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Resisting Motions to Exclude Medical Bills And Limit Recovery to Actual Payments Made By Health Insurers

Most, if not all, health insurers have some contractual arrangement, such as a preferred provider agreement (PPA), with health care providers. These contractual arrangements require that the health insurer receive a discount when they pay a bill on behalf of their insured. These arrangements exist because health insurers are excellent repeat customers with substantial bargaining power. Health insurers have this bargaining power because clients like yours have diligently paid premiums for years.

Recently, we have seen motions in limine seeking to exclude from evidence the amount billed by a health provider when the plaintiff’s health insurer paid some lesser amount. The defendants argue that the plaintiff is entitled only to the amount paid by their health insurer, not the amount of the medical bills.

These defense motions depart from well-established law and ignore the long-standing rule that defendants are responsible for the reasonable value of damages. The following article provides a response to these types of motions, however the research and analysis is by no means exhaustive. Further, as a disclaimer, this article only deals with situations where a private insurer, to whom the plaintiff has paid premiums has paid for the medical bills.


A.           Reasonable Value, and Not Out-of-Pocket Expense, is the Proper Measure of Damages.


In Montana, plaintiffs are entitled to recover the reasonable value of their loss. This is true whether the actual out-of-pocket expense is lower than the reasonable value, or higher than the reasonable value. Restatement (Second) of Torts 920A, cmt. b, c (1977) (quoted in Five U’s, Inc. v. Burger King Corp. 290 Mont. 452, 456, 962 P.2d 1218, 1221 (1998); see also Johnson v. U.S., 510 F. Supp. 1039, 1981 (under Montana law, plaintiff entitled to recover reasonable value of necessary expenses for any medical, surgical, hospital, and other services and care and supplies).

         It is not the law, and it has never been the law, that recovery is based solely on the amount paid for medical care. Storm v. City of Butte, 35 Mont. 385, 89 P. 726 (1907). As far back as 1907, the Montana Supreme Court has recognized that:

[T]he rule of law in [a personal injury] case is: “The measure of the recovery … is not necessarily the amount paid for medical attendance. The reasonableness of the charges must be established. The reasonable charges intended are the reasonable charges of the profession generally, and not the usual charges of the particular physician or surgeon who is testifying on that issue.”

Storm, 35 Mont. 385, 89 P. 726.

The rule that plaintiffs are compensated for the reasonable value of medical services, and not their out-of-pocket costs, is reflected in Montana’s pattern jury instruction 25.07:

Your award should include the reasonable value of necessary care, treatment and services received and those reasonably probable to be required in the future.

The rule derives from the sober acknowledgment that out-of-pocket costs may either exceed or fall short of the reasonable value of the service necessitated by the tortfeasor’s act or omission. Storm, 35 Mont. 385, 89 P. 726. The most equitable solution, long-recognized in the law, is to hold the defendant responsible for the reasonable value of the service, without regard for the out-of-pocket cost. In many cases, this rule protects defendants who avoid paying unreasonable costs incurred by the plaintiff.

 An analogy can be made to an auto collision case. In such a case, liability for damages is not tied to a plaintiff’s out-of-pocket expenses. To the contrary, plaintiffs are entitled to recover the amount it would reasonably cost to have the auto fixed. E.g., Hoenstine v. Rose, 131 Mont. 557, 563, 312 P.2d 514, 517 (1957). This is true even if the insured’s own collision insurer is able to negotiate a lower bill, or even if they do not repair the automobile at all. Id. The amount paid is irrelevant. Plaintiffs’ “actual damages” are the reasonable cost of repair – or, in this case, the reasonable cost of the medical services incurred.

B.            Excluding Medical Bills Deprives Plaintiffs of the Best Evidence Regarding the Reasonable Value Medical Expenses Incurred as a Result of Defendants’ Negligence.

