Medical Billed vs. Paid: It Probably Isn't What Your Lawyer Thinks

A. Introduction:
New legislation from last year settled (or so we thought) a long-standing debate amongst personal injury trial attorneys. The debate was: should an injury victim be able to claim, and therefore recover, the value of the medical bills at the price the hospitals or doctors charged, or should they be limited in recovery only to the rate at which a health insurance company paid that particular charge?

In the industry, this was known as the "billed v. paid" debate. On August 11, 2010, C.R.S. 10-1-135 was enacted. This statute attempted to clarify that the reasonable value of the services was NOT the amount paid by health insurance. In fact, the legislation entirely precludes the introduction at trial of that insurance re-priced amount. So, the debate is over, right? Victory for the person hoping to recover the full value of medical charges, not simply the re-priced amount, right? Wrong!

While this legislation had the best of intentions, in trial (which I have now had three since the change in the law), the law requires cautious and deliberate understanding of what is required to get your medical bills introduced to the jury at all.

B. It Ain't What You Think:
The change in the law is wrongly described as "medicals billed" legislation. What was thought to be legislation that would prevent introduction to a jury of the arbitrary health insurance medical bill re-pricing has actually resulted in lawyers finding it far more difficult, and without forewarning and deliberate preparation, perhaps impossible, to get ANY medical billing to be admissible.

The motivation behind the legislation was not to make it more difficult for injury victims to get full medical bill reimbursement. In fact, the motivation seems to have been to help injury victims. However, the law has actually created an unanticipated bigger problem at trial. There is no doubt that this new legislation was designed to prevent the unfair argument that if health insurance paid this bill, and at only 30% of the original bill, why should the injury victim receive more from a jury than that figure? After all, the at-fault party should not reap the benefit of a plaintiff having the foresight to purchase health insurance.

Everyone who has health insurance pays for it. If it's privately acquired health insurance, a family is paying a monthly premium for this benefit. That means the family does without something else so that they can pay to have their medical health care covered at least to some extent. Alternatively, if a family's health insurance is part of an employment benefits package, it's still paid for. While an employer might be paying for this benefit for its employee, clearly, if that benefit did not exist, the money paid for insurance could very well be passed on to the employee, or the employee could consider making a job change based on the comparative values of employer compensation packages. So even indirectly, an employee who receives health insurance also has paid for that benefit.

With that as background, it begs the question: why should a negligent driver's insurance company get the benefit of paying less to a person who has health insurance compared to someone who doesn't? Said another way: why should the negligent driver's auto insurance company get to pay injury victims at two levels: more to a person who didn't pay for health insurance and less to the person who did? Such a scenario would serve as a disincentive to folks who took prior responsibility to buy health insurance. It would, in turn, serve as a disincentive for people to get health insurance. After all, why should I buy health insurance, if all it will do is result in a negligent driver's insurance company paying me much less in injury recovery?

This debate went on for years between lawyers representing insurance companies and injury lawyers like us. We were promised that C.R.S. 10-1-135 would solve all that. In fact, I wrote two articles last year praising the legislation.

The legislation, contrary to what most lawyers think, does NOT say that plaintiffs' attorneys are free to introduce the gross amount of the medical bills with nothing for defense lawyers to say in response. In fact, it doesn't come close to saying anything like that. Sadly, I suspect most lawyers gearing up for trials in Colorado have not read this statute, and are therefore, unaware of the extra added burden placed on them.

The legislation reaffirms that the jury is told to award the reasonable value of necessary medical bills. It then says that the introduction of what health insurance PAID is inadmissible to serve as proof of the reasonable value of necessary medical care. So, defense lawyers don't get to introduce the reduced amount paid by a health insurer. So far so good. But plaintiff attorneys are REQUIRED to prove that the charges, whatever they may be, are at a REASONABLE rate for the services provided. Sounds simple enough, right? Wrong!

C. No One Knows What Reasonable Means:
Ask your medical doctor sometime what the "reasonable value" of his services are? Even better, ask him if he knows whether his charges are "usual and customary" and within a reasonable range for similar services in the community? Like the process of making sausage, there are some questions to which you may not want to know the answer.

