Are you Ready? Ensuring Your Workers’ Compensation Medicare Set Aside Program is in Order  

The day is drawing near. Beginning on April 4, 2025, workers’ compensation insurance carriers and self-insured entities must report certain data related to settlements with Medicare beneficiaries that include a Medicare Set Aside (MSA).  

Sec. 111’s Expansion & Implications for Your MSA Program  

Since its inception in 2007, Sec. 111 reporting has crept into every aspect of Medicare Secondary Payer (MSP) compliance. Initially a mechanism to provide notice of secondary payer instances, Sec. 111 soon became the hub for coordination of benefits and conditional payment identification and recovery.  

Not only is Sec. 111 a stand-alone reporting obligation for insurance carriers and self-insureds, known in the parlance as Responsible Reporting Entities (RREs), with potential penalties for non-compliance, it’s also the key driver for Medicare’s visibility and enforcement of all other MSP compliance provisions – including MSAs.  

Upcoming reporting changes will provide the Centers for Medicare & Medicaid Services (CMS) with unprecedented visibility and insight into all instances of an MSA in a workers’ compensation settlement with a Medicare beneficiary. The implications for oversight and enforcement are far-reaching and workers’ compensation payers will need to ensure their MSA program is in order.  

What New Information is Required?  

On April 4, 2025, RREs will be required to report certain data in workers’ compensation Total Payment Obligation to Claimant (TPOC) events (settlements) with Medicare beneficiaries involving an MSA. This is required regardless of whether a settlement meets CMS’ voluntary review thresholds for submission of an MSA. The data required in some instances is situational. It is as follows in the chart below and can be found in the Sec. 111 User Guide, at Chapter V, Appendix A.   

What Will Medicare Do with This Data?  

Medicare has indicated that, “[c]ollection of the information is necessary to assist Medicare in making appropriate determinations concerning coordination of benefits under [42] U.S.C. 1395y(b)(8)(ii), since Medicare should not be a primary payer for future medical services related to a WC injury as specified in the WC settlement as per 42 CFR 411.46.” See CMS’ Technical Change to Workers’ Compensation Reporting.  

In other words, Medicare will use the MSA Sec. 111 TPOC data reported to ensure it doesn’t pay when MSA funds are available. This is accomplished by flagging a beneficiary’s Medicare record, known as a Common Working File (CWF), with an MSA code. “A WCMSA ‘W’ record will be posted to the Common Working File (CWF) preventing payment of medical services related to injuries described by the diagnosis codes.” See CMS’ Sec. 111 Change to Workers’ Compensation Reporting Webinar #2, at Slide 5.  

Medicare will now have unprecedented insight on all settlements involving an MSA, including whether one was done or submitted. This should give all parties to a workers’ compensation settlement pause and reflect on ensuring their MSA program is in order to address some critical areas in light of these new reporting changes.  

MSA Program Areas of Importance  

Considering Medicare’s Interests in All Workers’ Compensation Settlements  

The new reporting requirements highlight the fact that, “[a]ll parties in a workers’ compensation case have significant responsibilities under the [MSP] laws to protect Medicare’s interests when resolving cases that include future medical expenses.” See CMS’ WCMSA webpage. This is the case even if a settlement does not meet CMS’ voluntary review thresholds for MSAs. As CMS notes, those “thresholds are created based on CMS’ workload and are not intended to indicate that claimants may settle below the threshold with impunity. Claimants must still consider Medicare’s interests in all WC cases and ensure that Medicare pays secondary to WC in such cases.” See WCMSA Reference Guide, v4.2, Sec. 8.1.  

Where a Medicare beneficiary resolves their workers’ compensation claim and is compensated for future / post-settlement medical expenses, Medicare’s interests must be protected and the “…recommended method to protect Medicare’s interests is a [workers’ compensation Medicare Set Aside].” See CMS’ WCMSA webpage. 

As such, it will be critical for workers’ compensation claims payers to revisit their internal protocols and workflows to ensure MSA attention on applicable settlements.  

