WCDefenseCA

Happy Monday, dear readers!

Your humble blogger is returned alive and mostly well from the WCRC in Dana Point!  The conference was wonderful and good times were had.  After so many years in workers’ compensation it’s nice to have such a positive and welcoming community and a lot of fun to see familiar faces again and again.

There were many interesting sessions (including your humble blogger’s of course) and even a know-it-all like yours truly came away feeling that I learned quiet a bit.  Side note, dear readers, that if you missed the Special Mission Impossible presentation at WCRC, feel free to join our webinar this month as we’ll be presenting it to the internet connected public.

While discussing the effects of not submitting Medicare Set-Asides for CMS approval, the discussion turned to a certain panel decision issued last year, Harrison v. Canyon Springs Pools and Spas, Inc.  In that case, the WCAB denied defendant’s petition for reconsideration where applicant successfully had a C&R rescinded!  Isn’t that a dreadful feeling – because even when your C&R is approved and you’re “done”, you’re still not done!

Applicant, while represented, went to an AME who ultimately found no impairment and thought applicant was exaggerating his symptoms based on observing him through a window.  Applicant, at some point, entered into a C&R with defendant, and ultimately dismissed his attorney. 

The parties obtained a “zero dollar” MSA and did not submit it to CMS.  However, applicant was charged with approximately $900 by CMS and required to pay that money to CMS, at which point he sought to set aside his C&R.  The trial judge did so, reasoning that there was “mutual mistake” on the point that CMS would accept a zero dollar MSA, which it apparently did not.

The WCJ also ruled that the parties were both mistaken in concluding that the AME found no industrial injury – he did, just no impairment and some harsh criticism of applicant for alleged malingering. 

The WCJ ordered the C&R set aside and rescinded the Order Approving Compromise and Release and suggested the parties obtain substantial medical evidence in support of an amended C&R.

So, dear readers, what does that mean for us?  Earlier, your humble blogger wrote about another case where the WCAB not only allowed applicant to assume the risk for an MSA which CMS had rejected as being $500,000 light, but also allowed him to self-administer his MSA over the objections of defendant.  In this case, however, the WCAB determined that it must be mutual mistake if the parties agree to a $0 MSA without seeking CMS approval.

Since CMS’s enforcement mechanism are almost entirely based on refusing to provide benefits to the injured worker, isn’t the assumption that applicant is always assuming the risk?

Perhaps it makes sense to have C&Rs clearly reflect that there is no mistake – applicant is knowingly assuming the risk that the $0 MSA might not be recognized by CMS.  But, as the WCJ pointed out in the Harrison matter, “[i]t could not possibly have been the parties’ intent to subject applicant to unlimited bills from Medicare, potentially up to the entire amount of the settlement.  If the undersigned had understood that to be the intent of the parties, the settlement would never have been approved.”

The WCAB is consistently inconsistent in this regard because there are rarely monolithic rulings binding on all the WCJs and on ever WCAB panel of judges – en banc opinions occurs but certainly with not even close to the frequency of panel decisions. 

What do you think dear readers?

Happy Monday, dear readers!  Your humble blogger welcomes you to the start of a new week. 

Imagine you’re in a particular situation – applicant wants to C&R a claim, and neither you nor the applicant can know with certainty what the cost of lifetime medical care will be.  Pretty common, right?  When we C&R a case, both parties are knowingly taking a gamble that the injured worker will be able to cover those costs with the proceeds of the C&R.  The WCAB probably processes several hundred C&Rs every workday and no one bats an eye.

If the WCAB is willing to allow applicant to assume the risk that the medical portion of the C&R is not adequate… what other risks will the WCAB allow applicant to take on?

For example, let’s take a scenario where the parties agree to a value for a C&R, but CMS finds the proposed MSA inadequate by some significant figure – like $500,000.  Well, defendant might take the position that a C&R is not worth it and propose stipulations instead.  If applicant is highly motivated to have cash on hand, can applicant stipulate that he will hold defendant harmless as to any action by CMS regarding the C&R?

In other words, can applicant tell the WCAB “look, I know that this C&R might end up costing me Medicare benefits in the future, but I’m willing to take the risk”?

Well, that’s what happened in the case of Villalpando vi Doherty Brothers.  Applicant resolved his claim for a 2002 injury in 2011, with language in the C&R that “released defendants from liability to Medicare related to the named injuries, and for any failure to create and correctly administer the MSA and any failure to obtain Medicare’s approval of any allocation or set aside arrangement.”