In truth, medical doctors have no idea if their charges are reasonable. They will tell you that their billing department has always sent out bills to health insurance at one rate. They will tell you that insurance pays at some different rate and that they have no idea if what they are charging, what they are receiving, or some number in between, is "the reasonable rate." They nearly always will add that they have no idea what their competitors charge for similar services. After all, they may have become doctors because early on in life they recognized that they were better in science than in business classes. So, asking the doctor won't always get your "reasonable value of the medical charges" admitted. Now what?

Going to the billing personnel is a good idea but is often even more frustrating. Billing offices will often tell you that they simply bill things based on a billing sheet that they have had around the office for years. Most will confess that they have no idea why they bill anything at a particular rate and certainly can not tell you if the rate is reasonable. In fact, I had a top billing person from a hospital tell me recently that "there isn't anyone in the entire hospital who would be able to affirm that (their) charges for anything were reasonable and customary in the community."

D. The Brave New World:
So if the doctor can't tell you that what he billed was reasonable and the billing office personnel simply bill services from a nebulous billing sheet, how do we get this evidence in? Answer: PERSISTENCE!

For years, as a practical matter, trial lawyers would introduce a plaintiff's medical expenses on a chart that listed all the charges that a person had been billed. We would simply ask the plaintiff, on the witness stand, if the chart was an accurate list of all the medical bills mailed to them related to this injury. That in combination with introduction of some doctor saying that the medical service received "were all medically reasonable and necessary" was really all we had to do to let the jury consider awarding those medical charges.

There really was no law that said simply producing a doctor to say that the treatment was MEDICALLY reasonable means the same thing as the medical services provided were charged at a reasonable rate. There was an old case that basically said that a medical doctor did not have to certify that the medical services were charged at a reasonable rate in order to introduce the medical charges. BUT that case never came close to saying "whatever charges you get in the mail" can simply be given to and duly considered for payment by the jury. What defense lawyers are rediscovering, after years of being rather careless about this, is that we as the plaintiffs' attorneys have the burden of proving that the individual bills for medical services were billed at a reasonable rate for similar services in the community. Arguing "These are the bills so we want the jury to make defendant (really his auto insurance company) pay them" just won't cut it anymore.

Under the new law, unless the parties have stipulated, any properly prepared attorney needs to have under subpoena for trial a knowledgeable person from each medial office or hospital that issued a medical bill. Those subpoenaed witnesses need to be ready to confirm that each bill was (1) an accurate and complete medical bill issued for medical services provided and (2) that the particular charges ARE reasonable charges that are within the acceptable range for similar services in the community for similar medical services. In addition, we also must prove (probably through a medical doctor) that the medical services were medically required and medically necessary to treat the injuries.

Sometimes it can be hard to find the right person to say that the charges are reasonable. In my last trial, I continued to subpoena multiple hospital personnel until I was forced to serve the hospital's CEO. Magically, after I accomplished that service of process (at his country club), suddenly, the hospital located a person who was prepared to testify as to the reasonableness of their charges.

E. Pitfalls Of Lawyers Being Blind-Sided:
If defense counsel is successful in keeping out evidence of the medical charges, an injury victim will be deprived of having a jury consider those charges when determining what amount of money will compensate the victim. This has happened over and over to other plaintiff attorneys since the new legislation.

CONCLUSION:
The change in the law has some positive aspects but also dangerous pitfalls. The good news is that with adequate preparation and a healthy anticipation of the arguments that will be presented from the defense, there is little risk of medical bills being excluded. Once an attorney has a reputation for knowing how to handle this issue, the defense will sometimes even stipulate to the reasonableness of the bills. But without such a stipulation, attorneys who dabble in personal injury will have great problems getting justice for their clients.

At Anderson Hemmat, we recognize the importance of understanding recent law changes. That's why we are diligent in staying up to date on these changes, so that we can competently represent our clients. If you have concerns as to how these changes may affect your claim, call us today.