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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

September 2012: 

VA Disability Compensation: 

Actions Needed to Address Hurdles Facing Program Modernization: 

GAO-12-846: 

GAO Highlights: 

Highlights of GAO-12-846, a report to congressional committees. 

Why GAO Did This Study: 

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

What GAO Found: 

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

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

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 VA’s capacity to revise the rating schedule now and in the 
future. These include completing plans for conducting earnings loss 
studies and developing a written strategy for implementing revisions 
to the rating schedule. VA agreed with the recommendations and noted 
plans to address them. 

View [hyperlink, http://www.gao.gov/products/GAO-12-846]. For more 
information, contact Daniel Bertoni at (202) 512-7215 or 
bertonid@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

VA Has Begun to Update Its Disability Criteria, but Faces Delays and 
Lacks Complete Planning in Key Areas: 

Selected Policy Approaches for Updating VA's Benefit Structure Present 
Both Opportunities and Challenges: 

Conclusions: 

Matter for Congressional Consideration: 

Recommendations for Executive Action: 

Appendix I: Scope and Methodology: 

Appendix II: Comprehensive Revisions and Other Key Updates to the VA 
Schedule for Rating Disabilities (VASRD): 

Appendix III: Key Questions for Designing New Disability Compensation 
Programs: 

Appendix IV: Comments from the Department of Veterans Affairs: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Examples of Medical Changes to VA's Rating Schedule Being 
Considered during the Current Update: 

Table 2: Key Steps Missing from VA's Project Planning: 

Table 3: Six Elements of Sound Planning Used to Evaluate VA's Efforts: 

Table 4: Experts and Veteran Groups Interviewed by GAO: 

Figures: 

Figure 1: The VA Disability Benefits Process: 

Figure 2: VA's Process for Revising the Disability Compensation Rating 
Schedule: 

Figure 3: Overview of What VA Does Now and the Modified Approaches: 

Figure 4: Experts' and Veteran Groups' Views on Potential 
Opportunities and Challenges of Providing a Quality of Life Payment: 

Figure 5: Experts' and Veteran Groups' Views on Potential 
Opportunities and Challenges of Providing Integrated Vocational 
Services along with Transitional Cash Assistance: 

Figure 6: Experts' and Veteran Groups' Views on Potential 
Opportunities and Challenges of Incorporating Assistive Technology and 
Medical Interventions into Disability Rating Decisions: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

September 10, 2012: 

Congressional Committees: 

The nation is committed to caring for veterans who incurred injuries 
during their military service. To compensate for these sacrifices, the 
U.S. Department of Veterans Affairs (VA) administers one of the 
largest federal disability compensation programs in the nation. VA's 
disability compensation program provides veterans with a cash benefit 
based on the average loss in earning capacity in civilian occupations 
that result from injuries or conditions incurred or aggravated during 
military service. In fiscal year 2011, VA's program provided about 
$39.4 billion in disability payments to nearly 3.4 million veterans 
with service-connected disabilities. In the years ahead, enrollment 
and costs could increase given the conflicts in Iraq and Afghanistan 
and as more Vietnam veterans--a significant proportion of the total 
veteran population--further age into disability-prone years. Given the 
large cash outlays and increasing demand for VA services, VA must be 
well positioned to make accurate disability decisions and ensure that 
veterans are appropriately and equitably compensated. 

In 2003, GAO designated federal disability programs, including VA's 
disability program, as high risk due in part to challenges agencies 
face in keeping their criteria for evaluating disability and 
determining compensation consistent with advances in medicine, 
technology, and changes in the labor market and society. According to 
experts, VA's disability program infers the ability to work based on 
an individual's medical conditions and symptoms--a concept that 
originated with the creation of the schedule for rating disabilities 
over 65 years ago. However, experts believe that, in assessing 
disability, a modern practice includes considering an individual's 
ability to function in their work and other environments along with 
their medical conditions. 

These concerns, in light of more modern concepts of disability, 
present an opportunity to reevaluate this federal program. Various 
reports and studies conducted by GAO, congressional-and presidential-
appointed commissions (including the Veterans' Disability Benefits 
Commission and the Dole-Shalala Commission), and task forces have 
individually suggested various approaches to address a sensitive, but 
critical, national issue: how to update and strengthen VA's disability 
benefits structure, including the type, timing, and conditions of cash 
and other assistance to ensure that veterans with service-connected 
disabilities receive the compensation and services they deserve. 

We have prepared this report under the Comptroller General's authority 
to evaluate government programs as part of our continued effort to 
assist policymakers in determining how VA programs could more 
effectively meet the needs of veterans with disabilities in the 21st 
Century.[Footnote 1] In this report, we (1) identify the progress that 
VA has made in revising the criteria used to determine eligibility for 
veterans' disability benefits with updated medical and economic 
information, and (2) discuss the opportunities and challenges 
associated with various policy approaches that disability commissions 
and others have raised for updating VA's disability benefits structure. 

To conduct our work, we reviewed prior GAO, disability commission and 
committee reports; relevant federal laws and regulations; program 
documentation, including policies, procedures, strategic goals, and 
supporting project plans; and testimonies from disability groups and 
commissions. We interviewed VA officials, disability experts, and 
representatives of veteran groups. We also evaluated VA's project 
plans for revising its disability criteria against generally accepted 
project management practices. To identify the policy approaches for 
our second objective, we conducted a literature search of relevant 
reports by disability commissions, task forces, committees, as well as 
GAO reports. We selected policy approaches that address VA's 
disability benefits structure and which reflect more modern concepts 
of disability. To identify the opportunities and challenges associated 
with these policy approaches, we conducted 16 interviews with a range 
of informed experts and veteran groups on the political and 
administrative feasibility, effectiveness, and fiscal sustainability 
they believe are associated with each approach. Of those we 
interviewed, most said that the policy approaches we selected were 
relevant approaches for our research purposes. Our nongeneralizable 
sample of experts included individuals who participated in disability 
commissions, research, or congressional testimony on the topic, or who 
serve in an organization that represents veterans with disabilities. 
Additional information about our scope and methodology is provided in 
appendix I. 

We conducted this performance audit from August 2011 to September 2012 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

VA's Disability Compensation Program and Related Services: 

VA's disability program compensates veterans with a service-connected 
disability by providing a monthly cash benefit. As required by 
statute, the benefit is based upon an average reduction in earning 
capacity across a group of individuals with a similar physical or 
mental impairment.[Footnote 2] Thus, the benefit is not based on the 
loss of individual earnings or noneconomic losses. A veteran with a 
service-connected disability receives the benefit whether or not 
employed and regardless of the amount of income he or she is earning. 

The level of cash benefit is determined in part through the Veterans 
Affairs Schedule for Rating Disabilities (VASRD or rating schedule). 
The rating schedule is based on the extent to which the veteran's 
disability limits average earning capacity. VA staff use the rating 
schedule to assign disability ratings to veterans.[Footnote 3] The 
rating schedule contains medical conditions or injuries categorized 
into 15 body systems, with a level of severity ranging in 10 percent 
increments up to 100 percent. For example, the removal of three ribs 
is rated as a 30 percent impairment in earning capacity, or $389 per 
month, and cash benefits are increased for veterans with spouses and 
dependents.[Footnote 4] A veteran must be rated at least 10 percent to 
receive cash benefits. For veterans with multiple impairments, VA uses 
a table that applies a formula for combining ratings into a single 
rating.[Footnote 5] 

Besides cash assistance, VA provides health care, housing, vocational 
rehabilitation, and other employment-related services to eligible 
veterans.[Footnote 6] These services are provided through multiple 
administrations and programs within VA, such as the Veterans Health 
Administration and Vocational Rehabilitation and Employment program. 
In many instances, a veteran must first receive a disability rating 
from the Veterans Benefits Administration (VBA) and then apply for 
these services at the discretion of the veteran, as shown in figure 1. 

Figure 1: The VA Disability Benefits Process: 

[Refer to PDF for image: illustration] 

Veteran: 
Former active-duty service member who was not dishonorably discharged, 

To be eligible for VA benefits, a veteran must have a medically 
diagnosed disability and evidence linking that disability to the 
veteran's experience on active duty. 

1. Disability rating: 
VA assigns veteran Veterans Affairs Rating Disabilities rating of 0% 
to 100%. 
A rating of at least 10% is generally required for VA cash benefits. 

2. Cash benefits: 
VA gives eligible beneficiaries a cash benefit to compensate for 
average loss of earning capacity. 

Completing additional documentation is often required for VA to 
determine additional eligibility for benefits such as: 
* Vocational training; 
* Specially adapted housing; 
* Other medical/rehabilitation services. 

3. Additional services: 
Veterans may also apply for VA services outside of the compensation 
program. 

Source: GAO analysis of VA and Congressional Research Service 
documents. 

Note: This figure is intended to present a basic overview of VA's 
disability compensation program. For clarity purposes, we omitted some 
steps, processes, and legal options. 

[End of figure] 

Concerns about VA's Disability Program in Light of Modern Approaches: 

Various commissions, expert panels, and our prior work have raised a 
variety of concerns about the soundness of the rating schedule and 
about VA's basic disability benefits structure. The following were 
among these concerns: 

* VA's modifications of the medical information in the disability 
criteria have been slow and have not fully incorporated advances in 
technology and medicine. Moreover, the rating schedule has not been 
adjusted since its creation in 1945 to reflect ongoing changes in the 
labor market. Past studies evaluated veterans' with service-connected 
disabilities average loss of earnings and found that not all veterans 
were being equitably compensated.[Footnote 7] 

* VA faces continuing challenges in the area of disability claims 
processing, contributing to a large backlog of initial compensation 
claims and appeals.[Footnote 8] 

* VA focuses too singularly on compensation without adequate focus on 
rehabilitation to maximize a veteran's recovery and reintegration. 
This issue was raised by the Bradley Commission and Dole-Shalala 
Commission.[Footnote 9] Also, a small proportion of veterans 
participate in VA's vocational services.[Footnote 10] 

* VA's various disability benefits and services need to be better 
integrated to serve individual veterans. 

To address these and other concerns, GAO, commissions, committees, and 
expert panels made a range of recommendations that generally reflect 
modern concepts of disability. These modern concepts are reflected in 
the International Classification of Functioning, Disability, and 
Health (ICF), which is the World Health Organization's framework for 
health and disability.[Footnote 11] This framework takes into account 
the interaction between an individual's medical condition or 
impairment and intervening factors, such as their physical and social 
environment.[Footnote 12] That is, rather than predominately viewing 
disability as a medical condition (e.g., loss of an arm), modern 
concepts of disability focus on an individual's functional ability. 
Under these concepts, two people with the same impairment and 
symptoms, for a variety of reasons, might have different degrees of 
disability. For example, some individuals with post-traumatic stress 
disorder (PTSD) may experience symptoms such as anxiety, depression, 
and insomnia that make maintaining employment very difficult. However, 
other individuals with PTSD may be able to mitigate these symptoms 
through medication or other therapies and perform adequately in a work 
environment. Some frameworks of disability also distinguish work 
participation from other consequences of injuries or diseases that 
have a broader impact on a person's quality of life. Examples include 
difficulty interacting with family and friends and managing personal 
finances. 

