If you or a loved one are the plaintiff in a personal injury lawsuit, you may have heard about liens, especially to pay medical bills. If you’ve ever wondered, “What is a lien?” and aren’t familiar with the process, we give you the essential information you need here.
At Kuzyk Law, we often help our clients in Lancaster and the Antelope Valley negotiate liens, but it can be a complicated process. Understanding how liens work and how they can potentially affect your settlement will give you more peace of mind as your case moves forward.
What Is a Lien?
A legal right to payment
A lien is a legal right that allows a third party to take something they would otherwise not have access to. You may have heard of tax liens, child support liens, or liens against your home if the mortgage is not paid.
In the case of personal injury lawsuits, a lien permits a third party to take all or a portion of a judgment in your favor to get money they are owed. The funds from the judgment go straight to the third party without going to you first, so you never see the money.
Liens were created to help creditors receive money for services they provided, often medical care (see below). The idea is that rather than wait for you to receive your settlement and pay bills, creditors get their money faster when they get it directly. A lien allows institutions and people who are owed money to secure the debt or right to reimbursement and to reduce the risk they won’t ever get paid.
What Are the Two Major Types of Liens?
There are two primary types of liens used in personal injury cases: contractual liens and statutory liens.
Contractual liens are usually health insurance liens or medical care liens. (We discuss more about who uses liens in the section below.) In these kinds of liens, medical professionals or insurance companies agree to delay payment for care if they are granted a lien that gives them all or part of your eventual judgment. Contractual liens are so called because the provision to impose a lien for collection of payments due is often written into healthcare contracts, such as insurance coverage.
Statutory liens are similar but get their name from the various state and local legal statutes that govern them. Statutory liens are most commonly given to:
- Hospitals for emergency care
- Counties for emergency transport
- Workers compensation insurance carriers
- Medi-Cal for California residents receiving this Medicaid benefit (see more on this below)
Who Uses Liens in Personal Injury Cases?
Healthcare providers and other agencies
As you’ve probably figured out from the information above, healthcare and related organizations are the most common recipients of liens in personal injury cases. We have negotiated liens with:
- Long-term care and rehab facilities
- Medical clinics
- Medical diagnostic facilities (laboratories, imaging centers, etc.)
- Private medical practices
- Physicians and other individual healthcare providers
- Health insurance carriers
- Government agencies, including the Veterans Administration (VA)
- Medicaid (Medi-Cal in California)
- Auto insurance carriers covering medical payments
These entities may request payment via a lien after an incident that results in a personal injury case. In some instances, these organizations bill patients separately, and in others, their charges are included as part of a larger invoice.
How Do Liens Work in California?
Delayed payment for settlement funds
In some cases, liens are pursued for care that has already been provided, such as ambulance transportation, treatment in the emergency room, or emergency surgery. In this instance, creditors may go to court to obtain a lien against your judgment once they learn you have initiated a personal injury lawsuit.
But what if you need ongoing care for an accident or illness caused by another for which you are asking legal damages? In this case, you may wish to proactively negotiate a lien with healthcare providers. They agree to treat you and delay payment in return for money you will receive in the future as part of your lawsuit settlement.
You and your lawyer can set up a lien agreement, which is a legally binding contract. The healthcare provider with whom you have negotiated the contract “perfects” the lien by sending a notice to any insurance carriers or other parties involved in the payments. This step allows other parties to pay the doctor or other healthcare providers directly, without any of the judgment funds going to you first.
Should You Pursue Medical Care Under a Lien Basis?
Lien agreement pros and cons
There are a few things you should know about getting medical care under a lien basis. First, a lien agreement is a legally binding contract. You can’t change your mind later after you have received care. You should thoroughly understand the agreement and go over it with your personal injury attorney before signing it.
Also, you should exhaust all your other means of paying your medical and insurance bills first before turning to a lien agreement. You may have medical bill coverage through your auto insurance, as well as your health insurance. Often, the amounts you would owe under your health insurance contract would be less than what you would owe under a lien agreement.
If there is no other way to receive the medical care you need, however, a lien agreement can be a way to cover your bills until your legal case is settled. Some of our clients use lien agreements to cover only the portion of their care that they can’t afford out of pocket at the moment, such as co-payments and deductibles. If you have no health insurance, you may find a lien agreement is better than no medical care at all.
Also, it’s worth noting that lien agreements are negotiable in California. You may be able to come to an agreement with doctors that meets both your need to keep costs reasonable and their desire for fair reimbursement. Not all doctors are willing to negotiate lien contracts, though, because this can mean added time and expense to them by involving their legal representation.
