The WCMSA Conundrum in California

 By Robert G. Rassp, Esq.

The following email string is true, accurate and correct. It is a typical email string between an applicant’s attorney and a defense attorney. We all have cases like this in our inventories.

In this case, the Applicant was a medical laboratory technologist who sustained admitted injuries to her lumbar spine and bilateral carpal tunnel syndrome on a cumulative trauma basis and is status post lumbar discectomy and wrist surgeries. The case originally had a stipulated award for 36% PD and was timely reopened. The orthopedic AME opined that she now has a 45% permanent disability. The date of injury is a cumulative trauma that ended over five years ago.

At the Applicant’s request, a compromise and release was negotiated in the amount of $115,000.00 new money, inclusive of a proposed WCMSA in the amount of $102,000.00 that was obtained by one of the regular vendors for that purpose. So here is the email string – Kevin is the Defense attorney and Robert (gee, what a coincidence) is the Applicant’s attorney:

Hi Kevin:

My client accepts the C&R for $115,000.00 new money inclusive of the WCMSA but not as a structured settlement. Please let me know if your client is willing to do a lump sum C&R so they can finally close this file. Since she has been Medicare eligible as a matter of law (over age 65 in 2007), I don't think we need to obtain CMS approval of the WCMSA in advance of getting WCAB approval. As long as we take Medicare's interests into account as part of the settlement then we are ok without prior CMS approval. We still have to submit it to CMS after WCAB approval or concurrent therewith. My client would then bear the risk of loss if CMS says the WCMSA needs to be increased. Please send me the C&Rs if this is acceptable to you.

Sincerely, Robert (January 12, 2012)

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Robert:

Thank you for your message. I will contact my client in this regard. Assuming that is acceptable to my client, I will send you the C&R along with a couple of addendum's by e-mail.

Sincerely, Kevin (January 12, 2012)

________________________________________________________

Hi Kevin:

What's the status of the C&R approval?

R. Rassp (June 30, 2012)

________________________________________________________

Robert:

I provided the Compromise and Release to my client back on May 15. They provided it to the MSA company to provide to CMS for Approval. I just e-mailed my client as to where we are at in the process. I should have a response shortly and will provide that information to you under separate cover. (July 2, 2012)

Sincerely, Kevin

________________________________________________________

Hi Kevin:

Thanks. But you have to stay on top of the vendor (or your client has to) because the vendors do not generally get paid to check on CMS status. Would your client consider getting the C&R approved without CMS approval since the Applicant is 70 years old and presumptively entitled to Medicare anyway for everything? We did, in the C&R, consider Medicare’s interests in the WC settlement which is all the WCMSP requires. (July 2, 2012)

Robert

_________________________________________________________

Robert:

I am certainly glad you sent your e-mail.  My client checked with the MSA vendor today.  The MSA vendor totally dropped the ball.  Even though my client sent them everything on May 15, they never sent it on to CMS.  Our sincere apologies.  It will go today.

I will check with my client regarding the defendant’s interests in obtaining approval of the C&R without CMS approval.  When I have his response, I will let you know.

Sincerely, Kevin (July 3, 2012)

Ok, so here we are, six months later and the “vendor totally dropped the ball?” The C&R and proposed WCMSA should have been submitted to CMS by the vendor before the C&R was even sent to the Applicant’s attorney’s office for signatures! CMS does not require signed documents for CMS approval of a proposed WCMSA!

What is not well known within the workers’ compensation community is that claims administrators enter into contracts with WCMSA vendors and those contracts spell out the services that the vendors are to provide to the claims administrators. Sometimes those contracts only require the vendor to prepare a proposed WCMSA – and does not provide for the vendor to transmit the proposed WCMSA to CMS for approval, or for any other follow-up with CMS or the claims administrator. There may be separate charges for those follow-up services. Most of these vendors do not have offices in the State of California so the WCAB has no jurisdiction over them. However, the WCAB does have jurisdiction over the claims administrators.

This is why we are proposing that the Administrative Director’s office adopts rules under title 8 California Code of Regulations that would force claims administrators who administer California workers’ compensation claims who insist on having WCMSA proposals to obtain the proposals and submit them to CMS in a timely fashion if and when claims administrators insist on having a compromise and release contingent on having a WCMSA with CMS approval in the first place.

