Addressing Pro-Rata Lien Amount Reductions | Best Practices Series

September 23rd, 2021


By: Paul K. Isaac, Esq., ChSNC  | Managing Partner, Precision Resolution, LLC and Yeganeh Gibson, Esq., CMSP

Q: Is there usually a percentage that Medicare, Medicaid, and Workers’ Compensation take of the lien after settlement?

A: While the case is ongoing, Medicare issues “conditional payment amounts.” These amounts are repayable to Medicare on the condition that the case settles or there is a plaintiff verdict.

Medicare will reduce this conditional amount and provide the plaintiff with a “final demand amount” which does reduce the conditional amount by a percentage based upon attorney fees and expenses, pursuant to 42 CFR 411.37. However, it is imperative that when settlement is reported to Medicare by plaintiff counsel or third-party administrator, also included with the gross settlement figure are the specific amounts of attorney’s fees and expenses. Without these figures, Medicare cannot compute the pro-rata final demand reduction.

Medicaid offers no such universally applied formula.

While there is no fixed percentage for a reduction in the Workers’ Compensation realm, in a case where no third-party component is present, the statute states that the carrier is entitled to recover its lien in entirety, with the exception of attorney fees.

Section 29 of the WCL requires recovery of liens be offset by the equitable share of costs incurred to obtain that recovery for them.

Therefore, the Workers’ Compensation lien must be reduced by the Cost of Litigation percentage. The carrier is also required to contribute the COL of the future benefits saved by virtue of their credit against future benefits to the extent of the third-party settlement.

We are experts in applying the formulas in Burns v Varriale, 9 N.Y.3d 207, 879 N.E.2d 140, 849 N.Y.S.2 1, and Matter of Kelly v State Ins. Fund 60 N.Y.2d 131, 456 N.E.2d 791)

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