Tag Archive for: Claim management

CMS Gets Tough on Unapproved MSAs– Until They Don’t

In January, 2022, CMS created an uproar when it published Version 3.5 of its Workers Compensation Medicare Set-Aside Reference Guide stating that it would essentially ignore “non-submit” or “evidence-based” Medicare Set-Aside allocations:

Unless an MSA is submitted and approved, CMS cannot be certain that Medicare’s interests are adequately protected. Therefore, CMS will treat any non-CMS-approved product as a potential attempt to improperly shift financial burden by denying payment for medical services related to the WC injuries or illness until the claimant demonstrates complete exhaustion of the entire settlement amount, less fees and costs, rather than a CMS-approved WCMSA amount.

CMS approval of an MSA was never required. Ten years ago, the LexisNexis Legal Newsroom for Workers Compensation Law published my article “Four Reasons To Avoid The CMS Approval Process For MSAs.” You can find an abstract of that article on this blog.

Then, the MSA industry created products known as “non-submit” or “evidence-based” MSAs. Since approval has never been required of any MSA, the purpose of this new version seemed to be to low-ball the MSA. CMS took notice.

If your MSA was priced correctly, they now say, it will be adequate to cover the injured worker’s medical expenses, and this will never be an issue. One problem with this approach is that injured workers do routinely exhaust their approved MSAs. Since MSA allocations do not account for inflation, they are likely to be depleted early; the younger the injured worker, the more likely the fund will be depleted.

CMS also took the position that if the MSA was paid via a structured settlement, Medicare wouldn’t pay a dime until every structured payment had been made. If the structure was set to pay for the life of the injured worker, that would never happen.

And Then They Backed Down

On March 15, 2022, CMS revised the relevant section to say:

CMS may at its sole discretion deny payment for medical services related to the WC injuries or illness, requiring attestation of appropriate exhaustion equal to the total settlement … less procurement costs and paid conditional payments, before CMS will resume primary payment obligation for settled injuries or illnesses. . .

Administratively, CMS can more easily simply ignore unapproved MSA allocations rather than spend time reviewing them in order to exercise discretion. Line by line review takes time.

CMS has sent a message that it intends to crack down on settlements designed to avoid CMS review. We may see sterner pronouncements in future revisions.

How to Proceed

Think twice before choosing to forego the approval process when it is available. Don’t rely on an MSA allocation designed to short-change CMS.

Re-think your settlement agreements. If approval was not available or not pursued, consider including a what-if clause., This would provide that if CMS denies payment of a claim-related Medicare-eligible expense, the employer will provide counsel to defend the MSA allocation. In the short term, the employer would be responsible for the medical expense of the injured worker’s immediate needs, perhaps subject to a ceiling.

One can imagine that disputes could arise about what constitutes a claim-related Medicare-eligible short-term need. Include an agreement for alternative dispute resolution. But, holy-moly, nobody wants to keep litigating long after everyone thought the claim was fully and finally settled.

These dilemmas will probably force people to seek approval whenever it is available.

Which is just what the folks at CMS want.

What is the Truth?

Many lawyers and claims professionals say that the litigation process is a search for truth. They will swear allegiance to a jury’s ability to ferret out the truth from conflicting evidence. And yet, more than 90% of all cases settle. The truth can be more slippery than you think.

Individual Lens
Each of us receives data through our own lens based on our experience and attitudes. Why We’re Wrong About Nearly Everything: A Theory of Human Understanding by Bobby Duffy provides multiple examples of people ignoring the facts in front of them. For example, a study reported in Behavioural Public Policy saw subjects looking at the exact same data about the effectiveness of gun control, but interpreting them to favor their own pre-conceived views.

Lawyers know it is impossible to ferret out every possible micro-experience in a potential juror’s background. They depend on the collective knowledge of the group to arrive at a favorable result.

Socrates Said There is No Absolute Truth
All of us filter the information we receive through our own mental and sometimes physical viewpoint. Several witnesses to an event may tell different stories about what occurred. What is more probably true than not? Are you sure?

This conundrum really breaks down when fact-finders are asked to decide between expert opinions. I often tell mediating parties about a case I was involved in which ended with a large verdict in favor of the plaintiff. The pivotal issue was causation. Did they really think the defendant’s act caused plaintiff’s damages? It didn’t matter. The jurors’ collective response was summarized by one representative statement: “She was just so sick.”

The Search for Truth is an Obstacle to Settlement
More often than not, parties never get to a judgment which establishes the “truth.” They do settle, but not before spending time and money beyond a point when they knew enough to settle.

