Medicare and Medicaid Liens After a Car Accident in New York

If Medicare or Medicaid paid your medical bills after a car accident in New York, they have a legal right to be reimbursed from any settlement or verdict you recover. Failing to understand and properly address these liens before you settle can result in future benefits being withheld, federal collection actions, and reduced net compensation. This guide explains how Medicare and Medicaid liens work in New York car accident cases, what steps must be taken during litigation, and how an experienced attorney approaches lien resolution to protect your recovery.

The Medicare Secondary Payer Act: Medicare Is Always Secondary

The Medicare Secondary Payer Act (MSPA), codified at 42 USC §1395y(b), establishes the foundational rule governing Medicare in personal injury litigation: Medicare is a secondary payer, meaning it should never pay for medical expenses that are the responsibility of a primary plan — including automobile liability insurance, no-fault insurance, workers’ compensation, or any other insurance coverage that is or may be responsible for the plaintiff’s medical costs.

When a primary plan exists or may exist — as is always the case in a car accident claim where the at-fault driver’s liability insurer or the plaintiff’s own no-fault insurer is potentially responsible — Medicare is prohibited from making payment in the first instance. However, because Medicare beneficiaries may need their medical bills paid while a tort claim is pending and the liability insurer has not yet made payment, the MSPA allows Medicare to make “conditional payments”: Medicare pays the bills conditionally, with the explicit legal condition that Medicare will be reimbursed from any subsequent settlement, judgment, or award that compensates the plaintiff for the same medical expenses Medicare paid.

The MSPA creates a federal reimbursement obligation. The statute authorizes the federal government to pursue recovery directly against the beneficiary, the beneficiary’s attorney, or any entity that receives proceeds from the settlement without first satisfying the Medicare lien. The penalty provisions are significant: the government may recover double damages if a primary plan (such as a liability insurer) fails to reimburse Medicare after settlement. These enforcement provisions make Medicare lien compliance non-negotiable in any New York car accident settlement.

How Medicare Conditional Payments Work in Practice

When a Medicare beneficiary is injured in a car accident, the following sequence occurs on the Medicare lien side of the case, running in parallel with the personal injury litigation:

1. Medicare pays conditional payments. Medicare pays the plaintiff’s treating hospitals, physicians, and other providers for services related to the accident injuries, noting these payments as “conditional” in the Medicare system. The amounts paid are tracked by the Benefits Coordination and Recovery Center (BCRC), the CMS contractor responsible for identifying and recovering conditional payments.

2. The BCRC issues a Conditional Payment Letter (CPL). The BCRC monitors outstanding tort claims through a process that includes receiving reports from liability insurers (who are required to report settlements under the MSPA’s mandatory insurer reporting provisions, 42 USC §1395y(b)(7)). The BCRC will issue a Conditional Payment Letter upon request, listing all Medicare payments that have been identified as related to the accident. Attorneys should request the CPL at the beginning of the case, not at the eve of settlement, because the BCRC processing time can take several months and the list of conditional payments is frequently incomplete or includes charges unrelated to the accident injuries.

3. Review and dispute incorrect charges. The CPL frequently includes medical expenses unrelated to the accident injuries — pre-existing condition treatment, unrelated medications, or services occurring before or after the injury period. Attorneys must review each line item against the medical records and dispute any charges that are not causally related to the accident. The BCRC dispute process requires submission of supporting medical documentation demonstrating why the disputed charges are not accident-related. Successfully disputing incorrect charges reduces the lien amount and increases the plaintiff’s net recovery.

4. Negotiate a reduction of the conditional payment amount. Even after removing unrelated charges, the remaining conditional payment amount may be subject to reduction. Under 42 CFR §411.37, the conditional payment amount is proportionately reduced to reflect procurement costs: attorney’s fees and costs incurred in obtaining the settlement that funded the reimbursement. The reduction formula under 42 CFR §411.37(c) allocates the procurement costs across the total recovery, reducing the Medicare reimbursement obligation proportionately. In cases where the settlement is substantially less than the full value of the claim due to liability disputes, coverage limits, or other factors, Medicare may also accept a “good cause” reduction based on the demonstrated compromise nature of the settlement.

5. Obtain a Final Demand Letter before distributing settlement proceeds. Once the conditional payments have been reviewed, disputes resolved, and the reduction calculated, the BCRC issues a Final Demand Letter stating the exact amount owed to Medicare. Settlement proceeds cannot be ethically distributed to the client until the Medicare lien is satisfied. Attorneys who distribute settlement proceeds without paying the Medicare lien expose themselves to direct liability to the federal government under the MSPA.

Medicare Set-Asides for Future Medical Expenses

The MSPA’s requirements do not end with conditional payments for past medical expenses. When a plaintiff who is a Medicare beneficiary (or who is reasonably expected to become a Medicare beneficiary within 30 months) settles a claim that includes compensation for future medical expenses related to the accident injuries, CMS takes the position that a Medicare Set-Aside (MSA) must be established to protect Medicare’s interests in paying future injury-related expenses.

