Medicare and Medical Liens in Personal Injury Cases

We explain here Medicare liens and medical liens in personal injury cases and the obligation to pay back Medicare after a personal injury settlement.

MEDICARE LIENS

How Medicare Liens Work in Personal Injury Cases

If you are injured in an accident and Medicare pays for some of your treatment, you will be obligated to reimburse Medicare for these payments if you bring a personal injury claim and get financial compensation for the accident.

This federal law also unambiguously gives the Medicare program subrogation rights if it does make payments.  The law provides: “The United States shall be subrogated (to the extent of payment made under this subchapter for such an item or service) to any right under this subsection of an individual or any other entity to payment concerning such item or service under a primary plan.” 42 U.S.C. § 1395y(b)(2)(B)(iv).

The Nature of the Medicare Medical Lien

To enforce this right to reimbursement, a “Medicare lien” will attach to judgment or settlement proceeds that are awarded as compensation for the accident. This means that if you get a settlement, you will have to pay back Medicare before anything else gets taken out unless there is an agreement to reduce the amount owed.  (We will keep taking about a Medicare lien because that is how lawyers talk.  Technically, Medicare does not place a lien in the traditional sense. Instead, Medicare has a recovery right under the Medicare Secondary Payer (MSP) statute, which functions similarly to a lien but is legally distinct.)

While you can get the lien reduced, paying back Medicare after a settlement is not optional.  The only path around a Medicare lien is to negotiate the lien to zero.  Have our lawyers done this?  We have.  Is it rare for Medicare to waive a lien?  It is very rare. But it can happen.

How Do Medicare Liens Work?

At the root of it all is the Medicare Secondary Payer (“MSP”) statute, section 1862(b) of the Social Security Act, 42 U.S.C. § 1395y(b).  The purpose of this law was to make sure that sure Medicare was not paying for medical bills that someone else should pay.  The MSP gives Medicare the right to claim (i.e., a lien) reimbursement from any judgment or settlement proceeds that include compensation for medical bills paid by Medicare.

If a Medicare beneficiary receives a personal injury settlement, they will be required to reimburse Medicare for any payments made on their behalf.  To enforce this requirement, the law gives Medicare an automatic priority lien against any settlement proceeds in personal injury cases.

Almost any party involved in the personal injury settlement or payment, including the attorneys, has the responsibility for complying. Any settlement or payment must be reported to Medicare within 60 days and their valid lien amount must be paid.

Medicare Actively Enforces These Reimbursement Rights

If a Medicare reimbursement claim is not properly paid after a settlement, Medicare has the authority under the CMS Final Rule (2023) to recover funds from various parties involved in the case. Medicare can seek repayment from:

• The plaintiff (Medicare beneficiary)
• The defendant (liable third party or insurer)
• The plaintiff’s attorney (if they fail to ensure compliance)
• The primary insurance company responsible for the settlement

Medicare’s enforcement powers include the ability to impose penalties if its reimbursement rights are ignored. Under the 2023 CMS Final Rule, Medicare can impose fines on insurers or other responsible reporting entities (RREs) for failing to report a settlement, judgment, or award involving a Medicare beneficiary.

Updated Penalty Structure for Non-Compliance

Previously, Medicare could impose a $1,000 per day penalty for non-compliance with its reporting requirements. Now, under the updated CMS regulations, the penalties have been revised:

• Penalties are now capped at $365,000 per year per unreported case.
• The daily fine is now calculated based on a percentage of the total settlement, rather than a flat $1,000 per day.
• CMS considers mitigating factors, such as good-faith efforts to report and technical errors, before imposing fines.

These changes provide some relief to insurers but also signal that CMS is serious about enforcing Medicare’s reimbursement rights. Attorneys handling personal injury cases must ensure compliance with Medicare’s reporting and repayment rules to avoid penalties or legal action.

How to Avoid Medicare Repayment Issues

To prevent unnecessary fines or enforcement actions:

• Determine whether your client is a Medicare beneficiary at the outset of the case.
• Report the settlement to Medicare’s Benefits Coordination & Recovery Center (BCRC).
• Request a conditional payment letter to determine Medicare’s claim amount.
• Ensure that final settlement disbursements account for Medicare’s reimbursement demands.

