New Workers Compensation Regulations and Guidelines: What’s it Worth?

June 1, 2022

There have been significant changes in workers’ compensation regulations and guidelines recently that have arguably increased the value of claims. In April 2021, The California Department of Industrial Relations, Division of Workers’ Compensation’s (DWC) new medical-legal fee schedule went into effect. The new fee schedule drastically increases medical-legal costs and may prompt defendants to consider whether early settlement may be more cost-effective.

Additionally, earlier this year, version 3.5 of CMS’ Workers’ Compensation Medicare Set Aside Reference Guide was published including a new regulation targeted at non-submit and evidence-based Medicare Set-Aside (MSA) allocations. This new regulation creates a risk for defendants who choose to forego the Centers for Medicare/Medicaid Services (CMS) review process.

Increased Medical-Legal Fee Schedule

The amount paid by defendants to medical-legal providers for review of records has increased to $3.00 per page in excess of the first 200 pages. To put this change in context, the average cost of a medical-legal evaluation with subpoenaed records from various hospitals and/or providers may result in thousands of dollars for the record reviews alone.

The increase in amount paid for record review could make some medical-legal evaluations so expensive that it becomes cost prohibitive. It is not uncommon for an applicant to have well over several hundred pages of relevant medical records, especially if the applicant sustained (or is alleging) injury to multiple body parts. In these circumstances the parties can meet and confer in an attempt to reduce the amount of records sent to the evaluator, settle the claim, or endure an almost punitive cost.

While parties can and do meet and confer to limit the records prior to transmittal to the medical-legal evaluator, there a risk that necessary records may be omitted. The parties may also dispute which records to send. If the parties are unable to agree on what records are relevant for the medical-legal evaluation, Board intervention is necessary to resolve the dispute before the records are sent to the evaluator.

California Code of Regulations Section 9795 has been updated as well. A medical-legal evaluation will include all subsequent evaluations that do not qualify as a follow-up or supplemental and be billed at the flat rate of $2,015.00. This flat fee is subject to the increase discussed above for record review ($3.00 per page over the first 200 pages of record review), a 10% increase if an interpreter is used, and a 35% increase if the doctor is serving as an Agreed Medical Examiner (AME). Additionally, increases apply to several specialties such as, psychiatry, psychology, oncology and toxicology. Re-evaluations will be billed at the flat fee of $1,316.35 with the above discussed increase in record review, but only if they take place within 18 months of the original examination.

The cover letter to the medical-legal evaluator prior to the initial evaluation has now become even more important and must be carefully drafted. If the doctor omits an issue discussed in the cover letter in his initial report, and a supplemental report is requested on that issue, that doctor cannot bill for drafting the supplemental report.

These increased medical-legal costs provide a strong incentive for defendants to avoid the medical-legal examination process where extensive record review is required, and explore the potential for early resolution.

Medicare Set Aside Approval is Recommended

CMS clearly stated its intentions when drafting section 4.3 by specifying that it is meant to target non-submit and evidence-based MSA allocations. The new policy essentially states that CMS cannot guarantee that Medicare’s interests are adequately protected unless an MSA is submitted to and approved by CMS. CMS will consider any non-CMS-approved MSA as a possible attempt to improperly shift the financial burden to Medicare by denying payment for medical services related to the workers’ compensation injury and/or illness until the injured worker can prove the entire net settlement amount has been exhausted – regardless of how much was contemplated for the cost of medical expenditures.

This new guideline means that if the MSA was not submitted to CMS for approval, Medicare will not provide financial assistance until the applicant can adequately demonstrate that their entire, net settlement amount was spent on medical treatment. For many applicants this functionally means that they will not receive the care that they need because they cannot afford to shoulder the financial burden without Medicare’s assistance. The need to exhaust the entire settlement amount is especially problematic for injured workers with structured settlements. If the injured worker has a structured settlement, they must wait until all payments have been made before Medicare will assist. If the settlement is structured to provide the injured worker with funds for the remainder of his life, with a non-submit MSA, Medicare may never assist because the net settlement amount will not be exhausted.

Defendants are encouraged to seek the advice of counsel, in conjunction with their Medicare vendors, to ensure that they have the most up-to-date information regarding CMS’ requirements, to avoid potential pitfalls.