Lead Opinion
I. INTRODUCTION
The plaintiff, Diane Stayton, sustained serious burn injuries while a resident at Harbor Healthcare and Rehabilitation Center (“Harbor Healthcare”), a skilled nursing center in Lewes, Delaware. She brought a medical negligence suit against those responsible for her care at Harbor Healthcare. In addition to general damages, Stayton sought special damages for the cost of her medical care after she was burned. Absent Medicare coverage, the burn hospital and other providers who treated her for her injuries would have billed Stayton $3,683,797.11. Because Stayton qualifies for Medicare, the Centers for Medicare and Medicaid Services (“CMS”) paid Stayton’s healthcare provid
The defendants moved for judgment on the pleadings seeking judgment as a matter of law that Stayton’s medical expense damages were limited to the amount actually paid by CMS, rather than the amount Stayton might have been billed for her care. Stayton opposed the motion, relying on the collateral source rule. Stated generally, the collateral source rule provides that if an injured party is compensated for injuries from a source independent of the tortfeasor, the payment is not admissible to limit the damages paid by the tortfea-sor. Application of the rule in this case to the amount Stayton’s healthcare providers wrote off would mean Stayton could introduce into evidence as potential special damages the amount her healthcare providers might have billed ($3,683,797.11), instead of the amount actually paid ($262,-550.17).
The Superior Court granted the defendants’ motion, and limited Stayton’s medical expense claim to the amount paid by CMS. The court decided that the collateral source rule did not apply to amounts required by federal law to be written off by healthcare providers. We accepted certification of an interlocutory appeal under Supreme Court Rule 42 from the Superior Court’s decision.
On appeal, Stayton argues that the Superior Court should have applied the collateral source rule to the Medicare write-offs. We conclude that the collateral source rule does not apply to amounts required to be written off by Medicare. Where a healthcare provider has treated a plaintiff covered by Medicare, the amount paid for medical services is the amount recoverable by the plaintiff as medical expense damages.
II. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
According to the allegations of the complaint, at the time of the accident, Stayton was a 76 year-old resident of the Harbor Healthcare and Rehabilitation Center. She was wheelchair bound, paralyzed in one of her arms and one of her legs, and had also suffered from a stroke. While unsupervised, she attempted to light a cigarette and caught her clothing on fire. Stayton was burned over twenty three percent of her body, requiring treatment by over thirty physicians and other healthcare providers during her nearly six month hospital stay at Crozer Burn Center in Chester, Pennsylvania.
Stayton alleges that defendants’ medical negligence caused her injuries. The hospital and her other healthcare providers billed a total of $3,683,797.11, representing the amount that would be billed to Stayton absent Medicare coverage.
Medicare is a government-sponsored health insurance program for people 65 years old or older who are eligible for Social Security retirement benefits.
When a healthcare provider like Crozer Burn Center delivers medical services to a patient covered under Medicare, the provider must submit its bill to the Medicare agency for reimbursement.
The defendants moved for judgment on the pleadings under Superior Court Civil Rule 12(c) to limit Stayton’s past medical expense damages to the $262,550.17 paid to Stayton’s healthcare providers by CMS. They argued that the written-off portion of the claim was not recoverable because neither Medicare nor Stayton would be required to pay it and Crozer Burn Center and Stayton’s other providers would never collect it. In response, Stayton contended that she was entitled to the entire amount billed by Crozer Burn Center and her other providers, including the written-off portions of her bills, because under the collateral source rule, an injured party is permitted to recover the full reasonable cost of medical services from the tortfea-sor, and a tortfeasor may not benefit from payments that the victim receives from third parties.
Although this Court recognized the collateral source rule as a “firmly embedded” principle of Delaware law in Mitchell v. Haldar,
After examining several cases addressing the question of whether the full amount of medical expenses, including amounts paid for by collateral sources, could be recovered in a damages action, the Superior Court decided to follow a Superior Court case, Rice v. The Chimes, Inc.
