Learn About Medical Liens and What They Mean for Your Case

The settlement process in a mass tort or personal injury case can be complicated. Even after the defendant is ordered to pay damages, there are still a number of factors that can affect your compensation.

These factors can include medical liens, bankruptcies, and estate issues. At Wallace Miller, we’re committed to making this process as transparent, efficient, and straightforward as possible. In this article, we’ll break down subrogation and medical liens—what they are, how they work, and what they mean for your case.

What is a lien?

A lien is the legal right of a creditor to be repaid for a debt via access to the property or assets of the debtor.

There are many different types of liens, including real estate liens, judgment liens, and tax liens. For mass tort and personal injury claims, Wallace Miller specifically works with medical lien agreements related to your lawsuit.

Photograph by Pixabay.

What is a medical lien or hospital lien?

In a personal injury lawsuit where you have been compensated for an injury—for example, if your insurance company paid for some portion of your medical bills through your insurance plan—the party who initially covered your medical expenses may be legally entitled to recoup their cost from the settlement provided. This is referred to as a medical lien, or a claim on your settlement award from an insurance company requesting payment for services rendered by your medical institution.

Your insurance company may have paid for medical treatment, surgery, follow-up hospital care, pain medication, or other medical expenses. If these expenses are linked to your personal injury claim, the insurance company is entitled to a percentage of your compensation.

The more of your treatment that your insurance plan covered, the more likely it is that you will have a lien for a substantial amount. This is because your insurance provider is more likely to file a lien if they have paid for more of your medical care.

What is the difference between subrogation and a lien?

In a personal injury claim, the term lien refers to a subrogation claim—which means that for most lawsuits dealing with healthcare providers, the two terms can be used interchangeably.

Technically speaking, subrogation is a legal technique in which one party takes on the role of another party. For example, an insurance company can take on the role of the plaintiff or injured party in order to have a right to the settlement money provided by the defendant for medical services.

Because a lien is the right of a creditor, like an insurance company, to receive money from someone’s property or assets to settle a debt, a subrogation lien or subrogation interest is simply the right of a third party to be reimbursed via a personal injury claim or mass tort settlement for medical expenses incurred by the client.

In establishing and overseeing legal procedures, it is important to clarify the distinctions between subrogations and liens. However, for the purposes of personal injury and mass tort cases, it is usually clearer and more efficient to use the term lien to refer to the full subrogation interest negotiation.

Who can file a lien in a personal injury claim?

Medical liens in personal injury and mass tort cases are filed by medical insurance companies and healthcare providers. They are most often brought by Medicare and Medicaid, although private insurance companies can also submit a claim. Under federal and state regulations, liens filed by Medicare and Medicaid must be resolved first, followed by any liens from private insurance companies.

Insurance companies are legally entitled to assert a lien on a settlement in order to make up for medical costs. The exact stipulations of these liens will depend on the contract established by the private insurance company.

Why does lien resolution take so long?

The lien resolution process is complicated and can take months or years. Institutions like Medicare require communication via hard copy, and negotiations often go back and forth several times. Private insurance companies often conduct lien resolution more quickly, but under federal and state regulations, claims from public health insurance programs like Medicare and Medicaid must be resolved first.

As a result of regulatory rollbacks and the backlog in processing caused by the Covid-19 pandemic, the process timeline has increased significantly in the last several years. Prior to 2020, the average resolution time for the lien process in mass tort cases was four to six months. As a result of recent changes, mass tort lien negotiation now typically takes a year or longer to resolve. The process for single event personal injury cases can proceed more quickly, with lien negotiations typically taking between a few weeks and a few months.

This time-consuming negotiation can be frustrating as a plaintiff—especially since the settlement money seems as though it has already been awarded and is now being withheld by attorneys and insurance providers. Although this is not the case, it’s upsetting nonetheless. Unfortunately, lien agreement resolution is mandated by law for programs like Medicare and Medicaid and is often written into private insurance policy. Insurance companies also control negotiation deadlines, so your attorneys have little or no control over how long it takes.

If you are awarded a settlement in a personal injury claim, your lawyer will work with you to keep you up to date on the status of your lien resolution. Lien resolution does not impact attorneys’ fees, and so attorney negotiations in this process occur solely for the client’s benefit. The team at Wallace Miller is committed to providing you with compensation as quickly and efficiently as possible and maximizing your total compensation amount. We will do everything we can to ensure that your case is progressing in the system.

Why do I have to pay my health insurance company from my personal injury settlement?

It can feel unfair that insurance providers are able to “double dip” by charging premiums for health insurance and then filing liens on future compensation. Some states have begun to pass legislation to limit the ways in which insurance companies can file liens, or at least streamline the negotiation so that plaintiffs are not waiting years to receive their settlement money. However, because liens are permitted by federal law, all law firms must go through the resolution process in order to make sure no liens are owed.

The best thing to do if you are frustrated by the lien timeline is to contact your congressperson or elected representative. They can advocate for the setup of the lien system to be revisited in order to move more quickly and fairly for plaintiffs.

Overview of lien resolution

The resolution begins after the settlement agreement has been finalized. Depending on the litigation, the court or settlement agreement may designate a neutral third party to oversee the process.

