United States Government Accountability Office

GAO Report to Congressional Requesters

 

VETERANS’

DISABILITY 

BENEFITS 

VA Should Improve Its 

Management of 

Individual 

Unemployability 

Benefits by 

Strengthening 

Criteria, Guidance, 

and Procedures 

This report was revised on October 23, 2006, to correct two pie charts 

and accompanying text dealing with the ages of (1) all IU 

beneficiaries as of October 2005 and (2) new IU beneficiaries from 

October 2004 to October 2005. See pages iv and v for a list of data 

changes. 

May 2006 

GAO-06-309 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

May 2006

VETERANS’ DISABILITY BENEFITS

VA Should Improve Its Management of 

Individual Unemployability Benefits by 

Strengthening Criteria, Guidance, and 

Procedures 

Highlights of GAO-06-309, a report to 

congressional requesters 

As part of its Disability

Compensation program, the 

Department of Veterans Affairs 

(VA) provides Individual 

Unemployability (IU) benefits to 

veterans of any age who are

unemployable because of serviceconnected disabilities. Over the last 

decade, the number of IU 

beneficiaries and benefit costs have

more than tripled. In 2005, about 

220,000 veterans received an 

estimated $3.1 billion in IU 

benefits. In response to a 

congressional request, GAO

assessed VA’s management of IU 

benefits. This report (1) examines 

the added value of IU benefits for

veterans of selected ages and 

disability ratings, (2) assesses the

criteria, guidance, and procedures

used for initial decision making, (3) 

assesses VA’s ongoing eligibility

enforcement procedures, and (4) 

compares VA’s decision-making 

and enforcement procedures with

those used by other disability 

programs. 

What GAO Recommends

GAO recommends that VA should 

clarify and strengthen its IU

eligibility criteria, guidance, and 

procedures for initial and ongoing

eligibility decisions; and develop a

return-to-work strategy for IU 

claimants. VA agreed with our

conclusions and concurred with 

our recommendations, and stated 

that it has implemented and plans 

to implement program changes in

areas that we identified as needing 

attention. 

Under VA’s disability compensation program, VA can award IU benefits (that 

is, total disability compensation) to veterans of any age who cannot work 

because of service-connected disabilities even though VA did not rate their 

impairments at the total disability level. The added value of IU benefits over 

a veteran’s lifetime depends upon the veteran’s level of impairment at the 

time he or she begins receiving IU benefits and the length of time these 

benefits are received. To illustrate the potential amount of IU benefits that 

could be received, GAO estimated the lifetime present value of the added 

benefits in disability compensation for veterans with different impairment 

levels who began receipt of IU benefits in 2005 at different ages. GAO found 

that the lifetime present value of these benefits can range from: 

• about $300,000 to over $460,000 for veterans age 20 in 2005, and 

• about $89,000 to about $142,000 for veterans age 75 in 2005. 

GAO also found that just under half (46 percent) of new IU beneficiaries was 

awarded IU benefits at the age of 60 or older, and 19 percent were age 75 or 

older. 

VA’s criteria, guidance, and procedures for awarding IU benefits do not 

ensure that its IU decisions are well supported. VA regulations and 

guidelines lack key criteria and guidance that are needed to determine 

unemployability.VA guidelines also do not give rating specialists the 

procedures to obtain the employment history and vocational assessments 

needed to support IU decisions. As a result, some VA staff told us that IU 

benefits have been granted to some veterans with employment potential. 

In addition, VA’s process for ensuring the ongoing eligibility of IU

beneficiaries is inefficient and ineffective. This enforcement process relies 

on old data, outdated, time-consuming manual procedures, insufficient 

guidance, and weak eligibility criteria. Moreover, the agency does not track 

and review its enforcement activities to better ensure their effectiveness. 

VA is among the federal disability programs GAO has identified as high risk 

and in need of modernization, in part, because it is poorly positioned to 

provide meaningful and timely support to help veterans with disabilities 

return to work. Specifically, VA’s compensation program does not reflect the 

current state of science, technology, medicine, and the labor market. VA’s 

management of IU benefits exemplifies these problems because its practices

lag behind those of other disability programs. Approaches from other 

disability programs demonstrate the importance of providing return-to-work

services and using vocational expertise to assess the claimant’s condition 

and provide the appropriate services. Incorporating return-to-work practices 

in IU decision making could help VA modernize its disability program to 

enable veterans to realize their full potential without jeopardizing the 

availability of benefits for veterans who cannot work. 

www.gao.gov/cgi-bin/getrpt?GAO-06-309.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Cristina 

Chaplain at (202) 512-7215 or 

ChaplainC@gao.gov. 
VA Individual Unemployability Benefits

Contents 

Letter 1

Results in Brief 5

Background 7

The Added Value of IU Benefits Over A Lifetime Depends on the 

Veteran’s Individual Circumstances 13 

VA’s Decision-making Criteria, Guidance, and Procedures Do Not 

Ensure That IU Decisions Are Well Supported 16 

VA’s Earnings Enforcement Process is Inefficient and Ineffective 23 

VA’s Practices to Manage Its Disability Benefits Lag Behind Other 

Disability Programs 27 

Conclusions 36

Recommendations for Executive Action 37 

Agency Comments 38 

Appendix I IU Beneficiaries and Estimated Expenditures 40 

Appendix II Lifetime Present Value Analysis of IU Benefits 42 

Appendix III Examples from VA’s Rating Schedule for Selected 

Medical Conditions 45 

Appendix IV Example of Procedures to Calculate Combined 

Disability Ratings 46 

Appendix V Comments from the Department of Veterans Affairs 47 

Appendix VI GAO Contacts and Staff Acknowledgements 50 

Page i GAO-06-309
VA Individual Unemployability Benefits

Tables 

Table 1: VA Basic Monthly Disability Compensation Rates in 2005 7 

Table 2: SSA’s Debt Collection Tools for Benefit Overpayments 35 

Table 3: Lifetime Present Value of Increased Benefits for Veterans 

Receiving IU by Selected Ages and Schedular Ratings 43 

Table 4: VA’s Rating Schedule for Selected Medical Conditions 45 

Figures 

Figure 1: Types of Service-Connected Impairments of IU 

Beneficiaries as of October 2005 9 

Figure 2: Ages of IU Beneficiaries as of October 2005 11 

Figure 3: Estimated Lifetime Present Values of the Added Benefits 

for Veterans Awarded IU Benefits in 2005 at Selected Ages 

and Schedular Ratings 14 

Figure 4: Ages of New IU Beneficiaries from October 2004 to

October 2005 15 

Figure 5: Number of IU Beneficiaries for 1996 to 2005 40 

Figure 6: Estimated IU Expenditures for 1996 to 2005 41 

Figure 7: Procedures to Calculate Combined Disability Rating 46 

Page ii GAO-06-309
VA Individual Unemployability Benefits

Abbreviations 

DI Disability Insurance 

HHS Department of Health and Human Services 

IRS Internal Revenue Service 

ITC Information Technology Center 

IU Individual Unemployability 

NDNH National Directory of New Hires 

PMC Pension Maintenance Center 

SSA Social Security Administration 

SSI Supplemental Security Income 

VA Department of Veterans Affairs 

VHA Veterans Health Administration 

VR&E Vocational Rehabilitation & Employment Service 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 

Page iii GAO-06-309
VA Individual Unemployability Benefits

This report was revised to correct two pie charts and accompanying text

dealing with the ages of (1) all IU beneficiaries as of October 2005 and (2) 

new IU beneficiaries from October 2004 to October 2005. The report’s 

conclusions and recommendations were not changed. 

In the Highlights Page, under “What GAO Found,” second paragraph, 

• On line 1, we replaced “the vast majority (79 percent)” with “just under 

half (46 percent).” 

In the Results in Brief, page 5, first paragraph, 

• On line 13, we replaced “the vast majority” with “just under half;” and 

• On line 14, we replaced “79” with “46.” 

In the Background, page 10, second paragraph, 

• On line 2, we deleted “vast;” and 

• On line 5, we replaced “77” with “51.” 

The corrected percentages in “Figure 2: Ages of IU Beneficiaries as of 

October 2005,” page 11, are as follows: 

Age Category Percentage

20 – 49 13 

50 – 59 36 

60 – 64 13 

65+ 38

In the section on “The Added Value of IU Benefits Over A Lifetime 

Depends on the Veteran’s Individual Circumstances,” page 14, second 

paragraph, 

• On line 2, we replaced “the vast majority” with “just under half.” 

And page 15, first paragraph, 

• On line 1, we replaced “79” with “46.” 

Page iv GAO-06-309
VA Individual Unemployability Benefits

The corrected percentages in “Figure 4: Ages of New IU Beneficiaries from

October 2004 to October 2005,” page 15, are as follows: 

Age Category Percentage

20 – 49 15 

50 – 59 39 

60 – 64 14 

65 – 69 5 

70 – 74 6 

75+ 19

Page v GAO-06-309
United States Government Accountability Office

Washington, DC 20548 

May 30, 2006

The Honorable Jeff Miller 

Chairman 

Subcommittee on Disability Assistance 

 and Memorial Affairs 

Committee on Veterans’ Affairs 

House of Representatives 

The Honorable Larry E. Craig 

Chairman 

Committee on Veterans’ Affairs 

United States Senate 

The Honorable Henry E. Brown, Jr. 

Chairman 

Subcommittee on Health

Committee on Veterans’ Affairs 

House of Representatives 

The Department of Veterans Affairs (VA) manages a range of benefit 

programs that, among other things, compensate veterans for disabilities 

incurred or aggravated during active military service. Military personnel in 

combat are now surviving injuries that would have been fatal in past 

conflicts, but along with this survival has come an increased rate of 

disabilities.1 With the continuing deployment of our military forces to 

armed conflicts in Iraq and Afghanistan and the use of military personnel 

in other efforts involving fighting terrorism and national preparedness, the 

effective and efficient management of VA’s disability programs is of 

paramount importance.2

 The largest of these programs is the Disability 

Compensation program, which as of September 2005, paid an estimated 

$29 billion in benefits to 2.6 million veterans in compensation for lost 

 1

 GAO, VA Disability Benefits and Health Care: Providing Certain Services to the 

Seriously Injured Poses Problems, GAO-05-444T (Washington, D.C.: Mar. 17, 2005). 

2

 GAO, Military Personnel: Preliminary Observations on Recruiting and Retention

Issues within the U.S. Armed Forces, GAO-05-419T (Washington, D.C.: Mar. 16, 2005); and

GAO, National Preparedness: Integration of Federal, State, and Local Efforts Is Critical 

to an Effective National Strategy for Homeland Security, GAO-02-621T (Washington, D.C.: 

Apr. 11, 2002). 

Page 1 GAO-06-309 VA Individual Unemployability Benefits
earning capacity due to service-connected disabilities. Through this 

program, VA provides benefits to veterans in accordance with a Schedule

for Rating Disabilities that categorizes disabilities on a scale ranging from 

0 percent to 100 percent (in increments of 10 percentage points), which is 

intended to equate to the average loss in earning capacity resulting from 

the service-connected disability. Under VA’s regulations governing 

Individual Unemployability (IU), VA can grant total disability 

compensation benefits at the 100-percent level to veterans of any age 

whose service-connected disabilities are rated at 60 percent or higher and 

have caused them to be unemployable. Although disability compensation 

benefits are provided to veterans regardless of their income, VA places an

earnings limit on the continued receipt of IU benefits. This limit applies 

only to the veteran’s earnings, and not to the veteran’s unearned income or 

household income. Managing IU benefits involves not only assessing initial 

eligibility for benefits, but also ensuring beneficiaries’ ongoing eligibility 

by identifying those who are not in compliance with the earnings limit. 

VA has experienced a marked increase in IU beneficiaries and 

expenditures at a time when advances in medicine and technology, along 

with labor market changes, have provided greater opportunity for people 

with disabilities to seek and maintain employment.3

 This trend has caused 

concern among Members of Congress about VA’s management of IU 

benefits. Our analysis of VA data shows that the number of IU 

beneficiaries and payments has more than tripled since the mid-1990s. 

From September 1996 to September 2005, the number of veterans 

receiving IU benefits has increased from about 71,000 to about 220,000.

Moreover, we estimated that IU benefit payments from 1996 to 2005 have 

grown from about $857 million to $3.1 billion. In September 2005, nearly 

half of all veterans receiving disability compensation who were rated 

between 60 percent and 90 percent received IU benefits. (See app. I for a 

discussion of our estimation methods and figures showing IU beneficiaries 

and expenditures over the last decade.) 

This report continues GAO’s long-standing reviews of VA and other federal 

disability programs. In January 2003, GAO determined that federal 

disability programs, including those of VA, were in urgent need of 

 3

 For more information on how the relationship between impairments and work has been 

redefined, see GAO, SSA Disability: Return-to-Work Strategies From Other Systems May 

Improve Federal Programs, GAO/HEHS-96-133 (Washington, D.C.: July 11, 1996); and GAO, 

SSA Disability: Other Programs May Provide Lessons for Improving Return-to-Work 

Efforts, GAO-01-153 (Washington, D.C.: Jan. 12, 2001). 

