Aаron Glenn HAYGOOD, Petitioner, v. Margarita Garza DE ESCABEDO, Respondent.
No. 09-0377.
Supreme Court of Texas.
Delivered July 1, 2011.
Rehearing Denied Jan. 27, 2012.
Argued Sept. 16, 2010.
Frank Gerhardt Cawley, Whitehurst & Cawley, L.L.P., Addison, for Margarita Garza.
Levon G. Hovnatanian, Martin Disiere Jefferson & Wisdom LLP, for amicus curiae American Insurance Association.
Warren Szutse Huang, Fulbright & Jaworski L.L.P., Houston, Gregory D. Smith, Ramey and Flock, P.C., Tyler, for amicus curiae National Association of Mutual Insurance Companies.
J. Mitchell Smith, Germer Gertz, L.L.P., Beaumont, for amicus curiae Texas Association of Defence Counsel.
Michael A. Choyke, Wright & Close, LLP, Houston, for amicus curiae Univar USA Inc.
Kirk L. Pittard, Kelly Durham & Pittard, LLP, Dallas, for amicus curiae The Texas Trial Lawyers Association.
Diana L. Faust, Cooper & Scully, P.C., Dallas, for amicus curiae Texas Alliance for Patient Access.
Justice HECHT delivered the opinion of the Court, in which Chief Justice JEFFERSON, Justice WAINWRIGHT, Justice GREEN, Justice JOHNSON, Justice WILLETT, and Justice GUZMAN joined.
Damages for wrongful personal injury include the reasonable expenses for necessary medical care, but it has become increasingly difficult to determine what expenses are reasonable. Health care providers set charges they maintain are reasonable while agreeing to reimbursement at much lower rates determined by insurers to be reasonable, resulting in great disparities between amounts billed and payments accepted. Section 41.0105 of the Texas Civil Practice and Remedies Code, enacted in 2003 as part of a wide-ranging package of tort-reform measures,1 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.”2 We agree with the court of appeals3 that this statute limits recovery, and consequently the evidence at trial, to expenses that the provider has a legal right to be paid.
Aaron Glenn Haygood sued Margarita Garza De Escabedo for injuries he sustained when the car he was driving collided with Escabedo‘s minivan as she was pulling out of a grocery store parking lot. Haygood‘s injuries required surgeries on his neck and shoulder. Both were successful, but some impairment remains.
Twelve health care providers billed Haygood a total of $110,069.12, but he was covered by Medicare Part B, which generally “pays no more for ... medical and оther health services than the ‘reasonable charge’ for such service.”4 Criteria for determining reasonable charges include customary charges for similar services and prevailing charges in the same locality for similar services.5 Federal law prohibits health care providers who agree to treat Medicare patients from charging more than Medicare has determined to be reasonable.6 Accordingly Haygood‘s health care providers adjusted their bills with credits of $82,329.69, leaving a total of $27,739.43. At the time of trial, $13,257.41 had been paid, and $14,482.02 was due.7
Invoking section 41.0105, Escabedo moved to exclude evidence of medical expenses other than those paid or owed. Haygood, asserting the collateral source rule, moved to exclude evidence of any amounts other than those billed, and of any adjustments and payments. The trial court denied Escabedo‘s motion and granted Haygood‘s. At trial, Haygood offered evidence from each of his health care providers that thе charges billed were reasonable and the services necessary. The jury found that Escabedo‘s negligence caused the accident and that Haygood‘s damages were $110,069.12 for past medical expenses, $7,000 for future medical expenses, $24,500 for past pain and mental anguish, and $3,000 for future pain and mental anguish. The trial court overruled Escabedo‘s objection to an award of past medical expenses in excess of those paid or owed and rendered judgment on the verdict.
