---
kind: "section"
citation: "42 U.S.C. § 1396m"
title: "42"
title_heading: "The Public Health and Welfare"
number: "1396m"
heading: "Withholding of Federal share of payments for certain medicare providers"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/42/1396m"
units:
  - "Chapter 7 — Social Security"
  - "Subchapter XIX — Grants to States for Medical Assistance Programs"
---

# §1396m. Withholding of Federal share of payments for certain medicare providers

- (a) **Adjustment of Federal matching payments—** The [Secretary](/usc/42/1301.md?p=a-6) may adjust, in accordance with this section, the Federal matching payment to a [State](/usc/42/619.md?p=5) with respect to expenditures for [medical assistance](/usc/42/1396d.md?p=a) for care or services furnished in any quarter by—
  - (1) an institution (A) which has or previously had in effect an agreement with the [Secretary](/usc/42/1301.md?p=a-6) under [section 1395cc of this title](/usc/42/1395cc.md); and (B)(i) from which the [Secretary](/usc/42/1301.md?p=a-6) has been unable to recover overpayments made under subchapter XVIII, or (ii) from which the [Secretary](/usc/42/1301.md?p=a-6) has been unable to collect the information necessary to enable him to determine the amount (if any) of the overpayments made to such institution under subchapter XVIII; and
  - (2) any [person](/usc/42/1301.md?p=a-3) (A) who (i) has previously accepted payment on the basis of an assignment under [section 1395u(b)(3)(B)(ii) of this title](/usc/42/1395u.md?p=b-3-B-ii), and (ii) during the annual period immediately preceding such quarter submitted no claims for payment under subchapter XVIII, or submitted claims for payment under subchapter XVIII which aggregated less than the amount of overpayments made to him, and (B)(i) from whom the [Secretary](/usc/42/1301.md?p=a-6) has been unable to recover overpayments received in [violation](/usc/42/2000e–16a.md?p=c) of the terms of such assignment, or (ii) from whom the [Secretary](/usc/42/1301.md?p=a-6) has been unable to collect the information necessary to enable him to determine the amount (if any) of the overpayments made to such [person](/usc/42/1301.md?p=a-3) under subchapter XVIII.
- (b) **Reductions in payments to and by States—** The [Secretary](/usc/42/1301.md?p=a-6) may (subject to the remaining provisions of this section) reduce payment to a [State](/usc/42/619.md?p=5) under this subchapter for any quarter by an amount equal to the lesser of the Federal matching share of payments to any institution or [person](/usc/42/1301.md?p=a-3) specified in [subsection (a)](#a), or the total overpayments to such institution or [person](/usc/42/1301.md?p=a-3) under subchapter XVIII, and may require the [State](/usc/42/619.md?p=5) to reduce its payment to such institution or [person](/usc/42/1301.md?p=a-3) by such amount.
- (c) **Notice—** The [Secretary](/usc/42/1301.md?p=a-6) shall not make any adjustment in the payment to a [State](/usc/42/619.md?p=5), nor require any adjustment in the payment to an institution or [person](/usc/42/1301.md?p=a-3), pursuant to [subsection (b)](#b) until after he has provided adequate notice (which shall be not less than 60 days) to the [State agency](/usc/42/629a.md?p=a-3) and the institution or [person](/usc/42/1301.md?p=a-3).
- (d) **Regulations—** The [Secretary](/usc/42/1301.md?p=a-6) shall by regulation provide procedures for implementation of this section, which procedures shall (1) determine the amount of the Federal payment to which the institution or [person](/usc/42/1301.md?p=a-3) would otherwise be entitled under this section which shall be treated as a setoff against overpayments under subchapter XVIII, and (2) assure the restoration to the institution or [person](/usc/42/1301.md?p=a-3) of amounts withheld under this section which are ultimately determined to be in excess of overpayments under subchapter XVIII and to which the institution or [person](/usc/42/1301.md?p=a-3) would otherwise be entitled under this subchapter.
- (e) **Restoration to trust funds of recovered amounts—** The [Secretary](/usc/42/1301.md?p=a-6) shall restore to the trust funds established under sections [1395i](/usc/42/1395i.md) and [1395t](/usc/42/1395t.md) of this title, as appropriate, amounts recovered under this section as setoffs against overpayments under subchapter XVIII.
- (f) **Liability of States for withheld payments—** Notwithstanding any other provision of this subchapter, an institution or [person](/usc/42/1301.md?p=a-3) shall not be entitled to recover from any [State](/usc/42/619.md?p=5) any amount in payment for [medical care](/usc/42/1301.md?p=a-7) and services under this subchapter which is withheld by the [State agency](/usc/42/629a.md?p=a-3) pursuant to an order by the [Secretary](/usc/42/1301.md?p=a-6) under [subsection (b)](#b).

## Source credit

(Aug. 14, 1935, ch. 531, title XIX, § 1914, as added Pub. L. 96–499, title IX, § 905(d), Dec. 5, 1980, 94 Stat. 2618.)