Last month, we discussed how the lack of CMS guidance in liability cases leaves Medicare and Medicare-eligible people ('Beneficiaries') in the dark about paying for injuries and illnesses they've developed due to exposure to the coronavirus. Many companies count on those populations to make their living. Potential coronavirus exposures that occur in their place of business are now creating liability exposures if/when their clients and customers can tie those exposures to their time within those walls. Those company owners who want to both open their enterprise and reduce their risk of liability for inadvertent COVID-19 exposures should review their reopening processes carefully and build in as many "virus-avoidant best practices" as possible.
It's No Longer Business as Usual
It's hard to know where to start reopening a business that has been shuttered since the onset of the COVID-19 pandemic. Every company that routinely welcomes paying customers onto their premises must make accommodations to keep them safe from a potential coronavirus exposure. Employers are doubly taxed: they must provide as safe an environment as possible for their workers and their customers. Not only could an outbreak at their site create resonating workers’ compensation issues, but it also poses a risk of liability issues when it's a customer who falls seriously ill with the disease.
And those concerns layer over the challenges arising when trying to resume 'normal' operations:
With so much to think about, it seems apparent that moving forward requires a well-thought-out strategy that balances every contingency, identifies and manages each risk, and maximizes as much as possible the profitability of each transaction.
Managing the Risks Inherent in Reopening During the COVID-19 Pandemic
Perhaps the biggest threat to the reopened company is the risk of inadvertently causing a COVID-19 outbreak. Company owners must manage two separate but similar concerns to ensure their enterprise isn't the next COVID-19 hot spot:
Some businesses have a higher risk of triggering an outbreak simply by their nature. Restaurants, hotels, gyms, and spas, to name just a few, must welcome the general public to stay in business. Their workers, therefore, are exposed to whatever contagions their customers carry. The close physical proximity and being indoors contribute to the spread of the virus among patrons and staff alike.
From a workers’ compensation point of view, the answer to one specific question arising from the situation has the potential to impact every employer in the country:
Is COVID-19 an 'Occupational Disease'?
Traditionally, the employer's workers' compensation (WC) insurance policy covers both injuries and 'occupational diseases,' when those arise within the 'course and scope' of the job. The coronavirus and its consequent disease, COVID-19, present a new wrinkle in the discussion about what constitutes 'course' and 'scope' of employment.
'Occupational diseases' typically develop when workers are exposed to toxic substances or materials inherently contained within production processes or employment practices. Firefighters and coal miners frequently develop occupationally-caused lung diseases related to the inhalation of toxic fumes and dust. Healthcare workers often contract the highly infectious conditions they find in their patients, such as tuberculosis or hepatitis.
The coronavirus is not an 'occupational disease' in the traditional sense because its contraction isn't limited to a specific occupation or job. Instead, because it spreads via airborne particles exhaled wherever an infected person might go, it can infect anyone in any position when there are insufficient protections in place to prevent that infection.
The hospitality industry is particularly vulnerable to triggering coronavirus outbreaks because of the frequency of customer turn-over. The more people there are entering the business, the higher the risk that one of them is an asymptomatic person carrying the virus, who, thereafter, unknowingly infects a staff person. Because hospitality workers must - by the nature of their work - interact with potentially infected customers, they can argue that their subsequent infection was, indeed, contracted within the 'course and scope' of their job. Their healthcare costs should be born by their employers WC insurer. The argument tries to move the job-related COVID-19 infection into that class of employment-related 'occupational diseases' that enjoy a "presumption of compensability:" if you contract the virus from a presumed work-based source, then your related healthcare costs are expected to be covered by the WC insurer.
Not surprisingly, there is a lot of push back against the 'presumption of compensability' that limits the employer's opportunity to point out the worker's other possible transmission points (family members, i.e.) and thereby deflect the burden of added COVID-19-related WC premiums.
Also, not surprisingly: those arguments and more are now the focus of discussion for more than one state government and WC insurer.