Lien agreements can be complex and full of terminology the average person wouldn’t understand. That’s why it’s good to work with a personal injury lawyer on these matters, in order to get the best possible outcome. Also, if you’re struggling to find healthcare providers willing to work with you on a lien basis, we can suggest some physicians we have worked with in the past.
What If You Have Medi-Cal or Medicare?
Special provisions for California Medicaid recipients
The state of California has a special process via the Department of Health Care Services (DHCS) to deal with personal injury settlement liens for Medi-Cal (Medicaid) recipients. The lien payments and documentation must go through DHCS. Since this is a rather elaborate system, with many places to make a misstep, many Medi-Cal recipients elect to hire an attorney to help them through it, which is allowed by law.
Likewise, the Centers for Medicare and Medicaid Services (CMS) have a federal program for dealing with settlement liens. Medicare recipients can find the lien process more complicated because not all Medicare patient contracts include the right to assert a lien. This is definitely an area where you want to consult with a knowledgeable attorney.
What If You Lose Your Lawsuit?
Your responsibilities under the law
If you have negotiated a lien agreement with healthcare providers but lose your lawsuit, you obviously won’t get a settlement to satisfy the lien. So, what happens in that situation?
If you lose your case, the entities with whom you’ve negotiated a lien agreement are still eligible to be paid. The plaintiff in the case (you or your family member) must come up with the money to pay doctors, insurance companies, and others entitled to reimbursement.
Without a settlement, this can present a financial hardship for many people. It helps to collaborate with an attorney at this point. An experienced lawyer can usually get the amount previously agreed upon in the lien contract reduced. Most doctors and others in the healthcare industry would rather be paid less than they originally anticipated than take patients to court or resort to collection agencies to get reimbursed. This is also a sound strategy if you receive less in your settlement than you originally expected.
Are Settlement Liens Good or Bad?
The advantages and disadvantages of settlement liens
After reading everything here, you might not be sure if a lien agreement to cover your medical care is a good thing or not. Honestly, liens can be both advantageous or disadvantageous, depending on the unique elements of the legal case in question and the plaintiff’s personal financial situation.
In general, liens are helpful if you have no other way to pay your medical bills. If you need ongoing care after an accident, for example, and you don’t have the resources to cover that care, a lien may be your best option.
Liens against your settlement can also be helpful to protect your personal assets. It’s usually better to pay all or part of your judgment to pay off your medical care providers than to have them try to put a lien against your home or other assets. This is another example of why working with an attorney is beneficial, so you can work out what’s best for you and protect yourself to whatever degree possible.
If you’re considering a lien agreement, here are some questions you may wish to consider first:
- Have you exhausted all other ways to pay your medical bills? Have you used your insurance properly? Do you have any healthcare flex spending accounts or rainy day savings you could use? Are you in a position to refinance your house or sell business assets? Can you pay some of your healthcare providers out of your own pocket and use a settlement lien for the rest?
- What is the likelihood you will prevail in your lawsuit? A frank discussion with your attorney is in order to see if a judgment is probable.
- How much are you asking for in your case, and what are you likely to be awarded? Again, your lawyer can help you determine if this will cover your lien payments. It’s always better to be realistic and not too overly optimistic about what you might receive in damages.
- How will you cover your financial responsibilities if you lose your case?
- Do you have healthcare providers and other agencies who are willing to negotiate with you? If not, can your attorney suggest physicians who are more open to providing care under a lien agreement?
- Does the lien agreement on the table seem fair to you? It should feel like a relative win-win for the parties involved. Never agree to a contract that you think is egregiously tilted in the healthcare provider’s favor.
- Are you comfortable with your judgment going directly to your creditors without you ever seeing the money? In cases where pain and suffering are involved, this can be particularly difficult, as many plaintiffs count on their judgment to take time off work or do other things to help get life back to normal.
- Do you or your family member understand that a lien agreement is a legally binding contract?
Why Should You Hire an Attorney to Negotiate Your Lien?
Expert advice for the best possible outcome
Typical lien agreements often favor the healthcare institution or doctor involved, so it’s helpful to have someone on your side who can help you write a lien contract you can live with. Also, as you now know from reading this post, personal injury cases and lien agreements can be extremely complicated. You want someone who knows the law and can help you navigate the process, especially if you’re still recovering from an injury or illness.
If you’ve been injured and are seeking a seasoned personal injury lawyer in Lancaster and the Antelope Valley, Kuzyk Law is here for you. We have an excellent track record when it comes to reaching lien agreements and winning cases with settlements.Call us 24/7 any day of the year at 661-945-6969, or reach out online to tell us more about your case. You don’t have to do this on your own. Get in touch today for a free consultation.