State News

Shareholder Adam Brown, who also serves as our Director of Professional Development, was invited to speak on a panel for the MSBA's New Lawyers Section on March 29. The program was called Preparing for the Interview Process from an Employer's Perspective.

The National Workers' Compensation Defense Network will hold its spring conference in Philadelphia on April 27 and 28. Please click here for more details about the event. If you are able to attend, please connect with Tom Kieselbach, who will be there in his capacity as Immediate Past President of the NWCDN.

Save the date for the 2022 NWCDN Annual Conference, which will be held in Nashville on August 3 and 4.

NWCDN is a national network of the top workers' compensation firms across the country and Canada. CWK is the sole member firm from Minnesota, and CWK has a strong presence in the organization, with Tom Kieselbach serving as Immediate Past President, Parker Olson serving as Midwest Regional Vice-Chair, and Adam Brown serving on the Inclusion and Diversity Committee.

Shareholder Whitney Teel has been asked to speak at this year's Minnesota Workers' Compensation Symposium, which will take place on Thursday, May 12, 2022. Please click here for the Symposium's webpage and registration information.

Whitney will present at 11:10 a.m. during Breakout Session 2B. She will be addressing vocational rehabilitation benefits in a session entitled Vocational Rehabilitation Bootcamp - Managing Services and Expenses.

CWK will once again be an exhibitor at the Symposium, and we hope you will stop by our booth to say hello. Please make sure to sign up for Breakout Session 2B for a great presentation from Whitney!

Please click here for summaries of Minnesota workers' compensation cases from February 2022. Issues include Petitions to Vacate Stipulations because of changes in medical conditions, judicial discretion in cases involving choice of medical experts, and cases involving witness credibility.

February 2022 summaries by Eric Behr.

CWK's popular Annual Seminar will be back in person this year! The seminar will be held on Friday, September 30, 2022 at the Hilton Minneapolis/Bloomington.

More details will follow over the next few months, but please save the date now. We hope to see you, live and in person, in September!

Alabama’s Exclusivity Doctrine Fails to Protect Employer from Wrongful Death Claim Following Employee’s Fatal Heart Attack at Work

The Alabama Supreme Court recently denied a petition filed by a large retail chain for a Writ of Mandamus. The petition was filed as the result of the trial court denying the defendant employer’s motion for judgment on the pleadings. It was the position of the employer that its employee’s wrongful death claim was barred by the exclusive remedy provision of the Alabama Workers’ Compensation Act.  The only written opinion was authored by Justice Mitchell who dissented. Justice Mitchell explained that any injury that an employee suffers because of employer provided treatment following a work accident should be considered as arising out of the employment. He also noted that the Alabama Supreme Court had previously held that the existence of an employer/employee relationship between a decedent and a defendant at the time of death triggered the exclusivity doctrine and made workers’ compensation death benefits the sole remedy for the decedent’s dependents.

Alabama Supreme Court Makes Emergency Pandemic Rule Regarding Settlement Procedure Permanent

On December 30, 2021, the Alabama Supreme Court adopted Rule 47 of the Alabama Rules of Judicial Administration, providing that a Circuit Court shall dismiss any pending action seeking workers’ compensation benefits when (1) the parties have reached a settlement, (2) the settlement has been reviewed and approved by an Alabama Department of Labor Workers’ Compensation Division Ombudsman, and (3) the parties file the approved settlement agreement, along with a joint stipulation of dismissal with the Court.

About the Author

Mike Fish, an attorney with Fish Nelson & Holden, LLC, a law firm dedicated to representing self-insured employers, insurance carriers, and third-party administrators in all matters related to workers’ compensation. Fish Nelson & Holden is the sole Alabama member of the National Workers’ Compensation Defense Network. If you have any questions about this submission or Alabama workers’ compensation in general, please contact Fish by e-mailing him at mfish@fishnelson.com or by calling him directly at 205-332-1448.

