What is CMS's threshold requirement?
Why does it have one?
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What are CMS's 'threshold' requirements?
 
When can a WCMSA proposal be
submitted to CMS for approval?
CMS UPDATE 04/25/06
CMS has changed it threshold requirements. It will only be approving WCMSA where the claimant (employee) is Medicare eligible and the total settlement amount is greater than $25,000. The previous amount was $10,000. See the whole text of the latest CMS Policy Memo here.
How does the new threshold requirement affect WCMSAs?

First, (and most importantly to CMS) it means that fewer WCMSA proposals should be submitted to CMS. This is probably in response to CMS's recent backlog of work. CMS is obvious trying to reduce it workload.

Second, it means that more WC cases are going to be settled without CMS approval. This can be good because the parties to smaller WC claims (those that settle for less than $25,000) don't have to go through the WCMSA approval process.  The downside though is uncertainty. Without CMS approval there is no guarantee that CMS won't in the future make a claim against the employer or employee for not adequately protecting Medicare's interests at the time of settlement. 
It order to reduce its workload, CMS has established certain criteria that a WC case must meet in order for CMS to review and approve a WCMSA proposal. It is extremely important to note that: "CMS wishes to stress that this is a CMS workload review threshold and not a substantive dollar or “safe harbor” threshold. Medicare  beneficiaries must still consider Medicare’s interests in all WC cases and ensure that Medicare is secondary to WC in such cases."  April 25, 2006 CMS Policy Memo.

CMS has created an environment where the parties in WC cases are required to take Medicare's interests into account every time a WC case settles. But, CMS is only going to get involved and tell the parties if they did it right (give approval) under certain circumstances. If the parties do not (or cannot) obtain CMS approval, federal law (Medicare Secondary Payer Act) provides that they so at their own risk. WC parties are not placed in an enviable position if their case does not meet CMS threshold criteria and they cannot obtain approval of the WCMSA.

So when can a WCMSA be submitted to CMS? According to CMS, there are two key variables: (1) the Medicare eligibility of the employee (claimant) and (2) the total amount of the settlement (including medical and indemnity benefits). 

A WCMSA may be submitted to CMS for review in the following situations:

1)    The claimant is currently a Medicare beneficiary and the total settlement amount is greater than $25,000; OR

2)    The claimant has a “reasonable expectation” of Medicare enrollment within 30 months of the settlement date and the anticipated total settlement amount for future medical expenses and disability/lost wages over the life or duration of the settlement agreement is expected to be greater than $250,000.   

It is not surprising that many WC cases will settle without CMS approval because it will fail to meet the threshold requirements. In these cases, CMS could, in the future, assert a right of recovery against the employer and employee because CMS did not approve the settlement.  

Therefore, it is recommended that approval be obtained whenever possible. When not possible, the WC settlement documents should contain language indicating that Medicare's interest were protected to the best of the parties abilities under the circumstances.
Questions?  770-374-3697. Copyright 2006 Michael R. Merlino II. All rights reserved. The Ramos Law Firm