In every case in which we have seen this type of motion, the defendants seek to exclude medical bills from evidence. The argument, in essence, is that: “The amount billed has no bearing on Plaintiffs’ purported damages.” Obviously this position is irreconcilable with the well-established law of Montana, articulated by the Montana Supreme Court:

“…[W]hen a person is injured or has suffered death through the wrongful death of another, the incurrence of the medical bills and the funeral costs, without more, is sufficient to establish a basis for the recovery of damages.”
 
Kunke v. Fisher, 210 Mont. 114, 124 683 P. 2d 916, 921(1984) (emphasis added).

Kunke clearly provides that medical bills are relevant to determining damages in a personal injury case. Any motion that asserts medical bills are irrelevant is simply irreconcilable with established Montana law.

C.           Medical Bills Have Probative Value Beyond Proving the Reasonable Value of Medical Services. 

Suggestions will be made by defense counsel that you can either show the jury the amount paid by the health insurer (with the insurer information redacted) or the parties can stipulate to the amount of medical bills. While your individual case may merit such an arrangement, in general you are probably worse off accepting these “solutions.”

Medical bills are important evidence in a jury trial and their probative value goes beyond proving the value of medical expenses. It is inappropriate in most cases to offer all medical records into evidence. However the itemized medical bills are a valuable way to show the jury the extent of medical care necessitated by the defendant’s negligence and are relevant to both pain and suffering as well as loss of established course of life.

Going to the doctor is, at a minimum, inconvenient. Medical bills itemize each test, treatment and follow up visit in a succinct record that, importantly, was not drafted by the lawyer. Medical bills should also provide persuasive evidence that your life care plan is reasonable and accurate. Because of the probative value of medical bills, you should always have the option to submit medical bills to the jury along with your Rule 1006 Summary that does the jury’s math for them.

An illustrative case is Barkley v. Wallace, 595 S.E.2d 271, 274 (Va. 2004). In Barkley, the defendant argued that the district court properly excluded medical bills because they had been discharged for a lesser amount. The Barkley court disagreed and ordered a new trial, holding:

Generally, a litigant is entitled to introduce all competent, material, and relevant evidence that tends to prove or disprove any material issue in the case, unless that evidence violates a specific rule of admissibility. Every fact that tends to establish the probability or improbability of a fact at issue is relevant. Therefore, evidence is relevant if “it tends to establish a party's claim or defense or adds force and strength to other evidence bearing upon an issue in the case.”

Like the medical bills in Parker, the medical bills before us were relevant because they tended to establish the probability of Barkley's claim that she experienced pain and suffering as a result of the accident.

Barkley at 273-274.

     In this well-reasoned opinion, the Barkley court recognized that medical bills have a probative value that goes beyond proving the value of the medical services necessitated by the negligence.

         Similarly, in Melaver v. Garis, 138 S.E.2d 435, 436 (Ga. App. 1964), the court upheld the decision of the district court allowing the admission of medical bills in a case only concerning the value of pain and suffering because the medical bills were “relevant to show not only the amount of medical expense incurred but the number and duration of plaintiff's treatment as illustrative of pain allegedly suffered by plaintiff.”[1]

         Because the medical bills are relevant not only to show the reasonable value of the medical care necessitated by the tort, but have probative value to show the pain, suffering and inconvenience imposed upon the plaintiff, you should have the option of admitting them into evidence.

Stipulating to an amount of medical expenses is not a solution. In most circumstances, submitting a document that reflects the amounts paid by the insurer is also not acceptable. Such documents generally do not itemize the medical care in the same fashion as the medical bills. For example, it might list all charges (which the defense would allege are inadmissible) and then a total (again inadmissible) and then a discount (inadmissible) and finally the amount paid by the insurer. Getting this document to the jury will result in submitting more redactions than substance, the same way Darth Vadar was more machine than man.