The Superior Court concluded that Stay-ton could only recover $262,550.17 as compensation for her medical expenses, the only amount that Crozer Burn Center and Stayton’s other providers would receive as payment, and the maximum amount that Medicare could recover from Stayton. It concluded that preventing the plaintiff from recovering “inflated and fictitious damages” reduced the possibility of overly-inflated special damage awards, which are often based on awards for actual damages, and ameliorated the increasing cost of liability insurance coverage for healthcare providers.
III. ANALYSIS
Where an injured plaintiff seeks to recover for medical services, the plaintiff must prove two distinct issues — first that the value claimed for medical services is reasonable, and second that the need for medical services was proximately caused by the tortfeasor’s negligence.
The defendants contend in response that the Superior Court correctly found that the collateral source rule does not apply to the written-off portion of Stayton’s medical bills because Stayton did not contract with Crozer Burn Center or her other providers to accept a discount, nor did she contract for Medicare benefits. The defendants also argue that Medicare is different from other private collateral sources: specifically, Crozer Burn Center and Stayton’s other providers have a legal obligation to accept a lower payment, determined by Medicare, for its medical services, and Medicare has no right of subrogation for the written-off portion of Stayton’s medical bills. They also contend that the total charges submitted to Medicare were based on factors other than the reasonable value of the medical services provided, and as such, the collateral source rule cannot permit recovery of those inflated, illusory charges. Finally, the defendants argue that a contrary ruling conflicts with tort law principles, which attempt to put a victim as close as possible to the same position as the victim was in before the injury.
The Chamber of Commerce of the United States filed an amicus curiae brief in support of defendants. It argues that we should affirm the Superior Court’s ruling because allowing Stayton to recover medical expenses that were never paid would merely generate windfalls for plaintiffs and their lawyers. Because the gap between the amount paid by Medicare and the actual medical bill is often quite large, requiring a damage payment for the full amount billed would lead to a substantial increase in insurance premiums, harming businesses and consumers.
We review the Superior Court’s legal determination de novo.
A. Delaware’s Collateral Source Rule
The collateral source rule is of common law origin
The collateral source rule is “designed to strike a balance between two competing principles of tort law: (1) a plaintiff is entitled to compensation sufficient to make him whole, but no more; and (2) a defendant is liable for all damages that proximately result from his wrong.”
When the rule applies, a tortfeasor cannot reduce its damages because of payments or compensation received by the injured person from an independent source.
B. The Collateral Source Rule and Healthcare Provider Write-Offs
Even though the collateral source rule has been recognized by most states,
States that apply the collateral source rule to provider write-offs as they do to third party payments view provider write-offs as benefits conferred on plaintiffs by providers, in the form of services gratuitously rendered at a price below the standard rate.
The injured party’s net loss may have been reduced [by a collateral source benefit], and to the extent that the defendant is required to pay the total amount there may be a double compensation for a part of the plaintiffs injury. But it is 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. If the plaintiff was himself responsible for the benefit, as by maintaining his own insurance or by making advantageous employment arrangements, the law allows him to keep it for himself. If the benefit was a gift to the plaintiff from a third party or established for him by law, he should not be deprived of the advantage that it confers. The law does not differentiate between the nature of the benefits, so long as they did not come from the defendant or a person acting for him.32
States that apply the collateral source rule to write-offs “bargained for” by the injured party express concern about granting double recoveries to plaintiffs given rising insurance costs, but on balance believe that applying the rule to bargained-for write-offs honors the insurance arrangement that the plaintiffs have paid consideration for, and encourages the purchase of insurance.
The last group of states disagrees, as a threshold matter, that the collateral source rule, by its express terms, applies to provider write-offs. These states reason that provider write-offs are not, in the words of the Restatement, “[p]ayments made to or benefits conferred on the injured party....”
This Court has applied the collateral source rule to provider write-offs as it has to third party payments. In Onusko, a physical therapist voluntarily reduced the price of treatment sessions from $534 to $282 per visit for the uninsured plaintiff. This Court applied the collateral source rule to the amounts written off by the therapist and upheld the trial judge’s decision to allow the plaintiff to present the jury with the $534 the therapist normally charged as evidence of the reasonable value of the therapy sessions.
