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These veterans are men and women who didn't hesitate when our Nation called them to serve. They did not delay when they were ordered to risk their lives for us. Yet we are asking them sometimes to wait years for the benefits that they are entitled to. And so the purpose of this hearing, hopefully, will be to help us work together to figure out how we can do a better job.

An important part of the solution is making sure that the VA has the men and women power and the resources to do their jobs. The Veterans' Administration has not, in my view, properly explained how it will deal with nearly 800,000 claims, when I understand we only have fewer than 9,000 workers to process those claims.

These are claims that are longer and more complex than they were in years past. And I would like Admiral Cooper, in my admiration and respect for you, to explain how you intend to cut into that backlog and to improve the accuracy rates, with the limited resources that you have for this task.

We also need to continue to improve the fairness and efficiency of the system. It is a system that gives to veterans of one State an average of $12,000, and gives veterans in another State less than $7,000. We need to understand why that occurs. And my home State of Colorado is below the national average in veterans' compensation.

We need to improve training and communication at the regional offices, to make sure that the system is fair and consistent. We need to continue adjusting the system, from gradual small administrative changes, such as improving quality control measures, to more significant legislative reforms, such as simplifying the appeals process in a way that preserves veterans' rights.

Backlogs and quality control are issues that have bedeviled the VA for decades. These are not new issues. And it is not one that I believe we can solve overnight, but I am hoping that today's hearing and your leadership at the Veterans' Administration will help us move forward in making progress in the resolution of some of these issues.

And finally, let me just note that both Senator Craig, I am sure, and I are delighted with the fact that our good friend and colleague from Ohio, former Attorney General Al Lance, is now sitting comfortably in the Court of Veterans' Claims. And I know that he will do a great job on behalf of veterans in that position. Thank you, Mr. Chairman.

Chairman CRAIG. Senator, thank you very much.

We have been joined by Senator Murray. Patty, do you have any opening comments you would like to make?

OPENING STATEMENT OF HON. PATTY MURRAY, U.S. SENATOR FROM WASHINGTON

Senator MURRAY. I will submit my comments for the record. Let me just join my colleagues in welcoming you all here. You have a tremendous task in front of you.

We are all heading home for the Memorial Day recess. I am sure we will all be talking with troops and observing the holiday over the weekend. We are going to come back and face some serious issues with some of the claims that are pending, and continued

concern from our veterans who are not getting the services they need.

And I think every senator in this entire body has someone working for them full-time helping veterans from their home get through the process. And I think it really behooves all of us to determine how we can get through that and deal with the red tape and the delay in the best way possible for those who have served us. Thank you, Mr. Chairman.

Chairman CRAIG. Patty, thank you very much.

Now, then let's turn to you, Daniel Cooper, Under Secretary for Benefits, Department of Veterans' Affairs. Dan, please proceed. STATEMENT OF HON. DANIEL L. COOPER, UNDER SECRETARY FOR BENEFITS, DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY RONALD GARVIN, ACTING CHAIRMAN OF THE BOARD OF VETERANS' APPEALS; AND ROBERT H. EPLEY, ASSOCIATE DEPUTY UNDER SECRETARY FOR POLICY AND PROGRAM MANAGEMENT, VETERANS BENEFITS ADMINISTRATION

Adm. COPPER. Thank you, sir. Mr. Chairman, members of the Committee, thank you for the opportunity to testify today concerning the VA's disability claims process. I am accompanied, by Ron Garvin, the Acting Chairman of the Board of Veterans' Appeals, and Mr. Bob Epley, my Associate Deputy for Programs.

I understand today that your interest is primarily in the disability compensation process. This process is built on a body of law that has evolved over many years. It is complicated, and it sometimes takes longer than any of us wish to reach decisions. But at the foundation, the disability claims process is designed to offer veterans the broadest opportunities and assistance to apply and reapply for benefits, so they receive their fullest entitlement.

