<DOC>
[110th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:34310.wais]
THE IMPACT OF OPERATION IRAQI FREEDOM/
OPERATION ENDURING FREEDOM ON THE
U.S. DEPARTMENT OF VETERANS AFFAIRS
CLAIMS PROCESS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON DISABILITY ASSISTANCE
AND MEMORIAL AFFAIRS
of the
COMMITTEE ON VETERANS' AFFAIRS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
MARCH 13, 2007
__________
Serial No. 110-8
__________
Printed for the use of the Committee on Veterans' Affairs
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COMMITTEE ON VETERANS' AFFAIRS
BOB FILNER, California, Chairman
CORRINE BROWN, Florida STEVE BUYER, Indiana, Ranking
VIC SNYDER, Arkansas CLIFF STEARNS, Florida
MICHAEL H. MICHAUD, Maine JERRY MORAN, Kansas
STEPHANIE HERSETH SANDLIN, South RICHARD H. BAKER, Louisiana
Dakota HENRY E. BROWN, JR., South
HARRY E. MITCHELL, Arizona Carolina
JOHN J. HALL, New York JEFF MILLER, Florida
PHIL HARE, Illinois JOHN BOOZMAN, Arkansas
MICHAEL F. DOYLE, Pennsylvania GINNY BROWN-WAITE, Florida
SHELLEY BERKLEY, Nevada MICHAEL R. TURNER, Ohio
JOHN T. SALAZAR, Colorado BRIAN P. BILBRAY, California
CIRO D. RODRIGUEZ, Texas DOUG LAMBORN, Colorado
JOE DONNELLY, Indiana GUS M. BILIRAKIS, Florida
JERRY McNERNEY, California VERN BUCHANAN, Florida
ZACHARY T. SPACE, Ohio
TIMOTHY J. WALZ, Minnesota
Malcom A. Shorter, Staff Director
______
Subcommittee on Disability Assistance and Memorial Affairs
JOHN J. HALL, New York, Chairman
CIRO D. RODRIGUEZ, Texas DOUG LAMBORN, Colorado, Ranking
PHIL HARE, Illinois MICHAEL R. TURNER, Ohio
SHELLEY BERKLEY, Nevada GUS M. BILIRAKIS, Florida
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Veterans' Affairs are also
published in electronic form. The printed hearing record remains the
official version. Because electronic submissions are used to prepare
both printed and electronic versions of the hearing record, the process
of converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
__________
March 13, 2007
Page
The Impact of Operation Iraqi Freedom/Operation Enduring Freedom
on the U.S. Department of Veterans Affairs Claims Process...... 1
OPENING STATEMENTS
Chairman John J. Hall............................................ 1
Prepared statement of Chairman Hall.......................... 39
Hon. Doug Lamborn, Ranking Republican Member..................... 2
Prepared statement of Congressman Lamborn.................... 40
WITNESSES
U.S. Government Accountability Office, Daniel Bertoni, Acting
Director, Education, Workforce, and Income Security Issues..... 5
Prepared statement of Mr. Bertoni............................ 41
U.S. Department of Veterans Affairs, Ronald R. Aument, Deputy
Under Secretary for Benefits, Veterans Benefits Administration. 32
Prepared statement of Mr. Aument............................. 61
______
Bilmes, Linda, Professor, John F. Kennedy School of Government,
Harvard University, Cambridge, MA.............................. 6
Prepared statement of Ms. Bilmes............................. 48
Iraq and Afghanistan Veterans of America, Patrick Campbell,
Legislative Director........................................... 23
Prepared statement of Mr. Campbell........................... 58
National Association of County Veterans Service Officers, Ann G.
Knowles, President............................................. 17
Prepared statement of Ms. Knowles............................ 51
Veterans for America:
Stephen L. Robinson, Director of Veterans Affairs............ 19
Prepared statement of Mr. Robinson....................... 53
Brady Van Engelen, Associate Director........................ 21
Prepared statement of Mr. Van Engelen.................... 57
VoteVets.org, Jon Soltz, Co-Founder and Chairman................. 25
Prepared statement of Mr. Soltz.............................. 59
MATERIAL SUBMITTED FOR THE RECORD
``How the U.S. Is Failing Its War Veterans,'' Newsweek Magazine,
March 05, 2007, by Dan Ephron and Sarah Childress.............. 66
``Pomona Veteran Shares Story of Fighting for Health Benefits,''
The Journal News, (Original Publication: March 13, 2007), by
Hema Easley.................................................... 80
``Vietnam Vet Fights for Fellow Soldiers,'' Times Herald-Record,
March 13, 2007, by Greg Bruno.................................. 81
``Veterans Face Vast Inequities Over Disability,'' New York
Times, March 09, 2007, by Ian Urbina and Ron Nixon............. 82
``The Economic Costs of the Iraq War: An Appraisal Three Years
after the Beginning of the Conflict,'' January 2006, by Linda
Bilmes, Kennedy School, Harvard University, and Joseph E.
Stiglitz, University Professor, Columbia University............ 85
``Soldiers Returning From Iraq and Afghanistan: The Long-Term
Costs of Providing Veterans Medical Care and Disability
Benefits,'' January 2007, by Linda Bilmes, Professor, Kennedy
School of Government, Harvard University....................... 108
THE IMPACT OF OPERATION IRAQI FREEDOM/
OPERATION ENDURING FREEDOM (OIF/OEF)
ON THE U.S. DEPARTMENT OF VETERANS
AFFAIRS CLAIMS PROCESS
----------
TUESDAY, MARCH 13, 2007
U.S. House of Representatives,
Committee on Veterans' Affairs,
Subcommittee on Disability Assistance
and Memorial Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:17 a.m., in
Room 334, Cannon House Office Building, Hon. John J. Hall
(Chairman of the Subcommittee) presiding.
Present: Representatives Hall, Hare, Rodriguez, and
Lamborn.
OPENING STATEMENT OF CHAIRMAN HALL
Mr. Hall. Okay. Now we are going to move to our hearing on
the Impact of Operation Iraqi Freedom/Operation Enduring
Freedom (OIF/OEF) Returning Veterans on the VA Claims Process.
And if our first two panelists would like to come to the
table in front, Dan Bertoni from the U.S. Government
Accountability Office and Linda Bilmes from the John F. Kennedy
School of Government.
And I think I have asked Congressman Lamborn, if it is okay
with my colleagues on this side of the aisle, we will make a
brief statement each and then we will hear from you because
that is where the hearing is. And then we can each make
statements as part of our 5 minutes. We can have as many 5
minutes as we want.
Thank you again for coming here today, and I am honored and
at the same time troubled to be sitting here with our topic
today and the news that has been heard and seen recently and
what I am hearing from veterans in my district.
Regardless of whether or not you agree or disagree with a
particular policy or a particular war, all Members of Congress
I have spoken to, and I think all Americans, believe that our
young men and women who serve in OIF/OEF deserve the best
medical care and all the help we can give them in transitioning
from military to civilian life.
Nothing bothers me more than hearing people say they
support the troops, but seeing a cold shoulder being turned
when those troops return home, or seeing veterans have to fight
their way through layers of bureaucracy, or wait for months or
years while their claims are processed.
The purpose of today's hearing is to ensure that the
problems discovered at Walter Reed Army Medical Center are not
the tip of the iceberg with respect to how prepared we are for
our returning servicemembers.
Since the jurisdiction of this Subcommittee is not
veterans' healthcare but veterans' benefits, we are going to
focus on the VA's claims process and how it has been impacted
by OIF and OEF, and more importantly, how it will be impacted,
I think, as the wave--I think we are only beginning to see the
front end of the wave of returning veterans who are affected
physically or psychologically.
As an aside, I would like to say that I am sponsoring a
bill to allow active-duty servicemembers the option of
receiving medical treatment at their local VA hospital if they
so desire without changing their status as active-duty Members
of the military.
In addition to looking at whether the VA is equipped to
handle the claims of returning servicemembers, this hearing
will also examine reports of discrepancies among active and
reserve veterans. Some media reports state that Reserve and
National Guard servicemembers had a greater risk of their
claims being denied or lowered than their active-duty
counterparts.
I am going to skip over the rest of my statement for now. I
just want to refer you all to, if you have not seen it already,
to the March 5th edition of Newsweek, which I will introduce
into the record, to see how some returning OIF and OEF veterans
are falling through the cracks.
[The article referenced by Chairman Hall, ``How the U.S. Is
Failing Its War Veterans,'' Newsweek Magazine, March 5, 2007,
by Dan Ephron and Sarah Childress, appears on page 66.]
Mr. Hall. There is a story on page 33 of that magazine
about Patrick Feges, who was wounded in October of 2004 and had
to wait 17 months until his first VA disability check arrived.
His mother, an elementary schoolteacher, took a second job at
McDonald's to help support him.
Mr. Feges' claim was only approved after Newsweek and the
Veterans for America began looking into his case. I thank them
both for their work.
And this hearing today is to see if the 17-month delay is
an anomaly or evidence of a systemic problem for returning OIF
and OEF veterans. If it is the latter, I would be interested in
hearing any and all recommendations from our witnesses on how
we can fix the problem.
And now I would like to recognize our Ranking Member,
Congressman Lamborn, for his opening statement.
[The prepared statement of Chairman Hall appears on page
39.]
OPENING STATEMENT OF HON. DOUG LAMBORN
Mr. Lamborn. Thank you, Mr. Chairman, for recognizing me.
And I want to thank you for holding this hearing on the claims
backlog and how it will affect the returning servicemembers
from the Global War on Terror.
As I said earlier, I congratulate you on your being
appointed as the Chairman of this Subcommittee, and I look
forward to working with you in a bipartisan manner to solve
these problems.
Today we are here to talk about the effect of OIF and OEF
veterans on the VA claims process. I am more concerned about
the effect of the VA claims process on our great veterans. And
since the beginning of Operation Enduring Freedom, more than
150,000 claims have been filed by OIF and OEF veterans.
In part, this is a positive response to VA's increased
outreach, but now we have a responsibility to process these
claims and to care for these veterans in a responsible manner.
I believe the first step toward improvement for these
veterans is to improve the overall VA claims processing system.
The backlog of compensation and pension claims is over 632,000
claims, about 15,000 more than a month ago according to the
VA's weekly report.
The VA has set a goal to decide a given claim in an average
of 125 days. While more than 4 months does strain the meaning
of the word prompt, it is not unreasonable given the complexity
and the demands of the ``Veterans Claims Assistance Act'' and
other administrative requirements, but now we need the VA to go
out and just do it.
I know that we in Congress bear some responsibility for all
of the complexity. I look forward to asking Mr. Aument what we
can do to help improve the bureaucratic process while
safeguarding it for veterans.
Mr. Chairman, both the budget views and estimates from the
Committee's Majority and the Minority recommend 1,000 new hires
for the VBA over and above the President's request for 457 new
staff for compensation and pension.
In two years when they are all hired and trained, they will
indeed make a difference. The conventional approach of
increased hiring is entirely appropriate. VBA has over the past
several years experienced personnel shortages.
We must also explore some innovative ways to tackle the
challenge that may have even faster payoffs than the new hires.
That is why Committee Republicans this year have recommended
funding for innovative pilot programs to address the backlog as
well.
We recommended funding for a pilot program to explore the
feasibility of inter-governmental and VSO partnerships with VA
in the development of compensation and pension claims. This
pilot program would build on positive findings from a 2002
project conducted between the VA's Buffalo, New York regional
office and the New York State Division of Veterans Affairs.
Within six months of their collaboration, the State
Veterans Division was developing claims in partnership with VA.
Decisions for the region's veterans came faster and accuracy
improved. This kind of innovation holds great promise.
Access to VBA regional offices can be difficult for many
veterans. That is why we also recommended funding a pilot
program for mobile claims offices.
VBA staff Members in mobile offices would provide outreach,
help veterans file their claims, and gather ombudsman feedback
and resolution for veterans.
Mobile offices helping veterans with their claims could
speed up the claims process by improving communication and
access for veterans.
To take advantage of the potential offered by technology,
we recommend funding to explore a rules-based adjudication
system. Software could potentially decide simple claims
accurately, quickly, and consistently so that developers can
focus on the complex cases.
For our newest veterans returning from Afghanistan, Iraq,
and elsewhere in the Global War, we must achieve a seamless
transition from the military into the VA system. It is apparent
to me that a seamless transition will help erase that backlog
because it does increase the system's overall efficiency.
We need full inter-operable electronic health records
between VA and Department of Defense, an electronic DD Form
214, military separation physicals that can also function as VA
disability physicals, and a disability rating process that
provides consistent ratings.
What good is a separation exam and health records from DoD
if the veteran has to repeat the whole process all over again
with the VA?
Mr. Chairman, I am sure you agree no veteran should have to
wait 6 months to a year for their claim to be decided and then
endure an appeal possibly that adds another year or two. For
some veterans, this is not merely inconvenient, it is financial
and potentially emotional disaster.
Every one of these claims is an American veteran and his or
her family awaiting a decision. Every veteran deserves to have
their claim adjudicated quickly and accurately.
One thing is certain. If we do not fix this problem now,
our legacy will be an intolerable backlog regrettably endured
by this generation of veterans and inexcusably bequeathed to a
future generation. I firmly believe no one in this room wants
such an outcome.
I want to thank the witnesses for their service and for
their testimony. I look forward to hearing it and I look
forward to our continued discussion today.
Mr. Chairman, I yield back.
[The prepared statement of Congressman Lamborn appears on
page 40.]
Mr. Hall. Thank you, Mr. Lamborn. Some good ideas there,
and we will be taking close looks at them as we go forward.
If our other Members would be content to submit opening
statements to the record, then we will move straight to the
testimony.
And if we could start with you, Mr. Bertoni. Daniel
Bertoni, the Acting Director of Education, Workforce, Income
Security Issues for the GAO.
Welcome, Mr. Bertoni.
STATEMENTS OF DANIEL BERTONI, ACTING DIRECTOR, EDUCATION,
WORKFORCE, AND INCOME SECURITY ISSUES, U.S. GOVERNMENT
ACCOUNTABILITY OFFICE; AND LINDA J. BILMES, PROFESSOR, JOHN F.
KENNEDY SCHOOL OF GOVERNMENT, HARVARD UNIVERSITY, CAMBRIDGE, MA
STATEMENT OF DANIEL BERTONI
Mr. Bertoni. Mr. Chairman, Members of the Subcommittee,
good morning. I am pleased to be here to discuss the Department
of Veterans Affairs disability claims process in the context of
the wars in Iraq and Afghanistan.
Last year, VA provided nearly $35 billion in benefits to
3.5 million veterans and survivors. For years, the claims
process has been the subject of attention by VA, the Congress,
and others due to untimely decisions, large backlogs, and other
weaknesses.
In 2003, we designated VA and other Federal disability
programs high risk because these programs were based on
outmoded concepts and continue to experience management and
operational problems. And since that time, we have issued
numerous reports with recommendations for change.
My testimony today is based on our prior work and focuses
on three areas, service delivery challenges facing VA, actions
taken to better serve applicants, and areas where fundamental
reform may be needed to further improve performance in the
future.
In summary, several factors have created service delivery
challenges for VA. In general, the growth in disability claims
has strained operations. Since 2000, the number of annual
claims, including those filed by veterans of Iraq and
Afghanistan, have risen steadily from about 579,000 to over
800,000 last year.
While VA has had success in the past reducing its claims
inventory, it is now losing ground. Since 2003, pending claims
have increased almost 50 percent to nearly 400,000. Those
pending over 6 months also increased more than 75 percent to
over 80,000.
And the time required to resolve appeals also remains
problematic. The current average processing time of 657 days is
far from VA's stated goal of 1 year.
Other factors affecting performance include court decisions
requiring VA to assist veterans in developing claims, laws and
regulations which have expanded benefit entitlement, increasing
caseload complexity as more veterans claim multiple
disabilities, difficulties obtaining key evidence in a timely
manner, and VA's increased outreach to veterans and
servicemembers.
VA is also receiving more claims for new and complex
disabilities related to combat overseas, including traumatic
brain injuries, as well as posttraumatic stress disorder cases
as well, which are generally hard to evaluate.
In light of these considerable challenges, we have noted
that continuing to devise new ways to work smarter and more
efficiently will be essential to VA's productivity. VA has
taken steps to improve claims process. Its 2008 budget requests
over 450 additional claims processing staff, a 6 percent
increase over last year.
Other productive initiatives include increasing overtime,
using retired staff as trainers, and piloting a paperless
benefits delivery and discharge process where servicemembers'
disability claim and medical records are captured
electronically prior to separation.
VA has also enhanced internal training and information
sharing to reduce the number of cases sent back by the Board of
Appeals due to errors or incomplete evidence.
VA also recently announced a new initiative to provide
priority processing of all OIF and OEF disability claims.
It is imperative that VA continue to address weaknesses and
bottlenecks in its system to expedite case processing, increase
decisional accuracy, as well as consistency.
Through our ongoing work, we will continue to monitor and
assess VA's near-term initiatives to ensure that VA balances
the need for improved case processing, that they need to
protect the veterans' due process rights.
Going forward, there also may be opportunities for more
fundamental reform that could dramatically improve the program
in the longer term.
In designating VA's disability program high risk, we noted
that its processes did not reflect the current state of
science, medicine, technology, and the national economy which
has moved away from manual labor to service and knowledge-based
employment.
We recommended that VA reassess its disability criteria to
better align with changes in the national economy and that it
place a greater emphasis on early intervention and
rehabilitation services.
We have also reported that VA's field structure may impede
efficient operations. Despite limited efforts to consolidate
some processes and workloads, VA has not changed its basic
field structure for processing claims at 57 regional offices
which have experienced large variations in productivity,
accuracy, and consistency.
While reexamining claim processing challenges can be
daunting, key efforts are underway. In 2003, the Congress
established the Veterans Disability Benefits Commission to
study many of the issues discussed today, including VA claims
processing operations and the location and number of processing
centers.
The Commission is scheduled to report to Congress by
October of 2007. And like you, we look forward to the findings
and recommendations.
Mr. Chairman, this concludes my remarks. I am happy to
answer any questions that you or the Members of the
Subcommittee may have. Thank you.
Mr. Hall. Thank you, Mr. Bertoni. And your written
testimony as submitted will be added to the record.
[The prepared statement of Mr. Bertoni appears on page 41.]
Mr. Hall. And before we go to questions, we would like to
hear the statement of Professor Linda J. Bilmes from the
Kennedy School of Government at Harvard University.
Professor Bilmes.
STATEMENT OF LINDA J. BILMES
Ms. Bilmes. Thank you, Mr. Chairman, Mr. Lamborn, Members
of the Subcommittee. Thank you for inviting me to speak to you
today on this important topic.
I am Professor Linda Bilmes, a faculty member of the
Kennedy School of Government where I teach budgeting and public
finance.
Just by way of background, last year, I co-authored with
Nobel Laureate Professor Joe Stiglitz a paper that analyzed the
economic cost of the Iraq War. One of the long-term costs we
identified is the cost of providing lifetime disability
benefits and medical care for veterans.
[The paper referenced above, "The Economic Costs of the
Iraq War: An Appraisal Three Years after the Beginning of the
Conflict,'' appears on page 85.]
Today I would like to focus on the projected number of
veterans' claims, the capacity of the Department of Veterans
Affairs to process those claims, and the cost of providing
benefits to returning OIF/OEF soldiers.
This was the subject of my second paper written this year
which specifically looked at the cost of providing care and
disability benefits to veterans in Operation Iraqi Freedom and
Enduring Freedom. The paper has been entered into the record.
[The second paper referenced above, ``Soldiers Returning
From Iraq and Afghanistan: The Long-Term Costs of Providing
Veterans Medical Care and Disability Benefits,'' appears on
page 108.]
I would like to discuss five key areas of concern and then
to recommend five changes that I believe would significantly
streamline the process.
First, the areas of concern. First, the VBA is currently
overwhelmed with the volume of claims it is receiving, leading
to a huge backlog. In 2006, the VBA received over 800,000
claims.
Secretary Nicholson testified last month that he expects to
receive 1.6 million additional claims in the next 2 years. My
own projections show that between 250,000 and 400,000 of these
claims will be new, unique applications from soldiers currently
serving in Iraq and Afghanistan. The number of pending claims
and paperwork has risen from 69,000 in 2001 to more than
600,000 as of today.
Second, the claims process itself is extremely long,
cumbersome, and paperwork intensive. As noted, the VBA takes an
average of about 6 months to process an initial claim and an
average of about 2 years to process an appeal. By contrast, the
private sector medical insurance settles 30 million insurance
claims, including the appeals, within an average of 89.5 days.
The process for ascertaining whether a veteran is suffering
from a disability and rating the percentage level of a
veteran's disability is far too complex. After a veteran
applies to one of the 57 regional offices, a claims adjudicator
evaluates the veteran's service-connected impairments and
assigns a rating for the degree to which the veteran is
disabled.
Claims specialists determine the percentage of disability
for each condition in increments of ten. However, you would
think that would be complicated enough, but conditions are not
scaled monotonically from zero to a hundred.
Mental conditions, for example, are rated zero, ten,
thirty, fifty, seventy, or a hundred. Coronary artery disease
ratings are ten, thirty, sixty, and one hundred. Spinal
conditions are rated ten, twenty, thirty, forty, fifty, one
hundred. A huge amount of time and effort is devoted to making
these determinations and then on the veteran's side, to
appealing the decision.
There is wide disparity in efficiency between individual
VBA offices. Regional offices are inconsistent in how they rate
disabilities. GAO found that the days needed to process a claim
range from 99 days in the Salt Lake City VA to 237 in Honolulu.
Currently some of the States providing the most soldiers for
the war are suffering the longest delays in claims
adjudication.
In addition, the claims themselves are more complicated
than in previous conflicts. Vietnam-era claims cited on average
three disability conditions. Gulf War veterans filed four. For
GWOT veterans, the average claim includes five separate
disability issues. One-quarter of the new claims filed this
year cited eight or more disabilities. And then since each item
within a claim is treated separately, there is a great deal of
opportunity for duplication and delay.
The VBA has more than 9,000 claims specialists. Many of
them are themselves veterans, and they generally do a good job
and they try very hard to help veterans. But they are under an
enormous strain. They are required to assist the claimant in
obtaining evidence in accordance with hundreds of arcane VBA
regulations, policies, procedures, and guidelines. They have to
rate the claims, establish files, authorize payments, conduct
in-person and telephone interviews, process appeals, and
generate various notification documents through the process.
New employees require about 18 months to become trained.
For all these reasons, I believe that the agency as
currently structured is simply not capable of settling the
current and projected volume of claims in a timely manner.
My third point is that the projected number of claims from
the wars in Iraq and Afghanistan will rapidly turn this
disability claims problem into a crisis. The current conflict
has the highest incidence of nonmortal casualties in U.S.
military history, a ratio of 16 woundings or injuries per
fatality.
To date, of the more than 1.4 million U.S. soldiers who
have been deployed, about 631,000 have been discharged and one-
third have already been treated and diagnosed at VHA hospitals
and clinics. About 180,000 have applied for disability
benefits.
If returning GWOT soldiers claim benefits at the same rate
as veterans from the first Gulf War, we can expect anywhere
from 638,000 to 869,000 unique, new first-time claims from the
GWOT in the next 5 years. If all the troops return home sooner,
if they all return home by 2008, there are likely to be more
than 400,000 new claims by the end of 2009 alone.
Fourth, the cost of providing disability benefits to GWOT
veterans is projected to be between 70 billion and 150 billion
in 2007 dollars. The cost is not the only issue here, but it is
yet another major cost of war that has not been anticipated by
the Administration.
The eventual cost will depend on several factors, including
the total number of troops deployed and the length of time they
are deployed, the rate of claims and utilization of benefit
programs by returning troops, and the cost of living
adjustments in their benefits.
Fifth, it is important to understand that the disability
process and the health process are inter-related. The growing
number of disability claims is creating additional demand for
veterans' medical examinations. This is adding to pressure on
the veterans health facilities.
The current system, as Mr. Lamborn pointed out, does not
guarantee that all soldiers receive complete physicals in the
military upon discharge and even if they do, they cannot
automatically transfer that information from DoD to VA.
Consequently newly discharged veterans who intend to file a
disability claim are seeking medical examinations from VHA
health facilities in order to document their disabilities. Some
of the backlog at the veterans health facilities is from
veterans who are seeking appointments not necessarily because
they require immediate treatment but they have to verify a
disabling condition, even in cases where it was already
documented upon discharge from the military.
Recommendations. To address the immediate backlog, the
proposal from Secretary Nicholson is to hire 457 additional
claims specialists, to increase the claims processed per
specialist from 98 to 101, and to make training manuals more
readily available.
He projects that this will cut the length of time it takes
to process a veteran's claim by 32 days by 2008. I am not at
all optimistic that a few hundred inexperienced new staffers,
even assuming that they can be hired quickly, will produce a 22
percent improvement in claims processing time during a period
in which the agency faces a huge influx of complex claims.
Indeed, it is conceivable that the task of training and
integrating a large number of inexperienced new hires will in
the short term actually lengthen claims processing times and
increase the number of appeals. And this problem is compounded
by the fact that like many Federal agencies, many experienced
VBA personnel will be retiring over the next 2 to 5 years.
Therefore, I believe that finding an answer to the claims
problem requires us to think outside the box, and I would like
to offer several proposals that do this.
First, for the next 2 years, the VBA should accept and pay
all disability claims by returning GWOT soldiers at face value
and then audit a sample of them. In other words, what we should
do is essentially what the IRS does with taxes, accept the
claims and then audit them.
I would not see this as being a long-term solution, but as
a short-term solution. This would ensure that new returning
veterans do not fall through the cracks and it would shift the
focus while the VBA reforms its process.
Second, the VBA should replace the cumbersome zero to one
hundred scale for disabilities with a simple four-level
ranking, zero disabled, low disability, medium disability, and
high disability. This would immediately streamline the process,
reduce discrepancies between regions, and likely cut the number
of appeals.
The VBA should create a short form for returning veterans
using this four-level ranking and set a goal of processing all
claims within 60 days of receipt. This new system should be up
and running within 2 years, including retraining the workforce
and developing necessary guidelines and appeals procedures.
Third, all soldiers serving in the GWOT should receive a
mandatory full medical examination at discharge from DoD with
all records from this examination made available electronically
to the VBA immediately, and then the VBA should be able to use
these records to grant disability, to spot check and audit
claims, and to assist veterans and to relieve some of the
pressure on VBA.
Moreover, if veterans are discharged without full medical
examinations, they should be reimbursed to receive such an
examination from any fully accredited physician within 90 days
of discharge, and this record should be used by VBA for making
claims.
Fourth, VBA should shift some of its focus away from claims
processing onto more rehabilitation and reintegration of
veterans. In other words, the VBA staff should be used more as
a strategic asset. More of them should be placed in
neighborhood veteran centers, health centers, and assisting in
benefits at discharge systems.
Fifth and finally, Congress should enact what is a bill now
in the Senate, Senate Bill 117, the Lane Evans ``Veterans
Healthcare and Benefits Improvement Act,'' co-sponsored by
Senators Obama and Snowe. This is an excellent piece of
legislation that would improve data collection, improve
monitoring of claims, improve access to mental healthcare, and
improve the benefits and level the playing field for Guards and
Reservists.
Thank you very much for your time and attention, and I
would be pleased to answer any questions you have.
[The prepared statement of Ms. Bilmes appears on page 48.]
Mr. Hall. Thank you, Professor Bilmes.
Excellent presentations from both of our witnesses.
I will keep my questions short for now, and say there have
been a number of instances you both have brought up and
Congressman Lamborn has also mentioned the redundancy of having
a discharge physical from DoD and then an evaluation physical
from the Department of Veterans Affairs.
I had a visit yesterday in my district with a soldier, a
Vietnam veteran, who had repeated physicals for a prostate
diagnosis when, in fact, he had prostate cancer. He already had
scans showing that it was in his bones already and he went 5
years before getting his claims recognized and the bills paid.
And I will submit a couple stories about that into the
record, but he was complaining not just that he was going back
for redundant physicals, but the time the doctor was taking on
his could have been used for somebody who actually needed a
physical who had not been diagnosed already with a more high-
tech means.
[The articles referenced by Chairman Hall, ``Pomona Veteran
Shares Story of Fighting for Health Benefits,'' The Journal
News, (Original Publication: March 13, 2007), by Hema Easley,
``Vietnam Vet Fights for Fellow Soldiers,'' Times Herald-
Record, March 13, 2007, by Greg Bruno, appear on pages 80 and
81.]
And it seems that obviously there are some procedural
guidelines, the simplification that you speak of in terms of
categories, but also in terms of certain conditions, what the
doctors and the staff are required to do, maybe to cover their
own backs so that they can show a paper trail and not be
questioned later.
Which would you suggest, and this can be for both of our
witnesses, that we accept the DoD's separation physical, we
make that mandatory? And you were saying it did not always
occur, but that we make that mandatory and make that the
equivalent of a VA evaluation entry physical or vice versa.
And a more radical thought, what would you think of--it has
been suggested recently to me--what would you think of the
Department of Veterans Affairs being folded into the Department
of Defense so that the true cost of war and of the use of our
soldiers is evaluated in the long term and seen as part of the
same budget?
Ms. Bilmes. Shall I comment first? First of all, in terms
of the discharge issue, I think there are three parts to it.
First, all soldiers should have a mandatory physical on
discharge from the military, you know, while they are there in
the military.
And if you think about the private sector analogy, you
cannot imagine most employers dumping the entire cost and
responsibility on to their insurers, which is sort of the VA,
for the care of their employees.
So, I would recommend that they should have a mandatory
examination, and it is very important that the information be
then useable, that the files be electronically immediately
available to people in the VA and that they not be sort of at
the mercy of the fax machine to be trying to locate documents
from the DoD, and finally that this examination be allowable
within the VA for benefits.
You know, those are three different things that need to be
accomplished at the same time. But I strongly feel it would be
very helpful.
Secondly, regarding the more radical idea of folding the VA
into DoD, I would not be in favor of that at this time. I think
that generally the culture in the VA is very much an empathetic
culture that favors the veteran, that cares about the veteran.
Certainly when you speak to people who run the polytrauma
units and some of these units, they are wonderful people. They
really, care about the veterans and there is sort of an
inherent conflict in putting some of those people into a
military fighting machine.
However, there has to be a much better transition between
the DoD and the VA, and GAO has certainly documented many cases
of a lack of sharing of information between DoD and VA.
So what typically happens now is a veteran has to scramble
around, having already fought for his country, to get hold of a
blood test or something like that was already taken in DoD. It
takes a huge amount of time and effort just to get the most
basic information that DoD already has.
So this kind of lack of sharing of DoD medical records and
medical information with VA simply has got to be stopped.
Mr. Hall. Thank you, Professor.
My time has expired, and I will turn to Ranking Member
Lamborn.
Mr. Lamborn.
Mr. Lamborn. Thank you, Mr. Chairman.
Mr. Bertoni, what do you think about the feasibility of the
VA using a rules-based computer system to automate some of the
claims decisions that do not require complex interpretations?
Mr. Bertoni. I think for some straightforward maladies,
disabilities, that is a possibility. There can be deviations
even for those and perhaps a rules-based system would not work.
There would have to be, I think, an escape hatch where you
would go to another process if it did not apply.
But certainly the concept for applying that technology or
that approach to more straightforward--I do not want to say
simple--but more straightforward conditions, there is a
potential.
But we have not looked at that. We would be happy to
explore that further in the future though. But conceptually it
is possible to use.
Mr. Lamborn. Thank you.
And, Professor Bilmes, in your study, you propose a change
in the disability rating system to four levels that you just
described to us.
What would be the compensation levels for each of those
four categories?
Ms. Bilmes. Sir, you know, I have not studied what would be
the compensation levels for those four levels, but I have
discussed this proposal with a number of veterans organizations
as well as Cynthia Bascetta at GAO. And I believe that it is
something that should be studied. I mean, I think it could be
designed to be a better and fairer system.
Mr. Lamborn. Okay. Thank you.
And which VSOs were you just referring to?
Ms. Bilmes. I have been in contact over the course of the
last 6 months on all of the research I have done with the
American Legion, the Veterans of Foreign War, the Paralyzed
Veterans of American, the Vietnam Veterans of America, the
Veterans for America, the Disabled Veterans of America, the
Iraq and Afghanistan Veterans, as well as other groups of
veterans, the university veterans organizations, you know, with
basically a full range of the veterans organizations.
Mr. Lamborn. Thank you, Professor.
Ms. Bilmes. Indeed, I want to point out the reason I wrote
this paper is that veterans from the Legion, the VFW, and
Veterans for America approached me and asked if I would look at
this.
Mr. Lamborn. Okay. Thank you.
Mr. Bertoni. Mr. Chairman, could I respond to your first
question----
Mr. Hall. Yes. Certainly.
Mr. Bertoni [continuing]. With regard to the exit physical?
I believe an exit physical, regardless of whether it is at DoD
or VA, makes good sense in terms of establishing a baseline
whether that person ultimately never even enters the disability
system or whether they do shortly thereafter.
But I think it is a good idea to have. We think it is a
good idea to have that baseline. And certainly when you look at
the VA's Benefits Delivery at Discharge Program, that is an
avenue where you are getting pretty comprehensive medical
information, historical information up front where you can use
that in the event of a claim. And to the extent that that is
electronic, it can be transferred electronically, that is even
better.
Mr. Hall. Okay. Thank you, Mr. Bertoni, Professor Bilmes.
I will now recognize for his questions Congressman
Rodriguez for 5 minutes.
Mr. Rodriguez. Thank you very much, and thank you for your
testimony.
And let me just make a couple of comments and ask you for
your comments. First of all, you know, the recommendations that
you have made with the exception of the first one, are good.
And I think the idea of the Ranking Minority Member about
trying to get an assessment on some of the individuals who are
almost assured through a computer process, that they will
receive the correct rating that they deserve. It might be
something that we ought to look at.
But let me make some general comments. It is my
understanding, and it is based on maybe just stereotypes and
feedback, because there were some people that, I thought it was
a no-brainer, they should have received something the first
time around. The general rule is, and I tell them, hey, you are
going to get turned down the first time no matter what, so you
just apply the second time and keep going at it.
And is there a feeling within the system that they
automatically--because that is the feeling that we have back
home--that they automatically, no matter how genuine their
request is, they are going to get denied the first time and
that there is an attitude by the administration, by the VA to
do that.
I am wondering if from region to region, how that varies in
terms of how veterans get treated in one region versus another,
and if there have been any assessments from that perspective? I
would assume that in some areas where there is a no-brainer,
that we just go ahead and recognize the fact that these
individuals might deserve those benefits. Just do that, and
that in itself would reduce the number of claims in the future
because they have a feeling, like I do, that they are going to
get turned down the first time anyway.
Ms. Bilmes. I think that may be a perception that some
people have, but my research showed that 88 percent of claims
are accepted, at least at some level. That means at least part
of the claim is granted.
So, you know, my sense is that the real problem here is
that when you have a system where almost 90 percent of the
claims are eventually granted, the process of getting to that
final point is unbelievably complex and bureaucratic. And so it
is really a process problem compounded by a huge volume of
incoming claims problem.
Mr. Rodriguez. You just indicated that 88 percent get
granted and then at the end 90 percent. That means all this
fighting is over 2 percent?
Ms. Bilmes. No. Eighty-eight----
Mr. Rodriguez. Or did I misunderstand?
Ms. Bilmes. If I submit a claim, 88 percent of the total
claims do get granted, but sometimes claims have multiple
parts. The claim might have four parts and not all of the parts
might be granted.
And what we see in this war is much greater complexity of
claims. And so we do not have the data yet on how many, at
least I do not have the data on what percentage of, say, an
eight-condition claim, you know, is granted.
Mr. Rodriguez. And do any of you have any data on the
regions, if one region is harsher than the other regions?
Mr. Bertoni. Yeah, I can speak to that. I would reiterate
what the witness just said that there is a continuum. Someone
can apply, be denied, and ultimately get to appeal and their
case will be approved. And ultimately as they go through that
process, we end up with the 80 percent approval rate.
As far as consistency across regions, we have reported on
numerous occasions that there is considerable inconsistency
across the 57 regional offices. And veterans with like
conditions are not always treated consistently in terms of the
actual determination of disability, the compensation amount,
and/or the rating percentage.
So there has been numerous reports that we put out where we
have been concerned about consistency. We have recommended that
VA look at all levels of their decisionmaking process, identify
specific disabilities that are most problematic or areas that
are most problematic and take actions to address them. And we
are aware of some movement on their part to do that.
But, yes, consistency has been a long-standing issue and
your benefit amount or decision should not be contingent upon
where you filed.
Mr. Rodriguez. My last comment. I know that we had
situations where we would submit a case on behalf of a veteran,
and I think most of the Members of Congress, I think, are doing
a lot of the casework for VA, and we would submit it and then
30 days later, we would call up and they would say, sorry, you
know, we have not gotten it yet. So we would submit it again,
and this was a game that was played.
Have we made any end roads in that area?
Mr. Bertoni. In terms of hand-offs and lost documents, I
mean, I think that is part of the paper process that we are in.
You know, we have real concerns about the hand-offs, the
movement of case files across country, the brokering of claims,
how that can result in just lost records and materials.
So certainly, yes, that is an issue of concern. I cannot
talk to specific circumstances, but, yes, it is an issue.
Mr. Rodriguez. Thank you. My time has expired.
Thank you, sir.
Mr. Hall. I thank the gentleman from Texas.
I now recognize the gentleman from Illinois, Mr. Hare.
Mr. Hare. Thank you, Mr. Chairman.
Thank you both for coming this morning.
It seems like every time we take one step forward here on
disability, we are taking two or three steps backward. And, you
know, we really, from my perspective, have got to get this
under control and we have got to do it sooner rather than
later.
And, Professor, let me just say I like what you had in your
testimony in terms of your recommendations. I think that would
go a long way toward helping solve some of the problems that we
have encountered here because I have a lot of veterans in my
congressional district and I hear this over and over again,
``It takes so long and, you know, I fought and defended this
country and, you know, what is the holdup here.''
And for that veteran, they do not understand the process.
They need the help. And they said you guys have got to figure
it out. So, that is why we are here today.
I just want to ask you, if I could, Mr. Bertoni. You said
in your written testimony that due to the increased number of
compensation claims for posttraumatic stress disorders, it adds
to the amount of time required to process the claim because the
claims are more difficult to evaluate and provide evidence for.
Can you talk about why these claims are more difficult to
evaluate and what actions the VA can take to improve the
process to evaluating medical or mental health?
Mr. Bertoni. Sure. And in the case of PTSD claims, one of
the key variables is to document the stressor event. And if a
veteran comes into a regional office and claims PTSD, if in the
record they can corroborate combat experience or POW status,
that individual's allegation of a stressor event is sufficient
for them to process the claim.
If they cannot substantiate combat or a POW status and this
individual alleges a stressor event, you have to go to the
record. And if it is not immediately available, the regional
office submits a claim.
The National Personnel Records Center is a VBA unit that
has to do the search to find that specific event that is
claimed. And you are talking about historical record, you know,
the person's unit, whatever, to dig through this information.
If, in fact, the individual is a Marine Corps veteran, it
is easier. There is an electronic historical database where the
analyst can go and do the research. And I believe we were told
that that turnaround time could be as little as one day. Any of
the other services, we are in a more difficult situation,
basically slog through manual paper documents, a needle in a
haystack. And that can take up to in excess of a year.
So, you know, we are back to this automated electronic
environment versus paper manual environment, and you can see
how the deficiencies occur when you have two environments.
We did find that VA has been trying to sort of offset, at
least in a couple regional offices. They have cobbled together
or put together an unclassified historical database of records
that they are able to use prior to making that referral to the
Records Center. And we are told that they can close the loop on
that in about 3 weeks. And they have farmed that out to other
regions, and we have recommended that they consider a similar
system nationally.
Mr. Hare. Okay. In both the testimonies, you state that the
VBA needs to seriously reexamine the structure and program
design for the benefits system.
I wonder if you could describe what specific structural
problems you have encountered and what recommendations you
would have to improve the VBA system to meet the demands.
Ms. Bilmes. I favor, as I have testified, a complete revamp
of the system basically in every way. I mean, first of all, I
think that the claims disability rating system needs to be
vastly simplified. I think there needs to be a short form where
people can apply quickly.
I think that the benefit of the doubt should go to the
veteran right away up front so that claims should be
essentially granted for returning first-time unique claims at
least to some extent, so a veteran has a small stipend at least
coming in while the rest of the claim is processed.
And I think that the VA needs to kind of shift its culture
in the benefits process, shifting the culture away from trying
to make sure that not one penny is given out that is not
deserving to a process of trying to use the people more
strategically, deploying them more in the field at benefits of
discharge, deploying them more in theatre which is not done at
the moment, and deploying claims adjudicators in the vet
centers which are very popular neighborhood walk-in clinics for
veterans to help them fill in these simplified forms.
And so I think that the whole way that it is structured in
terms of what people do, what the process is, the records, the
medical records for granting disabilities, and the culture
needs to be reformed.
Mr. Hare. Thank you.
Mr. Bertoni. Our position is that as VA considers how it
may want to modernize its disability process and think more
about more timely intervention support services, with that, you
might want to look at how you are organized structurally.
We do know that they have at times consolidated workloads
and processes to ring out efficiencies, and these were mainly
tactical efforts to try to go after problem areas or backlogs.
But we also know that in doing that in those isolated or
specific instances, they were able to again ring out additional
efficiencies, productivity increases, accuracy, consistency,
building staff expertise are particular issues and even
administrative overhead savings.
We also know where they have not done that in their current
existing 57 regional office structure, we have a situation with
massive productivity variance. We have timeliness, accuracy,
consistency issues.
So we believe that they really need to look at this more
strategically as they move into the 21st century, as we move
forward, and think about this more strategically and how they
want to reorganize and they have the right people, processes,
and technologies in the right place going forward.
We do not have the answers, but somebody has to take a hard
look at this.
Mr. Hare. Thank you.
Mr. Hall. Thank you very much, Mr. Bertoni and Professor
Bilmes.
The idea of giving veterans the benefit of the doubt sounds
good to me. When you said that in the end 88 percent of claims
are approved, that would seem to indicate that maybe only 12
percent of them are an excessively ambitious task.
And so we may actually save money as well as serve our
veterans benefit if we tried your idea of a temporary plan of
accepting all claims and then auditing them later so that our
returning soldiers get, as you said, at least a baseline of
assistance.
So thank you very much, both of you, and the first panel is
now excused.
Mr. Bertoni. Thank you.
Ms. Bilmes. Thank you.
Mr. Hall. And we are going to try to keep moving along
because we all have busy days of solving such serious problems
and others.
Panel two, Stephen Robinson from Veterans for America,
Brady Van Engelen from Veterans for America, Patrick Campbell
from Iraq and Afghanistan Veterans for America, and Ann Knowles
of the National Association of County Veterans Service
Officers, please come up and take your seats. Oh, I am sorry.
Jon Soltz from VoteVets.org. Thank you, Mr. Soltz.
Thank you all. You do not need to hear a speech from me. We
will start with Mrs. Knowles.
And we have your written testimony and it will be included
in the record, so feel free to deviate from your statement.
