Massive Veterans Affairs backlog leaves half a million waiting for benefits

(CBS News) MANASSAS, Va. - It's Iraq, 2003, and a tragedy is about to happen. A photo shows a marine preparing to pull the trigger on a rocket-propelled grenade launcher. When he did, it blew up. After the smoke cleared two marines lay dead and Aaron Helstrom was riddled with shrapnel.

"I've got a fused spine that's causing me pain every day," Helstrom said.

He returned to active duty, served a tour in Afghanistan, and went on to become a master sergeant. Several months before he finally retired, Helstrom submitted a disability claim to the Department of Veterans Affairs, or VA.

It lists a total of 65 conditions ranging from his shrapnel wounds to PTSD which would qualify him for $2,800 a month in disability pay.

"They say at the time of your retirement or when you get out you will start receiving your compensation claim," Helstrom said. "That's not the case."

Helstrom retired on Dec. 1, 2011. Seven months later, all he had gotten from the VA was a monthly form letter: "We're still processing your application for compensation."

That makes Helstrom one of half a million veterans whose claims are caught in the increasing VA backlog.

"It's actually 565,000," said Allison Hickey, the VA's director of benefits. "Way too many."

Hickey says the system has been swamped by a quarter million new claims from a change in regulations that allowed more Vietnam veterans to file disability claims from exposure to the pesticide Agent Orange. On top of that, Hickey says, veterans from Iraq and Afghanistan whose lives were saved by advances in battlefield medicine are now filing claims at a record rate.

"Forty-five percent of them are filing a claim," Hickey said, "and that is unprecedented in terms of the number of veterans that will file a claim with us."

It's all flooding into a bureaucracy that lags behind other agencies like the IRS in switching from paper to electronic files. In Hickey's words, the VA is choking on paper.

"We have 4.4 million active records, paper records across our 56 regional offices today -- and these paper files are not one or two pages big," Hickey said. "They are reams and reams and reams of paper."

A single example of those paper files -- one veteran's claim being handled by the VA office in Salt Lake City -- reaches from a man's waist to above his shoulders. They're not all so big, but until now they all had to be processed by hand.

Keaton Stamper says she spends her days "surrounded" by all the paper needed to support a veteran's claim. David Walser, himself a disabled veteran, also handles claims for the VA. He knows first-hand that those files represent peoples' lives.

"I put in my claim for disability and went through the systems and I went through this just like all the other veterans," he said.

The brace on his wrist is not a war wound. It's from handling all the paper.

The VA plans to switch from paper to electronic files by the end of 2015. Melissa Colin is thrilled at how much easier that should make her job. Colin demonstrates a system with two screens, saying she can view an application on one screen and be working on the other.

It won't come in time to help Aaron Helstrom. But talking to CBS News did. The day after we contacted the VA about his case, he got a call from them.

"I have an appointment at 12:30, at 1:15, at 2 o'clock, at 2:45 and then at 3:30," he said. "Back to back to back to back appointments."

Helstrom set off for those appointments, still lugging all his paperwork. If the VA keeps to the new schedule, Helstrom's claim should be settled by Labor Day and the VA will have one less backlogged case.