I've had just one medical redshirt in my seasons in HD. The game automatically took care of it, but I didn't find out he got a medical redshirt until the end of that season (presumably because the engine has to determine if he meets the qualifications). There is no option for you to decide if you want to apply the medical redshirt, it just happens. He was a good player, too, so I was very pleased to see I'd have him back the next season.