Medicaid Liens



Medicaid Liens and How They May Affect Your Recovery

From beginning to end, the recovery process for accidents can be cumbersome and difficult. Having medical liens attached to your recovery only adds to the headache. If you are a recipient of Medicaid and are injured in an accident, it is highly likely that the program has an interest in any proceeds you receive from a settlement or judgment. In other words, Medicaid likely has a right to reimbursement from your personal injury recovery.

As you may be aware, Medicaid is a federally funded program administered by the states. This program is need-based and is provided to those who fall within strict qualification guidelines. Medicaid liens are governed by the complex North Carolina General Statute §108A-57; thus, it is always a good idea to seek advice from a personal injury attorney about your personal injury claim when Medicaid is involved.

How are Medicaid Liens Established?

Essentially, Medicaid liens attach to personal injury proceeds once the injured party accepts Medicaid coverage. Therefore, if you are injured in an accident and accept benefits from Medicaid to help cover those injuries, Medicaid automatically receives an interest on future settlement or judgment proceeds for the accident. This program is also unique in that they will also receive rights in any proceeds received from MedPay (also known as Medical Payments coverage) or personal insurance coverage. Also, Medicaid, like Medicare, is not required to send notice of their lien in order for the lien to be valid. However, you should be sure to notify Medicaid of any settlements reached and you must pay the lien amount within 30 days of receiving your recovery proceeds.

How Will Medicaid Liens Affect Disbursement of Your Recovery?

Once you have received the proceeds from your settlement or judgment, you will then need to calculate the Medicaid lien amount and disburse payment. Medicaid’s recovery on their lien may not exceed 1/3 of your total settlement or judgment amount. Furthermore, you will likely not be obligated to pay any remaining balance on a lien that exceeds the 1/3 total settlement amount. Medicaid also allows for attorney’s fees and costs to be deducted before the program will take their share of the recovery proceeds. The following example will help better illustrate how Medicaid affects your disbursement.

Assume that Tom is injured in a car accident and receives $12,000 worth of medical treatment. Medicaid covers the entire $12,000 amount. Tom hires an attorney and eventually enters into a settlement agreement for an amount of $30,000. Here, Medicaid would have a $12,000 lien on Tom’s recovery because that was the amount paid by the program. However, the program will not be able to receive the full $12,000 amount due to the 1/3 total settlement cap. Therefore, Medicaid will only be able to receive up to $10,000 of Tom’s settlement. Tom’s attorney will receive $10,000 (standard 1/3 contingency fee) Medicaid will receive $10,000 (1/3 of the total settlement) and Tom will receive the remaining $10,000 balance. It is also important to reiterate that Tom will not likely be obligated to pay the remaining $2,000 balance on the Medicaid lien. The calculations and disbursement amounts are shown below.

Maximum Amount Medicaid can receive: $30,000 x 1/3 = $10,000 (1/3 of total settlement)
Settlement Amount: $30,000
Attorney’s Fees: -$10,000
Remaining balance: $20,000
Maximum Medicaid: -$10,000 (1/3 of $30,000)
Amount to Tom: $10,000

Disbursement Calculations with Both Medicare and Medicaid Liens

When you are injured in an accident and you receive benefits from both Medicare and Medicaid, each program will likely have a lien on your recovery proceeds. Medicare will receive repayment from your proceeds before Medicaid does. Thus, if the Medicare lien amount is greater than 1/3 of the total recovery amount, Medicaid will receive nothing. For example, if Medicare receives $12,000 of a $30,000 settlement, Medicaid will receive nothing, as Medicare has already received up to 1/3 of the total recovery amount.

If, however, Medicare receives less than 1/3 of the total settlement, Medicaid can then receive the difference between Medicare’s lien amount and 1/3 of the total recovery. For instance, if Medicare receives an $8,000 reimbursement from a $30,000 settlement, Medicaid will be able to receive up to $2,000 of the recovery, the difference between Medicare’s lien amount $8,000 and 1/3 of the total recovery proceeds ($10,000 – $8,000 = $2,000 left for Medicaid reimbursement).

It is important to note that Medicare allows for a reduction in their overall lien amount based on total attorney’s fees. Therefore, it is important to hire an attorney to ensure that all liens are receiving the correct reimbursement.

