Sounds like she did not retire, did not get put on the disabled-retired list by her service, but then went through the (More lenient) VA process to get her 'chronic back injury,' psychological issues, or some such other difficult to dispute malady adjudged as service-connected and so has that for an ID to prove veteran status instead of any kind of DOD ID.
Other than educational benefits, I've never had a file with VA, so I haven't got one of those cards. I'm covered by TriCare now that I've retired, and whatever may be wrong with me physically I just ascribe to 37-odd years of normal wear-and-tear in uniform full- and part-time.