2011 Alphabet Soup: MSA, CMS, WCMSA, MSPRC, COBC, C&R, RRE, ORM, TPOC, EIEIO - The Latest in Medicare, Social Security and Your Large C&R in California

 By Robert G. Rassp, Esq.

Yes, so, the last one is a joke – Old MacDonald had a farm… We have recently traveled all over the country talking about and listening to the effect CMS has had on all of the stakeholders in the entire workers’ compensation community and not just in California. In this article, we want to demystify some of the misunderstandings about when you need a Medicare Set-aside arrangement and when you don’t if there is a lump sum settlement. We also want to talk about the relationship between a large C&R and Social Security Disability benefits.

We will provide a checklist for you to review that covers all of the relevant issues we are facing in our cases in California. We will provide some updates on federal regulations that have been proposed to hopefully streamline the CMS approval process of set-aside arrangements.  We will cover some proposed regulations in California that await final drafting and presentation to the DWC administration.

But for now, let’s start with a hypothetical situation. Actually, it’s a real factual situation. You are minding your own business working on your own cases when your Blackberry (mine is a “Rasspberry”) chimes with an email question from a colleague:

“I just finished watching your webinar from 1/12/11 on Social Security Disability, Medicare and Workers’ Compensation settlements. Here is a scenario:

The Applicant suffers an orthopedic injury on the job. The Applicant has been on SSD and receives Medicare benefits for the orthopedic injury. The defendant denies injury AOE/COE and pays no benefits. The case is settled by a C&R on the date of a priority hearing on injury AOE/COE with no evidence taken or decision made by the WCAB.

A C&R is prepared (but not submitted to the judge for an order approving) pending the outcome of the CMS review of an MSA. The defendant prepares a proposed MSA which proposes a determination by CMS that no funds be set aside by the Applicant to protect Medicare because there is a dispute over injury AOE/COE.

Will the absence of a finding by the WCAB that there is no injury AOE/COE mean that CMS will not approve a $0.00 MSA? Or does the absence of a judicial finding on injury only affect any Medicare lien to recover past benefits paid?

The short response to this question is that if the C&R is equal to or over $25,000.00, defendant should get a $0.00 MSA letter from CMS prior to submitting the C&R to the WCAB for approval.  If the settlement is less than $25,000.00 that amount is below the threshold amount of a settlement CMS will scrutinize.

But this is only half of the equation. Not only do you have to be concerned about shifting costs of future medical treatment to Medicare, you also have to be concerned about conditional payments for medical treatment Medicare has already made prior to the settlement that should have been paid, hypothetically, by defendant if the injury was, in fact, work related.

Possible conditional payments by Medicare for parts of body alleged to be industrially injured may create a duty of the defendant to inquire of the MSPRC (Medicare Secondary Payer Recovery Contractor) to determine if reimbursement for medical treatment for the orthopedic injury is required.  Since the case is denied AOE/COE, the defendant may avoid reimbursement on the grounds that the payments were not conditional since there was no industrial injury in the first place.

Alternatively, the defendant may ask the WCAB to approve the C&R and issue an order that the Applicant would “take nothing” had the case gone to trial on the merits, based on the WCJ’s review of an offer of proof by both parties. This is no longer called a “Thomas Finding” since those were intended to avoid liability for future vocational rehabilitation benefits which were legislated out of our system from SB 899. CMS has state specific Procedure Operations Manuals (POMS) that indicate what flies and what does not within a state’s workers’ compensation system and how those relate to federal SSD and Medicare benefits.

Instead, defendants should consider as part of an Order Approving C&R in cases where the Applicant is eligible for Medicare at the time of the settlement that the approving WCJ also makes a specific finding that had the case gone to trial, the Applicant would probably not prevailed on injury AOE/COE, based on the judge’s review of the evidence in the record.

