A recent case out of a Mississippi District Court, Welch v. American Home Insurance Company, 2013 U.S. District LEXIS 25948 (February 26, 2013), determined the amount of a Medicare Set-Aside (MSA) in a global settlement of a workers’ compensation and liability claim. The settlement parties specifically requested that the court determine the MSA amount so the parties would be in compliance with the Medicare Secondary Payer (MSP) Act. What is really interesting about this case is that this is the first case that we have seen where the court not only heard expert testimony regarding the amount of the MSA, but additionally formed its own opinion on the MSA and actually increased the amount of the MSA required to be set-aside. The settlement parties thus were able to receive court approval of their MSA; however, they ended up with the unexpected result of an increased MSA.
Prior to making this determination, the court received and heard expert testimony from both the Plaintiff’s primary treating physician as well as an expert RN/CLCP hired by the Plaintiff. The treating physician testified that the estimated costs of the Plaintiff’s future medical needs related to the injury would be $456,657.35, whereas the RN/CLCP stated that the treating physician’s estimates were “generous,” and calculated an estimate by removing those items that would not be covered by Medicare. She testified to the court that the MSA amount should be $178,638.27. Additionally, there appeared to have been a dispute regarding the number of times the Plaintiff would need spinal cord stimulator replacements. The court found the treating physician’s recommendation of four (4) replacements over the Plaintiff’s life expectancy to be persuasive. As a result, the court ruled that the MSA should be $278,019.08 based upon the Plaintiff’s future Medicare-covered items and services, as well as based on the primary treating physician’s recommendation of spinal cord stimulator replacements.
What is also curious about this case is that CMS would have reviewed the MSA in this case; the settlement parties and the court made mention that they were unsure whether CMS would review the case due to the liability aspect of the global settlement. However, because the underlying claim in this case was a workers’ compensation claim wherein the Plaintiff injured his left elbow in the course and scope of his employment when he was attempting to lift a wooden board, CMS would consider any MSA in this case as a workers’ compensation MSA (WCMSA), and therefore CMS workload review thresholds would apply.
The next question would be if the case met CMS’ workload thresholds. The Plaintiff in this case would be considered to have a “reasonable expectation” of Medicare entitlement due to the fact that he had applied for Social Security Disability (SSDI) and was appealing a denial of benefits. Therefore, as long as his settlement was over $250,000, CMS would review the case. Although the opinion does not provide the amount of the total settlement that the Plaintiff received, his MSA amount approved by the court clearly exceeded this threshold.
CMS approval of this MSA may have been the better route to take in this case for a decreased MSA amount. The RN/CLCP testified and felt confident that CMS would have accepted her proposed MSA amount of $175,762.85 with less spinal cord stimulator replacements. Therefore, it appears that the four (4) replacements for the spinal cord stimulator may not have been CMS mandated.
In most cases that we have seen where the parties seek court approval of an MSA, CMS is noticed on the case and given the opportunity to appear, but has not yet taken the opportunity to participate. In response to the notice on this case, CMS responded: “CMS does not review or verify counsel’s determination of whether a settlement, judgment, or award included a recovery for future medical services or counsel’s proposal regarding the amount to be set-aside to protect the Medicare Trust Fund, except under limited circumstances.” In all prior case law where this same situation occurred, the court essentially “rubber-stamped” the amount recommended for the MSA by the expert in the case. This is the first case where the court increased the amount of the MSA.
Although utilizing the court system may be a fast and efficient way to resolve a claim and be sure that you have protected Medicare’s interests, this case proves that utilizing the MSA court approval method may result in undesired circumstances. Additionally, in a time when the new Workers’ Compensation Review Contractor (WCRC) has greatly increased turnaround time, the parties in this case may have been able to receive CMS approval of the lower MSA figure within just two months.
The lesson to be learned here is that each case should be analyzed on a case-by-case basis. Settlement parties should consider the facts of the case and the jurisdiction where the case resides prior to deciding whether to seek CMS or court approval of an MSA in a settlement.