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Michael Walcoff

Michael Walcoff, U.S. Department of Veterans Affairs, Deputy Under Secretary for Benefits, Veterans Benefits Administration

Mr. Chairman and Members of the Subcommittee:

Thank you for providing me the opportunity to appear before you today to discuss the Veterans Benefits Administration’s (VBA) disability claims processing system and our efforts to improve processing and timeliness.  I am pleased to be accompanied by Mr. Bradley G. Mayes, VBA’s Director of the Compensation and Pension Service, and Mr. Scott Cragg, Executive Director and Program Manager for the Virtual Lifetime Electronic Record.

My testimony will also focus on defining the backlog, improvement initiatives, our information technology modernization strategy, business transformation efforts, the Joint VA/DoD Virtual Lifetime Electronic Record, and the implementation of Public Law 110-389.

Defining Backlog

A number of figures have been used to define the backlog of compensation and pension (C&P) disability claims at VBA.  Before accepting any backlog figure, an explanation of the pending claims inventory at any given time should be considered.  I will describe this pending claims inventory, and then relate it to the VBA’s definition of backlog.

The VBA’s pending inventory includes all claims received, whether pending for just a few hours or as long as six months.  Completed claims are continuously removed from the inventory while newly received claims are added.  VBA maintains this pending inventory of claims, which are bundled into two categories:  rating workload and non-rating workload. 

The rating workload is composed of original and reopened claims for disability compensation and/or pension.  This workload is how VBA traditionally measures its claims inventory.  These claims are considered to be the core of our claims processing activity because they represent Veterans awaiting an entitlement decision for service connected disability compensation or non-service connected pension benefits.  At the end of May 2009, VBA’s rating-related inventory was 402,047 claims.  Of these, 267,093, or 66.4 percent, were reopened claims, which include claims for increased benefits, newly claimed disabilities for Veterans who have previously filed claims, or additional evidence submitted to reopen a previously denied claim.

Non-rating workload includes dependency adjustments on active compensation awards, income adjustments on pension awards, and eligibility determinations for ancillary benefits like auto, clothing, and special housing allowances.  At the end of May 2009, non-rating inventory was 220,891 claims.  This portion of VBA’s workload varies during the year due to the cyclical nature of the income and eligibility verification processes associated with pension workload.  During the second and third quarter of the fiscal year, it’s not unusual to see fluctuations in inventory up to 50,000 claims.

One major challenge in improving service delivery of compensation and pension benefits is the steady and sizeable increase in workload.  During FY08, VBA received 888,000 rating claims and 755,000 non-rating claims for a total of more than 1.6 million, or 4,501 per day. 

Through May 2009, rating-related claims received are up 13.5 percent during FY09 compared to the same period in FY08.  Despite a 9.3 percent increase in claims completed, the rating-related inventory has increased from 379,842 at the end of FY08 to 402,047 at the end of May 2009. 

Although the inventory of rating claims has increased by approximately 22,000 this year, we have made progress in improving the timeliness of our decisions.  During FY09, VBA has improved average days to complete on rating claims from 178.9 days at the end of FY08 to 161.8 days at the end of May 2009.  We have made similar progress in improving non-rating timeliness from 109.4 days at the end of FY08 to 88 days at the end of May 2009.  The combined FY09 timeliness for all rating and non-rating claims completed through May 2009 is 120.9 days. 

VBA’s entire inventory of pending disability claims is frequently – and incorrectly – referred to as the “claims backlog.”  While we currently have approximately 400,000 claims in our inventory, the majority of these claims are not “backlogged.”    The inventory is dynamic rather than static.  It includes all claims received, whether pending for just a few hours or as long as six months.  Completed claims are continuously removed from the inventory while new claims are added.  This year we are averaging over 80,000 new claims added to the inventory each month. 

VBA’s strategic goal for completing disability claims is 125 days.  At the end of FY08, there were 139,333 rating claims pending more than 125 days, or 36.7 percent of the pending inventory.  During FY09, VBA has made progress in reducing the number and percent of inventory pending greater than 125 days.  At the end of May 2009, rating 134,626 claims, or 33.5 percent of the inventory, were pending greater than 125 days.

Improvement Initiatives

VBA has aggressively hired across the nation since the second quarter of FY07 and has hired nearly 4,200 new employees since January 2007.  Because it takes at least two years for a new employee to become fully trained in all aspects of claims processing, we’re only now beginning to see the full impact of those employees hired at the outset of this initiative.  During FY09 to date (through May 2009), VBA has completed 9.3 percent more than the same period during FY08 and 19.8 percent more than the same period in FY07.  We believe our newly hired workforce will continue to make progress in delivering more decisions to Veterans.

