A new reporting rule went into effect on April 4, 2025, that could impact employers and businesses in the Gulf South, Midwest, and nationwide. Now, Medicare requires workers’ compensation payers to report MSA (Medicare Set Aside) amounts in any settlement involving Medicare beneficiaries.
In other words, MSA amounts are required to be reported, regardless of whether the settlement meets any threshold requirement or not. This rule is applicable to all full and final settlements approved and payable on or after April 4, 2025 (or if no judge approval is required, then the date the settlement agreement is signed).
Background
In the context of workers’ compensation settlements, the Center for Medicare & Medicaid Services (CMS) requires that their interests be protected and that settlements allocate a specific amount for future medical care if the settlement involves individuals who are or may become eligible for Medicare. This is done through a Medicare Set Aside, or MSA, which is usually performed by specialized companies/vendors who look at the injury and estimate the future Medicare covered medical treatment. The injured party is required to document their treatment and use the set aside funds first before Medicare will cover any related treatment in the future. CMS will review the proposed MSA in certain instances and in essence guarantee or protect the beneficiary once the set aside sums are used, otherwise the injured worker may be left without Medicare coverage pertaining to that injury in the future.
New Reporting Guidelines
The information to be included in the reporting is:
- The MSA amount even if the MSA is zero dollars. The MSA amount is the sum to be set aside from the settlement for future medical care. Workers’ compensation settlements without an MSA are to enter all zeros in the report.
If there is a structured settlement funding the MSA, the MSA amount must be calculated by the total payoff amount.
If the agreement includes an annuity, the total payout for the annuity is to be listed.
- The MSA period or time in year that the MSA is expected to cover the beneficary. This requirement is applicable for all MSAs greater than zero dollars.
- The new reporting also requires identification of whether the MSA is to be paid in a lump sum (L) or structured annuity (S). If it is paid by a combination of the two, then it is to be identified as a structured/annuity (S).
If the MSA is funded by a structured settlement, the initial seed amount and the annual payment amount must also be identified.
- Two optional reporting requirements include the CMS case control number and the professional administrator’s EIN (if applicable). See MMSEA Section 111, Medicare Secondary Payer Mandatory Reporting Liability Insurance (Including Self Insurance), No Fault Insurance and Workers’ Compensation User Guide.
No More Zero MSAs
Additionally, another policy change goes into effect on July 17, 2025. As of that date, CMS will no longer accept or review Workers’ Compensation MSA proposals with a zero-dollar allocation. Because CMS will no longer approve a zero MSA, the parties will be solely responsible for ensuring that Medicare’s interests are protected and whether a zero-dollar MSA is appropriate and can be supported by documentation.
Moreover, without this protection, both Medicare beneficiaries and Employers/Carriers lack the previously provided finality and/or assurance that they are protected from CMS. This means that once this change goes into effect, CMS will no longer stand behind zero-dollar MSAs and Medicare may deny related medical claims in the future or pursue recovery for related medical claims that Medicare paid up to the full amount of the settlement, judgment, award, or other payment.
Compliance with CMS’s requirements is understood when a settlement is only for past medical expenses and there is no evidence that the beneficiary or Employer/Carrier are attempting to maximize other aspects of the settlement to Medicare’s detriment. Another instance where an MSA is not needed with no concern for future liability is where medical remain open.
Other means to ensure compliance with CMS’s guidelines to protect Medicare’s interests include:
- Obtaining an opinion from the beneficiaries treating physician that to a reasonable degree of medical certainty no additional medical treatment or medication is required for the work-related injury or condition being settled; or
- The Employer/Carrier denied the claim from the outset and no payments have been made for medical or compensation benefits (other than to investigate or defend) and the settlement does not allocate a certain amount for specific future or past medical or prescriptions; or
- The appropriate workers’ compensation Court or Board has rendered a decision on the merits that the Employer/Carrier is not liable for any additional medical or compensation benefits and the settlement does not allocate a certain amount for specific future or past medical or prescriptions; or
- The Employer/Carrier denied the claim within the state statutory timeframe allowed to pay without prejudice (if applicable in your state) during investigation period, benefits are not actively being paid, and the settlement does not allocate a certain amount for specific future or past medical or prescriptions.
This new policy will streamline the settlement process for CMS. However, it also raises the risk for settlements with zero-dollar MSAs as down the line CMS may play “Monday Morning Quarterback” and second guess the reasoning and support for one. Now, more than ever, zero-dollar MSAs will need to be thoroughly documented to protect all parties involved.
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