Veterans with debilitating injuries said they thought their payments would increase when the federal government announced in May that it wouldn't challenge the Federal Court decision on the so-called clawbacks.
The court found the government was acting illegally by reducing veterans long-term disability benefits because they were receiving pain and suffering payments and other awards.
Defence Minister Peter MacKay said the clawbacks would end July 1.
But many vets are still having thousands of dollars withheld, reducing their disability payments to nothing.
Ron Cundell, who receives a Canada Pension Plan disability benefit, a military pension and a pain and suffering award from Veterans Affairs, said his long-term disability payment has not been reinstated.
"The most severely injured — we're getting squat," he said from his home in Angus, Ont.
"It's being used as a negotiation piece between the law firm and the Department of Justice. The most severely injured Canadian soldier is a pawn."
Cundell, 50, said he would likely receive an additional $1,400 a month in long-term disability from the military's insurance program, the Service Income Security Insurance Plan.
But like many other veterans, his other payments exceeded the limit of 75 per cent of his military salary, so he received nothing in long-term disability through the income security plan.
Other veterans whose benefits haven't exceeded the 75 per cent cap have seen their payments reinstated, as MacKay said they would.
But veterans' advocates argue those with most grievous injuries should see an immediate reinstatement of the benefits, particularly since many can't work and rely solely on pain and suffering awards.
Peter Stoffer, the NDP's veterans affairs critic, said the federal government could easily start the payments that he says the former military members are due.
"The government should be saying whatever it takes to fix this system, fix it," he said.
In an email to The Canadian Press on Friday, a spokesman for National Defence said the government "has begun discussions with the claimants' legal team to resolve all outstanding issues."
The court ruling came after Dennis Manuge, a Halifax veteran, launched a class-action suit in 2007 to end the clawback, arguing it was unjust to treat pain and suffering awards as income.
A lawyer for the Halifax legal firm that handled the case didn't want to comment as negotiations continue with the government.
Sean Bruyea, a veterans' advocate, said the government is acting in defiance of the court's decision and should reinstate the payments.
"This is a perfect example as to how bureaucratic red tape results in needless suffering," he said in an email.
"This bureaucratic inability to see people through the process, especially highly marginalized and vulnerable disabled Canadian Forces veterans and their families, is unnecessary and illegal."
Cundell was medically released from the military in 2000 and said he suffers from sarcoidosis, an autoimmune disease that has affected his lungs, sinuses, kidneys, tear ducts and bones. He says it was detected after he returned from serving in the Gulf War as a generator technician.
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