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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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Presentation on theme: "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."— Presentation transcript:

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

2 2 THE WAR Does “paid or incurred” mean “paid or incurred” or “paid and accepted”?

3 3 THE WAR is Ultimately about the Collateral Source Rule

4 4 THE BATTLES The Legislature The Legislature The Governor The Governor The Federal Courts The Federal Courts The Texas Appellate Courts The Texas Appellate Courts

5 5 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.

6 6 THE LEGISLATURE 2003 – HB 4 House, after debate, passed amendment to delete the “Collateral Source Benefits” sub-chapter that would have abrogated the rule.

7 7 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

8 8 THE LEGISLATURE 2007 – HB 3281 Added to § , 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.”

9 9 THE LEGISLATURE 2007 – HB 3281 House Civ. Prac. Committee5 – 0 House Civ. Prac. Committee5 – 0 Full House139 – 0 Full House139 – 0 Senate State Affairs Committee9 – 0 Senate State Affairs Committee9 – 0 Full Senate Full Senate28 - 2

10 10 THE GOVERNOR 2007 – HB VETOED - Filed a veto message: “House Bill No would reverse Texas’ sweeping lawsuit reforms passed in 2003”

11 Legislative History Intent of the Legislature is crystal clear. Intent of the Legislature is crystal clear. Intent of Governor is clear, but clearly contrary to Legislature. Intent of Governor is clear, but clearly contrary to Legislature.

12 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.)

13 13 THE FEDERAL COURTS Self v. Wal-Mart Stores, No. 2:05-CV- 301 (E.D. Tex. April 5, 2007) Self v. Wal-Mart Stores, No. 2:05-CV- 301 (E.D. Tex. April 5, 2007) Coppedge v. K. B. I., Inc., 2007 WL (E.D. Tex. July 3, 2007) Coppedge v. K. B. I., Inc., 2007 WL (E.D. Tex. July 3, 2007)

14 14 Self v. Wal-Mart Granted motion in limine on evidence of collateral source benefits. Granted motion in limine on evidence of collateral source benefits. Held - collateral source not abrogated by § Held - collateral source not abrogated by §

15 15 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.

16 16 Coppedge v. K.B.I., Inc. Granted motion in limine excluding evidence of payments, adjustments, and write offs. Granted motion in limine excluding evidence of payments, adjustments, and write offs. Refused to limit evidence to net amount of medical expenses. Refused to limit evidence to net amount of medical expenses. Will consider post-trial motion for reduction of damages. Will consider post-trial motion for reduction of damages.

17 17 THE TEXAS APPELLATE COURTS Bituminous Gas. Corp. v. Cleveland, 223 S.W.3d 485 (Tex. App. – Amarillo 2006, no pet.) Bituminous Gas. Corp. v. Cleveland, 223 S.W.3d 485 (Tex. App. – Amarillo 2006, no pet.) Daughters of Charity Health Serv. v. Linnstaedter, 2007 WL (Tex. June 1, 2007) Daughters of Charity Health Serv. v. Linnstaedter, 2007 WL (Tex. June 1, 2007) Mills v. Fletcher, 2007 WL (Tex. App. – San Antonio, May 16, 2007, no pet.) Mills v. Fletcher, 2007 WL (Tex. App. – San Antonio, May 16, 2007, no pet.) Gore v. Faye, No CV (Tex. App. – Amarillo) Gore v. Faye, No CV (Tex. App. – Amarillo)

18 18 Bituminous Gas Corp. v. Cleveland “Following receipt of the jury verdict awarding $999,000, pursuant to section 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, ” Mere Recitation of Proceedings Below

19 19 Linnstaedter Plaintiff injured in car crash while in course of employment. Plaintiff injured in car crash while in course of employment. Hospital filed lien per Property Code. Hospital filed lien per Property Code. Comp paid medical, discounted per Labor Code. Comp paid medical, discounted per Labor Code. Third-party suit settled for $175,000, balance paid to hospital to satisfy lien. Third-party suit settled for $175,000, balance paid to hospital to satisfy lien. Plaintiffs brought dec action to get back the $12, Plaintiffs brought dec action to get back the $12,966.71

20 20 Linnstaedter Issue: Whether hospital paid by worker’s comp can recover balance by filing hospital lien.

21 21 Linnstaedter Because hospitals cannot sue patient directly for balance (thus, no debt), they cannot collect balance indirectly through lien. Which Prevails, Labor Code or Property Code? Labor Code.

22 22 Linnstaedter “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.” § Not In Issue - But -

23 23 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

24 24 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 § (eff. Sept. 1, 2003).”

25 25 Linnstaedter First party breach of contract suit – insured suit against her PIP carrier for paying an arbitrarily discounted amount to medical providers. First party breach of contract suit – insured suit against her PIP carrier for paying an arbitrarily discounted amount to medical providers. Attempted class action. Attempted class action. Forth dropped damages claim and sought only declaratory and injunctive relief. Forth dropped damages claim and sought only declaratory and injunctive relief. Dismissed for lack of standing. Dismissed for lack of standing. FN22 – Allstate v. Forth

26 26 Linnstaedter 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). 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. Allstate paid the expenses and did not question whether Forth had incurred the charges. FN22 – Allstate v. Forth

27 27 Linnstaedter “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.” FN22 – Allstate v. Forth

28 28 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 § (eff. Sept. 1, 2003).” FN22 – Allstate v. Forth “Holding Codified”?

