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United States Government Accountability Office: 
GAO: 

Testimony: 

Before the Committee on Veterans' Affairs, U.S. Senate: 

For Release on Delivery: 
Expected at 10:00 a.m. EST: 
Thursday, November 18, 2010: 

Military And Veterans Disability System: 

Preliminary Observations on Evaluation and Planned Expansion of DOD/VA 
Pilot: 

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

GAO-11-191T: 

GAO Highlights: 

Highlights of GAO-11-218T, a testimony before the Committee on Small 
Business and Entrepreneurship, U.S. Senate. 

Why GAO Did This Study: 

Third parties, often businesses, reported more than $6 trillion in 
miscellaneous income payments to the Internal Revenue Service (IRS) in 
tax year 2006 on Form 1099-MISC. Payees are to report this income on 
their tax returns. It has been long known that if these payments are 
not reported on 1099-MISCs, it is less likely that they will be 
reported on payee tax returns. In 2010, the reporting requirements 
were expanded to cover payments for goods and payments to 
corporations, both previously exempt, beginning in 2012. 

This testimony summarizes recent GAO reports and provides information 
on (1) benefits of the current requirements in terms of improved 
compliance by taxpayers and reduced taxpayer recordkeeping, (2) costs 
to the third-party businesses of the current 1099-MISC reporting 
requirement, and (3) options for mitigating the reporting burden for 
third-party businesses. GAO has not assessed the expansion of 1099-
MISC reporting to payments for goods. 

What GAO Found: 

Information reporting is a powerful tool for encouraging voluntary 
compliance by payees and helping IRS detect underreported income. 
Also, information reporting may sometimes reduce taxpayers’ costs of 
preparing their tax returns, although by how much is not known. IRS 
estimated that $68 billion of the annual $345 billion gross tax gap 
for 2001, the most current available estimate, was caused by sole 
proprietors underreporting their net business income. A key reason for 
this noncompliance was that sole proprietors were not subject to tax 
withholding and only a portion of their net business income was 
reported to IRS by third parties. The benefits from information 
reporting are affected by payers’ compliance with reporting 
requirements and IRS’s ability to use the information in its process 
that matches third-party data with tax returns. However, IRS does not 
have estimates of the number or characteristics of payers that fail to 
submit 1099-MISCs as required. To improve its use of 1099-MISC 
information, IRS has collected data to help identify ways to refine 
its matching process and select the most productive cases for review, 
as GAO recommended in 2009. 

Current 1099-MISC requirements impose costs on the third parties 
required to file them. The magnitude of these costs is not easily 
estimated because payers generally do not track these costs separate 
from other accounting costs. In nongeneralizable case studies 
conducted in 2007 with four payers and five vendors that file 
information returns on behalf of their clients, GAO was told that 
existing information return costs were relatively low. One small 
business employing under five people told GAO of possibly spending 3 
to 5 hours per year filing Form 1099 information returns manually, 
using an accounting package to gather the information. Two vendors 
reported prices for preparing and filing Forms 1099 of about $10 per 
form for 5 forms to about $2 per form for 100 forms, with one charging 
about $0.80 per form for 100,000 forms. However, these prices did not 
include clients’ recordkeeping costs. Payers face a variety of 
impediments preparing and submitting 1099-MISC forms, including 
complex rules and an inconvenient submission process. For example, 
payers must determine whether payees are incorporated, must get the 
payees’ taxpayer identification number, and must use special forms if 
filing on paper. 

A variety of options exist for mitigating the costs of filing Form 
1099-MISC. Most have pros and cons. IRS has already exempted payments, 
including those paid by credit card, which will be reported to IRS by 
other means. Other options include improving IRS guidance and 
education; adding a check-the-box question to business tax forms that 
would force return preparers to ask their clients whether they have 
complied with 1099-MISC reporting requirements; waiving late 
submission penalties for first-time payers; raising the payment 
reporting threshold; initially limiting the types of payments covered; 
having IRS develop an online filing capability; and allowing paper 
filers to submit computer-generated black and white 1099-MISCs rather 
than IRS’s printed forms. 

