Opinion ID: 2120164
Heading Depth: 1
Heading Rank: 5

Heading: Minnesota's Collateral-Source Statute

Text: The Minnesota Legislature enacted Minn.Stat. § 548.251 to control the treatment of collateral sources in cases such as this. The collateral-source statute defines collateral sources as payments related to the injury or disability in question made to the plaintiff, or on the plaintiff's behalf up to the date of the verdict, by or pursuant to ... health, accident and sickness, or automobile accident insurance or liability insurance that provides health benefits. Minn.Stat. § 548.251, subd. 1. Swanson argues that this language in the collateral-source statute is unambiguous, and that negotiated discounts are not collateral sources under the statute. He points out that collateral sources are defined as payments and asserts that payment clearly means an amount paid. According to Swanson, money given in exchange for goods or services is an amount paid, but the forgiveness of debt is not an amount paid and therefore a negotiated discount is not a payment. Swanson concludes that because a negotiated discount is not a payment, the district court's collateral-source determination was correct and that the Brewsters are not entitled to any further reduction of the damage award. The Brewsters argue that the collateral-source statute is unambiguous, but assert that while the plain meaning of payment includes amounts of money given, it also includes amounts written off or discharged because the words payment and pay include the concept of discharging of a debt. In the alternative, the Brewsters argue that if the collateral-source statute is ambiguous, the legislative history of the statutethat the Legislature was attempting to address the insurance liability crisis through tort reformsuggests that negotiated discounts are collateral sources. Based on either approachan unambiguous or ambiguous statuteit is the Brewsters' position that the district court erred when it failed to reduce Swanson's award by the discount HealthPartners negotiated on Swanson's behalf. When construing a statute, our goal is to ascertain and effectuate the intention of the legislature. Am. Family Ins. Group v. Schroedl, 616 N.W.2d 273, 278 (Minn.2000). In Schroedl, we declared that courts are to construe words and phrases according to their plain and ordinary meaning. Id. at 277; accord Minn. Stat. § 645.08 (2008) ([W]ords and phrases are construed according to rules of grammar and according to their common and approved usage....). Also, [a] statute should be interpreted, whenever possible, to give effect to all of its provisions. Schroedl, 616 N.W.2d at 277. A court must read and construe a statute as a whole and must interpret each section in light of the surrounding sections to avoid conflicting interpretations. Id. And, finally, courts should construe a statute to avoid absurd results and unjust consequences. Id. at 278. The first step in any statutory interpretation is to determine if the statute is clear and unambiguous. Id. at 277. If the statute's language is unambiguous, we must give it its plain meaning. Wynkoop v. Carpenter, 574 N.W.2d 422, 425 (Minn. 1998). If the statute's language is ambiguous, the court may look outside the statutory text to ascertain legislative intent. Id.; see also Minn.Stat. § 645.16 (2008). A statute's meaning is ambiguous if it is subject to more than one reasonable interpretation. Schroedl, 616 N.W.2d at 277. Given the foregoing mandate, we proceed to analyze the collateral-source statute to determine whether the meaning of collateral sources is unambiguous. The statute specifically defines the term collateral sources as payments related to the injury or disability in question made to the plaintiff, or on the plaintiff's behalf, up to the date of the verdict by or pursuant to... health ... insurance. Minn.Stat. § 548.251, subd. 1. The statute also directs courts to determine amounts of collateral sources that have been paid for the benefit of the plaintiff or are otherwise available to the plaintiff as a result of losses. Minn.Stat. § 548.251, subd. 2(1) (emphasis added). The words payment and paid are not defined in the statute, nor does the statute expand upon the phrase otherwise available. Black's Law Dictionary defines payment as both (1) the [p]erformance of an obligation by the delivery of money or some other valuable thing accepted in partial or full discharge of the obligation and (2) [t]he money or other valuable thing so delivered in satisfaction of an obligation. Black's Law Dictionary 1243 (9th ed. 2009). The American Heritage Dictionary defines