The “Paid or Incurred” Rule’s Application to Future Medical Damages

by Angela M. Buchanan

It’s well understood that Plaintiffs are limited to only recovering medical expenses that are “actually paid or incurred.” Haygood v. De Escabedo, 356 S.W.3d 390, 397-98 (Tex. 2001). In fact, the rule that only paid or incurred expenses are relevant evidence and are recoverable as damages, speaks to all medical expenses – both past and future. Id. at 398-399.

Some may want to argue that the “paid or incurred rule” only applies to past medical expenses. This is incorrect. The text of Texas Civil Practice and Remedies Code §41.0105 states that: “[i]n addition to any other limitation under law, recovery of medical or health care expenses incurred is limited to the amount actually paid or incurred by or on behalf of claimant.” Tex. Civ. Prac. & Rem. Code §41.0105. In Haygood v. De Escobedo, the Court held that “actually ‘paid and incurred’ means expenses that have been or will be paid, and excludes the difference between such amount and charges the service provider bills but has no right to be paid.” Haygood v. De Escobedo, 356 S.W.3d at 405 (emphasis added). As explanation for the holding, the Haygood Court stated that a plaintiff is not permitted to recover medical expenses that a service provider is not entitled to charge. Id. at 396.

Since the Haygood Court made reference to expenses that “will be paid,” it interpreted the “paid and incurred rule” to include calculations for future damages. Id. Indeed, the Dallas Court of Appeals referred to Section 41.0105 as limiting “past and future medical expenses to those ‘actually paid or incurred.’” U-Haul Intern., Inc. v. Waldrip, 322 S.W.3d 821, 854 (Tex. App. – Dallas 2010), aff’d in part, rev’d in part on unrelated grounds, 380 S.W.3d 118 (Tex. 2012) (emphasis added). Other cases, such as Henderson v. Spann, explain that if there is evidence that Medicaid or private insurance will obtain discounts for a party’s future medical expenses, then evidence that fails to account for these likely discounts is not relevant. 367 S.W.3d 301, 306 (Tex. App.–Amarillo 2012, pet. denied) (Justice Pirtle concurring) (stating that “evidence of unadjusted past medical expenses may have probative value as to the extent of reasonable and necessary future medical expenses unless there is evidence that the future medical expenses will be adjusted, discounted or written-off on the same basis as current medical expenses”).

These holdings and the interpretations of Section 41.0105 as applying to future medical expenses underscores the fact that there is no logical reason to treat past and future medical damages differently. The purpose of Section 41.0105 is to ensure that a claimant is made whole and receives the appropriate compensation but not more. See Haygood, 356 S.W.3d at 396. Awarding damages based on the full list price of medical services that a Plaintiff alleges he or she will receive would violate the Texas Legislature’s intent because it would provide excess compensation and go beyond making the plaintiff whole.

As further support for this position, in Texas, to recover future medical expenses, a plaintiff must show that there is a “reasonable probability” that he will incur such expenses in the future, and these expenses must be based on the probable cost. See, e.g., Gunn v. McCoy, 489 S.W.3d 75, 112 (Tex. App.—Houston [14th Dist.] 2016, pet. filed); Whole Foods Market Southwest, L.P. v. Tijerina, 979 S.W.2d 768, 781-782 (Tex. App.—Houston [14th Dist.] 1998, pet. denied). Evidence of future medical expenses that does not account for probable write-offs and adjustments does not meet this standard. The Texas Supreme Court has acknowledged that “[f]ew patients today ever pay a hospital’s full charges, due to the prevalence of Medicare, Medicaid, HMOs, and private insurers who pay discounted rates.” Daughters of Charity Health Services of Waco v. Linnstaedter, 266 S.W.3d 409, 410 (Tex. 2007). In fact, a provider’s full charges “are generally at least double and may be up to eight times what the hospital would accept as payment in full for the same services from Medicare, Medicaid, HMOs, or private insurers.” George A. Nation, Obscene Contracts: The Doctrine of Unconscionability and Hospital Billing of the Uninsured, 94 Ky. L.J. 101, 103 (2005-2006).

Accordingly, since the “paid or incurred” rule applies to future as well as past medical damages, attorneys bearing the burden of proof must consider and provide evidence regarding the amount that their client will, in all reasonable probability, actually incur or pay for future medical services when presenting evidence of future medical expenses through life care plans or other means.

Angela M. Buchanan is a Trial Lawyer at the Rodriguez Law Firm, P.C., and can be reached at abuchanan@therodriguezfirm.com.

 

Articles on the DAYL website are provided for informational use only, and are in no way intended to constitute legal advice or the opinions or views of the DAYL.