The court of appeals reversed, holding that section 41.0105 precluded evidence or recovery of expenses that “neither the claimant nor anyone acting on his behalf will ultimately be liable for paying“.8 The court suggested a remittitur of the amount of the health care providers’ adjustments,9 which Haygood did not accept, and the case was remanded for a new trial.10 The court noted that two other courts had reached conflicting decisions.11 We granted Haygood‘s petition for review to resolve the conflict.12
II
The Legislature enacted section 41.0105 against a backdrop of health care pricing
A
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.13 A two-tiered structure has evolved: “list” or “full” rates sometimes charged to uninsured patients,14 but frequently uncollected,15 and reimbursement rates for patients covered by govern-
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.20 Portions of bills showing only list charges are admitted in evidence, with proof of reasonableness coming from testimony by the provider, or more often, by affidavit of the provider or the provider‘s records custodian as permitted by section 18.001 of the Texas Civil Practice and Remedies Code.21
In all these respects, the present case is entirely typical. The providers testified the charges billed to Haygood were reasonable, even though those charges were four times the amount they were entitled to collect.
B
As a general principle, compensatory damages, like medical expenses, “are intended to mаke the plaintiff ‘whole’ for any losses resulting from the defendant‘s interference with the plaintiff‘s rights.”22 The collateral source rule is an exception.23 Long a part of the common law of Texas24 and other jurisdictions,25 the rule precludes any reduction in a tortfeasor‘s liability because of benefits received by the plaintiff from someone else—a collateral source. Thus, for example, insurance payments to or for a plaintiff are not credited to damages awarded against the defendant.26 “The theory behind the collateral source rule is that a wrongdoer should not have the benefit of insurance independently procured by the injured party, and to which the wrongdoer was not privy.”27
The collateral source rule reflects “the position of the law that a benefit that is directed to the injured party should not be shifted so as to become a windfall for the tortfeasor.”28 To impose liability for medical expenses that a health care provider is not entitled to charge does not prevent a windfall to a tortfeasor; it creates one for a claimant, as we recently wrote in Daughters of Charity Health Services of Waco v. Linnstaedter.29 Linnstaedter and Bolen sued Jones for injuries they sustained in a motor vehicle accident, claiming damages for the full amount of their hospital expenses.30 The hospital was reimbursed part of those expenses by workers’ compensation insurance and was precluded from seeking payment of the unpaid balance from its patients by the
Consistent with our views in Daughters of Charity, we hold that the common-law collateral source rule does not allow recovery as damages of medical expenses a health care provider is not entitled to charge.39
C
With this background, we turn to the text of section 41.0105, which states simply: “In addition to any other limita-
Haygood argues that this construction is inconsistent with our decision in Black v. American Bankers Insurance Co.,43 but it is not. Black sued his health insurer, American Bankers, for medical bills, a portion of which had been paid by Medicare.44 The policy covered expenses Black “actually incurred“, and American Bankers argued that Black had not actually incurred the expenses paid by Medicare because he was never liable for them.45 We held that the issue had been “rеsolved by the stipulation of the parties, which recites that plaintiff ‘incurred the reasonable, necessary and customary charges by said Hospital ... as shown by the bill’ “.46 We added: “Further, as a matter of law, we hold that when plaintiff entered the hospital and received its services, there was created an implied contract to pay for same, and he was liable therefor until he or someone else paid the bill.”47 Black differs from the present case, not only because it involved the construction of a policy and primary insurance issues, but also because Black‘s entire bill was actually paid while most of Haygood‘s bill was adjusted with credits the service provider was required to apply.
Haygood concedes that in Daughters of Charity,48 “[t]his court has previously implied that § 41.0105 affects the recovery of medical expenses“,49 but our decision in that case was more than an implication. As already explained, we held that a tortfeasor is not liable to a health care provider or its patients for medical expenses the patients were not required to pay the provider. For the patients to recover such expenses from the tortfeasor “would be a windfall“.50 Our holding, we said, had been “codified” in section 41.0105.51 The effect of section 41.0105 is thus to prevent a “windfall” to a claimant. Our decision in Daughters of Charity does not merely imply that Haygood‘s argument is without merit; it rejects the argument outright.
