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VA Issued Thousands of Improper Deferrals on Veterans’ Disability Claims: OIG Report

Jenna Zellmer

May 17, 2019

Updated: June 20, 2024

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The Office of Inspector General (OIG) serves veterans and the public by conducting oversight of the programs and operations of VA through independent audits, inspections, reviews, and investigations.  On May 15, 2019, OIG released its report “Deferrals in the Veterans Benefits Management System”.

About the Report

OIG conducted this review to determine whether Veterans Benefits Administration (VBA) staff properly created deferrals for disability compensation claims in the Veterans Benefits Management System (VBMS).  VBA employees use VBMS, an online database, to process veterans’ disability claims.  There are four phases within the VBMS disability claims process, including: establishment, development, rating, and award.  This report covers the development and rating phases, as the majority of deferrals occur in these phases.  OIG focused this review on the VBMS deferral process specifically because VBA claims processors generated nearly 676,000 deferrals in Fiscal Year 2017 and nearly 832,000 in Fiscal Year 2018.

What is a Deferral?

In VBMS there is a function for VBA employees to return a veteran’s claim to an earlier phase in the claims process for correction or additional action; this is known as a deferral.  When creating a deferral, claims processors must select the most appropriate deferral reason from a dropdown menu in VBMS that provides a primary and secondary reason for the actions needed.  Secondary reasons help to clarify the primary.  For example, the primary reason could be listed as “exam” with the secondary reason being “needs exam.”

Importantly, there is a distinction between avoidable and unavoidable deferrals.  Specifically, the former occurs when claims processors incorrectly determine a claim is ready for decision whereas the latter are caused by actions outside of the claims processor’s control, such as receipt of records after the claim was made ready for decision.  Avoidable deferrals are assigned to the Regional Office that caused the deferral while unavoidable deferrals are assigned to any Regional Office based on claim priority and production capacity.  Claims processors who receive a deferral are required to resolve it within five business days.

What the Report Found

OIG analyzed a total of 116,000 deferrals issued between February and April of 2018.  While OIG determined that VBA staff generally resolved VBMS deferrals within the required five business days, Rating Veterans Service Representatives (RVSRs) did not always properly create deferrals.  OIG categorized these improper deferrals into three main types:

Unwarranted Deferrals

Unwarranted deferrals refer to when part or all of the deferral was not necessary and claims processing could have continued without rework.  Within the 3-month review period from February through April, 23,200 out of 116,000 deferrals (20%) were unwarranted.  OIG found that unwarranted deferrals could result in needless examination costs, delayed processing, unnecessary rework, and improper guidance to claims processors.  Specifically, an estimated 7,000 unwarranted deferrals resulted in avoidable medical examinations.  Based on the rates at the time of the review, the OIG team estimated that VBA could spend at least $8.8 million on unnecessary medical examinations taken over the next five years if corrective actions are not taken.  Furthermore, of the 23,200 unwarranted deferrals, 16,200 (70%) were delayed.  Delays averaged 43 days with the longest delay being 232 days.

Incorrect Deferrals

The deferral reason selected in VBMS determines how the deferral is classified.  Incorrect deferrals occur when RVSRs did not select all or the most appropriate reasons when creating a deferral.  OIG determined that during the review period an estimated 27,900 deferrals (24%) did not have the most accurate reason selected in VBMS.  Incorrect classification could lead to deferrals not being assigned to the proper VA Regional Office, as was the case for 9,300 of these deferrals.

Incomplete deferrals

For incomplete deferrals, RVSRs did not include the required references explaining why the deferral, or part of the deferral, was necessary.  During the 3-month review period, 55,700 of the 116,000 deferrals (48%) were incomplete.  As a result, claims processors did not receive all of the relevant information needed to learn the proper procedures that would ensure consistency and prevent recurrence of such deferrals.


Category of Deferral ErrorEstimated Number of ErrorsEstimated Deferrals in Error
Unwarranted deferral23,20020%
Incorrect deferral reason27,90024%
Incomplete deferral55,70048%


Source: VA OIG analysis and projections of statistically sampled VBMS deferrals issued during the review period for compensation claims that were ready for decision.

Reasons Why VA Issued Improper Deferrals

The OIG report found several possible reasons as to why VA issued such a great number of improper deferrals, including the following:

Quality Review Staff Did Not Conduct Routine Assessments

VBA’s quality review staff did not conduct routine national accuracy assessments focusing on deferrals.  Instead, the focus of national quality reviews was on the final products of claims processing, including an emphasis on issues such as benefit entitlement decision accuracy and payment management.  VBA reportedly did not review unwarranted, incorrect, or incomplete deferrals because the quality review staff did not realize it was an issue.

Unclear Deferral Processing Guidance

The guidance regarding the deferral process is currently unclear about when to select certain deferral explanations.  For example, there are no guidelines distinguishing between deferral reasons and it is unclear as to whether there is a requirement to select more than one deferral reason for claims that require multiple actions.  This resulted in an increased number of incorrect deferrals.

Limitations of VBMS

The additional comments field in VBMS is subject to a 250-character limit for all deferral reasons for claims in a ready-for-decision status, except for one, which makes it difficult for claims processors to explain the reasoning behind a deferral.  Designers of VBMS deliberately included the character limitation to ensure that deferral justifications were concise.  However, RVSRs noted that to give sufficient information, they would sometimes intentionally select a less appropriate deferral reason that allowed more characters.  Furthermore, incomplete deferrals occurred because VBMS functionality allows RVSRs to create deferrals without including the required explanations.

OIG Recommendations for Deferred Claims

At the end of its report, OIG made the following recommendations to VA’s Undersecretary for Benefits, instructing him to conduct the following actions:

  • Implement plans to enhance quality assurance by conducting periodic national oversight of deferrals and ensuring local oversight specifically addresses all aspects of the accuracy of deferrals created in VBMS.
  • Establish internal controls documenting when RVSRs are informed of their mitigated deferrals and corrective action is taken.
  • Update guidance to clarify why certain reason selections should be made for deferrals, provide training on this guidance, and monitor the effectiveness of the training.
  • Establish plans to modify VBMS to allow sufficient space for inputting deferral instructions and require claims processors to input references when creating deferrals.

According to OIG, the Under Secretary concurred with the recommendations and provided acceptable action plans for them.  OIG will monitor VBA’s progress and follow up on implementation of the recommendations until all proposed actions are completed.  Ultimately, the report concluded that VBA staff need to improve accuracy when creating deferrals to minimize unnecessary medical examinations, claims processing delays, incorrect instructions provided to claims processors, and unreliable tracking data used to train staff.

About the Author

Bio photo of Jenna Zellmer

Jenna joined CCK in January of 2014 as an appellate attorney, was named Managing Attorney in September of 2019, and now serves as a Partner at the firm. Her law practice focuses on representing disabled veterans at the Court of Appeals for Veterans Claims and the Court of Appeals for the Federal Circuit.

See more about Jenna