Texas law limits the medical expenses a person can recover in a personal injury claim to the amount actually paid or incurred, not the full amount originally billed. “Incurred” means an amount you are legally obligated to pay, even if you have not paid it yet. The rule comes from Section 41.0105 of the Texas Civil Practice and Remedies Code, which states:
In 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 the claimant.
In practice, the recoverable figure is generally the total of what your health insurer paid, what you paid out of pocket, and any balance you still legally owe for reasonable and necessary treatment related to the injury, not the total shown on the bills.
The Paid or Incurred Rule Under Texas Law
As a practical matter, patients today rarely pay or otherwise become obligated to a hospital’s “full” charges. Medicare, Medicaid, health maintenance organizations (HMOs), and private insurers are generally charged discounted rates through their contracts with providers. Because insurers often pay only a percentage of the full rate, providers may set that full rate higher than what is normally paid. The amount a provider writes off under those contracts, often called an adjustment, is not recoverable. What counts is the amount a patient or their insurer has actually paid, or otherwise became legally obligated to pay.
For example, suppose a hospital bills $20,000, the injured person’s health insurer pays $8,000 under its contract rate, and the patient owes a $1,000 deductible. The recoverable past medical expense for that bill is generally $9,000, not $20,000.
As the Texas Supreme Court held in Haygood v. de Escabedo, 356 S.W.3d 390 (Tex. 2011), a claimant is not entitled to recover medical expenses that a provider is not entitled to be paid, so evidence of the full billed charges is irrelevant to the issue of damages. Accordingly, only evidence of recoverable medical expenses is admissible at trial. In Haygood, the jury heard the full billed amounts, and the Supreme Court held that admitting that evidence was harmful error and ordered a new trial.
How Texas Courts Have Applied the Rule
Texas courts continue to address how the rule applies in situations the statute does not spell out. For example, in the case of Big Bird Tree Serv. v. Gallegos, 365 S.W.3d 173 (Tex. App.–Dallas 2012, no pet.) the court held that a plaintiff could recover the reasonable value of medical care provided free of charge through a hospital’s charity program for low-income patients, because those expenses were incurred on the patient’s behalf.
How the Medical Expense Figure Is Calculated
The recoverable medical expense figure in a Texas personal injury claim is generally built from each bill’s paid or incurred amount, limited to treatment that was reasonable, necessary, and caused by the accident. For each provider, that usually means adding what the health insurer paid, what the injured person paid out of pocket (such as deductibles and copays), and any balance the person still legally owes. Contractual write-offs are left out. Future medical care is calculated separately, based on medical testimony about the treatment likely to be needed and its reasonable cost.
These amounts are commonly proven with billing records and affidavits under Section 18.001 of the Texas Civil Practice and Remedies Code. In these sworn statements, a provider or records custodian states that the charges were reasonable and the services were necessary. The defendant can contest an affidavit by serving a counteraffidavit.
The final figure can also be reduced by fault. Under Chapter 33 of the Texas Civil Practice and Remedies Code, a claimant’s damages are reduced by their percentage of responsibility for causing the accident in which they were injured. For example, a claimant found 20 percent at fault who has $9,000 in recoverable medical expenses would generally recover $7,200 of that amount. A claimant found more than 50 percent responsible cannot recover any damages.
Future Medical Expenses and Other Unresolved Questions
Other questions remain unresolved. For example, neither the Haygood decision nor the statute directly addresses whether or how future medical expenses should be reduced. Because the law in this area is still developing, it is important to have an experienced personal injury lawyer, like the lawyers at Bailey & Galyen, on your side when seeking compensation for medical expenses.
Contact Bailey & Galyen to talk through the medical expenses in your case. The firm offers free consultations and is available 24/7, or reach out online.
Frequently Asked Questions
1. Does Having Health Insurance Lower the Total Amount I Can Recover?
Health insurance can lower the total amount you recover because it usually lowers the medical expense portion of your claim. Under the paid or incurred rule, recoverable past medical expenses are generally limited to what your insurer actually paid under its contract rate, plus any deductibles, copays, or balances you still owe. The rule does not reduce other damages, such as lost wages or pain and suffering. The jury also generally is not told that insurance paid your bills. Depending on the type of plan, your health insurer may have a right to be reimbursed from a settlement.
2. What Happens If a Hospital Puts a Lien on My Settlement?
A hospital lien is a claim on part of your recovery that generally must be resolved before you receive your share. Under Texas Property Code Sections 55.002 and 55.005, the lien applies only if you were admitted within 72 hours of the accident and the hospital filed notice with the county clerk before money is paid. Section 55.004 caps the lien at the lesser of the hospital’s charges for the first 100 days of hospitalization, 50 percent of your recovery, or, if a judge or jury specifically awards hospital charges, that award minus your share of attorney’s fees and expenses.
3. Can I Recover Medical Expenses If I Paid Out of Pocket With No Insurance?
Yes. If you paid a provider directly, or you’re legally obligated to pay the billed amount, that amount can generally be used to calculate your medical expenses under the paid or incurred rule, since no insurer negotiated it down. The amount still has to be reasonable for the services provided, and the defendant can challenge it, including by pointing to the lower rates the provider accepts from insurers. Keeping itemized bills, receipts, and payment records helps document what you actually paid and what you still owe.
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