VBA’s Compensation and Pension Service, located at VA headquarters, formulates the policy and guidance used by the RO staff who receive, develop, and evaluate veterans’ compensation and pension claims. The compensation program pays monthly benefits to veterans with service-connected disabilities (injuries or diseases incurred or aggravated while on active military duty). Veterans with service-connected disabilities are entitled to compensation benefits even if they are working and regardless of the amount they earn. By contrast, the pension program pays monthly benefits to wartime veterans who have low incomes and are permanently and totally disabled for reasons not connected to their service. In compensation cases, the payment amount varies according to degree of disability; in pension cases, the amount varies according to financial need. When veterans are unable to manage their affairs, benefit payments are made to guardians who serve as their fiduciary representatives. Adjudicating an original disability claim involves two basic functions—“authorization” and “disability rating.” Authorization involves obtaining records from the military services and information from the veterans, such as medical records and information on income and dependents. Disability rating involves establishing whether a veteran’s impairment is service-connected and, if so, evaluating the veteran’s degree of disability. VBA considers claims requiring a disability rating to be the core workload of the compensation and pension program, and as a group, cases requiring a disability rating are considered to be the most error-prone in the program. In order to rate (or evaluate) a veteran’s disability, ROs often determine that they need medical evidence in addition to evidence obtained from the veteran’s physicians and other medical providers. In such cases, they send veterans to the Veterans Health Administration (VHA) for physical or mental examinations by VHA physicians. From the medical evidence, ROs rate a veteran’s disability using VA’s Schedule for Rating Disabilities, which lists physical and mental conditions and assigns a disability rating to each condition. Under this schedule, the degree of disability is expressed in 10-percent increments up to 100-percent disability. A veteran can also receive a “zero-percent” disability rating, which means the veteran’s condition is service-connected but not severe enough to qualify for compensation payments on the basis of the medical criteria specified in the rating schedule. If the veteran’s condition later worsens, he or she may reapply, asking VA to increase the rating from zero to 10 percent or more. Evaluating the degree of disability for some conditions, such as mental impairments, can require adjudicators to make subjective judgments that are not always clear-cut. For veterans with multiple impairments, the RO must rate each impairment separately and then combine them into a composite rating. After a veteran is placed on the rolls, his or her condition or circumstances may change in ways that can result in adjustments to the RO’s initial decision. For example, a veteran may file a claim for an increase in degree of disability if his or her medical condition deteriorates. Or nonmedical issues may arise that require an adjustment to the initial decision but do not require a disability rating in order to make the new decision. Such cases could arise from changes in the status of the veteran’s dependents or changes in the income of a veteran receiving pension benefits. After the RO notifies the veteran of its decision, the veteran, if dissatisfied, may ask for a hearing before an RO hearing officer. The veteran also may file a notice of disagreement with the RO and then file an appeal asking for a review of the RO’s decision by the Board of Veterans’ Appeals, which makes VA’s final decisions on appeals on behalf of the Secretary. The Board may conduct a hearing if the veteran requests one. In deciding appeals, the Board can grant benefits (reverse the RO decision), deny benefits (affirm the RO decision), or remand (or return) the case to the RO to develop further evidence and reconsider the claim. After further development of a remanded claim, the RO either awards the claim or returns it to the Board for a decision. Before 1989, the Board’s decisions on appeals were final. In that year, however, the Court of Veterans Appeals—established by the Veterans’ Judicial Review Act of 1988 (P.L. 100-687, Nov. 18, 1988)—began to hear cases. As a result, the Board is no longer the final step in the claims adjudication process. When a veteran disagrees with a decision of the Board, the veteran may now appeal to the Court, which is independent of VA. Additionally, either veterans or VA may appeal decisions of the Court of Veterans Appeals to the Court of Appeals for the Federal Circuit. Since veterans began appealing Board decisions to the Court of Veterans Appeals, according to a court official, the Court has remanded more than 4,500 decisions back to the Board for further development and reconsideration. According to the same official, this represents about 59 percent of the Board’s decisions that were appealed to the Court, excluding dismissed