Title: Hope J. Ellsworth v. Mark A. Schelbrock
Citation: 2000 WI 63
Docket Number: 1998AP000294
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: June 22, 2000

2000 WI 63 
 
SUPREME COURT OF WISCONSIN 
 
 
Case No.: 
98-0294 
 
 
Complete Title 
of Case: 
 
Hope J. Ellsworth, and Adam John Ellsworth, 
David Michael Gibson, Jr., and Lewis Jadwin 
Asfeld, minors, by their Guardian ad Litem, 
Timothy J. O'Brien, 
 
Plaintiffs-Respondents-Cross-Appellants, 
Dunn County Department of Human Services,  
 
Plaintiff-Respondent, 
 
v. 
Mark A. Schelbrock,  
 
Defendant-Appellant-Petitioner, 
MSI Insurance Company,  
 
Defendant-Third-Party Plaintiff- 
 
Co-Appellant, 
General Motors Corporation,  
 
Defendant-Third-Party Defendant- 
 
Respondent-Cross-Respondent, 
ABC Insurance Company,  
 
Third-Party Defendant.  
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
Reported at:  229 Wis. 2d 542, 600 N.W.2d 247 
 
 
(Ct. App. 1999-Published) 
 
 
Opinion Filed: 
June 22, 2000 
Submitted on Briefs: 
      
Oral Argument: 
February 29, 2000 
 
 
Source of APPEAL 
 
COURT: 
Circuit 
 
COUNTY: 
St. Croix 
 
JUDGE: 
Conrad A. Richards 
 
 
JUSTICES: 
 
Concurred: 
      
 
Dissented: 
SYKES, J., dissents (opinion filed) 
 
 
WILCOX and CROOKS, J.J., join dissent. 
 
Not Participating:       
 
 
ATTORNEYS: 
For the defendant-appellant-petitioner there were 
briefs by James A. Pelish, Willem J. Noorlander and Thrasher, 
Doyle, Pelish & Franti, Ltd., Rice Lake, and oral argument by 
James A. Pelish. 
 
 
For the plaintiffs-respondents-cross appellants 
there was a brief by James A. Drill, Brian H. Sande and Doar, 
Drill & Skow, S.C., New Richmond, and oral argument by Brian H. 
Sande. 
 
 
An amicus curiae brief was filed by Arthur P. 
Simpson and Simpson & Deardorff, Milwaukee, on behalf of Civil 
Trial Counsel of Wisconsin. 
 
 
An amicus curiae brief was filed by Edward E. 
Robinson and Cannon & Dunphy, S.C., Brookfield, on behalf of the 
Wisconsin Academy of Trial Lawyers. 
 
2000 WI 63 
 
NOTICE 
This opinion is subject to further editing and 
modification.  The final version will appear 
in the bound volume of the official reports. 
 
 
No. 98-0294 
 
STATE OF WISCONSIN                    :  
  IN SUPREME COURT 
______________________________________________________________________________________________ 
 
Hope J. Ellsworth, and Adam John 
Ellsworth, David Michael Gibson, Jr., and 
Lewis Jadwin Asfeld, minors, by their 
Guardian ad Litem, Timothy J. O'Brien, 
 
Plaintiffs-Respondents-Cross-
Appellants, 
 
Dunn County Department of Human Services, 
 
 
Plaintiff-Respondent, 
 
 
v. 
 
Mark A. Schelbrock, 
 
 
Defendant-Appellant-Petitioner, 
 
MSI Insurance Company, 
 
Defendant-Third-Party Plaintiff-Co-
Appellant, 
 
General Motors Corporation, 
 
Defendant-Third-Party Defendant-
Respondent-Cross-Respondent, 
 
ABC Insurance Company, 
 
 
Third-Party Defendant. 
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed. 
FILED 
 
JUN 22, 2000 
 
Cornelia G. Clark 
 Clerk of Supreme Court 
Madison, WI 
 
 
 
 
 
