Authors
The cost of future medical care is often the largest component of economic damages sought and awarded in personal injury cases. Plaintiff attorneys regularly offer a Life Care Plan (LCP) from a life care planner to prove these damages. Defense attorneys frequently offer a defense life care planner expert who opines that some or all of the goods and services in the plaintiff LCP are unnecessary. A defense life care planner may also opine that some costs in the plaintiff’s LCP overstate what is usually charged for a service.
The Supreme Court of Texas (SCOTX) has held that a plaintiff is entitled to recover only the reasonable value of past medical expenses, and while it has made no similar decision on future medical expenses, the same reasoning would apply. However, life care planners rarely present opinions or analyses showing that the charges in the plaintiff LCP significantly overstate the reasonable value of most recommended care. Likewise, the costs in the defense LCP are usually based on reasonable charges and do not reflect the reasonable value of the care.
SCOTX has also recognized that a provider’s billed charges are usually not the reasonable value of the services.[2] In the US healthcare system, it is rare for providers to regularly be paid their full-billed charges. Instead, the ultimate transacted price for health care results from rates negotiated by providers and insurers, rates set by governments (e.g., Medicare, Medicaid, workers’ compensation, or laws about reasonable charges), and cash discounts providers sometimes offer uninsured patients. While most life care planners, providers, and attorneys know this, and while both plaintiff and defense attorneys may even make this very point when addressing charges for past medical care in either personal injury or medical lien cases, LCPs from both sides are typically based on reasonable charges rather than the market value (i.e., reasonable value) of health care.
Two primary factors contribute to the apparent disconnect between billed charges in LCPs and the actual market value of the recommended care. First, one standard of life care planners adopted in their “Consensus and Majority Statements” is that LCPs should identify nondiscounted/market-rate prices.[3] Most life care planners comply with this standard by equating prices with billed charges or usual, customary, and reasonable charges at the 80th percentile (UCR80), whether retained by the plaintiff or defendant.
Second is the collateral source rule: “The theory behind the collateral source rule is that a wrongdoer should not have the benefit of insurance independently procured by the injured party and to which the wrongdoer was not privy.”[4] Often, attorneys and judges boil this rule down to “nothing about insurance is admissible.” However, the collateral source rule should not prevent a defendant from showing what the actual cost of the plaintiff’s future care will be. The collateral source rule is intended to prevent a windfall for the defendant, but it is not intended to create a windfall for the plaintiff.
For example, some plaintiffs have insurance coverage that is reasonably certain to continue for their life span. The Texas Workers’ Compensation Act provides lifetime medical benefits for care related to the compensable injury. Medical fee guidelines set the maximum allowable payment for most services. If the plaintiff’s employer had workers’ compensation insurance, the plaintiff should be awarded no more for covered services than medical providers are entitled to collect under the medical fee guidelines.
Other plaintiffs may be eligible for Medicare under Social Security Disability Insurance (SSDI) or covered by Medicare at age 65. A plaintiff’s injuries may qualify him or her for SSDI benefits and Medicare 24 months after the SSDI award date. For any years in an LCP when plaintiffs are reasonably certain to have Medicare coverage, they should be awarded no more for Medicare-covered services than medical providers are entitled to collect at Medicare rates.
As another possibility, the damages for future medical care may be limited to the cost of insurance premiums plus the allowable amount for care for services covered by the Affordable Care Act (ACA). This amount would provide the plaintiff with insurance, fund any out-of-pocket costs such as deductibles or co-insurance the plaintiff would be responsible for, and cover any subrogation interest the insurer may claim. With the ACA’s provisions ensuring coverage of preexisting conditions becoming settled law, plaintiffs would have a guarantee of coverage for necessary medical care through plans available in the health care marketplace. The defendant would need a reasonable basis to project future premium costs. Currently, annual premiums for some Gold-level ACA plans in Texas cost less than $6,000 per year and have a maximum patient responsibility of $8,700.[5]
Neither the standards of life care planners nor the collateral source rule should prevent an economist from recalculating the cost of an LCP based on the reasonable value of the recommended care rather than billed charges. The collateral source rule should not prevent consideration of the impact of actual or potential insurance coverage on future medical costs. This conclusion follows recent SCOTX decisions in In Re K&L Auto Crushers[6] and In Re Exxon Mobil Corp.,[7] where the court ruled the amounts actually paid for and accepted as payment in full for past medical care from commercial insurers were both discoverable and relevant, regardless of the plaintiff’s insurance status.
RPC can recalculate the reasonable value of LCPs based on general commercial health insurance allowed amounts (i.e., the market value of health care) or on specific fee schedules the plaintiff may be eligible for, such as Medicare, Medicaid, or workers’ compensation. RPC’s methods are based on accepted academic and governmental research; on our years of experience in health care and personal injury litigation; and our experience working with health care providers and the Texas Workers’ Compensation system outside of litigation.
RPC has provided reports on the reasonable value of LCPs for many of our clients. The difference between the total cost in the original plan based on charges and the reasonable value varies based on the care in the LCP; in our reports so far, the differences have ranged from about 10% to over 75% of the original cost. The cost of most plaintiff LCPs was reduced by at least 39%, and the cost of defense LCPs is also reduced when based on reasonable value instead of charges.
Please contact RPC or authors to discover how we can help you calculate the reasonable value of life care plans. 512-371-8000
[1] Haygood v. De Escabedo, 356 S.W.3d 390 (Tex. 2011).
[2] In Re North Cypress Medical Center Operating Co., LTD., Realtor, 559 S.W.3d 128 (Tex. 2018).
[3] Cloie B. Johnson, Jamie L. Pomeranz, and Nichole E. Stetten, “Consensus and Majority Statements Derived from Life Care Planning Summits Held in 2000, 2002, 2004, 2006, 2008, 2010, 2012, 2015, and 2017, and Updated via Delphi Study in 2018,” Journal of Life Care Planning 16, no. 4 (Dec. 2018): 15–18.
[4] Raymond J. Brown, Petitioner, v. American Transfer and Storage Company, 601 S.W.2d 931 (Tex. 1980).
[5] “MyBlue Health Gold 403,” HealthMarkets Insurance Agency, https://www.healthmarkets.com/plans/blue-cross-and-blue-shield-of-texas/myblue-health-gold-403-33602TX0860006.
[6] In Re K&L Auto Crushers, LLC, and Thomas Gothard Jr., Realtors, 607 S.W.3d 358 (Tex. App. 2019).
[7] In Re ExxonMobil Corporation, Realtor, 635 S.W.3d 631 (Tex. 2021).