Settling Workers’ Compensation Cases Involving the World Trade Center Health Program
Where a claimant has a New York or New Jersey or Longshore workers’ compensation claim and is entitled to benefits under the James Zadroga 9/11 Health and Compensation Act of 2010 (“Zadroga Act”) you can obtain a Section 32 (NY WCL § 32), Section 20 (N.J.S.A. 34:15-20) or 8(i) LHWCA (33 U.S.C. 908[i]) lump-sum dismissals of state or Federal workers’ compensation benefits if the secondary payer rights of the WTC Health program are considered.
The Zadroga Act and the World Trade Center Health Program.
The James Zadroga 9/11 Health and Compensation Act of 2010 (“Zadroga Act”) establishes the World Trade Center Health Program (“WTC Health Program”) administered by the Department of Health and Human Services. The Act also extends the September 11th Victim Compensation Fund (VCF), initially operated from 2001 to 2004. The WTC Health Program provides medical monitoring and treatment for emergency responders, recovery, and cleanup workers, and volunteers who helped after the terrorist attacks on September 11, 2001 and for people who were present in the dust or dust cloud on 9/11 or who worked, resided, or attended school, childcare, or adult daycare in the New York City disaster area for a period of time on 9/11 or during the following months.
Conditions Covered by the WTC Health Program
As per 42 U.S.C. § 300mm-12:
Aerodigestive Disorders (Airways and Digestive Disorders)
2. Chronic cough syndrome
3. Chronic laryngitis
4. Chronic nasopharyngitis
5. Chronic respiratory disorder—fumes/vapors
6. Chronic rhinosinusitis
7. Gastroesophageal reflux disorder (GERD)
8. Interstitial lung diseases
9. Reactive airways dysfunction syndrome (RADS)
10. Sleep apnea exacerbated by or related to another condition described in the list of aerodigestive disorders
11. Upper airway hyperreactivity
12. WTC-exacerbated chronic obstructive pulmonary disease (COPD)
13. Cancer (Note: A list of the cancers covered by the WTC Health Program and included on the List of WTC-Related Health Conditions can be found on the Covered Cancers page.)
Mental Health Conditions
1. Acute stress disorder
2. Adjustment disorder
3. Anxiety disorder (not otherwise specified)
4. Depression (not otherwise specified)
5. Dysthymic disorder
6. Generalized anxiety disorder
7. Major depressive disorder
8. Panic disorder
9. Posttraumatic stress disorder (PTSD)
10. Substance abuse
Musculoskeletal Disorders (Limited to responders who received any treatment for a WTC-related musculoskeletal disorder on or before September 11, 2003, and meaning chronic or recurrent disorder of the musculoskeletal system caused by heavy lifting or repetitive strain on the joints or musculoskeletal system occurring during rescue or recovery efforts in the New York City disaster area in the aftermath of the September 11, 2001, terrorist attacks.)
1. Carpal tunnel syndrome (CTS)
2. Low back pain
3. Other musculoskeletal disorders
What Medical, Pharmaceutical, and transportation expenses are paid by the WTC Health program?
As per 42 C.F.R. § 88.16 (Reimbursement for medically necessary treatment, outpatient prescription pharmaceuticals, monitoring, and initial health evaluations, and travel expenses), the Fund pays:
(a) Medically necessary treatment and outpatient prescription pharmaceuticals.
(1) The costs of providing medically necessary treatment or services for a WTC-related health condition or a health condition medically associated with a WTC-related health condition by a Clinical Center of Excellence or by a member of the nationwide provider network will be reimbursed according to the payment rates that apply to the provision of such treatment and services by the facility under the Federal Employees Compensation Act (5 U.S.C. 8101 et seq., 20 CFR Part 20).
(i) The WTC Program Administrator will reimburse a Clinical Center of Excellence or a member of the nationwide provider network for treatment not covered under the Federal Employees Compensation Act pursuant to the applicable Medicare fee for service rate, as determined appropriate by the WTC Program Administrator.
(2) Payment for costs of medically necessary outpatient prescription pharmaceuticals for a WTC-related health condition or health condition medically associated with a WTC-related health condition will be reimbursed by the WTC Program Administrator under a contract with one or more pharmaceutical providers.
