Lump sum payment may be improvement

By Tom Philpott: Military Update

The Veterans’ Disability Benefits Commission has examined and rejected a proposal that the VA 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 at a public meeting in Washington, D.C. It did so after being briefed on the pros and cons of lump-sum VA 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 are to be delivered to lawmakers next fall.

One idea the commission won’t embrace is lump-sum compensation, rather than monthly disability pay, for veterans rated 10 or 20 percent disabled by the Department of Veterans Affairs (VA). Veterans with 10 and 20 percent ratings represent about three quarters of all disabled veterans.

Those with a 10-percent rating now receive $112 a month in disability 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 veteran with a 20 percent rating, who is also 25, might be offered $22,000. Veterans who have been receiving monthly compensation for years obviously would get smaller offers. Actual amounts are unknown. They would be based not only on age or disability but final economic assumptions used including “discount rates” that veterans attach to dollars paid today versus in the future. The goal of a lump sum option would be to balance fairness for veterans with savings to the VA.

Joseph V. 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, that same day, directed their staff to prepare a decision paper recommending rejection of all 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, said Violante. 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 re-open 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. It has been endorsed periodically since then, by various studies. 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 or 20 percent by DoD can only get a lump-sum disability severance.

Most DoD disabled retirees apply for a VA rating after leaving service. That can result in a higher rating and better benefits. Those with DoD ratings of 10 or 20 percent typically see their monthly VA compensation delayed until an amount equal to their lump sum from DoD is recouped.
CNA Corp., formerly known as the Center for Naval Analyses, was hired by this commission to study and report on the advantages and disadvantages of a lump-sum option for VA. CNA reviewed how an option might be designed, who should be eligible and what savings might be gained.

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 VA claims process might improve, said the CNA report.