The Collateral-Source Rule and Robinson v. Bates: Billed vs. Paid Medical Expenses

Published February 4, 2014 · Injury Law Basics

A client sat in our conference room last month with two stacks of paper. One stack was the hospital's bills from her crash on I-675: a little over $61,000. The other was her health insurer's explanation of benefits showing that the hospital had accepted about $19,000 and written off the rest. Her question was the one we hear in nearly every serious case: "Which number is my claim worth, and does the other driver get credit because I paid for good insurance?"

The answer in Ohio today comes from a legal doctrine called the collateral-source rule, a 2005 statute that narrowed it, and a pair of Ohio Supreme Court decisions, Robinson v. Bates in 2006 and Moretz v. Muakkassa last fall. This post walks through all of them in plain English.

What the collateral-source rule is

For more than a century, Ohio courts followed a simple principle: a person who injures you does not get a discount because someone else helped you. If your health insurer paid your hospital, if your employer kept paying your salary, or if a relative covered your rent, that money came from a "collateral source," and the wrongdoer could not tell the jury about it or subtract it from what he owed. The reasoning was fairness. You paid premiums for years, or your employer extended you a kindness, and neither of those should become a gift to the driver who hurt you.

The rule still exists in Ohio. But two things have changed its reach.

The 2005 statute: R.C. 2315.20

In 2005 the General Assembly passed a broad tort-reform bill that included a new section, R.C. 2315.20. It says that in a tort action the defendant may introduce evidence of amounts "payable as a benefit to the plaintiff" because of the injury. In other words, the legislature opened the door for juries to hear about collateral benefits.

The exceptions, however, swallow much of the rule, and they matter to injured people. The statute does not allow that evidence if the source of the benefit has a right of subrogation, whether under a contract, a statute, or a federal program. Nearly every health insurance plan, Medicare, Medicaid, and workers' compensation has a subrogation right, meaning it can demand repayment out of your settlement. Because those sources have a right to be paid back, the defendant generally cannot use their payments to reduce what you recover. Life insurance and disability benefits are also protected. And if the defendant does introduce collateral-benefit evidence, the statute lets you show the jury what you paid in premiums to earn that benefit.

So the practical effect of R.C. 2315.20 in a typical crash case is narrower than it first appears. What the defense really wanted was something different: the write-off.

Robinson v. Bates: the write-off is not a "benefit"

Carolyn Robinson broke a bone in her foot in the driveway of a house she rented, after a contractor hired by the landlord tore out a retaining wall and left the concrete footer exposed. Her medical bills totaled $1,919; her insurer negotiated them down to $1,350.43. The trial court let the jury see only the lower number.

In Robinson v. Bates, 112 Ohio St.3d 17, 2006-Ohio-6362, the Supreme Court said both numbers come in. The Court reasoned that the collateral-source rule bars evidence of benefits that were actually paid by someone else. A write-off is not paid by anyone. It is simply the difference between what the provider charged and what it agreed to accept. Because nobody pays the write-off, the Court said, it is not a collateral benefit and the rule does not keep it from the jury.

The Court then set the rule that governs every Ohio injury claim today: the original bill and the amount accepted as full payment are both admissible, and the jury decides the reasonable value of the care. The jury may find that value is the billed amount, the paid amount, or something in between. The Court also confirmed that under R.C. 2317.421, an itemized medical bill is itself prima facie evidence (evidence sufficient unless rebutted) that the charges are reasonable, as long as it is delivered to the other side at least five days before trial.

That second point is the part the defense bar prefers to forget. Robinson did not say the paid amount is the measure of damages. It said the jury decides, and it affirmed that the full bill is competent, presumptively reasonable evidence of what the treatment was worth.

Moretz: the write-off comes in without an expert

Robinson left a practical question open. Could the defendant simply hand the jury a statement showing the adjustments, or did it need a billing expert to explain them? In Moretz v. Muakkassa, 137 Ohio St.3d 171, 2013-Ohio-4656, decided in October, the Court held that no expert is required: the write-offs reflected on a provider's statement are a "relevant portion" of the bill under R.C. 2317.421 and may be admitted as prima facie evidence of reasonable value. We covered that decision in detail in our post on medical-bill write-offs after Moretz.

Put the two cases together and the picture is clear. In a case tried in Ohio in 2014, the jury will see both the $61,000 and the $19,000, and each side will argue about which figure reflects what the care was actually worth.

Why you should still use your health insurance

Some injured people hear all of this and conclude they should avoid using their health insurance so that no write-off ever exists. That is a mistake, for four reasons.

• Treatment comes first. Unpaid bills go to collections, and providers stop scheduling follow-up care. A claim built on incomplete treatment is worth far less than any write-off argument could cost you.
• The subrogation protection cuts both ways. Because your health plan has a right to repayment, the defendant cannot use its payments against you, and your lawyer can often negotiate the plan's lien down at settlement. The net result usually favors the insured patient.
• The full bill still comes in. Under Robinson, the jury hears the billed amount and may award it. Good preparation, including testimony from the providers about their usual charges, keeps that number credible.
• MedPay and other first-party coverage on your own auto policy can pay deductibles and co-pays without a subrogation fight in many cases. We explained how in our MedPay post.

If you are curious how the billed-versus-paid question looked before Moretz, our 2010 post on the topic traces the earlier history.

What this means for you

The collateral-source rule still protects you from having insurance payments, disability benefits, and life insurance used to cut your recovery. What the defense can now do is argue that your medical care was worth only what the provider accepted. That argument is answered with preparation: complete itemized bills delivered on time, provider testimony on the reasonableness of charges, proof of future care that no discount touches, and a full accounting of lost income and the human cost of the injury. Our personal injury practice builds every serious claim that way from the start.