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entitled 'Veterans' Disability Benefits: Processing of Claims Continues 
to Present Challenges' which was released on March 13, 2007. 

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Testimony before the Subcommittee on Disability Assistance and Memorial 
Affairs, Committee on Veterans' Affairs, House of Representatives: 

United States Government Accountability Office: 

GAO: 

For Release on Delivery Expected at 10:00 a.m. EDT: 

Tuesday, March 13, 2007: 

Veterans' Disability Benefits: 

Processing of Claims Continues to Present Challenges: 

Statement of Daniel Bertoni, Acting Director: 
Education, Workforce, and Income Security Issues: 

GAO-07-562T: 

GAO Highlights: 

Highlights of GAO-07-562T, a testimony before the Subcommittee on 
Disability Assistance and Memorial Affairs, Committee on Veterans' 
Affairs, House of Representatives 

Why GAO Did This Study: 

The Subcommittee on Disability Assistance and Memorial Affairs, House 
Veterans’ Affairs Committee, asked GAO to discuss its recent work 
related to the Department of Veterans Affairs’ (VA) disability claims 
and appeals processing. 

GAO has reported and testified on this subject on numerous occasions. 
GAO’s work has addressed VA’s efforts to improve the timeliness of 
decisions on claims and appeals and VA’s efforts to reduce backlogs. 

What GAO Found: 

VA continues to face challenges in improving service delivery to 
veterans, specifically speeding up the process of adjudication and 
appeal, and reducing the existing backlog of claims. For example, as of 
the end of fiscal year 2006, rating-related compensation claims were 
pending an average of 127 days, 16 days more than at the end of fiscal 
year 2003. During the same period, the inventory of rating-related 
claims grew by almost half, in part because of increased filing of 
claims, including those filed by veterans of the Iraq and Afghanistan 
conflicts. Meanwhile, appeals resolution remains a lengthy process, 
taking an average of 657 days in fiscal year 2006. However, several 
factors may limit VA’s ability to make and sustain significant 
improvements in its claims-processing performance, including the 
potential impacts of laws and court decisions, continued increases in 
the number and complexity of claims being filed, and difficulties in 
obtaining the evidence needed to decide claims in a timely manner, such 
as military service records. VA is taking steps to address these 
problems. For example, the President’s fiscal year 2008 budget requests 
an increase of over 450 full-time equivalent employees to process 
compensation claims. VA is also working to improve appeals timeliness 
by reducing appeals remanded for further work. 

Figure: Rating-Related Claims Pending at End of Period, Fiscal Years 
2000-2006: 

[See PDF for Image] 

Source: VA data. 

[End of figure] 

While VA is taking actions to address its claims-processing challenges, 
opportunities for significant performance improvement may lie in more 
fundamental reform of VA's disability compensation program. This could 
include reexamining program design such as updating the disability 
criteria to reflect the current state of science, medicine, technology, 
and labor market conditions. It could also include examining the 
structure and division of labor among field offices. 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-562T]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Daniel Bertoni at (202) 
512-7215 or bertonid@gao.gov. 

[End of figure] 

Mr. Chairman and Members of the Subcommittee: 

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 about $34.5 billion in cash 
disability benefits to more than 3.5 million veterans and their 
survivors in fiscal year 2006. For years, the claims process has been 
the subject of concern and attention by VA, the Congress, and veterans 
service organizations, due in large part because of long waits for 
decisions and large claims backlogs. Veterans of the conflicts in Iraq 
and Afghanistan, and survivors of servicemembers who have died in those 
conflicts, are facing these same issues as they seek VA disability 
benefits. In January 2003, we designated modernizing VA and other 
federal disability programs as a high-risk area, because of these 
service delivery challenges, and because our work over the past decade 
has found that these programs are based on outmoded concepts from the 
past. 

You asked us to discuss VA's disability claims process, in light of the 
ongoing conflicts in Iraq and Afghanistan. My statement draws on a 
number of prior GAO reports and testimonies, (see related GAO 
products), and information we have updated to reflect the current 
status of VA claims processing and initiatives. 

