VA Ratings vs. Military Disability Ratings: Understanding the Difference

One of the most common misconceptions among service members going through the disability evaluation process is that a VA disability rating and a military disability rating are the same thing. They are not. They are assigned by different agencies, under different legal standards, for different purposes — and the distinction has significant consequences for your benefits.

Understanding how these two rating systems work — and how they interact — is essential for anyone navigating the IDES or PDES process.

The VA disability rating system is administered by the Department of Veterans Affairs. Its purpose is to compensate veterans for the average reduction in earning capacity caused by a service-connected disability. VA ratings are expressed as percentages in increments of 10, and they determine the amount of monthly VA disability compensation a veteran receives. A VA rating does not, by itself, determine whether a service member is fit or unfit for continued military service.

The military disability rating system is administered by the branch of service through the Physical Evaluation Board (PEB). Its purpose is to determine whether a service member is fit for continued duty and, if not, to establish the appropriate level of disability benefits — either separation with severance pay or disability retirement. Military disability ratings use the same VA rating schedule, but they are assigned for a different purpose and under a different legal framework.

The most important difference between the two systems is that the military disability system begins with a fitness determination that the VA system does not make.

Before a PEB assigns any disability rating, it must first determine whether each of your conditions renders you unfit for continued military service. A condition that is rated by the VA — even at a high percentage — will not result in military disability benefits unless the PEB also finds that the condition makes you unfit for duty.

This distinction matters enormously in practice. A service member with a 70% VA rating for PTSD may still be found fit for duty by a PEB if the board determines that the PTSD does not prevent the service member from performing the duties of their military occupational specialty. In that case, the service member would receive VA compensation but no military disability retirement.

The Integrated Disability Evaluation System (IDES) was designed to reduce duplication between the two rating systems by having the VA conduct disability examinations and assign proposed ratings during the MEB/PEB process — before the service member separates. Under the IDES:

1. The VA conducts Compensation and Pension (C&P) examinations for all conditions referred by the MEB
2. The VA assigns proposed ratings for each condition
3. The PEB uses those proposed VA ratings to calculate the military disability rating if the service member is found unfit
4. Upon separation, the proposed VA ratings automatically become the service member's actual VA ratings

The practical effect is that a service member who goes through the IDES exits the military with both a military disability determination and an established VA rating — without having to go through a separate VA claims process.

Both the VA and the military use the VA Schedule for Rating Disabilities (VASRD) to assign percentage ratings. However, the way those ratings are applied differs between the two systems.

The VA rates all service-connected conditions, regardless of whether they affect your ability to work or perform specific duties. The VA uses a "combined ratings" formula — not simple addition — to calculate a combined disability percentage from multiple individual ratings.

The military PEB rates only conditions that are found to be unfitting. If you have five VA-rated conditions but only two are found to be unfitting by the PEB, only those two conditions will be included in your military disability rating. The other three will still be rated by the VA, but they will not affect your military retirement calculation.

The single most consequential number in the military disability rating system is 30%. A combined military disability rating of 30% or higher qualifies a service member for permanent disability retirement — with lifetime retired pay, Tricare healthcare coverage, and access to military installations. A rating below 30% results in separation with a one-time severance payment and no ongoing retirement benefits.

The VA does not have an equivalent threshold. A 20% VA rating and a 40% VA rating both result in monthly compensation — the amount simply differs.

Military retirees who also receive VA disability compensation are generally required to waive a dollar-for-dollar equivalent of their retired pay — this is the VA waiver. The result is that most retirees receive the same total amount whether they take it as retired pay or VA compensation, though VA compensation has the advantage of being tax-free.

There are two exceptions to this offset:

Concurrent Retirement and Disability Pay (CRDP) allows retirees with a VA rating of 50% or higher to receive both their full retired pay and their full VA compensation simultaneously, phased in over a 10-year period.

Combat-Related Special Compensation (CRSC) allows retirees with combat-related disabilities to receive a tax-free payment that restores the portion of retired pay offset by VA compensation, without the 50% threshold required for CRDP.

Understanding the distinction between VA ratings and military disability ratings has practical implications for how you approach the MEB/PEB process:

• All unfitting conditions should be rated as accurately as possible. Because the military uses VA ratings for unfitting conditions, an underrated condition in the VA system translates directly to a lower military disability rating — and potentially the difference between separation and retirement.
• Conditions that are not referred by the MEB can still be rated by the VA. If you have service-connected conditions that are not included in the MEB referral, you should ensure they are documented and submitted to the VA separately.
• The fitness determination is where cases are won and lost. A high VA rating means nothing for military retirement purposes if the PEB finds you fit for duty. Challenging a fitness determination — or ensuring that all unfitting conditions are properly identified — is often the most important work an attorney can do in an IDES case.

For a deeper look at how ratings are calculated, see our post on how military disability ratings are determined. If you have received a 100% VA rating alongside a low DoD rating, our post on 100% VA with 0% DoD explains how that gap happens and what you can do. For retirees, our CRSC vs. CRDP guide explains how the two systems interact with your retired pay.

If you have questions about how your VA rating interacts with your military disability case, contact Attorney Gately for a free consultation.