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VA paid $300-million in ineligible benefits

Published Oct. 1, 2005

The Department of Veterans Affairs paid more than $300-million in 1995 to veterans and their families who were ineligible to receive the benefits, according to the latest in a series of audits criticizing the agency.

The VA's inspector general found that the department had trouble recouping the overpayments and had accumulated a $574-million debt over the years from nearly 200,000 people ineligible for benefits.

The average debt is $2,986. However, in one case, the VA sent $56,000 to a dead woman. Monthly checks were sent to her bank account for nearly six years until the VA got word of her death from the Social Security Administration.

Auditors blamed some of the overpayments on the VA's slow response to the death of beneficiaries, or other changes such as increases in income that made them ineligible. Beneficiaries sometimes lose their eligibility if they enter a hospital or nursing home, but they often fail to notify the VA.

In response to the report, VA compensation and pension officials said they are working to prevent overpayments and to collect those that have been made. They hope to save up to $7-million by halting payments to prisoners who are receiving benefits unlawfully and to save millions more by enlisting veterans groups to alert beneficiaries that they may no longer qualify for a check.

"One thing we want to do is use resources we have a little better," said Carl Lowe, deputy director of the VA's compensation and pension service.

As evidence that the VA has improved its track record, Lowe said total overpayments dropped to $551-million in 1996 from the $574-million cited in the inspector general's study of 1995 cases.

In large government benefit programs, it's not uncommon for checks to be sent to ineligible people.

The General Accounting Office reported last week that $3.5-million in food stamps were issued in 1995 for 12,138 people behind bars in Florida, New York and Texas and in Los Angeles County.

In another instance, the $22-billion Supplemental Security Income program for the poor and the disabled recorded $895-million in overpayments in 1996. That program recovered less than half of the funds, according to the GAO.

This particular audit _ completed by the inspector general, the VA's watchdog agency, in December _ is the latest report that criticizes the department's management and delivery of services to some of the nation's 26-million veterans.

One recent audit found a former medical center director in Fayetteville, N.C., had sexually harassed an employee and verbally abused two others. The ex-director was transferred to the VA Medical Center at Bay Pines and allowed to keep his $106,000-a-year salary.

Other audits found that managers have misspent taxpayers' money _ including $26,000 for a saltwater fish tank _ but the directors have kept their jobs.

Unlike those cases, the overpayment issue deals with millions of dollars, not thousands, and it comes as the VA is re-examining its spending habits and trying to do more with less.

The VA delivers $17.8-billion in pension and compensation benefits to 3.3-million veterans and their families.

The benefits come in two forms: Compensation benefits are paid to veterans suffering from service-connected injuries, and to their survivors. Pensions go to needy disabled wartime veterans and their families. Compensation benefits for 1997 range from $94 to $1,924 a month, depending on the degree of the veteran's injury.

In 1995, the GAO said the VA knew little about the causes of the overpayments because it had not studied them. After that study, the VA began reminding soon-to-retire recipients that their new Social Security benefits could push them over the income eligibility threshold for veterans' checks.

The December inspector general audit said the VA had made some progress in tackling the problem.

Of the $303-million that the VA overpaid in 1995, some $120-million remained uncollected by the end of the year.

The auditors suggested the VA could do more, by notifying beneficiaries of changes in eligibility, as patients enter hospitals, and by simplifying the process. They also recommended that the VA suspend direct-deposit checks when a beneficiary can't be located, to avoid continuous payments to ineligible or deceased recipients.

Those changes could prevent $30-million in VA overpayments.

Prevention is important, because once the overpayments are delivered it is tough to collect the money from the mostly poor recipients. The inspector general noted that of the $574-million outstanding at the end of the 1995 fiscal year, 64 percent had been delinquent for more than a year.

"Given VA's collection difficulties, overpayment prevention should be a major focus of its debt management program," the inspector general wrote. "The major goal of overpayment prevention is to correct the underlying causes, while reducing the amount of debt established."

A major stumbling block in streamlining the process is a 1987 settlement that allows beneficiaries 60 days to respond to the VA's intention to reduce benefits. The decree is due to expire in August, and the VA hopes to begin speeding the cuts then.

Lowe, the VA benefits official, said the department will reduce benefits if beneficiaries notify the VA by telephone of a change in their circumstances. Currently, the VA must wait for notification by mail before reducing the benefits.

Even the auditors concede some overpayments are inevitable. For example, beneficiaries may die at the end of the month, and their checks are already in the mail.

However, the auditors found instances where the VA continued to send checks months or even years after the beneficiary was no longer eligible.

_ David Dahl can be reached by e-mail at or by telephone at (202) 463-0576.