It just got harder to practice personal injury law in Colorado.
A new case by the Colorado Court of Appeals allows hospitals to create liens against their patients' personal injury settlements rather than billing their Medicare or Medicaid insurance. The new opinion almost guarantees auto accident victims (and other victims of negligence) who were covered by these public insurance plans will walk away with substantially less in pocket at the end of their injury cases.
In Harvey v. Centura, 2020COA18, the Colorado Court of Appeals interpreted section 38-27-101(1) of the hospital lien statute in a manner exactly opposite of how plaintiffs' attorneys have interpreted the statute since 2015: when the General Assembly added requirements to protect consumers from aggressive hospital lien practices.
Up until Harvey, the common understanding among members of the plaintiffs' bar was that section 38-27-101(1), C.R.S. (as amended in 2015) required hospitals to bill a patient's Medicare or Medicaid insurance before creating a lien against the patient. In other words, we all thought that hospitals had to bill our clients' health insurance, if the client had health insurance, rather than filing liens against the patients and putting into jeopardy their assets, settlement monies and credit rating.
Apparently, this is not the case when the client has Medicare or Medicaid.
In this case, the plaintiff, Ms. Harvey was rear-ended by a commercial truck and suffered injuries. She had Medicare and Medicaid insurance. She was treated at a Centura medical facility which billed $15,611.39 for medical services rendered. Centura first sent its medical bill to the truck's owner, Gibbons Erectors, Inc. Because Colorado is a tort law state, Gibbons was not required to immediately pay the medical bill - and did not. Centura then assigned the bill to a debt collector - Avectus Health Care Solutions.
When the debt collector, Avectus, contacted Ms. Harvey, she provided her own Geico auto policy information, and claim information for the at-fault driver's liability insurance carrier, Travelers. Avectus contacted both auto carriers, submitted the bill to Geico, and re-submitted the bill to Gibbons. About two-weeks later, Avectus filed a hospital lien for Centura against Ms. Harvey for the full billed amount. Neither the medical provider, nor the debt collector, ever billed Medicare or Medicaid.
Ms. Harvey sued Centura alleging the medical provider violated section 38-27-101(1) of the hospital lien statute by creating a lien against her instead of billing Medicare or Medicaid.
In 2015, the Colorado legislature amended the hospital lien statute to require hospitals to bill the auto liability insurance and the primary health insurance in the same manner that hospitals would use for patients not injured by another's negligence. The purpose of the amendment was to make hospitals bill insurance first. If the hospital could not recover from insurance, only then, could the medical facility create a lien against the patient. Clearly, the measure was designed to protect patients from abusive hospital collections practices.
In its Harvey decision, however, the Colorado Court of Appeals has carved out exceptions that have given the green light for hospitals to resume their aggressive collections tactics against injury victims who are unlucky enough to have Medicare or Medicaid as their health insurance.
Here's How the Court of Appeals got there:
The language of the amended hospital lien statute under section 38-27-101(1) states that a hospital must submit its medical bills to “the property and casualty insurer and the primary medical payer of benefits …” (emphasis added). The appellate panel concluded that Medicare and Medicaid are not primary, but rather, secondary payers of benefits under federal law. In other words, as secondary payers, Medicare and Medicaid will pay only after other primary insurers have paid first. Primary payers include group health plans, workers' compensation plans, auto or liability insurance, and no-fault insurance.
Because Medicare and Medicaid are secondary payers, and not primary payers, the appellate court reasoned, the amended hospital lien statute did not require hospitals to bill Medicare and Medicaid prior to filing a lien against the patient.
This is bad news for elderly and indigent accident victims. Instead of billing Medicare and Medicaid, hospitals will now be incentivized to file hospital liens against their patients who were injured through another's negligence. They will do this because they will have a better chance of collecting their entire hospital bill from the personal injury settlement rather than accepting reduced billing amounts provided through their contracts with Medicaid and Medicare plans.
This means some injury victims covered by Medicare and Medicaid will almost certainly walk away with little to nothing in settlement money after the hospital bills and attorney fees have been paid. Of course, this result was never intended by the Colorado legislature. The legal interpretation provided by the Court of Appeals will require an urgent and immediate legislative fix to protect elderly and indigent Coloradans who have been injured by the negligence of others.