Is Reduction Fees and Costs for Medicare, Regulation or Statute?

Question: Does anyone know if the 1/3 reduction for fees and costs is by regulation or statute? Someone just told me that Medicare is claiming that it is not automatic and depends of the settlement dollars.

NJ Attorney

Answer: The procurement reduction is found in 42 CFR 411.37
TITLE 42 - PUBLIC HEALTH

CHAPTER IV - CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN SERVICES

SUBCHAPTER B - MEDICARE PROGRAM

PART 411 - EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE PAYMENT

subpart b - INSURANCE COVERAGE THAT LIMITS MEDICARE PAYMENT: GENERAL PROVISIONS

411.37 - Amount of Medicare recovery when a third party payment is made as a result of a judgment or settlement.

(a) Recovery against the party that received payment (1) General rule

Medicare reduces its recovery to take account of the cost of procuring the judgment or settlement, as provided in this section, if (i) Procurement costs are incurred because the claim is disputed; and (ii) Those costs are borne by the party against which CMS seeks to recover.

(2) Special rule. If CMS must file suit because the party that received payment opposes CMS's recovery, the recovery amount is as set forth in paragraph (e) of this section.

(b) Recovery against the third party payer. If CMS seeks recovery from the third party payer, in accordance with 411.24(i), the recovery amount will be no greater than the amount determined under paragraph (c) or (d) or (e) of this section.

(c) Medicare payments are less than the judgment or settlement amount.

If Medicare payments are less than the judgment or settlement amount, the recovery is computed as follows: (1) Determine the ratio of the procurement costs to the total judgment or settlement payment.

(2) Apply the ratio to the Medicare payment. The product is the Medicare share of procurement costs.

(3) Subtract the Medicare share of procurement costs from the Medicare payments. The remainder is the Medicare recovery amount.

(d) Medicare payments equal or exceed the judgment or settlement amount.

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.

(e) CMS incurs procurement costs because of opposition to its recovery.

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.