payment as (1) [t]he act of paying or the state of being paid, and (2) [a]n amount paid. The American Heritage Dictionary of the English Language 1292 (4th ed. 2000). According to the American Heritage Dictionary the word pay can mean [t]o give money to in return for goods or services rendered, [t]o give (money) in exchange for goods or services, or [t]o discharge or settle (a debt or an obligation). Id. at 1291. The Brewsters argue that because the words pay and payment include the idea of discharging or satisfying a debt, a negotiated discount is a collateral source. Based on the foregoing definitions, we agree with the Brewsters that the ordinary and plain meaning of the words pay and payment include the idea of discharging or satisfying a debt. But the fact that the words pay and payment include the idea of discharging a debt does not mean that a negotiated discount is a payment as the word is used in the collateral-source statute. Accordingly, we must conduct a more penetrating analysis of the meaning of the word payment in the context of the statute. When conducting such an analysis we have little difficulty in coming to the conclusion that the plain and ordinary meaning of the word payment is broader than the narrow meaning advocated by Swanson. Swanson argues that only money given in exchange for goods or services is a payment. But, as Black's Law Dictionary states, a payment may be something other than cash; it is [t]he money or other valuable thing so delivered in satisfaction of an obligation. Black's Law Dictionary 1243 (emphasis added). Here, HealthPartners delivered another valuable thing to Swanson's medical providers in order to satisfy Swanson's debt; i.e., the medical providers did not gratuitously agree to accept $17,643.76 as full satisfaction for Swanson's $62,259.30 in medical bills. It appears that HealthPartners and the medical providers had some type of understanding that in exchange for HealthPartners referring its policyholders to them, they would provide medical services at a discount to these policyholders. Each party to such an understanding would gain something valuable. The medical providers would not have discounted Swanson's bills absent an agreement with HealthPartners. Therefore, we conclude the negotiated discount was a payment because it involved the exchange of things of value to discharge Swanson's medical bill contractual obligations. In addition to being a payment under the ordinary and plain meaning of that word, a negotiated discount also satisfies the other statutory requirements to qualify as a collateral source: that the payment is related to the injury or disability in question and that the payment is made on the plaintiff's behalf pursuant to a health insurance policy. The statute specifically provides that `collateral sources' means payments related to the injury or disability in question made ... on the plaintiff's behalf ... pursuant to ... health ... insurance. Minn.Stat. § 548.251, subd. 1. HealthPartners satisfied Swanson's medical debts with the delivery of money and the negotiation of a discount because the medical providers provided medical care to Swanson after he was injured in the accident caused by Rebecca Brewster. Accordingly, the discount was secured in relation to the injury in question. As to whether the discount was paid on Swanson's behalf, the Supreme Court of Florida addressed this point in Goble, 901 So.2d at 833. In Goble, the Florida court interpreted a collateral-source statute similar to Minnesota's [9] in the context of a motorcycle accident and explained that: Because of the medical providers' contracts with [the tort plaintiff's] HMO, [the tort plaintiff] was obligated to pay the claimants $145,970.76, rather than the billed charges of $574,554.31. In this light, the discounts negotiated by [the tort plaintiff's] HMO are as much a benefit to [the tort plaintiff] as the HMO's remittance of $145,970.76 to satisfy the remaining charges on [the tort plaintiff's] medical bills. Id. at 833; see also Acuar v. Letourneau, 260 Va. 180, 531 S.E.2d 316, 322 (2000) (Those amounts written off are as much of a benefit ... as are the actual cash payments made by his health insurance carrier to the health care providers.). We agree with the Florida court's analysis in Goble and conclude it applies to the facts of this case. [10] The discount secured by HealthPartners was as much a benefit to Swanson as the $17,643.76 HealthPartners tendered to Swanson's medical providers, because the delivery of money did not alone satisfy Swanson's medical debt. HealthPartners tender of $17,643.76 to the medical