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NAMSAP Featured Article: The Truth About "Legal Zero" Allocations

Tuesday, April 28, 2020   (0 Comments)
Posted by: Schuyler Green
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The Truth About "Legal Zero" Allocations

Many organizations have certain protocols which they follow when it comes to addressing Medicare’s interests in certain settlements. This month’s featured article by Annie M. Davidson, Senior MSP Compliance Council and Policy Strategist for ExamWorks Clinical Solutions, discusses “legal zero” Medicare Set-Aside allocation recommendations.


For the uninitiated, a “zero allocation” is what we call not setting money aside to pay for a claimant’s post-settlement Medicare-covered medical needs. A zero allocation is possible in two situations:

  1. Money would not need to be set aside if a claimant requires no future medical treatment associated with the workers’ compensation injury. If the claimant is not getting treatment, then no money should be set aside and Medicare may approve these zero allocations on a medical basis. These are often referred to as “medical zero” allocations.
  2. The other and far trickier zero allocation is what we often refer to as a “legal zero” allocation. A legal zero allocation occurs when the parties designate zero dollars for future medical care because the employer has denied the case in its entirety and is not responsible for the claimant’s medical treatment. Thus, there is no medical treatment to commute as part of the settlement.

Legal zero allocations are the focus here. As it stands now Medicare still approves legal zero allocations if the cases meet strict guidelines. Evaluation of each potential case is key. We first ask whether a case would qualify for a legal zero allocation based on its facts. Second, if parties plan to exercise their option to submit the case to Medicare, then we evaluate whether it will be approved based on the items available for that submission.

Will your case qualify for a legal zero allocation?

There are no “rules” per se, but generally a legal zero allocation is appropriate in situations where a workers’ compensation claim is denied and where no medical or indemnity benefits have been paid. Even if payments have been made, a zero allocation may still be appropriate as long as the claim remains denied, and you have support to document the disputed nature of the claim. Remember, the goal is not to shift the burden for future medical care to the Medicare program. If there’s no burden to shift, then a zero allocation that documents the parties acted reasonably and in good faith may be “just the ticket” to comply with the Medicare Secondary Payer Act.

Will my zero allocation be approved by Medicare?

Medicare approval can sometimes be more art than science and that is always true with legal zero allocations. In order to submit one to Medicare for review and approval, the estimated total settlement value must exceed any applicable submission threshold which currently is $25,000 if the claimant is a Medicare beneficiary, and $250,000 if the claimant has a reasonable expectation of Medicare eligibility within 30 months of the date of settlement. Assuming any applicable threshold is met, here is a list of what must be included along with the allocation report in the submission packet:

 

The list of what information Medicare “requires” to approve a legal zero allocation is ever evolving and Medicare can be very detail-oriented in its review of these cases. Some important areas to focus on include:

  • Medical records, which Medicare will seek even if there are no relevant treatment records available;
  • Letter of explanation, which must include information about the history of the claim and explain any payments made; and
  • The FROI must be submitted which is often overlooked.

It is indeed good news that Medicare will approve legal zero allocations in denied cases if the parties meet its strict guidelines. However, remember this is ever evolving and in November 2016, Medicare briefly stopped reviewing and approving legal zero allocations only to reverse course following industry outcry. More recently, Medicare representatives have sought assistance crafting updated guidance from the industry with an eye to an eventual cessation of the review of zero allocations altogether.

What about non-submisison?

Assuming any applicable workload review threshold is met, submission of any funded or zero allocation to Medicare is entirely voluntary. If the threshold is not met, then parties simply rely on the MSA as written and settle the case. Now, plenty of parties have embraced “non-submit” programs and do not submit their MSAs to Medicare even when the applicable workload review threshold is met. So long as the parties have reasonably considered Medicare’s interest in good faith, then they have satisfied the Medicare Secondary Payer Statute. And that is all that matters in the end.


Annie M. Davidson is Senior MSP Compliance Counsel and Policy Strategist for ExamWorks Clinical Solutions. In her role, Davidson provides legal analysis to ensure the integrity and quality of ExamWorks' Medicare Secondary Payer (MSP) compliance services and related products. Prior to joining ExamWorks, Davidson practiced as an insurance defense attorney in her native Minnesota where she litigated workers’ compensation and liability insurance cases, particularly those involving MSP issues. She is admitted to practice law in the State of Minnesota and the United States District Court for Minnesota, and is a graduate of William Mitchell College of Law.Davidson can be reached at Annie.Davidson@examworks-cs.com or 651-262-9618.
 

About ExamWorks Clinical Solutions

ExamWorks Clinical Solutions is a proud Silver Level NAMSAP member and provides clients with access to an all-inclusive portfolio of Medicare compliance solutions, including Section 111 Mandatory Insurer Reporting services, Workers’ Compensation and Liability Medicare Set-Asides, Lien/Conditional Payment Resolution and related services that reduce costs and promote compliance. Their full scope of integrated processes and settlement planning services are focused on business goals while keeping clients informed, prepared and equipped to avoid costly issues.

 



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