The Medicare Secondary Payer statute, at 42 U.S.C. ยง 1395y(b), requires Medicare to be reimbursed whenever it has paid for injury-related care that another insurer was actually responsible for covering. Once a workers’ compensation carrier, liability insurer, or no-fault auto policy pays through a settlement, judgment, or award, the money Medicare advanced becomes a debt owed back to the government. Beneficiaries, their attorneys, and the primary insurer all share legal responsibility for making that repayment happen, and the penalties for ignoring it include double damages.
When the Statute Applies
Medicare is designed to pay second whenever another source is primarily on the hook for medical costs. When the primary payer’s obligation is delayed or contested, Medicare makes a “conditional payment” so the beneficiary can get treated, then expects repayment once liability is resolved.1Centers for Medicare & Medicaid Services (CMS). Medicare Secondary Payer Overview
Three kinds of claims put the statute in motion:
- Workers’ compensation awards or settlements for a work-related injury or illness.
- Liability claims, including personal injury, medical malpractice, and product liability suits against a third party or a self-insured defendant.
- No-fault auto insurance payments for accident-related care.1Centers for Medicare & Medicaid Services (CMS). Medicare Secondary Payer Overview
Small physical-trauma settlements are exempt. CMS will not pursue recovery on liability, no-fault, or workers’ compensation settlements at or below a $750 threshold.2Centers for Medicare & Medicaid Services. 2026 Recovery Thresholds for Certain Liability Insurance, No-Fault Insurance, and Workers Compensation Settlements The threshold does not apply to claims based on ingestion, implantation, or exposure, so pharmaceutical and toxic tort cases owe reimbursement from dollar one.
Who Owes the Money
The statute reaches any entity that received a primary plan’s payment or the proceeds of one. Liability is joint and several across three groups, meaning the government can pursue any of them for the full amount:
- The primary plan itself: the liability insurer, workers’ compensation carrier, no-fault insurer, or self-insured defendant.
- The Medicare beneficiary who received the settlement.
- The beneficiary’s attorney or other representative, who has a duty to make sure Medicare is paid before disbursing settlement funds.3Office of the Law Revision Counsel. 42 U.S. Code 1395y – Exclusions From Coverage and Medicare as Secondary Payer
Distributing the entire settlement without accounting for Medicare’s lien is one of the fastest ways for an attorney to create personal liability. Funds should stay in trust until the conditional payment number is resolved.
How the Reimbursement Process Runs
The Benefits Coordination & Recovery Center (BCRC) manages the recovery for CMS, and the process starts well before a case settles.4Centers for Medicare & Medicaid Services. Medicare’s Recovery Process
Once a case involving a Medicare beneficiary is reported, the BCRC opens a file and sends a Rights and Responsibilities letter. Within 65 days, it issues a Conditional Payment Letter and a Payment Summary Form listing every claim it believes is injury-related. This number is an estimate and can climb while treatment continues, so an updated interim letter can be requested if the case drags on.
After settlement, the BCRC issues a Conditional Payment Notification with the final claim list. Recipients have 30 days to dispute charges that are not actually related to the injury.5Centers for Medicare & Medicaid Services. Conditional Payment Information A formal demand letter follows, and payment is due within 60 days. Miss that deadline and interest accrues from the date of the demand letter, compounding for every 30-day period the balance remains unresolved.6Centers for Medicare & Medicaid Services. Conditional Payment Letters and Conditional Payment Notices
The Medicare Secondary Payer Recovery Portal (MSPRP) lets beneficiaries and authorized representatives view case status, request letters, dispute individual claims, submit settlement details, file waiver and compromise requests, and pay electronically.7Centers for Medicare & Medicaid Services. Benefits of Using the MSPRP Using it instead of waiting on mail can save weeks.
How to Lower What You Owe
The first number CMS sends is rarely the final one. Three mechanisms bring it down.
Dispute Unrelated Charges
The initial claim list often sweeps in medical expenses that have nothing to do with the injury. Cardiology visits appearing on a knee-injury list, for example, can be removed with medical records showing the treatment was for something else. This is where the largest reductions typically come from.
Procurement Cost Reduction
Medicare’s recovery is reduced proportionally to reflect the attorney’s fees and litigation costs the beneficiary paid to obtain the settlement. The reduction is calculated as a pro-rata share of fees and costs against the total recovery.8Centers for Medicare & Medicaid Services. Medicare Secondary Payer Manual – Chapter 5 If your attorney took a one-third contingency and costs equaled another 5% of the settlement, Medicare’s claim would drop by roughly 38%. The reduction is available on request.
Fixed Percentage Option
For a physical-trauma-based liability settlement of $5,000 or less with no other related settlements pending, the beneficiary can elect to pay 25% of the gross settlement instead of going through the full recovery process.9Centers for Medicare & Medicaid Services. Fixed Percentage Option The election has to be made before CMS issues its demand letter. It is not available for no-fault or workers’ compensation settlements, and not for claims involving ingestion, exposure, or implants.