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.[Footnote 13] This comprehensive revision 
will update the two major components of the rating schedule: (1) the 
medical criteria, and (2) earnings loss information. In 1989, VA took 
steps to conduct a comprehensive revision of the medical criteria, but 
it did not complete revisions for all body systems.[Footnote 14] Since 
then, VA has updated portions of its medical criteria primarily in 
response to congressional or stakeholder requests. (See appendix II 
for more information about previous updates to the rating schedule.) 
According to VA, while the agency has conducted economic earnings loss 
studies, it has never adjusted the rating schedule based on the 
findings from these studies.[Footnote 15] According to VA, the purpose 
of the current initiative to update the medical and earnings loss 
information is to ensure the rating schedule is as accurate and 
modernized as possible to meet the needs of veterans in the 21st 
century.[Footnote 16] 

VA is using a multiphase process to comprehensively revise the medical 
and earnings information for each body system. This process is led by 
VBA--which hired six full-time medical officers to lead the revisions--
in consultation with the Veterans Health Administration. Phase 1 
involves a 2-day public forum to solicit updated medical information 
from various stakeholders, and the process ends with the publication 
of revisions as final rules in the Federal Register, as shown in 
figure 2. 

Figure 2: VA's Process for Revising the Disability Compensation Rating 
Schedule: 

[Refer to PDF for image: illustration] 

Medical updates: 

Phase 1: Hold public forums: 
* Hold public forum for each body system; 
* Solicit updated medical information from governmental and private-
sector subject matter experts, and get input from the public and 
interested stakeholders.  

Phase 2: Convene workgroups and draft revisions: 
* Representatives from VBA, VHA, Rating Specialists, and legal and 
medical experts help draft proposed body system revisions. 
 
Earnings loss updates: 

Analyze results from previous studies: 
* For 3 of 15 body systems; 
and: 
Conduct new studies: 
* For 12 of 15 body systems; 
* Contract with outside organizations to conduct econometric studies. 

Incorporate earnings loss information into proposed revisions.   

Phase 3: Conduct internal review and impact analysis: 
* Conduct an impact analysis for the draft proposed rule; 
* Internal review of proposed rule by several departments within VA; 
* Hold status summit before publication of proposed rules to solicit 
public comments. 

Phase 4: Publish draft rules and hold comment period:  
* Publish draft rule in the Federal Register for public comment; 
* Respond to comments in a published final rule. 

Phase 5: Publish final rules: 
* Final rule for body system published in Federal Register. 

Source: GAO analysis of VA documentation and interviews with VA 
officials. 

[End of figure] 

To conduct the medical updates, the workgroups evaluate all 
impairments in the current rating schedule and make recommendations to 
add or remove impairments, update medical and diagnostic terminology, 
and clarify impairments that cannot be easily identified. For example, 
as part of the current updates, VA workgroups proposed adding a new 
body system, "rheumatic diseases." See table 1 for examples of changes 
being considered to existing body systems. In addition to specific 
updates and clarifications, the medical workgroups consider broader 
concepts such as how VA measures pain for the purposes of evaluating 
claims. 

Table 1: Examples of Medical Changes to VA's Rating Schedule Being 
Considered during the Current Update: 

Body system: Digestive/nutritional disorders; 
Medical change being considered: Add new criteria for liver 
transplants; 
Update criteria for malnutrition and Celiac disease. 

Body system: Dental and oral conditions; 
Medical change being considered: Revise criteria for hard and soft 
tissue impairments. 

Body system: Skin; 
Medical change being considered: Use color photographs in the 
evaluations of dermatological disorders. 

Source: GAO analysis of VA presentations on rating schedule updates. 

[End of table] 

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.[Footnote 17] 
According to VA officials, a common theme emerging from the workgroups 
is the need to shift from the current symptom-based rating criteria to 
one that incorporates a veteran's ability to function in the 
workplace. Subject-matter experts involved in the workgroups have 
suggested that, while symptoms determine diagnosis, the best indicator 
of impairment in earnings is the translation of symptoms into 
functional impairment.[Footnote 18] To develop the indicators of 
functional impairment, VA conducted research and determined that four 
functional domains directly impact one's ability to secure and 
maintain gainful employment. These include interacting with others, 
developing and maintaining a routine or schedule, managing workload 
demands, and completing tasks that require mental skills.[Footnote 19] 

While VA is considering a number of different elements to update its 
medical criteria, it is giving only limited consideration to the role 
that supports--such as assistive technology and medical interventions--
can play in enhancing a veteran's earning capacity. In 2002, we 
reported that VA's program was not designed to factor in the potential 
benefits of treatment, corrective devices, and assistive technology 
when evaluating a veteran's service-connected disability.[Footnote 20] 
Assistive devices and other supports can play a critical role in a 
veteran's capacity for work, according to the ICF framework. VA 
officials told us that, while they plan to consider how medical 
advances have decreased the severity and duration of some conditions, 
they do not plan to change the way assistive technology and medical 
interventions are considered when making individual disability 
determinations for a number of reasons.[Footnote 21] Specifically, 
according to VA officials, including the effects of assistive 
technology in evaluations of disabilities would overlook the severity 
of the disability itself and focus on the individualized adaptation to 
an assistive device, and the statute for VA's disability compensation 
program is based on the average reduction in earning capacity across a 
group of individuals with a similar physical or mental impairment. 
[Footnote 22] 

Concurrent with the medical updates, VA also plans to obtain updated 
information on the average earnings loss associated with service-
connected disabilities. VA officials stated that conducting earnings 
loss analyses are necessary to make knowledge-based adjustments to the 
rating schedule, a practice consistent with recommendations from 
expert panels and our prior work.[Footnote 23] An important aspect of 
the earnings updates are validation studies to confirm the findings of 
the earnings loss analyses and to verify the accuracy of proposed 
changes to the rating schedule. The validation studies will be 
conducted through separate contracts. Specifically, VA plans to update 
all 15 body systems as follows: 

* For the first three body systems--the mental health, 
hemic/lymphatic, and endocrine systems--VA plans to use the results 
from a 2008 earnings loss report to inform any adjustments to the 
level of compensation associated with these various impairments. 
[Footnote 24] 

* For the remaining 12 body systems, VA plans to contract with 
external organizations to conduct earnings loss studies and validation 
studies. However, VA's first contracted earnings study with a 
university for the musculoskeletal system is pending termination as of 
August 2012, according to VA. 

For each earnings loss study, the contractor will identify the average 
lifetime earnings loss incurred by veterans with specific service-
connected disabilities. To do this, the studies will compare the 
earnings levels of veterans with various service-connected 
disabilities to veterans without a disability as well as with the 
nonveteran population. Contractors will identify differences between 
veterans' average earnings losses and VA disability compensation 
levels (i.e., the extent that veterans are being over-and 
undercompensated) and suggest improvements to the current system. 

VA's Revision Process Faces Delays and Additional Hurdles: 

VA has experienced delays in revising its disability rating schedule. 
Specifically, VA planned to publish final rules in the Federal 
Register (phase 5) for the first three body systems by June 2011. VA 
has not, however, met this goal. As of July 2012, VA has completed 
public forums for all 15 body systems (phase 1) and has working drafts 
of revisions for nine body systems (phase 3). However, VA has not 
issued any proposed or final rules (phases 4 and 5). Moreover, as of 
July 2012, VA was more than a year behind in completing the first 
earnings loss study for the musculoskeletal body system and has yet to 
complete studies for the remaining eleven body systems. According to 
VA officials, they now expect to issue proposed rules for all body 
systems by 2016, but they have moved the original project completion 
date from 2016 to an unspecified future date. 

VA officials noted various reasons for the delays, including a lengthy 
drafting and review process for the potential medical revisions. VA 
officials told us that giving greater consideration to functional 
impairment represents a significant change to VA's current disability 
criteria. As a result, VA workgroups and staff have taken longer to 
draft and review revisions than originally planned. Furthermore, VA 
took additional steps to solicit comments from stakeholders about 
these changes. For example, VA held a rating schedule status summit in 
June 2012 to publicly share the draft revisions for nine body systems 
before the publication of proposed rules in the Federal Register in an 
effort to promote transparency and solicit comments. 

VA also is experiencing delays because it has had difficulty obtaining 
the data it needs to study earnings loss. Specifically, to conduct 
these studies, VA needs earnings data from the Social Security 
Administration (SSA) and the Internal Revenue Service (IRS), among 
other data sources, as well as VA data on veterans with service-
connected disabilities. VA officials stated that the coordination 
between the various federal agencies took much longer than expected, 
in part, because federal law generally prohibits the release of 
certain individual information.[Footnote 25] VA officials also stated 
that VBA contractors must work very closely with SSA to process, 
analyze, and transmit earnings data. As of July 2012, VA had not 
obtained the aggregate data from SSA or the IRS needed to conduct the 
first earnings loss study. In addition, VA officials described hurdles 
obtaining internal agency data in a timely way. For example, VBA has 
experienced challenges coordinating with another VA office to obtain 
data needed to evaluate veterans' earnings losses. VBA recently 
received this data 12 months after first requesting it. To address 
this hurdle and streamline the process, VBA is implementing a system 
that will allow VBA staff to more independently access and analyze 
internal data. However, as of July 2012, VBA had not fully implemented 
this new system. 

In addition to delays in obtaining data, VA faces other hurdles 
related to the earnings loss studies. For example, VA currently relies 
on external organizations that produce studies one body system at a 
time. Experts we interviewed, including members of VA's Advisory 
Committee on Disability Compensation, said this process is inefficient 
and may not best facilitate the agency's goal to measure earnings loss 
on an ongoing basis. As one expert noted, to contract with an external 
organization, VA must complete market research and evaluate and select 
a contractor, among other tasks. Once a contractor is selected, they 
must then perform a number of start-up tasks, including applying for 
security clearances and authorization to use VA data, reviewing the 
methodology of previous earnings studies, and identifying and 
gathering needed data from various federal agencies to create a study 
group of veterans with service-connected disabilities and a comparison 
group. To avoid repeating these tasks for each contract, several 
experts we interviewed suggested that VA should build its internal 
research capacity to more seamlessly conduct these studies. For 
example, VA could develop more in-house resources for conducting these 
types of analyses or establish long-term partnerships with research 
organizations. VA has explored methods to build their research 
capacity, but it has yet to adopt an approach for doing so. 

