Medicaid Recoupment: What to Do When Medicaid Takes Back a Payment

A recoupment rarely arrives as a bill. More often a deposit is smaller than the trips you ran, or a letter says money will come out of your next payments. This guide covers why it happens, how long you have to fight it, and how to keep paying drivers while the money is taken.

What Medicaid recoupment means

Federal rules define an overpayment as any amount a Medicaid agency pays a provider above what is allowable for the services given. Recoupment is one way the state gets it back: any formal action by the state or its fiscal agent to recover an overpayment without advance official notice, by reducing future payments to the provider (42 CFR 433.304). Health plans and brokers do the same thing under their contracts, where it is usually called an offset.

Several words describe money moving the wrong way. They are not the same, and each has its own fix.

Term	What happens to your money	Where the rule is
Denial	The claim is never paid	The payer’s claim rules. See how to appeal a denied claim.
Recoupment	Money already paid comes out of later payments, often before any letter	42 CFR 433.304
Demand for repayment	A letter names the amount and a deadline to pay it back	State rules, such as California Welfare and Institutions Code 14172.5
Offset	A broker or plan subtracts what you owe from what it owes you	Your contract, such as section 6.D of MTM Health’s standard agreement
Payment suspension	Payments are held while a credible allegation of fraud is investigated	42 CFR 455.23. See payment suspension.
Self-reported overpayment	You find the error and send the money back	42 U.S.C. 1320a-7k(d): within 60 days after you identify it

A denial is the easiest to fix, because the money never arrived. A recoupment is harder, because the payer takes the money first and you argue afterward.

Why NEMT payments get taken back

These are the common causes, each with the rule behind it.

Cause	What it looks like	The rule behind it
A gap in the trip record	A leg with no pickup time, no driver’s printed name, or no attestation that the trip happened	New York OMIG’s ambulette audit protocol (revised July 22, 2026) disallows the claim
Miles above the route	Billed miles longer than the trip from first pickup to last drop-off	The same protocol disallows the extra miles
No covered visit	The rider never reached a Medicaid-covered appointment	Modivcare’s North Carolina agreement (version February 2021) pays only when the rider attends a covered medical service
The wrong procedure code	A code that pays more than the one the trip should have been billed under, such as a higher level of service	OMIG takes back the difference between the billed code and the correct one
Coverage changed after the ride	The rider was moved to another health plan, or back to fee-for-service, for that date	In North Carolina, the payer that paid you recoups, and you bill the new one
A duplicate claim	The same leg paid twice, or paid to two companies	States must check for duplicates before paying (42 CFR 447.45(f)), and post-payment reviews catch the rest
An excluded person	A driver or owner on the federal exclusion list	No Medicaid payment is made for services furnished by an excluded person (42 CFR 1001.1901)
An unapproved driver or van	A trip run with a driver or vehicle the broker had not credentialed	MTM Health’s standard agreement pays nothing for those trips (section 6.B)
The rider had died	A standing order kept billing after a death	OMIG disallows claims dated after the date of death
Broker penalties	Liquidated damages for trips not completed, or a penalty when a late pickup makes the rider miss the visit	MTM’s agreement lets it deduct them from any payment it owes you (section 7.B)

New York’s list is one state’s, but it shows what auditors look for on each leg. The Medicaid audit guide explains how auditors pick trips and project errors over a whole period.

Broker contracts can move fast. Under Modivcare’s North Carolina agreement (version February 2021), when a facility reports that a rider did not attend, you have 30 days from Modivcare’s written request to respond in writing. If you do not, the trip is treated as never given, you waive the right to protest, and its cost comes out of your next payment.

Who finds the overpayments

• The state’s program integrity staff review paid claims after the fact, as federal rules require (42 CFR 447.45(f)(2)).
• Recovery Audit Contractors (RACs) are paid a contingency fee only from money they recover, and must return the fee if a finding is reversed on appeal (42 CFR 455.510). A RAC may not review claims more than 3 years old without state approval, must tell you its findings within 60 calendar days, and must put a toll-free number on every letter (42 CFR 455.508). Your state must give you appeal rights (42 CFR 455.512). See Medicaid RAC audit.
• Health plans recover overpayments from their network providers. Federal rules let each state decide how much of those recoveries a plan may keep, and CMS says that choice is meant to give plans a reason to watch provider billing (CMS toolkit, November 1, 2023).
• Brokers audit trips and check attendance with facilities under their contracts.
• HHS OIG announced a new series of audits of state NEMT payments on May 28, 2026, expected to finish in fiscal year 2028. When a federal review finds an overpayment the state missed, it counts as discovered on the date CMS notifies the state in writing (42 CFR 433.316(e)). That starts the state’s clock to collect.