Payments made to or benefits conferred on the injured party from other sources are not credited against the tortfeasor’s liability, although they cover all or part of the harm for which the tortfeasor is liable.... This applies to cash gratuities and to the rendering of services. Thus the fact that the doctor did not charge for his services ... does not prevent his recovery for the reasonable value of the services.36
In Mitchell, the defendant sought to limit the plaintiffs recovery to the amount paid by his private health insurer, Blue Cross, arguing that the plaintiff could not recover the full amounts of his medical bills unless those amounts were actually paid by Blue Cross. We disagreed, observing,
[W]e recently held in Onusko v. Kerr, the portions of medical expenses that health care providers write off constitute “compensation or indemnity received by a tort victim from a source collateral to the tortfeasor.” The result is the same whether the write-off is generated by a cash payment such as Kerr’s or, as in this ease, because of a reduction attributable to a health insurance contract for which the tortfeasor paid no compensation.37
C. Medicare Write-offs
In Onusko and Mitchell, the written off portions of the plaintiffs’ medical bills were far more modest in relation to the amounts actually paid than in this case. The fact that the written off portion of Stayton’s medical bills is thirteen times the amount paid gives us pause. It reflects the purchasing power of Medicare, given the size of its beneficiary population. It is also reflects the way in which the realities of today’s healthcare economy diverge from the traditional underpinnings of the collateral source rule.
Discounting is the rule rather than the exception in healthcare today. “[Ojnly a small fraction of persons receiving medical services actually pay originaL amounts billed for those services.”
Whether to apply the collateral source rule to Medicare write-offs is a question of first impression for this Court. In our
It is similarly hard to view these 'discounts as benefits bargained for by the patient. As stated in Haygood v. De Escabedo:
The benefit of insurance to the insured is the payment of charges owed to the health care provider. An adjustment in the amount of those charges to arrive at the amount owed is a benefit to the insurer, one it obtains from the provider for itself, not for the insured.40
Treating provider write-offs as if they were benefits bargained for by insureds theoretically encourages individuals to purchase health insurance. In reality, though, we suspect few individuals decide to purchase health insurance because they expect to be tort victims and want to assure themselves a double recovery. It is far more likely that decisions to purchase or not purchase insurance are motivated by consideration of the cost of the premiums and the health coverage to be gained in return for those premiums. Since the passage of the Patient Care and Affordable Care Act, the penalties to be incurred for failing to purchase insurance have undoubtedly played a role as well.
Though we applied the collateral source rule to provider write-offs in Mitchell and Onusko, we decline today to extend that application to amounts that a healthcare provider is required to write off for Medicare patients. Instead we follow the view that provider write-offs are not payments made to or benefits conferred on the injured party. The $3,421,246.94 that Stay-ton’s healthcare providers wrote off was paid by no one. Any benefit that Stayton’s healthcare providers conferred in writing off over ninety percent of their collective charges was conferred on federal taxpayers, as a consequence of Medicare’s purchasing power. Thus, the collateral source rule does not apply to the amounts written off by Stayton’s healthcare providers.
D. Reasonable Value of Medical Services
Because we find that the collateral source rule does not. apply to Medicare write-offs, the question becomes how to determine the reasonable value of medical services where there are Medicare write-offs. Like the application of the collateral source rule to write-offs, states diverge on how to measure reasonable value when the amount paid differs from the amount that might be billed for medical services. Among states that do not apply the collateral source rule to provider write-offs, some treat the determination of the reasonable value of medical services as a jury question, as is done where the collateral source rule applies. Other states that do not apply the collateral source rule to provider write-offs treat the amount paid as
States that continue to leave the reasonable value determination to the jury, despite 'finding the collateral source rule inapplicable to write-offs, believe that the “realities of health care finance”
States that find the amount paid disposi-tive of the reasonable value as a matter of law suggest that the collateral source rule is an exception to the general rule of damages. Where the rule does not apply, the determination of damages ought to proceed under the principle that a plaintiff is entitled to compensation sufficient to make her whole, but no more.