But your humble blogger isn’t polluting your in-box with old news from 11 years ago.  The case came up recently because applicant decided he wanted to change administrators from the agreed-upon vendor in the C&R to himself.  Yes, applicant declared that he wanted to move from California to Mexico and that administration in Mexico would be particularly burdensome.

The WCAB made basic inquiries and ultimately ruled that since there is defendant would not be harmed by the change of administrator, since no further liability or benefits could be due, it was not inappropriate to change administrators to make the MSA fund self-administered.

Now mind you, dear readers, it’s not that applicant MOVED to Mexico.  Applicant announced his intent to move to Mexico and that appeared sufficient. 

The reason there was a WCAB decision at all was because defendant contested rendering the MSA self-administered.

So, zooming back to our every-day C&Rs, can we apply this approach to all of our C&R settlements?  If applicant in the Villalpando case was able to absolve defendant of any liability with respect to CMS, and he can also choose to take on the risks of mismanaging his future medical funds, why can’t every applicant?

Take, for example, the cost of getting an MSA and the cost of professional administration.  What if defendant’s were to tell applicants that so long as applicant agrees to self-administer and release defendant from any CMS-related liability, the parties could split that money.

The result in the Villalpando matter certainly raises those questions, which, of course, raise an even more important one – to quote Clint Eastwood: “Do you feel lucky?”

Well, do you, dear readers?  If you’ve had any luck bypassing CMS by inviting applicant to agree to assume the risk, please let your humble blogger know.  The Villalpando case certainly seems to set a precedent and provide authority for the proposition that such arrangements should be approved by the WCAB so long as the parties are in agreement.

And it’s Wednesday again dear readers!  So glad you could come back!

Here’s a hypothetical for you, dear readers.  You’re ready to settle your case by way of C&R, and you’ve ever reached an agreeable figure.  The applicant is saying “give me the money, and I never want to see you again.”  The defendant is saying “take this money, and I never want to see you again.”  At last, after depositions and med-legals and subpoenaed records and 5-hour trials over whether the UR report denying the $20 aspirin was timely, you’re finally ready to part ways forever and ever and ever.

Now here’s the problem.  At the start of the case, applicant looked like the guy on the right, and by the time you are ready for a C&R, he looks like the guy on the left.  So now you need an Medicare Set-Aside.

But both parties are ready to go and want the money now, and you don’t want the hassle of having CMS review and possibly sink the settlement.  So you do what’s called a “non-submit MSA,” where your vendor makes an overly cautious estimate of future medical and you proceed with the C&R without getting CMS’s sign-off. 

Well, the Federal Gubmn’t would like to have a word with you about that.

On January 10, 2022, CMS issued its “Workers’ Compensation Medicare Set-Aside Arrangement Reference Guide (Please shoot me an e-mail if you would like a copy!)  Section 4.3 specifically addresses such an approach with some scary consequences.  In short, if the MSA was not approved by CMS, CMS will require proof that the entire C&R was exhausted prior to providing benefits.

If there is a med-legal report that rates to 16% PD ($16,095) and future medical care is reasonable estimated at $20,000, and the parties end up settling for $60,000 to resolve all issues, including right to reopen, some disputed TD, AOE/COE on a denied body part, etc., then it looks like CMS would not provide benefits until there is proof that all $60,000 was exhausted, not just the $20,000 reasonably earmarked for future medical care.

“Yes,” you might say, “but what does that have to do with the price of tea in China?”  Well, if you were optimistic about getting those non-submit MSAs into your C&R, you might have cause to deflate a bit.  Applicant attorneys, once they hear about this, will be hesitant to recommend such arrangements to their clients lest they be faced with a mal-practice lawsuit or, even worse… a negative review on Yelp!

And even if you can get past a sleepy applicant attorney, all settlements must be approved by a workers’ compensation Judge, who must assess the settlement for adequacy.  In light of the CMS’s approach to non-submit MSAs, the WCJ might be reluctant to find a C&R adequate.

What can the defense community do in these situations to move files along?  Well, besides the obvious of stipping every case or submitting every MSA to CMS (which no one wants to do, of course), it looks like the only other real approach is to have either the defendant or the MSA vendor agree to pay, adjust, litigate, or defend the non-submit MSA in the event CMS declines to provide benefits. 

Another thing we should all be doing is cursing the name of CMS for ruining all of our fun.  A closed file is a happy file, and CMS’s approach is going to ensure that a lot fewer files get closed.  That makes for a lot more unhappy files, no?

Straight on to Friday, dear readers!