29 29 Linnstaedter Paid or incurred was not in issue nor was it briefed. A “footnote decision”

30 30 Linnstaedter Has Supreme Court pre-judged an issue absent a case or controversy and full briefing? “Shot across the bow.”

31 31 Mills v. Fletcher Jury found $1,551 in medical expenses. Jury found $1,551 in medical expenses. Liability carrier sought post-verdict reduction. Liability carrier sought post-verdict reduction.

32 32 Mills v. Fletcher Opinion – J. Angelini Opinion – J. Angelini J. Hilbig concurred in judgment only J. Hilbig concurred in judgment only Dissent – J. Stone Dissent – J. Stone Plurality Opinion

33 33 Mills v. Fletcher Not Binding Precedent Not Binding Precedent Mere Dicta Mere Dicta Plurality Opinion

34 34 Mills v. Fletcher “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.” “Incurred” v. “Actually Incurred”

35 35 Mills v. Fletcher “However, given the plain meaning of section ’s language, we need not consider legislative history here.” Ignored Legislative History

36 36 Mills v. Fletcher Court may consider legislative history “whether or not the statute is considered ambiguous on its face...” Tex. Gov’t. Code § Ignored Legislative History

37 37 Mills v. Fletcher Court may consider legislative history, even if statute not ambiguous per Code Construction Act 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. Medical charges are incurred at time services are rendered. See, Black v. American Bankers Ins. Co. - Dissent -

38 38 Mills v. Fletcher “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.” - Dissent -

39 39 Mills v. Fletcher “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 , Mills (the ‘wrongdoer’) will have the benefit of those adjustments made as the result of Fletcher having paid premiums and carrying health insurance.” Court Threw Out Collateral Source Rule

40 40 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 shows the Legislature’s intent to do so here.” Again Ignored Legislative History to Throw Out Collateral Source Rule

41 41 Mills v. Fletcher “ The laudable public benefit of the collateral source rule was continued by the Legislature when it rejected earlier proposed versions of section that would have eliminated the collateral source rule.” - Dissent -

42 42 Mills v. Fletcher Defense position is that § does not violate Collateral Source Rule. Governor says § Governor says § does not violate Collateral Source Rule

43 43 Mills v. Fletcher Substantive Due Process – Does not discriminate against the financially responsible. Substantive Due Process – Does not discriminate against the financially responsible. Open courts – Does not restrict common law cause of action. Open courts – Does not restrict common law cause of action. Unconstitutionality Vague – Not according to Justice Angelini. Unconstitutionality Vague – Not according to Justice Angelini. No Constitutional Violation

44 44 Gore v. Faye $6,000 case with three amicus briefs filed so far. Undecided

45 45 Gore v. Faye Liability carrier attacking trial court’s refusal to admit evidence of payments and adjustments on medical bills.

46 46 Gore v. Faye Testimony from provider that in liability cases, provider can refund the payer and collect full charges.

47 47 Gore v. Faye Jury found less than the full amount of medical expenses sought. How can court reduce damages if jury already has? How can court reduce damages if jury already has? Which medical bills did jury reduce, and by how much? Which medical bills did jury reduce, and by how much? If statute means “paid and accepted,” why are these questions not answered? If statute means “paid and accepted,” why are these questions not answered?

48 48 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.’”

49 49 More Unanswered Questions Mills v. Fletcher Dissent At what point in time are bills determined to have been “actually” incurred v. incurred? 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 is a dispute between provider and payer over coverage or charges? What if there are adjustments after litigation initiated or concluded? What if there are adjustments after litigation initiated or concluded?

50 50 More Unanswered Questions Plan Variations What are terms of a given plan with regard to the balance after payments or adjustments, reimbursement, and subrogation? 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? Who is paying for the coverage? How much? For how long?

51 51 More Unanswered Questions Program Variations What are the provisions of a given program in terms of discounts, adjustments, and subrogation? What are the provisions of a given program in terms of discounts, adjustments, and subrogation?

52 52 More Unanswered Questions Must limitations run on charges or the provider execute a release? Must limitations run on charges or the provider execute a release? What is to stop collusion between providers/payers/liability carriers? What is to stop collusion between providers/payers/liability carriers?

53 53 COLLATERAL SOURCE RULE Who is getting “the windfall?” Collateral Source Rule Do not let wrongdoer benefit from his victim’s financial responsibility. Do not let wrongdoer benefit from his victim’s financial responsibility.

54 54 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. Do not let victim of another’s wrongdoing benefit from her own financial responsibility. Let government programs subsidize wrongdoers. Let government programs subsidize wrongdoers.

55 55 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 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.”

56 56 COLLATERAL SOURCE RULE Governor’s statement is wrong

57 57 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.

58 58 HOW WILL THE CONFLICT BE DECIDED? Based on the plain language of the statute, legislative history, and stare decisis? 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? Based on an unfulfilled political agenda to eliminate collateral source rule?


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