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The Other VA Scandal

by Sally Satel & B. Christopher Frueh

Disability payments are making victims of veterans

Robert McDonald, former chief of Procter and Gamble and President Obama’s choice to head the beleaguered Department of Veterans Affairs, faces a gargantuan task. The previous agency head, General Eric Shinseki, resigned in the wake of scandals involving secret patient waiting lists and record falsification at numerous medical centers. Since his departure, additional reports of retaliation against whistleblowers and millions of dollars in unnecessary payments to veterans with only temporary disabilities have come before Congress.

McDonald will doubtless begin by addressing administrative bloat, deficits in medical staffing, and, in the words of a recent White House assessment, the “corrosive culture” that permeates the health-care arm of the VA. Indeed, the Veterans Access, Choice, and Accountability Act was recently passed to address precisely these problems. But the new director should not ignore the VA’s other scandal: a dysfunctional benefits system for veterans with disabilities.

Problems at the Veterans Benefits Administration, or VBA, which administers veterans’ disability benefits, have been festering for decades. As a result, it is choked by a massive backlog of disability claims, more than 260,000 of them, and by a set of bureaucratic procedures and policies that not only waste billions of dollars but create perverse incentives for veterans not to recover from war-related injuries and conditions.

The 2014 budget for disability compensation is $65.7 billion. Even as the population of U.S. veterans declines, the number of disability beneficiaries increases. Between 2000 and 2012, there was about a 15 percent decline in the total number of veterans, while the number of them receiving disability compensation climbed by 50 percent.

Today, almost 30 percent of post-9/11 veterans receive service-connected disability pay. By comparison, 11 percent of World War II veterans, 16 percent of Vietnam-era troops, and 21 percent of those who served in the first Gulf War are current beneficiaries.

Disability compensation is available for any injury or condition that an individual develops while on active duty, regardless of how it is incurred. Only a modest portion of disability benefits goes to veterans with major physical injuries sustained in combat, such as burns, amputations, or head trauma. According to the VBA, conditions such as tinnitus, lower-back strain, limited knee flexion, mental disorders, and scars are among the most common disability conditions for which monthly checks are sent.

Before turning to the factors that explain the surge in disability claims, a brief description of the claims process is in order.

A veteran must first establish that a particular condition is traceable (or “connected”) to military service, or that a preexisting condition was aggravated by military service. He or she then files a claim with a regional VA benefits office, listing the conditions for which compensation is requested. A medical specialist must validate each condition. This generally requires the veteran to make several visits to VA clinicians, thereby adding to the overall health-care workload of the institution.

If his claim is validated, the veteran becomes eligible for a “service connected” disability rating, which ranges from 0 to 100 percent, depending on the severity of the illness or injury. This rating is based on a fixed formula intended to calculate the degree to which the illness or injury reduces the veteran’s earning capacity. The kind of care for which a veteran and his or her family are eligible, and the size of the monthly disability payment the veteran receives, vary with the rating. A veteran with a rating of 10 percent receives $130, while a veteran with a rating of 100 percent receives $2,858 (or $3,134 for a family, all of whom will also receive free health care at the VA). For any given veteran, the ratings for separate service-connected conditions add up. He or she can have ten discrete non-severe problems each rated at 10 percent and thus attain a total rating of 100 percent.

As of 2012, the most recent year for which data are available, the average number of service-connected conditions claimed by Gulf War–era veterans was over a dozen; a smaller number, five to six on average, resulted in compensation. Among Vietnam-era veterans, the average number of conditions covered was between three and four, compared with two to three among veterans of World War II and the Korean War. Veterans who are now applying for the first time — regardless of the war they served in — are likely to receive higher payments than those whose claims were approved a decade ago.

Several factors have driven the steady rise in claimants. First, modern wars have a long economic tail. The social impact of lost lives, impaired quality of life, and damaged families, as well as the expense of caring for veterans, imposes delayed costs. According to Linda Bilmes of Harvard’s Kennedy School of Government, the peak year for paying disability benefits to veterans of World War I was 1969; payments to World War II veterans peaked in the 1980s; and the peak for Vietnam veterans has not even arrived. Bilmes and her colleague Joseph Stiglitz project that the long-term cost of caring for veterans of Iraq and Afghanistan will be at least $500 billion, and quite possibly much higher.

Second, new veterans are filing for disabilities at historic rates. About 45 percent of former troops from Iraq and Afghanistan are seeking compensation for ailments, often for a number of conditions at once. Social media enable veterans to educate one another about the workings of the system and to compare notes. This — coupled with the greater social acceptability of requesting benefits (especially for psychiatric conditions) and vigorous outreach by Veterans Service Organizations, which press veterans to file claims if they are eligible — plays an important role in claims initiation. The VA itself encourages active-duty service members to file disability claims before they are discharged from the military, even though they are still deemed fit to serve.

