Testimony 

Before the Committee on Veterans’ 

Affairs, U.S. Senate 

United States General Accounting Office 

GAO

For Release on Delivery 

Expected at 2:30 p.m. EDT 

Tuesday, September 23, 2003 VA BENEFITS 

Fundamental Changes to 

VA’s Disability Criteria 

Need Careful Consideration

Statement of Cynthia A. Bascetta, Director, 

Education, Workforce, and Income Security Issues 

GAO-03-1172T 
Page 1 GAO-03-1172T 

Mr. Chairman and Members of the Committee: 

I am pleased to be here to discuss our past reviews of the Department of 

Veterans Affairs (VA) disability programs as you consider the fundamental 

issue of eligibility for benefits and the related issue of concurrent receipt 

of VA disability compensation and Department of Defense (DOD) 

retirement pay. Our work has addressed these issues in addition to 

identifying significant program design and management challenges 

hindering VA’s ability to provide meaningful and timely support to 

disabled veterans and their families. It is especially fitting, with the 

continuing deployment of our military forces to armed conflict, that we 

reaffirm our commitment to those who serve our nation in its times of 

need. Therefore, effective and efficient management of VA’s disability 

programs is of paramount importance. 

As you know, in January 2003, we designated VA’s disability compensation 

programs, as well as other federal disability programs including Social 

Security Disability Insurance and Supplemental Security Income, as highrisk areas.1

 We did this to draw attention to the need for broad-based 

transformation of these programs, which is critical to improving the 

government’s performance and ensuring accountability within expected 

resource limits. In March 2003, we cautioned that the proposed 

modification of concurrent receipt provisions in the military retirement 

system would not only have significant implications for DOD’s retirement 

costs but could also increase the demands placed on the VA claims 

processing system. This would come at a time when the system is still 

struggling to correct problems with quality assurance and timeliness. 

Moreover, we testified that it would be appropriate to consider the pursuit 

of more fundamental reform of the disability programs as the Congress 

and other policy makers consider concurrent receipt. 

Today, as you requested, I would like to highlight the findings of our 

related past work on VA’s disability programs, including our 1989 report 

on veterans receiving compensation for disabilities unrelated to military 

service. My comments are based on numerous reports and testimonies 

prepared over the last 15 years as well as our broader work on other 

federal disability programs. (See Related GAO Products.) 

 1

 U.S. General Accounting Office, High-Risk Series: An Update, GAO-03-119 (Washington, 

D.C.: Jan. 1, 2003). 
Page 2 GAO-03-1172T 

In summary, VA needs to modernize its disability programs. In particular, 

VA relies on outmoded medical and economic disability criteria in 

adjudicating claims for disability compensation. In addition, VA has longstanding problems providing veterans with accurate, consistent, and 

timely benefit decisions, although recent efforts have made important 

improvements in timeliness. However, complex program design features, 

including eligibility, have developed over many years, and solutions to the 

current problems will require thoughtful analysis to ensure that efficient, 

effective, and equitable solutions are crafted. Moreover, these solutions 

might need to take into account a broader perspective from other 

disability programs to ensure sound federal disability policies across 

government programs and to reduce the risks associated with the current 

programs. 

VA provides disability compensation to veterans with service-connected 

conditions, and also provides compensation to survivors of service 

members who died while on active duty. Disabled veterans are entitled to 

cash benefits whether or not employed and regardless of the amount of 

income earned. The cash benefit level is based on the percentage 

evaluation, commonly called the “disability rating,” that represents the 

average loss in earning capacity associated with the severity of physical 

and mental conditions. VA uses its Schedule for Rating Disabilities to 

determine, based on an evaluation of medical and other evidence, which 

disability rating to assign to a veteran’s particular condition. VA’s ratings 

are in 10 percent increments, from 0 to 100 percent. 