In order to leverage the knowledge and experience of recently retired claims processors, VBA has hired back more than 90 recent retirees as rehired annuitants.  These rehired annuitants assist in completing rating decisions and training and mentoring new employees.

In September 2008, VBA partnered with Booz Allen Hamilton (BAH) to conduct a review of the rating-related claim development process to provide recommendations to improve the process with an emphasis on cycle time reduction.  During their study, BAH interviewed VBA leadership, conducted site visits to regional offices and met with front-line employees.  At the conclusion of their review, BAH recommended VBA apply Lean Six Sigma production practices to claims processing in order to facilitate claims movement, or flow, thereby reducing processing time.  We are in the process of establishing a pilot to examine BAH’s recommendations.

We are pleased with recent progress to address the backlog, but not satisfied with current performance and strive for new methods for improvement.

Information Technology Modernization

Not only is VBA working on process improvements to the claims processing system, we are also working on other changes as well.  With regard to our information technology modernization strategy, VBA is investing in the migration of VBA compensation and pension claims processing to a paperless environment.  We have successfully used imaging technology and computable data to support claims processing in our Insurance, Education, and Loan Guaranty programs for many years.  Initial pilot efforts in our Compensation and Pension business line demonstrated the feasibility of using this type of technology for these benefit programs as well.

At the core of our strategy is the implementation of a business model for Compensation and Pension processing that is less reliant on the acquisition and storage of paper documents.  Our comprehensive plan, the Paperless Delivery of Veterans Benefits Initiative, is envisioned to employ a variety of enhanced technologies to support end-to-end claims processing. 

In addition to imaging and computable data, we will incorporate enhanced electronic workflow capabilities, enterprise content and correspondence management services, and integration with our modernized payment system.  We are also exploring the utility of business-rules-engine software both for workflow management and to potentially support improved decision-making by claims processing personnel. 

VA contracted with Electronic Data Systems (EDS) to serve as the lead systems integrator (LSI) for this effort.  Fiscal year 2010 is our target year for release of the initial hardware and software in support of the large-scale expansion of the Paperless Initiative.  The LSI effort is focused on the design of the technology solution, which will support enhanced paperless claims processing capabilities across VA.  By committing to a paperless system, we will improve the efficiency and speed of claims processing.

Virtual Lifetime Electronic Record (VLER)

VA and the Department of Defense (DoD) also continue to work collaboratively to define the scope and strategy for the Virtual Lifetime Electronic Record (VLER).  Both Departments have agreed that the objective for VLER is to establish a coherent, lifetime electronic record that will capture Service member/Veteran information from accession into military service to interment, and include all information necessary to provide medical care, services, benefits, and compensation to the Veteran, eligible family members, or eligible beneficiaries.

VLER will enable VBA to have a consolidated view of Veterans’ data and leverage the exchange of accurate data from the authoritative source, in order to streamline claims processing.

Business Transformation Efforts

While the use of advanced technologies is critical to our service-delivery strategy, we must also address our business processes.  To that end, VBA developed strategic partnerships with two recognized experts in the field of organizational transformation.  MITRE Corporation, a manager of Federally Funded Research and Development Centers, has been supporting VBA on the VETSNET project since 2006.  MITRE is now actively providing strategic program management support, as well as support for the overall Paperless Initiative, addressing multiple areas of focus. 

Additionally, Booz Allen Hamilton (BAH) was recently engaged by VBA to provide business transformation services.  BAH is assisting VBA in business process re-engineering, organizational change management, workforce planning and organizational learning strategies to ensure that VBA is well-positioned to take best advantage of the technology solutions being developed. 

As another element of our comprehensive transformation strategy, VBA designated the VA Regional Office in Providence, Rhode Island, to serve as our Business Transformation Lab.  The Business Transformation Lab will serve as the focal point for convergence of process re-engineering and technology, assuring that service delivery is optimized and best practices are developed and deployed throughout VBA.

We recognize that, while technology is not the panacea for our claims-processing concerns, it is the hallmark of a forward-looking organization.   Our paperless strategy combines a business-focused transformation and re-engineering effort with enhanced technologies, to provide an overarching vision for improving service delivery to our nation’s Veterans.