Mediation helps parties see beyond a search for an absolute truth to evaluate all the relevant factors and settle sooner.

3 REASONS HONEST WITNESSES TELL FALSE STORIES

Many cases turn on the recollection of “percipient” or “occurrence” witnesses. These are people who used their senses to see or hear relevant evidence. Less commonly, they might have smelled, touched,   or tasted something. Percipient witnesses contrast with expert witnesses, who are usually engaged in anticipation of or during litigation. Expert witnesses rely on evidence which has been submitted to them so they can render an opinion based on their education and experience. They need to record what they relied on, but don’t have a recollection of the events of the case as they occurred.
Honesty Isn’t the Issue
In his 2021 book Why The Innocent Plead Guilty And The Guilty Go Free/ And Other Paradoxes Of Our Broken Legal System, federal district judge Jed S. Rakoff explains why eyewitness testimony in criminal cases is unreliable. Those same reasons apply to percipient witnesses in civil cases.

1)The witness’s own level of stress at the time of the incident affects and can impair their recollection.

2)The inherent human tendency over time is to add embellishments to enhance the completeness of the recollection or simply to accord with preexisting biases.

3) There is a wide range among people’s ability to retrieve memories of events that lasted only a short time.

It’s An Old Story
In the celebrated 1950 film Rashomon, multiple percipient witnesses tell wildly different versions of the same event. Today, the well-known unreliability of eyewitnesses is sometimes called the Rashomon Effect.

What to Do?
A witness may really believe the story that witness is telling—and that story could hurt your case a lot. It’s hard to predict how the trier of fact will view conflicting evidence. Witness unreliability is one reason why going to trial is such a gamble. Recognizing this paradigm should prompt you to choose mediation  to settle sooner rather than later.

50 SHADES OF NEGOTIATION GREY

No, this post doesn’t qualify as erotica. It’s about the ability to see nuance. Most cases are not black-and-white, no-doubt-about-it, situations. Rather, there are shades of grey. If this were an open-and-shut case, chances are that claim would not be in dispute.
It’s Part of Empathy
Being able to see all the facets of an issue enhances your ability to negotiate a settlement. You can best meet your opponent’s arguments if you take the time to put yourself in that person’s shoes long enough to figure out what those arguments are. Then you can best meet them.

While it is appropriate to research all the facts and law that help predict an outcome,  when researchers choose to dismiss negative findings, they will not be able to constructively negotiate. Only interpreting findings as favorable, a mindset known as confirmation bias, prolongs conflict.

When initial research reveals negative information, the impulse may be to just keep digging. This attitude manifests itself in the actions of litigators who, for example, keep designating treaters and experts in the hope that somebody will back up their position. An analogy might be to a company which continually engages in research and development, but never actually brings a product to market. That’s not what success looks like.

Grey Is Stressful
Uncertainty generates stress. Parties in mediation sometimes tell me how relieved they are that the dispute is over, even when they got a result they see as unfavorable.

Settlement isn’t about who’s right and who’s wrong. It’s about showing everyone that concluding the dispute is in their own self-interest. Mediation is the place to do that.

The One Thing You Can Control in Negotiation

Here’s a basic fact of life. People like to feel in control, whether it’s at their workplace, at home, or in a negotiation. But we are seldom in sole control of any of those situations, and that’s how disputes arise and continue. Though the result of a negotiation is not completely under your control, your preparation is.

Start by defining the pivotal issues. There are seldom more than five, usually just one or two. Determine the specific range of results your side needs to bring the matter to conclusion.

Imagine the circumstances from your opponent’s point of view. Be specific. What is the hot button? It’s usually not just money. The emotional or reputational costs as well as the financial drain of drawn-out proceedings may be factors. Many litigants feel they have been disrespected. Sometimes a carefully worded apology goes a long way towards bridging a negotiation gap. What does this person really need?

It Takes More Than Two
Bringing everyone together for mediation shows a serious intent to resolve the dispute. Make sure the real decision-makers are attending. That might be a corporate higher-up like a claims manager, but it might also be a family member.

Using the mediator as a buffer between parties can magnify the effectiveness of your message. Your opponent may have brushed off your arguments before, but will listen to them when they come from the mediator.

You cannot completely control a negotiation. The opposing party could surprise you in a number of ways. Your own client may surprise you. But thorough preparation will help you manage a negotiation. You are the one person you know you can control.

Was King Solomon Right?

