A Workers' Compensation Medicare Set-Aside (WCMSA) is your projected annual injury-related, Medicare-covered medical and drug cost multiplied by your life expectancy — the amount that must be reserved to pay those costs before Medicare pays. This Medicare Set-Aside calculator estimates your MSA by combining annual future medical costs, annual prescription-drug costs, and your remaining life expectancy (or a rated age), and it can also estimate the initial seed deposit when the MSA is funded by an annuity. Enter your figures below. CMS reviews a proposed WCMSA voluntarily when a Medicare beneficiary settles for more than $25,000, or when a near-beneficiary settles for more than $250,000.
An MSA protects Medicare under the Medicare Secondary Payer Act by ensuring that settlement dollars — not Medicare — pay first for future injury-related care. Setting the amount correctly matters in both directions: too little risks losing future Medicare coverage for the injury, while too much needlessly ties up settlement money the claimant could otherwise use. Use the calculator as a planning tool, then read the detailed sections on the formula, CMS thresholds, seed funding, administration, and what the funds can be spent on.
A WCMSA projects the future medical care and prescription drugs related to the work injury that Medicare would otherwise cover, and reserves that money so Medicare does not pay first. The core formula the calculator follows is:
MSA = (Annual Injury-Related Medical Cost + Annual Injury-Related Drug Cost) × Life Expectancy + One-Time Future Procedures
The annual medical cost covers physician visits, therapy, diagnostics, durable medical equipment, and other Medicare-covered services tied to the injury, usually priced at the applicable workers' compensation fee schedule or actual charges. The annual drug cost projects injury-related prescriptions, often priced using average wholesale pricing. Life expectancy comes from the CDC actuarial life tables — or, where a physician supports it, a rated age that reflects the claimant's actual health and shortens the projection. One-time future surgeries or replacements (for example, a knee replacement or spinal-cord-stimulator replacement) are added on top. The result is the amount reserved in the MSA account.
CMS will review a proposed WCMSA on a voluntary basis when certain workload thresholds are met. These thresholds determine whether CMS will formally approve the amount, but they are not safe harbors — Medicare's interests must be protected regardless.
| Situation | CMS Review Threshold |
|---|---|
| Claimant is a current Medicare beneficiary | Total settlement greater than $25,000 |
| Claimant has a reasonable expectation of Medicare enrollment within 30 months | Total settlement greater than $250,000 |
| Below the thresholds | No CMS review, but Medicare's interests must still be considered |
A "reasonable expectation of Medicare enrollment within 30 months" includes claimants who have applied for or are appealing Social Security Disability benefits, are 62.5 years old or older, or have end-stage renal disease, among other criteria. Meeting a threshold lets the parties submit the MSA for CMS approval, which provides certainty that the amount adequately protects Medicare.
An MSA can be funded two ways. A lump-sum MSA deposits the entire amount at once. A structured (annuity) MSA deposits an initial seed and then makes annual payments to replenish the account. When an annuity is used, CMS generally requires the seed to equal the cost of the first surgical procedure or replacement plus the first two years of annual payments, whichever is greater. The annuity then funds the remaining years. Structured funding is often cheaper to establish because the annuity is purchased for less than the full undiscounted total, while still satisfying CMS. The calculator's seed estimate uses the greater of your one-time procedure cost or two years of annual cost to illustrate this rule.
Suppose an injured worker has $6,000/year in injury-related Medicare-covered medical costs, $3,000/year in injury-related drugs, a remaining life expectancy of 22 years, and one expected future surgery costing $40,000, funded by an annuity with a 2-year seed basis. Using the calculator:
The calculator shows an estimated MSA of $238,000 with a seed deposit of $40,000. If a physician supports a rated age that reduces the projection to 16 years, the MSA falls to $9,000 × 16 + $40,000 = $184,000 — which is why rated ages, when justified, are one of the most powerful tools for right-sizing an MSA.
