Workers’ compensation law is already complex in Colorado, but when federal benefit programs like Medicare and Medicaid come into play, things can get even more complicated. At Kaplan Morrell, we often receive questions from injured workers who are also eligible for Medicare, Medicaid, or Social Security benefits—and they want to know how these programs interact with their workers’ compensation case.
In this article, we’ll explain how these benefit systems overlap, what risks you need to be aware of, and how to protect your rights.
Understanding the Basics: State vs. Federal Benefits
Workers’ Compensation: A State Program
In Colorado, workers’ compensation is governed by state law. This means medical care, wage loss benefits, and permanent disability compensation are all determined under Colorado statutes and rules.
Every state has its own system, so what’s true in Colorado may not be true elsewhere.
Medicare & Medicaid: Federal Programs
Medicare provides health coverage primarily for people age 65 and older, or those with certain disabilities, regardless of income.
Medicaid offers health coverage for individuals and families with limited income and resources.
While both programs provide essential healthcare access, they are not responsible for paying medical bills related to a workplace injury—at least, not initially.
Why Medicare (and Medicaid) Care About Workers’ Compensation Cases
Under the Medicare Secondary Payer Act (MSP), passed in 1980, Medicare is considered a “secondary payer” when there is another legally responsible party. This means:
- If you are injured at work and your medical care is covered by workers’ compensation, Medicare is not supposed to pay for those bills.
- Similarly, Medicaid typically defers to workers’ compensation when a workplace injury is involved.
The intent behind this law is clear: to ensure that workers’ compensation carriers—not taxpayers—are responsible for paying medical expenses related to workplace injuries.
Medicare Set-Asides (MSAs) in Workers’ Compensation Settlements
One of the most significant interactions between Medicare and workers’ compensation arises when an injured worker settles their workers’ compensation claim, especially if the settlement includes future medical benefits.
When you settle a case that involves ongoing or future medical care, you may need a Medicare Set-Aside (MSA). This is an account designed to:
- Protect Medicare’s interests
- Ensure that settlement funds are used for work injury-related care before Medicare pays for anything
When is an MSA Required?
- If you are already on Medicare or are reasonably expected to qualify within 30 months of settlement.
- If your settlement involves medical expenses in the future.
Failing to properly set aside funds can result in Medicare denying coverage later, leaving you personally responsible for bills.
Medicaid and Workers’ Compensation
For individuals who receive Medicaid, the interaction is similar:
- Medicaid is typically not responsible for paying medical expenses from a work injury.
- If you receive a lump-sum workers’ compensation settlement, it could potentially affect your income eligibility for Medicaid.
- Special planning (such as setting up a special needs trust) may be necessary to avoid losing Medicaid eligibility after settlement.
What About Social Security Disability and Workers’ Compensation?
Many workers who suffer serious injuries also apply for or receive Social Security Disability Insurance (SSDI). Workers’ compensation benefits can reduce your monthly SSDI payments through something called the “workers’ compensation offset”.
Proper legal planning can minimize or eliminate this reduction by structuring your settlement in a way that spreads payments over time.
Why Legal Guidance Matters
Combining state-level workers’ compensation with federal benefits like Medicare, Medicaid, or Social Security is highly technical. Without the right legal guidance, injured workers may:
- Lose access to essential healthcare coverage
- Be forced to repay Medicare or Medicaid for medical expenses they covered
- Receive lower disability payments
- Jeopardize their eligibility for future benefits
These risks make it absolutely essential to consult an experienced workers’ compensation attorney—especially before settling any claim involving long-term medical care. At Kaplan Morrell, we’ve been helping injured workers across Colorado since 1995. We understand the complex interaction between state and federal benefits, and we’re here to help you. Call us today at 303-780-7329 for a free, confidential consultation.
