WC Settlement Used as Evidence that Claimant was not Disabled for Purposes of Social Security Benefits

CMS, Commentary, Medicare Advantage, Medicare Set-Aside Blog, Social Security on June 16, 2016
Posted by Jennifer Jordan, JD, MSCC

Ever wonder what happens after a case is settled in which no MSA was funded because the parties all agreed that there was no reasonable anticipation of Medicare entitlement within the magical 30 months from the date of settlement?  The answer is as we all suspected:  the claimant proceeds to apply for Social Security Disability anyway. But in an interesting turn of events, one claimant has been denied SSI because she alleged that she was not disabled enough in order to avoid funding a Medicare set-aside.

In Boone v. Colvin, a former worker comp claimant sought judicial review of the final decision of the Acting Commissioner of Social Security denying her application for supplemental security income (SSI) on the grounds that she is not disabled. Ms. Boone applied for SSI on July 14, 2010, alleging a disability onset of December 2, 2004 which is coincidentally her workers’ compensation date of loss. The application was denied and a request for reconsideration timely filed requesting a hearing before an ALJ. The ALJ again denied benefits on March 9, 2012, upon which a request for review by the Appeals Council was filed. The Council remanded the case back to the ALJ to further evaluate the May 9, 2011 award by the state of Medicaid benefits for her mental impairment. On December 5, 2013, a second hearing was held by a different ALJ and again she was denied benefits. When her appeal to the Appeals Council was denied, the decision of the ALJ became the final decision of the Commissioner which is under judicial review here.

The Disability Standard

In these hearings, the ALJ must determine whether the claimant has the inability “to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months” [42 U.S.C. § 1382c(a)(3)(A)]. The regulations provide a five-step analysis that the ALJ must consider when determining whether a claimant is disabled:

(i) work activity, if any  [claimant not disabled if doing any substantial gainful activity]

(ii) medical severity  [claimant is not disabled if no severe medically determinable physical or mental impairment exists that meets the duration requirement in § 416.909, or a combination of impairments that is severe and meets the duration requirement]

(iii) medical severity of impairment(s) [Disabled if impairment(s) meets or equals one of the listings in 20 C.F.R. pt. 404, subpt. P, app. 1 and meets the duration requirement]

(iv) residual functional capacity [“RFC”] and past relevant work [If can still do past relevant work, not disabled]

(v)  assessment of RFC and age, education, and work experience to see adjustment can be made to other work [If claimant can make an adjustment to other work, then not disabled. If claimant cannot make an adjustment to other work, then disabled]

20 C.F.R. § 416.920(a)(4)(i)-(v).

Here the ALJ found that Ms. Boone had the residual functional capacity to perform light work as defined in 20 CFR 416.967 (b) [includes sitting, standing, and walking for 6 hours in an 8-hour workday and lifting, carrying, pushing and pulling 10 pounds frequently and 20 pounds occasionally except with the option to sit and stand, maintaining each posture for 60 minutes]. Although the claimant “could never climb scaffolds, and occasionally climb stairs and balance,” “there were jobs in the national economy existing in significant numbers that plaintiff could perform, including jobs in the occupations of silver wrapper, routing clerk, and advertising material distributor.” Although not capable of her past work, claimant was capable of work and therefore not disabled for purposes of receiving Social Security benefits.

Additionally, the ALJ must assess the claimant’s credibility in a two-step process:

(i) determine whether plaintiff’s medically documented impairments could cause plaintiff’s alleged symptoms.

(ii) evaluate the extent to which the claimant’s statements concerning the intensity, persistence, or functionally limiting effects of the symptoms are consistent with the  objective medical evidence and the other evidence of record.

[20 C.F.R. § 416.929(c)(3)]

“Such other evidence” includes claimant’s own statements made” in connection with his or her claim for disability benefits with statements he or she made under other circumstances, when such information is in the case record. . . . [including] statements the individual made in connection with claims for other types of disability benefits, such as workers’ compensation.” If the ALJ does not find claimant’s statements to be credible, the ALJ must cite specific reasons for that finding that are supported by the evidence.

While the ALJ here found that Ms. Boone’s impairments could reasonably be caused by some of her alleged symptoms, it was the second step of the assessment that she failed due to certain aspects of her workers’ compensation settlement.

ALJ’s Evaluation of the Workers’ Compensation Agreement

Following claimant’s 2004 L4-5 disc herniation and two years of pain management, she had an artificial disk implantation on February 5, 2007 and was deemed at MMI on July 5, 2007 with permanent light duty restrictions and a 15% partial disability rating. She promptly settled her claim for $75,000, receiving $56,000 after attorneys’ fees. The settlement agreement included the following language:

Whereas, it is not the intention of the instant settlement agreement to shift responsibility for future medical benefits to the federal government. Having considered Medicare’s potential interest in future medical expenses, the parties have agreed no Medicare set aside amount is necessary by way of this claim. In determining no set aside is necessary, the parties considered various matters, including but not limited to the following: Plaintiff is not Medicare eligible and there is no reasonable expectation that Plaintiff will be Medicare eligible within the next thirty (30) months. It is noted that the future need for medical care and treatment is disputed in this case as previously noted in this agreement. It is further noted that this settlement agreement specifically forecloses the possibility of future payment of medical benefits incurred after the date of the settlement agreement.

The ALJ found this inconsistent with claimant’s claims of disability, finding that by claiming that she was not likely to become Medicare eligible, that she was conceding that she was not then disabled.

Take Away

This is unfortunately where this particular case ceases to be valuable for our purposes. The case was remanded because the ALJ erred in applying standards for a SSDI application whereas claimant has actually applied for SSI. The court rationalized that after having been denied SSDI twice already that claimant’s statements in the settlement agreement could be viewed as reasonable and should not have been held against her credibility for the third application for a different benefit. However, the way that the process played out here provides hope that the various state and federal programs that overlap in this area are finally starting to work together. If not so disabled that you are willing to settle your comp claim for de minimis value with no future medical allocation, then you must be capable of the light duty work that your doctor believes you to be and not eligible for SSDI.

The other lesson to be learned here is to not rely upon empty promises from claimants who swear at settlement that they do not plan on applying for SSDI when deciding how to deal with future medical exposure. In this case, if awarded benefits and she does end up eligible for Medicare and Medicare eventually makes related payments, where does that leave this carrier? Reasonable expectation of Medicare benefits within 35 or 40 months is still expectation. 30 months is merely a review threshold established for purposes of obtaining CMS approval of the WCMSA. This carrier would have been better served by actually stating that future related anticipated medical expenses have been contemplated and included (hopefully) in this total settlement amount and that in the event that claimant should become Medicare eligible, she understands that she may be required by CMS to provide proof that the allocation was spent on related medical treatment before Medicare will lift the secondary payer exclusion and provide related benefits. At least then the settlement doesn’t have the appearance that because review thresholds weren’t met that nothing was done about future medicals.

As talk of creating a SSDI set-aside program has been initiated and the financial realities that the Social Security program does not have adequate funds to administer the program for much longer, it will be interesting to see if the standards for being awarded Social Security benefits become more stringent. As it stands, the ease of obtaining SSDI is greatly responsible for the number of MSAs funded over the past decade. Any change on this front would be a welcome one.

Bone v. Colvin

Court for the Eastern District of North Carolina, Eastern Division


2016 U.S. Dist. LEXIS 77982

June 01, 2016, Filed