Veterans' Disability Benefits: Claims Processing Challenges and Opportunities for Improvements
Published: 2005-12-07T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Chairman, Committee on Veterans' Affairs, U.S. House of Representatives, asked GAO to report on the claims processing challenges and opportunities facing the Department of Veterans Affairs (VA) disability compensation and pension program. For years, the claims process has been the subject of concern and attention within VA and by the Congress and veterans service organizations. Their concerns include long waits for decisions, large claims backlogs, and inaccurate decisions. Our work and media reports of significant discrepancies in average disability payments from state to state have also highlighted concerns over the consistency of decision making within VA. In January 2003, we designated federal disability programs, including VA's compensation and pension programs, as a high-risk area because of continuing challenges to improving the timeliness and consistency of its disability decisions and the need to modernize programs. VA's outdated disability determination process does not reflect a current view of the relationship between impairments and work capacity. Advances in medicine and technology have allowed some individuals with disabilities to live more independently and work more effectively.
section_title: What GAO Found
paragraphs: The Department of Veterans Affairs continues to experience challenges processing veterans' disability compensation and pension claims including large numbers of pending claims and lengthy processing times. While VA made progress in fiscal years 2002 and 2003 reducing the size and age of its inventory of pending claims, it has lost ground since the end of fiscal year 2003. For example, pending claims increased by over one-third from the end of fiscal year 2003 to the end of fiscal year 2005. Meanwhile, VA faces continuing questions about its ability to ensure that veterans get consistent decisions across its 57 regional offices. GAO recommended in August 2002 that VA study the consistency of decisions made by different regional offices, identify acceptable levels of decision-making variation, and reduce variations found to be unacceptable. Several factors may impede VA's ability to significantly improve its claims processing performance. These include the potential impacts of laws, court decisions, and increases in the number and complexity of claims received. Opportunities for improvement may lie in more fundamental reform in the design and operation of disability compensation and pension claims programs. This would include reexamining program design and the context in which decisions are made as well as the structure and division of labor among field offices. For example, in recent years, GAO has found that VA and other federal disability programs have not been updated to reflect the current state of science, medicine, technology, and labor market conditions. The schedule on which disability decisions are made within VA, for example, is based primarily on estimates made in 1945 about the effect service-connected impairments have on the average individual's ability to perform jobs requiring manual or physical labor. In addition, our work has shown that about one-third of newly compensated veterans could be interested in receiving a lump sum payment, potentially saving VA time and money associated with reopening cases over time. In addition, VA and other organizations have identified potential changes to field operations that could enhance productivity and accuracy in processing disability claims. While reexamining claims processing challenges in a larger context may be daunting, there are mechanisms for undertaking such an effort, including the congressionally chartered commission currently studying veterans' disability benefits.

section_title: Letter
paragraphs: I am pleased to have the opportunity to comment on the claims processing  challenges and opportunities facing the Department of Veterans Affairs’  (VA) disability compensation and pension programs. Through these  programs, VA provided almost $30 billion in cash disability benefits to  more than 3.4 million veterans and their survivors in fiscal year 2004. For  years, the claims process has been the subject of concern and attention  within VA and by the Congress and veterans service organizations. Many  of their concerns have focused on long waits for decisions, large claims  backlogs, and inaccurate decisions. Our work and media reports of  significant discrepancies in average disability payments from state to state  have also highlighted concerns about the consistency of decision making  within VA. In January 2003, we designated modernizing VA and other  federal disability programs as a high-risk area, because our work over the  past decade found that these programs are based on concepts from the  past and continue to experience management problems. VA’s disability  programs have not been updated to reflect the current state of science,  medicine, technology, and labor market conditions. In addition, VA still  experiences lengthy processing times and lacks a clear understanding of  the extent of possible decision inconsistencies.
You asked us to discuss the challenges and opportunities VA faces in  processing disability compensation and pension claims. My statement  draws on numerous GAO reports and testimonies on VA’s compensation  and pension claims processing operations. (See Related GAO Products.)  To update our work, we reviewed recent claims processing performance  data and VA’s fiscal year 2005 Performance and Accountability Report, but  did not perform independent verification of VA’s data. We conducted our  work in November 2005 in accordance with generally accepted  government auditing standards.
