Applying Simulation Techniques to Legislative Analysis: The Veterans and Survivors Pension Reform Act

The Veterans and Survivors Pension program of the VA has recently been under study by the United States Senate. The Senate Committee on Veterans Affairs has for the last two years been working on a number of proposals to reform completely both the income restrictions and the benefit structure of the pension program. The budget staff of VA has worked closely with the Committee staff to provide the data and analysis necessary for their consideration of this proposal.Since fairly detailed financial case histories were available on current beneficiaries, simulation was chosen to generate cost estimates and beneficiary impact analyses for the various proposals. A case-by-case model was developed which simulates the two pension programs operating simultaneously for five years. The model uses a data base of 20,000 records, a 1% sample of the cases currently receiving pension. These records contain data on items such as age, number of dependents, amount and type of income received. After aging each case and passing it through a mortality routine, the individual types of income are updated based on various economic indicators; and it is determined which pension program would return the highest payment amount to the beneficiary. The beneficiary and his dependents are then assigned to the pertinent program and recycled until all five years have been completed.Since the requirements for eligibility are changed by the reform proposal, new cases under reform would not necessarily have the same characteristics as new cases under the existing law. However, as the new requirements are generally more restrictive than current law, the new population of accessions should be a subset of the present population. This assumption is the basis of the procedure used to estimate future new cases in the model.By using the output from the model, the staff of the Senate Committee was able to analyze the cost-benefit ratio of nearly 50 different proposals in a very short period of time. In the past, such detailed analysis of even one proposal would have been impossible.The Veterans and Survivors Pension Reform Act was passed by the Senate in December, 1975, and is now under consideration in the House of Representatives.