Page 2 GAO-06-309 VA Individual Unemployability Benefits
attention and transformation, and placed the modernization of federal 

disability programs on its high-risk list.4

 With regard to VA, we have 

reported that the agency’s Disability Compensation program has struggled 

to make timely and accurate decisions and that the program does not 

reflect the current state of science, technology, medicine, and the labor 

market. Over the last 2 decades, GAO, the VA Inspector General, and the

United States Court of Appeals for Veterans Claims,5

 have raised a number 

of concerns about VA’s management of IU benefits, including problems 

with both the decision-making process and enforcement procedures. Many 

of these problems remain to be addressed. You asked us to examine the 

criteria VA uses in determining initial eligibility for IU benefits and VA’s 

efforts to enforce ongoing eligibility. In response to your request, this 

report (1) examines the potential added value of IU benefits over a lifetime 

for veterans of selected ages and disability ratings, (2) assesses the extent 

to which VA has the decision-making criteria, guidance, and procedures to 

ensure its IU decisions are well supported, (3) assesses the extent to 

which VA has efficient and effective enforcement procedures, and (4) 

compares decision-making and enforcement procedures used by other 

disability programs with VA’s procedures. 

To examine the potential added value of IU benefits, we estimated lifetime

present value of IU benefits for veterans of various ages with disability 

ratings between 60 percent and 90 percent. (See app. II for more 

information on our methods.)6

 To assess VA’s IU decision-making criteria 

and processes, we reviewed agency regulations and guidance, GAO 

reports, Court of Appeals for Veterans Claims decisions, VA Inspector 

General reports, and VA’s 2001 proposal to revise the regulations 

governing IU decision making. Additionally, we interviewed officials from 

VA’s Compensation and Pension Service central office, Vocational 

Rehabilitation and Employment (VR&E) Service, and Veterans Health 

Administration (VHA). We visited four VA regional offices,7

 where we 

interviewed officials and reviewed a small number of case files for 

veterans who had been awarded IU benefits to improve our understanding 

 4

 GAO, High-Risk Series: An Update, GAO-03-119 (Washington, D.C.: January 2003). 

5

 Previously known as the U.S. Court of Veterans Appeals.

6

 For consistency purposes, we have used 2005 data throughout the report. 

7

 We visited the VA regional offices in Milwaukee, Wisconsin; Oakland, California;

Philadelphia, Pennsylvania; and St. Petersburg, Florida; which we chose because of their 

differing workloads and location in different regions of the United States. 

Page 3 GAO-06-309 VA Individual Unemployability Benefits
of the IU decision-making process. We also discussed the provision of IU

benefits with officials of several veterans service organizations.

8

 To assess 

VA’s procedures for the enforcement of the IU earnings limit, we reviewed 

VA regulations and policies, and other agency documents. We also 

performed work at the agency’s Compensation and Pension Service 

central office, Hines Information Technology Center, Pension Maintenance 

Centers,9

 and the four regional offices we visited. In addition, we 

interviewed information technology staff from the Social Security 

Administration (SSA) who were responsible for conducting the computer 

match of VA records and SSA earnings data. To compare VA’s procedures 

with those of other disability programs, we reviewed disability programs 

administered by SSA and private-sector long-term disability insurers.10 For 

information on decision making in other programs, we relied primarily on 

prior GAO reports, but also supplemented this information with interviews 

with relevant officials to ensure our information was current. We also 

interviewed SSA officials to gain more information about SSA’s own 

enforcement activities. In addition, because several agencies use the 

National Directory of New Hires (NDNH) to enforce earnings limits in 

their programs, we interviewed officials in the Department of Health and

Human Services (HHS) regarding access to and the reliability of NDNH 

data, which contains information on quarterly wages, new hires, and 

unemployment insurance compensation.11 We conducted our work 

between January 2005, and March 2006, in accordance with generally 

accepted government auditing standards. 

 8

 The American Legion, Disabled American Veterans, and Paralyzed Veterans of America. 

9

 VA’s three Pension Maintenance Centers are located in Milwaukee, Wisconsin; 

Philadelphia, Pennsylvania; and St. Paul, Minnesota. 

10 We reviewed and reported upon the practices of the three U.S. private insurers in our 

2001 report entitled SSA Disability: Other Programs May Provide Lessons for Improving

Return-to-Work Efforts, GAO-01-153 (Washington, D.C.: Jan. 12, 2001). To update our 

information, we contacted the insurers in 2005 and two of the three insurers told us they 

still used similar practices. The other insurer would not comment on its current practices. 

11 The data on quarterly wages is reported by states and federal agencies within 1 to 4

months after each reporting quarter. Data on new hires is reported within 30 days from the

date of hire and unemployment insurance compensation is reported within 1 month of the

end of a quarter. 

Page 4 GAO-06-309 VA Individual Unemployability Benefits
The added value of IU benefits over a veteran’s lifetime depends upon the 

veteran’s schedular rating at the time he or she begins receiving IU 

benefits and the length of time these benefits are received. To illustrate the 

potential amount of IU benefits that could be received, GAO estimated the 

lifetime present value of the increase in disability compensation benefits 

for veterans with schedular disability ratings between 60 and 90 percent 

who began receipt of IU benefits in 2005 at different ages. For example, for 

younger veterans, those at age 20 in 2005, the estimated lifetime present 

value of these benefits can range from almost $300,000 to over $460,000. 

For veterans awarded IU benefits at age 75 in 2005, the lifetime present 

value of these benefits can range from about $89,000 to about $142,000. In

addition, GAO’s analysis of the age at which veterans begin to receive IU 

benefits shows that just under half of new IU beneficiaries were awarded 

IU benefits at the age of 60 or older. For example, GAO found that 46 

percent of veterans awarded IU benefits from October 2004 to October 

2005 were age 60 or older, and 19 percent were age 75 or older. 

Results in Brief 

VA’s regulations and guidelines for awarding IU benefits do not ensure 

that its decisions are well supported. VA regulations and guidelines lack 

key criteria and guidance that are needed to determine unemployability. 

VA rating specialists making IU decisions are required to determine 

whether the claimant is capable of obtaining or retaining substantially 

gainful employment. VA guidelines, however, do not specify the criteria for 

determining whether someone has the ability to obtain or retain 

substantially gainful employment. Instead, rating specialists rely on the 

concept of marginal employment when making IU decisions. The 

guidelines generally define marginal employment as annual earnings at or

below the poverty threshold for one person, which was $10,160 for 2005. 

However, the guidelines do not state how rating specialists are to 

determine whether a veteran who is not working or is engaged in only 

marginal employment has the ability to obtain or retain substantially 

gainful employment. In addition, VA guidelines do not give rating 

specialists the procedures to obtain the employment and earnings history 

and vocational assessments needed to support IU decisions. As a result, 

VA ratings specialists and some vocational rehabilitation staff told us that 

unemployability benefits have sometimes been granted to veterans who 

may have employment potential. 

In addition, VA has an inefficient and ineffective process to enforce the 

earnings limit for ongoing eligibility for IU benefits. VA’s main 

enforcement mechanism is its computerized match that identifies 

beneficiaries with earnings, which is supplemented with a manual review 

to assess whether those IU beneficiary are in compliance with ongoing 

Page 5 GAO-06-309 VA Individual Unemployability Benefits
eligibility criteria. While effective enforcement relies on quickly identifying 

veterans who are no longer qualified, VA’s process relies on 1.5-year old 

earnings data when more current data is available. VA also manually 

transmits information, which further slows down the process. In addition, 

the agency’s written guidelines do not require staff to thoroughly evaluate

all available earnings information to identify those who are not qualified.

Furthermore, other earnings related criteria may allow veterans with high 

earnings to retain their benefits. Finally, the agency does not track and 

review its enforcement activities to ensure their effectiveness. 

VA’s practices for its IU benefits lag behind the practices used by other 

disability programs. VA lacks several features used by the private-sector 

disability programs we reviewed and by SSA to provide a more thorough 

assessment of a claimant’s ability to work as well as supports and 

incentives to encourage them to return to work. Private insurers have 

developed assessment processes that focus on return to work, using a 

variety of assessment tools and expertise to evaluate claimants’ ongoing 

eligibility and assist those with work potential to return to the labor force. 

They also offer various financial and other incentives to encourage 

claimants to return to work. Like insurers, SSA also has access to medical 

and vocational specialists to evaluate a claimant’s ability to work, and 

provides assistance and incentives to help its beneficiaries’ return to work. 

Furthermore, SSA has taken advantage of federal opportunities to evaluate 

beneficiaries’ ongoing eligibility and to detect and recover benefit 

overpayments, such as federal databases with recent employment and 

earnings information to detect unreported beneficiary earnings and federal 

debt collection methods. 

To help VA ensure the integrity of its processes for determining the initial 

and ongoing eligibility for IU benefits, we recommend that the Secretary of 

Veterans Affairs (1) clarify and strengthen its eligibility criteria, guidance, 

and procedures for determining unemployability and (2) update 

procedures and strengthen criteria for the enforcement of the IU earnings 

limit. Moreover, to help VA modernize its disability program to enable 

veterans to realize their full productive potential without jeopardizing the 

availability of benefits for veterans who cannot work, we also recommend 

that the Secretary develop a strategy to ensure that IU claimants with 

work potential receive encouragement and assistance to return to work, 

while protecting benefits for those unable to work. 

We provided a draft of this report to VA, SSA, and HHS for comment. VA 

agreed with our conclusions and concurred with our recommendations, 

and stated that it has implemented and plans to implement program 

Page 6 GAO-06-309 VA Individual Unemployability Benefits
changes in areas that we identified as needing attention. The actions 

described by VA should strengthen its management of IU benefits; 

however, we believe that further steps are needed to fundamentally 

transform IU benefits into a meaningful and timely way of supporting 

unemployed veterans with service-connected disabilities. VA’s comments 

appear in app. V. In addition, VA, SSA, and HHS provided technical 

comments, which are reflected in the report as appropriate. 

Under VA’s Disability Compensation program, the agency can award total 

(100 percent) disability compensation to veterans who cannot work 

because of service-connected disabilities, even though their schedular 

rating is less than 100 percent.12 Specifically, VA will consider a veteran for 

IU benefits if the veteran has a single disability rated at least 60 percent or 

multiple disabilities rated at least 70 percent (with at least one disability 

rated at 40 percent or more) and there is some evidence that the veteran 

cannot work. In some instances, veterans with lower ratings may also be 

evaluated for and granted IU eligibility. 

Background 

As shown on table 1, veterans receiving an IU total disability 

compensation rate may receive substantially greater benefits than they

would have received based on their schedular rating. IU benefits, like 

other VA disability compensation benefits, are exempt from federal 

taxation. 

Table 1: VA Basic Monthly Disability Compensation Rates in 2005 

Disability 

rating (percent) Monthly payment

Disability 

 rating (percent) Monthly payment

10 $108 60 $839

20 210 70 1,056

30 324 80 1,227

40 466 90 1,380

50 663 100 2,299

Source: VA, Fact Sheet: Disability Compensation – 2005 Rates (Washington, D.C.: December 2004). 

 12 For VA’s regulations governing the adjudication of IU benefits, see Title 38, U.S. Code of 

Federal Regulation, Chapter 1, Part 3 and Part 4. 

Page 7 GAO-06-309 VA Individual Unemployability Benefits
VA created IU benefits in 1934. By statute, VA is required to adopt and 

apply a schedule of ratings to compensate veterans for reductions in 

average earning capacities resulting from service-connected medical 

conditions.13 This statute calls for compensation benefits to be tied to a 

schedule of ratings that is to be based, “as far as practicable,” upon the 

average impairments of earning capacity resulting from such injuries in 

civil occupations.14 The statute does not mention individual 

unemployability as a basis for granting benefits. However, VA regulations 

allow the agency to grant total (100 percent) disability compensation to a 

veteran who is unemployable due to his or her service-connected 

disabilities, but does not meet the requirements for a total disability using 

the rating schedule. Veterans can receive IU benefits when their serviceconnected disabilities result in their inability to obtain or retain 

“substantially gainful employment,” which VA defines as employment that

is “ordinarily followed by [individuals without disabilities] to earn their 

livelihood with earnings common to the particular occupation in the 

community where the veteran resides.” 

