Zero Allocation in CMS Submissions

When Is a Medicare Set Aside Required?

Recently, Gould and Lamb has seen an increase in requests for submission to the Centers for Medicare/Medicaid Services CMS of “zero allocations.” Essentially, the parties to a workers’ compensation case that is either completely contested or where a portion of the claim is disputed believe that evidence or argument can be presented that will result in Medicare’s future interests being quantified as having no value. CMS acknowledges that there are, indeed, circumstances where Medicare’s interests are not at issue and, therefore, the parties are not required to establish a Medicare set-side arrangement.  CMS also recognizes, however, that there are many situations wherein the parties believe that a workers’ compensation zero allocation is warranted, but in fact it is not.

Two Types of Workers’ Compensation Claim Settlements

Medicare has identified two types of settlements in workers’ compensation cases.

One - No future medical care is anticipated based upon the compensable injuries or accident. The second is presented where only the past medical exposure or treatment is the subject of the settlement. Medicare recognizes the second scenario as a “compromise” case. As Medicare is not exposed for future medical care or services and because medical care remains “open” the establishment of an MSA is not necessary. In its policy Memorandum dated April 22, 2003, CMS advised that in true compromise cases, a Medicare Set Aside MSA is not necessary when all of the following factors were present:

• The facts demonstrate that the injured individual is only being compensated for past medical expenses.
• There is no evidence that the individual is attempting to maximize the other aspects of the settlement to Medicare’s detriment, and
• The individual’s treating physicians conclude (in writing) that, to a reasonable degree of medical certainty, the individual will no longer require Medicare-covered treatment related to the workers’ compensation injury.

Clearly, even where medical benefits are not the subject of a claim settlement, the documentary evidence to be presented to Medicare can be extensive as all of the above elements must be satisfied.

Two - The future medical component of a case is resolved as a portion of the settlement fund but where there is evidence that Medicare’s interests are not at issue as no future medical care is reasonably anticipated. These “commutation cases” raise issues of fact and law that make the analysis by the submitter and the CMS reaction to that analysis, critical.

For commutation cases where evidence or legal arguments are utilized to demonstrate that Medicare’s interests are not at issue (and therefore that a CMS zero allocation is warranted) we normally see either an argument concerning the relatedness of treatment to the accident or a legal argument that questions the availability of medical benefits as a matter of law. Gould & Lamb has found that, in Medicare’s inquiry regarding the medical necessity of continued care is centered upon the reports and finding of the treating physician. The opinions of the treating provider will, in most instances, be considered persuasive to CMS. If the reports and physical findings show clearly that the condition or need for care is unrelated to the accident or its sequlae, a zero allocation may be approved. In contrast, if the opinions and findings to support the zero allocation are primarily based upon a records examination of an independent or court ordered evaluator, this evidence seems much less likely to provide the medical support needed for a zero finding by CMS.

Legal arguments regarding the availability of treatment in a commutation case in order to support a workers’ compensation zero allocation, many times, include the running of the statute of limitations, that the individual was not within the course and scope of employment at the time of the injury and/ or myriad other defenses. Medicare has consistently advised that they will respect an evidentiary order as binding on these types of issues. The order must be truly evidentiary, however. Gould and Lamb has seen CMS disregard transcripts of a settlement hearing because no evidence was presented other than the testimony of the parties as to their desire to settle. Certainly, the CMS desire for evidentiary orders seems inconsistent with the overriding desire of the parties to settle case without resorting to the judicial process. Nonetheless, CMS guidance is clear that only hearings where evidence was presented, argument made and an order entered will be considered persuasive support for a zero allocation.

Commutation Cases Require Submitter to Present Both Legal and Medical Analysis

Because the majority of requests for zero allocations are commutation case where both legal and causation arguments are made, the submitter must present both legal and medical analysis if the zero allocation is to be accepted by CMS. CMS has routinely approved zero allocations in commutation cases where a cogent, well supported argument is made which recognizes and incorporates the evidence and positions of the parties with regard to the overall compensability and necessity of the need for care. In the absence of an evidentiary finding, a zero allocation must, in effect, be presented as to leave little doubt regarding the legal and medical underpinnings of the failure to allocate future care dollars. When properly presented, zero allocations should include relevant medical evidence as well as an analysis of the applicable state statutory requirements and the particular factual scenario presented in the case. When including other evidentiary factors including interrogatories, depositions and medical findings, a persuasive document can be created which can significantly increase the probability that a zero allocation will be accepted by CMS and that the parties can proceed with settlement with confidence. Gould and Lamb prepares each zero allocation utilizing our team of legal, medical and claims professionals to maximize the potential of CMS approval of what is, in essence, a legal/medical argument whose form and content are crucial to successful resolution of a disputed claim.

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