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Understanding Basics of Medicare Overpayment

Understanding Basics of Medicare Overpayment

What is Medicare Overpayment?

An overpayment is a payment made to a provider exceeding amounts due and payable according to existing laws and regulations. Identified overpayments are debts owed to the federal government. Laws and regulations require CMS recover overpayments. This fact sheet describes the overpayment collection process. A Medicare overpayment exceeds regulation and statute properly payable amounts. When Medicare identifies an overpayment, the amount becomes a debt a healthcare provider owes the federal government. Federal law requires CMS recover all identified overpayments. Medicare overpayments happen because of incorrect coding; insufficient documentation; medical necessity errors; and processing and administrative errors. The Medicare Secondary Payer (MSP) program is in place to ensure that Medicare is aware of situations where it should not be the primary, or first, payer of claims. In certain situations, after a Medicare claim is paid, CMS receives new information indicating Medicare has made a primary payment by mistake. Based on this new information, CMS takes action to recover the mistaken Medicare payment.

Medicare Overpayment Collection Process

After provider or billing team identifies the overpayment, they must report and return a self-identified overpayment to Medicare within:

  • 60 days of overpayment identification
  • 6 years from overpayment receipt, generally known as the “lookback period”
  • If applicable, the cost report due date

When provider get an overpayment of $25 or more, applicable Medicare Administrative Contractor (MAC) initiates overpayment recovery by sending a demand letter requesting repayment. A MAC demand letter explains overpayment reason(s), interest accrual begins if the overpayment isn’t repaid in full within 30 days, immediate recoupment request options, Extended Repayment Schedule (ERS) request options, rebuttal rights, and appeal rights.

Response by Provider’s Office

Provider’s office can review this demand letter and check for details provided in demand letter to verify actual overpayments. Based upon review provider’s office can take following steps:

Immediate Payment

Follow the demand payment letter directions.

Request Immediate Recoupment

Occurs when Medicare recovers an overpayment by offsetting future payments. MAC may recoup a partial payment (for example, a percentage of payments recouped) or a complete recoupment. Upon provider’s request, MAC can begin recoupment immediately by following the demand letter instructions. Initiating immediate recoupment applies to all current and future debts, unless otherwise specified.

Request Standard Recoupment

MAC automatically begins standard recoupment according to the Overpayment Debt Collection Activities schedule. If the debt becomes delinquent, interest may accrue.

Request an ERS

If provider can’t make the full overpayment in the required timeframe, follow the instructions in the MAC ERS demand letter.


Submit a rebuttal within 15 calendar days from the date of receiving MAC’s demand letter. Explain or provide evidence why no recoupment should occur. The MAC promptly evaluates your rebuttal statement.


In case of disagreement with an overpayment decision, provider or provider’s representative can request an appeal. Medicare Part A and Part B has 5 appeal levels:

  1. Redetermination is the first appeal level after the initial Part A and Part B claims determination. MAC takes a second look at the claim and supporting documentation. A MAC employee uninvolved in the initial determination makes the redetermination.
  2. Reconsideration by a Qualified Independent Contractor (QIC).
  3. Hearing by an Administrative Law Judge or Review by an Attorney Adjudicator at the Office of Medicare Hearings and Appeals (OMHA).
  4. Review by the Medicare Appeals Council.
  5. Judicial Review in U.S. District Court.

In case, provider fails to pay in full, he will get an ITR letter 60–90 days after the initial demand letter. The ITR letter advises to refund the overpayment or establish an ERS. In case of non-compliance, MAC refers the debt for collection.

Medisys Data Solutions is a leading medical billing company providing complete assistance in medical billing and coding. If you need any assistance in billing Medicare, contact us at 302-261-9187.

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