No. 
98-0294 
 
 
2 
¶1 
WILLIAM 
A. 
BABLITCH, 
J.   Mark 
A. 
Schelbrock 
(Schelbrock) seeks review of a published opinion by the court of 
appeals 
applying 
the 
collateral 
source 
rule 
to 
Medical 
Assistance payments.  Ellsworth v. Schelbrock, 229 Wis. 2d 542, 
600 N.W.2d 247 (Ct. App. 1999).  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, such as 
insurance or sick leave.  Payne v. Bilco Co., 54 Wis. 2d 424, 
433, 195 N.W.2d 641 (1972).  Schelbrock, the tortfeasor, argues 
that the court of appeals erred in applying the collateral 
source rule here because the injured party, Hope Ellsworth 
(Ellsworth), did not personally incur liability for her medical 
expenses and the third-party payer, the State of Wisconsin 
through Dunn County, had subrogation rights.  According to 
Schelbrock, Ellsworth's award for past medical expenses should 
be limited to the amount paid by the Medical Assistance program 
to her health care providers.  We disagree.   
¶2 
Medical Assistance is social legislation providing a 
form of health insurance to certain needy individuals.  Program 
participants receive gratuitous medical services paid for by the 
state.  Because we apply the collateral source rule to insurance 
as well as to benefits provided gratuitously, we conclude that 
the rule is also properly applied when damages are awarded to an 
injured person who was also a Medical Assistance participant.  
Accordingly, we affirm. 
 
No. 
98-0294 
 
 
3 
Facts 
¶3 
In April 1994 Schelbrock struck a vehicle driven by 
Ellsworth.  As a result of the collision, Ellsworth was severely 
burned and required hospitalization for approximately four 
months.  During this time she underwent several surgical 
procedures as well as extensive physical rehabilitation. 
¶4 
Ellsworth 
sued 
Schelbrock 
and 
his 
insurer, 
MSI 
Insurance Company.  The Dunn County Department of Human Services 
intervened 
as 
party 
plaintiffs, 
asserting 
a 
claim 
of 
subrogation.  Additional claims were made against other parties 
who were joined to the action.  These claims are not at issue in 
this appeal. During the trial, Ellsworth introduced expert 
testimony stating that she had been the recipient of reasonable 
and necessary past medical services valued at $597,448.27.  No 
other testimony was introduced by any other party regarding the 
necessity of any medical treatment or the reasonable value of 
services provided to Ellsworth.  Schelbrock objected to the 
expert testimony and to the use of any figure for past medical 
expenses other than $354,941, the amount paid by Medical 
Assistance to Ellsworth's health care providers.  The circuit 
court judge held that as a matter of law Ellsworth's past 
medical expenses were $597,448.27, and used this amount in 
answer to the special verdict question on this matter.  The jury 
found Schelbrock negligent, and that his negligence was a cause 
of injury to Ellsworth. 
¶5 
Schelbrock appealed.  The court of appeals affirmed 
the finding of the circuit court regarding past medical 
No. 
98-0294 
 
 
4 
expenses.  This court granted review pursuant to Wis. Stat. 
§ 808.10 (1997-98).  
Analysis 
¶6 
Wisconsin's tort law recognizes the collateral source 
rule.  Rixmann v. Somerset Pub. Sch., 83 Wis. 2d 571, 582, 266 
N.W.2d 326 (1978).  The issue presented here is whether the 
collateral source rule applies to Medical Assistance benefits.1  
This is a question of law reviewed independently of the 
decisions of the court of appeals and circuit court, although 
aided by their analyses.  Brown v. Dibbell, 227 Wis. 2d 28, 42, 
595 N.W.2d 358 (1999).  Wisconsin Stat. ch. 49 (1993-94)2 
regulates 
public 
assistance 
programs, 
including 
Medical 
Assistance.  Statutory interpretation is also a question of law, 
which we review de novo.  McDonough v. Department of Workforce 
Dev., 227 Wis. 2d 271, 277, 595 N.W.2d 686 (1999).   
¶7 
In general, the collateral source rule provides that a 
tortfeasor's liability to an injured individual is not reduced 
because the individual received benefits or payments from other 
sources.  Payne, 54 Wis. 2d at 433.  Our tort law applies the 
collateral source rule as part of a policy seeking to "deter 
                     
1 We note, as did the court of appeals, that we are not 
addressing the situation where a provider of medical services 
charges less as part of an agreement to act as the exclusive 
provider of treatment as part of a managed care plan.  Ellsworth 
v. Schelbrock, 229 Wis. 2d 542, 553 n.2, 600 N.W.2d 247 (Ct. 
App. 1999).  
2 All subsequent references are to the 1993-94 volume of the 
Wisconsin statutes, unless otherwise noted.  
No. 
98-0294 
 
 
5 
negligent conduct by placing the full cost of the wrongful 
conduct on the tortfeasor."  American Standard Ins. Co. v. 
Cleveland, 124 Wis. 2d 258, 264, 369 N.W.2d 168 (Ct. App. 1985). 
 The tortfeasor who is legally responsible for causing injury is 
not relieved of his obligation to the victim simply because the 
victim had the foresight to arrange, or good fortune to receive, 
benefits from a collateral source for injuries and expenses. In 
an early case applying the collateral source rule to wages this 
court stated: 
 
