Regarding Change to CMS Requirements for Approval of Zero-Dollar MSAs

Effective July 17, 2025, Centers for Medicare & Medicaid Services (“CMS”) will no longer review a Medicare Set-Aside (“MSA”) recommendation for a “zero-dollar allocation.” This change comes as an acknowledgement that the significant time and expense of reviewing these zero-dollar MSAs is of little benefit to the Medicare Trust Fund.

What this means is that, going forward, Virginia employers are no longer required to submit for CMS approval an MSA in which Medicare’s interests are valued at $0 (Section 8.1, WCMSA Reference Guide). This is a significant change, given the difficulty in recent years in obtaining zero-dollar allocation approval from CMS. As a brief review, the factors subjecting a workers’ compensation settlement to the requirement for CMS approval of an MSA are:

(1) Claimant is entitled to Medicare and the settlement value exceeds $25,000.00;

or

(2) Claimant has a reasonable expectation of becoming entitled to Medicare within 30 months of the settlement date and settlement value for future medical expenses, disability, and lost wages exceeds $250,000.00.

What this does not mean is that you are no longer permitted to value Medicare’s interests in a settlement at $0 when either of the above criteria sets are met. CMS has explicitly provided for certain instances in which you may legitimately value Medicare’s interests at $0 in a settlement (see Section 4.2 of the WCMSA Reference Guide). These instances include the following:

• Future medical expenses relating to the injury are not anticipated. This might include an injury or illness that has fully resolved, and for which only past medical and disability benefits are considered in the settlement.
• The workers’ compensation carrier remains fully responsible for ongoing medical and prescription expenses once settlement is reached.

In determining whether a zero-dollar MSA may be appropriate, be mindful of whether the Claimant is under an existing award for injury and what injury or illness has been awarded, as well as whether the Claimant is presently receiving medical or indemnity benefits, and other factors such as the age of the Claimant and whether the Claimant has applied for Social Security Disability benefits.

At the end of the day, the MSA and the guideline published by CMS are designed to avoid burdening Medicare with expenses that would have otherwise been paid by the employer or the Claimant. The new criteria regarding zero-dollar MSAs does not relieve the parties of their obligation to adequately consider Medicare’s interests in a settlement where future medical expenses and prescription expenses are anticipated. However, it does relieve them of the significant burden of seeking approval from CMS where a zero-dollar MSA is appropriate, streamlining the settlement process for the litigants, and saving time and expense to the employer.

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