After Further Review: $0 MSAs and the WCMSA Review Process
January 24, 2025
By: Aaron P. Frederickson, Esq. - MSP Compliance Attorney for MSA Source
Effective July 17, 2025, CMS will no longer review proposed $0 allocations under the voluntary Workers’ Compensation Medicare Set-aside Arrangement (WCMSA) process. This is welcomed by many, but will also create confusion. Now is the time to review your compliance program and implement change with experienced compliance partners to avoid civil monetary penalties, delayed settlements, and adverse action by Medicare.
Zero Allocations: A Brief Background
The $0 allocation is essentially a legal fiction created by CMS in the WCMSA Reference Guide that many argue is consistent with statute and regulation.[1] This is further broken down in the Reference Guide to include the following concepts:
• Medical $0 allocation: Cases where the medical evidence supports a complete recovery by the injured employee (excluding the findings and opinion of an independent medical examiner);[2] and
• Legal $0 allocation: Instances where the employer and insurer have denied primary liability and not “demonstrated responsibility” for an injury.[3]
Allocations of these nature have become difficult to gain CMS approval under the voluntary review and approval process. Although CMS will no longer review these cases, steps should be taken to consider Medicare’s interests and protect your client. Always be reasonable.
Zero Allocations: A New CMS Perspective
Under current CMS policy, any MSA meeting review workload thresholds can be submitted under the WCMSA process. This includes the review of submissions seeking $0 allocation approval. Starting on July 17, 2025, “CMS will no longer accept or review WCMSA proposals with a zero-dollar ($0) allocation. Entities should consider the above parameters in determining whether a zero-dollar WCMSA allocation is appropriate and maintain documentation to support that allocation.” CMS also cautions interested stakeholders not to abuse the new guidance.
Move Forward With Confidence By Being Reasonable
The change in CMS policy should not alter how you view MSAs in your settlements. Always consider the following:
The use of an MSA is never required, but determine if one is recommended in your settlement based on factors such as the closure of Medicare reimbursable items and services, the age and Medicare status of the employee, and reasonable need for future medical care and treatment post-settlement. Consider Medicare’s interests in all settlements;
Review CMS guidance in the WCMSA Reference Guide regarding the reasonableness of any MSA;
Consult a Medicare compliance service provider regarding any allocation amount, including $0 allocations.
Include language in your settlement agreement that outlines the justification and reasonableness of a legal or medical $0.
Determinations regarding a $0 allocation should only be made while working with a compliance attorney –decisions made by non-attorneys is by definition, the unauthorized practice of law and could jeopardize your settlement.
Conclusions
MSA Source is here to help you navigate this significant change with confidence. Our compliance team includes trained nurses with decades of experience writing complete allocations and legal counsel who can review your proposed $0 allocations and provide guidance. This includes assistance in drafting settlement language to demonstrate why the $0 allocation is reasonable and considers Medicare’s interests.
[1] Cf. 42 U.S.C. §1395y(b)(2)(B)(ii); See also 42 C.F.R.§411.46(b)(2).[2] WCMSA Reference Guide Section 4.2 – Indications That Medicare’s Interests are Protected.[3] Id, and Section 10.1 – Cover Letter; 42 U.S.C. §1395y(b)(2)(B)(ii). As a matter of policy, CMS has informally recognized statues such as Cal. Lab. Code§5402 (2023), which requires insurance carriers to make payments for medical care during the investigation phase of a claim.