Can we settle? Yes we can! Part 1 of 5

Medicare Set-Aside Blog on February 15, 2011
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The question of whether a claim can be settled while either waiting on CMS approval or without any approval at all comes up frequently. Just this morning, an attorney wrote to “Ask Jen” and posed the following question: “Can an employer or carrier settle a workers’ compensation claim prior to obtaining CMS approval?”. On its face, it seems like a fairly straightforward question.  “Yes, of course you can” was my initial reaction. But then I started thinking of all the exceptions, the pro’s, the con’s and what I consider to be best claims handling practices after spending the better part of the last 20 years working in the  claims settlement business. So after spending 30 minutes trying to succinctly answer this question while covering all the possibilities, probabilities and distinctions,  I realized this was a seemingly simple question that needed a much more in-depth answer (reader note: in-depth answers are NOT my forte and are the exclusive province of Ms. Jennifer Jordan, MEDVAL’s General Counsel and prolific essayist on all things MSP. But given that she was on vacation all last week and will be on a five city speaking/training tour beginning today, you are stuck with me and my just this minute conceived blog format of answering in five, bite-sized parts).

Back to the question at hand. Unless subject to the jurisdiction of the Workers’ Compensation Commission in the State of Maryland, the unequivocal answer is yes. Parties may settle their claim pursuant to State law, with or without CMS’ blessing, once there is a meeting of the minds on the settlement terms. To my knowledge, no state Workers’ Compensation Board or Commission other than Maryland has refused as a matter of law to approve a settlement without CMS approval in hand. There are scattered reports around the country about individual judges and jurisdictions requiring documentation that Medicare’s interests are being addressed (which is reasonable) but nothing mandating that the case must have been approved by CMS before finalizing the settlement.  Most state agencies correctly understand that a parties’ MSP obligations are triggered by the underlying  state law and are reluctant to give the federal government more oversight and authority then the feds expressly legislate for themselves.  So whether to close the claim with this aspect of the settlement unresolved is a matter of personal preference and ultimately a risk management decision for both plaintiff and defense. Aside from the obvious advantages/disadvantages inherent in all settlements, settling a case while waiting on CMS approval presents a few special considerations. Namely,

Who bears the cost of the additional indemnity/medical payments while waiting on CMS?
What happens if CMS comes back with a different WCMSA amount than projected?
In the event of a counter approval what happens if one party is in agreement with the amount and the other is not?
What are the resources available if the settlement terms are fixed prior to CMS approval and neither party is satisfied with the outcome of the WCMSA review process?
Are their alternatives to seeking CMS approval? What are the advantages and disadvantages?

Stay tuned this week for answers to these and other pressing MSP questions.