Medical Liens Explained

A medical lien is a common term in auto accident and personal injury cases. It is the amount of money you have to pay back to the organization that paid your medical bills. In some cases that will be a government organization like Medi-Cal or Medicare, in other situations it may be your health insurance.

Why do you have to pay money back? Well, the basic reasoning is that when you settle a case, part of the money being paid to you is for the medical bills. And if somebody else paid the medical bills for you, then they want that money back.

Three types of medical liens you need to keep in mind:

1. Statutory Liens

These are liens that are established by some law. This type of lien would be in place if your medical bills were paid by any government program such as Medi-Cal, Medicare or any type of county based insurance program for low-income individuals.

2. Health insurance liens (rights of reimbursement)

These are liens that are created through your private health insurance. Believe it or not, buried deep in your health insurance contract is a paragraph or section giving the insurance company the right to be reimbursed by you for any money you recover for medical bills that they paid.

3. Private liens

These are liens that you create yourself usually because you have been in an accident, are not covered by any insurance and you need medical care. In this situation, your lawyer will often recommend you seek out a doctor that will treat you on a lien basis. In

other words, they provide you with medical care and defer the payment until your case is settled.

In my practice, the lien that surprises clients most is the health insurance one. Nobody reads the reimbursement clause buried in their own health plan, so the letter demanding payback always comes as a shock. I tell every client up front to assume their health insurance will ask to be repaid, and that handling it is part of my job on the case.

Resolving Medical Liens

Your lawyer will handle the resolution of your medical liens as part of your case. Just like an insurance company negotiates a reduction in the amount they pay to doctors, your lawyer will negotiate your medical liens. This is necessary because you had to pay for a lawyer and pay costs of a lawsuit in order to get any money at all, so the idea is that you should get a break from the amount owed since you were the one that paid to get the recovery.

The laws that create the statutory liens all have built-in formulas for reducing the amount owed to them. Some health insurance contracts have the formulas built into them as well. Certain private medical liens can be difficult to resolve because these do not have formulas to reduce the amount owed. However, there is always room for negotiation, no matter what type of medical lien. Here are some of the factors that will be considered when negotiating your liens:

1. Attorney fees;
2. Lawsuit costs;
3. Other liens – often you will have several liens;
4. Causation – was the medical care related to this accident or a pre-existing issue;
5. Fault – if the accident was 50% your fault! then you probably are not being paid all of your medical bills, so you shouldn’t have to pay back the full amount either.

Lien negotiation is one of the least visible parts of what I do, and one of the most valuable. I have seen the difference between a client walking away with very little and walking away whole come down to how hard the liens were pushed down. The statutes and policies give us formulas to start from, but the real work happens in the back-and-forth.

These are all factors used to negotiate your medical liens. The process of lien negotiation can take several weeks, and often can

delay payment of a settlement. However, you are paying these medical liens with your money, so it is in your best interest to take the necessary time to allow your lawyer to negotiate the best deal possible.

Attorney Q&A: Medical Liens

I just got a letter from my health insurance company saying they want to be paid back out of my settlement. Is that real, or can I ignore it?

It’s very real. Virtually every private health insurance company, and all government-assisted insurance, whether that’s Medi-Cal, Medicare, or some county-based medical program, has reimbursement requirements. Most clients are shocked to hear this, but their insurance requires that they reimburse the insurance company for any medical bills paid due to the negligence of a third party. The good news is that this is reimbursement, not repayment, so it only comes into play if you receive a settlement from the person who caused your injuries. If there is no settlement, you do not have to pay them back.

My attorney sent me to a doctor who agreed to treat me “on a lien.” What does that actually mean for what I end up owing?

When an attorney sends you to a doctor, that lien is a little bit different than your private health insurance or government health insurance. These contracts usually require that the client agree to pay the doctor’s bills no matter the outcome of the injury case, but the doctor is agreeing to delay payment of those bills until the case is resolved. In essence, that usually means they will get paid out of the settlement. The important thing to know here is that these agreements make the client responsible for the entire bill no matter the outcome of the case, so if you lose your case, you still have to pay the medical bills. Obviously the goal is to obtain a recovery and pay the bills out of that, but be aware that the doctor could seek payment directly from you when the case is done.

Can medical liens be negotiated down, or am I stuck paying back every dollar?

Medical liens can be reduced or negotiated down, but that is often very fact-dependent on your case and the type of lien at issue. For example, a private health insurance policy may have a formula for reducing the lien, but I’ve seen many insurance policies that also require 100% reimbursement. So yes, it can be done, but it is very dependent on the facts of your case.