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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 Lovell, Lovell, Newsom & Isern, LLP Amarillo, Texas. THE WAR. Does “paid or incurred” mean “paid or incurred” or

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Paid or incurred medical expense recoveries

Paid or Incurred Medical Expense Recoveries

State Bar of Texas

23rd Annual Advanced

Personal Injury Law Course

July 18-20, 2007 - Dallas

Joe L. Lovell

Lovell, Lovell, Newsom & Isern, LLP

Amarillo, Texas


The war
THE WAR

Does “paid or incurred” mean

“paid or incurred”

or

“paid and accepted”?


The war1
THE WAR

is

Ultimately about the

Collateral Source Rule


The battles
THE BATTLES

  • The Legislature

  • The Governor

  • The Federal Courts

  • The Texas Appellate Courts


The legislature 2003 hb 4
THE LEGISLATURE2003 – HB 4

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


The legislature 2003 hb 41
THE LEGISLATURE2003 – HB 4

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


The legislature 2003 hb 42
THE LEGISLATURE2003 – HB 4

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

Senator Bill Ratliff


The legislature 2007 hb 3281
THE LEGISLATURE2007 – HB 3281

Added to § 41.0105, the following:

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

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


The legislature 2007 hb 32811
THE LEGISLATURE2007 – HB 3281

  • House Civ. Prac. Committee 5 – 0

  • Full House 139 – 0

  • Senate State Affairs Committee 9 – 0

  • Full Senate 28 - 2


The governor 2007 hb 3281 vetoed
THE GOVERNOR2007 – HB 3281 - VETOED -

Filed a veto message:

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


2007 legislative history
2007 Legislative History

  • Intent of the Legislature is crystal clear.

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


2007 legislative history1
2007 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 Floresville, 53 S.W.3d 447,454

(Tex. App. – San Antonio 2001, no pet.)


The federal courts
THE FEDERAL COURTS

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

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


Self v wal mart
Self v. Wal-Mart

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

  • Held - collateral source not abrogated by § 41.0105.


Self v wal mart1
Self v. Wal-Mart

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

Citing Black v. American Bankers Ins.


Coppedge v k b i inc
Coppedge v. K.B.I., Inc.

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

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

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


The texas appellate courts
THE TEXAS APPELLATE COURTS

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

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

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

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


Bituminous gas corp v cleveland
Bituminous Gas Corp. v. Cleveland

Mere Recitation of Proceedings Below

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


Linnstaedter
Linnstaedter

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

  • Hospital filed lien per Property Code.

  • Comp paid medical, discounted per Labor Code.

  • Third-party suit settled for $175,000, balance paid to hospital to satisfy lien.

  • Plaintiffs brought dec action to get back the $12,966.71


Linnstaedter1
Linnstaedter

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


Linnstaedter2
Linnstaedter

Which Prevails, Labor Code or Property Code?

Labor Code.

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


Linnstaedter3
Linnstaedter

§ 41.0105 Not In Issue

- But -

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


Linnstaedter4
Linnstaedter

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


Linnstaedter5
Linnstaedter

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


Linnstaedter6
Linnstaedter

FN22 – Allstate v. Forth

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

  • Attempted class action.

  • Forth dropped damages claim and sought only declaratory and injunctive relief.

  • Dismissed for lack of standing.


Linnstaedter7
Linnstaedter

FN22 – Allstate v. Forth

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

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


Linnstaedter8
Linnstaedter

FN22 – Allstate v. Forth

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


Linnstaedter9
Linnstaedter

FN22 – Allstate v. Forth

“Holding Codified”?

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


Linnstaedter10
Linnstaedter

A “footnote decision”

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


Linnstaedter11
Linnstaedter

“Shot across the bow.”

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


Mills v fletcher
Mills v. Fletcher

  • Jury found $1,551 in medical expenses.

  • Liability carrier sought post-verdict reduction.


Mills v fletcher1
Mills v. Fletcher

Plurality Opinion

  • Opinion – J. Angelini

  • J. Hilbig concurred in judgment only

  • Dissent – J. Stone


Mills v fletcher2
Mills v. Fletcher

  • Not Binding Precedent

  • Mere Dicta

Plurality Opinion


Mills v fletcher3
Mills v. Fletcher

“Incurred” v. “Actually Incurred”

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


Mills v fletcher4
Mills v. Fletcher

Ignored Legislative History

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


Mills v fletcher5
Mills v. Fletcher

Ignored Legislative History

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

Tex. Gov’t. Code § 311.023


Mills v fletcher6
Mills v. Fletcher

- Dissent -

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

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


Mills v fletcher7
Mills v. Fletcher

- Dissent -

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


Mills v fletcher8
Mills v. Fletcher

Court Threw Out Collateral Source Rule

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


Mills v fletcher9
Mills v. Fletcher

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

Again Ignored Legislative History to Throw Out Collateral Source Rule


Mills v fletcher10
Mills v. Fletcher

- Dissent -

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


Mills v fletcher11
Mills v. Fletcher

Defense position is that § 41.0105

does not violate Collateral Source Rule.

Governor says § 41.0105does not violate Collateral Source Rule


Mills v fletcher12
Mills v. Fletcher

No Constitutional Violation

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

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

  • Unconstitutionality Vague – Not according to Justice Angelini.


Gore v faye
Gore v. Faye

Undecided

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


Gore v faye1
Gore v. Faye

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


Gore v faye2
Gore v. Faye

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


Gore v faye3
Gore v. Faye

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

  • How can court reduce damages if jury already has?

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

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


More unanswered questions mills v fletcher dissent
More Unanswered QuestionsMills v. Fletcher Dissent

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


More unanswered questions mills v fletcher dissent1
More Unanswered QuestionsMills v. Fletcher Dissent

  • At what point in time are bills determined to have been “actually” incurred v. incurred?

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

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


More unanswered questions plan variations
More Unanswered QuestionsPlan Variations

  • What are terms of a given plan with regard to the balance after payments or adjustments, reimbursement, and subrogation?

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


More unanswered questions program variations
More Unanswered QuestionsProgram Variations

  • What are the provisions of a given program in terms of discounts, adjustments, and subrogation?


More unanswered questions
More Unanswered Questions

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

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


Collateral source rule who is getting the windfall
COLLATERAL SOURCE RULEWho is getting “the windfall?”

Collateral Source Rule

  • Do not let wrongdoer benefit from his victim’s financial responsibility.


Collateral source rule who is getting the windfall1
COLLATERAL SOURCE RULEWho is getting “the windfall?”

Linnstaedter/Mills Rule

  • Do not let victim of another’s wrongdoing benefit from her own financial responsibility.

  • Let government programs subsidize wrongdoers.


Collateral source rule
COLLATERAL SOURCE RULE

Governor’s Veto Statement:

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


Collateral source rule1
COLLATERAL SOURCE RULE

Governor’s statement is wrong


Collateral source rule2
COLLATERAL SOURCE RULE

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

AND

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


How will the conflict be decided
HOW WILL THE CONFLICT BE DECIDED?

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

    OR

  • Based on an unfulfilled political agenda to eliminate collateral source rule?


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