As of late in South Carolina, it has become more and more common for the Claimant’s Bar to use the largely uncontested admission of medical questionnaires from authorized/unauthorized physicians as evidence in workers’ compensation matters to meet their burden of proof.  These statements typically are related to causation, permanent restrictions, physical limitations, future medical treatment, and more.  Generally, these questionnaires are not the written statements by the completing physician; rather, they are drafted by claimant’s counsel, using phrasing not likely to be used by medical professionals, and bolstering the statements made therein by qualifying them to the appropriate medical standard (“to a reasonable degree of medical certainty”) which is why they are problematic. The effect of these questionnaires is two-fold: (1) a detailed explanation of the claimant’s medical condition is boiled down to a check mark in a “yes” or “no” box, and (2) the claimant’s burden of proof is seemingly shifted to the defendants who must then go and depose said medical professional, at the cost of the employer/insurance provider, in order to cross-examine them on these statements that are most often not their own.   Under the “hearsay” definition (outlined below), a medical questionnaire is clearly hearsay, as it contains out-of-court statements (made by claimant’s counsel and adopted by the medical professional) and is offered into evidence to prove the truth of the matter asserted, i.e., to prove the statements made therein.  The rules regarding the submission of evidence in SC Workers Compensation are relaxed under the APA Guidelines, but these questionnaires seek to present a legal standard, fashioned as though the physician provided it in support of their unsolicited medical record, which is why they should be subjected to a different level of scrutiny and not omitted from the hearsay exception.

S.C. Code Ann. § 1-23-330(1) makes clear that the South Carolina Rules of Evidence do not apply in proceedings before the Workers’ Compensation Commission.  Hamilton v. Bob Bennett Ford, 339 S.C. 68, 70, 528 S.E.2d 667, 668 (2000) (citing Ham v. Mullins Lumber Co., 193 S.C. 66, 7 S.E.2d 712 (1940)).  As such, “great liberality is exercised in permitting the introduction of evidence in proceedings under the Workers’ Compensation Act.”  Id.  Note, however, that this liberality is not a wide-open door, permitting the admission of any and all evidence without thought; rather, South Carolina courts have opined that certain evidence must still meet judicial standards of admissibility.  Specifically, while the hearsay rules laid out in SCROE 801 – 806 are not applicable, hearsay evidence sought to be introduced in a workers’ compensation proceeding must still “be corroborated by facts, circumstances, or other evidence.”  Ham v. Mullins Lumber Co., 193 S.C. 66, 7 S.E.2d 712 (1940); See also Horton v. Pyramid Masonry Contractors, Inc., 2008 WL 9841237 (S.C. Ct. App. 2008); McCallum v. Beaufort County School Dist. Ex rel. South Carolina Boards Ins. Trust, 2005 WL 7083462 (S.C. Ct. App. 2005).  “Hearsay” is defined by South Carolina Rule of Evidence 801 as “a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.”

Recently, the Defense Bar began contesting these medical questionnaires and pushing for an outright ban on the same.  To date, the Workers’ Compensation Commission has been largely unwilling to make affirmative findings as to their admissibility or inadmissibility.  But see Eric Counsel v. Transportation Servs. LLC, & United Wisconsin Ins. Co. 2020 WL 8872085 (S.C. Work. Comp. App. Panel. Sept. 16, 2020) (Commissioners Wilkerson, Barden, and Beck holding a medical questionnaire admissible as an exception to the rule against hearsay because the medical conclusions drawn therein were also noted in the physician’s prior medical records and were corroborated by the medical records of another treating physician).  In response to this contentious debate, the South Carolina Senate has proposed bill S. 366 which seeks to amend S.C. Code 42-17-40(A) so as to provide that medical records and opinions of medical providers (i.e., medical questionnaires) are deemed admissible without regard to the rules of evidence.  The effect of this bill would be to stifle any and all arguments from the defense bar and allow for the admissibility of medical questionnaires without objection.  This bill was introduced for its first reading on January 12, 2021, and was found favorable by the SC Senate Judiciary Committee on March 16, 2022.  The bill must now be read for the second and third times, not to occur on the same day.  At the third reading, the bill may be debated, amended, committed, recommended, tabled, etc.  After this third reading occurs, the Senate will put the bill to a vote wherein only a majority is needed for passage.  If this occurs, it will then be sent to the South Carolina General Assembly where it must be found favorable by the appropriate committee and read on three separate occasions, the debate of which will occur during the second reading.  If passed in the SC General Assembly, the Governor will have five days to veto it, after which time it will become law.  An override of the Governor’s veto would require 2/3 vote of the SC General Assembly.  If the General Assembly does not accept this bill as written, they may amend the same and send it back to the Senate for approval.  If the amendments are approved, the bill passes.  In the event of a disagreement, a conference committee of members from both houses will convene to resolve the issues.  If the conference fails to agree, the bill will likely fail to pass. 