Finally, Haygood argues that if the Legislature had intended to limit recovery, it would also have had to amend section 18.001 of the Civil Practice and Remedies Code, which states in part:
Unless a controverting affidavit is filed as provided by this section, an affidavit that the amount a person charged for a service was reasonable at the time and place that the service was provided and that the service was necessary is sufficient evidence to support a finding of fact by judge or jury that the amount charged was reasonable or that the service was necessary.52
But this statute is purely procedural, providing for the use of affidavits to streamline proof of the reasonableness and necessity of medical expenses. The statute does not establish that billed charges are reasonable and necessary; on the contrary, it expressly contemplates that the issue can be controverted by affidavit, which could aver that only the amount actually paid was reasonable.
Accordingly, we hold that section 41.0105 limits a claimant‘s recovery of medical expenses to those which have been or must be paid by or for the claimant. All the courts of appeals that have addressed the issue have reached the same conclusion,53 although as we have said, there has been disagreement over the effect of section 41.0105 on the evidence at trial, the issue to which we now turn.
Haygood argues that even if section 41.0105 precludes recovery of expenses a provider has no right to be paid, evidence of such expenses is nonetheless admissible at trial. “Evidence which is not relevant is inadmissible.”54 This includes evidence of a claim of damages that are not compensable.55 Since a claimant is not entitled to recover medical charges that a provider is not entitled to be paid, evidence of such charges is irrelevant to the issue of damages.
The question remains whether such evidence has any other probative value. A few courts in other jurisdictions have expressed concern that limiting the evidence to amounts that have been or must be paid provides the jury an unfairly low benchmark with which to gauge the seriousness of the plaintiff‘s injuries and awarding non-economic damages, such as for physical pain and mental anguish.56 But there is no unfairness if reimbursable amounts are reasonable for the services provided. In this case, Medicare, as required by federal law, determined that the charges it reimbursed were reasonable, given customary and prevailing rates where Haygood was treated. Even so, Haygood argues, if he were uninsured, his medical expenses would not be subject to adjustments or credits, and evidence of more expensive treatment would suggest to the jury that his injuries were more serious. It is unfair, he contends, to treat insured and uninsured claimants differently. Haygood‘s solution is to allow the jury to consider evidence of non-recoverable economic damages in setting non-economic damages. But we think that any relevance of such evidence is substantially outweighed by the confusion it is likely to generate, and therefore the evidence must be excluded.57
Haygood argues that if the Legislature had intended to allow evidence of amounts actually paid to be offered at trial, it would also have had to amend sections 41.012 and 18.001 of the Civil Practice and Remedies Code. Section 41.012 states that “[i]n a trial to a jury, the court shall instruct the jury with regard to Sections 41.001, 41.003, 41.010, and 41.011”58—that is, the jury must be instructed on the standards for recovery of exemplary damages and the factors to be considered in setting any award. But an instruction on the limit on recovery of medical expenses would be necessary only if evidence of amоunts charged were admitted along with evidence of amounts paid or to be paid. The absence of a statutorily required jury instruction suggests that the Legislature intended either that juries not be given the only evidence relevant to recovery or that they be given only evidence relevant to recovery. Since the jury cannot determine what expenses were necessary absent evidence relevant to recovery, we think the Legislature must have intended the latter. As for section 18.001, as already explained, it merely provides for any dispute over reasonable and necessary expenses to be teed up by affidavit, and says nothing about whether unpaid expenses are reasonable and necessary.
