End of $0 WCMSA Proposals: CMS July 2025 Policy Guide

Effective July 17, 2025, the Centers for Medicare and Medicaid Services no longer accepts or reviews Workers' Compensation Medicare Set-Aside Arrangement proposals submitted with a zero-dollar allocation. The change does not prohibit $0 WCMSAs; it removes the review-and-approval pathway that practitioners previously used to obtain CMS validation of a $0 position. Parties may still elect to settle with a $0 MSA where the facts support it, but the burden of demonstrating that Medicare's interests are protected now sits entirely with the settling parties and their files.

This is a methodology change, not just a procedural one. Every shop that historically defaulted marginal cases to a $0 submission and waited for CMS to bless or counter is now redoing its analytical workflow. The cases that previously generated CMS approval letters now generate internal documentation memoranda. The cases that previously got a CMS counter-offer now require a fully allocated, fully defensible MSA. The work is the same; the audience for the work product has shifted from CMS to the settlement file itself, and ultimately to a future Medicare Secondary Payer recovery action that may or may not occur.

This guide walks the policy text, what "strong documentation" means in practice, the methodology shift required, a documentation checklist, and a worked example comparing a marginal case under the old rules and the new.

The Policy Text and Effective Date

CMS announced the change in its updated WCMSA Reference Guide, Version 4.2, released January 17, 2025. The substantive policy was codified in subsequent revisions (Version 4.3, April 7, 2025; Version 4.4, July 14, 2025) and took effect on July 17, 2025.

The operative language from the CMS "What's New" announcement and the WCMSA Reference Guide is direct: "Effective July 17, 2025, CMS will no longer accept or review WCMSA proposals with a zero-dollar ($0) allocation."

Two clarifications follow from the agency's language and supporting commentary.

First, the change is to CMS review, not to the validity of $0 MSAs as a settlement structure. Section 4.2 of the Reference Guide continues to describe conditions under which Medicare's future interests are considered protected without funded MSA dollars. Parties may continue to settle with $0 MSAs when those conditions apply.

Second, CMS will not issue "verification letters" stating that an MSA is unnecessary. The pre-July 17 practice of submitting a $0 WCMSA primarily to obtain CMS correspondence for the file — with no realistic expectation of a counter — is no longer available.

The Updated Section 4.2 Conditions

The revised Reference Guide consolidates the prior three-condition framework into two conditions describing when a WCMSA is not necessary:

Condition (a): The facts of the case demonstrate that the injured individual is only being compensated for past medical expenses (services furnished prior to settlement).

Condition (b): Either the carrier or employer denied responsibility for benefits under the state workers' compensation law and made no payments for medical treatment or indemnity (with a narrow exception for investigational purposes) prior to settlement, medical and indemnity benefits are not actively being paid, and the settlement agreement does not allocate amounts for specific future or past medical or pharmacy services as a condition of settlement; or a court, commission, or board of competent jurisdiction has determined, by a ruling on the merits, that the carrier or employer does not owe additional medical or indemnity benefits, and benefits are not actively being paid.

Two practical observations on Condition (b). The "investigational purposes" carve-out is a measured shift from prior CMS practice, which had treated essentially any payment on a denied claim as disqualifying. Practitioners with claims that include early diagnostic spend before a denial now have a defensible path to a documented $0 position that did not clearly exist before.

A merits ruling — not a procedural dismissal, not a settlement-on-the-record — is required for the second prong of Condition (b). The Reference Guide language is specific: a determination "by a ruling on the merits" that the carrier or employer owes nothing further. Voluntary dismissals, withdrawn claims, and statute-of-limitations dispositions do not satisfy the language.

What "Strong Documentation" Actually Means

The phrase "strong documentation" appears across CMS commentary and industry guidance describing how parties should support a $0 position post-July 17, 2025. CMS itself has not published a definitive checklist. What follows is the practitioner consensus on what a defensible $0 file looks like, derived from the Reference Guide text, the Section 111 audit language, and the documentation patterns CMS has historically credited in submitted cases.

The compensability spine

The file should show, in primary documents rather than summaries, that the matter falls inside one of the two Section 4.2 conditions:

For a Condition (a) past-medicals-only case: the settlement agreement language specifying that consideration is for past medical expenses only, the medical bills underlying those past expenses, and (preferably) language confirming that future medical care is not part of the consideration.