What GAO Recommends: 

GAO is not making new recommendations in this testimony. In 2009, GAO 
suggested that Congress consider requiring payers to report service 
payments to corporations. GAO did not study reporting of payments for 
goods. Other prior GAO recommendations included ways for IRS to 
improve its use of 1099-MISC information received. IRS agreed with six 
of eight recommendations and is taking action to address them. 

View [hyperlink, http://www.gao.gov/products/GAO-11-218T] or key 
components. For more information, contact James R. White, at (202) 512-
9110 or whitej@gao.gov. 

[End of section] 

Mr. Chairman and Members of the Committee: 

I am pleased to be here today to comment on the efforts by the 
Departments of Defense (DOD) and Veterans Affairs (VA) to integrate 
their disability evaluation systems. Over 40,000 servicemembers have 
been wounded in the wars in Iraq and Afghanistan, as of October 2010. 
Many of those who are unable to continue their military service must 
navigate complex disability evaluation systems in both DOD and VA, 
through which they are assessed for eligibility for disability 
compensation from the two agencies. GAO and others have found problems 
with these systems, including long delays, duplication in DOD and VA 
processes, confusion among servicemembers, and distrust of systems 
regarded as adversarial by servicemembers and veterans. To address 
these problems, DOD and VA have designed an integrated disability 
evaluation system (IDES), with the goal of expediting the delivery of 
VA benefits to servicemembers. DOD and VA have pilot tested the IDES 
at 27 military treatment facilities. They are now planning to expand 
the IDES worldwide, starting with 28 facilities by the end of 2010. 

My testimony summarizes findings of a draft report that is currently 
with DOD and VA for their review and comment. It reflects work we 
performed under a mandate in the National Defense Authorization Act 
for Fiscal Year 2008, which required GAO to review DOD and VA's 
implementation of a comprehensive policy on improvements to the care, 
management, and transition of recovering servicemembers, including 
improvements to the agencies' disability evaluation systems.[Footnote 
1] Consistent with this mandate, we examined: (1) the results of DOD 
and VA's evaluation of their pilot of the IDES, (2) challenges in 
implementing the piloted system to date, and (3) DOD and VA's plans to 
expand the piloted system and whether those plans adequately address 
potential challenges. With respect to the pilot evaluation, we 
reviewed evaluation reports and analysis plans and assessed the 
reliability of two types of data that DOD and VA used as the basis of 
their evaluation.[Footnote 2] To identify challenges in implementing 
the piloted system to date, we visited 10 of the 27 military treatment 
facilities participating in the pilot, selected to represent each 
military service branch, different geographical regions, and sites 
with varying caseloads and organizational structures.[Footnote 3] For 
all of the research objectives, we conducted interviews with key 
officials involved in the pilot at DOD, VA, and each of the military 
services; analyzed case data; and reviewed pertinent reports, 
guidance, plans, other documents, and relevant federal laws and 
regulations. We are conducting this performance audit from November 
2009 to December 2010, 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: 

Under the existing, or "legacy" system, the military's disability 
evaluation process begins at a military treatment facility when a 
physician identifies a condition that may interfere with a 
servicemember's ability to perform his or her duties. On the basis of 
medical examinations and the servicemember's medical records, a 
medical evaluation board (MEB) identifies and documents any conditions 
that may limit a servicemember's ability to serve in the military. The 
servicemember's case is then evaluated by a physical evaluation board 
(PEB) to make a determination of fitness or unfitness for duty. If the 
servicemember is found to be unfit due to medical conditions incurred 
in the line of duty, the PEB assigns the servicemember a combined 
percentage rating for those unfit conditions, and the servicemember is 
discharged from duty. Depending on the overall disability rating and 
number of years of active duty or equivalent service, the 
servicemember found unfit with compensable conditions is entitled to 
either monthly disability retirement benefits or lump sum disability 
severance pay. 

