Recovery of medical expenses in Texas.

I n health care liability claims, and in most personal injury claims for that matter, medical expenses related to the care and treatment of the injury alleged by the claimant often constitute a significant portion of the damages that might be recovered at trial. For this reason, it is important to understand exactly what medical expenses are recoverable. In Texas, recoverable medical expenses were addressed in the 2003 tort reform legislation. The new statute, Section 41.0105 of the Texas Civil Practice and Remedies Code, changes the way in which courts and juries are to evaluate this element of damages. Prior to September 1, 2003, the effective date of Section 41.0105, in the event of a verdict in favor of the claimant, juries were asked to determine the amount of reasonable expenses of necessary medical care that the claimant required as a result of the injury or occurrence in question (1). Under this scheme, plaintiffs would generally file a copy of the billing records from their treating health care providers, along with an affidavit from each health care provider stating the total amount of charges for the services provided and indicating that the medical services provided and the charges for such services were reasonable and necessary. The actual amount that the health care providers were paid for the services was not an issue. In this framework, the touchstone issues were the amount of the charges, that the charges were “reasonable,” and that the charges were for “necessary” medical services. Effective September 1, 2003, under Section 41.0105, plaintiffs are entitled to recover only medical expenses “actually paid or incurred” (2). Thus, while the fees at issue must still be reasonable and necessary, the focus is now not on the total amount of the charges but on the amount of those charges that were “actually paid or incurred” by the claimant. Since the amount actually paid is often easy to determine from review of the health care provider’s billing records, the true matter at issue is the amount of the total medical expenses “incurred” by the claimant. In determining what expenses were “incurred,” the issue is whether or not “discounts” such as Medicaid/Medicare “write-offs” and/or managed care contractual “adjustments” constitute medical expenses incurred by the claimant. These discounts often constitute a significant percentage of the total amount billed. Since the new statutory provision has been in place for just over 3 years, it is not surprising that no case law specifically interprets application of Section 41.0105 of the Texas Civil Practice and Remedies Code on this issue. There is, however, Texas case law that interprets the meaning of the term “incurred.” From as far back as 1918, Texas courts have consistently interpreted the term “incurred” to mean the creation of a legal obligation to pay (3). The question should be whether or not the claimant ever had a “legal obligation to pay” the health care provider the write-off or adjustment deducted from that provider’s charges. Under the third-party payer agreements we are familiar with, patients are not responsible or obligated to pay such adjustments. Since the patient was never obligated to pay the health care provider those portions of the total charges for medical services, they were not medical expenses that the patient incurred and, therefore, should not be damages that could potentially be recovered in a lawsuit. Obviously, the exact nature or wording of the contract between the health care provider and the third-party payer will likely determine the outcome of this question. The question about whether or not medical expenses have been incurred is often of even greater significance when the claimant is covered by Medicaid or Medicare. The write-offs on medical billing taken by these entities are often greater than those taken by private third-party payers. In addition, as opposed to a relatively simple review of a contract between a health care provider and a third-party payer, evaluation of this question requires consultation with and review of state and federal statutory provisions about these programs. The Medicaid program is jointly funded by the federal and state governments. Medicaid providers agree with the US government that they will accept reimbursement for services provided to Medicaid recipients on a nonnegotiable flat-fee basis. Specifically, Medicaid providers are reimbursed for their services based on a prospective, preset payment schedule based on the cost of services. Medicaid providers agree to accept Medicaid’s flat fee as full and final payment for the medical services they provide (4). Medicaid providers further agree to not charge Recovery of medical expenses in Texas