Mandatory Spending
Multiple Budget Functions
Introduce Means-Testing for Eligibility for VA’s Disability Compensation
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 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2025– | 2025– |
Change in outlays | 0 | -26 | -37 | -43 | -38 | -43 | -45 | -47 | -53 | -52 | -144 | -384 |
This option would take effect in January 2026.
Veterans with medical conditions or injuries that occurred or worsened during active-duty service may receive disability compensation from the Department of Veterans Affairs (VA). Payments are structured differently than other disability programs. VA's disability payments are intended to compensate for the average earnings that veterans would be expected to lose given the severity of their service-connected medical conditions or injuries, whether or not a particular veteran's condition reduced his or her earnings. Unlike disability programs such as Social Security Disability Insurance, payments are unaffected by a veteran's earnings or other types of income.
Under this option, VA would means-test (that is, restrict full compensation to those with income below a certain amount) all current and prospective recipients of VA's disability compensation. Beginning in January 2026, veterans with service-related disabilities and total household income below $135,000, excluding disability income from the VA, would receive full benefits. That threshold corresponds to the 70th percentile of total household income in the United States in 2022, adjusted for inflation to reach the threshold value applicable to 2026 benefits. CBO estimates that nearly 30 percent of veterans receiving disability payments from VA will have household income above that threshold in 2026. (After 2026, that income threshold would rise with the consumer price index for urban wage earners and clerical workers.) Above the threshold, benefits would be phased out at a constant rate: For every additional two dollars of gross household income, disability compensation would decrease by one dollar.