Medicare is a federal health insurance program administered by the Centers for Medicare and Medicaid Services (CMS) that primarily provides coverage to individuals age 65 and older, and also to certain younger individuals with qualifying disabilities and to people with end-stage renal disease. It is generally divided into Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage plans offered by private insurers), and Part D (prescription drug coverage). Medicare Set-Asides (MSAs) are best understood as a practical compliance mechanism that grew up around a simple statutory premise: Medicare is a secondary payer when another payer is responsible. The Medicare Secondary Payer statute prohibits Medicare from paying for items or services to the extent payment “has been made, or can reasonably be expected to be made” under workers’ compensation, liability insurance (including self-insurance), or no-fault insurance.[1]
When Medicare nonetheless pays, it characterizes those payments as “conditional,” and it has broad recovery tools to recoup them from a primary plan, an entity that receives settlement proceeds, and, in some circumstances, the claimant’s counsel.[2] The MSP statute also authorizes a private cause of action for double damages in certain circumstances, which is one of the reasons Medicare compliance has moved from “paperwork problem” to “real exposure.”[3] Cases involving Medicare Advantage Organizations add another layer because many courts have recognized that Medicare Advantage plans can pursue recovery under the MSP private cause of action framework.[4] Against that legal backdrop, an “MSA” is not a statute-defined requirement in every settlement; it is instead a method of evidencing that Medicare’s past and future interests have been addressed, especially where future injury-related care would otherwise be shifted onto Medicare.
This distinction between past payments and future medical is the source of most confusion. Past payments are handled through conditional payment resolution: identify what Medicare (or a Medicare Advantage plan) paid that is related to the injury, dispute unrelated charges, and reimburse the proper amount from settlement proceeds.[5] Future medical is different. The statute does not use the phrase “set-aside” and does not create a single, universal checklist for every line of insurance. Instead, CMS has created detailed administrative guidance and a voluntary review process in the workers’ compensation context to help parties quantify and isolate the dollars that should be spent on future Medicare-covered, injury-related care before Medicare pays. In other words, in workers’ compensation, the industry has an established playbook (the Workers’ Compensation Medicare Set-Aside Arrangement or “WCMSA”), whereas in liability/no-fault settlements the “playbook” is still largely risk-management and documentation driven, because CMS has not implemented a comprehensive national review program for Liability MSAs (LMSAs) the way it has for WCMSAs.
In workers’ compensation settlements that close or compromise future medical, the WCMSA is the best-known and most defensible mechanism for “protecting Medicare’s interests.” The core concept is straightforward: if a settlement includes money intended to cover future medical services related to the work injury (such as a workers’ compensation future credit in a third-party tort settlement), and those services are Medicare-covered, Medicare expects those settlement dollars to be spent first on that injury-related care before Medicare pays anything further.[6] A WCMSA is the allocation of settlement proceeds to cover future Medicare-covered, work-injury-related care. CMS publishes a reference guide and maintains a submission portal, but CMS approval is not, strictly speaking, a statutory “requirement.” It is better described as a voluntary safe-harbor process: if CMS approves an amount and the WCMSA is properly funded, administered, and exhausted on appropriate expenses, Medicare should then pay for additional Medicare-covered, injury-related care.[7] That “certainty value” is why WCMSAs remain common even though “mandatory” is a misleading word in a strict legal sense.
When is a WCMSA practically required? In the real world, it is required whenever a workers’ compensation settlement (including a commutation/compromise settlement) closes future medical and the claimant is either a Medicare beneficiary or has a “reasonable expectation” of Medicare entitlement soon, because the settlement otherwise risks disrupting the claimant’s Medicare coverage for injury-related treatment and exposing payers and counsel to MSP recovery activity. The industry has long used CMS’s workload review thresholds as a decision point for submission: if the claimant is a current Medicare beneficiary and the total settlement amount exceeds $25,000, or if the claimant has a reasonable expectation of Medicare within 30 months and the total settlement amount exceeds $250,000, submission to CMS is typically recommended.[8] These are not “bright-line legal mandates” so much as CMS’s published thresholds for when it will devote review resources, but they function as the de facto industry standard for when parties should strongly consider a CMS-reviewed WCMSA.
