As the September 30 deadline looms, workers' compensation professionals nationwide face an unprecedented crisis that could freeze thousands of settlements, leaving injured workers in a state of financial limbo.
The potential government shutdown threatens to cripple the Centers for Medicare & Medicaid Services (CMS) operations that are essential to finalizing workers' compensation settlements across America. While Medicare itself remains a mandatory program, the administrative machinery that processes conditional payments—the Benefits Coordination & Recovery Center (BCRC)—faces devastating staffing cuts, which will bring settlement activity to a grinding halt.
The 49% Solution: A System on Life Support
During a shutdown, approximately 49% of CMS staff would be furloughed. This isn't just an inconvenience—it's a catastrophic blow to the conditional payment recovery process that underpins every workers' compensation settlement involving Medicare beneficiaries.
The BCRC, responsible for issuing Conditional Payment Letters (CPLs) and processing Medicare's recovery claims, operates with reduced staff even under normal circumstances. Cut that workforce in half, and the system essentially collapses. Attorneys, adjusters, and injured workers who need current conditional payment amounts to finalize settlements will find themselves staring at unanswered phone lines and unprocessed requests.
The Settlement Standstill
Here's the harsh reality: You cannot safely close a workers' compensation case involving a Medicare beneficiary without knowing Medicare's conditional payment amount. Federal law requires reimbursement within 60 days of settlement, and penalties for non-compliance are severe—including double damages.
What gets delayed:
- Conditional Payment Letters: These critical documents list all Medicare payments related to a workers' compensation injury. Without updated CPLs, parties cannot determine accurate settlement amounts or properly protect Medicare's interests. During a shutdown, issuance of new CPLs and updates to existing ones will grind to a halt.
- Final Demand Processing: Even if you have a current CPL, you need a final demand letter after settlement occurs. The BCRC must calculate the final recovery amount, but furloughed staff cannot issue these demands. Settlements may close, but Medicare's lien cannot be satisfied.
- WCMSA Reviews: Workers' Compensation Medicare Set-Aside Arrangements require CMS review to provide certainty that future medical expenses are properly allocated. These reviews, already taking months under normal conditions, will be indefinitely suspended. Without WCMSA approval, many high-value cases simply cannot proceed.
- Dispute Resolution: Found claims on your CPL that aren't related to the workers' compensation injury? Good luck disputing them during a shutdown. The BCRC staff who review and process disputes will be furloughed, leaving incorrect recovery amounts unchallenged.
The Medicare Secondary Payer Recovery Portal: A Digital Ghost Town
The MSPRP—the online system that provides 24/7 access to conditional payment information—may technically remain operational, but without staff to process requests, update information, or provide technical support, it becomes a digital dead end. You might log in, but you won't get answers.
Ripple Effects Across the Nation
The shutdown's impact cascades through every level of the workers' compensation system:
- For Injured Workers: Settlement funds remain frozen, medical bills pile up, and financial uncertainty grows. Many depend on these settlements to pay for ongoing care or to cover living expenses after a work injury. Delays of weeks or months can mean genuine hardship.
- For Employers and Insurers: Claim reserves must remain open, increasing liability exposure. Cases that should close remain on the books, complicating financial reporting and budget forecasting. The carrying costs of delayed settlements add up quickly.
- For Attorneys: Cases that have taken months or years to negotiate cannot be finalized. Client frustration mounts. Contingency fees remain unpaid. And the worst part? No one can say when normal operations will resume.
- For Medicare: Ironically, the shutdown that's supposed to save taxpayer money may cost Medicare millions. Delayed recoveries mean delayed reimbursements. When staff finally return, they face a mountain of backlogged cases, increasing the likelihood of errors, missed recoveries, and administrative waste.
An Unprecedented Threat: Permanent Damage
Previous shutdowns involved temporary furloughs with guaranteed back pay and eventual return to normal operations. This time is different.
The Trump administration has issued a chilling directive through the Office of Management and Budget: agencies must prepare "reduction in force" plans that go beyond traditional furloughs. These plans could permanently eliminate federal jobs, even in essential services. CMS staff who process conditional payments might not just be sent home temporarily—they could lose their jobs permanently.
This isn't just about a temporary disruption. We're looking at potential permanent damage to Medicare's recovery infrastructure. Staff with years of specialized knowledge in conditional payment processing, Medicare Secondary Payer law, and WCMSA review could be gone for good. The institutional knowledge lost could take years to rebuild.
Even after the shutdown ends, the backlog could be staggering. If the shutdown lasts weeks, the BCRC could face months of delayed cases. Processing times that already stretch 60-90 days under normal conditions could balloon to six months or more.
What You Can Do Now
If you're involved in workers' compensation settlements, take action immediately:
1. Request Updated CPLs Today: Contact the BCRC at 1-855-798-2627 now to request current conditional payment information for any pending settlements. Don't wait until you need it.
2. Accelerate Settlement Timelines: If you're close to settling a case, push to finalize it before September 30. Get that settlement agreement signed and obtain your final demand letter before the shutdown begins.
3. Document Everything: Keep detailed records of all BCRC communications, CPL requests, and settlement negotiations. If disputes arise later about delayed reimbursements, documentation will be critical.
4. Build Contingency Time: For cases that cannot close before the shutdown, revise your settlement timelines to account for potentially months of delay. Set realistic expectations with clients and opposing parties.
5. Consider Conditional Settlements: In some jurisdictions, you may be able to structure settlements that are conditional upon obtaining Medicare's final recovery amount. Consult with counsel about whether this approach works in your state.
6. Monitor WCMSA Submissions: If you have WCMSAs pending with CMS, check their status immediately. Consider whether to proceed with settlements under WCMSA guidelines even without formal CMS approval, understanding the increased risk.
The Bottom Line
A government shutdown doesn't just close national parks and delay passport applications. For the workers' compensation system, it creates a chokepoint that affects thousands of injured workers, billions of dollars in settlements, and the fundamental functioning of Medicare's recovery process.
The mandatory nature of Medicare funding provides cold comfort when the administrative staff needed to process your settlements are sitting at home without pay—or worse, facing permanent job loss. The system's complexity means there are no easy workarounds, no simple fixes, and no way to just "work around" the BCRC.
As September 30 approaches, the workers' compensation community faces a crisis that will test the system's resilience. The question isn't whether a shutdown will cause delays—it's how severe those delays will become and how long the recovery will take.
For an industry built on the timely resolution of claims and the efficient administration of benefits, a government shutdown represents nothing less than a systems failure with nationwide consequences. The time to prepare was yesterday. The time to act is now.
Federal workers are guaranteed back pay after a shutdown ends, but the timeline for clearing backlogs in conditional payment processing remains uncertain. Settlement professionals should monitor developments closely and maintain regular contact with BCRC as the September 30 deadline approaches.
Recommended Citation: Gelman, Jon, Shutdown Threatens Workers' Compensation Settlements (09/26/2025) https://workers-compensation.blogspot.com/2025/09/shutdown-threatens-workers-compensation.html
Blog: Workers' Compensation
LinkedIn: JonGelman
LinkedIn Group: Injured Workers Law & Advocacy Group
Author: "Workers' Compensation Law" West-Thomson-Reuters
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