In addition to receiving disability benefits from DOD, veterans with 
service-connected disabilities may receive compensation from VA for 
lost earnings capacity. VA's disability compensation claims process 
starts when a veteran submits a claim listing the medical conditions 
that he or she believes are service-connected.[Footnote 4] In contrast 
to DOD's disability evaluation system, which evaluates only medical 
conditions affecting servicemembers' fitness for duty, VA evaluates 
all medical conditions claimed by the veteran, whether or not they 
were previously evaluated in DOD's disability evaluation process. For 
each claimed condition, VA must determine if there is credible 
evidence to support the veteran's contention of a service connection. 
Such evidence may include the veteran's military service records and 
treatment records from VA medical facilities and private medical 
service providers. Also, if necessary for reaching a decision on a 
claim, VA arranges for the veteran to receive a medical examination. 
Medical examiners are clinicians (including physicians, nurse 
practitioners, or physician assistants) certified to perform the exams 
under VA's Compensation and Pension program. Once a claim has all of 
the necessary evidence, a VA rating specialist evaluates the claim and 
determines whether the claimant is eligible for benefits. If so, the 
rating specialist assigns a percentage rating. If VA finds that a 
veteran has one or more service-connected disabilities with a combined 
rating of at least 10 percent, the agency will pay monthly 
compensation. 

In November 2007, DOD and VA began piloting the IDES, a joint 
disability evaluation system, to eliminate duplication in their 
separate systems and expedite receipt of VA benefits for wounded, ill, 
and injured servicemembers. The IDES merges DOD and VA processes, so 
that servicemembers begin their VA disability claim while they undergo 
their DOD disability evaluation, rather than sequentially, making it 
possible for them to receive VA disability benefits shortly after 
leaving military service (see figure 1). Specifically, the IDES: 

* merges DOD and VA's separate exam processes into a single exam 
process conducted to VA standards. This single exam (which may involve 
more than one medical examination, for example, by different 
specialists), in conjunction with the servicemembers' medical records, 
is used by military service PEBs to make a determination of 
servicemembers' fitness for continued military service, and by VA as 
evidence of service-connected disabilities. The exam may be performed 
by medical staff working for VA, DOD, or a private provider contracted 
with either agency. 

* consolidates DOD and VA's separate rating phases into one VA rating 
phase. If the PEB has determined that a servicemember is unfit for 
duty, VA rating specialists prepare two ratings--one for the 
conditions that DOD determined made a servicemember unfit for duty, 
which DOD uses to provide military disability benefits, and the other 
for all service-connected disabilities, which VA uses to determine VA 
disability benefits. 

* provides VA case managers to perform outreach and nonclinical case 
management and explain VA results and processes to servicemembers. 

Figure 1: Overview of the Legacy and IDES Processes: 

[Refer to PDF for image: illustration] 

Legacy process: 

Actions performed by Department of Defense (DOD): 

1. Service member referred to disability system. 

2. Military medical providers conduct medical exam. 

3. Medical Evaluation Board (MEB) identifies conditions that may make 
member unfit for duty. 

4. Physical Evaluation Board (PEB) assesses service member’s fitness 
for duty. 

5. If found unfit, PEB rates the unfitting conditions to determine 
benefits. 

6. Service member discharged with DOD benefits if eligible. 

Actions performed by Veterans’ Affairs (VA): 

7. Veteran files claim for benefits with VA. 

8. VA providers examine veteran. 

9. VA rates all of vet’s service-connected conditions. 

10. Veteran receives VA benefits if eligible. 

IDES process: 

Actions performed by DOD and VA: 

1. Service member referred to disability system. 

2. Medical providers conduct medical exam to VA standards.[A] 

3. Medical Evaluation Board (MEB) identifies conditions that may make 
member unfit for duty. 

4. Physical Evaluation Board (PEB) assesses service member’s fitness 
for duty. 

5. If found unfit, VA rates the conditions to determine both DOD and 
VA benefits. 

6. Service member receives both DOD and VA benefits shortly after 
discharge. 

Sources: GAO analysis of DOD and VA policies. 

Note: Under the legacy system, steps 1, 2, and 3 are not necessarily 
performed in this order. For example, a Navy official told us that 
under the legacy system, the servicemember is referred into the 
disability evaluation system when the MEB completes the documentation 
identifying the conditions that may make a member unfit for duty. With 
regard to step 7, servicemembers may file a claim with VA while still 
in the military, but they can only obtain disability compensation from 
VA as a veteran. With regard to step 8, the exams may be conducted by 
VA clinicians or by private-sector physicians contracted with VA. 