According to some experts we interviewed, even after the earnings loss 
studies are completed, VA's revision initiative may face an additional 
hurdle: gaining acceptance from a diverse group of stakeholders. 
Various experts and veteran groups have raised concerns about the 
changes being considered.[Footnote 26] Some experts and veteran groups 
we interviewed raised concerns about incorporating measures of 
functional impairment into the rating schedule. They stated that 
assessing a veteran's function may result in a more prolonged 
disability claims process and questioned VA's ability to successfully 
implement new functional criteria. In addition, one veteran group 
raised concerns that the earnings loss studies may not adequately 
capture the complex nature of a veteran's impaired earning capacity. 
For example, measuring veterans' average lifetime earnings losses due 
to a service-connected injury or illness--the aim of the current 
studies--may not capture lost opportunities to pursue a more lucrative 
or fulfilling career. At the same time, several experts did not agree 
with the methodology of the current earnings loss studies.[Footnote 
27] Other experts said that these studies are a good way to measure 
average earnings loss. In addition, several veteran group 
representatives told us that the rating schedule in its present form 
generally represents an equitable method for determining disability 
compensation. 

VA's Project Planning Reflects a Number of Sound Practices but Lacks 
Key Information: 

To guide the revision initiative, VA developed a project management 
plan and operating plan that contain many elements of sound planning 
but lack complete and updated information in key areas.[Footnote 28] 
In our previous work, we have identified elements of sound planning 
that facilitate effective project management. Sound planning practices 
include identifying and documenting specific activities needed to 
achieve project goals. They also include documenting when work 
activities will occur, how long they will take, and how they are 
related to one another.[Footnote 29] VA's project plans include key 
elements of sound planning, such as clearly stating the purpose and 
strategy, including the goals and objectives, of the revision project. 
However, VA has not taken several key steps that may be critical to 
completing and maintaining an updated rating schedule, such as 
planning for earnings loss and validation studies, developing a 
strategy for implementing revisions, and adopting a formal policy for 
regular updates in the future (see table 2). Regarding an 
implementation strategy, for example, if revisions to the mental 
health rating criteria resulted in upward adjustments of the ratings, 
VA would re-rate those veterans with mental health disabilities, 
according to VA officials. As noted previously, the earnings study 
being used by VA to update the mental health rating criteria showed 
the veterans with those conditions are likely undercompensated. As of 
the end of fiscal year 2011, 878,417 or 6.7 percent of those 
disabilities for which veterans received benefits were mental health 
conditions. Any effort to re-rate those cases likely represents a 
significant workload increase. Some experts we interviewed recommended 
that VA immediately develop a written strategy for implementing these 
revisions to help ensure that veterans do not experience any negative 
service-delivery consequences, such as increased wait times for 
disability benefits. 

Table 2: Key Steps Missing from VA's Project Planning: 

Information in key areas: Earnings loss updates; 
Steps not taken: VA does not have a complete plan--containing specific 
activities and time frames--for conducting earnings loss studies for 
all body systems in the rating schedule. VA's project plans are 
missing details and updated time frames associated with a number of 
critical steps, such as finalizing contracts with research 
organizations. VA project plans are also missing descriptions of the 
activities and time frames for conducting validation studies; 
Why is this important? VA officials stated that conducting earnings 
loss analyses are necessary to make knowledge-based adjustments to the 
rating schedule, a practice consistent with recommendations from 
expert panels and our prior work. VA officials said that validation 
studies are an integral part of the earnings update process. 

Information in key areas: Implementation strategy; 
Steps not taken: VA has not developed a written strategy for 
addressing the full range of effects that revisions to the rating 
schedule may have on agency operations, which may include increased 
staff and resource needs, reconfiguring staff duties, and developing a 
plan for training and developing new procedures. VA has not yet 
assessed possible effects of revisions on agency operations or 
documented activities that need to occur, according to VA officials; 
Why is this important? VA should be proactively assessing potential 
impacts of any revisions and developing plans for implementation, 
according to some experts we interviewed. VA officials told us they 
recognize the need to do this. If the current revisions resulted in 
higher disability ratings for conditions affecting a significant 
number of veterans, this could negatively impact VA's claims 
processing workload. VA's disability claims system already has a 
substantial backlog, and changes to the rating schedule may pose an 
administrative burden.[A] It is important that agencies clearly 
document activities, particularly to help manage change to cope with 
shifting environments and evolving demands and priorities.[B] 

Information in key areas: Regular updates; 
Steps not taken: Although VA intends to continue comprehensive 
revisions beyond the completion of the current project, it lacks a 
formal policy, procedure, or mechanism committing itself to doing 
so.[C] VA has not established a policy--through regulation, policy 
manual, or other means--for the continuation of the revision project 
in the future. VA officials told us they intend to use lessons learned 
from the current process to guide future efforts, but are not 
currently documenting these to inform a formal policy.[D] 
Why is this important? Many experts and veteran groups we interviewed 
said it is important that VA continue to update the rating schedule in 
the future. Several commission reports, including the Institute of 
Medicine's, recommended that VA update the rating schedule at regular 
intervals to serve veterans with disabilities more effectively and 
equitably. It is important that agencies establish policies, 
procedures, and mechanisms that enforce management's directives. 

Source: GAO analysis of VA documents, interviews with VA officials and 
experts, and GAO guidance and prior work related to internal controls. 

[A] In 2010, we found that VA's disability claims and appeals 
processing had improved in some aspects and worsened in others. In 
recent years, the number of claims completed annually by VA has 
increased but not by enough to keep pace with the increasing number of 
compensation claims received, resulting in more claims awaiting a 
decision. GAO, Veterans' Disability Benefits: Further Evaluation of 
Ongoing Initiatives Could Help Identify Effective Approaches for 
Improving Claims Processing, GAO-10-213 (Washington, D.C.: Jan. 29, 
2010). 

[B] See GAO, [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-
21.3.1. 

[C] In 2002, we found that VA did not have a well-defined plan to 
conduct future medical criteria updates. At the time, VA provided us 
with a statement acknowledging the need to re-review the medical 
criteria in the future, but had neither a time frame nor strategy for 
completing the task. See GAO, SSA and VA Disability Programs: Re-
Examination of Disability Criteria Needed to Help Ensure Program 
Integrity, GAO-02-597 (Washington, D.C.: Aug. 9, 2002). 

[D] In July 2012, VA stated that they are taking steps to update their 
current project management plan to include future reviews of each body 
system every 5 years. 

[End of table] 

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. These approaches are (1) providing 
quality of life payments, (2) providing integrated vocational services 
with transitional cash assistance, and (3) factoring the effects of 
assistive technology and medical interventions systematically into 
rating decisions. See figure 3 for an overview of what VA does now and 
what these approaches would do. Those we interviewed said to varying 
degrees that the approaches could provide more equitable compensation 
and that approaches two and three could better help veterans integrate 
into the workforce and society. At the same time, however, experts and 
veteran groups identified administrative, political feasibility, and 
cost challenges, among others. 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. When considering such large-scale policy changes, we 
have previously identified strategies for policymakers to use to 
develop specific policy proposals. In translating broad policy 
approaches or concepts--including the three outlined below--into 
specific proposals, policymakers will need to define key design 
features (e.g., eligibility requirements and the type and timing of 
payments). For a summary of key questions raised during our 
discussions with experts and veteran groups about the possible design 
of the approaches, see appendix III. 

When assessing these policy approaches, one must keep in mind that 
VA's disability compensation program is a statutory scheme with 
parameters set forth in federal law. This statutory scheme restricts 
the extent to which VA can reform its disability program, as there are 
many actions VA cannot take without Congress amending the relevant 
laws. For example, under 38 U.S.C. § 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. This provision essentially prohibits VA from basing 
disability ratings (or a portion of the ratings) on a loss of quality 
of life, thus making the first policy approach discussed below legally 
impossible without a statutory change. 

Figure 3: Overview of What VA Does Now and the Modified Approaches: 

[Refer to PDF for image: illustration] 

Providing quality of life payments: 

What VA does now:   
VA provides a payment for average loss in earning capacity to veterans 
with service-connected disabilities.  

What the modified approach would do: 
Explicitly provide a payment for loss in quality of life to veterans 
with service-connected disabilities (also referred to as "noneconomic 
loss" payments). 

Providing integrated vocational services with transitional cash 
assistance: 

What VA does now: 
VA provides vocational rehabilitation services as well as educational 
benefits. However, commissions have raised concerns that vocational 
rehabilitation is neither a main focus nor integrated with disability 
compensation decisions. Veterans must first receive a disability 
rating before applying, at their own discretion, for vocational 
rehabilitation services. As a consequence, veterans may apply for and 
receive monthly disability compensation for a medical condition and 
never seek VA vocational services.  

What the modified approach would do: 
VA would integrate its vocational services with disability 
compensation decisions. VA would provide earlier assistance and 
transition payments during a vocational rehabilitation and training 
period. At the end of this period, permanent VA payments for average 
earnings loss would begin to make up for any remaining reduced earning 
capacity. 
     
Factoring assistive technology and medical interventions into rating 
decisions: 

What VA does now: 
Medical interventions and assistive devices are currently incorporated 
into the rating schedule for some medical diagnoses, according to VA 
officials. For example, the rating schedule contains a section on 
prosthetic implants, like hip replacements. However, VA does not 
systematically factor in the increased functional capacity of veterans 
afforded by assistive technology and treatment when making an initial 
disability assessment.  

What the modified approach would do: 
Systematically factor in the increased functional capacity of veterans 
afforded by assistive technology when VA makes disability assessments. 

Source: GAO analysis of VA program information and relevant reports by 
disability commissions, task forces, committees, and GAO. 

Note: Regarding the integrated vocational services with transitional 
cash assistance approach, the Dole-Shalala Commission stated that the 
goal of VA's disability program should be to return veterans to normal 
activities, if feasible, as quickly as possible. The commission 
recommended integrating vocational rehabilitation with transition 
payments into the VA disability compensation system. According to VA 
officials, Congress and VA have made efforts to address issues related 
to the timing and incentives for rehabilitation for wounded 
servicemembers. For example, according to VA, the National Defense 
Authorization Act for Fiscal Year 2008 established Vocational 
Rehabilitation and Employment eligibility for severely injured active 
duty individuals before a VA rating is issued. In addition, VA is 
initiating the Integrated Disability Evaluation System (IDES) that 
provides Vocational Rehabilitation and Employment outreach and 
transition services to active duty servicemembers at 48 IDES 
installations. This outreach includes a mandatory meeting with a 
Vocational Rehabilitation and Employment counselor. 

[End of figure] 

Selected Policy Approaches Hold Opportunities, but Would Present 
Challenges: 

Quality of Life Payments: 

According to several of the experts and veteran groups we interviewed, 
quality of life payments could better align VA's compensation program 
with more current thinking about disability while simultaneously 
providing greater equity to VA's disability compensation program. 
[Footnote 30] In general, experts and veteran groups we interviewed 
said that a payment for quality of life held more opportunity than the 
other proposed approaches to update the nation's veteran benefits 
program. However, they also cited challenges relating to its 
implementation and fiscal sustainability, as shown in figure 4. 

