1. THE MEDICAL AND DISABILITY COSTS OF THE IRAQ WAR Professor Linda Bilmes Kennedy School of Government, Harvard University Greater Boston Physicians for Social Responsibility Medical and Societal Consequences of the War May 19, 2007

2. 2 Dimensions of OIF/OEF Conflict* Total deployed: 1.5 million Discharged: 689,317 Deaths:3748 Wounded (combat only):26,293 Total “non-mortal casualties”: 60,433 Disability claimants: 180,000 Using VA medical care: 229,000 * Updated May 7, 2007

3. 3 Costs of the Iraq War  Direct budgetary costs  Economic and social costs  Veterans disability and health care

4. 4 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

5. 5 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 bn The 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

6. 6 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.

7. 7 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

8. 8 Two Scenarios for Projecting LT costs  “Conservative” scenario: Assumes all US troops withdrawn by 2010  “Moderate” scenario Small but continuous US presence through 2015  Both scenarios Use 4% discount rate Use troop deployments based on projections by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

9. 9 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)

10. 10 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 life 4.Economic value of serious wounds

11. 11 Total Costs of the War in Iraq (excluding Afghanistan and debt) ScenarioConservativeModerate Direct costs8391104 Macroeconomic178750 1,0171,854 TOTAL COSTS

12. 12 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

13. 13 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 injuries 34% symptoms without immediate cause  Many severe injuries; such as brain, head, spinal, amputations, severe burns, blindness  Estimated 10% of wounded have TBI

14. 14 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

15. 15 Capacity Issues: Veterans Medical Waiting lists esp. for psychiatric care “render care virtually inaccessible” – VA Under Secretary for Health Frances Murphy Vet Centers: 40% in inappropriate care, 17% waiting lists VA Funding: Ran out of money in past 2 years 2006 ($2 bn) 2005 ($1 bn)

16. 16 Model: VA health usage LOWMODERATEHIGH Servicemen1.5 million1.7 million2.0 million Duration20102016 Usage rate48% 50% Rate of growth4%4.5%5.0% Initial uptake32.5% Annual cost per patient $3500$4500$5000 HC inflation7.5%8%9.5% # eventual users 700,000790,000930,000 Total cost ($bn) 190285536

17. 17 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

18. 18 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

19. 19 Capacity Issues: Veterans Disability  Backlog of pending claims 2000: 69,000 2006: 600,000  VA expects 1.6 million addl claims w/i 2 years  Average length of time = 6-24 months vs, industry average 90 days  900,000 GWOT troops deployed who have not returned yet

20. 20 LOWMODERATEHIGH Servicemen1.4 million1.7 million2.0 million Duration20102016 Claims rate44% 50% Approval rate87%88% Initial uptake25% Avg. Benefit payment $6506$8890 Rate of increase 2.8% (COLA)4.1%6.1% # eventual claimants 638,000740,000872,000 Total cost ($bn) 68110127 Disability benefits for OIF/OEF veterans

21. 21 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 program 3.Streamline disability rating scale to 4 levels 4.Fast track hiring of claims adjudicators 5.Place claims specialists in VA centers and mobile centers 6.Extend free VA medical care to 3 years

22. 22 Medical Recommendations 1.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

23. 23 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)

24. 24 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