Submitting such a document with substantial redactions will inevitably brew suspicion amongst the jurors. Weren’t you wondering about how Darth Vader looked under the helmet? The jury should be educated about the reasonable value of the medical service provided without being tempted to conclude that the medical bills were covered by health insurance. After all, you probably will not be able to educate the jury about the insurer’s subrogation rights.

D.           Collateral Sources, Such as Health Insurance, Are Irrelevant.

When the “solutions” are recommended, keep in mind that payments by health insurers are collateral source benefits that are inadmissible. It is well-recognized that in all personal injury cases evidence concerning collateral source benefits, such as health insurance or life insurance, is inadmissible and the introduction of such evidence constitutes reversible error. Mydlarz v. Palmer/Duncan Construction Co. 209 Mont. 325, 341, 682 P.2d 695, 703 (1984); see also Thomsen v. State, Dept. of Highways, 253 Mont. 460, 463, 833 P.2d 1076, 1077 (1992); Allers v. Willis, 197 Mont. 499, 643 P.2d 592 (1982); Goggans v. Winkley,159 Mont. 85, 91, 495 P.2d 594, 598 (1972). As quoted by the Montana Supreme Court:

The potentially prejudicial impact of evidence that a personal injury plaintiff received collateral insurance payments varies little from case to case. Even with cautionary instructions, there is substantial danger that the jurors will take the evidence into account in assessing the damages to be awarded to an injured plaintiff.
 
*****

[I]ntroduction of collateral source evidence may be much more damaging to a plaintiff's case than just affecting the jury's judgment regarding damages… such evidence can have an impact upon a jury's verdict on the issue of liability…
 

Thomsen, 253 Mont. at 463, 833 P.2d at 1077 (internal citations omitted).

If the district court excludes medical bills, in light of the prohibition on admitting collateral source benefits, a plaintiff has no remaining proof of damages related to the reasonable value of medical care. In the motions we have seen, the defendants argue that the amount paid by health insurers should evidence the entire amount of damages, instead of the amount billed by the Defendants following their negligence. It is important to educate the district court that such a position invites a reversible error.

E.            Defendants Not Entitled to “Discount” Because This Benefit Procured Through Years of Premium Payments, Which Defendants Did Not Contribute Towards.

         In the case where a plaintiff carries private health insurance, there is well-established law holding that a plaintiff’s recovery is not reduced to a discounted amount paid by a health insurer because the defendant should not benefit from the plaintiff’s own prudence in paying insurance premiums which made the discount possible. See Restatement (Second) of Torts § 920A.

         Restatement (Second) of Torts § 920A, cmt. b. states:

Payments made or benefits conferred by other sources are known as collateral-source benefits. They do not have the effect of reducing the recovery against the defendant…

If the plaintiff was himself responsible for the benefit, as by maintaining his own insurance or by making advantageous employment arrangements, the law allows him to keep it for himself.

Restatement (Second) of Torts § 920A, cmt. b.

         According to American Jurisprudence:

It is a well-settled rule of damages that the amount recoverable for tortious personal injuries is not decreased by the fact that the injured party has been wholly or partly indemnified for the loss by proceeds from accident insurance where the tortfeasor did not contribute to the payment of premiums of such insurance. This rule is usually justified on the basis that the wrongdoer should not benefit from the expenditures made by the injured party in procuring the insurance coverage.

22 Am. Juris. 2d § 210.

         AmJur acknowledges that some cases have held that damages have been reduced in cases where the plaintiff receives public assistance, but states that the general rule is to avoid a reduction from the reasonable value of services necessitated by the tort where the plaintiff procured the insurance:

Even here, however, the general rule is that the tortfeasor cannot decrease his damages by the amount of such insurance received by the injured party where the tortfeasor did not contribute to the payment of the premiums of the insurance.

Id.

