How Does Medicare/Medicaid Affect My Personal Injury Claim?

Medicare and Medicaid are entitled to statutory liens against any claims you may have against any person, company, or insurer, to pay your medical bills out of a personal injury claim. You and your personal injury lawyer must familiarize yourselves with the liens and the obligations that come along with them.

What is a Medicare Lien?

A Medicare lien is a right created by statute that requires anyone involved in the transfer of money to settle or resolve a personal injury claim to reimburse the Federal Medicare program for benefit payments made by Medicare on behalf of a Medicare beneficiary that was the responsibility of a negligent third party.

What is a Medicaid Lien?

Medicare Enrollment FormsA Medicaid lien is a right created by statute that requires anyone involved in the transfer of money to settle or resolve a personal injury claim to reimburse the State Medicare program for benefits it has paid in the past for medical services rendered to a Medicaid beneficiary that was the responsibility of a third-party tortfeasor.

Medicare and Medicaid are government programs that provide qualified individuals with medical care benefits. Medicare is a Federal program while Medicaid is a state-run program. Both programs create a statutory lien for benefits paid for past medical expenses that arose due to a personal injury.  However, Medicare is different from Medicaid in that federal laws also require that money be “set aside” to cover the cost of anticipated future medical care.

What is the Medicare Secondary Payor Program?

The Medicare Secondary Payor Program is a branch of the federal government tasked with the job of identifying third parties responsible for a Medicare beneficiary’s medical bills and seeking reimbursement for any benefits that Medicare paid out but that should have been paid for by the responsible third party. In 1980, Congress passed a law making Medicare benefits a secondary payment source to other sources of payment such as health insurance, worker’s compensation insurance, no-fault auto insurance, and auto insurance. This law requires any injured victim, their law firm, and the insurance company to ensure that Medicare is reimbursed when auto insurance or worker’s comp. benefits are paid by following a series of steps through the Medicare Secondary Payor Recovery Portal that enable them to alert Medicare to the claim and trigger the process of obtaining a final demand for payment from Medicare so they can be reimbursed.

Medicaid and Medicare Liens and Personal Injury Settlements: FAQ

What Form Do I Use to Submit My Information to Medicare to Request a Lien Reduction?

Here is the Medicare Lien Reduction Request Form that we currently use to submit the settlement information and seek a Medicare lien reduction. Please note, the form is provided to us by Medicare and reflects the only information that take into account unless you convince them to consider a waiver under special circumstances.

Is Repayment of a Past Medical Lien Required?

Anytime Medicare or Medicaid has paid for medical benefits, there is an obligation on the part of both the client and the attorney to repay the lien if money is recovered from a negligent third party for damages suffered out of the incident that produced the medical bills. It is important to note that the statute does not differentiate what the settlement money was paid for. (i.e. medical bills vs pain and suffering) The lien is on the entire settlement.  Failure to repay a Medicare Lien carries with it the ability of the Federal Government to sue the lawyer for double damages plus interest for knowingly ignoring a Medicare lien. State Medicaid lien laws vary from state to state, but you can rest assured that at a minimum, the state can sue the client and the lawyer for the amount of the lien with interest.  Medicare requires that you fill out a form and notify them of every personal injury case so that they can check to see if they have a claim for medical bills paid, Thus, a prudent personal injury lawyer handling a personal injury claim must take steps to confirm and take into account any Medicare and/or Medicaid liens.

How Do I Know What I Owe Medicare or Medicaid?

If you have a qualified personal injury lawyer representing you, early on in your personal injury case your attorney will have you sign an authorization for Medicare and Medicaid and a proof of representation form so that your attorney can submit your information to them and request that they produce a breakdown of the lien. This is the first step in paying back Medicaid or Medicare after a settlement. Once you do this, they send out a notice to all of their local branches to see if any benefits have been paid on your behalf. This process can take anywhere from a few months to six months generally.  Once the Center for Medicare and Medicaid Services gathers all of the paid claims, they will provide your attorney with a written breakdown of the lien. It will be updated if you incur additional bills or they locate more that were not accounted for.

How Much Will Medicare and Medicaid Take From My Settlement or Judgment?

Medicare uses one of two formulas to determine what your owe.  If the Medicare lien exceeds the amount of the total recovery, then Medicare will deduct the procurement costs (attorneys fees and attorneys expenses) from the total amount of the lien and they will demand that you pay the rest of the recovery to them. If the amount you owe Medicare is less than the total recovery, Medicare reduces their lien by the same percentage as your procurement costs. So, you add attorneys fees and expenses then divide that amount by the total settlement amount and multiply that percentage by the total lien. Subtract this amount from the total lien and you get the repayment amount.

The formulas look like this:

Formula 1: Medicare Lien > Total Recovery

Attorney’s fees + Attorney’s costs = Procurement Cost

Total Recovery – Procurement Cost = Amount You Owe Medicare

Formula 2: Medicare < Total Recovery

Attorney’s fees + Attorney’s costs = Procurement Cost

Procurement Cost / Total Recovery = Ratio

Medicare Lien  x Ratio = Lien Reduction

Medicare Lien – Lien Reduction = Amount You Owe Medicare

Keep in mind they may allow or not allow certain costs or charges, so certain expenses may not be included in determining the ratio. They also do not care if you have other outstanding medical bills. Outstanding bills are not factored into their determination.

What is the Medicare Lien Repayment Process?

Once your personal injury case settles, Medicaid and Medicare require that you send in a form with certain calculations showing what the case expenses were,  what the total settlement is, as well as details of any special circumstances you wish them to consider. Once they have evaluated the information, they will tell you what they expect to be reimbursed. If you feel your case warrants a waiver of the lien or special reduction, you can submit a request with documentation–but this is pretty rare.

