Big Change to Medicare Set-Asides: No more $0 Proposals After July 17, 2025

Starting July 17, 2025, the Centers for Medicare & Medicaid Services (CMS) will no longer accept or review Workers’ Compensation Medicare Set-Aside (WCMSA) proposals with a $0 allocation.

What does this mean?

Going forward, CMS will only review WCMSA proposals where:

• The claimant is a Medicare beneficiary and the total settlement amount exceeds $25,000.00; or
• The claimant has a reasonable expectation of Medicare enrollment within thirty (30) months of the settlement date and the total settlement amount is expected to exceed $250,000.00.

Can a claim still settle with a $0 MSA?

Yes – but with important changes. Even though CMS will no longer review $0 allocations, the parties must still evaluate and document whether a $0 allocation adequately protects Medicare’s interests.

CMS has outlined specific “conditions” to evaluate whether a $0 allocation truly protects Medicare’s interests:

• The facts of the case demonstrate that the injured individual is only being compensated for medical services rendered prior to the settlement; and
• There is no evidence that the injured individual is attempting to maximize the other aspects of the settlement (e.g. lost wages and disability portions of the settlement) to Medicare’s detriment.

Per CMS, there are four specific ways to demonstrate these “conditions”:

1. Physician Statement
   The claimant’s treating physician documents “to a reasonable degree of medical certainty” that the claimant will not require any future treatment or medications related to the work injury.
2. Claim Denial with No Payments
   The compensation insurer or self-insured employer denied responsibility for benefits under the state workers’ compensation law and (i) made no payment for medical treatment or indemnity (other than for investigation), (ii) medical and indemnity benefits are not actively being paid, and (ii) the settlement agreement does not allocate certain amounts for specific future or past medical or pharmacy services as a condition of settlement.
3. Court Ruling on Claim Merits
   By a ruling on the merits, a Court, Commission, or Board of competent jurisdiction determined that (i) the workers’ compensation insurer or self-insured employer does not owe any additional medical or indemnity benefits, (ii) medical and indemnity benefits are not actively being paid, and (iii) the settlement agreement does not allocate certain amounts for specific future medical services.
4. Claim Denied Under State Statute (If Applicable)
   Insurer or Self-Insured Employer denies the claim within the state statutory timeframe allowed to pay without prejudice (if allowed in that state) during the investigation period, and (i) benefits are not actively being paid, and (ii) the settlement agreement does not allocate certain amounts for specific future medical services.

Only one of these conditions needs to be satisfied to demonstrate Medicare’s interests are protected.

Why this matters

This shift is intended to streamline $0 WCMSA settlements and reduce costs while ensuring Medicare’s interests remain protected. However, the responsibility shifts to the parties to independently document and maintain proper documents in case Medicare later challenges the $0 allocation.

For additional information, see CMS’ WCMSA Reference Guide: CMS WCMSA Reference Guide (v.4.4)

Written by Ronald Kim, Esq.