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.  The extent of the liability of the 
wrongdoer is dependent upon the extent of the injuries 
inflicted by his wrongful act, not upon the question 
whether the employee receives wages during disability 
from his employer. 
Campbell v. Sutliff, 193 Wis. 370, 374, 214 N.W. 374 (1927), 
overruled on other grounds Powers v. Allstate Ins. Co., 10 
Wis. 2d 78, 92, 102 N.W.2d 393 (1960). 
¶8 
In its formulation of the collateral source rule the 
Restatement (Second) of Torts § 920A cmt. b (1979) states that 
"it is the tortfeasor's responsibility to compensate for all 
harm that he [or she] causes, not confined to the net loss that 
the injured party receives."  The Restatement further provides 
No. 
98-0294 
 
 
6 
that the collateral source rule applies to benefits from 
insurance policies, gratuities, and benefits from employment and 
social legislation.  Restatement (Second) of Torts § 920A cmt. c 
(1979).   
¶9 
The collateral source rule has been applied in 
Wisconsin to medical expenses paid directly by Medicare or by an 
insurance company.  Thoreson v. Milwaukee & Suburban Transp. 
Corp., 56 Wis. 2d 231, 244, 201 N.W.2d 745 (1972).  In Thoreson, 
we held that the collateral source rule "is not limited to paid-
for benefits but applies to gratuitous medical services provided 
or paid for by the state."  Thoreson, 56 Wis. 2d at 245.   
¶10 Medical Assistance is a means of providing gratuitous 
medical services paid for by the state.  Created by Title 19 of 
the federal Social Security Act of 1965, Medical Assistance is 
an entitlement program that pays for covered health services for 
certain low-income individuals.  The program is funded jointly 
by the federal and state government and is administered by the 
state within federal guidelines.  The state pays certified 
providers 
for 
services furnished 
to 
program 
participants.  
Wisconsin Legislative Fiscal Bureau, Informational Paper #44, 
Medical Assistance Program (January 1999).   
¶11 In addition, Medical Assistance, a public assistance 
program, creates a form of health insurance for certain needy 
individuals.  We agree with the North Carolina Supreme Court, 
which stated: "Medicaid [Medical Assistance] is a form of 
insurance paid for by taxes collected from society in general.  
'The 
Medicaid 
[Medical 
Assistance] 
program 
is 
social 
No. 
98-0294 
 
 
7 
legislation; it is the equivalent of health insurance for the 
needy; and, just as any other insurance form, it is an 
acceptable collateral source.'"  Cates v. Wilson, 361 S.E.2d 
734, 738 (N.C. 1987) (quoting Bennett v. Haley, 208 S.E.2d 302, 
311 (1974)). As we have noted, the Restatement applies the 
collateral source rule to social legislation.  Restatement 
(Second) of Torts § 920A cmt. c (4). 
¶12 Schelbrock, citing to Wis JI-Civil 1756, set forth 
below, asserts that because Ellsworth did not personally incur 
any liability for her medical expenses she is not entitled to an 
award of damages on this basis or to the benefit of the 
application of the collateral source rule.3  According to 
Schelbrock, Ellsworth incurred no liability because the health 
care providers agreed to accept as payment in full the amount 
received from Medical Assistance.  Wis. Admin. Code § HFS 
106.04(3) (April, 1999).  In addition, Wis. Stat. § 49.49(3m)(a) 
provides that, in general, a health care provider who accepts 
the payment made by Medical Assistance may not impose additional 
charges upon the program participant. We are not persuaded. 
¶13 The genesis of Schelbrock's argument on this point is 
Oliver v. Heritage Mut. Ins., 179 Wis. 2d 1, 505 N.W.2d 452 (Ct. 
App. 1993).  In Oliver the plaintiff brought a personal injury 
action after the motorcycle he was riding collided with an 
                     
3 Wis JI-Civil 1756 states that a plaintiff should be 
compensated for "the sum of money . . . [that] has reasonably 
and 
necessarily 
been 
incurred 
from 
the 
date 
of 
the 
accident . . . for the care and treatment of the injuries 
sustained by (plaintiff) as a result of the accident." 
No. 
98-0294 
 
