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May 25, 2007:

The Honorable Bob Dole:
The Honorable Donna Shalala:
Co-Chairs:
President's Commission on Care for America's Returning Wounded Warriors:

Subject: GAO Findings and Recommendations Regarding DOD and VA 
Disability Systems:

As of April 2007, about 26,000 service members had been injured as part 
of Operation Iraqi Freedom (OIF) and Operation Enduring Freedom (OEF), 
according to the Department of Defense (DOD). Those service members 
injured in the line of duty are eligible for military disability 
compensation. When they leave the military, they may also be eligible 
for compensation from the Department of Veterans Affairs (VA). In 
fiscal year 2005 alone, the Army, Navy, and Air Force evaluated over 
23,000 military disability retirement cases and, in fiscal year 2004, 
over $1 billion in permanent and temporary military disability 
retirement benefits were paid to over 90,000 service members. Through 
the VA disability compensation and pension claims programs, about $34.5 
billion in VA cash disability benefits went to more than 3.5 million 
veterans and their survivors in fiscal year 2006.

On April 23, 2007, we briefed the Commission on the results of our 
recent studies of DOD and VA disability systems (see app. I). This 
report presents the information we provided during that briefing.

Background:

In the DOD military disability retirement system, each of the military 
services administers its own disability evaluation process. According 
to DOD regulations, the process begins with a medical evaluation board 
(MEB) that takes place at a military treatment facility when a 
physician identifies a condition that may interfere with a service 
member's ability to perform his or her duties. Cases in which service 
members do not meet military retention standards according to the MEB 
are then referred to a physical evaluation board (PEB), which is 
responsible for determining if service members can no longer perform 
their assigned military duties, and if the illness or injury that 
renders them "unfit for duty" is linked to military service.[Footnote 
1] Depending on the overall disability rating and number of years of 
active duty or equivalent service, the service member found unfit with 
compensable conditions is entitled to either monthly disability 
retirement benefits or a lump sum disability severance 
payment.[Footnote 2] In terms of their rights to appeal military 
disability decisions, service members dissatisfied with PEB 
determinations may request a formal hearing but are not always 
guaranteed one and, under certain circumstances, further appeal to the 
authority that reviews the PEB.

In contrast, when a veteran submits a claim for VA disability 
compensation for an illness or injury to any of the Veterans Benefits 
Administration's (VBA) 57 regional offices, a service representative at 
that regional office is responsible for obtaining the relevant evidence 
to evaluate the claim. Such evidence includes a veteran's 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 it and 
determines whether the illness or injury is "service-connected" 
(incurred or aggravated while on active military duty). If so, the 
veteran is eligible for disability compensation and the rating 
specialist assigns a percentage severity rating to the illness or 
injury based on degree of disability. VA monthly disability benefit 
amounts are based primarily on the severity rating assigned to service- 
connected injuries and illness and number of dependents.[Footnote 3] 
Veterans who disagree with the regional office's decision can appeal to 
VA's Board of Veterans' Appeals and then to the U.S. federal courts.

DOD Military Disability Retirement: Findings and Open Recommendations:

In our 2006 report on the DOD military disability retirement 
system,[Footnote 4] we found the services were not achieving the DOD 
timeliness goals for processing disability cases and DOD was not 
monitoring achievement of these goals.[Footnote 5] Our analysis of Army 
data on military disability benefit decisions also suggests that 
outcomes for active duty and reserve component members of the military 
may not be consistent. More specifically, Army reservists judged unfit 
for duty were somewhat less likely to receive either permanent 
disability retirement or a lump sum disability payment than their 
active duty counterparts,[Footnote 6] although we were unable to take 
into account all factors that might have legitimately explained this 
difference. Despite the potential for inconsistent disability decisions 
within and across the services, neither DOD nor the services 
systematically evaluated the consistency of these decisions or compiled 
the data on the characteristics of service members needed to do so. 
Finally, we found that training for MEB and PEB disability evaluation 
staff designed to produce timely and consistent decisions was lacking.

