; 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 payment amount for items and services under the workers' compensation law or plan and applicable fee schedule (effective as of the date of the agreement). (II) Workers' compensation fee schedule defined For purposes 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 injury or illness as defined under such law or plan (or in the absence of such a schedule, the applicable medical reimbursement rate under such law or plan). (ii) Optional proportional adjustment for compromise settlement agreements In the case of a compromise settlement agreement, a claimant or workers' compensation payer who is party to the agreement may elect to calculate the Medicare set-aside amount of the agreement by applying a percentage reduction 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 contested portion of the claim not been subject to a compromise agreement. The percentage 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 Secretary A party to a workers' compensation settlement agreement that includes