Calculating Medicare’s Share of Beneficiary Procurement Costs

40.16 – Calculating Medicare’s Share of Beneficiary Procurement Costs (Rev. 12438; Issued: 01-04-24; Effective: 02-06-24; Implementation: 02-06-24) Pursuant to 42 C.F.R. § 411.37, the Medicare recovery is reduced when procurement costs are incurred by a beneficiary to obtain a third party payment as a result of a settlement, judgment, award, or other payment. If the reimbursement is not made, Medicare: a) May bring legal action against any entity required to make or responsible for payment and collect double damages; b) May take legal action to recover its benefits from any entity that has received primary payment from the NGHP for items and services furnished to an individual for whom Medicare is the secondary payer; c) May join or intervene in any legal action against the NGHP related to the events that gave rise to the need for the items or services; and d) Is subrogated to the extent it paid for items or services to the rights of any individual who is entitled to receive primary payment from a NGHP. Under 42 C.F.R. § 411.37, Medicare will recognize a proportionate share of the necessary procurement costs incurred by a beneficiary in obtaining a settlement, judgment, award, or other payment. Procurement costs are those costs incurred by the beneficiary in obtaining a settlement, judgment, award, or other payment (e.g., court costs, attorney fees). If a liability insurer pays a beneficiary, the MSP Contractor recovers Medicare’s payment from the beneficiary, reduced by a proportionate share of the beneficiary’s procurement costs, if any. If, under the Prospective Payment System (PPS), Medicare pays a provider, physician, or other supplier more than its charges, the MSP Contractor does not recover more than the charges from a beneficiary’s liability settlement. See P.L. 98-21 (97 Stat. 65, April 20, 1983). (Under Medicare regulations, a beneficiary who must refund a Medicare payment made to a provider, physician, or other supplier is liable only to the extent that the beneficiary benefited from the payment. Since the beneficiary would have had to pay only the provider, physician, or other supplier’s charges in the absence of Medicare, the beneficiary is not liable for refunding more than the charges). The provider, physician, or other supplier is not required to refund the excess of the Medicare payment rate over the provider, physician, or other supplier’s charges. See Medicare Financial Manual, Chapter 3 (Overpayments), Section 110.1. To determine beneficiary procurement costs, the MSP Contractor asks the attorney to furnish (in writing) the costs, including attorney fees, incurred by the beneficiary to procure the settlement, judgment, award, or other payment. If these costs appear in excess of the prevailing costs in the area for similar claims, it asks for an itemized statement of costs or copy of a contingency agreement, if applicable, or other appropriate documentation. If the beneficiary’s procurement costs are documented, the MSP Contractor allows them. Should an MSP Contractor need advice on what constitutes beneficiary procurement costs in a particular case, it should consult CMS. The MSP Contractor uses the following formula to determine the amount of Medicare’s claim when there are beneficiary procurement costs: a) Determine the ratio of the beneficiary procurement costs to the total amount of the liability insurance settlement, judgment, award, or other payment; b) Apply this ratio to the Medicare payment. The product is the Medicare share of the beneficiary procurement costs; and c) Subtract the Medicare share of beneficiary procurement costs determined in step 2 from the lesser of the total conditional payments or the provider, physician, or other suppliers’ charges. The remainder is the amount to be refunded to the Medicare program. (This amount may be rounded to the nearest dollar). NOTE: If Medicare payments equal or exceed the amount of the liability insurance settlement, judgment, award, or other payment amount, the MSP Contractor recovers the entire liability insurance settlement, judgment, award, or other payment, up to the amount of the provider, physician, or other suppliers’ charges, minus the total beneficiary procurement costs.