The landscape of workers’ compensation settlements is undergoing its most significant shift in years. For decades, attorneys and insurance carriers have relied on a specific safety net when settling denied or medically resolved claims: the ability to submit a "Zero-Dollar" Medicare Set Aside (MSA) to the Centers for Medicare & Medicaid Services (CMS) for approval. This approval acted as a shield, confirming that Medicare accepted the position that no future medical funds were needed.

That shield is being removed.

In a move that fundamentally alters settlement strategies, CMS has announced that effective July 17, 2025, it will no longer accept or review WCMSA proposals with a zero-dollar allocation. This change, coupled with new mandatory reporting protocols, places the burden of compliance entirely on the shoulders of the settling parties.

For injured workers and legal representatives, the new reality requires rigorous documentation, strategic planning, and a deep adherence to compliance protocols to avoid future liability.

CMS Workers’ Comp Update 2025

The ability to submit a Zero-Dollar MSA to CMS was previously a strategic tool for finalizing difficult cases. If a claim was denied, or if a treating physician certified that an injury had fully healed, parties could submit the file to CMS proposing that $0 be set aside for future medical care. If CMS agreed, they issued an approval letter. This letter provided certainty; it was a federal confirmation that Medicare would not seek reimbursement from the settlement proceeds later.

The CMS workers’ comp update in 2025 effectively dismantles this validation process. By refusing to review these files, CMS is not saying that Zero-Dollar MSAs are invalid. Rather, they are stating that they will no longer expend resources verifying them. The agency expects settling parties to make the correct determination themselves.

This shift creates a "trust but verify" environment, where the "verification" might come years later in the form of an audit or a denial of benefits, rather than an upfront approval. Without the CMS seal of approval, the finality of a settlement is less guaranteed unless the legal team has built an airtight defense of the allocation.

Defining the Zero-Dollar MSA Changes

To adapt to this new environment, it is necessary to define exactly what is changing. A Zero-Dollar MSA is appropriate in cases where the burden of future medical care should not shift to Medicare because the injury is either not work-related (denied) or the medical condition has resolved completely.

Historically, getting CMS to sign off on this change was a way to "close the file" with confidence. Under the zero-dollar MSA changes, the mechanism for closing that file has vanished.

The Reference Guide Update (Version 4.4) clarifies that while you cannot submit the file for review, you must still adhere to specific criteria to justify a zero allocation. The burden of proof has not disappeared; it has merely shifted from a federal reviewer to the attorney’s file cabinet. If Medicare questions the settlement five years from now, the defense rests entirely on the quality of the evidence gathered at the time of settlement.

Medicare Reporting Requirements 2025: What Insurers Must Do

While CMS is stepping back from reviewing these files, they are simultaneously stepping up their data collection. This is where the Medicare reporting requirements for 2025 come into play. Effective April 4, 2025, CMS requires mandatory Section 111 reporting for all workers’ compensation settlements involving Medicare beneficiaries, including those with zero-dollar allocations.

The rule is a critical enforcement mechanism. Previously, many settlements with "nuisance value" or denied claims went unnoticed. Now, every single one must be reported to CMS. This data provides the government with a comprehensive view of every settlement where medicals are closed out.

If an insurer reports a settlement of $150,000 but allocates $0 to future medicals, that data point is now in the CMS. If the beneficiary later seeks treatment for the work injury using Medicare benefits, the agency has the data to flag the discrepancy immediately. The combination of "no review" and "mandatory reporting" means that CMS is building a database of potential audit targets without the administrative burden of approving them beforehand.

2025 Medicare Secondary Payer Rules and Compliance

The foundation of all these changes is the Medicare Secondary Payer (MSP) statute. The law prohibits Medicare from making payments for items or services when payment has been made, or can reasonably be expected to be made, by a primary plan—in this case, workers' compensation.

The Medicare Secondary Payer rules for 2025 reinforce the concept that Medicare should not pay for work-related injuries. Even without a formal submission process, the obligation to protect Medicare’s interests remains absolute.

Legal teams must now conduct their internal audits that mirror the rigor of a CMS review. This involves a granular analysis of payment histories, medical records, and legal defenses. If a case is settled for $0 in future medicals, the file must contain "clear and convincing" evidence that explains why. This might include court orders, specific denial letters, or exhaustive medical chronologies showing a complete cessation of treatment.

Workers’ Compensation Settlement Regulations: The New Approval Process

Since the federal government has exited the approval business for these specific cases, the industry must develop its own workers’ comp settlement regulations and standards. The "New Approval Process" is essentially a rigorous internal compliance check.

When a settlement is reached, the attorney and the carrier must agree that the file meets the strict criteria for a Zero-Dollar allocation. CMS has outlined acceptable scenarios in the updated Reference Guide:

• The Physician Certification: A treating physician certifies in writing that no future medical treatment is required for the work injury.
• The Complete Denial: The claim was denied from the outset, no medical or indemnity payments were made, and the denial was maintained throughout the litigation.
• The Judicial Ruling: A worker’s compensation judge or board has issued a ruling on the merits finding that no future medical benefits are owed.

