Medical Liens On Settlement

A medical lien on settlement gives a health care provider the right to receive payment directly from a judgment or settlement. 

By Brad Nakase, Attorney

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What are medical liens?

The medical lien on settlement takes first priority when a settlement is paid out. An often ignored element of personal injury cases is medical liens. However, these can have a major effect on what an individual is able to collect for their injuries. If a person lacks insurance, he or she will probably go up against a medical lien for the care they receive in hospital following an accident. Even if a person has insurance, a medical lien will probably be affixed to his or her claim for whatever care that they get in relation to an accident. Recipients of Medi-Cal face a guaranteed medical lien when the program doles out money for injuries related to accidents.

A hospital or medical lien is a typical aspect of the claim process for personal injuries. However, plenty of injury victims are caught by surprise. When a settlement is granted, the medical lien has the first priority. This lien can take away from your settlement value entirely, even taking the whole settlement. Accident victims could even find themselves owing money to a hospital, having gained nothing from their case settlement.

The following is information you should know about medical liens in California related to personal injury settlements. Also discussed are the ways personal injury attorney can help an individual protect their interests and negotiate a lien.

How do California medical liens work?

The purpose of the medical lien is to give a doctor or hospital the ability to get payment from an individual’s claim. This way, they can recover any funds that they are due in relation to the treatment the individual received after their accident.

There exist two main kinds of medical liens: hidden and explicit.

If a lien is hidden, this means that the injured party failed to sign a contract and is not conscious that the lien is extant until the settlement of the case. These exist typically as personal injury settlements and health insurance liens. Usually, these are from HMOs and PPOs. Medicare, VA, and Medicaid liens on cases involving personal injury also happen, and you are not required to sign a fresh contract.

When it comes to these healthcare liens, the right of the provider to file a claim against the proceeds of your settlement exists in your policies fine print or within the specific program.

One federal law, the Medicare Secondary Payer Act, or MSPA, gives Medicaid and Medicare permission to look for reimbursement from settlements as well as awards within the programs that covered the medical expenses at hand.

38 U.S.C. Section 1729 and the Federal Medical Care Recovery Act are federal laws that permit a lien to be put in place for repayment of care offered by the VA or TriCare.

It is also possible for a lien in healthcare to be explicit. When an individual gets treatment for their injuries, the health care provider could decide to offer treatment in return for a lien. He or she will generally be requested to supply a signed contract or a letter of protection that states he or she will compensate the provider with the owed amount after the settlement of the claim.

A doctor or hospital will perfect their lien via giving a hospital lien notice to the insurance company and any interested parties. However, not every healthcare provider wants to offer care through a medical lien due to the risk they face. If an individual’s case fails, then the providers only recourse is to sue you to get their money.

Who is able to put a medical lien on proceeds from a settlement?

Whether you have insurance, are uninsured, or have government health benefits, liens may be affixed to your personal case. The following parties can attach medical liens to settlements:

  • VA
  • Healthcare providers and hospitals
  • Health insurance providers
  • Medicaid
  • Medicare
  • Medi-Cal

Depending on the lien holder and how the lien is placed, a healthcare lien may function in various ways.

Government health insurance programs and health insurance programs both use subrogation. This concept means that these parties can expect to be reimbursed for the amount they pay to cover your treatment. The insurers are justified to act on your behalf and go after the at-fault party for payment. If a person files a claim or lawsuit and recovers compensation, the insurance company is the first one allowed to collect any money owed.

As opposed to the majority of health insurance providers, federal programs like the VA, Medicaid, and Medicare do consider an individual’s expenses and attorney’s fees. This means that the healthcare lien amount is usually reduced in relation to your expense in recovering payment.

Hospital liens, which are also referred to as a Letter of Protection or explicit medical liens, work in a different way. A health care provider or a hospital agrees to offer services but is entitled to collect compensation from the individual’s settlement. Essentially, they are offering a credit. The health care provider does not possess rights of subrogation to go after the at fault party. The victim of the accident who signed the contract is left to pay the bill, including if the settlement fails to cover the entire amount.

An individual or their personal injury lawyer is required to contact the relevant agency when making a claim. This may be completed via the CHAMPVA Potential Liability Claim or the Medicare Secondary Payer Recovery Portal (MSPRP).

