Subrogation rarely gets attention until it lands in your lap as a demand letter. By then, you might be staring at a settlement that suddenly shrinks, a health plan asking for its pound of flesh, and a client who wants answers. I have spent many years as a personal injury lawyer negotiating with health insurers, ERISA plans, Medicare, Medicaid, MedPay, and workers’ compensation carriers. Subrogation can be a minefield, but it is manageable when you understand who gets paid, how much they can claim, and when you have leverage.
This is a practical guide built from that experience. It applies whether you are a car accident lawyer, bus accident lawyer, or any accident lawyer handling third-party liability cases. The principles are similar across the board, though the rules can change with the source of the lien and the jurisdiction.
What subrogation really is, and why it matters
Subrogation means a payor that covered your client’s medical bills wants reimbursement from the settlement or judgment you obtain from the at-fault party. Think of it as an I-fronted-the-bill claim. The right can arise by statute, by contract, or by equity. When clients say, “My insurance already paid for that,” they usually do not realize that repayment may ride on the back end.
Subrogation reaches the money you recover for medical damages. That is why it matters. Mismanage it, and your client’s net recovery falls apart. Handle it well, and you preserve value while avoiding ugly surprises after the check clears. Your job is to deliver the best net result, not just the largest gross number.
The players and their playbooks
Different lienholders follow different rulebooks. Understanding the source of the claim tells you your options, your defenses, and your negotiation posture.
Statutory programs like Medicare and Medicaid operate under federal and state law respectively. Medicare’s rights are powerful and procedural, and they carry strict notice and reporting requirements. Medicaid liens depend on state law but are shaped by federal limits, including the requirement that states recover only from the medical portion of a settlement if that portion can be reasonably allocated.
ERISA plans are group health plans governed by federal law. Some have ironclad language that can preempt state anti-subrogation rules. Others are insured plans subject to state insurance law. This difference has consequences. You need the plan document, not just the summary, to know what you are dealing with.
Private health insurers vary. Some states curb their subrogation rights. Others allow it when the policy language supports it. Hospital liens can appear almost out of nowhere if a facility filed a lien notice under a state hospital lien statute. Workers’ compensation carriers usually have statutory rights to reimbursement that can include a credit against future benefits.
MedPay and PIP can be friendly or not, depending on policy language and state rules. In some jurisdictions, MedPay payments are not subrogable. In others, they are. I have seen $5,000 in MedPay evaporate because a lawyer did not check the policy. I have also seen that same $5,000 preserved with a simple statutory citation tucked into a two-paragraph letter.
When you represent an injury lawyer client base, you have to know these distinctions cold. One missed rule can cost your client thousands.
Intake habits that prevent lien headaches later
Get the right information on day one. Ask your client exactly how the medical bills were paid: health insurance, Medicare Advantage, Medicaid, MedPay, VA, workers’ comp, or out of pocket. Get policy numbers, member IDs, and copies of any cards. Ask about employer plans and whether the employer is public or private. If the client is over 65 or disabled, assume Medicare may be involved, including Medicare Advantage.
Hospitals and providers often push patients to sign subrogation forms without explaining them. Collect those forms. They can expand contractual rights, create direct assignments, or give you leverage depending on how they were drafted. Encourage clients to forward every letter they receive that mentions “reimbursement,” “lien,” or “recovery.” The earlier you see it, the better your options.
Document the medical damages meticulously. Keep a running ledger of billed charges, allowed amounts, and amounts actually paid. For many negotiations, the paid amount matters far more than the sticker price. The difference between a $75,000 bill and a $22,000 paid amount can be the difference between a tolerable lien and a catastrophic one.
The art of noticing and controlling the flow of information
Notice obligations differ by payer, but a controlled, timely notice is almost always in your client’s interest. With Medicare, reporting is mandatory, and penalties for noncompliance are severe. With ERISA and private plans, early notice lets you start the dialogue and frame the issues.
