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What GAO Found

The Department of Veterans Affairs (VA) initiated a comprehensive effort in 2009 to revise its disability rating schedule with both updated medical and earnings information, but faces hurdles with several key aspects. The current revision effort takes a more comprehensive and empirical approach than VA’s past efforts. VA has hired full-time staff to revise the rating schedule’s medical information and plans to conduct studies to evaluate veterans’ average loss of earnings in today’s economy. As part of this effort, VA is considering modifying the rating schedule—currently based largely on degree of medical severity—to include a veteran’s ability to function in the workplace. Moving in this direction is more consistent with how experts conceive of disability. However, this change, in part, has resulted in VA falling behind schedule. As of July 2012, VA is over 12 months behind in revising criteria for the first categories of impairments. In addition, VA has not developed its capacity to produce timely research on the impact of impairments on earnings. Moreover, VA lacks a complete plan—with specific activities and updated time frames—for conducting earnings loss and related studies. VA also does not have a written strategy to address the possible effects that revisions may have on agency operations, including impacts on an already strained claims workload. Finally, although VA intends to conduct medical and earnings updates beyond the current effort, VA lacks a formal mechanism to guide its commitment to do so. It is important that VA update and maintain its rating schedule to reflect current medical and labor market information to avoid overcompensating some veterans with service-connected disabilities while undercompensating others.

Three key approaches for modernizing VA’s disability programs recommended by disability commissions and others—providing quality of life payments, providing integrated vocational services with transitional cash assistance, and systematically factoring the effects of assistive technology and medical interventions into rating decisions—hold opportunity and challenges. Experts and veteran groups GAO interviewed believe each approach holds at least some opportunity for serving veterans more fairly, equitably, and effectively. However, challenges exist. For example, they noted that it could be difficult to achieve consensus for specific design elements among the diverse set of stakeholders. Also, VA’s capacity to administer these approaches—which could increase the complexity and/or number of claims—is questionable. Importantly, costs of each approach were raised. Some interviewees also noted that two or more of the approaches could be combined into a comprehensive benefits package that may mitigate concerns raised by the implementation of any single approach. For example, if factoring assistive technology into disability ratings resulted in lower disability compensation payment levels for some, a quality of life payment could offset that loss. VA officials told GAO they are not considering these approaches because they fall outside of VA’s legal responsibility to compensate for loss of earning capacity. However, a system that maximizes equity, balances fiscal pressures, and ultimately serves individual veterans effectively will benefit from deliberations informed by more modern views about disability.

Why GAO Did This Study

VA administers one of the nation’s largest federal disability compensation programs, providing veterans with a cash benefit based on average loss of earning capacity as a result of service-connected disabilities. However, concerns exist that VA’s rating schedule—the criteria used to assign degree of work disability—is not consistent with changes in medicine and the labor market. Due in part to these types of challenges, GAO designated federal disability programs as high risk. Consequently, GAO examined (1) VA’s progress in revising its rating schedule with updated medical and economic information; and (2) the opportunities and challenges of various policy approaches proposed by commissions and others for updating VA’s disability benefits structure. To do this, GAO reviewed literature and VA documents, and relevant federal laws and regulations, as well as interviewed VA officials, disability experts, and veteran groups.

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Congress may wish to direct VA to conduct focused studies on various approaches to modernize disability benefits and, if necessary, propose relevant legislation. GAO is also making several recommendations to improve VA’s capacity to revise the rating schedule now and in the future. These include completing plans for conducting earnings loss studies and developing a written strategy for implementing revisions to the rating schedule. VA agreed with the recommendations and noted plans to address them.

Matter for Congressional Consideration

Matter Status Comments
To the extent that Congress wishes to consider various options to modernize VA's disability benefits program, Congress could direct the VA to conduct focused studies on these or other policy approaches and, if necessary, propose relevant legislation for congressional consideration. For example, providing explicit quality of life payments, or some other combination of policy changes, to veterans with service-connected disabilities may help to modernize VA's program, but such changes need further study to determine their feasibility and fiscal impact.
Closed - Not Implemented
Congress has not considered various options to modernize the VA disability benefits program.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Veterans Affairs 1. To ensure that decisions about veteran disability compensation benefits are informed by current earnings loss information, the Secretary of Veterans Affairs should (1) take necessary steps to increase research capacity to determine the impact of impairments on earnings in a timely manner and (2) develop a more complete plan for conducting earnings loss and validation studies for the entire rating schedule.
Closed - Implemented
In 2014, VA reported that the agency will contract for research to expand its research capacity to support future revisions to the rating schedule. In addition, VA recently reported that earnings loss information contained in studies completed by the Center for Naval Analyses and EconSys are sufficient to update the rating schedule. During the course of our review, VA had originally planned to use the results of the CNA and EconSys studies for 3 body systems and contract for research on the remaining 12 body systems. Although VA's strategy for conducting earnings loss and validation studies during the current rating schedule review has changed since 2012, VA could further bolster its internal resources and plans for conducting future studies on the impact of impairments on earnings. For example, VA could develop more in-house resources for conducting earnings loss analyses or establish long-term partnerships with research organizations. GAO will continue to pay attention to the importance of making fact-based and timely revisions to the VA rating schedule.
Department of Veterans Affairs 2. To ensure that VA is positioned to seamlessly implement revisions to the rating schedule, the Secretary of Veterans Affairs should develop a written implementation strategy. This strategy could include steps to mitigate the possible effects of rating schedule revisions on agency operations, including an increase in the number of claims received.
Closed - Implemented
VA agreed with this recommendation and said that now is the time to standardize a process for implementing rating schedule changes. In its June 2014 project management plan, VA documented planned actions to ensure a smooth and timely implementation of the revisions to each body system in the rating schedule. VA's planned actions consist of (1) including VA rating specialists in workgroups developing proposed changes to help ensure that revisions do not adversely affect the rating process; (2) identifying updates to guidance, training, and computer systems through a series of internal reviews by several departments within VA; (3) establishing cross-functional teams to identify necessary updates to examination templates and worksheets associated with the revisions; and, (4) conducting impact analyses - published in the Federal Register with the proposed and final rules - as required by the Office of Management and Budget (OMB). Regarding updates to the worksheets and templates, VA plans these updates prior to final publication of each body system revision in the Federal Register. In the impact analyses, VA considers the potential for an increased number of claims and costs associated with the publication of each regulation. According to VA, the specific actions it takes will be dictated by the nature of the proposed updates for each body system.
Department of Veterans Affairs 3. To ensure the rating schedule revisions are sustained beyond the current update project, the Secretary of Veterans Affairs should establish a formal policy, procedure, or mechanism to revise the rating schedule--with updated medical and earnings loss information--at regular intervals.
Closed - Implemented
VA agreed with this recommendation and stated that the agency would formulate a plan to establish a formal, continuous revision policy that is efficient, traceable, and transparent to produce a rating schedule that reflects up-to-date medical information. In November 2013, VA sent us a new project management plan that included plans for subsequent updates to the disability rating schedule at regular intervals. The 2013 project management plan calls for an initiation of reviews for each individual body system on a staggered five-year cycle. This systematic approach ensures a body system goes no longer than 10 years without review and possible revision.

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