The dissent argues that the jury should consider only evidence of charges billed, without adjustments or credits required by insurers. Evidence of expenses paid or to be paid, the dissent urges, should be presented to the trial court post-verdict by the defendant. A fundamental rule is that “[t]o recover damages, the burden is on the plaintiff to produce evidence from which the jury may reasonably infer that the damages claimed resulted from the defendant‘s conduct.”59 The only justification the dissent has for shifting the burden of proof to the defendant is that section 41.0105‘s limitation on damages is like the monetary caps imposed by other statutes. But imposing a monetary cap never requires the court to resolve a disputed fact; limiting the recovery of expenses to those actually paid often does. For one thing, parties may dispute whether expenses are necessarily related to a plaintiff‘s injuries. In Texarkana Memorial Hospital v. Murdock, for example, we held that there was evidence that only some but not all of the plaintiff‘s medical expenses found by the jury were related to her injuries.60 The issue could not simply be redetermined by the trial court; the case had to be retried to the jury.61 Also, the parties may disagree whether any part of some providers’ charges is reasonable. If the jury awards less than the total of all charges, the trial court may have no way of knowing which charges the jury found reasonable and which it did not. In all these situations, a requirement that the trial court resolve disputed facts in determining the damages to be awarded violates the constitutional right to trial by jury. “In enacting a statute, it is presumed that compliance with the constitutions of this state and the United States is intended; ... a just and reasonable result is intended; [and] a result feasible of execution is intended....”62 The dissent‘s construction of section 41.0105 is contrary to all three presumptions.
Accordingly, we hold that only evidence of recoverable medical expenses is admissible at trial. We disapprove the cases that have reached conflicting deci-
*
*
*
We agree with the opinion of the court of appeals, and therefore its judgment is
Affirmed.
Justice LEHRMANN filed a dissenting opinion, in which Justice MEDINA joined.
Justice LEHRMANN, joined by Justice MEDINA, dissenting.
Today, the Court holds that a claimant may neither recover amounts written off and never paid, nor introduce evidence of such amounts during trial. I agree with the Court that section 41.0105 reflects the Legislature‘s intent to restrict the amount of past medical expenses that may be recovered. However, I disagree with the Court‘s conclusion that the Legislature intended to prohibit the introduction of evidence of amounts that are written off and never paid, as they represent collateral source benefits. Neither the “express terms” of the statute, which speak only to a claimant‘s recovery of past medical expenses, “[n]or [any] necessary implications” support such a conclusion. Cash Am. Int‘l, Inc. v. Bennett, 35 S.W.3d 12, 16 (Tex.2000) (citation omitted). Furthermore, one consequence of the Court‘s decision is that juries may deliver insupportably divergent results as between those plaintiffs who are insured and those who arе not, resulting in inconsistent appellate review of damages awards in some tort cases. I would hold that the court of appeals erred to the extent it held that section 41.0105 affects the admissibility of evidence of past medical expenses. It suggested a remittitur, but based on improper grounds. Therefore, I would reverse the court of appeals’ judgment and remand to that court.
I. ANALYSIS
I agree with the Court that section 41.0105 abrogates the collateral source rule as a rule of recovery by proscribing damages awards for amounts written off and never paid. While the precise issue was not before us, we implied as much in Daughters of Charity Health Services of Waco v. Linnstaedter, 226 S.W.3d 409, 410 (Tex.2007). However, while the Court‘s reasoning as to recovery is solidly grounded, its holding as to the admissibility of evidence of adjusted charges finds scant support in the statute‘s language, is contradicted by the statute‘s legislative history, and runs counter to long-standing common law.
It is not the prerogative of the Court to second-guess the Legislature‘s policy choices. Rather, it is the Court‘s duty to discern and implement the law in accordance with, not in contravention of, the Legislature‘s intent. Here, the Court ignores the obvious conflict between section 41.0105‘s title and its text. In doing so, the Court reaches its conclusion without utilizing either the statute‘s legislative history or any one of the enumerated statutory construction aids. See
A. Evidence of Past Medical Expenses
The collateral source rule has applied in Texas since 1883. Tex. & Pac. Ry. Co. v. Levi & Bro., 59 Tex. 674, 676 (1883). Under the common law, a tortfeasor was not entitled to a liability offset for proceeds procured as a result of the injured party‘s independently bargained-for agreement with an insurance company or other source of benefits. See Mid-Century Ins. Co. of Tex. v. Kidd, 997 S.W.2d 265, 274 (Tex.1999); see also Brown v. Am. Transfer & Storage Co., 601 S.W.2d 931, 934 (Tex.1980). The rule was predicated on the notion that a tortfeasor should not benefit from an agreement to which the tortfeasor is not privy. Brown, 601 S.W.2d at 934. The collateral source rule has been applied to all manner of benefits, including payments received under a worker‘s compensation policy, see Exxon Corp. v. Shuttlesworth, 800 S.W.2d 902, 907-08 (Tex.App.-Houston [14th Dist.] 1990, no writ), income received as part of veterans’ benefits, see Montandon v. Colehour, 469 S.W.2d 222, 229-30 (Tex.Civ.App.-Fort Worth 1971, no writ), and Social Security disability payments, see Traders & Gen. Ins. Co. v. Reed, 376 S.W.2d 591, 593-94 (Tex.Civ.App.-Corpus Christi 1964, writ ref‘d n.r.e.). In this sense, the collateral source rule was a rule of recovery.