When the plaintiff seeks to recover for expenditures made or liability incurred to third parties for services rendered, normally the amount recovered is the reasonable value of the services rather than the amount paid or charged. If, however, the injured person paid less than the exchange rate, he can recover no more than the amount paid, except when the low rate was intended as a gift to him.48
The fact that Stayton’s healthcare providers collectively accepted less than a tenth of the amount they might have billed, and did so not as a gratuitous exception but as part of an agreement with a high-volume payer, makes it difficult to conclude that the billed amounts represent the reasonable value of the medical services. On the other hand, the fact that Stayton’s providers agreed up front to provide their services to Medicare patients in exchange for the amount Medicare pays for those services suggests that the amount paid might be in the range of what should be considered reasonable.
There are several shortcomings to the jury approach. Evidence of the amount billed and the amount paid are both relevant to the question of the reasonable value of medical services. But introducing the amount paid into evidence informs jurors that the plaintiffs medical expenses have been at least partially paid for by a collateral source. This creates a risk that jurors will absolve the defendant of liability for that amount paid by the collateral source. This reduction in the plaintiffs recovery, for a payment from a third party payer, is disallowed by the collateral source rule, even if a reduction for a provider write-off is not. Indeed, preventing reduction in the plaintiffs recovery for a collateral source payment is the prototypical application of the rule. Thus, in an effort to strike a balance in connection ■with write-offs to which the collateral source rule does not apply, the jury approach undercuts the rule in connection with third party payments to which the rule indisputably does apply. Finally there is the cost to the system of requiring multiple experts to testify about the reasonable value of the medical services.
On balance, we believe the better course is to treat the amount paid by Medicare as dispositive of the reasonable value of healthcare provider services. Delaware has followed the Restatement (Second) of Torts in its application of the collateral
The collateral source rule is an exception to the general principles governing compensatory damages. That exception does not apply here, so recovery, if it is had, should be had in accordance with the ordinarily damage principles. In Delaware “a plaintiff is entitled to compensation sufficient to make him whole, but no more.”
IV. CONCLUSION
For the foregoing reasons, we affirm the judgment of the Superior Court that the collateral source rule does not apply to Medicare write-offs. Stayton’s healthcare provider expenses are limited to the amount paid by CMS for her medical care.
. App. to Opening Br. at 43-54 (Complaint Exhibit A).
. Id. at 54.
. 42 U.S.C. § 1395c.
. 26 U.S.C. §§ 310(b), 3111(b).
. Participation on the part of health care providers is by agreement. See 42 U.S.C. § 1395cc(a)(l) (providing that "any provider of services ... shall be qualified to participate [in Medicare] and shall be eligible for payments ... if it files with the Secretary an agreement” and specifying the terms of the agreement).
. 42 U.S.C. § 1395w-21(a)(l).
. 42 USC § 1395cc(a)(l)-(2). Providers may charge Medicare patients applicable deductibles and coinsurance.
. Id.
. Stephen L. Olson & Pat Wasson, Is the Collateral Source Rule Applicable to Medicare and Medicaid Write-Offs, 71 Def. Couns. J. 172, 172 (2004) (citing Confronting the New Health Care Crisis: Improving Health Care Quality and Lowering Costs by Fixing Our Medical Liability System, U.S. Dep’t of Health and Human Services, July 24, 2002).
. 42 U.S.C. § 1395cc(a)(l)-(2); 42 C.F.R. § 489.21(a).
. Id. at § 1395y(b)(2)(B)(iii); 42 C.F.R. § 411.37(c) ("If Medicare payments are less than the judgment or settlement amount, the recovery is computed as follows: (1) Determine the ratio of the procurement costs to the total judgment or settlement payment. (2) Apply the ratio to the Medicare payment. The product is the Medicare share of procurement costs. (3) Subtract the Medicare share of procurement costs from the Medicare payments. The remainder is the Medicare recovery amount.”).
. Mitchell v. Haldar, 883 A.2d 32, 37 (Del.2006) (quoting Yarrington v. Thornburg, 205 A.2d 1, 2 (Del.1964)).
. State Farm Mut. Auto Ins. Co. v. Nalbone, 569 A.2d 71 (Del.1989).
. Stayton v. Delaware Health Corp., 2014 WL 4782997, at *2 (Del.Super. Sept. 24, 2014) (internal quotations omitted).