cases. In turn, ROs have felt the repercussions of these Court decisions as evidenced by significant increases in the Board’s reversals and remands of appealed RO decisions. Before the advent of the Court, the Board historically had annually awarded benefits in 12 to 14 percent of appealed RO decisions and had annually remanded another 12 to 24 percent back to ROs for further development. However, in the years since the advent of the Court, the Board has annually awarded benefits in about 14 to 20 percent of the cases it reviewed and remanded another 31 to 51 percent back to ROs for further development. Despite these increases in awards and remands by the Board, VBA had continued to report—until STAR was implemented—that ROs were accurately processing compensation and pension claims more than 95 percent of the time. (See app. I for more details on the reversal and remand rates of the Court and the Board and on the accuracy rates reported by VBA.) VBA considers a disability claim to have been accurately processed if basic eligibility has been determined correctly, the case file contains all required medical and nonmedical documentary evidence, the RO’s decision on service-connection and the rating given to each impairment are correct, the payment amount is correct, and the RO properly notified the veteran of the outcome of his or her claim. Under the accuracy measurement system that was in operation from fiscal year 1992 through fiscal year 1997, VBA headquarters annually reviewed approximately 100 cases randomly selected from the cases completed by each of 57 ROs. These cases were selected from the entire universe of compensation and pension work products completed by the ROs. Using this procedure, VBA produced a national accuracy rate with a reasonable level of statistical precision. While each year’s sample was too small for VBA to produce accuracy rates for each RO with a reasonable level of statistical precision, VBA required each RO to self-review 300 to 900 cases annually, depending on the size of the RO. These RO self-reviews were to provide ROs with information needed to improve quality, not to compute accuracy rates for measuring performance. Statistical precision refers to the amount of uncertainty in an estimate that results from sampling variability at a given level of confidence. For example, if a sample that has a 95-percent confidence level and a precision level of plus or minus 5 percentage points yields an estimated accuracy rate of 70 percent, this means that one can be 95-percent confident that the true accuracy rate is between 65 percent and 75 percent. accountability for the SDN’s overall performance of all work assigned to it. In meeting the requirements of the Results Act, VBA headquarters will measure each SDN’s performance, and each SDN will assess the performance of its ROs. This measurement will be made on the basis of five performance factors: claims-processing accuracy (as determined by STAR), timeliness of claims processing, unit cost, customer satisfaction, and employee satisfaction and development. The new STAR system represents an important step forward by VBA in measuring the accuracy of compensation and pension claims processing and in providing data to identify error-prone cases and correct the causes of errors, including those that result in reversals and remands by the Board of Veterans’ Appeals. Compared with the previous accuracy measurement system that VBA had been using since 1992, the STAR system is a step forward because it focuses more on RO decisions that are likely to contain claims-processing errors, uses a stricter method for computing accuracy rates, provides more data on the performance of additional organizational levels within VBA, collects more data on errors, and stores the results of more accuracy reviews in a centralized database for further review and analysis. Whereas VBA had been reporting more than 95-percent accuracy under the previous accuracy measurement system, VBA, in its pilot test of STAR, reported that only 64 percent of veterans’ claims were processed accurately. A primary reason for this difference is that the pilot test focused only on the most complex and more error-prone RO work products, those involving disability rating decisions. By contrast, the previous system drew its sample of cases from the entire universe of RO work products, including those not requiring an assessment of disability and, therefore, less error-prone. The newly implemented STAR system continues to focus on claims that involve disability ratings, but it also includes a sample of cases that address issues typically not requiring disability ratings and a separate sample of cases involving guardianship issues for veterans unable to represent themselves. Separate accuracy rates are computed for each of these two other samples. Another reason that the STAR pilot test found an accuracy rate of 64 percent rather than 95 percent as reported under the previous system is STAR’s stricter accuracy rate computation method. Under the previous system, VBA categorized each error into one of three areas of the claims adjudication process: (1) case control and development, (2) decision elements, and (3) notification to the veteran.