California’s statute of limitations for contractual medical liens is four years. This gives medical providers four years from the date of the lien agreement to take legal action to collect on it. After the four years have passed, the lien expires. The medical provider loses their right to pursue payment in court, though they may pursue it in other ways.
How does a medical lien affect my settlement?
A medical lien can influence your personal injury settlement by giving your medical provider the right to collect payment for its services. That payment would come from your settlement.
Medical liens are binding contracts between an injured person and their healthcare provider. The healthcare provider agrees to provide treatment for the injured party at a deep discount or for free. In return, the injured person agrees to give the healthcare provider the right to collect their medical bills from their settlement or verdict in their lawsuit against the at-fault party.
You can think of a medical lien as a way to receive the medical care you need “on credit.” If you do not pay it back, the healthcare provider can sue you for it.
These liens also prevent you from receiving a windfall. If there were no lien, you would receive your treatment from the healthcare provider and then compensation for your medical expenses from the liable party’s insurance carrier.
Medical liens are used most often by victims who suffer injuries in an accident and who are:
- underinsured, or
- unable to pay for their deductible or copay.
The healthcare provider who agrees to provide medical treatment in exchange for a lien is known as the medical lienholder.
How long can lienholders pursue a part of my settlement?
Under California law, medical lienholders have four years to collect medical bills from a claimant’s personal injury case.[1] This is known as the medical lien statute of limitations.
These 4 years begin on the date that the lien agreement was signed.
Significantly, this only limits when the medical lienholder can take legal action to enforce the lien against your personal injury settlement or award. If there is another way to collect the medical debt, the statute of limitations does not block it.
Can they collect on the lien after 4 years?
The medical lien statute of limitations only applies to the lienholder’s ability to enforce the lien against your settlement through court. A medical lienholder can still:
- try to collect the medical debt without going through court, and/or
- enforce provisions in the lien contract that required you to hold the money in trust.
Medical lienholders can seek to recover the amount owed outside of court by sending the bill to a debt collector. This can end up hurting your credit score if you do not pay.
More commonly, medical lien contracts stipulate that any settlement money you recover is to be held in trust for the lienholder to collect. In these cases, legally, the lienholder is no longer pursuing your settlement. Therefore, there is no statute of limitations. The lienholder can collect at any time.
Are there any exceptions to the 4-year statute?
Yes. The 4-year statute of limitations only applies to contractual liens. These are not the only types of medical lien, though they are likely the most common.
Statutory liens by hospitals, also known as hospital liens, come with a 1-year statute of limitations.[2]
Medical liens by Medi-Cal have a 3-year statute of limitations.[3]
Why is there a statute of limitations?
The statute of limitations makes medical lienholders take prompt action or risk losing what they are owed. This speeds up the process of distributing money from a settlement to its proper recipient.
As the accident victim, it also gives you the ability to repose after the 4-year window closes. Once the statute of limitations has expired, you can rest assured that any further attempts to enforce the lien can easily be dismissed.
What if my insurer covered my medical bills?
Suppose you are hurt in an accident, and your insurance company covers your medical bills, including Medicare or Medicaid. In that case, your insurer can recoup its losses from the proceeds of your case. This is known as subrogation.
Like a medical lien, subrogation prevents you from recovering a windfall.
For example: Mary is hurt in a car accident. Her health insurance coverage pays for her medical bills, which were $50,000. Her personal injury claim settles for $150,000 to cover all of her losses from the crash. This includes her medical expenses. If it were not for subrogation, Mary would recover compensation for her medical bills, even though it was her insurance policy that covered them.
What if I lose my personal injury case?
Your medical lienholder has a contractual right to reimbursement for the care it provided. If you lose your case, you would be responsible for paying off the full amount of the medical lien. You would also be responsible for paying off the lien if you win your case, but for a settlement amount below the lien obligation.
In these cases, a personal injury lawyer from a reputable law firm may be able to negotiate a reduction to the lien amount to protect some of the settlement funds for you. Suppose this is not possible. In that case, you can work out a payment plan that makes repayment easier without upsetting the medical services provider.
Additional Reading
For more in-depth information, refer to these scholarly articles:
- A Common Conflict: Common Fund Doctrine and Medical Provider Liens in Tort Settlements – Boston College Law Review.
- Legality and Ethics of Lien Uses in Medicine – Missouri Medicine.
- Preying on Pain: A Legal and Bioethical Analysis of How Hospitals Profit from Placing Hospital Liens on Medicaid Patients’ Accident Recoveries – Wake Forest University.
- Healthcare Liens and the Common Fund Doctrine: The Need for Legislative Action to Prevent Fee Shifting at the Expense of Healthcare Providers – Iowa Law Review.
- “Disingenuous and Somewhat Deplorable” A Look at Hospitals’ Use of Healthcare-Provider Liens to Reap a Windfall – Florida State University Law Review.
Legal References:
[1] California Code of Civil Procedure 337 CCP.
[2] California Civil Code section 3045.5 CIV.
[3] California Code of Civil Procedure 338 CCP.
