What A Government Shutdown Means For Liens In Your Personal Injury Case

When Congress fails to pass appropriations and parts of the federal government shut down, many people worry about how that pause will affect ongoing legal matters, including personal injury settlements and the liens that must be resolved before you can receive money. The short answer: a shutdown can slow some federal processes that affect liens (especially Medicare-related matters and federal court activity), but not every part of the lien-resolution process stops. In this blog, we discuss the practical effects of a government shutdown, what usually continues, steps you should take now, and answer to common questions about how your liens are affected during a shutdown.

What Typically Continues During a Shutdown

Not everything stops. In prior shutdowns and in official contingency plans, agencies identify “excepted” or essential functions that continue. Examples important to personal-injury litigants:

Medicare and Medicaid services deemed mission-critical: certain claims processing and oversight functions are maintained. (But some non-critical or discretionary activities can be limited.)
VA benefit payments: disability compensation, pensions and many core benefit payments generally continue. Some regional office operations (like in-person services, outreach, certain specialty programs) may be limited.
Essential court work: federal courts typically continue minimal operations, and many filings and matters go forward, but scheduling and non-urgent matters may be postponed if resources run out. State courts usually run on state funding and may be unaffected.

Which Liens are Most Likely Affected During a Government Shutdown

Medicare-related liens/Medicare Secondary Payer (MSP) recovery: most commonly affected. CMS and contractors that verify, audit, or process some Medicare recovery activities may reduce non-essential work during a shutdown, which can delay final lien amounts and conditional payment letters. Start lien resolution early for this reason.
Medicaid/state health-plan liens: state agencies may be less affected (they operate under state budgets). State-level processes vary; some states continue recovery activity even during a federal lapse.
VA-related liens/benefit offsets: core VA benefit payments are typically continued, though regional offices and some services may be curtailed. That means VA financial obligations may be less disrupted than other federal programs.
Federal court / DOJ lien enforcement: if the federal judiciary reduces operations, filings and some enforcement actions can be slowed, which can delay deadlines or case scheduling. Local/state courts may be unaffected unless they rely on federal funding.

Why Medicare Liens are Usually the Top Concern

Medicare frequently pays for medical treatment before a personal injury case resolves. Under the Medicare Secondary Payer (MSP) rules, Medicare has a right to be reimbursed from any settlement for conditional payments it made. That reimbursement process requires verification of conditional payments and often a formal demand or conditional payment letter from CMS or its contractors.

During a shutdown, CMS may furlough staff or limit certain non-essential administrative work. That can mean:

slower issuance of conditional payment letters;
longer waits for final demand amounts; and
delays in review of settlement allocations if CMS involvement is necessary.

This matters because many defendants or insurers will not disburse settlement funds until Medicare’s conditional payment amount is verified and resolved, otherwise they risk being sued later. Starting the Medicare lien investigation well before settlement reduces the chance a shutdown causes last-minute delays.

Practical Consequences for Your Personal Injury Settlement Timeline

If your case involves a federal lien (especially Medicare), expect possible delays that can affect when you actually receive settlement money:

Settlement holdups: Insurers often require resolution or a good-faith verification of federal liens before disbursing funds. A shutdown can slow that verification.
Administration costs or interest: In some jurisdictions, prolonged delays could increase interest or administrative costs tied to lien resolution.
Court scheduling: If your case is in federal court, non-urgent hearings may be reset and clerical processing slowed. This can indirectly lengthen the time before settlement negotiations are complete. State court cases are less likely to be affected.

What Your Attorney Will Do

A proactive attorney can minimize shutdown-related disruption. Typical steps:

Open Medicare/benefit lien investigations early. Request conditional payment information and start the process of identifying Medicare claims and other federal liens well before settlement negotiations begin.
Document communications. Keep records of any shutdown-related delays from government agencies so you can show the cause of the delay if a dispute arises.
Negotiate interim protections. Insurers can sometimes agree to escrow the disputed funds or issue a limited release into an escrow account while the lien is finalized. This keeps settlements moving while protecting the payer from later claims.
Check state agency procedures. For Medicaid or other state recoveries, your attorney will contact the relevant state recovery unit to learn whether state processes are continuing.
Monitor federal agency announcements. CMS, VA, and the federal judiciary will publish contingency guidance during a shutdown.

What You Can Do as the Injured Person

Gather all medical records and billing statements. The faster these are available, the faster lien reviewers can verify conditional payments.
Give your lawyer authorization to request records and talk to agencies on your behalf (HIPAA authorization, Medicare authorization).
Be patient but stay informed. Ask your attorney for updates when agencies acknowledge receipt of lien requests or conditional payment inquiries.

Example Timeline: How a Shutdown Might Play Out in Practice

Before shutdown: Your counsel requests Medicare conditional payment history and begins lien resolution.
During shutdown: CMS limits some administrative staff. You may see slower responses or delayed final demand letters. Your attorney negotiates escrow or conditional releases if needed. Courts may postpone non-urgent hearings.
After funding resumes: Agencies typically clear backlogs but it can take weeks for full processing to return to normal. Expect activity to pick up, but keep documentation in case of disputes.

Common Misconceptions about Liens and the Government Shutdown

“A shutdown wipes out federal liens.” No. It usually just delays administrative processing. The underlying statutory rights of Medicare, Medicaid, or other federal programs to recovery do not vanish.
“VA benefits stop during a shutdown.” Core VA benefit payments usually continue, although some regional services may be curtailed.
“State liens are governed by federal shutdown rules.” State lien programs are governed by state budgets and rules; some are unaffected by a federal shutdown.

Frequently Asked Questions About Handling Personal Injury Liens During a Government Shutdown

Q: Will a government shutdown cancel Medicare’s ability to recover conditional payments?
A: No. Shutdowns generally only limit certain administrative functions temporarily. Medicare’s statutory right to recovery remains. That said, administrative steps (conditional payment letters, verifications) may be slower, which can delay settlement disbursements.

Q: Does the VA stop paying benefits that would otherwise offset my settlement?
A: Generally no. Core VA payments continue. However, some regional functions may be limited. Your attorney should confirm any VA offsets or obligations directly with VA guidance.

Q: Are federal courts closed during a shutdown?
A: Federal courts may reduce operations and prioritize essential matters; however, many filings continue and some urgent proceedings are handled. The level of disruption depends on how long the lapse lasts and whether courts exhaust non-appropriation funds. State courts typically are unaffected.

Q: How long after a shutdown ends will lien processing return to normal?
A: There’s no fixed timeline. Agencies will often prioritize essential work and then work through backlogs, but it can take weeks for full processing to normalize depending on the agency and the backlog size. Monitor agency announcements.

Contact the Award-Winning Illinois Personal Injury Lawyers at John J. Malm & Associates

Navigating a personal injury settlement is already complex, and the added uncertainty of a government shutdown can make things even more challenging, especially when federal liens from Medicare or other agencies threaten to delay the compensation you rightfully deserve. At John J. Malm & Associates, we understand how critical it is for you to receive your settlement promptly, and we have the experience to anticipate and overcome lien-related hurdles, even during a federal lapse in funding.

If you or a loved one is worried about the impact of a government shutdown on your injury case, don’t wait. Contact our firm today for a free consultation. We’ll help you protect your recovery, manage lien negotiations, and ensure no shutdown stands in the way of justice.