Figure 4: Experts' and Veteran Groups' Views on Potential 
Opportunities and Challenges of Providing a Quality of Life Payment: 

[Refer to PDF for image: illustration] 

Opportunities: as cited by experts and/or veterans groups: 

* Recognition of loss beyond earnings: 
Would acknowledge the impact of a disability on a veteran's life 
beyond earnings, which reflects a more modern view of disability. 

* A systematic and equitable approach: 
Would develop a systematic and equitable approach for providing 
quality of life compensation to veterans experiencing such losses. 

* Existing tools to measure loss of quality of life: 
Could develop approaches to determine whether a veteran has a loss in 
quality of life using existing tools or methodologies. 

Challenges: as cited by experts and/or veterans groups: 

* Change in law and administrative limitations: 
Would require a change in law to expand the purpose of veteran 
disability compensation. Moreover, expanding the program's purpose 
could increase the scope and time required to conduct disability 
assessments, which may contribute to existing claims backlogs. 

* Difficulties assigning compensation: 
While quality of life tools and methodologies exist, they are not 
designed to assign dollar values for different degrees of loss. 
Further work is needed to develop these methods and tools for 
compensation purposes. 

* Program costs: 
 Adding a new payment category could have potential short- and long-
term cost implications, although exact values are unclear. 

Source: GAO summary of experts' and veterans groups' views. 

[End of figure] 

In terms of opportunities, a payment for veterans' loss in quality of 
life might help align the program with more current thinking about 
disability by recognizing the impact of illness or injury beyond loss 
in earnings. Along these lines, many experts and veteran groups said 
that loss in earnings and quality of life should be explicitly 
integrated into the compensation program to recognize the overall 
impact of disability on veterans. For example, veterans who lose a 
hand may be able to work in today's economy, but the injury could 
prevent them from tossing a football with their children or engaging 
in other life activities. Most of those we interviewed agreed with 
commissions and experts who concluded that a modern program should 
compensate veterans with disabilities for losses beyond their 
earnings, even though the current program is designed to compensate 
based on economic losses. 

According to several experts, VA has an opportunity to develop a 
systematic approach to more equitably award quality of life 
compensation. According to these experts, VA currently provides 
implicit quality of life benefits to some veterans with service-
connected disabilities but not others.[Footnote 31] For example, 
several experts argued that some veterans may receive compensation for 
impairments in the rating schedule that have little, if any, 
associated earnings loss.[Footnote 32] Several experts added that, in 
considering a quality of life payment, VA needs to determine the 
degree to which the rating schedule already includes consideration of 
the effect of a disability on quality of life. 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. 
[Footnote 33] 

While this approach presents opportunities, it could prove challenging 
because it would require a change in law and could create a more 
complex system, according to several of those we interviewed. 
Congress, they noted, would likely need to revise the statute to 
expand the purpose of disability compensation to include quality of 
life. And if the program's purpose is expanded, VA would need to 
determine how to make fair, timely, and accurate payments but not 
exacerbate the existing claims backlog, according to several experts 
and veteran groups we interviewed. Specifically, adding a quality of 
life assessment might require additional time to assess claims and 
create another avenue for appeals. Further, VA would need to address 
how to adjust compensation for any changes in a veteran's quality of 
life loss over time, according to VA. 

Another implementation challenge is how to measure quality of life--a 
subjective judgment--and assign a dollar value to different degrees of 
these losses. Two veterans with the same service-connected illness or 
injury may experience pain, social difficulties, and other intangible 
impacts that, depending on their circumstances and characteristics, 
may result in different degrees of losses in quality of life. 
According to several experts and veteran groups, a number of tools 
exist to make the process more objective. For example, CNA surveyed 
veterans with and without service-connected disabilities to show 
differences in quality of life loss between the two groups. While 
losses in quality of life can be measured, a process to attach a 
dollar value will need to be developed and refined, according to 
several experts and veteran groups, because none of the existing tools 
are intended to determine levels of compensation. Also, several 
experts suggested that VA could use benchmarks, such as the 
compensation provided by other countries' programs. 

Finally, many experts added that quality of life payments would 
increase program costs. In the short term, VA would likely need 
additional funds to cover the costs of researching and developing 
assessment tools and for training staff on new procedures. In the long 
term, according to experts and veteran groups, veterans may receive 
increased levels of compensation, which could also affect the 
program's long-term cost. Any increased costs would need to be 
considered in the context of our nation's current and future fiscal 
challenges. However, several experts noted that quality of life 
payments could offset any reduced compensation for service-connected 
conditions that have no associated earnings loss, subsequently 
resulting in total compensation remaining level. 

Providing Integrated Vocational Services with Transitional Cash 
Assistance: 

Several of the experts we interviewed stated that a key goal for VA 
should be helping veterans with disabilities return to the workforce. 
Moreover, they identified this approach as an opportunity to provide 
early assistance to help veterans achieve their full work potential. 
However, experts and veteran groups suggested that moving forward with 
this approach would present challenges, such as gaining consensus for 
the approach and its potential cost, as shown in figure 5. 

Figure 5: Experts' and Veteran Groups' Views on Potential 
Opportunities and Challenges of Providing Integrated Vocational 
Services along with Transitional Cash Assistance: 

[Refer to PDF for image: illustration] 

Opportunities: as cited by experts and/or veterans groups: 

* Early vocational interventions: 
Could provide rehabilitation and training soon after a veteran incurs 
a disability to improve a veteran's capacity to work. 

* Encourage work: 
Would place greater emphasis on building a veteran's capacity to work 
rather than income support while maintaining cash benefits for 
veterans in need. 

Challenges: as cited by experts and/or veterans groups: 

* Lack of consensus: 
Obtaining consensus might be difficult, particularly if this 
assistance is linked to rating decisions. 

* Capacity limitations: 
VA might not have the capacity to conduct additional vocational 
assessments. 

* Program costs: 
Adding a new payment category and expanding current rehabilitation 
programs could have potential cost implications. 

Source: GAO summary of experts' and veteran groups' views. 

[End of figure] 

According to several experts we interviewed, the goal of VA's 
disability program should be to build a veteran's capacity to work 
rather than mainly providing income support or cash benefits.[Footnote 
34] These experts said that participation in work leads to better 
integration into civilian life and other intangible benefits like 
greater satisfaction and self-esteem. In addition, several experts 
suggested that, if vocational assistance increases a veteran's earning 
capacity, VA should consider that when determining losses in earnings. 
That is, veterans should be rated after they reach maximum medical 
improvement.[Footnote 35] However, several cautioned that VA should 
maintain protections for veterans with service-connected disabilities 
who may not succeed at work even after extensive assistance. 

According to many experts we interviewed, this policy approach could 
enhance veterans' capacity to work by providing earlier vocational 
assistance after the onset of disability rather than after a veteran 
has been rated for disability compensation. Experts we interviewed 
cited several benefits of early vocational assistance. For example, 
they said that it improves the likelihood that veterans with service-
connected disabilities will obtain and retain employment after injury. 

At the same time, achieving consensus for this approach may be 
difficult. Several of those we interviewed suggested that the approach 
does not provide much additional incentive to participate in 
rehabilitation. For example, veterans already have access to 
employment and training services, and many veterans work with or 
without these services.[Footnote 36] While veteran groups we spoke 
with said they support rehabilitation services, they would not favor 
this policy shift if it means that a veteran's disability payment may 
be reduced because of increased vocational capacity. They maintained, 
in fact, that a veteran whose work potential was increased or who 
completed the program should receive the same level of compensation he 
or she would have received had he or she not received services. 
Officials from two veteran groups also said that these services should 
not be mandatory. In addition, while this approach would target 
veterans of working age, several of the experts' and veteran groups' 
views differed on whether the approach should target veterans at any 
point after military discharge and/or veterans shortly after 
discharge, particularly those with no or little civilian work history. 
[Footnote 37] 

Several veteran groups and experts also expressed concerns about VA's 
capacity to administer this approach. For example, they said that VA 
does not have sufficient numbers of staff capable of assessing a 
veteran's vocational capacity or providing work supports through its 
current vocational program. Moreover, others noted that this reform 
could divert resources from current VA management initiatives, such as 
efforts to expedite the delivery of VA benefits to servicemembers and 
veterans. 

This approach also would likely have cost implications. In the short 
term, VA would need to estimate costs, pilot the approach while 
running VA's current programs, and then implement the program, 
according to several of those we interviewed. Others said that there 
could also be long-term cost implications if this approach required 
resources in addition to those being expended under the current 
program. According to two of those we interviewed, the ultimate costs 
would depend on who is eligible for the services. For example, 
limiting eligibility to veterans shortly after discharge would be less 
costly than making services available to veterans at any point in time 
after discharge. 

Systematically Incorporate Assistive Technology and Medical 
Interventions in Rating Decisions: 

According to experts we interviewed, systematically incorporating the 
effects of assistive technology and medical interventions into rating 
decisions affords an opportunity to more accurately assess veterans' 
impaired earning capacity, including the loss of functioning in the 
workplace. Assistive technology and medical interventions include, for 
example, a prosthetic device for walking, a device to assist with a 
vision impairment, and medications for pain. However, they suggested 
that implementing this approach would present challenges, such as its 
acceptability among veterans and other stakeholders, as shown in 
figure 6. 

Figure 6: Experts' and Veteran Groups' Views on Potential 
Opportunities and Challenges of Incorporating Assistive Technology and 
Medical Interventions into Disability Rating Decisions: 

[Refer to PDF for image: illustration] 

Opportunities: as cited by experts and/or veterans groups: 

* Accuracy: 
May result in more accurate assessments of veterans' average earnings 
losses and a closer relationship between VA disability ratings and 
actual average loss. 

* Equity: 
Accurately measuring veterans' ability to function with personal and 
environmental supports may result in less compensation for some 
veterans, but allow VA to target resources to those with the greatest 
earning loss. 

Challenges: as cited by experts and/or veterans groups: 

* Lack of consensus: 
Obtaining consensus might prove difficult given different views about 
the benefits of assistive technology. 

These interventions affect individuals differently and may not work 
for everyone. 

* Disincentives: 
Could introduce a disincentive for veterans to use supports and seek 
treatment if this results in lower ratings and payments. 

* Capacity limitations and costs: 
Might complicate the rating system and increase assessment processing 
time, contributing to existing backlogs. Would likely have upfront 
costs, such as costs for training and higher administrative costs 
because of additional time and skills needed for assessments. 

Source: GAO summary of experts' and veteran groups' views. 

[End of figure] 

According to several experts we interviewed, factoring in these 
advances may result in more accurate assessments of veterans' average 
earnings losses. Advances in assistive technology and modern medicine 
can help veterans with service-connected disabilities increase their 
earnings by helping them more fully integrate into the workplace. 
While assistive devices and medications can play a critical role in an 
individual's ability to function, VA does not always consider them in 
its assessment of disability. According to several experts we talked 
with, accurately measuring veterans' ability to function with personal 
and environmental supports may result in less compensation for certain 
veterans. However, a couple of experts said that this may allow VA to 
target resources to those with the greatest earnings losses. 

