STATEMENT OF
BRADLEY G. MAYES
DIRECTOR, COMPENSATION AND PENSION SERVICE
VETERANS BENEFITS ADMINISTRATION
BEFORE THE
HOUSE COMMITTEE ON VETERANS' AFFAIRS
SUBCOMMITTEE ON DISABILITY ASSISTANCE
& MEMORIAL AFFAIRS

February 26, 2008

Mr. Chairman and members of the subcommittee, I am pleased to appear before you today to speak on the subject of revising the Department of Veterans Affairs ( VA) schedule for rating disabilities. I am accompanied by Dr. Patrick Joyce, Chief of the Occupational Health Clinic and Chief Physician, Compensation and Pension ( C&P) Program, at the Washington, D.C., VA Medical Center; Dr. Steven Brown, Director of the Compensation and Pension Examination Program Office, Veterans Health Administration; Mr. Tom Pamperin, Deputy Director for Policy, Compensation and Pension Service; and Mr. Richard Hipolit, Office of the General Counsel.

Within VA, the mission of providing C&P disability benefits to veterans relies on the regulatory scheme embodied in 38 Code of Federal Regulations (CFR), Part 4 - Schedule for Rating Disabilities (rating schedule). This rating schedule serves to provide an organized and coherent system for evaluating disabilities and for providing equitable and consistent compensation for service-connected injuries and diseases to our nation's veterans. We are aware that the schedule must continue to "evolve," and, as you know, the President has sent to Congress a bill, "America's Wounded Warriors Act," to implement the recommendations of the President's Commission on Care for America's Returning Wounded Warriors, including the Commission's recommendation that VA should update its disability rating schedule to reflect current injuries and modern concepts of the impact of disability on quality of life.

Also, as you noted in your letter inviting us to testify today, the Veterans Disability Benefits Commission ( VDBC) has made several recommendations about how to improve the VA rating schedule. In addition, the Center for Naval Analyses ( CNA) and the National Academies' Institute of Medicine ( IOM) have recently evaluated the rating schedule. We welcome the congressional interest in C&P and the issue of rating schedule improvement because we share the common goal of improving benefits and service to veterans.

The current rating schedule is the product of many years of development and is an expression of our nation's desire to acknowledge the sacrifices made by veterans and to compensate them for disabilities resulting from military service. Early in our nation's history, the Continental Congress of 1776 passed the first pension laws and administrative directives for veterans disabled during military service as a means to encourage enlistment and curtail desertion. These laws remained in effect, with some modifications, until after the Civil War, when additional benefits were introduced due to the activity of newly formed veterans organizations. During this period, the basis for pension payment amounts shifted from the veteran's service rank to the degree of disability. Until 1890, pensions were granted only to veterans discharged because of illness or injury resulting from military service. In that year, Congress substantially broadened the scope of eligibility to include veterans incapable of manual labor. In 1912, veterans of the Mexican War and Union veterans of the Civil War became eligible for pension at age 62, even though not sick or disabled.

The War Risk Insurance Act of 1917 provided for the first significant rating schedule as well as the idea of compensating veterans for service-connected aggravations of pre-existing conditions. This legislation introduced compensation based on the average loss of earning capacity. Section 302 of the act stated the following:

"A schedule of ratings of reductions in earning capacity from specific injuries or combinations of injuries of a permanent nature shall be adopted and applied by the bureau [of War Risk Insurance]. Ratings may be as high as one hundred per centum. The ratings shall be based, as far as practicable, upon the average impairments of earning capacity resulting from such injuries in civil occupations and not upon the loss of earning capacity in each individual case, so that there shall be no reduction in the rate of compensation for individual success in overcoming the handicap of permanent injury. The bureau shall from time to time readjust this schedule of ratings in accordance with actual experience."

A 1918 amendment to the Act provided for the presumption of soundness in health for those "examined, accepted, and enrolled in service." In 1921, a Veterans Bureau was established and the first codified rating schedule was drafted. The 1921 Rating Schedule adopted the average loss of earning capacity standard. It also modified the presumption of soundness to exclude defects, disorders, or infirmities recorded at the inception of active service and provided for the first presumptions of service connection for tuberculosis and neuropsychiatric conditions. In addition, local rating boards were established around the country to replace a single rating board in Washington D.C.