At this time there are several open recommendations to DOD to ensure 
that military disability retirement decisions are timely and 
consistent. We have recommended that DOD:

* evaluate the appropriateness of current timeliness goals;

* assess the adequacy of training for MEB and PEB staff;

* require the Army, Navy, and Air Force to take action to ensure that 
data on disability rating and benefit decisions are reliable;

* require the services to track and regularly report these data; and:

* determine, based on these reports, if ratings and benefit decisions 
are consistent and timely across the services.

VA Disability Compensation: Findings and Open Recommendations:

In recent years we have completed several reviews on various aspects of 
VA disability compensation that have led to a number of recommendations 
for improvements in the system. With regard to claims processing 
between fiscal years 2003 and 2006, the average number of days these 
claims were pending increased by 16 days, to an average of 127 days. At 
the same time, appeals resolution remained a lengthy process. In fiscal 
year 2006, it took an average of 657 days to resolve appeals. Moreover, 
the accuracy of VA compensation decisions was 88 percent in 2006, well 
short of its goal of 98 percent.

VA claims processing timeliness and decisional accuracy often are 
hampered by its inability to obtain the information it needs in a 
timely manner. For example, to obtain information needed to fully 
develop some post-traumatic stress disorder (PTSD) 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. Moreover, VBA does not evaluate the quality 
of the information it receives from service records, which is critical 
to the accuracy of VA disability decisions based on this information. 
In addition, although VBA has had difficulty obtaining medical 
information needed to accurately adjudicate claims involving joint and 
spine disabilities, it has no performance measure for the quality of 
the medical exam requests in these cases.[Footnote 7]

Beyond the issues we have identified with timeliness and accuracy of VA 
disability compensation decisions, VBA's fiscal year 2005 budget 
justification did not clearly explain how the agency would achieve the 
productivity improvements needed to meet its compensation and pension 
claims processing performance goals with fewer employees. More 
transparent budget justifications were needed to better inform 
congressional oversight of VBA by making it easier to evaluate whether 
the agency's budget requests reflect the resources, particularly 
staffing, needed to achieve expected performance.

There is also a need to consider more fundamental reform of the VA 
disability compensation program, particularly with regard to its 
disability criteria and field structure. VA eligibility criteria for 
disability continue to be based primarily on physicians' and lawyers' 
estimates made in 1945 of the effects of service-connected impairments 
on the average individual's ability to perform jobs requiring manual or 
physical labor. Moreover, the program's eligibility criteria do not 
sufficiently account for developments in science, medicine, and 
technology, as well as changes in the nature of work that have occurred 
in the past 62 years--which potentially affect the extent to which 
disabilities limit one's earning capacity.

Finally, VBA continues to process claims for disability compensation 
and pension benefits at 57 regional offices, where large performance 
variations and questions about the consistency of decisions persist. 
Despite these claims processing challenges, VA has no systematic method 
for ensuring consistent decision making across all offices. VBA and 
others have suggested that consolidating claims processing into fewer 
regional offices could help improve claims processing efficiency, save 
overhead costs, and improve the accuracy and consistency of 
decisions.[Footnote 8]

There are currently several open recommendations to VA. To improve 
disability claims processing timeliness, accuracy, and consistency, we 
have recommended that VA:

* move forward in implementing a systematic quality review program that 
evaluates and measures the accuracy of the VA unit at the National 
Personnel Records Center's responses to all types of regional office 
requests for information from service records;

* assess whether it could use an electronic library of historical 
military records, to identify veterans whose PTSD claims can be granted 
on the basis of this information, rather than submitting all research 
requests to the Joint Services Records Research Center;

* develop a strategy for improving consistency among its health care 
networks in meeting the criteria for joint and spine exam reports. VA 
could require that its medical centers use the automated templates for 
joint and spine exams;

