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Mr. Tom Murphy

Mr. Tom Murphy, Director of Compensation Service, Veterans Benefits Administration U.S. Department of Veterans Affairs

Mr. Chairman and members of the Subcommittee:

Thank you for the opportunity to testify on the state of the VA disability ratings schedule.  The Department of Veterans Affairs (VA) Schedule for Rating Disabilities (rating schedule) is the engine through which VA is able to provide Veterans with compensation for diseases and injuries they incur while serving our nation.  It is this rating schedule that guides the disability rating personnel of the Veterans Benefits Administration (VBA) and Department of Defense (DoD) in making the correct determination of the compensation benefit level applicable for a Veteran’s service-connected condition(s).  The manner of rating Veterans for their service-connected conditions has evolved since the 1917 War Risk Insurance Act created the first rating schedule that was used to calculate replacement of lost earnings for our Veterans.  This evolution continues as we update the rating schedule to include the signature injuries of our current wars. 

Today, I will describe the history of the rating schedule and the statutory basis for our current schedule, 38 United States Code (U.S.C.) § 1155, and I will explain how VBA is actively and comprehensively ensuring that this legislative mandate is implemented effectively.  To focus on the Subcommittee’s concerns regarding the contemporary state of disability ratings, I will also describe VBA’s current plan to ensure the rating schedule is as accurate and modernized as possible, to meet the needs of Veterans in the 21st Century. 

I.  Rating Schedule’s Authority and Brief History

Section 1155 of Title 38, U.S.C., and the statute’s implementing regulation, at 38 Code of Federal Regulations (C.F.R.) § 4.1, require VA to assign Veterans who are service-connected with percentage ratings that represent as far as practicable the average impairment in earning capacity resulting from diseases and injuries that were incurred or aggravated during active military service.  This statutory and regulatory mandate is the current manifestation of a history of the rating schedule that has included various measures of disability.  Section 1155 also provides that “[t]he schedule shall be constructed so as to provide ten grades of disability, and no more, upon which payments of compensation shall be based,” with increments of 10 to the total 100 percent.  Congress sets the associated dollar amount rates of compensation under 38 U.S.C. § 1114.

With the outset of the first rating schedule in 1917, the law focused on average loss of earning capacity as the measure for replacement of lost income for Veterans.  In 1925, lawmakers switched to an individual occupation-based evaluation of compensation before returning to the original concept of average impairments of earning capacity without regard to occupation under a new schedule in 1933.  The schedule would undergo future revisions, notably in 1945, the year in which a system was developed that forms the baseline from which VA has developed the current rating schedule.  Particularly, the 1945 rating schedule introduced three basic concepts that are still evident in today’s scheme for rating Veterans: 1) compensation that is based, to the extent possible, on average lost earnings capacity; 2) use of disability evaluations, and associated compensation ranges, from 10 percent through 100 percent disability, including a potential non-compensable zero percent evaluation for each disability; and 3) disabilities organized into 14 discrete body systems – for instance, musculoskeletal, digestive, organs of special sense, or mental disorders – with unique descriptive diagnostic codes for diseases and injuries within each system.  The current rating schedule differs from the 1945 rating schedule due to periodic updates to individual body systems throughout the years and now contains diagnostic codes for 15 body systems.  Revisions in 1961 updated the mental disorder diagnostic codes, which had been largely unchanged since 1933.

Starting in 1989, VA has incrementally revised the rating schedule many times with consideration given to the views of Veterans Health Administration (VHA) clinicians, VBA disability rating personnel, groups of non-VA medical specialists, and comments received from Veterans Service Organizations (VSOs), Veterans, and other public and private interested stakeholders in response to various Notices of Proposed Rule Making.

II.  Increasing Focus on Rating Veterans’ Disabilities: Recent Studies and a New VA Rating Schedule Initiative

With increased interest turning to Veterans’ benefits and care, deservedly so due to the return of Servicemembers from recent conflicts, various studies and Commissions since 2007 have made many recommendations relating to VA’s disability compensation program.  Some studies and commission reports have proposed wholly new concepts for rating disabilities.  Some of these recommendations for improvement have been outside the bounds of VA’s current statutory authority based on average impairments of earning capacity; however, some recommendations have been within the scope of VA’s  mandate from Congress. 

For example, the National Academy of Sciences’ Institute of Medicine (IOM), in its 2007 report to the Veterans Disability Benefits Commission (VDBC), A 21st Century System for Evaluating Veterans for Disability Benefits, recommended, in part, that VA immediately update the current rating schedule, beginning with body systems that have been in place for a long time without a comprehensive update.  The IOM report also recommended that VA devise a system for keeping the schedule up-to-date, and that VA regularly conduct research on the ability of the rating schedule to predict actual loss in earnings.  The report additionally recommended that VA regularly use the results from research on the ability of the rating schedule to predict actual losses in earnings to revise the rating system, either by changing the rating criteria in the schedule or by adjusting the amount of compensation associated with each rating. 

The 2007 VDBC report, Honoring the Call to Duty: Veteran’s Disability Benefits in the 21st Century, recommended that priority be given to the mental disorders section of the rating schedule, urging that VA begin by updating those body systems that addressed the rating of post-traumatic stress disorder, other mental disorders, and traumatic brain injury.  The report further recommended that VA address the other body systems until the rating schedule is comprehensively revised.  Another recommendation, made by the President’s Commission on Care for America’s Returning Wounded Warriors in its 2007 report, Serve, Support, Simplify, is that the rating schedule focus on a Veteran’s ability to function directly instead of inferring it from physical impairments.

