Saved by Zero: Important Updates to the Workers’ Compensation MSA Reference Guide 

On January 17, 2025, the Centers for Medicare & Medicaid Services (CMS) issued an updated Workers’ Compensation Medicare Set Aside (WCMSA) Reference Guide (v4.2). There were several changes, but the most important relates to the policy update affecting zero-dollar ($0) Medicare Set Asides (MSAs). Beginning on July 17, 2025, CMS will no longer accept or review zero-dollar MSA proposals. See WCMSA Reference Guide, v4.2, Sec. 4.2. We’ll break down these changes and highlight important considerations going forward.  

What is a Zero Dollar MSA?  

In certain types of accepted workers’ compensation settlements an MSA is prepared and funded “to protect Medicare’s interests…” See CMS’ WCMSA website. An MSA is a determination of lifetime post-settlement Medicare-covered healthcare and prescription drug expenses related to the underlying workers’ compensation claim. See WCMSA Reference Guide, v4.2, Sec. 3.0. The intent of an MSA is to ensure there’s not a post-settlement cost-shift to the Medicare program. Id.  

However, what about workers’ compensation claims that do not implicate post-settlement medicals? These could include denied claims, instances where no future medical treatment will occur, court orders on the merits relieving a payer of obligations, certain state laws which act as a bar to benefits, etc. In settlements involving these types of claims, it may be appropriate to forego funding a traditional MSA and instead conduct an analysis and written determination that no funds should be set aside – i.e., a “zero-dollar MSA.” 

CMS states an MSA isn’t necessary under the following conditions because they indicate Medicare’s interests are already protected:  

• The facts of the case demonstrate that the injured individual is only being compensated 

for past medical expenses (i.e., for services furnished prior to the settlement); and 

• There is no evidence that the individual is attempting to maximize the other aspects of the 

settlement (e.g., the lost wages and disability portions of the settlement) to Medicare’s 

detriment.  

See WCMSA Reference Guide, Sec. 4.2. 

Legal Zero 

The MSP regulatory provision which provides the foundation for MSAs makes key distinctions between “commutation” and “compromise” settlements in workers’ compensation. See 42 CFR 411.46. A commutation of benefits settlement usually involves, in addition to payment for wages, compensation for future medical expenses associated with the work-related injury and relieves the payer of any ongoing obligation to pay for such medical treatment (i.e., “full and final settlement”). In these types of settlements an MSA is prepared and funded to prevent Medicare from paying primary for future medical expenses. See WCMSA Reference Guide, v4.2, Sec. 3.0.  

As distinguished from a commutation settlement, a compromise settlement usually involves an underlying workers’ compensation claim which is denied or controverted. Payment made to the injured worker in a compromise settlement is typically “…less than the injured individual would have received if he or she had received full reimbursement for… life long medical treatment for the injury or illness.” See CMS’ Patel Memo. Of note, a workers’ compensation “settlement can have both compromise and commutation aspects.” WCMSA Reference Guide at Sec 4.1.1.  

Where a compromise settlement involving an underlying claim that is wholly denied, and no payments (either medical or indemnify) were made, parties will often forego funding an MSA since “medical expenses incurred after the date of the settlement are payable under Medicare.” See 42 CFR 411.46(d)(1). There may be situations where further circumstances exist which support the denied posture, such as a court order or judicial determination on the merits upholding the denial.  

In the instance of a denied claim that resolves by way of a compromise settlement, in efforts to take Medicare’s interests into account, the parties may opt to prepare a memorandum supporting why no funds were set aside. Since the basis for this determination is legal in nature, they are often referred to as a “legal zero.”  

Medical Zero  

In contrast to a legal zero, a “medical zero” MSA refers to a situation where no funds are allocated based on medical grounds. Support for a medical zero may include a statement by the treating physician indicating the underlying workers’ compensation condition has resolved and that no further treatment will be required – along with corresponding healthcare and payment records that reflect this. Essentially, a medical zero is appropriate when there is no continued requirement for Medicare-covered injury-related treatment. Thus, there is no risk of a cost-shift to the Medicare Trust post-settlement and no need to fund an MSA. In these circumstances, the parties may choose to analyze the claim file and prepare a formalized memorandum supporting the determination not to fund an MSA – i.e., a “medical zero.”  

Voluntary Submission of Zero MSAs Going Away  

Historically, in instances where a settlement otherwise met CMS’ review thresholds for submission of a zero-dollar MSA, the parties might voluntarily submit a proposal to the Workers’ Compensation Review Contractor (WCRC) for review and approval prior to finalizing a settlement. Over the years, with respect to reviewing zero-dollar submissions, CMS made changes to the required supporting documentation and information.  