The single biggest driver of an MSA is the number of years the future care is projected over. The default is the claimant's statistical life expectancy from the CDC life tables. However, if the claimant's actual health is worse than average — due to comorbidities, the injury itself, or lifestyle factors — a rated age supported by a life-expectancy underwriter can be used instead. A rated age treats the claimant as older for actuarial purposes, shortening the projection and lowering the MSA. Because every year removed from the projection cuts the annual cost out of the total, rated ages can substantially reduce the set-aside while still adequately protecting Medicare. Conversely, a claimant in good health may have a longer expectancy that increases the MSA.
MSA money is not free cash. It must be used only for medical services and prescription drugs that are related to the injury and would otherwise be covered by Medicare. The account must be kept separate (typically an interest-bearing account), and the funds must be administered either by the claimant (self-administration) or by a professional administrator. Records of every expenditure must be maintained, and CMS may require annual accounting attestations. When the funds are properly exhausted on injury-related Medicare-covered care, Medicare then becomes the primary payer for that injury. Misusing MSA funds — spending them on unrelated care or non-medical expenses — can cause Medicare to deny future injury-related claims until the misused amount is restored.
Because the MSA is carved out of the gross settlement and dedicated to future injury care, it reduces the cash a claimant can spend on other things. But the MSA remains the claimant's money, set aside for their own medical needs, and any properly accounted-for funds that remain in the account at the end of a year roll over. The goal is to fund the MSA at the correct amount — not inflated — so the claimant keeps as much usable settlement value as possible while still protecting Medicare. Accurate cost projections and appropriate rated ages are how that balance is struck, which is the practical reason the calculator separates annual cost, life expectancy, and one-time procedures.
A Workers' Compensation Medicare Set-Aside (WCMSA) is calculated by projecting the future cost of injury-related medical care and prescription drugs that Medicare would otherwise cover, then multiplying the annual cost by the claimant's life expectancy (or, for a rated age, the adjusted expectancy). The medical and pharmacy projections are usually priced at the applicable workers' compensation fee schedule or actual charges. The total represents the amount that must be set aside to pay Medicare-covered injury costs before Medicare pays. The calculator multiplies your annual injury-related medical and drug costs by life expectancy to estimate the MSA.
CMS will review a proposed Workers' Compensation Medicare Set-Aside on a voluntary basis when the claimant is a Medicare beneficiary and the total settlement is over $25,000, or when the claimant has a reasonable expectation of Medicare enrollment within 30 months and the total settlement is over $250,000. These are workload review thresholds, not safe harbors: Medicare's interests must still be considered and protected even when a settlement falls below them.
When an MSA is funded with an annuity rather than a single lump sum, CMS generally requires an initial deposit called seed money. The seed is typically the first surgical procedure or replacement and the first two years of annual payments, whichever is greater. After the seed, the annuity makes annual deposits to replenish the account. The calculator can show an estimated seed amount based on your annual cost and a chosen number of seed years.
No. MSA funds must be used only for medical services and prescription drugs related to the work injury that would otherwise be covered by Medicare. The account must be administered (self-administered or professionally administered), records must be kept, and annual accounting may be required. Spending MSA funds on unrelated expenses can jeopardize future Medicare coverage for the injury.
If MSA funds are properly exhausted on Medicare-covered injury-related care, Medicare then pays for further injury-related care. Any funds left over in a given year that were properly accounted for can roll over to the next year. If the account is depleted appropriately and documented, Medicare becomes the primary payer for the injury going forward. Improper use, however, can leave the claimant responsible for costs Medicare would otherwise cover.
No federal statute mandates a formal MSA in every case, but the Medicare Secondary Payer Act requires that Medicare's interests be protected when a settlement closes future medical care for an injury. In practice, an MSA is commonly used in workers' compensation settlements involving Medicare beneficiaries or near-beneficiaries to avoid shifting injury costs to Medicare. Liability MSAs are less standardized but the same principle applies.
The MSA amount is carved out of the settlement and reserved for future Medicare-covered injury care, so it reduces the cash the claimant can use for other purposes, but it is still the claimant's money dedicated to their own medical needs. Properly setting the MSA at the correct amount, using rated ages and accurate cost projections, prevents over-funding that would needlessly tie up settlement dollars.