Title: Klover E. Lagerstrom v. Myrtle Werth Hospital-Mayo Health System

State: wisconsin

Issuer: Wisconsin Supreme Court

Document:

2005 WI 124 
  
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2003AP2027 
COMPLETE TITLE: 
 
 
Klover E. Lagerstrom, as surviving spouse  
of, and as Special Administrator of the  
Estate of Vance H. Lagerstrom,  
          Plaintiff-Appellant, 
     v. 
Myrtle Werth Hospital-Mayo Health System,  
ABC Insurance Company, its insurer, Red  
Cedar Clinic-Mayo Health System, and DEF  
Insurance Company, its insurer,  
          Defendants-Respondents. 
 
 
 
 
ON CERTIFICATION FROM THE COURT OF APPEALS 
 
 
OPINION FILED: 
July 14, 2005   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
December 14, 2004   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Dunn   
 
JUDGE: 
William C. Stewart, Jr.   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
CONCUR/DISSENT: 
ROGGENSACK, J., concurs in part, dissents in 
part (opinion filed). 
WILCOX and PROSSER, J.J., join the 
concurrence/dissent. 
 
DISSENTED: 
WILCOX, J., dissents (opinion filed). 
ROGGENSACK, J., joins the dissent. 
PROSSER, J., dissents (opinion filed). 
WILCOX, J., joins the dissent.   
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the plaintiff-appellant there were briefs by Charles B. 
Harris, Martha H. Heidt and Doar, Drill & Skow, S.C., Baldwin, 
and oral argument by Charles B. Harris. 
 
For the defendants-respondents there was a brief by Guy 
DuBeau and Axley Brynelson, LLP, Madison, and oral argument by 
Guy DuBeau. 
 
 
 
2
An amicus curiae brief was filed by Laura J. Leitch, 
Madison, on behalf of the Wisconsin Hospital Association, Inc; 
and Mark L. Adams, Madison, on behalf of the Wisconsin Medical 
Society.  
 
An amicus curiae brief was filed by Lynn R. Laufenberg and 
Laufenberg & Hoefle, S.C., Milwaukee; Bruce R. Bachhuber and 
Hanaway, Weidner, Bachhuber, Woodward & Maloney, S.C., Green 
Bay; William C. Gleisner, III, and Law Offices of William C. 
Gleisner, III, Milwaukee, on behalf of the Wisconsin Academy of 
Trial Lawyers. 
 
2005 WI 124 
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
 
No.  2003AP2027  
(L.C. No. 
01 CV 180) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Klover E. Lagerstrom, as surviving spouse  
of, and as Special Administrator of the  
Estate of Vance H. Lagerstrom,  
 
          Plaintiff-Appellant, 
 
     v. 
 
Myrtle Werth Hospital-Mayo Health System,  
ABC Insurance Company, its insurer, Red  
Cedar Clinic-Mayo Health System, and DEF  
Insurance Company, its insurer,  
 
          Defendants-Respondents. 
 
FILED 
 
JUL 14, 2005 
 
Cornelia G. Clark 
Clerk of Supreme Court 
 
 
 
 
 
APPEAL from a judgment and order of the Circuit Court for 
Dunn County, William C. Stewart, Jr., Judge.  Reversed and 
Remanded.   
 
¶1 
SHIRLEY S. ABRAHAMSON, C.J.   This is an appeal from a 
judgment and order of the Circuit Court for Dunn County, William 
C. Stewart, Jr., Judge.  This wrongful death medical malpractice 
No. 
2003AP2027   
 
2 
 
case comes before this court on certification1 from the court of 
appeals pursuant to Wis. Stat. § 809.61 (2001-02).2   
¶2 
Following a jury's verdict, the circuit court entered 
judgment in the amount of $55,755 plus costs in favor of Klover 
Lagerstrom, individually as surviving spouse of Vance H. 
Lagerstrom and as Special Administrator of the Estate of Vance 
H. Lagerstrom, deceased, referred to collectively as the estate, 
against Myrtle Werth Hospital-Mayo Health System, ABC Insurance 
Company, its insurer, Red Cedar Clinic-Mayo System, and DEF 
Insurance Company, its insurer, referred to collectively as the 
defendants.  The circuit court's order denied a post-verdict 
motion under Wis. Stat. § 805.14(5)(c)3 to change the answers on 
the special verdict; the estate appealed. 
¶3 
The primary issue presented is whether the circuit 
court erred under Wis. Stat. § 893.55(7) in admitting evidence 
of collateral source payments in this medical malpractice 
action, in refusing to admit evidence of the estate's potential 
obligation to reimburse Medicare, and in instructing the jury 
that it may, but need not, consider the collateral source 
payments in determining the reasonable value of the medical 
                                                 
1 Lagerstrom v. Myrtle Werth Hosp., 2004 WL 1057849 (Wis. 
Ct. App. May 11, 2004). 
2 All references to the Wisconsin Statutes are to the 2001-
02 version unless otherwise noted. 
3 Wisconsin Stat. § 805.14(5)(c) provides: "Motion to change 
answer.  Any party may move the court to change an answer in the 
verdict on the ground of insufficiency of the evidence to 
sustain the answer." 
No. 
2003AP2027   
 
3 
 
services rendered.  A second issue is whether the circuit court 
erred in not awarding the estate $7,610.10 for funeral expenses. 
¶4 
Wisconsin Stat. § 893.55(7) reads: 
Evidence 
of 
any 
compensation 
for 
bodily 
injury 
received from sources other than the defendant to 
compensate the claimant for the injury is admissible 
in 
an 
action 
to 
recover 
damages 
for 
medical 
malpractice. 
 
This 
section 
does 
not 
limit 
the 
substantive or procedural rights of persons who have 
claims based upon subrogation. 
¶5 
We conclude that the text of § 893.55(7) explicitly 
allows evidence of collateral source payments to be introduced 
in medical malpractice actions but fails to state the purpose 
for which the evidence is admitted.  We further conclude that if 
evidence of collateral source payments from sources including 
Medicare, other state or federal government programs, medical 
insurance or write-offs, and discounted or free medical services 
is presented to the fact-finder, then the parties must be 
allowed to furnish the jury with evidence of any obligations of 
subrogation or reimbursement.  Because the statutory text does 
not inform a fact-finder what to do with the evidence, in 
interpreting the statute and determining what a fact-finder must 
do with the evidence we consider the text of the statute, the 
legislative history, the legislative goal, and three common-law 
concepts encompassed in medical malpractice actions and Wis. 
Stat. § 893.55(7), namely the reasonable value of medical 
services, the collateral source rule, and subrogation.  We 
conclude that the circuit court must instruct the fact-finder 
that it must not reduce the reasonable value of medical services 
No. 
2003AP2027   
 
4 
 
on the basis of the collateral source payments.  Although the 
jury is instructed not to use the evidence of collateral source 
payments to reduce the award for medical services, evidence of 
collateral source payments may be used by the jury to determine 
the reasonable value of medical services.   
¶6 
We 
further 
conclude 
that 
regardless 
of 
the 
interpretation of Wis. Stat. § 893.55(7) adopted, because the 
jury in the present case was advised of the collateral source 
payments and the net amount the estate paid for medical 
services, but was not advised of the estate's potential 
obligation to reimburse Medicare for medical services, the jury 
was not able to assess the reasonable value of medical services 
fully and fairly.  This error in refusing to admit evidence of 
or argument about the estate's potential obligation to reimburse 
Medicare is reversible error.     
¶7 
Accordingly, under our interpretation of Wis. Stat. 
§ 893.55(7), and indeed under any interpretation of § 893.55(7), 
we must reverse the judgment and order of the circuit court and 
remand the cause to the circuit court for a new trial on the 
issue of hospital and medical expenses. 
¶8 
On the issue of funeral expenses, the defendants argue 
that according to Wis. Stat. § 895.04(5),4 the award of funeral 
                                                 
4 Wisconsin Stat. § 895.04(5) reads: 
If the personal representative brings the action [for 
wrongful death], the personal representative may also 
recover the reasonable cost of medical expenses, 
funeral expenses, including the reasonable cost of a 
cemetery lot, grave marker and care of the lot.  If a 
No. 
2003AP2027   
 
5 
 
expenses is permissive, not mandatory, and therefore a fact-
finder has discretion whether to award these expenses.  In the 
instant case the jury awarded no sum of money to reimburse the 
estate for funeral and burial expenses even though the jury 
found that the defendants' negligence was a cause of the 
decedent's death and even though no evidence controverted the 
sum of $7,610.10 as a reasonable expense.  We hold that under 
these circumstances the circuit court erred in not granting the 
estate's motion to change the special verdict answer relating to 
funeral and burial expenses to reflect the undisputed amount of 
$7,610.10 for these expenses.  On remand, we therefore instruct 
the circuit court to enter $7,610.10 on the special verdict form 
as the amount required to fairly and reasonably compensate the 
estate for funeral and burial expenses.  
I 
¶9 
For purposes of this appeal the facts are undisputed. 
The defendants conceded that they were negligent in their care 
and treatment of the decedent and committed malpractice by 
inserting a feeding tube into the passageway of the decedent's 
lung rather than into the stomach and inserting fluids.   
¶10 The defendants asserted that their negligence caused 
injury but was not a cause of death.  They argued that the 
                                                                                                                                                             
relative brings the action [for wrongful death], the 
relative may recover such medical expenses, funeral 
expenses, including the reasonable cost of a cemetery 
lot, grave marker and care of the lot, on behalf of 
himself or herself or of any person who has paid or 
assumed liability for such expenses. 
No. 
2003AP2027   
 
6 
 
decedent's age and medical history, combined with the severe 
trauma associated with breaking his hip and the ensuing surgery, 
caused the death some two months after the negligent placement 
of the feeding tube.  The jury found that the defendants' 
negligence was a cause of the decedent's death.  The issue of 
causation is not before the court in this appeal.  The issues 
before the court involve the jury award of damages for medical 
services and funeral expenses.   
¶11 Vance H. Lagerstrom, the decedent, was 87 years old 
when he fell and broke his hip on November 24, 2000.  He was 
admitted to Myrtle Werth Hospital, and within two days following 
hip replacement surgery, the family doctor noted some congestion 
in the decedent's lungs and a fever.  A chest x-ray showed no 
acute damage to the lungs. 
¶12 On December 2 the duty doctor decided to insert a 
feeding tube to ensure that the decedent was getting the proper 
nutrients.  The feeding tube was misplaced, reaching into the 
passageway of the decedent's lung rather than into his stomach.  
In the afternoon of December 2, 8 ounces of a nutrient-laden 
drink, Ensure, was pumped through the feeding tube directly into 
the decedent's left lung.     
¶13 The decedent was transferred to the critical care 
unit, then to Luther Hospital, and then to Lakeside Nursing 
Home.  The decedent remained on a ventilator and on Christmas 
Day, 2000, was re-admitted to Luther Hospital with a fever, 
despite treatments with antibiotics.  After his fever was 
controlled, the decedent was returned to Lakeside Nursing Home, 
No. 
2003AP2027   
 
7 
 
where he remained from December 29, 2000 until January 14, 2001, 
when the fever recurred and he was returned to Luther Hospital.   
¶14 By February 14, the decedent had been off the 
ventilator a week, but the following day he was taken to the 
emergency room of St. Joseph's with joint pain.  The decedent 
then returned to Lakeside Nursing Home. By February 22, the 
decedent was having problems, including hallucinations.  He died 
on February 24, 2001.  The death certificate listed the cause of 
death as pneumonia. 
¶15 The decedent's wife initiated a wrongful death medical 
malpractice action under ch. 655 as the surviving spouse and as 
the special administrator of the decedent's estate.   
¶16 Counsel for the estate communicated with Medicare in 
regard 
to 
various 
medical 
expenses 
that 
Medicare 
paid.  
Communications from Medicare indicate that Medicare would rely 
on its statutory right to reimbursement.  Medicare was therefore 
not joined in the action. 
¶17 The estate introduced evidence about the reasonable 
value of the medical services rendered to the decedent.  The 
amount was approximately $89,000.  The defendants, over the 
estate's objections, presented evidence and argued to the jury 
that the out-of-pocket charges incurred by the estate were only 
$755, 
with 
the 
remaining 
medical 
expenses 
paid 
through 
collateral sources, such as Medicare, medical provider write-
offs pursuant to Medicare regulations, and private insurance. 
The circuit court instructed the jury that the estate's total 
out-of-pocket expense for medical services was $755.   
No. 
2003AP2027   
 
8 
 
¶18 The jury was instructed that the law does not require 
it to reduce the sum it determines to be the reasonable value of 
the medical services caused by the defendants' negligence to 
reflect payments made by other sources.  The jury was further 
instructed, however, that it may reduce, if it so decides, the 
amount awarded for the reasonable value of medical services by 
the amount of collateral source payments.  
¶19 The circuit court limited the estate's argument to the 
jury regarding the estate's obligation to reimburse Medicare.  
The estate could not argue that the estate had potential 
liability to Medicare.  Rather, the estate was forced to argue 
that the estate could, if it wished, voluntarily repay Medicare.    
¶20 The circuit court gave the jury special verdict 
questions with separate instructions on each element of damages 
as recommended by the Civil Jury Instruction Committee5 and as 
required by Wis. Stat. § 893.55(5).6  The jury answered the 
                                                 
5 Wis JI——Civil 1750.1 Comment (1998).  These instructions 
are designed for all cases, including medical malpractice cases, 
involving personal injuries.  The Committee recommends the 
following subdivided verdict format: (1) past medical; (2) 
future medical; (3) past loss of earning capacity; (4) future 
loss of earning capacity; (5) past pain, suffering, and 
disability; and (6) future pain, suffering, and disability.  
This format was used in the present case.  
6 Wisconsin Stat. § 893.55(5) reads as follows: 
(5) Every award of damages under ch. 655 shall specify 
the sum of money, if any, awarded for each of the 
following for each claimant for the period from the 
date of injury to the date of award and for the period 
after the date of award, without regard to the limit 
under sub. (4)(d): 
No. 
2003AP2027   
 
9 
 
separate verdict questions on damages, awarding the estate 
$20,000 for the decedent's pain and suffering and awarding the 
surviving 
spouse 
$35,000 
for 
the 
loss 
of 
society 
and 
companionship.7  The jury awarded the estate $755 for medical 
expenses 
("ambulance, 
medical, 
hospital, 
nursing 
home, 
rehabilitation, and bed hold expenses") and nothing for funeral 
expenses.  
¶21 The focus of the appeal is the circuit court's 
admission of evidence of collateral source payments for the 
purpose of determining the reasonable value of the medical 
services, its refusal to admit evidence of the estate's 
potential obligation to reimburse Medicare, and its instruction 
to the jury that it may consider the collateral source payments 
in awarding damages for the medical expenses. 
¶22 The 
estate's 
central 
objection 
to 
Wis. 
Stat. 
§ 893.55(7) is that in permitting evidence of collateral 
                                                                                                                                                             
(a) 
Pain, 
suffering 
and 
noneconomic 
effects 
of 
disability. 
(b) Loss of consortium, society and companionship or 
loss of love and affection. 
(c) Loss of earnings or earning capacity. 
(d) Each element of medical expenses. 
(e) Other economic injuries and damages. 
7 Two jurors dissented on the question of whether the 
negligent placement of the feeding tube was a cause of the 
decedent's death and the question of what amount of money would 
fairly and reasonably compensate Klover Lagerstrom for the loss 
of society and companionship. 
No. 
2003AP2027   
 
10 
 
benefits and in not providing guidance regarding the fact-
finder's consideration of this evidence, the legislature has 
unlawfully delegated public policy and equitable considerations 
to juries on a case-by-case basis without any guidelines.  The 
estate challenges 
the 
constitutionality 
of 
§ 893.55(7) on 
several grounds, including violation of separation of powers, 
right to trial by jury, and equal protection and due process 
guarantees.8  We conclude that under a proper interpretation of 
§ 893.55(7), these constitutional issues do not arise.   
¶23 The estate also asserts it is entitled to $7,610.10 
for funeral and burial expenses.  The estate's position is that 
because negligence was conceded, the jury established causation 
between the negligence and the death, and the funeral expenses 
were undisputed, the circuit court should have entered that 
undisputed amount on the verdict, instead of allowing the jury 
to determine the award.  The defendant asserts that the estate 
is not entitled to a new trial on the funeral and burial 
expenses because the jury was merely doing what it always does, 
that is, making a factual determination of the amount of money 
                                                 
8 State courts are divided about the constitutionality of 
legislative enactments declaring collateral source payments 
admissible as evidence.  For state courts declaring such laws 
constitutional, see, e.g., Marsh v. Green, 782 So. 2d 223 (Ala. 
2000); Barme v. Wood, 689 P.2d 446 (Cal. 1984).  For state 
courts declaring such laws unconstitutional, see, e.g., O'Bryan 
v. Hedgespeth, 892 S.W.2d 571, 576-78 (Ky. 1995) (violation of 
separation of powers); Carson v. Maurer, 424 A.2d 825, 835-36 
(N.H. 1980) (violation of equal protection); State ex rel. Ohio 
Academy of Trial Lawyers v. Sheward, 715 N.E.2d 1062, 1088-90 
(Ohio 1999) (violation of due process).   
No. 
2003AP2027   
 
11 
 
that would fairly and reasonably compensate the estate for 
funeral and burial expenses. 
II 
 
¶24 The primary issue presented is the interpretation of 
Wis. Stat. § 893.55(7), a question of law that this court 
decides independently of the circuit court or court of appeals 
but benefiting from their analyses.  Section 893.55(7) provides 
that in a medical malpractice action, evidence of compensation 
for bodily injury received from sources other than the defendant 
is admissible in a medical malpractice action to recover 
damages.  The statute adds that it does not limit the 
substantive or procedural rights of persons with subrogation 
claims.  The statute reads as follows: 
Evidence 
of 
any 
compensation 
for 
bodily 
injury 
received from sources other than the defendant to 
compensate the claimant for the injury is admissible 
in 
an 
action 
to 
recover 
damages 
for 
medical 
malpractice. 
 
