Rising Settlement Costs in Medicare-Involved Liability Claims
Settlement costs for Medicare-involved liability claims have surged significantly in recent years, according to Verisk’s 2025 Benchmark Report. The report highlights key trends contributing to higher claim values and suggests that understanding these elements can help casualty insurers develop more effective claims management strategies.
Between 2018 and 2024, the average total payment obligation to claimants (TPOC) jumped by 52%, outpacing the 25% rise in the consumer price index during the same period. This discrepancy indicates that settlement values are escalating faster than general inflation. Verisk’s analysis identifies several factors influencing this trend.
Factors Influencing Settlement Costs
Claims involving attorneys reached an average TPOC of $51,000, compared to $34,700 for those settled without legal representation. The presence of an attorney appears to correlate with higher settlement values across the board. Settlement duration also played a significant role in claim amounts. Claims resolved within six months recorded an average TPOC of $14,300, while those settled after more than 48 months averaged $136,900. These figures suggest that longer resolution timelines may increase financial exposure for insurers managing Medicare-involved cases.
The timing of claim reporting also impacted settlement outcomes. Claims reported after more than one year averaged $139,900 in TPOC, while those reported within one month saw an average of $33,500. Delays in initiating the claims process were associated with higher total payments.
Michigan reported the highest average TPOC among all states at $95,600. Verisk links this to Michigan’s unique position as the only jurisdiction with unlimited Personal Injury Protection (PIP). The state’s no-fault insurance system reforms, enacted in 2020, introduced new administrative complexities for carriers managing both legacy unlimited PIP policies and newer limited coverage tiers.
Impact on Insurers and Regulatory Changes
A subset of 10 responsible reporting entities (RREs) identified as benchmark performers demonstrated better control over average TPOC values. However, even these organizations struggled to maintain cost advantages in Michigan, highlighting the state’s consistent cost pressures across the industry.
New regulatory changes are expected to expand the scope of mandatory reporting for RREs complying with Medicare Secondary Payer (MSP) requirements. As of April 4, the Centers for Medicare & Medicaid Services (CMS) requires the inclusion of Workers’ Compensation Medicare Set-Aside (WCMSA) data within TPOC submissions. This change will likely prompt adjustments in reporting workflows and data collection systems for insurers and third-party administrators.
Additionally, CMS will continue to enforce the $750 recovery threshold for liability settlements. While settlements below this amount are exempt from Medicare recovery, RREs must still submit reports in accordance with Section 111 guidelines. Maintaining accuracy in low-dollar cases remains crucial, as failure to meet compliance standards may expose insurers to civil monetary penalties.
Beginning July 17, CMS will no longer review proposals for zero-dollar MSAs in workers’ compensation claims. This shift increases the burden on insurers to ensure that their settlement documentation clearly supports the decision to allocate nothing for future medical expenses. Carriers will need to coordinate more closely with legal and compliance teams to substantiate these positions and prevent potential post-settlement disputes or audits.
