Medical liens are one of the most overlooked aspects of a personal injury case, but they can have a big impact on what you are able to recover for your injuries. If you don’t have insurance, you will likely face a medical lien after an accident for the treatment you receive in a hospital. Even with coverage, a medical lien will likely attach to your claim for any treatment you receive related to an accident. Medi-Cal recipients face an automatic medical lien whenever the program pays for accident-related injuries.
A medical or hospital lien is a common part of the personal injury claim process, but it takes many injury victims by surprise. The medical lien takes first priority when a settlement is paid out. The lien can entirely eat away at your settlement proceeds or even take the entire settlement. Victims may even be left owing a hospital money afterward with nothing gained from settling a case.
Here’s what you need to know about California medical liens on personal injury settlements and how a personal injury lawyer can help you negotiate a lien and protect your interests.
What Are Medical Liens? How a California Medical Lien Works
A medical lien grants a healthcare provider such as a hospital or doctor the right to receive money from your personal injury claim to recover any money they are owed for your treatment related to the accident.
There are two broad types of healthcare liens: explicit and hidden.
A lien may be hidden, which means the injured person did not sign an agreement and is not aware the lien exists until the case settles. These usually come in the form of health insurance liens and personal injury settlements, most often from PPOs and HMOs. VA, Medicare, and Medicaid liens on personal injury cases are also common and do not require that you sign a new agreement.
With these medical liens, the provider’s right to make a claim against your settlement proceeds is in the fine print of your policy or the program itself.
The Medicare Secondary Payer Act (MSPA) is a federal law giving Medicare and Medicaid the right to pursue repayment from personal injury settlements and awards in the programs paid for any of the related medical expenses.
The Federal Medical Care Recovery Act and 38 U.S.C. § 1729 are federal laws that allows a lien to be placed for reimbursement of care provided by TriCare or the VA.
A healthcare lien can also be explicit. When you receive treatment for your injuries, the healthcare provider may be willing to provide treatment in exchange for a lien. You will usually be required to provide a Letter of Protection or a signed contract stating you will pay the provider the amount owed once your claim settles.
A healthcare provider will “perfect” their lien by sending a notice of hospital lien to the insurer and interested parties.
Not all healthcare providers are willing to provide services with a medical lien as they face risk. If your case is not successful, their only avenue to recover the money is suing you.
Who Can Place a Medical Lien on Settlement Proceeds?
Personal injury liens can be attached to your case if you have insurance, have government health benefits, or are uninsured. Medical liens on settlements can be placed by:
- Hospitals and healthcare providers
- Health insurance providers
A medical lien can work in different ways depending on how it’s placed and the lienholder.
Health insurance and government health insurance programs use subrogation, a concept that means they have the right to be paid back for the cost they paid on your behalf. The insurers have the right to take your place to pursue the negligent party for the money. If you file a lawsuit or personal injury claim and recover compensation, the insurer has the first right to the money they are owed.
Unlike most health insurance companies, government programs like Medicare, Medicaid, and the VA do take your attorney’s fees and expenses into consideration. This means the amount of the medical lien is generally reduced in proportion to your cost to recover compensation.
Hospital liens, also known as explicit medical liens or a Letter of Protection, work differently. A hospital or other healthcare provider is agreeing to provide services with the right to be repaid from the proceeds of your case. They are essentially providing a credit. They do not have subrogation rights to pursue the negligent party; the accident victim who signed the agreement is responsible for paying the bill, even if the settlement does not cover the full amount.
You or your personal injury attorney are required to notify the proper agency if you make a personal injury claim. This can be done through the Medicare Secondary Payor Recovery Portal (MSPRP) or the CHAMPVA Potential Liability Claim form for the Department of Veterans Affairs.
You are legally obligated to notify DHCS within 30 days of filing a claim or action if you are a Medi-Cal beneficiary. The Medi-Cal lien process can be lengthy, and it’s similar to what you can expect with other health insurance liens.
How Are Personal Injury Settlements Paid Out?
