Workers’ Compensation claims involving Medicare Beneficiaries: Should you Settle “Denied Claims”?
Roy Franco
February 8, 2012

The worker’s compensation system has been notorious for settlement of a “denied claim.” These are the claims where the cost to litigate the matter is greater than the settlement options. Thus, in exchange for a sum of money the Claimant agrees to discontinue their application for WC benefits.
Over the years we have witnessed the Centers for Medicare and Medicaid Services (“CMS”) taking a position  on denied claims that settle with a Medicare Beneficiary over $25,000 in the context of the WCMSA review process. One aspect that the worker’s compensation industry may have lost sight of is the impact of a settlement below the applicable future medical review threshold. In recent months, beneficiaries have become aware of the interplay between an “old” workers’ compensation case and their Medicare benefits.
Medicare beneficiaries receive knowledge thru a variety of situations. These can be as simple as  providers advising that Medicare refuses to pay for services, to direct communications from CMS. This area of concern is now touching Human Resource groups as the phone calls have started, “my benefits are being suspended because of an old WC claim.” The unfortunate situation is that Medicare beneficiaries are typically ill-equipped to respond to CMS, based on the claim specific information needed to resolve the situation. Until such a resolution is identified, the beneficiary’s right to benefits may be suspended, leaving the beneficiary in an unfortunate “uninsured” situation.
Are settlements of denied WC claims a thing of the past? Does the denied status position the claim in the same light as the general liability claim with minimal negligence? Compensating a Medicare beneficiary without coordinating benefits with Medicare can be seen as an intentional shift as outlined in 42 C.F.R. 411.46(2):
If a settlement appears to represent an attempt to shift to Medicare the responsibility for payment of medical expenses for the treatment of a work-related condition, the settlement will not be recognized. For example, if the parties to a settlement attempt to maximize the amount of disability benefits paid under workers’ compensation by releasing the workers’ compensation carrier from liability for medical expenses for a particular condition even though the facts show that the condition is work-related, Medicare will not pay for treatment of that condition.
Following a settlement of a denied WC claim, there is potential for creating an ongoing liability wherein the Medicare beneficiary may pursue a Private Cause of Action.   Did this minimal settlement just create a significant liability? All entities seen as plans by Medicare should take considerable caution when resolving claims with a Medicare beneficiary. Plans should investigate not only their internal best practices, but also those of their respective vendors. These steps go well beyond the need for a WCMSA, a complete coordination of benefits and reimbursement should be cautiously addressed. Franco Signor recommends each of these cases be thoroughly reviewed and coordination between the MSP service provider and the WC defense counsel becomes critical to avoid any unintended consequences.