Federal law requires employers to consider Medicare’s potential interests when settling a workers’ compensation claim with a Medicare beneficiary. The foregoing generally involves the use of a Workers’ Compensation Medical Set-Aside Agreement (WCMSA), wherein a portion of the settlement consideration is used to cover future medical costs.
On April 4, 2025, The Centers for Medicare & Medicaid Services (CMS) implemented significant prospective changes to the WCMSA reporting requirements involving the settlement of workers’ compensation claims which include the medical portion of the claim and involve injured workers who are, or were, a Medicare beneficiary. CMS now requires WCMSA data to be reported in all full and final settlements of a Medicare beneficiary’s workers’ compensation claim. Reporting will be required even in cases that do not involve CMS approval.
Historically there have been no statutory, or regulatory, provisions requiring a WCMSA proposal to be submitted by a responsible reporting entity, as part of the Total Payment Obligation to Claimant (TPOC), to CMS regardless of the Claimant’s status as a Medicare beneficiary.
The new rules mandate that the following must be reported to CMS:
- The WCMSA total amount – in the event the dollar amount of the WCMSA is funded with an annuity, the WCMSA amount should be calculated using the annuity payout.
- WCMSA period – the number of years that the WCMSA is expected to cover the beneficiary.
- Whether the WCMSA is a structured/annuity payment or lump sum.
- Initial Seed (deposit) Money (structed/annuity settlement).
- Annual deposit amount (structured/annuity settlement).
The new reporting obligations include the following settlements:
- Settlements where the parties obtain a WCMSA or otherwise allocate money for future care but have not submitted it to CMS (Evidence based WCMSAs);
- Settlements where the parties put no money towards future medical (Zero dollar WCMSA);
- Settlements involving a WCMSA where the total settlement value does not exceed the applicable Medicare workload review threshold for voluntary participation in the CMS review process;
- Settlements involving CMS approved WCMSAs.
On, and after April 4, 2025, a failure to report WCMSA information to CMS following settlement of a claim involving a Medicare beneficiary may result in civil penalties, with potential for CMS to decline to recognize the underlying settlement, recover post settlement conditional payments, and/or pursue treble damages under the False Claims Act.
