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Mr. Chairman and Members of the Subcommittee:
I am pleased to appear before you to present the views of the more than one million members of the Disabled American Veterans (DAV) and its Women's Auxiliary on critical issues facing the Department of Veterans Affairs (VA). Many challenges confront VA today, and we appreciate the opportunity to discuss them with you.
One of those challenges is the institution of appropriate measures to address the unique problems of our Persian Gulf War veterans. Mr. Chairman, you have already devoted a great deal of attention to that effort, and we especially want to take this opportunity to express our appreciation and commend you for your leadership on that issue.
In many ways, VA is an agency in crisis. While some of the problems are complex and difficult to overcome, others are susceptible to relatively straightforward practical solutions, but have been neglected for various reasons. Whether simple or complex, the problems and their causes, in most instances, are well defined, but the remedies are either held hostage by the politics of the Federal budget or depend on the will of VA management to take decisive action.
Unquestionably, insufficient funding must bear a major share of the blame for the current sad state of veterans' programs. Regrettably, as obvious as it is thatny of VA's woes are directly or indirectly consequent to degradation from years of inadequate resources, the Administration's budget for FY 2000 provides no relief. Indeed, the recommended funding for health care is so insufficient that it only pushes VA closer to the precipice. That reality has become undeniable. While they are not unanimous in their assessments of the extent of the shortfall, your colleagues on the Veterans' Affairs Committee recognize the problem well.
For medical care, the Administration has requested budget authority of $18.1 billion, which includes $17.306 billion in appropriations and $749 million from projected insurance collections for the treatment of nonservice-connected conditions. The requested appropriation is the same as last year, in accordance with the President's 5-year budget plan that calls for no increase for medical care.
The Independent Budget (IB), an annual alternative assessment by the DAV, AMVETS, Paralyzed Veterans of America (PVA), and Veterans of Foreign Wars (VFW), has calculated the deficiency as $3 billion. Regardless of the dollar amount of the inadequacy, the impact in practical terms is shocking, partly attributable to the immediate effects of the budget and partly because of the cumulative effects of past budgets that did not provide the resources necessary to maintain the system at current service levels. For well over a decade, VA has been faced with the dilemma of ever-increasing demand for medical care and perennially inadequate budgets.
In a memorandum to Veterans Affairs Secretary Togo D. West, Jr., VA Under Secretary for Health, Dr. Kenneth W. Kizer, said the VA faces "the very real prospect of...mandatory employee furloughs, severe curtailment of services or elimination of programs, and possible unnecessary facility closures." During a February 24, 1999, hearing before the Subcommittee on Health of the House Veterans' Affairs Committee on the FY 2000 VA budget, the director of one of the Veterans Integrated Service Networks (VISNs) indicated that furloughs would have to be considered as well as the closure of as many as three facilities within his network if the budget is not increased. Hospital directors privately indicate that they will have to choose between a range of drastic measures if they are required to operate within the constraints of the proposed budget:
- disenroll and discontinue health care for thousands of sick, disabled, and elderly veterans who are currently enrolled for VA medical care and depend on it as their sole source of treatment - eliminate entire primary care teams
- terminate or furlough thousands of VA medical care employees across the country
- close entire VA medical care facilities
- reduce or discontinue inpatient nursing care
- shut down hospice care units
- discontinue kidney dialysis for service-connected and other eligible veterans
VA's health care system simply cannot continue to fulfill its mission and obligation to meet the health care needs of our Nation's veterans without an infusion of additional funding to save it from collapse. Members from both the majority and minority in the House Veterans' Affairs Committee are openly calling this budget plan a "house of cards" because it promises expanded services and treatment for more veterans without any request for increased funding to cover the costs of that care. The Administration's plan also relies on optimistic projections of collections from insurers for health care funding. However, VA has historically fallen short of projections in its collections from private insurers. VA has never met its targets for third-party collections--a fact Dr. Garthwaite, VA's Deputy Under Secretary for Health, acknowledged in a April 24, 1999, heating before the Health Subcommittee of the House Veterans' Affairs Committee. An external review reflected the following: "In Fiscal Year 1996, VHA sought recovery of about $1.6 billion of its costs but only recovered 35% of the billed amount, or $563 million. Not only was this a low dollar amount, it also represented a decrease of more that 5% under the previous year's collections."l The report went on to note that, in FY 1997, the MCCR recoveries were $524 million and in FY 1998 to $598 million. This year's target of $625 million is unrealistic. Under the current rate of collections, VA is not likely to achieve this year's level, nor will it achieve the targeted level of $749 million for FY 2000. Under the best case scenario, that is, a collection level based on the successful ratio of 1996, a cost of 34 cents for every dollar collected, VA would be $189 million short of its goal for FY 2000.