[A] In the IDES process, the medical exam performed to VA standards 
can be conducted by VA, DOD, or private-sector providers contracted 
with either agency. 

[End of figure] 

Pilot Evaluation Results Are Promising, but the Degree of Improvement 
Achieved Is Unknown: 

In August 2010, DOD and VA officials issued an interim report to 
Congress summarizing the results of their evaluation of the IDES pilot 
as of early 2010. In that report, the agencies concluded that, as of 
February 2010, servicemembers who went through the IDES pilot were 
more satisfied than those who went through the legacy system, and that 
the IDES process met the agencies' goals of delivering VA benefits to 
active duty servicemembers within 295 days and to reserve component 
servicemembers within 305 days. Furthermore, they concluded that the 
IDES pilot has achieved a faster processing time than the legacy 
system, which they estimated to be 540 days. 

While our review of DOD and VA's data and reports generally confirm 
DOD and VA's findings, as of early 2010, we also found that not all of 
the service branches were achieving the same results, case processing 
times have increased since February, and other agency goals have not 
been met. 

* Servicemember satisfaction: Our reviews of the survey data indicate 
that, on average, servicemembers in the IDES pilot have had higher 
satisfaction levels than those who went through the legacy process. 
However, Air Force members--who represented a small proportion (7 
percent) of pilot cases--were less satisfied. We reviewed the 
agencies' survey methodology and generally found their survey design 
and conclusions to be sound. 

* Average case processing times: The agencies have been meeting their 
295-day and 305-day timeliness goals for much of the past 2 years, but 
the average case processing time for active duty servicemembers has 
steadily increased from 274 days in February 2010 to 296 days, as of 
August 2010. While still an improvement over the 540-day estimate for 
the legacy system, the agencies missed their timeliness goal by 1 day. 
[Footnote 5] Among the military service branches, only the Army-- 
which comprised about 60 percent of cases that had completed the pilot 
process--met the agencies' timeliness goals in August, while average 
processing times for each of the other services exceeded 330 days. 
Across all military service branches, processing times for individual 
pilot sites have generally increased as their caseloads have 
increased. We reviewed the reliability of the case data upon which the 
agencies based their analyses and generally found these data to be 
sufficiently reliable for purposes of these analyses.[Footnote 6] 

* Goals to process 80 percent of cases in targeted time frames: DOD 
and VA had indicated in their planning documents that they had goals 
to deliver VA benefits to 80 percent of servicemembers within the 295-
day and 305-day targets. As of February 2010, these goals were not 
met. For both active duty and reserve cases, about 60 percent (rather 
than 80 percent) of cases were meeting the targeted time frames. By 
service branch, the Army had the highest rate of active duty cases (66 
percent) meeting the goal, and the Air Force had the lowest (42 
percent). 

Although DOD and VA's evaluation results indicate promise for the 
IDES, the extent to which the IDES is an improvement over the legacy 
system cannot be known because of limitations in the legacy data. DOD 
and VA's estimate of 540 days for the legacy system was based on a 
small, nonrepresentative sample of cases. DOD officials told us that 
they planned to use a broader sample of legacy cases to compare 
against pilot cases with respect to processing times and appeal rates. 
However, significant gaps in the legacy case data precluded such 
comparisons. Specifically, DOD compiled the legacy case data from each 
of the military services and the VA, but the military services did not 
track the same information. In addition, VA was not able to provide 
data on the date VA benefits were delivered for legacy cases, which 
are needed to determine the full processing time from referral to 
final delivery of VA benefits. 

Limited comparisons of pilot and legacy timeliness are possible with 
Army data, which appears to be reliable on some key processing dates. 
Our analysis of Army legacy data suggests that active duty cases took 
on average 369 days to complete the DOD legacy process and reach the 
VA rating phase--which does not include time to complete the VA rating 
and deliver the VA benefits to servicemembers. In comparison, it took 
on average 266 days to deliver VA benefits to soldiers in the pilot, 
according to the agencies' August data.[Footnote 7] However, Army 
comparisons cannot be generalized to the other services. 

