Third Party Settlement Allocation
Third party settlement allocation divides a limited recovery among hospital liens, Medicare conditional payments, Medicaid claims, ERISA or insured-plan reimbursement, attorney fees, and the household remainder. Primaries list caps and reductions, not a national stack. G.S. 44-50 preserves attorney fees and caps the provider lien at fifty percent (50%) of damages; 42 C.F.R. § 411.37 lists Medicare's procurement-cost reduction.
Last updated: September 1, 2026
Allocation
North Carolina rows are North Carolina law. Medicare, Medicaid TPL, and ERISA rows are federal law.
| Claimant / method | What the law says | Source |
|---|---|---|
| Hospital statutory lien (NC example) | G.S. 44-49 creates a lien upon any sums recovered as damages for personal injury in favor of a physician, dentist, nurse, or hospital. G.S. 44-50 states that the lien shall in no case, exclusive of attorneys' fees, exceed fifty percent (50%) of the amount of damages recovered. | G.S. 44-50 / G.S. 44-49 |
| Attorney fees (NC hospital-lien path) | G.S. 44-50 states that nothing in that section or in G.S. 44-49 shall be construed so as to interfere with any amount due for attorney's services. The same section lists the provider-lien cap exclusive of those fees. | G.S. 44-50 |
| Medicare conditional payment | 42 U.S.C. § 1395y states that a conditional payment is conditioned on reimbursement to the appropriate Trust Fund. 42 C.F.R. § 411.37 states that Medicare reduces its recovery to take account of the cost of procuring the judgment or settlement when procurement costs are incurred because the claim is disputed. | 42 C.F.R. § 411.37 / 42 U.S.C. § 1395y |
| Medicaid (NC example + federal TPL duty) | G.S. 108A-57(a1) lists the one-third presumption on the medical assistance beneficiary's gross recovery. 42 U.S.C. § 1396a states that the state plan must seek reimbursement from such third party. | G.S. 108A-57 / 42 U.S.C. § 1396a |
| Self-funded ERISA plan | 29 U.S.C. § 1144(a) states that ERISA shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan. Subsection (b)(2)(B) states that such a plan shall not be deemed to be an insurance company. | 29 U.S.C. § 1144 |
| State Health Plan / published remainder (NC) | G.S. 135-48.37 lists a right to first recovery and that the Plan's lien shall in no event exceed fifty percent (50%) of the total damages recovered by the Plan member, exclusive of reasonable costs of collection. G.S. 44-50 separately lists the hospital-lien fifty percent (50%) cap exclusive of attorneys' fees. | G.S. 135-48.37 / G.S. 44-50 |
Sources fetched September 1, 2026: G.S. 44-49, G.S. 44-50, G.S. 108A-57, G.S. 135-48.37, 42 C.F.R. § 411.37, 29 U.S.C. § 1144, 42 U.S.C. § 1395y, 42 U.S.C. § 1396a.
Published allocation methods
G.S. 44-50 lists two allocation facts on the same page: attorney's services are not interfered with, and the provider lien is capped at fifty percent (50%) of damages exclusive of those fees. 42 C.F.R. § 411.37 lists a procurement-cost reduction for Medicare recovery. G.S. 108A-57 lists a one-third presumption for Medicaid. G.S. 135-48.37 lists a State Health Plan right to first recovery with its own fifty percent (50%) lien cap. Those are competing published methods.
Nothing in this section or in G.S. 44-49 shall be construed so as to interfere with any amount due for attorney's services. The lien provided for shall in no case, exclusive of attorneys' fees, exceed fifty percent (50%) of the amount of damages recovered.
Medicare reduces its recovery to take account of the cost of procuring the judgment or settlement, as provided in this section, if— (i) Procurement costs are incurred because the claim is disputed; and (ii) Those costs are borne by the party against which CMS seeks to recover.
If the amount of the Medicaid claim does not exceed one-third of the medical assistance beneficiary's gross recovery, it is presumed that the gross recovery includes compensation for the full amount of the Medicaid claim. If the amount of the Medicaid claim exceeds one-third of the medical assistance beneficiary's gross recovery, it is presumed that one-third of the gross recovery represents compensation for the Medicaid claim.
Blockquotes: G.S. 44-50, 42 C.F.R. § 411.37, G.S. 108A-57 — fetched September 1, 2026.
What is third party settlement allocation?
Third party settlement allocation is how a limited third-party recovery is divided when hospital liens, Medicare conditional payments, Medicaid claims, plan reimbursement, attorney fees, and the household remainder all claim the same pot. Primaries list caps, procurement reductions, and presumptions.
Do attorney fees always come off before medical liens?
North Carolina G.S. 44-50 states that nothing in that section or G.S. 44-49 shall be construed so as to interfere with any amount due for attorney's services, and that the provider lien shall in no case, exclusive of attorneys' fees, exceed fifty percent (50%) of damages recovered. That is North Carolina law.
How does Medicare allocate its recovery from a settlement?
42 C.F.R. § 411.37 states that Medicare reduces its recovery to take account of the cost of procuring the judgment or settlement when procurement costs are incurred because the claim is disputed. 42 U.S.C. § 1395y states that a conditional payment is conditioned on reimbursement to the appropriate Trust Fund.
What does North Carolina Medicaid list for a small recovery?
G.S. 108A-57(a1) lists a one-third presumption: if the Medicaid claim does not exceed one-third of the medical assistance beneficiary's gross recovery, the gross recovery is presumed to include the full Medicaid claim; if it exceeds one-third, one-third of the gross recovery is presumed to represent the Medicaid claim.
Does ERISA change how state allocation rules apply?
29 U.S.C. § 1144(a) states that ERISA shall supersede any and all State laws insofar as they relate to an employee benefit plan. Subsection (b)(2)(A) saves state insurance law; (b)(2)(B) states that a plan shall not be deemed an insurance company.