STATEMENTS OF ANN G. KNOWLES, PRESIDENT, NATIONAL ASSOCIATION
OF COUNTY VETERANS SERVICE OFFICERS; STEPHEN L. ROBINSON,
DIRECTOR OF VETERANS AFFAIRS, VETERANS FOR AMERICA; BRADY VAN
ENGELEN, ASSOCIATED DIRECTOR, VETERANS FOR AMERICA; PATRICK
CAMPBELL, LEGISLATIVE DIRECTOR, IRAQ AND AFGHANISTAN VETERANS
OF AMERICA; AND JON SOLTZ, CHAIRMAN, VOTEVETS.ORG
STATEMENT OF ANN G. KNOWLES
Ms. Knowles. Thank you, sir.
Mr. Chairman and Members of the Committee, it is truly my
honor to be able to present this testimony before you. As
President of the National Association of County Veterans
Service Officers, I am going to talk about the issues affecting
the veterans of the OIF and OEF.
Returning veterans from these two theaters of action have
been receiving priority care from the Veterans Administration.
There are valid reasons, but it has resulted in many other
claims being placed on the back burner, claims that have equal
and valid reasons for priority action.
VA officials have stated the number of claims filed since
2000 has risen nearly 40 percent, and this has caused the
number of cases pending to balloon to over 800,000. Yet, only
about 4 percent of the new claims are from Iraq and
Afghanistan. This is according to the St. Louis Post dispatch
February the 26th, 2007.
To stay on target with the subject at hand, let us look at
the number and nature of injuries of OIF and OEF veterans. It
has been reported by the DoD that over 19,000 Purple Heart
Medals have been awarded since the beginning of OIF and OEF.
Each of these is a potential claim for benefits with the DVA.
Add to this another 25,000 wounded and ever-escalating KIA
numbers as additional troops are assigned to Iraq.
Secretary Nicholson in his interview with Bob Woodard of
ABC News showed statistics of treatment within VA facilities of
over 200,000 OIF/OEF veterans, and not every treatment is a
claim, but even a small percentage of these filing a claim for
benefits will escalate the numbers in the pipeline waiting
processing.
PTSD is recognized in returning veterans from Iraq and
Afghanistan. Their treatment has been given priority. A United
States Army study places those suffering from PTSD at
approximately one in eight soldiers who have served in either
Iraq or Afghanistan.
A survey of deployed troops indicates that twelve percent
of those serving in Iraq and up to 6 percent who served in
Afghanistan have reported symptoms of major depression,
anxiety, or PTSD.
The most frightening statistic is that only 38 percent were
interested in getting help and as low as 28 percent actually
have even looked at help. They cited concerns for how they
would be viewed by their peers if they sought assistance.
This, Mr. Chairman, is a ticking timebomb that will
eventually blow up in our faces, not necessarily in the face of
the military, but in the local communities where the veterans
are returning to their homes.
CVSOs and the VA would be forced to deal with these issues
because local officials and families concerned about the mental
health of these young men and women will demand it. And it is a
sad state of affairs indeed.
Another issue is the number of veterans who are returning
with missing limbs and prosthetic devices. Battlefield
treatment and speed of evacuation of wounded service men and
women have advanced substantially over the years. Many of the
veterans returning from the Gulf region needing specialty care
for missing limbs may well have died in previous battles.
This has placed a tremendous and vital responsibility on
the Veterans Administration that they are ill equipped to deal
with in health and medical care, but also to provide adequate
and timely and fair compensation decisions for the veterans,
their families who are desperately trying to survive.
Other issues that must be addressed is that of placing one
group of veterans in a higher priority or class than other
veterans. When the VA decides to give top priority to a select
group of claims, the other claims, the veterans suffer. Some
claims that have been pending for a year or more suddenly
become less likely to be rated or receive appropriate attention
because of a change of a policy.
This is because personnel in the regional office have been
instructed to focus on OIF and OEF veterans' claims, the
determent of other claims that have been working their way
through this backlog or inventory or whatever we want to call
it now. We feel this is tragic and extremely inappropriate.
Veterans continue to die while waiting for VA benefits.
We are concerned with the VA's centralization of OIF and
OEF claims. We are not convinced that the practice can be
justified. When the regional office claims are brokered out,
the focus becomes quantity and not quality. Issuing flawed
rating decisions just increases the inventory or backlog of an
already inflated and bloated backlog of appellate litigation,
but we have some suggested solutions for you.
One solution would be to reemphasize the BDD. That is the
program, a pre-separation program. Claims and medical course
could be submitted prior to separation allowing local VA teams
to adjudicate the claims and to dramatically shorten the time
that the veteran has to wait for a decision after separation.
Second, streamlining single issue disability claims at the
regional office level while multi-face claims that have a
combination of disabilities that require extensive research are
passed to a tiger team. This would speed the process.
Another suggestion, solution is to increase outreach
efforts. Outreach efforts must be expanded in order to reach
those veterans and dependents that are unaware of their
benefits and to bring them into the system.
The National Association of County Veterans Service
Officers believes that we must do better. Approximately 88
percent of the veterans not being compensated is more likely
than not an issue of lack of access or knowledge of available
services rather than lack of need or some other issue.
NACVSO supports House Resolution 67 introduced by
Congressman Mike McIntyre of North Carolina that would allow
Secretary Nicholson to provide Federal, State, and local grants
for assistance to State and county veterans service officers to
enhance outreach to veterans and their dependents.
We also support House Resolution 1435 introduced by
Congressman Baca of California which would have a significant
impact upon existing claims backlog.
We stand ready to partner with the Veterans Administration
to bring about a reduction in the backlog and increase the
outreach efforts to the veterans of our community.
In conclusion, the bottom line is that the Veterans
Administration is going to have to rise to the occasion, place
more personnel to handle the expected large influx of new
claims and resulting larger inventory or backlog of claims and
they need a much improved IT.
Thank you.
[The prepared statement of Ms. Knowles appears on page 51.]
Mr. Hall. Thank you very much for your testimony, Ms.
Knowles.
And we are going to jump to the middle of the table now to
Mr. Robinson.
Welcome.
STATEMENT OF STEPHEN L. ROBINSON
Mr. Robinson. Thank you.
I am going to deviate from my written testimony. It is very
extensive and well worth the read if you get the opportunity.
Mr. Hall. Thank you. We were going to try to keep this to
five minutes approximately. We do have your written testimony
for the record.
Mr. Robinson. Thank you.
Benefits delivery at discharge is the gold standard to
reduce claims backlog in the Department of Veterans Affairs.
In 1998, I served in the Office of the Secretary of Defense
and I used to go around and do briefings about the great things
that we were doing to make sure we did not repeat the mistakes
of the first Gulf War.
One of the things that was recommended at that time was a
thing called the personal information carrier, a dog-tag sized
device that you could carry the whole entire medical record on.
And we went around and briefed that for about three or 4 years
while I was in the Department of Defense. Never implemented.
And one of the big problems that we have today is data, data
from DoD to the VA.
Now, the discharge process in DoD is broken. That has been
widely publicized with the stories from Walter Reed. And that
puts the Department of Veterans Affairs at a disadvantage
because when the soldier does not get a proper discharge from
the DoD or does not have the proper medical record or has to go
out and find witness statements from commanders on the
battlefield, it creates a situation where the gap from getting
out and getting care gets wider and wider and wider.
I am Steve Robinson. I am the Director of Veterans Affairs
with Veterans for America. And in my position, I meet with
Iraqi Freedom, Enduring Freedom veterans on a regular basis and
happen to know pretty much everybody at the table too.
There is a systematic failure in the DoD and the VA
programs designed to address their medical needs, to track
them, and to share information across platforms. As a result,
we do not have an adequate understanding of what this
generation needs, what are their unique needs as it involves
the kinds of battles they are fighting, improved body armor,
higher survivability, more soldiers that are married leaving
families behind, 16,000 single mothers. These are all unique
needs that will have to be identified and programs developed
around, but currently we do not know because no one has looked
at what is unique about this war.
The face of the American soldier has changed since Vietnam,
but, yet, we are still using a system designed for them. The VA
needs to come up to the 21st century model, and they are making
incredible improvements. But, again, I stress that they do not
know what this generation looks like and what their unique
needs are.
More than 155,000 women have served in Iraq and
Afghanistan. We are creating new female combat veterans in a
system that was designed for men that came home after World War
II and trauma nurses. Combat female veterans are a unique
entity that will need programs and services. Sixteen thousand
single mothers, as I said.
Three out of every five deployed servicemembers have family
responsibilities, spouse, and children. That is an incredibly
different scenario than when people served in Vietnam. But,
yet, we are treating them with the exact same system.
What is happening today is a new chapter in the rule book.
We have yet to begin to recognize the true needs of the current
generation and create programs and services for their war-
related problems.
What do multiple deployments mean? Less than a percent of
this population is serving the war over and over and over and
over again. If you can imagine an NFL football player playing
the Super Bowl every day for 365 days and the kinds of injuries
that they would sustain, they would not have a long career. And
it is the same thing with these soldiers that are fighting the
war over and over. Multiple deployments create unique
situations, break down the bodies. That needs to be identified.
We are especially concerned that servicemembers are not
provided the mental healthcare they need. There is a dramatic
rise in less than honorable discharges and a subsequent loss of
VA benefits. That is a DoD problem, but it also impacts the
Department of Veterans Affairs in their vet centers and in
people seeking mental healthcare services, trying to get those
services even though they may have lost them forever.
There is also an over-use of personality disorders, again a
DoD problem, but it prevents people from receiving the benefits
of the VA and it needs strong investigation.
The Veterans Benefits Administration disability
compensation claims process can be characterized as either
completely broken or partially broken depending on how you want
to look at it. It is completely broken when you are a soldier
who has honorably served and you have been denied your VA
benefit. It is completely broken. It is partially broken for
those who are able to get into the system and then go through
the wait process, and if they are fortunate enough, survive.
I see my time is getting close, so I am going to come to
summary.
We want to address the problems. We urge the Members of the
House to consider co-sponsoring House Resolution 1354, the Lane
Evans ``Health Improvement Act.'' This bill has key components
in it which collect data which will allow us to know what is
happening to this generation. It also tracks and trends what is
happening in this war and it provides mental healthcare in a
way that we currently do not offer it.
We owe this generation, Mr. Chairman. We thank you for your
leadership on taking up these hard issues. They have earned
what we want to give them. Now let us make sure that we give
them what they are owed.
Thank you, sir.
[The prepared statement of Mr. Robinson appears on page
53.]
Mr. Hall. Thank you very much, Mr. Robinson. Thank you for
your service on active duty and thank you for your service
since and today.
We will now hear the testimony of Mr. Van Engelen. And,
once again, we have your written statement for the record, so 5
minutes, please.
STATEMENT OF BRADY VAN ENGELEN
Mr. Van Engelen. Chairman Hall, Representative Lamborn,
Members of the Subcommittee, thank you for the opportunity to
testify.
On April 6th, 2004, I sustained a gunshot wound to the head
in Baghdad while positioned at an observation post. After being
shot, first aid was immediately administered. I was fortunate
to survive long enough to make it to the 28th Combat Support
Hospital.
The primary repairs and closures for my head were conducted
while in theater at the 28th CSH. From there, I was medically
evacuated to a military hospital in Landstuhl, Germany, where I
stayed for recovery until I had regained enough strength to
travel back to Walter Reed Army Medical Center to complete the
recovery process.
I arrived at Walter Reed Army Medical Center on April 14th,
2004. I was immediately asked if I wanted to be treated as an
inpatient or an outpatient. Wanting to spend time with my
family and loved ones, I chose to be an outpatient.
At this point, I was given the building number of the
Malone House and told to go check in. With no clue as to where
the building was, I hopped onto the facility shuttle and asked
if I could get a ride to the Malone House to check in.
The first 2 weeks of appointments, I was fortunate enough
to have my family and loved ones at my side to assist me
through the bureaucratic maze that is outpatient care at Walter
Reed.
In one month's time, my rehabilitative care was completed
and I was told the Physical Evaluation Board process would
begin shortly thereafter. That was May 30, 2004. I did not hear
back about my case until December of 2004.
Other than the research that I conducted on my own time, I
was completely unaware of what my possibilities were and what
to do next. Throughout the entire process, I was the one who
always initiated contact with the case managers in the
hospital. If it were not for my persistence, I would have gone
unnoticed for months. There were just too many patients and not
enough case managers to oversee the process.
The systemic problems exposed at Walter Reed also exist in
the Department of Veterans Affairs. The VA is overwhelmed by
the numbers of claims filed and patients needing attendance. We
did not prepare for this and it is painfully evident. My
generation is going to have to pay for this and we will be
paying for years and years.
While at Walter Reed as an outpatient, there was no
outreach on behalf of the VA to inform me of my benefits for
myself and my family.
When troops were returning from World War II, there were VA
claims specialists on the boats with the servicemen informing
them of their benefits that they were eligible for. We have
lost that aggressive approach with today's servicemembers and
veterans.
Today we are being asked to navigate the bureaucratic maze
of DoD and VA on our own. I can assure you that this is no
small feat. Shifting the burden from our government to those
who serve has created a system where servicemembers and
veterans are unaware of the benefits and programs promised to
them upon enlistment.
I understand the VA has begun to more aggressively address
the inpatients while they are recovering at medical facilities.
But as the case at Walter Reed, only a small number of injured
soldiers are benefiting. This is not acceptable.
Many wounded servicemembers at other medical outpatient
facilities throughout the country remain as uninformed as I was
upon leaving the military. Servicemembers from my generation
are becoming increasingly disenfranchised with the system that
our government promised would help us to heal and rehabilitate.
Claims backlogs are currently at 180 days. A few years ago,
claims were half that. The families of servicemembers are
suffering from the lack of preparation by our VA. They cannot
call the bank and say they are waiting for a response on a
claim and ask for payments to be delayed for another 180 days.
The passive nature of the VA regarding health and claims
dispensation will only tarnish their perception amongst the
military and their families. We may end up with an entire
generation of veterans who have no faith in our VA because
those running it as well as those overseeing it were unable to
uphold their end of the bargain. This saddens me deeply.
I urge the Members of this Subcommittee to keep one
question in mind as they work to repair this broken system.
What is owed to those who serve?
While I do not claim to have all the answers to this
question, I am confident that you will conclude that the answer
is more than servicemembers and veterans are receiving now.
Thank you.
[The prepared statement of Mr. Van Engelen appears on page
57.]
Mr. Hall. Thank you, Mr. Van Engelen, and thank you for
your service and for your testimony. And I think we would agree
with your last statement there at the very least.
And, Mr. Campbell, would you like to go next?
STATEMENT OF PATRICK CAMPBELL
Mr. Campbell. Thank you so much for allowing me to be here
and actually thank you for allowing me to sit at a table with
such fine representatives.
I, too, want to deviate a little bit. On the Metro ride
over here, I noticed a guy in a wheelchair kind of laughing how
late he was to a meeting with a Congressman. I asked him why he
was going down there, and he said, ``I am a traumatic brain
injury sufferer.'' Actually, he said, ``I am a traumatic brain
injury survivor.''
And I remember thinking that, you know, this whole day we
are talking about these statistics hundreds of thousands of
people. And as I am sitting here watching this one person so
excited to go talk about, you know, some programs on how to
find soldiers who are suffering from traumatic brain injury, he
could not even get out, you know, the little gates because he
could not figure out how to use the system.
You know, this is a person who used to come here once a
month, could not even figure out how to put the ticket in the
machine. And he was yelled at twice by the Metro employees for
not having enough money on his card when he just honestly did
not know what was going on.
So I am sitting here in front of you as one of the 54,000
OIF and OEF veterans that the VA is guesstimating will use the
system in 2007.
Earlier in January when the Department of Veterans Affairs
presented their budget, they said that 263,000 of their current
users of their system are OEF and OIF veterans.
In looking at their budget, there is a general principle
that a department's proposed budget is a clear signal to the
outside world of both their priorities and their assumptions.
When you look at the assumptions the Department of Veterans
Affairs are making for the next 5 years, it is clear that they
honestly believe that there will be a drop in VA claims over
the next 5 years. That is why in 2009, the budget for VA is
supposed to drop and then it is supposed to stay the same for
the next 2 years.
Now, I am not an accountant. I am actually in law school,
so I am definitely not good with numbers. And I do not want to
argue with the VA's accountants and actuarial tables. But when
the numbers seem to defy common sense, our alarms must go off.
If you remember any one thing from this testimony today
from me, remember that the VA has grossly underestimated the
demand for their services once again. The soldiers coming home
and they will be asking for care. The question we must be
asking ourselves is, will we be ready for them.
If anything, the recent Walter Reed expose has taught us is
that trying to treat and care for soldiers on a limited budget
and limited oversight only has one logical conclusion: poor
care.
In the context of this specific hearing, soldiers are
languishing while they wait for their claims to be processed
and woe to the veteran who does not file his or her paperwork
correctly and gets denied. They will be stuck in bureaucratic
limbo for years.
If you think that only 54,000 people, veterans are going to
ask for help this year and even less in the next years, all you
are doing is setting yourself up for failure. Soldiers fight
for their country and they should not be made to fight for
their benefits when they get home.
We are all here, you know, all these organizations here and
Linda, are offering you great statistics and great suggestions.
And the Iraq and Afghanistan Veterans of America stands behind
their recommendations.
My purpose here is just to remind you as clear as I can in
a single message, that if you start with faulty assumptions,
you will end up with poor results.
This Committee must work with the Department of Veterans
Affairs and us, the Veterans Service Organizations, to
formulate a realistic number of incoming veterans, not the OMB
approved number that fits nicely into their balanced budget for
the next 10 years. Only then will we be able to hire the
correct number of claim processors and medical staff to provide
the quality healthcare that these veterans deserve.
Thank you for allowing me to testify.
[The prepared statement of Mr. Campbell appears on page
58.]
Mr. Hall. Thank you Mr. Campbell for your testimony and for
your service. And we are here to work with you.
That is why we are holding these hearings and everybody on
this Subcommittee, including the members who could not be here
now because they are in the middle of other work, other
Committee hearings that are scheduled at the same time, I know
all agree with our wish to collaborate in coming up with a
realistic picture and solving the problems in terms of funding.
We will now hear the testimony of Jon Soltz.
Mr. Soltz.
STATEMENT OF JON SOLTZ
Mr. Soltz. Sir, I just want to thank everyone here first
for having us here as well and for you inviting us. And to Mr.
Lamborn, Congressman Lamborn, thank you. Thank you as well.
Everyone here was listening. I am obviously an Iraq War
veteran, served in Iraq in 2003, served in Kosovo in 2000. I am
still an officer of the United States Army today. I am about to
hit my 8-year mark.
You know, obviously my greatest honor is leading soldiers
in war. I wanted to go to Iraq. The hardest part was coming
back. I have gone to the VA and sought VA services when I
returned. I have still got my card right here. I, like many
others when I left active duty, lost healthcare, so it was the
place I went.
I think there has been a lot of great statistics, so I am
going to deviate from my testimony about obviously some
personal stories. There are a lot of people that are going to
use the VA, specifically the Guard and Reserve. When they come
off active duty, they lose healthcare benefits.
When I went to the VA, it took me a long time, so I do not
want you to think that, you know, if the DoD is giving them a
little questionnaire when they get off their airplane, they are
going to pay attention to it. It is going to take them 6 to 8
months, 10 months, sometimes years before they walk in the
doors of the VA and get help.
Specifically if they do not have a wound that is
identifiable immediately for disability like they got their arm
shot or so forth, that you are going to see more and more
stress with the disorders that we do not see. Obviously the
mental disorders.
My experience was one similar. I heard the professor talk
about the culture climate. When I went to the VA, it was one of
the hardest things I ever did. My nurse, she looked at me and
she said, you know, you came to the right place and she asked
me why I came. And I came because I was not sleeping right
after eight months and, you know, it took me less than 20 hours
to get into combat. And it was something that did not affect me
when I was there, but affected me when I got back.
So I went to the VA. You know, I went through the process
and I took a couple tests and it took me several weeks to get
in to see a doctor. And, you know, ultimately the VA told me
that I was just, you know, not adjusting properly.
And I do not want us to focus so much on the backlog
specifically. I think there are two broader issues that you all
should be aware about before we look at systematically fixing
the backlog. And one is the diagnosis process. And I do not
think that it is quantifiable and I do not think it is
consistent with when you talked about why some issues are
harder than others, it is hard to quantify posttraumatic stress
disorder.
And what you are seeing is a lot of soldiers and Marines
that are going to go through the system and they are going to
be given adjustment disorder. You know, we know one in three
are having these kind of issues, but only 12 percent get
diagnosed with PTSD.
So the quantification moving from DoD to VA is very
difficult, and I think that for the first time in this country,
we have an opportunity to have a real conversation over an
extended period of time, that we all need to sort of understand
what I call the yellow brick road. And I think we saw a piece
of that with the Walter Reed.
But when a soldier gets wounded like Brady did, he entered
the system on one side and I entered it on another, but they
are really going to go through five or six different
institutions before they settle at the VA or they are going to
answer at their home duty station and what that process is.
And if we only look at it from the Veterans
Administration's side and fixing that piece of it, then we are
still going to have a tremendous amount of problems watching
the soldier through the entire system.
And it is sort of like a school system and right now the
way we are set up is K through six is one school system and six
through twelve is another. And if you just look at it that way,
I am not quite sure we are going to get the answer we need.
And until we fix the diagnosis inconsistencies, look, there
is a big reason why people are giving adjustment disorder. How
do you quantify what PTSD is? What is the quantification
recommendations that we are making between what the DoD is and
VA?
If I brought ten Iraq War veterans in here, and I am more
than willing to do it, if I brought a psychiatrist from the VA,
a psychiatrist from DoD, and a private psychiatrist, you are
going to get three different answers.
And this is part of why we are getting this backlog, and I
think we have to look at it from both sides, DoD and VA, and
then I think you need to look at how we quantify where we are
going to see the most amount of stress which is the TBI and the
PTSD because they are not entering the system like Brady did.
Brady enters the system because he got shot.
A lot of soldiers, especially Guard and Reservists, one in
three who served in Iraq are from that component. Because of
the way we redesignated the force, we cannot deploy without
them. They are going to enter the system at their home VA
centers when they return home because they fall out of the DoD
system.
So I think that this has to be very broad-based and I think
that we have to look specifically at how we quantify what these
illnesses are.
I do support the recommendation, however, of treating, if
anyone, we give them the benefit of the doubt to provide them
support immediately like the IRS. I think that is why we have a
lot of homeless vets. And at least we are guaranteeing we are
protecting everybody.
With that said, my time is up. And thank you guys for
having me.
[The prepared statement of Mr. Soltz appears on page 59.]
Mr. Hall. Thank you, Mr. Soltz. You win the prize for
stopping before your time was actually up.
Mr. Soltz. Usually I go over my time, so I wanted to make
sure I behaved today.
Mr. Hall. It will not happen often today, I am sure.
Anyway, I just have a couple of questions. Mr. Robinson,
you made mention of the number of women who have served in OIF/
OEF. I think it was 155,000.
Are you aware of any particular instances in which women
veterans have had a more difficult time with the claims process
and how might that be approached differently?
Mr. Robinson. I have not broken out in terms of women
veterans and the claims process, but one stunning example is
that Reserve and National Guard soldiers are twice as likely to
be denied if they file a claim than active-duty soldiers. And I
do not understand why that is happening.
Mr. Soltz. Can I say one thing. I think Steve is right on
that, sir, but I think the point here is that National Guard
and Reserve soldiers that get wounded in Iraq, they enter the
system with a prior sort of wound. And if you go home to your
home duty station and you fall out of the active component
force, you then become dependent on going to the VA.
So the National Guard and Reserve soldiers that are
entering directly through the VA are obviously entering with
something like PTSD, which is harder to quantify. You cannot
give them a blood test. You cannot quantify that. And that is
the systematic issue that Steve is talking about.
Mr. Robinson. Some of the other issues that we have
noticed--I do not know if the Committee saw the New York Times
article on disparities--the cities and towns that send the most
people to war are the cities and towns where the backlog is the
greatest. And there was a great New York Times article that was
written on that just several days ago.
[The article referenced by Mr. Robinson, ``Veterans Face
Vast Inequities Over Disability,'' New York Times, March 09,
2007, by Ian Urbina and Ron Nixon, appears on page 82.]
Mr. Soltz. May I say one more thing about women----
Mr. Hall. Yes, please.
Mr. Robinson [continuing]. To try to answer the question
you asked? There are no unique programs. They are starting to
develop unique programs, but there are no unique programs for
female combat veterans.
Imagine a female combat veteran in a group therapy session
trying to discuss sexual intimacy. Imagine her talking about
not wanting to hold her baby. It is not going to happen in
front of a bunch of other men.
So we need to create specialized care programs for the new
female combat veterans. And there may be unique claims issues
surrounding that.
Mr. Hall. Thank you very much.
I want to ask Ms. Knowles what has been the impact of
prioritizing OIF/OEF claims on the other claimants waiting to
be adjudicated?
Ms. Knowles. Whenever you prioritize and you bring in
putting new claims over the older claims, we have veterans that
literally have had claims in there a year, and this is not an
appeal. This is a regular claim. And they are pushed to the
back burner. No way saying that the OIF and OEF is not
important. It is. A veteran is important be it Vietnam, World
War II, Korea, or our current veteran of Iraq and Afghanistan.
They are all veterans and they should all be treated the same.
The impact that we see, and I think it is due to regional
offices, I think when your regional office has that priority
that they are following the guidelines and do not take the
common sense approach and look at those that are already a year
old, that is how we see the impact.
And about the numbers earlier, when they were saying that
the 1,000 new employees, it will take 2,000 new employees
because the 400 the President is talking about are retiring,
people that are going to retire. It will take 2,000 new
employees to put in the regional offices to handle the claims
that they have now and will have in the very near future.
Mr. Hall. Thank you.
And one last question. This could go to anybody. There have
been in previous wars extended illnesses, for example, that
came up due to exposure to Agent Orange from Vietnam. I have a
close family member of mine who just underwent prostate surgery
for--well, we do not know for sure, but it is one of the things
that has been known to be caused by Agent Orange, and a
gentleman from my district, the veteran I spoke about before
who is dealing with prostate cancer also.
Gulf War syndrome, I am not sure if the verdict really is
in on it. Is it depleted uranium? You know, there can be
exposures that show up 20, 30 years later due to these things.
Are any of you expecting or seeing already a similar kind
of long-term problem that may crop up in the distant future?
Mr. Robinson. I would like to start because I just came off
of the VA Research Advisory Committee on Gulf War veterans'
illnesses, so I am pretty familiar with it.
There are things that are occurring on the battlefield that
are things we are doing to ourselves. There are things that
need serious investigation and have not yet been fully
investigated that servicemembers on this battlefield are facing
that veterans from the first Gulf War faced.
The drug Mefloquine Lariam, DoD stood up a task force to
investigate whether or not that drug was a neurotoxin and
harming people. The Armed Forces Epidemiological Board never
completed its work. The Anthrax vaccine, depleted uranium
screening. What we have learned from the mistakes of the first
Gulf War are that a lot of times we do things to ourselves that
were unintentional or perhaps not really scientifically
validated before we did it.
But we do not see any, at this point, any strange or unique
thing happening except people coming home with exposures to,
you know, the things that happen on the battlefield that make
people sick.
As you mentioned, Agent Orange is now a presumptive service
connection for the disease that you are speaking about and it
came about because people did scientific work and initially it
was poo-pooed. People did scientific work and they discovered
the connection.
There are going to be connections to things that soldiers
used on the battlefield in the future or that science is now
looking at that are going to be presumptively connected to
their service in this war. But right now we see no giant
epidemiological trend like we did in the first Gulf War,
primarily because in the first Gulf War, we blew up the
majority of all chemical warfare agents on the battlefield in
the pre-war, during-war, and post-war bombing phase.
Mr. Soltz. Sir, we have a lady, a woman who I work with
very closely. Her son, he committed suicide. He blew his brains
out with his weapon. And she to this day, you know, talks about
her own personal studies in regards to Lariam. He was a Marine
Corps officer and, you know, it is her specific interest.
And I would agree with Steve. We have not seen a large
trend like Gulf War syndrome or Agent Orange in effect, but
there are individual cases out there. You know, in Iraq, there
is a mystery ammonia, lice meiosis, some very different things,
but----
Mr. Robinson. There is a huge cancer, rapid onset cancer.
We are seeing it at Fort Carson, Colorado, sir. There are a
couple of people that have died. There is rapid onset cancer
that kills them. We do not know what it is, but it needs to be
investigated.
Mr. Soltz. Yeah. Just like in theater, we had this ammonia
where soldiers were dying immediately in theater. But the
Lariam is something I would take specific attention of
considering there are people that claim that it causes
psychological problems and can be the cause of suicide. We see
a lot of suicide in theater.
Mr. Campbell. If I could just add one more thing. This is
not nearly as dramatic, but I think we are going to be seeing a
lot of people with back injuries from all this body armor that
we are putting on people.
You cannot wear 60, 70 pounds of armor every day for 365
days, you know, two or three tours without 10 years, 15 years
down line, people's backs and knees and shoulders and
everything. You know, it is not as dramatic, but I am telling
you all my soldiers are already starting to suffer their
problems, and they are only in their twenties. You know, 20
years down the line, they are going to be coming to the VA.
Mr. Hall. Thank you very much.
I am going to remind our Members that we have a first vote
expected at 12:20, so we will try to move the questions along.
Ranking Member Lamborn.
Mr. Lamborn. Thank you, Mr. Chairman. And I just have one
question.
But first I want to thank all of you for coming here today
and helping put a personal face on these issues that we are
looking at. So thank you.
Mr. Robinson, a question for you in particular. You had
some really good suggestions on clearing up the backlog. Of
those suggestions, if you could just implement one of them
right off the bat, if we cannot do all, which one would you
single out?
Mr. Robinson. Fix the DoD discharge process because it is
going to make the VA backlog disappear. Benefits Delivery at
Discharge is the gold standard along with other
recommendations. You are inheriting a problem because they are
not doing their job.
Mr. Lamborn. Okay. Thank you.
Mr. Hall. Thank you for yielding back. I assume you do.
Mr. Lamborn. I do.
Mr. Hall. Mr. Hare.
Mr. Hare. Well, first of all, thank you all for your
service and thanks for taking the time to come here today. And,
again, it never ceases to amaze me how we are quick to put
people in harm's way and very slow to help them when they need
help the most.
I know, if I could, Mr. Campbell, I know you were
speculating we were going to have some people testify. But in
your opinion, why do you think the VA is anticipating a drop in
claims that you were talking about, and I think you said they
were grossly underestimating? What are they using for criteria,
do you think? I mean, I know we will ask later, but I am just
wondering from your end.
Mr. Campbell. Well, I think it has to do with budget
numbers. I mean, you have--we want to balance the budget. You
know, this whole debate is about paying for the full cost of
the war. And when you are trying to balance a budget without
raising taxes and fighting two wars at the same time, you know,
you have to kind of cross your fingers and hope and pray that
certain things are going to happen.
And, you know, the administration wanted a budget that is
going to look balanced in 2 years, 3 years, 4 years down the
line and, you know, that is one of the ways to do it. And it is
just not going to happen. You cannot have a VA budget that
stagnates or decreases when you are just starting to see the
claims begin. I mean, there is no way to get around it.
The budget needs to increase with the increased demand. And
unless you are planning on cutting services or hoping a whole
bunch of World War II veterans are going to die in the next
couple years, you know, it is not going to happen.
So the assumption has to be that there are not going to be
any more claims. Like I said, I am not a statistician, but it
does not pass the test.
Mr. Hare. I do not think you have to, Mr. Campbell. I think
being realistic, I think we clearly know that there is going to
be an increase and not a decrease.
Mr. Van Engelen, I just had a question for you. When you
were in Walter Reed and experiencing this transition between
the DoD healthcare to the VA, from your experience, what
recommendations would you give to us to improve the transition
from the whole VA disability claims process? I mean, as I
understand it, you said it was 7 months that you were----
Mr. Van Engelen. That was the discharge process from the
DoD aspect of it. On addressing the issue of them informing,
keeping me informed of what I should know, I was at Walter
Reed, so, you know, there were some people there that were in a
similar situation that could brief me on this stuff.
Mr. Hare. But you said you initiated the contact with the
case managers.
Mr. Van Engelen. That is correct.
Mr. Hare. And basically you were working for yourself in
this process. And I guess what I am asking you is, for those
people who may not be able to do that or do not do that, what
do we need to do better? I mean, clearly this has got to get
fixed.
Mr. Van Engelen. I agree. It does need to get fixed. I
think that they need to be much more aggressive. I think they
need to have people on the field literally out there pounding
pavement at Walter Reed and all the medical installations,
talking with family Members.
I know that General Waitman, when he was in command at
Walter Reed, he had town halls. That would be a great place to
send the VA representative and just have them sit there and
say, look, I want everyone that is within timeframe of being
discharged to come talk to me. I am going to give you a general
spiel and then we will work some stuff out from there. But this
is not an outpatient facility more or less.
I have a friend who is at Fort Richardson in Alaska. He has
no idea of what the VA has to offer and what benefits he can
get. And he is 6 days from ETS.
Mr. Hare. And he has no idea?
Mr. Van Engelen. No idea. He is a college educated
individual, sir. It is just part of the process. There is no
one up there to help these guys. They just came back from Iraq
and they are all getting ready to ETS and there is no one there
to inform them of what there is out there for them to get.
Mr. Hare. Amazing. Sad, but amazing.
Ms. Knowles, just one quick question. You said of those 400
and some people that they are talking about adding 1,000 and I
think you said you would need like 2,000, do you see if we can
up those numbers significantly that this is going to help in
the processing of the claims and help our vets out?
I know that the Professor testified that training these new
people is going to be a problem because you have got to train
them and get them up to speed and that could take up to a year,
I think she was talking about, or longer.
So if we do get the new people, which, by the way, I think
we should do more than we are going to do or thinking of doing
what is the fix here from your perspective for us?
Ms. Knowles. From a person who sits across the desk and
files a claim daily, that is my job, I sit across the desk
every day and file the claims, when we submit it to the
regional office, it stagnates. They do not have adjudicators,
enough adjudicators, and the ones they have, she is absolutely
right, they are brand new on the job. The decisions they make
are wrong decisions and we have to go back with a
reconsideration.
We know there are going to be people retiring. We have to
start somewhere. That is the reason we need to go ahead and put
employees there to start training them. We still have another
bad 5 years before we are going to see the backlog really come
down because we have got to have people there to do the job.
Now, County Service Officers, the State Service Officers
are doing the legwork on the outside. We are gathering the
information and presenting it. That is why we have tried to
work with the VA for years. Give us your check list of what you
need. We will make sure you get it so that even a brand new
adjudicator can do their job, a new rater can do their job.
Mr. Hare. Thank you all very much.
Mr. Hall. Thank you, Mr. Hare.
Thank you, our panel. Thank you for your service continuing
and in the past, and you have been a great enlightenment to us.
I am going to ask Mr. Hare if you would sit in the Chair
for a moment.
Mr. Hare. I would.
Mr. Hall. Thank you.
Mr. Hare [presiding]. If we can call our last panel, I
think Mr. Ronald Aument.
Thank you, Mr. Secretary, for coming to visit with us this
afternoon, and we will go ahead and start with your testimony.
STATEMENT OF RONALD R. AUMENT, DEPUTY UNDER SECRETARY FOR
BENEFITS, VETERANS BENEFITS ADMINISTRATION, U.S. DEPARTMENT OF
VETERANS AFFAIRS; ACCOMPANIED BY MICHAEL WALCOFF, ASSOCIATE
DEPUTY UNDER SECRETARY FOR FIELD OPERATIONS, VETERANS BENEFITS
ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS
Mr. Aument. Thank you, Mr. Chairman.
Mr. Hare. You are welcome.
Mr. Aument. Mr. Chairman and Members of the Subcommittee,
it is my pleasure to be here to discuss the Disability
Compensation Program and our efforts to meet the needs of
servicemembers and veterans of Operations Iraqi and Enduring
Freedom.
I am accompanied today by Mr. Michael Walcoff, VBA's
Associate Deputy Under Secretary for Field Operations.
The Veterans Benefits Administration is responsible for
administering a wide range of benefits and services for
veterans, their families, and their survivors.
At the heart of our mission is the Disability Compensation
Program. Last year, we provided veterans with decisions on over
774,000 disability claims and performed more than 1.3 million
other award actions and benefits adjustments for beneficiaries
already on our rolls.
Additionally, we handled over 6.6 million phone calls,
conducted over a million interviews, briefed more than 390,000
service persons, and conducted nearly 65,000 hours of outreach.
Today I will discuss the challenges we face in providing
timely, accurate, and consistent determinations on veterans'
claims for disability compensation. I will also discuss some of
the actions we are taking to improve claims processing and
expedite the process of the claims from Operations Iraqi and
Enduring Freedom of veterans.
VBA is engaged in numerous initiatives aimed at better
managing the disability claims workload and providing benefits
processing. The efforts include changes to the organization and
structure of the veterans service center, delivery of training,
consolidation of specialized operations, and redistribution of
workload.
The implementation of the claims processing improvement
initiative, CPI model established a consistent organizational
structure across all of our regional offices. Work processes
were reengineered and specialized teams established to reduce
the number of tasks performed by individual decisionmakers,
establish consistency in work flow and process, and incorporate
a triage approach to incoming claims. Implementation of this
model provided a strong foundation for improving both the
accuracy and consistency of our claims processing.
We also established an aggressive and comprehensive program
of quality assurance and oversight to assess compliance of VBA
claims processing, policy, and procedures, and assure
consistent application. As a result of these efforts, our
quality has risen over the last 4 years from 81 percent to 89
percent.
VBA has deployed new training tools and centralized
training programs that support accurate and consistent
decisionmaking. New hires receive comprehensive training and a
consistent foundation in claims processing principles through a
national centralized training program, and local training is
provided utilizing a standard curriculum.
Standardized computer-based tools have been developed and
training letters and satellite broadcasts are provided to the
field on the proper approach to rating complex issues.
In addition, the mandatory cycle of training for all
veterans service center employees has been developed consisting
of an 80-hour annual curriculum.
The consolidation of specialized processing operations for
certain types of claims has been implemented to provide better
and more consistent decisions, and we continue to look for ways
to achieve additional organizational efficiencies through
further consolidation.
Some of our efforts include the establishment of pension
maintenance centers, the tiger team, the appeals management
center, and the casualty assistance unit. We are exploring the
centralization of all pension adjudications in these centers.
VBA also established two development centers in Phoenix and
Roanoke and centralized the processing of all radiation claims
to the Jackson regional office.
The Benefits Delivery at Discharge Program provides
servicemembers with briefings on VA benefits, assistance with
completing applications, and a disability examination before
leaving service. Through the BDD Program, a servicemember can
file a pre-discharge claim while on active duty.
These claims are received at one of our designated BDD
intake sites and processed through the BDD Program. In order
for a claim to be processed as a BDD claim, servicemembers must
have 60 to 180 days remaining on active duty and must be
available for all required examinations at the local intake
site. The goal of this program is to deliver benefits within 60
days following discharge.
VBA has consolidated the rating aspects of our BDD Program
which will bring greater consistency of decisions on claims
filed by newly separated veterans.
VBA is aggressively pursuing measures to decrease the
volume of pending disability claims and shorten the time
veterans must wait for decisions on their claims.
We began aggressively hiring additional staff in fiscal
year 2006, increasing our on-board strength by over 580
employees between January 2006 and January 2007.
We will continue to accelerate hiring and fund additional
training programs this fiscal year and then maintain staffing
at maximum levels based upon funding received in 2008 and
following.
We are recruiting now to increase our on-board strength by
an additional 400 employees by the end of June. We have also
increased overtime funding this year and recruited retired
claims processors to return to work as reemployed in order to
increase decision output.
VBA implemented the brokering strategy in which rating
cases are sent from stations of high inventories to other
stations with the capacity to process additional rating work.
Brokering allows the organization to address simultaneously the
local and national backlog issues by maximizing the use of
available resources.
Since the onset of combat operations in Iraq and
Afghanistan, VA has provided expedited and case managed
services for all seriously injured Operations Iraqi and
Enduring Freedom veterans and their families.
VA assigns special benefits counselors, social workers, and
case managers to work with these servicemembers and their
families throughout the transition to VA care and benefit
systems and to ensure expedited delivery of all benefits.
Last month, the Secretary of Veterans Affairs announced a
new initiative to provide priority processing of all OIF/OEF
veterans' disability claims. This initiative covers all active
duty, National Guard, and Reserve veterans who were deployed to
or in support of the OIF/OEF combat operations as identified by
the Department of Defense.
This initiative will assist these veterans to enter the VA
system and begin receiving disability benefits as soon as
possible after separation. We have designated our two
development centers in Roanoke and Phoenix and three of our
resource centers as special tiger team resources for processing
OIF/OEF claims.
The development centers will obtain the evidence needed to
properly develop the OIF/OEF claims and the resource centers
will rate OIF/OEF claims for regional offices with the heaviest
workloads. Medical examinations needed to support these claims
are also being expedited.
We are expanding our outreach programs for National Guard
and Reserve components and our participation in OIF/OEF
community events and other information dissemination
activities.
An OIF/OEF team is being established at VBA headquarters to
address all operational and outreach issues at the national
level to include the coordination of a national memorandum of
understanding with each of the Reserve components.
The MOUs will ensure that VA is provided service medical
records and notified of when and where Reserve Members are
available to be briefed during the demobilization process and
at later times.
We will work with DoD to discuss the possibility of
expanding VA's role and VA's military preseparation process.
Specifically we will assess the feasibility of providing a new
claims workshop where groups of servicemembers would be
instructed on how to complete the general portions of the VA
application forms. Personal interviews would be conducted at
the end of the workshop with those applying for benefits.
Mr. Chairman, this concludes my testimony. I appreciate
being here today and look forward to answering your questions.
[The prepared statement of Mr. Aument appears on page 61.]
Mr. Hall. Thank you very much for your testimony, Mr.
Aument, is it?
Mr. Aument. That is correct.
Mr. Hall. What percentage of the current claims backlog
would you say is made up of OIF/OEF veterans?
Mr. Aument. Of the currently pending claims workload?
Around 10 percent.
Mr. Hall. And what are your projected casualties for OIF/
OEF and also how many of those veterans do you anticipate will
file a claim with VBA?
Mr. Aument. We do not project casualties. What we do is
project claims workload based upon prior experience. Our
projection models, we use one both for projecting the mandatory
account spending as well as for the claims workload, have been
in use for some time now and they rely primarily upon prior
years' experience being adjusted based on the most recent
experience.
Mr. Hall. I was wondering if you had the opportunity to
read Professor Bilmes' paper and, if so, what your thoughts are
on her conclusions.
Mr. Aument. Yes, I have. I have read her earlier work
together with Professor Stiglitz's that was published earlier.
I found it very interesting. They obviously involved a lot of
research. There are many points I certainly could agree with.
Others, I am not so certain I agree with.
I certainly agree with some of her over-arching
observations in listening to her testimony today. One is that
the disability compensation system is extremely complex. I
believe that is probably one of the most confounding hurdles
that we all face, those of us who are charged with
administering the program, as well as those who come to us for
support.
