The Final Demand Letter (FDL) is an integral part of the recovery process involving Medicare Secondary Payer (MSP) liability claims. It is only upon receipt of the FDL that a Medicare-related claim can move toward final closure.
Medicare’s Benefits Coordination and Recovery Center (BCRC) will first issue a Conditional Payment Letter (CPL). This outlines the charges Medicare has paid on behalf of their beneficiary that they feel is related to the liability claim in question. This is part of the initial claims process and will precede a final settlement. The CPL can be reviewed and challenged if it contains charges that the beneficiary or a third party administrator (TPA) identify as not related to the accident or incident that prompted the liability claim.
After the CPL is received and reviewed, the liability insurance carrier is in a position to proceed with settling the claim with an understanding of how much Medicare expects to receive in reimbursement. Once the claim is officially settled, Medicare is notified of the settlement amount. They do one final query of their claims history to identify any and all related charges before issuing the FDL.
A copy of the FDL is sent to the beneficiary as well as any representatives or parties to the claim Medicare is aware of, such as the insurance company, the claimant’s attorney, or outside entities like Flagship Services Group (if we are assisting the primary payer in handling the Medicare claim). It is broken up into six question-based sections:
Section One: Why am I required to pay Medicare?
This section gives a brief explanation of the MSP law and the fact that Medicare has made conditional payments for the beneficiary’s medical expenses related to the accident or incident that prompted their liability claim. As a result, they are responsible to reimburse Medicare out of the proceeds of the settlement they have recently agreed to.
Section Two: How did Medicare decide how much money I owe?
Here, the final reimbursement demand amount is noted along with an explanation regarding Medicare’s formula for determining how much of the settlement they are demanding. Generally, Medicare’s demand amount will include all medical charges related to the claim minus any legal fees incurred by the beneficiary to obtain the settlement. This amount can be up to 100% of the settlement, but no more.
Section Three: If I accept this determination, how do I repay Medicare what I owe?
Medicare notes in this section that the demanded repayment must be made via check or money order within 60 days of receipt of the letter. If payments have already been made to cover a portion of this debt, only the remaining portion needs be paid within that time frame.
Section Four: What rights do I have if I disagree with the amount this letter says I owe or think that I should not have to repay Medicare for some other reason?
Here, the right to request a waiver and the right to appeal are explained in detail. Basically, the beneficiary can request a waiver of all or part of the repayment demand if you feel the overpayment was not their fault AND repaying Medicare would cause a financial hardship. The beneficiary can appeal the repayment demand amount if they feel they should not owe Medicare anything or if they feel the amount being demanded is incorrect. An example is, for instance, if it is based on one or more charges that should not be included with the claim-related medical charges in question.
While the appeals process allows 120 days to file an appeal, after the first 60 days (as noted in Section Three) Medicare will forward the recovery process to the Treasury department for collection. So, practically speaking, it’s wise to file any appeal within 60 days.
Section Five: What happens if I do not repay Medicare what I owe?
This section describes the accrual of interest at a 10.5% APR if the repayment amount is not paid in full within 60 days. The filing of an appeal does not eliminate the accrual of interest, so it is often best to pay the amount demanded within 60 days, and then appeal the decision. If the demand is overturned or reduced as a result of the appeal, the beneficiary will receive repayment from Medicare for the amount paid. The option of installment payments is also explained if repayment in a lump sum is not possible.
Section Six: Who should I contact if I have questions about this letter?
The beneficiary is provided with contact options for Medicare’s BCRC and instructions for what information to have available when making contact.
The last page of the letter contains an itemized list of all the charges Medicare is using to determine the final demand amount. As was necessary with the CPL, this list should be carefully reviewed to confirm that every charge is legitimately the responsibility of the primary payer and should not have been paid by Medicare. If unrelated charges still appear, they provide grounds for appealing the demand amount as outlined in Section Four.
If you are a P&C claims examiner or VP of claims and you have any questions at all about a Final Demand Letter you’ve received from Medicare, contact Flagship Services Group to discuss how we can mitigate risk and protect your financial resources. You definitely don’t want to go into this stage of recovery without being certain of 100% Medicare compliance.