Wednesday, July 21, 2021
Pennsylvania (and Universal?) Medicare Set-Aside Development: In Open Meds/MSA Option C&R Approach, Claimant Held to his Promise of Future Cooperation
Parties under the Pennsylvania practice may compromise and release (C&R) any liability claimed to exist under the law. The statute (enacted in 1996) was, notably, patterned after the California Act provision. Currently, the majority of (though by no means all) disputes end, as in many states, in C&R.
With the federal government's demand for MSAs in cases where the worker has Medicare rights, one creative strategy is for the claimant to tender a release for disability benefits, accept a lump sum, and agree to cooperate with the employer's continuing attempts to secure an advantageous CMS-approved MSA. The employer typically reserves the right to either continue its liability for medical indefinitely or fund the MSA. As a WCJ, I have referred to this popular strategy as the Open Meds/MSA Option.
The employer's risk in such a situation has always been that the injured worker will not, at the future date, cooperate with securing CMS approval. In a July 2, 2021 case, that situation was on display.
In this regard, the Commonwealth Court (a powerful middle-level appeals court), reversing the Appeal Board, and restoring the WCJ’s order, held that a claimant was bound by his C&R promise to cooperate in the future with facilitating a CMS-approved MSA. Lehigh Specialty Melting, Inc. v. WCAB (Bosco), 569 C.D. 2020, filed July 3, 2021, 2021 WL 2934769 (en banc, unreported, Pa. Commw. 2021). (A link to the full text is below.)
A worker, Bosco, sustained acknowledged work injuries in 2011. Three years later, he and employer, Lehigh Specialty Melting, Inc., agreed to a $155,000.00 C&R. The C&R was for disability only, with the employer reserving the right to exercise its option of either indefinitely covering medical or seeking out a CMS-approved MSA. The WCJ approved the arrangement in his 2014 order.
A number of years passed, and medical marijuana became available; claimant began to utilize the substance for his chronic work-injury condition.
In 2018, employer secured CMS approval of a $44,913.00 MSA. Claimant advised employer of the medical marijuana use, and employer re-contacted CMS to determine if claimant’s use of the same would alter the MSA amount. CMS (no surprise) advised that it would not.
In any event, claimant refused to cooperate in executing documents to finalize the MSA, which consisted of a lump sum and monthly installments.
The employer then filed a recurrent C&R approval petition. Employer requested that the WCJ oblige the claimant to be bound by the original C&R. At hearings, claimant acknowledged that he knew a delay would occur between the original C&R approval and his later obligation to follow through on the employer’s MSA option.
The WCJ granted employer relief, indicating that if claimant – after an employer effort to receive a new MSA quote from CMS – did not execute the paperwork, employer was to disburse to him the value of the MSA. The WCJ had noted and found credible that claimant understood how the open medicals/MSA option was to work and that years might pass before the employer exercised the option.
The Appeal Board reversed, holding that, given the succeeding legalization of medical marijuana, no original “meeting of the minds” as to employer’s responsibility for medical necessarily could have occurred at the time of the 2014 C&R.
The court, however, restored the WCJ’s ruling and ratified the remedy noted above. The Board had committed error in its “no meeting of the minds” analysis. To the contrary, the bases for setting aside a C&R – or here, disregarding its provisions – are fraud, coercion, or mistake. And in this case, claimant had not shown any of these factors. In this regard, the court noted in particular that the intervening legalization of medical marijuana (a “change in the law”) did not reflect “mistake” sufficient to change the terms of the C&R.
In making its ruling, the court agreed with employer’s assertion that the Board’s standard “would open a Pandora’s box that could potentially unravel countless C&Rs based on the contention that there was no ‘meeting of the minds’ at the time the agreements were approved.”
Postscript: In the original C&R, the parties had marked the “no” box where the agency form inquires whether medical was being settled. The court was unmoved by claimant’s argument that this fact changed the critical analysis. In this regard, the original C&R was (as with all C&Rs) approved after an on-the-record hearing, and it was obvious that the parties were indeed then seeking to settle medical.