There have been accounts shared in the submitter community of a protracted review process involving zero-dollar MSAs, which include onerous development requests (when CMS asks for additional documentation), disregard for claim denial relying upon state workers’ compensation laws and sound claim determinations – and most concerning of all, counter-higher decisions where CMS indicates a dollar amount (instead of approving a zero-dollar MSA) effectively forcing parties to potentially fund an MSA (in a claim that otherwise doesn’t warrant an MSA).  

However, with the updated reference guide, as of “…July 17, 2025, CMS will no longer accept or review WCMSA proposals with a zero-dollar ($0) allocation.” See WCMSA Reference Guide, v4.2, Sec. 4.2.  

Clarity Around Zero-Dollar MSA Criteria  

Along with the upcoming elimination of CMS’ review of zero-dollar MSAs, the agency also articulated conditions in Sec. 4.2 of the Reference Guide which may demonstrate that Medicare’s interest have been protected. They are as follows:  

• The injured workers’ treating doctor documents in medical records that “to a reasonable degree of medical certainty” the injured worker no longer requires treatment or prescription drugs related to the condition(s) which are subject to the workers’ compensation settlement (Of note this provision has existed in previous versions of the guide. See also above for discussion on “medical zeros”); or 

• The workers’ compensation primary payer has denied benefits under state workers’ compensation law and has made no payments, medical or indemnity, save for investigatory purposes prior to any settlement, that medical/indemnity benefits are not being actively paid, and the settlement agreement doesn’t attribute any amounts for future or past medical care as a condition of resolution; or  

• An applicable judicial body of competent jurisdiction determined via a “ruling on the merits” that the workers’ compensation payer isn’t responsible for any medical and indemnity benefits, such benefits are not presently being paid, and the underlying agreement does not attribute certain amounts to future medicals; or  

• The underlying workers’ compensation claim was denied by the payer within the applicable statutory period permitted to “pay without prejudice”, no benefits are actively being paid, and the settlement agreement doesn’t allocate amounts to future medicals.   

Zero Path Forward  

This new policy shouldn’t negate compliance attention towards denied claims and/or those which may not implicate post-settlement medicals. Instead, each claim should be reviewed and analyzed for appropriate treatment. Moreover, as CMS indicates, workers’ compensation payers, “…should consider the above parameters in determining whether a zero-dollar WCMSA allocation is appropriate and maintain documentation to support that allocation.” See WCMSA Reference Guide, v4.2, Sec. 4.2.  

As many zero-dollar MSAs are based upon rights and obligations under complex MSP provisions vis-à-vis nuanced workers’ compensation laws, it is incumbent upon parties to ensure a thorough legal analysis is completed by an experienced attorney versed in these areas.  

Attention around appropriate zero-dollar MSA treatment is also of importance in light of upcoming Sec. 111 reporting obligations relative to workers’ compensation settlements. CMS will have unprecedented visibility into all workers’ compensation settlements involving MSAs, even those where no MSA funds were set aside. The Sec. 111 reporting data will not indicate whether a zero-MSA opinion was prepared, but it will clue Medicare into the fact that no funds were set aside. CMS could identify those claims involving Ongoing Responsibility for Medicals (ORM), or higher settlement amounts, or potentially cross-reference other reported claims data or information in paying scrutiny to a particular settlement. Given the agency’s visibility, it is prudent that parties who forego an MSA should ensure proper independent analysis by an MSP compliance expert, a formalized determination for the claim file, and proper review and inclusion of appropriate language in the settlement documentation. This will ensure any potential scrutiny paid towards the claim will be defensible and will mitigate against any future risk or exposure to all settling parties.  

Additional Updates  

CMS also updated Sec. 9.4.3. of the WCMSA Reference Guide to add additional language around the WCRC’s MSA review process. The updated provision is as follows:  

The WCRC final determination relies on the claimant’s past use and future recommended treatment as supported by the medical records. Evidence-based guidelines for prescription medication and medical treatment allocations and current peer-reviewed medical literature are also reviewed; however, these are guidelines, not rules. See Appendix 4 for a list of resources the WCRC uses. Treating provider plans are given preference where the two are at odds. 

This highlights the primacy of the treating physician and indications reflected in the medical / treatment records. However, as noted, evidence-based guidelines for treatment will still be considered.  

Lastly, additional updates included revised and corrected example calculations for Intrathecal Pump, Spinal Cord Stimulator, and Peripheral Nerve stimulator replacements in Sec. 9.4.5. 

Wrap-Up  

Medicare Secondary Payer is constantly changing and 2025 is already off to a hot start with these updates to the Reference Guide. While the workers’ compensation community received a welcomed reprieve from submitting zero-dollar MSA proposals, because of CMS’ upcoming reporting changes, parties must remain vigilant in their compliance treatment of settlements that do not warrant a traditionally funded MSA. Reach out to J29 to stay ahead of it all and ensure you’re in compliance and applying best practices.  

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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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