Invisible Wounds: Health and Well-Being Impacts of Mental Disorder Disability Compensation on Veterans

We study impacts of the US Department of Veteran Affairs (VA) Disability Compensation program on the health and well-being of the large and rapidly growing population of veterans claiming mental disorders. Our empirical strategy leverages quasi-random assignment of veterans to medical examiners who vary in their assessing tendencies. We find that an additional $1,000 per year in transfers decreases food insecurity and homelessness by 4.1% and 1.3% over five years, while the number of collections on VA debts declines by 6.4%. Despite facing few monetary costs, healthcare utilization increases by 2.5% over the first five years, with greater engagement in preventive care and improved medication adherence. Patient satisfaction surveys suggest that transfers improve communication and trust between veterans and VA clinicians, leading to greater overall satisfaction. Apart from a reduction in self-reported pain, we estimate precise null average effects on mental and physical health, and on mortality. Lastly, those on the margin of claim denial experience worse outcomes on average than other applicants, with suggestive evidence of large treatment effects for this sub-population, highlighting the precarious positions of many marginally (dis)qualified applicants for this program.