In summary, VA continues to face challenges processing disability claims.  For example, as of the end of fiscal year 2005, rating-related claims were  pending an average of 120 days, 9 days more than at the end of fiscal year  2003, and far from VA’s strategic goal of 78 days. During the same period,  the rating-related inventory grew by about 92,000 claims to a total of about  346,000 claims. While VA has improved the accuracy of its rating-related  compensation decisions to 84 percent in fiscal year 2005—close to its goal  of 88 percent in fiscal year 2005, it has 3 years to reach its strategic goal of  98 percent. Further, we have identified concerns about the consistency of  decisions across VA’s regional offices. VA has begun studying one  indicator of inconsistency, the wide variations in average payments per  veteran from state to state, in response to adverse media coverage. While  VA is making efforts to address these problems, several factors may  impede VA’s ability to make and sustain significant improvements in its  claims processing performance. These include the potential impacts of  laws, court decisions, and continued increases in the number and  complexity of claims being filed.
Opportunities for improvement may lie in more fundamental reform of  VA’s disability compensation programs. This would include reexamining  program design and the context in which decisions are made as well as the  structure and division of labor among field offices. For example, in recent  years, GAO has found that VA and other federal disability programs have  not been updated to reflect the current state of science, medicine,  technology, and labor market conditions. The schedule on which disability  decisions are made within VA, for example, is based primarily on  estimates made in 1945 about the effect service-connected impairments  have on the average individual’s ability to perform jobs requiring manual  or physical labor. In addition, our work has shown that about one-third of  newly compensated veterans could be interested in receiving a lump sum  payment, which could potentially save VA time and money associated with  reopening cases over time and could be beneficial to veterans. In addition,  VA and other organizations have identified potential changes to field  operations that could enhance productivity and accuracy in processing  disability claims. While reexamining claims processing challenges in a  larger context may be daunting, there are mechanisms for undertaking  such an effort, including the congressionally chartered commission  currently studying veterans’ disability benefits.
subsections: section_title: Background
paragraphs: VA’s disability compensation program pays monthly benefits to veterans  with service-connected disabilities (injuries or diseases incurred or  aggravated while on active military duty) according to the severity of the  disability. Also, VA pays dependency and indemnity compensation to some  deceased veterans’ spouses, children, and parents and to survivors of  service members who died on active duty. The pension program pays  monthly benefits based on financial need to wartime veterans who have  low income, served in a period of war, and are permanently and totally  disabled for reasons not service-connected (or are aged 65 or older). VA  also pays pensions to surviving spouses and unmarried children of  deceased wartime veterans.
When a veteran submits a claim to any of VA’s 57 regional offices, a  veterans service representative (VSR) is responsible for obtaining the  relevant evidence to evaluate the claim. Such evidence includes veterans’  military service records, medical examinations, and treatment records  from VA medical facilities and private medical service providers. Once a  claim is developed (i.e., has all the necessary evidence), a rating VSR, also  called a rating specialist, evaluates the claim and determines whether the  claimant is eligible for benefits. If the veteran is eligible for disability  compensation, the rating specialist assigns a percentage rating based on  degree of disability. Veterans with multiple service-connected disabilities  receive a single composite rating. For veterans claiming pension eligibility,  the regional office determines if the veteran served in a period of war, is  permanently and totally disabled for reasons not service-connected (or is  aged 65 or older), and meets the income thresholds for eligibility. A  veteran who disagrees with the regional office’s decision for either  program can appeal sequentially to VA’s Board of Veterans’ Appeals  (BVA), the U.S. Court of Appeals for Veterans Claims, and the U.S. Court  of Appeals for the Federal Circuit.
In January 2003, we designated modernizing VA’s disability programs,  along with other federal disability programs, as high-risk. We did so, in  part, because VA had long-standing problems with lengthy claims  processing times and lacked a clear understanding of the extent of  possible decision inconsistencies. Moreover, VA’s disability programs have  not been updated to reflect the current state of science, medicine,  technology, and labor market conditions.
