North Carolina Federal Court Finds Provision on Anticipation of Medicare Eligibility within 30 Months of Settlement Does Not Concede Potential Social Security Disability

051816_1352_VirginiaFed1.jpgOn June 1, 2016, the United States District Court for the Eastern District of North Carolina published its opinion on Boone v. Colvin, concluding that in deciding Plaintiff’s credibility pertaining to her Supplemental Security Income (SSI) application, the administrative law judge (ALJ) incorrectly used a portion of the workers compensation settlement agreement addressing future Medicare eligibility. Because the issue was entitlement to SSI, not Disability Insurance Benefits (DIB), the fact that the settlement agreement indicated there was no reasonable expectation that Plaintiff will be Medicare eligible within thirty months of the settlement, did not mean Plaintiff conceded or agreed she was not disabled under the Social Security Administration rules for SSI benefits.

Case History

Ms. Boone, the Plaintiff in this case, had an accident in the course and scope of her employment on December 2, 2004. As a result of her industrial accident, she suffered a disc herniation at L4-5, which was initially treated with pain management. Ultimately, she had an artificial disk implantation on February 5, 2007. Thereafter, she reached maximum medical improvement on July 5, 2007 with permanent light duty restrictions and a 15 percent partial disability rating. After negotiating with her employer/carrier, on March 30, 2009, she agreed to and was awarded a $75,000 settlement by a workers’ compensation judge, terminating any and all entitlement to indemnity and medical benefits she may have had pursuant to the North Carolina workers’ compensation law. After attorney fees and costs, she netted $56,000.

The workers’ compensation settlement agreement contained a provision regarding future medical benefits. Because she was not then a Medicare beneficiary, had not applied for social security disability benefits and was not within 30 months of reasonably anticipating becoming a Medicare beneficiary, the agreement included language stating “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.”

Although the opinion does not indicate whether at a previous point the Plaintiff may have been insured for Disability Insurance Benefits (DIB), by the time she applied for social security benefits, she was not insured for DIB, therefore applied only for Supplemental Security Income (SSI). Almost six years after her date of accident, and more than three years after her settlement, Plaintiff filed an application for SSI on July 14, 2010, alleging a disability onset date of December 2, 2004, her workers’ compensation date of accident. The application was denied initially and upon reconsideration, and a request for a hearing was timely filed. While waiting for the hearing to be scheduled, on May 9, 2011, the North Carolina Department of Health and Human Services (NCDHHS) allowed Plaintiff Medicaid benefits.

On February 9, 2012, a video hearing was held before an ALJ. The ALJ issued a decision denying Plaintiff’s claims on March 9, 2012. Plaintiff timely requested review by the Appeals Council. More than a year later, on April 15, 2013, the Appeals Council allowed the request and remanded the case with instructions that the ALJ further evaluate Plaintiff’s medically determinable mental impairments, evaluate the May 9, 2011 decision by the NCDHHS allowing Plaintiff Medicaid benefits and give further consideration to Plaintiff’s residual functional capacity (RFC), providing appropriate rationale for it with specific supporting references to evidence of record.

On December 5, 2013, a second hearing was held before a different ALJ On March 24, 2014, the ALJ issued a decision again denying Plaintiff’s claim for SSI. Plaintiff timely requested review by the Appeals Council. More than a year later, on June 25, 2015, the Appeals Council denied the request for review. Almost 11 years after her date of accident, and more than 5 years from the date of her application for SSI, on August 31, 2015, Plaintiff commenced this proceeding for judicial review of the ALJ’s decision.

Administrative Law Judge Findings

Plaintiff was 42 years old on the date she filed her application for SSI and 45 years old on the date of the hearing, therefore considered a younger individual. 20 C.F.R. § 416.964(b)(3). The ALJ found that she had at least a high school education. 20 C.F.R. § 416.964(b)(4). The ALJ further found that Plaintiff had past relevant work as a driver, fire watcher, transporter and child care provider.

Applying the five-step sequential evaluation analysis of 20 C.F.R. § 416.920(a)(4), the ALJ found at step one that Plaintiff had not engaged in substantial gainful activity since the date of her application. At step two, the ALJ found that Plaintiff had the following medically determinable impairments that were severe within the meaning of the Regulations: post-laminectomy syndrome, lumbosacral spondylosis and chronic back pain. At step three, the ALJ found that Plaintiff’s impairments did not meet or medically equal any of the Listings.

Due to concerns about the Plaintiff’s credibility, the ALJ next determined that Plaintiff had the RFC to perform a limited range of light work. Based on her determination of Plaintiff’s RFC, the ALJ found at step four that the Plaintiff was not capable of performing her past relevant work. At step five, the ALJ accepted the testimony of the vocational expert and found that there were jobs in the national economy existing in significant numbers that the Plaintiff could perform, including jobs in the occupations of silver wrapper, routing clerk and advertising material distributor. The ALJ therefore concluded that Plaintiff was not disabled from the date of her application, July 14, 2010, and therefore not entitled to SSI.

Evaluation of the Workers’ Compensation Agreement

On appeal, Plaintiff asserted that the ALJ’s decision should be reversed and SSI benefits awarded or, alternatively, that the case should be remanded for a new hearing on the principal grounds that the ALJ erroneously evaluated the state Medicaid decision and the workers’ compensation settlement into which Plaintiff entered into on March 30, 2009 in determining Plaintiff’s credibility.

At the second step of the assessment, the ALJ found that Plaintiff’s allegations were not fully credible. The ALJ stated that “the claimant’s statements concerning the intensity, persistence and limiting effects of her symptoms are not entirely credible.” The ALJ provided specific reasons for her credibility determination, including an assessment of the workers’ compensation agreement.

