How to Navigate Medicaid Liens in a Personal Injury Settlement in North Carolina
Understanding Medicaid Liens After a Personal Injury Settlement in North Carolina
Detailed Answer
If North Carolina Medicaid paid any part of your medical bills after an accident, the North Carolina Department of Health and Human Services ("NCDHHS") automatically acquires a lien on your personal injury recovery. The rules appear in N.C. Gen. Stat. § 108A-57. Understanding – and properly satisfying – the lien is critical because:
Failing to pay it can trigger collection action against you, your lawyer, or the liability insurer.
Negotiating the lien correctly can put more settlement dollars in your pocket.
1. How the Lien Arises
Under § 108A-57, NCDHHS is automatically subrogated to any right you have against the at-fault party for medical expenses Medicaid covered. No separate filing is required; the lien attaches when benefits are paid.
2. Cap on the Lien – The “One-Third Rule”
North Carolina limits NCDHHS’s recovery to the lesser of:
Full amount of Medicaid payments attributable to the injury, or
One-third (33⅓ %) of the gross settlement or judgment.
The cap appears in § 108A-57(c) and was upheld after the U.S. Supreme Court’s decision in Wos v. E.M.A. Because the cap is automatic, you rarely have to file a motion to allocate medical damages unless you believe the cap is still unfairly high (see Step 5).
3. Step-by-Step Lien Resolution
Request the Medicaid payments printout. Your attorney submits Form DMA-5027 to the Benefit Recovery Section of NCDHHS. Expect a detailed list of ICD-10 codes, dates of service, and amounts.
Verify the charges. Compare the printout against your medical records. Exclude payments unrelated to the accident (e.g., routine primary-care visits). If you find errors, dispute them in writing.
Calculate the statutory cap. Multiply the gross settlement by 1/3. Example: $90,000 settlement × 0.3333 = $30,000 maximum lien.
Negotiate, if appropriate. Even when the cap is lower than the paid amount, NCDHHS sometimes accepts less, particularly if you face extraordinary costs (e.g., future surgery). Provide documentation of hardship.
File a motion to determine lien (optional). If you believe paying the capped amount would still be inequitable, § 108A-57(d) lets you ask the Superior Court to allocate a smaller share. The judge balances your net recovery against Medicaid’s interest.
Pay the lien from the trust account. Your attorney issues a check payable to “N.C. DHHS – Medicaid Recovery” from the trust account and forwards the settlement statement to NCDHHS.
Obtain a Release of Claim. Once NCDHHS cashes the check, request a written release confirming the lien is extinguished. Retain it for your records and give a copy to the liability insurer on request.
4. How Attorney’s Fees Affect the Cap
The one-third cap applies before deducting attorney’s fees and costs – meaning your lawyer’s fee does not reduce Medicaid’s share. For example:
Gross settlement: $90,000
Attorney’s fee (⅓): $30,000
Medicaid lien (max ⅓): $30,000
Client net (assuming no other liens): $30,000
Effective negotiation or a court allocation motion can lower Medicaid’s payment and increase your net.
5. Special Situations
Minor or incapacitated clients. Court approval may be required for the settlement itself. Resolve the lien before presenting the settlement for approval.
Wrongful death claims. Medicaid may still assert a lien if the estate recovers medical expenses incurred before death. Carefully allocate settlement proceeds between personal injury (subject to lien) and wrongful death damages (often not subject).
Medicare and ERISA plans. These create separate liens with different rules; they do not affect the Medicaid cap.
Helpful Hints
Request the Medicaid claims printout early; processing can take 30–60 days.
Keep a spreadsheet of all medical bills to cross-check NCDHHS’s list.
Use certified mail or secure email when disputing unrelated charges.
Document hardship thoroughly; NCDHHS reviewers can reduce the lien if you face exceptional circumstances.
Never disburse settlement funds until you have written confirmation of the final lien amount.
Store the final Release of Claim in multiple places – you may need it years later if NCDHHS inquires.
Take the Next Step
A Medicaid lien can dramatically change what ends up in your pocket after a personal injury settlement. Our North Carolina attorneys handle lien negotiations daily and understand how to protect your net recovery while staying compliant with § 108A-57. Call us now at 919-313-2737 to schedule a free consultation and let us resolve the Medicaid lien so you can focus on healing.
