Indiana Supreme Court Weighs Collateral Source Statute and Government Payers

Most Indiana personal injury lawsuits involve a claim for reimbursement of medical expenses – past and future. Thus, a central point of contention for some litigants is “what is the reasonable cost of medical care?”

Many courts have accepted that the amount billed for services can be taken at face value as “reasonable” for services rendered. However, defendants are increasingly challenging these amounts, saying they should not be taken at face value as “reasonable.” One thing that constrains this rebuttal, however, is the collateral source rule. Jurisdictions vary greatly on the collateral source rule application and scope, and the law is constantly evolving. Indiana is no exception, as shown in the recent case of Patchett v. Lee, before the Indiana Supreme Court.

In general, American case law prevents the admission of evidence that a plaintiff or victim in a personal injury lawsuit received compensation from a source other than damages sought by the defendant. Thus, for example, if you are injured but had private health insurance that covered a substantial portion of your medical costs, that information would not be subject to review by the jury. The idea is that this could unfairly affect the jurors’ perception of the compensation to which a plaintiff is entitled.

In Patchett, the question of first impression was whether reduced medical bills negotiated by government payers are subject to the collateral source rule protection. That is, if health care providers agree to accept a lower amount from Medicaid for the treatment of a plaintiff’s injuries, can a defendant in a personal injury lawsuit present this information to the jury as evidence that the amount paid – rather than the amount billed – was the true reasonable cost of services?

It’s an important issue because we know that government payers often wrangle deals from medical service providers that amount to reimbursement for hundreds, thousands, or even tens of thousands less than what is billed.

The Indiana Supreme Court decided in favor of the defendant.

According to court records, the defendant conceded she negligently drove her vehicle into oncoming traffic on one day in 2012, striking the plaintiff’s vehicle and causing an injury to the plaintiff that necessitated medical treatment. The plaintiff sued for full and fair compensation. The defendant agreed she was liable for the car accident and generally agreed that the plaintiff received necessary medical treatment for the injuries she suffered. However, she disputed what was the “reasonable” amount of the plaintiff’s medical costs.

The plaintiff was enrolled in the Health Indiana Plan (HIP), which is a government-sponsored health care program. The providers from which the plaintiff received medical services were HIP participants, and as part of the deal with the government, they agreed often to accept significantly less than the original amount billed. In this case, the plaintiff was billed $87,700, but HIP paid $12,000 to cover those costs in full – an 86 percent discount.

The collateral source rule would prohibit the defendant from introducing that the plaintiff’s health insurer paid a much lower rate than billed. If the plaintiff recovered the full cost, she’d only be responsible to reimburse her insurer what was actually paid.

However, the defendant argued the “reasonable” value of those services was the amount actually paid, and this evidence should be allowed because this was a government payer – rather than a private health insurer.

The plaintiff countered that reduced HIP amounts were not based on market negotiation. The trial court and the Indiana Court of Appeals agreed with her, finding the information was not probative or of reasonable value, and thus it was properly excluded. However, the state supreme court vacated the appellate court’s ruling and reversed. The court ruled that since participating providers in the HIP program do so voluntarily, the reduced rates they accept are probative and relevant in determining the reasonable cost of medical services.

Indiana Injury Attorney Burton A. Padove handles personal injury claims throughout northern Indiana, including Highland.

Additional Resources:

Patchett v. Lee, Oct. 21, 2016, Indiana Supreme Court

More Blog Entries:

Rogers v. Martin – Indiana Supreme Court Weighs Duty of Care for Party Hosts, Nov. 16, 2016, Highland Injury Lawyer Blog