SUMMARY
For the upcoming update, I don't find a need to dramatically revise the medical costs estimates downward.
For disability, I've changed the estimation methodology to use a run-rate, adjusted by a projection of the ultimate number of unique deployments to Iraq and Afghanistan.
I've taken a 10% haircut to the earlier figures to cut out the costs associated with Afghanistan, leaving just Iraq, which is what some want to look at in isolation.
For medical, my own adjustments come up with a figure of $257bn againt Bilmes $287bn, so I'm not adjusting at this time.
MEDICAL COST ESTIMATES
In comparing estimates, Peter Orzag writes on his blog:
In their higher case, Stiglitz and Bilmes apply to veterans of those recent conflicts the $5,765 average amount that VA spent in 2006 to treat veterans of all eras, including the aging Vietnam-era population. Stiglitz and Bilmes then increase the larger amount in subsequent years at a medical-specific inflation rate equal to twice the rate of general inflation. The VA, though, estimates that it spent less than half that initial amount — an average of $2,610 in 2006 — to treat veterans returning from Iraq and Afghanistan. It may appear surprising to some readers, but veterans of the recent conflicts on average require less medical care from VA than veterans of earlier conflicts such as the Vietnam War do today.
Unfortunately, for FY2009 budget, the VA estimates have climbed to $3,802.
Nevertheless, that's still below the Bilmes estimates.
Yet, one wonders if the VA is using a fully-loaded cost estimate.
Look at the baseline growth in the VA's medical services budget. Adjusting for a 4.5% medical inflation rate, one still gets a climb in baseline VA costs of $2.4 billion dollars, from 2007 to 2009, and $5bn without any adjustment. One has to guess that the lion's share of that is related to the uptick related to OIF/OEF and $5bn is closer to the Blimes estimates than the direct-cost method...
| VA Growth | 2007 | 2009 | Growth | Adj Growth | Baseline increase |
|---|---|---|---|---|---|
| Medical Services | $28.9 | $34.0 | 17.6% | 8.4% | $2.4 |
| Med Services Employment | 210,702 | 224,752 | 6.7% | 6.7% | 14,050 |