Medical liens in California are complicated and have the potential to delay your settlement payout. Until an agreement is reached and the lienholder is paid, your settlement cannot be disbursed.
In some cases, you may be required to create a Medicare Set-Aside along with repaying medical benefits from your settlement. As a general rule, you must create a Set-Aside if you are a current Medicare recipient and settle a claim for more than $25,000 or settle for over $250,000 and are expected to receive Medicare within 30 months. The purpose of the Set-Aside is creating a fund to pay for future medical expenses Medicare is expected to pay.
Before you receive your settlement funds, all medical liens must be cleared and the attorney’s fees and costs must be paid. An important benefit of hiring a personal injury lawyer in California is they can attempt to negotiate your medical or hospital liens.
What Happens if I Lose My Injury Case?
What happens to a medical or hospital lien if you lose your personal injury case depends on the type of lien.
With a hospital lien, the patient is typically still liable for the remaining balance if they do not recover enough through settlement or a jury award, or if they lose their case. The hospital or provider can pursue you for the balance through collections or a lawsuit.
Most medical liens only give the insurer the right to collect on the lien if and when you recover compensation from a negligent party. With these personal injury liens, you are not liable for the balance if you lose your case.
Medical Lien Auto Accident Example
A car accident personal injury lien is very common and may involve multiple lienholders including your auto insurance company and health insurance company.
- Medical Pay or Med-Pay claims. If you used Med-Pay coverage, your own auto insurance policy was billed for medical care you received. If you recover compensation from an at-fault party, the insurance company must be reimbursed for what it paid.
- Uninsured motorist claims. If you ultimately recover compensation from an at-fault motorist who did not have insurance, the insurance company has the right to reimbursement for what it paid for your uninsured motorist claim. Otherwise, the insurance company has the responsibility to try to seek payment from the uninsured motorist.
- Health insurance liens. If you used your insurance to cover medical expenses related to your accident, they may place a lien on your settlement for reimbursement.
California Medical Lien Law
California law places some important limits on medical liens to protect your right to recover damages. Most limits like CCP 3040, the Made Whole Doctrine, and the Common Fund Doctrine only apply to subrogation, not hospital liens enforced by a signed agreement.
Hospital Lien Act (CCP 3045)
California Civ. Code § 3045 or the Hospital Lien Act spells out certain rights and responsibilities for healthcare providers and patients:
- If a defendant settles with the patient or accident victim without honoring a perfected hospital lien, they are still liable to the hospital for the amount owed.
- A hospital lien can be placed for “emergency and ongoing medical care” for reasonable, ordinary charges
- The hospital lien only applies to third-party recoveries. It may be recovered through arbitration, settlement, or judgment. It does not apply to first-party claims such as uninsured motorist coverage.
- A hospital cannot use certain unfair balance billing practices
- The hospital’s recovery is limited to 50% of the amount due to the patient after paying prior liens including attorney’s fees and earlier perfected liens
A Court of Appeal opinion places a burden on hospitals to prove their lien amount is “reasonable and necessary.” Other court opinions have also limited accident victims to recovering the amount of their bills paid by insurance, not the total billed amount. Essentially, California courts have found that the full amount medical providers bill is not a good measure of the value of the services as hospital charges are inflated and almost no one pays their standard rates.
This can make it easier to get a hospital lien reduced through settlement.
California Civil Code 3040 CCP
This California law limits how much health insurance carriers can receive from a victim’s personal injury settlement. Your insurance company is only entitled to recover the lesser of:
- The total cost of medical services provided,
- 1/3 of the total settlement if the plaintiff did have an attorney, or
- 1/2 of the total settlement if the victim did not have an attorney
Under 3040 CCP, the cost of services will depend on how providers were paid by the insurer. With capitation, in which providers are paid a flat amount for every patient they see, the cost is capped at 80% of what providers pay in non-capitated cases. If the insurance company does not use capitation, the cost is the amount on the medical bill.