* develop a performance measure for the quality of exam requests that 
regional offices send to medical centers;

* prepare the following information and work with the relevant 
appropriations subcommittees on how best to make it available for their 
use:
- an explanation of the expected impact of specific initiatives and 
changes in incoming disability claims workload on requested staffing 
levels;
- information on disability claims processing productivity, including 
how VBA plans to improve productivity; and:
- an explanation of how disability claims complexity is expected to 
change and the impact of these changes on productivity and requested 
staffing levels;

* use VA's annual performance plan to delineate strategies for and 
progress in periodically updating its Schedule for Rating Disabilities 
and labor market data used in its disability determination process;

* study and report the effect that a comprehensive consideration of 
medical treatment and assistive technologies would have on the VA 
disability programs' eligibility criteria and benefit package. The 
analysis should estimate the effects on the size, cost, and management 
of the program and other relevant VA programs; and:

* undertake a comprehensive review of its field structure for 
processing disability compensation and pension claims. This review 
would address staff deployment, opportunities for consolidating 
disability compensation and pension claims processing, and human 
capital and real property issues.

Conclusions:

Decisions affecting eligibility for military disability benefits and VA 
disability compensation have a significant impact on the future of 
service members dedicated to serving their country. Given the 
importance of these decisions and the complexity of evaluation 
processes and rules governing eligibility for these benefits, it is 
essential that DOD and VA take the necessary steps to ensure that 
decisions in these cases are accurate, consistent, and timely.

We will make copies of this report available to other interested 
parties upon request. In addition, this report will be available at no 
charge on GAO's Web site at [hyperlink, http://www.gao.gov]. If you 
have any questions about this report, please contact me on 202-512-7215 
or bertonid@gao.gov. Contact points for our Office of Public Affairs 
may be found on the last page of this report. Clarita Mrena (Assistant 
Director), Scott Heacock (Analyst-in-Charge), and Greg Whitney (Senior 
Analyst) also made significant contributions to this report.

Signed by:

Daniel Bertoni:
Director, Education, Workforce, and Income Security Issues:

Appendix I: Briefing Slides:

Briefing for the President’s Commission on Care for America’s Returning 
Wounded Warriors:

GAO Recommendations to Improve the DOD and VA Disability Evaluation 
Systems:

Daniel Bertoni:
Director:
Education, Workforce, and Income Security Issues:

Monday, April 23, 2007:

Comparison of the DOD and VA Disability Compensation Systems:

Department of Defense (DOD):
* Compensates military service members rendered unfit for military duty 
as a result of service-connected disability;
* Considers only conditions making member unfit for duty;
* Rates conditions based on VA Schedule for Rating Disabilities;
* Compensation is based on years of military service and disability 
rating;
* Lump sum or monthly payments.

Veterans Affairs (VA):
* Compensates veterans with service-connected disabilities to make up 
for an average reduction of service-connected disability in civilian 
earnings capacity they are likely to experience; 
* Considers all service-connected injuries and illness
* Rates conditions based on VA Schedule for Rating Disabilities
* Compensation is based primarily on disability rating and number of 
dependents;
* Monthly payments only.

DOD Disability System: Recent GAO Findings & Conclusions:

Evaluating the consistency and timeliness of military disability 
decisions:
* Between fiscal years 2002 and 2005, the Physical Evaluation Board 
(PEB) caseload for all services increased from 15,000 to 23,000.
* Timeliness data generally show that services are not meeting DOD 
timeliness goals.
- Medical Evaluation Board (MEB) and PEB processing time, (Goal is 70 
days for combined processes);
- In FY 2005, the Army reported that 26 percent of active duty cases 
and 52 percent of reserve component cases took over 90 days to process.
- PEB processing time only, (Goal is 40 days);
- In FY 2005, the Navy reported that 13 percent of active duty and32 
percent of reserve component cases took over 60 days to process;
- In FY 2005, the Air Force reported that 22 percent of active duty and 
36 percent of reserve component cases took over 60 days to process.
* Neither DOD nor the services systematically evaluate the consistency 
of military disability decisions, even though DOD provides guidance to 
promote consistency and timeliness.
* Lack of oversight by DOD and the services provides little assurance 
decisions are consistent. DOD does not monitor achievement of 
timeliness goals for processing cases.