 
8 
automobile.  Subsequently, he filed for bankruptcy "apparently 
because of his inability to pay his hospital and medical bills." 
 Id. at 15.  At trial, Oliver was awarded approximately $40,500 
for past hospital and medical expenses.  Id. at 22.  However, 
because of the bankruptcy action Oliver had gained discharge of 
these bills.  The circuit court therefore declined to assess 
these costs to the defendant, and the court of appeals affirmed. 
 The court of appeals cited Wis JI-Civil 1750A (now withdrawn) 
for the proposition that "Wisconsin law mandates that medical 
bills be 'incurred' by a plaintiff in order to be the subject of 
compensation."  Oliver, 179 Wis. 2d at 24.  
¶14 Nevertheless, the primary basis for the decision in 
Oliver was that the collateral source rule is invoked when a 
third party pays or gratuitously provides or pays for benefits 
to the injured party.  Id. at 23.  The court of appeals found in 
Oliver that because of the bankruptcy action, no third party had 
given the plaintiff benefits and therefore the collateral source 
rule did not apply.  Id.  Although the court of appeals briefly 
raised the idea of medical bills being "incurred," it cited no 
precedent other than the jury instruction and did not discuss 
the application of its reasoning to situations where the 
collateral source rule is applied because benefits were provided 
gratuitously.  
¶15 In Thoreson the issue of recovering damages when 
expenses were not incurred was addressed, and it was held that 
the collateral source rule applies to gratuitous medical 
benefits paid for by the state.  Thoreson, 56 Wis. 2d at 243-45. 
No. 
98-0294 
 
 
9 
 We stated that a plaintiff may recover the reasonable value of 
medical costs. 
 
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, and therefore there need 
be no actual charge. . . . The reason for this view is 
often given that the recovery has a penal effect on a 
tort-feasor and the tort-feasor should not get the 
advantage of gratuities from third parties. 
Thoreson, 56 Wis. 2d at 243 (footnote omitted) (emphasis 
supplied).  In addition, this court has on several occasions 
cited 22 Am. Jur. (2d) Damages § 207 (1965): 
 
"The general rule is that a plaintiff who has 
been injured by the tortious conduct of the defendant 
is entitled to recover the reasonable value of medical 
and 
nursing services 
reasonably 
required 
by the 
injury.  This is a recovery for their value and not 
the 
expenditures 
actually 
made 
or 
obligations 
incurred.  Thus, under this general rule, the fact 
that the medical and nursing services were rendered 
gratuitously to the one who was injured will not 
preclude the injured party from recovering the value 
of those services as part of his compensatory damages. 
 Accordingly, the plaintiff's recovery will not be 
reduced by the fact that the medical expenses were 
paid by some source collateral to the defendant, such 
as by a beneficial society, by members of the 
plaintiff's family, by the plaintiff's employer, or by 
an insurance company . . . ." 
McLaughlin v. Chicago, Milwaukee, St. Paul & Pacific Ry. Co., 31 
Wis. 2d 378, 395-96, 143 N.W.2d 32 (1966) (quoting 22 Am. Jur. 
(2d) Damages § 207 (1965)); Rixmann, 83 Wis. 2d at 580; see also 
Thoreson, 56 Wis. 2d at 243.  Thus, the injured plaintiff may 
recover the reasonable value of gratuitous medical services as 
part of his compensatory damages.   
No. 
98-0294 
 
 
10
¶16 According to Schelbrock, the reasonable value of these 
services is established as the amount received by the health 
care providers from Medical Assistance.  Schelbrock argues that 
recovery for past medical expenses should be limited to the 
amount paid by Medical Assistance because this amount is the 
reasonable 
value 
of 
services 
provided. 
 
Wisconsin 
Stat. 
§ 49.43(1)4 defines "charge" for Medical Assistance purposes as 
"the customary, usual and reasonable demand for payment as 
established . . . by the department . . . which does not exceed 
the general level of charges by others who render such service 
or care . . . under similar or comparable circumstances within 
the community in which the charge is incurred."  Therefore, 
Schelbrock characterizes as irrelevant the testimony accepted by 
the circuit court relating to the reasonable value of the 
medical 
services 
received 
by 
Ellsworth 
because 
what 
the 
providers charged and collected was the amount paid by Medical 
Assistance.  We disagree.   
¶17 The collateral source rule seeks to place upon the 
tortfeasor full responsibility for the loss he has caused.  
Schelbrock is not entitled to reap the benefit of Ellsworth's 
eligibility for public assistance or from the government's 
economic 
clout 
in 
the 
health 
care 
market 
place. 
The 
reimbursement rate that is established by the state for health 
care providers participating in the Medical Assistance program 
                     