Why states collect fast: the one-year federal clock

Medicaid is paid partly with federal money, and the state must return the federal share of an overpayment on a schedule. Once an overpayment is discovered, the state has 1 year to recover it, or try to, before it must refund the federal share to CMS, whether or not it has collected from you (42 CFR 433.312). If the state misses that refund, it owes interest on the federal share (42 CFR 433.320).

For an overpayment not caused by fraud, discovery is the earliest of three dates (42 CFR 433.316):

1. The state first notifies you in writing and names a dollar amount.
2. You first acknowledge a specific overpaid amount in writing.
3. The state starts to recoup a specific amount without writing to you first.

Two things follow for you. Your appeal does not move the discovery date (42 CFR 433.316(i)), which is one reason many states keep collecting while you dispute. And a written admission of a specific amount starts the clock too, so agree to a number in writing only after you have checked every claim.

Fraud cases run on a different clock. An overpayment from fraud counts as discovered on the date of the state’s final written notice. If the amount is still under appeal after a year, the federal adjustment waits until 30 days after the final judgment.

How a recoupment shows up

A recoupment often shows up first on a remittance advice, the statement that comes with each payment.

• A reversed claim. The original claim repeats with negative amounts, often next to a replacement claim that pays the corrected amount. How to read remittance advice walks through one line by line.
• A deduction from the total. Money comes off after the claims are added up, so the deposit is smaller than the paid claims.
• A letter. Audits end in a written report: a draft and then a final audit report in New York and Texas, an audit report in Florida, and a statement of account status or demand for repayment in California.
• A broker statement. Brokers subtract offsets and penalties from the payment and list them on the statement.

The reason code on the line tells you what to do next. These standard claim adjustment reason codes, maintained by X12, often sit on a recouped claim:

Code	What it says	What to do
18	Exact duplicate claim or service	Check whether the leg was really billed twice. If not, show the two trips were different.
24	Charges are covered under a capitation agreement or managed care plan	Bill the rider’s health plan or broker for that date
27	Expenses incurred after coverage terminated	Check eligibility and the plan that covered the rider on the date of the ride
109	Not covered by this payer. Send the claim to the correct payer.	Find the right payer and bill it

Match every negative line to its trip with the payer’s claim number. Keep a running log of each recoupment until its balance reaches zero. A payment log with one row per trip makes this quick.

Deadlines to dispute a recoupment in five states

Deadlines are short, they count from a date the rule sets, and missing one usually makes the finding final. Your notice names the process that applies. Here is how five states handle it, as of September 2026.

How long you have to dispute

State	What you file	Deadline
New York (OMIG)	Written objections to the draft audit report, item by item, with documents	30 days from receipt, presumed 5 days after the report’s date (18 NYCRR 517.5)
New York (OMIG)	A written hearing request on the final audit report	60 days from the report’s date. OMIG says it cannot extend this (18 NYCRR 519.7).
Florida (AHCA)	A petition for an administrative hearing	21 days from receipt of the written notice, the general rule for state agency decisions unless another law sets a different limit (rule 28-106.111)
California (DHCS)	A Statement of Disputed Issues naming each issue, your position, and the amount	30 calendar days from receipt of the audit findings for non-institutional providers, meaning providers that are not licensed clinics or health facilities and do not file cost reports (22 CCR 51016 and 51022)
Texas (HHSC OIG)	An informal appeal or written response to a draft audit report	30 calendar days from receipt, or an earlier date the auditor sets (1 TAC 371.1719)
Texas (HHSC OIG)	An appeal of a final audit report	15 calendar days from receipt (1 TAC 371.1719)
Texas (HHSC OIG)	A hearing request on a final notice of overpayment, sent by certified mail	Received by OIG within 30 days after the notice is served (1 TAC 371.1615)
North Carolina	More documents after tentative audit results	At least 30 days from receipt of the notice (G.S. 108C-5(p))
North Carolina	A contested case petition at the Office of Administrative Hearings	60 days from notice, the general limit for contested cases (G.S. 150B-23(f)). A decision is due within 180 days of filing (G.S. 108C-12).

Two details catch providers out. A New York hearing can cover only the issues you raised in your objections to the draft report (18 NYCRR 517.5). And in Texas, a request for a payment plan on a final audit report must say you will not dispute those findings, so it gives up the appeal (1 TAC 371.1719).

