SEC. 2. APPLICATION OF MEDICARE SECONDARY PAYER 
RULES TO CERTAIN WORKERS’ COMPENSA-
TION SETTLEMENT AGREEMENTS. 
(a) SECONDARY PAYER PROVISIONS FOR WORKERS’ 
COMPENSATION
SETTLEMENT
AGREEMENTS.—Section 
1862 of the Social Security Act (42 U.S.C. 1395y) is 
amended— 
(1) in subsection (b)(2)(A)(ii), by inserting 
‘‘subject to subsection (p),’’ after ‘‘(ii)’’; and 
(2) by adding at the end the following new sub-
section: 
‘‘(p) DEFINITIONS.—For purposes of this subsection 
and subsection (q): 
‘‘(1) COMPROMISE
AGREEMENT.—The term 
‘compromise agreement’ means a workers’ com-
pensation settlement agreement that— 
‘‘(A) applies to a workers’ compensation 
claim that is denied or contested, in whole or in 
part, by a workers’ compensation payer involved 
under the workers’ compensation law or plan 
applicable to the jurisdiction in which the 
agreement has been settled; and 
‘‘(B) does not provide for a payment of the 
full amount of benefits sought or that may be 
payable under the workers’ compensation claim. 
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‘‘(2) WORKERS’ COMPENSATION
CLAIMANT.— 
The term ‘workers’ compensation claimant’ means a 
worker who— 
‘‘(A) is or may be covered under a workers’ 
compensation law or plan; and 
‘‘(B) submits a claim or accepts benefits 
under such law or plan for a work-related in-
jury or illness. 
‘‘(3) 
WORKERS’ 
COMPENSATION
LAW
OR 
PLAN.— 
‘‘(A) IN
GENERAL.—The term ‘workers’ 
compensation law or plan’ means a law or pro-
gram administered by a State or the United 
States to provide compensation to workers for 
a work-related injury or illness (or for disability 
or death caused by such an injury or illness), 
including the Longshore and Harbor Workers’ 
Compensation Act (33 U.S.C. 901–944, 948– 
950), chapter 81 of title 5, United States Code 
(known as the Federal Employees Compensa-
tion Act), the Black Lung Benefits Act (30 
U.S.C. 931 et seq.), and part C of title 4 of the 
Federal Coal Mine and Safety Act (30 U.S.C. 
901 et seq.), but not including the Act of April 
22, 1908 (45 U.S.C. 51 et seq.) (popularly re-
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ferred to as the Federal Employer’s Liability 
Act). 
‘‘(B) INCLUSION OF SIMILAR COMPENSA-
TION PLAN.—Such term includes a similar com-
pensation plan established by an employer that 
is funded by such employer or the insurance 
carrier of such employer to provide compensa-
tion to a worker of such employer for a work- 
related injury or illness. 
‘‘(4) WORKERS’ COMPENSATION
PAYER.—The 
term ‘workers’ compensation payer’ means, with re-
spect to a workers’ compensation law or plan, a 
workers’ compensation insurer, self-insurer, em-
ployer, individual, or any other entity that is or may 
be liable for the payment of benefits to a workers’ 
compensation claimant pursuant to the workers’ 
compensation law or plan. 
‘‘(5) WORKERS’ COMPENSATION
SETTLEMENT 
AGREEMENT.—The term ‘workers’ compensation set-
tlement agreement’ means an agreement, between a 
claimant and one or more workers’ compensation 
payers which— 
‘‘(A) forecloses the possibility of future 
payment of some or all workers’ compensation 
benefits involved; and 
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‘‘(B)(i) compensates the claimant for a 
work-related injury or illness as provided for by 
a workers’ compensation law or plan; or 
‘‘(ii) eliminates cause for litigation involv-
ing issues in dispute between the claimant and 
payer.’’. 