In November 2003, the Congress established the Veterans’ Disability  Benefits Commission to study the appropriateness of VA disability  benefits, including disability criteria and benefit levels. The commission  held its first public hearing in May 2005.
section_title: VA Continues to Face Significant Challenges in Processing Disability Compensation Claims
paragraphs: VA continues to experience challenges processing veterans’ disability  compensation and pension claims. These include large numbers of  pending claims and lengthy processing times. While VA made progress in  fiscal years 2002 and 2003 in reducing the size and age of its inventory of  pending claims, it has lost ground since the end of fiscal year 2003. As  shown in figure 1, pending claims increased by over one-third from the end  of fiscal year 2003 to the end of fiscal year 2005, from about 254,000 to  about 346,000. During the same period, claims pending over 6 months  increased by about 54 percent, from about 47,000 to about 72,000.
Similarly, as shown in figure 2, VA reduced the average age of its pending  claims from 182 days at the end of fiscal year 2001 to 111 days at the end  of fiscal year 2003. Since then, however, average days pending have  increased to 120 days at the end of fiscal year 2005. This is also far from  VA’s strategic goal of an average of 78 days pending by the end of fiscal  year 2008. Meanwhile, the time required to resolve appeals remains too  long. While the average time to resolve an appeal dropped from 731 days  in fiscal year 2002 to 622 days in fiscal year 2005, VA was still far from its  fiscal year 2005 goal of 500 days.
In addition to problems with timeliness of decisions, VA acknowledges  that the accuracy of regional office decisions needs further improvement.  VA reports that it has improved the accuracy of decisions on rating related  compensation claims from 80 percent in fiscal year 2002 to 84 percent in  fiscal year 2005, close to its 2005 goal of 88 percent.
VA also faces continuing questions about its ability to ensure that veterans  receive consistent decisions—that is, comparable decisions on benefit  entitlement and rating percentage regardless of the regional offices  making the decisions. The issue of decision-making consistency across VA  is not new. In May 2000 testimony before the House Subcommittee on  Oversight and Investigations, Committee on Veterans’ Affairs, we  underscored the conclusion made by the National Academy of Public  Administration in 1997 that VA needed to study the consistency of  decisions made by different regional offices, identify the degree of  subjectivity expected for various medical issues, and then set consistency  standards for those issues. In August 2002, we drew attention to the fact  that there are wide disparities in state-to-state average compensation  payments per disabled veteran. We noted that such variation raises the  question of whether similarly situated veterans who submit claims to  different regional offices for similar conditions receive reasonably  consistent decisions. We concluded that VA needed to systematically  assess decision-making consistency to provide a foundation for identifying  acceptable levels of variation and to reduce variations found to be  unacceptable. Again, in November 2004, we highlighted the need for VA to  develop plans for studying consistency issues. VA concurred in principle  with our findings and recommendation in the August 2002 report, agreed  that consistency is an important goal, and acknowledged that it has work  to do to achieve it. However, VA was silent on how it would evaluate and  measure consistency. Subsequently, VA concurred with our  recommendation in the November 2004 report that it conduct systematic  reviews for possible decision inconsistencies.
In December 2004, the media drew attention to the wide variations in the  average disability compensation payment per veteran in the 50 states and  published VA’s own data showing that the average payments varied from a  low of $6,710 in Ohio to a high of $10,851 in New Mexico. Reacting to  these media reports, in December 2004, the Secretary of Veterans Affairs  instructed the agency’s Inspector General to determine why average  payments per veteran vary widely from state to state. The Inspector  General found that compensation payments are affected by many factors  and that some disabilities are inherently more susceptible to variations in  rating determinations. The Inspector General made eight  recommendations to improve the consistency of rating decisions,  including recommending that VBA conduct a study of the major influences  on compensation payments and use the results to detect, correct, and  prevent unacceptable payment patterns. Also, VA’s Veterans Benefits  Administration began a study in March 2005 of three disabilities believed  to have potential for inconsistency: hearing loss, post-traumatic stress  disorder, and knee conditions. VA assigned 10 subject matter experts to  review 1,750 regional office decisions. After completing its analysis of  study data, VA planned to develop a schedule for future studies of specific  ratable conditions and recommend a schedule for periodic follow-up  studies of previously studied conditions.
