Liens, subrogation, and your net check.

Why this matters: gross vs. net

When you hear a personal injury case "settled for $250,000," that's the gross figure — the amount the defendant or insurer paid. The amount the client actually receives can be substantially less, after:

• Attorney fees (typically 33-40% of gross)
• Case expenses (medical records costs, expert witnesses, depositions, court filing fees)
• Hospital liens
• Health insurance subrogation/reimbursement
• Medicare/Medicaid liens
• Other lien claims (workers' comp, VA, ERISA plans, etc.)

Properly handled, lien negotiation and resolution can preserve substantial portions of the recovery for the client. Improperly handled — or worse, ignored — the client can end up with little or nothing.

Texas hospital liens

Texas has a specific statute giving hospitals a lien on personal injury recoveries: Tex. Prop. Code § 55.001 et seq.

Key features of the Texas hospital lien:

• Hospital must serve written notice with proper filing under § 55.005 to perfect the lien
• Lien applies to the patient's cause of action and any settlement/judgment
• Lien is for reasonable and necessary charges for services provided within 100 days of the accident
• Lien amount is capped by statute under § 55.004 (and is the lesser of charges or specific maximums in some cases)
• Settlement without addressing perfected lien can expose the settling party (including the plaintiff's attorney) to direct liability to the hospital

Texas hospital liens are commonly over-asserted — hospitals routinely send lien notices for full billed charges, even when the lien should be capped or the charges should be reduced. Skilled negotiation regularly reduces hospital lien claims by 30-60%.

Health insurance subrogation

If your health insurance paid your medical bills after the accident, the insurer almost certainly has a contractual right to be reimbursed from any settlement you receive. This is called "subrogation" or "reimbursement."

The mechanics depend on what kind of health plan you have:

Commercial individual policies (state-regulated)

Subrogation rights and recovery amounts are governed by Texas insurance law and policy terms. Texas has applied the "made whole" doctrine in some contexts — meaning the insurer can't recover unless the plaintiff has been made whole — but this is policy-dependent.

Self-funded ERISA plans (federal preemption)

If your health plan is an employer-sponsored self-funded plan covered by ERISA (29 U.S.C. § 1001 et seq.), federal law governs and state-law defenses like "made whole" generally don't apply. ERISA plan administrators often have broad reimbursement rights under Sereboff v. Mid Atlantic Medical Services, 547 U.S. 356 (2006), and US Airways v. McCutchen, 569 U.S. 88 (2013).

Fully-insured ERISA plans

State insurance law applies despite ERISA preemption issues — this is the so-called "savings clause" of ERISA. Different rules.

Determining what kind of plan you have — self-funded vs fully-insured, ERISA vs non-ERISA — is the first step in evaluating subrogation. Plan documents, summary plan descriptions, and Form 5500s are usually required to make this determination.

Medicare reimbursement

Medicare has powerful federal lien rights when it pays for accident-related medical care under 42 U.S.C. § 1395y(b) — the Medicare Secondary Payer Act.

Key features of the Medicare lien:

• Medicare has a direct right of recovery from settlements/judgments
• Recovery extends to past medical care already paid by Medicare
• "Conditional payments" must be repaid — Medicare pays first, then recovers from settlement
• For future medical care, a "Medicare Set-Aside" (MSA) may be required in some cases (more common in workers' comp than personal injury)
• Failure to address Medicare can expose the plaintiff, attorney, and insurer to double damages and penalties under federal law
• The Medicare Conditional Payment Letter identifies amounts paid; final demand follows settlement

Medicare claims must be reported to CMS under § 111 reporting rules — applicable to most liability settlements over $750. The reporting and resolution process can take months and must be completed before settlement funds can be safely distributed.

Medicaid liens

State Medicaid programs (like Texas Medicaid) similarly have reimbursement rights when they pay for accident-related care, under both federal law (42 U.S.C. § 1396a(a)(25)) and state law (Tex. Hum. Res. Code § 32.033).

The Medicaid lien analysis was substantially altered by Wos v. E.M.A., 568 U.S. 627 (2013), and Arkansas DHS v. Ahlborn, 547 U.S. 268 (2006), which limit state Medicaid recovery to the portion of the settlement that represents past medical expenses (rather than the entire recovery).

In Texas, the Health and Human Services Commission handles Medicaid lien claims through a contractor (typically Equian/Optum). The process involves submitting settlement information and negotiating the lien amount.

Lien negotiation strategies

Most liens are negotiable. Skilled negotiation can substantially reduce reimbursement obligations and increase the plaintiff's net recovery. Common strategies:

Reasonable charges arguments

Hospital bills are often the "full billed charges" — the highest price the hospital charges. Negotiated rates with insurers are typically 30-60% of billed charges. Arguing the lien should be capped at "reasonable and necessary" charges (rather than billed) can produce major reductions.

Cap-based reductions

Texas hospital lien statute has built-in caps under § 55.004. Many liens are asserted above the statutory limit and can be reduced.

Attorney fee allocation

Under common-fund doctrine, lienholders that benefited from the attorney's recovery can sometimes be required to share in attorney fees. This effectively reduces the net lien.

Hardship reduction

Medicare, Medicaid, and some private insurers have hardship reduction procedures when the plaintiff's net recovery would be substantially diminished by full lien repayment.

Procedural challenges

Liens not properly perfected (untimely notice, missing information) may be partially or wholly invalid. The hospital lien statute has specific perfection requirements that are sometimes missed.

Allocation of settlement

For liens limited to "medical expenses" portion of recovery, allocating more of the settlement to non-medical damages (pain and suffering, lost wages) can reduce the lien base.

How we handle liens in our cases

At our firm, lien resolution is a core part of every case from intake. The process:

1. Identify all potential liens at intake — health insurance, Medicare/Medicaid eligibility, hospital admissions, workers' comp, VA, ERISA plans
2. Request itemized billings from each lienholder early
3. Verify lien validity — properly perfected? Within statutory limits? Reasonable charges?
4. Identify case-specific reduction opportunities based on the analysis above
5. Negotiate aggressively with each lienholder, typically beginning before settlement is finalized
6. Coordinate Medicare/Medicaid reporting and clearance to avoid double-damages exposure
7. Document all reductions and provide the client a clear net recovery breakdown before disbursement

Skilled lien resolution can preserve 10-30% of additional recovery for the client compared to "pay every lien as asserted." On a $500,000 case, that can be $50,000-$150,000 in additional net to the client.