Medical Liens and Subrogation on a Tennessee Injury Settlement

How Much of My Tennessee Settlement Will Medical Liens Take?

Less than the offer suggests, because Tennessee law puts hard limits on how much.

A hospital's lien on your recovery is capped at one third of what you collect, under Tennessee's Hospital Lien Act.

If TennCare paid your bills, it gets repaid, but its share is cut by your attorney's fees and case costs first.

A private health insurer usually cannot take a dollar until you have been made whole for your losses.

A settlement offer is a gross number, and what reaches you is that number minus the liens that survive.

That gap is where a real part of the recovery is won or lost, and the fight over it comes after the settlement figure is agreed.

Knowing which rule controls each claimant is how you hold onto the largest share the law allows.

What a Medical Lien Is, and Why It Comes Out of Your Settlement

A medical lien is a legal claim against your injury recovery, filed by someone who paid for or provided your treatment and now wants to be repaid out of what you collect. Subrogation is the same idea from an insurer's side: the plan that covered your care steps into your shoes and claims reimbursement from the at-fault party's money once it reaches you.

Either way, the claim attaches to the recovery, not to you personally, so the gross settlement and your take-home are two different numbers: your net is what remains after the fee, the case costs, and every valid lien. What Tennessee lets you claim in the first place is shaped by the state's limits on certain damages, covered in our breakdown of Tennessee personal injury damage caps, and once the recovery exists each lien follows its own rule about how much it can take.

The Tennessee Hospital Lien Act and Its One-Third Cap

When a hospital treats you after a crash and files a lien, Tennessee's Hospital Lien Act governs how far that lien can reach. It is the single most useful protection an injured person has against a bill swallowing the whole recovery.

The Cap: One Third of Your Recovery

The Act creates a lien for the reasonable and necessary charges of hospital care, treatment, and maintenance. Then it caps the lien: it does not apply to any amount over one third (1/3) of the damages you obtain by judgment, settlement, or compromise.^[1] On a $90,000 settlement, the hospital's lien cannot claim more than $30,000, no matter how large the billed charges were. Two limits stack here: the charges must be reasonable and necessary, and the lien is held to one third of the recovery.

Perfecting the Lien: The 120-Day Rule

A hospital lien only holds if the hospital perfects it correctly. Under § 29-22-102, the hospital has to file a verified written statement with the clerk of the circuit court in the county where the hospital sits and in the county where the patient lives, either before discharge or within 120 days after it, and then send a copy by registered mail within 10 days to each party claimed to be liable. Miss a step, and the lien can be challenged by a motion to quash or reduce it. The gap between a perfected lien and a flawed one can be thousands of dollars in the client's pocket.

TennCare Subrogation and Why Made-Whole Will Not Help You Here

If TennCare, Tennessee's Medicaid program, paid for your accident treatment, it has a right to be reimbursed from your recovery. Many people assume the made-whole doctrine applies, meaning the plan cannot collect until the victim is fully compensated. It does not apply to TennCare, and TennCare says so itself.^[2]

Instead, § 71-5-117 sets TennCare's own rules. Its recovery is an automatic assignment backed by a right of subrogation and an independent right of action. The claim is not unlimited, though: the subrogation interest is reduced on a pro-rata basis by the reasonable attorney's fees and litigation costs spent to produce the recovery, which yields a net subrogation interest, and a court can hold a subrogation-interest hearing to sort out the amount.

Timing is built into the statute. Your lawyer must give written notice before a judgment or settlement, and TennCare or its managed care organization has to respond within 60 days, or 120 days if it needs more time to determine the amount.^[3] There is no automatic cap that holds TennCare to a fixed percentage of your recovery, and any page that promises one is describing another state's law. What actually shrinks the TennCare number is the fee-and-cost reduction, a hard look at which charges were accident-related, and, where warranted, that hearing.

Private Health Insurance and the Made-Whole Doctrine

An ordinary private health insurer is where Tennessee's made-whole doctrine does its work. Under that rule, an insurer that paid your medical bills cannot be reimbursed from your recovery until you have been fully compensated for your loss, so if the settlement is not enough to make you whole, the insurer's reimbursement claim yields.

The doctrine runs through a line of Tennessee Supreme Court cases. It was recognized in Wimberly v. American Casualty Co., 584 S.W.2d 200 (Tenn. 1979), then reaffirmed and extended to reimbursement claims in York v. Sevier County Ambulance Authority, 8 S.W.3d 616 (Tenn. 1999). In Health Cost Controls, Inc. v. Gifford, 108 S.W.3d 227 (Tenn. 2003), the court held that made-whole applies regardless of the language in the insurance contract, so a plan cannot write the protection away in its fine print.^[4]

The major exception comes in the next section: a self-funded ERISA plan governed by federal law can override this state-law protection, so pinning down whether your plan is an ordinary insurer or a self-funded ERISA plan is one of the first things a Tennessee lawyer checks when a health plan asserts reimbursement.