But the collateral source rule also has an evidentiary aspect; the defendant may not introduce evidence at trial of collateral sources of compensation for a plaintiff‘s injuries. See, е.g., Taylor v. Am. Fabritech, 132 S.W.3d 613, 626 (Tex.App.-Houston [14th Dist.] 2004, pet. denied) (holding that governmental assistance payments made to plaintiff were a collateral source and that trial court erred when it allowed evidence of such payments); Exxon Corp., 800 S.W.2d at 907-08 (excluding evidence of worker‘s compensation benefits). As a rule of evidence, the collateral source rule has excluded such things as evidence of payments and downward adjustments in accordance with Medicare guidelines. See Matbon, Inc. v. Gries, 288 S.W.3d 471, 480-82 (Tex.App.-Eastland 2009, no pet.); Wong v. Graham, No. 03-00-00440-CV, 2001 WL 123932, at *11 (Tex.App.-Austin Feb. 15, 2001, no pet.) (not designated for publication); see also Briese v. Tilley, No. C 08-4233 MEJ, 2010 WL 3749442, slip op. at 7-10 (N.D.Cal. Sept. 23, 2010).
1. Is the rule implicated?
The Court concludes that the collateral source rule is not implicated by statutory or contractual adjustments to medical charges because the discounted amounts are “a benefit to the insurer,” not the insured. 356 S.W.3d 390, 395. While I agree the discounting of medical charges benefits insurers, I disagree that the rule is not otherwise implicated. Although medical expenses that are discounted and written off are not direct, out-of-pocket payments made on the plaintiff‘s behalf, the discount would not have occurred but
2. Legislature‘s intent
I agree with the Court to the extent it concludes that the Legislature did not intend to abrogate the rule as it relates to payments made by collateral sources. Consequently, my analysis is confined to whether the Legislature intended to abrogate the common law prohibition of evidence of amounts written off and never paid that may be ascribed to collateral sources. In construing a statute, we always strive to give effect to the Legislature‘s stated intent.
The plain language of section 41.0105 does not support the Court‘s conclusion that the Legislature intended to alter the status quo with regard to the admissibility of evidence. The statute‘s unambiguous text, which states that “recovery of medical or health care expenses incurred,” refers only to a limitation on recovery, and makes
The first iteration of section 41.0105, which was included as part of a broader effort to reform medical malpractice laws, would have allowed “a defendant physician or health care provider [to] introduce evidence in a health care liability claim of any amount payable to the claimant as a collateral benefit.”
When House Bill 4 reached the Senate State Affairs Committee, it expanded section 41.0105‘s application beyond health care liability claims. The Senate further renamed the proposed statute “Evidence Relating to Amount of Economic Damages,” and included the following language:
“[a] defendant may introduce evidence of any amount payable to the claimant as a collateral benefit arising from the event in the cause of action.”
Tex.C.S.H.B. 4, 78th Leg., R.S. (2003) .
Just like the initial version of section 41.0105 proposed in the House, the State Affairs Committee‘s proposed statute would have undoubtedly abrogated the collateral source rule both as a rule of recovery and a rule of evidence. But the final enrolled version of the bill amended the proposed statute once more, this time deleting the provisions concerning evidence of collateral sources. Despite the language of the bill being expressly limited to recovery of past medical expenses, it retained its title from the State Affairs Committee: “Evidence Relating to Amount of Economic Damages.”