VA’s Process for Making IU 

Decisions and Enforcing 

Compliance with Its 

Earnings Limit 

Staff at VA’s 57 regional offices make virtually all eligibility decisions for 

VA disability compensation benefits, including IU benefits. These regional

offices employ non-medical rating specialists to evaluate veterans’ 

eligibility for these benefits. Upon receipt of an application for 

compensation benefits, the rating specialist would typically refer the 

veteran to a VA medical center or clinic for an examination. Based on the 

medical examination and other available information, the rating specialist

must first determine which of the veteran’s conditions are (or are not) 

service-connected. For service-connected conditions, the rating specialist

compares the diagnosis with the rating schedule to assign a disability 

rating. (App. III provides examples of selected impairments from VA’s 

disability rating schedule.) As figure 1 shows, the service-connected 

impairments of IU beneficiaries include a wide range of medical 

conditions. Multiple disabilities will result in a combined degree of 

disability, which is expressed as a percentage and represents the overall

effect on a veteran of all his or her service-connected disabilities. (App. IV 

 13 See 38 U.S.C. §1155 for the statute giving VA broad authority to create a rating schedule 

and compensate veterans for the average loss in earnings resulting from service-connected

medical conditions. 

14 For VA’s Schedule of Disability Ratings, see Title 38, U.S. Code of Federal Regulations,

Chapter 1, Part 4. 

Page 8 GAO-06-309 VA Individual Unemployability Benefits
explains VA’s process for compiling combined ratings.) VA’s IU 

determinations are subject to appeal to the Board of Veterans’ Appeals and 

subsequently the U.S. Court of Appeals for Veterans Claims. 

Figure 1: Types of Service-Connected Impairments of IU Beneficiaries as of October 

2005 

10%

9%

12%

33%

Source: GAO analysis of VA data on impairments of IU beneficiaries by body system.

36%

Mental

Neurological

Cardiovascular

Musculoskeletal

Other

Note: VA’s database lists up to six impairments for each beneficiary. This figure reflects all 

impairments listed in the VA database for IU beneficiaries. 

VA rating specialists initiate IU evaluations when a veteran submits an 

application for IU benefits or his or her application for compensation 

benefits contains evidence of unemployability.15 In all cases, before 

granting benefits, rating specialists must evaluate the impact that the 

veteran’s service-connected disability has had on his or her ability to 

perform substantially gainful employment, which for decision-making 

purposes is generally interpreted as employment that is more than 

“marginal employment.” VA generally defines marginal employment as 

employment for which the worker’s annual earned income is at or below 

the poverty threshold for one person established by the U.S. Census 

 15 In accordance with the decision of the U.S. Court of Appeals for Veterans Claims in 

Norris v. West, 12 Vet. App. 413 (1999), VA rating specialists must infer that claimants for 

disability compensation are also seeking IU benefits if they meet the schedular 

requirements and their files contain evidence that they are not gainfully employed. 

Page 9 GAO-06-309 VA Individual Unemployability Benefits
Bureau—$10,160 for 2005.

16 However, marginal employment may also be

held to exist, on a case by case basis, when a veteran maintaining 

employment at a sheltered workshop17 or family business receives annual 

earnings above the poverty threshold. VA rating specialists are to rely on 

various sources of information for the evidence needed to support such a 

determination, including an employment and earnings history furnished by 

the claimant, basic employment information from the claimant’s 

employers (if any), and a medical exam report from VHA.18 If the claimant 

had received vocational rehabilitation assistance from VA or disability 

benefits from SSA, the rating specialist might also seek information on 

these services or benefit decisions.19 Finally, under its regulations, VA 

rating specialists are not to consider age as a factor in determining 

eligibility for IU benefits; thus, veterans of any age may be determined 

eligible for IU benefits. 

When we analyzed VA data to determine the ages of all veterans receiving

IU benefits as of October 2005, we found that the majority of veterans 

receiving IU benefits were age 60 or older. Our analysis of VA data shows 

that 219,725 veterans were receiving IU benefits in October 2005. As 

shown in figure 2, 51 percent of IU beneficiaries were age 60 or older and

38 percent were age 65 or older. 

 16 The 2005 poverty threshold is $10,160 for an individual without a family who is under 65 

years of age and is $9,367 for an individual without a family who is 65 years of age or older.

17 A sheltered workshop is a workplace that provides a supportive environment where 

individuals with disabilities can acquire job skills and vocational training.

18 Employers report such information as the claimant’s rate of pay, duties and

responsibilities, and reason for leaving. 

19 If available evidence is insufficient to award IU benefits and the record shows that the 

claimant is receiving Social Security disability benefits, complete copies of the SSA records 

must be obtained and considered. 

Page 10 GAO-06-309 VA Individual Unemployability Benefits
Figure 2: Ages of IU Beneficiaries as of October 2005

36%

13%

Source: GAO analysis of VA data.

65+ 

60-64

20-49

50-59

38%

13%

Studies and Proposals for 

Strengthening VA’s

Provision of IU Benefits 

In 1987, we issued a report that identified several problems with VA’s 

administration of IU benefits and made several recommendations for 

improvement.20 We found that VA did not require sufficient medical and

vocational evaluation of IU claimants to support award decisions. To 

address this weakness, we recommended that, in cases involving IU 

benefits, VA ensure that its (1) examining physicians provide observations

on how the service-connected medical condition impairs the veteran’s 

functional capabilities and (2) vocational counselors provide vocational 

information, including an assessment of how the veteran’s serviceconnected condition affects job skills and employment potential. 

Furthermore, we identified potential overpayments to IU beneficiaries and 

suggested that the Congress provide VA with access to Internal Revenue

Service (IRS) earnings information to monitor IU eligibility and help detect 

and prevent overpayments. Since we made the recommendations, the 

Congress provided the agency with access to IRS earnings data, which the 

agency is using to monitor compliance with the ongoing earnings limit. 

However, to date, VA has not implemented our recommendation that its

 20 See GAO, Veterans’ Benefits: Improving the Integrity of VA’s Unemployability 

Compensation Program, GAO/HRD-87-62 (Washington, D.C.: Sept. 21, 1987). 

Page 11 GAO-06-309 VA Individual Unemployability Benefits
vocational counselors assess the veteran’s job skills and employment 

potential so that this information could be used in the IU decision-making 

process. 

More recently, two studies highlighted the need for fundamental changes

to VA’s disability decision making. In 2004, the VA Vocational 

Rehabilitation and Employment Task Force study recommended that 

vocational professionals from VA’s VR&E should provide more complete 

vocational assessments to assist in disability and vocational decisions.21

More specifically, the task force recommended that VR&E perform a 

functional capacity evaluation that would identify what work a veteran 

could do in the paid economy despite his or her disabilities. Also, a 2005 

VA Inspector General study pointed to the need for improved IU initial and 

ongoing eligibility determinations.22 The VA Inspector General found that 

some veterans receiving IU benefits may not have been entitled because 

VA had not aggressively used IRS and SSA records and developed proper

controls to monitor their income through the verification process. 

In addition, the Veterans’ Disability Benefits Commission was created by 

the National Defense Authorization Act of 2004 (Pub. L. No. 108-136) to 

independently evaluate compensation to veterans and their survivors for 

disabilities and deaths attributable to military service. Among other things, 

the Commission plans to include IU benefits in its review. The law requires 

the Commission to provide a report to the Congress, with 

recommendations as needed, which addresses the appropriateness of 

benefits and the standards for granting benefits. 

 21 VA Vocational Rehabilitation and Employment Task Force, Report to the Secretary of 

Veterans Affairs: The Vocational Rehabilitation and Employment Program for the 21st 

Century Veteran (Washington, D.C.: March 2004). 

22 The Department of Veterans Affairs, Office of the Inspector General, Review of State 

Variances in VA Disability Compensation Payments, Report No. 05-00765-137 

(Washington, D.C.: May 19, 2005). 

Page 12 GAO-06-309 VA Individual Unemployability Benefits
In a recently issued report, we noted that additional benefits are available

to veterans with total disabilities.23 In particular, awarding IU benefits 

increases a veteran’s monthly disability compensation. The increase in the

monthly compensation for IU beneficiaries is the difference between the 

compensation at the veteran’s schedular rate and the compensation at the

100-percent rate. For example, a schedular rating of 60 percent would 

entitle a veteran to $839 per month in 2005. The veteran, however, would 

be entitled to $2,299 per month if granted IU benefits—a difference of 

$1,460 per month or $17,520 per year.

24 The lower the veteran’s schedular 

rating, the higher his or her increase in monthly disability compensation 

when awarded IU benefits. 

The Added Value of 

IU Benefits Over A 

Lifetime Depends on 

the Veteran’s 

Individual 

Circumstances 

When the present value of IU benefits is considered over a veteran’s 

lifetime, the value of these added benefits depends upon the veteran’s 

schedular rating at the time he or she begins receiving IU benefits and the 

length of time these benefits are received. To illustrate the potential 

amount of added benefits that could be received due to IU, we estimated 

the lifetime present value of the increase in disability compensation 

benefits for veterans with schedular disability ratings between 60 and 90 

percent who began receipt of IU benefits in 2005 at different ages. To 

calculate these lifetime present values, we used the SSA general 

population mortality tables for males to estimate the lifespan of IU 

beneficiaries.25 Because benefits awarded to younger veterans would be 

expected to be received for a longer length of time in comparison with 

older veterans, younger veterans are estimated to receive more in benefits 

than older veterans who have the same schedular rating. Also, because the 

lower the veteran’s schedular rating, the greater the increase in monthly 

disability compensation benefits when awarded IU benefits, veterans with 

lower ratings were estimated to receive more in added IU benefits than 

 23 See GAO, Disability Benefits: Benefit Amounts for Military Personnel and Civilian

Public Safety Officers Vary by Program Provisions and Individual Circumstances, 

GAO-06-4 (Washington, D.C.: Apr. 7, 2006). 

24 Dependents and other circumstances can increase a veteran’s monthly compensation. 

Veterans with a 30 percent schedular rating or higher can receive additional monthly 

compensation for each dependent, ranging from $39 to $130 for a spouse and $26 to $88 for 

a child in 2005, depending upon the veteran’s schedular rating. Other special circumstances 

that increase monthly compensation include, for example, the loss of use of a limb or

sensory organ, required attendant care, a spouse with a disability, or a child age 18 or older 

attending school. 

25 See appendix II for more information on the assumptions we made and the methods we

used. 

Page 13 GAO-06-309 VA Individual Unemployability Benefits
those of the same age with higher schedular ratings. For example, for 

younger veterans, those at age 20 in 2005, the estimated lifetime present 

value of these benefits can range from almost $300,000 to over $460,000. 

Even for older veterans, the value of these benefits can be substantial. For 

veterans awarded IU benefits at age 75 in 2005, the lifetime present value 

of these benefits can range from about $89,000 to about $142,000. The 

estimated lifetime present values of the added benefits for veterans 

awarded IU benefits in 2005 at selected ages and schedular ratings is 

shown in figure 3. 

Figure 3: Estimated Lifetime Present Values of the Added Benefits for Veterans 

Awarded IU Benefits in 2005 at Selected Ages and Schedular Ratings 

0

100,000

200,000

300,000

400,000

500,000

Age 20 Age 45 Age 75

Dollars

Age individual begins receiving IU

Source: GAO analysis based on VA 2005 schedular disability compensation rates and annuity factors described in appendix II.

60%

70%

80%

90%

When we analyzed VA data to determine the age at which veterans begin

receiving IU benefits, we found that just under half of new IU beneficiaries 

were awarded IU benefits at the age of 60 or older. For example, we found 

Page 14 GAO-06-309 VA Individual Unemployability Benefits
that 46 percent of veterans awarded IU benefits from October 2004 to

October 2005 were age 60 or older, and 19 percent were age 75 or older.26

See figure 4 for the age distribution of new IU beneficiaries from October 

2004 to October 2005. Data for the 2 prior year periods show a similar 

pattern in the age distribution of new IU beneficiaries. 

Figure 4: Ages of New IU Beneficiaries from October 2004 to October 2005 

15%

39%

5%

19%

Source: GAO analysis of VA data. 

14%

20-49

6%

50-59

65-69

75+ 

60-64

70-74

Note: Percentages do not sum to 100 because of rounding. 

In addition to disability compensation benefits, some IU beneficiaries are 

also entitled to military disability retirement benefits or normal retirement 

 26 We calculated the number of new beneficiaries because VA’s beneficiary database does 

not include the date that each veteran began receiving IU benefits. We used VA beneficiary 

database information for the month of October for 4 years from 2002 to 2005. For annual 

estimates we compared consecutive years. For example, all IU beneficiaries on the 2005

database, but not on the 2004 database, were identified as new IU beneficiaries for October 

2004 to October 2005. 

Page 15 GAO-06-309 VA Individual Unemployability Benefits
benefits based on years of military service.27 In general, however, an offset

provision restricts most veterans from receiving the full value of both 

benefits, unless they have 20 or more years of service. Recent legislation 

allows veterans with combat-related disabilities and 20 or more years of 

service to receive the full value of both benefits.28 Also, recent legislation is

phasing out the offset for veterans who have 20 or more years of military 

service and disability ratings of 50 percent or more. The phase out is 

taking place between January 1, 2004, and December 31, 2013, but IU 

beneficiaries with 20 or more years of service will be eligible for full 

concurrent receipt with no offset beginning October 1, 2009.

