The Baird Formula is a method of reducing EDD liens proportionately, when a worker’s compensation claim is settled for less than its full amount. The formula was approved by the California Supreme Court in California-Western States Life Insurance Co. v. Industrial Accident Commission (Baird), 59 Cal.2d 257, 28 Cal.Rptr. 872, 379 P.2d 328 (1963). It seeks to assure fairness in proportional reductions of EDD liens by showing a reasonable estimate of the full value of the claims as if the worker had prevailed. The EDD lien is reduced so that the EDD does not receive a greater percentage of full recovery then does the injured worker. So, the question becomes, is it similarly possible to reduce the amount allocated to protect the interests of Medicare in a Workers’ Compensation Medicare Set Aside (WCMSA) situation so that CMS does not receive a greater percentage recovery than the claimant? While there are no cases on this point in the world of workers’ compensation claims, there are some new cases that may seem to agree with this concept in cases where a Liability Medicare Set Aside (LMSA) is required during the settlement of a liability case.

The United States District Court, W.D. Louisiana decided Benoit v. Neustrom, 2013 U.S. Dist. LEXIS 55971. on April 17, 2013. Michael Benoit suffered injuries while incarcerated. Michael Neustrom, as Sheriff of Lafayette Parish was sued for allegedly not recognizing his health condition, causing a delay in medical care leading to disabling neurologic injury. The Parties agreed to a settlement of $100,000 and Medicare claimed $2,777.78 for conditional payments it made related to the claim. Although the Parties did not contest what was owed to Medicare, there was concern regarding future Medical and CMS statements that its future interests must be protected. To do so, Plaintiff secured a LMSA with cost projections in the range of $277,758.62 – $333,267.02. Based on the settlement amount of only $100,000, an issue of how to fund the LMSA was obvious.

CMS was served notice of a Motion for Declaratory Judgment asking the Court how to proceed, but declined to appear. In lieu of its appearance, the U.S. Attorney sent its standard letter which included a handout from the MSP regional Coordinator for CMS in Region VI. According to such handout, Medicare’s interests must be protected, but CMS does not mandate a specific mechanism to protect those interests. It goes on to state the law does not require a “set – aside” in any situation, but it is [CMS] method of choice for workers’ compensation settlements .The law makes no distinction between workers’ compensation and liability cases. The implication therefore is that the LMSA would be a vehicle, but CMS has no approval mechanism in place. Absent a CMS approval, the LMSA could be later challenged by CMS.

Since CMS provides no other procedure to determine the adequacy of protecting Medicare’s interest for future medical, the Court decided it must act to fill the vacuum that is left. In doing so, the U.S. District Court made several important findings of fact, important to its determination which covered: 1) Jurisdictional basis; 2) Agreement that both liability and medical issues were contested; 3) The potential damage elements plaintiff would have recovered for had the case been tried; 4) The settlement amount of $100,000 represents a reasonable compromise; 5) Plaintiff will take more than 30 months to reach age 65; 6) A calculation of the allocation based on the settlement amount; 7) The need for Plaintiff’s wife to administer the fund, based on Plaintiff’s incapacitation; 8) The requirement to reimburse Medicare its conditional payment claim in full; and 9 ) No Party is attempting to maximize the settlement.

To arrive at the appropriate figure, the Court took the net settlement proceeds, after reimbursement of conditional payments to Medicare, attorneys’ fees and costs and divided it into the mid – point of the LMSA range that was presented to the Court, arriving at a ratio of 18.2%. That ratio was then applied to the net proceeds where the Court arrived at the $10,138 figure to fund the set-aside. The Court looked to the 11th Circuit decision in Bradley v. Sebelius for guidance. 621 F.3d 1330 (11th Cir. 2010). Bradley was an allocation case under the MSP with respect to conditional payments, holding that CMS must respect a judicial allocation based on the merits of the case.

Based upon the logic of these new federal decisions, perhaps it is time for the judicial creation of a “Baird” type formula for the resolution of conditional payments and set-aside allocations under California workers’ compensation law.

