If Medi-Cal or Medicare paid for your treatment after a car crash or a fall, the program is entitled to be repaid from any settlement or verdict you receive from the person who hurt you. That repayment right is called a lien, and it is not optional: the state and federal governments have statutes that require it, and a settlement check cannot be responsibly disbursed until the lien is resolved. What surprises most clients is the second half of the answer. The lien is almost never the full amount the program paid. Both Medi-Cal and Medicare are required by law to reduce their liens to account for the attorney fees and costs it took to recover the money, and in many cases the lien can be reduced further based on the facts of the case.
This guide explains where the liens come from, how each program calculates what it is owed, the order in which a settlement is paid out, and how to estimate what is left for you. The settlement tool below lets you enter the numbers and see the order of payment and an estimated net.
Why the programs get paid back
Medi-Cal is California’s Medicaid program, run by the Department of Health Care Services. When Medi-Cal pays for treatment caused by someone else’s negligence, state law gives the department a right to recover what it paid from the responsible party or from the injured person’s settlement. The rules are in the Welfare and Institutions Code beginning at section 14124.70, and they require the injured person or their attorney to notify the department of the claim. Medi-Cal managed care plans, such as L.A. Care and Health Net, have similar recovery rights and typically pursue them through their own contractors.
Medicare works under a federal law known as the Medicare Secondary Payer Act. The idea is in the name: when someone else is liable for an injury, Medicare is supposed to be the secondary payer, and any payments it makes while the claim is pending are called conditional payments, conditioned on being repaid once the liable party pays. Medicare’s recovery is handled by a federal contractor, and the process has its own timelines and paperwork.
Both programs have the same underlying logic. Public health coverage paid bills that the at-fault driver or property owner should have paid, so the program takes its share from the settlement. Private health insurers and employer health plans often have contractual reimbursement rights too, but the government programs have statutes behind them and the least flexibility about being ignored.
How the Medi-Cal lien is calculated
Medi-Cal starts with the total of what it actually paid for injury-related treatment, which is usually far less than the amount the hospital billed. That is consistent with the rule from Howell v. Hamilton Meats that recoverable medical damages are the amounts paid or owed, not the amounts billed, explained in our guide to billed versus paid medical damages. A hospital may bill $60,000 for an emergency visit and surgery; Medi-Cal may have paid a fraction of that under its fee schedule, and the lien is based on the paid figure.
From there the statute requires reductions. The department must reduce its lien by its share of the attorney fees and litigation costs, on the theory that the injured person’s lawyer did the work that produced the recovery. The statute also caps the lien so that it cannot exceed the portion of the settlement that represents medical expenses, and it limits the department to no more than half of the injured person’s net recovery after fees and costs in most circumstances. When the settlement is small relative to the injuries, for example when the at-fault driver had only the 30/60/15 minimum policy required by Vehicle Code 16056, those limits do real work.
The department also removes charges that are unrelated to the injury. Medi-Cal’s initial lien letter often lists everything paid during a date range, including a dental visit or a prescription that had nothing to do with the crash. Going through the itemization line by line and disputing unrelated charges is routine and reduces the lien in most cases.
How the Medicare lien is calculated
Medicare’s process begins with a request for a conditional payment letter, which lists the claims Medicare believes are related to the injury. As with Medi-Cal, unrelated charges get on the list and have to be disputed. Once the case settles, a final demand is issued, and the amount is reduced by a formula that accounts for attorney fees and costs proportionally. Medicare has to be paid within a set time after the final demand or interest begins to accrue, and the injured person, the lawyer and the paying insurance company can all be held responsible if Medicare is not repaid.
Medicare adds one more consideration when the injury will need future treatment: whether part of the settlement should be set aside to cover future injury-related care that Medicare would otherwise pay. That analysis is one of the reasons Medicare cases take longer to close.
The order of payment
When a settlement check arrives, it is deposited into the attorney’s trust account and paid out in a fixed order. Understanding the order is the key to understanding the net.
- Attorney fees, calculated as the percentage in the fee agreement applied to the gross recovery.
- Case costs, meaning the money spent to prove the case: medical records fees, filing fees, deposition transcripts, consultant fees and similar expenses.
- Medical liens, including Medi-Cal, Medicare, a private health plan, or providers who treated on a lien basis, each negotiated to a final figure.
- The balance to the client.
The number that matters to the client is the last one, and it depends on how well step three goes. Two settlements of the same gross amount can produce very different net figures depending on whether the liens were reviewed and reduced or simply paid as first demanded.
The settlement tool
Enter the gross settlement, the attorney fee percentage from your agreement, the case costs and the total of the medical liens. The tool applies the order of payment above and shows an estimated net to you, along with each line of the breakdown.
Where does the settlement money go?
Enter round numbers. This shows the order of payment and an estimate of what would remain.
Liens are often reduced through negotiation before the check is written; the number you enter is a starting point, not the final figure.
General information, not legal advice. Every case turns on its own facts. Call (818) 818-5031 for a free consultation.
