**MEMORANDUM MATHEMATICA**

Policy Research, Inc.

600 Maryland Ave. S.W., Suite 550

Washington, DC 20024-2512

Telephone (202) 484-9220

Fax (202) 863-1763

www.mathematica-mpr.com

**TO:** Allen Berkowitz and Stephen Meskin

**FROM:** Jonathan Jacobson **DATE:** 11/7/2003

8986-016

**SUBJECT**: Conceptual Framework for Simulating from 4/1/2000 to

9/30/2002 and Beyond for VAM3 (Revised, Version 4.0)

In this memo, I outline a framework for creating the 4/1/2000 and
9/30/2002 baseline database for the 2003 Veterans Actuarial Model
(VAM3). This memo builds on earlier (8/12/2003, 10/7/2003) memos on
simulated Health Care Priority Status (HCP) for VAM3 and is a revision
of 9/24/2003 and 9/25/2003 versions of this memo.

I first review the definitions of the classification variables and
certain key attribution variables that will be included in the model
database. Next, I discuss the datasets that would need to be created
before creating this database. I then present a sequence of steps by
which to construct the 4/1/2000 baseline for VAM3. The fourth part of
the memo describes the steps for moving from 4/1/2000 to 9/30/2002, and
a fifth section discusses moving from 9/30/2002 forward in VAM3
simulations.

**1. Variable Definitions**

The model database will include the following *classification
variables*, which will define cells of veterans, equal to
N(S,Y,L,G,A,P,V,R,I,C) in number for each cell:

-   S: SOURCE = source of data: DMDC (d), for veterans with post-Vietnam
    service, otherwise Census (c), although some parameters and
    preliminary counts will be obtained using data from the National
    Survey of Veterans (n) and other counts will be obtained from the
    Compensation and Pension data (cp)

-   Y: DATE = date of projection (4/1/2000 -- 9/30/2102)

-   L: LIVING = living status (=1, deceased = 0)

-   G: GENDER = gender of veteran (Male or Female)

-   A: AGE = age of veteran (17 to 90 and above in Census, 16 to 120 in
    DMDC)

-   P: PERSVC = period of service (13 categories, to be mapped to be
    consistent with VAM2)

-   V: POSTVNE = flag for post-Vietnam era (varies within 3 PERSVC
    groups)

-   R: RACE = race/ethnicity (1 = Hispanic of any race, 2 = White and
    non-Hispanic, 3 = Black and non-Hispanic, 4 = American Indian or
    Aleut or Eskimo, 5 = Asian, 6 = Native Hawaiian or Pacific Islander,
    7 = Other or multiple race)

-   I: VAHUD = income status, having one of 3 values

    -   1 = low-income, below the VA means test threshold

    -   2 = between the VA means test threshold and the HUD geographic
        index for the underlying county

    -   3 = above both the VA means test threshold and the HUD
        geographic index for the underlying county

-   C: CP_STAT = compensation / pension status, having one of 8 values:

    -   0 = SC_70+ = receiving compensation (but not pension) with
        70-100 percent degree of service-connected disability[^1]

    -   1 = SC_50_60 = receiving compensation (but not pension) with
        50-60 percent degree of service-connected disability

    -   2 = SC_30_40 = receiving compensation (but not pension) with
        30-40 percent degree of service-connected disability

    -   3 = SC_10_20 = receiving compensation (but not pension) with
        10-20 percent degree of service-connected disability

    -   4 = MISC_P1_P4 = not receiving compensation or pension but
        identified by SSN in VA data as in health care priority groups
        1-4 (this includes those eligible for compensation but not
        receiving benefits, but will not be indicated for any veterans
        in the preliminary version of the model)

    -   5 = PEN = receiving VA pension benefits

    -   6 = SC_00 = receiving compensation (but not pension) with 0
        percent degree of service-connected disability

    -   7 = OTHER

Length of service is not planned for the immediate version of VAM3, but
could conceivably be added in the future. VAHUD and CP_STAT will be used
with the other classification variables to identify the proportion of
veterans in one of 9 health care priority rankings:

