Can Plaintiff Board the Amount of Medical Expenses Billed or Merely the Amount Paid?

By Armand J. Della Porta Jr., Esq.*

A plaintiff is injured, allegedly due to the defendant’s negligence or defective product. The plaintiff seeks medical treatment for his injury and is billed by his medical provider. The amount paid by his insurance company is substantially less than the amount billed. The plaintiff files suit against the defendant and, at trial, wants to introduce the amount his medical provider billed him as an item of damages. The defendant counters and argues that the appropriate amount to be submitted to the jury should be the amount paid by his insurer. The answer to this issue will have an impact on the settlement and verdict value, as the total amount of the medical bills will affect how much the parties and the jury will value the plaintiff’s case—particularly the plaintiff’s pain and suffering. Which figure should be submitted to the jury, the amount billed or the amount paid?

Courts have struggled with this issue. The Delaware Supreme Court recently issued an opinion in Stayton v. Delaware Health Corp., 2015 Del. LEXIS 288 (Del. June 12, 2015), which addresses it. In that case, the plaintiff sustained serious burn injuries while at a skilled nursing center. The burn hospital and medical providers who treated her billed $3,683,797.11. The plaintiff qualified for Medicare, which paid the providers $262,550.17 in full satisfaction of her medical bills. Medicare regulations required the write-off of the balance, and the providers could not pursue the plaintiff for the difference. The defendants moved for judgment on the pleadings, seeking judgment as a matter of law that the plaintiff’s medical expense damages were limited to the amount actually paid by Medicare. The plaintiff opposed the motion, relying on the collateral source rule, which provides that, if an injured party is compensated for injuries from a source independent of the tortfeasor, the payment is not admissible to limit the damages paid by the tortfeasor. The trial court granted the defendants’ motion, holding that the collateral source rule did not apply to amounts required by federal law to be written off by health care providers. The plaintiff appealed.

The Delaware Supreme Court has long recognized the collateral source rule as a “firmly embedded” principle of Delaware law. Under this rule, a tortfeasor cannot reduce its damages because of payment received by the plaintiff from an independent source based on the theory that the tortfeasor has no interest in and cannot benefit from funds received by the plaintiff from sources not related to the defendant. The rule recognizes that the plaintiff is receiving a windfall, but the court prefers that, if a windfall is to be awarded, it should be to the plaintiff instead of the defendant.

Most states recognize the collateral source rule, but when the issue is a write-off by the health care provider, states have taken various positions. Some states treat health care provider write-offs as they would any other third-party payments, such as those from insurers. Other states apply the rule only if the plaintiff bargained for the write-off. A third approach is to not apply the rule to provider write-offs at all.

The Delaware Supreme Court has applied the collateral source rule to provider write-offs in the same manner it has applied the rule to third-party payments. Where a provider reduced his bill to an uninsured plaintiff, the court upheld allowing the plaintiff to present to the jury the amount of the bill before it was reduced. Onusko v. Kerr, 880 A.2d 1022 (Del. 2005). Where Blue Cross, the plaintiff’s private health insurer, paid less than the full amount of the plaintiff’s invoices, the court held that the collateral source rule prohibited the tortfeasor from receiving the benefit of the health insurance contract for which the tortfeasor had paid no compensation. Mitchell v. Halder, 883 A.2d 32 (Del. 2006).

In Stayton, the Delaware Supreme Court faced the issue of whether to apply the collateral source rule to Medicare write-offs. The court did not view provider write-offs, in the case of Medicare, as payments made to or benefits conferred upon the plaintiff. Rather, the benefit of the provider write-off was conferred on federal taxpayers due to the tremendous purchasing power of Medicare. Therefore, the court held that the collateral source rule did not apply.

Because the collateral source rule did not apply, the next issue was how to determine the reasonable value of the medical services provided. Some states that face this issue hold that the amount paid after the write-off is the reasonable value of those services. Other courts hold that neither the amount charged nor the amount paid constitutes the reasonable value. Instead, both sides must present expert testimony as to what the reasonable value is, and the jury must make that determination based on that testimony.

The Delaware Supreme Court followed the first approach. It found that the fact that the medical providers agreed to provide their services to Medicare patients for the amount Medicare pays for their services suggested that, that amount was their reasonable value. This approach has an attractive simplicity and negates the need for expensive expert testimony. Thus, in the case of provider write-offs for Medicare patients, Delaware now holds that the proper measure of damages for the medical services the plaintiff received is the amount Medicare paid for those services, not what the providers originally charged.

*Armand, a shareholder in our Wilmington, Delaware office, can be reached at 302.552.4323 or ajdellaporta@mdwcg.com.

_{Defense Digest, Vol. 21, No. 3, September 2015}

_{Defense Digest is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2015 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}