(b) Monitoring and initial health evaluations.
(1) Payment for the costs of providing monitoring and initial health evaluations to a WTC responder, screening-eligible survivor, or certified-eligible survivor by a Clinical Center of Excellence or a member of the nationwide provider network will be reimbursed according to the payment rates that would apply to the provision of such treatment and services under the Federal Employees Compensation Act (5 U.S.C. 8101 et seq., 20 CFR Part 20).
(c) Review of claims for reimbursement for medically necessary treatment.
(1) Each claim for reimbursement for treatment will be reviewed by the WTC Program Administrator.
(2) If the WTC Program Administrator determines that the treatment is not medically necessary, reimbursement will be withheld by the WTC Program Administrator.
(d) Transportation and travel expenses. The WTC Program Administrator may provide for necessary and reasonable transportation and expenses incident to the securing of medically necessary treatment through the nationwide provider network, involving travel of more than 250 miles.
What types of Workers’ Compensation Settlements May Require Set-Aside Approval for the WTC Health program’s Future Interest?
New York Lump Sum Dismissals: “Section 32” Settlements.
New York’s Workers’ Compensation Law (WCL § 32) permits the claimant and employer to join in an agreement to settle the claim for benefits. The parties can settle all of the issues relating to the claim. The agreement must be submitted to the WCB for approval on a prescribed form or a document which describe the agreement fully. If approved by the Board, the settlement is binding on all the parties and not subject to appeal. Section 32 agreements can expedite the adjudication of issues or entire claims, while assuring the rights of the claimant and all other parties.
The Section 32 settlement is submitted at the time of the hearing. The agreement may also contain a ‘reasonable fee’ for the claimant’s attorney.
After the Section 32 agreement is submitted, the WCB reviews the matter before rendering a decision. This review takes at least 10 days. WCL § 32(b)(3). During this review period, all proceedings in the matter are stayed.
A Section 32 agreement can close all of the claimant’s future rights – and that includes compensation and medical benefits. Or, the parties can choose a more limited agreement – one closing the right to just future medical treatment, for example. It is possible to have more than one Section 32 settlement in a case.
The § 32 agreement will be approved as long as:
• It is not unfair;
• It is not unconscionable;
• It is not improper as a matter of law; and
• Both parties wish the Board to approve the agreement (no objections by either side).
Once the agreement is approved by the WCB, it has the same binding effect as an award in an arbitration – it is conclusive and not subject to review or appeal. It is possible that a Section 32 agreement could be challenged for intentional misrepresentation of a material fact – for example the fraud of a claimant. However, an employer challenging the legitimacy of the agreement post hoc will have difficulty recovering moneys already paid to the claimant.
New Jersey Lump Sum Dismissals: “Section 20” Settlements.
Practitioners often refer to “Section 20” to describe settlement pursuant to the statutory authority provided by N.J.S.A. 34:15-20. Such a settlement allows a respondent to dispose of a claim for compensation as a “lump-sum” dismissal. The petitioner who accepts a Section 20 settlement is barred from re-opening a claim petition in the future. Even if a claimant’s condition worsens, she will be prohibited from re-opening her claim. A Section 20 settlement in New Jersey must include future indemnity benefits and future medicals.
Any payments to the petitioner made pursuant to Section 20 are not technically compensation. Therefore, the respondent cannot assert a lien for amounts paid to the petitioner under Section 20 against a third-party settlement or judgment.
Not all cases can be resolved by way of Section 20. There must be an issue as to employment, causal relationship, a jurisdictional issue, or a dispute as to the extent and nature of permanent disability. Any settlement pursuant to Section 20 must be approved by the Judge of Compensation.
Longshore Lump-Sum Dismissals: “8(i)” Settlements.
It is possible to close a LHWCA claim for a lump-sum settlement that forecloses the claimant’s right to future medical and indemnity benefits. Lump-sum dismissal settlements are allowed under Section 908(i) of the Act. The settlement may be for compensation, solely for medical benefits, or both compensation and medical benefits combined.2 Any settlement that forecloses the right to future medical must consider Medicare’s potential interest.3
All Section 908(i) settlements must be approved in order to take effect. During the informal, pre-hearing, period, jurisdiction to approve a settlement resides with the district director. Once the case has been transferred to the Office of the Administrative Law Judges, sole jurisdiction resides with the OALJ. If a district director disapproves the settlement, any party may request a hearing before a judge. The ALJ shall then issue an order approving or rejecting the settlement.
