Stayton v. Delaware Health Corporation
2015 Del. LEXIS 288
| Del. | 2015Background
- Plaintiff Diane Stayton, a Medicare beneficiary, suffered severe burns and received treatment billed at $3,683,797.11; CMS (Medicare) paid providers $262,550.17 and providers were required to write off $3,421,246.94.
- Stayton sued for medical negligence and sought special damages including the full billed amount for medical care.
- Defendants moved for judgment on the pleadings to limit past medical expense damages to the amount actually paid by Medicare ($262,550.17).
- Stayton invoked Delaware’s collateral source rule, arguing the written-off amounts should be recoverable from the tortfeasor.
- The Superior Court limited recovery to the Medicare payment; the Delaware Supreme Court affirmed, holding the collateral source rule does not apply to Medicare-required write-offs and that the Medicare-paid amount is the recoverable medical-expense measure.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the collateral source rule permits recovery of Medicare write-offs as medical expense damages | Stayton: collateral source rule allows recovery of full billed amounts (including write-offs) so tortfeasor cannot benefit from third-party payments | Defendants: Medicare write-offs are not payments to plaintiff; providers are legally required to accept reduced Medicare rates, so write-offs are not recoverable | Court: collateral source rule does not apply to Medicare-required write-offs; plaintiff may recover only amount actually paid by Medicare |
| Whether provider write-offs represent a benefit "bargained for" by the patient | Stayton: write-offs function like insurance discounts and should be treated as benefits to plaintiff | Defendants: write-offs benefit the insurer/taxpayers and stem from provider–payer arrangements, not patient bargains | Court: Medicare write-offs are not benefits conferred on the plaintiff or bargained for by the plaintiff; they are paid by no one on plaintiff’s behalf |
| Appropriate measure of "reasonable value" of medical services when Medicare pays less than billed | Stayton: billed amount approximates reasonable value; collateral source rule permits introduction of full bill | Defendants: the amount paid reflects market realities and should control | Court: amount paid by Medicare is dispositive as the reasonable value (as a matter of law) where collateral source rule is inapplicable |
| Policy concerns about fairness and unequal recoveries between plaintiffs with different payers | Stayton: limiting recovery discriminates against Medicare/ government-covered plaintiffs versus privately insured plaintiffs | Defendants/Amicus: allowing recovery of unpaid billed amounts creates windfalls, raises insurance costs, and misallocates costs | Court: acknowledged concerns but concluded federal statutory framework and reality of Medicare reimbursements justify limiting recovery to amount paid; |
Key Cases Cited
- Mitchell v. Haldar, 883 A.2d 32 (Del. 2005) (recognized collateral source rule applied to provider write-offs from private insurance contracts)
- Onusko v. Kerr, 880 A.2d 1022 (Del. 2005) (allowed recovery of full customary charges where provider voluntarily discounted for uninsured plaintiff)
- State Farm Mut. Auto. Ins. Co. v. Nalbone, 569 A.2d 71 (Del. 1989) (distinguished application of collateral-source principles in no-fault/contract contexts)
- Robinson v. Bates, 857 N.E.2d 1195 (Ohio 2006) (held collateral source rule does not apply to provider write-offs that are never paid)