The Effect of COVID-19 on WC and MSAs

Even before the COVID-19 virus situation was declared a global pandemic by the World Health Organization (WHO), world events indicated that a future recession was possible. Now that we are living amidst the full force of the COVID-19 effect, it seems like a recession is inevitable. Further, the high numbers of newly unemployed workers and shuttered businesses indicate that any recession that might emerge during the pandemic will be more severe than it would have been without the virus surfacing. The whole situation makes it difficult for business leaders to know what to expect once the COVID threat subsides. However, there are lessons to be insights to be gained for those who take the time to evaluate how the global community experienced and managed past recessions.


Swift, Massive and Unrelenting

The origins of the onset of the pandemic remain unclear; scientists only recently learned that the first two American deaths attributable to the virus (on February 6 and 17, respectively) occurred well before the first reported such death (February 29). If confirmed, it means that the coronavirus has been in the U.S. longer than previously believed and that its spread is wider than previously asserted. That assertion would help to explain the astonishing speed with which the virus overtook many U.S. cities and communities. As of this posting, the number of reported cases in the country tops 850,000, and the number of deaths caused by the virus is over 50,000, all having occurred in less than three months.


The earlier transmission date of early February also indicates that more people have probably contracted the coronavirus or are at risk of suffering from it than was previously thought. Making the situation worse is the vast array of unknowns still surrounding the disease, its spread, its treatment, and its actual toll. Without a clear idea of where the virus is spreading or what methods are truly containing it, government leaders can't re-open their communities for fear of triggering an even larger pandemic much closer to home.


Early Responses Also Cause Chaos

The most comprehensive response to the virus (so far) has been to order people to remain 'safer at home' to stop unintended viral transmissions through inadvertent social contact. The mandate became necessary in early 'hot spot' locations, including cities in Northern Italy, across Europe, San Francisco, and New York City. In those situations, the calamitous rise in the volume of critically ill patients quickly consumed all available medical resources, which, in turn, lead to more deaths because there were no resources left available to treat those later arriving patients. To prevent this situation in areas where the rise in case numbers was slower, many communities around the globe elected to tell their constituents sooner rather than later to stay home so that they did not face the unacceptable risk posed by a lack of sufficient medical interventions.


The consequence of the 'safer at home' mandate is that millions of people are now quarantined in their homes, unable to leave except for 'essential' reasons such as grocery shopping or if their work requires them to be out. Those who can work from home are now doing so. For the millions who can't, the stay-at-home mandate also means the loss of their job.


In the U.S., some 26,000,000 people have filed for UI (UI) as of late April, as the shops, restaurants, and services companies that employed them were forced to close their doors. Too many of those workers were existing on a paycheck-to-paycheck basis, meaning they don't have the resources they need to sustain their living situation while the pandemic runs its course. The UI funds will allow them to pay their rent and buy food until the situation lightens, their previous jobs become available again, or they can find another line of work.  Unfortunately, for many of them, the old job will be forever gone, and there will be no other resource available to assist them after they exhaust their short-term unemployment benefits.


For workers already suffering from a work-related injury or disability, the current crisis is creating an even more dire situation. Workers who are currently unemployed or receiving disability coverage because of an on-the-job event have been working to regain their health and capacity to return to their occupation. With so many healthy workers now available to take that job as soon as it becomes available again, these workers now find themselves essentially 'unemployable.' Even when they are strong enough to return to the workforce, the current situation indicates that there will be no jobs available for them to take. What will they do when that day comes?


The analysis of events that occurred after previous recessions and economic downturns suggests that many of today's unemployed workers will file worker's compensation (WC) claims or, if appropriate, social security disability claims (SSDI) to fill the void created by no job and exhausted UI benefits. Further, that research also shows that an increase in both WC and SSDI claims often also leads to an increase in requests for Medicare Set Aside accounts.


The Past Informs the Present

It's always helpful to look at relevant past events to make sense of current happenings. The economic crisis generated by today's COVID-19 pandemic is certainly similar to the housing crisis that caused the 2007-2009 Great Recession, so social responses to that situation can provide insights and direction for today's business leaders.


The message in brief: expect an influx of both UI and SSDI claims, as well as a swell of MSA applications. Data gathered over time reveals that the number of both UI and SSDI claims rose during the last seven recessionary periods, all of which occurred during the past five decades. Simply put, people who can't find work will seek alternative resources to fill that economic void. That pivot away from a work search to alternative financial supports usually takes them to either WC or SSDI options, and, in both cases, the opportunities to file an MSA application grow.


Newly Unemployed Workers:

Many employees will continue to work through an on-the-job injury if they can, prefering to retain their incomes even if that means slowing their recovery. These now unemployed workers may not be able to return to their old jobs, nor are they likely to find new work as stronger, healthier competitors vie for what is sure to be a limited opportunity for employment post-pandemic. These former employees may turn to WC resources as an alternative to returning to their old job or looking in vain to find a new one. They may also see the value of establishing an MSA within the case to ensure their health needs are covered regardless of the state of the future global economy


SSDI Recipients

In a similar vein, workers who are already collecting SSDI benefits may find themselves also blanked out of any work they might have taken or returned to as healthier applicants compete against them for that work.

Further, many of them may now also qualify for an MSA if they've been on SSDI for more than two years. This option is available regardless of their age. In 2008, the number of displaced workers who applied for SSDI benefits topped 2.3 million, which was the record at that time.


Research conducted after the Great Recession receded confirmed that many workers who struggled through that event filed either or both WC and SSDI claims to replace lost wages and healthcare coverage. The population receiving federal disability benefits grew from 7.6 million in 2009 to 8.9 in 2013 because their combined health and employment challenges provided the opportunity to access these resources rather than attempt to return to work. And    F    subsequent research indicates that 'most' Medicare MSA claimants are eligible because they have been on SSDI for the requisite two years, and not because of their chronological age.


Impact on CMS

This research suggests that many of today's unemployed workers will be turning to both UI and SSDI for alternative financial support during and after this pandemic. That influx of cases will significantly increase the already high demands being made on UI and SSDI providers, as well as on the Centers for Medicare and Medicaid Services (CMS). Making things worse for CMS: the Agency is already facing massive budget challenges as the number of workers who continue to pay into the system is shrinking while the number of those taking resources out of it is rising.


These unique and difficult challenges suggest that, as a response to heightened demand and reduced resources, the Agency will also become significantly more stringent regarding MSA compliance practices. Its efforts to enforcing the Mandatory Secondary Payor Act will almost certainly require more stringent attention to detail in every MSA case to prevent CMS from shouldering any inappropriate economic burdens that belong to other entities.