will receive the correct rating that they deserve. It might be something that we ought 

to look at. 

But let me make some general comments. It is my understanding, and it is based on maybe just stereotypes and feedback, 

because there were some people that, I thought it was a no-brainer, 

they should have received something the first time around. The 

general rule is, and I tell them, hey, you are going to get turned 

down the first time no matter what, so you just apply the second 

time and keep going at it. 

And is there a feeling within the system that they automatically—because that is the feeling that we have back home—that 

they automatically, no matter how genuine their request is, they 

are going to get denied the first time and that there is an attitude 

by the administration, by the VA to do that. 

I am wondering if from region to region, how that varies in terms 

of how veterans get treated in one region versus another, and if 

there have been any assessments from that perspective? I would 

assume that in some areas where there is a no-brainer, that we 

just go ahead and recognize the fact that these individuals might 

deserve those benefits. Just do that, and that in itself would reduce 

the number of claims in the future because they have a feeling, like 

I do, that they are going to get turned down the first time anyway. 

Ms. BILMES. I think that may be a perception that some people 

have, but my research showed that 88 percent of claims are accepted, at least at some level. That means at least part of the claim 

is granted. 

So, you know, my sense is that the real problem here is that 

when you have a system where almost 90 percent of the claims are 

eventually granted, the process of getting to that final point is unbelievably complex and bureaucratic. And so it is really a process 

problem compounded by a huge volume of incoming claims problem. 

Mr. RODRIGUEZ. You just indicated that 88 percent get granted 

and then at the end 90 percent. That means all this fighting is over 

2 percent? 

Ms. BILMES. No. Eighty-eight——

Mr. RODRIGUEZ. Or did I misunderstand? 

Ms. BILMES. If I submit a claim, 88 percent of the total claims 

do get granted, but sometimes claims have multiple parts. The 

claim might have four parts and not all of the parts might be 

granted. 

And what we see in this war is much greater complexity of 

claims. And so we do not have the data yet on how many, at least 

I do not have the data on what percentage of, say, an eight-condition claim, you know, is granted. 

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Mr. RODRIGUEZ. And do any of you have any data on the regions, 

if one region is harsher than the other regions? 

Mr. BERTONI. Yeah, I can speak to that. I would reiterate what 

the witness just said that there is a continuum. Someone can 

apply, be denied, and ultimately get to appeal and their case will 

be approved. And ultimately as they go through that process, we 

end up with the 80 percent approval rate. 

As far as consistency across regions, we have reported on numerous occasions that there is considerable inconsistency across the 57 

regional offices. And veterans with like conditions are not always 

treated consistently in terms of the actual determination of disability, the compensation amount, and/or the rating percentage. 

So there has been numerous reports that we put out where we 

have been concerned about consistency. We have recommended 

that VA look at all levels of their decisionmaking process, identify 

specific disabilities that are most problematic or areas that are 

most problematic and take actions to address them. And we are 

aware of some movement on their part to do that. 

But, yes, consistency has been a long-standing issue and your 

benefit amount or decision should not be contingent upon where 

you filed. 

Mr. RODRIGUEZ. My last comment. I know that we had situations 

where we would submit a case on behalf of a veteran, and I think 

most of the Members of Congress, I think, are doing a lot of the 

casework for VA, and we would submit it and then 30 days later, 

we would call up and they would say, sorry, you know, we have not 

gotten it yet. So we would submit it again, and this was a game 

that was played. 

Have we made any end roads in that area? 

Mr. BERTONI. In terms of hand-offs and lost documents, I mean, 

I think that is part of the paper process that we are in. You know, 

we have real concerns about the hand-offs, the movement of case 

files across country, the brokering of claims, how that can result 

in just lost records and materials. 

So certainly, yes, that is an issue of concern. I cannot talk to specific circumstances, but, yes, it is an issue. 

Mr. RODRIGUEZ. Thank you. My time has expired. 

Thank you, sir. 

Mr. HALL. I thank the gentleman from Texas. 

I now recognize the gentleman from Illinois, Mr. Hare. 

Mr. HARE. Thank you, Mr. Chairman. 

Thank you both for coming this morning. 

It seems like every time we take one step forward here on disability, we are taking two or three steps backward. And, you know, 

we really, from my perspective, have got to get this under control 

and we have got to do it sooner rather than later. 

And, Professor, let me just say I like what you had in your testimony in terms of your recommendations. I think that would go a 

long way toward helping solve some of the problems that we have 

encountered here because I have a lot of veterans in my congressional district and I hear this over and over again, ‘‘It takes so long 

and, you know, I fought and defended this country and, you know, 

what is the holdup here.’’

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And for that veteran, they do not understand the process. They 

need the help. And they said you guys have got to figure it out. So, 

that is why we are here today. 

I just want to ask you, if I could, Mr. Bertoni. You said in your 

written testimony that due to the increased number of compensation claims for posttraumatic stress disorders, it adds to the 

amount of time required to process the claim because the claims 

are more difficult to evaluate and provide evidence for. 

Can you talk about why these claims are more difficult to evaluate and what actions the VA can take to improve the process to 

evaluating medical or mental health? 

Mr. BERTONI. Sure. And in the case of PTSD claims, one of the 

key variables is to document the stressor event. And if a veteran 

comes into a regional office and claims PTSD, if in the record they 

can corroborate combat experience or POW status, that individual’s 

allegation of a stressor event is sufficient for them to process the 

claim. 

If they cannot substantiate combat or a POW status and this individual alleges a stressor event, you have to go to the record. And 

if it is not immediately available, the regional office submits a 

claim. 

The National Personnel Records Center is a VBA unit that has 

to do the search to find that specific event that is claimed. And you 

are talking about historical record, you know, the person’s unit, 

whatever, to dig through this information. 

If, in fact, the individual is a Marine Corps veteran, it is easier. 

There is an electronic historical database where the analyst can go 

and do the research. And I believe we were told that that turnaround time could be as little as one day. Any of the other services, 

we are in a more difficult situation, basically slog through manual 

paper documents, a needle in a haystack. And that can take up to 

in excess of a year. 

So, you know, we are back to this automated electronic environment versus paper manual environment, and you can see how the 

deficiencies occur when you have two environments. 

We did find that VA has been trying to sort of offset, at least in 

a couple regional offices. They have cobbled together or put together an unclassified historical database of records that they are 

able to use prior to making that referral to the Records Center. 

And we are told that they can close the loop on that in about 3 

weeks. And they have farmed that out to other regions, and we 

have recommended that they consider a similar system nationally. 

Mr. HARE. Okay. In both the testimonies, you state that the VBA 

needs to seriously reexamine the structure and program design for 

the benefits system. 

I wonder if you could describe what specific structural problems 

you have encountered and what recommendations you would have 

to improve the VBA system to meet the demands. 

Ms. BILMES. I favor, as I have testified, a complete revamp of the 

system basically in every way. I mean, first of all, I think that the 

claims disability rating system needs to be vastly simplified. I 

think there needs to be a short form where people can apply quickly. 

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I think that the benefit of the doubt should go to the veteran 

right away up front so that claims should be essentially granted for 

returning first-time unique claims at least to some extent, so a veteran has a small stipend at least coming in while the rest of the 

claim is processed. 

And I think that the VA needs to kind of shift its culture in the 

benefits process, shifting the culture away from trying to make 

sure that not one penny is given out that is not deserving to a process of trying to use the people more strategically, deploying them 

more in the field at benefits of discharge, deploying them more in 

theatre which is not done at the moment, and deploying claims adjudicators in the vet centers which are very popular neighborhood 

walk-in clinics for veterans to help them fill in these simplified 

forms. 

And so I think that the whole way that it is structured in terms 

of what people do, what the process is, the records, the medical 

records for granting disabilities, and the culture needs to be reformed. 

Mr. HARE. Thank you. 

Mr. BERTONI. Our position is that as VA considers how it may 

want to modernize its disability process and think more about more 

timely intervention support services, with that, you might want to 

look at how you are organized structurally. 

We do know that they have at times consolidated workloads and 

processes to ring out efficiencies, and these were mainly tactical efforts to try to go after problem areas or backlogs. 

But we also know that in doing that in those isolated or specific 

instances, they were able to again ring out additional efficiencies, 

productivity increases, accuracy, consistency, building staff expertise are particular issues and even administrative overhead savings. 

We also know where they have not done that in their current existing 57 regional office structure, we have a situation with massive productivity variance. We have timeliness, accuracy, consistency issues. 

So we believe that they really need to look at this more strategically as they move into the 21st century, as we move forward, and 

think about this more strategically and how they want to reorganize and they have the right people, processes, and technologies in 

the right place going forward. 

We do not have the answers, but somebody has to take a hard 

look at this. 

Mr. HARE. Thank you. 

Mr. HALL. Thank you very much, Mr. Bertoni and Professor 

Bilmes. 

The idea of giving veterans the benefit of the doubt sounds good 

to me. When you said that in the end 88 percent of claims are approved, that would seem to indicate that maybe only 12 percent of 

them are an excessively ambitious task. 

And so we may actually save money as well as serve our veterans benefit if we tried your idea of a temporary plan of accepting 

all claims and then auditing them later so that our returning soldiers get, as you said, at least a baseline of assistance. 

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So thank you very much, both of you, and the first panel is now 

excused. 

Mr. BERTONI. Thank you. 

Ms. BILMES. Thank you. 

Mr. HALL. And we are going to try to keep moving along because 

we all have busy days of solving such serious problems and others. 

Panel two, Stephen Robinson from Veterans for America, Brady 

Van Engelen from Veterans for America, Patrick Campbell from 

Iraq and Afghanistan Veterans for America, and Ann Knowles of 

the National Association of County Veterans Service Officers, 

please come up and take your seats. Oh, I am sorry. Jon Soltz from 

VoteVets.org. Thank you, Mr. Soltz. 

Thank you all. You do not need to hear a speech from me. We 

will start with Mrs. Knowles. 

And we have your written testimony and it will be included in 

the record, so feel free to deviate from your statement. 

STATEMENTS OF ANN G. KNOWLES, PRESIDENT, NATIONAL 

ASSOCIATION OF COUNTY VETERANS SERVICE OFFICERS; 

STEPHEN L. ROBINSON, DIRECTOR OF VETERANS AFFAIRS, 

VETERANS FOR AMERICA; BRADY VAN ENGELEN, ASSOCIATED DIRECTOR, VETERANS FOR AMERICA; PATRICK CAMPBELL, LEGISLATIVE DIRECTOR, IRAQ AND AFGHANISTAN 

VETERANS OF AMERICA; AND JON SOLTZ, CHAIRMAN, 

VOTEVETS.ORG 

STATEMENT OF ANN G. KNOWLES 

Ms. KNOWLES. Thank you, sir. 

Mr. Chairman and Members of the Committee, it is truly my 

honor to be able to present this testimony before you. As President 

of the National Association of County Veterans Service Officers, I 

am going to talk about the issues affecting the veterans of the OIF 

and OEF. 

Returning veterans from these two theaters of action have been 

receiving priority care from the Veterans Administration. There are 

valid reasons, but it has resulted in many other claims being 

placed on the back burner, claims that have equal and valid reasons for priority action. 

VA officials have stated the number of claims filed since 2000 

has risen nearly 40 percent, and this has caused the number of 

cases pending to balloon to over 800,000. Yet, only about 4 percent 

of the new claims are from Iraq and Afghanistan. This is according 

to the St. Louis Post dispatch February the 26th, 2007. 

To stay on target with the subject at hand, let us look at the 

number and nature of injuries of OIF and OEF veterans. It has 

been reported by the DoD that over 19,000 Purple Heart Medals 

have been awarded since the beginning of OIF and OEF. Each of 

these is a potential claim for benefits with the DVA. Add to this 

another 25,000 wounded and ever-escalating KIA numbers as additional troops are assigned to Iraq. 

Secretary Nicholson in his interview with Bob Woodard of ABC 

News showed statistics of treatment within VA facilities of over 

200,000 OIF/OEF veterans, and not every treatment is a claim, but 

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even a small percentage of these filing a claim for benefits will escalate the numbers in the pipeline waiting processing. 

PTSD is recognized in returning veterans from Iraq and Afghanistan. Their treatment has been given priority. A United States 

Army study places those suffering from PTSD at approximately one 

in eight soldiers who have served in either Iraq or Afghanistan. 

A survey of deployed troops indicates that twelve percent of those 

serving in Iraq and up to 6 percent who served in Afghanistan 

have reported symptoms of major depression, anxiety, or PTSD. 

The most frightening statistic is that only 38 percent were interested in getting help and as low as 28 percent actually have even 

looked at help. They cited concerns for how they would be viewed 

by their peers if they sought assistance. 

This, Mr. Chairman, is a ticking timebomb that will eventually 

blow up in our faces, not necessarily in the face of the military, but 

in the local communities where the veterans are returning to their 

homes. 

CVSOs and the VA would be forced to deal with these issues because local officials and families concerned about the mental health 

of these young men and women will demand it. And it is a sad 

state of affairs indeed. 

Another issue is the number of veterans who are returning with 

missing limbs and prosthetic devices. Battlefield treatment and 

speed of evacuation of wounded service men and women have advanced substantially over the years. Many of the veterans returning from the Gulf region needing specialty care for missing limbs 

may well have died in previous battles. 

This has placed a tremendous and vital responsibility on the Veterans Administration that they are ill equipped to deal with in 

health and medical care, but also to provide adequate and timely 

and fair compensation decisions for the veterans, their families who 

are desperately trying to survive. 

Other issues that must be addressed is that of placing one group 

of veterans in a higher priority or class than other veterans. When 

the VA decides to give top priority to a select group of claims, the 

other claims, the veterans suffer. Some claims that have been 

pending for a year or more suddenly become less likely to be rated 

or receive appropriate attention because of a change of a policy. 

This is because personnel in the regional office have been instructed to focus on OIF and OEF veterans’ claims, the determent 

of other claims that have been working their way through this 

backlog or inventory or whatever we want to call it now. We feel 

this is tragic and extremely inappropriate. Veterans continue to die 

while waiting for VA benefits. 

We are concerned with the VA’s centralization of OIF and OEF 

claims. We are not convinced that the practice can be justified. 

When the regional office claims are brokered out, the focus becomes 

quantity and not quality. Issuing flawed rating decisions just increases the inventory or backlog of an already inflated and bloated 

backlog of appellate litigation, but we have some suggested solutions for you. 

One solution would be to reemphasize the BDD. That is the program, a pre-separation program. Claims and medical course could 

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dicate the claims and to dramatically shorten the time that the veteran has to wait for a decision after separation. 

Second, streamlining single issue disability claims at the regional 

office level while multi-face claims that have a combination of disabilities that require extensive research are passed to a tiger team. 

This would speed the process. 

Another suggestion, solution is to increase outreach efforts. Outreach efforts must be expanded in order to reach those veterans 

and dependents that are unaware of their benefits and to bring 

them into the system. 

The National Association of County Veterans Service Officers believes that we must do better. Approximately 88 percent of the veterans not being compensated is more likely than not an issue of 

lack of access or knowledge of available services rather than lack 

of need or some other issue. 

NACVSO supports House Resolution 67 introduced by Congressman Mike McIntyre of North Carolina that would allow Secretary 

Nicholson to provide Federal, State, and local grants for assistance 

to State and county veterans service officers to enhance outreach 

to veterans and their dependents. 

We also support House Resolution 1435 introduced by Congressman Baca of California which would have a significant impact upon 

existing claims backlog. 

We stand ready to partner with the Veterans Administration to 

bring about a reduction in the backlog and increase the outreach 

efforts to the veterans of our community. 

In conclusion, the bottom line is that the Veterans Administration is going to have to rise to the occasion, place more personnel 

to handle the expected large influx of new claims and resulting 

larger inventory or backlog of claims and they need a much improved IT. 

Thank you. 

[The prepared statement of Ms. Knowles appears on page 51.] 

Mr. HALL. Thank you very much for your testimony, Ms. 

Knowles. 

And we are going to jump to the middle of the table now to Mr. 

Robinson. 

Welcome. 

STATEMENT OF STEPHEN L. ROBINSON 

Mr. ROBINSON. Thank you. 

I am going to deviate from my written testimony. It is very extensive and well worth the read if you get the opportunity. 

Mr. HALL. Thank you. We were going to try to keep this to five 

minutes approximately. We do have your written testimony for the 

record. 

Mr. ROBINSON. Thank you. 

Benefits delivery at discharge is the gold standard to reduce 

claims backlog in the Department of Veterans Affairs. 

In 1998, I served in the Office of the Secretary of Defense and 

I used to go around and do briefings about the great things that 

we were doing to make sure we did not repeat the mistakes of the 

first Gulf War. 

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One of the things that was recommended at that time was a 

thing called the personal information carrier, a dog-tag sized device 

that you could carry the whole entire medical record on. And we 

went around and briefed that for about three or 4 years while I 

was in the Department of Defense. Never implemented. And one of 

the big problems that we have today is data, data from DoD to the 

VA. 

Now, the discharge process in DoD is broken. That has been 

widely publicized with the stories from Walter Reed. And that puts 

the Department of Veterans Affairs at a disadvantage because 

when the soldier does not get a proper discharge from the DoD or 

does not have the proper medical record or has to go out and find 

witness statements from commanders on the battlefield, it creates 

a situation where the gap from getting out and getting care gets 

wider and wider and wider. 

I am Steve Robinson. I am the Director of Veterans Affairs with 

Veterans for America. And in my position, I meet with Iraqi Freedom, Enduring Freedom veterans on a regular basis and happen to 

know pretty much everybody at the table too. 

There is a systematic failure in the DoD and the VA programs 

designed to address their medical needs, to track them, and to 

share information across platforms. As a result, we do not have an 

adequate understanding of what this generation needs, what are 

their unique needs as it involves the kinds of battles they are fighting, improved body armor, higher survivability, more soldiers that 

are married leaving families behind, 16,000 single mothers. These 

are all unique needs that will have to be identified and programs 

developed around, but currently we do not know because no one 

has looked at what is unique about this war. 

The face of the American soldier has changed since Vietnam, but, 

yet, we are still using a system designed for them. The VA needs 

to come up to the 21st century model, and they are making incredible improvements. But, again, I stress that they do not know what 

this generation looks like and what their unique needs are. 

More than 155,000 women have served in Iraq and Afghanistan. 

We are creating new female combat veterans in a system that was 

designed for men that came home after World War II and trauma 

nurses. Combat female veterans are a unique entity that will need 

programs and services. Sixteen thousand single mothers, as I said. 

Three out of every five deployed servicemembers have family responsibilities, spouse, and children. That is an incredibly different 

scenario than when people served in Vietnam. But, yet, we are 

treating them with the exact same system. 

What is happening today is a new chapter in the rule book. We 

have yet to begin to recognize the true needs of the current generation and create programs and services for their war-related problems. 

What do multiple deployments mean? Less than a percent of this 

population is serving the war over and over and over and over 

again. If you can imagine an NFL football player playing the Super 

Bowl every day for 365 days and the kinds of injuries that they 

would sustain, they would not have a long career. And it is the 

same thing with these soldiers that are fighting the war over and 

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over. Multiple deployments create unique situations, break down 

the bodies. That needs to be identified. 

We are especially concerned that servicemembers are not provided the mental healthcare they need. There is a dramatic rise in 

less than honorable discharges and a subsequent loss of VA benefits. That is a DoD problem, but it also impacts the Department of 

Veterans Affairs in their vet centers and in people seeking mental 

healthcare services, trying to get those services even though they 

may have lost them forever. 

There is also an over-use of personality disorders, again a DoD 

problem, but it prevents people from receiving the benefits of the 

VA and it needs strong investigation. 

The Veterans Benefits Administration disability compensation 

claims process can be characterized as either completely broken or 

partially broken depending on how you want to look at it. It is completely broken when you are a soldier who has honorably served 

and you have been denied your VA benefit. It is completely broken. 

It is partially broken for those who are able to get into the system 

and then go through the wait process, and if they are fortunate 

enough, survive. 

I see my time is getting close, so I am going to come to summary. 

We want to address the problems. We urge the Members of the 

House to consider co-sponsoring House Resolution 1354, the Lane 

Evans ‘‘Health Improvement Act.’’ This bill has key components in 

it which collect data which will allow us to know what is happening 

to this generation. It also tracks and trends what is happening in 

this war and it provides mental healthcare in a way that we currently do not offer it. 

We owe this generation, Mr. Chairman. We thank you for your 

leadership on taking up these hard issues. They have earned what 

we want to give them. Now let us make sure that we give them 

what they are owed. 

Thank you, sir. 

[The prepared statement of Mr. Robinson appears on page 53.] 

Mr. HALL. Thank you very much, Mr. Robinson. Thank you for 

your service on active duty and thank you for your service since 

and today. 

We will now hear the testimony of Mr. Van Engelen. And, once 

again, we have your written statement for the record, so 5 minutes, 

please. 

STATEMENT OF BRADY VAN ENGELEN 

Mr. VAN ENGELEN. Chairman Hall, Representative Lamborn, 

Members of the Subcommittee, thank you for the opportunity to 

testify. 

On April 6th, 2004, I sustained a gunshot wound to the head in 

Baghdad while positioned at an observation post. After being shot, 

first aid was immediately administered. I was fortunate to survive 

long enough to make it to the 28th Combat Support Hospital. 

The primary repairs and closures for my head were conducted 

while in theater at the 28th CSH. From there, I was medically 

evacuated to a military hospital in Landstuhl, Germany, where I 

stayed for recovery until I had regained enough strength to travel 

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back to Walter Reed Army Medical Center to complete the recovery 

process. 

I arrived at Walter Reed Army Medical Center on April 14th, 

2004. I was immediately asked if I wanted to be treated as an inpatient or an outpatient. Wanting to spend time with my family and 

loved ones, I chose to be an outpatient. 

At this point, I was given the building number of the Malone 

House and told to go check in. With no clue as to where the building was, I hopped onto the facility shuttle and asked if I could get 

a ride to the Malone House to check in. 

The first 2 weeks of appointments, I was fortunate enough to 

have my family and loved ones at my side to assist me through the 

bureaucratic maze that is outpatient care at Walter Reed. 

In one month’s time, my rehabilitative care was completed and 

I was told the Physical Evaluation Board process would begin 

shortly thereafter. That was May 30, 2004. I did not hear back 

about my case until December of 2004. 

Other than the research that I conducted on my own time, I was 

completely unaware of what my possibilities were and what to do 

next. Throughout the entire process, I was the one who always initiated contact with the case managers in the hospital. If it were not 

for my persistence, I would have gone unnoticed for months. There 

were just too many patients and not enough case managers to oversee the process. 

The systemic problems exposed at Walter Reed also exist in the 

Department of Veterans Affairs. The VA is overwhelmed by the 

numbers of claims filed and patients needing attendance. We did 

not prepare for this and it is painfully evident. My generation is 

going to have to pay for this and we will be paying for years and 

years. 

While at Walter Reed as an outpatient, there was no outreach on 

behalf of the VA to inform me of my benefits for myself and my 

family. 

When troops were returning from World War II, there were VA 

claims specialists on the boats with the servicemen informing them 

of their benefits that they were eligible for. We have lost that aggressive approach with today’s servicemembers and veterans. 

Today we are being asked to navigate the bureaucratic maze of 

DoD and VA on our own. I can assure you that this is no small 

feat. Shifting the burden from our government to those who serve 

has created a system where servicemembers and veterans are unaware of the benefits and programs promised to them upon enlistment. 

I understand the VA has begun to more aggressively address the 

inpatients while they are recovering at medical facilities. But as 

the case at Walter Reed, only a small number of injured soldiers 

are benefiting. This is not acceptable. 

Many wounded servicemembers at other medical outpatient facilities throughout the country remain as uninformed as I was 

upon leaving the military. Servicemembers from my generation are 

becoming increasingly disenfranchised with the system that our 

government promised would help us to heal and rehabilitate. 

Claims backlogs are currently at 180 days. A few years ago, 

claims were half that. The families of servicemembers are suffering 

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from the lack of preparation by our VA. They cannot call the bank 

and say they are waiting for a response on a claim and ask for payments to be delayed for another 180 days. 

The passive nature of the VA regarding health and claims dispensation will only tarnish their perception amongst the military 

and their families. We may end up with an entire generation of 

veterans who have no faith in our VA because those running it as 

well as those overseeing it were unable to uphold their end of the 

bargain. This saddens me deeply. 

I urge the Members of this Subcommittee to keep one question 

in mind as they work to repair this broken system. What is owed 

to those who serve? 

While I do not claim to have all the answers to this question, I 

am confident that you will conclude that the answer is more than 

servicemembers and veterans are receiving now. 

Thank you. 

[The prepared statement of Mr. Van Engelen appears on page 

57.] 

Mr. HALL. Thank you, Mr. Van Engelen, and thank you for your 

service and for your testimony. And I think we would agree with 

your last statement there at the very least. 

And, Mr. Campbell, would you like to go next? 

STATEMENT OF PATRICK CAMPBELL 

Mr. CAMPBELL. Thank you so much for allowing me to be here 

and actually thank you for allowing me to sit at a table with such 

fine representatives. 

I, too, want to deviate a little bit. On the Metro ride over here, 

I noticed a guy in a wheelchair kind of laughing how late he was 

to a meeting with a Congressman. I asked him why he was going 

down there, and he said, ‘‘I am a traumatic brain injury sufferer.’’

Actually, he said, ‘‘I am a traumatic brain injury survivor.’’

And I remember thinking that, you know, this whole day we are 

talking about these statistics hundreds of thousands of people. And 

as I am sitting here watching this one person so excited to go talk 

about, you know, some programs on how to find soldiers who are 

suffering from traumatic brain injury, he could not even get out, 

you know, the little gates because he could not figure out how to 

use the system. 

You know, this is a person who used to come here once a month, 

could not even figure out how to put the ticket in the machine. And 

he was yelled at twice by the Metro employees for not having 

enough money on his card when he just honestly did not know 

what was going on. 

So I am sitting here in front of you as one of the 54,000 OIF and 

OEF veterans that the VA is guesstimating will use the system in 

2007. 

Earlier in January when the Department of Veterans Affairs presented their budget, they said that 263,000 of their current users 

of their system are OEF and OIF veterans. 

In looking at their budget, there is a general principle that a department’s proposed budget is a clear signal to the outside world 

of both their priorities and their assumptions. 

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When you look at the assumptions the Department of Veterans 

Affairs are making for the next 5 years, it is clear that they honestly believe that there will be a drop in VA claims over the next 

5 years. That is why in 2009, the budget for VA is supposed to drop 

and then it is supposed to stay the same for the next 2 years. 

Now, I am not an accountant. I am actually in law school, so I 

am definitely not good with numbers. And I do not want to argue 

with the VA’s accountants and actuarial tables. But when the numbers seem to defy common sense, our alarms must go off. 

If you remember any one thing from this testimony today from 

me, remember that the VA has grossly underestimated the demand 

for their services once again. The soldiers coming home and they 

will be asking for care. The question we must be asking ourselves 

is, will we be ready for them. 

If anything, the recent Walter Reed expose ́ has taught us is that 

trying to treat and care for soldiers on a limited budget and limited 

oversight only has one logical conclusion: poor care. 

In the context of this specific hearing, soldiers are languishing 

while they wait for their claims to be processed and woe to the veteran who does not file his or her paperwork correctly and gets denied. They will be stuck in bureaucratic limbo for years. 

If you think that only 54,000 people, veterans are going to ask 

for help this year and even less in the next years, all you are doing 

is setting yourself up for failure. Soldiers fight for their country 

and they should not be made to fight for their benefits when they 

get home. 

We are all here, you know, all these organizations here and 

Linda, are offering you great statistics and great suggestions. And 

the Iraq and Afghanistan Veterans of America stands behind their 

recommendations. 

My purpose here is just to remind you as clear as I can in a single message, that if you start with faulty assumptions, you will end 

up with poor results. 

This Committee must work with the Department of Veterans Affairs and us, the Veterans Service Organizations, to formulate a realistic number of incoming veterans, not the OMB approved number that fits nicely into their balanced budget for the next 10 years. 

Only then will we be able to hire the correct number of claim processors and medical staff to provide the quality healthcare that 

these veterans deserve. 

Thank you for allowing me to testify. 

[The prepared statement of Mr. Campbell appears on page 58.] 

Mr. HALL. Thank you Mr. Campbell for your testimony and for 

your service. And we are here to work with you. 

That is why we are holding these hearings and everybody on this 

Subcommittee, including the members who could not be here now 

because they are in the middle of other work, other Committee 

hearings that are scheduled at the same time, I know all agree 

with our wish to collaborate in coming up with a realistic picture 

and solving the problems in terms of funding. 

We will now hear the testimony of Jon Soltz. 

Mr. Soltz. 

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STATEMENT OF JON SOLTZ 

Mr. SOLTZ. Sir, I just want to thank everyone here first for having us here as well and for you inviting us. And to Mr. Lamborn, 

Congressman Lamborn, thank you. Thank you as well. 

Everyone here was listening. I am obviously an Iraq War veteran, served in Iraq in 2003, served in Kosovo in 2000. I am still 

an officer of the United States Army today. I am about to hit my 

8-year mark. 

You know, obviously my greatest honor is leading soldiers in 

war. I wanted to go to Iraq. The hardest part was coming back. I 

have gone to the VA and sought VA services when I returned. I 

have still got my card right here. I, like many others when I left 

active duty, lost healthcare, so it was the place I went. 

I think there has been a lot of great statistics, so I am going to 

deviate from my testimony about obviously some personal stories. 

There are a lot of people that are going to use the VA, specifically 

the Guard and Reserve. When they come off active duty, they lose 

healthcare benefits. 

When I went to the VA, it took me a long time, so I do not want 

you to think that, you know, if the DoD is giving them a little questionnaire when they get off their airplane, they are going to pay attention to it. It is going to take them 6 to 8 months, 10 months, 

sometimes years before they walk in the doors of the VA and get 

help. 

Specifically if they do not have a wound that is identifiable immediately for disability like they got their arm shot or so forth, 

that you are going to see more and more stress with the disorders 

that we do not see. Obviously the mental disorders. 

My experience was one similar. I heard the professor talk about 

the culture climate. When I went to the VA, it was one of the hardest things I ever did. My nurse, she looked at me and she said, you 

know, you came to the right place and she asked me why I came. 

And I came because I was not sleeping right after eight months 

and, you know, it took me less than 20 hours to get into combat. 

And it was something that did not affect me when I was there, but 

affected me when I got back. 

So I went to the VA. You know, I went through the process and 

I took a couple tests and it took me several weeks to get in to see 

a doctor. And, you know, ultimately the VA told me that I was just, 

you know, not adjusting properly. 

And I do not want us to focus so much on the backlog specifically. I think there are two broader issues that you all should be 

aware about before we look at systematically fixing the backlog. 

And one is the diagnosis process. And I do not think that it is 

quantifiable and I do not think it is consistent with when you 

talked about why some issues are harder than others, it is hard to 

quantify posttraumatic stress disorder. 

And what you are seeing is a lot of soldiers and Marines that are 

going to go through the system and they are going to be given adjustment disorder. You know, we know one in three are having 

these kind of issues, but only 12 percent get diagnosed with PTSD. 

So the quantification moving from DoD to VA is very difficult, 

and I think that for the first time in this country, we have an opportunity to have a real conversation over an extended period of 

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time, that we all need to sort of understand what I call the yellow 

brick road. And I think we saw a piece of that with the Walter 

Reed. 

But when a soldier gets wounded like Brady did, he entered the 

system on one side and I entered it on another, but they are really 

going to go through five or six different institutions before they settle at the VA or they are going to answer at their home duty station and what that process is. 

And if we only look at it from the Veterans Administration’s side 

and fixing that piece of it, then we are still going to have a tremendous amount of problems watching the soldier through the entire 

system. 

And it is sort of like a school system and right now the way we 

are set up is K through six is one school system and six through 

twelve is another. And if you just look at it that way, I am not 

quite sure we are going to get the answer we need. 

And until we fix the diagnosis inconsistencies, look, there is a big 

reason why people are giving adjustment disorder. How do you 

quantify what PTSD is? What is the quantification recommendations that we are making between what the DoD is and VA? 

If I brought ten Iraq War veterans in here, and I am more than 

willing to do it, if I brought a psychiatrist from the VA, a psychiatrist from DoD, and a private psychiatrist, you are going to get 

three different answers. 

And this is part of why we are getting this backlog, and I think 

we have to look at it from both sides, DoD and VA, and then I 

think you need to look at how we quantify where we are going to 

see the most amount of stress which is the TBI and the PTSD because they are not entering the system like Brady did. Brady enters the system because he got shot. 

A lot of soldiers, especially Guard and Reservists, one in three 

who served in Iraq are from that component. Because of the way 

we redesignated the force, we cannot deploy without them. They 

are going to enter the system at their home VA centers when they 

return home because they fall out of the DoD system. 

So I think that this has to be very broad-based and I think that 

we have to look specifically at how we quantify what these illnesses 

are. 

I do support the recommendation, however, of treating, if anyone, 

we give them the benefit of the doubt to provide them support immediately like the IRS. I think that is why we have a lot of homeless vets. And at least we are guaranteeing we are protecting everybody. 

With that said, my time is up. And thank you guys for having 

me. 

[The prepared statement of Mr. Soltz appears on page 59.] 

Mr. HALL. Thank you, Mr. Soltz. You win the prize for stopping 

before your time was actually up. 

Mr. SOLTZ. Usually I go over my time, so I wanted to make sure 

I behaved today. 

Mr. HALL. It will not happen often today, I am sure. 

Anyway, I just have a couple of questions. Mr. Robinson, you 

made mention of the number of women who have served in OIF/ 

OEF. I think it was 155,000. 

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Are you aware of any particular instances in which women veterans have had a more difficult time with the claims process and 

how might that be approached differently? 

Mr. ROBINSON. I have not broken out in terms of women veterans 

and the claims process, but one stunning example is that Reserve 

and National Guard soldiers are twice as likely to be denied if they 

file a claim than active-duty soldiers. And I do not understand why 

that is happening. 

Mr. SOLTZ. Can I say one thing. I think Steve is right on that, 

sir, but I think the point here is that National Guard and Reserve 

soldiers that get wounded in Iraq, they enter the system with a 

prior sort of wound. And if you go home to your home duty station 

and you fall out of the active component force, you then become dependent on going to the VA. 

So the National Guard and Reserve soldiers that are entering directly through the VA are obviously entering with something like 

PTSD, which is harder to quantify. You cannot give them a blood 

test. You cannot quantify that. And that is the systematic issue 

that Steve is talking about. 

Mr. ROBINSON. Some of the other issues that we have noticed—

I do not know if the Committee saw the New York Times article 

on disparities—the cities and towns that send the most people to 

war are the cities and towns where the backlog is the greatest. And 

there was a great New York Times article that was written on that 

just several days ago. 

[The article referenced by Mr. Robinson, ‘‘Veterans Face Vast Inequities Over Disability,’’ New York Times, March 09, 2007, by Ian 

Urbina and Ron Nixon, appears on page 82.] 

Mr. SOLTZ. May I say one more thing about women——

Mr. HALL. Yes, please. 

Mr. ROBINSON [continuing]. To try to answer the question you 

asked? There are no unique programs. They are starting to develop 

unique programs, but there are no unique programs for female 

combat veterans. 

Imagine a female combat veteran in a group therapy session trying to discuss sexual intimacy. Imagine her talking about not wanting to hold her baby. It is not going to happen in front of a bunch 

of other men. 

So we need to create specialized care programs for the new female combat veterans. And there may be unique claims issues surrounding that. 

Mr. HALL. Thank you very much. 

I want to ask Ms. Knowles what has been the impact of 

prioritizing OIF/OEF claims on the other claimants waiting to be 

adjudicated? 

Ms. KNOWLES. Whenever you prioritize and you bring in putting 

new claims over the older claims, we have veterans that literally 

have had claims in there a year, and this is not an appeal. This 

is a regular claim. And they are pushed to the back burner. No way 

saying that the OIF and OEF is not important. It is. A veteran is 

important be it Vietnam, World War II, Korea, or our current veteran of Iraq and Afghanistan. They are all veterans and they 

should all be treated the same. 

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The impact that we see, and I think it is due to regional offices, 

I think when your regional office has that priority that they are following the guidelines and do not take the common sense approach 

and look at those that are already a year old, that is how we see 

the impact. 

And about the numbers earlier, when they were saying that the 

1,000 new employees, it will take 2,000 new employees because the 

400 the President is talking about are retiring, people that are 

going to retire. It will take 2,000 new employees to put in the regional offices to handle the claims that they have now and will 

have in the very near future. 

Mr. HALL. Thank you. 

And one last question. This could go to anybody. There have been 

in previous wars extended illnesses, for example, that came up due 

to exposure to Agent Orange from Vietnam. I have a close family 

member of mine who just underwent prostate surgery for—well, we 

do not know for sure, but it is one of the things that has been 

known to be caused by Agent Orange, and a gentleman from my 

district, the veteran I spoke about before who is dealing with prostate cancer also. 

Gulf War syndrome, I am not sure if the verdict really is in on 

it. Is it depleted uranium? You know, there can be exposures that 

show up 20, 30 years later due to these things. 

Are any of you expecting or seeing already a similar kind of longterm problem that may crop up in the distant future? 

Mr. ROBINSON. I would like to start because I just came off of the 

VA Research Advisory Committee on Gulf War veterans’ illnesses, 

so I am pretty familiar with it. 

There are things that are occurring on the battlefield that are 

things we are doing to ourselves. There are things that need serious investigation and have not yet been fully investigated that 

servicemembers on this battlefield are facing that veterans from 

the first Gulf War faced. 

The drug Mefloquine Lariam, DoD stood up a task force to investigate whether or not that drug was a neurotoxin and harming people. The Armed Forces Epidemiological Board never completed its 

work. The Anthrax vaccine, depleted uranium screening. What we 

have learned from the mistakes of the first Gulf War are that a lot 

of times we do things to ourselves that were unintentional or perhaps not really scientifically validated before we did it. 

But we do not see any, at this point, any strange or unique thing 

happening except people coming home with exposures to, you 

know, the things that happen on the battlefield that make people 

sick. 

As you mentioned, Agent Orange is now a presumptive service 

connection for the disease that you are speaking about and it came 

about because people did scientific work and initially it was poopooed. People did scientific work and they discovered the connection. 

There are going to be connections to things that soldiers used on 

the battlefield in the future or that science is now looking at that 

are going to be presumptively connected to their service in this 

war. But right now we see no giant epidemiological trend like we 

did in the first Gulf War, primarily because in the first Gulf War, 

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we blew up the majority of all chemical warfare agents on the battlefield in the pre-war, during-war, and post-war bombing phase. 

Mr. SOLTZ. Sir, we have a lady, a woman who I work with very 

closely. Her son, he committed suicide. He blew his brains out with 

his weapon. And she to this day, you know, talks about her own 

personal studies in regards to Lariam. He was a Marine Corps officer and, you know, it is her specific interest. 

