Medical Liens and Subrogation: How Much of Your Settlement Do You Keep?

Every client eventually asks the same question, and it is the right one: how much of this do I actually keep? The settlement figure is only the top line. A “lien” is a legal claim on that money by someone who treated you. “Subrogation” is the right of someone who paid for your treatment to be repaid out of what the at-fault party pays you. This guide goes through each kind of claim that can attach to a Nebraska injury settlement, quotes the law it rests on, and explains how each one gets reduced. A short section at the end covers Iowa.

Who Gets Paid Out of a Nebraska Injury Settlement?

Medical Provider Liens in Nebraska

Nebraska gives treating providers a lien by statute. Under section 52-401, when a person employs “a physician, nurse, chiropractor, physical therapist, hospital, or provider of emergency medical service” to treat an injury and claims damages from the party who caused it, the provider “shall have a lien upon any sum awarded the injured person in judgment or obtained by settlement or compromise on the amount due for the usual and customary charges.” Physical therapists were added by the Legislature in 2026.

Four features of that statute decide how much a provider can actually take.

• The lien is for what is still owed, not for the full bill. In Midwest Neurosurgery, 268 Neb. 642 (2004), a provider that had already been paid by the patient’s health insurer claimed a lien of $16,410.20, the difference between its list price and what the insurer paid. The Nebraska Supreme Court held that “the lien is equal to the debt still owed to the provider,” and that a provider who agreed to accept the insurer’s rate as payment in full “cannot use § 52-401 to escape the consequence of the agreements that it struck.” The valid lien was $885.97, the unpaid co-pay.
• If you have private health coverage, the lien is cut to the insured rate. The statute says: “For persons covered under private medical insurance or another private health benefit plan, the amount of the lien shall be reduced by the contracted discount or other limitation which would have been applied had the claim been submitted for reimbursement.” A provider that refuses to bill your insurance and files a lien instead does not get the full price. Its lien is limited to what it would have received had it submitted the bill to your plan. I have seen providers try to collect their full charges out of accident proceeds this way, and I have pushed back on it for my clients.
• Your attorney’s lien comes first. “The lien of the injured person’s attorney shall have precedence over the lien created by this section.”
• It does not apply to work injuries. “No such lien shall be valid against anyone covered under the Nebraska Workers’ Compensation Act.”

Two things the statute does not do. It has no percentage cap, so a provider is not limited to a third or a half of the recovery as in some states. And since 1995 it has said a provider “shall not be liable for attorney’s fees and costs incurred by the injured person in securing the judgment.” A provider does not have to reduce its lien to share the cost of the case. Reductions beyond the statutory limits come from negotiation, and from the practical fact that a provider is usually better off with a certain payment now than a disputed claim later.

A lien has to be perfected. The provider must “serve a written notice upon the person or corporation from whom damages are claimed” stating the amount due and the nature of the services, or file the notice in the lawsuit if one is pending. Once that is done, the at-fault driver’s insurer ignores it at its own risk: “If the insurer impairs the lien, then the insurer is directly liable to the provider.” That is why insurers put lienholders’ names on settlement checks, and why a lien cannot simply be left unresolved.

One sentence in the statute works in your favor on the other side of the ledger: “The measure of damages for medical expenses in personal injury claims shall be the private party rate, not the discounted amount.” What the at-fault party owes is measured at the full private rate, while the provider’s lien is measured at the discounted one.

Your Health Insurance: Two Very Different Rules

When health insurance paid your bills, the plan will usually ask to be repaid from the settlement. Whether it can, and how much, depends on a fact most people do not know about their own coverage: whether it is an insured policy or a self-funded employer plan.

Insured policies: you must be made whole first

If your employer or you bought a policy from an insurance company, Nebraska law controls, and it is protective. In a 2004 decision known as Dailey, 268 Neb. 733, the insurer’s policy said it could be repaid from any recovery. The Supreme Court refused to enforce it, holding that such provisions “are contrary to Nebraska law, which requires that an insurer cannot recover under subrogation unless the insured has been made whole.” If the settlement does not fully compensate you — because the at-fault driver’s policy limits were too low, for example — the health insurer may be entitled to nothing.

Even when an insurer is entitled to repayment, it does not get a free ride on the work that produced the money. The Supreme Court restated the common-fund rule in 2021: a party holding a subrogation right who “accepts the avails of the litigation … should be subjected to his or her proportionate share of the expenses thereof, including attorney fees.”

Self-funded employer plans: the plan document controls

Many large employers pay claims from their own funds and hire an insurance company only to administer the plan. Those plans are governed by a federal law, ERISA, and the U.S. Supreme Court has held that self-funded plans are exempt “from state laws that ‘regulat[e] insurance.’” For those plans, the written terms decide. In US Airways v. McCutchen the Court held that equitable rules such as made-whole cannot “override the clear terms of a plan,” although the common-fund rule fills the gap where “the plan is silent about allocating the costs of recovery.”

The first step with any health plan claim is therefore to get the plan documents and find out which kind of plan it is. A demand letter from a recovery vendor does not answer that question, and the two answers lead to very different numbers.

