Make No Mistake: The Elusive Zero ($0) Medicare Set-Aside Occasionally, workers compensation practitioners will learn their case may be appropriate for a zero ($0) Workers’ Compensation Medicare Set-Aside (WCMSA or MSA). From a Defense perspective, zero sounds good doesn’t it? But how do parties settle utilizing a zero MSA allocation? Does a zero MSA need to be submitted to the Centers for Medicare & Medicaid Services (CMS) for review and approval?
Mutual Mistake Sets Aside Compromise and Release with Zero MSA These questions were recently touched upon in Harrison v. Canyon Springs Pools and Spas, Inc., 2021 Cal. Wrk. Comp. P.D. LEXIS 234, where the WCAB, denying reconsideration, affirmed WCJ’s finding of good cause to set aside 1/8/2020 Order Approving Compromise and Release agreement based on mutual mistake, when Compromise and Release agreement contained zero-dollar Medicare Set-Aside. Because the settlement contained a zero MSA, the Center for Medicare Services (CMS) charged applicant for medical treatment which applicant paid for out of pocket. The WCAB found there was mutual mistaken belief by parties that zero-dollar Medicare Set-Aside did not have to be submitted to CMS for approval, and further determined there was mutual mistake by parties that AME found no compensable injury, which formed premise of entire settlement agreement and zero-MSA.
The WCAB explained that a Compromise & Release agreement may be set aside based on fraud, duress, undue influence, incompetency, or mutual mistake (Silva v. Industrial Accident Commission (1924) 68 Cal.App. 510; Sun Indemnity Co. v. Industrial Accident Commission (McKinney) (1948) 85 Cal.App.2d 171, [13 Cal.Comp.Cases 82]).
In Harrison, there was a mutual mistake because both defense counsel and applicant’s counsel believed that a zero MSA would be accepted by Medicare without submission to CMS. Based on the evidentiary record, it appeared the entire settlement agreement was based on this mistaken assumption.
At trial, a letter from the Center for Medicare Services (CMS) shows that CMS did not in fact consider this a zero-MSA case and charged applicant with payment for treatment from a nonexistent MSA fund, which applicant actually paid back to CMS out-of-pocket in the amount of $909.96. Thus, the parties were both mistaken in relying on a zero-dollar MSA as the basis for their settlement agreement.
The WCAB also found there was a mutual mistake in the interpretation of the AME opinion. The parties supported their zero-MSA, in part, because the AME found no injury. This turned out to be inaccurate and incorrect. At both the trial and WCAB level, the court concluded that the AME found industrial causation with need for medical treatment but provided 0% PD (and very harsh criticism that applicant was malingering). Another helpful reminder that a 0% Permanent Disability case does not necessary absolve Defendant from ongoing medical treatment for that body part. Accordingly, the Compromise & Release agreement was ordered to be set aside based on a mutual mistake, and the Order Approving Compromise & Release was rescinded.
The opinion also suggests that the parties may obtain substantial evidence in support of an amended settlement agreement, and either obtain advance approval by CMS of an MSA or use a guaranteed MSA that holds applicant harmless from rejection or modification of the MSA by CMS.
Harrison illustrates confusion that many workers compensation practitioners may feel when determining when a zero MSA is appropriate. There are two (2) primary reasons when a zero MSA may be warranted in settlement of the workers’ compensation claim: 1) The claim is denied or 2) there is a medical opinion substantiating no further medical treatment to cure or relieve the effects of the industrial injury.
CMS will review zero-MSA allocations and parties with zero MSA allocations must be vigilant to comply with CMS’ requirements. Indeed, CMS review of an MSA is recommended, but not required. However, it is always important to periodically review CMS’ Reference Guide which is available online.
A zero-MSA may be obtainable if no medical expenses or indemnity benefits were paid prior to the settlement unless the employer was required to pay by state law during an investigation period. In California, it is up to $10,000.00 until the claim is denied within the initial 90-day period. Any court orders or any other documentation which supports the denial of the case should also be provided to CMS. Generally, if no indemnity is paid, no treatment provided, and there is medical or other evidence to substantiating a non-industrial injury, a zero MSA is likely appropriate.
No Future Medical
If there is clear evidence that applicant has completely recovered from his or her injury, with no future medical treatment required on an industrial basis, a zero MSA may be appropriate. In this situation, the treating physicians report is critical. It is important to note that CMS favors the treating physician’s opinion over and AME/QME opinion.
In Harrison, not only did the parties base the zero-MSA on an AME opinion, but they also misinterpreted that opinion to state that no future medical care was warranted.
Obtaining a zero MSA takes careful thought and consideration, just like all aspects of a workers compensation case. However, Defendants should be particularly prudent because an underfunded zero MSA account will ultimately be defendant’s medical treatment liability. In closing, be sure to gather all your evidence, consult the WCMSA online guide, and contact your favorite Mullen & Filippi attorney to solidify your best plan of action for settlement.
By Brock Roverud, Associate Managing Attorney; Claire Meredith, Associate Attorney; Ashley Mohammadi. Associate Attorney; Treanna Garza, Associate Attorney, Fresno Office, November 2021.