While many of those we interviewed acknowledged the benefits of 
assistive technology and medicine, many of those we interviewed and VA 
officials expressed concerns with factoring assistive technology into 
disability rating decisions, including the following: 

* The effectiveness of assistive technology and medication is 
difficult to demonstrate, or research is incomplete. 

* The interventions affect individuals differently and may not work 
for everyone. Also, the effectiveness of assistive technology varies 
over the lifetime of an individual--for example, as a person ages and 
experiences changes in musculature, their ability to compensate using 
a prosthetic decreases. Others described assistive technology that did 
not perform as expected. 

* The incorporation of assistive technology into rating decisions 
could introduce a disincentive for veterans to use such tools and 
supports. 

Many experts and veteran groups discussed challenges similar to those 
raised with the other policy approaches, such as potentially needing 
to administer new assessments and the associated upfront costs. In 
particular, individually assessing veterans would add complexity to a 
ratings process that already faces challenges with making timely and 
accurate rating decisions. For example, VA may need to determine 
whether veterans are making good faith efforts to use interventions 
when making disability assessments, according to two of those we 
interviewed. In addition, to assess a veteran's ability to function 
while using these interventions, VA would need to hire staff with 
necessary skills. To address some of these challenges, several experts 
said that VA's planned studies to measure earnings loss would 
automatically factor in the average economic benefits of assistive 
technology use without needing a new assessment. However, one expert 
cautioned that this approach might not be as precise as an individual 
assessment. 

Experts and Veteran Groups Discussed Combining Selected Policy 
Approaches: 

According to several of those we interviewed, policymakers could 
create a comprehensive benefits package for individual veterans by 
integrating compensation with vocational training and treatment. 
Several experts outlined a sequence for implementing the approaches to 
improve the timing of benefits and provide seamless support to 
veterans. Initially, VA would provide financial support during a 
temporary medical and vocational rehabilitation period to maximize a 
veteran's recovery. This temporary period would be followed by long-
term compensation for any reduced earnings loss. In conjunction with 
these payments, veterans would receive an explicit quality of life 
payment. 

Several of the experts we talked to described potential benefits of 
combining approaches. Specifically, VA may be able to: 

* provide more equitable compensation and services to veterans by 
examining the interactive effects of existing and new 
approaches,[Footnote 38] 

* clarify the distinction between compensation for earnings loss and 
the other impacts of living with a disability, and/or: 

* mitigate potential adverse effects associated with any single 
approach. For example, if payments for average earnings loss were 
reduced because the impact of assistive devices was incorporated, 
adding an offsetting quality of life payment could ensure that future 
veterans get sufficient compensation. 

Several experts and veteran groups, however, did not necessarily 
support combining the three approaches. Finally, if a comprehensive 
program was targeted to new enrollees, VA may need to administer dual 
programs. 

Key Strategies to Consider in Updating VA's Disability Program for the 
21st Century: 

Although we and others have identified a need to reexamine federal 
disability programs to meet the challenges and expectations of the 
21st Century, VA officials said they are not currently considering the 
three policy approaches discussed in this report. VA officials said 
they have, however, kept abreast of all studies and recommendations 
arising from the various commissions and reports. Further, they said 
they have taken into consideration many of the recommendations made in 
these studies. For example, VA is implementing recommendations to 
comprehensively revise the rating schedule. Moreover, in 2008 VA 
contracted with a private consultant to study disability compensation, 
loss in quality of life, transition benefits for rehabilitation, 
assistive technology, and other areas raised by the disability 
commissions and our work. While their report proposed many specific 
policy options to address these issues, it stated that the Congress 
and VA needed to decide on the key goals of the approaches.[Footnote 
39] Doing so would help further specify how to design and implement a 
new approach. 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. VA 
officials said they will further consider new policy approaches at the 
request of the Congress. 

As our high-risk series notes, however, continued attention by the 
Office of Management and Budget (OMB) and concerted efforts by 
agencies, as well as sustained congressional attention, are critical 
to fully resolve high-risk areas, which include federal disability 
programs.[Footnote 40] Should the Congress choose to pursue 
fundamental changes to the disability compensation program, with 
assistance from VA, we have identified key reexamination strategies 
that should be considered,[Footnote 41] such as: 

* building support within the Congress, the Administration, the 
agency, and the broader public to justify a reexamination of the 
program. 

* identifying the most important goals for the program and developing 
specific policy proposals to meet those goals. 

* choosing reexamination methods to guide the process and help 
evaluate potential changes.[Footnote 42] 

Conclusions: 

The nation has a long-standing commitment to compensate veterans for 
injuries or illnesses incurred during their military service. After 
decades of recurring criticism that VA's rating schedule is out of 
date, VA is now demonstrating a commitment to comprehensive revision 
of its disability criteria and consideration of a more modern approach 
to determining disability. VA faces challenges, however, that may 
impede its ability to complete and implement the revisions. 
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. Moreover, incomplete plans for 
conducting earnings loss and related studies could jeopardize project 
outcomes and result in a rating schedule that remains, in the end, 
outdated. In addition, without a written strategy for implementing the 
revisions, VA might not be adequately positioned to mitigate possible 
increases to the disability claims backlogs. This could increase 
veterans' wait times for disability benefits, which runs counter to 
one of the desired outcomes of the revision goal of improving claims 
efficiency. Finally, in the absence of sustained, ongoing revisions 
and adjustments, VA's rating schedule is increasingly at risk of not 
reflecting advances in medicine and changes in the labor market. 
Without a formal policy for conducting regular updates in the future, 
VA may experience extended gaps in its efforts to revise the rating 
schedule. Consequently, some future veterans may not receive the 
appropriate level of compensation. We recognize that adjusting the 
rating schedule and making changes to veterans' disability benefits 
can be contentious. Stakeholders have different views about how to 
define disability, measure the loss of earning capacity, and even the 
purpose of veterans' disability compensation. 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. 

As underscored by the policy approaches recommended by previous 
commissions and other experts, current thinking on disability has 
outpaced consideration of updates to VA's disability compensation 
benefits structure. Changes in our understanding of disability and the 
economy create a compelling case for the Congress, VA, and 
stakeholders to reexamine the goals of VA's disability compensation 
programs and how to best serve veterans with service-connected 
disabilities. This examination would raise important, but difficult, 
questions: Should veterans with disabilities be compensated for more 
than loss of earning capacity? Should the discussion of disability 
benefits structure be intertwined with efforts to build a veteran's 
capacity to work and provide work supports? Should some compensation 
be considered temporary? Should any proposed disability compensation 
changes apply to existing and/or future veterans? VA officials are 
giving little attention to these larger issues, and the trade-offs 
involved. 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. VA has signaled that, absent further direction from the 
Congress, it will focus its efforts within its current framework. 
Without a broader perspective, VA may miss the opportunity to be an 
agent in its own transformation to the benefit of those it serves. 

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. For example, providing explicit quality of life 
payments, or some other combination of policy changes, to veterans 
with service-connected disabilities may help to modernize VA's 
program, but such changes need further study to determine their 
feasibility and fiscal impact. 

Recommendations for Executive Action: 

Based on our review, we are making three recommendations. 

1. 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. 

2. To ensure that VA is positioned to seamlessly implement revisions 
to the rating schedule, we recommend that the Secretary of Veterans 
Affairs develop a written implementation strategy. This strategy could 
include steps to mitigate the possible effects of rating schedule 
revisions on agency operations, including an increase in the number of 
claims received. 

3. 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. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to VA for review and comment. VA 
concurred with our recommendations and indicated it will take steps to 
address them by a target completion date of August 31, 2013. Its 
written comments are reproduced in appendix IV. VA also provided 
technical comments that we incorporated, as appropriate. 

VA agreed with our recommendation to take necessary steps to increase 
its 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. VA stated that it is exploring the option of engaging in 
research partnerships to conduct more than one earnings loss study at 
a time. After exploring this and any other appropriate options, we 
encourage VA to take all necessary actions to ensure it conducts 
earnings loss studies in a timely manner, now and in the future. In 
addition, VA stated that it will expand its current project management 
plan to include milestones, deliverables, and the designation of a sub-
program manager to manage the earnings loss and validation studies. 

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. VA stated 
that, going forward, it will develop a formal plan that establishes 
cross-functional teams representing all business processes and 
procedural functions involved in the rating schedule changes. VA 
acknowledged that now is the time to standardize a process for 
implementing the rating schedule revisions. 

Finally, VA agreed with our recommendation to establish a formal 
policy, procedure, or mechanism to revise the rating schedule with 
updated medical and earnings loss information at regular intervals. 
According to VA, it is currently formulating a plan that evaluates the 
rating schedule revision process, which will allow VA's Compensation 
Service to establish a formal, continuous revision policy that is 
efficient, traceable, and transparent to produce a rating schedule 
that reflects up-to-date medical information. 

We are sending copies of this report to the appropriate congressional 
committees; the Secretary of Veterans Affairs; and other interested 
parties. In addition, the report is available at no charge on the GAO 
website at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-7215 or bertonid@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff who made key contributions 
to this report are listed in appendix V. 

Signed by: 

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

List of Committees: 

The Honorable Patty Murray: 
Chairman: 
The Honorable Richard Burr: 
Ranking Member: 
Committee on Veterans' Affairs: 
United States Senate: 

The Honorable Darrell Issa: 
Chairman: 
Committee on Oversight and Government Reform: 
House of Representatives: 

The Honorable Jeff Miller: 
Chairman: 
The Honorable Bob Filner: 
Ranking Member: 
Committee on Veterans' Affairs: 
House of Representatives: 

[End of section] 

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. Overall, we reviewed prior GAO, 
disability commission, and committee reports; relevant federal laws 
and regulations; program documentation, including policies, 
procedures, strategic goals, and supporting project plans; and 
congressional testimonies from disability groups and commissions. We 
also interviewed VA officials, key stakeholders, disability experts, 
and representatives of veteran groups. 

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 also reviewed 
VA's Advisory Committee on Disability Compensation reports, 
recommendations, and meeting minutes and presentations on the rating 
schedule updates. In addition, we interviewed several Advisory 
Committee on Disability Compensation members and reviewed reports and 
interviewed experts from relevant organizations--such as the Institute 
of Medicine--and veteran disability commissions--such as the Veterans 
Disability Benefits Commission. We also evaluated VA's project 
planning documents using established elements for sound planning. 

Elements of Sound Planning: 

To determine the extent to which VA's project plans to revise its 
disability criteria included elements of sound planning, we relied on 
project management practices in A Guide to Project Management Body of 
Knowledge, our guidance on internal controls, and the Government 
Performance and Results Act of 1993 (GPRA).[Footnote 43] We also 
considered recent GAO work that evaluated federal planning efforts. 
Through these efforts, we identified six elements for sound planning. 
Although there is no established set of requirements for all project 
plans, we determined that these elements of sound planning help 
decision makers effectively shape policies, programs, priorities, and 
resource allocations intended to help achieve desired results and 
ensure accountability. While these elements may be organized in a 
variety of ways and use different terms, for the purposes of this 
report, we grouped them into six categories, from plan conception 
through implementation, that represent sufficiently broad, higher-
level criteria that may apply to a wide variety of project plans and 
priorities. (See table 3.) 

