Medicare does not waive its interest in future medical expenses simply because a workers' compensation case settles. Section 1862(b) of the Social Security Act requires that Medicare remain the secondary payer when another entity, including a workers' comp carrier, is responsible for medical costs. When a case settles and medical treatment is closed out, the settlement must account for Medicare's future interest or the beneficiary risks having Medicare refuse to pay for future related treatment until the set-aside amount is exhausted. That mechanism is the Workers' Compensation Medicare Set-Aside Arrangement, the WCMSA.
Who Needs a WCMSA
A WCMSA is appropriate when two conditions are met: the claimant is a Medicare beneficiary or is reasonably expected to become one within 30 months of the settlement date, and the settlement will close out the employer or carrier's obligation for future medical expenses related to the work injury.
For the first prong, the 30-month window captures claimants who are currently enrolled in Medicare, claimants who are 62.5 years old or older (approaching Medicare eligibility at 65 with 2.5 years of margin), and claimants who have applied for or are expected to receive Social Security Disability Insurance, since SSDI recipients become Medicare-eligible after a 24-month waiting period. If your client is 50 years old with no pending disability application and no Medicare enrollment, a WCMSA may not be required, but document your analysis in the file.
For the second prong, the trigger is settlement structure: if the settlement leaves the employer or carrier responsible for future medical treatment on a continuing basis, there is no need for a set-aside. The WCMSA question only arises when the settlement is a complete close-out of future medical, typically through a Compromise and Release in California or a similar final settlement agreement in other states.
The CMS Voluntary Review Thresholds
CMS maintains a voluntary review program for WCMSA proposals. Submission to CMS for approval is not required by statute, but without CMS approval the set-aside amount is not protected from a Medicare secondary payer dispute if CMS later claims the amount was inadequate. CMS will review a proposal if two conditions are met: the claimant is a current Medicare beneficiary and the total settlement amount exceeds $25,000, or the claimant has a reasonable expectation of Medicare enrollment within 30 months and the total settlement amount exceeds $250,000.
If the case falls below those thresholds, you can proceed with a self-calculated MSA without CMS review, but document the methodology. CMS has issued no-review thresholds of $750 in cases where the projected future medical need is minimal, but in practice attorneys use that exception only for cases with resolved injuries and no expected ongoing treatment.
A CMS-approved WCMSA binds Medicare. It will not seek recovery for future treatment costs related to the work injury as long as the set-aside funds are properly administered and exhausted before Medicare coverage resumes. A non-approved MSA carries the risk of a later CMS determination that the amount was insufficient, leaving the claimant's Medicare coverage for related future treatment in jeopardy.
Minimizing the Set-Aside Amount
CMS calculates the WCMSA using the actual, rated cost of future medical treatment, priced at fee-schedule rates, over the claimant's projected life expectancy. The methodology rewards accurate, well-documented medical evidence. The goal for plaintiff counsel is to present CMS with a life care plan that reflects the medically necessary and expected treatment, not a worst-case projection that captures every possible future complication.
Several strategies help minimize the set-aside amount legitimately:
- Accurate life expectancy documentation: If the claimant has co-morbidities that reduce life expectancy below standard actuarial tables, a rated age analysis from a life expectancy vendor should be submitted with the MSA proposal. CMS will use the rated age, not the standard table, when the documentation supports it.
- MMI treatment plan documentation: Secure a detailed opinion from the treating physician about what treatment is medically necessary at maximum medical improvement, specifically. Future speculative surgeries that are possible but not probable should not be included in the life care plan.
- Pricing at fee schedule rates: CMS prices future treatment at the applicable Medicare fee schedule, not at billed charges. If the life care plan uses hospital list prices rather than Medicare-allowable rates, the set-aside will be inflated. The life care planner retained for the MSA proposal should use Medicare pricing throughout.
- Allocation only to work-related conditions: The set-aside covers only future treatment for the work-related injury. Pre-existing conditions and unrelated medical needs are excluded. A detailed treatment history that separates work-related care from background treatment strengthens the allocation argument.
Administration: Professional Administrator vs. Self-Administration
Once the WCMSA is funded and CMS has approved it, the set-aside must be administered correctly or Medicare may treat the funds as improperly dissipated. The claimant has two main options: self-administration or professional administration through a CMS-compliant MSA administrator.
Self-administration requires the claimant to maintain a separate, interest-bearing account dedicated to the set-aside funds, pay only for Medicare-covered, work-injury-related expenses from the account, submit annual attestations to CMS documenting expenditures, and report exhaustion of the account before Medicare resumes coverage. Many claimants lack the organizational capacity to do this correctly over a period of years, creating risk of a CMS challenge to coverage later in life when the consequences are most severe.
Professional administration is more expensive but produces a compliant annual accounting and reduces Medicare secondary payer risk. For catastrophic injuries with large set-aside amounts and long life expectancy projections, professional administration is generally the right choice. For the disbursement mechanics and how WCMSA administration interacts with other lien resolutions at settlement, see the liens and settlement resources on this site. For the broader workers' comp settlement framework, including the C&R versus Stip with Award decision that drives the MSA question, see the workers' comp archive.