Comparability of disability determinations for Army active duty and 
reserve members:
* Army reservists are somewhat less likely to be determined eligible 
for military disability retirement, which may be due to it taking 
longer for them to accrue years of service.
* However, among Army active duty and reserve soldiers determined 
eligible for military disability retirement, ratings of the severity of 
their conditions appear to be comparable after controlling for other 
factors.

Monitoring military disability evaluation decisions for service 
members: 
* DOD allows the services to implement their disability evaluation 
systems differently, but does not adequately monitor disability 
decisions for service members.

DOD Disability Retirement: GAO’s Open Recommendations to DOD:

Evaluating the consistency and timeliness of military disability 
decisions:
* Evaluate the appropriateness of current timeliness goals. 
* Assess the adequacy of training for MEB and PEB staff. 

Monitoring military disability evaluation outcomes for service members:
* Require the Army, Navy, and Air Force to take action to ensure that 
data on disability rating and benefit decisions are reliable. 
* Require the services to track and regularly report these data. * 
Determine, based on these reports, if ratings and benefit decisions are 
consistent and timely across the services

VA Disability Compensation: Overview of Recent GAO Findings & 
Conclusions:

VA disability claims processing:
* VA continues to face challenges in improving service delivery to 
veterans. These challenges include:
- Making timely, accurate, and consistent decisions;
- Obtaining military service records needed to adjudicate disability 
claims, particularly claims of Post-Traumatic Stress Disorder (PTSD), 
in a timely manner;
- Ensuring that VA medical exam reports provide the information needed 
to adjudicate claims of joint and spine disabilities, as required by a 
court decisions.

Budget transparency:
* VA does not make budget information, particularly staffing resource 
requests, transparent.

Fundamental reform: 
* GAO designated modernizing VA and other Federal disability programs 
as a High-Risk area that may require fundamental reform to more 
effectively serve individuals with disabilities in the 21st Century. 
For VA, this includes updating VA’s disability criteria and examining 
its field structure for adjudicating disability claims. 

Recent GAO Findings & Conclusions: VA Disability Claims Processing:

Making timely, accurate, and consistent decisions:
* From fiscal years 2003 -2006, the inventory of rating-related claims 
grew by almost half to a total of about 378,000, due in part to 
increased filing of claims, including those filed by veterans of the 
Iraq and Afghanistan conflicts.
* During the same period, the average number of days these claims were 
pending increased by 16 days, to an average of 127 days. In fiscal year 
2006, it took an average of 657 days to resolve appeals. 
* VA improved the accuracy of its compensation decisions to 88 percent 
in fiscal year 2006, short of its goal of 98 percent.
* VA also continues to face questions about its ability to ensure that 
veterans receive consistent decisions across regional offices.

Obtaining complete and accurate military service records in a timely 
manner:
* VA does not know the extent to which the information that is provided 
to regional offices by a VA unit at the National Personnel Records 
Center is reliable and accurate.
* The average response time to obtain records from the U.S. Army and 
Joint Services Records Research Center needed to fully develop some 
PTSD claims is about 1 year.

Many VA medical exam reports do not provide the information needed to 
adjudicate claims of joint and spine disabilities:
* VA has made progress in ensuring that its medical centers' joint and 
spine exam reports adequately address range of motion limitations, as 
required by a court decision. However, many exam reports still did not 
comply with the criteria in the court decision, and the percentage of 
reports satisfying the criteria varied widely among VA’s 21 health care 
networks.
* There are deficiencies in a substantial portion of the requests that 
VA's regional offices send to VA's medical centers, asking them to 
perform disability exams.
* VA has not yet established a performance measure for the quality of 
the exam requests that regional offices submit to medical centers.

