The U.S. Department of Veterans' Affairs (VA) currently provides disability benefits to 2.72 million veterans of U.S. military service through the Disability Compensation (DC) program. Until recently, the medical eligibility criteria for this program were the same across service eras, with the key condition being that the disability was caused or aggravated by military service. But in July of 2001, the VA relaxed the eligibility criteria for Vietnam veterans by including diabetes in the list of conditions covered by DC. This change was motivated by an Institute of Medicine report, which linked exposure to Agent Orange and other herbicides used by the U.S. military in Vietnam, to the onset of diabetes. In this paper, we investigate the impact of this policy change on DC enrollment, expenditures, and the sensitivity of the program to economic conditions. Our findings demonstrate that the Agent Orange decision increased DC enrollment by 7.6 percentage points among Vietnam veterans and that an additional 3.3 percent enjoyed an increase in their DC benefits. Our estimates further suggest that the policy change increased program expenditures by $2.69 billion during the 2006 fiscal year and by $45 billion in present value terms. After the policy took effect, we find that the sensitivity of the program to local economic conditions increased substantially. Taken together, our results suggest that even relatively narrow changes in the medical eligibility criteria for federal disability programs can have a powerful effect on program enrollment and expenditures.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
12323.
Length: Date of creation: Jun 2006 Date of revision: Handle: RePEc:nbr:nberwo:12323
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Find related papers by JEL classification: H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War I10 - Health, Education, and Welfare - - Health - - - General I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
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