Department of Veterans Affairs Underpaid Some Disabled Veterans
Some veterans and veteran advocacy groups are asking, “What’s going wrong at the Department of Veterans Affairs?” due to a number of problems at the VA with accidental overpayments to veterans who collect VA disability, and now, underpayments for some who are entitled to more VA payments due to the nature and severity of their service-connected medical issues.
In 2025 alone, publications critical of the VA included multiple reports by the VA Inspector General, noting improper sharing of personal data on cloud-based systems, deficiencies in emergency care, and a lack of accountability. And now, problems with underpayments in the VA Special Monthly Compensation program.
In June 2025, the VA IG noted that the Department of Veterans Affairs struggles to calculate accurately the disability benefits it pays to qualifying veterans.
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VA Overpayments, VA Underpayments
Those struggles include a simultaneous problem with overpayment to some veterans, which the VA is now trying to “claw back” from them, and, as a May 30 VA IG report claims, a serious issue with underpayment of some VA beneficiaries due to a flaw in the tool used to calculate VA Special Monthly Compensation.
At the end of May 2025, the Department of Veterans Affairs Inspector General released a report titled, VBA’s Special Monthly Compensation Calculator in the Veterans Benefits Management System for Rating Did Not Always Produce Accurate Results.”
This report discusses problems with VA tools used to calculate VA benefits known as Special Monthly Compensation. At the time of the IG report, the Department of Veterans Affairs was in transition from its legacy systems to process disability claims to a new system meant to fully modernize the VA.
However, the new system doesn’t seem to be performing as advertised. According to the IG, the new system is meant to provide the same end result. “The two calculators are programmed differently and look different; however, the supervisory program manager confirmed they should produce the same results.
However, Stripes.com notes the IG report is in response to a 2023 report, the new compensation calculator “did not always generate the correct results for determining disability compensation”.
What is Special Monthly Compensation?
According to VA.gov, “VA special monthly compensation (SMC) is a higher rate of compensation that we pay to Veterans as well as their spouses, surviving spouses, and parents with certain needs or disabilities.” This additional compensation is offered only to those with qualifying disabilities or circumstances. This benefit is paid at without-dependent and with-dependent rates, and additional considerations may affect the level of compensation.
The VA Inspector General report notes that VA Special Monthly Compensation is not an easy process to learn.
“When this review began, VBA had two versions of an SMC calculator to help claims processors identify the correct SMC level and corresponding codes and paragraphs. The codes determine a veteran’s payment rate, and the paragraphs describe the conditions met.” One version of the calculator—the legacy calculator—is described as “a stand-alone tool on the Compensation Service’s intranet site.”
Once the compensation level has been calculated, the IG report notes, “…claims processors have to manually enter the codes and paragraphsinto the Veterans Benefits Management System for Rating (VBMS-R). The other version—referred to as the VBMS-R calculator—was built into VBMS-R and allows the codes and paragraphs generated by the calculator to automatically populate the appropriate fields.”
VA SMC Calculator “Did Not Produce Accurate Results”
The IG report notes that “the VBMS-R calculator did not generate accurate results for the disability scenarios listed in the allegation or for several others the team identified” and that the inaccuracies by the VBMS-R calculator “involved a wide range of disability combinations and SMC levels.” This is significant because the “old” legacy calculator provided accurate results in each case, while the replacement calculator, meant to upgrade and modernize the VA system, did not.
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Incorrect VA Payments
The IG report says incorrect payment levels assigned by the replacement system “would cause incorrect payments—most of which would be underpayments—if claims processors relied on them. The amount of the incorrect payments would depend on the unique facts of each case; however, the review team found errors that would result in monthly underpayments from $132.74 to $4,170.59, as well as monthly overpayments of $373.18.9:”
In October 2024, VA claims processors were told to use “only the legacy calculator” and not the new replacement calculator the Department of Veterans Affairs was sure would replace it. The VA pledges to “monitor progress” of this issue going forward.
The IG report includes the following statement, which should be considered when assessing the long-term implications of this serious issue with VA disability compensation payments. According to page 10 of the report:
“Given the large number of possible disability combinations that could establish entitlement to SMC, it was not feasible for the team to assess all possible disability combinations. As a result, the team did not identify all scenarios where the VBMS-R calculator might have produced incorrect results, and this review does not represent the overall accuracy of the VBMS-R calculator.”
Frequently Asked Questions about VBA’s Special Monthly Compensation Calculator IG Report
What is the purpose of this VA OIG report?
The report reviews the accuracy of the Special Monthly Compensation (SMC) calculator within the Veterans Benefits Management System for Rating (VBMS-R). The OIG received an allegation that this calculator was not producing accurate results for certain disability combinations.
What is VA Special Monthly Compensation (SMC)?
Special Monthly Compensation (SMC) is an additional tax-free benefit paid to veterans for certain severe disabilities or combinations of disabilities incurred or aggravated during active military service, beyond the basic disability compensation. It’s often complex to calculate.
What was the main finding of the OIG’s review?
The OIG review team confirmed that the VBMS-R calculator generated inaccurate results for several disability scenarios, including those listed in the initial allegation and others identified by the team.
What were the implications of these inaccurate results?
For some errors, the VBMS-R calculator produced incorrect results that, if relied upon by claims processors, would lead to incorrect payments. The report specifically notes that most of these incorrect payments would be underpayments to veterans.
Did the calculator always produce a result, even if incorrect?
No, in some instances, the VBMS-R calculator did not produce SMC results at all; instead, it generated an “alert message that the request failed.”
Did the VA know about these errors?
Officials from the Veterans Benefits Administration (VBA) and VA’s Office of Information and Technology (OIT) could not determine the cause of the errors or how long they had been occurring at the time of the review.
What recommendations did the OIG make in this report?
The OIG made two recommendations to the Under Secretary for Benefits:
Ensure all erroneous scenarios in the VBMS-R special monthly compensation calculator identified in this review are corrected and certify the results to the VA Office of Inspector General.
Establish a plan to conduct additional testing of the VBMS-R special monthly compensation calculator to ensure its accuracy.
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About the author
Editor-in-Chief Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter/editor for Air Force Television News and the Pentagon Channel. His freelance work includes contract work for Motorola, VALoans.com, and Credit Karma. He is co-founder of Dim Art House in Springfield, Illinois, and spends his non-writing time as an abstract painter, independent publisher, and occasional filmmaker.