When collection starts and how to repay

State	When collection starts	Repayment options	Interest
New York	Not sooner than 20 days after the final audit report. It continues after a hearing request, but pauses if the hearing cannot start within 90 days for reasons that are not yours (18 NYCRR 518.8).	Pay within 20 days, or sign a repayment agreement. The standard term is two years at no less than 15 percent of your prior year’s billings, with a hardship application for longer (OMIG 2026 work plan).	May apply when terms run past 90 days. After a determination, the current rate plus 2 percentage points, or the legal maximum if lower (18 NYCRR 518.4).
Florida	AHCA withholds payments during the hearing unless, within 30 days of the notice, you repay in full or agree to a plan (409.913(27))	A plan AHCA accepts. Arrangements are due within 30 days of the final order, or your enrollment is terminated (409.913(25) and (30)).	10 percent a year from the final determination (409.913(25))
California	Not until 60 days after the first statement of accountability or demand for repayment. Then an offset runs until the debt is paid, a plan is signed, or an appeal clears you (W&I Code 14172.5).	A lump sum, an offset, or a repayment agreement. Paying does not give up your right to a hearing.	The higher of 7 percent simple interest or the state investment fund rate, from 60 days after the first demand (W&I Code 14171)
Texas	After a final audit report, refund within 60 calendar days, or ask for a payment plan or appeal within 15 days. Without payment or a signed plan by day 60, OIG can hold your payments. Amounts under appeal are not recouped until the appeal is decided (1 TAC 371.1719).	A final payment plan agreement the OIG approves	Check your notice
North Carolina	A payment suspension can start on the 31st day after the overpayment becomes final, unless you have an approved payment plan (G.S. 108C-5)	Payment plans of up to 24 months, including interest and any penalty	Check your notice

Florida adds two more rules. You can contest a finding only with records made at the time of the ride that were handed over when requested (409.913(22)). And if you do not contest the findings, or you contest and lose, the state can also recover its investigative and legal costs (409.913(23)).

If your state is not listed, find the appeals section of its provider manual and your state guide.

How to dispute a recoupment, step by step

1. Read who sent it and what it is. A draft audit report, a final notice, a remittance adjustment, and a broker offset each follow different rules.
2. Calendar the deadline the day it arrives. Count from the date the rule uses. New York presumes you received a draft report 5 days after its date, and Texas counts a hearing request only when OIG receives it.
3. Get the claim list. Ask for every claim number, date of service, and amount. If the total was projected from a sample, ask for the sample and the full list of claims it was drawn from.
4. Pull the full record for each trip. Both legs of the trip log, signatures, the authorization, proof of the appointment, odometer or GPS miles, and the driver’s and van’s credentials for that date. See NEMT trip documentation.
5. Sort each claim into three piles. Wrong (you can prove it), owed (you agree), and wrong payer (the rider’s coverage changed, so someone else pays).
6. Check the math. Rates, units, and miles on each line, whether each duplicate really is one, and eligibility on the date of the ride.
7. Never change an old record. Send what you have, and say plainly what is missing.
8. File the dispute in writing, claim by claim. Name the claim, the finding, why it is wrong, and the document that proves it. Send it the way the notice says, and keep proof of delivery.
9. Rebill the right payer at once for trips taken back because coverage changed, before that payer’s timely filing limit runs out.
10. Settle what you owe. Pay, or ask for a payment plan, before collection starts.
11. Fix the cause so the same error does not repeat in months the review did not cover.

Get a health care attorney when the amount is large, when it was projected from a sample, or when the letter mentions fraud.

When a broker or health plan takes the money back

If you work through a broker, the broker takes money back under your contract. MTM Health’s standard agreement, in the January 1, 2023 version Pennsylvania posts, shows the usual terms:

• Recovery of any overpayment may be made by offsets against future payments (section 6.D).
• MTM may pass on to you any sum its client or a government agency assesses against MTM for your performance (section 7.A).
• Liquidated damages may be withheld from any payment MTM owes you (section 7.B).
• If you give notice and do not run the trips assigned during your 30-day notice period, MTM can deduct what it cost to reassign them (section 14.B).
• After a termination notice, unpaid claims are held until MTM audits your records, and MTM can still recoup money paid in error (section 14.E).

Brokers also set their own dispute windows. MTM Health’s Virginia handbook (approved August 10, 2026) gives providers 365 calendar days to appeal a denied claim in its online claims portal. It also says to contact your field monitor right away when a claim goes in by mistake, so MTM can void it.

