As Discussed on KGET 17: How Medical Bills Get Paid in an Injury Claim

On KGET 17’s Studio 17 Live, guest host Kait Hill talked with attorney Alina Dermendjian of B&D Injury Law Group about one of the first worries after any accident: who pays the medical bills while the injury claim is still open? You can watch the KGET 17 Studio 17 Live segment on the station’s site. This guide expands on that conversation and explains how the main payment sources work under California law.

Why medical bills come before the settlement

A personal injury claim can take months, sometimes longer, to resolve. Your doctors, the hospital and the ambulance company usually expect payment long before that. In most cases the at-fault driver’s insurance company does not pay your medical bills as you go. It pays once, at the end, as part of a settlement or judgment.

That gap is why it helps to understand the different ways treatment gets paid for in the meantime, and who may ask to be paid back when the case resolves.

Health insurance and Med-Pay

Health insurance. If you have health insurance, it is usually the first place to turn. Use it. Your plan pays the provider at its contracted rate, and you pay your normal deductible and copays. Many plans include a right to be reimbursed from an injury recovery, so your health plan may later assert a claim against your settlement. The terms of your specific plan control how that works.

Medical payments coverage (Med-Pay). Med-Pay is optional coverage on many auto policies. It typically pays medical expenses for you and your passengers up to the policy limit, regardless of who caused the crash. It can help with deductibles, copays or bills your health plan does not cover. Check your declarations page to see whether you bought it and how much it covers. Some policies also give the insurer a right to be repaid from a later recovery, so read the policy language or ask your attorney to review it.

Hospital liens and treating on a lien

The Hospital Lien Act. California’s Hospital Lien Act, Civil Code sections 3045.1 through 3045.6, gives a licensed hospital that provides emergency and ongoing care to an injured person a lien on the damages that person recovers from the party responsible. Under Civil Code section 3045.1, the lien is limited to the reasonable and necessary charges for that care. The act does not apply to injuries covered by workers’ compensation.

The hospital must give notice of its lien as provided in Civil Code section 3045.3. Under Civil Code section 3045.4, an insurer or other payer that pays the injured person after receiving that notice, without paying the hospital, can be liable to the hospital for the lien amount, or as much of it as can be satisfied out of 50 percent of the money due under the judgment or settlement after prior liens are paid. In practice, that 50 percent figure is why hospital liens are often negotiated as part of closing out a case.

Doctors who treat on a lien. Some people have no health insurance, or their plan will not cover a certain treatment. In that situation, some doctors, chiropractors, physical therapists and imaging centers will agree to treat you “on a lien.” That is a written agreement: the provider waits to be paid until your case resolves, and you agree the bill will be paid from any recovery. You remain responsible for the bill under that agreement, so read it before you sign, and keep copies.

Medi-Cal and Medicare reimbursement rights

Medi-Cal. If Medi-Cal paid for your injury treatment, the state has a right to recover the reasonable value of those benefits from the party responsible for your injury (Welfare and Institutions Code section 14124.71). A settlement or judgment is not considered final until the Department of Health Care Services has been given notice and a reasonable opportunity to perfect and satisfy its lien (Welfare and Institutions Code section 14124.76). The law also includes protections for the injured person:

• Recovery is limited to the part of a settlement, judgment or award that represents payment for medical expenses or medical care (section 14124.76).
• When you bring the claim yourself and pay attorney’s fees and costs, the lien is reduced by 25 percent as the state’s share of attorney’s fees, plus a share of litigation costs (section 14124.72, subdivision (d)).
• The state cannot recover more than what you recover after attorney’s fees and litigation costs are deducted (section 14124.78).

Medicare. Under the federal Medicare Secondary Payer law, 42 U.S.C. section 1395y(b)(2), Medicare can make conditional payments when a liability insurer has not paid and cannot be expected to pay promptly, and those payments must be repaid. Once a liability insurer pays through a judgment or settlement, the insurer and anyone who receives the payment must reimburse Medicare. If Medicare is not repaid within 60 days after notice, federal law allows it to charge interest. Because the federal government can pursue repayment directly, Medicare’s claim needs to be identified and resolved before settlement money is distributed.

What you can recover: paid versus billed

A hospital bill may list one number, while your health plan paid a much lower negotiated amount. In Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541, the California Supreme Court held that an injured plaintiff whose medical expenses were paid by private insurance may recover as economic damages no more than the amounts actually paid or still owed for that care, not the higher billed amount.

This matters when evaluating a claim. The number on the first bill you receive is not always the number a court will use. How the rule applies can change depending on how your care was paid for, which is one reason careful records of every bill, payment and adjustment are important.

How bills are paid from the settlement

When a case resolves, the settlement funds are typically deposited into the attorney’s client trust account. Before money is distributed, outstanding medical bills and liens are identified, verified and, where possible, negotiated. That can include hospital liens, provider liens, health plan reimbursement claims, Med-Pay reimbursement and any Medi-Cal or Medicare claim. Those amounts are paid from the settlement, and the remaining balance goes to the client after attorney’s fees and case costs, as set out in the fee agreement.

For more on timing, see our guide on how long a lawyer can hold a settlement check. If an insurer has told you it plans to seek repayment, our article on subrogation claims explains what that means. You may also want to read about how injury settlements are evaluated in California.

Key takeaways

• The at-fault party’s insurer usually pays once, at the end of the case, not bill by bill.
• Health insurance and Med-Pay can cover treatment while the claim is pending, but either may seek repayment.
• Hospitals can assert a lien under Civil Code section 3045.1 et seq., and some providers will treat on a written lien.
• Medi-Cal and Medicare both have legal reimbursement rights that must be resolved before settlement funds are released.
• Under Howell, recoverable past medical expenses for privately insured plaintiffs are generally limited to amounts paid or still owed.

Talk to a California injury attorney

If medical bills are piling up after an accident, you do not have to sort out liens and reimbursement claims alone. Call B&D Injury Law Group at (888) 977-2238 or contact us online to talk about your situation.

Attorney advertising. This article is general information, not legal advice. Reading it or contacting us does not create an attorney-client relationship. Every case is different, and results will differ based on different facts. Past results do not guarantee a similar outcome, and no result is guaranteed. B&D Law Group, APLC, Los Angeles office: 10700 Santa Monica Blvd, Suite 200.

Related Reading

• How Long Does an Insurance Company Have to Settle a Claim in California?
• Do I Have to Give a Recorded Statement to the Insurance Company?
• Should I Accept the Insurance Company’s First Offer?
• The Demand Letter in a Personal Injury Claim: What It Is and What Goes In It
• Personal Injury Attorneys — B&D Law Group