Medicare does not take back every dollar it paid for your injury care: under 42 CFR 411.37 it reduces its recovery by its share of the cost of getting the settlement, usually your attorney fee and case expenses. This Medicare lien reduction formula calculator applies that regulation to your numbers, checks the $750 recovery threshold for small physical trauma settlements, and compares the result with Medicare's 25 percent Fixed Percentage Option when your settlement is $10,000 or less. You get Medicare's estimated recovery, the reduction for fees, and your net before and after other liens.
When Medicare pays medical bills that another payer is responsible for, the payment is called a conditional payment, and it has to be repaid when a settlement, judgment or award comes in. The formula below comes straight from the Medicare regulation that governs these recoveries, so it is a practical way to check a demand letter, plan a settlement distribution, or see whether a small case qualifies for a simpler option.
Use the final conditional payment amount from the MSPRP or your conditional payment letter.
The regulation says Medicare reduces its recovery to take account of the cost of procuring the judgment or settlement when procurement costs are incurred because the claim is disputed and those costs are borne by the party Medicare recovers from. CMS lists procurement costs as the attorney fees and other expenses the beneficiary paid, and it only counts costs borne by the beneficiary. When Medicare's payments are less than the settlement, 411.37(c) sets out three steps:
1. Ratio = procurement costs / total settlement
2. Medicare share of procurement costs = Medicare payments x ratio
3. Medicare recovery = Medicare payments - Medicare share of procurement costs
Put simply, Medicare pays the same percentage of the legal costs that you did. If a third of the settlement went to fees and expenses, Medicare's recovery drops by a third. When Medicare's payments are equal to or larger than the settlement, 411.37(d) uses a different rule: the recovery is the total settlement minus the total procurement costs. A third rule in 411.37(e) applies when CMS has to sue because the person who received the money opposes recovery; then the recovery is the lower of the Medicare payment or the settlement minus that person's total procurement cost, so Medicare's share of the fees is no longer deducted.
The calculator applies 411.37(c) or (d) automatically based on your inputs. Enter the attorney fee as a percentage or a dollar amount, add the case expenses you paid, and enter the conditional payment amount Medicare has identified as related to the injury.
The reduction is not automatic. CMS says that after a settlement is reported, the information sent to its recovery contractor must identify the date of settlement, the settlement amount and the amount of attorney fees and other procurement costs borne by the beneficiary. When Medicare learns of a settlement through an insurer's report, it sends a conditional payment notice with 30 calendar days to respond, and CMS states that if no response arrives in 30 days, a demand letter is issued automatically without any reduction for fees or costs. In example A below, missing that window would mean losing the $7,000 reduction.
| Case | Settlement | Fees and costs | Medicare paid | Medicare recovery |
|---|---|---|---|---|
| A. Typical case, 411.37(c) | $100,000 | $35,000 (35%) | $20,000 | $20,000 - $7,000 = $13,000 |
| B. Medicare paid more than the settlement, 411.37(d) | $100,000 | $35,000 | $150,000 | $100,000 - $35,000 = $65,000 |
| C. Small trauma case, standard formula | $8,000 | $2,800 (35%) | $6,000 | $6,000 x 0.65 = $3,900 |
| C. Same case, Fixed Percentage Option | $8,000 | not deducted | not needed | 25% x $8,000 = $2,000 |
| D. Trauma settlement under the threshold | $700 | any | any | $0 (CMS does not seek recovery) |
In case A, the fees and costs are 35 percent of the settlement, so Medicare's share of those costs is 35 percent of $20,000, or $7,000, and it recovers $13,000. The injured person keeps $100,000 - $35,000 - $13,000 = $52,000 before any other liens. In case B the formula takes everything left after fees, which is why large Medicare balances can consume a small settlement. Case C shows how the Fixed Percentage Option can beat the standard formula when medical payments are high relative to a small settlement.
In a November 18, 2025 alert, CMS said that until further notice the threshold for physical trauma-based liability insurance settlements will remain at $750, and it keeps the same $750 threshold for no-fault and workers' compensation settlements where that payer has no ongoing responsibility for medicals. For settlements at or under the threshold, entities are not required to report and CMS will not seek recovery. The threshold does not apply to settlements for alleged ingestion, implantation or exposure, so a small drug, device or toxic exposure settlement can still owe Medicare.