The AD’s office has told us that there has to be a compelling interest by the DWC to have such regulations. How about the fact that we are filing for WCAB hearings - status conferences and MSC hearings - just to tell a WCJ that “the parties are waiting for CMS approval of a WCMSA” and we are attending five or six WCAB hearings before anyone even finds out for the first time that a proposed WCMSA had never been sent to CMS in the first place? Perhaps some indirect regulations of vendor practices will reduce unnecessary WCAB hearings just to find out what the status is of a proposed WCMSA is from a claims administrator.

Here is a summary of some of the proposed regulations:

  • Once a Notice of Representation, HIPAA release and CMS Consent To Release forms are signed and returned by the injured worker, the claims administrator has a specific time limit within which to send the necessary CMS required documentation to its vendor (to include all medications and physicians the injured worker has seen for the last two years) to develop a proposed WCMSA.
  • Once the vendor has received the documents from the claims administrator, it has a specific time period to develop the proposed WCMSA.
  • Once the proposed WCMSA is developed by the vendor, the vendor must give written notice to the claims administrator who in turn notifies all parties and their attorneys that a proposed WCMSA has been prepared.
  • The claims administrator must serve the proposed WCMSA on all parties and their attorneys, if any, at the same time.
  • If the claims administrator orders the vendor to send the proposed WCMSA to CMS, the vendor must notify all parties and their attorneys, if any, in writing the date on which a proposed WCMSA was sent to CMS for approval.
  • If any party, its attorney, or the vendor receives any written notice from CMS, MSPRC, SSA, or any other federal agency regarding Medicare or Social Security eligibility, a copy of that written notice shall be served on all interested parties and counsel in accordance with Rule 10500.

Once again, it cannot be emphasized enough times that if you represent an injured worker, employer or claims administrator, you must always include your name and address on the federal Consent to Release and Notice of Representation forms so that you are served with any notices from CMS or vendors.

These proposed regulations will not increase costs to employers or their claims administrators. The services of the WCMSA vendors can be bundled to include the notice requirements of state regulations without additional cost to the claims administrators. In other words, if vendors want the business, they need to provide the notices required by the regulations.

It is incumbent upon the claims administrators to continue to communicate with vendors who prepare proposed WCMSAs and instruct them to file the proposals with CMS, to notify all interested parties and their attorneys of that fact, or to notify defense counsel, the injured employee and his or her attorney why a proposed WCMSA is not being filed with CMS.

Alternatively, as many claims administrators are now doing, a compromise and release agreement with a proposed WCMSA can be approved at the WCAB without waiting for CMS approval in appropriate cases such as the example discussed above – here the injured worker was entitled to Medicare as a matter of turning 65 years of age in 2007, five years ago.

In every case where there is a proposed WCMSA that was prepared in good faith with proper and complete information being provided to the vendor by the claims administrator, that process alone is probably sufficient to “consider Medicare’s interest” in cases where there is a compromise and release and responsibility for future medical treatment may eventually be shifted to the Medicare system. Reimbursement to Medicare for conditional payments for a Medicare beneficiary for treatment of a work related injury is a completely separate issue and must be dealt with by the claims administrator separately.

But as to settlement of future medical treatment, there is nothing in the federal law or federal regulations that require CMS approval in the first place and the risk of loss goes solely to the injured worker if Medicare’s interests are not properly considered in the lump sum settlement. The Affordable Health Care Act that was upheld by the US Supreme Court will probably not affect the Medicare Secondary Payer Act or the regulations that requires taking Medicare’s interests into consideration in any lump sum settlement of workers compensation claims that attempt to shift responsibility for future medical treatment for industrial injuries to the Medicare system.

Notwithstanding that, all claims administrators should have a feedback mechanism at all times between claims and the vendors concerning the WCMSA process – from the initial assignment of a case through WCAB and CMS approvals of a C&R. There should be a seamless communication channel between the vendor, the claims administrator, defense and applicant counsel, and the injured worker. It is time for the Administrative Director to assign her legal staff to develop meaningful regulations that create and enforce this feedback mechanism. The regulations can hold the claims administrator’s feet to the fire while the vendors only have to answer to the claims administrators.

© Copyright 2012 Robert G. Rassp, Esq. All rights reserved. Reprinted with permission.

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The Complete Guide to Medicare Secondary Payer Compliance now includes discussion of California WCMSAs written by contributing author Robert G. Rassp, Esq.

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