1 Paid or Incurred Medical Expense Recoveries State Bar of Texas 23 rd Annual Advanced Personal Injury Law Course July 18-20, 2007 - Dallas Joe L. Lovell.

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Paid or Incurred Paid or Incurred Medical Expense RecoveriesMedical Expense Recoveries

State Bar of TexasState Bar of Texas2323rdrd Annual Advanced Annual Advanced

Personal Injury Law CoursePersonal Injury Law CourseJuly 18-20, 2007 - DallasJuly 18-20, 2007 - Dallas

Joe L. LovellJoe L. LovellLovell, Lovell, Newsom & Isern, LLPLovell, Lovell, Newsom & Isern, LLP

Amarillo, TexasAmarillo, Texas

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THE WARTHE WAR

Does “paid or incurred” Does “paid or incurred” meanmean

““paid or incurred” paid or incurred”

or or

““paid and accepted”?paid and accepted”?

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THE WARTHE WAR

isis

Ultimately about theUltimately about the

Collateral Source Collateral Source RuleRule

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THE BATTLESTHE BATTLES

The LegislatureThe Legislature The GovernorThe Governor The Federal CourtsThe Federal Courts The Texas Appellate The Texas Appellate

CourtsCourts

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THE LEGISLATURETHE LEGISLATURE2003 – HB 42003 – HB 4

Original versions of HB3 and Original versions of HB3 and CSHB4 contained a sub-chapter CSHB4 contained a sub-chapter entitled “Collateral Source entitled “Collateral Source Benefits” which expressly Benefits” which expressly abrogated the collateral source abrogated the collateral source rule in med mal cases.rule in med mal cases.

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House, after debate, passed House, after debate, passed amendment to delete the amendment to delete the “Collateral Source Benefits” “Collateral Source Benefits” sub-chapter that would have sub-chapter that would have abrogated the rule.abrogated the rule.

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““No, it just means that economic No, it just means that economic damages are limited to those damages are limited to those actually incurred. You can’t actually incurred. You can’t recover more than you’ve actually recover more than you’ve actually paid or been chargedpaid or been charged for your for your health care expenses in the past or health care expenses in the past or what the evidence shows you will what the evidence shows you will probably probably be chargedbe charged in the in the future.”future.”

Senator Bill RatliffSenator Bill Ratliff

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Added to § 41.0105, the following:Added to § 41.0105, the following:

““(b) This section only applies to (b) This section only applies to a health care liability claim a health care liability claim under Chapter 74.under Chapter 74.

(c) This section does not apply (c) This section does not apply to a claim for future medical or to a claim for future medical or health care expenses.”health care expenses.”

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House Civ. Prac. CommitteeHouse Civ. Prac. Committee5 – 05 – 0

Full HouseFull House 139 – 0139 – 0 Senate State Affairs CommitteeSenate State Affairs Committee 9 – 9 –

00 Full SenateFull Senate 28 - 228 - 2

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THE GOVERNORTHE GOVERNOR2007 – HB 3281 2007 – HB 3281

- VETOED - - VETOED -

Filed a veto message:Filed a veto message:

““House Bill No. 3281 would House Bill No. 3281 would reverse Texas’ sweeping reverse Texas’ sweeping lawsuit reforms passed in lawsuit reforms passed in 2003”2003”

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2007 Legislative History2007 Legislative History

Intent of the Legislature is Intent of the Legislature is crystal clear.crystal clear.

Intent of Governor is clear, Intent of Governor is clear, but clearly contrary to but clearly contrary to Legislature. Legislature.

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2007 Legislative History2007 Legislative History

“[T]he governor’s veto does not detract from the Legislature’s effort to clarify the law as we have interpreted it. See Brown v. Owens, 674 S.W.2d 748, 750 (Tex. 1984)(noting legislative intent reflected in passage of bill despite veto).”

Texas Dept. of Trans. v. City of FloresvilleTexas Dept. of Trans. v. City of Floresville, 53 S.W.3d 447,454 , 53 S.W.3d 447,454 (Tex. App. – San Antonio 2001, no pet.)(Tex. App. – San Antonio 2001, no pet.)

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THE FEDERAL COURTSTHE FEDERAL COURTS

Self v. Wal-Mart Stores,Self v. Wal-Mart Stores, No. No. 2:05-CV-301 (E.D. Tex. April 2:05-CV-301 (E.D. Tex. April 5, 2007)5, 2007)

Coppedge v. K. B. I., Inc.,Coppedge v. K. B. I., Inc., 2007 WL1989840 (E.D. Tex. 2007 WL1989840 (E.D. Tex. July 3, 2007)July 3, 2007)

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Self v. Wal-MartSelf v. Wal-Mart

Granted motion in limine Granted motion in limine on evidence of collateral on evidence of collateral source benefits.source benefits.

