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What Are Paid and Incurred Medical Expenses?
February 28, 2017

What Are Paid and Incurred Medical Expenses?

By Jim Adler
February 28, 2017 • 3 min read

Under a badly worded Texas law passed in 2003, victims seeking payments for losses after injury due to someone’s negligence face a challenge: the murky concept of only “paid and incurred medical expenses” being admissible at trial. But what are paid and incurred medical expenses, and how does that apply to you?

The answer begins with a review of the 2003 law in question: Texas Civil Practice & Remedies CODE §41.0105.

It held that, in an injury lawsuit, plaintiffs’ or claimants’ recovery or payments for medical care costs “is limited to the amount actually paid or incurred by or on behalf of the claimant.” The trouble is, that can fail to take into account the often vast difference between a hospital’s full rate and its actual, discounted rate.

Hospital Charges

Hospital charges can mean different things. A hospital may charge its full rate for services, as when a patient lacks health insurance. Or a hospital may charge a discounted rate, as when contracts with providers or coverage from Medicare or private insurance is involved. Which rate is admissible at trial?

Due to the 2003 “paid and incurred” law and later Texas court decisions, when plaintiffs seek payments for medical costs which already have been paid, the basis of their claim and the amount which can be recovered cannot be a hospital’s full charge, but rather only the costs already paid or incurred.

This means that in some cases only the actual payments or legal obligations to pay hospitals are admissible at trial. Submitting evidence of the full rate of a hospital’s charge is only admissible if the bill has not been paid and is due in full.

Eliminating hospitals’ full charges at trial works against plaintiffs. First, it fails to underscore the severity of their injuries. Also, barring hospitals’ full charges as evidence hurts plaintiffs when juries assess payments for non-economic losses, such as victims’ pain and suffering.

In reality, the law and its interpretation by some Texas courts benefits only insurance companies. Their exposure can be reduced at trial by allowing in evidence only the costs actually due or paid to a hospital and not the greater initial value of such costs — that is, a hospital’s full charges.
To put it simply: Plaintiffs’ lawyers believe the law’s “paid or incurred” language should include any amount billed by a hospital or medical provider. Defense lawyers hold that “paid or incurred” means only the amount actually due or paid to such hospitals or medical providers.

The De Escabedo Case

Along with the badly worded 2003 law, a 2011 Texas Supreme Court case has led to the controversy. That case was Haygood v. de Escabedo, 356 S.W.3d 390, 392.

It involved Aaron Haygood suing Margarita Escabedo for injuries he suffered in a car crash. His health care providers billed $110,069.12 for their services, though that was adjusted to $27,739.43 due to a Medicare agreement.

The trial court admitted as evidence the full costs charged, but an appeals court and later the Texas Supreme Court held otherwise.

Since those rulings, cases brought before courts of appeals in Houston, Dallas, San Antonio and other Texas cities have addressed the 2003 law’s ambiguity, caused by errors in its wording. That wording was meant to apply only to medical negligence claims and not all medical claims, such as those arising in a car wreck injury lawsuit.

It’s believed that the Haygood v. de Escabedo ruling on the paid and incurred medical expenses law will spur additional motions and discovery in recovering past medical expenses, via claims made in appellate courts. Other issues with the law will be raised in trial courts.

Indeed, many questions about the “paid and incurred” law and the de Escabedo case still haven’t been answered — or perhaps even addressed. And they can be extremely important to your injury claim.

Hire An Experienced Personal Injury Lawyer

In view of these things, it’s vital that you engage a knowledgeable and experienced personal injury lawyer for your claim — a lawyer who can work to ensure that the “paid and incurred” law is properly interpreted and applied in court.

About Jim Adler

Jim Adler, also known as The Texas Hammer®, is an American trial attorney and owner of Jim Adler & Associates. He has been practicing law in Texas in the area of personal injury for 54 years.

Jim Adler graduated from the University of Texas School of Law where he received his Juris Doctor degree (J.D.) in 1967.

Jim Adler is a member of the State Bar of Texas, American Bar Association (ABA) and American Trial Lawyers Association. He is licensed to practice in the United States Court of Appeals for the Fifth Circuit and U.S. District Courts of Texas. Read More

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