Of her recommendations, I do not know that she touched upon
it today so much, but in her most recent paper, one of the
recommendations I was very intrigued by, and wholeheartedly
endorse, was the idea of modernizing many of our systems to
include the use of more electronic information within our
systems to include imaging and systems that much like that,
parallel those that are used in private industry.
Mr. Hall. I think she is writing her third paper right now.
Mr. Aument. I see.
Mr. Hall. I was wondering how you might explain the 10
percent discrepancy between ratings approved for active-duty
servicemembers as opposed to those in the Guard and Reserves.
Mr. Aument. I certainly do not have a full explanation. I
can put forth a couple of theories on this.
We are about to release, I expect later this month or early
next month, a study that was performed by the Institute for
Defense Analyses that we contracted with about a year ago
following some of the controversy over consistency and interest
in the fact that we had inconsistencies from office to office.
They have a number of very interesting findings. One that I
find most compelling for this issue is that a military retiree
is four times more likely to be receiving disability
compensation than a non-retiree. Many of the Guardsmen and
Reservists, quite frankly, unless they have been injured in the
past while they are on active duty for training, typically were
not eligible for VA benefits. So they are only becoming more
eligible because of the mobilization periods that they have
gone through.
They spend considerably less time on active duty than an
active-duty servicemember does. We believe that there is some
rationale that would connect those two facts.
One of the things that we are discussing is going back to
the Institute for Defense Analyses and having them examine this
very issue to try to give us greater insight as to what might
be driving some of those discrepancies.
Mr. Hall. Back to Professor Bilmes, she was invited by a VA
health economist, Dr. Todd Wagner, to present her studies to
all the VA health economists. This was scheduled, but the VA
headquarters canceled it the day before it was to take place.
I am just curious if you were aware of that or maybe we
could find out why and whether it could be rescheduled.
Mr. Aument. I will certainly take that back. I was not
aware of this at all, but I will certainly take that back.
Mr. Hall. That would be good.
And of the 57 regional offices of VBA, 54 of them received
an outstanding rating. I was wondering how that could happen
with a backlog of 600,000 cases. I mean, I understand there is
a lot of good work going on in the VA. Nobody says that there
is not. I know plenty of people who have been treated and are
happy with their treatment. It is the numbers that are adding
up to accentuate the negative at this point. And so I am just
curious how we get 54 of 57 regional offices being judged
outstanding.
Mr. Aument. We typically do not really judge the regional
office. Are you speaking about the Directors of the regional
offices, their performance evaluation?
Mr. Hall. Yes. That is correct.
Mr. Aument. I am not sure we agree with that number. I will
ask Mr. Walcoff to address that.
Mr. Walcoff. I am the rating official for all of our
regional office directors, and I do not have the exact number,
but I will tell you that the number rated outstanding was
probably somewhere around 15. It was nowhere near 54.
Mr. Hall. Okay. Well, glad to hear my information was
wrong.
I have exhausted my time. Mr. Lamborn, you are next.
Mr. Lamborn. Thank you, Mr. Chairman.
Mr. Aument, in shortening the time for a claim to be
decided, there are certain administrative challenges that you
face. What are some of these and how do you think we could
streamline these administrative issues so that we can get the
adjudications done faster?
Mr. Aument. There truly are, Congressman Lamborn. Probably
the very first one that we encounter is assuring that we have
the background records necessary to perform an accurate review
of the claim.
Typically that means that we need to have, more often than
not, the veteran's service medical records in hand before we
can actually fairly evaluate the claim. Often cases come to us
without those service medical records.
That is one of the reasons why the Benefits Delivery at
Discharge Program is a good model to follow, because we are
able to overcome that initial bureaucratic hurdle while the
servicemember is still on active duty.
Secondly, most cases that come to us require some form of
physical evaluation. That typically is going to add anywhere
from 35 to 50 days on the front end of the evaluation process,
particularly if specialty examinations are required.
General medical examinations are difficult enough to
arrange, but when you need specialist examinations, orthopedic
specialists, audiologists, those types of examinations, that
can lengthen the delays.
Then also there are some built-in due process
considerations that are there for the protection of the
veterans that were enacted, I think, certainly in the best
interest of the veteran, through the ``Veterans Claims
Assistance Act.'' But they clearly do add to the cycle time for
the processing of a typical claim.
Today when we believe that we have all the evidence finally
gathered that is needed to rate a claim, we have to inform the
veterans that we are preparing to rate their claims and we have
to give them 60 days to tell us whether or not they have any
additional evidence they want us to consider in that rating.
If we do not hear back from that veteran, we have to wait
for that 60 days to expire before we can proceed to rate the
claim, which is often the case.
So there are some built-in wait states to today's claims
process that, if left unchanged, we believe, under the best of
circumstances, will compel us to take around 125 days on
average to rate a claim.
Mr. Lamborn. Mr. Aument, you referred to that 60-day
waiting period. I believe that that is waivable. But how good
of a job are you doing to let the claimant know that that is
waivable and the claim could be expedited if they have no
reason to ask for it and they want to waive it?
Mr. Aument. Absolutely, it is waivable. We do inform the
veteran that it can be waived. We are working with the Veterans
Service Organizations. When a service organization is
representing a veteran, quite often they can be helpful in
obtaining that waiver from them.
In other cases, and unfortunately some of our offices are
more challenged than others by their pending workload, they are
less able to do this, but we do encourage attempts by our
claims processors to reach the veteran by telephone because we
can obtain waivers by telephone. That is legally acceptable as
long as we document the record.
So we do that wherever we can. But we operate normally
during normal business hours and, quite frankly, most veterans
are working during that period of time. So sometimes contacting
them can be challenging.
Mr. Lamborn. Thank you.
And I yield back my time.
Mr. Hall. I want to thank you, Mr. Aument, Mr. Walcoff. I
thank all Members of all the three panels.
It has been a very educational day. We seem to be learning
a lot about our system and how we can better serve those who
defend our country and fight on our behalf when they come home.
And we will follow-up with more questions as they occur to
us and hope that together we can find the solutions to reduce
this waiting time and provide the same shock and awe in terms
of treatment that we do in terms of initiating combat.
I think that, you know, if we are capable of being prompt
and accurate in the way that we deploy and utilize our Armed
Forces, that we should attempt to be and get closer to being
that prompt and that accurate and that immediate, especially
when the injuries or diseases that they face are so immediate
to them and their families.
And I appreciate your contributing to our understanding of
this.
Thank you, Mr. Lamborn. Thank you, Counsel and staff, for
the Members who were here. And the hearing is now adjourned.
[Whereupon, at 12:20 p.m., the Subcommittee was adjourned.]
A P P E N D I X
----------
Opening Statement of the Honorable John J. Hall, Chairman, Subcommittee
on Disability Assistance and Memorial Affairs
Thank you all for coming today. I am pleased that so many folks
could attend this oversight hearing on the ``Impact of OIF/OEF on the
VA Claims Process.''
Regardless of whether or not you agree or disagree with the war in
Iraq, I think most--if not all--Members of Congress believe that our
young men and women who served in OIF/OEF deserve the best medical care
and all the help we can give them in transitioning from military to
civilian life. Nothing bothers me more than those who say they support
the troops, but turn a cold shoulder when those same troops return home
and become veterans.
The purpose of today's hearing is to ensure that the problems
discovered at Walter Reed Army Medical Center are not the tip of the
iceberg with respect to how prepared we are for our returning
servicemembers. Since the jurisdiction of this Subcommittee is not
veterans' healthcare, but veterans' benefits, we are going to focus on
the VA's claims process and how it has been impacted by OIF/OEF.
However, as an aside, I would like to say that I am sponsoring a bill
to allow Active Duty servicemembers the option of receiving medical
treatment at their local VA hospital if they so desire.
In addition to looking at whether the VA is equipped to handle the
claims of returning servicemembers, this hearing will also examine
reports of rating discrepancies among Active and Reserve veterans.
Recently, media reports stated that Reserve and National Guard
servicemembers had a greater risk of their claims being denied or
lowered than their Active Duty counterparts. I don't think there should
be a Reserve/Active Duty distinction with respect to a veteran who
suffers an injury.
In determining whether the VA claims' system can handle the influx
of returning OIF/OEF servicemembers, we will hear from GAO who will
discuss the current claims backlog and possible solutions to fix the
problem. As most know, the VA has had a claims backlog for many years
now and it only continues to grow.
At last count, the average wait to have a VA claim processed, had
grown from 2 months to 6 months, and even much longer in some areas of
the country. From December 2000 to March 2007, the backlog of
compensation claims grew from 363,412 to 632,140.
Next, we will hear from Professor Linda Bilmes who has written a
widely acclaimed paper entitled, ``The Long Term Costs of Providing
Veterans Medical Care and Disability Benefits.'' I will be most
interested to learn whether or not Professor Bilmes expects the rate of
OIF/OEF claims to grow significantly. Furthermore, I want to hear her
thoughts about how the DoD and VA define the term ``casualty.''
After Professor Bilmes, we will hear from three veterans'
organizations: (1) Veterans for America; (2) Iraq and Afghanistan; and
(3) VoteVets. I want to hear their assessment of how the VA is handling
the claims of returning OIF/OEF veterans. Finally, we will hear from
the Veteran Benefits Administration, which has the Herculean task of
ensuring that our veterans receive the benefits they deserve. I am
specifically interested in learning more about the VA's new priority
processing for OIF/OEF veterans which was recently instituted. Also, I
want to know about the VA's projection for future OIF/OEF claims.
Specifically, I want to understand how they can predict an actual
decrease in the number of claims in 2007 and 2008 in light of the
President's escalation of the Iraq War.
As I stated earlier, I am concerned about an overall lack of
preparedness by this Administration with respect to the War in Iraq,
whether it be insufficient body armor or inadequate housing at Walter
Reed. The cost for caring for our veterans must be understood by
Congress and the Administration as an ongoing cost of war--veterans
shouldn't suffer because of poor planning.
One only has to read the March 5, 2007 edition of Newsweek, which I
will be introducing into the record, to see how some returning OIF/OEF
veterans are falling through the cracks. On page 33, there is a story
about Patrick Feges who was wounded in October 2004 and had to wait 17
months until his first VA disability check arrived. His mother, an
elementary schoolteacher, took a second job at McDonalds to help
support him. Mr. Feges' claim was only approved after Newsweek and the
Veterans for America began looking into his case. I thank both for
their work.
I am holding this hearing today to see if Mr. Feges 17 month delay
is an anomaly or evidence of a systemic problem for returning OIF/OEF
veterans. If it is the latter, I would be interested in hearing any and
all recommendations from the speakers today on how we can fix the
problem. 6 months, not to mention 17 months, can be devastating to a
person who is rated unemployable and is without any other means of
support.
<F-dash>
Opening Statement of the Honorable Doug Lamborn, Ranking Republican
Member, Subcommittee on Disability Assistance and Memorial Affairs
Thank you Mr. Chairman for recognizing me. I thank you for holding
this hearing on the claims backlog and how it will affect the returning
servicemembers from the global war on terror.
Before I begin, I would like to offer my congratulations to you Mr.
Hall, for your appointment as chairman of this Subcommittee. I look
forward to working with you in a bipartisan fashion as we fulfill our
number-one priority--doing what is right for our veterans and our
Nation.
Today we are here to talk about the effect of OIF and OEF veterans
on the VA claims process.
I am more concerned about the effect of the VA claims process on
these wonderful veterans.
Since the beginning of Operation Enduring Freedom, more than
150,000 claims have been filed by OIF and OEF veterans. In part, this
is a positive response to VA's increased outreach, but now we have a
responsibility to process those claims and care for these veterans.
I believe the first step toward improvement for these veterans is
to improve the overall VA claims processing system. The backlog of
compensation and pension claims is over 632,000--about 15,000 more than
a month ago, according to VA's own weekly report.
VA has set a goal to decide a given claim in an average of 125
days. While more than 4 months strains the meaning of the word
``prompt,'' it is not unreasonable, given the complexity and demands of
the Veterans Claims Assistance Act and other administrative
requirements.
Now we need VA to ``just do it.''
I know that we in Congress bear some responsibly for all this
complexity. I look forward to asking Mr. Aument what we could do to
help improve the bureaucratic process, while safeguarding it for
veterans.
Mr. Chairman, both the budget views and estimates from the
Committee's majority and the minority recommend 1,000 new hires for VBA
over the President's request for 457 new compensation and pension
staff. In 2 years, when they are all hired and trained, they will
indeed make a difference.
The conventional approach of increased hiring is entirely
appropriate; VBA has over the past several years experienced personnel
shortages.
We must also explore some innovative ways to tackle this challenge
that may even have faster payoffs than new hires.
That is why Committee Republicans this year have recommended
funding for innovative pilot programs to address the backlog.
We have recommended funding for a pilot program to explore the
feasibility of intergovernmental and VSO partnerships with VA in the
development of compensation and pension claims.
This pilot would build on positive findings from a 2002 project
conducted between VA's Buffalo, New York, regional office and the New
York State Division of Veterans Affairs.
Within 6 months of their collaboration, the state veterans'
division was developing claims in partnership with VA. Decisions for
the region's veterans came faster and accuracy improved. This sort of
innovation holds great promise.
Access to Veterans Benefits Administration regional offices can be
difficult for many veterans. That is why we also recommended funding a
pilot program for mobile claims offices.
VBA staff members in mobile offices would provide outreach, help
veterans file their claims, and gather ``ombudsman'' feedback and
resolution for veterans.
Mobile offices helping veterans with their claims could speed up
the claims process by improving communication and access for veterans.
To take advantage of the potential offered by technology, we
recommend funding to explore a rules-based adjudication system.
Software could potentially decide simple claims accurately, quickly,
and consistently, so that developers can focus on the complex ones.
For our newest veterans returning from Afghanistan, Iraq, and
elsewhere in this global war, we must achieve a seamless transition
from the military into the VA system. It is apparent to me that a
seamless transition will help erase that backlog, because it increases
the system's overall efficiency.
We need fully interoperable electronic health records between VA
and DoD, an electronic DD Form 214, military separation physicals that
can also function as VA disability physicals, and a disability rating
process that provides consistent ratings.
What good is a separation exam and health records from DoD if the
veteran has to repeat the whole process over again with VA?
Mr. Chairman, I am sure you agree, no veteran should have to wait 6
months or a year for their claim to be decided--and then endure an
appeal that adds another year or two. For some veterans, this is not
mere inconvenience; it is financial and potentially emotional disaster.
Every one of these claims is an American veteran and his or her
family awaiting a decision. Every veteran deserves to have their claim
adjudicated quickly and accurately!
One thing is certain. If we do not fix this problem now, our legacy
will be an intolerable backlog regrettably endured by this generation
of veterans, and inexcusably bequeathed to a future generation.
I firmly believe no one in this room wants such an outcome.
I want to thank the witnesses for their service and their
testimony, and I look forward to our discussion today.
Mr. Chairman, I yield back.
<F-dash>
Statement of Daniel Bertoni, Acting Director, Education, Workforce, and
Income Security Issues, U.S. Government Accountability Office
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.\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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.\2\
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\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).
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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 Year
2000-2006
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Source: VA
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
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Source: VA Data.
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.\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.
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\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).
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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 decisionmaking 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.\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.
---------------------------------------------------------------------------
\4\ VBA also provides dependency and indemnity compensation to
survivors of certain deceased disability compensation beneficiaries.
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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.
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.
GAO Highlights
VETERANS' DISABILITY BENEFITS
Processing of Claims Continues to Present Challenges
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.
See Figure 1. Rating-Related Claims Pending at End of Period, Fiscal
Years 2000-2006 above.
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.
<F-dash>
Statement of Linda J. Bilmes, Professor, John F. Kennedy School of
Government, Harvard University, Cambridge, MA
Thank you for inviting me to speak to you today on this important
topic.
By way of background, last year I co-authored, with Nobel laureate
Professor Joseph Stiglitz, a paper that analyzed the economic costs of
the Iraq War. One of the long-term costs we identified is the cost of
providing lifetime disability benefits and medical care for veterans.
After we published the paper, a number of prominent veterans'
organizations approached us. They argued that we had underestimated the
cost of providing veterans care, primarily because we had not included
all the soldiers who would potentially become eligible to claim
benefits. They urged me to do additional research into this topic. As a
result I wrote a second paper this year, specifically looking at the
cost of providing medical care and disability benefits to veterans
deployed in Operation Iraqi Freedom and Operation Enduring Freedom
(OIF/OEF). [The paper, Soldiers Returning from Iraq and Afghanistan:
The Long-term Costs of Providing Veterans Medical Care and Disability
Benefits, KSG Research Working Paper RWP07-001 has been submitted for
the record.]
To date, over 1.4 million US servicemen have been deployed to
operations in and around Iraq and Afghanistan.\1\ The servicemen who
have been officially wounded in combat are a small percentage of the
veterans who will be using the veteran's administration system.
Hundreds of thousands of these men and women will be seeking medical
care and claiming disability compensation for a wide variety of
disabilities incurred during their tours of duty. Disability
compensation is thus a significant long-term entitlement cost that will
continue for at least the next forty years.
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\1\ As of September 30, 2006, 1,406,281 unique servicemembers have
been deployed to the wars in Iraq and Afghanistan, according to the
Department of Defense, Defense Manpower Data Center, and ``Contingency
Tracking System.'' The Veterans Health Administration (VHA) Office of
Public Health and Environmental Hazards, November 2006 uses the number
1.4 million (as of November 2006). The Veterans Benefits Administration
(VBA) lists 1,324,419 unique servicemen deployed to GWOT as of May 2006
(prepared by VBA/OPA&I, 7/20/06).
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Today I would like to focus on the projected number of veterans'
claims, the capacity of the Department of Veterans Affairs to process
those claims, and the cost of providing benefits to returning OIF/OEF
soldiers. I would like to discuss five key areas of concern and then to
recommend five changes that I believe would streamline the claims
process.
<bullet> First, the Veterans Benefits Administration (VBA) is
overwhelmed with the volume of claims it is receiving, leading
to a huge backlog;
<bullet> Second, the claims process is unnecessarily long,
cumbersome, and paperwork-intensive;
<bullet> Third, the wars in Iraq and Afghanistan are rapidly
turning the disability claims problem into a crisis;
<bullet> Fourth, the long-term cost of providing disability
benefits to GWOT veterans is projected to be $70 to $150
billion, in today's dollars; and
<bullet> Fifth, the growing number of disability claims has
increased demand for veteran's medical examinations, which is
adding to the pressure on veteran's health facilities.
I will review these points first, and then I will offer my
recommendations.
First, the VBA is currently overwhelmed with the volume of claims
it is receiving, leading to a huge backlog. In 2006, the VBA received
over 800,000 claims. Secretary Nicholson testified last month that he
expects to receive 1.6 million additional claims in the next 2 years.
These include both new claims from returning OIF/OEF veterans as well
as claims from veterans who are already service-connected, mostly for
conditions that have worsened since their initial claim. My own
projections show that between 250,000 and 400,000 of these claims will
be new applications from soldiers currently serving in Iraq and
Afghanistan.
The number of pending claims has risen from 69,000 in 2001 to more
than 400,000 as of December 2006. Including the back-and-forth of
paperwork related to claims, the VBA currently has a backlog of more
than 600,000.
Second, the claims process itself is long, cumbersome and
paperwork-intensive. The VBA takes an average of 177 days (about 6
months) to process an initial claim, and an average of 657 days (about
2 years) to process an appeal. This is 22% below the agency's own
target goal of 145 days. It is also far below the standards of the
private sector medical insurance industry, which settles 30 million
insurance claims--including appeals--within an average of 89.5 days.
Back in 2000, before the current war, the GAO identified
longstanding problems in the claims process. These included large
backlogs of pending claims, lengthy processing times for initial
claims, high error rates in claims processing, and inconsistency across
regional offices.
The process for ascertaining whether a veteran is suffering from a
disability, and rating the percentage level of a veteran's disability,
is too complex. A veteran must apply to one of the 57 VBA regional
offices, where a claims adjudicator evaluates the veteran's service-
connected impairments and assigns a rating for the degree to which the
veteran is disabled. Claims specialists must determine the percentage
disability for each condition, in increments of ten. However,
conditions are not scaled monotonically from 0 to 100. Mental
conditions, for example, are rated: 0, 10, 30, 50, 70, or 100. Coronary
artery disease ratings are: 10, 30, 60, and 100. Spinal conditions are
rated: 10, 20, 30, 40, 50, and 100. A huge amount of time is devoted to
making these determinations.
If a veteran disagrees with any part of the regional office's
decision, he or she can file a notice of disagreement with the local
office. If this is rejected, the veteran may file a formal appeal and
the claim will be physically transferred to the Board of Veterans
Appeals based in Washington, DC, which is not part of VBA. The Board
may then grant, deny, or remand the claim, in whole or in part. If the
veteran still disagrees with the board, the veteran may appeal to the
courts. This process often takes years during which the veteran is left
in limbo.
Moreover there is a wide disparity in efficiency between individual
VBA offices. Regional offices are inconsistent in how they rate
disabilities. GAO found that the days needed to process a claim ranged
from 99 in Salt Lake City to 237 in Honolulu. Some of the states
providing the most soldiers for the war are suffering the longest
delays in claims adjudication.
In addition, the claims themselves are more complicated than in
previous conflicts. Vietnam era claims cited on average three
disability conditions. Gulf War veterans filed on average for four
conditions. In the current conflict the average claim includes five
separate disability issues. One-quarter of the new claims filed in 2006
cited 8 or more disabilities. Often these involve complex battle
related injuries, as well as traumatic brain injury, PTSD, or
complications from chronic diseases. Since each item within a claim is
treated separately, there is a great deal of duplication and delay.
The VBA has more than 9,000 claims specialists. Many are themselves
veterans, and they generally do a wonderful job in assisting veterans
obtain the maximum amount of benefits to which they are entitled. But
they are under enormous strain. They are required to assist the
claimant in obtaining evidence, in accordance with hundreds of arcane
VBA regulations, policies, procedures and guidelines. They must also
rate the claims, establish claims files, authorize payments, conduct
in-person and telephone interviews, process appeals and generate
various notification documents through the process. New employees
require about 18 months to become fully trained. The VBA has antiquated
IT systems that make it difficult for the claims specialists to do
their job efficiently. For example, many staffers are dependent on
unreliable old fax machines to obtain vital documentation from veterans
and medical providers.
For all these reasons I believe that the agency, as currently
structured, is simply not capable of settling the current and projected
volume of claims in a timely manner.
My third point is that the projected number of claims from the wars
in Iraq and Afghanistan will rapidly turn the disability claims problem
into a crisis. The current conflict has the highest incidence of non-
mortal casualties in U.S. military history: a ratio of 16 woundings or
injuries per fatality. To date, of the more than 1.4 million U.S.
soldiers who have been deployed, about 631,000 have been discharged.
One-third of these men and women--about 205,000--have already been
treated and diagnosed at VHA hospitals and clinics, and 180,000 have
applied for disability benefits. If returning GWOT soldiers claim
benefits at the same rate as veterans from the first Gulf War, we can
expect 638,000 unique new first-time claims in the next five years. If
all troops return home by 2008, there are likely to be more than
400,000 new claims by the end of 2009 alone.
Fourth, the cost of providing disability benefits to GWOT veterans
is projected to be between $70 billion and $150 billion in 2007
dollars.\2\ The cost is not the only issue here, but it is yet another
major cost of war that has not been anticipated by the administration.
The eventual cost will depend on several factors, including the number
of troops stationed in Iraq and Afghanistan and the length of time they
are deployed. It will also depend on the rate of claims and utilization
of benefit programs by returning troops and the rate of increase in
disability payments (including cost-of-living adjustments). My study
did not take into account the additional costs of nursing home care,
concurrent receipt pay, or the social and economic cost to society of
these disabilities.
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\2\ The discount rate used for this analysis was 4.75%.
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In order to project the number of claims for the current conflict,
I looked at the claims history of veterans from the first Gulf War. We
currently pay over $4 billion per year in disability claims for that
war, even though it was short and had relatively few casualties. The
cost of providing benefits to GWOT veterans will be higher by an order
of magnitude.
The ``best case'' low scenario cost of $71 billion (present value
discounted at 4.75% over 40 years) assumes the total number of soldiers
deployed does not exceed 1.4 million, that all troops come home by
2010, and that GWOT veteran's disability claims show a similar profile
to Gulf War veterans--that is, 44% claim some level of disability and
87% of those claims are at least partially granted. This scenario
assumes that 643,000 GWOT veterans eventually claim benefits, that the
average payment to a veteran is the same as the average to a Gulf War
veteran ($504 per month) and that the veteran receives an average
annual cost-of-living adjustment of only 2.8%
The moderate scenario--which is looking increasingly likely---
assumes that the conflict involves a total of 1.7 million servicemen,
including keeping a small U.S. presence in the region through 2015, and
that 747,000 GWOT soldiers file claims. The present value cost of this
scenario, assuming that cost-of-living adjustments are 4.1% (the amount
given this year) and average payment is in line with Gulf War veterans,
is $109 billion.
The ``high'' scenario assumes that two million servicemen are
deployed to GWOT through 2015, that 50% of veterans file disability
claims, and that benefits increase at a compound annual growth rate of
6.1%, which is the actual rate of increase over the past 10 years. Here
I have estimated the monthly benefit at $716, which is the average
benefit to all veterans today. Under this scenario I project 869,000
successful claimants and a total present value cost of $125 billion. If
the amount of the GWOT veterans claims were to equal the level of
Vietnam veterans, the cost would rise beyond $150 billion.
Fifth, the growing number of disability claims is creating
additional demand for veterans' medical examinations. This is adding to
the pressure on veterans' health facilities. The current system does
not guarantee that all soldiers receive complete physicals in the
military upon discharge. Even if the soldier does obtain a complete
physical exam prior to discharge, he or she cannot automatically
transfer that information to the VBA for use in certifying
disabilities. Consequently, newly discharged veterans who intend to
file any kind of disability claim are seeking medical examinations from
VBA health facilities primarily in order to document their
disabilities. The VBA health facilities already face a major challenge
to provide first rate care for the large volume of soldiers returning
from Iraq and Afghanistan. My point is that the complexity of the
claims process itself is diverting valuable medical resources away from
providing treatment into supporting the claims process itself. Veterans
are seeking appointments with doctors in the VBA, not because they
require immediate treatment, but rather to verify a disabling
condition--even in cases where it was already documented upon discharge
from the military.
RECOMMENDATIONS
The veterans returning from Iraq are suffering from the same
problem that has plagued many other aspects of the war, namely a
failure to plan ahead. The VBA has many initiatives underway to
streamline the benefits process. But these efforts are unlikely to be
fully implemented in time to help the returning Iraq and Afghanistan
war veterans.
To address the immediate backlog, Secretary Nicholson proposes to
hire 457 additional claims specialists, to increase the claims
processed per specialist from 98 to 101, and to make training manuals
more readily available. He projects this will cut the length of time it
takes to process a veteran's claim by 32 days in 2008. I am not
optimistic that a few hundred inexperienced new staffers (even assuming
they can all be hired quickly) will produce a 22% improvement in claims
processing time, during a period in which the agency faces a huge
influx of complex claims. Indeed it is conceivable that the task of
training and integrating a large number of inexperienced hires will in
the short term actually lengthen claims processing times and increase
the level of appeals. The problem is compounded by the fact that many
experienced VBA personnel will be retiring over the next 5 years.
I believe that finding an answer to the claims problem requires us
to think outside the box. I would like to offer several proposals that
do this.
1. First, for the next two years, the VBA should accept and pay all
disability claims by returning GWOT soldiers at face value--and then
audit a sample of them. This is essentially the same system that is
used elsewhere in government, for example, the IRS for taxes and the
SEC for filings. This idea would involve retraining some of the claims
specialists as auditors, freeing up the remaining specialists to focus
on assisting non GWOT veterans claims, which should reduce the backlog
of old claims. At the same time, this bold step would ensure that new
claimants do not fall through the cracks or endure months of
bureaucratic delay.
2. Second, the VBA should replace the cumbersome 0-100 scale for
disabilities with a simple four-level ranking: zero disabled, low
disability, medium disability, and high disability. This would
immediately streamline the process, reduce discrepancies between
regions, and likely cut the number of appeals. The VBA should create a
``short form'' for returning veterans, using this four-level ranking
and set a goal of processing all claims within 60 days of receipt. This
new system should be up and running within two years, including
retraining of the workforce and developing necessary guidelines and
appeals procedures.
3. Third, all soldiers serving in the GWOT should receive a mandatory
full medical examination at discharge, with all records from this
examination made available electronically to the VBA immediately. The
VBA should then be able to use these records to spot check and audit
claims and to assist veterans, and to relieve some of the pressure on
VBA. If veterans are discharged without full medical examinations, they
should be reimbursed to receive such an examination from any fully
accredited physician within 30 days of discharge, and this record
should be used by VBA for making claims awards.
4. Fourth, VBA should shift its focus away from claims processing and
onto rehabilitating and reintegration of veterans. The VBA has a
dedicated staff who wants to help veterans. Instead of using them to
process papers, we should use this workforce as a strategic asset. The
VBA staff should be given much greater discretion in helping veterans.
Claims specialists should be placed in all neighborhood veterans'
centers, help centers, and special centers to assist reservists and
Guardsmen.
5. Fifth and finally, Congress should enact Senate Bill 117, the Lane
Evans Veterans Healthcare and Benefits Improvement Act of 2007,
sponsored by Senators Obama and Snowe. This legislation would improve
data collection and monitoring of disability claims, improve access to
mental healthcare and create a more level playingfield for Guards and
Reservists.
Thank you very much for your time and attention today. I would be
pleased to answer any questions you may have.
<F-dash>
Statement of Ann G. Knowles, President, National Association of County
Veterans Service Officers
Introduction
Mr. Chairman, members of the Committee, it is truly my honor to be
able to present this testimony before your Committee. As President of
the National Association of County Veterans Service Officers, I am
commenting on:
<bullet> The impact of Operation Iraqi Freedom and Operation
Enduring Freedom on the Veterans Administration Claims Process
The National Association of County Veterans Service Officers is an
organization made up of local government employees. Our Members are
tasked with assisting veterans in developing and processing their
claims. We exist to serve veterans and partner with the National
Service Organizations and the Department of Veterans Affairs to serve
veterans. Our Association focuses on outreach, standardized quality
training, and claims processing. We are an extension or arm of
government, not unlike the VA itself in service to the nation's
veterans and their dependents.
The Relationship Between CVSOs and the VA
The relationship between the Department of Veterans Affairs (DVA)
and the County Veterans Service Officers (CVSO) throughout our great
nation has traditionally been professional and mutually advantageous.
The DVA has assisted CVSOs in providing limited training and access to
information the DVA holds on the CVSO's clients. The CVSO serves as the
entry point for a large majority of disability and pension claims
nationwide for the local veteran to access the services offered by the
DVA. Most veterans view the local CVSO as ``The VA'' and do not realize
that the DVA and the CVSO are not one and the same.
NACVSO sees the role of county veteran's service officers as one of
advocacy and claims development in concert with the veteran or
dependent at the grassroots level.
Our Members sit across the desk from our veterans everyday. Because
of this direct access to our veterans, we believe we are in the
position to assist the DVA in claims development in an unprecedented
way. Developing complete and ready to rate claims eases the burden on
the DVA's backlog or inventory of claims.
The process begins with a face to face, in depth interview between
the veteran and the CVSO. This initial interview accomplishes many
things. It builds a trust between the veteran and the CVSO and provides
the veteran with a basic understanding of how the DVA system works. The
CVSO honestly explains the process with the veteran while building
realistic expectations for the veteran. This results in lessening the
impact of frivolous claims or unrealistic appeals that the DVA is
mandated to process and develop.
Once complete, the application package is passed on to a state or
national service office for review and presentation to the VA regional
office of jurisdiction. Any hearings or additional records required can
be obtained by the CVSO of record if needed.
Once the rating decision is made and received by the veteran, the
veteran nearly always returns to the CVSO for an explanation. The CVSO
then interprets the decision for the veteran and explains what the
decision means. The CVSO reviews the rating decision for accuracy and
explains the veteran's benefits. If an appeal is warranted, the CVSO
can explain a notice of disagreement and assist the veteran with the
preparation of the appeal. The CVSO can also limit frivolous claims
through proper guidance and counsel to the veteran without further
bogging down the system. We believe this division of responsibility,
between two arms of government, benefits the veteran, the CVSO and the
DVA and has the potential to provide a clearer understanding for the
veteran of the process of claims development and how the DVA system
works.
Issues Affecting Veterans of OIF/OEF
The returning veterans from these two theaters of action have been
receiving priority care from the Veterans Administration. There are
valid reasons but it has resulted in many other claims being placed on
the back burner, claims that have equally valid reasons for priority
action. VA officials have stated the number of claims filed since 2000
has risen nearly 40% and this has caused the number of cases pending to
balloon to over 800,000. Yet, only about 4% of the new claims are from
Iraq and Afghanistan (St Louis Post Dispatch, February 26, 2007). To
stay on target with the subject at hand, let us look at the numbers and
nature of injuries of OIF and OEF veterans. It has been reported by the
DOD that over 19,000 Purple Heart Medals have been awarded since the
beginning of OIF/OEF. Each of these is a potential claim for benefits
with the DVA. Add to this another 25,000 wounded and ever escalating
KIA numbers as additional troops are assigned to Iraq. Secretary
Nicholson, in his interview with Bob Woodward of ABC News, showed
statistics of treatment within VA facilities of over 200,000 OIF-OEF
veterans. Not every treatment is a claim, but even a small percentage
of these filing a claim for benefits will escalate the numbers in the
pipeline waiting processing.
Post-Traumatic Stress Disorder is recognized in the returning
veterans from Iraq and Afghanistan; their treatment has been given
priority. A United States Army study places those suffering from PTSD
at approximately one in eight soldiers who have served in either Iraq
or Afghanistan. A survey of deployed troops indicates that 12% of those
serving in Iraq and up to 6% who served in Afghanistan have reported
symptoms of major depression, anxiety or PTSD. The most frightening
statistic is that only 38% of those were interested in getting help and
as low as only 23%. They cited concerns for how they would be viewed by
their peers if they sought assistance. This, Mr. Chairman, is a ticking
time bomb that will eventually blow up in our faces. Not necessarily in
the face of the military but in local communities where the veterans
are returning to their homes. CVSOs and VA will be forced to deal with
these issues because local officials and families concerned about the
mental health of these young men and women will demand it. And it is .
. . a sad state of affairs indeed.
Another issue is the number of veterans who are returning with
missing limbs and prosthetic devices. Battlefield treatment, and speed
of evacuation of wounded servicemen and women, has advanced
substantially over the years. Many of the veterans returning from the
Gulf Region needing specialty care for missing limbs may well have died
in previous conflicts. This has placed a tremendous and vital
responsibility on the Veterans Administration that they are ill
equipped to deal with, in health and medical care but also to provide
adequate, timely and fair compensation decisions for the veterans and
their families who are desperately trying to survive.
Other Issues
An issue that must be addressed is that of placing one group of
veterans in a higher priority or ``Class'' than other veterans. When
the VA decides to give ``Top Priority'' to a select group of claims,
the other claims, veterans, suffer. Some claims that have languished
for a year or more suddenly become less likely to be rated or receive
appropriate attention because of a change of policy. This is because
personnel in the Regional Office have been instructed to focus on OIF/
OEF veterans claims to the detriment of other claims that have been
working their way through the backlog or inventory of claims. We feel
this is tragic and extremely inappropriate. Veterans continue to ``die
while waiting for VA benefits''.
We are concerned with the VA's centralization of OIF/OEF claims. We
are not convinced that the practice can be justified. When Regional
Office claims are ``brokered out'', the focus becomes quantity and not
quality. Issuing flawed rating decisions just exacerbates the inventory
or backlog of and further inflates the bloated backlog of appellate
litigation.
Suggested Solutions
One solution would be to re-emphasize the Benefits Delivery at
Discharge (BDD) program as a ``Pre-separation Program''. Claims and
medical reports could be submitted prior to separation allowing local
VA teams to adjudicate the claims and dramatically shorten the time
that the veteran has to wait for a decision after separation.
Secondly, streamlining single-issue disability claims at the
Regional Office level while multi-faced claims that have a combination
of disabilities that require extensive research are passed to Tiger
Teams would speed the process.
Another suggested solution is to increase outreach efforts.
Outreach efforts must be expanded in order to reach those veterans and
dependents that are unaware of their benefits and to bring them into
the system. The National Association of County Veterans Service
Officers believes that we must do better. Approximately 88 plus % of
veterans not being compensated is more likely than not an issue if lack
of access or knowledge of available services rather than lack of need
or some other issue.
NACVSO supports HR 67 introduced by Congressman Mike McIntyre, of
North Carolina that would have allowed Secretary Nicholson to provide
Federal--state--local grants for assistance to state and county
veterans service officers to enhance outreach to veterans and their
dependents. We also support the Bill introduced by Congressman Baca of
California which would have a significant impact upon the existing
claims backlog.
NACVSO stands ready to partner with the Veterans Administration to
bring about a reduction in the backlog and increase the outreach
efforts to the veterans of our communities.
Conclusion
The bottom line is that the Veterans Administration is going to
have to rise to the occasion and place more personnel to handle the
expected large influx of new claims and the resulting larger inventory
or backlog of claims.
<F-dash>
Statement of Stephen L. Robinson, Director of Veterans Affairs,
Veterans for America
Chairman Hall, Representative Lamborn, Members of the Subcommittee:
Thank you for the opportunity to testify.
I am Steve Robinson, and I am the Director of Veterans Affairs for
Veterans for America, formerly known as the Vietnam Veterans of America
Foundation.
VFA unites a new generation of veterans with those from past wars
to address the causes, conduct and consequences of war. In my position,
I constantly meet with Iraq and Afghanistan war veterans about their
needs and concerns.
The recent uproar over the treatment of returning servicemembers at
Walter Reed is not simply an issue of dilapidated physical facilities,
mice and mold, or inadequacies with one hospital. The issue is much
larger. Specifically, there is a systematic failure in both Department
of Defense (DoD) and Department of Veterans Affairs (VA) programs
designed to address the medical and overall readjustment needs of war
veterans. As one example, there appears to be no plan to gather robust
consistent data and then closely monitor the 1.5 million deployed
Operation Enduring Freedom and Operation Iraqi Freedom (OEF/OIF)
servicemembers as they return to duty or reintegrate into civilian
society. As a result, we do not have an adequate understanding of the
unique needs specific to our newest generation of veterans.
The controversy around Walter Reed reminds Veterans for America of
the squalid conditions of the hospitals and the inadequacy of care for
the returning servicemembers more than 36 years ago. This topic was on
the cover of the May 22, 1970 issue of Life magazine, which was the
second-highest selling issue in the magazine's history.
Today, the same story is being repeated for a new generation of war
veterans. The recent scandals were noticed by many when the Washington
Post gave the issue national attention, but the alarm bell first rang
in a 2003 series by Mark Benjamin, then with United Press
International, for which I helped to provide key information.
With Benjamin's reporting, along with that of others, providing
ample evidence of a broken, failing system, I am surprised that the
nation has not expressed its outrage before now. That said, I am
pleased that Congress has begun to execute its oversight authority on
this critical issue.
On March 5, 2007, the Washington Post reporters who published the
series on the Walter Reed situation stated that they were flooded with
e-mails, calls, and faxes from servicemembers and veterans recounting
similar experiences in military and veterans' hospitals across the
country. It was clear to these reporters that the system has failed.
Veterans for America has also been dealing with tremendous numbers
of servicemembers, veterans, and their families reaching out to our
organization for help. Too often we have encountered unresponsive
agencies. We have been painfully aware of the distress that exists
amongst servicemembers and the need to address it. The situation
requires immediate remedies, and the effort required will need
commitment and leadership from the upper echelons of our government--
starting with you, our elected representatives.
The face of the American soldier has changed since Vietnam. The
average age of the servicemembers then was just over 19 years old.
Today's military is much older. The average age of an active-duty
soldier is 27 years. The Reserve and Guard soldier is even older:
averaging 33 years.
More than 155,000 women have served in Iraq and Afghanistan. Among
their ranks are more than 16,000 single mothers. More than half of
those deployed are married, and three out of every five deployed
servicemembers have family responsibilities (i.e., a spouse and/or
children).
Recently the American Psychological Association released an
excellent report stating that no serious study has yet been undertaken
to define what these new factors mean in terms of the needs of
returning servicemembers and their families.
We are all too familiar with the failure to recognize the unique
needs of each generation of veterans. For instance, it was not until a
decade after the height of the Vietnam War that the Veterans
Administration undertook the first study of Vietnam veterans. Years
later the National Vietnam Veterans' Readjustment Study was
commissioned. Post-traumatic stress disorder was not recognized as a
mental health problem until 1980. We can only guess at the number of
veterans whose lives were destroyed because no one understood their
needs. In short, we failed an entire generation of veterans.
What's happening today is new chapter in an old book. We have yet
to begin to recognize the true needs of the current generation and
create programs and services appropriate to their war-related problems.
<bullet> What have multiple deployments meant?
<bullet> What are the implications of traumatic brain injury
being the signature injury of this war?
<bullet> What are the effects of so many being constantly
exposed to a high degree of violence?
<bullet> What does it mean to have the unprecedented survival
rates of casualties?
These questions--and many more--need answering.
VFA is especially concerned that servicemembers and veterans are
not being provided the mental healthcare they need. There are a number
of pressing issues:
<bullet> A dramatic rise in less than honorable discharges,
and subsequent loss of VA healthcare and benefits,
<bullet> Overuse of ``personality disorders'' to discharge
veterans (e.g., use of chapters 5-13, 5-17, 14-12),
<bullet> Rise in disciplinary problems related to alcohol and
drug use, domestic violence, risk-taking behavior, motor
vehicle violations, and other war-related reintegration issues,
<bullet> Inadequate staffing in mental health, Medical
Evaluation Board-Physical Evaluation Board (MEB-PEB) case work,
social work, family care and ``seamless transition'' programs
into the VA network,
<bullet> Absence of consistently prompt mental health
referrals as part of the Post-Deployment Health Assessment
process, and
<bullet> Absence of Alcohol and Substance Abuse Programs
(ASAP) at all military bases.
VFA also believes the VA's Veterans Benefits Administration (VBA)
disability compensation claims process is completely broken.
Many veterans do not receive their benefits in a timely and
accurate manner. VBA's problems are linked strongly to the DoD's
failure to manage their disability discharges, as was epitomized by the
fiasco at Walter Reed. Just as America saw that active duty
servicemembers were denied prompt evaluations and disability benefits,
America demands that Congress and VA take immediate action so that no
disabled veteran waits endlessly.
Our nation was prepared for the return of troops after World War
II. The quality and timelines of veterans' claims are not negotiable.
If both DoD and VA are not overhauled soon, we will see the
situation worsen when all of our 1.5 million deployed servicemembers
eventually return home from the wars in Iraq and Afghanistan.
Here are the facts:
<bullet> As of October 2006, more than 176,000 OEF/OIF
veterans filed claims against VBA.
<bullet> More than 200 OEF/OIF veterans become disabled every
day.
