MED PAY “LIEN” REDUCTION
Insurance subrogation claims are the most common. They should be “easy”, yet carriers now realize they can recoup much if they take a hard line. How often have we heard the scripted line “our policy is to only reduce for attorney fees”?
Reserve your anger, and instead send a reduction letter [like Exhibit A]. This should recount the fact that I.C. 34-51-2-19 clearly forces the three types of reductions discussed above.
Sometimes a low liability limit or a comparative fault argument make a good excuse to justify “reduction #3" (proportional reduction if “full value” of damages is reduced for “any” reason). But often the “any reason” is simply that there would be too much expense, delay, and risk to take the liability case to trial. Emphasize that the “any reason” essentially renders moot the particular reason WHY the plaintiff is choosing to settle. The ONLY thing that matters to the Couch analysis is (1) the amount recovered, and (2) the “full value” of the damages. Make sure you SHOW YOUR MATH. Letters of this type can often be good exhibits for the judge and/or transplanted into a declaratory judgment action.
As with all other types of liens, most lienholders will not want to spend a lot of time and money. Usually, once you merely file the claim, you will get a more fair offer. Sending the reduction letter, threatening to file a dec action, or even filing the dec action, should not take much extra work, will greatly increase your clients’ net recovery, and will make you look like a champion in their eyes. Show clients what you saved them in the final accounting. For further tips, see also the 11/01/2016 Verdict article by Dan Vinovich, Practical Tips to Reduce Medical Pay and Health Insurance Subrogation Claims.
IMPACT OF LIEN REDUCTION ON LIABILITY OFFERS
The defense bar, and many liability adjusters, are well aware of both Stanley and Patchett. These cases have driven down liability offers because most carriers anchor their case values to the medical bills. This fact likely stems from the assumption that juries also anchor their final “full damages” determinations to the medical bills. If we work hard to reduce the liens, are we helping our clients? The liability carrier? Both? How will that impact our attorney fee?
The answer lies in timing. There is no good reason for plaintiffs to confront final lien or subrogation claim paybacks until a liability offer is made that they want to take. No one can assume that ANY liability recovery will ever be made until it actually happens. We cannot lie back and allow a client’s medical expenses to grow unchecked and unpaid any more than we can assume a reasonable liability offer will be made on the case. No liability payment at all will be made for medical bills until the end of the case. Until then, plaintiffs should be advised to use their own collateral source to the fullest extent. Can the payment of medical bills be manipulated to enhance settlement? Perhaps on a limited basis, but thoughtful consideration is needed.
1. Work comp: if your client is hurt in the scope of employment, health insurance and med pay will not be available. This is just as well, because work comp tends to pay providers a high percentage of “retail charges”. The work comp lien can later be “strongarmed” with a Kornelik motion.
2. Med pay: it is tempting to allow med pay to pay all the bills. Few med pay carriers bother to attempt any sort of adjustment of retail provider charges. There will be few “Stanley” or “Patchett” discounts. Good, right? But most med pay limits are only $5,000 per accident or less. Unless your client has a much higher med pay limit, using the med pay first will simply “burn” the only source your client has of paying out of pocket balances before the liability settlement occurs. If the med pay limit is high ($10,000/$25,000/$100,000), and you are reasonably certain that the full billing charges can be covered within the limit, serious consideration should be given to allowing med pay to pay all the bills.
3. Health insurance/Medicare/Medicaid: if your client has high medical bill charges, and only the “usual” $5,000 med pay limit, you should still advise your client too try to get the charges turned in primarily to health insurance first. Many providers (especially hospitals) train billing staff to ignore health benefit plans if the care was required by a liability event.
Stop short of litigating, but at least create a paper trail that can be used later on showing that you and your client at least tried to have the bills paid by health insurance, Medicare, and Medicaid first. Yes, if the bills are paid this way there will likely be Stanley and Patchett discounts. But if the bills are not paid, your client will be harassed by bill collectors for the life of the case, and their credit may unnecessarily suffer for years. By at least sending letters to providers with the health insurance information early on, you have the means to defend any collection action filed against your client later. This must be done before the plan’s deadline for the submission of bills. You can argue that the provider violated its network contract with the health insurer/Medicare/Medicaid by not giving the patient the discounts and payments that were deserved. The paper trail could be as simple as obtaining a billing summary early on proving that the provider knew about the health plan.
Some providers still balk at submitting charges to a health plan if a liability claim is known. If no collections activity is occurring, and the paper trail exists, you are free to do nothing further until settlement time. You can honestly claim all the medical bills incurred by your client at undiscounted rates in the liability case. The liability defendant would have to hire a special expert if it wished to offer admissible evidence regarding a lower “reasonable value” of the medical expenses. Most will not.
Later, after you obtain a liability settlement offer you want, circle back to the providers. Use their breach of the provider/network contract against them to negotiate a fair payoff.
Conclusion
The information shared in this article is the culmination of 25 years of experience and knowledge gained in large part through membership in ITLA. This piece builds on countless other articles and speeches given by our fellow members over the years at great cost of their own time, and for no direct financial compensation. The fight never ends, but together we are stronger.