by John Darer® CLU ChFC MSSC CeFT RSP CLTC Updated 2026
What happens to a Workers’ Compensation Medicare Set‑Aside (WCMSA) when a marriage ends?
⚖️In 2012, the Illinois Appellate Court (Third District) tossed a greasy wrench into what had been a predictable process for employers seeking finality in workers’ compensation settlements. In In re Marriage of Washkowiak, 2012 IL App (3d) 110174 (Rule 23 Order), the court held that an injured worker’s WCMSA was marital property — and awarded the ex‑wife a slice of the MSA pie.
The ruling was short, unpublished, and legally awkward. But its implications were anything but small.
What the Court Did — and Why It Raised Eyebrows🤨
The Third District reasoned that:
- the workers’ comp settlement was earned during the marriage,
- the MSA was funded from that settlement, and
- therefore the MSA was part of the marital estate.
The court emphasized that CMS rules restrict use, not ownership. So, in its view, dividing the MSA as property did not violate federal law.
That’s tidy family‑law logic. It’s also completely incompatible with Medicare Secondary Payer compliance.
The Real‑World Problem: CMS Doesn’t Recognize Ex‑Spouses
CMS only recognizes one beneficiary of a WCMSA:
the injured worker.
CMS does not recognize:
- ex‑spouses
- marital property allocations
- QDRO‑style divisions
- proportional or “half” exhaustion
- state‑court re‑characterizations of federal medical‑spending accounts
CMS’s position is unwavering:
The entire approved MSA amount must be spent properly before Medicare will pay.
So if a divorce court splits a $200,000 MSA 50/50:
- Husband gets $100,000
- Wife gets $100,000
…and the husband uses his $100,000 for injury‑related care…
CMS still says:
“The MSA is not exhausted. Medicare remains secondary.”🚫🧾🤨
The husband is stuck. The wife’s share is unusable for its intended purpose. The divorce decree is irrelevant to CMS.
This is exactly what happened in the real‑world aftermath reported by WorkCompCentral — the injured worker was “stung twice”-fianncially and legally.🐝💸⚖️🤨
The Key Concern (Then and Now): The Half‑Exhaustion Trap🧩🤨
The original question from 2012 remains the core issue in 2026:
If the parties split the MSA 50/50 and the claimant spends “his half,” can he then seek Medicare coverage?
No. CMS will deny the claim because only half of the required MSA amount was exhausted.
There is no such thing as:
- “half exhaustion”
- “proportional exhaustion”
- “divorce‑adjusted exhaustion”
The entire MSA corpus must be spent correctly before Medicare becomes primary.
This is why dividing an MSA is not just bad policy — it’s a compliance impossibility.
Have There Been Follow‑Up Cases Since 2012?
Illinois
No appellate court has revisited Washkowiak. It remains a Rule 23 orphan — cited in CLEs, ignored in jurisprudence.
Other States
No appellate decisions anywhere have:
- adopted Washkowiak,
- rejected it, or
- created a workable framework for dividing MSAs in divorce.
Trial courts occasionally issue misguided orders, but nothing with precedential weight.
Federal Courts
Zero. No federal court has addressed whether:
- a state court can divide an MSA,
- CMS must honor such a division, or
- Medicare must pay after partial exhaustion.
CMS has never budged.
The Modern Practitioner Rule (2026)🚫
A WCMSA cannot be split. A WCMSA cannot be re‑beneficiated. A WCMSA cannot be divided in any way CMS will honor.
The only safe approaches are:
- Offsetting property division The MSA stays intact; the spouse receives other assets.
- Maintenance or equalization payments Again, the MSA remains untouched.
- Explicit acknowledgment of federal supremacy Some judges now include language stating the MSA is not divisible.
- Expert testimony To prevent a Washkowiak-style misstep.
Why This Case Still Matters🍕
Washkowiak is a cautionary tale — a reminder that:
- state courts can classify an MSA as marital property,
- but federal Medicare rules control how the funds can be used, and
- CMS will not bend to accommodate a divorce decree.
It’s a perfect example of what happens when state‑law marital‑property concepts collide with federal secondary‑payer rules: the claimant loses, CMS doesn’t care, and the ex‑spouse gets an asset she can’t legally use.
Related Reading
1. Ex‑Spouse, Medicare Rules and CMS Sting Illinois Man Twice
💸⚖️🤨 WorkCompCentral’s analysis of the Washkowiak ruling and the half‑exhaustion problem — including the real‑world consequences for the claimant. Read contemporary March 15, 2012 analysis on the WorkCompCentral blog.
2. Medicare Set‑Asides (MSAs) — 4structures.com
🏛️🧾🍕 MSAs, compliance, allocation, and settlement planning —Read More About Medicare Set Asides
3. Illinois Appellate Court Opinion — In re Marriage of Washkowiak (2012)
⚖️📜 Primary source: the Rule 23 order that started it all.
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