Section 405.377 - Withholding Medicare payments to recover Medicaid overpayments(a)Basis and purpose. This section implements section 1885 of the Act, which provides for withholding Medicare payments to certain Medicaid providers that have not arranged to repay Medicaid overpayments as determined by the Medicaid State agency or have failed to provide information necessary to determine the amount (if any) of overpayments.(b)When withholding may be used. CMS may withhold Medicare payment to offset Medicaid overpayments that a Medicaid agency has been unable to collect if- (1) The Medicaid agency has followed the procedure specified in § 447.31 of this chapter; and(2) The institution or person is one described in paragraph (c) of this section and either- (i) Has not made arrangements satisfactory to the Medicaid agency to repay the overpayment; or(ii) Has not provided information to the Medicaid agency necessary to enable the agency to determine the existence or amount of Medicaid overpayment.(c)Institutions or persons affected. Withholding under paragraph (b) of this section may be made with respect to any of the following entities that has or had in effect an agreement with a Medicaid agency to furnish services under an approved Medicaid State plan:(1) An institutional provider that has in effect an agreement under section 1866 of the Act. (Part 489 (Provider and Supplier Agreements) implements section 1866 of the Act.)(2) A physician or supplier that has accepted payment on the basis of an assignment under section 1842(b)(3)(B)(ii) of the Act. (Section 424.55 sets forth the conditions a supplier agrees to in accepting assignment.)(d)Amount to be withheld.(1) CMS contacts the appropriate Medicare contractor to determine the amount of Medicare payment to which the institution or person is entitled.(2) CMS may require the Medicare contractor to withhold Medicare payments to the institution or person by the lesser of the following amounts: (i) The amount of the Medicare payments to which the institution or person would otherwise be entitled.(ii) The total Medicaid overpayment to the institution or person.(e)Notice of withholding. If CMS intends to withhold payments under this section, it notifies by certified mail, return receipt requested, the institution or person and the appropriate Medicare contractor of the intention to withhold Medicare payments and follows the procedure in § 405.374 . The notice includes- (1) Identification of the institution or person; and(2) The amount of Medicaid overpayment to be withheld from payments to which the institution or person would otherwise be entitled under Medicare.(f)Termination of withholding. CMS terminates the withholding if- (1) The Medicaid overpayment is completely recovered;(2) The institution or person enters into an agreement satisfactory to the Medicaid agency to repay the overpayment; or(3) The Medicaid agency determines that there is no overpayment based on newly acquired evidence or a subsequent audit.(g)Disposition of funds withheld. CMS releases amounts withheld under this section to the Medicaid agency to be applied against the Medicaid overpayment made by the State agency.61 FR 63747, Dec. 2, 1996