Medicaid Liens and How They May Affect Your Recovery
From beginning to end, the recovery process for accidents can be cumbersome
and difficult. Having medical liens attached to your recovery only adds
to the headache. If you are a recipient of Medicaid and are injured in
an accident, it is highly likely that the program has an interest in any
proceeds you receive from a settlement or judgment. In other words, Medicaid
likely has a right to reimbursement from your personal injury recovery.
As you may be aware, Medicaid is a federally funded program administered
by the states. This program is need-based and is provided to those who
fall within strict qualification guidelines. Medicaid liens are governed
by the complex North Carolina General Statute §108A-57; thus, it
is always a good idea to seek advice from a personal injury attorney about
your personal injury claim when Medicaid is involved.
How are Medicaid Liens Established?
Essentially, Medicaid liens attach to personal injury proceeds once the
injured party accepts Medicaid coverage. Therefore, if you are injured
in an accident and accept benefits from Medicaid to help cover those injuries,
Medicaid automatically receives an interest on future settlement or judgment
proceeds for the accident. This program is also unique in that they will
also receive rights in any proceeds received from MedPay (also known as
Medical Payments coverage) or personal insurance coverage. Also, Medicaid,
like Medicare, is not required to send notice of their lien in order for
the lien to be valid. However, you should be sure to notify Medicaid of
any settlements reached and you must pay the lien amount within 30 days
of receiving your recovery proceeds.
How Will Medicaid Liens Affect Disbursement of Your Recovery?
Once you have received the proceeds from your settlement or judgment, you
will then need to calculate the Medicaid lien amount and disburse payment.
Medicaid’s recovery on their lien may not exceed 1/3 of your total
settlement or judgment amount. Furthermore, you will likely not be obligated
to pay any remaining balance on a lien that exceeds the 1/3 total settlement
amount. Medicaid also allows for attorney’s fees and costs to be
deducted before the program will take their share of the recovery proceeds.
The following example will help better illustrate how Medicaid affects
Assume that Tom is injured in a car accident and receives $12,000 worth
of medical treatment. Medicaid covers the entire $12,000 amount. Tom hires
an attorney and eventually enters into a settlement agreement for an amount
of $30,000. Here, Medicaid would have a $12,000 lien on Tom’s recovery
because that was the amount paid by the program. However, the program
will not be able to receive the full $12,000 amount due to the 1/3 total
settlement cap. Therefore, Medicaid will only be able to receive up to
$10,000 of Tom’s settlement. Tom’s attorney will receive $10,000
(standard 1/3 contingency fee) Medicaid will receive $10,000 (1/3 of the
total settlement) and Tom will receive the remaining $10,000 balance.
It is also important to reiterate that Tom will not likely be obligated
to pay the remaining $2,000 balance on the Medicaid lien. The calculations
and disbursement amounts are shown below.
Maximum Amount Medicaid can receive: $30,000 x 1/3 = $10,000 (1/3 of total
Settlement Amount: $30,000
Attorney’s Fees: -$10,000
Remaining balance: $20,000
Maximum Medicaid: -$10,000 (1/3 of $30,000)
Amount to Tom: $10,000
Disbursement Calculations with Both Medicare and Medicaid Liens
When you are injured in an accident and you receive benefits from both
Medicare and Medicaid, each program will likely have a lien on your recovery
proceeds. Medicare will receive repayment from your proceeds before Medicaid
does. Thus, if the Medicare lien amount is greater than 1/3 of the total
recovery amount, Medicaid will receive nothing. For example, if Medicare
receives $12,000 of a $30,000 settlement, Medicaid will receive nothing,
as Medicare has already received up to 1/3 of the total recovery amount.
If, however, Medicare receives less than 1/3 of the total settlement, Medicaid
can then receive the difference between Medicare’s lien amount and
1/3 of the total recovery. For instance, if Medicare receives an $8,000
reimbursement from a $30,000 settlement, Medicaid will be able to receive
up to $2,000 of the recovery, the difference between Medicare’s
lien amount $8,000 and 1/3 of the total recovery proceeds ($10,000 –
$8,000 = $2,000 left for Medicaid reimbursement).
It is important to note that Medicare allows for a reduction in their overall
lien amount based on total attorney’s fees. Therefore, it is important
to hire an attorney to ensure that all liens are receiving the correct