Overview of Reasonable Value of Medical Expenses in Texas
In the past few years, the Supreme Court of Texas (SCOT) has handed down decisions that better define the limits on a plaintiff’s liability to a defendant for medical expenses in a personal injury case. These decisions have also clarified a defendant’s right to reasonable discovery from a plaintiff’s medical providers to determine the damages for medical expenses.
The defendant’s liability for medical expenses is limited to the lesser of:
- The amount paid or incurred by the plaintiff, or
- The reasonable value of the goods or services
The amount paid or incurred by the plaintiff depends on the plaintiff’s insurance coverage and the negotiated or regulated rates the provider must accept as payment in full for its services. For past medical expenses, if the plaintiff had insurance coverage, the defendant’s liability to the plaintiff should be limited to the payment rates the providers were entitled to from the plaintiff’s insurer, whether or not the plaintiff filed the claims with the insurer to take advantage of the rates.
For example, if a plaintiff’s employer in a workplace injury has statutory workers’ compensation coverage, the plaintiff’s medical providers must accept the Maximum Allowable Reimbursement (MAR) under the Division of Workers’ Compensation Fee Guidelines as payment in full and are barred from charging the plaintiff more. The MAR is the amount incurred and limits the defendant’s liability. Sometimes, plaintiffs choose not to file claims with the workers’ compensation carrier but instead try to claim billed charges as the measure of damages. Failing to take advantage of regulated rates may increase the plaintiff’s liability to his or her medical providers, but it will not increase the defendant’s liability to the plaintiff. The same analysis applies if the plaintiff has coverage from Medicare, Medicaid, commercial health insurance, or other public or private health plans.
If the plaintiff is covered by insurance with published rates, such as workers’ compensation, Medicare, or Medicaid, there may be no need to determine the payment rates through discovery. However, if the plaintiff has coverage through a private insurance plan and has not filed the claims with the insurer, the defendant may need to make very specific discovery requests to each medical provider to learn its negotiated rates with the plaintiff’s insurer. Interrogatories to the plaintiff to determine any insurance coverage are relevant and proper. Specific interrogatories to the plaintiff’s medical providers for rates for the specific services the plaintiff received on the dates of service are relevant and proper. These interrogatories should be filed and supplemented as early as possible in the discovery process.
Some plaintiffs in personal injury cases will have no insurance coverage to establish an amount incurred. In those cases, the defendant’s liability for medical expenses is limited to the reasonable value of the services. The reasonable value of services can be based on either:
- The amounts each plaintiff medical provider has typically accepted as payment in full for specific services, or
- Amounts accepted as payment in full for specific services by other providers in the same geographic market as the plaintiff’s providers
To determine reasonable value, the defendant may file interrogatories to each of the plaintiff’s health care providers, specific to the services the plaintiff received and the dates of service:
- Did the provider participate in Medicare, Medicaid, and workers’ compensation?
- With what health plans did the provider have negotiated rates?
- What were the provider’s negotiated rates with each health plan for the specific services performed?
- What was the provider’s cash price for prompt payment for uninsured patients?
Some plaintiffs choose providers that do not treat Medicare, Medicaid, or workers’ compensation patients, and that do not have provider contracts with private health plans. They may specialize in treating patients in personal injury cases under letters of protection. These providers may set charges that are among the highest in the medical market. In these circumstances, it is necessary to determine reasonable value based on what other providers in a medical market accept as payment in full.
To protect policyholders from balance billing by out-of-network providers, many health plans have based an allowed amount for out-of-network services on the 80th percentile of provider charges in the medical market. Now that federal and state legislation is banning balance billing by out-of-network providers in many circumstances, these health plans are likely to lower their allowed amounts to allowable amounts calculated as a multiple of the Medicare rate. Several studies by MedPAC, the Congressional Budget Office, RAND, and other researchers have found that negotiated rates with private health plans fall between 100% and 200% of Medicare. Soon, health plans may eliminate allowed amounts based on provider charges and base allowed amounts on 200% or less of the Medicare rate.
By 2023, the federal “No Surprises Act” will require all commercial health plans to publish their negotiated rates with all providers. Assuming the health plans comply, this will reduce the discovery needed to determine the amounts plaintiffs incurred or the reasonable value of medical services.
To summarize, the SCOT has limited the liability of defendants in personal injury suits for past medical expenses to the lesser of the amount paid or incurred by the plaintiff or the reasonable value of the services. A medical provider’s billed charges are not determinative and may be irrelevant in many cases. The SCOT has authorized discovery from medical providers specific to the services the plaintiff received on the date received, to determine the amount paid or incurred or the reasonable value of the services. Defense counsel should make full use of these holdings to prevent exaggerated claims for medical expenses.