Topic: Fees for specialized counsel retained to negotiate a plaintiff’s complex Medicare, Medicaid or private health insurance lien may be charged to the settlement as a disbursement under certain conditions.
Code: DR 6-101, 2-106, 5-104
It is ethically permissible for a plaintiff’s personal injury attorney to retain a specialty firm to handle the resolution of a Medicare, Medicaid or private healthcare lien on a settled lawsuit. Under the following conditions, the fee for said outside service may be charged as a disbursement against the total proceeds of the settlement: (a) at the outset of the representation, the Retainer Agreement with the client provides that the attorney may do so, and the client has given informed consent thereto; (b) the actual charges are passed on to the client at cost (without any overage or surcharge) and must be reasonable; (c) the transaction results in a net benefit to the client on each lien negotiated; (d) the transaction complies with all principles of substantive law, including the fee limitations on contingent fees in the New York Judiciary Law and Appellate Division rules; and (e) the referring attorney remains responsible for the overall work product.
A cottage industry of specialty law firms has evolved in the last few years that specialize in negotiating Medicare, Medicaid and private healthcare liens on behalf of personal injury plaintiffs. Said services are marketed to attorneys representing personal injury clients. Resolving liens is a complex area of law with many traps for the inexperienced and unwary. These specialty law firms charge fees for their work and describe their services as being akin to other legal areas that often effect personal injury settlements. Often, ancillary legal services involved with personal injury settlement such as bankruptcy, probate and disability planning do result in a separate fee chargeable to the client. However, negotiating liens has frequently been done by the plaintiff’s attorney at no extra charge (and included in the contingency fee). By posturing Medicare, Medicaid and private healthcare lien resolution as an ancillary area, the specialty law firms are suggesting that fees for their service may be considered a legal disbursement chargeable to the total proceeds of the settlement. The alternative would be for the personal injury attorney to pay such fees out of the attorney’s contingency fee, as may be done with legal services provided by trial counsel or appellate counsel.