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Court Determines the Necessity and Amount of the MSA in Stephen Welch v. American Home Assurance

An interesting case dealing with a dispute about the necessity for and the amount of a Medicare Set-Aside (MSA) was decided last week in a U. S. District Court in Mississippi.

Facts

Mr. Welch filed a workers’ compensation insurance claim with his employer, claiming that he injured his left elbow at work while lifting a wooden board.  The employer/carrier denied the claim based on a doctor’s report that Mr. Welch was suffering from an acute left elbow strain prior to the date of the injury.  A Mississippi Workers’ Compensation Commission (MWCC) administrative law judge later ordered that Mr. Welch be provided medical and temporary disability benefits by the employer/carrier.  Mr. Welch then filed a bad faith action against the carrier seeking actual, compensatory and punitive damages claiming that the carrier’s denial and delay of his workers compensation claim substantially worsened his condition.

Issues Before the Court

A confidential global settlement was entered into with the condition that a court determine the necessity of an MSA and the amount of an MSA, if any.  An immediate motion was filed in the U.S. District Court.  In addition, the defendants also requested that the court-determined MSA be self-administered by the claimant.   Finally, the parties requested that the court order declare that the interests of Medicare were reasonably considered and protected.

The Court was advised, by letter from the U. S. Attorney’s Office, that the U.S. Government would not have a representative at the hearing stating that  “the United States Department of Health and Human Services (DHHS) is not a party to this action and there has been no waiver of sovereign immunity on its behalf.”  The letter further stated that, “Nevertheless, the settlement funds should be exhausted on otherwise reimbursable services related to what was claimed and/or released before Medicare is billed for future medical services.

Court Decision

After an analysis of some conflicting testimony, the Court ordered that an MSA in the amount of $278,019.08 should be set aside from the global settlement, and that this figure would adequately protect Medicare’s interests.

Discussion – There are two particular issues in this case that warrant further discussion, in our opinion:

1.  Submitting a global settlement for CMS review.

It seems that the settling parties should have simply submitted an MSA to the Centers for Medicare and Medicaid Services (CMS) under the well-established review procedures established for this type of global settlement case, instead of asking a court to review it.

2.   Two-Step Approach to Determining Competence to Self-Administer

First, kudos to the court for evaluating Mr. Welsh’s “cognitive” ability to be able to self-administer his own MSA funds.   The CMS allows an individual to self-administer his or her own MSA funds but the CMS also requires that the administrator be “competent”.

In determining “competence”, the court first determined that the claimant was not “cognitively impaired”.   This is a very good first step because rarely would a cognitively impaired, injured person have the ability to successfully apply the complex rules required to properly administer an MSA.

Second, kudos again to the court for also determining that Mr. Welch was “capable of administering any funds placed in an MSA account” based upon the findings that Mr. Welch understood and agreed: (a) to an MSA to protect Medicare’ interest, (b) that the MSA must be placed into an interest bearing account, (c) that MSA funds must be used solely for injury related medical treatment, and (d) that he must keep accurate accounting records.   Certainly these factors are essential in order to successfully administer an MSA account.  In addition, MSA administration requires an understanding of very complex Medicare allowable treatment guidelines, state-specific fee schedules and financial discipline.   The truth is very few individuals have the ability, knowledge and skills necessary to successfully accomplish this on their own.

Finally, much care is usually taken to determine the MSA amount.  Similar care should be taken to determine if the claimant is competent to self-administer the MSA funds.  The court is off to a good start in outlining a protocol for settling parties to adopt to evaluate whether an injured person is competent to self-administer an MSA.  If the injured person is not cognitively impaired, understands all the complex requirements and has the requisite skills and abilities, then self-administration is an option.  If not, then self-administration should be avoided and an experienced professional administration company should be chosen to administer the MSA funds.

To view Stephen Welch v. American Home Assurance click here.

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