Failure to follow these steps could result in legal action, financial penalties, or even double damages under the MSP statute. Proper handling of Medicare reimbursement ensures compliance and prevents costly consequences.

How Do You Handle a Medicare Lien

So what should attorneys do to avoid these large penalties? First, when an attorney has been hired they should inquire whether the client is a Medicare beneficiary, and if they are, they should contact the Benefits Coordination & Recovery Center (BCRC) and report the case.

After the BCRC is notified of the case, it will begin to determine what conditional payments it has made for the injuries and treatment related to the case. Based on this, they will issue a conditional payment letter containing detailed claim information to the beneficiary.

Keep in mind that this initial letter will not provide a final conditional payment amount because Medicare can and often makes changes while the beneficiary’s claim is pending.  Is this an unfair and torturous rule?  It is.  But this is the way it is and there is no other path.

An attorney will not receive a formal recovery demand letter until there is a final settlement, judgment, award, or other payment reported to Medicare. Once this occurs, a final demand letter will be sent out regarding the Medicare lien amount.

This letter will make clear the timeframe you have to pay, conditional payments that were made by Medicare, the total demand amount, and information on applicable waiver and administrative appeal rights.

The Gun to Your Head

Once the final demand letter is issued, from that date interest will begin to accrue, but is only assessed if the debt is not repaid or otherwise resolved. If you fail to repay the debt, interest is due and payable for each full 30-day period the debt remains unpaid and any payments that are made will be applied to the interest first and then to the principal.

If you fail to respond to the demand letter within the specified timeframe, it can result in the referral of the debt to the Department of Justice for legal action and/or the Department of the Treasury for further collection actions. After the lien has been paid, Medicare will issue a letter usually called the “zero letter” that confirms the lien has been paid. Settlement proceeds should never be disbursed unless and until any Medicare lien is paid in full.

Maryland Law Firm Learns Hard Lesson About Medicare Liens

A Maryland malpractice law firm recently had to pay $250k for failing to pay off a Medicare lien. The firm had obtained a $1.15 million settlement for one of its clients in a medical malpractice case. This client happened to be a Medicare beneficiary for whom Medicare had made conditional payments. Medicare had been notified of the settlement and demanded repayment of its debts incurred. But the law firm apparently refused or failed to pay the lien off in full, even after an administrative finding had made the debt final.

The firm was ultimately forced to enter into a settlement agreement with the United States to resolve allegations that it had failed to reimburse the U.S. for the Medicare payments regarding this case.

Under the terms of the agreement entered into with the U.S. Attorney’s Office for the District of Maryland, Meyers Rodbell had to pay the $250,000 for the Medicare lien in the malpractice case.

The firm was also required to adopt certain policies for handling Medicare liens in future cases.  They had to designate a person in the firm who would be responsible for paying Medicare liens, train that employee to ensure the firm would pay those liens on a timely basis, and review any outstanding liens with that employee every six months to ensure compliance.

No Medicare Liens in Wrongful Death Cases

Medicare cannot assert a lien on a wrongful death claim in Maryland. Why? Medicare says they make a claim only in wrongful death cases where the wrongful death statute provides payment for medical damages.

Maryland wrongful death claims are brought for the pain, suffering, and loss of economic support that a wrongful death beneficiary suffers from the loss of their loved one. They are claims for the victims’ loss and Medicare has no claim on those proceeds.

In states outside of Maryland, the rules can be different. The key is whether the wrongful death claim can recover medical bills. Medicare’s ability to enforce its right of reimbursement against a wrongful death settlement or verdict is going to depend on whether the state’s law allows for the recovery of medical expenses in wrongful death actions.

Survival Action Claims ARE Subject to Medicare Liens

There is a Medicare lien on a survival action claim in Maryland.  So there is a potential lien if the estate of a Medicare beneficiary receives money in a settlement or verdict for medical bills that were paid by Medicare. In Maryland, this claim is part of  survival action.  A reasonable amount for attorney fees are subtracted from the amount of the lien.  This is a key reduction but you also want to negotiate more.