In summary, VA continues to face challenges in improving service 
delivery to veterans. Between fiscal years 2003 and 2006, the inventory 
of rating-related claims grew by almost half to a total of about 
378,000, in part because of increased filing of claims, including those 
filed by veterans of the Iraq and Afghanistan conflicts.[Footnote 1] 
During the same period, the average number of days these claims were 
pending increased by 16 days, to an average of 127 days. Meanwhile, 
appeals resolution remains a lengthy process. In fiscal year 2006, it 
took an average of 657 days to resolve appeals. Several factors may be 
affecting VA's claims-processing performance. These include the 
potential impacts of laws and court decisions, continued increases in 
the number and complexity of claims being filed, and difficulties in 
obtaining the evidence needed to adjudicate claims in a timely manner, 
such as military service records. To help improve claims-processing 
performance, VA has taken a number of steps, including requesting 
funding for additional staff and undertaking initiatives to reduce 
appeal remands. The President's fiscal year 2008 budget requests an 
increase of over 450 full-time equivalent employees to process 
compensation claims. Through training and information sharing, VA is 
also working to reduce appeals processing times by decreasing the 
number of cases sent back from the appeals level for further 
development. 

Despite the steps VA is taking, opportunities for significant 
performance improvement may lie in more fundamental reform of VA's 
disability compensation program. This would include reexamining program 
design as well as the structure and division of labor among field 
offices. For example, we found that VA's and other federal disability 
programs have not been updated to reflect the current state of science, 
medicine, technology, and labor market conditions. For example, the 
criteria for disability decisions are based primarily on estimates made 
in 1945 about the effect of service-connected impairments on the 
average individual's ability to perform jobs requiring manual labor. In 
addition, VA and other organizations have identified potential changes 
to field operations that could enhance productivity in processing 
disability claims. While major reexamination may be daunting, there are 
mechanisms for undertaking such an effort. For example, the 
congressionally chartered commission on veterans' disability benefits 
has been studying a number of program design issues and will report to 
the Congress later this year. 

Background: 

VA pays monthly disability compensation 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. VA also pays compensation to some spouses, children, 
and parents of deceased veterans and servicemembers. VA's pension 
program pays monthly benefits based on financial need to certain 
wartime veterans or their survivors.[Footnote 2] 

When a veteran submits a claim to any of the Veterans Benefits 
Administration's (VBA) 57 regional offices, a veterans service 
representative 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 has all 
the necessary evidence, 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. A veteran 
who disagrees with the regional office's decision can appeal to VA's 
Board of Veterans' Appeals, and then to U.S. federal courts. If the 
Board finds that a case needs additional work, such as obtaining 
additional evidence or contains procedural errors, it is sent back to 
the Veterans Benefits Administration, which is responsible for initial 
decisions on disability claims. 

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 is scheduled to report the results of its study to the 
Congress in October 2007. 

VA Continues to Face Challenges in Improving Its Claims Processing: 

Several factors are continuing to create challenges for VA's claims 
processing, despite its steps to improve performance. While VA made 
progress in fiscal years 2002 and 2003 reducing the size and age of its 
pending claims inventory, it has lost ground since then. This is due in 
part to increased filing of claims, including those filed by veterans 
of the Iraq and Afghanistan conflicts. Other factors include increases 
in claims complexity, the effects of recent laws and court decisions, 
and challenges in acquiring needed evidence in a timely manner. VA's 
steps to improve performance include requesting funding for additional 
staff and undertaking initiatives to reduce appeal remands. 

VA's inventory of pending claims and their average time pending has 
increased significantly in the last 3 years, in part because of an 
increase in the number of claims. The number of pending claims 
increased by almost one-half from the end of fiscal year 2003 to the 
end of fiscal year 2006, from about 254,000 to about 378,000. During 
the same period, the number of claims pending longer than 6 months 
increased by more than three-fourths, from about 47,000 to about 83,000 
(see fig. 1). 

Figure 1: Rating-Related Claims Pending at End of Period, Fiscal Years 
2000-2006: 

[See PDF for image] 

Source: VS data. 

[End of figure] 

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. However, by the end of fiscal year 
2006, average days pending had increased to 127 days. Meanwhile, the 
time required to resolve appeals remains too long. The average time to 
resolve an appeal rose from 529 days in fiscal year 2004 to 657 days in 
fiscal year 2006. 

Figure 2: Average Days Pending for VA Compensation and Pension Rating- 
Related Claims, Fiscal Years 2000-2006: 

[See PDF for image] 

Source: VA data. 

