Government Benefit Setoffs and Michigan No-Fault PIP benefits

What if I receive government benefits for my auto accident injuries?

Frequently, persons injured in Michigan automobile accidents not only have no-fault PIP benefits, but they also have health insurance and, sometimes, eligibility for benefits under some governmental program. These situations create questions that are addressed by §3109(1) of the Act. The highlights of these issues are discussed briefly below.

Under the Michigan No-Fault Act, a No-Fault insurance company is permitted to reduce no-fault PIP benefits by any governmental benefits paid or payable to the injured person. This governmental benefit setoff provision is set forth in §3109(1) of the statute, which states: “Benefits provided or required to be provided under the laws of any state or federal government shall be subtracted from the personal protection insurance benefits otherwise payable for the injury.”  

The question of what kind of government benefit can be set off against PIP benefits and what cannot is often a complicated issue. In interpreting the language of §3109(1), the Michigan Supreme Court has held that “benefits” are “provided or required to be provided” if the benefits pass this two-part test: first, the governmental benefit must be payable as a result of the auto accident and second, it must serve the same purpose as the No-Fault benefit.

Some governmental benefits have “flunked” this two-part test and, therefore, cannot be set off against No-Fault benefits. For example, the $255.00 “death benefit” payable under the U.S. Social Security Act cannot be offset against the No-Fault funeral and burial expense benefit, because the death benefit was payable as a result of the person’s death and not payable to cover actual cost incurred for funeral and burial expenses as required under §3107(1)(a).  

Types of Governmental Benefit Setoffs  

Michigan courts have issued many decisions regarding the governmental benefit setoff provision of the Act and have held that, depending upon the facts of the case, the following kinds of governmental benefits can be deducted from PIP benefits: (1) Social Security disability benefits; (2) Social Security survivor’s benefits; (3) Workers’ Compensation benefits; and (4) certain kinds of veterans or military benefits. 

Government Benefits Set-off and Medicare  

Unlike other types of governmental benefits, Medicare benefits are not payable for any expense that is compensable under an automobile No-Fault insurance system.  Therefore, a No-Fault insurance company cannot take the position that an auto accident victim must first turn to Medicare for payment of auto-related medical expenses because federal law prohibits Medicare from paying benefits to persons insured under a No-Fault system. Therefore, an accident victim should never knowingly submit, nor permit a treating medical provider to submit, any medical expenses to Medicare for payment if the expenses are otherwise covered under the Michigan No-Fault Act.  If Medicare mistakenly pays medical expenses that should have been paid by No-Fault insurance, the Medicare program has the legal right to seek reimbursement from a variety of sources, including the responsible No-Fault insurer, the medical provider receiving the Medicare payment, and under certain circumstances, even the patient.  This is an area that requires great caution for both patients and providers. Under the 2019 No-Fault insurance reforms, those consumers with “qualified health coverage” may elect to opt out of PIP coverage, as explained in MCL 500.3107(d).. Medicare may be considered qualified health coverage.  Consumers should carefully consider the implications of “opting out” before doing so and make sure that they meet all statutory requirements. 

Government Benefit Set-offs and Medicaid  

Persons insured by Medicaid cannot submit auto accident-related expenses to Medicaid for payment if they are covered by auto No-Fault insurance. Medicaid only pays the medical expenses of those individuals who are “medically indigent.”  A person who is entitled to recover reimbursement for medical expenses under the No-Fault Act is not medically indigent and, therefore, not eligible for Medicaid benefits for that particular expense. Accordingly, the No-Fault insurance company must pay the full amount of all medical expenses even though the accident victim might otherwise be entitled to Medicaid. As with Medicare recipients, persons insured by Medicaid should not submit, nor allow treating medical providers to submit, auto-accident-related medical expenses to Medicaid for payment.  If the Medicaid program mistakenly pays medical expenses that should have been paid by No-Fault insurance, Medicaid has powerful reimbursement rights similar to the Medicare program referenced above. 

Significantly, due to the 2019 changes to Michigan’s auto no-fault reform, Michigan consumers can now purchase less than unlimited lifetime medical coverage. MCL 500.3107(c).(1)(a) applies specifically to Medicaid beneficiaries for those who selected less than unlimited no-fault insurance injured in a crash requiring more medical services than the limit of their no-fault policy covers, those injured people must look to Medicaid as their health insurance coverage to cover the rest of their expenses. Read more about Medicaid and auto accident claims here.