Medicare’s Demand Letter
In general, CMS issues the demand letter directly to:
- The Medicare beneficiary when the beneficiary has obtained a settlement, judgment, award or other payment.
- The liability insurer (including a self-insured entity), no-fault insurer, or workers’ compensation (WC) entity when that insurer or WC entity has ongoing responsibility for medicals (ORM).
- For ORM, there may be multiple recoveries to account for the period of ORM, which means that CMS may issue more than one demand letter.
When Medicare is notified of a settlement, judgment, award, or other payment, including ORM, the recovery contractor will perform a search of Medicare paid claims history. When the most recent search is completed and related claims are identified, the recovery contractor will issue a demand letter advising the debtor of the amount of money owed to the Medicare program and how to resolve the debt by repayment. The demand letter also includes information on administrative appeal rights.
For demands issued directly to beneficiaries, Medicare will take the beneficiary’s reasonable procurement costs (e.g., attorney fees and expenses) into consideration when determining its demand amount. The formula used to decide how much the amount of reduction should be may be found by clicking the 42 CFR 411.37 link.
For more information on the beneficiary recovery process, click the Medicare’s Recovery Process link.
For more information on the insurer recovery process, click the Insurer NGHP Recovery link.
Assessment of Interest and Failure to Respond
Interest accrues from the date of the demand letter, but is only assessed if the debt is not repaid or otherwise resolved within the time period specified in the recovery demand letter. Interest is due and payable for each full 30-day period the debt remains unresolved; payments are applied to interest first and then to the principal. Interest is assessed on unpaid debts even if a debtor is pursuing an appeal or a beneficiary is requesting a waiver of recovery; the only way to avoid the interest assessment is to repay the demanded amount within the specified time frame. If the waiver of recovery or appeal is granted, the debtor will receive a refund.
Failure to respond within the specified time frame may result in the initiation of additional recovery procedures, including the referral of the debt to the Department of Justice for legal action and/or the Department of the Treasury for further collection actions.
Right to Appeal
It is important to note that the individual or entity that receives the demand letter seeking repayment directly from that individual or entity is able to request an appeal. This means that if the demand letter is directed to the beneficiary, the beneficiary has the right to appeal. If the demand letter is directed to the liability insurer, no-fault insurer or WC entity, that entity has the right to appeal. If an individual or entity receives a courtesy copy of a demand letter, that individual or entity does not have the right to appeal. Debtors have the right to appeal Medicare’s demand if the debtor believes the amount or existence of the debt is in error. The appeal must be filed no later than 120 days from the date the demand letter is received.
To file an appeal, send a letter explaining why the amount or existence of the debt is incorrect with applicable supporting documentation. The letter and documentation should be submitted to the return mailing address indicated on the demand letter. Once the request for appeal is received, a decision will be made indicating whether the demand amount is correct. A letter will be sent that explains the reasons for the decision. The letter will also explain the steps that need to be taken to appeal that decision if it is less than fully favorable.
Note: When an insurer/WC entity appeals a demand, the beneficiary will receive a letter that explains that the insurer/WC entity has submitted an appeal. Insurer/WC entity debtors may only appeal demands issued on or after April 28, 2015.
The insurer/WC entity’s recovery agent can request an appeal for the insurer/WC entity if the insurer/WC entity has submitted an authorization, such as a Letter of Authority, for the recovery agent. Please see the Recovery Agent Authorization Model Language document which can be accessed by clicking the Insurer NGHP Recovery link.
Waiver of Recovery
The beneficiary has the right to request that the Medicare program waive recovery of the demand amount owed in full or in part. The right to request a waiver of recovery is separate from the right to appeal the demand letter, and both a waiver of recovery and an appeal may be requested at the same time. The Medicare program may waive recovery of the amount owed if the following conditions are met:
- The beneficiary is not at fault for Medicare making conditional payments, and;
- Paying back the money would cause financial hardship or would be unfair for some other reason.
If it is believed that both of these conditions apply, a letter should be sent to the BCRC that explains the reasons. When a waiver of recovery is requested, the BCRC will send the SSA 632 Request for Waiver form asking for more specific information about the beneficiary’s income, assets, expenses, and the reasons why waiver of recovery should be granted. If the BCRC is unable to grant the request for a waiver of recovery, the BCRC will send a letter that explains the reason(s) for the decision and the steps to be followed to appeal that decision if it is less than fully favorable.
Note: The waiver of recovery provisions do not apply when the demand letter is issued directly to the insurer or WC entity. See Section 1870 of the Social Security Act (42 U.S.C. 1395gg).