How to use the fixed percentage option
Roy Franco
February 16, 2012

As of November 7, 2011, for liability insurance claims that settle for $5,000 or less, the Medicare beneficiary claimant is able to elect to pay Medicare 25% of his/her settlement rather than proceeding through the traditional recovery process. The “Fixed Percentage Option” as it is called, is an option that both the parties involved with the liability claim should carefully consider prior to electing it as it has the potential to save the parties time and money.

In order to elect the Fixed Percentage Option, the following requirements must be met:

  1. Liability Insurance (including self insurance);
  2. that settled for $5,000 or less;
  3. for a physical trauma based injury (not ingestion or exposure);
  4. the Medicare beneficiary must not have received or expect to receive any other settlements, judgments or other payments related to the incident; and
  5. the Medicare beneficiary must elect the Fixed Percentage Option prior to the issuance of the Final Demand Letter.

In other words, the Fixed Percentage Option can NOT be used when:

  1. Involves no-fault or workers compensation,
  2. Involves ingestion or exposure
  3. The settlement is greater than $5,000 or the Medicare beneficiary will be receiving other payments related to the incident,
  4. the Medicare beneficiary chooses to NOT elect the Fixed Percentage Option

If the Medicare beneficiary elects the Fixed Percentage Option, Medicare will collect 25% regardless of the conditional payment amount, even if no conditional payments have been made. For example:  a liability claim involving an unrepresented Medicare beneficiary settles for $5,000. The known conditional payments are $500. Medicare will receive 25% ($1,250) and the Medicare beneficiary receives 75% ($3,750). Assuming the conditional payment amount remains unchanged, Medicare receives $750 more than what it actually paid in relation to the liability incident.

However, using the above example, if the known conditional payments were $2,500, Medicare still receives 25% of settlement ($1,250) and the Medicare beneficiary still receives 75% ($3,750). Had the parties obtained the Medicare demand through the traditional recovery process, Medicare would have received $2,500 (50% of the settlement). (Assuming the conditional payments remained the same.)

The above examples demonstrate that the Fixed Percentage Option is a gamble: sometimes Medicare ‘wins’ and receives more money than the conditional payments, sometimes the Medicare beneficiary ‘wins’ and receives a larger portion of the settlement distribution.

The key points to remember when determining whether to pursue the Fixed Percentage Option are:

  1. Removes the time needed to pursue the traditional recovery process of receiving the Conditional Payment information followed by the Final Demand.
  2. Simple: Medicare is owed 25% of the settlement.
  3. If elected, then the Medicare beneficiary does not have the right to appeal.

To elect the Fixed Percentage Option the request, using the model language below (http://msprc.info/forms/Fixed%20Percentage%20Election%20Model%20Language.pdf ), must be mailed to:

MSPRC-Fixed Percentage

PO Box 138880

Oklahoma City, OK 73113