Settlement costs for Medicare-involved liability claims have increased significantly in recent years, according to Verisk's 2025 Benchmark Report.
The report highlights trends contributing to higher claim values and suggests that a better understanding of these elements may support more effective claims management strategies among casualty insurers.
Between 2018 and 2024, the average total payment obligation to the claimant (TPOC) increased by 52%, while the consumer price index rose only 25% over the same period. The data indicates that settlement values are outpacing general inflation, and Verisk’s analysis points to several influencing factors.
Claims with attorney involvement 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 contributed significantly to claim amounts. Claims resolved within six months recorded an average TPOC of $14,300. In contrast, those settled after more than 48 months averaged $136,900. These figures suggest that longer resolution timelines may escalate financial exposure for insurers managing Medicare-involved cases.
The timing of claim reporting played a role in 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. The report links this to the state’s unique position as the only jurisdiction with unlimited Personal Injury Protection (PIP). According to Verisk, the structure of Michigan’s PIP system presents challenges even for highly efficient insurers, contributing to consistently higher settlement amounts.
In recent years, Michigan enacted reforms to its no-fault insurance system, giving drivers the option to purchase lower levels of PIP coverage starting in 2020. While intended to lower premiums, this change also introduced new administrative complexities for carriers managing both legacy unlimited PIP policies and newer limited coverage tiers.
For Medicare-involved liability settlements, these overlapping frameworks can create challenges in calculating appropriate future medical expense allocations, particularly when claimants are transitioning into Medicare eligibility.
A subset of 10 responsible reporting entities (RREs), drawn from the 25 largest by claim volume, were identified as benchmark performers for their ability to limit average TPOC values. These insurers were generally more insulated from the impact of extended settlement durations and late reporting.
However, Verisk noted that even these organizations were unable to maintain cost advantages in Michigan, indicating that the state's unlimited PIP framework imposes consistent cost pressures across the industry.
As RREs work to comply with Medicare Secondary Payer (MSP) requirements, new regulatory changes are expected to expand the scope of mandatory reporting. As of April 4, the Centers for Medicare & Medicaid Services (CMS) requires inclusion of Workers’ Compensation Medicare Set-Aside (WCMSA) data within TPOC submissions.
This move will give CMS a broader perspective on how insurers evaluate and accommodate Medicare’s future interests during settlement. The 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 important, as failure to meet compliance standards may expose insurers to civil monetary penalties, regardless of the claim’s value.
Another regulatory update affecting claims settlements is the upcoming policy shift on zero-dollar Medicare Set-Asides. Beginning July 17, CMS will no longer review proposals for zero-dollar MSAs in workers’ compensation claims. This change 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.
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