- Legal
Medicare Set-Aside Record Prep: The Documentation CMS Actually Wants Before a Settlement Closes
CMS does not reject an incomplete Medicare Set-Aside submission. It fills the gaps with defaults, and the defaults run against the payer.
Table of Contents
The short version
- Missing information does not stall the number. It raises it, through published defaults.
- CMS lists the five most common reasons for development requests, and all five are records problems.
- The development clock is 20 business days on the portal, 30 days by mail. Non-response closes the case.
- Some omissions cannot be cured later: CMS states that failure to include required documentation at original submission is not a basis for re-review.
- Skip the review process altogether and the fallback is exhaustion measured against the entire settlement, not the allocated figure.
The
WCMSA Reference Guide (Version 4.6, July 13, 2026)
is unusually explicit about what happens when a submission is thin. The Workers’ Compensation Review Contractor does not guess in the submitter’s favor, and it does not pause indefinitely. It applies a rule.
Every gap has a default, and the defaults are expensive
| What is Missing | What CMS Does | Effect on the Number |
|---|---|---|
| No valid rated age, or the required statement that all rated ages obtained have been included | Uses actual age | Longer life expectancy, larger allocation |
| No drugs listed in the proposal, but the condition or records indicate medication | Defaults to brand-name pricing | Higher pharmacy allocation |
| CT or MRI ordered without specifying contrast | Allocates for “without followed by with” contrast | Two studies priced instead of one |
| Spinal cord stimulator type not identified | Defaults to non-rechargeable, single array | Seven-year replacement interval rather than nine |
| State statute or utilization review limit referenced but not supplied | Prices at full life expectancy or original treatment value, disregarding the limit | The statutory reduction is lost |
| No breakdown between medical and prescription amounts | Assumes the entire amount is medical items and services | Pharmacy proposal effectively disregarded |
| No settlement document or written request specifying payout | Defaults to lump sum | Removes the structured option |
| Major discrepancies between medical and pharmacy records | Uses the pharmacy records, favoring actual use | Drug list built from fills, not from the treatment plan |
The state statute line deserves particular attention, because it is the one that cannot be repaired. CMS states that failure to include the required documentation at the time of original submission will not constitute a reason for a re-review request. A reduction available under state law is forfeited by not attaching the statute.
The largest default applies to the whole file
Section 4.3 addresses what CMS calls non-submit or evidence-based products, meaning allocations prepared without using the voluntary review process. CMS treats their use as a potential attempt to shift financial burden, and states it may at its sole discretion deny payment for services related to the injury until the claimant demonstrates exhaustion equal to the total settlement, less procurement costs and paid conditional payments, rather than exhaustion of the allocated set-aside figure.
The exception CMS identifies is a showing, at the time the funds are exhausted, that the initial funding was sufficient and that utilization was appropriate. That showing is made from records, years after settlement, by a claimant who may no longer have them. The policy applies to settlement notifications received on or after January 11, 2022.
This is the same logic as the table above, applied to the entire file rather than one line in it. Where CMS cannot verify from documentation that its interests were protected, it resolves the question against the settlement.
CMS publishes the five reasons submissions get developed
Section 9.4.1.1 lists the most frequent reasons the WCRC issues a development request. It is a documentation failure rather than a valuation dispute.
| CMS’s Stated Reason | What Closes It |
|---|---|
| Insufficient or out-of-date medical records | Two years of treatment records per condition, required on every submission including disputed claims |
| Insufficient payment histories, usually lacking category breakdowns | A history broken out across medical, indemnity and expenses, with category codes identified |
| Failure to address draft or final settlement agreements and court rulings | The documents themselves, addressed in the cover letter. Where conditional payments form part of the agreement, CMS will not accept a letter saying no settlement documents exist |
| Documents referenced in the file but not provided | Anything the proposal cites, usually court rulings or settlement papers |
| State statutes cited without supporting documentation | A copy of the statute, plus identification of which payments and which section of the submission it applies to |
Development is not a warning. If the submitter does not respond within 20 business days for a WCMSAP submission or 30 days for one routed through the BCRC, the case is closed for lack of response. Where more than one request has issued, the clock runs from the most recent one.