Public Law 110-389

I appreciate the opportunity to discuss VA’s efforts in the implementation of Public Law 110-389.  I will discuss VA’s progress for each pertinent section of this law.

Section 101 amends Title 38, United States Code, Section 5103(a) to authorize the Secretary of Veterans Affairs to prescribe regulations on the content of the notice to be provided to claimants when they file claims with VA.  Currently, VA is drafting regulations according to the specified requirements listed in section 5103(a) and with the intent to make notification letters to our clients more understandable and useful.  Because of the legal complexities involved with the notification process and the potential impact on VA’s ability to reduce the pending inventory of claims in the future, VA continues to carefully draft this regulation. 

Section 104 requires VA to submit a report to Congress describing the progress of the Secretary in addressing the causes of variances in compensation payments for Veterans with service-connected disabilities.  A contract has been awarded to the Institute for Defense Analysis to conduct this assessment.  A workgroup has been established and is working closely with the contractor to ensure a proper analysis and report is completed by October 2009. 

Section 105 extends the temporary authority for the performance of medical disability examinations by contract physicians.  This amends section 704(c) of the Veterans Benefits Act of 2003 by extending temporary authority for performance of contract examinations to December 31, 2010.  Because of this time extension, VA continues to expand this program to other areas of the country.   

Section 106 adds osteoporosis to disabilities presumed to be service connected in former prisoners of war (FPOWs) with post-traumatic stress disorder.  A final rule to implement this provision has been drafted and is currently undergoing Executive Branch review.  The final rule incorporates a determination by theSecretary that a presumption of service connection for osteoporosis in FPOWs will be established irrespective of the presence of PTSD.

Section 212 added a new section 5121A entitled “Substitution in case of death of claimant,” to title 38.  The new statute provides that if a claimant dies while his or her claim or appeal for any benefit is pending, a person who is eligible to receive accrued benefits can request to be substituted as the claimant to continue the claim.  We are carefully analyzing various policy and procedural issues relating to substitution.  We will draft a proposed regulation as soon as our analysis is completed.  

Section 213 directs the Secretary to submit a report to Congress on VA’s findings and recommendations with respect to a report prepared by Economic Systems, Inc. (EconSys).  EconSys conducted studies of compensation based on earnings loss, quality of life loss, and long-term transition payments to Veterans undergoing rehabilitation for service-connected disabilities.  VBA has completed its analysis and submitted findings and recommendations for the Secretary’s review and approval.

Section 214 requires the establishment of an Advisory Committee on Disability Compensation.  This eleven-member committee has met each month since its first meeting in November 2008.  The Committee is directed to submit biennial reports to the Secretary, with the first report due no later than October 31, 2010.  At its most recent meeting, the Committee heard testimony from, and dialogued with, the Compensation and Pension Service concerning VA’s Schedule for Rating Disabilities and examination process.  The Secretary’s chief of staff also discussed the Secretary’s priorities with the Committee. 

Section 221 requires VA to carry out two pilot programs.  First, VA will carry out a one-year pilot program to assess the feasibility and advisability of providing expeditious treatment of fully developed compensation and pension claims no later than 90 days after the date the claim is submitted.  A second pilot will assess the feasibility and advisability of providing a claimant and his/her representative (if any) of a checklist containing information or evidence required for the claimant to submit to substantiate the claim. 

Regarding the first pilot, we are on-track to issue a report to Congress by December 9, 2009, as stipulated in the section.  An all-station letter implementing the pilot was issued on December 11, 2008, which identified the ten regional offices participating in the pilot.  The letter directed that the claimant or representative (if any) must submit, along with the claim, an indication that the claimant does not intend to submit any additional information or evidence in support of the claim, and does not require additional assistance with it.  The claim must be accompanied by a fully developed claim (FDC) certification signed and dated by the claimant and the representative (if any).  Additional development will not be needed, other than scheduling a VA examination or obtaining records in the constructive custody of the Federal Government.  For the purposes of this pilot program, the status of a fully developed claim may change if, during processing, we determine that the claim requires assistance beyond that required in the FDC criteria.  A contract has been awarded to the Center for Naval Analyses (CNA) to review and report on results of the pilot. 