The district director or judge has 30 days to approve or disapprove a settlement agreement. If the parties are not represented by counsel, this period is calculated from the day after receipt, unless the parties are otherwise notified. If the parties are represented by counsel the settlement is deemed approved unless specifically disapproved within 30 days after receipt of a complete application.
The WTC Health Program has Secondary Payer Status in a state or Federal Workers’ Compensation Claim.
42 U.S.C. § 300mm-41 (“Payor Provisions”), states that:
…payment for treatment under subparts 1 and 2 of this part of a WTC-related health condition of an individual that is work-related shall be reduced or recouped to the extent that the WTC Program Administrator determines that payment has been made, or can reasonably be expected to be made, under a workers’ compensation law or plan of the United States, a State, or a locality, or other work-related injury or illness benefit plan of the employer of such individual, for such treatment.
The Law also provide that the calculation of future medicals shall be the same as that used to consider future payments under the Medicare Secondary as Secondary Payer Act (42 U.S.C. 1862 et. seq.) except that the reimbursement rates are those set by the Zadroga Act (and not the Medicare rates). 42 U.S.C. § 300mm-41(b).
Any proposed settlement agreement entered into on or after October 1, 2013, that will pay a lump sum to a workers’ compensation (WC) claimant and that will release all or part of an employer or insurer’s obligation to pay future medical expenses for illness or injuries arising from activities at the WTC must protect the WTC Health Program’s interests. That means that, where appropriate, money from the settlement should be set aside to cover future medical expenses that would otherwise have been paid by WC. Any proposed settlement agreement filed with a WC agency before October 1, 2013, even if not approved by it before October 1, 2013, is not covered by this recoupment policy.
Determining Allocation of Future Medical Expenses in a lump sum settlement.
The WTC Health Program requires the parties to allocate a reasonable amount toward future medical expenses for WTC-related conditions through 2016 in a lump sum settlement. Currently, Congress has funded the WTC Health Program only through 2016, so the WTC Health Program will not require a WC claimant to set aside funds for future medical expenses after that date. Future medical expenses should be calculated based on reimbursement rates under state WC law.
WC claimants are not required to set aside money to cover the cost of screening or monitoring exams or diagnostic testing provided by the WTC Health Program.
Step by Step Instructions for obtaining approval of a proposed Zadroga Act set-aside.
The claimant, or the claimant’s authorized representative, must submit the following information to the WTC Health Program at email@example.com
1. A copy of the proposed settlement agreement showing the amount allocated for future medical expenses.
2. An explanation of how the amount allocated for future medical expenses was calculated.
3. If the amount is based on the actuarial estimate of an outside expert, attach the expert’s report.
4. An indication of whether the settlement represents a compromise of a WC claim or a commutation to present value of an established claim.
5. The name and address of the custodian of the funds to be set aside for future medical expenses. This custodian must be the person or entity that will pay any medical expenses on behalf of the WC claimant.
Inadequate Set Aside; Set Aside does not cover all future medical expenses through 2016.
If the WTC Health Program approves the amount of money for future medical expenses, and the WC claimant establishes a set-aside account funded with the agreed-upon amount, the parties to the settlement agreement have a safe harbor that protects them from having to pay the WTC Health Program for any medical expenses in excess of the approved amount for future medical expenses.
Does the WTC Health program have thresholds for review?
Does the WTC health program assert demands for reimbursement of conditional payments?
Medicare Set Asides.
In July 2001 CMS issued a memo to its regional offices. It suggests that under certain circumstances parties to workers’ compensation claims should not settle those cases until after CMS has had an opportunity to review the settlement and approve the allocation to future medical expenses. The memo discussed the circumstances under which the regional offices will “pre-approve” such an allocation. It discusses pre-approval in two categories of cases:
- Cases in which the workers’ compensation claimant is currently entitled to Medicare benefits.
