Written by attorney Christopher B. Wigand

How to determine how much of a Medicare lien needs to be paid back.

Once you have determined how much money Medicare has paid for medical bills related to your case it is time to determine how much you will have to pay them back.

42 CFR 411.37 is the Federal law which establishes the formula that Medicare uses when determining the amount of a lien that must be paid back. The formula takes into account how much money it cost the client in attorney fees and costs to procure the settlement and makes a pro-rata reduction based on that figure.

I. If Medicare payments are less than the judgment or settlement amount, the recovery is computed as follows:

1. Procurement Cost

Determine the procurement cost by adding the attorney fees and costs together.

Assuming a total recovery of $100,000

Attorney Fees $40,000

Taxable Costs $5,000

Procurement Costs $45,000

2. Procurement Ratio

Determine the ratio of the procurement costs to the total judgment or settlement by dividing the procurement cost by the total recovery.

45,000/100,000 = .45

  1. Medicare’s Share of Procurement Costs

Determine Medicare’s share of the procurement costs by multiplying Medicare’s total claim by the procurement ratio.

Medicare’s Total Claim $10,000

The Ratio x .45

Medicare’s Share of Costs $4,500

  1. Medicare’s Recovery

Determine how much of the recovery will be paid to Medicare by subtracting Medicare’s Share of the Procurement Costs from the Total Recovery.

Medicare’s Total Claim $10,000

Medicare’s Share of Costs - $4,500

Recovery Paid to Medicare $5,500

II. If Medicare payments equal or exceed the judgment or settlement amount, the recovery amount is the total judgment or settlement payment minus the total procurement costs.

III. If CMS must bring suit against the party that received payment because that party opposes CMS's recovery, the recovery amount is the lower of the following:

(1) Medicare payment.

(2) The total judgment or settlement amount, minus the party's total procurement cost.

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