That single concept-the benefit of the doubt for the veteran— frames all of the other elements of our process. In my written statement, I've tried to outline how the disability claims process works; provide some statistics about our performance; and provide some description of the major factors that complicate it.

Over the last several years, several management actions have been taken to improve the process. We have worked to bolster our staffing and strengthen the training we provide to the staff. We have standardized the work process. We have installed significant performance and accountability measures, and we monitor those measures diligently.

These steps have helped. We have stabilized our work, but challenges remain and new challenges continue to arise. One of our biggest challenges is obviously the growth of incoming claims. Almost 2.6 million veterans are receiving disability compensation today, more than at any time in U.S. history.

The number on the rolls is growing at the rate of 5,000 to 7,000 per month. Coincident with this growth, the number of claims we receive each month is increasing, and the number of issues on each claim for each veteran is also rising steadily.

Legislative changes also affect our process. Most notably, the passage of VCAA, the Veterans Claims Assistance Act, had a dramatic effect on our work. This legislation clarified and enhanced

the VA's duty to assist claimants. But it also resulted in a larger inventory of pending work, and it lengthened the process.

In addition, court decisions can affect our claims process. An example of this was the PVA v. VA case, decided in September of 2003. This decision directed that the VA hold open many of our pending claims until one year after the date of claim. It slowed down the system dramatically for about 3 months, until Congress passed amending legislation.

Our appeals process is another key component of this VA disability claims process. Our Board of Veterans' Appeals was established in 1933 to review evidence, to hold hearings, and to render quality decisions on appeals of claims for veterans' benefits. Its function remains essentially the same today.

A claimant initiates an appeal by filing a notice of disagreement with the original regional office. The regional office offers the opportunity for the claimant to discuss that appeal with a decision review officer in that office. Then, if it does not resolve the appeal, the claimant can continue his action by filing a substantive appeal to the Board of Veterans' Appeals.

Claimants also have a right to a hearing on their appeal, and this can be arranged at the regional office, by videoconference, or in Washington, DC, at the Board of Veterans' Appeals. Most appellants choose to be represented before the Board by veterans' service organizations, and many of these organizations have appeals units co-located at the Board here in Washington.

The Board has worked hard to expedite the appeal process, but the process continues to be a lengthy one. Our management improvement efforts include emphasis on resolving appeals at the local level; seeking productivity improvements at the Board, and centralizing the handling of remands.

In summary, our disability claims process has evolved over many years. Its fundamental principle is to make the system work for the veterans' benefit. The process is complicated, and often lengthy; but we continue to look at ways to improve it.

I welcome your interest in processing systems. I look forward to collaborating with you on ways to improve the system so that the veterans continue to see improvements in our service delivery and each veteran can be fully and fairly served in a consistent and timely manner.

I will now be glad to answer any of your questions. [The prepared statement of Adm. Cooper follows:]

PREPARED STATEMENT HON. DANIEL L. COOPER, UNDER SECRETARY FOR BENEFITS, DEPARTMENT OF VETERANS AFFAIRS

Good morning Mr. Chairman and Members of the Committee.

I am pleased to appear before you today to discuss the extremely important work of the Veterans Benefits Administration. As you are aware, we administer myriad veterans' programs in VBA. Disability compensation is the one program that probably has the most visibility in the total veteran community and will be the primary focus of my testimony today. I will also briefly discuss several other important programs that directly and deeply affect individual veterans and their families.

In June 1944 President Roosevelt signed the original GI Bill. This landmark legislation gave birth to our VA Education and Home Loan Guaranty Programs. The GI Bill is proclaimed as one of the most important social actions of that century. It underpinned major economic change for the 16 million veterans returning from WWII in the European and Pacific theaters of action, most of whom had never been employed as civilians. Each of those veterans was eligible for educational benefits

and loans for businesses, homes, or farm purchases. Today, our Education and Loan Guaranty Programs remain vitally important to both veterans and active duty servicemembers.

