DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, Maryland   21244-1850 
 
Center for Medicaid, CHIP and Survey & Certification 
 
SMDL# 10-014 
ACA# 5 
 
July 13, 2010 
 
Re: Extended Period for Collection of Provider 
Overpayments 
 
Dear State Medicaid Director: 
 
This letter is one of a series intended to provide guidance on the implementation of the Patient 
Protection and Affordable Care; (Pub. L. No. 111-148), as amended by the Health Care and 
Education Reconciliation Act of 2010; (Pub. L. No. 111-152), together called the Affordable 
Care Act (ACA).  Specifically, this letter provides initial guidance on Section 6506 of the 
Affordable Care Act, which is entitled, Overpayments.  This section was effective March 23, 
2010, the date of enactment, and provides an extension of the period for collection of 
overpayments.  For overpayments identified prior to the effective date, the previous rules on 
discovery of overpayments will be in effect. 
 
Under section 6506 of the Affordable Care Act, States now have up to one year from the date of 
discovery of an overpayment for Medicaid services to recover, or to attempt to recover, such 
overpayment before making an adjustment to refund the Federal share of the overpayment.  
Except in the case of overpayments resulting from fraud (discussed below), the adjustment to 
refund the Federal share must be made no later than the deadline for filing the quarterly 
expenditure report (Form CMS-64) for the quarter in which the one-year period ends, regardless 
of whether the State recovers the overpayment.  Previously, States were allowed up to 60 days 
from the date of discovery of an overpayment to recover such overpayment before making the 
adjustment to the Federal share. 
 
This change to Federal law does not affect the treatment of Federal credit for amounts actually 
collected prior to the expiration of the one-year time limit.  Such amounts remain due on the 
CMS-64 form filed for the quarter in which the collection is actually made.  As required under 
section 1903(d)(3) of the Social Security Act (the Act), OMB Circular A-87 Cost Principles for 
State, Local and Indian Tribal Governments, Attachment A, Section C, and Federal regulations at 
45 CFR section 92.21(f), reported medical assistance expenditures must be net of all applicable 
credits.  Applicable credits refer to those receipts or reduction of expenditure-type transactions 
that offset or reduce expense items allocable to Federal awards, including adjustments of 
overpayments.  To the extent that adjustments of overpayments received by the State relate to 
allowable costs, they must be credited to the Federal award in the quarter in which the collection 
is made.   
Page 2  State Medicaid Director 
 
Section 6506(a)(1)(B) of the Affordable Care Act amends the Act by adding section 
1903(d)(2)(D)(ii) pertaining to overpayments made due to fraud, which is defined in Federal 
regulations at 42 CFR sections 433.304 and 455.2.  Specifically, when a State has been unable to 
recover overpayments due to fraud within one year of discovery because of an ongoing judicial 
or administrative process, the State will have until 30 days after the conclusion of judicial or 
administrative processes to recover such overpayments before making the adjustment to the 
Federal share.  Previously, there had been no specific exception for fraud recoveries in the 
statute, although Federal regulations at 42 CFR section 433.316 provide that the date of 
discovery of an overpayment resulting from fraud or abuse is determined differently than for 
other types of overpayments.  As a result of changes under the Affordable Care Act, the 
discovery date for overpayments due to fraud begins on the date of the final written notice of the 
States overpayment determination to the provider. 
 
Section 6402(a) of the Affordable Care Act also addresses overpayments.  This provision, which 
amends the Act by creating a new section 1128J, has no impact on a States obligations under 
section 6506 of the Affordable Care Act to return the Federal share.  Instead, the new section 
1128J(d)(2) of the Act makes explicit that overpayments must be reported and returned to States 
within 60 days of identification or by the date any corresponding cost report is due, whichever is 
later.  This provision applies to providers of services, suppliers, Medicaid managed care 
organizations, Medicare Advantage organizations, and Medicare Prescription Drug Program 
sponsors.  It does not apply to beneficiaries. 
 
To the extent there is a conflict with existing regulatory language, the provisions of section 
6506(a) of the Affordable Care Act and this guidance supersede the Federal regulations at 42 
CFR Part 433 subpart F.  We will issue guidance regarding additional aspects of section 6506 in 
the future, including the requirements of section 6506(b) of the Affordable Care Act to assure the 
correction of identified claims overpayments with new Medicaid Management Information 
System edits, audits, and other appropriate corrective action. 
 
We look forward to our continuing work together as we implement this important legislation.  If 
you have questions regarding this information, please contact Mr. Ron Perkins, Director of the 
Division of Financial Operations, Ronald.Perkins@cms.hhs.gov, or at 410-786-8669. 
 
Sincerely, 
 
/s/ 
 
Cindy Mann 
Director  Page 3  State Medicaid Director 
 
cc: 
 
CMS Regional Administrators 
 
CMS Associate Regional Administrators 
Division of Medicaid and Childrens Health 
 
Ann C. Kohler 
NASMD Executive Director 
American Public Human Services Association 
 
Joy Wilson 
Director, Health Committee 
National Conference of State Legislatures 
 
Matt Salo 
Director of Health Legislation 
National Governors Association 
 
Debra Miller 
Director for Health Policy 
Council of State Governments 
 
Christine Evans, M.P.H. 
Director, Government Relations 
Association of State and Territorial Health Officials 
 
Alan R. Weil, J.D., M.P.P. 
Executive Director 
National Academy for State Health Policy