What “medical records” means in practice?
The requirement is two years of treatment records for the work injury, and the Reference Guide closes the usual workarounds directly. Statements from the claimant, the carrier, or the claimant’s attorney are not a substitute for treatment records. IME, QME, and AME reports are not a substitute either. CMS gives the example of an IME reporting that a claimant has not treated since 2008: the reviewer still needs the 2007 and 2008 treatment records.
The two years are measured by treatment, not by calendar. Where a claim covers several body parts and some are no longer under active care, CMS wants the last two years of treatment for those conditions even if that treatment ended years ago. A 2006 shoulder injury with no recent care means producing the 2006 and 2007 shoulder records, unless current records address the shoulder sufficiently. Records must also follow the claimant, including treatment obtained outside the workers’ compensation provider network.
| Document | Coverage | Currency |
|---|---|---|
| Treatment records | Last two years of treatment per condition, including resolved conditions | Measured from treatment, not calendar |
| Carrier payment records | Two-year history across medical, indemnity and expenses. Entire history where any condition was denied | Printed within six months of submission or reopening |
| Pharmacy records | Sufficient to establish dose and frequency for each medication | Dated within six months of submission or reopening |
| First report of injury, surgical reports | Related to the work injury | Helpful regardless of age |
CMS also ranks pharmacy sources. Prescription claim records direct from the workers’ compensation insurer come first, then pharmacy benefit manager or TPA records, then individual pharmacy records, which are useful but carry the risk that a claimant used multiple pharmacies. Where a physician dispenses medication and it does not appear in the carrier history, billing records or other documentation of the refill history should be supplied.
Three changes worth confirming against your current playbook
Zero-dollar proposals ended. Effective July 17, 2025, CMS no longer accepts or reviews WCMSA proposals with a zero-dollar allocation. Parties may still conclude a zero allocation is appropriate, but must assess it against Section 4.2 and hold documentation supporting it. Note that the treating physician’s statement has to appear in the medical records rather than in a separate letter.
Section 111 reporting now captures MSA amounts. CMS began requiring Section 111 reporting of workers’ compensation MSA amounts for TPOC dates of April 4, 2025 and later, and issues a letter to the claimant covering the expectation that the set-aside be used for injury-related care, annual attestation, and self-administration. This applies even to set-asides never submitted for approval, which gives CMS visibility into allocations it was previously never told about.
The Amended Review waiting period is gone. Since April 7, 2025, an Amended Review may be requested at any time after approval rather than after twelve months. The criteria are otherwise unchanged: a conditional approval or approved amount, a case that has not yet settled, and a change in projected care worth 10% or $10,000, whichever is greater. The submission requires a new cover letter, all medical documentation relating to the settling injuries since the previous submission, the most recent six months of pharmacy records, a consent to release, and a summary of expected future care.
Personal injury: no reviewer, so the file is the whole defence
Everything above describes the workers’ compensation process. There is no equivalent for liability settlements. CMS has never implemented a formal review and approval program for liability set-asides, and its most recent attempt to regulate the area, the proposed rule on Medicare Secondary Payer and future medicals, was withdrawn on October 13, 2022 without comment. Earlier efforts in 2012 and 2018 met the same end.
The obligation itself does not soften. Medicare’s secondary payer status under 42 U.S.C. § 1395y(b) applies to liability insurance, including self-insurance, in the same terms it applies to workers’ compensation. What disappears is the counterparty. There is no submission to make, no threshold to clear, no development letter to answer, and no approval letter to put in the file.
For a WC file, thorough records buy a CMS determination that ends the argument. For a liability file, there is no determination to buy. The documentation is not evidence supporting the allocation; it is the allocation’s only defence, and it will be read years later, by someone looking for a reason it was inadequate.
That inverts the usual economics. A thin WC file produces a development letter and a delay, both recoverable. A thin liability file produces nothing at settlement and surfaces only when Medicare denies injury-related care or asserts recovery. Assemble and retain the record on the assumption that nobody will tell you it was insufficient until it matters.