-   H: HCP = Health Care Priority status, including 8 distinct
    categories:

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-   HCP_1A = 100 percent of veterans with CP_STAT = SC_70+, and a
    percentage (varying by classification variables) of veterans with
    CP_STAT = MISC_P1_P4, PEN, and OTHER

-   HCP_1B = 100 percent of veterans with CP_STAT = SC_50_60, and a
    percentage (varying by classification variables) of veterans with
    CP_STAT = MISC_P1_P4, PEN, and OTHER

-   HCP_2 = 100 percent of veterans with CP_STAT = SC_30_40, and a
    percentage (varying by classification variables) of veterans with
    CP_STAT = MISC_P1_P4, PEN, and OTHER

-   HCP_3 = 100 percent of veterans with CP_STAT = SC_10_20, and a
    percentage (varying by classification variables) of veterans with
    CP_STAT = MISC_P1_P4, PEN, SC_00, and OTHER

-   HCP_4 = a percentage (varying by classification variables) of
    veterans with CP_STAT = MISC_P1_P4, PEN, SC_00, and OTHER

-   HCP_5 = a percentage (varying by classification variables) of
    veterans with CP_STAT = PEN, SC_00, and OTHER, including all
    remaining veterans with VAHUD = 1

-   HCP_6 = a percentage (varying by classification variables) of
    veterans with CP_STAT = SC_00 and OTHER

-   HCP_7 = a percentage (varying by classification variables) of
    veterans with CP_STAT = OTHER and VAHUD = 2

-   HCP_8 = a percentage (varying by classification variables) of
    veterans with CP_STAT = OTHER and VAHUD = 3

The HCP\_\* variables are examples of *attribution variables* that will
be created using parameter files applied to unique cells of veterans in
the model database. Other attribution variables will include

-   B: BRANCH_w (percentage in each branch of service, w = 1 to 6, where
    1 = Army but not reserves, 2 = Navy but not reserves, 3 = Air Force
    but not reserves, 4 = Marines, 5 = non-defense but not reserves, 6 =
    reserves)

-   O: OFFICER (percentage officer)

-   M: MARRIED (percentage married)

-   D: DEGR_xx (degree of disability indicators, where xx = 00, 10, 20,
    ..., 90, 100)

-   T: STATE_yy (proportion of veterans in state yy, where yy takes on
    54 distinct values including the 53 regions identified in the Census
    plus other overseas areas)

    **2. Precursor Datasets to the Model Database**

As prerequisites to creating the 4/1/2000 model database, it will be
necessary to create the following datasets: (i) an extract from Census
2000 data, (ii) an extract from DMDC data, including information on
veterans from both the Active Duty Loss File and the Reserve File and
C&P records with post-Vietnam service; and (iii) an extract from the C &
P mini master frozen file to which DMDC information on period of service
has been merged. The key variables included in each of these files are
listed in Table 1.

The **Census 2000 dataset**, to be created by the program
PROCESS_CENSUS, will need to contain the number of veterans (CENSUSVETS)
for unique cells defined by GENDER, AGE, PERSVC, POSTVNE (= ,
post-Vietnam service), RACE, VAHUD, and STATE. These totals may be
expressed as N(S=c,Y=4/2000,L=1,L=1,G,A,P,V,R,I,T). We will integrate
two Census data sets to obtain state-level Census data matching national
population totals. We will use the parameter file **VETS_CENSUS** to
increase the total population to account for overseas veterans not
included in the Census. We will also calculate in the Census the number
of veterans by GENDER, AGE, PERSVC, and POSTVNE for the sake of
adjusting counts based on DMDC data, and will store this total in the
variable DMDCVETS_CENSUS, which may be expressed as
N(S=c,Y=4/2000,L=1,L=1,G,A,P,V).

