There are nearly 40 million personal injury cases in the U.S. every year that require medical evaluations and treatment.

People slip and fall, get into car accidents, hurt themselves at work, or are the victims of medical malpractice. All these scenarios open the door for lawsuits. 

If you have been injured because of the negligent actions of another person, a personal injury settlement can help you recover some of your damages.

Getting a compensation payout will allow you to pay for medical expenses and fill the gap left by lost income. 

However, if you are over 65, Medicare may have a lien on your settlement (if you are a beneficiary of this health insurance). 

What Is a Lien?

Liens are claims made by a third party for a portion of a personal injury settlement.

What Is a Lien

When it comes to settlements, these third parties are typically a government agency, insurance provider, or health insurance company. 

When a lien is placed on your settlement, a third party wants to ensure they are reimbursed for the expenses incurred after you sustained your injury.

So, if an insurance company covered your medical bills before you settled your personal injury case, the insurer can place a lien on your final settlement. 

A lien will automatically reduce your settlement. Therefore, it is crucial to know when it is likely for a lien to be placed on your settlement and how it will affect your payout. 

What Is Medicare? 

Medicare is a federal health insurance program intended to assist U.S. citizens 65 years of age and above. The program also covers young people with certain disabilities and those suffering from end-stage renal disease. 

Medicare Part A refers to the program’s hospital insurance benefits. These benefits cover inpatient hospital stays, hospice care, treatment and care in a nursing facility, and sometimes, home health care. 

Medicare Part B is medical insurance covering physician services and outpatient treatment. This part of the program also includes funding for medical supplies and preventative medical services. 

The third part of the Medicare program, Part D, covers the cost of prescription drugs. This also includes important vaccines and shots. 

What Is A Medicare Lien?

If, for instance, you are in a car accident, Medicare’s benefits will kick in and cover your medical expenses for the injuries you sustained. This will typically happen long before you even initiate a personal injury case.

If you win your case against the at-fault driver, you will hear from Medicare again. This time, they will claim reimbursement for the medical bills they paid on your behalf. This reimbursement claim is called a Medicare lien. 

The Medicare program uses liens to both recoup money and to ensure that it does not pay twice for the same treatment. 

Medicare also works under a secondary payer system. This means the program will not pay for medical expenses if you have another source of insurance. For instance, you may get paid by the at-fault driver’s insurance company or your own insurer. 

If the at-fault driver is uninsured and no other insurer can cover your expenses, Medicare will cover the costs. 

The main goal of the lien system is to ensure fairness during and after personal injury settlement processes.

Considering that Medicare paid for your treatment, it would be unreasonable to expect them to absorb the expense while you also receive a separate settlement. 

What Is the Medicare Set-Aside Arrangement?

There is little room for negotiations when Medicare has placed a lien on your settlement. A lien prioritizes the program over other claims, including the insured party’s. 

It is also important to note the Medicare Set-Aside (MSA) arrangement. This arrangement requires that part of a settlement be reserved for future medical expenses if you expect Medicare to cover them. 

The MSA requirement will apply if you are already a Medicare beneficiary settling a claim over $25,000. It will also apply if you plan to enroll in Medicare within 30 months of settling claims worth over $250,000.

How Will A Medicare Lien Affect Your Settlement

How Will A Medicare Lien Affect Your Settlement?

Reporting a settlement or judgment resulting from your personal injury claim to Medicare is mandatory within 60 days. If you do not report your finalized settlement, you could be fined $1,000 per day. 

The easiest way to report your settlement is to visit the Medicare website and submit the information electronically.

Once Medicare receives your report, you will receive a notice of the amount of the Medicare lien (this takes around 120 days). 

When you get the notice, you will see a list of expenses and treatments that Medicare wants to be reimbursed for.

Remember that Medicare can only receive reimbursement for medical treatment related to your personal injury claim. 

Let your lawyer review the notice for accuracy and remove unrelated medical expenses from the list. Medicare will send a payment demand within 30 days when this is done. 

You will have to pay the money out of your settlement, or your lawyer can file an appeal if they believe the lien amount is incorrect.

Unfortunately, it is rare for Medicare to accept a lower sum after unrelated medical expenses are removed from the list. 

However, because you have a lawyer, the lien may be reduced by one-third. This is because Medicare will consider that another third of your settlement will be paid to your lawyer. 

Lien Payment Exceptions

There are a few exceptions to keep in mind. For instance, if your settlement totals less than $5,000, the Medicare lien will only be 25%. This amount will be a final reimbursement. 

If your settlement is less than $300 and you do not receive a demand letter from Medicare, you will not have to pay the program anything. However, this happens very rarely. 

A Medicare Lien Does Not Have to Ruin Your Settlement Victory

While a Medicare lien can significantly affect your settlement amount, it does not have to ruin your settlement victory.

You can still secure a fair outcome by understanding the process and working with an experienced lawyer.