CMS to Cease Review of Zero Allocations: Sanderson Firm Now Offering Indemnified Zero Allocation Solution
By Annie M. Davidson, Esq., CMSP, MSCC
As you may have heard, the latest WCMSA Reference Guide, among other things, provided the Medicare Secondary Payer (MSP) industry with notice of an upcoming change in the agency’s voluntary Medicare Set-Aside (MSA) review process with respect to zero-dollar allocations.
Per the Centers for Medicare and Medicaid Services (CMS), “[e]ffective July 17, 2025, CMS will no longer accept or review WCMSA proposals with a zero-dollar ($0) allocation. Entities should consider [CMS’ updated] parameters [outlined in the guide] in determining whether a zero-dollar WCMSA allocation is appropriate and maintain documentation to support that allocation.”
What is a zero-dollar allocation?
As my colleague Kristina Bonanno, Esq. discussed in a previous Sanderson Firm blog, we typically see zero allocations in one of two scenarios:
“(1) when the workers’ compensation claim remains fully denied and the employer or carrier has not made any medical or indemnity payments, or
(2) when the workers’ compensation claim remains fully accepted but the claimant has completed all injury-related treatment.”
What impact will CMS’ new policy have on parties’ ability to obtain and rely on zero allocations to reasonably recognize Medicare’s interests?
The short answer is none. CMS long expressed an interest in moving away from the review and approval of zero allocations. Industry groups have reported on CMS wanting to stop zero allocation reviews at least as far back as the Fall of 2016, when CMS abruptly attempted to stop review sans any advance notice to the industry. That effort was quickly overturned and CMS agreed to provide adequate advance notice of any such change in the future.
Well, the future is now, and CMS kept its word in providing six months’ notice of their plan to cease review of zero allocations. Just because the agency plans to cease review and approval of zero allocations does not mean that these options go away altogether. Parties can and should still settle using these tools.
Per Section 4.2 of the WCMSA Reference Guide, the parties may use the criteria outlined below to demonstrate “a [funded] WCMSA is not necessary [] because when [the following] are true, they indicate Medicare’s interests are already protected:” that “the injured individual is only being compensated for past medical expenses (i.e., for services furnished prior to the settlement); and [t]here is no evidence that the individual is attempting to maximize the other aspects of the settlement (e.g., the lost wages and disability portions of the settlement) to Medicare’s detriment.”
CMS had long outlined in their reference guide the demonstrative criteria for cases where the treating physician or the judge indicates the claimant does not need future care. They’ve now added additional criteria to codify situations that are commonly referred to as Legal Zero allocations. That is, the reference guide now lists the following (emphasis added in bold highlights new demonstrative criteria):
The individual's treating physician documents in medical records that to a reasonable degree of medical certainty the individual will no longer require any treatments or medications related to the settling WC injury or illness; or
The workers’ compensation insurer or self-insured employer denied responsibility for benefits under the state workers’ compensation law and the insurer or self-insured employer has made no payments for medical treatment or indemnity (except for investigational purposes) prior to settlement, medical and indemnity benefits are not actively being paid, and the settlement agreement does not allocate certain amounts for specific future or past medical or pharmacy services as a condition of settlement; or
A Court/Commission/Board of competent jurisdiction has determined, by a ruling on the merits, that the workers’ compensation insurer or self-insured employer does not owe any additional medical or indemnity benefits, medical and indemnity benefits are not actively being paid, and the settlement agreement does not allocate certain amounts for specific future medical services; or
The workers’ compensation claim was denied by the insurer/self-insured employer within the state statutory timeframe allowed to pay without prejudice (if allowed in that state) during investigation period, benefits are not actively being paid, and the settlement agreement does not allocate certain amounts for specific future medical services.
Indemnification of zero allocations?
Sanderson Firm is pleased to announce the expansion of our innovative iMSA product to include indemnification of zero-dollar allocations where appropriate and supported by law and / or the facts of the case. And you do not have to wait until July 17th to take advantage of them – they’re available to you today! Under Sanderson Firm’s new zero iMSA program, settling parties may rest assured that they remain protected against potential CMS claims even after CMS eliminates its review of zero MSAs this July. Should you have any questions about the updated WCMSA Reference Guide, zero allocations, or if you wish to submit a referral for our zero-dollar iMSA, please don’t hesitate to reach out via email or phone at 941-479-9877.
Want to know even more on this important topic?
Save the date and stay tuned for registration information for our next Sanderson Firm Webinar: What to Know When Your Medicare Set-Aside Totals Zero scheduled for Wednesday, March 12, 2025, 1:30 – 2:30 PM EST.