         Courts agree that where a plaintiff has prudently protected themselves by paying premiums for health insurance, a tortfeasor may not reduce damages. For example, a California court held:

Where a person suffers personal injury or property damage by reason of the wrongful act of another, an action against the wrongdoer for the damages suffered is not precluded nor is the amount of the damages reduced by the receipt by him of payment for his loss from a source wholly independent of the wrongdoer…

The most typical case is where the person suffering the damage has procured insurance protecting him against the loss, to which the wrongdoer did not contribute in procuring, and his insurer pays him for the loss suffered.      

Anheuser-Busch, Inc. v. Starley, 179 P.2d 448, 450 (1946) (internal citations omitted).

If a plaintiff’s recovery is reduced by some amount because she carried health insurance, then it logically follows that that recovery should be increased to reflect the costs she paid to obtain the health coverage. It is simply easier and more equitable to follow Montana law and determine the reasonable value of the medical services provided and allow the medical bills to serve as probative evidence. Then, if appropriate to avoid a windfall, a reduction to accommodate collateral sources may be made after the verdict by the district court.

F.            The “Windfall Argument.”

Defendants may argue that a plaintiff might receive a “windfall” if recovery is not reduced to the amount actually paid by the health insurers. It is important to educate the district court that any concerns about “windfall” are adequately addressed, however, by Section 27–1–308, MCA.

Section 27–1–308(1), MCA, provides that “a plaintiff's recovery must be reduced by any amount paid or payable from a collateral source that does not have a subrogation right.” Importantly, Section 27–1–308(3), MCA, requires a jury to determine its award without consideration of any collateral sources. After the jury award, the trial judge must hold an evidentiary hearing to determine the existence and amount of collateral sources. Section 27–1–308(3), MCA.

G.           Cases Dealing with This Issue. 

There are now a few district court opinions utilized by defendants to support their motions to exclude medical bills and limit recovery to the amount actually paid by a health insurer. Two are from Federal Courts: Chapman v. Mazda Motor of America Inc., 7 F. Supp. 2d 1123 (D. Mont. 1998); and ; and Willink v. Boyne, USA, 2013 WL 5756157. One is a district court opinion from Billings: Moody v. Hill, DV-10-1587 (Mont. Dist. Apr. 30, 2012). I’ll address these cases in turn below.

                                 i.Chapman v. Mazda

In Chapman, the plaintiff’s medical expenses were covered by Medicaid. Medicaid disallowed various expenses under the reimbursement scheme. The defendant moved to exclude evidence of medical bills beyond the amounts actually paid for Chapman’s care. Mazda relied on §27-1-201, MCA, which states that damage in a non-contract action is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not.” 

Judge Molloy denied the motion to exclude the bills because he recognized that evidence of total medical bills is admissible ‘to show the jury the severity and the extent of [plaintiff’s] injuries.’” Chapman at 1125. Judge Molloy did write, in dicta, however that “the amounts of disallowed medical expenses are not relevant to prove damages for past medical loss.” Id.

This unfortunate sentence is not binding on Montana district courts. Further, Chapman does not address the Montana rule, set forth in MPI 25.07, that the appropriate measure of damages are the “reasonable value” of the services. Instead Chapman relies on the California case of Hanif v. Housing Authority, 200 Cal. App. 3d 635 (Cal. App. 1988), where an appellate level California court held that the “reasonable value” does not mean that a plaintiff can recover more than the amount paid by Medi-Cal, even though reasonable value of services was higher. Id. at 639.  As recognized by courts around the country, Hanif represents a minority approach.  Leitinger v. DBart, Inc. (Wis. 2007), 736 N.W.2d 1, 9 fn. 28 (citing Hanif for the proposition that a “minority of courts [have] taken the position that regardless of the reasonable value of the medical services rendered, the amount actually paid is admissible and governs recovery of damages”); Lopez v. Safeway Stores, Inc. (Ariz. App. 2006), 129 P.3d 487, 495 (citing Hanif for the proposition that such “cases represent a distinct minority view and have not been followed by other courts”).