The ALJ deemed the “not reasonably eligible for Medicare within 30 months of settlement” provision inconsistent with Plaintiff’s claim of disability. In other words, the ALJ found that because the claimant herself agreed in the workers’ compensation settlement agreement there was no reasonable expectation she would become Medicare eligible within 30 months; in effect, “she conceded that she agreed she was not disabled under the Social Security Administration rules at that time.”

Improper Use of Medicare Eligibility Provision to Evaluate Credibility

On appeal, Plaintiff contends that “the agreement and the specific Medicare eligibility provision does not relate at all as to whether or not she meets Social Security requirements.” The court finds merit in this point indicating that “while entitlement to a period of disability and disability insurance under Title II of the Act (DIB) establishes entitlement to Medicare benefits, 42 U.S.C. § 426(b)(2)(A)(i), entitlement to SSI does not. Plaintiff’s agreement to the provision could reflect simply Plaintiff’s pursuit of SSI rather than DIB.”

The Commissioner of the SSA agrees that the ALJ was evaluating the Medicare eligibility provision from a DIB perspective and that the ALJ erred in doing so. “The Commissioner concedes that the ALJ’s interpretation of the agreement was ill-founded.” The Commissioner argues, nonetheless, that the ALJ’s error in discounting Plaintiff’s credibility on the basis of the provision in the workers’ compensation agreement is harmless. She cites to the other significant evidence the ALJ discusses in support of her credibility assessment. The court here however indicates that “while the evidence is admittedly extensive, the court cannot say that the ALJ’s error was harmless.”

One reason is that the ALJ did not indicate the weight she gave the inconsistency she found between the provision in the workers’ compensation agreement and Plaintiff’s claim of disability. “The decision fails to foreclose the possibility that the ALJ’s error significantly tainted her view toward Plaintiff’s credibility and her evaluation of other evidence bearing on Plaintiff’s credibility.”

Moreover, Plaintiff’s claim of disability relies substantially on her allegations of pain and other limitations resulting from her back impairment. “Because symptoms, such as pain, sometimes suggest a greater severity of impairment than can be shown by objective medical evidence alone, any statements of the individual concerning his or her symptoms must be carefully considered if a fully favorable determination or decision cannot be made solely on the basis of objective medical evidence.” Soc. Sec. Ruling 96-7p, 1996 SSR LEXIS 4, 1996 WL 374186. Thus, “the credibility of Plaintiff’s statements about her pain and other symptoms and their functional effects are of particular importance to the propriety of her disability claim.”

In addition, the court here alludes to the fact that Plaintiff was not well equipped to understand the interrelation between DIB, SSI, Medicare, Medicaid and workers compensation. “She is not a lawyer and does not have a college degree. As noted, the ALJ found at one point that she obtained a GED, but only had an

eighth grade

education. While Plaintiff expressly represented in the workers’ compensation agreement that she had read and fully understood it, the implicit concession the ALJ found arguably falls outside the scope of simply understanding the agreement. There does not appear to be any evidence showing that Plaintiff’s lawyer or anyone else explained to her any impact the provision in question could have on a claim by her for Social Security disability-based benefits. The ALJ herself does not appear to have properly understood the statutory interrelation on which she grounded her finding.”


The court concludes that the ALJ committed prejudicial error in her evaluation of Plaintiff’s credibility. As a result, the court recommends this case should be remanded for further administrative proceedings. In making this ruling, the court expressed no opinion on the weight that should be given to any piece of evidence, as that is a matter for the Commissioner to decide.

Although this is an SSI case, which sometimes affects Medicare eligibility, this is a worrisome case for many reasons. First, it clearly demonstrates that even when injured individuals stipulate in their settlement agreements there is no reasonable anticipation of Medicare enrollment within 30 months of settlement, when injured individuals apply for benefits and allege a retroactive date of disability onset which matches the date of accident, if successful, Medicaid or Medicare coverage may also become effective within 30 months of the date of the settlement. Those who have been following Medicare Secondary Payer compliance over the last fifteen years see CMS pursuit of a primary payer or applicable plan for reimbursement of any conditional payments it may make related to the accident that gave way to eligibility for benefits and therefore Medicare coverage.

Second, the case shows how the language and ideas expressed in a workers compensation, auto, longshore, medical malpractice, no-fault, products, or general liability settlement, agreement, release or stipulation matter and may be significant to other parties, including federal agencies like the SSA and CMS. As the ALJ did here, it is no longer unthinkable for an ALJ deciding entitlement to DIB benefits, which has a direct correlation to Medicare, to use the language regularly included in such agreements when contemplating MSP compliance to conclude that no anticipation of Medicare eligibility within 30 months of settlement means the claimant concedes he or she is not disabled.

Third, the case provides a blue print for potential federal false claims. Given the direction that false claims case law has gone over the last several years, it is no longer inconceivable to think that the federal government would interpret the language used by litigants, such as the parties in this case, as a purposeful shift to taxpayers for the future responsibility of any and all medical expenditures related to the settled non group health plan claim.

As part of our MSP compliance services, Optum Settlement Solutions offers a review of clients’ settlement release, agreement or stipulation by our legal team to ascertain if Medicare’s interests have been properly considered and appropriate protective language has been included. Our legal team, with years of experience as claims handlers, trial attorneys, appellate lawyers and MSP compliance counselors, will discuss ideas and strategies as well as provide recommendations and suggested language to comply with MSP statutory, regulatory and case law mandates.

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