If you are disabled from an on-the-job injury then you may have numerous benefits available in order to compensate for lost wages and to help finance medical expenses. The first benefit is Workers’ Compensation (“WC”). The second is Social Security Disability Insurance (“SSDI”). Each of these has its unique considerations and you may qualify for or need both. The interplay between these two benefits is complex and requires the skilled guidance of an attorney to navigate around several pitfalls, including offsetting benefits as well as Medicare Set Aside (“MSA”) accounts.
The purpose of this article is to outline considerations of which the claimant should be aware when considering combining SSDI to a WC claim.
Social Security Disability Insurance Offset
The State of Georgia prohibits claimants from receiving 100% of their SSDI benefits in addition to their WC. Claimants’ WC benefits reduce their SSDI benefits by any amount in excess of the claimant’s best year’s earnings for the past 5 years. Here is a sample calculation:
Suppose you make $50,000 as your highest year’s earnings. Divided by 12, this amounts to $4,166.67 per month. 80% of your monthly income is $3,333. Therefore, Social Security’s monthly limit is $3,333 per month.
Further assume that you receive $2,000 per month from SSDI and $1,500 per month in WC. The total allowable income is $3,333 per month, but you are receiving $3,500 per month. There is an excess of $167 per month. This means that your SSDI monthly cash benefit will be reduced to $1,833 per month. This reduction continues until the WC benefits are extinguished.
The best way to mitigate the SSDI offset is for the WC attorney to structure the WC settlement amount to be calculated for the life of the impairment. This language requires the settlement to be calculated over the total life expectancy of the claimant. This can reduce the monthly WC monthly benefit, extend the WC benefits, and retain SSDI more cash benefits.
Medicare Set Aside
Medicare Set Aside (“MSA”) is money from a settlement put into an annuity for medical bills related to your injury. The MSA applies in situations where Medicare would pay for injuries that could be covered by a private insurance policy. In other words, the law seeks to prevent the privatization of profits and socialization of costs. Medicare is the secondary payer in cases where there is another liable party, such as an employer or its Workers’ Compensation Insurance carrier. 42 USC § 1395y. If the actual expenses exceed the set aside amount, then Medicare covers the difference.
The MSA is only a concern in two situations. First, if the claimant is Medicare eligible then an MSA must be created. Medicare eligible patients are generally defined as those between ages 62.5 and 65, those receiving SSDI, those who have applied for SSDI, and those suffering from end state renal disease. Second, if the case is settled for $250,000 or more and there is a reasonable expectation of Medicare expenses within 30 months of the settlement, then an MSA must be created. (Note: the Centers for Medicare and Medicaid (“CMS”) do not review MSAs for $25,000 or less.)
The MSA funds are kept in an interest bearing account with distributions only made for medical expense. The account administrator must keep accounting records for the CMS. Once the funds are exhausted, a final accounting is performed before the claimant’s Medicare benefits are reinstated without any risk of termination. The interest bearing account is either administered by the claimant or a third party administrator.
Claimants should be aware that funds for an MSA will be taken out of the claimant’s settlement. If a claimant is entitled to $100,000 for a settlement with a $50,000 MSA, then the claimant will only receive $50,000, minus attorney’s fees.
For example, if there were no MSA, then the usual settlement amounts work out to 25% of the settlement to the attorney and the remainder to the client. This works out to $25,000 for the lawyer and $75,000 for the client for a $100,000 settlement. In the event of a $100,000 settlement with a $50,000 MSA, then the attorney’s fees are 25% of $50,000, which amounts to $12,500. The remaining $37,500 goes to the claimant.
The effect of an MSA can result in enormous costs for both attorney and client. As such, an understanding of the effects of Medicare eligibility is necessary in order to prevent the claimant from forfeiting more money from their case than is necessary.
The Least You Need to Know
Matthew Queen is an Associate Attorney with The Law Firm of Feiler & Associates. His practice focuses on representing disability claimants for both SSDI and SSI claims in front of the Social Security Administration. In addition, Matthew assists families to create sophisticated estate plans for people with a chronic condition or disability. Matthew is a veterans accredited attorney with the U.S. Department of Veterans Affairs and helps veterans to manage disability denials and to structure their assets so as to maximize available public benefits. Prior to joining the firm, Matthew was an associate with a Big 4 accounting firm in Los Angeles, California specializing in state and local corporate tax planning and compliance. Matthew received his Doctorate of Jurisprudence from the Georgia State College of law, graduating with Pro Bono Honors as well as his Masters of Taxation from the Georgia State Robinson College of Business. For undergraduate studies, Matthew attended the Georgia Institute of Technology and earned a Bachelor of Science in Management with a concentration in Finance, graduating With Honors.