Disbursement Calculations with Both Medicaid and Physicians Liens

Generally, when proceeds from a personal injury settlement or judgment have both physicians liens and Medicaid liens attached, the Medicaid liens should be pro-rated with the physician lien. Determining the pro rata share for each lien holder can be confusing; however, using an easy three-step process can help minimize the confusion and will establish the correct pro rata share amount every time.

STEP 1: Add together all physicians liens to find a total amount.

STEP 2: Divide each individual lien by the total amount found in step 1 to get a percentage.

STEP 3: Multiply each percentage found in step 2 by the 1/3 total settlement amount available to pay the Medicaid liens.

*Step 3 will provide the dollar amount owed to each lien holder per their pro rata share.

Let’s look at an example to better understand how lien holders calculate pro rata shares. Tom received a $30,000 settlement. Tom has a $20,000 Medicaid lien and three physicians liens in the amount of $8,000, $4,000, and $2,000. In this example, Tom will have $10,000 to pay liens (1/3 of the total recovery). With this, we will determine each lien holder’s pro rata share and the amount each lien holder will receive from the $10,000 using the simple three-step process. The four liens are as follows:

Medicaid lien: $16,000
Physician lien 1: $8,000
Physician lien 2: $4,000
Physician lien 3: $2,000

STEP 1: Add together all the liens to find a total amount.

16,000
8,000
4,000
+ 2,000
30,000

STEP 2: Divide each individual lien by the total amount found in step 1 to find a percentage.

Medicaid Lien: $16,000 ÷ 30,000 = .533
Physician lien 2: $8,000 ÷ 30,000 = .267
Physician lien 3: $4,000 ÷ 30,000 = .133
Physician lien 4: $2,000 ÷ 30,000 = .066

STEP 3: Multiply each percentage found in step 2 by the 1/3 total settlement amount to pay liens to find the amount each lien holder should be paid.
Medicaid lien 1: .533 x 10,000 = $5,330
Physician lien 2: .267 x 10,000 = $2,670
Physician lien 3: .133 x 10,000 = $1,330
Physician lien 4: .066 x 10,000 = $660

The amounts found in Step 3 are the dollar amounts each lien holder will receive from Steve’s $10,000, per their pro rata share. Again, please remember that any amount of a physician lien not fully covered by the recovery proceeds will still be owed.

Negotiating and Reducing Lien Amounts

Negotiating or reducing a Medicaid lien can be difficult. The best way to reduce this type of lien is to request a final itemization from the program and to dispute any claims that you feel are not related to your personal injury case. Disputing unrelated treatments or procedures is the most effective way to potentially reduce a Medicaid lien. Please be aware that here are very specific dispute procedures that must followed. Please visit the following link [“Medicaid Lien Requests”] which provides the Medicaid lien request form and information as to where it should be sent. Once the request is sent, Medicaid will generally respond within 30 days. Once you receive the response, carefully look at each provider included in the lien amount. If for some reason treatment included in Medicaid’s claim does not involve medical treatment for your accident, immediately notify the program of the discrepancy. Medicaid may request medical records for those charges that you believe are unrelated. Be sure to send those medical records quickly, as a delay may result in denial of your claim.

Furthermore, a change in North Carolina law in 2013 allows for Medicaid to negotiate their lien amount. It is important to begin the process as soon as an offer is on the table and it becomes evident that the settlement amount will not cover Medicaid’s lien. You can send a lien reduction request to Medicaid, which should include why the lien amount should be reduced. The Medicaid office will consider factors such as the amount of your out-of-pocket costs, the amount of future medical costs, the likelihood that your case will succeed if taken to court, and the severity of injuries. Also, do not be afraid to include pictures of the severity of your injuries, as an emotional response to the injuries may bolster your case.

Lastly, an injured party may petition the court and request a further limitation on the amount Medicaid may recover. Petitioning the court must be done as a last resort, and hiring an experienced personal injury attorney to handle your petition is strongly recommended.

As you can see, handling Medicaid liens can be a difficult process. It is important for you to know that speaking with a lawyer and seeking legal advice for your personal injury claim is always a good idea. Please feel free to call our office at (919) 313-2729 or use our lawyer locator to find an attorney near you.



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