Judgment of Solomon – Nicholas Poussin

Pretty much everyone knows the bible story about King Solomon. Two women claimed they were the mother of an infant after a different child had died. Solomon ordered the baby to be split in half and divided between them. One woman agreed; the other would rather abandon her claim. Solomon then knew that the one who put the baby’s welfare ahead of her own interests was the true mother.

Splitting the Baby
Attorneys and claim professionals complain about judges who decide cases where it appears the result does nothing more than equally divide the difference between the parties’ positions. Complaints about “baby-splitters” are loudest when the defendant or employer maintains no money should be awarded at all.

Pay Attention to the Midpoint
In mediation, the parties are in control of the outcome. As mediator, I facilitate the negotiation, gradually narrowing the negotiation gap until the parties can agree on terms to resolve their dispute.

Each demand and offer sends a message. Smart negotiators pay attention to how the midpoint changes with each round of negotiation. Cases do often resolve at the midpoint between the first reasonable settlement proposals.

Some negotiators start with an extreme position intended as an anchor. Anchoring communicates what your ballpark is. However, if the proposal is so unreasonable as to be ridiculous, no one will take it seriously, and the midpoint is not predictive.

Is There Ever A Time to Split the Baby?
When the negotiators’ positions are close, they may agree to split the difference. Often cases settle near but not exactly at the midpoint to avoid the appearance of a baby-split.

Sometimes the parties would accept a compromise at the midpoint, but are unwilling to let the opponent know this because they fear the disclosure would not resolve the dispute. When I see a likely resolution that the parties are not willing to put on the table themselves, I may make a “mediator’s proposal.” My proposal rarely suggests an even split, but like Solomon’s suggested result, it does resolve the dispute.

COVID-19 IS MESSING THIS UP, TOO

HOW CCP 599 HELPS AND HURTS

Due to the pandemic, very few cases are being tried. Reports from the legal community indicate that the absence of an imminent trial date is inducing parties to put off settlement as well.

A History of Procrastination
Lawyers have always seemed to have a reason why it’s too early to settle a case. They need to get another report, look under every rock for new information, research the heck out of every issue whether or not it is pivotal. Traditionally, discovery cut-offs and upcoming trial dates have put up a big stop sign to that process in civil cases. Without that stop sign, some workers compensation cases continue for decades.

Human nature being what it is, litigants tend to wait to the last minute to undertake the tasks necessary to close a case. The global pandemic has aggravated our proclivity to procrastinate.

When do cases settle? Legal and claims professionals have always referred to the ubiquitous last-minute settlements as happening “on the courthouse steps.” As trial dates get pushed further and further back on courts’ calendars, parties put off settlement longer.

CCP 599 Makes Procrastination Easy
When the global pandemic forced courthouses to close their doors, the California legislature recognized the obstacles to litigants’ ability to move their cases forward. The response was Code of Civil Procedure 599. This new section delays most civil litigation deadlines during the official COVID-19 state of emergency and for 180 days thereafter. If a deadline had not passed by March 19, 2020, the continuance or postponement of a trial date extended that deadline. That includes discovery cut-offs and dates for identification of expert witnesses and motions for summary judgment. Notably, the court retains the power to order litigation deadlines. Parties can also agree to self-impose deadlines which would otherwise be suspended.

At the beginning of the pandemic, no one had any idea how long this suspension would last or how we would all learn to conduct much of the court’s business remotely. Still, 599 remains in place. Some lawyers and claims professionals report that the absence of a hard deadline has resulted in fewer settlements.

Blessing or Curse?
In the last year, we have learned to manage litigation pretty well without setting foot in the courthouse. Doctors have resumed seeing patients. The suspension of many hard deadlines provided breathing room while we figured it all out. These are blessings.

On the flip side, cases are backing up. After courthouse life returns to a version of normal, it will take a long time to work through the backup. Once 599 expires, there will be a rush to undertake long-delayed tasks critical to settlement. Things could get kind of crazy, and that’s the curse.

What to Do Now
Before any more time passes, look at those files to see what can be done to set them up for settlement. Almost all mediations are now occurring remotely. Let’s settle those cases promptly, so you can better manage your caseload once the state of emergency is lifted.

