CMS Pub. 100-06, ch. 3, § 70.3

Once the contractor has concluded that an overpayment exists (that is, a finding that payment cannot be

made under the waiver of liability provisions) it makes a §1870(b) determination regarding whether the

provider/beneficiary was without fault with respect to the overpayment. Once this determination has

been made, then waiver of recovery of the overpayment from the provider/beneficiary should be

considered per §1870(c).

The contractors make a §1870 determination for all assigned and non-assigned claims, however, §1870

(b) or (c) of the Act, does not apply to the provider on non-assigned post-payment §1862(a)(1) denied

claims. However, it can apply to the beneficiary meaning that the beneficiary was not at fault in causing

the overpayment. The provider may have a refund obligation to the beneficiary, but the provider did not

receive an overpayment from the Medicare program.

Section 1870 is not limited to claims denied under §1862(a)(1) of the Act for not being reasonable and

necessary. Section 1870 is the framework for determining who is liable for the overpayment and

whether the overpayment recovery can be waived. For providers taking assignment, waiving recovery of

an overpayment is appropriate where the provider was without fault with respect to causing the

overpayment. Where recovery from the provider is waived per 1870(c), the overpayment becomes an

overpayment to the beneficiary. However, if the provider was “at fault” in causing the overpayment,

recovery of the overpayment from the provider must proceed. Section 1870 waiver of recovery

determinations also must be made where the provider mistakenly receives direct payment on an

unassigned claim and this is the basis for the overpayment.

Examples of §1870 determinations:

A. Overpaid Provider or Physician Not Liable Because It Was Without Fault (§1870(b) of the

Act.)

If a provider was without fault with respect to an overpayment it received (or is deemed without fault, in

the absence of evidence to the contrary, because the overpayment was discovered subsequent to the fifth

calendar year after the year of payment) it is not liable for the overpayment; therefore, it is not

responsible for refunding the amount involved. The contractor makes these determinations.

B. Beneficiary Liable for Overpayments to Provider That Was Without Fault With Respect to the

Overpayment (§§1870(a) and (b) of the Act)

If an overpaid provider was without fault, or is deemed without fault and therefore not liable for refund,

liability shifts to the beneficiary. If the overpayment involves services that are not reasonable and

necessary, you should have made a §1879 determination regarding the beneficiary’s liability for the

overpayment. If the overpayment does not involve medically unnecessary services, then limitation on

liability does not apply.

C. Contractor Waiver of Recovery from Beneficiary (§1870(c) of the Act)

If a beneficiary is liable for an incorrect payment, recovery may be waived if the beneficiary was

without fault with respect to the overpayment and recovery would defeat the purposes of title II or title

XVIII of the Social Security Act (i.e., cause financial hardship) or would be against equity and good

conscience. (Where an overpayment is discovered subsequent to the fifth calendar year after the year the

payment was made, recovery is deemed against equity and good conscience if the beneficiary was

without fault.)

If §1879 of the Act is applicable, then §1879 determination is made first since an overpayment does not

exist if payment can be made under §1879 because there was lack of knowledge by both the beneficiary

and the provider.