And I would agree with Steve. We have not seen a large trend 

like Gulf War syndrome or Agent Orange in effect, but there are 

individual cases out there. You know, in Iraq, there is a mystery 

ammonia, lice meiosis, some very different things, but—— Mr. ROBINSON. There is a huge cancer, rapid onset cancer. We 

are seeing it at Fort Carson, Colorado, sir. There are a couple of 

people that have died. There is rapid onset cancer that kills them. 

We do not know what it is, but it needs to be investigated. 

Mr. SOLTZ. Yeah. Just like in theater, we had this ammonia 

where soldiers were dying immediately in theater. But the Lariam 

is something I would take specific attention of considering there 

are people that claim that it causes psychological problems and can 

be the cause of suicide. We see a lot of suicide in theater. 

Mr. CAMPBELL. If I could just add one more thing. This is not 

nearly as dramatic, but I think we are going to be seeing a lot of 

people with back injuries from all this body armor that we are putting on people. 

You cannot wear 60, 70 pounds of armor every day for 365 days, 

you know, two or three tours without 10 years, 15 years down line, 

people’s backs and knees and shoulders and everything. You know, 

it is not as dramatic, but I am telling you all my soldiers are already starting to suffer their problems, and they are only in their 

twenties. You know, 20 years down the line, they are going to be 

coming to the VA. 

Mr. HALL. Thank you very much. 

I am going to remind our Members that we have a first vote expected at 12:20, so we will try to move the questions along. 

Ranking Member Lamborn. 

Mr. LAMBORN. Thank you, Mr. Chairman. And I just have one 

question. 

But first I want to thank all of you for coming here today and 

helping put a personal face on these issues that we are looking at. 

So thank you. 

Mr. Robinson, a question for you in particular. You had some 

really good suggestions on clearing up the backlog. Of those suggestions, if you could just implement one of them right off the bat, if 

we cannot do all, which one would you single out? 

Mr. ROBINSON. Fix the DoD discharge process because it is going 

to make the VA backlog disappear. Benefits Delivery at Discharge 

is the gold standard along with other recommendations. You are inheriting a problem because they are not doing their job. 

Mr. LAMBORN. Okay. Thank you. 

Mr. HALL. Thank you for yielding back. I assume you do. 

Mr. LAMBORN. I do. 

Mr. HALL. Mr. Hare. 

Mr. HARE. Well, first of all, thank you all for your service and 

thanks for taking the time to come here today. And, again, it never 

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ceases to amaze me how we are quick to put people in harm’s way 

and very slow to help them when they need help the most. 

I know, if I could, Mr. Campbell, I know you were speculating 

we were going to have some people testify. But in your opinion, 

why do you think the VA is anticipating a drop in claims that you 

were talking about, and I think you said they were grossly underestimating? What are they using for criteria, do you think? I mean, 

I know we will ask later, but I am just wondering from your end. 

Mr. CAMPBELL. Well, I think it has to do with budget numbers. 

I mean, you have—we want to balance the budget. You know, this 

whole debate is about paying for the full cost of the war. And when 

you are trying to balance a budget without raising taxes and fighting two wars at the same time, you know, you have to kind of cross 

your fingers and hope and pray that certain things are going to 

happen. 

And, you know, the administration wanted a budget that is going 

to look balanced in 2 years, 3 years, 4 years down the line and, you 

know, that is one of the ways to do it. And it is just not going to 

happen. You cannot have a VA budget that stagnates or decreases 

when you are just starting to see the claims begin. I mean, there 

is no way to get around it. 

The budget needs to increase with the increased demand. And 

unless you are planning on cutting services or hoping a whole 

bunch of World War II veterans are going to die in the next couple 

years, you know, it is not going to happen. 

So the assumption has to be that there are not going to be any 

more claims. Like I said, I am not a statistician, but it does not 

pass the test. 

Mr. HARE. I do not think you have to, Mr. Campbell. I think 

being realistic, I think we clearly know that there is going to be 

an increase and not a decrease. 

Mr. Van Engelen, I just had a question for you. When you were 

in Walter Reed and experiencing this transition between the DoD 

healthcare to the VA, from your experience, what recommendations 

would you give to us to improve the transition from the whole VA 

disability claims process? I mean, as I understand it, you said it 

was 7 months that you were—— Mr. VAN ENGELEN. That was the discharge process from the DoD 

aspect of it. On addressing the issue of them informing, keeping me 

informed of what I should know, I was at Walter Reed, so, you 

know, there were some people there that were in a similar situation that could brief me on this stuff. 

Mr. HARE. But you said you initiated the contact with the case 

managers. 

Mr. VAN ENGELEN. That is correct. 

Mr. HARE. And basically you were working for yourself in this 

process. And I guess what I am asking you is, for those people who 

may not be able to do that or do not do that, what do we need to 

do better? I mean, clearly this has got to get fixed. 

Mr. VAN ENGELEN. I agree. It does need to get fixed. I think that 

they need to be much more aggressive. I think they need to have 

people on the field literally out there pounding pavement at Walter 

Reed and all the medical installations, talking with family Members. 

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I know that General Waitman, when he was in command at Walter Reed, he had town halls. That would be a great place to send 

the VA representative and just have them sit there and say, look, 

I want everyone that is within timeframe of being discharged to 

come talk to me. I am going to give you a general spiel and then 

we will work some stuff out from there. But this is not an outpatient facility more or less. 

I have a friend who is at Fort Richardson in Alaska. He has no 

idea of what the VA has to offer and what benefits he can get. And 

he is 6 days from ETS. 

Mr. HARE. And he has no idea? 

Mr. VAN ENGELEN. No idea. He is a college educated individual, 

sir. It is just part of the process. There is no one up there to help 

these guys. They just came back from Iraq and they are all getting 

ready to ETS and there is no one there to inform them of what 

there is out there for them to get. 

Mr. HARE. Amazing. Sad, but amazing. 

Ms. Knowles, just one quick question. You said of those 400 and 

some people that they are talking about adding 1,000 and I think 

you said you would need like 2,000, do you see if we can up those 

numbers significantly that this is going to help in the processing 

of the claims and help our vets out? 

I know that the Professor testified that training these new people 

is going to be a problem because you have got to train them and 

get them up to speed and that could take up to a year, I think she 

was talking about, or longer. 

So if we do get the new people, which, by the way, I think we 

should do more than we are going to do or thinking of doing what 

is the fix here from your perspective for us? 

Ms. KNOWLES. From a person who sits across the desk and files 

a claim daily, that is my job, I sit across the desk every day and 

file the claims, when we submit it to the regional office, it stagnates. They do not have adjudicators, enough adjudicators, and the 

ones they have, she is absolutely right, they are brand new on the 

job. The decisions they make are wrong decisions and we have to 

go back with a reconsideration. 

We know there are going to be people retiring. We have to start 

somewhere. That is the reason we need to go ahead and put employees there to start training them. We still have another bad 5 

years before we are going to see the backlog really come down because we have got to have people there to do the job. 

Now, County Service Officers, the State Service Officers are 

doing the legwork on the outside. We are gathering the information 

and presenting it. That is why we have tried to work with the VA 

for years. Give us your check list of what you need. We will make 

sure you get it so that even a brand new adjudicator can do their 

job, a new rater can do their job. 

Mr. HARE. Thank you all very much. 

Mr. HALL. Thank you, Mr. Hare. 

Thank you, our panel. Thank you for your service continuing and 

in the past, and you have been a great enlightenment to us. 

I am going to ask Mr. Hare if you would sit in the Chair for a 

moment. 

Mr. HARE. I would. 

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Mr. HALL. Thank you. 

Mr. HARE [presiding]. If we can call our last panel, I think Mr. 

Ronald Aument. 

Thank you, Mr. Secretary, for coming to visit with us this afternoon, and we will go ahead and start with your testimony. 

STATEMENT OF RONALD R. AUMENT, DEPUTY UNDER SECRETARY FOR BENEFITS, VETERANS BENEFITS ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY MICHAEL WALCOFF, ASSOCIATE DEPUTY UNDER 

SECRETARY FOR FIELD OPERATIONS, VETERANS BENEFITS 

ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS 

Mr. AUMENT. Thank you, Mr. Chairman. 

Mr. HARE. You are welcome. 

Mr. AUMENT. Mr. Chairman and Members of the Subcommittee, 

it is my pleasure to be here to discuss the Disability Compensation 

Program and our efforts to meet the needs of servicemembers and 

veterans of Operations Iraqi and Enduring Freedom. 

I am accompanied today by Mr. Michael Walcoff, VBA’s Associate 

Deputy Under Secretary for Field Operations. 

The Veterans Benefits Administration is responsible for administering a wide range of benefits and services for veterans, their 

families, and their survivors. 

At the heart of our mission is the Disability Compensation Program. Last year, we provided veterans with decisions on over 

774,000 disability claims and performed more than 1.3 million 

other award actions and benefits adjustments for beneficiaries already on our rolls. 

Additionally, we handled over 6.6 million phone calls, conducted 

over a million interviews, briefed more than 390,000 service persons, and conducted nearly 65,000 hours of outreach. 

Today I will discuss the challenges we face in providing timely, 

accurate, and consistent determinations on veterans’ claims for disability compensation. I will also discuss some of the actions we are 

taking to improve claims processing and expedite the process of the 

claims from Operations Iraqi and Enduring Freedom of veterans. 

VBA is engaged in numerous initiatives aimed at better managing the disability claims workload and providing benefits processing. The efforts include changes to the organization and structure of the veterans service center, delivery of training, consolidation of specialized operations, and redistribution of workload. 

The implementation of the claims processing improvement initiative, CPI model established a consistent organizational structure 

across all of our regional offices. Work processes were reengineered 

and specialized teams established to reduce the number of tasks 

performed by individual decisionmakers, establish consistency in 

work flow and process, and incorporate a triage approach to incoming claims. Implementation of this model provided a strong foundation for improving both the accuracy and consistency of our claims 

processing. 

We also established an aggressive and comprehensive program of 

quality assurance and oversight to assess compliance of VBA 

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plication. As a result of these efforts, our quality has risen over the 

last 4 years from 81 percent to 89 percent. 

VBA has deployed new training tools and centralized training 

programs that support accurate and consistent decisionmaking. 

New hires receive comprehensive training and a consistent foundation in claims processing principles through a national centralized 

training program, and local training is provided utilizing a standard curriculum. 

Standardized computer-based tools have been developed and 

training letters and satellite broadcasts are provided to the field on 

the proper approach to rating complex issues. 

In addition, the mandatory cycle of training for all veterans service center employees has been developed consisting of an 80-hour 

annual curriculum. 

The consolidation of specialized processing operations for certain 

types of claims has been implemented to provide better and more 

consistent decisions, and we continue to look for ways to achieve 

additional organizational efficiencies through further consolidation. 

Some of our efforts include the establishment of pension maintenance centers, the tiger team, the appeals management center, and 

the casualty assistance unit. We are exploring the centralization of 

all pension adjudications in these centers. 

VBA also established two development centers in Phoenix and 

Roanoke and centralized the processing of all radiation claims to 

the Jackson regional office. 

The Benefits Delivery at Discharge Program provides servicemembers with briefings on VA benefits, assistance with completing 

applications, and a disability examination before leaving service. 

Through the BDD Program, a servicemember can file a pre-discharge claim while on active duty. 

These claims are received at one of our designated BDD intake 

sites and processed through the BDD Program. In order for a claim 

to be processed as a BDD claim, servicemembers must have 60 to 

180 days remaining on active duty and must be available for all required examinations at the local intake site. The goal of this program is to deliver benefits within 60 days following discharge. 

VBA has consolidated the rating aspects of our BDD Program 

which will bring greater consistency of decisions on claims filed by 

newly separated veterans. 

VBA is aggressively pursuing measures to decrease the volume 

of pending disability claims and shorten the time veterans must 

wait for decisions on their claims. 

We began aggressively hiring additional staff in fiscal year 2006, 

increasing our on-board strength by over 580 employees between 

January 2006 and January 2007. 

We will continue to accelerate hiring and fund additional training programs this fiscal year and then maintain staffing at maximum levels based upon funding received in 2008 and following. 

We are recruiting now to increase our on-board strength by an 

additional 400 employees by the end of June. We have also increased overtime funding this year and recruited retired claims 

processors to return to work as reemployed in order to increase decision output. 

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VBA implemented the brokering strategy in which rating cases 

are sent from stations of high inventories to other stations with the 

capacity to process additional rating work. Brokering allows the organization to address simultaneously the local and national backlog 

issues by maximizing the use of available resources. 

Since the onset of combat operations in Iraq and Afghanistan, 

VA has provided expedited and case managed services for all seriously injured Operations Iraqi and Enduring Freedom veterans 

and their families. 

VA assigns special benefits counselors, social workers, and case 

managers to work with these servicemembers and their families 

throughout the transition to VA care and benefit systems and to 

ensure expedited delivery of all benefits. 

Last month, the Secretary of Veterans Affairs announced a new 

initiative to provide priority processing of all OIF/OEF veterans’

disability claims. This initiative covers all active duty, National 

Guard, and Reserve veterans who were deployed to or in support 

of the OIF/OEF combat operations as identified by the Department 

of Defense. 

This initiative will assist these veterans to enter the VA system 

and begin receiving disability benefits as soon as possible after separation. We have designated our two development centers in Roanoke and Phoenix and three of our resource centers as special tiger 

team resources for processing OIF/OEF claims. 

The development centers will obtain the evidence needed to properly develop the OIF/OEF claims and the resource centers will rate 

OIF/OEF claims for regional offices with the heaviest workloads. 

Medical examinations needed to support these claims are also 

being expedited. 

We are expanding our outreach programs for National Guard 

and Reserve components and our participation in OIF/OEF community events and other information dissemination activities. 

An OIF/OEF team is being established at VBA headquarters to 

address all operational and outreach issues at the national level to 

include the coordination of a national memorandum of understanding with each of the Reserve components. 

The MOUs will ensure that VA is provided service medical 

records and notified of when and where Reserve Members are 

available to be briefed during the demobilization process and at 

later times. 

We will work with DoD to discuss the possibility of expanding 

VA’s role and VA’s military preseparation process. Specifically we 

will assess the feasibility of providing a new claims workshop 

where groups of servicemembers would be instructed on how to 

complete the general portions of the VA application forms. Personal 

interviews would be conducted at the end of the workshop with 

those applying for benefits. 

Mr. Chairman, this concludes my testimony. I appreciate being 

here today and look forward to answering your questions. 

[The prepared statement of Mr. Aument appears on page 61.] 

Mr. HALL. Thank you very much for your testimony, Mr. 

Aument, is it? 

Mr. AUMENT. That is correct. 

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Mr. HALL. What percentage of the current claims backlog would 

you say is made up of OIF/OEF veterans? 

Mr. AUMENT. Of the currently pending claims workload? Around 

10 percent. 

Mr. HALL. And what are your projected casualties for OIF/OEF 

and also how many of those veterans do you anticipate will file a 

claim with VBA? 

Mr. AUMENT. We do not project casualties. What we do is project 

claims workload based upon prior experience. Our projection models, we use one both for projecting the mandatory account spending 

as well as for the claims workload, have been in use for some time 

now and they rely primarily upon prior years’ experience being adjusted based on the most recent experience. 

Mr. HALL. I was wondering if you had the opportunity to read 

Professor Bilmes’ paper and, if so, what your thoughts are on her 

conclusions. 

Mr. AUMENT. Yes, I have. I have read her earlier work together 

with Professor Stiglitz’s that was published earlier. I found it very 

interesting. They obviously involved a lot of research. There are 

many points I certainly could agree with. Others, I am not so certain I agree with. 

I certainly agree with some of her over-arching observations in 

listening to her testimony today. One is that the disability compensation system is extremely complex. I believe that is probably 

one of the most confounding hurdles that we all face, those of us 

who are charged with administering the program, as well as those 

who come to us for support. 

Of her recommendations, I do not know that she touched upon 

it today so much, but in her most recent paper, one of the recommendations I was very intrigued by, and wholeheartedly endorse, was the idea of modernizing many of our systems to include 

the use of more electronic information within our systems to include imaging and systems that much like that, parallel those that 

are used in private industry. 

Mr. HALL. I think she is writing her third paper right now. 

Mr. AUMENT. I see. 

Mr. HALL. I was wondering how you might explain the 10 percent discrepancy between ratings approved for active-duty servicemembers as opposed to those in the Guard and Reserves. 

Mr. AUMENT. I certainly do not have a full explanation. I can put 

forth a couple of theories on this. 

We are about to release, I expect later this month or early next 

month, a study that was performed by the Institute for Defense 

Analyses that we contracted with about a year ago following some 

of the controversy over consistency and interest in the fact that we 

had inconsistencies from office to office. 

They have a number of very interesting findings. One that I find 

most compelling for this issue is that a military retiree is four 

times more likely to be receiving disability compensation than a 

non-retiree. Many of the Guardsmen and Reservists, quite frankly, 

unless they have been injured in the past while they are on active 

duty for training, typically were not eligible for VA benefits. So 

they are only becoming more eligible because of the mobilization 

periods that they have gone through. 

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They spend considerably less time on active duty than an activeduty servicemember does. We believe that there is some rationale 

that would connect those two facts. 

One of the things that we are discussing is going back to the Institute for Defense Analyses and having them examine this very 

issue to try to give us greater insight as to what might be driving 

some of those discrepancies. 

Mr. HALL. Back to Professor Bilmes, she was invited by a VA 

health economist, Dr. Todd Wagner, to present her studies to all 

the VA health economists. This was scheduled, but the VA headquarters canceled it the day before it was to take place. 

I am just curious if you were aware of that or maybe we could 

find out why and whether it could be rescheduled. 

Mr. AUMENT. I will certainly take that back. I was not aware of 

this at all, but I will certainly take that back. 

Mr. HALL. That would be good. 

And of the 57 regional offices of VBA, 54 of them received an outstanding rating. I was wondering how that could happen with a 

backlog of 600,000 cases. I mean, I understand there is a lot of 

good work going on in the VA. Nobody says that there is not. I 

know plenty of people who have been treated and are happy with 

their treatment. It is the numbers that are adding up to accentuate 

the negative at this point. And so I am just curious how we get 54 

of 57 regional offices being judged outstanding. 

Mr. AUMENT. We typically do not really judge the regional office. 

Are you speaking about the Directors of the regional offices, their 

performance evaluation? 

Mr. HALL. Yes. That is correct. 

Mr. AUMENT. I am not sure we agree with that number. I will 

ask Mr. Walcoff to address that. 

Mr. WALCOFF. I am the rating official for all of our regional office 

directors, and I do not have the exact number, but I will tell you 

that the number rated outstanding was probably somewhere 

around 15. It was nowhere near 54. 

Mr. HALL. Okay. Well, glad to hear my information was wrong. 

I have exhausted my time. Mr. Lamborn, you are next. 

Mr. LAMBORN. Thank you, Mr. Chairman. 

Mr. Aument, in shortening the time for a claim to be decided, 

there are certain administrative challenges that you face. What are 

some of these and how do you think we could streamline these administrative issues so that we can get the adjudications done faster? 

Mr. AUMENT. There truly are, Congressman Lamborn. Probably 

the very first one that we encounter is assuring that we have the 

background records necessary to perform an accurate review of the 

claim. 

Typically that means that we need to have, more often than not, 

the veteran’s service medical records in hand before we can actually fairly evaluate the claim. Often cases come to us without those 

service medical records. 

That is one of the reasons why the Benefits Delivery at Discharge Program is a good model to follow, because we are able to 

overcome that initial bureaucratic hurdle while the servicemember 

is still on active duty. 

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Secondly, most cases that come to us require some form of physical evaluation. That typically is going to add anywhere from 35 to 

50 days on the front end of the evaluation process, particularly if 

specialty examinations are required. 

General medical examinations are difficult enough to arrange, 

but when you need specialist examinations, orthopedic specialists, 

audiologists, those types of examinations, that can lengthen the 

delays. 

Then also there are some built-in due process considerations that 

are there for the protection of the veterans that were enacted, I 

think, certainly in the best interest of the veteran, through the 

‘‘Veterans Claims Assistance Act.’’ But they clearly do add to the 

cycle time for the processing of a typical claim. 

Today when we believe that we have all the evidence finally 

gathered that is needed to rate a claim, we have to inform the veterans that we are preparing to rate their claims and we have to 

give them 60 days to tell us whether or not they have any additional evidence they want us to consider in that rating. 

If we do not hear back from that veteran, we have to wait for 

that 60 days to expire before we can proceed to rate the claim, 

which is often the case. 

So there are some built-in wait states to today’s claims process 

that, if left unchanged, we believe, under the best of circumstances, 

will compel us to take around 125 days on average to rate a claim. 

Mr. LAMBORN. Mr. Aument, you referred to that 60-day waiting 

period. I believe that that is waivable. But how good of a job are 

you doing to let the claimant know that that is waivable and the 

claim could be expedited if they have no reason to ask for it and 

they want to waive it? 

Mr. AUMENT. Absolutely, it is waivable. We do inform the veteran that it can be waived. We are working with the Veterans 

Service Organizations. When a service organization is representing 

a veteran, quite often they can be helpful in obtaining that waiver 

from them. 

In other cases, and unfortunately some of our offices are more 

challenged than others by their pending workload, they are less 

able to do this, but we do encourage attempts by our claims processors to reach the veteran by telephone because we can obtain 

waivers by telephone. That is legally acceptable as long as we document the record. 

So we do that wherever we can. But we operate normally during 

normal business hours and, quite frankly, most veterans are working during that period of time. So sometimes contacting them can 

be challenging. 

Mr. LAMBORN. Thank you. 

And I yield back my time. 

Mr. HALL. I want to thank you, Mr. Aument, Mr. Walcoff. I 

thank all Members of all the three panels. 

It has been a very educational day. We seem to be learning a lot 

about our system and how we can better serve those who defend 

our country and fight on our behalf when they come home. 

And we will follow-up with more questions as they occur to us 

and hope that together we can find the solutions to reduce this 

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waiting time and provide the same shock and awe in terms of 

treatment that we do in terms of initiating combat. 

I think that, you know, if we are capable of being prompt and 

accurate in the way that we deploy and utilize our Armed Forces, 

that we should attempt to be and get closer to being that prompt 

and that accurate and that immediate, especially when the injuries 

or diseases that they face are so immediate to them and their families. 

And I appreciate your contributing to our understanding of this. 

Thank you, Mr. Lamborn. Thank you, Counsel and staff, for the 

Members who were here. And the hearing is now adjourned. 

[Whereupon, at 12:20 p.m., the Subcommittee was adjourned.] 

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A P P E N D I X 

Opening Statement of the Honorable John J. Hall, Chairman, 

Subcommittee on Disability Assistance and Memorial Affairs 

Thank you all for coming today. I am pleased that so many folks could attend this 

oversight hearing on the ‘‘Impact of OIF/OEF on the VA Claims Process.’’ Regardless of whether or not you agree or disagree with the war in Iraq, I think 

most—if not all—Members of Congress believe that our young men and women who 

served in OIF/OEF deserve the best medical care and all the help we can give them 

in transitioning from military to civilian life. Nothing bothers me more than those 

who say they support the troops, but turn a cold shoulder when those same troops 

return home and become veterans. 

The purpose of today’s hearing is to ensure that the problems discovered at Walter Reed Army Medical Center are not the tip of the iceberg with respect to how 

prepared we are for our returning servicemembers. Since the jurisdiction of this 

Subcommittee is not veterans’ healthcare, but veterans’ benefits, we are going to 

focus on the VA’s claims process and how it has been impacted by OIF/OEF. However, as an aside, I would like to say that I am sponsoring a bill to allow Active 

Duty servicemembers the option of receiving medical treatment at their local VA 

hospital if they so desire. 

In addition to looking at whether the VA is equipped to handle the claims of returning servicemembers, this hearing will also examine reports of rating discrepancies among Active and Reserve veterans. Recently, media reports stated that Reserve and National Guard servicemembers had a greater risk of their claims being 

denied or lowered than their Active Duty counterparts. I don’t think there should 

be a Reserve/Active Duty distinction with respect to a veteran who suffers an injury. 

In determining whether the VA claims’ system can handle the influx of returning 

OIF/OEF servicemembers, we will hear from GAO who will discuss the current 

claims backlog and possible solutions to fix the problem. As most know, the VA has 

had a claims backlog for many years now and it only continues to grow. 

At last count, the average wait to have a VA claim processed, had grown from 

2 months to 6 months, and even much longer in some areas of the country. From 

December 2000 to March 2007, the backlog of compensation claims grew from 

363,412 to 632,140. 

Next, we will hear from Professor Linda Bilmes who has written a widely acclaimed paper entitled, ‘‘The Long Term Costs of Providing Veterans Medical Care 

and Disability Benefits.’’ I will be most interested to learn whether or not Professor 

Bilmes expects the rate of OIF/OEF claims to grow significantly. Furthermore, I 

want to hear her thoughts about how the DoD and VA define the term ‘‘casualty.’’

After Professor Bilmes, we will hear from three veterans’ organizations: (1) Veterans for America; (2) Iraq and Afghanistan; and (3) VoteVets. I want to hear their 

assessment of how the VA is handling the claims of returning OIF/OEF veterans. 

Finally, we will hear from the Veteran Benefits Administration, which has the Herculean task of ensuring that our veterans receive the benefits they deserve. I am 

specifically interested in learning more about the VA’s new priority processing for 

OIF/OEF veterans which was recently instituted. Also, I want to know about the 

VA’s projection for future OIF/OEF claims. Specifically, I want to understand how 

they can predict an actual decrease in the number of claims in 2007 and 2008 in 

light of the President’s escalation of the Iraq War. 

As I stated earlier, I am concerned about an overall lack of preparedness by this 

Administration with respect to the War in Iraq, whether it be insufficient body 

armor or inadequate housing at Walter Reed. The cost for caring for our veterans 

must be understood by Congress and the Administration as an ongoing cost of war—

veterans shouldn’t suffer because of poor planning. 

One only has to read the March 5, 2007 edition of Newsweek, which I will be introducing into the record, to see how some returning OIF/OEF veterans are falling 

through the cracks. On page 33, there is a story about Patrick Feges who was 

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wounded in October 2004 and had to wait 17 months until his first VA disability 

check arrived. His mother, an elementary schoolteacher, took a second job at 

McDonalds to help support him. Mr. Feges’ claim was only approved after Newsweek 

and the Veterans for America began looking into his case. I thank both for their 

work. 

I am holding this hearing today to see if Mr. Feges 17 month delay is an anomaly 

or evidence of a systemic problem for returning OIF/OEF veterans. If it is the latter, 

I would be interested in hearing any and all recommendations from the speakers 

today on how we can fix the problem. 6 months, not to mention 17 months, can be 

devastating to a person who is rated unemployable and is without any other means 

of support. 

f 

Opening Statement of the Honorable Doug Lamborn, Ranking Republican 

Member, Subcommittee on Disability Assistance and Memorial Affairs 

Thank you Mr. Chairman for recognizing me. I thank you for holding this hearing 

on the claims backlog and how it will affect the returning servicemembers from the 

global war on terror. 

Before I begin, I would like to offer my congratulations to you Mr. Hall, for your 

appointment as chairman of this Subcommittee. I look forward to working with you 

in a bipartisan fashion as we fulfill our number-one priority—doing what is right 

for our veterans and our Nation. 

Today we are here to talk about the effect of OIF and OEF veterans on the VA 

claims process. 

I am more concerned about the effect of the VA claims process on these wonderful 

veterans. 

Since the beginning of Operation Enduring Freedom, more than 150,000 claims 

have been filed by OIF and OEF veterans. In part, this is a positive response to 

VA’s increased outreach, but now we have a responsibility to process those claims 

and care for these veterans. 

I believe the first step toward improvement for these veterans is to improve the 

overall VA claims processing system. The backlog of compensation and pension 

claims is over 632,000—about 15,000 more than a month ago, according to VA’s own 

weekly report. 

VA has set a goal to decide a given claim in an average of 125 days. While more 

than 4 months strains the meaning of the word ‘‘prompt,’’ it is not unreasonable, 

given the complexity and demands of the Veterans Claims Assistance Act and other 

administrative requirements. 

Now we need VA to ‘‘just do it.’’

I know that we in Congress bear some responsibly for all this complexity. I look 

forward to asking Mr. Aument what we could do to help improve the bureaucratic 

process, while safeguarding it for veterans. 

Mr. Chairman, both the budget views and estimates from the Committee’s majority and the minority recommend 1,000 new hires for VBA over the President’s request for 457 new compensation and pension staff. In 2 years, when they are all 

hired and trained, they will indeed make a difference. 

The conventional approach of increased hiring is entirely appropriate; VBA has 

over the past several years experienced personnel shortages. 

We must also explore some innovative ways to tackle this challenge that may 

even have faster payoffs than new hires. 

That is why Committee Republicans this year have recommended funding for innovative pilot programs to address the backlog. 

We have recommended funding for a pilot program to explore the feasibility of 

intergovernmental and VSO partnerships with VA in the development of compensation and pension claims. 

This pilot would build on positive findings from a 2002 project conducted between 

VA’s Buffalo, New York, regional office and the New York State Division of Veterans 

Affairs. 

Within 6 months of their collaboration, the state veterans’ division was developing 

claims in partnership with VA. Decisions for the region’s veterans came faster and 

accuracy improved. This sort of innovation holds great promise. 

Access to Veterans Benefits Administration regional offices can be difficult for 

many veterans. That is why we also recommended funding a pilot program for mobile claims offices. 

VBA staff members in mobile offices would provide outreach, help veterans file 

their claims, and gather ‘‘ombudsman’’ feedback and resolution for veterans. 

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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. 

Mobile offices helping veterans with their claims could speed up the claims process by improving communication and access for veterans. 

To take advantage of the potential offered by technology, we recommend funding 

to explore a rules-based adjudication system. Software could potentially decide simple claims accurately, quickly, and consistently, so that developers can focus on the 

complex ones. 

For our newest veterans returning from Afghanistan, Iraq, and elsewhere in this 

global war, we must achieve a seamless transition from the military into the VA system. It is apparent to me that a seamless transition will help erase that backlog, 

because it increases the system’s overall efficiency. 

We need fully interoperable electronic health records between VA and DoD, an 

electronic DD Form 214, military separation physicals that can also function as VA 

disability physicals, and a disability rating process that provides consistent ratings. 

What good is a separation exam and health records from DoD if the veteran has 

to repeat the whole process over again with VA? 

Mr. Chairman, I am sure you agree, no veteran should have to wait 6 months 

or a year for their claim to be decided—and then endure an appeal that adds another year or two. For some veterans, this is not mere inconvenience; it is financial 

and potentially emotional disaster. 

Every one of these claims is an American veteran and his or her family awaiting 

a decision. Every veteran deserves to have their claim adjudicated quickly and accurately! 

One thing is certain. If we do not fix this problem now, our legacy will be an intolerable backlog regrettably endured by this generation of veterans, and inexcusably 

bequeathed to a future generation. 

I firmly believe no one in this room wants such an outcome. 

I want to thank the witnesses for their service and their testimony, and I look 

forward to our discussion today. 

Mr. Chairman, I yield back. 

f 

Statement of Daniel Bertoni, Acting Director, Education, Workforce, and 

Income Security Issues, U.S. Government Accountability Office 

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 

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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). 

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. 

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. 

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). 

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Figure 1: Rating Related Claims Pending at End of Period, Fiscal Year 

2000–2006 

Source: VA 

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. 

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Figure 2: Average Days Pending for VA Compensation and Pension RatingRelated Claims, Fiscal Years 2000–2006 

Source: VA Data. 

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 

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3See GAO, 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). 

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 decisionmaking 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 

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4 VBA also provides dependency and indemnity compensation to survivors of certain deceased 

disability compensation beneficiaries. 

times, 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. 

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. 

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. 

GAO–07–512T. Washington, D.C.: March 7, 2007. 

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

Veterans’ Disability Benefits: VA Can Improve Its Procedures for Obtaining Military Service Records. 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. GAO–06–149. Washington, D.C.: December 9, 

2005. 

Veterans’ Disability Benefits: Claims Processing Challenges and Opportunities for 

Improvements. GAO–06–283T. Washington, D.C.: December 7, 2005. 

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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. 

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. 

GAO Highlights 

VETERANS’ DISABILITY BENEFITS 

Processing of Claims Continues to Present Challenges 

Why GAO Did This Study 

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. 

What GAO Found 

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. 

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1 As of September 30, 2006, 1,406,281 unique servicemembers have been deployed to the wars 

in Iraq and Afghanistan, according to the Department of Defense, Defense Manpower Data Center, and ‘‘Contingency Tracking System.’’ The Veterans Health Administration (VHA) Office of 

Public Health and Environmental Hazards, November 2006 uses the number 1.4 million (as of 

November 2006). The Veterans Benefits Administration (VBA) lists 1,324,419 unique servicemen 

deployed to GWOT as of May 2006 (prepared by VBA/OPA&I, 7/20/06). 

See Figure 1. Rating-Related Claims Pending at End of Period, Fiscal Years 

2000–2006 above. 

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. 

f 

Statement of Linda J. Bilmes, Professor, John F. Kennedy School of 

Government, Harvard University, Cambridge, MA 

Thank you for inviting me to speak to you today on this important topic. 

By way of background, last year I co-authored, with Nobel laureate Professor Joseph Stiglitz, a paper that analyzed the economic costs of the Iraq War. One of the 

long-term costs we identified is the cost of providing lifetime disability benefits and 

medical care for veterans. After we published the paper, a number of prominent veterans’ organizations approached us. They argued that we had underestimated the 

cost of providing veterans care, primarily because we had not included all the soldiers who would potentially become eligible to claim benefits. They urged me to do 

additional research into this topic. As a result I wrote a second paper this year, specifically looking at the cost of providing medical care and disability benefits to veterans deployed in Operation Iraqi Freedom and Operation Enduring Freedom (OIF/ 

OEF). [The paper, Soldiers Returning from Iraq and Afghanistan: The Long-term 

Costs of Providing Veterans Medical Care and Disability Benefits, KSG Research 

Working Paper RWP07–001 has been submitted for the record.] 

To date, over 1.4 million US servicemen have been deployed to operations in and 

around Iraq and Afghanistan.1 The servicemen who have been officially wounded in 

combat are a small percentage of the veterans who will be using the veteran’s administration system. Hundreds of thousands of these men and women will be seeking medical care and claiming disability compensation for a wide variety of disabilities incurred during their tours of duty. Disability compensation is thus a significant long-term entitlement cost that will continue for at least the next forty years. 

Today I would like to focus on the projected number of veterans’ claims, the capacity of the Department of Veterans Affairs to process those claims, and the cost of 

providing benefits to returning OIF/OEF soldiers. I would like to discuss five key 

areas of concern and then to recommend five changes that I believe would streamline the claims process. 

• First, the Veterans Benefits Administration (VBA) is overwhelmed with the 

volume of claims it is receiving, leading to a huge backlog; 

• Second, the claims process is unnecessarily long, cumbersome, and paperwork-intensive; 

• Third, the wars in Iraq and Afghanistan are rapidly turning the disability 

claims problem into a crisis; 

• Fourth, the long-term cost of providing disability benefits to GWOT veterans 

is projected to be $70 to $150 billion, in today’s dollars; and 

• Fifth, the growing number of disability claims has increased demand for veteran’s medical examinations, which is adding to the pressure on veteran’s 

health facilities. 

I will review these points first, and then I will offer my recommendations. 

First, the VBA is currently overwhelmed with the volume of claims it is 

receiving, leading to a huge backlog. In 2006, the VBA received over 800,000 

claims. Secretary Nicholson testified last month that he expects to receive 1.6 million additional claims in the next 2 years. These include both new claims from returning OIF/OEF veterans as well as claims from veterans who are already serviceconnected, mostly for conditions that have worsened since their initial claim. My 

own projections show that between 250,000 and 400,000 of these claims will be new 

applications from soldiers currently serving in Iraq and Afghanistan. 

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The number of pending claims has risen from 69,000 in 2001 to more than 

400,000 as of December 2006. Including the back-and-forth of paperwork related to 

claims, the VBA currently has a backlog of more than 600,000. 

Second, the claims process itself is long, cumbersome and paperwork-intensive. The VBA takes an average of 177 days (about 6 months) to process an initial claim, and an average of 657 days (about 2 years) to process an appeal. This 

is 22% below the agency’s own target goal of 145 days. It is also far below the standards of the private sector medical insurance industry, which settles 30 million insurance claims—including appeals—within an average of 89.5 days. 

Back in 2000, before the current war, the GAO identified longstanding problems 

in the claims process. These included large backlogs of pending claims, lengthy processing times for initial claims, high error rates in claims processing, and inconsistency across regional offices. 

The process for ascertaining whether a veteran is suffering from a disability, and 

rating the percentage level of a veteran’s disability, is too complex. A veteran must 

apply to one of the 57 VBA regional offices, where a claims adjudicator evaluates 

the veteran’s service-connected impairments and assigns a rating for the degree to 

which the veteran is disabled. Claims specialists must determine the percentage disability for each condition, in increments of ten. However, conditions are not scaled 

monotonically from 0 to 100. Mental conditions, for example, are rated: 0, 10, 30, 

50, 70, or 100. Coronary artery disease ratings are: 10, 30, 60, and 100. Spinal conditions are rated: 10, 20, 30, 40, 50, and 100. A huge amount of time is devoted 

to making these determinations. 

If a veteran disagrees with any part of the regional office’s decision, he or she can 

file a notice of disagreement with the local office. If this is rejected, the veteran may 

file a formal appeal and the claim will be physically transferred to the Board of Veterans Appeals based in Washington, DC, which is not part of VBA. The Board may 

then grant, deny, or remand the claim, in whole or in part. If the veteran still disagrees with the board, the veteran may appeal to the courts. This process often 

takes years during which the veteran is left in limbo. 

Moreover there is a wide disparity in efficiency between individual VBA offices. 

Regional offices are inconsistent in how they rate disabilities. GAO found that the 

days needed to process a claim ranged from 99 in Salt Lake City to 237 in Honolulu. 

Some of the states providing the most soldiers for the war are suffering the longest 

delays in claims adjudication. 

In addition, the claims themselves are more complicated than in previous conflicts. Vietnam era claims cited on average three disability conditions. Gulf War veterans filed on average for four conditions. In the current conflict the average claim 

includes five separate disability issues. One-quarter of the new claims filed in 2006 

cited 8 or more disabilities. Often these involve complex battle related injuries, as 

well as traumatic brain injury, PTSD, or complications from chronic diseases. Since 

each item within a claim is treated separately, there is a great deal of duplication 

and delay. 

The VBA has more than 9,000 claims specialists. Many are themselves veterans, 

and they generally do a wonderful job in assisting veterans obtain the maximum 

amount of benefits to which they are entitled. But they are under enormous strain. 

