On January 17, 2025, CMS released version 4.2 [https://www.cms.gov/files/document/wcmsa-reference-guide-version-42.pdf] of its Workers Compensation Medicare Set-Aside Reference Guide. This Guide describes the policies and rules for the submission of MSAs for CMS approval and for CMS to determine the final amount of those MSAs. This new version makes two huge changes to $0 MSA allocations and evidence-based medicine (EBM) allocations that will significantly impact the feasibility and merit of submitting MSAs for CMS approval.
This announcement is preceded by an expanded list of what CMS deems to be satisfactory conditions for an employer to settle a case without an MSA. Previously, CMS had stated that no MSA was necessary if the following three conditions were met:
- The claimant was only being compensated for past medical expenses (incurred prior to settlement)
- The parties did not “maximize” the indemnity portion of the settlement to Medicare’s detriment
- There was a written statement from the claimant’s treating physicians that the claimant no longer required any Medicare-covered treatments related to the work injury.
The new Guide states that these conditions may be further demonstrated in denied cases if no medical benefits were paid except for “investigational purposes” and if the settlement makes no allocation for future medical benefits, or if the claimant’s medical rights were terminated by a ruling on the merits.
The new policy will impact claims that are partially denied. If a claim involves an accepted hand injury for which treatment has concluded, but a much later diagnosis of neck pain is denied, CMS will not accept a $0 MSA proposal limited to the hand condition, unless a decision on the merits finds the neck treatment to be non-compensable. This policy will also discourage submission of cases where any medical bills were inadvertently paid that were not for “investigational purposes.” At a minimum, this new policy will impact the language used in settlement agreements that are intended to fit within the above conditions.
The new guide includes changes related to evidence-based medicine (EBM). In the previous version of the Guide, CMS stated that it “relies on evidence-based guidelines” for determining what is included in MSA allocations. The new version states that CMS only “relies on” the medical treatment records, but merely “reviews” EBM guidelines. This weakens the impact, if any, of EBM guidelines and signifies that employers will more likely be the mercy of treating physicians who recommend treatment beyond the bounds of EBM, leading to unreasonable increases in the MSA amounts approved by CMS.
There is another relatively minor correction in the new Guide concerning the calculation of the frequency of future repeat surgeries, such as revisions of joint replacements or spinal cord stimulators. The new policy adds the number of years since the last such surgery to the claimant’s life expectancy and then divides that total by the expected duration of the implanted prostheses or devices.
As always, the CMS process for approving MSAs remains strictly voluntary. The risk of obtaining an unreasonably high allocation from CMS has undoubtedly increased with the implementation of this new Guide.
Please reach out to IFMK Law’s Medicare Secondary Payer team with any questions about these new developments or to develop the best strategy for your claims to comply with Medicare laws, including MSAs, Medicare conditional payments, mandatory insurer reporting, and settlement strategies.