Recent GAO Findings & Conclusions: Budget Transparency:

* VA's fiscal year 2005 budget justification did not clearly explain 
how the agency would achieve the productivity improvements needed to 
meet its compensation and pension claims processing performance goals, 
particularly timeliness of claims decisions, with the requested 
staffing level. 
* VA's budget justification did not provide projections on claims 
complexity, such as average disabilities per claim, or explain how 
changes in complexity affect workload and staffing requirements. 
* More transparent budget justifications would better inform 
congressional oversight of VA by making it easier to evaluate whether 
the agency's budget requests reflect the resources, particularly 
staffing, needed to achieve expected claims processing performance. 

Recent GAO Findings & Conclusions: Fundamental Reform:

* VA disability criteria have not been updated to reflect the current 
state of science, medicine, technology, and labor market conditions.
- While VA’s rating schedule has been updated to reflect medical 
terminology and new conditions, it has not been updated to reflect the 
effect these factors have on disabled veterans’ earning capacity. 
* Examining VA’s Claims Processing Field Structure;
- VA has made a number of changes to its field structure and staff 
deployment in an effort to improve compensation and pension claims 
processing performance. However, VA has not changed the basic field 
structure for processing claims for disability compensation and pension 
benefits, and it still faces performance challenges, such as large 
variations in claims processing time.
- VA and others who have studied claims processing have suggested that 
consolidating claims processing into fewer regional offices could help 
improve claims processing efficiency, save overhead costs, and improve 
decision accuracy and consistency.

GAO’s Open Recommendations to VA: Disability Claims Processing:

Obtaining complete and accurate military service records in a timely 
manner:
* To adequately ensure the quality of the records research done on 
behalf of regional offices by the VA unit at the National Personnel 
Records Center, VA should move forward in implementing a systematic 
quality review program that evaluates and measures the accuracy of the 
unit's responses to all types of regional office research requests.
* To improve its timeliness in deciding PTSD claims, VA should assess 
whether it could use an electronic library of historical military 
records to identify veterans whose PTSD claims can be granted on the 
basis of this information, rather than submitting all research requests 
to the Joint Services Records Research Center.

Ensuring that VA medical exam reports provide the information needed to 
adjudicate claims of joint and spine disabilities:
* VA should develop a strategy for improving consistency among its 
health care networks in meeting the criteria for joint and spine exam 
reports. VA could require that its medical centers use the automated 
templates for joint and spine exams.
* VA should develop a performance measure for the quality of exam 
requests that regional offices send to medical centers.

GAO’s Open Recommendations to VA: Budget Transparency:

VA should prepare the following information and work with the 
Committees on Veterans’ Affairs and the relevant Appropriations 
Subcommittees on how best to make it available for their use:
* Explanation of the expected impact of specific initiatives and 
changes in incoming claims workload on requested staffing levels; 
* Information on claims processing productivity, including how VA plans 
to improve productivity; and:
* Explanation of how claims complexity is expected to change and the 
impact of these changes on productivity and requested staffing levels. 

GAO’s Open Recommendations to VA: Fundamental Reform:

Updating the VA Schedule for Rating Disabilities: 
* VA should use its annual performance plan to delineate strategies for 
and progress in periodically updating the Schedule for Rating 
Disabilities and labor market data used in its disability determination 
process.
* VA should study and report the effect that a comprehensive 
consideration of medical treatment and assistive technologies would 
have on the VA disability programs’ eligibility criteria and benefit 
package. The analysis should estimate the effects on the size, cost, 
and management of the program and other relevant VA programs.

Examining VA’s claims processing field structure:
* VA should undertake a comprehensive review of its field structure for 
processing disability compensation and pension claims. This review 
would address staff deployment, opportunities for consolidating 
disability compensation and pension claims processing, and human 
capital and real property issues. 