They are required to assist the claimant in obtaining evidence, in accordance with 

hundreds of arcane VBA regulations, policies, procedures and guidelines. They must 

also rate the claims, establish claims files, authorize payments, conduct in-person 

and telephone interviews, process appeals and generate various notification documents through the process. New employees require about 18 months to become fully 

trained. The VBA has antiquated IT systems that make it difficult for the claims 

specialists to do their job efficiently. For example, many staffers are dependent on 

unreliable old fax machines to obtain vital documentation from veterans and medical providers. 

For all these reasons I believe that the agency, as currently structured, is simply 

not capable of settling the current and projected volume of claims in a timely manner. 

My third point is that the projected number of claims from the wars in 

Iraq and Afghanistan will rapidly turn the disability claims problem into 

a crisis. The current conflict has the highest incidence of non-mortal casualties in 

U.S. military history: a ratio of 16 woundings or injuries per fatality. To date, of 

the more than 1.4 million U.S. soldiers who have been deployed, about 631,000 have 

been discharged. One-third of these men and women—about 205,000—have already 

been treated and diagnosed at VHA hospitals and clinics, and 180,000 have applied 

for disability benefits. If returning GWOT soldiers claim benefits at the same rate 

as veterans from the first Gulf War, we can expect 638,000 unique new first-time 

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2The discount rate used for this analysis was 4.75%. 

claims in the next five years. If all troops return home by 2008, there are likely to 

be more than 400,000 new claims by the end of 2009 alone. 

Fourth, the cost of providing disability benefits to GWOT veterans is pro- jected to be between $70 billion and $150 billion in 2007 dollars.2 The cost 

is not the only issue here, but it is yet another major cost of war that has not been 

anticipated by the administration. The eventual cost will depend on several factors, 

including the number of troops stationed in Iraq and Afghanistan and the length 

of time they are deployed. It will also depend on the rate of claims and utilization 

of benefit programs by returning troops and the rate of increase in disability payments (including cost-of-living adjustments). My study did not take into account the 

additional costs of nursing home care, concurrent receipt pay, or the social and economic cost to society of these disabilities. 

In order to project the number of claims for the current conflict, I looked at the claims history of veterans from the first Gulf War. We currently pay over $4 billion 

per year in disability claims for that war, even though it was short and had relatively few casualties. The cost of providing benefits to GWOT veterans will be higher by an order of magnitude. 

The ‘‘best case’’ low scenario cost of $71 billion (present value discounted at 4.75% 

over 40 years) assumes the total number of soldiers deployed does not exceed 1.4 

million, that all troops come home by 2010, and that GWOT veteran’s disability 

claims show a similar profile to Gulf War veterans—that is, 44% claim some level 

of disability and 87% of those claims are at least partially granted. This scenario 

assumes that 643,000 GWOT veterans eventually claim benefits, that the average 

payment to a veteran is the same as the average to a Gulf War veteran ($504 per 

month) and that the veteran receives an average annual cost-of-living adjustment 

of only 2.8% 

The moderate scenario—which is looking increasingly likely-—assumes that the 

conflict involves a total of 1.7 million servicemen, including keeping a small U.S. 

presence in the region through 2015, and that 747,000 GWOT soldiers file claims. 

The present value cost of this scenario, assuming that cost-of-living adjustments are 

4.1% (the amount given this year) and average payment is in line with Gulf War 

veterans, is $109 billion. 

The ‘‘high’’ scenario assumes that two million servicemen are deployed to GWOT 

through 2015, that 50% of veterans file disability claims, and that benefits increase 

at a compound annual growth rate of 6.1%, which is the actual rate of increase over 

the past 10 years. Here I have estimated the monthly benefit at $716, which is the 

average benefit to all veterans today. Under this scenario I project 869,000 successful claimants and a total present value cost of $125 billion. If the amount of the 

GWOT veterans claims were to equal the level of Vietnam veterans, the cost would 

rise beyond $150 billion. 

Fifth, the growing number of disability claims is creating additional demand for veterans’ medical examinations. This is adding to the pressure on 

veterans’ health facilities. The current system does not guarantee that all soldiers 

receive complete physicals in the military upon discharge. Even if the soldier does 

obtain a complete physical exam prior to discharge, he or she cannot automatically 

transfer that information to the VBA for use in certifying disabilities. Consequently, 

newly discharged veterans who intend to file any kind of disability claim are seeking medical examinations from VBA health facilities primarily in order to document 

their disabilities. The VBA health facilities already face a major challenge to provide 

first rate care for the large volume of soldiers returning from Iraq and Afghanistan. 

My point is that the complexity of the claims process itself is diverting valuable 

medical resources away from providing treatment into supporting the claims process 

itself. Veterans are seeking appointments with doctors in the VBA, not because they 

require immediate treatment, but rather to verify a disabling condition—even in 

cases where it was already documented upon discharge from the military. 

RECOMMENDATIONS 

The veterans returning from Iraq are suffering from the same problem that has 

plagued many other aspects of the war, namely a failure to plan ahead. The VBA 

has many initiatives underway to streamline the benefits process. But these efforts 

are unlikely to be fully implemented in time to help the returning Iraq and Afghanistan war veterans. 

To address the immediate backlog, Secretary Nicholson proposes to hire 457 additional claims specialists, to increase the claims processed per specialist from 98 to 

101, and to make training manuals more readily available. He projects this will cut 

the length of time it takes to process a veteran’s claim by 32 days in 2008. I am 

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not optimistic that a few hundred inexperienced new staffers (even assuming they 

can all be hired quickly) will produce a 22% improvement in claims processing time, 

during a period in which the agency faces a huge influx of complex claims. Indeed 

it is conceivable that the task of training and integrating a large number of inexperienced hires will in the short term actually lengthen claims processing times and 

increase the level of appeals. The problem is compounded by the fact that many experienced VBA personnel will be retiring over the next 5 years. 

I believe that finding an answer to the claims problem requires us to think outside the box. I would like to offer several proposals that do this. 

1. First, for the next two years, the VBA should accept and pay all disability claims by returning GWOT soldiers at face value—and then audit a 

sample of them. This is essentially the same system that is used elsewhere in government, for example, the IRS for taxes and the SEC for filings. This idea would 

involve retraining some of the claims specialists as auditors, freeing up the remaining specialists to focus on assisting non GWOT veterans claims, which should reduce the backlog of old claims. At the same time, this bold step would ensure that 

new claimants do not fall through the cracks or endure months of bureaucratic 

delay. 

2. Second, the VBA should replace the cumbersome 0–100 scale for disabilities with a simple four-level ranking: zero disabled, low disability, medium 

disability, and high disability. This would immediately streamline the process, 

reduce discrepancies between regions, and likely cut the number of appeals. The 

VBA should create a ‘‘short form’’ for returning veterans, using this four-level ranking and set a goal of processing all claims within 60 days of receipt. This new system should be up and running within two years, including retraining of the workforce and developing necessary guidelines and appeals procedures. 

3. Third, all soldiers serving in the GWOT should receive a mandatory full 

medical examination at discharge, with all records from this examination 

made available electronically to the VBA immediately. The VBA should then 

be able to use these records to spot check and audit claims and to assist veterans, 

and to relieve some of the pressure on VBA. If veterans are discharged without full 

medical examinations, they should be reimbursed to receive such an examination 

from any fully accredited physician within 30 days of discharge, and this record 

should be used by VBA for making claims awards. 

4. Fourth, VBA should shift its focus away from claims processing and onto 

rehabilitating and reintegration of veterans. The VBA has a dedicated staff 

who wants to help veterans. Instead of using them to process papers, we should use 

this workforce as a strategic asset. The VBA staff should be given much greater discretion in helping veterans. Claims specialists should be placed in all neighborhood 

veterans’ centers, help centers, and special centers to assist reservists and Guardsmen. 

5. Fifth and finally, Congress should enact Senate Bill 117, the Lane Evans 

Veterans Healthcare and Benefits Improvement Act of 2007, sponsored by 

Senators Obama and Snowe. This legislation would improve data collection and 

monitoring of disability claims, improve access to mental healthcare and create a 

more level playingfield for Guards and Reservists. 

Thank you very much for your time and attention today. I would be 

pleased to answer any questions you may have. 

f 

Statement of Ann G. Knowles, President, National Association of County 

Veterans Service Officers 

Introduction 

Mr. Chairman, members of the Committee, it is truly my honor to be able to 

present this testimony before your Committee. As President of the National Association of County Veterans Service Officers, I am commenting on: 

• The impact of Operation Iraqi Freedom and Operation Enduring Freedom on 

the Veterans Administration Claims Process 

The National Association of County Veterans Service Officers is an organization 

made up of local government employees. Our Members are tasked with assisting 

veterans in developing and processing their claims. We exist to serve veterans and 

partner with the National Service Organizations and the Department of Veterans 

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Affairs to serve veterans. Our Association focuses on outreach, standardized quality 

training, and claims processing. We are an extension or arm of government, not unlike the VA itself in service to the nation’s veterans and their dependents. 

The Relationship Between CVSOs and the VA 

The relationship between the Department of Veterans Affairs (DVA) and the 

County Veterans Service Officers (CVSO) throughout our great nation has traditionally been professional and mutually advantageous. The DVA has assisted CVSOs in 

providing limited training and access to information the DVA holds on the CVSO’s 

clients. The CVSO serves as the entry point for a large majority of disability and 

pension claims nationwide for the local veteran to access the services offered by the 

DVA. Most veterans view the local CVSO as ‘‘The VA’’ and do not realize that the 

DVA and the CVSO are not one and the same. 

NACVSO sees the role of county veteran’s service officers as one of advocacy and 

claims development in concert with the veteran or dependent at the grassroots level. 

Our Members sit across the desk from our veterans everyday. Because of this direct access to our veterans, we believe we are in the position to assist the DVA in 

claims development in an unprecedented way. Developing complete and ready to 

rate claims eases the burden on the DVA’s backlog or inventory of claims. 

The process begins with a face to face, in depth interview between the veteran 

and the CVSO. This initial interview accomplishes many things. It builds a trust 

between the veteran and the CVSO and provides the veteran with a basic understanding of how the DVA system works. The CVSO honestly explains the process 

with the veteran while building realistic expectations for the veteran. This results 

in lessening the impact of frivolous claims or unrealistic appeals that the DVA is 

mandated to process and develop. 

Once complete, the application package is passed on to a state or national service 

office for review and presentation to the VA regional office of jurisdiction. Any hearings or additional records required can be obtained by the CVSO of record if needed. 

Once the rating decision is made and received by the veteran, the veteran nearly 

always returns to the CVSO for an explanation. The CVSO then interprets the decision for the veteran and explains what the decision means. The CVSO reviews the 

rating decision for accuracy and explains the veteran’s benefits. If an appeal is warranted, the CVSO can explain a notice of disagreement and assist the veteran with 

the preparation of the appeal. The CVSO can also limit frivolous claims through 

proper guidance and counsel to the veteran without further bogging down the system. We believe this division of responsibility, between two arms of government, 

benefits the veteran, the CVSO and the DVA and has the potential to provide a 

clearer understanding for the veteran of the process of claims development and how 

the DVA system works. 

Issues Affecting Veterans of OIF/OEF 

The returning veterans from these two theaters of action have been receiving priority care from the Veterans Administration. There are valid reasons but it has resulted in many other claims being placed on the back burner, claims that have 

equally valid reasons for priority action. VA officials have stated the number of 

claims filed since 2000 has risen nearly 40% and this has caused the number of 

cases pending to balloon to over 800,000. Yet, only about 4% of the new claims are 

from Iraq and Afghanistan (St Louis Post Dispatch, February 26, 2007). To stay on 

target with the subject at hand, let us look at the numbers and nature of injuries 

of OIF and OEF veterans. It has been reported by the DOD that over 19,000 Purple 

Heart Medals have been awarded since the beginning of OIF/OEF. Each of these 

is a potential claim for benefits with the DVA. Add to this another 25,000 wounded 

and ever escalating KIA numbers as additional troops are assigned to Iraq. Secretary Nicholson, in his interview with Bob Woodward of ABC News, showed statistics of treatment within VA facilities of over 200,000 OIF–OEF veterans. Not every 

treatment is a claim, but even a small percentage of these filing a claim for benefits 

will escalate the numbers in the pipeline waiting processing. 

Post-Traumatic Stress Disorder is recognized in the returning veterans from Iraq 

and Afghanistan; their treatment has been given priority. A United States Army 

study places those suffering from PTSD at approximately one in eight soldiers who 

have served in either Iraq or Afghanistan. A survey of deployed troops indicates 

that 12% of those serving in Iraq and up to 6% who served in Afghanistan have 

reported symptoms of major depression, anxiety or PTSD. The most frightening statistic is that only 38% of those were interested in getting help and as low as only 

23%. They cited concerns for how they would be viewed by their peers if they sought 

assistance. This, Mr. Chairman, is a ticking time bomb that will eventually blow 

up in our faces. Not necessarily in the face of the military but in local communities 

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where the veterans are returning to their homes. CVSOs and VA will be forced to 

deal with these issues because local officials and families concerned about the mental health of these young men and women will demand it. And it is . . . a sad state 

of affairs indeed. 

Another issue is the number of veterans who are returning with missing limbs 

and prosthetic devices. Battlefield treatment, and speed of evacuation of wounded 

servicemen and women, has advanced substantially over the years. Many of the veterans returning from the Gulf Region needing specialty care for missing limbs may 

well have died in previous conflicts. This has placed a tremendous and vital responsibility on the Veterans Administration that they are ill equipped to deal with, in 

health and medical care but also to provide adequate, timely and fair compensation 

decisions for the veterans and their families who are desperately trying to survive. 

Other Issues 

An issue that must be addressed is that of placing one group of veterans in a 

higher priority or ‘‘Class’’ than other veterans. When the VA decides to give ‘‘Top 

Priority’’ to a select group of claims, the other claims, veterans, suffer. Some claims 

that have languished for a year or more suddenly become less likely to be rated or 

receive appropriate attention because of a change of policy. This is because personnel in the Regional Office have been instructed to focus on OIF/OEF veterans 

claims to the detriment of other claims that have been working their way through 

the backlog or inventory of claims. We feel this is tragic and extremely inappropriate. Veterans continue to ‘‘die while waiting for VA benefits’’. 

We are concerned with the VA’s centralization of OIF/OEF claims. We are not 

convinced that the practice can be justified. When Regional Office claims are ‘‘brokered out’’, the focus becomes quantity and not quality. Issuing flawed rating decisions just exacerbates the inventory or backlog of and further inflates the bloated 

backlog of appellate litigation. 

Suggested Solutions 

One solution would be to re-emphasize the Benefits Delivery at Discharge (BDD) 

program as a ‘‘Pre-separation Program’’. Claims and medical reports could be submitted prior to separation allowing local VA teams to adjudicate the claims and dramatically shorten the time that the veteran has to wait for a decision after separation. 

Secondly, streamlining single-issue disability claims at the Regional Office level 

while multi-faced claims that have a combination of disabilities that require extensive research are passed to Tiger Teams would speed the process. 

Another suggested solution is to increase outreach efforts. Outreach efforts must 

be expanded in order to reach those veterans and dependents that are unaware of 

their benefits and to bring them into the system. The National Association of County Veterans Service Officers believes that we must do better. Approximately 88 plus 

% of veterans not being compensated is more likely than not an issue if lack of access or knowledge of available services rather than lack of need or some other issue. 

NACVSO supports HR 67 introduced by Congressman Mike McIntyre, of North 

Carolina that would have allowed Secretary Nicholson to provide Federal—state—

local grants for assistance to state and county veterans service officers to enhance 

outreach to veterans and their dependents. We also support the Bill introduced by 

Congressman Baca of California which would have a significant impact upon the existing claims backlog. 

NACVSO stands ready to partner with the Veterans Administration to bring 

about a reduction in the backlog and increase the outreach efforts to the veterans 

of our communities. 

Conclusion 

The bottom line is that the Veterans Administration is going to have to rise to 

the occasion and place more personnel to handle the expected large influx of new 

claims and the resulting larger inventory or backlog of claims. 

f 

Statement of Stephen L. Robinson, Director of Veterans Affairs, Veterans 

for America 

Chairman Hall, Representative Lamborn, Members of the Subcommittee: 

Thank you for the opportunity to testify. 

I am Steve Robinson, and I am the Director of Veterans Affairs for Veterans for 

America, formerly known as the Vietnam Veterans of America Foundation. 

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VFA unites a new generation of veterans with those from past wars to address 

the causes, conduct and consequences of war. In my position, I constantly meet with 

Iraq and Afghanistan war veterans about their needs and concerns. 

The recent uproar over the treatment of returning servicemembers at Walter Reed 

is not simply an issue of dilapidated physical facilities, mice and mold, or inadequacies with one hospital. The issue is much larger. Specifically, there is a systematic 

failure in both Department of Defense (DoD) and Department of Veterans Affairs 

(VA) programs designed to address the medical and overall readjustment needs of 

war veterans. As one example, there appears to be no plan to gather robust consistent data and then closely monitor the 1.5 million deployed Operation Enduring 

Freedom and Operation Iraqi Freedom (OEF/OIF) servicemembers as they return to 

duty or reintegrate into civilian society. As a result, we do not have an adequate 

understanding of the unique needs specific to our newest generation of veterans. 

The controversy around Walter Reed reminds Veterans for America of the squalid 

conditions of the hospitals and the inadequacy of care for the returning servicemembers more than 36 years ago. This topic was on the cover of the May 22, 1970 issue 

of Life magazine, which was the second-highest selling issue in the magazine’s history. 

Today, the same story is being repeated for a new generation of war veterans. The 

recent scandals were noticed by many when the Washington Post gave the issue national attention, but the alarm bell first rang in a 2003 series by Mark Benjamin, 

then with United Press International, for which I helped to provide key information. 

With Benjamin’s reporting, along with that of others, providing ample evidence 

of a broken, failing system, I am surprised that the nation has not expressed its 

outrage before now. That said, I am pleased that Congress has begun to execute its 

oversight authority on this critical issue. 

On March 5, 2007, the Washington Post reporters who published the series on the 

Walter Reed situation stated that they were flooded with e-mails, calls, and faxes 

from servicemembers and veterans recounting similar experiences in military and 

veterans’ hospitals across the country. It was clear to these reporters that the system has failed. 

Veterans for America has also been dealing with tremendous numbers of servicemembers, veterans, and their families reaching out to our organization for help. Too 

often we have encountered unresponsive agencies. We have been painfully aware of 

the distress that exists amongst servicemembers and the need to address it. The situation requires immediate remedies, and the effort required will need commitment 

and leadership from the upper echelons of our government—starting with you, our 

elected representatives. 

The face of the American soldier has changed since Vietnam. The average age of 

the servicemembers then was just over 19 years old. Today’s military is much older. 

The average age of an active-duty soldier is 27 years. The Reserve and Guard soldier is even older: averaging 33 years. 

More than 155,000 women have served in Iraq and Afghanistan. Among their 

ranks are more than 16,000 single mothers. More than half of those deployed are 

married, and three out of every five deployed servicemembers have family responsibilities (i.e., a spouse and/or children). 

Recently the American Psychological Association released an excellent report stating that no serious study has yet been undertaken to define what these new factors 

mean in terms of the needs of returning servicemembers and their families. 

We are all too familiar with the failure to recognize the unique needs of each generation of veterans. For instance, it was not until a decade after the height of the 

Vietnam War that the Veterans Administration undertook the first study of Vietnam veterans. Years later the National Vietnam Veterans’ Readjustment Study was 

commissioned. Post-traumatic stress disorder was not recognized as a mental health 

problem until 1980. We can only guess at the number of veterans whose lives were 

destroyed because no one understood their needs. In short, we failed an entire generation of veterans. 

What’s happening today is new chapter in an old book. We have yet to begin to 

recognize the true needs of the current generation and create programs and services 

appropriate to their war-related problems. 

• What have multiple deployments meant? 

• What are the implications of traumatic brain injury being the signature injury of this war? 

• What are the effects of so many being constantly exposed to a high degree 

of violence? 

• What does it mean to have the unprecedented survival rates of casualties? 

These questions—and many more—need answering. 

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VFA is especially concerned that servicemembers and veterans are not being provided the mental healthcare they need. There are a number of pressing issues: 

• A dramatic rise in less than honorable discharges, and subsequent loss of VA 

healthcare and benefits, 

• Overuse of ‘‘personality disorders’’ to discharge veterans (e.g., use of chapters 

5–13, 5–17, 14–12), 

• Rise in disciplinary problems related to alcohol and drug use, domestic violence, risk-taking behavior, motor vehicle violations, and other war-related reintegration issues, 

• Inadequate staffing in mental health, Medical Evaluation Board–Physical 

Evaluation Board (MEB–PEB) case work, social work, family care and ‘‘seamless transition’’ programs into the VA network, 

• Absence of consistently prompt mental health referrals as part of the PostDeployment Health Assessment process, and 

• Absence of Alcohol and Substance Abuse Programs (ASAP) at all military 

bases. 

VFA also believes the VA’s Veterans Benefits Administration (VBA) disability 

compensation claims process is completely broken. 

Many veterans do not receive their benefits in a timely and accurate manner. 

VBA’s problems are linked strongly to the DoD’s failure to manage their disability 

discharges, as was epitomized by the fiasco at Walter Reed. Just as America saw 

that active duty servicemembers were denied prompt evaluations and disability benefits, America demands that Congress and VA take immediate action so that no disabled veteran waits endlessly. 

Our nation was prepared for the return of troops after World War II. The quality 

and timelines of veterans’ claims are not negotiable. 

If both DoD and VA are not overhauled soon, we will see the situation worsen 

when all of our 1.5 million deployed servicemembers eventually return home from 

the wars in Iraq and Afghanistan. 

Here are the facts: 

• As of October 2006, more than 176,000 OEF/OIF veterans filed claims against 

VBA. 

• More than 200 OEF/OIF veterans become disabled every day. 

• The rise in the backlog of more than 100,000 claims in 2 years is directly related to the flood of new Iraq and Afghanistan war claims. 

• VBA can expect between 700,000 and 1,000,000 claims in the next 10 years. 

• VBA can expect to pay between $67 and $127 billion in the next ten years. 

• As the war escalates and casualties climb, VBA can expect even more claims. 

• VBA has not presented a written plan of action so that every VBA employee 

knows how to produce fast and accurate results. 

These problems are especially severe for Members of the National Guard and Reserve. 

Here are some facts: 

• 37 percent of active duty veterans have filed for disability compensation. 

• Only 20 percent of those who served with National Guard or Reserve units 

have filed such claims. 

• 8 percent of claims filed by active duty troops are denied. 

• 18 percent of claims filed by Guard and Reserve soldiers are denied. 

In short, while about half as many members of the Guard and Reserve file disability claims as compared to active duty veterans, these claims are rejected at twice 

the rate. These statistics beg the question: are our Members of the Guard and Reserve again being short-changed compared to their active-duty brothers and sisters? 

VBA is broken in a variety of areas. 

• It takes 6 months to decide original claims. VA’s stated goal is for this to be 

accomplished in 90 days. 

• It takes 24 months to decide appealed claims; the goal is 12 months. 

• As of February 17, 2007, the total backlog of claims was 558,000—402,000 are 

original claims and 156,000 are appealed claims. 

• This backlog is a disgrace. The message being sent is that VBA doesn’t care 

about disabled veterans. 

VBA’s failures hurt veterans many ways: 

• Lack of prompt and adequate VA healthcare, 

• Inability to pay bills for food, utilities, etc., 

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• Increase in credit problems, 

• Rise in evictions and foreclosures, and 

• Mounting homelessness. 

Here are some ‘‘band-aid’’ approaches that might be utilized to take care of some 

of the most pressing problems: 

First, the signal needs to be sent from the top that the VBA backlog will be reduced soon. 

After the tone is set, a number of steps should be taken, including: 

1. Insist that VA and DoD better coordinate efforts and become more proactive. 

2. Hire additional VBA claims adjudication staff. 

3. End the Post-Traumatic Stress Disorder (PTSD) ‘‘second signature’’ policy. 

4. Stop reviewing 72,000 PTSD cases. 

5. End VA’s efforts to narrow the definition of PTSD via contract with the National Academy of Sciences. 

6. Grant the presumption of a stressor for deployment to a war zone. 

7. Immediately produce quarterly reports on the number of claims by OEF/OIF 

servicemembers (as required by S. 117). This will allow VBA to conduct trend 

analysis and determine staffing and budget needs specific for this cohort. 

8. Provide sufficient VBA staff for all military treatment facilities and bases so 

that the Benefits Delivery at Discharge Program (BDD) is fully implemented. 

9. Appoint an ombudsman with responsibility and authority to fix transition 

problems between DoD and VA. 

10. Define the war zone (also included in S. 117) so that VBA knows which veterans are eligible for war-related benefits, for data collection and for accurate reports and projections. 

11. Hold executives accountable by eliminating bonuses and terminating those 

who fail to perform. 

12. Adopt mandatory electronic records at discharge given to veteran and VA 

within 1 year. 

13. Shift military ratings of disabled servicemembers from DoD to VA and the 

BDD program. 

14. Review and consider Professor Linda Bilmes’s proposal to streamline 

claims. 

15. Allow all servicemembers a ‘‘second look’’ for PTSD, TBI, VA healthcare, 

and VA claims assistance. 

We don’t need more excuses. A claim delayed is a claim denied. 

To address these problems, VFA urges Members of the Senate to consider cosponsoring a House version of S. 117, the Lane Evans Veterans Health and Benefits Improvement Act of 2007 which: 

• Requires face-to-face medical exams. DoD currently requires servicemembers to answer a limited questionnaire to determine if they need to be referred for treatment. Soldiers are typically rushing to return home after a deployment and do not necessarily give these questions sufficient attention. 

DoD should, instead, conduct mandatory in-person physical and mental 

health exams with every service Member 30 to 90 days after deployment. 

• Extends VA Mental Health Care. Currently, the VA holds a 2-year window 

to allow newly returning veterans to obtain free healthcare. Unfortunately, it 

can take many years for symptoms of PTSD and other mental health problems to manifest themselves. S. 117 provides a 5-year window for veterans 

to receive a free assessment of mental health medical needs by the VA. 

• Defines the Global War On Terror (GWOT). To accurately determine 

healthcare and benefit eligibility for returning servicemembers, the GWOT 

needs to be explicitly defined in statute. Currently, the Secretary of Defense 

is not allowing some soldiers serving in GWOT territories to receive combatrelated medical benefits. 

• Establishes a GWOT registry to track healthcare data. Collect aggregate data on GWOT servicemembers and veterans to monitor their healthcare 

and benefit use. The data will help lead to better budget forecasting and 

avoid shortfalls. A similar effort was undertaken after the Gulf War. 

• Requires equal transition services for Guardsmen and Reservists. A 

2005 GAO report found that demobilization for guardsmen and reservists is 

accelerated and these units receive insufficient transition assistance. 

• Requires Secure Electronic Records. DoD should provide a full, secure 

electronic copy of all medical records at the time of discharge. 

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Again, Veterans for America appreciates the opportunity to submit a statement 

for this hearing. We reaffirm our desire to work with Congress and the relevant 

agencies in trying to address these critical needs, but it is important that I reiterate 

that we will not stop failing our servicemembers and veterans across-the-board until 

we take a step back, evaluate their unique needs. We must stop trying to squeeze 

our new military into a system designed for a previous generation. 

Thank you. 

f 

Statement of Brady Van Engelen, Associate Director, Veterans for America 

Chairman Hall, Representative Lamborn, Members of the Subcommittee: 

Thank you for the opportunity to testify. 

On April 6th of 2004 I sustained a gunshot wound to the head in Baghdad while 

positioned at an observation post. First aid was immediately administered, and I 

was fortunate to have survived long enough to make it to the 28th Combat Support 

Hospital (CSH). The primary repairs and closures for my head were conducted while 

in theater at the 28th CSH. From there, I was medically evacuated to a military 

hospital in Landstuhl, Germany, where I was staged for recovery until I had regained enough strength to travel back to Walter Reed Army Medical Center to complete the recovery process. 

I arrived at Walter Reed Army Medical Center on April 14, 2004, where I was 

immediately asked if I wanted to be treated as an inpatient or outpatient. Wanting 

to spend time with family and loved ones, I chose to be an outpatient, at which 

point I was given the building number of the Mologne House and told to check in 

there. With no clue as to where the building was, I hopped onto a facility shuttle 

and asked if I could get a ride to the Mologne House to check in. 

The first 2 weeks of appointments I was fortunate enough to have my family and 

loved ones at my side to assist me through the bureaucratic maze that is outpatient 

care at Walter Reed. In one month’s time, my rehabilitative care was completed, 

and I was told the Physical Evaluation Board (PEB) process would begin shortly 

thereafter. 

That was May 30, 2004. 

I didn’t hear back about my case until December of 2004. 

Other than the research that I conducted on my own time, I was completely unaware of what my possibilities were and what to do next. Throughout the entire 

process I was the one who always initiated contact with the case managers and the 

hospital. If it weren’t for my persistence, I could have gone unnoticed for months. 

There were just too many patients, and not enough case managers to oversee the 

process. 

The systemic problems that have highlighted Walter Reed in recent weeks have 

unfortunately trickled over to the Department of Veterans Affairs (VA). The VA is 

overwhelmed by the number of claims filed and patients needing attendance. We 

didn’t prepare for this, and it’s painfully evident. My generation is going to have 

to pay for this, and we will be paying for years and years. 

While at Walter Reed as an outpatient there was no outreach on behalf of the 

VA to inform me of benefits for myself and for my family. When troops were returning from WWII, there were VA claims specialists on the boats with the servicemen 

informing them of benefits that they were eligible for. We have lost that aggressive 

approach with today’s servicemembers and veterans. Today, we are being asked to 

navigate the bureaucratic maze of DoD and VA on our own. I can assure you that 

this is no small feat. Shifting the burden from our government to those who serve 

has created a system where servicemembers and veterans are unaware of the benefits and programs promised to them upon enlistment. 

I understand that the VA has begun to more aggressively address the inpatients 

while they are recovering at medical facilities, but, as was the case at Walter Reed, 

only a small number of injured soldiers are benefiting. This is not acceptable. 

Many wounded servicemembers at other medical outpatient facilities throughout 

the country remain as uninformed as I was upon leaving the military. Servicemembers from my generation are becoming increasingly disenfranchised with a system 

that our government promised would help us heal and rehabilitate. 

Claims backlogs are currently at 180 days. A few years ago claims were half that. 

The families of servicemembers are suffering from this lack of preparation by our 

VA. They cannot call the bank, say they are waiting for a response on a claim, and 

ask for payments to be delayed for another 180 days. The passive nature of the VA 

regarding health and claims dispensation will only tarnish their perception amongst 

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erans who have no faith in our VA because those running it—as well as those overseeing it—were unable to hold up their end of the bargain. This saddens me deeply. 

In closing, I’d sum up the problems with the VA claims process like this: 

I entered the VA system on January 29, 2005. 

That was 774 days ago. 

No one from the VA has contacted me yet to tell me how the system works. 

I urge the Members of this subcommittee to keep one question in mind as they 

consider how to repair this broken system: 

What is owed those who serve? 

While I do not claim to have all the answers to that question, I am confident that 

you will conclude that the answer is: More than servicemembers and veterans are 

receiving now. 

Thank you. 

f 

Statement of Patrick Campbell, Legislative Director, Iraq and Afghanistan 

Veterans of America 

Mr. Chairman and Members of the House Subcommittee on Disability Assistance 

& Memorial Affairs, on behalf of the Iraq and Afghanistan Veterans of America 

(IAVA), thank you for this opportunity to address the issue of ‘‘The Impact of OIF/ 

OEF on the VA Claims Process.’’

My name is SGT Patrick Campbell and I am a combat medic for the DC National 

guard, an OIF vet and the Legislative Director for the Iraq & Afghanistan Veterans 

of America. IAVA is the nation’s first and largest organization for Veterans of the 

wars in Iraq and Afghanistan. IAVA believes that the troops and veterans who were 

on the frontlines are uniquely qualified to speak about and educate the public about 

the realities of war, its implications on the health of our military, and its impact 

on the strength of our country. 

According to the Department of Veterans Affairs I am one of the 54,000 OIF/OEF 

veterans they are guesstimating will seek care from the VA in 2007. In a briefing 

with Veteran Service Organizations the Department of Veterans Affairs stated that, 

‘‘263,000 of their current users’’ are from the Global War on Terror and they expect 

an increase of 54,000 in FY 2007. 

In general a department’s proposed budget is the clearest signal to the outside 

world of their priorities and their assumptions. Although IAVA sincerely applauds 

the Department of Veterans Affairs for removing certain onerous proposals from 

their FY08 budget proposal and requesting healthy increases, we believe that the 

VA’s assumptions about future usage of the VA system from the soldiers fighting 

in the Global War on Terror are severely flawed. 

The administration’s budget projections show a decrease in VA spending over the 

next 3 years. One can only assume that the VA is wishing/hoping/expecting the 

number of veterans demanding services to decrease or maintain their current levels. 

It is hard to argue with VA’s accountants and their actuarial tables because they 

will cloak their assumptions in mounds of numbers, but when these numbers seem 

to defy common sense that is when the alarms must go off. 

If you remember one thing from this testimony today, remember that the VA has 

grossly underestimated the demand for their services once again. The soldiers are 

coming home and they will be asking for care. The question we must be asking ourselves, will it be ready for them? 

If anything the recent Walter Reed expose has taught us is that trying to treat 

and care for soldiers and veterans on a limited budget and limited oversight only 

has one logical conclusion, poor care. In the context of this specific hearing, soldiers 

are languishing while they wait for their claims to be processed. And woe to the 

veteran who does not file his/her paperwork correctly and gets denied, because they 

will be stuck in bureaucratic limbo for years. 

We also believe that the VA’s current standard for evaluating the speed a veteran 

gets seen by a medical professional should not be a whopping 45 days or even 30 

days. For veterans coming home, especially with mental health issues, a month is 

like an eternity. The standard should be 2 weeks or at least broken down into categories. 

Soldiers fight for their country, they should not be made to fight against their 

country. 

Many of the other organizations today who are testifying will be providing excellent statistics and solutions. IAVA stands firmly behind their recommendations. Our 

purpose here today is to convey a single message, that if you start with faulty assumptions you will end with poor results. 

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This Committee must work with the Department of Veterans Affairs and the various veterans service organizations to formulate a realistic number of incoming veterans into the VA system over the next 5 years. Only then will we be able to hire 

to the correct number claims processors and medical staff to provide the quality of 

care these veterans deserve. 

f 

Statement of Jon Soltz, Co-Founder and Chairman, VoteVets.org 

Thank you, Mr. Chairman, Congressman Lamborn, and Members of the Committee for inviting me here today to discuss this critically important issue. 

I am Jon Soltz, and I am the Co-Founder and Chairman of VoteVets.org, which 

is a leading organization of Iraq and Afghanistan Veterans. VoteVets.org was established to give voice to the 21st century patriots who have fought in these wars, and 

to raise concerns about the state of today’s military preparedness as well as the resources and support available to servicemen and women when they return home. 

I myself am an Iraq war veteran. From May to September 2003, I served as a 

Captain during Operation Iraqi Freedom, deploying logistics convoys with the 1st 

Armored Division. During 2005, I was mobilized for 365 days at Fort Dix, New Jersey, training soldiers for combat in Afghanistan and Iraq. I also served with distinction in the Kosovo Campaign as a Tank Platoon Leader between June and December 2000. Let me make clear, however, that today I am speaking for my organization and the troops and veterans we represent, not for the U.S. Army. 

I’ve also experienced, first-hand, many of the issues we’ll be talking about today. 

After I returned from Iraq, I knew that I was mentally affected from the war. Eight 

months later, I went to the VA and asked for help. The nurse, who I’m close with 

to this day, told me I came to the right place. After a few tests, though, I was told 

that I just had something called ‘‘Adjustment Disorder,’’ and that I should come 

back in for counseling once a month, for 4 months. Maybe that was the right diagnosis, and maybe it wasn’t. All I know is that I didn’t feel that the diagnosis was 

based on any in-depth testing, and I’m not sure that my treatment was enough. 

Even worse, just a short time later, it was announced that the VA center I had 

been going to, in Pennsylvania, would be closed. I tried to attend the press conference to announce the closure, so I could learn more about what was going on, 

and was told that I could either leave on my own, or police would be called to escort 

me out. I hadn’t even said a peep, or protested at the event. I simply wasn’t allowed 

to watch. 

That’s when I held my own first press conference, across the street, where I questioned to the media, why I was good enough to go and fight and risk my life for 

this country, but not good enough to deserve an explanation as to why my VA hospital was closing. That is when I made the decision that I would talk about these 

issues, until I was blue in the face, so that not only would veterans get answers, 

but we could see real fixes to the issues we face. 

The recent report in the Washington Post regarding Walter Reed’s Building 18 

set off a media and political firestorm here on Capitol Hill. Many in the media dramatically shook their heads in sorrow on television. Many Members of Congress 

started to call press conferences to express their dismay. Even the President expressed surprise and anger. 

I have to admit, as someone who has dealt with our veterans’ care system, and 

talks on a daily basis to many others who have, I found it somewhat amusing that 

everyone seemed so surprised that the quality of care didn’t meet the quality of 

service these troops and veterans gave. Those of us who have served have known 

for a long time about bureaucratic and capacity problems, especially at the VA. I 

want to make clear that I do not impugn the fine service those who work at the 

VA centers have given. They are all great people, and do heroic work. But, it is an 

overburdened and woefully underfunded system that has all too often tied their 

hands, and hurt America’s veterans. 

Nonetheless, veterans care in this nation has not been up to snuff for a long time. 

Many veterans’ organizations much older than VoteVets.org have been trying to get 

the media and politicians to pay attention for a long time. No one wanted to listen. 

In the end, what I find so sadly funny is that a few rats did in one day what we 

veterans haven’t been able to do for years—get America’s attention. 

It’s important that we as a nation look at the larger issue here, though, and not 

get too bogged down in just the problems at Building 18. That larger issue goes way 

past the Pentagon’s hospitals, like Walter Reed, into the VA system. 

Are our current military obligations affecting the capacity of the VA to deal with 

an influx of vets? Absolutely. Last year, VoteVets.org did a poll of about 450 vetrmajette on PROD1PC63 with HEARING

60 

erans of the wars in Iraq and Afghanistan, focusing both on the issues they faced 

in the field, and issues they faced at home. Here is some of what we found: 

Troops returned home, and many encountered emotional and physical health 

problems as well as economic hardship resulting from their service. 

• One in four veterans has experienced nightmares since returning, including 33 

percent of Army and Marine veterans and 36 percent of combat veterans. 

• A fifth of all veterans (21 percent) and a quarter of Army and Marines (26 percent) and ground combat veterans (27 percent) say they have felt more stress 

now than before they left for war. 

• Among National Guard or Reserve veterans, 32 percent said their families experienced economic hardship; 25 percent feel more stress now than before the war; 

32 percent experienced more extreme highs and lows; and 30 percent experienced nightmares. 

• Twenty-six percent of all veterans have sought some service from the VA or a 

VA hospital, including 33 percent of Reservists and National Guard respondents. 

