Joseph LEITINGER, Bonnie Leitinger and Services Unlimited, Plaintiffs-Appellants, v. DBART, INC., d/b/a Barthenheier Construction, Inc., and Heritage Mutual Insurance Company, n/k/a Acuity, a mutual insurance company, Defendants-Respondents-Petitioners, VAN BUREN MANAGEMENT, INC., American Economy Insurance Company and Compcare Health Services Insurance Corp., Defendants.
No. 2005AP2030
Supreme Court of Wisconsin
Decided July 3, 2007.
2007 WI 84 | 736 N.W.2d 1
Oral argument March 2, 2007.
For the plaintiffs-appellants there was a brief by Timothy J. Aiken, James C. Gallanis, and Aiken & Scoptur, S.C., Milwaukee, and oral argument by Timothy J. Aiken.
An amicus curiae brief was filed by Martha H. Heidt, MH Heidt Law Office, Mondovi, on behalf of the Wisconsin Academy of Trial Lawyers.
¶ 1. SHIRLEY S. ABRAHAMSON, C.J. This is a review of a published decision of the court of appeals1 reversing a judgment of the Circuit Court for Milwaukee County, Jeffrey A. Kremers, Judge.
¶ 2. Joseph Leitinger and Bonnie Leitinger, his wife, and Services Unlimited2 (collectively referred to as Leitinger) sued several defendants, collectively re-
¶ 3. The parties disputed the reasonable value of Joseph Leitinger‘s medical treatment in this personal injury action. The health care provider billed Joseph Leitinger $154,818.51 for the treatment rendered, but as a result of negotiated discounts the health care provider accepted $111,394.73 from Joseph Leitinger‘s health insurance company. The difference between the amount billed and the amount actually paid by Leitinger‘s health insurance company is $43,424.78. Leitinger‘s health insurance company protected its subrogation rights in the present case.
¶ 4. The issue of law presented on review is whether, in light of the collateral source rule, evidence of the amount actually paid by a plaintiff‘s health insurance company for the plaintiff‘s medical treatment is admissible in a personal injury action for the purpose of establishing the reasonable value of the medical treatment rendered.
¶ 5. Leitinger argues that the amount actually paid by his health insurance company for his medical treatment is evidence of a collateral source payment and is thus inadmissible evidence under the collateral source rule. In contrast, Acuity contends that evidence of the amount actually paid by Leitinger‘s insurance company
¶ 6. The circuit court ruled that the evidence of the amount actually paid for the medical treatment rendered was relevant to the determination of the reasonable value of the medical treatment and was therefore admissible. The court of appeals reversed the judgment of the circuit court, concluding that the collateral source rule prohibits parties in a personal injury action from introducing evidence of the amount actually paid by the injured person‘s health insurance company, that is, a collateral source, for medical treatment to prove the reasonable value of the treatment.
¶ 7. For the reasons set forth, we affirm the decision of the court of appeals. We hold, as did the court of appeals, that the collateral source rule prohibits parties in a personal injury action from introducing evidence of the amount actually paid by the injured person‘s health insurance company, a collateral source, for medical treatment rendered to prove the reasonable value of the medical treatment. We therefore remand this cause to the circuit court for proceedings consistent with this decision and the parties’ stipulations.
I
¶ 8. The facts in this case are not in dispute for purposes of this review. In August 2001, Joseph Leitinger was employed as a contractor by Van Buren Management. While at work on a construction site operated by DBart, Joseph Leitinger crashed through the floor, falling 30 feet, sustaining serious injuries. Leitinger incurred extensive medical expenses, which were paid primarily by his health insurance company, Compcare Health Services Insurance Corporation.
¶ 9. Leitinger‘s complaint alleged negligence and safe workplace violations against Van Buren Management, DBart, and their liability insurers. In a special verdict, the jury found DBart 67% causally negligent and Joseph Leitinger 33% causally negligent. Leitinger was awarded $596,881.68.4
¶ 10. The parties’ liability is not at issue here. The sole dispute involves the appropriate amount Leitinger can recover as damages from the tortfeasor for the cost of Leintinger‘s medical treatment. In other words, what damages may Leitinger recover from Acuity, the tortfeasor‘s insurance company, which agreed to stand in the shoes of the tortfeasor and pay whatever sums for which the tortfeasor was liable?
¶ 11. Refusing to apply the collateral source rule, the circuit court denied Leitinger‘s motion in limine to exclude evidence of the amount actually paid by Leitinger‘s health insurance company for his medical treatment. The circuit court allowed the parties to proffer as evidence both the amount billed by the medical service provider and the amount paid by Leitinger‘s health insurance company to prove the reasonable value of the medical treatment rendered. The circuit court also allowed the parties to present expert testimony about the reasonable value of the medical services.5
¶ 13. Leitinger was awarded $111,394.73 for his medical expenses, which is the amount Leitinger‘s health insurance company actually paid for the medical treatment.
