If you are on Medicare, then Medicare will pay your medical bills after a car accident. Unfortunately, Medicare’s involvement with your personal injury case does not end there. Medicare holds a lien on your case. A lien is a legally enforceable right of payment. If you have a personal injury claim, Federal Law requires that additional steps be taken because of the Medicare lien. These obligations kick in when filing a claim, usually against the other driver. The same holds true for other kinds of personal injury cases, not just car accidents.
Medicare Liens
Medicare must be reimbursed for what they paid out on your behalf after an accident. For example, if you went to the Emergency Room after a car accident and Medicare paid that bill, they are expecting to get that money back from you once you settle your claim or go to court, against the driver who hit you.
By way of example, let’s say that Bob runs a red light and crashes into Sally’s car. Sally has Medicare. The accident is completely Bob’s fault. Sally has to go to the Emergency Room and then gets 4 months of physical therapy to help her recover from the car crash. Medicare pays Sally’s hospital bill and physical therapy bills in the amount of $7,000.00. When Sally goes after Bob for everything he caused her to go through, the cost of medical services is taken into account when a final dollar amount comes to Sally from Bob (or Bob’s car insurance company). Sally’s attorney will receive the check for Sally and must disburse money from the settlement. Before Sally’s attorney (or the insurance company, if she did not hire a lawyer) is allowed to write a check to Sally, she has to cut checks for anyone who has a valid lien or subrogation interests. This just means whoever is legally entitled to get a check from your proceeds. “Subrogation interests” are the rights usually held by whomever paid your medical bills, which can also include your own car insurance company if you used Med Pay. Liens are usually filed by medical providers who have not yet been paid.
Some courts will separate out what your compensation was for, providing a breakdown. This is rare, but you may find that X amount was for medical costs, X amount was for pain and suffering, etc. For Medicare repayment, it does not matter. Their lien is over the whole amount that you receive from the third party who caused the injuries that gave rise to the medical bills. So, if your bills were small and your pain and suffering was great, you cannot protect part of your total settlement or court judgment from Medicare.
Medicare also requires that money be set aside for future medical care that is anticipated, in some situations. The rules are very complex and have to be handled carefully.
Why Medicare is Reimbursed by you, not the negligent party
You may wonder why you have to be the one to reimburse Medicare, instead of the other driver. If someone else caused your injuries, shouldn’t they be the ones reimbursing Medicare for the cost of your paid bills? Yes and No. The other driver is ultimately responsible to you, for causing your injuries. In reality, it is usually going to be the insurance company for the other driver (or drivers) who will cough up the money to compensate you. Then from this compensation fund, you are responsible for paying back anyone who is legally entitled to payment. It works the same way with most private health insurance plans. Medicare is reimbursed by you, for paying your accident related bills. The source of this repayment comes from money that you receive from the person responsible for injuring you. This means that you do not have to pay them back until the end of your case.
Is Repayment to Medicare Optional?
No. Like death and taxes, there is no way around a Medicare Lien. Legally, injury victims, their lawyers and the auto insurance companies are required to make sure that Medicare is notified and that reimbursement happens. All liens, in fact, are legally enforceable.
How are Liens fair to the Injured Party?
At first, it might not seem fair. But think it through and it does make sense. If you are receiving a certain dollar amount for your personal injury case, the charges on your medical bills are taken into consideration when this amount is determined. Someone who racked up $1,500 in medical expenses after an accident is going to receive far less money than someone who racked up $20,000 in bills. If the amount of your compensation in a personal injury case is supposed to be based in part on your medical expenses, but you are not the one who paid for those expenses out of your own pocket, then it makes sense that the one who paid will have their hand out for repayment from you. You paid the bills indirectly through Medicare, and Medicare is indirectly reimbursed by the responsible party.
But wait, you did all of the work by hiring a lawyer and paying that lawyer. Why should Medicare conveniently get reimbursed at the end of your case, when they made zero effort in holding the other driver accountable? It was your efforts and the efforts of your lawyer that made the reimbursement possible. How does that work?
The answer is two-fold. First of all, it is the law and dealing with subrogation interests and liens is not optional. Second of all, in some instances, the amount can be negotiated down by your lawyer. We always will find out what Medicare is willing to settle for, so that you may not have to repay the full amount that they paid out. Medicare and some other lien holders understand that you are the one paying your lawyer, not them. The reduction is sort of their way of acknowledging that. This comes from what is known legally as the Common Fund Doctrine.
Where does Medicare get Lien Rights?
Medicare liens are statutory, meaning that Congress passed a law creating the right of Medicare to be reimbursed. In 1980, the law was passed which said that Medicare is only ultimately responsible to pay after other sources make payment, like car insurance. If an auto insurance company is responsible for a medical cost, which happens when their insured causes an accident and hurts someone on Medicare, that insurance company must pay. But they do not pay at the outset. The car insurance company will pay for personal injury at the end of the case, in a lump settlement to you (or by judgment, if a court decides your case). The insurance company is not cutting checks to your doctors. Medicare does that. It makes sense, because doctors and hospitals should not be made to wait until you settle your injury case to get paid. It might help to think of Medicare payments as a loan to get your medical bills paid until you can get the money back from the one responsible for causing the accident.
What’s the point of my personal injury case if there are liens?
You might be wondering why bother at all with a personal injury case? With liens and having to repay Medicare, isn’t it just shuffling money around between Medicare and the insurance companies? No.
Your personal injury case should be about much more than reimbursement to you for your medical bills, especially if you were in pain for a while. Car insurance companies want people to think that if you get your medical bills paid for after an accident, that you should be happy. This is why they try to negotiate settlements with accident victims before that person talks to an attorney. When people talk to or hire a lawyer, they will discover all of the other things that they could potentially be compensated for. Medical bills are just one piece of it.