Racial disparities in health are persistent and pervasive in the United States. Researchers and policymakers have known for decades that access to health care is not sufficient for addressing health disparities because of the socially situated roots of the disparities. We argue that the lack of progress in alleviating health disparities is the result of a lack of overarching framework to guide both policymakers and researchers in their efforts. We propose Amartya Sen’s capabilities approach as a theoretical framework that is expansive enough to address both the social context in which health occurs as well as the quality of health care provided. In this article, we use a subset of veterans receiving care from the Veterans Health Administration to review the theoretical concepts that link social inequalities with health disparities. Next, we provide empirical evidence of disparities in health based on race within the Veterans Health Administration, and we then provide a theoretical explanation for those disparities that exist at a system level. We close with a detailed examination of the applicability of the capabilities approach in addressing health disparities in the United States.