4 Wisconsin Stat. § 49.43(1) was renumbered Wis. Stat. 
§ 49.43(1m) by 1995 Act 27, § 2943.  
No. 
98-0294 
 
 
11
is not dispositive.  Ellsworth, as the party claiming damages, 
carries the burden to prove her medical expenses to a reasonable 
certainty, by the greater weight of credible evidence.  Wis JI-
Civil 200, 1705. Having done so in this case, she may recover as 
tort damages the value of these services. 
¶18 Next, Schelbrock contends that the collateral source 
rule does not apply in this case because Dunn County, as an 
agent for the State of Wisconsin, has a right to subrogation 
under Wis. Stat. § 49.65(2).5  Under the common law doctrine of 
subrogation, "'one, other than a volunteer, who pays for the 
                     
5 Wis. Stat. § 49.65(2) Subrogation.   
The 
department, 
county 
or 
elected 
tribal 
governing body providing any public assistance under 
this chapter as a result of the occurrence of an 
injury, sickness or death which creates a claim or 
cause of action, whether in tort or contract, on the 
part of a public assistance recipient or beneficiary 
or the estate of a recipient or beneficiary against a 
3rd party, including an insurer, is subrogated to the 
rights of the recipient, beneficiary or estate and may 
make a claim or maintain an action or intervene in a 
claim or action by the recipient, beneficiary or 
estate against the 3rd party. 
 
Wisconsin 
Stat. § 49.65(2) was 
renumbered 
Wis. 
Stat. 
§ 49.89(2) and amended by 1995 Wis. Act 27, § 3154.  The 
amendment does not impact upon our analysis.  1999 Act 9 § 1489 
amended Wis. Stat. § 49.89(2).  The amendment provides that 
Medical Assistance subrogation  
 
constitutes a lien, equal to the amount of medical 
assistance provided as a result of the injury, 
sickness or death that gave rise to the claim.  The 
lien is on any payment resulting from a judgment or 
settlement that may be due the obligor.  A lien under 
this subsection continues until it is released and 
discharged by the department of health and family 
services. 
No. 
98-0294 
 
 
12
wrong of another should be permitted to look to the wrongdoer to 
the extent he has paid and be subject to the defenses of the 
wrongdoer.'"  Waukesha County v. Johnson, 107 Wis. 2d 155, 160, 
320 N.W.2d 1 (Ct. App. 1982) (quoting Garrity v. Rural Mut. Ins. 
Co., 77 Wis. 2d 537, 541, 253 N.W.2d 512 (1977)).  When applying 
the doctrine of subrogation to private insurance policies, it 
has been held that where subrogation exists, the collateral 
source rule does not apply.  Lambert v. Wrensch, 135 Wis. 2d 
105, 121, 399 N.W.2d 369 (1987) (insurance policy found to be an 
indemnity contract and therefore subrogation exists by operation 
of law); Heifetz v. Johnson, 61 Wis. 2d 111, 124-25, 211 N.W.2d 
834 (1973).  The doctrine of subrogation operates "to prevent 
double recovery by the plaintiff . . . ."  Id. at 125.   
¶19 Subrogation arises in this case by statute, not common 
law principles.  DeHaven v. Dan-Co FS Co-op., 128 Wis. 2d 472, 
477, 383 N.W.2d 509 (Ct. App. 1986) ("[T]he department's right 
of subrogation is not based upon common law principles but 
rather is granted by virtue of statute.  It is statutory 
subrogation, not common law, and equitable rules in common 
subrogation do not apply.").  Therefore, once the injured party 
has established the reasonable value of medical services 
gratuitously provided, the statutory subrogation in Wis. Stat. 
§ 49.65 prevents the injured party from recouping a double 
recovery through application of the collateral source to Medical 
Assistance benefits.   
¶20 While the state recoups from the tortfeasor amounts it 
expended for medical services, the collateral source rule will 
No. 
98-0294 
 
 
13
"prevent 
the 
tortfeasor 
from 
benefiting 
from 
third-party 
payments made for the medical services rendered to an injured 
plaintiff."  Ellsworth, 229 Wis. 2d at 555.  As a result, the 
responsibility for the victim's loss ultimately remains fully on 
the wrongdoer.  
¶21 Finally, 
Schelbrock 
contends 
that 
Ellsworth 
has 
assigned all rights for the collection of medical expenses to 
the state pursuant to Wis. Stat. § 49.45(19)(a)2, set forth 
below, and therefore cannot collect any damage award for medical 
expenses that is not subrogated to the state.6  We disagree.  
Wisconsin 
Stat. 
§ 49.65, 
not 
§ 49.45(19)(a)2, 
specifically 
addresses assignment of actions and subrogation of rights by a 
public assistance recipient who is injured and has a tort claim 
against a third party.  Within the context of a tort action, the 
assignment is to the extent that Medical Assistance payments 
                     