The United States Court of Appeals for the Fifth District (Texas) ruled that a claim for reimbursement of the costs for treatment for the effects of an industrial injury paid by Medicare, cannot circumvent the requirements of state workers’ compensation law. In other words, federal law does not preempt state law procedural requirements. Here is what happened in the case of Guadalupe Caldera vs The Insurance Company of the State of Pennsylvania.

Caldera injured his back at work in 1995. Workers’ compensation carrier Insurance Company of the State of Pennsylvania (“ICSP”) initially paid Caldera benefits pursuant to Texas state law. Still suffering from the injury, Caldera applied for and obtained Medicare benefits in 1998.

He then had two back surgeries: one in 2005 and another in 2006. Medicare paid for both, with costs totaling $42,637.41. Although Caldera did not seek preauthorization for either surgery from ICSP (a prerequisite for payment under Texas workers’ compensation law), he filed a claim with ICSP for these expenses, arguing that ICSP – not Medicare – was responsible for payment. An “Agreed Judgment” between ICSP and Caldera established that Caldera’s 1995 injury was the producing cause of the conditions that gave rise to his surgeries, but it did not liquidate any damages or require any payment.

Caldera filed a Medicare Secondary Payer Statute (MSP) reimbursement claim against ICSP in the state court action, seeking double-damages. At the time Caldera suffered no out-of-pocket loss for these costs. Medicare had taken no steps to recover these funds from ICSP or Caldera. His motivation – MSP contains a private right of action to incentivize citizens to aid the government in recovering funds erroneously paid by Medicare. (See 42 U.S.C. § 1395y(b)(3)(A)). A Medicare beneficiary may recover from his workers’ compensation carrier twice the amount that Medicare paid on his behalf if, among other things, the carrier qualifies as a “primary plan” – that is, if it “can reasonably be expected” to cover the expense “under a workmen’s compensation law or plan.” Id. § 1395y(b)(2)(A). To succeed, then, Caldera had to state a plausible claim that ICSP “can reasonably be expected” to pay for his surgeries under Texas workers’ compensation law.

ICSP answered that Caldera could not recover under the MSP because – regardless of the extent-of-injury issue – ICSP had no obligation to pay for surgeries that were not preauthorized in accordance with Texas workers’ compensation law. Caldera filed and lost a declaratory judgment action to determine whether the MSP preempts ICSP’s state-law defense. The United States Court of Appeals for the Fifth District (Texas) affirmed the dismissal in favor of ICSP.

The Court of Appeals noted that “Medicare serves as a back-up insurance plan to cover that which is not paid for by a primary insurance plan.” But, Caldera admits that he failed to obtain preauthorization for his surgeries, a state-law prerequisite for the receipt of workers’ compensation benefits from ICSP. Nevertheless, Caldera argues that ICSP qualifies as a “primary plan” that “can reasonably be expected” to pay because the MSP preempts the Texas preauthorization requirement. Caldera broadly argues that the MSP preempts any state laws that “impede the intent of recouping monies from primary payers” like ICSP.

The Court of Appeals agreed that “Congress explicitly prohibited workers’ compensation and other insurers from subordinating their payment obligations to those of Medicare.”. However, the court went on to state “[t]he MSP and its implementing regulations do not, however, extend so far as to eviscerate all state-law limitations on payment, as Caldera suggests. ….Indeed,numerous MSP regulations (indeed, an entire subchapter) presuppose the application of state workers’ compensation laws. …. In sum, we conclude that Congress intended the MSP to complement, not supplant, state workers’ compensation rules. This includes the preauthorization requirement that Caldera failed to meet before he filed suit.” The Court of Appeals concluded that Texas has gone to great lengths to craft a statutory structure that “carefully constructs rights, remedies, and procedures” to provide adequate coverage for injured workers…..That structure “contains detailed procedures and penalties for failures of the various interested parties to comply with statutory and regulatory requirements.” Id. at 440. “We will not upset this well-oiled machine absent a clear directive from Congress.”

