PMSI has frequently been asked what the MSP obligations are when a settlement occurs and the claimant is not currently receiving Medicare benefits, but previously applied for SSDI benefits. It is clear that there is no conditional payment reimbursement obligation to Medicare if the claimant is not a beneficiary; however, whether an MSA is necessary is not always entirely clear. Generally, an MSA would be appropriate in these types of situations, but it is important to understand why, since the issue is not “black and white.” Before diving into this issue, let us first explore the background of SSDI and how it relates to Medicare eligibility.
What is Social Security Disability?
Social Security Disability Insurance (SSD or SSDI) is a payroll tax-funded, federal insurance program of the United States government. It is managed by the Social Security Administration (SSA) and is designed to provide income supplements to people who are restricted in their ability to be employed because of a notable disability (usually a physical disability). SSDI can be supplied on a temporary or permanent basis, dependent upon whether the person’s disability is temporary or permanent.
A disabled person can file an application for SSDI benefits with the SSA. If SSDI benefits are granted, the monthly amount received is based on payments previously made into the system while the disabled individual was working. Only legal residents and citizens of the United States are eligible for SSDI and they must have enough eligible work quarters to qualify for benefits (generally they need to have worked 5 of the last 10 years). It is well known that the SSA denies the majority of SSDI applications upon first request. Typically, an applicant will have to re-apply or obtain the assistance of an attorney or SSDI specialist to obtain benefits as the standard for receiving benefits is quite high. Basically, an applicant must prove to the SSA that they can no longer work or have a severely limited work capacity due to their injury/disability. This disability is usually verified by medical reports and opinions provided to the SSA.
Once an SSDI recipient receives benefits for twenty-four months, they will automatically become enrolled in Medicare. It is for this reason that application for SSDI benefits is relevant to Medicare entitlement and the world of MSAs.
Why should an MSA be considered on settlements where the claimant has applied for SSDI benefits?
CMS’ Memorandum dated April 22, 2003 states that a claimant has a “reasonable expectation” of Medicare enrollment if they have applied for SSDI, or if they were denied benefits and anticipate appealing the determination. Whether a claimant anticipates appealing the denial or not is rather subjective since the claimant could always change their mind at any time. They may also not be confident about their case for SSDI benefits, and may later seek the services of an attorney and find out that their case is stronger than they originally thought.
The decision to utilize an MSA in a settlement where the claimant has applied for SSDI may not always be clear, particularly if the claimant was denied benefits. It is up to the parties to decide whether they will elect to do an MSA in these scenarios according to their “appetite for risk.” However, it is important to keep in mind that once a claimant begins receiving SSDI benefits, Medicare enrollment will automatically occur after twenty-four months. If the claimant becomes a Medicare beneficiary within thirty months of the settlement and an MSA was not included, the claimant may have to expend the entire settlement on Medicare covered expenses related to the injury before Medicare will provide coverage.
Arguably, the best practice for settlements involving a claimant who has applied for SSDI is to consider an MSA in order to protect all parties and avoid loss or interruption of the claimant’s future Medicare benefits. However, the decision regarding whether to include an MSA in the settlement of the case rests with the parties to the settlement. If the parties wish to utilize the voluntary CMS submission process to receive CMS approval of the MSA, the total settlement must be over the current $250,000 review threshold. In addition to a claimant’s right to appeal a denial of SSDI benefits, they can also request a re-opening of their case, or file a new case. This should also be considered when the parties are making the determination to include an MSA in the settlement or not. There are specific timelines and criteria which apply to re-opening an existing case which are listed below, but a new claim can be filed at any time.
What are the timelines to re-apply or re-open a claim once a claimant has been denied SSDI benefits?
If the Social Security Administration denies benefits, and the claimant disagrees, they have the following options:
- 60 days to appeal the determination
- 12 months (from the date of the determination) to re-open the case for any reason
- 4 years (from the date of the determination) to re-open the case for “good cause” only
- And any time within the claimant’s life a claimant can be re-opened if a claimant can meet 1 of 11 conditions set forth by the Social Security Administration. We won’t name them here, but these 11 conditions can be found in 20 CFR 404.988.
- A claimant can always file a new case with the SSA at any time
In summary, there are numerous ways that a claimant can seek a reversal of the SSA’s decision or re-apply for SSDI benefits if they are initially denied. It is well known that the SSA generally denies a large portion of applications upon first review, however most claimants will re-apply and the success rate is generally much greater the second time around. Settlement parties should consider this carefully when determining whether to establish an MSA in a settlement where the applicant has applied for SSDI, as the lack of an MSA could cause the claimant to lose Medicare coverage, up to the amount of their settlement.