. Id. at *1.
. Rice v. The Chimes, Inc., C.A. No. 01-03-260 CLS (Del.Super.Oct. 4, 2002).
. Id. at 4 (quoting Wildermuth v. Staton, 2002 WL 922137, at *5 (D. Kan. April 29, 2002)).
. Stayton v. Delaware Health Corp., 2014 WL 4782997, at *2.
. Mitchell, 883 A.2d at 37.
. General Motors Corp. v. New Castle County, 701 A.2d 819, 822 (Del.1997).
. Restatement (Second) of Torts § 920A, cmt. d.
. Mitchell, 883 A.2d at 37 (discussing The Propeller Monticello v. Mollison, 58 U.S. 152, 17 How. 152, 15 L.Ed. 68 (1854)).
. Yarrington v. Thornburg, 205 A.2d 1, 2 (Del.1964).
. Mitchell, 883 A.2d at 38.
. Id.
. Id. Even though the right to recover the written off amount might be termed a windfall, the amount of the windfall is affected by subrogation rights. Most private insurance policies provide a subrogation right to the insurer covering its payments. Guillermo Gabriel Zorogastua, Improperly Divorced From Its Roots: The Rationales of the Collateral Source Rule and Their Implications for Medicare and Medicaid Write-Offs, 55 U. Kan. L. Rev. 463, 470 n. 56 (2007) (quoting Eric Mills Holmes, Holmes' Appleman on Insurance 2d § 141.2(c)(2)). As noted earlier, Medicare and Medicaid beneficiaries are subject to a lien covering government payments on any personal injury recovery. 42 U.S.C. § 1395y(b)(2)(B)(iii); 42 C.F.R. § 411.37(c).
. Restatement (Second) of Torts § 920A.
. Mitchell, 883 A.2d at 37-38
. Yarrington, 205 A.2d at 2.
. See Bynum v. Magno, 101 P.3d 1149, 1156 (Haw.2004) ("Because a plaintiff like Joseph is not required to pay the difference between the standard rate and the Medicare/Medicaid payment, that part of such medical services attributable to such difference could be viewed conceptually as gratuitous service to the plaintiff, so as to come within the collateral source rule.”); Wills v. Foster, 229 Ill.2d 393, 323 Ill.Dec. 26, 892 N.E.2d 1018, 1024 (2008) (citing comment c(3) to the Restatement (Second) of Torts § 920A regarding gratuities, which states "the fact the doctor did not charge for his services .., does not prevent [the plaintiff’s] recovery for the full value of the services”).
. See Bynum, 101 P.3d at 1154 ("Comment b to [Restatement (Second) of Torts] § 920A ... explains that, although double compensation may result to the plaintiff, such a benefit should redound to the injured party rather than ‘become a windfall’ to the party causing the injury.”) Wills, 323 Ill.Dec. 26, 892 N.E.2d at 1030 (“A benefit that is directed to the injured party should not be shifted so as to become a windfall for the tortfeasor.”) (internal quotation omitted).
. Restatement of Torts § 920A, cmt. b.
. See Bozeman v. State, 879 So.2d 692, 704 (La.2004) ("The collateral source rule expresses a policy judgment in favor of encouraging citizens to purchase and maintain insurance for personal injuries and other eventualities.”) (quoting Helfend v. California Rapid Transit District, 2 Cal.3d 1, 84 Cal.Rptr. 173, 465 P.2d 61, 66 (1970)); Acuar v. Letourneau, 260 Va. 180, 531 S.E.2d 316, 322 (2000) ("Those amounts written off are as much of a benefit for which [the plaintiff] paid consideration as are the actual cash payments made by his health insurance carrier to the health care providers.”).
. Restatement (Second) of Torts § 920A(2). See Howell v. Hamilton Meats & Provisions, Inc., 52 Cal.4th 541, 129 Cal.Rptr.3d 325, 257
. Onusko, 880 A.2d at 1024-25.
. Restatement (Second) of Torts § 920A(2); comment c.(3).
