Medi-Cal and Medicare liens

If Medi-Cal or Medicare paid for your treatment after a crash, that program has to be repaid from your settlement. Both have strong, statute-backed recovery rights, and both come with rules you cannot ignore — a missed Medicare step can hold up a settlement or expose the lawyer and the insurer. Getting these claims resolved and reduced is core work in any case with public-payer coverage.

It is general information, not legal advice. Private health plans work differently — see health insurance liens.

Medi-Cal

Medi-Cal is California's Medicaid program, run by the Department of Health Care Services (DHCS). When Medi-Cal pays for care of an injury someone else caused, DHCS has a statutory right to recover those payments from your recovery against the responsible party (Welf. & Inst. Code, § 14124.70 et seq.).

• Notice. DHCS must be notified of the claim, and it provides an itemized list of what it paid that it contends is related to the injury. That list is checked line by line for unrelated care.
• The recovery cap. DHCS cannot recover more than the least of three amounts (§ 14124.785):
  • the lien reduced by 25 percent for attorney fees, minus a pro rata share of the litigation costs (§ 14124.72);
  • the portion of the settlement fairly allocable to past medical expenses — the Ahlborn allocation (§ 14124.76);
  • the amount you actually take from the settlement after your attorney fees and costs (§ 14124.78).
• Small settlements. When the settlement is small relative to the full value of the case — a limited policy, shared fault — the allocation figure and the net-to-you figure both drop, and the lien drops with them.
• Special-needs planning. If preserving Medi-Cal eligibility matters, the settlement may need to route through a special-needs trust.

Sources: Welf. & Inst. Code, § 14124.70 et seq. (Medi-Cal third-party recovery); § 14124.72 (25 percent fee reduction and pro rata costs); § 14124.76 (Ahlborn allocation to the medical-expense portion); § 14124.78 (recovery may not exceed the beneficiary's net); § 14124.785 (DHCS recovers the least of the three); Arkansas Dept. of Health & Human Servs. v. Ahlborn (2006) 547 U.S. 268 (Medicaid recovery limited to the medical-expense portion of a settlement); Bolanos v. Superior Court (2008) 169 Cal.App.4th 744 and Lima v. Vouis (2009) 174 Cal.App.4th 242 (California courts applying Ahlborn to the Medi-Cal lien).

Medicare

Medicare is a secondary payer by federal law. It will pay injury-related bills conditionally while the liability claim is open, but those "conditional payments" must be repaid from the settlement, and the recovery right runs against everyone who touches the settlement — the claimant, the attorney, and the liability insurer.

• Reporting. The liability insurer must report the settlement of a Medicare beneficiary's claim to Medicare.
• Conditional-payment resolution. The Medicare recovery contractor produces a conditional-payment amount, which is disputed for unrelated charges and then finalized. There is a process to get a final demand tied to the settlement date.
• Reduction. Medicare's demand is reduced by a proportionate share of procurement costs, and in a full-policy-limits or hardship situation further reductions or waivers can be sought.
• Do not disburse first. Settlement funds tied to Medicare conditional payments are generally held until the demand is resolved.

Sources: Medicare Secondary Payer statute, 42 U.S.C. § 1395y(b); implementing regulations at 42 C.F.R. part 411.

Medicare Set-Asides and future care

When a settlement compensates you for future injury-related medical care and you are (or will soon be) a Medicare beneficiary, the concern is that Medicare should not pay for care the settlement already covered. In workers' compensation, a formal Medicare Set-Aside is routine. In a liability settlement, whether a set-aside is needed, and how it is calculated, is unsettled and fact-specific — it depends on the injury, the settlement's allocation, and your Medicare status. This gets evaluated before the settlement is finalized.

What to do

• Tell your lawyer at the start if you have Medi-Cal or Medicare, or if you have applied.
• Keep every notice from DHCS, a Medicare recovery contractor, or a "Rights and Responsibilities" letter.
• Do not accept a first conditional-payment or lien figure — both are routinely inflated with unrelated charges.
• Expect the lien resolution to add time at the end of the case; it is worth it for what it saves.

Common questions

Does Medi-Cal take money out of my settlement?

Yes. The Department of Health Care Services has a statutory right to recover what Medi-Cal paid for treatment of your injury, from your recovery against the person who caused it (Welf. & Inst. Code, § 14124.70 et seq.). The amount is capped and reduced by a formula.

How much can Medi-Cal actually recover?

Its recovery is capped at the least of three figures: the lien minus 25 percent for attorney fees and a pro rata share of costs; the part of the settlement allocated to past medical expenses; or the amount you actually net from the settlement after fees and costs. In a limited-settlement case this often cuts the lien substantially.

What is a Medicare "conditional payment"?

Medicare pays your injury-related bills conditionally while the liability claim is pending, then must be repaid from the settlement. Medicare is a secondary payer by law, and its recovery right is strong — it can pursue the claimant, the lawyer, and the insurer.

What is a Medicare Set-Aside?

When a settlement includes money for future injury-related care and you are a Medicare beneficiary, a portion may need to be set aside to pay for that future care before Medicare will cover it. Whether one is required in a liability case is fact-specific.