Workers’ compensation as a source of disability benefits is surpassed in size only by the federal Social Security Disability Insurance (SSDI) program and Medicare. These programs provide cash and medical benefits respectively to workers with disabilities who become unable to work prior to normal retirement age.
While Social Security disability benefits and workers’ compensation are the nation’s two largest work-based disability benefit programs, the two programs differ in many respects. Workers’ compensation benefits cover only those disabilities arising out of and in the course of employment, whereas Social Security disability benefits are provided whether the disability arises on or off the job. Workers are eligible for workers’ compensation benefits from their first day of employment, while eligibility for SSDI requires workers to have a substantial work history. Workers’ compensation provides benefits for both short-term and long-term disabilities, and for partial as well as total disabilities. Social Security disability benefits are paid only to workers who have long-term impairments that preclude any gainful work. Workers’ compensation cash benefits begin after a few days’ work absence, and medical benefits are available immediately. Social Security disability benefits begin after a five month waiting period.
Medicare coverage begins for those on SSDI after a further 24-month waiting period, or 29 months after the onset of disability. Medicare covers all medical conditions, not just work-related injuries or illnesses. As a result of the Medicare Secondary Payer Act, when a worker receiving workers’ compensation is a Medicare beneficiary, workers’ compensation is the primary payer and Medicare is the secondary payer for care related to the occupational injury.
If a worker becomes eligible for both workers’ compensation and Social Security disability insurance benefits, one or both of the programs will limit benefits to avoid making excessive payments relative to the worker’s past earnings. The Social Security amendments of 1965 require that Social Security disability benefits be reduced (or “offset”) so that the combined totals of workers’ compensation and Social Security disability benefits do not exceed 80 percent of the workers’ prior earnings. Some states, however, had established reverse offset laws prior to the 1965 legislation, whereby workers’ compensation payments are reduced if the worker receives Social Security disability benefits. Legislation in 1981 eliminated the states’ option to adopt reverse offset laws, but the 15 states that already had such laws in place were exempted.
For more information on how age and disability benefit program interact, see: