What Is A Medical Lien – Everything You Need To Know

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what is a medical lien

Do you know what happens if you get hurt in an accident and you have no health insurance? Will you go bankrupt trying to pay the necessary medical bills? If you’re struggling with these questions, you’re going to appreciate learning what is a medical lien.

The sad fact is that even if an individual gets injured due to the neglect of a different party, they’re still responsible for their own medical bills. To mitigate this issue, healthcare providers can choose to provide medical care in return for a lien.

Let’s take a closer look at what is a medical lien and how it can help you cover your medical expenses.

The definition of a medical lien

To answer the question of what is a medical lien is fairly simple:

It’s a legally binding agreement between a healthcare provider and the patient. It gives the healthcare provider the ability to recoup money owed for treatment by placing a request on the patient’s personal injury claim.

In other words, the patient gives the provider a lien on the proceedings of the case while the hospital provides medical services on credit, so to speak. When the case comes to a close, the healthcare provider then exercises their rights, as per the lien agreement, and recovers the costs of healthcare they provided.

While that answers the question of what is a medical lien, there’s still a bit more to unpack. More precisely: 

Who gets paid first once the settlement is over?

The healthcare provider gets their piece of the cake first, even before the patient (aka. the case’s plaintiff). After the contract is signed, the medical provider will send out a notice of debt to all parties involved. This is called perfecting the lien and it guarantees that the lien holder will be paid first from the verdict or the settlement.

For individuals who have no means of covering the cost of their medical treatment in case of an accident or an injury caused by another person, medical liens are a godsend. However, this legal remedy might not be available in all cases.

Are liens available with every healthcare provider?

Depending on the provider, no. You see, medical liens are a known risk for healthcare providers. To completely understand what is a medical lien and why it’s a risk for the hospital, you’ve got to know one thing – a lien is not a debt. 

It doesn’t attach to the personal property or real estate of the patient, only to the proceeds of the settlement. This means that if the plaintiff loses, the healthcare provider can receive money only from the plaintiff. 

We already mentioned that victims in such cases usually have severe financial limitations, so they will likely have a problem paying for those medical bills.

In such a case, a medical institution or a provider will have no other recourse but to send the bill to collections in this case, ultimately, getting only a fraction of what they are owed.

Do people with insurance need medical liens?

Being familiar with what is a medical lien isn’t as important for people who have health insurance as the health insurance company can cover the medical bills in case of an injury or an accident.

Yet, even the plaintiffs that didn’t turn to a medical lien still might need to give up a part of their settlement money due to subrogation. 

Subrogation is usually a part of the insurance policy itself and it states that the insurance company has the legal right to collect damages on behalf of the other party (in this case, the plaintiff). This is a way for them to recoup their losses. 

Many people find subrogation unfair because a large part of their settlement money goes to a third party. Without it though, the victim would basically have a financial advantage from an injury. Their medical bills would be covered by the insurance company and if they win their claim, they’d walk away with a lot of extra money.

This brings us to our next point:

How much can a healthcare provider take?

There is quite a bit of difference between insured and uninsured victims. While in most cases, there is a state limit on the amount the insurer can recoup from the settlement money, there is no such limit regarding liens.

By now, you already know what is a medical lien and that it’s legally binding; hence the healthcare provider has the legal right to the full amount of the lien. But what happens if the injury settlement can’t cover the full amount?

If the settlement money ends up being less than projected, the healthcare provider can pursue the patient for the remainder of the amount. 

What if the victim loses the case?

If everything goes south and the plaintiff ends up losing the case, they are liable for their healthcare expenses and will need to pay them eventually. They will still owe a hefty sum to the healthcare provider and will be personally responsible for paying it in total. 

When we explained earlier what a medical lien is we mentioned how the healthcare provider is entitled to their legal rights. Even if the victim doesn’t have the money to pay, the lien holder can take the patient to court or collections.

However, it’s not all that scary as liens are quite different from debts and it’s still possible to renegotiate the amounts once the worst happens.

Medical liens negotiations

Generally, all contracts can be negotiated and renegotiated. The same goes for liens. Being aware of what is a medical lien is important so you can also know your options. 

Even before a lien is signed, the terms of the contract can be negotiated. In most cases, they can be negotiated to tip the favors toward the victim. Yet, oftentimes healthcare providers will stay away from entering negotiations to avoid the hassle of adjusting the terms of the lien offer. 

However, most people without health insurance would simply find a healthcare provider that offers a more favorable agreement if they knew what is a medical lien.

Contracts aren’t set in stone, so the terms can be altered even after the lien is signed (naturally, if both parties agree). This usually happens in case a victim doesn’t receive their injury settlement as planned. 

Because taking a patient to court would be time-consuming and taking them to collections would probably end up yielding less money, the lienholder will be open to negotiations. They’ll either agree to reduce the owed amount or more commonly, agree to a payment plan that lets the victim pay over a specified timeframe.

Those are the available options you can pursue once you are familiar with what is a medical lien.

Contact an attorney

The fact that medical liens are negotiable means that you can reach a compromise with your healthcare provider and find the perfect amount favorable to both parties. What’s even better is that it’s possible to negotiate the agreement before the case even settles. Generally, doing so can save you a lot of money in the long run.

While you can go about the negotiation process alone once you fully understand what is a medical lien, it may not be the best idea. The proceedings will be highly technical so we recommend looking for legal counsel specialized for these exact events.

An experienced attorney can give you the necessary advice and guidance that will, ultimately, make a world’s difference between a tough legal situation and a medical lien that’s manageable for you.