The perpetual volatility in the health care marketplace has made it more and more difficult for VA to make its collection quota. It is relatively easy to bill an insurer, but as VA's own numbers show, it is more difficult to collect. This is because a number of factors come into play. Currently, 85% of all insured Americans are under some form of managed care, and few insurers recognize VA as a network provider eligible for reimbursement. Additionally, the shift from inpatient to outpatient care continues to make collections more difficult. Because of the lower reimbursement rate for outpatient visits, VA must collect third-party reimbursement on approximately 20 outpatient bills to produce recoveries equivalent to one inpatient bill. VA's billing system also exacerbates the collection problem.

Although VA is working to change its antiquated billing system, many insurers will continue to deny claims if the claims are not based on actual charges. VA, however, continues to bill according to average costs.
It is important to note that there is no longer any appropriation to guarantee to offset VA collection shortages. If the money is not collected, patients cannot be treated. VA is relying on collection to support its new workload, an expected increase of 54,000 patients in FY 2000. The question that must be asked is where is VA going to get the money to treat these new veterans when it is already hard pressed to take care of its current workload? VA already has a large number of veterans enrolled for medical care that it cannot treat because of limited staff and resources. In addition to this "unmet need," VA is already forced to ration health care among sick veterans to the point that only the most severely ill are hospitalized and others with urgent medical needs wait months for clinic appointments.
To meet budget constraints, VA plans to reduce its staffing level by 7,830 more employees in FY 2000 alone. Such reduction in staff will necessarily result in a reduction in the critical staff to patient ratio. This is particularly troubling because studies have shown a direct correlation between quality of care and patient staffing levels.
The State Nursing Home Grant program is projected to be cut by 55% under the Administration's budget. This is truly a disregard for the Private Ryan's of World War II. Currently, $1.3 billion is needed to fund planned state home construction projects. However, VA will be able to provide only $40 million in grants or less than 3% of the current state need.
VA plans to increase outpatient care by $587 million; this is almost a dollar-for-dollar shift from savings generated by reductions in inpatient care. Although we strongly support the expanded use of outpatient care, it appears that VA is making this shift without the necessary capital investment in such basics as supplies and equipment. In the FY 2000 budget, equipment purchases are reduced by 27% and land and structures by 37%. How can VA adequately support the addition of 89 new outpatient clinics without the necessary investment in the equipment, supplies, structures, and staff? This is another example of attempting to do a lot more with even less than before. We are very concerned that the Administration's Patient's Bill of Rights excludes some veterans from having access to emergency health care. The Administration's FY 2000 budget discriminates within the veteran population by stating that only compensably disabled veterans should have access to emergency health care, even if your only health care provider is the VA. There are approximately 3.1 million veterans who use VA services. Under this proposal only 940,000 veterans will have emergency services eligibility.
It is ironic that nearly one year ago, the President signed an executive order requiring Medicare, Medicaid, Department of Defense (DOD), the Federal Employees Health Plan, and, we thought the VA, to provide emergency services to all of their enrollees or eligible beneficiaries. This does not appear to be the case. Under this budget, the Administration has excluded 2.1 million veterans and said that they cannot have the same level of services as the other groups. The provision of emergency services is an issue of parity. Through a policy of exclusion from a service considered basic in any health plan, the Administration has put veterans last, not first.
It has been our hope that the VA research budget would parallel the increases projected for the National Institutes of Health (NIH) budget. Over the next 5 years, the NIH budget is expected to double. It is noteworthy that while the research projects are expected to stay at the FY 99 level of slightly over 2,100 projects, there will be almost 100 fewer people to support the various research initiatives. According to the VA, the loss of 98 employees will make the program more efficient. This is a particularly troubling recommendation because not only will there be fewer researchers engaged in actual research, but there will also be significantly less support coming from the medical care budget to support research activities, such as adequate lab facilities, equipment, and supplies. To make a bad story worse, researchers, because of increased patient care responsibilities, have less time to devote to important research efforts to improve the quality of life for veterans. Under the 30-20- 10 formula, there are fewer doctors and more patients, consequently the VA research effort has become a casualty of trying to do more with less.