What to send and when to send it is a judgment call. I do not hand over every medical record the moment someone says the word “lien.” I confirm coverage, identify the legal basis for the claim, and request an itemized payment ledger that ties each charge to the date of service and provider. If a plan cannot show the payment, there is nothing to reimburse.
Keep copies of every letter, every call log, every conditional payment summary, and every revised demand. I keep a simple spreadsheet that tracks: date of request, date of response, amount claimed, disputed items, and current net demand. When someone calls six months later with “an updated lien,” you can respond with specifics instead of starting from scratch.
Reading the contract like a litigator
When an ERISA or private plan asserts subrogation, ask for the plan document and the summary plan description. The summary is not enough. You are looking for magic words: first-dollar priority, make-whole disclaimers, common fund disclaimers, and language granting an equitable lien by agreement. The presence or absence of these phrases changes your leverage.
A plan with strong first-dollar language might claim full reimbursement regardless of whether your client is made whole. That is the theory. In practice, I have resolved many of these for less, especially when liability is contested, damages outstrip coverage, or the plan’s documentation is messy. Plans lose appetite for litigation when you show gaps in proof, poor itemization, or inconsistent summary language.
If the plan is insured rather than self-funded, state anti-subrogation rules may apply. The distinction often hinges on who ultimately pays claims: the employer with its own funds, or an insurance company. Ask directly, in writing. If they hedge, push for confirmation and proof.
The big doctrines that drive negotiation
Make-whole and common fund doctrines are the two workhorses in subrogation negotiation.
Make-whole means a lienholder does not get paid until the injured person is made whole for their losses. Many plan documents try to disclaim it. State law may revive it for certain plans or payers. The factual story matters. If your client had $200,000 in damages and a $100,000 policy limit, it is obvious they were not made whole. That story is leverage.
The common fund doctrine says the lienholder should contribute to attorney fees and case costs proportionate to the benefit they received. Medicare applies a reduction formula that essentially mimics a common fund reduction. Medicaid rules vary by state, but many systems recognize the principle. Private plans often disclaim it, but they will still negotiate in the shadow of it.
I never present these doctrines as academic points. I frame them around risk. I explain that litigation over subrogation costs money, your plan may not recover more even if it wins, and an early, fair reduction reflects uncertainty in liability, comparative negligence, and collectability.
Sorting out medical versus non-medical components
Allocation matters. Some liens can only attach to the part of the recovery that represents medical expenses. Others, like many ERISA plans, assert rights to the whole recovery. Even then, courts may be receptive to reasonable allocations that reflect jury-verdict logic.
When the case settles, capture the allocation reasoning in your file. Use medical specials, expert reports, and wage loss evidence to ground your numbers. If a plan demands 100 percent reimbursement in a case where medical care was a fraction of the total harm, that is a negotiation point. I have persuaded lienholders to accept proportionate reductions based on a defensible allocation, especially when we can show that a jury would have apportioned value heavily toward pain, suffering, and impairment.
Medicare, Medicaid, and Medicare Advantage quirks
Medicare is both structured and slow. You must report the claim, request a conditional payment letter, dispute unrelated charges, and obtain a final demand after settlement. You cannot disburse funds that belong to Medicare. The good news is the formula for reductions is relatively predictable when attorney fees and costs are involved. The bad news is that delays can test everyone’s patience.
The most common Medicare pitfall is failing to challenge unrelated charges. If your client had a cardiology workup three months before the crash, it will often appear in the conditional payments. Send a clean dispute with CPT codes, provider names, and a concise explanation of why the service is unrelated. I have seen conditional payments drop by 20 to 40 percent with a well-documented challenge.
Medicare Advantage plans, administered by private insurers, claim rights similar to Medicare under the Medicare Secondary Payer statute. They tend to be more aggressive and faster to respond, but they also make more errors. Treat them like a hybrid: assert statutory defenses where appropriate while demanding the same proof and itemization you require from private carriers.