            While the effect of this legislation will not bring about a drastic shift in defense practice in workers’ compensation matters, as the WCC has thus far chosen not to reject these questionnaires, the fact that the WCC will now accept them without question is rather concerning.  This unobjectionable acceptance ultimately takes us farther away from an even playing field in workers’ compensation claims where claimant’s attorney would be required to incur the same expenses and follow the same rules as defense attorney, and further allows claimants to shift their own statutory burden of proof on to the defense which is not proper under the Act.

Further updates on this issue will undoubtedly be forthcoming in the next few months. 

                                                                                                Authored by,

                                                                                                Brandon Rattray, Esq.

                                                                                                Workers’ Compensation Associate

                                                                                                Robinson Gray Stepp & Laffittee, LLC

The NWCDN has a lengthy history of sponsoring cutting-edge seminars addressing incisive topics that are timely to the business of Workers’ Compensation.  The NWCDN will continue this tradition on April 28, 2022 in Philadelphia at the Hilton at Penns Landing.  The theme of the conference is “Philadelphia Freedom.” The speakers will address complex issues that face the industry today with an eye toward the developments of tomorrow.  

This one day seminar moderated by Lora Northen of Capehart Scatchard and John Ellis of Heckler & Frabizzio features an exciting array of Industry leaders.  Bruce Hamilton, the President of the NWCDN, will get things started with a few opening remarks followed by Caryl Russo, Ph.D.-Senior Vice President at RWJBarnabas Health who will discuss the anatomy of a national award winning workers’ compensation program. Robert Wilson-President & CEO of WorkersCompensation.com will then offer his unique perspective on recent trends in the workers’ compensation industry as well as what he sees on the horizon.   The morning will be rounded out with a session by Max Koonce – Chief Claims Officer at Sedgwick who will discuss the evolution of the workers’ compensation system as well as its future.

The afternoon session will kick off with Sarah Sherman the Assistant General Counsel for Maxim Healthcare Staffing Services and Bert Randle of Franklin & Prokopik discussing lessons they have learned in managing professional relationships.  Kenneth Kutner, PhD, ABPP-CN a Clinical Assistant Professor of Neuropsychology  at Weill Cornell Medicine- Cornell University and the lead author of the Sideline Concussion Checklist with then draw from his 28 years of experience as the team neuropsychologist for the New York Giants to provide all attendees with the opportunity to learn from a true “giant” in the industry on how to approach head injury claims.  The final panel will feature Lisa Thompson the Workers’ Compensation Claims Manager at Campbell’s and William Abate the Corporate Risk and Safety Manager at Holman Enterprises and be moderated by Lora Northen.  This panel of industry experts will discuss the “dos and don’ts of handling claims” and even reveal some of their secrets to crafting a successful workers’ compensation program.  I hope to see you in Philadelphia this April.  

Nicholas A. Dibble, Esq.

Capehart Scatchard

By Nicole Graci of Hamberger & Weiss LLP (NY) and Daniel Hayes of Teague Campbell Dennis & Gorham LLP (NC)

The NWCDN has re-established its Medicare Compliance Committee, and what great timing! On January 10, 2022, the Centers for Medicare and Medicaid Services (CMS) updated the Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide, which it does periodically, but this update sent shockwaves throughout the Medicare compliance community. As our first act as a committee, we offer the following analysis of what has become known as “The 4.3 Update.”

CMS’ 1/11/22 update to Section 4.3 of the WCMSA Reference Guide is a strong message about CMS’ view of evidence based or non-submit WCMSA products. On March 15, 2022, CMS updated the Reference Guide again, to clarify that message.