These numbers were compiled just last fall, so we believe those numbers have 

held, if not gotten worse, as the violence and chaos our troops have to deal with 

gets more intense. Nearly 1.5 million troops have now been deployed to Iraq or Afghanistan. So, to put our poll in real numbers, about 390,000 troops and veterans 

have or will seek care from the VA, if no more troops are deployed to the wars. 

Frankly, I think the numbers will be higher, for two reasons. First, the nature of 

this war lends itself to more mental trauma, because you are in a 360 degree battlefield, where you truly feel hunted. This stress becomes worse as you are extended 

multiple times, which many troops have been. Second, we are using our National 

Guard and Reserve at a much greater level than we have ever, in any war. Those 

Guardsmen and Reservists are still not guaranteed healthcare, and many of them 

will not be working when they return home, so they’ll have no insurance at all. 

Thus, the only option available to them will be VA services, meaning we’ll surely 

see a huge spike in the levels of demand from Guardsmen and Reservists. 

If you talked to any veteran of Vietnam or the Gulf War, they’ll tell you there 

were serious capacity issues with the VA before Iraq and Afghanistan. Since the 

start of the wars, the Bush administration has failed to adequately increase resources for the VA to meet the need. That’s why Secretary Nicholson had to come 

back to Congress a while back and admit the agency was billions short. Though 

Congress acted fast to appropriate emergency funds for the VA, the agency doesn’t 

get close to what it needs. According to the nation’s top veterans groups, which put 

together The Independent Budget each year, the agency is still being shortchanged 

by about ten billion dollars in the latest budget proposal. 

If the President has his way, the agency’s budget will be cut in 2009 and 2010. 

God willing, we will have started to redeploy from Iraq by then. That will be precisely the time when hundreds of thousands of new veterans will flood the VA system. Will there be capacity problems? You can’t possibly imagine. 

What does this mean in real terms? It means more frequent tales that I’ve heard 

since beginning VoteVets.org. I know one veteran, Josh Lansdale of Missouri. Josh 

served as an EMT in Iraq and came back with post-traumatic stress disorder and 

a busted ankle. He faced a 6 month wait to get the care he needed. 

Another young patriot, Tomas Young, is now wheelchair bound, paralyzed from 

the chest down, because he was shot in the spine while riding in a truck without 

the right armor. Every day, he takes a cocktail of pills just to get through the day. 

He’s lucky enough to have a wife that brings him to his VA center on a regular 

basis, but Tomas tells me that the quality of care is never as consistent. Sometimes 

he has a good experience, and sometimes the VA just doesn’t have the ability to deal 

with him. In short, Tomas can’t depend on the system. 

I know of veterans who have to hold their prosthetics together with duct tape, 

because their VA center doesn’t have anything that fits right. Veterans in rural 

areas I know of have to travel for hours to get the care they need. Veterans like 

Tyson Johnson from Alabama, who lost a kidney and had shrapnel in his lungs from 

a mortar attack, often couldn’t stand the long drive to the VA hospital, followed by 

the long wait for care, so he didn’t go at all, a lot of the time. 

Again, the people employed by the VA are not the problem. The problem is twofold: Budgetary and systemic. But, the problem right now is a walk in the park compared to what the situation will be like in a year or two, if nothing substantial is 

done. 

I’m hopeful that Congress and the Bush administration will finally address these 

issues. I hope this Committee works with your colleagues on the Committee on 

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Armed Services, to examine the serious transition problems there when a troop 

leaves the Pentagon system and enters the VA system. 

Those of us who served have kept our end of the bargain. We’ve risked our bodies 

and lives in service. Now it is time for you to do your jobs, and keep the government’s end of the deal by ensuring that the Department of Veterans Affairs is fully 

funded, and that bureaucratic SNAFUs are eliminated. No more excuses. No more 

delays. We veterans deserve nothing less. 

Thank you again for allowing me to testify here today. I sincerely hope that this 

marks a new day in how we address the issues facing veterans care in this nation. 

And though much of what I said today I’ve said before, for the first time, I feel that 

the American people are listening. Most importantly, I hope you will commit to 

keeping this process moving, and not end your concern with today’s hearing. It will 

be important that all of us—those of us on this panel, those of you in Congress, and 

the administration all work together to really make a difference and give America’s 

veterans the level of care they deserve. 

f 

Statement of Ronald R. Aument, Deputy Under Secretary for Benefits, 

Veterans Benefits Administration, U.S. Department of Veterans Affairs 

Mr. Chairman and Members of the Subcommittee, it is my pleasure to be here 

today to discuss the Disability Compensation Program and our efforts to meet the 

needs of servicemembers and veterans of Operations Iraqi and Enduring Freedom. 

I am pleased to be accompanied by Mr. Michael Walcoff, VBA’s Associate Deputy 

Under Secretary for Field Operations. 

The Veterans Benefits Administration (VBA) is responsible for administering a 

wide range of benefits and services for veterans, their families, and their survivors. 

We manage a life insurance program that consistently ranks among the best in the 

nation. We promote homeownership through the loan guaranty program and help 

veterans and their dependents seek greater education and economic opportunities 

through the highly successful Montgomery GI Bill program and other educational 

programs. We assist low-income disabled and elderly wartime veterans and their 

survivors through our pension programs. For qualifying veterans with disabilities 

related to their military service, our Vocational Rehabilitation and Employment Program provides both rehabilitation and training and assists them in reentering the 

civilian workforce. We are proud of our achievements in all these vital areas. 

At the heart of our mission is the Disability Compensation Program, which provides monthly benefits to veterans who are disabled as a result of injuries or illness 

incurred or aggravated during their military service. Over 2.7 million veterans of 

all periods of service currently receive VA compensation benefits. Last year, we provided veterans with decisions on over 774,000 disability claims. We also performed 

more than 1.3 million other award actions and benefits adjustments of all types 

(e.g., dependency adjustments, death pension awards, income adjustments, burial 

awards, and so forth.) to maintain the accounts of the beneficiaries already on the 

rolls. Additionally, we handled over 6.6 million phone calls; conducted over a million 

interviews; briefed more than 390,000 service persons; and conducted nearly 65,000 

hours of outreach to military members, former prisoners of war, homeless, minorities, women, and other targeted groups. 

Today I will discuss the challenges we face in providing timely, accurate, and consistent determinations on veterans’ claims for disability compensation. These challenges include the growth of the disability claims workload, the increasingly complex nature of that workload, the rise in appellate processing, and the absolute need 

to produce accurate benefit decisions. I will also discuss some of the actions we are 

taking to improve claims processing and our efforts to expedite the processing of 

claims from Operations Iraqi and Enduring Freedom veterans. 

Growth of Disability Claims Workload 

The number of veterans filing initial disability compensation claims and claims 

for increased benefits has increased every year since FY 2000. Disability claims 

from returning Afghanistan and Iraq war veterans as well as from veterans of earlier periods of war increased from 578,773 in FY 2000 to 806,382 in FY 2006. For 

FY 2006 alone, this represents an increase of nearly 228,000 claims or 38 percent 

over the 2000 base year. It is expected that this high level of claims activity will 

continue. 

The primary factors leading to the sustained high levels of claims activity are: 

more beneficiaries on the rolls with resulting additional claims for increased benefits; Operation Iraqi Freedom (OIF) and Operation Enduring Freedom (OEF); imrmajette on PROD1PC63 with HEARING

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proved and expanded outreach to active-duty servicemembers, guard and reserve 

personnel, survivors, and veterans of earlier conflicts; and implementation of Combat Related Special Compensation (CRSC) and Concurrent Disability and Retired 

Pay (CDRP) programs by the Department of Defense (DoD). 

Ongoing hostilities in Afghanistan and Iraq are expected to continue to increase 

the VA compensation workload. Earlier studies by VA indicate that the most significant indicator of new claims activity is the size of the active force. Nearly 1.46 million active-duty servicemembers, members of the National Guard, and reservists 

have thus far been deployed in the Global War on Terrorism. Over 689,000 have 

returned and been discharged. 

Whether deployed to foreign-duty stations or maintaining security in the United 

States, the authorized size of the active force and the mobilization of thousands of 

citizen soldiers means that the size of the total force on active duty has significantly 

increased. The claims rate for veterans of the Gulf War Era, which began in 1991 

and includes veterans who are currently serving in Operations Iraqi Freedom and 

Enduring Freedom, is significant. Veterans and survivors of the Gulf War Era currently comprise the second largest population of veterans receiving benefits after 

Vietnam Era veterans. 

The number of veterans receiving compensation has increased by almost 400,000 

since 2000—from just over 2.3 million veterans to nearly 2.7 million in 2006. This 

increased number of compensation recipients, many of whom suffer from chronic 

progressive disabilities such as diabetes, mental illness, and cardiovascular disabilities, will continue to stimulate more claims for increased benefits in the coming 

years as these veterans age and their conditions worsen. Reopened disability compensation claims currently comprise 54 percent of VBA’s disability claims receipts. 

VA is committed to increased outreach efforts to active-duty personnel. These outreach efforts result in significantly higher claims rates. Original claim receipts rose 

from 111,672 in FY 2000 to 217,343 in FY 2006—a 95-percent increase. We believe 

this increase is directly related to our aggressive outreach programs; we believe this 

increasing trend will continue. 

Combat-Related Special Compensation (CRSC) and Concurrent Retired and Disability Pay (CRDP) further contribute to increased claims activity for VBA. It is now 

potentially advantageous for the majority of our military retirees, even those with 

relatively minor disabilities, to file claims with VA and to receive VA disability compensation, since their waived retired pay may be restored and not be subject to 

waiver in the future under these new DoD programs. Today more than 54,000 military retirees receive CRSC and approximately 194,000 retirees receive CRDP. The 

number of military retirees receiving VA compensation has increased since the advent of these programs to over 840,000. The total number of retirees as of the end 

of FY 2006 was approximately two million, meaning that over 40 percent of all U.S. 

military retirees now receive VA benefits. 

Complexity of Claims Processing Workload 

The increase in claims receipts is not the only change affecting the claims processing environment. The greater number of disabilities veterans now claim, the increasing complexity of the disabilities being claimed, and changes in law and Court 

decisions affecting the decision process pose additional challenges to timely processing the claims workload. The trend toward increasingly complex and difficult-torate claims is expected to continue for the foreseeable future. 

A claim becomes more complex as the number of directly claimed conditions increases because of the larger number of variables that must be considered and addressed. Multiple regulations, multiple sources of evidence, and multiple potential 

effective dates and presumptive periods must be considered. The effect of these factors increases proportionately and sometimes exponentially as the number of 

claimed conditions increases. Additionally, as the number of claimed conditions increases, the potential for additional unclaimed but secondary, aggravated, and inferred conditions increases as well, further complicating the preparation of adequate 

and comprehensive Veterans Claims Assistance Act of 2000 (VCAA) notice and rating decisions. Since veterans are able to appeal decisions on specific disabilities to 

the Board of Veterans’ Appeals (Board) and the United States Court of Appeals for 

Veterans Claims (CAVC), the increasing number of claimed conditions significantly 

increases the potential for appeal. 

VA’s experience since 2000 demonstrates that the trend of increasing numbers of 

conditions claimed is system-wide, not just at special intake locations such as Benefits Delivery at Discharge (BDD) sites. The number of cases with eight or more disabilities claimed increased from 21,814 in FY 2000 to 51,260 in FY 2006, representing a 135-percent increase over the 2000 base year and a 15-percent increase 

over FY 2005. 

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The VCAA has significantly increased both the length of time and the specific requirements of claims development. VA’s notification and development duties increased as a result of VCAA, adding more steps to the claims process and lengthening the time it takes to develop and decide a claim. Since enactment, we are required to review the claims at additional points in the decision process. 

Appellate and Non-Rating Workload 

As VBA renders more disability decisions, a natural outcome of that process is 

more appeals filed by veterans and survivors who disagree with some part of the 

decision made on their case. Appeals of regional office decisions and remands by the 

Board and the CAVC following appeal are some of the most challenging types of 

cases because of their complexity and the growing body of evidence necessary to 

process these claims. In recent years, the appeal rate on disability determinations 

has climbed from a historical rate prior to 2000 of approximately 7 percent of all 

disability decisions to the current rate of 11 percent. There are more than 130,000 

appeals now pending in the regional offices and the Appeals Management Center. 

This number includes cases requiring processing prior to transfer of the appeal to 

the Board and cases remanded by the Board and the CAVC following an appeal. 

There are over 30,000 additional appeals pending at the Board. 

Claims Processing Accuracy and Consistency 

In 2001, then Secretary of Veterans Affairs Anthony J. Principi, established the 

VA Claims Processing Task Force to examine a wide range of issues affecting the 

processing of claims. A product of the Task Force Report was the Claims Processing 

Improvement (CPI) model. Implementation of the CPI model established a consistent organizational structure across all regional offices. Work processes were reengineered and specialized teams established to reduce the number of tasks performed by individual decisionmakers, establish consistency in workflow and process, 

and incorporate a triage approach to incoming claims. 

Implementation of this model provided a strong foundation for improving both the 

accuracy and consistency of our claims decisions. We also established an aggressive 

and comprehensive program of quality assurance and oversight to assess compliance 

with VBA claims processing policy and procedures and assure consistent application. 

As a result of these efforts, our accuracy has risen over the last 4 years from 81 

percent to 89 percent. 

We are also identifying unusual patterns of variance in claims adjudication by diagnostic code, and then reviewing selected disabilities to assess the level of decision 

consistency among and between regional offices. These studies are used to identify 

where additional guidance and training are needed to improve consistency and accuracy, as well as to drive procedural or regulatory changes. Site surveys of regional 

offices also address compliance with procedures. 

Training 

Critical to improving claims accuracy and consistency is ensuring that our employees receive the essential guidance, materials, and tools to meet the ever-changing and increasingly complex demands of their decisionmaking responsibilities. To 

that end, VBA has deployed new training tools and centralized training programs 

that support accurate and consistent decisionmaking. 

New hires receive comprehensive training and a consistent foundation in claims 

processing principles through a national centralized training program called ‘‘Challenge.’’ After the initial centralized training, employees follow a national standardized training curriculum (full lesson plans, handouts, student guides, instructor 

guides, and slides for classroom instruction) available to all regional offices. Standardized computer-based tools have been developed for training decisionmakers (69 

modules completed and an additional 8 in development). Training letters and satellite broadcasts on the proper approach to rating complex issues are provided to 

the field stations. In addition, a mandatory cycle of training for all Veterans Service 

Center employees has been developed consisting of an 80-hour annual curriculum. 

Consolidation of Specialized Operations 

The consolidation of specialized processing operations for certain types of claims 

has been implemented to provide better and more consistent decisions, and we continue to look for ways to achieve additional organizational efficiencies through further consolidation. Three Pension Maintenance Centers were established to consolidate the complex and labor-intensive work involved in ensuring the continued eligibility and appropriateness of benefit amounts for pension recipients. We are exploring the centralization of all pension adjudications in these Centers. 

In November 2001, a Tiger Team was established at the Cleveland Regional Office 

to adjudicate the claims of veterans age 70 and older. VBA also established an Aprmajette on PROD1PC63 with HEARING

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peals Management Center to consolidate expertise in processing remands from the 

Board of Veterans’ Appeals. In a similar manner, a centralized Casualty Assistance 

Unit was established to process all in-service death claims. VBA also established 

two Development Centers in Phoenix and Roanoke to assist regional offices in obtaining the required evidence and preparing cases for decision, and centralized the 

processing of all radiation claims to the Jackson Regional Office. 

The Benefits Delivery at Discharge (BDD) Program provides servicemembers with 

briefings on VA benefits, assistance with completing applications, and a disability 

examination before leaving service. The goal of this program is to deliver benefits 

within 60 days following discharge. VBA has consolidated the rating aspects of our 

BDD program, which will bring greater consistency of decisions on claims filed by 

newly separated veterans. 

Inventory Reduction 

VBA is aggressively pursuing measures to decrease the pending inventory of disability claims and shorten the time veterans must wait for decisions on their claims. 

Our pending inventory of rating related claims is currently about 400,000 claims, 

and average processing time is 177 days. However, all 400,000 claims in our inventory should not be considered as ‘‘backlog;’’ this number includes all claims, whether 

pending only a few days or a number of months. Under the very best of circumstances, it takes about four months to fully develop a claim (obtain military and 

private medical records, schedule necessary medical examinations and receive results, evaluate evidence, etc.). Based on our projected receipts of 800,000 claims and 

our timeliness performance target of 145 days, our expected level of pending inventory with no backlog would be approximately 318,000 claims. 

To balance the inventory of disability claims across regional offices, VBA implemented a ‘‘brokering’’ strategy in which rating cases are sent from stations with 

high inventories to other stations with the capacity to process additional rating 

work. Brokering allows the organization to address simultaneously the local and national inventory by maximizing use of available resources. 

We are increasing staffing levels to reduce the pending inventory and provide the 

level of service expected by the American people. We began aggressively hiring additional staff in FY 2006, increasing our on-board strength by over 580 employees between January 2006 and January 2007. With a workforce that is sufficiently large 

and correctly balanced, VBA can successfully meet the needs of our veterans. 

Our plan is to continue to accelerate hiring and fund additional training programs 

for new staff this fiscal year. We are recruiting now and will increase our on-board 

strength by an additional 400 employees by the end of June. However, because it 

requires an average of two to three years for our decisionmakers to become fully 

productive, increased staffing levels do not produce immediate production improvements. Performance improvements from increased staffing are more evident in the 

second and third years. We have therefore also increased overtime funding this year 

and recruited retired claims processors to return to work as reemployed annuitants 

in order to increase decision output. 

Priority Processing for OIF/OEF Veterans 

Since the onset of the combat operations in Iraq and Afghanistan, VA has provided expedited and case-managed services for all seriously injured Operations Iraqi 

and Enduring Freedom (OIF/OEF) veterans and their families. This individualized 

service begins at the military medical facilities where the injured servicemembers 

return for treatment, and continues as these servicemembers are medically separated and enter the VA medical care and benefits systems. VA assigns special benefits counselors, social workers, and case-managers to work with these servicemembers and their families throughout the transition to VA care and benefits systems, 

and to ensure expedited delivery of all benefits. 

Last month the Secretary of Veterans Affairs announced a new initiative to provide priority processing of all OIF/OEF veterans’ disability claims. This initiative 

covers all active duty, National Guard, and Reserve veterans who were deployed in 

the OIF/OEF theatres or in support of these combat operations, as identified by the 

Department of Defense (DoD). This will allow all the brave men and women returning from the OIF/OEF theatres who were not seriously injured in combat, but who 

nevertheless have a disability incurred or aggravated during their military service, 

to enter the VA system and begin receiving disability benefits as soon as possible 

after separation. 

We have designated our two Development Centers in Roanoke and Phoenix and 

three of our Resource Centers as a special ‘‘Tiger Team’’ for processing OIF/OEF 

claims. The two Development Centers will obtain the evidence needed to properly 

develop the OIF/OEF claims. The three Resource Centers, located in Muskogee, San 

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Diego, and Huntington, will rate OIF/OEF claims for regional offices with the heaviest workloads. Medical examinations needed to support OIF/OEF veterans’ claims 

are also being expedited. 

We are expanding our outreach programs for National Guard and Reserve components and our participation in OIF/OEF community events and other information 

dissemination activities. An OIF/OEF Team is being established at VBA Headquarters to address all OIF/OEF operational and outreach issues at the national 

level and to support and assist newly designated OIF/OEF Managers at each regional office. The VBA OIF/OEF Team will also direct and coordinate national 

Memoranda of Understanding (MOU) with each of the Reserve Components to formalize relationships with them, mirroring the agreement between VA and the National Guard Bureau signed in 2005. Having an MOU with each Reserve Component 

will ensure that VA is provided service medical records and notified of ‘‘when and 

where’’ reserve Members are available to be briefed during the demobilization process and at later times. 

In order to ensure that VA benefits information is provided to all separating 

Guard and Reserve servicemembers, we will work with DoD to discuss the possibility of expanding VA’s role in DoD’s military pre-separation process. Specifically, 

we will assess the feasibility of providing a new ‘‘Claims Workshop’’ in conjunction 

with VA benefits briefings and Disabled Transition Assistance (DTAP) briefings. At 

such workshops, groups of servicemembers would be instructed on how to complete 

the general portions of the VA application forms. Following the general instruction 

segment, personal interviews would be conducted with those applying for individual 

VA benefits. 

Expediting the claims process is critical to assisting OIF/OEF veterans in their 

transition from combat operations back to civilian life. VA is also continuing to focus 

on reducing the pending workload and improving the overall timeliness of processing for all veterans. 

Mr. Chairman, this concludes my testimony. I greatly appreciate being here today 

and look forward to answering your questions. 

f 

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MATERIAL SUBMITTED FOR THE RECORD 

How the U.S. Is Failing Its War Veterans 

By Dan Ephron and Sarah Childress 

Newsweek Magazine, March 5, 2007, Issue 

After returning from Iraq in late 2005, Jonathan Schulze spent every day struggling not to fall apart. When a Department of Veterans Affairs clinic turned him 

away last month, he lost the battle. The 25-year-old Marine from Stewart, Minn., 

had told his parents that 16 men in his unit had died in 2 days of battle in Ramadi. 

At home, he was drinking hard to stave off the nightmares. Though he managed 

to get a job as a roofer, he was suffering flashbacks and panic attacks so intense 

that he couldn’t concentrate on his work. Sometimes, he heard in his mind the 

haunting chants of the muezzin—the Muslim call to prayer that he’d heard many 

times in Iraq. Again and again, he’d relive the moments he was in a Humvee, manning the machine gun, but helpless to save his fellow Marines. ‘‘He’d be seeing them 

in his own mind, standing in front of him,’’ says his stepmother, Marianne. 

Schulze, who earned two Purple Hearts for wounds sustained in Iraq, was initially reluctant to turn to the VA. Raised among fighters—Schulze’s father served 

in Vietnam and over the years his older brother and six stepbrothers all enlisted 

in the military—Jonathan might have felt asking for help didn’t befit a Marine. 

But when the panic attacks got to be too much, he started showing up at the VA 

emergency room, where doctors recommended he try group therapy. He resisted; he 

didn’t think hearing other veterans’ depressing problems would help solve his own. 

Then, early last month, after more than a year of anxiety, he finally decided to 

admit himself to an inpatient program. Schulze packed a bag on Jan. 11 and drove 

with his family to the VA center in St. Cloud, about 70 miles away. The Schulzes 

were ushered into the mental-health-care unit and an intake worker sat down at 

a computer across from them. ‘‘She started typing,’’ Marianne says. ‘‘She asked, ‘Do 

you feel suicidal?’ and Jonathan said, ‘Yes, I feel suicidal’.’’ The woman kept typing, 

seemingly unconcerned. Marianne was livid. ‘‘He’s an Iraqi veteran!’’ she snapped. 

‘‘Listen to him!’’ The woman made a phone call, then told him no one was available 

that day to screen him for hospitalization. Jonathan could come back tomorrow or 

call the counselor for a screening on the phone. 

When he did call the following day, the response from the clinic was even more 

disheartening: the center was full. Schulze would be No. 26 on the waiting list. He 

was encouraged to call back periodically over the next 2 weeks in case there was 

a cancelation. Marianne was listening in on the conversation from the dining room. 

She watched Jonathan, slumped on the couch, as he talked to the doctor. ‘‘I heard 

him say the same thing: I’m suicidal, I feel lost, I feel hopelessness,’’ she says. Four 

days later Schulze got drunk, wrapped an electrical cord around a basement beam 

in his home and hanged himself. A friend he telephoned while tying the noose called 

the police, but by the time officers broke down the door, Schulze was dead. 

How well do we care for our wounded and impaired when they come home? For 

a country amid what President Bush calls a ‘‘long war,’’ the question has profound 

moral implications. We send young Americans to the world’s most unruly places to 

execute our National policies. About 50,000 servicemembers so far have been banged 

up or burned, suffered disease, lost limbs or sacrificed something less tangible inside 

them. Schulze is an extreme example but not an isolated one, and such stories are 

raising concerns that the country is failing to meet its most basic obligations to 

those who fight our wars. 

The question of after-action care also has strategic consequences. Iraq marks the 

first drawn-out campaign we’ve fought with an all-volunteer military. In practice, 

that means far fewer Americans are taking part in this war (12 percent of the total 

population participated in World War II, 2 percent in Vietnam and less than half 

of 1 percent in Iraq and Afghanistan). Already, the war has made it harder for the 

military to recruit new soldiers and more expensive to retain the ones it has. If we 

fall down in the attention we provide them, who’s to say volunteers will continue 

coming forward? 

The issue of veterans’ care jumped into the headlines last week when The Washington Post published a series about Walter Reed Army Medical Center in Washington, D.C. The stories revealed decay and mismanagement at the hospital, and 

provoked shock and concern among politicians in both parties. ‘‘The doctors were 

fantastic,’’ a Walter Reed patient, 21-year-old Marissa Strock, tells NEWSWEEK. 

‘‘But some of the nurses and other staffers here have been a nightmare.’’ Strock sufrmajette on PROD1PC63 with HEARING

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fered multiple injuries, including broken bones, a lacerated liver and severely 

bruised lungs, when her Humvee rolled over an improvised explosive device on Nov. 

24, 2005. She later had both her legs amputated. ‘‘I think a big part of [Walter 

Reed’s problems] is they just don’t have enough people to adequately handle all the 

wounded troops coming in here every day,’’ she says. (Walter Reed did not respond 

to requests for comment about Strock’s case.) The Pentagon responded swiftly to the 

Post series. It vowed to investigate what went wrong and immediately sent a repair 

crew to repaint and fix the damage to the aging buildings. 

The revelations were especially shocking because Walter Reed is one of the country’s most prestigious military hospitals, often visited by prominent politicians, including the president. But it is just one part of a vast network of hospitals and clinics that serve wounded soldiers and veterans throughout the country. A NEWSWEEK investigation focused not on one facility but on the services of the Department of Veterans Affairs, a 235,000-person bureaucracy that provides medical care 

to a much larger number of servicemen and women from the time they’re released 

from the military, and doles out their disability payments. Our reporting paints a 

grim portrait of an overloaded bureaucracy cluttered with red tape; veterans having 

to wait weeks or months for mental-health care and other appointments; families 

sliding into debt as VA case managers study disability claims over many months, 

and the seriously wounded requiring help from outside experts just to understand 

the VA’s arcane system of rights and benefits. ‘‘In no way do I diminish the fact 

that there are veterans out there who are coming in who require treatment and 

maybe are not getting the treatment they need,’’ White House Deputy Press Secretary Tony Fratto tells NEWSWEEK. ‘‘It’s real and it exists.’’ The system’s shortcomings are certainly not deliberate; no organization is perfect. 

Some of the VA’s hospitals have been cited as among the best in the country, and 

even in extreme cases, the picture is seldom black-and-white. Before he killed himself, Schulze was seen by the VA 46 times, VA Secretary James Nicholson told Congress this month. (He did not elaborate on what care Schulze received.) 

Yet, as the number of veterans continues to grow, critics worry the VA is in a 

state of denial. In a broad sense, the situation at the VA seems to mirror the overall 

lack of planning for the war. ‘‘We know the VA doesn’t have the capacity to process 

a large number of disability claims at the same time,’’ says Linda Bilmes, a Harvard 

public-finance professor and former Clinton administration Commerce Department 

official. Last month Bilmes released a 34-page study on the long-term cost of caring 

for veterans from Iraq and Afghanistan. She projects that at least 700,000 veterans 

from the global war on terror (GWOT) will flood the system in the coming years. 

As it is, for some veterans the wait can be agonizing. Patrick Feges was on hold 

for 17 months until his first disability check from the VA came through. An Eagle 

Scout from Sugar Land, Texas, Feges enlisted in 2003 and found himself in Ramadi 

a year later. In October 2004, a mortar exploded on his base about 50 yards from 

him, spraying him with shrapnel, slicing his intestines and severing a major artery. 

Feges lost consciousness and was flown to Walter Reed, where he underwent surgery. Long scars trail down his legs and midsection. At the hospital a fellow Texan 

came to visit: President Bush stood by his bed and chatted with him. 

Feges is a polite 22-year-old with a military manner. He addresses strangers by 

last name and an honorific, even when prodded to drop the formality. ‘‘I was 

brought up right, sir,’’ he explains. But his voice rises slightly when he describes 

his ordeal with the VA. A case officer in Houston processed Feges’s request for disability in September 2005, then lost his application. Feges was summoned to repeated medical evaluations at the Houston center, but a year later he was still waiting for a check. By then, Feges had been accepted to culinary school in Austin and 

did not want to put off his studies. His mother, an elementary-schoolteacher, took 

a second job at a local McDonald’s to help support him. 

For discharged servicemembers, the VA serves two functions: it provides medical 

care for service-related conditions at its clinics and hospitals across the country, and 

it reviews claims for disability benefits—chiefly, the monthly payments wounded 

veterans get for the rest of their lives. The review process can be complicated. It 

requires veterans to prove, through documents and sometimes through the testimony of fellow soldiers, that their afflictions are a result of their time in the military. Feges listed on his application all the ways he’d been affected by the wounds: 

he’d lost mobility in his ankles and knees, he suffered regular stomach cramps from 

the intestinal wound, he lost sensation in his hands and legs, he had trouble standing for long periods. NEWSWEEK presented the VA with the names and details of 

the veterans whose stories are told here, but a spokesman for the agency declined 

to comment on individual cases, citing doctor-patient confidentiality. Speaking generally, Dr. Michael Kussman, the VA’s acting under secretary for health, tells 

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proach their date of discharge, and that he does not believe Iraq and Afghanistan 

are straining resources severely. ‘‘The impact on the VA so far has been relatively 

small,’’ Kussman says. ‘‘It has not kicked the system over in our budget and in our 

ability to absorb it.’’ Still, a jump in disability claims in recent years has created a bottleneck. Daniel 

Cooper, the VA’s under secretary for benefits, confirmed his department was coping 

with a backlog of 400,000 applications and appeals; 75 percent of them were still 

within a ‘‘reasonable’’ reviewing timeframe, he says. Yet, most of those claims were 

filed by veterans of previous wars (a veteran can file or appeal a claim even decades 

after discharge). As more servicemen and women return from Iraq, the backlog is 

likely to increase. Cooper says the average waiting time for a benefits claim is about 

6 months. NEWSWEEK turned up a number of veterans who’d waited longer. Keri 

Christensen, a National Guard veteran and a mother of two, says the VA in Chicago 

took 10 months to process her application. Rory Dunn, who nearly died in an IED 

attack outside Fallujah, says his application was delayed because, among other 

things, the VA mixed up his file with that of a Korean war veteran. 

Feges’s claim was finally approved last month: after NEWSWEEK and the advocacy group Veterans for America began looking into his case, he got a call from a 

VA official in Waco, Texas, with the news that his money would come through. Last 

week he received back pay to the date of his application. 

The compensation is not huge. A veteran with a disability rating of 100 percent gets about $2,400 a month—more if he or she has children. A 50 percent rating brings in around $700 a month. But for many returning servicemen burdened with 

wounds, it is, initially at least, their sole income. ‘‘When I started school, that’s when it became really hard not to have that money,’’ says Feges. 

One reason to worry about a crush of new vets at the VA has to do with the proportion of wounded to dead Americans in Iraq. Though we tend to mark the grim 

timeline of the war by counting fatalities, what really distinguishes this conflict is 

how many soldiers don’t die, but suffer appalling injuries. In Vietnam and Korea, 

about three Americans were wounded for every one who died. The ratio in WWII 

was nearly 2–1. In Iraq, 16 soldiers are wounded or get sick for every one who dies. 

The yawning ratio marks progress: better body armor and helmets are shielding 

more soldiers from fatal wounds. And advanced emergency care is keeping more of 

the wounded alive. The VA’s Kussman says that soldiers who survive the first few 

minutes after an explosion have a 98 percent chance of surviving altogether. But 

that means an increased burden on the VA’s health-care system. 

Two such survivors are Albert and Connie Ross. Albert lost a leg when a rocketpropelled grenade landed close to him in August 2004 while he was on patrol in 

Baghdad. Connie lived through a 2004 suicide bombing in Mosul but suffered multiple fractures and burns. When the two met in a hallway at Brooke Army Medical 

Center in San Antonio, Texas, Connie thought she noticed a certain swagger in 

Albert’s walk. ‘‘He had this weird dip in his walk, so I asked him, ‘Why are you 

pimp-walking in a hospital?’ And he said: ‘I’m not pimp-walking, I’m an amputee.’

I was so embarrassed.’’ The two married earlier this year and are expecting a child. 

Though he’s been in the VA system for more than 2 years now, Albert still doesn’t 

have a primary-care doctor. Without one, getting appointments with specialists can 

be difficult. ‘‘You’re supposed to be assigned one right away,’’ says Albert, who now 

lives in San Antonio. ‘‘I’m not frustrated so much as worried—worried if and when 

something does go wrong, something will happen with one of my legs. . . . They 

[primary-care doctors] are the ones who have to fill out a work-order form; it’s impossible to do anything without them.’’

One thing Albert desperately wants to do: get a new prosthetic. He’s one of the 

early African-American amputees of the war. But the fake limb he’s been given 

matches the skin tone of a Caucasian. It so embarrasses Albert that he always 

wears a sock over it—even if he’s in sandals. ‘‘He’s very self-conscious about it,’’ says 

Connie. ‘‘It really bothers him.’’

Albert’s situation is probably atypical. The VA says a huge majority of veterans 

get primary-care doctors within 30 days. But people inside the system do concede 

there’s a shortage of mental-health workers at many of the VA’s hospitals and clinics across the country. And Schulze is not the only veteran to commit suicide after 

being turned away. In a similar case in 2004, the VA twice neglected to treat Iraq 

veteran Jeffrey Lucey for posttraumatic stress disorder (the second time because he 

was told alcoholics must dry out before being accepted to an inpatient program). By 

the time a VA counselor tracked down a bed in a New York facility with a builtin detox program, Lucey had already hanged himself. ‘‘The system doesn’t treat 

mental health with the same urgency it treats general healthcare,’’ says a senior 

VA manager who did not want to be named talking about shortcomings in the agency. 

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Even when veterans get to the right doctors, understanding how to leverage what 

they need from the system can be mind-bending. Tonia Sargent, whose husband, 

Kenneth, nearly died in a sniper attack in Najaf in 2004, says no one ever sat her 

down and explained the benefits and how to access them. Her husband’s brain injury made him often incapable of understanding his own care. Key decisions fell to 

her alone. It’s a ‘‘don’t ask, don’t tell system,’’ she says. 

Kenneth is a Marine master sergeant who’d been in the Corps for nearly 18 years. 

He was on his second tour in Iraq when a sniper bullet ricocheted off the metal 

hatch on his vehicle and hit him directly below the right eye, grazing the front of 

his brain and exiting near his left ear. Among other things, he was diagnosed with 

traumatic brain injury, which has become the signature wound of the Iraq war. 

Tonia had to fight the Marine Corps to keep him from being discharged, figuring 

he’d get better medical care if he remained in active service. But some of his treatment has been outsourced to the VA. 

One of the tricks she learned early on was to demand photocopies of her husband’s records—every exam, every X-ray, every diagnosis—and personally carry the 

file from appointment to appointment. ‘‘I don’t know if there is a more formal protocol for transferring documents, but I know that what I brought . . . . was definitely put to use.’’ When Sargent was transferred to the VA’s lauded Polytrauma 

Center in Palo Alto, Calif., doctors there encouraged her to go home to Camp Pendleton near San Diego and treat his stay at the hospital as if it was a deployment. 

‘‘After 2 weeks, they asked me how long I was planning to stay with my husband,’’

she says. ‘‘They said it was his rehab, not mine. But I needed to learn how to care 

for him, and he suffered from extreme anxiety without me.’’ She pushed back, staying in Palo Alto until he completed his care. 

How can the system improve? Bilmes, who authored the Harvard study, proposes 

at least one drastic change—automatically accepting all disability claims and auditing them after payments have begun. (The VA says that would be an irresponsible 

use of taxpayer money.) Other critics have focused on raising the VA’s budget, 

which has been proposed at $87 billion for 2008. More money could go toward hiring 

more claims officers and more doctors, easing the burden now and preparing the VA 

for the end of the Iraq war, when soldiers return home en masse. 

But veterans’ support groups and even some former and current VA insiders believe there’s a reluctance in the Bush administration to deal openly with the longterm costs of the war. (All told, Bilmes projects it could cost as much as $600 billion 

to care for GWOT veterans over the course of their lifetimes.) That reluctance, they 

say, trickles down to the VA, where top managers are politically appointed. Secretary Jim Nicholson, a decorated Vietnam War veteran who was chosen by Bush 

in 2005, tends to be the focus of this criticism. 

The senior VA manager who did not want to be named criticizing superiors told 

NEWSWEEK: ‘‘He’s a political appointee and he needs to respond to the White 

House’s direction.’’ Steve Robinson of Veterans for America levels the accusation 

more directly. ‘‘Why doesn’t the VA have a projection of casualties for the wars? Because it would be a political bombshell for Nicholson to estimate so many casualties.’’ The VA denies political considerations are involved in its budgeting or planning. Nicholson declined to be interviewed but Matt Burns, a spokesman for the VA, 

called Robinson’s comments ‘‘nonsensical and inflammatory,’’ adding: ‘‘The VA, in its 

budgeting process, carefully prepares for future costs so that we can continue to deliver the quality healthcare and myriad benefits veterans have earned.’’

Fratto, the White House deputy press secretary, says money is not the problem. 

He points out the VA has had a hard time filling positions in some remote parts 

of the country. ‘‘You need to find people who are trained in PTSD and other disorders that are affecting veterans and find those who are willing to go to places 

where they are needed.’’

As is often the case in America when government institutions falter, however, 

community groups are already stepping into the void. Veterans of Foreign Wars has 

advocates helping vets negotiate the VA bureaucracy, much the way health 

facilitators in the private sector help consumers get the most from their health insurance. Robinson, of Veterans for America, has pulled together teams of volunteers—physicians, psychologists, lawyers—who give vets free services when the local 

VA branch falls down. At his office recently, he was coordinating a traumatic-braininjury screening with a private doctor for a veteran who’d been denied access to VA 

care. The fact that Americans are coming forward doesn’t absolve the VA of its obligation to provide first-rate care for veterans. Most of the wounded’s problems just 

can’t be solved by private citizens and groups, no matter how well meaning. But it 

does serve to remind us that we should take better care of veterans wounded in the 

line of duty as they make their way home, and try to remake their lives. 

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With Jamie Reno, Eve Conant, John Barry, Richard Wolffe, Karen Springen, Jonathan Mummolo and Ty Brickhouse 

Still Hurting Photographs 

Pictures by Ethan Hill 

How well does the United States care for its wounded and impaired when they 

come home? For a country engaged in what President Bush calls a ‘long war,’ the 

question has profound moral implications. About 50,000 servicemembers so far have 

been banged up or burned, suffered disease, lost limbs or sacrificed their mental 

well-being while implementing American policies in dangerous places. The stories 

of these soldiers raise concerns that the country is failing to meet its most basic obligations to those who fight its wars. 