29 However, 

the recent legislation to eliminate the benefit offset is likely to affect 

relatively few IU beneficiaries, as our review of IU beneficiary data as of 

October 2005 shows that only about 8 percent of all IU beneficiaries have 

20 years or more of service. 

VA’s regulations and guidelines for awarding IU benefits do not ensure 

that its decisions are well supported. VA regulations and guidelines lack 

key criteria and guidance that are needed to determine unemployability. In

addition, VA guidelines do not give rating specialists the procedures to 

obtain the employment and earnings history, and vocational assessments 

needed to support IU decisions. As a result, VA rating specialists and some 

vocational rehabilitation staff told us that unemployability benefits have 

sometimes been granted to veterans who have employment potential. 

VA’s Decision-making 

Criteria, Guidance, 

and Procedures Do 

Not Ensure That IU 

Decisions Are Well 

Supported 

 27 Military disability retirement benefits and normal retirement benefits based on years of

military service are provided by the Department of Defense. Entitlement to these benefits 

is determined at the time a person leaves military service. To qualify for disability 

retirement, a person must be found unfit for duty due to a disability incurred or aggravated 

during active service, and have either (1) a disability rating of 30 percent or more, or (2) a

disability rating less than 30 percent and 20 or more years of service. A person who is

found fit for duty and has 20 or more years of military service generally would qualify for 

normal retirement. 

28 Beginning in May 2003, these veterans can receive a special benefit under the CombatRelated Special Compensation Payment program equal to the amount of the offset. 

29 In 2003, the Congress authorized Concurrent Retirement and Disability Payments to 

phase in the concurrent receipt of retirement and disability compensation benefits for 

eligible veterans from January 1, 2004 to December 31, 2013. The National Defense 

Authorization Act for Fiscal Year 2006, however, reduces the phase-in time for IU 

beneficiaries so that IU beneficiaries with 20 or more years of military service will receive 

the full value of both benefits starting in October 2009. 

Page 16 GAO-06-309 VA Individual Unemployability Benefits
VA rating specialists making IU decisions are required to determine 

whether the claimant is capable of obtaining or retaining substantially 

gainful employment, which agency guidelines define as “that which is 

ordinarily followed by [persons without disabilities] to earn their 

livelihood with earnings common to the particular occupation in the 

community where the veteran resides.” However, VA regulations and 

guidelines do not provide the criteria and guidance that are needed to 

determine whether a claimant has the ability to obtain or retain 

substantially gainful employment or is unemployable because of his or her 

service-connected disabilities. 

VA Lacks Key Criteria and 

Guidance Needed to 

Determine 

Unemployability 

VA guidelines also define substantially gainful employment as any 

employment greater than marginal employment. Marginal employment 

generally exists when a veteran’s annual earned income does not exceed 

the poverty threshold for one person.30 In addition, the guidelines 

recognize that the terms “unemployability” and “unemployable” are not 

synonymous for compensation purposes because a veteran may be 

unemployed or unemployable for a variety of reasons. As noted in the 

guidelines, rating specialists are to determine whether the severity of the 

service-connected conditions preclude the veteran from obtaining or 

retaining substantially gainful employment. In doing so, the rating 

specialists are to identify and isolate the effects of extraneous factors such 

as age,31 nonservice-connected conditions, availability of work, or 

voluntary withdrawal from the labor market when determining whether a 

veteran is unemployable solely by reason of service-connected disabilities. 

However, the guidelines do not state how rating specialists are to isolate 

these factors from the veteran’s service-connected disabilities or how 

these factors should be considered in making IU decisions. For example, 

the guidelines do not specify how rating specialists are to determine 

whether a veteran’s lack of work or marginal employment is the result of 

the veteran’s service-connected disabilities or extraneous factors such as 

local labor market conditions or the veteran’s “voluntary withdrawal” from

the labor force. In particular, the guidelines do not specify the criteria 

 30 Marginal employment may also be held to exist, on a case by case basis, when a veteran 

who receives annual earnings above the poverty threshold is employed at a sheltered 

workshop or family business. Depending on the circumstances, a veteran so employed may

be determined eligible to receive IU benefits. 

31 As noted earlier, VA rating specialists are not to consider age when making IU

determinations. 

Page 17 GAO-06-309 VA Individual Unemployability Benefits
rating specialists should use in determining whether a veteran, who is not 

working or has only marginal employment, has the ability to obtain or 

retain substantially gainful employment. For instance, the guidelines do 

not mention how factors such as education, skills, or prior work history 

should be used to assess a veteran’s ability to work. 

Recognizing the deficiencies in VA’s regulations and guidelines, the Court 

of Appeals for Veterans Claims urged VA to “undertake a broad-based 

review and revision” of unemployability regulations.32 In 2001, the agency

proposed regulatory changes to address this and other problems with its 

IU decision making.33 The proposal included changes intended to define 

key terms, such as substantially gainful employment. During the public 

comment period, however, VA received numerous comments from 

veterans groups that were strongly opposed to the proposed regulations. 

In December 2005, VA withdrew this regulatory proposal and initiated a 

new effort to develop a proposal for revising IU regulations. As of March 

2006, VA was still in the process of drafting this new regulatory proposal. 

VA Guidelines Lack 

Procedures for Obtaining 

Necessary Evidence for 

Determining 

Unemployability 

VA also lacks adequate procedures for obtaining necessary evidence to

support IU decisions. In particular, VA does not have procedures for rating 

specialists to obtain (1) complete and corroborated employment 

information from IU claimants and their employers, and (2) vocational 

assessments of IU claimants that could supplement medical information, 

even though the agency has an in-house vocational rehabilitation service.

VA guidelines state that, when making an IU determination, rating 

specialists are to ensure that the “evidence is sufficient to evaluate . . . the 

veteran’s current . . . employment status.” Such evidence generally comes 

from two sources. First, the IU application form requires veterans to 

furnish employment and earnings history (e.g., jobs held, number of hours 

worked, type of work performed, and accommodations) for the 5-year 

period preceding the date the veteran claims to have become too disabled

to work and for the entire time after that date. Second, the guidelines 

instruct the rating specialist to request related information from each of 

the claimant’s employers for the 12-month period prior to the date the 

veteran last worked. 

VA Does Not Have Sufficient 

Procedures to Obtain Complete 

and Corroborated Employment 

Information 

 32 See Halestad v. Derwinski, 3 Vet. App. 213, 216 (1992). 

33 For VA’s former proposed rules for its IU benefits decision making, see 66 Fed. Reg.

49886 (Oct. 1, 2001). 

Page 18 GAO-06-309 VA Individual Unemployability Benefits
At the VA regional offices we visited, several rating specialists stated that 

the employment information submitted by claimants and employers is 

sometimes incomplete. VA guidelines state that it is essential that the form

contain the claimant’s complete work history34 but does not specify what is

acceptable for decision making when the work history is less than 

complete. According to an analysis conducted at a VA regional office, 

failure of the veteran to submit the requested employment information did 

not serve as a basis for denying an IU claim. 

Also, when assessing the eligibility of claimants who report recent prior 

work experience, rating specialists told us that they sometimes have 

difficulty obtaining corroborating information from employers. VA 

regional office officials stated that it is often difficult to obtain relevant 

information from employers because, among other reasons, they have 

moved, gone out of business, maintained poor records, or had such 

turnover that no one remembers the claimant. One VA regional office 

official stated that he has instructed his staff not to “hold a benefit hostage 

to the employer information.” We reviewed 29 case files in which IU 

benefits were awarded at three of the VA regional offices we visited.35 We 

found that 23 case files contained employment history information 

submitted by the claimant but only eight of these contained evidence from 

employers. Three case files did not contain claimant or employer 

employment forms. In the remaining three case files, the veterans claimed 

to have not worked or to have been self-employed. 

When a veteran claims not to have worked or to have been marginally selfemployed during the past 5 years, agency guidelines for IU decision 

making do not give rating specialists the procedures to obtain

corroborating evidence in the form of earned income information from 

other federal databases. As a result, rating specialists are unable to 

confirm (or refute) the veteran’s claim. Specifically, rating specialists are 

unable to obtain earnings information from SSA and the IRS. In addition, 

VA does not have access to earnings information from the NDNH 

database, which contains quarterly information on earnings. Some rating 

specialists stated that, if available, they sometimes considered information 

 34 Employment history for the 5-year period preceding the date on which the veteran claims 

to have become too disabled to work and for the entire time after that date. 

35 At the Milwaukee, Wis.; Oakland, Calif.; and St. Petersburg, Fla.; regional offices, we 

reviewed 29 case files with the assistance of a rating specialist or decision review officer. 

Page 19 GAO-06-309 VA Individual Unemployability Benefits
in the medical exam report or hospital records showing that the claimant

had been out of work as evidence of unemployability. 

VA Lacks Procedures for 

Obtaining Vocational 

Assessments of IU 

Claimants That Could 

Supplement Medical 

Information 

VA regulations on IU decision making do not contain procedures for rating 

specialists to request vocational assessments of IU claimants that could 

supplement claimants’ medical information. VA guidelines require rating 

specialists to consider medical information when granting IU benefits. 

Specifically, the medical evidence must support a current evaluation of the 

extent of all the veteran’s disabilities and reflect the veteran’s condition in 

the past 12 months. At the regional offices we visited, managers stated that 

their rating specialists rely heavily on medical examinations conducted by

VHA clinicians to make IU determinations.36 Rating specialists at one of 

these regional offices stated that these medical reports were often the only

information they have upon which to base a decision that is not selfreported. 

Some rating specialists we interviewed, however, expressed concern that 

they were awarding IU benefits based on medical reports that provided 

insufficient support for determining unemployability. VA regional office 

officials and rating specialists told us that the current medical reports may 

have limited applicability to IU decision making. Medical reports may have 

limited applicability because, as we have noted in a prior report, while 

most medical impairments may influence the extent to which an individual 

is capable of engaging in gainful activity, vocational and other factors are 

often considered to be more important determinants of work capacity.37 It 

is these other factors, along with the person’s medical condition, that are 

considered in a vocational assessment of work potential. 

Vocational assessments can supplement the results of medical 

examinations by taking into consideration factors such as the veteran’s 

education, training, prior work experience, skills, and abilities, to identify 

the extent to which the veteran is employable. Yet, when making IU 

determinations, rating specialists do not have procedures to obtain 

vocational assessments from VR&E counselors. Rating specialists have 

access to vocational assessments only when they already exist prior to the 

 36 In addition to VHA, QTC Management, Inc., conducts disability examinations for 10 VA 

regional offices on an as needed basis. 

37 GAO, SSA Disability: Program Redesign Necessary to Encourage Return to Work, 

GAO/HEHS-96-62 (Washington, D.C.: Apr. 24, 1996). 

Page 20 GAO-06-309 VA Individual Unemployability Benefits
request for IU benefits.38 According to VA officials we spoke with, rating 

specialists generally make employability determinations without the 

benefit of a vocational assessment.39 At 3 of the VA regional offices we 

visited, our review of 29 case files in which IU benefits were awarded 

found that 25 lacked any vocational assessment.40

Lacking vocational assessments for most IU claims, officials at some 

regional offices we visited told us that they sometimes asked VHA 

clinicians to assess and make a determination on a claimant’s

employability. Of the 29 case files we reviewed, 7 contained medical 

reports that gave opinions on the veterans’ employability. These opinions 

ranged from a comment that the claimant is not a good candidate for 

working with the public to comments that one veteran is “unemployable in

any function” and another is simply “unemployable.” Two cases contained

employability decisions that were based on examinations of the claimant’s 

functional capabilities. One official in a regional office indicated that 

medical reports containing opinions on employability often dictate their IU 

decisions. A senior VHA management official explained that these medical 

reports should not be the only source used to render an opinion regarding

a claimant’s unemployability because the agency’s clinicians are currently

not trained to conduct medical examinations that support decisions on 

employability. 

Rating specialists at some of the VA regional offices we visited stated that, 

when available, the assessments in VR&E case files were very relevant to

IU decision making. VR&E managers and counselors suggested that 

permitting rating specialists to obtain VR&E assessments of IU claimants 

could address the need for vocational information. VR&E officials stated 

 38 Generally, rating specialists have access to vocational assessments only when the 

claimant sought (1) assistance from VA’s VR&E Service, which prepared an assessment as

part of its normal service; (2) assistance from a Vet Center, which sent the veteran to a

private firm for a vocational assessment as part of a treatment plan; or (3) disability 

benefits from SSA, which conducted a vocational assessment and included the results in 

the claimant’s records. 

39 Only veterans receiving disability compensation benefits are eligible for VA vocational 

rehabilitation benefits. Of the 2.6 million veterans currently receiving disability benefits, 

about 95,000 (or less than 4 percent) are receiving vocational rehabilitation services. 

40 The remaining 4 case files contained assessments conducted by SSA and private 

vocational counselors for Vet Centers, which provide services to veterans and their 

families, such as readjustment counseling, community education, and providing access to 

other VA and community services. 

