The economic meltdown that has dominated media coverage over the past several months has overshadowed a crisis at the Department of Veterans Affairs, an agency in dire need of new leadership, veterans groups and Democratic lawmakers say.

The VA is now treating more than 350,000 Iraq and Afghanistan war veterans and with the war in Iraq guaranteed to continue for at least another three years, and with the possibility of more troops being sent to fight in Afghanistan, tens of thousands of those veterans will likely seek medical care and benefits from the VA for combat related injuries.

But the VA is still unprepared to meet these challenges.

In recent months, as benefits claims have piled up at the VA, some of the agency�s 250,000 employees have apparently become so overwhelmed with their workload that they were prepared to shred hundreds of benefits claims in order to avoid processing the forms, thereby denying veterans the benefits they have come to depend upon to survive.

Last month, internal watchdogs discovered 500 benefits claims in shredding bins at 41 of the 57 regional VA offices around the country.

The incident resulted in a hastily arranged roundtable discussion last month, led by House Veterans Affairs Chairman Bob Filner who excoriated the VA for creating a �culture of dishonesty� that he said has become so pervasive over the years that it has completely shattered the confidence of war veterans who feel they can no longer depend on the agency for help when they return from combat.

�This episode has further strengthened my belief that VA desperately needs new leadership, and it needs new leadership today,� Filner, D-CA, said. �These incidents and �mistakes,� all occurring to the detriment of our veterans and never to their benefit, remind me more of the Keystone Cops rather than a supportive organization dedicated to taking care of our veterans.

�First, I am not convinced that only 500 documents were saved from the shredding bin. This is merely a snapshot in time. The VA was unable to convince me that more documents have not been shredded in the past and I honestly do not know how many records have been destroyed and how many files lost over the past decades.�

Two days before the Nov. 19 meeting, Secretary of Veterans Affairs Dr. James B. Peake responded to the controversy stating that he was �deeply concerned that improper actions by a few VA employees could have caused any veterans to receive less than their full entitlement to benefits earned by their service to our nation.�

�In rectifying this unacceptable lapse, VA will be guided by two principles -- full accountability for VA staff and ensuring veterans receive the benefit of the doubt if receipt of a document by VA is in question,� Peake said.

The VA extended the deadline to Nov. 19, 2009, for veterans to resubmit benefits claims filed between April 14, 2007, and Oct. 14, 2008, may have ended up in one of the 47 shredding bins. Additionally, the agency said shredding equipment at regional offices is now under the control of the facility records management officer. The VA said all bins that contain documents for shredding are subject to review and two people and the facility records management officer must approve benefits claims that are shredded.

Peake said the VA�s inspector general is continuing to investigate cases �where inappropriate shredding may be traceable to a specific employee� and the agency will initiate �legal and disciplinary action . . . to hold accountable any employee who has acted improperly.�

Admiral Patrick Dunne, the Under Secretary for Benefits for the VA, who attended last week�s roundtable discussion with Filner, said benefits claims slated for the shredder underscores the VA�s need to address poor document handling procedures. It doesn�t mean the VA trying to prevent veterans from obtaining benefits.

Dunne suggested the VA move to an electronic filing system to safeguard benefits claims.

But Filner said he doesn�t trust the VA and does not believe, under Peake, that the agency can get its act together.

�We have heard promises from the VA before,� Filner said. �We have heard that the claims process will go paperless. Training will be improved. VA�s latest promise is that veterans can submit statements containing information that will be used in the adjudication process in lieu of documents missing from their files. While this is an important step forward, I am skeptical that this new step will become part of the claims process

�Additionally, the VA�s outreach has been limited to a reliance on media reports and a message on the VA website. The VA did not report a systematic way of reaching out to veterans to alert them of new policies that may have huge implications in their claims going forward. Congress must hold the VA accountable for a job not well done. A complete paradigm shift is necessary and I look forward to working with new leadership to correct the problems plaguing the benefits claims system.�

The VA has been the subject of numerous lawsuits related to the backlog of benefits claims that in some cases can take as long as a six month to process and as long as four years to appeal if they are rejected.

In the book, �The Three Trillion Dollar War,� by Joseph Stiglitz and Linda Bilmes, the authors wrote that �even in 2000, before the war� the VA was the subject of numerous Government Accountability Office studies that �identified long-standing problems, including large backlogs of pending claims, lengthy processing time for initial claims, high rates of error in processing claims, and inconsistency across regional offices.�

�In a 2005 study,� Stiglitz and Blimes wrote, �the GAO found that the time to complete a veteran�s claim varied from 99 days at the Salt Lake City Office to 237 days in Honolulu. In a 2006 study, GAO found that 12 percent of claims were inaccurate.�

The authors estimate that the VA will spend hundreds of billions of dollars in healthcare and disability benefits over several decades and the process for approving benefits claims could average one year. Last March, the VA was sued in federal court by two veterans groups who sought a preliminary injunction to force the VA to immediately treat veterans who show signs of post traumatic stress disorder and are at risk of suicide and to overhaul internal system that handles benefits claims.

