On March 21, 2017, the California Workers Compensation Appeals Board published its opinion on Fernando Muniz Villalpando v. Doherty Brothers; Martin Dusters; State Compensation Insurance Fund, concluding that in deciding whether to allow a claimant to go from having his MSA professionally administered to self-administering his own MSA account, the trial judge must examine the terms of the parties' agreement, and whether it included any provision for a change of administration in the event the hired vendor ceased to operate or withdraw from providing the contracted services over the life of the agreement. The Appeals Board makes it clear that the trial judge should be provided the opportunity to consider the nature of the agreement between the employer/carrier, claimant, and vendor, and whether there is any provision for a change of administration, and if none, the nature of claimant's contractual remedies.
Facts of the Case
Fernando Muniz Villalpando (Applicant) filed multiple claims for industrial injuries in 2002 and 2003 while employed as a laborer by two different employers, Martin Dusters and Doherty Brothers. He claimed injury to his lumbar spine against both employers and to his cervical spine and bilateral shoulders at Doherty Brothers. All claims were settled against both employers and its insurer State Compensation Insurance Fund (SCIF) by Compromise and Release Agreement (CRA). The Workers' Compensation Judge (WCJ) approved an Order Approving Compromise and Release on August 12, 2011.
Because the Applicant was a Medicare beneficiary at time of settlement, the parties' settlement included a Medicare set aside agreement (MSA) in which defendant would fund applicant's future medical treatment related to the claim. The MSA was produced by Bridge Pointe, a contracted vendor of SCIF. The proposed self-administered MSA was submitted by Bridge Pointe to the Centers for Medicare and Medicaid Services (CMS) for approval. Unfortunately, CMS did not agree with the proposed MSA amount and instead countered the proposal by conditioning its approval on an increase in funding of $519,390 to cover future medical treatment and future prescription drug costs to adequately consider Medicare's interests.
As a result of the increase in the MSA, the parties provided an Addendum to the Compromise and Release Agreement (Addendum). The Addendum provided that SCIF would establish the account with an initial payment to Bridge Point of $57,084 and thereafter $15,941 annually for 29 additional years. The Addendum also provided that SCIF would pay Bridge Pointe $3,555 as a fee to establish the MSA account. Thereafter Bridge Pointe would receive an administrative fee of $1,800 on an annual basis to administer the account.
The Applicant agreed Bridge Point would administer the MSA. The Agreement however did not contain any language pertaining to any future contingency involving the administration of his MSA by Bridge Pointe, including any reference to a potential change of administration to another third-party administrator or to the Applicant as a self-administrator.
Unhappy with Administration, Claimant Seeks to Administer His Own MSA
Five years after the CRA was approved, Applicant complained that Bridge Pointe was not appropriately administering his MSA account. He therefore requested that he be able to self-administer his account. He filed a Declaration of Readiness to Proceed and his trial was held and completed on December 14, 2016. On January 9, 2017, the WCJ entered Findings and Order, concluding that Bridge Point appropriately managed the MSA account. Applicant therefore filed a timely Petition for Reconsideration.
Beneficiary Not Allowed to Change Administrator
On February 3, 2017, in a Joint Report and Recommendation on Petition for Reconsideration, the WCJ concluded that the Applicant did not produce sufficient evidence that Bridge Point denied any charges that were presented which were industrially related and Medicare eligible. The unrepresented Applicant offered voicemail recordings in support of his claim that Bridge Pointe did not administer his funds adequately. In addition, he also offered the testimony of witnesses to prove same. However, the WCJ did not allow into evidence either of the voice mail recordings or the testimony of the new witnesses. As a result, the WCJ concluded that the Applicant did not present any new evidence, nor did he prove fraud sufficient to set aside any portion of the CRA. The WCJ therefore recommended that the Petition for Reconsideration be denied.
Appeals Board Remands Case to Examine Agreement and Remedies
On appeal to the State of California Workers' Compensation Appeals Board (WCAB), Applicant seeks reconsideration of the Joint Findings and Order issued January 9, 2017. Applicant again contended that he has presented sufficient evidence, and has additional evidence available, to show that the MSA has not been properly administered. Applicant again indicated he wishes to replace Bridge Pointe and self-administer his MSA based upon his claims that he has had problems obtaining medical services based on the current arrangement.
