SSR 76-34c: SECTION 224(a) AND (b) (42 U.S.C. 424(a) and (b)) -- DISABILITY -- REDUCTION OF BENEFITS DUE TO RECEIPT OF WORKMEN'S COMPENSATION

20 CFR 404.408(d)

SSR 76-34c

Vaughn v. Mathews, U.S.D.C. S.D. Ohio, No. 8627 (2/18/76)

PORTER, District Judge:

This is an action under 42 U.S.C. § 405(g). Plaintiff seeks review of the

decision of the Secretary holding that plaintiff's disability insurance

benefits were subject to a reduction under the "workmen's compensation

offset" provisions of 42 U.S.C. § 424a. The case is here for general

judicial review on the merits and is before us on the submissions of each

side (doc. 9 for plaintiff; doc. 12 for defendant).

The plaintiff became entitled to disability benefits effective July 1969

but the benefits were subject to a reduction due to his entitlement to

weekly workmen's compensation for a period ending in March 1970.

Thereafter, he claimed further workmen's compensation for a psychiatric

disability. This subsequent claim culminated in an agreement in April 1971

with the workmen's compensation administrator whereby the plaintiff

settled his claim for "$8,500.00, plus unpaid medical bills on file." The

settlement was made in full satisfaction of all claims and, after attorney

fees were paid, the lump sum received by the claimant under the settlement

agreement was $5,666.67.

The Appeals Council found that the plaintiff's disability benefits were

subject to offset in the amount of $3,366.67 -- the $5,666.67 previously

determined less $2,300 attributable to medical expenses after the date of

the workmen's compensation award.

Title 42 U.S.C. § 424(a) provides in pertinent part:

And, Title 42 U.S.C. § 424a(b) reads as follows:

It is plaintiff's contention that the offset provisions of § 424a(a) and

intiff's disability benefits were

subject to offset in the amount of $3,366.67 -- the $5,666.67 previously

determined less $2,300 attributable to medical expenses after the date of

the workmen's compensation award.

Title 42 U.S.C. § 424(a) provides in pertinent part:

And, Title 42 U.S.C. § 424a(b) reads as follows:

It is plaintiff's contention that the offset provisions of § 424a(a) and

(b) are not applicable to the settlement of April 1971 because: 1)

plaintiff's settlement and resulting lump sum payment was not based upon a

determination by Ohio authorities that plaintiff was "entitled" to

workmen's compensation benefits, and 2) the lump sum payment was not a

true substitute for periodic payments -- i.e., not a "commutation of, or a

substitute for, periodic payments" within the meaning of § 424a(b).

Alternatively, plaintiff argues that even if the settlement of April 1971

does fall within the scope of § 424a, more medical expenses should have

been excluded from the offset pursuant to 20 C.F.R. § 404.408(d).

We turn first to plaintiff's contention that the offset provisions of the

Social Security Act are inapplicable since they only come into play where

a person is "entitled" to workmen's compensation benefits and, here, the

benefits received by plaintiff were not awarded pursuant to any explicit

finding of entitlement. We find this argument to be without merit. As the

Secretary points out (doc. 12, p. 3) the following language of Section

4123.54 of the Ohio Revised Code makes it clear that compensation benefits

can only be made if the recipient is "entitled" to receive such

benefits:

nefits and, here, the

benefits received by plaintiff were not awarded pursuant to any explicit

finding of entitlement. We find this argument to be without merit. As the

Secretary points out (doc. 12, p. 3) the following language of Section

4123.54 of the Ohio Revised Code makes it clear that compensation benefits

can only be made if the recipient is "entitled" to receive such

benefits:

Since the settlement of April 1971 was pursuant to Ohio Revised Code

Section 4123.65, it is apparent that the compensation received was based

on entitlement. We do not think the "denial of liability" recitation which

appears in the settlement documents indicates that the Ohio Industrial

Commission paid the plaintiff benefits to which he was not entitled.

Indeed, plaintiff provides no authority of any kind for the proposition

that benefits could properly be awarded absent "entitlement." We must

conclude that plaintiff was entitled to the lump-sum settlement of April

1971.

Plaintiff further argues that the offset provisions of the Social

Security Act are not applicable because the lump sum he received was not a

true substitute for periodic payments. In rejecting this argument, the

Appeals Council relied on Paris Stone v. Richardson , CCH UIR, Fed.

para. 16,093 and 17,044 (S.D. Ohio 1970, 1973). We think that reliance is

well placed. Paris Stone holds that the workmen's compensation

offset applies to a lump sum settlement reached under Ohio Revised Code

Section 4123.65. Indeed, the fact that there was never a determination in

that case of "either the period involved in periodic payment or the amount

involved in a periodic payment" indicates that a lump sum settlement under

Section 4123.65 can be regarded as a substitute for periodic payments even

where the lump sum has never been equated to a specific monthly or other

periodic amount

Section 4123.65. Indeed, the fact that there was never a determination in

that case of "either the period involved in periodic payment or the amount

involved in a periodic payment" indicates that a lump sum settlement under

Section 4123.65 can be regarded as a substitute for periodic payments even

where the lump sum has never been equated to a specific monthly or other

periodic amount. Plaintiff's cases do not detract from the Paris

Stone holding, and the Appeals Council cited two cases which are

similar to ours in which lump sum settlements have been treated as

substitutes for periodic payments (Tr. 161-62). Accordingly, we think

plaintiff's argument on this point is not well taken.

