Medical Liens and Injury Settlements: Who Gets Paid Before the Victim Does
Think your settlement check is all yours?
Think again. In a negligence injury lawsuit, the number you settle for is rarely, if ever, the number that you receive in your bank account. Far from it.
Before you see a single dollar, a whole line of people wants their cut:
- Hospitals
- Health insurers
- Government programs
It’s known as a medical lien. And it can seriously cut into your settlement.
Here’s the good news:
Learn how liens work. You can plan for them (and avoid them altogether.) Time to dive right in…
Here’s What’s Covered:
- What Is A Medical Lien?
- The Payout Line: Who Gets Paid First?
- Why Hospitals Love Liens
- How To Shrink Your Liens
What Is A Medical Lien?
A medical lien is a legal claim on the money from your injury case.
It says basically this: “We covered your treatment costs. Remit payment to us when your case is resolved.”
Few injured people can afford to “self-pay” for surgery, scans and PT. Instead, a hospital, insurer or govt pays for your care now… then bills your settlement later. It’s logical when you crunch the numbers. KFF research shows 1 in 10 adults already have medical debt. That’s BEFORE they got into an accident.
Medical bills typically make up the majority of your damages in a negligence injury lawsuit. Which is precisely why lienholders line up at the finish line licking their chops. Savvy attorneys for injury claims will investigate liens months before your negligence injury lawsuit settles, because one overlooked lien can hold up your entire settlement. The check can not be cut until all valid liens are resolved.
Pretty important, right?
The Payout Line: Who Gets Paid First?
Imagine your community is a giant pot of funds. Everyone who has a claim has a spoon.
The order may vary by state. However, in most states the line will resemble:
- Attorney fees and case costs
- Government liens (Medicare and Medicaid)
- Private health insurance claims
- Hospital and doctor liens
- You.
Yes… the injured person is dead last.
Medicare & Medicaid Liens
Government liens are the strictest of the bunch.
If Medicare paid for any treatment related to your injury, they are entitled to reimbursement under federal law. Full stop. There is no wiggle room. Avoidance of a Medicare lien now could subject you (and any person who handled the funds) to serious penalties in the future.
Medicaid is no different. Since every state administers its own Medicaid program, eligibility requirements vary by state.
Health Insurance Liens
Did your private health insurance pay your bills after your accident? If so, they will probably want that money back as well.
This is known as subrogation. Your insurance company steps into your shoes and takes a portion of the settlement. Plans obtained through work can be even worse because most are governed by federal law rather than state law.
Hospital & Doctor Liens
Numerous hospitals have the ability to file a lien against your injury claim. Some doctors and chiropractors will even treat you “on a lien.” This allows them to wait until your case settles before they get paid.
Keep copies of all lien letters you receive in the mail. Liens can sneak up on you at the last minute when you think your case is wrapped up.
Why Hospitals Love Liens
Here’s something most accident victims never see coming…
Some hospitals would rather file a lien than bill your insurance.
Why? Because insurance companies don’t pay full price. When a hospital places a lien, they can pursue that full list price instead. The New York Times reports this practice is now commonplace at major health systems nationwide.
Plus the laws allowing it are antiquated. Extremely antiquated. Numerous states enacted hospital lien laws back in the early 1900s when fewer than 10% of Americans had health insurance.
That’s a big problem today.
It means hospitals can waive your good insurance, charge you retail and keep the difference out of your payout.
Some states now force hospitals to bill insurance first. Plenty don’t.
What It Looks Like In Real Numbers
Take a look at a simple example.
Your negligence lawsuit settles for $60,000. Awesome!, you think. Now watch…the line forms:
- Attorney fee (one third): $20,000
- Case costs: $2,000
- Medical liens: $25,000
What’s left for you? $13,000.
That’s only 20% of the award. Which is why so many victims end up feeling ripped off even after a “big victory”.
How To Shrink Your Liens
Here’s the thing most people don’t realise…
Liens aren’t permanent. You can chop down many of them. Others you can extinguish.
Here’s how to keep more of your money:
Ask For An Itemized Bill
Never accept a lien at face value. Ask for a full itemized statement.
Hospitals don’t ALWAYS get it right! They will bill you for tests you never received. Every mistake you find is money returned to you.
Make Sure Your Insurance Was Billed
Appeal if the hospital intentionally bypassed your insurance. In most states, the hospital can only charge you the discounted insurance rate. Not the full “sticker price.”
Negotiate A Reduction
Why would most lienholders settle for pennies on the dollar? Because they know you paid attorney fees to litigate for the money originally.
Everyone uses this one: it’s so easy. Why shouldn’t the lienholder pay their share of getting the settlement? If your lawyer took 1/3, the lien should be reduced by 1/3 as well.
Check Your State’s Caps
Some states have a maximum percentage that a lien can take from your settlement. Some states have maximums that a hospital can lien you for. Checking your states regulations could net you thousands.
Before You Cash That Check
Medical liens are typically the largest shock to any negligence injury case. Hospitals, insurance companies and government programs ALL want paid first….LEAVE THE VICTIM LAST.
To quickly recap:
- Expect liens to take a big chunk of your settlement
- Government liens (like Medicare) must be paid back
- Some hospitals skip insurance to charge full price
- Always ask for an itemized bill
- Negotiate every lien you can
It’s frustrating. But once you see who the lineup is against you, you can strategize how to hold onto as much of what you’re owed.
Your settlement should pay for your recovery — not just everyone else’s bills.
Frequently Asked Questions
Can a medical lien take your whole settlement?
It can occur, although uncommonly. Most states shield a portion of the settlement for the victim. Additionally, most lienholders will work with you prior to destroying a case.
Do you have to pay a lien if you didn’t sign anything?
Yes, frequently. Government programs, such as Medicare and most hospital lien laws do not require your signature. Your consent to be reimbursed is implied by law.
