WCDefenseCA

What happens when Medicare Set-aside Agreement treatment occurs before the approval of a Compromise and Release?  That is what appears to have happened in the case of Carolyn Christian v. TJ Maxx, as covered excellently by Jennifer C. Jordan, Esq.

Medicare Set-aside Agreements are a paralyzing element in California workers’ compensation.  Applicants’ attorneys and defense lawyers must send away for an agreement as to the future medical treatment of an applicant prior to settling, and wait for various amounts of time before approval by the federal government.  Perhaps because workers’ compensation benefits are so often used as a supplement to retirement income at the end of a workers’ career, MSA problems are close to the top of the list of problems with the system.  WCDefenseCA has had occasion to cover this topic a time or two before.

In Christian, applicant entered into a compromise and release agreement with defendant which included an MSA.  One of the items listed on the MSA, which defendant was including in the compromise and release amount, was knee replacement surgery.  Well, after starting the MSA process and before getting approval of the compromise and release agreement, applicant had the procedure performed, and was looking forward to receiving the same benefit twice – both the treatment and the cost of the treatment.

The defense had other ideas about how this works.  Seeking to have the C&R set aside as either the result of a mutual mistake (at best), or the product of fraud (at worst), the defense met with resistance from the workers’ compensation Judge and the C&R was not disturbed.

The WCJ reasoned that applicant might need a second knee replacement surgery in the future, but the defendant appealed, and the Workers’ Compensation Appeals Board ordered additional hearings on the matter.

Perhaps we should begin including terms in our compromise and release agreements to the effect that the amount due after approval shall be reduced by the amount of MSA contemplated treatment received before the date of approval?

Centers for Medicare and Medicaid Services’ (CMS) regulations regarding Medicare Set-Asides have had a devastating effect upon California Workers’ Compensation practice.  Even when the parties want to settle a claim for a legitimate, good-faith amount, the nature of CMS’ approval system makes this nearly impossible.

Presently, CMS will not review set-asides for settlement amounts under $25,000, citing a shortage of man-power.  This means that the parties can settle a claim by compromise and release for under $25,000, only to have CMS later recoup costs from the self-insured employer or the insurer.  Naturally, this proves a strain to settlement negotiations.

Some parties have been adding language as an addendum, shifting the responsibility of all future medical costs to the applicant as part of the Compromise and Release.  A vendor is usually hired (Gould and Lamb is one example, Carr Allison is another) to perform a Medicare Set-Aside Analysis report, providing an estimate of how much future medical treatment will cost.  This figure is ear-marked for that purpose.

In one recent case before the Workers’ Compensation Appeals Board, Isaac v. Paramount Pictures, the validity of this addendum language was tested.  The Workers’ Compensation Judge rejected the addendum language, yet still held the rest of the compromise and release binding upon the parties.

Defendant filed a petition to set aside the order approving the compromise and release.

The skinny:  an addendum to a compromise and release agreement addressing the interests of Medicare may not be rejected by a WCJ without rejecting the entire agreement.

The WCAB ordered the approval of the compromise and release with the CMS addendum included.  The extent to which the addendum language will be binding on CMS down the road is questioned by the WCJ, WCAB, and most likely the parties as well.

But, if nothing else, the efforts on the part of the defense in this case firmly establish that the interests of the Federal Government have been fairly considered, and efforts have been made not to shift any of the burden of applicant’s treatment to Medicare.

If the applicant is on Medicare or is soon to be on Medicare, it’s probably a good idea to include some language in a compromise and release agreement addressing future medical costs.