VA Disability Compensation

Disability Ratings May Not Reflect Veterans' Economic Losses Gao ID: HEHS-97-9 January 7, 1997

The disability ratings used by the Department of Veterans Affairs (VA) still rely on judgments made by doctors and lawyers in 1945 about the effect of service-connected conditions on an average individual's ability to do jobs requiring manual or physical labor. During fiscal year 1995, veterans' monthly benefit ranged from $89 to about $1,800, depending on the degree of disability. Dramatic changes have occurred in the labor market and in society since 1945, and some of the ratings in the VA schedule likely do not reflect the economic loss experienced by veterans today. Basing disability ratings at least in part on actual earnings loss rather than solely on judgments of loss in functional capacity would help to ensure that veterans are compensated according to their economic losses and that compensation money is distributed equitably.

GAO found that: (1) the disability ratings in VA's current schedule are still primarily based on physicians' and lawyers' judgments made in 1945 about the effect service-connected conditions had on the average individual's ability to perform jobs requiring manual or physical labor; (2) although the ratings in the schedule have not changed substantially since 1945, dramatic changes have occurred in the labor market and in society since then; (3) the results of an economic validation of the schedule conducted in the late 1960s indicated that ratings for many conditions did not reflect the actual average loss in earnings associated with them; (4) it is likely that some of the ratings in the schedule do not reflect the economic loss experienced by veterans today; (5) the schedule may not equitably distribute compensation funds among disabled veterans; (6) VA has done little since 1945 to help ensure that disability ratings correspond to disabled veterans' average loss in earning capacity; (7) despite the results of the economic validation study, VA's efforts to maintain the schedule have concentrated on improving the appropriateness, clarity, and accuracy of the descriptions of the conditions in the schedule rather than on attempting to ensure that the schedule's assessments of the economic loss associated with these conditions are accurate; (8) basing disability ratings at least in part on actual earnings loss rather than solely on judgments of loss in functional capacity would help to ensure that veterans are compensated to an extent commensurate with their economic losses and that compensation funds are distributed equitably; (9) GAO's work demonstrates that there are generally accepted and widely used approaches to statistically estimate the effect of specific service-connected conditions on veterans' average earnings; (10) these estimates could be used to set disability ratings in the schedule that are appropriate in today's socioeconomic environment; and (11) it could cost between $5 million and $10 million to collect the data that produce these estimates, a small fraction of the over $11 billion VA paid in disability compensation to veterans in fiscal year 1995.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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