An MSA is a segregated fund — typically held in a trust account or administered by a professional administrator — that is funded from the settlement proceeds and used exclusively to pay for accident-related medical expenses that would otherwise be covered by Medicare. The plaintiff must exhaust the MSA funds before Medicare will resume paying for related treatment.

CMS has established submission thresholds above which it will review and formally approve a proposed MSA amount:

• $250,000 or more in total settlement amount with a plaintiff who is a current Medicare beneficiary, or
• $25,000 or more in total settlement with a plaintiff who has a reasonable expectation of Medicare enrollment within 30 months (for example, a plaintiff who has applied for Social Security Disability and is in the 24-month Medicare waiting period).

Below these thresholds, CMS will not formally review the MSA, but the obligation to account for future medical costs still exists, and parties should document their analysis. Above the thresholds, submitting to CMS for formal approval provides protection against future CMS challenge to the MSA amount.

MSA calculations require a qualified medical professional to project the future medical expenses for accident-related treatment over the plaintiff’s life expectancy, applying Medicare reimbursement rates (not billed charges or commercial insurance rates). For serious injuries requiring ongoing treatment — spinal cord injuries, traumatic brain injuries, complex orthopedic injuries — MSA amounts can run into the tens or hundreds of thousands of dollars and must be factored into settlement negotiations from the outset.

Medicaid Liens in New York Car Accident Cases

Medicaid — the joint federal-state health insurance program for low-income individuals — has its own lien rights that operate independently of and alongside Medicare. In New York, Medicaid is administered by the New York State Department of Health under the framework established by OBRA 1993 (the Omnibus Budget Reconciliation Act of 1993), which required states to enact laws mandating Medicaid beneficiary assignment of rights to recover from third parties. New York’s implementation is found in Social Services Law §367-a and in regulations promulgated by the New York Department of Financial Services.

Under New York law, when Medicaid pays medical bills for a beneficiary who later recovers compensation from a third-party tortfeasor, Medicaid has a statutory lien against the recovery and must be reimbursed. The New York Medicaid agency (the Department of Health, through the Office of Medicaid Management) tracks its payments and asserts a lien against the settlement. Like Medicare conditional payments, the Medicaid lien must be identified and resolved before settlement proceeds are distributed.

The Ahlborn Limitation: Medicaid Liens Are Limited to the Medical Portion of the Settlement

A landmark U.S. Supreme Court decision significantly limits Medicaid’s ability to recover its full lien amount from a personal injury settlement: Arkansas Department of Health and Human Services v. Ahlborn, 547 US 268 (2006). The Court held that the federal anti-lien and anti-recovery provisions of the Medicaid statute — 42 USC §1396p(a) and (b) — prohibit states from asserting Medicaid liens against portions of a settlement that represent compensation for items other than medical expenses, such as pain and suffering, lost wages, and other non-medical damages.

Under Ahlborn, a Medicaid lien is limited to the portion of the settlement that represents compensation for past medical expenses. If the full settlement represents only a fraction of the total value of the claim — as is almost always the case in personal injury litigation where liability is disputed, the defendant is underinsured, or the settlement is a compromise — the Medicaid lien is proportionately reduced.

The proportionate reduction works as follows: if the full value of the plaintiff’s claim is $1,000,000, of which $200,000 represents past medical expenses (20%), and the plaintiff settles for $300,000, the Medicaid lien is limited to 20% of the $300,000 settlement, or $60,000 — regardless of whether Medicaid’s total lien amount would otherwise be $80,000 or $100,000.

Wos v. E.M.A., 568 US 627 (2013), extended the Ahlborn principle by striking down North Carolina’s fixed-percentage statutory formula for Medicaid lien allocation. The Court held that a state law presuming a fixed percentage (one-third) of any settlement represents medical costs — without allowing the plaintiff to demonstrate the actual allocation — is preempted by federal law because it may in some cases assign more than the medical portion of the settlement to the Medicaid lien. After Wos, states must use a proportionate allocation methodology that reflects the actual value allocation of the specific settlement, not a blanket statutory formula.

New York applies the Ahlborn/Wos proportionate reduction framework. Calculating the proportionate reduction requires a full valuation of the claim — documenting the total damages including past medical expenses, future medical expenses, lost wages, pain and suffering, and loss of enjoyment of life — and then determining what fraction of the total damages is represented by past medical expenses. That fraction, applied to the settlement amount, determines the maximum Medicaid lien recovery. In cases where the plaintiff is seriously injured and the non-economic damages (pain and suffering) are the dominant component of the total claim value, the Ahlborn reduction can dramatically reduce the Medicaid lien that must be satisfied from a limited settlement.

No-Fault PIP and Medicare Coordination in New York

New York’s no-fault automobile insurance system adds a layer of complexity to Medicare lien analysis. Under New York Insurance Law Article 51, no-fault (Personal Injury Protection, or PIP) coverage pays the first $50,000 in medical expenses and lost wages for any person injured in a car accident in New York, regardless of fault. No-fault pays as the primary payer under New York’s priority rules — before Medicare, before Medicaid, and before group health insurance.