Furthermore, reading section 41.0105 in context with other laws concerning the proof and presentation of damages evidence supports my conclusion that section 41.0105 did not abrogate the collateral source rule‘s application as a rule of evidence. At the time section 41.0105 was enacted, section 41.012 directed that a court should instruct the jury with regard to several other provisions of chapter 41 establishing criteria and evidence to be considered in awarding exemplary damages.
Significantly, the Legislature also chose not to amend section 18.001 of the Code, which has long governed procedures for proving damages in personal injury cases. Under that section, an uncontroverted affidavit in proper form attesting
that the amount a person charged for a service was reasonable at the time and place that the service was provided and that the service was necessary is sufficient evidence to support a finding of fact by judge or jury that the amount charged was reasonable or that the service was necessary.
Moreover, the severity of the plaintiff‘s injury is a factor that enters into the review of the legal and factual sufficiency of evidence supporting mental anguish damages. See Fifth Club, Inc. v. Ramirez, 196 S.W.3d 788, 797-798 (Tex.2006); D. Burch, Inc. v. Catchings, 2009 WL 2581862, at *4 (Tex.App.-Dallas 2009, pet. denied). In Burch, for example, the court considered the amounts billed by various medical providers in evaluating the factual sufficiency of the evidence supporting the amount of mental anguish damages awarded. Consequently, insured plaintiffs whose medical charges are written off and never paid may find it more difficult to establish the sufficiency of evidence supporting the amount of any mental anguish damages awarded.
B. Application of Section 41.0105
Having determined that Section 41.0105 precludes a plaintiff from recovering past medicаl expenses that are discounted and written off, but does not abrogate the collateral source rule as it applies to the admissibility of evidence of such amounts, I now turn to the statute‘s application. The Legislature‘s limitation of a plaintiff‘s recovery for past medical expenses through section 41.0105 is not novel. The Civil Practice and Remedies Code contains several similar examples of limitations on a plaintiff‘s recovery. See
Escabedo argues that implementing section 41.0105 post-verdict will not work. But the Legislature has adopted a scheme that necessitates the post-verdict adjustment of damages in other provisions of the Civil Practice and Remedies Code. See, e.g.,
I likewise am unpersuaded by Escabedo‘s argument that post-verdict modification could run afoul of our decisions in Crown Life Insurance, Co. v. Casteel, 22 S.W.3d 378 (Tex.2000), and Harris County v. Smith, 96 S.W.3d 230 (Tex.2002). Escabedo raised a hypothetical at oral argument in which a claimant receives treatment from two providers, one of whom has a contractual agreement with the hospital and one of whom does not. In the hypothetical, the jury is permitted to hear evidence of the total amount billed by both providers, as I propose, but the jury awards the plaintiff less than that amount. While Escabedo‘s hypothetical could conceivably lead to a Casteel/Harris County issue, that likelihood can be accounted for through the submission of carefully tailored jury questions. See Greer v. Buzgheia, 141 Cal.App.4th 1150, 46 Cal.Rptr.3d 780, 785-86 (2006) (rejecting defendant‘s motion for post-verdict reduction in damages awarded by jury because defendant failed to object to failure to segregate damages in verdict form). This post-verdict mechanism, though cumbersome, has been used by a number of California courts for over twenty years, and the case law does not reflect any pervasive problems with the process. See, e.g., Olsen v. Reid, 164 Cal.App.4th 200, 79 Cal.Rptr.3d 255, 256-57 (2008); see id. at 263-65 (Moore, Acting P.J., concurring).
II. CONCLUSION
For these reasons, I am compelled to respectfully dissent. I would hold that section 41.0105 does not affect the admissibility at trial of evidence of discounts, credits, adjustments to medical bills, or amounts actually paid but disallows the recovery of the discounted portion as a past medical expense. The court of appeals suggested a remittitur reflecting the discounts, but based on improper grounds. I would therefore remand to the court of appeals.
DEBRA H. LEHRMANN
JUSTICE