COORDINATING SOCIAL SECURITY DISABILITY AND WORKERS' COMPENSATION BENEFITS

	For More Information Social Sec. Ruling 87-21c SSA WC/PDB Offset POMS Example Settlement Language Medicare Set-Aside News

You are allowed to receive Workers' Compensation and Social Security disability benefits at the same time, up to a combined benefit of 80% of the gross income you were earning before you became disabled.   

But the Workers' Compensation and Social Security laws determine the amount of income you were earning before you became disabled in very different ways.

The Social Security Administration calculates your "average current wage" (i.e., your income level before you became disabled) based upon 42 U.S.C 424(a)a. Your "average current wage" should be the larger of the following three numbers: 

• your average lifetime earnings, or
• your average earning during the five years before you became disabled, or
• your average earnings during the year before you became disabled.

Meanwhile, your "average weekly wage" for Louisiana Workers' Compensation claims is generally based upon your wages in the four full weeks prior to your accident or the beginning of your illness.

While a claimant is receiving Workers' Compensation benefits, their Social Security benefits may be reduced ("offset") so that the combined benefits don't exceed 80% of the claimant's "average current wage" as determined by the Social Security Administration. The exception to this rule is that the claimant's employer may request that the Louisiana Workers' Compensation Court reverse the offset if the Court determines that the claimant is permanently totally disabled. 

The Social Security offset can become a very important issue when a Workers' Compensation claim is settled because the Social Security Administration may treat the lump-sum settlement as a replacement for periodic benefits. SSA may pro rate the amount of the settlement at the same rate that the claimant was receiving Workers' Compensation wage benefits before the settlement.

Specifically, Social Security applies the first appropriate option:

1. The rate specified in the lump-sum award, or
    
2. The periodic rate paid prior to the lump sum (if no rate is specified in the lump-sum award).
    
3. The state's Workers' Compensation maximum in effect in the year of injury. This figure can be used if no rate is specified in the award or there were no periodic benefits paid prior to the settlement.

The net effect is that a claimant's Social Security benefits will continue at the pre-settlement (offset) rate despite the fact that the claimant is no longer receiving Workers' Compensation indemnity benefits. This can be particularly painful where the claimant used a significant portion of their Workers' Compensation settlement to satisfy debts that they incurred while their claim was pending.

To address this problem, Social Security Ruling 87-21c allows the claimant and his employer to stipulate in the Joint Settlement Petition that the amount paid in the lump-sum settlement of the Workers' Compensation claim is intended to compensate the claimant for his lost wages (or loss of earning capacity) over his entire remaining work-life (based upon standard life-expectancy tables). The settlement documents should explicitly state the term and imputed periodic rate of the lump-sum settlement. 

In the typical settlement of a disputed Louisiana Workers' Compensation claim, the appropriate stipulation in the Joint Settlement Petition and corresponding Order should substantially reduce or eliminate the Social Security offset.

MEDICARE SET-ASIDE (MSA)

Medicare is health insurance for people who qualify for Social Security Disability and Social Security Retirement benefits. It also covers some people who were employed by state and local governments.

If you've been approved for Social Security Disability, your Medicare health insurance coverage should begin 29 months after the first month you were eligible for Disability benefits, including the six month waiting period that applies to most Social Security Disability claims. In other words, Medicare coverage usually begins after you've received about two full years of Social Security Disability benefits, even if those two years of benefits were partially or completely paid in a lump-sum following a Favorable Decision by a Social Security Administrative Law Judge.

Medicare wants to prohibit Workers' Compensation insurance companies and claimants from settling Workers' Compensation claims for future medical treatment for low amounts and then turning to Medicare to pay for the future medical care the claimant will need for their work-related injury. Medicare has two main ways of accomplishing this.

1. By refusing to recognize the terms of the Workers' Compensation settlement, thus allowing Medicare to recoup from the insurance company, employer and claimant any medical costs Medicare has already paid;  and

2. By refusing to pay for future medical treatment until the claimant can show that all of the money they received from the settlement was used to pay for medical expenses for their work-related condition, even when only a portion of the settlement was intended to cover future medical treatment.

You need to take steps to make certain that your right to future Medicare coverage is protected if you meet any of the following three categories:

• You're already approved for, and covered by, Medicare.
• You've been approved for Social Security Disability and you're waiting for your Medicare coverage to start.
• You should have a "reasonable expectation" of being covered by Medicare within the next 30 months,

The first step in protecting yourself is that you or your attorney should inform the Workers' Compensation insurance company that you've applied for, or have been approved for, Social Security Disability.

Many insurers will then hire a separate company to review your medical records and your doctor's opinions about the type of medical treatment you will need in the future. The company will prepare a report that includes an estimate of how much the future medical treatment for your work-related injury is expected to cost over your lifetime.

At a minimum, the settlement of the medical portion of your Workers' Compensation claim should provide you with benefits sufficient to cover the expenses detailed in the insurance companies' report.

The settlement documents for your Workers' Compensation claim may say that the medical benefits are subject to a "Medicare Set-Aside Constructive Trust." This is often referred to as an "M.S.A."

Medicare Set-Asides are often structured to allow the Workers' Compensation insurer company to make a down payment on your future medical expenses at the time of the settlement and future annual installment payments for the rest of your life. Typically, the Workers' Compensation insurance company will purchase an annuity contract from another insurance company to pay for the future annual payments. The Workers' Compensation insurance company may then completely close their file about you because, from their point of view, your claim is over. Your future medical payments will come to you directly from the annuity company and you should deposit those payments into your Medicare Set-Aside bank account. Medicare will then pay for your future medical expenses for your work-related injury only if your have depleted the funds in your M.S.A.  

There are a number of things to consider when negotiation the settlement of the medical portion of your Workers' Compensation claim, including:

• M.S.A. money may be used only for future medical expenses for your work-related injury. If you spend the money on anything else, Medicare has the right to refuse to cover the cost of your future medical expenses until you have put the money back into the account. 

• All of your future medical expenses for your work-related injury will not necessarily be covered by Medicare, so the amount apportioned to the M.S.A. may be inadequate to cover your actual future medical expenses.

• You will need to maintain a separate bank account and excellent financial  records about your M.S.A. in case Medicare ever asks for proof of how you spent the money.

• There is no limitation on using your Medicare coverage for injuries or illnesses that are not related to your Workers' Compensation claim.