American Taxpayer Relief Act of 2012 Authorizes Extension of Recovery Period for Medicare Overpayments

Buried within the American Taxpayer Relief Act of 2012 (ATRA; signed January 2, 2013, to avoid the “fiscal cliff”) is a provision authorizing the Centers for Medicare and Medicaid Services (CMS) to increase by up to two years the length of time within which its contractors may recoup Medicare overpayments. See American Taxpayer Relief Act of 2012, Pub. L. No. 112-240, § 638, 126 Stat. 2313 (2013).

Prior to ATRA, Section 1870 of the Social Security Act (42 U.S.C. § 1395gg) contained an awkwardly worded provision that permitted Medicare to recoup overpayments for up to three years following the calendar year in which the overpayment occurred, unless CMS decides upon a shorter time period. CMS implemented this provision by authorizing its contractors to recoup overpayments occurring within four years absent fraud or similar fault. See 42 C.F.R. § 405.980(b); Medicare Financial Management Manual, Chapter 3, §§ 70, 80.

ATRA amended Section 1870 of the Social Security Act to permit Medicare to recoup overpayments for up to five years (instead of three years) following the calendar year in which the overpayment occurred. It appears that this statutory change is not self-executing, however, and that CMS would need also to revise 42 C.F.R. § 405.980(b) and Chapter 3 of the Medicare Financial Management Manual in order to effect a change in Medicare administration.

For its part, CMS has previously suggested that the time frame within which Medicare may recoup overpayments is not limited by Section 1870. In February 2012, CMS proposed extending the recoupment period to 10 years, asserting that the extension was justified to correspond to the maximum potential length of the False Claims Act statute of limitations. 77 Fed. Reg. 9179, 9184 (Feb. 16, 2012). That proposed regulation has not been finalized and was subject to widespread criticism that CMS was seeking to extend the recoupment period beyond what was authorized by law.

Health care providers that have identified Medicare overpayments should carefully consider whether and how ATRA may affect their investigative and remedial plans. Under the Affordable Care Act, the failure to report and return Medicare overpayments within 60 days of identifying the overpayment can trigger False Claims Act liability as well as form the basis for exclusion from federal health programs. Many providers consider, among other facts and circumstances, the period of time for recoupment in determining whether a past payment is an overpayment that must be reported and returned, including when past potential Stark Law violations are investigated. The recent legislative change in the potential recoupment period should now be taken into account when making these decisions.