Recovery Would Be Against Equity and Good Conscience

50.15 – Recovery Would Be Against Equity and Good Conscience (Rev. 12438; Issued: 01-04-24; Effective: 02-06-24; Implementation: 02-06-24) In addition to the factors and parameters of 42 C.F.R. § 405.376, equity and good conscience is applied to Medicare overpayment recoveries when required, based on the totality of the circumstances in a particular case. In applying the standard of equity and good conscience factors to consider include, but are not limited to, the following: a) The degree to which the beneficiary contributed to causing the overpayment; b) The degree to which Medicare and/or its MSP Contractors contributed to causing the overpayment; c) The degree to which recovery or adjustment would cause undue hardship for the beneficiary; d) Whether the beneficiary would be unjustly enriched by a waiver or adjustment of recovery; and e) Whether the beneficiary changed their position to their material detriment as a result of receiving the overpayment or as a result of relying on erroneous information supplied to the beneficiary by Medicare. Below are several Medicare overpayment situations when application of equity and good conscience is likely to result in a waiver of adjustment and recovery: a) The beneficiary made a personal financial decision, based on written information from an official CMS source, that the overpayment was correct, and recovery would change the beneficiary’s position for the worse. b) Recovery of the full overpayment amount is contraindicated by especially compelling mitigating facts and circumstances of the beneficiary’s case. c) Facts: The beneficiary sustained injuries in an automobile accident. Medicare made conditional payments in the amount of $7,500 on the beneficiary’s behalf. The beneficiary later filed suit for the injuries and damages suffered as a result of the accident and received a $5,000 settlement. There were no attorney’s fees, thus Medicare’s claim is $5,000. The beneficiary requested a waiver of the overpayment. The beneficiary submitted documentation demonstrating that the money received was used to replace the automobile that was totaled in the accident. Analysis: If Medicare seeks full recovery, the beneficiary will likely have to sell the replacement vehicle to repay Medicare. The beneficiary’s vehicle was the only means of transportation used for a part-time job to supplement income as well as transportation to doctors etc. Selling the vehicle to repay Medicare would cause the beneficiary to be placed in a worse position than before the accident, which would be against equity and good conscience. Action: Either full or partial waiver may be granted. Obviously, Medicare may seek its entire recovery. However, since the beneficiary’s documentation indicates that the entire $5,000 was needed to replace the car, full waiver would be more appropriate. NOTE: Using the settlement money to replace the totaled car was considered appropriate only because loss of the beneficiary’s car was complete. It would be inappropriate to grant waiver simply because the beneficiary chose to purchase a car from the proceeds. d) Facts: The beneficiary sustained multiple injuries in an automobile accident, including a permanent injury that will preclude employment ever again. Monthly income equals monthly expenses. Medicare’s conditional payments were $8,500. The beneficiary received a liability insurance payment of $5,000 (which was the limit of the policy). No attorney was retained. Therefore, Medicare’s recovery becomes $5,000. The beneficiary incurred allowable, properly documented out-of-pocket medical expenses of $4500. Analysis: Since the beneficiary is now unable to work, the ability to absorb the out-of-pocket medical expenses has greatly diminished. Since a valuable right, i.e., the right to be gainfully employed, is a change in one’s position, it would be against equity and good conscience for Medicare to recoup its entire recovery. In accordance with § 40.15, since Medicare stands to recover 100 percent of the settlement amount, it may waive 100 percent of the out-of-pocket costs. It would not be feasible to pursue recovery of the remaining $500. Action: Grant full waiver.