The Basics of VA Compensation Benefits and the Effect that the receipt of VA Compensation will have upon Eligibility for SSI and Medicaid Benefits

If a person with disabilities is a veteran, a child of a veteran, the spouse of a veteran, or the parent of a veteran, the disabled person may be eligible to receive benefits from the U.S. Department of Veterans Affairs (VA).  Moreover, the receipt of these benefits may jeopardize Supplemental Security Income (SSI) or Medicaid benefits.  Therefore, it is important to review veteran status, and to determine the availability of veteran benefits, before implementing any special needs plan.

A. VA Compensation Benefits.

A veteran who suffered an injury or disease while on active duty, and the injury resulted from his or her  service or was exacerbated by the veteran’s service, can receive monthly income from the VA called disability Compensation. Veterans are entitled to Compensation if the following requirements are met:

1.    The veteran was discharged/released under conditions other than dishonorable,
2.    The disease or injury was incurred or aggravated in the line of duty, and
3.    The disability is not a result of their own willful misconduct or abuse of alcohol or drugs.

Service connected Compensation is the VA’s version of worker’s compensation in the private sector.  Employment by the veteran is not a bar to receiving service connected Compensation.   Furthermore, VA Compensation benefits are not reduced by earned or unearned income or the value of the veteran’s net worth.  VA Compensation is tax-free income.

Thus, a veteran who is expecting to receive a personal injury settlement, inheritance, or financial windfall of another sort, will not lose eligibility for or the receipt of any service-connected benefits.

Receipt of service-connected Compensation benefits may, however, reduce the amount of SSI benefits which the client is entitled to receive. VA Compensation will reduce SSI benefits on a dollar-for-dollar basis, like any other kind of income classified as “unearned” under the SSI rules.  Thus, if a person relies on SSI for Medicaid services, the SSI recipient must analyze whether the receipt of Compensation from the VA is more advantageous or less advantageous.  The veteran can choose to discontinue the receipt of Compensation at any time.  If the veteran does so, Compensation can be applied for again in the future.

When service-connected disability Compensation has been awarded, the veteran also receives access to healthcare at the VA clinic and pharmacy services.

Moreover,  if a veteran has a service-connected disability and receives Compensation, a dependent of that veteran can file a claim for benefits based on the status of the veteran.  The different benefits that may be available include:  Dependency and Indemnity Compensation (DIC), Accrued Benefits, and Death Pension.    Dependent survivors of veterans include the surviving spouse, surviving child, and dependent surviving parents.

B. Survivor Benefits Program – Military Benefits.

Service members who retire from the military receive a retirement “annuity” in the form of a monthly pension payment.   While in the service, the service member can elect to have the monthly annuity payments reduced so that, upon death, a surviving spouse or dependent child can receive payments.   The election is made at the time the military person retires.  If no election is made, the full benefit available under the Survivor Benefits Program (SBP) will automatically take effect for a spouse and the children.  SBP elections cannot be canceled or changed after retirement, with the exception of divorce or death of a beneficiary.   The typical election is for the survivor to receive up to 55% of the retiree’s pay.   SBP income is taxable.

Children who are eligible for SBP must be unmarried, under the age of 18 (under 22 if in school), or disabled prior to the age of 18 (under 22 if in school).   When the veteran has a child with disabilities, it may be tempting to elect SBP for the child to ensure the child has an income stream for support.  However, this income stream can prevent the child from becoming eligible for SSI benefits, thus also denying the child eligibility for Medicaid.  The services provided through Medicaid may be more beneficial than the income from SBP. SBP payments cannot be paid directly to a trust.  Thus, the income will count toward SSI eligibility and any VA pension program that is needs-based.

C. Health Care for Veterans.

The Veteran Health Administration provides health care services through VA clinics as well as extended care services (i.e. inpatient and outpatient care, geriatric evaluations, nursing home care, domiciliary, home health, adult day, residential/ respite care programs). To be eligible for health care services, the veteran must have served in the military for 24 continuous months of active duty service (some exceptions may apply).  These services may require co-payments.

Enrollment in the health care system is established through “priority groups.”  There are 8 priority groups to which a veteran can be assigned. Assignment is based on the veteran’s service record.  Priority Group 1 is the highest level of priority, and Priority Group 8 is the lowest level.

Prescriptions provided by the VA are one of the most beneficial services the VA provides.  Veterans who are “in the system” can obtain their prescriptions from the VA clinic.  The veteran can provide a prescription to the VA clinic by a VA physician or a private physician.  The co-payment for each prescriptions range from $0.00 to $8.00 per 30 day supply.

Source: Academy of Special Needs Planners