The Centers for Medicare and Medicaid Services (CMS) has announced that it will maintain the current threshold of $750 for workers' compensation settlements in 2025. This threshold determines when settlements must be reported to Medicare and conditional payments must be repaid. Let's dive into what this means and how CMS made this decision.
Understanding the Threshold
The threshold applies to workers' compensation settlements where the carrier does not have ongoing responsibility for medical expenses. For settlements of $750 or less:
- No reporting to Medicare is required
- No repayment of conditional payments is necessary
This policy streamlines the settlement process for smaller cases while protecting Medicare's interests in larger settlements.
How CMS Calculated the Threshold
The calculation process involves several key steps and metrics:
Cost of Collection Analysis
CMS reviewed the costs of identifying and recovering conditional payments through its Benefit Coordination & Recovery Center (BCRC). The total cost for recovery activities across liability, no-fault, and workers' compensation cases was $53,942,108.80.
To determine the average cost per case, CMS divided the total cost by the number of demand letters sent (159,231), resulting in an average collection cost of $339 per case.
Workers' Compensation Settlement Data
CMS analyzed workers' compensation settlements in various ranges to determine where the $339 collection cost would be most effective. The data showed:
- Settlements $0-$300: Average demand of $112.10
- Settlements $301-$500: Average demand of $316.13
- Settlements $501-$750: Average demand of $585.86
- Settlements $751-$1,000: Average demand of $757.26
The $750 threshold was maintained because the average demand amount in the $501-$750 range ($585.86) exceeded the collection cost of $339 without exceeding it too much, making it a cost-effective cutoff point.
Impact on Stakeholders
This threshold helps:
- Reduce administrative burden for smaller settlements
- Save processing costs for both CMS and insurers
- Allow focus on larger settlements where recovery is more cost-effective
- Provide clarity and consistency for workers' compensation professionals
Looking Forward
Maintaining the $750 threshold for 2025 suggests stability in CMS's approach to workers' compensation settlements. Stakeholders can continue to use established practices for handling settlements below this amount while ensuring proper reporting and repayment for larger settlements.
This threshold will remain in effect throughout 2025. CMS is likely to review and adjust it for 2026 based on updated cost analysis and recovery data.
jon@gelmans.com has represented injured workers and their families who have suffered occupational illnesses and diseases.
LinkedIn: JonGelman
LinkedIn Group: Injured Workers Law & Advocacy Group
Author: "Workers' Compensation Law" West-Thomson-Reuters
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