Medicaid varies by state. Many states cap recovery to the portion of the settlement allocated to medical expenses, and some require judicial approval of that allocation. Learn your state’s procedure. A short hearing that locks in a medical allocation can save thousands and fend off future disputes.
Workers’ compensation and third-party cases
When a worker is injured on the job in a motor vehicle crash and you also pursue a third-party claim against the at-fault driver, the workers’ compensation carrier usually has a statutory right of reimbursement. Most states also grant the carrier a future credit, meaning it can stop or reduce future benefits until the credit is exhausted.
Negotiation here is about timing and overlap. If your client needs ongoing care or temporary disability checks, a hard-fought reduction on past benefits may not be worth it if it expands the credit and jeopardizes medical continuity. I sometimes accept a modest reimbursement with a limited credit, documented by stipulation, to protect the client’s future treatment plan. That is the kind of trade-off you discuss openly with the client before finalizing the third-party settlement.
Hospital liens and provider balances
Hospitals can file statutory liens even when health insurance exists. Some states prohibit balance billing after contractual adjustments. Others allow creative end runs. When a hospital files a lien for full billed charges but also accepted a contractual rate from your client’s insurer, challenge it immediately. Demand evidence the hospital preserved its lien rights with proper notice and timing, and point to any state law limits on the amount recoverable.
I keep the tone professional. Many lien coordinators respond better to a clean legal citation and a proposed resolution than to a threat. Offer the contract-adjusted amount or the plan’s paid amount, less a common fund share. If the hospital balks, a short motion to adjudicate the lien can reset the conversation.
Evaluation and settlement strategy with liens in mind
You do not evaluate a case only on liability and damages. You evaluate the lien landscape. A $100,000 settlement with $40,000 in hard-to-move ERISA liens may net less than an $85,000 settlement with Medicaid subject to a judicial medical allocation.
Start modeling scenarios early. I put together three views for the client: optimistic, realistic, and conservative. Each includes a lien projection, fee, costs, and likely reductions. When clients see their net in numbers rather than promises, the settlement conversation becomes grounded. Expectations align. Surprises fade.
Keep lienholders informed as settlement approaches. If liability is soft, say so, and explain how that affects their risk. If policy limits cap recovery, share proof. Limit demand letters and declarations to the essentials, but do not let lienholders learn about settlement from a check months later. Cooperative timing gets faster final demands and more reasonable reductions.
Negotiation techniques that consistently move numbers
I rely on a few habits that work across payer types.
First, narrow the lien to what was actually paid and is actually related. An item-by-item challenge takes time, but it is often where the largest savings hide. Many ledgers include duplicate entries, unrelated charges, or claims denied and later reprocessed. I ask for the transaction history, not just the sum.
Second, lead with facts that change litigation risk. Comparative fault, low policy limits, a defendant with minimal assets beyond insurance, and a cosmetically strong but medically modest case, all of these make a full recovery by a lienholder unlikely in court. When I explain that the alternative to a pragmatic reduction is years of chasing a client who was not made whole, reductions follow.
Third, frame the reduction as a shared win. I do not threaten. I explain that a reduced payoff today is more certain than a theoretical full payoff later. Lien negotiators are measured on closed files. Help them close the file.
Pitfalls that cost clients money
Clients sometimes pay medical providers directly after settlement without consulting you, assuming it helps. It rarely does. Providers may not credit the payment properly, then still send a larger balance to collections because the lien department did not communicate with billing. Insist on routing all lien payments through your trust account with a written payoff confirmation.
Do not rely on summary plan descriptions without the master plan. I have seen SPDs that disclaim the common fund doctrine while the plan document is silent, a gap that creates leverage. I have also seen the opposite, which calls for a different approach.
Never assume a Medicare final demand is truly final until you have the letter that says Final Demand Amount. Conditional payments change. If you must disburse quickly, hold back enough to protect the client and document your holdback in writing.