The World War Veterans' Act of 1924 created a new rating schedule, based on the California workmen's compensation system, which became known as the 1925 Rating Schedule. It provided for disability evaluation percentages in increments of one percent and introduced a disability indexing system that became the basis for diagnostic codes. It also departed from the average loss of earning capacity standard and adopted the idea of a disability compensation system based on assumptions about the loss of skills and functions needed for specific occupations. This led to rating decisions, for example, which would compensate a veteran, whose occupation required reading and writing skills, at a higher rate for visual impairment than a veteran engaged in manual labor. This focus on specific occupations provided the initial rational for including an occupational specialist on the rating board. However, the emphasis on specific occupations was short-lived.

The Economic Act of 1933 authorized the next version of the rating schedule. Disability percentage evaluations were now determined in 10 percent increments, prior differences between temporary and permanent evaluations were eliminated, and additional compensation was provided for bilateral anatomical loss. Most important, the 1933 Rating Schedule eliminated ratings based on occupational variance and reintroduced the concept of average impairment in civilian occupational earning capacity as the basis for disability compensation.

As a result of medical and technological advances resulting from World War II, the 1945 Rating Schedule was created. This schedule maintained the average loss of earning capacity standard and, with periodic updates of medical evaluation criteria, is the rating schedule in use today.

Development of the current rating schedule is based on the Congressional mandate provided in 38 U.S.C. 1155, Authority for schedule for rating disabilities, which states that the "rating shall be based, as far as practicable, upon the average impairments of earning capacity resulting from [specific injuries or combination of specific] injuries in civil occupations." As a result of this directive, the rating schedule compensation system is viewed primarily as a means to replace work-related lost wages resulting from a service-connected disability. The basic elements of the rating schedule are described below.

The current rating schedule brings together more than 700 diagnostic codes representing distinct physical and mental impairments that are grouped by body systems or like symptoms. Covered body systems include the musculoskeletal, visual, auditory, respiratory, cardiovascular, digestive, genitourinary, hemic and lymphatic, skin, and endocrine systems. Also covered are gynecological and breast disorders, neurological and convulsive disorders, dental and oral disorders, and mental disorders. Each diagnostic code is broken down into levels of impairment severity, with disability percentages assigned to each level. These range from less severe to more severe, with higher percentages assigned to more severe levels. Disability percentage numbers range from 0 to 100%, in 10% increments, throughout the rating schedule, although individual diagnostic codes vary in the incremental progression and the maximum available disability percentage.

If the veteran's impairment is not listed in one of the specific diagnostic codes, it is rated under a hybrid code representing an analogous anatomical location or symptomatology. When a veteran has more than one service-connected disability, the percentages for each disability are combined, rather than added, under a numerical table provided at 38 CFR 4.25, Combined Rating Table. In a case with an exceptional or unusual disability picture where application of the rating schedule does not adequately compensate a veteran for functional loss, the case may be sent to the C&P Service for consideration of an extra-schedular rating. If a veteran's disability cannot be rated at 100% under the regular schedule, but the veteran is unable to secure or follow a substantially gainful occupation as a result of the veteran's service-connected disabilities, then an extra-schedular 100% can be assigned under the regulation providing for a total disability rating based on individual unemployability. In cases where the veteran's disability is rated at 100%, but it is severe enough that a veteran is permanently bedridden or has a regular need for aid and attendance, or where anatomical loss or loss of use is involved, additional special monthly compensation payments are available.

Title II of the President's draft bill, America's Wounded Warriors Act, would require VA to complete a study regarding creation of a schedule for rating disabilities based upon current concepts of medicine and disability, taking into account loss of quality of life and loss of earnings resulting from specific injuries. The legislation requires VA, within seven months after entering into a contract for the study, to submit a report to Congress that includes VA's findings and conclusions with respect to the creation of a disability rating schedule based on loss of quality of life and loss of earnings resulting from specific injuries. The legislative proposal provides the framework for VA to pay disability compensation for the loss of quality of life attributable to an eligible veteran's service-connected disabilities at rates to be determined pursuant to the Secretary's report to Congress. Current law only allows the VA to compensate for loss of earning capacity.