Although VA generally does not pay disability compensation for 

disabilities rated at 0 percent, such a rating would make veterans eligible 

for other benefits, including health care. About 65 percent of veterans 

receiving disability compensation have disabilities rated at 30 percent or 

lower, and about 8 percent are 100 percent disabled. Basic monthly 

payments range from $104 for a 10 percent disability to $2,193 for a 100 

percent disability. 

In assessing veterans’ disabilities, VA remains mired in concepts from the 

past. VA’s disability programs base eligibility assessments on the presence 

of medically determinable physical and mental impairments. However, 

these assessments do not always reflect recent medical and technological 

advances, and their impact on medical conditions that affect potential 

earnings. VA’s disability programs remain grounded in an approach that 

equates certain medical impairments with the incapacity to work. 

Background 

VA’s Disability Criteria 

Are Outmoded 
Page 3 GAO-03-1172T 

Moreover, advances in medicine and technology have reduced the severity 

of some medical conditions and allowed individuals to live with greater 

independence and function more effectively in work settings. Also, VA’s 

rating schedule updates have not incorporated advances in assistive 

technologies—such as advanced wheelchair design, a new generation of 

prosthetic devices, and voice recognition systems—that afford some 

disabled veterans greater capabilities to work. 

In addition, VA’s disability criteria have not kept pace with changes in the 

labor market. The nature of work has changed in recent decades as the 

national economy has moved away from manufacturing-based jobs to 

service- and knowledge-based employment. These changes have affected 

the skills needed to perform work and the settings in which work occurs. 

For example, advancements in computers and automated equipment have 

reduced the need for physical labor. However, the percentage ratings used 

in VA’s Schedule for Rating Disabilities are primarily based on physicians’ 

and lawyers’ estimates made in 1945 about the effects that serviceconnected impairments have on the average individual’s ability to perform 

jobs requiring manual or physical labor. VA’s use of a disability schedule 

that has not been modernized to account for labor market changes raises 

questions about the equity of VA’s benefit entitlement decisions; VA could 

be overcompensating some veterans, while undercompensating or denying 

compensation entirely to others. 

In January 1997, we suggested that the Congress consider directing VA to 

determine whether the ratings for conditions in the schedule correspond 

to veterans’ average loss in earnings due to these conditions and adjust 

disability ratings accordingly. Our work demonstrated that there were 

generally accepted and widely used approaches to statistically estimate 

the effect of specific service-connected conditions on potential earnings. 

These estimates could be used to set disability ratings in the schedule that 

are appropriate in today’s socioeconomic environment.2

In August 2002, we recommended that VA use its annual performance plan 

to delineate strategies for and progress in periodically updating labor 

market data used in its disability determination process.3

 We also 

 2

 U.S. General Accounting Office, VA Disability Compensation: Disability Ratings May 

Not Reflect Veterans’ Economic Losses, GAO/HEHS-97-9 (Washington, D.C.: Jan. 7, 1997). 

3

 U.S. General Accounting Office, SSA and VA Disability Programs: Re-Examination of 

Disability Criteria Needed to Help Ensure Program Integrity, GAO-02-597 (Washington, 

D.C.: Aug. 9, 2002). 
Page 4 GAO-03-1172T 

recommended that VA study and report to the Congress on the effects that 

a comprehensive consideration of medical treatment and assistive 

technologies would have on its disability programs’ eligibility criteria and 

benefit package. This study would include estimates of the effects on the 

size, cost, and management of VA’s disability programs and other relevant 

VA programs and would identify any legislative actions needed to initiate 

and fund such changes. 

A disease or injury resulting in disability is considered serviceconnected if 

it was incurred or aggravated during military service. No causal 

connection between the disability and actual military service is required. 

In 1989, we reported on the U.S. practice of compensating veterans for 

conditions that were probably neither caused nor aggravated by military 

service.4

 These conditions included diabetes unrelated to exposure to 

Agent Orange5

, chronic obstructive pulmonary disease, arteriosclerotic 

heart disease, and multiple sclerosis. A review of case files for veterans 

receiving compensation found that 51 percent of compensation 

beneficiaries had disabilities due to injury; of these, 36 percent were 

injured in combat, or otherwise performing a military task. The remaining 

49 percent were disabled due to disease; of these, 17 percent had 

disabilities probably caused or aggravated by military service; 19 percent 

probably did not have disabilities related to service; and for 13 percent, the 

link between disease and military service was uncertain. We suggested 

that the Congress might wish to reconsider whether diseases neither 

caused nor aggravated by military service should be compensated as 

service-connected disabilities. 