The second pilot under this section will assess the feasibility and advisability of providing a claimant and his/her representative (if any) with a checklist containing information or evidence required for the claimant to submit to substantiate the claim.  We are also on-track to report on the pilot to Congress by December 9, 2009.  An all-station letter implementing the pilot was issued on December 11, 2008, which identified the four regional offices participating in the pilot.  This pilot will assess whether providing such a checklist will result in more frequent and timelier submission of evidence.  This checklist, which provides claimants with a “snapshot” of the evidence/information needed to substantiate a claim, will be used for original claims, claims to reopen, and claims for increased ratings.  The duration of the pilot will be a year for original claims and three years for claims for an increase or reopened claims.  The Center for Naval Analyses has also been awarded the contract for preparing an analysis and report upon the completion of this project. 

Section 222 directs the VA Secretary to establish an “Office of Survivors Assistance” to serve as a resource regarding survivors and dependents of deceased Veterans and service members and serve as the Secretary’s primary advisor concerning such issues.  The Office was created on December 22, 2008, and set up under the Office of the Secretary.  Four employees were immediately detailed to the Office to start working on the mission as defined by Congress.  A Director and one permanent employee have been selected and the remaining personnel will be chosen soon.

Section 223 directs that the Comptroller General submit to Congress, within ten months after enactment of the law, a report on VA’s Dependency and Indemnity Compensation (DIC) benefits that addresses the current system for paying DIC to survivors including the current rates; an assessment of the adequacy of DIC payments in replacing the deceased Veteran’s income; and recommendations to improve or enhance the effects of the DIC payments in replacing the deceased Veteran’s income.  The Comptroller General has not yet delivered his report.  We look forward to reviewing the findings and recommendations. 

Section 224 directs the Secretary of VA to enter into a contract with an independent third-party entity to conduct an assessment of VBA’s quality assurance program and issue a report no later than October 2011.  We have awarded a contract to the Institute for Defense Analysis (IDA) to undertake the assessment. 

Section 225 requires VA to develop skills certification examination criteria for VBA employees and managers responsible for processing compensation and pension claims.  VBA’s decision review officers (DROs) and coaches (Supervisory VSRs) have been designated to participate in testing; however, assistant service center managers and service center managers may also participate in the future.  A contract has been awarded to the Human Resources Research Organization (HumRRO).  A design team has been created for the supervisory test; however, assignment of the design team for the DRO test is pending.

Section 226 tasks VA with conducting a study on the effectiveness of the current employee work credit system and management system within VBA, which is used to measure and manage the work production of employees who handle compensation and pension claims.  The study is also to evaluate more effective means of improving performance.  A contract was awarded to the Center for Naval Analyses in March 2009.  CNA’s analysis will address the performance accountability and work measurement systems, as well as work process improvements.  VA is on-track to provide its report to Congress by October 2009.

Section 227 requires VA to conduct a review of the information technology (IT) in VBA concerning compensation and pension benefits, and to develop a comprehensive plan for the use of IT technology in processing claims for the purpose of reducing subjectivity, avoidable remands, and regional office variances in disability ratings for specific disabilities.  A full report regarding our technology approach will be provided no later than April 1, 2010.

Section 228 directs the VA Secretary to provide an assessment of various mechanisms to improve communication between VBA and VHA in providing medical advice to rating specialists.  The assessment is also to include an evaluation of the need for more staff in VHA to support providing advice to rating specialists.  A joint VBA/VHA review was timely provided to Congress in April 2009, in accordance with the statute.  The report concluded that based on current processes and resources, VBA field stations have sufficient access to medical advice. 

Sections 331 through 334 addressed services provided to Veterans under the VA Vocational Rehabilitation and Employment (VR&E) program.  Section 331 waived the 24 month limitation on programs of independent living services when necessary to ensure a substantial increase in severely ill or injured GWOT Veterans’ level of independence in daily living.  Section 332 of the bill increased the cap for new plans of independent living services from 2,500 to 2,600 cases.  VA correspondingly revised policy and provided implementation guidance to field stations.  Studies of the VR&E program include a report on measures to assist and encourage Veterans in completing vocational rehabilitation (Section 333) and a longitudinal Study of VR&E Programs of three cohorts of Veterans who begin receiving VR&E services during fiscal years 2010, 2012, and 2014 (Section 334).  VA is working with the Office of Acquisitions and Logistics to contract for both studies.  Proposals from interested vendors are due to VA this month.


VBA has taken various steps to resolve the existing inventory, and has many pilot programs and studies ongoing to determine the way forward. 

Mr. Chairman, this concludes my testimony.  I will be happy to respond to any questions that you or other members of the Subcommittee have.