Legally, an individual is obligated to contact DHCS within thirty days of issuing an action or claim if he or she is a beneficiary of Medi-Cal. The process for a Medi-Cal lien can be time intensive, and it is not that different from what you may expect with similar kinds of liens.

How are personal injury settlements paid out?

In California, medical liens are tricky and can potentially postpone an individual’s settlement payout. Your settlement cannot be paid out until an agreement is made and the lienholder is compensated.

In some circumstances, you might also need to set up a Medicare set aside in addition to paying back medical benefits from the settlement. In general, if you are a Medicare beneficiary currently and resolve a claim for over $25,000 or resolve a claim for more than $250,000 in our anticipated to become a beneficiary of Medicare within thirty months, you must construct a set aside. The set aside is intended to establish a fund for medical costs in the future that Medicare is anticipated to cover.

All healthcare liens need to be satisfied, and the lawyers’ fees and charges need to be paid before you can get your settlement money. For example, many car accident attorneys in San Diego negotiate all hospital or medical liens you may have before closing the case.

What happens if an individual loses their injury case?

Depending on the type of lien, an individual may lose their right to a hospital or medical lien if they lose their case.

If the patient does not receive enough compensation via a jury award, a settlement, or if they lose their lawsuit, they are often still responsible for the outstanding sum under a hospital lien. The provider or hospital has the right to sue you or use collections to get their remaining payment from you.

Permission to collect on a medical lien is often only granted to the insurer when and if you receive reimbursement from a at-fault party. If you lose your case, you are not responsible for the remaining debt with these personal injury liens.

Auto accident example for medical lien

It is highly typical for many lien holders, including your health insurance provider and vehicle insurance company, to be involved in a car accident personal injury lien.

  • Claims for Med-Pay or medical pay: If you utilized Med-Pay coverage, the cost of the medical care you required was covered by your own car insurance policy. The insurance company needs to be compensated for its costs if you receive damages from the at fault party.
  • Claims by uninsured drivers: The insurance company possesses the right to restitution for the costs it incurred in connection with your uninsured driver claim if you ultimately receive compensation from a negligent driver who lacked insurance. Otherwise, the insurance provider must make an effort to get the uninsured driver to pay.
  • Liens on health insurance: They might attach a lien to your settlement as compensation if you used your insurance to pay for accident-related medical costs.

Medical lien law in California

The state of California puts important ceilings on healthcare liens in order to safeguard an individual’s right to collect damages. Limits such as the Made Whole Doctrine, CCP 3040, as well as the Common Fund Doctrine are only applicable to subrogation and not hospital liens that are backed up by a signed contract.

Hospital Lien Act (CCP 3045)

Section 3045 of the California Civil Code, otherwise known as the hospital lien act, lists the particular responsibilities and rights for both patients and healthcare providers.

  • Should a defendant settle with the accident victim or patient without acknowledging a perfected hospital lien, he or she is still responsible to the health care provider for the owed amount.
  • For ordinary, reasonable charges a hospital lien may be put in place for ongoing and emergency medical care.
  • A hospital lien is only applicable to third-party recoveries. It could be recovered via settlement, arbitration, or judgment. It is not applicable to first party claims. An example of this would be uninsured driver coverage.
  • A hospital is forbidden from using particular unjust methods of billing.
  • A hospital may only recover half of the value owed to the victim following the payment of prior liens, which includes previous perfected liens and attorneys’ fees.

Due to a Court of Appeal interpretation, hospitals have a burden to demonstrate that their lien value is necessary and reasonable. Further court views have additionally limited victims of accidents to collecting the value of their charges paid by insurance, versus the entire build amount. In essence, the courts in California have decided that the complete value medical providers charge is not an acceptable measure of the service value. This is because hospital bills are often inflated and hardly anyone pays the standard rates.

For this reason, it can be simpler to use a settlement to reduce a hospital lien.

