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EVALUATING MEDICARE’S NEW INTEREST IN DENIED CLAIMS: Keeping Medicare from Derailing your Denial

Every so often Medicare causes an industry freak out (legal term) by stating a new policy or threatening to do so. The most recent freak out involves Medicare’s review of denied claims. Medicare’s decision to reconsider its position on these types of claims gives workers’ compensation practitioners a perfect opportunity to do the same.

Image this scenario: you are presented with a workers’ compensation claim. You perform your usual thorough evaluation of the facts of the claim and determine that for one or more reasons the claim is not compensable in your state. You then deny the claim and refuse to pay any benefits associated with it. While the claim continues to pend, you are diligent in denying any requested medical bills or lost time benefits. Ultimately, the opportunity presents itself to mitigate exposure and expense and settle the claim without making any admissions as to compensability or providing for any future medical benefits. During your evaluation of the claim, you realize that the claimant is a Medicare beneficiary (or soon will be) and the settlement will require a payout of greater than $25,000.00. Exercising an abundance of caution, you submit your settlement proposal to CMS with the expectation that they will return a letter confirming that a $0.00 allocation is required as it is a fully denied case with no benefits having been paid. You then proceed with finalizing the settlement agreement, close your file, and afford yourself a congratulatory pat on the back.

Recently, however, Medicare has indicated that obtaining a $0.00 proposal on a fully disputed case will no longer be so easy. Instead, CMS has indicated that it will require additional documentation before determining that no MSA is required. This documentation must include confirmation of an absence of payments by the carrier and either: 1) a court order issued after a hearing on the merits that confirms that the insurance carrier has no liability for the claim; or if no such opinion exists, 2) a recommendation from the treating physician that no further treatment for the industrial injury is required.

It is this last passage that is causing the concern. Since most workers’ compensation claims do not end in a fully litigated issue of compensability, workers’ compensation carriers would be required to obtain statements from treating physicians that no further injury related treatment was required. This is an impractical requirement in some cases as the basis for the need for treatment may have absolutely nothing to do with the basis for the claim’s denial.

Referring to our theoretical claim above, consider that this particular claimant did not provide notice of the injury as required by the state in which the claim is pending. Your familiarity with your state’s requirements led you to properly deny the compensability of the claim for lack of timely notice. This does not mean, however, that the accident in question did not cause an injury to the claimant. Neither, does it mean that the claimant will not require ongoing medical treatment as a result of this incident. What it does mean is that no compensable accident occurred and that the insurer should not be responsible for any future medical needs. This requirement is in conflict with the requirement that the treating physician confirm that no future medical treatment is required as a result of the claimed accident.

Before simply throwing our hands in the air and submitting a whole new array of cases to CMS for its review, this change in policy announced by Medicare provides us with the opportunity to re-evaluate what cases we are sending to Medicare for their review in the first place. After all, the applicable Medicare regulations have always forbade the “shifting” to Medicare of medical burdens that would otherwise have been the responsibility of the workers’ compensation carrier. But in the denied claim above, there is no “shifting” of the burden to Medicare because Medicare had the burden all along. Since the claim was never accepted and no medical benefits were ever paid, there was never a time in that claim when Medicare’s duties had been relieved. Since the claim does not involve a shifting of a burden to Medicare, the CMS procedural requirements do not apply. Based upon this logic, there is no need to submit an MSA to CMS in this type of denied claim at all. If you do submit to Medicare, however, your submission will face the newly articulated scrutiny discussed above, but, again, only if you actually submit the case to Medicare.

Avoiding the more stringent requirements articulated by CMS by refusing to submit to Medicare those denied cases that should not be submitted to Medicare anyway is a position also being touted by at least one national Medicare Set-Aside vendor. Heather Schwartz-Sanderson, Esq., Chief Legal Officer for Franco Signor LLC, wrote an interesting piece called “CMS Plans to Change Requirements for Approval of Zero Allocations; CMS MSA Review is Intended Only for Commutation Cases.” Ms. Schwartz-Sanderson argues that CMS approval has always only been intended for commutation cases, where the workers’ compensation carrier/plan is funding future medical care. In support of this position, she references 42 CFR § 411.46(d). Further, Ms. Schwartz-Sanderson outlines the nonsensical nature of submitting a denied claim for MSA approval only when there is a court order indicating non-compensability (where there has never been a need to allocate money for future medical treatment) or in the case where a treating physician says that no future medical is needed (a scenario in which Medicare has previously indicated there is no need to produce an allocation on the claim).

The take away from the new CMS policy for review of denied cases should be a review of what cases are submitted to Medicare in the first place. Submitting denied cases for CMS approval has always been a timely and costly process, but, with the new review procedures intact, will most certainly lead to more CMS mandated allocations.

Like any issues involving a settlement, especially those cases with Medicare involvement, careful crafting of the settlement language is critical. As always, the attorneys at Lemp & Murphy, P.C. are willing to help you work through your complicated workers’ compensation issues and provide you with the knowledge, experience and creativity necessary to efficiently complete your settlements without running afoul of any Medicare requirements.

Then, we can sit back and wait for the next thing to freak out about.

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