Settlement and CMS (California) (California)

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Settlement and CMS (California) (California)

Postby smtilley on Mon Mar 23, 2009 11:50 am

I am a defense attorney on a California Workers Compensation claim. The applicant (currently 72) has two claims, one a specific claim of injury and one a cumulative trauma claim. One carrier has the entire responsibility for the specific injury and another carrier has all the liability for the CT claim.

The MSA amount is $33,381.50 and covers both claims. The future medical care was apportioned by the AME in the case.

The carrier for the specific injury only wants to settle with a stipulated award which would require no MSA nor, obviously, CMS approval of the settlement.

The carrier for the cumulative trauma claim wants to settle with a C&R. The C&R would be below the $25K threshold for necessary CMS approval. The settlement would be about $12,000.00. Of this amount $6676.30 is this carriers responsibility on the MSA amount (the other carrier is liable for the remainder).

In the normal course the carrier with the C&R would attach the MSA and simply indicate the apportionment of the AME in the language of the settlement documents and because the settlement is below the $25,000 one might expect there would be no problems. However, there are a few questions that I need your help with:

1. With the apportionment findings of the AME, is it enough to indicate in the settlement documents that the Judge Approves the apportionment as found or does there need to be a hearing on the merits of the apportionment finding?

2. With the C&R for $12,000.00 there would be attached an MSA with a value of $33,381.50. Does this raise red flags for CMS?

3. Is it possible to re-work the MSA to reflect only liability on the CT claim and a separate MSA to reflect only liability on the specific injury claim?

4. Do you see MMSEA impacting the above settlement arrangement?

Any help would be appreciated. Thanks.
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Re: Settlement and CMS (California) (California)

Postby on Tue Mar 31, 2009 1:22 pm

Maybe I am missing something, but why do you need an MSA? If the body part is the same, the carrier who is resolving by Stip is going to pay for medical treatment; therefore, you are not shifting the burden for your medical treatment to CMS making them the primary payer. You are, however, shifting it entirely to the carrier retaining an open medical award.

Now, the carrier for the specific may not like your settlement, and they will likely object. Maybe you can offer that carrier the amount of money that you were going to put toward the MSA and resolve your relative future proportion of the medical treatment.
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Re: Settlement and CMS (California) (California)

Postby on Tue Mar 31, 2009 4:58 pm


I agree with your post, but with a caveat! The carrier with the stip doesn't necessarily have to pick up the whole ball of wax in the future, depending on how the paperwork is written on the C&R and the Stip....but it can cause expensive problems for them if they don't!

A couple of years or so ago I posted on this about a nightmare claim I worked on 15 years or so ago. There were 4 defendants on specifics and CTs. The bottom line is one defendant refused to pay their "share" of a global C&R.

Thus, one defendant had a stip with open meds, but 3 others had C&Rs. They were all approved the same day and the C&Rs and stip each referenced the other documents and the agreement was only 75% of the future medical was settled and the remainder on the stip would allow all future meds to be paid by the non-settling defendant only after around $6,000 in future med bills were paid by the EE for treatment for the back injury caused by all 4 claims.

The EE INSISTED he wanted the deal, he was strongly advised by not only my office, but by the WCJ involved this was not a good idea, but he again INSISTED.

A couple of years later he worsened dramatically over a period of 1 - 2 months. He needed another surgery....badly. He was broke, he'd paid almost no medical bills himself and he had the surgery. The hospital and doctors filed a lien which the non-settling defendant strenuously resisted.

YEARS later the bottom line is the non-settling defendant got hit with a $20k or so medical bill. The WCJ ruled they had to pay for the new surgery and add that amount to the rest of their "credit"! Recon denied, Writ of Review denied!

This was a Lose/Lose proposition for all involved. Every single party had cause to wish they'd never entered into the agreement....except those who settled on a C&R!
Stew (James T. Stewart)
Author: Work Comp Index, 7th ed., 912 pgs; next ed. summer, 2010.
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Re: Settlement and CMS (California) (California)

Postby jpod on Wed Apr 01, 2009 7:47 am

I am not sure I would agree to a C&R under these circumstances. While I agree logically that since one employer will leave FM rights open and therefore why should Medicare care, the problem is Medicare has said it will not honor a parties agreement on spliting liability, whether it be a comp claim or a civil tort claim. From Medicare viewpoint the future medical is at least $33,000, and they could care less how the parties slpit that liability up, they will see the employee pocketed $12,000 plus whatever was in the stip from the other carrier and they could very well play hardball and hold the employee to that number.

