Joseph Bustamante appeals the district court’s judgment affirming the Social Security Administration’s (“SSA”) denial of his application for disability benefits and for Supplemental Security Income under Titles II and XVI of the Social Security Act (“the Act”). We have jurisdiction under 28 U.S.C. § 1291, and we reverse and remand because (1) the Administrative Law Judge (“ALJ”) prematurely evaluated the impact of Bustamante’s alcoholism pri- or to completing the five-step sequential disability inquiry; and (2) the ALJ’s conclusion that Bustamante did not have a severe mental impairment was not supported by substantial evidence.
I. BACKGROUND
Bustamante was 53 years old at the time of the alleged onset of his disability in 1994. He has an eighth-grade education and relevant work experience as a newspaper delivery person and temporary laborer. Bustamante also has at least a 20-year history of alcohol abuse and is frequently homeless.
A. Procedural History
On July 5, 1994, Bustamante applied for a “Period of Disability and Disability Insurance Benefits” under §§ 216(i) and 223 of the Act, 42 U.S.C. §§ 416(i) and 423, and for Supplemental Security Income (“SSI”) under § 1614(a)(3)(A) of the Act, 42 U.S.C. § 1382c(a)(3)(A), (collectively, “disability benefits”). Bustamante initially alleged that he suffered from diabetes mel-litus, tuberculosis, pneumonia, and back problems. He later alleged diabetes, memory problems, a history of alcohol abuse, and anxiety.
The SSA denied his application on January 9, 1995. Bustamante then requested a hearing before an ALJ to obtain a de novo review of the SSA’s ruling. At a hearing on April 17,1996, Bustamante testified and was represented by counsel. At the conclusion of the hearing, the ALJ held the record open for the receipt of additional psychological evidence.
On December 27, 1996, the ALJ, after considering the additional post-hearing evidence, issued a written decision finding Bustamante ineligible for disability benefits.
The ALJ found that Bustamante suffered from diabetes mellitus and had a history of pulmonary tuberculosis, but that these conditions did not constitute a severe physical impairment, as defined by 20 C.F.R. §§ 404.1521, 416.921, because the former was not severe and the latter was successfully treated with medication.
The ALJ also found that Bustamante suffered from two mental impairments: a personality disorder and a substance abuse addiction disorder, that “result[ed] in moderate difficulties with activities of daily living, marked difficulties in maintaining social functioning, and seldom ... deficiencies in concentration, persistence or pace.” The ALJ noted that Bustamante also had “continual episodes of deterioration or de-compensation in the work place.”
*952 Nevertheless, the ALJ rejected Busta-mante’s mental impairments as a basis for disability eligibility on several independent grounds. First, the ALJ found that “alcohol abuse is his primary impairment” and that “any secondary behavioral and emotional conditions he may have are the product and consequence of his alcohol abuse and not an independently severe or disabling impairment.” Second, the ALJ concluded that even Bustamante’s alcohol abuse did “not reach a disabling level of severity.” Third, the ALJ concluded, with little analysis, that Bustamante “retains the physical and mental ability to perform basic work-related functions, including his past relevant work as a newspaper delivery person or laborer.” The ALJ also found that Bustamante “was not credible as to his limitations.” Finally, the ALJ concluded that “alcohol abuse is a contributing factor material to a finding of disability.”
Bustamante appealed the ALJ’s decision to the SSA Appeals Council on December 27, 1996. The Appeals Council affirmed after reviewing both the ALJ’s decision and additional evidence from a psychiatrist who examined Bustamante after the ALJ’s decision.
On August 4, 1998, Bustamante sought judicial review of the final decision by filing a complaint in federal district court against the Commissioner of the SSA, pursuant to 42 U.S.C. §§ 406(g) and 1383(c)(3). The district court granted summary judgment against Bustamante on September 8, 1999, in a one-line order, stating simply “that defendant’s decision is supported by substantial evidence.”
Bustamante filed a timely notice of appeal on October 1,1999.
B. Medical & Psychological Evidence
Between 1995 and 1997, several medical and mental health professionals examined Bustamante. The reports of the first three were considered by the ALJ in his December 1996 decision. The report of the last one, Dr. Newman, was not prepared until after the ALJ’s decision but was considered by the SSA Appeals Council on Bustamante’s appeal and is part of the administrative record.
1. William P. Andersen, M.D.
William P. Andersen, M.D., conducted a consultative medical examination on behalf of the SSA on October 16, 1995. He recorded the following ailments: chronic alcoholism, non-insulin dependent diabetes mellitus, history of pulmonary tuberculosis, peripheral edema, and a “mood disorder, secondary to chronic substance abuse and chronic alcoholism, associated with depressive features which are moderate to severe, and social stressors of homelessness.” Dr. Andersen further noted that Bustamante’s diabetes was such that “I am not able to qualify him for any known listing under the SSI requirements” and that his pulmonary tuberculosis was of a type that “would not be expected to be disabling.”
