Date

2015

Department or Program

Economics

Primary Wellesley Thesis Advisor

Courtney C. Coile

Additional Advisor(s)

Sari A. Kerr

Abstract

The VA’s Disability Compensation (VADC) program, which provides monthly tax-free cash benefits for qualifying disabled veterans, has been growing rapidly since 2001. The drivers of the program’s growth are not well understood and worsening health is one possible driver, but recent liberalizations of medical eligibility criteria may also play a role. This study decomposes the recent growth in the VADC program into the share of the program’s growth due to worsening veteran health and the share due to other factors. I use data from the National Health Interview Survey (NHIS) to estimate the relationship between health and receipt of VADC benefits in the late 1990s, and then use those estimates along with the actual health of recent veterans to project the share of today's veterans that would be on the program if eligibility criteria had not changed. My primary empirical finding is that the worsening health of veterans can only explain about one-quarter of the program’s growth. This result suggests that the program is not growing primarily due to veterans being in worse health during the post-period. Rather, the program is growing mostly as a result of other factors unrelated to health status. These findings may help policy makers as they consider how to balance the needs of wounded veterans against rapidly rising program expenditures.

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