Incorporate a Reasonable & Defensible MSA in Non-Threshold Settlements  

If a settlement includes future medical expenses but doesn’t meet CMS’ voluntary review thresholds, Medicare’s interests should be protected by way of an MSA that is reasonable and defensible. CMS will now possess the amount and associated information relative to the MSA and if an MSA figure was arbitrarily chosen, this could pose issues for the beneficiary and settling parties – with potential denial of benefits or “…in the claimant needing to demonstrate complete exhaustion of the net settlement amount…” before Medicare will continue to pay. See WCMSA Reference Guide, Sec. 4.3.  

A reasonable and defensible MSA should possess the following attributes:  

• Case-Specific Allocation: the MSA must be based on the injured party’s healthcare treatment records, medical history and anticipated future care.  

• Reasonable medical cost estimate: the MSA should include reasonably anticipated Medicare-covered physician visits, surgeries, therapies, Durable Medical Equipment (DME), and prescription drugs, for the lifetime of the individual associated with the underlying established work-related injuries.  

• Justification: the MSA should “show the math” vs. “picking a round number” and contain documented rationale for any excluded treatment(s), if applicable.  

Given CMS’ visibility of the MSA amount via Sec. 111, a properly prepared MSA will allow the parties to defend against any scrutiny relative to the sufficiency of the allocation and there will be a medical and legal defense to any such inquiry related to a contention of allocation inadequacy.  

Non-Submit Considerations  

There are some unique considerations in light of the upcoming Sec. 111 TPOC MSA reporting requirements and CMS’ established policy position around non-submits contained in Sec. 4.3 of the WCMSA Reference Guide. Prior to the new MSA reporting requirements, CMS had little visibility with respect to whether a settlement met voluntary thresholds and if an MSA was incorporated. It’s possible the agency could have cross-referenced TPOC data with voluntary CMS submission information – but the agency indicated, “CMS historically has had limited or incomplete information on MSAs and [w]hile it might be possible to tie a voluntary [MSA] submission to a S111 Total Payment Obligation to Claimant (TPOC) report based on the beneficiary and Date of Incident (DOI), CMS cannot guarantee that the entities are using the voluntary WCMSA amounts.” See CMS’ Sec. 111 Change to Workers’ Compensation Reporting Webinar #2, at Slide 3. 

Moving forward, CMS will now know whether a settlement met voluntary review thresholds and if an MSA was incorporated and/or submitted (or not).  

CMS indicates that it may, in relation to a non-submit MSA, “...deny payment for medical services related to the WC injuries or illness, requiring attestation of appropriate exhaustion equal to the total settlement… before CMS will resume primary payment obligation for settled injuries or illnesses, unless it is shown, at the time of exhaustion of the MSA funds, that both the initial funding of the MSA was sufficient, and utilization of MSA funds was appropriate.” See WCMSA Reference Guide, Sec. 4.3.   

Therefore, given CMS’ non-submit policy position and their visibility via Sec. 111, in non-submit instances, the parties should ensure:  

• MSA Funding Sufficiency: care should be taken (see above) in preparing a reasonable / defensible allocation and with initial funding to cover “…the first surgery or procedure for each body part, and/or replacement and the first two years of annual payments.” See WCMSA Reference Guide, Sec. 5.2.  

• MSA Administration: a professional administrator is highly recommended to ensure that the MSA funds were spent appropriately, that attestation information is being transmitted to Medicare on time, and accurate records are being kept – not to mention potential savings which may extend the life of the funds.  

Administration Consideration 

Speaking of administration, the new Sec. 111 MSA reporting requirement highlights the importance of post-settlement administration of MSAs. The stated goal by CMS for the new reporting requirements is to coordinate benefits post-settlement. This is accomplished by CMS receiving MSA attestation information and the injured party adhering to CMS’ guidelines. One misstep could result in a denial of benefits or demonstration of appropriate exhaustion of the MSA – or worse – the entire settlement amount.   