CMS expressed its concern that products commonly called “evidence-based” or “non-submit” MSAs are not adequately protecting Medicare’s interests.  Here is the full text of the 1/10/22 update,

4.3 The Use of Non-CMS-Approved Products to Address Future Medical Care

A number of industry products exist with the intent of indemnifying insurance carriers and CMS beneficiaries against future recovery for conditional payments made by CMS for settled injuries.  Although not inclusive of all products covered under this section, these products are most commonly termed “evidence-based” or “non-submit.”  42 C.F.R. 411.46 specifically allows CMS to deny payment for treatment of work-related conditions if a settlement does not adequately protect the Medicare program’s interest.  Unless a proposed amount is submitted, reviewed, and approved using the process described in this reference guide prior to settlement, CMS cannot be certain that the Medicare program’s interests are adequately protected.  As such, CMS treats the use of non-CMS-approved products as a potential attempt to shift financial burden by improperly giving reasonable recognition to both medical expenses and income replacement.  As a matter of policy and practice, CMS will deny payment for medical services related to the WC injuries or illness requiring attestation of appropriate exhaustion equal to the total settlement less procurement costs before CMS will resume primary payment obligation for settled injuries or illnesses.  This will result in the claimant needing to demonstrate complete exhaustion of the net settlement amount, rather than a CMS-approved WCMSA amount.

There has been an increase in the use of evidence based or non-submit WCMSA products in the last few years. Under the theory that CMS’ method for calculating a WCMSA results in inflated medical and prescription expense, resulting in higher settlement costs, evidence based or non-submit MSAs are calculated using alternative methods, resulting in reduced treatment and medication over a claimant’s lifetime and less expense. These products are often accompanied by “guarantees,” offers of post-settlement professional administration of MSA funds, structured WCMSAs and, in some cases, reversionary interests. In response to the 1/11/22 update, the purveyors of evidence based or non-submit MSA products immediately published analyses, arguing that CMS was contradicting the well-established legal reality that CMS pre-settlement approval of a WCMSA is voluntary. Detailed arguments were presented, outlining how CMS was overreaching its authority. CMS responded with the subsequent update on March 15, 2022.

However, a close reading of the January and March updates and review of the Medicare Secondary Payer statute and accompanying federal regulations reveals that the updates are consistent with CMS’ long standing policy that CMS pre-settlement approval, although not required by law, has been and continues to be recommended. The March 15, 2022 update softened the language of the January update, notably changing “will deny” to “may at its sole discretion deny” in reference to post-settlement payment of Medicare covered, causally related services. In addition, the beneficiary/claimant’s burden to attest to proper expenditure of the MSA funds is clarified to include a showing that, “both the initial funding of the MSA was sufficient, and utilization of MSA funds was appropriate.” CMS also clarified that its policy applies to notifications of settlements using evidence based or non-submit MSAs from 1/11/22 forward, but that it is flagging pre-1/11/22 notifications as well. CMS went on to reiterate the legal requirement of the Medicare Secondary Payer statute, regulations, and CMS memorandum that primary payers are obligated to consider Medicare’s interests at settlement, while recognizing that all settlements do not meet the CMS work review thresholds for pre-settlement approval of a WCMSA. It is well known that the CMS work review thresholds are internal and are not safe harbors. 

The full text of the March 15, 2022 update is below, with changes highlighted,  

4.3 The Use of Non-CMS-Approved Products to Address Future Medical Care

A number of industry products exist for the purpose of complying with the Medicare Secondary Payer regulations without participation in the voluntary WCMSA review process set forth in this reference guide. Although not inclusive of all products covered under this section, these products are most commonly termed “evidence-based” or “non-submit.” 42 C.F.R. 411.46 specifically allows CMS to deny payment for treatment of work-related conditions if a settlement does not adequately protect the Medicare program’s interest. Unless a proposed amount is submitted, reviewed, and approved using the process described in this reference guide prior to settlement, CMS cannot be certain that the Medicare program’s interests are adequately protected. As such, CMS treats the use of non-CMS-approved products as a potential attempt to shift financial burden by improperly giving reasonable recognition to both medical expenses and income replacement. As a matter of policy and practice, CMS may at its sole discretion deny payment for medical services related to the WC injuries or illness, requiring attestation of appropriate exhaustion equal to the total settlement as defined in Section 10.5.3 of this reference guide, less procurement costs and paid conditional payments, before CMS will resume primary payment obligation for settled injuries or illnesses, unless it is shown, at the time of exhaustion of the MSA funds, that both the initial funding of the MSA was sufficient, and utilization of MSA funds was appropriate. This will result in the claimant needing to demonstrate complete exhaustion of the net settlement amount, rather than a CMS-approved WCMSA amount. Notes: This official policy shall apply to all notifications of settlement that include the use of a non-CMS-approved product received on, or after, January 11, 2022; however, flags in the Common Working File for notifications received prior to that date will be set to ensure Medicare does not make payment during the spend-down period. CMS does not intend for this policy to affect any settlement that would not otherwise meet review thresholds. This comment does not relieve the settling parties of an obligation to consider Medicare’s interests as part of the settlement; however, CMS does not expect notification or submission where thresholds are not met.

