Past studies evaluated veterans’ with service-connected  disabilities average loss of earnings and found that not all veterans  were being equitably compensated. VA Has Begun to Update Its Disability Criteria, but Faces Delays and Lacks Complete Planning in Key Areas

		VA Has Begun a Comprehensive Update of Its Disability Criteria with Medical and Earnings Information

In response to a directive from the Secretary, VA initiated an effort in  2009 to comprehensively revise all 15 body systems in its disability rating  schedule. In recognition of medical advances and current research on disability, VA  is considering revising its criteria to reflect a more modern view of  disability that gives greater consideration to a veteran’s ability to function  with a service-connected disability. However, as of July 2012, VBA had not fully  implemented this new system. Selected Policy Approaches for Updating VA’s Benefit Structure Present Both Opportunities and Challenges

Three key approaches for modernizing VA’s disability programs—as  recommended by disability commissions and others—present  opportunities and challenges. See figure 3 for an overview of what VA does now and what these  approaches would do. Nevertheless, some experts said that combining the  approaches could create a more integrated, comprehensive benefits  package and could also mitigate challenges associated with any one  approach. § 1155, VA is required, as far as is  practicable, to base its disability ratings on the average impairments of  earning capacity resulting from various types of injuries. Two experts we interviewed said that  benefits currently provided to veterans outside of the rating schedule,  such as enhanced monthly compensation payments, could be viewed as  compensation for loss in quality of life. At the same time, achieving consensus for this approach may be difficult. Several veteran groups and experts also expressed concerns about VA’s  capacity to administer this approach. For example, VA is implementing recommendations to comprehensively  revise the rating schedule. According to VA officials, they currently are  not acting on these approaches because they fall outside the VA’s  statutory requirement to compensate veterans for average earnings loss. Specifically, without sufficient  capacity to conduct research on earnings loss, VA may be unable to  make fact-based and timely revisions to its rating schedule. Nevertheless, without a rating schedule that reflects  advances in medicine and changes in the labor market, VA may continue  to overcompensate some veterans while undercompensating others. However, a system that  maximizes equity, balances fiscal pressures, and ultimately serves  individual veterans effectively will benefit from deliberations informed by  more modern views about disability. Matter for Congressional Consideration

To the extent that Congress wishes to consider various options to  modernize VA’s disability benefits program, Congress could direct the VA  to conduct focused studies on these or other policy approaches and, if  necessary, propose relevant legislation for congressional consideration. To ensure that decisions about veteran disability compensation  benefits are informed by current earnings loss information, we  recommend that the Secretary of Veterans Affairs  take necessary steps to increase research capacity to determine the  impact of impairments on earnings in a timely manner and develop a more complete plan for conducting earnings loss and  validation studies for the entire rating schedule. To ensure the rating schedule revisions are sustained beyond the  current update project, we recommend that the Secretary of Veterans  Affairs establish a formal policy, procedure, or mechanism to revise  the rating schedule—with updated medical and earnings loss  information—at regular intervals. VA also agreed with our recommendation to develop a written  implementation strategy that could include steps to mitigate the possible  effects of rating schedule revisions on agency operations, including an  increase in the number of claims received. GAO staff who made key contributions to this  report are listed in appendix V.

Appendix I: Scope and Methodology

In this report, we (1) identified the progress that the Department of  Veterans Affairs (VA) has made in revising the criteria used to determine  eligibility for veterans’ disability benefits with updated medical and  economic information, and (2) discussed the opportunities and challenges  associated with selected policy approaches that disability commissions  and others have raised for updating VA’s disability benefits structure. To address our first reporting objective, we reviewed VA’s strategic goals,  plans, policies, Federal Register notices, and other relevant program  documentation and interviewed VA officials. We selected  approaches from the following reports:
Advisory Committee on Disability Compensation, Biennial Report  dated 27, July 2010; Interim Report dated 7 July, 2009;
CNA, Final Report for the Veterans’ Disability Benefits Commission:  Compensation, Survey Results, and Selected Topics (August 2007);
Economic Systems Inc., A Study of Compensation Payments for  Service-Connected Disabilities (September 2008);
GAO, SSA and VA Disability Programs: Re-Examination of Disability  Criteria Needed to Help Ensure Program Integrity, GAO-02-597  (August 2002);  Institute of Medicine, Committee on Medical Evaluation of Veterans  for Disability Compensation, A 21st Century System for Evaluating  Veterans for Disability Benefits and PTSD Compensation and Military  Service (2007);
President’s Commission on Care for America’s Returning Wounded  Warriors (Dole-Shalala Commission), Serve, Support, Simplify: Report  of the President’s Commission on Care for America’s Returning  Wounded Warriors (July 2007); and
Veterans’ Disability Benefits Commission, Honoring the Call to Duty:  Veterans’ Disability Benefits in the 21st Century (October 2007). These sources offered numerous recommendations intended to improve  VA’s disability benefits structure. The following summarizes key questions raised  during our discussions with experts and veteran groups about the  possible design of programs for providing quality of life payments,  providing integrated vocational services with transitional cash assistance,  and factoring the effects of assistive technology and medical interventions  systematically into rating decisions.
Why GAO Did This Study

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

What GAO Found

The Department of Veterans Affairs (VA) initiated a comprehensive effort in 2009 to revise its disability rating schedule with both updated medical and earnings information, but faces hurdles with several key aspects. The current revision effort takes a more comprehensive and empirical approach than VAs past efforts. VA has hired full-time staff to revise the rating schedules medical information and plans to conduct studies to evaluate veterans average loss of earnings in todays economy. As part of this effort, VA is considering modifying the rating schedulecurrently based largely on degree of medical severityto include a veterans ability to function in the workplace. Moving in this direction is more consistent with how experts conceive of disability. However, this change, in part, has resulted in VA falling behind schedule. As of July 2012, VA is over 12 months behind in revising criteria for the first categories of impairments. In addition, VA has not developed its capacity to produce timely research on the impact of impairments on earnings. Moreover, VA lacks a complete planwith specific activities and updated time framesfor conducting earnings loss and related studies. VA also does not have a written strategy to address the possible effects that revisions may have on agency operations, including impacts on an already strained claims workload. Finally, although VA intends to conduct medical and earnings updates beyond the current effort, VA lacks a formal mechanism to guide its commitment to do so. It is important that VA update and maintain its rating schedule to reflect current medical and labor market information to avoid overcompensating some veterans with service-connected disabilities while undercompensating others.
Three key approaches for modernizing VAs disability programs recommended by disability commissions and othersproviding quality of life payments, providing integrated vocational services with transitional cash assistance, and systematically factoring the effects of assistive technology and medical interventions into rating decisionshold opportunity and challenges. Experts and veteran groups GAO interviewed believe each approach holds at least some opportunity for serving veterans more fairly, equitably, and effectively. However, challenges exist. For example, they noted that it could be difficult to achieve consensus for specific design elements among the diverse set of stakeholders. Also, VAs capacity to administer these approacheswhich could increase the complexity and/or number of claimsis questionable. Importantly, costs of each approach were raised. Some interviewees also noted that two or more of the approaches could be combined into a comprehensive benefits package that may mitigate concerns raised by the implementation of any single approach. For example, if factoring assistive technology into disability ratings resulted in lower disability compensation payment levels for some, a quality of life payment could offset that loss. VA officials told GAO they are not considering these approaches because they fall outside of VAs legal responsibility to compensate for loss of earning capacity. However, a system that maximizes equity, balances fiscal pressures, and ultimately serves individual veterans effectively will benefit from deliberations informed by more modern views about disability.

What GAO Recommends

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