If the plaintiff’s accident-related medical expenses are fully covered by no-fault PIP coverage, Medicare may have no conditional payment obligation because no-fault (as the primary plan) pays first. However, in serious injury cases where medical expenses exceed the $50,000 basic no-fault limit — which is common in cases involving hospitalization, surgery, or long-term rehabilitation — Medicare may become the payer for expenses that exceed the no-fault limit. In those cases, Medicare’s conditional payments for expenses above the no-fault limit generate a lien against the bodily injury settlement that must be resolved.

Attorneys must coordinate the no-fault benefit exhaustion analysis with the Medicare conditional payment identification process: determine what amounts were paid by no-fault, what amounts were paid by Medicare after no-fault exhaustion, and what amounts remain as the plaintiff’s out-of-pocket or future medical expenses. This coordination analysis must be completed before finalizing settlement allocations.

Workers’ Compensation and Medicare in Car Accident Cases

When a car accident occurs in the course of employment — a delivery driver, rideshare driver, construction worker commuting to a job site, or any employee operating a vehicle for work — both a workers’ compensation claim and a third-party personal injury claim may be available. In these dual-recovery scenarios, Medicare Set-Aside analysis becomes particularly important.

CMS has established separate guidance for workers’ compensation MSAs (WCMSAs) that applies when workers’ compensation settles a claim that includes future medical expenses for a Medicare beneficiary or soon-to-be beneficiary. When both workers’ compensation and liability insurance are involved in the same accident, the MSA must account for both streams of future medical expense payments and their interaction with Medicare. The complexity of these dual-recovery, dual-payer scenarios requires experienced legal and MSA allocation counsel to navigate properly.

Practical Steps for Attorneys in New York Car Accident Cases

The Medicare and Medicaid lien process requires active management throughout the litigation, not just at the settlement stage. Key steps include:

At intake: Register the client with the BCRC if they are a Medicare beneficiary. Request a BCRC query letter to identify whether Medicare has an interest and to begin tracking conditional payments. Review the client’s insurance coverage including Medicare Part A, B, C (Medicare Advantage), and D, and determine whether a Medicare Advantage plan (Part C) also has independent lien rights under MSPA (which it does — see Humana Medical Plan v. Western Heritage Insurance Co., 832 F.3d 1229 (11th Cir. 2016)).

During litigation: Monitor conditional payment notices from the BCRC. Request updated Conditional Payment Letters as the case progresses and new medical treatment is received. If the client is receiving ongoing treatment, the conditional payment amount will increase. Preserve documentation of all medical treatment and its causal relationship to the accident injuries for later dispute of unrelated charges.

At settlement: Obtain the Final Demand Letter from the BCRC. Apply the procurement cost reduction under 42 CFR §411.37. Identify the Medicaid lien amount from the New York Department of Health and apply the Ahlborn/Wos proportionate reduction. Determine whether an MSA is required and, if above the submission thresholds, consider submitting to CMS for approval. Do not distribute settlement proceeds until all lien obligations are resolved and documented.

Client Impact: Why Lien Compliance Matters

Failure to satisfy Medicare and Medicaid liens after a car accident settlement is not merely a legal technicality — it has direct consequences for the client’s ongoing access to healthcare benefits. If a Medicare beneficiary receives a settlement that includes compensation for medical expenses and fails to reimburse Medicare, CMS has the authority to withhold future Medicare payments for accident-related medical treatment until the lien is satisfied. In practice, this means that a client who fails to address their Medicare lien after settlement may find that Medicare refuses to pay for their future treatment of the same accident injuries.

Similarly, failure to reimburse New York Medicaid from a third-party settlement can result in Medicaid recoupment actions, loss of Medicaid eligibility in some circumstances, and personal liability for the unrepaid lien amount. The state may pursue collection through the court system.

For clients with ongoing medical needs — particularly those with serious injuries from car accidents requiring long-term treatment — protecting access to Medicare and Medicaid coverage after settlement is as important as maximizing the settlement amount. A properly structured settlement that addresses both the lien obligations and the MSA requirements ensures that the client retains their coverage and can continue receiving care without interruption.

Working With an Experienced New York Car Accident Attorney

Medicare and Medicaid lien compliance in New York car accident cases requires expertise at the intersection of personal injury litigation, federal healthcare law, and insurance coordination. An attorney who does not actively manage the lien process from intake to settlement distribution puts the client’s net recovery and future benefits at risk.

Our firm handles all aspects of Medicare and Medicaid lien identification, dispute, and resolution as part of every New York car accident representation. We begin the lien process at intake, track conditional payments throughout litigation, dispute unrelated charges to reduce the lien amount, apply the legally available procurement cost and Ahlborn reductions to maximize the client’s net recovery, and ensure that all lien obligations are satisfied before disbursement. For Medicare-eligible clients with serious injuries, we coordinate with qualified MSA specialists to ensure that the settlement structure complies with CMS requirements.

If you were injured in a car accident on Long Island or in New York City, visit our Long Island car accident lawyer page to learn more about how New York no-fault insurance and personal injury law work together, and contact us for a free consultation.