Pilot Sites Experienced Several Challenges: 

As DOD and VA tested the IDES at different facilities and added cases 
to the pilot, they encountered several challenges that led to delays 
in certain phases of the process. 

* Staffing: Most significantly, most of the 10 sites we visited 
reported experiencing staffing shortages and related delays to some 
extent, in part due to workloads exceeding the agencies' initial 
estimates. The IDES involves several different types of staff across 
several different DOD and VA offices, some of which have specific 
caseload ratios set by the agencies, and we learned about insufficient 
staff in many key positions.[Footnote 8] With regard to VA positions, 
officials cited shortages in examiners for the single exam, rating 
staff, and case managers. With regard to DOD positions, officials 
cited shortages of physicians who serve on the MEBs, PEB adjudicators, 
and DOD case managers. In addition to shortages cited at pilot sites, 
DOD data indicate that 19 of the 27 pilot sites did not meet DOD's 
caseload target of 30 cases per manager.[Footnote 9] Local DOD and VA 
officials attributed staffing shortages to higher than anticipated 
caseloads and difficulty finding qualified staff, particularly 
physicians, in rural areas. These staffing shortages contributed to 
delays in the IDES process. 

Two of the sites we visited--Fort Carson and Fort Stewart--were 
particularly challenged to provide staff in response to surges in 
caseload, which occurred when Army units were preparing to deploy to 
combat zones. Through the Army's predeployment medical assessment 
process, large numbers of servicemembers were determined to be unable 
to deploy due to a medical condition and were referred to the IDES 
within a short period of time, overwhelming the staff. These two sites 
were unable to quickly increase staffing levels, particularly of 
examiners. As a result, at Fort Carson, it took 140 days on average to 
complete the single exam for active duty servicemembers, as of August 
2010, far exceeding the agencies' goal to complete the exams in 45 
days. 

* Exam summaries: Issues related to the completeness and clarity of 
single exam summaries were an additional cause of delays in the VA 
rating phase of the IDES process. Officials from VA rating offices 
said that some exam summaries did not contain information necessary to 
determine a rating. As a result, VA rating office staff must ask the 
examiner to clarify these summaries and, in some cases, redo the exam. 
VA officials attributed the problems with exam summaries to several 
factors, including the complexity of IDES pilot cases, the volume of 
exams, and examiners not receiving records of servicemembers' medical 
history in time. The extent to which insufficient exam summaries 
caused delays in the IDES process is unknown because DOD and VA's case 
tracking system for the IDES does not track whether an exam summary 
has to be returned to the examiner or whether it has been resolved. 

* Medical diagnoses: While the single exam in the IDES eliminates 
duplicative exams performed by DOD and VA in the legacy system, it 
raises the potential for there to be disagreements about diagnoses of 
servicemembers' conditions. For example, officials at Army pilot sites 
informed us about cases in which a DOD physician had treated members 
for mental disorders, such as major depression. However, when the 
members went to see the VA examiners for their single exam, the 
examiners diagnosed them with posttraumatic stress disorder (PTSD). 
Officials told us that attempting to resolve such differences added 
time to the process and sometimes led to disagreements between DOD's 
PEBs and VA's rating offices about what the rating should be for 
purposes of determining DOD disability benefits. Although the Army 
developed guidance to help resolve diagnostic differences, other 
services have not.[Footnote 10] Moreover, PEB officials we spoke with 
noted that there is no guidance on how disagreements about 
servicemembers' ratings between DOD and VA should be resolved beyond 
the PEBs informally requesting that the VA rating office reconsider 
the case. While DOD and VA officials cited several potential causes 
for diagnostic disagreements, the number of cases with disagreements 
about diagnoses and the extent to which they have increased processing 
time are unknown because the agencies' case tracking system does not 
track when a case has had such disagreements.[Footnote 11] 

* Logistical challenges integrating VA staff at military treatment 
facilities: DOD and VA officials at some pilot sites we visited said 
that they experienced logistical challenges integrating VA staff at 
the military facilities. At a few sites, it took time for VA staff to 
receive common access cards needed to access the military facilities 
and to use the facilities' computer systems, and for VA physicians to 
be credentialed. DOD and VA staff also noted several difficulties 
using the agencies' multiple information technology (IT) systems to 
process cases, including redundant data entry and a lack of 
integration between systems. 