We noted last month our belief that COVID-19 cases will trigger thousands of liability lawsuits, as infected sufferers look for ways to obtain and cover the cost of the healthcare services they need. For sufferers who are also 'Beneficiaries,' those lawsuits will take on added significance. This population is at risk for worse infections with more severe symptoms and often take longer to recover. Further, because they often also have underlying health conditions that complicate their COVID-19 case, they are also more likely to suffer permanent damage and injury. In those cases, they will need COVID-19-related healthcare services for the rest of their lives. Lawsuits filed by members of this population will provide the necessary evidence to ensure that CMS doesn't bear the brunt of those added COVID-19-related expenses in its future healthcare payments. By bringing the suit, Beneficiaries will have access to a separate healthcare fund without imperiling their future Medicare healthcare coverage.
Sensible Precautions for All Populations
Fortunately, implementing safeguards and precautions to prevent business-based coronavirus infections protect all populations as much as is possible, considering what is currently known about how the virus spreads. Today's best business practice is implementing a virus-protection plan to avoid getting hit with unnecessary WC or liability claims for COVID-19 infections.
There are two fundamentals to consider when developing your plan: how to make the physical plant safe, and how to modify business practices to keep workers and customers safe.
Steps to Safeguard Your Workplace
A walk through the place of business and a review of current practices will each reveal vulnerabilities that might cause a virus exposure. Manage whatever threats exist, then change your policies to prevent those risks from emerging again.
It's abundantly clear that covering the healthcare and related costs of just one COVID-19 case are high, and that they become exponentially greater when staff and customers are the sufferers. Establishing appropriate safety precautions throughout the enterprise to protect both staff and customers is imperative for every business struggling to keep afloat in the wake of the COVID-19 pandemic. It's always better to prevent a disaster than recover from one, and all too often, a COVID-19 outbreak has caused the demise of many excellent companies. Don't let yours be one of them.
Decades of continuing silence on the role of Medicare Set Aside (MSA) accounts in liability cases may prove disastrous in the face of the injuries and damages caused by the COVID-19 pandemic. America's aging population is growing, and more people reach Medicare-eligibility every day. Any injuries they suffer due to the virus and its debilitating disease will become an issue for the Centers for Medicare and Medicaid Services (CMS).
The challenge is this: any entity - any business, any service provider, and even any individual - could be found liable if something they did or didn't do is proven to have caused a COVID-19 infection in a successful plaintiff. When that plaintiff is also a Medicare recipient or is Medicare-eligible (Beneficiaries), resolving the liability case should also include the establishment of an MSA to ensure compliance with the Medicare Secondary Payer Act (MSP) and to protect CMS from paying for injuries that are rightly attributed to that primary payer.
However, that there are no clear rules in place regarding MSAs in liability cases will create havoc for all entities involved in the issue:
Most employers and insurers are aware of the MSP obligations mandated when Beneficiaries are injured on the job (although many entities are looking to limit that liability for workers who contract COVID on the job). However, the general public may not be mindful that those mandates also apply to non-WC cases where a person or entity is deemed responsible for injuries occurring to a Beneficiary outside the workplace setting. The majority of the general public may not have ever heard about the MSP. They aren't aware that the Act requires no-fault and liability insurance to be the primary payer for accidental or 'other situation-related health care services, claimed or released' when the injured party is a Beneficiary. When these cases arise (and they will), those entities grappling with confounding legal concerns will be even more baffled by a lack of CMS guidance on the wisdom of including MSA calculations for the liability lawsuit.
Making things worse are two aspects of the pandemic that are converging ominously:
The 'Baby Boomer' generation, those born between 1946 and 1964, is aging, and now numbers more than 52,000,000. In 2011, the first wave of these 'Boomers' hit Medicare eligibility, and the last of them won't cross that threshold for another nine years. Further, of the 52 million, approximately 45 million are retired and drawing their Social Security Benefits. Those who contract the COVID-19 virus and require medical help to recover from it will have to find another healthcare resource to pay for those services. For many, that identity of that resource may only be revealed in the courtroom.
