Duggan, Rosenheck, and Singleton 2010 — Federal Policy and the Rise in Disability Enrollment Evidence for the VA's Disability Compensation Program

Summary

The first rigorous economic study of the U.S. Department of Veterans Affairs (VA) Disability Compensation (DC) program — the nation's third-largest disability program ($31B/year to 3M veterans in 2008), almost entirely absent from prior economic research. Exploits the July 2001 Agent Orange decision (deeming type II diabetes a service-connected disability for Vietnam theater veterans) as a natural experiment to estimate the enrollment, expenditure, and behavioral effects of a medical eligibility expansion. Finds that the narrow policy change increased DC enrollment by ~6 percentage points (pp) and DC expenditures by $2.85B annually, validating the medical eligibility mechanism central to the Duggan-Imberman (2009) decomposition.

Key Claims

• Enrollment effect: Agent Orange decision increased DC enrollment by 200,000–238,000 veterans (~6 pp among Vietnam theater veterans); additional 65,000 existing beneficiaries received benefit increases; DC enrollment was growing at 0.6%/year before 2001 and 3.5%/year after
• Expenditure effect: Policy increased DC expenditures by $2.85 billion in fiscal year 2007 (FY2007) — accounting for 52% of total DC spending acceleration from 2001 to 2007 — with a present value cost of ≈$50 billion
• No veteran labor supply effect: No measurable impact on Vietnam veterans' own labor force participation or self-reported health/disability status (though estimates are imprecise)
• Spousal labor supply effect: Wives of Vietnam veterans significantly reduced labor supply and hours worked — a household wealth effect via transfer income, consistent with Cullen and Gruber (2000); the induced beneficiary did not reduce own labor supply but the household's secondary earner did
• Medical eligibility mechanism validated: A narrow eligibility expansion induced ~8% take-up among potentially affected Vietnam veterans, directly supporting the plausibility of the 1984 Disability Benefits Reform Act's (DBRA) large effects on Social Security Disability Insurance (SSDI)/Supplemental Security Income (SSI) enrollment

Concepts Introduced or Extended

• DI Growth Decomposition
• Causal Effects of DI Receipt

Entities Mentioned

• Mark Duggan
• Robert Rosenheck
• Perry Singleton
• David Autor

Quotes

"This makes it more plausible that the 1984 reforms to SSDI and SSI, which substantially expanded the medical eligibility criteria for these programs, could have caused much of the increase in enrollment for both programs during the past two decades."

"The VA's Disability Compensation program is a large and rapidly growing program that has been essentially ignored in prior economic research."

My Take

A methodologically clean study providing the closest thing to a causal estimate of the medical eligibility channel in disability enrollment. The identification is unusually credible — a specific dated policy change affecting only one subgroup of veterans, with clear pre-policy parallel trends. The main limitation is that SSDI/SSI have no-work requirements that create stronger labor supply distortions than the VA's DC program; response magnitudes may differ. The $50B present value figure for a single condition ruling illustrates how consequential narrow administrative eligibility decisions can be.