The result is general information about how a settlement is typically distributed, not legal advice or a prediction about your case. Real liens are reduced through negotiation and by statute, unrelated charges get removed, costs vary, and Medicare cases may involve a set-aside for future care. Use the tool to understand the structure, then have a lawyer work through the actual numbers.
Where the liens can be reduced further
The statutory fee-and-cost reduction is the floor. Beyond it, there are three arguments that regularly reduce a government lien.
The first is that the settlement did not fully compensate the injury. When a driver with a minimum policy causes a serious injury and the settlement is the policy limit, the injured person recovered a fraction of the true value of the case. The law recognizes that the lien should be reduced in proportion, so that the program does not take the entire settlement for medical bills while the injured person receives nothing for lost wages or the injury itself. This argument requires showing what the case was worth, which is the same analysis in our guide to how much a car accident case is worth.
The second is unrelated charges, discussed above. The third is comparative fault. If the injured person shared some responsibility for the crash under California’s pure comparative negligence rule, the settlement was reduced accordingly, and the lien can be argued down to match.
For Medicare, there is also a formal waiver and compromise process for cases where full repayment would cause financial hardship, and Medicare has a fixed-percentage option for certain smaller liability settlements that resolves the lien without a line-by-line review.
What this looks like in practice
A driver rear-ended on the 134 near Glendale and treated at Glendale Adventist or USC Verdugo Hills has a Medi-Cal managed care plan through L.A. Care. The hospital bills a large figure, the plan pays a much smaller one, and a few months later a recovery contractor sends a lien notice listing every claim paid since the crash date. Among them are two pharmacy charges and a routine visit from before the injury was even diagnosed. The unrelated items come off, the statutory reduction for fees and costs is applied, and because the at-fault driver carried only minimum limits, the remaining lien is argued down further to reflect the limited recovery. The net to the client is a substantially larger share of the settlement than the first lien letter implied.
A pedestrian in her seventies hit in a crosswalk on Brand Boulevard has Medicare. The conditional payment letter arrives with charges for a cardiology appointment that had nothing to do with the crash. Those are disputed. The case settles, the final demand comes with the fee-and-cost reduction, and because her orthopedic care is finished, no set-aside is needed. Medicare is paid within the required window and the case closes.
These are composite examples described in general terms, not descriptions of any client’s case.
Why this should not be handled alone
Lien resolution happens after the exciting part of a case is over, and it is where an unrepresented person is most likely to leave money on the table or, worse, disburse a settlement without paying Medicare and receive a demand letter a year later with interest attached. The programs do not volunteer their reductions. Someone has to request the itemization, dispute the unrelated charges, cite the statute, make the limited-recovery argument, and get the final figure in writing before the check is split.
This is part of what a personal injury lawyer does on every case, and it is included in the contingency fee. Our guide to who pays medical bills after a car accident covers the front end of the same question: how bills get paid while the claim is pending. Our car accident page describes how a case moves from the first call to disbursement.
Cases in the Glendale and Burbank area are generally filed in the Los Angeles Superior Court at the Burbank or Glendale courthouse, or downtown for larger matters. Clients from that side of the Valley meet with us at the Chatsworth office, by phone or video, or in the hospital, and the attorney on your case handles the lien work. The firm helps clients in English, Spanish and Armenian. Our Glendale injury page covers the local courts and hospitals.
Key points
- Medi-Cal and Medicare have statutory rights to be repaid from an injury settlement for injury-related treatment they paid for.
- The lien is based on what the program actually paid, not what the hospital billed, and must be reduced for the attorney fees and costs that produced the recovery.
- Unrelated charges appear on lien letters regularly and should be disputed line by line.
- When the settlement is limited by a small insurance policy or by comparative fault, the lien can often be reduced further.
- Settlement proceeds are paid in order: attorney fees, case costs, medical liens, then the client.
- Medicare must be repaid within a set time after its final demand, and everyone involved in the settlement can be held responsible if it is not.
Frequently asked questions
Do I have to tell Medi-Cal about my injury claim?
Yes. California law requires the injured person or their attorney to notify the Department of Health Care Services of a claim against a third party when Medi-Cal paid for treatment. The notice starts the process that produces the lien figure, and it is far better to raise the issue early than to have it surface after the settlement.
Will Medi-Cal take my entire settlement?
No. The statute limits the lien to the medical portion of the recovery and, in most cases, to no more than half of what remains after attorney fees and costs. Unrelated charges are removed, and the lien is reduced when the settlement did not fully compensate the injury.
What happens if Medicare is not paid?
Medicare can pursue the injured person, the attorney and the insurance company that paid the settlement, and it can charge interest from the date of the final demand. Insurance companies now report settlements involving Medicare beneficiaries to the federal government, so an unpaid lien is not going to be overlooked.
I was treated at Kaiser. Is that a lien too?
Often, yes. Kaiser and other health plans, whether private or through Medi-Cal managed care, generally have reimbursement rights under the plan documents or under state law. Those liens are reviewed and negotiated in the same way, though the specific reductions available differ from the government programs.
If you are on Medi-Cal or Medicare and were hurt in Glendale, Burbank or anywhere in California, call Manoukian Law Firm at (818) 818-5031 or reach us through our contact page. Consultations are free and there is no fee unless we win.