. Mitchell, 883 A.2d at 40 (quoting Acuar, 531 S.E.2d at 320). We disagree with the Superior Court’s view that Delaware -has adopted a benefit-of-the-bargain approach to the collateral source rule. The Superior Court relies on State Farm Mut. Auto Ins. Co. v. Nalbone, 569 A.2d 71 (Del.1989), and suggests that our later decision in Mitchell "followed a contract law inspired principle” from
. Thomas R. Ireland, The Concept of Reasonable Value in Recovery of Medical Expenses in Personal Injury Torts, 14 J. Legal Econ. 87, 88 (2008).
. Pub.L. No. 111-148, 124 Stat. 119 (2010). See Ann S. Levin, The Fate of the Collateral Source Rule After Healthcare Reform, 60 UCLA L. Rev. 736, 742 (2013) ("Because of [the Patient Protection and Affordable Care Act’s] individual mandate requirement (effective January 1, 2014), almost everyone will be insured. Thus defendants will rarely, if ever, encounter plaintiffs whose medical bills are paid in full at the billed rate rather than at the lower negotiated rate paid by insurance companies.”).
. Haygood, 356 S.W.3d at 395. See also Martinez v. Milburn Enterprises, Inc., 290 Kan. 572, 233 P.3d 205, 232-33 (2010) (Johnson, J., concurring) (explaining that the purchaser of health insurance bargains for, “the reimbursement or payment for needed medical services which might be required for any reason, including illnesses, as well as accidents,” and that, "an insured is unconcerned about how much it will cost the insurer to fulfill its policy obligation.... ”).
. Stanley, 906 N.E.2d at 857.
. See id. ("The complexities of health care pricing structures make it difficult to determine whether the amount paid, the amount billed, or an amount in between represents the reasonable value of medical services.”).
. See Robinson, 857 N.E.2d at 1200 ("To avoid the creation of separate categories of plaintiffs based on individual insurance coverage, we decline to adopt a categorical rule.... Due to the realities of today's insurance and reimbursement system, in any given case, [the reasonable value] determination is not necessarily the amount of the original bill or the amount paid.”).
. See Stanley, 906 N.E.2d at 858 ("Given the current state of the health care pricing system ... the jury may well need the amount of the payments, amounts billed by medical service providers, and other relevant and admissible evidence to be able to determine the amount of reasonable medical expenses. To assist the jury in this regard, a defendant may cross-examine any witness called by the plaintiff to establish reasonableness. The defendant may also introduce its own witnesses to testify that the billed amounts do not represent the reasonable value of the services. Additionally, the defendant may introduce the discounted amounts into evidence to rebut the reasonableness of charges introduced by the plaintiff.”)
. See Haygood, 356 S.W.3d at 394 ("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. The collateral source rule is an exception.”) (internal citations omitted).
. See Howell, 129 Cal.Rptr.3d 325, 257 P.3d at 1138 ("To be recoverable as expenses, monies must generally have been expended, or at least incurred .... ”) (internal quotation omitted); Moorhead, 765 A.2d at 789 ("The expenses for which a plaintiff may recover must be such as have been actually paid, or such as, in the judgment of the jury, are reasonably necessary to be incurred.”) (internal quotation omitted).
. A number of courts have challenged the relevance to these cases of comment h to § 911 because by its terms it applies “when the plaintiff seeks to recover for expenditures made or liability to third parties for services rendered” and plaintiffs seeking recovery for medical services damages are not seeking "to recover for expenditures made or liability to third parties for services rendered.” Bynum, 101 P.3d at 1159; Wills, 323 Ill.Dec. 26, 892 N.E.2d at 1027-28. To the extent plaintiffs seeking to recover medical services damages have not made expenditures or incurred liability to their medical services providers, it is only due to collateral source payments. Even courts that do not apply the collateral source rule to provider write-offs agree that a plaintiff is entitled to recover as if such collateral source payments had not been made, in which case the plaintiff would have incurred a liability to the providers. In any case, a collateral source payer often has a subrogation right, standing in the plaintiffs shoes, to recover for the payments it made to the providers on the plaintiff's behalf. In either case, recovery is had as if payments were made or a liability incurred.
. Restatement (Second) of Torts § 911, cmt. h.
