Medicare and Medicaid Liens on an Iowa Injury Settlement

By the FigureMyTax Editorial Team · How we calculate

The Iowa Medicaid payor has an automatic lien. In a tort case it presumptively receives the lesser of what it paid and two-thirds of the recovery after reasonable attorney fees, legal expenses and filing fees, whether or not you are made whole. Medicare recovers under federal rules.

The lien

Iowa Code 249A.54(1) and (3) makes Medicaid the payor of last resort and says it is repaid in full, ahead of other persons, from third-party benefits regardless of whether you are made whole or other creditors are paid. The Medicaid payor has an automatic lien on the collateral (your claims, judgments, settlements and proceeds) for the full amount of assistance, attaching when you first receive covered services; filing a notice of lien with the district court clerk is notice to all persons.

The two-thirds formula

In a tort action, the amount recovered is distributed as follows: after deduction of reasonable attorney fees, reasonably necessary legal expenses and filing fees, there is a rebuttable presumption that all Medicaid payors together receive two-thirds of the remainder or the total medical assistance provided, whichever is less, and the rest goes to you (subsection 16). On a $100,000 settlement with $33,333 in fees and $3,000 in costs, the remainder is $63,667 and two-thirds is $42,444.

Notice and payment deadlines

Your attorney must notify the Medicaid payor in writing within 30 days after starting an informal recovery, and of a lawsuit within 30 days after filing. You must give notice of a settlement at least 30 days before it is finalized, by certified mail to the payor's third-party liability contact, or you, your agent and your attorney are jointly and severally liable. Within 60 days after receiving proceeds you must pay the payor or put the full amount in an interest-bearing trust account while the amount is decided (subsections 11, 13, 14 and 17).

Contesting the amount

If federal law limits Medicaid to the medical portion of a recovery, as the Supreme Court held in Arkansas Department of Health and Human Services v. Ahlborn (2006), you may contest the amount, but only by proving by clear and convincing evidence that the medical portion is lower or that Medicaid paid less. A settlement that designates the medical portion does not meet that burden unless the Medicaid payor is a party to it. Disputes go to the court where you filed your action, or by a declaratory judgment petition within 121 days if you did not sue.

Medicare

Under the Medicare Secondary Payer statute, 42 U.S.C. 1395y(b)(2), the United States may recover conditional payments and collect double damages from responsible entities; 42 CFR 411.24 governs recovery, and 42 CFR 411.37(c) reduces Medicare's recovery by its procurement-cost share. On a $100,000 settlement with $36,333 of fees and costs, $15,000 of Medicare payments would shrink to about $9,550.

Next steps

See how hospital liens work and what Iowa law says about insurer reimbursement, then enter every claim in the Iowa medical lien calculator.

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