Health Law Consulting Blog

Monday, April 6, 2015

Medicare & Medicaid Liens

Medicare is a federal health insurance program available to U.S. citizens who are 65-years-old or older. It provides health insurance coverage to people with disabilities under the age of 65 and people with End-Stage-Renal Disease. Beneficiaries pay part of the costs through deductibles for hospital stays and are required to pay monthly premiums for health care services.

In 1980, Congress passed legislation that made Medicare the secondary payer for certain primary plans and required private health insurance coverage to pay medical expenses. Pursuant to 42 U.S.C. 1395y(b)(2(B)(ii)/Section 1862(b)(2)(B)(ii) of the Act) and 42 C.F.R. 411.24(e) & (g), CMS may recover from a primary plan or any entity, including a beneficiary, provider, supplier, physician, attorney, State agency or private insurer that has received a primary payment. Under CMS’ Medicare Secondary Payer (CMS), Medicare is subrogated to any right of an individual or entity to recover payments from an insurer for medical bills. 42 USC § 1395y(b)(2)(B)(iv). Federal law allows Medicare to place a lien on property to collect the money that is owed directly from another payer.  The MSP recovery claim (under its direct right of recovery as well as its subrogation right) is commonly referred to as a Medicare “lien”, but the proper term is Medicare or MSP “recovery claim.”

  • A lien allows a person/company/government entity to legally take someone else’s property if an outstanding obligation (debt) is not discharged. The lien holder (e.g., Medicare) retains an interest in the property that lasts until the property owner’s outstanding debt is satisfied or released. 

A Medicare lien is managed by the federal government through CMS’ Benefits Coordination & Recovery Center. Medicare liens are typically placed on personal injury awards when the plaintiff’s treatment was paid by Medicare. A lien will be placed on the beneficiary’s property, including estate in the event that she received money in a settlement, verdict or other payment for medical bills that were paid by Medicare.

Medicare Lien vs. Medicaid Lien

Medicaid is a financial assistance program for low-income people.  Under New Jersey State law, the Division of Medical Assistance and Health Services can place a lien against real or personal property of a recipient of Medicaid. A lien is recorded against property to ensure the Medicaid recipient’s estate pays any outstanding Medicaid debts owed.  The lien protects Medicaid’s interest and its right to recover debts owed prior to the conveyance of real property. There are two types of New Jersey Medicaid liens: Pre-death (also referred to as TEFRA) and post-death (estate recovery) liens.

  1. Pre-Death Medicaid Lien

    A pre-death Medicaid lien is the only type of lien that can be placed on real or personal property prior to the death of a Medicaid recipient. This type of lien only applies to permanently institutionalized recipients, such as an inpatient of a nursing facility, or an intermediate care facility for the mentally impaired or other medical institution. The pre-death lien must be dissolved if the recipient returns home.  A pre-death lien cannot be placed against real property if any of the following relatives live in the home:

    1. A spouse, child under the age of 21, or a blind or permanently disabled child of any age.
    2. A sibling who has equity interest in the home and has lawfully resided in the home for at least one year before the Medicaid recipient’s admission to a medical institution.

    Estate recovery does not begin until the Medicaid recipient dies.

  2. Post-Death Medicaid Lien
    A post-death Medicaid lien is placed against the estate of the deceased Medicaid recipient. New Jersey law permits Medicaid to file a lien against a recipient’s real or personal property if he/she was permanently institutionalized or received Medicaid services after age 55. 

How to Protect their Assets from Medicare & Medicaid Liens

The estate heir must pay Medicare’s or Medicaid’s lien obligation to keep the estate’s property.

A Medicaid lien can be repaid by obtaining a loan or mortgage, or selling the home to pay off the lien.  A Medicaid recipient may also use a trust to protect their home from a Medicaid lien. Once transferred into the trust, the Medicaid recipient is no longer the owner. The house legally belongs to the trust. Consult with an elder law or other competent professional for more information.


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