6 Wis. 
Stat. 
§ 49.45(19) 
Establishing 
paternity 
and 
assigning support rights.   
(a) As a condition of eligibility for medical 
assistance, a person shall:   
 . . .  
2.  Notwithstanding other provisions of the 
statutes, be deemed to have assigned to the state, by 
applying for or receiving medical assistance, any 
rights to medical support or other payment of medical 
expenses from any other person, including rights to 
unpaid amounts accrued at the time of application for 
medical assistance as well as any rights to support 
accruing during the time for which medical assistance 
is paid. 
No. 
98-0294 
 
 
14
were made for injuries arising as a result of the injury.  
Wisconsin Stat. 49.65(5)7 provides:  
 
Recovery; 
How 
Computed. 
 
Reasonable 
costs 
of 
collection including attorney fees shall be deducted 
first.  The amount of assistance granted as a result 
of the occurrence of the injury, sickness or death 
shall be deducted next and the remainder shall be paid 
to the public assistance recipient or other party 
entitled to payment. 
Read together, § 49.65(5) and § 49.45(19)(a)2 assign to the 
state the amount of assistance expended as a result of the 
injury by the tortfeasor.  The statute contemplates any 
"remainder" being available for payment to the public assistance 
beneficiary after the state receives its subrogated amount.  
Therefore, 
we 
find 
Schelbrock's 
argument 
on 
this 
point 
unpersuasive. 
¶22 In keeping with precedent and well-established tort 
policy, we conclude that the collateral source rule applies to 
Medical Assistance benefits.  The injured party may establish 
and recover the reasonable value of the medical services 
received gratuitously via Medical Assistance.  The state's 
subrogated amount is deducted from this recovery, and the 
injured party is entitled to any remainder.  As a result, the 
responsibility for the victim's injury remains fully on the 
wrongdoer. 
By the Court.—The decision of the court of appeals is 
affirmed. 
                     
7 Wisconsin Stat. § 49.65(5) was renumbered as Wis. Stat. 
§ 49.89(5) by 1995 Wis. Act 27, § 3164.  
No. 
98-0294 
 
 
15
 
98-0294.dss 
 
1 
¶23 DIANE S. SYKES, J.    (dissenting). "In Wisconsin 
compensatory damages are given to make whole the damage or 
injury suffered by the injured party."  White v. Benkowski, 37 
Wis. 2d 285, 290, 155 N.W.2d 74 (1967).  Past medical and health 
care expenses are recoverable as compensatory damages where they 
are reasonably and necessarily incurred for the treatment of 
injuries sustained by a plaintiff as a result of a defendant's 
tortious conduct.  Wis JI-Civil 1756; see also Lautenschlager v. 
Hamburg, 41 Wis. 2d 623, 630, 165 N.W.2d 129 (1969).   
¶24 The collateral source rule provides that a plaintiff's 
recovery "'will not be reduced by the fact that the medical 
expenses were paid by some source collateral to the defendant, 
such as by a beneficial society, by members of the plaintiff's 
family, by the plaintiff's employer, or by an insurance 
company.'"  McLaughlin v. Chicago, Milwaukee, St. Paul & Pac. 
Ry. Co., 31 Wis. 2d 378, 396, 143 N.W.2d 32 (1966) (quoting 22 
Am. Jur. (2d), Damages, § 207, p. 288).  The collateral source 
rule has been extended to cases in which the plaintiff's medical 
expenses were paid by a government welfare program.  Thoreson v. 
Milwaukee & Suburban Transp. Co., 56 Wis. 2d 231, 243-45, 201 
N.W.2d 745 (1972).  The policies underlying the collateral 
source rule are aptly catalogued in the majority opinion and 
summarized at ¶7:  "The tortfeasor who is legally responsible 
for causing injury is not relieved of his obligation to the 
victim simply because the victim had the foresight to arrange, 
or good fortune to receive, benefits from a collateral source 
for injuries and expenses."  
98-0294.dss 
 
