Can I Avoid a Medicare Set-Aside?

The Direct Answer: A Medicare Set-Aside Is Not Required in Every Case

There is no federal statute or regulation requiring every injured worker to prepare a WCMSA or submit a proposed allocation to CMS for approval. CMS itself describes its WCMSA review process as voluntary.

That sounds like excellent newsuntil the second half of the sentence arrives wearing sensible shoes. Workers’ compensation claimants must still consider Medicare’s interests. Under the Medicare Secondary Payer framework, Medicare generally does not pay first when workers’ compensation is responsible for medical treatment connected to a work injury.

Therefore, you may be able to avoid a formal Medicare Set-Aside when the facts genuinely show that no settlement money is replacing workers’ compensation’s responsibility for future Medicare-covered medical care. You cannot safely avoid one merely by changing the wording of the settlement or pretending future treatment does not exist.

What Is a Medicare Set-Aside?

A Workers’ Compensation Medicare Set-Aside is a financial arrangement that allocates part of a workers’ compensation settlement to future medical services and prescription drugs related to the work injury that Medicare would otherwise cover.

The money is kept separate from the claimant’s ordinary spending money. It is then used for qualifying injury-related care before Medicare becomes responsible for those services. Once an approved WCMSA has been properly exhausted and accurately accounted for, Medicare may begin paying for additional covered treatment related to the injury.

A WCMSA Is About Future Expenses, Not Past Medicare Bills

A set-aside addresses future medical care. Conditional payments are a separate issue. A conditional payment occurs when Medicare pays for treatment that another payer, such as a workers’ compensation carrier, may have been responsible for.

Those past payments may need to be identified, disputed when unrelated, and repaid from the settlement. Resolving a Medicare lien or conditional payment demand does not automatically resolve future medical obligations. Think of them as two different drawers in the same federal filing cabinet.

CMS Review Is Different From Creating an MSA

Parties may establish an MSA without asking CMS to approve it. This is sometimes called a non-submit or non-CMS-approved MSA. However, CMS is not bound by an amount selected privately by the parties.

A CMS-approved WCMSA offers greater certainty because CMS agrees that the approved amount adequately protects Medicare’s interests, provided the account is funded and administered correctly. Without approval, CMS may later question the allocation or require proof that a much larger portion of the settlement was properly spent.

When Might You Avoid a Medicare Set-Aside?

1. The Workers’ Compensation Carrier Keeps Future Medical Benefits Open

A WCMSA generally should not be submitted when the settlement leaves the medical portion of the claim open and the workers’ compensation carrier continues to pay for injury-related treatment.

In that situation, the settlement is not transferring future medical responsibility to Medicare or the claimant. The carrier retains ongoing responsibility for medical care. There is nothing to “set aside” because future medical benefits have not been bought out.

Read the settlement language carefully. “Medical remains open” should mean what it says, not “medical remains open until someone closes the file next Tuesday.”

2. The Treating Physician Documents That No Future Treatment Is Needed

A WCMSA may be unnecessary when the injured worker is being compensated only for past medical expenses and reliable medical evidence shows that no future treatment or medication will be required for the settled injury.

The strongest support is usually a clear statement in the treating physician’s records. The physician should address whether future injury-related treatment, prescriptions, procedures, therapy, equipment, or follow-up care is reasonably expected.

A settlement document saying “no future treatment is anticipated” carries less weight when the most recent medical record recommends injections, surgery, monthly medication, and a follow-up appointment in six weeks.

3. The Claim Was Properly Denied and No Benefits Are Being Paid

CMS guidance recognizes circumstances in which a zero-dollar allocation may be appropriate for a denied workers’ compensation claim. The surrounding facts matter enormously.

Examples may include cases in which the insurer denied responsibility under applicable state law, paid no medical or indemnity benefits except permitted investigative payments, is not actively paying benefits, and does not allocate settlement money to specific past or future medical services.