This 
section 
does 
not 
limit 
the 
substantive or procedural rights of persons who have 
claims based upon subrogation. 
¶25 This case appears to be the first time an appellate 
court in this state has considered this statute.   
¶26 We determine the meaning of Wis. Stat. § 893.55(7) in 
light of (A) the text of the statute; (B) the legislative 
history of the statute; (C) the legislative goal in adopting the 
statute; and three concepts of law embodied in the statute; 
namely, 
(D) 
the 
valuation 
of 
medical 
services; 
(E) 
the 
collateral source rule; and (F) subrogation.  
No. 
2003AP2027   
 
12 
 
¶27 We conclude that the text of § 893.55(7) explicitly 
allows evidence of collateral source payments to be introduced 
in medical malpractice actions.  We further conclude that if 
evidence of collateral source payments from sources including 
Medicare, other state or federal government programs, medical 
insurance or write-offs, and discounted or free medical services 
is presented to the fact-finder, then the parties must be 
allowed to furnish the jury with evidence of any obligations of 
subrogation or reimbursement.  Because the text does not inform 
a fact-finder what to do with the evidence, in interpreting the 
statute and determining what a fact-finder must do with the 
evidence we consider the text of the statute, the legislative 
history, the legislative goal, and three common-law concepts 
encompassed in medical malpractice actions and Wis. Stat. 
§ 893.55(7), namely reasonable value of medical services, the 
collateral source rule, and subrogation.  We conclude that the 
circuit court must instruct the fact-finder that it must not 
reduce the reasonable value of medical services on the basis of 
the collateral source payments.  Although the jury is instructed 
not to use the evidence of collateral source payments to reduce 
the award for medical services, evidence of collateral source 
payments may be used by the jury to determine the reasonable 
value of medical services. 
A 
¶28 We examine first the text of Wis. Stat. § 893.55(7).  
It is only 50 words long, yet covers a large area of the law of 
damages in medical malpractice cases.  Although the instant case 
No. 
2003AP2027   
 
13 
 
involves medical expenses, the statute appears to encompass all 
damages in a medical malpractice action and to make evidence of 
all collateral source payments admissible in regard to all 
damage claims.   
¶29 Although the statute speaks of compensation to the 
claimant, the instant case demonstrates that the statute also 
encompasses payments, write-offs, or forgiveness made directly 
to health care providers rather than to the claimant.  Also, 
even though the statute uses only the phrase "bodily injury," 
unlike Wis. Stat. § 893.55(4)(b) and (e), which use both "bodily 
injury" and "death," it is broad enough to include wrongful 
death actions.   
¶30 The 
statute 
does 
not 
limit 
the 
nature 
of 
the 
collateral source payments and thus on its face seems to 
encompass payments such as those from federal and state 
governments, life insurance, income continuation plans, and 
volunteer services, some of which are ordinarily excluded by 
similar statutes in other states.9 
¶31 The only limitation stated in Wis. Stat. § 893.55(7) 
is that it does not limit the substantive or procedural rights 
of persons who have claims based upon subrogation.  The 
legislature obviously attempted to make the statute conform to 
the rules of subrogation.   
                                                 
9 See, 
e.g., 
Delaware 
Code 
Ann. 
Tit. 
18, 
§ 6862 
(introduction of evidence of collateral sources limited to 
public collateral source of compensation or benefits; statute 
not applicable to life insurance or private collateral sources 
of compensation or benefits).  
No. 
2003AP2027   
 
14 
 
¶32 The text of the statute does not address numerous 
issues in relation to medical expenses, the subject of this 
appeal.  First and foremost, the text does not state the purpose 
for which the evidence of collateral source payments is 
admissible.  The statute does not require that a fact-finder or 
circuit court reduce the reasonable value of the medical 
services rendered to account for the collateral source payments. 
The collateral source rule denies a tortfeasor credit for 
payments or benefits conferred upon the plaintiff by any person 
other than the tortfeasor.10   
¶33 The statute is silent about the admissibility of 
evidence about the expenses a victim incurred to acquire the 
collateral 
source 
payments, 
such 
as 
premiums 
or 
other 
                                                 
10 Dan B. Dobbs, Dobbs Law of Remedies: Damages, Equity, 
Restitution § 8.6(3), at 493 (2d ed. 1993).  Many states 
abrogating the collateral source rule by statute require the 
fact-finder or court to reduce the reasonable value of medical 
services by the amount of  collateral source payments.  See, 
e.g., Reid v. Williams, 964 P.2d 453 (Alaska 1998) (under terms 
of the statute, the circuit court makes a mandatory reduction of 
the award to reflect collateral source payments not provided by 
government program); Rudolph v. Iowa Methodist Med. Ctr., 293 
N.W.2d 550 (Iowa 1980) (statute requires mandatory reduction in 
award to account for collateral source payments); Arneson v. 
Olson, 270 N.W.2d 125 (N.D. 1978) (statute requires mandatory 
reduction 
of 
award 
to 
reflect 
nonrefundable 
medical 
reimbursement benefits received less premiums paid over the five 
years prior to the medical malpractice). 
No. 
2003AP2027   
 
15 
 
expenditures.11  The statute neither prohibits nor allows the 
admission of such evidence. 
¶34 The statute explicitly states that it does not limit 
the rights of subrogees but says nothing about the rights of 
reimbursement.  The statute is silent about whether a victim may 
introduce evidence of subrogation or the victim's obligation to 
reimburse a collateral source.12  The statute neither prohibits 
nor allows the admission of such evidence.  
¶35 The statute is silent about whether the parties may 
argue to the fact-finder about the public policies underlying 
the collateral source rule, such as preventing tortfeasors from 
benefiting from payments inuring to the victim and deterring 
tortfeasors.  Similarly, the statute does not say whether the 
public policies underlying subrogation, such as the prevention 
of double recovery, can be argued to the jury.  The statute 
                                                 
11 For example, the Arizona statute that allows evidence of 
certain collateral source payments also allows the plaintiff to 
introduce evidence of expenses paid to secure the collateral 
source payments.  The plaintiff may also introduce evidence of 
the collateral source provider's right to recovery against the 
plaintiff as reimbursement or under subrogation.  The statute 
further provides that "unless otherwise expressly permitted to 
do so by statute, no provider of collateral benefits . . . shall 
recover any amount against the plaintiff as reimbursement for 
such benefits nor shall such provider be subrogated to the 
rights of the plaintiff."  Ariz. Rev. Stat. Ann. § 12-565 (West 
2003). 
12 For example, Indiana's statute that allows the admission 
of proof of collateral source payments other than certain 
enumerated payments allows admission into evidence of proof of 
the amount of money the plaintiff is required to repay.  See 
Ind. Code Ann., § 34-44-1-2 (West 1998). 
No. 
2003AP2027   
 
16 
 
neither prohibits nor allows such arguments.  In sum, the text 
of the statute raises more questions than it answers. 
¶36 Even though the legislature did not clearly articulate 
how fact-finders and courts are supposed to use and apply Wis. 
Stat. § 893.55(7), and even though the language of the statute 
does not express a complete abrogation of the collateral source 
rule in medical malpractice actions, we must interpret Wis. 
Stat. § 893.55(7) to give effect to the legislature's explicit 
language allowing the admission of evidence of collateral source 
payments in medical malpractice actions under chapter 655. 
B 
¶37 The legislative history of Wis. Stat. § 893.55(7) 
provides some guidance in interpreting the statute.   
¶38 An early draft of the bill that became Wis. Stat. 
§ 893.55(7) included a sentence requiring that collateral source 
payments reduce an award of damages:  "The award of damages 
under ch. 655 shall be reduced by any compensation that the 
injured party received from sources other than the defendant to 
compensate him or her for the injury."  This sentence does not 
appear in the enacted statute.  
¶39 Four documents in the legislative history files cast 
some light on the deletion of the sentence requiring reduction 
of an award by collateral source payments and the addition of 
the sentence protecting subrogation rights. 
¶40 First, a communication from Employers Health Insurance 
to Representative Sheryl Albers, Chair of the Assembly Committee 
on 
Insurance, 
Securities 
and 
Corporate 
Policy, 
in 
the 
No. 
2003AP2027   
 
17 
 
Legislative Council bill file for 1995 Assembly Bill 36 explains 
the need to protect subrogation.  The communication requested 
the 
addition 
of 
the 
last 
sentence 
of 
§ 893.55(7).  
Representative Albers forwarded the communication to Gordon 
Anderson, Senior Staff Attorney at the Wisconsin Legislative 
Council. 
 
The 
communication 
explains 
Employers 
Health 
Insurance's request to protect subrogation as follows: 
ASSEMBLY BILL 36 (LRB 1913/3) 
After discussions with the author and staff counsel, 
we reviewed the language again and consulted with our 
attorneys.  Although the language itself does not pose 
the problem since the collateral source rule and those 
who have subrogation rights function independently, we 
continue to have concerns about future interpretations 
based on a creative application of the "made whole" 
doctrine. 
Therefore, we would appreciate your consideration of 
the following two options for modifications. 
1. Insert within the committee record a reference, 
which would be included in the comment section of the 
annotation to the statute, the following reference: 
"This section (section 7) relates to the collateral 
source rule.  It does not limit the substantive or 
procedural rights of persons who have claims based 
upon subrogation." 
2. 
The 
alternative 
would 
be 
to 
amend 
the 
bill . . . through 
the 
addition 
of 
the 
following 
language: 
"This section does not limit the substantive or 
procedural rights of persons who have claims based 
upon subrogation." 
It is critical that the reference contained in option 
one appear within the annotated statutes.  If there is 
a possibility that reference would not appear in 
comments section, we believe it is necessary to 
No. 
2003AP2027   
 
18 
 
include the statutory language outlined in option 
two.13 
¶41 It is far from clear what this memorandum means by 
"creative application" of the made whole doctrine.14  Employers 
Health Insurance gives no explanation or examples.  Nothing else 
in the bill file or the drafting records in the Wisconsin 
Legislative Reference Bureau or Wisconsin Legislative Council 
explains "creative application" of the made whole doctrine.  
Thus the memorandum provides no insight about the application of 
the last sentence of Wis. Stat. § 893.55(7) other than that an 
insurance company wanted subrogation rights to be protected.15 
¶42 Second, a one-page document entitled Explanation for 
Proposed Amendment to Engrossed Assembly Bill 36: Admissibility 
of Evidence of Other Sources explains that the mandatory 
                                                 
13 Memorandum from Representative Albers to Gordon Anderson, 
Senior Staff Attorney, Wisconsin Legislative Council, January 
23, 1995 (available at Wisconsin Legislative Council, Madison, 
Wisconsin) (emphasis added). 
14 The "made whole doctrine" in Wisconsin, also called the 
Rimes doctrine, prevents subrogation by acting as a "rule of 
priority, such that only where an injured party has received an 
award . . . which pays all of his elements of damages, including 
those for which he has already been indemnified by an insurer, 
is there any occasion for subrogation."  Petta v. ABC Ins. Co., 
2005 WI 18, ¶28, 278 Wis. 2d 251, 692 N.W.2d 639 (internal 
quotation and citation omitted).  
15 The collateral source rule has blocked the assertion of 
subrogation rights even when the insurance policy expressly 
reserves subrogation rights.  See Ruckel v. Gassner, 2002 WI 67, 
¶43, 253 Wis. 2d 280, 646 N.W.2d 11 ("[W]e hold that pursuant to 
this court's [made whole doctrine cases], an insurer is not 
entitled to subrogation against its insured unless and until the 
insured is made whole, regardless of contractual language to the 
contrary.").  
No. 
2003AP2027   
 
19 
 
reduction language was deleted to protect subrogation rights of 
insurance companies.  The author and source of this document are 
not identified and the document is not dated.  The document 
explains that Wis. Stat. § 893.55(7) as proposed and adopted 
does not require an offset or reduction because some health 
insurers were concerned that they not lose subrogation rights.  
The document reads in pertinent part as follows: 
Explanation: The first sentence . . . modifies the 
"collateral source" rule by merely allowing evidence 
regarding 
other 
sources 
of 
compensation 
to 
be 
presented to the jury in a medical malpractice action.  
It does not require an offset or reduction of any 
malpractice award by the amount of any other payments.  
Some health insurers expressed concern that this might 
affect their ability to exercise their subrogation 
rights whereby they pay for an injury, then seek to 
recover from the plaintiff if the plaintiff receives 
compensation again through the malpractice award.  
Accordingly, 
the 
last 
sentence 
clarifies 
that 
subrogation rights (which are seldom exercised) are 
unaffected.16  
                                                 
16 The Explanation for Proposed Amendment to Engrossed 
Assembly Bill 36 goes on to describe the comments of an American 
Law Institute Reporter's Study relating to modification of the 
collateral source rule.  These comments were not made in regard 
to the Wisconsin bill. 
According to a study commissioned by the American Law 
Institute [Reporters' Study of Enterprise Liability 
and Personal Injury, April 1991, vol. II, p. 167], 
nearly half of all states . . . have modified the 
"collateral source" rule to either allow admissibility 
of other payments made, or, going one step further, to 
require mandatory offsets to assure there is no double 
recovery. 
There 
are 
two 
main 
reasons 
for 
this 
modification of the collateral source rule.  First, 
economists who have studied the effects of various 
tort reforms have concluded that collateral source 
rule modification yields substantial savings in the 
long run, second only to caps on damages in terms of 
No. 
2003AP2027   
 
20 
 
¶43 Not all insurance companies have the same interests in 
regard to the collateral source rule and subrogation, as this 
memorandum demonstrates.  Insurance companies insuring a victim 
of medical malpractice for the victim's medical expenses want to 
retain the collateral source rule and subrogation rights so that 
they can be reimbursed by the tortfeasor for the payments they 
made for the victim's medical expenses.  In contrast, insurance 
companies insuring a health care provider tortfeasor want to 
eliminate the collateral source rule so that they can pay a 
victim less money for the victim's medical expenses; these 
insurance companies want to eliminate subrogation so that they 
need not pay a victim's insurance company for medical expenses 
the 
victim's 
insurance 
company 
paid.17 
 
The 
legislature 
apparently added the last sentence of the statute as some sort 
of compromise to take into account the divergent interests of 
different insurance companies.  The compromise is, however,  
unintelligible in the context of Wis. Stat. § 893.55(7).  
                                                                                                                                                             
effect on overall costs.  Second, fairness is enhanced 
by reducing the likelihood of double recoveries and 
allowing 
juries to 
take 
other 
compensation 
into 
account in determining the amount of an award.  
Explanation for Proposed Amendment to Engrossed Assembly 
Bill 36: Admissibility of Evidence of Other Sources, in Drafting 
Records, 
Assembly 
Bill 
36 
(available 
at 
the 
Wisconsin 
Legislative Reference Bureau, Madison, Wisconsin). 
17 The 
abolition 
of 
the 
collateral 
source 
rule 
(and 
subrogation) results in an anomaly:  The victim's insurance 
company compensates the victim for medical expenses and the 
tortfeasor's insurance company is relieved of paying the 
victim's medical expenses. 
No. 
2003AP2027   
 
21 
 
¶44 Third, the legislative files have references to an 
American Law Institute Reporter's Study that recommended, among 
other things, that statutory modifications of the collateral 
source rule should include a provision providing for mandatory 
reduction of a plaintiff's tort award "by the amount of present 
and estimated future payments from all sources of collateral 
benefits except life insurance."18  The proponents of the bill 
thus were well aware of the Reporter's Study and deliberately 
did not adopt the Study's proposed approach. 
¶45 Fourth, a January 27, 1995 memorandum from Gordon A. 
Anderson, a Wisconsin Legislative Council staff attorney, to 
Representative Sheryl Albers (co-chair) and other members of the 
Assembly Committee on Insurance, Securities and Corporate Policy 
reinforces that the purpose of Wis. Stat. § 893.55(7) is to 
alter the admissibility of collateral source payments, not to 
change the substantive application of the collateral source 
rule.  The memorandum candidly admits, and highlights, that 
§ 893.55(7) 
does 
not 
explain 
the 
consequences 
of 
the 
admissibility of the collateral source payments.  The memorandum 
reads in relevant part: 
5. Collateral Sources 
Currently, if an injured party brings an action 
against a person who allegedly caused that injury, 
information that the 
insured party has 
received 
benefits for that injury from another source, such as 
                                                 
18 The 
American 
Law 
Institute, 
II 
Reporters' 
Study: 
Enterprise Responsibility for Personal Injury 182 (1991). 
No. 
2003AP2027   
 
22 
 
a health insurer or disability income insurer, is not 
admissible as evidence in the action. 
 