Hardship Waivers and Compromise
Two separate paths address cases where the beneficiary genuinely cannot pay.
A waiver of recovery under Section 1870(b) of the Social Security Act applies when the beneficiary is “without fault” for the overpayment and repayment would either defeat the purpose of the Medicare program or be against equity and good conscience.10eCFR. 42 CFR Part 405 Subpart C – Suspension of Payment, Recovery of Overpayments, and Repayment of Scholarships and Loans In practice, that means the beneficiary did not cause the overpayment and paying it back would leave them unable to meet ordinary living expenses. Waiver requests can be submitted through the MSPRP.
Compromise is different. CMS can accept less than the full amount if the beneficiary lacks the present or future ability to pay within a reasonable time, or if collecting the full debt would cost more than it would produce.11eCFR. 42 CFR Part 401 Subpart F – Claims Collection and Compromise The agreed amount must be paid in full for the compromise to hold. Defaulting reinstates the original debt minus payments already made.
Appeals
If disputing individual charges through the BCRC does not resolve the disagreement, there is a five-level administrative appeal process.12Medicare.gov. Filing an Appeal The first level is a redetermination, which can be requested through the MSPRP.7Centers for Medicare & Medicaid Services. Benefits of Using the MSPRP Each level can be advanced if you lose the one below. The final level is judicial review in federal district court, which requires a minimum disputed amount of $1,960 for 2026.
An appeal does not pause the interest clock. Interest keeps running from the date of the demand letter, so pushing a weak dispute through all five levels has a real cost.
Penalties for Ignoring the Statute
The government can sue any responsible party and recover double the amount owed. A $10,000 conditional payment obligation becomes a $20,000 judgment. Suit must be filed within three years after the government receives notice of the settlement, judgment, or award. The statute also gives private parties a cause of action for double damages against a primary plan that fails to pay or reimburse.3Office of the Law Revision Counsel. 42 U.S. Code 1395y – Exclusions From Coverage and Medicare as Secondary Payer
Insurers face their own separate penalty regime. Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 requires insurers and self-insured entities (Responsible Reporting Entities) to report settlements involving Medicare beneficiaries to CMS.13Centers for Medicare & Medicaid Services. Mandatory Insurer Reporting (NGHP) Late reporting triggers civil money penalties on a daily basis: base amounts of $250 per day for records one to two years late, $500 for two to three years late, and $1,000 for records more than three years late, all adjusted annually for inflation. The 2025 rates are $378, $756, and $1,512 per day, capped at $365,000 per instance.14Centers for Medicare & Medicaid Services. NGHP Civil Money Penalties These penalties fall on the insurer, but they explain why carriers push hard to verify Medicare status before closing a claim.
Future Medical Costs and Set-Asides
Repayment of conditional payments settles the past. When a settlement also compensates for future injury-related care, Medicare expects those funds to be set aside and spent on that care before Medicare pays again.
A Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) allocates part of a workers’ compensation settlement for future Medicare-covered treatment related to the injury.15Centers for Medicare & Medicaid Services. Workers’ Compensation Medicare Set Aside Arrangements CMS will review a proposed WCMSA amount when the settlement exceeds $25,000 and the claimant is a current Medicare beneficiary, or when it exceeds $250,000 and the claimant has a reasonable expectation of enrolling in Medicare within 30 months.16Centers for Medicare & Medicaid Services. Workers’ Compensation Medicare Set-Aside Arrangement Reference Guide Version 4.4 These thresholds change, so verify them with CMS before finalizing terms. Self-administered WCMSAs come with annual attestation and recordkeeping obligations.17Centers for Medicare & Medicaid Services. Self-Administration and You: A Beneficiary Toolkit for Workers’ Compensation Medicare Set-Aside Arrangements
Liability settlements are different. CMS has not established a formal review or approval process for liability set-asides. They remain optional, though many practitioners recommend one when a Medicare beneficiary settles a liability case that includes future medical damages, because Medicare can later seek reimbursement for expenses the settlement should have covered. The lack of binding CMS guidance in this area is why experienced counsel matters more here than in the workers’ compensation context.
Medicare Advantage Plans Have Their Own Claim
If you are enrolled in a Medicare Advantage (Part C) plan rather than traditional Medicare, the plan that paid for your injury-related care has its own reimbursement rights, separate from the BCRC process. The MSP statute’s private cause of action has been read to let Medicare Advantage organizations sue a primary plan for double damages when the primary plan fails to pay or reimburse as required.3Office of the Law Revision Counsel. 42 U.S. Code 1395y – Exclusions From Coverage and Medicare as Secondary Payer Federal circuits have not fully agreed on the scope of that right, but the practical effect for a Medicare Advantage enrollee is that both the plan and, potentially, the federal government can have a claim on the settlement proceeds. Confirm which entity paid for the injury-related care and address each claim before disbursing funds.