Federal Debt & CMS Points to Bigger Cost Issues

New Jersey work comp lawyer and prolific blogger (and photographer!) Jon Gelman opined yesterday on the devastating effects on state workers' compensation systems if the federal government goes into default.

Gelman said payments in the state-run workers' compensation systems are so intertwined with the national system that a debt crisis will have a number of major consequences:

• Centers for Medicare and Medicaid Services (CMS) and its contractor will be unable to provide conditional payment information, bringing negotiations in workers' compensation settlements to a halt.
• CMS will be unable to approve settlement compromises and releases in advance of disposition of state claims.
• Chaos will erupt in states where the U.S. Social Security system takes a reverse offset on permanency payments. Insurers and employers could become responsible for the entire amount to be paid.
• The U.S. Department of Veterans Affairs will be unable to provide information concerning medical treatment of veterans. Records will be held up and will delay evaluations in adjudication of workers' compensation claims.
• Federal insurers, such as the military health plan Tricare, will be unable to provide benefit information to parties in state workers' compensation cases. The lack of reimbursement data will stymie medical evaluations.

Gelman told WorkCompCentral in an interview that "You don't know what the administration is going to next do to bring it to a new level of chaos. Everybody is postured all over the place, and you don't really know what buttons they're going to push next."

Indeed, one element of escalating workers' compensation costs that is unknown to the industry is the effect over the past five years of CMS' increasing aggressiveness regarding workers' compensation settlements, and the added burden of obtaining approval on a Medicare Set Aside Trust Agreement (MSA) and/or foregoing early claim closure and not settling out future medical components (for those states that permit the settlement of the future medical liability).

There are many different cost components that are within the purview of state legislators and regulators to control, but one that is out of the control of the industry is the federal governments intervention in an otherwise state specific system.

CMS has never had a solid system in place for the expeditious approval of MSAs or any other system in place that would provide the industry with a stability and efficiency to satisfy the federal government's right to reimbursement for medical obligations that should not be covered by Medicare.

I think it would behoove the industry to fund a study to determine just how much the federal government, and specifically CMS, costs employers and carriers on a per claim basis, then use that information to lobby for a more efficient, stable and predictable, process.

As it stands now, the only way to truly avoid the CMS uncertainty is to not settle out future medical. Some states don't allow such settlements anyhow, but for the states that do, this is an important consideration because of the ability to put final numbers on a claim - i.e. sum certains - reducing risk, and shortening the employer's exposure to escalating experience modification adjustments.