3040 CCP of the California Civil Code

The purpose of this California law is to limit the amount that health insurance providers may get from the settlement of an accident victim. An individual’s insurance company is only permitted to receive the lesser value of:

  • The entire cost of provided medical services
  • 1/3 of the entire settlement if the plaintiff had a lawyer
  • ½ of the entire settlement if the plaintiff did not have a lawyer

According to 3040 CCP, the charge for services is dependent on how the insurer paid providers. When providers are compensated a flat amount for each patient they treat, known as capitation, the amount is limited to eighty percent of what insurers dole out in non-capitated situations. Should the insurance company not use capitation, the charge is listed on the medical bill as the amount.

Made whole doctrine

The made whole doctrine is a principle of common law related to subrogation. This is the right of the insurer to be repaid for anything paid on a policyholder’s behalf. According to the made whole doctrine, after the accident the policyholder must be financially compensated prior to the insurance company taking their portion from the policyholder or the settlement proceeds as repayment.

This doctrine is supposed to make sure that accident victims are allowed to use their right for the at-fault party to make them whole.

If an individual suffers an injury, he or she is entitled to be made whole by the party responsible for the accident. If the negligent party is unable to compensate the victim fully for the damages he or she suffered, this doctrine safeguards the victim from an insurance provider taking a cut from a settlement that is already valued less than the damages.

A lot of insurance providers have specific lingo in their contracts that is meant to get around the made whole doctrine. The state of California permits these providers to utilize contractual lingo to get around the doctrine. In some cases, a lawyer can fight this contract if the provisions are insufficient.

Common Fund Doctrine

The common fund doctrine safeguards victims of accidents from taking on the entire amount of their lawyer fees without the assistance of insurance carriers using subrogation rights. According to this law, the party that recovers a common fund for others benefit has the right to attorneys’ fees from this fund.

That is to say, if the victim of an accident recovers damages from the at-fault party via a lawsuit, and insurance provider will be unable to benefit from a subrogation claim and be repaid without supplying a portion of the fees for the cost of an attorney.

According to this law, an individual does not have to pay attorneys’ fees and pay back the insurance company if the company did not help the individual get the compensation.

California Medical Lien Statute of Limitations

If an individual signs a hospital lien agreement, they are subject to a statute of limitations that begins when the individual breaks their vow to pay. The statute of limitations is 4 years.

If an individual does not win their injury case or the settlement is insufficient to cover the lien, the lien holder can go after the individual for the debt until the expiration of the statute of limitations.

It should be noted that the majority of agreements include language that indicates any recovered settlement money will be held in trust for the provider or hospital. In situations such as this, the statute of limitations is not applicable. This means that an individual cannot recover compensation, not pay the hospital lien, and wait 4 years for the expiration of the statute of limitations. The hospital still has the right to pursue the individual for the remainder.

How does an individual know if they have a medical lien?

Plenty of injured individuals are not aware that a medical lien is in place until they need to file a claim or lawsuit. Here is how you can find out if a medical lien exists:

  • For a hospital lien, an individual must sign a contract. He or she will get a copy of this contract that is sent via certified mail to any responsible parties and insurance providers.
  • Look for a subrogation clause in your health insurance policy, which will detail the right of the insurer to repayment.
  • A statutory lien exists on award or settlement proceeds if any relevant treatment was paid by Medi-Cal, VA/TriCare, or Medicare.

A lawyer specializing in personal injury can help you recognize if there are medical liens, as well as file the necessary notices to insurance companies.

How can a personal injury lawyer help with medical liens?

There is always the potential that a medical lien can suck up a big part of an individual’s injury settlement. A California lawyer can help a person keep as much of their settlement as is possible, to treat any suffering and pain.

The majority of medical liens can be settled, waived, or reduced, contingent on the situation. Included in this are health insurance liens and personal injury liens under Medi-Cal.

A skilled personal injury attorney in California can work for you to reduce the hospital lien. This would include confirming the lien is legitimate and perfected and the fees are necessary and reasonable. A hospital lien release is a vital part of negotiation to ensure the lien is entirely cleared.

It is recommended that you start to negotiate medical liens right away, ideally prior to a settlement. That said, it may still be feasible to negotiate hospital liens following a settlement.

If an individual agrees to a hospital lien and signs an agreement, it is especially important to work with a skilled attorney since he or she will still be responsible for the charges if they lose their case or do not collect enough money. An injury attorney is often able to negotiate a reduced lien in these circumstances.

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