As a rule,¹ a disability rating is based solely on the “unfitting” condition (DOD, 1996).

DOD compensation awards are based both on disability ratings and on time in service. The compensation may be awarded as a lump-sum severance payment or as monthly payments² (GAO, 2006). The standard for the determination of DOD disability ratings—DOD Instruction 1332.39; Title 10, United States Code Chapter 61—is the Department of Veterans Affairs’ Schedule for Rating Disabilities (VASRD) (DOD, 1996). But while the VASRD, as described in the U.S. Code of Federal Regulations, Title 38, Part 4 (38 CFR, Part 4), provides the standard for DOD disability ratings, the DOD considers absolute application of VASRD provisions incompatible with its mission. Thus, the DOD differs from the VA both in how it views the purpose of disability compensation and in how it implements the VASRD. Furthermore, within the DOD variation exists among service branch DESs. DOD regulations are consistent across the different branches, in that they require each DES to have a medical evaluation boardand a physical evaluation board, but both the boards and the appeals processes are constituted differently from branch to branch (GAO, 2006).

When a service member is granted monthly DOD disability compensation, officially referred to as permanent disability retirement, he or she is also entitled to be considered for disability compensation through the VA. Until January 2004 permanent disability retirement pay was, by statute, reduced by the dollar amount of VA disability compensation received (Henning, 2006). But Public Law 108-136, in addition to altering other DOD retirement payment policies,³ authorized a 10-year phase-out of the reduction of military retirement due to VA compensation and allowed concurrent receipt of VA and DOD compensation for those veterans with a combined disability rating at or above 50 percent (DOD, 2006). As part of the military retirement offset phase-out, on January 1, 2005 veterans rated