The prosthetic budget has been frozen at this year's level of $319 million. This is $56 million less than the IB recommendation. The budget inadequacies will cause the rationing of prosthetics and durable goods or cause substantial delay in receiving them. During a February 11, 1999, hearing before the House Veterans' Affairs Committee, VISN 10 Director Laura Miller testified that she was facing a $5 million shortfall within the prosthetics account. We are hearing of unacceptable delays veterans experience in obtaining prosthetics. Also, current VA prosthetics policy, based on budget constraints, forces veterans to obtain prosthetics only from vendors willing to provide them at 14% below the amount Medicare will pay for the same prosthetic device or service. We fear that this practice will result in inferior service or quality in the artificial limbs and other prosthetic devices provided to veterans. It is shameful that our Nation's disabled veterans are not provided services at least equal to Medicare beneficiaries.
The budget reflects that one of the most critical issues facing the VA is hepatitis C. The VA estimates that an additional $135.7 million in new health care spending will occur in FY 2000. We applaud the Administration for taking the initial steps in identifying and treating this disease; however, the budget does not provide new funding for the testing and treatment of hepatitis C.
Today, I have only touched on the major health care failings of the FY 2000 budget. I believe that there are countless other examples of the Administration's total lack of commitment to those who served this country in the Armed Forces. The huge staff reductions, coupled with inadequate resources, will cripple the VA's ability to provide high quality services to veterans. It is hard to understand in light of today's robust economy with a large surplus, that this Administration could have such a callous disregard for those who served.
We owe our very existence as a nation to our veterans, and their programs should always be a priority for Federal funding. However, our Nation's veterans are at risk because of the deterioration of the VA health care system due to traderfunding. We are concerned that VA will be unable to avert disaster for much longer under such perilous circumstances.
Quality is achieved when health care providers are given the freedom and resources to practice the most effective and scientifically proven medicine available. It should also be based on agreement about standards of care and the reduction of variations in practice. An integral part of health care requires the creation of a system that is patient focused coupled with procedures that ensure timely access to appropriate care.
DAV is currently conducting an independent survey of VA medical facilities. We have asked our 189 hospital service coordinators (HSCs) stationed throughout the Nation to provide us with a monthly assessment of appointment scheduling times, scheduled appointment waiting times, and staffing ratios. The survey indicates that the VA's health care system is suffering from the long-term effects of economic asphyxiation. The survey shows veterans are having to wait longer to see a VA health care professional for services, some must wait for months for a specialty clinic appointment. The delays experienced by veterans are just one indication of how stagnant funding and an increased demand for services are stressing the VA health care system.

We submit that, to fulfill its mission of providing quality, effective medical care to the Nation's veterans, the VA health delivery system must encompass, as a minimum:
- Assurance that health care quality is maintained and protected within the VA health care system;
- Entitlement to guaranteed access to a full continuum of care from preventive through hospice;
- Guaranteed funding through adequate appropriations;
- Fair and equitable distribution of resources in treating the greatest number of veterans having priority to VA health care;
- Provision of clinically necessary medications, supplies, prosthetic devices and other over-the-counter supplies;
- Preservation of VA's mission and role as a provider of special services in areas such as blindness, amputation, aging, mental health, and long-term care;
- Maintain the integrity of an independent health care delivery system as representing the primary responsible entity for the delivery of health care services to entitled veterans;
- Maintain an adequate workforce of highly skilled and trained health care providers who are adequately compensated;
- Maintain a strong veteran-focused research program; and
- Third party reimbursements which includes Medicare Subvention that supplements and does not supplant Congressional appropriations.