¶ 14. After the jury returned its verdict, Leitinger renewed his motion before the circuit court to exclude evidence of the amount actually paid for his medical treatment, relying on the collateral source rule. Specifically, Leitinger requested “an order by the [Circuit] Court to order a new trial on the issue of medical bills with the Collateral Source Rule enforced; i.e. evidence of the amount paid by the medical insurer excluded pursuant to Ellsworth6 and Kauffman [sic].”7
¶ 15. The circuit court denied Leitinger‘s motion for a new trial and affirmed its prior evidentiary ruling. The circuit court reasoned as follows: “So, the reasonable value of the services provided to be determined, given that the reasonable value of the services has to be
¶ 16. The parties then further modified their stipulation. Acuity agreed that if evidence of the amount actually paid by Leitinger‘s health insurance company is inadmissible, then the entire amount billed is the reasonable value of the medical treatment rendered. Thus, if Leitinger wins his appeal, he will receive $43,424.78, which is the difference between the amount billed by the medical service provider and the amount actually paid by Leitinger‘s health insurance company.8
¶ 17. Relying on this court‘s recent decision in Koffman v. Leichtfuss, 2001 WI 111, 246 Wis. 2d 31, 630 N.W.2d 201, the court of appeals concluded that “the fact finder should not be allowed to consider ‘payments made by outside sources on the plaintiffs behalf, including insurance payments.’ ”9 Adhering to the parties’ stipulations, the court of appeals added to Leitinger‘s jury award the difference between the amount the medical service provider billed and the amount paid by Leitinger‘s health insurance company.
II
¶ 18. We ordinarily review a circuit court‘s ruling on the admission of evidence to determine whether the
¶ 19. If a circuit court exercises its discretion upon an error of law, the circuit court has erroneously exercised its discretion.11 The question of law embedded in the circuit court‘s decision to admit the evidence at issue is the interpretation and application of the collateral source rule. More specifically, the circuit court was called upon to determine whether, as a matter of law, the collateral source rules operates to bar evidence of collateral source payments in a personal injury action when offered for the purpose of determining the reasonable value of the medical treatment rendered.
¶ 20. The question presented in the instant case is not whether the damages are to be limited to or reduced by the amount actually paid for medical treatment rendered but rather whether, in determining the reasonable value of the treatment, the fact-finder may consider the amount actually paid by a collateral source, which in the present case is the injured person‘s health insurance company. This court decides a ques-
III
¶ 21. The issue presented requires us to explore three areas: (A) the proper measure of damages for medical treatment rendered in a personal injury action; (B) the collateral source rule and the public policy considerations underlying it; and (C) prior decisions interpreting and applying the collateral source rule.
A
¶ 22. At issue in this case is the appropriate measure of damages Leitinger may recover for his medical expenses. We examine the traditional, oft-stated rule for the measure of damages to be recovered for medical expenses and apply this rule in the present case.
¶ 23. The proper measure of damages for medical treatment rendered in a personal injury action is the reasonable value of the medical treatment reasonably required by the injury.13 The court has explained that “while the actual amount paid for medical services may reflect the reasonable value of the treatment rendered, the focus is on the reasonable value, not the actual charge. In other words, ’ “this is a recovery for their value and not for the expenditures actually made or
¶ 24. Thus, the fact-finder determines the reasonable value of the medical treatment rendered, which is not necessarily the amount actually paid or the amount billed for the treatment.16
B
¶ 25. How the fact-finder will evaluate the reasonable value of Leitinger‘s medical expenses depends
¶ 26. The collateral source rule is a well-established rule of law in Wisconsin.17 Simply put, the collateral source rule states that benefits an injured person receives from sources that have nothing to do with the tortfeasor may not be used to reduce the tortfeasor‘s liability to the injured person. In other words, the tortfeasor is not given credit for payments or benefits conferred upon the injured person by any person other than the tortfeasor or someone identified with the tortfeasor (such as the tortfeasor‘s insurance company). Thus under the collateral source rule, as the phrase implies, a payment by one who is not a tortfeasor (that is, a payment collateral to the tortfeasor) is treated differently from a payment by the tortfeasor.18
¶ 27. The collateral source rule was formally adopted by this court in 1921 in Cunnien v. Superior Iron Works, 175 Wis. 172, 184 N.W. 767 (1921).19 We recently summarized the collateral source rule in tortfeasor‘s responsibility to compensate for all harm that he causes, not confined to the net loss that the injured party receives.”
The general rule governing collateral source benefits has also been set forth as follows:
[B]enefits received by the plaintiff from a source collateral to the defendant may not be used to reduce that defendant‘s liability for damages.
1 Dan B. Dobbs, Dobbs Law of Remedies: Damages, Equity, Restitution § 3.8(1) at 372-73 (2d ed. 1993).
The collateral source or collateral benefit rule denies the defendant any credit for payments or benefits conferred upon the plaintiff by any person other than the defendant himself or someone identified with him. Payments made by the plaintiff‘s own insurer, or gratuitous benefits conferred by others, for example, do not reduce the defendant‘s tort liability, even though the payments operate to reduce the plaintiff‘s loss.
2 Dan B. Dobbs, Dobbs Law of Remedies: Damages, Equity, Restitution § 8.6(3) at 493 (2d ed. 1993).
2 Dan B. Dobbs, The Law of Torts § 380 at 1058 (2001), explains the collateral source rule as follows:
In many cases, the injured plaintiff receives some compensation for injuries from sources that have nothing to do with the defendant. The plaintiff‘s own insurance, job benefits, or donations by friends may all operate to reduce the plaintiffs loss. The traditional rule is that compensation from “collateral sources” is none of the defendant‘s business and does not go to reduce the defendant‘s obligation to pay damages, either in negligence or in strict liability cases.