(b) SATISFACTION OF SECONDARY PAYER OBLIGA-
TIONS.—Section 1862 of the Social Security Act (42 
U.S.C. 1395y), as amended by subsection (a), is further 
amended by adding at the end the following new sub-
section: 
‘‘(q) TREATMENT OF MEDICARE SET-ASIDES UNDER 
WORKERS’ 
COMPENSATION
SETTLEMENT
AGREE-
MENTS.— 
‘‘(1) SATISFACTION OF SECONDARY PAYER OB-
LIGATIONS.— 
‘‘(A) FULL SATISFACTION OF CLAIM OBLI-
GATIONS.— 
‘‘(i) IN GENERAL.—If a workers’ com-
pensation settlement agreement, related to 
a claim of a workers’ compensation claim-
ant, includes a Medicare set-aside (as de-
fined in subparagraph (B)(i)), such set- 
aside shall satisfy any obligation with re-
spect to payments reasonably expected to 
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be made under subsection (b)(2)(A)(ii) 
with respect to such claim. 
‘‘(ii) 
RULE
OF
CONSTRUCTION.— 
Nothing in this section shall be construed 
as requiring the submission of a Medicare 
set-aside to the Secretary. 
‘‘(B) MEDICARE
SET-ASIDE
AND
MEDI-
CARE SET-ASIDE AMOUNT DEFINED.—For pur-
poses of this subsection: 
‘‘(i) 
MEDICARE
SET-ASIDE.—The 
term ‘Medicare set-aside’ means, with re-
spect to a workers’ compensation settle-
ment agreement, a provision in the agree-
ment that provides for a payment of a 
lump sum, annuity, a combination of a 
lump sum and an annuity, or other 
amount that is in full satisfaction of the 
obligation described in subparagraph (A) 
for items and services that the workers’ 
compensation claimant under the agree-
ment received or is reasonably expected to 
receive under the applicable workers’ com-
pensation law. 
‘‘(ii) 
MEDICARE
SET-ASIDE 
AMOUNT.—The term ‘Medicare set-aside 
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amount’ means, with respect to a Medicare 
set-aside, the actual dollar amount pro-
vided for in clause (i). 
‘‘(2) MEDICARE SET-ASIDE.— 
‘‘(A) SATISFACTION
OF
MEDICARE
SET- 
ASIDE.—For purposes of this subsection, a 
Medicare set-aside meets Medicare secondary 
payer obligations if the Medicare set-aside 
amount reasonably takes into account the full 
payment obligation described in paragraph 
(1)(A), while meeting the requirements of sub-
paragraphs (B) and (C) and is determined 
based on the following: 
‘‘(i) The illness or injury giving rise to 
the workers’ compensation claim involved. 
‘‘(ii) The age and life expectancy of 
the claimant involved. 
‘‘(iii) The reasonableness of and ne-
cessity for future medical expenses for 
treatment of the illness or injury involved. 
‘‘(iv) The duration of and limitation 
on benefits payable under the workers’ 
compensation law or plan involved. 
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‘‘(v) The regulations and case law rel-
evant to the State workers’ compensation 
law or plan involved. 
‘‘(B) ITEMS AND SERVICES INCLUDED.—A 
Medicare set-aside— 
‘‘(i) shall include payment for items 
and services that are covered and otherwise 
payable under this title as of the effective 
date of the workers’ compensation settle-
ment agreement and that are covered by 
the workers’ compensation law or plan; 
and 
‘‘(ii) is not required to provide for 
payment for items and services that are 
not described in clause (i). 
‘‘(C) PAYMENT REQUIREMENTS.— 
‘‘(i) 
REQUIRED
APPLICATION
OF 
WORKERS’ COMPENSATION LAW AND FEE 
SCHEDULE.— 
‘‘(I) IN GENERAL.—Except in the 
case of an optional direct payment of 
a Medicare set-aside made under 
paragraph 
(5)(A), 
the 
set-aside 
amount shall be based upon the pay-
ment amount for items and services 
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under the workers’ compensation law 
or plan and applicable fee schedule 
(effective as of the date of the agree-
ment). 
‘‘(II) WORKERS’ COMPENSATION 
FEE SCHEDULE DEFINED.—For pur-
poses of this subsection, the term 
‘workers’ compensation fee schedule’ 
means, with respect to a workers’ 
compensation law or plan of a State 
or a similar plan applicable in a State, 
the schedule of payment amounts the 
State has established to pay providers 
for items and services furnished to 
workers who incur a work-related in-
jury or illness as defined under such 
law or plan (or in the absence of such 
a schedule, the applicable medical re-
imbursement rate under such law or 
plan). 
