Grim employment prospects for some U.S. residents have caused Social Security disability benefit applications to surge, which has ramifications for workers compensation claims payers.
Insurers and Medicare set-aside service providers say they have seen a trend of workers comp claimants — particularly those in their 50s and younger who have been hardest hit by a lack of employment prospects — among the increased number of people filing for Social Security disability benefits.
Coinciding with the country's labor doldrums, the trend complicates workers comp claim settlements and adds to their expense because of Medicare Secondary Payer compliance requirements.
Compliance includes a requirement that workers comp claims payers fund all future medical needs for work-related injuries or illnesses suffered by claimants who automatically become eligible for Medicare health insurance benefits after receiving Social Security disability insurance for 24 months.
The Medicare Secondary Payer compliance requirement kicks in when an individual merely applies for Social Security benefits, regardless of whether they have been approved to receive those benefits, said Rosey Atkins, MSA product manager in Tampa, Fla., for medical cost-containment company Rising Medical Solutions Inc.
It was once expected that a need for Medicare set-aside arrangements would be limited mostly to cases with claimants nearing retirement around age 65, Ms. Atkins said.
“In the last three or four years, I have seen an increase of younger claimants coming through where I have had to project costs for a Medicare set-aside,” she said. “In the 55-year-old range, we are seeing an increase.”
“It's very odd, but in the past year we have seen a lot of younger claimants,” said Kristine M. Wilson, chief operating officer and general counsel for Medicare secondary payer adviser Tower MSA Partners L.L.C. in Delray Beach, Fla.
The monetary amount that claims payers must set aside to meet the future medical expenses of younger people, in contrast to those who are 65 or older, increases significantly because of a longer life expectancy, sources said.
“It's not uncommon for us to be dealing with MSAs where we have a 30-year life expectancy funded into an MSA, which is truly significant,” said Kathleen Wyeth, Medicare specialist for insurer Accident Fund Holdings Inc. in Lansing, Mich. “People in their 50s are not uncommon,” particularly since the economy turned downward.
Beginning with the start of the Great Recession in late 2007, people in their 50s have been among workers finding it harder to find employment once laid off, providing an incentive for them to seek Social Security disability benefits, particularly when returning to work will more likely mean reduced wages, several sources said.
“Unemployed workers in their 50s were about a fifth less likely than those age 25 to 34 to become re-employed between 2008 and 2011, and they experienced steep wage losses,” according to a report from the Washington-based Urban Institute, which conducts social and economic policy research.
Meanwhile, some claimants needing medical care file for Social Security disability while their workers comp claims are being contested by payers, sources said. To bolster their chances of qualifying for the disability benefits and possibly winning their case for workers comp benefits, attorneys may advise them to seek additional medical treatments. That can force workers comp payers to fund Medicare set-aside arrangements based on an estimated value of future medical care inflated by the additional treatments that claimants received to bolster their chances of qualifying for Social Security disability.
“Medicare set-asides do indeed make (workers comp claim) settlements more complicated,” Ms. Wyeth said.
At the end of 2011, more than 9.8 million U.S. residents received Social Security disability benefits, with 89% of the awards going to disabled workers, a majority of whom suffered musculoskeletal or connective tissue injuries, according to a recent report from the U.S. Social Security Administration.
In contrast, about 7.8 million people received Social Security disability benefits in December 2006, a year before the official start of the recession.
The number of workers seeking Social Security disability benefits is related to recent labor-market factors, but congressional revisions during the 1980s and an increase in benefit amounts since then have encouraged a longer-term trend of more people seeking benefits, said Harry Shuford, chief economist at Boca Raton, Fla.-based rating and research organization NCCI Holdings Inc.
The changes expanded the ailments qualifying for the disability benefits to include injuries such as arthritis and back pain.
The ability to receive Medicare health coverage after two years of qualifying for Social Security disability benefits also makes the benefits more attractive than looking for another job, particularly when fewer available jobs provide health benefits, Mr. Shuford said.
But there may be slight relief ahead for workers compensation payers.
Social Security Administration data shows that the number of disability claims the agency processed peaked in 2011 at nearly 3.4 million. That number is projected to fall to just less than 3 million by the end of 2013.
Additionally, U.S. Labor Department reports released this month show job market improvement. Claims for unemployment benefits fell to their lowest level since 2008, and employers added 165,000 jobs in April.
But other Labor Department data shows a still-difficult jobs picture. The employment-to-population ratio, for example, stood at 58.6% in April, down from 63.4% at year-end 2006.
“The economy does continue to grow at a modest pace,” Mr. Shuford said. “It's encouraging, but it's (still) nothing to go out in the streets and celebrate.”