What’s New in Workers’ Compensation Medicare Set-Aside Reporting Requirements

Workers’ Compensation Medicare Set-Asides (WCMSAs) have strict reporting requirements designed to prevent Medicare from paying for injured worker treatments that should be covered by a settlement. These guidelines also protect Medicare’s interest and ensure settlement funds are tracked and used appropriately while enforcing compliance through reporting audits. Recent updates to these requirements, outlined by the Centers for Medicare & Medicaid Services (CMS), aim to further protect their interests.

“Previously, inconsistent WCMSA information was provided to CMS on settlements that involved Medicare beneficiaries where the stakeholders preferred CMS’ formal review process,” said Christian Kolb, Assistant Vice President of Excess Workers’ Compensation Claims at Safety National. “With the new mandatory WCMSA reporting requirements, CMS requests more detailed information, including the funding method for settlements involving WCMSAs for all Medicare beneficiaries. There may be an increase in CMS enforcement or audits. There is also potential for this mandatory reporting to expand into liability or no-fault MSAs.”

Here, we review the new expectations for CMS requirements, repercussions for non-compliance, and how organizations can prepare.

New Requirements

Historically, WCMSAs had informal expectations attached to their submission to CMS. New reporting standards, effective April 4, 2025, now require WCMSA reporting for all full and final settlements involving Medicare beneficiaries. Even if CMS approval is not requested, reporting must be completed through the Section 111 reporting process. Insurance carriers, self-insured employers, and third-party administrators (TPAs) must report the settlement amount, WCMSA allocation, and the funding mechanisms, whether lump sum or annuity.

Non-Compliance Implications

Stakeholders who fail to comply with these new standards could potentially face civil penalties or the future denial of Medicare benefits for injured workers. For employers and insurance carriers, non-compliance is a serious liability. If Medicare denies payment for future medical care, an injured worker may pursue litigation if their Medicare coverage is denied due to an employer’s reporting failure. This makes WCMSA reporting documentation and audit preparation increasingly important, especially if a settlement is challenged, even after a claim is thought to be fully resolved.

Practical Steps for Compliance

Proactive compliance is necessary to avoid costly mistakes related to misreporting. Carriers, employers, and TPAs should review and update their internal processes for handling WCMSA settlements, coordinating with Medicare Secondary Payer (MSP) compliance and legal counsel to ensure all bases are covered. Additionally, claims adjusters and legal teams should undergo training specific to these CMS updates. CMS provides regular updates as new information becomes available, so stakeholders should monitor CMS’s communications and have someone on staff trained to understand and administer policy changes.