A federal law known as the Medicare Secondary Payer Act (MSP) ((42 U.S.C §1395y(b)(2) and 42 C.F.R. §411)) established that Medicare’s responsibility for paying medical care was secondary to worker’s compensation self-insured employer’s or insurer’s responsibility. Parties to worker’s compensation settlements are required to consider Medicare’s potential interests—both past and future—when settling a worker’s compensation claim. It is good practice to include in the settlement agreements language describing how the parties have considered Medicare’s potential interests.

In 2007, amendments to MSP (the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA Section 111)(42 U.S.C. §1395(b)(8)) created employer/insurer mandatory reporting obligations which required entities to report on a quarterly basis the ongoing responsibility for medical care paid to a Medicare beneficiary in a worker’s compensation claim and worker’s compensation settlements made with a Medicare beneficiary. With this information, the Center for Medicare and Medicaid Services (CMS) pursues reimbursement for medical care payments it made in the past that it deemed to be another entity’s responsibility (known as conditional payments). Following additional MSP amendments which addressed procedures for collection, appeals, and limitations for litigation, the MMSEA Section 111 civil money penalty regulations for non-compliance became effective in 2023. Accordingly, before finalizing any settlement, the best practice is to clarify and resolve any asserted conditional payments.

In addition to identifying and resolving past/conditional payments, parties should evaluate whether Medicare may assert an interest related to future medical care associated with a worker’s compensation claim. One method to address future medical care expenses and avoid Medicare denying coverage for the employee’s medical conditions is to establish a Medicare Set Aside (MSA) allocation; an MSA is one method to address future medical care interests—it is not required.

Early next year, there will be an additional mandatory reporting requirement as part of CMS’s Section 111 data collection. Effective April 4, 2025, CMS will begin requiring employers/insurers to report settlement details related to MSA allocations. The reporting requirements include the total MSA amount, the period/number of years covered, lump sum or structured payout indicators, initial deposit amounts, and anniversary/annual deposit amounts. The new reporting includes claim settlements that do not meet the submission threshold or those that do not include any money allocated for potential future medical care. CMS will use this data to determine whether the parties adequately considered Medicare’s interests related to future medical care it deems is the responsibility of employer/insurer in worker’s compensation claims. Failure to correctly input worker’s compensation MSA information in a timely manner could result in civil money penalties.

There are many details that are yet to be resolved regarding the new reporting requirements and CMS’ compliance investigations. Are you ready?

If you have questions about the Medicare Secondary Payer Act and the new mandatory reporting requirements, contact Ann Stewart or the Workplace Solutions lawyer with whom you most frequently work.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.