The Outdated Medicare Set-Aside Threshold is Hurting Pa.’s Injured Workers

How MSAs (and the $250,000 threshold) came to be

MSAs emerged in response to heightened enforcement of the Medicare Secondary Payer (MSP) Act in the late 1990s and early 2000s. The MSP Act prohibits Medicare from paying for medical treatment when another primary payer, such as a workers’ compensation carrier, is responsible. To ensure compliance, the Centers for Medicare & Medicaid Services (CMS) began encouraging parties to allocate a portion of workers’ compensation settlements to cover future injury-related medical care before Medicare assumes responsibility.

Beginning with a July 2001 Policy Memorandum, CMS issued informal guidance identifying when it would review proposed MSAs. One key benchmark was that CMS would review an MSA if the claimant was a Medicare beneficiary and the total settlement exceeded $250,000. Notably, CMS repeatedly emphasized that this threshold was not statutory, was adopted solely for administrative efficiency, and could be modified at any time. It was not intended to dictate settlement value or define medical necessity.

Despite those caveats, the $250,000 figure has solidified into a vice that constrains the process for settling workers’ compensation cases. Over time, insurers, practitioners, and even adjudicators began treating the threshold as a bright-line rule rather than a trigger for discretionary review. And while nearly every other aspect of the workers’ compensation system has evolved over the last twenty years, this dollar amount has not.

A threshold frozen in an earlier time

When CMS adopted the $250,000 benchmark, the medical and economic landscape looked different. Prescription drug prices were substantially lower. Long-term opioid management, biologic medications, implantable devices, and advanced surgical techniques were far less common. Life expectancy tables and medical projection methodologies were comparatively rudimentary. Settlements approaching $250,000 were exceptional.

Today, that amount is reached quickly in workers’ compensation cases involving serious orthopedic injuries, chronic pain, multiple surgeries, or ongoing pharmaceutical needs. What once signaled an unusually large settlement now often reflects nothing more than standard medical projections over a claimant’s remaining lifetime.

Yet CMS has never adjusted the threshold to account for inflation, wage growth, or the expanded use of MSAs by carriers. Based on the rate of inflation alone, the threshold should be around $458,000. The result is a trigger for discretionary review that no longer tracks the realities of modern medicine or workers’ compensation practice.

How the outdated threshold harms injured workers

The $250,000 MSA threshold distorts the process of settling workers’ compensation cases in several predictable but no less damaging ways.

1. Artificially depressed settlement values

Carriers routinely treat the CMS review threshold as a ceiling rather than a trigger. Out of concern that CMS will reject an MSA or require an inflated allocation, insurers often refuse to negotiate settlements above $250,000, even when a claim plainly warrants more.

What was never intended to be a valuation cap becomes one, suppressing compensation for injured workers whose wage losses and medical expenses create claim values that exceed an arbitrary federal guideline.

2. MSAs become settlement deal-breakers

CMS-reviewed MSAs rely on conservative pricing, rigid treatment assumptions, and lifetime projections that frequently result in MSA estimates that exceed an injured worker’s realistic course of treatment. Settlements that should settle for reasonable amounts become financially unworkable and gridlocked, not because the medical needs are unclear, but because the MSA methodology is detached from how care is actually delivered today.

3. Pressure on workers to settle for less to avoid CMS review

Because CMS review is slow, unpredictable, and often opaque, injured workers and their counsel face an unenviable choice: accept a lower settlement to stay under $250,000, or risk months, even years, of delay tied to MSA submission and revision. That pressure undermines both Medicare’s interests and injured workers’ rights to fair compensation that’s promptly attained. A system that incentivizes under-settlement to avoid bureaucratic delay serves neither purpose.

The MSA threshold affects Pennsylvania workers

Although the $250,000 threshold is a national issue, its impact is felt strongly in Pennsylvania. Data from the U.S. Census Bureau, as reported by Pennsylvania’s Independent Fiscal Office, shows that Pennsylvania has a relatively older population and workforce than most other U.S. states. Many of the commonwealth’s largest industries, such as healthcare, manufacturing, logistics, warehousing, and other labor-intensive sectors, employ older workers. Labor force participation among Pennsylvanians over 65 is projected to increase for the rest of the decade.

Injuries to these workers frequently occur when they are already Medicare-eligible or approaching eligibility. According to the Pennsylvania Department of Labor & Industry, Bureau of Workers’ Compensation’s most recent Pennsylvania Workers’ Compensation and Workplace Safety Annual Report, 5.8% of workplace injuries in 2024, which is just shy of 10,000 injuries, were suffered by workers ages 65 and over. That same demographic suffered 14 fatalities in 2024—the largest number of any group and just shy of 20 percent of all fatalities. If you include workers aged 60 to 64, the percentage of workplace injuries suffered by members of both groups increases to 13.8%, and the percentage of all fatalities increases to just shy of 30%.

As a result, Pennsylvania workers’ compensation cases often involve long-term medical utilization, chronic pain management, surgical intervention, and extended recovery periods. These are precisely the cases most likely to cross the $250,000 threshold based solely on projected medical care. Pennsylvanians bear more than their fair share of the delay, uncertainty, and reduced settlement values caused by CMS’s failure to modernize an outdated administrative review trigger.

Systemic costs beyond delaying justice for injured workers’ claims

The consequences of the MSA review threshold extend beyond individual claimants. The unrealistic threshold increases litigation across the system, bringing about prolonged disputes, additional medical examinations, repeated settlement conferences, and significantly higher attorney time and costs. Cases that could be resolved in months drag on for years, straining judicial resources and increasing the administrative burden for all parties.

Ironically, none of these consequences advance Medicare’s interests. CMS receives an ever-growing volume of MSA submissions that could be avoided with a more realistic review trigger, while truly high-risk cases compete for agency attention with routine settlements inflated past $250,000 by nothing more than modern medical pricing.

CMS has long acknowledged that its MSA review threshold is a nonbinding guideline. Yet despite years of commentary from practitioners and stakeholders, the agency has not updated it. Because insurers and defense counsel treat the threshold as sacrosanct, meaningful change is unlikely to occur without legislative or political pressure.

An administrative relic with consequences

At its core, the $250,000 MSA review threshold is an administrative relic dating back to a time when “hanging chads” were fresh in voters’ minds and the first iPhone was half a decade away from hitting the market. The threshold has outlived its usefulness. The continued misapplication of it distorts negotiations, delays case resolution, and unfairly penalizes Medicare-eligible injured workers, especially those in Pennsylvania, who depend on timely and adequate workers’ compensation benefits.

Modernizing the $250,000 benchmark would not eliminate MSAs or undermine the MSP Act. It would simply recalibrate the review trigger to reflect contemporary economics and costs. Adjusting the threshold for inflation brings it to approximately $458,000, before accounting for advances in medical care or expanded treatment options. That change alone would remove an enormous number of routine cases from unnecessary CMS review while preserving administrative review where it is genuinely needed.

For Pennsylvania workers’ compensation attorneys, the MSA threshold is not an abstract policy issue. It is a daily, practice-level problem that affects clients, clogs dockets, and undermines confidence in the settlement process.

As their advocates, our firm and our colleagues in the workers’ compensation claimants’ bar have a duty to shine a light on the threshold and work towards increasing it. Drawing attention to the threshold’s outdated nature is a necessary first step toward reform.

The threshold was never meant to carry so much weight. But until it is updated, it will continue to shape outcomes in ways CMS never intended, and Pennsylvania’s injured workers will continue to pay the price.