A Medicare set-aside allocation estimates the portion of a settlement that should be reserved for future injury-related care that Medicare would otherwise cover. The allocation is narrower than a life care plan in scope, priced on a fee-schedule basis, and prepared with Medicare's review process in mind.
When it is used
An allocation is prepared when a workers' compensation or liability settlement involves a Medicare beneficiary or a person with a reasonable expectation of enrollment and the settlement closes out future medical care. It is compared with a life care plan in life care plan vs. MSA.
Step-by-step
Confirm the evaluee's Medicare entitlement status or reasonable expectation of entitlement, and whether the settlement meets the thresholds for voluntary CMS review
Review the medical and payment records to identify injury-related, Medicare-covered future care recommended by treating providers
Separate covered from non-covered items and injury-related from unrelated care; non-covered items such as most home modifications fall outside the allocation
Price each item on a fee-schedule or usual-and-customary basis appropriate to the jurisdiction and Medicare's review guidance
Apply life expectancy, or a rated age where one has been obtained, to carry each item across the allocation period
Address prescription drugs separately, and document the funding method (lump sum or structured annuity with seed money)
Prepare the allocation report with the supporting records so it can be submitted for review or retained in the settlement file, and address professional administration where appropriate
State workers' compensation fee schedules or usual-and-customary charge data as applicable
Medicare coverage rules for the identified items
Rated-age determinations where obtained
Limitations
An allocation is not a life care plan. It excludes care Medicare does not cover and does not attempt to capture the full cost of the injury. CMS review is voluntary and threshold-based, and CMS guidance changes; the allocation should state the guidance version relied on.
Admissibility
Allocations are prepared for settlement rather than trial and are evaluated against Medicare's published review guidance rather than evidentiary standards. Where an allocator testifies, the questions concern entitlement, the covered-care inventory, and the pricing basis.
Frequently Asked Questions
Can the same professional prepare the life care plan and the MSA allocation?
Yes, and it is often efficient because the medical record review overlaps. The two documents serve different purposes and should be kept distinct: the plan captures the full scope of future care, the allocation captures only the Medicare-covered, injury-related portion.
Does an MSA require CMS approval?
Submission for review is voluntary and available only when the settlement meets published thresholds. Parties may settle without review, but the allocation should still be reasonable and documented so Medicare's interests are demonstrably considered.
Why does an MSA use a rated age?
A rated age from a life insurance underwriter can shorten the allocation period when the evaluee's health profile supports it, reducing the amount set aside. Life care plans for litigation generally do not use rated ages for their horizon.
References
Centers for Medicare & Medicaid Services. (2026). Workers' compensation Medicare set-aside arrangement (WCMSA) reference guide (Version 4.6). U.S. Department of Health and Human Services. cms.gov
Centers for Medicare & Medicaid Services. (n.d.). Workers' compensation Medicare set aside arrangements. U.S. Department of Health and Human Services. Retrieved August 26, 2026. cms.gov
Centers for Medicare & Medicaid Services. (n.d.). Medicare secondary payer. U.S. Department of Health and Human Services. cms.gov
Medicare Secondary Payer, 42 U.S.C. sec. 1395y(b) (2018). law.cornell.edu
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