Written by attorney Jeffrey Pierce Fultz


a. Lien – claim, encumbrance or charge on property for payment of some debt, obligation or duty – may be created by statute, contract, or common law

i. Personal injury situation liens –

ii. Hospital lien, government liens, worker’s compensation liens

b. Subrogation – substitution of one person in the place of another with reference to a lawful claim, demand or right so that he who is substituted succeeds to the rights of the other in relation to the debt or claim, and its rights, remedies or securities.

i. Personal injury situation subrogation interests

ii. Auto insurance, group health insurance, homeowner’s insurance, employee benefit plans

c. Government liens and subrogation rights

i. Medicare

  1. Medicare was created to assist qualified recipients to obtain medical care benefits. 42 USCS 1395

a. Part A – provides primary hospital insurance benefits for persons qualifying under 42 USCS 1395(c).

i. Persons over 65 years or those under 65 who have received Social Security benefits for at least 24 months

b. Part B – provides supplementary medical insurance for physicians fees and other services outside a hospital setting to persons qualifying under 42 USCS 1395(j)

c. Secondary Payor

i. Medicare was initially the primary payor for medical services even when such services were covered by private insurance.

ii. In 1980, Congress amended the Medicare Act to reduce the costs of Medicare by making the government a secondary provider of medical insurance coverage

iii. Conditional payments – made for covered matters where a primary plan has not made or be expected to make payment promptly

iv. Reimbursement rights – payments made by Medicare are conditioned upon reimbursement by a primary plan

  1. Government entitled to brine an action against an entity which is required or responsible to make payment with respect to the paid item or any part thereof.

  2. Government may collect double damages against any such person failing to make reimbursement as required under the act.

  3. Act creates a private cause of action for damages

  4. Subrogation Rights – government is subrogated to the extent of medicare payment to any right under the secondary payer provisions, of any individual or any other entity to payment under a primary plan.

  5. Tort Claims

a. Courts are split on whether tort settlements are subject to medicare reimbursement.

d. Texas

i. Medicaid

  1. Texas, like other states, is required to designate a single state agency responsible for the administration of the Medicaid program.

  2. Texas – Health and Human Services Commission

  3. Right of Action

a. Upon application with the state of benefits under Medicaid, the state program must provide for assignment of the applicant’s right of recovery against a responsible third party.

b. Under Texas law, receipt of benefits constitutes an assignment of the party’s right of action to the state by operatio of law.

c. Limitations of recovery

i. The right of recovery in Texas is limited to the amount of costs of medical care services provided.

ii. State is to be assigned the right to recover the amounts paid for support and medical expenses.

d. Recipient must cooperate with the state in recovering benefits paid.

ii. Texas Rehabilitation Commission

  1. In furnishing rehabilitation services, the TRC is subrogated to the person’s right of recovery.

a. Extends to personal insurance, another person for personal injuries caused by the other person’s negligence or wrongdoing, or any other source

iii. Texas Hospital Lien

  1. Enacted to provide for liens in favor of hospitals

a. Encourage hospitals to provide immediate care and treatment to persons injured in accidents

b. To compensate hospitals for the vast sums of money being lost when treating patients unable to pay.

  1. Attachment of the Hospital Lien – Tex. Prop. Code Ann. § 55.002

a. Attaches to a cause of action or claim of an individual who receives services for injuries caused by or attributable to another’s negligence

i. Patient must be admitted no later than 72 hours after the accident

ii. Extends to both the admitting hospital and transferring hospital as long as the admission was within 72 hours of the accident.

b. Lien attaches to the following:

i. Cause of action for damages arising from an injury for which the injured individual is admitted to the hospital

ii. A judgment of a Texas court or the decision of a public agency in a proceeding brought by the injured individual or by another person entitled to bring the suit in case of the death of an individual is admitted to the hospital

iii. The proceeds of a settlement of a cause of action or a claim by the injured individual entitled to make the claim arising from an injury for which the injured individual is admitted to the hospital.

c. Lien does not attach to the following

i. Claim under the Texas worker’s compensation laws

ii. Proceeds of an insurance policy in favor of the insured individual or the insured individual’s legal representative

  1. except for public liability insurance carried by the insured that protects the insured against loss caused by an accident or collision

iii. Claim against the owner/operator of a railroad company that maintains a hospital in which the injured individual is receiving hospital care.

iv. Does not attach to the proceeds of uninsured/underinsured motorists insurance – not public liability insurance

v. Wrongful death judgment – must be recovery from the personal injuries

  1. exception – recovery of proceeds under a survival action based on the damages sustained by the decedent and medical bills constitute debts of the estate

d. Limitations of the lien

i. Although the injured individual may be liable for the entire costs of the hospitalization, the lien attaches only to the first 100 days of the hospitalization and does not cover charges that exceed a reasonable and regular rate for the services.

e. Securing the lien

i. Hospital must file written notice of the lien with the county clerk of the county where the hospital services were provided prior to the payment of proceeds for the compensation of the injury.

ii. If lien not perfected by the hospital, a judgment rendered may be valid, and the defendant is not exposed to further possible liability since the hospital still possesses a cause of action against the patient.

f. Separate cause of action

i. The hospital lien creates a separate cause of action in favor of the lien holder and against anyone paying or receiving funds in derogation of the perfected lien

ii. The cause of action accrues when the judgment or settlement proceeds are actually paid.

iii. Limitations

  1. no express limitations period, so the four year residual limitations rule applies

  2. limitations begins at the time the payment in derogation of the lien is paid

iv. Attorneys fees

  1. attorneys fees not allowed

  2. Pre-judgment interest not allowed

g. Liability for non-satisfaction of lien

i. Hospital with proper lien can bring an action against all settling parties, the insurers, attorneys and others who ignore the statutory lien.

ii. Lawyers must do thorough investigation to ascertain whether lien filed

h. Discharge of Lien

i. Lien remains in effect until the hospital charges are paid in full or otherwise resolved

ii. Hospital authority must execute proper documentation that the lien has been paid and must authorize the county clerk to discharge the lien

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