Ideally, a personal injury settlement should provide swift financial relief, helping the injured party cover medical expenses and move forward with peace of mind. However, in practice, unforeseen challenges such as medical liens frequently arise, significantly diminishing the injured party’s net recovery. Whether the incident involves a motor vehicle accident, a premises liability case, or a workplace injury, it is imperative to understand how these liens function and the extent to which they affect your entitlement.
This comprehensive guide explores the impact of medical liens on your personal injury claim. It outlines the relevant federal and state laws and emphasizes how developing an understanding of these legal intricacies can help you make informed decisions.
What Are Personal Injury Liens?
In personal injury cases, a lien is a legal claim against your settlement proceeds. It allows certain parties—such as healthcare providers, health insurance companies, or government agencies—to seek reimbursement for medical expenses paid on your behalf. These claims arise because of medical services rendered during your medical treatment for injuries related to your personal injury lawsuit.
There are three main types of liens:
Statutory liens: Created by-laws (e.g., Medicare, Medicaid, workers’ compensation).
Contractual liens: Stemming from agreements with health insurers.
Hospital liens: Placed directly by medical providers for services rendered.
Multiple liens can reduce your net recovery. When you settle a personal injury case, you must understand your liens and legal obligations to avoid unexpected financial burdens.
How Federal Law Governs Medical Liens
Under federal law, several programs have the right to assert liens against personal injury settlements:
Medicare and Medicaid Liens
If you’re a Medicare or Medicaid beneficiary, and your injury-related medical bills were paid through these programs, the government has a right to be reimbursed.
Medicare: The Medicare Secondary Payer Act (42 U.S.C. §1395y(b)) allows the Centers for Medicare & Medicaid Services (CMS) to recover Medicare payments from third-party settlements. You can manage your medicare lien claims through the Medicare Secondary Payer Recovery Portal.
Medicaid: Under 42 U.S.C. §1396k, state Medicaid agencies can recover Medicaid service costs from your settlement funds. To find your state’s Medicaid agency for lien recovery, visit the official Medicaid website at Contact Us | Medicaid
These are known as government liens, and CMS typically sends a Conditional Payment Letter detailing what they paid.
ERISA and Workers’ Compensation Liens
ERISA (Employee Retirement Income Security Act) plans are governed by federal law and may recover benefits paid for medical treatment. These are contractual liens often held by health insurance companies.
Workers’ compensation liens are governed by both federal and state laws, allowing insurers to seek reimbursement for medical expenses and medical payments made to the injured worker.
Federal agencies enforce these legal frameworks to assert liens and recover medical expenses paid through public health programs. While some disputes may go to court, most lien recoveries occur through administrative processes and settlement negotiations.
California Laws on Personal Injury Liens
California has specific laws regulating how lien holders may claim a portion of settlement money:
Hospital Liens
Under California Civil Code § 3045.1, hospitals that provide emergency and ongoing care to a person injured due to an accident or wrongful act (not covered by workers’ compensation) have the right to place a lien on any damages recovered from a third party by the injured person. This lien covers the reasonable and necessary charges for the hospital’s services. Per California Civil Code § 3045.4, the total amount of all hospital liens cannot exceed 50% of the net proceeds of the settlement or judgment, ensuring that the injured party retains a significant portion of the recovery.
Medi-Cal (Medicaid) Recovery
Under California Welfare and Institutions Code § 14009.5, the California Department of Health Care Services is authorized to recover the cost of Medi-Cal services from the estates of deceased beneficiaries who were either 55 years of age or older when they received services or permanently institutionalized, under federal requirements. Recovery is limited to services required under federal law and applies only to the decedent’s probate estate, with exceptions for surviving spouses, registered domestic partners, and certain children.
Workers’ Compensation
Under California Labor Code § 3852, when a third party is responsible for an employee’s injury or death, the employer (or its workers’ compensation insurance carrier) has the right to seek reimbursement for benefits paid by either filing its lawsuit or joining the employee’s third-party action. Insurers can recover the amounts they pay for compensation, wages, pensions, or other benefits.