The federal judge who presided over the case, ruled last June that he lacked the legal authority to force the VA to immediately treat war veterans suffering from post-traumatic stress disorder (PTSD) and could not order the VA to overhaul its internal systems that handle benefits claims and medical services. However, in an 82-page ruling U.S. District Court Judge Samuel Conti said that it is �clear to the court� that �the VA may not be meeting all of the needs of the nation�s veterans.�

During a trip to Alaska in May to meet with a Vietnam veteran, Peake, the Secretary of the VA, said concerns about PTSD were �overblown� and likened some cases �to what anyone who played football in their youth might have suffered.�

He said veterans who suffer from the disease just �need a little counseling� and don�t �need the PTSD label their whole lives.�

Peake�s comments were made just a couple of weeks after the RAND Corporation released a study that said about 300,000 U.S. troops sent to combat in Iraq and Afghanistan suffered from major depression or PTSD, and 320,000 received traumatic brain injuries largely due to multiple deployments.

�There is a major health crisis facing those men and women who have served our nation in Iraq and Afghanistan,� said Terri Tanielian, a researcher at RAND who worked on the study.

�Unless they receive appropriate and effective care for these mental health conditions, there will be long-term consequences for them and for the nation. Unfortunately, we found there are many barriers preventing them from getting the high-quality treatment they need.�

On July 25, the veterans� advocacy groups who filed the lawsuit against the VA, Veterans for Common Sense and Veterans United for Truth, appealed the judge�s ruling at the 9th Circuit Court of Appeals. They are still waiting to hear if the appeals court will hear the case.

Now the VA is the subject of a similar lawsuit filed by two other veterans� advocacy groups who claim that the VA�s failure to process benefits claims in a timely manner has caused severe economic hardships for hundreds of thousands of veterans.

�The VA�s failure to provide timely benefits decisions often leads to financial crises, homelessness, addiction and suicide,� says the lawsuit filed two weeks ago in U.S. District Court for the District of Columbia by Vietnam Veterans for America and Veterans of Modern Warfare.

The lawsuit demands the VA provide veterans with interim benefits while they wait for their claims to be processed.

Paul Sullivan, the executive director of Veterans for Common Sense, said the VA has a full-blown crisis on its hands. In a letter sent to President-elect Barack Obama recently, Sullivan said the VA needs �an immediate overhaul to avert a perfect storm of problems threatening to overwhelm� the agency.

�The economic recession is forcing more veterans who have lost their jobs and medical care into VA,� Sullivan said. The VA �faces a tsunami of up to one million Iraq and Afghanistan veterans flooding into VA. And . . . VA faces a surge of hundreds of thousands of additional Vietnam War veterans seeking care for mental health conditions as well as medical conditions linked to Agent Orange poisoning.

�Our vision is that whenever a veteran comes to any VA facility, his or her medical and benefit needs should be quickly and completely addressed, without red tape, delay, stigma, or discrimination. For too many veterans this vision is a fantasy, however, because recent VA leadership has failed to put our veterans first and has inadequately funded vital services and programs.�

On his transition website, change.gov, Obama said he intends to �Fix the Benefits Bureaucracy: Hire additional claims workers, and improve training and accountability so that VA benefit decisions are rated fairly and consistently. Transform the paper benefit claims process to an electronic one to reduce errors and improve timeliness.�

According to Sullivan�s organization, less than half of the veterans diagnosed with PTSD by VA receive disability compensation. Out of 83,436 Iraq and Afghanistan war veterans diagnosed with PTSD by VA, only 38,448 (or 46 percent) were granted service connection for PTSD by VA.

Sullivan places much, if not all, of the blame for such squarely on President George W. Bush�s shoulders.

�Additional funding and new laws pushed through by Congress in 2007 should have some impact next year,� Sullivan said in an interview. �But �until VA�s failed leadership is removed, until VA�s policies are streamlined, and until VA�s budget is significantly increased and stabilized, then the legacy of President Bush�s failures may last for generations.�

Filner agreed with Sullivan�s assessment and said the VA is now at a �critical juncture.�

The VA �is on the verge of completely losing the trust and confidence of the people that it is supposed to represent . . . the very same people it has been entrusted to care for,� he said. These [benefits claims] are matters of life and death for some of these veterans.