. See Mitchell, 883 A.2d at 38-39 (citing the Restatement (Second) of Torts § 920A and § 920A, cmt. b); Onusko, 880 A.2d at 1024-25 (citing the Restatement (Second) of Torts § 920A and § 920A, cmt. c(3)).
. Mitchell, 883 A.2d at 38 (internal quotations omitted).
. Restatement (Third) of Torts § 1 TD No. 1 (2012).
. Laskowski v. Wallis, 205 A.2d 825, 826 (Del.1964).
Concurrence Opinion
concurring:
I join the excellent opinion of the Court, and write separately only to note that this decision illustrates the wisdom of taking a Hippocratic approach to applying longstanding doctrines that have been extended beyond what was necessary to accomplish their original goal. In other words, by taking a “this far, no further” approach to the collateral source rule, the Court adheres to the principle, “first do no harm.”
The Court respects the reality that Harbor Healthcare has not asked us to narrow the reach of the collateral source rule, but only to refuse to extend it to this context. But the case before us calls into question the wisdom of applying the collateral source rule — itself an exception to the general rule of damages that a plaintiff is entitled to be made whole and nothing more
As the Court notes, the collateral source rule emerged to “balance between two competing principles of tort law: (1) a plaintiff is entitled to compensation sufficient to make him whole, but no more; and (2) a defendant is liable for all damages that proximately result from his wrong.”
Historically, courts have applied the collateral source rule to allow a plaintiff to
In this case, by contrast, if we were to apply the collateral source rule to allow Stayton to recover the full amount of her medical bill, it would not help the real party that Stayton contends was shortchanged: Crozer Burn Center. Stayton’s lawyer is not acting as the champion of a hospital that he alleges did not receive fair reimbursement for providing critical care to his client, but is instead seeking to have his client pocket compensation for hospital charges that she was never obligated to pay, charges that are thirteen times greater than the amount that Medicare actually paid on his client’s behalf. Likewise, if the collateral source rule was employed to allow a plaintiff such as Stayton to recover the full cost nf medical treatment she received for free, rather than requiring her recovery to go to the hospital, the rule would perversely provide a windfall for the plaintiff, rather than fairly allocate an award of expenses to the party that actually incurred them.
It makes sense not only as a matter of good incentives, but of fundamental fairness, to ensure that a provider that gives charitable or discounted care to help a tort victim who cannot pay for the care is able to be topped up to market when the tort-feasor is held accountable for the tort. But why the plaintiff should get to pocket the difference for herself as part of her recovery, leaving the provider who did the good deed with a shortfall, measured precisely by the extent of the plaintiffs own windfall, is harder to understand.
Of course, the common law might determine that a plaintiff who acts as an enforcement agent for herself and her healthcare provider should receive an award of attorneys’ fees and costs to ensure that the net recovery of her healthcare costs is not reduced by any enforcement costs. Even under that approach, windfalls should be avoided, and there should be no double recovery of enforcement costs or any incentives created to run them up.
Allowing a plaintiff like Stayton to recover the full value of the hospital services Crozer provided at a supposed discount would also do nothing to reduce the corresponding harm to social welfare that results from Crozer’s increased costs, incurred because of Harbor Health’s alleged negligence. When a hospital has to treat additional patients because a tortfeasor failed to exercise due care, its capacity to treat other patients becomes more limited. If the hospital also generously discounts the cost of the services it provides because, for example, the patient was uninsured and unable to pay the full cost of treatment, it will incur even greater costs. Ensuring that any tort recovery for the reasonable cost of treatment goes to the hospital that provided the medical care at a lower-than-market rate ameliorates the overall loss to social welfare due to the tortfeasor’s negligence. Moreover, requiring the tortfeasor to bear the full cost of the harm imposed on the victim, the victim’s insurer, and the victim’s healthcare providers, and no more, sets the right incentive for deterrence.
Because the Court’s well-reasoned opinion is directionally sensitive to these concerns, I gladly join it in full.