Defendant would then send this Order Approving C&R with a “take nothing” statement to CMS and hold its breath. As you see in the outline of these issues below, if the C&R is a fairly large settlement, if the Applicant is relatively young, you need a proposed WCMSA even if injury AOE/COE has been denied with a bona fide dispute over injury (such as a stroke or other brain injury that may or may not be industrially related) and you need to wait until CMS signs off on a $0.00 MSA. That may not be good enough to avoid conditional payment reimbursement claims by CMS, however, since CMS stands to increase its efforts to collect money from primary payers who should have paid for medical treatment instead of Medicare.

As you know, CMS and Medicare do not have collection methods in place for each state’s workers’ compensation system in order to seek reimbursement for conditional payments. That is because federal law pre-empts state law and the feds do not want to submit to state administrative or judicial jurisdictions. So defendants should err on the side of caution and communicate with MSPRC to establish that no money is owed for conditional payments.

PROPOSED CALIFORNIA REGULATIONS

All of us are frustrated by the entire C&R and Medicare “problem” which is really four separate problems. A set of proposed regulations are in development that will hopefully solve some problems in communication between claims administrators, WCMSA vendors, CMS, parties and their attorneys. Here is a sample:

·         Once Notice of Representation, HIPAA release and CMS Consent To Release forms are signed and returned by the injured worker, the claims administrator has a limited time to send the necessary CMS required documentation to its vendor 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, all parties and their attorneys that a proposed WCMSA has been prepared.

·         The vendor must serve the proposed WCMSA on all parties and their attorneys 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 the date on which the proposed WCMSA was sent to CMS for approval.

·         If any party, its attorney or the vendor receives any written notice from CMS, MSPRC 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 their counsel in accordance with Rule 10500.

This last proposed regulation will account for common situations where the injured worker receives a notice from CMS, doesn’t know what it means and then tosses it in the trash can. We have seen this happen when the injured worker receives CMS approval or rejection of a proposed WCMSA and no one else does.

This is because federal regulations permit all interested parties to include their names, addresses and phone numbers on the Notice of Representation form that is sent to the vendor. CMS will send copies of all notices it generates to all parties and legal counsel listed on the Notice of Representation form. That form is NOT just for the Applicant and the proposed WCMSA vendor – it is for everyone.

PROPOSED FEDERAL STATUTES AND REGULATIONS

There also are some proposed statutes pending in Congress to limit the requirement of WCMSAs to settlements that are greater than or equal to $250,000.00. This proposal has been introduced in various forms over the years since 1997 in bipartisan sponsored bills but each one has died in committee. This is because CMS claims Medicare has paid $38 billion in medical treatment since 1997 that should have been paid by a primary payer and CMS has only collected $2.5 billion back. In light of recent partisan politics in Congress, it is predicted that any pending legislation that increases the CMS threshold limit of review will go nowhere fast.

There is a better chance that CMS could face some federal regulations that mandate time limits for CMS to approve proposed WCMSAs and a “statute of limitations” to seek collection of conditional payments once CMS receives notice that it may have a right to collect from a primary payer such as a workers’ compensation claims administrator. These proposed regulations are a slap in the face response by the insurance industry to CMS for its pushing through the Section 111 reporting in the 2007 legislation mentioned in the checklist below.

AND NOW THE CHECKLIST

MEDICARE SECONDARY PAYER ISSUES CHECKLIST

I. FOUR ISSUES TO BE CONCERNED WITH

II. WHAT IS THE 80% RULE?

III. WHEN DOES SOMEONE QUALIFY FOR MEDICARE?

IV. WHAT DOES AND DOESN’T MEDICARE COVER?

V. WHEN DOES THERE NEED TO BE A WCMSA?

VI. WHAT IS REQUIRED TO BE INCLUDED IN A WCMSA?

VII. CAN AN APPLICANT’S ATTORNEY CLAIM A FEE FROM A WCMSA?

VIII. WHAT ARE “CONDITIONAL PAYMENTS?”

IX. CAN DEFENDANT REQUIRE APPLICANT TO SIGN CONSENT FOR RELEASE, CMS HIPAA AUTHORIZATION AND NOTICE OF REPRESENTATION FORMS?

