PAID VS. INCURRED MEDICAL EXPENSES: TEXAS SUPREME COURT HOLDS THAT ONLY EVIDENCE OF RECOVERABLE MEDICAL EXPENSES IS ADMISSIBLE AT TRIAL.

August 15, 2011

In a paramount decision, the Texas Supreme Court recently held that only evidence of recoverable medical expenses, meaning those expenses, which have been or must be paid by or for the claimant, is admissible at trial. Haygood v. DeEscobedo, 2011 WL 2601363 (Tex. July 1, 2011).

The majority opinion, written by Justice Hecht, explains: “Damages for wrongful personal injury include the reasonable expenses for necessary medical care, but it has become increasingly difficult to determine what expenses are reasonable. Health care providers set charges they maintain are reasonable while agreeing to reimbursement at much lower rates determined by insurers to be reasonable, resulting in great disparities between amounts billed and payments accepted.”   Pursuant to Section 41.0105 of the Texas Civil Practice and Remedies Code, “recovery of medical or health care expenses incurred is limited to the amount actually paid or incurred by or on behalf of the claimant.”  In its opinion, Texas Supreme Court further explains that Section 41.0105 limits recovery, and consequently the evidence at trial, to expenses that the provider has a legal right to be paid.

In Haygood, a motorist who was injured in an automobile accident filed lawsuit against another motorist involved  in  accident.  The  District  Court  found  that  the  defendant  motorist’s  negligence  caused  the accident and awarded past medical expenses to Plaintiff in excess of those paid or owed. The court of appeals reversed, holding that section 41.0105 precluded evidence or recovery of expenses that “neither the claimant nor anyone acting on his behalf will ultimately be liable for paying.” The Texas Supreme Court granted the injured motorist's petition for review to resolve the conflict between the two courts.

The Supreme Court’s decision states: “The benefit of insurance to the insured is the payment of charges owed to the health care provider. An adjustment in the amount of those charges to arrive at the amount owed is a benefit to the insurer, one it obtains from the provider for itself, not for the insured…Thus, ‘actually paid and incurred’ means expenses that have been or will be paid, and excludes the difference between  such  amount  and  charges  the  service  provider  bills  but  has  no  right  to  be  paid.”  As  to admissibility of evidence, the Court held that since a claimant is not entitled to recover medical charges that a provider is not entitled to be paid, evidence of such charges is irrelevant to the issue of damages. The Court goes on to advise that the collateral source rule continues to apply to such expenses, and a jury should not be told that medical expenses will be covered in whole or in part by insurance, nor should a jury be told that a health care provider adjusted its charges because of insurance.