Our Vocational Rehabilitation and Employment Program is directed specifically at veterans who have an employment handicap as a result of their service-related disabilities. We assist these disabled veterans in preparing for and obtaining suitable employment, which often means establishing rehabilitation programs to help them get a better education, obtain basic skills and training, or start a business. For the most seriously injured for whom employment is not immediately feasible, we provide services to help them gain more independence in daily living.

Our Insurance Program is administered by the Philadelphia Regional Office and Insurance Center. We currently have four active insurance plans, the largest of which is the Servicemembers Group Life Insurance (SGLI) Program. The SGLI Program makes life insurance available to every servicemember entering military_service. The Philadelphia Insurance Center and the Office of Servicemembers Group Life Insurance have done an extraordinary job in serving widows and other family survivors during Operations Enduring and Iraqi Freedom. Once the Insurance Program receives the necessary paperwork from the Department of Defense, payments to the surviving beneficiaries are made in less than two days.

Finally, our Disability Pension Program is available for wartime veterans who have low income and are permanently and totally disabled.

Today I am here to discuss the largest of our programs in VBA, the Disability Compensation Program. Disability compensation is a monetary benefit paid to veterans who are disabled by injury or disease incurred or aggravated during active military service. The amount of compensation varies with degree of disability and, when appropriate, with the number of dependents. Compensation is paid monthly and is not subject to either Federal or State income tax. The specific amounts paid for each 10 percent step in disability are decided by Congress. Today a veteran with 10-percent disability rating receives $108 per month. Fifty-percent disabled veterans receive $663; the 90-percent rate is $1,380; and the 100 percent rate is $2,299. Note the much larger jump from 90 percent to 100 percent versus any other 10-percent increment. Those veterans rated 30 percent and higher receive an additional allowance for a spouse and each dependent child.

The recently released report by the Department's Inspector General (IG), entitled, "Review of State Variances in VĂ Disability Compensation Payments," stated:

"The VA disability compensation program is based on a 1945 model that does not reflect modern concepts of disability. Over the past 5 decades, various commissions and studies have repeatedly reported concerns about whether the rating schedule and its governing concept of average impairment adequately reflects medical and technological advancements or changes in workplace opportunities and earning capacity for disabled veterans. Although some updates have occurred, proponents for improving the accuracy and consistency of ratings advocate that a major restructuring of the rating schedule is long overdue." The VA Disability Compensation Program has evolved from a long series of legislative actions, spanning most of a century. Each piece of legislation was intended to address a specific need, or the needs of a special sub-population of veterans. The one constant has been Congress' desire to recognize the sacrifice of those who served in uniform.

The incremental legislative process has also had the effect of building an increasingly complicated system. Our Disability Compensation Program recognizes over 110 diseases that are considered to be presumptively related to special military service conditions. These special conditions range from prisoner of war experiences, to exposure to ionizing radiation, to service in Vietnam (with related exposure to Agent Orange).

In addition to these complicating factors, and possibly because of them, the Disability Compensation Program is growing rapidly. Almost 2.6 million veterans are receiving disability compensation today, more than at any time in U.S. history. The number on the rolls is growing at a rate of 5,000 to 7,000 per month. Entitlement to disability compensation drives eligibility to other programs, including VA medical care, vocational rehabilitation, dependents educational assistance, and some home loan and insurance benefits. In addition, recent laws provide for concurrent receipt of VA disability compensation and military retirement benefits. So there are clear incentives for the VA Disability Compensation Program to continue to grow.

All of these laws rightfully serve to benefit our veterans and are extremely important to them. A classic example is the group of laws and rulings related to Agent Orange exposure. Any veteran stationed in Vietnam between January 9, 1962 and May 7, 1975 is presumed to have been exposed to Agent Orange, and any of several

diseases they might have contracted is presumed to be a result of that exposure. The presumption of service connection for type II diabetes, in particular, resulted in over 100,000 individual claims.

