Medicare, Medicaid and VA Liens: Reimbursing the Government From Your Injury Settlement

Government medical liens are legally deducted from your injury settlement before you see any money. See how to reduce your obligations.

Medical treatment for injuries can’t wait. Most accident victims rely on health insurance to cover medical costs until their personal injury case is resolved.

Health insurance providers, including Medicare, Medicaid, or the Veterans Administration, have a legal right of subrogation. This means they are entitled to be reimbursed for the money they paid on your behalf.

A health insurance provider can protect their rights by placing a medical lien against your injury settlement.

Government liens are called “super liens” because of their legal priority over all other liens. It’s important to understand how government liens work, and what you can do to keep more of your injury compensation.

Medicare Liens – Conditional Payments

Medicare is the United States health insurance program for people age 65 or older. Some people younger than age 65 can qualify for Medicare, such as those with disabilities or permanent kidney failure.

Technically, Medicare will not cover medical services provided to a beneficiary that should be covered by another type of insurance, such as auto insurance or workers’ compensation.

Federal law states:

“Payment under this title may not be made … with respect to any item or service to the extent that payment has been made or can reasonably be expected to be made under a workmen’s compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance.”

When Medicare covers medical treatment for injuries caused by someone else, federal law provides a right to subrogation to recover your treatment expenses.

Part of the Federal Code requires this:

“The United States shall be subrogated … to any right under this subsection of an individual or any other entity to payment with respect to such item or service under a primary plan… to any right under this subsection of an individual or any other entity to payment with respect to such item or service under a primary plan.”

Medicare considers coverage provided to accident victims as conditional payments, meaning they are advancing the cost of care on the condition that the costs paid on your behalf will be repaid.

Conditional Payment Notification

The Benefits Coordination & Recovery Center (BCRC) is responsible for recovering conditional Medicare payments when there is a settlement, judgment, award, or other payment made to the Medicare beneficiary.

The BCRC will send a Conditional Payment Letter (CPL) that lists the services related to your injury claim and the total conditional payment amount.

Medicare liens are so strong that federal law requires everyone involved in a settlement, including your attorney and the at-fault party’s insurance company, to comply. Any settlement or jury award must be reported to Medicare within 60 days and their valid lien amount must be paid.

Medicaid Health Coverage Liens

Medicaid benefits provide health coverage to millions of Americans. Low-income adults, children, pregnant women, elderly adults, and people with disabilities typically meet Medicaid eligibility requirements. Medicaid is administered by states, according to federal requirements. The program is funded jointly by states and the federal government.

Federal and state laws prohibit Medicaid payment for medical services that should be covered by a third party. Under Federal Coordination of Benefits rules, settlements from an insurance company count as liabilities of a third party.

Third-party insurers include:

  • Automobile insurance policies
  • Business liability carriers
  • Homeowners insurance
  • Malpractice insurance providers

If Medicaid does pay for your medical care after a workplace accident, motor vehicle crash, or any other accident caused by a negligent party, you must reimburse Medicaid out of your settlement proceeds.

A person who suffers severe injuries in an accident may need urgent medical assistance. As a Medicaid beneficiary, they will have coverage for hospital and treatment bills as they recover. If the injuries caused are disabling, they may need nursing home care or some other type of long-term care facility.

Medicaid Rules Vary by State

Each state has specific Medicaid rules and requirements regarding injury settlements. For example:

In West Virginia, injury settlement agreements must be reported, and may require pre-approval: 

“(1) A recipient … shall notify [Medicaid] of a settlement with a third-party and retain in escrow an amount equal to the amount of the subrogation lien … The notification shall include the amount of the settlement being allocated for past medical expenses paid for by the Medicaid program. Within 30 days of the receipt of any such notice, [Medicaid] shall notify the recipient of its consent or rejection of the proposed allocation. If [Medicaid] consents, the recipient or his or her legal representation shall issue payment out of the settlement proceeds… within 30 days of consent to the proposed allocation.

(2) If the total amount of the settlement is less than the [Medicaid] subrogation lien, then the settling parties shall obtain [Medicaid] consent to the settlement before finalizing the settlement. [Medicaid] shall advise the parties within 30 days and provide a detailed itemization of all past medical expenses paid … on behalf of the recipient for which [Medicaid] seeks reimbursement out of the settlement proceeds.”