X. WHAT IS THE MMSEA OF 2007 SECTION 111 REPORTING?

XI. WHAT IS THE CALIFORNIA FLAVOR IN ALL OF THIS?

I. FOUR ISSUES TO BE CONCERNED WITH

1. The 80% Rule – to avoid a reduction of monthly Social Security Disability benefits due to a large WC settlement.

2. Conditional payments made by Medicare become a lien as a matter of law in the WC case.

3. WCMSA needs to be completed if the C&R is less than $25,000.00 (This may change under #4).

4. MMSEA of 2007 Section 111 reporting when Medicare beneficiary has a workers’ compensation case and when future medical treatment is settled.

II. WHAT IS THE 80% RULE?

1. IW qualifies for Title II SSDI benefits.

2. Distinguish from Title XVI SSI benefits.

3. SSDI requires IW meets earnings requirement and disability requirement –two prongs.

4. Earnings requirement: Contribute 21 quarters into SSA system in 40 quarters prior to the onset of disability

5. Disability requirement: Based on the Claimant’s age, education, past relevant work (15 years), medically determinable physical and/or mental impairments and residual functional capacity, the Claimant is unable to engage in any kind of substantial gainful activities.

6. Once IW qualifies for SSDI, he/she cannot receive more than 80% of the highest calendar year’s earnings in the five years preceding the onset of disability between SSDI benefits plus WC benefits (TTD, SDI or PD).

i. $30,000.00 per year 80% = $2,000.00 per month

ii. $60,000.00 per year 80% = $4,000.00 per month

iii. $15,000.00 per year 80% = 1,000.00 per month

7. Maximum SSDI per month for an individual is about $2,500.00 per month; family benefit can be up to almost $4,500.00 per month.

8. C&R will not affect a person who is receiving regular Social Security Retirement benefits.

9. See 42 U.S.C.S. section 424(a); 20 C.F.R. sections 404.317 and 404.408

III. WHEN DOES SOMEONE QUALIFY FOR MEDICARE?

1. IW reaches age 65 years when C&R is approved.

2. Applicant has already filed for SSD; or

3. SSD has been denied but the Applicant anticipates re-filing or appealing the denial; or

4. Applicant is 62 years, six months old (30 months from retirement age) at the time of C&R and C&R is >$250,000.00; or

5. Applicant has ESRD; or

6. Applicant is under 65 years but has been receiving SSD for at least two years; or

7. MediCal distinguished.

8. Medicare eligibility occurs automatically 24 months after entitlement to SSD benefits if the IW is under 65 years of age or at age 65, whichever is sooner.

IV. WHAT DOES AND DOESN’T MEDICARE COVER?

1. MEDICARE PART A covers hospitalization and hospice care and is paid for out of payroll deductions. This is not an optional benefit – everyone who is Medicare eligible automatically qualifies for Part A. 42 U.S.C.S. Section 1395w.

2. MEDICARE PART B covers the nuts and bolts of medical coverage – physician visits, diagnostic tests, surgical procedures etc. This is optional. 42 U.S.C.S. section 1395j.

3. MEDICARE PART D is the optional prescription medication program effective 2006. 42 U.S.C.S. section 1395w-102.

4. MEDICARE SENIOR ADVANTAGE (Also called “Medicare Part C or Medicare Plus C) combined Parts A, B and D components. 42 U.S.C.S. section 1395w-21(a)(2).

5. Medicare does not cover highly addictive drugs such as benzodiazepines (tranquilizers), long term opiates or opioids (narcotic pain killers), home health care, mileage reimbursement, transportation expenses, off-label use of drugs unless supported by recent literature in PubMed, eye glasses, chiropractic services (unless there is documented subluxation).

