When someone talks about a personal injury case, it's easy to think of clever attorneys and courtroom drama. But the core story is about pain, hospital visits and, often, big medical bills you can't pay. Fortunately, you have some options for getting help thanks to California's personal injury attorneys, who take these cases for plaintiffs on a contingency basis, and to the state's medical lien system. If you aren't sure how a medical lien works in California, you may want to find out before you need one.
Medical Liens in California
A medical lien in California is an agreement between a patient and a medical provider. Under the lien agreement, the medical provider works essentially on credit, providing necessary medical care for the patient in exchange for the right to have those medical bills paid directly from a personal injury case settlement or judgment.
Not every California medical provider is willing to work on a medical lien, and generally, those that are will only sign the medical lien form when the injured person doesn't have enough money to pay for the needed care themselves.
Medical Liens vs. Subrogation
Subrogation looks a lot like the medical lien process. When your insurance company pays your claim in California, its rights are said to be subrogated to your rights against anyone who is held liable for your damages. That simply means that the insurance company has a right to reimbursement if you get paid from the person who was liable.
Almost all California insurance policies contain a subrogation clause, sometimes called a reimbursement provision. In property damage cases, the auto insurer must pay your claim, but also has the right to sue the party at fault or to intervene in any lawsuit you might bring.
This process doesn't work for medical care however, since California law prohibits the assignment of personal injury claims. That means that neither the insurer nor the medical provider can acquire the right to directly sue the person at fault for your personal injury medical bills. They'll have to wait until you get a recovery and then seek reimbursement. That's why there are medical liens in California.
Finding a Medical Provider
The hardest part about medical liens in California is finding medical providers who will agree to treat you on that basis. Since a medical provider agreeing to work on a medical lien basis hopes to be paid from the proceeds of a lawsuit, it may only offer medical lien treatment to patients with strong legal cases.
But doctors are not legal experts and are unlikely to be able to assess the patient's chances of winning a case. That's why, in order to get treated on a lien basis, it is also useful to have a respected plaintiff's personal injury attorney representing you who can assure the provider that you have a good chance of settling or winning.
Medical Lien Management in California
Once a medical provider agrees to treat you on a medical lien, you will sign a contract lien agreement. Often the medical provider has a standard medical lien form they use regularly. However, your attorney should review the form before you sign it and, if the language is too restrictive, try to negotiate better terms for you.
Once this lien contract is signed, the medical provider sends notice of it to the other party's insurer to perfect the lien. That authorizes them to pay the doctor or other medical provider directly from any settlement or money verdict before you or your lawyer get any money.
Paying Medical Liens if You Win
A medical lien is a binding contract in California. If you have signed a medical lien and win a money judgment or get a settlement for your injuries, the medical provider gets their money first.
What if the settlement amount is not enough to cover all of your liens, plus compensatory damages? An experienced attorney will take the liens into account before advising you to accept any settlement offer. Together you consider the numbers: How much you would get if you paid the lien claimants at the full value of their claims and how much the liens would have to be reduced to make the remaining settlement amount acceptable to you.
Before responding to the third-party settlement offer, your attorney contacts the lien holders to inform them of the pending offer and to discuss how to make the settlement work. If they agree to reducing the amount of the liens, your attorney will get the required documentation and finalize the settlement.
Paying Medical Liens if You Lose
Sometimes the worst-case scenario comes to pass: You sign medical lien agreements, get medical treatment, and then lose your case. In this case, you are on the hook for the medical bills. The medical provider can use any and all remedies available under the lien contract and California law to collect the money.
Your attorney may be able to work out a payment plan so that you pay the full amount, or a reduced amount, over time. A medical lien holder might simply walk away from the bills if you are indigent. But there is no guarantee of either of these things happening, and a medical lien holder can take legal action to collect the debt.
Statutory Medical Liens
If you are a California resident with Medi-Cal coverage, that program will pay for your medical treatment whether or not someone else is at fault for causing the injury. This is also true of Medicare, ERISA health insurance plans, Veterans Administration plans and workers' compensation. However, if someone else was at fault, and you get a settlement or money judgment, the laws give these providers a lien against your recovery.
Take Medi-Cal as an example. The California Department of Health Care Services is charged with recovering the cost of medical care that Medi-Cal paid for if you get a personal injury settlement. You can find forms online that you or your attorney should complete and submit to satisfy the reporting requirements.
Read More: What Is a Statutory Lien?
Statutory Liens and Right of Reimbursement
Although the claims of Medi-Cal and other providers to collect their money are termed statutory liens, they are actually simple rights of reimbursement. That makes them different from contractual medical liens in two very important ways.
First, the consequences are different if you do not win the case. If you signed a contractual medical lien, you have to pay the bills yourself if you don't get money from the lawsuit. With a statutory lien like Medi-Cal, you don't owe anything if you don't recover anything from a third party.
Second, if you win the case, a contractual lien is paid directly to the lien holder by the third-party insurer. The money comes off the top of the settlement or verdict before you get a dime. The holder of a statutory lien, on the other hand, has only a right of reimbursement. That means you get the entire amount, but the provider can sue you to collect the cost of medical services.
Negotiating Lien Amounts
In California, an attorney has a fiduciary responsibility to a lien claimant, the highest form of duty provided for in the law. So, your attorney is obligated to keep statutory lien holders informed of the outcome of your case, but may be able to negotiate down the liens. Since these agencies will have to go to court to collect their money from you, they are often willing to settle for less in order to avoid court expenses.
Teo Spengler earned a JD from U.C. Berkeley Law School. As an Assistant Attorney General in Juneau, she practiced before the Alaska Supreme Court and the U.S. Supreme Court before opening a plaintiff's personal injury practice in San Francisco. She holds both an MA and an MFA in English/writing and enjoys writing legal blogs and articles. Her work has appeared in numerous online publications including USA Today, Legal Zoom, eHow Business, Livestrong, SF Gate, Go Banking Rates, Arizona Central, Houston Chronicle, Navy Federal Credit Union, Pearson, Quicken.com, TurboTax.com, and numerous attorney websites. Spengler splits her time between the French Basque Country and Northern California.