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Essley: The land of (health care lien) confusion

February 12, 2014
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Indiana Lawyer Focus
By Eric Essley

essley-eric.jpg Essley
In 1986, the British rock band Genesis wrote of the troubling times the world faced. While practitioners might not be quite as anxious as the writers of “Land of Confusion,” there is likely some misunderstanding surrounding the various Indiana lien statutes attorneys face when trying to settle health care related claims. This is even truer given the Legislature’s recent revisions to the Hospital Lien Statute (see I.C. 32-33-4). Accordingly, this article will provide a high-level review of the few health care-related lien statutes often encountered and/or cited by the plaintiff’s bar and their in-house/defense counterparts.

Initially, attorneys frequently cite the Comparative Fault Statute (see I.C. 34-51-2-19(2)) in an effort to secure a lien reduction. This statute requires lienholders to diminish their recovery in the “same proportion as the claimant’s recovery is diminished.” Id. It also obligates the lienholder to pay “a pro rata share of the claimant’s attorney’s fees and litigation expenses.” Id. While it is sensible to expect a lien reduction and to be asked to compensate an attorney for her services, a few concerns jump off the page.

First, lienholders rarely ever see a detailed report describing the basis for the valuation of the pre-settlement/judgment case. Thus, a request to accept a substantial discount solely on an adverse party’s word might be hard to swallow, especially if the lien is significant. Second, because there is no rule as to what attorney rates can be charged in any given case, the fees and costs generated by different counsel are typically quite varied. Although I.C. 34-53-1-2 might work to offer some additional guidance to both parties in certain cases, counsel should naturally expect added scrutiny where the fees statement is considerable and, thus, where more insurer/provider dollars are at play.

The final concern is that the reduction request rarely acknowledges the first part of the statute, which calls for plaintiff’s own culpability to be measured. See I.C. 34-51-2-19(1). The insurer/provider will necessarily want to discuss the facts and evidence of the case as those aspects relate to plaintiff’s conduct. Privacy and ethical concerns must be respected, but these conversations should be pursued and anticipated. Notwithstanding the above, the resulting lien reduction process is often a standard negotiation between two parties who have an interest in maximizing their respective positions.

Next, practitioners should be aware of the lien statutes that specifically apply to Medicaid recipients. See I.C. 12-15-8 and I.C. 12-15-8.5. Ind. Code 12-15-8-1 unequivocally asserts that the state of Indiana (through the Office of Medicaid Policy and Planning) will have a lien on any recoveries where the office has paid medical expenses related to the underlying claim at issue. See I.C. 12-15-8-1. In practice, the “office” could include any health plan, provider network or individual provider that is contracted with the state directly or indirectly to provide approved Medicaid-related services to Indiana residents.

Given the scope of the office’s jurisdictional statement, the Medicaid lien statutes arguably occupy the field with respect to recoveries tied to Medicaid recipients. Further, they are different from the Comparative Fault Statute in a couple of critical ways.

First, there is no required lien reduction specifically due to a recipient’s comparative fault or in the event that the ultimate recovery does not achieve the projected value level. Though again, parties often negotiate reductions in order to efficiently close files. Next, this statute provides the office with the discretion to waive any rights to a lien it might otherwise have. See I.C. 12-15-8-9. The frequency of such benevolence by any one of the entities that might qualify as the “office” is unknown. Similar to the Comparative Fault Statute however, this chapter does contain a provision requiring the office to compensate plaintiff’s counsel for certain costs and expenses and for attorney fees. See I.C. 12-15-8-7 and -8.

Where I.C. 12-15-8 relates to Medicaid liens on the pecuniary proceeds of a recipient’s recovery, I.C. 12-15-8.5 addresses potential attachments to real property held by the recipient. Likely due to very reasonable public policy considerations, this chapter is much more restrictive and will allow the office to move forward with a property-based lien satisfaction only in limited circumstances. Nevertheless, it is not without teeth and should be considered when attempting to understand all potential lien hurdles.