CMS offers a flat alternative for small physical trauma cases. You may elect the Fixed Percentage Option if the liability insurance settlement relates to an alleged physical trauma-based incident, the total settlement is $10,000 or less (raised from $5,000 effective October 2, 2023), you elect it within the required time frame before Medicare has issued a demand letter, and you have not received and do not expect other settlements for the incident. CMS's model language states that the payment is 25 percent of the total settlement amount and tells beneficiaries not to reduce the total settlement for attorney fees and costs.
There is a trade-off. In the model letter the beneficiary acknowledges giving up the right to appeal the fixed payment amount or request a waiver of recovery. The option pays off when Medicare's conditional payments are high compared with the settlement, as in case C above, and it costs you money when Medicare's payments are small. The calculator shows both numbers side by side whenever the option is available.
For somewhat larger trauma cases, CMS lets you calculate the conditional payment amount yourself and get Medicare's demand before settlement. The conditions include an injury caused by physical trauma (not exposure, ingestion or a medical implant), medical treatment completed with no further treatment expected and finished at least 90 days before you submit, a total settlement that cannot exceed $25,000, and an incident at least six months before you submit. You give up the right to appeal the amount or existence of the debt, but CMS says you keep the right to pursue a waiver of recovery.
Cases that do not fit those options can use the Final Conditional Payment process on the Medicare Secondary Payer Recovery Portal (MSPRP). CMS describes these steps: it is available for liability and workers' compensation cases, can be started only once per case by the debtor or an authorized representative, notifies the recovery contractor that the case is within 120 days of settlement, and guarantees that disputes submitted through the portal are addressed within 11 business days. You request the final amount when the case is within three business days of settlement, settle within three business days of that request, and report the settlement details within 30 calendar days. The final amount you receive is the number to enter in the calculator.
Under 42 CFR 411.24(h), a beneficiary or other party who receives a primary payment must reimburse Medicare within 60 days, and 411.24(m) allows CMS to charge interest if reimbursement is not made within the 60-day period that begins when CMS receives notice of the payment. CMS's recovery page adds that interest accrues from the date of the demand letter and is assessed for each 30-day period the debt remains unresolved after the time allowed in the letter. Interest keeps accruing while an appeal or waiver request is pending, so CMS notes you may choose to pay the demand to stop interest and receive a refund if the waiver or appeal is later granted.
Medicare's recovery is one line in the settlement statement. The attorney fee and case costs come off first, Medicare's reduced recovery comes next, and other liens (hospital liens, private health plans, Medicaid) are handled under their own rules. Enter other liens in the optional field to see an estimated net. To model every deduction together, use the net settlement calculator linked below. If the settlement also pays for future medical care in a workers' compensation case, a Medicare Set-Aside is a separate question from conditional payment recovery.
Under 42 CFR 411.37(c), when Medicare's conditional payments are less than the settlement, you divide the procurement costs (attorney fees and costs) by the total settlement, apply that ratio to Medicare's payments to get Medicare's share of procurement costs, and subtract that share from Medicare's payments. The remainder is Medicare's recovery amount.
Medicare reduces its recovery by the same percentage of the settlement that went to procurement costs. If fees and costs are 35 percent of the settlement and Medicare paid $20,000, Medicare's share of procurement costs is $7,000 and it recovers $13,000.
If Medicare's payments equal or exceed the judgment or settlement, 42 CFR 411.37(d) sets the recovery at the total settlement minus the total procurement costs. In that case the formula leaves nothing for the injured person before other liens. Medicare's demand letter explains the waiver and administrative appeal rights that apply.
CMS said on November 18, 2025 that, until further notice, it will not seek recovery on physical trauma-based liability insurance settlements of $750 or less. The threshold does not apply to settlements for alleged ingestion, implantation or exposure.
For a physical trauma-based liability settlement of $10,000 or less, a beneficiary who has not received a Medicare demand letter and expects no other settlements can elect to pay Medicare 25 percent of the total settlement, not reduced for attorney fees and costs, instead of the regular recovery process. Choosing it gives up the right to appeal the amount or request a waiver.
42 CFR 411.24(h) says a beneficiary or other party who receives a primary payment must reimburse Medicare within 60 days. CMS says interest accrues from the date of the demand letter and is assessed for each 30-day period the debt remains unresolved after the time allowed in the letter, even while an appeal or waiver request is pending.
No. Medicare's Benefits Coordination and Recovery Center issues the demand. The calculator applies the regulation formula to the numbers you enter so you can check a demand or plan a settlement, but it is an educational estimate and not legal advice.