How much of your personal injury settlement can Medicaid take?

If you receive financial assistance for medical treatment through Medicaid and are injured by a third party, then the State Department has a subrogation right to also be compensated from the recovery you obtain from that third party for any medical payments made on your behalf. In fact, the State Department is entitled to an automatic lien against a liable third party. C.R.S. § 25.5-4-301(4), (5). However, the question arises of what amount should be reimbursed.

Understanding the Medicaid Laws

Colorado’s third-party liability statute provides that the lien “shall be in an amount that shall be the fullest extent allowed by federal law as applicable in this state, but not to exceed the amount of the medical assistance provided.” C.R.S. § 25.5-4-301(5)(a). The problem is when the settlement or jury verdict does not specify how much of the total award was allocated to medical expenses, as opposed to other damages, such as:

• Lost wages
• Impairment of quality of life
• Pain and suffering

The Case that Changed it All

If the settlement or verdict fails to adequately apportion the medical damages, the task is left to the courts. See State Dep’t of Health Care Policy & Fin. v. S.P., 356 P.3d 1033, 1036 (Colo. Ct. App. 2015). Up until June 2015, the courts used several different analyses based upon any reasonable means to determine such allocations. This changed with the Colorado Court of Appeals’ decision in State Dep’t of Health Care Policy & Fin. v. S.P., 356 P.3d 1033 (Colo. Ct. App. 2015).

The Formula for What the State Department Can Take

In S.P., the plaintiff reached a global settlement in her personal injury case that did not allocate the amount of the settlement for medical expenses. Id. at 1037. The parties agreed upon the total value of the case, but a dispute then arose regarding the amount that the State Department was entitled to as its Medicaid lien. Id. The Denver District Court then created the following formula, which the Colorado Court of Appeals affirmed:

Amount paid by Medicaid ÷total value of case × 100 = X % of medical expenses to the total value

X % × gross settlement amount = gross repayment lien amount

Lien amount – attorneys’ fees reduction* = net repayment amount

*Per C.R.S. § 25.5-4-301(5)(d), up to 25% of the lien may be reduced as a contribution to attorneys’ fees. Attorneys’ fees reduction = lien amount – (25% × lien amount).

Id. at 1038-1039.

In other words, the Court first determined the percentage of the total value of the case that can be allocated to medical expenses. That percentage times the gross settlement amount determines the gross repayment lien amount that the State Department is entitled to. Reducing the lien amount by the State Department’s contribution to attorneys’ fees gives the total net amount that the State Department is entitled to recover.

Following this formula will enable you to use a reasonable means to calculate a proportional allocation of the amount that Medicaid will be entitled to collect from your settlement proceeds. Such calculations are complex, and if you have questions, give us a call to speak with an experienced attorney to ensure that you are not giving away more of your subrogation rights than you should be.

Paying Back Medicare After Settlement

Victims who are receiving Medicare may not even be considering how much they will have to give back to Medicare after a personal injury settlement or judgment. If you are aware, you may wonder whether you should even go through the claims process if Medicare can go after reimbursement. In some cases, Medicare will only take half of your net recovery after the attorney fees have been covered, but this depends on the circumstance.

Medicare will notify you of the amount it has paid on your behalf within 120 days from the time you reported your claim. If you, as the claimant, and Medicare cannot reach a compromise as to the amount that you owe to Medicare, the appeals process may be the next step. Talk to your lawyer to review the case and see what is the best possible objective and route to pursue.