Transcript 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
1
THE WAR
Does “paid or incurred” mean
“paid or incurred”
or
“paid and accepted”?
2
THE WAR
is
Ultimately about the
Collateral Source Rule
3
THE BATTLES
The Legislature
 The Governor
 The Federal Courts
 The Texas Appellate Courts

4
THE LEGISLATURE
2003 – 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.
5
THE LEGISLATURE
2003 – HB 4
House, after debate, passed
amendment to delete the “Collateral
Source Benefits” sub-chapter that
would have abrogated the rule.
6
THE LEGISLATURE
2003 – 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
7
THE LEGISLATURE
2007 – 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.”
8
THE LEGISLATURE
2007 – HB 3281




House Civ. Prac. Committee
Full House
Senate State Affairs Committee
Full Senate
5–0
139 – 0
9–0
28 - 2
9
THE GOVERNOR
2007 – HB 3281
- VETOED Filed a veto message:
“House Bill No. 3281 would reverse
Texas’ sweeping lawsuit reforms passed
in 2003”
10
2007 Legislative History
Intent of the Legislature is crystal
clear.
 Intent of Governor is clear, but
clearly contrary to Legislature.

11
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.)
12
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)
13
Self v. Wal-Mart
Granted motion in limine on
evidence of collateral source
benefits.
 Held - collateral source not
abrogated by § 41.0105.

14
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.
15
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.

16
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)
17
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.”
18
Linnstaedter



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
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
19
Linnstaedter
Issue: Whether hospital paid by worker’s
comp can recover balance by filing
hospital lien.
20
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.
21
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.”
22
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
23
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).”
24
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.
25
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.
26
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.”
27
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).”
28
Linnstaedter
A “footnote decision”
Paid or incurred was not in issue
nor was it briefed.
29
Linnstaedter
“Shot across the bow.”
Has Supreme Court pre-judged an
issue absent a case or controversy and
full briefing?
30
Mills v. Fletcher
Jury found $1,551 in medical expenses.
 Liability carrier sought post-verdict
reduction.

31
Mills v. Fletcher
Plurality Opinion
Opinion – J. Angelini
 J. Hilbig concurred in judgment only
 Dissent – J. Stone

32
Mills v. Fletcher
Plurality Opinion
Not Binding Precedent
 Mere Dicta

33
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.”
34
Mills v. Fletcher
Ignored Legislative History
“However, given the plain
meaning of section 41.0105’s
language, we need not consider
legislative history here.”
35
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
36
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.

37
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.”
38
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.”
39
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
40
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.”
41
Mills v. Fletcher
Defense position is that § 41.0105
does not violate Collateral Source Rule.
Governor says § 41.0105 does not violate
Collateral Source Rule
42
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.
43
Gore v. Faye
Undecided
$6,000 case with three amicus briefs
filed so far.
44
Gore v. Faye
Liability carrier attacking trial court’s
refusal to admit evidence of payments
and adjustments on medical bills.
45
Gore v. Faye
Testimony from provider that in liability
cases, provider can refund the payer
and collect full charges.
46
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?

47
More Unanswered Questions
Mills 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.’”
48
More Unanswered Questions
Mills 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?

49
More Unanswered Questions
Plan 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?

50
More Unanswered Questions
Program Variations

What are the provisions of a given
program in terms of discounts,
adjustments, and subrogation?
51
More Unanswered Questions
Must limitations run on charges or
the provider execute a release?
 What is to stop collusion between
providers/payers/liability carriers?

52
COLLATERAL SOURCE RULE
Who is getting “the windfall?”
Collateral Source Rule

Do not let wrongdoer benefit from
his victim’s financial responsibility.
53
COLLATERAL SOURCE RULE
Who 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.

54
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.”
55
COLLATERAL SOURCE RULE
Governor’s statement is wrong
56
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.
57
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?

58