¶ 28. As a rule of damages, “the collateral source rule denies a tortfeasor credit for payments or benefits conferred upon the plaintiff by any person other than the tortfeasor.”21 In other words, “[t]he tortfeasor who is legally responsible for causing injury is not relieved of his obligation to the victim simply because the victim had the foresight to arrange, or good fortune to receive, benefits from a collateral source for injuries and expenses.”22 Accordingly, an award of damages cannot be limited to or reduced by a collateral source payment.
¶ 29. The court explained in Koffman v. Leichtfuss, 2001 WI 111, ¶¶ 43, 45-46, 246 Wis. 2d 31, 630 N.W.2d 201, the relationship between the reasonable value of medical expenses, the rights of the injured person to recovery of the reasonable value of the medical expenses, and the subrogation rights of the injured person‘s health insurance company that paid the medical expenses: “The creation of a subrogation interest in the insurer does not vest the entirety of the medical expense claim in the insurer. Nor does it extinguish the insured‘s right to recover amounts above and beyond those paid by the insurer.... Thus, recoverable medical expense damages may exist beyond that of the amount paid by the insurer, and the insured is entitled to pursue those amounts.... [T]he collateral source rule allows the plaintiff to seek recovery for the reasonable value of medical services without consideration of payments made by the plaintiff‘s insurer; and... the insurer‘s subrogation rights entitle it to recoup the amounts it paid on the plaintiff‘s behalf.”23
¶ 30. The collateral source rule is also a rule of evidence.24 As a rule of evidence, the collateral source rule generally precludes introduction of evidence regarding benefits a plaintiff obtained from sources collateral to the tortfeasor. A limited exception has been recognized when the evidence is offered for impeachment purposes.25
¶ 33. The collateral source rule, like other tort principles, also aims at deterring a tortfeasor‘s negli-
¶ 34. Although an injured person may experience double recovery when the collateral source rule is applied,31 one recovery from the collateral source and a second recovery from the tortfeasor, the purpose of the collateral source rule is not to provide the injured person with a windfall, but rather to prevent the tortfeasor from escaping liability because a collateral source has compensated the injured person. The injured person, not the tortfeasor, benefits from the collateral source.32
¶ 35. Two recent cases, Ellsworth v. Schelbrock, 2000 WI 63, 235 Wis. 2d 678, 611 N.W.2d 764, and Koffman v. Leichtfuss, 2001 WI 111, 246 Wis. 2d 31, 630 N.W.2d 201, reaffirming the vitality of the collateral source rule, govern the present case.
¶ 36. In Ellsworth, the plaintiff was severely injured in an automobile accident and the Medical Assistance program paid medical expenses at an amount less than billed. The tortfeasor contended that the collateral source rule was inapplicable to the facts of the case and that the plaintiff‘s recovery for medical expenses should be limited to the amount paid by Medical Assistance.
¶ 37. Applying the collateral source rule to Medical Assistance benefits, the Ellsworth court held that the award for medical damages is not limited to the amount paid by the Medical Assistance program.33 The court declared that a plaintiff‘s recovery for medical
¶ 38. The Ellsworth court not only addressed the damages aspect of the collateral source rule but also explored whether the amounts paid by Medical Assistance for medical services were the reasonable value of the medical services. The tortfeasor in Ellsworth argued that the amount paid by Medical Assistance represented, as a matter of law, the reasonable value of the medical services rendered to the plaintiff. The tortfeasor contended that, by statute, Medical Assistance payments are to be “the customary, usual and reasonable demand for payment... which does not exceed the general level of charges by others who render such service or care....”34 Three dissenting justices in Ellsworth, Justices Sykes, Wilcox, and Crooks, agreed that the proper measure of damages is not what would have been paid for the medical services (the amount billed) but what was actually incurred in the care and treatment of the plaintiff‘s injuries (the amount paid by Medical Assistance). The dissenting justices concluded that “the plaintiff‘s measure of damages in this case is that which Medical Assistance paid and the medical providers accepted as payment in full for the services rendered.”35
¶ 39. The Ellsworth majority rejected the tortfeasor‘s invitation to treat the amounts paid by Medical Assistance as the reasonable value of the services.36 Contrary to the dissenting justices’ view, the
The collateral source rule seeks to place upon the tortfeasor full responsibility for the loss he has caused. [The defendant] is not entitled to reap the benefit of Ellsworth‘s eligibility for public assistance or from the government‘s economic clout in the health care market place. The reimbursement rate that is established by the state for health care providers participating in the Medical Assistance program is not dispositive. Ellsworth, as the party claiming damages, carries the burden to prove her medical expenses to a reasonable certainty, by the greater weight of credible evidence.37
They cautioned, however, in a footnote that “[w]e note, as did the court of appeals, that we are not addressing the situation where a provider of medical services charges less as part of an agreement to act as the exclusive provider of treatment as part of a managed care plan.”38
¶ 40. Justice Prosser, a member of the Ellsworth majority, explained the Ellsworth decision in a dissent in a subsequent case as follows: “The Ellsworth majority held that the plaintiff was entitled to recover the higher amount, while the dissent concluded that the extra $250,000 reflected ‘what the highest payor would have paid for the same medical services,’ and thus yielded an unjustified windfall for the plaintiff.”39
¶ 41. One year later in Koffman, the court was again faced with a question about the proper applica-
¶ 42. The plaintiff in Koffman was severely injured in an automobile accident and required extensive medical care, the cost of which was paid primarily by the plaintiff‘s insurance company. The amount billed for the medical treatment was $187,931.78, but because of “certain contractual relationships with the plaintiff‘s health care providers, [the plaintiff‘s insurance company] received the benefit of reduced ‘contracted rates’ and was able to satisfy its liability for the amounts billed by the providers with total payments of $62,324.00.”40
¶ 43. The parties stipulated that the reasonable value of the medical services was the amount billed by the health care providers. The tortfeasor nevertheless argued that the plaintiff‘s recovery was limited, as a matter of law, to the amounts paid for the medical treatment. Agreeing with the tortfeasor, the circuit court reduced the jury‘s medical expense damage award to the amount actually paid.