V. WHEN DOES THERE NEED TO BE A WCMSA?

1. If the Applicant enters into a C&R and is Medicare eligible at the time of the C&R approval.

2. If the C&R is >$250,000.00 AND the Applicant has a reasonable expectation of becoming Medicare eligible within 30 months of the date of the settlement.

3. See Section III above, items 1-6

VI. WHAT IS REQUIRED TO BE IN A WCMSA?

1. Applicant’s health insurance claim number or SSN if not yet eligible for Medicare.

2. The same information in a C&R (each party’s address), claim number and counsels’ addresses.

3. Total workers’ compensation settlement amount.

4. Proposed WCMSA amount – one part for medical treatment and second part for Part D covered prescription medications.

5. Applicant’s life expectancy (actual and not rated unless vendor justifies it.

6. Life care plan.

7. Copy of C&R with addendums. (Does not have to be signed).

8. Current treatment info. CMS prefers medical reports at time of MMI and thereafter.

9. Future treatment information, including prescription medication needs (medical reports).

10. Applicant’s medical recovery prognosis.

11. CMS will put more weight on treating physician reports rather than on AME or QME reports.

12. All WCMSA proposals are to be submitted to MSPRC centralized office who then sends file to appropriate RO (regional office). MSPRC contract is up for renewal next year.

VII. CAN AN APPLICANTS ATTORNEY CLAIM A FEE FROM A WCMSA?

1. It happens every day when there are no longer unencumbered funds left (e.g. low PD but high future medical treatment amount). Applicant may have to replenish the WCMSA account to the level CMS approved in the first place.

2. If injury AOE/COE was denied but IW still needs a WCMSA,

3. It appears that at least one WCAB panel says “no.” This is because a C&R shifts the burden of future medical treatment on the IW to include annual reporting to CMS and accounting for Medicare covered expenses.

4. Also see CMS Guidance Memoranda 5/7/04 that says administrative fees, expenses for administration and attorneys costs specifically associated with establishing the WCMSA cannot be charged to a set-aside arrangement.

VIII. WHAT ARE CONDITIONAL PAYMENTS?

1. When Medicare pays for medical treatment that should have been paid for by a workers’ compensation claims administrator.

2. Payments for medical treatment otherwise covered under Medicare Parts A, B and D and prior to a WC settlement.

3. Medicare has a lien by operation of law against the Claimant, his attorney, the employer, the claims administrator and the defense attorney.

4. CMS has no real easy mechanism in place to pay them back because CMS has one flavor, vanilla, and not 50 flavors.

5. You need to contact CMS to negotiate resolution of conditional payments.

6. Conditional payment negotiations occur with a separate CMS office than submitting WCMSA proposals.

7. MSPRC means Medicare Secondary Payer Recovery Contractor who is the contacted entity CMS hired to seek recovery of conditional payments. Currently, the Chickasaw Nation holds the contract. See http://www.msprc.info

8. See 42 U.S.C.S. sections 1395y(b)(2)(A) and (b)(2)(B); 42 C.F.R. 411.21-411.37.

IX. CAN DEFENDANT REQUIRE APPLICANT TO SIGN CONSENT FOR RELEASE, CMS HIPAA AUTHORIZATION AND NOTICE OF REPRESENTATION FORMS?

1. All Medicare beneficiaries have a federal duty to notify CMS that a workers’ compensation claims administrator is primary for medical treatment for a work related injury.

2. Defendant can ask an Applicant in a deposition whether he or she is eligible for Medicare, is receiving SSDI or SSI or SSR or if he or she has filed for SSDI or SSI or SSR.

3. All persons who claim workers’ compensation benefits should be required to sign these releases if he or she wants a C&R. Hypothetically a WCJ could order a WC Applicant to sign these releases because they are a form of discovery to determine whether Defendant has a federal duty to notify CMS that an Applicant has a primary payer.

