Dealing With Liens by J. Mitchell Lambros


I. Introduction


Dealing with liens is a persistent chal- lenge confronting the personal injury practitioner. The purpose of this article is to attempt to summarize most of the types of liens that a practitioner is likely to encounter, to review rules applicable to these different types of liens, and to suggest strategies for dealing with the lien holders as well as with the client. By its nature, this paper cannot be comprehen- sive in scope, and it is important to realize that the statutory and case law surround- ing liens constantly is evolving.


II. Types of Liens


A. Medicare Medicare is a federal health insurance program that was created as part of the Social Security Act to provide health cov- erage to the elderly and disabled. Medicare has a lien by statute that is known as the “Super Lien”. See 42 U.S.C. Section 1395(y)(b). By statute, Medicare may not pay for any medical services that have been or that are reasonably expected to be paid under workers’ compensation, an automobile or liability insurance policy or plan, or an employer group health plan. If Medicare does pay such medical ex- penses, which it will do if the health care provider is not promptly paid by the other sources, then Medicare by statute auto- matically is given a subrogation interest. The Super Lien is rare and dangerous among liens in that Medicare has taken the position, by regulation, that the lien exists even if no written notice has been provided to the claimant or the claimant’s attorney that Medicare has paid medical bills. If an attorney disburses funds with- out honoring the lien, Medicare’s position is that the attorney’s fee is subject to at- tachment by Medicare. In Trial’s September, 1997 edition,


Sally Hart presented an article taking the position that the attorney has no duty to advise Medicare if there may be a personal injury award due the client. Respectfully, that would appear to be a dangerous po- sition for the practitioner to take since it could result in personal liability for the


Spring 2001 Trial Reporter 17


practitioner. In particular, 42 C.F.R. sec- tion 411.26 provides as follows:


Subrogation and right to intervene.


(a) Subrogation. With respect to services for which Medicare paid, HCFA is sub- rogated to any individual, provider, supplier, physician, private insurer, state agency, attorney, or any other entity en- titled to payment by a third party payer.1 As far as what the amount of


Medicare’s lien is, the applicable regula- tion is 42 C.F.R. Section 405.324(b). By regulation, Medicare’s lien is reduced by a proportionate share of attorney’s fees and expenses. Importantly, Medicare has a lien for all medical expenses claimed in the action. As a result, perhaps the sim-


1


The language of the enabling statute, 42 U.S.C. Section 1395(y)(2)(B), is not as clear, but arguably supports the notion that this regulation is does not exceed statutory au- thority: (B)Conditional Payments (i) Primary plans.


Any payment under this subchapter with


respect to any item or service … shall be conditioned on reimbursement to the appro- priate trust fund established by the subchap- ter … (ii)Action by United States. In order to recover payment under this subchapter for such an item or service, the United States may bring an action against


plest way to reduce Medicare’s lien is for the practitioner simply be careful about what expenses are being claimed in the case. In particular, if it is debatable as to whether a particular medical expense is causally related to a tortfeasor’s wrongdo- ing, it may be that the better course of action is to not claim the expense so that the lien will be reduced. Despite its power and reach, dealing with the Super Lien does not have to be intimidating. When a trial attorney sus- pects that Medicare may have a lien, written notice should be provided promptly to a Medicare contractor. The notice should provide the name of the


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any entity which is required or responsible under this subsection to pay with respect to such item or service … or against any other entity (including any physician or provider) that has received payment from that entity with respect to the item or service, and may join or intervene in any action related to the events that gave rise to the need for the item or service. (iii) Subrogation Rights. The United States shall be subrogated (to the extent of payment made under the sub- chapter or such an item or service) to any right under this subsection of an individual or any other entity to payment with respect to such item or service under a primary plan.


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