Under SECTION 7 of Assembly Bill 36, evidence of 
any compensation for bodily injury received from 
sources other than the defendant to compensate for 
[sic] the claimant for the injury is admissible in an 
action to recover damages for medical malpractice.  
The provision does not state the consequences of that 
admissibility (i.e., is the trier of fact expected to 
award damages based on the difference between the 
actual damages and the amounts received or to award 
damages 
which 
include 
the 
amounts 
paid 
by 
the 
"collateral sources").19 
¶46 The most reasonable explanation of the statute on the 
basis of the legislative history is that Wis. Stat. § 893.55(7) 
became simply a modification of the evidentiary aspect of the 
collateral source rule, not the substantive aspect.20   
¶47 Although 
the 
legislative 
history 
indicates 
the 
legislature intended to modify what evidence is admissible in a 
medical 
malpractice 
action, 
it 
is 
not 
clear 
how 
that 
modification impacts our case law defining "reasonable value of 
medical services" as the reasonable value of medical services 
                                                 
19 Wisconsin Legislative 
Council 
Staff 
Memorandum 
from 
Gordon A. Anderson, Senior Staff Attorney, to Representative 
Albers and Members of the Assembly Committee on Insurance, 
Securities and Corporate Policy, January 27, 1995 (available at 
the Wisconsin Legislative Council, Madison, Wisconsin). 
20 See Linda J. Gobis, Note, Lambert v. Wrensch: Another 
Step Toward Abrogation of the Collateral Source Rule in 
Wisconsin, 1988 Wis. L. Rev. 857, 861 ("As a rule of evidence, 
[the collateral source rule] precludes introduction of evidence 
regarding any benefits the plaintiff obtained from sources 
collateral to the defendant.  As a rule of damages, it precludes 
the defendant from offsetting the plaintiff's receipt of 
collateral compensation against the . . . judgment."). 
No. 
2003AP2027   
 
23 
 
rendered, without limitation to amounts paid, or how that 
modification affects the collateral source rule and subrogation.   
¶48 The key concepts that emerge from this legislative 
history are as follows: the collateral source rule is modified, 
not abrogated; the modification of the collateral source rule is 
a modification of the rules of evidence to allow evidence of the 
other payments; the modification is not an explicit modification 
of the substantive collateral source rule that a collateral 
source payment does not reduce an award of medical expenses; and 
subrogation rights are preserved and seem to trump other 
considerations. 
C 
¶49 The legislative goals are not explicitly set forth in 
the statute.  Section 893.55(7) was adopted in the 1995-96 
session to modify the 1975 Liability and Patients Compensation 
Act, which created chapter 655 in the Wisconsin Statutes, along 
with other provisions governing medical malpractice actions, 
effective July 1975.  Chapter 655 was adopted in reaction to a 
perceived crisis in medical malpractice.21   
¶50 The immediate goal of Wis. Stat. § 893.55(7) was 
arguably to provide fact-finders with information about the 
collateral source payments in the hope that victims would not 
                                                 
21 Larry Stephen Milner, Comment, The Constitutionality of 
Medical Malpractice Legislative Reform: A National Survey, 18 
Loy. U. Chi. L.J. 1053, 1053 (1986-87); Pamela Mathy, Comment, 
Testing 
the 
Constitutionality 
of 
Medical 
Malpractice 
Legislation: The Wisconsin Medical Malpractice Act of 1975, 1977 
Wis. L. Rev. 838, 839-40. 
No. 
2003AP2027   
 
24 
 
obtain double recovery as a result of the increased prevalence 
of 
both 
publicly 
and 
privately 
provided 
medical 
expense 
insurance.22  The ultimate goal of § 893.55(7) would be to reduce 
health care providers' insurance premiums as a result of a 
reduction of victims' recoveries. 
¶51 We therefore examine possible interpretations of Wis. 
Stat. § 893.55(7) with the legislative history and goals in 
mind, along with three key legal concepts implicated in Wis. 
Stat. § 893.55(7): the valuation of reasonable medical expenses; 
the common law collateral source rule; and subrogation.  We 
                                                 
22 The Delaware Supreme Court declared that the purpose of a 
similar statute was "to prevent the collection of a loss from a 
collateral public source (such as Social Security) and then the 
collection for the same loss from the party or hospital being 
sued."  Nanticoke Mem'l Hosp., Inc. v. Uhde, 498 A.2d 1071, 1075 
(Del. 1985). 
The Arizona supreme court declared that the purpose of its 
statute is  
to inform the fact finder of the true extent of the 
plaintiff's economic loss in order to avoid the 
inequity 
of windfall 
recoveries. 
 
The 
resulting 
judgments will no doubt reflect a set-off for the 
benefits the plaintiff has already received and these 
lower 
judgments 
would 
be 
reflected 
in 
lower 
malpractice insurance premiums, one of the objectives 
of the legislation.  It should be noted that admission 
into evidence of plaintiffs' collateral benefits in no 
way guarantees any reduction in the damages awarded by 
the trier of fact. 
Eastin v. Broomfield, 570 P.2d 744, 753 (Ariz. 1977). 
See also Milner, supra note 21, at 1068 ("An increase in 
insurance protection nationwide, combined with utilization of 
this [collateral source] rule, however, has resulted in multiple 
recoveries.").   
No. 
2003AP2027   
 
25 
 
shall discuss these three concepts in turn and then finally set 
forth our interpretation of § 893.55(7) in light of the text, 
the 
legislative 
history, 
the 
legislative 
goal 
and 
these 
concepts.     
D 
¶52 In calculating damages, a person injured by medical 
malpractice may recover the reasonable value of the medical 
services reasonably required by the injury.23  We have recognized 
that in "most cases [the reasonable value of medical services] 
is the actual expense, but in some cases it is not.  But the 
test is the reasonable value, not the actual charge, and 
therefore there need be no actual charge."24  It is not a 
controversial proposition that the recovery is for the value of 
the services, not for the expenditures actually made or the 
                                                 
23 Thoreson v. Milwaukee & Suburban Transp. Co., 56 Wis. 2d 
231, 243, 201 N.W.2d 745 (1972). 
24 Id.  See also Koffman v. Leichtfuss, 2001 WI 111, ¶56, 
246 Wis. 2d 31, 630 N.W.2d 201 ("[W]e have determined that the 
plaintiff was entitled to seek recovery of the reasonable value 
of the medical expenses rendered without limitation to the 
amounts paid by the plaintiff and his insurers."); Ellsworth v. 
Schelbrock, 2000 WI 63, 235 Wis. 2d 678, 611 N.W.2d 764 (court 
concluded that the collateral source rule applies to medical 
assistance benefits; rejected argument that recipient of public 
assistance did not incur liability for medical expenses and was 
not entitled to award of damages or benefit of collateral source 
rule).  See also I The Law of Damages in Wisconsin § 9.9, at 8 
(Russell Ware ed., 4th ed. 2005). 
No. 
2003AP2027   
 
26 
 
obligations incurred.25  That medical and nursing services are 
rendered gratuitously "should not preclude the injured party 
from recovering the value of the services as part of his 
compensatory damages."26 
¶53 The defendants argue that Wis. Stat. § 655.009(2), 
enacted in 1975, changed the standard for determining the 
reasonable value of medical services in medical malpractice 
cases.  Section 655.009(2) provides that "[t]he court or the 
jury, which ever is applicable, shall determine the amounts of 
medical expense payments previously incurred and for future 
medical expense payments."   
¶54 We are not persuaded that this statute changes the 
long-standing rule that the "reasonable value of medical 
services" is the reasonable value of medical services rendered, 
without limitation to amounts paid.  This long-standing rule has 
been applied in both chapter 655 medical malpractice actions and 
in other actions as the method for determining the reasonable 
value of medical services.  
¶55 The 
most 
logical 
interpretation 
of 
Wis. 
Stat. 
§ 655.009(2) is that the court or jury should determine past and 
                                                 
25 See I The Law of Damages in Wisconsin, supra note 24, 
§ 9.9, at 8 n.32 ("Several Wisconsin cases have reaffirmed the 
general rule that the plaintiff, on the basis of the collateral 
source rule and principles of subrogation, is entitled to 
recover the reasonable value of the health care services 
rendered rather than the amount actually paid to the provider." 
(citing Koffman and Ellsworth)). 
26 Thoreson, 56 Wis. 2d at 243. 
No. 
2003AP2027   
 
27 
 
future medical expenses based on the common-law standard for 
determining such damages.  We agree with the amicus curiae brief 
of the 
Wisconsin 
Academy 
of Trial 
Lawyers 
that if the 
legislature had intended in 1975 to make the measure of damages 
in medical malpractice actions "payments" for medical services 
actually 
made 
by 
the 
victim, it 
need not 
have adopted 
Wis. Stat. § 893.55(7) to modify the collateral source rule. 
E 
¶56 We 
next 
examine 
the 
second, 
related 
principle 
implicated by Wis. Stat. § 893.55(7), the well-recognized common 
law collateral source rule.  The collateral source rule helps 
claimants recover the "reasonable value of the medical services, 
without limitation to the amounts paid."27  Regardless of the 
method 
of 
financing 
the 
victim's 
medical 
expenses, 
a 
tortfeasor's liability is the reasonable value of the treatment 
rendered without limitation to the amounts actually paid by the 
victim.  "Under the collateral source rule, the amount of 
damages 
awarded 
to 
a 
person 
injured 
because 
of 
another 
individual's tortious conduct is not reduced when the injured 
party receives compensation from another source . . . ."28       
¶57 The policy basis for the collateral source rule is 
that a tortfeasor who is legally responsible for causing an 
injury should not be relieved of his or her obligation to 
                                                 
27 Koffman, 246 Wis. 2d 31, ¶2. 
28 Ellsworth, 235 Wis. 2d 678, ¶1.  We cited Restatement 
(Second) of Torts § 920A adopting the collateral source rule 
with approval in Ellsworth at ¶8. 
No. 
2003AP2027   
 
28 
 
compensate the victim simply because the victim has the 
foresight to arrange, or good fortune to receive, benefits from 
a collateral source for injuries and expenses.29  An underlying 
justification for the rule is that should a windfall arise 
because of an outside payment, the party to profit from that 
collateral source should be the injured person, not the 
tortfeasor.30  The collateral source rule also ensures that the 
liability of similarly situated tortfeasors is not dependent on 
the relative fortuity of the manner in which each victim's 
medical expenses are financed.31  Moreover, although some 
plaintiffs 
may 
get 
duplicate 
recovery, 
many 
successful 
plaintiffs are far from fully compensated, considering, for 
example, attorney fees and costs.    
¶58 Furthermore, the collateral source rule is designed to 
deter wrongdoing; the rule "deter[s] negligent conduct by 
placing 
the 
full 
cost 
of 
the 
wrongful 
conduct 
on 
the 
tortfeasor."32   
¶59 Those critical of the collateral source rule argue 
that the rule allows a victim a double recovery: a payment by 
the tortfeasor and a payment by a collateral source.   
                                                 
29 Koffman, 246 Wis. 2d 31, ¶29. 
30 Id. (citing Campbell v. Sutliff, 193 Wis. 370, 374, 214 
N.W. 374 (1927), overruled on other grounds by Powers v. 
Allstate Ins. Co., 10 Wis. 2d 78, 92, 102 N.W.2d 393 (1960). 
31 Koffman, 246 Wis. 2d 31, ¶31. 
32 Ellsworth, 235 Wis. 2d 678, ¶7 (quoted source omitted). 
No. 
2003AP2027   
 
29 
 
¶60 This court has applied the collateral source rule in 
recent cases.  For example, in Koffman v. Leichtfuss, 2001 WI 
111, 246 Wis. 2d 31, 630 N.W.2d 201, an automobile accident 
case, the tortfeasor argued that because the plaintiff's insurer 
had subrogation rights against the defendant tortfeasor, the 
plaintiff was entitled only to amounts he actually paid for 
medical services.  The circuit court allowed the plaintiff to 
argue 
for 
the 
full 
amount 
of 
medical 
expenses 
while 
simultaneously allowing the defendants to argue that the 
plaintiff should recover only for the amount he actually paid.  
The jury reduced its award to the plaintiff for medical services 
by the amount of the collateral source payments, and in response 
to post-verdict motions, the circuit court further reduced the 
award to the amounts actually paid by the plaintiff. 
¶61 We recognized in Koffman that the plaintiff often does 
not incur out of pocket expenses for medical services, stating: 
The modern health care system employs a myriad of 
health care finance arrangements.  As part of the 
system, negotiated and contracted discounts between 
health care providers and insurers are increasingly 
prevalent.  Pursuant to these agreements, an insurer's 
liability for the medical expenses billed to its 
insured is often satisfied at discounted rates, with 
the remainder being "written-off" by the health care 
provider.33 
Wisconsin Stat. § 893.55(7) was not at issue in Koffman, and the 
collateral source rule was fully operational in that case.  The 
plaintiff in that case was entitled to seek recovery of the 
                                                 
33 Koffman, 246 Wis. 2d 31, ¶21. 
No. 
2003AP2027   
 
30 
 
reasonable value of the medical services without limitation to 
the amounts paid.34   
¶62 The collateral source rule works in conjunction with 
subrogation and reimbursement.  Plaintiffs do not necessarily 
actually receive a double recovery even if they collect fully 
from both the tortfeasor and the collateral source, because a 
collateral 
source 
may 
have 
a 
right 
of 
subrogation 
or 
reimbursement.35   
¶63 Wisconsin Stat. § 893.55(7) explicitly provides that 
it does not limit the substantive or procedural rights of 
persons who have claims based upon subrogation.  As we explained 
previously, the legislature did not mandate that a fact-finder 
offset collateral source payments in determining the reasonable 
value of medical services to protect subrogation.  Subrogation 
helps reduce an insurer's losses and makes it at least 
theoretically possible for an insurer to limit premium charges 
accordingly.  The protection of subrogation has therefore been 
used to justify the collateral source rule.36  The relationship 
of § 893.55(7) to the collateral source rule and subrogation 
dictates to a large extent the interpretation of the statute.  
F 
¶64 We turn now to the third legal principle embodied in 
the statute, subrogation.  By virtue of payments made on behalf 
                                                 
34 Id., ¶¶2, 31. 
35 Dobbs, supra note 10, § 8.6 at 496. 
36 Id., § 8.6(3), at 496-97. 
No. 
2003AP2027   
 
31 
 
of the victim (the subrogor), a payor (subrogee) sometimes 
obtains a right to recover these payments in an action against a 
tortfeasor and is a necessary party in an action against the 
tortfeasor.37  Subrogation exists to ensure that the loss is 
ultimately placed upon the wrongdoer and to prevent the victim 
(the subrogor) from being unjustly enriched through a double 
recovery, namely recovering from both the paying party (the 
subrogee) and the tortfeasor.38  An entity with a subrogation 
right 
can 
waive 
the 
right 
to 
subrogation 
in 
favor 
of 
reimbursement.39  Successful plaintiffs thus must sometimes 
reimburse sources of collateral payments out of tort recoveries.  
The principles of subrogation therefore are applicable when the 
right is asserted as a reimbursement.     
¶65 Subrogation ordinarily 
works 
in tandem 
with the 
collateral source rule to further the goals of both rules.40  The 
collateral source rule prevents benefits received by the victim 
from inuring to the tortfeasor, and subrogation prevents the 
victim from receiving a double recovery because the payor of the 
benefits may recover the payments from the tortfeasor or the 
victim.41  In other words, when the risk of double recovery on 
                                                 
37 Koffman, 246 Wis. 2d 31, ¶33 (citations omitted). 
38 Id. 
39 Jindra v. Diederich Flooring, 181 Wis. 2d 579, 596, 511 
N.W.2d 855 (1994). 
40 Koffman, 246 Wis. 2d 31, ¶40. 
41 Id. 
No. 
2003AP2027   
 
32 
 
the part of the victim does not exist because the payor may seek 
subrogation, the collateral source rule applies.42 
¶66 In other states with statutes admitting collateral 
source payments in evidence, subrogation rights are explicitly 
not protected, and the payor of the collateral source payments 
(the subrogee) is prohibited from receiving reimbursement.43  In 
contrast, 
the 
Wisconsin 
legislature 
chose 
in 
Wis. 
Stat. 
§ 893.55(7) to protect the substantive or procedural rights of 
persons who have claims based upon subrogation.44  This choice is 
clear on the face of the statute and in the legislative history, 
as we previously explained. 
                                                 
42 Id. 
43 This alternative is recommended by the American Law 
Institute, II Reporters' Study of Enterprise Responsibility for 
Personal Injury 161-82 (1991).   
For other states' treatment of subrogation, see, e.g., Ala. 
Code 
§ 12-21-45 
(2001)(upon 
proof 
by 
plaintiff 
that 
the 
plaintiff is obligated to repay the medical expenses which have 
been 
reimbursed, evidence 
of 
plaintiff's reimbursement or 
payments is admissible); Cal. Civ. Code § 3333.1(b) (2005) (no 
source of collateral benefits introduced in evidence shall 
recover any amount against the plaintiff nor be subrogated to 
the rights of the plaintiff against a defendant). 
44 The Wisconsin statute does not explain how the subrogee's 
rights are to be protected.  In contrast, the Kentucky statute 
provides that a plaintiff must notify subrogees that their 
failure to assert subrogation rights by intervention in that 
lawsuit will result in loss of those rights with respect to the 
final award the plaintiff receives.  See Ky. Rev. Stat. Ann. 
§ 411.188 (2004).  This statute was declared unconstitutional on 
grounds unrelated to this provision.  See O'Bryan v. Hedgespeth, 
892 S.W.2d 571 (Ky. 1995).   
No. 
2003AP2027   
 