providers plus the discount it negotiated with the medical providers relieved Swanson of his obligation to pay the total amount of his medical bills, which amounted to $62,259.30. Based on our foregoing analysis, we conclude that the discount HealthPartners secured through its agreements with the medical providers is a type of payment, the payment is related to Swanson's injury or disability, and the payment was made on Swanson's behalf pursuant to a health insurance policy. See Minn.Stat. § 548.251, subd. 1. Therefore, we conclude that the negotiated discount is unambiguously a collateral source for purposes of the collateral-source statute. [11] Our conclusion that a negotiated discount is a collateral source for purposes of the collateral-source statute is consistent with our case law. Swanson urges us to apply the reasoning in Stout to this case, but some language in Stout actually appears to contradict Swanson's position. Swanson argues that money payments and negotiated discounts are fundamentally different; but in Stout, we pointed out that a negotiated discount is not substantively different from a money payment. See Stout, 645 N.W.2d at 114. In holding that neither a negotiated discount secured by an insurer nor a money payment made by an insurer could be deducted from the no-fault insurer's obligation, we explained, Although the forms of the two transactions may differ, we find it more important that, from the standpoint of the no-fault insurer, their substance is the same. Id. Other courts have drawn similar conclusions. One court stated, [F]or purposes of the collateral source rule, no rational distinction exists between money payments made by an insurer on behalf of a plaintiff and a healthcare provider's negotiated discounts made pursuant to contractual relationships. Lopez v. Safeway Stores, Inc., 212 Ariz. 198, 129 P.3d 487, 495 (2006); see also Mitchell v. Haldar, 883 A.2d 32, 40 (Del.2005); Brown v. Van Noy, 879 S.W.2d 667, 676 (Mo.Ct.App. 1994) ([T]he fact that the expenses were `taken care of' by Medicare is not materially different than expenses paid by insurance or paid in part by insurance with part `written off' pursuant to a contract or agreement between the medical provider and the insurance company.). Courts in the foregoing cases interpreted and applied the common-law collateral-source rule and held that plaintiffs could recover the full amount billed by their health care provider. Nevertheless, the legal analysis used by the courts in these cases supports our conclusion in Stout that the substance [of the two transactions] is the same. In addition, other parts of the collateral-source statute support our conclusion that the term collateral source unambiguously includes a negotiated discount. Our case law provides that we are to read and construe statutes as a whole. See Schroedl, 616 N.W.2d at 277. When we read and construe the collateral-source statute as a whole and interpret each section in light of the surrounding sections, it appears that Swanson's argument limiting the meaning of collateral source to money delivered is too narrow an interpretation for at least three reasons. First, the collateral-source statute provides that collateral sources are payments... made ... pursuant to ... a contract or agreement of a group, organization, partnership, or corporation to provide, pay for, or reimburse the costs of hospital, medical, dental or other health care services. Minn.Stat. § 548.251, subd. 1(3). As a preliminary issue, we conclude the phrase the costs of modifies the word reimburse but not the word provide or the phrase pay for. While one can provide or pay for health care services, one cannot reimburse health care services; one must reimburse the costs of health care services. Moreover, if the phrase the cost of modifies provide, pay for, and reimburse the statute would be redundant because there is no difference between providing the costs of health care and paying for the cost of healthcare. Therefore, the phrase the costs of modifies only the word reimburse. Because the phrase the costs of modifies only the word reimburse, this clause in the statute demonstrates that the provision of hospital, medical, dental or other health care services is a collateral source. Minn. Stat. § 548.251, subd. 1(3). Therefore, we conclude the Legislature intended that the word payment be interpreted broadly because the statute states that the provision of health care services is a collateral source even though it is not the delivery of money to the plaintiff, or on the plaintiff's behalf. Second, subdivisions 2(1) and 3 of the collateral-source statute specifically instruct a district court to reduce the damage award by collateral sources that have been paid for the benefit of the plaintiff or are otherwise available to the plaintiff. Minn.Stat. § 548.251, subds. 