Recent history has shown that VA’s claims processing workload and  performance are being affected by several factors, including the impacts of  laws and court decisions and the filing behavior of veterans. For example,  court decisions in 1999 and 2003 related to VA’s duty to assist veterans in  developing their benefit claims, as well as legislation in response to those  decisions, significantly affected VA’s ability to produce rating-related  decisions. VA attributes some of the worsening of inventory level and  pending timeliness since the end of fiscal year 2003 to a September 2003  court decision that required over 62,000 claims to be deferred, many for   90 days or longer. Also, VA notes that legislation and VA regulations have  expanded benefit entitlement and as a result added to the volume of  claims. For example, presumptions of service-connected disabilities have  been created in recent years for many Vietnam veterans and former  Prisoners of War. Also, VA expects additional claims receipts based on the  enactment of legislation allowing certain military retirees to receive both  military retirement pay and VA disability compensation.
In addition, VA continues to receive increasing numbers of rating-related  claims, from about 586,000 in fiscal year 2000 to about 788,000 in fiscal  year 2005. VA projects 3 percent increases in claims received in fiscal  years 2005 and 2006. VA notes that claims received are increasing in part  because older veterans are filing disability claims for the first time. One  reason for this increase could be that older veterans have incentives to file  disability claims because obtaining a service-connected disability rating is  a gateway to VA health care. According to VA, the complexity of claims is  also increasing because veterans are citing more disabilities in their claims  than in the past. Because each disability needs to be evaluated, these  claims can take longer to complete. VA planned to develop baseline data  on average issues per claim by the end of calendar year 2005.
In November 2004, we reported that VA would have to rely on productivity  improvements to achieve its claims processing performance goals in the  face of increasing workloads and decreased staffing levels. However, its  fiscal year 2005 budget justification did not provide information on claims  processing productivity or how much VA expected to improve  productivity. VA’s fiscal year 2006 budget justification provides  information on actual and planned productivity, in terms of rating-related  claims decided per direct full-time equivalent (FTE) employee, and  identifies a number of initiatives that could improve claims processing  performance. These initiatives include technology initiatives, such as  Virtual VA, involving the creation of electronic claims folders;  consolidation of the processing of Benefits Delivery at Discharge (BDD)  claims at two regional offices; and collaboration with the Department of  Defense (DOD) to improve VA’s ability to obtain evidence, such as  evidence of in-service stressors for veterans claiming service-connected  Post-Traumatic Stress Disorder.
Despite these and other measures, we noted in May 2005 that it is still not  clear whether VA will be able to achieve its planned improvements. In  our May 2005 testimony we noted that VA’s fiscal year 2006 budget  justification assumes that it will increase the number of rating-related  claims completed per FTE from 94 in fiscal year 2004 to 109 in fiscal year  2005 and 2006, a 16 percent increase. For fiscal year 2005, this level of  desired productivity translates into VA completing almost 826,000 rating- related decisions. In actuality, VA completed about 763,000 decisions in  fiscal year 2005.
section_title: Opportunities for Improvement May Lie in More Fundamental Reform
paragraphs: While VA is taking a number of actions to address its claims processing  challenges, there are opportunities for more fundamental reform, that  could dramatically improve decision making and processing. These  include reexamining program design and the context in which decisions  are made as well as the structure and division of labor among field offices.  For example, in designating federal disability programs as high risk in  2003, GAO noted that VA’s and the Social Security Administration’s (SSA)  disability programs have not been updated to reflect the current state of  science, medicine, technology, and labor market conditions. In addition,  our work has shown that about one-third of newly compensated veterans  could be interested in receiving a lump sum payment, potentially saving  VA time and money associated with reopening cases over time. Moreover,  VA and other organizations have identified potential changes to field  operations that could enhance productivity and accuracy in processing  disability claims.
