Medicare Liens

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Medicare Liens and How They May Affect Your Settlement or Award

As you may be aware, Medicare is a federally funded program that provides some health insurance assistance to individuals with disabilities and citizens receiving Social Security benefits. Medicare is classified as a “secondary” payer. In other words, this government program will not pay for medical treatment until all other avenues are exhausted. These avenues are generally personal coverage plans. Typically, Medicare liens are placed on the personal injury case of a person whose treatment is paid for by the program. Essentially, if you are injured in an accident and Medicare covers any part of your medical expenses, the government will receive reimbursement directly from your settlement or award for your injuries. Also, Medicare is entitled to be reimbursed for everything that it has paid stemming from a personal injury claim.

How Are Medicare Liens Established?

As a federally funded program, Medicare has a priority right of recovery. This means that Medicare will be reimbursed from recovery proceeds before any other party. Moreover, Medicare liens attach to the proceeds of a personal injury claim as soon as medical care is covered by the program. Medicare has a right to reimbursement as soon as you receive your settlement or award and does not need to give notice of their lien. This is unique, as most lien holders must give some form of notice that a lien exists. Please be aware, however, that you should notify Medicare of a personal injury settlement or judgment, as failing to do so can result in penalties and fines. See here for a step-by-step guide on how to process your own claim. [“How To Notify Medicare of a Personal Injury Claim”]

How Will Medicare Liens Affect Disbursement of Your Recovery?

Medicare liens will greatly affect the disbursement of recovery proceeds, as they take precedent over all other liens. As previously mentioned, if there is a Medicare lien attached to your recovery proceeds, the program must be reimbursed before any other liens. Medicare also does not have a cap as to how much of your recovery they can claim; thus, the program is capable of receiving all of your settlement proceeds. Medicare does, however, allow for a reduction for reasonable attorney’s fees before claiming their share. A one-third or less contingency fee is seen as reasonable in most circumstances. This is generally known as a reduction for procurement cost. In other words, Medicare will reduce their lien amount by 1/3 (this only plays a role when the lien amount is less than the settlement amount). Let’s look at the following two hypothetical situations to help illustrate how Medicare liens affect disbursement.

Let’s assume Steve receives Medicare benefits and is injured in an accident. Steve’s medical treatment costs $20,000 and Medicare covered the entire amount. Therefore, Medicare would have up to a $20,000 lien on Steve’s recovery proceeds. Steve also visits the chiropractor, which receives a $2,000 physician lien. Steve hires an attorney for a one-third contingency fee. Steve eventually agrees to an $18,000 settlement. Under these circumstances, Steve’s attorney would receive his 1/3 share ($6,000), and Medicare would receive the remaining amount ($12,000). In this example, the chiropractor and Steve would receive nothing from the recovery because Medicare liens receive priority over all other liens, with no cap amount as to how much the program can receive. Also, it is important to reiterate that Steve will still be obligated to pay the chiropractor’s bill. A breakdown can be found below.

Settlement Amount: $18,000
Amount Paid to Attorney: – $ 6,000 (1/3 Settlement amount)
Amount paid to Medicare: $12,000
Chiropractor = $0
Steve = $0

Let’s now assume that Jason’s settlement amount was for $60,000 with only a $22,000 Medicare lien attached (no chiropractor). Under these circumstances, Jason’s attorney would receive $20,000 (1/3 of 60,000), leaving $40,000. Medicare would then be fully reimbursed in what is known as procurement cost (explained above) for their $22,000 lien and Jason would receive the remaining balance.

Settlement Amount: $60,000
Amount Paid to Attorney: -$20,000 (1/3 Settlement amount)
Amount paid to Medicare = $22,000 less 1/3 for procurement (7333.33) =
– $14299.66 = amount paid to Medicare
Amount Jason Receives: $25,700.34

Negotiating and Reducing Lien Amounts

Medicare liens are essentially non-negotiable and the program typically fights for full reimbursement. There are ways, however, that a compromise or lien reduction can be achieved. The best way to reduce a Medicare lien is to request a final itemization, and dispute any claims that you feel are not related to your personal injury case. Please be aware that there are very specific dispute procedures that must followed, and can be found in the article titled “How to dispute a Medicare Lien”. Medicare has also established procedures for requesting a compromise or waiver of a lien.