For a Condition (b) denied-claim case: the denial notice, the documentation of the denial's grounds, evidence of no payments (or only investigational-purpose payments) prior to settlement, and the settlement agreement language confirming that no future or past medical allocation is part of the settlement.

For a Condition (b) merits-ruling case: the order itself, with attention to whether the disposition is a ruling on the merits or a procedural disposition. Orders that dismiss for failure to prosecute, voluntary dismissals, and consent orders without findings should not be treated as merits rulings without further analysis.

The medical record reconstruction

Even in $0 cases, the medical record set should be assembled and analyzed as if a funded MSA were going to be submitted. The reasoning: if the case is later challenged, either through Medicare audit of the Section 111 $0 report or through an MSP recovery action, the file must demonstrate that the parties analyzed Medicare-covered future care and concluded there was none related to the work injury. A $0 conclusion derived from absence of records is weaker than a $0 conclusion derived from a complete record set affirmatively showing no Medicare-covered future treatment is anticipated.

The treating-provider analysis

Section 9.4.3 of the Reference Guide was updated alongside the $0 changes to clarify that the WCRC's allocation analysis primarily relies on the claimant's past use and future recommended treatment as supported by medical records. Where evidence-based guidelines and the treating provider conflict, the treating provider is given preference. For a $0 file, this means a treating-provider statement or release-from-care note expressly addressing future care for the work injury carries more weight than a guideline-based projection that no future care will be needed.

The Section 111 alignment

A $0 WCMSA must still be reported through Section 111 with MSA Amount = $0 (see our companion guide on the April 2025 Section 111 expansion for the full reporting workflow). CMS has stated it reserves the right to audit $0 reported values where it suspects cost-shifting. The documentation memo in the file should be ready to surface in response to such an audit without requiring a fresh investigation of the underlying medicals.

Methodology Changes: When $0 Isn't an Option

Before July 17, 2025, the analytical flow for a marginal MSA case had a two-fork structure: prepare a fully allocated MSA, or submit a $0 proposal and let CMS counter if the agency disagreed. The $0 fork was, in effect, a way to outsource the close-call judgment to the WCRC. That fork no longer exists.

Three methodology shifts follow.

The "marginal case" workflow now goes through a documented internal decision, not a CMS submission. The settling parties decide, on the file, whether the case meets Section 4.2 or whether it requires a funded MSA. There is no agency tiebreaker.

The threshold for "marginal" tightens. A case where reasonable analysts could disagree about whether future Medicare-covered care is anticipated is no longer a candidate for $0 by default. The risk-shifted scenario — where parties settle $0, the claimant later requires Medicare-covered care for the injury, Medicare denies primary coverage or pays and pursues recovery — falls on the parties without the comfort of a CMS approval letter. Risk-averse files now allocate where the prior practice would have $0-submitted.

Low-dollar funded MSAs become more attractive than $0 in close cases. The Reference Guide's review thresholds remain in place: WCMSAs above $25,000 (for Medicare beneficiaries) or above $250,000 (for those with reasonable expectation of Medicare entitlement within 30 months) can be voluntarily submitted for review. A $500 or $5,000 MSA, properly allocated and documented, sits inside the review eligibility band and carries finality protection that a $0 position cannot offer. The cost differential between a small allocation and no allocation is now weighed against the loss of the CMS approval pathway, and that calculus pushes some files toward small funded amounts that previously would have been $0.

Documentation Checklist for Post-July 17 $0 Cases

The following items, assembled into a single $0 MSA documentation memorandum and held in the settlement file, represent the practitioner consensus on a defensible file:

The objective is a file that, two years after settlement, when the settling counsel is no longer immediately available and a Medicare Administrative Contractor or MSP recovery contractor inquires about the $0 position, can answer the question on its own.

Worked Example: A Marginal Case Under Old Rules vs. New

Consider a hypothetical case: the claimant is a 52-year-old Medicare beneficiary, settled a denied workers' compensation claim for $35,000 TPOC. The carrier denied compensability based on a pre-existing condition argument. The carrier paid $1,800 in initial diagnostic imaging before the denial. The claimant treated for eight months on his own group health, was released from care with a modest residual limitation, and has not sought treatment for the alleged injury in 18 months. There is no court order on compensability; the case settled while a hearing was pending.

