In May 2013, this blog reported that a New Jersey court had done what the Centers for Medicare & Medicaid Services (CMS) declined to do. In Duhamell v. Renal Care Group East, Inc., 431 N.J. Super. 93 (Law Div. 2012), the Superior Court in Atlantic County approved two self-administered Medicare set-asides after CMS refused to review them, citing limited resources. Thirteen years later, CMS still will not grant a safe harbor outside its own review process, but it now sees nearly every set-aside that gets created. For injured workers in New Jersey, that shift changes the calculus of every lump-sum settlement.
What Duhamell Decided
The plaintiffs in Duhamell settled a civil liability case at mediation, with the deal conditioned on a CMS determination of the amount to be set aside for future medical care. Their expert proposed set-asides of $13,689.25 and $114,246 to be held in separate interest-bearing accounts. CMS answered both submissions in November 2012 with “no review” letters warning that its silence was not “a release or a safe harbor.”
Judge Kane treated the letters as lacking the force of law, relied on New Jersey’s strong policy favoring settlement, and found the proposed amounts reasonable and reliable after reviewing the expert’s sworn testimony. The court declared Medicare’s interests adequately protected and enforced the settlements. Duhamell was a liability case, not a workers’ compensation case, but it became a touchstone for claimants’ counsel looking for a judicial answer when CMS would not give one.
What CMS Says in October 2026
CMS posted Version 4.7 of the WCMSA Reference Guide on October 5, 2026. The only change it lists is a new “Ineligible, Other” letter for cases CMS will not review. On October 20, 2026, CMS announced that beginning October 31, 2026, it will price life expectancy using the CDC’s 2024 life tables. Proposals now in the pipeline should be checked against the new table before they are submitted.
The core rules have hardened rather than softened:
• Review is still voluntary. CMS reviews a proposal only when a Medicare beneficiary settles for more than $25,000, or when a worker with a reasonable expectation of enrollment within 30 months settles for more than $250,000, as its WCMSA page explains.
• Non-submitted allocations carry a penalty. Section 4.3 of the Reference Guide says CMS may refuse to pay injury-related care until the worker spends down the entire net settlement, not just the allocation, when parties use a non-CMS-approved “evidence-based” or “non-submit” product. That policy has been applied since January 11, 2022.
• Zero-dollar proposals are gone. Since July 17, 2025, CMS no longer accepts $0 set-aside proposals and will not issue letters confirming that none is needed. The parties must document why Medicare’s interests are protected.
• Every set-aside is reported. Under the Section 111 NGHP User Guide, Version 8.6, also dated October 5, 2026, carriers must report the amount of any WCMSA in settlements on or after April 4, 2025, whether CMS approved it or the parties “determined” it themselves. CMS audits a random sample of 250 new occurrences each quarter, and civil money penalties now apply to late or missing reports.
When CMS approves an amount, the Guide says, CMS “stands behind that amount.” When it has not, a court order in the style of Duhamell gives the worker an argument, not a guarantee.
Where the New Jersey Division Stands
The Division of Workers’ Compensation has moved in the opposite direction from CMS. Its January 10, 2005 memorandum told judges that a CMS-approved set-aside was required in every Section 20 settlement involving a Medicare-entitled petitioner. On July 11, 2012, then-Director Peter Calderone dropped the requirement that parties obtain federal approval before a judge signs off on a lump-sum settlement, as WorkCompCentral reported at the time. Its April 18, 2018 memorandum now requires the parties to complete Section 111 reporting and begin the conditional payment process before a judge will consider either an Order Approving Settlement or a Section 20 settlement for a Medicare beneficiary. Consistent with its March 28, 2016 memorandum, the Division leaves the resolution of remaining Medicare issues to the parties.
The Division’s legal information page, revised October 22, 2026, lists no newer Medicare directive. The practical result is that New Jersey judges will approve a Section 20 settlement without a CMS-reviewed set-aside, but the approval binds only the parties. Under N.J.A.C. 12:235-3.13, a Section 20 settlement is a complete surrender of future benefits for the conditions in the claim petition. Medicare is not a party to that surrender.
