By Michael Shemtoub, trial attorney, Beverly Law. Updated November 2026.
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Who can claim part of a $50,000 settlement
Before any money goes out, your lawyer has to find every party with a right to be repaid. They usually include:
- hospitals and providers that treated you on a lien, whose caps differ by state (see our $25,000 settlement page)
- a private health plan or insurer with a reimbursement clause
- a self-funded employer plan governed by ERISA, the federal benefits law
- Medicare
- Medi-Cal in California, or Medicaid in Texas and Washington
- a MedPay or PIP insurer that paid your bills
Each one follows its own rules. A lien you do not know about can delay the whole payout, so list every card and coverage you had at the time of the crash. Our page on medical liens explains provider liens in more detail.
Private health plans: state limits and ERISA
State law limits what many health plans can take back. The rules are not the same in the three states.
| State | Limit on health plan payback | Law |
|---|---|---|
| California | No more than what the plan actually paid providers plus reasonable costs of perfecting the lien; capped at one-third of what is owed to you if you have a lawyer (one-half if not); reduced pro rata for fees and costs, and by your share of fault if a judgment finds it. Does not cover Medi-Cal or hospital liens. | Civ. Code 3040 |
| Texas | With a lawyer, all plans together get the lesser of half your gross recovery or what they paid, each minus attorney fees and procurement costs. The made-whole doctrine does not apply. Medicare, Medicaid and self-funded ERISA plans are excluded. | CPRC 140.002, 140.005, 140.007 |
| Washington (PIP insurers) | A PIP insurer can be repaid only after you are fully compensated, and it must pay its share of the legal expenses. | Mahler v. Szucs (1998) |
Self-funded ERISA plans work differently. In US Airways v. McCutchen (2013), the U.S. Supreme Court held that equitable rules cannot override the clear terms of an ERISA plan. When the plan says nothing about attorney fees, the common-fund doctrine is the default, so the plan shares in the cost of getting the money. Ask the plan for its full plan document, since the wording decides how much it can take.
Medicare: conditional payments and the reduction formula
Medicare pays your bills conditionally when a liability insurer is expected to pay, and those payments must be repaid from the settlement (42 U.S.C. 1395y(b)(2)). CMS first sends a conditional payment letter with an interim estimate, then a final demand after you settle. Interest runs from the date of the demand letter, and you can ask for a waiver or appeal (CMS recovery process).
The federal rule cuts Medicare’s recovery for the fees and costs you paid (42 C.F.R. 411.37). The steps are short:
- Divide your fees and costs by the total settlement.
- Multiply Medicare’s payments by that ratio.
- Subtract the result from Medicare’s payments.
If Medicare paid as much as the settlement or more, it recovers the settlement minus your fees and costs.
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Medi-Cal and Medicaid
California’s Medi-Cal lien is cut by 25 percent for attorney fees, plus a share of litigation costs, when you bring the claim yourself (Welf. & Inst. Code 14124.72(d)). The lien reaches only the part of the recovery that pays for medical care, and a court decides that portion if the parties disagree (14124.76(a)). Medi-Cal also cannot recover more than you receive after fees and costs (14124.78).
In Texas, applying for or receiving Medicaid assigns your right of recovery to the state, limited to what it paid for your care. You must tell the state about a tort claim within 60 days of learning of it (Hum. Res. Code 32.033). Washington’s Medicaid agency is subrogated to your claim and holds a lien up to the value of the care it furnished (RCW 74.09.180).
