Subrogation and Medical Liens in Maryland: Understanding Your Recovery

Alan J. Belsky · Maryland · Client resources

Understanding who may claim repayment helps you understand the amount you may receive from a settlement or judgment. The answer depends on who paid for your care, the coverage documents, and the law governing that payer.

Subrogation and reimbursement: who may claim part of a recovery?

A settlement or judgment is not necessarily the amount the client ultimately receives. An insurer, benefit plan, or government program that paid injury-related expenses may assert a right to recover some of those payments. Subrogation generally allows a payer to exercise rights against a responsible third party; reimbursement concerns repayment from money recovered. A lien is a claim against particular property or funds. These terms are related, but not interchangeable.

Private health insurance

For private coverage, review begins with the policy or plan documents, who actually funded the benefits, and the law governing the arrangement. Individual insurance, an insured employer plan, a self-funded employer plan, and an HMO may have different rights and restrictions. An insurance company’s name on the card does not answer those questions.

Request the actual reimbursement or subrogation provision and an itemized payment history. Review whether the charges relate to the injury, whether the claimed right is enforceable, and whether a reduction applies. Maryland Courts and Judicial Proceedings §11–112 provides a formula for reducing qualifying health-benefit subrogation claims for attorney’s fees, with a percentage capped at one-third and specified conditions. It is not a universal reduction for every payer or every plan.

Employer health plans governed by ERISA

ERISA—the Employee Retirement Income Security Act—is a federal law governing many private-employer benefit plans. “ERISA-covered” does not mean the same thing as “self-funded.” A covered plan may purchase insurance, pay benefits from its own funds, or use a combination. Governmental and church plans generally fall outside ERISA, subject to applicable exceptions.

Funding matters. Under FMC Corp. v. Holliday, self-funded ERISA plans are generally protected from state insurance regulation that would limit their recovery rights. Insured arrangements require a different analysis. In U.S. Airways v. McCutchen, the Supreme Court explained that clear reimbursement terms govern an ERISA equitable-lien-by-agreement claim; general equitable principles cannot simply override them, although they may help interpret gaps.

How do I find out what kind of plan I have?

• Ask your employer’s benefits office or the named plan administrator for the Summary Plan Description, governing plan document, amendments, and reimbursement provisions.
• Ask specifically whether the plan is ERISA-covered and whether it is self-funded or fully insured. Obtain the answer in writing.
• Look for the plan sponsor and administrator, funding description, and statement of ERISA rights. A familiar insurer may only process claims for a self-funded plan.
• Provide those documents to counsel. The insurance card or a benefits summary alone may not resolve the issue.

The U.S. Department of Labor explains ERISA coverage, participants’ access to plan information, and the different funding arrangements.

Workers’ compensation

When a workplace injury also supports a claim against a responsible third party, the compensation payer may have statutory recovery rights. Maryland Labor and Employment §9–902 addresses third-party actions and reimbursement of compensation and other covered payments. It also allocates court costs and attorney’s fees proportionately. Review includes the benefits paid, the third-party recovery, any waiver, and possible consequences for continuing benefits. Do not treat a compensation payer’s interest as merely an ordinary private health-insurance demand.

Medicare

Medicare may make conditional payments when liability insurance, no-fault coverage, or workers’ compensation should pay. Those payments can become repayable when a settlement, judgment, award, or other payment occurs. These federal recovery rights do not depend on a private insurer first sending a Maryland lien letter.

The claim should be reported through the appropriate Medicare recovery process, the payment list checked for unrelated treatment, and the repayment amount resolved before distribution. An initial conditional-payment figure is not necessarily the final demand. Medicare Advantage or prescription-drug coverage should also be identified so the appropriate plan’s claim can be reviewed separately. See CMS: Medicare’s recovery process.

Medicaid / Maryland Medical Assistance

Maryland Medical Assistance has statutory subrogation rights for related benefits. Health–General §15–120 requires counsel to notify the Department before filing a claim, commencing an action, or negotiating a settlement, and before resolution. It also addresses holding funds and liability after written notice. Thus, statutory rights and notice obligations can coexist.

The recoverable amount and allocation require separate review; do not assume the Department can take every category of damages. Maryland’s third-party liability regulations describe notices, payment itemization, disputed amounts, and procedures. Coverage through a Medicaid managed-care organization should be disclosed as well.

Federal Medical Care Recovery Act (FMCRA)

The Federal Medical Care Recovery Act, 42 U.S.C. §2651, gives the United States an independent right to recover the reasonable value of certain federally furnished or paid medical care when a third party has tort liability. This statutory right is distinct from a private policy’s reimbursement clause.

TRICARE explains its third-party recovery rights, which can involve care provided at military facilities or paid through TRICARE. Identify the program, relevant agency, and treatment, then obtain the recovery information. Other federal programs and additional statutes may require separate analysis.

Does a payer have to send a lien letter?

There is no reliable, universal rule that every private payer must send a letter before any reimbursement obligation exists, or that every statutory payer can ignore notice requirements. For a private claim, distinguish a contractual obligation, an enforceable interest in specific funds, and any obligation of an attorney or settling defendant. The documents, governing law, notice, timing, and recipient all matter.

Medicare and FMCRA rights arise under federal statutes rather than a private lien letter. Workers’ compensation rights are also statutory. Maryland Medicaid has statutory rights alongside express notice provisions. A letter may identify or quantify a claim without being the event that creates the underlying right. Conversely, notice can be important to enforcement or distribution duties. The practical approach is to identify each payer early and resolve its actual rights before distributing funds, rather than treating silence as a waiver.

Do reimbursement claims follow a legal-malpractice recovery?

Subrogation and reimbursement can affect the amount a client ultimately receives. Subrogation generally allows a payer to pursue rights against a responsible third party; reimbursement concerns repayment from a recovery. In legal malpractice, whether those rights reach the settlement or judgment presents a distinct question.

One argument is that the attorney caused the loss of a legal claim, rather than the physical injury for which medical or workers’ compensation benefits were paid. The competing position is that the malpractice recovery replaces damages from the underlying injury claim. The answer cannot safely be assumed from the label “legal malpractice.”

In Haugenoe v. Workforce Safety and Insurance (2008), North Dakota’s Supreme Court rejected a workers’ compensation subrogation interest in a legal-malpractice settlement under the statute before it. That is an illustration from another state, not a ruling on Maryland law or on every type of payer.

Contract language can point in a different direction. A 2024 State of Maryland health-plan document expressly includes certain professional or legal-malpractice claims within its third-party recovery provisions. That example does not establish that every plan has the same terms or that every asserted claim is enforceable.

Medicare requires separate attention. In a December 15, 2009 CMS teleconference, the agency explained that a Medicare recovery claim could arise when medical expenses form part of a legal-malpractice claim or release. This historical agency discussion is not a case-specific determination or a substitute for current statutory and administrative review.

The firm therefore evaluates the governing law, applicable benefit-plan documents, the basis and scope of each reimbursement demand, and the damages claimed and recovered. Clients should not assume that an existing reimbursement claim automatically carries over—or automatically disappears—when recovery comes from an attorney rather than the original defendant.

What should I provide to the firm?

Provide your insurance cards, benefit-plan documents, payment statements, and any reimbursement notices. Tell the firm about Medicare, Medicaid, workers’ compensation, military coverage, and changes in coverage during treatment. The office will explain how to provide these records securely.

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Related practice areas: Legal malpractice · Medical malpractice · Personal injury · Workers’ compensation