You settled your injury case for $50,000. After months of negotiations, you’re ready to receive compensation for everything you’ve been through. Then your attorney explains that between medical liens, outstanding bills, and legal fees, you’ll actually receive about $18,000. Welcome to the frustrating reality of medical liens.
Our friends at Fogelman Law LLC discuss how lien claims often surprise injury victims who assumed their settlement check represented money they’d actually keep. As a motorcycle accident lawyer will tell you, understanding which entities have claims against your settlement prevents shocking disappointments when it’s time to distribute the funds.
What Medical Liens Actually Are
A medical lien gives healthcare providers a legal claim against your injury settlement for treatment they provided. Instead of requiring upfront payment, the provider agrees to treat you with the understanding they’ll be paid from your eventual settlement or verdict.
These arrangements help injured people get necessary medical care when they can’t afford to pay out of pocket. The downside is that these providers expect full repayment, often at inflated rates, directly from your settlement proceeds.
Liens aren’t suggestions or requests. They’re legally enforceable claims that must be satisfied before you receive your portion of the settlement.
Common Types Of Medical Liens
Different entities can place liens on your settlement, each with its own legal foundation and priority:
- Health insurance companies seeking reimbursement for accident-related treatment they covered
- Medicare or Medicaid claiming repayment under federal law
- Hospitals and emergency rooms that treated you
- Doctors and chiropractors who agreed to defer payment
- Ambulance services and other medical providers
- Workers’ compensation carriers if your injury was work-related
Each lien holder has different rights, different negotiation flexibility, and different consequences if you fail to pay them.
How Health Insurance Subrogation Works
Most private health insurance policies include subrogation clauses. These provisions give your insurance company the right to recover money they paid for accident-related medical care from any settlement you receive.
If your health insurance paid $25,000 in medical bills related to your car accident, they can place a lien for that amount against your settlement. This seems unfair since you’ve been paying insurance premiums for years, but it’s perfectly legal and enforceable in most states.
Some health plans aggressively pursue every dollar. Others negotiate reductions, especially when the settlement barely covers all damages. The strength of their legal position varies depending on the type of plan and applicable state and federal laws.
Medicare And Medicaid Liens Are Different
Government healthcare programs operate under special federal rules that make their liens particularly difficult to reduce. The Medicare Secondary Payer Act requires Medicare to be reimbursed for accident-related treatment before you can keep settlement proceeds.
Medicare tracks every payment they make for your care and calculates exactly how much they’re owed. Failing to repay Medicare can result in serious consequences including double damages and difficulty obtaining future Medicare coverage.
Medicaid operates similarly but falls under state administration, which means the rules vary by location. Some states aggressively pursue Medicaid liens while others rarely enforce them.
Hospital Liens Can Be Substantial
Many states allow hospitals to place statutory liens on injury settlements for emergency and continuing care they provided. These liens attach automatically without requiring the patient’s signature or agreement.
Hospital bills are notoriously inflated. A few hours in the emergency room can generate $15,000 to $30,000 in charges. Physical therapy, diagnostic imaging, and follow-up care quickly add tens of thousands more.
The good news is that hospital liens are often negotiable. Hospitals bill at their standard rates but frequently accept significantly reduced amounts in final payment, particularly when the settlement is modest.
Negotiating Lien Reductions
A major part of our job involves negotiating with lien holders to reduce what they’re owed. The arguments we use depend on the type of lien and the specific circumstances of your case.
Common reduction strategies include demonstrating that you didn’t recover full compensation for your injuries, showing that the lienholder’s charges were unreasonable or inflated, proving that attorney fees and costs should reduce the recovery proportionally, or arguing that paying the full lien would leave you with inadequate compensation.
Some lien holders, particularly private health insurance companies, have more flexibility to negotiate than government programs. Success depends on the specific facts, the legal framework, and the lienholder’s policies.
The Made Whole Doctrine
Some states recognize the “made whole” doctrine, which holds that injury victims should be fully compensated for their losses before lien holders can claim reimbursement. If your total damages were $200,000 but you only settled for $75,000, you weren’t made whole and arguably shouldn’t have to repay medical liens.
Not all states follow this doctrine, and even in states that do, many lien holders successfully argue their way around it. Still, it provides a valuable negotiating tool in appropriate cases.
Attorney Fees And Lien Resolution
Attorney fees typically get calculated before lien holders receive payment, but this varies by agreement and jurisdiction. Some lien holders argue they shouldn’t have to contribute toward the attorney fees that helped recover the settlement.
For example, if you settle for $100,000, your attorney takes a standard 33% contingency fee ($33,333), and you have $40,000 in medical liens, you would receive only $26,667 before costs and other fees are deducted.
Negotiating lien reductions directly increases what you receive. Reducing that $40,000 lien to $25,000 puts an extra $15,000 in your pocket.
ERISA Plans Complicate Everything
Health insurance provided through employers often falls under ERISA, the federal Employee Retirement Income Security Act. ERISA preempts state laws that might otherwise limit subrogation rights, giving these plans stronger reimbursement claims.
ERISA plans can sometimes claim reimbursement even when state law would prohibit it. Recent Supreme Court decisions have strengthened ERISA plans’ ability to recover full reimbursement regardless of whether the injured person was made whole.
Planning For Liens From The Start
Knowing which liens exist early in your case allows us to factor them into settlement negotiations. If we know you have $50,000 in Medicare liens, we won’t recommend accepting a $60,000 settlement that leaves you with almost nothing.
We track all medical providers and identify potential liens as your case progresses. This prevents surprises at settlement and allows us to negotiate more effectively with insurance companies about appropriate settlement amounts.
Understanding medical liens protects you from settlement disappointment and helps set realistic expectations about what you’ll actually receive. If you have questions about medical bills, health insurance claims, or liens affecting your injury settlement, reach out to discuss your specific situation and learn how we can work to minimize these reductions and maximize your final recovery.