<bullet> The rise in the backlog of more than 100,000 claims
in 2 years is directly related to the flood of new Iraq and
Afghanistan war claims.
<bullet> VBA can expect between 700,000 and 1,000,000 claims
in the next 10 years.
<bullet> VBA can expect to pay between $67 and $127 billion in
the next ten years.
<bullet> As the war escalates and casualties climb, VBA can
expect even more claims.
<bullet> VBA has not presented a written plan of action so
that every VBA employee knows how to produce fast and accurate
results.
These problems are especially severe for Members of the National
Guard and Reserve.
Here are some facts:
<bullet> 37 percent of active duty veterans have filed for
disability compensation.
<bullet> Only 20 percent of those who served with National
Guard or Reserve units have filed such claims.
<bullet> 8 percent of claims filed by active duty troops are
denied.
<bullet> 18 percent of claims filed by Guard and Reserve
soldiers are denied.
In short, while about half as many members of the Guard and Reserve
file disability claims as compared to active duty veterans, these
claims are rejected at twice the rate. These statistics beg the
question: are our Members of the Guard and Reserve again being short-
changed compared to their active-duty brothers and sisters?
VBA is broken in a variety of areas.
<bullet> It takes 6 months to decide original claims. VA's
stated goal is for this to be accomplished in 90 days.
<bullet> It takes 24 months to decide appealed claims; the
goal is 12 months.
<bullet> As of February 17, 2007, the total backlog of claims
was 558,000--402,000 are original claims and 156,000 are
appealed claims.
<bullet> This backlog is a disgrace. The message being sent is
that VBA doesn't care about disabled veterans.
VBA's failures hurt veterans many ways:
<bullet> Lack of prompt and adequate VA healthcare,
<bullet> Inability to pay bills for food, utilities, etc.,
<bullet> Increase in credit problems,
<bullet> Rise in evictions and foreclosures, and
<bullet> Mounting homelessness.
Here are some ``band-aid'' approaches that might be utilized to
take care of some of the most pressing problems:
First, the signal needs to be sent from the top that the VBA
backlog will be reduced soon.
After the tone is set, a number of steps should be taken,
including:
1. Insist that VA and DoD better coordinate efforts and become
more proactive.
2. Hire additional VBA claims adjudication staff.
3. End the Post-Traumatic Stress Disorder (PTSD) ``second
signature'' policy.
4. Stop reviewing 72,000 PTSD cases.
5. End VA's efforts to narrow the definition of PTSD via
contract with the National Academy of Sciences.
6. Grant the presumption of a stressor for deployment to a war
zone.
7. Immediately produce quarterly reports on the number of
claims by OEF/OIF servicemembers (as required by S. 117). This
will allow VBA to conduct trend analysis and determine staffing
and budget needs specific for this cohort.
8. Provide sufficient VBA staff for all military treatment
facilities and bases so that the Benefits Delivery at Discharge
Program (BDD) is fully implemented.
9. Appoint an ombudsman with responsibility and authority to
fix transition problems between DoD and VA.
10. Define the war zone (also included in S. 117) so that VBA
knows which veterans are eligible for war-related benefits, for
data collection and for accurate reports and projections.
11. Hold executives accountable by eliminating bonuses and
terminating those who fail to perform.
12. Adopt mandatory electronic records at discharge given to
veteran and VA within 1 year.
13. Shift military ratings of disabled servicemembers from DoD
to VA and the BDD program.
14. Review and consider Professor Linda Bilmes's proposal to
streamline claims.
15. Allow all servicemembers a ``second look'' for PTSD, TBI,
VA healthcare, and VA claims assistance.
We don't need more excuses. A claim delayed is a claim denied.
To address these problems, VFA urges Members of the Senate to
consider cosponsoring a House version of S. 117, the Lane Evans
Veterans Health and Benefits Improvement Act of 2007 which:
<bullet> Requires face-to-face medical exams. DoD currently
requires servicemembers to answer a limited questionnaire to
determine if they need to be referred for treatment. Soldiers
are typically rushing to return home after a deployment and do
not necessarily give these questions sufficient attention. DoD
should, instead, conduct mandatory in-person physical and
mental health exams with every service Member 30 to 90 days
after deployment.
<bullet> Extends VA Mental Health Care. Currently, the VA
holds a 2-year window to allow newly returning veterans to
obtain free healthcare. Unfortunately, it can take many years
for symptoms of PTSD and other mental health problems to
manifest themselves. S. 117 provides a 5-year window for
veterans to receive a free assessment of mental health medical
needs by the VA.
<bullet> Defines the Global War On Terror (GWOT). To
accurately determine healthcare and benefit eligibility for
returning servicemembers, the GWOT needs to be explicitly
defined in statute. Currently, the Secretary of Defense is not
allowing some soldiers serving in GWOT territories to receive
combat-related medical benefits.
<bullet> Establishes a GWOT registry to track healthcare data.
Collect aggregate data on GWOT servicemembers and veterans to
monitor their healthcare and benefit use. The data will help
lead to better budget forecasting and avoid shortfalls. A
similar effort was undertaken after the Gulf War.
<bullet> Requires equal transition services for Guardsmen and
Reservists. A 2005 GAO report found that demobilization for
guardsmen and reservists is accelerated and these units receive
insufficient transition assistance.
<bullet> Requires Secure Electronic Records. DoD should
provide a full, secure electronic copy of all medical records
at the time of discharge.
Again, Veterans for America appreciates the opportunity to submit a
statement for this hearing. We reaffirm our desire to work with
Congress and the relevant agencies in trying to address these critical
needs, but it is important that I reiterate that we will not stop
failing our servicemembers and veterans across-the-board until we take
a step back, evaluate their unique needs. We must stop trying to
squeeze our new military into a system designed for a previous
generation.
Thank you.
<F-dash>
Statement of Brady Van Engelen, Associate Director, Veterans for
America
Chairman Hall, Representative Lamborn, Members of the Subcommittee:
Thank you for the opportunity to testify.
On April 6th of 2004 I sustained a gunshot wound to the head in
Baghdad while positioned at an observation post. First aid was
immediately administered, and I was fortunate to have survived long
enough to make it to the 28th Combat Support Hospital (CSH). The
primary repairs and closures for my head were conducted while in
theater at the 28th CSH. From there, I was medically evacuated to a
military hospital in Landstuhl, Germany, where I was staged for
recovery until I had regained enough strength to travel back to Walter
Reed Army Medical Center to complete the recovery process.
I arrived at Walter Reed Army Medical Center on April 14, 2004,
where I was immediately asked if I wanted to be treated as an inpatient
or outpatient. Wanting to spend time with family and loved ones, I
chose to be an outpatient, at which point I was given the building
number of the Mologne House and told to check in there. With no clue as
to where the building was, I hopped onto a facility shuttle and asked
if I could get a ride to the Mologne House to check in.
The first 2 weeks of appointments I was fortunate enough to have my
family and loved ones at my side to assist me through the bureaucratic
maze that is outpatient care at Walter Reed. In one month's time, my
rehabilitative care was completed, and I was told the Physical
Evaluation Board (PEB) process would begin shortly thereafter.
That was May 30, 2004.
I didn't hear back about my case until December of 2004.
Other than the research that I conducted on my own time, I was
completely unaware of what my possibilities were and what to do next.
Throughout the entire process I was the one who always initiated
contact with the case managers and the hospital. If it weren't for my
persistence, I could have gone unnoticed for months. There were just
too many patients, and not enough case managers to oversee the process.
The systemic problems that have highlighted Walter Reed in recent
weeks have unfortunately trickled over to the Department of Veterans
Affairs (VA). The VA is overwhelmed by the number of claims filed and
patients needing attendance. We didn't prepare for this, and it's
painfully evident. My generation is going to have to pay for this, and
we will be paying for years and years.
While at Walter Reed as an outpatient there was no outreach on
behalf of the VA to inform me of benefits for myself and for my family.
When troops were returning from WWII, there were VA claims specialists
on the boats with the servicemen informing them of benefits that they
were eligible for. We have lost that aggressive approach with today's
servicemembers and veterans. Today, we are being asked to navigate the
bureaucratic maze of DoD and VA on our own. I can assure you that this
is no small feat. Shifting the burden from our government to those who
serve has created a system where servicemembers and veterans are
unaware of the benefits and programs promised to them upon enlistment.
I understand that the VA has begun to more aggressively address the
inpatients while they are recovering at medical facilities, but, as was
the case at Walter Reed, only a small number of injured soldiers are
benefiting. This is not acceptable.
Many wounded servicemembers at other medical outpatient facilities
throughout the country remain as uninformed as I was upon leaving the
military. Servicemembers from my generation are becoming increasingly
disenfranchised with a system that our government promised would help
us heal and rehabilitate.
Claims backlogs are currently at 180 days. A few years ago claims
were half that. The families of servicemembers are suffering from this
lack of preparation by our VA. They cannot call the bank, say they are
waiting for a response on a claim, and ask for payments to be delayed
for another 180 days. The passive nature of the VA regarding health and
claims dispensation will only tarnish their perception amongst the
military and their families. We may end up with an entire generation of
veterans who have no faith in our VA because those running it--as well
as those overseeing it--were unable to hold up their end of the
bargain. This saddens me deeply.
In closing, I'd sum up the problems with the VA claims process
like this:
I entered the VA system on January 29, 2005.
That was 774 days ago.
No one from the VA has contacted me yet to tell me how the system
works.
I urge the Members of this subcommittee to keep one question in
mind as they consider how to repair this broken system:
What is owed those who serve?
While I do not claim to have all the answers to that question, I am
confident that you will conclude that the answer is: More than
servicemembers and veterans are receiving now.
Thank you.
<F-dash>
Statement of Patrick Campbell, Legislative Director, Iraq and
Afghanistan Veterans of America
Mr. Chairman and Members of the House Subcommittee on Disability
Assistance & Memorial Affairs, on behalf of the Iraq and Afghanistan
Veterans of America (IAVA), thank you for this opportunity to address
the issue of ``The Impact of OIF/OEF on the VA Claims Process.''
My name is SGT Patrick Campbell and I am a combat medic for the DC
National guard, an OIF vet and the Legislative Director for the Iraq &
Afghanistan Veterans of America. IAVA is the nation's first and largest
organization for Veterans of the wars in Iraq and Afghanistan. IAVA
believes that the troops and veterans who were on the frontlines are
uniquely qualified to speak about and educate the public about the
realities of war, its implications on the health of our military, and
its impact on the strength of our country.
According to the Department of Veterans Affairs I am one of the
54,000 OIF/OEF veterans they are guesstimating will seek care from the
VA in 2007. In a briefing with Veteran Service Organizations the
Department of Veterans Affairs stated that, ``263,000 of their current
users'' are from the Global War on Terror and they expect an increase
of 54,000 in FY 2007.
In general a department's proposed budget is the clearest signal to
the outside world of their priorities and their assumptions. Although
IAVA sincerely applauds the Department of Veterans Affairs for removing
certain onerous proposals from their FY08 budget proposal and
requesting healthy increases, we believe that the VA's assumptions
about future usage of the VA system from the soldiers fighting in the
Global War on Terror are severely flawed.
The administration's budget projections show a decrease in VA
spending over the next 3 years. One can only assume that the VA is
wishing/hoping/expecting the number of veterans demanding services to
decrease or maintain their current levels. It is hard to argue with
VA's accountants and their actuarial tables because they will cloak
their assumptions in mounds of numbers, but when these numbers seem to
defy common sense that is when the alarms must go off.
If you remember one thing from this testimony today, remember that
the VA has grossly underestimated the demand for their services once
again. The soldiers are coming home and they will be asking for care.
The question we must be asking ourselves, will it be ready for them?
If anything the recent Walter Reed expose has taught us is that
trying to treat and care for soldiers and veterans on a limited budget
and limited oversight only has one logical conclusion, poor care. In
the context of this specific hearing, soldiers are languishing while
they wait for their claims to be processed. And woe to the veteran who
does not file his/her paperwork correctly and gets denied, because they
will be stuck in bureaucratic limbo for years.
We also believe that the VA's current standard for evaluating the
speed a veteran gets seen by a medical professional should not be a
whopping 45 days or even 30 days. For veterans coming home, especially
with mental health issues, a month is like an eternity. The standard
should be 2 weeks or at least broken down into categories.
Soldiers fight for their country, they should not be made to fight
against their country.
Many of the other organizations today who are testifying will be
providing excellent statistics and solutions. IAVA stands firmly behind
their recommendations. Our purpose here today is to convey a single
message, that if you start with faulty assumptions you will end with
poor results.
This Committee must work with the Department of Veterans Affairs
and the various veterans service organizations to formulate a realistic
number of incoming veterans into the VA system over the next 5 years.
Only then will we be able to hire to the correct number claims
processors and medical staff to provide the quality of care these
veterans deserve.
<F-dash>
Statement of Jon Soltz, Co-Founder and Chairman, VoteVets.org
Thank you, Mr. Chairman, Congressman Lamborn, and Members of the
Committee for inviting me here today to discuss this critically
important issue.
I am Jon Soltz, and I am the Co-Founder and Chairman of
VoteVets.org, which is a leading organization of Iraq and Afghanistan
Veterans. VoteVets.org was established to give voice to the 21st
century patriots who have fought in these wars, and to raise concerns
about the state of today's military preparedness as well as the
resources and support available to servicemen and women when they
return home.
I myself am an Iraq war veteran. From May to September 2003, I
served as a Captain during Operation Iraqi Freedom, deploying logistics
convoys with the 1st Armored Division. During 2005, I was mobilized for
365 days at Fort Dix, New Jersey, training soldiers for combat in
Afghanistan and Iraq. I also served with distinction in the Kosovo
Campaign as a Tank Platoon Leader between June and December 2000. Let
me make clear, however, that today I am speaking for my organization
and the troops and veterans we represent, not for the U.S. Army.
I've also experienced, first-hand, many of the issues we'll be
talking about today. After I returned from Iraq, I knew that I was
mentally affected from the war. Eight months later, I went to the VA
and asked for help. The nurse, who I'm close with to this day, told me
I came to the right place. After a few tests, though, I was told that I
just had something called ``Adjustment Disorder,'' and that I should
come back in for counseling once a month, for 4 months. Maybe that was
the right diagnosis, and maybe it wasn't. All I know is that I didn't
feel that the diagnosis was based on any in-depth testing, and I'm not
sure that my treatment was enough.
Even worse, just a short time later, it was announced that the VA
center I had been going to, in Pennsylvania, would be closed. I tried
to attend the press conference to announce the closure, so I could
learn more about what was going on, and was told that I could either
leave on my own, or police would be called to escort me out. I hadn't
even said a peep, or protested at the event. I simply wasn't allowed to
watch.
That's when I held my own first press conference, across the
street, where I questioned to the media, why I was good enough to go
and fight and risk my life for this country, but not good enough to
deserve an explanation as to why my VA hospital was closing. That is
when I made the decision that I would talk about these issues, until I
was blue in the face, so that not only would veterans get answers, but
we could see real fixes to the issues we face.
The recent report in the Washington Post regarding Walter Reed's
Building 18 set off a media and political firestorm here on Capitol
Hill. Many in the media dramatically shook their heads in sorrow on
television. Many Members of Congress started to call press conferences
to express their dismay. Even the President expressed surprise and
anger.
I have to admit, as someone who has dealt with our veterans' care
system, and talks on a daily basis to many others who have, I found it
somewhat amusing that everyone seemed so surprised that the quality of
care didn't meet the quality of service these troops and veterans gave.
Those of us who have served have known for a long time about
bureaucratic and capacity problems, especially at the VA. I want to
make clear that I do not impugn the fine service those who work at the
VA centers have given. They are all great people, and do heroic work.
But, it is an overburdened and woefully underfunded system that has all
too often tied their hands, and hurt America's veterans.
Nonetheless, veterans care in this nation has not been up to snuff
for a long time. Many veterans' organizations much older than
VoteVets.org have been trying to get the media and politicians to pay
attention for a long time. No one wanted to listen. In the end, what I
find so sadly funny is that a few rats did in one day what we veterans
haven't been able to do for years--get America's attention.
It's important that we as a nation look at the larger issue here,
though, and not get too bogged down in just the problems at Building
18. That larger issue goes way past the Pentagon's hospitals, like
Walter Reed, into the VA system.
Are our current military obligations affecting the capacity of the
VA to deal with an influx of vets? Absolutely. Last year, VoteVets.org
did a poll of about 450 veterans of the wars in Iraq and Afghanistan,
focusing both on the issues they faced in the field, and issues they
faced at home. Here is some of what we found:
Troops returned home, and many encountered emotional and physical
health problems as well as economic hardship resulting from their
service.
<bullet> One in four veterans has experienced nightmares since
returning, including 33 percent of Army and Marine veterans and 36
percent of combat veterans.
<bullet> A fifth of all veterans (21 percent) and a quarter of
Army and Marines (26 percent) and ground combat veterans (27 percent)
say they have felt more stress now than before they left for war.
<bullet> Among National Guard or Reserve veterans, 32 percent said
their families experienced economic hardship; 25 percent feel more
stress now than before the war; 32 percent experienced more extreme
highs and lows; and 30 percent experienced nightmares.
<bullet> Twenty-six percent of all veterans have sought some
service from the VA or a VA hospital, including 33 percent of
Reservists and National Guard respondents.
These numbers were compiled just last fall, so we believe those
numbers have held, if not gotten worse, as the violence and chaos our
troops have to deal with gets more intense. Nearly 1.5 million troops
have now been deployed to Iraq or Afghanistan. So, to put our poll in
real numbers, about 390,000 troops and veterans have or will seek care
from the VA, if no more troops are deployed to the wars. Frankly, I
think the numbers will be higher, for two reasons. First, the nature of
this war lends itself to more mental trauma, because you are in a 360
degree battlefield, where you truly feel hunted. This stress becomes
worse as you are extended multiple times, which many troops have been.
Second, we are using our National Guard and Reserve at a much greater
level than we have ever, in any war. Those Guardsmen and Reservists are
still not guaranteed healthcare, and many of them will not be working
when they return home, so they'll have no insurance at all. Thus, the
only option available to them will be VA services, meaning we'll surely
see a huge spike in the levels of demand from Guardsmen and Reservists.
If you talked to any veteran of Vietnam or the Gulf War, they'll
tell you there were serious capacity issues with the VA before Iraq and
Afghanistan. Since the start of the wars, the Bush administration has
failed to adequately increase resources for the VA to meet the need.
That's why Secretary Nicholson had to come back to Congress a while
back and admit the agency was billions short. Though Congress acted
fast to appropriate emergency funds for the VA, the agency doesn't get
close to what it needs. According to the nation's top veterans groups,
which put together The Independent Budget each year, the agency is
still being shortchanged by about ten billion dollars in the latest
budget proposal.
If the President has his way, the agency's budget will be cut in
2009 and 2010. God willing, we will have started to redeploy from Iraq
by then. That will be precisely the time when hundreds of thousands of
new veterans will flood the VA system. Will there be capacity problems?
You can't possibly imagine.
What does this mean in real terms? It means more frequent tales
that I've heard since beginning VoteVets.org. I know one veteran, Josh
Lansdale of Missouri. Josh served as an EMT in Iraq and came back with
post-traumatic stress disorder and a busted ankle. He faced a 6 month
wait to get the care he needed.
Another young patriot, Tomas Young, is now wheelchair bound,
paralyzed from the chest down, because he was shot in the spine while
riding in a truck without the right armor. Every day, he takes a
cocktail of pills just to get through the day. He's lucky enough to
have a wife that brings him to his VA center on a regular basis, but
Tomas tells me that the quality of care is never as consistent.
Sometimes he has a good experience, and sometimes the VA just doesn't
have the ability to deal with him. In short, Tomas can't depend on the
system.
I know of veterans who have to hold their prosthetics together with
duct tape, because their VA center doesn't have anything that fits
right. Veterans in rural areas I know of have to travel for hours to
get the care they need. Veterans like Tyson Johnson from Alabama, who
lost a kidney and had shrapnel in his lungs from a mortar attack, often
couldn't stand the long drive to the VA hospital, followed by the long
wait for care, so he didn't go at all, a lot of the time.
Again, the people employed by the VA are not the problem. The
problem is twofold: Budgetary and systemic. But, the problem right now
is a walk in the park compared to what the situation will be like in a
year or two, if nothing substantial is done.
I'm hopeful that Congress and the Bush administration will finally
address these issues. I hope this Committee works with your colleagues
on the Committee on Armed Services, to examine the serious transition
problems there when a troop leaves the Pentagon system and enters the
VA system.
Those of us who served have kept our end of the bargain. We've
risked our bodies and lives in service. Now it is time for you to do
your jobs, and keep the government's end of the deal by ensuring that
the Department of Veterans Affairs is fully funded, and that
bureaucratic SNAFUs are eliminated. No more excuses. No more delays. We
veterans deserve nothing less.
Thank you again for allowing me to testify here today. I sincerely
hope that this marks a new day in how we address the issues facing
veterans care in this nation. And though much of what I said today I've
said before, for the first time, I feel that the American people are
listening. Most importantly, I hope you will commit to keeping this
process moving, and not end your concern with today's hearing. It will
be important that all of us--those of us on this panel, those of you in
Congress, and the administration all work together to really make a
difference and give America's veterans the level of care they deserve.
<F-dash>
Statement of Ronald R. Aument, Deputy Under Secretary for Benefits,
Veterans Benefits Administration, U.S. Department of Veterans Affairs
Mr. Chairman and Members of the Subcommittee, it is my pleasure to
be here today to discuss the Disability Compensation Program and our
efforts to meet the needs of servicemembers and veterans of Operations
Iraqi and Enduring Freedom. I am pleased to be accompanied by Mr.
Michael Walcoff, VBA's Associate Deputy Under Secretary for Field
Operations.
The Veterans Benefits Administration (VBA) is responsible for
administering a wide range of benefits and services for veterans, their
families, and their survivors. We manage a life insurance program that
consistently ranks among the best in the nation. We promote
homeownership through the loan guaranty program and help veterans and
their dependents seek greater education and economic opportunities
through the highly successful Montgomery GI Bill program and other
educational programs. We assist low-income disabled and elderly wartime
veterans and their survivors through our pension programs. For
qualifying veterans with disabilities related to their military
service, our Vocational Rehabilitation and Employment Program provides
both rehabilitation and training and assists them in reentering the
civilian workforce. We are proud of our achievements in all these vital
areas.
At the heart of our mission is the Disability Compensation Program,
which provides monthly benefits to veterans who are disabled as a
result of injuries or illness incurred or aggravated during their
military service. Over 2.7 million veterans of all periods of service
currently receive VA compensation benefits. Last year, we provided
veterans with decisions on over 774,000 disability claims. We also
performed more than 1.3 million other award actions and benefits
adjustments of all types (e.g., dependency adjustments, death pension
awards, income adjustments, burial awards, and so forth.) to maintain
the accounts of the beneficiaries already on the rolls. Additionally,
we handled over 6.6 million phone calls; conducted over a million
interviews; briefed more than 390,000 service persons; and conducted
nearly 65,000 hours of outreach to military members, former prisoners
of war, homeless, minorities, women, and other targeted groups.
Today I will discuss the challenges we face in providing timely,
accurate, and consistent determinations on veterans' claims for
disability compensation. These challenges include the growth of the
disability claims workload, the increasingly complex nature of that
workload, the rise in appellate processing, and the absolute need to
produce accurate benefit decisions. I will also discuss some of the
actions we are taking to improve claims processing and our efforts to
expedite the processing of claims from Operations Iraqi and Enduring
Freedom veterans.
Growth of Disability Claims Workload
The number of veterans filing initial disability compensation
claims and claims for increased benefits has increased every year since
FY 2000. Disability claims from returning Afghanistan and Iraq war
veterans as well as from veterans of earlier periods of war increased
from 578,773 in FY 2000 to 806,382 in FY 2006. For FY 2006 alone, this
represents an increase of nearly 228,000 claims or 38 percent over the
2000 base year. It is expected that this high level of claims activity
will continue.
The primary factors leading to the sustained high levels of claims
activity are: more beneficiaries on the rolls with resulting additional
claims for increased benefits; Operation Iraqi Freedom (OIF) and
Operation Enduring Freedom (OEF); improved and expanded outreach to
active-duty servicemembers, guard and reserve personnel, survivors, and
veterans of earlier conflicts; and implementation of Combat Related
Special Compensation (CRSC) and Concurrent Disability and Retired Pay
(CDRP) programs by the Department of Defense (DoD).
Ongoing hostilities in Afghanistan and Iraq are expected to
continue to increase the VA compensation workload. Earlier studies by
VA indicate that the most significant indicator of new claims activity
is the size of the active force. Nearly 1.46 million active-duty
servicemembers, members of the National Guard, and reservists have thus
far been deployed in the Global War on Terrorism. Over 689,000 have
returned and been discharged.
Whether deployed to foreign-duty stations or maintaining security
in the United States, the authorized size of the active force and the
mobilization of thousands of citizen soldiers means that the size of
the total force on active duty has significantly increased. The claims
rate for veterans of the Gulf War Era, which began in 1991 and includes
veterans who are currently serving in Operations Iraqi Freedom and
Enduring Freedom, is significant. Veterans and survivors of the Gulf
War Era currently comprise the second largest population of veterans
receiving benefits after Vietnam Era veterans.
The number of veterans receiving compensation has increased by
almost 400,000 since 2000--from just over 2.3 million veterans to
nearly 2.7 million in 2006. This increased number of compensation
recipients, many of whom suffer from chronic progressive disabilities
such as diabetes, mental illness, and cardiovascular disabilities, will
continue to stimulate more claims for increased benefits in the coming
years as these veterans age and their conditions worsen. Reopened
disability compensation claims currently comprise 54 percent of VBA's
disability claims receipts.
VA is committed to increased outreach efforts to active-duty
personnel. These outreach efforts result in significantly higher claims
rates. Original claim receipts rose from 111,672 in FY 2000 to 217,343
in FY 2006--a 95-percent increase. We believe this increase is directly
related to our aggressive outreach programs; we believe this increasing
trend will continue.
Combat-Related Special Compensation (CRSC) and Concurrent Retired
and Disability Pay (CRDP) further contribute to increased claims
activity for VBA. It is now potentially advantageous for the majority
of our military retirees, even those with relatively minor
disabilities, to file claims with VA and to receive VA disability
compensation, since their waived retired pay may be restored and not be
subject to waiver in the future under these new DoD programs. Today
more than 54,000 military retirees receive CRSC and approximately
194,000 retirees receive CRDP. The number of military retirees
receiving VA compensation has increased since the advent of these
programs to over 840,000. The total number of retirees as of the end of
FY 2006 was approximately two million, meaning that over 40 percent of
all U.S. military retirees now receive VA benefits.
Complexity of Claims Processing Workload
The increase in claims receipts is not the only change affecting
the claims processing environment. The greater number of disabilities
veterans now claim, the increasing complexity of the disabilities being
claimed, and changes in law and Court decisions affecting the decision
process pose additional challenges to timely processing the claims
workload. The trend toward increasingly complex and difficult-to-rate
claims is expected to continue for the foreseeable future.
A claim becomes more complex as the number of directly claimed
conditions increases because of the larger number of variables that
must be considered and addressed. Multiple regulations, multiple
sources of evidence, and multiple potential effective dates and
presumptive periods must be considered. The effect of these factors
increases proportionately and sometimes exponentially as the number of
claimed conditions increases. Additionally, as the number of claimed
conditions increases, the potential for additional unclaimed but
secondary, aggravated, and inferred conditions increases as well,
further complicating the preparation of adequate and comprehensive
Veterans Claims Assistance Act of 2000 (VCAA) notice and rating
decisions. Since veterans are able to appeal decisions on specific
disabilities to the Board of Veterans' Appeals (Board) and the United
States Court of Appeals for Veterans Claims (CAVC), the increasing
number of claimed conditions significantly increases the potential for
appeal.
VA's experience since 2000 demonstrates that the trend of
increasing numbers of conditions claimed is system-wide, not just at
special intake locations such as Benefits Delivery at Discharge (BDD)
sites. The number of cases with eight or more disabilities claimed
increased from 21,814 in FY 2000 to 51,260 in FY 2006, representing a
135-percent increase over the 2000 base year and a 15-percent increase
over FY 2005.
The VCAA has significantly increased both the length of time and
the specific requirements of claims development. VA's notification and
development duties increased as a result of VCAA, adding more steps to
the claims process and lengthening the time it takes to develop and
decide a claim. Since enactment, we are required to review the claims
at additional points in the decision process.
Appellate and Non-Rating Workload
As VBA renders more disability decisions, a natural outcome of that
process is more appeals filed by veterans and survivors who disagree
with some part of the decision made on their case. Appeals of regional
office decisions and remands by the Board and the CAVC following appeal
are some of the most challenging types of cases because of their
complexity and the growing body of evidence necessary to process these
claims. In recent years, the appeal rate on disability determinations
has climbed from a historical rate prior to 2000 of approximately 7
percent of all disability decisions to the current rate of 11 percent.
There are more than 130,000 appeals now pending in the regional offices
and the Appeals Management Center. This number includes cases requiring
processing prior to transfer of the appeal to the Board and cases
remanded by the Board and the CAVC following an appeal. There are over
30,000 additional appeals pending at the Board.
Claims Processing Accuracy and Consistency
In 2001, then Secretary of Veterans Affairs Anthony J. Principi,
established the VA Claims Processing Task Force to examine a wide range
of issues affecting the processing of claims. A product of the Task
Force Report was the Claims Processing Improvement (CPI) model.
Implementation of the CPI model established a consistent organizational
structure across all regional offices. Work processes were reengineered
and specialized teams established to reduce the number of tasks
performed by individual decisionmakers, establish consistency in
workflow and process, and incorporate a triage approach to incoming
claims.
Implementation of this model provided a strong foundation for
improving both the accuracy and consistency of our claims decisions. We
also established an aggressive and comprehensive program of quality
assurance and oversight to assess compliance with VBA claims processing
policy and procedures and assure consistent application. As a result of
these efforts, our accuracy has risen over the last 4 years from 81
percent to 89 percent.
We are also identifying unusual patterns of variance in claims
adjudication by diagnostic code, and then reviewing selected
disabilities to assess the level of decision consistency among and
between regional offices. These studies are used to identify where
additional guidance and training are needed to improve consistency and
accuracy, as well as to drive procedural or regulatory changes. Site
surveys of regional offices also address compliance with procedures.
Training
Critical to improving claims accuracy and consistency is ensuring
that our employees receive the essential guidance, materials, and tools
to meet the ever-changing and increasingly complex demands of their
decisionmaking responsibilities. To that end, VBA has deployed new
training tools and centralized training programs that support accurate
and consistent decisionmaking.
New hires receive comprehensive training and a consistent
foundation in claims processing principles through a national
centralized training program called ``Challenge.'' After the initial
centralized training, employees follow a national standardized training
curriculum (full lesson plans, handouts, student guides, instructor
guides, and slides for classroom instruction) available to all regional
offices. Standardized computer-based tools have been developed for
training decisionmakers (69 modules completed and an additional 8 in
development). Training letters and satellite broadcasts on the proper
approach to rating complex issues are provided to the field stations.
In addition, a mandatory cycle of training for all Veterans Service
Center employees has been developed consisting of an 80-hour annual
curriculum.
Consolidation of Specialized Operations
The consolidation of specialized processing operations for certain
types of claims has been implemented to provide better and more
consistent decisions, and we continue to look for ways to achieve
additional organizational efficiencies through further consolidation.
Three Pension Maintenance Centers were established to consolidate the
complex and labor-intensive work involved in ensuring the continued
eligibility and appropriateness of benefit amounts for pension
recipients. We are exploring the centralization of all pension
adjudications in these Centers.
In November 2001, a Tiger Team was established at the Cleveland
Regional Office to adjudicate the claims of veterans age 70 and older.
VBA also established an Appeals Management Center to consolidate
expertise in processing remands from the Board of Veterans' Appeals. In
a similar manner, a centralized Casualty Assistance Unit was
established to process all in-service death claims. VBA also
established two Development Centers in Phoenix and Roanoke to assist
regional offices in obtaining the required evidence and preparing cases
for decision, and centralized the processing of all radiation claims to
the Jackson Regional Office.
The Benefits Delivery at Discharge (BDD) Program provides
servicemembers with briefings on VA benefits, assistance with
completing applications, and a disability examination before leaving
service. The goal of this program is to deliver benefits within 60 days
following discharge. VBA has consolidated the rating aspects of our BDD
program, which will bring greater consistency of decisions on claims
filed by newly separated veterans.
Inventory Reduction
VBA is aggressively pursuing measures to decrease the pending
inventory of disability claims and shorten the time veterans must wait
for decisions on their claims. Our pending inventory of rating related
claims is currently about 400,000 claims, and average processing time
is 177 days. However, all 400,000 claims in our inventory should not be
considered as ``backlog;'' this number includes all claims, whether
pending only a few days or a number of months. Under the very best of
circumstances, it takes about four months to fully develop a claim
(obtain military and private medical records, schedule necessary
medical examinations and receive results, evaluate evidence, etc.).
Based on our projected receipts of 800,000 claims and our timeliness
performance target of 145 days, our expected level of pending inventory
with no backlog would be approximately 318,000 claims.
To balance the inventory of disability claims across regional
offices, VBA implemented a ``brokering'' strategy in which rating cases
are sent from stations with high inventories to other stations with the
capacity to process additional rating work. Brokering allows the
organization to address simultaneously the local and national inventory
by maximizing use of available resources.
We are increasing staffing levels to reduce the pending inventory
and provide the level of service expected by the American people. We
began aggressively hiring additional staff in FY 2006, increasing our
on-board strength by over 580 employees between January 2006 and
January 2007. With a workforce that is sufficiently large and correctly
balanced, VBA can successfully meet the needs of our veterans.
Our plan is to continue to accelerate hiring and fund additional
training programs for new staff this fiscal year. We are recruiting now
and will increase our on-board strength by an additional 400 employees
by the end of June. However, because it requires an average of two to
three years for our decisionmakers to become fully productive,
increased staffing levels do not produce immediate production
improvements. Performance improvements from increased staffing are more
evident in the second and third years. We have therefore also increased
overtime funding this year and recruited retired claims processors to
return to work as reemployed annuitants in order to increase decision
output.
Priority Processing for OIF/OEF Veterans
Since the onset of the combat operations in Iraq and Afghanistan,
VA has provided expedited and case-managed services for all seriously
injured Operations Iraqi and Enduring Freedom (OIF/OEF) veterans and
their families. This individualized service begins at the military
medical facilities where the injured servicemembers return for
treatment, and continues as these servicemembers are medically
separated and enter the VA medical care and benefits systems. VA
assigns special benefits counselors, social workers, and case-managers
to work with these servicemembers and their families throughout the
transition to VA care and benefits systems, and to ensure expedited
delivery of all benefits.
Last month the Secretary of Veterans Affairs announced a new
initiative to provide priority processing of all OIF/OEF veterans'
disability claims. This initiative covers all active duty, National
Guard, and Reserve veterans who were deployed in the OIF/OEF theatres
or in support of these combat operations, as identified by the
Department of Defense (DoD). This will allow all the brave men and
women returning from the OIF/OEF theatres who were not seriously
injured in combat, but who nevertheless have a disability incurred or
aggravated during their military service, to enter the VA system and
begin receiving disability benefits as soon as possible after
separation.
We have designated our two Development Centers in Roanoke and
Phoenix and three of our Resource Centers as a special ``Tiger Team''
for processing OIF/OEF claims. The two Development Centers will obtain
the evidence needed to properly develop the OIF/OEF claims. The three
Resource Centers, located in Muskogee, San Diego, and Huntington, will
rate OIF/OEF claims for regional offices with the heaviest workloads.
Medical examinations needed to support OIF/OEF veterans' claims are
also being expedited.
We are expanding our outreach programs for National Guard and
Reserve components and our participation in OIF/OEF community events
and other information dissemination activities. An OIF/OEF Team is
being established at VBA Headquarters to address all OIF/OEF
operational and outreach issues at the national level and to support
and assist newly designated OIF/OEF Managers at each regional office.
The VBA OIF/OEF Team will also direct and coordinate national Memoranda
of Understanding (MOU) with each of the Reserve Components to formalize
relationships with them, mirroring the agreement between VA and the
National Guard Bureau signed in 2005. Having an MOU with each Reserve
Component will ensure that VA is provided service medical records and
notified of ``when and where'' reserve Members are available to be
briefed during the demobilization process and at later times.
In order to ensure that VA benefits information is provided to all
separating Guard and Reserve servicemembers, we will work with DoD to
discuss the possibility of expanding VA's role in DoD's military pre-
separation process. Specifically, we will assess the feasibility of
providing a new ``Claims Workshop'' in conjunction with VA benefits
briefings and Disabled Transition Assistance (DTAP) briefings. At such
workshops, groups of servicemembers would be instructed on how to
complete the general portions of the VA application forms. Following
the general instruction segment, personal interviews would be conducted
with those applying for individual VA benefits.
Expediting the claims process is critical to assisting OIF/OEF
veterans in their transition from combat operations back to civilian
life. VA is also continuing to focus on reducing the pending workload
and improving the overall timeliness of processing for all veterans.
Mr. Chairman, this concludes my testimony. I greatly appreciate
being here today and look forward to answering your questions.
<F-dash>
MATERIAL SUBMITTED FOR THE RECORD
How the U.S. Is Failing Its War Veterans
By Dan Ephron and Sarah Childress
Newsweek Magazine, March 5, 2007, Issue
After returning from Iraq in late 2005, Jonathan Schulze spent
every day struggling not to fall apart. When a Department of Veterans
Affairs clinic turned him away last month, he lost the battle. The 25-
year-old Marine from Stewart, Minn., had told his parents that 16 men
in his unit had died in 2 days of battle in Ramadi. At home, he was
drinking hard to stave off the nightmares. Though he managed to get a
job as a roofer, he was suffering flashbacks and panic attacks so
intense that he couldn't concentrate on his work. Sometimes, he heard
in his mind the haunting chants of the muezzin--the Muslim call to
prayer that he'd heard many times in Iraq. Again and again, he'd relive
the moments he was in a Humvee, manning the machine gun, but helpless
to save his fellow Marines. ``He'd be seeing them in his own mind,
standing in front of him,'' says his stepmother, Marianne.
Schulze, who earned two Purple Hearts for wounds sustained in Iraq,
was initially reluctant to turn to the VA. Raised among fighters--
Schulze's father served in Vietnam and over the years his older brother
and six stepbrothers all enlisted in the military--Jonathan might have
felt asking for help didn't befit a Marine.
But when the panic attacks got to be too much, he started showing
up at the VA emergency room, where doctors recommended he try group
therapy. He resisted; he didn't think hearing other veterans'
depressing problems would help solve his own. Then, early last month,
after more than a year of anxiety, he finally decided to admit himself
to an inpatient program. Schulze packed a bag on Jan. 11 and drove with
his family to the VA center in St. Cloud, about 70 miles away. The
Schulzes were ushered into the mental-health-care unit and an intake
worker sat down at a computer across from them. ``She started typing,''
Marianne says. ``She asked, `Do you feel suicidal?' and Jonathan said,
`Yes, I feel suicidal'.'' The woman kept typing, seemingly unconcerned.
Marianne was livid. ``He's an Iraqi veteran!'' she snapped. ``Listen to
him!'' The woman made a phone call, then told him no one was available
that day to screen him for hospitalization. Jonathan could come back
tomorrow or call the counselor for a screening on the phone.
When he did call the following day, the response from the clinic
was even more disheartening: the center was full. Schulze would be No.
26 on the waiting list. He was encouraged to call back periodically
over the next 2 weeks in case there was a cancelation. Marianne was
listening in on the conversation from the dining room. She watched
Jonathan, slumped on the couch, as he talked to the doctor. ``I heard
him say the same thing: I'm suicidal, I feel lost, I feel
hopelessness,'' she says. Four days later Schulze got drunk, wrapped an
electrical cord around a basement beam in his home and hanged himself.
A friend he telephoned while tying the noose called the police, but by
the time officers broke down the door, Schulze was dead.
How well do we care for our wounded and impaired when they come
home? For a country amid what President Bush calls a ``long war,'' the
question has profound moral implications. We send young Americans to
the world's most unruly places to execute our National policies. About
50,000 servicemembers so far have been banged up or burned, suffered
disease, lost limbs or sacrificed something less tangible inside them.
Schulze is an extreme example but not an isolated one, and such stories
are raising concerns that the country is failing to meet its most basic
obligations to those who fight our wars.
The question of after-action care also has strategic consequences.
Iraq marks the first drawn-out campaign we've fought with an all-
volunteer military. In practice, that means far fewer Americans are
taking part in this war (12 percent of the total population
participated in World War II, 2 percent in Vietnam and less than half
of 1 percent in Iraq and Afghanistan). Already, the war has made it
harder for the military to recruit new soldiers and more expensive to
retain the ones it has. If we fall down in the attention we provide
them, who's to say volunteers will continue coming forward?
The issue of veterans' care jumped into the headlines last week
when The Washington Post published a series about Walter Reed Army
Medical Center in Washington, D.C. The stories revealed decay and
mismanagement at the hospital, and provoked shock and concern among
politicians in both parties. ``The doctors were fantastic,'' a Walter
Reed patient, 21-year-old Marissa Strock, tells NEWSWEEK. ``But some of
the nurses and other staffers here have been a nightmare.'' Strock
suffered multiple injuries, including broken bones, a lacerated liver
and severely bruised lungs, when her Humvee rolled over an improvised
explosive device on Nov. 24, 2005. She later had both her legs
amputated. ``I think a big part of [Walter Reed's problems] is they
just don't have enough people to adequately handle all the wounded
troops coming in here every day,'' she says. (Walter Reed did not
respond to requests for comment about Strock's case.) The Pentagon
responded swiftly to the Post series. It vowed to investigate what went
wrong and immediately sent a repair crew to repaint and fix the damage
to the aging buildings.
The revelations were especially shocking because Walter Reed is one
of the country's most prestigious military hospitals, often visited by
prominent politicians, including the president. But it is just one part
of a vast network of hospitals and clinics that serve wounded soldiers
and veterans throughout the country. A NEWSWEEK investigation focused
not on one facility but on the services of the Department of Veterans
Affairs, a 235,000-person bureaucracy that provides medical care to a
much larger number of servicemen and women from the time they're
released from the military, and doles out their disability payments.
Our reporting paints a grim portrait of an overloaded bureaucracy
cluttered with red tape; veterans having to wait weeks or months for
mental-health care and other appointments; families sliding into debt
as VA case managers study disability claims over many months, and the
seriously wounded requiring help from outside experts just to
understand the VA's arcane system of rights and benefits. ``In no way
do I diminish the fact that there are veterans out there who are coming
in who require treatment and maybe are not getting the treatment they
need,'' White House Deputy Press Secretary Tony Fratto tells NEWSWEEK.
``It's real and it exists.''
The system's shortcomings are certainly not deliberate; no
organization is perfect. Some of the VA's hospitals have been cited as
among the best in the country, and even in extreme cases, the picture
is seldom black-and-white. Before he killed himself, Schulze was seen
by the VA 46 times, VA Secretary James Nicholson told Congress this
month. (He did not elaborate on what care Schulze received.)