To address the recommendations of the Dole-Shalala Commission, as well as various commissions, organizations, and interest groups that have offered suggestions for improving the current rating schedule, VA has developed the following plan to update the schedule and to adopt various suggestions that have been made.

I. Contract for Study

The Department entered into a contract on January 25, 2008, for a study analyzing the nature of specific injuries and diseases for which disability compensation is payable under various disability programs of Federal and State governments and other countries, including VA's program. The study will examine specific approaches and the usefulness of currently available instruments for measuring disabilities' effects on an individual's psychological state, loss of physical integrity, and social inadaptability. The study will make findings and recommendations on the following: (1) the service-connected disabilities that should be included in the schedule for rating disabilities; (2) the appropriate level of compensation for loss of quality of life and for loss of earnings; and (3) the appropriate standard(s) for determining whether an injury or disease, or combination of injuries and diseases, has caused a loss in a veteran's quality of life or loss of a veteran's earnings. The study will take into account the impact of medical advances on disability functioning. We expect that the study will be completed by August 2008.

II. C&P Staff Development and Contract Assistance

Meaningful changes to the rating schedule will require strong leadership and the input of competent personnel who possess the knowledge and skills required to interpret, understand, and write regulations on complex medical concepts. The C&P Service is in the process of recruiting key personnel and expanding our Policy staff. One important aspect of this resource development is our effort to recruit physicians who can bring their medical expertise to improving the rating schedule. Physicians possess the medical knowledge necessary to assist in the effective management of a systematic, ongoing Rating Schedule review process. The hiring of physicians and other qualified individuals is the foundation for the future integration and standardization of this review process. In addition to augmenting the C&P Policy staff as described, we intend to seek assistance from organizations such as the National Academies' Institute of Medicine. We want to leverage the work already accomplished for the Veterans Disability Benefits Commission, and it is important to ensure that our review of the schedule is based on the latest science regarding compensation for disability. The Institute of Medicine already has a process of peer review of literature in place that will help as we move forward in this area.

III. Continue with Rating Schedule Changes under the Current Construct

Revision of the rating schedule has actually been underway since the 1990s, and will continue. A deliberative process is in place that includes input from sources such as the Veterans Health Administration, non- VA medical experts, and veterans service organizations. The general public has opportunity to comment on proposed changes to the schedule in compliance with the Administrative Procedure Act. To date, 12 of the 16 body system sections in the schedule have been revised, and a 13th is nearing publication. The remaining three body systems are in various stages of development. Major changes that have been made include: addition of new disabilities; deletion of obsolete and rarely used disabilities; updating of medical terminology; and most important, development of more objective criteria based on current medical knowledge. Partial revisions of body systems in the rating schedule are being carried out on an ongoing basis. This process continues.

The VDBC specifically recommended that the C&P Service generate changes to the rating schedule criteria for traumatic brain injury (TBI) and post-traumatic stress disorder (PTSD). The C&P Service created a new set of criteria for evaluating TBI and published proposed criteria in the Federal Register for public comment. New rating criteria for evaluating the severity of PTSD are being developed. The criteria will incorporate the criteria for evaluation PTSD identified in the Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition, published by the American Psychiatric Association. These specific criteria will replace the general criteria used for evaluating all mental disorders and will promote equity and consistency in the assignment of disability percentages for PTSD.

IV. Periodic Reviews of the Rating Schedule

Periodic reviews and studies of the rating schedule are a valuable source of information for assessment and improvement. We plan to continue supporting the tradition of reviews established by the Bradley Commission in 1956. That commission conducted studies of the rating schedule that included a survey of 169 medical specialists on the currency and validity of the schedule and a survey and comparative analysis of the earnings of 12,000 veterans receiving compensation and 7,000 veterans not receiving compensation. The survey of medical specialists indicated a consensus that the schedule generally did provide an equitable compensation for earning loss but that much of the evaluation criteria had not kept pace with modern medical diagnostic and treatment practices. The comparative study of earnings indicated that compensation was generally equivalent to lost wages. However, the commission reported that further studies were desirable. This commission served as the impetus to update many of the diagnostic codes. Another review, initiated by VA in 1961, was responsible for modernizing the classifications and nomenclature of the rating schedule's mental disorder section, which incorporated diagnoses from the first Diagnostic and Statistical Manual of Mental Disorders.

