Medical Bills, Health Insurance, and Liens

This chapter of The DC, Maryland & Virginia Injury Guide explains who pays while your case is pending and which payers can claim part of your recovery.

Who pays your bills while the case is pending?

The liability insurer pays once, at settlement or judgment. Until then, your bills are paid from these sources, roughly in this order:

1. PIP or MedPay. Maryland PIP, D.C. PIP if you elected it, or Virginia medical expense benefits. These are no-fault benefits from your own policy. Our chapter on using your own insurance explains each.
2. Health insurance. Employer plans, individual plans, Medicare, Medicaid, TRICARE, and VA care all pay crash-related treatment. Use them; negotiated rates are usually far lower than full charges.
3. Treatment on a lien or letter of protection. When someone has no coverage, some providers will treat in exchange for a promise of payment from the recovery. This can work, but the bills are usually at full, undiscounted rates, and they must be paid in full or negotiated down at the end.

Do not let bills go to collections while you wait for the at-fault insurer; that adds pressure to settle early. If a provider refuses to bill your health insurance because "it's an accident case," tell us.

What is a lien, in plain terms?

A lien is a legal claim against your settlement or judgment by someone who paid for, or provided, your care. If your health plan paid $40,000 for your surgery and you later recover from the driver who caused the crash, the plan may claim some or all of that $40,000 back from the recovery. Whether it can, and how much, depends on who the payer is and what law governs it.

Private health insurance: insured plans

Many health policies include a reimbursement or subrogation clause. State law shapes how far those clauses reach when the plan is fully insured, meaning an insurance company bears the risk.

• D.C. When a health insurer or employer that paid your medical benefits is repaid voluntarily from a personal injury recovery, its claim is reduced by its proportional share of the attorney's fees and costs that produced the recovery, unless it intervened in your lawsuit with its own lawyer (D.C. Code § 31-3551). If you recover $90,000 with $30,000 in fees and costs, one-third of a $15,000 claim comes off, leaving $10,000. The statute does not apply to D.C. Medicaid.
• Maryland. A health maintenance organization may include a subrogation provision in its contract, limited to its actual payments, but it may not recover PIP payments, and it may not recover medical expenses unless you recover medical expenses in your case (Md. Code, Health-Gen. § 19-713.1).
• Virginia. Health insurance contracts and health services plans covering people who live or work in Virginia may not contain a subrogation provision for a personal injury recovery, and may not require you to agree to pay back benefits from a recovery (Va. Code § 38.2-3405). If a Virginia insured plan sends a reimbursement demand, we check first whether the plan is actually self-funded, because that changes the answer.

Self-funded employer plans and ERISA

Many large employers pay claims from their own funds and hire an insurer only to administer the plan. These self-funded plans are governed by the federal Employee Retirement Income Security Act (ERISA), and an employee benefit plan is not treated as an insurance company for purposes of state laws that regulate insurance (29 U.S.C. § 1144(b)(2)(B)). As a result, state limits on health insurer reimbursement often do not reach them.

For these plans, the written plan terms usually control. The Supreme Court of the United States held that when a plan sues to enforce a reimbursement provision as an equitable lien by agreement, the plan's terms govern, but where the plan is silent on attorney's fees, the common-fund doctrine fills the gap, so the plan shares the cost of the lawyer who created the recovery. US Airways, Inc. v. McCutchen, 569 U.S. 88 (2013). As the Court put it, "if the agreement governs, the agreement governs." That is why we ask for the full plan document before negotiating.

The Court later held that if a participant spends an entire settlement on nontraceable items, the plan cannot use that same equitable remedy to reach the participant's general assets. Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, 577 U.S. 136 (2016). Do not read that as permission to spend first and ask questions later: plans now move quickly to freeze settlement funds, and a lawyer holding money in trust after notice of a lien has duties to the lienholder.

What does Medicare require?

Medicare is a secondary payer: it may not pay for care when payment has been made, or can reasonably be expected to be made, by an automobile or liability insurance policy or no-fault insurance, and any payment it makes in the meantime is conditioned on reimbursement (42 U.S.C. § 1395y(b)(2)). In practice Medicare pays your bills as "conditional payments" and must be repaid from the recovery.

The Medicare Secondary Payer Act has teeth. If repayment is not made within the statute's 60-day period, Medicare may charge interest. The United States may sue to recover, may collect double damages, and may recover from any entity that received payment from a primary plan or from the proceeds of that payment, language broad enough that everyone who handles settlement money has reason to take it seriously. The statute also creates a private cause of action for double damages against a primary plan that fails to pay. Medicare's recovery contractor issues a conditional payment amount that can be disputed line by line, and unrelated charges are often included. We review every line, remove charges unrelated to the crash, and request the final demand before settlement funds are released.

