Bill to change value of medical damages goes to governor

When the Republican-led Missouri Legislature overhauled the state’s tort laws in 2005, lawmakers considered a major change to the way evidence of medical damages would be introduced in personal injury suits.

The final version of the bill settled on a more modest change. Now, 11 years later, that original idea is getting new life.

The Missouri House on Tuesday sent a bill to the governor that would rewrite the so-called collateral source rule. The bill would limit plaintiffs’ claimed medical expenses to the amounts actually paid for medical care.

Under longstanding common law principles, a defendant in a tort case cannot reduce his or her liability by arguing that some other party has already paid for the plaintiff’s injuries. The 2005 law change preserved that common law stance, but it added a provision that proponents said would prevent windfall recoveries for plaintiffs: There would be a “rebuttable presumption” that the amount the plaintiff actually paid for medical care represents the value of that treatment.

In a 2010 ruling, Deck v. Teasley, the Missouri Supreme Court said plaintiffs can rebut that presumption by introducing evidence of the amount they were billed.

“The legislature’s use of a ‘rebuttable presumption’ is consistent with its recognition that the item of damage for which recovery is sought is the value of services rendered, not a reimbursement of amounts paid by a collateral source,” Judge Patricia Breckenridge wrote at the time. “Therefore, the legislature permitted a party to introduce evidence that a figure other than the amount actually paid represented the value of the services rendered in the particular case.”

In a footnote, the court pointed out that the original version of the tort-overhaul bill proposed allowing only “the amount actually paid for medical treatment rendered to a party that was reasonable, necessary, and the proximate result of the negligence of any party.”

The amount billed is often much higher than what plaintiffs or their insurers actually pay. For instance, in the Deck case itself, a car crash suit from Greene County, the plaintiff’s bills totaled nearly $28,000, but after adjustments through Medicare and supplemental insurance, the obligation was just $9,900. Following Deck, attorneys often submit both amounts and allow the jury to determine the appropriate damages.

Rich AuBuchon, a lawyer and lobbyist in Jefferson City who worked on this year’s bill, said the 2005 bill’s rebuttable presumption language helped to get it passed at the time. He said that approach, however, has proved burdensome for attorneys on both sides because it can require extensive discovery and expert witnesses to prove medical damages.

“Over the years, those in litigation found that it was unpredictable and costly,” AuBuchon said. The 2005 version was a compromise, but “that was a compromise we weren’t willing to accept this year.”

Jay Benson of The Benson Law Firm in Kirksville, who had testified against the bill on behalf of the Missouri Association of Trial Attorneys, agreed that proving both the amount billed and the amount paid added a layer of complexity to litigation — but that wasn’t to plaintiffs’ disadvantage. Insurance companies, he said, tend to use medical damages as a barometer of the value of the case. If expected damages go down, the value of verdicts and settlements could fall as well.

“Just because something is easier doesn’t mean it’s fair,” Benson said. “If they wanted it to be easier, they could have gone back to the old system.” Before 2005, he said, the medical damages were simply based on the amount billed.

Rep. Joe Don McGaugh, R-Carrollton, who carried the bill in the House, said Tuesday that plaintiffs should not be allowed to collect “phantom damages” for bills they didn’t pay. The bill does away entirely with the rebuttable presumption.

McGaugh, who is an attorney, also noted that the bill wouldn’t affect plaintiffs’ ability to recover other categories of damages, from lost wages to punitive damages.

“Don’t let anybody tell you that we’re not making people whole, because we are,” he said.

Proponents of the law argued that the amount actually paid is a much better gauge of the treatment’s value. Rep. Kirk Mathews, R-Pacific, who used to own a small healthcare company, said a hospital’s fee schedules are “nowhere close” to market value.

“They set that on the off chance that someone might pay that, but in reality no one does,” Mathews said in an exchange with Rep. Keith Frederick, R-Rolla.

“It sure seems to me that a closer estimate of what the value of the services provided to that patient is really what money exchanged hands between the insurance company … and those providers,” responded Frederick, who is an orthopedic surgeon. “That seems to me to be the fair market price.”

The hour-long debate, however, featured bipartisan opposition to the bill. Rep. Jay Barnes, R-Jefferson City and an attorney, responded to Mathews and Frederick’s exchange by noting that hospitals’ internal price lists are routinely certified as fair and reasonable charges in lawsuits against people who cannot pay for their treatment.

“If what the two gentlemen were saying here was true, the records administrator for every hospital and every single doctor’s office in the state commits perjury on a daily basis,” he said.

Barnes argued that the bill discriminates against people who are responsible enough to obtain insurance. At one point, he accused it of employing “Obamacare logic” by treating the uninsured better than those with insurance. Because insured patients’ bills are lower, he argued, they would recover less than someone who didn’t have coverage and had to pay the hospital’s full price.

“This bill gores your constituents. They just don’t know it yet, because they haven’t been T-boned by a drunk driver,” Barnes said.

A raft of business and medical-industry advocacy groups had backed the bill. MATA opposed it, prompting discussion Tuesday that its members were simply concerned about their paychecks, as the size of a plaintiff’s recovery typically boosts the amount the trial attorney can claim in fees.

“Our tort system is not about compensating attorneys,” McGaugh said. “It’s about compensating victims.”

David Klarich, a lobbyist for MATA, noted that the collateral source rule dates to an 1854 U.S. Supreme Court case, The Propeller Monticello v. Mollison.

“I don’t buy the argument that it’s attorneys’ fees that are driving the opposition behind this,” he said. “This was not brought for the last 160-plus years.”

The bill passed on a 95-57 vote. It had cleared the Senate in February by a 25-7 vote. Although the Senate vote appears to be large enough to override a veto, the House’s vote is not. Gov. Jay Nixon on Thursday said he hasn’t decided what action he would take.

“Anything that changes hundreds of years of law requires a very tight look at it,” he said during a visit to the University of Missouri-Kansas City to sign next year’s budget for higher education.

Nixon promised a thorough review of both the collateral source and the expert witness bills. He added that the change to the collateral source law “could be problematic” and wanted to make sure people got adequate compensation for their injuries.

If the governor were to veto either bill and the legislature attempt an override in September, Klarich said there would be opportunity for more discussion.

“The more representatives who had time to digest that policy change, the more concerned they became with regard to its enactment,” he said.

The bill is SB847.