Disabled veterans program mismanaged

By Tom Philpott: Military Update

The Department of Veterans Affairs mismanages its program for rating disabled veterans as “unemployable,” according to a new report by congressional auditors.

Because of weak oversight of Individual Unemployability (IU) benefits, some veterans get more compensation than warranted, and the VA is ineffective in moving seriously disabled veterans toward productive working lives, the Government Accountability Office has found.

Overall, the process VA uses to determine whether veterans are unemployable lacks integrity, GAO decided after 15 months of study. Its May 30 report says VA criteria, guidance and procedures for awarding such benefits “do not ensure that IU decisions are well supported.”

The number of disabled veterans rated IU and the cost of their benefits have risen sharply in recent years. From fiscal 1996 through 2005, veterans rated unemployable tripled from 71,000 to 220,000. In the same period, IU payments jumped from $857 million a year to $3.1 billion.

The “marked increase” is troublesome, GAO suggests, because it has occurred “at a time when advances in medicine and technology, along with labor market changes, have provided greater opportunity for people with disabilities to seek and maintain employment.”

The 54-page report has been much anticipated by members of the Veterans’ Disability Benefits Commission, which is conducting the first major review of veterans’ disability benefits in 50 years. The commission, which will deliver a final report to Congress by October 2007, has listed among its priorities a finding on whether IU benefits need reform.

Veterans with injuries or ailments tied to time in service can receive tax-free VA compensation. Amounts vary based on the severity of disabilities, which are rated on a scale of 0 to 100 percent in increments of 10.

Veterans rated 60 to 90 percent disabled still can qualify for compensation at the 100 percent level if they are deemed to be unemployable and therefore qualify for the IU designation.

Almost half of all veterans with 60 to 90 percent currently receive the IU benefits. It means a significant pop in payments. Based on VA disability compensation rates effective for most of 2006, 100-percent disabled veterans and those with the IU designations who with no dependents draw $2,393 a month. By contrast, veterans rated 60 percent receive $873 a month and the scale slides to $1,436 a month for 90 percent disabled.

So a 60-percent disabled veterans designated IU will receive an additional $18,240 a year. The disparity widens even more if veterans have spouses or dependent children.

GAO estimates the added lifetime value of IU designation for a 20-year-old, 60-percent disabled veteran is more than $460,000, in 2005 dollars. If a veteran doesn’t gain IU status until age 75, says GAO, the lifetime compensation still would jump by $89,000 to $142,000, depending on disability rating and life expectancy.

Why the spike in IU determinations? Appearing before the benefits commission last year, VA officials blamed a 1999 decision to stop requiring IU veterans to complete a form each year to verify that they remain unemployed or earning incomes below the poverty level. VA began asking IU veterans to complete the forms again last September.

One senior VA official also told the commission that awarding IU status was a way for rating specialists to help clear a rising backlog of claims.

The GAO report, however, points to more systemic problems with how IU benefits are administered. It suggests the VA is less conscientious than either the Social Security Administration or private sector disability plans in monitoring employability and encouraging beneficiaries to return to work.

Tom Philpott can be contacted at Military Update, P.O. Box 231111, Centreville, Va. 20120-1111, or by e-mail at: