Medicare and Medicaid Liens on an Alabama Injury Settlement

By the FigureMyTax Editorial Team · How we calculate

Medicare recovers its conditional payments under federal law, and Alabama Medicaid is subrogated by statute to the extent of what it paid. Both must be resolved before the settlement money is released.

Medicare: the federal right to be repaid

Under the Medicare Secondary Payer statute, 42 U.S.C. 1395y(b)(2), the United States may bring an action against any entity that was required or responsible to pay under a primary plan, and may collect double damages. A payment Medicare makes while a liability claim is pending is a conditional payment, and 42 CFR 411.24 sets how Medicare recovers it.

How Medicare's claim shrinks

When Medicare's payments are less than the settlement, 42 CFR 411.37(c) reduces its recovery by its share of the procurement costs: divide the fees and costs by the total settlement, apply that ratio to the Medicare payment, and subtract. On a $100,000 settlement with $36,333 of fees and costs, the ratio is 36.3%. If Medicare paid $20,000, its share of the costs is $7,267 and the recovery is $12,733. The Alabama medical lien calculator runs this formula for you.

Alabama Medicaid is subrogated by statute

Ala. Code 22-6-6(a) says that when the Alabama Medicaid Program provides medical assistance for an injury caused under circumstances creating a cause of action, the State is subrogated to the recipient's rights and may recover the proceeds to the extent of the actual medical assistance payments. The recipient must do nothing to prejudice those rights, and section 22-6-6.1 separately assigns to the State the recipient's rights to payment for medical care.

Notice deadlines you cannot miss

A Medicaid recipient who files a civil action must, within 10 days of filing, give the director of the Alabama Medicaid Program and the Attorney General written notice and a copy of the complaint (22-6-6(c)). The Agency's rules add that the recipient must notify the Third Party Division before entering any settlement and pay the State the funds needed to satisfy its subrogation rights (Ala. Admin. Code 560-X-20-.07).

A federal limit on Medicaid recovery

In Arkansas Department of Health and Human Services v. Ahlborn (2006), the U.S. Supreme Court held that federal Medicaid law and its anti-lien provision did not let a State assert a lien on a settlement beyond the portion that represented medical costs. How that applies to an Alabama case depends on how the settlement is allocated, so ask an attorney before agreeing to a Medicaid payoff.

Where this fits

Medicare and Medicaid are only two of the claims on a settlement. See how hospital liens and health insurer claims work and when the made-whole doctrine delays a health insurer's repayment.

This is general information, not legal advice, and the state comparisons above are illustrative, not an exhaustive survey. Confirm how Alabama's rules apply to your specific case with a licensed Alabama attorney.