A question which frequently comes up during settlement discussions is whether the workers’ compensation settlement will affect a worker’s Medicare or Medi-Cal benefits.
The first issue to clear up is the two ways that the worker can settle their workers’ compensation claim. The first is by way of “Stipulation” keeping future medical care open. The stipulation will describe the parties that are involved in the case, the body parts that are injured, the benefits paid to date and the percentage of permanent disability. Each percentage point of permanent disability is approximately $1,000.00. The higher the percentage, the greater dollar amount tied to that percentage point.
A stipulation will keep the medical care open for the body part that is being settled. There are two areas that call for vigilance on behalf of the worker:
(1) Make sure that all the body parts are included in the settlement. The relation to a disputed body part to the work injury should be established before going to court to settle the case. Once you get the settlement conference, it might be too late to start adding body denied parts to the agreement. The body parts noted in the agreement will impact what medical expenses Medicare will pay for, so this is something that must be thought out and properly described in the settlement.
(2) The second area which must be looked at carefully is all the language the insurance company will put in the boxes provided by the settlement form. Many times they will say that mileage and out-of-pocket expenses are being resolved. If these expenses have not been paid, then, that note in the settlement should be crossed off. The defense attorney may try to “sneak-in” the resolution of some rights that have not been bargained for. The worker and his/her attorney must be alert to this tactic and make sure that the settlement reflects what the parties intend to resolve.
The second type of settlement is called a “Compromise & Release” (C&R). This type of settlement normally closes all aspects of the case. Once the Judge approves the C&R, it will be next to impossible to undo the agreement.
When the worker stipulates his/her case, the payments are made in bi-weekly installments of approximately $580.00 every two weeks. So, for example, if a worker settles his/her case at 15% permanent disability (PD) – the worker will be paid $14,645.00 at $580.00 every two weeks.
A C&R will normally pay the settlement amount in a lump sum. If the worker with the 15% PD negotiates a “buy-out” of his/her medical care for an additional $20,000.00 that worker will receive a check for: $14,645.00 + $20,000.00 = $34,645.00. Many times the insurance will start the PD payments before the settlement date. If prior PD payments are made, these would be deducted from the settlement.
If a worker is receiving social security at the time of the settlement, the work comp insurance will not settle the claim for more than $25,000.00 without first talking to Medicare and seeing how much Medicare thinks the workers should get for his/her medical care. About thirty years ago, the federal government enacted statutes that protect the interests of Medicare. The federal government realized that many injured workers were not getting enough money to settle their future medical care and were asking Medicare for help once the money ran out.
The laws now state that if the parties ignore Medicare’s interests when settling their claim:
(1) Medicare may refuse to pay any medical care for the industrially injured body part(s) and
(2) If Medicare does pay, they may come after the parties for reimbursement.
Once the parties talk to Medicare, and Medicare tells them how much the worker has to be paid, the parties are safe and Medicare will not determine that their interest were ignored.
If the injured worker wants to assure himself/herself that Medicare will “pick up the tab” when all the workers’ compensation money is used up, the worker must show Medicare that every penny of the work comp medical money was used to pay for medical expenses. If the worker shows Medicare that he/she did use up all his Medicare approved medical care monies for medical care then, Medicare will normally step in and pay for medical expenses once that money is used up.
Many of my clients fret over the forms that are given to them noting all the responsibilities they must take upon themselves in order to protect Medicare. If the worker does not plan to ask Medicare for future help for the industrial body parts, the money may be spent on the necessities of life. However, if the worker cannot show that the money was used for medical care, Medicare will no longer be responsible for future costs.
Sometimes a C&R settlement is so large that the insurance company will want to structure the payments. For example, instead of giving a worker $250,000.00 in a lump sum, the insurance company may put $150,000.00 in an annuity that will pay the worker $10,000.00 a year for the rest of his/her life. There is usually some “up-front” money to start off the payments and then the yearly amounts are allotted.
In these types of cases, the worker would have to show Medicare that his/her yearly amount was used for medical care. Once that is done, Medicare would cover the costs until the next year.
There is another aspect of the settlement which could impact your social security checks. If the worker is not over 62 and is getting social security disability insurance; social security will take a credit for any monies paid out by workers’ comp for the same disability social security is paying for. For example, if a worker injures her knees and can no longer walk, she may qualify for social security disability payments. If these payments are $1,000.00 a month once workers’ comp starts paying – social security will stop until the work comp payments are all paid out.
So what happens if a 35 year old worker who is getting social security because of the industrial injuries settles her claim for $45,000.00? Let’s say $20,000.00 is due to the disability and $25,000.00 for medical care. How much will social security deduct from each check? What would happen is social security will divide the $20,000.00 disability payment throughout the expected life of the injured worker. If the worker is expected to live another 50 years, then, the $20,000.00 is divided by 50 = $400.00 a year or $33.33 per month. Social security will deduct $33.33 from each monthly social security check. This calculation should be included in the settlement to
(1) show social security that their interest were taken into account and
(2) to show them how much should be taken out each month.
Social security will do their own calculations, but they may adopt what the settlement says as an accurate reflection of the worker’s life-span and monthly payment deduction.
When it comes to Medi-Cal we are looking at a different concern. In order to qualify for Medi-Cal a worker can only have a certain amount of money in the bank. A huge settlement may disqualify the worker and his/her family for Medi-Cal benefits. The safest way to better ensure that nothing bad happens is to take the settlement to social security or Medi-Cal prior to signing. That way there are no surprises down the line.
The final issue that must be covered is conditional payments. These are medical bills paid by Medicare or Medi-Cal prior to the settlement. If these are not paid back, Medicare and/or Medi-Cal can come after the worker’s social security checks for reimbursement. The general rule of thumb is to never sign a settlement when Medicare has paid prior medical care for the industrial injury until Medicare/Medi-Cal are fully reimbursed.