Third, once a veteran has submitted a claim, there is no limit to the number of subsequent claims he may file. Indeed, many of those filing claims today are Vietnam-era veterans attributing common conditions of advancing age — such as arthritis, sleep apnea, back pain, or psychiatric illness — to the worsening of original service-connected complaints.

Though nearly half of those in the system have ratings of 30 percent or below, they can and do apply for higher ratings if ailments worsen. “The disability system has this escalator quality,” David Autor, an economist at MIT, has told the Los Angeles Times. “Once you get on, you just keep going up.”

In addition, veterans may file their first claim at any time, no matter how long ago they served. In its latest report, the VBA documents that Vietnam-era servicemen, aged 55 to 74, constituted the largest cohort of veterans — over one-third — among those who began receiving service-connected compensation in 2012.

A fourth cause of the growing volume of disability claims are “presumptions,” a category of service-related illnesses presumed to have been caused during military service even if the veteran cannot demonstrate that this is the case. Exposure to Agent Orange, the dioxin-containing defoliant sprayed in Vietnam, is the best-known presumption. Congress first established exposure to the chemical as a presumption in 1991. At the time, skin conditions, lymphoma, and soft-tissue sarcomas were presumed to be caused by dioxin.

But it was after Congress extended the Agent Orange presumption to Type II diabetes in 2001 that claims really took off. The scientific justification for this extension is highly questionable, since Type II diabetes is not at all uncommon. The correlation between Agent Orange and diabetes is weak to statistically insignificant, depending on the study, and it’s likely that the development of the condition is more strongly influenced by factors such as family history, physical inactivity, and obesity. The VA is not permitted, however, to take these other factors into account. A similarly tenuous linkage exists between Agent Orange and heart disease and Parkinson’s disease, two presumptions that Congress added in 2010.

A veteran may also file a claim for a “secondary” condition. Thus, a beneficiary of the Agent Orange presumption for Type II diabetes may file for compensation for conditions caused or exacerbated by diabetes, such as high blood pressure, erectile dysfunction, cataracts, or renal failure. If these secondary conditions worsen over time, as many will, the veteran is eligible to file yet another claim. (And because VA doctors participate in the disability-determination process, evaluating these claims occupies time that they would otherwise devote to patient care.)

A final contributing element to the surge in disability compensation is the jump in claims submitted, and granted, for post-traumatic stress disorder (PTSD), primarily in Vietnam veterans. The condition encompasses symptoms such as nightmares, unbidden waking images, phobic avoidance (e.g., remaining isolated from situations or people reminiscent of the trauma), negative mood (e.g., guilt, social detachment, sadness), and hyper-arousal (e.g., enhanced startle, anxiety, sleeplessness).

Why, decades after their service, are Vietnam veterans only now applying for PTSD disability compensation? Experts have offered a number of reasons, all of them plausible. Among the possibilities are that the claimants had been suffering in silence for decades, that some experienced transient stress but attributed it to long-ago war trauma, and that retirement-age veterans are seeking economic support.

Fully one-third of new admissions to VA PTSD-treatment programs in 2012 were Vietnam-era veterans, according to a just-released report from the Institute of Medicine. Researchers have found that the vast majority of patients in such programs are planning to file claims or have filed them already. There is little reason to expect that the current patient cohort will differ in this regard, though the pattern certainly warrants tracking.

Americans hold their veterans in high esteem and support government provision of a financial safety net for men and women who became incapacitated in the course of their military service. Yet the vexing paradox of disability compensation is that it can create a perverse incentive to stay sick and remain out of the work force. The “VA’s benevolent benefits system,” says former VA secretary Jim Nicholson, “is making permanent victims out of young Americans in the prime of their lives.”

Imagine a young man wounded in Iraq. His physical injuries heal, but he remains in intense psychic pain. Sudden noises make him jump out of his skin. He is flooded with memories of bloody firefights and deaths of buddies. Nightmares torment him; he can barely concentrate and feels emotionally estranged from his family. This veteran has a classic case of PTSD. He is only in his early 20s, yet he is convinced he’ll never be able to hold a job or fully function in society, and so he files a claim with the VA for “total” (100 percent) disability compensation for PTSD.

