Charges for health care, once based on the provider’s costs and profit margin, have more recently been driven by government regulation and negotiations with private insurers. A two-tiered structure has evolved: ” list” or ” full” rates sometimes charged to uninsured patients, but frequently uncollected, and reimbursement rates for patients covered by government and private insurance. Few patients today ever pay a hospital’s full charges, due to the prevalence of Medicare, Medicaid, HMOs, and private insurers who pay discounted rates. Hospitals, like health care providers in general, feel financial pressure to set their “full” charges as high as possible, because the higher the “full” charge the greater the reimbursement amount the hospital receives since reimbursement rates are often set as a percentage of the hospital’s “full” charge. Although reimbursement rates have been determined to be reasonable under Medicare or other programs, or have been reached by agreements between willing providers and willing insurers, providers nevertheless maintain that “list” rates are also reasonable. Providers commonly bill insured patients at “list” rates, with reductions to reimbursement rates shown separately as adjustments or credits. Portions of bills showing only list charges are often admitted in evidence in court proceedings, with proof of the reasonableness of the charges coming from testimony by the provider. Against this backdrop of health care pricing practices, the Texas Legislature enacted Section 41.0105 of the Texas Civil Practices and Remedies Code.
Section 41.0105, provides that, in addition to any other limitation under law, recovery of medical or health care expenses in a personal injury suit is limited to the amount actually paid or incurred by or on behalf of the claimant. In the recent opinion of Haygood v. De Escabedo, 356 S.W.3d 390 (Tex.2011), the Texas Supreme Court stated that Section 41.0105 is a limitation on the claimant’s recovery so that only evidence of recoverable medical expenses is admissible at trial. In other words, only evidence of expenses actually paid or incurred by the claimant can be presented to a jury and any determination of what was paid or incurred precedes any reduction for the claimant’s percentage of responsibility.
In Haygood, the Texas Supreme Court reasoned that although reimbursement rates have been determined to be reasonable under Medicare or other programs, or have been reached by agreements between willing providers and willing insurers, providers nevertheless maintain that list rates are also reasonable. The court stated that as a general principle, compensatory damages, like medical expenses, are intended to make the plaintiff whole for any losses resulting from the defendant’s interference with the plaintiff’s rights. But the collateral source rule is an exception to this principle. Long a part of the common law of Texas and other jurisdictions, the collateral source rule precludes any reduction in a tortfeasor’s liability because of benefits received by the plaintiff from someone else as a collateral source. For example, health insurance payments to or for a plaintiff are not credited to the damages awarded against the defendant because of the collateral source rule..