Yet, as the number of veterans continues to grow, critics worry the
VA is in a state of denial. In a broad sense, the situation at the VA
seems to mirror the overall lack of planning for the war. ``We know the
VA doesn't have the capacity to process a large number of disability
claims at the same time,'' says Linda Bilmes, a Harvard public-finance
professor and former Clinton administration Commerce Department
official. Last month Bilmes released a 34-page study on the long-term
cost of caring for veterans from Iraq and Afghanistan. She projects
that at least 700,000 veterans from the global war on terror (GWOT)
will flood the system in the coming years.
As it is, for some veterans the wait can be agonizing. Patrick
Feges was on hold for 17 months until his first disability check from
the VA came through. An Eagle Scout from Sugar Land, Texas, Feges
enlisted in 2003 and found himself in Ramadi a year later. In October
2004, a mortar exploded on his base about 50 yards from him, spraying
him with shrapnel, slicing his intestines and severing a major artery.
Feges lost consciousness and was flown to Walter Reed, where he
underwent surgery. Long scars trail down his legs and midsection. At
the hospital a fellow Texan came to visit: President Bush stood by his
bed and chatted with him.
Feges is a polite 22-year-old with a military manner. He addresses
strangers by last name and an honorific, even when prodded to drop the
formality. ``I was brought up right, sir,'' he explains. But his voice
rises slightly when he describes his ordeal with the VA. A case officer
in Houston processed Feges's request for disability in September 2005,
then lost his application. Feges was summoned to repeated medical
evaluations at the Houston center, but a year later he was still
waiting for a check. By then, Feges had been accepted to culinary
school in Austin and did not want to put off his studies. His mother,
an elementary-schoolteacher, took a second job at a local McDonald's to
help support him.
For discharged servicemembers, the VA serves two functions: it
provides medical care for service-related conditions at its clinics and
hospitals across the country, and it reviews claims for disability
benefits--chiefly, the monthly payments wounded veterans get for the
rest of their lives. The review process can be complicated. It requires
veterans to prove, through documents and sometimes through the
testimony of fellow soldiers, that their afflictions are a result of
their time in the military. Feges listed on his application all the
ways he'd been affected by the wounds: he'd lost mobility in his ankles
and knees, he suffered regular stomach cramps from the intestinal
wound, he lost sensation in his hands and legs, he had trouble standing
for long periods. NEWSWEEK presented the VA with the names and details
of the veterans whose stories are told here, but a spokesman for the
agency declined to comment on individual cases, citing doctor-patient
confidentiality. Speaking generally, Dr. Michael Kussman, the VA's
acting under secretary for health, tells NEWSWEEK that the department
is trying to reach veterans earlier, as they approach their date of
discharge, and that he does not believe Iraq and Afghanistan are
straining resources severely. ``The impact on the VA so far has been
relatively small,'' Kussman says. ``It has not kicked the system over
in our budget and in our ability to absorb it.''
Still, a jump in disability claims in recent years has created a
bottleneck. Daniel Cooper, the VA's under secretary for benefits,
confirmed his department was coping with a backlog of 400,000
applications and appeals; 75 percent of them were still within a
``reasonable'' reviewing timeframe, he says. Yet, most of those claims
were filed by veterans of previous wars (a veteran can file or appeal a
claim even decades after discharge). As more servicemen and women
return from Iraq, the backlog is likely to increase. Cooper says the
average waiting time for a benefits claim is about 6 months. NEWSWEEK
turned up a number of veterans who'd waited longer. Keri Christensen, a
National Guard veteran and a mother of two, says the VA in Chicago took
10 months to process her application. Rory Dunn, who nearly died in an
IED attack outside Fallujah, says his application was delayed because,
among other things, the VA mixed up his file with that of a Korean war
veteran.
Feges's claim was finally approved last month: after NEWSWEEK and
the advocacy group Veterans for America began looking into his case, he
got a call from a VA official in Waco, Texas, with the news that his
money would come through. Last week he received back pay to the date of
his application.
The compensation is not huge. A veteran with a disability rating of
100 percent gets about $2,400 a month--more if he or she has children.
A 50 percent rating brings in around $700 a month. But for many
returning servicemen burdened with wounds, it is, initially at least,
their sole income. ``When I started school, that's when it became
really hard not to have that money,'' says Feges.
One reason to worry about a crush of new vets at the VA has to do
with the proportion of wounded to dead Americans in Iraq. Though we
tend to mark the grim timeline of the war by counting fatalities, what
really distinguishes this conflict is how many soldiers don't die, but
suffer appalling injuries. In Vietnam and Korea, about three Americans
were wounded for every one who died. The ratio in WWII was nearly 2-1.
In Iraq, 16 soldiers are wounded or get sick for every one who dies.
The yawning ratio marks progress: better body armor and helmets are
shielding more soldiers from fatal wounds. And advanced emergency care
is keeping more of the wounded alive. The VA's Kussman says that
soldiers who survive the first few minutes after an explosion have a 98
percent chance of surviving altogether. But that means an increased
burden on the VA's health-care system.
Two such survivors are Albert and Connie Ross. Albert lost a leg
when a rocket-propelled grenade landed close to him in August 2004
while he was on patrol in Baghdad. Connie lived through a 2004 suicide
bombing in Mosul but suffered multiple fractures and burns. When the
two met in a hallway at Brooke Army Medical Center in San Antonio,
Texas, Connie thought she noticed a certain swagger in Albert's walk.
``He had this weird dip in his walk, so I asked him, `Why are you pimp-
walking in a hospital?' And he said: `I'm not pimp-walking, I'm an
amputee.' I was so embarrassed.'' The two married earlier this year and
are expecting a child.
Though he's been in the VA system for more than 2 years now, Albert
still doesn't have a primary-care doctor. Without one, getting
appointments with specialists can be difficult. ``You're supposed to be
assigned one right away,'' says Albert, who now lives in San Antonio.
``I'm not frustrated so much as worried--worried if and when something
does go wrong, something will happen with one of my legs. . . . They
[primary-care doctors] are the ones who have to fill out a work-order
form; it's impossible to do anything without them.''
One thing Albert desperately wants to do: get a new prosthetic.
He's one of the early African-American amputees of the war. But the
fake limb he's been given matches the skin tone of a Caucasian. It so
embarrasses Albert that he always wears a sock over it--even if he's in
sandals. ``He's very self-conscious about it,'' says Connie. ``It
really bothers him.''
Albert's situation is probably atypical. The VA says a huge
majority of veterans get primary-care doctors within 30 days. But
people inside the system do concede there's a shortage of mental-health
workers at many of the VA's hospitals and clinics across the country.
And Schulze is not the only veteran to commit suicide after being
turned away. In a similar case in 2004, the VA twice neglected to treat
Iraq veteran Jeffrey Lucey for posttraumatic stress disorder (the
second time because he was told alcoholics must dry out before being
accepted to an inpatient program). By the time a VA counselor tracked
down a bed in a New York facility with a built-in detox program, Lucey
had already hanged himself. ``The system doesn't treat mental health
with the same urgency it treats general healthcare,'' says a senior VA
manager who did not want to be named talking about shortcomings in the
agency.
Even when veterans get to the right doctors, understanding how to
leverage what they need from the system can be mind-bending. Tonia
Sargent, whose husband, Kenneth, nearly died in a sniper attack in
Najaf in 2004, says no one ever sat her down and explained the benefits
and how to access them. Her husband's brain injury made him often
incapable of understanding his own care. Key decisions fell to her
alone. It's a ``don't ask, don't tell system,'' she says.
Kenneth is a Marine master sergeant who'd been in the Corps for
nearly 18 years. He was on his second tour in Iraq when a sniper bullet
ricocheted off the metal hatch on his vehicle and hit him directly
below the right eye, grazing the front of his brain and exiting near
his left ear. Among other things, he was diagnosed with traumatic brain
injury, which has become the signature wound of the Iraq war. Tonia had
to fight the Marine Corps to keep him from being discharged, figuring
he'd get better medical care if he remained in active service. But some
of his treatment has been outsourced to the VA.
One of the tricks she learned early on was to demand photocopies of
her husband's records--every exam, every X-ray, every diagnosis--and
personally carry the file from appointment to appointment. ``I don't
know if there is a more formal protocol for transferring documents, but
I know that what I brought . . . . was definitely put to use.'' When
Sargent was transferred to the VA's lauded Polytrauma Center in Palo
Alto, Calif., doctors there encouraged her to go home to Camp Pendleton
near San Diego and treat his stay at the hospital as if it was a
deployment. ``After 2 weeks, they asked me how long I was planning to
stay with my husband,'' she says. ``They said it was his rehab, not
mine. But I needed to learn how to care for him, and he suffered from
extreme anxiety without me.'' She pushed back, staying in Palo Alto
until he completed his care.
How can the system improve? Bilmes, who authored the Harvard study,
proposes at least one drastic change--automatically accepting all
disability claims and auditing them after payments have begun. (The VA
says that would be an irresponsible use of taxpayer money.) Other
critics have focused on raising the VA's budget, which has been
proposed at $87 billion for 2008. More money could go toward hiring
more claims officers and more doctors, easing the burden now and
preparing the VA for the end of the Iraq war, when soldiers return home
en masse.
But veterans' support groups and even some former and current VA
insiders believe there's a reluctance in the Bush administration to
deal openly with the long-term costs of the war. (All told, Bilmes
projects it could cost as much as $600 billion to care for GWOT
veterans over the course of their lifetimes.) That reluctance, they
say, trickles down to the VA, where top managers are politically
appointed. Secretary Jim Nicholson, a decorated Vietnam War veteran who
was chosen by Bush in 2005, tends to be the focus of this criticism.
The senior VA manager who did not want to be named criticizing
superiors told NEWSWEEK: ``He's a political appointee and he needs to
respond to the White House's direction.'' Steve Robinson of Veterans
for America levels the accusation more directly. ``Why doesn't the VA
have a projection of casualties for the wars? Because it would be a
political bombshell for Nicholson to estimate so many casualties.'' The
VA denies political considerations are involved in its budgeting or
planning. Nicholson declined to be interviewed but Matt Burns, a
spokesman for the VA, called Robinson's comments ``nonsensical and
inflammatory,'' adding: ``The VA, in its budgeting process, carefully
prepares for future costs so that we can continue to deliver the
quality healthcare and myriad benefits veterans have earned.''
Fratto, the White House deputy press secretary, says money is not
the problem. He points out the VA has had a hard time filling positions
in some remote parts of the country. ``You need to find people who are
trained in PTSD and other disorders that are affecting veterans and
find those who are willing to go to places where they are needed.''
As is often the case in America when government institutions
falter, however, community groups are already stepping into the void.
Veterans of Foreign Wars has advocates helping vets negotiate the VA
bureaucracy, much the way health facilitators in the private sector
help consumers get the most from their health insurance. Robinson, of
Veterans for America, has pulled together teams of volunteers--
physicians, psychologists, lawyers--who give vets free services when
the local VA branch falls down. At his office recently, he was
coordinating a traumatic-brain-injury screening with a private doctor
for a veteran who'd been denied access to VA care. The fact that
Americans are coming forward doesn't absolve the VA of its obligation
to provide first-rate care for veterans. Most of the wounded's problems
just can't be solved by private citizens and groups, no matter how well
meaning. But it does serve to remind us that we should take better care
of veterans wounded in the line of duty as they make their way home,
and try to remake their lives.
With Jamie Reno, Eve Conant, John Barry, Richard Wolffe, Karen
Springen, Jonathan Mummolo and Ty Brickhouse
Still Hurting Photographs
Pictures by Ethan Hill
How well does the United States care for its wounded and impaired
when they come home? For a country engaged in what President Bush calls
a `long war,' the question has profound moral implications. About
50,000 servicemembers so far have been banged up or burned, suffered
disease, lost limbs or sacrificed their mental well-being while
implementing American policies in dangerous places. The stories of
these soldiers raise concerns that the country is failing to meet its
most basic obligations to those who fight its wars.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Albert Ross: He was on foot patrol in Baghdad when a rocket-
propelled grenade exploded near him. That was over 2 years ago, and
Ross still doesn't have a primary care doctor.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Connie Ross: During her rehab, she was sitting in her wheelchair in
the hallway of the hospital, when she met the man she'd eventually
marry. Now she and Albert Ross, pictured in the previous slide, are
expecting their first child.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Eric Edmundson: A bomb blast ruptured this 26-year-old father's
spleen. Military doctors inserted a catheter that accidentally tickled
his heart, enough trauma to stop it--and deprive his brain of oxygen--
for 30 minutes. The resulting damage--near-total lack of muscle
control--was bad enough to require therapy outside the VA system.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Keri Christensen: Since coming home from Iraq, the mother of two
has struggled with emotional issues. She's haunted by nightmares, has
imaginary conversations with her husband and rarely leaves the house.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Rory Dunn: Shrapnel ripped through Dunn's unarmored Humvee, causing
traumatic brain injury, the signature wound of the Iraq war. He was so
severely hurt that the triage doctor initially set the 24-year-old
aside to die.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Patrick Feges: Shrapnel tore into his intestines and cut a major
artery. While the 22-year-old waited 17 months for his disability check
to come, his mother took a second job at McDonald's to help support
him.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Marissa Strock: The 21-year-old lost both of her legs after her
Humvee rolled over an IED in Iraq. The others on board, whose names she
tattooed on her back, died. The trauma didn't end once she got to the
hospital.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
John Newport: The discs in his back became compressed when he
manned a truck-mounted machine gun--now he walks with a cane and wears
a nerve stimulator to moderate pain. These injuries have still not been
verified by the VA, more than 2 years later. He also suffers from PTSD,
and has had flashbacks of an Iraqi girl he saw run over by an American
vehicle--she reminded him of his daughter.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
<F-dash>
Pomona Veteran Shares Story of Fighting for Health Benefits
By Hema Easley
The Journal News, (Original Publication: March 13, 2007)
GOSHEN, N.Y.--Vietnam War veteran Ted Wolf tells a saga of
government apathy in providing him treatment for cancer, which he
likely developed because of exposure to chemicals during the war.
His saga ended because of Rep. John Hall, D-Dover Plains, who
intervened with the Department of Veterans Affairs to get Wolf his due
benefits.
In the wake of revelations of substandard treatment for veterans at
the Walter Reed Army Medical Center, Wolf's case is not alone. In fact,
the backlog of veterans' benefit claims has grown to more than 630,000,
said Hall, who is the chair of the Subcommittee on Disability
Assistance and Memorial Affairs.
``You get the feeling that the VA doesn't care,'' said Wolf, 62, a
Pomona resident, speaking at a news conference yesterday in Hall's
office.
His comments came a day before Hall holds a House Veterans Affairs
subcommittee hearing on the healthcare needs of veterans of the Iraq
and Afghanistan wars, and their impact on the ability of the VA to
process disability claims.
The hearing will also examine reports of claims rating
discrepancies between active duty and Reserve veterans.
Wolf and Hall blamed the VA bureaucracy, inadequate staffing and
lack of information sharing between the Department of Defense and the
VA for the backlog.
In addition, Hall said, the ratio of wounded-to-killed in the Iraq
war is 15-1, several times the ratio in previous wars. More military
men and women are surviving injuries because of better medical care on
the battlefield, thereby putting pressure on the system.
``It's only fair that we pick up the bill,'' said Hall, who
estimated that the cost of taking care of veterans would rise to $1
trillion.
``When our soldiers and military personnel return home and need
help, they should get the assistance they have earned, without delay,''
Hall said.
Wolf shared his story yesterday at Hall's office to illustrate how
many veterans have to struggle to get benefits, and how he was helped
by the congressman's office.
After being diagnosed with prostate cancer in September 2002, Wolf
initially didn't think to apply to the VA for help. He didn't think he
was eligible, and on his doctor's advice he went to Memorial Sloan
Kettering Cancer Center in New York City.
But browsing on the Internet one day, he read about the suspected
link between prostate cancer and Agent Orange, a chemical that he and
many other servicemembers had been exposed to during the Vietnam War.
His wife, Harriet, had suffered seven miscarriages before their only
daughter was born, and Wolf thought that that might also have been
linked to the chemical.
But when Wolf approached the VA, he was put on a 6-month waiting
list for a physical based upon which VA would decide if he was
eligible.
``There is a bureaucracy doing needless physicals,'' said Wolf, a
former realtor. ``The cancer is in my bones. It will not come up in a
physical.''
After an initial physical, Wolf was recalled for another physical
in six months. While Wolf waited, the VA reduced his pension from
$2,300 a month to $600, saying that his cancer was in remission.
There are an estimated 18,000 veterans in Rockland County. About
6,000 are enrolled in the VA's health clinic.
``The backlog of cases is phenomenal,'' said Jerry Donnellan,
director of the county's Veterans Service Agency. ``We've had people
literally die waiting to have their cases adjudicated.''
Help finally came to Wolf when he approached Hall's office, and it
intervened to expedite his case.
Earlier this year, Wolf's pension was raised to $2,900. He was also
reimbursed for all medical expenses since June, which totaled $19,000,
``I was extremely pleased with the care and rapid response,'' said
Wolf.
But, he said, ``We shouldn't need to contact a congressman. The
process should be easier.''
<F-dash>
Vietnam Vet Fights for Fellow Soldiers
By Greg Bruno
Times Herald-Record, March 13, 2007
GOSHEN--Three and a half decades after dodging bullets in the
jungles of Vietnam, Ted Wolf is still fighting for fellow soldiers.
But now his enemies are cancer, politics and a foundering veterans'
health-care system.
``My concern is for the young guys coming back from war today,''
said Wolf, 62, as he detailed his 5-year odyssey through the Department
of Veterans Affairs. ``They shouldn't have to wait (for care),'' he
said, choking back tears. ``There's enough stress. They shouldn't have
to wait.''
As the wars in Iraq and Afghanistan chew up American soldiers,
creating the largest pool of wounded veterans since the Vietnam era,
the backlog of disability claims is skyrocketing, lawmakers and
veterans' advocates say.
There are more than 630,000 claims waiting to be processed by the
VA, according to congressional estimates. That number will only
increase as servicemembers return from America's latest war.
``I'm here, my staff, we're here to fight for veterans to get their
due. But it absolutely shouldn't be necessary,'' said Rep. John Hall,
D-Dover Plains, who joined Wolf during a news conference yesterday in
Goshen.
``It's easy to say you support the troops, but the way you do it is
by putting up the money and getting it done,'' the congressman said.
Problems with veterans' medical care reached a boil last month when
The Washington Post detailed the unsanitary and decrepit living
conditions at Walter Reed Army Medical Center.
But woes within the Department of Defense and VA health-care
systems run deeper than one Army hospital in Washington.
In testimony last week, Cynthia A. Bascetta, director of healthcare
for the Government Accountability Office, told a House Subcommittee
that veterans returning from Iraq and Afghanistan often fall through
the medical cracks.
Many veterans are not screened for mental health problems, leading
to undiagnosed conditions, the GAO said. Other oversights include poor
military recordkeeping and payment issues that force financial burdens
on veterans.
Fixing the system won't come cheap. As of March 1, more than 24,000
servicemembers had been injured during fighting in Iraq and
Afghanistan, according to the Defense Department. Hall said long-term
care estimates for the nation's veterans top $1 trillion.
``Disability benefits is a hot topic, and the quality of care our
active soldiers and veterans are getting has been revealed ``to have
some serious difficulties,'' Hall said.
Wolf knows firsthand how broken the system is: His run-in with a
bumbling VA began in 2002, when he was diagnosed with prostate cancer.
Wolf was eligible for coverage within the VA system because prostate
cancer is one of four cancers linked to exposure to Agent Orange, a
defoliant used by the U.S. military during the Vietnam War.
But when the VA wrongly declared Wolf to be in remission, his
disability benefits were slashed by 60 percent, to about $600 a month,
he said. Even though his cancer never stopped eating at his bones and
skull, it took congressional intervention from Hall to get benefits
restored.
``We should not need to have a congressperson to make the process
easier,'' he said. Returning soldiers ``should be processed
immediately.''
What's Next?
Rep. John Hall and Members of a Veterans' Affairs subcommittee will
hear testimony in Washington today on how to reduce the backlog of
veterans' claims. The hearing will also examine reports of care
discrepancies between active and reserve duty veterans.
Vietnam veteran Ted H. Wolf, left, speaks yesterday at a news
conference about problems with veterans' healthcare and benefits
alongside Rep. John Hall at the Orange County Government Center in
Goshen.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Times Herald-Record/TOM BUSHEY
<F-dash>
Veterans Face Vast Inequities Over Disability
By Ian Urbina and Ron Nixon
New York Times, March 9, 2007
WASHINGTON, March 8--Staff Sgt. Gregory L. Wilson, from the Texas
National Guard, waited nearly 2 years for his veterans' disability
check after he was injured in Iraq. If he had been an active-duty
soldier, he would have gotten more help in cutting through the red
tape.
Allen Curry of Chicago has fallen behind on his mortgage while
waiting nearly two years for his disability check. If he had filed his
claim in a state deploying fewer troops than Illinois, Mr. Curry, who
was injured by a bomb blast when he was a staff sergeant in the Army
Reserve in Iraq, would most likely have been paid sooner and gotten
more in benefits.
Veterans face serious inequities in compensation for disabilities
depending on where they live and whether they were on active duty or
were members of the National Guard or the Reserve, an analysis by The
New York Times has found.
Those factors determine whether some soldiers wait nearly twice as
long to get benefits from the Department of Veterans Affairs as others,
and collect less money, according to agency figures.
``The V.A. is supposed to provide uniform and fair treatment to
all,'' said Steve Robinson, the director of veteran affairs for
Veterans for America. ``Instead, the places and services giving the
most are getting the least.''
The agency said it was trying to ease the backlog and address
disparities by hiring more claims workers, authorizing more overtime
and adding claims development centers.
The problems partly stem from the agency's inability to prepare for
predictable surges in demand from certain states or certain categories
of servicemembers, say advocates and former department officials.
Numerous government reports have highlighted the agency's backlog of
disability claims and called for improvements in shifting resources.
``It's Actuary Science 101,'' said Paul Sullivan, who until last
March monitored data on returning veterans for the V.A. ``When 5,000
new troops get deployed from California, you can logically expect a
percent of them will show up at the V.A. in California in a year with
predictable types of problems.''
``It makes no sense to wait until the troop is already back home to
start preparing for them,'' Mr. Sullivan said. ``But that's what the
V.A. does.''
Veterans' advocates say the types of bureaucratic obstacles
recently disclosed at Walter Reed Army Medical Center are eclipsed by
those at the Veterans Affairs division that is supposed to pay soldiers
for service-related ills. The influx of veterans from the Iraq war has
nearly overwhelmed an agency already struggling to meet the healthcare,
disability payment and pension needs of more than three million
veterans.
Stephen Meskin, who retired last year as the V.A.'s chief actuary,
said he had repeatedly urged agency managers to track data so they
could better meet the needs of former soldiers. ``Where are the new
vets showing up?'' Mr. Meskin said he kept asking. ``They just
shrugged.''
Agency officials say they have begun an aggressive oversight effort
to determine if all disability claims are being properly processed and
contracted for a study that will examine state-by-state differences in
average disability compensation payments.
``V.A.'s focus is to assure consistent application of the
regulations governing V.A. disability determinations in all states,''
the department said in a written statement.
Many new veterans say they are often left waiting for months or
years, wondering if they will be taken care of.
Unable to work because of post-traumatic stress disorder and back
injuries from a bomb blast in Iraq in 2004, Specialist James Webb of
the Army ran out of savings while waiting 11 months for his claim. In
the fall of 2005, Mr. Webb said, he began living on the streets in
Decatur, Ga., a state that has the 10th-largest backlog of claims in
the country.
``I should have just gone home to be with family instead of trying
to do it on my own,'' said Mr. Webb, who received a Bronze Star for his
service in Iraq. ``But with the post-traumatic stress disorder, I just
didn't want any relationships.''
After waiting 11 months, he began receiving his $869 monthly
disability check and he moved into a house in Newnan, Ga. About 3 weeks
ago, Mr. Webb moved back home to live with his parents in Kingsport,
Tenn.
The backlogs are worst in some states sending the most troops, and
discrepancies exist in pay levels.
Illinois, which has deployed the sixth-highest number of soldiers
of any state, has the second-largest backlog. The average disability
payment for Illinois veterans--$7,803 a year--is among the lowest in
the nation, according to 2005 V.A. data.
In Pennsylvania, which has sent the fourth-highest number of
troops, the claims office in Pittsburgh is tied for second for longest
backlogs, where 4 out of 10 claims have been pending for more than 6
months. Veterans from this state on average receive relatively low
payments, $8,268 per year, according to 2005 V.A. data. Comparable 2006
data were not available.
The agency's inspector general in 2005 examined geographic
variations in how much veterans are paid for disabilities, finding that
demographic factors, like the average age of each state's veteran
population, played roles. But the report also pointed to the subjective
way that claims processors in each state determined level of
disability.
Staffing levels at the veterans agency vary widely and have not
kept pace with the increased demand. The current inventory of
disability claims rose to 378,296 by the end of the 2006 fiscal year.
The claims from returning war veterans plus those from previous periods
increased by 39 percent from 2000 to 2006. During the same period, the
staff for handling claims has remained relatively flat, a problem the
department highlighted in its 2008 proposed budget. The department
expects to receive about 800,000 new claims in 2007 and 2008 each.
``It's clear to everyone here that the system overall is struggling
and some veterans are waiting far too long for decisions,'' Senator
Larry E. Craig, Republican of Idaho, said Wednesday at a hearing before
the Senate Veterans' Affairs Committee.
The growing strains on the veterans agency have affected some
soldiers more than others.
While the Reserve and National Guard have sent a disproportionate
number of soldiers to the war, the average annual disability payment
for those troops is $3,603, based on 2006 V.A. data for unmarried
veterans with no dependents. Active-duty soldiers on average receive
$4,962.
Though the V.A. acknowledged that there were discrepancies,
officials also said they believed that a significant factor might be
length of service. Active-duty soldiers generally serve longer, and
therefore more suffer from chronic diseases or disabilities that
develop over time. Many who served in the Guard think they are losing
the battle against the bureaucracy.
``We take a harder toll,'' said Mr. Wilson, the Texan, referring to
the fate of reservists and Guard troops compared with active duty
soldiers.
He said that last month he received his disability check for his
back injuries but only after a 21-month wait and the intervention of a
congressman and a colonel.
When active-duty soldiers near discharge, they have access to far
more programs offering assistance with benefits than do reserve and
National Guard soldiers, according to veterans' advocates.
``The active-duty guys, they get those resources,'' Mr. Wilson
said. ``We don't.''
He said that while active-duty soldiers often received medical
disability evaluations in about 30 days, many reservists he knew waited
2 years or more to get an initial appointment. Active-duty personnel
also routinely received legal advice about appeals and other issues
from military lawyers, while reservists had to request those hearings,
he said.
For years, the V.A.'s inspector general, the Government
Accountability Office, Members of Congress and veterans' advocates have
pointed out the need to improve how the V.A. tracks data on soldiers as
they are deployed and when they are injured. That would help prepare
for their future needs and ease delays in processing health and benefit
claims.
In 2004, a system was designed to track soldiers better, prepare
for surges in demand and avoid backlogs. But the system was shelved by
program officials under Secretary Jim Nicholson for financial and
logistical reasons, V.A. officials said Thursday at a hearing before
the House Veterans' Affairs Committee.
The V.A., which has said it has an alternate tracking system nearly
operational, depends on paper files and lacks the ability to download
Department of Defense records into its computers.
President Bush has appointed a commission to investigate problems
at military and veterans hospitals.
For Mr. Curry, the reservist from Chicago who has fallen behind on
his mortgage payments, his previous life as a $60,000-a-year postal
worker is a fading memory. ``It's just disheartening,'' he said. ``You
feel like giving up sometimes.''
Richard G. Jones contributed reporting from Trenton, Bob Driehaus
from Cincinnati, and Sean D. Hamill from Pittsburgh.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
James Webb waited 11 months for benefits and began living on the
streets. Now he lives at his parents' house with his son, Christian.
<F-dash>
THE ECONOMIC COSTS OF THE IRAQ WAR: An Appraisal Three Years after the
Beginning of the Conflict\1\
---------------------------------------------------------------------------
\1\ Paper prepared for presentation at the ASSA meetings, Boston,
January 2006. The views expressed here are solely those of the authors,
and do not represent those of any institution with which they are
currently affiliated, or with which they have been affiliated in the
past.
---------------------------------------------------------------------------
Linda Bilmes, Kennedy School of Government, Harvard University,
and Joseph E. Stiglitz, University Professor, Columbia University,
January 2006
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
The views expressed in the KSG Faculty Research Working Paper Series are those of the author(s) and do not
necessarily reflect those of the John F. Kennedy School of Government or of Harvard University. Copyright
belongs to the author(s). Papers may be downloaded for personal use only.
----------------------------------------------------------------------------------------------------------------
Three years ago, as America was preparing to go to war in Iraq,
there were few discussions of the likely costs. When Larry Lindsey,
President Bush's economic adviser, suggested that they might reach $200
billion, there was a quick response from the White House: That number
was a gross overestimation.\2\ Deputy Defense Secretary Paul Wolfowitz
claimed that Iraq could ``really finance its own reconstruction,''
apparently both underestimating what was required and the debt burden
facing the country. Lindsey went on to say that ``The successful
prosecution of the war would be good for the economy.'' \3\
---------------------------------------------------------------------------
\2\ OMB Director Mitch Daniels is reported to have said that
Lindsey's estimates were ``very, very high.'' Both he and Secretary of
Defense Rumsfeld estimated the costs in the range of $50-60 bn, some of
which they believed would be financed by other countries.
\3\ Wall Street Journal, September 15, 2002.
---------------------------------------------------------------------------
Many aspects of the Iraq venture have turned out differently from
what was purported before the war: There were no weapons of mass
destruction, no clear link between Al Qaeda and Iraq, no imminent
danger that would warrant a pre-emptive war. Whether Americans were
greeted as liberators or not, there is evidence that that they are now
viewed as occupiers. Stability has not been established. Clearly, the
benefits of the War have been markedly different from those claimed.
So too for the costs. It now appears that Lindsey was indeed
wrong--by grossly underestimating the costs. Congress has already
appropriated approximately $357 billion for military operations,
reconstruction, embassy costs, enhanced security at U.S. bases and
foreign aid programs in Iraq and Afghanistan. This total, which covers
costs through the end of November 2005, includes $251 bn for military
operations in Iraq, $82 bn for Afghanistan and $24 bn for related
foreign operations, such as reconstruction, embassy safety and base
security.\4\ These costs have been rising throughout the war. Since FY
2003, the monthly average cost of operations has risen from $4.4 bn to
$7.1 bn--the costs of operations in Iraq have grown by nearly 20% since
last year (whereas Afghanistan was 8% lower than last year).\5\ The
Congressional Budget Office has now estimated that in their central,
mid-range scenario, the Iraq war will cost over $266 billion more in
the next decade, putting the direct costs of the war in the range of
$500 billion\6\
---------------------------------------------------------------------------
\4\ Congressional Research Service Report for Congress, ``The Cost
of Iraq, Afghanistan and Enhanced Base Security Since 9/11'', Amy
Belasco, Defense Specialist, October 7, 2005. This covers funding in
P.L. 107-117, 107-206, 1207-115, 108-7, 108-11, 108-106, 108-199, 108-
287, 109-13, 108-447, and the recent FY 2006 Continuing Resolution
(109-77) which provides $45 bn for the 6-week period starting 9/30/05.
DOD will need additional funds to cover the rest of the year.
\5\ Ibid.
\6\ The CBO estimated costs for the period of 2005-2014 under three
scenarios. The estimates were $179 bn, $266 bn, and $392 bn,
respectively. We have conservatively used their middle scenario. CBO
2005.
---------------------------------------------------------------------------
These estimates, however, underestimate the War's true costs to
America by a wide margin. In this paper, we attempt to provide a range
of estimates for what those costs have been, and are likely to be. Even
taking a conservative approach, we have been surprised at how large
they are. We can state, with some degree of confidence, that they
exceed a trillion dollars.
Providing even rough order of magnitude estimates of the costs
turns out to be very difficult, for a number of reasons. There are
standard problems in cost allocation; there are future costs associated
with the Iraq war that are not included in the current calculations;
there are marked differences between social costs and prices paid by
the government (and it is only the latter which traditionally get
reflected in the cost estimates); and there are macro-economic costs,
associated both with the increase in the price of oil and the Iraq war
expenditures.
Consider, as an example, accounting for the value of the more than
two thousand American soldiers who have died since the beginning of the
war, and the more than sixteen thousand who have been wounded. The
military may quantify the value of a life lost as the amount it pays in
death benefits and life insurance to survivors--which has recently been
increased from $12,240 to $100,000 (death benefit) and from $250,000 to
$500,000 (life insurance). But in other areas, such as safety and
environmental regulation, the government values a life of a prime age
male at around $6 million, so that the cost of the American soldiers
who have already lost their lives adds up to around $12 billion\7\
---------------------------------------------------------------------------
\7\ Government agencies have estimated the value of a life at $6.1m
(Environmental Protection Agency), and $5.5m (Department of
Transportation). The value of a life for victims of 9/11 were estimated
in a range from $2-$11million.
---------------------------------------------------------------------------
The standard estimates of the death costs also omit the cost of the
nearly one hundred American civilian contractors\8\ and the four
American journalists that have been killed in Iraq, as well as the cost
of coalition soldiers, and non-American contractors working for U.S.
firms.
---------------------------------------------------------------------------
\8\ Although the actuarial value of those lives should, presumably,
have been included in the contractors' bid price when undertaking the
contract.
---------------------------------------------------------------------------
The military values the cost of those injured by what their medical
treatment costs and disability pay; and current accounting only
reflects current payments in disability, not the present discounted
value of (expected) future payments; a full cost analysis includes both
the present discounted value of all future payments, as well as the
difference between the disability pay and what the individual might
have earned--and even this ignores the enormous compensation that would
have been paid for pain and suffering had this been a private injury.
Costs of recruiting have increased enormously--and even after the
war ends, there is reason to believe that compensation will have to be
increased, including for Reserves and National Guard. Many Reservists,
particularly those who are older, supporting families and established
in their careers, underestimated the risks of being called to fight a
war abroad and the ability of the government to force them to extend
their tours of duty and even to serve second and third tours. The
majority of these Reservists have suffered a significant loss in wages
due to serving in Iraq. By the same token, wages currently paid the
military almost surely represent an underestimation of a fair market
wage, given what individuals would have needed to make them willingly
undertake the job in Iraq. In fact, we know from the wages being paid
by contractors performing similar work what the free market wage for
such services are, and they are a multiple of what the American
military get paid.\9\
---------------------------------------------------------------------------
\9\ For example, experienced security guards working for Blackwater
Security, who guarded senior officials in the Coalition Provisional
Authority, were earning up to $1,000 per day. The majority of such
guards were former members of the military.
---------------------------------------------------------------------------
Even determining the current ``direct'' expenditures turns out to
be a difficult task.\10\ The Administration has provided a number,
based on the current costs of operations in Iraq. We are interested
here in finding the total economic cost, the value of the resources
used, and it is not always clear that standard accounting and budgetary
figures reflect that. For instance, the faster depreciation or
destruction of equipment already owned by the government is clearly
part of the cost of the war. Standard cost allocation procedures would
attribute a substantial fraction of the overhead in the Pentagon to the
War; by devoting its attention to Iraq, it has less time to work on
other issues, to prepare for other problems.
---------------------------------------------------------------------------
\10\ A recent report by the Government Accountability Office (GAO-
05-767) states that the Defense Department has ``lost visibility'' on
over $7 bn of funding and reports several cases where obligations
exceeded appropriations in 2004, including $4.3 bn in Army operation
and maintenance. A recent report by the Congressional Research Service
cites the difficulty of tracking Pentagon expenditures in Iraq, because
(unlike the State Department and other agencies), DOD does not allocate
funds by operation or mission until after the fact. ``Defense
Department witnesses periodically give average monthly costs or `burn
rates' for Iraq and Afghanistan but DOD has not provided Congress with
a complete or consistent record showing those rates over time or total
amounts for each operation each year.'' CRS, 10/7/05.
---------------------------------------------------------------------------
A true costing of the war would focus, of course, on the
incremental cost; to the extent that the actual War substitutes for
expensive ``war games,'' the incremental cost is less than the actual
money spent. In our analysis we have subtracted the direct savings,
such as policing the ``no-fly'' zone in Iraq, from the cost of the war.
This paper attempts to provide a more complete reckoning of the
costs of the Iraq War than have previously been provided, using
standard economic and accounting/budgetary frameworks. Of course, a
final tally will have to wait until the end, and even the President has
made it clear that there is no clear end in sight. And even then, it
will be years before we can be sure about whether our estimates of
future costs--increased costs of recruiting or payments for disability
or the healthcare costs of the injured veterans--were accurate.
Of necessity, the numbers, especially of future expenditures, are
estimates, and we have tried to avoid a false sense of accuracy by
rounding our numbers from the more precise estimates provided by
econometric and statistical studies, when those are employed. We
provide several sets of numbers. A ``conservative'' estimate that we
think is excessively conservative. We realize that the numbers provided
here may be controversial. They provide a picture of costs that is much
larger than that which has been provided by the administration,
especially before the War. We also provide a second estimate, which,
while still conservative, is more reasonable. We refer to this as our
``moderate'' estimate.
Our estimates, for instance, assume that we have 136,000 troops
stationed in Iraq in 2006. The Administration has recently announced a
troop reduction, from 160,000 due to the pre-election buildup, to
140,000, a number which is still larger than the numbers employed in
our analysis.
We have not been able to quantify many of what may turn out to be
the most important costs of the Iraq venture. There is a value in
military preparedness, and it is the reason for investing so heavily in
defense. By most accounts, America's ability to engage in a second
front at the current time is greatly diminished. At the beginning of
the War, there was a great deal of talk about winning the hearts and
minds of those in the Middle East. Recent opinion polls reflecting
public opinion in the Arab world show that exactly the opposite has
happened. Some American businesses have even claimed that anti-
Americanism spawned by the Iraq War has had an effect on their sales
and profits. America's credibility has been diminished: If some time in
the future another American President were to claim that he had solid
evidence based on intelligence that there was a threat, that evidence
is more likely to be treated with skepticism. America has always prided
itself in fighting for human rights; but America's credentials have
been tarnished by Abu Ghraib and Guantanamo. These are among the many
costs of the Iraq War that we do not attempt to quantify, but which
should clearly be counted in any assessment of the Iraq War.
Nor have we included in this paper any of the costs borne directly
by other countries, either directly (as a result of military
expenditures) or indirectly (as a result of the increase in the price
of oil.) Most importantly, we have not included the costs of the war to
Iraq, either in terms of destruction of property (infrastructure,
housing) or the loss of lives.\11\ Clearly, including these would
increase the cost of the war substantially--perhaps by an order of
magnitude.
---------------------------------------------------------------------------
\11\ We have not included the cost of the deaths of coalition
soldiers and contractors, nor of the Iraqis themselves. Even the most
conservative estimates put the loss of life at a multiple of that of
the United States, with some estimates putting the numbers in excess of
30,000, or even 100,000. Of those, over 3,000 Iraqi deaths have been
among Iraqi military and police who are supporting coalition forces.
---------------------------------------------------------------------------
The paper is divided into two parts. In the first, we provide an
estimate of the ``direct'' expenditures, and provide adjustments to
reflect the true social costs of the resources deployed. The second
provides an estimate of the macro-economic costs; the effects of the
War on the overall performance of the economy, taking into account both
the effects of the expenditures themselves and of the increased price
of oil, some of which at least should be attributed to the War.
I. Budgetary Costs to the U.S. Government
The budgetary costs of the war reflect the huge scale of operations
that are being undertaken. For the first half of 2005, there were over
200,000 U.S. military personnel stationed in Iraq and Kuwait (which
serves as a staging ground for Iraq). To date, over 550,000 troops have
served in Iraq in a combined total of approximately one million tours
of duty.\12\
---------------------------------------------------------------------------
\12\ Many troops have served two or three tours of duty.
---------------------------------------------------------------------------
The costs of the war in Iraq that have been reported in the media
have almost exclusively focused on one type of cost--the $251 bn in
cash that the government has spent on combat operations since the
invasion of Iraq in March 2003. This is an important element of the
financial cost but it is only the tip of a very deep iceberg.
Currently the U.S. is spending about $6 bn per month on operations
in Iraq. However, there are additional costs to the government--over
and above this number. These include disability payments to veterans
over the course of their lifetimes, the cost of replacing military
equipment and munitions which are being consumed at a faster-than-
normal rate, the cost of medical treatment for returning Iraqi war
veterans, particularly the more than 7,000 servicemen with brain,
spinal, amputation and other serious injuries, and the cost of
transporting returning troops back to their home bases. The Defense
Department, for which expenditures not directly appropriated for Iraq
have grown by more than 5% (CAGR) since the war began, has also spent a
portion of this increase on support for the war in Iraq, including
significantly higher recruitment costs, such as nearly doubling the
number of recruiters, paying recruitment bonuses of up to $40,000 for
new enlistees and paying special bonuses and other benefits, up to
$150,000 for current troops that re-enlist. Another cost to the
government is the interest on the money that it has borrowed to finance
the war.
Although it is difficult to estimate these costs precisely, we can
use current and expected troop deployment to make a reasonable
projection of the likely costs. Looking purely at direct budgetary
costs to the taxpayer, we estimate that the total cost of the Iraq war
is in the range of $750 billion to $1.2 trillion, assuming that the
U.S. begins to withdraw troops in 2006 and maintains a diminishing
presence in Iraq for the next 5 years. We have looked at the budgetary
cost both including and excluding the cost of interest on the debt. We
have also adjusted this cost for economic factors, as outlined in
section two. Under any reasonable set of assumptions, the cost of the
war even without considering the macroeconomic costs--is more than
double the current number provided by the administration.
We have estimated the budgetary costs using two scenarios. Both
scenarios are based on the troop deployment projected by the
Congressional Budget Office.\13\ Our ``Conservative'' scenario assumes
that all troops will be withdrawn from Iraq by 2010, and that all
interest on the debt borrowed to finance the war will be repaid within
5 years. Under this scenario we count the long-term costs of disability
pay and healthcare for veterans over a twenty-year period, even though
most of the troops in Iraq are between ages 21-28 and are likely to
live far longer. We have taken the present value of all cash flows at a
4% discount rate. Even under this conservative scenario, the direct
costs to the government are likely to exceed $700 bn. (See figure 1).
---------------------------------------------------------------------------
\13\ U.S. Congressional Budget Office, Estimate of War Spending FY
2005-FY2015, Feb 1, 2005.
---------------------------------------------------------------------------
Under a second, ``Moderate'' scenario, we have used CBO's
assumption that a small but continuous U.S. presence in Iraq continues
through 2015. This has implications for the projected number of
casualties and the length of involvement by the Defense Department.
This scenario also assumes that the U.S. budget will remain in deficit
for the next 20 years. This would raise the cost of the war to over
$1.2 trillion. Both scenarios exclude the cost of operations in
Afghanistan--estimated to be approximately $82 bn to date and consuming
$1 bn per month.