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Albert Ross: He was on foot patrol in Baghdad when a rocket-propelled grenade 

exploded near him. That was over 2 years ago, and Ross still doesn’t have a primary 

care doctor. 

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Connie Ross: During her rehab, she was sitting in her wheelchair in the hallway 

of the hospital, when she met the man she’d eventually marry. Now she and Albert 

Ross, pictured in the previous slide, are expecting their first child. 

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Eric Edmundson: A bomb blast ruptured this 26-year-old father’s spleen. Military 

doctors inserted a catheter that accidentally tickled his heart, enough trauma to 

stop it—and deprive his brain of oxygen—for 30 minutes. The resulting damage—

near-total lack of muscle control—was bad enough to require therapy outside the 

VA system. 

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Keri Christensen: Since coming home from Iraq, the mother of two has struggled 

with emotional issues. She’s haunted by nightmares, has imaginary conversations 

with her husband and rarely leaves the house. 

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Rory Dunn: Shrapnel ripped through Dunn’s unarmored Humvee, causing traumatic brain injury, the signature wound of the Iraq war. He was so severely hurt 

that the triage doctor initially set the 24-year-old aside to die. 

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Patrick Feges: Shrapnel tore into his intestines and cut a major artery. While the 

22-year-old waited 17 months for his disability check to come, his mother took a second job at McDonald’s to help support him. 

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Marissa Strock: The 21-year-old lost both of her legs after her Humvee rolled over 

an IED in Iraq. The others on board, whose names she tattooed on her back, died. 

The trauma didn’t end once she got to the hospital. 

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John Newport: The discs in his back became compressed when he manned a 

truck-mounted machine gun—now he walks with a cane and wears a nerve stimulator to moderate pain. These injuries have still not been verified by the VA, more 

than 2 years later. He also suffers from PTSD, and has had flashbacks of an Iraqi 

girl he saw run over by an American vehicle—she reminded him of his daughter. 

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Pomona Veteran Shares Story of Fighting for Health 

Benefits 

By Hema Easley 

The Journal News, (Original Publication: March 13, 2007) 

GOSHEN, N.Y.—Vietnam War veteran Ted Wolf tells a saga of government apathy in providing him treatment for cancer, which he likely developed because of exposure to chemicals during the war. 

His saga ended because of Rep. John Hall, D–Dover Plains, who intervened with 

the Department of Veterans Affairs to get Wolf his due benefits. 

In the wake of revelations of substandard treatment for veterans at the Walter 

Reed Army Medical Center, Wolf’s case is not alone. In fact, the backlog of veterans’

benefit claims has grown to more than 630,000, said Hall, who is the chair of the 

Subcommittee on Disability Assistance and Memorial Affairs. 

‘‘You get the feeling that the VA doesn’t care,’’ said Wolf, 62, a Pomona resident, 

speaking at a news conference yesterday in Hall’s office. 

His comments came a day before Hall holds a House Veterans Affairs subcommittee hearing on the healthcare needs of veterans of the Iraq and Afghanistan 

wars, and their impact on the ability of the VA to process disability claims. 

The hearing will also examine reports of claims rating discrepancies between active duty and Reserve veterans. 

Wolf and Hall blamed the VA bureaucracy, inadequate staffing and lack of information sharing between the Department of Defense and the VA for the backlog. 

In addition, Hall said, the ratio of wounded-to-killed in the Iraq war is 15–1, several times the ratio in previous wars. More military men and women are surviving 

injuries because of better medical care on the battlefield, thereby putting pressure 

on the system. 

‘‘It’s only fair that we pick up the bill,’’ said Hall, who estimated that the cost 

of taking care of veterans would rise to $1 trillion. 

‘‘When our soldiers and military personnel return home and need help, they 

should get the assistance they have earned, without delay,’’ Hall said. 

Wolf shared his story yesterday at Hall’s office to illustrate how many veterans 

have to struggle to get benefits, and how he was helped by the congressman’s office. 

After being diagnosed with prostate cancer in September 2002, Wolf initially 

didn’t think to apply to the VA for help. He didn’t think he was eligible, and on 

his doctor’s advice he went to Memorial Sloan Kettering Cancer Center in New York 

City. 

But browsing on the Internet one day, he read about the suspected link between 

prostate cancer and Agent Orange, a chemical that he and many other servicemembers had been exposed to during the Vietnam War. His wife, Harriet, had suffered 

seven miscarriages before their only daughter was born, and Wolf thought that that 

might also have been linked to the chemical. 

But when Wolf approached the VA, he was put on a 6-month waiting list for a 

physical based upon which VA would decide if he was eligible. 

‘‘There is a bureaucracy doing needless physicals,’’ said Wolf, a former realtor. 

‘‘The cancer is in my bones. It will not come up in a physical.’’

After an initial physical, Wolf was recalled for another physical in six months. 

While Wolf waited, the VA reduced his pension from $2,300 a month to $600, saying 

that his cancer was in remission. 

There are an estimated 18,000 veterans in Rockland County. About 6,000 are enrolled in the VA’s health clinic. 

‘‘The backlog of cases is phenomenal,’’ said Jerry Donnellan, director of the county’s Veterans Service Agency. ‘‘We’ve had people literally die waiting to have their 

cases adjudicated.’’

Help finally came to Wolf when he approached Hall’s office, and it intervened to 

expedite his case. 

Earlier this year, Wolf’s pension was raised to $2,900. He was also reimbursed 

for all medical expenses since June, which totaled $19,000, 

‘‘I was extremely pleased with the care and rapid response,’’ said Wolf. 

But, he said, ‘‘We shouldn’t need to contact a congressman. The process should 

be easier.’’

f 

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Vietnam Vet Fights for Fellow Soldiers 

By Greg Bruno 

Times Herald-Record, March 13, 2007 

GOSHEN—Three and a half decades after dodging bullets in the jungles of Vietnam, Ted Wolf is still fighting for fellow soldiers. 

But now his enemies are cancer, politics and a foundering veterans’ health-care 

system. 

‘‘My concern is for the young guys coming back from war today,’’ said Wolf, 62, 

as he detailed his 5-year odyssey through the Department of Veterans Affairs. ‘‘They 

shouldn’t have to wait (for care),’’ he said, choking back tears. ‘‘There’s enough 

stress. They shouldn’t have to wait.’’

As the wars in Iraq and Afghanistan chew up American soldiers, creating the 

largest pool of wounded veterans since the Vietnam era, the backlog of disability 

claims is skyrocketing, lawmakers and veterans’ advocates say. 

There are more than 630,000 claims waiting to be processed by the VA, according 

to congressional estimates. That number will only increase as servicemembers return from America’s latest war. 

‘‘I’m here, my staff, we’re here to fight for veterans to get their due. But it absolutely shouldn’t be necessary,’’ said Rep. John Hall, D–Dover Plains, who joined 

Wolf during a news conference yesterday in Goshen. 

‘‘It’s easy to say you support the troops, but the way you do it is by putting up 

the money and getting it done,’’ the congressman said. 

Problems with veterans’ medical care reached a boil last month when The Washington Post detailed the unsanitary and decrepit living conditions at Walter Reed 

Army Medical Center. 

But woes within the Department of Defense and VA health-care systems run 

deeper than one Army hospital in Washington. 

In testimony last week, Cynthia A. Bascetta, director of healthcare for the Government Accountability Office, told a House Subcommittee that veterans returning 

from Iraq and Afghanistan often fall through the medical cracks. 

Many veterans are not screened for mental health problems, leading to 

undiagnosed conditions, the GAO said. Other oversights include poor military recordkeeping and payment issues that force financial burdens on veterans. 

Fixing the system won’t come cheap. As of March 1, more than 24,000 servicemembers had been injured during fighting in Iraq and Afghanistan, according to the 

Defense Department. Hall said long-term care estimates for the nation’s veterans 

top $1 trillion. 

‘‘Disability benefits is a hot topic, and the quality of care our active soldiers and 

veterans are getting has been revealed ‘‘to have some serious difficulties,’’ Hall said. 

Wolf knows firsthand how broken the system is: His run-in with a bumbling VA 

began in 2002, when he was diagnosed with prostate cancer. Wolf was eligible for 

coverage within the VA system because prostate cancer is one of four cancers linked 

to exposure to Agent Orange, a defoliant used by the U.S. military during the Vietnam War. 

But when the VA wrongly declared Wolf to be in remission, his disability benefits 

were slashed by 60 percent, to about $600 a month, he said. Even though his cancer 

never stopped eating at his bones and skull, it took congressional intervention from 

Hall to get benefits restored. 

‘‘We should not need to have a congressperson to make the process easier,’’ he 

said. Returning soldiers ‘‘should be processed immediately.’’

What’s Next? 

Rep. John Hall and Members of a Veterans’ Affairs subcommittee will hear testimony in Washington today on how to reduce the backlog of veterans’ claims. The 

hearing will also examine reports of care discrepancies between active and reserve 

duty veterans. 

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Vietnam veteran Ted H. Wolf, left, speaks yesterday at a news conference about 

problems with veterans’ healthcare and benefits alongside Rep. John Hall at the Orange County Government Center in Goshen. 

Times Herald-Record/TOM BUSHEY 

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Veterans Face Vast Inequities Over Disability 

By Ian Urbina and Ron Nixon 

New York Times, March 9, 2007 

WASHINGTON, March 8—Staff Sgt. Gregory L. Wilson, from the Texas National 

Guard, waited nearly 2 years for his veterans’ disability check after he was injured 

in Iraq. If he had been an active-duty soldier, he would have gotten more help in 

cutting through the red tape. 

Allen Curry of Chicago has fallen behind on his mortgage while waiting nearly 

two years for his disability check. If he had filed his claim in a state deploying fewer 

troops than Illinois, Mr. Curry, who was injured by a bomb blast when he was a 

staff sergeant in the Army Reserve in Iraq, would most likely have been paid sooner 

and gotten more in benefits. 

Veterans face serious inequities in compensation for disabilities depending on 

where they live and whether they were on active duty or were members of the National Guard or the Reserve, an analysis by The New York Times has found. 

Those factors determine whether some soldiers wait nearly twice as long to get 

benefits from the Department of Veterans Affairs as others, and collect less money, 

according to agency figures. 

‘‘The V.A. is supposed to provide uniform and fair treatment to all,’’ said Steve 

Robinson, the director of veteran affairs for Veterans for America. ‘‘Instead, the 

places and services giving the most are getting the least.’’

The agency said it was trying to ease the backlog and address disparities by hiring more claims workers, authorizing more overtime and adding claims development 

centers. 

The problems partly stem from the agency’s inability to prepare for predictable 

surges in demand from certain states or certain categories of servicemembers, say 

advocates and former department officials. Numerous government reports have 

highlighted the agency’s backlog of disability claims and called for improvements in 

shifting resources. 

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‘‘It’s Actuary Science 101,’’ said Paul Sullivan, who until last March monitored 

data on returning veterans for the V.A. ‘‘When 5,000 new troops get deployed from 

California, you can logically expect a percent of them will show up at the V.A. in 

California in a year with predictable types of problems.’’ ‘‘It makes no sense to wait until the troop is already back home to start preparing 

for them,’’ Mr. Sullivan said. ‘‘But that’s what the V.A. does.’’ Veterans’ advocates say the types of bureaucratic obstacles recently disclosed at 

Walter Reed Army Medical Center are eclipsed by those at the Veterans Affairs division that is supposed to pay soldiers for service-related ills. The influx of veterans 

from the Iraq war has nearly overwhelmed an agency already struggling to meet 

the healthcare, disability payment and pension needs of more than three million 

veterans. 

Stephen Meskin, who retired last year as the V.A.’s chief actuary, said he had repeatedly urged agency managers to track data so they could better meet the needs 

of former soldiers. ‘‘Where are the new vets showing up?’’ Mr. Meskin said he kept 

asking. ‘‘They just shrugged.’’ Agency officials say they have begun an aggressive oversight effort to determine 

if all disability claims are being properly processed and contracted for a study that 

will examine state-by-state differences in average disability compensation payments. ‘‘V.A.’s focus is to assure consistent application of the regulations governing V.A. 

disability determinations in all states,’’ the department said in a written statement. 

Many new veterans say they are often left waiting for months or years, wondering 

if they will be taken care of. 

Unable to work because of post-traumatic stress disorder and back injuries from 

a bomb blast in Iraq in 2004, Specialist James Webb of the Army ran out of savings 

while waiting 11 months for his claim. In the fall of 2005, Mr. Webb said, he began 

living on the streets in Decatur, Ga., a state that has the 10th-largest backlog of 

claims in the country. ‘‘I should have just gone home to be with family instead of trying to do it on my 

own,’’ said Mr. Webb, who received a Bronze Star for his service in Iraq. ‘‘But with 

the post-traumatic stress disorder, I just didn’t want any relationships.’’ After waiting 11 months, he began receiving his $869 monthly disability check 

and he moved into a house in Newnan, Ga. About 3 weeks ago, Mr. Webb moved 

back home to live with his parents in Kingsport, Tenn. 

The backlogs are worst in some states sending the most troops, and discrepancies 

exist in pay levels. 

Illinois, which has deployed the sixth-highest number of soldiers of any state, has 

the second-largest backlog. The average disability payment for Illinois veterans— $7,803 a year—is among the lowest in the nation, according to 2005 V.A. data. 

In Pennsylvania, which has sent the fourth-highest number of troops, the claims 

office in Pittsburgh is tied for second for longest backlogs, where 4 out of 10 claims 

have been pending for more than 6 months. Veterans from this state on average 

receive relatively low payments, $8,268 per year, according to 2005 V.A. data. Comparable 2006 data were not available. 

The agency’s inspector general in 2005 examined geographic variations in how 

much veterans are paid for disabilities, finding that demographic factors, like the 

average age of each state’s veteran population, played roles. But the report also 

pointed to the subjective way that claims processors in each state determined level 

of disability. 

Staffing levels at the veterans agency vary widely and have not kept pace with 

the increased demand. The current inventory of disability claims rose to 378,296 by 

the end of the 2006 fiscal year. The claims from returning war veterans plus those 

from previous periods increased by 39 percent from 2000 to 2006. During the same 

period, the staff for handling claims has remained relatively flat, a problem the department highlighted in its 2008 proposed budget. The department expects to receive about 800,000 new claims in 2007 and 2008 each. 

‘‘It’s clear to everyone here that the system overall is struggling and some veterans are waiting far too long for decisions,’’ Senator Larry E. Craig, Republican of 

Idaho, said Wednesday at a hearing before the Senate Veterans’ Affairs Committee. 

The growing strains on the veterans agency have affected some soldiers more than 

others. 

While the Reserve and National Guard have sent a disproportionate number of 

soldiers to the war, the average annual disability payment for those troops is 

$3,603, based on 2006 V.A. data for unmarried veterans with no dependents. Activeduty soldiers on average receive $4,962. 

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abilities that develop over time. Many who served in the Guard think they are losing the battle against the bureaucracy. 

‘‘We take a harder toll,’’ said Mr. Wilson, the Texan, referring to the fate of reservists and Guard troops compared with active duty soldiers. 

He said that last month he received his disability check for his back injuries but 

only after a 21-month wait and the intervention of a congressman and a colonel. 

When active-duty soldiers near discharge, they have access to far more programs 

offering assistance with benefits than do reserve and National Guard soldiers, according to veterans’ advocates. 

‘‘The active-duty guys, they get those resources,’’ Mr. Wilson said. ‘‘We don’t.’’

He said that while active-duty soldiers often received medical disability evaluations in about 30 days, many reservists he knew waited 2 years or more to get an 

initial appointment. Active-duty personnel also routinely received legal advice about 

appeals and other issues from military lawyers, while reservists had to request 

those hearings, he said. 

For years, the V.A.’s inspector general, the Government Accountability Office, 

Members of Congress and veterans’ advocates have pointed out the need to improve 

how the V.A. tracks data on soldiers as they are deployed and when they are injured. That would help prepare for their future needs and ease delays in processing 

health and benefit claims. 

In 2004, a system was designed to track soldiers better, prepare for surges in demand and avoid backlogs. But the system was shelved by program officials under 

Secretary Jim Nicholson for financial and logistical reasons, V.A. officials said 

Thursday at a hearing before the House Veterans’ Affairs Committee. 

The V.A., which has said it has an alternate tracking system nearly operational, 

depends on paper files and lacks the ability to download Department of Defense 

records into its computers. 

President Bush has appointed a commission to investigate problems at military 

and veterans hospitals. 

For Mr. Curry, the reservist from Chicago who has fallen behind on his mortgage 

payments, his previous life as a $60,000-a-year postal worker is a fading memory. 

‘‘It’s just disheartening,’’ he said. ‘‘You feel like giving up sometimes.’’

Richard G. Jones contributed reporting from Trenton, Bob Driehaus from Cincinnati, and Sean D. Hamill from Pittsburgh. 

James Webb waited 11 months for benefits and began living on the streets. Now 

he lives at his parents’ house with his son, Christian. 

f 

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1Paper prepared for presentation at the ASSA meetings, Boston, January 2006. The views expressed here are solely those of the authors, and do not represent those of any institution with 

which they are currently affiliated, or with which they have been affiliated in the past. 2OMB Director Mitch Daniels is reported to have said that Lindsey’s estimates were ‘‘very, 

very high.’’ Both he and Secretary of Defense Rumsfeld estimated the costs in the range of $50– 60 bn, some of which they believed would be financed by other countries. 3Wall Street Journal, September 15, 2002. 4 Congressional Research Service Report for Congress, ‘‘The Cost of Iraq, Afghanistan and Enhanced Base Security Since 9/11’’, Amy Belasco, Defense Specialist, October 7, 2005. This covers 

funding in P.L. 107–117, 107–206, 1207–115, 108–7, 108–11, 108–106, 108–199, 108–287, 109– 13, 108–447, and the recent FY 2006 Continuing Resolution (109–77) which provides $45 bn for 

the 6-week period starting 9/30/05. DOD will need additional funds to cover the rest of the year. 5 Ibid. 

6The CBO estimated costs for the period of 2005–2014 under three scenarios. The estimates 

were $179 bn, $266 bn, and $392 bn, respectively. We have conservatively used their middle 

scenario. CBO 2005. 

THE ECONOMIC COSTS OF THE IRAQ WAR: An Appraisal 

Three Years after the Beginning of the Conflict1

Linda Bilmes, Kennedy School of Government, Harvard University, 

and Joseph E. Stiglitz, University Professor, Columbia University, 

January 2006 

The views expressed in the KSG Faculty Research Working Paper Series are 

those of the author(s) and do not necessarily reflect those of the John F. Kennedy 

School of Government or of Harvard University. Copyright belongs to the 

author(s). Papers may be downloaded for personal use only. 

Three years ago, as America was preparing to go to war in Iraq, there were few 

discussions of the likely costs. When Larry Lindsey, President Bush’s economic adviser, suggested that they might reach $200 billion, there was a quick response from 

the White House: That number was a gross overestimation.2 Deputy Defense Secretary Paul Wolfowitz claimed that Iraq could ‘‘really finance its own reconstruction,’’ apparently both underestimating what was required and the debt burden facing the country. Lindsey went on to say that ‘‘The successful prosecution of the war 

would be good for the economy.’’ 3

Many aspects of the Iraq venture have turned out differently from what was purported before the war: There were no weapons of mass destruction, no clear link 

between Al Qaeda and Iraq, no imminent danger that would warrant a pre-emptive 

war. Whether Americans were greeted as liberators or not, there is evidence that 

that they are now viewed as occupiers. Stability has not been established. Clearly, 

the benefits of the War have been markedly different from those claimed. 

So too for the costs. It now appears that Lindsey was indeed wrong—by grossly underestimating the costs. Congress has already appropriated approximately $357 

billion for military operations, reconstruction, embassy costs, enhanced security at 

U.S. bases and foreign aid programs in Iraq and Afghanistan. This total, which covers costs through the end of November 2005, includes $251 bn for military operations in Iraq, $82 bn for Afghanistan and $24 bn for related foreign operations, 

such as reconstruction, embassy safety and base security.4 These costs have been 

rising throughout the war. Since FY 2003, the monthly average cost of operations 

has risen from $4.4 bn to $7.1 bn—the costs of operations in Iraq have grown by 

nearly 20% since last year (whereas Afghanistan was 8% lower than last year).5 The 

Congressional Budget Office has now estimated that in their central, mid-range scenario, the Iraq war will cost over $266 billion more in the next decade, putting the 

direct costs of the war in the range of $500 billion6

These estimates, however, underestimate the War’s true costs to America by a 

wide margin. In this paper, we attempt to provide a range of estimates for what 

those costs have been, and are likely to be. Even taking a conservative approach, 

we have been surprised at how large they are. We can state, with some degree of 

confidence, that they exceed a trillion dollars. 

Providing even rough order of magnitude estimates of the costs turns out to be 

very difficult, for a number of reasons. There are standard problems in cost allocation; there are future costs associated with the Iraq war that are not included in 

the current calculations; there are marked differences between social costs and 

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7Government agencies have estimated the value of a life at $6.1m (Environmental Protection Agency), and $5.5m (Department of Transportation). The value of a life for victims of 9/11 were 

estimated in a range from $2–$11million. 8 Although the actuarial value of those lives should, presumably, have been included in the 

contractors’ bid price when undertaking the contract. 9For example, experienced security guards working for Blackwater Security, who guarded senior officials in the Coalition Provisional Authority, were earning up to $1,000 per day. The 

majority of such guards were former members of the military. 10 A recent report by the Government Accountability Office (GAO–05–767) states that the Defense Department has ‘‘lost visibility’’ on over $7 bn of funding and reports several cases where obligations exceeded appropriations in 2004, including $4.3 bn in Army operation and maintenance. A recent report by the Congressional Research Service cites the difficulty of tracking Pentagon expenditures in Iraq, because (unlike the State Department and other agencies), DOD 

does not allocate funds by operation or mission until after the fact. ‘‘Defense Department witnesses periodically give average monthly costs or ‘burn rates’ for Iraq and Afghanistan but DOD 

has not provided Congress with a complete or consistent record showing those rates over time 

or total amounts for each operation each year.’’ CRS, 10/7/05. 

flected in the cost estimates); and there are macro-economic costs, associated both 

with the increase in the price of oil and the Iraq war expenditures. 

Consider, as an example, accounting for the value of the more than two thousand 

American soldiers who have died since the beginning of the war, and the more than 

sixteen thousand who have been wounded. The military may quantify the value of 

a life lost as the amount it pays in death benefits and life insurance to survivors— which has recently been increased from $12,240 to $100,000 (death benefit) and 

from $250,000 to $500,000 (life insurance). But in other areas, such as safety and 

environmental regulation, the government values a life of a prime age male at 

around $6 million, so that the cost of the American soldiers who have already lost 

their lives adds up to around $12 billion7

The standard estimates of the death costs also omit the cost of the nearly one 

hundred American civilian contractors8 and the four American journalists that have 

been killed in Iraq, as well as the cost of coalition soldiers, and non-American contractors working for U.S. firms. 

The military values the cost of those injured by what their medical treatment 

costs and disability pay; and current accounting only reflects current payments in 

disability, not the present discounted value of (expected) future payments; a full cost 

analysis includes both the present discounted value of all future payments, as well 

as the difference between the disability pay and what the individual might have 

earned—and even this ignores the enormous compensation that would have been 

paid for pain and suffering had this been a private injury. 

Costs of recruiting have increased enormously—and even after the war ends, 

there is reason to believe that compensation will have to be increased, including for 

Reserves and National Guard. Many Reservists, particularly those who are older, 

supporting families and established in their careers, underestimated the risks of 

being called to fight a war abroad and the ability of the government to force them 

to extend their tours of duty and even to serve second and third tours. The majority 

of these Reservists have suffered a significant loss in wages due to serving in Iraq. 

By the same token, wages currently paid the military almost surely represent an 

underestimation of a fair market wage, given what individuals would have needed 

to make them willingly undertake the job in Iraq. In fact, we know from the wages 

being paid by contractors performing similar work what the free market wage for 

such services are, and they are a multiple of what the American military get paid.9

Even determining the current ‘‘direct’’ expenditures turns out to be a difficult 

task.10 The Administration has provided a number, based on the current costs of 

operations in Iraq. We are interested here in finding the total economic cost, the 

value of the resources used, and it is not always clear that standard accounting and 

budgetary figures reflect that. For instance, the faster depreciation or destruction 

of equipment already owned by the government is clearly part of the cost of the war. 

Standard cost allocation procedures would attribute a substantial fraction of the 

overhead in the Pentagon to the War; by devoting its attention to Iraq, it has less 

time to work on other issues, to prepare for other problems. 

A true costing of the war would focus, of course, on the incremental cost; to the 

extent that the actual War substitutes for expensive ‘‘war games,’’ the incremental 

cost is less than the actual money spent. In our analysis we have subtracted the 

direct savings, such as policing the ‘‘no-fly’’ zone in Iraq, from the cost of the war. 

This paper attempts to provide a more complete reckoning of the costs of the Iraq 

War than have previously been provided, using standard economic and accounting/ 

budgetary frameworks. Of course, a final tally will have to wait until the end, and 

even the President has made it clear that there is no clear end in sight. And even 

then, it will be years before we can be sure about whether our estimates of future 

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11We have not included the cost of the deaths of coalition soldiers and contractors, nor of the 

Iraqis themselves. Even the most conservative estimates put the loss of life at a multiple of that 

of the United States, with some estimates putting the numbers in excess of 30,000, or even 

100,000. Of those, over 3,000 Iraqi deaths have been among Iraqi military and police who are 

supporting coalition forces. 12 Many troops have served two or three tours of duty. 

costs—increased costs of recruiting or payments for disability or the healthcare costs 

of the injured veterans—were accurate. 

Of necessity, the numbers, especially of future expenditures, are estimates, and 

we have tried to avoid a false sense of accuracy by rounding our numbers from the 

more precise estimates provided by econometric and statistical studies, when those 

are employed. We provide several sets of numbers. A ‘‘conservative’’ estimate that 

we think is excessively conservative. We realize that the numbers provided here may 

be controversial. They provide a picture of costs that is much larger than that which 

has been provided by the administration, especially before the War. We also provide 

a second estimate, which, while still conservative, is more reasonable. We refer to 

this as our ‘‘moderate’’ estimate. 

Our estimates, for instance, assume that we have 136,000 troops stationed in Iraq 

in 2006. The Administration has recently announced a troop reduction, from 160,000 

due to the pre-election buildup, to 140,000, a number which is still larger than the 

numbers employed in our analysis. 

We have not been able to quantify many of what may turn out to be the most 

important costs of the Iraq venture. There is a value in military preparedness, and 

it is the reason for investing so heavily in defense. By most accounts, America’s ability to engage in a second front at the current time is greatly diminished. At the beginning of the War, there was a great deal of talk about winning the hearts and 

minds of those in the Middle East. Recent opinion polls reflecting public opinion in 

the Arab world show that exactly the opposite has happened. Some American businesses have even claimed that anti-Americanism spawned by the Iraq War has had 

an effect on their sales and profits. America’s credibility has been diminished: If 

some time in the future another American President were to claim that he had solid 

evidence based on intelligence that there was a threat, that evidence is more likely 

to be treated with skepticism. America has always prided itself in fighting for 

human rights; but America’s credentials have been tarnished by Abu Ghraib and 

Guantanamo. These are among the many costs of the Iraq War that we do not attempt to quantify, but which should clearly be counted in any assessment of the 

Iraq War. 

Nor have we included in this paper any of the costs borne directly by other countries, either directly (as a result of military expenditures) or indirectly (as a result 

of the increase in the price of oil.) Most importantly, we have not included the costs 

of the war to Iraq, either in terms of destruction of property (infrastructure, housing) or the loss of lives.11 Clearly, including these would increase the cost of the war 

substantially—perhaps by an order of magnitude. 

The paper is divided into two parts. In the first, we provide an estimate of the 

‘‘direct’’ expenditures, and provide adjustments to reflect the true social costs of the 

resources deployed. The second provides an estimate of the macro-economic costs; 

the effects of the War on the overall performance of the economy, taking into account both the effects of the expenditures themselves and of the increased price of 

oil, some of which at least should be attributed to the War. 

I. Budgetary Costs to the U.S. Government 

The budgetary costs of the war reflect the huge scale of operations that are being 

undertaken. For the first half of 2005, there were over 200,000 U.S. military personnel stationed in Iraq and Kuwait (which serves as a staging ground for Iraq). 

To date, over 550,000 troops have served in Iraq in a combined total of approximately one million tours of duty.12

The costs of the war in Iraq that have been reported in the media have almost 

exclusively focused on one type of cost—the $251 bn in cash that the government 

has spent on combat operations since the invasion of Iraq in March 2003. This is 

an important element of the financial cost but it is only the tip of a very deep iceberg. 

Currently the U.S. is spending about $6 bn per month on operations in Iraq. However, there are additional costs to the government—over and above this number. 

These include disability payments to veterans over the course of their lifetimes, the 

cost of replacing military equipment and munitions which are being consumed at 

a faster-than-normal rate, the cost of medical treatment for returning Iraqi war veterans, particularly the more than 7,000 servicemen with brain, spinal, amputation 

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13 U.S. Congressional Budget Office, Estimate of War Spending FY 2005–FY2015, Feb 1, 2005. 14 Approximately 40% of the U.S. troops serving in Iraq have been drawn from the National 

Guard and the Reserves, particularly the Army Reserves. Currently some 56,000 National 

Guardsmen and Reservists serve in Iraq. Additionally, over 60,000 people have been recruited 

to ‘‘backfill’’ domestic positions in the Guard and Reserves that are vacant because the others 

and other serious injuries, and the cost of transporting returning troops back to 

their home bases. The Defense Department, for which expenditures not directly appropriated for Iraq have grown by more than 5% (CAGR) since the war began, has 

also spent a portion of this increase on support for the war in Iraq, including significantly higher recruitment costs, such as nearly doubling the number of recruiters, 

paying recruitment bonuses of up to $40,000 for new enlistees and paying special 

bonuses and other benefits, up to $150,000 for current troops that re-enlist. Another 

cost to the government is the interest on the money that it has borrowed to finance 

the war. 

Although it is difficult to estimate these costs precisely, we can use current and 

expected troop deployment to make a reasonable projection of the likely costs. Looking purely at direct budgetary costs to the taxpayer, we estimate that the total cost 

of the Iraq war is in the range of $750 billion to $1.2 trillion, assuming that the 

U.S. begins to withdraw troops in 2006 and maintains a diminishing presence in 

Iraq for the next 5 years. We have looked at the budgetary cost both including and 

excluding the cost of interest on the debt. We have also adjusted this cost for economic factors, as outlined in section two. Under any reasonable set of assumptions, 

the cost of the war even without considering the macroeconomic costs—is more than 

double the current number provided by the administration. 

We have estimated the budgetary costs using two scenarios. Both scenarios are 

based on the troop deployment projected by the Congressional Budget Office.13 Our 

‘‘Conservative’’ scenario assumes that all troops will be withdrawn from Iraq by 

2010, and that all interest on the debt borrowed to finance the war will be repaid 

within 5 years. Under this scenario we count the long-term costs of disability pay 

and healthcare for veterans over a twenty-year period, even though most of the 

troops in Iraq are between ages 21–28 and are likely to live far longer. We have 

taken the present value of all cash flows at a 4% discount rate. Even under this 

conservative scenario, the direct costs to the government are likely to exceed $700 

bn. (See figure 1). 

Under a second, ‘‘Moderate’’ scenario, we have used CBO’s assumption that a 

small but continuous U.S. presence in Iraq continues through 2015. This has implications for the projected number of casualties and the length of involvement by the 

Defense Department. This scenario also assumes that the U.S. budget will remain 

in deficit for the next 20 years. This would raise the cost of the war to over $1.2 

trillion. Both scenarios exclude the cost of operations in Afghanistan—estimated to 

be approximately $82 bn to date and consuming $1 bn per month. 

Figure 1: Budgetary Cost of the Iraq War ($BN) 

Conservative Moderate 

1 Spent to date 251 251 

2 Future spending on operations 200 271 

3 VA costs 40 57 

4 Cost for Brain injuries 14 35 

5 Veterans disability payments 37 122 

6 Demobilization costs 6 8 

7 Increased defense spending 104 139 

8 Interest on debt 98 386 

Total 750 1,269 

Assumptions for Figure 1 ‘‘Total Cost of War in Iraq to the U.S. Government’’. 

1. Spending to Date on Combat and Support Operations 

The total spending to date, as of December 30, 2005 is $251 billion. This includes 

funds appropriated specifically for Iraq in Emergency supplemental appropriations 

in April 2002, November 2003, August 2004, April 2005, and the Continuing Resolution of September 2005, which covers the first 6 weeks of FY 2006. This money includes funding for combat operations, basic troop deployments and logistics, deployment of National Guard and Reserves,14 food and supplies, training of Iraqi forces, 

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are in Iraq. The direct additional cost of mobilizing these individuals is $3 billion per year. We 

have assumed that participation of the Guards and Reserves remains constant at 40%. 15 Congress appropriated $18.4 bn—an unprecedented sum—for Iraqi reconstruction in September 2003. This funding was specified for purposes including school construction, sewerage, 

sanitation, repair of the electrical grid and other civilian projects. To date, most of the money 

spent has been diverted to military projects, including training bomb squads, training Iraqi security forces, constructing prisons, purchasing armored cars, and of the 3,600 projects completed, some 25% of funds were spent on security. Money has also been diverted to pay for the 

elections (source: Special Inspector General for Iraqi reconstruction). The Administration has recently announced that it will rescind its request for remaining reconstruction money. 16 CRS, 10/7/05, Ibid. 17 Currently there are 20,000–25,000 private military contractors operating in Iraq, representing some 60 contracting firms. Experienced U.S. soldiers can earn up to several times 

their military salary working for high-end contractors, in some cases up to $1,000/day. (IPS, 

2004). 18Wallsten and Kosec, AEI-Brookings Working Paper 05–19, September 2005, estimates 20% 

with serious brain injuries and 6% amputees. They estimate 24% with other serious injuries. 

(We use 21% with other serious injuries based on the latest Pentagon numbers.) 

weapons, munitions, supplementary combat pay, reconstruction,15 and payments to 

countries such as Jordan, Pakistan and Turkey. This also includes the payment of 

$500,000 in ‘‘death gratuity payment’’ and life insurance to the survivors of the 

2,156 fatalities in Iraq during this period. We have not included the costs to the 

Defense Department for planning the invasion in the months prior to the invasion, 

which the Congressional Research Service has estimated at $2.5 bn.16

2. Future Spending on Combat and Support Operations 

We have estimated the cost of future operations to be proportional to the number 

of troops scheduled to be deployed in Iraq from 2006–2010. We have estimated the 

current number of troops stationed in Iraq as 160,000, using the number cited by 

the Pentagon. Future troop deployment figures are based on recent forecasts by the 

Congressional Budget Office, which predicts that troop levels in 2006 will be reduced to 136,000. The CBO has forecast troop levels through 2015, but in the conservative scenario we are assuming that all troops are out of Iraq by 2010. However, 

this approach almost certainly underestimates the actual cost of military operations, 

because the Pentagon will hire contractors to replace some portion of the activities 

performed by troops who are withdrawn.17 In our moderate scenario, we have assumed that the U.S. maintains a small troop presence until 2015, that we increase 

the number of contractors as troops decline, and that casualties continue, proportional to troop deployment. . . . 

3. Additional Veterans Administration Medical Care Costs for Returning 

Veterans 

As of December 2005, over 16,000 military personnel have been wounded in Iraq 

since March 2003, of whom 96% were injured after the official combat operations 

ceased (since May 1st, 2003). Due to improvements in body armor that protect the 

core body, there has been an unusually high number of soldiers who have survived 

with major injuries, such as brain damage, spinal injuries, and amputations. According to the Pentagon and other sources,18 about 20% of those injured have suffered 

major head or spinal injury and an additional 6% are amputees. Another 21% suffered serious wounds that prevented them from returning to the military, including 

blindness, deafness, partial vision and hearing impairments, nerve damage and 

burns. In addition, more than half of the 550,000 U.S. troops who have served in 

Iraq have served two or three tours of continuous duty under stressful, grueling conditions. Some 20,000 soldiers have been prevented from leaving the service by the 

government’s ‘‘stop-loss’’ policy, which requires troops to extend their tours in case 

of emergency. It is perhaps not surprising that the surgeon general of the Army reported, in July 2005, that 30% of U.S. troops have developed mental health problems within 3–4 months of returning from Iraq. To date, more than one-third of returning veterans have used the VA system for health ailments. 

The number we include here represents a conservative estimate of the additional 

costs to the Veterans Administration due to providing medical care and other benefits (such as rehabilitation, retraining, purchase, fitting and replacement of prosthetic devices, and counseling—but not including disability, housing, educational or 

loan payments) to returning Iraqi War veterans (other than those with brain injuries). The costs of treatment could be substantial. The VA had originally projected 

that 23,553 veterans returning from Iraq would seek medical care last year, but in 

June 2005, the VA revised this number to 103,000. The VA also is now responsible 

for providing care to an estimated 90,000 National Guards, who previously were not 

eligible for VA services. To meet these unforeseen demands, the VA appealed to 

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19 Institute for Policy Studies, 2005. 20See the discussion in the next section for an alternative methodology, which focuses on the 

direct costs of the Iraq injured. 21Former VA Secretary Anthony Principi said that the VA will need $600 bn over the next 

30 years to meet its existing obligations for healthcare, education, pensions and housing loans— but this figure did not include the Iraqi war veterans. It also does not include additional funding 

for capital needs, including construction and repairs of VA facilities. 22Wallsten and Kosec, AEI, The Economic Cost of the War, 2005 and Department of Defense 

estimates for number of wounded. 23 VA Disability Compensation Program, Legislative History, VA Office of Policy, Planning and 

Preparedness, December 2004 24This principle is cited in numerous legal cases in which juries award compensation for injury. 

Congress for an emergency $1.5 bn in funding for FY 2005. The VA is likely to face 

a shortfall of $2.6 billion in 2006.19 While not all the additional healthcare expenditures may in fact be directly linked to the Iraq war, it will be difficult not to provide 

the requested medical care. We assume that this need will continue and increase 

to $3 bn as the veterans return home, and that the VA will require this additional 

level of funding added to its base budget.20 (We expect that this figure is significantly understated, considering that The Veterans Administration is already facing 

a shortfall in funding to meet its existing obligations.21) 

The additional cost of providing benefits to Iraqi war veterans will become a 

major challenge for the VA. In our conservative scenario we have estimated that all 

troops are withdrawn by 2010 and these costs are for 20 years; in the moderate scenario we have assumed that troops continue to be deployed through 2015 and these 

costs continue throughout the lifetime of the veterans (40 years). 