Additionally, given the new challenge that a potential hepatitis C epidemic presents, there must be a measurable and comprehensive process to identify, treat, and educate all veterans who may be at risk for this disease. A registry of infected veterans would permit VA to track outcomes and keep veterans notified of new developments. VA must monitor its facilities to ensure that they follow appropriate treatment modalities. VETERANS EQUITABLE RESOURCE ALLOCATION (VERA) FUNDING
An example of how cost is negatively impacting the delivery of health care is in mental health services. It is our belief that VERA distorts the clinical strategic planning process for "high cost patients." VERA reimburses facilities at a rate of approximately $38,000 per year per special category veteran (spinal cord injury; serious mental illness; amputation and blind rehabilitation). For the seriously mentally ill (SMI) veteran who is in a long-term care bed, which costs $100,000 or more annually, the facility administrators view the maintenance of these beds as an intrinsically losing proposition. It is not possible to turn over the beds three times a year, which is the VERA break even point, for those veterans who truly need long-term care. Therefore, there is a very strong incentive to close such beds. There are many patients in those beds who really should be in the community, and this is certainly true throughout the United States.
Clinicians may or may not be making all appropriate efforts to develop community support programs for these veterans, but the decisions about the very existence of long-term psychiatric beds are being made by administrators who are driven by the strong fiscal considerations inherent in a capitation model.
There are no known bed-sizing methodologies for long-term SMI needs, so it becomes impossible to point to objective evidence that there are too few beds. We believe, clinical assessment of such needs has become secondary to fiscal assessment and that VERA has caused a rapid deinstitutionalization of SMI veterans. There has been no systematic effort to assess if this is done well or poorly. It may vary from place to place. We hope that VA is not contributing to the well-known trans-institutionalization from hospital to jails, or to homelessness, that some of state efforts have created. For instance, in California, the Los Angeles County jail is now the largest institution for individuals with schizophrenia in the country. Properly done, deinstitutionalization can, in certain cases, dramatically improve veterans' lives, but it requires understanding, timely planning, and reinvestment of a significant portion of inpatient resources into community support efforts. VHA has no idea what the current and near future impact really is. There is no ongoing assessment of reinvestment, and efforts to examine this have been resisted as promoting "special interests." VERA may force funding changes to occur faster than clinical changes can reasonably occur. This is particularly evident in the Northeast, which is being hit hard due to its distribution of long-term medical, nursing home and psychiatric beds. Even with clinical leadership committed to thoughtful and speedy return of institutionalized veterans to community settings, it still takes a significant period of time to do this safely. There is no apparent process in place to assess what the clinical impact is likely to be of staff reductions occurring before beds are actually closed. It is dangerous to push the system to change by decreasing the staffing first.
The Commission of Servicemembers and Veterans Transition Assistance made recommendations to combine VA and DoD health care funding, management, and delivery under one system. Obviously, veterans would not be well served by DoD because their needs would be secondary to weapons systems and institutional priorities of the defense establishment. If the recommendation envisions VA providing DoD's health care services, we note that the VA's health care delivery system is already suffering from years of inadequate resources and has difficulty just meeting the needs of veterans.
The Commission's most objectionable recommendation was that VA should be able to charge veterans' health insurers for treatment of service- connected disabilities, thus recommending that the Government shift its obligation to the private sector. Throughout our Nation's history, the costs of war and national defense have been the responsibility of the Federal Government. We cannot now, as a matter of Government convenience, merely abandon what is clearly a Government obligation. This would represent a departure from our core national values and is an insult to those who bear the risks and burdens of our national defense.
Another important issue affecting medical care is Medicare Subvention. DAV has historically called for the enactment of legislation for Medicare Reimbursement (Subvention) for the treatment of non-core group (category C) Medicare-eligible veterans.
During the 105th Congress, Representatives William M. Thomas (R-CA) and Bob Stump (R-AZ), introduced H.R. 3828 the "Veterans Medicare Access Improvement Act of 1998."
As we noted at the time, we are concerned about any legislative proposal that would shift responsibility for service-connected veterans' health care away from VA, the agency dedicated to veterans programs only, to another agency that does not have veterans interests as its priority.
The Federal Government, through the VA, must always maintain its fiduciary responsibility and moral obligation to provide and maintain a health care delivery system dedicated to meeting the special needs of this Nation's service-connected disabled veterans. Therefore, enactment of legislation that diminishes and potentially eliminates that responsibility by allowing Medicare to pay for the treatment of service-connected conditions is highly objectionable to DAV.
