Vast changes are swiftly approaching regarding the efforts Workers’ Compensation practitioners must make in protecting Medicare’s interests in future medical settlements. The Centers for Medicare/Medicaid Services (CMS) has revised several sections of its Guidelines for Medicare Set-Asides (MSA’s). The first change is to section 4.2 of its guidelines for MSA’s, which took effect January 17, 2025. While many of the guidelines we have come to accept will go unchanged, there are two primary changes that must be addressed going forward.
The Threshold for CMS Review Remains the Same
As before, CMS will only review a Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) proposal if it meets the following criteria:
- The injured worker is a Medicare beneficiary, and the total settlement amount is greater than $25,000.00; or
- 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 $250,000.00.
Changes in 2025
Effective April 4, 2025, CMS is now mandating Section 111 reporting of WCMSA data—including those with zero-dollar allocations—for all settlements involving Medicare beneficiaries. This includes any settlements below the CMS review threshold of $25,000.00. The mandatory reporting categories include the MSA amount and period, whether the MSA will be funded by a lump sum or annuity, and the initial deposit and annual deposit amounts, if an annuity.
In general, Responsible Reporting Entities (RRE) who must report per Section 111 of the Medicare, Medicaid, and SCHIP Extension Act includes permissibly self-insured employers, liability insurers, workers’ compensation insurers and third-party administrators. This reporting is mandatory, regardless of whether the WCMSA is approved by CMS or not. Failure to report required WCMSA information may result in an action under the False Claims Act and Medicare may decline to recognize the underlying settlement or pursue recovery for post-settlement conditional payments.
Additionally, beginning July 17, 2025, CMS will no longer review MSA recommendations for “zero-dollar allocations.” CMS approval will not be required where the workers’ compensation claim was timely denied, and no benefits (medical or indemnity) have been paid. This is a significant change, given the difficulty in recent years in obtaining zero-dollar allocation approval from CMS.
Please note that if there are any conditional payments related to the workers’ compensation injury that were furnished prior to the settlement, Medicare will still attempt to recover such payments. Further, Medicare will not pay for any workers’ compensation related services furnished prior to the date of the settlement for which it has not already paid.
The WCMSA Reference Guide cautions that CMS’s WCMSA amount review process is still completely voluntary but strongly recommended. CMS review and approval is the only process that offers both Medicare beneficiaries and defendants finality. When CMS approves a proposed WCMSA amount, CMS will stand behind that amount. Without CMS’s approval, Medicare may deny related medical claims, or pursue recovery for related medical claims that Medicare paid up to the full amount of the settlement, judgment, award, or other payment.
Going forward with Medicare Set-Aside Agreements
Given these new, stringent requirements, 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 and monetary sanctions.
