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What are Medical Liens?

by | Nov 22, 2021 | Personal Injury

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What are Medical Liens?

Unpaid Medical Bills are Paid from Your Injury Settlement and Recovery when there is a Perfected Lien

Medical liens are a common part of personal injury litigation. A lien is simply the right to have a demand satisfied out of the property of another.[1]  Hospitals, physicians, chiropractors, and medical providers have a lien against your settlement or award when there are unpaid bills for your accident-related treatment, services, or equipment at the time of recovery.   In a personal injury case, liens often arise when an injured person is not able to pay for medical care up front or has no health insurance or a high deductible health insurance plan. In North Carolina, the procedure by which a medical provider can claim and perfect a medical lien is governed by N.C. Gen. Stat. §§44-49, 44-50, and 44-51. When an accident victim obtains a recovery either by settling with the defendant’s insurance carrier or winning a jury verdict, a properly perfected medical lien will be satisfied from the recovery, and your attorney is required by law to honor all valid and perfected medical liens and to disburse the recovery once valid liens are satisfied.

North Carolina Lien Rules and the Process

In North Carolina, medical providers and government entities can have a lien on your recovery for any drugs, medical care (including dental, hospital, and chiropractic services), or other services rendered in connection with your injuries.[2]

For the lien to be valid, the medical provider such as the hospital, doctor’s office, chiropractor’s office, etc. must “perfect” the lien, which makes it enforceable by law. To do this, medical lienholders must do the following:

  1. Provide you or your attorney with all your medical records free of charge;
  2. Provide you or your attorney with all your medical bills free of charge; and
  3. Provide you or your attorney with an affirmative written notice of the lien.[3]

There is no specific time limit on when a medical provider is required to send notice of the lien. A provider can send notice at any time so long as the provider has not charged for medical records or bills.

Although there is a three-year statute of limitations on the collection of medical debts, application of the statute to any given lien can be tricky. A medical provider without a perfected lien or a contract stating otherwise only has three years from the date of the last service provided to collect on medical debt. Johnson Neurological Clinic v. Kirkman, 121 N.C. App. 326, 331, 465 S.E.2d 32, 34 (1996). However, a medical provider with a perfected lien will have the right to enforce and collect its lien against the injury recovery even if it is more than 3 years from the last date of treatment. See N.C. Gen. Stat. §§1-52 and 1-15.


Assignment of Benefits

Although North Carolina law provides medical providers with the right to statutory liens, many medical providers attempt to further secure their rights to collect from patients’ recoveries by having patients sign a contract called an “assignment of benefits.” The provider normally has you sign an assignment of benefits when you are admitted into their care, and you may not realize you have created a lien against your recovery. These assignments of benefits can be enforced by providers to claim a portion of the patient’s personal injury settlement or award. The Supreme Court of North Carolina has held that such assignments of benefits are valid. See Charlotte-Mecklenburg Hosp. Auth. v. First of Ga. Ins. Co., 340 N.C. 88, 455 S.E.2d 655 (1994). An experienced personal injury attorney can help identify and verify any medical liens and/or assignments of benefits and, furthermore, ensure that the appropriate amounts are disbursed to all parties with valid rights to the recovery.

How Do Medical Liens Affect My Personal Injury Settlement?

Before you officially accept a settlement offer on your personal injury case, your personal injury attorney will do his or her due diligence to verify and reduce any medical liens if possible. An experienced personal injury attorney will keep track of all the relevant liens from your medical providers and closely examine any notice letter and itemized statement to confirm that only services related to your injuries are included. A good personal injury attorney will try to negotiate with your medical providers to reduce the amount of your recovery that is eaten up by liens.

Once you have settled your personal injury case or won a jury award, your personal injury attorney is required by law to inform your medical providers who have given proper notice of a lien and confirm any amounts of money owed. If there are amounts owed to these medical providers, then they have a lien against your recovery and your attorney will withhold the proper amount necessary to satisfy the lien. It can take several weeks or sometimes longer for an attorney to verify all the applicable liens. If there is a dispute regarding the amounts you owe to lienholders, North Carolina law does not require an injured party or their attorney to pay the liens until the claim is fully established and determined, either through settlement or jury verdict.[4]

According to North Carolina law, no more than 50% of your total recovery after deduction of attorney fees shall be disbursed to pay off lienholders.[5] For example, if your gross recovery is $30,000 and your attorney is charging a one-third contingency fee, then all medical liens are capped and cannot exceed $10,000, which is 50% of the recovery after deduction of the contingency fee. If the amount of the medical liens exceed the statutory limit amount for lienholders, then the allocated amount for medical liens must be distributed “pro rata” or proportionally by the percentage of total compensation owed. It is important to keep in mind that any amount of a medical lien not fully covered by your recovery will still be owed unless you or your attorney have successfully negotiated a reduction and release with the provider, or if there is a statute of limitations defense. It is possible that a medical provider will seek to collect any unpaid amounts through a separate collections action against you.