¶ 44. The Koffman court examined the implications of the health care system in which an insurer‘s liability for medical expenses billed to an insured is often satisfied at discounted rates, with the remainder written off by the health care provider.41 The Koffman court reasoned that the collateral source rule is specifically designed to prevent a discount received by a plaintiff‘s insurance company from affecting the plaintiff‘s recovery of the reasonable value of medical
¶ 45. The Koffman court explained as follows:
Where the plaintiff‘s health care providers settle the plaintiff‘s medical bills with the plaintiff‘s insurer at reduced rates, the collateral source rule dictates that the defendant-tortfeasor not receive the benefit of the written-off amounts. The benefit of the reduced payments inures solely to the plaintiff.
. . . .
Despite the various insurance arrangements that exist in each case, the factor controlling a defendant‘s liability for medical expense is the reasonable value of the treatment rendered.43
¶ 46. The Koffman court reached the following conclusions:
- “[T]he plaintiff is entitled to seek recovery of the reasonable value of the medical services, without limitation to the amounts paid.”44
The collateral source rule “renders irrelevant the amounts of the collateral source payments . . . and precludes a reduction in medical expense damages based on those payments.”45 - Limiting medical expense damages to the amounts actually paid “is contrary to the rule of valuation of medical expense damages, the collateral source rule, and principles of subrogation . . . .”46
- “Applying the collateral source rule to payments that have been reduced by contractual arrangements . . . assures that the liability of similarly situated defendants is not dependent on the relative fortuity of the manner in which each plaintiff‘s medical expenses are financed.”47
¶ 47. Most important to our review in the instant case, the Koffman court stated that evidence of the amounts actually paid by the plaintiff‘s health care insurance company is inadmissible in the absence of a separate basis for the relevance of this collateral source evidence.48
¶ 48. The Ellsworth and Koffman decisions leave no doubt that the tortfeasor is not to benefit from the fact that the medical services provider was paid less by a collateral source than the amount billed. If evidence of the collateral source payments were admissible, even for consideration of the reasonable value of the medical treatment rendered, a plaintiff‘s recovery of medical expenses would be affected by the amount actually paid by a collateral source for medical services. Such a
¶ 49. Acuity offers several arguments why the instant case does not involve the collateral source rule and why Ellsworth and Koffman are inapposite. None of the arguments is persuasive.
¶ 50. First, Acuity contends that Ellsworth and Koffman are inapposite because in those cases no question was raised about the reasonable value of the medical treatment rendered. According to Acuity, in Ellsworth and Koffman, the court applied the collateral source rule to the ultimate award of damages, not to the question of the reasonable value of the medical treatment. Acuity is wrong to conclude that the rule established in those cases does not extend to the present case.
¶ 51. Our holdings and discussions in Ellsworth and Koffman set forth a proposition of law that applies to the present case: A plaintiff in a personal injury tort action is entitled to seek recovery of the reasonable value of medical treatment without limitation to the amount paid by a collateral source for the medical treatment.
¶ 52. Second, Acuity argues that because it seeks to introduce as evidence only the amount actually paid for medical treatment, and not the source of these compromised payments, and does not seek to reduce damages by the amount of the collateral source payments, it is doing no violence either to the collateral source rule or to Ellsworth and Koffman. The South Carolina Supreme Court evaluated an argument similar to Acuity‘s. The court declared that “[w]hile facially
¶ 53. Although claiming that the evidence assists the fact-finder in determining the reasonable value of the medical treatment and does not limit or reduce the damages, Acuity, in essence, is seeking to do indirectly what it cannot do directly, that is, it is seeking to limit Leitinger‘s award for expenses for medical treatment by introducing evidence that payment was made by a collateral source. Acuity ignores the fact that the collateral source rule protects against the “ever-present danger that the jury will misuse the evidence [of collateral payments] to diminish the damage award.”50 Acuity is trying to circumvent the collateral source rule.
¶ 54. The collateral source rule prevents the fact-finder from learning about collateral source payments, even when offered supposedly to assist the jury in determining the reasonable value of the medical treatment rendered, so that the existence of collateral source payments will not influence the fact-finder.51
¶ 55. Third, Acuity narrowly focuses on paragraph 52 in the Koffman decision, arguing that the court recognized that the amount actually paid by a third party is a relevant factor in calculating the reasonable value of medical services.
