New Workers’ Compensation Medicare Rules

2025–2026: What Injured California Workers Need to Know

The Centers for Medicare & Medicaid Services (CMS) issued several new workers’ compensation medicare rules taking effect on April 4, 2025, June 14, 2025, and July 17, 2025, that directly affect injured workers settling California workers’ comp claims. If you are on Medicare or expect to be soon, these changes shape how your settlement is structured, reported, and spent.

Key Takeaways Regarding the New CMS Approval System and Medicare Reporting Requirements

• A Workers’ Compensation Medicare Set-Aside (WCMSA or Medicare set-aside) is money from a workers’ compensation settlement specifically to pay future medical expenses related to a work injury that Medicare would typically not cover. A WCMSA allocates funds for future medical bills so that Medicare benefits remain available long-term.
• Starting April 4, 2025, insurers and self-insured employers must report Medicare set-aside information, including the WCMSA amount, funding method, and annual deposit amount, on every Medicare beneficiary settlement, even if CMS never reviews or approves the MSA. Reporting includes zero-dollar WCMSA allocations starting on that same date.
• As of July 17, 2025, CMS no longer reviews $0 WCMSA submissions in most denied-claim situations, but Medicare can still pursue recovery of post-settlement conditional payments it already made.
• Errors in Medicare reporting requirements or misusing MSA funds can cause Medicare to deny related medical claims and expose insurers to False Claims Act penalties, making early advice from an experienced workers’ compensation attorney critical.

Overview of Workers’ Compensation Medicare Set-Asides (WCMSAs)

A Workers’ Compensation Medicare Set-Aside is a special account created from a workers compensation settlement to pay for future Medicare-covered medical treatment related to a specific workers compensation injury.

MSAs ensure Medicare’s interests are protected in settlements by keeping injury-related medical expenses separate from other settlement funds.

WCMSAs exist because of the Medicare Secondary Payer (MSP) law, which requires Medicare to act as a secondary payer when another party, such as a workers’ comp insurer, is responsible. Workers’ compensation is the primary payer for work-related injuries, meaning Medicare does not cover medical costs related to job injuries while workers’ compensation is applicable.

Key points about how WCMSAs work include:

• A WCMSA may be required for certain settlements where future medical services are expected.
• The allocation is based on detailed projections of future care visits, surgeries, therapy, and prescription drugs that Medicare would normally cover.
• WCMSAs must cover only Medicare-eligible medical expenses tied to the work injury.
• A portion of settlement funds may need to be allocated to cover future injury-related care before Medicare can pay for those services.
• Medicare becomes the primary payer for that condition going forward, once funds are properly spent and documented

California’s Division of Workers’ Compensation updates its Official Medical Fee Schedule to align with Medicare’s payment systems, which means state and federal reimbursement frameworks are closely connected. WCMSAs are most common in cases with ongoing needs, such as serious back injuries, traumatic brain injuries, or complex orthopedic cases from California workplace accidents.

Important CMS Changes Affecting Workers’ Comp Medicare Set-Asides

CMS significantly updated its WCMSA policies and reporting rules in 2025. These changes affect how settlements are structured and reported going into 2026, and every injured worker approaching a workers’ compensation case should understand them.

Here is a timeline of what changed and when:

• April 4, 2025: Section 111 reporting rules now require Responsible Reporting Entities (insurers, self-insured employers, third-party administrators) to report the MSA amount, whether funded by lump sum or annuity, and the schedule of deposits, including the initial deposit and the annual deposit, for every settlement involving a Medicare beneficiary. CMS mandates reporting WCMSA data for all settlements.
• June 14, 2025: CMS begins using the CDC 2022 Life Tables for life expectancy in MSA calculations, which can change the size of a Medicare set-aside for compensation, especially in long-life-expectancy cases.
• July 17, 2025: CMS no longer reviews $0 WCMSA submissions. Per the updated WCMSA reference guide (version 4.5), zero-dollar proposals are not accepted for cms review, though parties must still document their reasoning internally.
• September 20, 2025: CMS switches to CDC 2023 Life Tables, further refining life-expectancy projections.

CMS has warned that failure to report WCMSA information may lead to legal action, including enforcement under the False Claims Act and aggressive recovery by the Centers for Medicare & Medicaid Services (CMS).

Even if a WCMSA is not submitted for review, the insurer must report the required fields to CMS for any total payment obligation to the claimant on or after April 4, 2025.

When Is a Medicare Set-Aside Needed in a California Workers’ Comp Case?

There is no statute that literally requires an MSA, but CMS expects parties to consider Medicare’s interests whenever a workers’ compensation settlement specifically includes money for future medical care. If a workers’ compensation claim settles, future medical treatment costs must be allocated in Medicare’s interest.

