Social Security Disability Insurance (SSDI) replaces a portion of earnings for an eligible worker whose illness or injury—while not necessarily caused by a work-related incident—results in an inability to work. As an insurance program, workers (including active-duty military) and employers in covered occupations, as well as self-employed individuals, contribute to the program through the Federal Insurance Contributions Act (FICA) payroll tax and the Self-Employment Contributions Act (SECA) tax. Currently, 94% of all workers are covered by Social Security. Conversely, Veterans Disability Compensation (VDC) provides payments to veterans for illnesses and injuries that are caused or aggravated by military service. VDC is a compensation program funded through a mandatory appropriation as part of the Department of Veterans Affairs (VA) annual budget. VDC is not insurance and therefore, neither veterans nor active military personnel contribute directly toward the funding of the program. SSDI and VDC—administered by the Social Security Administration (SSA) and the VA, respectively—are two of the largest federal disability programs. In December 2013, there were more than 8.9 million disabled workers receiving payments through SSDI at a cost of approximately $10.3 billion per month. The number of veterans receiving disability compensation was less than half that amount at the end of FY2012, with more than 3.5 million recipients. Total monthly receipts for VDC were just under $3.7 billion in FY2012. Although SSDI and VDC both serve the goal of providing income security for individuals with disabilities, these programs fundamentally differ in how they define "disability" and determine eligibility for benefits. For example, an individual must be unable to work to be eligible for SSDI benefits, yet employability is not a factor in VDC disability determinations. Indeed, veterans that receive a disability rating from the VA will not necessarily be eligible for SSDI benefits, unless their particular condition prevents them from entering the civilian workforce under specific SSA guidelines. This report seeks to clarify why one group of individuals with disabilities may be eligible for benefits under VDC, but ineligible for benefits under SSDI (and vice versa), through a description and comparison of several distinguishing characteristics of the SSDI and VDC programs. This report concludes with a discussion of the challenges facing the administration of both programs, including processing delays for pending claims and appeals. These issues will be of particular interest to Congress due to the high numbers of SSDI claims resulting from a combination of the recent economic decline, an increase in the number of baby-boomers approaching retirement age and their most disability-prone years. In addition, the extension of presumptive conditions has expanded the pool of veterans eligible for VDC. SSDI was established in 1956 as a component of the Old Age, Survivors and Disability Insurance (OASDI) program. Its primary purpose is to replace a portion of an insured worker's earnings, should a medically determinable illness or injury impede his or her ability to work. For SSDI benefits, an individual must have a sufficient work history and must be unable to engage in any employment that brings income in excess of the s ubstantial g ainful a ctivity (SGA) threshold, as a result of one or more medical conditions that is expected to last 12 months or longer, or result in death. To ensure that a condition is long-term, a worker only becomes eligible to apply for SSDI five months after the onset of a disability, and the worker is further evaluated to determine if the disability will last longer than 12 months or result in death. Once payments commence, claimants may be eligible for up to 12 months of retroactive benefits for the period between the date of disability-onset and their benefits application date. Monthly payments are determined based on a worker's past earnings and can be supplemented if the claimant has qualifying dependents. Individuals with disabilities become eligible to receive health care benefits through Medicare, 24 months after becoming eligible for SSDI. Benefit payments continue until the individual (1) dies; (2) reaches the retirement age, at which point his or her benefits remain the same, but are paid out of the Old-Age and Survivors Insurance (OASI) trust fund; or (3) experiences an improvement in his or her medical condition, enabling him or her to return to the workforce. In December 2013, over 8.9 million disabled workers were receiving an average of $1,146.43 per month in SSDI cash benefits. Disability determinations for SSDI benefits entail a five-step process (see Figure 1 ). First, an applicant files for benefits with the SSA at the agency's website, a field office, or through a toll-free phone line. The responsibility for adjudicating the application then shifts to medical and vocational experts at state-level Disability Determination Services (DDS) agencies. A disability examiner from the DDS will then determine if the claimant's income falls below the SGA threshold (Step 1), condition is current and expected to last longer than 12 months or result in death (Step 2), and condition meets the SSA medical listings (Step 3), If the first three steps are satisfied, the claimant is deemed eligible to receive SSDI benefits. If the claimant's condition does not meet—or is not equal in severity to—a condition in the SSA medical listings, he or she can be further evaluated for SSDI eligibility by examining whether the claimant's remaining capacities would enable him or her to perform their past work (Step 4), and condition would still enable him or her to work in other jobs that exist within the national economy (Step 5). If a disability examiner decides that an individual meets the requirements for a particular step, the application proceeds to the next step for further review. With the exception of Step 3, if an individual does not meet the requirements at any step in the process, their application is denied. If an SSDI claimant reaches Step 3 of the evaluation process, a DDS official has already determined that the claimant's earnings do not exceed the SGA threshold and that the condition is both long-term and limits the claimant's ability to work. If the claimant's condition meets, or is equal in severity to, the SSA's Medical Listings (at Step 3), the claimant is deemed eligible to receive benefits. If the claimant's condition does not meet SSA's Medical Listings, the claimant can still meet eligibility requirements if he or she is unable to perform past work (Step 4) or other types of work that exist in the national economy (Step 5). The disability determination process can be long and complex and is largely contingent upon receipt of all necessary documents by SSA. Processing time for initial application decisions averaged 107 days at the end of November 2013. If, at any point in the assessment process, a claimant's application is denied by the state DDS, that individual can begin the appeals process. If an application for SSDI benefits is denied at any point in the five-step determination process, a claimant can appeal the ruling up to four possible levels (see Figure 2 ). The appeals process includes three levels of administrative review through SSA before a case can then be appealed to the U.S. court system, in this order: 1. reconsideration of the claimant's application by the state DDS office, 2. a hearing by an Administrative Law Judge (ALJ), 3. a review by Social Security Appeals Council (SSAC), and 4. filing suit against SSA in U.S. district court. If a claimant's initial application or subsequent appeal is denied, he or she must request an appeal to the next level, in writing, within 60 days of receiving the prior decision. Claimants can also present any additional evidence or comments to support their cases at any step in the administrative appeals process. U.S. district court is generally the final level of appeal pursued in SSDI cases. On rare occasions, SSDI cases can be appealed beyond U.S. district court to the U.S. court of appeals and, ultimately, the U.S. Supreme Court. Upon receipt of the initial appeal request, the state DDS office will "reconsider" the application, which involves a review by a disability examiner who was not involved in the initial application process. To have a case reconsidered, the claimant completes and submits a Request for Reconsideration and an Appeal Disability Report (online or a paper form) to SSA. SSA will then send the case to the state DDS office, although 10 states currently do not conduct the reconsideration step. A DDS official—other than the person who made the first determination—reviews the claimant's medical records along with any additional evidence provided and makes a new determination about the claimant's disability. After a review of the medical records, the claimant is notified in writing of the decision. If the claimant disagrees with the reconsideration decision, he or she may then request a formal hearing with an Administrative Law Judge (ALJ). If a claimant disagrees with the reconsidered judgment, he or she can appeal the decision by completing and submitting a Request for Hearing by an ALJ and an Appeal Disability Report (online or a paper form) to SSA. SSA will then send the request to the Office of Disability Adjudication and Review, where claimants can request a face-to-face meeting with the ALJ assigned to their case. After talking with the claimant and his or her representative, the claimant will be notified in writing of the ALJ's decision on the case. If the ALJ rules against the claimant, the case can be further appealed to the Social Security Appeals Council (SSAC). SSA can also bring a case to the SSAC, even if the ALJ has ruled in the claimant's favor.