What Is a Medicare Set-Aside (MSA) and Why Is Medical Record Review Critical?

Did you know that for a settlement involving a Medicare Set-Aside (MSA), the Centers for Medicare & Medicaid Services (CMS) recommends allocating part of the settlement for future care, because Medicare cannot pay until those funds are exhausted?

In fact, as per new guidance effective April 4, 2025, every workers’ compensation settlement involving Medicare beneficiaries must report MSA details to CMS, a clear indicator of how vital MSA compliance has become.

That means this is not just boilerplate, but a compliance trigger with financial and operational consequences.

What Is a Medicare Set-Aside and How Does It Work?

A Medicare Set-Aside (MSA) is a mechanism, often a financial arrangement, that designates a portion of a settlement (typically in a workers’ compensation or liability context) for future medical expenses that would otherwise fall under Medicare’s purview.

For example, in a workers’ compensation case: the metals-worker settles his claim; part of the settlement is reserved to cover future medical treatment related to the injury. That reserved amount (the MSA) must be used before Medicare picks up any treatment costs for that injury.

Why Does It Exist?

the Medicare Secondary Payer Act (MSP) requires that whenever payment can reasonably be expected from a primary insurer (workers’ comp, liability, no-fault), Medicare must act as the secondary payer.

So, when a settlement includes future medical costs, Medicare’s interest must be protected. An MSA is the “recommended method” under CMS guidance to satisfy that interest in a structured way.

When Is an MSA Needed?

While each case is unique, some broad-brush criteria apply:

• If the claimant is a Medicare beneficiary at the time of settlement and the settlement amount (including future medical) exceeds $25,000, an MSA is generally recommended.
• If the claimant is not yet on Medicare but has a “reasonable expectation” of Medicare eligibility within 30 months of settlement (for instance via SSDI) and settlement (including future medical) is expected to exceed ~$250,000, an MSA may be required.

Note: There is no strict statutory requirement for each and every scenario, but failing to consider risk.

The ‘Why’ of MSA: The Upside and the Risk

1. Upside: Secure future care and protect eligibility

   For the injured party, establishing a proper MSA helps ensure that future injury-related care is funded and that Medicare may resume primary payment for that injury once the set-aside is exhausted.

   For insurers/employers/carriers, allocating for future medical via an MSA helps demonstrate compliance with Medicare’s secondary-payer rules, and mitigates future risk of Medicare denial or cost-shift back to the carrier.

2. Risk of not doing it properly

   If an MSA is under-funded or improperly administered:

   • Medicare could deny payment for future medical expenses related to the injury until the funds are fully exhausted; potentially leaving the injured party to pay out of pocket.
   • Medicare may seek recovery (liens) against the settlement monies.
   • For carriers/employers, inadequate planning could lead to financial exposure, regulatory scrutiny or reputational damage.
3. Recent regulatory twist

   As of July 17, 2025, CMS will no longer review “zero-dollar” MSAs (that is, settlements where no funds are allocated for future medical) for workers’ compensation cases.

   This means if parties choose to forego allocating future medical care, the documentation burden becomes heavier, and the risk of challenge increases.

Medical Record Review: The Critical Link

Here’s where things get operational, and where the value of expert review shines.

1. Why Medical Record Review Is Important for MSA Compliance
   • Determining the appropriate MSA amount requires a future medical cost projection. That projection hinges on what past and current medical treatment shows: diagnoses, procedures, medications, frequency of visits, future need.
   • The review of medical and payment history is a key step before submission of a WCMSA. Experts emphasize that claims administrators need to gather medical records, payment histories and ensure that the treatment is properly documented.
   • An entity known as the Workers’ Compensation Review Contractor (WCRC) reviews submissions and checks medical/pharmacy records to determine whether the proposed amount is sufficient.
   • Poorly vetted records or missing treatment history can delay approval, increase cost (due to conservative inflation of future costs) or result in higher exposure.

2. Key Components of Record Review
   • Gather all relevant medical records: treating physician notes, diagnostic reports, surgical/procedure records, pharmacy history. IMEs or QMEs alone won’t substitute for full treatment records.
   • Chronological organization of care history, establishing frequency, trend of treatment and expected future duration and intensity.
   • Evaluation of life expectancy, rated age (if applicable), co-morbidities and the nature/severity of the injury to adjust projections.
   • Payment history (who paid what for which services and when) to ensure accurate baseline for projection.
   • Documentation of projected costs year-by-year, clearly tied back to injury-related services that Medicare would have otherwise covered.

3. Why Outsourcing Review (and Advanced Review Methods) Adds Value

   Having a dedicated partner with domain experience ensures that the record review is consistent, thorough and aligned with CMS expectations. For settlement administrators, carriers or TPAs, this means smoother submissions, fewer surprises and more defensible allocations.

   Also, leveraging AI-enhanced medical record review (indexing, identifying injury-related treatments, mapping payment history) can raise efficiency, accuracy and transparency, especially when volumes are large or data is complex.

What Organizations Have to Do?

For organizations dealing with settlements (employers, insurers, carriers, TPAs), here’s how to view the MSA–medical record review combination:

1. Early identification of potential Medicare interest: Identify if the claimant is Medicare-eligible now or reasonably expected to be within 30 months. Assess settlement projections and determine if an MSA is triggered.
2. Comprehensive record collection and review: Before finalizing settlement value, pull medical records and payment history, and engage record-review experts to map out the future medical cost projection.
3. Allocation and funding strategy: Based on review outcomes, allocate the set-aside funds (lump sum or structured settlement), ensure documentation supports the amount, and determine whether to submit to CMS for review.
4. Administration and compliance: Once funded, ensure MSA funds are placed in an interest-bearing separate account, track expenditures, file annual attestations (if self-administered) or monitor professional administrator processes.
5. Risk mitigation: Keep robust supporting documentation of why the amount was chosen, the medical record review, the settlement breakdown, the funding choice. This protects against future Medicare denials or recovery actions.

Why Partner with MOS Medical Record Review for Your MSA and Record-Review Needs

1. Medical-Records Expertise: Advanced review methods reveal treatment details, payment history, and future-care trends.
2. Risk Mitigation: Defensible, CMS-aligned MSA allocations with clear future-medical projections.
3. Efficiency & Scale: AI-driven workflow for faster turnaround, cleaner outputs, and fewer surprises.
4. Compliance Confidence: Stay ahead of evolving regulations, including April 2025 reporting rules.
5. Strategic Insight: Guidance on funding strategy, administration best practices, and settlement optimization.

Final Thoughts

An MSA is more than a line-item in a settlement; it’s a discipline. And the linchpin of that discipline is solid medical record review.

Whether you are an insurer, employer, TPA or claims-administrator, the moment you recognize that a claimant is Medicare-eligible (or will soon be), the clock starts on assessing future medical exposure, aligning settlement structure and getting your documentation in order.

The good news? With the right partner, this doesn’t have to be a burdensome, error-prone process. With MOS Medical Record Reviews, it’s assured your MSA documentation is precise, compliant, and future-ready.