After more than a decade of research, GAO has determined that federal  disability programs are in urgent need of attention and transformation and  placed modernizing federal disability programs on its high-risk list in  January 2003. Specifically, our research showed that the disability  programs administered by VA and the Social Security Administration  lagged behind the scientific advances and economic and social changes  that have redefined the relationship between impairments and work. For  example, advances in medicine and technology have reduced the severity  of some medical conditions and have allowed individuals to live with  greater independence and function in work settings. Moreover, the nature  of work has changed in recent decades as the national economy has  moved away from manufacturing-based jobs to service- and knowledge- based employment. Yet VA’s and SSA’s disability programs remain mired  in concepts from the past—particularly the concept that impairment  equates to an inability to work—and as such, we found that these  programs are poorly positioned to provide meaningful and timely support  for Americans with disabilities.
In August 2002, we recommended that VA use its annual performance plan  to delineate strategies for and progress in periodically updating labor  market data used in its disability determination process. We also  recommended that VA study and report to the Congress on the effects that  a comprehensive consideration of medical treatment and assistive  technologies would have on its disability programs’ eligibility criteria and  benefits package. This study would include estimates of the effects on the  size, cost, and management of VA’s disability programs and other relevant  VA programs and would identify any legislative actions needed to initiate  and fund such changes.
Another area of program design that could be examined is the option of  providing a lump sum payment in lieu of monthly disability compensation.  In 1996, the Veterans’ Claims Adjudication Commission noted that most  disability compensation claims are repeat claims—such as claims for  increased disability percentage—and most repeat claims were from  veterans with less severe disabilities. According to VA, about 65 percent  of veterans who began receiving disability compensation in fiscal year  2003 had disabilities rated 30 percent or less. The commission questioned  whether concentrating claims processing resources on these claims, rather  than on claims by more severely disabled veterans, was consistent with  program intent. The commission asked Congress to consider paying less  severely disabled veterans compensation in a lump sum. According to the  commission, the lump sum option could have a number of benefits for VA  as well as veterans. Specifically, the lump sum option could reduce the  number of claims submitted and allow VA to process claims more  quickly—especially those of more seriously disabled veterans. Moreover, a  lump sum option could be more useful to some veterans as they make the  transition from military to civilian life. In December 2000, we reported that  about one-third of newly compensated veterans could be interested in a  lump sum option.
In addition to program design changes, external studies of VA’s disability  claims process have identified the regional office structure as  disadvantageous to efficient operation. Specifically, in its January 1999  report, the Congressional Commission on Servicemembers and Veterans  Transition Assistance found that some regional offices might be so small  that their disproportionately large supervisory overhead unnecessarily  consumes personnel resources. Similarly, in its 1997 report, the National  Academy of Public Administration found that VA could close a large  number of regional offices and achieve significant savings in  administrative overhead costs.
Apart from the issue of closing regional offices, the Congressional  Commission on Servicemembers and Veterans Transition Assistance  highlighted a need to consolidate disability claims processing into fewer  locations. VA has consolidated its education assistance and housing loan  guaranty programs into fewer than 10 locations, and the commission  encouraged VA to take similar action in the disability programs. In 1995 VA  enumerated several potential benefits of such a consolidation. These  included allowing VA to assign the most experienced and productive  adjudication officers and directors to the consolidated offices; facilitating  increased specialization and as-needed expert consultation in deciding  complex cases; improving the completeness of claims development, the  accuracy and consistency of rating decisions, and the clarity of decision  explanations; improving overall adjudication quality by increasing the pool  of experience and expertise in critical technical areas; and facilitating  consistency in decision making through fewer consolidated claims  processing centers. VA has already consolidated some of its pension  workload (specifically, income and eligibility verifications) at three  regional offices. Also, VA has consolidated at its Philadelphia regional  office dependency and indemnity compensation claims by survivors of  service members who died on active duty, including those who died during  Operation Enduring Freedom and Operation Iraqi Freedom.
VA is also is in the process of consolidating decision-making on Benefits  Delivery at Discharge claims, which are generally original claims for  disability compensation, at the Salt Lake City and Winston-Salem regional  offices. VA established this program to expedite decisions on disability  compensation claims from newly separated service members. A service  member can file a BDD claim up to 180 days before separation; VA staff  performs some development work on the claim before separation. VBA  actually decides the claim after the service member is separated and the  official discharge form (DD Form 214) is received. Under the  consolidation, regional offices and VBA’s 142 BDD sites will accept and  develop claims, but will send the developed claims to Salt Lake City or  Winston-Salem for decision. VBA expects this consolidation to help  improve decision efficiency and consistency. Consolidation began in  December 2004 and is expected to be completed by March 2006.