The “reasonable expectation” category is where inexperienced handlers get blindsided. It is not limited to people already on Medicare. It often includes claimants in the Social Security disability pipeline (because Medicare entitlement generally follows 24 months after SSDI entitlement), older claimants approaching Medicare age, and claimants with end-stage renal disease. A prudent WC settlement evaluation asks early: is the claimant on Medicare now, or likely within 30 months, and are future medical benefits being closed? If the answer is yes, you should assume the settlement needs a defensible future medical allocation plan and document it, whether that plan is a funded WCMSA, an allocation explaining why no set-aside is required, or an arrangement leaving medical open so that the carrier maintains ongoing responsibility for medicals (which is a different compliance posture than closing medical with cash).[9]
The mechanics of building a WCMSA are also more disciplined than most subrogation professionals expect, because it is not simply “take X% of the settlement.” The allocation is built from the claimant’s medical records, diagnosis codes, treatment plan, prescription history, fee schedules, life expectancy assumptions, and projected future utilization, with the focus limited to Medicare-covered services that are injury-related.[10] Funding can be a lump sum or structured, and the arrangement must be administered with Medicare compliance in mind. Typical rules include placing the funds in a separate interest-bearing account, paying only for injury-related Medicare-covered items and services, keeping receipts and ledgers, and reporting annual accounting to CMS.[11] Improper administration is not a technicality; it is the scenario that can trigger Medicare denial of injury-related care, because Medicare will treat the settlement dollars as still available if they were not properly spent.
Who is supposed to do all of this? The short answer is that the settling parties must make sure it gets done, but the workflow usually lands on the claimant’s attorney with vendor support, while carriers and defense counsel monitor and insist on a defensible approach. Medicare’s recovery regulations make clear that CMS can pursue recovery against multiple entities, including the beneficiary, providers, suppliers, physicians, attorneys, and any entity that receives a portion of a third-party payment. 42 C.F.R. § 411.24(g). In the workers’ compensation setting, the employer/carrier is typically the primary plan, so it has obvious MSP exposure. From a practical standpoint, if the employer/carrier is paying to close future medical, it should require the settlement documents to reflect how Medicare’s interests are being protected (often by identifying the WCMSA amount, funding method, and administration approach). In contrast, if you are a subrogated carrier participating in a third-party recovery that includes a workers’ compensation component, you may not be the party “closing medical” in the comp claim, but you can still get dragged into the Medicare compliance consequences if settlement language is sloppy and proceeds are distributed without addressing Medicare’s conditional payments and the future medical allocation problem.
This is not academic. CMS’s 2025 policy changes underscore that Medicare is increasing its visibility into WCMSA practices. For example, Section 111 reporting has evolved to require WCMSA-related data points to be reported with certain settlements involving Medicare beneficiaries, and those reporting requirements can apply regardless of whether a WCMSA was submitted for CMS approval and even in lower-dollar settlements.[12] In addition, CMS has updated its amended review procedures for previously approved WCMSAs, and it has ended its practice of reviewing $0 WCMSA proposals (while still permitting parties to use a $0 allocation if they satisfy and document the applicable criteria).[13] The compliance lesson for claims professionals is that “we’ll just ignore it” is becoming less defensible operationally, because Medicare’s data ecosystem now makes it easier to identify which claims were settled, what was reported, and whether future medical was plausibly addressed.
The liability and no-fault side is where most subrogation professionals encounter the “MSA myth” problem: someone asserts that a liability settlement “requires an MSA,” and negotiations grind to a halt. The more accurate statement is that Medicare’s interests must be considered and Medicare must be reimbursed for conditional payments, but there is not a universally adopted statutory or regulatory requirement that an LMSA be created in every third-party liability settlement.[14] Courts have reached differing conclusions depending on facts and posture, and much of the “LMSA requirement” rhetoric is driven by risk tolerance rather than black-letter law. For instance, the case of Finke v. Hunter’s View, Ltd., is frequently cited for the proposition that an LMSA was not required on the record presented.[15] On the other hand, state-court decisions have sometimes pushed parties toward future medical protection mechanisms in particular procedural contexts.[16] The takeaway is not that one case “settles the issue,” but that liability MSAs are best approached as a documentation-and-allocation exercise tailored to the risk profile of the case, rather than as a rigid CMS-reviewed process like WCMSAs.