Do you really have to pay back the lien on a survival action?  Yes. Medicare is stone serious about its rights. Under the “received payment” provision in the law, Medicare can compel anyone in the chain – doctors, lawyers, insurance companies – to pay back the lien.  So Medicare can recover from primary insurers, attorneys, and sometimes plaintiffs if reimbursement obligations are ignored.

The law gives Medicare a “super lien” for reimbursement.  This means that Medicare, Medicaid, and Medicare Part C plans now all have super lien rights.

This means they get their money first out of the plaintiff’s settlement before any other health care providers or the victim, regardless of any other claims or state law.

Maryland Law on Medicare Liens in Death Cases

This section is for lawyers trying to better understand the factual underpinnings of the thesis that there is no Medicare lien in a wrongful death case in Maryland.   First, let’s back up a bit.  Under the Medicare Secondary Payer (“MSP”) statute, when another payer (the “primary plan”) is available, Medicare, as the “secondary plan,” is not responsible for paying for the medical services. 42 U.S.C. § 1395y(b)(2)(A).

When the primary plan is unlikely to pay “promptly” for a beneficiary’s covered medical services, Medicare makes “a conditional payment” to ensure the beneficiary receives the services.” 42 U.S.C. § 1395y(b)(2)(B). “The scope of the beneficiary’s liability to Medicare ‘is ultimately defined by the scope of his own claim against the third party.’” Weiss v. Azar, II, Secretary United States Department of Health and Human Services, et al., 2018 WL 6478025 at P. 4 (4th Cir. February 7, 2019). See also Taransky v. Sec. of U.S. Dept. of Health and Human Servs., 760 F.3d 307, 315 (3rd Cir. 2014).

Medicare does not have a lien on a wrongful death beneficiary’s recovery when medical expenses are not claimed in the Complaint. See, e.g., Denekas v. Shalala, 943 F.Supp. 1073, 1080 (S.D. Iowa 1996) (holding Medicare could not recover from Plaintiffs as wrongful death beneficiaries because the Complaint did not include damages for their father’s medical expenses); Bradley v. Sebelius, 621 F.3d 1330, 1337 (11th Cir. 2010) (Medicare could not recover from the wrongful death settlement as it contained only ‘non-medical tort property claims,’).

“In Maryland, Medicare does not seek recovery from that portion of court awards that are designated as payment for wrongful death.” Weiss v. Azar II, 2018 WL 6478025 at p.7 (4th Cir. February 7, 2019). According to Medicare’s Secondary Payer Manual, “[w]hen a liability insurance payment is made under a wrongful death action, Medicare may recover from the payment only if the state statute permits recovery of these medical expenses.” MSP Manual, Ch. 7, § 50.5.4.1.1. This is critical to the interpretation of how this should play out in Maryland.  This might not be true in some other jurisdictions.  “If a wrongful death statute does not permit recovering medical damages, Medicare has no claim to the wrongful death payments.” Id.

In Maryland, a wrongful death action by its very nature does not include reimbursement for the decedent’s medical expenses. See Md. Cts. & Jud. Pro. Art. § 3-904(c);

The Key Case to Read If You Want to Settle Your Claim

The seminal case on this issue is Bradley v. Sebelius, an 11th Circuit opinion from 2010. This case involved Medicare’s appeal when a Florida probate court ruled that Medicare was only entitled to recover less than $800 out of a $22,000 lien in a wrongful death nursing home case. The probate court essentially divided the proceeds after the case was settled with the nursing home. Medicare argued that it was not required to follow the probate court’s ruling.

Medicare’s position was that the probate court did not rule on the merits of the case as to who gets what. The family paid back Medicare conditional payments anyway, probably because of the threats that come from the “super lien” provision we discussed above.

The 11th Circuit ruled that Medicare’s interpretation would put plaintiffs’ lawyers in the quagmire of having to file suit — and incur additional expenses — to get a ruling on the merits. In some cases, this is the tail wagging the dog because any recovery would be reduced by the costs of getting the case to trial. This is a good decision for plaintiffs, obviously.