We turn now to plaintiff's alternative argument that no part of the

$8,500 lump sum settlement should have been subject to offset because it all went for legal fees and medical expenses. The Appeals Council

addressed this issue in considerable detail and, rather than repeat the

Council's discussion in toto , we shall merely attach the pertinent

portion (Tr. 162-64) of their decision at the end of our opinion. For

summation purposes, suffice it to say that the Council determined that, in

addition to the $2,833.33 of attorney fees which were not subject to

offset, there should be $2,300 excluded from the offset amount which

$2,300 represented reasonable medical expenses paid or incurred by

plaintiff between April 1971 (the settlement date) and July 1, 1973 (the

date he became eligible for Medicare). In essence, plaintiff argues that

the Secretary erred by not excluding medical expenses covered by Medicare

from the offset.

The applicable regulation, 20 C.F.R. § 404.408(d), provides in pertinent

part as follows:

00 represented reasonable medical expenses paid or incurred by

plaintiff between April 1971 (the settlement date) and July 1, 1973 (the

date he became eligible for Medicare). In essence, plaintiff argues that

the Secretary erred by not excluding medical expenses covered by Medicare

from the offset.

The applicable regulation, 20 C.F.R. § 404.408(d), provides in pertinent

part as follows:

Citing this language, plaintiff argues: 1) that disability benefits are

not to be reduced if such reduction is not in accord with State law; 2)

that in Ohio, a "collateral source" may not properly be considered in

diminution of damages; and 3) that, therefore, workmen's compensation

benefits cannot properly be used to offset Social Security disability

benefits to which claimant is otherwise entitled. We find this argument

unpersuasive because, as the Secretary points out (doc. 12, p. 5), it is

based upon an "ungrammatical and illogical" interpretation of the

regulation. We believe an analysis of the pertinent language indicates

that the "they" which must be consonant with State law refers to

" amounts paid or incurred" and not to the "exclusion" of such

amounts in computing the reduction. That is, medical expenses, paid or

incurred by the individual are excluded from offset to the

extent that they (the amounts of said expenses) are consonant with

State law. We think it is clear that the regulation's "consonant with

State law" language is addressing the question of how much may be

excluded and therefore only comes into play where an exclusion from offset

is shown to be proper in accordance with the rest of the regulation --

i.e., where qualifying medical expenses have been paid or incurred by the

individual. [1] Thus, the

permissibility of an exclusion is to be determined in accordance with the

Social Security Act and the appropriate regulation promulgated thereunder

(i.e., 20 C.F.R

e only comes into play where an exclusion from offset

is shown to be proper in accordance with the rest of the regulation --

i.e., where qualifying medical expenses have been paid or incurred by the

individual. [1] Thus, the

permissibility of an exclusion is to be determined in accordance with the

Social Security Act and the appropriate regulation promulgated thereunder

(i.e., 20 C.F.R. § 404.408), and only the amount of such a permissible

exclusion is affected in any way by State law -- i.e., the amounts are

excluded "to the extent that they are consonant with State law." We agree

with the Secretary (doc. 12, p. 5) that if the draftsman of the regulation

meant to say that the permissibility of an exclusion were to be determined

according to State law, he would not have written "to the extent they

are consonant with State law" but instead would have written "to the

extent that such exclusion is consonant with State law," or some

equivalent thereof. In short, we think plaintiff's interpretation of the

regulation is unsound. It is our opinion that Ohio's "collateral source"

rule has no bearing on this case. In this connection, we would simply

state that the cases cited by plaintiff are not on point -- they deal

generally with the topic of collateral source but have nothing to do with

the sort of Social Security issues presently before us.

In what appears to be almost afterthought fashion, plaintiff "throws in"

two final arguments which we shall address briefly. First, plaintiff

contends that since his eligibility for health insurance was not

foreseeable when the settlement was reached in April 1971, his subsequent

eligibility should have been ignored in calculating offset

sort of Social Security issues presently before us.

In what appears to be almost afterthought fashion, plaintiff "throws in"

two final arguments which we shall address briefly. First, plaintiff

contends that since his eligibility for health insurance was not

foreseeable when the settlement was reached in April 1971, his subsequent

eligibility should have been ignored in calculating offset. The fact

remains that plaintiff's Medicare eligibility was a fait accompli by the time offset was considered and calculated by the Secretary, and the

plaintiff advances no reason why the Secretary should have (or dutifully

could have) ignored the relevant facts and circumstances existing at that

time. Secondly, and lastly, plaintiff argues that the offset regulation,

20 C.F.R. § 404.408(d), is invalid to the extent it goes beyond workmen's

compensation "entitlements" and "purports to cover settlement agreements

and compromises." As may properly be inferred from our earlier discussion,

the concept of "entitlement" to benefits is not inherently at odds with

settlements and compromises. Whatever a State agency pays, whether by

virtue of settlement or otherwise, may be said to represent a finding as

to the amount of benefits to which a claimant is "entitled." In any case,

the Secretary's regulations are presumed valid and should not be

overturned on the basis of an unsupported, one-sentence argument such as

that advanced by plaintiff at the closing of his brief.

For the foregoing reasons, the Secretary's decision represents a proper

application of the law and the regulations to the undisputed facts and

must, therefore, be affirmed.

[1] Here, of course, it is the

Secretary's position that medical expenses covered by Medicare do not

represent amounts paid by the individual.