On July 1, the Texas Supreme Court handed down an opinion that has the potential to impact any case where medical or health expenses are at issue. In the wake of the Court’s ruling, a plaintiff may not recover medical expenses for amounts that the plaintiff’s health providers bill but have no right to be paid. In addition, the Court held that such bills are inadmissible - including to show pain and suffering.

Case Background and Issues Presented

Haygood v. De Escabedo stems from an automobile accident between Aaron Haygood and another driver. No. 09-0377, 2011 Tex. LEXIS 514 (Tex. July 1, 2011). Haygood filed suit against the other driver. As a result of the accident, Haygood underwent two surgeries. Haygood’s health care providers billed him approximately $110,000 for their services. Because Haygood was covered by Medicare, those providers adjusted their bills downward by more than $80,000. In the end, Haygood’s providers were paid or owed less than $30,000.¹

Such widely divergent costs raise three major questions:

The Supreme Court answered all three questions in the negative.

The Court’s Decision

As an initial matter, the Court held “that the common-law collateral source rule does not allow recovery of damages of medical expenses a health care provider is not entitled to charge.” Under the collateral source rule, payments or benefits received by a plaintiff from sources other than the defendant (i.e., from a collateral source) do not reduce damages recoverable against the defendant. The court reasoned that the downward adjustments in charges from health care providers are a benefit for the insurer that would be responsible for those costs, not the insured.

Second, the Court held that a plaintiff cannot recover medical expenses in excess of “those which have been or must be paid by or for the claimant.” Texas law provides that “recovery of medical or health care expenses incurred is limited to the amount actually paid or incurred by or on behalf of the claimant.” TEX. CIV. PRAC. & REM. CODE ANN. § 41.0105 (emphasis added). The Court found that “expenses that have been or will be paid” are recoverable and “the difference between such amount and charges the service provider bills but has no right to be paid” are not.

Finally - and perhaps most significantly - the Court held that “only evidence of recoverable medical expenses is admissible at trial.” The Court reasoned that since the higher list prices were not recoverable, they were not relevant to medical and health expenses. Furthermore, the Court found that any relevance of these unrecoverable amounts to issues such as pain and suffering was substantially outweighed by the risk of confusion posed by such evidence. As such, evidence of the unrecoverable amounts is inadmissible.

Conclusion

When an injured plaintiff is covered by private insurance or a program like Medicare, health care providers often initially bill much higher expenses than they are eventually entitled to be paid. Following the Haygood decision, it is clear that these higher list amounts may not form the basis of a judgment for medical and health expenses. Moreover, these billed but unrecoverable expenses are inadmissible at trial. An important consequence of this is that juries determining issues such as physical suffering and mental anguish will no longer consider the unrecoverable medical and health expenses - expenses which are often dramatically higher than those actually paid by or for the claimant.

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