2 
¶25 So far, there is no controversy.  These are well-
established principles of the law of damages, and they are fully 
applicable in this case. Indeed, no one is arguing that Hope 
Ellsworth's recovery for past medical expenses should be reduced 
by the amount paid by a source collateral to the tortfeasor, in 
this case, Medical Assistance.  The foregoing authorities 
establish that it cannot be; the collateral source rule clearly 
applies to allow recovery for the amounts paid by Medical 
Assistance.  Furthermore, this is not a situation in which the 
collateral source rule conflicts with the law of subrogation and 
therefore must give way.8  The state, through Dunn County, is 
statutorily subrogated.  Wis. Stat. § 49.89(2); Wis. Admin. Code 
§ HFS 106.03(8).  The application of the collateral source 
ruleat 
least 
to 
the 
extent 
of 
the 
Medical 
Assistance 
paymentstherefore does not frustrate subrogation's goal of 
                     
8 The cases involving the interaction between the law of 
subrogation and the collateral source rule are difficult to 
reconcile.  For example, where an insurer has made payments but 
is not contractually subrogated and fails to prove equitable 
subrogation, or has expressly waived subrogation (gratuitously 
or in favor of some other form of recovery), the collateral 
source rule generally applies.  See Jindra v. Diederich 
Flooring, 181 Wis. 2d 579, 511 N.W.2d 855 (1994); Voge v. 
Anderson, 181 Wis. 2d 726, 512 N.W.2d 749 (1994); Rixmann v. 
Somerset Pub. Sch., 83 Wis. 2d 571, 266 N.W.2d 326 (1978). On 
the other hand, where subrogation is present but unenforceable 
by operation of law (because of the expiration of the statute of 
limitations), the collateral source rule does not apply.  See 
Lambert v. Wrensch, 135 Wis. 2d 105, 399 N.W.2d 369 (1987), 
relying on Heifetz v. Johnson, 61 Wis. 2d 111, 211 N.W.2d 834 
(1973).  The general rule seems to be that where subrogation is 
present and the principles of the collateral source rule and 
subrogation would conflict, subrogation trumps the collateral 
source rule, and the latter will not apply.   
98-0294.dss 
 
3 
preventing double recovery.  By operation of the collateral 
source rule, the amount paid by Medical Assistance is included 
in the damages award, and by operation of the principles of 
subrogation, Medical Assistance recoups that amount from the 
award.     
¶26 The real question here is not whether the collateral 
source rule applies but which measure of damages it applies to. 
 The plaintiff put in expert testimony regarding the full retail 
value of the medical services provided:  $597,448.27.  The 
parties 
stipulated, 
however, 
that 
a 
discounted 
amount, 
$354,941.21, was actually paid by Medical Assistance and was 
accepted by the medical providers as payment in full pursuant to 
the rules of the Medical Assistance program.  See Wis. Stats. 
§§  49.43(1m), 49.46 and 49.49(3m)a.  The differencealmost 
$250,000was absorbed by the providers as legally unrecoverable. 
 The plaintiff can never be held liable for the excess; she has 
not 
incurred 
it. 
 
Wis. 
Admin. 
Code 
§ HFS 
106.04(3).  
Nevertheless, the circuit court concluded as a matter of law 
that she was entitled to recover the higher amount.   
¶27 The applicable jury instruction provides that the 
measure of damages for past medical expenses is "the sum of 
money . . . reasonable and necessarily incurred . . . for the 
care and treatment of the [plaintiff's] injuries."  Wis JI-Civil 
1756.  The defendant argues that the plaintiff's damages cannot 
encompass the higher retail value of the medical services 
provided for two reasons:  (1) because she never "incurred" that 
amount; and (2) because the amount paid pursuant to the rules 
98-0294.dss 
 
4 
governing Medical Assistance, which was accepted by the medical 
providers as full payment for their services, constitutes the 
reasonable value of those services, regardless of whether the 
providers could have received more from some other person or 
source.9  I agree.   
¶28 While this is an issue of first impression in this 
state, I am persuaded by the reasoning of the California Court 
of Appeals in Hanif v. Housing Authority of Yolo County, 246 
Cal. Rptr. 192 (1988), the Kansas Court of Appeals in Bates v. 
Hogg, 921 P.2d 249 (1996), and the United States District Court 
for the Western District of Virginia in McAmis v. Wallace, 980 
F. Supp. 181 (W.D. Va. 1997).  All of these cases involved 
injured 
plaintiffs 
whose 
medical 
expenses 
were 
paid 
by 
government medical assistance programs.  In each, the plaintiff 
was attempting to recover the difference between the full market 
value of the medical services and the discounted amount that was 
paid by the program and accepted by the medical providers as 
full payment.    
¶29 The reasoning of the California Court of Appeals in 
Hanif is particularly persuasive:  
 
 
Preliminarily, we note there is no question here 
that Medi-Cal's payment for all injury-related medical 
care 
and 
services does 
not 
preclude 
plaintiff's 
recovery from defendant, as special damages, of the 
                     