Held - collateral source Held - collateral source not abrogated by § not abrogated by § 41.0105.41.0105.

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Self v. Wal-MartSelf v. Wal-Mart

““[T]he Court is reluctant to [T]he Court is reluctant to overturn well-settled law that overturn well-settled law that the language ‘incurred’ the language ‘incurred’ means the full amount of a means the full amount of a Plaintiff’s medical bills, even Plaintiff’s medical bills, even when the amount is when the amount is ultimately paid by insurance ultimately paid by insurance or written off.”or written off.”

Citing Citing Black v. American Bankers Ins.Black v. American Bankers Ins.

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Coppedge v. K.B.I., Inc.Coppedge v. K.B.I., Inc.

Granted motion in limine Granted motion in limine excluding evidence of excluding evidence of payments, adjustments, and payments, adjustments, and write offs.write offs.

Refused to limit evidence to Refused to limit evidence to net amount of medical net amount of medical expenses.expenses.

Will consider post-trial motion Will consider post-trial motion for reduction of damages.for reduction of damages.

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THE TEXAS APPELLATE THE TEXAS APPELLATE COURTSCOURTS

Bituminous Gas. Corp. v. ClevelandBituminous Gas. Corp. v. Cleveland, , 223 S.W.3d 485 (Tex. App. – Amarillo 223 S.W.3d 485 (Tex. App. – Amarillo 2006, no pet.)2006, no pet.)

Daughters of Charity Health Serv. v. Daughters of Charity Health Serv. v. LinnstaedterLinnstaedter, 2007 WL1576045 (Tex. , 2007 WL1576045 (Tex. June 1, 2007)June 1, 2007)

Mills v. FletcherMills v. Fletcher, 2007 WL1423883 (Tex. , 2007 WL1423883 (Tex. App. – San Antonio, May 16, 2007, no pet.)App. – San Antonio, May 16, 2007, no pet.)

Gore v. FayeGore v. Faye, No. 07-06-00218-CV (Tex. , No. 07-06-00218-CV (Tex. App. – Amarillo)App. – Amarillo)

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Bituminous Gas Corp. v. Bituminous Gas Corp. v. ClevelandCleveland

““Following receipt of the jury verdict Following receipt of the jury verdict awarding $999,000, pursuant to section awarding $999,000, pursuant to section 41.0105 of the Texas Civil Practice and 41.0105 of the Texas Civil Practice and Remedies Code, finding that Cleveland did Remedies Code, finding that Cleveland did not pay all the medical expenses, the trial not pay all the medical expenses, the trial court reduced the award by $139,531.68, court reduced the award by $139,531.68, and making other deductions, rendered and making other deductions, rendered judgment that Cleveland recover judgment that Cleveland recover $816,493.69.”$816,493.69.”

Mere Recitation of Proceedings Mere Recitation of Proceedings BelowBelow

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LinnstaedterLinnstaedter

Plaintiff injured in car crash while in Plaintiff injured in car crash while in course of employment.course of employment.

Hospital filed lien per Property Code.Hospital filed lien per Property Code. Comp paid medical, discounted per Comp paid medical, discounted per

Labor Code.Labor Code. Third-party suit settled for $175,000, Third-party suit settled for $175,000,

balance paid to hospital to satisfy lien.balance paid to hospital to satisfy lien. Plaintiffs brought dec action to get Plaintiffs brought dec action to get

back the $12,966.71back the $12,966.71

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Issue: Whether hospital paid Issue: Whether hospital paid by worker’s comp can recover by worker’s comp can recover balance by filing hospital balance by filing hospital lien.lien.

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Because hospitals cannot sue Because hospitals cannot sue patient directly for balance patient directly for balance (thus, no debt), they cannot (thus, no debt), they cannot collect balance indirectly collect balance indirectly through lien.through lien.

Which Prevails, Labor Which Prevails, Labor Code or Property Code?Code or Property Code?

Labor Code.Labor Code.

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““The hospital’s most salient point is The hospital’s most salient point is that in the suit against Jones, that in the suit against Jones, Linnstaedter and Bolen sought the full Linnstaedter and Bolen sought the full medical charges billed by the hospital medical charges billed by the hospital rather than the reduced amount paid rather than the reduced amount paid by their compensation carrier.”by their compensation carrier.”

