It remains poorly understood whether income assistance for adults with low income and disability improves health outcomes. To examine the association between eligibility for disability compensation and mortality and hospitalizations among Vietnam-era veterans with diabetes. Quasiexperimental cohort study of a July 1, 2001, policy that expanded eligibility for disability compensation to veterans with "boots on the ground" (BOG) during the Vietnam era on the basis of a diagnosis of diabetes; veterans who were "not on ground" (NOG) remained ineligible. Participants were Vietnam-era veterans with diabetes in the Veterans Affairs Healthcare System. Difference-in-differences were estimated during early (July 1, 2001-December 31, 2007), middle (January 1, 2008-December 31, 2012), and later (January 1, 2013-December 31, 2018) postpolicy periods. Data analysis was performed from October 1, 2020, to December 1, 2021. Interaction between having served with BOG (as recorded in Vietnam-era deployment records) and postpolicy period. Primary outcomes were all-cause mortality and hospitalizations. The study population included 14 247 BOG veterans (mean [SD] age at baseline, 51.2 [3.8] years; 25.7% were Black; 3.3% were Hispanic; 63.6% were White; and 6.9% were of other race) and 56 224 NOG veterans (mean [SD] age, 54.2 [6.3] years; 21.7% were Black; 2.1% were Hispanic; 67.1% were White; and 8.2% were of other race). Compared with NOG veterans, BOG veterans received $8025, $14412, and $17 162 more in annual disability compensation during the early, middle, and later postpolicy periods, respectively. Annual mortality rates were unchanged (prepolicy mortality rates: 3.04% for BOG and 3.56% for NOG veterans), with adjusted difference-in-differences of 0.24 percentage points (95% CI, -0.08 to 0.52), -0.08% (95% CI, -0.40 to 0.24), and -0.08% (95% CI, -0.48 to 0.36), during the early, middle, and later postpolicy periods. Among 3623 BOG veterans and 19 174 NOG veterans with Medicare coverage in 1999, a population whose utilization could be completely observed in our data, BOG veterans experienced reductions of -7.52 hospitalizations per 100 person-years (95% CI, -13.12 to -1.92) during the early, -10.12 (95% CI, -17.28 to -3.00) in the middle, and -15.88 (95% CI, -24.00 to -7.76) in the later periods. These estimates represent relative declines of 10%, 13%, and 21%. Falsification tests of BOG and NOG veterans who were already receiving maximal disability compensation prior to the policy yielded null findings. In this cohort study, disability compensation among Vietnam-era veterans with diabetes was not associated with lower mortality but was associated with substantial declines in acute hospitalizations. Veterans' disability compensation payments may have important health benefits.