Medicare Regulations have been in existence since 1980 requiring that Medicare’s interests be considered in all workers' compensation settlements and authorizes the recovery of funds conditionally paid by Medicare before its position as secondary payer is investigated and clearly understood.

Originally, Medicare/CMS had no method of identifying medical payments made to injured workers’ who had received settlement money that was intended for future medical treatment related to the Workers’ Compensation claim.

In January of 2001 the Federal Government hired an outside vendor at the cost of 87 million dollars over the next five years, called Coordinator of Benefits (COB), to do nothing except identify bills which could be related to a work related accident for which a medical provider is requesting Medicare payment. The COB uses reports by beneficiaries, attorneys, and medical providers to:

• 1) create a case record when possible Medicare Secondary Payer recovery is found;
• 2) contact attorneys or representatives of the claimant to notify them of how the case will be investigated, and
• 3) assign a local COB contractor to investigate and determine Medicare liens if due.

One of the reasons for this was due to a study done by the General Accounting Office  in May 2001, which found significant errors in the review of workers compensation related claims for offsets. They calculated that between 1991 and 1998, $43 billion was paid by Medicare for services that probably should have been paid by workers’ compensation.

Letters were sent to all medical providers requesting Medicare reimbursement outlining their responsibility to notify Medicare of the possibility of another payor, such as Workers’ Compensation

Medicare has been given authority to impose stiff penalties for causing mistaken payments. If Medicare must sue for recovery of the mistaken payments they may double the value of the original lien plus collection costs. In addition, if an insurer settles a claim without making a provision for a Medicare lien, a lien for recovery can be enforced at double the actual Medicare payments.

Medicare Set-Aside reform legislation was introduced in Congress on May 24,2007 that supporters say creates clear standards to ensure that Medicare doesn’t inappropriately absorb the cost of injuries covered by workers’ compensation settlements. Bill H.R. 2549, entitled “‘Medicare Secondary Payer and Workers’ Compensation Settlement Act of 2007,” seeks to amend title XVIII (Medicare) of the Social Security Act to: (1) create an exception to Medicare secondary payer requirements for certain workers' compensation settlement agreements; and (2) provide for the satisfaction of such requirements through use of qualified Medicare set-asides under workers' compensation settlement agreements.

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