The **DMDC dataset**, to be created by the program PROCESS_ADLOSS from
both the Active Duty Loss and the Reserves files, will contain, for
veterans serving after the end of the Vietnam War (as indicated by
POSTVNE), the number of veterans (DMDCVETS_DMDC) for unique cells
defined by GENDER, AGE, PERSVC, and POSTVNE, or
N(S=d,Y=4/2000,L=1,L=1,G,A,P,V). The parameter file **VETS_DMDC** will
adjust these counts upwards to account for veterans with a non-defense
BRANCH.

TABLE 1

> Variables to Include in Precursor Datasets to VAM3 Database

+-----------------+---------------+--------+-----------+-------------+
| *Variable*      | *Definition*  | *      | *DMDC*    | *C&P Frozen |
|                 |               | Census |           | Mini*       |
|                 |               | 2000*  | *         |             |
|                 |               |        | Veterans* | *Master     |
|                 |               |        |           | File*       |
+-----------------+---------------+--------+-----------+-------------+
| G: GENDER       | Gender (M, F) | X      | X         | X           |
+-----------------+---------------+--------+-----------+-------------+
| A: AGE          | Single year   | X      | X         | X           |
|                 | age           |        |           |             |
|                 |               |        |           |             |
|                 | (74+ values)  |        |           |             |
+-----------------+---------------+--------+-----------+-------------+
| P: PERSVC       | Period of     | X      | X         | (from merge |
|                 | service       |        |           | with DMDC,  |
|                 |               |        |           | parameter   |
|                 | (13           |        |           | file)       |
|                 | categories)   |        |           |             |
+-----------------+---------------+--------+-----------+-------------+
| V: POSTVNE      | Flag for      | X      | X         | X           |
|                 | post-Vietnam  |        |           |             |
|                 | service       |        |           |             |
+-----------------+---------------+--------+-----------+-------------+
| R: RACE         | R             | X      | \--       | \--         |
|                 | ace/ethnicity |        |           |             |
|                 |               |        |           |             |
|                 | (7            |        |           |             |
|                 | categories)   |        |           |             |
+-----------------+---------------+--------+-----------+-------------+
| I: VAHUD        | Income level  | X      | \--       | \--         |
|                 |               |        |           |             |
|                 | (3            |        |           |             |
|                 | categories)   |        |           |             |
+-----------------+---------------+--------+-----------+-------------+
| T: STATE        | State or      | X      | \--       | X^1^        |
|                 | territory     |        |           |             |
|                 |               |        |           |             |
|                 | (54           |        |           |             |
|                 | categories)   |        |           |             |
+-----------------+---------------+--------+-----------+-------------+
| CENSUSVETS =    | Total         | X      | \--       | \--         |
| N(Y             | veterans by   |        |           |             |
| =4/2000,L=1,L=1 | GENDER, AGE,  |        |           |             |
| ,G,A,P,V,R,I,T) | PERSVC,       |        |           |             |
|                 | POSTVNE,      |        |           |             |
|                 | RACE, VAHUD,  |        |           |             |
|                 | STATE         |        |           |             |
+-----------------+---------------+--------+-----------+-------------+
| DMDCVETS =      | Total         | X      | X         | \--         |
|                 | veterans by   |        |           |             |
| N(Y=4/2000,L    | GENDER, AGE,  |        |           |             |
| =1,L=1,G,A,P,V) | PERSVC,       |        |           |             |
|                 | POSTVNE       |        |           |             |
+-----------------+---------------+--------+-----------+-------------+
| CPVETS_i =      | Total         | (from  | \--       | X           |
|                 | veterans with | para   |           |             |
| N(Y             | CP_STAT = i   | -meter |           |             |
| =4/2000,L=1,L=1 | by GENDER,    | file)  |           |             |
| ,G,A,P,V,T,C=i) | AGE, PERSVC,  |        |           |             |
|                 | POSTVNE,      |        |           |             |
| (i = 0 to 6,    | STATE         |        |           |             |
| with \_CENSUS,  |               |        |           |             |
| \_CP added to   |               |        |           |             |
| indicate        |               |        |           |             |
| source)         |               |        |           |             |
+-----------------+---------------+--------+-----------+-------------+