Mr. Chairman, your Subcommittee has done more than any other Committee or Subcommittee in the House or Senate to not only unravel the mysteries surrounding Gulf War illnesses----etiology, treatments, and cure--but to keep our Government from reneging on its promise to care for those veterans who suffer from illness, injury, or disability as a result of their service to their country and to continue its research projects. The members of this Subcommittee have heard first hand from many Gulf War veterans about the problems they experience in accessing VA health care, receiving adequate care, and receiving earned benefits. Therefore, I will not belabor these points other than to say that VA and DoD must do better providing for the needs of sick and disabled Gulf War veterans.
Recently, the DAV participated in a research planning conference conducted by the Centers for Disease Control and Prevention in Atlanta, Georgia.

We were very encouraged by the words of Representative Bernard Sanders (I-VT) when he told the researchers to do more than merely exchange ideas at the Conference and charged them to return home to find answers and solutions to the mysteries surrounding Gulf War illnesses. He encouraged them to look at all possible avenues, including alternative methods of treatment. DAV strongly supports adequate funding for research projects to examine the etiology, treatment and cure of the illnesses affecting Gulf War veterans.
Additionally, we note with concern that legislation, Public Law 105- 227, signed into law at the end of the 105th Congress, authorizing the Secretary of Veterans Affairs to enter into agreement with the National Academy of Sciences (NAS) to investigate toxins and illnesses associated with service in the Persian Gulf theater, has not been implemented. This agreement between the VA and the NAS will help the Secretary establish, for the first time, presumptions of service connection for any diagnosed illnesses determined by NAS to have been incurred in or aggravated by active duty in Southwest Asia during the Persian Gulf War. We are concerned about the VA's delay in entering into this agreement in a timely fashion.
Gulf War veterans have waited too long to have their problems adequately addressed by VA, DoD, and other government agencies. Now is the time for VA to move forward with its statutory obligation under Public Law 105-227.
The effectiveness of benefits delivery is of primary importance to DAV, an organization whose more than one million members are service- connected disabled veterans. Today, we have more than 25 million living veterans and approximately 44 million family members of living and deceased veterans. Our citizens highly value patriotic service in the Nation's Armed Forces. The depth of their appreciation is revealed in part by the comprehensive benefit programs created to meet the special needs of veterans consequent to that service. To meet this foremost national obligation, we must place the highest priority upon ensuring that these benefits are administered in a way that most effectively fulfills their beneficial purposes. The measure of how well we deliver on our solemn promises is how well we provide these services to our veterans, our most deserving citizens. Certainly, an effective delivery system is essential if these benefits are to serve their intended goals. Undue delay and inaccuracy in eligibility determinations defeat the beneficial purposes of even the most carefully crafted programs. Overall, VBA and many of its dedicated employees dispense a variety of benefits to veterans everyday in a highly professional and effective manner. Unfortunately, for a variety of reasons some of which I will discuss later--VBA is, at the same time, in some areas falling short in meeting the Nation's commitments to our veterans.
One of VA's three administrations, VBA is responsible for operating the nonmedical benefit programs. The array of benefits and services are designed to address the effects of service-connected disabilities and death, the needs of indigent disabled wartime veterans and their survivors, the various lost opportunities and disadvantages that result from the interruption of civilian life to perform military service, the insurability of veterans against death and disability, and the burial costs of veterans. VBA furnishes these benefits and services to veterans and their eligible family members or survivors through a nationwide system of field offices. Program direction and control is performed at VA's Central Office (VACO) here in Washington, D.C. Form follows function in VBA's organizational structure. Because the major programs, or "product lines," naturally constitute the fundamental elements of this administration, VBA's organizational structure is built around the operational requirements of these benefit programs. They are (1) compensation, pensions, and related ancillary benefits, (2) vocational rehabilitation, (3) education programs, (4) housing programs, and (5) insurance programs. These business lines are represented in VACO by Compensation and Pension Service (C&P), Vocational Rehabilitation and Counseling Service (VR&C), Education Service, and Loan Guaranty Service. VA's Insurance Service administers its insurance programs at the Insurance Center, collocated with VA's regional office in Philadelphia, Pennsylvania. Until recently, all but Insurance Service had counterpart organizations in essentially all of VA's regional offices. With completion of VA's consolidation initiatives, only C& P and VR& C will be mirrored by full-service operations in the various regional offices. VBA has already consolidated processing of education benefit claims to four Regional Processing Offices (RPOs), housed in VA's Atlanta, Buffalo, Muskogee, and St. Louis regional offices. Loan Guaranty Service is consolidating most of its field operations to nine Regional Loan Centers (RLCs). The education and loan guaranty programs will retain some presence in the regional offices to perform necessary local activities. VBA has recently emulated the Veterans Health Administration's creation of"Veterans Integrated Service Networks" (VISNs) by grouping VBA field offices into nine "Service Delivery Networks" (SDNs). While not an intermediate level of management for the substantive policy aspects of benefit programs, the facilities within a SDN cooperatively manage resources and service delivery to veterans in the geographic area of the SDN.