New Trends in Medicare Lien Enforcement and Recovery in 2025

Since Gallardo v. Marstiller, which we will talk about in a momenet, the legal landscape surrounding Medicare and Medicaid reimbursement rights has continued to evolve. In 2024 and early 2025, both federal regulations and enforcement mechanisms have been expanded, impacting how personal injury settlements are handled.

One of the most significant developments is the increasing push for Medicare Set-Asides (MSAs) in liability settlements. While MSAs have long been required in workers’ compensation cases, the CMS has signaled a growing interest in requiring them for liability settlements as well. If CMS moves forward with this policy, plaintiffs receiving long-term medical care may be required to set aside a portion of their settlement to cover future medical expenses that Medicare would otherwise pay. This would significantly impact how settlements are structured, making it critical for attorneys to develop strategies that protect their clients’ financial interests.

Additionally, Congress is actively considering legislative reforms that could limit Medicaid and Medicare’s ability to recover from personal injury settlements. Lawmakers have introduced bipartisan bills aimed at curbing Medicaid’s right to recover future medical expenses, a practice allowed under Gallardo but widely criticized for depriving plaintiffs of funds intended for ongoing care. While no major federal law has passed yet, pressure is growing for changes that ensure injury victims retain more of their settlements.

At the same time, CMS has ramped up its enforcement of Medicare’s recovery rights, leveraging artificial intelligence (AI) and automated data tracking to identify unreported settlements involving Medicare beneficiaries. Insurers and attorneys have reported an increase in Medicare lien audits, with CMS scrutinizing whether settlements properly account for Medicare’s reimbursement claims. The 2023 CMS Final Rule also updated the penalty structure for failing to report settlements, capping fines at $365,000 per year per unreported case, rather than the previous flat $1,000 per day penalty. These changes provide some relief to insurers but reinforce Medicare’s strong enforcement stance.

Another key development is the rise of Medicare Advantage (Part C) plans aggressively seeking reimbursement. In recent years, courts have ruled that private Medicare Advantage plans have the same recovery rights as traditional Medicare, meaning they can demand repayment from personal injury settlements. Some of these plans are even asserting higher claims than Medicare itself, further complicating the settlement process. Attorneys must now carefully distinguish between traditional Medicare and Medicare Advantage liens to ensure compliance while minimizing unnecessary payouts.

In response to these changes, attorneys are adopting new settlement strategies to reduce the impact of Medicare liens. Structured settlements are becoming a popular tool, allowing funds to be distributed over time rather than in a lump sum, potentially limiting Medicare’s ability to claim reimbursement. Likewise, plaintiffs’ attorneys are focusing on settlement allocations that direct more compensation toward non-medical damages—such as pain and suffering or lost wages—thereby reducing the portion subject to Medicare recovery.

These trends highlight a shifting landscape in Medicare lien enforcement and settlement negotiations. As CMS and private insurers become more aggressive in recovering funds, attorneys representing injury victims must stay ahead of regulatory changes, adopt proactive settlement strategies, and ensure full compliance with Medicare’s ever-evolving recovery rules.

Medicaid Liens

The Supreme Court’s ruling in Gallardo v. Marstiller has significantly reshaped how Medicaid reimbursement works in personal injury settlements. Decided in 2022, the Court held that state Medicaid programs may recover costs not only for past medical expenses but also for future medical care from settlement proceeds. This decision has major implications for Medicaid recipients and personal injury lawyers navigating settlement negotiations.

The Impact of the Gallardo Decision

Before Gallardo, federal law only explicitly allowed Medicaid to seek reimbursement from portions of a settlement specifically allocated to past medical expenses. But with the Supreme Court’s ruling, states can now recover a portion of funds meant for future medical care as well, meaning plaintiffs may see a much larger portion of their settlements redirected to Medicaid.

This decision disproportionately affects cases involving catastrophic injuries, where a significant portion of the settlement is intended to cover long-term medical needs. Since Medicaid is a payer of last resort, the ruling creates additional hurdles for injury victims who rely on settlements to fund ongoing care.

