Navigating the Web of MSAs in Workers’ Comp Settlements

As the U.S. working population ages, more workers are becoming eligible for Medicare every year. According to the Centers for Medicare & Medicaid Services (CMS), there are 67.7 million Medicare beneficiaries. In 2023, there were 2.6 million work-related injuries, according to data released by the U.S. Bureau of Labor Statistics.

Considering this data, it is fairly obvious that many work injuries involve Medicare beneficiaries. An injured worker’s Medicare status has long impacted the handling—and more specifically, the settlement—of their workers’ compensation claim. Recent changes in CMS reporting requirements will further complicate what is already a complex process.

Pursuant to CMS guidelines, Medicare’s interests must always be considered when settling a workers’ comp claim. This applies whether or not the injured worker is a Medicare beneficiary. While it is often assumed that a Medicare Set-Aside (MSA) must be submitted to CMS when the settlement involves a Medicare beneficiary or if it meets certain review thresholds if the injury worker is not yet a Medicare beneficiary, CMS’ review process is completely voluntary.

While there are many programs that involve the preparation of nonsubmit MSAs (MSAs prepared but not submitted for CMS approval), the insurance community wants the safe and guaranteed option that only CMS can provide and generally is hesitant to participate. CMS’ published guidelines are clear: If it approves a submitted MSA and underestimates the amount to be set aside, the agency will “eat” those added costs. However, in many circumstances, the price of certainty is not worth taking.

Submitting MSAs to CMS is a risky proposition for three main reasons. First, CMS takes a “snapshot” review approach to a claim. If an injured worker is taking two Percocet a day and going to physical therapy three times a week, CMS will assume this will continue for eternity. It refuses to consider that people might improve with time, may die if they keep taking the medication at the same frequency and dosage forever or the treatment plans may change. As one can guess, taking this snapshot approach and multiplying the current costs by the injured worker’s lifetime leads to substantial future costs.

The second reason why submission is risky is that CMS refuses to honor and follow state law, although its guidelines say it does.

For example, in Georgia, an injured worker’s medical treatment is capped at 400 weeks from their injury in the vast majority of cases. This is the rule, not the exception. Lifetime medical only applies if the claim is designated as catastrophic either by order or agreement of the parties. Catastrophic cases are severe, permanent injuries, which in many other states are referred to as “perm total” cases. Rather than simply inquiring as to whether the 400-week cap applies or not in a case, CMS requires settling parties to obtain a court order verifying that the case is not catastrophic. In other words, it makes settling parties go to a judge to simply verify that the law (medical is capped at 400 weeks) applies. It is an unnecessary step. Further, even when the parties get such an order, CMS has shown on multiple occasions the willingness to disregard said order and make its own independent judgment that a claim is catastrophic.

The third reason submission to CMS is risky is that there are no official appeals. There are two options to ask CMS to take a second look at a proposed MSA: amended review and re-review. However, they are very limited in scope and do not allow for a thorough review of the contents of the approved MSA. In most circumstances, trying to “appeal” is fruitless.

In contrast, using a nontraditional or nonsubmit MSA opens more opportunities for a challenge in the event CMS deems the set-aside amount insufficient. In most nonsubmit MSAs, the parties engage with a provider who prepares their own analysis of the future claim-related medical costs. Oftentimes, this is done with an evidence-based approach, which is intended to be more accurate and factors in a change in treatment plan over time, an option not provided by a traditional MSA. As part of the settlement, the parties agree to set aside the amount projected by the provider for future medical treatment but not to submit the proposal to CMS. If the injured worker exhausts the amount in their account, they then would submit their claims to CMS for future payment. At this point, CMS may decline to cover the care because it did not approve the MSA. The option available here, which is not available with a submitted MSA, is that the injured worker has a right to an administrative hearing to challenge the denial. Evidence can then be presented to a judge, which would support the reasonableness of the nonsubmit MSA. Many providers who prepare nonsubmit MSAs indemnify their proposals, providing a further safety net to the injured worker.

In January 2022, CMS issued guidance that basically disallowed nonsubmit MSAs. The Medicare service provider community reacted forcefully to this news, and in March 2022, CMS retracted that earlier guidance. Since March 2022, nonsubmit or evidence-based MSAs have been common, although some in the industry are still hesitant to prepare them as they seek that elusive (but risky) certainty.

In April 2025, CMS is going to begin requiring that all settlements involving Medicare beneficiaries be reported, regardless of the settlement amount. The agency has indicated that carriers must report data on the settlement, which includes the amount of the MSA and who prepared it. It is unknown why CMS has changed the reporting requirements, but the speculation is that it is trying to get more data on MSAs and how prevalent the nonsubmit process is, which could lead to it embracing that option or, more likely, trying (again) to end it. For this reason, the next several years will certainly be an interesting time for those handling workers’ compensation claims, especially those involving older workers.

Stinson is a partner in the Atlanta office of Swift Currie. He has handled workers’ compensation claims on behalf of employers and insurers for more than 20 years. Email: jeff.stinson@swiftcurrie.com.