33 
 
¶67 Any interpretation of § 893.55(7) must therefore take 
into account that the statute does not limit the rights of 
claims based on subrogation. 
III 
¶68 With 
these 
principles 
in 
mind, 
we 
interpret 
Wis. Stat. § 893.55(7).    
¶69 The text of § 893.55(7) renders admissible evidence of 
any compensation for bodily injury received from sources other 
than the defendant to compensate the claimant for bodily injury 
in a medical malpractice damage action.  The text does not 
direct the fact-finder how to consider or use evidence of 
collateral source payments.  The Wisconsin statute, unlike 
statutes in other states, does not require an offset or 
reduction of any malpractice award by the amount of collateral 
source payments.   
¶70 According 
to the 
legislative history, 
the 
first 
sentence of Wis. Stat. § 893.55(7) modifies the collateral 
source rule by merely allowing evidence regarding other sources 
of compensation to be presented to the jury in a medical 
malpractice action.  Wisconsin Stat. § 893.55(7) modified, but 
did not abrogate, the long-standing common-law collateral source 
rule that the reasonable value of medical services is the full 
value of the medical services, not limited by any collateral 
source payments. 
¶71 The rights of persons whose claims are based on 
subrogation are not limited by Wis. Stat. § 893.55(7), as the 
last sentence in the statute makes clear.  The sentence in the 
No. 
2003AP2027   
 
34 
 
original draft of the statute requiring that damages under ch. 
655 shall be reduced by any compensation the injured party 
received from sources other than the defendant made insurance 
companies worry that their subrogation rights would be adversely 
affected, and the sentence was therefore eliminated. 
¶72 In order for subrogation (or reimbursement) and the 
collateral source rule to work in tandem to prevent a victim's 
double recovery and protect subrogation, Wis. Stat. § 893.55(7) 
must be interpreted to require courts to instruct juries to 
consider the collateral source payments only in determining the 
reasonable value of the medical services rendered.   
¶73 An 
alternative 
interpretation 
of 
Wis. 
Stat. 
§ 893.55(7), that is, to allow a fact-finder to offset the 
collateral source payments, leaves many questions unanswered 
that the legislature could not have intended this court to 
answer.  The statute is silent about the parties' ability to 
introduce evidence or argue about the obligation to repay 
collateral 
sources. 
 
The 
statute 
is 
silent 
about 
the 
admissibility and consideration by the fact-finder of expenses 
the victim incurred to acquire the collateral source payments.  
The statute is silent about the ability of the parties to argue 
to the fact-finder the public policies underlying the collateral 
source rule and subrogation.  The statute is silent about the 
ability of the parties to argue about the inequity resulting to 
health care providers who receive reduced payments for the care 
they provide to patients as a result of rules governing Medicare 
and other programs, while the reasonable value of medical 
No. 
2003AP2027   
 
35 
 
services is valued at the full reasonable value.  With so many 
unresolved issues regarding a fact-finder's ability to make 
discretionary off-sets, we must conclude that the legislature 
intended that the jury not do so. 
¶74 We conclude that the text of § 893.55(7) explicitly 
allows evidence of collateral source payments to be introduced 
in medical malpractice actions.  We further conclude that if 
evidence of collateral source payments from sources including 
Medicare, other state or federal government programs, medical 
insurance or write-offs, and discounted or free medical services 
is presented to the fact-finder, then the parties must be 
allowed to furnish the jury with evidence of any potential 
obligations of subrogation or reimbursement.  Because the text 
does not inform a fact-finder what to do with the evidence, in 
interpreting the statute and determining what a fact-finder must 
do with the evidence we consider the text of the statute, the 
legislative history, the legislative goal, and three common-law 
concepts encompassed in medical malpractice actions and Wis. 
Stat. § 893.55(7), namely reasonable value of medical services, 
the collateral source rule, and subrogation.  We conclude that 
the circuit court must instruct the fact-finder that it must not 
reduce the reasonable value of medical services on the basis of 
the collateral source payments.  Although the jury is instructed 
not to use the evidence of collateral source payments to reduce 
the award for medical services, evidence of collateral source 
payments may be used by the jury to determine the reasonable 
value of medical services. 
No. 
2003AP2027   
 
36 
 
¶75 The 
facts 
of 
this 
case 
illustrate 
that 
our 
interpretation 
of 
Wis. 
Stat. 
§ 893.55(7) 
fulfills 
the 
legislative policies and objectives.  In this case, Medicare was 
not a party but has rights of reimbursement from the parties.  
The concepts of reimbursement and subrogation are similar.   
¶76 If the estate recovers an award for the value of the 
medical services rendered, the estate would not necessarily have 
a double recovery because it would have an obligation to 
reimburse Medicare.  In the instant case, the attorney for the 
estate received three lengthy letters (dated July 30, 2001; 
December 12, 2001; and January 22, 2002 respectively) from 
Medicare, each advising the attorney in boldface type of the 
estate's obligation to reimburse Medicare for Medicare payments 
out of any recovery or settlement it receives as a result of the 
litigation.  Because Medicare may seek reimbursement, to protect 
Medicare's right of reimbursement the collateral source rule 
should apply.  That is, the fact-finder should be advised of the 
estate's potential obligation to Medicare and the fact-finder 
should not reduce an award to the estate by the collateral 
source payments by Medicare because of the potential obligation 
to repay Medicare.45  The defendants assert that they, too, may 
be liable to Medicare.  It does not appear that § 893.55(7) can 
at the same time allow an offset for collateral source payments, 
protect the parties to the action, and protect the rights of 
Medicare, 
which 
provided 
collateral 
source 
payments.  
                                                 
45 Koffman, 246 Wis. 2d 31, ¶40. 
No. 
2003AP2027   
 
37 
 
Accordingly, the jury may hear evidence of collateral source 
payments 
and 
evidence 
relevant 
thereto 
to 
determine 
the 
reasonable value of the medical services but must not use the 
collateral source payments as an offset to determine the 
reasonable value of the medical services. 
¶77 Because the circuit court failed to advise the jury 
that it must not reduce its award for the reasonable value of 
medical expenses by the amount of the collateral source 
payments, we reverse the circuit court's judgment and order and 
remand the cause for a new trial in accordance with this 
decision on the issue of the hospital and medical expenses.    
IV 
¶78 Irrespective of the interpretation of Wis. Stat. 
§ 893.55(7) adopted, the circuit court committed prejudicial 
error and a new trial must be held on the issue of the hospital 
and medical expenses. 
¶79 In this case the estate's counsel requested an 
instruction informing the jury that the estate was obliged to 
reimburse Medicare.  The estate's proposed jury instruction 
would have allowed the jury to hear and consider evidence of 
collateral source payments in determining the reasonable value 
of medical services.  The proposed instruction would also have 
allowed the jury to consider the estate's potential obligation 
to reimburse Medicare.  The estate's proposed instruction read 
as follows: 
 
No. 
2003AP2027   
 
38 
 
Collateral Source Payments 
Under the law in the State of Wisconsin, an 
injured party, or that party and Medicare, is usually 
entitled to recover the reasonable value of medical 
services of which the negligence of a person is a 
cause, whether or not the services are provided for 
free, and regardless of whether or not an insurer or 
Medicare pays the bill.  The purpose of this rule is 
to hold the negligent parties accountable for their 
acts by holding them responsible for the value of the 
damages they have caused. 
However, in medical negligence cases such as this 
one, Wis. Stat. § 893.55(7) allows you to hear 
testimony regarding payments made by Medicare and 
insurance sources.  The statute does not require you 
to reduce the sum found by you to be the reasonable 
value of the medical services of which the negligence 
of the defendants was a cause by any payment made by 
any such source.  You may do so. 
You are instructed, however, that the Estate of 
Vance Lagerstrom is obligated to reimburse Medicare 
for expenditures made by it. 
The circuit court did not use this proposed jury instruction.  
 
¶80 The circuit court did not even allow the estate to 
tell the jury that it might have a potential obligation to 
reimburse Medicare.46  The circuit court ruled that the estate 
could, if it wished, argue that the estate "could reimburse 
Medicare."  It could not argue that the estate might be required 
to do so. 
¶81 The instruction given did not advise the jury of the 
estate's potential obligation to reimburse Medicare.  The jury 
was instructed as follows: 
                                                 
46 R. 127:125-26. 
No. 
2003AP2027   
 
39 
 
ESTATE'S RECOVERY FOR MEDICAL, HOSPITAL, AND FUNERAL 
EXPENSES 
Subdivision (b) of question 4 asks what sum of 
money will fairly and reasonably compensate the Estate 
of Vance Lagerstrom for the reasonable value of the 
medical 
and 
hospital 
expenses 
necessarily 
and 
reasonably incurred in the care of him from the date 
of the Ensure infusion incident to the time of his 
death, because of the injuries resulting to him as a 
result of the Ensure incident. 
In medical negligence cases such as this one, you 
are allowed to hear testimony regarding payments made 
by Medicare, insurance and other sources.  The law 
does not require you to reduce the sum found by you to 
be the reasonable value of the medical services of 
which the negligence of the defendants was a cause by 
any payment by any such source.  You may do so.  It is 
for you the jury to decide. 
¶82 This jury instruction is infirm, aside from any 
consideration of Wis. Stat. § 893.55(7).  The instruction given 
to the jury is deficient because it does not alert the jury that 
the estate is potentially obligated to reimburse Medicare.  
¶83 The estate contended at trial that it had a legal 
obligation to reimburse Medicare for Medicare's payments for 
medical expenses.  According to the record, Medicare explicitly 
asserted its intention to seek reimbursement for its payments.     
¶84 Nevertheless, the circuit court barred the estate from 
introducing evidence of its potential obligation to reimburse 
Medicare and further barred the estate from arguing to the fact-
finder that it would not be getting a double recovery if the 
fact-finder awarded it the full reasonable value of medical 
services.  
No. 
2003AP2027   
 
40 
 
¶85 According to the calculation of the reasonable value 
of medical services rendered, the collateral source rule and 
subrogation (or reimbursement), the risk of double recovery on 
the part of the estate did not necessarily exist in the present 
case.  The circuit court forced the defense counsel to argue an 
incorrect interpretation of law to the jury, namely that the 
estate merely had the option to repay Medicare.  Under these 
circumstances the jury did not have full information to decide 
the value of reasonable medical services, and any decision was 
erroneous.  The real controversy has not been fully tried.47  
¶86 The estate was clearly prejudiced when the circuit 
court barred the estate from introducing evidence about its 
potential obligation to Medicare and gave an instruction that 
did not refer to the estate's potential obligation to reimburse 
Medicare.  The result was that the estate recovered only $755 
for medical expenses although it may have to reimburse Medicare 
for a significantly larger sum.48   
¶87 The defendants argue that much of the decedent's 
medical treatment did not relate to the medical malpractice and 
that the estate failed to prove what specific charges Medicare 
paid for services that related to the medical malpractice.  The 
defendants also argue that the difficulties facing the estate 
stem not from Wis. Stat. § 893.55(7) or the instructions but 
                                                 
47 Morden v. Cont'l AG, 2000 WI 51, ¶89, 235 Wis. 2d 325, 
611 N.W.2d 659. 
48 See, e.g., 42 C.F.R. 411.24, 411.37. 
No. 
2003AP2027   
 
41 
 
from the estate's failure to name Medicare as a party.  The 
defendants contend that had Medicare been named as a party, the 
statute presumably would have worked as intended: Evidence of 
Medicare's payments would have been admitted and subject to 
cross-examination; Medicare would have been on the verdict and 
the issue of the estate's obligation to Medicare would no longer 
exist.  The defendants assert that they too have a potential 
liability to Medicare, and that they would be subject to double 
liability if the jury awarded greater medical expenses to the 
estate than the $755 awarded.  In sum, according to the 
defendants, neither party should have been allowed to argue 
specifically about Medicare because Medicare was not a party.  
Yet Medicare considerations were important, once its payments 
were submitted to the jury.   
¶88 The effect of the circuit court errors on the estate 
was significant. The jury was not informed of the crucial fact 
that the estate may be responsible to Medicare for all or part 
of $89,000.  By not allowing the jury to hear evidence that 
Medicare could recover a sum in excess of $755 from the estate, 
the circuit court committed reversible error. 
¶89 Irrespective of the proper interpretation of Wis. 
Stat. § 893.55(7), we conclude that the circuit court erred in 
not admitting evidence of the estate's potential obligation to 
reimburse Medicare.  Accordingly, we reverse the circuit court's 
judgment and order and remand the cause for a new trial on the 
issue of the hospital and medical expenses.  
 
No. 
2003AP2027   
 
42 
 
V 
¶90 We turn next to the issue of funeral expenses.  At the 
close of the five-day trial, in response to Question Number 4 on 
the special verdict,49 the jury declined to award the estate any 
compensation for funeral expenses.  Undisputed evidence at trial 
established that the funeral expenses totaled $7,610.10.  The 
jury found the defendants' negligence was a cause of the 
decedent's death.50 
¶91 After trial the estate moved, pursuant to Wis. Stat. 
§ 805.14(5)(c), to have the answers in the verdict changed on 
the ground that the evidence was insufficient to sustain the 
answer.51  In response to the estate's post-verdict motion on the 
issue of funeral expenses, the defendants argued that under Wis. 
Stat. § 895.04, the jury "may" award funeral expenses, but that 
a jury is not required to do so.  The defendants argued that 
                                                 
49 Special Verdict Question Number 4 read: "What sum of 
money will fairly and reasonably compensate the Estate of Vance 
Lagerstrom for damages in each of the following respects:  a. 
His pain and suffering: $20,000.  b.  Ambulance, medical, 
hospital, nursing home, rehabilitation, and bed hold expenses: 
$755.  c. Funeral Expenses: $0." 
50 Special 
Verdict 
Question 
Number 
3 
read: 
"Was 
the 
negligence of such agents and employees of Myrtle Werth and Red 
Cedar Clinic a cause of Vance Lagerstrom's death?  Answer: Yes." 
51 Wisconsin Stat. § 805.14(5)(c) reads: "Motion to Change 
Answer.  Any party may move the court to change an answer in the 
verdict on the ground of insufficiency of the evidence to 
sustain the answer." 
The defendants also moved for a change in the verdict 
answer on the ground that evidence at trial did not support the 
jury's finding of negligence. 
No. 
2003AP2027   
 
43 
 
"[t]he evidence in this case establishes that the jury could 
have 
concluded 
that 
the 
decedent 
was 
going 
to 
die 
anyway . . . ," and that the estate was going to incur funeral 
expenses regardless of what illness eventually killed the 
decedent. 
¶92 The circuit court denied the estate's motion for a 
change in the verdict to award funeral expenses and entered 
judgment reflecting the jury's award of $0 for funeral expenses.   
¶93 Like 
the 
circuit 
court, 
"when 
[this 
court 
is] 
requested 
to 
change 
an 
answer 
[or 
answers] 
in 
a 
jury 
verdict, . . . [we will view] the evidence . . . in the light 
most favorable to the verdict and the verdict will be affirmed 
if supported by any credible evidence."52  In the alternative, 
the 
estate 
argues 
that 
this 
court 
should 
determine 
the 
reasonable 
value 
of 
the 
funeral 
expenses 
and 
order 
the 
defendants to accept additur under Wis. Stat. § 805.15(6)53 or 
retry the issue of the funeral expenses. 
                                                 
52 Nelson v. Travelers Ins. Co., 80 Wis. 2d 272, 282-83, 259 
N.W.2d 48 (1977) (citing Roach v. Keane, 73 Wis. 2d 524, 536, 
243 N.W.2d 508 (1976)). 
53 Wisconsin Stat. § 805.15(6) reads in relevant part: 
Excessive or inadequate verdicts.  If a trial court 
determines that a verdict is excessive or inadequate, 
not due to perversity or prejudice or as a result of 
error during trial (other than an error as to 
damages), the court shall determine the amount which 
as a matter of law is reasonable, and shall order a 
new trial on the issue of damages, unless within 10 
days the party to whom the option is offered elects to 
accept judgment in the changed amount. 
No. 
2003AP2027   
 
44 
 
¶94 The instruction to the jury read in relevant part: 
"Subdivision (c) of question 4 asks what sum of money will 
fairly and reasonably compensate the Estate of Vance Lagerstrom 
for the funeral and burial expenses of Mr. Lagerstrom."54   
¶95 Eventually, we all must die.55  But that fact does not 
mean that a fact-finder may refuse to award funeral and burial 
expenses when the victim of the medical malpractice is elderly 
and, in the absence of medical malpractice, was likely to die 
sooner than a younger victim.  The malpractice was a cause of 
the death and the tortfeasor is liable, as a matter of law, for 
reasonable funeral and burial expenses.   
¶96 It is the role of the circuit court to change an 
answer on the verdict if there is a complete lack of any 
evidence to support the answer, and it was error here for the 
circuit court to deny the estate's motion to change the answer 
regarding the fair and reasonable amount of funeral expenses.  
The undisputed evidence was that funeral expenses totaled 
                                                 
