Workers' Compensation: WCMSAs: What You Need to Know

The Centers for Medicare & Medicaid Services (CMS) recently hosted an informative webinar on Workers' Compensation Medicare Set-Asides (WCMSAs), shedding light on these crucial financial agreements and their impact on workers' compensation claims.

A WCMSA is a designated portion of a Workers' Compensation (WC) settlement set aside to cover future medical and prescription drug costs related to a work injury. This webinar emphasized the ultimate purpose of WCMSAs: protecting Medicare's interests by ensuring funds are available for future medical costs when a worker is, or is likely to become, a Medicare beneficiary.

The insights from this webinar are particularly relevant for claimants, carriers, and attorneys involved in workers' compensation claims, as understanding WCMSAs is crucial for smooth claim resolution and uninterrupted Medicare payments.

Key Takeaways from the Webinar:

Purpose of WCMSAs: WCMSAs are financial agreements intended to protect Medicare's interests by allocating a portion of a WC settlement for future medical expenses related to a work injury, especially when the worker is or will become a Medicare beneficiary.
Medicare Secondary Payer (MSP) Provisions: Under MSP provisions, Medicare generally does not pay for medical expenses when payment can reasonably be expected from Workers' Compensation. WCMSAs help fulfill this requirement by ensuring funds are available for work-related injury medical costs. As of April 4, 2025, WCMSA information must be included in reporting.
Calculation and Funding: WCMSA calculations are case-by-case, based on factors like injury severity, expected future medical costs, and the worker's age and health. They can be funded in two ways: lump sum or structured annuity.

Lump Sum WCMSA: The injured party receives a single payment to cover all future medical expenses. Medicare will not pay for related medical expenses until these funds are fully exhausted. Lump sum WCMSAs are generally easier to monitor.
Structured WCMSA: Payments are made on a defined schedule over future years. An initial deposit (seed money) is required, followed by annual deposits. Unused funds roll over, and Medicare will pay primarily if the fund is appropriately exhausted within a given annual period.

When a WCMSA is Not Necessary: A WCMSA is not necessary if the injured individual is only compensated for medical expenses before settlement, and there's no attempt to maximize other settlement aspects (like lost wages) to Medicare's detriment.
Important Change for Zero-Dollar Allocations: Effective July 17, 2025, CMS will no longer accept or review WCMSA proposals with a zero-dollar ($0) allocation.
Voluntary Submission and Review: While not statutorily required, submitting a WCMSA proposal to CMS for review is recommended. This voluntary process provides certainty and ensures Medicare will resume payments upon appropriate exhaustion of WCMSA funds.
Review Thresholds: WCMSA proposals will only be reviewed if the claimant is a Medicare beneficiary and the settlement is over $25,000, or if the claimant is expected to enroll in Medicare within 30 months of settlement and the anticipated total settlement is over $250,000.
Submission Methods: WCMSAs can be submitted electronically via the Workers Compensation Medicare Set Aside Portal (WCMSAP) (recommended for efficiency) or by mail.
Workers' Compensation Review Contractor (WCRC): The WCRC independently reviews voluntary WCMSAs for the adequacy of medical and prescription drug costs. They assess the likely need and prices of treatments for the claimant's life expectancy.
Case Completion: After WCRC review, if thresholds are met, the WCRC recommends the final WCMSA amount for CMS approval, and an approval letter is issued. CMS aims to review and decide on proposals within 45-60 days of receiving all relevant documents.
Re-Review and Amended Review: Under specific circumstances, submitters can request a one-time re-review for mathematical or submission errors. An amended review can be requested if the case hasn't been settled and projected care changes result in a 10% or $10,000 difference in the approved amount.
Account Administration: WCMSA accounts can be professionally administered or self-administered. All funds must be in an interest-bearing account, separate from personal savings. Accurate record-keeping and annual attestations of fund usage are required.
Notice of Settlement Letter: Beginning in April 2025, Workers' Compensation Insurance Carriers are required to report WCMSA information on all WC claims involving Medicare beneficiaries with a settlement. This generates a "Notice of Settlement Letter" to claimants, providing information on appropriate fund use.
Non-Voluntary Process: If the voluntary submission process is not used, Medicare will still use information from mandatory insurer reporting to coordinate benefits and expects adherence to established fund disposition procedures, including attestation.

This information underscores the importance of proper WCMSA management to ensure seamless coordination between Workers' Compensation settlements and Medicare benefits, ultimately impacting the resolution of claims for beneficiaries.

Recommended Citation: Gelman, Jon, WCMSAs: What You Need to Know (06/29/2025) WCMSAs: What You Need to Know

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*Jon L. Gelman of Wayne, NJ, is the author of NJ Workers' Compensation Law (West-Thomson-Reuters) and co-author of the national treatise Modern Workers' Compensation Law (West-Thomson-Reuters). For over five decades, the Law Offices of Jon Gelman 1.973.696.7900
jon@gelmans.com has represented injured workers and their families who have suffered occupational illnesses and diseases.