- Cases in which the injured individual has a “reasonable expectation” of Medicare entitlement within 30 months of the settlement date and the settlement is over $250,000.
Medicare announced that the ‘threshold’ for reviewing cases was to be set at $25,000. Medicare refuses to provide a pre-approval of set-aside unless the lump-sum payment to the claimant exceeds $25,000.
After a case is settled, CMS encourages the parties to create some form of “set-aside” arrangement in which the funds for future medical expenses that would be covered under Medicare are placed in a trust or deposited in a separate account. Medicare will begin paying medical bills for the work-related condition only when set-aside is depleted and the funds are accounted for. This has caused considerable difficulty for the workers’ compensation system. If a case is settled for more than $250,000, it is reasonable to devote the time and resources necessary to obtain pre-approval and create some form of set-aside agreement. However, the vast majority of workers’ compensation claims are settled for much smaller amounts.
Failure to Obtain Approval for Lump Sum Settlement.
An insurance company who fails to make certain that CMS approval has been obtained is on the hook for double the amount of the settlement. Employers should expect their defense attorney to:
- Review the medical situation and prepare a defensible estimate of how much of a lump-sum settlement should be allocated to future medical expenses. This is sometimes called a “life care plan.” More frequently, defense counsel simply reviews what is prepared by a Medicare Set Aside vendor.
- Obtain pre-approval from CMS of the amount of the settlement that will be allocated to future medical expenses.
- Create a Medicare set-aside arrangement. These are sometimes formal trusts, and sometimes less formal agreements, that pay or keep track of the expenditure of the portion of the settlement that is allocated to future medical expenses. Vendors have played a significant role in creating and administering these arrangements.
Often, a defense attorney will merely monitor the claimant’s counsel’s progress or the progress of the chosen vendor in achieving the milestones discussed above. The status of conditional payments or payments for medical treatment by Medicare which should have been paid for by the workers’ compensation insurer remain the province of Medicare in every case.
The Medicare statute does not allow Medicare to make a payment if a workers’ compensation policy should be the proper primary payer. In the case of a denied claim, the workers’ compensation carrier will not pay for medical treatment. In such cases Medicare pays for the medical treatment conditioned on the premise that the workers’ compensation carrier must reimburse Medicare if the workers’ compensation carrier has or had the responsibility to make primary payment.
If Medicare has provided treatment, then Medicare’s interest must be considered. If Medicare has not paid for treatment for the disability/injury alleged in the claim petition, then the type of closure must be considered. As Medicare will treat the judgment of a workers’ compensation judge as final as to compensability and causal relationship, closure by way of Judgment with dismissal does not trigger a Medicare interest.
Need for set-aside.
Because there is a possibility that Medicare may become responsible for additional (prospective) medical care for an injury or disability which is resolved by way of a lump-sum dismissal, Medicare demands that the claimant set-aside money to pay for the future medical costs. If Medicare determines that no set-aside is necessary, then a waiver will be issued.
Best Practices for obtaining a Set Aside.
Medicare continually issues guidance as to how Set-Aside proposals “could” be submitted to Medicare. These recommendations are “best practices” for dealing with Set-Aside arrangements.
Updated Forms (September 2009 and March 2013).
Medicare has issued a reference guide with a checklist including sample forms that it ‘recommends’ submitters utilize. According to CMS, “cases using this or similar format can generally be processed more quickly with fewer errors – resulting in faster determinations at less cost to submitters and the government.” The ‘recommended’ submission form is divided into numbered sections to correspond to the electronic folders in which CMS scans and files documents for review. For submissions by CD-ROM, grouping and naming documents by the CMS conventions is the preferred method of delivery.
CMS recommends the following numbered sections:
Section 05 – Cover Letter;
Section 10 – Consent Form;
Section 15 – Rated Ages;
Section 20 – Life Care/Treatment Plan;
Section 25 – Court/WC Board Documents;
Section 30 – WCMSA Administration Agreement;
Section 35 – Medical Records;
Section 40 – Payment Information;
Section 50 – Supplemental – Additional Information.
For more on these submissions, see the Workers’ Compensation Set Aside Reference Guide published March, 2013.
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