How do Medicaid or Medicare reimbursements impact a personal injury settlement offer?
Medicaid, Medicare, and Your North Carolina Personal Injury Settlement
1. Detailed Answer
When you receive medical treatment paid by Medicaid or Medicare after an accident, both programs obtain an automatic statutory lien against any personal injury settlement you later receive. In short, the government must be reimbursed before you can keep the full proceeds. Understanding those rules lets you (and your lawyer) negotiate a realistic settlement and avoid surprise bills.
Medicaid Reimbursement in North Carolina
Statutory authority. North Carolina’s Medicaid lien rules appear in N.C. Gen. Stat. § 108A-57 (reimbursement) and § 108A-59 (lien notice).
Payment cap. After deduction of reasonable attorney’s fees and litigation costs, Medicaid may collect no more than one-third of the remaining settlement. Example: You settle for $90,000. Attorney fees/costs are $30,000, leaving $60,000. Medicaid’s lien cannot exceed $20,000 (one-third of $60,000), even if it paid more.
Distribution order. Settlement funds are typically disbursed: (1) attorney fees and costs; (2) Medicaid lien up to the cap; (3) client receives the balance.
Petition to reduce further. If the capped amount would still create hardship, you may petition the superior court under § 108A-57(d) for an equitable reduction.
Medicare Reimbursement (Federal Law)
Statutory authority. The Medicare Secondary Payer Act, 42 U.S.C. § 1395y(b), gives Medicare a first-dollar right of recovery against settlements.
No automatic cap. Unlike Medicaid, Medicare can demand the full amount it paid—after procurement costs—but will often compromise.
Conditional payments. Medicare issues a Conditional Payment Letter (CPL) listing what it spent. You must (a) verify accuracy, (b) request reductions for unrelated charges, and (c) pay the Final Demand within 60 days of settlement to avoid interest.
Future medicals. Where future Medicare-covered treatment is expected, you must consider Medicare’s interests—often through a Medicare Set-Aside (MSA). While MSAs are not formally required in third-party liability cases, failing to protect Medicare can jeopardize future benefits.
Why Liens Change Your Negotiating Leverage
Because a portion of the settlement is already committed, insurers know your net recovery will be smaller. A well-prepared demand package should show:
This data helps justify a higher offer by emphasizing what it takes for you to be “made whole.”
2. Helpful Hints
Report any claim to Medicaid (NC Division of Health Benefits) or Medicare within 60 days of opening the injury case.
Keep every Explanation of Benefits (EOB); you will need them to dispute unrelated charges.
Request an interim lien amount before settlement talks. Numbers change as new bills post.
Budget for lien resolution to avoid delaying your settlement payout.
File any equitable-reduction petition quickly—courts will not reduce liens after you have already disbursed funds.
Never ignore a Medicare Final Demand; interest accrues at roughly 10% per year.
Ready to Protect Your Settlement?
Medicaid and Medicare reimbursement rules are complex, but the financial stakes are high. Our firm’s experienced North Carolina personal injury attorneys navigate lien laws every day, maximizing what clients take home while staying fully compliant. Call 919-313-2737 for a free, no-obligation consultation.