> ^1^Refers to state to which the benefit is sent, assumed (for now) to
> be the state of residence
>
> NOTE: LIVING, LOS are excluded from this list but could be added to
> Census / DMDC data

The **C & P Frozen Mini Master File** dataset, to be created by the
program PROCESS_COMPPEN, will contain, for veterans receiving
compensation or pension benefits, the number of veterans by CP_STAT
(CPVETS_i_CP, i = 0 to 6) for unique cells defined by GENDER, AGE,
PERSVC, POSTVNE, and STATE, or N(S=cp,Y=4/2000,L=1,L=1,G,A,P,V,T,C=i).
PERSVC is weakly and incompletely measured in the C & P data, so PERSVC
will be obtained by merging relevant information from the DMDC, for
veterans identified in both datasets. For veterans in the C&P file but
not in the DMDC data, we will use the parameter file **PERSVC_CP** to
impute PERSVC by GENDER and AGE based on the corresponding Census
distributions. The distributions applied to cells of veterans will be
constrained to be consistent with any wartime service indicated by
entitlement codes or pension benefits.

While creating the primary DMDC and C&P datasets, we will also create,
using the programs PROCESS_ADLOSS and PROCESS_COMPPEN, a secondary
DMDC/C&P dataset that will contain, by GENDER, AGE, PERSVC, POSTVNE, and
CP_STAT, relevant attribution variables (such as BRANCH, OFFICER, and
DEGR) to be merged onto the VAM3 database. These variables may be
expressed as %(B: Y=4/2000,L=1,G,A,P,V,C), %(O: Y=4/2000,L=1,G,A,P,V,C),
and %(D: Y=4/2000,L=1,G,A,P,V,C).

**3. Steps for Creating the 4/1/2000 Baseline Database**

a.  After creating the Census 2000 dataset, we will, in the context of
    the program PROCESS_INPUT, merge on from the DMDC file the variable
    DMDCVETS_DMDC by GENDER, AGE, PERSVC, and POSTVNE. For observations
    in which new values have been merged on, we will set SOURCE = "DMDC"
    and will recode the number of veterans as follows: NUMBERVETS =
    CENSUSVETS \* DMDCVETS_DMDC / DMDCVETS_CENSUS, or
    N(S=d,Y=4/2000,L=1,G,A,P,V,R,I,T) =
    N(S=c,Y=4/2000,L=1,G,A,P,V,R,I,T) \* N(S=d,Y=4/2000,L=1,G,A,P,V) /
    N(S=c,Y=4/2000,L=1,G,A,P,V). This recoding will adjust the number of
    veterans in the overlap group to match the number in the DMDC data.
    For all other observations not merging with records from the DMDC
    dataset, we will set SOURCE = "Census" and set NUMBERVETS =
    CENSUSVETS = N(S=c,Y=4/2000,L=1,G,A,P,V,R,I,T). We would then be
    able to drop the variables CENSUSVETS, DMDCVETS_DMDC, and
    DMDCVETS_CENSUS from the dataset.

b.  Within each of the cells of the merged Census / DMDC dataset defined
    by the GENDER, AGE, PERSVC, POSTVNE, RACE, VAHUD, and STATE, we will
    use the parameter file **CPSTAT_CENSUS** to assign a proportion of
    veterans (CPSTAT_i, i = 0 to 7) in each of the CP_STAT groups for
    with CP_STAT between 0 and 7. The parameters in CPSTAT_CENSUS will
    vary for groups defined by RACE (white versus nonwhite) and VAHUD
    (below the means test threshold versus above it) and will contain
    values calculated from the 2001 National Survey of Veterans.
    CPSTAT_i may be expressed as %(C=i: S=n,Y=2001,R,I). We will
    multiply these proportions by the number of veterans in each
    cell\--CPSTAT_i\*NUMBERVETS for i = 0 to 6, or %(C=i:
    S=n,Y=2001,R,I)\*N(Y=4/2000,L=1,G,A,P,V,R,I,T) in the notation
    introduced previously\--and then sum veterans for cells with the
    same GENDER, AGE, PERSVC, POSTVNE, and STATE, to obtain counts of
    the estimated number of veterans in each CP_STATUS group,
    CPVETS_i_CENSDMDC for i = 0 to 6. These counts may be expressed as
    N(S=c/d,Y=4/2000,L=1,G,A,P,V,T,C=i)