A ruling on the merits may also support a conclusion that the carrier owes no additional medical or indemnity benefits. However, a denial letter is not a magic wand. The settlement, payment history, medical evidence, state workers’ compensation rules, and reason for the payment must tell a consistent story.

CMS stopped accepting or reviewing zero-dollar WCMSA proposals in July 2025. Parties may still determine that a zero-dollar allocation is appropriate, but they should preserve documentation supporting that decision. CMS does not issue a friendly certificate saying, “Congratulations, no MSA needed.”

4. A Judge or Workers’ Compensation Board Decides the Merits

When a court, commission, or workers’ compensation board makes a genuine ruling on the merits, CMS generally gives weight to that determination, including a specific allocation between medical damages and nonmedical damages such as lost wages.

This is different from asking a judge to rubber-stamp an agreement designed solely to minimize Medicare’s share. The decision should result from a real adjudication based on evidence and applicable law.

5. The Settlement Does Not Close or Fund Future Medical Care

A settlement may involve past wages, disputed liability, attorney fees, or other damages without compensating the worker for future medical expenses. If continued care is not claimed, released, effectively released, or funded, a WCMSA may not be necessary.

Substance matters more than labels. A clause stating that none of the money is for medical expenses will not be persuasive when the agreement releases the carrier from a documented lifetime of injury-related care.

6. The Case Falls Below CMS Review Thresholds

CMS currently reviews a proposed WCMSA when either of the following workload thresholds is met:

• The claimant is already a Medicare beneficiary and the total settlement is greater than $25,000.
• The claimant has a reasonable expectation of Medicare enrollment within 30 months and the anticipated total settlement is greater than $250,000.

A reasonable expectation of Medicare enrollment may exist when the claimant has applied for Social Security Disability benefits, is appealing a denial, is 62 years and 6 months old, or has end-stage renal disease but has not yet qualified for Medicare on that basis.

Falling below these amounts generally means CMS will not review the proposed WCMSA. It does not automatically mean that no allocation or future-medical plan is needed. The thresholds are workload-management rules, not legal safe harbors.

For example, a Medicare beneficiary might settle a claim for $20,000 while continuing to need medication for the work injury. CMS may decline to review the case, but Medicare’s secondary-payer status has not disappeared merely because the settlement came in under budget.

Strategies That Do Not Safely Avoid a Medicare Set-Aside

Calling the Entire Settlement “Pain and Suffering”

Workers’ compensation systems do not always award traditional pain-and-suffering damages, and settlement labels do not override the medical evidence. If future care is being released, CMS may examine what the settlement actually accomplishes rather than what the parties decided to call it.

Relying on Private Insurance or Medicare Advantage

Private insurance, Veterans Affairs benefits, Medicare Advantage, or Medicare Part D coverage does not necessarily eliminate the need to address future work-related medical expenses. Coverage can change, terminate, or apply secondary-payer rules of its own.

Keeping the Settlement Below $25,000 or $250,000

Artificially dividing payments or negotiating just below a review threshold does not create immunity. CMS considers the total settlement amount broadly, including certain indemnity payments, attorney fees, repayment of liens, and structured settlement funding.

Using a Non-Submit MSA Without Understanding the Risk

A carefully prepared non-submit MSA may be used in some settlements, but it does not provide the same finality as CMS approval. CMS may question whether the amount was sufficient or whether the account was administered properly.

In some circumstances, the claimant could be required to demonstrate appropriate exhaustion of the net settlement rather than exhaustion of only the privately selected MSA amount. Saving money at settlement can become expensive if Medicare later declines related claims.

Spending the MSA on Ordinary Living Expenses

WCMSA money is not a bonus fund for vacations, home renovations, car payments, or an extremely optimistic cryptocurrency purchase. The account is generally reserved for Medicare-covered, injury-related medical expenses and limited allowable administrative costs.

Improper spending may delay Medicare payment and create a difficult accounting problem at exactly the time the claimant needs medical care.