9 Disputes over the "reasonableness" of medical expenses in 
personal injury actions more commonly focus on whether the 
plaintiff was overtreated, given the nature and extent of the 
injury.  That type of "reasonableness" evaluation is a question 
of fact for the jury.  This case presents an issue of law.       
98-0294.dss 
 
5 
amount paid.  This follows from the collateral source 
rule . . . . For purposes of analysis, plaintiff is 
deemed to have personally paid or incurred liability 
for these services and is entitled to recompense 
accordingly.  This is not unreasonable or unfair in 
light of Medi-Cal's subrogation and judgment lien 
rights . . . . 
 
 
Nor is there any question about the appropriate 
measure of recovery:  a person injured by another's 
tortious conduct is entitled to recover the reasonable 
value of medical care and services reasonably required 
and attributable to the tort . . . .   
 
 
The question here involves the application of 
that measure, i.e., whether the "reasonable value" 
measure of recovery means that an injured plaintiff 
may recover from the tortfeasor more than the actual 
amount he paid or for which he incurred liability for 
past 
medical 
care 
and 
services. 
 
Fundamental 
principles underlying recovery of compensatory damages 
in tort actions compel the following answer:  no.   
 
"In tort actions damages are normally awarded for the 
purpose of compensating the plaintiff for injury 
suffered, i.e., restoring him as nearly as possible to 
his former position, or giving him some pecuniary 
equivalent." . . . The primary object of an award of 
damages in a civil action, and the fundamental 
principle on which it is based, are just compensation 
or indemnity for the loss or injury sustained by the 
complainant, and no more . . . .  
 
Applying the above principles, it follows that an 
award of damages for past medical expenses in excess 
of what the medical care and services actually cost 
constitutes overcompensation . . . .   
 
 
Thus, when the evidence shows a sum certain to 
have been paid or incurred for past medical care and 
services, 
whether 
by 
the 
plaintiff 
or 
by 
an 
independent source, that sum certain is the most the 
plaintiff may recover for that care despite the fact 
it may have been less than the prevailing market rate. 
  
Hanif, 246 Cal. Rptr. 192, 194-95 (citations omitted).   
98-0294.dss 
 
6 
¶30 McAmis and Bates involved injured plaintiffs whose 
medical expenses were paid by Medicaid, and the courts reached 
similar results.  The United States District Court in McAmis 
summarized its holding in this way:   
 
 
Since Plaintiff did not incur the written-off 
amounts, they cannot be included in any compensatory 
damage award she may receive.  In order to make 
Plaintiff whole, to reimburse her for costs expended 
as a result of this accident, Plaintiff need only 
receive the actual costs of medical care borne by 
Medicaid.  These are the amounts that Plaintiff has 
incurred for purposes of the collateral source rule.  
While Plaintiff was not able to pay her medical bills 
herself, under the collateral source rule, she may 
deserve to be compensated for what Medicaid paid as if 
these benefits were insurance . . . . Defendant is not 
permitted to avoid compensating his victim merely 
because she was able to qualify for Medicaid benefits. 
 At 
the 
same 
time, 
Plaintiff 
only 
receives 
compensation sufficient to make her whole.   
McAmis, 980 F. Supp. at 185 (citations omitted).   
¶31 I agree with the reasoning of these courts, and 
conclude it is fully consistent with Wisconsin law.  Since the 
plaintiff never incurred medical expenses at the higher retail 
cost, her measure of damages cannot encompass that amount.  The 
value of the medical services necessary to treat the plaintiff's 
injuries is not what the medical providers might have been able 
to charge and recover from someone else (say, someone with 
private, 
fee-for-service 
insurance, 
or 
someone 
with 
the 
financial wherewithal to pay the highest market rate) but what 
they accepted as full payment for the services reasonably and 
necessarily rendered in this case.  In other words, the measure 
of damages is not what the highest payor would have paid for the 
98-0294.dss 
 
7 
same medical services but what was actually incurred in the care 
and 
treatment 
of 
the 
plaintiff's 
injuries. 
 
Thus, 
the 
plaintiff's measure of damages in this case is that which 
Medical Assistance paid and the medical providers accepted as 
payment in full for the services rendered.  By this measure, the 
defendant is not relieved of responsibility for his tortious 
conduct, and the plaintiff is made whole.  Accordingly, I 
respectfully dissent.   
¶32 I am authorized to state that Justices JON P. WILCOX  
and N. PATRICK CROOKS join this dissent.   
 
 
 
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