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What Workers’ Compensation Insurers and Attorneys Need to Know 

By: Ryan Hathcock, Partner at Chartwell Law

On April 4, 2025, the Centers for Medicare & Medicaid Services (CMS) will implement significant changes to the reporting requirements for workers’ compensation claims involving Medicare beneficiaries. This new policy aims to enhance oversight and ensure proper coordination of benefits, particularly concerning Medicare Set-Asides (MSAs). Here’s a brief overview of what these changes entail and how they will impact the management of workers’ compensation claims.

Expanded MSA Reporting Requirements 

CMS has identified gaps in the information it receives about MSAs through the Section 111 reporting process. To address these gaps, CMS is now implementing mandatory reporting requirements and expressing its intent to pursue significant consequences for failure to comply. Effective April 4, 2025, all workers’ compensation settlements involving Medicare beneficiaries that include an MSA of $750 or more, must now be reported to CMS. The new requirements will apply regardless of whether the settlement was previously reported under the voluntary MSA process and regardless of whether the MSA met the CMS threshold for review. The review threshold for voluntary MSA submissions remains at $25,000.

The reporting details for MSAs reported to CMS will include the following fields:

• The amount of the MSA.
• The duration the MSA is designed to cover.
• Whether the MSA is paid in a lump sum or structured.
• For structured MSAs, the amount of the initial deposit and the annual deposit amount.
• Case Control Number.
• Identification of any professional administrator involved, including their tax ID number.

Rationale Behind the Changes 

CMS’s primary objective with these changes is to ensure that post-settlement benefits are properly coordinated and to prevent Medicare from being billed for expenses that should be covered by the MSA. This policy aims to safeguard Medicare’s interests by confirming that MSA funds are used exclusively for medical expenses related to the work injury, and by instituting consequences for non-compliance, including refusing to provide Medicare coverage to the individual.

Impact on MSA Administration 

Once an MSA is completed and a settlement is agreed upon, the injured worker generally has the right to administer the MSA funds independently. However, with the heightened reporting requirements and immense downside risk to non-compliance, it is possible that employees will begin to demand professional administration of MSAs as a condition to settlement. The requirements that will fall on the individual or the professional administrator in the management of the MSA set out in the WCMSA Reference Guide include:

• Interest-Bearing Accounts: MSA funds must be placed in a separate interest-bearing account (Section 17.2).
• Exclusive Use of MSA Funds: Funds should be used solely for claim-related medical treatment covered by Medicare, with exceptions for certain expenses like income tax on interest, banking fees, and postage (Section 17.3).
• Annual Attestation: The Benefits Coordination & Recovery Center (BCRC) will require an annual attestation from the MSA administrator, verifying that the funds were used appropriately. This attestation is due within 30 days of the settlement anniversary and must be submitted each year until the MSA funds are depleted (Section 17.6).

Enforcement and Penalties 

CMS has expressed that a failure to comply with the reporting obligations may result in the use of statutory and regulatory options to recover improperly made payments, including taking action against the responsible reporting entity under the False Claims Act. In addition, failure to comply with the new reporting requirements or incorrect attestation can lead to penalties. Importantly, CMS has indicated that there will be no civil money penalties that are directly related to the errors in the reporting of the MSA elements noted above. However, a rejection of required filings that leads to a delay in reporting of a year or more could result in the assessment of penalties due to the untimeliness of the filing. See 42 CFR § 402.1(22)(i).

Included in the potential penalties that may be imposed, CMS may levy a penalty of $250 per day for noncompliance lasting more than one year but less than two years. That penalty increases to $500 per day for noncompliance lasting from two to three years after the required reporting date. Daily penalties ultimately escalate to $1,000 per day if the attestation is not submitted for three years or more. The maximum penalty for a single instance of noncompliance is capped at $365,000.00. See 42 CFR § 402.105(b)(3). CMS is providing a grace period as it relates to penalties, with the effective trigger date being October 11, 2025.

The Importance of Adapting to New Requirements

The upcoming changes represent a significant shift in CMS’s approach to overseeing workers’ compensation settlements and are expected to impact most states handling such cases. The April 4, 2025, reporting changes highlight the need for workers’ compensation insurers and self-insured entities to adapt to new requirements. Proper MSA administration and timely compliance with reporting obligations will be essential to avoiding delays, denials, and potential penalties. Insurers and claim administrators should prepare for these changes by updating their processes and ensuring that all relevant details are accurately reported to CMS.

For more information, contact Ryan Hathcock by email at rhathcock@chartwelllaw.com or by phone at (404) 410-1151.