Negotiating Medical Bills and Liens After Settlement: How to Keep More of Your Money

Take action to keep more of your injury settlement. Here’s how to negotiate reductions to injury-related medical bills and liens.

If you’re injured because of someone else’s negligence, you expect compensation. But settling an injury claim with the at-fault party’s insurance company can take many months.

In the meantime, you need medical care. If you’ve got health insurance, you think it’s all covered. It may be a surprise that your doctor or insurance company can put a lien on your settlement.

Fortunately, medical lien holders are almost always willing to negotiate a lower payoff amount. Here’s how to keep more of your injury compensation.

Difference Between Medical Bills and Medical Liens

A medical bill is simply a statement of charges for medical services. A medical lien, also called a hospital lien, is a legal guarantee of payment to a healthcare provider for their services.

Medical liens are used by doctors and hospitals to get paid for the services provided to you in connection with your injury. If you have outstanding bills for medical treatment, you shouldn’t be surprised if they try to collect through a lien.

Most people don’t realize that private and government health insurance companies can also use liens to recover medical costs paid on your behalf.

State and federal laws giving subrogation rights to insurance companies are intended to keep down the rising cost of health insurance. Lawmakers argue that the injured person would be “double-dipping” if they had their medical bills paid by an insurance policy, and also got to keep settlement funds that were meant to cover those same medical bills.

Example of State Lien Laws: California

“Every person, partnership, association, corporation, public entity, or other institution or body maintaining a hospital licensed under the laws of this state which furnishes emergency and ongoing medical or other services to any person injured by reason of an accident or negligent or other wrongful act … shall, if the person has a claim against another for damages on account of his or her injuries, have a lien upon the damages recovered, or to be recovered, by the person, or by his or her heirs or personal representative in case of his or her death to the extent of the amount of the reasonable and necessary charges of the hospital and any hospital affiliated health facility …”

Example: Federal Subrogation Rights

“[T]he United States has the right to recover or collect from a third party the reasonable charges of care or services so furnished or paid for to the extent that the recipient or provider of the care or services would be eligible to receive payment for such care or services from such third party if the care or services had not been furnished or paid for by a department or agency of the United States.”

Calculate the True Cost of Your Medical Care

If you have a strong injury claim, you undoubtedly received medical care and treatment. The more severe your injuries, the more compensation you can demand.

When calculating medical expenses for your settlement demand, be careful to use the full amount of the billed service. Don’t use the amounts of your copay or deductible, or the reduced rate your health insurance company was charged. Otherwise, you run the risk of short-changing yourself by accepting a settlement for less than you deserve.

Be Prepared for Settlement Liens

Tackle any potential medical liens before settling your claim. Good communication can go a long way in your negotiations with medical providers. They would rather get a reduced amount to pay off the bill than spend the difference on collection efforts.

If You Already Settled Your Claim

Let’s say you recently settled an injury claim on your own after a car accident. Don’t ignore the possibility of medical liens and spend all the settlement proceeds, even if other bills piled up while you were recovering from your injury.

Double-check your accident documents for anything that may indicate you still owe money.

Go through your paperwork to look for:

If you were injured by a third party while working, and your medical bills and lost wages were covered by worker’s compensation, you can expect a workers’ comp lien against your settlement.

Ignoring medical bills and liens will only make your situation worse. Failing to resolve liens can lead to serious trouble, ranging from penalties and fees to possible criminal charges.

Figure out the parties who have a stake in your settlement money, and how much each lien may be demanding.

Review the Lien Notice

If you got a subrogation notice from your private insurance carrier, contact them for a copy of the policy language that gives them the right to your settlement money. Insist on a written copy and read it for yourself. You may find they are only entitled to recover a partial amount of the bills they paid.

If you have a written Notice of Lien, call the insurance company or BCRC. Use the reference or claim number at the top of your notice to identify your case. You’ll need a detailed list of every medical charge included in the lien.

Go over the list carefully to look for:

  • Credits: Look for credit for amounts already paid. Out-of-pocket copays and deductibles you paid should offset the cost of each service charge.
  • Relatedness: The medical bills included in the lien should only be related to the injury claim. Unrelated charges like flu shots or routine care like mammograms or cholesterol testing should not be included in the lien amount.
  • Duplicates: Make sure you are only charged one time for each medical service. You should be able to see the date each service was rendered, the type of service, and the billed amount.

Sometimes medical lien lists use billing codes to describe medical services. You can look up the different billing codes online to get an idea of the service.

Don’t mark up the original list. Make a clean copy to work from and use ink to check or draw a single line through incorrect entries. Don’t use highlighters because highlights often don’t show on scanned or photocopied pages.

Keep a marked copy for yourself, and send one back to the lienholder, with a dated cover letter explaining the amount that should be deducted due to the incorrect entries.

Some states require health insurance carriers to compromise liens by certain percentages, depending on the settlement amount. Be sure to check with your state insurance board to find out if those percentages apply to you.

Then, get ready to negotiate.

Negotiating Medical Bill Reductions

Outstanding medical bills must be paid, even if you don’t end up settling your personal injury claim. Or you may have to settle for less than the value of your claim, such as when the at-fault driver’s auto insurance has low policy limits and there’s not enough to pay all your bills.

If you ignore unpaid medical bills, the provider or their collections agency can get a judgment against you in court. Then they can garnish your wages or put a lien on your house for the amount of your debt plus legal fees.

However, you can usually get doctors, chiropractors, or hospitals to discount some or all of their services if you’re willing to pay before they go to collections.

First, review all the bills to ensure they are accurate.

