In what appears to be a further erosion of the basic consideration to protect future medical interests when dealing with a potential for Medicare payments, a California Workers' Compensation Board has ruled Plaintiff attorneys can take a fee on the MSA value. Their June 22 decision in Viale v. Lockheed Martin, Nos. ADJ3845272 and ADJ 1335789, is a change from a similar claim decision reached two years ago in Pratt v. Wells Fargo, No. ADJ579864.
No one knows how the troops at ITLA and aggressive claimant attorneys from other states will handle this situation but we are sure they are watching and want to dig in and get their attorney-members more money, if there is any plausible way to do so.
In Viale, attorney John Bloom negotiated a global settlement of $638,982 for a 2001 injury which included $46,066 as a lump to start a Medicare set-aside (MSA) and $175,514 was used to fund an annuity for making future payments to the MSA. Bloom requested attorney fees on the total value including the MSA funds. Workers' Compensation Administrative Law Judge James Johnson awarded him only $40,000, which was roughly 15% of the settlement outside the MSA value and in doing so reasoned the MSA funds "have not placed the applicant in a more advantageous position" since he continued to need treatment and since he could only use the funds for future medical and in this case the funds did not pass to the estate upon death.
California ALJ Johnson further took support for his position from the California WCAB's 2010 decision in Pratt which involved a claim for attorney fees on a $485,000 settlement where the attorney was awarded $15,000 of the $45,440 he had requested. On reconsideration in Pratt, the WCAB panel noted the applicant in the Pratt case had previously obtained an award of further medical treatment, entitling her to lifetime care paid by her employer, but the MSA would supplant that award and require she fund her own medical treatment outside Medicare with a buy-out also taking place so the attorney was awarded 15% of the amount the applicant would have received if the parties had not agreed to a buy-out of the applicant's medical treatment award, which wound up being $21,752—or a fee on the amount which created a more advantageous position essentially.
The Board appears to have distinguished the current Viale claim from Pratt due to the lack of record in Pratt allowed the board to deduce whether or not the applicant benefited from the MSA and in Viale, the Commissioners rejected ALJ Johnson's determination the applicant had not benefited by the MSA because the MSA allowed applicant to avoid having to deal with the adversarial process inherent in the workers' compensation system. (And some would say being out of the WC system is better than winning the lottery).
It should be noted since the panel decision is not binding precedent, this doesn’t become the law in California or anywhere else—however it gives us some insight. Plaintiff attorneys in related news articles appear to be supportive of the decision and argue they are entitled to the fee for all of their “work” on the MSA and gaining the extra benefit for their clients. The defense bar doesn’t seem to have much of a concern if it doesn’t raise the cost for them or their clients (with the argument that it simply comes out of what was already offered with a bigger portion going to counsel and less to claimant).
As we reported recently, taking some portion of an MSA for other purposes is gaining in popularity with the courts. The last Illinois case we reported was In re Marriage of Christopher Washkowiak and Rosana Washkowiak 2012 IL App (3d) 110174, where the Court in that case ruled since money did not actually go to Medicare, it was a “proceed” and the spouse had a right to her portion with the court concluding they were simply enforcing the agreement Christopher had entered into with Rosana.
As a defense attorney who solely defends claims and also deals with MSA questions on a daily basis, I haven’t seen an enormous amount of “work” performed to determine an MSA on the plaintiff side to justify thousands of dollars in fees but there are those claims where it could be an additional annoyance and some fee is probably justified. Regardless of personal feelings, moving monies which are set aside for future medical care to other parties will erode the “protection” of Medicare’s interests in the minds of those in power at CMS and we believe it will create more problems than solutions. Multiple issues arise with all of these types of rulings because, since no party can contract around Medicare’s interest, the portioning of the MSA for fees and other interests lead to a less than fully funded MSA which could create issues in the future, not only for the Plaintiff/Petitioner, but the other parties if Medicare issues conditional payments and seeks reimbursement.
We feel this ruling along with the Washkowiak ruling continue to open the door for individuals to use the MSA in non-medical circumstances with unknown consequences. This writer continues to believe it will lead to more supervision and possibly direct federal control of the MSA proceeds upon completion of settlements. We will continue to provide updates they further muddy MSA issues. For a copy of the cases noted above or with any other CMS related questions or questions regarding these ongoing cases, please email Shawn R Biery JD, MSCC at firstname.lastname@example.org or call him directly at 312-756-3701.