Medicare and Medicaid Liens After a Settlement: How to Reduce What You Owe

Why the Government Gets Paid First

When Medicare or Medicaid pays for medical care related to an injury caused by someone else, the program has a right to be reimbursed from any settlement or judgment you receive. This right is called a lien or a right of recovery. It is not optional, and ignoring it can result in the government pursuing you, your attorney, or even the defendant's insurer directly.

Under the Medicare Secondary Payer Act (MSP), Medicare is treated as the payer of last resort. If a third-party liability claim exists, Medicare pays conditionally and expects repayment when the case resolves.

How Medicare Conditional Payments Work

Once your attorney puts Medicare on notice of a pending claim, Medicare's Benefits Coordination and Recovery Center (BCRC) will identify all payments made related to the injury and issue a conditional payment letter. The amount listed is a starting point, not a final number.

You have the right to dispute charges that are not related to the accident. For example, if Medicare paid for a knee replacement that preceded the accident, you can request removal of those charges from the lien calculation.

Medicaid Liens: State Rules Vary

Medicaid is administered by individual states, and lien rights differ significantly. Some states assert a lien for all Medicaid payments; others are limited by the Ahlborn rule, which restricts recovery to the portion of the settlement representing past medical expenses. An experienced attorney can analyze your state's Medicaid recovery statute and negotiate accordingly.

Negotiating a Reduction

Both Medicare and Medicaid lien amounts can often be reduced. The most common grounds are:

• **Procurement costs:** Medicare may reduce its lien by a pro-rata share of attorney fees and litigation costs
• **Relatedness dispute:** Exclude payments for unrelated conditions
• **Hardship waiver:** Available in limited circumstances for Medicare
• **Compromise of claim:** Medicare will accept less than full repayment if the settlement is insufficient to cover all losses

The negotiation process takes time. Build lien resolution into your case timeline before finalizing any settlement.

What Happens If You Don't Pay

Failure to satisfy a Medicare lien can result in double damages — the government may sue for twice the conditional payment amount. Attorneys have joint and several liability under the MSP, so most attorneys will hold settlement funds in trust until lien resolution is complete.

Medicare Set-Aside Accounts (MSA)

If your injuries require future medical care related to the accident, Medicare may require a Medicare Set-Aside (MSA) arrangement — a segregated account funded from your settlement to cover future accident-related care. Workers' compensation cases trigger formal MSA review thresholds; liability cases have no mandatory review threshold, but an MSA may still be advisable.

Handling these liens correctly protects your settlement and avoids costly post-resolution disputes.