As part of its ongoing efforts to implement Senate Bill 863, the Division of Workers’ Compensation (DWC) has posted proposed changes to the existing Medical Provider Network (MPN) regulations to the online forum where members of the public may review and comment on the proposals. The reform provisions of SB 863 substantially modified the MPN requirements. The modifications include:

• Expanding the types of entities who may qualify to have an MPN.
• Establishing an MPN approval period of four years.
• Allowing any person to submit a complaint against an MPN.
• Providing a petition process to either revoke or suspend an MPN.
• Authorizing DWC to conduct reviews of MPN s and assess administrative penalties for violations of statutory and regulatory requirements.

The proposed amendments to the MPN regulations modify regulatory definitions, which include a definition of an entity that provides physician network services. The regulations also detail the changes to MPN operating requirements, which include physician acknowledgments, Internet Web site postings of providers, medical access assistants, quality of care, geocoding and MPN disclosure requirements to medical providers. In addition, the regulations set the requirements for MPN approval for a period of four years and the procedural timelines for MPN re-approval.

Regarding compliance and enforcement, the proposed regulations set forth the process for filing a written complaint against an MPN, and the manner to petition DWC for the suspension or revocation of MPN status. Finally, the regulations detail more enforcement actions, establishing additional grounds for the probation, suspension, or revocation of an MPN, and the procedure by which MPNs are reviewed by the Division and assessed administrative penalties.

The proposed changes to the MPN regulations start with section 9767.1 of title 8 of the California Code of Regulations. The forum can be found online on the D WC website. Comments will be accepted on the forum until 5 p.m. on May 23 . Please feel free to participate in this important process.

The Court of Appeal affirmed the denial of a peace officers presumed industrial disability retirement claim notwithstanding the accepted workers’ compensation claim. Here is what happened in the unpublished opinion of Henry Kirk v Retirement Board of of the City and County of San Francisco

Henry Kirk was a police officer for the San Francisco Police Department from 1975 until his retirement in June 2008 due to his heart-related physical impairment. His heart trouble appears to have surfaced in the 1980s, when he began to notice rapid heart beating and other symptoms, first, when exercising in 1983, and, next, when he passed out while driving a police vehicle in pursuit of a suspect in 1983 or 1984.

He was diagnosed with paroxysmal supraventricular tachycardia (PSVT) in 1990, high blood pressure in 1994, hypertensive cardiovascular disease and possible cardiomyopathy in 1997. In 1998 he was evaluated for his worker’s compensation claim. The evaluator determined that since the cardiomyopathy developed during the years he was a police officer, he qualified for workers’ compensation benefits under the “California Presumption Statute.” His treating physician however continued to express doubts about the diagnosis of cardiomyopathy.

On July 28, 2007, Kirk collapsed and lost consciousness while dancing at a private event, suffering a cardiac arrest. After initially receiving emergency medical care that included emergency catheterization, hypothermia treatment and life support, kirk received an implantable cardiac defibrillator. Then, following nearly six months of recuperation, appellant returned to police duty on January 19, 2008.

On January 17, 2008, Kirk was examined by Dr. Robert Blau in connection with his July 2007 workers’ compensation claim. Dr. Blau did not address the link (if any) between Kirk’s heart condition and his police service except to state “[he] has already received acknowledgement of his hypertension and cardiovascular disease being industrial.”