While reexamining claims processing challenges in a larger context may  be daunting, there are mechanisms for undertaking such an effort,  including the congressionally chartered commission currently studying  veterans’ disability benefits. In November 2003, the Congress established  the Veterans’ Disability Benefits Commission to study the appropriateness  of VA disability benefits, including disability criteria and benefit levels.  The commission was to examine and provide recommendations on (1) the  appropriateness of the benefits, (2) the appropriateness of the benefit  amounts, and (3) the appropriate standard or standards for determining  whether a disability or death of a veteran should be compensated. As of  October 2005, the commission had established 31 potential research  questions for study. Questions include how well do disability benefits meet  the congressional intent of replacing average impairment in earnings  capacity, should lump sum payments be made for certain disabilities or  level of severity of disability, and how does VA’s claims processing  operation compare to other disability programs, including the location and  number of processing centers. These issues and others have been raised  by previous studies of VBA’s disability claims process.
section_title: Contact and Acknowledgments
paragraphs: For further information, please contact Cynthia A. Bascetta at (202)   512-7215. Also contributing to this statement were Cristina Chaplain,   Irene Chu, and Martin Scire.
section_title: Related GAO Products
paragraphs: Veterans’ Disability Benefits: Improved Transparency Needed to  Facilitate Oversight of VBA’s Compensation and Pension Staffing  Levels. GAO-06-225T. Washington, D.C.: November 3, 2005.
VA Benefits: Other Programs May Provide Lessons for Improving  Individual Unemployability Assessments. GAO-06-207T. Washington,  D.C.: October 27, 2005.
Veterans’ Disability Benefits: Claims Processing Problems Persist and  Major Performance Improvements May Be Difficult. GAO-05-749T.  Washington, DC.: May 26, 2005.
VA Disability Benefits: Board of Veterans’ Appeals Has Made  Improvements in Quality Assurance, but Challenges Remain for VA in  Assuring Consistency. GAO-05-655T. Washington, D.C.: May 5, 2005.
High-Risk Series: An Update. GAO-05-207. Washington, D.C.: January  2005.
Veterans Benefits: VA Needs Plan for Assessing Consistency of  Decisions. GAO-05-99. Washington, D.C.: November 19, 2004.
Veterans’ Benefits: More Transparency Needed to Improve Oversight of  VBA’s Compensation and Pension Staffing Levels. GAO-05-47.  Washington, D.C.: November 15, 2004.
Veterans’ Benefits: Improvements Needed in the Reporting and Use of  Data on the Accuracy of Disability Claims Decisions. GAO-03-1045.  Washington, D.C.: September 30, 2003.
Department of Veterans Affairs: Key Management Challenges in Health  and Disability Programs. GAO-03-756T. Washington, D.C.: May 8, 2003.
Veterans Benefits Administration: Better Collection and Analysis of  Attrition Data Needed to Enhance Workforce Planning. GAO-03-491.  Washington, D.C.: April 28, 2003.
Veterans’ Benefits: Claims Processing Timeliness Performance Measures  Could Be Improved. GAO-03-282. Washington, D.C.: December 19, 2002.
Veterans’ Benefits: Quality Assurance for Disability Claims and Appeals  Processing Can Be Further Improved. GAO-02-806. Washington, D.C.:  August 16, 2002.
Veterans’ Benefits: VBA’s Efforts to Implement the Veterans Claims  Assistance Act Need Further Monitoring. GAO-02-412. Washington, D.C.:  July 1, 2002.
Veterans’ Benefits: Despite Recent Improvements, Meeting Claims  Processing Goals Will Be Challenging. GAO-02-645T. Washington, D.C.:  April 26, 2002.
Veterans Benefits Administration: Problems and Challenges Facing  Disability Claims Processing. GAO/T-HEHS/AIMD-00-146. Washington,  D.C.: May 18, 2000.
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