Table 3: Six Elements of Sound Planning Used to Evaluate VA's Efforts: 

Problem, goals, and methodology: 
In establishing the problem, goals, and methodology, the agency 
identifies the problem to be addressed and the causes of the problem, 
as well as the strategy, including goal and objectives, and the 
methodology for achieving these goals and objectives. 

Activities and timelines: 
An agency should identify and document the specific activities that 
must be performed to complete the project. The agency should develop a 
schedule that defines, among other things, when work activities will 
occur, how long they will take, and how they are related to one 
another, as well as interim milestones and checkpoints to gauge the 
completion of the project. 

Resources: 
The agency should identify the sources and types of resources or 
investments needed (e.g., budgetary, human capital, information 
technology, research and development, contracts) to complete project 
activities. If resource availability cannot be assured, the agency 
will need to establish alternate plans. The agency should develop a 
reliable estimate of the costs of these resources. 

Coordination: 
The agency should identify stakeholders--individuals and organizations 
that are involved in or may be affected by project activities--and 
ensure that they are included in developing and executing the project 
plan, allowing them to contribute appropriately. In addition to 
internal communications, management should ensure there are adequate 
means of communicating with, and obtaining information from, external 
stakeholders that may have a significant impact on the agency 
achieving its goals. 

Risk:
Risk assessment generally includes estimating the significance of 
risks from both external and internal sources, assessing the 
likelihood of its occurrence, and deciding how to manage the risk. 

Performance evaluation: 
The agency should describe how goals will be achieved and establish 
performance indicators to be used in measuring or assessing the 
relevant outputs, service levels, and outcomes of each program 
activity, and identify a process to monitor and report on progress. 

Source: GAO analysis based on the Program Management Institute 
Information, the Government Performance and Results Act of 1993, and 
selected GAO reports. 

[End of table] 

Selection and Expert Assessment of Policy Approaches: 

To address our second reporting objective, we identified policy 
approaches that could update VA's disability benefits structure by 
conducting a literature search for relevant reports by disability 
commissions, task forces, committees, and GAO. 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. We assumed that these high-level 
commissions and review groups had identified many of the major policy 
approaches to update VA's disability benefits structure. We limited 
selection of policy approaches to those that address more broadly 
focused updates to VA's current disability benefits structure, such as 
changes to the type, timing, or conditions of disability benefits 
(e.g., levels of benefits and changes in legislative authorities) and 
those that align with modern concepts of disability. For example, 
policy approaches of relevant scope would be those that facilitate the 
participation of people with disabilities in the workforce and society 
by evaluating and addressing environmental factors that can hinder 
employment and other activities. For this review, we excluded 
recommendations aimed at VA's organizational structure, administrative 
processes, and management operations (e.g., developing and using 
performance metrics and improving processes for communicating with 
veterans). 

Applying these criteria, we identified three relevant policy 
approaches: (1) providing quality of life payments, (2) providing 
integrated vocational services with transitional cash assistance, and 
(3) systematically factoring assistive technology and medical 
interventions into rating decisions. To identify other policy 
approaches, we asked 16 experts and veteran groups what other policy 
approaches, if any, might improve VA's disability benefits structure. 
Of those we interviewed, most said that the policy approaches we 
selected were the relevant approaches for our research purposes. 

Selection of Experts: 

To obtain information from experts and veteran groups on the 
opportunities and challenges associated with each approach, we 
developed a list of semi-structured interview questions. We conducted 
several pretests of the interview questions to validate its structure 
and ensure the clarity and logical sequence of the questions asked. 
During each semi-structured interview, we obtained information from 
experts and veteran groups on several topics, including their general 
assessments of the fiscal sustainability, political and administrative 
feasibility, and effectiveness of each approach. In addition, we 
obtained experts' and veteran groups' views on design features--such 
as eligibility criteria and the type and duration of payments--that 
could be considered part of each policy approach. We also obtained 
experts' and veteran groups' perspectives on the need, if any, to 
combine two or more policy approaches. Finally, we analyzed the 
information obtained from experts and veteran groups to identify 
underlying opportunities and challenges associated with each policy 
approach. 

We selected a nongeneralizable sample of experts who had participated 
in disability commissions, research, or a congressional hearing on the 
topic, or who serve in an organization that represents veterans with 
disabilities. In addition, we selected a group of experts to help 
ensure a range of viewpoints. Although many points of view were 
represented by our experts, they may not represent the complete range 
of opinions on the policy approaches. Table 4 identifies the experts 
and veteran groups we interviewed, including their respective title 
and professional affiliation. 

Table 4: Experts and Veteran Groups Interviewed by GAO: 

Name and title: Carl Blake, National Legislative Director; 
Current affiliation: Paralyzed Veterans of America. 

Name and title: Lonnie R. Bristow, Former President; 
Current affiliation: American Medical Association. 

Name and title: John F. Burton, Jr., Professor Emeritus; 
Current affiliation: Rutgers University and Cornell University. 

Name and title: Edward Eckenhoff, Founder and President Emeritus; 
Current affiliation: National Rehabilitation Hospital Network. 

Name and title: Bob Epley, Independent Consultant; 
Current affiliation: VA Advisory Committee on Disability Compensation. 

Name and title: Howard H. Goldman, Professor of Psychiatry; 
Current affiliation: University of Maryland, School of Medicine. 

Name and title: Barry A. Jesinoski, Executive Director; 
Current affiliation: Disabled American Veterans. 

Name and title: George Kettner, President; 
Current affiliation: Economic Systems Inc. 

Name and title: Michael McGeary, Senior Program Officer; 
Current affiliation: Institute of Medicine. 

Name and title: Lori Perkio, Assistant Director; 
Current affiliation: The American Legion. 

Name and title: Sally Satel, Resident Scholar; 
Current affiliation: American Enterprise Institute. 

Name and title: David Stapleton, Senior Fellow; 
Current affiliation: Mathematica Policy Research. 

Name and title: Tom Tarantino, Deputy Policy Director; 
Current affiliation: Iraq and Afghanistan Veterans of America. 

Name and title: Rick Weidman, Executive Director for Policy and 
Government Affairs; 
Current affiliation: Vietnam Veterans of America. 

Name and title: Ray Wilburn, Senior Analyst; 
Current affiliation: CNA. 

Name and title: Gail R. Wilensky, Senior Fellow; 
Current affiliation: Project HOPE. 

Source: GAO. 

[End of table] 

[End of section] 

Appendix II: Comprehensive Revisions and Other Key Updates to the VA 
Schedule for Rating Disabilities (VASRD): 

Body system: Musculoskeletal; 
Most recent comprehensive body system update (Final rule source): 
1945[A]; 
Most recent noncomprehensive revision to diagnostic codes (since last 
comprehensive update) (Final rule source): 2005; (70 Fed. Reg. 75,399, 
Dec. 20, 2005); 
Nature of noncomprehensive change: Reference to conditions to be rated 
analogously to diagnostic code for atrophic rheumatoid arthritis was 
revised. 

Body system: Muscle Injuries Section; 
Most recent comprehensive body system update (Final rule source): 1997; 
(Major Revision - 62 Fed. Reg. 30,235, June 3, 1997); 
Most recent noncomprehensive revision to diagnostic codes (since last 
comprehensive update) (Final rule source): Not applicable (n/a); 
Nature of noncomprehensive change: n/a. 

Body system: Digestive; 
Most recent comprehensive body system update (Final rule source): 1945; 
Most recent noncomprehensive revision to diagnostic codes (since last 
comprehensive update) (Final rule source): 2001; (66 Fed. Reg. 29,486, 
May 31, 2001); 
Nature of noncomprehensive change: Revision of diagnostic codes for 
residuals of injury and cirrhosis of the liver and revision to weight 
loss regulation. 

Body system: Neurological Conditions and Convulsive Disorders; 
Most recent comprehensive body system update (Final rule source): 1961; 
Most recent noncomprehensive revision to diagnostic codes (since last 
comprehensive update) (Final rule source): 2011; (76 Fed. Reg. 78,824, 
Dec. 20, 2011); 
Nature of noncomprehensive change: Revised rating criteria for 
amyotrophic lateral sclerosis. 

Body system: Dental and Oral Conditions; 
Most recent comprehensive body system update (Final rule source): 1994; 
(59 Fed. Reg. 2530, Jan. 18, 1994); 
Most recent noncomprehensive revision to diagnostic codes (since last 
comprehensive update) (Final rule source): 1997; (62 Fed. Reg. 8201, 
Feb. 24, 1997); 
Nature of noncomprehensive change: Relocated portions pertaining to 
noncompensable conditions to Part 3. 

Body system: Genitourinary; 
Most recent comprehensive body system update (Final rule source): 1994; 
(59 Fed. Reg. 2523, Jan. 18, 1994); 
Most recent noncomprehensive revision to diagnostic codes (since last 
comprehensive update) (Final rule source): 1994; (59 Fed. Reg. 46,339, 
Sept. 8, 1994); 
Nature of noncomprehensive change: Note regarding entitlement to 
Special Monthly Compensation (SMC) for deformity of the penis with 
loss of erectile power, testis atrophy and removal. 

Body system: Gynecological Conditions/; 
Disorders of the Breast; 
Most recent comprehensive body system update (Final rule source): 1995; 
(60 Fed. Reg. 19,851, April 21, 1995); 
Most recent noncomprehensive revision to diagnostic codes (since last 
comprehensive update) (Final rule source): 2002; (67 Fed. Reg. 6874, 
Feb. 14, 2002; corrected by 67 Fed. Reg. 37,695, May 30, 2002); 
Nature of noncomprehensive change: Entitlement to SMC for loss of a 
breast. 

Body system: Hemic/Lymphatic; 
Most recent comprehensive body system update (Final rule source): 1995; 
(60 Fed. Reg. 49,227, Sept. 22, 1995); 
Most recent noncomprehensive revision to diagnostic codes (since last 
comprehensive update) (Final rule source): 2012; (77 Fed. Reg. 6467, 
Feb. 8, 2012); 
Nature of noncomprehensive change: Diagnostic code for AL amyloidosis 
(primary amyloidosis) was added. 

Body system: Mental Health; 
Most recent comprehensive body system update (Final rule source): 1996; 
(71 Fed. Reg. 52,695, Oct. 8, 1996); 
Most recent noncomprehensive revision to diagnostic codes (since last 
comprehensive update) (Final rule source): 2009; (74 Fed. Reg. 18,467, 
Apr. 23, 2009); 
Nature of noncomprehensive change: Post-traumatic stress disorder 
nomenclature change. 

Body system: Endocrine; 
Most recent comprehensive body system update (Final rule source): 1996; 
(61 Fed. Reg. 20,446, May 7, 1996); 
Most recent noncomprehensive revision to diagnostic codes (since last 
comprehensive update) (Final rule source): n/a; 
Nature of noncomprehensive change: n/a. 