VBA is headed by VA's Under Secretary for Benefits. In addition to its field office operations and line management, VBA includes various associated staff functions. With its more than 11,000 employees, it is a large, geographically-dispersed organization, with responsibility for diverse benefits and laws.
Insofar as VBA can achieve economies of scale by the consolidation of education claims processing and home loan guaranties without diminishing the level or quality of services to claimants, its streamlining of operations is appropriate. To the extent realignments or consolidations achieve cost savings without tradeoffs in levels of service, they are justified. However, compensation and pension, and vocational rehabilitation and counseling, have innate differences that require direct and local personal service. Similarly, VBA must retain at all of its field operations personnel qualified to provide information and claims filing assistance for all of its benefits. VA's strategic plan appears to recognize the advantages and necessity of personal service because it envisions increasing the number of access points for veterans seeking benefits or claims assistance and puts new and increased emphasis on customer service. VA plans to establish satellite offices with out-based decisionmakers and is in the process of expanding its presence at military separation sites, where it accepts and processes claims for separating servicemembers. Information on veterans' benefits will be more widely available through automated telephone systems and the Internet. Even more than evidenced by the structural changes of consolidation of some functions and the expansion of others, VBA is an organization in the midst of extensive change as it straggles to improve its performance. After years of doing business by essentially the same methods, widespread customer dissatisfaction, intensified outside scrutiny, and consequent revelations of inefficiency have forced initiation of comprehensive reforms. Nowhere is the source of claimants' frustrations greater, and the proportions of that inefficiency and the VA response to it more evident, than in the compensation and pension claims processes. After it discovered startling deficiencies through an in-depth and candid self-examination, C&P Service arrived at some sobering conclusions about its methods and its proficiency. In response, it developed a multifaceted plan to reengineer its business processes. The success of this Business Process Reengineering (BPR) plan depends heavily on the accomplishment of all of its elements because they are, to a great extent, interdependent.
The core problems VA identified through its study, were already perceived and well understood by many in the veterans' community. We knew, for example, that quality was the major problem one that immediately adversely impacted on VA claimants who were erroneously deprived of benefits and one that seriously degraded VA's efficiency, and timeliness, by requiring repeat work to properly resolve claims. Several factors were responsible for this lack of quality, most notably: an institutional culture that did not value, or at least did not stress, quality as a foremost goal; management emphasis on quantity over quality, that is, a focus on production and artificial measures of outputs, known as "end products"; quality control criteria that did not accurately reflect accuracy of decisionmaking, adherence to law, and observance of established claims processing procedures; and a lack of accountability for, and mechanisms to enforce, quality. Incidentally, inadequate resources also must be blamed for contributing to the circumstances and environment that led to this situation, and inadequate resources have impeded C&P's ability to implement reforms and overcome the problems.
The solutions set forth in the BPR plan follow logically from the identified deficiencies. All elements of the plan are geared toward the objective of prompt, accurate, courteous, and efficient delivery of benefits.
A redesigned claims process is the centerpiece of the BPR plan. The new integrated claims adjudication procedure replaces a segmented, compartmentalized structure.