54 Richards v. Mendivil, 200 Wis. 2d 665, 671-72, 548 85 
(Ct. App. 1996) ("However, an appellate court may overturn the 
trial court's decision to change the jury's answers if the 
record reveals that the trial court was 'clearly wrong.'") 
(citing Weiss v. United Fire & Cas. Co., 197 Wis. 2d 365, 389, 
541 N.W.2d 753 (1995)).  
55 Horace, We All Must Die (Samuel Johnson trans. 1760).   
The circuit court reasoned as follows:  "And I think I'll 
apply my common sense.  [The jurors'] belief was that even 
without the negligence of the defendants this family and the 
estate of Vance Lagerstrom were in a very short period of time 
going to be required to pay those expenses, even without the 
negligence of the defendants."  
No. 
2003AP2027   
 
45 
 
$7,610.10.  The defendants offered no evidence, credible or 
otherwise, to dispute this figure.  Upon a finding of negligence 
and causation, the fair and reasonable amount necessary to 
compensate the estate for the funeral expenses in the absence of 
any evidence to the contrary was $7,610.10. 
¶97 The circuit court should have entered the sum of 
$7,610.10 on the special verdict form in response to the 
question 
asking 
what 
amount 
would 
fairly 
and 
reasonably 
compensate the estate for the funeral expenses.  In fact, the 
parties contemplated having the circuit court do just that, 
although because of the timing of the estate's request, it was 
decided to let the question go to the jury.56  Nevertheless, it 
is the long-standing rule that: 
                                                 
56 Just before submitting the special verdict form to the 
jury, the circuit court and counsel discussed having the court 
enter the amount of funeral expenses: 
THE COURT: All right.  Any other comments or concerns 
about the verdict form? 
MR. HARRIS [Counsel for estate]:  I don't have a 
strong feeling, your Honor.  I would think that 
question 4 C, funeral expenses, could be answered by 
the Court.  But —— 4 C, funeral, 7610.10 on Exhibit 
11. 
MR. DUBEAU [Co-Counsel for the defendants]:  Yeah.  I 
guess I don't have a problem with that.  I don't know 
if the Court then needs to do the "I've answered the 
damage question" instruction as well, too. 
MR. HARRIS:  That's fine.  Just leave it the way it 
is. 
THE COURT:  Thank you. 
No. 
2003AP2027   
 
46 
 
In drafting a special verdict the trial court must 
first consider the issues raised by the pleadings.  
[The court] should then eliminate from the issues so 
raised those that are determined by the evidence on 
the trial by admissions, by uncontradicted proof, or 
by failure of proof.57 
Here there the undisputed amount of the funeral expenses was 
$7,610.10.  Defendants offered no evidence that this amount was 
unreasonable or otherwise unwarranted.  They implicitly conceded 
as much in the colloquy before submission of the special verdict 
form to the jury. 
¶98 For the foregoing reasons, we reverse the circuit 
court's order denying the estate's motion for a change of the 
answer on the special verdict form and order the circuit court 
on remand of the cause to enter the amount of $7,610.10 on the 
special verdict form for reasonable funeral expenses. 
¶99 For the foregoing reasons, we conclude that although 
the text of Wis. Stat. § 893.55(7) renders admissible evidence 
of any compensation for bodily injury received from sources 
other than the defendant to compensate the claimant in a medical 
malpractice damage action, § 893.55(7) requires that a jury be 
instructed not to reduce the award for medical services in the 
amount of the collateral source payments; the jury may consider, 
                                                                                                                                                             
MS. LUBINSKY [Co-Counsel for the defendants]:  That 
might be too confusing at this point. 
THE COURT:  Yep. 
57 Allen v. State Farm Fire & Cas. Co., 71 Wis. 2d 212, 216, 
238 N.W.2d 104 (1976) (emphasis added) (quoting Bell v. Duesing, 
275 Wis. 47, 53, 80 N.W.2d 821 (1957)); see also Dahl v. K-Mart, 
46 Wis. 2d 605, 609, 176 N.W.2d 342 (1970). 
No. 
2003AP2027   
 
47 
 
however, 
collateral 
source 
payments 
in 
determining 
the 
reasonable value of the medical services rendered.  
¶100 We therefore reverse the judgment of the circuit court 
relating to the award to the estate for hospital and medical 
expenses and remand the cause to the circuit court for a new 
trial on the issue of hospital and medical expenses.  We further 
order the circuit court on remand of the cause to enter the 
amount of $7,610.10 on the special verdict form for reasonable 
funeral expenses.  
By the Court.—The judgment and order of the circuit court 
are reversed and the cause is remanded. 
 
 
 
No.  2003AP2027.pdr 
 
1 
 
¶101 PATIENCE DRAKE ROGGENSACK, J. (concurring in part and 
dissenting in part).   I concur in the majority opinion's 
conclusion that Klover Lagerstrom and the estate of Vance 
Lagerstrom (Lagerstrom) proved its claim for funeral expenses of 
$7,610.10.  Majority op., ¶8.  Therefore, I would order that the 
circuit court enter a judgment modified accordingly.  I also 
concur in the majority opinion's conclusion that Wis. Stat. 
§ 893.55(7) is constitutional.  Majority op., ¶22.  However, I 
dissent from the majority opinion's conclusion that evidence 
admitted pursuant to § 893.55(7) could not be used by a fact-
finder to abrogate Wisconsin's collateral source rule58 in this 
case.  Majority op., ¶5.   
¶102 The legislature enacted Wis. Stat. § 893.55(7) in 
order to reduce health care providers' insurance premiums by 
reducing medical malpractice jury verdicts through the use of 
evidence of expenses59 that the plaintiff has incurred, but has 
not paid.  In order to achieve the legislature's purpose, when 
third parties with rights of subrogation or direct action have 
not been joined, a jury must be able to reduce the damages 
awarded to a plaintiff for amounts the plaintiff has not paid, 
                                                 
58 Under the collateral source rule, the damages that a 
plaintiff is entitled to recover from a defendant cannot be 
reduced by payments or benefits from other sources.  Koffman v. 
Leichtfuss, 2001 WI 111, ¶29, 246 Wis. 2d 31, 630 N.W.2d 201.   
59 I address only medical expenses here, but I agree with 
the majority that the statute is not so limited and could cover 
other types of payments made to a plaintiff due to the fault of 
the tortfeasor.  Majority op., ¶28.  However, I do not agree 
that the statute goes so far as to contemplate evidence of 
"volunteer services."  Majority op., ¶30. 
No.  2003AP2027.pdr 
 
2 
 
thereby abrogating the collateral source rule under those 
circumstances.  Because the United States government was not 
joined in the lawsuit, the case before us presents a fact-
finder's reduction of health care expenses for amounts the 
Lagerstroms have not paid, which I conclude is permissible under 
§ 893.55(7).  Accordingly, because I would affirm the judgment 
of the circuit court, as modified to include an award of 
$7,610.10 for funeral expenses, I do not join the majority 
opinion.   
A. 
Standard of Review 
¶103 This appeal requires us to interpret Wis. Stat. 
§ 893.55(7), which is a question of law that we review without 
deference to the circuit court's interpretation.  State v. Reed, 
2005 WI 53, ¶13, ___ Wis. 2d ___, 695 N.W.2d 315. 
B. 
Wisconsin Stat. § 893.55(7) 
¶104 Wisconsin Stat. § 893.55(7) states: 
Evidence of any compensation for bodily injury 
received from sources other than the defendant to 
compensate the claimant for the injury is admissible 
in 
an 
action 
to 
recover 
damages 
for 
medical 
malpractice. 
 
This 
section 
does 
not 
limit 
the 
substantive or procedural rights of persons who have 
claims based upon subrogation. 
The interpretation of § 893.55(7) begins with the plain meaning 
of the words chosen by the legislature.  State ex rel. Kalal v. 
Circuit Court for Dane County, 2004 WI 58, ¶45, 271 Wis. 2d 633, 
681 N.W.2d 110.  Context, scope and purpose are relevant in 
ascertaining the plain meaning of a statute.  Id., ¶¶46, 48.  
Accordingly, statutory language is not interpreted in isolation, 
but as a part of a whole statutory scheme that may address a 
No.  2003AP2027.pdr 
 
3 
 
particular 
topic, giving 
proper accord 
to 
closely-related 
statutes.  Id., ¶46.  It is also to be interpreted reasonably, 
"to avoid absurd or unreasonable results."  Id. (citations 
omitted).  If the statute is plain on its face, it is simply 
applied.  Id.  However, if the statute is ambiguous, we may 
examine extrinsic sources, such as legislative history, to aid 
in construction.  Id., ¶50.  Statutes may be ambiguous through 
the legislature's use of imprecise terms, See Landis v. 
Physicians Ins. Co. of Wis., 2001 WI 86, ¶26, 245 Wis. 2d 1, 628 
N.W.2d 893, or through the statute's interaction with other 
statutes, State v. White, 97 Wis. 2d 193, 198, 295 N.W.2d 346 
(1980).  In either case, the statute is ambiguous because it is 
capable of being understood by reasonably well-informed persons 
in two or more ways.  Kalal, 271 Wis. 2d 633, ¶47.  When a 
statute is ambiguous, the legislature is presumed to intend the 
interpretation that advances the purpose of the statute.  
Sonnenburg v. Grohskopf, 144 Wis. 2d 62, 65, 422 N.W.2d 925 (Ct. 
App. 1988). 
¶105 Here, both parties agree that Wis. Stat. § 893.55(7) 
is ambiguous, although they differ in regard to what its meaning 
should be.  The majority opinion concludes the statute provides 
for the admission of evidence of payments by others and write-
offs of health care charges that otherwise would be inadmissible 
under our holding in Koffman v. Leichtfuss, 2001 WI 111, 246 
Wis. 2d 31, 630 N.W.2d 201.  Majority op., ¶70.  But once 
admitted, the majority opinion holds that this evidence cannot 
be used as a subtraction from the damages to be awarded a 
No.  2003AP2027.pdr 
 
4 
 
successful plaintiff because to do so would abrogate the 
collateral source rule.  Majority op., ¶76.  In my view, that 
second conclusion is not reasonable.  As I explain below, it 
cuts against the legislative purpose behind the enactment of 
§ 893.55(7), that of reducing the size of damage awards in 
medical malpractice actions through the abrogation of the 
collateral source rule when doing so will prevent windfalls or 
double recoveries by the plaintiff.   
¶106 In 1975, the legislature first responded to what it 
perceived as a crisis in the provision of health care by 
creating ch. 655.  It saw the rapid rise in medical malpractice 
suits as part of the problem, and it began to address that 
concern by creating a number of procedures that were required in 
medical malpractice actions.  Aicher v. Wisconsin Patients Comp. 
Fund, 2000 WI 98, ¶22, 237 Wis. 2d 99, 613 N.W.2d 849.  In 
subsequent years, the legislature maintained its concern with 
the continuing rise in health care costs, and again it focused 
on medical malpractice actions by attempting to limit the size 
of malpractice awards.  See Maurin v. Hall, 2004 WI 100, ¶¶48-
62, 274 Wis. 2d 28, 682 N.W.2d 866.  It did so, in part, to 
reduce the cost of malpractice insurance, which is born by all 
consumers of health care services.  Id., ¶¶48, 65. 
¶107 In 1995, as a further development of the legislature's 
comprehensive scheme to reduce health care costs, 1995 Wis. Act 
10 was passed.  It revised parts of ch. 655.  1995 Wis. Act 10, 
§§ 3-7.  Section 3 of Act 10 shows that the legislature 
continued to be concerned about the premiums that health care 
No.  2003AP2027.pdr 
 
5 
 
providers pay for health care liability insurance.  1995 Wis. 
Act 10 also created Wis. Stat. § 893.55(7).  1995 Wis. Act 10, 
§ 12m.  Accordingly, § 893.55(7) must be read in the context of 
a comprehensive legislative scheme to reduce health care costs 
through containment of the size of awards in medical malpractice 
cases.  See Kalal, 271 Wis. 2d 633, ¶46.   
¶108 A drafting request for an amendment to the original 
proposal for Wis. Stat. § 893.55(7) from Senator Joanne Huelsman 
shows that § 893.55(7), as finally enacted, was created to 
modify the collateral source rule and to permit evidence of 
other sources of payment to be presented to the fact-finders in 
medical malpractice actions.  See Legislative Reference Bureau 
Drafting File for 1995 Wis. Act 10.  That amendment of 
§ 893.55(7) did not require an offset or a reduction of the 
award by the amount of other payments.  Rather, the Legislative 
Reference Bureau's file shows that presenting information to 
facilitate a reduction, while not requiring a reduction in each 
case, was done in order to preserve the interests of parties to 
the action that had subrogated rights.  See id.  The Legislative 
Reference Bureau Drafting File for 1995 Wis. Act 10 also shows 
that states that have enacted similar modifications of the 
collateral source rule have experienced a reduction in the size 
of medical malpractice verdicts by reducing the possibility of 
windfalls to plaintiffs.  See id.  
¶109 Accordingly, I interpret Wis. Stat. § 893.55(7) as 
permitting a reduction of damages awarded to a successful 
plaintiff in a medical malpractice action by amounts that a 
No.  2003AP2027.pdr 
 
6 
 
plaintiff has incurred, but has not paid, for health care 
services.  In order to accomplish the legislative purpose for 
which § 893.55(7) was enacted, a reduction should occur when 
write-offs have occurred or when third-party payers with rights 
of reimbursement or subrogation were not joined in the action.  
This is fair to plaintiffs who will be made whole, and it is 
fair to defendants who will not be required to give windfalls or 
double recoveries to plaintiffs.  However, when third parties 
with subrogated rights or rights of direct action due to their 
payment of the injured party's medical expenses are joined in 
the lawsuit and their rights are adjudicated in that lawsuit, a 
reduction in the amount the tortfeasor is found to owe for what 
those parties paid would not be appropriate.  Stated otherwise, 
when the parties who paid medical expenses claim for repayment 
in the lawsuit, the award of damages will include compensation 
for those parties, as well as for the injured party.  
¶110 In the case before us, Lagerstrom paid only $755 for 
medical services, yet Lagerstrom sought $89,375.78 from the 
jury.  Medicare paid $64,759.40 and received provider write-offs 
of $23,861.38 for a total participation of $88,620.78 as payment 
for Vance Lagerstrom's health care services.  Lagerstrom was 
made whole by the jury's verdict because everything Lagerstrom 
paid was repaid by the damages that were awarded.  Yet, 
Lagerstrom appeals.  Lagerstrom seeks all that Medicare paid and 
all that the health care providers wrote off of their bills, the 
latter of which no one will ever have to pay.  In support of 
that position, Lagerstrom asserts that he should get a windfall 
No.  2003AP2027.pdr 
 
7 
 
under the collateral source rule in regard to the amounts that 
were written off and that he has potential liability to Medicare 
for the payments that Medicare made.  I disagree with both 
contentions. 
¶111 In regard to the first contention, that Lagerstrom is 
legally entitled to a windfall for the amounts that health care 
providers wrote off, the statute cannot be so interpreted.  
While the collateral source rule may permit a windfall to a 
plaintiff when the claim is not based on medical malpractice, 
See Koffman, 246 Wis. 2d 31, ¶27, the purpose of Wis. Stat. 
§ 893.55(7) was to modify the collateral source rule in medical 
malpractice actions.  Accordingly, Lagerstrom is due only so 
much in reimbursement for health care expenses as Lagerstrom 
paid.  That is sufficient to make Lagerstrom whole.  Id., ¶69 
(Sykes, J., dissenting).  In my view, § 893.55(7) cannot be 
interpreted to permit recoveries of amounts written off of bills 
for health care services in medical malpractice actions and be 
consistent 
with 
the 
legislative 
policy 
choice 
underlying 
§ 893.55(7).  
¶112 In regard to the second contention, that Lagerstrom 
should recover the $64,759.40 that Medicare paid, I again 
disagree.  Lagerstrom purposefully refused to name the United 
States government as a party, either as a defendant or as an 
No.  2003AP2027.pdr 
 
8 
 
involuntary 
plaintiff, 
pursuant 
to 
Wis. 
Stat. 
§ 803.03.60  
Accordingly, as I explain below, the judgment in this case does 
not affect any claim the United States government has by virtue 
of the Medicare payments that were made.   
¶113 When Medicare participates in the payment of health 
care services, at times it does so as a secondary payer by 
making "conditional" payments.  42 U.S.C. § 1395y(b)(2)(B)(i).  
One of the occasions when Medicare is a secondary payer and its 
payments are "conditional" is when there is a liability 
insurance policy or plan that may be responsible for paying for 
the services.  42 CFR § 411.21.  If a Medicare conditional 
payment is made, the Center for Medicare & Medicaid Services 
(CMS), an arm of Health Care Financing Administration (HCFA), 
may seek recovery of those conditional payments.  42 CFR 
§ 411.24.  CMS can recover conditional payments from parties who 
have "received a third party payment."  Section 411.24(g).  This 
includes a beneficiary, such as Vance Lagerstrom.  Id.  If a 
"party receives a third party payment," that party must 
reimburse Medicare within 60 days.  Section 411.24(h).  The 
payment due Medicare may be reduced by the costs of collection.  
42 CFR § 411.37(a).   
                                                 
