THE MEDICAL AND DISABILITY COSTS OF THE IRAQ WAR Professor Linda Bilmes Kennedy School of Government, Harvard University Greater Boston Physicians for.

THE MEDICAL AND DISABILITY COSTS OF THE IRAQ WAR

Professor Linda BilmesKennedy School of Government, Harvard University

Greater Boston Physicians for Social ResponsibilityMedical and Societal Consequences of the War

May 19, 2007

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Dimensions of OIF/OEF Conflict*

Total deployed: 1.5 millionDischarged: 689,317 Deaths: 3748Wounded (combat only): 26,293Total “non-mortal casualties”: 60,433

Disability claimants: 180,000 Using VA medical care : 229,000

* Updated May 7, 2007

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Costs of the Iraq War

Direct budgetary costs Economic and social costs

Veterans disability and health care

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Before the Iraq War…. Costs of the War were estimated by

Mitch Daniels and Rumsfeld at $60bn Wolfowitz said it would pay for itself Lindsay predicted $100-$200 billion

CBO now projects past and future expenditures of $722 billion

Even this grossly underestimates full economic and budgetary costs

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Objective of Paper was to Estimate Total cost of Iraq War

Budgetary costs: Money appropriated to

date Future running costs Veterans medical Veterans disability

benefits Military replenishment DOD structural

spending increases

Economic costs: Loss due to serious

injuries Loss of life Less veterans

disability pay Depreciation of

military hardware Macroeconomic

impacts Oil price increase

$2.3 bnThe Economic Costs of the Iraq War: An Appraisal Three Years After The Beginning of the Conflict” by Linda Bilmes and Joseph Stiglitz, January 2006 Updated 8/15/06

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Costs to date

Congress has appropriated over $500Bn for Iraq and Afghanistan military operations, reconstruction, enhanced security at US bases and foreign aid programs $379bn for military operations in Iraq

Since FY 2003 the monthly average cost of operations has risen from $4.4bn to $9.8bn – largely due to Iraq.

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Why is “burn rate” so high?

Combat pay High cost of reservists Contractors and security costs of

contracts Fuel, Maintenance and Repairs Re-enlistment bonuses, death

gratuities Medical care in field

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Two Scenarios for Projecting LT costs

“Conservative” scenario: Assumes all US troops withdrawn by 2010

“Moderate” scenario Small but continuous US presence through 2015

Both scenarios Use 4% discount rate Use troop deployments based on projections by the

Congressional Budget Office, before surge Exclude Afghanistan Exclude costs by other countries Ignore important costs which are not easily quantifiable

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Large Future Budgetary Expenses

Veterans Costs Disability pay +other benefits Medical costs Care of those with serious injuries

Increased defense spending/reset costs/replenishments

Continued military operations (Interest: large cumulative debt)

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Other Costs

Social Costs:

1. Difference between military and civilian pay

2. Cost to families/societies of caring for wounded

3. Economic value of statistical life4. Economic value of serious wounds

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Total Costs of the War in Iraq (excluding Afghanistan and debt)

Scenario Conservative Moderate

Direct costs 839 1104

Macroeconomic 178 750

1,017 1,854TOTAL COSTS

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Soldiers Returning from Iraq and Afghanistan: The Long-term Costs of Providing Veterans Medical Care and Disability Benefits

1.Government overwhelmed by volume of disability claims

2. Insufficient funds and capacity, esp. in mental health

3. Long-term costs for returning OIF/OEF veterans from $300-$600bn

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Veterans Medical Costs

“Non-mortal woundings” >62,000 which is 16:1 ratio to fatalities

229,000 veterans treated by VA: 37% mental health

43% musculoskeletal injuries34% symptoms without immediate cause

Many severe injuries; such as brain, head, spinal, amputations, severe burns, blindness

Estimated 10% of wounded have TBI

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Veterans Medical Costs 48% of Gulf War I vets using VA health care

system

Assuming that OIF/OEF veterans build to same rate (from 38% now); cost of medical care for OIF/OEF veterans: $200-$538 bn

Depends on length of deployment, number of troops, wounded, medical inflation rate, claimant rate

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Capacity Issues: Veterans Medical

Waiting lists esp. for psychiatric care “render care virtually inaccessible” – VA Under

Secretary for Health Frances MurphyVet Centers: 40% in inappropriate care, 17%

waiting listsVA Funding: Ran out of money in past 2 years

2006 ($2 bn)2005 ($1 bn)

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Model: VA health usage

LOW MODERATE HIGH

Servicemen 1.5 million 1.7 million 2.0 million

Duration 2010 2016 2016

Usage rate 48% 48% 50%

Rate of growth 4% 4.5% 5.0%

Initial uptake 32.5% 32.5% 32.5%

Annual cost per patient

$3500 $4500 $5000

HC inflation 7.5% 8% 9.5%

# eventual users

700,000 790,000 930,000

Total cost ($bn)

190 285 536

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Veterans Disability

Veterans eligible for disability for a wide number of conditions

44% of Gulf War I veterans claimed for disability benefits (87% granted)

Annual cost of disability pay for Gulf War I veterans is more than $4 billion

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Veterans Disability (2) More than 25% of returning OIF/OEF vets

have already claimed disability

Assuming claims at same rate as Gulf War I veterans, the lifetime cost is $68 -$100bn

If 50% claim benefits and COLAs go up at higher rate, cost could reach $125bn

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Capacity Issues: Veterans Disability

Backlog of pending claims2000: 69,0002006: 600,000

VA expects 1.6 million addl claims w/i 2 years

Average length of time = 6-24 monthsvs, industry average 90 days

900,000 GWOT troops deployed who have not returned yet

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LOW MODERATE HIGH

Servicemen 1.4 million 1.7 million 2.0 million

Duration 2010 2016 2016

Claims rate 44% 44% 50%

Approval rate 87% 88% 88%

Initial uptake 25% 25% 25%

Avg. Benefit payment

$6506 $8890 $8890

Rate of increase

2.8% (COLA) 4.1% 6.1%

# eventual claimants

638,000 740,000 872,000

Total cost ($bn)

68 110 127

Disability benefits for OIF/OEF veterans

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Recommendations

Disability Benefits:1. Change presumption so soldiers receive 2 years of

stipend (while claim is processed)2. Require all servicemen to have exit medical

medical examination; expand BDD program3. Streamline disability rating scale to 4 levels4. Fast track hiring of claims adjudicators5. Place claims specialists in VA centers and mobile

centers6. Extend free VA medical care to 3 years

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Medical Recommendations1. Increase funding for VHA mental health care and

add hiring flexibilities

2. Expand “free” health care to 5 years

3. Change VHA funding to a Trust system (remove from discretionary)

4. Fund studies of long-term effects of TBI and PTSD

5. Fund National Vietnam Readjustment Study

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OMITTED COSTS (1) Costs of risks borne by individuals

Health care costs not borne by the government All costs borne by other countries, including Iraq

Military costs Destruction of property Loss of life

All costs of increased insecurity Increased costs of cross border flows Reduced Private investment Value of reduced capability of responding to national

security threats elsewhere in the world Value of reduced capability of responding to domestic

situations in which the National Guard or the Reserves might have been called upon (as in New Orleans)

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OMITTED COSTS (2) Indirect aggregate demand effects

Reduced incomes in trading partners Anti-American sentiment

Consequences of tighter monetary policy as a result of increased inflation

Costs of oil price volatility Investment, Bankruptcy

Losses in asset values (arising from increase in oil prices or otherwise Equity market Housing

Indirect consequences of worsening fiscal position Increased government expenditures on oil Increased expenditures on the war