Medicare procurement cost calculator. What Medicare recovers after its share of fees and costs.

The rule

When Medicare pays for care that a liability insurer is responsible for, the payment is conditional: Medicare is repaid when the settlement or judgment comes in (42 U.S.C. 1395y(b)(2)(B); 42 CFR 411.24). Without legal action, Medicare recovers the lesser of what it paid or the full primary payment (411.24(c)(1)).

The beneficiary paid fees and costs to get that money, so Medicare bears its share. Under 42 CFR 411.37, Medicare reduces its recovery for procurement costs when those costs were incurred because the claim was disputed and they are borne by the party Medicare recovers from (411.37(a)(1)). Procurement costs are the attorney's fees and case costs of getting the settlement or judgment.

The formula

When Medicare's payments are less than the settlement (411.37(c)):

1. Divide the procurement costs by the total settlement or judgment.
2. Apply that ratio to Medicare's payments. The result is Medicare's share of procurement costs.
3. Subtract that share from Medicare's payments. The remainder is the repayment.

When Medicare's payments equal or exceed the settlement (411.37(d)): the repayment is the total settlement less all procurement costs.

When CMS has to sue because the party that received the money opposes recovery (411.37(e)): the repayment is the lower of Medicare's payments or the settlement less the party's procurement costs. The pro rata share in step 2 is lost.

Worked examples

Payments less than the settlement:

Payments more than the settlement: a $30,000 settlement with $10,000 in fees and $1,000 in costs, and $45,000 in conditional payments. The repayment is $30,000 less $11,000, or $19,000.

Where the numbers come from

• Fees and costs are what the beneficiary actually paid to get this recovery. Report them to the recovery contractor. For demands issued to a beneficiary, CMS says it considers reasonable procurement costs, such as attorney fees and expenses, when it sets the demand amount.
• Conditional payments come from Medicare's conditional payment letter. Dispute charges that aren't related to the injury before the final demand, since the ratio applies to whatever total remains.
• The final demand is the amount owed. CMS charges interest if the debt isn't resolved within the time the demand letter gives, even during an appeal or waiver request, and refunds the difference if the appeal or waiver succeeds.

Waiver and compromise requests are separate from the procurement cost reduction. They can lower the amount further, but they're decided on their own grounds.

What it leaves out

• Medicare Advantage and Part D plans, which pursue their own recovery. Check the plan's demand.
• Future medical expenses and Medicare set-aside arrangements.
• Other payers. Medi-Cal, ERISA plans and hospital liens follow their own rules: see Medi-Cal lien, ERISA lien and hospital lien.
• Interest, appeals and waivers.

This is general information, not legal advice. The final demand letter controls.

Using it with the settlement statement

Take the repayment from this calculator and enter it as an "other lien" in the personal injury settlement calculator to see the client's net. Our guide to medical lien reductions in California covers the negotiation side, and the glossary explains Medicare conditional payments and subrogation.

In PlaintiffStack

The Finances app tracks each lien with its asserted and negotiated amounts and status, and the settlement statement computes the fee, costs, liens and net to the client. See the personal injury practice page.