For carriers and TPAs: the penalty safe harbor is also a records requirement
Section 111 reporting now carries enforceable penalties, and the WCMSA reporting obligation that began on April 4, 2025 sits inside that regime. Under the civil money penalties final rule, applicable from October 11, 2024, non-compliance means failing to report a TPOC or the assumption of ongoing responsibility for medicals on time.
| How late the record was reported | Penalty per calendar day |
|---|---|
| 1 year or more, less than 2 years after the required date | $250, as adjusted |
| 2 years or more, less than 3 years | $500, as adjusted |
| 3 years or more | $1,000, as adjusted |
NGHP civil money penalty tiers. These are the statutory base amounts; the figures actually applied are higher, since each is adjusted annually for inflation. Confirm current amounts before relying on them. Source: CMS, NGHP Civil Money Penalties.
The maximum for a single instance of non-compliance is $365,000, also inflation-adjusted. CMS audits up to 1,000 cases a year, 250 per quarter, across group and non-group health plans. Its own worked example describes a TPOC reported 85 days beyond the deadline drawing a potential penalty of $21,250.
The relevant point for record practice is the good-faith exception. Where late reporting results from a beneficiary’s failure to cooperate, no penalty applies provided the entity documents its efforts: three attempts in total, at least two by mail or email and a third by telephone, email, or another reasonable method, with the documentation retained for a minimum of five years. The escape from the penalty is itself a documentation requirement, and one that has to be built at the time rather than reconstructed during an audit.
For plaintiff and applicant counsel reviewing a proposal
Several provisions are worth knowing when a proposed allocation looks high. The WCRC prices at 100% of future injury-related costs and does not recognize any apportionment. For medical expenses, the treating physician’s opinion carries the greatest weight unless a court order says otherwise, and the guide expressly flags whether non-treating provider reviews are taking precedence over the treating provider’s plan as a review consideration. Where a recommended amount lands within 5% of the submitter’s proposal, the WCRC recommends approving the proposed amount. And a counter-higher determination comes with a written decision rationale, which is the document to read before deciding whether an Amended Review is worth pursuing.
A pre-submission checklist
- Confirm the threshold is met and that the total settlement amount is stated unambiguously in the cover letter. An unclear total stops the review outright.
- Pull two years of treatment records for every condition being settled, including body parts no longer under active care.
- Order the payment history with category breakdowns and confirm it is printed within six months of the filing date.
- Pull the entire payment history, not two years, if any condition was denied.
- Source pharmacy records in CMS’s stated order of preference and verify dose and frequency are determinable for every drug.
- Reconcile the medical and pharmacy records against each other before filing, since major discrepancies hand the drug list to the pharmacy data.
- Attach every document the proposal references, particularly court rulings and settlement papers.
- Attach any state statute relied on, and identify which payments and which section it applies to. This one cannot be fixed on re-review.
- Include the rated-age statement, or accept actual-age pricing.
- Specify contrast, stimulator type, and the medical versus prescription split rather than leaving CMS to default.
- If the file will not be submitted, document why Medicare’s interests are protected to the Section 4.2 standard and retain it, since the fallback is exhaustion measured against the whole settlement.
- For carriers and TPAs, confirm the Section 111 good-faith contact log exists and is retained for five years before it is needed in an audit.
Where the time actually goes?
None of this is analytically difficult. It is retrieval, reconciliation, and completeness checking across several years of records from multiple providers, a carrier payment system, and a pharmacy benefit manager, assembled to a standard published in a 180-page guide. It is also the step most exposed to schedule pressure: terms are agreed, the file goes to a vendor, and the records that arrive are whatever was already in the claim file. A development letter thirty days later costs more than the preparation would have, and a default applied for want of a one-line statement costs more again.
Rapid Care MRR’s record review platform
was built for this shape of work: assembling multi-provider record sets into a dated chronology, separating conditions and body parts, and surfacing what is missing against a defined requirement before a file goes out rather than after it comes back. For carriers and TPAs managing panel vendors, the same completeness check is what makes an allocation defensible and a
reserve figure reliable,
and the underlying discipline is the same one behind
defense-side apportionment review.
underlying discipline is the same one behind defense-side apportionment review.