Medical Payments Coverage on Your Own Auto Policy

Medical payments coverage, often called med-pay, pays your crash-related medical bills regardless of fault. Nebraska allows the auto insurer to be repaid from the settlement, by statute: a med-pay subrogation provision “shall be valid and enforceable, except that if the claimant receives less than actual economic loss from all parties liable for the bodily injuries, subrogation of medical payments shall be allowed in the same proportion that the medical expenses bear to the total economic loss” (§ 44-3,128.01).

The catch is the next sentence: “it shall be conclusively presumed that any settlement or judgment which is less than the policy limits of any applicable liability insurance coverage constitutes complete recovery of actual economic loss.” If you settle for less than the at-fault driver’s limits, the law presumes you were fully paid, and the med-pay insurer can seek its money back. The common-fund rule still applies, so the insurer bears its share of the fees and costs. For how med-pay works while a case is open, see who pays medical bills while your crash case is pending.

Medicare

Medicare’s claim is the one that cannot be ignored or bargained with in the ordinary way. When Medicare pays for crash-related care, the payment is “conditional” — in the agency’s words, “because it must be repaid to Medicare when a settlement, judgment, award, or other payment is made.” The duty runs to everyone who touches the money. Federal regulations give the agency “a right of action to recover its payments from any entity, including a beneficiary, provider, supplier, physician, attorney, State agency or private insurer that has received a primary payment,” and require reimbursement “within 60 days.” The statute allows the government to “collect double damages.”

Medicare’s claim is still reduced in three ways.

• Its share of the cost of the case. Under 42 C.F.R. § 411.37, “Medicare reduces its recovery to take account of the cost of procuring the judgment or settlement.” The formula is simple: determine the ratio of attorney fees and costs to the total settlement, apply that ratio to Medicare’s payments, and subtract.
• Unrelated charges. Medicare’s first list of payments often includes care that had nothing to do with the crash. Those items are disputed before the final demand is issued.
• Options for smaller settlements. For certain small settlements Medicare offers simplified ways to resolve its claim, including a fixed-percentage option; the terms are on the agency’s demand calculation page.

Timing matters as much as the amount. Medicare’s contractor issues its payment list “within 65 days” of opening a file, and once a final demand goes out, “interest accrues from the date of the demand letter.” Private Medicare Advantage plans have “the same rights to recover” as traditional Medicare under the federal regulations. If you are on Medicare, tell your lawyer at the first meeting so the process starts long before the case settles.

Nebraska Medicaid

Applying for Medicaid gives the State a claim on any injury recovery. “An application for medical assistance shall give a right of subrogation to the Department of Health and Human Services,” and it includes “every claim or right which the applicant may have against a third party when such right or claim involves money for medical care” (§ 68-716). Refusing to cooperate with the Department’s recovery “renders the applicant or recipient ineligible for assistance.”

Federal law puts a firm limit on that claim. In Arkansas Department of Health & Human Services v. Ahlborn, the U.S. Supreme Court held a state could not take more than the portion of a settlement that represented medical expenses. In Wos v. E.M.A. it struck down a fixed-percentage rule, holding that “a State may not demand any portion of a beneficiary’s tort recovery except the share that is attributable to medical expenses.” And in Gallardo v. Marstiller it held that the medical share includes amounts “representing ‘payment for medical care,’ past or future.”

So the fight in a Medicaid case is over allocation: how much of the settlement is for medical care, and how much is for pain, lost income and everything else. A Nebraska case shows how that can go wrong. In Smalley v. Nebraska Department of Health & Human Services, the injured man had promised the Department full repayment in exchange for its help with his bills; the Supreme Court held he had thereby agreed that the full amount of the settlement “related to medical expenses,” and the Department was repaid in full. What is said to a Medicaid agency before settlement can decide the outcome.

Workers’ Compensation: When You Were Hurt on the Job by Someone Else

If you were injured while working and a third party caused it — another driver, a contractor, an equipment maker — you have a comp claim and a negligence claim. The comp insurer has a statutory right to be repaid from the negligence recovery: “the employer shall be subrogated to the right of the employee … against such third person” (§ 48-118).

Three rules are unique to this situation. A third-party settlement “is void unless” the employee and the comp insurer agree to it in writing, or the court finds it “fair and reasonable.” If they cannot agree on how to split the money, “the court, upon application, shall order a fair and equitable distribution of the proceeds.” And that standard is not the made-whole rule: in Turco v. Schuning the Supreme Court held the statute “does not mandate that the employee be ‘made whole.’ Instead, it requires a fair and equitable distribution to be determined by the trial court under the facts of each case.” Fees and expenses are prorated between the employee and the insurer. These cases are covered in more depth in car accidents while working.