In the liability context, the core compliance tasks remain consistent: resolve conditional payments, ensure Medicare is reimbursed appropriately, and document why Medicare’s future interests are protected.[17] “Protecting future interests” can mean different things depending on facts. If the settlement clearly does not include compensation for future medical (for example, a purely disputed liability settlement with no allocation to future care, supported by medical evidence that treatment has ended), the documentation may be the protection. If the settlement obviously includes future medical (for example, catastrophic injuries with ongoing Medicare-covered care), then an allocation for future medical, sometimes structured, may be the prudent course even if CMS will not review it. The compliance objective is to avoid shifting to Medicare the expense of future care that the settlement is reasonably expected to cover, consistent with the Medicare Set-Aside statute.[18]
This is where subrogation professionals need a practical decision tree that works across product lines such as workers’ compensation, auto med pay, and health insurance subrogation. Start by separating “past” from “future.” Past is the conditional payment problem: identify Medicare’s payments, dispute unrelated items, and reimburse the net amount. Future is the allocation problem: if settlement dollars are, in whole or part, for future medical that Medicare would otherwise cover, the parties should be able to explain, with medical support, what the settlement is and is not paying for, and what mechanism will ensure those dollars are used before Medicare is billed. That mechanism might be a WCMSA (in comp), a documented future medical allocation (in liability/no-fault), a structured settlement that earmarks future medical dollars, or a physician-supported record showing no future Medicare-covered care is anticipated for the injury. The right mechanism is less important than a record that can withstand later scrutiny if Medicare (or a Medicare Advantage plan) asserts that settlement proceeds were available and should have paid first.
There is another subrogation wrinkle: many of your files are not “the plaintiff’s settlement,” but a settlement in which your carrier is asserting reimbursement rights, sometimes through a lien, sometimes through intervention, and sometimes through an independent subrogation action. In a workers’ compensation third-party action, you may be resolving the tort claim while a separate comp claim continues, or you may be resolving both in a global settlement. The Medicare issues can arise in any of these configurations. If the comp claim is being settled and future medical is being closed, the WCMSA analysis is in play. If only the third-party liability claim is being settled, you still have conditional payment exposure if Medicare paid for injury-related care, and you still have future interest exposure if the settlement plainly includes future medical dollars. The fact that a subrogated carrier is involved does not exempt the settlement from MSP requirements, and it can create additional friction if liens are negotiated without attention to Medicare’s priority recovery rights.[19]
In med pay and health insurance subrogation cases, you will often see an adjuster assume “Medicare compliance is plaintiff counsel’s problem.” Plaintiff counsel does bear most of the operational burden, but subrogated carriers should not ignore the issue for two reasons. First, settlement timing and distribution can be delayed or derailed if conditional payments and future interest issues surface late. Second, insurers and other payers can face direct recovery demands or become targets in MSP litigation theories, especially when a Medicare Advantage plan or an MSP recovery entity asserts that the primary plan failed to reimburse Medicare appropriately.[20] Practically, the best approach is to incorporate Medicare compliance checkpoints into your settlement workflow, particularly in cases involving older claimants, SSDI recipients, or those with significant future care needs.
Responsibility allocation between the claimant’s attorney and the carrier should be addressed explicitly in settlement documentation, especially in workers’ compensation closures. WCMSA documents typically identify the allocation amount, whether it is funded by a lump sum or structure, who will administer it, and what reporting obligations apply.[21] In liability settlements, parties sometimes include language reflecting that conditional payments have been resolved (or will be resolved), that Medicare’s interests have been considered, and that a specific portion of the proceeds represents future medical or that the settlement does not include future medical, supported by medical evidence. While boilerplate alone is not a shield, careful settlement language backed by a real record is far better than silence.
For the neophyte, it helps to remember that “MSA required” is the wrong starting question. The better starting questions are: Is Medicare (or a Medicare Advantage plan) in the past-payments chain, meaning conditional payments exist? Is Medicare likely to be in the future-payments chain, meaning future Medicare-covered injury care is expected? Is the settlement closing or shifting responsibility for that future care? And finally, what documentation and mechanism will prove that the settlement dollars intended for that care will be spent before Medicare pays? Those questions work in comp claims, third-party tort settlements, med pay files, and health insurance subrogation matters, even though the implementation differs across those lines.