Almost everyone in that older population group has the potential to be a Beneficiary plaintiff:
The CMS has promised some form of 'guidance' on using MSAs in liability cases for years. In its Fall 2018 notification, CMS indicated that the new rules would give Beneficiaries better opportunities to manage their future healthcare needs while also protecting Medicare's interests. It suggested the new guidance would be issued sometime in 2019. That didn't happen.
Instead, in 2020, an updated notice stated that the new rule would 'clarify' that it would be the Beneficiary's responsibility to protect Medicare's interest in the liability suit and that more information would be made available by August. August has now come and gone, and still, no word from CMS about the liability MSA question.
The delay is, however, causing its own angst:
Clearly, the process of designing and implementing an MSA strategy for liability cases involving Beneficiaries is complex at the best of times. The COVID-19 pandemic makes these, arguably, the worst of times to be mandating the use of such a complicated tool in an entirely new class of cases. However, the MSP is clear: Medicare is the mandatory secondary payor for Beneficiary healthcare costs caused by a third-party. Failing to clarify that point in any Beneficiary-related liability lawsuit threatens the stability of that case resolution, and/or opens CMS to risk of using Medicare funds to pay for another entity's errors.
What we do know is this:
There are (most likely) a lot of Beneficiary-related, liability-based lawsuits on the way. Planning now to manage a possible CMS MSA application within them will save all parties time, money, and stress.
For most injured workers, a complete recovery and the ability to return to work are only possible because of the medical and health care services provided by Workers’ Compensation insurance. However, the concept of healthcare support delivered through an employment setting and applied to on-the-job injuries is a recent one, and its premise and principles are designed to set aside centuries of unfair and often exploitive labor practices.
To understand how and why America's worker protection systems came into being, you first need to know about the European foundations that define their history. Europe's culture around work habits and practices evolved significantly from the Middle Ages to modern times, and changes in economics, industries, and social norms caused equally significant changes in how, where, and why people worked.
Those changes in 'employment' thought patterns traveled with New World explorers to North America, where they, too, evolved to reflect the cultures in which they existed. Without a doubt, that evolution benefitted the workers, saving them from horrendous working conditions and poverty-level wages. But it also helped the companies that hired workers and the communities in which they worked. And each step of that evolution adds nuance to our understanding of the balance that now exists between workers, their employers, and the communities that benefit from a safe and productive industrial complex.
The world's workers have never had it easier than they do today. National laws governing safety and health standards ensure that employees aren't required to risk their lives to make a living. Those standards, however, rest on the backs of the untold number of sick, injured, and dead workers that toiled without those protections in place.
Before the Victorian era (1837 - 1901), working conditions were unregulated, and 'employers' were often more 'owners' than job providers. Lower class citizens traded labor for food or lodging and were expected to work seven days a week for as many as 18 hours a day. Safety standards on the job were also unheard of, regardless of the location or type of work. Domestic workers were exposed to the smoke and flames of wood-burning stoves; field hands got no reprieve from the weather, and miners toiled deep underground with no fresh air ventilation nor protection from the toxic and caustic air they were breathing. Premature deaths were common, as were deaths caused by accidents and disasters. Children were not saved from the situation either; because their small size made them ideal candidates for many tasks, children were forced into work as early as three years, and often died young from overwork and dangerous worksite conditions.
The Victorians improved the situation, but only slightly. While safety precautions were still nonexistent, workers during this period were finally given a day off per week, although they continued to work 14 to 16 hours a day during the other six.
