Yes, You Must Pay These Liens Back
Money received by a claimant as compensation for pain and suffering in a personal injury lawsuit is not taxable because that money is not enriching the person as income, but rather, is compensating in an attempt to make the person “whole” again, or as close to whole as possible after being injured.
Yet, the money received from a personal injury claim is often subject to a lien, typically in the following situations:
Under the Medicare Secondary Payer Act (MSP), the federal government has a statutory lien against the recovery amount. The Center for Medicare Services (CMS) usually allows a 1/3 reduction of the lien for attorney’s fees and often will work with the attorney to compromise the lien somewhat if it will assist the claimant in deciding to settle the liability claim. CMS has incentive to see a claim settle for a sum certain, because the Medicare lien exists only on any amount recovered in the litigation. If nothing is recovered in the litigation, no corpus exists on which a lien can be asserted.
In order to be eligible to receive Medicaid benefits, an applicant must agree to assign any rights to money received as payment for medical care back to Medicaid. So, if a claimant receives a $15,000 settlement, and $5,000 is meant to compensate her for lost wages due to missed time from work, the Medicaid lien exists on only the $10,000 bodily injury recovery. Though often more difficult liens to get compromised than Medicare liens, a good attorney will always try to get your Medicaid lien reduced.
The Employee Retirement Income Security Act allows self-insured employee benefit plans to assert a lien on personal injury claim proceeds. The Plan language for the specific employer must clearly state the right to reimbursement for accident related medical payments and the Plan’s right to recovery must be against a specific fund, such as the proceeds received in a personal injury claim.
TANF LIENS & WELFARE
Temporary Assistance For Needy Families is a welfare program If you have received any financial support from any city or county, a lien will exist on any personal property that you have, including the proceeds of any personal injury claim.
When your third party liability claim settles or otherwise resolves, a statutory WC lien exists to the extent the workers’ compensation insurance carrier paid your medical bills as well as money for temporary and permanent disability benefits.
As with all liens, your attorney should be taking every action possible to reduce your liens, decrease your indebtedness and get as much money in your pocket as possible.