¶ 56. Paragraph 52 of the Koffman decision states as follows:
Here, the evidence of the amounts paid by the plaintiff‘s insurers was inadmissible. As a consequence of the parties’ stipulation to the reasonableness of amounts billed by the health care providers, the sole issue for the jury to determine was the amount of medical expense damages caused by the defendants’ negligence. The amounts paid by the plaintiff and his insurers were irrelevant to the determination of the causal link between the treatment and the injury. In the absence of a separate basis for the relevance of this collateral source evidence, evidence of such payments should have been deemed inadmissible.52
An accompanying footnote reads as follows: “Because the reasonableness of the amounts billed by the plaintiff‘s health care providers was the subject of the parties’ stipulation, it cannot be said that the defendant‘s presentation of this evidence was material to the valuation of those expenses in this case.”53
¶ 57. Acuity argues that paragraph 52 means that the reasonable value of medical services is a separate basis for admitting evidence of the collateral source payment. The Koffman court cites only one case as an exception to the collateral source rule: Hack v. State Farm Mutual Automobile Insurance Co., 37 Wis. 2d 1, 154 N.W.2d 320 (1967). In Hack, evidence of collateral source payments was admissible to impeach the credibility of the plaintiff. We need not address whether other exceptions to the collateral source rule exist. We need only decide, and do decide, that Koffman does not support an exception to the collateral source rule when the evidence is used to determine the reasonable value of the medical treatment.
¶ 58. The Koffman court did not hold in this passage that collateral source evidence is admissible for valuation purposes. The Koffman court was simply acknowledging that under the circumstances of the case in which the parties stipulated that the amount billed was the reasonable value of the medical treatment, no one could argue that the amount actually paid was admissible to prove the reasonable value.
¶ 59. The sole purpose of Acuity‘s presentation of the evidence of the amount actually paid by a collateral source is to reduce the award for medical expenses to this payment, a result that is exactly what the Koffman court said the collateral source rule is designed to combat.54 Acuity attempts to extrapolate too much from paragraph 52 in Koffman. The passage upon which Acuity relies cannot be read to overrule the clear holding of Koffman.
¶ 60. Fourth, Acuity attempts to distill from paragraph 27 in the KoffmanKoffman court stated as follows:
In Wisconsin, a plaintiff who has been injured by the tortious conduct of another may recover the reasonable
value of medical services rendered. . . [W]e [have] explained that while the actual amount paid for medical services may reflect the reasonable value of the treatment rendered, the focus is on the reasonable value, not the actual charge.55
¶ 61. Once again, we disagree with Acuity‘s interpretation of Koffman. This passage is silent about the effect of the collateral source rule. In the quoted passage, the Koffman court elucidated the well-accepted standard for valuation of medical services.
¶ 62. Acuity reads too much into this isolated passage and reads it out of context, ignoring the overall premise of Koffman: the collateral source rule operates to ensure that a plaintiff may recover the reasonable value of medical services rendered without being limited to the amount actually paid by a collateral source.
¶ 63. Fifth, Acuity argues that even if the collateral source rule bars introduction of evidence of amounts actually paid for medical services, this court modified the collateral source rule in Lagerstrom to permit introduction of evidence of collateral source payments.
¶ 64. In Lagerstrom, the court considered the admissibility of collateral source payments in a medical malpractice action governed by
¶ 65. Acuity relies on Lagerstrom to conclude that evidence of the amount actually paid by an insurance company is relevant and admissible evidence and accordingly that “evidence of collateral source payments may be used by the jury to determine the reasonable value of medical services.”59 Acuity‘s arguments are off the mark. Lagerstrom cannot be read so broadly as to apply to the facts of this case.
¶ 66. The court in Lagerstrom observed that
¶ 67. Sixth, Acuity argues that the amounts billed by health care providers are “fantasy,” “arbitrary,” and “random” figures that have no correlation to the reasonable value of the medical services actually provided. Acuity insists that the “reality rate,” that is, the amount actually paid, is the true measure of the reasonable value of the medical services to be considered by the fact-finder in determining the reasonable value of medical services rendered.61
¶ 68. Acuity may be correct that a significant difference frequently exists between the amount billed and the amount actually paid for medical services. The amount actually paid for medical services may include substantial “discounts,” as illustrated here and in Koffman. The Koffman court reviewed factors that contribute to the discounted amounts that health insurance
The modern health care system employs a myriad of health care finance arrangements. As part of the system, negotiated and contracted discounts between health care providers and insurers are increasingly prevalent. Pursuant to these agreements, an insurer‘s liability for the medical expenses billed to its insured is often satisfied at discounted rates, with the remainder being “written-off” by the health care provider.62
¶ 69. Acuity nonetheless asserts that the Koffman court was mistaken in characterizing the difference between the amount paid and the amount billed as a “discount.” Acuity explains that reimbursement rates are not “discounts” and instead are typically determined by each health insurance company pursuant to “usual, customary, and reasonable charges or prevailing rates in the community,” as required by law.63
¶ 70. We disagree with Acuity. The Ellsworth court refused to accept a similar argument made by the tortfeasor in that case and concluded that the amount established by the state for health care providers participating in the Medical Assistance program is not dispositive of reasonable value, even though the statute defines the charge for Medical Assistance as “the customary, usual and reasonable demand for payment.”