Lawful Ways to Reduce the Cost or Burden of an MSA

Update the Medical Records Before Calculating the Allocation

Old records frequently make future care look more extensive than it really is. Obtain current treatment notes, prescription histories, surgical recommendations, and physician statements before calculating the WCMSA.

If a proposed surgery is no longer recommended, a medication has been discontinued, or the claimant has reached maximum medical improvement without ongoing treatment, the records should say so clearly. An allocation should reflect credible current evidence, not medical plans that went stale three years ago.

Separate Conditional Payments From Future Medical Expenses

Review Medicare’s conditional payment information before settlement. Unrelated claims may be disputed with supporting records. Resolving past payments early prevents the parties from confusing Medicare’s recovery claim with the amount needed for future care.

Consider a Structured WCMSA

A WCMSA may be funded with a lump sum or through a structured arrangement. A structure generally begins with an initial deposit followed by scheduled annual payments.

This approach may reduce the immediate cash required to fund the settlement. Unused annual funds carry forward, and properly exhausted annual deposits may permit Medicare to pay covered injury-related expenses during the remainder of that funding period until the next deposit is due.

Explore Whether Future Medical Benefits Can Remain Open

Some claimants would rather preserve lifetime workers’ compensation medical benefits than accept responsibility for managing a settlement-funded account. Whether this is possible depends on state law, the carrier’s willingness, the claim’s value, and the worker’s long-term treatment needs.

Use Professional Administration When Appropriate

Self-administration is permitted, but it involves establishing a separate interest-bearing account, reviewing bills, paying qualifying expenses, keeping receipts, applying the correct pricing rules, and submitting required attestations.

A professional administrator can reduce errors and help negotiate medical charges. Administration has a cost, but it may be worthwhile for a claimant with complex treatment, significant prescriptions, cognitive limitations, or absolutely no desire to become the unpaid manager of a miniature health plan.

Request an Amended Review When the Medical Picture Changes

When CMS has approved an amount but the claim has not yet settled, an amended review may be available if documented medical changes materially affect the allocation. Updated records can sometimes support a lower amount, although the request must satisfy current CMS criteria.

Three Practical Examples

Example One: No Future Treatment

A warehouse employee sprained a shoulder, completed physical therapy, returned to full duty, and has not received treatment for two years. The treating physician documents that no additional care or medication is reasonably expected. The settlement compensates the worker for disputed past benefits without releasing any realistic future medical obligation.

A formal WCMSA may be unnecessary, provided the documentation and settlement language accurately reflect those facts.

Example Two: Below the Review Threshold

A 68-year-old Medicare beneficiary settles a knee claim for $22,000. The settlement closes future medical benefits, and the worker still receives injections and prescription medication.

CMS generally will not review the case because the settlement does not exceed the beneficiary threshold. Nevertheless, the parties should still develop and document a reasonable method for paying future Medicare-covered treatment. “CMS will not review it” does not mean “Medicare volunteered to pay it.”

Example Three: A Strong Candidate for CMS Review

A Medicare beneficiary receives a $175,000 workers’ compensation settlement that closes future medical care. Records recommend ongoing pain management, medication, diagnostic testing, and possible surgery.

The settlement exceeds the CMS review threshold and includes substantial future medical exposure. Preparing and submitting a well-supported WCMSA would usually offer greater protection than relying on a privately chosen number.

Questions to Ask Before Trying to Avoid an MSA

• Is the claimant currently enrolled in Medicare?
• Is Medicare enrollment reasonably expected within 30 months?
• Does the settlement close future workers’ compensation medical benefits?
• What future treatment or medication appears in the latest records?
• Has the treating physician clearly addressed future care?
• Did Medicare make conditional payments related to the injury?
• Was the claim formally denied under state law?
• Has a judge or board issued a genuine ruling on the merits?
• Does the settlement exceed current CMS review thresholds?
• Who will administer and document any allocated medical funds?

