VA Subrogation Claims: Liens, Waivers, and Priority

VA subrogation claims are the Department of Veterans Affairs’ legal right to be reimbursed, out of your personal injury settlement, for medical care it provided to treat an injury someone else caused. The claim attaches as a lien on your recovery, it survives any release you sign with the other side, and it has to be resolved before settlement funds are distributed. You can dispute charges that don’t belong on it, and you can ask the VA to accept less — but you cannot ignore it.

When the VA Will Claim Part of Your Settlement

Two federal statutes give the government this reach. The Federal Medical Care Recovery Act (42 U.S.C. §§ 2651–2653) lets the United States recover the reasonable value of care from any third party liable in tort, regardless of whether your condition is service-connected.¹ A VA-specific statute, 38 U.S.C. § 1729, reaches further than tort: it authorizes the VA to bill health-plan contracts, auto accident reparations insurers, workers’ compensation carriers, and employers’ insurance directly.²

In everyday terms, that means the VA will assert a claim when:

Another driver caused a crash and you were treated at a VA facility. The VA pursues the at-fault driver’s insurer, and in no-fault or PIP states it can also reach your own auto policy.
You were hurt on someone else’s property and their liability insurer is paying.
Your injury is covered by workers’ compensation.
A non-VA provider’s malpractice sent you to the VA for follow-up care.
You carry private health insurance and received VA care for a non-service-connected condition — the VA can bill your private plan directly.

Service connection does not shut the claim down. Under § 1729, the VA can still recover from a private health-plan contract even for a service-connected condition if you have outside coverage, and the FMCRA ignores the service-connected question entirely. One protection does exist: the VA cannot deny you care or require a copayment as a condition of asserting its recovery rights.²

How the Lien Amount Is Set

The VA does not bill its own internal cost. It bills “reasonable charges” under 38 C.F.R. § 17.101, a methodology designed to approximate what the same care would cost in the private market. Inpatient stays are priced per diem by diagnosis-related group, adjusted for geographic wage differences and case complexity. Outpatient services are set at the nationwide 80th percentile of Medicare’s Ambulatory Payment Classification rates — meaning the VA bills higher than most Medicare reimbursements. Physician services use Medicare’s Relative Value Unit system with geographic adjustment, and pharmacy, lab, equipment, and ambulance charges each have their own schedule.³

The practical result is an itemized ledger that climbs quickly for emergency surgery, inpatient rehab, or long courses of care. Third-party payers under § 1729 can pay the VA’s billed charges or demonstrate what they would have paid a private provider in the same area for the same services and pay that instead.³ For FMCRA claims, OMB sets the rates and publishes them in the Federal Register.⁴

What You Have to Do After You Get a Notice of Claim

The Revenue Law Group within the VA Office of General Counsel sends the notice, along with the ledger of billed charges and the name of your assigned case manager. That case manager is your contact for everything related to the lien.⁵

From that point you have three ongoing duties: provide information the VA asks for about how the injury happened and any related lawsuit, notify the VA of settlement offers and completed settlements, and cooperate with the government’s own collection efforts against the responsible party.⁵

Here is where cases go wrong. A payment to you and a signed release from the other side do not extinguish the VA’s claim. The VA’s position is explicit: the claim must be paid at the time of distribution, and any payment of less than the full lien amount requires advance approval from the Revenue Law Group. Distribute settlement funds without resolving the lien first and the outstanding balance remains due.⁵ Before you sign off on a settlement, confirm the final lien figure in writing with your case manager.

Disputing Charges on the Lien

If the ledger includes treatment unrelated to your injury, you can challenge individual line items. Written documentation supporting your position goes directly to the Revenue Law Group team member named in your notice of claim, and the VA expects disputes to be raised promptly rather than days before trial.⁵

A procedural detail that catches firms off guard: the VA will not accept disputes submitted through third-party records retrieval companies or commercial lien resolution services. The dispute has to come from you, your attorney, or defense counsel.⁵

Asking the VA to Reduce or Waive the Lien

When the settlement cannot cover the attorney fee, other medical liens, your own losses, and the full VA charge, you can ask the VA to compromise or waive its claim. The authority is 42 U.S.C. § 2652, which lets the agency head waive a claim for the convenience of the Government or on a finding that full collection would cause undue hardship. Section 2652 also protects your right to recover damages beyond the government’s share; the VA’s claim cannot eat into the portion of your settlement that compensates your own losses.⁶

Compromise Based on an Insufficient Settlement

Send the following to the case manager named in your notice:⁵

Settlement amount, including any structured payment terms.
Insurance coverage details — types and amounts available, if not already provided.
Attorney costs and fees, with a note on any reductions.
Amounts owed to other medical providers and any reductions you negotiated with them.
Any other factor you want weighed, including prior VA copayments.