CMS has published exactly what it wants. The cost of an incomplete file is not a rejection. It is a larger number and a later closing date.
Send us one file heading for MSA submission. We will return a completeness review against the WCMSA Reference Guide record requirements, at no cost on your first case, showing what is present, what is missing, and which defaults the current file would trigger.Request a review.
Files are handled under our
HIPAA compliance program and returned or destroyed on request.
Frequently Asked Questions
What medical records does CMS require for a WCMSA submission?
Treatment records for the last two years of treatment of the work injury. Statements from the claimant, carrier, or claimant’s attorney are not a substitute, and IME, QME, and AME reports are not a substitute either. All related treatment records must be provided even where the claimant relocated or began treating outside the workers’ compensation provider network. CMS notes it is helpful to include the first report of injury and any surgical reports, even where those fall outside the two-year window.
How far back do medical records need to go for a Medicare Set-Aside?
Two years of treatment, measured by treatment rather than by calendar. Where some conditions are resolved or not under active treatment, CMS asks for the last two years of treatment for those conditions even if it did not occur in the last two calendar years. Carrier payment records work differently and must be printed within six months of the submission date.
What are the CMS review thresholds for a WCMSA?
A Medicare beneficiary with a total settlement above $25,000, or a claimant with a reasonable expectation of Medicare enrollment within 30 months and an anticipated total settlement above $250,000. Reasonable expectation includes having applied for Social Security Disability benefits, being denied and appealing, or being 62 years and 6 months old. These are workload thresholds rather than a safe harbor, and CMS will not issue a verification letter confirming a set-aside was unnecessary.
What causes delays in CMS review of a Medicare Set-Aside?
CMS publishes five leading reasons for development requests: insufficient or out-of-date medical records; payment histories without category breakdowns; failure to address draft or final settlement agreements and court rulings; documents referenced but not provided; and state statutes cited without supporting documentation. Once a development letter issues, the response window is 20 business days on the portal and 30 days through the BCRC, and non-response closes the case.
Does CMS still review zero-dollar Medicare Set-Aside proposals?
No. Effective July 17, 2025, CMS no longer accepts or reviews zero-dollar WCMSA proposals. Parties may still conclude a zero allocation is appropriate, but must assess that against the conditions in Section 4.2 of the Reference Guide and maintain documentation supporting it, including treating physician documentation within the medical records rather than in a separate letter.
Can an approved WCMSA amount be reduced?
Through Amended Review, where CMS has issued a conditional approval or approved amount, the case has not settled, and projected care has changed by 10% or $10,000, whichever is greater. Since April 7, 2025 there is no waiting period, so a request may be made at any time after approval. It requires a new cover letter, all medical documentation for the settling injuries since the previous submission, six months of pharmacy records, a consent to release, and a summary of expected future care.
What happens if the parties do not submit the MSA to CMS?
CMS treats non-submit or evidence-based allocations as a potential attempt to shift financial burden. Under Section 4.3 of the Reference Guide, it may at its sole discretion deny payment for services related to the injury until the claimant demonstrates exhaustion equal to the total settlement, less procurement costs and paid conditional payments, rather than exhaustion of the allocated amount. The exception is a showing, at the point funds are exhausted, that the initial funding was sufficient and utilization was appropriate. The policy applies to settlement notifications received on or after January 11, 2022. Submission is voluntary, but the consequence of not submitting is measured against the whole settlement.
Does CMS review Medicare Set-Asides in personal injury settlements?
No. CMS has never implemented a formal review and approval process for liability set-asides, and its proposed rule on Medicare Secondary Payer and future medicals was withdrawn on October 13, 2022 without comment, following similar withdrawals in 2012 and 2018. The Medicare Secondary Payer statute still applies to liability insurance including self-insurance, so the obligation to consider Medicare’s interests remains. What is absent is any mechanism to have an allocation approved, which means the supporting documentation is the only thing standing behind it if the allocation is later questioned.
