In the last blog, I spoke about the health insurance companies’ right to recover money paid for accident related medical expenses from an injured person’s lawsuit.  Medicare (I will assume everyone knows what Medicare is) may also recover money it pays for an accident victim’s medical expenses just like the insurance companies.  However, as a result of 2007 amendments to the Medicare law, it may now be necessary to set aside money out of a lawsuit settlement or award for future medical expenses also.  This “Set-Aside” fund becomes the money the injured person must use for future care.  Failure to properly reimburse Medicare or set aside funds for future expenses may result in significant costs and penalties to both the accident victims and their attorneys.

So what does this mean for you and your lawsuit?  First, your attorney must keep track of the Medicare lien for past expenses and receive Medicare’s approval for your settlement as it has always been done.  Second, to avoid a set-aside requirement, your attorney must obtain a report from a physician or other private consultant giving an opinion that you will not need further care for accident related injuries or the expense will not be significant enough to require a set-aside under the Medicare law.  If you may need significant future care, your attorney will have to pay a consultant to estimate the amount required for the set-aside.  While a set-aside does not need Medicare approval, the defendant’s attorney may seek court approval if the parties cannot agree on the set-aside amount because the Medicare law imposes certain requirements on them, too.  In short, if you are eligible for Medicare, expect your case to take much longer to resolve.

When your case settles, the set-aside money goes to you, but it must go into its own account.  It is considered a “self-administered trust.”  This simply means you are responsible for using it only for accident related medical expenses.  You cannot submit any bills for treatment of accident related injuries to Medicare unless and until the set-aside fund has been exhausted.  You must maintain accurate records for the set-aside fund.  If you use up all the money and submit a bill to Medicare, expect an audit.  If Medicare finds you spent money from the fund for things other than medical needs related to the accident, you may be subject to stiff civil and criminal penalties.  In plain English, don’t mess with your set-aside fund.  Pretend it is not there unless you have a legitimate medical expense. 

The availability of the set-aside fund does not prevent you from submitting bills to Medicare for non-accident related treatment.  If the set-aside fund comes from an auto accident settlement, you can still expect Medicare to pay bills for treatment of a heart condition (unless the heart condition was caused by the accident).

Fortunately, there is no law at the moment that requires an accident victim to create a set-aside fund so private health insurance companies don’t have to pay for the future medical expenses.  But don’t think the insurance companies aren’t pushing for one.

Important new changes to Pennsylvania unemployment compensation law will take effect January 1, 2012.  Perhaps the most significant change affects persons who are terminated and receive severance pay.  Currently, severance pay is not taken into consideration in eligibility decisions for unemployment benefits.  This has resulted in some individuals receiving more overall compensation while unemployed than when they were working.  The most infamous example was the recent award of unemployment benefits to Arlene Ackerman after she received a $900,000.00 severance from the City of Philadelphia.  Under the new law, however, severance pay will be offset against unemployment benefits to the extent it exceeds 40% of the state average annual wage.  Consequently, persons with generous severance packages may be precluded from receiving any unemployment benefits unless they are still unemployed when the severance pay runs out.

The change in the unemployment law regarding severance pay will also have the unfortunate effect of making it more difficult to resolve employment disputes.  Plaintiffs were willing to accept less cash from employers and employers were willing to include a promise not to contest unemployment eligibility in a settlement agreement knowing that government money was a part of the package providing economic security for the harmed employee.  Now employees will have to get their full pound of flesh from the employer.  The expense to employers for settling will be higher and settlements in employment lawsuits are likely to decrease as a result of the change in unemployment law.

Another important change requires benefit recipients to actively search for new employment and provide an accounting of their efforts to the unemployment office.  A failure to actively search for work may result in a termination of benefits.  Anyone intending to take an extended vacation until their benefits run out will now do so at their own risk.

Other changes include expanded availability of testifying by telephone for appeal hearings and the creation of a “shared work program.”  The shared work program will allow employers to apply to the Department of Labor for approval of a shared work plan.  Under an approved plan, the employer can reduce the hours of all employees in a unit or department instead of laying off some workers.  Each affected employee would then be entitled to receive “shared work benefits” from unemployment compensation for the percentage of their weekly benefit rate equal to the percentage by which their hours have been reduced. 

Did you know Pennsylvania has been unable to pay back loans to the federal government to cover unemployment benefits to its residents?  Because of the irresponsibility of our state government, PA employers will now pay three percent (3%) more in unemployment taxes as a penalty for the State’s failure to make good on the loans.

From a viewpoint of fairness and the amazing self-interest displayed by a former public servant supposedly dedicated to the education of children, Arlene Ackerman’s decision to seek state unemployment benefits after receiving a $900,000.00 severance package leaves one wondering whether there is anyone left in the Philadelphia School District who is not looking out for themselves.  Yet, from a legal viewpoint, there is nothing improper with Ms. Ackerman’s request.  The fault must lie with the attorney for the City of Philadelphia who negotiated the severance agreement and did not preclude Ms. Ackerman from claiming any further benefits on top of the generous severance.

An employment severance agreement is simply a contract.  The parties are free to negotiate the terms and conditions and enter into a bargain they find mutually acceptable.  Typically, the employee gives up the right to sue the employer for any reason in exchange for compensation which may include money, extended healthcare benefits, retraining, and whatever else the employee’s attorney is skillful enough to wrangle for the client. 

Until a new law known as Act 6 of 2011 takes effect in Pennsylvania on January 1, 2012, it has been perfectly legal for employees to negotiate severance packages in which they reserved the right to apply for unemployment benefits and the employer agreed not to contest.  In these circumstances, the employee often received more money for the duration of the severance period than if the person remained employed.  In Ms. Ackerman’s case, her departure from the Philadelphia School District does not appear to have been strictly voluntary.  One’s acceptance of a severance package in lieu of termination does not turn a firing into a voluntary quit under the unemployment laws.  Accordingly, she may well qualify for the maximum amount of unemployment benefits given her six figure salary.  Having paid unemployment taxes to the State of Pennsylvania during her employment, one can also argue she is simply taking back what she already put in.

Starting in January 2012, someone who becomes unemployed and receives a severance package will now have the severance pay deducted from their unemployment benefits “to the extent the severance pay exceeds forty percent (40%) of the state average annual wage.”  In Ms. Ackerman’s case, it is unlikely she would have been eligible for unemployment benefits under the new law.