The Industrial Revolution of the mid-19th Century, however, caused three major shifts in workplace cultures:
All three shifts posed challenges that, eventually, provided the opportunity for more positive changes in the world’s work environments:
And working conditions remained terrible. There was rarely fresh air ventilation, so employees inhaled the smoke and ash put off by the machines. Short lunch and dinner breaks led to exhaustion, which, in turn, led to accidents. Children suffered the most, and many were sickened or deformed due to poor nutrition, inhaling toxic air, and the lack of exposure to sunlight. In fact, it was the challenging working conditions for children that contributed to the development of unions.
The 'Union'- an organization of workers - first appeared in the early 1700s, as workers grew frustrated with low wages and poor working conditions. Over time, if uniting as a grouped 'workforce,' they may have increased leveraging power to improve their situation because the law offered an individual worker little or no protection from an overly oppressive boss. Although litigations were often pressed based on unhealthy work conditions, employers were equally often let off the liability hook because of one of three major defenses that were popular in those days:
1) The employee was negligent and caused their own injury;
2) Another employee was at fault and caused the injury, or
3) The injured worker knew it was a hazardous job and 'assumed that risk' by accepting the
As a unified force, however, a union could overcome those defenses by bringing different tactics to the fray. From their perspective, without their combined effort, the factories couldn't produce, and employers would lose their customers.
Initially, these groups were a conglomerate of skilled workers, tradesmen, whose productivity couldn't be readily replicated by someone else. They fought for shorter hours, better pay and safer working conditions to balance the toll taken on their health by exhaustion and poverty-level nutrition. The circumstances of child workers were also a common complaint, and many unions stopped work to force factory owners to stop using children as laborers.
By the mid-1800s, Unions had become common on both sides of the Atlantic, and the movement grew significantly as the new 20thCentury approached. Strikes - work cessations - became a favored method of forcing change and were growing in size and frequency. While localized strikes often involved only local workers, the Union movement itself was attracting growing numbers of laborers across regions and even countries. In 1892, 261 strikes in France engaged only about 50,000 workers, but by 1914, just 22 years later, 1,309 strikes took 438,000 workers offline. In Britain between 1909 and 1913, more than 2,000,000 workers refused to work due to adverse work conditions.
The American colonies were not immune to the consequences of striking European workforces. Even before the Revolution, in 1768, a group of New York tailors went on strike to protest a wage reduction, and when the Federal Society of Journeyman Cordwainers, a union of shoemakers, formed in 1794, the American labor movement was launched. The trade unions fought back against British-based business practices by publishing their prices to demonstrate their value and prevent their replacement by cheaper, unskilled laborers. The Unions grew quickly because they were able to attract larger memberships as cities grew and national communications systems developed.
Although the modern rules around compensating an injured worker are new, the concept itself has been around since approximately 2050 B.C. That "Law of Ur" provided financial compensation for injuries to specific body parts, including bone fractures. Over the next four thousand years, other cultures adopted the practice, although each was unique in the value it set on the particular body part that was harmed (loss of a thumb was worth twice the compensation as the loss of a finger, according to the ancient Arabs).
It wasn't until 1871, however, when Prussian Chancellor Otto von Bismarck enacted the "Employers Liability Law," that selected classes of workers finally received a reliable option to pursue that related to their on-the-job injury. von Bismarck wasn't addressing workers’ demands out of personal concern for their well-being, however. Instead, he used the protections to secure the support of the general population which was, at the time, leaning towards the Marxist and socialist movements. By suppressing that leadership while adopting their most popular theories, von Bismarck maintained a steady hold over the Prussian nation.
The new law didn’t hold all employers liable for all work-related injuries, as its name might suggest. It mandated that employers pay into a fund that would, in turn, pay out to injured workers the funds they needed to get medical care for their injuries. And, the original 1871 law applied only to injured laborers in the quarries, mines, railroads, and certain factories, but didn’t cover other industries or other worker concerns. Eventually, this disparity drove von Bismarck to extend the protections by adding the publicly funded Workers’ Accident Insurance provisions in 1884, then later the Public Pension Insurance (for those rendered disabled by a job injury) and Public Aid funding, to ensure long-term support for disabled former workers.
