New Jersey DWC Changes Positions on MSAs

Thursday, July 26, 2012 | 0

On June 12, you might remember us posting an announcement from the New Jersey Division of Workers' Compensation regarding policy on attorneys' fees and conditional payments. Well, this month they have published policy regarding Medicare set-asides.

In New Jersey, it was fairly well known that the judges would not approve a Section 20 settlement without prior approval of a workers' compensation Medicare set-aside (WCMSA) by the Centers for Medicare and Medicaid Services (CMS). It was not a law, but merely the practice adopted by the DWC. On July 11, the DWC reversed that position completely and, from now on, will remain uninvolved of the Medicare Secondary Payer compliance aspect of any workers' comp settlements. Due to litigation pending in the New Jersey federal district court (which Judge Calderone did not name in his memo), the state has decided to follow the Justice Department's lead and, because the WCMSA program is voluntary, the decision of whether to seek approval or not belongs to the parties.

The federal case in question is obviously an interesting one which I cannot wait to read in its entirety. In the pages from the pleadings that were published in support of the DWC's change in position, it is obvious that CMS is being accused of bad faith in failing to respond to proposals for WCMSA approval. I'm not an expert in bad faith, but New Jersey's law must have some pretty extensive reach to get to CMS. Questionable pleading aside, it appears that the delay may have something to do with plaintiff not answering development letters. Could it be that the requests cannot be answered? I think we've seen that before. Still it doesn't mean that CMS is the real problem – the fact that the parties elected to prevail themselves of that program is the issue.

The unknown court's analysis is actually very good. The court recognized that there is no legal requirement that the WCMSA process be utilized, let alone one that requires the claimant to maintain a WCMSA. It is the claimant that faces consequences if and when a claim is submitted to Medicare for payment and denied, which he may appeal at that time through the administrative appeal process. Until Medicare makes a payment for which it is entitled reimbursement, it is not entitled to any of the money from the settlement funds and any opinion that it may render is merely a guess as to how much might keep Medicare from ever having to make a related payment. It in no way creates a legal obligation to fund that amount.

With regard to the New Jersey DWC position change, I think it is a little extreme. Will its decision to stay out of the matter altogether prevent it from providing a ruling on the merits when an issue needs to be decided for purposes of a WCMSA? The issue not often recognized is Medicare's secondary payer exclusion is governed by the compensability of the underlying state WC claim for which the DCW is the proper arbiter. DWC's decision to stay out of the matter might not be exactly what is needed and obviously more understanding of the MSP is still needed at all levels of government.

Jennifer Jordan is general counsel for Medval, a set-aside consulting firm in Maryland. This column was reprinted with her permission from her Medicare Set-Aside blog.