This seems a perfectly logical move on his part, and in granting him the benefits, the VA sincerely believes it is acting humanely. But being designated as disabled and receiving a monthly check as a result may undermine the veteran’s chances of recovery, by confirming his fear of being forever sidelined from normal life. This is a big problem. Imagine telling someone with a spinal injury that he’ll never walk again — before he has had surgery and physical therapy.  “Why should I bother with treatment?” he might think.

The months immediately after military service are a time when mental wounds are fresh and thus most responsive to therapeutic intervention. But instead our veteran, at home and on disability, settles into a “sick role.” Tragically, he is deprived of the potent therapeutic value of work. Lost are the sense of purpose work gives (or, at least, the distraction from depressive rumination it provides), the daily structure it affords, and the socializing and friendships it can provide. The longer our veteran remains unemployed, the more his confidence and motivation erode and his skills atrophy. The veteran-patient is caught in a downward spiral of invalidism. What’s more, the amount of his monthly check is contingent upon his symptoms, which creates an incentive to remain sick.

The current disability system is a throwback to 1917, when the government established disability compensation as part of the War Risk Insurance Act. At a time when farming and industrial labor were the dominant occupations, loss of a limb or other bodily injuries could mean impoverishment. The nature of work has changed as service- and knowledge-based jobs have moved to the forefront of the economy, but the VA’s disability system remains fixed in amber, organized around an outmoded model that equates physical impairment with inability to work.

Returning from war is a major existential project. Sometimes the emotional intensity can be overwhelming and merit professional help. This should come in the form of quality treatment and rehabilitation, with ample doses of warranted optimism. The possibility of ongoing disablement should not even be in the picture yet. But under the current system, well-meaning though it is, rating examiners are often assigned to determine the extent of a veteran’s incapacitation irrespective of whether he has received treatment.

This is clinically irresponsible. It is also premature in the extreme. Given the estimable role of non-medical factors — expectation of recovery, strength of social support, and the meaning one makes of one’s distress — how can any clinician predict at the time of diagnosis the odds of a veteran’s developing long-lasting, let alone lifelong, disablement?

Over the coming years, hundreds of thousands of troops will be discharged. In the short term, timely adjudication of claims will be a priority, but policy architects articulating an overarching vision of VA reform will need to clarify — and presumably revise — the objectives of veteran-disability policy.

Former VA director Anthony Principi has put forth a number of pragmatic suggestions. He believes that benefits and services should be provided only for disabilities that veterans incurred while serving, and not for the inevitable diseases of old age. Imposing a cutoff date for filing claims so that resources preferentially go toward the most recent generation of veterans is another idea Principi suggests considering.

A suggestion from public-health experts, including those at the Institute of Medicine, concerns presumptions: namely, that instead of relying on correlation between a toxin and a medical condition, the VA should employ a standard of demonstrated causation.

More expansive reform, we believe, should entail a shift to a “social model” that takes into account personal factors — as well as environmental ones, such as the availability of wheelchair ramps — in addition to medical diagnoses. Such an approach embodies the expectation that rehabilitation and successful transition to civilian life are possible. It would also be a front-loaded apparatus that spent money on top-flight care of trauma, both mental and physical, as soon as possible after separation from the military.

Under a treatment-and-rehabilitation-first regimen, veterans would not be permitted to file for disability compensation until after they received rigorous medical care as well as rehab services oriented toward helping them participate in society. Such rehab takes time, of course, so while veterans underwent care and were too fragile for employment, they would receive temporary financial support. Call it a “recovery benefit” — one generous enough to meet needs, but temporary, and devoid of the current disincentives to recover and work.

As a last resort, a veteran who had been through high-quality rehab but still could not work would be eligible for disability status. Benefits would be based on functional incapacity and reviewed every three to five years — and would not include the same disincentives to work that exist now. To former troops who never regain their civilian footing despite the best treatment, full and generous disability compensation would surely be due.

Meaningful disability reform will be a mammoth administrative undertaking and, even more daunting, an epic challenge to entrenched ideological and political forces. For decades, Congress has debated, legislated, and revised benefits to veterans — and debated and revised them again. Agency rule has been piled upon agency rule to produce a hidebound edifice that, like Congress, is too often beholden to powerful veterans’ advocates who tend to be vehemently opposed to any changes, particularly those meant to rein in costs.

A front-loaded system that seeks full recovery or the highest level of function attainable for each individual — and that provides state-of-the-art treatment and rehabilitation — will not come cheap. But it will allow us to better fulfill our debt to the injured veterans who sacrificed so greatly for our safety and freedom — by restoring them to healthy and productive lives.

– Sally Satel is a resident scholar at the American Enterprise Institute. B. Christopher Frueh is the chairman of the social-sciences division at the University of Hawaii at Hilo. Both are former VA clinicians.

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