In addition, a recent law dramatically changed the business of VA disability claims adjudication. This legislation was the Veterans Claims Assistance Act of 2000 (VCĂA). One of its central provisions clarified and enhanced VA's "duty to assist" veterans with their benefit claims. In my opinion, this was a proper and wellconceived law that addressed a deficient process under which VA was previously adjudicating claims. That law clearly defined VA's responsibilities for assisting claimants. It made our adjudicators absolutely responsible for helping each individual veteran know what to do, what is needed to substantiate his/her claim, and how to respond. It also requires that we tell the veteran what we will do to assist him or her.

It was as a result of the VCAA, and the immediate and very rapid accumulation of claims, that Secretary Principi convened the Claims Processing Task Force in May 2001. His charge was to recommend specific actions that the Secretary (of Veterans' Affairs) could initiate, within his own authority, without legislative or judicial relief, to attack and reduce the current veterans' claims backlog and make claims processing more efficient."

I was asked to chair that Task Force, although I had had no prior experience with VA or with claims processing. However, the Secretary appointed to the Task Force a group of individuals who were extremely knowledgeable and very motivated. In October 2001, we reported out.

There had been many such reports over the years, each with a larger scope; but ours was focused on what could be done-soon and under the purview of the Secretary—without asking Congress to revisit laws or opinions.

The thrust of our recommendations was to improve the efficiency and effectiveness of VBA claims processing. Accountability and integrity were to be absolute. But the engine was uniformity of organization, application, and process. The Task Force was convinced that each of the 57 regional offices operated in ways unique only to that individual office. The Task Force essentially dictated the internal organization of all offices, the IT applications to be used by all, and the standard business processes to be followed in adjudicating veterans' claims. This revised, consistent operational structure is now known as the Claims Processing Improvement (CPI) Model. Additionally, we specifically increased the oversight from headquarters and in the field, and we established measurable goals for which all offices are accountable.

The Task Force also initiated one of the most important and quick-response recommendations, the establishment of a "Tiger Team" in Cleveland, Ohio, whose only task was to address claims which were over 1-year-old, from veterans over 70 years of age. This specialized team has also assisted with our most difficult cases, and continues to fulfill a valuable role.

A primary goal we established, as we made major changes in VBA, was to increase productivity. We did that in somewhat dramatic fashion. In the year 2001, we had completed claims at the rate of 41,000 per month across the country. Last year we produced 63,000 per month. There were many who said we sacrificed quality. That is incorrect; quality improved about 6 percentage points. It is now 86 (plus) percent.

In February 2002, the number of pending claims in our inventory (frequently referred to as the "backlog") reached 432,000. Veterans were waiting 233 days on average for decision on their claims. Over the next nineteen months, through implementation of the CPI Model throughout the entire VBA field organization, we reduced the inventory to 253,000 by September 2003. Even more important, we reduced the time to provide veterans with decisions on their claims to 156 days.

That same month a judicial opinion (PVA v. Secretary of Veterans' Affairs) was rendered which stated that we could make no negative decision on any claim issue for at least one year from the date we notify the claimant as to what evidence is needed to support the claim. Three months later, in December, the Congress put corrective language into effect. By that time the inventory reached 352,000.

Another factor that has to date prevented us from reducing the inventory much further is the increasing number of disability claims received each year (674,000 in 2001; 771,000 in 2004; over 800,000 projected to be received in 2005).

A further complicating factor in our process is the number of disabilities (referred to as claims' "issues") veterans are now presenting in each of their claims. Prior to a decade or so ago, VBA estimated there were 2.5 issues per claim. Today we are seeing higher numbers of issues-in many cases, over 10 issues per claim.

Appeals of claims have also measured slightly more than one would expect for the large increase in decisions. That rate too has peaked and is coming back down.

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