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entitled 'VA Benefits: Fundamental Changes to VA's Disability Criteria 
Need Careful Consideration' which was released on September 23, 2003.

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Before the Committee on Veterans' Affairs, U.S. Senate:

United States General Accounting Office:


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 

Statement of Cynthia A. Bascetta, Director, Education, Workforce, and 
Income Security Issues:


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 high-risk areas.[Footnote 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.):

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 long-standing 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 

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.

VA's Disability Criteria Are Outmoded:

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.

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 
service-connected 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.[Footnote 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.[Footnote 3] 
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 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.

Some Veterans Are Compensated For Disabilities Not Related To Military 

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.[Footnote 4] These conditions 
included diabetes unrelated to exposure to Agent Orange[Footnote 5], 
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 future cases. In August 2003, we also identified this as 
an opportunity for budgetary savings if the Congress wished to 
reconsider program eligibility.[Footnote 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 

Mr. Chairman, this concludes my prepared remarks. I would be happy to 
answer any questions that you or Members of the Committee might have.

Contact and Acknowledgments:

For further information, please contact me at (202) 512-7101 or Irene 
Chu at (202) 512-7102. Greg Whitney also contributed to this statement.

[End of section]

Related GAO Products:

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, 

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 Claims-
Processing 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, 

VA Benefits: Law Allows Compensation for Disabilities Unrelated to 
Military Service. GAO/HRD-89-60. Washington, D.C.: July 31, 1989.


[1] U.S. General Accounting Office, High-Risk Series: An Update, 
GAO-03-119 (Washington, D.C.: Jan. 1, 2003).

[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).

[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. 

[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).