A $100,000 settlement doesn't always mean $100,000 for you. After fees and costs, some of the money may legally belong to whoever paid your medical bills or benefits, such as a health insurer, Medicare, Medicaid, or a workers' comp carrier. These claims are called liens. Handling them well can put thousands of dollars back in your pocket.

The main kinds of liens

1. Medicare

Under the federal Medicare Secondary Payer Act (42 U.S.C. § 1395y(b)), when Medicare pays for treatment that a liability insurer is responsible for, those payments are "conditional." Medicare must be repaid from the settlement. Medicare's lien comes ahead of most others, and ignoring it can expose the beneficiary, and even the lawyers and insurers, to liability. Medicare's recovery is reduced by a share of the procurement costs, meaning the fees and costs of getting the recovery (42 C.F.R. § 411.37). The amount can be challenged when Medicare's list includes unrelated treatment.

2. Medicaid and NJ FamilyCare

New Jersey's Division of Medical Assistance and Health Services can recover what Medicaid paid for accident-related care from a settlement or judgment (N.J.S.A. 30:4D-7.1). Federal law limits the State's recovery to the part of the settlement that represents medical expenses, as the U.S. Supreme Court held in Arkansas Department of Health v. Ahlborn, 547 U.S. 268 (2006), and later cases.

3. Health insurance

Whether your private health insurer can be repaid depends heavily on the type of plan:

  • Fully insured state-regulated plans: New Jersey's collateral source statute (N.J.S.A. 2A:15-97) and state insurance regulations generally limit these insurers' ability to recover from a personal injury settlement.
  • Self-funded ERISA plans, which are many large employer plans, are governed by federal law and can often enforce reimbursement terms in the plan document, as the U.S. Supreme Court held in US Airways v. McCutchen, 569 U.S. 88 (2013).
  • Federal employee plans (FEHBA) and military coverage have their own rules.

Getting the actual plan document is the first step. Many claimed liens shrink or disappear once the plan type is confirmed.

4. Workers' compensation

If you were hurt at work and also have a third-party lawsuit, the comp carrier has a lien on that recovery under N.J.S.A. 34:15-40, reduced by its share of legal costs, and a credit against future comp benefits. Read about third-party claims.

Others

Hospitals sometimes assert liens, as do child support agencies. Medical providers who treated you on a promise of payment from the settlement may also need to be paid. In New Jersey auto cases, PIP generally doesn't have a lien against the at-fault driver's coverage, because of the no-fault system. PIP explained.

How liens are reduced

  • Audit the charges. Lien statements often include unrelated treatment.
  • Apply procurement cost reductions and the "common fund" doctrine where the law allows
  • Confirm the plan type and whether reimbursement is allowed at all
  • Request waivers or compromises based on hardship or limited insurance
  • Limited recovery: when the settlement is small compared to the damages, lienholders often accept less

Liens in New York cases

New York's General Obligations Law § 5-335 generally bars health insurers from seeking reimbursement from a personal injury settlement, but it doesn't apply to self-funded ERISA plans, Medicare, or Medicaid. If your accident happened in New York, different lien rules may apply.

Future Medicare interests

When a settlement includes money for future medical care for someone who's on Medicare, or will be soon, Medicare's future interests may need to be considered. For workers' comp, this is often done through a Medicare Set-Aside.

Why it matters to you

A lawyer's job isn't finished when the case settles. Resolving liens correctly protects you from future claims, and negotiating them down increases what you keep. Ask any lawyer how they handle liens, and expect a written settlement statement showing every dollar. How fees and costs work.