Page 21 GAO-06-309 VA Individual Unemployability Benefits
that their counselors are qualified to conduct such assessments and, 

where appropriate, VR&E counselors could also use this opportunity to 

use incentives to encourage return to work, develop return-to-work plans 

in collaboration with the claimant, and identify and provide needed 

accommodations or services for those who can work. By incorporating 

vocational assessments into its IU decision-making process, VA can 

modernize its disability programs by enabling veterans to realize their full 

productive potential without jeopardizing the availability of benefits for 

veterans who cannot work. 

VA Staff Express Concerns

that They May Have 

Awarded IU Benefits to 

Veterans with Employment 

Potential 

We discussed IU decision-making criteria and evidence requirements with 

managers and rating specialists at the regional offices we visited. During 

these discussions, some rating specialists expressed concerns that they 

may have awarded IU benefits to some veterans who appeared to be 

employable. These rating specialists told us that they awarded IU benefits

in these cases with the expectation that VA would identify these 

beneficiaries in the income matching process as having earnings above the 

IU threshold and discontinue their IU benefits. Another rating specialist 

stated that he felt compelled by the workload at his regional office to 

make IU determinations based on existing evidence, even when necessary 

information was lacking.

VR&E managers and counselors at the regional offices we visited stated 

that VA has awarded IU benefits to veterans making good progress in their 

VR&E-sponsored vocational rehabilitation. Our analysis of VA’s electronic 

case files identified 683 veterans who received both IU benefits and a 

stipend from VR&E, which is generally provided only to veterans who are 

attending college and who are expected to seek employment at the 

conclusion of their vocational rehabilitation.41 VR&E officials and rating 

staff at three of the VA regional offices we visited brought to our attention 

veterans who had received VR&E assistance and were making good 

progress in their rehabilitation plans, only to drop out of the program 

when they were awarded IU benefits. 

 41 Using VA’s Compensation and Pension Master File, we identified all disability 

compensation beneficiaries who received both IU benefits and stipends from VR&E. Using 

VR&E’s case management database, we obtained information on financial and other 

support provided to a number of these veterans selected through a randomization process.

Page 22 GAO-06-309 VA Individual Unemployability Benefits
VA has an inefficient and ineffective process to enforce the earnings limit 

for ongoing eligibility for IU benefits. VA’s main enforcement mechanism 

is its computerized match that identifies beneficiaries with earnings, which

is supplemented with a manual review to assess whether these earnings 

are within the limit and meet other ongoing eligibility criteria. However, 

this process relies on old data, outdated and time-consuming procedures, 

insufficient guidance, and weak eligibility criteria. Moreover, the agency 

does not track and review its enforcement activities to better ensure their

effectiveness. 

VA utilizes a multi-step annual computer match and manual process, 

referred to as its Income Verification Match, to evaluate both the ongoing

eligibility of its IU and pension beneficiaries.42 During 2004 and 2005, VA’s 

income match, in coordination with SSA and IRS, assessed beneficiaries’ 

income for 2002. VA provided SSA and IRS with data on VA’s 2004

beneficiaries that the agencies matched to their 2002 income data. SSA 

matched VA beneficiaries to its wage and self-employment earnings to 

provide VA with 2002 earned income data for IU and pension beneficiaries. 

To provide VA with data on unearned income for its pension beneficiaries, 

IRS matched the beneficiaries with its 2002 unearned income data. VA’s 

Hines Information Technology Center (ITC) used SSA’s match results to 

identify IU beneficiaries with earned income above $6,000 in 2002 for 

further review.43 Hines ITC combined the results of the computer matches 

for IU and other beneficiaries to produce and mail documents to 

employers and to the Pension Maintenance Centers (PMC) for further 

review. 

VA’s Earnings

Enforcement Process 

is Inefficient and 

Ineffective 

VA Uses a Multi-Step 

Process to Evaluate 

Beneficiaries’ Ongoing 

Eligibility 

Hines ITC identified 8,563 IU beneficiaries with earnings over $6,000 in 

2002 for review by VA’s three PMCs. For each identified beneficiary, Hines

ITC produced and mailed a letter to the employer requesting earnings data

to verify SSA-reported earnings. It also produced and mailed to the PMCs 

several documents for follow-up on each beneficiary, such as a letter for 

the veteran and a tracking sheet. The three PMCs manually reviewed the

information provided by Hines ITC and employers and may have also 

contacted the veterans, as needed, to determine whether they continued to

 42 VA also uses the match to assess the incomes of the surviving spouses and children of

certain deceased veterans who receive death pension benefits. 

43 The IVM threshold was established by VA at the inception of its computer matching effort

in 1991. 

Page 23 GAO-06-309 VA Individual Unemployability Benefits
meet ongoing IU eligibility criteria. In general, IU beneficiaries who have

exceeded the annual IU earnings threshold (set in 2002 at $9,039), have 

worked 12 consecutive months or more, and have not been employed in a 

sheltered workshop or family business should have their IU benefits 

discontinued.44 PMCs close the cases when they find beneficiaries meet the 

eligibility criteria and forward cases that needed additional information for 

a decision to VA regional offices for further review. The VA regional 

offices should obtain whatever additional information is needed to 

determine whether benefits should be discontinued and inform the veteran 

if VA decides to do so. 

VA’s Process to Evaluate 

Beneficiaries’ Ongoing IU 

Eligibility Is Inefficient 

In its computer matching process to evaluate ongoing IU benefit eligibility, 

VA used SSA earnings data that is about 1.5 years old, despite the fact that 

the data is available earlier and more recent earnings data is available from 

another federal database. Using old earnings data, along with other 

processing delays in its review, means that IU beneficiaries with earnings 

above the IU threshold can continue to receive benefits for up to 2.5 years 

before VA can determine that their IU benefits should be discontinued. 

Quick identification of IU beneficiaries who are no longer entitled to 

benefits is important because VA typically will only discontinue their 

benefits and will not collect any overpayments.45 Although SSA earnings 

data could be available as early as September following the end of a tax

year,46 VA postpones the match of IU benefits and waits for unearned 

income from IRS so that it can evaluate both IU eligibility and pension 

payments at the same time. Also, HHS’ NDNH can provide more current 

earnings data than SSA, but VA does not have the statutory authority to 

access this database. The NDNH database includes quarterly wage data for 

up to 8 quarters, which can be compiled into annual data for matching 

 44 VA has a few exceptions to its IU earnings threshold. For example, beneficiaries who 

work in protected environments, such as a sheltered workshop or family business, may be 

considered to be marginally employed and still eligible for IU benefits, even when their 

earnings exceed the IU threshold. In addition, beneficiaries who have been receiving IU 

benefits for 20 years or more cannot have their benefits terminated, regardless of their 

earnings and employment. 

45 VA can collect IU benefit overpayments only in certain situations, such as when it 

determines benefits were obtained fraudulently or makes a mistaken overpayment. 

46 The earnings data available in September is nearly 100 percent complete, according to an 

SSA official responsible for maintaining the data. 

Page 24 GAO-06-309 VA Individual Unemployability Benefits
purposes.47 Although VA currently lacks access to the NDNH database, 

other agencies—such as SSA, IRS, and the Department of Housing and 

Urban Development—have sought and gained statutory authority to 

access the NDNH to improve their enforcement efforts.48 In addition to 

gaining statutory authority, to obtain access to the NDNH, VA would need 

to meet data security and privacy safeguarding requirements HHS has 

established to ensure the security and confidentiality of NDNH data. 

VA’s enforcement process is also inefficient because VA has not updated 

its computer matching program to reflect annual changes in its IU earnings 

threshold. The program identified those who earned more than $6,000

rather than the annual IU threshold, which was $9,093 for 2002. As a result, 

the PMC staff told us that they manually reviewed many more cases than

necessary. VA’s Hines ITC officials told us that they are prohibited from 

making any changes in the matching program until the agency has 

replaced its current compensation and pension payment system, which 

may take place in 2007. 

VA’s enforcement process experiences additional delays because the 

computer matching information is transmitted manually to VA’s 

enforcement staff rather than electronically. VA’s ITC mails thousands of 

paper documents to employers and VA’s three PMCs. It mails letters to 

veterans’ employers to provide verification of veterans’ earnings to the 

PMCs. ITC also mails a tracking sheet and a letter for each veteran earning

over $6,000 to the PMCs, where the information is manually collated and

reviewed. The center officials told us that they use information from the 

computer match, employers, and veterans to assess whether beneficiaries 

meet ongoing IU eligibility criteria and they close the case for those who 

meet the criteria. If a center did not have sufficient information to 

determine eligibility, it mailed the case file to a VA regional office for 

further review. Although VA currently mails paper documents generated

from the match to its PMCs and regional offices, software exists to 

 47 NDNH data has some limitations. For example, NDNH does not contain complete 

information on some types of workers, such as independent contractors, subcontractors,

and self-employed individuals, and persons who perform services such as child care for 

private homes. 

48 To obtain access to the NDNH database, an agency must seek authority from the 

Congress through enactment of legislation, which the Congress must pass and the 

President must sign. Moreover, the agencies may use the NDNH data only for those 

purposes authorized by law. 

Page 25 GAO-06-309 VA Individual Unemployability Benefits
transfer the confidential information electronically, and VA officials 

acknowledged that doing so would make the process more timely. 

One action VA has recently taken to enhance enforcement is to reinstate a 

procedure that requires IU beneficiaries to annually complete a form to 

provide their earnings and employment status. VA had discontinued use of 

the form about 6 years ago to reduce the paperwork burden for 

beneficiaries and instead was annually sending a letter to IU beneficiaries 

to remind them of their responsibility to notify VA of their employment 

and earnings. However, VA officials believed that the annual reminder had 

not resulted in sufficient compliance and in September 2005, reinstituted 

the requirement to complete the VA form. Because the agency has very 

recently implemented this change, we cannot assess its effectiveness. 

Although the agency believes that this information will improve its ability 

to monitor veterans’ ongoing eligibility, it still plans to continue the 

income verification match. 

VA Has Insufficient 

Guidance to Evaluate 

Beneficiaries’ Earnings 

VA’s written guidance for evaluating beneficiaries’ earnings also hinders 

enforcement by failing to clarify that PMC staff should use all the available 

earnings information from the match and other sources, such as 

employers, to assess beneficiaries’ initial and continuing eligibility. 

Lacking this written guidance, VA staff focus on whether beneficiaries’ 

earnings and employment qualified them for benefits for the match year. 

For example, when PMC staff receive earnings data for veterans who were

granted benefits during the match year, the staff disregard the earnings, 

regardless of the amount, and close the case. Staff do so because they only 

consider earnings subsequent to granting benefits and know that the new

beneficiaries could not have worked for 12 consecutive months in the 

match year. The match data and the beneficiaries’ application information, 

however, could show that veterans may not have fully disclosed their 

earnings during the application process and may have exceeded the IU 

threshold. Staff also disregard some of the earnings information provided 

by employers that could have had a bearing on eligibility. Although VA’s 

letters to employers request earnings information for the match year and 2 

subsequent years, management’s verbal guidance at one center was to 

disregard the earnings from the subsequent years and only consider the 

earnings of the match year. 

Page 26 GAO-06-309 VA Individual Unemployability Benefits
VA has weak criteria to determine whether veterans should continue to 

receive IU benefits. In evaluating IU beneficiary eligibility, PMCs allow 

beneficiaries to continue to receive IU benefits if their earnings at the time 

of the review did not exceed the IU threshold. However, some IU 

beneficiaries can have earnings far above the IU threshold because VA, 

under current law, continues to provide them benefits until they have 

maintained employment for 12 consecutive months.49 In effect, this law 

allows beneficiaries to retain their benefits despite unlimited earnings, so 

long as they do not work for 12 consecutive months. For example, a 

beneficiary could earn $50,000 from January to September, choose to stop 

working for reasons other than his or her service-connected disability, and 

still be allowed to retain his or her IU benefits. 

VA does not effectively track and review the results of its enforcement 

activities. VA does not track the results of cases reviewed by PMCs or 

those sent to regional offices. As a result, the agency does not know the 

results of these reviews or the reasons for continuing or discontinuing IU 

benefits. For example, the agency does not know how many beneficiaries 

were identified by its computerized match with earnings below the IU 

threshold or had higher earnings and continued to receive benefits. Also, 

without sufficient information to monitor enforcement, the agency cannot 

ensure that beneficiary cases are being fully reviewed or that appropriate

actions are taken to discontinue benefits. 

Private-sector and SSA disability programs provide important features that 

VA’s IU benefits lack. Unlike VA, private insurers have developed 

assessment processes that focus on return to work and use a wide variety 

of assessment tools, expertise, and incentives to evaluate claimants’ ability 

to work and encourage and enable those with work potential to return to 

the labor force. Likewise, SSA requires applicants to provide substantial 

information for assessment purposes and, in recent years, has 

implemented a new program to provide return-to-work services and is 

conducting pilots to test new methods to return applicants and 

beneficiaries to work. In addition, SSA has implemented critical 

management practices to help ensure the financial integrity of its disability 

programs. 

