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.
I presume the intention is that “future cost” shifting is to be absorbed by private health. What if the plan is ERISA self-funded? The burden gets placed squarely back on the shoulders of applicant, if language so guides. If I were AA, I would carefully review Notice from Health Plan and request language before allowing client to sign this type of C&R. Your thoughts?
Beth, that’s a really good comment. The whole approach is very muddled and poorly thought out by CMS. I believe there is a federal case in Arizona right now, filed by an applicant’s attorney, because CMS is interfering with their ability to get benefits for their clients. The problem is that CMS knows that the applicant will spend the money and then become insolvent, and the only way to the money earmarked for future medical treatment is to recover it from the insurer. I can understand the federal government’s interest in not paying for treatment when someone else is technically liable, but the uncertainty this is creating in the workers’ comp world is beyond the bounds of reason.
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