Figure 1: Budgetary Cost of the Iraq War ($BN)
------------------------------------------------------------------------
Conservative Moderate
------------------------------------------------------------------------
1 Spent to date 251 251
2 Future spending on 200 271
operations
3 VA costs 40 57
4 Cost for Brain injuries 14 35
5 Veterans disability payments 37 122
6 Demobilization costs 6 8
7 Increased defense spending 104 139
8 Interest on debt 98 386
Total 750 1,269
------------------------------------------------------------------------
Assumptions for Figure 1 ``Total Cost of War in Iraq to the U.S.
Government''.
1. Spending to Date on Combat and Support Operations
The total spending to date, as of December 30, 2005 is $251
billion. This includes funds appropriated specifically for Iraq in
Emergency supplemental appropriations in April 2002, November 2003,
August 2004, April 2005, and the Continuing Resolution of September
2005, which covers the first 6 weeks of FY 2006. This money includes
funding for combat operations, basic troop deployments and logistics,
deployment of National Guard and Reserves,\14\ food and supplies,
training of Iraqi forces, weapons, munitions, supplementary combat pay,
reconstruction,\15\ and payments to countries such as Jordan, Pakistan
and Turkey. This also includes the payment of $500,000 in ``death
gratuity payment'' and life insurance to the survivors of the 2,156
fatalities in Iraq during this period. We have not included the costs
to the Defense Department for planning the invasion in the months prior
to the invasion, which the Congressional Research Service has estimated
at $2.5 bn.\16\
---------------------------------------------------------------------------
\14\ Approximately 40% of the U.S. troops serving in Iraq have been
drawn from the National Guard and the Reserves, particularly the Army
Reserves. Currently some 56,000 National Guardsmen and Reservists serve
in Iraq. Additionally, over 60,000 people have been recruited to
``backfill'' domestic positions in the Guard and Reserves that are
vacant because the others are in Iraq. The direct additional cost of
mobilizing these individuals is $3 billion per year. We have assumed
that participation of the Guards and Reserves remains constant at 40%.
\15\ Congress appropriated $18.4 bn--an unprecedented sum--for
Iraqi reconstruction in September 2003. This funding was specified for
purposes including school construction, sewerage, sanitation, repair of
the electrical grid and other civilian projects. To date, most of the
money spent has been diverted to military projects, including training
bomb squads, training Iraqi security forces, constructing prisons,
purchasing armored cars, and of the 3,600 projects completed, some 25%
of funds were spent on security. Money has also been diverted to pay
for the elections (source: Special Inspector General for Iraqi
reconstruction). The Administration has recently announced that it will
rescind its request for remaining reconstruction money.
\16\ CRS, 10/7/05, Ibid.
---------------------------------------------------------------------------
2. Future Spending on Combat and Support Operations
We have estimated the cost of future operations to be proportional
to the number of troops scheduled to be deployed in Iraq from 2006-
2010. We have estimated the current number of troops stationed in Iraq
as 160,000, using the number cited by the Pentagon. Future troop
deployment figures are based on recent forecasts by the Congressional
Budget Office, which predicts that troop levels in 2006 will be reduced
to 136,000. The CBO has forecast troop levels through 2015, but in the
conservative scenario we are assuming that all troops are out of Iraq
by 2010. However, this approach almost certainly underestimates the
actual cost of military operations, because the Pentagon will hire
contractors to replace some portion of the activities performed by
troops who are withdrawn.\17\ In our moderate scenario, we have assumed
that the U.S. maintains a small troop presence until 2015, that we
increase the number of contractors as troops decline, and that
casualties continue, proportional to troop deployment. . . .
---------------------------------------------------------------------------
\17\ Currently there are 20,000-25,000 private military contractors
operating in Iraq, representing some 60 contracting firms. Experienced
U.S. soldiers can earn up to several times their military salary
working for high-end contractors, in some cases up to $1,000/day. (IPS,
2004).
3. Additional Veterans Administration Medical Care Costs for Returning
---------------------------------------------------------------------------
Veterans
As of December 2005, over 16,000 military personnel have been
wounded in Iraq since March 2003, of whom 96% were injured after the
official combat operations ceased (since May 1st, 2003). Due to
improvements in body armor that protect the core body, there has been
an unusually high number of soldiers who have survived with major
injuries, such as brain damage, spinal injuries, and amputations.
According to the Pentagon and other sources,\18\ about 20% of those
injured have suffered major head or spinal injury and an additional 6%
are amputees. Another 21% suffered serious wounds that prevented them
from returning to the military, including blindness, deafness, partial
vision and hearing impairments, nerve damage and burns. In addition,
more than half of the 550,000 U.S. troops who have served in Iraq have
served two or three tours of continuous duty under stressful, grueling
conditions. Some 20,000 soldiers have been prevented from leaving the
service by the government's ``stop-loss'' policy, which requires troops
to extend their tours in case of emergency. It is perhaps not
surprising that the surgeon general of the Army reported, in July 2005,
that 30% of U.S. troops have developed mental health problems within 3-
4 months of returning from Iraq. To date, more than one-third of
returning veterans have used the VA system for health ailments.
---------------------------------------------------------------------------
\18\ Wallsten and Kosec, AEI-Brookings Working Paper 05-19,
September 2005, estimates 20% with serious brain injuries and 6%
amputees. They estimate 24% with other serious injuries. (We use 21%
with other serious injuries based on the latest Pentagon numbers.)
---------------------------------------------------------------------------
The number we include here represents a conservative estimate of
the additional costs to the Veterans Administration due to providing
medical care and other benefits (such as rehabilitation, retraining,
purchase, fitting and replacement of prosthetic devices, and
counseling--but not including disability, housing, educational or loan
payments) to returning Iraqi War veterans (other than those with brain
injuries). The costs of treatment could be substantial. The VA had
originally projected that 23,553 veterans returning from Iraq would
seek medical care last year, but in June 2005, the VA revised this
number to 103,000. The VA also is now responsible for providing care to
an estimated 90,000 National Guards, who previously were not eligible
for VA services. To meet these unforeseen demands, the VA appealed to
Congress for an emergency $1.5 bn in funding for FY 2005. The VA is
likely to face a shortfall of $2.6 billion in 2006.\19\ While not all
the additional healthcare expenditures may in fact be directly linked
to the Iraq war, it will be difficult not to provide the requested
medical care. We assume that this need will continue and increase to $3
bn as the veterans return home, and that the VA will require this
additional level of funding added to its base budget.\20\ (We expect
that this figure is significantly understated, considering that The
Veterans Administration is already facing a shortfall in funding to
meet its existing obligations.\21\)
---------------------------------------------------------------------------
\19\ Institute for Policy Studies, 2005.
\20\ See the discussion in the next section for an alternative
methodology, which focuses on the direct costs of the Iraq injured.
\21\ Former VA Secretary Anthony Principi said that the VA will
need $600 bn over the next 30 years to meet its existing obligations
for healthcare, education, pensions and housing loans--but this figure
did not include the Iraqi war veterans. It also does not include
additional funding for capital needs, including construction and
repairs of VA facilities.
---------------------------------------------------------------------------
The additional cost of providing benefits to Iraqi war veterans
will become a major challenge for the VA. In our conservative scenario
we have estimated that all troops are withdrawn by 2010 and these costs
are for 20 years; in the moderate scenario we have assumed that troops
continue to be deployed through 2015 and these costs continue
throughout the lifetime of the veterans (40 years).
4. Medical Treatment for Brain Injuries
There is a special category of healthcare expenditures that goes
beyond those included in the above calculation--for those with brain
injuries. To date, 3,213 people--20% of those injured in Iraq--have
suffered head/brain injuries that require lifetime continual care at a
cost range of $600,000 to $5 million.\22\ The government will be
required to commit resources through intensive care facilities, round-
the-clock home or institutional care, rehabilitation and assisted
living for these veterans.
---------------------------------------------------------------------------
\22\ Wallsten and Kosec, AEI, The Economic Cost of the War, 2005
and Department of Defense estimates for number of wounded.
---------------------------------------------------------------------------
For the conservative estimate, we have used a midpoint estimate of
a net present value of $2.7 million over a 20 year expected survival
rate for this group, which is about $135,000 per year, yielding a cost
of $14 billion. This amount seems low for brain-injured individuals who
will require round-the-clock care in feeding, dressing and daily
functioning. For the moderate estimate, we use a higher cost estimate
($4m) and assume longer life duration for a total cost of $35 billion.
In both cases we assume that the number injured will rise in a manner
consistent with the duration of the conflict.
5. Disability Pay for Veterans
Veterans of the Iraq war are eligible to claim disability pay and
benefits, ranging up to a maximum of about $44,000 per year, under a
complex formula administered by the Veterans Administration. It is
important to note that that Congressional intent for disability
payments is to ``compensate for a reduction in quality of life due to
service-connected disability payment of this disability''. The benefit
is intended to ``provide compensation for average impairment in
earnings capacity''--but it does not require the veteran to actively
seek employment nor is it offset against post-military civilian
earning. The principle dates back to the Bible at Exodus 21:25, which
authorizes financial compensation for pain inflicted by another.\23\
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\23\ VA Disability Compensation Program, Legislative History, VA
Office of Policy, Planning and Preparedness, December 2004
---------------------------------------------------------------------------
Veterans are awarded claims based on the percentage of disability
they can demonstrate; in gradations (0-100%) though it is possible to
have a 0% disability percentage across multiple conditions and still
qualify a veteran for some disability pay. The presumption for
disability compensation is tied to symptoms that appear within a period
of time after service. There are numerous programs that provide
benefits depending on the situation, including disability compensation,
specially adapted housing grants, medical benefits with higher
priorities, vocational rehabilitation, service-disabled veterans life
insurance, dependency and indemnity compensation (paid to surviving
spouse and children if a veteran dies of an illness or injury
contracted while on active duty, or dies of such after retirement).\24\
---------------------------------------------------------------------------
\24\ This principle is cited in numerous legal cases in which
juries award compensation for injury.
---------------------------------------------------------------------------
We have estimated the amount of claims that the government will
need to pay based on a projection of the rate of claims based on the
Persian Gulf War. The government currently pays $2 billion annually in
support of 169,000 claims, or an average of $11,834 per claimant.
(Hartung, 2004) The total number of claims for that war exceeded
200,000, or more than one-third of the troops deployed, despite the
fact that the war lasted 4 weeks with 148 dead and 467 wounded. Many of
those claims were related to the exposure to depleted uranium during
the Persian Gulf conflict, and included ailments such as memory loss,
sleep problems, Lou Gehrig's disease, poor concentration, and joint
problems. Congress has established a ``presumption of service-
connection'' for any health problems linked to ``exposure to possible
nerve agents and other toxins present in the Persian Gulf conflict and
vaccinations against biological war hazards in preparation for the
Persian Gulf.'' \25\
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\25\ In 1994 Congress passed the Gulf War Veterans Benefit Act,
which legislated a presumption of service connection for an undiagnosed
illness that occurred within an unprescribed time frame, taking into
account the Gulf War Syndrome. This time frame period was extended in
2001 to include any disabilities associated with the Persian Gulf War
service that may appear through Dec. 31, 2011. (VA Disability
Compensation Program, Ibid).
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In the Iraq conflict, more depleted uranium was used in the bombing
of Baghdad than in the Persian Gulf conflict; \26\ therefore the Iraq
war veterans will be easily eligible for disability claims for any
health problems that they can link to exposure. As we noted earlier,
more than one-third of returning veterans have used the VA system for
health ailments. We have estimated that those with serious injuries
would receive the maximum disability benefits from the VA, those with
medium-serious injuries would receive half those benefits ($22,000),
and one-third of the remaining forces would receive the average benefit
awarded to the Gulf War veterans, or $11,834. This sums to an annual
payment of $2.3 billion. In the conservative scenario we have estimated
this payment over 20 years; in the moderate scenario we have assumed
that these payments continue over the lifetime of the veteran, so until
2045.
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\26\ William Hartung, ``The Cost of War'' 2004, Taxpayers for
Common Sense.
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6. Cost of Demobilization
The Pentagon has announced plans to reduce troop levels from their
current force of over 160,000 to around 140,000 in the next year, and
we have assumed that this withdrawal will continue gradually as
outlined by the CBO. This will in itself require direct payments of $6-
10 bn for the transportation and demobilization of troops, returning
them to their home bases, or civilian roles (in the case of Reserves).
7. Increased Defense Spending
Since 2002, the total appropriations for the Defense Department
have increased from $310 bn to $420 bn, representing a total cumulative
increase of $325 bn. Portions of the FY 2002, 2003, 2004 and 2005
appropriations bills, as well as FY 2003 and FY 2004 transfers, have
been appropriated for Iraq. In total we estimate that 30% of the $325
increase has been devoted to Iraq. This figure covers increased
military pay, research and development, recruitment, operations and
maintenance and replacement of equipment. According to Pentagon
estimates, the military is wearing out equipment at a rate that is 4-5
times the rate of usage in non-combat situations.\27\ Additionally, CBO
has estimated that the military will require some $100 bn in
replacements over the next five to 10 years. (Much of this funding has
not yet been requested) \28\ and GAO has referred to the shortfall in
funding for repairs, replacements and procurements \29\ and the
confusion between determining emergency supplemental and ordinary
funding needs.. . .
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\27\ Secretary Donald Rumsfeld said at a briefing on March 10, 2005
that U.S. military equipment such as tanks, Bradley fighting vehicles
and helicopters are being worn out at up to 6 times the peacetime rate.
(Washington Post, 3/11/05)
\28\ Scott Lilly, staff director of the House Appropriations
Committee, said the Army would need more than $17.5 bn to replace or
repair worn or damaged equipment in the first year of the war. But the
Army's request for depot maintenance and procurement was only about
$2.2 bn in the supplemental. ``Pentagon's Request for Iraq includes
money for troops and rewards'', New York Times, 10/03/03. Additionally,
Rep. Duncan Hunter, Chairman of the House Appropriations Committee, has
cited figures that the Defense Department needs $90 bn per year in
annual modernizations and at present levels, is still $30 bn short,
based on CBO estimates. (Wall Street Journal, 5/03)
\29\ The GAO has also referred to the shortfall in funding requests
for military replacements. (GAO, ``Global War on Terrorism: DOD Should
Consider All Funds Requested for the War When Determining Needs and
Covering Expenses.''
---------------------------------------------------------------------------
In our estimates, we have attributed one-third of the increase in
Defense spending to Iraq, minus the savings from no longer policing the
no-fly zone to the Pentagon. Savings from the no-fly zone have been
estimated to be from $11 to $15 bn per year.\30\ Given that the
Department is highly focused on the outcome of the war in Iraq, we
estimate that up to one-half of the increase in the defense spending
may be related to Iraq, but we have used only 30% of the spending in
our conservative and moderate scenarios.
---------------------------------------------------------------------------
\30\ Wallsten and Kosec estimate savings from the no-fly zone at
$32 bn in the nearly 3 years since March 2003. John Amidon of the Air
War College estimates the cost of policing the no-fly zone at $15 bn
per year.
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In addition, this increase reflects the military's increasing
difficulty in recruiting troops and officers at all levels since the
beginning of the Iraq conflict. During 2005, the Army was below target
for most of the year, and actually lowered its targets in order to
achieve them.\31\ There were shortfalls in the Army National Guard,
Army Reserves, and Marine Reserves. Applications to West Point and the
U.S. Naval Academy also fell between 10-25% from previous years. The
military has responded to this challenge by hiring thousands of
additional recruiters, increasing its national advertising campaigns,
offering sign-up bonuses of up to $40,000 for new recruits, offering
higher retirement and disability benefits, increasing the ``death
gratuity'' to $100,000, and providing re-enlistment bonuses of up to
$150,000 for experienced troops (who might otherwise leave the military
to join private contractors who would pay even higher amounts). In
further efforts to boost recruitment, the Pentagon increased the
maximum enlistment age from 35 to 42 and relaxed standards for
appearance and behavior, making it more difficult to be fired. The cost
to the military per recruit has increased from $14,500 in 2003 to
$17,500 in 2005. (Pentagon). Hardship pay has been increased from $300
to $750 per month. We assume that the military will need to make these
changes permanent, adding at least $1 bn-$2 bn per year into the
permanent budget base. Additional increases include military pay
raises, and the purchase of more expensive body armor for combat.
---------------------------------------------------------------------------
\31\ For example, the May recruiting target was originally 8050,
but was lowered to 6706. Similar adjustments were made throughout the
year.
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8. Interest Payments on Debt
Given that at the onset of the War, the country was already running
a deficit, and no new taxes have been levied, it is not unreasonable to
assume, for purposes of budgeting,\32\ that all of the funding for the
war to date has been borrowed, adding to the already existing Federal
budget deficit. In the conservative scenario we assume that these funds
are borrowed at 4% and repaid in full within five years. The moderate
scenario assumes that the country continues to have a deficit over the
next 20 years and therefore interest continues to accrue.
---------------------------------------------------------------------------
\32\ An economic analysis is somewhat more complicated, as the
discussion in section IV will make clear.
---------------------------------------------------------------------------
II. Costs of the War to the U.S. Economy: Adjustments to the Budgetary
Estimates
A second way to measure the cost of the war is to examine its
economic cost. Economic costs differ from budgetary costs in three
ways: (a) costs are borne by others (than the Federal government and
those fighting in the war), and these are obviously excluded from the
budgetary costs to the Federal government; (b) the prices paid by the
government do not reflect full market value; and (c) economic costs do
not include interest payments (which can be viewed just as transfer
payments), but do include long run impacts on the growth of the
economy. For instance, in the days of the draft, pay provided soldiers
were a vast underestimate of their opportunity costs. Healthcare costs
borne by soldiers and their families are examples of costs borne by
others.
Here, we focus on the loss of productive capacity of the young
Americans who have been killed or seriously wounded in Iraq, and the
loss of civilian wages that would have been earned by those called back
to duty in the Reserve forces.
There are some ``problematic'' items within the budgetary costs,
most notably expenditures on veterans not linked with the Iraq war. The
best way to think of this is as part of deferred compensation, and
therefore, while the ``categorization''--repairing human damage as a
result of the war--is incorrect, it is still part of the cost of the
war.
Once again we have estimated the costs under two scenarios. In the
conservative case, the adjustments add $187 bn onto the budgetary
cost--raising the cost to $839 bn, even when subtracting the entire
cost of interest payments. In the moderate case, the economic
adjustments increase costs by $305 bn. Even if we deduct the cost of
interest, the cost of the war under this scenario exceeds $1 trillion.
But these calculations ignore the fact that some of the resources
deployed in the war could have been used to promote economic growth,
and that there are a broad range of macro-economic costs, the effect of
which, as we shall show in the next section, is to increase the
economic costs of the war by a significant amount.
Figure 2: Adjustments to Budgetary Numbers to Account for Economic Costs
($BN)
------------------------------------------------------------------------
Conservative Moderate
------------------------------------------------------------------------
1 Spent to Date 3 8
2 Economic Cost of Reserves 3 9
3 Economic Cost of Fatalities 23 29
4 Loss due to Brain Injuries 34 48
5 Loss due to Other Serious 30 64
Injuries
6 Loss due to Other Injuries 18 26
7 Less veterans disability (12) (28)
payments
8 Increased depreciation of 89 149
military hardware
Net Adjustment 187 305
------------------------------------------------------------------------
The cost of the war to the United States, before taking
macroeconomic factors into account, can therefore be estimated under a
variety of assumptions to fall between $700 bn and $1 trillion dollars,
as shown in Figure 3.
Figure 3: Projected Cost of the Iraq War ($US bn) without macroeconomic costs
----------------------------------------------------------------------------------------------------------------
Budgetary cost Budgetary Cost (inc. Cost with Economic
Scenario (without interest) interest) Adjustments \33\
----------------------------------------------------------------------------------------------------------------
Conservative 652 750 839
----------------------------------------------------------------------------------------------------------------
Moderate 884 1269 1189
----------------------------------------------------------------------------------------------------------------
Differences between assumptions for economic and budgetary models.
1. Economic Cost of Reserves
\33\ Budgetary cost without interest+economic adjustments.
---------------------------------------------------------------------------
As we noted earlier, the U.S. force in Iraq is composed of 40% the
National Guard and Reserve forces. Many of these men and women normally
work in critical ``first responder'' jobs in their local communities,
such as firemen, policemen and emergency medical personnel. More than
210,000 of the National Guard's 330,000 soldiers have served in Iraq or
Afghanistan, and the average length of Guard mobilization is 480
days.\34\ It is difficult to measure the cost of this deployment in
purely economic terms because there is a large unquantifiable cost in
terms of the loss of these ``first responders'' to emergencies,
including the value of the ``insurance'' of having these people ready
to respond to emergencies. This was clearly seen in the Hurricane
Katrina debacle, where 3000 Louisiana National Guardsmen and 4000
Mississippi Guardsmen were stationed in Iraq when the hurricane hit.
According to the Institute for Policy Studies, some 44% of U.S. police
forces have some of their ranks deployed in Iraq. The loss of these
services in Katrina and elsewhere clearly has had large budgetary and
economic costs. We do not directly measure either the economic costs of
the loss of ``insurance'' or the economic and budgetary costs arising
from reduction in first responder capabilities (which may have been
considerable.)
---------------------------------------------------------------------------
\34\ IPS, Ibid.
---------------------------------------------------------------------------
Still, there are some quantifiable economic costs that go beyond
those noted earlier in our budgetary analysis. In the budgetary model,
we included (as part of operating costs) the additional cost to the
government of hiring replacements for those sent to Iraq, which is
around $3 bn per year. In this model, we have subtracted that sum from
the total cost of operations but added in the economic cost of the
difference between the civilian wages that these individuals would earn
in their regular occupations and the lower wages they typically earn in
the Reserves. Scott Wallsten and Katrina Kosec (AEI/Brookings, 2005)
have calculated that Reserve soldiers earn about $33,000 per year as
civilians. They estimate that the opportunity cost of using Reserve
troops at current levels is $3.9 billion to date. We have adopted that
figure into our conservative assumptions. In our moderate model, we
have increased the pay per Reservist slightly to $46,000, taking into
account the fully loaded cost of benefits, particularly for those
reservists who are in police and fire departments and receiving 60-100%
benefits.\35\
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\35\ It is apparent (evidenced by increased difficulties in
recruiting) that individuals did not fully appreciate the risks they
faced when joining the reserves, so that the wage received does not
reflect adequate compensation for those risks. This is particularly
true because of the stop-loss policy which requires troops to extend
their tours, with some 20,000 having in fact been prevented from
leaving their service at their scheduled dates. A full adjustment of
the economic costs would include appropriate compensation for the risks
taken. See below.
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2. Economic Cost of Military Fatalities
The budgetary model only incorporates the payments made to
individuals as a result of death. Had these individuals been killed in
a car accident or a work related accident (other than military) there
would have been much larger payments, reflecting the economic costs of
the losses.
Although it is impossible to translate the value of a life into
purely monetary terms, the government commonly uses this approach and
determines the ``Value of statistical life'' or ``VSL'', based to some
extent on the value of foregone earnings and contributions to the
economy. This method is also widely used by insurance companies and
other private sector concerns. In this study, we have estimated the VSL
of each U.S. military and contractor fatality as of December 2005.
According to the Pentagon casualty reports, this is 2156 military
fatalities and approximately 100 contractors.\36\ We have projected
these forward according to the two different scenarios described
earlier.
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\36\ In the case of the contractors, one might argue that their
wages (already included in the analysis) includes compensation for the
risk of the loss of life, so that the value of the loss of these 100
contractor lives should be subtracted (reducing the overall cost of the
War by some $600 million.)
---------------------------------------------------------------------------
We have not taken into account the number of Iraqis who have been
killed in the conflict, estimates of which range from 30,000 (the
number estimated by President Bush in December 2005), to a 100,000
estimated by the British Lancet. We have also not counted the several
hundred casualties among coalition countries, of which about 100 were
British soldiers.
There are a wide range of VSL values in use. In our conservative
scenario, we have adopted the standard set by the U.S. Environmental
Protection Agency, $6.1 million per life. However this is only an
approximation. The value of a young life may be determined to be higher
than average, based on an estimate of foregone earnings (Viscusi and
Aldy, 2005\37\.) Juries frequently award much higher amounts in
wrongful death lawsuits, and some have reached as high as $269
million.\38\ We have used the number $6.5 million in our moderate
scenario. In projecting the number of fatalities and casualties
forward, we have assumed that these would be proportional to the number
of troops deployed in Iraq, based on the average number of casualties
per month to date. However, even this is a conservative estimate, since
the number of casualties has been increasing.
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\37\ The ``peak'' age for VSL may be 29, in terms of lost earnings
potential, with a VSL between $5.9 and $7.5 (Viscusi, and Aldy, NBER
Working Paper 10199, 2003)
\38\ There have been hundreds of large jury awards (ranging from $2
m-$269 m) in wrongful death suits over the past 5 years. These include
the awards of $112 to Elizabeth and John Reden of New York for a
malpractice case in which their daughter suffered brain damage (2004)
and $43 in Louisiana in 2001 for Seth Becker, a 24-year old who needed
both legs amputated after an injury he sustained while working for
Baker Oil Tools. In both of these and many other cases the amount
awarded was determined primarily on the basis of the cost of round-the-
clock medical care for life that the injured person would require. The
$269 m award was for Rachel Martin, a 15-year old Texas girl who died
in 1998. In most cases the plaintiffs receive less than the total
award, typically about 10%.
---------------------------------------------------------------------------
3. Economic Cost of Contractor Fatalities
There have been about 100 U.S. contractors killed in Iraq since
March 2003 (as well as some non-U.S. contractors, mostly working for
western companies.) In this model we have only included the U.S.
contractors, and extrapolated the numbers according to the two
different war scenarios. We have used the VSL of 6.1 million and 6.5
million, respectively, for the conservative and moderate models.
However it should be noted that in many cases, the contractors were
highly skilled, highly paid specialists, working on reconstruction
projects such as fixing the electricity grid and oil facilities. We
have not counted their true loss to the success of the project in Iraq,
or the fact that their high casualty rate has made it more difficult
and more expensive for western contractors to higher replacements to
perform these jobs.
4. Economic Cost of the Seriously Injured \39\
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\39\ One might argue that for those joining the army and reserves
after the beginning of the War, the increased compensation already
incorporates the (present discounted value of) loss in welfare from the
increased injuries (deaths), and so including both item 10 from table 1
and items 2 and 4 from table 2 represents ``double counting.''
Therefore, it may be argued, we should subtract $5.3 (conservative;
$8.76 in moderate case) from the total. However, there is no reason to
believe that those enlisting have a good sense of the actual risks
(there is no evidence that the armed forces provides accurate
information to the enlistees) and the increased compensation reflects
no just increased probability of injury and death, but also the stop
loss provisions which did not allow individuals to leave the services
at the scheduled time. In any case, the basic pattern of results is
unaltered.
Earlier, we described the budgetary costs of healthcare and
disability for the seriously injured. The wounded contribute
significantly to the cost of the war--both in a budgetary sense (in the
form of lifetime disability payments, housing assistance, living
assistance and other benefits from the Veterans Administration), and in
an economic sense. The budgetary expenditures discussed earlier
underestimate the true economic costs for three reasons: (a) They do
not include adequate compensation for ``pain and suffering,'' of the
kind that would have been provided, for instance, had those suffering
injuries been hurt in an automobile accident; (b) they do not include
additional healthcare expenditures by the parties themselves, their
families, or other government agencies; and (c) perhaps most
importantly, they do not include the loss of economic services. On the
other hand, they do include healthcare expenditures that may not be
directly a consequence of the war. However, as we noted earlier, we are
treating this as part of the deferred compensation, and therefore it is
both a budgetary and an economic cost.
In their recent study of the economic costs of the war, Wallsten
and Kosec used a ``value of statistical injury'' to estimate the cost
of the wounded. This value represents what people are willing to pay in
order to avoid being injured. They applied this value to the number of
injured personnel, according to the severity of their injuries and the
average cost of treatment over its lifetime. They calculated total net
present value of injuries at $18.2 bn to date, and $48 bn through 2015,
using a 5% discount rate.\40\
---------------------------------------------------------------------------
\40\ This is based on their ``midpoint'' scenario. Their high
estimate is $74 bn.
---------------------------------------------------------------------------
The Wallsten and Kosec study is quite thorough and we have used
their estimates of the number and type of wounds, and lifetime
treatment costs. However, they probably underestimated the total cost
of the wounded because they only assigned an amount to the 26% with
brain injuries and/or amputations. We have included additionally the
cost of the 21% of personnel (5545 people, as of December 2005) with
other serious wounds. Such injuries would include wounds from shells,
explosions, gunfire, mortar, landmines, grenades, firearms and
infections, resulting in conditions such as blindness, partial
blindness, deafness, partial deafness, cardiac injury, facial
deformation, burns, multiple broken bones, nerve damage and mental
breakdown. We have deducted the veterans' disability payments from all
these individuals.
We have estimated that personnel with serious injuries (including
brain injuries) receiving full disability payments will essentially be
lost to the economy and therefore we should assign them a VSL similar
to the deceased, of $6.1 m. In the Conservative case, we have estimated
that those who were wounded during the conflict, but returned to the
military will suffer some impairment beyond the small amount of
disability pay they may receive. We have very conservatively estimated
that 20% of the total VSL would be an approximation of this impairment.
Taken together, this adds approximately $70 bn.
Under our moderate scenario, we have used a similar formula, but
using an estimate of $6.5 m for the VSL and assuming that there are
more casualties, due to the longer duration of the conflict. Less
disability payments this adds another approximately $110 bn.
There is another significant cost that we have not included, simply
because we did not have the data to prepare a robust estimate. This is
the degree of impairment that will be suffered by the other veterans--
numbering some 160,000, or approximately one-third of the 550,000
veterans from the Iraq war--who will be eligible to claim some
disability benefits. We believe that a significant number of these
individuals will suffer substantial mental and physical ailments that
will significantly reduce their earning potential and quality of life.
If even 15% of these veterans fall into this category, this alone would
add another $30-35 bn to the economic cost of the war.\41\
---------------------------------------------------------------------------
\41\ Assuming 20% of the VSL for 24,000 individuals.
---------------------------------------------------------------------------
A conservative estimate of the risk premium individuals would
require to be compensated for the injuries (beyond the loss of economic
functionality and healthcare costs) could (with reasonable estimates of
risk premia) double the total.\42\ We have, however, omitted those
numbers from the analysis.
---------------------------------------------------------------------------
\42\ Individuals are willing to pay insurance premia that are
typically 60% to 120% of the value of the loss. In the case of the loss
of limbs and other major bodily injuries, the risk premia are likely to
be considerably higher.
---------------------------------------------------------------------------
5. Accelerated Depreciation of Military Hardware
There is only a slight difference in the estimate of the budgetary
and economic costs associated with military hardware. The budgetary
costs focus on replacement expenditures, the economic costs on the more
rapid depreciation of hardware (than otherwise would have been the
case.) In our conservative scenario, we have simply estimated straight-
line 5-year depreciation for the $100 m in military replacements
estimated by the House Armed Services Committee and CBO, over the next
5 years. This is in line with the DOD's assessment that equipment is
being used up at 5 times the normal rate of utilization in peacetime.
We are assuming that the Pentagon will incur at least an additional $25
bn in replacements through 2015, in the moderate scenario.
III. The Macro-economic Effects of the War in Iraq
As large as the direct costs--current and future--are, the macro-
economic consequences may even be several times larger.\43\ There are
at least three major sources of macro-economic consequences: (a) the
increase in the price of oil; (b) the increase in defense expenditures;
and (c) the increased insecurity that has followed from the way that
the war has been pursued.
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\43\ We provide here preliminary estimates of the costs so far, and
what those costs might be expected to be under various scenarios. We do
not provide what would have been a reasonable estimate of the costs at
the time that the United States went to war. Given the administration's
attempt to minimize the expected costs, it is not surprising that they
did not take into account all of the costs discussed in this section.
---------------------------------------------------------------------------
In ascertaining the magnitude of these macro-economic effects,
there is a standard problem: the counterfactual, what would the world
have looked like, but for the war in Iraq.
Security
Consider the issue of security. The bombings in Madrid and London
have only exacerbated a growing sense of insecurity. Would matters have
been even worse had there been no war? One of the stated objectives of
the war was to enhance the sense of security (to make sure that the war
on terrorism was fought there, not here.) It is conceivable that the
Middle East would have been even more unstable than it is today. But
especially on the basis of what we know today--Iraq did not have
weapons of mass destruction, and it did not have the capacities to
develop them quickly--this seems unlikely, Contrary to the assertions
before the War by the administration, Iraq (with its highly secular
regime) was not working with Al Qaeda, and was not a training ground
for insurgency. Unfortunately, the disorder that has followed the war
has provided a place where such training is going on today.
The costs of this insecurity are potentially huge.
a. Individuals are risk averse, and there is thus a direct
quantifiable cost associated with the increase in risk.
b. The response to security threats has been to create
significant barriers to the free flow of people, goods, and
services. The Administration champions the virtues of free
trade and the benefits from lowering trade barriers, even when
those barriers are already low. But increased border security
(including airport security, the reporting and registration
requirements of the bioterrorism act, and so forth) are trade
barriers; not only are there direct costs associated with
administering these security measures, there can be significant
macro-economic effects of the reduced flow of goods and
services. A special category of costs is associated with the
significantly reduced flow of students to the U.S., especially
in areas of science and technology, where we have become very
dependent on these ``imports.'' (Many have stayed and made
large contributions to the economy.)
c. Increased risk is bad for business; it lowers investment,
and over the long run thus has supply side as well as demand
side effects.
Calculating these costs--and particular, the incremental costs
associated with the Iraq War (beyond the costs which would otherwise be
associated with the War on Terrorism)--is sufficiently difficult and
problematic that we do not provide any estimates here. But it means
that the numbers reported below almost surely underestimate the total
macro-economic effects.
Oil
The price of oil is significantly higher today than it was before
the War in Iraq. Even as the country went to war, it was recognized
that it might have effects on the global oil market. Some of the
remarks of those in the administration seem to suggest that it may have
even been a factor driving the country to war. Larry Lindsey is
reported to have said, ``the best way to keep oil prices in check is a
short, successful war on Iraq . . .'' \44\
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\44\ Wall Street Journal, September 15, 2002.
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The higher price of oil brings costs and benefits. Profits of the
oil companies have increased enormously.\45\ It is the one group
(besides certain defense contractors) that has clearly benefited from
the war. (Though popular discussions of the still not-clear motives for
going to war often focused on oil, there is so far no reason to suppose
that these benefits to one of the President's ``constituencies'' played
an important motivation.) Here, we are concerned with the costs to the
overall economy of these high oil prices.
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\45\ In 2005, four of the ten most profitable corporations in the
world are oil and gas companies--Exxon-Mobil, Shell, BP and Chevron
Texaco. In 2002, only one of the top 10 most profitable corporations
was from the oil and gas industry. Source: The Forbes Global 2000,
http://www.forbes.com/2005/03/30/05f2000land.html, http://
www.forbes.com/2002/03/27/forbes500.html.
---------------------------------------------------------------------------
First, however, we have to ascertain to what extent has the
increased price (from $25 a barrel before the War to around $50 today--
ignoring the spike associated with Katrina when prices rose to $60)
been a result of the war itself.\46\ Again, the question is, what is
the counterfactual? What would the price have been had there been no
war? To what extent is the rise in price due to the war, and to what
extent is it due to other factors?
---------------------------------------------------------------------------
\46\ Oil price averaged $23.71/barrel during 2002. In run up to the
war, price rose to $32.23 by February 2003 (war began on March 20,
2003). One has to interpret a significant part of the run up of costs
prior to the war to the war itself--an increase in stockpiling in
response to worries about supply interruptions. The price averaged
$27.71 in 2003, $35.90 in 2004 and rose to $49.28 by June 2005. After
Katrina, prices have stayed relatively high. As we argue, part of the
cost of the War is the reduction in the capability of responding
quickly to these supply shocks.
---------------------------------------------------------------------------
Future markets provide some insight. Before the war, they were
forecasting that oil prices remain in the range that they had been, $20
to $30. Futures markets take into account growth in demands in China
and elsewhere as well as changes in supply. They do so on the basis of
``business as usual,'' that is, on the basis that nothing out of the
ordinary happens. The war in Iraq was the most notable event, and it is
hard to identify any other which can be given as much credit for
significant change in demand or supply (apart from Katrina). Some might
blame the high demand for oil from China. But China has had two decades
of robust growth, and its growth in 2004 was stronger than many market
analysts had anticipated earlier; but global growth in 2005 (of around
4%) is clearly not particularly unusual. Markets are supposed to
anticipate and respond to changes in demand by increasing supply.
Errors in one year are quickly corrected in the next.
What is striking is that present prices are significantly higher
than what most analysts believe is the long run price, and futures
markets expect that such prices will persist for at least another 2
years.\47\ That is, costs of extraction in Iraq (apart from the
security concerns), Saudi Arabia, and elsewhere in the Middle East are
much lower than $40, and at $40 there are many alternative sources
(shale, tar sands) with a large supply elasticity. The question is, why
has there not been this normal supply response. We suggest that the War
in Iraq provides the critical explanation.
---------------------------------------------------------------------------
\47\ Futures market predicts the price to remain mid $60 range
during 2006 and 2007 and then fall in 2008.
---------------------------------------------------------------------------
Had there been no war, and had price increased, the international
community could have allowed Iraq to expand production, and this would
have brought down the price. But it is more likely that production
elsewhere, including and especially elsewhere in the Middle East, would
have increased. The instability in the Middle East which has been
brought about by the Iraq War has increased the risk of investing in
that region; but because costs of extraction are so much lower than
elsewhere, it has not provided a commensurate supply response
elsewhere. If stability is restored, then prices will fall, and these
investments elsewhere would turn a loss.\48\
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\48\ The increase in the price immediately after the war can be
partially directly attributed to Iraq, as what it had been supplying to
the world markets under the oil-for-food program was greatly diminished
(by almost 1 mbd). Oil prices had, of course, increased even before the
war, in anticipation of these effects, so that the costs of the war
began even before the war itself.
---------------------------------------------------------------------------
In addition, there is the fact that oil production in Iraq has
plummeted since the war. Even though Iraq is not an oil producer on the
scale of Saudi Arabia and Russia, Iraq did produce around 2.6m barrels
per day (a similar level to Kuwait, Nigeria and the UK) on the eve of
the war. Now production has dropped to 1.1 million barrels per day. The
insurgency has sabotaged refining capacity and truck drivers have
refused to transport oil from the north, due to the threat of
insurgents.\49\
---------------------------------------------------------------------------
\49\ Iraqi Oil production statistics from Pearson Education. Iraq
produced 3.5 million barrels per day in 1990, prior to the Gulf War,
and is said to have one of the world's greatest oil reserves.
---------------------------------------------------------------------------
Though we believe, accordingly, that the best estimate of the cost
of Iraq on oil prices is a very large proportion of the $25 a barrel or
more increase in the price of oil (and looking forward, we can
extrapolate this cost for the next two years), we provide a
conservative calculation based on the assumption that only 20% of that
amount--$5--is due to Iraq. In our moderate estimate, we assume $10 is
due to Iraq.
Figure 4: Impact of Oil Prices
----------------------------------------------------------------------------------------------------------------
Refiner
Total Crude Oil Total Import Per Acquisition Cost Total Cost of
Year Import (Thousand Year (Billion of Crude Oil, Oil Import
Barrels Per Day) Barrels) Imported ($/ (Billion US$)
Barrel)
----------------------------------------------------------------------------------------------------------------
2000 11459.3 4.19 27.7 116.2
----------------------------------------------------------------------------------------------------------------
2001 11871.3 4.34 22.0 95.3
----------------------------------------------------------------------------------------------------------------
2002 11530.2 4.22 23.7 99.8
----------------------------------------------------------------------------------------------------------------
2003 12264.4 4.49 27.7 124.0
----------------------------------------------------------------------------------------------------------------
2004 13145.1 4.81 35.9 172.7
----------------------------------------------------------------------------------------------------------------
2005* 13415.5 4.91 47.9 234.7
----------------------------------------------------------------------------------------------------------------
2006** 13952.1 5.11 57.4 292.3
----------------------------------------------------------------------------------------------------------------
2007** 14510.2 5.31 65.0 344.3
----------------------------------------------------------------------------------------------------------------
* Average for the first 9 months of 2005. The total import cost is for the 12-month period using the 9-month
average.
** Assuming 4% growth in 2006 and 2007. \50\
Given U.S. imports of roughly 4.75 to 5.0 billion barrels a year, a
$5 per barrel increase translates into an extra expenditure of
approximately $25 billion ($10 would be $50 billion). Americans are, in
a sense, poorer by that amount.
---------------------------------------------------------------------------
\50\ Data compiled from Energy Information Administration,
Department of Energy, U.S. Government, http://www.eia.doe.gov/emeu/
international/petroleu.html#IntlProduction
---------------------------------------------------------------------------
In a neoclassical model that assumes full employment of all
resources, this would be the principle effect on national income. If
the economy continues to use all of its resources fully, gross output
remains unchanged; only what is paid for inputs of oil has increased,
so that value added (GDP) is reduced commensurately.\51\
---------------------------------------------------------------------------
\51\ That is, simplifying, if we write GDP = vL + p, where p is
profits, v is real wages, and L is employment, then <diffl>GDP/<diffl>p
= M + v<diffl>L/<diffl>p, where p is the price of oil and M is imports.
The last term is the effect of the price of oil on the amount of labor
individuals wish to supply, which we assume is negligible. Note that
when there is a large change in price, the effect is measured by DpM*,
where M* is some number between the level of the actual imports and
what the imports would have been, had the price of oil not increased.
Given the low short run elasticity of the demand for oil, the
difference may be small.
---------------------------------------------------------------------------
Assuming that a $5 price increase persists for 5 years, this
generates a conservative estimate of $125 billion. For our moderate
estimate, we use a $10 price increase, but more plausibly, assume it
extends (as future markets believe) for at least 6 years. That
generates a cost of $300 billion.
This supply side approach assumes that if the price increase is
reversed, the damage is over. To put it another way, this simple model
implies that if first the price goes up by $10 for 1 year, and then
down by $10 by 1 year (from its baseline), and then is restored to its
previous level, there is no cost. This is wrong. There is a cost to
this volatility. The technology, for instance, that is best adapted to
one set of prices will not be that appropriate for another. And the
costs can be significant. This is consistent with macro economic
studies that show large asymmetries between the impacts of increases
and decreases in oil prices.\52\ Thus this analysis of a 5-year period
of high prices, which assumes that the only cost is the increased
transfer abroad, provides a significant underestimate of the true
economic costs. We have not, however, provided an estimate of this
additional cost.
---------------------------------------------------------------------------
\52\ See, e.g., Rodriguez, 2005.
---------------------------------------------------------------------------
Global Income and Price Effects
The value of national income is affected by the prices of other
goods the country imports or exports, and these too can indirectly be
affected by the increase in the price of oil. If, for instance, a
global increase in the price of oil leads to a decrease in the price of
other commodities (because of a global slowdown), then America is
thereby better off. These effects are complex and likely in any case to
be small.