Made Whole Doctrine
This doctrine is a common law principle that applies to subrogation, or an insurer’s right to be reimbursed for costs paid on behalf of a policyholder. Under the made whole doctrine, the policyholder must be made whole after their accident before the insurance company can take money from the settlement proceeds or the policyholder as reimbursement.
The purpose of this doctrine is to ensure accident victims can exercise their right to be made whole by the negligent party.
If you are injured, you have the right to be made whole by the responsible party. If the responsible party can’t fully compensate you for the damages you suffered, this doctrine protects you from an insurance company taking money from a settlement amount already lower than your damages.
Many insurance companies use language in their policy contracts to bypass the made whole doctrine. California allows companies to use contractual language to override the doctrine. In some circumstances, an attorney may challenge this agreement if the provisions are not sufficient.
Common Fund Doctrine
This doctrine protects injury victims from bearing the full cost of their attorney fees without any help from insurance companies using their subrogation rights. Under this law, the party who recovers a common fund for the benefit of others is entitled to reasonable attorney’s fees from the fund.
In simpler terms, if an accident victim recovers compensation from the responsible party through a lawsuit, an insurance company can’t simply benefit from a subrogation claim and get reimbursed without paying a portion of the attorney’s fees too.
Under this law, you will not be forced to pay attorney’s fees and reimburse the insurance company when they did nothing to help you recover the compensation.
California Medical Lien Statute of Limitations
If you sign a hospital lien agreement, there is a statute of limitations of four years which begins if you break your promise to pay.
If you do not win your injury case or the settlement doesn’t provide enough money to pay the lien, the lienholder can only pursue you for the debt until the statute of limitations expires.
Note that most agreements have language that specifies that any settlement money recovered is held in trust for the hospital or provider. In these cases, the statute of limitations does not apply. This means you can’t recover compensation, fail to pay the hospital lien, and wait four years for the statute of limitations to expire – the hospital is still able to pursue you for the balance.
How do I Know if I Have a Medical Lien?
Many injured victims are unaware a medical lien exists until they file a personal injury lawsuit or make a claim.
How to find out if you have a medical lien:
- A hospital lien requires signing an agreement that becomes a binding contract. You should receive a copy of this agreement which is sent by certified mail to potentially liable parties and known liability insurance providers.
- Check your health insurance policy for a subrogation clause that details the insurer’s right to reimbursement.
- There is a statutory lien on settlement or award proceeds if any related treatment was paid by Medicare, Medi-Cal, or the VA/TriCare.
Your personal injury lawyer will help you understand any medical liens in your case and file appropriate notices to insurers.
How a California Personal Injury Lawyer Can Help with Medical Liens on Settlements
A medical lien has the potential to eat up a large portion of your injury settlement. California personal injury attorneys can help you retain as much of your settlement as possible for your pain and suffering.
Most medical liens can be reduced, settled, or even waived depending on the circumstances. This includes Medi-Cal personal injury liens and health insurance liens.
An experienced California personal injury lawyer will work on your behalf to negotiate the reduction of a hospital lien. This includes verifying the lien is valid and perfected and the charges are reasonable and necessary. A release of hospital lien is an important aspect of negotiation to make sure the lien is completely cleared.
It’s best to begin negotiating medical liens as soon as possible, ideally before a settlement is reached. However, negotiating hospital liens after settlement may still be possible.
If you agreed to a hospital lien and signed an agreement, it’s especially critical to work with an experienced lawyer because you will still be liable for the bills if you lose your case or do not recover enough money. An injury lawyer can often negotiate a reduced lien amount in these cases.
At Berman & Riedel, LLP, we have decades of experience fighting for accident victims. We can help you find a healthcare provider who accepts medical liens in California if needed to cover your treatment and negotiate the agreement to protect your interests. We can also help with negotiating any personal injury lien in your case and making sure any lien or subrogation clause is valid and properly executed.
Contact Berman & Riedel, LLP today for a free case review with a San Diego personal injury lawyer to discuss your case. Our law firm is based in San Diego but we accept cases throughout California.