¶ 72. The reimbursement rate of a particular health insurance company generally arises out of a contractual relationship and reflects a multitude of factors related to the relationship of the insurance company and the provider, not just to the reasonable value of the medical services.65
¶ 73. The admission in evidence of the amount actually paid in the present case, even if marginally relevant,66 might bring complex, confusing side issues before the fact-finder that are not necessarily related to the value of the medical services rendered.67 Accord-
¶ 74. In sum, we are not persuaded by Acuity‘s arguments that the collateral source rule is not applicable or that Ellsworth and Koffman do not govern the instant case.
****
¶ 75. For the reasons set forth, we affirm the decision of the court of appeals. We hold, as did the court of appeals, that the collateral source rule prohibits parties in a personal injury action from introducing evidence of the amount actually paid by a collateral source for medical treatment rendered to prove the reasonable value of the medical treatment. We therefore remand this cause to the circuit court for proceedings consistent with this decision and the parties’ stipulations.
¶ 76. By the Court.—The decision of the court of appeals is affirmed.
¶ 77. PATIENCE DRAKE ROGGENSACK, J. (dissenting). Joseph Leitinger was injured during the course of his employment. His health care providers billed him $154,818.51 for the medical care he received. However, his insurer paid only $111,394.73 to settle the bills in full. No one has paid, or will ever pay, the $43,424.78 difference between the billed amount and
¶ 78. The majority opinion concludes that “the collateral source rule prohibits parties in a personal injury action from introducing evidence of the amount actually paid by the injured person‘s health insurance company, a collateral source, for medical treatment rendered to prove the reasonable value of the medical treatment.” Majority op., ¶ 7. In so doing, (1) it provides damages to Leitinger that are no longer compensatory damages because they exceed the amount necessary to make him whole; (2) it causes the relevancy of evidence to turn on who pays for the medical care provided, rather than on the relationship of the evidence to the reasonable value of the medical care provided, i.e., a fact the jury must determine; and (3) it usurps the jury‘s fact-finding function by hiding relevant evidence from the jury while at the same time presenting it with misleading evidence that implies that the billed amount is the cost of the medical care provided. Because I conclude that the majority opinion extends the collateral source rule too far, I respectfully dissent.
I. BACKGROUND1
¶ 79. Leitinger was injured in a construction-related accident while employed by his own company,
¶ 80. At trial, Acuity, who provided liability insurance to various defendants, did not stipulate that the amount that was billed is the reasonable value of the medical care provided, as the insurer had in Koffman v. Leichtfuss, 2001 WI 111, ¶ 7, 246 Wis. 2d 31, 630 N.W.2d 201. Acuity introduced the amount actually paid for Leitinger‘s medical care as evidence relevant to the jury‘s determination of the reasonable value of his medical care.2 The circuit court permitted expert testimony on the reasonable value of Leitinger‘s medical care, as well. The jury awarded $111,394.73, the amount actually paid for the medical care.
¶ 81. Leitinger appealed, and the court of appeals reversed, concluding that the collateral source rule prohibited presentation of evidence of the amount paid by Leitinger‘s insurance company. Leitinger v. Van Buren Mgmt., Inc., 2006 WI App 146, ¶ 1, 295 Wis. 2d 372, 720 N.W.2d 152. We granted Acuity‘s petition for review.
II. DISCUSSION
A. Standard of Review
¶ 82. A circuit court‘s decision to admit or deny admission of proffered evidence is a discretionary determination. State v. Cofield, 2000 WI App 196, ¶ 7, 238 Wis. 2d 467, 618 N.W.2d 214. However, we determine as
B. Relevant Evidence
¶ 83. As a general principle, relevant evidence is admissible. State v. Eugenio, 219 Wis. 2d 391, 411, 579 N.W.2d 642 (1998).
C. The Collateral Source Rule
¶ 84. The collateral source rule began as a substantive rule of damages wherein the amount due to an injured party could not be reduced by amounts paid to or on behalf of an injured party by a collateral source. Id. In Cunnien, we concluded that the lower court erred
¶ 85. Under the collateral source rule, an injured plaintiff may seek as part of his damages the reasonable value of medical care provided, without a deduction for payments made for those services by collateral sources. Ellsworth, 235 Wis. 2d 678, ¶ 9. The collateral source rule “prevents payments made by the insure[r of the injured party] from inuring to the benefit of the defendant, and the insurer‘s subrogation rights prevent a double recovery on the part of the plaintiff.” Koffman, 246 Wis. 2d 31, ¶ 40.
¶ 86. Over the years, the collateral source rule has taken on an evidentiary character, in addition to its being a substantive rule of damages. Id., ¶ 52. It has been used to prevent, or overrule, the admission of evidence of payments by a collateral source. Id.
¶ 87. In Koffman, the defendant stipulated4 that the amount billed by Koffman‘s medical care providers was reasonable. Id., ¶ 7. Therefore, we concluded that the admission of the amount actually paid to the medical care providers was “irrelevant” to determining the reasonable value of the medical care provided. Id., ¶ 53. Accordingly, we concluded that the amount paid was not admissible. Id.