Additionally, in Chapman the plaintiff’s expenses were covered by Medicaid, not a private insurer to whom Chapman had paid premiums. Judge Molloy’s reference to Hanif in dicta certainly does not demonstrate that the Montana Supreme Court would adopt a minority approach that is inconsistent with MPI 25.07 in cases involving private insurer payments. The province of this rule in situations where there is public assistance is an overlapping, but distinct issue that I don’t mean to address in this article.

                               ii.Willink v. Boyne

In Willink v. Boyne, the plaintiff’s medical expenses were covered by Medicare. Boyne filed a motion to exclude evidence of the amount billed because Medicare paid some lesser amount. The motion was granted by Judge Christianson. It is important to keep in mind that, like Chapman, this case involved a plaintiff receiving public assistance.

                             iii.Moody v. Hill

In Moody v. Hill, the defendant hospital and radiologist moved to exclude all medical bills because Rochelle Moody’s health insurer paid some percentage less than the amount set forth in the bills. We were Plaintiff’s counsel in Moody, and I can personally attest to the difficulty in proving medical expenses in that case due to the court’s order. We were limited to Rule 1006 summaries that needed to be re-calculated shortly before trial to take the insurer discount into account.

I am happy to share the briefing and Order in Moody and discuss that case with anyone interested or facing a similar issue.

H.           The Majority Rule Supports Plaintiffs’ Position.

While defendants may reference Chapman, Willink, and Moody, the vast majority of jurisdictions that use “reasonable value” of services as the measure of damages (as does Montana) and who have been presented with this issue have determined that medical bills are admissible and any discount inuring to a collateral source payor should not decrease the liability of the tortfeasor. See e.g., Papke v. Harbert, 2007 WL 2353132, *23 (S.D.) (plaintiff may introduce into evidence and recover entire cost of medical expenses even though some portion discounted by a health care provider); Pipkins v. TA Operating Corp., 466 F. Supp. 2d 1255, 1262 (D. N.M. 2006) (same); Calva‑Cerqueira v. United States, 281 F. Supp. 2d 279, 295-96 (D. D.C. 2003) (same); Haselden v. Davis, 534 S.E.2d 295, 304 (S.C. App. 2000) (“recovery for medical expenses is, as a rule, controlled by what the services rendered were reasonably worth and not by what was actually paid or contracted to be paid”); Hardi v. Koffman v. Leichtfuss (Wis. 2001), 630 N.W.2d 201, 208 (plaintiffs are entitled to seek recovery of reasonable value of medical services received, without limitation to amounts paid for such services; limiting recovery to amounts paid would be contrary to rule of valuation of medical expense damages, collateral source rule, and principles of subrogation).

The general and fair rule is to allow the medical bills into evidence. In order to prevent double recovery, the court may take into account collateral source benefits in the statutorily mandated post-trial hearing. The majority of jurisdictions clearly allow medical bills into evidence because they are relevant evidence.

CONCLUSION

Limiting recovery for past medical expenses to the “amount paid” by their health insurer would create great disparity amongst plaintiffs in the application of the Rules of Evidence. Limiting recovery is unfair to the plaintiff who had the prudence to purchase health insurance and provides a needless benefit to a negligent defendant. Montana law is clear that it is the reasonable value of the service necessitated that is relevant to proving damages – not out-of-pocket expenses.

It is inequitable to give a defendant the discount procured on plaintiff’s behalf by her health insurer. It is also illegal because giving the defendant the benefit of this discount violates the evidentiary bar on collateral sources, Mont. Code Ann. § 27-1-308 and the well-established rule that discounts obtained due to the payment of premiums may not inure to the benefit of a wrongdoer.


[1] Even Judge Molloy recognized in Chapman, a case that I will address below, that medical bills demonstrate the severity and extent of injuries to the jury and therefore carry probative value regarding damages beyond the value of the medical services necessitated by the tort. Chapman at 1125.