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California: Board Panel Grants Applicant’s Request to Self-Administer MSA

June 08, 2023 (7 min read)

In an apparent case of first impression, a Board panel granted an applicant’s petition to modify the terms in a previously approved Compromise and Release (C&R), to allow a change in the administration of his Medicare Set-Aside (MSA) account from a third party custodial administrator to self-administration. The decision includes a determination of jurisdiction vis-à-vis Labor Code sections 5803 and 5804. The Board also addressed a problem common to many custodial MSA agreements, namely the lack of sufficient provisions to deal with a future request for change of administrators. The decision provides a roadmap of the applicable legal standards and necessary evidence to decide a contested petition for self-administration of the MSA. The case is Villalpando v. Doherty Brothers, 2022 Cal. Wrk. Comp. P.D. LEXIS 226 (Appeals Board noteworthy panel decision).


Applicant Fernando Muniz Villalpando entered into a C&R in 2011 resulting from workers’ compensation claims for back injuries sustained in 2002. The C&R included an MSA partially funded through a structured annuity. Pursuant to the terms of the C&R, the applicant released the defendant from liability to Medicare for any failure to create and correctly administer the MSA, and for any failure to obtain Medicare approval.[fn1] A signed MSA Custodial Agreement with BridgePointe[fn2] was attached and incorporated into the C&R.

In 2016, Applicant petitioned to remove the custodial administrator and sought to self-administer the MSA. Following a contested hearing, the trial judge found that there was no evidence that the third party administrator had inappropriately administered the MSA; therefore, whether or not the applicant could self-administer was moot. Upon reconsideration, a Board panel rescinded the F&O and remanded with instructions. (ODAR 3/21/17.) The Board pointed out that it was premature to consider applicant’s request to modify the terms of the C&R, because there was inadequate consideration of the full nature of the agreement that led to BridgePointe’s appointment as administrator of the MSA account. The Board noted that future contingencies were not found in the record and directed the WCJ to consider the nature of the custodial agreement and determine whether there was any provision for change of administration based on either a request or a finding of good cause.[fn3] The panel also directed that the applicant should establish his competency to manage his affairs and to comply with the Center for Medicare and Medicaid Services (CMS) requirements for self-administration.

At the next contested hearing the parties entered into stipulations including a stipulation that there had been no improper administration by BridgePointe, and agreed that the MSA did not provide for a change of administrators if BridgePointe could no longer administer it.

Applicant testified that he lives in California but intends to move to Mexico and not return to the USA. Evidence was admitted showing that Medicare does not cover treatment expenses obtained outside the United States. Applicant also testified that he had the mental capacity to self-administer the MSA, and submitted supporting letters from three doctors. He denied defendant’s assertion that he had a gambling problem. The trial judge found that the WCAB lacked jurisdiction to terminate the MSA Custodial Agreement and order self-administration because applicant had not shown any fraud or extrinsic mistake as required by Labor Code section 5804 in order to avoid the five-year limitation on setting aside the agreement. She also found that the purpose of the MSA had not been frustrated, and that the applicant appeared to be mentally competent to self-administer, but that it was not in his best interests to do so due to his gambling issues, his interest in monetary gain, and because he may not use the MSA for the reason it was established.

Applicant again petitioned for reconsideration. The Appeals Board granted, rescinded the trial judge’s F&O, and substituted their own findings that the MSA agreement did not address the possibility of a change of administrator, that the WCAB has jurisdiction under Labor Code section 5803 to grant applicant’s request to self-administer, and that the applicant is mentally competent to do so, consistent with CMS requirements. The panel also concluded that Medicare’s interests had been duly considered.

Can Defendant Be Aggrieved by a Decision Allowing Applicant to Self-Administer the MSA?

Preliminarily, the panel noted that the defendant made no showing that it would be aggrieved by the panel’s decision, even though the defendant opposed applicant’s petitions, and thus “it is unclear whether defendant can ultimately challenge the decision.” Pursuant to the terms of the C&R, defendant’s rights are protected because defendant had already paid the specified amounts to applicant and on applicant’s behalf including the amounts to fund the MSA account. Future payments will remain the same regardless of the identity of the administrator. Per the C&R, Medicare has no recourse against defendant, and the obligations of defendant will not change.


In contrast to the limitations imposed by section 5804 to set aside an entire award via compromise and release, the Board explained that section 5803 confers continuing jurisdiction to enforce its awards through collateral changes as long as the amount of benefits remains unchanged and the merits of the underlying decision are not altered.

Here, the applicant does not seek to set aside a condition in the C&R that changes his compensation. The amount of compensation to applicant and the defendant’s liability are fixed, and the change of administrators is simply a change in how the award is enforced. It will not change the defendant’s obligations. Thus it is a ministerial change in administration, not barred by section 5803.

Good Cause

Applicant established good cause for his request, because Medicare will not cover his medical expenses while in Mexico and Medicare excludes any medical expenses that are not provided within the United States.[fn4]

It appears that the applicant will not be able to obtain treatment or coverage through Medicare, making the exposure for liability to Medicare “minimal at best.” Further, defendants have already been released from liability, and that release will remain unchanged with the change in administrator.


Citing to the CMS Guidelines, the panel noted that CMS allows self-administration if the claimant is competent as long as they submit to annual self-attestations, and that the Appeals Board routinely approves settlements providing for self-administration.

The Labor Code does not define incompetency or require a finding of competency. The Appeals Board has defined “incompetency” for purposes of workers’ compensation as “not insanity, but rather inability to properly manage or take care of oneself or property without assistance.” Medical evidence is required to establish incompetency.

Here, the applicant testified that he was mentally competent to self-administer the MSA, and submitted letters from three treating physicians stating that he was competent and able to manage his financial affairs. There was no substantial medical evidence that he was unable to do so, and thus “an applicant is presumed competent.”

The trial judge had agreed that applicant was competent, but concluded that self-administration was not in his best interests. The panel pointed out that consideration of applicant’s best interests is not part of the evaluation of competency, and may not be taken into account.

Consideration of Medicare’s Interests

The panel enunciated the legal duty of the parties and the WCAB to consider Medicare’s interests. They then analyzed the evidentiary record to determine whether or not that legal duty was carried out. The C&R included the creation of an MSA account with a structured annuity, in the amount required by CMS (CMS’ letter was attached to the C&R itself). The ministerial change of administrators will not change that amount including the structured payments. The panel also considered Medicare’s interests at time of their decision, noting that the applicant had limited ability to use Medicare coverage while outside the United States, which further reduces exposure for Medicare. Finally, the panel again noted that CMS allows self-administration if the claimant is competent and submits to annual self-attestations.

Disposition of Case

The case was remanded for the parties to adjust the C&R and the MSA Custodial Agreement to reflect that applicant is the Administrator, with any disputes deferred to the WCJ in the first instance. The panel recommended that the WCJ “either advise applicant on the record, or have applicant sign an acknowledgement, showing his understanding of the CMS rules … for self-administration, the consequences of failure to follow the CMS rules, and his full release of SCIF.” The Board also recommended that this acknowledgement be made in consultation with the Self-Administration Toolkit for WCMSAs.


1. A proposed MSA was first submitted to CMS, who rejected the initial proposal and advised that the sum of $513,390 was required to protect Medicare’s interests. The approved C&R provided for the full amount recommended by CMS.

2. Nuquest also administered the MSA account.

3. The MSA agreement provided that Bridgepointe could terminate the MSA upon malfeasance by the applicant, but contained no provisions to deal with potential changes of administrators.

4. There are limited exceptions for inpatient hospital services.

Reminder: Board panel decisions are not binding precedent.

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