Workers' Compensation: Coverage Gaps Become Compensation Claims

Medicaid cuts, lapsed subsidies and Medicare Advantage exits will push more medical costs into workers' compensation.

Millions of Americans are about to discover that the health coverage they counted on has thinned or vanished, and much of that loss will land in the workers' compensation system. On October 9, 2026, The New York Times reported that millions of older Americans enrolled in private Medicare Advantage plans are being forced to change coverage for 2027 and will pay more for prescriptions and medical care, even as the Trump Administration describes the program as stable.

The Medicare disruption is only one piece. The Times reporting by Christopher Rowland and Reed Abelson notes that about 35 million older Americans now rely on Medicare's private plans, that a typical plan's out-of-pocket ceiling is projected to rise to about $6,600, and that roughly 4 million people in traditional Medicare will lose zero-premium Part D drug coverage as temporary subsidies end. Earlier this year, a study reported by Reuters found that nearly 3 million Medicare Advantage enrollees, about 10% of the program, had to find new coverage in 2026 as insurers exited markets.

For working-age Americans, the picture is starker. The enhanced Affordable Care Act premium tax credits expired at the end of 2025. The 2025 reconciliation law, the One Big Beautiful Bill Act, Pub. L. No. 119-21, imposes Medicaid work requirements and more frequent eligibility checks for expansion adults beginning in January 2027. KFF, citing the Congressional Budget Office, reports that these changes together will add more than 14 million people to the ranks of the uninsured by 2034. The Census Bureau's September 15, 2026 report already counts 26.7 million people uninsured for all of 2025, with Medicaid coverage falling among adults ages 19 to 64.

Most of the newly uninsured will be workers. KFF found that 85.1% of the uninsured in 2024 lived in working families, and that about 7 in 10 uninsured workers were either not offered or not eligible for employer coverage.

Why Workers' Compensation Absorbs the Shift

Workers' compensation is the only first-dollar medical coverage in the nation that carries no premium, no deductible and no copayment for the injured worker. When general health insurance retreats, the line between a work injury and a personal condition becomes the line between care and no care at all.

Economists have measured that pressure. Marcus Dillender of the W.E. Upjohn Institute found that a 10-percentage-point decrease in health insurance coverage among young workers increased workers' compensation medical bills by 15.3%. Erin Todd Bronchetti and Melissa McInerney documented the mirror image after the 2006 Massachusetts reform, where expanded coverage cut emergency room visits billed to workers' compensation by 6 to 8%. The federal policies now taking effect run that experiment in reverse.

What Changes for Claims

More filings. Expect more claims, particularly cumulative trauma, back and shoulder injuries, and occupational disease, where causation is legitimately contested. Carriers will answer with more denials and cost-shifting defenses. The legal test, however, has not changed. Compensability turns on whether the injury arose out of and in the course of employment, not on whether the worker happens to have a health plan. A worker who lacks insurance is not a less credible witness.
Denials hit harder. A denied claim has always been a hardship. For an uninsured worker it can mean no treatment at all. KFF reports that 38.6% of uninsured adults delayed or skipped needed care because of cost. Delayed care produces longer temporary disability, poorer surgical outcomes and higher permanency, and those costs come back to the employer. In New Jersey, N.J.S.A. 34:15-15 obligates the employer to furnish necessary treatment and makes the employer liable for care the worker secures when the employer refuses or neglects to provide it, and N.J.S.A. 34:15-15.3 permits a motion for emergent medical treatment. Those remedies, once a backstop, will become front-line tools.
Fewer payers to reimburse, more unpaid providers. When a health plan pays for treatment of an injury later found compensable, N.J.S.A. 34:15-15.1 authorizes the compensation judge to order the employer or carrier to reimburse that payer. As private coverage disappears, there will be fewer such payers and more hospital charity care write-offs, unpaid physicians, and collection pressure on injured workers while compensability is litigated.
Medicare Advantage churn multiplies liens. Older workers face a different problem. Medicare is secondary to workers' compensation, and Medicare Advantage organizations enforce that priority aggressively. In In re Avandia Marketing, Sales Practices & Products Liability Litigation, 685 F.3d 353 (3d Cir. 2012), the Third Circuit held that a Medicare Advantage organization may sue a primary payer for double damages under the Medicare Secondary Payer Act's private cause of action, 42 U.S.C. § 1395y(b)(3)(A). The court rested on the statute's plain text and, alternatively, on Chevron deference to CMS regulations. Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), removed that alternative ground, but the textual holding of Avandia still governs in the Third Circuit, which includes New Jersey. When workers are pushed from one Medicare Advantage plan to another, a single injury can generate conditional payments by two or three different plans over successive years. Each must be identified and resolved before a settlement closes. Missing one exposes the carrier, and potentially the worker, to a double-damages claim.
Medicaid's work rules turn circular. Under the One Big Beautiful Bill Act, an injured worker who cannot work may lose Medicaid for failing to document qualifying hours, unless an exemption applies. The result is a cruel loop, a worker hurt on the job and unable to work loses the very coverage that would have paid for care while the compensation claim is contested.

What Practitioners Should Do Now

Claimants' counsel should document every source of health coverage over the life of the claim at intake, including each Medicare Advantage plan by year, and should not wait for a formal denial before moving for treatment. Employers and carriers should anticipate rising medical frequency, reserve accordingly, and recognize that prompt acceptance of compensable claims costs less than litigated delay. Settlement practitioners should build multi-plan conditional payment searches into every Medicare-involved closing. Policymakers should recognize that cutting health coverage does not eliminate medical costs; it relocates them to the employer-funded compensation system.

Workers' compensation was built more than a century ago as a narrow, injury-specific form of social insurance. It was never designed to be the health plan of last resort for a nation that cannot agree on how to cover its workers. Coverage cut in Washington will be paid for, one claim at a time, in compensation courts across the country.