A short checklist for staying out of trouble
- Identify every potential lienholder at intake and verify coverage sources in writing. Demand itemized payment ledgers and challenge unrelated or unpaid items promptly. Obtain governing documents: plan document, SPD, statutory citations, and lien notices. Model net recovery scenarios for the client that include projected lien reductions. Document every agreement with lienholders and pay from trust with written confirmation.
Real-world examples that illustrate the range
A bus accident lawyer colleague called me about a case with a $250,000 policy limit and catastrophic injuries. The ERISA plan demanded $180,000 based on paid claims. Liability was strong, but damages dwarfed limits. The plan had clean first-dollar language. We built a make-whole argument anchored in the obvious shortfall, pointed out that a separate action against the client would be costly and slow, and offered $90,000 with a full release. We closed at $110,000. The client kept far more, and the plan avoided litigation it was unlikely to pursue.
In a pedestrian case, Medicare listed over $14,000 in conditional payments. Half were unrelated cardiology and prior dermatology visits. We sent a tight, three-page dispute with CPT codes and physician notes. The final demand dropped to about $7,800, then reduced further under the procurement cost formula after settlement. The client’s net improved by several thousand dollars for two hours of disciplined work.
On a workers’ compensation third-party case, the comp carrier wanted all past medical reimbursed and a full future credit. The client needed a knee replacement. We negotiated a partial reimbursement plus a limited credit carved out for the knee surgery and post-op PT. That compromise protected the client’s care path and kept the third-party settlement viable.
Communication that keeps clients on your side
Clients hate the feeling that their own insurance is eating their recovery. I address it directly. I explain that the law often requires repayment but that we can usually reduce it. I show the delta between billed charges and paid amounts to demonstrate the real savings I am targeting. I share the written agreements we secure before disbursement.
When the client sees the before and after numbers, they understand the value of the negotiation and the time it takes. This is especially important when you are a car accident lawyer advertising quick results. Fast is good. Accurate and net-positive is better.
What to do when a lienholder will not budge
If a lienholder refuses to negotiate, test the foundation. Do they have the right plan document? Can they prove payments? Are they claiming unrelated bills? Is there a state statute that limits them? If none of that moves North Carolina Work Injury Lawyer 1charlotte.net them, consider interpleader or a motion to adjudicate the lien, especially where state law provides a path. Judges appreciate reasoned allocations and fair common fund contributions. I have walked out of hearings with court-ordered reductions after months of stonewalling.
Do not be afraid to escrow contested amounts and disburse the rest, with the client’s informed consent. Silence breeds distrust. A transparent holdback with a clear plan to resolve the dispute keeps the case moving.
Building a repeatable workflow in your practice
You do not need a giant team to master subrogation. You need a consistent process.
Assign one person to own lien communications. Create templates for initial notices, itemization requests, dispute letters, and common fund arguments, but personalize each for the facts. Keep a calendar for Medicare and Medicaid deadlines. Use simple dashboards that show status at a glance: who’s claimed, what amount, what you’ve disputed, and what you’re holding in trust.
Measure your results. Track average reduction percentages by payer type. Share the data with your team. Over time, you will learn where to spend your energy and where a quick, fair settlement serves the client best.
Final thoughts from the trenches
Subrogation sits at the intersection of contract law, statutory rights, and practical negotiation. It is easy to overlook in the rush to settle, but it is where the case often lives or dies. The difference between a personal injury lawyer who treats liens as an afterthought and one who integrates them into strategy shows up in the client’s net every time.
Be curious about the source of the lien. Be relentless about documentation. Be creative in allocations that reflect reality. Be candid with your client. And when a lienholder plants their feet, be ready to show your work to a judge.
Do this consistently, and whether you are a car accident lawyer handling fender benders or a bus accident lawyer litigating high-exposure crashes, your clients will feel the difference where it matters most: the check they take home.