VA Has Weak Criteria to 

Evaluate Beneficiaries’ 

Ongoing Eligibility 

VA Management Does Not 

Track and Review the 

Outcome of Its 

Enforcement Activities 

VA’s Practices to 

Manage Its Disability 

Benefits Lag Behind 

Other Disability 

Programs 

 49 See 38 U.S.C. §1163. 

Page 27 GAO-06-309 VA Individual Unemployability Benefits
The eligibility assessment processes of three U.S. private insurers we 

reviewed focused on returning people with disabilities to work.50 The 

private insurers’ assessment processes we reviewed both evaluated a 

person’s potential to work and assisted those with work potential to return

to the labor force. Insurers provided assessment and other services shortly 

after disability onset and throughout the duration of the claim, as needed. 

Their ongoing assessment process is closely linked to their definition of 

disability that shifts over time from less to more restrictive—that is, from 

an inability to perform one’s own occupation to an inability to perform any 

occupation. Both the definitional shift and the ongoing assessment 

process recognize the possibility for improvement in an individual’s work 

capacity by providing supports and services, such as workplace 

adaptations or training as well as financial and other incentives to 

encourage claimants to return to work. 

Private Insurers’ Eligibility 

Assessment Processes 

Focus on Return-to-Work 

Throughout the duration of the claim, private insurers use a wide variety 

of tools and expertise to assess the claimant’s work potential and develop 

and implement an individualized return-to-work plan for those with work 

potential. As part of the process of assessing whether a claimant can 

perform his or her own occupation, insurers directly contact the claimant, 

the treating physician, and the employer to collect medical and vocational 

information and initiate return-to-work efforts, as needed. For example, 

insurers consult medical staff and use other resources, such as medical 

guidelines, which describe disabilities and their treatment and duration, to

evaluate whether the treating physician’s diagnosis and the expected 

duration of the disability are in line with the claimant’s reported symptoms 

and test results. Insurers’ contacts with treating physicians may also be

aimed at ensuring that the claimant has an appropriate treatment plan 

focused on timely recovery and return to work. Insurers may also use an 

independent medical examination or tests of basic skills, interests, and 

 50 For more information on the medical and vocational tasks, tools, methods and expertise 

used by private insurers to assess disability claims and provide return-to-work assistance, 

see VA Benefits: Other Programs May Provide Lessons for Improving Individual 

Unemployability Assessments, GAO-06-207T (Washington, D.C.: Oct. 27, 2005) and SSA 

Disability: Other Programs May Provide Lessons for Improving Return-to-Work Efforts, 

GAO-01-153 (Washington, D.C.: Jan. 12, 2001). The 2001 report also examined social 

insurance disability programs in Germany, Sweden, and The Netherlands, which have also 

invested in return-to-work efforts and have implemented practices similar to those in the 

U.S. private sector. Although these countries’ disability programs operate in a somewhat

different social and political context than U.S. federal programs, the experiences of these 

countries show that return-to-work strategies can apply to a broad population with a wide 

range of skills and disabilities. 

Page 28 GAO-06-309 VA Individual Unemployability Benefits
aptitudes to clarify the medical or vocational limitations and capabilities 

of a claimant. In addition, they may use medical or vocational specialists 

to identify possible accommodations for the claimant and may also 

contact employers to encourage them to provide workplace 

accommodations for a claimant who has the capacity to work. To 

determine whether a claimant can go back to his current job, or if not, 

engage in other work, insurers will identify a claimant’s remaining skills 

and abilities (i.e., transferable skills) by comparing the claimant’s 

capabilities and limitations with the demands of the claimant’s own 

occupation. Included in these assessment tools and methods are services 

to help the claimant return to work, such as job placement, job 

modification, and retraining. 

The definition of disability shifts after 2 years from being unable to 

perform one’s own occupation to being unable to perform any occupation. 

This period provides an opportunity for claimants who have the potential

to work to recover medically and develop skills to return to work. During

this period, insurers may provide financial and other assistance to help

claimants with work potential make a successful transition. Insurers try to 

develop the best strategies for managing each claim, which can include, 

for example, helping to plan medical care or providing vocational services

to help claimants acquire new skills, adapt to assistive devices, or find new 

positions. For those requiring vocational intervention to return to work, 

the insurers develop an individualized return-to-work plan, as needed. 

Work incentives are an important feature of the private insurers’ programs 

to encourage and facilitate a claimant’s return to work. These incentives 

require the claimant to obtain appropriate medical treatment and can

result in a possible loss of benefits if the claimant does not participate in a 

return-to-work program, if such a program would benefit the individual. 

To support these requirements, these disability systems help the individual 

obtain the appropriate medical care and provide financial incentives to 

promote participation in rehabilitation, such as reimbursement for family 

care costs. Insurers may provide additional financial benefits to those who 

participate in a return-to-work plan. For example, one insurer told us that 

claimants may receive an additional benefit equal to 10 percent of their 

disability payment for participating in rehabilitation. To further encourage 

rehabilitation and return to work, insurers may allow claimants who work

to supplement their disability benefit payments with earned income. 

Conversely, insurers may reduce or terminate benefits for claimants who 

could work, but do not. Claimants’ benefits may also be terminated if they 

refuse to accept a reasonable accommodation that would enable them to

work. 

Page 29 GAO-06-309 VA Individual Unemployability Benefits
If the insurer initially determines that the claimant has no work potential, 

it monitors the claimant’s condition for changes that could increase the 

potential to work. After 2 years, it reassesses the claimant’s eligibility 

under the more restrictive definition of disability. The insurer continues to

look for opportunities that may enable these claimants to return to work. 

For example, opportunities may occur for claimants when there are 

improvements in medical treatments and technology, such as new 

treatments for cancer or AIDS. 

VA Lacks Some of SSA’s

Eligibility Assessment and 

Return-to-Work Efforts 

Both VA and SSA disability programs are on our high-risk list, in part, 

because they do not reflect the current state of science, technology, 

medicine, or labor market conditions. Nevertheless, SSA’s disability 

programs have efforts to assess eligibility and encourage return-to-work 

that VA’s disability compensation program lacks. For example, SSA 

requires applicants to provide substantial information for assessment 

purposes and in recent years has implemented a new program to provide 

return-to-work services and is conducting pilots to test new methods to 

return applicants and beneficiaries to work. Moreover, in 2003, SSA’s 

Commissioner announced in a testimony to the Congress that a key 

operational goal for the agency’s disability programs is to foster return-towork efforts at all stages of decision making. 

As with VA’s definition of individual unemployability, SSA’s definition of 

disability for its two disability programs includes both medical and 

employment criteria. For the agency’s Disability Insurance (DI) and 

Supplemental Security Income (SSI) programs, the Social Security Act51

defines disability as the inability to engage in any substantial gainful 

activity52 by reason of any medically determinable physical or mental 

impairment(s) that is expected to result in death or has lasted or can be 

expected to last for a continuous period of not less than 12 months. In 

addition to SSA’s medical criteria, an applicant must also meet nonmedical program criteria for both of its disability programs. For DI 

 51 42 U.S.C. §§ 423(d) and 1382c(a)(3). 

52 SSA has established earnings criteria as an indication of whether applicants are able to

engage in substantial gainful activity. In 2005, the substantial gainful activity level for 

individuals who have impairments other than blindness was $830 in earnings per month.

For blind individuals, the level was $1,380 in earnings per month. In addition, SSA has

established a substantial gainful activity level for self-employed individuals that is not 

based solely on earnings but includes such factors as the significance of the individual’s 

contribution to the business. (See 20 C.F.R. §§ 404.1575 and 416.975.) 

Page 30 GAO-06-309 VA Individual Unemployability Benefits
benefits, an individual must have contributed earnings to the DI program, 

have sufficient annual earnings to receive one credit per year, and 

generally have at least 20 credits for the last 40 quarters ending with the 

onset of a disability.53 To receive SSI benefits, individuals must have 

limited assets and income. 

To collect key decision-making information, SSA requires a DI or SSI 

applicant to provide the agency with extensive medical and vocational 

information, including the illness, injuries, or conditions and how they 

affect the applicant’s ability to work; 15 years of prior work history; the 

requirements of the applicant’s longest lasting job; medications taken and 

medical history; education and training; and any vocational rehabilitation. 

If needed, SSA may also collect additional information from the applicant 

about his or her pain, fatigue, and ability to perform common daily and

other specific activities, like meal preparation or ability to stand and sit, as 

well as the use of accommodations. 

To assess claims for eligibility, SSA generally uses both a disability 

examiner and a medical consultant.54 If needed, the medical consultant will 

use the collected information to determine what an applicant can still do, 

despite physical or mental limitations, referred to as the applicant’s 

residual functional capacity.55 The residual functional capacity will be used 

by the decision makers, along with other vocational information in the 

applicant’s file, to determine if the applicant can perform his or her prior 

job. If not, the decision makers will use this information to determine if 

 53 Younger workers may qualify with fewer credits. Credits are based on an individual’s

total annual earnings and a maximum of four credits can be earned each year. For 2005,

annual wages or net earnings from self-employment income to obtain one credit was $920. 

54 If the applicant is not satisfied with the initial decision, he or she may request 

reconsideration of the decision and also has an opportunity thereafter to request a hearing

before an Administrative Law Judge and for an additional review by SSA’s Appeals Council. 

For additional information on SSA’s current disability decision making process, see GAO, 

Social Security Disability Insurance: SSA Actions Could Enhance Assistance to 

Claimants with Inflammatory Bowel Disease and Other Impairments, GAO-05-495 

(Washington, D.C.: May 31, 2005). 

55 SSA does not evaluate the residual functional capacity of all applicants. Instead, SSA uses 

a sequential assessment process to more quickly identify individuals who the agency 

believes are clearly eligible or ineligible for benefits. For example, SSA denies benefits to 

individuals who are working and earning more than the agency’s threshold amount or do

not have a severe impairment. SSA grants benefits to applicants whose earnings are below 

the threshold level and whose impairments meet or equal the agency’s pre-established list

of medical criteria for impairments considered severe enough to prevent an individual from

earning wages above the established threshold. 

Page 31 GAO-06-309 VA Individual Unemployability Benefits
the applicant can perform another job in the national economy. Although 

these vocational decisions can be complex, SSA may include, but does not 

require, that vocational specialists provide input to decision making. SSA, 

however, has acknowledged the need to strengthen its decision making 

and has proposed, along with other changes, to establish a national 

network of medical, psychological, and vocational experts to assist SSA 

decision makers throughout the country.56

The SSA Commissioner’s recent commitment to fostering return-to-work 

efforts is illustrated by some of the agency’s ongoing programs and pilot 

tests.57 In September 2004, SSA completed implementation of its Ticket to 

Work and Self-Sufficiency Program.58 The program is intended to provide 

beneficiaries with greater choice in vocational rehabilitation and 

employment services so that they can work and become self-sufficient. 

While we reported in March 2005 that the program was having limited 

success,59 the agency has proposed steps to strengthen the program, such 

as expanding eligibility and improving incentives to encourage 

participation by service providers and beneficiaries. Furthermore, SSA has 

developed a Work Opportunity Initiative, with several demonstration 

projects, to provide both applicants and beneficiaries with medical 

coverage or cash incentives to support their ability to work. 

 56 For more information about this change and others proposed by SSA’s Commissioner to

improve disability decision making, see the agency’s notice of final rulemaking for its 

administrative review process for adjudicating initial disability claims. 71 Fed. Reg. 16424

(Mar. 31, 2006). 

57 For many years, SSA has had work incentives incorporated into its disability programs to 

protect the cash and medical benefits of beneficiaries who try to work. GAO, however, has 

reported that the incentives were ineffective in motivating beneficiaries to work. For 

related GAO testimony, see Social Security Disability: Multiple Factors Affect Return to 

Work, GAO/T-HEHS-99-82 (Washington, D.C.: Mar. 11, 1999). 

58 SSA also implemented two supporting programs. The Benefits Planning, Assistance, and 

Outreach program enables community groups to provide outreach and information to SSA

beneficiaries with disabilities to help them make informed choices about using a ticket and 

returning to work. The Protection and Advocacy for Beneficiaries of Social Security 

projects provide a broad range of advocacy related services to beneficiaries with 

disabilities that may be needed by beneficiaries to secure employment.

59 For the GAO report on SSA’s Ticket Program, see Social Security Administration: 

Better Planning Could Make the Ticket Program More Effective, GAO-05-248 (Washington,

D.C.: Mar. 2, 2005). 

Page 32 GAO-06-309 VA Individual Unemployability Benefits
While supporting people with disabilities is an essential function of SSA’s 

disability programs, the agency is also responsible for ensuring the 

programs’ financial integrity. In 1997, we designated SSI a high-risk 

program after several years of reporting on specific instances of abuse and

mismanagement, increasing overpayments, and poor recovery of 

outstanding SSI overpayments. SSA’s actions since then included 

developing a major SSI legislative proposal with numerous overpayment 

deterrence and recovery provisions. The ensuing enacted legislation 

directly addressed a number of our prior recommendations and warranted 

removal of the SSI program from our high-risk list in 2003.60 We have,

however, continued to monitor the program to ensure that improvements 

have been sustained. 

