Medicare Charges 11.875% on Overpayments Not Repaid in 30 Days. An Appeal Does Not Stop the Clock.

On October 15, CMS issued Change Request 14676. It tells Medicare contractors to charge 11.875% interest on overpayments and underpayments from October 21, 2026, for the first quarter of fiscal year 2027. The rate is the same as last quarter.

Under 42 CFR 405.378, Medicare charges the higher of two rates: the Treasury's current value of funds rate, which is 1% for 2026, or the private consumer rate the Treasury sets each quarter. The consumer rate is the higher one, so 11.875% applies to every Medicare overpayment debt that becomes delinquent.

When the interest starts

When a Medicare Administrative Contractor (MAC) finds an overpayment of $25 or more, it sends a demand letter. CMS's overpayment fact sheet sets out what happens next:

• Day 15: the last day to send a rebuttal. A rebuttal is not an appeal and does not stop recoupment.
• Day 30: the last day to pay in full without interest.
• Day 31: interest starts, counted from the date of the demand letter, for every 30-day period until the debt is paid.
• Day 41: for Part B, the MAC starts taking the money from your future payments, unless a valid redetermination request arrived by day 30 or another exception applies.

Every payment or recoupment is applied to interest first and only then to the amount owed. A practice paying slowly pays the interest before it reduces the debt.

An appeal stops recoupment, not interest

Many practices assume that filing a redetermination freezes the debt. It does not. A timely appeal can stop the MAC from recouping while the first two appeal levels are decided. CMS's fact sheet says interest still begins by day 31 whether or not you have appealed, and the regulation says interest keeps accruing through administrative and judicial appeals.

If the practice wins, the overpayment and the interest are adjusted. If it loses, the interest from the date of the demand letter is owed on top of the original amount. At 11.875%, a disputed $8,000 overpayment adds about $78 in simple interest for each 30-day period. Six months of appeals add about $470.

Overpayments you find yourself

The demand letter is not the only route. Under 42 CFR 401.305, a practice that identifies an overpayment must report and return it within 60 days. That deadline can be suspended for up to 180 days while the practice runs a timely, good-faith investigation of related claims. The rule reaches back six years.

A self-reported overpayment, returned through the MAC's voluntary refund or claim adjustment process, does not go through the demand-letter clock. Overpayments that are known and kept past the deadline can carry far more risk than interest. Credit balances on Medicare patient accounts are the usual place to find them.

A check to run this month

This is general information, not legal advice. A practice can start here:

• List every open Medicare demand letter with its date. Mark day 15, day 30 and day 40 for each one.
• For each letter, decide by day 30: pay, request immediate recoupment, appeal, or ask for an extended repayment schedule. CMS's fact sheet says a written request for immediate recoupment is generally treated as a voluntary repayment and is not subject to interest under Section 935.
• If you appeal, put the expected interest next to the amount in dispute. A small, weak appeal can cost more than it saves.
• If the amount is too large to repay in 30 days, follow the extended repayment schedule instructions in the demand letter before recoupment starts.
• Read your remittance advice each week for recoupment lines, and match each one to a demand letter so nothing is taken twice or left open.
• Run a Medicare credit balance report every month. Return anything that is a true overpayment within 60 days, and keep a note of when it was found.
• Watch for older claims being rechecked. CMS has announced a review of nursing home visits billed with place of service 32 in 2023 and 2024, which may bring demand letters in batches.

The interest rate is reset every quarter. The next notice is due in January.

Interest is a cost you can choose

Most overpayment interest is paid by practices that let a demand letter sit, or that appealed without weighing the cost of losing. Thirty days is enough time to decide, if someone owns each letter from the day it arrives. If you want a second view of your open Medicare balances, a revenue review is a place to start.