Other Claims That Can Reach a Settlement

• Your underinsured motorist insurer. When you settle with an at-fault driver for policy limits and then turn to your own underinsured coverage, your insurer has rights against that settlement and must be given written notice first. It then has thirty days to substitute its own payment, and if it does not, it “shall have no right of subrogation.” The steps are on my underinsured motorist coverage page.
• The VA and military health care. Federal law gives the United States “a right to recover … from said third person, or that person’s insurer, the reasonable value of the care and treatment” it furnished.
• Child support arrears. A child support judgment “creates a lien upon the real or personal property of the judgment debtor,” and the Department may order a payor — a term that includes insurance companies — “to withhold and deliver” property owed to a parent whose support is in arrears.
• Unpaid medical bills with no lien. A provider that never perfected a lien is still owed its bill. Paying those debts from the settlement, at a negotiated figure, is usually better than leaving them for collections.

How Liens Get Reduced: What a Lawyer Actually Does

• Find them early. Every provider, every payer and every plan is identified while the case is still being built, so nothing surfaces after the release is signed.
• Audit them. Charges for unrelated care are removed. Provider liens are checked against the amount actually still owed and against the insured rate the statute requires.
• Apply the legal limits. The made-whole rule for insured health policies, the proportional rule for med-pay, the fee-and-cost reduction for Medicare, the medical-portion limit for Medicaid, and the common-fund rule wherever it applies.
• Negotiate the rest. Where the law gives no formula, a lienholder still has to weigh a certain payment against a contested one — especially when the insurance available was less than the injury was worth.
• Document it. You receive a closing statement showing the settlement, the fee, the costs, each lien before and after reduction, and the amount paid to you.

Liens also affect the decision to settle at all. An offer that sounds large can net very little once the claims against it are paid, and the right time to learn that is before the offer is accepted. I cover the sequence in how long a personal injury case takes, and the tax side in are personal injury settlements taxable.

What Not to Do

• Do not ignore a lien letter. An unanswered Medicare file becomes a demand “without any reduction for fees or costs.”
• Do not promise repayment in full to get help with a bill without advice. That was the mistake in Smalley.
• Do not assume your health plan has no claim because no one has written to you. Recovery vendors often appear months later.
• Do not let a provider skip your health insurance. Ask that your treatment be billed to your coverage. If the provider refuses and files a lien, the statute still limits the lien to what your plan would have paid, but tell your lawyer, because an overstated lien has to be challenged before the settlement is paid out.
• Do not spend settlement money before the liens are resolved.

How Iowa Differs

• Hospitals only. Iowa’s lien statute covers hospitals, “to the amount of the reasonable and customary charges.” The hospital “shall submit all charges to the patient’s health plan prior to filing the notice of the lien,” and the lien “shall be limited to the amount the hospital would have received” from the plan.
• Hospitals share the cost of the case. Unlike Nebraska, Iowa provides that a hospital recovering under its lien “shall be responsible for the pro rata share of the legal and administrative expenses incurred in obtaining the judgment, verdict, or settlement.”
• Iowa Medicaid is harder. The Iowa statute says the Medicaid payor “shall be repaid in full … regardless of whether a recipient is made whole,” with a rebuttable presumption that Medicaid receives two-thirds of what remains after fees and expenses, or its total payments if less.
• Made-whole is narrower. Iowa recognizes the rule, but the Iowa Supreme Court has held that “an insured need not be paid in full for pain and suffering and disability before subrogation for medical expenses is allowed,” and that contract-based subrogation rights are not held back by it.

Statutes, regulations and opinions read at their official sources on October 3, 2026. Lien rights depend on the documents in your own case; this page is general information, not advice about your claim.

Your Attorney

Frank Younes

Every page on this site is written by Frank Younes, a Nebraska trial attorney with a published record of verdicts and settlements, selection to the National Trial Lawyers Top 100, and a practice that covers every county in Nebraska and Iowa. No case is handed to an associate — the lawyer you read here is the lawyer who works your case.

More about Frank → · Free consultation: (402) 378-9208

Frequently Asked Questions

How much of my settlement do I actually keep?

What remains after the attorney fee and case costs, unpaid medical bills, and repayment to anyone who paid for your care and has a legal right to be repaid. Several of those claims are limited by Nebraska and federal law, and most can be negotiated.

Can a hospital take my whole settlement in Nebraska?

No. A provider’s lien is limited to the amount still owed for its usual and customary charges, is reduced to the insured rate if you have private health coverage, and ranks behind your attorney’s lien.

Do I have to pay back my health insurance?

It depends on the plan. A Nebraska insured policy cannot recover unless you have been made whole. A self-funded employer plan governed by ERISA is controlled by its own written terms.

Do I have to repay Medicare from an injury settlement?

Yes, for care related to the injury. Medicare reduces its claim by its share of attorney fees and costs, and unrelated charges can be disputed. Reimbursement is due within 60 days.

Does Medicaid get paid back from my settlement?

Only from the part of the settlement that represents medical expenses, under the U.S. Supreme Court’s decisions in Ahlborn, Wos and Gallardo.

Can medical liens be negotiated?

Usually. Beyond the limits the law already imposes, lienholders regularly accept less, particularly when the available insurance was not enough to cover the full loss.

What happens if a lien is ignored?

The lienholder can pursue the money. An insurer that pays around a perfected provider lien is directly liable to the provider, and Medicare can charge interest and seek double damages.