Medicare Liens and Settlements: Calculation, Demand, and Appeals

If you settle a personal injury claim and Medicare paid for any of your injury-related care, federal law requires you to repay Medicare out of the settlement before you keep your net recovery. That obligation is what people mean when they talk about Medicare liens and settlements: Medicare’s payments were conditional from the start, and once a liability insurer, no-fault carrier, or workers’ compensation plan pays, the conditional payments come due. The amount is reduced to reflect your attorney fees and litigation costs, and there are firm deadlines for reporting the settlement, responding to Medicare’s numbers, and paying the final demand.

Why Medicare Has a Claim on Your Settlement

Since 1980, Medicare has been a secondary payer whenever another source of payment exists for the same care, including liability insurance, no-fault coverage, and workers’ compensation. Because liability claims take months or years to resolve, Medicare pays your injury-related bills conditionally in the meantime, on the understanding that it will be repaid from the settlement.¹

The statute is 42 U.S.C. § 1395y(b)(2), and it overrides state law and the language of your settlement agreement.² You cannot label your settlement as pain-and-suffering or non-medical to shield it. If the settlement doesn’t allocate medical expenses, Medicare can seek recovery against the full settlement amount up to the total of its conditional payments.³

Ignoring the obligation is expensive. Under 42 U.S.C. § 1395y(b)(2)(B)(iii), the government can collect double the conditional payment amount from any entity that fails to reimburse. A separate provision at § 1395y(b)(3)(A) creates a private right of action for double damages as well.² Beneficiaries, insurers, and attorneys can all be on the hook.

How the Lien Amount Is Calculated

Medicare starts with the total of every conditional payment it made for care related to your specific injury. Technicians review billing codes to separate injury-related charges from unrelated care such as annual checkups or chronic condition treatment. That gross figure is then reduced under 42 C.F.R. § 411.37 to account for your procurement costs, meaning your attorney fees and litigation expenses.⁴

The formula runs in three steps. First, divide your total procurement costs by the total settlement amount to get a ratio. Second, multiply that ratio by Medicare’s conditional payment total; that product is Medicare’s share of your legal costs. Third, subtract Medicare’s share from the conditional payment total. The remainder is the final demand.

Say your settlement is $50,000 and your attorney takes a one-third contingency, giving you roughly $16,667 in procurement costs. The ratio is about 33.3%. Applied to a $10,000 conditional payment total, Medicare absorbs roughly $3,333 of the legal costs, and the demand comes in near $6,667.⁴ The reduction is automatic once you submit your procurement cost information; you don’t have to argue for it, but you do have to submit the numbers on time.

The Fixed Percentage Option for Small Settlements

If your liability settlement is $10,000 or less and involves a physical trauma-based injury, you can resolve Medicare’s claim by paying a flat percentage of the settlement rather than waiting for Medicare to itemize its conditional payments. You must elect the option before Medicare issues a demand letter, and you cannot have received or expect to receive any other payments tied to the same incident.⁵ Larger settlements and non-trauma claims go through the standard process.

The Reporting and Demand Timeline

The clock starts before your settlement is final. Missing a deadline can cost you the procurement cost reduction, add interest, or send the debt to Treasury for collection.

Before You Settle

Up to 120 days before the expected settlement date, you or your attorney can notify CMS through the Medicare Secondary Payer Recovery Portal (MSPRP) that a settlement is coming.⁶ That notification opens a dispute window in which unrelated charges can be challenged before the number is locked. Disputes filed after this notification are resolved within 11 business days. If you download or request the conditional payment amount within 3 days of the actual settlement date, that figure becomes Medicare’s final conditional payment amount.

Beneficiaries access the MSPRP through their Medicare.gov login; attorneys and insurers register separately.⁷ Before the Benefits Coordination & Recovery Center (BCRC) will talk to anyone other than the beneficiary, it needs a signed Proof of Representation (for an attorney acting on your behalf) or Consent to Release (allowing information sharing without decision authority).⁸ The forms require the beneficiary’s legal name as it appears on the Medicare card, the Medicare Beneficiary Identifier, the date of injury, and a description of the incident. Mismatched details get the submission rejected.

After You Settle

Within 30 days of settlement, submit the settlement documents through the MSPRP, including the total settlement amount and your procurement costs. Miss that window and any final conditional payment amount you obtained through the portal before settlement becomes void.⁶ Separately, the beneficiary is required to notify and repay Medicare within 60 days of receiving the settlement payment.²

The Conditional Payment Notice and Demand Letter

After receiving your settlement information, the BCRC issues a Conditional Payment Notice (CPN). You have 30 days to respond by disputing charges, providing procurement cost information, or agreeing with the amount. If you don’t respond, the BCRC issues a demand letter calculated on the full conditional payment total with no procurement cost reduction.⁹ On a large lien that silence can cost thousands.

The demand letter is the official bill. Payment is due within 60 days of the demand letter’s date. If the debt is unresolved, the BCRC sends an Intent to Refer letter around day 90, and by day 150 the debt is referred to the U.S. Treasury for collection.¹⁰

Interest on a Late Demand

If you don’t pay within 60 days of the demand letter, interest accrues back to the date of the letter.¹⁰ The rate is set quarterly by the Secretary of the Treasury; as of January 2026 it is 11.625%.¹¹ Interest is simple, not compounded, and assessed in full 30-day periods.¹²

Getting the Number Down

Medicare’s initial calculation is often too high. Its systems cast a wide net when pulling injury-related claims, and unrelated charges regularly appear. You have two main tools.

