Compensation of Veterans with Psychiatric or Substance Abuse Disorders and Employment and Earnings

Military Medicine, Feb 2007 by Greenberg, Greg A, Rosenheck, Robert A

Using a national sample of veterans, we examined the relationship between disability income and employment, adjusting for health status and other factors. Veterans Affairs disability income payments had no globally detrimental effect on labor force participation, in that the likelihood of employment was reduced only at payment levels of more than $800 per month. Although unearned income from other sources also did not have a substantial negative effect on labor force participation, veterans who received benefits from the Social Security Administration or welfare payments were less likely to be employed, mostly likely because employment earnings above a certain level in some programs may result in the loss of monetary benefits and health insurance.

Introduction

In recent years, there has been Increasing emphasis on the role of employment in recovery from psychiatric and substance abuse disorders1,2 and growing evidence of the effectiveness of several models of vocational rehabilitation.3-5 However, many adults who have a psychiatric or substance abuse disorder also rely on disability income programs for financial support, and there have been concerns that these programs may create disincentives for obtaining employment and participating in rehabilitation.6-12 Several researchers have suggested that disability benefits may create disincentives for individuals with psychiatric disorders, compared with general medical disorders.13-15

Few studies, however, have examined the effect of disability income on the likelihood of employment for people with psychiatric or substance abuse disorders.2,13 Researchers have demonstrated with both cross-sectional and longitudinal population data from Canada and the United States that disability benefits create disincentives for labor market participation beyond the effects of the illness or injury.6,8,10,11,16,17 A study by Drew et al.13 that examined veterans with psychiatric or substance abuse disorders showed that participants in a Veterans Affairs (VA) vocational rehabilitation program who also received compensation payments worked fewer hours, earned less money, had a higher dropout rate, and were less likely to be competitively employed at discharge than were other veterans in the program.

However, other researchers examining cross-sectional data from samples of disability recipients showed that the effect of benefit levels on labor force participation, although significant, is small.18-21 In a longitudinal study, Muller et al.22 found that policy changes by the Social Security Administration that allowed Supplemental Security Income (SSI) recipients to retain some benefits upon employment had little or no effect on either the probability of working or earnings. Bound23 compared employment among beneficiaries and among individuals whose applications for benefits were rejected and found a negligible relationship between labor force participation among older men and receipt of benefits. A cross-sectional study of VA beneficiaries found a significant but small relationship between benefit levels and measures of labor force participation, hours worked, and earnings and reported no differences in these effects between veterans with psychiatric disorders and those with general medical disorders.2

In this cross-sectional study, data from two national surveys of veterans conducted in the late 1980s, the Survey of Disabled Veterans and the National Survey of Veterans (SOV), were combined and used to analyze the relationship between specific VA benefit levels and both labor force participation and earnings among working veterans, controlling for measures of health status and other sources of income. These two surveys contain an unusually rich array of data on nationally representative samples that allow adjustment for age, functional incapacity, unearned income and non-VA public support, and a variety of other sociodemographic and health status characteristics. Because the resulting sample is large (N = 18,625), it is particularly well suited for determining specific benefit levels at which labor force participation is reduced. Furthermore, we considered whether specific benefit levels have more or less of an effect on veterans reporting psychiatric or substance abuse disorders, compared with veterans disabled from other conditions.

Methods

VA Compensation Program

The VA compensation program is an indemnity program providing financial support to veterans who are either partially or totally disabled by injuries or illnesses that were incurred or aggravated during military service.24 The term service connected is used to describe veterans' disability related to such medical problems (i.e., from 10% to 100% service connected), with greater service connectedness yielding greater disability compensation payments. In 1990, the average VA monthly compensation for all veterans in the program was $352 and that for totally disabled veterans (100% service connected) was $1,892.25 The amount of disability compensation payments may change as the severity of an injury or illness changes. If a veteran has dependents, then an additional allowance may be added if the veteran is service connected at >30%. An evaluation performed by a Veterans Health Administration physician and a variety of other documents, including service medical records, medical records from private doctors and hospitals, and military service records, are used by the VA to determine the severity of a veteran's service-related medical problem, eligibility for benefits, and specific benefit levels.

VA payments are more generous than the $300 to $600 monthly payments provided by the Social Security Disability Insurance (SSDI) and SSI programs, for which beneficiaries must be totally disabled.26 Another important difference between the VA compensation program and income replacement programs such as SSDI is that in the VA program most participants are able to return to work without an automatic reduction in their benefits, because the program is intended to compensate participants for illnesses or injuries incurred during military service. This distinctive feature of the VA program allows for an assessment of how compensation payments influence employment and earnings, without needing to take into account the risk of immediate benefit reduction required in income replacement programs.13