Case Example: In Parnell v. Adventist Health System/West (2005), the California Supreme Court held that hospitals may not bill insured patients more than the negotiated rates accepted by their insurers, effectively limiting lien amounts. This ruling reinforced protections for injured parties by preventing inflated hospital charges from reducing personal injury recoveries.
Nevada Laws on Personal Injury Liens
Nevada balances the rights of injured parties with the ability of healthcare providers to recover benefits paid:
Hospital Liens: Nevada Revised Statutes (NRS) § 108.590 allows hospitals to assert a lien for the reasonable value of hospitalization provided to a person injured due to another’s actions. This lien applies to any amount awarded to the injured person or their personal representative through a judgment, settlement, or compromise related to the injury.
Public Employee Benefits: NRS § 287.0465 provides that the Public Employees’ Benefits Program (PEBP) is subrogated to the rights of a member who receives medical benefits due to an illness or injury caused by a third party. The Board may recover the costs of those benefits by asserting a lien on any judgment, settlement, or recovery obtained from the liable party.
Workers’ Compensation: NRS § 616C.215 permits workers’ compensation insurers to seek reimbursement from third-party settlements or judgments related to the injury.
Case Example: In Great American Insurance Co. v. General Builders, Inc. (1973), the Nevada Supreme Court upheld lien priority principles that required hospital and provider liens to reflect actual, reasonable charges and comply with statutory procedures, safeguarding the injured party’s ability to recover fair compensation.
Colorado Laws on Personal Injury Liens
Colorado has specific statutes governing medical liens:
Hospital Liens: Under C.R.S. § 38-27-101, hospitals may file a lien for reasonable and necessary charges for treating an injured person when another party is legally responsible for the injury. They must file the lien in the county where they provided care. Under C.R.S. § 38-27.5-104, health-care providers or their assignees must disclose payment options and lien terms to the patient before creating the lien. The lien only applies to unpaid amounts after health insurance payments. The law ensures the injured person only pays from their net recovery from a settlement, judgment, or insurance claim.
Medicaid Estate Recovery: Federal law mandates the Colorado Department of Health Care Policy & Financing to recover medical assistance costs from the estates of deceased Medicaid recipients who were 55 or older or permanently institutionalized. This is outlined in Colorado Revised Statutes § 25.5-4-302.
Workers’ Compensation: Colorado Revised Statutes § 8-41-203 allows workers’ compensation insurers to assert a lien on any third-party recovery by an injured worker to recoup benefits paid.
Case Example: In Smith v. Kinningham (2016), a court denied a provider’s lien because they failed to give proper notice. This reinforces the importance of adhering to legal procedures under state and federal laws.
The Impact of Medical Liens on Settlements
Liens can drastically reduce the total settlement amount available to the injured party. Here’s how:
The parties involved pay liens from the settlement proceeds before the injured party’s attorney receives attorney fees.
The injured party receives what remains after covering fees owed to medical professionals, and health insurance companies, and resolving legal claims linked to the injury.
If future medical bills or future medical expenses are expected, they may not be covered by the remaining funds.
It’s crucial to review all potential liens early in the personal injury case to avoid surprises. Experienced personal injury lawyers negotiate with lien holders during settlement negotiations to reduce the lien amount, maximizing net recovery.
How a Personal Injury Lawyer Helps with Lien Resolution
A personal injury lawyer plays a pivotal role in navigating the legal process. They help you minimize lien impact, and protecting your financial interests throughout the lien resolution process.
Here’s how:
Identifies all liens early in the case (e.g., Medicare, Medicaid, health insurance).
Requests conditional payment letters from CMS.
Challenges inflated medical costs or unauthorized liens.
Negotiates with healthcare providers and government agencies to reduce lien amounts.
Coordinates lien recovery with settlement distribution.
A seasoned attorney ensures that medical costs don’t swallow your fair compensation, protecting your legal rights and financial obligations.
Let Bourassa Law Group Help You
Navigating personal injury liens is a complex journey that requires experience, diligence, and negotiation skills. At Bourassa Law Group, we specialize in maximizing your net recovery while minimizing the impact of medical expenses and legal claims. If you’re facing a personal injury lawsuit, don’t let hidden liens reduce your compensation.
Contact us today for a free consultation and let our legal team protect what you fought to win
1-800-870-8910