VA pays basic compensation benefits to veterans incurring disabilities from injuries or diseases that were incurred or aggravated while on active military duty. VA rates the severity of all service-connected disabilities by using its Schedule for Rating Disabilities. The schedule lists types of disabilities and assigns each disability a percentage rating, which is intended to represent an average earning impairment the veteran would experience in civilian occupations because of the disability. All veterans awarded service-connected disabilities are assigned single or combined (in case of multiple disabilities) ratings ranging from 0 to 100 percent, in increments of 10 percent, based on the rating schedule; such a rating is known as a schedular rating. Diseases and injuries incurred or aggravated while on active duty are called service-connected disabilities. Disability compensation can be increased if VA determines that the veteran is unemployable (not able to engage in substantially gainful employment) because of the service-connected disability. Under VA’s unemployability regulations, the agency can assign a total disability rating of 100 percent to veterans who cannot perform substantial gainful employment because of service-connected disabilities, even though their schedular rating is less than 100 percent. To qualify for unemployability benefits, a veteran must have a single service-connected disability of 60 percent or more or multiple disabilities with a combined rating of 70 percent or more, with at least one of the disabilities rated 40 percent or more. VA can waive the minimum ratings requirement and grant unemployability benefits to a veteran with a lower rating; this is known as an extra-schedular rating. Staff at VA’s regional offices make virtually all eligibility decisions for disability compensation benefits, including IU benefits. The 57 VA regional offices use nonmedical 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 exam. Based on the medical examination and other information available to the rater, the rater must first determine which of the veteran’s conditions are or are not service-connected. For service-connected conditions, the rater compares the diagnosis with the rating schedule to assign a disability rating. Along with medical records, raters may also obtain other records to evaluate an IU claim. VA may require veterans to furnish an 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. VA guidance also requires that raters request basic employment information from each employer during the 12-month period prior to the date the veteran last worked. In addition, if the veteran has received services from VA’s VR&E program or Social Security disability benefits, the rater may also request and review related information from these organizations. Once VA grants unemployability benefits, a veteran may continue to receive the benefits while working if VA determines that the work is only marginal employment rather than substantially gainful employment. Marginal employment exists when a veteran’s annual earned income does not exceed the annual poverty threshold for one person as determined by the U.S. Census Bureau—$ 9,827 for 2004. Furthermore, if veterans are unable to maintain employment for 12 continuous months due to their service-connected disabilities they may retain their IU benefits, regardless of the amount earned. After more than a decade of research, GAO has determined that federal disability programs were 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 (SSA) lagged behind the scientific advances and economic and social changes that have redefined the relationship between impairments and work. For example, advances in medicine and technology have reduced the severity of some medical conditions and have allowed individuals to live with greater independence and function in work settings. Moreover, the nature of work has changed in recent decades as the national economy has moved away from manufacturing-based jobs to service- and knowledge-based employment. Yet VA’s and SSA’s disability programs remain mired in concepts from the past—particularly the concept that impairment equates to an inability to work—and as such, we found that these programs are poorly positioned to provide meaningful and timely support for Americans with disabilities. In contrast, we found that a growing number of U.S. private insurance companies had modernized their programs to enable people with disabilities to return to work. In general, private insurer disability plans can provide short- or long-term disability insurance coverage, or both, to replace income lost by employees because of injuries and illnesses. Employers may choose to sponsor private disability insurance plans for employees either by self-insuring or by purchasing a plan through a private disability insurer. The three private disability insurers we reviewed recognized the potential for reducing disability costs through an increased focus on returning people with disabilities to productive activity. To accomplish this comprehensive shift in orientation, these insurers have begun developing and implementing strategies for helping people with disabilities return to work as soon as possible, when appropriate. The three private insurers we studied incorporate return-to-work considerations early in the assessment process to assist claimants in their recovery and in returning to work as soon as possible. With the initial reporting of a disability claim, these insurers immediately set up the expectation that claimants with the potential to do so will return to work. Identifying and providing services intended to enhance the claimants’ capacity to work are central to their process of deciding eligibility for benefits. Further, the insurers continue to periodically monitor work potential and provide return-to-work assistance to claimants as needed throughout the duration of the claim. Their ongoing assessment process is closely linked to a 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. After a claim is received, the private insurers’ assessment process begins with determining whether the claimant meets the initial definition of disability. In general, for the three private sector insurers we studied, claimants are considered disabled when, because of injury or sickness, they are limited in performing the essential duties of their own occupation and they earn less than 60 to 80 percent of their predisability earnings, depending upon the particular insurer. As part of determining whether the claimant meets this definition, the insurers compare the claimant’s capabilities and limitations with the demands of his or her own occupation and identify and pursue possible opportunities for accommodation— including alternative jobs or job modifications—that would allow a quick and safe return to work. A claimant may receive benefits under this definition of disability for up to 2 years. As part of the process of assessing eligibility according to the “own occupation” definition, 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. Insurers’ contacts with the claimant’s treating physician are aimed at ensuring that the claimant has an appropriate treatment plan focused, in many cases, on timely recovery and return to work. Similarly, insurers use early contact with employers to encourage them to provide workplace accommodations for claimants with the capacity to work. If the insurers find the claimant initially unable to return to his or her own occupation, they provide cash benefits and continue to assess the claimant to determine if he or she has any work potential. For those with work potential, the insurers focus on return to work before the end of the 2-year period, when, for all the private insurers we studied, the definition of disability becomes more restrictive. After 2 years, the definition shifts from an inability to perform one’s own occupation to an inability to perform any occupation for which the claimant is qualified by education, training, or experience. Claimants initially found eligible for benefits may be found ineligible under the more restrictive definition. The private insurers’ shift from a less to a more restrictive disability definition after 2 years reflects the changing nature of disability and allows a transitional period for insurers to provide financial and other assistance, as needed, to help claimants with work potential return to the workforce. During this 2-year period, the insurer attempts to determine the best strategy for managing the claim. Such strategies can include, for example, helping plan medical care or providing vocational services to help claimants acquire new skills, adapt to assistive devices to increase functioning, or find new positions. For those requiring vocational intervention to return to work, the insurers develop an individualized return-to-work plan, as needed. Basing the continuing receipt of benefits upon a more restrictive definition after 2 years provides the insurer with leverage to encourage the claimant to participate in a rehabilitation and return-to-work program. Indeed, the insurers told us they find that claimants tend to increase their efforts to return to work as they near the end of the 2-year period. If the insurer initially determines that the claimant has no work potential, it regularly monitors the claimant’s condition for changes that could increase the potential to work and reassesses after 2 years the claimant’s eligibility under the more restrictive definition of disability. The insurer continues to look for opportunities to assist claimants who qualify under this definition of disability in returning to work. Such opportunities may occur, for example, when changes in medical technology—such as new treatments for cancer or AIDS—may enable claimants to work, or when claimants are motivated to work. The private insurers that we reviewed told us that throughout the duration of the claim, they tailor the assessment of work potential and development of a return-to-work plan to the specific situation of each individual claimant. To do this, disability insurers use a wide variety of tools and methods when needed. Some of these tools, as shown in tables 1 and 2, are used to help ensure that medical and vocational information is complete and as objective as possible. For example, insurers consult medical staff and other resources 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.