Finally, Indiana’s Legislature recently passed a revised version of the Hospital Lien Statute. See I.C. 32-33-4. In Indiana, hospitals have the legal authority to pursue a recovery where the services rendered originate from an illness or injury that is the subject of a cause of action, lawsuit or claim. See I.C 32-33-4-3. This authority, however, is not unlimited. To begin, a hospital may not seek recoupment of its charges until the underlying injury claim has been resolved by settlement or judgment. See I.C 32-33-4-3.5(e).

Next, the hospital’s lien must now be reduced to reflect amounts to which the plaintiff is entitled, regardless of whether such a recovery is realized. See I.C 32-33-4-3(b)(5). This section represents a departure from the previous iteration of the statute, which did not require hospitals to apply the reductions and/or credits against a patient’s bill unless the hospital actually received payment from an alternate source. Now, hospitals cannot casually avoid the often cumbersome legwork required to collect recoveries from these other sources. Third, the new statute contains another lien reduction provision aimed at addressing the scenario where the patient’s recovery is disproportionally low as compared to the hospital bills. See I.C 32-33-4-3(c). Lastly, the new Hospital Lien Statute has added a number of carve-out populations. Most notably, the statute will not apply to persons covered by state and/or federal workers’ compensation laws, to Medicare recipients or to individuals whose claims are subject to a disability insurance policy or an automobile policy that includes medical payment benefits. See I.C 32-33-4-3(b)(3) and (d).

Attorneys must navigate many lien challenges as they work to close files on behalf of their clients. The health care lien statutes addressed in this article represent just one small corner of that complex world.•

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Eric Essley is an associate general counsel at MDwise Inc., an Indiana-based HMO. Eric’s practice focuses on a diverse set of in-house and state and federal health care matters. The opinions expressed in this article are those of the author.

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  1. I have been on this program while on parole from 2011-2013. No person should be forced mentally to share private details of their personal life with total strangers. Also giving permission for a mental therapist to report to your parole agent that your not participating in group therapy because you don't have the financial mean to be in the group therapy. I was personally singled out and sent back three times for not having money and also sent back within the six month when you aren't to be sent according to state law. I will work to het this INSOMM's removed from this state. I also had twelve or thirteen parole agents with a fifteen month period. Thanks for your time.

  2. Our nation produces very few jurists of the caliber of Justice DOUGLAS and his peers these days. Here is that great civil libertarian, who recognized government as both a blessing and, when corrupted by ideological interests, a curse: "Once the investigator has only the conscience of government as a guide, the conscience can become ‘ravenous,’ as Cromwell, bent on destroying Thomas More, said in Bolt, A Man For All Seasons (1960), p. 120. The First Amendment mirrors many episodes where men, harried and harassed by government, sought refuge in their conscience, as these lines of Thomas More show: ‘MORE: And when we stand before God, and you are sent to Paradise for doing according to your conscience, *575 and I am damned for not doing according to mine, will you come with me, for fellowship? ‘CRANMER: So those of us whose names are there are damned, Sir Thomas? ‘MORE: I don't know, Your Grace. I have no window to look into another man's conscience. I condemn no one. ‘CRANMER: Then the matter is capable of question? ‘MORE: Certainly. ‘CRANMER: But that you owe obedience to your King is not capable of question. So weigh a doubt against a certainty—and sign. ‘MORE: Some men think the Earth is round, others think it flat; it is a matter capable of question. But if it is flat, will the King's command make it round? And if it is round, will the King's command flatten it? No, I will not sign.’ Id., pp. 132—133. DOUGLAS THEN WROTE: Where government is the Big Brother,11 privacy gives way to surveillance. **909 But our commitment is otherwise. *576 By the First Amendment we have staked our security on freedom to promote a multiplicity of ideas, to associate at will with kindred spirits, and to defy governmental intrusion into these precincts" Gibson v. Florida Legislative Investigation Comm., 372 U.S. 539, 574-76, 83 S. Ct. 889, 908-09, 9 L. Ed. 2d 929 (1963) Mr. Justice DOUGLAS, concurring. I write: Happy Memorial Day to all -- God please bless our fallen who lived and died to preserve constitutional governance in our wonderful series of Republics. And God open the eyes of those government officials who denounce the constitutions of these Republics by arbitrary actions arising out capricious motives.

