The Veterans’ Disability Benefits Commission has rejected a proposal that the Department of Veterans Affairs begin offering veterans with lower-rated disabilities a lump-sum payment instead of lifetime monthly compensation.
The 13-member commission reached its decision unanimously last week in Washington, D.C. It did so after being briefed on the pros and cons of lump-sum disability payments and hearing arguments against the idea from veterans’ service organizations.
The commission, created by Congress in 2004, is conducting the first comprehensive review of veterans’ disability benefits in 50 years. Its recommendations will be delivered to lawmakers next fall.
The commission rejected lump-sum compensation for veterans rated 10 percent or 20 percent disabled by the VA. Veterans with 10 percent and 20 percent ratings represent about three-quarters of all disabled veterans.
Those with a 10 percent rating now receive $112 a month in compensation. Veterans rated 20 percent disabled get $218. The payments are adjusted annually to keep pace with inflation.
Under a lump-sum option, a 25-year-old veteran newly rated as 10 percent disabled might be offered $11,000. A 25-year-old veteran with a 20 percent rating might be offered $22,000. Veterans who have been receiving monthly compensation for years obviously would get smaller offers. Actual amounts are unknown. The goal of a lump-sum option would be to balance fairness for veterans with savings for the VA.
Joseph Violante, legislative director for Disabled American Veterans, testified Oct. 19 against the lump-sum settlements on behalf of 13 veterans groups and service associations. Later, in an interview, Violante said he was surprised to learn that commissioners immediately directed their staff to prepare a decision paper recommending rejection of lump-sum options.
Commissioners intend to approve that decision formally at a future meeting, said Ray Wilburn, spokesman for the commission.
Veterans should be relieved, Violante said. Those tempted by lump sums, he said, “would be giving up a lot of their benefit … and would face the possibility of not being able to reopen their claim should conditions worsen.”
The idea of lump-sum offers for lower-rated disabled veterans was raised in 1956, the last time the VA disability system was overhauled. Various studies have endorsed lump-sum offers periodically since then. The Department of Defense uses lump sums under its own disability retirement program. Service members rated 30 percent disabled or more qualify for monthly disability retirement. But those rated 10 percent or 20 percent can get only a lump-sum disability severance.
CNA Corp., formerly known as the Center for Naval Analyses, was hired by the Veterans’ Disability Benefits Commission to study and report on the advantages and disadvantages of a lump-sum option for the VA.
CNA said veterans might view lump sums as more useful in transitioning to civilian life. They also might enjoy having a choice. And because lump-sum recipients would have fewer interactions with VA, the timeliness of the claims process might improve, according to the CNA report.
The report also said VA compensation costs would fall over time because total dollars paid in lump sums would be a lot less than those paid over a lifetime as monthly compensation. Savings could be 10 percent to 20 percent.
The VA also would save on administrative costs, CNA concluded. That would be especially true if veterans who accepted lump-sum payments were prohibited from applying for a re-rating if their disabilities worsened.
But CNA acknowledged that lump-sum settlements raise new worries about the welfare of veterans who accept such deals. Some would use lump-sum payments foolishly, placing their financial futures in greater jeopardy. Another issue is what these veterans would do if their disabilities worsened.
To better understand the implications, CNA tracked how disabilities in the year 2000 changed over the next five years. CNA found that by 2005, almost no veteran saw his or her disability rating drop, and 5 percent of disabilities had a rating increase.
CNA calculated that offering lump sums to newly rated veterans with these ratings and types of conditions would raise VA compensation costs by $545 million in the first year. Also, the VA wouldn’t break even and begin to see net savings from the change for 25 years.
To comment, e-mail milupdate@aol.com; write to Military Update, P.O. Box 231111, Centreville, VA, 20120-1111; or go to www.militaryupdate.com.
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