Example only: a $50,000 settlement with Medicare
Round, made-up numbers. Assume Medicare paid $12,000, the fee comes off the gross amount, and one other provider accepted $4,000.
| Example only | One-third fee | 40 percent fee |
|---|---|---|
| Gross settlement | $50,000 | $50,000 |
| Attorney fee | $16,667 | $20,000 |
| Case costs | $1,500 | $1,500 |
| Medicare repayment after the 411.37 reduction | $7,640 | $6,840 |
| Other provider, after negotiation | $4,000 | $4,000 |
| Paid to you | $20,193 | $17,660 |
The higher fee raises your procurement costs, so the reduction in Medicare’s claim grows from $4,360 to $5,160. That offsets part of the difference. Your actual figures come from your signed fee agreement, the real bills and each payer’s final letter. Contingency agreements must be in writing in all three states (Bus. & Prof. Code 6147; Gov’t Code 82.065; RPC 1.5(c)). For how fees are set, see what percentage accident lawyers take.
What this means for your case
Give your lawyer the name of every plan that paid for care, and ask your employer whether its plan is self-funded. If you have Medicare or Medi-Cal, the claim should be reported early so the final numbers are ready when the case settles. In Texas, watch the 60-day Medicaid notice rule. Texas cases are handled by the firm’s Texas-licensed attorneys, Joyce Ondich and John Efstathiou.
Do not sign a plan’s reimbursement form or send it money without a review. IRS Publication 4345 says the part of a settlement covering medical expenses you deducted in earlier years can be taxable, so keep your old returns handy. Larger cases bring more costs and structured payment choices, covered on our $100,000 settlement page.
Common questions
Do I have to pay back my health insurance from a $50,000 settlement?
Often yes, if the plan has a reimbursement right. How much depends on whether it is a state-regulated plan or a self-funded ERISA plan, and on the state rules in the table.
Can Medicare take the whole settlement?
Not all of it. When Medicare’s payments equal or exceed the settlement, it recovers the settlement minus your fees and costs. You can also ask CMS for a waiver.
Can Medi-Cal take money meant for pain and suffering?
California limits the Medi-Cal lien to the part of the recovery for medical expenses. A court can decide that share if you and the state disagree.
Does a Texas health plan have to wait until I am made whole?
No. Chapter 140 says the made-whole doctrine does not apply to those plans, but it caps their share and takes fees off the top.
When does Medicare send its numbers?
CMS says its contractor usually issues the conditional payment letter within 65 days of the rights and responsibilities letter. The amount can change until the final demand. Beverly Law offers a free case review in English or Spanish at (310) 552-6959. You owe no fees or costs unless we win. Browse more settlement answers in our injury law FAQs.
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Related pages
Sources
- Cal. Civil Code 3040 (leginfo.legislature.ca.gov)
- Tex. Civ. Prac. & Rem. Code ch. 140 (140.002, 140.005, 140.007) (statutes.capitol.texas.gov)
- Mahler v. Szucs, 135 Wn.2d 398 (1998) (law.justia.com)
- US Airways, Inc. v. McCutchen, 569 U.S. 88 (2013) (law.justia.com)
- 42 U.S.C. 1395y(b)(2) (law.cornell.edu)
- 42 C.F.R. 411.37 (ecfr.gov)
- CMS, Medicare's Recovery Process (cms.gov)
- Cal. Welfare and Institutions Code 14124.72 (leginfo.legislature.ca.gov)
- Cal. Welfare and Institutions Code 14124.76 (leginfo.legislature.ca.gov)
- Cal. Welfare and Institutions Code 14124.78 (leginfo.legislature.ca.gov)
- Tex. Human Resources Code 32.033 (statutes.capitol.texas.gov)
- RCW 74.09.180 (lawfilesext.leg.wa.gov)
- Cal. Business and Professions Code 6147 (leginfo.legislature.ca.gov)
- Tex. Government Code 82.065 (statutes.capitol.texas.gov)
- Washington RPC 1.5 (courts.wa.gov)
- IRS Publication 4345 (irs.gov)
Important: This page is general information, not legal or medical advice, and reading it does not create an attorney-client relationship. Every case is different; talk to a lawyer about yours. Texas cases are handled by the firm’s Texas-licensed attorneys, Joyce Ondich and John Efstathiou. Last reviewed: November 7, 2026.