CMS reviews WCMSA proposals that meet the following criteria:

• The claimant is a current Medicare beneficiary, and the total settlement amount exceeds $25,000, or
• The claimant has a reasonable expectation of becoming eligible for Medicare within 30 months of the settlement date, and the anticipated total settlement amount exceeds $250,000.

Guidelines state that if a settlement exceeds $25,000 for Medicare beneficiaries, a WCMSA is typically required. WCMSA amounts are determined on a case-by-case basis, reflecting projected future medical costs for each injured worker.

In California, MSAs commonly arise in long-term disability cases, such as serious back, neck, or knee injuries, where future treatment is clearly expected. In some smaller-value settlements where future medical is minimal, parties may document Medicare’s interests without formally seeking CMS approval.

A California Workers’ Compensation Lawyer can evaluate whether a Medicare set aside is advisable in your particular settlement and how it may interact with other personal injury claims.

How CMS Review and Approval of WCMSAs Works

There is an important distinction between creating an MSA and submitting it to CMS for voluntary review. CMS review of WCMSAs is voluntary but strongly recommended in higher-value or medically complex cases. Here is how the review process works:

• When the underlying settlement meets CMS review thresholds, the parties may submit a proposed WCMSA to CMS through its electronic portal for a cms review of whether the WCMSA amount is adequate.
• When CMS approves the WCMSA proposal, it provides an added security service for the injured worker. Medicare is less likely to deny future claims or argue the MSA was underfunded. CMS may deny claims without approval of WCMSA amounts in some circumstances.
• The average review time for CMS is 30 to 60 days after a complete submission, not counting the weeks needed to assemble medical records and draft the MSA report.
• Amended Review requests can now be submitted at any time after CMS approval, eliminating the prior one-year waiting period. This matters if surgery is canceled or treatment guidelines change.

The workers’ compensation review contractor evaluates whether the proposed amount adequately protects Medicare’s interests before CMS issues its determination.

Medicare Enrollment, Eligibility, and Impact on Benefits

Medicare enrollment status-current or expected-is a key factor in deciding whether and how to set up a WCMSA. Basic medicare eligibility pathways include:

• Age 65 or older
• Under 65 after qualifying for social security disability insurance (SSDI) for the required waiting period
• Certain conditions, like end-stage renal disease

A person can receive both workers’ comp benefits and Medicare, but total disability-related benefits may be subject to offset rules. When an appropriately funded and administered MSA is exhausted and properly reported, Medicare becomes the primary payer for future injury-related medical services.

Misuse of MSA funds, spending on non-medical or non-injury-related items, can cause Medicare to deny future claims for that injury until the full MSA amount is properly accounted for. Medicare can pursue recovery for payments up to the settlement amount, and double damages apply for amounts Medicare pays for injury-related care that should have been covered by the settlement.

Practical tip: Keep meticulous receipts and records of every MSA expenditure, and consider professional administration if tracking medicare guidelines on your own feels overwhelming.

Funding and Administering a Workers’ Comp Medicare Set-Aside

WCMSAs can be funded in two main ways, and either approach must comply with CMS guidance:

• Lump sum funding: The entire WCMSA amount is deposited at once. This offers simplicity but requires careful budgeting by the injured worker or administrator.
• Structured (annuity) funding: An initial seed deposit covers early years of care, followed by annual payments. This can reduce upfront cost while meeting CMS’ life-expectancy-based projections.

Once funded, WCMSA funds must cover future medical expenses related to the injury, including only Medicare-covered, injury-related medical treatment and prescription drugs. The administrator must report spending to Medicare annually, as required under the Medicaid Services CMS rules.

The injured person can self-administer the MSA using Medicare’s Self-Administration Toolkit or hire a professional administrator. Attorney Jeff Car Accident Lawyer can help clients understand the pros and cons of each funding structure, negotiate the terms of the settlement agreement with the insurer, and connect clients with reputable MSA administration services.

Risks of Non-Compliance and Protecting Your Rights

Mishandling Medicare set-asides or ignoring Medicare’s interests creates serious problems for injured workers and insurers alike.

• If Medicare pays for treatment that should have been covered by a workers’ comp settlement or WCMSA, it can seek reimbursement from any party involved, including the injured worker, insurer, or attorneys. Medicare can pursue recovery for payments it made up to the total settlement value.
• Medicare may deny future coverage for injury-related medical expenses if it believes settlement funds or the MSA were not properly used, leaving the injured person to pay out of pocket.
• For insurers and self-insured employers, failing to report settlements accurately after the April 4, 2025, changes can trigger civil penalties and False Claims Act allegations. Failure to report WCMSA information may result in legal action.
• Detailed documentation-medical records, settlement documents, MSA calculations, deposit records, and annual reports-is critical evidence of good-faith compliance with Medicare secondary payer obligations.