‘‘(ii) OPTIONAL
PROPORTIONAL
AD-
JUSTMENT FOR COMPROMISE SETTLEMENT 
AGREEMENTS.—In the case of a com-
promise settlement agreement, a claimant 
or workers’ compensation payer who is 
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party to the agreement may elect to cal-
culate the Medicare set-aside amount of 
the agreement by applying a percentage re-
duction to the Medicare set-aside amount 
for the total settlement amount that could 
have been payable under the applicable 
workers’ compensation law or similar plan 
involved had the denied, disputed, or con-
tested portion of the claim not been subject 
to a compromise agreement. The percent-
age reduction shall be equal to the denied, 
disputed, or contested percentage of such 
total settlement. Such election may be 
made by a party to the agreement only 
with the written consent of the other party 
or parties to the agreement. 
‘‘(3) OPTIONAL
PROCESS
FOR
APPROVAL
OF 
MEDICARE SET-ASIDES.— 
‘‘(A) OPTIONAL PRIOR APPROVAL BY SEC-
RETARY.—A party to a workers’ compensation 
settlement agreement that includes a Medicare 
set-aside may submit to the Secretary the Medi-
care set-aside amount for approval. 
‘‘(B) NOTICE OF DETERMINATION OF AP-
PROVAL OR DISAPPROVAL.—Not later than 60 
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days after the date on which the Secretary re-
ceives a submission under subparagraph (A), 
the Secretary shall notify in writing the parties 
to the workers’ compensation settlement agree-
ment of the determination of approval or dis-
approval. If the determination disapproves such 
submission the Secretary shall include with 
such notification the specific reasons for the 
disapproval. 
‘‘(4) APPEALS.— 
‘‘(A) IN GENERAL.—A party to a workers’ 
compensation settlement agreement that is dis-
satisfied with a determination under paragraph 
(3)(B), upon filing a request for reconsideration 
with the Secretary not later than 60 days after 
the date of notice of such determination, shall 
be entitled to— 
‘‘(i) reconsideration of the determina-
tion by the Secretary (with respect to such 
determination); 
‘‘(ii) a hearing before an administra-
tive law judge thereon after such reconsid-
eration; and 
‘‘(iii) judicial review of the Secretary’s 
final determination after such hearing. 
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‘‘(5) ADMINISTRATION OF MEDICARE SET-ASIDE 
PROVISIONS.— 
‘‘(A) OPTIONAL
DIRECT
PAYMENT
OF 
MEDICARE SET-ASIDE AMOUNT.— 
‘‘(i) ELECTION FOR DIRECT PAYMENT 
OF MEDICARE SET-ASIDE AMOUNT.—Effec-
tive 30 days after the date of enactment of 
this subsection, with respect to a claim for 
which a workers’ compensation settlement 
agreement is or has been established, a 
claimant or workers’ compensation payer 
who is party to the agreement may elect, 
but is not required, to transfer to the Sec-
retary a direct payment of the Medicare 
set-aside amount. The parties involved may 
calculate the Medicare set-aside amount of 
such set-aside using any of the following 
methods: 
‘‘(I) In the case of any Medicare 
set-aside of a compromise settlement 
agreement under paragraph (2)(C)(ii), 
the amount calculated in accordance 
with such paragraph. 
‘‘(II) In the case of any Medicare 
set-aside, the amount based upon the 
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payment amount for items and serv-
ices under the workers’ compensation 
law or plan and fee schedule (effective 
as of the date of the agreement) in ac-
cordance with paragraph (2)(C)(i)(I). 
‘‘(III) In the case of any Medi-
care set-aside, the payment amount 
applicable to the items and services 
under this title as in effect on the ef-
fective date of the agreement. 
Such transfer shall be made only upon 
written consent of the other party or par-
ties to the agreement. 
‘‘(ii) ELECTION
SATISFYING
LIABIL-
ITY.—An election made under clause (i), 
with respect to a qualified Medicare set- 
aside shall satisfy any payment, in relation 
to the underlying claim of the related 
workers’ compensation settlement agree-
ment, required under subsection (b)(2) to 
be made by the claimant or payer to the 
Secretary. 
‘‘(B) ELECTION
OF
PROFESSIONAL
OR 
BENEFICIARY SELF ADMINISTRATION OF MEDI-
CARE SET-ASIDE PAYMENTS.—Nothing in this 
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