Using a Loan for Repaying the Overpayment

When Medicare sends a letter notifying you of an overpayment the letter is relatively clear about the timeline you have to file the appeal. At the redetermination level, that appeal from the initial denial, you have 120 days to submit a request for redetermination.

Effectively you have four months. There is a presumption you receive the notice five days after it was sent. But I’ve had clients receive the letter weeks or even months after it was dated.  Make sure that you both keep the envelope in which the letter was sent with the postmark and stamp the letter with the date it was received if the letter arrives more than five days after it was sent. Then you get 120 days from the actual receipt date.    

While you have 120 days to appeal, if you wait more than 30 days to send the appeal, Medicare will begin recouping the money, taking it from your payments. During the first two levels of a Medicare appeal, up until you get a decision from the Qualified Independent Contractor or QIC, the recoupment is paused if you appeal within 30 days of getting the decision, but under the very weird rules, if you get to the 31^st day, recoupment starts. 

It can be very difficult to complete an appeal in a month. Historically, there was a great strategy to address this problem. If you sent an appeal letter within a month noting that you were still gathering information and would be supplementing the appeal, the Medicare Administrative Contractors would accept that and delay recoupment.  

But recently we’ve had situations where the contractor has asserted that if you haven’t completed your appeal, they are required to begin recoupment. I think they’re wrong about this, and you can try going to the regional office, but this presents a material challenge if the overpayment is large enough to threaten the existence of the organization. Then may need to get your appeal in within 30 days.

There is a second hidden consideration. The interest rate you will pay on the outstanding balance is ridiculously high, and interest starts to accrue if you don’t pay by day 30. 

When the overpayment is large enough to present an existential threat, you certainly want to delay that recoupment as much as you can. But many overpayments don’t pose the risk of economic calamity.

In those cases you might be better off paying immediately. The interest rate charged on the outstanding balance varies over time; it’s often north of 10 percent. Basically, the interest rate is much closer to a credit card rate than what you could get borrowing from a bank.

Therefore, if it’s at all possible for you to pay the overpayment within 30 days it’s an economically sound decision, even if you have to borrow money to do it. If you prevail, the government will pay you interest at the same high rate, which can actually make your overpayment into a pretty good investment.  

Repaying the overpayment and then winning is almost a form of legal arbitrage.