How is the actual pension amount calculated?

The first step is to calculate your income for VA pension purposes (IVAP).  The IVAP is your gross income minus certain deductions.  Almost all of these deductions are for un-reimbursed medical costs.  This is a long list, but the most important ones are your Medicaid supplement premium, long term care expenses, and any deductibles and co-pays you actually aid.  These deductions reduce your gross income to IVAP.  The IVAP is now compared to the maximum pension amount you qualify for.  Thus, if the IVAP is more than the pension you get nothing.  If it is less you get the difference, and if the IVAP is zero or negative you qualify for the maximum pension.  In most cases, you will get little or no pension benefit unless you have high unreimbursed medical expenses.  However, your pension qualification rating may allow access to other benefits.  If you need home healthcare or need to be in an assisted living facility, all of these costs are considered medical expenses.  Therefore, the major impact of a VA pension is that it may allow the veteran or surviving spouse to avoid going into a nursing home (which is the only long term care option paid by Medicaid) by providing extra income for care at home or in assisted living.