On Friday, Obama sent a letter to Veterans Affairs Secretary James Peake expressing his "serious concerns" over the reports and demanding an investigation.
The Washington Post broke the story on Friday, which included emails from Dr. Norma Perez suggesting to her staff members that they "refrain from giving a diagnosis of PTSD straight out," because of the increasing costs of treating the disorder.
"Simply put, Ms. Perez's email is outrageous," Obama wrote in the letter. "As you well know, PTSD is the most prevalent mental disorder afflicting our returning...veterans."
"In order to receive their deserved benefits, these brave men and women must endure a long and arduous process. To hear that a VA official is promoting misdiagnoses of soldiers to save money is unacceptable and is tantamount to fraud. "
Peake issued a statement on the matter, saying that Perez's email was "inappropriate" and did not reflect VA policy.
"Too many veterans see the VA as a bureaucracy with the singular goal of denying services and benefits to veterans," said Obama. "This recent incident merely serves to promote that impression."
The Democratic presidential hopeful gave Peake a deadline of May 23 to inform him if the department will open an investigation.
Obama, who is a member of the Senate Veterans' Affairs Committee, also wrote a letter to committee chairman Sen. Daniel Akaka (D-Hawaii) asking him to look into the matter.