4. Medical Treatment for Brain Injuries 

There is a special category of healthcare expenditures that goes beyond those included in the above calculation—for those with brain injuries. To date, 3,213 people—20% of those injured in Iraq—have suffered head/brain injuries that require lifetime continual care at a cost range of $600,000 to $5 million.22 The government 

will be required to commit resources through intensive care facilities, round-theclock home or institutional care, rehabilitation and assisted living for these veterans. For the conservative estimate, we have used a midpoint estimate of a net present value of $2.7 million over a 20 year expected survival rate for this group, which is 

about $135,000 per year, yielding a cost of $14 billion. This amount seems low for 

brain-injured individuals who will require round-the-clock care in feeding, dressing 

and daily functioning. For the moderate estimate, we use a higher cost estimate 

($4m) and assume longer life duration for a total cost of $35 billion. In both cases 

we assume that the number injured will rise in a manner consistent with the duration of the conflict. 

5. Disability Pay for Veterans 

Veterans of the Iraq war are eligible to claim disability pay and benefits, ranging up to a maximum of about $44,000 per year, under a complex formula administered 

by the Veterans Administration. It is important to note that that Congressional intent for disability payments is to ‘‘compensate for a reduction in quality of life due 

to service-connected disability payment of this disability’’. The benefit is intended 

to ‘‘provide compensation for average impairment in earnings capacity’’—but it does 

not require the veteran to actively seek employment nor is it offset against postmilitary civilian earning. The principle dates back to the Bible at Exodus 21:25, 

which authorizes financial compensation for pain inflicted by another.23

Veterans are awarded claims based on the percentage of disability they can demonstrate; in gradations (0–100%) though it is possible to have a 0% disability percentage across multiple conditions and still qualify a veteran for some disability pay. 

The presumption for disability compensation is tied to symptoms that appear within 

a period of time after service. There are numerous programs that provide benefits 

depending on the situation, including disability compensation, specially adapted 

housing grants, medical benefits with higher priorities, vocational rehabilitation, 

service-disabled veterans life insurance, dependency and indemnity compensation 

(paid to surviving spouse and children if a veteran dies of an illness or injury contracted while on active duty, or dies of such after retirement).24

We have estimated the amount of claims that the government will need to pay 

based on a projection of the rate of claims based on the Persian Gulf War. The government currently pays $2 billion annually in support of 169,000 claims, or an average of $11,834 per claimant. (Hartung, 2004) The total number of claims for that 

war exceeded 200,000, or more than one-third of the troops deployed, despite the 

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25 In 1994 Congress passed the Gulf War Veterans Benefit Act, which legislated a presumption of service connection for an undiagnosed illness that occurred within an unprescribed time 

frame, taking into account the Gulf War Syndrome. This time frame period was extended in 

2001 to include any disabilities associated with the Persian Gulf War service that may appear 

through Dec. 31, 2011. (VA Disability Compensation Program, Ibid). 26William Hartung, ‘‘The Cost of War’’ 2004, Taxpayers for Common Sense. 27Secretary Donald Rumsfeld said at a briefing on March 10, 2005 that U.S. military equipment such as tanks, Bradley fighting vehicles and helicopters are being worn out at up to 6 

times the peacetime rate. (Washington Post, 3/11/05) 28Scott Lilly, staff director of the House Appropriations Committee, said the Army would need 

more than $17.5 bn to replace or repair worn or damaged equipment in the first year of the 

war. But the Army’s request for depot maintenance and procurement was only about $2.2 bn 

in the supplemental. ‘‘Pentagon’s Request for Iraq includes money for troops and rewards’’, New 

York Times, 10/03/03. Additionally, Rep. Duncan Hunter, Chairman of the House Appropriations 

Committee, has cited figures that the Defense Department needs $90 bn per year in annual 

modernizations and at present levels, is still $30 bn short, based on CBO estimates. (Wall Street 

Journal, 5/03) 29The GAO has also referred to the shortfall in funding requests for military replacements. 

(GAO, ‘‘Global War on Terrorism: DOD Should Consider All Funds Requested for the War When 

Determining Needs and Covering Expenses.’’ 30Wallsten and Kosec estimate savings from the no-fly zone at $32 bn in the nearly 3 years 

since March 2003. John Amidon of the Air War College estimates the cost of policing the nofly zone at $15 bn per year. 

fact that the war lasted 4 weeks with 148 dead and 467 wounded. Many of those 

claims were related to the exposure to depleted uranium during the Persian Gulf 

conflict, and included ailments such as memory loss, sleep problems, Lou Gehrig’s 

disease, poor concentration, and joint problems. Congress has established a ‘‘presumption of service-connection’’ for any health problems linked to ‘‘exposure to possible nerve agents and other toxins present in the Persian Gulf conflict and vaccinations against biological war hazards in preparation for the Persian Gulf.’’ 25

In the Iraq conflict, more depleted uranium was used in the bombing of Baghdad 

than in the Persian Gulf conflict; 26 therefore the Iraq war veterans will be easily 

eligible for disability claims for any health problems that they can link to exposure. 

As we noted earlier, more than one-third of returning veterans have used the VA 

system for health ailments. We have estimated that those with serious injuries 

would receive the maximum disability benefits from the VA, those with medium-serious injuries would receive half those benefits ($22,000), and one-third of the remaining forces would receive the average benefit awarded to the Gulf War veterans, 

or $11,834. This sums to an annual payment of $2.3 billion. In the conservative scenario we have estimated this payment over 20 years; in the moderate scenario we 

have assumed that these payments continue over the lifetime of the veteran, so 

until 2045. 

6. Cost of Demobilization 

The Pentagon has announced plans to reduce troop levels from their current force 

of over 160,000 to around 140,000 in the next year, and we have assumed that this 

withdrawal will continue gradually as outlined by the CBO. This will in itself require direct payments of $6–10 bn for the transportation and demobilization of 

troops, returning them to their home bases, or civilian roles (in the case of Reserves). 

7. Increased Defense Spending 

Since 2002, the total appropriations for the Defense Department have increased 

from $310 bn to $420 bn, representing a total cumulative increase of $325 bn. Portions of the FY 2002, 2003, 2004 and 2005 appropriations bills, as well as FY 2003 

and FY 2004 transfers, have been appropriated for Iraq. In total we estimate that 

30% of the $325 increase has been devoted to Iraq. This figure covers increased military pay, research and development, recruitment, operations and maintenance and 

replacement of equipment. According to Pentagon estimates, the military is wearing 

out equipment at a rate that is 4–5 times the rate of usage in non-combat situations.27 Additionally, CBO has estimated that the military will require some $100 

bn in replacements over the next five to 10 years. (Much of this funding has not 

yet been requested) 28 and GAO has referred to the shortfall in funding for repairs, 

replacements and procurements 29 and the confusion between determining emergency supplemental and ordinary funding needs.. . . 

In our estimates, we have attributed one-third of the increase in Defense spending 

to Iraq, minus the savings from no longer policing the no-fly zone to the Pentagon. 

Savings from the no-fly zone have been estimated to be from $11 to $15 bn per 

year.30 Given that the Department is highly focused on the outcome of the war in 

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31For example, the May recruiting target was originally 8050, but was lowered to 6706. Similar adjustments were made throughout the year. 32 An economic analysis is somewhat more complicated, as the discussion in section IV will 

make clear. 

Iraq, we estimate that up to one-half of the increase in the defense spending may 

be related to Iraq, but we have used only 30% of the spending in our conservative 

and moderate scenarios. 

In addition, this increase reflects the military’s increasing difficulty in recruiting 

troops and officers at all levels since the beginning of the Iraq conflict. During 2005, 

the Army was below target for most of the year, and actually lowered its targets 

in order to achieve them.31 There were shortfalls in the Army National Guard, 

Army Reserves, and Marine Reserves. Applications to West Point and the U.S. 

Naval Academy also fell between 10–25% from previous years. The military has responded to this challenge by hiring thousands of additional recruiters, increasing its 

national advertising campaigns, offering sign-up bonuses of up to $40,000 for new 

recruits, offering higher retirement and disability benefits, increasing the ‘‘death 

gratuity’’ to $100,000, and providing re-enlistment bonuses of up to $150,000 for experienced troops (who might otherwise leave the military to join private contractors 

who would pay even higher amounts). In further efforts to boost recruitment, the 

Pentagon increased the maximum enlistment age from 35 to 42 and relaxed standards for appearance and behavior, making it more difficult to be fired. The cost to 

the military per recruit has increased from $14,500 in 2003 to $17,500 in 2005. 

(Pentagon). Hardship pay has been increased from $300 to $750 per month. We assume that the military will need to make these changes permanent, adding at least 

$1 bn–$2 bn per year into the permanent budget base. Additional increases include 

military pay raises, and the purchase of more expensive body armor for combat. 

8. Interest Payments on Debt 

Given that at the onset of the War, the country was already running a deficit, 

and no new taxes have been levied, it is not unreasonable to assume, for purposes 

of budgeting,32 that all of the funding for the war to date has been borrowed, adding 

to the already existing Federal budget deficit. In the conservative scenario we assume that these funds are borrowed at 4% and repaid in full within five years. The 

moderate scenario assumes that the country continues to have a deficit over the 

next 20 years and therefore interest continues to accrue. 

II. Costs of the War to the U.S. Economy: Adjustments to the Budgetary Estimates 

A second way to measure the cost of the war is to examine its economic cost. Economic costs differ from budgetary costs in three ways: (a) costs are borne by others 

(than the Federal government and those fighting in the war), and these are obviously excluded from the budgetary costs to the Federal government; (b) the prices 

paid by the government do not reflect full market value; and (c) economic costs do 

not include interest payments (which can be viewed just as transfer payments), but 

do include long run impacts on the growth of the economy. For instance, in the days 

of the draft, pay provided soldiers were a vast underestimate of their opportunity 

costs. Healthcare costs borne by soldiers and their families are examples of costs 

borne by others. 

Here, we focus on the loss of productive capacity of the young Americans who 

have been killed or seriously wounded in Iraq, and the loss of civilian wages that 

would have been earned by those called back to duty in the Reserve forces. 

There are some ‘‘problematic’’ items within the budgetary costs, most notably expenditures on veterans not linked with the Iraq war. The best way to think of this 

is as part of deferred compensation, and therefore, while the ‘‘categorization’’—repairing human damage as a result of the war—is incorrect, it is still part of the 

cost of the war. 

Once again we have estimated the costs under two scenarios. In the conservative 

case, the adjustments add $187 bn onto the budgetary cost—raising the cost to $839 

bn, even when subtracting the entire cost of interest payments. In the moderate 

case, the economic adjustments increase costs by $305 bn. Even if we deduct the 

cost of interest, the cost of the war under this scenario exceeds $1 trillion. But these 

calculations ignore the fact that some of the resources deployed in the war could 

have been used to promote economic growth, and that there are a broad range of 

macro-economic costs, the effect of which, as we shall show in the next section, is 

to increase the economic costs of the war by a significant amount. 

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33 Budgetary cost without interest∂economic adjustments. 34 IPS, Ibid. 

Figure 2: Adjustments to Budgetary Numbers to Account for Economic 

Costs ($BN) 

Conservative Moderate 

1 Spent to Date 3 8 

2 Economic Cost of Reserves 3 9 

3 Economic Cost of Fatalities 23 29 

4 Loss due to Brain Injuries 34 48 

5 Loss due to Other Serious Injuries 30 64 

6 Loss due to Other Injuries 18 26 

7 Less veterans disability payments (12) (28) 

8 Increased depreciation of military 

hardware 89 149 

Net Adjustment 187 305 

The cost of the war to the United States, before taking macroeconomic factors into 

account, can therefore be estimated under a variety of assumptions to fall between 

$700 bn and $1 trillion dollars, as shown in Figure 3. 

Figure 3: Projected Cost of the Iraq War ($US bn) without macroeconomic 

costs 

Scenario 

Budgetary cost 

(without interest) 

Budgetary Cost 

(inc. interest) 

Cost with Economic 

Adjustments 33

Conservative 652 750 839 

Moderate 884 1269 1189 

Differences between assumptions for economic and budgetary models. 

1. Economic Cost 33 of Reserves 

As we noted earlier, the U.S. force in Iraq is composed of 40% the National Guard 

and Reserve forces. Many of these men and women normally work in critical ‘‘first 

responder’’ jobs in their local communities, such as firemen, policemen and emergency medical personnel. More than 210,000 of the National Guard’s 330,000 soldiers have served in Iraq or Afghanistan, and the average length of Guard mobilization is 480 days.34 It is difficult to measure the cost of this deployment in purely 

economic terms because there is a large unquantifiable cost in terms of the loss of 

these ‘‘first responders’’ to emergencies, including the value of the ‘‘insurance’’ of 

having these people ready to respond to emergencies. This was clearly seen in the 

Hurricane Katrina debacle, where 3000 Louisiana National Guardsmen and 4000 

Mississippi Guardsmen were stationed in Iraq when the hurricane hit. According to 

the Institute for Policy Studies, some 44% of U.S. police forces have some of their 

ranks deployed in Iraq. The loss of these services in Katrina and elsewhere clearly 

has had large budgetary and economic costs. We do not directly measure either the 

economic costs of the loss of ‘‘insurance’’ or the economic and budgetary costs arising 

from reduction in first responder capabilities (which may have been considerable.) 

Still, there are some quantifiable economic costs that go beyond those noted earlier in our budgetary analysis. In the budgetary model, we included (as part of operating costs) the additional cost to the government of hiring replacements for those 

sent to Iraq, which is around $3 bn per year. In this model, we have subtracted that 

sum from the total cost of operations but added in the economic cost of the difference between the civilian wages that these individuals would earn in their regular occupations and the lower wages they typically earn in the Reserves. Scott 

Wallsten and Katrina Kosec (AEI/Brookings, 2005) have calculated that Reserve soldiers earn about $33,000 per year as civilians. They estimate that the opportunity 

cost of using Reserve troops at current levels is $3.9 billion to date. We have adopted that figure into our conservative assumptions. In our moderate model, we have 

increased the pay per Reservist slightly to $46,000, taking into account the fully 

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35 It is apparent (evidenced by increased difficulties in recruiting) that individuals did not 

fully appreciate the risks they faced when joining the reserves, so that the wage received does 

not reflect adequate compensation for those risks. This is particularly true because of the stoploss policy which requires troops to extend their tours, with some 20,000 having in fact been 

prevented from leaving their service at their scheduled dates. A full adjustment of the economic 

costs would include appropriate compensation for the risks taken. See below. 36 In the case of the contractors, one might argue that their wages (already included in the 

analysis) includes compensation for the risk of the loss of life, so that the value of the loss of 

these 100 contractor lives should be subtracted (reducing the overall cost of the War by some 

$600 million.) 37The ‘‘peak’’ age for VSL may be 29, in terms of lost earnings potential, with a VSL between 

$5.9 and $7.5 (Viscusi, and Aldy, NBER Working Paper 10199, 2003) 38There have been hundreds of large jury awards (ranging from $2 m–$269 m) in wrongful 

death suits over the past 5 years. These include the awards of $112 to Elizabeth and John 

Reden of New York for a malpractice case in which their daughter suffered brain damage (2004) 

and $43 in Louisiana in 2001 for Seth Becker, a 24-year old who needed both legs amputated 

after an injury he sustained while working for Baker Oil Tools. In both of these and many other 

cases the amount awarded was determined primarily on the basis of the cost of round-the-clock 

medical care for life that the injured person would require. The $269 m award was for Rachel 

Martin, a 15-year old Texas girl who died in 1998. In most cases the plaintiffs receive less than 

the total award, typically about 10%. 

loaded cost of benefits, particularly for those reservists who are in police and fire 

departments and receiving 60–100% benefits.35

2. Economic Cost of Military Fatalities 

The budgetary model only incorporates the payments made to individuals as a result of death. Had these individuals been killed in a car accident or a work related 

accident (other than military) there would have been much larger payments, reflecting the economic costs of the losses. 

Although it is impossible to translate the value of a life into purely monetary 

terms, the government commonly uses this approach and determines the ‘‘Value of 

statistical life’’ or ‘‘VSL’’, based to some extent on the value of foregone earnings and 

contributions to the economy. This method is also widely used by insurance companies and other private sector concerns. In this study, we have estimated the VSL 

of each U.S. military and contractor fatality as of December 2005. According to the 

Pentagon casualty reports, this is 2156 military fatalities and approximately 100 

contractors.36 We have projected these forward according to the two different scenarios described earlier. 

We have not taken into account the number of Iraqis who have been killed in the 

conflict, estimates of which range from 30,000 (the number estimated by President 

Bush in December 2005), to a 100,000 estimated by the British Lancet. We have 

also not counted the several hundred casualties among coalition countries, of which 

about 100 were British soldiers. 

There are a wide range of VSL values in use. In our conservative scenario, we 

have adopted the standard set by the U.S. Environmental Protection Agency, $6.1 

million per life. However this is only an approximation. The value of a young life 

may be determined to be higher than average, based on an estimate of foregone 

earnings (Viscusi and Aldy, 200537.) Juries frequently award much higher amounts 

in wrongful death lawsuits, and some have reached as high as $269 million.38 We 

have used the number $6.5 million in our moderate scenario. In projecting the number of fatalities and casualties forward, we have assumed that these would be proportional to the number of troops deployed in Iraq, based on the average number 

of casualties per month to date. However, even this is a conservative estimate, since 

the number of casualties has been increasing. 

3. Economic Cost of Contractor Fatalities 

There have been about 100 U.S. contractors killed in Iraq since March 2003 (as 

well as some non-U.S. contractors, mostly working for western companies.) In this 

model we have only included the U.S. contractors, and extrapolated the numbers according to the two different war scenarios. We have used the VSL of 6.1 million and 

6.5 million, respectively, for the conservative and moderate models. However it 

should be noted that in many cases, the contractors were highly skilled, highly paid 

specialists, working on reconstruction projects such as fixing the electricity grid and 

oil facilities. We have not counted their true loss to the success of the project in 

Iraq, or the fact that their high casualty rate has made it more difficult and more 

expensive for western contractors to higher replacements to perform these jobs. 

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39One might argue that for those joining the army and reserves after the beginning of the 

War, the increased compensation already incorporates the (present discounted value of) loss in 

welfare from the increased injuries (deaths), and so including both item 10 from table 1 and 

items 2 and 4 from table 2 represents ‘‘double counting.’’ Therefore, it may be argued, we should subtract $5.3 (conservative; $8.76 in moderate case) from the total. However, there is no reason 

to believe that those enlisting have a good sense of the actual risks (there is no evidence that 

the armed forces provides accurate information to the enlistees) and the increased compensation 

reflects no just increased probability of injury and death, but also the stop loss provisions which 

did not allow individuals to leave the services at the scheduled time. In any case, the basic pattern of results is unaltered. 40This is based on their ‘‘midpoint’’ scenario. Their high estimate is $74 bn. 41 Assuming 20% of the VSL for 24,000 individuals. 

4. Economic Cost of the Seriously Injured39

Earlier, we described the budgetary costs of healthcare and disability for the seriously injured. The wounded contribute significantly to the cost of the war—both in 

a budgetary sense (in the form of lifetime disability payments, housing assistance, 

living assistance and other benefits from the Veterans Administration), and in an 

economic sense. The budgetary expenditures discussed earlier underestimate the 

true economic costs for three reasons: (a) They do not include adequate compensation for ‘‘pain and suffering,’’ of the kind that would have been provided, for instance, had those suffering injuries been hurt in an automobile accident; (b) they 

do not include additional healthcare expenditures by the parties themselves, their 

families, or other government agencies; and (c) perhaps most importantly, they do 

not include the loss of economic services. On the other hand, they do include 

healthcare expenditures that may not be directly a consequence of the war. However, as we noted earlier, we are treating this as part of the deferred compensation, 

and therefore it is both a budgetary and an economic cost. 

In their recent study of the economic costs of the war, Wallsten and Kosec used a ‘‘value of statistical injury’’ to estimate the cost of the wounded. This value represents what people are willing to pay in order to avoid being injured. They applied 

this value to the number of injured personnel, according to the severity of their injuries and the average cost of treatment over its lifetime. They calculated total net 

present value of injuries at $18.2 bn to date, and $48 bn through 2015, using a 5% 

discount rate.40

The Wallsten and Kosec study is quite thorough and we have used their estimates 

of the number and type of wounds, and lifetime treatment costs. However, they 

probably underestimated the total cost of the wounded because they only assigned 

an amount to the 26% with brain injuries and/or amputations. We have included 

additionally the cost of the 21% of personnel (5545 people, as of December 2005) 

with other serious wounds. Such injuries would include wounds from shells, explosions, gunfire, mortar, landmines, grenades, firearms and infections, resulting in 

conditions such as blindness, partial blindness, deafness, partial deafness, cardiac 

injury, facial deformation, burns, multiple broken bones, nerve damage and mental 

breakdown. We have deducted the veterans’ disability payments from all these individuals. 

We have estimated that personnel with serious injuries (including brain injuries) 

receiving full disability payments will essentially be lost to the economy and therefore we should assign them a VSL similar to the deceased, of $6.1 m. In the Conservative case, we have estimated that those who were wounded during the conflict, 

but returned to the military will suffer some impairment beyond the small amount 

of disability pay they may receive. We have very conservatively estimated that 20% 

of the total VSL would be an approximation of this impairment. Taken together, 

this adds approximately $70 bn. 

Under our moderate scenario, we have used a similar formula, but using an esti- mate of $6.5 m for the VSL and assuming that there are more casualties, due to 

the longer duration of the conflict. Less disability payments this adds another approximately $110 bn. 

There is another significant cost that we have not included, simply because we 

did not have the data to prepare a robust estimate. This is the degree of impairment 

that will be suffered by the other veterans—numbering some 160,000, or approximately one-third of the 550,000 veterans from the Iraq war—who will be eligible 

to claim some disability benefits. We believe that a significant number of these individuals will suffer substantial mental and physical ailments that will significantly 

reduce their earning potential and quality of life. If even 15% of these veterans fall 

into this category, this alone would add another $30–35 bn to the economic cost of 

the war.41

A conservative estimate of the risk premium individuals would require to be compensated for the injuries (beyond the loss of economic functionality and healthcare 

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42 Individuals are willing to pay insurance premia that are typically 60% to 120% of the value 

of the loss. In the case of the loss of limbs and other major bodily injuries, the risk premia are 

likely to be considerably higher. 43We provide here preliminary estimates of the costs so far, and what those costs might be 

expected to be under various scenarios. We do not provide what would have been a reasonable 

estimate of the costs at the time that the United States went to war. Given the administration’s 

attempt to minimize the expected costs, it is not surprising that they did not take into account 

all of the costs discussed in this section. 

costs) could (with reasonable estimates of risk premia) double the total.42 We have, 

however, omitted those numbers from the analysis. 

5. Accelerated Depreciation of Military Hardware 

There is only a slight difference in the estimate of the budgetary and economic 

costs associated with military hardware. The budgetary costs focus on replacement 

expenditures, the economic costs on the more rapid depreciation of hardware (than 

otherwise would have been the case.) In our conservative scenario, we have simply 

estimated straight-line 5-year depreciation for the $100 m in military replacements 

estimated by the House Armed Services Committee and CBO, over the next 5 years. 

This is in line with the DOD’s assessment that equipment is being used up at 5 

times the normal rate of utilization in peacetime. We are assuming that the Pentagon will incur at least an additional $25 bn in replacements through 2015, in the 

moderate scenario. 

III. The Macro-economic Effects of the War in Iraq 

As large as the direct costs—current and future—are, the macro-economic consequences may even be several times larger.43 There are at least three major 

sources of macro-economic consequences: (a) the increase in the price of oil; (b) the 

increase in defense expenditures; and (c) the increased insecurity that has followed 

from the way that the war has been pursued. 

In ascertaining the magnitude of these macro-economic effects, there is a standard 

problem: the counterfactual, what would the world have looked like, but for the war 

in Iraq. 

Security 

Consider the issue of security. The bombings in Madrid and London have only exacerbated a growing sense of insecurity. Would matters have been even worse had 

there been no war? One of the stated objectives of the war was to enhance the sense 

of security (to make sure that the war on terrorism was fought there, not here.) It 

is conceivable that the Middle East would have been even more unstable than it 

is today. But especially on the basis of what we know today—Iraq did not have 

weapons of mass destruction, and it did not have the capacities to develop them 

quickly—this seems unlikely, Contrary to the assertions before the War by the administration, Iraq (with its highly secular regime) was not working with Al Qaeda, 

and was not a training ground for insurgency. Unfortunately, the disorder that has 

followed the war has provided a place where such training is going on today. 

The costs of this insecurity are potentially huge. 

a. Individuals are risk averse, and there is thus a direct quantifiable cost associated with the increase in risk. 

b. The response to security threats has been to create significant barriers to the 

free flow of people, goods, and services. The Administration champions the 

virtues of free trade and the benefits from lowering trade barriers, even 

when those barriers are already low. But increased border security (including 

airport security, the reporting and registration requirements of the bioterrorism act, and so forth) are trade barriers; not only are there direct costs 

associated with administering these security measures, there can be significant macro-economic effects of the reduced flow of goods and services. A special category of costs is associated with the significantly reduced flow of students to the U.S., especially in areas of science and technology, where we 

have become very dependent on these ‘‘imports.’’ (Many have stayed and 

made large contributions to the economy.) 

c. Increased risk is bad for business; it lowers investment, and over the long 

run thus has supply side as well as demand side effects. 

Calculating these costs—and particular, the incremental costs associated with the 

Iraq War (beyond the costs which would otherwise be associated with the War on 

Terrorism)—is sufficiently difficult and problematic that we do not provide any estimates here. But it means that the numbers reported below almost surely underestimate the total macro-economic effects. 

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44Wall Street Journal, September 15, 2002. 45 In 2005, four of the ten most profitable corporations in the world are oil and gas companies—Exxon-Mobil, Shell, BP and Chevron Texaco. In 2002, only one of the top 10 most profitable corporations was from the oil and gas industry. Source: The Forbes Global 2000, http:// 

www.forbes.com/2005/03/30/05f2000land.html, http://www.forbes.com/2002/03/27/ 

forbes500.html. 46Oil price averaged $23.71/barrel during 2002. In run up to the war, price rose to $32.23 

by February 2003 (war began on March 20, 2003). One has to interpret a significant part of 

the run up of costs prior to the war to the war itself—an increase in stockpiling in response to worries about supply interruptions. The price averaged $27.71 in 2003, $35.90 in 2004 and 

rose to $49.28 by June 2005. After Katrina, prices have stayed relatively high. As we argue, 

part of the cost of the War is the reduction in the capability of responding quickly to these supply shocks. 47Futures market predicts the price to remain mid $60 range during 2006 and 2007 and then 

fall in 2008. 48The increase in the price immediately after the war can be partially directly attributed to 

Iraq, as what it had been supplying to the world markets under the oil-for-food program was 

Continued 

Oil 

The price of oil is significantly higher today than it was before the War in Iraq. 

Even as the country went to war, it was recognized that it might have effects on 

the global oil market. Some of the remarks of those in the administration seem to 

suggest that it may have even been a factor driving the country to war. Larry 

Lindsey is reported to have said, ‘‘the best way to keep oil prices in check is a short, 

successful war on Iraq . . .’’ 44

The higher price of oil brings costs and benefits. Profits of the oil companies have 

increased enormously.45 It is the one group (besides certain defense contractors) 

that has clearly benefited from the war. (Though popular discussions of the still notclear motives for going to war often focused on oil, there is so far no reason to suppose that these benefits to one of the President’s ‘‘constituencies’’ played an important motivation.) Here, we are concerned with the costs to the overall economy of 

these high oil prices. 

First, however, we have to ascertain to what extent has the increased price (from 

$25 a barrel before the War to around $50 today—ignoring the spike associated 

with Katrina when prices rose to $60) been a result of the war itself.46 Again, the 

question is, what is the counterfactual? What would the price have been had there 

been no war? To what extent is the rise in price due to the war, and to what extent 

is it due to other factors? 

Future markets provide some insight. Before the war, they were forecasting that 

oil prices remain in the range that they had been, $20 to $30. Futures markets take 

into account growth in demands in China and elsewhere as well as changes in supply. They do so on the basis of ‘‘business as usual,’’ that is, on the basis that nothing 

out of the ordinary happens. The war in Iraq was the most notable event, and it 

is hard to identify any other which can be given as much credit for significant 

change in demand or supply (apart from Katrina). Some might blame the high demand for oil from China. But China has had two decades of robust growth, and its 

growth in 2004 was stronger than many market analysts had anticipated earlier; 

but global growth in 2005 (of around 4%) is clearly not particularly unusual. Markets are supposed to anticipate and respond to changes in demand by increasing 

supply. Errors in one year are quickly corrected in the next. 

What is striking is that present prices are significantly higher than what most 

analysts believe is the long run price, and futures markets expect that such prices 

will persist for at least another 2 years.47 That is, costs of extraction in Iraq (apart 

from the security concerns), Saudi Arabia, and elsewhere in the Middle East are 

much lower than $40, and at $40 there are many alternative sources (shale, tar 

sands) with a large supply elasticity. The question is, why has there not been this 

normal supply response. We suggest that the War in Iraq provides the critical explanation. 

Had there been no war, and had price increased, the international community 

could have allowed Iraq to expand production, and this would have brought down 

the price. But it is more likely that production elsewhere, including and especially 

elsewhere in the Middle East, would have increased. The instability in the Middle 

East which has been brought about by the Iraq War has increased the risk of investing in that region; but because costs of extraction are so much lower than elsewhere, it has not provided a commensurate supply response elsewhere. If stability 

is restored, then prices will fall, and these investments elsewhere would turn a 

loss.48

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greatly diminished (by almost 1 mbd). Oil prices had, of course, increased even before the war, 

in anticipation of these effects, so that the costs of the war began even before the war itself. 49 Iraqi Oil production statistics from Pearson Education. Iraq produced 3.5 million barrels per 

day in 1990, prior to the Gulf War, and is said to have one of the world’s greatest oil reserves. 50Data compiled from Energy Information Administration, Department of Energy, U.S. Government, http://www.eia.doe.gov/emeu/international/petroleu.html#IntlProduction 51That is, simplifying, if we write GDP = vL + π, where π is profits, v is real wages, and L 

is employment, then ∂GDP/∂p = M + v∂L/∂p, where p is the price of oil and M is imports. The 

last term is the effect of the price of oil on the amount of labor individuals wish to supply, which 

we assume is negligible. Note that when there is a large change in price, the effect is measured 

by ∆pM*, where M* is some number between the level of the actual imports and what the imports would have been, had the price of oil not increased. Given the low short run elasticity 

of the demand for oil, the difference may be small. 

In addition, there is the fact that oil production in Iraq has plummeted since the 

war. Even though Iraq is not an oil producer on the scale of Saudi Arabia and Russia, Iraq did produce around 2.6m barrels per day (a similar level to Kuwait, Nigeria and the UK) on the eve of the war. Now production has dropped to 1.1 million 

barrels per day. The insurgency has sabotaged refining capacity and truck drivers 

have refused to transport oil from the north, due to the threat of insurgents.49

Though we believe, accordingly, that the best estimate of the cost of Iraq on oil 

prices is a very large proportion of the $25 a barrel or more increase in the price 

of oil (and looking forward, we can extrapolate this cost for the next two years), we 

provide a conservative calculation based on the assumption that only 20% of that 

amount—$5—is due to Iraq. In our moderate estimate, we assume $10 is due to 

Iraq. 

Figure 4: Impact of Oil Prices 

Year 

Total Crude 

Oil Import 

(Thousand 

Barrels Per 

Day) 

Total Import 

Per Year 

(Billion Barrels) 

Refiner Acquisition 

Cost of Crude 

Oil, 

Imported ($/ 

Barrel) 

Total Cost of 

Oil Import 

(Billion 

US$) 

2000 11459.3 4.19 27.7 116.2 

2001 11871.3 4.34 22.0 95.3 

2002 11530.2 4.22 23.7 99.8 

2003 12264.4 4.49 27.7 124.0 

2004 13145.1 4.81 35.9 172.7 

2005* 13415.5 4.91 47.9 234.7 

2006** 13952.1 5.11 57.4 292.3 

2007** 14510.2 5.31 65.0 344.3 

* Average for the first 9 months of 2005. The total import cost is for the 12-month period using the 9- 

month average. 

** Assuming 4% growth in 2006 and 2007. 50

Given U.S. imports of roughly 4.75 to 5.0 billion barrels a year, a $5 per barrel 

increase translates into an extra expenditure of approximately $25 billion ($10 

would be $50 billion). Americans are, in a sense, poorer by that amount. 

In a neoclassical model that assumes full employment of all resources, this would 

be the principle effect on national income. If the economy continues to use all of its 

resources fully, gross output remains unchanged; only what is paid for inputs of oil 

has increased, so that value added (GDP) is reduced commensurately.51

Assuming that a $5 price increase persists for 5 years, this generates a conservative estimate of $125 billion. For our moderate estimate, we use a $10 price increase, but more plausibly, assume it extends (as future markets believe) for at least 

6 years. That generates a cost of $300 billion. 

This supply side approach assumes that if the price increase is reversed, the damage is over. To put it another way, this simple model implies that if first the price 

goes up by $10 for 1 year, and then down by $10 by 1 year (from its baseline), and 

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52See, e.g., Rodriguez, 2005. 

then is restored to its previous level, there is no cost. This is wrong. There is a cost 

to this volatility. The technology, for instance, that is best adapted to one set of 

prices will not be that appropriate for another. And the costs can be significant. This 

is consistent with macro economic studies that show large asymmetries between the 

impacts of increases and decreases in oil prices.52 Thus this analysis of a 5-year period of high prices, which assumes that the only cost is the increased transfer 

abroad, provides a significant underestimate of the true economic costs. We have 

not, however, provided an estimate of this additional cost. 

Global Income and Price Effects 

The value of national income is affected by the prices of other goods the country 

imports or exports, and these too can indirectly be affected by the increase in the 

price of oil. If, for instance, a global increase in the price of oil leads to a decrease 

in the price of other commodities (because of a global slowdown), then America is 

thereby better off. These effects are complex and likely in any case to be small. 

There may be some commodities that the United States exports in which it has 

market power. In that case, we take firms as setting the price of exports to maximize profits. An oil price shock lowers income of buyers of American products, shifting the demand curve over to the left. The income effect (at least for a small perturbation) is just the change in profits at the old price. If markets are fairly competitive, the effect is small, but especially in areas of the New Economy where markups are large, the losses in income can be significant. We have not, however, directly 

tried to estimate the magnitude of these effects. 

Most macro-economic analyses, however, assume that there are more than just 

these (neoclassical or) supply side effects. This is especially important when the 

economy is operating below full employment. We noted that with the increase in oil 

prices, Americans are poorer; they have that much less to spend on other goods—

including goods made in the United States. There will be a reduction in aggregate 

demand, and the reduction in aggregate demand caused by an increase in oil prices 

is likely to result in a lower level equilibrium output. 

The Macro-economic Counterfactuals 

The net effect depends on the macro-economic state of the world and how policy 

makers respond. If the economy is already in a world in which there is excess supply (demand constrained), then we need to focus on how monetary and fiscal authorities respond to stimulate demand. If the economy were in a state of excess demand, then the dampening of demand would lower inflationary pressure, but would 

leave output largely unaffected. Unfortunately, the post Iraq War world is one in 

which there has been excess supply (demand constrained output) in all of the major 

economies. 

Monetary policy response is determined by two offsetting factors. The oil price increase generates some inflationary pressures, and especially among central banks 

focusing on inflation, this leads to higher interest rates, exacerbating the slowdown 

of the economy. On the other hand, if central banks focus on aggregate demand and 

unemployment, it is conceivable that monetary policy could offset the adverse effects 

of oil price increases. If they fully offset the effect, then the only effect would be 

the transfer effect described earlier. 

Fiscal policy typically does not adjust quickly enough to stabilize the economy 

(and the effect of built-in automatic stabilizers is reflected in the multipliers discussed below). Again, there are two effects. For countries with fixed expenditures, 

then the increase in the oil price means that there is less to be spent on domestic 

goods, and that exerts a downward effect on the economy. On the other hand, for 

countries running active countercyclical fiscal policies, the slowdown in the economy 

could be offset by such policies. 

With Europe’s Central Bank focusing on inflation, the higher inflation resulting 

from higher energy prices most likely contributed to higher interest rates than they 

otherwise would have been, and thus a further weakening of the economy. Fiscal 

constraints (the growth and stability pact) has also meant that fiscal policy could 

not respond; on the contrary, increased government expenditures on energy meant 

there was less to spend on domestically produced goods and services, again contributing to the weakening of aggregate demand. In short, for Europe, the 

contractionary effects including policy responses are greater than without them. 

In Japan, with interest rates close to zero in any case and fiscal policy stretched 

to its limits, probably little policy response can be attributed to the oil price increase. 

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53The tax cut of 2003 occurred roughly contemporaneously with the War in Iraq. It does not 

appear that the War played any significant effect either in support or opposition to its passage; 

though it is likely that had the magnitude of the expenditures been identified, it might have 

weighed against the tax cut. 54One-year multipliers are typically smaller, but our concern is with the total impact, not the 

timing of the impact (the focus of most short run GDP forecasting models.) See Blinder and 

Wescott, 2004, based on model simulations from Global Insight, Inc. simulation results supplied 

August 9, 2004 (results with a monetary policy reaction function engaged and disengaged were 

essentially the same); and Macroeconomic Advisers, LLC simulation results supplied August 2, 

2004. 55 Increased expenditures on oil can adversely affect consumption (as households have less to 

spend on other goods), investment (as firms, other than producers of oil, see profits decrease 

from what they otherwise would have been), and government expenditures on domestically produced goods (as with budget constraints, there is less to spend on these). Impacts on households 

are, for instance, marked. Median household expenditures on gasoline and home heating have 

increased about 5% of household income. Given the low (zero) level of savings, this can be expected to translate into an equivalent reduction in expenditures on other goods. 56While these models predict the effects are not fully felt for two periods, they also predict 

that the effects are felt even after the prices come down. Our calculations ignore the timing of 

the impacts. Oil price shocks have effects that are different (and presumably greater) than many 

other shocks, since they adversely affect all of the advanced industrial countries simultaneously. 57See International Monetary Fund, ‘‘The Impact of Higher Oil Prices on the Global Economy,’’ Dec. 8, 2000, prepared by Research Department staff under the direction of Michael 

Mussa; cited in Blinder and Wescott. 

The United States is the most problematic. It appears that fiscal policy has not 

been closely related to the short run cyclical state of the economy. (The worsening 

of the fiscal position of the United States may have contributed to the resolve by 

some moderate Republicans not to cut taxes or expand expenditures as much as 

they otherwise would have done.53 In this sense, the oil price increase has probably 

had a negative effect on cyclical fiscal policy, i.e. the multipliers are larger than they 

would be if fiscal authorities took a ‘‘neutral’’ stance.) So too for monetary policy: 

the increased inflationary pressure from the high oil prices would, if anything, led 

to a tightening of monetary policy in response to the high oil price, leading to a larger multiplier. 

