Medicare Fixed Percentage Option- The Basics

By:  Amanda Williamson

In an effort to streamline Medicare’s recovery process the Medicare Secondary Payer Recovery Contractor (MSPRC) has introduced a new method for calculating recovery amounts on certain liability insurance cases. A beneficiary who receives a settlement of $5,000 or less for a physical, trauma-based injury may elect Medicare’s fixed percentage option to resolve Medicare’s claim. The fixed percentage option has been available for use by beneficiaries for almost one year now. While it seems like a great step towards simplifying and expediting the recovery process, the fixed percentage option is only available in limited situations.

Settlements meeting the following criteria will be eligible for use of the fixed percentage option:

1.     The underlying injury must be physical, trauma-based (rather than related to ingestion, exposure, or medical implant);

2.     The total amount of the settlement, judgment or other payment must be less than $5,000;

3.     Must be a liability insurance (including self-insurance) settlement, judgment, award, or other payment. (No-fault or workers’ compensation settlements do not qualify);

4.     The option must be elected within the required timeframe and before Medicare has issued a demand letter or made any other requests for reimbursement related to the incident;

5.     The beneficiary must not have received or expect to receive any other settlements, judgments, awards, or other payments related to the incident.

With the implementation of the fixed percentage option, settling parties can anticipate the exact amount owed to Medicare. If the fixed percentage option is elected and approved, the beneficiary will be able to immediately pay Medicare a flat 25% of the total liability insurance settlement amount. The total liability insurance settlement amount is not to be reduced for attorney fees and costs.

The fixed percentage option offers speed and simplicity compared to the tradition recovery process. The fixed percentage option eliminates the tort recovery record, conditional payments, audits, and the final demand letter. Thus, many of the complications of the traditional recovery process can be avoided. Beneficiaries will know they owe Medicare a flat 25% of the gross settlement amount.

It is important to note that if a beneficiary elects the fixed percentage option all appeal and waiver rights are waived. The beneficiary will give up the right to appeal the fixed payment amount or request a waiver of recovery for the fixed payment amount. This must be considered when deciding whether to elect the fixed percentage option.

If you chose to utilize the fixed percentage option a written request must be mailed to MSPRC – Fixed Percentage, P.O. Box 138830, Oklahoma City, OK 73113. Model language for the request can be found on the MSPRC website in the Attorney and Beneficiary Toolkit. This request must be submitted prior to, or with, the documentation for Notice of Settlement. As noted above, the request can not be made in response to a Conditional Payment Letter. MSPRC will generate a response within 30 days of request receipt. If the request is approved the beneficiary will receive a bill for 25% of the total liability insurance settlement, judgment, award or other payment amount. If the request is denied the beneficiary will receive an explanation letter as to why the request was denied and the beneficiary will have to use the traditional recovery process.

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