Suppose you suffered injuries in an accident that was someone else’s fault.
In that case, you might be wondering how you will cover your medical expenses before your personal injury case settles.
It is actually fairly common for providers to give medical treatment pursuant to a lien. This means that they provide treatment, and you promise to pay them back out of your settlement proceeds.
Essentially, the provider is issuing credit to you. You should speak to an attorney before agreeing to a medical lien on a personal injury settlement because it is a legally binding contract.
You may end up paying back the entire lien, even if your legal case is not successful. Your attorney can also speak to you about negotiating medical liens after settlement, as you may not have to pay back the full amount of the lien.
What Is a Lien in California?
A lien is a demand for repayment. In personal injury cases, a third party (i.e., a health insurance company or hospital) might pay for your medical treatments related to your accident.
Typically your insurance policy or the law would allow them to place a lien on settlement proceeds you receive from your personal injury case.
The terms of your health insurance policy control your rights in reference to medical liens.
If you hire an attorney to handle your claim, the healthcare lien cannot exceed the lesser of either one-third of the settlement or judgment money or the sum of the reasonable costs actually paid for the care (subject to other legal limits depending on the type of care).
In the case of hospital liens, California law limits their recovery to 50% of the net proceeds of the settlement.
What About Deductibles and Premiums?
Your premium is what you pay to your health insurance company every month for the cost of your health insurance coverage.
Your deductible is the amount you must pay before your health insurance covers your eligible expenses. Your health insurance company cannot assert a lien for any amount you paid out of your own pocket.
However, if you have met your deductible and your insurance company begins to cover the cost of your medical expenses, they can go after your personal injury settlement for the amount they paid.
A medical lien in a personal injury settlement is paid first before you receive your proceeds.
If your personal injury case is unsuccessful, you will not owe anything to your insurance company beyond your normal expenses for medical costs.
What About a Medicare Lien on a Personal Injury Settlement?
If a government provider such as the Veterans Administration, Medi-Cal, or Medicare covers your medical bills, they can request a lien and probably will. These are statutory liens.
The Centers for Medicare and Medicaid Services handles these liens, and they take priority over other liens, if any.
The VA or Tricare (military) liens are “super liens,” meaning the agency has no legal obligation to reduce medical liens, but they will, depending on how much of a settlement the person receives.
These agencies can take the entire settlement if their lien exceeds the amount of your net proceeds (less the legal expenses).
Workers’ Compensation Liens
Your entire settlement is subject to a workers’ compensation lien. Your employer can recover anything they paid for your injuries from your net settlement proceeds.
However, if the employer shared any fault in the accident, they could be barred from recovering through their lien.
ERISA plans are employer-sponsored plans. If your ERISA plan is an insured plan, it is subject to state law, such as the Common Fund Doctrine or the Made Whole Doctrine.
However, the plan can exempt itself from these principles. If it’s a self-insured plan (meaning your employer funds the plan with their own money), it can be as draconian as the employer wants it to be, even seizing the entire settlement.
Negotiating Medical Liens After Settlement
It is possible to negotiate a medical lien, both before and after a settlement. Your attorney can help you work with the third party to agree to a reduction of the amount you owe or to set up a payment plan.
The following legal doctrines also serve to protect your settlement money.
California law provides that the plaintiff’s comparative fault further reduces the lien.
Comparative fault means that if the plaintiff shared some responsibility for their accident, an arbitrator, judge, or jury assigns the plaintiff a percentage of the fault.
Their settlement proceeds are then reduced by that percentage. For example, if the plaintiff was 20% responsible for their accident, and the value of their settlement is $100,000, their net proceeds will be $80,000, or 80% of the total.
The plaintiff’s comparative fault reduces the medical lien by the same amount. In our example above, if the plaintiff had a medical lien, it would be reduced by 20%.
Medicare must reduce a lien to take into account your legal costs, such as attorneys’ fees. You can also request a waiver of recovery.
The Made Whole Doctrine
The Made Whole Doctrine is a common law principle that protects the plaintiff from a lien if it means that they would not be “made whole” (fully compensated) for their injuries because the third party takes part of their settlement.
It can bar liens entirely. This is especially important in cases where someone’s settlement is less than the amount of their damages.
For example, if Sarah hit Amy’s car and caused Amy to incur $50,000 of property damage and medical expenses, but Amy is uninsured and can only compensate Sarah for $40,000.
Sarah has not been “made whole” by the settlement because her expenses exceeded what she recovered. Her health insurance company would likely not receive any compensation from a medical lien.
Insurance companies can attempt to overrule the doctrine via your policy contract.
The Common Fund Doctrine
California law codifies the Common Fund Doctrine, a pro-rata reduction of the claim for fees and costs.
The idea of the Common Fund Doctrine is basically that the injured plaintiff has created a benefit for the third-party payer (i.e., the health insurance company or healthcare provider) by litigation.
The third-party payer, by way of its lien, receives compensation for care provided that it likely would not recover otherwise.
Since the third-party payer does not join in the legal efforts to obtain the settlement, their recovery is reduced by the amount of the attorney’s reasonable legal expenses.
Contact the Law Office of Chuck Geerhart
If you could be dealing with a medical lien or other lien arising out of your personal injury claim, it is essential that you contact an attorney.
The laws about these liens and how they could affect your compensation can be very confusing. Attorney Chuck Geerhart is knowledgeable in these matters and all other personal injury issues.
We can help protect you from signing away your rights or being taken advantage of by companies trying to collect money from you.
Contact the Law Firm of Chuck Geerhart today for more information.