## Facts

- Joseph Bustamante, age 53, applied for Disability Insurance Benefits and Supplemental Security Income in July 1994.
- He alleged disability based on physical conditions (including diabetes mellitus and a history of pulmonary tuberculosis) and mental conditions (including anxiety and memory problems), with long-term alcohol abuse and frequent homelessness.
- The Social Security Administration denied the claim initially; Bustamante requested a de novo hearing before an Administrative Law Judge (ALJ).
- After an April 1996 hearing (with counsel), the ALJ kept the record open for additional psychological evidence.
- In December 1996, the ALJ found no severe physical impairment and no severe mental impairment at step two.
- The ALJ treated alcoholism as a contributing factor material to disability before completing the standard five-step sequential evaluation.
- The Appeals Council denied review; the district court affirmed; Bustamante appealed.

## Issues

1. Whether the ALJ erred by evaluating the impact of alcoholism as “material” before completing the five-step sequential disability analysis required by statute and regulations.
2. Whether substantial evidence supported the ALJ’s step-two finding that Bustamante had no severe mental impairment.

## Decision

- The Ninth Circuit reversed the district court’s judgment and remanded to the Commissioner for further proceedings.
- The court held the ALJ applied the alcoholism materiality inquiry in the wrong sequence by addressing materiality before completing the five-step disability evaluation.
- The court held the step-two finding of no severe mental impairment was not supported by substantial evidence under the de minimis severity standard.

## Legal Principles

- Under 42 U.S.C. § 423(d)(2)(C) and implementing regulations (20 C.F.R. §§ 404.1535, 416.935), the agency must first determine disability using the ordinary five-step sequential process while considering all impairments, including alcohol or drug addiction.
- Only after a claimant is found disabled may the agency determine whether the claimant would still be disabled if alcohol or drug use stopped; that determination controls whether addiction is a “contributing factor material” to disability.
- At step two, an impairment is “not severe” only if it is a slight abnormality with no more than a minimal effect on the ability to work; step two functions as a de minimis screen for groundless claims.
- The agency must evaluate the combined effects of a claimant’s impairments when determining disability.

## Conclusion

The Ninth Circuit required the Commissioner to redo the disability analysis by completing the full five-step evaluation before addressing whether alcoholism is material, and to reassess the severity of Bustamante’s mental impairments under the correct, low step-two threshold.


Bustamante v. Massanari, 262 F.3d 949 (9th Cir. 2001)