¶ 88. While the collateral source rule is grounded in requiring a tortfeasor to pay all the damages that resulted from his tortious conduct and ensuring that he does not benefit from collateral payments made to
¶ 89. Our explanation about preventing a double recovery for a single injury while employing the collateral source rule in Koffman is consistent with our earlier statements in Voge v. Anderson, 181 Wis. 2d 726, 732, 512 N.W.2d 749 (1994) and Lambert v. Wrensch, 135 Wis. 2d 105, 121, 399 N.W.2d 369 (1987), as we explained in Koffman. There, we reaffirmed that if the collateral payer is barred from pursuing a subrogation claim for its payment, the tortfeasor is entitled to a reduction in the judgment for that collateral payment. Koffman, 246 Wis. 2d 31, ¶ 39 (explaining that “[i]n Voge v. Anderson, we properly characterized Lambert as holding that ‘where the [plaintiff‘s] insurer is barred from pursuing a claim [of subrogation], the tortfeasor is entitled to a reduction in judgment for the amount of that claim‘“). Therefore, the collateral source rule does not always prevent a reduction in a plaintiff‘s award of damages for amounts paid by a collateral source, nor are such payments always inadmissible evidence. See also Hack v. State Farm Mut. Auto. Ins. Co., 37 Wis. 2d 1, 10, 154 N.W.2d 320 (1967) (concluding that evidence of a collateral source payment is admissible for purposes of impeachment).
¶ 90. The majority opinion asserts, contrary to Wisconsin law, that there are times when the collateral source rule permits double recoveries by an injured
¶ 91. Furthermore, as its name demonstrates, the collateral source rule applies to payments only if they are made by a “collateral” source. That is, the source of payment must be collateral to the tortfeasor. The majority opinion recognizes this legal principle. Majority op., ¶ 26.
¶ 92. Therefore, if the tortfeasor or the tortfeasor‘s insurer pays for the medical care provided to the injured party, their payments would not be governed by the collateral source rule because a payment from either the tortfeasor or his liability insurer would not be from a “collateral” source. Restatement (Second) Torts § 920A(2) (1977). Accordingly, the collateral source rule would not prevent the amount paid by a tortfeasor or by the tortfeasor‘s insurer for a plaintiff‘s medical care from being presented to the jury
D. Effects of the Majority Opinion
¶ 93. The jury awarded Leitinger $43,424.78 less than the amount he was billed for the medical care he received. No one has paid this $43,424.78 on his behalf. The collateral source rule, whether a substantive rule of damages or an evidentiary rule relating to what evidence is relevant to a determination of the reasonable value of medical care provided to an injured plaintiff, is grounded in two principles: (1) the collateral payments must not provide a double recovery for a single injury and (2) any collateral payments made to or on behalf of an injured plaintiff should not reduce the amount the tortfeasor will be required to pay to compensate for the injury he caused. Koffman, 246 Wis. 2d 31, ¶¶ 29, 41. The majority opinion cuts against both principles.
¶ 94. The first principle—not providing a double recovery for a single injury—is driven by the policy that an injured party is entitled to be made whole by compensatory damages, but not more than whole. White v. Benkowski, 37 Wis. 2d 285, 290, 155 N.W.2d 74 (1967). There are only two occasions under Wisconsin law for which an injured party receives damages that exceed damages sufficient to make him whole: first, when punitive damages are awarded to punish the wrongdoer, id., or second, when the legislature establishes a statutory right of recovery that exceeds a plaintiff‘s compensatory damages. See, e.g.,
¶ 95. Here, the majority opinion employs the collateral source rule to provide damages that are greater than those that will make Leitinger whole; however, no punitive damages were awarded and no statute afforded a recovery in addition to compensatory damages. The majority opinion simply gives Leitinger a double recovery for part of the reasonable value of the medical care provided, contrary to established precedent. Koffman, 246 Wis. 2d 31, ¶ 41; Voge, 181 Wis. 2d at 732; Lambert, 135 Wis. 2d at 121.
¶ 96. In so doing, the majority opinion creates a new category of damages, without acknowledging what it is doing. It does so by unnecessarily expanding the evidentiary component of the collateral source rule to prohibit the jury from hearing what was actually paid to cover all of Leitinger‘s medical care bills while admitting evidence of what was billed, even though no one will ever pay that amount.
¶ 97. This new rule of evidence, which will be applied to cases where the plaintiff‘s insurance company pays the medical care bills, cannot be applied to preclude the admission of the same evidence of payment when a tortfeasor‘s insurer pays for the medical care. This is so because a payment from the tortfeasor‘s insurer is not a payment from a collateral source. Therefore, the majority opinion will produce inconsistent evidentiary rulings, where the admissibility of evidence will not depend on whether the evidence is actually relevant to the reasonable value of the medical care provided to an injured person, i.e., a fact that a jury must find, but rather, it will depend on who pays for the
¶ 98. As I have explained above, Leitinger will never have to pay the amount billed, nor will anyone else. However, it does not follow that there is no cost to anyone for the $43,424.78 that Leitinger will collect. Liability insurance premiums will rise to cover this new wrinkle in damages that a liability insurer will be required to pay, even though a jury decided that these amounts are not needed to fully compensate the injured party. And query, if the amount billed is actually the reasonable value of the medical care provided, shouldn‘t it be paid to the persons who provided that care, as it is they who have not been fully compensated?