2(1), 3 (emphasis added). The phrase otherwise available indicates that defining the phrase collateral sources as money delivered to a creditor is too narrow because this provision of the statute suggests that collateral sources can be money payments or can be otherwise available. We conclude that other interpretations would render the words otherwise available superfluous and conflict with the rule that a statute be construed to give effect to all its provisions. [12] See Minn.Stat. § 645.16. The discount HealthPartners negotiated with Swanson's medical providers on his behalf was not paid to Regions as a money tender, but it was otherwise available to Swanson because Swanson was able to use that discount to satisfy part of his medical debt. Therefore, we conclude that the $43,445.74 negotiated discount is a collateral source because it was otherwise available to Swanson. Third, we conclude that our interpretation of the collateral-source statute effectuates the intention of the Legislature. See Minn.Stat. § 645.16. We have said that the Legislature specifically intended to abrogate in part the common-law collateral-source rule by prevent[ing] double recoveries in many circumstances. See Imlay, 453 N.W.2d at 331. In passing the collateral-source statute, the Legislature ended certain double recoveries for plaintiffs. See Minn.Stat. § 548.251, subds. 1-3. Though the Legislature specifically excluded some traditional collateral-source benefits, such as gifts from family members, from the statute's definition of collateral sources, see Minn.Stat. § 548.251, subds. 2(2), 3, it specifically included payments made to a plaintiff pursuant to that plaintiff's health insurance policies, see Minn. Stat. § 548.251, subd. 1(2). The plain language of the statute demonstrates that while the Legislature intended to maintain the common-law collateral-source rule in instances of familial gifts, the Legislature intended to abrogate the rule in instances of coverage of the plaintiff's health insurance. See Minn.Stat. § 548.251, subd. 1(2). Swanson has not offered any principle or reason why the Legislature would treat the two types of insurer compensation negotiated discounts and money paymentsdifferently. In other words, Swanson has not explained why the Legislature would allow damage-award reductions by amounts of money an insurer pays for health care services on the plaintiff's behalf, but not allow damage-award reductions by discounts negotiated by an insurer for health care services on the plaintiff's behalf. Swanson asserts that an application of the common-law collateral-source rule is appropriate in this instance because he had the foresight and prudence to secure health insurance and he paid premiums for his policy with HealthPartners that in turn allowed him to receive discounted services. But the Legislature provided that a plaintiff's health insurance coverage is a collateral source for purposes of the collateral-source statute even though it was aware that plaintiffs often pay premiums for that insurance. See Minn.Stat. § 548.251, subd. 1(2). And the Legislature accounted for premium payments in subdivisions 2(2) and 3 of the statute, requiring district courts to offset any collateral-source reduction of an award by the amount of premiums paid by that plaintiff or the plaintiff's family. Because it appears that the Legislature intended to abrogate the common-law collateral-source rule in cases of benefits derived from a plaintiff's health insurance policy, it would be an absurd result to allow collateral-source deductions for money paid by a plaintiff's health insurer but not for the amount an insurer negotiates as a discount. [13] The consequences of interpreting the statute to mean negotiated discounts are not collateral sources as defined by Minn. Stat. § 548.251 would be that Swanson would recover a sum of money based on a portion of his medical bills that he never paid and never will have to pay. Moreover, the medical bills themselves might not be a true measure of the reasonable value of Swanson's injury. One commenter points out that negotiated discounts are now common and asks, If most [medical] providers in the community accept the same or similar `paid charge' in full satisfaction of their claims, can it still be honestly suggested that the `billed charge' is reasonable? Beard, supra, at 457; see also Stanley, 906 N.E.2d at 857 (Currently, the relationship between charges and costs is `tenuous at best.'). The consequence of Swanson's interpretation appears to contravene the intent of the Legislature by requiring the Brewsters to compensate Swanson for a loss he did not suffer, or by permitting double recovery. Again, given our conclusion that the Legislature intended to abrogate the common-law collateral-source rule in cases of health insurance benefits, see Minn.Stat. § 548.251, subd. 1(2), it would be inconsistent to allow courts to make deductions from an award for money paid by health insurers but not for the amounts an insurer negotiates as discounts. Accordingly, we conclude that interpreting the statute to include negotiated discounts as collateral sources is consistent with the intention of the Legislature. Swanson argues that broad interpretation of the phrase collateral sources is inappropriate because the collateral-source statute is in derogation of the common law and therefore we are to construe the statute strictly, limiting the statute's application to those instances where the Legislature expressly declares or clearly indicated it abrogated the common law rule. See Rosenberg v. Heritage Renovations, LLC, 685 N.W.2d 320, 328 (Minn.2004). Though it is true that we must strictly construe the collateral-source statute because it is in derogation of the common law, see id. at 327-28, it is also true that we should not so narrowly construe statutes that we disregard the Legislature's intent, Maust v. Maust, 222 Minn. 135, 139, 23 N.W.2d 537, 540 (1946). Our construction of the statute must be sensible and in harmony with the statute's purpose. See Maust, 222 Minn. at 139, 23 N.W.2d at 540. [14] The collateral-source statute is designed to address instances when a third partysuch as the government, an insurance company, or an organizationdischarges a tort plaintiff's medical debts whether by a money payment or otherwise. See Minn.Stat. § 548.251, subd. 1(1)-(3). We conclude that the Legislature clearly indicated that it intended to abrogate the common-law collateral-source rule in instances of compensation by a plaintiff's health insurer, including discounts negotiated by that insurer and secured on the plaintiff's behalf. See Rosenberg, 685 N.W.2d at 328. We cannot and should not lessen the scope of the statute beyond what the Legislature intended. See Maust, 222 Minn. at 139, 23 N.W.2d at 540. The dissent asserts that to deny[ ] the plaintiff the benefit of a negotiated insurance discount represents a distinct minority view among state courts that have considered the issue. Infra at D-8. In an effort to support this statement, the dissent cites several cases from other jurisdictions in which other courts have concluded that a negotiated discount should not be deducted from a damage award. But these cases do not provide support for the dissent's assertion that our decision represents a distinct minority view. We do not believe that the dissent can fairly categorize our opinion as a distinct minority because we are interpreting a law different from the law being interpreted by the 16 courts cited by the dissent. The dissent also fails to note and explain that in 15 of the 16 cases it lists, the courts interpreted and applied the common-law collateral-source rule, not a collateral-source statute. As explained earlier, the common-law collateral-source rule states that collateral sources may not be deducted from a plaintiff's damages award. Courts in these 15 cases determined that money given to a medical provider by a third party and negotiated discounts are both collateral sources and are recoverable by a plaintiff. Though we have never before addressed the foregoing question, we acknowledge that it is possible that we could have come to a similar conclusion as these 15 courts if Minnesota still followed the common-law collateral-source rule in its entirety. But this is not the case here, because Minnesota no longer strictly adheres to the common-law collateral-source rule in its entirety. In 1986, our Legislature passed a collateral-source statute that modifies the common-law collateral-source rule, and we must interpret that statute to see how it applies in this case. The sixteenth case cited by the dissent was decided by the Oregon Supreme Court. White, 347 Or. 212, 219 P.3d 566. Oregon has a collateral-source statute, but it specifically provides that insurance benefits may not be deducted from a damage award. See id. at 578, 580; Or. Rev. Stat. § 31.580 (2009). Because the Minnesota collateral-source statute provides the opposite, the Oregon case is not helpful in determining