In Virginia, Medicaid can take up to the full amount it paid for your injury-related medical care out of a personal injury settlement, but only after your attorney’s fees and costs come off the top, and often less than that once the lien is negotiated or limited by federal law. How much Medicaid will take from your settlement in Virginia depends on three numbers: what Medicaid actually spent on your injury, what your lawyer charges, and how much of the settlement represents medical expenses rather than pain, lost wages, or future losses.
How the Dollar Figure Is Actually Calculated
Attorney’s fees and litigation costs are paid first. Virginia law makes the Medicaid lien inferior to reasonable attorney’s fees and costs, so those come out of the gross settlement before the Department of Medical Assistance Services (DMAS) gets anything.1Virginia Code Commission. Virginia Code 8.01-66.9 – Lien in Favor of Commonwealth, Its Programs, Institutions or Departments on Claim for Personal Injuries Personal injury attorneys in Virginia typically charge contingency fees of roughly one-third to 40 percent.
After that deduction, Medicaid’s lien equals whichever is less: the total amount Medicaid paid for your injury-related care, or the net settlement left after fees and costs.
A worked example:
- Settlement: $50,000
- Attorney fees (33%) and costs: $20,000
- Net settlement: $30,000
- Medicaid paid: $22,000 for injury-related care
- Lien amount: $22,000, because it is less than the $30,000 net
- What you keep: $8,000
Change one number and the picture flips. If Medicaid had paid $35,000 on the same $50,000 settlement, the lien would be capped at the $30,000 net, your attorney would still collect fees, DMAS would take the entire $30,000, and you would walk away with nothing. That is the scenario where fighting the lien matters most.
The Federal Cap That Often Shrinks the Number
Medicaid cannot touch the parts of your settlement that pay you for things other than medical care. The U.S. Supreme Court held in Arkansas Department of Health and Human Services v. Ahlborn that Medicaid is limited to the portion of a settlement that represents payment for medical expenses. Money allocated to pain and suffering, lost wages, or future earning capacity is off limits.2Justia. Arkansas Dept. of Health and Human Servs. v. Ahlborn
Most settlements arrive as a single lump sum with no breakdown. Your attorney can argue that only a fraction of that lump sum represents medical costs, which directly reduces what Medicaid can claim. If you suffered $200,000 in total losses but settled for $50,000 because the defendant had limited insurance, the medical portion of that $50,000 is only a slice, not the whole check. The smaller that slice, the smaller the lien.
Three Ways to Get the Lien Reduced
The number DMAS sends is a starting point, not the final answer. Virginia law provides three paths to bring it down, and they are often used in combination.
Negotiate Through the Attorney General’s Office
DMAS processes lien requests initially, then forwards reduction requests to the Attorney General’s office, which is authorized to compromise state claims.3Virginia State Bar. DMAS Updates Procedures Concerning Lien Determinations, Updates, and Reduction Requests The strongest argument is that your settlement does not fully compensate you for all your damages, so Medicaid should accept a proportionally reduced amount under Ahlborn.2Justia. Arkansas Dept. of Health and Human Servs. v. Ahlborn
Before negotiating, review the itemized charges carefully. Not everything Medicaid paid during the relevant period necessarily relates to your injury. Treatment for pre-existing conditions should not be on the lien, and getting unrelated charges stripped out is one of the easiest reductions available.
Ask a Court to Reduce and Apportion
If negotiation fails, Virginia’s lien statute lets a judge reduce the lien and divide the recovery among you, your attorney, and the state “as the equities of the case may appear.” Your attorney must have made a good-faith effort to compromise with the Attorney General’s office before filing. The court looks at the severity of your injuries, whether the settlement covers your total losses, your ongoing medical needs, and what you would actually take home. Any reduction is explained in a written order.1Virginia Code Commission. Virginia Code 8.01-66.9 – Lien in Favor of Commonwealth, Its Programs, Institutions or Departments on Claim for Personal Injuries
Raise Financial Hardship
If paying the full lien would leave you unable to afford food, shelter, or necessary medical care, Virginia’s regulations recognize undue hardship as a basis for reduction. The standard is that enforcing the claim would deprive you of medical care endangering your health or life, or leave you without basic living necessities.4Virginia Code Commission. Virginia Administrative Code 12VAC30-110-710 – Undue Hardship; Transfer of Resources Hardship arguments carry more weight when paired with an Ahlborn allocation argument.
The Timeline That Can Work in Your Favor
Once your case settles, your attorney requests an itemized breakdown of every medical charge Medicaid paid in connection with your injury. DMAS has 60 days to respond with that statement and a specific dollar demand.5Virginia Code Commission. Virginia Code 8.01-66.9:2 – Lien in Favor of the Department of Medical Assistance Services on Claim for Personal Injuries
If DMAS misses that deadline, you gain real leverage. Your attorney can send DMAS and the Office of the Attorney General a specific dollar offer to settle the lien with an explanation of the figure. DMAS then has 45 days to accept or reject. If DMAS stays silent past 45 days, the offer is deemed accepted as full and final resolution of the lien.5Virginia Code Commission. Virginia Code 8.01-66.9:2 – Lien in Favor of the Department of Medical Assistance Services on Claim for Personal Injuries
Settlement funds should stay in your attorney’s trust account until the lien is resolved. Once the final number is set, your attorney pays DMAS directly from the settlement before distributing the rest to you. Ignoring the lien does not make it go away; the state’s claim exists whether you acknowledge it or not.
Protecting What’s Left So You Don’t Lose Medicaid
Even after the lien is paid and your attorney takes their fees, the money left over can knock you off Medicaid. Virginia’s asset limit for Medicaid coverage through the aged, blind, and disabled program is just $2,000 for a single individual. A settlement check deposited into your bank account can push you over that threshold immediately. The SSI resource limit is also $2,000 for individuals.6Social Security Administration. Understanding Supplemental Security Income SSI Resources
The usual solution is a first-party special needs trust, often called a d4A trust after the federal statute that authorizes it. Settlement proceeds placed in this trust do not count against Medicaid eligibility, as long as you meet the requirements:7Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
- You are under 65 and meet the federal definition of disabled.
- The trust is established by you, a parent, grandparent, legal guardian, or a court.
- When you pass away, any money remaining in the trust reimburses Medicaid for what it paid during your lifetime.
Trust funds can pay for assistive technology, home modifications, transportation, personal care attendants, and recreation. Using trust funds for food and shelter can reduce SSI benefits, so those expenditures take planning. Set the trust up before the settlement check arrives, not after; even a brief gap where the money sits in your own account can cost you both Medicaid and SSI.
If You Have Both Medicare and Medicaid
Some people receive both programs, particularly those on Social Security disability or over 65. When both paid for injury-related care, each holds a separate right to reimbursement. Medicare’s claim follows different federal rules, runs on different timelines, and is handled by the Centers for Medicare and Medicaid Services rather than DMAS. Both liens must be resolved before you see any money, and the combined total plus attorney fees can consume most of a modest settlement. If you are dual-covered, both agencies need to be worked at the same time; resolving one lien without accounting for the other can leave you short.