Are You On Track To Fulfill Your Medicare Advance Payments Recoupments?

Early in 2020, the Centers for Medicare & Medicare Services or ‘CMS,’ expanded its COVID-19 Accelerated Advanced Payments (CAAP) program to include additional Medicare providers and suppliers. These advance payments are designed to provide a needed funding injection during periods of heightened demand, including national emergencies such as the COVID-19 pandemic. As the name suggests, these funds represent an advance payment against future Medicare claims. However, unlike other COVID-driven funding distributions, Medicare Advance Payments (MAP) payments are not restricted to a certain use and may be used like any other cash an entity may receive.

  • Refresh on Recoupment
  • Repayments are applied to Medicare payments owed to providers and suppliers beginning one year from the initial date the MAP was issued. These repayments continue for eighteen (18) months via a tiered recoupment rate, as follows:

  • Months from MAP Receipt Recoupment Rate
    0-11 25%
    12-17 50%
    18 (30 days) Any remaining balance to be settled in full
    Every 30 days thereafter 4% interest incurred on unpaid balance
  • Recipients may also repay their advanced payments at any time.

Monitoring Recoupment Tracking and Projection

Monitoring the estimation of future recoupments is important so that organizations can track their ability to cash flow operational costs while enduring these paybacks. These recoupments should be treated much like a loan, with a projected payback schedule that is refined based on the previous claims history. If the entity has cyclical aspects to its business model, this should be considered when determining future cash flows and the amount that will be subject to payback.

We recommend using a tracking and projection model to ensure MAP balances are reduced accurately by their recoupments. The tool should also gauge and ensure recoupment obligations are fulfilled within the provided timeline.

  • Tracking Recoupment
  • Monitoring recoupments is important for ensuring your MAP balance is reducing accurately. It may be as simple as maintaining a log of Medicare Payment receipts less recoupments deducted, and:
    • Calculating the recoupment value as a percentage of the Medicare payment (to validate the recoupment rate is appropriate per the recoupment schedule, i.e. not less than 25% or 50%); and
    • Deducting the recoupment amount from the MAP balance each period.
  • Here is an example of a simple schedule on a $2 million MAP distribution:
  • Period A
    B C D
    (=Initial balance-C)
    1 Claim Payment Payment received Recoupment amount Recoupment % MAP Balance
    Example P-1 $100,000 $75,000 $25,000 25% $1,975,000
    Example P-2 $105,000 $78,750 $26,250 25% $1,948,750
  • Estimating Fulfilment
  • While monitoring recoupments are likely to be linear and unsophisticated, approaches to projecting future recoupments to fulfilment may be more subjective. A common and logical approach may be to calculate a rolling cumulative average based on actual recoupments to estimate future recoupment amounts.
  • For example, following this approach, the seventh and upcoming recoupment may be estimated as the average of the prior six actual recoupments. Subsequently, the eighth recoupment will be estimated as the average of the prior seven actual recoupments, and so on. However, if applying this approach, the entity should keep in mind recoupment brackets (25%, 50%).
  • Estimating future recoupments will indicate whether the MAP will be fulfilled within the provided time or whether there may be an un-recouped balance. Anticipated balances may prompt additional questions such as:
    • Do we have the liquidity to repay unpaid balances in full?
    • Can we absorb penalties (4%) on unpaid balances?
    • In answering the above questions, should we make additional repayments now to avoid unpaid balances at settlement date?

MAP recoupment monitoring and projection is a simple yet effective tool to ensure timeliness and accuracy of your obligations, as well as signal potential for penalties and avoid surprises. If you would like assistance with understanding your obligations and establishing monitoring mechanisms, please contact us. We are here to help.

Authored by Anna Stevens, CPA, CHFP, and Yoram Kappel, CA.

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