Industrial Commission of Arizona Issues Advisory Document Outlining Best Practices for Full and Final Settlements
The Administrative Law Judge Division of the Industrial Commission of Arizona has issued guidance for cases involving full and final settlements, in the form of an informative and suggested best practices document. The document can be found here, and applies to full and final settlements that take place on or after August 3, 2018. You may recall our most recent blog on a modification to the 2017 Arizona law which enabled full and final settlements, or the permanent closure of claims. Prior to the 2017 law, a claimant could reopen a claim at any time, despite the finality and resolution of the claim. The 2017 law allows for future medical claims to be completely resolved, meaning that claims cannot be reopened once settled, even if medical treatment has changed or additional medical treatment is required.
The most significant points of the recently issued guidance, as related to Medicare Secondary Payer compliance, include:
- That the Full and Final Settlement Agreement should include a description of the injured worker’s medical conditions that have been identified and contemplated;
- That the parties should attach written disclosure of the following:
- reasonable anticipated future medical, surgical, and hospital benefits relating to the claim;
- the projected cost of those benefits;
- an explanation of how those projected costs were determined; and
- the amount of the settlement that represents the settlement of future medical, surgical and hospital benefits.
- That the Full and Final Settlement Agreement should include a signed attestation by all parties, that the parties have considered and taken reasonable steps to protect the interests of Medicare, Medicaid, the Indian Health Service, and the United States Department of Veterans Affairs, including establishing a Medicare savings account or a Workers’ Compensation Medicare Set-Aside Agreement (“WCMSA”).
- Note: This attestation should include a discussion of all steps taken by the parties to protect the interests of Medicare, Medicaid, the Indian Health Service, and the United States Department of Veterans Affairs.
- That if the injured worker is receiving or anticipates receiving Social Security Disability benefits, the parties should appropriately address a potential lifetime pro-ration of the net settlement proceeds.
Takeaway and commentary: This “best practices” document, in addition to the clear and plain language of the Arizona law, indicates the need for a thorough and accurate projection of a claimant’s future medical needs, best done through a reasonable Medicare Set-Aside allocation. A reasonable allocation is one which clearly documents the claimant’s medical condition, includes a clinical analysis supported by legal evidence, and provides an accurate breakdown of all future costs, including medical and prescription drug treatment. This advisory document further suggests that settlement documents should outline the steps and actions taken to attain MSP compliance. Using appropriate settlement language and papering your file is of utmost importance. In the process of doing so, a claimant’s Medicare or social security disability status should be determined and adequately reflected in the settlement. Lastly, as further suggested in the document, the interests of all secondary payers must be considered. This means that in addition to setting aside appropriate future medical costs, the parties should remember to conduct a conditional payment inquiry to ensure that all conditional payments and liens have been resolved and satisfied, prior to settlement. This document provides guidance on the intricacies of the requirements for full and final settlement of claims in Arizona.