60 The record reflects that on July 30, 2001, the United 
States government gave notice to Lagerstrom's attorney that 
"Medicare's regulations require that your client pay Medicare 
back within 60 days of your receipt of settlement or insurance 
proceeds."  Medicare had then paid $64,759.40.  The record also 
reflects that the defendants attempted to get Lagerstrom to name 
the United States as a necessary party pursuant to Wis. Stat. 
§ 803.03, but Lagerstrom resisted and prevailed.  The jury 
verdict dated February 2003 did not adjudicate the interests of 
the United States. 
No.  2003AP2027.pdr 
 
9 
 
¶114 "In the case of liability insurance settlements . . .  
[i]f Medicare is not reimbursed as required by paragraph (h) of 
this section [411.24], the third party payer must reimburse 
Medicare even though it has already reimbursed the beneficiary 
or other party."  42 CFR § 411.24(i)(1).  In liability insurance 
settlements where a lump sum, which does not allocate among the 
types of damages included, is received, the beneficiary/ 
recipient of the settlement may be subject to claims by CMS that 
it has received a third-party payment to which Medicare is 
entitled.  See Zinman v. Shalala, 67 F.3d 841, 843 (9th Cir. 
1995); Denekas v. Shalala, 943 F. Supp. 1073, 1075 (S.D. Iowa 
1996); Smith v. Travelers Indem. Co., 763 F. Supp. 554, 558 
(M.D. Fla. 1989).  However, this case does not present a 
settlement by a liability insurance company, nor has Lagerstrom 
received a lump sum, undifferentiated payment.  Furthermore, 
Lagerstrom has not received any third-party payment for sums 
paid by Medicare.  However, the United States government does 
retain the right to pursue recovery of conditional payments it 
made by direct action against all who were required or 
responsible to make payment with respect to the same item or 
service. 
42 U.S.C. 
§ 1395y(b)(2)(B)(iii).  
Accordingly, a 
lawsuit by the United States government against the tortfeasor's 
insurer has not been precluded by this lawsuit.  However, there 
is no basis for a claim against Lagerstrom under the jury's 
clearly itemized verdict.   
¶115 The majority opinion criticizes the circuit court's 
jury instruction and concludes it prevented the real controversy 
No.  2003AP2027.pdr 
 
10 
 
from being fully tried.  Majority op., ¶85.  Lagerstrom 
requested a jury instruction that said, "Vance Lagerstrom is 
obligated to reimburse Medicare for expenditures made by it."  
The majority opinion asserts that by refusing to give this 
instruction, Lagerstrom was prevented from advising the jury of 
the estate's "potential" obligation to reimburse Medicare.  
Majority op., ¶¶79-89.  However, the instruction Lagerstrom 
requested did not say "potential" liability. 
¶116 Further, as the tortfeasor's insurer argued, the 
insurer 
has 
"potential" 
liability 
to 
Medicare. 
 
42 
CFR 
§411.24(h)-(i).  Since Lagerstrom refused to name the United 
States government as a party to the action, both the plaintiff 
and the defendants were treated similarly in regard to the 
arguments each could make to the jury.  That is, Lagerstrom 
could argue to the jury that if it included in the damages 
amounts that Medicare paid, it would repay those amounts to the 
United States government, and the insurer could argue that 
amounts paid by Medicare should not be included in the verdict 
because it remained obligated to Medicare for those same 
amounts.  Therefore, I agree that the circuit court properly 
instructed the jury.  
¶117 In my view, it would have been contrary to law to give 
the instruction Lagerstrom requested because Medicare was not a 
party to the action.  Instead, the instruction given followed 
the purpose set out by the legislature in enacting Wis. Stat. 
§ 893.55(7).  The reduction the jury made prevented a windfall 
to Lagerstrom, and it prevented a double recovery that could 
No.  2003AP2027.pdr 
 
11 
 
have occurred because Lagerstrom refused to name the United 
States government as a party and thereby adjudicate its 
interests.  Accordingly, a new trial is not appropriate.  
Lagerstrom was made whole by the jury's verdict.  That the 
United States government still may have a right of action for 
the Medicare payments it made, is not unfair to Lagerstrom.  
Lagerstrom is left with the choice he made, as are the 
defendants who may be required to deal with CMS about what is 
yet due to Medicare.   
¶118 Therefore, for the reasons set out above, I would 
affirm the judgment of the circuit court, as modified, to 
include $7,610.10 for funeral expenses.   
¶119 Accordingly, I respectfully concur in part and dissent 
in part from the majority opinion.   
¶120 I am authorized to state that Justices JON P. WILCOX 
and DAVID T. PROSSER join this concurrence and dissent. 
 
 
No.  2003AP2027.jpw 
 
1 
 
¶121 JON P. WILCOX, J.   (dissenting).  I wholeheartedly 
join 
Justice 
Prosser's 
well-reasoned 
dissent. 
 
I 
write 
separately only to indicate that the majority opinion represents 
yet another instance of this court undermining the intent of the 
legislature by rendering void a properly enacted statute through 
creative judicial interpretation.  Although the majority has not 
declared the statute at issue unconstitutional, the effect of 
the majority opinion is just the same.   
¶122 I am  authorized to state that Justice PATIENCE DRAKE 
ROGGENSACK, joins this opinion.   
 
 
2003AP2027.dtp 
 
1 
 
¶123 DAVID T. PROSSER, J.   (dissenting).  The plaintiff-
appellant 
challenges 
the 
constitutionality 
of 
Wis. Stat. § 893.55(7).  She also claims that the admission of 
"prejudicial evidence of collateral source payments so that 
[she] was awarded only her out-of-pocket medical expenses 
instead of the reasonable value of the medical expenses 
incurred" entitles her to a new trial as to medical expense 
damages.  The majority opinion reformulates the issues, and then 
eviscerates a key component of the medical malpractice statute.  
Because the court's decision countermands legitimate legislative 
action, I respectfully dissent. 
I 
¶124 The collateral source rule provides that damages 
awarded to an injured person are not to be affected by the fact 
that the claimant received compensation from other sources, such 
as sick leave or insurance.  Payne v. Bilco Co., 54 Wis. 2d 424, 
433, 195 N.W.2d 641 (1972).  This rule in tort cases has been 
part of Wisconsin common law since at least 1908.  Gatzweiler v. 
Milwaukee Elec. Ry. & Light Co., 136 Wis. 34, 116 N.W. 633 
(1908).   
¶125 The rule was explained in Campbell v. Sutliff, 193 
Wis. 370, 373-74, 214 N.W. 374 (1927) (overruled on other 
grounds by Powers v. Allstate Ins. Co., 10 Wis. 2d 78, 92, 102 
N.W.2d 393 (1960)), where the defendant contended that the trial 
court erred by instructing the jury, in assessing the amount of 
the plaintiff's damages, to "wholly disregard" the fact that the 
injured plaintiff had received money from an accident insurance 
2003AP2027.dtp 
 
2 
 
policy and had continued to receive his salary while he was 
injured.  The defendant argued that the plaintiff's damages 
should be measured "by the loss in wages or earnings he actually 
sustained" and that there were no lost earnings when his 
employer 
continued 
to 
pay 
the 
plaintiff 
throughout 
his 
disability.  Id. at 374.  The court rejected this contention, 
observing that "the prevailing doctrine in this country" was 
otherwise.  Id. (citing Cunnien v. Superior Iron Works Co., 175 
Wis. 172, 188, 184 N.W. 767 (1921)).  It added: 
We see no reason why one whose acts have caused 
injury to another should reap the entire benefit that 
comes from the payment of wages made by an employer, 
either as a gratuity to a faithful employee or because 
such payments are required by contract.  Such payments 
do not change the nature of the injury which the 
employee sustains through the wrongful acts of the 
tortfeasor.  If either is to profit by the payments 
made by the employer, it should be the person who has 
been injured, not the one whose wrongful acts caused 
the injury. 
Id. 
 
¶126 Early cases discussing the collateral source rule 
addressed whether insurance payments or continued wages should 
reduce an injured plaintiff's damages.  Eventually the court 
considered medical expenses.  See McLaughlin v. Chicago, 
Milwaukee, St. Paul & Pac. R.R. Co., 31 Wis. 2d 378, 395-96, 143 
N.W.2d 32 (1966); Merz v. Old Republic Ins. Co., 53 Wis. 2d 47, 
53-54, 191 N.W.2d 876 (1971); Rixmann v. Somerset Pub. Schs., 83 
Wis. 2d 571, 575-83, 266 N.W.2d 326 (1978) (collecting cases). 
 
¶127 In Thoreson v. Milwaukee & Suburban Transport Corp., 
56 Wis. 2d 231, 241-45, 201 N.W.2d 745 (1972), the court 
discussed medical expenses at length: 
2003AP2027.dtp 
 
3 
 
The general rule in Wisconsin has been that a 
plaintiff who has been injured by the tortious conduct 
of another is entitled to recover the reasonable value 
of his medical costs reasonably required by the 
injury.  In most cases this is the actual expense, but 
in some cases it is not.  But the test is the 
reasonable value, not the actual charge . . . .  [T]he 
fact that necessary medical and nursing services are 
rendered gratuitously . . . should not preclude the 
injured party from recovering the value of those 
services as part of his compensatory damages. 
Id. at 243.  "We hold the collateral-source rule is not limited 
to paid-for benefits but applies to gratuitous medical services 
provided or paid for by the state."  Id. at 245 (citing 22 Am. 
Jur. 2d Damages § 207, at 288 (1959); R.P. Davis, Annotation, 
Hospital and Medical Services Furnished to Injured Person By 
Government as Affecting Damages Recoverable For Personal Injury 
or Death, 68 A.L.R. 2d 876 (1959); Dahlin v. Kron, 45 
N.W. 2d 833 (Minn. 1950)). 
¶128 This principle was affirmed and extended in Ellsworth 
v. Schelbrock, 2000 WI 63, 235 Wis. 2d 678, 611 N.W.2d 764, a 
case involving Medical Assistance payments to a woman injured in 
an automobile accident, and Koffman v. Leichtfuss, 2001 WI 111, 
246 Wis. 2d 31, 630 N.W.2d 201, another motor vehicle accident 
case in which the court drew a distinction between the 
subrogation 
interest 
in 
medical 
expense 
claims 
and 
the 
reasonable value of medical services rendered.   
¶129 In both Ellsworth and Koffman, Justice Diane Sykes 
dissented, arguing that the real question was not whether the 
collateral source rule applied but which measure of damages it 
applied to.  Ellsworth, 235 Wis. 2d 678, ¶26 (Sykes, J., 
dissenting); Koffman, 246 
Wis. 2d 31, 
¶¶67-74 
(Sykes, J., 
2003AP2027.dtp 
 
4 
 
dissenting).  In Ellsworth, for example, the plaintiff put in 
expert testimony regarding the full retail value of the medical 
services she had received, which added up to $597,448.27.  The 
amount actually paid by Medical Assistance was $354,941.21, an 
amount accepted by the medical providers as payment in full.  
Ellsworth, 235 Wis. 2d 678, ¶26.  Thus, "[t]he difference——
almost $250,000——was absorbed by the providers as legally 
unrecoverable."  Id.   
¶130 The Ellsworth majority held that the plaintiff was 
entitled to recover the higher amount, while the dissent 
concluded that the extra $250,000 reflected "what the highest 
payor would have paid for the same medical services," id., ¶31, 
and thus yielded an unjustified windfall for the plaintiff. 
¶131 From the outset, the collateral source rule recognized 
the unfairness in relieving a tortfeasor from full liability for 
injuries the tortfeasor caused simply because the injured party 
had the foresight to purchase or bargain for insurance or other 
benefits, 
or 
because 
the 
injured 
party 
received 
other 
"compensation" from a collateral source.  Over the years, 
however, the collateral source rule has tended to inflate jury 
verdicts and lead to double recovery for plaintiffs.  The rule 
sometimes provides an extra source of economic damages, and this 
may be significant when noneconomic damages have been capped by 
legislation.  Indeed, some litigants have used the rule as a 
means to get around the cap on noneconomic damages.  Using this 
strategy, double recovery is not an occasional byproduct of the 
rule; it is the desired objective.  Inconsistent appellate 
2003AP2027.dtp 
 
5 
 
decisions reflect judicial ambivalence about this turn of 
events.  Compare Lambert v. Wrensch, 135 Wis. 2d 105, 399 
N.W.2d 369 (1987), with Koffman. 
¶132 Whatever the merits of the collateral source rule in 
the court's past cases, the case at hand presents new issues.  
Unlike past cases, this case involves medical malpractice, which 
is governed by a unique set of statutes.  In 1995 the 
legislature created Wis. Stat. § 893.55(7), which modifies the 
collateral source rule in medical malpractice cases.  Thus, the 
principal issue is how the modified rule affects medical 
expenses in medical malpractice cases.  A second issue is 
whether the measure of compensatory medical damages in a medical 
malpractice case includes the reasonable value of medical costs 
already absorbed by the tortfeasor.  A third issue concerns the 
specific reimbursement rights of Medicare. 
II 
¶133 Medical 
malpractice 
cases 
are 
governed 
by 
Wis. Stat. ch. 655 (see Wis. Stat. § 655.005(1)(a)), as well as 
Wis. Stat. § 893.55 
and 
a 
few 
other 
statutes 
like 
Wis. Stat. §§ 895.04 
and 
895.045. 
 
Chapter 
655 
and 
Wis. Stat. §§ 893.55(5) and (7) have bearing on this case. 
A. 
Wisconsin Stat. § 655.009(2) 
¶134 Chapter 655 was enacted in 1975.  See ch. 37, Laws of 
1975.  Wisconsin Stat. § 655.009(2) was part of this original 
legislation and has not been changed.  Entitled "Medical expense 
payments," 
it 
reads: 
"The 
court 
or 
jury, 
whichever 
is 
applicable, shall determine the amounts of medical expense 
2003AP2027.dtp 
 
6 
 
payments previously incurred and for future medical expense 
payments."  Wis. Stat. § 655.009(2) (emphasis added).  Because 
this subsection became law more than two years after this 
court's 1972 decision in Thoreson, the legislature is deemed to 
be familiar with the collateral source rule and its application 
to medical expenses as described in Thoreson.   
¶135 Subsection (2) does not speak to medical expense 
payments incurred "by a patient."  Thus, it cannot be said to 
attack the collateral source rule head on.  Nonetheless, the 
subsection speaks of "payments," both in the past and in the 
future, and this statutory term makes it different from the 
passage in Thoreson that "the test is the reasonable value, not 
the actual charge, and therefore there need be no actual 
charge."  Thoreson, 56 Wis. 2d at 243.  Logically, "medical 
expense payments incurred" are not the same as "the reasonable 
value of medical costs," whether one looks back to the past or 
forward to the future.   
B. 
Wisconsin Stat. § 893.55(5) 
¶136 In 1986 the legislature amended Wis. Stat. § 893.55 to 
create subsection (5).  1985 Wis. Act 340, § 72b.  This 
subsection reads: 
(5) Every award of damages under ch. 655 shall 
specify the sum of money, if any, awarded for each of 
the following for each claimant for the period from 
the date of the injury to the date of the award and 
for the period after the date of the award, without 
regard to the limit under sub. (4)(d): 
. . . .  
(d) Each element of medical expenses. 
2003AP2027.dtp 
 
7 
 
Wis. Stat. § 893.55(5) (emphasis added). 
 
¶137 Economic damages, such as medical expenses, are not 
subject 
to 
the 
limit 
on 
noneconomic 
damages 
in 
Wis. Stat. § 893.55(4)(d).  Thus, the purpose of subsection (5) 
is to require the jury to make specific factual findings with 
respect 
to 
the 
elements 
of 
economic 
damages 
in 
medical 
malpractice cases.  Before enactment of this provision, courts 
had the latitude to submit special verdicts that combined 
elements of damages.61  Subsection (5) ended this practice in 
medical malpractice cases.  Subsection (5) must be read in 
tandem 
with 
Wis. Stat. § 655.009(2) 
because 
subsection 
(5) 
refers to every award of damages under Chapter 655. 
C. 
Wisconsin Stat. § 893.55(7) 
¶138 In 1995 the legislature specifically addressed the 
collateral source rule in medical malpractice cases.  1995 Wis. 
                                                 
61 Wis 
JI——Civil 
1750A 
(1982) 
included 
the 
following 
comment: 
It has long been established that the trial court has 
absolute discretion as to the formulation of a special 
verdict.  Traditionally, there has been a great 
diversity of practice in the trial courts as to how 
the damage question in the special verdict is framed.  
Some courts combine all damage elements in a single 
question; 
others combine 
pain 
and 
suffering and 
disability, future medical and loss of future earning 
capacity 
into 
a 
single 
question 
inquiry 
about 
plaintiff's personal injury while submitting separate 
questions as to past medical expense and past wage 
loss which are often answered by the court.  (Emphasis 
added.) 
Future medical expenses were often combined with other elements 
even when past medical expenses were listed separately. 
2003AP2027.dtp 
 
8 
 
Act 10, § 12m.  The Act created Wis. Stat. § 893.55(7), which 
reads: 
Evidence 
of 
any 
compensation 
for 
bodily 
injury 
received from sources other than the defendant to 
compensate the claimant for the injury is admissible 
in 
an 
action 
to 
recover 
damages 
for 
medical 
malpractice. 
 