§ 41.0105 Not In Issue- But -

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““We agree that a recovery of medical We agree that a recovery of medical expenses in that amount would be a expenses in that amount would be a windfall; as the hospital had no windfall; as the hospital had no claim for these amounts against the claim for these amounts against the patients, [Linnstaedter and Bolen] patients, [Linnstaedter and Bolen] in turn had no claim for them in turn had no claim for them against Jones.” FN22against Jones.” FN22

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““FN22. FN22. See Allstate Indem. Co. v. See Allstate Indem. Co. v. ForthForth, 204 S.W.3d 795,796 (Tex. , 204 S.W.3d 795,796 (Tex. 206)(holding insured who had no 206)(holding insured who had no exposure for unreimbursed exposure for unreimbursed medical expenses had no medical expenses had no standing to assert claim against standing to assert claim against her insurer for underpayment). her insurer for underpayment). This rule has since been codified. This rule has since been codified. SeeSee Tex. Civ. Prac. & Rem. Code Tex. Civ. Prac. & Rem. Code § 41.0105 (eff. Sept. 1, 2003).”§ 41.0105 (eff. Sept. 1, 2003).”

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First party breach of contract suit – First party breach of contract suit – insured suit against her PIP carrier insured suit against her PIP carrier for paying an arbitrarily discounted for paying an arbitrarily discounted amount to medical providers.amount to medical providers.

Attempted class action.Attempted class action. Forth dropped damages claim and Forth dropped damages claim and

sought only declaratory and sought only declaratory and injunctive relief.injunctive relief.

Dismissed for lack of standing.Dismissed for lack of standing.

FN22 – FN22 – Allstate v. ForthAllstate v. Forth

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Distinguished Distinguished Black v. American Black v. American Bankers Ins.Bankers Ins. (which held carrier’s (which held carrier’s obligation to pay was triggered by obligation to pay was triggered by insured’s “incurrence” of medical insured’s “incurrence” of medical expenses upon receiving the expenses upon receiving the services).services).

Allstate paid the expenses and did Allstate paid the expenses and did not question whether Forth had not question whether Forth had incurred the charges.incurred the charges.


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““Moreover, Forth has no exposure in Moreover, Forth has no exposure in the future because limitations has the future because limitations has now run on the medical claims. From now run on the medical claims. From all appearances, her medical all appearances, her medical providers have accepted the amount providers have accepted the amount Allstate paid them without complaint, Allstate paid them without complaint, thereby satisfying Allstate’s thereby satisfying Allstate’s obligation under the policy.”obligation under the policy.”


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““FN22. FN22. See Allstate Indem. Co. v. See Allstate Indem. Co. v. ForthForth, 204 S.W.3d 795,796 (Tex. 206), 204 S.W.3d 795,796 (Tex. 206)(holding insured who had no exposure (holding insured who had no exposure for unreimbursed medical expenses for unreimbursed medical expenses had no standing to assert claim against had no standing to assert claim against her insurer for underpayment). This her insurer for underpayment). This rule has since been codified. rule has since been codified. SeeSee Tex. Tex. Civ. Prac. & Rem. Code § 41.0105 (eff. Civ. Prac. & Rem. Code § 41.0105 (eff. Sept. 1, 2003).”Sept. 1, 2003).”

FN22 – FN22 – Allstate v. Forth Allstate v. Forth ““Holding Codified”?Holding Codified”?

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Paid or incurred was not Paid or incurred was not in issue nor was it in issue nor was it briefed.briefed.

A “footnote decision”A “footnote decision”

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Has Supreme Court pre-Has Supreme Court pre-judged an issue absent a judged an issue absent a case or controversy and full case or controversy and full briefing?briefing?

““Shot across the bow.”Shot across the bow.”

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Mills v. FletcherMills v. Fletcher

Jury found $1,551 in medical Jury found $1,551 in medical expenses.expenses.

Liability carrier sought post-Liability carrier sought post-verdict reduction.verdict reduction.

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Opinion – J. AngeliniOpinion – J. Angelini J. Hilbig concurred in J. Hilbig concurred in

judgment onlyjudgment only Dissent – J. StoneDissent – J. Stone

Plurality OpinionPlurality Opinion

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Not Binding Not Binding PrecedentPrecedent

Mere DictaMere Dicta

Plurality OpinionPlurality Opinion

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““Thus, in constructing this statute, Thus, in constructing this statute, we believe that ‘medical or we believe that ‘medical or healthcare expenses incurred’ healthcare expenses incurred’ refers to the ‘big circle’ of medical refers to the ‘big circle’ of medical or healthcare expenses incurred at or healthcare expenses incurred at the time of the initial visit with the the time of the initial visit with the healthcare provider, while, as healthcare provider, while, as applied to the facts presented here, applied to the facts presented here, ‘actually incurred’ refers to the ‘actually incurred’ refers to the ‘smaller circle’ of expenses ‘smaller circle’ of expenses incurred after an adjustment of the incurred after an adjustment of the healthcare provider’s bill.”healthcare provider’s bill.”