Medicaid in D.C., Maryland, and Virginia

Medicaid programs in all three jurisdictions have a right to be repaid from an injury recovery for what they paid for crash-related care, with different procedures.

• D.C. The District has its own cause of action against the person who caused the injury and is subrogated to your claim. Whoever starts a lawsuit or settlement negotiations must give written notice within 20 calendar days, and before the recovery is paid out, the District must get written notice and 30 calendar days to perfect its lien. If you pay the fees and costs of recovery, the District must determine in good faith a contribution that is subtracted from its lien, and it may waive collection for undue hardship (D.C. Code §§ 4-602, 4-604, 4-606, 4-607).
• Maryland. The Maryland Department of Health is subrogated to your claim to the extent of its payments. Your lawyer must notify the Department before filing a claim, suing, or negotiating a settlement, and must give it three business days' notice before the claim is resolved. After written notice, the recovery must be held for the Department after deducting attorney's fees and litigation costs, and the Department may compromise when collection would cause substantial hardship (Md. Code, Health-Gen. § 15-120).
• Virginia. The Commonwealth has a lien for the total amount Medicaid paid, which is inferior to reasonable attorney's fees and costs but superior to all other liens. It may be compromised, and if a good-faith attempt at compromise fails, a court may reduce the lien and apportion the recovery as the equities require (Va. Code § 8.01-66.9).

Do hospitals have liens on injury settlements?

Yes, in all three jurisdictions, though the rules differ sharply.

• D.C. A hospital has a lien on the patient's share of a judgment or settlement for its reasonable and necessary charges, but only if it files a written notice with the Recorder of Deeds and mails a copy to the person alleged to be liable and any known insurer before payment is made (D.C. Code §§ 40-201, 40-202).
• Maryland. A hospital has a lien on 50 percent of the recovery for reasonable and necessary charges, limited to the amounts the Workers' Compensation Commission would allow, and the lien is subordinate to the attorney's lien. To perfect it, the hospital must file notice with the circuit court clerk and send it by registered or certified mail before payment (Md. Code, Com. Law §§ 16-601, 16-602).
• Virginia. Hospitals, nursing homes, physicians, nurses, physical therapists, pharmacies, and EMS providers have liens for reasonable charges, capped at $2,500 for a hospital or nursing home, $750 for each physician, nurse, physical therapist, or pharmacy, and $200 for each EMS provider (Va. Code § 8.01-66.2). The lien is inferior to the attorney's fee and is not effective until written notice is given (Va. Code §§ 8.01-66.3, 8.01-66.5).

The bills still count as damages

Liens do not shrink the value of your claim; they affect where the money goes after it is recovered. Under the collateral source rule, the at-fault driver generally does not get credit because your health insurance or another independent source paid your bills. How each jurisdiction applies that rule, including to amounts your providers wrote off, is covered in What Your Case Is Worth.

How we negotiate liens at settlement

Lien resolution is where careful work adds money to a client's net recovery. We identify every payer early, get the governing plan or policy documents, remove charges unrelated to the crash, apply every statutory reduction, hardship waiver, and compromise argument available, and release funds only on written final figures.

Key points

• Use PIP, MedPay, and your health insurance to keep treatment going; the at-fault insurer pays only at the end.
• Who can claim your settlement, and how much, depends on whether the payer is an insured plan, a self-funded ERISA plan, Medicare, Medicaid, or a hospital.
• D.C. reduces many health insurer claims by a share of fees and costs; Maryland limits HMO recovery; Virginia bars subrogation clauses in insured health plans; self-funded ERISA plan terms usually control.
• Medicare must be repaid and can collect double damages from anyone who received the money, so it is resolved before funds are released.
• Hospital liens exist in all three jurisdictions; Virginia caps them by provider type and Maryland limits them to half the recovery.

• Previous chapter: Using Your Own Insurance: PIP, MedPay, and UM/UIM
• Next chapter: What Your Case Is Worth

Related practice areas

Related reading

• Liens on your Maryland settlement: health insurers and Medicare
• D.C. law that limits health insurer subrogation
• Health insurance paid your bills: do you still have a claim?
• Why getting medical attention after an accident is critical
• Focus on Treatment First
• What Your Case Is Worth

Responsible attorneys: Ryan C. Posey and Jacob M. Lebowitz. Posey Lebowitz PLLC, 3221 M Street NW, Washington, DC 20007.