The $25,000 Myth: What Settling Parties Get Wrong About CMS Review Thresholds and Medicare Set-Aside Obligations

Insurance carriers, self-insured employers, attorneys, and other parties to workers' compensation (WC) settlements routinely make decisions about whether to fund or submit a Medicare Set-Aside (MSA) based on a misunderstanding of the Centers for Medicare and Medicaid Services’ (CMS’) $25,000 workload review threshold, and those decisions can expose claimants and settling parties to real risks.

When CMS began reviewing MSAs in 2001 via its voluntary submission program, it established workload review thresholds to determine which MSAs they would review, which have remained unchanged for 25 years.

As outlined in Section 8.1 of the CMS Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide, CMS will review a proposed WCMSA amount when the following workload review thresholds are met:

• The claimant is a Medicare beneficiary and the total settlement amount is greater than $25,000.00; or

• The claimant has a reasonable expectation of Medicare enrollment within 30 months of the settlement date and the anticipated total settlement amount for future medical expenses and disability or lost wages over the life or duration of the settlement agreement is expected to be greater than $250,000.00.

The following myths commonly arise around the $25,000 threshold for Medicare beneficiaries:

Myth #1: If the total estimated settlement value will exceed $25,000 the parties must submit an MSA to CMS to reasonably recognize Medicare’s interest.

Fact: Submission of an MSA to CMS is always voluntary, regardless of the total estimated settlement value.

Section 8.0 of the CMS WCMSA Reference Guide clearly states:

There are no statutory or regulatory provisions requiring that you submit a WCMSA amount proposal to CMS for review.

Even if the total estimated WC settlement amount exceeds the $25,000 review threshold, there is no requirement to submit an MSA to CMS. The $25,000 workload review threshold is in place because CMS and their review contractor simply do not have the resources to review all MSAs.

While the parties may choose to submit an MSA to CMS for review and approval if it exceeds the applicable threshold, as of March 2022 CMS formally acknowledged that non-submit MSAs may also be used to protect Medicare’s interest instead.

There may be several reasons a non-submit MSA could be a better fit for settling a case. For example, if the parties cannot meet the documentation requirements CMS has for submissions or need an expedited settlement and do not want to risk the potential delays that can accompany submission to CMS, a non-submit MSA may be a better option.

Additionally, CMS has been publishing annual statistics on submitted MSAs since 2020 and over that time the total number of MSA submissions completed has decreased year over year. Most recently, submissions fell from 14,862 in FY2024 to 13,884 in FY2025. The FY2025 submission information also noted that CMS was returning an average counter higher of 24% compared to the submitted MSA amount.

This trend reflects a growing recognition among settling parties that CMS submission is optional and that non-submit MSAs can effectively protect Medicare's interest while avoiding some of the pitfalls of the CMS submission process.

Myth #2: Settling for less than $25,000 means no MSA is required.

Fact: CMS’ workload review thresholds are irrelevant in determining whether an MSA is appropriate.

Parties settling below the $25,000 CMS workload review threshold still need to reasonably recognize Medicare’s interest if the claimant needs future care related to the injury. The CMS workload review threshold is not a safe harbor, nor has it ever been one. Medicare’s interest must be considered in any WC settlement involving a Medicare beneficiary or where a claimant has a reasonable expectation of becoming a beneficiary within 30 months of the settlement.

While parties may have treated the $25,000 threshold as a safe harbor in the past, CMS, via Section 111 mandatory insurer reporting, is now keeping tabs on specific MSA amounts on all settlements with claimant-beneficiaries over $750.

For all WC settlements with Medicare beneficiaries falling on or after April 4, 2025, Responsible Reporting Entities (RREs) are required to report MSA information along with other required Section 111 mandatory insurer reporting settlement data (i.e. the total payment obligation to the claimant or TPOC, etc.). An MSA amount must be reported even if no amount is being set aside for future medicals; in that case the RRE reports $0 in the required field. If no MSA was prepared and CMS finds the claim did not meet relevant $0 criteria at the time of settlement, CMS could require the claimant to exhaust the entire settlement amount on injury related care before CMS would agree to pay for treatment in the name of protecting Medicare’s interests.

While parties should always consider Medicare’s interest when settling a claim involving a Medicare beneficiary, the required reporting of the MSA amount makes the decision on whether to prepare an MSA even more important. Generally, an MSA is appropriate in a settlement where (1) future medicals are being released; (2) the individual claimant will require claim-related, Medicare-covered medical care, and (3) the individual claimant is either a current Medicare beneficiary or has a reasonable expectation of becoming a Medicare beneficiary within 30 months of the settlement date.

CMS has outlined certain scenarios when no amount would need to be set aside for future medicals such as when a treating physician has certified that to a reasonable degree of medical certainty the individual will no longer require any future treatment for the settling work injury or when the carrier has denied the claim, no medical or indemnity payments have been made, and the settlement agreement does not allocate any amount for future or past medical services.

While there are many factors to consider in determining whether to fund an MSA or complete a $0 allocation as part of a WC settlement, whether the settlement amount is less than $25,000 is not relevant.

Sanderson Firm PLLC offers nationwide Medicare Secondary Payer compliance services. We stay at the forefront of MSP compliance and are clear innovators in the industry with our cutting-edge competitive offerings. In fact, we have indemnification available through our popular iMSA service, which is available for zero allocations too, and our aMSA service for funded low dollar (i.e. under threshold) settlements. Please reach out if you have any questions or wish to make a referral today!