When we started practicing law over 37 years ago, we would successfully fight insurance companies to obtain recoveries for our clients. That would be the last battle we had to fight in the case.
Now, however, when we obtain a good recovery for our clients there are those who try to take it away. Raleigh injury attorney Brent Adams now teaches attorneys on the best practices for handling liens on personal injury claims.
A lawyer now has to fight a second battle for their clients to keep the money won. In the past 10 years, Medicare, Medicaid and health insurance companies have become very active in their attempts to take away personal injury recoveries. The following are the most common categories of entities who line up to get their hands in the pockets of accident victims after they obtain a personal injury settlement:
- Medicare. Medicare is a program funded and administered by the Federal Government which provides certain health insurance benefits for disabled people and citizens receiving Social Security Retirement Benefits. Federal law provides that Medicare is a "secondary" payer. This means that if there is any insurance or benefits available to pay medical bills, those sources should be exhausted before Medicare is used.
An example of the third party recovery would be proceeds from a personal injury lawsuit paid by an insurance company which insures a negligent driver. The law provides that Medicare can pay health care costs in advance of the claimant receiving funds from the negligent party or its insurance company. However, when the victim of an automobile accident or some other negligent conduct receives money, the federal government has a "lien" against those proceeds for whatever benefits were paid by Medicare relating to the injuries arising out of the negligent conduct.
It is usually not possible to completely eliminate a Medicare lien. However, there are certain things a lawyer can do to help reduce the Medicare lien. Among the things a lawyer should do are to carefully examine the Medicare payments for which reimbursement is being sought. If those Medicare payments are not related to injuries caused by the negligent conduct, Medicare should not be reimbursed. The lawyer should ask for a reduction in the lien. Many times in hardship cases the federal government will voluntarily reduce a Medicare lien.
- Medicaid. Medicaid is provided to certain citizens who, for financial hardship reasons, are unable to pay for their medical costs. This is a needs-based program and there are strict asset and income guidelines which must be met in order for an individual to become eligible for Medicaid. Medicaid is also a federally-funded program administered by the states. Unlike Medicare, there is a specific percentage limitation on the amount of a Medicaid "lien." As in the case of Medicare charges, your lawyer should carefully check the Medicaid charges to be sure they are directly related to the injuries, which arise from the accident.
- ERISA. If your medical bills were paid by health insurance policy or by an employee benefit plan provided by your employer, the health insurance company or your company's employee benefit plan will very likely want you to reimburse it out of any personal injury recovery you receive.
North Carolina law strictly prohibits an insurance company from placing a subrogation clause into a health insurance policy. A clause is language in an insurance policy which provides that if an insurance company pays any medical bills for you for which you are reimbursed wholly or partially by another source of funds such as a recovery from a liability insurance policy the health insurance company would be subrogated to your claim. In other words, the health insurance company would stand in your place and collect from your recovery against the negligent party an amount sufficient to fully reimburse it for whatever health insurance cost it may have paid for you. Such a clause in an insurance policy is strictly prohibited by North Carolina Law.
Unfortunately, insurance companies seek to avoid North Carolina Law by claiming that it is governed by a federal law known as the Employee Retirement Income Security Act of 1974. This law is commonly called ERISA. ERISA laws are very complex. This area of the law changes frequently and needs to be closely monitored by your attorney. It is a strict policy of our office to fight the ERISA claim. Some lawyers "roll over" and pay their clients personal injury recoveries to any governmental agency, insurance company, doctor or hospital that makes a claim. Our lawyers do not. We carefully analyze the law and the facts and make every effort to see that the personal injury recovery is paid fully to our clients.
- TRICARE (Previously known as Champus). The federal government has a lien on the proceeds of a personal injury recovery for any sums paid by, or incurred by it, for services rendered by Veteran's Administration hospitals, or by private health care providers. TRICARE is a program of medical assistance for veterans, their spouses, and children of veterans. If you receive medical care which is paid for either by the Veteran's Administration or a private insurance company which insures veterans, their spouses, and children of veterans, the government or the insurance company has a lien. There is no deduction permitted for attorney's fees on this lien and there is no cap on the amount of the lien. The lien, however, is subject to adjustment and can be reduced or waived by the government when justice requires. Good lawyers work hard for their clients to obtain from the government a waiver of this lien or at least a substantial reduction.
- North Carolina Workers' Compensation Liens. If you were at work and were injured during the course of your employment by a third party (that is, someone not working for your employer), your employer's workers' compensation insurance carrier has a lien on your recovery for personal injuries. This lien is to guarantee that your employer or its workers' compensation carrier will get paid back for all the money they paid on your workers' compensation claim. The law provides however that a judge has the power to eliminate or reduce this lien. Our lawyers always seek to reduce the North Carolina workers' compensation liens so that injured workers can receive more money from their personal injury recovery.
- Federal Workers' Compensation. A lien is imposed upon money from claims made against third parties in favor of the federal government if you are injured while on the job as a federal employee and have received medical or other benefits under the federal workers' compensation program.
Federal statute does allow the employee to retain at least one-fifth of the net recovery remaining after deduction of all expenses. Additionally, the law allows for a reduction of the federal government's recovery by the proportionate amount of attorney's fees. When our lawyers handle a third party claim for a federal employee who has received federal workers' compensation benefits, they make every effort to reduce the lien so that our clients can realize a greater recovery from the proceeds of their claim.
- State Vocational Rehabilitation. If an injured person receives North Carolina vocational rehabilitation assistance pursuant to a financial needs test, the state has a lien on any personal injury recovery from another party. This lien is limited to one-third of the amount recovered. State law allows for a total or partial waiver of the subrogation rights. This may be done when the Division of Vocational Rehabilitation finds that the enforcement of the lien would tend to defeat the claimant's process of rehabilitation.
- State Teachers and Employees Comprehensive Major Medical Plan Lien. North Carolina created a lien in 2004 against personal injury recovery for any "hospital, surgical, medical, or prescription drug expenses" paid by the Teachers and State Employees Health Insurance. The law provides for a reduction of the lien by the "proportionate share of the costs of collection." This lien is limited to one third of the money collected for the claim, but a North Carolina medical malpractice case in 2012 changed this percentage.
- Lien for Healthcare Providers. Doctors, hospitals, and other health care providers may have a lien on an injured person's recovery from the negligent party. Even though a health care provider's lien is limited, the claimant is still responsible to the health care provider for the full amount of the bill. Our Raleigh personal injury lawyers try to work out an arrangement with the health care provider that completely satisfies the patient's obligation to the doctor.
If a doctor, hospital or other health care provider charges the client for medical records, they automatically loose their lien. Once the lien is lost, the attorney does not have an obligation to hold money out from the settlement for payment to the health care provider. However, the patient remains liable to the health care provider for the full amount of the bill.
Ambulance services are considered health care providers and therefore have the health care provider lien discussed above. In addition, in certain counties ambulance services can file a lien with the Clerk of Superior Court. If this lien is filed within 180 days the county can utilize garnishment or attachment proceedings to recover the lien. This lien exists for ten years from the date the service was furnished.
The laws relating to liens and subrogation rights against money collected for a personal injury claim are complex. An experienced personal injury attorney should be consulted to help the injured victim navigate this dangerous minefield.