This 
section 
does 
not 
limit 
the 
substantive or procedural rights of persons who have 
claims based upon subrogation. 
¶139 Subsection (7) modifies the collateral source rule by 
allowing evidence of other compensation to be presented to the 
jury in a medical malpractice action.  It does not require an 
offset or a reduction of a malpractice award by the amount of 
any other payments, but it permits the jury to make such a 
reduction after considering evidence of other compensation.  
Admitting this information into evidence negates the principle 
that the jury should "wholly disregard" the fact of other 
compensation.  A legislative document describing 1995 Engrossed 
Bill 36, the source of 1995 Wis. Act 10, explains:  
There are two main reasons for this modification of 
the collateral source rule.  First, economists who 
have studied the effects of various tort reforms have 
concluded that collateral source rule modification 
yields substantial savings in the long run, second 
only to caps on damages in terms of effect on overall 
costs.  Second, fairness is enhanced by reducing the 
likelihood of double recoveries and allowing juries to 
take other compensation into account in determining 
the amount of an award.   
Proposed Amendment to Engrossed Assembly Bill 36: Admissibility 
of Evidence of Other Compensation, in Drafting Records, 1995 
Assembly Bill 36 (available at the Wisconsin Legislative 
Reference Bureau, Madison, Wisconsin) (emphasis added).  The 
purpose of the modification could not be stated more plainly. 
2003AP2027.dtp 
 
9 
 
¶140 Subsection 
(7) 
is 
different 
from 
Wis. Stat. § 655.009(2) and Wis. Stat. § 893.55(5) because, by 
its terms, it is not limited to evidence of payments for medical 
expenses.  It is broad enough to cover all kinds of compensation 
from collateral sources for medical malpractice.  Some of this 
compensation will have no right of subrogation or reimbursement, 
which indicates that the patient would receive double recovery 
under the collateral source rule in the absence of the statutory 
modification. 
¶141 If the three provisions discussed above were combined 
into a single statute for purposes of this case, it might read 
as follows: 
(1) The 
court 
or 
jury 
shall 
determine the 
amounts 
of 
medical 
expense 
payments 
previously 
incurred.  [Wis. Stat. § 655.009(2)] 
(2) Evidence of any compensation [for medical 
expenses] 
received 
from 
sources 
other 
than 
the 
defendant is admissible in [determining] damages.  
[Wis. Stat. § 893.55(7)] 
(3) Every award of damages shall specify the sum 
of money, if any, awarded for each element of medical 
expenses.  [Wis. Stat. § 893.55(5)] 
(4) This section does not limit the substantive 
or procedural rights of persons who have claims based 
on subrogation.  [Wis. Stat. § 893.55(7)] 
Each of the principles stated above must be applied in medical 
malpractice cases to comply with statutory directives. 
III 
¶142 The majority opinion acknowledges that the collateral 
source rule has been modified.  Majority op., ¶48.  But it jumps 
to the conclusion that "the modification of the collateral 
2003AP2027.dtp 
 
10 
 
source rule is a modification of the rules of evidence to allow 
evidence of the other payments; the modification is not an 
explicit modification of the substantive collateral source rule 
that a collateral source payment does not reduce an award of 
medical expenses."  Id.  The opinion goes on to hold that "the 
circuit court must instruct the fact-finder that it must not 
reduce the reasonable value of medical services on the basis of 
the collateral source payments."  Id., ¶¶5, 74. 
¶143 These 
startling 
conclusions 
render 
Wis. Stat. § 893.55(7) a nullity.  Moreover, they appear to lock 
in an inflated value of medical services, even when some or all 
of these services have been absorbed already by the tortfeasor.  
The latter proposition is completely contrary to conventional 
views of the collateral source rule. 
¶144 The majority's mistaken conclusions are built on a 
series of false premises, derived from examination of (A) the 
text of the statute; (B) the legislative history of the statute; 
(C) 
the 
alleged 
legislative 
goal 
in 
adopting 
Wis. Stat. § 893.55(7), and three concepts of law allegedly 
"embodied in the statute, namely, (D) the valuation of medical 
services; (E) the collateral source rule; and (F) subrogation."  
Id., ¶26.  It should be noted at once that the majority's 
methodology 
is 
an 
unprecedented 
departure 
from 
orthodox 
statutory interpretation. 
¶145 First, 
the 
majority 
examines 
the 
text 
of 
Wis. Stat. § 893.55(7), which reads: 
Evidence 
of 
any 
compensation 
for 
bodily 
injury 
received from sources other than the defendant to 
2003AP2027.dtp 
 
11 
 
compensate the claimant for the injury is admissible 
in 
an 
action 
to 
recover 
damages 
for 
medical 
malpractice. 
 
This 
section 
does 
not 
limit 
the 
substantive or procedural rights of persons who have 
claims based upon subrogation. 
It correctly notes that subsection (7) encompasses all damages 
in a medical malpractice action and makes evidence of all 
collateral source payments admissible in regard to all damage 
claims.  Id., ¶28.  The opinion then asserts: "Although the 
statute speaks of compensation to the claimant, the instant case 
demonstrates that the statute also encompasses payments, write-
offs, or forgiveness made directly to health care providers 
rather than to the claimant."  Id., ¶29 (emphasis added).  This 
circular assertion is plainly a non sequitur. 
¶146 "Compensation" in this subsection may contemplate the 
reasonable value of medical services received by a patient, but 
this does not mean that the reasonable value of medical services 
is necessarily to be measured by what the highest payor would 
have to pay for the same medical service.  See Ellsworth, 235 
Wis. 2d 678, ¶31 (Sykes, J., dissenting).  In this subsection, 
"compensation" is a statutory term, not a common law concept, 
and it must be construed in a manner consistent with its 
legislative context and purpose.  Subsection (7) was enacted 
before the court's decisions in Ellsworth and Koffman.  It is 
not possible to square the legislative objectives of containing 
costs 
and 
minimizing 
double 
recovery 
with 
the 
court's 
interpretation of the term "compensation," especially when we 
factor in Wis. Stat. § 655.009(2). 
2003AP2027.dtp 
 
12 
 
¶147 The majority opinion also argues that "the text of the 
statute raises more questions than it answers."  Majority op., 
¶35.  This contention, designed to open the door to statutory 
interpretation, sums up four paragraphs, ¶¶32-35, in which the 
majority poses questions that the statute does not address.  
Posing questions that will be answered by the circuit court or 
jury on a case-by-case basis is nothing more than a ploy to 
create 
ambiguity 
in 
the 
statute 
to 
justify 
statutory 
construction. 
¶148 Second, the majority looks at legislative history and 
notes that an early draft of 1995 Assembly Bill 36 contained the 
sentence: "The award of damages under ch. 655 shall be reduced 
by any compensation that the injured party received from sources 
other than the defendant to compensate him or her for the 
injury."  Majority op., ¶38.  This sentence is deleted from the 
final draft.   
¶149 1995 Assembly Bill 36 had a Legislative Reference 
Bureau number of LRB 1913/3.  This means that the bill 
introduced was the third draft of the 1913th bill requested.  
The deleted sentence was found in the first draft of the bill, 
and it was removed by the authors in the second draft before the 
third draft was introduced as the bill.     
¶150 There 
is 
a perfectly reasonable 
explanation for 
deletion of the sentence from the first draft.  The authors of 
the bill opted to permit juries to weigh the facts and then 
decide whether to reduce damage awards by all or part of the 
amount of collateral source payments, which is the practice in 
2003AP2027.dtp 
 
13 
 
Delaware.62  The revised draft "does not require an offset or a 
reduction of any malpractice award by the amount of any other 
payments. . . . [The evidence] allow[s] juries to take other 
compensation into account in determining the amount of an 
award."  Proposed Amendment to Engrossed Assembly Bill 36: 
Admissibility of Evidence of Other Compensation, in Drafting 
Records, 1995 Assembly Bill 36 (available at the Wisconsin 
Legislative Reference Bureau, Madison, Wisconsin) (emphasis 
added).  This flexibility anticipates juries balancing the 
equities in widely varying fact situations, and taking into 
account special circumstances like Medicare reimbursement.   
                                                 
62 See Del. Code Ann. tit. 18, § 6862 (2003).  The Delaware 
statute was cited in 2 The A.L.I. Reporters' Study: Enterprise 
Responsibility For Personal Injury, Approaches to Legal and 
Institutional Change (1991), the very document cited by the 
Legislative Council in its analysis of 1995 Engrossed Bill 36. 
The 
Delaware 
Statute 
is 
strikingly 
similar 
to 
Wis. Stat. § 893.55(7).  Delaware Code Ann. tit. 18, § 6862 
provides: 
In any medical negligence action for damages because 
of property damage or bodily injury, including death 
resulting therefrom, there may be introduced, and if 
introduced, the trier of facts shall consider evidence 
of: (1) Any and all facts available as to any public 
collateral source of compensation or benefits payable 
to the person seeking such damages (including all sums 
which will probably be paid payable to such person in 
the future) on account of such property damage or 
bodily injury . . . . 
The Delaware courts had no difficulty understanding that 
"The purpose of this statute is to prevent the collection of a 
loss from a collateral public source (such as Social Security) 
and then the collection for the same loss from the party or 
hospital being sued."  Nanticoke Memorial Hosp., Inc. v. Uhde, 
498 A.2d 1071, 1075 (Del. 1985). 
2003AP2027.dtp 
 
14 
 
¶151 The 
Delaware 
approach, 
followed 
by 
Wis. Stat. § 893.55(7), has also been adopted in such other 
states as Alabama,63 Arizona,64 and California.65 
                                                 
63 Ala. Code § 12-21-45 (2001).  See Marsh v. Green, 782 
So.2d 223 (Ala. 2000). 
64 Ariz. Rev. Stat. § 12-565 (2005); see also Eastin v. 
Broomfield, 570 P.2d 744, 752-53 (Ariz. 1977) (disagreed with on 
other grounds by Shotwell v. Donahoe, 85 P.3d 1045, 1049 (Ariz. 
2004)). 
65 Cal. Civ. Code § 3333.1 (2005).  California Civil Code 
§ 3333.1 (2005) provides in part: 
[T]he defendant . . . in an action for personal injury 
against a health care provider based upon professional 
negligence . . . may introduce evidence of any amount 
payable as a benefit to the plaintiff as a result of 
the personal injury pursuant to the United States 
Social Security Act, any state or federal income 
disability or worker's compensation act, any health, 
sickness 
or 
income-disability 
insurance, 
accident 
insurance that provides health benefits or income-
disability coverage, and any contract or agreement of 
any group, organization, partnership, or corporation 
to provide, pay for, or reimburse the cost of medical, 
hospital, 
dental, 
or 
other 
health 
care 
services. . . .  
The California Supreme Court has determined that "the 
[California] Legislature's assumption was that the trier of fact 
would take the plaintiff's receipt of such benefits into account 
by reducing damages," and that the statute is constitutional. 
Barme v. Wood, 37 Cal. 3d 174, 179-82 (1984).  Both the Barme 
court and later California appellate panels were careful to note 
that although the original draft of the California statute 
required the trier of fact to reduce the plaintiff's damages, 
the enacted statute "simply provides for the admission of 
evidence of such benefits, apparently leaving to the trier of 
fact the decision as to how such evidence should affect the 
assessment of damages."  Id. at 179 n.5; see also Hernandez v. 
California Hosp. Med. Ctr., 93 Cal. Rptr. 2d 97, 102 (Ct. App. 
2000).  
2003AP2027.dtp 
 
15 
 
¶152 The majority opinion attempts to link the deletion of 
the sentence from the first draft of the bill and the later 
addition of a sentence by legislative amendment.  The latter can 
be explained by a memorandum in the Legislative Council files.  
On January 20, 1995, representatives of Employers Health 
Insurance faxed a memorandum to Representative Sheryl Albers, 
who was then Chair of the Assembly Committee on Insurance, 
Securities and Corporate Policy.  The memorandum read in part: 
After discussions with the author and staff counsel, 
we reviewed the language again and consulted with our 
attorneys.  Although the language itself does not pose 
the problem since the collateral source rule and those 
who have subrogation rights function independently, we 
continue to have concerns about future interpretations 
based on a creative application of the "made whole" 
doctrine. 
Memorandum dated January 20, 1995, in Bill File for 1995 
Assembly Bill 36 (available at Wisconsin Legislative Council, 
Madison, Wisconsin). 
¶153 The Employers Health memorandum then proposed adding: 
"This section does not limit the substantive or procedural 
rights of persons who have claims based upon subrogation."  Id.  
This is precisely the language later added by a Senate 
amendment. 
 
In 
short, 
the 
legislative 
history 
of 
Wis. Stat. § 893.55(7) does not establish a link between the 
deletion of one sentence and the addition of another. 
¶154 The majority complains that the legislative history 
does not make clear how the admissibility of collateral source 
payments 
to 
a 
plaintiff 
"impacts 
our 
case 
law 
defining 
'reasonable value of medical services' as the reasonable value 
2003AP2027.dtp 
 
16 
 
of medical services rendered, without limitation to amounts 
paid, or how that modification affects the collateral source 
rule and subrogation."  Majority op., ¶47.  I believe it does.  
The statute permits the jury to consider collateral source 
payments in a medical malpractice case in determining damages.  
Subsection (7) preserves the substantive and procedural rights 
of persons who have claims based on subrogation.  Those rights 
are established outside the statute.  Persons who have claims 
based on subrogation or reimbursement must assert their claims 
at an appropriate time in an appropriate manner, neither of 
which is limited by subsection (7).  The court is then required 
to respond in a way that both accurately informs the jury and 
protects subrogation rights. 
¶155 The majority declares that the legislature was "well 
aware" 
of 
the 
American 
Law 
Institute 
Reporters' 
Study 
recommending "mandatory reduction of a plaintiff's tort award 
'by the amount of present and estimated future payments from all 
sources 
of 
collateral 
benefits 
except 
life 
insurance.'"  
Majority op., ¶44.  It states that the legislature "deliberately 
did not adopt the Study's proposed approach."  Id.  The truth 
is, 
the 
Reporters' 
Study 
recommended 
"virtually 
complete 
reversal of the collateral source rule wherever such an approach 
is feasible," in tandem with "a bar to any subrogation or 
reimbursement rights exercised by loss insurers against the tort 
award." 
 
2 
The 
A.L.I. 
Reporters' 
Study: 
Enterprise 
Responsibility for Personal Injury, Approaches to Legal and 
Institutional Change at 182 (1991).  The American Law Institute 
2003AP2027.dtp 
 
17 
 
never 
adopted 
the 
Reporters' 
Study, 
and 
obviously 
the 
legislature took steps to preserve subrogation rights. 
¶156 Third, the majority takes up legislative goals and 
declares that the "legislative goals are not explicitly set 
forth in the statute."  Majority op., ¶49.  This is not a 
surprise.  Legislative goals are often not stated in the text of 
a statute.  A court's job is to discern legislative goals from 
intrinsic sources, if possible, and extrinsic sources, if 
necessary.  State ex rel. Kalal v. Circuit Court for Dane 
County, 2004 WI 58, ¶¶44-51, 271 Wis. 2d 633, 681 N.W.2d 110.  
¶157 The 
majority 
accurately 
states 
two 
of 
the 
legislature's goals, namely, (1) to provide fact-finders with 
information about the collateral source payments in the hope 
that 
patients 
will 
not 
obtain 
double 
recovery; 
and 
(2) 
ultimately, to reduce health care providers' insurance premiums.  
The obvious goal not stated by the majority is to allow juries 
to take other compensation into account in determining the 
amount of damage awards.  This goal is not acknowledged even 
though it is explicitly stated in the legislative history.  See 
majority op., ¶42 n.16. 
¶158 Fourth, having stated at least some of the legislative 
goals, the majority sets out to undermine them.  It begins with 
a discussion of "the valuation of reasonable medical expenses."  
Majority op., ¶¶50-51.  The majority writes: "In calculating 
damages, a person injured by medical malpractice may recover the 
reasonable value of the medical services reasonably required by 
the injury."  Id., ¶52 (citing Thoreson, 56 Wis. 2d at 243).   
2003AP2027.dtp 
 
18 
 
¶159 There are two serious problems with this statement.  
First, 
Thoreson 
predates 
Chapter 
655, 
predates 
Wis. Stat. § 893.55(5), 
and 
predates 
Wis. Stat. § 893.55(7).  
Second, Thoreson is not a medical malpractice case.  Hence, to 
make the statement above, the majority has to determine that 
three focused statutes, including a statute that the majority 
admits modifies the collateral source rule, have no effect on 
the substance of the collateral source rule with respect to 
medical expenses in a medical malpractice case.   
¶160 The majority dismisses Wis. Stat. § 655.009(2), saying 
it does not change "the long-standing rule that the 'reasonable 
value of medical services' is the reasonable value of medical 
services 
rendered, 
without 
limitation 
to 
amounts 
paid."  
Majority op., ¶54.  This is not correct.  The majority does not 
point to any authority to substantiate its conclusion that the 
reasonable value of medical services has no relationship to 
actual payments where actual payments have been made in the 
medical malpractice context.  Clearly, Ellsworth and Koffman 
have not been the law for the last three decades, nor have they 
been applied in this manner in medical malpractice cases 
¶161 Contrary to the majority opinion, there is substantial 
evidence that damages for past medical and hospital expenses 
have been tightly controlled over the years by Wisconsin judges, 
in keeping with § 655.009(2) ("the amounts of medical expense 
payments previously incurred").  For instance, Wis JI——Civil 
1750A ("Personal Injury: One Subdivided Question as to Past and 
2003AP2027.dtp 
 
19 
 
Future Damages" (1990)) instructs as to "Past Medical and 
Hospital Expenses" in Subdivision 1: 
 
Question ___ inquires as to what sum of money 
will fairly and reasonably compensate the plaintiff 
for the damages sustained by him from the date of 
accident to the date of trial, which were the result 
of such accident, with respect to medical and hospital 
expenses. 
 
