Bough's client died of his injuries not long after Bough took the case. But the client's widow still has received nothing from the settlement. Kurtz's client, who was paralyzed in a car accident, also died. He's helping the family.

"The agony for these families who have to go through this hassle is tragic," he said, adding that many plaintiffs' lawyers could tell similar horror stories.

Medicare has a non-competitive, sole-source $40 million contract to Chickasaw Nation Industries Inc. in Norman, Okla., to recover payments from clients in cases involving secondary insurers.

It received the contract in 2006 under federal rules governing disadvantaged businesses. A spokeswoman for Chickasaw referred questions to Medicare.

Sen. Claire McCaskill, a Missouri Democrat who's the chairman of a subcommittee on contracting oversight, has asked Medicare to explain how its payment recovery program works.

"People are trying to pay Medicare and Medicare is not paying any attention," she said. "Clearly with our health care costs where they are and the amount taxpayers are spending on Medicare, the notion that someone is trying to give them money and no one is home is pretty offensive."

As of March 31, Medicare clients owed the agency $201 million in cases involving secondary insurance payments, Walters said. It's hard to know how much of that money was, like Bough's $60,000, sitting in an escrow account or a safe in some lawyer's office.

"I know we've had in excess of several hundred thousand dollars and it just sits there," Dollar said. "This is rampant."

Patrick LePley, a personal injury lawyer in Bellevue, Wash., said that he's held as much as $200,000 to $300,000.

"Two years ago, I held over $70,000 for almost 18 months," he said. "I thought my guy was going to die."

LePley said that Medicare appeared to be taking steps to improve the situation because it seemed to him that lately he's not holding onto money as long.

He said that another problem was Medicare asking for more money after a lien had been settled if additional charges from hospitals and doctors suddenly showed up.

Walters said that Medicare issues demands for new payments only when an attorney "gives us misinformation."

LePley, however, said that in one case where his client died after the settlement, Medicare subsequently demanded more money and went after the client's widow, threatening to withhold her Social Security income. LePley appealed the new bills and Medicare dropped the lien.

"They're dunning a widow who is distraught," he said. "Why does anybody have to go through this?"

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