Medicare recovery is the process by which the federal government reclaims money it spent on medical bills that should have been paid by someone else. If you were injured in a car accident, hurt at work, or harmed by another party’s negligence, Medicare may have covered your treatment while you pursued a legal claim. Once you receive a settlement, judgment, or insurance payout, Medicare has the legal right to be paid back for those bills. This process catches many people off guard, especially when a chunk of their settlement check goes straight back to the government.
Why Medicare Wants Its Money Back
The legal foundation is the Medicare Secondary Payer (MSP) Act of 1980. It establishes a simple rule: when another insurance source exists, Medicare is the backup payer, not the primary one. That “other source” could be an auto insurer, a workers’ compensation carrier, a liability policy, or any no-fault insurance. If Medicare paid your medical bills while one of those sources should have been responsible, it’s entitled to reimbursement.
This applies broadly. All health, liability, no-fault, and workers’ compensation insurers that make a payment to a Medicare beneficiary are required to report that payment to CMS (the Centers for Medicare & Medicaid Services). CMS can then recover from the primary payer, from the beneficiary directly, or from anyone who received payment from the primary payer, including attorneys.
How Conditional Payments Work
The money Medicare spends on your behalf while your claim is pending is called a “conditional payment.” Medicare covers your bills on one condition: that it gets paid back once the responsible party settles up. Think of it as a temporary loan. Medicare steps in so you’re not stuck without medical care during a legal dispute, but the expectation of repayment is built in from the start.
If you have a pending liability, no-fault, or workers’ compensation claim, you or your attorney should contact the Benefits Coordination & Recovery Center (BCRC) to report the case. You’ll need to provide your Medicare number, date of injury, a description of the illness or harm, the type of claim, and the insurer’s information. The BCRC can be reached at 1-855-798-2627, Monday through Friday, 8 a.m. to 8 p.m. Eastern time.
Once a case is reported, the BCRC issues a conditional payment letter listing every Medicare claim it believes is related to your injury. This is your opportunity to review the list carefully. If any claims are unrelated to the case (say, a routine checkup that has nothing to do with your accident), you can submit documentation asking for those to be removed. Getting this right matters, because every claim left on the list adds to the amount you’ll owe.
What Happens After a Settlement
Once you settle your case or receive a judgment or award, you need to notify the BCRC as soon as possible. This triggers the formal recovery process. Within 65 days, the BCRC will send a payment summary form showing the final conditional payment amount. You then have 30 calendar days to respond with any disputes, documentation of unrelated claims, or proof of attorney fees and legal costs.
If you respond within that 30-day window, the BCRC reviews your submission and issues a formal demand letter stating what you owe. If you don’t respond in time, the demand letter goes out automatically with no reductions for your legal costs. That distinction alone can cost you thousands of dollars, so hitting the deadline is critical.
Reducing the Amount You Owe
Medicare doesn’t ignore the fact that you paid an attorney to secure the settlement. It accounts for “procurement costs,” which include attorney fees and litigation expenses. The formula reduces Medicare’s recovery demand proportionally based on what you spent to obtain the settlement. For example, if your attorney took a standard contingency fee, Medicare’s claim is reduced by a corresponding percentage. Your attorney should submit this documentation to the BCRC as part of the response process.
You can also challenge specific claims on the conditional payment list. If Medicare included treatment for a pre-existing condition or a medical visit unrelated to the injury in your case, you can submit records showing those charges shouldn’t count. Every item you successfully remove lowers the final demand.
Recovery Thresholds
Not every settlement triggers a recovery effort. As of January 1, 2025, CMS will not pursue recovery on physical trauma-based liability insurance settlements of $750 or less. The same $750 threshold applies to no-fault insurance and workers’ compensation settlements where the insurer doesn’t have ongoing responsibility for medical costs. Below that amount, insurers aren’t required to report the payment, and CMS won’t seek reimbursement.
Requesting a Waiver
If paying back Medicare would create genuine financial hardship, you can request a waiver. Medicare may waive recovery if two conditions are met: the beneficiary was not at fault for Medicare making the conditional payments, and repayment would either cause financial hardship or be unfair for some other reason. Waiver requests are submitted through the BCRC, and approval isn’t guaranteed. But for beneficiaries living on limited income who received a small settlement, it’s an option worth pursuing.
The Five Levels of Appeal
If you disagree with the amount Medicare says you owe, or you believe the recovery demand is wrong, there’s a structured appeals process with five levels. You start with a redetermination, where a different reviewer at the Medicare contractor takes a fresh look at the claim. If that doesn’t resolve it, you can escalate to a reconsideration by a qualified independent contractor. From there, appeals move to the Office of Medicare Hearings and Appeals, then to the Medicare Appeals Council, and finally to federal district court as the fifth level. Most disputes are resolved well before reaching a courtroom, but the option exists for cases involving significant amounts.
Recovery Audits for Providers
Medicare recovery isn’t limited to beneficiaries. The Medicare Fee for Service Recovery Audit Program targets overpayments made to hospitals, doctors, and other healthcare providers. Recovery Audit Contractors review claims after they’ve been paid, looking for billing errors, duplicate payments, and services that weren’t medically necessary. These audits use both automated system checks and manual reviews where a qualified individual examines the actual medical record. When an overpayment is found, the provider is required to return the money. The program also identifies underpayments, so providers occasionally receive additional funds.
If your provider receives an audit request, the Recovery Audit Contractor issues an Additional Documentation Request asking for the medical record and supporting documentation. This is a provider-side process that generally doesn’t involve the patient directly, but it’s part of the broader ecosystem of Medicare recovering funds it shouldn’t have spent.
Medicare Recovery vs. Medicaid Estate Recovery
People often confuse Medicare recovery with Medicaid estate recovery, but they’re fundamentally different programs. Medicare recovery is about reclaiming conditional payments from settlements and correcting overpayments to providers. It happens during a person’s lifetime and is tied to specific insurance claims or billing errors.
Medicaid estate recovery, by contrast, happens after death. State Medicaid programs are required to seek repayment from the estates of enrollees age 55 and older for nursing facility services, home and community-based services, and related hospital and prescription drug costs. States can place liens on real property while someone is permanently institutionalized. However, recovery is blocked when the deceased is survived by a spouse, a child under 21, or a blind or disabled child of any age. States must also offer hardship waivers. If you’re dealing with a recovery demand from Medicare specifically, Medicaid estate recovery rules don’t apply to your situation.