There may be some commodities that the United States exports in
which it has market power. In that case, we take firms as setting the
price of exports to maximize profits. An oil price shock lowers income
of buyers of American products, shifting the demand curve over to the
left. The income effect (at least for a small perturbation) is just the
change in profits at the old price. If markets are fairly competitive,
the effect is small, but especially in areas of the New Economy where
mark-ups are large, the losses in income can be significant. We have
not, however, directly tried to estimate the magnitude of these
effects.
Most macro-economic analyses, however, assume that there are more
than just these (neoclassical or) supply side effects. This is
especially important when the economy is operating below full
employment. We noted that with the increase in oil prices, Americans
are poorer; they have that much less to spend on other goods--including
goods made in the United States. There will be a reduction in aggregate
demand, and the reduction in aggregate demand caused by an increase in
oil prices is likely to result in a lower level equilibrium output.
The Macro-economic Counterfactuals
The net effect depends on the macro-economic state of the world and
how policy makers respond. If the economy is already in a world in
which there is excess supply (demand constrained), then we need to
focus on how monetary and fiscal authorities respond to stimulate
demand. If the economy were in a state of excess demand, then the
dampening of demand would lower inflationary pressure, but would leave
output largely unaffected. Unfortunately, the post Iraq War world is
one in which there has been excess supply (demand constrained output)
in all of the major economies.
Monetary policy response is determined by two offsetting factors.
The oil price increase generates some inflationary pressures, and
especially among central banks focusing on inflation, this leads to
higher interest rates, exacerbating the slowdown of the economy. On the
other hand, if central banks focus on aggregate demand and
unemployment, it is conceivable that monetary policy could offset the
adverse effects of oil price increases. If they fully offset the
effect, then the only effect would be the transfer effect described
earlier.
Fiscal policy typically does not adjust quickly enough to stabilize
the economy (and the effect of built-in automatic stabilizers is
reflected in the multipliers discussed below). Again, there are two
effects. For countries with fixed expenditures, then the increase in
the oil price means that there is less to be spent on domestic goods,
and that exerts a downward effect on the economy. On the other hand,
for countries running active countercyclical fiscal policies, the
slowdown in the economy could be offset by such policies.
With Europe's Central Bank focusing on inflation, the higher
inflation resulting from higher energy prices most likely contributed
to higher interest rates than they otherwise would have been, and thus
a further weakening of the economy. Fiscal constraints (the growth and
stability pact) has also meant that fiscal policy could not respond; on
the contrary, increased government expenditures on energy meant there
was less to spend on domestically produced goods and services, again
contributing to the weakening of aggregate demand. In short, for
Europe, the contractionary effects including policy responses are
greater than without them.
In Japan, with interest rates close to zero in any case and fiscal
policy stretched to its limits, probably little policy response can be
attributed to the oil price increase.
The United States is the most problematic. It appears that fiscal
policy has not been closely related to the short run cyclical state of
the economy. (The worsening of the fiscal position of the United States
may have contributed to the resolve by some moderate Republicans not to
cut taxes or expand expenditures as much as they otherwise would have
done.\53\ In this sense, the oil price increase has probably had a
negative effect on cyclical fiscal policy, i.e. the multipliers are
larger than they would be if fiscal authorities took a ``neutral''
stance.) So too for monetary policy: the increased inflationary
pressure from the high oil prices would, if anything, led to a
tightening of monetary policy in response to the high oil price,
leading to a larger multiplier.
---------------------------------------------------------------------------
\53\ The tax cut of 2003 occurred roughly contemporaneously with
the War in Iraq. It does not appear that the War played any significant
effect either in support or opposition to its passage; though it is
likely that had the magnitude of the expenditures been identified, it
might have weighed against the tax cut.
---------------------------------------------------------------------------
We have not carried out a full global general equilibrium analysis,
but rely instead on results of standard macro-economic models. These
suggest an ``oil multiplier'' of around 1.5 (achieved over 2
years).\54\ Thus, assuming that the economy remains below its potential
over the period of analysis, and focusing on the total impact (not the
timing), our conservative estimate is increased to $187 billion,\55\
and our more reasonable estimate to $450 billion. These models too have
no feedback from exports.\56\
---------------------------------------------------------------------------
\54\ One-year multipliers are typically smaller, but our concern is
with the total impact, not the timing of the impact (the focus of most
short run GDP forecasting models.) See Blinder and Wescott, 2004, based
on model simulations from Global Insight, Inc. simulation results
supplied August 9, 2004 (results with a monetary policy reaction
function engaged and disengaged were essentially the same); and
Macroeconomic Advisers, LLC simulation results supplied August 2, 2004.
\55\ Increased expenditures on oil can adversely affect consumption
(as households have less to spend on other goods), investment (as
firms, other than producers of oil, see profits decrease from what they
otherwise would have been), and government expenditures on domestically
produced goods (as with budget constraints, there is less to spend on
these). Impacts on households are, for instance, marked. Median
household expenditures on gasoline and home heating have increased
about 5% of household income. Given the low (zero) level of savings,
this can be expected to translate into an equivalent reduction in
expenditures on other goods.
\56\ While these models predict the effects are not fully felt for
two periods, they also predict that the effects are felt even after the
prices come down. Our calculations ignore the timing of the impacts.
Oil price shocks have effects that are different (and presumably
greater) than many other shocks, since they adversely affect all of the
advanced industrial countries simultaneously.
---------------------------------------------------------------------------
Global Effects
There are some studies, however, which obtain much larger results.
The IMF's models yield results with longer lags, but with full effects
that are almost 4 times as large.\57\
---------------------------------------------------------------------------
\57\ See International Monetary Fund, ``The Impact of Higher Oil
Prices on the Global Economy,'' Dec. 8, 2000, prepared by Research
Department staff under the direction of Michael Mussa; cited in Blinder
and Wescott.
---------------------------------------------------------------------------
One of the standard studies, that of Hamilton, estimates that in
the past a 10% increase in the price of oil has been associated with a
1.4% decrease in GDP. A $5 increase in the price of oil thus implies a
lowering of GDP by 2.8%, or approximately ($300 billion) per year that
oil prices remain at that level. A 5-year price rise would generate
costs of $1.5 trillion. Hamilton's analysis is consistent with an oil
price multiplier that is much larger than the earlier studies.
There are two possible explanations of the large discrepancies in
results. The first has to do with the analysis of global general
equilibrium results, and can be seen most sharply in the context of a
``counterfactual'' which has governments maintaining a fixed level (or
percentage of GDP) deficit. In the standard model, what limits the
multiplier are leakages, income which is not spent ``domestically,''
but is taken out of the system, and spent abroad, or by government. In
both cases, the feedback of income into further expenditures stops. But
if we take a global equilibrium approach, then the money spent abroad
is part of the system. If we include government endogenous expenditures
as part of the system, then as taxes are taken out of disposable
income, government spends the increased revenues, just as if the
individual himself had spent them. (There can be even ``negative''
leakages; if the government maintains a fixed deficit to GDP ratio, a
stimulus--such as a fall in oil prices--leads to a higher GDP, and so
an increase in government expenditures. Thus, for a global closed
economy, the multiplier increases from 1/s(1-t) + t, in which taxation
reduces the multiplier, to 1/(s(1-t)-d, where taxation increases the
multiplier (where s is the savings rate, t the tax rate on income, and
d the allowable deficit to GDP ratio). Thus, if d = 0, s = .2 t = .25,
the multiplier increases from 1/.4 to 1/.15, i.e. it increases by a
factor of almost 3.\58\
---------------------------------------------------------------------------
\58\ Y = (1-t)(1-s)Y + tY + dY + I + X-mY, since G-tY = dY, so Y =
I + X/ (s(1-t) + m-d
---------------------------------------------------------------------------
(Of course, we need to model the oil exporting countries as
separate from the oil importing countries, and spending a substantially
smaller fraction of the income on American goods than Americans would.
If Saudi expenditure and savings patterns were identical to those of
Americans, then the change in the price of oil would simply be a change
in the distribution of income, but have no effect on aggregates,
besides the supply side effects originating from the higher price of
oil. We have slightly overestimated the negative effects on American
GDP by assuming that there is no feedback from increased Saudi income
back to the United States.)
If we further include future consumption generated by extra
savings, then even savings does not constitute a leakage, so long as
over the prevailing time horizon, the economy remains in a demand
constrained situation. In short, leakages are much, much smaller, when
multiyear aggregate incomes are calculated. These dynamic feedbacks are
even present in first year income. Thus, increased savings this year
leads to increased wealth next year, and that increased wealth leads to
increased output (if output is sensitive to demand). But rational
consumers will realize this; \59\ their lifetime income has gone up,
and so too will their current consumption. In calculating the cost of
the War, we are concerned not just with the impact today, but the
impact in all future years. Calculating the total multipliers requires
assessing the fraction of future periods\60\ in which it is reasonable
to assume that demand constraints will be binding.\61\
---------------------------------------------------------------------------
\59\ See Neary and Stiglitz, 1983.
\60\ When supply constraints are binding, individuals may displace
consumption to other periods, so the net effect may be not much
different from that which would prevail if demand constraints were
always prevailing.
\61\ Consider a simple two period model in which there is not the
second feedback, but in which increased savings this period does lead
to increased consumption next period. Then the two-period
(Y<INF>1</INF> + Y<INF>2</INF>) multiplier associated with increased
investment the first period is, instead of 1/m (where m = s(1-t)), (1 +
a(1+r))/m, where a is the marginal propensity to consume out of wealth.
In a simple life cycle model with no bequests, where the only reason to
save is for consumption in ``the'' future period(s), 1/1 = 1, so the
multiplier has more than doubled.
---------------------------------------------------------------------------
In the periods at hand, Europe, the United States, and Japan were
all demand constrained throughout the relevant time, and government
expenditures were very much constrained by the level of revenues
(especially in Europe). In the very short run, it was clear that such
constraints were not perfectly binding in the U.S., but government
expenditures were tempered from what they otherwise would have been by
the looming deficit. This is clearly true for the states and localities
(which make up a third of total expenditure) but even true at the
Federal level. Accordingly, we believe a multiple period multiplier
that is substantially in excess of that generated by the partial
equilibrium American models (generating, as we have noted multipliers
around 1.5) is warranted. Numbers of the order of magnitude generated
by the IMF model are totally reasonable, but to stay on the
conservative side, we use a much smaller multiplier of 2 as our
(conservative) ``moderate'' estimate. (We even believe the very large
multipliers implicit in Hamilton's study are not implausible.)
However, we do believe that great care must be used in employing
studies based on the impact of earlier oil price shocks. Changes in the
structure of the economy, the nature of the policy responses, and the
state of the economy (the extent to which it was at or near full
employment) can have large effects on the full response of an oil price
increase. Earlier increases occurred at a time when the global economy
was already facing inflationary pressures (the U.S. from trying to
ignore the fiscal costs of the Vietnam War.) Under doctrines of
monetarism, there were large responses--excessive--to the inflation
resulting from the oil price shock. Globalization has put greater
downward pressure on prices, so today, inflation is much more benign.
Monetarism has been discredited, and even if de jure or de facto
inflation targeting has meant that some countries put excessive focus
on inflation, including the inflation generated by high oil prices--and
thus monetary policy exacerbates the contractionary pressures of oil--
it does so less than it did in the earlier oil price shocks.
Thus, while we believe that these global general equilibrium
effects are significant, and should raise the multiplier considerably
about 1.5 or 2, given the uncertainties associated with these global
general equilibrium effects, we do not include them in our conservative
estimate. For our ``moderate'' estimate, we use a 6-year impact and a
multiplier of 2. We believe, however, that a substantially larger
multiplier might be justified.\62\
---------------------------------------------------------------------------
\62\ For instance, the IMF study cited earlier with much larger
multi-year multipliers, near 4, would be associated with a total impact
of $1.2 billion over 6 years.
---------------------------------------------------------------------------
Budgetary Costs
The most difficult to estimate macro-economic costs are those
associated with the increased expenditure. If we were not spending the
money on the war, would we be spending it on something else? Would we
have cut back spending, and had a smaller deficit? Would we have had
the same deficit, but just more tax cuts?
But this is only part of the counterfactual analysis. How would the
Federal Reserve have responded to the different macro-economic
situation? Would it have dampened or exacerbated these effects?
These are standard questions in incidence analysis, in which public
sector economists attempt to ascertain the consequence of one policy or
another. One standard methodology focuses on expenditure switching: it
is assumed that the government simply substitutes Iraq expenditures for
other expenditures (some defense, some non-defense). This is the
methodology upon which we focus here.
Another methodology focused on marginally balanced budgets, where
taxes are assumed to increase in tandem (from what they otherwise would
have been; there may still be tax cuts, but they are somewhat smaller
than they otherwise would have been.) The Bush administration seems
undeterred in its commitment to make its tax cuts permanent, unaffected
by the War, but Congress is showing some sensitivity to the size of the
deficit.
A third methodology assumes that the increased expenditure leads to
higher deficits. We comment on the implications of this at the end of
this section.
The expenditure switching methodology focuses on two critical
differences between expenditures on the war in Iraq and other public
expenditures, such as investments in research, infrastructure, or
education. The first is that the domestic content and leakages differ.
Consider, for instance, a $1000 spent to hire Nepalese workers to
perform services in Iraq. There is no ``first round'' effect on
domestic GDP, and little impact on subsequent rounds (only to the
extent that the Nepalese contractors buy goods made in the United
States). By contrast, a $1000 spent on university research in the
United States has a full $1000 first round impact, and high impacts in
subsequent rounds. While ``multipliers'' associated with different
kinds of expenditures are known to differ, there may be few
expenditures with a lower multiplier than those in Iraq.
There are no data on the basis of which to provide accurate
estimates of the differences in multipliers and leakages. Assume,
however, that in the case of normal investment expenditures (like
university based research) the first round and subsequent rounds of
expenditure have a leakage of .67, generating an overall multiplier of
1.5. (The numbers are chosen to be deliberately very conservative.) By
contrast, if the first round expenditure for Iraq is three-fourths that
amount (again a conservative number, since it may well be much less)
and leakages are the same thereafter, then the overall multiplier is
1.1. Switching $500 bn (over the years of the war) to domestic
investment would have resulted in increased GDP by $200 bn.
(For some of the long run costs referred to in the first section of
this paper, there are not likely to be large differences in
multipliers. The increased disability and healthcare costs of Iraq War
veterans are likely to have multipliers similar to that for investment
expenditures. That is why we have conservatively focused on the impact
of switching only $500 bn.)
The second major difference is impacts on long run output.
Investments in the public sector yield high returns, and so output
would have been higher in the future. Expenditures on the Iraq war have
no benefits of this kind. As a result, output in the future will be
smaller. Assume, for instance, that of the direct costs of the war
estimated in the previous section $500 billion \63\ were put into
investments yielding conservatively a 6% real return on the investment,
and using a (conservative) 4% discount rate, the present discounted
value of the lost income is $750 billion.\64\
---------------------------------------------------------------------------
\63\ Obviously, it is conceivable that far more than $500 billion
out of the nearly $1 trillion in Iraq expenditures switch to
investment.
\64\ 6% is the certainty equivalent return. Investments in
government research have been shown to have much higher rates of
return. The natural discount rate to use (for discounting certainty
equivalents) is the real T-bill rate, which in recent years has been
close to zero or negative. Historically, it has been around 1.5%. The
present discounted value of lost income of an investment I yielding a
return of g at a discount rate of r is Ig/r, i.e. a ``multiplier'' of
g/r. We have been conservative in choosing a low g and a high r,
generating a multiplier of 1.5. The standard cut-off for government
projects is 7%, and research yields are even higher. Using a value of g
= .07 and r = .015 yields a multiplier of 4.67, which is substantially
higher. In the case at hand, with forgone investment of $500 billion,
the PDV of future lost income is $2.3 trillion.
Note that it would be double counting to both count the value of
the investment (the opportunity cost) and the value of the benefits
that would have been generated by the investment. In a world with
perfect markets and no costs to raising taxes, presumably there would
be no difference between the discount rate and the marginal return to
investment, in which case, the value of the investment would be equal
to the present discounted value of the benefits generated by it. In the
public sector, however, it is clear that there are often large
discrepancies. A relatively modest investment in levees in New Orleans
would have saved hundreds of billions of dollars.
---------------------------------------------------------------------------
If the government had, instead, simply let the deficit grow, one
would have to calculate the additional growth costs of that deficit.
The additional deficit could, for instance, crowd out private
investment, and calculations similar to those just performed would
provide an estimate of the cost, somewhat larger than the costs
estimated above.\65\
---------------------------------------------------------------------------
\65\ If the private investment yields a return of 8%, and we
discount at the rate of 4%, then the $500 billion of displaced
investment has a PDV costs of $1 trillion, or $500 billion in excess of
the direct costs. If the United States borrows the full amount abroad,
and there are no effects on the interest rates at which the U.S. can
borrow, then there is no displacement effect, and the only costs are
the direct costs already estimated. At the same time, the deficit-
financed expenditures will give rise to a positive aggregate demand
effect. $500 billion of expenditures, in the assumptions given earlier,
would have an additional multiplier effect of $50 billion. Note that in
the case of full deficit financing, in the moderate scenario, the total
budgetary impact is $1.185 trillion; if just 25% of this displaces
private investment, the estimated macro-economic costs would be greater
than under the expenditure switching analysis.
---------------------------------------------------------------------------
Other Macroeconomic Costs (Stock Market, Housing)
Higher oil prices and higher interest rates to which the oil prices
give rise also have effects on asset values. To the extent that these
effects are greater than just the current year effects on profits, they
suggest a persistence of the consequences that our previous analysis
did not fully take into account, and the existence of large
nonlinearities. This is evident in the industries that are particularly
sensitive to oil prices, like the airline industry, where many firms
face the prospect of bankruptcy.
The surge in corporate profits in the last couple of years has not
been accompanied by an increase in stock prices of the magnitude that
would have been expected. Robert Wescott \66\ estimates that the value
of the stock market is some $4 trillion less than would have been
predicted on the basis of past performance. Assuming that the major
factor contributing to that is the increase in oil prices, and that 20%
of that increase in oil prices is due to Iraq leads to a cost of some
$800 billion. This is several times the increase in the direct energy
costs over the next few years. This may reflect the fact that we have
grossly underestimated the effects by limiting our analysis to 6 years;
or to the fact that there are large nonlinearities. \67\ But this
decrease in corporate wealth does imply that consumption was lower than
it otherwise would have been, with the attendant multiplier
effects.\68\
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\66\ Personal correspondence
\67\ For example, bankruptcy exerts a strong nonlinearity. Some key
American industries (automobile, airlines) have been pushed near
bankruptcy as a result of oil prices.
\68\ Similar issues arise in the case of housing. Though there has
been a boom in housing, presumably if the costs of operations were
lower, the demand for housing services would have been higher, and
prices would have been still higher. We have not estimated the value of
the implied reduction in the value of housing from what it otherwise
would have been.
---------------------------------------------------------------------------
Uncertainty about future oil prices also has a dampening effect on
investment. Firms do not know what technology is appropriate for the
economic environment that will prevail, and respond to that uncertainty
by postponing investment. This has both an effect on aggregate demand
and aggregate supply in the short run. Again, we have not estimated the
magnitude of these effects.
Summary
The macro-economic costs are potentially very large; possibly even
a multiple of the direct costs. Clearly, though ensuring supply of oil
was one of the sometimes stated or inferred goals, the risks of Middle
East instability that might result was often noted as one of the main
risks of the venture. What has happened is certainly within the range
of predicted consequences to the price of oil;\69\ and experiences in
the seventies should have made us aware of how large the macro economic
consequences could be. In short, while large, when adjusted for the
larger size of the economy today, they are, we believe, totally
plausible.\70\
---------------------------------------------------------------------------
\69\ See, in particular, Nordhaus [2002].
\70\ For most of the analysis, we have assumed that there has been
excess capacity in the economy, i.e. the economy during the period of
concern has been operating below its potential. This is evidenced not
only by figures on capacity utilization and by the fact that the
employment ratio (fraction of working age population working) is
significantly below the level of the nineties. Even the unemployment
rate is significantly higher than the 3.8% reached in the 90s (and
there appeared to be no significant inflationary pressures even at that
unemployment rate.) The factors that have led to a decrease in the
NAIRU, including the competitive supply of goods from abroad, have
continued to operate, so that there is every reason to believe that the
NAIRU remains far lower than current unemployment rates. (See Stiglitz,
2000). Stagnation and declines in real wages, higher than normal levels
of ``disability,'' and large numbers of individuals claiming to be
working part time involuntarily are consistent with this view of
significant weaknesses in the labor market, i.e. significant potential
for increasing incomes without generating increases in inflation. Our
analysis assumes that potential output will exceed actual output for
(in the conservative scenario) the next 2 years. This is consistent
with most forecasts which see a slowing of growth to between 3.25% and
3.5% in the period 2006-2008, particularly as consumption growth is
dampened from its unsustainable levels fueled by rising real estate
prices and low interest rates. Even if productivity growth slows from
the 3% that marked the nineties, these rates are not sufficient to
overcome the ``jobs deficit'' created in 2001-2003. In any case, even
our ``moderate'' estimate projects that had oil prices not been as
high, output would have been higher by amounts that are a fraction of
the estimated gap between potential and actual output.
Figure 5: Macro-economic Effects ($ billion)
----------------------------------------------------------------------------------------------------------------
Impact Conservative Moderate
----------------------------------------------------------------------------------------------------------------
Oil price increase
----------------------------------------------------------------------------------------------------------------
Transfer (supply side) effect 125 \71\ 300
----------------------------------------------------------------------------------------------------------------
Aggregate demand \72\ 62 150
----------------------------------------------------------------------------------------------------------------
Global General Equilibrium 150
----------------------------------------------------------------------------------------------------------------
Budgetary impacts
----------------------------------------------------------------------------------------------------------------
Expenditure switching 200
----------------------------------------------------------------------------------------------------------------
Growth impacts (PDV) 250
----------------------------------------------------------------------------------------------------------------
Total 187 1050
----------------------------------------------------------------------------------------------------------------
We therefore estimate that the total economic costs of the war,
including direct costs and macroeconomic costs, lie between $1 and $2
trillion, as shown in Figure 6.
---------------------------------------------------------------------------
\71\ Conservative: $5 barrel for 5 years; moderate: $10 barrel for
6 years.
\72\ Conservative: (multi-year) multiplier of 1.5; moderate:
(multi-year) multiplier of 2.
Figure 6: Total Economic Costs of the Iraq War ($BN)
----------------------------------------------------------------------------------------------------------------
Scenario Conservative Moderate
----------------------------------------------------------------------------------------------------------------
Direct costs 839 1189
----------------------------------------------------------------------------------------------------------------
Macroeconomic 187 1050
----------------------------------------------------------------------------------------------------------------
1026 2239
----------------------------------------------------------------------------------------------------------------
List of Omitted Costs
Defense and destruction costs
<bullet> Costs of planning war \73\
---------------------------------------------------------------------------
\73\ Estimated at $2.5 billion.
---------------------------------------------------------------------------
<bullet> All costs borne by other countries, including Iraq
<bullet> Military costs
<bullet> Destruction of property
<bullet> Loss of life
<bullet> All costs of increased insecurity \74\
---------------------------------------------------------------------------
\74\ Other than the indirect impact of increased insecurity in
impeding oil supply response.
<bullet> Increased costs of cross border flows
<bullet> Reduced investment
<bullet> Consequences of Loss of credibility
<bullet> Value of reduced capability of responding to national
security threats elsewhere in the world
Value of reduced capability of responding to domestic situations in
which the National Guard or the Reserves might have been called upon
(as in New Orleans).
Macroeconomic costs
<bullet> All costs of increased insecurity \75\
---------------------------------------------------------------------------
\75\ Other than the indirect impact of increased insecurity in
impeding oil supply response.
<bullet> Increased costs of cross border flows
<bullet> Reduced investment
<bullet> Indirect aggregate demand effects (as a result of
reduced incomes in trading partners) \76\
---------------------------------------------------------------------------
\76\ Other than as reflected in higher multiplier in
``conservative'' case.
<bullet> Costs of oil price volatility
<bullet> Including on investment
<bullet> Costs of bankruptcy \77\
---------------------------------------------------------------------------
\77\ Other than as reflected in the multiplier analysis. The
multiplier analysis focuses on demand side effects; bankruptcy costs
are more correctly viewed as supply side effects (not included in the
standard neoclassical model.)
<bullet> Reduced demands as a result of anti-American
sentiment
<bullet> Consequences of losses of asset values (arising from
increase in oil prices or otherwise)
<bullet> Equity markets
<bullet> Housing
<bullet> Consequences of tighter monetary policy as a result
of increased inflation \78\
---------------------------------------------------------------------------
\78\ Other than as reflected in multiplier analysis.
---------------------------------------------------------------------------
<bullet> Consequences of worsening fiscal position
<bullet> As a result of increased government
expenditures on oil \79\
---------------------------------------------------------------------------
\79\ Other than as reflected in multiplier analysis.
---------------------------------------------------------------------------
<bullet> As a result of increased expenditures on the
war \80\
---------------------------------------------------------------------------
\80\ In the ``Conservative'' scenario. In the ``moderate''
scenario, we perform an expenditure switching incidence analysis, which
provides a number that may partially reflect these costs.
---------------------------------------------------------------------------
Other Costs
<bullet> Costs of risks borne by individuals \81\ (including
compensation that would be required to make them willingly bear
risks)
---------------------------------------------------------------------------
\81\ Other than as reflected in increased recruitment costs.
---------------------------------------------------------------------------
<bullet> Economic Cost of impairment to earnings potential and
quality of life for veterans who claim partial disability (est.
160,000) but were not wounded during the conflict
<bullet> Healthcare costs not borne by the government
IV. Concluding Remarks
The most important things in life--like life itself--are priceless.
But that doesn't mean that topics like defense, involving the
preservation of our way of life and the protection of life itself,
should not be subject to cool, hard analysis of the kind for which
economics has long earned a reputation.
Take the decision of when to go to war. Here, economic analysis
employs the concept of option value. Even if one thinks war is
inevitable or highly likely, there is a question of timing because
there are costs and benefits to postponement. The enemy may be better
prepared, but so may we. Normally, one goes into such a war under the
presumption that one is going to win, and therefore a critical issue is
managing the post-war occupation. Without adequate preparation, weapons
may easily fall in the hands of insurgents--as in fact they did--
enormously increasing the occupation costs. With adequate armor, fewer
American troops are likely to be injured or killed. As even the
Secretary of Defense has admitted, in the rush to war, there was not
time to provide adequate protection for the troops, protection that
clearly the richest country in the world could have afforded and that
its citizens would have expected.
Economists also think about the value of information. In this
situation, postponing war might have allowed us to gather better
information with which to judge whether Iraq posed a real threat. This
is not, as Americans say, Monday morning quarterbacking: there were
already strong suspicions regarding our sources of intelligence on
Iraq's alleged weapons of mass destruction. More time would have
enabled the verification of this evidence. The value of this
information would have been enormous. The possibility of war later on
would have still been an option. Tens of thousands of lives would have
been spared, and hundreds of billions of dollars saved.
All of this leads to economists' constant urging that politicians
undertake a cost benefit analysis before undertaking any project--
especially one with as significant consequences as war. This can and
should be done even if certain elements of the costs and benefits are
hard to value.
If Congress had been informed of the range of costs, perhaps if
they had been told that the costs might exceed a half trillion, or a
trillion dollars, perhaps, in the end, they would have made the same
decision. But perhaps they would have been a bit more cautious in
making that decision, looked a little harder at the evidence, thought
differently about how best to conduct the war.
We have not attempted in this paper an overall assessment of
whether the war was conducted in the most cost efficient manner, i.e.
whether, given what has been achieved (however that is defined), those
objectives could have been achieved at lower costs. We have taken the
expenditures, as they have occurred, not as they might have been. The
Administration has explicitly tried to fight the war on the cheap, that
is limit direct commitments of American troops, even shortchanging body
and personnel armor. In violating the Powell doctrine, this may be one
of those instances of ``penny wise-pound foolish''. Certainly, the long
run costs to the individuals and to society of the individuals who died
or were badly maimed (not to mention the additional costs of
recruitment) far exceed the savings from not purchasing better body
protection. Many observers believe that the manner in which the War was
conducted led to the extended insurgency, which too has greatly
increased cost.
Though we have suggested that many of the costs were within the
range of what could have been anticipated, we have not sought in this
paper to ascertain whether on the basis of the information available,
the Administration could have made more reliable estimates. We do not
address the question of whether the disparity between the predicted
numbers and the actual numbers is a result of a deliberate attempt of
the Administration to mislead the American people on the cost of the
war, or of incompetence, going to War with information of low
reliability and with best estimates that were far from the mark. In
response to accusations about the existence of weapons of mass
destruction and the connection with Al Qaeda, the Administration has
been adamant that it did not intentional deceive the American people;
it prefers charges of incompetence to those of malevolence. We have not
attempted to ascertain the relative role of each in the failure to
provide the American people with an accurate cost of the venture. At
the very least, though, honesty would have required laying out the
various scenarios, even if it attached low probabilities to those that
in fact turned out to be the case.\82\
---------------------------------------------------------------------------
\82\ An excellent example of the kind of analysis that could and
should have been provided is that of Nordhaus (2002), who lays out
various scenarios. The CBO and the House Budget Committee provided some
estimates. Nordhaus points out, however, that they did not include
scenarios involving extended engagement, occupation, and
reconstruction.
---------------------------------------------------------------------------
Americans could, and should have asked, are there ways of spending
that money that would have enhanced our long run well-being--and
perhaps even our security--more. Take the conservative estimate of a
trillion dollars. Half that sum would have put Social Security on a
firm grounding for the next seventy-5 years. If we spent even a small
fraction of the remainder on education and research, it is likely our
economy would be in a far stronger position. If some of the money spent
on research were devoted to alternative energy technologies, or to
providing further incentives for conservation, we would be less
dependent on oil, and thereby more secure; and the lower prices of oil
that would result would have obvious implications for the financing of
some of the current threats to America's security. While we may not
know what causes terrorism, clearly the desperation and despair that
comes from the poverty that is rife in so much of the Third World has
the potential of providing a fertile feeding ground. For sums less than
the direct expenditures on the war, we could have fulfilled our
commitment to provide.7% of our GDP to help developing countries--money
that could have made an enormous difference, for the better, to the
well-being of billions today living in poverty. We could have had a
Marshall Plan for the Middle East, or the developing countries, that
might actually have succeeded in winning the hearts and minds of those
in the Middle East.
What is clear is that the Administration's original estimates were
strikingly low.\83\ Would the American people have had a different
attitude toward going to war had the known the total cost? Would they
have thought that there might be better ways of advancing the cause of
democracy or even protecting themselves against an attack, that would
cost but a fraction of these amounts? In the end, we may have decided
that a trillion dollars spent on the War in Iraq was better than all of
these alternatives. But at least it would have been a more informed
decision than the one that was made. And recognizing the risks, we
might have conducted the War in a manner different from the way we did.
---------------------------------------------------------------------------
\83\ It is of interest that our ``moderate'' estimate is not
dissimilar to Nordhaus' ``high'' (protracted and unfavorable) case,
$1.9 trillion. His estimate of direct military spending, occupation,
and reconstruction was $745. However, he did not include a number of
the long run costs (such as health costs and disability benefits and
increased recruiting costs), nor the adjustments between economic and
budgetary costs noted in section III. His estimate of the direct impact
on oil markets (the transfer effect) was $778 billion, which we believe
to be more accurate than estimate of $300 million (in the moderate
case), which was deliberately chosen to be conservative. He uses a
``macro-economic oil'' multiplier that is similar to ours, but because
he (realistically) assumes a large oil price effect, he obtains a
larger macro-economic effect. He does not include any ``growth
investment/displacement'' or ``expenditure switching'' effects in his
analysis. Nordhaus' historical analysis puts some perspective on the
magnitude of the expenditures: the projected direct expenditures in
Table 1 are comparable to those of the Vietnam War ($494 billion),
somewhat greater than the Korean war ($336 billion) and more than twice
as large as World War I ($190 billion).
---------------------------------------------------------------------------
Hamid Rashid, Robert Wescott, Joshua Goodman and Kwang Ryu made
important contributions to the results reported here, which are
gratefully acknowledged.
References
Abeysinghe, Tilak, ``Estimation of direct and indirect impact of
oil price on growth'', Economics Letters 73 (2001) 147--153
Belasco, Amy. ``The Cost of Iraq, Afghanistan and Enhanced Base
Security Since 9/11'', Congressional Research Service, Report for
Congress, October 7, 2005
Bennis, Phyllis and Leaver, Erik, ``The Iraq Quagmire: The Mounting
Costs of the War and the Case for Bringing Home the Troops'', Institute
for Policy Studies and Foreign Policy in Focus, August 2005
Blinder, Alan and Robert Wescott, ``Higher Oil Prices Will Hurt the
U.S. Economy''August 10, 2004, unpublished
Congressional Budget Office, ``Estimated Costs of a Potential
Conflict with Iraq,'' September 2002, available at http://www.cbo.gov/
and reports and estimates published in 2003, 2004, and 2005
Hamilton, James D., ``What is an oil shock?'' NBER Working Paper
Series 7755, June 2000
Hartung, William, ``The Cost of the Iraq War'', Taxpayers for
Common Sense, 2004
House Budget Committee, Democratic Staff, Assessing the Cost of
Military Action Against Iraq: Using Desert Shield/Desert Storm as a
Basis for Estimates, September 23, 2002
Kniesner, Thomas, Viscusi, Kip, Woock, Christopher, and Ziliak,
James, ``How the Unobservable Productivity Biases the Value of a
Statistical Life'', NBER W.P.11659, September 2005
Neary, Peter, and J. E. Stiglitz, ``Toward a Reconstruction of
Keynesian Economics: Expectations and Constrained Equilibria,''
Quarterly Journal of Economics, 98, Supplement, 1983, pp. 199-228.
Nordhaus, William D. ``The Economic Consequences of a War with
Iraq'', Cowles Foundation Discussion Paper Series, Yale University,
December 2002
Rodriguez, Rebeca and Marcelo Sanchez, ``Oil price shocks and real
GDP growth: empirical evidence for some OECD countries'', Applied
Economics, 2005, 37, 201--228
Stiglitz, J. E. ``Reflections on the Natural Rate Hypothesis,''
Journal of Economic Perspectives, 11(1), Winter 1997, pp. 3-10.
U.S. Government Accountability Office, ``Global War on Terrorism:
DOD Should Consider All Funds Requested for the War When Determining
Needs and Covering Expenses''; GAO-05-767
Wallsten, Scott and Kosec, Katrina, ``The Economic Costs of the War
in Iraq'', AEI/Brookings, working paper 05-19, September 2005
<F-dash>
SOLDIERS RETURNING FROM IRAQ AND AFGHANISTAN: The Long-term Costs of
Providing Veterans Medical Care and Disability Benefits
Linda Bilmes, Kennedy School of Government, Harvard University, January
2007
----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
The views expressed in the KSG Faculty Research Working Paper Series are those of the author(s) and do not
necessarily reflect those of the John F. Kennedy School of Government or of Harvard University. Faculty
Research Working Papers have not undergone formal review and approval. Such papers are included in this series
to elicit feedback and to encourage debate on important public policy challenges. Copyright belongs to the
author(s). Papers may be downloaded for personal use only.
----------------------------------------------------------------------------------------------------------------
EXECUTIVE SUMMARY:
This paper analyzes the long-term needs of veterans returning from
the Iraq and Afghanistan conflicts, and the budgetary and structural
consequences of these needs. The paper uses data from government
sources, such as the Veterans Benefit Administration Annual Report. The
main conclusions of the analysis are that:
(a) the Veterans Health Administration (VHA) is already overwhelmed
by the volume of returning veterans and the seriousness of their
healthcare needs, and it will not be able to provide a high quality of
care in a timely fashion to the large wave of returning war veterans
without greater funding and increased capacity in areas such as
psychiatric care;
(b) the Veterans Benefits Administration (VBA) is in need of
structural reforms in order to deal with the high volume of pending
claims; the current claims process is unable to handle even the current
volume and completely inadequate to cope with the high demand of
returning war veterans; and
(c) the budgetary costs of providing disability compensation
benefits and medical care to the veterans from Iraq and Afghanistan
over the course of their lives will be from $350-$700 billion,
depending on the length of deployment of U.S. soldiers, the speed with
which they claim disability benefits and the growth rate of benefits
and healthcare inflation.
Key recommendations include: increase staffing and funding for
veterans medical care particularly for mental health treatment; expand
staffing and funding for the ``Vet Centers,'' and restructure the
benefits claim process at the Veterans Benefit Administration.
----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
This paper was prepared for the Allied Social Sciences Association Meetings in Chicago, January, 2007. The views
expressed here are solely those of the author and do not represent any of the institutions with which she is
affiliated, now or in the past.
----------------------------------------------------------------------------------------------------------------
Introduction
The New Year has brought with it the grim fact that 3000 American
soldiers have been killed so far in Iraq. A statistic that merits equal
attention is the unprecedented number of U.S. soldiers who have been
injured. As of September 30, 2006, more than 50,500 U.S. soldiers have
suffered non-mortal wounds in Iraq, Afghanistan and nearby staging
locations--a ratio of 16 wounded servicemen for every fatality\1\ This
is by far the highest killed-to-wounded ratio in U.S. history. For
example, in the Vietnam and Korean wars there were 2.6 and 2.8 injuries
per fatality, respectively. World Wars I and II had fewer than 2
wounded servicemen per death.\2\
---------------------------------------------------------------------------
\1\ Department of Veterans Affairs, Office of Public Affairs,
``America's Wars'', September 30, 2006. This document shows that the
number of non-mortal woundings in the Global War on Terror (combining
Iraq, Afghanistan and surrounding duty stations) as of 9/30/06 was
50,508 compared with 2333 deaths in battle plus 707 other deaths in
theater. The comparison numbers for previous conflicts are as follows:
Desert Storm/Desert Shield: 1.2 wounded per fatality; Vietnam: 2.6
wounded per fatality; Korea: 2.8 wounded per fatality; World War II:
1.6 wounded per fatality; World War I: 1.8 wounded per fatality; Civil
War (union): .7 wounded per fatality; War of 1812:.5 wounded per
fatality; American Revolution: .7 wounded per fatality. Note: the VA
defines non-mortal wounded as those who are ``medically evacuated from
theatre''. The Pentagon has several definitions, but the daily casualty
reports on its website use a narrower definition referring to those
wounded by shrapnel, bullets, and so forth. Using this narrow
definition, the Iraq conflict has a ratio of 8 wounded per fatality--
still much higher than any previous war in U.S. history.
\2\ Ibid.
---------------------------------------------------------------------------
While it is welcome news and a credit to military medicine that
more soldiers are surviving grievous wounds, the existence of so many
veterans, with such a high level of injuries, is yet another aspect of
this war for which the Pentagon and the administration failed to plan,
prepare and budget. There are significant costs and requirements in
caring for our wounded veterans, including medical treatment and long-
term healthcare, the payment of disability compensation, pensions and
other benefits, reintegration assistance and counseling, and providing
the statistical documentation necessary to move veterans seamlessly
from the Department of Defense payroll into Department of Veterans
Affairs medical care, and to process VA disability claims easily.
To date, 1.4 million U.S. servicemen have been deployed to the
Global War on Terror (GWOT), the Pentagon's name for operations in and
around Iraq and Afghanistan.\3\ The servicemen who have been officially
wounded are a small percentage of the veterans who will be using the
veteran's administration medical system. Hundreds of thousands of these
men and women will be seeking medical care and claiming disability
compensation for a wide variety of disabilities that they incurred
during their tours of duty.\4\ The cost of providing such care and
paying disability compensation is a significant long-term entitlement
cost that the U.S. will be paying for the next forty years.\5\
---------------------------------------------------------------------------
\3\ As of September 30, 2006, 1,406,281 unique servicemembers have
been deployed to the wars in Iraq and Afghanistan, according to the
Department of Defense, Defense Manpower Data Center, and ``Contingency
Tracking System.'' The Veterans Health Administration (VHA) Office of
Public Health and Environmental Hazards, November 2006 uses the number
1.4 million (as of November 2006). The Veterans Benefits Administration
(VBA) lists 1,324,419 unique servicemen deployed to GWOT as of May 2006
(prepared by VBA/OPA&I, 7/20/06).
\4\ Based on an analysis of the first Gulf War in 1991, using the
Gulf War Veterans Information System (GWVIS August 2006, chart on
``Gulf War Veteran Outpatient Stays'', there were 297,125 veterans from
that conflict who used VA medical care, or 48.4%. If the same
percentages of Iraq/Afghan veterans use VA medical care then VA should
expect approximately 700,000 new patients from the 1.4 million existing
servicemen. Increasing the number of unique servicemen deployed will
increase medical and disability usage.
\5\ Veterans' disability pay is an entitlement program, like
Medicare and Social Security. Once a veteran has been approved to
receive disability pay, he or she is entitled to receive an annual
payment and cost-of-living adjustments. The average age of a servicemen
is about 25 years of age, therefore given current life expectancy
rates, 40 years is a reasonable amount of years to project payment of
benefits, even assuming the veteran does not claim for some years
following the period of service.
---------------------------------------------------------------------------
The objective of this paper is to examine the structural and
budgetary requirements for caring for the returning war veterans from
Iraq and Afghanistan, in terms of U.S. capacity to pay disability
compensation, provide high quality medical care, and provide other
essential benefits. The paper grew out of a previous paper that was co-
authored in January 2005 with Columbia University professor Joseph
Stiglitz, in which the overall costs of the war in Iraq were estimated
to exceed $2 trillion. One of the long-term costs cited in that paper
was the cost associated with providing healthcare and disability
benefits to veterans\6\ This paper expands on that topic.
---------------------------------------------------------------------------
\6\ Bilmes, Linda and Stiglitz, Joseph, The Economic Costs of the
Iraq War: An Appraisal Three Years After the Beginning of the Conflict,
NBER Working Paper 12054 (http://www.nber.org/papers/w12054), February
2006. The long-term budgetary costs associated with veterans health and
disability cited in that paper ranged from $77 bn to $179 bn (depending
on the length of the war), based on a population of 550,000 unique
Iraqi war veterans. After we published this paper, a number of
veteran's organizations including the American Legion and Veterans for
America, contacted us in appreciation of our highlighting the needs of
veterans. Veterans for America has particularly encouraged further
research to understand the needs of the returning GWOT veteran's
community.
---------------------------------------------------------------------------
Unlike the previous paper,\7\ this study does not differentiate
between veterans returning from Iraq, or Afghanistan or adjacent
locations (such as Kuwait, an important staging post for Iraq) in the
GWOT, for three reasons. First, nearly one-third of the servicemen
involved in the war have been deployed two or more times and many of
them have served both in Iraq and Afghanistan, and/or other
locations.\8\ Second, the data available from the VA does not
distinguish between the wars in Iraq and Afghanistan. Third, for the
purposes of estimating the long-term costs of taking care of the
returning veterans it does not matter where they served. However it is
worth noting that the overwhelming majority of the deaths and injuries
incurred in the GWOT have been in Iraq. Among those listed as wounded
on the Pentagon's casualty reports, more than 95% have been injured in
Iraq.\9\
---------------------------------------------------------------------------
\7\ The Bilmes/Stiglitz cost of war paper did not include the costs
of Afghanistan or other areas outside of Iraq in the GWOT. Had we
included those costs, the total cost of war would have increased by 15-
20%.
