A lien is basically the right of your health insurance company, Medicare, or any state agency that paid for medical treatment to receive reimbursement from your settlement for the medical expenses they incurred because of your injuries. A typical example: you have private health insurance, you had a defective hip implanted, and 2 years later you need it replaced. When that hip comes out, your insurance will pay for the revision and subsequent treatment after the revision surgery. Now, for all of the expenses the insurance company or Medicare paid for your revision surgery, they have a right to reimbursement for those expenses from your settlement.
Most of the time, all fee agreements I've seen between plaintiff’s lawyers and their clients provide that those liens actually come out of the client’s share of the recovery. For instance, if you have a $300,000 settlement and your insurance company paid $50,000 for your revision surgery, they would have a $50,000 lien on your settlement. That $50,000 would come out of your share of the settlement after your attorneys are paid.
The important thing to know about liens is that they are often negotiable. If an attorney calls an insurance company and tells them their client has a settlement in a case, the insurance company will most often agree to reduce that lien. Generally, the amount of the reduction is equal to the attorneys’ fees owed on that amount. If an agreement is a 40% fee agreement, the attorney would then call the insurance company and tell them to reduce the $50,000 lien by 40%; it is not fair the client paid that 40% and the insurance company doesn't have to. Almost always, the insurance company will agree to reduce the liens by the amount of the attorney’s fees.
Liens are unavoidable; you cannot ignore them. The insurance companies will come after you down the road if they find out you settled your case and you didn't take care of their lien. With respect to Medicare, there is a federal law requiring plaintiff’s lawyers and defendants to tell Medicare about a settlement; it has to be dealt with in every case. The problem with liens is they can take a long time to resolve. Many times the insurance companies are slow to provide the lien information and they’re even slower negotiating lien resolutions. Medicare is notorious for being very slow and it can often takes months to get a lien resolved.
If you have a defective hip, or any questions on liens and how they work (what’s recoverable and what’s not), give us a call toll free at (888) 522-2372. We have experience dealing with liens, negotiating with insurance companies, and we are happy to help.