* Housing and other challenges posed by extended time in the military 
disability evaluation process: Although many DOD and VA officials we 
interviewed at central offices and pilot sites felt that the IDES 
process expedited the delivery of VA benefits to servicemembers, 
several also indicated that it may increase the amount of time 
servicemembers are in the military's disability evaluation process. 
Therefore, some DOD officials noted that servicemembers must be cared 
for, managed, and housed for a longer period. The military services 
may move some servicemembers to temporary medical units or to special 
medical units such as Warrior Transition Units in the Army or Wounded 
Warrior Regiments in the Marine Corps, but at a few pilot sites we 
visited, these units were either full or members in the IDES did not 
meet their admission criteria. Where servicemembers remain with their 
units while going through the IDES, the units cannot replace them with 
able-bodied members. In addition, officials at two sites said that 
members are not gainfully employed by their units and, left idle, are 
more likely to be discharged due to misconduct and forfeit their 
disability benefits. However, DOD officials also noted that 
servicemembers benefit from continuing to receive their salaries and 
benefits while their case undergoes scrutiny by two agencies, though 
some also acknowledged that these additional salaries and benefits 
create costs for DOD. 

DOD and VA Expansion Plans Incorporate Many Lessons Learned but Do Not 
Address All Challenges: 

DOD and VA plan to expand the IDES to military facilities worldwide on 
an ambitious timetable--to 113 sites during fiscal year 2011, a pace 
of about 1 site every 3 days. Expansion is scheduled to occur in four 
stages, beginning with 28 sites in the southeastern and western United 
States by the end of December 2010.[Footnote 12] 

In preparing for IDES expansion military-wide, DOD and VA have many 
efforts under way to address challenges experienced to date, though 
their efforts have yet to be implemented or tested. For example, the 
agencies have completed a significant revision of their site 
assessment matrix--a checklist used by local DOD and VA officials to 
ascertain their readiness to begin the pilot--to address areas where 
prior IDES sites had experienced challenges. In addition, local senior-
level DOD and VA officials will be expected to sign the site 
assessment matrix to certify that a site is ready for IDES 
implementation. This differs from the pilot phase where, according to 
DOD and VA officials, some sites implemented the IDES without having 
been fully prepared. 

Through the new site assessment matrix and other initiatives, DOD and 
VA are addressing several of the challenges identified in the pilot 
phase. 

* Ensuring sufficient staff: With regard to VA staff, VA plans to 
increase the number of examiners by awarding a new contract through 
which sites can acquire additional examiners. To increase rating 
staff, VA has filled vacant rating specialist positions and 
anticipates hiring a small number of additional staff. With regard to 
DOD staff, Air Force and Navy officials told us they have added 
adjudicators for their PEBs or are planning to do so. Both DOD and VA 
indicated they plan to increase their numbers of case managers. 
Meanwhile, sites are being asked in the assessment matrix to provide 
longer and more detailed histories of their caseloads, as opposed to 
the 1-year history that DOD and VA had based their staffing decisions 
on during the pilot phase. The matrix also asks sites to anticipate 
any surges in caseloads and to provide a written contingency plan for 
dealing with them. 

* Ensuring the sufficiency of single exams: VA has begun the process 
of revising its exam templates to better ensure that examiners include 
the information needed for a VA disability rating decision and to 
enable them to complete their exam reports in less time. VA is also 
examining whether it can add capabilities to the IDES case tracking 
system that would enable staff to identify where problems with exams 
have occurred and track the progress of their resolution. 

* Ensuring adequate logistics at IDES sites: The site assessment 
matrix asks sites whether they have the logistical arrangements needed 
to implement the IDES. In terms of information technology, DOD and VA 
are developing a general memorandum of agreement intended to enable 
DOD and VA staff access to each other's IT systems. DOD officials also 
said that they are developing two new IT solutions--one currently 
being tested is intended to help military treatment facilities better 
manage their cases, while another still at a preliminary stage of 
development would reduce multiple data entry. 