. See 25 CJ.S. Damages § 189 (2015) (“The collateral-source rule is an exception to the general rule of damages preventing a double recovery by an injured party, or in other words, it is an exception to the general rule that in a tort action, the measure of damages
. E.g., Bryce Benjet, A Review of State Law Modifying the Collateral Source Rule: Seeking Greater Fairness in Economic Damages Awards, 76 Def. Couns. J. 210 (2009) (noting that "although the [collateral source] rule is entrenched in the common law, there is a growing trend to restrict, if not abolish, the rule,” and citing cases); Gary T. Schwartz, A National Elealth Care Program: What Its Effect Would Be on American Tort Law and Malpractice Law, 79 Cornell L. Rev. 1339, 1341 (1994) (“[T]he collateral source rule has by now been abolished in several states.”); Michael K. Beard, The Impact of Changes in Health Care Provider Reimbursement Systems on the Recovery of Damages for Medical Expenses in Personal Injury Suits, 21 Am. J. Trial Advoc. 453, 476-77 (1998) ("The collateral source rule and its policy justifications were widely accepted before health insurance became prevalent. Therefore, it was foreordained that the rule would be applied to, all forms of health insurance.... Only with the tort reform legislation of the last twenty years has there been any substantial modifications to the rule ... ”); 3 Litigating Tort Cases § 30:5 ("Several states have abolished or modified the collateral source rule in medical malpractice cases.”); cf John G. Fleming, The Collateral Source Rule and Loss Allocation in Tort Law, 54 Calif. L. Rev. 1478, 1478-82 (1966) (noting that the rationale for the collateral source rule when adopted — shifting losses to more affluent parties — has become less compelling in a society that prioritizes social programs over tort recovery as a mechanism for loss shifting); Rebecca Levenson, Comment, Allocating the Costs of Harm to Where They Are Due: Modifying the Collateral Source Rule After Healthcare Reform, 160 U. Pa. L. Rev. 921 (2012) (arguing that the collateral source rule should be limited in the wake of the individual mandate under the Affordable Care Act).
. Mitchell v. Haldar, 883 A.2d 32, 38 (Del.2005).
. See 25 C.J.S. Damages § 189 (2015) ("The collateral-source rule, like other tort principles, also aims át deterring a tortfeasor’s negligent conduct, and accordingly, it makes the tortfeasor fully responsible for damages caused as a result of tortious conduct.”).
. See, e.g., Mitchell, 883 A.2d at 38.
. In Onusko v. Kerr, for example, a physical therapist lowered his rates for an uninsured patient who_ was injured in a motorcycle crash. The patient was then allowed to recover the full market rate from the tortfeasor under the collateral source rule, with no apparent obligation to make the physical therapist whole for the amount that he should have received. See Onusko v. Kerr, 880 A.2d 1022, 1024-25 (Del.2005) (quoting the Restatement (Second) of Torts § 920A(2) and comment c.(3) for the proposition that ''[pjayments made to or benefits conferred on the injured party from other sources, are not-credited against the tortfeasor’s liability, although they cover all or part of the harm for which the tortfeasor is liable.... This applies to cash gratuities and to the rendering of services. Thus the fact that the doctor did not charge for his services ... does not prevent [the plaintiff’s] recovery for the reasonable value of the services.”).
. The rare case where a double recovery should be permitted is where an insured person has contracted for it specifically. In that case, the plaintiff does not really receive a double recovery because the insured party has contracted and paid for the right to recover. Those of us who went to school some decades ago might recall that students were often offered the chance to buy policies that provided for certain payments if a body part suffered specified damage for any reason (for example, $10,000 in the event of a loss of a pinkie). If a parent bought two separate policies of that kind for their child-student, and the student lost a pinkie, both policies would have to pay.
. See 3 Stein on Personal Injury Damages Treatise § 22:7 (3d ed.).
. See, e.g., A. Mitchell Polinsky, Steven Sha-vell, Punitive Damages: An Economic Analysis, 111 Harv. L. Rev. 869 (1998) ("The central point that we want to explain here is that, if a defendant will definitely be found liable for the harm for which he is responsible, the proper magnitude of damages is equal to the harm the defendant has caused. If damages are either lower or higher than the harm, various socially undesirable consequences will result.... ”).