2025 Legal and Legislative Developments Post-Gallardo

Since the ruling, several states have updated their Medicaid recovery statutes to align with the expanded recovery rights granted under Gallardo. Some key developments include:

• State-Level Legislative Changes: A handful of states have introduced laws clarifying how much Medicaid can recover from a settlement, with some states imposing caps or requiring a more detailed allocation of damages in settlement agreements.
• Federal Legislative Response: There have been discussions at the federal level about limiting Medicaid’s ability to claim future medical expenses to ensure that injury victims retain more of their settlements. While no major federal reform has passed as of early 2025, proposals have emerged seeking to impose clearer limits on Medicaid lien recovery.
• Litigation Strategies Adjusting to Gallardo: Personal injury attorneys are now being more strategic in structuring settlements, often working with experts to carefully allocate damages to minimize Medicaid’s lien recovery. Some courts have seen challenges to Medicaid’s claims when plaintiffs argue that a settlement is not fully compensating their losses, making broad state recovery unfair.
• Increased Use of Special Needs Trusts (SNTs): Attorneys have increasingly turned to Special Needs Trusts to protect settlements and ensure continued eligibility for Medicaid benefits. Properly structured, these trusts can help injury victims retain a portion of their settlement while still complying with Medicaid reimbursement requirements.

Practical Implications for Personal Injury Settlements

• Higher Medicaid Liens: Injury victims should expect Medicaid to claim a larger share of their settlements, particularly in cases involving severe or long-term injuries.
• Settlement Structuring Becomes Critical: Lawyers representing Medicaid beneficiaries must carefully structure settlements to limit excessive Medicaid clawbacks. This may involve court approval of settlement allocations or the strategic use of structured settlements.
• State-by-State Variations: Some states have taken an aggressive approach in recouping funds post-Gallardo, while others have placed limitations on Medicaid’s reach. It is now more important than ever for attorneys to understand the nuances of Medicaid recovery laws in their jurisdiction.

Looking Ahead: Will Gallardo Be Revisited?

As we move into 2025, there is growing pressure to revisit the broad implications of Gallardo. Advocates argue that allowing Medicaid to take funds meant for future care undermines the financial security of injury victims. Some federal and state lawmakers are exploring ways to mitigate the impact of the ruling, though no major legislative changes have been enacted at the federal level yet.

For now, Gallardo remains the law of the land, and Medicaid agencies continue to aggressively assert their rights under the decision. Plaintiffs and their attorneys must remain vigilant in navigating these complexities to maximize settlement value while complying with Medicaid recovery rules.

MEDICAL LIENS

In this section, we will look at medical liens in personal injury cases. Medical liens differ from Medicare liens in that they involve regular health insurance as opposed to Medicare. This section explains how the health insurance company may have an interest in your case in some states….and why it is not quite as big of a deal as you may think.

Medical Liens in Injury Cases

Most car and truck accident victims wisely use their PIP, Med-Pay, or health insurance to help with the costs of medical treatment. You are generally not obligated to pay back your health insurer, generally speaking.

If you break your arm playing with your kids in your backyard, your health insurance company is not looking to get paid back. But in many health insurance contracts (and under a legal rule called subrogation) your insurance company may place a lien on your case that allows them to be paid back out of any settlement.

Calculating Medical Liens

In many cases, your medical lien is not as much as you think it will be. First, your insurance company is not paying the full freight for all of your medical bills. Let’s say you have $100,000 in medical bills.

Your health insurer is not going to pay the doctors $100,000 because they are going to say the bills are too high and we only accept so much for this type of treatment. So your bills might get cut by let’s say 25%. So now your lien is down to $75,000. Good and aggressive accident lawyers will then work hard to negotiate down your lien. How much? It depends on the case.

So, why it is unfortunate that you have to pay back your medical liens keep in mind that the insurance company is required to pay you back for all of your medical bills, not the reduced amount. So in most cases, it is still a winning hand for the injured victim on the issue of how much compensation they get versus how much they have to pay back with respect to the medical bills.

Also, and we can’t emphasize this enough, make sure you know your state’s laws with respect to liens. Some do not allow subrogation on medical liens in some cases regardless of what your medical insurance contract says.