Without one of these pillars clearly documented, a Zero-Dollar MSA carries significant risk. The "approval" is now a consensus between the defense and plaintiff attorneys that the documentation is strong enough to withstand future scrutiny.

How CMS Policy Updates to Workers’ Compensation Affects Claims

The practical impact of the CMS policy update on workers’ compensation guidance is likely to be a slowdown in the settlement of denied claims. Previously, parties might settle a disputed claim for a lump sum and submit a Zero-Dollar MSA to CMS to "wash their hands" of the medical liability.

Now, carriers may be more hesitant to settle denied claims without stronger protections. They may demand more aggressive indemnification language from the injured worker, requiring the worker to hold the insurer harmless if Medicare later seeks reimbursement.

This update also impacts "compromise" settlements. If a carrier agrees to pay a settlement to avoid litigation costs but does not admit liability, justifying a $0 allocation becomes complex. If there is no judicial finding and no doctor confirms treatment has ended, arguing "it was a denied claim" may be insufficient even if the carrier paid some medical bills "without prejudice" earlier in the case.

Medicare Issues: Navigating the Shifts

For a workers’ comp attorney, these changes introduce new layers of liability and strategy. The primary role of the attorney is to maximize the client's recovery while ensuring the settlement is durable and legally sound.

Future Medicare compliance will place significant emphasis on the development of medical evidence. It is now imperative for attorneys to proactively secure "maximum medical improvement" (MMI) reports that clearly detail future medical needs. Previously a minor issue, an ambiguous medical report now presents a serious compliance risk.

Attorneys must also educate their clients. Injured workers need to know that just because a settlement says $0 for Medicare, it does not mean Medicare agrees. If the documentation is flawed, the worker could find themselves with a denied Medicare claim years down the road, with the government arguing that the settlement funds should have been used for treatment.

CMS MSA Reform 2025: The Documentation Imperative

The CMS MSA reform of 2025 can be summarized in one word: documentation. Since the external check is gone, the internal file must be impeccable.

Legal teams should consider creating a "Compliance Package" for every Zero-Dollar settlement. This package serves as a time capsule. If Medicare audits the file five years later, this package should contain:

• The exact payment history showing $0 paid (or payments only made under specific "without prejudice" statutes).
• The specific denial was filed with the state.
• The definitive medical report stating injury resolution.
• The text of the settlement agreement explicitly releases medical rights based on the denial.

While this level of detail has always been beneficial, it now serves as the sole means of protection. The CMS settlement guidelines for 2025 make it clear that the agency assumes the parties are following the rules and will penalize them if the data suggests otherwise.

Workers’ Comp Insurance Compliance: The Carrier’s Perspective

Insurance carriers face a unique challenge under the new rules. Workers’ comp insurance compliance departments are currently rewriting their settlement authority protocols.

Carriers are likely to become more rigid about when they will accept a Zero-Dollar allocation. They may refuse to settle cases on a full and final basis unless the medical evidence is overwhelming. We may see a rise in "medical open" settlements, where the indemnity portion is settled but the medical rights remain open, simply because the carrier does not want to risk a non-compliant MSA conclusion.

Furthermore, the integration of the Section 111 reporting means carriers are exposing their data to CMS in real time. This transparency forces carriers to ensure their claims adjusters are not just settling cases to clear their desks but are settling them in a way that aligns with federal reporting standards.

MSA Approval Process Changes: What Happens to Funded MSAs?

It is important to note that the MSA approval process changes primarily target the Zero-Dollar submissions. CMS will continue to review funded MSAs that meet the review thresholds (settlements over $25,000 for current beneficiaries or over $250,000 for those expecting to enroll within 30 months).

However, the scrutiny of funded MSAs may increase. With resources freed up from reviewing Zero-Dollar files, CMS contractors may dig deeper into the funded proposals.

The distinction between a "low dollar" MSA and a "zero dollar" MSA is now sharp. A $500 MSA can be submitted and approved (if thresholds are met), providing safety. A $0 MSA cannot. This scenario creates a perverse incentive, where allocating a small amount might be safer than allocating nothing, solely to gain access to the review process.

Workers’ Compensation Claim Management Strategies

Effective workers’ compensation claim management now requires a dual-track approach.

Track 1: The Denied Claim. If a claim is denied, the denial must be absolute. Managers must ensure no errant medical payments were made that could be construed as acceptance of the injury. The settlement documents must mirror the language in the CMS Reference Guide regarding denials.

Track 2: The Medical Resolution. If the claim is accepted but medically resolved, the focus is on the treating physician. Managers cannot rely on an Independent Medical Exam (IME) alone. CMS historically places more weight on the treating physician. Securing a clear sign-off from the treating doctor that "no further treatment is needed" is the gold standard for justifying a $0 allocation.

CMS Zero-Dollar MSA Guidance: The "Safe Harbors"

The updated CMS zero-dollar MSA guidance outlines specific scenarios that act as "safe harbors." Utilizing these safe harbors is the best way to protect the settlement.