These questions should be addressed before the final settlement documents are signed. Medicare compliance is much easier to plan than to reconstruct after the money has been distributed.

Conclusion: Avoiding an MSA Requires Facts, Not Creative Labeling

You may be able to avoid a Medicare Set-Aside when future work-related medical care remains the carrier’s responsibility, reliable evidence shows no future treatment is needed, or the facts of a properly denied or adjudicated claim demonstrate that Medicare’s interests are already protected.

You may also avoid CMS review when the settlement falls below its workload thresholds. However, that does not erase the underlying Medicare Secondary Payer obligations.

The safest approach is to examine the claimant’s Medicare status, settlement terms, medical records, payment history, and state workers’ compensation law as one complete picture. When future Medicare-covered care is being released, a carefully calculated WCMSAoften with CMS approvalmay be less troublesome than trying to explain the absence of one years later.

Experiences From the Medicare Set-Aside Process

The following are composite examples based on common settlement situations. They are not descriptions of specific clients or promises about how CMS will handle any individual case.

The Settlement That Was “Too Small” for an MSA

One common experience begins with a claimant being told that the settlement is below the CMS review threshold, so a Medicare Set-Aside is supposedly irrelevant. Everyone relaxes. The paperwork is signed. Months later, Medicare rejects a bill for treatment connected to the old work injury.

The claimant then discovers the important difference between CMS declining to review a proposal and Medicare agreeing to pay related expenses. The case may have been too small for voluntary review, but the settlement still closed future medical benefits and compensated the worker for an injury requiring continued care.

The practical lesson is simple: below-threshold cases still need analysis. A short written medical-cost projection, a documented allocation, or another defensible plan may prevent a small settlement from becoming a large administrative headache.

The Old Surgical Recommendation That Inflated Everything

Another familiar experience involves a medical record containing an old recommendation for surgery. The procedure was discussed once, the claimant improved, and no doctor mentioned it again. Nevertheless, it appears in an early MSA calculation as a future expensecomplete with hospital care, rehabilitation, follow-up appointments, and related medication.

The projected allocation suddenly becomes large enough to make the settlement feel impossible. The claimant is understandably frustrated because the estimate appears to fund treatment that nobody expects to happen.

The problem is often resolved by obtaining current records and a clear statement from the treating physician. When the physician explains that surgery is no longer recommended and identifies the care that is actually expected, the allocation can be recalculated using a more accurate medical picture.

The experience demonstrates why timing matters. An MSA prepared from incomplete or outdated records may be technically impressive and practically wrong.

The Self-Administrator With a Shoebox Full of Receipts

Some claimants choose self-administration because it sounds straightforward: open an account, pay medical bills, and keep records. For a person with one annual appointment and an inexpensive generic prescription, that may be manageable.

For someone receiving injections, therapy, equipment, specialist care, and several medications, administration can become a part-time job. Bills arrive with unfamiliar codes. Providers charge amounts that may not match applicable payment rules. Receipts migrate into drawers, envelopes, and the legendary shoebox that every accountant fears.

The claimant may eventually need to prove that the funds were spent only on Medicare-covered services related to the work injury. Missing statements and mixed personal transactions make that task difficult.

The experience does not mean everyone needs a professional administrator. It does mean administration should be considered before settlement, not after the first confusing bill arrives. The right choice depends on the account size, treatment complexity, claimant’s abilities, and availability of help.

The Best Experience: Planning Before Negotiation Ends

The smoothest settlements usually address Medicare early. The parties confirm Medicare status, collect recent records, investigate conditional payments, identify future care, and decide whether CMS review is appropriate before agreeing on the final distribution.

There may still be delays and paperworkthis is Medicare compliance, not a drive-through windowbut fewer surprises appear at closing. The claimant knows what money is restricted, who will administer it, and when Medicare may resume payment.

That planning may not eliminate the Medicare Set-Aside. It does something more useful: it prevents the set-aside from eliminating the settlement.

SEO Tags