Concerns About Maryland Workers’ Compensation Commission’s Emergency Regs on Medicare Set Asides

Concerns About Maryland Workers’ Compensation Commission’s Emergency Regs on Medicare Set Asides

Effective January 4, 2010, the Maryland Workers' Compensation Commission has issued emergency regulations (see also settlement worksheet) covering the approval process for final settlements. They are classified as “emergency” regulations because they were adopted short of the complete and formal regulation process. Further, they are considered temporary because the Commission included a sunset provision. These regulations will expire 7/2/10 (there is a good probability that they will become permanent at that time, as the Commission has been holding compliance seminars and have expressed a belief that they are necessary and proper).

The impetus behind the new regulations is the growing acknowledgement of the involvement of Medicare in workers' compensation settlements. The Commission is fully familiar with the present law that identifies Medicare as a "secondary payer" to workers' compensation. See, 42 USC 1395y(b)(2). Because of that law and the associated regulations and directives coming from the Centers for Medicare and Medicaid Services, the Commission has decided to utilize its rule-making authority, LE 9-309(a), to define the "terms and conditions" that are required for their approval of a settlement. LE 9-722(b).

The new requirements are set forth in C.O.M.A.R. 14.09.01.19. Most of the requirements are informational. This includes providing the Commission with information as to how much has been paid previously in the claim for certain specific types of benefits, whether the proceeds are paid in a lump sum, et cetera. It is, however, not the informational parts that are causing a bit of a stir in the Maryland workers' compensation community. The reason for the seminars is that the Commission has adopted some (if not all) of the pronouncements of the Centers for Medicare and Medicaid Services with regard to settlements of workers’ compensation claims.

Most specifically, the Commission has determined: 1) that every full and final settlement in Maryland must consider Medicare's interests, which means in cases not meeting review thresholds that the parties must identify and explain the apportionment of the total settlement that is for future medical costs; 2) that any settlement that would meet the review thresholds identified by Centers for Medicare and Medicaid Services must either have approval from the Centers for Medicare and Medicaid Services, contain language accepting the judgment of the Centers for Medicare and Medicaid Services as to the amount of a Medicare Set-Aside Allocation, or leave medical benefits as an open right for the life of the Claimant.

The Medicare issue, however, is not the only issue addressed by the new regulations. The Commission also used this opportunity to announce a new requirement that any settlement provision pertaining to an annuity would require that the Employer and Insurer retain ultimate responsibility for payments, in the case of a default by the annuity provider (most probably this is because annuities are used quite a bit as a funding mechanism for the Medicare Set-Aside Allocations). The long and the short of the new regulations is a heightened scrutiny by the Maryland Workers' Compensation Commission with regard to those settlements that would terminate the Claimant's entitlement to medical care and treatment benefits.

With regard to the new regulations, the entire Medicare issue seems only to become a problem in the cases where the settlement does not meet the threshold. In any case where the settlement meets the threshold, the insurance carriers (especially in light of the new reporting requirements instituted by the Centers for Medicare and Medicaid Services) are generally going to obtain a Medicare Set-Aside Allocation and insist on approval from the Centers for Medicare and Medicaid Services. In those other claims that fall below the review thresholds (which, by the way, are not safe harbors, so it is hard to rely on them as protection against further action by the Centers for Medicare and Medicaid Services), the question is how to adequately demonstrate that Medicare's interests have been protected.

The new regulations direct that the settlement, in pertinent part, must contain: 1) a statement that Medicare's interests have been considered; 2) an apportionment of the settlement figure that is provided for coverage of future medical expenses (this can be $0.00); and 3) the basis of the apportionment of the settlement figure for future medical expenses with support in the form of a medical opinion or other medical evidence. The requirement of a medical opinion to justify the apportionment of future medical expense is seen by a number of practitioners as problematic because it could require a medical statement that minimizes the future medical expense possibility. If the settlement is not approved, then there would appear to exist medical evidence contrary to positions the Claimant may want to assert in the future. In addition, some work-related accidents involve claims against third-party tort-feasors and a statement designed to limit the apportionment for future medical expenses would seem to have a limiting effect on any third-party recovery.

Perhaps the most interesting concept to this writer is that the Maryland Workers' Compensation Commission, in the form of these new regulations, has delegated, at least part of, its authority for approving settlements to the Centers for Medicare and Medicaid Services. Specifically, C.O.M.A.R. 14.09.01.19B(2) states, "[a] settlement that falls within the Medicare thresholds must be approved by CMS (Centers for Medicare and Medicaid Services) before it will be approved by the Commission." Certainly, the Commission has the authority and responsibility to review settlement agreements and insist on compliance with "terms and conditions" they believe are proper. The wholesale adoption of a Federal Agency as a determiner for their responsibility, however, seems somewhat concerning. Clearly the parties to any settlement must be aware of and comply with Federal Law and Federal Regulations that apply to their situation. That the Commission has taken it on themselves by emergency regulations to adopt pronouncements from the Centers for Medicare and Medicaid Services as binding on the parties to a Maryland Workers' Compensation claim seems to push the limits of the Commission's authority. How the entire situation will work out is presently unknown, but it can be expected that sometime before the new regulations expire, there will be further action on this issue.

 Lance G. Montour