c.  We will then merge onto the Census / DMDC dataset from the C&P file
    the variables CPVETS_i_CP (for i = 0 to 6) by GENDER, AGE, PERSVC,
    POSTVNE, and STATE. For observations in which values have merged on,
    we will code the count of veterans with CP_STAT = i, CPVETS_i, to
    equal CPSTAT_i \* NUMBERVETS \* CPVETS_i_CP / CPVETS_i_CENSDMDC for
    i = 0 to 6. We will set CPVETS_7 equal to NUMBERVETS minus the sum
    of CPVETS_i over i = 0 to 6, scaling down these proportions if
    necessary to constrain the sum so it does not exceed one. Using the
    notation above, the recoding would be
    N(Y=4/2000,L=1,G,A,P,V,R,I,T,C=i) = %(C=i: S=n,Y=2001,R,I) \*
    N(Y=4/2000,L=1,G,A,P,V,R,I,T) \* N(S=cp,Y=4/2000,L=1,G,A,P,V,T,C=i)
    / N(S=c/d,Y=4/2000,L=1,G,A,P,V,T,C=i) for i = 0 to 6, and
    N(Y=4/2000,L=1,G,A,P,V,R,I,T) -- N(Y=4/2000,L=1,G,A,P,V,R,I,T, C\<7)
    for i = 7. In other words, we will rescale the proportion of
    veterans with each value of CP_STAT to reproduce the total contained
    in the C&P data, provided that total does not exceed the total
    number of veterans in the corresponding cells of the Census/DMDC
    data. We would then be able to drop the variables CPVETS_i_CP and
    CPVETS_i_CENSDMDC from the dataset.

d.  Using the values of CPSTAT_i (i = 0 to 7) for each cell of veterans,
    we will split the database into separate cells, each with a distinct
    value of CP_STAT. We will save this dataset for future use by VA in
    creating Excel Pivot Tables as of 4/2000. We will then compress the
    database so that STATE becomes an attribution variable (STATE_yy for
    each FIPS code yy) for each cell of veterans with a unique
    combination of GENDER, AGE, PERSVC, POSTVNE, RACE, VAHUD, and
    CP_STAT. The resulting count of veterans will be named VETERANS, and
    the old variable NUMBERVETS will be dropped. Thus each cell of
    veterans in the 4/2000 database will contain a count that may be
    expressed as N(S,Y=4/2000,L=1,G,A,P,V,R,I,C).

e.  We will obtain additional attribution variables by merging on
    BRANCH, OFFICER, and DEGR from the secondary DMDC/C&P dataset. These
    variables will be the same for cells of veterans sharing the same
    values of GENDER, AGE, PERSVC, POSTVNE, and CP_STAT. After this
    merge, it should be possible to drop the variable POSTVNE, which
    duplicates the information in SOURCE. The parameter files
    BRANCH_CENSUS and OFFICER_CENSUS will be used to obtain
    distributions of BRANCH and OFFICER for veterans represented in
    neither the DMDC nor Compensation and Pension data.

f.  We could create additional attribution variables using the parameter
    files **DECEASED_CENSUS** to create deceased veterans for veterans
    with SOURCE = "Census." DMDC data contain data on deceased veterans
    that could be appended to the dataset to include information on
    deceased veterans varying by GENDER, AGE, PERSVC, POST, although at
    present we have no way of determining appropriate values of RACE and
    VAHUD for deceased DMDC veterans and STATE_yy for deceased DMDC
    veterans whose dependents are not receiving C&P benefits. Marital
    status and numbers of dependents for the living and departed would
    be determined by the parameter files **MARRIED_LIVING**,
    **MARRIED_DECEASED**, **DEPEND_LIVING**, and **DEPEND_DECEASED**.