SSA Has Implemented 

Practices to Help Ensure 

the Financial Integrity of 

Its Disability Programs 

To help ensure that applicants’ and beneficiaries’ earnings do not exceed 

allowed levels, SSA has incorporated several procedures into its eligibility 

assessments. In assessing eligibility, SSA must determine whether an 

applicant is working and earning an amount that exceeds its established 

thresholds. As part of this process, DI and SSI applicants must provide 

SSA with information on their past work and any current work. If 

applicants indicate that they are currently working or receiving earnings, 

or SSA obtains other information that suggests that they may have 

earnings, SSA requires additional information on their work and earnings. 

SSA field staff generally must then verify the applicants’ reported earnings 

using another reliable source of information. SSA also uses its online 

query system to access the NDNH database, which has recent earnings, 

new hire, and unemployment information, to verify the earnings for DI and 

SSI applicants it has designated as high risk, such as those whose stated 

income does not appear to cover their expenses. SSA has found that online 

access to NDNH data to verify earnings for the SSI program has a high 

return on investment. For example, using a pilot evaluation, SSA estimated 

that if it verified earnings online prior to benefit payment, it could annually 

reduce overpayments by $30.8 million and have a 3.6 to 1 return-oninvestment ratio.61

 60 For GAO’s report, see High-Risk Series: An Update, GAO-03-119 (Washington, D.C.: 

January 2003). 

61 This estimate is based on a judgmental selection of field offices for the study and does 

not represent a statistical estimate for the nation, according to an SSA Office of Inspector 

General report entitled, Review of the Social Security Administration’s Office of Child

Support Enforcements Pilot Evaluation, A-01-00-20006 (Baltimore, Md.: May 30, 2001). 

Page 33 GAO-06-309 VA Individual Unemployability Benefits
After benefits are granted, SSA performs frequent computer matches that 

are intended to assess earnings for all its beneficiaries. These matches 

compare earnings information from its beneficiary databases with two 

federal earnings databases to detect and prevent overpayments. For its 

computer matches, SSA uses both its own master earnings file with 

earnings information from employers and the self-employed and the 

NDNH database.62 SSA uses both databases because the SSA database has 

more complete earnings information than the NDNH database, whereas 

the NDNH database has more current earnings information in its quarterly 

wage database, as well as other important employment data, according to

SSA officials. SSA performs periodic matches using its master earnings file

to detect and prevent beneficiary overpayments for all its SSI and DI 

beneficiaries. In addition, SSA performs quarterly matches using NDNH 

quarterly earnings to detect and prevent overpayments to all SSI 

beneficiaries. SSA has also found that using NDNH data for the matches 

can be very cost-effective. In evaluating fiscal year 2002 computer matches 

using NDNH data, SSA estimated that it could annually realize $199 million 

in benefits from collecting and preventing overpayments and expend $23 

million for matching, following up on matches, and overpayment 

collection, yielding an estimated 8.7-to-1 benefit-to-cost ratio. SSA also 

plans to expand its use of the NDNH database to perform matches to 

evaluate all DI beneficiary earnings.

SSA has automated many features of its matching process and follow-up 

verification and collection activities to help improve the efficiency and 

effectiveness of its disability programs. SSA’s computerized matching 

process can not only detect potential unreported or underreported 

earnings, but can also electronically forward matches to the field office

responsible for follow-up and provide workload statistics to each level of

management to help monitor the process. Field office staff can also use 

SSA computer systems to view specific information on the match 

(including the amount of earnings detected), document their follow-up, 

and initiate collection activities, as needed. For example, the system will 

send a letter to a current beneficiary who has received a benefit 

overpayment with information about this debt, such as the amount owed, 

and options for repayment. Through automation, the agency has increased

its ability to ensure that matches are followed up and more efficiently 

initiate efforts to collect overpayments. SSA’s systems also have built in 

 62 SSA also has access to earnings data from 18 states to help monitor and prevent 

overpayments, according to an SSA official. 

Page 34 GAO-06-309 VA Individual Unemployability Benefits
security features to help ensure that SSA meets legal requirements to 

manage the privacy of the earnings and employment data. 

SSA uses various collection methods and other tools to manage the debt

owed by current and past beneficiaries who received disability benefit 

overpayments. SSA will withhold monthly disability benefits to collect

overpayments from beneficiaries who are still on its rolls. In fiscal year 

2005, SSA collected $2 billion in overpayments using this method. When 

the person is no longer on SSA’s benefit rolls, the agency uses its own 

billing and follow-up system to collect overpayments. That system enables 

SSA to send a series of progressively stronger notices requesting 

repayment and to make telephone calls to negotiate repayment. The 

agency collects several hundred million dollars a year using this approach. 

In addition, SSA uses other more aggressive debt collection tools, such as

tax refund offsets and administrative wage garnishment, to collect debt 

from prior benefit recipients who are no longer on its benefit rolls. When 

unable to collect debts from current or prior beneficiaries, SSA will write 

off the debts. In 2005, SSA reported debt collection of $2.4 billion, writing 

off debt of $842 million, which left outstanding debt of $13.1 billion at year 

end. Table 2 provides a list of the tools used by the agency to manage 

overpayment debt. 

Table 2: SSA’s Debt Collection Tools for Benefit Overpayments 

Debt collection tool Description

SSA billing and follow-up Collection of debt using a series of progressively stronger 

notices requesting repayment and telephone calls to 

negotiate repayment 

Benefit withholding Collection of overpayments from monthly disability 

benefits for individuals still on the disability rolls 

Mandatory cross-program 

recovery 

Collection of a former SSI recipient’s debt from any DI 

benefits due to that person 

Tax refund offset Collection of a former beneficiary’s delinquent debt from a 

federal tax refund 

Administrative offset Collection of a former beneficiary’s delinquent debt from a 

federal payment other than a tax refund 

Administrative wage 

garnishment 

Collection of a former beneficiary’s delinquent debt from 

their current wages from their employer 

Credit bureau reporting Reporting delinquent debt to a credit bureau to encourage

repayment 

Source: GAO analysis of SSA information.

Page 35 GAO-06-309 VA Individual Unemployability Benefits
To help monitor its debt collection efforts and their effectiveness, SSA also 

tracks and reports key debt management activities and performance 

indicators. For example, SSA’s annual performance and accountability 

reports provide data on the quarterly cumulative totals for the debt 

outstanding, collected, and written off, and the varying age of delinquent

debt.63 SSA also provides 5 years of trend data on the results and 

effectiveness of its activities, such as the percentage of outstanding debt 

that is delinquent or not expected to be collected and the average cost to 

collect a dollar of debt, which was $0.09 for fiscal year 2005. Furthermore, 

to help monitor its achievement of its strategic goals to improve debt

management, SSA measures and sets a goal for the percentage of debt in

collection for its Old-Age, Survivors, and Disability Insurance; and SSI 

programs. The indicators compare debt that is scheduled for collection 

through benefit withholding or installment payment with total outstanding 

debt. For fiscal year 2005, SSA reported that it met its collection goals, 

with 53 percent of SSI debt and 42 percent of Old-Age, Survivors and 

Disability Insurance debt in collection arrangements. 

VA’s management of IU benefits lacks the strong controls needed for 

ensuring the integrity of the process for determining the initial and 

ongoing eligibility for these benefits. In particular, VA lacks the criteria, 

guidance, and procedures to ensure that its IU decisions are well 

supported. For example, the guidelines do not mention how factors such 

as education, skills, or prior work history should be used to assess a 

veteran’s ability to obtain or retain substantially gainful employment in 

cases when the veteran is not working or is only marginally employed. As 

a result, the agency cannot assure that it is providing IU benefits only to 

those who are unemployable due to their service-related disabilities. In 

addition, due to limitations in the procedures to obtain evidence, VA rating

specialists may not have sufficient information for determining whether 

claimants are unemployable. Without the procedures needed to collect 

complete and corroborated employment and earnings histories, rating 

specialists lack access to important indicators of future employability. 

Moreover, without having the procedures needed to obtain vocational 

assessments from VA’s own vocational counselors, rating specialists lack 

important information that is needed to determine whether a claimant may 

be able to obtain or retain substantially gainful employment. 

Conclusions 

 63 For additional information on SSA’s debt management activities and results, see SSA’s 

Annual Performance and Accountability Report for fiscal year 2005. 

Page 36 GAO-06-309 VA Individual Unemployability Benefits
Further, VA’s income verification process lacks access to timely data, uses

an outdated earnings threshold, and relies on a manual process for followup on earnings matches, which results in the agency’s inability to 

effectively identify overpayments. In addition, VA’s methods for 

determining ongoing eligibility may allow veterans who do not meet the 

ongoing eligibility criteria to continue to receive IU benefits. Moreover, 

VA’s limited ability to detect and stop IU payments to beneficiaries no 

longer eligible to receive them not only increases the cost of IU benefits, it

can create an opportunity for program misuse. Finally, because VA does 

not track the results of its enforcement efforts, the agency cannot 

determine whether its efforts are cost-effective and cannot hold itself 

accountable to veterans or other taxpayers. 

Finally, the continuing deployment of our military forces to armed conflict 

has focused national attention on ensuring that those who incur 

disabilities while serving their country are provided the services needed to 

help them reach their full potential. Yet, VA is among the federal disability 

programs we have identified as high-risk, in part, because it is poorly 

positioned to provide meaningful and timely support to help veterans with 

disabilities return to work. VA’s management of IU benefits exemplifies 

these problems. Approaches from other disability programs demonstrate 

the importance of providing return-to-work services and using vocational 

expertise to assess the claimant’s condition and provide the appropriate 

services. Incorporating return-to-work practices in IU decision making 

could help VA modernize its disability program to enable veterans to 

realize their full productive potential without jeopardizing the availability 

of benefits for veterans who cannot work. 

We recommend that the Secretary of Veterans Affairs take the following 

steps to improve management of IU benefits: 

1. To help ensure that IU decisions are well-supported and IU benefits are 

provided only to veterans whose service-connected disabilities prevent 

them from obtaining or retaining substantially gainful employment, VA 

should clarify and strengthen its eligibility criteria, guidance, and 

procedures for determining unemployability. For example, VA could: 

Recommendations for 

Executive Action 

• clarify in its regulations and guidelines how vocational factors, such as 

education, skills, or prior work history, should be used to assess a 

claimant’s eligibility; 

• establish procedures for rating specialists to request VR&E to conduct 

vocational assessments of IU claimants as appropriate; and 

Page 37 GAO-06-309 VA Individual Unemployability Benefits
• seek legislative authority to use earnings data from the National 

Directory of New Hires. 

2. To improve the efficiency and effectiveness of VA’s enforcement efforts 

to monitor ongoing eligibility, VA should update procedures and 

strengthen criteria for the enforcement of the IU earnings limit. For 

example, VA could: 

• update and automate its enforcement process, including using more 

current earnings data and threshold amounts in its income verification 

match; 

• clarify guidance on the review of IU beneficiary earnings following the 

match; and 

• annually track and report on the results of matching process and 

related enforcement activities. 

3. To help modernize its IU decision-making process, VA should develop a 

strategy to ensure that IU claimants with work potential receive 

encouragement and assistance to return to work, while protecting benefits

for those unable to work. For example, VA could encourage claimants to 

return to work by having vocational counselors from VR&E develop 

return-to-work plans and provide assistance to claimants with work 

potential. 

We provided a draft of this report to VA, SSA, and HHS for comment. VA 

agreed with our conclusions and concurred with our recommendations, 

and stated that it has implemented and plans to implement program 

changes in areas that we identified as needing attention. The actions 

described by VA should strengthen its management of IU benefits; 

however, we believe that further steps are needed to fundamentally 

transform IU benefits into a meaningful and timely way of supporting 

unemployed veterans with service-connected disabilities. For example, 

VA seeks to improve decision making on initial and ongoing eligibility by 

increasing its collection of employment and earnings data. While these are 

positive developments, our recommendations envision a more 

comprehensive effort to restore the integrity of IU decision making 

through a series of reforms that would seek to strengthen IU criteria, 

guidance, and procedures for determining initial eligibility and enforcing 

the earnings limit. 

Agency Comments 

VA also proposes to encourage IU claimants to consider employment by 

including a motivational letter with the notice informing them that they 

Page 38 GAO-06-309 VA Individual Unemployability Benefits
have been approved for IU benefits. While we recognize VA’s intent is 

positive, providing such letters after veterans have been determined to be 

unemployable does not provide them with the timely support needed to 

return to work. Our recommendation envisions that VA implement a 

number of fundamental reforms that transform IU benefits from simply 

providing compensation for unemployed veterans with service-connected 

disabilities to incorporating a broad range of vocational rehabilitation 

services and assistance that encourage and support such veterans to 

realize their full productive capacity, while protecting benefits for veterans

unable to work. VA will need to expand upon the initiatives outlined in its 

comments to take full advantage of IU benefit decision making, not only as 

a means to restore the lost incomes of veterans with service-connected 

disabilities but, when appropriate, to restore their ability to pursue a 

livelihood and take their place as fully productive members of society. 