Medicare Liens

            If any of your treatment following an accident was paid for by Medicare, any settlement or award you recover will be subject to a Medicare lien. Medicare is considered a secondary payor when there are other sources of recovery due to an accident, and Medicare pays conditionally with a right of reimbursement from your recovery. Federal law provides that Medicare liens have priority over any other medical liens, meaning that Medicare liens will be paid before any other liens on your recovery. Also, in cases of large settlement recoveries that include consideration for future medical bills, a Medicare Set Aside (MSA) trust must be created and approved by the Centers for Medicare & Medicare Services, and the trust will be used to pay for future medical care for your injuries instead of Medicare.

Unlike other liens, Medicare liens are not capped as to how much of your recovery they can take. However, Medicare will reduce its lien for the payment of reasonable attorney’s fees. Contingency fees for 1/3 or less of the total recovery are considered reasonable. Also, Medicare will consider a hardship petition for a further lien reduction based upon equitable grounds such as being on a fixed income. Furthermore, if Medicare’s claim exceeds 50 percent of the recovery after reducing for reasonable attorney fees, then medical providers will not take anything from the recovery proceeds. If Medicare’s claim is less than 50 percent after reducing for reasonable attorney fees, then the medical providers will take a pro-rata share. Federal law requires that you cooperate with Medicare’s collection efforts and provides a right of action against you as the beneficiary if you fail to reimburse it, and furthermore, your Medicare coverage could be terminated if you fail to reimburse Medicare.[6] For that reason, it is important for you and/or your attorney to notify Medicare when you settle your personal injury case or receive an award.

Medicaid Liens

Your recovery will be subject to a Medicaid lien if any portion of your medical treatment was covered by Medicaid. Unlike Medicare, Medicaid may not recover more than 1/3 of your total settlement or award.[7] Medicaid is also entitled to recover the full amount of any payments made by your medical payment coverage (“med-pay”) carrier.[8] Additionally, under North Carolina law, a petition may be filed before a judge to consider a larger reduction of the Medicaid lien for good cause shown, which typically include grounds of an inadequate recovery due to limited liability insurance coverage and serious injuries not fully compensated due to limited liability insurance.[9] Again, it is important to notify Medicaid upon receipt of any recovery funds because Medicaid’s lien amount must be paid within thirty days of receipt.[10]

Other Liens Against Your Recovery

You should also be aware that there may be other liens against your recovery, such as child support or subrogation liens. Also, there may be subrogation liens asserted by your health insurance carrier. If your health insurance carrier has paid for some of the medical care for your accident-related injuries, the carrier might have what is called a subrogation lien. Private health insurance subrogation liens are generally not enforceable unless they are the health insurance plans funded by your employer and registered with the United States Department of Labor under the Employment Retirement Income Security Act of 1974 (“ERISA”).[11] Also, the North Carolina State Health Plan is permitted by statute to be subrogated up to 50% of the recovery after deduction of attorney fees and reasonable costs.[12]


Liens are a complex part of the litigation process and affect many cases. It is highly advised that you hire an experienced personal injury attorney to help you navigate the complex world of liens and the litigation process. If you have been injured in Iredell County and the surrounding area, Grimes Yeoman has decades of experience with Personal Injury claims and medical liens and is here to help you. Call us at 704-321-4878.

[1]   Thigpen v. Leigh, 93 N.C. 47, 49 (1885).

[2] N.C. Gen Stat. §44 https://www.ncleg.net/EnactedLegislation/Statutes/PDF/ByArticle/Chapter_44/Article_9.pdf

[3] N.C. Gen Stat. §44 https://www.ncleg.net/EnactedLegislation/Statutes/PDF/ByArticle/Chapter_44/Article_9.pdf

[4] N.C. Gen Stat 44-51 https://www.ncleg.net/EnactedLegislation/Statutes/PDF/ByArticle/Chapter_44/Article_9.pdf

[5] N.C. Gen Stat. §44-50 https://www.ncleg.net/EnactedLegislation/Statutes/PDF/ByArticle/Chapter_44/Article_9.pdf

[6] 42 CFR 411.24.

[7] N.C. Gen. Stat. §108A-57(a1).

[8] Medical payment or “med-pay” coverage provides coverage for reasonable and necessary medical and funeral expenses due to a motor vehicle accident.

[9] NC Gen. Stat. §108A-57

[10] N.C. Gen. Stat. §§108A-57(a4-5).

[11] 29 U.S.C. § 1001 et seq.

[12] N.C. Gen. Stat. § 135-48.37; https://www.shpnc.org/employee-benefits/subrogation-and-recovery.