A California workers’ compensation lawyer who understands both state comp law and federal Medicare rules can help protect your long-term benefits while maximizing the net settlement.

How Workers’ Compensation Attorneys Assist Injured Workers with Medicare Set-Asides

Attorney Jeff Car Accident Lawyer is a California plaintiff’s firm representing injured workers and accident victims on a contingency fee basis-no fees unless you recover money. Our law firm evaluates whether a WCMSA is necessary based on current or expected medicare enrollment, the scope of future medical care, and the anticipated total settlement.

The team works with experienced MSA vendors and medical experts to obtain accurate allocation reports and to determine whether CMS approval should be sought.

Our attorneys negotiate with insurance carriers over the amount and structure of the Medicare set-aside compensation, including lump-sum vs. structured payments, and coordinate with other personal injury claims, such as car accidents or premises liability cases arising from the same incident.

Our legal team also counsels clients on post-settlement issues: choosing between self-administration and professional administration, maintaining compliant records, and understanding how the MSA interacts with ongoing Medicare benefits and Centers for Medicare & Medicaid Services requirements.

Contact us today for a free, no-obligation consultation to review your rights and options before resolving cases involving Medicare. The claims process is complicated. You don’t have to try and figure it out alone; Jeff’s got you.

Additional Resources on Workers’ Comp Medicare Set-Asides

Medicare rules change frequently, so relying on up-to-date, authoritative sources is essential for both injured workers and practitioners. Additional resources include:

• The CMS Workers’ Compensation Medicare Set-Aside page as the primary federal resource on WCMSA policy, review thresholds, and procedures
• The CMS WCMSA Portal and Section 111 Mandatory Insurer Reporting pages for technical medicare reporting requirements
• Medicare’s Self-Administration Toolkit for practical guidance on managing an MSA without a professional administrator

While online resources are helpful, they are not a substitute for individualized legal advice from a California workers’ compensation attorney who can interpret how national Medicare policies apply under state workers’ comp law.

Frequently Asked Questions About the New Medicare Benefits Policies

Does having a Medicare Set-Aside reduce the amount of money I get from my workers’ comp settlement?

The total settlement amount does not automatically decrease due to an MSA. Instead, part of the settlement funds are earmarked as Medicare set-aside funds that must be used for future injury-related medical care, while the remainder can be used more freely by the injured worker. Think of it as a required savings account within your settlement, not a deduction from it.

If my claim was denied and I get a $0 WCMSA, can Medicare still ask me to repay anything?

Yes. Even when a workers’ compensation claim was denied, and CMS will not review a $0 WCMSA (as of July 17, 2025), Medicare can still attempt to recover past conditional payments it made for the injury before the settlement date. It is important to check and resolve any Medicare liens before finalizing the settlement agreement.

Can I avoid creating a Medicare Set-Aside by settling only for wage loss and not for future medical care?

While some settlements try to characterize funds as only wage loss, CMS looks at the entire underlying settlement to determine whether it realistically includes money for future medical. Intentionally ignoring Medicare’s interests can risk benefit denials and repayment demands. The anticipated total settlement amount and its allocation matter more than labels.

What happens to my MSA money if I pass away before it is all spent?

Once all outstanding injury-related medical bills are paid, any remaining MSA funds typically pass to the injured worker’s estate or designated beneficiary. The exact treatment may depend on the settlement agreement’s language and California state law, so legal advice is recommended when drafting the agreement.

Do I need a separate Medicare Set-Aside if I also have a related personal injury case (like a car accident) along with workers’ comp?

In complex situations with both workers’ compensation and liability or personal injury settlements, there may be separate considerations for WCMSAs and possible liability MSAs. Coordination is crucial to avoid double-counting or leaving Medicare unprotected. A Workers’ Compensation Lawyer experienced in both areas can structure the settlements correctly. 

Written By

Michelle Jaco

A content strategist and copywriter based in Orange County, she possesses over ten years of professional writing experience. A graduate of San Diego State University with a B.A. in English, she specializes in building brand identity and enhancing reader engagement, with expertise spanning legal content, software startup copy, and lifestyle branding. When she is not writing in her favorite coffee shop, Michelle is typically traveling, running along the beach, and indulging her sports fandom by cheering on the Kansas City Chiefs and Los Angeles Dodgers (she maintains that she is not a bandwagoner).