The longstanding "assembly line" system is not conducive to the type of personalized service and accountability for quality envisioned in the BPR plan. Decisionmakers have little or no direct interaction with claimants, and each employee in the sequential process is concerned only with his or her task and not responsible for the completion of the adjudication or quality of the whole product. Under the redesigned process, a more highly skilled and better trained team performs all activities necessary to complete the adjudication. The team works more closely with the claimant and representative and has ownership of the claim and accountability for its proper handling and disposition. A claimant who disagrees with the decision can have a "second look" by a decision review officer (DRO) who has the authority to change the decision on the existing evidence or upon consideration of new testimonial or documentary evidence. Should the claimant continue to disagree, the DRO will have ensured that the record is properly and completely developed and that the case is ready for review by the Board of Veterans' Appeals (BVA). Thus, this new system is designed to lead to the discovery of all pertinent evidence, enhance understanding between the claimant and VA, improve quality of the service and accuracy of the decision, and dispose of the claim or allow it to proceed to appellate review in much less time than the previous procedure. To make these adjudicators and DROs more skilled and proficient than adjudicators have been, the plan includes better information technology to assist in claims management and decisionmaking, more extensive training, and certification by testing and demonstrated competence. Quality will be measured more thoroughly.
As acknowledged in Volume 4, "General Operating Expenses," page 2-20, of VA's budget submission for fiscal year (FY) 2000, we cannot expect immediate results from this plan, however. VA having already lost so much ground in its efforts to get control over the large pending workload, it is important to understand that, because of the complexity inherent in compensation and pension determinations, correcting the systemic problems in VA's claims adjudication system is not susceptible to a quick remedy. Unlike most of the other benefit determinations, which involve application of simple, straightforward eligibility criteria, decisions on disability causation and degree require experienced and well-informed judgments that are cognizant of, and properly take into consideration, the many nuances of medical conditions and their implications in the individual cases. Quality cannot be improved and production increased until current decisionmakers are properly indoctrinated and retrained along with the infusion and proper training of substantial numbers of new claims adjudicators. In the short term, that may very well mean that we must tolerate protracted claims processing times, as well as repeat work.
Indeed, VA's timeliness has declined even further recently. VA statistics for the past seven years show that, after increasing from 3,405,413 claims in FY 1992 to 3,450,547 in FY 1993, the volume of C&P claims received has declined each year since FY 1994. In FY 1994, VA received 3,360,654 C&P claims. That number dropped to 2,279,009 in FY 1998. During the same period, the completed workload had decreased, however. The completed workload increased from 3,259,021 claims in FY 1992 to 3,440,154 in FY 1993, but has shown a steady decline in every year since, except FY 1996, and was down to 2,238,221 claims completed in FY 1998. Consequently, the pending workload is again on the rise after having declined for five successive years between FY 1992 and FY 1996. VA reduced its pending C&P workload from 538,135 claims in FY 1992 to 342,683 in FY 1996. Pending claims increased to 398,257 at the end of FY 1997 and 445,582 at the end of FY 1998. Claims are pending for longer times as a result. The percentage of claims pending for more than six months rose from 20% in FY 1996 to 33% in FY 1998. The percentage of claims pending for more than 1 year rose from 11.1% in FY 1996 to 16.4% in FY 1998. The average age of all C&P claims rose from 60 days in FY 1996 to 88 days in FY 1998. Of these, compensation claims requiting rating action took even longer. The average age of original compensation claims grew from 92 days in FY 1996 to 123 days in FY 1998. The average age of reopened compensation claims grew from 83 days in FY 1996 to 128 days in FY 1998. The average number of days to process a claim grew significantly during FY 1998. For original compensation claims, the average grew from 133 days in FY 1997 to 168 days in FY 1998. In January 1999, that average had grown to 205 days. For reopened compensation claims, the average days to process grew from 101 days in FY 1997 to 138 in FY 1998. That average had grown to 170 days in January 1999. These averages also significantly increased for dependency and indemnity compensation (DIC) and pension claims.
Within the C&P claims pending in the regional offices, the number and percentage of cases in an appellate status also continue to grow. At the end of FY 1996, of the 342,683 claims pending, 74,573, or 22%, were in appeals status. At the end of FY 1998, of the 445,582 claims pending, 102,834, or 23%, were in appeals status.
VA projects the number of C&P claims will increase from 2,279,009 in FY 1998 to 2,311,870 in FY 1999. That makes all of these worsening statistics look even more troublesome, despite VA's projection that it will decrease its pending C&P workload from the 445,582 claims pending at the end of FY 1998 to 410,000 by the end of FY 1999.