CMS did not change its prior WCMSA Reference Guide language, making it clear that the submission process is completely voluntary, as follows:

There are no statutory or regulatory provisions requiring that you submit a WCMSA amount proposal to CMS for review. If you choose to use CMS’ WCMSA review process, the Agency requests that you comply with CMS’ established policies and procedures.

WCMSA Reference Guide., pp. 1, 9 (emphasis original).  Of note, this italicized language is found twice in the Reference Guide. 

The Medicare Secondary Payer statute and accompanying regulations have always afforded CMS the authority to deny payment for work-related treatment if a settlement does not adequately protect Medicare’s interests.  See 42 C.F.R. 411.46, emphasis added:

§ 411.46 Lump-sum payments.

(a)           Lump-sum commutation of future benefits. If a lump-sum compensation award stipulates that the amount paid is intended to compensate the individual for all future medical expenses required because of the work-related injury or disease, Medicare payments for such services are excluded until medical expenses related to the injury or disease equal the amount of the lump-sum payment.

(b)          Lump-sum compromise settlement.

(1)          A lump-sum compromise settlement is deemed to be a workers' compensation payment for Medicare purposes, even if the settlement agreement stipulates that there is no liability under the workers' compensation law or plan.

(2)          If a settlement appears to represent an attempt to shift to Medicare the responsibility for payment of medical expenses for the treatment of a work-related condition, the settlement will not be recognized. For example, if the parties to a settlement attempt to maximize the amount of disability benefits paid under workers' compensation by releasing the workers' compensation carrier from liability for medical expenses for a particular condition even though the facts show that the condition is work-related, Medicare will not pay for treatment of that condition.

(c)           Lump-sum compromise settlement: Effect on services furnished before the date of settlement. Medicare pays for medical expenses incurred before the lump-sum compromise settlement only to the extent specified in § 411.47.

(d)          Lump-sum compromise settlement: Effect on payment for services furnished after the date of settlement -

(1)          Basic rule. Except as specified in paragraph (d)(2) of this section, if a lump-sum compromise settlement forecloses the possibility of future payment of workers' compensation benefits, medical expenses incurred after the date of the settlement are payable under Medicare.

(2)          Exception. If the settlement agreement allocates certain amounts for specific future medical services, Medicare does not pay for those services until medical expenses related to the injury or disease equal the amount of the lump-sum settlement allocated to future medical expenses.

Essentially, the January and March 2022 updates did not change anything regarding a primary payer’s obligation to protect the Medicare fund by considering Medicare’s future interests at time of settlement. Similarly, the updates did not change the CMS work review thresholds for pre-settlement approval of a WCMSA. Most importantly, the updates did not change the well-established tenet that CMS pre-settlement approval of a WCMSA is voluntary. Rather, the updates simply made clear CMS’ position that evidence based or non-submit MSAs will be scrutinized for consistency with the methodology that CMS uses to evaluate WCMSAs that are voluntarily submitted. This should not come as a surprise, as CMS put considerable resources behind developing a methodology for WCMSA review, engaging review contractors, and promulgating its methods through memorandum, town hall teleconferences, webinars, a robust website, and the WCMSA Reference G.