One major aspect of the previously mentioned VDBC report was the results of a survey study by the Center for Naval Analyses (CNA) on disability compensation as a replacement for the average impairment in earning capacity.  It was determined that VA compensation, on average, is generally appropriate relative to earned income losses.  However, the study found, particularly, that Veterans with physical disabilities are properly compensated, while those with mental disabilities may be under-compensated.  The study also found that Veterans entering the system at younger ages are generally under-compensated, while those entering at older ages are generally over-compensated.  While the study provided VA with an empirical basis for developing ways to correct any rating inconsistencies, it also confirmed that the current rating schedule generally provides fair compensation for lost earnings. 

VA is moving forward with a complete revision of the rating schedule while understanding that the current rating schedule is in many aspects sufficient as an adequate proxy for earnings loss. The efforts VA is taking toward modernization will ensure it continues to effectively serve Veterans.

In October 2009, following these studies and reports, VA began a comprehensive revision and update of all 15 body systems contained in the rating schedule.  VBA has implemented a project management plan detailing the organizational, developmental, and supporting processes that will result in a complete modernization of the rating schedule by 2016.  The plan calls for the application of current medical science and econometric earnings loss data, consistent with our charge in 38 USC §1155.  VBA’s project management plan incorporates a comprehensive, systematic review process for each body system, to include an initial public forum intended to solicit updated medical information from governmental and private-sector subject matter experts, as well as input on needed improvements in the rating schedule from the public and interested stakeholders, such as Veterans Service Organizations.  These forums have gathered medical science experts and interested stakeholders in a single meeting to engage in challenging dialogue and capture current medical information, all in the most transparent manner possible.  In 2009, VA held mini-forums for the endocrine and hematologic/lymphatic systems.  Public forums for the mental disorder and musculoskeletal systems were held in 2010.  In the interest of expediting the rating schedule revision process, in 2011, VA held public forums regarding eight body systems: dental and oral conditions, the genitourinary system, the digestive system, rheumatologic diseases and immune disorders, infectious diseases, the cardiovascular system, the respiratory system, and the system addressing the impairment of auditory acuity.

As the next step in the plan, VA convened work groups of subject matter experts for each body system to assist in development of specific changes.  A common theme emerging from the work groups analyzing the schedule is the need for a shift in focus in the rating criteria from a symptomatology-based system of rating to one which focuses on functional impairment.  Subject-matter experts involved with the revision process have concluded that while symptoms determine diagnosis, the translation of symptoms into functional impairments and overall disability is the indicator of impairment in earning capacity. 

Another important aspect of the review process for each system is the execution of an econometric earnings loss study.  Each study will provide the data necessary to determine whether current compensation rating levels accurately reflect the average impairment in earning capacity for specific conditions in the current rating schedule.  They will help identify any discrepancies between earnings loss and VA disability compensation by analyzing if  conditions are adequately compensated based on current associated evaluation levels.  VA is partnering with The George Washington University in connection with 5 body systems to analyze income and benefits data to carry out these studies.  VA may solicit proposals from other entities to carry out the studies for the remaining body systems.  

To provide a more concrete example of our process, I would like to describe the steps VA has undertaken for one body system – the musculoskeletal system.  In August 2010, clinical musculoskeletal experts, stakeholders, including Veterans Service Organizations and DoD officials, gathered in Washington D.C. for a public forum addressing musculoskeletal diseases and injuries.  Following the public forum, the subject matter experts gathered to kick off the workgroup phase, using information obtained in the public forum to discuss areas of the current schedule potentially in need of revision.  Over the next 10 months, the workgroup held periodic in-person meetings and teleconferences to craft revisions to the schedule.  Simultaneously, The George Washington University began an earnings loss study for the musculoskeletal system.  Drafting of a proposed rule revising the system has begun, and VA looks forward to publishing it in the Federal Register for public comment.  When comments are received, we will consider each comment to determine whether changes to the proposed regulations for the body system are needed and will respond to each comment in a published final rule.  Changes to the rating schedule for the body system will then become effective.

As noted earlier, VBA is committed to modernizing the rating schedule by 2016.  Currently, proposed rules to revise three body systems are undergoing final review within VA, and drafts of proposed rules for ten more systems are underway, and all will incorporate the results of earnings loss studies.  This week, public forums to obtain the input of medical experts and interested stakeholders will be completed for the four remaining body systems.  

While VA is nearing the completion of its modernization of the rating schedule, this effort does not signify the end of the initiative.  VA intends to establish a process that requires continual review and more frequent updating of body systems.  This will ensure America’s Veterans are compensated for their disabilities based on both cutting-edge medical science and the economic impacts of their disabilities resulting from military service. 

III. Conclusion

VA recognizes the importance of ensuring that its Schedule for Rating Disabilities meets the needs of Veterans in the 21st Century.  Through a successful modernization and revision of the rating schedule, VA is anticipating and proactively preparing for the needs of Veterans and their families.  VA is currently implementing a comprehensive initiative to modernize the rating schedule, with input from, DoD, VSOs, private-sector experts, members of the public, and Congress.  VA continues to look for ways to improve the rating schedule and will consider changes and improvements that appropriately compensate our Nation’s Veterans while meeting the rating schedule’s statutory mandate.  VA looks forward to continued input from this subcommittee, Congress, and other stakeholders in working together to ensure the best possible rating schedule for our Nation’s Veterans and their families.