Pre-July 17, 2025 workflow

The defense MSA shop would likely have prepared a $0 WCMSA submission based on the denied-claim language in the prior Section 4.2 conditions. The submission would acknowledge the $1,800 in diagnostic spend, position it as investigational, and submit to the WCRC. Possible outcomes:

WCRC approves the $0 (clean approval letter; settlement closes with finality protection on Medicare's interests).
WCRC counters with a recommended allocation, citing the diagnostic payments or the absence of release-from-care documentation. Parties either fund the counter-offer or withdraw and re-submit.
WCRC requests development (medical records, denial documentation, etc.).

The $0 fork was the default starting point, and the cost of a counter was a re-submission cycle, not a methodology rebuild.

Post-July 17, 2025 workflow

The submission pathway is closed. The defense team faces a binary internal decision: $0 with a documented file, or fund an allocated MSA.

The $0 path requires a defensible memorandum: denial notice, documentation that the $1,800 in payments was investigational (radiology orders, the claims-handling notes contemporaneous with the denial), a treating-provider release-from-care note (which the claimant's eight months of independent treatment may or may not yield), settlement language confirming no future medical allocation, and a counsel-signed memo addressing the Section 4.2 condition. The Section 111 report goes out with $0 in the MSA Amount field. The file sits in storage against a possible future MSP audit or recovery action.

The funded-allocation path requires a small WCMSA — perhaps $4,000–$8,000 — based on the residual limitation and the modest probability of future Medicare-covered care related to the alleged injury. The MSA can be voluntarily submitted to the WCRC if the parties want CMS finality, though at $35,000 TPOC the case is below the $25,000 review threshold for beneficiaries.

The trade-off is no longer "submit $0 and see what happens." It is now: how strong is the documentation, how risk-averse is the carrier, and is the cost of a small funded allocation greater or less than the residual MSP exposure of a documented $0 position?

For carriers with disciplined documentation practices and clear denied-claim language, the $0 path remains viable and substantially cheaper. For carriers whose files are thinner, or whose treating-provider documentation is incomplete, the funded-allocation path is the more defensible posture.

Practical Implications for Defense Counsel and MSA Shops

For defense counsel. The settlement-checklist must now include a $0 documentation block whenever a $0 position is contemplated. The check is no longer "did CMS approve the $0?" but "is the file complete enough to defend the $0 against a future MSP recovery action?" Counsel should also recalibrate the population of cases where $0 is the right answer — the residual MSP risk, previously absorbed by the CMS approval letter, now sits with the parties.

For MSA preparation shops. The deliverable on a $0 case is no longer a submission package; it is a documentation memorandum. Shops that previously delivered a "$0 letter" need to either substantially deepen that deliverable or be transparent with carriers about what the $0 letter does and does not cover post-July 17. Shops that have always prepared full record reviews behind their $0 conclusions are well-positioned; shops that minimized the work behind $0 submissions face a methodology rebuild.

For carriers. The expected loss profile of a $0 settled case has changed. The agency's approval letter previously functioned as a finality signal; without it, the residual MSP exposure is real and can be quantified for reserves purposes. The right response is not to fund every marginal case, but to fund the marginal cases whose documentation cannot carry the $0 weight on its own.

For settlement planners. The $0 vs. small-funded-MSA decision is now a settlement-design question, not a post-settlement compliance question. Planners who can model the trade-off — documentation cost on one side, allocation dollars plus administration cost on the other — add real value to the settlement conversation that was previously absorbed by the CMS submission process.

Sources

Workers' Compensation Medicare Set-Aside Arrangements — CMS
What's New — Workers' Compensation Medicare Set-Aside Arrangements (CMS)
WCMSA Reference Guide v4.5 (April 13, 2026 PDF) — current published version; Sections 4.2 and 9.4.3
WCMSA Reference Guide v4.4 (July 2025 PDF) — the version in which the $0 review policy was first codified following its January 2025 announcement in v4.2 and April 2025 confirmation in v4.3

A redacted sample MSA showing the documentation depth Zicron AI builds into both funded and $0 deliverables is available at zicron.claims/msa/sample. For defense files preparing post-July 17 settlements that need a documentation-grade $0 memorandum or a small funded allocation, see zicron.claims/msa.

The End of $0 WCMSA Proposals: What CMS's July 2025 Policy Means for Your Cases