Certainly, finding a primary payer that never disagreed with a CMS counter-higher WCMSA proposal would be akin to finding a unicorn. All primary payers can cite examples of CMS approved WCMSAs that include outlandish prescription medications, surgeries that will never take place and treatments extending a lifetime for claimants who will cease treatment shortly following settlement.  An evidence based/non-submit MSA is a permissible way for a primary payer to address those concerns, but not the only way. Depending on risk tolerance of the parties, CMS submission may still be preferred. Careful preparation of a WCMSA for submission to CMS, especially one prepared by counsel, includes implementation of legal strategies based on state specific workers’ compensation laws and treatment guidelines, and use of contrary medical evidence and/or litigation to effectively reduce prescriptions or treatment BEFORE submission to CMS. The resulting, palatable, CMS approved MSA effectuates settlement, as both the primary payer and the Medicare beneficiary/claimant can be secure in the knowledge that CMS has blessed their schism, evidenced by a CMS pre-settlement approval letter.

Practice Tip:  As always, parties should adequately consider Medicare’s interests, whether or not the settlement will qualify for voluntary submission to CMS for formal review.  The decision to participate in the voluntary submission process or use an evidence based or non-submit MSA should be made in consultation with counsel or other vendors who are well versed in Medicare compliance matters, and with full cooperation of the parties, on a case-by-case basis. 

References:

https://www.cms.gov/files/document/wcmsa-reference-guide-version-35.pdf

Stay tuned for more activity by your Medicare Compliance Committee - paperless conditional payments, forthcoming Section 111 reporting penalties, Medicare Advantage Plan Liens and more coming your way! Meet the members live in Nashville at the NWCDN national conference, where we will be presenting a Medicare Compliance update.  Please contact Nicole Graci of Hamberger & Weiss LLP (NY) or Daniel Hayes of Teague Campbell Dennis & Gorham, LLP (NC) for more in

By Nicole Graci of Hamberger & Weiss LLP (NY) and Daniel Hayes of Teague Campbell Dennis & Gorham LLP (NC)

The NWCDN has re-established its Medicare Compliance Committee, and what great timing! On January 10, 2022, the Centers for Medicare and Medicaid Services (CMS) updated the Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide, which it does periodically, but this update sent shockwaves throughout the Medicare compliance community. As our first act as a committee, we offer the following analysis of what has become known as “The 4.3 Update.”

CMS’ 1/11/22 update to Section 4.3 of the WCMSA Reference Guide is a strong message about CMS’ view of evidence based or non-submit WCMSA products. On March 15, 2022, CMS updated the Reference Guide again, to clarify that message.

CMS expressed its concern that products commonly called “evidence-based” or “non-submit” MSAs are not adequately protecting Medicare’s interests.  Here is the full text of the 1/10/22 update,

4.3 The Use of Non-CMS-Approved Products to Address Future Medical Care

A number of industry products exist with the intent of indemnifying insurance carriers and CMS beneficiaries against future recovery for conditional payments made by CMS for settled injuries.  Although not inclusive of all products covered under this section, these products are most commonly termed “evidence-based” or “non-submit.”  42 C.F.R. 411.46 specifically allows CMS to deny payment for treatment of work-related conditions if a settlement does not adequately protect the Medicare program’s interest.  Unless a proposed amount is submitted, reviewed, and approved using the process described in this reference guide prior to settlement, CMS cannot be certain that the Medicare program’s interests are adequately protected.  As such, CMS treats the use of non-CMS-approved products as a potential attempt to shift financial burden by improperly giving reasonable recognition to both medical expenses and income replacement.  As a matter of policy and practice, CMS will deny payment for medical services related to the WC injuries or illness requiring attestation of appropriate exhaustion equal to the total settlement less procurement costs before CMS will resume primary payment obligation for settled injuries or illnesses.  This will result in the claimant needing to demonstrate complete exhaustion of the net settlement amount, rather than a CMS-approved WCMSA amount.

There has been an increase in the use of evidence based or non-submit WCMSA products in the last few years. Under the theory that CMS’ method for calculating a WCMSA results in inflated medical and prescription expense, resulting in higher settlement costs, evidence based or non-submit MSAs are calculated using alternative methods, resulting in reduced treatment and medication over a claimant’s lifetime and less expense. These products are often accompanied by “guarantees,” offers of post-settlement professional administration of MSA funds, structured WCMSAs and, in some cases, reversionary interests. In response to the 1/11/22 update, the purveyors of evidence based or non-submit MSA products immediately published analyses, arguing that CMS was contradicting the well-established legal reality that CMS pre-settlement approval of a WCMSA is voluntary. Detailed arguments were presented, outlining how CMS was overreaching its authority. CMS responded with the subsequent update on March 15, 2022.

