Opinion ID: 2584655
Heading Depth: 1
Heading Rank: 5

Heading: Fischer & Liberty

Text: This court granted a motion for rehearing in Rose I. Before release of our modified opinion in June 2005, earlier that year one panel of the Court of Appeals released two unpublished opinions dealing with the possible applicability of the collateral source rule to write-offs. The decisions essentially excluded recovery for write-offs in the contexts of both Medicare (contrary to Rose I ) and private insurance. First, in Fischer v. Farmers Insurance Company Inc., No. 90,246, 2005 WL 400404, unpublished opinion filed February 18, 2005, the plaintiff was injured when her automobile was struck by a pickup. She settled with the defendant's insurance company and sought recovery under her own policy's underinsured motorist coverage. Her insurer filed a motion in limine to exclude evidence of that portion of Fischer's medical expenses that had been written off by the medical provider pursuant to an agreement with Fischer's own group health insurance carrier. The trial court relied upon Bates to exclude the amount of the write-off from plaintiff's damages. The Court of Appeals panel agreed that the Bates majority holding was not principally driven by the fact that the write-off was mandated by a Medicaid contract. Fischer, slip op. at 4. It emphasized the doctrine of restoration, explaining that when the plaintiff is awarded damages equal to the amount actually paid to his or her health care provider pursuant to an agreement, the plaintiff is then restored to his or her exact economic preinjury status. While the plaintiff would not be able to pocket the write-off amount, neither would he or she owe anything for medical services. Fischer, slip op. at 2. The panel explained that this solution results in restoration and equal treatment for all plaintiffs: The principle of restoration should be applicable to all plaintiffs, regardless of whether they be uninsured, covered by Medicaid, covered by Medicare, covered by an employer's group health policy, or covered by an individually purchased private insurance contract. . . . In short, applying Bates to all plaintiffs effects their restoration to pre-accident status without arbitrarily overcompensating some injured persons. Fischer, slip op. at 5. The Fischer panel interpreted the Bates holding to mean that while the amount a plaintiff's health insurer actually pays to the health care provider is a benefit from a collateral source, the amount the provider writes off is not. Accordingly, like the Bates court, it held that the collateral source rule was `not applicable under these circumstances.' Fischer, slip op. at 5. The Fischer panel also explained that the idea that a plaintiff should receive a windfall so that the tortfeasor can be held fully liable is fiction: The sentiment that public policy dictates giving a plaintiff a windfall in order to hold the tortfeasor fully liable for his or her tortious conduct is, in practice, an illusion. In most cases, a tortfeasor pays nothing personally; the plaintiff's judgment is paid by a liability insurance carrier. If the wrongdoer's bodily injury liability insurance limits are inadequate to cover the plaintiff's injuries, it is common for the tortfeasor to confess judgment in return for a covenant not to execute. On other occasions, a tortfeasor discharges an excess judgment in bankruptcy. Fischer, slip op. at 12. The panel not only concluded that the collateral source rule was inapplicable to write-offs but also that the amount the provider agreed to satisfy its bill conclusively established the reasonable value of the services: In summary, we hold that the amount which a health care provider has, in advance, agreed to accept in full satisfaction for services rendered to a plaintiff is the measure of the reasonable value of medical care and expenses for the treatment of the plaintiff's injuries. Previously established nonrecourse discounts by health care providers are not a collateral source benefit within the ambit of the collateral source rule. (Emphasis added.) Fischer, slip op. at 13. It then logically followed that [t]he plaintiff cannot introduce evidence of the amount of the nonrecourse discounts as part of the plaintiff's economic damages. Fischer, slip op. at 13. In effect, Fischer extended the Bates holding and rationalerefusing to apply the collateral source rule to Medicaid write-offs by medical care providersto private insurance write-offs by providers. And as in Bates, the rule still had some limited application: plaintiff could seek recovery of damages for the amount of medical expenses that was actually paid by a nonwrongdoer, i.e., plaintiff's carrier. Moreover, Fischer more clearly articulated the rule inherent in Bates' result: the paid amount is the measure of the reasonable value of medical care and expenses for the treatment of the plaintiff's injuries. Two months later, the same panel released Liberty v. Westwood United Super, Inc., No. 89,143, 2005 WL 1006363, unpublished opinion filed April 29, 2005, rev. denied 280 Kan. 983 (2005). There, the plaintiff fell and sustained injuries in defendant's business. Plaintiff challenged the district court's order in limine, based upon its interpretation of Bates, which excluded evidence of the portion of her medical expenses, which the health care providers wrote off pursuant to their contracts with Medicare. The Liberty panel then extended the Bates holding and rationalerefusing to apply the collateral source rule to Medicaid write-offs by medical care providersto Medicare write-offs by providers. This extension was contrary to our holding in Rose I, which was awaiting rehearing. The Liberty panel explained that, for several reasons, applying the collateral source rule to write-offs in Medicare scenarios made little sense: The application of that rule to mandatory Medicare discounts requires a great deal of creativity. First, one must perceive that the nonconsensual, involuntary deductions from a person's wages to fund the federally mandated Medicare program are akin to the premiums paid by the fiscally prudent and relatively affluent purchaser of private insurance. More importantly, however, one must fictionally characterize the mandatory contractual discount for Medicare patients as a `payment' of medical expenses. The write-off is a volume discount allowed by medical care providers who want to tap into the pool of Medicare patients. No one is paid the discount, but rather the discounted cost of services assists in keeping the amount that must be deducted from one's paycheck at a manageable level. (Emphasis added.) Slip op. at . As the panel had done in Fischer, it also addressed the windfall argument in Liberty: Finally, the rationale of giving the injured person a windfall in order to avoid allowing the tortfeasor to reap a windfall simply ignores reality. One can perceive that in the vast majority of cases, the `windfall' [to the plaintiff] is funded by a [defendant's] liability insurance carrier, not the tortfeasor personally. The tortfeasor is not taught a lesson via his or her pocketbook, but rather the rest of us must share the cost of the windfall through higher liability premiums. (Emphasis added.) Slip op. at . Where the panel in Fischer only suggested, in Liberty it now stated directly: [T]he issue presented is not the applicability of the collateral source rule, but rather the `reasonable value of medical care and expenses for the treatment of [ the victim's ] injuries.' (Emphasis added.) Liberty, slip op. at 13. Relying upon Bates, the Liberty panel held that the amount permitted to be charged to Medicare patients, i.e., the amount remaining after the write-off, is the customary charge for their medical treatment. Accordingly, the Liberty panel, as it did in Fischer, held that this reduced amount conclusively established the reasonable value of plaintiff's medical care and expenses. Liberty, slip op. at 13. As a result, the panel affirmed the trial court's exclusion from evidence that portion of the plaintiff's medical expenses which the health care providers wrote off pursuant to their contracts with Medicare.