\8\ As of 9/30/06, some 421,206 (30%) of 1,406,281 unique
servicemembers had been deployed twice or more to the wars in Iraq and
Afghanistan. Army Times, December 11, 2006, page 14, from the
Department of Defense, Defense Manpower Data Center, ``Contingency
Tracking System.''
\9\ As of 12/28/06, the DOD website listed 22,565 wounded in
Operation Iraqi Freedom and 1084 wounded in Operating Enduring Freedom
(Afghanistan). As noted previously, this is a narrower definition of
injuries than the one used by the Veterans administration, which lists
50,508 non-mortal woundings as of 9/30/06.
---------------------------------------------------------------------------
This paper will analyze the following aspects of the returning
veterans' needs.
1. Disability compensation
<bullet> Projected Cost
<bullet> Backlog of Pending Claims
2. Medical care
<bullet> Capacity issues
<bullet> Projected Cost
<bullet> Veterans Centers
<bullet> Transitioning from the Department of Defense
to VA care
3. Overall assessment of U.S. readiness to meet its
obligations to veterans
4. Recommendations
Methodology
All statistics used in this paper are from government sources,
including publications of the Veterans Benefit Administration (VBA),
Veterans Health Administration (VHA), and other VA offices, as well as
from the Congressional Budget Office, the Government Accountability
Office, the Department of Defense, and Congressional testimony. The
numbers are based on the servicemen involved in Operation Iraqi Freedom
(OIF) and Operation Enduring Freedom (OEF, Afghanistan) unless
otherwise noted.
The cost and structural requirements for returning veterans will
depend on several factors, including the number of U.S. troops
stationed in the region and how long they are deployed; the rate of
claims and utilization of health resources by returning troops, and the
rate of increase in disability payment and healthcare costs over time.
The model developed allows the user to vary these assumptions and may
be obtained with permission from the author's website. The current
analysis has been performed under three ``base'' scenarios that
reflect, broadly the three options now under consideration for the war.
<bullet> Low Scenario: The low scenario assumes that the U.S.
begins withdrawing troops in 2007 and that all U.S. servicemen
are home by 2010. This pattern is roughly in parallel with the
recommendations of the bipartisan Baker Commission that
reported to President Bush in November 2006. This scenario
assumes that we will not deploy any new troops beyond the 1.4
million already participating in the war. It assumes that 44%
of U.S. troops will claim for disability payment over a period
of years, with 87% of claims granted, following the same claims
pattern as the first Gulf War in 1991.\10\ The low scenario
assumes that soldiers will initially receive the VA's 2005
average recurring benefit and that the annual rate of increase
will be 2.8% to reflect a cost-of-living adjustment only. (As
opposed to the actual growth rate over the past 10 years which
is 6.1%). The medical usage in this scenario is based on the
lowest possible uptake of medical care and a rate of increase
that is below the historical rate of healthcare inflation. In
short, this scenario shows the absolute basement level--the
lowest possible cost of providing medical care and disability
benefits to soldiers returning from Iraq and Afghanistan under
the most optimistic assumptions.
---------------------------------------------------------------------------
\10\ Using the claims patterns from Gulf War I is almost certainly
too conservative because that war was much shorter and relied primarily
on aerial bombardment, whereas the current wars involve long
deployments and ground warfare. However it provides a baseline for the
current Iraq/Afghan wars.
<bullet> Moderate Scenario: The moderate scenario is based on
the current course of the war. This scenario uses the
Congressional Budget Office's expected deployment figures,
which would involve a gradual drawdown of troops but maintain a
small U.S. force in the region through 2015. Under this
scenario, the total unique servicemen involved in the conflict
will be 1.7 million, that is, 300,000 additional troops rotated
in over the period of years. Nearly 20,000 new troops are
regularly deployed into the two war zones each month, before
any ``surge'' or escalation of the conflict is considered.\11\
This scenario uses the first Gulf War as the basis for
predicting the level of troops who will claim disability
benefits, the rate of approval of the claims, and the
utilization of medical resources. However a growth rate of 4.4%
is projected for claims benefits, half way between the base
cost-of-living adjustment and the actual growth rate of 6.1%.
---------------------------------------------------------------------------
\11\ Footnote: Analysis of DMDC's Contingency Tracking System shows
57,462 new first-time deployments between June 2006 and September 2006,
an average 19,154 per month
<bullet> High ``Surge'' Scenario: This scenario assumes that
troop levels with surge in 2007 and that the total
participation in the war over time will eventually reach 2
million unique servicemen by 2016. It also models the potential
that half the veterans claim disability payments, which is a
reasonable possibility given the ferocity of the conflict and
the number of second and third deployments. This model also
looks at the impact of growth in claims benefit payments and
healthcare costs based on the actual growth rates over the past
10 years. If the U.S. decides to increase troops and all trends
on disability and healthcare continue as they have in the past,
---------------------------------------------------------------------------
this model presents the resulting cost consequences.
The costs estimated in this study are budgetary costs to the U.S.
government directly associated with the payment of disability benefits
and medical treatment for returning OIF/OEF war veterans. The costs do
not include the interest payments on the debt that is being incurred in
borrowing money to finance the war. Future cash flows were discounted
at a rate of 4.75% reflecting current long-term U.S. borrowing rates.
1. Disability Compensation
There are 24 million living veterans, of whom roughly 11% receive
disability benefits. Overall, in 2005 the U.S. currently paid $23.4
billion in annual disability entitlement pay to veterans from previous
wars, including 611,729 from the first Gulf War, 916,220 from Vietnam,
161,512 Korean war veterans, 356,190 World War II veterans and 3
veterans of World War I.\12\
---------------------------------------------------------------------------
\12\ Ibid, page 33, ``Benefits delivery network'', RCS 20-0221
---------------------------------------------------------------------------
All 1.4 million servicemen deployed in the current war effort are
potentially eligible to claim some level of disability compensation
from the Veterans Benefits Administration. Disability compensation is a
monetary benefit paid to veterans with ``service-connected
disabilities''--meaning that the disability was the result of an
illness, disease or injury incurred or aggravated while the soldier was
on active military service. Veterans are not required to seek
employment nor are there any other conditions attached to the program.
The explicit congressional intent in providing this benefit is ``to
compensate for a reduction in quality of life due to service-connected
disability'' and to ``provide compensation for average impairment in
earnings capacity.'' The principle dates back to the Bible at Exodus
21:25, which authorizes financial compensation for pain inflicted by
another\13\
---------------------------------------------------------------------------
\13\ See Veterans Benefits Administration ``Annual Benefits
Report'' (ABR), 2005, page 17 for definition of disability compensation
and see VA Disability Compensation Program, Legislative History, VA
Office of Policy, Planning and Preparedness 2004 for principles behind
the program.
---------------------------------------------------------------------------
Disability compensation is graduated according to the degree of the
veteran's disability, on a scale from 0 percent to 100 percent, in
increments of 10%. Annual benefits range from a low of $1304 per year
for a veteran with a 10% disability rating to about $44,000 in annual
benefits for those who are completely disabled.\14\ The average benefit
is $8890 although this varies considerably; Vietnam veterans average
about $11,670.\15\ Additional benefits and pensions are payable to
veterans with severe disabilities. Once deemed eligible, the veteran
receives the compensation payment as a mandatory entitlement for the
remainder of their lives, like Medicare and Social Security.
---------------------------------------------------------------------------
\14\ Ibid, page 24, lists $1304 for 10% and $31,611 for 100%, but
those with 100% disability also receive additional payments that
combined result in an annual payment of approximately $44,000.
\15\ Ibid, page 33.
---------------------------------------------------------------------------
There is no statute of limitations on the amount of time a veteran
can claim for most disability benefits. The majority of veteran's
claims are within the first few years after returning, but some
disabilities do not surface until years later. The VA is still handling
hundreds of thousands of new claims from Vietnam era veterans for post-
traumatic stress disorder and cancers linked to Agent Orange exposure.
The process for ascertaining whether a veteran is suffering from a
disability, and determining the percentage level of a veteran's
disability, is complicated and lengthy. A veteran must apply to one of
the 57 regional offices of the Veterans Benefits Administration (VBA),
where a claims adjudicator evaluates the veteran's service-connected
impairments and assigns a rating for the degree to which the veteran is
disabled. For veterans with multiple disabilities, the regional office
combines the ratings into a single composite rating. If a veteran
disagrees with the regional office's decision he or she can file an
appeal to the VA's Board of Veterans Appeals. The Board makes a final
decision and can grant or deny benefits or send the case back to the
regional office for further evaluation. Typically a veteran applies for
disability in more than one category, for example, a mental health
condition as well as a skin disorder. In such cases, VBA can decide to
approve only part of the claim--which often results in the veteran
appealing the decision. If the veteran is still dissatisfied with the
Board's decision to grant service connection or the percentage rating,
he or she can further appeal it to two even higher levels of
decisionmakers.\16\
---------------------------------------------------------------------------
\16\ GAO, ``Veterans Benefits Administration: problems and
Challenges Facing Disability Claims Processing'', GAO Testimony before
the Subcommittee on Oversight and Investigations, House Committee on
Veterans Affairs, May 18, 2000
---------------------------------------------------------------------------
Most employees at VA are themselves veterans, and are predisposed
to assisting veterans obtain the maximum amount of benefits to which
they are entitled. However, the process itself is long, cumbersome,
inefficient and paperwork-intensive. The process for approving claims
has been the subject of numerous GAO studies and investigations over
the years. Even in 2000, before the current war, GAO identified
longstanding problems in the claims processing area. These included
large backlogs of pending claims, lengthy processing times for initial
claims, high error rates in claims processing, and inconsistency across
regional offices.\17\ In a 2005 study, GAO found that the time to
complete a veteran's claim varied from 99 days at the Salt Lake City
regional office to 237 days at the Honolulu, Hawaii office\18\
---------------------------------------------------------------------------
\17\ Ibid.
\18\ ``Veterans Benefits: Further Changes in VBA's Field Office
Structure could help improve disability claims processing'', GAO-06-
149, December 2005
---------------------------------------------------------------------------
The backlog of pending claims has been growing since 1996. In 2000,
VBA had a backlog of 69,000 pending initial compensation claims, of
which one-third had been pending for more than 6 months.\19\ Today, due
in part to the surge in claims from the Iraq/Afghan wars, VBA has a
backlog of 400,000 claims.\20\ VBA now takes an average of 177 days (6
months) to process an original claim, and an average of 657 days
(nearly 2 years) to process an appeal.\21\ This compares unfavorably
with the private sector healthcare/financial services industry, which
processes an annual 30 billion claims in an average of 89.5 days per
claim, including the time required for claims that are disputed.\22\
---------------------------------------------------------------------------
\19\ Ibid
\20\ The VBA's backlog of pending claims was 399,751 as of December
9, 2006 (VBA Monday Morning Workload Report).
\21\ The average time to process a claim is 177 days as of 9/06 and
average time to process an appeal is 657 days (VA Performance and
Accountability Report FY 2006).
\22\ Bearing Point, Health Care/Financial Services industry report,
September 14, 2006.
---------------------------------------------------------------------------
Projected Demand for Benefits among OIF/OEF Veterans
It is difficult to predict with certainty the number of veterans
from the two current wars who will claim for some amount of disability.
The first Gulf War provides a baseline number although the Iraq and
Afghanistan war has been longer and has involved more ground warfare
than the Desert Storm conflict, which relied largely on aerial
bombardment and 4 days of intense ground combat. However, in both
conflicts, a number of veterans were exposed to depleted uranium that
was used in anti-tank rounds fired by U.S. M1 tanks and U.S. A10 attack
aircraft. Many disability claims from the first Gulf War stem from
exposure to depleted uranium, which has been implicated in raising the
risk of cancers and birth defects. Gulf War veterans also filed
disability claims related to exposures to oil well fire pollution, low-
levels of chemical warfare agents, experimental anthrax vaccines, and
experimental anti-chemical warfare agent pills called pyridostigmine
bromide, the anti-malaria pill Lariam, skin diseases, and disorders
from living in the hot climate,\23\ which are likely to be cited in the
current conflict. However, the number of disability claims in the Iraq/
Afghan wars is likely to be higher due to the significantly longer
length of soldier's deployments, repeat deployments, and heavier
exposure to urban combat.
---------------------------------------------------------------------------
\23\ Veterans for America, interview with Paul Sullivan, program
director, 11/06.
---------------------------------------------------------------------------
Following the Gulf War the criteria for receiving benefits were
widened by Congress based on evidence of widespread toxic
exposures.\24\ The same criteria for healthcare and benefits
eligibility still apply to veterans of the Iraq and Afghanistan
wars\25\ Forty-4 percent of those veterans filed disability claims for
a variety of conditions and 87% were approved.\26\ The U.S. currently
pays about $4 billion annually in disability payments to veterans of
Desert Storm/Desert Shield.\27\
---------------------------------------------------------------------------
\24\ ``Veterans Benefits Improvement Act 1994'' (Public Law 103-
446) and ``Persian Gulf War Veterans Act 1998'' (PL 105-277).
\25\ In fact, the VA does not distinguish, for the purpose of
claims processing, between the end of the first Gulf War and the
present conflict (38 USC section 101(33) defines the Gulf War as
starting on August 2, 1990, and continuing until either the President
or the Congress declares an end to it and 38 CFR 3.317 defines the
locations of the conflict).
\26\ For Gulf War, the total claims filed to date are 271,192, of
which 205,911 have been approved, 20,382 were denied and 34,899 are
still pending (GWVIS, August 2006, p.7: Granted Service Connection
+Denied Service Connection +Claims Pending)
\27\ Gulf War total annual payment $4.3 billion (Ibid., VBA, ABR
2005 pp. 33)
---------------------------------------------------------------------------
Of the 1.4 million U.S. servicemen who have so far been deployed in
the Iraq/Afghan conflicts, 631,174 have been discharged as of September
30, 2006. Of those 46% are in the full-time military and 54% are
reservists and National Guardsmen.\28\ Therefore the total population
that is potentially eligible for disability benefits is this number
(631,174). To date 152, 669 servicemen have applied for disability
benefits and of those, 104,819 have been granted, 34,405 are pending
and 13,445 have been rejected. This implies an approval rate of 88% to
date.\29\
---------------------------------------------------------------------------
\28\ VHA, Office of Public Health and Environmental Hazards,
November 2006
\29\ VBA ``Compensation and Benefit Activity among veterans
deployed to the GWOT'', July 20, 2006, obtained under Freedom of
Information Act by the National Security Archive at George Washington
University.
---------------------------------------------------------------------------
We have estimated the cost of providing disability benefits to
veterans under three scenarios. Under the low scenario, we expect that
as in the first Gulf War, 44% of the current veterans will eventually
claim disability, with an approval rate of 87%. We estimate that the
remaining 900,000 troops will be discharged in equal installments over
the next 4 years bringing all U.S. troops home by 2010. We expect the
same percentage of these troops to claim for disabilities, with the
same approval rate, within a further 5 years. We have assumed that on
average, claims are lower than average rate, at the lower rate of new
claimants from the first Gulf War of $6506.\30\ This is probably an
excessively conservative assumption because it projects the same rate
of serious injuries as occurred in Gulf War I, when in fact we already
know that more than the actual rate of serious injuries is much
higher.\31\
---------------------------------------------------------------------------
\30\ Ibid, ABR 2005, p33
\31\ Of the 50,508 non-mortally wounded soldiers in OIF/OEF there
are at least 10,000 serious injuries such as brain injuries, spinal and
amputations, according to DOD sources. See also Wallsten and Kosec,
AEI-Brookings Working Paper 05-19, September 2005, estimate of 20%
serious brain injuries, 6% amputees and 24% other serious injuries.
---------------------------------------------------------------------------
The moderate scenario assumes that the war continues through 2014
with a total deployment of 1.7 million over the course of the war, and
with gradually reduced deployment. It assumes that a slightly higher
percentage of eligible veterans (50%) make claims, which is more
realistic given deployment lengths. This scenario uses the actual
average VA benefit payment of $8890. It assumes the rate of increase in
benefits is 4.4%, midway between the mandatory Cost of Living
Adjustment and the actual 10-year growth rate of 6.1%. The high
scenario models the impact of a surge in forces bringing the total
unique deployments to 2 million. It assumes 50% of eligible forces
claim benefits and a rate of 6.1% increase, which is the actual rate
over the past 10 years. It further assumes a higher rate of medical
inflation (10% vs. 8% in the low and moderate scenarios).
Table 1: Long-term Cost of Veterans Disability Benefits \32\
----------------------------------------------------------------------------------------------------------------
Scenario Low Moderate High
----------------------------------------------------------------------------------------------------------------
Disability Benefits ($bn) 67.63 109.98 126.76
----------------------------------------------------------------------------------------------------------------
Backlog of Pending Disability Claims
---------------------------------------------------------------------------
\32\ The figures in Table 1 represent the present value of
disability benefits over 40 years for eligible veterans projected under
the three scenarios described.
---------------------------------------------------------------------------
The issue is not simply cost but also efficiency in providing
disabled veterans with their benefits. In addition to all the problems
detailed above, the Iraq and Afghan war veterans are filing claims of
unusually high complexity (see table 3). To date, the backlog of
pending claims from these recent war veterans is 34,000, but the vast
majority of servicemen from this conflict have not yet filed their
claims. Even without the projected wave of claims, the VA has an
overall backlog of 400,000, including thousands of Vietnam era claims.
Including all pending claims and other paperwork, the VA's backlog has
increased from 465,623 in 2004 to 525,270 in 2005 to 604,380 in
2006.\33\
---------------------------------------------------------------------------
\33\ VBA's ``Monday Morning Report'' of pending claims and other
work performed at regional offices, cites: 11/25/06: 604,380; 11/26/05:
525,270; 11/27/04: 465,623.
---------------------------------------------------------------------------
The fact that the VBA is largely sympathetic to the plight of
disabled veterans should not obscure the fact that this system is
already under tremendous strain. If only one fifth of the returning
veterans who are eligible claim in a given year, and the total claims
reaches a high of 38% effective rate (44%* 88% approval rate), the
number of likely claims at the VBA over the next 10 years can be
expected to rise from 104,819 to more than 600,000.\34\ (See table 2).
---------------------------------------------------------------------------
\34\ This projection based on the moderate scenario described
previously, based on 1.7 million unique servicemen and CBO troop
deployment figures through 2014.
Table 2: Projected Increase in Disability Claims (moderate scenario)
----------------------------------------------------------------------------------------------------------------
Disability Benefits 2006 2007 2008 2009 2010 2011 2012
----------------------------------------------------------------------------------------------------------------
Discharged 118,758 118,758 118,758 118,758 118,758 118,758
cum 118,758 237,517 356,275 475,034 593,792 712,551
Eligible claimants
Existing discharged
non-claimants 526,355 526,355 526,355 526,355 526,355 526,355 526,355
Newly discharged -- 118,758 237,517 356,275 475,034 593,792 712,551
Total potential claimants 645,113 763,872 882,630 1,001,389 1,120,147 1,238,906
Claim rate 22% 22% 27% 33% 38% 44% 44%
New claims -- 140,312 207,678 287,958 381,154 487,264 538,924
Current beneficiaries 104,819 104,819 104,819 104,819 104,819 104,819 104,819
Total claims (number) 104,819 245,131 312,497 392,777 485,973 592,083 643,743
------------------------------------------------------------------------
Total claims ($bn) 0.93 2.27 2.89 3.63 4.49 5.47 5.95
----------------------------------------------------------------------------------------------------------------
If nothing is done to address the problem, the claims backlog will
continue to grow throughout the period of the war, along with growing
inequity between different regional offices. A key question is: what is
a reasonable amount of time for the U.S. to make a disabled veteran
wait for a disability check? This paper proposes several actions that
could reduce the length of time for processing from zero to 90 days.
(Described in more detail in section 4: Recommendations). These
include: (a) greater use of the ``Vet Centers'' to provide assistance
for veterans to file their claims, (b) automatically granting all or
some of the claims, with subsequent audits to deter fraud, and (c)
streamlining and technologically upgrading the claims system into a
``fast track'' where veterans receive a quick decision on most claims.
2. Veterans Medical Care Shortfall
The VA's Veterans Health Administration provides medical care to
more than 5 million veterans each year. This care includes primary and
secondary care, as well as dental, eye and mental healthcare, hospital
inpatient and outpatient services. The care is free to all returning
veterans for the first 2 years after they return from active duty;
thereafter the VA imposes copayments for various services, with the
amounts related to the level of disability of the veteran.\35\
---------------------------------------------------------------------------
\35\ 38 USC section 1710
---------------------------------------------------------------------------
The VA has long prided itself on the excellence of care that it
provides to veterans. In particular, VA hospitals and clinics are known
to perform a heroic job in areas such rehabilitation. Medical staff is
experienced in working with veterans and provides a sympathetic and
supportive environment for those who are disabled. It is therefore of
utmost important that the quality of care be maintained as the demand
for it goes up.
However, the demand for VA medical treatment is far exceeding what
the VA had anticipated. This has produced long waiting lists and in
some cases simply the absence of care. To date, 205,097, or 32% of the
631,174 eligible discharged OEF/OIF veterans have sought treatment at
VA health facilities. These include 35% of the eligible active duty
servicemen (101,260) and 31% of the eligible Reservists/Guards
(103,837). To date, this number represents only 4% of the total patient
visits at VA facilities--but it will grow. According to the VA, ``As in
other cohorts of military veterans, the percentage of OIF/OEF veterans
receiving medical care from the VA and the percentage of veterans with
any type of diagnosis will tend to increase over time as these veterans
continue to enroll for VA healthcare and to develop new health
problems.\36\''
---------------------------------------------------------------------------
\36\ VHA, Office of Public Health and Environmental Hazards,
November 2006, Ibid, p. 14
---------------------------------------------------------------------------
The war in Iraq has been noteworthy for the types of injuries
sustained by the soldiers. Some 20% have suffered brain trauma, spinal
injuries or amputations; another 20% have suffered other major injuries
such as amputations, blindness, partial blindness or deafness, and
serious burns.
However, the largest unmet need is in the area of mental
healthcare. The strain of extended deployments, the stop-loss policy,
stressful ground warfare and uncertainty regarding discharge and leave
has taken an especially high toll on soldiers. Thirty-6 percent of the
veterans treated so far--an unprecedented number--have been diagnosed
with a mental health condition. These include PTSD, acute depression,
substance abuse and other conditions. According to Paul Sullivan, a
leading veterans advocate, ``The signature wounds from the wars will be
(1) traumatic brain injury, (2) post-traumatic stress disorder, (3)
amputations and (4) spinal chord injuries, and PTSD will be the most
controversial and most expensive'' \37\ (see Table 3).
---------------------------------------------------------------------------
\37\ Paul Sullivan, Program Director of Veterans for America, 12/
23/06 interview
Table 3: VHA Office of Public Health, November 2006
------------------------------------------------------------------------
Frequency of Possible Diagnoses Among Recent Iraq and Afghan Veterans
-------------------------------------------------------------------------
(n = 205,097)
Diagnosis (Broad ICD-9 Categories) ------------------------
Frequency * %
------------------------------------------------------------------------
Infectious and Parasitic Diseases (001-139) 21,362 10.4
Malignant Neoplasms (140-208) 1,584 0.8
Benign Neoplasms (210-239) 6,571 3.2
Diseases of Endocrine/Nutritional/Metabolic 36,409 17.8
Systems (240-279)
Diseases of Blood and Blood Forming Organs (280- 3,591 1.8
289)
Mental Disorders (290-319) 73,157 35.7
Diseases of Nervous System/Sense Organs (320- 61,524 30.0
389)
Diseases of Circulatory System (390-459) 29,249 14.3
Disease of Respiratory System (460-519) 36,190 17.6
Disease of Digestive System (520-579) 63,002 30.7
Diseases of Genitourinary System (580-629) 18,888 9.2
Diseases of Skin (680-709) 29,010 14.1
Diseases of Musculoskeletal System/Connective 87,590 42.7
System (710-739)
Symptoms, Signs and Ill Defined Conditions (780- 67,743 33.0
799)
Injury/Poisonings (800-999) 35,765 17.4
------------------------------------------------------------------------
* Hospitalizations and outpatient visits as of 9/30/2006; veterans can
have multiple diagnoses with each healthcare encounter.
A veteran is counted only once in any single diagnostic category but can
be counted in multiple categories, so the above numbers add up to
greater than 205,097.
Additionally, far more returning Iraqi war veterans (than those in
previous conflicts) are likely to seek such help, in part due to
awareness campaigns run by veteran's organizations through the press.
There is no reliable data on the length of waiting lists for returning
veterans, but even the VA concedes that they are so long as to
effectively deny treatment to a number of veterans. In the May 2006
edition of Psychiatric News, Frances Murphy M.D., the Under Secretary
for Health Policy Coordination at VA, said that mental health and
substance abuse care are simply not accessible at some VA facilities.
When the services are available, Dr. Murphy asserted that, ``waiting
lists render that care virtually inaccessible.'' \38\
---------------------------------------------------------------------------
\38\ Frances Murphy, May 2006, Psychiatric News
---------------------------------------------------------------------------
The VA curiously maintains that it can cope with the surge in
demand, despite much evidence to the contrary. For the past 2 years,
the VA ran out of money to provide healthcare. In FY 2006, the VA was
obliged to submit an emergency supplemental budget request for $2
billion, which included $677 million to cover an unexpected 2% increase
in the number of patients (half of which were OIF/OEF patients), $600
million to correct its inaccurate estimate of long-term care costs, and
$400 million to cover an unexpected 1.2% increase in the costs per
patient due to medical inflation. The previous year, (FY 2005), VA
requested an additional $1 billion, of which one-quarter was for
unexpected OIF/OEF needs and remainder was related to overall under-
estimation of patient costs, workload, waiting lists, and dependent
care. The GAO analysis of these shortfalls concluded that they were due
to the fact that VA was modeling its projections based on 2002 data,
before the war in Iraq began.\39\
---------------------------------------------------------------------------
\39\ GAO-06-430R, ``VA Health Care Budget Formulation'', pp 18-20.
---------------------------------------------------------------------------
The budget shortfalls and the statement by Dr. Murphy suggest that
the volume of veterans returning from Iraq and Afghanistan will not be
able to obtain the healthcare they need, particularly for mental health
conditions. Such veterans are at high risk for unemployment,
homelessness, family violence, crime, alcoholism, and drug abuse, all
of which impose an additional human and financial burden on the nation.
In addition, many of these social services are provided by state and
local governments which are already under tremendous strain.
Projected Medical Costs
The number of veterans who will eventually require treatment can be
estimated using a baseline of the utilization during the first Gulf
War, in which the VA is providing medical care to 48% of veterans. The
average annual cost of treating veterans in the system is now
$5000,\40\ although it is difficult to know whether the more grievous
injuries and disabilities of the current conflict will drive up costs
per patient.
---------------------------------------------------------------------------
\40\ This amount is calculated by estimating the budget 2006
supplemental budget request for OIF/OEF veterans per additional
patient, using the GAO analysis in GAO-06-430R
---------------------------------------------------------------------------
The costs of providing medical care have been calculated under the
three scenarios. Under the low scenario, under which the U.S. will
deploy no new troops, the ceiling for medical care is 48% of OIF/OEF
veterans. If half of all veterans eventually seek medical treatment
from the VA that will produce a demand of some 700,000 veterans.
However, due to the fact that veterans are eligible for free care
during the first 2 years after discharge, we can expect a wave of
returning war veterans within 2 years of their discharge date.
Additionally, since active duty veterans claim medical care at a higher
rate (than Guards/Reservists) and have been deployed in more of the
most hazardous front-line task come home, we can expect that the
average cost of treating such veterans increases as well as a high
level of demand.\41\
---------------------------------------------------------------------------
\41\ VHA, Office of Public Health and Environmental Hazards, Ibid.
---------------------------------------------------------------------------
If the demand for medical care increases as projected to some
700,000 or more veterans, there is a serious risk that the VA, which is
already overwhelmed, will be unable to meet the medical needs of
returning OIF/OEF veterans. Additional staff is needed in important
areas such as brain trauma units and mental health. The VA also needs
to expand systems such as triage nursing, to help leverage scarce
medical resources.
Even assuming that no more troops are deployed, the long-term cost
of treating returning veterans will reach $208 billion. This however
assumes that the supply of healthcare exists to treat them. If the
number of troops continues to grow as in the moderate then cost of
providing lifetime care rises to $315 billion. The annual budget
payment under this scenario will reach $3 bn by 2010 and more than
double by 2014. (See Table 4)
Table 4: Projected Cost of Providing VA Medical Care (moderate scenario) \42\
--------------------------------------------------------------------------------------------------------------------------------------------------------
MEDICAL COSTS 2006 2007 2008 2009 2010 2011 2012 2013 2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Discharged 631,174 749,932 868,691 987,449 1,106,208 1,224,966 1,343,725 1,462,483 1,581,242
% OIF/OEF veterans seeking
care 32.50% 33.96% 35.49% 37.09% 38.76% 40.50% 42.32% 44.23% 46.22%
Total OIF/OEF veterans
seeking care 205,132 254,696 308,305 366,224 428,731 496,123 568,711 646,827 730,822
Cost/medical claim $ 5,000 $ 5,400 $ 5,832 $ 6,299 $ 6,80 $ 7,34 $ 7,93 $ 8,56 $ 9,25
2 7 4 9 5
Total cost ($bn) 1.0 1.4 1.8 2.3 2.9 3.6 4.5 5.5 6.8
---------------------------------------------------------------------
NPV $315.23
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 4: Projected Cost of for Providing VA Medical Care (moderate
scenario) \42\
However, these scenarios are conservative in assuming that only
half of the returning veterans will eventually seek medical treatment
from the VA and that the level of healthcare inflation will remain
constant at 8%. Under a worst-case scenario, if troops levels rise to 2
million and if health inflation rises to the double-digit levels
experienced during the nineties, we can expect the total cost of
providing lifetime medical care to veterans to reach $600 bn.\43\
---------------------------------------------------------------------------
\42\ The NPV is calculated over 40 years, at a discount rate of
4.75%, with a peak rate of 50% veterans claiming care by 2016.
\43\ High scenario assuming 10% medical inflation rate.
---------------------------------------------------------------------------
Veterans Centers
How can the VA possibly handle the number of returning troops who
require care, as well as their families, especially for mental health
conditions? Perhaps the most creative and successful innovation in the
VA in past two decades has been the introduction of the ``Vet
Centers''--207 walk-in storefront centers where veterans or their
families can obtain counseling and reintegration assistance. The
centers, operated by VA's ``Readjustment Counseling Service'' are
popular with veterans and their families and--at a total cost of some
$100m per year--provide a highly cost-effective option for veterans who
are not in need of acute medical care. The Vet Centers are particularly
helpful for families, for example they provide a venue for a soldier's
spouse to seek guidance of the veteran is showing mental distress but
will not seek help. They also supply bereavement counseling to
surviving families of those killed during military service. And they
offer a friendlier environment often staffed with recent OEF/OIF combat
veterans and other war veterans--unlike VA regional offices which tend
to be stuffy, bureaucratic offices located in downtown locations.\44\
---------------------------------------------------------------------------
\44\ Opinion based on conversations with veterans organizations.
---------------------------------------------------------------------------
To date, 144,000 veterans have sought assistance at these
centers.\45\ However the demand for their services is threatening their
ability to provide care. Vet Center managers recently surveyed by
Congress said that in 50% of the Centers, the increasing workload is
affecting their ability to treat veterans. Some 40% of the Vet Centers
have directed veterans for whom individualized therapy would be
appropriate into group therapy, and more than one-quarter of the
Centers have limited or plan to limit family therapy. Nearly 17% have
established waiting lists (or are in the process of setting them
up).\46\
---------------------------------------------------------------------------
\45\ Vet Center costs document, page 3B-11
\46\ October 2006 report issued by the House Veterans Affairs
Committee, testimony by Vet Center managers.
---------------------------------------------------------------------------
Currently the centers do not assist veterans in filing disability
claims, but provided that the facility had sufficient secure storage
space to handle such documents, there is no reason why they could not.
The VA has recommended hiring an additional 1000 claims adjudicators--
who could be placed in the Vet Centers (an average of 5 each) to help
veterans figure out how to claim. The cost of expanding the number of
centers, hiring additional staff and placing more claims adjudicators
in the centers is minimal.
Transition from DOD Payroll to VA Care
One of the chief bottlenecks in the current system is the soldier's
transition from the DOD payroll into the VA benefit system. There are
three primary ways that a soldier makes this transition.
A veteran who is discharged regularly, and has some level of
disability will typically have to wait 6 months before receiving his or
her disability check from the VA. This is a period during which the
veterans, particularly those in a state of mental distress, are most at
risk for serious problems, including suicide, falling into substance
abuse, divorce, losing their job, or becoming homeless.
A second route is to exit via the ``Benefits Delivery at
Discharge'' (BDD) program. This successful program allows soldiers to
process their claims up to 6 months prior to discharge, so they can
begin receiving benefits as soon as they leave the military. However,
the use of this route has become much more difficult due to the
extended deployments, the use of ``stop-loss'' orders, and the
resulting unpredictability about when a soldier will be discharged.
Additionally, this program is not available to Reservists and
Guardsmen, who comprise 40% of the forces in Iraq and Afghanistan. The
VBA claim denial rate is twice as high for Reserve and Guard veterans,
possibly due in part to their lack of access to BDD.\47\ Consequently
the usage of this apparently better route has not been increasing as
would have been expected.\48\
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\47\ Active Duty denial rate is 7.6 percent compared with National
Guard and Reserve denial rate of 17.8 percent, See Footnote 28
\48\ Congressional testimony of Jack McCoy, VBA, March 16, 2006,
http://www.va.gov/OCA/testimony/hvac/sdama/060316JM.asp and a VA fact
sheet indicate 26,000 BDD claims in 2003, 39,000 in 2004, and 46,000 in
2005. http://www1.va.gov/opa/fact/tranasst.asp.
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For veterans who are more seriously wounded, the process is more
complicated as they transition from medical facilities run by DOD into
medical facilities run by the VA. For example a wounded veteran may be
treated initially at Walter Reed Army Hospital and then transferred to
a VA facility. Veterans experience some difficulties is securing the
maximum amount of disability benefits at discharge during such
transitions, due to a lack of compatibility between the DOD and VA
paperwork and tracking systems. The VA complains that the records they
receive from DOD are delayed or contain errors, in many cases it is the
situation where the data that is tracked is not compatible. This not
only creates unnecessary problems in moving veterans through the system
but it also makes it more difficult for the data to be analyzed in
medical and other studies.
Additionally there are the problems caused by the Pentagon's poor
accounting system. GAO investigators have found that DOD pursued
hundreds of battle-injured soldiers for payment of non-existent
military debts--because DOD financial systems erroneously reported that
they were indebted. For example, one Army Reserve Staff Sergeant, who
lost his right leg below the knee, was forced to spend 18 months
disputing an erroneously recorded debt of $2231 which prevented him
from obtaining a mortgage to purchase a home. Another staff sergeant
who suffered massive brain damage and PTSD had his pay stopped and
utilities turned off because the military erroneously recorded a debt
of $12,000. Hundreds of injured soldiers may be in this situation.\49\
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\49\ GAO-06-494, ``Hundred of Battle-Injured GWOT Soldiers Have
Struggled to Resolve Military Debts''
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Overall Assessment and Cost
Overall the U.S. is not adequately prepared for the influx of
returning servicemen from Iraq and Afghanistan. There are three major
areas in which it is not prepared: claims processing capacity for
disability benefits; medical treatment capacity, in terms of the number
of healthcare personnel available at clinics throughout the country,
particularly in mental health; and third, there is no preparation for
paying the cost of another major entitlement program.
As discussed earlier, the backlog in claims benefit is already
somewhere between 400,000 and 600,000. Unless major changes are made to
this process, the number of claims pending and requiring attention will
reach some 750,000 within the next 2 years and the pendency period will
increase proportionately, resulting in more veterans falling through
the cracks that could have been avoided. In addition, veterans whose
claims reach different centers in different parts of the country will
have widely different experiences, proving highly unfair to those who
just happen to be located in areas of greater backlog.
The quality of medical care is likely to continue to be high for
veterans with serious injuries treated in VA's new polytrauma centers.
However, the current supply of care makes it unlikely that all
facilities can offer veterans a high quality of care in a timely
fashion. Veterans with mental health conditions are most likely to be
at risk because of the lack of manpower and the inability of those
scheduling appointments to distinguish between higher and lower risk
conditions. If the current trends continue, the VA is likely to see
demand for healthcare rising to 750,000 veterans in the next few years,
which will overwhelm the system in terms of scheduling, diagnostic
testing, and visiting specialists, especially in some regions.\50\
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\50\ However, the availability of medical care may vary
significantly by region.
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The cost of providing disability benefits and medical care, even
under the most optimistic scenario that no additional troops are
deployed and the claims pattern is only that of the previous Gulf War,
would suggest that at a minimum the cost of providing lifetime
disability benefits and medical care is $350 billion. If the number of
unique troops increases by another 200,000 to 500,000 over a period of
years, this number may rise to as high as nearly $700 bn. (See Table 5)
The funding needs for veterans' benefits thus comprise an additional
major entitlement program along with Medicare and Social Security that
will need to be financed through borrowing if the U.S. remains in
deficit. This will in turn place further pressure on all discretionary
spending including that for additional veterans' medical care.
Table 5: Total Veterans Disability and Medical Costs \51\
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LOW MODERATE HIGH
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Disability 67.6 109.5 126.8
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Medical 282.2 315.2 536.0
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TOTAL ($Bn) 349.8 424.7 662.8
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In the context of the overall costs of the War
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\51\ Total lifetime costs over 40 years, discounted at 4.75% under
scenarios described.
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Veteran's disability benefits and medical care are two of the most
significant long-term costs of the War. As shown in our previous
analysis of the costs of the war, the war has both budgetary and
economic costs. This paper focuses only on the budgetary costs of
caring for veterans. It does not take into account the value of lives
lost, or effectively lost due to grievous injury. Not does it take into
account the economic impact of the large number of veterans living with
disabilities who cannot engage in full economic activities.\52\
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\52\ This paper considers only the budgetary costs of veterans
care. Standard economic theory would treat disability benefits as a
transfer payment and deduct these from the economic and social loss
associated with veteran's reduced economic lives. This was the
methodology used in (stiglitz paper).
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Recommendations
a) Medical Care
The Veterans Health Administration will not be able sustain its
high quality of care without greater funding and increased capacity in
areas such as psychiatric care and brain trauma units. In addition,
more funding should be provided for readjustment counseling services by
social workers at the Vet Centers. Even doubling the amount of funding
for counseling at the Vet Centers is a small amount compared to the
funds now being requested for additional recruiting of new soldiers.
(b) Disability Claims Backlog
There are at least three potential methods of reducing the number
of pending claims. Perhaps the easiest would be to ``fast track''
returning Iraq and Afghan war veteran's claims in a single center
staffed with highly experienced group of adjudicators who could provide
most veterans with a decision within 90 days. At a minimum, all simple
claims could be dispatched in this manner. During the past decade,
private sector health insurance companies have reengineered their
processes and adopted technologies, such as new automated data capture
and document processing systems that have dramatically improved their
ability to handle large volumes of information. This has allowed the
industry to bring the average claim processing time down to 89.5 days.
For example, the firm Noridian used technology to enable operators to
process four to five times more claims in the same amount of time as
under their old system, and to speed the form retrieval process for
better customer service.\53\
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\53\ KM World, June 1999.
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The VA has proposed a more typically governmental solution of
adding 1,000 more claims adjudicators. Even apart from the cost of $80
m or so of adding these personnel, the question is whether adding
additional personnel to a cumbersome system is the best possible way to
speed up transactions and improve service. A better idea would be to
expand the Vet Centers to offer some assistance in helping veterans
figure out their disability claims. The 1,000 claims experts could be
placed inside the Vet Centers (5 per center), thus enabling veterans
and their families to obtain quick assistance for many routine claims.
Vet Centers would only require minor modifications (secure storage
space, additional computers and offices) to fill this role.
The best solution might be to simplify the process--by adopting
something closer to the way the IRS deals with tax returns. The VBA
could simply approve all veterans' claims as they are filed--at least
to a certain minimum level--and then audit a sample of them to weed out
and deter fraudulent claims. At present, nearly 90 percent of claims
are approved. VBA claims specialists could then be redeployed to assist
veterans in making claims, especially at VA's ``Vet Centers.'' This
startlingly easy switch would ensure that the U.S. no longer leaves
disabled veterans to fend for themselves.
The cost of any solution that reduced the backlog of claims is
likely to be an increased number of claims, and a quicker pay-out. If
88% of claims were paid within 90 days instead of the 6 months to 2
years currently required, the additional budgetary cost is likely to be
in the range of $500m in 2007.
Conclusions
President Bush is now asking for more money to spend on recruiting
in order to boost the size of the Army and deploy more troops to Iraq.
But what about taking care of those same soldiers when they return home
as veterans? The number of veterans who are returning home with
injuries or disabilities is large and growing. We have not paid careful
enough attention, or devoted sufficient resources, to planning for how
to take care of these men and women who have served the nation.
There has been a tendency in the media to focus on the number of
U.S. deaths in Iraq, rather than the volume of wounded, injured, or
sick. This may have led the public to underestimate the deadliness and
long-term impact of the war on civilian society and the government's
pocketbook. Were it not for modern medical advances and better body
armor, we would have suffered even more loss of life.
One of the first votes facing the new Democratic-controlled
Congress will be yet another ``supplemental'' budget request for $100+
billion to keep the war going. The last Congress approved a dozen such
requests with barely a peep, afraid of ``not supporting our troops''.
If the new Congress really wants to support our troops, it should start
by spending a few more pennies on the ones who have already fought and
come home.
Limitations of Data
This paper has been prepared based on the best available data from
VA sources, CBO, GAO, and veterans organizations. Reconciling this data
has therefore been done to try to generate realistic estimates, but is
not precise. It is also difficult to predict with certainty the uptake
in the military of benefits and medical care. In all cases this study
has been done conservatively, for example it is entirely possible that
after the length and grueling nature of this war, that a much higher
number--perhaps \2/3\ of returning veterans--would seek disability
benefits and/or healthcare and the estimates in this paper prove too
low.
Issues not addressed
This paper has not attempted to address the cost of taking care of
wounded and disabled Iraqi soldiers in Iraq. A number of studies have
estimated the fatalities in Iraq, but there are few studies of the
number of injuries among the Iraqi military. As the U.S. continues to
place an emphasis on developing the Iraqi military to replace it, it is
worth asking what the cost to that country will be of providing medical
care and any kind of long-term benefits to those who are fighting. This
study excludes VBA benefits such as education, insurance, vocational
rehabilitation, and home loan guaranty programs. This study also
excludes private, state, and local healthcare, disability, and
employment benefits for returning veterans.
Acknowledgements
This paper was prepared with the invaluable assistance of Tony
Park, a student at the Kennedy School of Government, and Paul Sullivan,
Director of Research and Analysis at Veterans for America. Their
contributions are gratefully acknowledged.
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