One such harbor is the state statute of limitations. If a claim is denied and the statute of limitations for filing a petition has expired, this serves as a strong legal argument that no future medicals are owed. Documenting the specific dates and applicable state statutes in the settlement file provides a robust defense against future Medicare recovery actions.

Another safe harbor involves judicial determinations. A judge's order carries significant weight. Rather than settling via a private contract, parties may prefer to have a hearing where a judge makes a finding of fact regarding the medical status of the injury. This judicial stamp can serve as a proxy for the CMS approval letter.

Medicare Lien Resolution 2025: Addressing Past Payments

While MSAs deal with the future, Medicare lien resolution in 2025 remains a critical piece of the puzzle regarding the past. The new policy on Zero-Dollar MSAs does not change the obligation to repay conditional payments.

In fact, the mandatory reporting makes lien resolution more urgent. When the settlement is reported via Section 111, it triggers an automatic check for conditional payments. If Medicare paid for treatment while the claim was being denied, they will seek reimbursement immediately upon receiving the settlement report.

Parties cannot finalize a Zero-Dollar future allocation if they have not resolved the past debts. A Zero-Dollar MSA implies that the injury is not the responsibility of the carrier. If the carrier then pays Medicare back for past treatment, they are effectively admitting responsibility, which contradicts the Zero-Dollar argument for the future. Consistency between lien resolution and MSA allocation is vital.

Workers’ Comp Settlement Planning: The Timeline

Workers’ comp settlement planning must now account for these regulatory dates.

• Before April 4, 2025: Parties should review all pending settlements. If a case is near settlement, finalizing it before the mandatory reporting deadline might simplify the administrative process, though the underlying MSP obligations remain.
• Before July 17, 2025: There is a window of opportunity. CMS will still review Zero-Dollar MSAs until this date. If a carrier or attorney has a stockpile of denied claims with Medicare beneficiaries, there is a strategic advantage to submitting them for approval now before the door closes. Getting a final approval letter before July 17, offers permanent peace of mind that will not be available afterward.

Medicare Reimbursement Workers’ Comp: The Long-Term Risk

The ultimate risk of these changes is Medicare reimbursement workers’ comp actions. If a settlement is reported as $0, and five years later the worker requires surgery for the injury, Medicare may deny coverage. The worker, facing a massive medical bill, may sue the attorney for malpractice or the carrier for bad faith, arguing that the settlement was mishandled.

Alternatively, Medicare may pay for the surgery and then sue the carrier for double damages under the MSP statute, arguing that the primary payer (the carrier) shifted the burden to the taxpayer.

The elimination of the review process removes the "early warning system." Previously, CMS would reject a bad MSA, forcing the parties to fix it. Now, the "rejection" will come in the form of a recovery demand letter years after the file has been closed and the reserves released.

Best Practices for the New Era

To survive the CMS MSA reform of 2025, legal and insurance professionals should adopt the following best practices:

• Audit Pending Files: Identify all cases involving Medicare beneficiaries that are candidates for a Zero-Dollar MSA.
• Rush Submissions: For eligible cases, submit Zero-Dollar proposals to CMS immediately, ensuring they are received well before the July 17, 2025, cutoff.
• Standardize Denial Language: Update settlement templates to include specific language citing the Reference Guide criteria for zero allocations.
• Educate Doctors: Ensure that physicians understand the importance of clear, decisive language regarding future treatment needs. "PRN" (as needed) prescriptions are fatal to a Zero-Dollar argument.
• Prepare for Transparency: Assume that every data point in a settlement will be visible to CMS. Do not hide potential medical exposure in the indemnity figure.

The days of blindly accepting settlements are over. The era of accountability is here. By understanding the nuances of the 2025 changes, parties can continue to settle claims effectively, provided they are willing to do the work that CMS is no longer doing for them.

Need Legal Help? Brandon J. Broderick, Attorney at Law, is One Phone Call Away

Navigating the aftermath of a workplace injury is difficult enough without having to decipher complex federal regulations like the new CMS mandates. When you are in pain and worried about your financial future, the last thing you need is the stress of wondering if a paperwork error today will cost you your medical coverage tomorrow. Insurance companies have teams of experts working to minimize their payouts, and trying to face them alone often leaves you vulnerable. You deserve a partner who understands the human side of your struggle, someone who sees you not as a claim number but as a person deserving of recovery and peace of mind.

At Brandon J. Broderick, Attorney at Law, we believe that your only job should be getting better, while ours is to handle the legal heavy lifting. We bring a deep understanding of workers’ compensation laws and the evolving Medicare landscape to fight for the maximum settlement you are entitled to. Do not allow uncertainty to dictate your future or jeopardize your benefits because of a technicality. One phone call can lift the weight off your shoulders, giving you the confidence that a dedicated legal team is protecting your rights every step of the way.

Contact us today for a free legal consultation. We are available to assist you day or night.