Body system: Infectious Diseases, Immune Disorders and Nutritional 
Deficiencies; 
Most recent comprehensive body system update (Final rule source): 1996; 
(61 Fed. Reg. 39,875, July 31, 1996); 
Most recent noncomprehensive revision to diagnostic codes (since last 
comprehensive update) (Final rule source): n/a; 
Nature of noncomprehensive change: n/a. 

Body system: Respiratory System; 
Most recent comprehensive body system update (Final rule source): 1996; 
(61 Fed. Reg. 46,720, Sept. 5, 1996); 
Most recent noncomprehensive revision to diagnostic codes (since last 
comprehensive update) (Final rule source): 2006; (71 Fed. Reg. 52,457, 
Sept. 6, 2006); (71 Fed. Reg. 28,586, May 17, 2006); 
Nature of noncomprehensive change: Substantive revisions to the 
evaluation criteria for certain respiratory and cardiovascular 
conditions, hypertension with heart disease; amended provisions 
pertaining to tuberculosis for those entitled on August 19, 1968. 

Body system: Cardiovascular; 
Most recent comprehensive body system update (Final rule source): 1997; 
(62 Fed. Reg. 65,207, Dec. 11, 1997); 
Most recent noncomprehensive revision to diagnostic codes (since last 
comprehensive update) (Final rule source): 2006; (71 Fed. Reg. 52,460, 
Sept. 6, 2006); 
Nature of noncomprehensive change: Substantive revisions to the 
evaluation criteria for respiratory and cardiovascular conditions, 
hypertension with heart disease. 

Body system: Impairment of Auditory Acuity; 
Most recent comprehensive body system update (Final rule source): 1999; 
(64 Fed. Reg. 25,210, May 11, 1999); 
Most recent noncomprehensive revision to diagnostic codes (since last 
comprehensive update) (Final rule source): 2003; (68 Fed. Reg. 25,822, 
May 14, 2003); 
Nature of noncomprehensive change: Amendment on the evaluation of 
tinnitus. 

Body system: Skin; 
Most recent comprehensive body system update (Final rule source): 2002; 
(67 Fed. Reg. 49,590, July 31, 2002; corrected by 67 Fed. Reg. 58,448, 
Sept. 16, 2002); 
Most recent noncomprehensive revision to diagnostic codes (since last 
comprehensive update) (Final rule source): 2008; (73 Fed. Reg. 54,708, 
Sept. 23, 2008; corrected by 77 Fed. Reg. 2910, Jan. 20, 2012); 
Nature of noncomprehensive change: Modified evaluation of scars. 

Body system: Organs of the Special Sense; 
Most recent comprehensive body system update (Final rule source): 2008; 
(73 Fed. Reg. 66,543, Nov. 10, 2008); 
Most recent noncomprehensive revision to diagnostic codes (since last 
comprehensive update) (Final rule source): n/a; 
Nature of noncomprehensive change: n/a. 

Source: GAO analysis of VA information and Institute of Medicine 
report, verified by VA officials. 

[A] According to the Institute of Medicine report, the "Spine" section 
was comprehensively updated in 2003 (68 Fed. Reg. 51,454, Aug. 27, 
2003). 

[End of table] 

[End of section] 

Appendix III: Key Questions for Designing New Disability Compensation 
Programs: 

Transforming broad policy approaches into specific programs requires 
that design features be defined. In reference to VA's disability 
program for veterans, the features relate to the form, amount, and 
eligibility for the payments and services. 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. 

Quality of life payments: 

* Should existing veterans be eligible for quality of life payments or 
just new enrollees? 

* Should veterans have the opportunity to opt in or out of a new 
program that provides quality of life payments? 

* Should quality of life payments supplement earnings loss payments 
for veterans with low, high, or all disability ratings levels? 

* Should disability compensation be based primarily on quality of 
life, with earnings loss payments being made only when actual earnings 
loss occurs? 

* How frequently should quality of life payments be provided to 
veterans (e.g., one-time lump sum, monthly annuity)? 

* What system should be used to determine payment levels (e.g., 
individual assessments or an average loss in quality of life across a 
group of veterans)? 

* Should quality of life be inferred from impairment or measured 
directly? 

* For veterans receiving quality of life payments and earnings loss 
payments, should the earnings loss payments end at retirement age? 

Integrating vocational rehabilitation services with disability 
compensation: 

* Should all veterans be eligible for the program or just veterans 
shortly after discharge? 

* Should the program be available for veterans at all disability 
rating levels or for veterans with lower or higher degrees of 
disability? 

* Should the program focus on veterans with certain kinds of 
impairments? 

* Should the payments be provided while the veteran participates in 
vocational rehabilitation, education, or training programs (i.e., for 
a longer rehabilitative period)? Or, should the payments also be 
provided on a short-term basis to support a veteran's return to the 
community? 

* Should the loss of earnings be periodically reassessed following a 
temporary rehabilitation period? 

Assistive technology and medical interventions: 

* Should VA assess the effects of assistive technology and medical 
interventions during the disability examination process? 

* Should an assessment of the effects of assistive technology and 
medical interventions only be considered for future enrollees/veterans? 

* Should VA incorporate the anticipated effects of assistive 
technology and medical interventions only when a veteran actually uses 
them? 

* Should VA incorporate the estimated effects of assistive technology 
and medical interventions? 

* Should VA limit the incorporation of the effects of assistive 
technology and medical interventions to those with empirically-based 
demonstrations of their effectiveness? 

[End of section] 

Appendix IV: Comments from the Department of Veterans Affairs: 

Department of Veterans Affairs: 
Washington DC 20420: 

August 21, 2012: 

Mr, Daniel Bertoni: 
Director, Education Workforce and Income Security Issues: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Bertoni: 

The Department of Veterans Affairs (VA) has reviewed the Government
Accountability Office's (GAO) draft report, "VA Disability Compensation:
Actions Needed to Address Hurdles Facing Program Modernization”
(GA0,12-846). VA concurs with GAO's recommendations to the Department.
The enclosure specifically addresses each of GAO's recommendations and 
provides technical comments to the draft report. VA appreciates the 
opportunity to comment on your draft report. 

Sincerely, 

Signed by: 

John R. Gingrich: 
Chief of Staff: 

Enclosure: 

[End of section] 

Enclosure: 

Department of Veterans Affairs (VA) Comments to Government 
Accountability Office (GAO) Draft Report "VA Disability Compensation: 
Actions Needed to Address Hurdles Facing Program Modernization" (GAO-
12-846): 

Recommendation 1: 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. 

VA Response: Concur. Beginning in early June 2011, VA conducted market 
research into the possibility of increasing our research capacity and 
partnerships with research organizations. VA is exploring the option 
of engaging in research partnerships to conduct more than one study at 
a time to increase VA's research capacity. With regard to developing a 
more complete and overall plan for the earnings loss studies, VA is 
expanding the Project Management Plan (PMP) to include a specific 
addendum that will include milestones, deliverables, and the 
designation of a sub-program manager who is dedicated to managing the 
earnings loss and validation studies, Targeted completion date is 
August 31, 2013. 

Recommendation 2: To ensure that VA is positioned to seamlessly 
implement revisions to the rating schedule, we recommend that the 
Secretary of Veterans Affairs develop a written implementation 
strategy. This strategy could include steps to mitigate the possible 
effects of rating schedule revisions on agency operations, including 
an increase in the number of claims received. 

VA Response: Concur. VA recognizes the need to ensure that changes to 
the rating schedule are seamlessly integrated into business processes 
and rating procedures. Currently, proposed rules regarding rating 
schedule changes, the first step in the rating schedule update 
process, have not yet been approved by VA, However, VA agrees that now 
is the time to standardize a process for implementing rating schedule 
changes. One step VA has already taken is including members of the 
rating community on the workgroups that are developing the proposed 
changes to the rating schedule. This helps ensure that changes do not 
unnecessarily adversely impact the rating process and suggestions that 
would improve the process are taken into account. 

Going forward, VA will convene point persons from affected staffs to 
develop a formal plan. The plan will establish cross-functional teams 
representing all business processes and procedural functions involved 
in rating schedule changes, including needs in areas of training 
curriculum; procedure, field guidance, and VA manual updates; rating 
automation; and other related areas. Targeted completion date is 
August 31, 2013. 

Recommendation 3: 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 Response: Concur, VA is currently formulating a plan that evaluates 
the rating schedule revision process to date. This includes the 
acquisition and analysis of "lessons learned" data from the public 
forums, working groups, drafting of proposed rules, a Veteran Service 
Organization Summit, and the internal rulemaking concurrence process. 
VA is also reviewing auditing tools to determine the efficiency and 
effectiveness of operations associated with the revision process.
Evaluating the "lessons learned" data and auditing the current 
revision process will allow Compensation Service to establish a 
formal, continuous revision policy that is efficient, traceable, and 
transparent to produce a rating schedule that reflects up-to-date 
medical information. Targeted completion date is August 31, 2013. 

[End of section] 

Appendix V: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Daniel Bertoni, (202) 512-7215 or bertonid@gao.gov. 

Staff Acknowledgments: 

In addition to the contact named above, individuals making key 
contributions to this report were Brett Fallavollita, Assistant 
Director; Alison Grantham; Mark Ward; and James Whitcomb. In addition, 
key support was provided by James Bennett, Tim Carr, David Chrisinger, 
Alex Galuten, Kristen Jones, Jean McSween, Patricia Owens, and Almeta 
Spencer. 

[End of section] 

Footnotes: 

[1] For Comptroller General's authority, see 31 U.S.C. § 717(b)(1). 

[2] 38 U.S.C. § 1155 provides that the "ratings shall be based, as far 
as practical, upon the average impairments of earning capacity 
resulting from such injuries in civil occupations." 

[3] According to a VA-commissioned report, although significant 
differences exist between state worker compensation programs and VA's 
disability compensation program, both compensate for total disability 
as well as the permanent consequences of injuries or diseases that are 
not totally disabling. In contrast, SSA's disability programs 
compensate individuals whose disabilities prevent them from engaging 
in any substantial gainful activity and have lasted or are expected to 
last at least 1 year or result in death. 

[4] Congress sets the amount of veteran disability compensation for 
each percentage disability rating, and this amount is subject to 
annual cost-of-living adjustments. 

[5] For a description of the procedures used to calculate combined 
disability ratings, see GAO, Veterans' Disability Benefits: VA Should 
Improve Its Management of Individual Unemployability Benefits by 
Strengthening Criteria, Guidance, and Procedures, [hyperlink, 
http://www.gao.gov/products/GAO-06-309] (Washington, D.C.: May 30, 
2006). 

[6] Generally, veterans with a disability rating of 20 percent or 
higher (who have an employment handicap) and veterans with a 
disability rating of 10 percent (who have a serious employment 
handicap) are eligible to receive vocational rehabilitation services. 

