The use of third-party liens within the civil justice system to secure a creditor’s claim is on the rise. Referred to as subrogation, one of the more notable increases involves Medicare and other healthcare insurance providers staking a claim on a victim’s settlement or award. Medicare in particular has taken advantage of expanded lien rights in the last decade. This expansion is, in part, due to the impact of the Medicare Secondary Payer Act. This law gives Medicare the power to recover before any other potential creditor. This often results in the amount owed taken directly out of a settlement, trumping state law and any other existing claims.

Research from the RAND corporation, an organization that focuses on solutions for challenges in public policy, supports this finding. The group has found an increase in the presence of health care liens in large litigation events in recent years. This is important because the lien can reduce the settlement amount that remains available for the victim. It can also put an additional burden on negotiations, as they victim may be overwhelmed with the amount owed through an existing third-party claim. This could also reduce the likelihood the victim will move forward with the claim.

Other interesting points from the RAND’s research includes:

  • The average third-party lien was just over 10% of the total value of the claim, approximately $11,000.
  • Medicare liens are generally more frequent then private liens. This highlights the impact of expanded rights resulting from the Medicare Secondary Payer Act.
  • Private insurance companies are likely to push for expanded lien rights, similar to those available to Medicare.

The researchers behind this study note that it is likely the frequency of these third-party liens will continue to grow. The presence of these liens will lead to delays when resolving a claim and reduction of the overall settlement or award. Preparation for subrogation can mitigate this risk.