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.