Tennessee's Two-Track Collateral Source Rule

How much of your medical bills you can even claim depends on which kind of case you are in, because Tennessee runs two different rules for the same question.

Ordinary Injury Cases and Dedmon v. Steelman

In a standard personal injury case, the collateral source rule lets you prove the full, undiscounted amount of your medical bills. In Dedmon v. Steelman, 535 S.W.3d 431 (Tenn. 2017), the Tennessee Supreme Court held that a plaintiff may present the full billed charges, and the defense cannot show the jury the lower, discounted amounts an insurer actually paid.^[5] That keeps the medical-damages figure high, which matters because the liens are measured against the recovery that figure helps build.

Health Care Liability Cases and Section 29-26-119

Medical malpractice cases run the other way. Section 29-26-119 abrogates the collateral source rule for health care liability actions, limiting recoverable economic damages to the amounts actually paid, or that providers accepted or will accept as full payment. A 2023 amendment tightened it further, restricting the recovery to actual economic losses for cases filed on or after September 29, 2023. If your claim is against a doctor or hospital rather than a driver, this rule reshapes the medical-damages number, which is one more reason those cases are handled differently by our Tennessee medical malpractice lawyers.

 

 

Federal Liens: ERISA Plans and Medicare

Two federal programs can reach across Tennessee law and change the arithmetic, so they get checked early.

A self-funded ERISA plan, the kind many large employers use to cover their workers, is governed by federal law that preempts Tennessee's made-whole rule. If your plan is actually self-funded, it can enforce full reimbursement on its own terms, and the made-whole protection that shields you from an ordinary insurer will not apply. Whether a plan is self-funded or merely administered by an insurance company is a question of the plan documents, not the logo on the card.

Medicare is the other overlay. When Medicare has made conditional payments for accident-related care, they must be resolved under the federal Medicare Secondary Payer statute, 42 U.S.C. § 1395y(b), before you keep the money. For care you will still need going forward, a Medicare Set-Aside can come into play; set-asides are well established in workers' compensation and remain discretionary in liability settlements, and they turn on projecting future medical expenses the way any serious injury claim does. Getting the Medicare piece wrong can delay a settlement or expose the client later, so it is handled deliberately.

Who Can Claim a Piece of Your Tennessee Settlement

Each claimant against your recovery follows a different rule, and the rule decides how hard the claim can be pushed back. When the injured person is a child, a court reviewing the settlement also reviews these liens as part of protecting the child's net recovery, which we cover under Tennessee minor settlement approval.

Who Holds the Claim	What Limits It
Tennessee hospital lien	Capped at one third of your recovery, and must be perfected within 120 days of discharge
TennCare (Medicaid)	Reduced pro rata for attorney's fees and costs, with a court hearing available; the made-whole doctrine does not apply
Private health insurer	The made-whole doctrine: generally no reimbursement until you are fully compensated
Self-funded ERISA plan	The plan's own terms; federal law preempts Tennessee's made-whole rule
Medicare	The federal Medicare Secondary Payer statute, 42 U.S.C. § 1395y(b)

No single number tells you what a lien will take until you know who holds it: a hospital charge and a TennCare charge of the same size come out of the recovery on different terms.

Lien Negotiation: Where Your Take-Home Number Is Won

The settlement figure gets the attention, but the lien work is where a client's take-home is decided, and it happens after the number is agreed. A hospital lien held to one third of the recovery can still be argued down when the charges are not all reasonable and necessary, a TennCare demand shrinks once fees and costs are subtracted and unrelated charges are stripped out, and a private insurer's claim can be reduced or defeated under the made-whole rule. Two clients can settle for the identical amount and walk away with checks that are not close, based entirely on how those claims were handled.

A settlement figure is a starting line, not a finish line. The value side of that math shows up in our look at the average Tennessee car accident settlement and our guide to calculating pain and suffering in Tennessee, and the lien phase decides how much of that value the client keeps.

How Tennessee's One-Year Deadline Fits In

The lien math only matters if you still have a case, and Tennessee gives you less time than any other state to file. The deadline for most personal injury claims is one year from the date of injury under T.C.A. § 28-3-104, the shortest personal injury statute of limitations in the country. Miss it and there is no recovery for any lienholder to argue over.

The short clock also shapes lien strategy. Notices to TennCare, records requests to hospitals, and demands to health plans all take time, and a one-year window leaves little room to chase reimbursement figures at the end. The earlier the lienholders are identified and put on notice, the more room there is to negotiate before a settlement closes. If you are weighing what a claim is worth against what you would keep, our overview of what an injury case is worth puts the two sides together.