From a process standpoint, the cleanest practice is to treat Medicare compliance as a parallel workstream rather than an afterthought. Early in the claim, identify Medicare status and SSDI status and request authorizations needed for conditional payment investigation. As settlement approaches, verify conditional payment figures, resolve disputes, and plan funding for repayment. For workers’ compensation settlements closing medical, obtain a WCMSA projection early enough that it can inform negotiation rather than disrupt it late. Decide whether to submit to CMS based on the published thresholds and risk profile, and if you are not submitting, document why and what alternative protection mechanism is being used.[22] For liability settlements with significant future care, decide whether a future medical allocation is warranted and build a defensible record around it, recognizing that CMS review is generally not available in the same way as WCMSAs. Throughout, ensure the file reflects a coherent story that aligns with the MSP statute’s core rule: Medicare pays second, not first. 42 U.S.C. § 1395y(b)(2)(A).
In the final analysis, Medicare Set-Asides are best viewed less as a bureaucratic add-on and more as a practical way to document and operationalize the Medicare Secondary Payer rule that Medicare pays second when another source of coverage is responsible. The work begins by separating past conditional payments from future medical exposure, then deciding whether the settlement is closing or shifting responsibility for Medicare-covered, injury-related care, and finally building a defensible record that settlement dollars intended for that care will be spent before Medicare is billed. When that discipline is applied early, MSAs and related allocations stop being a last-minute settlement obstacle and become a straightforward risk-management step that protects the claimant’s access to benefits, reduces post-settlement disruption, and helps every stakeholder, including subrogation professionals, bring files to closure with confidence.
[1] 42 U.S.C. § 1395y(b)(2)(A).
[2] 42 U.S.C. § 1395y(b)(2)(B); 42 C.F.R. § 411.24.
[3] 42 U.S.C. § 1395y(b)(3)(A).
[4] In re Avandia Mktg., Sales Practices & Prods. Liab. Litig., 685 F.3d 353 (3d Cir. 2012). See also Humana Med. Plan, Inc. v. W. Heritage Ins. Co., 832 F.3d 1229 (11th Cir. 2016).
[5] 42 U.S.C. § 1395y(b)(2)(B); 42 C.F.R. § 411.24.
[6] 42 U.S.C. § 1395y(b)(2)(A); 42 C.F.R. §§ 411.20, 411.24.
[7] WCMSA Reference Guide, Version 4.4 (July 14, 2025).
[8] WCMSA Reference Guide, Version 4.4 (July 14, 2025); NCCI, Medicare Set-Asides and Workers Compensation (September 2014).
[9] WCMSA Reference Guide, Version 4.4 (July 14, 2025).
[10] Id.
[11] Id.
[12] CMS, Section 111 NGHP User Guide, Version 8.2 (October 6, 2025), Chapter V, Appendix A.
[13] WCMSA Reference Guide, Version 4.4 (July 14, 2025).
[14] 42 U.S.C. § 1395y(b)(2)(A); 42 U.S.C. § 1395y(b)(2)(B); 42 C.F.R. § 411.24.
[15] Finke v. Hunter’s View, Ltd., 596 F. Supp. 2d 1254 (D. Minn. 2009)
[16] Hinsinger v. Showboat Atl. City, 420 N.J. Super. 15, 18 A.3d 229 (N.J. Super. Ct. Law Div. 2011).
[17] 42 U.S.C. § 1395y(b)(2)(B); 42 C.F.R. § 411.24.
[18] 42 U.S.C. § 1395y(b)(2)(A).
[19] 42 U.S.C. § 1395y(b)(2)(B); 42 C.F.R. § 411.24.
[20] 42 U.S.C. § 1395y(b)(2)(B); 42 U.S.C. § 1395y(b)(3)(A). See Humana Med. Plan, Inc. v. W. Heritage Ins. Co., 832 F.3d 1229 (11th Cir. 2016).
[21] WCMSA Reference Guide, Version 4.4 (July 14, 2025).
[22] WCMSA Reference Guide, Version 4.4 (July 14, 2025); NCCI, Medicare Set-Asides and Workers Compensation (September 2014).
