Narrow Eligibility for VA’s Disability Compensation by Excluding Veterans With Low Disability Ratings

Background

In 2017, 4.5 million veterans with medical conditions or injuries that were incurred or that worsened during active-duty service received disability compensation from the Department of Veterans Affairs (VA). Such service-connected disabilities range widely in severity and type, from migraines and treatable hypertension to the loss of limbs. The base amount of compensation veterans receive depends on the severity of their disabilities, which are rated between zero and 100 percent in increments of 10; a 100 percent rating means that veterans are considered totally disabled and probably unable to support themselves financially. The most common rating is 10 percent. In 2018, base compensation rates generally ranged from about $140 to $3,000 per month. Additional compensation may be awarded based on the presence of dependents and other factors. The amount of compensation is intended to offset the average amount of income veterans lose as a result of the severity of their service-connected medical conditions or injuries.

Option

Under this option's first alternative, VA would narrow eligibility for compensation to veterans with disability ratings of 30 percent or higher. The second alternative would impose the same limits on eligibility, but it would only affect new applicants for disability compensation.

Effects on the Budget

By the Congressional Budget Office's estimates, the savings from the first alternative, in which current and future recipients would be ineligible for payments for disability ratings of less than 30 percent, would be $38 billion over the 2020-2028 period. In 2017, about 1.3 million veterans received compensation for a rating of less than 30 percent. Under current law, that number is projected to rise to 1.5 million in 2020 and then to 1.9 million by 2028. Under the first alternative, VA would discontinue compensation for those veterans.

Savings from the second alternative, in which VA would no longer make payments for future cases in which veterans' disability rating was less than 30 percent, would be $6 billion between 2020 and 2028. The number of veterans who would no longer qualify for compensation under this alternative would be small at first but would rise to 500,000 by 2028.

Additional savings would be possible if eligibility was further limited to veterans with disability ratings higher than 30 percent. However, the amount saved would not be proportional to the level of the disability rating, because neither payment amounts nor the beneficiary population increase at the same rate as their associated disability ratings.

The largest source of uncertainty in estimating the savings from this option is the future size of the population with disability ratings of less than 30 percent. CBO projects that number based on the number of veterans who received such disability ratings in the past, the growth of the overall disability compensation program, the mortality rate of veterans receiving disability compensation, and other factors.

Other Effects

One argument for this change is that it would permit VA to concentrate spending on veterans with the greatest impairments. Furthermore, there may be less need than in the past to compensate veterans with milder impairments. Many civilian jobs now depend less on physical labor than was the case in 1917, when the disability-rating system was first devised; the rating system that is the basis for current payments has not undergone major revisions since 1945. In addition, medical care and rehabilitation technologies have made great progress. Thus, a physical limitation rated below 30 percent might not substantively reduce a veteran's earning capability, because it would not preclude work in many modern occupations.

An argument against this option is that veterans' compensation could be viewed as a lifetime indemnification the federal government owes to people who become disabled to any degree during service in the armed forces.