The Supreme Court has issued its opinion in Stanley v. Walker (pdf) which is sure to loom large in personal injury litigation. The case had to do with what kind of evidence can be given to a jury for purposes of determining the reasonable cost of a plaintiff’s medical treatment.
Currently, it’s common for a plaintiff’s medical bills to be used as the cost of the treatment. This isn’t especially fair because almost nobody pays sticker price for medical services. So, it doesn’t really bear much relationship to the “reasonable cost” for those services. However, defendants who would like to challenge the sticker price were stuck. The rules of evidence state flat out that a billing statement constitutes prima facie evidence that the listed price is reasonable.
There is another statutory rule of evidence known as the collateral source statute that says defendants can’t introduce evidence of, among other things, benefits from insurance paid for by the plaintiff. This makes some sense: why should the guy who hit me get a benefit from the fact that I planned ahead and paid my insurance premiums? But, this collateral source doctrine was used to prohibit introduction of evidence that a medical provider accepted not only payment from an insurance company, but also “wrote off” a chunk of the bill based on its agreement with the insurer. (For it to be a “write off,” one has to start from the premise that the starting price was something other than a fiction in the first place. A dubious proposition.)
So, what the case boils down to, as I read it, is whether the “write off” is properly characterized as a benefit purchased by the plaintiff/insured or as simply a more accurate reflection of what the “reasonable cost” of the service was in the first place. The Supreme Court, in a 3-2 decision, decided that the write-offs could be introduced as evidence of the reasonable value of the medical services — if the hospital agreed to accept the reduced amount as payment in full (regardless of whether the paid portion originated as insurance money or elsewhere), then that is evidence a jury should be able to consider along side the sticker price. The jury can then make its own decision about what the reasonable value is.
This is a bigger deal than it appears on its face because the amount of medical expenses incurred are often used as an aid to calculating the proper measure of general damages (pain and suffering, etc.)
The Plaintiff’s bar can’t be too happy about this. For some time now, they have been able to talk to the jury (or an insurance adjuster) about the sticker price, get a verdict or settlement based on that, turn around and pay back insurers for the lesser amount they actually paid, and then (along with their clients, of course) pocket the difference.
For this particular case, the court held that the trial court should simply reduce the judgment by the amount of the medical provider’s write off. Justice Dickson dissents with a number of cogent points, but then suggests that if the court is going down this path, trial courts should reduce judgments post-verdict. But, I’m fairly sure that’s not what the majority has required for future cases — juries, not just judges, can consider the reduction. This is important because it has an impact on the amount of general damages, so there is a multiplier effect involved.
As I said, Justice Dickson raised a number of valid concerns — not least of which is the notion that the General Assembly should be the one to fix this mess. Perhaps it should revisit the issue. But, until it does, it looks like the Supreme Court has done what it could to wrestle with the fundamental problem that health care prices are opaque and, all too frequently, the sticker price on a medical bill is essentially fictional.
Justice Dickson :)
As an aside, I have always assumed that the “sticker price” of medical services was used as a tax deduction by medical providers to help recoup money spent on uninsured patients…but I don’t know whether this is actually the case or not.
Fixed the spelling. I can’t believe I messed that up. I know the spelling, and, I believe, Justice Dickson is the only member of the Indiana Supreme Court with whom I’ve exchanged more than 5 words since he comes to legal functions in Lafayette from time to time.
First, I think it is important to point out that to introduce the reduced charges, actually accepted by the healthcare provider, into evidence, there can be no mention of the word “insurance”, although 99.9% of jurors will be able to read between those lines.
Second, the injustice, if there is one, in this ruling is the plaintiffs do not get to recover the cost of premiums they have paid in order to secure this benefit for themselves, but also (now) for the defendants. As such, this is not, with all due respect, a well reasoned ruling, in that it contravenes the well established rule that if there is a windfall it should fall to the victim and not the tortfeasor.
Finally, I am not a member of the plaintiff’s bar…
The premiums were to get the payments for the medical costs. I.e., you pay $50,000 in insurance premiums to get $100,000 in medical cost payments. If the defendant pays the $100,000, there is no reason for the plaintiff to get the $50k insurance premiums back as well.
If the medical costs were actually reduced from the “real price” because of the premiums then maybe the Plaintiff should have the burden of proving that. The whole problem is that health care pricing is so screwed up, it’s impossible to put a “real” cost on a procedure. But, it’s clear that the sticker price is a fiction.
I see your point about health premiums, but what about a situation where a young healthy person pays for health premiums for 10 years and never makes a claim. Let’s say they pay $6,000 per year, or $60,000 total.
Then they get in a major accident that leaves them with big injuries and bills. Let’s also say the plaintiff is self-insured and their premiums are adjusted annually and on an individual basis. The Plaintiff now has a massive “pre-existing condition” for all future health care and can expect a significant rise in health premiums for the rest of their life if the injuries are permanent and require any ongoing treatment.
If the Plaintiff loses the benefit of the “write off” shouldn’t the Defendant also be on the hook for the health insurance premiums paid in the past (if they are less then the write off) as well as the increased health insurance premiums for the remainder of the Plaintiff’s life?
And if we are doing away with “fictions” before juries, what about the fiction that the Plaintiff is suing the individually defendant versus the Defendant’s liability insurance company? Would it not be fair to have a jury instruction which says (assuming there is some coverage) “You are not to take into consideration the Defendant’s ability to pay any verdict. The Defendant is covered by a policy of insurance but you are not to speculate as to the amount of that insurance in your deliberations.”