[End of figure] 

The increase in VA's inventory of pending claims, and their average 
time pending is due in part to an increase in claims receipts. Rating- 
related claims, including those filed by veterans of the Iraq and 
Afghanistan conflicts, increased steadily from about 579,000 in fiscal 
year 2000 to about 806,000 in fiscal year 2006, an increase of about 39 
percent. While VA projects relatively flat claim receipts in fiscal 
years 2007 and 2008, it cautions that ongoing hostilities in Iraq and 
Afghanistan, and the Global War on Terrorism in general, may increase 
the workload beyond current levels. VA also attributes increased claims 
to its efforts to increase outreach to veterans and servicemembers. For 
example, VA reports that in fiscal year 2006, it provided benefits 
briefings to about 393,000 separating servicemembers, up from about 
210,000 in fiscal year 2003, leading to the filing of more original 
compensation claims. VA has also noted that claims have increased in 
part because older veterans are filing disability claims for the first 
time. 

Moreover, according to VA, the complexity of claims is also increasing. 
For example, some veterans are citing more disabilities in their claims 
than in the past. Because each disability needs to be evaluated 
separately, these claims can take longer to complete. Additionally, VA 
notes that it is receiving claims for new and complex disabilities 
related to combat and deployments overseas, including those based on 
environmental and infectious disease risks and traumatic brain 
injuries. Further, VA is receiving increasing numbers of claims for 
compensation for post-traumatic stress disorder, which are generally 
harder to evaluate, in part because of the evidentiary requirements to 
substantiate the event causing the stress disorder. 

Since 1999, several court decisions and laws related to VA's 
responsibilities to assist veterans in developing their benefit claims 
have significantly affected VA's ability to process claims in a timely 
manner. VA attributes some of the increase in the number of claims 
pending and the average days pending 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 added to the volume of claims. For 
example, in recent years, laws and regulations have created new 
presumptions of service-connected disabilities 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. 

Additionally, claims-processing timeliness can be hampered if VA cannot 
obtain the evidence it needs in a timely manner. For example, to obtain 
information needed to fully develop some post-traumatic stress disorder 
claims, VBA must obtain records from the U.S. Army and Joint Services 
Records Research Center (JSRRC), whose average response time to VBA 
regional office requests is about 1 year. This can significantly 
increase the time it takes to decide a claim. In December 2006, we 
recommended that VBA assess whether it could systematically utilize an 
electronic library of historical military records rather than 
submitting all research requests to JSRRC. VBA agreed to determine the 
feasibility of regional offices using an alternative resource prior to 
sending some requests to JSRRC. 

VA has recently taken several steps to improve claims-processing. In 
its fiscal year 2008 budget justification, VA identified an increase in 
claims-processing staff as essential to reducing the pending claims 
inventory and improving timeliness. According to VA, with a workforce 
that is sufficiently large and correctly balanced, it can successfully 
meet the veterans' needs while ensuring good stewardship of taxpayer 
funds. The fiscal year 2008 request would fund 8,320 full-time 
equivalent employees working on compensation and pension, which would 
represent an increase of about 6 percent over fiscal year 2006. In 
addition, the budget justification cites near-term initiatives to 
increase the number of claims completed, such as using retired VA 
employees to provide training and the increased use of overtime. 

Even as staffing levels increase, however, VA acknowledges that it 
still must take other actions to improve productivity.[Footnote 3] VA's 
budget justification provides information on actual and planned 
productivity, in terms of claims decided per full-time equivalent 
employee. While VA expects a temporary decline in productivity as new 
staff are trained and become more experienced, it expects productivity 
to increase in the longer term. Also, VA has identified additional 
initiatives to help improve productivity. For example, VA plans to 
pilot paperless Benefits Delivery at Discharge, where servicemembers' 
disability claim applications, service medical records, and other 
evidence would be captured electronically prior to discharge. VA 
expects that this new process will reduce the time needed to obtain the 
evidence needed to decide claims. 

