Settlement Contingent Upon CMS Approval of WCMSA: Problematic?
Heather Sanderson
May 8, 2018

A decision just issued out of the Third Circuit Court of Appeal in Louisiana demonstrates the various nuances and obstacles that may be present when entering into a workers’ compensation settlement contingent upon CMS approval of a WCMSA. In Ortega v. Cantu Servs., Inc. 2018 La. App. LEXIS 845 (May 2, 2018), the claimant, a Medicare beneficiary, settled her disputed workers’ compensation claim for $120,000.

Evidence on the record demonstrated that the parties agreed that the employer/carrier would submit a proposed MSA of $56,049 to the Centers for Medicare & Medicaid Services (CMS) for approval. However, if CMS determined a different amount is appropriate for the MSA, the employer/carrier would fund the CMS required amount, but the settlement amount/total amount paid to the claimant would still be capped at $120,000. The employer/carrier agreed to pay benefits until the MSA amount was approved. The record additionally evidenced that both the claimant as well as her attorney clearly understood these suspensive conditions.

Despite this, the claimant filed a Motion and Order to add attorneys’ fees and penalties as well as a Motion to Enforce Settlement for the employer/carrier’s alleged failure to pay the settlement within thirty days after the recitation of the agreement in open court. The court concluded that the settlement was conditioned on CMS approval of an MSA and that the evidence on the record demonstrated that the claimant was aware of this contingency. The claimant then filed this appeal alleging that the workers’ compensation erred in finding that the settlement was not payable within 30 days and that the settlement included a contingency (CMS approval of an MSA) must be fulfilled before paying the claimant the $120,000 settlement.

Although it was determined to be inadmissible evidence, the court discussed statements from the carrier/employer’s counsel which essentially explain what happened behind the scenes. The employer/carrier did submit the MSA to CMS for approval, but CMS issued a development letter requesting additional documentation. Employer/carrier’s counsel attempted to obtain the requisite documentation from the claimant and her counsel, but the information was never provided. Either way, the Court affirmed the workers’ compensation decision that the settlement was in fact conditioned upon CMS approval of a WCMSA, and accordingly, the employer/carrier will not have to pay the settlement funds until the MSA is reviewed and approved by CMS. The Court further required the costs of the appeal to be paid by the Claimant.

Commentary: Conditioning settlement upon approval of a WCMSA is not necessarily unusual, but as evidenced here, it can be problematic. Settlement cannot be finalized unless all parties cooperate, provide all necessary documentation, and CMS actually reviews and approves the MSA. What was interesting about this case was that it appears that the claimant refused to provide the information necessary to obtain CMS approval, but still tried to insist her settlement payment was due. Generally, a less problematic approach should the parties desire CMS approval would be to obtain CMS approval of the WCMSA prior to finalizing settlement. Although ultimately the employer/carrier will be reimbursed its attorneys’ fees from this appeal, the headache that went along with this litigation was clearly not worth it.

Another option for parties entering into a workers’ compensation settlement with a Medicare beneficiary which allows the parties to settle more quickly, should the parties desire, is to establish a WCMSA amount and settle the claim without CMS approval. CMS has repeatedly stated in their guidance and particularly their WCMSA Reference Guide that submission of an MSA is voluntary, even if review thresholds are met. CMS also states that should the parties submit a WCMSA to CMS, that parties are bound by CMS’ rules and procedures, i.e., providing all necessary documentation, and foregoing any future right to appeal (parties may only utilize the CMS Re-Review process should they disagree with CMS’ determined amount).