In 1971, VA submitted to Congress an important review and study was conducted by VA, referred to as the Economic Validation of the Rating Schedule ( ECVARS). The study was a response to the Bradley Commission's recommendations and recurrent criticism that ratings in the schedule were not accurate. The ECVARS report noted that the 1945 rating schedule was created during a period when most workplace activity involved physical labor, but the "muscle-oriented society of the World War II era no longer exists, and the instrument that served so well as a yardstick to measure disablement in that era must now be updated and refined." An earnings survey of 485,000 veterans receiving compensation and 14,000 veterans not receiving compensation was conducted and analyzed. The results showed that under many diagnostic codes, especially those involving mental disorders, economic loss exceeded compensation. On the other hand, under some musculoskeletal codes, there appeared to be an over-compensation. VA revised the rating schedule based on the ECVARS findings, with higher compensation provided under some codes and lower compensation under others, and submitted it to Congress in 1973. However, VA did not adopt the revised schedule.

After the failure of ECVARS to affect the rating schedule, the VA review and revision process concentrated on improving the clarity, accuracy, and appropriateness of conditions in the schedule rather than attempting to ensure that economic loss compensation for the conditions was validated. In 1988 the General Accounting Office ( GAO) [now the Government Accountability Office] published a report on the need to update the medical criteria used in the schedule. This led to the comprehensive revisions described above. In 1997, the GAO published another report on the rating schedule. This report focused on the idea that disability ratings may not reflect veterans' actual economic losses. The recent CNA Corporation study provides the foundation for assessing the effectiveness of the VA Rating Schedule in compensating for average loss of earnings as recommended by the GAO in its 1997 review.

The most recent initiative for rating schedule review and research has come from VDBC's report issued in 2007, which included input from CNA, IOM, and other groups. As mentioned, CNA analyzed the effectiveness of VA disability compensation as a replacement for average loss of earning capacity. It was determined that " VA compensation on average is about right relative to earned income losses." . . . It is about right given the average age at which service-disabled veterans come into the VA system," i.e., age 50, "and it is about right when we consider all disability types and ratings as a whole." However, the study also found that veterans entering the system at younger ages are generally under-compensated, while those entering at older ages are generally over-compensated. In addition, while those veterans with physical disabilities are properly compensated, those with mental disabilities are under-compensated. This study provides VA with an empirical basis for developing ways to correct rating inconsistencies identified.

The Dole-Shalala Commission, the VDBC, and various other commissions and groups discussed the need for continuous review and updating of the schedules. As part of our plan for improving the rating schedule, we are committed to responding in a positive manner to recommendations from reviews and studies provided by commissions and organizations concerned with the welfare of veterans. We are also committed to conducting our own reviews and studies as needed to implement improvements in a practical and efficient manner.

V. Quality of Life Compensation

In addition to the Dole-Shalala Commission, recent studies and commission reports, have also recommended that compensation should also be provided for losses incurred in other aspects of a veteran's life. These aspects are generally referred to under the term "quality of life" and include losses in the social and psychological realms. As explained, the recent contract awarded by VA will study the alternatives for incorporating a quality of life component into the disability evaluation scheme. In addition, meetings have been scheduled with representatives of the World Health Organization and the American Medical Association to obtain their views on how quality of life is impacted by physical and mental disability. We stand ready to consider any viable and practical compensation construct that would assist disabled veterans in the quality of life realm. However, as noted above, if VA is to comprehensively incorporate diminution of quality of life resulting from disability into the rating schedule as proposed in the Administration's legislation, it will require additional statutory authority from Congress.

Mr. Chairman, this concludes my prepared remarks. I and others on the panel would be pleased to answer any questions you and members of the subcommittee might have.