A Real Life Lesson Why It’s Almost Always Better To Settle

LaQuan Tremell Taylor’s injuries were horrific. The 27-year-old veteran, was robbed, carjacked, and shot in the parking lot of a Kroger grocery store in Atlanta, Georgia. After three weeks in a coma, roughly a year in the hospital, multiple surgeries, and millions of dollars of treatment, plaintiff’s spinal cord injury left him a partial paraplegic with scars over his entire body and continuing pain. Kroger was the primary defendant in his suit for the store’s negligent failure to maintain adequate security.
Kroger’s insurance stacked thusly:
$3,000,000 self-insured retention (SIR)
$2,000,00 ACE American Insurance Company.
$25,000,000 Starr Surplus Lines Insurance Company
$25,000,000 Great American Insurance Company Of New York
Excess above Great American: XL Insurance America and Chubb Group of Insurance CompaniesPlaintiff’s pre-trial demands were within Starr’s coverage limit. But Starr refused to settle. The final judgment exceeded 61 million dollars. It appears that Starr did not attempt to mediate a settlement until after judgment was enteredNotwithstanding its ill-advised choice, Starr refused to pay more than its policy limit to satisfy the judgment. Great American settled the case and on February 11, 2021 sued Starr for reimbursement. The complaint for declaratory judgment alleges that Starr had acted in bad faith and was “stubbornly litigious.” Great American has asked for reimbursement of its settlement contribution plus attorney fees and expenses.

I see many cases that, like the Taylor case, clearly have the potential to “blow up.” Cases settle when parties are willing to spend the necessary time in good faith mediation and make reasonable settlement proposals. When parties are “stubbornly litigious”, the results can be disastrous.

And Then There’s . . .
In workers compensation cases, being “stubbornly litigious” can mean denying requested medical treatment. Often, though, alternative treatments end up being more expensive in the long run. Patients who cannot get treatment through the usual process sometimes end up in emergency rooms, incurring a much larger bill.
 

Authorizing a quick, “expensive” treatment can lead to early claim closure and a less costly claim overall. Sometimes the injured worker ends up undergoing the procedure which was originally requested anyway. And don’t forget the administrative expenses of utilization and bill review.Patients aren’t doctors. Patients are not writing the Requests for Authorization. Almost every patient will prefer conservative treatment to life-threatening surgery. Sure, there are malingerers and patients who exaggerate their pain in the hope of scoring heavy-duty medication or just gaining attention. And, yes, some doctors overtreat to increase their fees. Independent doctors, claims personnel, and defense attorneys have heightened their awareness of those patterns.

Don’t lose sight of the forest for the trees. Like Starr Surplus Insurance, a “stubbornly litigious” stance can end up costing you more in the end.

The Smartest Thing to Do in Mediation

W-A-I-T: these four letters remind you to ask yourself Why Am I Talking? Silence is often your most effective negotiation technique.
 

Silence has two big benefits
The first benefit of silence is to be better able to respond. Too many people come to mediation with their attitudes so entrenched that they don’t listen. You cannot successfully respond if you have not listened—really listened—to the opposing party.

Do not multi-task. During a remote mediation on your laptop, no one may be able to see you scrolling on your phone. But you are cheating yourself of the opportunity to collect information to help you conclude the case. You can miss something important if you’re not paying attention.

Lose the condescension. If you come to mediation with the attitude that your side is righteous and the other side’s views are valueless so you don’t have to pay attention to them, the initial obstacle to reaching settlement is yourself.

The second benefit is that if you just stay quiet, the other party may rattle off information to fill the silence void that damages their own case.

Listen First

Lawyers in particular are prone to thinking about what to say next instead of taking heed of what’s happening in the moment. It’s why they can miss asking the follow-up question a deponent’s answer should have prompted. And it’s why they ignore signals that would help them settle their case.

As your mediator, my job is to recognize those missed signals and follow up with the participants to facilitate settlement.

Align Thoughts, Words & Deeds to Get Results

Having trouble concentrating? Affected by shelter-in-place orders to contain the COVID-19, overlaid with curfews activated by civil unrest following the death of George Floyd? Join the club.

For some cases, nothing is urgent right now. It’s easy to leave those cases on autopilot.

What you focus on is what you get. If what you really want is to avoid the expense and stress that go with delaying case resolution, you need to align these:

Thoughts: Concentrate on one, just one, file and put together an action plan in your mind specifically what you can do right now to bring it to resolution. That may well be mediation. Do you really need that pending deposition when everyone knows pretty much what that witness will say? How about trying to resolve the case now without it?

Words: Document the plan, and communicate it to everyone needed to effect it. Tell your lawyer what you want to happen next. Contact opposing counsel to explain your plan. Set deadlines.

Deeds: Don’t slip back to inaction. Too many so-called action plans are never implemented. Calendar a follow-up date to make sure your plan is moving forward.

People prone to procrastination find that forcing themselves to action on one matter prompts them to tackle another and another. Taking ownership of a situation is challenging. It takes courage. It’s the way to get the result you want.