U.S. Department of Defense Disability Compensation Under a ...

Research Report

C O R P O R AT I O N

STEPHANIE RENNANE, BETH J. ASCH, MICHAEL G. MATTOCK,

HEATHER KRULL, DOUGLAS C. LIGOR, MICHAEL DWORSKY, JONAS KEMPF

U.S. Department of

Defense Disability

Compensation Under

a Fitness-for-Duty

Evaluation Approach

For more information on this publication, visit t/RRA1154-1.

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About This Report

The joint Department of Defense (DoD)¨CDepartment of Veterans Affairs Integrated

Disability Evaluation System (IDES) is the process by which DoD determines fitness

for duty, separation, or retirement of service members because of disability. Service

members who are evaluated for disability undergo a comprehensive medical examination to document all medical conditions and receive a disability rating for every

condition documented during the medical examination. These ratings are used by

DoD and the Department of Veterans Affairs to determine the amount of disability

compensation service members will receive if they are found unfit to continue serving

and consequently medically discharged.

The IDES is a lengthy, complex system. Much attention has been paid over the

years to the efficiency of the process, and many successful reforms have been put into

place to reduce the length of time that service members remain in the system. But it is

also a DoD priority to ensure that service members receive adequate and fair disability

compensation and that the DoD disability compensation system works efficiently and

compatibly with the IDES. As a result, it is important to occasionally review the current compensation system to ensure that it still achieves this goal as the characteristics

and needs of DoD and service members evolve over time.

Although proposals for reforming the DoD compensation system have been

made, a rigorous evaluation of what those alternatives might look like and what their

impact would be on service member benefits and costs to DoD has never been conducted until now. This report describes the results of an evaluation of four alternative

disability compensation approaches that would support a simpler, more streamlined

disability evaluation process. While these alternatives are hypothetical and none are

being pursued by DoD, the report provides relevant analysis should such alternatives

be considered in the future.

The research reported here was completed in April 2021 and underwent security review with the sponsor and the Defense Office of Prepublication and Security

Review before public release.

This research was sponsored by the Office of the Deputy Assistant Secretary of

Defense for Health Services Policy and Oversight and Deputy Assistant Secretary of

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iv

U.S. Department of Defense Disability Compensation Under a Fitness-for-Duty Evaluation Approach

Defense for Military Personnel Policy and conducted within the Forces and Resources

Policy Center of the RAND National Security Research Division, which operates the

National Defense Research Institute, a federally funded research and development

center sponsored by the Office of the Secretary of Defense, the Joint Staff, the Unified

Combatant Commands, the Navy, the Marine Corps, the defense agencies, and the

defense intelligence enterprise.

For more information on the RAND Forces and Resources Policy Center, see

nsrd/frp or contact the director (contact information is provided on the

webpage).

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Contents

About This Report.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

Figures and Tables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi

Acknowledgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix

Abbreviations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxi

CHAPTER ONE

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Streamlining the Current System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Study Objective and Research Approach.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Road Map of Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

3

6

7

CHAPTER TWO

Overview of the Current Department of Defense Disability Compensation System. . . . . 9

Department of Defense Disability Severance and Disability Retirement. . . . . . . . . . . . . . . . . . . . . . . . 9

Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

CHAPTER THREE

Alternative Department of Defense Disability Compensation Systems. . . . . . . . . . . . . . . . . . . 23

What Is the Compensation Objective?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Alternative Department of Defense Disability Compensation Systems. . . . . . . . . . . . . . . . . . . . . . . . . 25

Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

CHAPTER FOUR

Changes in Department of Defense Disability Compensation Under Alternatives.. . . . . 31

Approach for Estimating the Change in the Net Department of Defense Disability

Benefit Under Alternatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Data Sources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Results: Estimating the Change in the Net Department of Defense Disability Benefit

Under Alternatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

v

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