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  • Scott

VA Disability Pay Offset

Today’s blog entry is a little different than those in the past. Today I’m addressing a very specific issue with Veterans Disability payments and the practice of offsetting those payments by reducing retired pay earned by the recipients. In full transparency, I am one of those retired veterans affected by the practice.

Military veteran organizations have long railed against a procedure called VA Disability Benefits offset. The veteran is injured and assessed to have a disability rating. An assessed rating of 30% entitles the veteran to a monthly payment of $508.[1] Sounds great so far.

And it is if the veteran isn’t a retiree. If the veteran separated without earning a retirement, they receive the payment free and clear, just as intended. On the other hand, if the veteran is a retiree, the Defense Finance and Accounting Service subtract the $508 from their retired pay, resulting in the veteran effectively paying for their disability.

The Veterans of Foreign Wars estimates that over 50,000 military retirees are subject to this offset.[2] Some exceptions to the offset exist, the biggest of which are Concurrent Retirement and Disability Pay (CRDP) and Combat-Related Special Compensation (CRSC). CRDP is a program that restores the offset to a veteran’s pay if their disability rating is 50% or more. Similarly, the CRSC exception restores the offset to the veteran’s pay if the disability directly results from a qualifying combat injury. If you’re one of many veterans whose disability ratings are less than 50% and a retiree, your VA disability benefit is almost a financial illusion.[3]

Admittedly, how to look at the issues has a philosophical component. Is the payment meant to compensate the veteran for their direct injury, meaning is it a payment for past service? Or is the payment meant to compensate the veteran for future reductions in earning capacity and other tangible or intangible costs associated with the injury? The statutory definition of compensation doesn’t answer this core question. The statutes define compensation as “a monthly payment made by the Secretary to a veteran because of service-connected disability[.]”[4] But recently, the Congressional Budget Office has offered options to reduce disability payments for veterans who reach social security age[5] and reduce benefits for high-earning veterans.[6] Both recommendations were based on a presumption that the benefit was intended to compensate for lost or reduced earning potential due to the disability.

But I think most reasonable people looking at the exceptions believe they make sense. It is morally wrong that a veteran who completed a lifetime of service and was eligible for retirement but lost the “injury lottery” should be compensated differently for those direct injuries. From the moral and logical perspective, the only issue with the two exceptions is why they must be exceptions.

This system sets up a weird set of incentives for both the veteran and the VA. The current formula incentivizes the VA to rate disabilities below 50%. Conversely, the veteran can access a relatively robust, flexible, but slow appeals process and is incentivized to use them for a rating of 50% or more. The result is a lot of wasteful and, in my opinion, unnecessary medical, administrative, and legal processes.

The medical experts for both sides have a lot of discretion and subjective assessments as to which column the veteran’s rating the veteran best fits. When a veteran describes their pain level, are they expressing it the same way others may, and where do you place that in your decision tree? Similarly, when testing a veteran’s range of motion, how consistent is the assessor in the force used or even where the baseline starts?

I don’t believe VA clinicians consciously consider whether a retired pay offset is at play. But, based on my experience as both an attorney representing other veterans and my interactions, the choice of rating category always gives the benefit of the doubt to the VA system rather than the veteran. As outlined, this sets up a situation where the veteran with a rating of less than 50% is highly incentivized to appeal that rating and seek an outside medical expert to support the appeal.

The good news is members of Congress are attempting to address this issue. In the Senate, the Major Richard Star Act (S. 344) was reintroduced this year and has been referred to the Senate Armed Forces Committee. Sen. Jon Tester (D-MT) is the bill’s sponsor and has 62 cosponsors. The Act failed to pass in the last Congress, despite passing in the Senate and having 290 cosponsors in the House, the House leadership chose not to bring it up for a vote.[8]

In the House, the act was reintroduced this month by Rep. Gus. Bilirakis (R-FL) (H.R. 1282). The bill has 242 cosponsors crossing both ideological and geographic lines. For example, my representative, Thomas Massie (R-KY), and Former Speaker Nancy Pelosi (D-CA) are cosponsors. I have difficulty thinking of another bill that could claim this level of ideological diversity.

The question is, can the Major Richard Star Act make it through the partisan environment in Washington? Some issues must be considered. The Congressional Budget Office has pegged the Act’s cost at approximately $8B over eleven years.[9] But to be fair, that represents 0.01% of the federal budget over that period.[10] In addition, I’m not sure the CBO’s numbers include the likely possibility of fewer appeals and the likely administrative efficiency and savings that would result. I know every little bit helps when running a $1 Trillion plus deficit. I would gladly support deferring this change if it indicated that other, more costly programs were seeing any level of spending constraints.

So if you’re still reading this at this point, I guess I’m asking you to reach out to your Representatives and Senators and ask that they address the issue this year. Ask them not to let it get bogged down in the procedural issues that killed it last year.

I note that neither Senator Mitch McConnell nor Senator Rand Paul has signed on as cosponsors for my Kentucky readers. This does not mean they aren’t supporters, but only that they have not cosponsored it. Of Kentucky’s House members, Representative Andy Barr is a cosponsor in addition to Representative Massie. Again, just because the others are not cosponsors does not mean they will not support it if it comes to a vote, but a nudge can’t hurt.

Relevant Informational Links

Endnotes [1] 2023 Veterans Disability Compensation Rates. [2] VFW Action Alert: Eliminate Unjust Offset for Chapter 61 Retirees. [3] This is not to say having the disability rating doesn’t have real consequences. By acknowledging the service-connected injury, the VA provides access to the VA system for related medical care at no cost and that portion of the payment is not subject to taxation. [4] 38 U.S.C. Sec. 101(13). [5] Reduce VA’s Disability Benefits to Veterans Who Are Older Than the Full Retirement Age for Social Security. [6] Means-Test VA Disability Compensation for Veterans With Higher Income. [7] Rand Study: Is Military Disability Compensation Adequate to Offset Civilian Earnings Losses. [8] NBC News: Lawmakers decline to let Major Richard Star Act move forward for vote. [9] NBC News: Bill to help disabled war vets surpasses rare threshold of support. [10] Congressional Budget Office, 10 Year Budget Projections


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