The number of Vietnam-era VDC beneficiaries grew rapidly in the late 1990s, growth that accelerated in the early part of this century and has not yet leveled off.
The Veterans Disability Compensation Program (VDC), which provides a monthly stipend to disabled veterans, is the third largest American disability insurance program. Since the late 1990s, VDC growth has been driven primarily by an increase in claims from Vietnam veterans, raising concerns about costs as well as health. In Did Vietnam Veterans Get Sicker in the 1990s? The Complicated Effects of Military Service on Self-Reported Health (NBER Working Paper No. 14781), authors Joshua Angrist, Stacey Chen, and Brigham Frandsen use the draft lottery to study the long-term effects of Vietnam-era military service on health and work as reported in the 2000 Census. Their estimates show no significant overall effects on employment or work-related disability status, with a small effect on non-work-related disability for whites. On the other hand, for white men with low earnings potential there is a large estimated negative impact on employment, a marked increase in non-work-related disability rates, and an even larger impact on the use of federal disability programs. This differential impact of Vietnam-era service on low-skill men cannot be explained by more combat or war-theatre exposure for the least educated. That leaves the relative attractiveness of VDC for less skilled men, and the work disincentives embedded in the VDC system, as a likely explanation.
The authors use the draft lottery and the 2000 U.S. Decennial Census data to solve the problem of selection bias that is inherent in comparisons of outcomes between veterans and non-veterans. Although veterans differ from non-veterans in various ways, men who were randomly selected for service in the draft lottery are otherwise similar to those not selected. The 2000 Census provides an exceptionally large sample and, uniquely among large representative samples, contains the birthday information required to determine draft lottery numbers. Moreover, in addition to the usual labor force status variables, the 2000 Census long form asks respondents about disabilities along a variety of dimensions, with a distinct category for disabilities that affect work.
Vietnam veteran status is estimated to have a large impact on the use of federal disability transfer programs such as VDC in spite of an overall modest impact on self-reported disability status. Veterans who receive VDC or Social Security Disability Insurance (SSDI) -- especially those who are (or aspire to be) classified as 'individually unemployable (IU)' -- are probably more likely to define themselves as disabled and less likely to work. This seems to be a special concern for Vietnam-era Post-Traumatic Stress Disorder (PTSD) claims -- data from 2005 show that roughly one-third of PTSD claimants are designated IU and that the IU claimants are concentrated in the Vietnam cohort. IU claimants get the maximum disability benefit, are not supposed to work, and are likely to receive veterans' benefits for the rest of their lives.
These results have important implications for veterans' compensation policy. The number of Vietnam-era VDC beneficiaries grew rapidly in the late 1990s, growth that accelerated in the early part of this century and has not yet leveled off. This imposes a growing burden on a system that must serve new cohorts of veterans from the Gulf War, Afghanistan, and Iraq.
The authors' results also raise questions about widely publicized projections of the disability costs likely to come out of current conflicts. A large number of VDC claims in this most recent cohort are for PTSD, which is an especially expensive diagnosis, associated with high program costs and large earnings losses. But the costliness of PTSD claims comes in large part from the link with IU and the consequent increase in VDC benefits. Case reviews in the VA Office of the Inspector General show that mental health visits declined by 82 percent after an IU rating decision, and that many granted an IU determination stop seeking treatment for mental health entirely, although health care visits for other conditions are unchanged.
Likewise, the authors' results indicate that the employment consequences of PTSD may have as much to do with incentives as with a medical inability to work, at least in some cases. The complicated links between military service and variables related to health show that the disability-related costs of conflict are driven by policy and regulatory choices, as well as the battlefield consequences of war.
-- Lester Picker