“Incurred” v. “Actually Incurred”

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““However, given the However, given the plain meaning of section plain meaning of section 41.0105’s language, we 41.0105’s language, we need not consider need not consider legislative history here.”legislative history here.”

Ignored Legislative Ignored Legislative HistoryHistory

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Court may consider legislative Court may consider legislative history “whether or not the history “whether or not the statute is considered statute is considered ambiguous on its face...”ambiguous on its face...”

Tex. Gov’t. Code § 311.023Tex. Gov’t. Code § 311.023

Ignored Legislative Ignored Legislative HistoryHistory

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Court may consider legislative Court may consider legislative history, even if statute not history, even if statute not ambiguous per Code ambiguous per Code Construction ActConstruction Act

Medical charges are incurred at Medical charges are incurred at time services are rendered. time services are rendered. See, See, Black v. American Bankers Ins. Co.Black v. American Bankers Ins. Co.

- Dissent - - Dissent -

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““The statute does not The statute does not redefine the term ‘incurred’ redefine the term ‘incurred’ and it sets forth no different and it sets forth no different point in time from which to point in time from which to determine what expenses determine what expenses have been incurred.”have been incurred.”


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““Our Interpretation clearly Our Interpretation clearly doesdoes violate the violate the collateral source rule. … Here, the insurance collateral source rule. … Here, the insurance adjustments or amounts ‘written off’ are a adjustments or amounts ‘written off’ are a benefit that a patient receives only as a benefit that a patient receives only as a result of procuring healthcare insurance. result of procuring healthcare insurance. And, pursuant to our interpretation of And, pursuant to our interpretation of section 41.0105, Mills (the ‘wrongdoer’) will section 41.0105, Mills (the ‘wrongdoer’) will have the benefit of those adjustments made have the benefit of those adjustments made as the result of Fletcher having paid as the result of Fletcher having paid premiums and carrying health insurance.”premiums and carrying health insurance.”

Court Threw Out Collateral Court Threw Out Collateral Source RuleSource Rule

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““The Legislature, however, has the The Legislature, however, has the power to enact a statute that power to enact a statute that abrogates the collateral source rule, abrogates the collateral source rule, and we believe that the plain language and we believe that the plain language of section 41.0105 shows the of section 41.0105 shows the Legislature’s intent to do so here.”Legislature’s intent to do so here.”

Again Ignored Legislative Again Ignored Legislative History to Throw Out History to Throw Out

Collateral Source RuleCollateral Source Rule

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““The laudable public benefit of The laudable public benefit of the collateral source rule was the collateral source rule was continued by the Legislature continued by the Legislature when it rejected earlier proposed when it rejected earlier proposed versions of section 41.0105 that versions of section 41.0105 that would have eliminated the would have eliminated the collateral source rule.”collateral source rule.”


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Defense position is that § Defense position is that § 41.0105 41.0105

does not violate Collateral does not violate Collateral Source Rule.Source Rule.

Governor says § 41.0105Governor says § 41.0105 does not violate Collateral Source

Rule

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Substantive Due Process – Does not Substantive Due Process – Does not discriminate against the financially discriminate against the financially responsible.responsible.

Open courts – Does not restrict Open courts – Does not restrict common law cause of action.common law cause of action.

Unconstitutionality Vague – Not Unconstitutionality Vague – Not according to Justice Angelini.according to Justice Angelini.

No Constitutional Violation

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Gore v. FayeGore v. Faye

$6,000 case with three $6,000 case with three amicus briefs filed so far.amicus briefs filed so far.

Undecided

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Liability carrier attacking trial Liability carrier attacking trial court’s refusal to admit evidence court’s refusal to admit evidence of payments and adjustments on of payments and adjustments on medical bills.medical bills.

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Testimony from provider that in Testimony from provider that in liability cases, provider can liability cases, provider can refund the payer and collect full refund the payer and collect full charges.charges.

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Jury found less than the full Jury found less than the full amount of medical expenses amount of medical expenses sought.sought.

How can court reduce damages if How can court reduce damages if jury already has?jury already has?