[7] For example, two studies, conducted by CNA and Economic Systems 
Inc., respectively, suggested that veterans with mental health 
impairments were being undercompensated. 

[8] See GAO, High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-11-278](Washington, D.C.: February 
2011). 

[9] The President's Commission on Veterans' Pensions (also known as 
the Bradley Commission) was presidentially chartered in 1955 to carry 
out a comprehensive study of the laws and policies pertaining to 
veterans. The President's Commission on Care for America's Returning 
Wounded Warriors (also known as the Dole-Shalala Commission) was also 
presidentially charged to study the needs of the current generation of 
"wounded warriors" in 2007. 

[10] We also have reported on employment and training programs for 
veterans with disabilities and made recommendations to improve program 
coordination and measurement of performance. See GAO, Disabled 
Veterans' Employment: Additional Planning, Monitoring, and Data 
Collection Efforts Would Improve Assistance, [hyperlink, 
http://www.gao.gov/products/GAO-07-1020] (Washington, D.C.: Sept. 12, 
2007). 

[11] All 191 World Health Organization member states in 2001 endorsed 
the use of the ICF as the international standard to describe and 
measure health and disability. 

[12] Several modern frameworks of disability include the degree that 
an individual is unable to participate in life activities. These 
frameworks include the ICF, the Institute of Medicine model, and the 
Abridged Verbrugge and Jette Model of Disability. 

[13] The law states that VA shall adjust the rating schedule from time 
to time based on experience. 38 U.S.C. § 1155. In addition, the 
Advisory Committee on Disability Compensation was established by law 
to provide advice to VA on the maintenance and periodic readjustment 
of the rating schedule. 38 U.S.C. § 546. 

[14] GAO, SSA and VA Disability Programs: Re-Examination of Disability 
Criteria Needed to Help Ensure Program Integrity, [hyperlink, 
http://www.gao.gov/products/GAO-02-597] (Washington, D.C.: Aug. 9, 
2002). Although VA initiated a medical update of its rating schedule 
in 1989, in 2002, we found that the updates generally took more than 5 
years to complete for each body system. VA also did not complete 
revisions for all body systems, including the musculoskeletal system. 
This body system is the most common impairment category among all 
veterans receiving disability compensation by the end of fiscal year 
2011. 

[15] Earnings loss studies include VA's Economic Validation of the 
Rating Schedule (ECVARS) published in the late 1960s; CNA's Final 
Report for the Veterans' Disability Benefits Commission: Compensation, 
Survey Results, and Selected Topics published in 2007; and Economic 
Systems Inc.'s A Study of Compensation Payments for Service-Connected 
Disabilities, published in 2008. 

[16] VA documents also state that a goal of the rating schedule 
revisions is to improve the efficiency of the disability claims 
process. 

[17] This view is consistent with the ICF framework. As noted earlier, 
the ICF focuses on ability to function despite a medical impairment, 
including taking into account the impact of environmental factors, 
such as products and technology, public attitudes, and support 
services. 

[18] In July 2012, VA officials told us that the agency is moving 
forward with revisions to the mental health body system that 
incorporate measures of functional impairment. For the other body 
system revisions, VA is also considering changes that give greater 
consideration to a veteran's ability to function. 

[19] During recent updates to its medical criteria, SSA has also taken 
steps to include an assessment of an individual's functional 
abilities. For example, as part of SSA's comprehensive revisions to 
the immune system criteria, the agency included several functional 
measures, such as completing tasks in a timely manner despite 
deficiencies in concentration or persistence. See GAO, Modernizing SSA 
Disability Programs: Progress Made, but Key Efforts Warrant More 
Management Focus, [hyperlink, http://www.gao.gov/products/GAO-12-420] 
(Washington, D.C.: June 19, 2012). 

[20] [hyperlink, http://www.gao.gov/products/GAO-02-597]. 

[21] Section two of this report provides further details on VA's 
consideration of assistive technology and medical interventions. 

[22] Medical interventions and assistive devices are currently 
incorporated into the rating schedule for some medical diagnoses, 
according to VA officials. For example, prosthetic implants are rated 
within the anatomical locations and degree of residual effects of a 
prosthesis. 

[23] In 1997, we reported that there are generally accepted and widely 
used approaches to statistically estimate the effect of specific 
service-connected conditions on veterans' average earnings. See GAO, 
VA Disability Compensation: Disability Ratings May Not Reflect 
Veterans' Economic Losses, [hyperlink, 
http://www.gao.gov/products/GAO/HEHS-97-9] (Washington, D.C.: Jan. 7, 
1997). In addition, in more recent reports, the Institute of Medicine 
and CNA recommended that VA routinely assess the impact of impairments 
on earnings. 

[24] VA will use data from the 2008 Economic Systems Inc. report 
because the report's findings reflect the findings of other 
independent studies related to the mental health diagnoses and do not 
require further validation. In addition, the relatively noncomplex 
nature of the hemic/lymphatic and endocrine body systems combined with 
the minimal findings in the 2008 Economic Systems Inc. report require 
no additional independent data, according to VA's project management 
plan. 

[25] See 26 U.S.C. § 6103. Early in the update project, VA sought wage 
data on individual veterans from SSA and IRS. However, VA now plans to 
use aggregate earnings data like prior earnings loss studies. For 
example, to conduct their analyses in 2008, Economic Systems Inc. 
reported that SSA released only aggregate earnings information on 
groups of at least five veterans. The Veterans Disability Benefits 
Commission also cited this challenge. 

[26] Under federal law, adjustments to the rating schedule generally 
cannot result in a reduction of a veteran's disability rating. 38 
U.S.C. § 1155. Thus, if a recommended update would result in a 
decrease in rating levels and senior VA officials approve the change, 
veterans already in the system would not see a decrease in their 
compensation. Increases, if warranted, are allowable. 

[27] Two experts we interviewed said that measuring earnings loss one 
body system at a time may not accurately capture the impact of 
multiple impairments on veterans' earnings. 

[28] VA's project management plan is designed to document the 
organizational, developmental, and supporting processes that will 
result in the successful revision of the rating schedule. VA also 
developed an operating plan to consider the entire program lifecycle--
initiating, planning, executing, monitoring and controlling, and 
closing. 

[29] In addition, it is important that agencies establish policies, 
procedures, and mechanisms that enforce management's directives and 
clearly document activities, particularly with ongoing, long-term 
projects. See GAO, Internal Control: Standards for Internal Control in 
the Federal Government, [hyperlink, 
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C.: 
November 1999). 

[30] Several commission reports addressed the definition of quality of 
life. Economic Systems Inc. defined quality of life for veterans as an 
overall sense of well-being based on physical and psychological 
health, social relationships, and economic factors. See Economic 
Systems Inc., A Study of Compensation Payments for Service-Connected 
Disabilities (Falls Church, VA: September 2008). The Institute of 
Medicine defined quality of life as including the cultural, 
psychological, physical, interpersonal, spiritual, financial, 
political, temporal, and philosophical dimensions of a person's life. 
See Institute of Medicine, A 21ST Century System for Evaluating 
Veterans for Disability Benefits (Washington, D.C.: 2007). 

[31] The Institute of Medicine noted that Congress and VA have added 
conditions in the rating schedule that have little if any effect on 
ability to work. However, the expansions of conditions have been ad 
hoc and may not address the full range or extent of impacts of 
injuries on quality of life. See Institute of Medicine, A 21ST Century 
System for Evaluating Veterans for Disability Benefits (Washington, 
D.C.: 2007). 

[32] For example, in the rating schedule, a higher evaluation is 
assigned for an amputation of an extremity that prevents the use of a 
prosthetic device as compared to an evaluation of an extremity at the 
same location, which allows for a prosthetic device. According to VA 
officials, this higher evaluation could be argued as a quality of life 
benefit. 

[33] Enhanced compensation is provided to veterans with disabilities 
who are housebound or who are in need of aid and attendance from 
others. 

[34] In 2004, the VA Vocational Rehabilitation and Employment Task 
Force reached a similar conclusion, stating that VA had reduced its 
focus on the ultimate mission of returning veterans with service-
connected disabilities to the workforce and stressed the preeminent 
role of vocational rehabilitation in achieving that goal. See VA 
Vocational Rehabilitation and Employment Task Force, Report to the 
Secretary of Veterans Affairs: The Vocational Rehabilitation and 
Employment Program for the 21st Century Veteran (Washington, D.C.: 
March 2004). 

[35] A 2008 study commissioned by VA noted that a useful distinction 
is to separate the temporary disability period from the permanent 
disability period. The temporary disability period begins when the 
veteran is first affected by a service-connected disability and ends 
on the date when the veteran reaches maximum medical improvement. See 
Economic Systems Inc., A Study of Compensation Payments for Service-
Connected Disabilities (Falls Church, VA: September 2008). 

[36] VA and others offer a range of employment and training programs. 
For example, as previously discussed, VA's Vocational Rehabilitation 
and Employment program provides rehabilitative services as well as 
training toward degrees and certifications. VA, the Department of 
Labor, and the Department of Defense also offer transitioning 
servicemembers with short-term vocational assistance through the 
Disabled Transition Assistance Program and Transition Assistance 
Program (TAP). TAP, for example, provides 3-day employment workshops 
at military installations to servicemembers up to 6 months before they 
separate from the military (e.g., job searches, career decision 
making, current occupational and labor market conditions, etc.). In 
addition, veterans are given priority for Department of Labor-funded 
federal workforce employment and training programs through a 
streamlined delivery system, called the one-stop system, required by 
federal law. 

[37] The basic period of eligibility for Vocational Rehabilitation and 
Employment program services is generally the 12 years after the date 
of separation from active military service. The basic period of 
eligibility may be extended in certain circumstances, such as if it is 
determined that a veteran is in need of services to overcome a serious 
employment handicap. 

[38] Our previous work suggests some weaknesses in communication and 
coordination among various VA disability programs. Overall, we have 
noted that federal programs should be structured in a manner that 
collectively allows them to provide coherent and seamless support to 
people with disabilities. For example, see GAO, Federal Disability 
Assistance: Wide Array of Programs Needs to be Examined in Light of 
21ST Century Challenges, [hyperlink, 
http://www.gao.gov/products/GAO-05-626] (Washington, D.C.: June 2, 
2005). 

[39] Economic Systems Inc., A Study of Compensation Payments for 
Service-Connected Disabilities (Falls Church, VA: September 2008). 

[40] GAO, High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-11-278] (Washington, D.C.: February 
2011). 

[41] Several overarching components are necessary for the 
reexamination strategies, including (1) sustained leadership to 
champion program changes; (2) broad-based input from a range of 
stakeholders; (3) empirically based research to assess alternative 
approaches; and (4) clear and transparent processes for engaging the 
broader public in the debate over recommended changes. See GAO, 21ST 
Century Challenges: Reexamining the Base of the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO-05-325SP] (Washington, 
D.C.: February 2005). 

[42] Ibid. 

[43] Pub. L. No. 103-62, 107 Stat. 285. 

[End of section] 

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