Medical liens and Medicare in a car accident settlement

What a lien is

A lien or reimbursement claim is a right to be paid back out of your settlement for medical care that someone else paid for. Common ones come from health insurers, Medicare, Medicaid, hospitals that treated you without payment, and sometimes your own auto insurer's medical payments coverage. They are paid before you receive your share, so they directly cut your net. Enter them in the settlement calculator to see the effect.

Medicare

Medicare is a secondary payer when an auto liability or no-fault insurer is responsible for your care. When it pays your accident bills while the claim is pending, the payments are "conditional": they must be repaid when you receive a settlement, judgment or award. Report the accident to Medicare's Benefits Coordination and Recovery Center (BCRC), which tracks what Medicare paid and sends a final demand after you settle. Interest is charged if the demand is not paid on time, and you have 120 days from the demand to appeal.

Medicare formula

Medicare shares the cost of getting the settlement. Under 42 CFR 411.37, when Medicare's payments are less than the settlement, its recovery is reduced by its proportional share of your attorney fees and costs (procurement costs):

1. Procurement costs ÷ settlement = $21,000 ÷ $60,000 = 35%
2. Medicare's share of costs: 35% × $15,000 Medicare paid = $5,250
3. Medicare recovers $15,000 − $5,250 = $9,750

If Medicare paid as much as the settlement or more, it recovers the settlement minus the procurement costs.

Small settlements

• $750 threshold: for 2026, CMS does not seek recovery from physical trauma liability settlements of $750 or less.
• 25% option: for physical trauma liability settlements of $10,000 or less, you can resolve Medicare's claim for 25% of the gross settlement (for example $2,000 on an $8,000 settlement), if you elect it before Medicare issues a demand and expect no other settlements.

Private health plans

Whether a private health plan can be repaid, and how much, depends on the plan. Employer plans governed by federal law (ERISA), especially self-funded ones, often enforce their reimbursement terms strictly. Insured plans are subject to state law, and some states limit or bar subrogation or require the plan to share attorney fees. Ask the plan for its lien amount and the plan document before you settle.

Reducing liens

• Ask for an itemized lien and remove charges unrelated to the accident.
• Ask the lienholder to reduce its claim by its share of attorney fees, as Medicare's formula does.
• When the settlement is limited by low policy limits, ask for a further reduction so everyone shares the shortfall.
• Do not ignore a Medicare claim: paying it is your responsibility, and CMS can pursue the beneficiary, the insurer and the attorney.