A VA system paid out millions in ‘improper’ claims

When a veteran passed away in 2023 from heart disease, their family asked the Department of Veterans Affairs for service-connected benefits they believed their death triggered.

An automated system at the VA reviewed the request and two days later approved payments totaling $22,692.

But the system was wrong, an Inspector General report found in April, and not for the first time.

In all, the VA system approved “at least” $2.7 million in incorrect payments between September 2023 and August 2024, the VA Inspector General found in a new report. The overpayments were for deaths wrongly labeled as service-related.

The IG also said the overpayments might indicate that the VA system is also rejecting legitimate claims, though the investigators did not find examples of inaccurate denials.

“Improper payments increase the risk that claimants and survivors may not receive all benefits they are entitled to in a timely manner,” the IG said in the report.

The wrongly-awarded benefits found by the IG fell under the Dependency and Indemnity Compensation, or DIC. Military dependents are eligible for tax-free DIC if the veteran had a 100% service-connected disability at the time of death, if their disability contributed to their death or if they died due to VA medical treatment.

In the 2023 case, the veteran died of hypertension, “which is a different condition,” the report said. “A medical opinion would be required to make the link between hypertension and pulmonary hypertension.”

Increased use of AI in benefits review

VA officials told the IG that they began using automation in May 2020 as part of a major effort announced by the agency to “eliminate barriers and streamline” processing survivor benefits. According to the IG, the tool scans and extracts data from documents like death certificates and claims applications. The system then uses rules that are encoded into the system to generate decisions. If a claim is granted, the tool generates a DIC decision and a letter is sent to the family.

Scott Hope, national service director for Disabled American Veterans said he hopes the improperly approved claims by automation were “far and few between,” but he’s still supportive of it for faster and “rules-based” claims processing. However, he also said that the human oversight piece still needs to be strong enough to spot errors.

“I think that automation eventually will be much more accurate as long as we’re building the rules properly. But I do think that there’s going to be some complacency on behalf of any human that’s overly relying on it,” he said. “If automation is doing 2,000 a day, well, people are capable of doing 100 a day so now we’re looking at a different way people work, and how they do it, and what they’re checking. So those resources will have to be scaled as well.”

Top Stories This Week

Military will now prescreen recruits for 28 medical conditions

Air Force cargo hub stored weapons in unguarded building, IG finds

Last of the F-14 Tomcats could fly again under Maverick Act

By Jeff Schogol, Matt White

The IG also found that nearly 8,000 decisions where benefits were granted via automation had “incomplete” or “omitted” legally required information in letters sent out to families between 2023 and 2024. The IG then reviewed 20 automated rating decisions a year later and found “similar errors for automated service-connected death rating decisions and notification letters.”

The IG then looked at the Pension and Fiduciary Service’s oversight, in which its personnel run through quality review checklists that look at whether the automation incorrectly extracted data, didn’t follow requirements, or incorrectly granted a claim. The IG found that process to be “insufficient” and noted that the staff did not make any recommendations for how to improve the automated process.

The VA told the IG it has since revised procedures and removed directives that contributed to the errors. It also said it was reviewing its checklists to make sure automated claims oversight is “consistent” with the same way that manual claims are handled.