California: Can an Attorney Fee Be Requested on a Medicare Set-Aside Trust?

California: Can an Attorney Fee Be Requested on a Medicare Set-Aside Trust? subscribers can link to the cites below.

As any participant in the workers’ compensation system over the past ten to fifteen years can tell you, if you want to discuss a Compromise and Release, you will likely also have to consider “Medicare’s interests” in evaluating whether a “Medicare Set-Aside Trust” has to be included in the settlement.

Typically, a vendor will advise the parties what Medicare will likely accept in a given case and then that figure is submitted to Medicare for its approval. There are times where the set-aside figure is substantial. For example, in the case of an applicant utilizing a morphine pump for pain control, the set-aside amount could be as high as two million dollars.

Where the money being set aside is technically to cover solely those items that would otherwise be covered by Medicare, particularly in the context of an injured worker already having a stipulated award that includes a medical award, the question arises whether the applicant’s attorney should be allowed an attorney fee based on the set-aside amount. This debate became particularly interesting when, on October 10, 2010 an Appeals Board panel decided Pratt v. Wells Fargo Bank (2010) 2010 Cal. Wrk. Comp. P.D. LEXIS 499. In Pratt, Commissioners Brass, Cuneo and Moresi concluded that by settling her medical treatment award, and by settling by way of Compromise and Release with a Medicare Set-Aside, applicant had not placed herself in a more advantageous position and therefore her attorney should not benefit, by way of an attorney’s fee, as a result of the settlement of her medical treatment award.

Needless to say, Pratt was not welcome news to the applicants’ attorney’s bar. Recently, a panel of commissioners with the WCAB revisited the very issue addressed by Pratt. A different panel, with only one different commissioner, came to the exact opposite conclusion. In Viale v. Lockheed Martin Corporation, 2012 Cal. Wrk. Comp. P.D. LEXIS 320, Commissioners Moresi and Brass now concurred with newest Commissioner Sweeney in determining that the applicant’s attorney was, in fact, entitled to an attorney fee based on the value of the Medicare Set-Aside Trust.

In Viale, a Compromise and Release was approved wherein the applicant settled two cases by way of a global settlement in the amount of $638,982. From the $638,982, $46,066 was to fund a self-administered Medicare Set Aside account; $175,514 was used to fund an annuity to provide future funding for the Medicare Set-Aside account, $152,402 was used to fund an annuity for the applicant’s future non-Medicare covered expenses. Applicant’s attorney requested a fee of $90,000, which would have left the applicant with a balance of $159,125.94 in cash after the applicable deductions. However, the WCJ approved a fee of only $40,000 and held further proceedings on the applicant’s counsel’s right to the further $50,000 requested.

In rejecting applicant’s attorney’s request for a full $90,000 fee, the WCJ found that the applicant’s counsel was not entitled to any fee based on the settlement monies used to fund the Medicare Set-Aside accounts, reasoning that these monies could only be used for treatment for the applicant’s industrial injuries and that the applicant already had a right to this treatment pursuant to a prior stipulated award. In so finding, the WCJ specifically relied on Pratt.

On reconsideration, the panel granted reconsideration, rescinded the Findings and Order, and issued a new decision that reflected the applicant’s attorney was entitled to the full requested fee. The commissioners observed that in disallowing part of the requested fee, the WCJ gave undue weight to a non-binding panel decision, and insufficient weight to the binding provisions contained in Labor Code section 4903(a), WCAB Rule 10775, and WCAB Policy and Procedural Manual section 1.140.

The commissioners noted that given the result obtained, there should be no hesitation in finding that the requested $90,000 attorney fee is a reasonable fee. The commissioners specifically noted:

“The WCJ gave undue weight to the panel decision in Pratt, supra. We reiterate that, notwithstanding the fact that someone at LEXIS deemed the Pratt decision “noteworthy,” prior panel decisions are not binding on WCJ’s or subsequent Appeals Board panels. In Pratt, an Appeals Board panel concluded that, in that case, sums used to fund a Medicare Set Aside account should not be utilized in calculating a reasonable fee… We reject any argument that the Pratt panel was attempting to lay down an all-encompassing rule stating that it is improper to base an attorney’s fee on a Medicare Set Aside when there has been a prior award of medical treatment, or that we would be bound by such a holding. Although disregard of the Medicare Set Aside funds may be appropriate in setting a reasonable attorney’s fee in the proper case, given the results obtained, disregard of those funds would not be reasonable in the instant case.”

Thus, we have two cases with extremely similar facts with completely opposite outcomes. While Viale can be distinguished from Pratt on the basis that further proceedings were held by the WCJ, allowing the commissioners a more complete record from which to evaluate applicant’s counsel’s efforts, it could also be simply that there is a new sheriff in town; a sheriff that worked as an applicant’s attorney and a sheriff that understands the value of this type of settlement. It is difficult to say. However, if you are in the position of requesting such an attorney fee, you would be well advised to be prepared to create a record that establishes your entitlement to the attorney fee in accordance with Labor Code section 4903(a), WCAB Rule 10775, and WCAB Policy and Procedural Manual section 1.140.

TREND ALERT: The recent panel decision Malvesti v. Round Valley Unified School District is further evidence that the current commissioners may be changing their thinking when it comes to allowing an applicant’s attorney an attorney fee from the amounts included in a C&R for a Medicare set-aside trust.

© Copyright 2012 LexisNexis. All rights reserved. This case summary will appear in a forthcoming issue of the California WCAB Noteworthy Panel Decisions Reporter (LexisNexis).

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