On balance, most injured parties are not equipped to administer their own MSA. From placing funds in a separate interest-bearing account, to strict use of the account for Medicare-covered items, coordinating payment with providers, record-keeping, and attestation submission, etc., there’s a lot of room for error. This is why CMS indicates that, “[a]lthough beneficiaries may act as their own administrators, it is highly recommended that settlement recipients consider the use of a professional administrator for their funds.” See WCMSA Reference Guide, Sec. 17.0.  

The likely near-term greatest potential exposure vis-à-vis the new MSA TPOC reporting requirements comes from mishandling MSA funds and missteps in the administration process. An injured party having a professional administrator who can handle all aspects of MSA administration and coordinating their care with the MSA is in a much better position to avoid potential pitfalls.  

Cover Your Bases When No MSA Is Incorporated  

There are certain instances when a dollar-amount allocated MSA does not need to be prepared and incorporated in a settlement. See WCMSA Reference Guide, Sec. 4.2 and article covering Zero-MSAs here.  

Since CMS will have visibility – even in instances where no MSA was incorporated – it is important that the parties to a settlement properly document protecting Medicare’s interests. It could be inferred that where Ongoing Responsibility for Medicals was “no” from the outset, and where a TPOC occurred with zero (0) in the applicable Sec. 111 MSA amount field, that there was no legal basis to incorporate an MSA. However, if a zero-MSA analysis and opinion weren’t prepared, this may leave the parties to a settlement open for scrutiny and without the ability to fall back on an expert in the event CMS (or another party to the settlement) contested the decision to not set aside any funds.  

It would be much more difficult to infer (just from the Sec. 111 data) the validity setting aside no funds where ORM had been “yes” for the life of the claim – even though it’s permissible following receipt of a treating doctor’s written statement indicating the injured worker no longer requires treatment. See Sec. 4.2 of the WCMSA Reference Guide. In this example, certain documentation should be obtained. In addition to this, the most prudent approach is to retain the guidance of an independent expert to conduct an analysis and issue a legal opinion for the claim file indicating the basis and recommendation for not setting aside funds. This is especially the case now that CMS will not be reviewing zero-dollar MSA proposals.  

In the past, representatives from CMS have said that if they saw a high-dollar settlement and no MSA involved that this would potentially cause an inquiry. While there has been no indication by the agency that they will conduct audits relative to the lack of an MSA, it’s not a big stretch to imagine them doing so now that they will have all the data they need.   

Wrap Up 

Now’s the time for workers’ compensation payers to get their MSA house in order. With some small adjustments to approaching MSA compliance in light of the new MSA reporting requirements, you can confidently stay ahead of any potential risk. To discuss this article and these approaches to ensure compliance, you can reach Shawn at: Shawn.Deane@j29inc.com or at (866) 529-6771.   

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Author Bio   

Shawn Deane   

General Counsel & Vice President of Claims Solutions | J29   

Shawn.Deane@j29inc.com        

(866) 529-6771   

www.j29inc.com      

As General Counsel & Vice President of Claims Solutions, Shawn Deane leads J29’s legal and Medicare Secondary Payer (MSP) services team. Shawn is a practicing attorney and has over 17 years of experience in Medicare compliance, workers’ compensation, and insurance claims. He was previously General Counsel & Senior Vice President of Risk Management & Compliance at the nation’s largest professional administrator of Medicare Set Asides. Prior to that he was Vice President of Medicare Compliance & Policy at one of the country’s largest Medicare Set Aside vendors. He’s an industry expert and thought leader in workers’ compensation, Medicare Set Asides (MSAs) and Medicare compliance.    

About J29   

J29 is a women-owned business that offers Medicare Secondary Payer (MSP) compliance services providing Medicare Set Asides (MSAs), conditional payment / lien services and related solutions to all workers’ compensation stakeholders – including carriers, self-insureds, third-party administrators, and attorneys.  

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