Review of VBA’s Special Monthly Compensation Housebound Benefits

We conducted this review to determine whether the Veterans Benefits Administration (VBA) properly granted entitlement to all statutory housebound special monthly compensation (SMC) benefits for living veterans with a single disability rated as 100 percent and one or more disabilities independently rated at 60 percent. This review focused on whether VBA failed to pay or delayed paying any of these benefits. We also assessed the accuracy of SMC evaluations for veterans receiving compensation at the housebound rate, including statutory housebound, and housebound in fact, as well as SMC that had been incorrectly coded as housebound benefits. We conducted our review from March 2015 through February 2016. Our first review objective focused on a population of about 186,000 living veterans’ cases nationwide that at some point were entitled to statutory housebound SMC benefits based on a single disability rated as 100 percent and one or more disabilities independently rated at 60 percent as of March 10, 2015. To address our second objective, we reviewed a population of about 98,400 veterans’ cases nationwide receiving compensation at the housebound rate for any reason as of March 10, 2015. To accomplish our objectives, we reviewed applicable laws, regulations, policies, procedures, and guidelines. We also interviewed appropriate VBA management, employees, and other officials. We conducted onsite interviews with VBA management and staff at eight VA regional offices from September through November 2015. The VA regional offices in Atlanta, GA; Cleveland, OH; Lincoln, NE; Nashville, TN; Saint Petersburg, FL; Seattle, WA; Waco, TX; and Winston Salem, NC, were selected based on having the most cases in our samples. We reviewed a statistically selected random sample of 250 cases with eligibility to statutory housebound benefits, based on veterans having a single disability rated as 100 percent and one or more disabilities independently rated at 60 percent as of March 10, 2015. We also reviewed a stratified random sample of 247 cases of veterans receiving compensation at the housebound rate and grouped according to their combined evaluation. We reviewed the claims folders and electronic records for each of the cases and sought to determine whether they had been accurately worked. For more information on the scope and methodology of this review, go to Appendix B. We identified errors in 45 of 250 cases (18 percent) in which veterans were entitled to statutory housebound benefits based on having a single disability rated as 100 percent disabling and one or more disabilities independently rated at 60 percent or more. Errors included failure to grant housebound benefits, failure to pay housebound benefits that had been granted, and prematurely reducing housebound benefits. We also found errors in 127 of 247 cases (51 percent) in which veterans were being paid compensation at the housebound rate. In 10 additional cases, we could not determine whether housebound in-fact benefits were accurate because VBA’s eligibility criteria were unclear. We identified different error rates within each group of our stratified sample. As a result, we estimated an overall error rate of 10 percent for veterans being paid compensation at the housebound rate, and a 27 percent error rate for veterans with combined evaluations that were 90 percent or less. Generally, the inaccuracies we identified involved housebound benefits for unemployable veterans, entry of SMC codes into the electronic system, and housebound benefits on an in-fact basis. Generally, VBA staff failed to grant statutory housebound benefits because they overlooked the issue, and VBA’s electronic reminder was ineffective. Errors for veterans being paid compensation at the housebound rate were due to ineffective training and a multi-step process for entering temporary housebound codes in the electronic system. VBA staff were also confused as to the requirements for use of the SMC Calculator. Finally, VBA has not clarified the meaning of “substantially confined” for housebound in-fact determinations. Veterans entitled to statutory housebound benefits did not consistently receive correct benefits decisions. Based on sample projection results, we estimated errors in 33,400 of 186,000 cases. We estimated that these errors resulted in veterans being underpaid $110.1 million through February 2015, and receiving recurring underpayments of $1.8 million per month as of March 2015. In addition, we estimated that VBA staff delayed paying veterans $54.3 million. Errors for veterans receiving compensation at the housebound rate also resulted in incorrect benefits decisions. Based on sample projection results, we estimated errors in 2,600 of 9,800 cases for which veterans’ combined evaluations were 90 percent or less. We estimated that these errors resulted in veterans being overpaid $44.3 million through February 2015, with ongoing overpayments of $1.1 million per month as of March 2015. These overpayments included $21.4 million in benefits that were improper, which were ongoing at a rate of $678,000 per month. The remaining overpayments of $22.9 million were not supported by adequate documentation and were ongoing at a rate of $427,000 per month. Veterans’ monthly recurring overpayments generally continue for at least 5 months. We recommended the then Acting Under Secretary for Benefits establish plans to update the electronic system, conduct reviews of cases in which housebound benefits are being paid, provide updated training, remind staff to use the SMC Calculator in all SMC cases, and clarify the meaning of “substantially confined.” The Principal Deputy Under Secretary for Benefits concurred with our recommendations and stated that VBA will conduct an annual review of SMC housebound benefits with the initial review in October 2016, and then, each October thereafter. Compensation Service has provided business requirements for changes to the Veterans Benefits Management System Rating application to prevent staff from completing a decision without considering potential eligibility to statutory housebound benefits any time a veteran has a single 100 percent evaluation and to add a requirement to discontinue temporary housebound benefits when a veteran no longer meets the criteria. VBA has required decision-makers to use the SMC Calculator and to include the worksheet results in the claims folder. This requirement is included in updated mandatory training for all Rating Veterans Service Representatives and Decision Review Officers. Furthermore, VBA has initiated a working group to clarify the statutory term “substantially confined” to ensure consistent application of this benefit. VBA plans to complete these actions by December 2016. Finally, the Principal Deputy Under Secretary for Benefits stated that VBA has identified approximately 11,600 veterans being paid compensation at the housebound rate with a combined evaluation of 90 percent or less. VBA will review the cases and certification will be provided to the OIG. The target completion date for these actions is April 2017. The Principal Deputy Under Secretary for Benefits’ planned corrective actions are responsive to the recommendations, and we will follow up as required. To address Recommendation 1, VBA released VBMS 11.0 on June 17, 2016, which included new functionality that prevents staff from completing decisions without considering potential eligibility to statutory housebound benefits any time a veteran has a single 100 percent evaluation. Therefore, we consider Recommendation 1 closed and we will follow up as required.