Disputing Unrelated Charges

Through the MSPRP, you can see the individual claims making up the conditional payment total and dispute any that aren’t related to the injury.⁷ A shoulder injury from a car accident, for instance, shouldn’t include payments for an already-scheduled knee replacement. Upload medical records or physician statements to show the charge is unrelated. Fighting these inclusions before the demand letter issues is far easier than fighting them after.

Requesting a Waiver

You can ask Medicare to waive recovery in full or in part if two conditions are both met: you weren’t at fault for Medicare making the conditional payments, and repayment would either defeat the purpose of Medicare or be against equity and good conscience.¹³ “Not at fault” generally means you didn’t cause a billing error or fail to report something you should have. The equity prong looks at your income, assets, and expenses.

Start a waiver request with a letter to the BCRC explaining your circumstances. The BCRC will then send you an SSA-632 form asking for detailed financial information.¹⁴ Waivers can also be initiated through the MSPRP.⁷ They aren’t granted routinely, but they are a real option when a small settlement leaves you unable to repay the full lien.

Appealing a Final Demand

If disputing charges and requesting a waiver haven’t resolved things, Medicare’s appeals process has five levels, and you must exhaust each before moving to the next.¹⁵

Level 1, Redetermination by the BCRC. For MSP recovery cases, file within 120 days of the demand letter.¹⁶
Level 2, Reconsideration by a Qualified Independent Contractor. File within 180 days of the redetermination decision.¹⁵
Level 3, Administrative Law Judge hearing. Available if the amount in dispute meets the minimum, $200 for 2026. File within 60 days of the QIC decision.¹⁵
Level 4, Medicare Appeals Council review. File within 60 days of the ALJ decision.
Level 5, Federal District Court. Available if the amount in dispute is at least $1,960 for 2026. File within 60 days of the Appeals Council decision.¹⁵

Most MSP disputes are resolved at Level 1 or Level 2. The process is slow, so file promptly at each stage and keep copies of everything.

Future Medical Costs Are a Separate Issue

The lien covers what Medicare has already paid. Future injury-related care that Medicare would otherwise cover is handled separately, because the statute bars Medicare from paying when a primary plan can reasonably be expected to pay, and that language reaches settlement dollars set aside for future treatment.²

In workers’ compensation, CMS will review a proposed Medicare Set-Aside Arrangement (WCMSA) when the claimant is already a Medicare beneficiary and the total settlement exceeds $25,000, or when the claimant reasonably expects to enroll in Medicare within 30 months and the total settlement exceeds $250,000.¹⁷

For liability settlements, CMS has not set a formal review process or dollar thresholds. It has said it expects settlement funds to be spent on injury-related, Medicare-covered services before Medicare is billed for them again. Where a treating physician certifies in writing that treatment for the injury is complete and no future care will be needed, CMS considers its future interest satisfied without a set-aside. A separate certification is needed for each later settlement tied to the same injury.

Paying and Closing the File

Once the final demand is set, you can pay electronically through the MSPRP using Pay.gov, which accepts ACH transfers, debit cards, and PayPal.⁷ After payment is processed and verified, CMS closes the case file for that injury. Keep the confirmation. Without it, Medicare could later deny claims for ongoing treatment on the theory that settlement funds are still available to cover them.

1
Centers for Medicare & Medicaid Services. Medicare Secondary Payer Overview
2
Office of the Law Revision Counsel. 42 U.S. Code 1395y – Exclusions From Coverage and Medicare as Secondary Payer
3
Centers for Medicare & Medicaid Services. Medicare Secondary Payer Manual Chapter 7 – MSP Recovery
4
eCFR. 42 CFR 411.37 – Amount of Medicare Recovery When a Primary Payment Is Made as a Result of a Judgment or Settlement
5
Centers for Medicare & Medicaid Services. Demand Calculation Options
6
Federal Register. Obtaining Final Medicare Secondary Payer Conditional Payment Amounts via Web Portal
7
Centers for Medicare & Medicaid Services. Medicare Secondary Payer Recovery Portal
8
Centers for Medicare & Medicaid Services. Proof of Representation Model Language
9
Centers for Medicare & Medicaid Services. Conditional Payment Information
10
Centers for Medicare & Medicaid Services. Medicare’s Recovery Process
11
Noridian Healthcare Solutions. Overpayment Interest Rates – JE Part B
12
eCFR. 42 CFR 405.378
13
Office of the Law Revision Counsel. 42 USC 1395gg – Overpayment on Behalf of Individuals
14
Centers for Medicare & Medicaid Services. Reimbursing Medicare
15
Medicare.gov. Appeals in Original Medicare
16
Centers for Medicare & Medicaid Services. NGHP Applicable Plan Appeals Reference Guide
17
Centers for Medicare & Medicaid Services. Workers’ Compensation Medicare Set Aside Arrangements