  3. From back in the day before secularism got a stranglehold on Hoosier jurists comes this great excerpt via Indiana federal court judge Allan Sharp, dedicated to those many Indiana government attorneys (with whom I have dealt) who count the law as a mere tool, an optional tool that is not to be used when political correctness compels a more acceptable result than merely following the path that the law directs: ALLEN SHARP, District Judge. I. In a scene following a visit by Henry VIII to the home of Sir Thomas More, playwriter Robert Bolt puts the following words into the mouths of his characters: Margaret: Father, that man's bad. MORE: There is no law against that. ROPER: There is! God's law! MORE: Then God can arrest him. ROPER: Sophistication upon sophistication! MORE: No, sheer simplicity. The law, Roper, the law. I know what's legal not what's right. And I'll stick to what's legal. ROPER: Then you set man's law above God's! MORE: No, far below; but let me draw your attention to a fact I'm not God. The currents and eddies of right and wrong, which you find such plain sailing, I can't navigate. I'm no voyager. But in the thickets of law, oh, there I'm a forester. I doubt if there's a man alive who could follow me there, thank God... ALICE: (Exasperated, pointing after Rich) While you talk, he's gone! MORE: And go he should, if he was the Devil himself, until he broke the law! ROPER: So now you'd give the Devil benefit of law! MORE: Yes. What would you do? Cut a great road through the law to get after the Devil? ROPER: I'd cut down every law in England to do that! MORE: (Roused and excited) Oh? (Advances on Roper) And when the last law was down, and the Devil turned round on you where would you hide, Roper, the laws being flat? (He leaves *1257 him) This country's planted thick with laws from coast to coast man's laws, not God's and if you cut them down and you're just the man to do it d'you really think you would stand upright in the winds that would blow then? (Quietly) Yes, I'd give the Devil benefit of law, for my own safety's sake. ROPER: I have long suspected this; this is the golden calf; the law's your god. MORE: (Wearily) Oh, Roper, you're a fool, God's my god... (Rather bitterly) But I find him rather too (Very bitterly) subtle... I don't know where he is nor what he wants. ROPER: My God wants service, to the end and unremitting; nothing else! MORE: (Dryly) Are you sure that's God! He sounds like Moloch. But indeed it may be God And whoever hunts for me, Roper, God or Devil, will find me hiding in the thickets of the law! And I'll hide my daughter with me! Not hoist her up the mainmast of your seagoing principles! They put about too nimbly! (Exit More. They all look after him). Pgs. 65-67, A MAN FOR ALL SEASONS A Play in Two Acts, Robert Bolt, Random House, New York, 1960. Linley E. Pearson, Atty. Gen. of Indiana, Indianapolis, for defendants. Childs v. Duckworth, 509 F. Supp. 1254, 1256 (N.D. Ind. 1981) aff'd, 705 F.2d 915 (7th Cir. 1983)

  4. "Meanwhile small- and mid-size firms are getting squeezed and likely will not survive unless they become a boutique firm." I've been a business attorney in small, and now mid-size firm for over 30 years, and for over 30 years legal consultants have been preaching this exact same mantra of impending doom for small and mid-sized firms -- verbatim. This claim apparently helps them gin up merger opportunities from smaller firms who become convinced that they need to become larger overnight. The claim that large corporations are interested in cost-saving and efficiency has likewise been preached for decades, and is likewise bunk. If large corporations had any real interest in saving money they wouldn't use large law firms whose rates are substantially higher than those of high-quality mid-sized firms.

  5. The family is the foundation of all human government. That is the Grand Design. Modern governments throw off this Design and make bureaucratic war against the family, as does Hollywood and cultural elitists such as third wave feminists. Since WWII we have been on a ship of fools that way, with both the elite and government and their social engineering hacks relentlessly attacking the very foundation of social order. And their success? See it in the streets of Fergusson, on the food stamp doles (mostly broken families)and in the above article. Reject the Grand Design for true social function, enter the Glorious State to manage social dysfunction. Our Brave New World will be a prison camp, and we will welcome it as the only way to manage given the anarchy without it.

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