Which medical bills did jury Which medical bills did jury reduce, and by how much?reduce, and by how much?

If statute means “paid and If statute means “paid and accepted,” why are these questions accepted,” why are these questions not answered?not answered?

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More Unanswered More Unanswered QuestionsQuestions

Mills v. FletcherMills v. Fletcher Dissent Dissent““The majority opinion ultimately The majority opinion ultimately stands for the proposition that the stands for the proposition that the statutory language ‘actually paid statutory language ‘actually paid or incurred’ means ‘actually paid or incurred’ means ‘actually paid or actually incurred as ultimately or actually incurred as ultimately determined by the provisions of an determined by the provisions of an insurance policy.’”insurance policy.’”

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Mills v. FletcherMills v. Fletcher Dissent Dissent At what point in time are bills At what point in time are bills

determined to have been “actually” determined to have been “actually” incurred v. incurred?incurred v. incurred?

What if there is a dispute between What if there is a dispute between provider and payer over coverage provider and payer over coverage or charges?or charges?

What if there are adjustments after What if there are adjustments after litigation initiated or concluded?litigation initiated or concluded?

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Plan VariationsPlan Variations What are terms of a given plan What are terms of a given plan

with regard to the balance with regard to the balance after payments or adjustments, after payments or adjustments, reimbursement, and reimbursement, and subrogation?subrogation?

Who is paying for the Who is paying for the coverage? How much? For how coverage? How much? For how long?long?

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Program VariationsProgram Variations What are the provisions of a What are the provisions of a

given program in terms of given program in terms of discounts, adjustments, and discounts, adjustments, and subrogation?subrogation?

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Must limitations run on Must limitations run on charges or the provider charges or the provider execute a release? execute a release?

What is to stop collusion What is to stop collusion between between providers/payers/liability providers/payers/liability carriers?carriers?

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COLLATERAL SOURCE COLLATERAL SOURCE RULERULE

Who is getting “the Who is getting “the windfall?”windfall?”

Collateral Source RuleCollateral Source Rule Do not let wrongdoer Do not let wrongdoer

benefit from his victim’s benefit from his victim’s financial responsibility.financial responsibility.

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COLLATERAL SOURCE COLLATERAL SOURCE RULERULE

Who is getting “the Who is getting “the windfall?”windfall?”

Linnstaedter/MillsLinnstaedter/Mills Rule Rule Do not let victim of Do not let victim of

another’s wrongdoing another’s wrongdoing benefit from her own benefit from her own financial responsibility. financial responsibility.

Let government programs Let government programs subsidize wrongdoers.subsidize wrongdoers.

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COLLATERAL SOURCE COLLATERAL SOURCE RULE RULE

Governor’s Veto Statement:Governor’s Veto Statement:

““Proponents of this bill argue it would Proponents of this bill argue it would reverse the ‘collateral source’ rule, which reverse the ‘collateral source’ rule, which prevents defendants from introducing prevents defendants from introducing evidence that an insurance company, rather evidence that an insurance company, rather than the individual, paid all or a portion of than the individual, paid all or a portion of the medical bills. This is not true. Nothing the medical bills. This is not true. Nothing in Section 41.0105 allows a defendant to in Section 41.0105 allows a defendant to introduce this evidence or hinders an introduce this evidence or hinders an individual’s ability to recover the amount of individual’s ability to recover the amount of the medical bills paid by their insurance the medical bills paid by their insurance company.”company.”

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Governor’s statement is Governor’s statement is wrongwrong

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A rule of evidence – prohibits A rule of evidence – prohibits admission of evidence of admission of evidence of payment or adjustments.payment or adjustments.

ANDAND

A rule of damages – prohibits A rule of damages – prohibits wrongdoer from having benefit of wrongdoer from having benefit of payments or adjustments.payments or adjustments.

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HOW WILL THE HOW WILL THE CONFLICT BE DECIDED?CONFLICT BE DECIDED?

Based on the plain language Based on the plain language of the statute, legislative of the statute, legislative history, and stare decisis?history, and stare decisis?

OROR Based on an unfulfilled Based on an unfulfilled

political agenda to eliminate political agenda to eliminate collateral source rule?collateral source rule?

1 Paid or Incurred Medical Expense Recoveries State Bar of Texas 23 rd Annual Advanced Personal Injury Law Course July 18-20, 2007 - Dallas Joe L. Lovell.

Documents

texas slide

collateral source rule

intent of governor

senator bill ratliff

texas appellate courts

federal courts self

legislative intent

house bill