The Centers for Medicare & Medicaid Services (CMS) has released its fiscal year 2025 statistics for Workers' Compensation Medicare Set-Aside Arrangements (WCMSAs), revealing a striking trend that should concern workers' compensation professionals: the gap between what parties propose and what CMS recommends is at an all-time high.
The 24% Problem
In FY2025, CMS recommended WCMSA amounts that were 24% higher than what was initially proposed—the most significant differential in the five-year reporting period. This represents a substantial jump from the 15% gap seen in FY2021, suggesting that initial proposals are increasingly falling short of CMS's expectations for adequate Medicare protection.
The numbers tell a compelling story. While parties proposed an average WCMSA of $69,628 per case, CMS countered with recommendations averaging $86,169—a difference of more than $16,500 per settlement. Across 13,884 cases in FY2025, this gap translated to nearly $230 million in additional set-aside funding recommended beyond initial proposals.
Volume and Value Trends
The latest data reveals several vital patterns:
Declining Case Volume: WCMSA recommendations completed dropped to 13,884 in FY2025, down 12% from the peak of 15,743 cases in FY2023. This decline may reflect increased settlement activity outside the WCMSA review process or changing injury patterns in workers' compensation.
Stable Average Settlements: Despite year-to-year fluctuations, the average settlement amount has remained relatively consistent, ranging from $152,000 to $171,000 over the five-year period. FY2025 saw an average settlement of $161,251.
Consistent Recommended Amounts: CMS's recommended WCMSA averages have held steady in the $81,000 to $86,000 range, suggesting their methodology and expectations remain essentially unchanged even as proposal patterns shift.
The Prescription Drug Factor
An often-overlooked aspect of WCMSAs is the significant portion allocated to prescription medications. In FY2025, prescription drugs accounted for approximately 20% of total recommended WCMSA amounts, averaging $17,501 per case. This represents a slight decrease from FY2023's average of $19,925, possibly reflecting pharmaceutical cost management efforts or changes in treatment protocols.
Medical services comprised the remaining 80% of recommendations, averaging $68,668 per case in FY2025. The relatively stable split between medical and pharmaceutical allocations across all five years suggests these proportions reflect fundamental treatment patterns in workers' compensation cases.
What This Means for Practitioners
The widening gap between proposed and recommended amounts carries essential implications:
Conservative Proposals Backfire: The data suggests that overly conservative initial proposals may be prompting CMS to apply more aggressive scrutiny and larger upward adjustments. A proposal that appears unreasonably low may trigger closer review rather than smooth approval.
Planning is Critical: With CMS consistently recommending amounts significantly above proposals, parties should factor this predictable increase into settlement negotiations from the outset. Waiting for CMS feedback can delay closures and complicate negotiations.
Methodology Matters: The consistency of CMS's recommended amounts suggests their evaluation methodology is well-established. Understanding CMS's analytical framework and projection assumptions is essential for developing proposals that align with their expectations.
Future Care Planning: The steady allocation between medical services and prescriptions indicates that comprehensive future medical planning—not just immediate care needs—drives WCMSA valuations. Proposals that focus primarily on current treatment without adequate consideration of long-term medication needs are likely to face significant adjustments.
Looking Ahead
As we close out FY2025, the trend toward larger proposal-versus-recommendation gaps raises questions about whether current WCMSA development practices adequately account for Medicare's protection requirements. The data suggests that recalibration may be necessary.
For workers' compensation professionals, the message is clear: conservative proposals are not a safe strategy. With CMS now recommending amounts 24% above initial proposals, stakeholders would be wise to invest in more robust front-end analysis and accept that adequate Medicare protection comes at a price that continues to exceed industry expectations.
The FY2025 statistics serve as both a benchmark and a warning—understanding CMS's evolving standards isn't optional for anyone involved in workers' compensation settlements with Medicare beneficiaries.
Recommended Citation: Gelman, Jon L., WCMSA Gap Widens Dramatically, Workers' Compensation, 12/09/2025.
Blog: Workers' Compensation
LinkedIn: JonGelman
LinkedIn Group: Injured Workers Law & Advocacy Group
Author: "Workers' Compensation Law" West-Thomson-Reuters
Mastodon:@gelman@mstdn.social
Blue Sky: jongelman@bsky.social
© 2025 Jon L Gelman. All rights reserved.
Attorney Advertising
Prior results do not guarantee a similar outcome.
No comments:
Post a Comment