In March 2003, the Congressional Budget Office (CBO) reported that, 

according to VA data, about 290,000 veterans received about $970 million 

in disability compensation payments in fiscal year 2002 for diseases 

identified by GAO as neither caused nor aggravated by military service. 

CBO estimated that VA could save $449 million in fiscal years 2004 through 

2008, if disability compensation payments to veterans with several 

nonservice-connected, disease-related disabilities were eliminated in 

 4

 U.S. General Accounting Office, VA Benefits: Law Allows Compensation for Disabilities 

Unrelated to Military Service, GAO/HRD-89-60 (Washington, D.C.: July 31, 1989). 

5

 In May 2001, VA issued a regulation identifying Type 2 diabetes as a service-connected 

disability for veterans who served in Vietnam, based on presumed exposure to Agent 

Orange. 

Some Veterans Are 

Compensated For 

Disabilities Not 

Related To Military 

Service 
Page 5 GAO-03-1172T 

future cases. In August 2003, we also identified this as an opportunity for 

budgetary savings if the Congress wished to reconsider program 

eligibility.6

Because of the complexities involved in a potential change in eligibility, 

the details of how such a change would be implemented and its 

ramifications are important to the Congress, VA, veterans, and other 

stakeholders. For example, serviceconnection is linked with eligibility for 

other VA benefits, such as health care and vocational rehabilitation. 

Moreover, efforts to change VA disability programs, including eligibility 

reform, would benefit from consideration in the broader context of 

fundamental reform of all federal disability programs. 

Mr. Chairman, this concludes my prepared remarks. I would be happy to 

answer any questions that you or Members of the Committee might have. 

For further information, please contact me at (202) 512-7101 or Irene Chu 

at (202) 512-7102. Greg Whitney also contributed to this statement. 

 6

 U.S. General Accounting Office, Opportunities for Oversight and Improved Use of 

Taxpayer Funds: Examples from Selected GAO Work, GAO-03-1006 (Washington, D.C.: 

Aug. 1, 2003). 

Contact and 

Acknowledgments 
Page 6 GAO-03-1172T 

Opportunities for Oversight and Improved Use of Taxpayer Funds: 

Examples from Selected GAO Work. GAO-03-1006. Washington, D.C.: 

August 1, 2003. 

Department of Veterans Affairs: Key Management Challenges in Health 

and Disability Programs. GAO-03-756T. Washington, D.C.: May 8, 2003. 

High-Risk Series: An Update. GAO-03-119. Washington, D.C.: January 1, 

2003. 

Major Management Challenges and Program Risks: Department of 

Veterans Affairs. GAO-03-110. Washington, D.C.: January 1, 2003. 

Veterans’ Benefits: Quality Assurance for Disability Claims and Appeals 

Processing Can Be Further Improved. GAO-02-806. Washington, D.C.: 

August 16, 2002. 

SSA and VA Disability Programs: Re-Examination of Disability Criteria 

Needed to Help Ensure Program Integrity. GAO-02-597. Washington, D.C.: 

August 9, 2002. 

Veterans’ Benefits Claims: Further Improvements Needed in ClaimsProcessing Accuracy. GAO/HEHS-99-35. Washington, D.C.: March 1, 1999. 

VA Disability Compensation: Disability Ratings May Not Reflect Veterans’ 

Economic Losses. GAO/HEHS-97-9. Washington, D.C.: January 7, 1997. 

VA Benefits: Law Allows Compensation for Disabilities Unrelated to 

Military Service. GAO/HRD-89-60. Washington, D.C.: July 31, 1989. 

Related GAO Products 

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