by: Begley Law Group

Article by Thomas D. Begley Jr.

Unfortunately, many personal injury settlements come undone when liens have been discovered after the settlement has been agreed upon.  Sometimes this is fixable, but often it is not.  Here are some of the common liens that must be addressed in typical personal injury settlements:

Medicaid Liens

As a condition of Medicaid eligibility, a Medicaid applicant is required to assign to the state any rights to payment of medical care from a third party.[1]  If the individual fails to pursue the claim, the state has the option of pursuing it.  In New Jersey, the Attorney General is responsible to enforce any rights against third parties for recovery of liens.[2]  When an individual brings an action for damages against a third party, written notice must be given to the Director of the Division of Medical Assistance and Health Services.  In addition, the Division must be notified of any recovery from a third party.[3]  The Medicaid lien applies only to medical assistance related to the injury and the lien applies only to payments made from the date of the injury to the date of the settlement.  The Medicaid lien can be reduced for procurement costs, which include the attorneys’ fees and costs of the case.[4]  In addition, an Ahlborn reduction may be possible, if the case settles for less than the true value of the claim.[5]


The Medicare Secondary Payer Act (MSP) governs all claims for recovery of Medicare payments for accidents or injuries.[6]  Under the MSP the federal government has a statutory lien.  In addition to the lien against the settlement, CMS has a right of recovery from parties that received third party payments.  These include:  the beneficiary, provider, supplier, physician, attorney, state agency, or primary insurer that has received a third party payment.[7]

Medicare Advantage Plans and Medicare Part D

Medicare Advantage Plans, also called Medicare Part C, are Medicare-equivalent programs operated by private insurance companies.  There had been an issue as to whether Medicare Part C and D Plans have the same rights of reimbursement that Traditional Medicare has, or whether their right is billed out by contract.  The United State Supreme Court denied cert to a case in which the 3rd Circuit U.S. Court of Appeals ruled that the administrator of a Medicare Part C Plan was entitled to the same rights Medicare itself would have had an action against the makers of a Diabetes drug, Avandia.[8]


An ERISA Plan can recover for damages recovered from third parties where the plan language clearly establishes such a right.  The plan’s right of recovery must be against a specific identifiable fund, such as a tort recovery, as opposed to a claim against the general assets of the individual.  It is important to check the plan to determine if the plan has a right of recovery.  Generally, ERISA preempts state law.[9]  However, ERISA does not exempt or relieve any person from complying with any law of any state that relates to insurance, banking, or securities.[10]  Therefore, any self-insured employee benefit plan is covered under ERISA and enjoys federal preemption, but an insurance company insuring such a plan does not.  Such insurance companies are regulated by state law and are subject to the state’s laws governing subrogation reimbursement.[11]

Federal Employee Health Benefit Act

The Federal Employee Health Benefit Act (FEHBA) provides group health insurance for federal employees.[12]  FEHBA provides a preemption provision whereby the terms of the insurance contracts issued by private carriers preempts state and local law.[13]  Most plans contain subrogation or reimbursement provisions.

U.S. Medical Care Recovery Act

The United States Medical Care Recovery Act (USMCRA) provides coverage to military persons or dependents who sustain a personal injury or are treated at a military or veterans facility or for which treatment was paid for by government-sponsored insurance program such as TRICARE.[14] USMCRA prohibits the payments of attorneys’ fees and costs for prosecuting the government claim.

Welfare & TANF Liens

In New Jersey, there is a lien against real and personal property of a person who has been assisted by or receiving support from any municipality or county.  This is true whether a person has been in a county facility or at home.[15]  Temporary Assistance for Needy Families (TANF) is a welfare program.

Mental Health Liens

In New Jersey, a person with a mental illness who is over age 18 and is being treated in a state psychiatric hospital shall be liable for the full cost of his treatment, maintenance, and all necessary related expenses.[16]

Victims of Crime Compensation

In New Jersey, certain victims of crime are entitled to compensation under the Criminal Injuries Compensation Act of 1971.[17]  The state has a right of subrogation against persons responsible for personal injury or death and a lien after entry of judgment.[18]

State Workers’ Compensation Claims

When there is a state Workers’ Compensation (WC) claim and also a third party liability case, and the third party liability case settles, there is a WC lien against the third-party liability proceeds.[19]

Federal Employee Compensation Act

The Federal Employee Compensation Act (FECA) is the federal equivalent of a state Workers’ Compensation law.[20]  The United States has a statutory lien for recovery against third party liability cases.[21]

Hospital Liens

Generally, every hospital, nursing home, licensed physician, or dentist has a lien for services rendered by way of treatment, care, or maintenance to any person who has sustained personal injuries in an accident as a result of negligence or alleged negligence of any other person.[22]

Veterans Administration Claims

The federal Veterans Administration (VA) has a right of recovery against a third party when the VA pays for medical treatment on behalf of the Veteran or his family.[23]  There is a lien on any recovery the Veteran or his family subsequently receives from a third party from the same treatment.  The right of recovery applies only to non-service connected disabilities.[24]

Derivative Claims

Liens are generally enforceable against the settlement of an injured party on whose behalf benefits are paid, but it is unlikely enforceable against derivative claims of others related to the incident.[25]

[1] 42 U.S.C. §1396k(a)(1)(A); N.J.S.A. 30:4D-7.1(c).

[2] N.J.S.A. 30:4D-7.1(a).

[3] N.J.S.A. 30:4D-7.1(b).

[4] N.J.S.A. 30:4D-7.1(b).

[5] Arkansas Dept. of Health and Human Servs. v. Ahlborn, 126 S. Ct. 1752 (2006).

[6] 42 U.S.C. §1395y(b)(2).

[7] 42 U.S.C. §411.24(g).

[8] In re Avandia Mktg. Sales Practices & Prods. Liab. Litg., 685 F.3d 353 (3d Cir. 2012), cert. denied 12.609 2013 WL 1500 235 (U.S. Apr. 15, 2013).

[9] 29 U.S.C. §1144(a).

[10] 29 U.S.C. §1144(b)(2)(A).

[11] FMC Corp. v. Holliday, 498 U.S. 52 (1990).

[12] 38 U.S.C. §1725(a)(1).

[13] 5 C.F.R. §1890.

[14] 42 U.S.C. §§2651, 2653.

[15] N.J.S.A. 4:4-91.

[16] N.J.S.A. 30:4-60(c)(1).

[17] N.J.S.A. 52:4B-1.

[18] N.J.S.A. 52:4B-20.

[19] N.J.S.A. 34:15-40.

[20] 5 U.S.C. §§8131 and 8132; 20 C.F.R. §10.705-719.

[21] 5 U.S.C. §8132.

[22] N.J.S.A. 2A:44-36.

[23] 38 U.S.C. §1729.

[24] 38 U.S.C. §1729(a)(1).

[25] Admin. Comm. of Walmart Stores, Inc. v. Gamboa, 479 F.3d 538 (8th Cir. 2007).