However, a close reading of the January and March updates and review of the Medicare Secondary Payer statute and accompanying federal regulations reveals that the updates are consistent with CMS’ long standing policy that CMS pre-settlement approval, although not required by law, has been and continues to be recommended. The March 15, 2022 update softened the language of the January update, notably changing “will deny” to “may at its sole discretion deny” in reference to post-settlement payment of Medicare covered, causally related services. In addition, the beneficiary/claimant’s burden to attest to proper expenditure of the MSA funds is clarified to include a showing that, “both the initial funding of the MSA was sufficient, and utilization of MSA funds was appropriate.” CMS also clarified that its policy applies to notifications of settlements using evidence based or non-submit MSAs from 1/11/22 forward, but that it is flagging pre-1/11/22 notifications as well. CMS went on to reiterate the legal requirement of the Medicare Secondary Payer statute, regulations, and CMS memorandum that primary payers are obligated to consider Medicare’s interests at settlement, while recognizing that all settlements do not meet the CMS work review thresholds for pre-settlement approval of a WCMSA. It is well known that the CMS work review thresholds are internal and are not safe harbors. 

The full text of the March 15, 2022 update is below, with changes highlighted,  

4.3 The Use of Non-CMS-Approved Products to Address Future Medical Care

A number of industry products exist for the purpose of complying with the Medicare Secondary Payer regulations without participation in the voluntary WCMSA review process set forth in this reference guide. Although not inclusive of all products covered under this section, these products are most commonly termed “evidence-based” or “non-submit.” 42 C.F.R. 411.46 specifically allows CMS to deny payment for treatment of work-related conditions if a settlement does not adequately protect the Medicare program’s interest. Unless a proposed amount is submitted, reviewed, and approved using the process described in this reference guide prior to settlement, CMS cannot be certain that the Medicare program’s interests are adequately protected. As such, CMS treats the use of non-CMS-approved products as a potential attempt to shift financial burden by improperly giving reasonable recognition to both medical expenses and income replacement. As a matter of policy and practice, CMS may at its sole discretion deny payment for medical services related to the WC injuries or illness, requiring attestation of appropriate exhaustion equal to the total settlement as defined in Section 10.5.3 of this reference guide, less procurement costs and paid conditional payments, before CMS will resume primary payment obligation for settled injuries or illnesses, unless it is shown, at the time of exhaustion of the MSA funds, that both the initial funding of the MSA was sufficient, and utilization of MSA funds was appropriate. This will result in the claimant needing to demonstrate complete exhaustion of the net settlement amount, rather than a CMS-approved WCMSA amount. Notes: This official policy shall apply to all notifications of settlement that include the use of a non-CMS-approved product received on, or after, January 11, 2022; however, flags in the Common Working File for notifications received prior to that date will be set to ensure Medicare does not make payment during the spend-down period. CMS does not intend for this policy to affect any settlement that would not otherwise meet review thresholds. This comment does not relieve the settling parties of an obligation to consider Medicare’s interests as part of the settlement; however, CMS does not expect notification or submission where thresholds are not met.

CMS did not change its prior WCMSA Reference Guide language, making it clear that the submission process is completely voluntary, as follows:

There are no statutory or regulatory provisions requiring that you submit a WCMSA amount proposal to CMS for review. If you choose to use CMS’ WCMSA review process, the Agency requests that you comply with CMS’ established policies and procedures.

WCMSA Reference Guide., pp. 1, 9 (emphasis original).  Of note, this italicized language is found twice in the Reference Guide. 

The Medicare Secondary Payer statute and accompanying regulations have always afforded CMS the authority to deny payment for work-related treatment if a settlement does not adequately protect Medicare’s interests.  See 42 C.F.R. 411.46, emphasis added:

§ 411.46 Lump-sum payments.