To resolve appeals faster, VA has been working to reduce the number of 
appeals sent back by the Board of Veterans' Appeals for further work 
such as obtaining additional evidence and correcting procedural errors. 
To do so, VA has established joint training and information sharing 
between field staff and the Board. VA reports that it has reduced the 
percentage of decisions remanded from about 57 percent in fiscal year 
2004 to about 32 percent in fiscal year 2006, and expects its efforts 
to lead to further reductions. Also, VA reports that it has improved 
the productivity of the Board's judges from an average of 604 appeals 
decided in fiscal year 2003 to 698 in fiscal year 2006. The Board 
attributes this improvement to training and mentoring programs and 
expects productivity to improve to 752 decisions in fiscal year 2008. 

Opportunities for Improvement May Lie in More Fundamental Reform: 

While VA is taking 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, as well as the structure and division of 
labor among field offices. 

After more than a decade of research, we have determined that federal 
disability programs are in urgent need of attention and transformation, 
and we placed modernizing federal disability programs on our 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. Because of 
this, and because of continuing program administration problems, such 
as lengthy claims-processing times, 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. 

In addition to program design, VA's regional office claims processing 
structure may be disadvantageous to efficient operations. VBA and 
others who have studied claims processing have suggested that 
consolidating claims processing into fewer regional offices could help 
improve claims-processing efficiency and save overhead costs. We noted 
in December 2005 that VA had made piecemeal changes to its claims- 
processing field structure. VA consolidated decisionmaking 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 also consolidated in-service dependency and 
indemnity compensation claims at the Philadelphia regional office. 
These claims are filed by survivors of servicemembers who die while in 
military service.[Footnote 4] VA consolidated these claims as part of 
its efforts to provide expedited service to these survivors, including 
servicemembers who died in Operations Iraqi Freedom and Enduring 
Freedom. However, VA has not changed its basic field structure for 
processing compensation and pension claims at 57 regional offices, 
which experience large performance variations. Unless more 
comprehensive and strategic changes are made to its field structure, 
VBA is likely to miss opportunities to substantially improve 
productivity, especially in the face of future workload increases. We 
have recommended that VA undertake a comprehensive review of its field 
structure for processing disability compensation and pension claims. 

While reexamining claims-processing challenges 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 is 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. The commission held its first public hearing in May 2005, 
and in October 2005, the commission established 31 research questions 
for study. These questions address such issues as how well disability 
benefits meet the congressional intent of replacing average impairment 
in earnings capacity, and how VA's claims-processing operation compares 
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. The commission is 
scheduled to report to the Congress by October 1, 2007. 

Mr. Chairman, this concludes my remarks. I would be happy to answer any 
questions that you or other members of the subcommittee may have. 

Contact and Acknowledgments: 

For further information, please contact Daniel Bertoni at (202) 512- 
7215. Also contributing to this statement were Shelia Drake, Martin 
Scire, Greg Whitney, and Charles Willson. 

[End of section] 

Related GAO Products: 

Veterans' Disability Benefits: Long-Standing Claims Processing Problems 
Persist. GAO-07-512T. Washington, D.C.: March 7, 2007. 

High-Risk Series: An Update. GAO-07-310. Washington, D.C.: January 31, 
2007. 

Veterans' Disability Benefits: VA Can Improve Its Procedures for 
Obtaining Military Service Records. GAO-07-98. Washington, D.C.: 
December 12, 2006. 

Veterans' Benefits: Further Changes in VBA's Field Office Structure 
Could Help Improve Disability Claims Processing. GAO-06-149. 
Washington, D.C.: December 9, 2005. 

Veterans' Disability Benefits: Claims Processing Challenges and 
Opportunities for Improvements. GAO-06-283T. Washington, D.C.: December 
7, 2005. 

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. 

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. 

FOOTNOTES 

[1] Rating-related claims are primarily original claims for disability 
compensation and pension benefits, and reopened claims. For example, 
veterans may file reopened claims if they believe their service- 
connected conditions have worsened. 

[2] Veterans qualify for pensions if they have low income, served in a 
period of war, and are permanently and totally disabled for reasons not 
service-connected (or are age 65 or older). 

[3] See GAO, Veterans' Benefits: More Transparency Needed to Improve 
Oversight of VBA's Compensation and Pension Staffing Levels, GAO-05-47 
(Washington, D.C.: Nov. 15, 2004). 

[4] VBA also provides dependency and indemnity compensation to 
survivors of certain deceased disability compensation beneficiaries. 

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