**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:** 10/7/2003

8986-013

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

9/30/2002 and Beyond for VAM3 (Revised, Version 3.0)

> 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 an earlier (8/12/2003) memo 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 distinct cells of veterans in the model
> database:

-   SOURCE = source of data (DMDC, for veterans without post-Vietnam
    service, otherwise Census)

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

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

-   GENDER = gender of veteran (Male or Female)

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

-   LIVING = living/deceased status

-   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)

-   LOS = length of service (not planned for the immediate version of
    VAM3, but that could conceivably be added in the future)

-   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 = 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)

    -   5 = PEN = receiving VA pension benefits

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

    -   7 = OTHER

-   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

> CP_STAT and VAHUD will be used with the other classification variables
> to identify the proportion of veterans in one of 9 health care
> priority rankings:

-   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

-   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

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

> 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

-   BRANCH_w (percentage in each branch of service, 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 = Army
    and reserves, 7 = Navy and reserves, 8 = Air Force and reserves, 9 =
    Marines and reserves, 10 = non-defense and reserves)

-   OFFICER (percentage officer)

-   MARRIED (percentage married)

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

-   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)

> TABLE 1
>
> Variables to Include in Precursor Datasets to VAM3 Database

+----------------+----------------+--------+-----------+-------------+
| *Variable*     | *Definition*   | *      | *DMDC*    | *C&P Frozen |
|                |                | Census |           | Mini*       |
|                |                | 2000*  | *         |             |
|                |                |        | Veterans* | *Master     |
|                |                |        |           | File*       |
+----------------+----------------+--------+-----------+-------------+
| GENDER         | Gender (M, F)  | X      | X         | X           |
+----------------+----------------+--------+-----------+-------------+
| AGE            | Single year    | X      | X         | X           |
|                | age            |        |           |             |
|                |                |        |           |             |
|                | (74+ values)   |        |           |             |
+----------------+----------------+--------+-----------+-------------+
| PERSVC         | Period of      | X      | X         | (from merge |
|                | service        |        |           | with DMDC,  |
|                |                |        |           | parameter   |
|                | (13            |        |           | file)       |
|                | categories)    |        |           |             |
+----------------+----------------+--------+-----------+-------------+
| POSTVNE        | Flag for       | X      | X         | X           |
|                | post-Vietnam   |        |           |             |
|                | service        |        |           |             |
+----------------+----------------+--------+-----------+-------------+
| RACE           | Race/ethnicity | X      | \--       | \--         |
|                |                |        |           |             |
|                | (7 categories) |        |           |             |
+----------------+----------------+--------+-----------+-------------+
| VAHUD          | Income level   | X      | \--       | \--         |
|                |                |        |           |             |
|                | (3 categories) |        |           |             |
+----------------+----------------+--------+-----------+-------------+
| STATE          | State or       | X      | \--       | X^1^        |
|                | territory      |        |           |             |
|                |                |        |           |             |
|                | (54            |        |           |             |
|                | categories)    |        |           |             |
+----------------+----------------+--------+-----------+-------------+
| CENSUSVETS     | Total veterans | X      | \--       | \--         |
|                | by GENDER,     |        |           |             |
|                | AGE, PERSVC,   |        |           |             |
|                | POSTVNE, RACE, |        |           |             |
|                | VAHUD, STATE   |        |           |             |
+----------------+----------------+--------+-----------+-------------+
| DMDCVETS (with | Total veterans | X      | X         | \--         |
| \_CENSUS,      | by GENDER,     |        |           |             |
| \_DMDC added   | AGE, PERSVC,   |        |           |             |
| to indicate    | POSTVNE        |        |           |             |
| source)        |                |        |           |             |
+----------------+----------------+--------+-----------+-------------+
| CPVETS_i       | Total veterans | (from  | \--       | X           |
|                | with CP_STAT = | para   |           |             |
| (i = 0 to 6,   | i by GENDER,   | -meter |           |             |
| with \_CENSUS, | AGE, PERSVC,   | file)  |           |             |
| \_CP added to  | POSTVNE, STATE |        |           |             |
| 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
>
> **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** 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. We will
> integrate two Census data sets to obtain state-level Census data
> matching national population totals. We will also 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. (We will create the
> variables CPVETS_i_CENSUS, i = 0 to 6, after DMDC data are merged onto
> the file.)
>
> The **DMDC dataset** 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. The parameter file **VETS_DMDC** will adjust these counts
> upwards to account for veterans with a non-defense BRANCH.
>
> The **C & P Frozen Mini Master File dataset** 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. 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
> by the receipt of pension benefits.
>
> While creating the primary DMDC and C&P datasets, we will also create
> 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.
>
> **3. Steps for Creating the 4/1/2000 Baseline Database**

a.  After creating the Census 2000 dataset, we will 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. 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. 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. We will
    multiply these proportions by the number of veterans in each cell
    (CPSTAT_i\*NUMBERVETS for i = 0 to 6), 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_CENSUS for i = 0 to 6.

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 recode CPSTAT_i to equal CPSTAT_i \* CPVETS_i_CP /
    CPVETS_i_CENSUS for i = 0 to 6. (We will set CPSTAT_7 equal to 1
    minus the sum of CPSTAT_i over i = 0 to 6, scaling down these
    proportions if necessary to constrain the sum so it does not exceed
    one.) 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_CENSUS 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 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, CP_STAT, and VAHUD. The resulting count of
    veterans will be named VETERANS, and the old variable NUMBERVETS
    will be dropped.

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.

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**.
    BRANCH and OFFICER would be determined for Census veterans by the
    parameter files **BRANCH_CENSUS** and **OFFICER_CENSUS**,
    respectively.

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).

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