Many personal injury clients are surprised to learn that when they receive a settlement or verdict, they may not get to keep the entire amount. Various third parties who paid for your medical treatment or provided other benefits during your recovery may have liens against your settlement, meaning they have a legal right to be reimbursed from your recovery.
Understanding these liens and how to manage them is essential to maximizing the amount of money that actually ends up in your pocket.
What Is a Lien?
A lien is a legal claim that a third party has against your personal injury settlement or verdict. If someone else paid for your medical treatment or provided benefits related to your injury, they may have a right to be repaid from any money you recover from the at-fault party. The most common types of liens in personal injury cases include:
Health Insurance Liens
If your health insurance company paid for medical treatment related to your accident, they may have a subrogation right or contractual lien that entitles them to be reimbursed from your settlement. The specific rules depend on the type of health insurance you have. Self-funded ERISA plans are governed by federal law, which often gives the plan a strong subrogation right. State-regulated health insurance plans are subject to state subrogation laws, which may be more favorable to the injured person.
Medicare Liens
If you are a Medicare beneficiary and Medicare paid for medical treatment related to your injury, Medicare has a statutory right to reimbursement from your settlement. This is known as the Medicare Secondary Payer Act, and it is strictly enforced. Failing to properly address a Medicare lien can result in penalties and personal liability for the injured person and their attorney.
Medicaid Liens
Like Medicare, Medicaid has a right to be reimbursed for medical expenses it paid on your behalf. Each state administers its Medicaid program differently, and the rules regarding Medicaid liens vary by state.
Workers' Compensation Liens
If you received workers' compensation benefits and also pursue a third-party personal injury claim, the workers' compensation insurer typically has a lien against your third-party recovery.
Medical Provider Liens
In some cases, medical providers who treated you on a lien basis, meaning they agreed to defer payment until your case resolved, have a contractual right to be paid from your settlement.
How Liens Affect Your Settlement
Liens can take a significant bite out of your settlement. For example, if you receive a $200,000 settlement but have $75,000 in liens from your health insurer, Medicare, and medical providers, you would only receive $125,000 before attorney fees and costs. This is why lien negotiation is an important part of the settlement process.
Negotiating Liens
An experienced attorney can often negotiate to reduce the amount of liens against your settlement. Many health insurers will agree to accept a reduced amount in exchange for quick payment. Medicare and Medicaid liens can sometimes be reduced through established procedures. An attorney who understands the rules governing each type of lien can minimize the impact on your recovery.
At Dr. Ted Injury Law, we handle lien negotiation as part of our comprehensive representation. Contact us at (800) 555-HURT for a free consultation.