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Was he a reservist or active duty (TAR)? Either way if he was rated over 30% disabled (by the military, not the VA) he should have rated a retirement and got screwed. A good buddy of mine from school was close to getting just a medical discharge from the Army, not retirement, and since he is the happy go lucky type who doesn't want to make waves he was going along with what the Army was trying to do until his dad (retired NG Colonel) knocked some sense into him and he got medically retired after being rated 70% disabled by the Army.
TAR. I PCS'ed before he finalized his separation, so I'm not sure if he ended up fighting it. Right before I left was when he found out he was not being retired. There was some weird "career loan" option he could do, which I'm guessing was the severance, but he would have to pay it back (?). It's been a hot minute, so I don't remember all of the details.