The WCAB here finds it is premature to consider Applicant's request to modify the terms of the CRA, as there has not been adequate consideration of the full nature of the agreement that led to the appointment of Bridge Pointe as the administrator of Applicant's MSA account. The WCAB indicates that the WCJ did not address whether the terms of the parties' agreement included any provision for a change of administration in the event Bridge Pointe ceases to operate or withdraws from providing the contracted services over the 30 year life of the agreement.
The WCAB therefore orders that the WCJ should be provided the opportunity to consider the nature of the agreement between SCIF, Applicant, and Bridge Pointe, and whether there is any provision for a change of administration, based upon the request, or a finding a good cause. In the unlikely event there is no such agreement, or such a provision in the agreement, a determination of Applicant's contractual rights would be necessary.
The WCAB also indicates that in order for Applicant to be allowed to self-administer his MSA account, he should establish his competency to manage his affairs and be compliant with CMS requirements for self-administration. If SCIF still opposes Applicant's administration of his own MSA account, it would then have to show good cause why the change should not be permitted.
Consequently, the WCAB grants Applicant's Petition for Reconsideration, rescinds the Joint Findings and Order, and returns this matter to the trial level for further proceedings. The WCAB makes it clear that Applicant would benefit from legal assistance in determining whether the terms of the agreement setting up the administration of his MSA account provides for the contingency of a change in administration, and if not, the nature of Applicant's contractual remedies.
If you have heard me speak since 2001 on Medicare set-aside issues, then you have heard me speak about this issue regarding MSA administration. For more than 16 years, CMS has been focusing on the early structural components of when to take Medicare's interests into account, and how to take such an interest into account. It seems little amount of time has been spent on what many have argued is the most significant component of the Medicare set aside process, the post settlement administration of MSA funds. After all, it is here, in post settlement MSA administration, where the day to day decisions will be made as to the use of such funds, and ultimately, whether Medicare's interests have truly and appropriately been taken into consideration.
One of the most significant issues in this process is who or what will administer such MSA funds. The policy guidelines that CMS has provided since 2001 have always allowed self-administration of the MSA account, as well as professional administration of the MSA funds. The claimant who settled his case and asked to self-administer his MSA account will have no problem in turning around and deciding to have the MSA funds professionally administered, other than providing the new administrator with an accounting of how the MSA funds have been previously used. However, the claimant who settled his case and allowed a vendor to professionally administer his MSA account will have to jump through some difficult hoops to get the professional administrator to turn the MSA account funds over to the beneficiary to self administer his own account.
This case is a perfect example of that set of circumstances. As the California Worker's Compensation Appeals Board correctly indicated, no decision can be made on such a request until the fact finder has had the opportunity to review the agreement between all of the parties regarding administration of the MSA account. Today, most vendors include in their contract specific provisions as to when such a change is allowed; and when so, the documentation and process necessary to effectuate same. What the parties and the decision-makers in this case may have overlooked is what CMS may require of a beneficiary in order to allow him or her to go from professional administration to self-administration of his MSA account funds.
We can all understand a claimant's perspective on this issue, especially if he or she is having difficulty with an administrator who may not be authorizing allowable and related treatment or medications. But we can all also understand a vendor's perspective on this issue as returning such funds to an unrepresented claimant who may not fully understand the implications of noncompliance, let alone the contractual responsibilities attached to such work on behalf of both of the claimant and the employer/carrier. As a result, the very best solution for all parties involved, providing both sides and the courts sufficient evidence with which to make this type of decision, is to have a decision or conclusion from CMS indicating that such a transfer is allowed and appropriate.
We have generally sought approval of an MSA from CMS. We seek their approval regarding the appropriate amount of such MSAs, for both treatment and prescriptions . We seek their approval regarding our funding of the same MSA accounts, whether lump sum or structured. We also seek their approval as to administration, whether self-administering or professionally administering the MSA account funds. We have historically done this, not because it is required, but because it affords a layer of protection for both the claimant and the employer/carrier. It proves the parties have taken Medicare's interests into account. So why not seek CMS' approval as to whether a change in administration handlers should take place?
ABOUT THE AUTHOR
Rafael Gonzalez, Esq. serves as president and chief legal counsel of Flagship Services Group, a Medicare and Medicaid compliance company providing property and casualty insurers with mandatory reporting, conditional payment, and set aside allocation services. He has over 30 years experience in the auto, liability, no-fault, and work comp insurance industry, specializing in Medicare Secondary Payer compliance. Rafael earned his BS degree from the University of Florida, and his JD degree from the Florida State University.
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