What is a Medicare Set Aside?

In addition to repayment of past medical benefits, Medicare requires that both worker’s compensation and personal injury claimants set aside funds to pay for any future medical expenses anticipated to be paid by Medicare under certain circumstances.  The rules on this are ill-defined and in constant flux. However, currently, the government requires you to create a Medicare Set-Aside if you are either:

  • A current Medicare recipient settling a personal injury claim for more than $25,000, or;
  • Not a current Medicare recipient but you settle for more than $250,000 and can be expected to receive Medicare within 30 months of settlement.

Failure to create a Medicare Set Aside could result in Medicare coming after you and your attorney. Additionally, they could cut off your benefits in the future to recoup money paid out.

The Cost Factor of Medicare Set-Asides

Medicare Set-Asides are not free to set up nor are they easy. You generally will need to have a qualified medical professional review all of the medical records, approximate the future needs, estimate the costs of those needs, and come up with a rational basis for the amount you ultimately set aside. There are companies that can be hired to do this. In the typical case, they will charge $3,000.00-5,000.00. In more complex cases, this may be much higher.   This additional cost must be factored into the determination of whether it will be profitable to handle the case.

What Are the Medicare and Medicaid Reimbursement Rates?

Medicare and Medicaid have enormous bargaining power with medical professionals due to their volume of patients covered. As a result, they are able to negotiate huge discounts for the services their clients receive.  It is a mass volume discount.  So, whereas an individual might get charged 10,000.00 for a particular procedure, the Medicare and/or Medicaid reimbursement rate may be $500.00 for the same procedure. The other $9,500 gets written off.

This is important because under Texas law, not only can you not seek recovery for the part written off against the tortfeasor, but a jury may not be told the “sticker price” of a medical bill that was paid at a discount.  The amount of medical bills often influences how much a jury awards for pain and suffering. So when a jury hears that a patient only received $500.00 in medical damages, they are much more likely to give an award commensurate with $500.00 than they are $10,000.00 in damages.  A personal injury attorney evaluating whether it is cost-effective to spend the money to bring a personal injury claim must consider this. Unfortunately, this makes some legitimate personal injury claims cost-prohibitive since you can easily spend $5000.00 to bring to trial even the simplest of auto collision cases. On small car wreck and personal injury claims. Medicare liens are one of the top reasons a personal injury lawyer won’t take your case.

Do You Lose Medicare if You Get a Personal Injury Settlement?

If you recover a personal injury settlement and you fail to pay back a lien for past medical services to Medicare, they can refuse to pay for future services whether or not they are related to the injury from the accident or not. This is one way they can recoup the loss.

What Happens if I Refuse to Repay a Medicare or Medicaid Lien?

If Medicare or Medicaid discover that you recovered a settlement and did not reimburse them for money paid out or did not create a required Medicare set aside and they paid out more money, they can sue you, the attorney, and the insurance company for failure to pay the lien.  They can also seek double damages, interest, and penalties for a non-payment of the lien. In some states, there are criminal penalties as well. However, the Medicare Secondary Paypor Program requires mandatory insurer reporting of all settlements they pay out. Thus, before any insurance company pays you or your lawyer a dime, they will report the payment to Medicare and will want proof from you or your lawyer of what Medicare expects to be reimbursed. In most cases, the insurer will cut a separate check directly to Medicare out of your settlement proceeds and mail it to Medicare themselves. Thus, you will not even get the opportunity to “refuse” to pay back Medicare.

How Do You Get a Final Lien Amount?

Medicaid and Medicare will not tell you the final amount they require you to reimburse them until you settle your case. After your case settles, you must submit the required paperwork and documentation for them to calculate a final lien amount. Once they have calculated it, Medicaid and Medicare will send you a demand letter giving you the final conditional payment amount they expect you to pay and allowing you a certain amount of time to pay back the lien. They will start charging you interest if you fail to timely reimburse the total demand amount within the time frame.

How Will Medicare or Medicaid Find Out About Your Settlement?

Insurance companies and attorneys have mandatory reporting requirements. Insurers cannot pay an insurance claim without reporting to Medicare and Medicaid to whom they are paying the money so that Medicare and Medicaid can verify whether there is a lien. As soon as you file an injury claim against an auto insurance company or business liability policy, they report it. Your attorney becomes personally liable if he/she does not submit the information about the claim to Medicare or Medicaid as well. If you do not hire an attorney, the insurance company paying the settlement will still notify Medicare or Medicaid and they will honor the lien to protect themselves.


Anytime Medicare or Medicaid pays for your medical expenses that arise from a personal injury suffered due to the negligence of a third party, this has several negative impacts on the personal injury case. Medicare and Medicaid create a lien that must be reimbursed for past medical. It reduces the amount that can be claimed as damages and may reduce the anticipated pain and suffering award. Lastly, Medicare creates a costly obligation to create a Medicare Set Aside if future Medicare benefits may be anticipated.  As a result, a personal injury lawyer must weigh the effects of Medicare and Medicaid against the anticipated recovery in deciding whether or not to take a personal injury claimant’s case. Call Simmons and Fletcher, P.C. for a free consultation on your case: (713) 932-0777.




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Simmons and Fletcher, P.C., rooted in Christian values, exclusively handles personal injury cases, advocating for the rights of accident and negligence victims. Our Houston-based team, dedicated to compassion and excellence, handles cases across car accidents, motorcycle accidents, truck accidents, slip and falls, dog bites, and other types of cases with a commitment to personalized care. Upholding integrity and client-focused service, we strive for impactful legal outcomes. For a detailed understanding of our approach and team, visit our attorneys page.

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