While we already see the effects of the new quality measures, we do not see significant changes in the quality itself, and perhaps will not until new standards are imposed and enforced. Quality in claims development and decisions will determine the amount of repeat work and percentage of cases in appellate status.
In 1997, VA replaced its Quality Assurance program with its newly developed Systemic Technical Accuracy Review (STAR) program. An initial sample review under STAR, completed in December 1997, revealed a 36% error rate, or 64% accuracy, in rating actions. In November 1998, the accuracy for rating actions was 71.6% in the three SDNs for which the STAR review has been completed. VA's goal for FY 1999 is 75% accuracy. While these accuracy rates might appear shocking, we are encouraged that they represent an effort to be more objective and honest about quality. We believe they are evidence that C&P is working in earnest to assess and correct its problems. We would be much more disturbed if C&P continued to report, as it once consistently did, accuracy of 97% or higher, which was simply not a true measure of quality.
While we recognize that improvements in quality will, for the most part, be delayed until VA implements its training and other initiatives to raise the proficiency of its adjudicators, we believe VA could do more to improve quality now. Part of the quality problem is the institutional mindset and culture of indifference to quality and accuracy that is so widespread in VA field offices. VBA has communicated to its regional office management the depth of the problems, the urgency of the situation, and the change that must take place. We do not believe that message is being communicated, or adequately communicated, to decisionmakers, however. They seem oblivious to VBA's new vision and the necessity to properly apply all pertinent law and strive for technical accuracy. Arbitrariness and recalcitrance remain. Often they seem to lack knowledge or understanding of the law. What is worse, however, is their unwillingness to apply it when brought to their attention by our representatives.
We believe VBA will be unable to effectively enforce accountability by its adjudicators until C&P Service has line authority over them. In its August 1997 report to Congress, the National Academy of Public Administration (NAPA) attributed much of VBA's problems to unclear lines of accountability. NAPA found that a sense of powerlessness to take action permeates VBA. In turn, field personnel perceived VBA's Central Office staff as incapable of taking firm action. NAPA said that a number of executives interviewed by its study team indicated VBA executives have difficulty giving each other bad news or disciplining one another. NAPA concluded that, until VBA is willing to deal with this conflict and modify its decentralized management style, it will not be able to effectively analyze the variations in performance and operations existing among its regional offices. Neither will it be able to achieve a more uniform level of performance. Regarding C&P especially, NAPA concluded that the C&P director's lack of influence or authority over its field office employees would greatly hamper any efforts to implement reforms and real accountability. NAPA recommended that the Under Secretary for Benefits strengthen C&P influence over field operations and close the gaps in accountability. Until VBA firmly resolves to take the action necessary to bring about a change in attitudes and an end to the intransigence, its other efforts will likely fail to realize their full potential. Although all of VBA is challenged by the necessity to provide better service with fewer resources, the other services in VBA have not faced difficulties of the magnitude and complexity of those faced by C&P Service. Each of the other services have performed in-depth selfexamination as part of the strategic planning process, however. That self-examination and formulation of strategies to meet program missions and goals is an ongoing process, of course. While improvements are certainly possible and necessary, overall, we believe VR&C, Loan Guaranty Service, Education Service, and Insurance Service are doing a commendable job for the Nation's veterans and taxpayers. We continue to watch the general trend toward privatization of many of their activities with some hesitation, however. Lenders and educational institutions can and perhaps should perform a variety of functions such as underwriting and certification, but the nature and amount of responsibilities the Government can properly delegate to private concerns are limited. Eligibility determinations under VA laws must remain a responsibility of the Government. Veterans must continue to have meaningful recourse for erroneous actions and poor service. Appeals and other remedies are available when VA makes mistakes or provides poor service, but veterans and their representatives do not have the same remedies or courses of action when the matter in question is the responsibility of a private entity.
We hope that our statement is helpful to you. We appreciate the Subcommittee's interest in these issues and the opportunity to present our views.
1. Coopers & Lybrand L.L.P., VA MCCR National Study: Cost Assessment and Best Practices 1-1 (Apr. 21, 1998)

LOAD-DATE: March 19, 1999

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