Karon Law Blog

What Are Medical Liens?

By Jonathan A. Karon

Medical liens are the right of health insurers, government agencies or health care providers (like doctors and hospitals) to be repaid out of a personal injury settlement or judgment. Generally if a private health insurer or a government program, like Medicare or Medicaid pays for medical treatment for injuries you sustained in an accident, you will have to reimburse them out of your recovery for the amount of the bills that they paid. Similarly, state laws usually provide that doctors, hospitals and other providers can take steps to enforce a lien against your recovery for unpaid medical bills. The word ‘lien” means that your attorney is required to make sure that these entities are reimbursed or these health care providers are paid before releasing any funds to you.

There are many different types of medical liens, some created by state law and some created by Federal law. For example, both Medicare and Medicaid programs (like MassHealth) have automatic liens on any personal injury recovery. Not only do these programs not have to notify you that they have a lien on your recovery, but you are required to notify them if you are bringing a personal injury case for injuries for which they’ve paid for your treatment. Another automatic lien is created in Massachusetts if a worker’s compensation insurer pays for your medical treatment. In contrast, in Massachusetts, private health insurers and health care providers have to actually send you a formal “Notice of Lien” by certified mail to enforce their rights. (You should be aware, however, that even if they don’t send you a certified letter, health insurers usually have the right under their policy to sue you to get back the amounts they’ve paid, just as a doctor or hospital could sue you for an unpaid medical bill).

Some of these entities are required to chip in for their share of your costs and attorney’s fees and some are not. Both Medicare and worker’s compensation insurers in Massachusetts are required to reduce the amount of their medical liens by their proportionate share of your costs and attorney’s fees. For example, if you signed a contingent fee agreement providing that your attorney gets one-third of the amount of your recovery, then Medicare or the worker’s compensation carrier would have to reduce the amount of their lien by at least one third. On the other hand, private insurers and Medicaid programs are not required to reduce their liens by their fair share of attorney’s fees and costs.

Sometimes calculating the amount you are legally required to repay can be complicated. Where you receive health insurance from what’s known as an ERISA plan (one set up by your employer based on a Federal law known as the Employee Retirement Income Security Act of 1974) it may have additional rights to recover based on the specific documents setting up the health insurance plan. There are also some complicated federal court decisions regarding Medicaid’s right to be repaid when there is not enough insurance coverage to make sure an injured person is fully compensated.

This is, of course, just a brief overview of medical lien issues. You’ll want to discuss these in more detail with your attorney, so that they can explain what liens may be applicable in your case. In some cases, particularly where there is not enough liability insurance coverage, it may be possible for your attorney to negotiate a reduced lien amount. In any event, before settling a case, you should ask your attorney how much the medical liens are (in addition to the amount of the legal fee and expenses) so that you know how much you will be receiving.