Medicare Allocations Explained: Regulations, MSA Accounts, Settlements, and More Detailed Information
A Workers' Compensation Medicare Set-Aside Arrangement (WCMSA) is a crucial aspect of settling workers' compensation claims for individuals who are or expect to become eligible for Medicare. The specific guidelines for managing a WCMSA are detailed in the CMS WCMSA Reference Guide (v.4.4, July 14, 2025) and related CMS policies.
Purpose of WCMSA
The primary function of a WCMSA is to allocate a portion of a workers’ compensation settlement to cover future Medicare-covered medical expenses related to the work injury. The amount must be CMS-approved if submitted for review and must be exhausted before Medicare will pay for related care.
Account Management and Exhaustion
WCMSA funds must be used exclusively for work-injury-related, Medicare-covered medical expenses. Medicare will not pay for these expenses until the WCMSA funds, including any interest earned, are fully exhausted. The funds can be held in a lump sum or in a structured/annuity arrangement, with lump sums generally being easier to monitor.
Reporting Requirements
Responsible Reporting Entities (RREs) must report several WCMSA data points to CMS under Section 111 TPOC/WCMSA reporting. The required data include the MSA amount, MSA period, payout type (lump sum or structured), and deposit amounts (initial and annual) to facilitate CMS’s oversight and recovery efforts.
Monitoring and Documentation
The WCMSA account manager must ensure proper documentation and tracking of expenditures against the MSA funds. Claims, invoices, and payments related to future injury-related medical treatment should be thoroughly documented to prove the funds were appropriately exhausted before Medicare coverage begins.
CMS Recovery
If Medicare pays for work-related medical expenses before the MSA funds are exhausted, CMS may seek recovery from the WC insurer or other responsible parties. Correspondence related to recovery activities is typically shared with involved parties.
Allocation Reports
A Medicare Set-Aside Allocation Report estimates the anticipated Medicare allowable, injury-related expenses over the injured party’s life expectancy. This report guides the amount to be set aside in the WCMSA account.
Account Setup and Access
Account Managers must register and manage the WCMSA account through the CMS secure platforms (e.g., COB Secure Website) to submit and track required information and facilitate compliance.
In summary, managing a WCMSA account involves using CMS-approved funds exclusively for future work-related Medicare-covered medical expenses, carefully tracking and documenting expenditures to ensure proper exhaustion of funds before Medicare becomes liable, reporting required data to CMS under Section 111, and facilitating CMS recovery if payments are made prematurely.
It is essential to only use WCMSA funds for services that Medicare would otherwise cover. Any money allocated for a WCMSA must go into a separate interest-earning account. Only the person who receives the compensation settlement can use their WCMSA funds, and they must go toward healthcare for that individual.
A person can self-administer their WCMSA account, and they must ensure that their record-keeping is accurate and complete. Settlement recipients must use the set-aside account funds in their entirety before Medicare starts to cover the costs of care related to the illness, injury, or disease reported in the claim for compensation.
The amount allocated to the set-aside account varies on a case-by-case basis, and depends on the person's estimated medical needs. Medical costs covered by a WCMSA may include visits to the doctor, prescriptions, procedures and tests, medical supplies and equipment, surgeries, and prescription drug expenses.
Individuals must keep copies of receipts and bills and report all of their WCMSA-related costs to the CMS each year. Individuals who have a Medicare set-aside agreement must deposit the funds in a separate interest-earning bank account.
To be eligible to set up a WCMSA, a person must either be a Medicare beneficiary and receive a settlement greater than $25,000, or reasonably expect Medicare enrollment within 30 months of their workers' compensation settlement date, with the settlement agreement being greater than $250,000. Once a person has used all of their WCMSA funds, Medicare starts paying for approved services related to the workers' compensation claim.
Under Medicare Secondary Payer legislation, in some instances, Medicare does not have the primary responsibility to cover medical costs, and other available insurance is responsible for the coverage before Medicare. Setting up a Medicare set-aside agreement is voluntary and not federally mandated.
If a person passes away and funds from the WCMSA remain, a CMS regional office and the Benefits Coordination and Recovery Center are responsible for the payment of claims. Records should include evidence of the services and items covered by the account, such as receipts, medical reports, appointment letters, and prescriptions.
Medicare is a healthcare program that covers a range of costs for adults aged 65 and older, as well as some younger adults with specific health conditions. The CMS only monitors spending once the person is eligible for Medicare.
- The primary purpose of a WCMSA is to set aside funds specifically for future Medicare-covered medical expenses related to work injuries, with the amount needing CMS approval if submitted for review.
- In managing a WCMSA, it's crucial to use the funds exclusively for work-injury-related medical expenses, maintain accurate and complete records of expenditures, and deposit the funds in a separate interest-earning account.
- A Medicare Set-Aside Allocation Report helps estimate the anticipated expenses for healthcare services, like doctor visits, prescriptions, procedures, and surgeries, over the injured party's life expectancy, guiding the amount to be set aside in the WCMSA account.
