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CMS news alert: Zero allocations are far from over

The Centers for Medicare and Medicaid Services (CMS) made news this week by purportedly “correcting” their position on zero allocations. We strongly believe that the industry should fight CMS on this and not blindly accept what amounts to an illogical application of CMS’s own stated policies.


CMS’s purported position basically adopts a three-part test for a Medicare Set-Aside (MSA) to qualify for a zero allocation: (1) The case or body part in question has been denied throughout the case; (2) There has been no medical or indemnity payment for the denied case or body part; and (3) There is either a finding from a hearing on the merits from a court of competent jurisdiction relieving the carrier of liability or documentation from the beneficiary’s treating physician recommending no future treatment. In other words, CMS may only approve a zero allocation if a judge has determined that no compensable workers' compensation claim exists and no payments were made.

Ibrahim Rifath 789914 Unsplash

Zero allocations are approved by CMS in compromise settlement situations. For lack of a better term, a judicial determination “on the merits” is a trial. Trials are extremely rare and almost never occur. Seeking to avoid an up or down determination at trial—realizing that both sides have significant risk in a trial—the parties agree to settle a denied claim on a doubtful and disputed basis. If the insurer or employer wins at trial, the case is over. There is no settlement. This makes CMS’s purported requirement of a judicial finding nearly impossible—and certainly irrational—to comply with.

No official enactment

Thankfully, this position has not been officially enacted, and there is still time for change to occur. No update has been provided to the Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide. No CMS policy memo has been issued. Essentially, CMS started testing this approach on a few cases over the last week. During that time, we’ve been working to convince CMS that this change is completely illogical and unsupported by existing regulations. Moreover, rather than support the idea that this is merely a “correction” of its redacted operating rules, we believe CMS has erred in trying to make a policy change with absolutely no prior notice to the public.

We’ve asked CMS to correct this matter, which has so far affected only a few files. We strongly believe that it’s in the best interest of the entire workers' compensation industry for the existing zero allocation process to remain unchanged. At this point, we’ve been informed by CMS that they have temporarily stopped processing any zero allocations.

While the industry is still digesting this news and a variety of opinions are being offered, we strongly contend that this is far from final. Rather than simply wave the white flag, we’re challenging CMS and hope that you will join us in our efforts. Should you have any questions or would like to get additional information, please contact me directly.

Sid Wong, J.D.

Sid Wong is vice president of policy, Casualty Solutions at Verisk. You can contact Sid at

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