Compromise Request

A compromise is an agreement between you and your Medicare provider, generally resulting in a lower lien amount. You may only request a compromise when an offer has been made or settlement has actually been finalized. In other words, an offer must be on the table before you may seek a compromise. A compromise request must be submitted in writing. In your request, you should attempt to tell a compelling story as to why a compromise should be granted. There are three key factors that the program will look at when deciding whether to compromise, so be sure to address them in your written request.

Medicare will generally only reduce their lien if they feel that it is in the best interest of the program. They will respond to a compromise request within 60 days of receiving your written demand. If a compromise is granted and you accept, you will no longer be able to appeal. Also, you must pay the compromise amount with the time allotted, as failure to do so will reinstate the original debt.


Medicare also allows for a waiver. A waiver can be requested based on financial hardship due to the accident, or based on an equity (fairness) argument. The request must be made in writing and only after a settlement has been reached. Medicare will look to see whether enforcement of the lien would deprive you of necessary living expenses in making their decision. The program will also take into account your out-of-pocket medical expenses and any medical bills that you may still owe.

Again, a waiver may only be granted after a settlement has been reached and information pertaining to the settlement has been forwarded to the program’s office. Medicare has the power to grant full or partial waivers based on the particular circumstances of the claim.

Statute of Limitations

It is important to be aware of the statute of limitations on Medicare’s ability to enforce their lien. The government must file a complaint in court within three years of receiving notice that a settlement or judgment has been reached. Failure to do so will bar the program from enforcing the lien.

Medicare’s Settlement Programs

Within the past five years, Medicare has introduced three settlement programs that allow a person to potentially reduce a Medicare lien when certain requirements are met. This article provides a brief overview of the three types of settlement programs. These programs can be difficult to understand and apply for; thus, seeking advice from an attorney is important when dealing with Medicare liens.

1. Payment of Fixed Percentage option

This option can be used when you are injured in an accident and you have a trauma-based claim (directly from the car accident), the claim has already been settled (final settlement), and the total settlement was for $5,000 or less. Choosing to use this program will result in Medicare receiving 25% of your total recovery. This program is advantageous because it is quick and generally easy to complete. Furthermore, the 25% fixed amount can be beneficial because Medicare typically receives whatever is needed to reimburse their lien amount (after reasonable attorney’s fees are deducted). Please be cautious, however, when deciding whether to request the fixed percentage option, as it may result in an overpayment to the program. In other words, if the Medicare lien is less than 25% of your total recovery, you would not want to use this option.

2. Self-Calculated Conditional Payment Amount

This option can be used when you are injured in an accident and you have a trauma-based claim (directly from the car accident), the claim has already been settled, the total settlement was for $25,000 or less, the date of the accident was at least 6 months ago, and you have no expectation to receive further medical treatment. When sending your request, you must include either a notarized confirmation from your physician that further medical treatment is not needed, or a notarized confirmation stating that you have not received medical treatment within the last 90 days and that you do not expect further medical treatment.

The self-calculated settlement program will generally result in a lower lien amount. Once you choose to enter the program, you may not appeal the final amount. Furthermore, Medicare will send you a letter that includes a payment form that will need to be filled out. Make sure to follow the directions carefully.

3. $300 Threshold on Liability Settlements

This option can be used when you are injured in an accident and you have a trauma-based claim (directly from the car accident), the claim has already been settled, the total amount of recovery is $300 or less, and if you have not yet received a demand letter from Medicare. If all requirements are met, you will not likely owe Medicare anything. This situation is rare because the total settlement amount must be $300 or less.

Medicare liens should be paid as failure to do so can result in fines or loss of coverage. It is always a good idea to have an experienced personal injury attorney look over your claim, especially when you receive Medicare benefits. Please feel free to use our lawyer locater service.

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