Two Government Liens, One Settlement: Managing Medicare and Medi-Cal Recovery in PI Cases

James Wong — Founder & Pharmacist, LienScripts | November 1, 2024 | 9 min read

Dual-eligible clients trigger two separate government recovery programs — Medicare Secondary Payer through CMS and Medi-Cal through DHCS TPLRD — each with different agencies, rules, and timelines. A guide to coordinating both at settlement.

Two Government Liens, One Settlement: Managing Medicare and Medi-Cal Recovery in PI Cases

When your client is dual eligible — covered by both Medicare and Medi-Cal — you are dealing with two separate federal and state government recovery programs simultaneously. Each operates under its own legal framework, its own agency, its own timeline, and its own rules. Missing the requirements for either can expose your client to collection actions from two different government creditors.

This guide covers both programs and how to coordinate them at settlement.

[!KEY] Dual-eligible clients require parallel management of two separate government recovery programs — Medicare conditional payments through the BCRC and Medi-Cal liens through DHCS TPLRD — each with its own agency, rules, timeline, and reduction methodology.

What Makes Someone Dual Eligible?

Dual eligibles are individuals who qualify for both Medicare (federal) and Medi-Cal (state). This population typically includes:

• Elderly individuals (65+) who meet Medi-Cal income and asset requirements
• Younger individuals with qualifying disabilities who receive both SSI and Medicare

Dual eligibles are significant in personal injury cases because they are often involved in auto accidents and slip-and-fall cases, and both programs may have paid for injury-related treatment.

The Two Recovery Programs Side by Side

Medicare Recovery (CMS / BCRC):

• Legal authority: Medicare Secondary Payer Act (42 U.S.C. §1395y(b))
• Agency: CMS / Benefits Coordination and Recovery Center (BCRC)
• Process: Conditional payments that must be reimbursed from any third-party recovery
• Reduction: Procurement cost reduction (attorney fees and costs)
• Future medicals: Medicare Set-Aside (MSA) may be required for ongoing injury-related care

Medi-Cal Recovery (DHCS TPLRD):

• Legal authority: W&I Code §14124.70 et seq.
• Agency: DHCS Third Party Liability and Recovery Division
• Process: Statutory lien on settlement proceeds, 30-day notification requirement
• Reduction: Ahlborn formula (§14124.76), one-third cap (§14124.72), net recovery cap (§14124.78)
• Future medicals: No comparable future-care mechanism

Medicare: Conditional Payments and the BCRC Process

Medicare's recovery mechanism is the conditional payment — Medicare pays for injury-related treatment on the condition that it is reimbursed when the beneficiary recovers from a liable third party.

To resolve Medicare's conditional payments:

1. Report the case to the BCRC. Insurers have independent reporting obligations under the Mandatory Insurer Reporting (MMSEA) provisions. Attorneys should also ensure reporting has occurred.

2. Request a Conditional Payment Letter from the BCRC listing all conditional payments made for injury-related treatment. This is your starting number.

3. Dispute non-related items. Medicare sometimes includes payments for conditions unrelated to the injury. Review the conditional payment letter carefully and dispute items that predate the injury or are unrelated to the injuries claimed.

4. Calculate the procurement cost reduction. Similar to Medi-Cal's attorney fee deduction, Medicare reduces its recovery by a proportionate share of procurement costs (attorney fees and expenses). Unlike Medi-Cal's Ahlborn formula, this is a cost-based reduction, not a proportionate share of total damages.

5. Request a Final Demand Letter. After disputes are resolved, Medicare issues a final demand. The final demand amount must be paid from settlement proceeds.

Medicare Set-Asides: The Future Medical Complication

For cases involving significant ongoing injury-related medical needs, Medicare may require a Medicare Set-Aside (MSA) arrangement: a portion of the settlement earmarked to pay for future injury-related care that Medicare would otherwise cover.

MSAs are more common in workers' compensation but arise in some PI cases as well, particularly where the settlement contemplates future medical expenses for injury-related conditions. If your dual-eligible client will have future injury-related medical costs that Medicare might cover, consult a structured settlement specialist to evaluate whether an MSA is appropriate.

Medi-Cal: The Same Process as for Non-Dual Eligibles

The Medi-Cal TPLRD process for dual eligibles is identical to the standard process:

• Notify DHCS within 30 days of filing
• Submit Medical Authorization
• Work through the lien timeline
• Apply Ahlborn and §14124.72 reductions

Nothing about having Medicare changes the Medi-Cal recovery process. Both programs must be addressed independently.

One nuance: In some dual-eligible cases, Medicare and Medi-Cal may have both paid for the same episode of care (Medicare as primary, Medi-Cal as secondary). Both may then assert recovery rights. Request itemizations from both BCRC and DHCS and compare them for overlapping claims to avoid paying both programs for the same treatment.

[!WARNING] In dual-eligible cases, both Medicare and Medi-Cal may have paid for the same episode of care — request itemizations from both BCRC and DHCS and compare them before paying either program to avoid double-paying for the same treatment.

[!KEY] Run the Medicare and Medi-Cal resolution processes in parallel from the moment settlement is reached — waiting for one to complete before starting the other delays disbursement and frustrates your client.

Sequencing at Settlement

For dual-eligible PI cases, a typical settlement waterfall:

[!KEY] Medicare and Medi-Cal use entirely different reduction methodologies — Medicare uses a procurement cost reduction based on attorney fees and expenses, while Medi-Cal uses the Ahlborn proportionate share formula — knowing both before you negotiate prevents you from underestimating what each program is owed.

1. Attorney fees and litigation costs
2. Medicare conditional payment reimbursement (less procurement cost reduction)
3. Medi-Cal TPLRD lien (after Ahlborn, §14124.72, and fee deductions)
4. Any Medicare Set-Aside allocation (if applicable)
5. Client net recovery

Both government liens must be satisfied before proceeds are distributed to the client. Run the Medicare and Medi-Cal processes in parallel — do not wait for one to complete before starting the other.

Related Resources

• California's TPLRD Program: Full Overview
• How to Reduce a Medi-Cal Lien in California
• DHCS TPLRD Program