Hardship Waiver

For a full waiver or deep reduction based on your financial situation, submit VA Form 5655, the Financial Status Report.⁷ The form asks for a complete picture of household income, assets (bank accounts, real estate, vehicles, personal property), monthly living expenses, and all debts with creditor, original amount, unpaid balance, and monthly payment. Add a written statement explaining the hardship and attach bank statements or receipts to verify the figures. Unless a legal deadline forces faster action, the VA asks that you not follow up for at least 60 days after a complete request is submitted.⁵

What the VA Weighs

Federal agencies apply the compromise standards in 31 C.F.R. Part 902. The VA can accept less than the full amount if you cannot pay within a reasonable time given income, assets, age, and health; if the cost of enforcing the full amount outweighs what the government would collect; or if there is genuine legal uncertainty, such as a disputed liability case. The VA will verify your financial claims through credit reports and other information, and any compromise figure should reflect what the government could realistically collect through enforcement, accounting for exemptions available to you under federal and state law.⁸

Approval Limits for Larger Claims

The Revenue Law Group approves compromises and waivers up to a point. Claims between $300,000 and $1 million require Department of Justice approval. Claims exceeding $1 million require approval from the Attorney General’s office.⁵ Start the compromise conversation early when the lien is large; the sign-off chain adds time.

Attorney Fees and the VA’s Share

The VA generally will not reduce its lien to carry a proportionate share of your contingency fee. Its position is that the claim is an independent cause of action, not a lien that rides on your recovery, so your fee agreement with your lawyer applies to your share of the proceeds and not to the government’s.

The compromise process asks for your attorney costs and fees anyway, which means those costs are part of what the VA weighs when deciding whether to accept less.⁵ Present the numbers directly: total settlement, minus attorney fees and costs, minus other medical liens, and what is left for you. The VA is more likely to reduce the claim when the math shows that without a reduction you would receive nothing.

How Long the VA Has to Collect

Under 38 U.S.C. § 1729, the VA has six years from the last day it furnished the care in question to bring a legal proceeding for recovery.² The clock runs from the final date of treatment, not from the injury or the settlement.

Under the FMCRA, if you do not file suit against the responsible party within six months of the first day of care, the United States can bring its own action — in its own name or in yours — against the third party or their insurer.¹ Inaction on your part does not end the government’s claim. It only moves control of the litigation to the government.

Where the VA Lien Ranks Against Other Medical Liens

VA recovery claims carry significant weight in the distribution of settlement proceeds because they are federally mandated, and in practice the VA lien typically ranks above private medical provider liens and most state healthcare liens. The VA states that its claim must be paid at the time of distribution, and that partial payment requires advance approval.⁵

When several medical liens compete for the same settlement dollars, your attorney will need to negotiate reductions across all of them. The VA wants to see how other providers’ claims were handled before deciding what it will accept. A compromise request lands better when every party at the table absorbed some reduction, rather than the VA being asked to carry the full shortfall on its own.

1
Office of the Law Revision Counsel. 42 USC 2651 – Recovery by United States
2
Office of the Law Revision Counsel. 38 USC 1729 – Recovery by the United States of the Cost of Certain Care and Services
3
eCFR. 38 CFR 17.101 – Reasonable Charges
4
The White House. Certain Rates Regarding Recovery From Tortiously Liable Third Persons
5
Department of Veterans Affairs. Request VA Medical Bills – Office of General Counsel
6
Office of the Law Revision Counsel. 42 USC 2652 – Regulations
7
Veterans Affairs. About VA Form VA5655
8
eCFR. 31 CFR Part 902 – Standards for the Compromise of Claims