Here’s what you need to know to reduce or eliminate medical liens against your injury settlement. Get solid tips for negotiating with lien collectors.
Medical liens are a nasty surprise for most injury victims. The adjuster won’t bother telling you that the amount they’re offering won’t leave you much after the liens are paid.
When you’re injured because of someone else’s negligence, you expect them to compensate you for your damages, so you file an injury claim with their insurance company.
In the meantime, you need medical care. Doctors, emergency rooms, X-rays, medications, physical therapy – the bills add up fast.
If you’ve got health insurance, you think it’s all covered. Only later do you discover that your health care provider or insurance company can put a lien on your injury 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.
What are Medical Liens?
Medical liens are used by health care providers to get paid for the services provided to you in connection with your injury. If you owe a doctor or hospital money for your care, you shouldn’t be surprised if they try to collect.
Most people don’t realize that health insurance companies can use liens to recover medical costs paid on your behalf. If your injury care and treatments were covered by health insurance, you might be shocked to find a lien against your settlement for thousands of dollars.
What about all those health care premiums you’ve paid for years? Despite your paid premiums, under state and federal laws, health insurance companies are allowed to “subrogate” medical costs from the party who is liable for your injuries.
Subrogation is a party’s legal right to “stand in your shoes” to collect money. The party seeking subrogation (usually an insurance company) has the right to place a lien against your injury compensation to collect their share of the proceeds from the at-fault party.
Medical liens against injury settlements most often come from:
- Doctors, hospitals, chiropractors, or other health care providers
- Government agencies like Medicare, Medicaid, and the Veterans Administration
- Managed care plans like Health Management Organizations (HMO) and Preferred Provider Organizations (PPO)
- Other private or employer-based health care plans
- Workers’ compensation insurance
- Your health and auto insurance companies
State and Federal Subrogation Laws
State and federal laws giving subrogation rights to insurance companies are intended to keep down the rising cost of medical insurance. Many lawmakers contend that injured victims should not be allowed to profit from an accident by “double-dipping.”
They argue that the injured person would be “double-dipping” if they had the benefit of getting their medical bills paid, and then also got to keep settlement funds that were meant to cover the medical bills.
States usually have laws in place to help doctors and hospitals get paid for their services. These laws not only protect medical providers from financial hardship, but they also ensure that uninsured patients can still get vital services.
Without a way to get paid, doctors couldn’t afford to treat patients beyond mandatory emergency medical care.
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 …”
State law usually governs workers’ compensation rules, including allowing the workers’ comp insurance company to recover medical expenses. You will never have a workers comp medical lien unless you win a third-party settlement on top of your workers’ comp claim.
Federal laws allow government agencies like Medicare, Medicaid, and the Veterans Administration to recover medical expenses from settlements paid to injury victims.
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.”
Preparing for Settlement Liens
If you have a strong case for a successful injury claim, you undoubtedly received medical care and treatment. The more severe your injuries, the more compensation you can demand.
Severe injury claims should be handled by an experienced personal injury attorney to get anywhere near the amount of compensation you deserve.
If you’ve recovered from a mild to moderate injury, you can probably handle your claim directly with the at-fault party’s liability insurance carrier.
Be careful. It’s vitally important to accurately account for the full cost of all your medical expenses when calculating the value of your claim.
Don’t limit your damage calculations to the amounts you paid toward a co-pay or deductible. Otherwise, you run the risk of short-changing yourself by accepting less compensation than you need to cover your medical liens and personal needs.
Tackle any potential medical liens before settling your claim. Good communication can go a long way in your negotiations with lien holders. They would rather get a reduced amount to pay off the lien than end up with nothing if you can’t settle your injury claim.
If You Already Settled Your Claim
Let’s say you recently settled an injury claim after a car accident. The release is signed, and your check is on the way.
Don’t be tempted to ignore the possibility of medical liens and go on a spending spree, even if other bills piled up while you were recovering from your injury. Double-check your accident paperwork for anything that may indicate you still owe money.
Go through your accident paperwork to look for:
- Any “letters of protection” you may have signed as a promise to pay the doctor, hospital, or other medical providers
- Notices of subrogation or liens from your private health care insurance carrier
- Notices from the Medicare Benefits Coordination and Recovery Center (BCRC) regarding liens from Medicare or Medicaid
- A notice of Subrogation from the Veterans Administration
Ignoring medical 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.
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.
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 a Reduced Medical Lien
You can contact the lien holder to try negotiating a compromise agreement. “Compromise” means you and the lien holder will agree to resolve the lien for less than the full amount requested.
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 very carefully to look for:
- Credits: Look for credit for amounts already paid. Out-of-pocket co-pays 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 for 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.
Negotiating a Lien Reduction Due to Hardship
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 injury settlement, they may be willing to compromise if paying the lien would cause undue hardship.
Case Summary: 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 healthcare insurance covered close to $470,000 in medical expenses after Deborah’s catastrophic injuries.
Deborah’s family filed a 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 are 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 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.
Government Medical Liens
If Medicaid, Medicare, 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 go spending all the settlement money. 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 reach a compromise for an amount that you’re unable to pay in a lump sum, you can probably negotiate an interest-free payment plan with minimal monthly installments.
Attorneys Can Help Reduce Liens
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 costly nightmare.
You’re not out of the wood 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 settlement.
Experienced personal injury attorneys negotiate large medical liens with Medicare, Medicaid, and the VA regularly. They know what to say, and whom to contact to get results. In many cases, the attorney gets a fee from the lien holder for helping you negotiate payment.
A local attorney knows the medical lien laws for your state and how to protect your rights.
Get the help you need. Most injury attorneys don’t charge for their initial consultation. There’s no cost to find out what a good attorney can do for you.
Video: Tips for Negotiating Medical Liens
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