Relevant GAO Reports and Testimonies:

* Veterans’ Disability Benefits: Processing of Claims Continues to 
Present Challenges. GAO-07-562T. Washington, D.C.: March 13, 2007. 

* Veterans’ Disability Benefits: Long-Standing Claims Processing 
Challenges 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.

* Military Disability Evaluation: Ensuring Consistent and Timely 
Outcomes for Reserve and Active Duty Service Members. GAO-06-561T. 
Washington, D.C.: April 6, 2006.

* Military Disability System: Improved Oversight Needed to Ensure 
Consistent and Timely Outcomes for Reserve and Active Duty Service 
Members. GAO-06-362. Washington, D.C.: Mar. 31, 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.

* Veterans’ Disability Benefits: VA Could Enhance Its Progress in 
Complying with Court Decision on Disability Criteria. GAO-06-46. 
Washington, D.C.: October 12, 2005.

* Veterans’ Disability Benefits: Claims Processing Problems Persist and 
Major Performance Improvements May Be Difficult. GAO-05-749T. 
Washington, DC.: May 26, 2005.

* 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.

* VA Benefits: Fundamental Changes to VA’s Disability Criteria Need 
Careful Consideration. GAO-03-1172T. Washington, DC.: September 23, 
2003.

* 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.

FOOTNOTES

[1] Service members who do not meet military retention standards but 
whose conditions have not stabilized when their cases reach the PEB are 
placed on the temporary disability retired list pending a final 
decision.

[2] DOD disability retirement provides those with at least 20 years of 
service and a rating of at least 30 percent with a monthly payment for 
life (medical retirement). Those with less than 20 years service and a 
rating of less than 30 percent receive a lump sum payment (disability 
severance). 

[3] VA's pension program also pays monthly benefits based on financial 
need to certain wartime veterans or their survivors. Veterans qualify 
for pensions if they have low incomes, served in a period of war, and 
are permanently and totally disabled for reasons not service-connected 
(or are age 65 or older).

[4] GAO, Military Disability System: Improved Oversight Needed to 
Ensure Consistent and Timely Outcomes for Reserve and Active Duty 
Service Members, GAO-06-362 (Washington, D.C.: Mar. 31, 2006).

[5] Some of the military officials we spoke with believe the goals 
themselves are unrealistic, particularly when addendums to the MEB's 
findings are required, such as in orthopedic or psychiatric cases 
requiring certain medical tests. 

[6] It is important to recognize that, due to the part-time nature of 
reserve service, some laws governing military disability compensation 
result in different experiences with the disability system for 
reservists, which may account for this difference. Because reservists 
are not on duty at all times, it takes longer for them to accrue the 20 
years needed to qualify for monthly disability retirement benefits when 
their disability rating is less than 30 percent. Also, by law, service 
members determined to be unfit for duty are automatically eligible for 
disability compensation if they have at least 8 years of active duty 
service, even if their conditions existed prior to entry into the 
military or were not aggravated by their military service. Part-time 
status makes it more difficult for reservists with preexisting 
conditions to be covered by this "8-year rule" and therefore eligible 
for disability compensation of any kind. 

[7] When VA regional offices ask VA medical centers to conduct joint 
and spine disability exams, the medical centers are required to prepare 
exam reports containing the specific information related to joint and 
spine disabilities mandated in what is referred to as the DeLuca court 
decision. In 2005, we reported a 22 percent deficiency rate in the 
quality of the exam requests regional offices submit to medical centers 
in these cases, which indicates that many joint and spine exam reports 
still did not contain the required medical information needed to comply 
with the DeLuca decision. The percentage of exam reports satisfying the 
DeLuca criteria varied widely among the VA's 21 health care networks-- 
from a low of 57 percent to a high of 92 percent. 

[8] In January 2003, GAO designated modernizing DOD, 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.

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