Negotiating Tips for "Med Pay" Claims for Reimbursement

Continuing our series on how to approach lien claims in personal injury cases and negotiating tips for the myriad of lien claims that crop up, we now turn to a discussion of tips for medical pay (commonly called med pay) lien claims. I refer to them as claims for reimbursement, as they arise by contract and are usually couched in terms of subrogation and/or reimbursement rights, rather than "lien" rights which have a different legal effect.

Med pay is usually available under your client's own automobile insurance policy if your client contracted for that type of coverage. Under med pay coverage, you or your client can submit their medical bills to their own insurance company for payment under the med pay provisions of their own insurance policy (1st party coverage).

Your client's own insurer will generally pay the bills and will then advise if they will be asserting a claim for reimbursement for the same. This article will go over some considerations to keep in mind when dealing with med pay claims for reimbursement.

Tip #1: Use the Med Pay!

One of the first things to do is find out if there is available med pay and then USE it.

Clients often do not realize that they have med pay coverage, and even if they do, sometimes they do not realize what it is for or how to use it. Not surprisingly, their own insurer does not always make it clear that the coverage is available for use, or makes the client jump through a series of hoops that they do not understand.

Review the declaration page for your client's auto insurance policy to find out if coverage is available, and if so, how much.

You may ask: why use the med pay if you are pursuing funds from the third party tortfeasor?

Short Answer: It makes sense.

Long Answer:

  1. These are additional funds that may increase the overall amount of the settlement.
  2. All the medical bills and lien claims are going to have to be paid out of any settlement funds received from the third party. Outstanding balances with individual providers (i.e. ambulance, medical doctor, hospital, chiropractor) are going to be harder to negotiate than a health or med pay insurance claim, so it makes sense to have health insurance or med pay coverage pay the bills, and then negotiate with the insurers at the end of the case.
  3. If the med pay policy does not have a right to reimbursement, then those funds simply increase the settlement, without having to be reimbursed.
  4. Using med pay also avoids bills being sent to collection, as the case against the third party can take many months, or longer, to get resolved.

Tip #2: If Medical Bills Exceed the Med Pay Available, Submit Bills for Payment That Are Going to Be the Hardest to Negotiate

When the med pay amount available is less than the amount of outstanding medical bills, it is important to think through which bills to submit to med pay, and submit the ones that will be the most difficult to negotiate.

Generally speaking, but depending on your jurisdiction, outstanding bills and lien claims fall into the following categories:

  1. Will not negotiate: Ambulance
  2. Difficult to negotiate: Medical doctor or physician group
  3. Can be negotiated and statutory caps apply but may be difficult if there is not enough money to go around: Hospitals, County facilities
  4. May negotiate but not really required to: chiropractor, other individual providers
  5. Difficult to negotiate depending on the language of the plan: self-funded ERISA health insurance
  6. Will reduce for common fund: Medicare
  7. Will reduce for common fund and statutory cap applies: Medi-Cal
  8. Will negotiate, statutory caps may apply and equitable defenses may be available: health insurance, insured ERISA plans, med pay claims for reimbursement

Tip #3: Find Out if the Med Pay Insurer Has a Claim for Reimbursement

Most policies offering med pay will have a right of reimbursement written into the policy language. HOWEVER, there are still a few that do not have a right of reimbursement. Count yourself lucky if your client has one of those; they do exist but there not many of them.

Request a copy of the contract language and read it carefully to see if the policy does in fact have a claim for reimbursement.

Tip #4: Narrow the Claim

When you read the contract language, determine the parameters of the claim for reimbursement.

Since the med pay money is coming from your client's own insurance, the med pay insurer is going to be seeking recovery from the third party settlement. But note that if the claim is pursuant to an Underinsured Motorist (i.e. the third party had a limited policy, and you are now making a claim to your client's own insurer), the insurer may be entitled to a credit for any med pay amounts paid. However, if the value of your client's case exceeds the amount available per the Underinsured Motorist coverage plus the med pay, then you may be able to argue that no credit is appropriate.

The contract will also disclose whether the insurer has contracted around certain defenses, such as the "made-whole" or common fund doctrines. These are discussed in more detail below.

Tip #5: Reduce for Actual Recovery

When certain bills are not recovered as part of the settlement, advise the insurer of the same, and have them removed from their claim for reimbursement.

If you have a case where the third party policy is limited so that you can't recover all of the medical bills or there is a large amount of wage loss or pain and suffering that take up most of the available policy amount, it may be appropriate to make the argument that some of the medical bills have not been recovered, and therefore the lien claimant cannot seek reimbursement for the same.