However, in some areas, DOD and VA's efforts to prepare for IDES 
expansion do not fully address some challenges or are not yet complete. 

* Ensuring sufficient DOD MEB physician staffing: DOD does not yet 
have strategies or plans to address potential shortages of physicians 
to serve on MEBs. For example, the site assessment matrix does not 
include a question about the sufficiency of military providers to 
handle expected numbers of MEB cases at the site, or ask sites to 
identify strategies for ensuring sufficient MEB physicians if there is 
a caseload surge or staff turnover. 

* Ensuring sufficient housing and organizational oversight for IDES 
participants: Although the site assessment matrix asks sites whether 
they will have sufficient temporary housing available for 
servicemembers going through the IDES, the matrix requires only a yes 
or no response and does not ensure that sites will have conducted a 
thorough review of their housing capacity. In addition, the site 
assessment matrix does not address plans for ensuring that IDES 
participants are gainfully employed or sufficiently supported by their 
organizational units. 

* Addressing differences in diagnoses: According to agency officials, 
DOD is currently developing guidance on how staff should address 
differences in diagnoses. However, since the new guidance and 
procedures are still being developed, we cannot determine whether they 
will aid in resolving discrepancies or disagreements. Significantly, 
DOD and VA do not have a mechanism for tracking when and where 
disagreements about diagnoses and ratings occur and, consequently, may 
not be able to determine whether the guidance sufficiently addresses 
the discrepancies. 

As DOD and VA move to implement the IDES worldwide, they have some 
mechanisms in place to monitor challenges that may arise in the IDES, 
such as regular reporting of data on caseloads, processing times, and 
servicemember satisfaction, and preparation of an annual report on 
challenges in the IDES. However, DOD and VA do not have a system-wide 
monitoring mechanism to help ensure that steps they took to address 
challenges are sufficient and to identify problems in a more timely 
basis. For example, they do not collect data centrally on staffing 
levels at each site relative to caseload. As a result, DOD and VA may 
be delayed in taking corrective action, since it takes time to assess 
what types of staff are needed at a site and to hire or reassign 
staff. DOD and VA also lack mechanisms or forums for systematically 
sharing information on challenges, as well as best practices between 
and among sites. For example, DOD and VA have not established a 
process for local sites to systematically report challenges to DOD and 
VA management and for lessons learned to be systematically shared 
system-wide. During the pilot phase, VA surveyed pilot sites on a 
monthly basis about challenges they faced in completing single exams. 
Such a practice has the potential to provide useful feedback if 
extended to other IDES challenges. 

Concluding Observations: 

By merging two duplicative disability evaluation systems, the IDES 
shows promise for expediting the delivery of VA benefits to 
servicemembers leaving the military due to a disability. However, 
piloting of the system has revealed several significant challenges 
that require careful management attention and oversight. DOD and VA 
are currently taking steps to address many of these challenges. 
However, given the agencies' ambitious implementation schedule--more 
than 100 sites in a year--it is unclear whether these steps will be 
completed before DOD and VA deploy the IDES to additional military 
facilities. Ultimately, the success or failure of the IDES will depend 
on DOD and VA's ability to sufficiently staff the various offices 
involved in the IDES and to resolve challenges not only at the 
initiation of the transition to IDES, but also on an ongoing, long-
term basis. Because they do not have a mechanism for routinely 
monitoring staffing and other risk factors, DOD and VA may not be able 
to know whether their efforts to address these factors are sufficient 
or to identify new problems as they emerge, so that they may take 
immediate steps to address them before they become major problems. 

We have draft recommendations aimed at helping DOD and VA further 
address challenges surfaced during the pilot, which we plan to 
finalize in our forthcoming report after fully considering agency 
comments. 

Mr. Chairman, this concludes my prepared statement. I would be pleased 
to respond to any questions that you or other Members of the Committee 
may have at this time. 

GAO Contact and Staff Acknowledgments: 

For further information about this testimony, please contact Daniel 
Bertoni 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 testimony. In addition to the individual named 
above, key contributors to this testimony include Michele Grgich, 
Yunsian Tai, Jeremy Conley, and Greg Whitney. Key advisors include 
Bonnie Anderson, Rebecca Beale, Mark Bird, Brenda Farrell, Valerie 
Melvin, Patricia Owens, Roger Thomas, Walter Vance, and Randall 
Williamson. 