Dr. Andersen concluded that he “would defer to the results of a neuropsychiatric examination in this patient” but speculated that Bustamante’s “best qualifier for disability would be through the presence of his basically untreated substance abuse problem and the chronic mood disorder, which I believe may be secondary to chronic alcoholism.” He acknowledged that it “would be difficult to make an exact diagnosis in this case, since his drinking began at such a young age.”
2. David Pingitore, Ph.D.
David Pingitore, Ph.D., an SSA consultative psychologist, also examined Busta-mante on October 16, 1995. In addition to noting Bustamante’s history of alcohol *953 abuse and his various physical ailments, Dr. Pingitore administered a COGNISTAT test to evaluate cognitive functioning. Dr. Pingitore concluded in his functional assessment and recommendation that Busta-mante “currently possesses a marked degree of impairment in activities of daily living, as well as cognitive functioning and interpersonal relations.” He found that Bustamante “suffers from cognitive deficits that are the effects of long-term alcohol use,” but Dr. Pingitore could not say “whether any of these cognitive deficits are reversible if this client maintains sobriety from alcohol and enters a treatment program.”
3. Gary G. Balestin, Ph.D'.
Approximately one year later, on October 31, 1996, Gary G. Balestin, Ph.D., another SSA consultative psychologist, examined Bustamante and administered several tests. On a test for malingering, Busta-mante’s score was consistent with someone who deliberately misrepresents his memory span.
On the basis of this and other tests, as well as his clinical interview, Dr. Balestin diagnosed Bustamante with chronic alcohol abuse, dysthymia secondary to financial problems, and “personality disorder NOS [dependent, passive, avoidant, inadequate].” Dr. Balestin also rated Busta-mante’s functional capacities. He found that Bustamante was mildly impaired (“slight impairment which does not affect functional ability”) in 5 of 14 tasks and moderately impaired (“impairment which affects but does not preclude”) in the remaining 9 tasks.
4. Emily Newman, M.D.
Emily Newman, M.D., a psychiatrist, also examined Bustamante on three different occasions in the first half of 1997. Although no medical reports from Dr. Newman appear in the record, the record includes a letter from Dr. Newman dated May 5, 1997. In her letter, Dr. Newman diagnosed Bustamante with “Psychotic Disorder, 298.90,” “Alcohol Dependence, 303.9,” and “Schizotypal Personality Disorder.” Dr. Newman also wrote that a recent decrease in alcohol consumption “has likely contributed to his increase in psychotic symptoms” (emphasis added). Dr. Newman concluded:
Mr. Bustam[a]nte is quite functionally impaired. His psychotic symptoms and his anxiety prevent him from being organized enough to remember appointments. He is too paranoid about people to be able to work in any environment where contact with others is required.
II. DISCUSSION
A. Standard of Review
We review de novo the decision of the district court affirming the decision of the ALJ.
Tackett v. Apfel,
B. Overview of the Five-Step Disability Inquiry
The SSA regulations provide a five-step sequential evaluation process for determining whether a claimant is disabled.
Id.
at 1098; 20 C.F.R. §§ 404.1520, 416.920. The claimant has the burden of proof for steps one through four, and the Commis
*954
sioner has the burden of proof for step five.
Tackett,
1. Is claimant presently working in a substantially gainful activity? If so, then the claimant is not disabled within the meaning of the Social Security Act. If not, proceed to step two. See 20 C.F.R. §§ 404.1520(b), 416.920(b).
2. Is the claimant’s impairment severe? If so, proceed to step three. If not, then the claimant is not disabled. See 20 C.F.R. §§ 404.1520(c), 416.920(c).
3. Does the impairment “meet or equal” one of a list of specific impairments described in 20 C.F.R. Part 220, Appendix 1? If so, then the claimant is disabled. If not, proceed to step four. See 20 C.F.R. §§ 404.1520(d), 416.920(d).
4. Is the claimant able to do any work that he or she has done in the past? If so, then the claimant is not disabled. If not, proceed to step five. See 20 C.F.R. §§ 404.1520(e), 416.920(e).
5. Is the claimant able to do any other work? If so, then the claimant is not disabled. If not, then the claimant is disabled. See 20 C.F.R. §§ 404.1520(f), 416.920(f).