¶ 99. The majority opinion also implies throughout that the collateral source rule has been employed without exception any time there is a payment from a collateral source. However, our decisions in Koffman, Voge and Lambert show that is not correct. I recognize that in Koffman we said that “[w]here the plaintiff‘s health care providers settle the plaintiff‘s medical bills with the plaintiff‘s insurers at reduced rates, the collateral source rule dictates that the defendant-tortfeasor not receive the benefit of the written-off amounts.” Koffman, 246 Wis. 2d 31, ¶ 30. However, we reached this conclusion after the defendants stipulated that the amount billed was the reasonable value of the medical services provided. Id., ¶ 7. Acuity made no such stipulation here.
¶ 100. Furthermore, the statement at ¶ 30 of Koffman that is quoted immediately above must be read in the context of the issue we now face, i.e., can the jury consider the amount paid—together with any other
[C]oncealing relevant information from the jury does not further the legitimate purpose of the collateral source rule. . . . It serves no principled purpose for courts to diminish the jury‘s role through a judge-made policy of concealment. Other rules of damages are imparted to the jury through instructions from the court; courts should treat the collateral source rule in the same way.
Joel K. Jacobsen, The Collateral Source Rule and the Role of the Jury, 70 Or. L. Rev. 523, 541 (1991).
¶ 101. There is an additional reason why the amount paid should not be excluded from evidence a jury can consider while the amount billed is admitted. It has been said that the amount billed for medical expenses has become a fictitious amount. See Jacobsen, supra; John Dewar Gleissner, Proving Medical Expenses: Time for a Change, 28 Am. J. Trial Advoc. 649 (2005); Robert Hernquist, Arthur v. Catour: An Examination of the Collateral Source Rule in Illinois, 38 Loy. U. Chi. L.J. 169 (2006).
If the higher stated medical bill, an amount that never was and never will be paid, is admitted without evidence of the lower reimbursement rate, the jury is basing their verdict on “mere speculation or conjecture.” The difference between the stated bill and the paid charges . . . is purely fictional as a true charge.
Gleissner, 28 Am. J. Trial Advoc. at 656.
¶ 102. Therefore, I conclude that the majority opinion extends the collateral source rule too far, and in so doing: (1) it provides damages to Leitinger that are no longer compensatory damages because they exceed the amount necessary to make him whole; (2) it causes the relevancy of evidence to turn on who pays for the medical care provided, rather than on the relationship of the evidence to the reasonable value of the medical care provided, i.e., a fact the jury must determine; and (3) it usurps the jury‘s fact-finding function by hiding relevant evidence from the jury while at the same time presenting it with misleading evidence that implies that the billed amount is the cost of the medical care provided. Accordingly, I respectfully dissent.
¶ 103. I am authorized to state that Justice DAVID T. PROSSER joins in this dissent.
Notes
Wis JI—Civil 1756 (2007) states that a plaintiff should be compensated for “the sum of money... [that] has reasonably and necessarily been incurred from the date of the accident.. for the care and treatment of the injuries sustained by (plaintiff) as a result of the accident.”
The reasonable value of the medical services is just one component of what makes the injured plaintiff “whole.” Other damages include lost wages, future lost wages, loss of earning capacity, etc.
“Payments made to or benefits conferred on the injured party from other sources [than the tortfeasor or a person acting for him] are not credited against the tortfeasor‘s liability, although they cover all or a part of the harm for which the tortfeasor is liable.” Restatement (Second) of Torts § 920A(2) (1977). In Comment b at 514, the Restatement explains that “Payments made or benefits conferred by other sources are known as collateral-source benefits. They do not have the effect of reducing the recovery against the defendant.... [I]t is the
For criticism of the collateral source rule as a rule of evidence because it keeps information from the fact-finder, see Joel K. Jacobsen, The Collateral Source Rule and the Role of the Jury, 70 Or. L. Rev. 523 (1991).
In many instances of the collateral source rule it is possible to argue that the plaintiff paid for the benefit he is now receiving and that the defendant ought not benefit from the plaintiff‘s investment. Along with this, it is said that the collateral source rule encourages the plaintiff to protect himself by the purchase of insurance by making sure he reaps its value.
A minority of courts has taken the position that regardless of the reasonable value of the medical services rendered, the amount actually paid is admissible and governs recovery of damages. See, e.g., Moorhead v. Crozer Chester Med. Ctr., 765 A.2d 786 (Pa. 2001) (regardless of reasonable value, plaintiff‘s award limited to amount actually paid for medical services); Hanif v. Housing Auth., 246 Cal. Rptr. 192, 195 (Cal. App. 1988) (plaintiff generally entitled only to amount actually paid for medical services so long as the amount is reasonable).
This “double recovery” is often an unfounded fear. “The collateral source rule works in conjunction with subrogation and reimbursement. Plaintiffs do not necessarily actually receive a double recovery even if they do collect fully from both the tortfeasor and the collateral source, because a collateral source may have a right of subrogation or reimbursement.” Lagerstrom, 285 Wis. 2d 1, ¶ 62 (citing Dan B. Dobbs, Dobbs Law of Remedies: Damages, Equity, Restitution § 8.6 at 496 (2d ed. 1993)).
All references to the Wisconsin Statutes are to the 2001-02 version unless otherwise noted.Evidence of any compensation for bodily injury received from sources other than the defendant to compensate the claimant for the injury is admissible in an action to recover damages for medical malpractice. This section does not limit the substantive or procedural rights of persons who have claims based upon subrogation.