When a health plan recoups because a rider’s coverage changed, the fix is usually to bill the new payer. North Carolina’s August 10, 2026 bulletin gives providers 180 days from the plan’s recoupment date to send the claim to NC Medicaid Direct, with proof of the recoupment and proof the first claim was filed on time. As of September 2026, the state’s provider fact sheet says plans have two years after paying a claim to recoup it for a coverage change, unless fraud or an overpayment is suspected. It also says NEMT approvals do not move back to NC Medicaid Direct on their own and must be requested again.

Ask the broker for the trip ID behind every offset line. Then dispute it the way you would a state finding: in writing, trip by trip, before the contract deadline. See how to bill NEMT brokers and NEMT broker audits.

Recoupment, payment suspension, or investigation

A recoupment takes back money found to be overpaid. A payment suspension holds all or part of your payments while the state investigates a credible allegation of fraud, and it can start without warning (42 CFR 455.23).

The state must send notice within 5 days of suspending. Law enforcement can ask for a delay, but never for more than 90 days in all. The notice must give the general allegations, say the suspension is temporary, tell you that you may submit written evidence, and cite the state’s appeals process.

Texas calls this a payment hold. There, a request for an expedited hearing must reach the OIG within 10 days after the notice is served (1 TAC 371.1615). A suspension notice, a subpoena, or a letter from a Medicaid Fraud Control Unit calls for a health care attorney before anyone at your company gives an interview. See NEMT fraud for what investigators look for.

How to plan cash around a recoupment

A recoupment hurts because it lands on top of your normal costs. Drivers, fuel, and insurance still need paying while your deposits shrink, so size the hit before it starts.

Weeks of reduced deposits = amount owed ÷ (average weekly payment × share withheld)

Here is a hypothetical example. A state finds a $14,400 overpayment, and your payments from that payer average $4,800 a week.

How it is collected	What happens to your deposits
Every payment offset in full	No deposit from that payer for 3 weeks
Half of each payment offset	$2,400 a week for 6 weeks
A 24-month payment plan, the longest North Carolina’s statute allows	$600 a month, plus interest
One lump sum	$14,400 out of your reserve at once

Interest adds up on a long plan. At Florida’s 10 percent a year, a $14,400 balance costs up to $1,440 in the first year.

• Keep a reserve. Hold enough cash to cover payroll through a full offset. See NEMT cash flow and the cash reserve calculator.
• Ask for a plan before collection starts. Florida gives you 30 days from the notice to repay or agree to a plan and avoid the withholding. California waits 60 days after its first demand.
• Keep running and billing trips. The debt stays even if your payments stop. An unpaid balance can also follow you: New York can withhold from affiliates, and North Carolina can suspend payments to every provider sharing your EIN.
• Rebill the right payer for coverage-change recoupments, which turns a loss into a delay.
• Spread your payers. A recoupment from one broker hurts less when other brokers, facilities, and private riders pay you each week. See NEMT payer mix.

When you find the overpayment yourself

If you find you were paid for a trip you did not give, or paid twice, report and return the money within 60 days after you identify it, and tell the payer in writing why (42 U.S.C. 1320a-7k(d)). Money kept past that deadline becomes an obligation under the False Claims Act. Health plans must give network providers a way to do this within 60 calendar days (42 CFR 438.608(d)(2)).

Use the payer’s process: void or adjust the claim, or send a refund with an explanation. New York requires overpayments to be reported, returned, and explained through OMIG’s Self-Disclosure Program. OMIG credits voids and adjustments sent before a final audit report is resolved. Texas requires providers to report inappropriate payments to its Inspector General when they find them (TMPPM, September 2026). See the 60-day overpayment rule.

How to prevent the next recoupment

• Check eligibility and the rider’s plan for the date of every ride, not only when a standing order starts. See eligibility verification.
• Answer attendance questions from brokers in writing, before the contract deadline.
• Complete both legs of every trip record at the time of the ride. The free trip log template has every field.
• Bill the miles of the route, from pickup to drop-off.
• Screen owners, drivers, and staff against the OIG exclusion list before hiring and every month.
• Track credential dates for every driver and van, and keep anyone expired off broker trips.
• End standing orders as soon as you learn a rider has died or moved.
• Search for duplicates before you bill: the same rider, date, and leg.
• Void claims billed in error right away, through the payer’s process.
• Keep records for the longest period any payer requires. New York audits six years back from the date of service or billing, whichever is later (18 NYCRR 517.3). See NEMT record retention.