By Annie Davidson
Question: I’ve heard that zero allocations are getting more and more challenging. Please level with me, will Medicare approve a zero allocation in a denied case? If so, what is needed?
Answer: We get this question a lot. For the uninitiated, a “zero allocation” is what we call not setting money aside to pay for a claimant’s post-settlement Medicare-covered medical needs. A zero allocation is possible in two situations. First, money would not need to be set aside if a claimant requires no future medical treatment associated with the workers’ compensation injury. If the claimant is not getting treatment, then no money should be set aside and Medicare will approve these zero allocations on a medical basis. These are often referred to as “medical zero” allocations. The second, and far trickier, zero allocation is what we often refer to as “legal zero” allocations. A legal zero allocation occurs when the parties designate zero dollars for future medical care because the employer has denied the case in its entirety and is not responsible for the claimant’s medical treatment. Thus there is no medical treatment to commute as part of the settlement. Legal zero allocations are the focus here given the question posed.
The good news is that as it stands now Medicare still approves legal zero allocations if the cases meet strict guidelines. Evaluation of each potential case is key. We first ask whether a case would qualify for a legal zero allocation based on its facts. Second, if parties plan to exercise their option to submit the case to Medicare, then we evaluate whether it will be approved based on the items available for that submission.
- Will your case qualify for a legal zero allocation? There are no “rules” per se, but generally a legal zero allocation will be appropriate in situations where a workers’ compensation claim is denied and where no medical or indemnity benefits have been paid. Even if payments have been made, a zero allocation may still be appropriate as long as the claim remains denied, and you have support to document the disputed nature of the claim. Remember, the goal is not to shift the burden for future medical care to the Medicare program. If there’s no burden to shift, then a zero allocation that documents the parties acted reasonably and in good faith may be “just the ticket” to comply with the Medicare Secondary Payer Act.
- Will my zero allocation be approved by Medicare? Medicare approval can sometimes be more art than science and that is always true with legal zero allocations. In order to submit one to Medicare for review and approval, the estimated total settlement value must exceed any applicable submission threshold which currently is $25,000 if the claimant is a Medicare beneficiary, and $250,000 if the claimant has a reasonable expectation of Medicare eligibility within 30 months of the date of settlement. Assuming any applicable threshold is met, here is a list of what must be included along with the allocation report in the submission packet:
The list of what information Medicare “requires” to approve a legal zero allocation is ever evolving and Medicare can be very detail-oriented in its review of these cases. Some important areas to focus on include:
- Medical records, which Medicare will seek even if there are no relevant treatment records available;
- Letter of explanation, which must include information about the history of the claim and explain any payments made; and
- The FROI must be submitted which is often overlooked.
While it’s good news that Medicare will approve legal zero allocations in denied cases if the parties meet its strict guidelines. Remember this is ever evolving and in November 2016, Medicare briefly modified the requirements for legal zero allocation approvals only to reverse course following an industry outcry. More recently, Medicare representatives have sought assistance crafting updated guidance from the industry with an eye to an eventual cessation of the review of zero allocations altogether. We, of course, monitor this carefully and will provide any updates if changes occur.
ExamWorks Clinical Solutions’ track record of approvals on legal zero allocations speaks for itself. Our team of compliance attorneys review each legal zero allocation referral to ensure it meets Medicare’s stringent criteria. Those same attorneys contribute specific langauge to the allocation report itself based on the facts of the claim, and then perform a final signoff review after our submissions team has gathered and assembled everything necessary to submit. Do send us legal zero allocation referrals so they can be scrutinized and shepherded by our experts through the process for ultimate Medicare approval.
Annie M. Davidson is MSP Compliance Counsel for ExamWorks Clinical Solutions. In her role, Annie provides legal analysis to ensure the integrity and quality of ExamWorks' Medicare Secondary Payer (MSP) compliance services and related products. Prior to joining ExamWorks, Annie practiced as an insurance defense attorney in her native Minnesota where she litigated workers’ compensation and liability insurance cases, particularly those involving MSP issues. She is admitted to practice law in the State of Minnesota and the United States District Court for Minnesota, and is a graduate of William Mitchell College of Law. If you have a question or an idea for a future Ask Annie column, please email Annie at Annie.Davidson@examworks-cs.com or call her at 651-262-9618.