CMS Implements New Reporting for Workers' Compensation Settlements: What Employers and Insurers Need to Know

All parties in a workers’ compensation case have responsibility to protect Medicare’s interests when settling claims. In some cases, protecting Medicare’s involves getting approval of the amount allocated for future medical expenses in a MSA (Medicare Set-Aside) in the settlement. To help you navigate these changes, we’ve outlined the key updates and compliance steps below.

Effective April 4, 2025, the Centers for Medicare & Medicaid Services (CMS) has expanded its mandatory reporting requirements for workers’ compensation settlements. These new rules significantly impact how employers and insurers must handle claims involving Medicare beneficiaries in Workers’ Compensation Commission (WCC) cases.

Whether you're negotiating a six-figure settlement or a zero-dollar medical allocation, compliance is no longer optional, and failure to follow the updated guidelines can lead to serious financial and legal consequences.

What Changed?

CMS now requires detailed reporting of Medicare Set-Aside (MSA) information for ALL workers’ compensation settlements that involve a current or former Medicare beneficiary—even if the settlement falls below the traditional voluntary CMS review threshold of $25,000 or involves a zero-dollar MSA.

What Must Be Reported?

The following fields are now mandatory for submission through Section 111 reporting for applicable claims:

• Total MSA Amount

• MSA Coverage Period (i.e., how many years the MSA is expected to cover)

• Funding Type (lump sum vs. structured payment)

• Initial Seed Money (if structured)

• Annual Deposit Amount (if structured)

This new requirement applies to every applicable settlement, including those without prior voluntary CMS review and those with $0 MSA allocations—if medical benefits are being settled and the claimant is or was Medicare-eligible, it must be reported to CMS.

Why This Matters

Noncompliance with the new CMS requirements can result in:

• Civil monetary penalties

• Medicare is declining to recognize the settlement, leaving insurers and employers exposed to future medical costs

• Post-settlement conditional payment recovery actions

• Liability under the False Claims Act

CMS has made it clear: if medical benefits are part of the settlement, and the injured worker is a Medicare beneficiary, you must report these new data points—regardless of MSA review status or dollar amount.

Key Takeaways for Employers and Insurers

1. Verify Medicare Eligibility for Every Medical Settlement
   Prior to executing any settlement that includes medical benefits, you should confirm the claimant’s Medicare status.

2. Document All Medical Allocations—Even $0 MSAs
   A $0 allocation must be backed by formal documentation, such as a treating physician’s statement or a judicial finding that no future treatment is necessary.

3. As of July 17, 2025, CMS will no longer review or approve $0 MSAs, even if the claim meets the previous voluntary review thresholds.

Final Thoughts

The April 2025 CMS rule change marks a significant shift in federal oversight of workers’ compensation settlements. Employers and insurers must now approach every claim with proactive Medicare compliance planning, where medical benefits often remain open for extended periods.

At Tarpine, Heller & Pendergrass, we assist carriers, self-insured employers, and third-party administrators with CMS compliance and workers’ compensation settlement strategy. If your team needs guidance

Abigail Taylor