Mandatory Spending

Function 700 - Veterans' Benefits and Services

Reduce VA’s Disability Benefits for Veterans Who Are Older Than the Full Retirement Age for Social Security

CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.

Billions of Dollars 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2023–
Change in Outlays 0 -0.3 -0.7 -1.0 -1.3 -1.7 -2.0 -2.4 -2.8 -3.2 -3.2 -15.3

This option would take effect in January 2024.

Veterans with medical conditions or injuries that occurred or worsened during active-duty service receive disability compensation from the Department of Veterans Affairs (VA). By law, VA's disability ratings (the basis for disability payments) are to be based, as far as practicable, on the average earnings that veterans would be expected to lose given the severity of their service-connected medical conditions or injuries. Those ratings do not depend on whether a particular veteran's conditions reduced the person's earnings. Disability compensation is not means-tested: Veterans who work are eligible for benefits, and most working-age veterans who receive such compensation are employed. After veterans reach Social Security's full retirement age, VA's disability payments continue at the same level. By contrast, the income that people receive from Social Security or private pensions after they retire usually is less than their earnings from wages and salary before retirement.

Under this option, veterans who start receiving disability compensation payments in 2024 or later would have those payments reduced by 30 percent at age 67. (Social Security's full retirement age is 67 for people born after 1959.) Social Security and pension benefits would be unaffected by this option. Veterans who are already collecting disability compensation would see no reduction in their VA disability benefits when they reached age 67.