We have not carried out a full global general equilibrium analysis, but rely instead on results of standard macro-economic models. These suggest an ‘‘oil multiplier’’ of around 1.5 (achieved over 2 years).54 55 Thus, assuming that the economy 

remains below its potential over the period of analysis, and focusing on the total 

impact (not the timing), our conservative estimate is increased to $187 billion, and 

our more reasonable estimate to $450 billion. These models too have no feedback 

from exports.56

Global Effects 

There are some studies, however, which obtain much larger results. The IMF’s 

models yield results with longer lags, but with full effects that are almost 4 times 

as large.57

One of the standard studies, that of Hamilton, estimates that in the past a 10% 

increase in the price of oil has been associated with a 1.4% decrease in GDP. A $5 

increase in the price of oil thus implies a lowering of GDP by 2.8%, or approximately 

($300 billion) per year that oil prices remain at that level. A 5-year price rise would 

generate costs of $1.5 trillion. Hamilton’s analysis is consistent with an oil price 

multiplier that is much larger than the earlier studies. 

There are two possible explanations of the large discrepancies in results. The first 

has to do with the analysis of global general equilibrium results, and can be seen 

most sharply in the context of a ‘‘counterfactual’’ which has governments maintaining a fixed level (or percentage of GDP) deficit. In the standard model, what limits 

the multiplier are leakages, income which is not spent ‘‘domestically,’’ but is taken 

out of the system, and spent abroad, or by government. In both cases, the feedback 

of income into further expenditures stops. But if we take a global equilibrium approach, then the money spent abroad is part of the system. If we include government endogenous expenditures as part of the system, then as taxes are taken out 

of disposable income, government spends the increased revenues, just as if the individual himself had spent them. (There can be even ‘‘negative’’ leakages; if the government maintains a fixed deficit to GDP ratio, a stimulus—such as a fall in oil 

prices—leads to a higher GDP, and so an increase in government expenditures. 

Thus, for a global closed economy, the multiplier increases from 1/s(1¥t) + t, in 

which taxation reduces the multiplier, to 1/(s(1¥t)¥d, where taxation increases the 

multiplier (where s is the savings rate, t the tax rate on income, and d the allowable 

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58 Y = (1¥t)(1¥s)Y + tY + dY + I + X¥mY, since G¥tY = dY, so Y = I + X/ (s(1¥t) + m¥d 59See Neary and Stiglitz, 1983. 60When supply constraints are binding, individuals may displace consumption to other periods, so the net effect may be not much different from that which would prevail if demand constraints were always prevailing. 61 Consider a simple two period model in which there is not the second feedback, but in which 

increased savings this period does lead to increased consumption next period. Then the two-period (Y1 + Y2) multiplier associated with increased investment the first period is, instead of 1/ 

m (where m = s(1¥t)), (1 + α(1+r))/m, where α is the marginal propensity to consume out of 

wealth. In a simple life cycle model with no bequests, where the only reason to save is for consumption in ‘‘the’’ future period(s), h = 1, so the multiplier has more than doubled. 

deficit to GDP ratio). Thus, if d = 0, s = .2 t = .25, the multiplier increases from 

1/.4 to 1/.15, i.e. it increases by a factor of almost 3.58

(Of course, we need to model the oil exporting countries as separate from the oil 

importing countries, and spending a substantially smaller fraction of the income on 

American goods than Americans would. If Saudi expenditure and savings patterns 

were identical to those of Americans, then the change in the price of oil would simply be a change in the distribution of income, but have no effect on aggregates, besides the supply side effects originating from the higher price of oil. We have slightly overestimated the negative effects on American GDP by assuming that there is 

no feedback from increased Saudi income back to the United States.) 

If we further include future consumption generated by extra savings, then even 

savings does not constitute a leakage, so long as over the prevailing time horizon, 

the economy remains in a demand constrained situation. In short, leakages are 

much, much smaller, when multiyear aggregate incomes are calculated. These dynamic feedbacks are even present in first year income. Thus, increased savings this 

year leads to increased wealth next year, and that increased wealth leads to increased output (if output is sensitive to demand). But rational consumers will realize this; 59 their lifetime income has gone up, and so too will their current consumption. In calculating the cost of the War, we are concerned not just with the impact 

today, but the impact in all future years. Calculating the total multipliers requires 

assessing the fraction of future periods in which it is reasonable to assume that demand constraints will be binding.60, 61

In the periods at hand, Europe, the United States, and Japan were all demand 

constrained throughout the relevant time, and government expenditures were very 

much constrained by the level of revenues (especially in Europe). In the very short 

run, it was clear that such constraints were not perfectly binding in the U.S., but 

government expenditures were tempered from what they otherwise would have been 

by the looming deficit. This is clearly true for the states and localities (which make 

up a third of total expenditure) but even true at the Federal level. Accordingly, we 

believe a multiple period multiplier that is substantially in excess of that generated 

by the partial equilibrium American models (generating, as we have noted multipliers around 1.5) is warranted. Numbers of the order of magnitude generated by 

the IMF model are totally reasonable, but to stay on the conservative side, we use 

a much smaller multiplier of 2 as our (conservative) ‘‘moderate’’ estimate. (We even 

believe the very large multipliers implicit in Hamilton’s study are not implausible.) 

However, we do believe that great care must be used in employing studies based 

on the impact of earlier oil price shocks. Changes in the structure of the economy, 

the nature of the policy responses, and the state of the economy (the extent to which 

it was at or near full employment) can have large effects on the full response of an 

oil price increase. Earlier increases occurred at a time when the global economy was 

already facing inflationary pressures (the U.S. from trying to ignore the fiscal costs 

of the Vietnam War.) Under doctrines of monetarism, there were large responses—

excessive—to the inflation resulting from the oil price shock. Globalization has put 

greater downward pressure on prices, so today, inflation is much more benign. 

Monetarism has been discredited, and even if de jure or de facto inflation targeting 

has meant that some countries put excessive focus on inflation, including the inflation generated by high oil prices—and thus monetary policy exacerbates the 

contractionary pressures of oil—it does so less than it did in the earlier oil price 

shocks. 

Thus, while we believe that these global general equilibrium effects are significant, and should raise the multiplier considerably about 1.5 or 2, given the uncertainties associated with these global general equilibrium effects, we do not include 

them in our conservative estimate. For our ‘‘moderate’’ estimate, we use a 6-year 

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62For instance, the IMF study cited earlier with much larger multi-year multipliers, near 4, 

would be associated with a total impact of $1.2 billion over 6 years. 63Obviously, it is conceivable that far more than $500 billion out of the nearly $1 trillion in 

Iraq expenditures switch to investment. 64 6% is the certainty equivalent return. Investments in government research have been 

shown to have much higher rates of return. The natural discount rate to use (for discounting 

certainty equivalents) is the real T-bill rate, which in recent years has been close to zero or negative. Historically, it has been around 1.5% The present discounted value of lost income of an 

investment I yielding a return of g at a discount rate of r is Ig/r, i.e. a ‘‘multiplier’’ of g/r. We 

have been conservative in choosing a low g and a high r, generating a multiplier of 1.5. The 

standard cut-off for government projects is 7%, and research yields are even higher. Using a 

impact and a multiplier of 2. We believe, however, that a substantially larger multiplier might be justified.62

Budgetary Costs 

The most difficult to estimate macro-economic costs are those associated with the 

increased expenditure. If we were not spending the money on the war, would we 

be spending it on something else? Would we have cut back spending, and had a 

smaller deficit? Would we have had the same deficit, but just more tax cuts? 

But this is only part of the counterfactual analysis. How would the Federal Reserve have responded to the different macro-economic situation? Would it have 

dampened or exacerbated these effects? 

These are standard questions in incidence analysis, in which public sector economists attempt to ascertain the consequence of one policy or another. One standard 

methodology focuses on expenditure switching: it is assumed that the government 

simply substitutes Iraq expenditures for other expenditures (some defense, some 

non-defense). This is the methodology upon which we focus here. 

Another methodology focused on marginally balanced budgets, where taxes are assumed to increase in tandem (from what they otherwise would have been; there may 

still be tax cuts, but they are somewhat smaller than they otherwise would have 

been.) The Bush administration seems undeterred in its commitment to make its 

tax cuts permanent, unaffected by the War, but Congress is showing some sensitivity to the size of the deficit. 

A third methodology assumes that the increased expenditure leads to higher deficits. We comment on the implications of this at the end of this section. 

The expenditure switching methodology focuses on two critical differences between expenditures on the war in Iraq and other public expenditures, such as investments in research, infrastructure, or education. The first is that the domestic 

content and leakages differ. Consider, for instance, a $1000 spent to hire Nepalese 

workers to perform services in Iraq. There is no ‘‘first round’’ effect on domestic 

GDP, and little impact on subsequent rounds (only to the extent that the Nepalese 

contractors buy goods made in the United States). By contrast, a $1000 spent on 

university research in the United States has a full $1000 first round impact, and 

high impacts in subsequent rounds. While ‘‘multipliers’’ associated with different 

kinds of expenditures are known to differ, there may be few expenditures with a 

lower multiplier than those in Iraq. 

There are no data on the basis of which to provide accurate estimates of the differences in multipliers and leakages. Assume, however, that in the case of normal 

investment expenditures (like university based research) the first round and subsequent rounds of expenditure have a leakage of .67, generating an overall multiplier 

of 1.5. (The numbers are chosen to be deliberately very conservative.) By contrast, 

if the first round expenditure for Iraq is three-fourths that amount (again a conservative number, since it may well be much less) and leakages are the same thereafter, 

then the overall multiplier is 1.1. Switching $500 bn (over the years of the war) to 

domestic investment would have resulted in increased GDP by $200 bn. 

(For some of the long run costs referred to in the first section of this paper, there 

are not likely to be large differences in multipliers. The increased disability and 

healthcare costs of Iraq War veterans are likely to have multipliers similar to that 

for investment expenditures. That is why we have conservatively focused on the impact of switching only $500 bn.) 

The second major difference is impacts on long run output. Investments in the 

public sector yield high returns, and so output would have been higher in the future. Expenditures on the Iraq war have no benefits of this kind. As a result, output 

in the future will be smaller. Assume, for instance, that of the direct costs of the 

war estimated in the previous section $500 billion 63 were put into investments 

yielding conservatively a 6% real return on the investment, and using a (conservative) 4% discount rate, the present discounted value of the lost income is $750 billion.64

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value of g = .07 and r = .015 yields a multiplier of 4.67, which is substantially higher. In the 

case at hand, with forgone investment of $500 billion, the PDV of future lost income is $2.3 

trillion. 

Note that it would be double counting to both count the value of the investment (the opportunity cost) and the value of the benefits that would have been generated by the investment. 

In a world with perfect markets and no costs to raising taxes, presumably there would be no 

difference between the discount rate and the marginal return to investment, in which case, the 

value of the investment would be equal to the present discounted value of the benefits generated 

by it. In the public sector, however, it is clear that there are often large discrepancies. A relatively modest investment in levees in New Orleans would have saved hundreds of billions of 

dollars. 65 If the private investment yields a return of 8%, and we discount at the rate of 4%, then the $500 billion of displaced investment has a PDV costs of $1 trillion, or $500 billion in excess 

of the direct costs. If the United States borrows the full amount abroad, and there are no effects 

on the interest rates at which the U.S. can borrow, then there is no displacement effect, and 

the only costs are the direct costs already estimated. At the same time, the deficit-financed expenditures will give rise to a positive aggregate demand effect. $500 billion of expenditures, in 

the assumptions given earlier, would have an additional multiplier effect of $50 billion. Note 

that in the case of full deficit financing, in the moderate scenario, the total budgetary impact 

is $1.185 trillion; if just 25% of this displaces private investment, the estimated macro-economic 

costs would be greater than under the expenditure switching analysis. 66Personal correspondence 67For example, bankruptcy exerts a strong nonlinearity. Some key American industries (automobile, airlines) have been pushed near bankruptcy as a result of oil prices. 68Similar issues arise in the case of housing. Though there has been a boom in housing, presumably if the costs of operations were lower, the demand for housing services would have been 

higher, and prices would have been still higher. We have not estimated the value of the implied 

reduction in the value of housing from what it otherwise would have been. 69See, in particular, Nordhaus [2002]. 70For most of the analysis, we have assumed that there has been excess capacity in the economy, i.e. the economy during the period of concern has been operating below its potential. This 

Continued 

If the government had, instead, simply let the deficit grow, one would have to calculate the additional growth costs of that deficit. The additional deficit could, for instance, crowd out private investment, and calculations similar to those just performed would provide an estimate of the cost, somewhat larger than the costs estimated above.65

Other Macroeconomic Costs (Stock Market, Housing) 

Higher oil prices and higher interest rates to which the oil prices give rise also 

have effects on asset values. To the extent that these effects are greater than just 

the current year effects on profits, they suggest a persistence of the consequences 

that our previous analysis did not fully take into account, and the existence of large 

nonlinearities. This is evident in the industries that are particularly sensitive to oil 

prices, like the airline industry, where many firms face the prospect of bankruptcy. 

The surge in corporate profits in the last couple of years has not been accompanied by an increase in stock prices of the magnitude that would have been expected. Robert Wescott 66 estimates that the value of the stock market is some $4 

trillion less than would have been predicted on the basis of past performance. Assuming that the major factor contributing to that is the increase in oil prices, and 

that 20% of that increase in oil prices is due to Iraq leads to a cost of some $800 

billion. This is several times the increase in the direct energy costs over the next 

few years. This may reflect the fact that we have grossly underestimated the effects 

by limiting our analysis to 6 years; or to the fact that there are large nonlinearities. 

67 But this decrease in corporate wealth does imply that consumption was lower 

than it otherwise would have been, with the attendant multiplier effects.68

Uncertainty about future oil prices also has a dampening effect on investment. 

Firms do not know what technology is appropriate for the economic environment 

that will prevail, and respond to that uncertainty by postponing investment. This 

has both an effect on aggregate demand and aggregate supply in the short run. 

Again, we have not estimated the magnitude of these effects. 

Summary 

The macro-economic costs are potentially very large; possibly even a multiple of 

the direct costs. Clearly, though ensuring supply of oil was one of the sometimes 

stated or inferred goals, the risks of Middle East instability that might result was 

often noted as one of the main risks of the venture. What has happened is certainly 

within the range of predicted consequences to the price of oil;69 and experiences in 

the seventies should have made us aware of how large the macro economic consequences could be. In short, while large, when adjusted for the larger size of the 

economy today, they are, we believe, totally plausible.70

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is evidenced not only by figures on capacity utilization and by the fact that the employment 

ratio (fraction of working age population working) is significantly below the level of the nineties. 

Even the unemployment rate is significantly higher than the 3.8% reached in the 90s (and there 

appeared to be no significant inflationary pressures even at that unemployment rate.) The factors that have led to a decrease in the NAIRU, including the competitive supply of goods from 

abroad, have continued to operate, so that there is every reason to believe that the NAIRU remains far lower than current unemployment rates. (See Stiglitz, 2000). Stagnation and declines 

in real wages, higher than normal levels of ‘‘disability,’’ and large numbers of individuals claiming to be working part time involuntarily are consistent with this view of significant weaknesses 

in the labor market, i.e. significant potential for increasing incomes without generating increases in inflation. Our analysis assumes that potential output will exceed actual output for 

(in the conservative scenario) the next 2 years. This is consistent with most forecasts which see 

a slowing of growth to between 3.25% and 3.5% in the period 2006–2008, particularly as consumption growth is dampened from its unsustainable levels fueled by rising real estate prices 

and low interest rates. Even if productivity growth slows from the 3% that marked the nineties, 

these rates are not sufficient to overcome the ‘‘jobs deficit’’ created in 2001–2003. In any case, 

even our ‘‘moderate’’ estimate projects that had oil prices not been as high, output would have 

been higher by amounts that are a fraction of the estimated gap between potential and actual 

output. 71 Conservative: $5 barrel for 5 years; moderate: $10 barrel for 6 years. 72 Conservative: (multi-year) multiplier of 1.5; moderate: (multi-year) multiplier of 2. 73 Estimated at $2.5 billion. 74Other than the indirect impact of increased insecurity in impeding oil supply response. 

Figure 5: Macro-economic Effects ($ billion) 

Impact Conservative Moderate 

Oil price increase 

Transfer (supply side) effect 125 71 300 

Aggregate demand 72 62 150 

Global General Equilibrium 150 

Budgetary impacts 

Expenditure switching 200 

Growth impacts (PDV) 250 

Total 187 1050 

We therefore estimate that the total economic costs of the war, including direct 

costs and macroeconomic costs, lie between $1 and $2 trillion, as shown in Figure 

6. 

Figure 6: Total Economic Costs of the Iraq War ($BN) 

Scenario Conservative Moderate 

Direct costs 839 1189 

Macroeconomic 187 1050 

1026 2239 

List of Omitted Costs 

Defense and destruction costs 

• Costs of planning war 73

• All costs borne by other countries, including Iraq 

• Military costs 

• Destruction of property 

• Loss of life 

• All costs of increased insecurity 74

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75Other than the indirect impact of increased insecurity in impeding oil supply response. 76Other than as reflected in higher multiplier in ‘‘conservative’’ case. 77Other than as reflected in the multiplier analysis. The multiplier analysis focuses on demand side effects; bankruptcy costs are more correctly viewed as supply side effects (not included in the standard neoclassical model.) 78Other than as reflected in multiplier analysis. 79Other than as reflected in multiplier analysis. 80 In the ‘‘Conservative’’ scenario. In the ‘‘moderate’’ scenario, we perform an expenditure 

switching incidence analysis, which provides a number that may partially reflect these costs. 81Other than as reflected in increased recruitment costs. 

• Increased costs of cross border flows 

• Reduced investment 

• Consequences of Loss of credibility 

• Value of reduced capability of responding to national security threats elsewhere in the world 

Value of reduced capability of responding to domestic situations in which the National Guard or the Reserves might have been called upon (as in New Orleans). 

Macroeconomic costs 

• All costs of increased insecurity 75

• Increased costs of cross border flows 

• Reduced investment 

• Indirect aggregate demand effects (as a result of reduced incomes in trading 

partners) 76

• Costs of oil price volatility 

• Including on investment 

• Costs of bankruptcy 77

• Reduced demands as a result of anti-American sentiment 

• Consequences of losses of asset values (arising from increase in oil prices or 

otherwise) 

• Equity markets 

• Housing 

• Consequences of tighter monetary policy as a result of increased inflation 78

• Consequences of worsening fiscal position 

• As a result of increased government expenditures on oil 79

• As a result of increased expenditures on the war 80

Other Costs 

• Costs of risks borne by individuals 81 (including compensation that would be 

required to make them willingly bear risks) 

• Economic Cost of impairment to earnings potential and quality of life for veterans who claim partial disability (est. 160,000) but were not wounded during 

the conflict 

• Healthcare costs not borne by the government 

IV. Concluding Remarks 

The most important things in life—like life itself—are priceless. But that doesn’t 

mean that topics like defense, involving the preservation of our way of life and the 

protection of life itself, should not be subject to cool, hard analysis of the kind for 

which economics has long earned a reputation. 

Take the decision of when to go to war. Here, economic analysis employs the concept of option value. Even if one thinks war is inevitable or highly likely, there is 

a question of timing because there are costs and benefits to postponement. The 

enemy may be better prepared, but so may we. Normally, one goes into such a war 

under the presumption that one is going to win, and therefore a critical issue is 

managing the post-war occupation. Without adequate preparation, weapons may 

easily fall in the hands of insurgents—as in fact they did—enormously increasing 

the occupation costs. With adequate armor, fewer American troops are likely to be 

injured or killed. As even the Secretary of Defense has admitted, in the rush to war, 

there was not time to provide adequate protection for the troops, protection that 

clearly the richest country in the world could have afforded and that its citizens 

would have expected. 

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82 An excellent example of the kind of analysis that could and should have been provided is 

that of Nordhaus (2002), who lays out various scenarios. The CBO and the House Budget Committee provided some estimates. Nordhaus points out, however, that they did not include scenarios involving extended engagement, occupation, and reconstruction. 

Economists also think about the value of information. In this situation, postponing 

war might have allowed us to gather better information with which to judge whether Iraq posed a real threat. This is not, as Americans say, Monday morning quarterbacking: there were already strong suspicions regarding our sources of intelligence 

on Iraq’s alleged weapons of mass destruction. More time would have enabled the 

verification of this evidence. The value of this information would have been enormous. The possibility of war later on would have still been an option. Tens of thousands of lives would have been spared, and hundreds of billions of dollars saved. 

All of this leads to economists’ constant urging that politicians undertake a cost 

benefit analysis before undertaking any project—especially one with as significant 

consequences as war. This can and should be done even if certain elements of the 

costs and benefits are hard to value. 

If Congress had been informed of the range of costs, perhaps if they had been told 

that the costs might exceed a half trillion, or a trillion dollars, perhaps, in the end, 

they would have made the same decision. But perhaps they would have been a bit 

more cautious in making that decision, looked a little harder at the evidence, 

thought differently about how best to conduct the war. 

We have not attempted in this paper an overall assessment of whether the war 

was conducted in the most cost efficient manner, i.e. whether, given what has been 

achieved (however that is defined), those objectives could have been achieved at 

lower costs. We have taken the expenditures, as they have occurred, not as they 

might have been. The Administration has explicitly tried to fight the war on the 

cheap, that is limit direct commitments of American troops, even shortchanging 

body and personnel armor. In violating the Powell doctrine, this may be one of those 

instances of ‘‘penny wise-pound foolish’’. Certainly, the long run costs to the individuals and to society of the individuals who died or were badly maimed (not to mention the additional costs of recruitment) far exceed the savings from not purchasing 

better body protection. Many observers believe that the manner in which the War 

was conducted led to the extended insurgency, which too has greatly increased cost. 

Though we have suggested that many of the costs were within the range of what 

could have been anticipated, we have not sought in this paper to ascertain whether 

on the basis of the information available, the Administration could have made more 

reliable estimates. We do not address the question of whether the disparity between 

the predicted numbers and the actual numbers is a result of a deliberate attempt 

of the Administration to mislead the American people on the cost of the war, or of 

incompetence, going to War with information of low reliability and with best estimates that were far from the mark. In response to accusations about the existence 

of weapons of mass destruction and the connection with Al Qaeda, the Administration has been adamant that it did not intentional deceive the American people; it 

prefers charges of incompetence to those of malevolence. We have not attempted to 

ascertain the relative role of each in the failure to provide the American people with 

an accurate cost of the venture. At the very least, though, honesty would have required laying out the various scenarios, even if it attached low probabilities to those 

that in fact turned out to be the case.82

Americans could, and should have asked, are there ways of spending that money 

that would have enhanced our long run well-being—and perhaps even our security—more. Take the conservative estimate of a trillion dollars. Half that sum would 

have put Social Security on a firm grounding for the next seventy-5 years. If we 

spent even a small fraction of the remainder on education and research, it is likely 

our economy would be in a far stronger position. If some of the money spent on research were devoted to alternative energy technologies, or to providing further incentives for conservation, we would be less dependent on oil, and thereby more secure; and the lower prices of oil that would result would have obvious implications 

for the financing of some of the current threats to America’s security. While we may 

not know what causes terrorism, clearly the desperation and despair that comes 

from the poverty that is rife in so much of the Third World has the potential of providing a fertile feeding ground. For sums less than the direct expenditures on the 

war, we could have fulfilled our commitment to provide.7% of our GDP to help developing countries—money that could have made an enormous difference, for the 

better, to the well-being of billions today living in poverty. We could have had a 

Marshall Plan for the Middle East, or the developing countries, that might actually 

have succeeded in winning the hearts and minds of those in the Middle East. 

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83 It is of interest that our ‘‘moderate’’ estimate is not dissimilar to Nordhaus’ ‘‘high’’ (protracted and unfavorable) case, $1.9 trillion. His estimate of direct military spending, occupation, 

and reconstruction was $745. However, he did not include a number of the long run costs (such 

as health costs and disability benefits and increased recruiting costs), nor the adjustments between economic and budgetary costs noted in section III. His estimate of the direct impact on 

oil markets (the transfer effect) was $778 billion, which we believe to be more accurate than 

estimate of $300 million (in the moderate case), which was deliberately chosen to be conservative. He uses a ‘‘macro-economic oil’’ multiplier that is similar to ours, but because he (realistically) assumes a large oil price effect, he obtains a larger macro-economic effect. He does not 

include any ‘‘growth investment/displacement’’ or ‘‘expenditure switching’’ effects in his analysis. 

Nordhaus’ historical analysis puts some perspective on the magnitude of the expenditures: the 

projected direct expenditures in Table 1 are comparable to those of the Vietnam War ($494 billion), somewhat greater than the Korean war ($336 billion) and more than twice as large as 

World War I ($190 billion). 

What is clear is that the Administration’s original estimates were strikingly low.83

Would the American people have had a different attitude toward going to war had 

the known the total cost? Would they have thought that there might be better ways 

of advancing the cause of democracy or even protecting themselves against an attack, that would cost but a fraction of these amounts? In the end, we may have decided that a trillion dollars spent on the War in Iraq was better than all of these 

alternatives. But at least it would have been a more informed decision than the one 

that was made. And recognizing the risks, we might have conducted the War in a 

manner different from the way we did. 

Hamid Rashid, Robert Wescott, Joshua Goodman and Kwang Ryu made important 

contributions to the results reported here, which are gratefully acknowledged. 

References 

Abeysinghe, Tilak, ‘‘Estimation of direct and indirect impact of oil price on 

growth’’, Economics Letters 73 (2001) 147—153 

Belasco, Amy. ‘‘The Cost of Iraq, Afghanistan and Enhanced Base Security Since 

9/11’’, Congressional Research Service, Report for Congress, October 7, 2005 

Bennis, Phyllis and Leaver, Erik, ‘‘The Iraq Quagmire: The Mounting Costs of the 

War and the Case for Bringing Home the Troops’’, Institute for Policy Studies and 

Foreign Policy in Focus, August 2005 

Blinder, Alan and Robert Wescott, ‘‘Higher Oil Prices Will Hurt the U.S. 

Economy’’August 10, 2004, unpublished 

Congressional Budget Office, ‘‘Estimated Costs of a Potential Conflict with Iraq,’’

September 2002, available at http://www.cbo.gov/ and reports and estimates published in 2003, 2004, and 2005 

Hamilton, James D., ‘‘What is an oil shock?’’ NBER Working Paper Series 7755, 

June 2000 

Hartung, William, ‘‘The Cost of the Iraq War’’, Taxpayers for Common Sense, 

2004 

House Budget Committee, Democratic Staff, Assessing the Cost of Military Action 

Against Iraq: Using Desert Shield/Desert Storm as a Basis for Estimates, September 

23, 2002 

Kniesner, Thomas, Viscusi, Kip, Woock, Christopher, and Ziliak, James, ‘‘How the 

Unobservable Productivity Biases the Value of a Statistical Life’’, NBER W.P.11659, 

September 2005 

Neary, Peter, and J. E. Stiglitz, ‘‘Toward a Reconstruction of Keynesian Economics: Expectations and Constrained Equilibria,’’ Quarterly Journal of Economics, 98, 

Supplement, 1983, pp. 199–228. 

Nordhaus, William D. ‘‘The Economic Consequences of a War with Iraq’’, Cowles 

Foundation Discussion Paper Series, Yale University, December 2002 

Rodriguez, Rebeca and Marcelo Sanchez, ‘‘Oil price shocks and real GDP growth: 

empirical evidence for some OECD countries’’, Applied Economics, 2005, 37, 201—

228 

Stiglitz, J. E. ‘‘Reflections on the Natural Rate Hypothesis,’’ Journal of Economic 

Perspectives, 11(1), Winter 1997, pp. 3–10. 

U.S. Government Accountability Office, ‘‘Global War on Terrorism: DOD Should 

Consider All Funds Requested for the War When Determining Needs and Covering 

Expenses’’; GAO–05–767 

Wallsten, Scott and Kosec, Katrina, ‘‘The Economic Costs of the War in Iraq’’, 

AEI/Brookings, working paper 05–19, September 2005 

f 

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1Department of Veterans Affairs, Office of Public Affairs, ‘‘America’s Wars’’, September 30, 

2006. This document shows that the number of non-mortal woundings in the Global War on Terror (combining Iraq, Afghanistan and surrounding duty stations) as of 9/30/06 was 50,508 compared with 2333 deaths in battle plus 707 other deaths in theater. The comparison numbers 

for previous conflicts are as follows: Desert Storm/Desert Shield: 1.2 wounded per fatality; Vietnam: 2.6 wounded per fatality; Korea: 2.8 wounded per fatality; World War II: 1.6 wounded per 

fatality; World War I: 1.8 wounded per fatality; Civil War (union): .7 wounded per fatality; War 

of 1812:.5 wounded per fatality; American Revolution: .7 wounded per fatality. Note: the VA defines non-mortal wounded as those who are ‘‘medically evacuated from theatre’’. The Pentagon 

SOLDIERS RETURNING FROM IRAQ AND AFGHANISTAN: 

The Long-term Costs of Providing Veterans Medical Care 

and Disability Benefits 

Linda Bilmes, Kennedy School of Government, Harvard University, 

January 2007 

The views expressed in the KSG Faculty Research Working Paper Series are 

those of the author(s) and do not necessarily reflect those of the John F. Kennedy 

School of Government or of Harvard University. Faculty Research Working 

Papers have not undergone formal review and approval. Such papers are included 

in this series to elicit feedback and to encourage debate on important public 

policy challenges. Copyright belongs to the author(s). Papers may be downloaded 

for personal use only. 

EXECUTIVE SUMMARY: 

This paper analyzes the long-term needs of veterans returning from the Iraq and 

Afghanistan conflicts, and the budgetary and structural consequences of these 

needs. The paper uses data from government sources, such as the Veterans Benefit 

Administration Annual Report. The main conclusions of the analysis are that: 

(a) the Veterans Health Administration (VHA) is already overwhelmed by the volume of returning veterans and the seriousness of their healthcare needs, and it will 

not be able to provide a high quality of care in a timely fashion to the large wave 

of returning war veterans without greater funding and increased capacity in areas 

such as psychiatric care; 

(b) the Veterans Benefits Administration (VBA) is in need of structural reforms 

in order to deal with the high volume of pending claims; the current claims process 

is unable to handle even the current volume and completely inadequate to cope with 

the high demand of returning war veterans; and 

(c) the budgetary costs of providing disability compensation benefits and medical 

care to the veterans from Iraq and Afghanistan over the course of their lives will 

be from $350–$700 billion, depending on the length of deployment of U.S. soldiers, 

the speed with which they claim disability benefits and the growth rate of benefits 

and healthcare inflation. 

Key recommendations include: increase staffing and funding for veterans medical 

care particularly for mental health treatment; expand staffing and funding for the 

‘‘Vet Centers,’’ and restructure the benefits claim process at the Veterans Benefit 

Administration. 

This paper was prepared for the Allied Social Sciences Association Meetings in 

Chicago, January, 2007. The views expressed here are solely those of the author 

and do not represent any of the institutions with which she is affiliated, now or in 

the past. 

Introduction 

The New Year has brought with it the grim fact that 3000 American soldiers have 

been killed so far in Iraq. A statistic that merits equal attention is the unprecedented number of U.S. soldiers who have been injured. As of September 30, 2006, 

more than 50,500 U.S. soldiers have suffered non-mortal wounds in Iraq, Afghanistan and nearby staging locations—a ratio of 16 wounded servicemen for every fatality1 This is by far the highest killed-to-wounded ratio in U.S. history. For example, 

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has several definitions, but the daily casualty reports on its website use a narrower definition 

referring to those wounded by shrapnel, bullets, and so forth. Using this narrow definition, the 

Iraq conflict has a ratio of 8 wounded per fatality—still much higher than any previous war 

in U.S. history. 2 Ibid. 

3 As of September 30, 2006, 1,406,281 unique servicemembers have been deployed to the wars 

in Iraq and Afghanistan, according to the Department of Defense, Defense Manpower Data Center, and ‘‘Contingency Tracking System.’’ The Veterans Health Administration (VHA) Office of 

Public Health and Environmental Hazards, November 2006 uses the number 1.4 million (as of 

November 2006). The Veterans Benefits Administration (VBA) lists 1,324,419 unique servicemen 

deployed to GWOT as of May 2006 (prepared by VBA/OPA&I, 7/20/06). 4 Based on an analysis of the first Gulf War in 1991, using the Gulf War Veterans Information 

System (GWVIS August 2006, chart on ‘‘Gulf War Veteran Outpatient Stays’’, there were 

297,125 veterans from that conflict who used VA medical care, or 48.4%. If the same percentages of Iraq/Afghan veterans use VA medical care then VA should expect approximately 700,000 

new patients from the 1.4 million existing servicemen. Increasing the number of unique servicemen deployed will increase medical and disability usage. 5 Veterans’ disability pay is an entitlement program, like Medicare and Social Security. Once 

a veteran has been approved to receive disability pay, he or she is entitled to receive an annual 

payment and cost-of-living adjustments. The average age of a servicemen is about 25 years of 

age, therefore given current life expectancy rates, 40 years is a reasonable amount of years to 

project payment of benefits, even assuming the veteran does not claim for some years following 

the period of service. 6 Bilmes, Linda and Stiglitz, Joseph, The Economic Costs of the Iraq War: An Appraisal Three 

Years After the Beginning of the Conflict, NBER Working Paper 12054 (http://www.nber.org/papers/w12054), February 2006. The long-term budgetary costs associated with veterans health 

and disability cited in that paper ranged from $77 bn to $179 bn (depending on the length of 

the war), based on a population of 550,000 unique Iraqi war veterans. After we published this 

paper, a number of veteran’s organizations including the American Legion and Veterans for 

America, contacted us in appreciation of our highlighting the needs of veterans. Veterans for 

America has particularly encouraged further research to understand the needs of the returning 

GWOT veteran’s community. 7The Bilmes/Stiglitz cost of war paper did not include the costs of Afghanistan or other areas 

outside of Iraq in the GWOT. Had we included those costs, the total cost of war would have 

increased by 15–20%. 

in the Vietnam and Korean wars there were 2.6 and 2.8 injuries per fatality, respectively. World Wars I and II had fewer than 2 wounded servicemen per death.2

While it is welcome news and a credit to military medicine that more soldiers are 

surviving grievous wounds, the existence of so many veterans, with such a high 

level of injuries, is yet another aspect of this war for which the Pentagon and the 

administration failed to plan, prepare and budget. There are significant costs and 

requirements in caring for our wounded veterans, including medical treatment and 

long-term healthcare, the payment of disability compensation, pensions and other 

benefits, reintegration assistance and counseling, and providing the statistical documentation necessary to move veterans seamlessly from the Department of Defense 

payroll into Department of Veterans Affairs medical care, and to process VA disability claims easily. 

To date, 1.4 million U.S. servicemen have been deployed to the Global War on 

Terror (GWOT), the Pentagon’s name for operations in and around Iraq and Afghanistan.3 The servicemen who have been officially wounded are a small percentage of 

the veterans who will be using the veteran’s administration medical system. Hundreds of thousands of these men and women will be seeking medical care and claiming disability compensation for a wide variety of disabilities that they incurred during their tours of duty.4 The cost of providing such care and paying disability compensation is a significant long-term entitlement cost that the U.S. will be paying for 

the next forty years.5

The objective of this paper is to examine the structural and budgetary requirements for caring for the returning war veterans from Iraq and Afghanistan, in 

terms of U.S. capacity to pay disability compensation, provide high quality medical 

care, and provide other essential benefits. The paper grew out of a previous paper 

that was co-authored in January 2005 with Columbia University professor Joseph 

Stiglitz, in which the overall costs of the war in Iraq were estimated to exceed $2 

trillion. One of the long-term costs cited in that paper was the cost associated with 

providing healthcare and disability benefits to veterans6 This paper expands on that 

topic. 

Unlike the previous paper,7 this study does not differentiate between veterans returning from Iraq, or Afghanistan or adjacent locations (such as Kuwait, an important staging post for Iraq) in the GWOT, for three reasons. First, nearly one-third 

of the servicemen involved in the war have been deployed two or more times and 

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8 As of 9/30/06, some 421,206 (30%) of 1,406,281 unique servicemembers had been deployed 

twice or more to the wars in Iraq and Afghanistan. Army Times, December 11, 2006, page 14, 

from the Department of Defense, Defense Manpower Data Center, ‘‘Contingency Tracking System.’’ 9 As of 12/28/06, the DOD website listed 22,565 wounded in Operation Iraqi Freedom and 1084 

wounded in Operating Enduring Freedom (Afghanistan). As noted previously, this is a narrower 

definition of injuries than the one used by the Veterans administration, which lists 50,508 nonmortal woundings as of 9/30/06. 10 Using the claims patterns from Gulf War I is almost certainly too conservative because that 

war was much shorter and relied primarily on aerial bombardment, whereas the current wars 

involve long deployments and ground warfare. However it provides a baseline for the current 

Iraq/Afghan wars. 

many of them have served both in Iraq and Afghanistan, and/or other locations.8

Second, the data available from the VA does not distinguish between the wars in 

Iraq and Afghanistan. Third, for the purposes of estimating the long-term costs of 

taking care of the returning veterans it does not matter where they served. However 

it is worth noting that the overwhelming majority of the deaths and injuries incurred in the GWOT have been in Iraq. Among those listed as wounded on the Pentagon’s casualty reports, more than 95% have been injured in Iraq.9

This paper will analyze the following aspects of the returning veterans’ needs. 

1. Disability compensation 

• Projected Cost 

• Backlog of Pending Claims 

2. Medical care 

• Capacity issues 

• Projected Cost 

• Veterans Centers 

• Transitioning from the Department of Defense to VA care 

3. Overall assessment of U.S. readiness to meet its obligations to veterans 

4. Recommendations 

Methodology 

All statistics used in this paper are from government sources, including publications of the Veterans Benefit Administration (VBA), Veterans Health Administration (VHA), and other VA offices, as well as from the Congressional Budget Office, 

the Government Accountability Office, the Department of Defense, and Congressional testimony. The numbers are based on the servicemen involved in Operation 

Iraqi Freedom (OIF) and Operation Enduring Freedom (OEF, Afghanistan) unless 

otherwise noted. 

The cost and structural requirements for returning veterans will depend on several factors, including the number of U.S. troops stationed in the region and how 

long they are deployed; the rate of claims and utilization of health resources by returning troops, and the rate of increase in disability payment and healthcare costs 

over time. The model developed allows the user to vary these assumptions and may 

be obtained with permission from the author’s website. The current analysis has 

been performed under three ‘‘base’’ scenarios that reflect, broadly the three options 

now under consideration for the war. 