Then contact the healthcare provider’s billing office to request a reduction of the amount you owe. Be patient and polite.

Don’t Accept the Chargemaster Rate

Most doctors and hospitals automatically bill uninsured patients at the highest “chargemaster” rate for the service provided, which may be several times higher than the discounted rate paid by insurance companies. This practice has led to court battles in several states with mixed results.

The Georgia Supreme Court ruled in favor of hospitals against a patient who alleged the chargemaster rates are unreasonable. However, the Texas Supreme Court ruled in favor of the patient in a similar hospital lien case. In both cases, a woman without health insurance was injured in an auto accident, treated at a local hospital, and billed the chargemaster rate for her medical services.

It doesn’t hurt to ask the billing office to reduce your bill to the Medicare or medical insurance rate. Many providers also have a reduced self-pay rate. If you can’t get a reduction, consider talking to a personal injury lawyer about the reasonableness of the medical charges.

If you do succeed in negotiating a bill reduction, discuss a payment plan to pay off the discounted bills, then get your agreement in writing.

Negotiating Health Insurance Liens

Medical liens from your private health care insurance, Medicare, Medicaid, or the VA only have to be paid if you settle your injury claim or win an award in court. Here, the goal is to negotiate a reduction to the lien so you get to keep more of the injury compensation.

Always try to compromise an insurance company lien. You have nothing to lose and everything to gain. Even when the insurance company is legally entitled to every penny of your accident settlement, the insurer may be willing to compromise if paying the lien would cause undue hardship.

Case Example: Walmart Entitled to $470,000 Insurance Lien   

Deborah Shank was enjoying her day off visiting yard sales when her minivan was slammed by a tractor-trailer truck, leaving the 52-year-old woman brain-damaged and unable to care for herself.

At the time of the crash, Deborah was a shelf stocker at Walmart with employee health coverage. Her Walmart health insurance covered close to $470,000 in medical expenses after Deborah’s catastrophic injuries.

Deborah’s family filed an injury lawsuit against the trucking company, winning $700,000 on her behalf. Soon after, Walmart filed a lawsuit to recover the nearly $470,000 they paid in medical costs.

Walmart was legally entitled to recover the insurance money, as was affirmed in appeals court.

Fortunately for Deborah Shank and her family, Walmart later decided not to collect the $470,000 they were owed. After Deborah’s legal fees and other expenses, Walmart’s lien would have wiped out most of the remaining settlement.

Walmart’s decision followed a customer-relations nightmare caused by public outrage over a big company seeking funds needed by the helpless woman for life-long care.

Here are some time-tested arguments for compromise:

  • Your continuing treatment costs still must come out of the settlement funds
  • You could need future treatment, which may not be covered by your insurance plan
  • You are permanently disabled by the injuries and need the settlement funds for life-long care
  • You need the settlement money to pay bills while searching for a new job, especially if one of the consequences of the injury was losing your job
  • A portion of the settlement is compensation for your continuing pain and suffering

You’re more likely to successfully negotiate a compromise when you’ll be left with an unfairly low portion of compensation for pain and suffering, or you need the settlement to avoid financial hardship.

Be realistic: If the lien reimbursement amount is small compared to your settlement, for example, a $5,000 medical lien on a $15,000 settlement, you’ll need compelling evidence of hardship to negotiate a lien reduction.

Watch Out for Government Medical Liens

If Medicare, Medicaid, or the Veterans Administration paid any of your treatment costs related to the accident, they have the right to place a lien on your settlement proceeds.

If you haven’t received their notice yet, don’t assume you’re in the clear. Medicaid and Medicare have up to six years to notify you of a lien. If you don’t pay, you can be charged penalties and interest up to double the original amount of the lien.

You can set the full amount of money aside in a bank account, and wait for more than six years on the off-chance the government forgets about you, or you can take steps to negotiate a reduced payoff of the lien.

Medicaid and Medicare liens are administered through the Benefits Coordination and Recovery Center (BCRC). If you can prove any hardship, you’ll likely be able to negotiate your lien substantially downward with a BCRC representative.

If you compromise for an amount that you’re unable to pay in a lump sum, you can probably negotiate an interest-free payment plan with monthly installments.

Attorneys are Skilled Negotiators

Medical liens can cost thousands of dollars that you didn’t expect to pay. Even if you’ve already settled your injury claim, you might be better off with an attorney managing your medical liens.

Trying to interpret legal forms, billing codes, and contract language on your own can be a nightmare. Negotiating a reduction of your debt takes time and persistence. You won’t get it done in one phone call.

You’re not out of the woods just because you haven’t heard from Medicare or your health insurance company. Government medical liens might not show up for six years. State laws allow some types of medical liens to survive for years after your personal injury settlement.

Some liens, like Medicaid liens, can even survive after your death. Medicaid estate recovery laws allow the liens to get paid out of your estate before your surviving spouse or heirs receive anything.

Experienced personal injury attorneys negotiate large medical liens regularly. They know what to say, and whom to contact to get results. In many cases, an attorney gets a fee from the lien holder for helping you negotiate payment, at no cost to you.

A local attorney knows the medical lien laws for your state and how to protect your rights.

Get the legal advice you need. Most injury attorneys offer a free consultation to injured victims. There’s no cost to discuss your personal injury case.

Negotiating Medical Bills and Liens Questions

Charles R. Gueli, Esq. is a personal injury attorney with over 20 years of legal experience. He’s admitted to the NY State Bar, and been named a Super Lawyer for the NY Metro area, an exclusive honor awarded to the top five percent of attorneys. Charles has worked extensively in the areas of auto accidents,... Read More >>