4. If IW refuses to sign releases, Defendant cannot obtain a C&R settlement and a WCJ cannot compel IW to sign them?

5. Does a WCJ have jurisdiction to compel the IW to sign them?

X. WHAT IS THE MMSEA OF 2007 SECTION 111 REPORTING?

1. Under the Medicare and Medicaid and SCHIP Extension Act of 2007, section 111 requires all group health plans (GHP) and workers’ compensation claims administrators to report to CMS all claimants who are Medicare eligible or who have a reasonable expectation of becoming eligible and if the primary coverage terminates.

2. Any ORM or TPOC creates a duty to report primary payer status or termination of primary payer status. ORM means “Ongoing Responsibility for Medical”; TPOC means “Total Payment Obligations to Claimant” (in other words, an approved C&R) if the Applicant is entitled to Medicare.

3. The net result of Section 111 reporting is that CMS is getting more aggressive in seeking reimbursement from workers’ compensation claims administrators for “conditional payments.” Conditional payments are payments for medical treatment that Medicare has paid which should have been paid by a workers’ compensation claims administrator.

XI. WHAT IS THE CALIFORNIA FLAVOR FOR ALL OF THIS?

1. Does IW need an WCMSA?

·           Age > 65 (C&R is > $25,000.00); entitled to SSDI or SSI-D on date of settlement approval, or “reasonable expectation” of entitlement to Medicare within 30 months of settlement AND > $250,000.00 C&R.

·           A “reasonable expectation of entitlement to Medicare” means that the IW is age 62 ½ and the settlement is >$250,000.00; or

·           The IW has filed for SSDI or has appealed a denial of SSD and the settlement is >$250,000.00.

2. If IW needs an WCMSA, does the C&R need to be sent to CMS?

·           No, just the amount of the settlement needs to be submitted to CMS for CMS approval of a WCMSA.

·           You send a copy of the signed C&R AFTER CMS has approved the WCMSA to complete the process.

3. Should Def require CMS approval of a WCMSA prior to submission of a C&R to the WCAB for approval?

·           No, if the WCMSA is relatively low cost and IW or Defendant agrees to fund any deficiency CMS says exists, OR if IW is over 65.

·           Yes, if the WCMSA is very high cost OR IW is young (<60 years old) OR if WCMSA is structured amount.

·           No, if settlement is less than $25,000.00 even though the IW is eligible for Medicare on date of settlement.

·           Don’t forget SSD Addendum to avoid the “80% Rule.”

·           “Thomas findings” mean nothing to CMS.

·           If injury AOE/COE is denied, defendant should provide CMS with the evidence it relies on at the WCAB to defeat the claim.

·           Have a WCJ issue a “Take Nothing” order as part of his or her review of the C&R for adequacy. Having a WCJ say in an Order Approving C&R: “The settlement is approved as submitted because based on the evidence in the record and a review of the offers of proof, this Court would have issued an order that the Applicant take nothing by his or her claim for workers’ compensation benefits because…” may force CMS to give full faith and credit to the state workers’ compensation administrative law judge’s findings.

Remember, the risk of loss for failure to have a WCMSA falls strictly to the injured worker. CMS will consider the entire gross amount of a C&R as the Medicare set-aside which basically sentences the injured worker to never being covered by Medicare for any parts of body injured in an industrial injury.

The Defendant’s failure to negotiate with CMS over conditional payments is another story. The defendant, its attorney, the injured worker and his or her attorney and the medical provider can be held liable for any conditional payments Medicare made for medical treatment that should have been paid for by a workers’ compensation claims administrator. The risk of loss for failure to pay CMS reimbursement for conditional payment falls on all of us.

© Copyright 2011 LexisNexis. All rights reserved.

Order the new 2011 Edition today. The Lawyer’s Guide to the AMA Guides and California Workers’ Compensation, by Robert G. Rassp

Read The Rassp Report, a law blog by Robert G. Rassp, Esq.