[End of section] 

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[End of section] 

Footnotes: 

[1] Pub. L. No. 110-181, § 1615(d), 122 Stat. 3, 447. 

[2] Specifically, we assessed the reliability of case data from both 
the pilot and existing--or "legacy"--disability evaluation systems, as 
well as data from surveys DOD conducted to gauge servicemember 
satisfaction. 

[3] The IDES pilot sites we visited were: (1) Bayne Jones Army 
Community Hospital, Fort Polk, Louisiana; (2) David Grant Medical 
Center, Travis Air Force Base, California; (3) Dewitt Army Community 
Hospital, Fort Belvoir, Virginia; (4) Evans Army Community Hospital, 
Fort Carson, Colorado; (5) Naval Hospital Camp Lejeune, North 
Carolina; (6) Naval Hospital Camp Pendleton, California; (7) Naval 
Medical Center San Diego, California; (8) Walter Reed Army Medical 
Center, Washington, D.C.; (9) Winn Army Community Hospital, Fort 
Stewart, Georgia; and (10) Vance Air Force Base, Oklahoma. 

[4] Although a servicemember may file a VA claim while still in the 
military, he or she can only obtain disability compensation from VA as 
a veteran. 

[5] Case processing times for servicemembers in the reserve component 
have also increased but were still meeting the goal of 305 days as of 
August 29, 2010. The data on average case processing times presented 
are from DOD and VA's weekly monitoring reports, which provide 
cumulative case processing times, i.e., average case processing times 
for all cases completed as of that given week. 

[6] Our data reliability assessment included interviews regarding 
internal controls, electronic testing, and a trace-to-file process, 
where we matched a small number of randomly sampled case file dates 
against the dates that had been entered into the Veterans Tracking 
Application, the case tracking system for the IDES. For the trace-to- 
file process, the overall accuracy rate was 84 percent, and all but 
one date was 70 percent accurate or better and deemed sufficiently 
reliable for reporting purposes. 

[7] Reserve component cases in the Army took 389 days to reach the VA 
rating phase under the legacy process, compared with 285 days to 
deliver VA benefits under the pilot. Reserve component cases made up 
48 percent of legacy cases and 23 percent of pilot cases. 

[8] For the IDES pilot, the agencies have set targets for both DOD and 
VA case managers to handle no more than 30 cases at a time. However, 
DOD's guidance for the general disability evaluation system sets the 
target at a maximum of 20 cases per case manager, and agency documents 
related to planning for IDES expansion indicate that DOD is striving 
for a 1:20 caseload target for DOD case managers in the IDES. The Army 
has established a caseload target for MEB physicians of 120 
servicemembers per physician. The Navy and Air Force have not 
established caseload targets for their physicians; their MEB 
determinations are prepared by physicians who perform other 
responsibilities, such as clinical treatment or supervision. 

[9] Data were not available nationally to determine the extent to 
which sites are meeting the Army's target of 120 servicemembers per 
MEB physician or VA's target of 30 cases per VA case manager. 

[10] To address such processing delays, the Army issued guidance in 
February 2010 stating that MEB physicians should review all of the 
medical records (including the results of the single exam) and 
determine whether to revise their diagnoses. If after doing so, the 
MEB physician maintains that his or her original diagnosis is 
accurate, he or she should write a memorandum summarizing the basis of 
the decision, and the PEB should accept the MEB's diagnosis. 

[11] DOD and VA officials attributed disagreements about diagnoses to 
several factors, including the agencies identifying conditions for 
different purposes in the disability evaluation system, servicemembers 
being more willing to disclose all of their medical conditions to VA 
than to DOD since VA can compensate for all of the conditions, and VA 
examiners not receiving or not reviewing the servicemembers' medical 
records prior to the exam, making them unaware of the conditions for 
which the members had been previously diagnosed and treated. 

[12] DOD and VA had originally planned for 34 sites to implement the 
IDES by the end of December 2010. However, the Army postponed 
implementation at 6 sites. 

[End of section] 

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