g.  The parameter file **LOS_CENSUS** could be used to create the LOS
    variable for Census records if Census data have not been prepared
    for this purpose.

h.  We will use the parameter file **HCP** to determine the values of
    HCP_x (x = 1A, 2A, and 3 to 8) within each cell of veterans varying
    by CP_STAT and VAHUD. The proportions in this parameter file could
    be obtained from BIRLS / Sullivan file data, National Survey of
    Veterans data, or a combination of these sources.

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4.  **Steps for Moving from 4/1/2000 to 9/30/2002**

To capture the full detail of DMDC and C&P data available between
4/1/2000 and 9/30/2002, we propose that a similar approach be used to
creating the 9/30/2000, 9/30/2001, and 9/30/2002 (and, when available,
9/30/2003) veteran databases as in creating the 4/1/2000 baseline. The
main differences would be as follows:

a.  To create the underlying Census 2000 data, the entire Census 2000
    dataset used to create the 4/1/2000 baseline would be aged one year,
    and **MORT_CENSUS** would be applied to determine which veterans
    have died. **MIGRATE_HISTORICAL**, estimated by AGE group for
    veterans based on actual transitions between 1995 and 2000, would be
    used to determine the new state distribution of all (surviving)
    Census veterans.

b.  Veterans in the DMDC would be aged one year, and actual deaths would
    be merged onto the file. New separations would be added to the DMDC
    data.

c.  More recent C&P Frozen Mini Master data would be used to capture the
    characteristics of compensation and pension recipients at the
    appropriate time period (9/30/200, 9/30/2001, or 9/30/2002). These
    data would need to be created first at the SSN level to merge on
    appropriate PERSVC values from the DMDC data, but would then be
    celled for integration into the VAM3 database.

d.  The creation of the veterans population at the new point in time
    (9/30/2000, 9/30/2001, or 9/30/2002) would proceed according to the
    steps outlined in sections 2 and 3, above, except the aged and
    migrated Census data would take the place of the original Census
    2000 data, and the current time period's DMDC and C&P Frozen Mini
    Master data would be used instead of the 4/1/2000 versions of these
    files.

**5. Steps for Simulating the Veterans Population After 9/30/2002**

After 9/30/2002, separations projected by the DOD Office of the Actuary
would provide a source of new veterans. GENDER, LOS, RACE, CP_STAT,
VAHUD, BRANCH, and STATE_yy values for new veterans would be determined
by the parameter files **GENDER_DOD**, **LOS_DOD**, **RACE_DOD**,
**CPSTAT_DOD**, **VAHUD_DOD**, **BRANCH_DOD**, and **STATE_DOD**,
respectively. The parameter file **VETS_DOD** would adjust the scale of
new separations. The parameter files **MORT_ADJUST** and **MORT_FUTURE**
would determine which veterans die each year, and would possibly be
updated based on new mortality study findings. The parameter file
**CPSTAT_CHANGE**, estimated from C&P data, would indicate changes in
CP_STAT from year to year, while the parameter file **DEGR_CHANGE**
would indicate changes in the degree of disability within CP_STAT
groups. For newly disabled veterans, the parameter file **DEGR_NEW**
would indicate the appropriate values of DEGR. The parameter file
**MIGRATE_FUTURE** would allow migration rates to differ for veterans
based not only on prior state of residence and AGE but possibly on
disability status as indicated by CP_STAT.

cc: Brinkley, Rankin, Hustead, Graby, Tomczak, Watson, Sheldon, Wells,
Ahn, Klein, Thomas, Gerdes, Kim

[^1]: Degree of service-connected disability will be rounded to the
    nearest 10 percent.