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The C&R Dilemma – The Future Medical
Buy-Out
by Michael McDonald
In this series, Michael G. McDonald,
Esq. of the McDonald Law Corporation offers practical advice to WC
lawyers and adjustors.
How do the parties in a workers’ compensation case ultimately
agree to resolve the matter by a Compromise and Release and close the
future medical award, as compared to Stipulations or going to trial?
Are numbers just picked out of the air? Seems like at times, that is
what happens. However, in most instances, a very detailed approach
is taken.
Most seasoned defense attorneys have heard the expression “a
closed file is a good file.” We have been taught a closed file
will get you noticed by the adjuster and that adjuster would then be
more willing to send more files to the attorney or the firm.
Some companies
give bonuses to adjusters for closing a certain number of files per
month. They take down the reserves after paying all the bills, including
the liens and defense attorney fees. The adjusters have an incentive
to settle by C&R and pay some premium for the case closure and
future medical costs in order to take down the reserves and put the
puppy to rest.
Applicants have an interest in a Compromise and Release.
In my experience, many persons just want to take control over their
future medical expenses and get out of the workers’ compensation
system. Several years ago, I met an In Pro Per applicant (who was a
Registered Nurse) at an adequacy hearing. The WCALJ was reluctant to
approve the C&R and suggested she should settle by Stipulations.
I had never seen a judge dressed down so fast by litigant in all my
life. She was respectful, but forceful. This forty-something professional
let the judge know she understood her condition, appreciated the help
(yes, help) provided by the claims adjuster and the defense attorney,
but hated the waste of time and limited ability to choose her own doctor
and not worry about her doctor getting paid and/or writing reports.
She went on to tell the judge she knew and understood the ramifications
of the settlement and told the judge to “back-off” and
get out of her life. The judge, needless to say, was a bit flustered,
but did as he was instructed. The Compromise and Release was approved.
Many questions and issues exist when considering
settlement by a C&R.
Assuming the parties have an agreement on the level of PD and other
side issues, what future medical factors do defendants consider in
resolving the matter by C&R?
Reserves
Are there sufficient funds
to consider a buy-out of the future medical and case closure costs?
Has a demand been made by applicant? Is the demand within the reserves?
If not, what will be required to obtain an increase in the reserves?
Will the defendant reject the demand and make an offer? Will the offer
be a “take it or leave it” offer? Will the parties go into “nickel
and dime” mode to get to a settlement within the reserve amount?
Lots of questions and few solid answers.
Professional Relationships
Do the parties know each other? Is there a good working relationship
between the opponents? Is there professional respect for the opposition?
From a defense prospective, my clients know the good, tough, well-respected
applicant attorneys as compared to what some might consider “bottom
feeders.” The adjusters know or can find out from co-workers
or others what the opposing attorney’s reputation is.
Will the
opposing attorney always demand a C&R? Will that attorney settle
just to get a fee? Will that attorney normally refuse to settle by
C&R if there is a potential to re-open the file within five years
from the injury date?
Costs if File Remains Open
What allocated costs for defense would be
incurred if the file were to remain open for medical care in the future?
Is the opposition likely to file documents to increase costs? Drugs,
office visits, potential surgery should be considered in the future
medical calculations. However, a “may need” treatment recommendation
is not the same as a “will need” or “definitely need” treatment
of some sort. Doctor phrases, such as “up to 12 office visits
if the condition flares up,” carry little weight in FM calculations
from a defense perspective. Why? If there is another flare up occurring
as a result of subsequent work activity, the defendant may very well
consider that need for medical treatment a new injury due to subsequent
injurious industrial exposure. The settling defendant may not be on
risk or may be able to seek reimbursement. In such a situation, the
defendant will not pay a large premium to settle on such phrases.
Medical Control
Other factors concern the likelihood of controlling
costs of future medical care. If CHSWC requires hearings to discuss
the control of medical costs, how is an insurance adjuster expected
to see the future medical costs? Is there an MPN in place which is
effective in limiting costs? Is the treating physician prescribing
medications? What are they? What are the future medical ramifications
of the use of the medications? What is the potential for Medicare intervention?
Will an MSA be required? If so, what are the costs, including obtaining
the MSA estimates? Are out of pocket expenses considered in the settlement?
Risks to Consider
Similarly, Applicants and their attorneys need to
raise questions to determine whether a settlement of future medical
costs is warranted. For instance, does the injured worker have medical
insurance? Will that insurance cover future treatment if it is needed?
Is Medicare involved? Is the applicant capable of controlling their
funds and setting aside money to pay for the future medical costs?
Does the applicant want to deal with the insurance company and the
workers’ compensation system in the future? Most importantly
for the representative, is the client fully informed of their decision?
Is there a potential for a law suit against them by their client?
Sharing
certain information between the parties, such as medical insurance,
SSDI filings, etc., can enlighten the opposing side and provide opportunities
to discuss settlement.
The Market and Present Value
The questions raised may or may not take
into consideration further costs, such as out of pocket travel expenses,
Medicare gap in coverage, out of pocket non-covered medication costs,
etc. The payer will be looking at the present value of the settlement
figures to determine whether to agree to it or not. What will the market
bear on the side of the carrier or the side of the applicant?
The use
of present value calculations may help in placing the settlement within
the reserve limits and assist in settlement. The PV calculations may
include all amounts to be paid in the future, including PD and FM.
The applicant’s attorney should consider the PV calculations
to understand the potential differences in amounts offered and demanded.
By doing so, the applicant can make a more informed decision as to
whether the settlement is adequate.
Informed Consent
All parties need a “CYA” provision in
the settlement documents. Years ago, an opponent of mine was threatened
with a lawsuit by a former client for obtaining a C&R and settling
the future medical costs. Similarly, lawsuits have been filed against
applicant’s counsel for similar acts.
A client may wish to settle
the future medical costs over the attorney recommendations. Even when
an attorney acquiesces to a settlement, an “informed consent” provision
should be placed within the C&R document. This will help protect
all the parties from a potential lawsuit or possible attempt to set
aside the C&R.
Too, a similar provision should be added to protect
against a claim which may arise from a Medicare request for reimbursement.
At the present time, if there is a reasonable expectation of Medicare
enrollment within 30 months and the total settlement (including the
sum payment of all indemnity and medical costs) is greater than $250,000.00,
an MSA is not required if the applicant has not applied for Social
Security Disability.
If Medicare refuses payment, the settlement document’s
provisions may be helpful in outlining the understanding of the rights
and liabilities of the parties. The settlement document may be used
by the claimant to argue payment should not be denied. Also, the settlement
provisions which outline the rights, liabilities and understanding
of the parties may protect the attorneys and carriers against any Medicare
claims for reimbursement.
Logical Analysis or Grinding
Even if both sides fully analyze the risks
and benefits of future medical costs, a meeting of the minds may not
happen. The carrier has the money, the applicant wants it. If the demand
is deemed too high or if the offer is perceived as too low, there will
be no settlement even though the numbers on both sides may be logical
and based upon sound analysis.
In such a case, we get back to the market
value of settlement. Is it worth the costs and the benefits? Then,
at the end, will the judge approve the settlement? Can the parties
explain the basis for the settlement in order to obtain the approval?
If so, a good file is a closed file.
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