whether negotiated discounts should be deducted from a plaintiff's damage award in Minnesota. [15] Similarly, the Minnesota cases cited by the dissent, Dahlin v. Kron, 232 Minn. 312, 320, 45 N.W.2d 833, 837 (1950), and Dyson v. Schmidt, 260 Minn. 129, 140, 109 N.W.2d 262, 269 (1961), are not dispositive because they were decided when Minnesota followed the common-law collateral-source rule in its entirety, i.e., before 1986 when the Legislature passed the collateral-source statute. Further, we note that the Eighth Circuit case Ince v. Aetna Health Management, Inc., 173 F.3d 672, 676 (8th Cir.1999), quoted by the dissent cites Dahlin as its authority. While Dahlin, Dyson, and Ince may correctly state that the measure of damages for past medical expenses is the reasonable value of the services received, they do not provide support for the conclusion that a negotiated discount should not be deducted from a plaintiff's damage award under the collateral-source statute. These cases were decided, or rely on a case that was decided, before Minnesota's collateral-source statute was enacted. The dissent also notes that the jury found that a $62,259 damage award fairly and adequately compensates Swanson for his past medical expenses, and argues that we are not free to second-guess that finding. Infra at D-11. The dissent in an earlier footnote, infra at D-7 n. 3, cites Robinson, 857 N.E.2d at 1200, an Ohio case that explains that both an original medical bill and the amount accepted as full payment could be used to prove the reasonable value of medical services. The dissent is mistaken if it is attempting to suggest that the jury considered the money amount accepted in full satisfaction of Swanson's original bill to determine the reasonableness of the cost of Swanson's medical services, or that juries in future cases could determine reasonableness of damage amounts if the defendant introduces the amount of money used to discharge an original medical bill. Under Minnesota's collateral-source statute, [t]he jury shall not be informed of the existence of collateral sources or any future benefits which may or may not be payable to the plaintiff. Minn.Stat. § 548.251, subd. 5. Given that the dissent properly notes that the admissibility of a negotiated discount is not an issue in this case, it is also proper in the context of the dissent's assertion to note that the collateral-source statute suggests that while evidence of the medical bills incurred by the plaintiff is admissible, evidence of what a health insurer paid on a plaintiff's behalf, and the fact that it is less than the amount billed, cannot be considered by a jury. See Minn. Stat. § 548.251, subd. 5; see also Leitinger, 736 N.W.2d at 14 (explaining that though a rule allowing the admission of evidence regarding of the amount of money actually used to satisfy a medical bill is appealing, the evidence would confuse the jury, and the plaintiff's attempts to explain the compromised payment would necessarily lead to the existence of a collateral source). We conclude that negotiated-discount amountsamounts a plaintiff is billed by a medical provider but does not pay because the plaintiff's insurance provider negotiated a discount on the plaintiff's behalfare collateral sources for purposes of the Minnesota collateral-source statute, Minn. Stat. § 548.251. We therefore hold that the district court erred in its collateral-source determination because it failed to classify the amount by which Swanson's medical providers discounted Swanson's medical bills as a collateral source. Because of Swanson's accident with Rebecca Brewster, Swanson's medical expenses totaled $62,259.30. After Swanson's copayments of $1,169.80, $61,089.50 in charges remained. Because the money HealthPartners delivered to the medical providers ($17,643.76) combined with the negotiated discount ($43,445.74) fully satisfied Swanson's remaining $61,089.50 obligation, the total amount of collateral sources that have been paid for the benefit of [Swanson] or are otherwise available to [Swanson] is $61,089.50 for purposes of Minn.Stat. § 548.251, subd. 2(1). As required by Minn.Stat. § 548.251, subd. 3, the district court on remand should also offset the collateral-source amount$61,089.50-by $4,570.64, the total of Swanson's health insurance premium payments for the two-year period immediately before this action. Accordingly, the district court on remand should reduce Swanson's damage award by the amount of $56,518.86. Reversed and remanded to the district court. Concurring, DIETZEN, J. Dissenting, MEYER and PAGE, JJ. Took no part, ANDERSON, G. BARRY, J.