It is possible to have CMS approve a Zero Allocation settlement. In such a case, nothing is set aside for payment of future medical care. However the Centers for Medicare and Medicaid Services (CMS) made news last month by purportedly “correcting” their position on zero allocations by adding a new, controversial requirement.
CMS announced on November 1, 2016 , that effective immediately, the Workers’ Compensation Review Contractor (WCRC) will utilize procedures that were previously in effect in reviewing zero MSAs. CMS’s purported “new” position basically adopted a three-part test for a Medicare Set-Aside (MSA) to qualify for a zero allocation: (1) The case or body part in question has been denied throughout the case; (2) There has been no medical or indemnity payment for the denied case or body part; and (3) There is either a finding from a hearing on the merits from a court of competent jurisdiction relieving the carrier of liability or documentation from the beneficiary’s treating physician recommending no future treatment.
In other words, under this new requirement CMS may only approve a zero allocation if a judge has determined that no compensable workers compensation claim exists and no payments were made.
For lack of a better term, a judicial determination “on the merits” would be a trial. Trials in cases that are settled are extremely rare and almost never occur. Seeking to avoid an up or down determination at trial – realizing that both sides have significant risk in a trial – the parties agree to settle a denied claim on a doubtful and disputed basis. If the insurer or employer wins at trial, the case is over. There is no settlement. This makes CMS’s purported requirement of a judicial finding nearly impossible – and certainly irrational – to comply with.
In response to negative feedback from the worker’s compensation community, CMS provided the following announcement on its “What’s New” page:
“CMS recently received inquiries regarding procedural changes in the way that CMS’ Workers’ Compensation Review Contractor (WCRC) reviews proposed zero-dollar Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) amounts. CMS determined changes had transpired without prior notification. Effective immediately, the WCRC will utilize procedures that were previously in effect. CMS continually evaluates all policy and procedures related to WCMSA reviews and will publish any pending changes when or before they go into effect.”
So, for now, CMS is maintaining the status quo when it comes to zero allocation review procedures. Until CMS makes a subsequent announcement, the basic requirements to obtain a zero allocation CMS approval remain as follows:
1) The claim is denied; and
2) No payments, medical or indemnity, have ever been made.
It now appears that CMS tested an additional requirement for zero allocations: that parties obtain an “on the merits” determination in addition to the above-referenced requirements. It ends up that this additional requirement would simply not work in certain jurisdictions or in true disputed settlements.