We have all been there. You are ready to settle out your case, and all of a sudden you remember that you might need to consider Medicare’s interest. The thought of a WCMSA may not have been at the front of your mind earlier in the settlement process because an allocation for future medical care is not being considered by the settlement parties. Not wanting to leave any loose ends or potential future exposure, you know you want CMS to review the case and agree that no WCMSA is needed.
You find yourself thinking, “Getting Medicare to agree that no allocation is necessary should be no issue. The settlement is so small, basically nuisance value.” Or you might say, “The IME concluded that no future treatment is needed and it is highly unlikely that the claimant will need future medical care.” You might be right on these points. However, when dealing with CMS, it is not always about being right; it is about getting CMS to agree with you and approve that no WCMSA is needed.
Let us give you some practical advice on how to improve your chances of getting a zero allocation approved by CMS. There are certain things CMS will usually seek prior to approving a zero allocation and there is never a guarantee that CMS will accept a proposed zero allocation; however, the below suggestions may increase the odds of success.
There are two circumstances where a zero allocation would be warranted: a denied/controverted settlement or cases where a claimant does not require future medical care related to the work injury.
- Generally, the total settlement amount should be considered nuisance value, or a significantly compromised amount. CMS will be more suspicious of higher settlement amounts where an employer/carrier is alleging a case is totally denied.
- No medical expenses or indemnity benefits should be paid prior to the settlement unless the employer/carrier was required to pay by state law during an investigation period. In that case, the employer/carrier should provide a copy of the state law to CMS when submitting the MSA for approval. A recent trend is that CMS will not approve a zero allocation when an advance payment or full payment is made of the settlement proceeds and/or settlement agreement has been finalized (signed and approved as required by state law). Generally, having made no payments to the claimant at the time of the submission of the MSA to CMS will give you the best odds of getting the zero allocation WCMSA approved.
- Any letters, court orders, or any other documentation which supports the denial of the case should be provided to CMS. Note that a court order where a judge simply approves the parties’ stipulation to no liability is not persuasive with CMS. CMS states in their memoranda that they will only accept court orders where a judge has rendered a decision after a hearing on the merits of the case (see April 22, 2003 memorandum Q&A #5).
- Additionally, if the denial is based upon a defense that the treatment is not “causally related” to the accident, a clear report from the treating physician to that effect should be obtained. CMS generally will not accept an opinion rendered by an IME/QME unless there is a court ruling agreeing with the IME/QME opinion.
No Future Medical Care Needed
The April 22, 2003 memorandum (Q&A #20) states that the following criteria need to be met for CMS to approve a zero allocation in this situation:
a) The facts of the case demonstrate that the injured individual is only being compensated for past medical expenses (i.e., for services furnished prior to the settlement);
b) There is no evidence that the individual is attempting to maximize the other aspects of the settlement (e.g., the lost wages and disability portions of the settlement) to Medicare’s detriment; and
c) The individual’s treating physicians conclude (in writing) that to a reasonable degree of medical certainty the individual will no longer require any Medicare-covered treatments related to the WC injury.
Arguably, the most important piece of advice to take away from this three-prong criteria is the third component noted by CMS-that the claimant’s treating physician certifies in writing that no future care is needed. Although CMS has not made it an official policy or stated this in other memoranda, we have seen over the years that CMS gives great deference to the treating physician’s opinion. CMS generally does not give deference to an IME/QME opinion and may not approve a zero allocation if the only medical report stating that no future treatment is needed comes from someone other than the treating physician. Although it may not always be practical or easy to get a treating physician to provide this opinion, due to the deference that CMS gives to treating physicians it may be well worth the effort to obtain it.
Once the treating physician has determined no future treatment is needed for the work related injuries, no further medical payments should be made after the date of the opinion was rendered in writing. If further payments occur after the treating physician’s opinion is received, CMS will likely ignore the no further treatment determination and return an MSA allocation.
Having CMS validate your settlement and the zero allocation obviously provides a sense of closure to the parties; however, keep in mind that even if your settlement meets CMS review thresholds (see CMS memorandum May 11, 2011 for review thresholds), submission of any WCMSA to CMS is always a voluntary process. In light of the above, employers and carriers should each weigh their tolerance for risk and the circumstances of each case before deciding whether to seek approval of a zero allocation.