On March 18, 2008, Kirk suffered another cardiac arrest while driving home from work and effectively retired on June 28, 2008. Just before his retirement, on June 10, 2008, Kirk applied for an industrial disability retirement, identifying a “cardiac arrest” in July 2007 as his disabling condition. Dr. Thomas Allems found Kirk unfit to serve as a law enforcement officer in any capacity and thus “appropriately medically retired on a non-service connected basis.” With respect to the underlying cause of his heart trouble, Dr. Allems found it unrelated to his service as a police officer: He said that “[Kirks’s] dilated cardiomyopathy is likely idiopathic in nature; he may have a genetic predisposition. As a result of his cardiomyopathy he has had symptomatic supraventricular and ventricular arrhythmias, dating back to the 1980s, with eventual ventricular arrhythmic arrests on two occasions in July 2007 and March 2008. This sequence of events reflects the natural history of his underlying cardiomyopathy.” After acknowledging that his heart disease had been accepted for workers’ compensation as industrial, Dr. Allems nontheless concluded that “With reasonable medical probability, his cardiomyopathy . . . was unrelated to any factors of his employment as a San Francisco police officer. His heart pathology would have occurred at the same time (becoming symptomatic shortly after his employment began) and progressed at the same rate and requested the same degree of medical treatment absent his being employed as a peace officer.”

His industrial disability retirement was denied after an arbitrator adopted the conclusion of Dr. Allems. The City of San Franciso adopted the arbitrators award and Kirk appealed.

The Court of Appeal in the unpublished opinion of Henry Kirk v Retirement Board of of the City and County of San Francisco affirmed the denial of his disability retirement claim. The task on appeal was to determine whether the trial court’s judgment is supported by substantial evidence. Contrary evidence developed in his workers’ compensation claim does not require reversal, particularly in light of the great deference accorded lower court findings in writ. proceedings. The Court of Appeal concluded that Dr. Allems did more than simply point out the lack of evidence that the applicant’s condition was industrial. Dr. Allems provided factually-supported medical opinions demonstrating the non-industrial nature and non-industrial progression of appellant’s condition, thereby successfully rebutting the applicable presumption

AB 1309 was authored by Insurance Committee Chairman Perea to address abuse of California’s ultra-lenient workman’s comp system. As is, the system lends itself to abuse by allowing former professional athletes to file claims in CA even if their contacts with the state are minimal. During the insurance committee hearing, Assemblywoman Torres noted that an insurance company’s statistics showed that claims paid out to approximately 2% of claimants involved former athletes whose only contact with California was their agents. They had never played for a California team, played a game in California, or even lived in California. But because of the system’s set up, they were somehow able to file a successful claim.

So to close the “loopholes” and prohibit athletes from “taking advantage” of the system, AB 1309 was introduced. AB 1309 will effectively exclude professional athletes from filing workman’s comp claims in the state of California. If passed, it will retroactively wipe out pending claims as well, some that have been in the pipeline for 4-5 years. There are approximately 1,000 pending workman’s comp claims in the state that would be precluded if the bill passes.

The original version of the bill introduced in February would preclude a claim if the athlete played on another pro-team domiciled in another state, unless he played more than 90 days in California within the last 365 days of employment. Critics argued that players like LaDainian Tomlinson, Tim Brown or the late Junior Seau would all be precluded from filing a claim in California because they played on out-of-state teams even though they spent a majority of their career on a California team.

Assemblyman Perea attempted to address these concerns by amending the bill in April to include what is being called the 80-8 rule. The amendment would allow players who played 80% of their career and 8 years on a California team to file a workman’s comp claim even if the last year of the employment was with an out of state employer. The bill language reads “This paragraph shall apply to all occupational disease and cumulative injury claims filed against an employer of professional athletes if the employer is subject to this division, unless the professional athlete was employed for eight or more consecutive years by the same California-based employer pursuant to a contract of hire entered into in California, and 80 percent or more of the professional athlete’s employment as a professional athlete occurred while employed by that California-based employer against whom the claim is filed.

Critics of the amendment point out that the average NFL career is 3.5 years – there are probably a handful of players who will actually play 8 years on one team, let alone 8 years total in the NFL. The duration of most NFL contracts are 1-4 years. These contracts are not guaranteed, and players often move from team to team after being cut or their contracts expire. Thus they say that the 80-8 rule will not help many players who started their career with a California team and moved elsewhere for the remaining years of their limited career.