This lien resolution company will identify if any liens have been filed and determine their amounts. After an auditing process, the company will negotiate with the insurance companies to reduce the lien amount as much as possible.

After the settlement proceeds are distributed, they will work with your law firm to determine a payment plan for the agreed-upon lien amount.

Are medical liens on a personal injury settlement negotiable?

Medical liens are often negotiable, and your personal injury lawyer at Wallace Miller and the lien resolution company will conduct an in-depth audit of the liens asserted on your case and challenge any they believe are not valid.

These may include liens that apply to medical care outside of the time frame of the case, care with incorrect or irrelevant billing codes, and service that is not related to the claim in question. Your representatives will negotiate to waive as many liens as possible and reduce those that can’t be waived in order to maximize the compensation you receive.

Some insurance companies will accept waived liens, while others won’t—every personal injury case is unique and must be conducted individually.

What is a lien holdback?

The law requires that part of your total settlement award be “held back” or reserved in order to pay any liens that have been filed. This money, usually held by the defendant, is not available to anyone, including your law firm, until the lien resolution has concluded. During the resolution process, your law firm will conduct research to find out if any liens have been filed.

The lien resolution process can take months or even years. In order to get some of your settlement money to you as soon as possible, Wallace Miller and other law forms will often pay your settlement in two installments. In these situations, the first check does not include the money held back to pay any potential liens. Then, after the resolution process has concluded, any liens will be subtracted from the holdback and the remaining amount will be sent to the plaintiff. If it’s proven that there are no liens on the settlement, the full amount held back will be paid to the plaintiff.

Photograph by Pixabay.

How are mass tort settlements distributed?

Many plaintiffs are familiar with class actions, in which it usually only takes a few months to receive a settlement after a plaintiff provides their payout information. This is possible because, in class action cases, the suit is filed by a “class” of people under one or a few representatives.

In mass tort litigation, on the other hand, each plaintiff brings an individual case against the defendant(s). These may then be grouped together into multidistrict litigations in order to go through litigation more efficiently, but they remain individual claims.

For litigations like these, money is most often distributed to clients via a global settlement. Each plaintiff in a mass tort litigation receives a copy of the settlement documents, including the offer amount and a release. These must be signed and returned in order to accept the compensation offer.

A certain threshold of returned settlement documents must be reached before defendants begin to issue funding. This threshold is typically between 80 to 95% of releases. This threshold applies not only to cases at Wallace Miller, but to all cases represented by all law firms participating in the multidistrict litigation across the country.

The defendants will not start reviewing claims until that threshold is reached. In turn, lien negotiations can’t begin until this stage is completed. This means that there is often a significant wait time in mass tort settlements even before the lien negotiation begins.

Wallace Miller attorneys (left to right): Jessica Wieczorkiewicz, Mark R. Miller, Molly Condon Wells, Edward Wallace, Timothy E. Jackson. Not pictured: Nicholas P. Kelly.

We know that the lien process can be confusing and frustrating, so our team is with you every step of the way. Wallace Miller’s trained settlement coordinators are available to answer your questions and walk you through lien resolution as your case is resolved.

Questions about your settlement? Call Wallace Miller at 312-261-6193 to discuss your case today.

Glossary

Assets

Something of value owned by an individual or organization. This includes physical assets, such as property, or intangible assets like intellectual property.

Creditor

The organization or individual to whom money is owed.

Defendant

The party being sued in criminal or civil court. In a civil case, the defendant is the party against whom the suit is filed

Insurance company

A company that issues insurance contracts in order to provide financial protection against potential future hazards.

Lien

The legal right of a creditor to be repaid for a debt via access to the property or assets of the debtor. A medical lien is a claim on your settlement award from an insurance agency or healthcare organization requesting payment for services they have provided.

Lien holdback

An amount held back from your settlement in order to satisfy any potential liens.

Lien resolution company

A neutral third party designated by the court or settlement agreement in order to oversee the lien resolution process. The lien resolution company will identify, audit, and negotiate any liens filed.

Personal injury lawsuit

A legal dispute filed when one individual (the plaintiff) suffers harm and claims that another individual or organization (the defendant) may be legally responsible to pay damages.

Personal injury lawsuits are civil cases. Examples may include an individual suing for broken bones as a result of a collision with a drunk driver; compensation for cancer caused by a chemical exposure at a factory; or harm suffered due to a dangerous product on the market.

Plaintiff

The suing party in a criminal or civil case. In a civil case, the plaintiff is the person filing the lawsuit. Plaintiffs bring lawsuits in civil court because they believe that they have been harmed by the defendant physically, financially, or otherwise.

Release

The legally binding agreement to resolve the dispute between the plaintiff and defendant in litigation. The release must be signed in order for the plaintiff to obtain their settlement.

Settlement

An agreement reached by the plaintiff and defendant before a trial, often including financial compensation on the part of the defendant. Settlements are different from verdicts, which are the official decision reached by a judge or jury after trial proceedings.

When a defendant negotiates a settlement with multiple plaintiffs, they may opt to undergo a course of action that applies to all individual claims. This is called a global settlement.

Subrogation

A legal technique in which one party takes on the role and obligations of another party. For example, an insurance company can take on the role of a plaintiff in a personal injury case in order to have a right to the settlement award paid by the defendant for medical expenses.