How Much Can Medicare Take from a Personal Injury Settlement?

If you receive Medicare benefits and suffer injuries in an accident caused by someone else, you may be able to pursue compensation through a personal injury claim or lawsuit. However, if Medicare covered treatment for your accident-related injuries, they may seek reimbursement from any settlement you receive. So how much can Medicare take?

Below we’ll look at Medicare’s reimbursement rights, how the amount is calculated, the appeal process, and tips for handling Medicare liens on accident settlements.

Medicare’s Right to Reimbursement from Injury Settlements

Under the Medicare Secondary Payer Act, Medicare has a legal right to seek reimbursement when it pays for medical treatment that should have been covered by another party. This often comes into play with personal injury settlements.

For example, if you’re injured in a car accident caused by another driver, their liability insurance should pay your accident-related medical bills. But if Medicare paid any of those bills upfront before you received a settlement, they can seek repayment from your eventual car accident settlement.

Medicare does this to avoid paying expenses that are the responsibility of other parties. It ensures the program’s funds are not misused.

How Medicare Calculates Reimbursement Amounts

When seeking repayment from an injury settlement, Medicare has specific guidelines on calculating appropriate reimbursement amounts:

• Document medical expenses paid: Medicare compiles documentation showing how much they paid providers for treatment related to the accident injuries.

• Allow for procurement costs: Medicare reduces their reimbursement amount to account for legal costs incurred obtaining the settlement.

• Take a percentage of recovery: Medicare does not usually take 100% of a settlement, even if their expenses exceed the recovery amount. Their reimbursement is limited to a percentage.

• Reduce for attorney fees: Medicare’s reimbursement is decreased by up to 25% as a contribution to legal fees for obtaining the settlement.

So in many cases, Medicare does not seek full repayment of all expenses from personal injury settlements. Their reimbursement is reduced to be reasonable and proportional.

When Might Medicare Take the Full Settlement Amount?

There are some scenarios where Medicare could potentially seek reimbursement of the full settlement amount:

• Very low settlement amount: If the settlement is extremely small relative to expenses incurred, Medicare may need to take the bulk of it to recoup anything.

• Excessive expenses: If Medicare’s expenses are exorbitantly high relative to a reasonable settlement value, they may claim the full amount.

• Failure to report: Not reporting your injury claim to Medicare can allow them to take the entire eventual settlement as reimbursement.

• Ongoing treatment: If additional expenses are expected after the initial settlement, Medicare may take more upfront for future care.

• Appeal denial: If denied a reduction on appeal, Medicare could demand the full amount.

But in most standard cases, Medicare does not attempt to take entire personal injury settlements, recognizing the need to cover other damages and legal costs as well.

The Medicare Appeal Process to Reduce Reimbursement

If you disagree with the reimbursement amount Medicare demands, you can appeal it within 120 days of receiving the demand letter. Your appeal should include documentation justifying a reduction, such as:

• Evidence of additional procurement costs not accounted for

• Proof of other losses covered by the settlement

• Disproportionality relative to total recovery

• Excessive reimbursement percentage

• Inability to cover basic living expenses

With evidence on your side, it is possible to have Medicare reduce their reimbursement claim to a more reasonable amount. But denied appeals may have to pay the full original amount.

Tips for Dealing With Medicare Liens

Here are some tips for smoothly navigating Medicare reimbursement requests when settling a personal injury claim:

• Report your claim/lawsuit to Medicare promptly to avoid issues.

• Have Medicare document all expenses before finalizing any settlement.

• Try to allocate specific settlement amounts to medical costs.

• Account for any future medical expenses Medicare may cover.

• Discuss Medicare’s reimbursement rights upfront with your attorney.

• Save all documentation related to procurement costs and Medicare communications.

• Appeal unreasonable Medicare repayment amounts.

• Contact Medicare directly with any questions about their process and calculations.

• Do not spend settlement funds until Medicare has been fully reimbursed.

With proper planning and strategic appeal timing, it is possible to limit how much Medicare takes from your personal injury settlement while following the rules. But ignoring Medicare’s rights can cause major problems, so address their potential lien proactively.

Other Options to Resolve Medicare Liens

Beyond the formal Medicare appeals process, there are some other potential options for resolving Medicare liens on favorable terms:

• Compromise agreement – You can attempt to negotiate a compromise settlement with Medicare for a mutually agreeable lower reimbursement amount.

• Waiver request – In rare cases of severe hardship, Medicare can be asked to waive their reimbursement claim partially or fully.

• Structured settlement – An upfront lump sum to Medicare followed by scheduled ongoing payments as you receive settlement funds.

• “Carve-out” – Allocate a specific portion of the settlement exclusively to cover Medicare’s expenses.

An experienced personal injury attorney can advise whether any of these settlement strategies may be applicable in your particular situation.

Why Medicare Seeks Reimbursement from Settlements

To summarize, Medicare’s repayment demands aim to accomplish two main objectives:

1. Recover funds wrongfully paid that other parties should have covered initially.

2. Avoid misuse of taxpayer funds by paying expenses that are clearly another party’s responsibility.

By diligently pursuing reimbursement, Medicare maximizes the availability of benefits funds for eligible recipients who truly have no other coverage options. This prevents wasting federal program funds.

However, Medicare does make reasonable allowances within the reimbursement regulations so that accident victims are not left destitute. There is room for appeal and negotiation in appropriate cases. With proper legal guidance, fair compromises can usually be reached.

Consulting a Personal Injury Attorney

If you need help with a personal injury claim that also involves Medicare reimbursement rights, consult an experienced personal injury attorney. They can:

• Maximize your total settlement/judgment amount
• Allocate damages to shield portions from Medicare liens
• Dispute excessive Medicare reimbursement requests
• Negotiate compromise agreements where possible
• Interact with Medicare directly on your behalf

This can alleviate the burden of dealing with Medicare so you can focus on recovering from your injuries. Protecting your settlement should be a priority.

The Bottom Line

While Medicare may seek reimbursement from injury settlements for related expenses paid, they do not indiscriminately take entire settlements in most cases. Reasonable reductions apply based on legal costs incurred and proportionality principles. Valid appeals and compromise negotiations can also limit how much Medicare ultimately recoups. But failing to address their repayment rights appropriately can cost you dearly.