California allows your legal fees to be paid before your Medi-Cal lien: 

In the event of a settlement, judgment, or award in a suit or claim against a third party or carrier:

(a) If the action or claim is prosecuted by the beneficiary alone, the court or agency shall first order paid from any settlement, judgment, or award the reasonable litigation expenses incurred in preparation and prosecution of the action or claim, together with reasonable attorney’s fees, when an attorney has been retained. After payment of these expenses and attorney’s fees the court or agency shall … allow as a first lien against the amount of the settlement, judgment, or award the amount that [Medi-Cal] is entitled to recover as satisfaction of the [Medi-Cal] lien. 

Medicaid Estate Recovery

In certain situations, Medicaid liens can fall to your estate when you die. Fatal injury cases or wrongful death claims take time to settle. It’s important for the surviving spouse or family members to work closely with the attorney for the estate.

Under estate recovery rules, Medicaid has the right to recover from the estate of the decedent before any money is distributed to heirs. Your injury claim may still be pending at the time of death.

Veterans Administration Benefit Liens

If you were in active military service and were separated under any condition other than dishonorable, you may qualify for VA health care benefits.

Eligible veterans receive the Department of Veterans Affairs (VA’s) comprehensive Medical Benefits Package which includes preventive, primary and specialty care, diagnostic, inpatient and outpatient care services. Veterans may receive additional benefits, such as dental care depending on their unique qualifications.

VA Subrogation Rights

If you received the Veterans Administration benefits in connection with injuries caused by someone else’s negligence, then the at-fault party is liable for the cost of your treatment. The VA has a legal right to put a lien on any settlement or court award you get from the at-fault party.

Federal law requiring subrogation for VA benefits states, in part:

“[T]he United States has the right to recover or collect from a third party the reasonable charges of care or services so furnished or paid for to the extent that the recipient or provider of the care or services would be eligible to receive payment for such care or services from such third party if the care or services had not been furnished or paid for by a department or agency of the United States.”

It’s important to know exactly how much money you must include in your settlement demand to cover payment of a VA lien, as well as your other damages.

The VA requires this Request for VA Billing Form to be filled out to obtain copies of VA medical bills.

Minimizing Government Medical Liens

You’ll be able to walk away with a larger portion of your injury settlement if you’re aware of potential liens from the start.

Whether you decide to handle your insurance claim on your own or hire an attorney, it’s critical to base your demand amount on the full cost of all your medical expenses, not just your co-pays, or the reduced amount charged to the insurance company.

Your attorney can access updated information through the Medicare Secondary Payer Recovery Portal, an online service made available to help resolve liability insurance, no-fault insurance, and worker’s compensation Medicare recovery liens.

Experienced personal injury attorneys can successfully negotiate a reduction to liens with Medicare, Medicaid, and the VA so that you end up with more money at the end of the day. Often, they can get a hardship waiver by convincing the lienholder that full payment would create an undue hardship for their client.

Medicaid Lien Resolution

Resolving a Medicaid lien can be complicated. You’ll need legal advice from an attorney who is familiar with the latest laws in your state.

Depending on the actual value of your claim and the amount of your settlement, you may not have to pay back the full amount of the lien.

For example, in the landmark case Arkansas Dept. of Health and Human Servs. v. Ahlborn, the Supreme Court ruled that the state Medicaid agency could not take the full amount of their lien from the beneficiary’s personal injury settlement, since the victim was unable to recover the full value of her injury claim.

Dealing with the Centers for Medicare and Medicaid Services (CMS)

Reimbursements for Medicaid and Medicare are administered by the Centers for Medicare and Medicaid Services (CMS). If there is a CMS lien on your settlement proceeds, it takes precedence over all other liens.

CMS is part of the federal government, and as such, it can move slowly. It may be several months before you receive a repayment demand letter. It’s a good idea to escrow the amount of the lien from your settlement, so you have it available when they send the notice.

If you’re a Medicare or Medicaid recipient who will have future medical costs related to the accident, your attorney might need to negotiate a Medicare Set Aside as part of your settlement.

A Medicare Set Aside is money put into a trust to pay your future injury-related medical bills. The idea is to save Medicare or Medicaid from costs that should be the responsibility of another party. Any set-aside arrangement must be approved by the Centers for Medicare and Medicaid Services (CMS)

Medicare, Medicaid and VA Lien Questions

Charles R. Gueli, Esq. is a personal injury attorney with over 20 years of legal experience. He’s admitted to the NY State Bar, and been named a Super Lawyer for the NY Metro area, an exclusive honor awarded to the top five percent of attorneys. Charles has worked extensively in the areas of auto accidents,... Read More >>