For a related discussion on this topic in the context of Medicaid liens, see State Medicaid Liens Limited by U.S. Supreme Court in Wos v. E.M.A. But see this discussion of the passage of Section 202 of the Bipartisan Budget Act and its effect on the holdings of these cases.

Tip #6: Use Applicable Statutory Scheme

If there is a statutory scheme for reducing health insurance liens, look to the concepts of that statute.

See, Negotiating Tips for Health Insurance Liens for a discussion of California's statutory scheme governing health insurance liens, as well as a discussion of calculating a proportionate share under the statutory scheme.  

Tip #7: Reduce for Comparative Fault

If the settlement was reduced because the plaintiff was at fault for a percentage of their damages, use this to negotiate the claim down.

Even if you don't have specific finding as to fault, this is still a point worth making, but must be done before finalizing the settlement. If needed, ask the third party's adjuster or attorney to put in writing that their settlement offer reflects their position on comparative fault.

See also, Arkansas Dept. of Health and Human Services v. Ahlborn, (2006) 126 S. Ct. 1752. In Ahlborn, the court reduced the lien claim to one-sixth of the amount because the recovery by the plaintiff in that case was only one-sixth of the value of the case due to plaintiff's comparative fault, as evidenced by the stipulation of the parties.

Tip #8: Reduce for Common Fund

Depending on your jurisdiction, the common fund doctrine may allow for reduction for attorney's fees and pro rata share of costs depending on the law of your jurisdiction.

"[A] litigant or a lawyer who recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable attorney's fee from the fund as a whole." US Airways v. McCutchen (2013) 133 S. Ct. 1537, 1545 citing Boeing Co. v. Van Gemert (1980) 100 S.Ct. 745. The claim for reimbursement must therefore be reduced by the same percentage for attorney's fees that the client is being charged, and reduced for a proportionate share of costs. The US Airways case also held that the common fund rule serves as the default, if the contract does not address the issue. See also, Progressive West Insurance Co. v. Yolo County Superior Court (2005) 37 Cal.Rptr. 434, 444, and 21st Century Insurance Co. v. Superior Court (Quintana) (2009) 47 Cal.4th 511 for a discussion of the rule in California.

Tip #9: Reduce for Made Whole

The made whole rule states that a lien claimant cannot assert its contractual right to repayment until the insured is fully compensated. The nuances of rule may vary by jurisdiction.

In the California case, Progressive West, the court held that in personal injury cases, to preserve its right of subrogation, the med pay insurer must either interplead itself into any action brought by the insured against the third party tortfeasor, or wait to seek reimbursement under the language of its policy from its insured to the extent that the insured recovers money from the third party. Progressive West Insurance Co. v. Yolo County Superior Court, supra, 37 Cal.Rptr. at 442 citing Plut v. Fireman's Fund Ins. Co. (2000) 85 Cal.App.4th 98, 104; Hodge v. Kirkpatrick Dev., Inc. (2005) Cal.App.4th 540, 548.  

As stated above, there are some policies that specifically waive any rights to argue the made whole doctrine. What constitutes a valid waiver may depend on law of your state.

Even if a policy includes valid language waiving the made whole rule, insurers may consider the equities of the situation, so make the argument regardless of whether it is allowed by the policy or not.

Tip #10: Common Sense and Courtesy Should Prevail

Like the other types of lien claims and claims for reimbursement, common sense and courtesy go a long way in this area of law. Creative legal arguments can take you part of the way, but building rapport with the lien claimant early on in the case, and appealing to their common sense throughout the process, is also helpful. People generally prefer being paid something now so that they can close the account, rather than waiting months and possibly ending up with nothing.

*Every case has unique facts and requires independent up-to-date research specific to your jurisdiction. This article is intended to highlight general concepts, and is not meant as an exhaustive discussion, nor a guarantee of a particular result.*

For further discussion on liens, please see:
1. The FindLaw Guide to Negotiating Liens in Personal Injury Cases
2. Negotiating Tips for Hospital Liens in Personal Injury Cases
3. Tips for Negotiating ERISA Liens in Personal Injury Cases
4. 7 Steps to Approaching Lien Claims in Personal Injury Cases
5. How to Deal with Medicare Liens in Personal Injury Cases
6. Negotiating Tips for Health Insurance Liens in Personal Injury Cases
7. What US Airways v. McCutchen Means for Your Personal Injury Cases
8. State Medicaid Liens Limited by US Supreme Court in Wos v. E.M.A.