Further, perhaps the most significant action taken by von Bismarck was to establish this state-administered 'injured worker protection system' as the 'exclusive remedy' when injuries occurred on the job. Although those injured workers could no longer sue their employers for compensation for their injuries, they weren't left unemployable or destitute in that situation, either.
Also, not insignificantly, von Bismarck's introduction of the state as a player in the realm of workers’ compensation management set the stage for the involvement in and oversight by America's modern CMS in today's workers’ compensation industries.
That discussion follows next month.... See you then!
The confusion caused by gaps in CMS regulations regarding Medicare Set-Asides (MSAs) continues to grow. An aging population ensures that more people will become potential Medicare claimants if they are injured for any reason. While CMS has provided clear guidelines around the development of MSAs when injuries occur on the job, it has not been so forthcoming when those injuries occur in a third-party liability setting. Without such guidelines, both applicants/claimants and their legal representatives face potentially devastating consequences if they fail to 'guess correctly' about the appropriate use or non-use of an MSA in a third-party liability case.
Fundamentally, an MSA holds the funding necessary to cover the current and future medical costs of injuries sustained by Medicare beneficiaries (or soon-to-be beneficiaries). The theory behind the account is to protect Medicare (and Medicaid) from making medical payments for injuries that are the legal responsibility of another entity (the primary payor).
Federal law requires that the primary payor is deemed liable (responsible) for paying the costs of those injuries and must provide 100% of the current and future medical coverage for their treatment.
The distinction between a workers’ compensation MSA (WCMSA) and a liability MSA (LMSA) is the location of the incident that caused the injury.
In both cases, when the injuries will take time to heal fully and require ongoing medical coverage, the primary payor is also responsible for covering those future costs that accrue after the legal case has closed. The MSA is the account used to sequester the funds needed for this purpose.
The present challenge arises because the Centers for Medicare and Medicaid Services (CMS) has issued guidance for handling MSAs based in WC cases, but not for MSAs based in third-party liability cases.
From a legal perspective, not having official governmental guidance for setting the parameters of legally binding agreements (like an MSA) can open liability and other vulnerabilities for everyone involved in the liability case:
While all MSAs are voluntary, including WCMSAs, not all cases should have one, not even LMSAs, even when the guidelines for its establishment are clear.
The main determiners for creating an MSA are:
As in a WC injury, injuries sustained in a liability case don't always require long-term medical care. Broken bones, for example, that don't also have co-occurring nerve or muscle damage will often heal back to their pre-break state and require no additional medical coverage after that process is complete. When those injuries also include ongoing or irreparable nerve damage, muscle damage or other long-term health concerns, an MSA might be the best option to ensure that the appropriate funding is available to cover the costs of that care.
The type and duration of the injury are relevant factors regardless of whether it happened on the job site or in a liability scenario.
Medicare coverage is only available for people who are already eligible to receive it (currently age 65 years), or who will become eligible within a reasonable period (during which ongoing treatment for the injury is expected). Ergo, if the injured person is only 45 years old and the injury is expected to heal completely within two years, then the MSA is unnecessary.
On the other hand, if the injured person is 64 years old at the time of the incident, and the injury is expected to take two years to heal, then setting up an MSA to cover the costs of care after Medicare kicks in might be a wise choice.
Whether an injury occurs because of a workplace incident or through the fault of another party, having access to appropriate medical care is critical for the injured person to recover fully and regain their previous lifestyle. Despite having no direct guidance as yet from CMS about the necessity or appropriateness of an MSA in a third-party liability case, every person should perform a careful evaluation of both the cause of their injury, its short- or long-term prognosis, and the costs of its medical care before deciding an MSA is not for them. While there's no drawback to setting up the account as a prudent act of self-care, there may be significant drawbacks if it turns out that CMS will indeed have an interest in payouts for that injury and that interest wasn't considered when the financial resolution of the liability case occurred.