Under the facts presented (employee is 72 which is significant b/c Medicare is essentially a party) I think Medicare would still require the MSA on the C&R'd claim. From Medicare's viewpoint there is but one medical condition and you have already indicated that the MSA for this condition is north of $25,000 in the $33,000 range. Medicare will not acknowledge the parties stipulations about the liability split unless you have a trial and a judge's decision on the merits. If the MSA is not filed with CMS and approved (for the C&R), then CMS reserves the right to calculate what the MSA should have been and they will not look to issues of liability between the two defendants, they will look at the medical condition wihtout respect to apportionment of future medical costs between the two carriers.

Now maybe you have CMS's approval of the set aside and that might be enough under the circumstances but I would be nervous unless CMS is brought to the table to sign off on the deal.

One other wrinkle is I assume one carrier has been the lead in terms of paying for past medical bills. CMS will probably take the position that the carrier who did not take the lead on paying for the medical treatment to date is required to include their share of those payments when calulating the settlement amount, so even though your C&R is only $12,000, with approximately $6,000 allocated for future medical, how much is the carrier going to pay the other carrier by way of contribution for PAST medicals? One of the hammer's CMS uses is, if you do not play by their rules, they will decide what should have been done and at that point we have little leverage left. They will simply refuse to allow the beneficairy access to Medicare and advise the beneficiary to sue his former employer, and attorney.

In terms of MMSEA 111 the answer is: that depends. If the settlement is reached after 7/1/09 then it will need to be reported as of 1/1/2010 via the secure COBC Web site. If settled prior to, it will need to be reported somewhere after 2010. MMSEA 111 is really only a mechanism for CMS to be better at locating primary payors.
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Re: Settlement and CMS (California) (California)

Postby medlink on Sun May 03, 2009 9:10 am

Jpod did a great job explaining the complex Medicare Set-Aside (MSA) considerations in this two-prong scenario yet some additional concepts should be highlighted. Also, the separate MMSEA 111 Mandatory Insurance Reporting (MIR) should be a consideration with this settlement after July 2009.

Medicare Set-Aside (MSA) Consideration:
For the cumulative trauma claim with C&R, it appears that settlement for indemnity would be about $12,000 plus the cost of the MSA of $33,381 ($6,676 is one carriers MSA responsibility with remainder to the 2nd carrier - per the AME). Since Medicare looks at the total settlement, it would be incorrect for the carrier with the CT claim to assume that they are below the CMS threshold of $25K. Also, CMS does not allow a 'hide-the-ball' shift from Work Comp to Liability for the same claim. Therefore, the carrier for the CT should submit a formal MSA Arrangement for CMS approval.

For the specific injury Settlement with Open Medical, CMS does not require an MSA at this time. Note: The parties should remember to include this Stip amount in the total settlement with any future C&R as the total ettlement ammount must be considered in Part One of the CMS threshold criteria of $25K. Yet as jpod cautioned, this settlement for a Medicare beneficiary will be require Mandatory Insurance Reporting (MIR) by 7/1/2009 (if settled after that date) or by 2010 (if settled now with Open Medical) per Medicare's MMSEA Section 111.

MSA in Settlement that meets CMS Criteria:
Since 2001, there has been a formal mechanism to submit a Workers' Comp MSA Arrangement to CMS for approval when any of the CMS thresholds have been met. Although there is no formal MSA mechanism for a Liability MSA, Medicare does require consideration as the secondary payer in Liability settlements with an informal MSA, at the least.

MMSEA 111 Mandatory Insurance Reporting (MIR) Consideration:
With the new and separate Medicare MIR requirement (includes Work Comp, Liability, No Fault, Self insured), it is clear that Liability is included in the MMSEA Section 111 that enforces a $1,000 per day penalty for not reporting claims that meet this new criteria. Responsible Reporting Entities (RRE) such as the carrier/self-insured employer/party and the RRE Agent such as the TPA must register with Medicare beginning May 1 through June 30, 2009. The MIR Report Testing Process by the RRE (and/or RRE-Agent) will begin July 1, 2009, with the mandatory reporting extended to start January 1, 2010. In this case, both the Work Comp RRE & the Liability RRE will need to report the settlement separately with open medical.

Janice Skiljo Haris, RN MS MSCC CNLCP
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