In your answer to question ___, you will fix upon 
such a sum of money as you find has been reasonably 
and necessarily incurred by the plaintiff for the 
hospital and medical care required for the treatment 
of his personal injuries.  This amount may not be 
limited to doctor bills and hospital bills.  The 
plaintiff is entitled to recover, as a part of these 
expenses, such an amount as will reasonably compensate 
him for costs of transportation, including ambulance 
service, from his home to the places of treatment and 
return and also for such amounts as were reasonably 
paid or incurred by him for nursing services and for 
drugs and medications. 
Wis JI——Civil 1750A (emphasis added). 
¶162 This old instruction, which was in use more than 20 
years after the Thoreson decision, cross-referenced former Wis 
JI——Civil 1765 ("Personal Injury: Past Medical and Hospital 
Expenses" (1990)).  The comment to the latter instruction cites 
two post-Thoreson cases: Green v. Rosenow, 63 Wis. 2d 463, 217 
N.W.2d 388 (1974), and Fouse v. Persons, 80 Wis. 2d 390, 259 
N.W.2d 92 (1977).  In Green, the court said: "Where a medical 
bill may relate to two separate maladies, one having nothing to 
do with the plaintiff's claim, plaintiff must prove which 
charges relate to the injury caused by the defendant."  Green, 
63 Wis. 2d at 474 (emphasis added).  In Fouse, the court 
supported medical and hospital expenses that doctors testified 
2003AP2027.dtp 
 
20 
 
"were reasonable and necessary."  Fouse, 80 Wis. 2d at 396-97 
(emphasis added). 
¶163 In other words, notwithstanding the Thoreson decision, 
the reasonable value of medical services has not been measured 
consistently as the highest reasonable cost for those services, 
particularly in medical malpractice cases.  The "highest value" 
approach is a recent phenomenon.  Government health programs 
such as Medicare and Medical Assistance are not the only health 
care payors who now secure medical services at a discount.  
Indeed, discounted payments may be the norm. 
¶164 Even 
if 
Wis. Stat. § 655.009(2) 
and 
Wis. Stat. § 893.55(7) were to be interpreted as requiring the 
full, undiscounted value of medical services, this does not 
negate the admitted modification of the collateral source rule 
in § 893.55(7) for medical malpractice cases.   
¶165 The majority's discussion of the collateral source 
rule in ¶¶56-63 is an unpersuasive denial of the fact that the 
legislature has acted to modify the rule.  For instance, the 
discussion of the policy basis for the collateral source rule in 
¶¶57-58 is beside the point, inasmuch as the legislature had a 
different policy objective in mind: containing the liability 
costs of health care providers by discouraging double recovery. 
¶166 A medical malpractice case may be factually different 
from other cases.  To illustrate, if a person receives treatment 
from a physician, the physician will bill someone for services, 
even if those services were negligent.  If the physician 
receives discounted payment, then this "tortfeasor" will absorb 
2003AP2027.dtp 
 
21 
 
the difference between the so-called "full" value and the 
payment actually made.  If a "tortfeasor" is held accountable 
for the full value of medical services and is required to 
reimburse actual payments received from a third party, then 
there will be double liability as well as partial double 
recovery. 
 
The 
majority 
cannot 
show 
authority 
for 
the 
proposition that double liability for tortfeasors is a component 
of the collateral source rule. 
¶167 This brings us to subrogation.  Subrogation has been 
defined as the "substitution of one party for another whose debt 
the party pays, entitling the paying party to rights, remedies, 
or securities that would otherwise belong to the debtor."  
Ruckel v. Gassner, 2002 WI 67, ¶14, 253 Wis. 2d 280, 646 
N.W.2d 11 (quoting Black's Law Dictionary 1440 (7th ed. 1999)).  
Subrogation rights are often embodied in contracts, such as 
insurance policies.  Sometimes subrogation is protected by 
statute or derived from operation of law.  In Wisconsin, private 
subrogation agreements are ordinarily subject to the made whole 
doctrine.  Id., ¶16 (citing Garrity v. Rural Mut. Ins. Co., 77 
Wis. 2d 537, 
541, 
253 
N.W.2d 512 
(1977)). 
 
However, 
legislatively sanctioned subrogation may override the made whole 
doctrine.  Id., ¶42 n.7 (citations omitted). 
¶168 There are multiple ways to handle subrogation claims.  
Some of these were enumerated in Jindra v. Diederich Flooring, 
181 Wis. 2d 579, 595-97, 511 N.W.2d 855 (1994).  Wisconsin Stat. 
§ 893.55(7) does not attempt to catalog all the possibilities or 
to determine the procedure to be followed in each situation. 
2003AP2027.dtp 
 
22 
 
¶169 The majority writes that "[a]ny interpretation of 
§ 893.55(7) must . . . take into account that the statute does 
not limit the rights of claims based on subrogation."  Majority 
op., ¶67.  This is not in dispute.  It does not follow, however, 
that "Wis. Stat. § 893.55(7) must be interpreted to require 
courts to instruct juries to be instructed to consider the 
collateral source payments only in determining the reasonable 
value of the medical services rendered."  Id., ¶72.  Such an 
instruction ignores situations in which there is absolutely no 
right of subrogation or reimbursement. 
¶170 There 
are 
many 
different 
relationships 
between 
patients and health care providers.  Four broad categories come 
to mind.  First, patients may be the beneficiaries of a 
government program such as Medicare or Medical Assistance that 
pays most or all of their medical bills.  Second, patients may 
be direct beneficiaries of private health insurance, private 
self-insurance, or some other privately funded coverage that 
pays all or most of their medical bills.  Third, patients may 
pay their own medical bills or have them paid by a friend or 
family member.  Fourth, patients with no health care coverage 
may 
receive 
services 
gratuitously 
from 
providers. 
 
This 
categorization is intended to be illustrative, not exhaustive, 
and to show the problems with the majority's holding. 
¶171 The recent case of Meriter Hospital, Inc. v. Dane 
County, 2004 WI 145, 277 Wis. 2d 1, 689 N.W.2d 627, can be used 
as the teaching tool.  In Meriter, a prisoner at the Dane County 
jail was admitted to the hospital.  Criminal charges against the 
2003AP2027.dtp 
 
23 
 
prisoner were dropped on the third day of the prisoner's 
extended hospitalization, after his parole hold had been lifted.  
Id., ¶1.  This court concluded, after interpreting a statute, 
that the county was not obligated to pay for the prisoner's 
entire 34-day stay.  The hospital ended up eating most of the 
extensive cost. 
¶172 According to the decision, the total cost of the 
prisoner's care and treatment at Meriter, not including the 
overtime pay for the security provided, amounted to $187,569.37.  
Id., ¶5.  This figure was based on a calculation method known as 
the Diagnostic Related Group (DRG) rate.  Id., ¶9.  By contrast, 
the 
government 
payment 
rate 
for 
the 
services 
was 
only 
$74,847.92.  In fact, Dane County paid only $4,463.26.  Id., ¶8.  
The difference between the last two amounts was $70,384.66. 
¶173 Suppose, hypothetically, that the hospital's treatment 
of the prisoner had not been excellent, that medical malpractice 
had injured the prisoner on the fourth day after the county 
stopped paying.  Would the hospital have any liability for 
medical expenses to the prisoner-plaintiff?  If so, how much?  
Under traditional collateral source theory, there should be no 
hospital liability at all for medical expenses because there is 
no collateral source, only the tortfeasor.  Unfortunately, this 
result is not clearly signaled by the majority opinion. 
¶174 Changing the hypothetical, suppose the county paid the 
hospital the extra $70,384.66.  Would the prisoner be entitled 
to medical expenses of $70,384.66 from the hospital, or even 
$187,569.37 (less the DRG rate incurred before the malpractice)?  
2003AP2027.dtp 
 
24 
 
The difference between the $70,384.66 payment and the applicable 
DRG rate would have been absorbed by the hospital already, but 
the majority opinion implies that this difference as well as the 
actual payment would be subject to a damage award to the 
plaintiff.  If the hospital had to repay the county, would the 
plaintiff be able to keep $70,384.66 in medical expense damages, 
or would the plaintiff be required to turn over the $70,384.66, 
less the cost of collection, to the county?66 
¶175 The 
majority 
opinion 
in 
¶73 
asserts 
that 
Wis. Stat. § 893.55(7) leaves many questions unanswered, such as 
"the parties' ability to introduce evidence or argue about the 
obligation to repay collateral sources."  In my view, it is the 
majority opinion that muddles the law and creates confusion.  I 
can fathom no reason why a jury should not be permitted to 
receive any evidence or hear any argument on collateral source 
payments that will help it make a reasonable determination of 
medical 
malpractice 
damages, 
after 
taking 
into 
account 
subrogation 
and/or 
reimbursement 
rights 
and 
anything 
the 
plaintiff 
contributed 
to 
earn 
the 
payments. 
 
Under 
Wis. Stat. § 893.55(7), the jury must be permitted not to award 
double recovery to the plaintiff in a medical malpractice case. 
IV 
¶176 The case at hand presents unusual circumstances.  
These circumstances, which are outlined in ¶¶9-14 of the 
majority opinion, must be addressed with particularity. 
                                                 
66 See Karsten v. Kaiser Found. Health Plan, 808 F. Supp. 
1253 (E.D. Va. 1992). 
2003AP2027.dtp 
 
25 
 
¶177 The deceased, Vance H. Lagerstrom, was 87 years old 
when he fell and broke his hip on November 24, 2000.  Mr. 
Lagerstrom was admitted to Myrtle Werth Hospital, where he 
underwent hip replacement surgery and eventually developed lung 
congestion and fever.  There is no evidence of any malpractice 
at the hospital until December 2, 2000.  Consequently, Mr. 
Lagerstrom's health care providers were entitled to receive 
payment from Medicare for every day of service up to the time of 
malpractice.  This was about seven days. 
¶178 The mistake with the feeding tube occurred on December 
2.  Assuming without deciding that the defendants are liable for 
all medical costs after the malpractice, the fact-finder would 
have to determine: (A) the actual post-malpractice payments from 
Medicare to Myrtle Werth Hospital; (B) the "reasonable value" of 
the post-malpractice medical services of Myrtle Werth Hospital; 
(C) the actual Medicare payments to Luther Hospital; (D) the 
reasonable value of the medical services of Luther Hospital; (E) 
the actual Medicare payments to Lakeside Nursing Home; (F) the 
reasonable value of the medical services of Lakeside Nursing 
Home; (G) the actual Medicare payments to St. Joseph's Hospital; 
(H) the reasonable value of the medical services of St. Joseph's 
Hospital; (I) the actual Medicare payments to any other health 
care provider after the malpractice; and (J) the reasonable 
value of these other post-malpractice services.  Against this 
background, medical expense damages should be treated as 
follows: 
2003AP2027.dtp 
 
26 
 
¶179 First, the plaintiff is not entitled to recover 
medical expense damages from the defendants for any value of 
medical services provided by Myrtle Werth Hospital that exceeds 
the actual Medicare payments to Myrtle Werth because any such 
damages would not only be double recovery for the plaintiff but 
also double liability for the tortfeasor-defendants.  Such 
liability is simply not part of the collateral source rule. 
¶180 Second, if the jury were permitted to consider the 
full reasonable value of medical services provided by Luther 
Hospital, Lakeside Nursing Home, St. Joseph's Hospital, and any 
other post-malpractice provider (except Myrtle Werth Hospital), 
the jury must be given authority to award damages or not to 
award 
damages 
for 
the 
"value" 
exceeding 
actual 
Medicare 
payments.  The jury should not be instructed to disregard actual 
payments by Medicare or actual costs to Mr. Lagerstrom in 
determining the award of damages for past medical expenses.  The 
jury should be fully informed of the facts, including facts 
about reimbursement. 
¶181 Third, 
Medicare 
reimbursement 
amounts 
should 
be 
determined by the court and inserted in the special verdict.  
Mrs. Lagerstrom argues that Medicare has statutory reimbursement 
rights under 42 U.S.C. § 1395y(b) (2000), codified at 42 C.F.R. 
pt. 411.  She quotes 42 C.F.R. § 411.24 (2004) to the effect 
that: "If the beneficiary or other party receives a third party 
payment, the beneficiary must reimburse Medicare within 60 
days."  The Wisconsin Academy of Trial Lawyers argues in its 
amicus brief that: 
2003AP2027.dtp 
 
27 
 
The federal government is expressly granted statutory 
rights of reimbursement. . . .  The government may 
seek to exercise these rights against any and all 
amounts recovered, regardless of their designation by 
the jury.  Consequently, if a jury reduces or 
eliminates an award for medical expenses paid by 
Medicare, plaintiffs face the very real likelihood of 
a "double loss."  This is because Medicare may assert 
its right of recovery against the entirety of the 
award. . . .  
¶182 If these representations are accurate, Medicare could 
assert its right of reimbursement against the plaintiff's award 
for the deceased's actual medical costs, the award for pain and 
suffering, and the award for wrongful death.   
¶183 Such a draconian result would not occur with a private 
insurer because of the made whole doctrine.  But there appears 
to be a basis for such a conclusion in the Code of Federal 
Regulations, even though the July 30, 2001, communication from 
the Health Care Financing Administration to Mrs. Lagerstrom's 
attorney demands reimbursement for "overpayment."  This dilemma 
illuminates why Medicare should have been joined as a plaintiff 
in this litigation, just as the Dunn County Department of Human 
Services was joined as a plaintiff in Ellsworth.  In any event, 
Medicare could not force Lagerstrom to repay more than the 
judgment amount.  See 42 C.F.R. § 411.37(d) (2004) ("if Medicare 
payments equal or exceed the judgment or settlement amount, 
[Medicare's] recovery amount is the total judgment or settlement 
payment minus the total procurement costs"). 
¶184 In my view, upon remand, the circuit court should 
award Medicare the precise amount of money it paid for post-
malpractice 
medical 
services, 
plus 
interest, 
minus 
a 
proportionate share of the cost incurred by Mrs. Lagerstrom in 
2003AP2027.dtp 
 
28 
 
securing this reimbursement amount.  This would protect all 
damages awarded to Mrs. Lagerstrom and enlarge the award against 
which the plaintiff attorney fees are calculated, permitting a 
significant deduction from Medicare's reimbursement. 
V 
¶185 The court gave the jury the following instruction: 
Estate's Recovery for Medical, Hospital, and Funeral 
Expenses 
 
Subdivision (b) of question 4 asks what sum of 
money will fairly and reasonably compensate the Estate 
of Vance Lagerstrom for the reasonable value of the 
medical 
and 
hospital 
expenses 
necessarily 
and 
reasonably incurred in the care of him from the date 
of the Ensure infusion incident to the time of his 
death, because of the injuries resulting to him as a 
result of the Ensure incident. 
 
In medical negligence cases such as this one, you 
are allowed to hear testimony regarding payments made 
by Medicare, insurance and other sources.  The law 
does not require you to reduce the sum found by you to 
be the reasonable value of the medical services of 
which the negligence of the defendants was a cause by 
any payment made by any such source.  You may do so.  
It is for you the jury to decide. 
¶186 The majority contends that the instruction is infirm  
because it does not alert the jury that the estate is 
potentially obligated to reimburse Medicare.  Majority op., ¶82. 
¶187 This criticism may be legitimate because of Medicare's 
potential statutory claim on the plaintiff's other damages.  But 
the deficiency can be corrected by remanding the case to the 
circuit court for an award of Medicare's damages, as outlined 
above in ¶¶59, 62.   
¶188 There is no need to order a new trial on the issue of 
hospital and medical expenses.  Indeed, ordering a new trial on 
2003AP2027.dtp 
 
29 
 
damages alone is unfair and prejudicial to the defendants.  See 
Leonard v. Employers Mut. Liab. Ins. Co., 265 Wis. 464, 470, 62 
N.W.2d 10 (1953).  A jury should be able to hear all the facts 
and evaluate the plaintiff's demand for medical expenses in the 
context of the whole case. 
¶189 For the reasons stated above, I respectfully dissent. 
¶190 I am authorized to state that Justice JON P. WILCOX 
joins this opinion. 
 
 
 
No.  2003AP2027.pdr 
 
1