Yay, another lien article!
I know, right? If lien articles are your thing, we've definitely got you covered. And even if liens aren't your favorite topic, there's a solid chance that you'll need this information if you've been involved in a car wreck.
So let's recap what we know from last week's article. We know that General Statutes §§44-49 and -50 authorize medical providers to assert a lien against your recovery, whether it comes through a settlement or judgment. We know that the lien will attach to liability, uninsured and underinsured proceeds, and that it shouldn't attach to Medpay, but many medical providers will circumvent this through the use of a contractual Assignment of Benefits. Finally, we know that in order for the lien to attach, the provider must (i) give written notice of the lien, (ii) provide you with medical records free of charge, and (iii) provide you with your medical bills free of charge.
Cool beans. What else do I need to know?
The most important thing about these liens is that they're subject to a statutory cap, or a maximum amount that a medical provider can recover. That amount is going to be determined by calculating 50 percent of the plaintiff's net recovery, after attorney's fees are deducted.
So what does that look like in practice? Let's say that you get hurt, you hire an attorney, you get treatment from one doctor, and your bills end up totaling $15,000. After negotiating with the insurance adjuster, you end up accepting settlement in the amount of $30,000. Your attorney is working on a contingent fee arrangement of one-third of your recovery, so the attorney gets $10,000 as his legal fee. This leaves $20,000, of which your doctor can claim a lien against 50 percent, or $10,000. Pretty straightforward, right?
Mostly, yeah. However! You need to be keenly aware of the fact that your medical provider does not have to accept his maximum lien amount as full and final payment of your bill. In the above example, the doctor could only claim $10,000 of your recovery, but you would still owe him the remaining $5,000 at the end of the day. So how can you get around that?
Well, the most direct way is to call the doctor before accepting settlement, explaining what the statutory cap would be, and tell the doctor that she can (i) pursue you individually for the bill (with a lower chance of recovering anything at all), (ii) go ahead and bill your insurance (for a significantly reduced amount), or (iii) accept a less-reduced rate from your recovery and agree to consider that amount the full and final payment of your bill. So looking at the present example, you're telling the doctor that they can bill the insurance and get maybe $5,000, or they can agree to accept the statutory cap of $10,000 (or maybe a little bit less) as full and final payment of your bill.
Okay, that's great. But what if I have more than one doctor claiming a lien?
Good question! The short answer is that when two or more providers claim §44-49 liens against the same recovery, they get to share the statutory maximum amount in a pro rata distribution. Let's look at another example. Here are the particulars:
- Total settlement amount of $90,000.
- Attorney's fees of one-third.
- Doctor A claims a §44-49 of $24,000.
- Doctor B claims a §44-49 of $21,000.
- Doctor C claims a §44-49 of $3,000.
So here's what we're looking at. The attorney's fees end up being $30,000, leaving $60,000 left in the pool of funds. The doctors' liens can only total $30,000, since that's the maximum statutory amount, so we're going to prorate their interests. And how do we do that, pray tell?
- Add all of the bills together. In this case, $24,000 + $21,000 + $3,000 = $48,000.
- Divide the statutory max by the total amount of the bills. So $30,000 divided by $48,000 equals 0.625.
- Multiply each individual lien by the figure you arrived at in Item 2. Here's how it breaks down:
- Doctor A's bill of $24,000, times 0.625, equals $15,000.
- Doctor B's bill of $21,000, times 0.625, equals $13,125.
- Doctor C's bill of $3,000, times 0.625, equals $1,875.
- These three figures, added together, total $30,000; the statutory maximum amount available in this example.
Now remember, you can't force any of the doctors to accept these prorated amounts as full and final satisfaction of your bill. What you can do is try to incentivize your doctors to do so using the same tactics we discussed above. In a lot of cases, I've found that this strategy can be quite effective.
How do §44-49 liens interact with other liens?
We already know that §44-49 liens assume equal footing with other §44-49 liens, so you're going to prorate them all together like we just did above.
ERISA plans, since they live under the protection of federal law, are going to preempt any §44-49 claims; even if that precludes the recovery of the other providers, the attorney, or even the injured party. That can and often does leave the injured party stuck with a bunch of unpaid medical bills, so be aware of that possibility when you're negotiating your settlement.
Medicare and TRICARE both arise under federal law, so they're also going to preempt any §44-49 liens. The North Carolina State Employees' Health Plan has a statutory right of first recovery, so it's also going to preempt.
Medicaid is a creature of state law, and it doesn't have a right of first recovery, so any Medicaid liens are going to sit at the same table as the §44-49 liens. That means that Medicaid's going to prorate right alongside, as if it's the claim of another medical provider.
Sounds like a headache. Anything else I should know?
1. Costs and expenses don't get factored into attorney's fees. You have to subtract the attorney's fees, divide what remains in half to determine the amount available for §44-49 liens, and only then can you deduct costs and expenses.
2. You must comply with the request of medical providers for disbursal information. Upon a medical provider's request, you must provide (i) the total settlement amount, (ii) the total amount being paid to lienholders, (iii) the amount of each lien claimed, (iv) the percentage of each claimed lien being paid, and (v) any applicable attorney's fees.
3. You're allowed to play medical providers against one another. So if four medical providers are on board for pro rata disbursal as full and final, and one provider isn't, you might think about sending a disbursal statement to him even if he hasn't requested one yet. Seeing that he's the only stick-in-the-mud preventing you from accepting settlement might encourage him to play ball. If he still doesn't bite, you can go ahead and disburse to everyone and leave yourself with one unsatisfied bill instead of five.
This stuff can get hairy, especially when there are other types of liens in play. Be very careful with this stuff, and ask for help if you think you might possibly need some. Good luck!