See also Tackett,
C. Role of Alcoholism or Drug Addiction
A finding of “disabled” under the five-step inquiry does not automatically qualify a claimant for disability benefits. Under provisions added by the Contract with America Advancement Act, Pub.L. No. 104-121, 110 Stat. 847 (March 29, 1996), an “individual shall not be considered to be disabled for purposes of [benefits under Title II or XVI of the Act] if alcoholism or drug addiction would (but for this subparagraph) be a contributing factor material to the Commissioner’s determination that the individual is disabled.” 42 U.S.C. §§ 423(d)(2)(C), 1382c(a)(3)(J);
see also Sousa v. Callahan,
We addressed the application of 20 C.F.R. § 404.1535 in
Ball v. Massanari,
Here, we must determine whether it is error for an ALJ to determine that a *955 claimant’s mental impairments are “the product and consequence of his alcohol abuse” prior to making a determination that the claimant is disabled under the five-step inquiry.
The Tenth Circuit has held this to be error in a similar case involving a claimant diagnosed with “significant depressive symptoms” and “a long history of alcohol abuse.”
Drapeau v. Massanari,
Here, the ALJ erred by concluding at step two that Bustamante’s “behavioral and emotional conditions” were “the product and consequence of his alcohol abuse and not an independently severe or disabling impairment.” This was improper. The ALJ should have proceeded with the five-step inquiry without attempting to determine the impact of Bustamante’s alcoholism on his other mental impairments. If, and only if, the ALJ found that Busta-mante was disabled under the five-step inquiry, should the ALJ have evaluated whether Bustamante would still be disabled if he stopped using alcohol. 1
D. Severity of Mental Impairment
To the extent that the ALJ concluded that Bustamante’s mental impairments were not severe regardless of the impact of alcoholism, we find that conclusion to be unsupported by substantial evidence. The Social Security regulations define severe impairment as an impairment which significantly limits a claimant’s “ability to do basic work activities.” 20 C.F.R. §§ 404.1521, 416.921. 2 The ALJ acknowledged in his decision that:
*956 The psychological evidence of record establishes that the claimant has a personality disorder, and a substance abuse addiction disorder, resulting in moderate difficulties with activities of daily living, marked difficulties in maintaining social functioning, and seldom has deficiencies in concentration, persistence or pace. He has continual episodes of deterioration or decompensation in the work place.
It is difficult to reconcile the ALJ’s above description of the psychological evidence with a conclusion that Bustamante would be capable of performing such basic work activities as “[understanding, carrying out, and remembering simple instructions,” “[using his] judgment,” or “[responding appropriately to supervision, coworkers and usual work situations.” See 20 C.F.R. §§ 404.1521, 416.921.
Indeed, every psychiatrist or psychologist who examined Bustamante found significant mental problems. Dr. Andersen diagnosed “[m]ood disorder, secondary to chronic substance abuse and chronic alcoholism, associated with depressive features which are moderate to severe, and social stressors of homelessness.” Dr. Pingitore, the consultative psychologist, noted that Bustamante possessed “a marked degree of impairment in activities of daily living, as well as cognitive functioning and interpersonal relations.” Dr. Balestin, another consultative psychologist, rated him moderately impaired (“impairment which affects but does not preclude”) in 9 of 14 functional capacities. Finally, Dr. Newman stated in a letter that Bustamante was “quite functionally impaired,” that his “psychotic symptoms and his anxiety prevented] him from being organized enough to remember appointments,” and that he was “too paranoid about people to be able to work in any environment where contact with others is required.”
In short, the evidence as a whole overwhelmingly supports Bustamante’s claim that he suffers from a severe mental impairment. A conclusion to the contrary is not supported by substantial evidence.
III. CONCLUSION
Accordingly, we reverse and remand with instructions that the ALJ proceed with step three (and four and five, if necessary) of the disability determination without attempting to separate out the impact of Bustamante’s alcohol abuse. Only if the ALJ determines that Bustamante is disabled under the five-step inquiry, should the ALJ consider whether “alcoholism is a contributing factor material to” that determination, pursuant to 20 C.F.R. §§ 404.1535 and 416.935.
REVERSED and REMANDED.
Notes
. In
Ball,
we stated in dicta that the claimant bears the burden of proving that his alcoholism or drug addiction is not a contributing factor material to his disability determination.
. 20 C.F.R. § 404.1521 states in full:
What we mean by an impairment(s) that is not severe.
(a) Non-severe impairment(s). An impairment or combination of impairments is not severe if it does not significantly limit your physical or mental ability to do basic work activities.
*956 (b) Basic work activities. When we talk about basic work activities, we mean the abilities and aptitudes necessary to do most jobs. Examples of these include—
(1) Physical functions such as walking, standing, sitting, lifting, pushing, pulling, reaching, carrying, or handling;
(2) Capacities for seeing, hearing, and speaking;
(3) Understanding, carrying out, and remembering simple instructions;
(4) Use of judgment;
(5) Responding appropriately to supervision, co-workers and usual work situations; and
(6) Dealing with changes in a routine work setting.
20 C.F.R. § 416.921 is identical, except for the heading.