VA’s comments appear in app. V. In addition, VA, SSA, and HHS provided

technical comments, which are reflected in the report as appropriate. 

We will send copies of this report to the Secretary of Veterans Affairs, 

Secretary of Health and Human Services, Commissioner of the Social

Security Administration, relevant congressional committees, and other 

interested parties. We will also make copies available to others upon 

request. In addition, the report will be available at no charge on GAO’s 

Web site at http://www.gao.gov. Please contact me at (202) 512-7215 if you 

or your staff have any questions about this report. Contact points for our 

offices of Congressional Relations and Public Affairs may be found on the 

last page of this report. Other major contributors to this report are listed in

appendix VI.

Cristina T. Chaplain 

Acting Director, Education, Workforce, 

 and Income Security Issues 

Page 39 GAO-06-309 VA Individual Unemployability Benefits
Appendix I: IU 

Expend

Beneficiaries and Estimated 

itures 

Page 40 GAO-06-309

Appendix I: IU Beneficiaries and Estimated 

Expenditures 

We estimated the number of Individual Unemployability (IU) beneficiaries 

for 1996 to 2005 from monthly internal Department of Veterans Affairs 

(VA) reports on activity under the Disability Compensation program. For 

each year, we identified the number of IU beneficiaries from the “end of 

month” total in the September report for that year. Figure 5 shows the 

growth in number of IU beneficiaries from 1996 to 2005. 

Figure 5: Number of IU Beneficiaries for 1996 to 2005 

0

25,000

50,000

75,000

100,000

125,000

150,000

175,000

200,000

225,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Veterans receiving IU benefits

Source: GAO analysis of VA data.

Years

At the time of our study, VA did not report or maintain separate data on IU

expenditures. We estimated VA’s annual added expenditures due to IU 

benefits for 1996 to 2005 from monthly internal VA reports showing 

expenditures on the Disability Compensation program. Using data in the 

September report for each year, we computed average monthly payments

due to IU benefits for 1996 to 2005, annualized this amount, and factored 

in the number of beneficiaries to estimate total expenditures on IU 

benefits for each year. Figure 6 shows the growth in IU expenditures from 

1996 to 2005. 

VA Individual Unemployability Benefits
Appendix I: IU Beneficiaries and Estimated 

Expenditures 

Figure 6: Estimated IU Expenditures for 1996 to 2005 

0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

3,000,000,000

3,500,000,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Dollars

Source: GAO analysis of VA data.

Years

Page 41 GAO-06-309 VA Individual Unemployability Benefits
Appendix II: Lifetime Present Value Analysis Appendix II: Lifetime Present V of IU Benefits alue Analysis 

of IU Benefits 

To illustrate the value of IU benefits, we calculated the present value of

the added benefits due to IU that would be available over a lifetime to 

veterans who begin to receive IU benefits at different ages and with 

schedular disability ratings of 60-, 70-, 80-, and 90-percent. We chose the 

ages of 20, 25, 35, 45, 55, 65, and 75 to illustrate the added value of IU 

benefits over a wide range of ages at which veterans could begin to receive 

such benefits. 

For each age and disability rating combination, we calculated the present 

value of the added increment due to IU that would be received over a 

lifetime. Our present value analysis uses annuity factors that are based on

two key assumptions: the length of time benefits will be received, and the 

rate at which future payments will be discounted (on the basis that a 

dollar today is worth more than a dollar received a year from today). For 

the first assumption about life span, we used Social Security 

Administration general population mortality tables for males.1

 For the 

second assumption about the discount rate, we assumed that the rate of 

interest absent inflation (the real interest rate) is 3 percent, and that 

inflation is constant at 3 percent annually, resulting in an assumed nominal 

interest rate (which is the sum of the real interest rate and inflation) of 6 

percent. Because the yearly cost-of-living adjustment of VA compensation 

rates is linked to the consumer price index,2

 we assumed that this 

adjustment is equal to the rate of inflation, resulting in a net discount rate 

for our calculations of 3 percent a year. The present value of the additional 

amount of disability compensation provided to veterans granted IU 

benefits for selected ages and schedular ratings is provided in table 3. 

 1

 We used estimates for males because 2001 data from the Bureau of Labor Statistics show 

that over 93 percent of veterans are male. 

2

 A cost of living adjustment is not guaranteed, but the Congress has historically passed 

annual adjustments based on a percentage equal to the increase in Social Security benefits. 

Page 42 GAO-06-309 VA Individual Unemployability Benefits
Appendix II: Lifetime Present Value Analysis

of IU Benefits 

Table 3: Lifetime Present Value of Increased Benefits for Veterans Receiving IU by Selected Ages and Schedular Ratings

Age awarded IU 

Schedular

Rating (percent) 

2005 annual amount

 of schedular 

compensationa

Annuity factor

Lifetime present value of

compensation based on

the schedular ratingb

Lifetime present

value of the added 

benefits due to IUc

60 $10,068 26.4768 $266,568 $463,874

70 12,672 26.4768 335,514 394,928

80 14,724 26.4768 389,844 340,598

90 16,560 26.4768 438,456 291,986

20 

100 27,588 26.4768 730,442 NAd

60 10,068 25.4894 256,627 446,574

70 12,672 25.4894 323,002 380,200

80 14,724 25.4894 375,306 327,896

90 16,560 25.4894 422,104 281,097

25 

100 27,588 25.4894 703,202 NAd

60 10,068 22.9946 231,510 402,865

70 12,672 22.9946 291,388 342,987

80 14,724 22.9946 338,572 295,803

90 16,560 22.9946 380,791 253,584

35 

100 27,588 22.9946 634,375 NAd

60 10,068 19.8757 200,109 348,222

70 12,672 19.8757 251,865 296,466

80 14,724 19.8757 292,650 255,681

90 16,560 19.8757 329,142 219,189

45 

100 27,588 19.8757 548,331 NAd

60 10,068 16.1821 162,921 283,511

70 12,672 16.1821 205,060 241,372

80 14,724 16.1821 238,265 208,167

90 16,560 16.1821 267,976 178,456

55 

100 27,588 16.1821 446,432 NAd

60 10,068 12.1007 121,830 212,004

70 12,672 12.1007 153,340 180,494

80 14,724 12.1007 178,171 155,663

90 16,560 12.1007 200,388 133,447

65 

100 27,588 12.1007 333,834 NAd

75 60 10,068 8.1091 81,642 142,071

70 12,672 8.1091 102,759 120,955

Page 43 GAO-06-309 VA Individual Unemployability Benefits
Appendix II: Lifetime Present Value Analysis

of IU Benefits 

Age awarded IU 

Schedular

Rating (percent) 

2005 annual amount

 of schedular 

compensationa

Annuity factor

Lifetime present value of

compensation based on

the schedular ratingb

Lifetime present

value of the added 

benefits due to IUc

80 14,724 8.1091 119,398 104,315

90 16,560 8.1091 134,287 $89,427

100 27,588 8.1091 223,714 NAd

Source: GAO analysis using VA 2005 schedular disability compensation rates and annuity factors described above. 

a

Disability compensation is paid monthly. The monthly compensation has been multiplied by 12 to 

provide annual compensation figures. 

b

To calculate the lifetime present values of disability compensation associated with a veteran’s

schedular rating, we multiplied the annual schedular compensation by the annuity factor. 

c

The lifetime present value of the increase in disability compensation for veterans granted IU benefits 

is the difference in the lifetime present value of compensation at the 100-percent rate and the lifetime 

present value of compensation at the schedular rate. Due to rounding, the sum of the compensation 

based on the schedular rating and the added compensation due to the receipt of IU benefits may not 

exactly equal the compensation amount at the 100-percent rate. 

d

Veterans with a 100-percent schedular rating would receive the maximum basic disability

compensation and would not be awarded IU benefits. 

Page 44 GAO-06-309 VA Individual Unemployability Benefits
Appendix III: Examples from VA’s Rating Appendix III: Examples from V Schedule for Selected Medical Conditions A’s Rating 

Schedule for Selected Medical Conditions 

Table 4: VA’s Rating Schedule for Selected Medical Conditions

Percent 

rating

Mental impairments: 

major depressive disorder 

Physical injury: 

removal of ribs 

Illness: 

migraine headaches 

0 Symptoms do not interfere with 

occupational or social functioning or 

require continuous medication.

Incapacitating attacks occurring less 

than once every two months on

average over the last several months 

10 Mild or transient symptoms decrease 

work efficiency and ability to perform 

occupational tasks only during periods 

of significant stress, or symptoms 

controlled by continuous medication. 

Removal of one rib, or the partial 

removal of two or more ribs without 

potential for regrowth 

Incapacitating attacks occurring once 

in two months on average over the 

last several months 

20 Removal of two ribs 

30 Symptoms such as depressed mood 

and anxiety cause occasional

decrease in work efficiency and 

intermittent periods of inability to 

perform occupational tasks, although 

generally functioning satisfactorily. 

Removal of three or four ribs Incapacitating attacks occurring once 

a month on average over last several 

months 

40 Removal of five or six ribs 

50 Symptoms such as flattened affect, 

panic attacks more than once a week, 

and impairment of short-and long-term 

memory cause reduced reliability and 

productivity. 

Removal of more than six ribs Very frequent, completely 

incapacitating and prolonged attacks, 

producing severe economic 

inadaptability 

60

70 Symptoms such as suicidal ideation 

and obsessional rituals cause

deficiencies in most areas, such as 

work, school, family, judgment, 

thinking, or mood. 

80

90

100 Symptoms such as persistent 

delusions or hallucinations and grossly 

inappropriate behavior cause total 

occupational and social impairment. 

Source: GAO analysis of VA regulations. 

Page 45 GAO-06-309 VA Individual Unemployability Benefits
Appendix

C

 IV: Example of Procedures to 

alculate Combined Disability Ratings 

Page 46 GAO-06-309

Appendix IV: Example of Procedures to 

Calculate Combined Disability Ratings 

Figure 7: Procedures to Calculate Combined Disability Rating 

Step 1

Step 3 Step 4

Step 2

 Determine rating for 

 each disability

To compute Value:

To compute Value: To compute Value:

To compute Value:

Value:

Value:

Value:

Significance of value:

Significance of value:

Significance of value:

Find specific disability diagnoses 

from rating schedule

50%

20%

70%

X

X

Determine impact of 

primary disability on 

residual earning capacity

Subtract initial rating from 100%

100% - 50% = 50%

Veteran has 50% earning 

capacity remaining.

Migraine 

headaches

50%

Determine impact of 

secondary disability

Multiply residual earning 

capacity by second rating

40% x 50% = 20%

As a result of second 

disability, the veteran has 

lost an additional 20% of 

earning capacity

Determine combined 

rating

Add loss of earning 

capacity resulting from 

both disabilities

50% + 20% = 70%

As a result of both 

disabilities the veteran has 

lost 70% of earning capacity.

Source: GAO analysis and images from Art Explosion.

Loss of use

of foot

40%

.

Primary

disability

Secondary

disability

Note: In order to obtain a 50 percent rating, migraine headaches must be characterized by very 

frequent, completely prostrating and prolonged attacks productive of severe economic inadaptability.

VA Individual Unemployability Benefits
Appendix V: Comments from the Department Appendix V of Veterans Affairs : Comments from the Department 

of Veterans Affairs 

Page 47 GAO-06-309 VA Individual Unemployability Benefits
Appendix V: Comments from the Department 

of Veterans Affairs 

Page 48 GAO-06-309 VA Individual Unemployability Benefits
Appendix V: Comments from the Department 

of Veterans Affairs 

Page 49 GAO-06-309 VA Individual Unemployability Benefits
Appendix VI: 

A

GAO Contacts and Staff 

cknowledgements 

Page 50 GAO-06-309

Appendix VI: GAO Contacts and Staff 

Acknowledgements 

Cristina T. Chaplain, Acting Director, (202) 512-7215, ChaplainC@gao.gov

Cynthia A. Bascetta, Director, (202) 512-7215, BascettaC@gao.gov

Carol Dawn Petersen, Assistant Director; Joseph J. Natalicchio, Analyst-inCharge; and Julie M. DeVault, Senior Analyst; made significant 

contributions to all aspects of this report. Crystal Bernard, Margie K. 

Shields, and Jonathan Elkin also made significant contributions. Joan 

Vogel, Walter Vance, Vanessa Taylor, Roger Thomas, and Joseph 

Applebaum provided technical assistance. 

VA Individual Unemployability Benefits

GAO Contacts 

Acknowledgements 

(130443) 
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