One more New Jersey wrinkle matters to the dollars. The Reference Guide lists New Jersey among the six states with no workers’ compensation medical fee schedule, so CMS’s contractor prices New Jersey set-asides at actual charges. New Jersey allocations therefore, tend to run higher than those in fee-schedule states, which increases the temptation to self-allocate and the cost of getting it wrong.
What It Means for Injured Workers
• Keep medicals open when you can. CMS says no set-aside is needed when the carrier keeps ongoing responsibility for medical care, and the Division’s 2005 memorandum recognized that an Order Approving Settlement, which preserves the right to reopen, does not foreclose future medicals. For a Medicare beneficiary, a Section 22 award is often safer than a Section 20 lump sum.
• A Section 20 approval is not a ruling on the merits. Section 4.1.4 of the Guide defers to a compensation judge’s allocation after a hearing on the merits. A Section 20 settlement is, by definition, a compromise of contested issues, so CMS does not treat it as that kind of determination.
• The risk sits with the worker. If CMS rejects a self-administered allocation, the carrier has closed its file, but the worker loses Medicare coverage for the injury until the net settlement is gone. Counsel should explain that the trade is in writing before the client signs.
• The law-versus-guidance argument is stronger, but it is still an argument. The Reference Guide is sub-regulatory, and the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), ended judicial deference to agency readings of ambiguous statutes. That strengthens the reasoning in Duhamell. It does not help an older or disabled worker whose surgery claim is denied while the issue is litigated.
Duhamell asked a court to fill a vacuum that CMS left open. CMS has since filled it, not with a safe harbor, but with reporting, audits, and penalties. The settlement that protects the injured worker in 2026 is the one that either keeps medical care open or puts a defensible, documented, and preferably CMS-reviewed number on the record.
Sources
1. Duhamell v. Renal Care Group East, Inc., 431 N.J. Super. 93, 66 A.3d 736 (Law Div. 2012).
2. Centers for Medicare & Medicaid Services, WCMSA Reference Guide, Version 4.7 (Oct. 5, 2026).
3. Centers for Medicare & Medicaid Services, WCMSA What’s New (last modified Oct. 20, 2026).
4. Centers for Medicare & Medicaid Services, Workers’ Compensation Medicare Set Aside Arrangements (last modified Oct. 5, 2026).
5. Centers for Medicare & Medicaid Services, MMSEA Section 111 NGHP User Guide, Chapter III, Version 8.6 (Oct. 5, 2026).
6. National Center for Health Statistics, United States Life Tables, 2024.
7. N.J. Division of Workers’ Compensation, Memorandum re: Medicare Secondary Payer Statute Issues and Information (Jan. 10, 2005).
8. N.J. Division of Workers’ Compensation, Memorandum re: Medicare Conditional Payment and Set-Aside Issues (July 11, 2012).
9. Michael Whiteley, DWC Drops Set-Aside Approval Requirement for Settlements, WorkCompCentral (July 16, 2012).
10. N.J. Division of Workers’ Compensation, Memorandum re: Medicare Insurer Non-Group Health Plans Recovery (Mar. 28, 2016).
11. N.J. Division of Workers’ Compensation, Memorandum re: Medicare Conditional Payments (Apr. 18, 2018).
12. N.J. Division of Workers’ Compensation, Legal Information (rev. Oct. 22, 2026).
13. N.J.A.C. 12:235-3.13, Orders Approving Settlement reached pursuant to N.J.S.A. 34:15-20.
14. Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024).
15. Jon L. Gelman, NJ Court Approves Medicare Set-Aside Agreement Lacking CMS Review, Workers’ Compensation (May 18, 2013).
Recommended Citation
Jon L. Gelman, Set-Asides Without Safe Harbor, Workers’ Compensation (workers-compensation.blogspot.com) (Oct. 24, 2026), https://workers-compensation.blogspot.com/2026/10/set-asides-without-safe-harbor.html.
About the Author
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).
Blog: Workers' Compensation
LinkedIn: JonGelman
LinkedIn Group: Injured Workers Law & Advocacy Group
Author: "Workers' Compensation Law" West-Thomson-Reuters
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© 2026 Jon L Gelman. All rights reserved.
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