(a)           Lump-sum commutation of future benefits. If a lump-sum compensation award stipulates that the amount paid is intended to compensate the individual for all future medical expenses required because of the work-related injury or disease, Medicare payments for such services are excluded until medical expenses related to the injury or disease equal the amount of the lump-sum payment.

(b)          Lump-sum compromise settlement.

(1)          A lump-sum compromise settlement is deemed to be a workers' compensation payment for Medicare purposes, even if the settlement agreement stipulates that there is no liability under the workers' compensation law or plan.

(2)          If a settlement appears to represent an attempt to shift to Medicare the responsibility for payment of medical expenses for the treatment of a work-related condition, the settlement will not be recognized. For example, if the parties to a settlement attempt to maximize the amount of disability benefits paid under workers' compensation by releasing the workers' compensation carrier from liability for medical expenses for a particular condition even though the facts show that the condition is work-related, Medicare will not pay for treatment of that condition.

(c)           Lump-sum compromise settlement: Effect on services furnished before the date of settlement. Medicare pays for medical expenses incurred before the lump-sum compromise settlement only to the extent specified in § 411.47.

(d)          Lump-sum compromise settlement: Effect on payment for services furnished after the date of settlement -

(1)          Basic rule. Except as specified in paragraph (d)(2) of this section, if a lump-sum compromise settlement forecloses the possibility of future payment of workers' compensation benefits, medical expenses incurred after the date of the settlement are payable under Medicare.

(2)          Exception. If the settlement agreement allocates certain amounts for specific future medical services, Medicare does not pay for those services until medical expenses related to the injury or disease equal the amount of the lump-sum settlement allocated to future medical expenses.

Essentially, the January and March 2022 updates did not change anything regarding a primary payer’s obligation to protect the Medicare fund by considering Medicare’s future interests at time of settlement. Similarly, the updates did not change the CMS work review thresholds for pre-settlement approval of a WCMSA. Most importantly, the updates did not change the well-established tenet that CMS pre-settlement approval of a WCMSA is voluntary. Rather, the updates simply made clear CMS’ position that evidence based or non-submit MSAs will be scrutinized for consistency with the methodology that CMS uses to evaluate WCMSAs that are voluntarily submitted. This should not come as a surprise, as CMS put considerable resources behind developing a methodology for WCMSA review, engaging review contractors, and promulgating its methods through memorandum, town hall teleconferences, webinars, a robust website, and the WCMSA Reference G.

Certainly, finding a primary payer that never disagreed with a CMS counter-higher WCMSA proposal would be akin to finding a unicorn. All primary payers can cite examples of CMS approved WCMSAs that include outlandish prescription medications, surgeries that will never take place and treatments extending a lifetime for claimants who will cease treatment shortly following settlement.  An evidence based/non-submit MSA is a permissible way for a primary payer to address those concerns, but not the only way. Depending on risk tolerance of the parties, CMS submission may still be preferred. Careful preparation of a WCMSA for submission to CMS, especially one prepared by counsel, includes implementation of legal strategies based on state specific workers’ compensation laws and treatment guidelines, and use of contrary medical evidence and/or litigation to effectively reduce prescriptions or treatment BEFORE submission to CMS. The resulting, palatable, CMS approved MSA effectuates settlement, as both the primary payer and the Medicare beneficiary/claimant can be secure in the knowledge that CMS has blessed their schism, evidenced by a CMS pre-settlement approval letter.

Practice Tip:  As always, parties should adequately consider Medicare’s interests, whether or not the settlement will qualify for voluntary submission to CMS for formal review.  The decision to participate in the voluntary submission process or use an evidence based or non-submit MSA should be made in consultation with counsel or other vendors who are well versed in Medicare compliance matters, and with full cooperation of the parties, on a case-by-case basis. 

References:

https://www.cms.gov/files/document/wcmsa-reference-guide-version-35.pdf

Stay tuned for more activity by your Medicare Compliance Committee - paperless conditional payments, forthcoming Section 111 reporting penalties, Medicare Advantage Plan Liens and more coming your way! Meet the members live in Nashville at the NWCDN national conference, where we will be presenting a Medicare Compliance update.  Please contact Nicole Graci of Hamberger & Weiss LLP (NY) or Daniel Hayes of Teague Campbell Dennis & Gorham, LLP (NC) for more information.