• Low Scenario: The low scenario assumes that the U.S. begins withdrawing 

troops in 2007 and that all U.S. servicemen are home by 2010. This pattern 

is roughly in parallel with the recommendations of the bipartisan Baker Commission that reported to President Bush in November 2006. This scenario assumes that we will not deploy any new troops beyond the 1.4 million already 

participating in the war. It assumes that 44% of U.S. troops will claim for 

disability payment over a period of years, with 87% of claims granted, following the same claims pattern as the first Gulf War in 1991.10 The low scenario assumes that soldiers will initially receive the VA’s 2005 average recurring benefit and that the annual rate of increase will be 2.8% to reflect a costof-living adjustment only. (As opposed to the actual growth rate over the past 

10 years which is 6.1%). The medical usage in this scenario is based on the 

lowest possible uptake of medical care and a rate of increase that is below 

the historical rate of healthcare inflation. In short, this scenario shows the 

absolute basement level—the lowest possible cost of providing medical care 

and disability benefits to soldiers returning from Iraq and Afghanistan under 

the most optimistic assumptions. 

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11Footnote: Analysis of DMDC’s Contingency Tracking System shows 57,462 new first-time 

deployments between June 2006 and September 2006, an average 19,154 per month 12 Ibid, page 33, ‘‘Benefits delivery network’’, RCS 20–0221 13See Veterans Benefits Administration ‘‘Annual Benefits Report’’ (ABR), 2005, page 17 for 

definition of disability compensation and see VA Disability Compensation Program, Legislative 

History, VA Office of Policy, Planning and Preparedness 2004 for principles behind the program. 14 Ibid, page 24, lists $1304 for 10% and $31,611 for 100%, but those with 100% disability also 

receive additional payments that combined result in an annual payment of approximately 

$44,000. 15 Ibid, page 33. 

• Moderate Scenario: The moderate scenario is based on the current course of 

the war. This scenario uses the Congressional Budget Office’s expected deployment figures, which would involve a gradual drawdown of troops but 

maintain a small U.S. force in the region through 2015. Under this scenario, 

the total unique servicemen involved in the conflict will be 1.7 million, that 

is, 300,000 additional troops rotated in over the period of years. Nearly 20,000 

new troops are regularly deployed into the two war zones each month, before 

any ‘‘surge’’ or escalation of the conflict is considered.11 This scenario uses the 

first Gulf War as the basis for predicting the level of troops who will claim 

disability benefits, the rate of approval of the claims, and the utilization of 

medical resources. However a growth rate of 4.4% is projected for claims benefits, half way between the base cost-of-living adjustment and the actual 

growth rate of 6.1%. 

• High ‘‘Surge’’ Scenario: This scenario assumes that troop levels with surge in 

2007 and that the total participation in the war over time will eventually 

reach 2 million unique servicemen by 2016. It also models the potential that 

half the veterans claim disability payments, which is a reasonable possibility 

given the ferocity of the conflict and the number of second and third deployments. This model also looks at the impact of growth in claims benefit payments and healthcare costs based on the actual growth rates over the past 

10 years. If the U.S. decides to increase troops and all trends on disability 

and healthcare continue as they have in the past, this model presents the resulting cost consequences. 

The costs estimated in this study are budgetary costs to the U.S. government directly associated with the payment of disability benefits and medical treatment for 

returning OIF/OEF war veterans. The costs do not include the interest payments 

on the debt that is being incurred in borrowing money to finance the war. Future 

cash flows were discounted at a rate of 4.75% reflecting current long-term U.S. borrowing rates. 

1. Disability Compensation 

There are 24 million living veterans, of whom roughly 11% receive disability benefits. Overall, in 2005 the U.S. currently paid $23.4 billion in annual disability entitlement pay to veterans from previous wars, including 611,729 from the first Gulf 

War, 916,220 from Vietnam, 161,512 Korean war veterans, 356,190 World War II 

veterans and 3 veterans of World War I.12

All 1.4 million servicemen deployed in the current war effort are potentially eligible to claim some level of disability compensation from the Veterans Benefits Administration. Disability compensation is a monetary benefit paid to veterans with 

‘‘service-connected disabilities’’—meaning that the disability was the result of an illness, disease or injury incurred or aggravated while the soldier was on active military service. Veterans are not required to seek employment nor are there any other 

conditions attached to the program. The explicit congressional intent in providing 

this benefit is ‘‘to compensate for a reduction in quality of life due to service-connected disability’’ and to ‘‘provide compensation for average impairment in earnings 

capacity.’’ The principle dates back to the Bible at Exodus 21:25, which authorizes 

financial compensation for pain inflicted by another13

Disability compensation is graduated according to the degree of the veteran’s disability, on a scale from 0 percent to 100 percent, in increments of 10%. Annual benefits range from a low of $1304 per year for a veteran with a 10% disability rating 

to about $44,000 in annual benefits for those who are completely disabled.14 The 

average benefit is $8890 although this varies considerably; Vietnam veterans average about $11,670.15 Additional benefits and pensions are payable to veterans with 

severe disabilities. Once deemed eligible, the veteran receives the compensation payment as a mandatory entitlement for the remainder of their lives, like Medicare and 

Social Security. 

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16GAO, ‘‘Veterans Benefits Administration: problems and Challenges Facing Disability Claims 

Processing’’, GAO Testimony before the Subcommittee on Oversight and Investigations, House 

Committee on Veterans Affairs, May 18, 2000 17 Ibid. 18 ‘‘Veterans Benefits: Further Changes in VBA’s Field Office Structure could help improve 

disability claims processing’’, GAO–06–149, December 2005 19 Ibid 20The VBA’s backlog of pending claims was 399,751 as of December 9, 2006 (VBA Monday 

Morning Workload Report). 21The average time to process a claim is 177 days as of 9/06 and average time to process an 

appeal is 657 days (VA Performance and Accountability Report FY 2006). 22 Bearing Point, Health Care/Financial Services industry report, September 14, 2006. 23 Veterans for America, interview with Paul Sullivan, program director, 11/06. 

There is no statute of limitations on the amount of time a veteran can claim for 

most disability benefits. The majority of veteran’s claims are within the first few 

years after returning, but some disabilities do not surface until years later. The VA 

is still handling hundreds of thousands of new claims from Vietnam era veterans 

for post-traumatic stress disorder and cancers linked to Agent Orange exposure. 

The process for ascertaining whether a veteran is suffering from a disability, and 

determining the percentage level of a veteran’s disability, is complicated and 

lengthy. A veteran must apply to one of the 57 regional offices of the Veterans Benefits Administration (VBA), where a claims adjudicator evaluates the veteran’s serv- ice-connected impairments and assigns a rating for the degree to which the veteran 

is disabled. For veterans with multiple disabilities, the regional office combines the 

ratings into a single composite rating. If a veteran disagrees with the regional office’s decision he or she can file an appeal to the VA’s Board of Veterans Appeals. 

The Board makes a final decision and can grant or deny benefits or send the case 

back to the regional office for further evaluation. Typically a veteran applies for disability in more than one category, for example, a mental health condition as well 

as a skin disorder. In such cases, VBA can decide to approve only part of the 

claim—which often results in the veteran appealing the decision. If the veteran is 

still dissatisfied with the Board’s decision to grant service connection or the percentage rating, he or she can further appeal it to two even higher levels of decisionmakers.16

Most employees at VA are themselves veterans, and are predisposed to assisting 

veterans obtain the maximum amount of benefits to which they are entitled. However, the process itself is long, cumbersome, inefficient and paperwork-intensive. 

The process for approving claims has been the subject of numerous GAO studies and 

investigations over the years. Even in 2000, before the current war, GAO identified 

longstanding problems in the claims processing area. These included large backlogs 

of pending claims, lengthy processing times for initial claims, high error rates in 

claims processing, and inconsistency across regional offices.17 In a 2005 study, GAO 

found that the time to complete a veteran’s claim varied from 99 days at the Salt 

Lake City regional office to 237 days at the Honolulu, Hawaii office18

The backlog of pending claims has been growing since 1996. In 2000, VBA had 

a backlog of 69,000 pending initial compensation claims, of which one-third had 

been pending for more than 6 months.19 Today, due in part to the surge in claims 

from the Iraq/Afghan wars, VBA has a backlog of 400,000 claims.20 VBA now takes 

an average of 177 days (6 months) to process an original claim, and an average of 

657 days (nearly 2 years) to process an appeal.21 This compares unfavorably with 

the private sector healthcare/financial services industry, which processes an annual 

30 billion claims in an average of 89.5 days per claim, including the time required 

for claims that are disputed.22

Projected Demand for Benefits among OIF/OEF Veterans 

It is difficult to predict with certainty the number of veterans from the two current wars who will claim for some amount of disability. The first Gulf War provides 

a baseline number although the Iraq and Afghanistan war has been longer and has 

involved more ground warfare than the Desert Storm conflict, which relied largely 

on aerial bombardment and 4 days of intense ground combat. However, in both conflicts, a number of veterans were exposed to depleted uranium that was used in 

anti-tank rounds fired by U.S. M1 tanks and U.S. A10 attack aircraft. Many disability claims from the first Gulf War stem from exposure to depleted uranium, 

which has been implicated in raising the risk of cancers and birth defects. Gulf War 

veterans also filed disability claims related to exposures to oil well fire pollution, 

low-levels of chemical warfare agents, experimental anthrax vaccines, and experimental anti-chemical warfare agent pills called pyridostigmine bromide, the antimalaria pill Lariam, skin diseases, and disorders from living in the hot climate,23

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24 ‘‘Veterans Benefits Improvement Act 1994’’ (Public Law 103–446) and ‘‘Persian Gulf War 

Veterans Act 1998’’ (PL 105–277). 25 In fact, the VA does not distinguish, for the purpose of claims processing, between the end 

of the first Gulf War and the present conflict (38 USC section 101(33) defines the Gulf War as 

starting on August 2, 1990, and continuing until either the President or the Congress declares 

an end to it and 38 CFR 3.317 defines the locations of the conflict). 26For Gulf War, the total claims filed to date are 271,192, of which 205,911 have been approved, 20,382 were denied and 34,899 are still pending (GWVIS, August 2006, p.7: Granted 

Service Connection +Denied Service Connection +Claims Pending) 27Gulf War total annual payment $4.3 billion (Ibid., VBA, ABR 2005 pp. 33) 28 VHA, Office of Public Health and Environmental Hazards, November 2006 29 VBA ‘‘Compensation and Benefit Activity among veterans deployed to the GWOT’’, July 20, 

2006, obtained under Freedom of Information Act by the National Security Archive at George 

Washington University. 30 Ibid, ABR 2005, p33 31Of the 50,508 non-mortally wounded soldiers in OIF/OEF there are at least 10,000 serious 

injuries such as brain injuries, spinal and amputations, according to DOD sources. See also 

Wallsten and Kosec, AEI–Brookings Working Paper 05–19, September 2005, estimate of 20% serious brain injuries, 6% amputees and 24% other serious injuries. 

which are likely to be cited in the current conflict. However, the number of disability claims in the Iraq/Afghan wars is likely to be higher due to the significantly 

longer length of soldier’s deployments, repeat deployments, and heavier exposure to 

urban combat. 

Following the Gulf War the criteria for receiving benefits were widened by Congress based on evidence of widespread toxic exposures.24 The same criteria for 

healthcare and benefits eligibility still apply to veterans of the Iraq and Afghanistan 

wars25 Forty-4 percent of those veterans filed disability claims for a variety of conditions and 87% were approved.26 The U.S. currently pays about $4 billion annually 

in disability payments to veterans of Desert Storm/Desert Shield.27

Of the 1.4 million U.S. servicemen who have so far been deployed in the Iraq/Afghan conflicts, 631,174 have been discharged as of September 30, 2006. Of those 

46% are in the full-time military and 54% are reservists and National Guardsmen.28

Therefore the total population that is potentially eligible for disability benefits is 

this number (631,174). To date 152, 669 servicemen have applied for disability benefits and of those, 104,819 have been granted, 34,405 are pending and 13,445 have 

been rejected. This implies an approval rate of 88% to date.29

We have estimated the cost of providing disability benefits to veterans under 

three scenarios. Under the low scenario, we expect that as in the first Gulf War, 

44% of the current veterans will eventually claim disability, with an approval rate 

of 87%. We estimate that the remaining 900,000 troops will be discharged in equal 

installments over the next 4 years bringing all U.S. troops home by 2010. We expect 

the same percentage of these troops to claim for disabilities, with the same approval 

rate, within a further 5 years. We have assumed that on average, claims are lower 

than average rate, at the lower rate of new claimants from the first Gulf War of 

$6506.30 This is probably an excessively conservative assumption because it projects 

the same rate of serious injuries as occurred in Gulf War I, when in fact we already 

know that more than the actual rate of serious injuries is much higher.31

The moderate scenario assumes that the war continues through 2014 with a total 

deployment of 1.7 million over the course of the war, and with gradually reduced 

deployment. It assumes that a slightly higher percentage of eligible veterans (50%) 

make claims, which is more realistic given deployment lengths. This scenario uses 

the actual average VA benefit payment of $8890. It assumes the rate of increase 

in benefits is 4.4%, midway between the mandatory Cost of Living Adjustment and 

the actual 10-year growth rate of 6.1%. The high scenario models the impact of a 

surge in forces bringing the total unique deployments to 2 million. It assumes 50% 

of eligible forces claim benefits and a rate of 6.1% increase, which is the actual rate 

over the past 10 years. It further assumes a higher rate of medical inflation (10% 

vs. 8% in the low and moderate scenarios). 

Table 1: Long-term Cost of Veterans Disability Benefits 32

Scenario Low Moderate High 

Disability Benefits ($bn) 67.63 109.98 126.76 

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32The figures in Table 1 represent the present value of disability benefits over 40 years for 

eligible veterans projected under the three scenarios described. 33 VBA’s ‘‘Monday Morning Report’’ of pending claims and other work performed at regional 

offices, cites: 11/25/06: 604,380; 11/26/05: 525,270; 11/27/04: 465,623. 34This projection based on the moderate scenario described previously, based on 1.7 million 

unique servicemen and CBO troop deployment figures through 2014. 35 38 USC section 1710 

Backlog of Pending Disability Claims 

The issue is not simply cost but also efficiency in providing disabled veterans with 

their benefits. In addition to all the problems detailed above, the Iraq and Afghan 

war veterans are filing claims of unusually high complexity (see table 3). To date, 

the backlog of pending claims from these recent war veterans is 34,000, but the vast 

majority of servicemen from this conflict have not yet filed their claims. Even without the projected wave of claims, the VA has an overall backlog of 400,000, including thousands of Vietnam era claims. Including all pending claims and other paperwork, the VA’s backlog has increased from 465,623 in 2004 to 525,270 in 2005 to 

604,380 in 2006.33

The fact that the VBA is largely sympathetic to the plight of disabled veterans 

should not obscure the fact that this system is already under tremendous strain. If 

only one fifth of the returning veterans who are eligible claim in a given year, and 

the total claims reaches a high of 38% effective rate (44%* 88% approval rate), the 

number of likely claims at the VBA over the next 10 years can be expected to rise 

from 104,819 to more than 600,000.34 (See table 2). 

Table 2: Projected Increase in Disability Claims (moderate scenario) 

Disability Benefits 2006 2007 2008 2009 2010 2011 2012 

Discharged 118,758 118,758 118,758 118,758 118,758 118,758 

cum 118,758 237,517 356,275 475,034 593,792 712,551 

Eligible claimants 

Existing discharged 

non-claimants 526,355 526,355 526,355 526,355 526,355 526,355 526,355 

Newly discharged — 118,758 237,517 356,275 475,034 593,792 712,551 

Total potential claimants 645,113 763,872 882,630 1,001,389 1,120,147 1,238,906 

Claim rate 22% 22% 27% 33% 38% 44% 44% 

New claims — 140,312 207,678 287,958 381,154 487,264 538,924 

Current beneficiaries 104,819 104,819 104,819 104,819 104,819 104,819 104,819 

Total claims (number) 104,819 245,131 312,497 392,777 485,973 592,083 643,743 

Total claims ($bn) 0.93 2.27 2.89 3.63 4.49 5.47 5.95 

If nothing is done to address the problem, the claims backlog will continue to grow 

throughout the period of the war, along with growing inequity between different regional offices. A key question is: what is a reasonable amount of time for the U.S. 

to make a disabled veteran wait for a disability check? This paper proposes several 

actions that could reduce the length of time for processing from zero to 90 days. (Described in more detail in section 4: Recommendations). These include: (a) greater 

use of the ‘‘Vet Centers’’ to provide assistance for veterans to file their claims, (b) 

automatically granting all or some of the claims, with subsequent audits to deter 

fraud, and (c) streamlining and technologically upgrading the claims system into a 

‘‘fast track’’ where veterans receive a quick decision on most claims. 

2. Veterans Medical Care Shortfall 

The VA’s Veterans Health Administration provides medical care to more than 5 

million veterans each year. This care includes primary and secondary care, as well 

as dental, eye and mental healthcare, hospital inpatient and outpatient services. 

The care is free to all returning veterans for the first 2 years after they return from 

active duty; thereafter the VA imposes copayments for various services, with the 

amounts related to the level of disability of the veteran.35

The VA has long prided itself on the excellence of care that it provides to veterans. In particular, VA hospitals and clinics are known to perform a heroic job in 

areas such rehabilitation. Medical staff is experienced in working with veterans and 

provides a sympathetic and supportive environment for those who are disabled. It 

is therefore of utmost important that the quality of care be maintained as the demand for it goes up. 

However, the demand for VA medical treatment is far exceeding what the VA had 

anticipated. This has produced long waiting lists and in some cases simply the absence of care. To date, 205,097, or 32% of the 631,174 eligible discharged OEF/OIF 

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36 VHA, Office of Public Health and Environmental Hazards, November 2006, Ibid, p. 14 37Paul Sullivan, Program Director of Veterans for America, 12/23/06 interview 38Frances Murphy, May 2006, Psychiatric News 

veterans have sought treatment at VA health facilities. These include 35% of the 

eligible active duty servicemen (101,260) and 31% of the eligible Reservists/Guards 

(103,837). To date, this number represents only 4% of the total patient visits at VA 

facilities—but it will grow. According to the VA, ‘‘As in other cohorts of military veterans, the percentage of OIF/OEF veterans receiving medical care from the VA and 

the percentage of veterans with any type of diagnosis will tend to increase over time 

as these veterans continue to enroll for VA healthcare and to develop new health 

problems.36’’

The war in Iraq has been noteworthy for the types of injuries sustained by the 

soldiers. Some 20% have suffered brain trauma, spinal injuries or amputations; another 20% have suffered other major injuries such as amputations, blindness, partial blindness or deafness, and serious burns. 

However, the largest unmet need is in the area of mental healthcare. The strain 

of extended deployments, the stop-loss policy, stressful ground warfare and uncertainty regarding discharge and leave has taken an especially high toll on soldiers. 

Thirty-6 percent of the veterans treated so far—an unprecedented number—have 

been diagnosed with a mental health condition. These include PTSD, acute depression, substance abuse and other conditions. According to Paul Sullivan, a leading 

veterans advocate, ‘‘The signature wounds from the wars will be (1) traumatic brain 

injury, (2) post-traumatic stress disorder, (3) amputations and (4) spinal chord injuries, and PTSD will be the most controversial and most expensive’’ 37 (see Table 3). 

Table 3: VHA Office of Public Health, November 2006 

Frequency of Possible Diagnoses Among Recent Iraq and Afghan Veterans 

Diagnosis 

(Broad ICD–9 Categories) 

(n = 205,097) 

Frequency * % 

Infectious and Parasitic Diseases (001–139) 21,362 10.4 

Malignant Neoplasms (140–208) 1,584 0.8 

Benign Neoplasms (210–239) 6,571 3.2 

Diseases of Endocrine/Nutritional/Metabolic Systems (240–279) 36,409 17.8 

Diseases of Blood and Blood Forming Organs (280–289) 3,591 1.8 

Mental Disorders (290–319) 73,157 35.7 

Diseases of Nervous System/Sense Organs (320–389) 61,524 30.0 

Diseases of Circulatory System (390–459) 29,249 14.3 

Disease of Respiratory System (460–519) 36,190 17.6 

Disease of Digestive System (520–579) 63,002 30.7 

Diseases of Genitourinary System (580–629) 18,888 9.2 

Diseases of Skin (680–709) 29,010 14.1 

Diseases of Musculoskeletal System/Connective System (710–739) 87,590 42.7 

Symptoms, Signs and Ill Defined Conditions (780–799) 67,743 33.0 

Injury/Poisonings (800–999) 35,765 17.4 

* Hospitalizations and outpatient visits as of 9/30/2006; veterans can have multiple diagnoses with each 

healthcare encounter. 

A veteran is counted only once in any single diagnostic category but can be counted in multiple categories, 

so the above numbers add up to greater than 205,097. 

Additionally, far more returning Iraqi war veterans (than those in previous conflicts) are likely to seek such help, in part due to awareness campaigns run by veteran’s organizations through the press. There is no reliable data on the length of 

waiting lists for returning veterans, but even the VA concedes that they are so long 

as to effectively deny treatment to a number of veterans. In the May 2006 edition 

of Psychiatric News, Frances Murphy M.D., the Under Secretary for Health Policy 

Coordination at VA, said that mental health and substance abuse care are simply 

not accessible at some VA facilities. When the services are available, Dr. Murphy 

asserted that, ‘‘waiting lists render that care virtually inaccessible.’’ 38

The VA curiously maintains that it can cope with the surge in demand, despite 

much evidence to the contrary. For the past 2 years, the VA ran out of money to 

provide healthcare. In FY 2006, the VA was obliged to submit an emergency supplemental budget request for $2 billion, which included $677 million to cover an unexpected 2% increase in the number of patients (half of which were OIF/OEF patients), $600 million to correct its inaccurate estimate of long-term care costs, and 

$400 million to cover an unexpected 1.2% increase in the costs per patient due to 

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39GAO–06–430R, ‘‘VA Health Care Budget Formulation’’, pp 18–20. 40This amount is calculated by estimating the budget 2006 supplemental budget request for 

OIF/OEF veterans per additional patient, using the GAO analysis in GAO–06–430R 41 VHA, Office of Public Health and Environmental Hazards, Ibid. 

medical inflation. The previous year, (FY 2005), VA requested an additional $1 billion, of which one-quarter was for unexpected OIF/OEF needs and remainder was 

related to overall under-estimation of patient costs, workload, waiting lists, and dependent care. The GAO analysis of these shortfalls concluded that they were due 

to the fact that VA was modeling its projections based on 2002 data, before the war 

in Iraq began.39

The budget shortfalls and the statement by Dr. Murphy suggest that the volume 

of veterans returning from Iraq and Afghanistan will not be able to obtain the 

healthcare they need, particularly for mental health conditions. Such veterans are 

at high risk for unemployment, homelessness, family violence, crime, alcoholism, 

and drug abuse, all of which impose an additional human and financial burden on 

the nation. In addition, many of these social services are provided by state and local 

governments which are already under tremendous strain. 

Projected Medical Costs 

The number of veterans who will eventually require treatment can be estimated 

using a baseline of the utilization during the first Gulf War, in which the VA is providing medical care to 48% of veterans. The average annual cost of treating veterans 

in the system is now $5000,40 although it is difficult to know whether the more 

grievous injuries and disabilities of the current conflict will drive up costs per patient. 

The costs of providing medical care have been calculated under the three scenarios. Under the low scenario, under which the U.S. will deploy no new troops, the 

ceiling for medical care is 48% of OIF/OEF veterans. If half of all veterans eventually seek medical treatment from the VA that will produce a demand of some 

700,000 veterans. However, due to the fact that veterans are eligible for free care 

during the first 2 years after discharge, we can expect a wave of returning war veterans within 2 years of their discharge date. Additionally, since active duty veterans 

claim medical care at a higher rate (than Guards/Reservists) and have been deployed in more of the most hazardous front-line task come home, we can expect that 

the average cost of treating such veterans increases as well as a high level of demand.41

If the demand for medical care increases as projected to some 700,000 or more 

veterans, there is a serious risk that the VA, which is already overwhelmed, will 

be unable to meet the medical needs of returning OIF/OEF veterans. Additional 

staff is needed in important areas such as brain trauma units and mental health. 

The VA also needs to expand systems such as triage nursing, to help leverage scarce 

medical resources. 

Even assuming that no more troops are deployed, the long-term cost of treating 

returning veterans will reach $208 billion. This however assumes that the supply 

of healthcare exists to treat them. If the number of troops continues to grow as in 

the moderate then cost of providing lifetime care rises to $315 billion. The annual 

budget payment under this scenario will reach $3 bn by 2010 and more than double 

by 2014. (See Table 4) 

Table 4: Projected Cost of Providing VA Medical Care (moderate 

scenario) 42

MEDICAL COSTS 2006 2007 2008 2009 2010 2011 2012 2013 2014 

Total Discharged 631,174 749,932 868,691 987,449 1,106,208 1,224,966 1,343,725 1,462,483 1,581,242 

% OIF/OEF veterans seeking 

care 32.50% 33.96% 35.49% 37.09% 38.76% 40.50% 42.32% 44.23% 46.22% 

Total OIF/OEF veterans 

seeking care 205,132 254,696 308,305 366,224 428,731 496,123 568,711 646,827 730,822 

Cost/medical claim $ 5,000 $ 5,400 $ 5,832 $ 6,299 $ 6,802 $ 7,347 $ 7,934 $ 8,569 $ 9,255 

Total cost ($bn) 1.0 1.4 1.8 2.3 2.9 3.6 4.5 5.5 6.8 

NPV $315.23 

Table 4: Projected Cost of for Providing VA Medical Care (moderate 

scenario) 42

However, these scenarios are conservative in assuming that only half of the returning veterans will eventually seek medical treatment from the VA and that the 

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42The NPV is calculated over 40 years, at a discount rate of 4.75%, with a peak rate of 50% 

veterans claiming care by 2016. 43 High scenario assuming 10% medical inflation rate. 44Opinion based on conversations with veterans organizations. 45 Vet Center costs document, page 3B–11 46October 2006 report issued by the House Veterans Affairs Committee, testimony by Vet 

Center managers. 

level of healthcare inflation will remain constant at 8%. Under a worst-case scenario, if troops levels rise to 2 million and if health inflation rises to the doubledigit levels experienced during the nineties, we can expect the total cost of providing 

lifetime medical care to veterans to reach $600 bn.43

Veterans Centers 

How can the VA possibly handle the number of returning troops who require care, 

as well as their families, especially for mental health conditions? Perhaps the most 

creative and successful innovation in the VA in past two decades has been the introduction of the ‘‘Vet Centers’’—207 walk-in storefront centers where veterans or their 

families can obtain counseling and reintegration assistance. The centers, operated 

by VA’s ‘‘Readjustment Counseling Service’’ are popular with veterans and their 

families and—at a total cost of some $100m per year—provide a highly cost-effective 

option for veterans who are not in need of acute medical care. The Vet Centers are 

particularly helpful for families, for example they provide a venue for a soldier’s 

spouse to seek guidance of the veteran is showing mental distress but will not seek 

help. They also supply bereavement counseling to surviving families of those killed 

during military service. And they offer a friendlier environment often staffed with 

recent OEF/OIF combat veterans and other war veterans—unlike VA regional offices which tend to be stuffy, bureaucratic offices located in downtown locations.44

To date, 144,000 veterans have sought assistance at these centers.45 However the 

demand for their services is threatening their ability to provide care. Vet Center 

managers recently surveyed by Congress said that in 50% of the Centers, the increasing workload is affecting their ability to treat veterans. Some 40% of the Vet 

Centers have directed veterans for whom individualized therapy would be appropriate into group therapy, and more than one-quarter of the Centers have limited 

or plan to limit family therapy. Nearly 17% have established waiting lists (or are 

in the process of setting them up).46

Currently the centers do not assist veterans in filing disability claims, but provided that the facility had sufficient secure storage space to handle such documents, 

there is no reason why they could not. The VA has recommended hiring an additional 1000 claims adjudicators—who could be placed in the Vet Centers (an average 

of 5 each) to help veterans figure out how to claim. The cost of expanding the number of centers, hiring additional staff and placing more claims adjudicators in the 

centers is minimal. 

Transition from DOD Payroll to VA Care 

One of the chief bottlenecks in the current system is the soldier’s transition from 

the DOD payroll into the VA benefit system. There are three primary ways that a 

soldier makes this transition. 

A veteran who is discharged regularly, and has some level of disability will typically have to wait 6 months before receiving his or her disability check from the 

VA. This is a period during which the veterans, particularly those in a state of mental distress, are most at risk for serious problems, including suicide, falling into substance abuse, divorce, losing their job, or becoming homeless. 

A second route is to exit via the ‘‘Benefits Delivery at Discharge’’ (BDD) program. 

This successful program allows soldiers to process their claims up to 6 months prior 

to discharge, so they can begin receiving benefits as soon as they leave the military. 

However, the use of this route has become much more difficult due to the extended 

deployments, the use of ‘‘stop-loss’’ orders, and the resulting unpredictability about 

when a soldier will be discharged. Additionally, this program is not available to Reservists and Guardsmen, who comprise 40% of the forces in Iraq and Afghanistan. 

The VBA claim denial rate is twice as high for Reserve and Guard veterans, posrmajette on PROD1PC63 with HEARING

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47 Active Duty denial rate is 7.6 percent compared with National Guard and Reserve denial 

rate of 17.8 percent, See Footnote 28 48 Congressional testimony of Jack McCoy, VBA, March 16, 2006, http://www.va.gov/OCA/testimony/hvac/sdama/060316JM.asp and a VA fact sheet indicate 26,000 BDD claims in 2003, 

39,000 in 2004, and 46,000 in 2005. http://www1.va.gov/opa/fact/tranasst.asp. 49GAO–06–494, ‘‘Hundred of Battle-Injured GWOT Soldiers Have Struggled to Resolve Military Debts’’ 50 However, the availability of medical care may vary significantly by region. 

sibly due in part to their lack of access to BDD.47 Consequently the usage of this 

apparently better route has not been increasing as would have been expected.48

For veterans who are more seriously wounded, the process is more complicated 

as they transition from medical facilities run by DOD into medical facilities run by 

the VA. For example a wounded veteran may be treated initially at Walter Reed 

Army Hospital and then transferred to a VA facility. Veterans experience some difficulties is securing the maximum amount of disability benefits at discharge during 

such transitions, due to a lack of compatibility between the DOD and VA paperwork 

and tracking systems. The VA complains that the records they receive from DOD 

are delayed or contain errors, in many cases it is the situation where the data that 

is tracked is not compatible. This not only creates unnecessary problems in moving 

veterans through the system but it also makes it more difficult for the data to be 

analyzed in medical and other studies. 

Additionally there are the problems caused by the Pentagon’s poor accounting system. GAO investigators have found that DOD pursued hundreds of battle-injured 

soldiers for payment of non-existent military debts—because DOD financial systems 

erroneously reported that they were indebted. For example, one Army Reserve Staff 

Sergeant, who lost his right leg below the knee, was forced to spend 18 months disputing an erroneously recorded debt of $2231 which prevented him from obtaining 

a mortgage to purchase a home. Another staff sergeant who suffered massive brain 

damage and PTSD had his pay stopped and utilities turned off because the military 

erroneously recorded a debt of $12,000. Hundreds of injured soldiers may be in this 

situation.49

Overall Assessment and Cost 

Overall the U.S. is not adequately prepared for the influx of returning servicemen 

from Iraq and Afghanistan. There are three major areas in which it is not prepared: 

claims processing capacity for disability benefits; medical treatment capacity, in 

terms of the number of healthcare personnel available at clinics throughout the 

country, particularly in mental health; and third, there is no preparation for paying 

the cost of another major entitlement program. 

As discussed earlier, the backlog in claims benefit is already somewhere between 

400,000 and 600,000. Unless major changes are made to this process, the number 

of claims pending and requiring attention will reach some 750,000 within the next 

2 years and the pendency period will increase proportionately, resulting in more veterans falling through the cracks that could have been avoided. In addition, veterans 

whose claims reach different centers in different parts of the country will have widely different experiences, proving highly unfair to those who just happen to be located in areas of greater backlog. 

The quality of medical care is likely to continue to be high for veterans with serious injuries treated in VA’s new polytrauma centers. However, the current supply 

of care makes it unlikely that all facilities can offer veterans a high quality of care 

in a timely fashion. Veterans with mental health conditions are most likely to be 

at risk because of the lack of manpower and the inability of those scheduling appointments to distinguish between higher and lower risk conditions. If the current 

trends continue, the VA is likely to see demand for healthcare rising to 750,000 veterans in the next few years, which will overwhelm the system in terms of scheduling, diagnostic testing, and visiting specialists, especially in some regions.50

The cost of providing disability benefits and medical care, even under the most 

optimistic scenario that no additional troops are deployed and the claims pattern 

is only that of the previous Gulf War, would suggest that at a minimum the cost 

of providing lifetime disability benefits and medical care is $350 billion. If the number of unique troops increases by another 200,000 to 500,000 over a period of years, 

this number may rise to as high as nearly $700 bn. (See Table 5) The funding needs 

for veterans’ benefits thus comprise an additional major entitlement program along 

with Medicare and Social Security that will need to be financed through borrowing 

if the U.S. remains in deficit. This will in turn place further pressure on all discretionary spending including that for additional veterans’ medical care. 

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51Total lifetime costs over 40 years, discounted at 4.75% under scenarios described. 52This paper considers only the budgetary costs of veterans care. Standard economic theory 

would treat disability benefits as a transfer payment and deduct these from the economic and 

social loss associated with veteran’s reduced economic lives. This was the methodology used in 

(stiglitz paper). 53KM World, June 1999. 

Table 5: Total Veterans Disability and Medical Costs 51

LOW MODERATE HIGH 

Disability 67.6 109.5 126.8 

Medical 282.2 315.2 536.0 

TOTAL ($Bn) 349.8 424.7 662.8 

In the context of the overall costs of the War 

Veteran’s disability benefits and medical care are two of the most significant longterm costs of the War. As shown in our previous analysis of the costs of the war, 

the war has both budgetary and economic costs. This paper focuses only on the 

budgetary costs of caring for veterans. It does not take into account the value of 

lives lost, or effectively lost due to grievous injury. Not does it take into account the 

economic impact of the large number of veterans living with disabilities who cannot 

engage in full economic activities.52

Recommendations 

a) Medical Care 

The Veterans Health Administration will not be able sustain its high quality of 

care without greater funding and increased capacity in areas such as psychiatric 

care and brain trauma units. In addition, more funding should be provided for readjustment counseling services by social workers at the Vet Centers. Even doubling 

the amount of funding for counseling at the Vet Centers is a small amount compared to the funds now being requested for additional recruiting of new soldiers. 

(b) Disability Claims Backlog 

There are at least three potential methods of reducing the number of pending 

claims. Perhaps the easiest would be to ‘‘fast track’’ returning Iraq and Afghan war 

veteran’s claims in a single center staffed with highly experienced group of adjudicators who could provide most veterans with a decision within 90 days. At a minimum, all simple claims could be dispatched in this manner. During the past decade, private sector health insurance companies have reengineered their processes 

and adopted technologies, such as new automated data capture and document processing systems that have dramatically improved their ability to handle large volumes of information. This has allowed the industry to bring the average claim processing time down to 89.5 days. For example, the firm Noridian used technology to 

enable operators to process four to five times more claims in the same amount of 

time as under their old system, and to speed the form retrieval process for better 

customer service.53

The VA has proposed a more typically governmental solution of adding 1,000 more 

claims adjudicators. Even apart from the cost of $80 m or so of adding these personnel, the question is whether adding additional personnel to a cumbersome system is the best possible way to speed up transactions and improve service. A better 

idea would be to expand the Vet Centers to offer some assistance in helping veterans figure out their disability claims. The 1,000 claims experts could be placed inside the Vet Centers (5 per center), thus enabling veterans and their families to obtain quick assistance for many routine claims. Vet Centers would only require minor 

modifications (secure storage space, additional computers and offices) to fill this 

role. 

The best solution might be to simplify the process—by adopting something closer 

to the way the IRS deals with tax returns. The VBA could simply approve all veterans’ claims as they are filed—at least to a certain minimum level—and then audit 

a sample of them to weed out and deter fraudulent claims. At present, nearly 90 

percent of claims are approved. VBA claims specialists could then be redeployed to 

assist veterans in making claims, especially at VA’s ‘‘Vet Centers.’’ This startlingly 

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easy switch would ensure that the U.S. no longer leaves disabled veterans to fend 

for themselves. 

The cost of any solution that reduced the backlog of claims is likely to be an increased number of claims, and a quicker pay-out. If 88% of claims were paid within 

90 days instead of the 6 months to 2 years currently required, the additional budgetary cost is likely to be in the range of $500m in 2007. 

Conclusions 

President Bush is now asking for more money to spend on recruiting in order to 

boost the size of the Army and deploy more troops to Iraq. But what about taking 

care of those same soldiers when they return home as veterans? The number of veterans who are returning home with injuries or disabilities is large and growing. We 

have not paid careful enough attention, or devoted sufficient resources, to planning 

for how to take care of these men and women who have served the nation. 

There has been a tendency in the media to focus on the number of U.S. deaths 

in Iraq, rather than the volume of wounded, injured, or sick. This may have led the 

public to underestimate the deadliness and long-term impact of the war on civilian 

society and the government’s pocketbook. Were it not for modern medical advances 

and better body armor, we would have suffered even more loss of life. 

One of the first votes facing the new Democratic-controlled Congress will be yet 

another ‘‘supplemental’’ budget request for $100+ billion to keep the war going. The 

last Congress approved a dozen such requests with barely a peep, afraid of ‘‘not supporting our troops’’. If the new Congress really wants to support our troops, it 

should start by spending a few more pennies on the ones who have already fought 

and come home. 

Limitations of Data 

This paper has been prepared based on the best available data from VA sources, 

CBO, GAO, and veterans organizations. Reconciling this data has therefore been 

done to try to generate realistic estimates, but is not precise. It is also difficult to 

predict with certainty the uptake in the military of benefits and medical care. In 

all cases this study has been done conservatively, for example it is entirely possible 

that after the length and grueling nature of this war, that a much higher number—

perhaps 2⁄3 of returning veterans—would seek disability benefits and/or healthcare 

and the estimates in this paper prove too low. 

Issues not addressed 

This paper has not attempted to address the cost of taking care of wounded and 

disabled Iraqi soldiers in Iraq. A number of studies have estimated the fatalities in 

Iraq, but there are few studies of the number of injuries among the Iraqi military. 

As the U.S. continues to place an emphasis on developing the Iraqi military to replace it, it is worth asking what the cost to that country will be of providing medical 

care and any kind of long-term benefits to those who are fighting. This study excludes VBA benefits such as education, insurance, vocational rehabilitation, and 

home loan guaranty programs. This study also excludes private, state, and local 

healthcare, disability, and employment benefits for returning veterans. 

Acknowledgements 

This paper was prepared with the invaluable assistance of Tony Park, a student 

at the Kennedy School of Government, and Paul Sullivan, Director of Research and 

Analysis at Veterans for America. Their contributions are gratefully acknowledged. 

Æ 

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