New Jersey State Bar Association - The voluntary Bar Association of New Jersey, serving members since 1899.

CONTACT:Barbara S. Straczynski
Communications and Marketing Manager

NJSBA Seeks Remedy to Workers' Comp Backlog

NEW BRUNSWICK, NJ—The New Jersey State Bar Association (NJSBA) is supporting an American Bar Association (ABA) resolution urging Congress to enact legislation to amend the Medicare Secondary Payer Act and improve the workers’ compensation system nationwide.

Medicare is interpreting The Medicare Secondary Payer Act (MSP Act) as a right to review and challenge any and all settlements of workers’ compensation benefit claims. The assertion has effectively brought a significant number of workers’ compensation cases in New Jersey to a halt with little recovery of any money by Medicare, according to the New Jersey Department of Labor and Workforce Development. A major obstacle that attorneys and clients face is the lack of definitive standards and guidance.

ABA Resolution No. 109B seeks to address the delays and disruptions with regard to settlements in state, federal and territorial workers’ compensation systems throughout the country caused by the Medicare set-aside process. The ABA will address the resolution when its House of Delegates meets on Feb. 14 as part of the ABA Mid-Year Meeting in Salt Lake City, Utah.

“The federal statute has been on the books for years, but it was never used to go after reimbursements,” says NJSBA Trustee Marie Rose Bloomer who also serves as trustee liaison to the Workers’ Compensation Section.

“In the last two years, it’s become a problem. Cases are getting to the stage where they are getting resolved, but you can’t put them on the record because Medicare hasn’t resolved them. We’re asking for a definitive process and certainty.”

An NJSBA delegation consisting of Bloomer, Workers’ Compensation Section Chair Julius Feinson, Chair-Elect Marcia Stander Freedman, Vice Chair Arthur Kravitz and Secretary Gerald D. Rotella has been meeting with various members of the New Jersey Congressional delegation in recent months to send the message that the Medicare Secondary Payer Act needs to be amended.

“They have applied a national process to what amounts to a state process,” says Feinson.

“In New Jersey, the judge has absolute jurisdiction and is the ultimate decider in determining whether settlements are fair and how a case should be resolved. Now, someone in Atlanta or Tennessee says come up with the facts, and we will determine if they are appropriate or not. It’s an enormous bureaucracy.”

Feinson describes a case that is being held up where a widow is ultimately entitled to a lump sum payment that has been negotiated.

“The attorney has attempted to sign off and Medicare said the amount they want is in excess of $10,000. However, Medicare won’t sign off, even though the attorney is ready to send in the check, because they don’t know if there are any outstanding medical bills. The man has been deceased for over two years, so how can there be outstanding medical bills?”

Different agencies handle various parts of the process, and that adds further confusion, says Feinson. New York is the initiating place where the claim is input and necessary information is verified. An agency in Atlanta decides whether or not there should be a set-aside. Another agency in Tennessee makes decisions about monies for past benefits.

According to the Division of Workers’ Compensation, there are close to 1500 cases awaiting Medicare approval out of approximately 40,000 cases in the system that are active and pending, and that number is increasing. Many of those cases have been awaiting Medicare response for over a year.

In addition, the division was advised that in August 2004, Medicare resolved approximately 1400 cases nationally, demonstrating that Medicare may not have the resources or personnel to adequately resolve the claims.

Finally, a Government Accountability Office (GAO) report concluded that in the year 2003, Medicare collected only 38 cents for every dollar spent on recovery, resulting in a net loss to Medicare rather than an increase in revenue.

ABA Resolution 109B urges Congress to enact legislation incorporating the following principles:

1. The Medicare Secondary Payer Act should only be applicable to settlements of workers’ compensation claims when the primary payer has a legal obligation to pay medical benefits and those claims in which the net revenue to the Centers for Medicare and Medicaid Services (CMS) justifies the special procedures to protect Medicare’s interests and the considerable burden on the state, federal and territorial workers’ compensation systems that depend on settlements to function.

a. All settlements in which there is no legal obligation to pay medical benefits, and in all settlements in which the cost of the protection of Medicare’s interests is unreasonably expensive in relation to the amount at stake, should be exempt from review by use of a reasonable, clearly defined, threshold.

b. All settlements in which there is a dispute over liability or compensability for medical benefits under a state, federal or territorial Workers’ Compensation Act as determined by the workers’ compensation board, commission or court authorized to adjudicate workers’ compensation claims in such jurisdiction should be exempt from CMS review.

c. CMS should be precluded from seeking additional money out of settlement proceeds from the parties to the settlement after review and approval by CMS has occurred even if Medicare coverage is expanded in the future or inflation causes a shortfall in the adequacy of the funds set aside in the settlement to cover future Medicare eligible expenses to treat the occupational injury.

2. The CMS allocation process for approving claims that remain subject to the MSP Act should be clarified.

3. A deadline should be established for CMS to either approve or deny a proposed allocation of settlement proceeds by the parties, after which time approval should be deemed to occur by law.

4. An appeal procedure should be established if the parties dispute the ruling of CMS.

5. The applicable state, federal or territorial workers’ compensation fee schedule (or in the absence of a workers’ compensation fee schedule, the applicable medical reimbursement rate) should be used to compute allocations.

6. Medical inflation factors should be expressly prohibited in establishing the amount of money to be set aside for future Medicare eligible expenses to be incurred in the treatment of the occupational injury, unless the applicable jurisdiction so provides.

7. Safe Harbors should be established for claims in the form of a presumption that Medicare’s interests are protected if the amount of any MSP set-aside is at least a set percentage of the total claim cost (combined medical and indemnity), or at least a set percentage of the total medical benefits.

8. After receiving a request from a party to a Worker’s Compensation agreement for the review and approval of a proposed settlement, a 60 day deadline should be established for CMS to state in writing when it believes Medicare has made a conditional payment that should have been paid by a party under the state, federal or territorial Workers’ Compensation Act, after which time no additional claim of a conditional payment may be asserted.

9. The cost of protecting Medicare’s interests, the expenses associated with obtaining CMS approval, and the cost of administration of a set-aside trust should be funded out of the money allocated for Medicare.

10. The parties to a workers’ compensation settlement should be able to elect to have Medicare administer the set-aside allocation by turning those funds over to CMS, after which time the parties to the claim, the attorneys and the carrier should no longer be responsible for the liability.

11. CMS should give full faith and credit to the terms of workers’ compensation settlements that have been reviewed and approved by state, federal or territorial agencies authorized to administer and adjudicate workers’ compensation claims, c