Lawyer Listings Add, Update, or Remove Listings

Subrogation and Medical Liens on a Settlement

Why an injured person does not keep the whole settlement - the right of health insurers, Medicare, Medicaid, ERISA plans, workers' compensation carriers and hospitals to be repaid from a recovery for the treatment they paid for, how each kind of lien is created and enforced, the rules that reduce them, and why the liens have to be resolved before the cheque is cashed.

Informational only - this is not legal advice. These definitions explain general legal vocabulary in plain English. They are not advice about your situation, reading them creates no attorney-client relationship, and the law differs from state to state and changes over time. For advice you can rely on, speak to a lawyer licensed in your state.

What it means

When a person is injured by someone else and a third party pays for the treatment, that payer usually has a right to be reimbursed from whatever the injured person recovers from the wrongdoer. The right goes by different names - subrogation, reimbursement, a lien, a right of recovery - and rests on different sources, but the effect is the same: a portion of the settlement or verdict belongs to the payer, must be identified and resolved, and cannot lawfully be ignored. A settlement that looks large at the mediation table can shrink substantially once the liens are paid, and a lawyer who disburses to the client without satisfying a known lien can be personally liable for it.

The sources differ in strength. Medicare's right of recovery is federal and nearly absolute: the parties must report a settlement with a Medicare beneficiary, Medicare must be repaid its conditional payments (reduced by a share of the attorney's fees and costs), and it can pursue the beneficiary, the lawyer and even the paying insurer for what it is owed. Medicaid recovers under state statutes required by federal law, but its lien is limited to the part of the recovery that represents medical expenses. A self-funded ERISA employee health plan may enforce reimbursement provisions written into the plan document, often without the reductions state law would impose, and most such plans claim first-dollar reimbursement; an insured plan or an individual policy is governed by state law, which in many states applies a made-whole rule (no reimbursement until the injured person is fully compensated) or a common-fund rule (the payer shares the fee), or both. A workers' compensation carrier has a statutory lien on a third-party recovery for benefits paid, plus a credit against future benefits. Hospital-lien statutes in most states let a hospital that treated an accident victim file a lien directly against the recovery, sometimes for its full billed charges rather than the negotiated rate. Veterans Affairs, military health plans and state crime-victim funds have their own recovery rights.

Resolving the liens is part of the case. The lawyer identifies every payer, obtains an itemised claim, audits it for treatment unrelated to the accident, and negotiates: many payers accept a reduction for attorney's fees and for the risk and costs of the case, and most will compromise where the recovery is limited by policy limits or the injured person's own fault. Medicare and Medicaid have formal processes and appeal rights for that. Where the settlement is small relative to the medical bills, the ordering of payments - liens, then fees and costs, then the client - can leave the client with little, which is a fact the lawyer should explain before a settlement is accepted, not after. In a case involving future Medicare-covered treatment, the parties may need to set aside part of the recovery for that treatment so that Medicare's interest is protected.

Where this comes from

Medicare's recovery right is the Medicare Secondary Payer statute, 42 U.S.C. § 1395y(b)(2), with the regulations at 42 C.F.R. part 411, subpart B, and the mandatory reporting requirement at § 1395y(b)(8). Medicaid recovery is required by 42 U.S.C. § 1396a(a)(25) and § 1396k and limited to the medical portion of a recovery by Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268 (2006), and Wos v. E.M.A., 568 U.S. 627 (2013), with Gallardo v. Marstiller, 596 U.S. 420 (2022), extending it to amounts for future medical care. ERISA plan reimbursement is enforced under 29 U.S.C. § 1132(a)(3) as construed in Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 356 (2006), US Airways, Inc. v. McCutchen, 569 U.S. 88 (2013) (plan terms override equitable defences; the common-fund rule fills a gap), and Montanile v. Board of Trustees, 577 U.S. 136 (2016) (the fund must still be traceable); FMC Corp. v. Holliday, 498 U.S. 52 (1990), holds that state anti-subrogation laws do not reach self-funded plans. Workers' compensation liens, hospital-lien acts and the made-whole and common-fund doctrines are each state's own. Military and VA recovery is the Federal Medical Care Recovery Act, 42 U.S.C. §§ 2651-2653.

When people hire a lawyer for this

Lien resolution is one of the main things an injury lawyer does that a client never sees, and a client should ask at the start who paid for the treatment, whether the lawyer will negotiate each lien, and how the fee is charged on the lien reductions. Anyone on Medicare or Medicaid should tell the lawyer at the first meeting, because the reporting and repayment rules are federal and a settlement that ignores them can be unwound. A person settling a small claim without a lawyer should get the health insurer's reimbursement demand in writing before signing anything, since the release usually makes the injured person responsible for every lien.

Find a lawyer for this in your state

Choose your state. Each link opens the directory page for the city in that state with the most currently published law firms in this practice area; a +n beside the city is how many other cities in the state also have one. The list is generated when this page loads, so a state whose listings have lapsed drops out rather than becoming a dead link.

« All glossary terms

Part of the LawyerLand plain-English legal glossary. Definitions are written from primary sources - statutes and court rules - and each entry states the authority it rests on, or says plainly when the doctrine is state law with no national rule.

If you cannot afford a lawyer, civil legal aid programmes provide free help with many of these problems: civil legal aid programmes by state.

Related free reference tools: statute of limitations for a personal-injury claim, by state, quoted from each state's official text - part of LawyerLand's legal reference tools.