Texas Civil Practice & Remedies Code §41.0105: Paid or Incurred

Since being included in House Bill 4 passed in 2003, §41.0105 of the Texas Civil Practice & Remedies Code has presented challenges to plaintiffs and defendants alike in their quest to quantify a claimant's damages for medical expenses when the expenses are not wholly paid by or on behalf of the claimant. The section provides, "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." An example of a situation where §41.0105 has an application is one where a claimant with health insurance receives medical treatment at a cost of $1,000. The claimant's health insurer, through a contract with the medical provider, pays only $300 of the bill, and the provider writes off the remaining $700. The patient owes none of the balance. On its face, §41.0105 would seem to limit the claimant's recovery to the $300 actually paid by her insurance company (which would in turn usually be subject to the insurance company's lien). Primarily relying on Black v. American Bankers Ins. Co., 478 S.W.2d 434 (Tex. 1972), which predated the passage of HB 4, plaintiffs and their attorneys have argued that a claimant "incurred" the entire $1,000 bill when she was sent the bill, regardless of what was ultimately accepted by her provider as payment. The Fourth Court of Appeals rejected this argument in its opinion in Mills v. Fletcher, 229 S.W.3d 765 (Tex.App.-San Antonio 2007, no pet.). In Mills, the court of appeals held that "section 41.0105 limits a plaintiff from recovering medical or health care expenses that have been adjusted or "written off.""

The means of applying §41.0105 at trial has been addressed by the Seventh Court of Appeals in Gore v. Faye, 253 S.W.3d 785 (Tex.App.-Amarillo 2008, no pet.). In Gore, the defendant sought to introduce in evidence testimony of records custodians and medical bills showing that the plaintiff paid less than the face value of her medical bills. The judge ruled that such evidence was a "post-verdict pre-judgment matter," and sustained plaintiff's objection to the offered evidence. The jury awarded plaintiff her medical expenses but found plaintiff to be 25% at fault. The trial court reduced the damage award to account for plaintiff’s comparative fault but reasoned that it was not "feasible" to reduce the award further to account for the amounts neither paid nor incurred. The defendant complained on appeal of the trial court's refusal to admit the offered evidence regarding expenses paid or incurred. The Seventh Court of Appeals affirmed the court's decision, holding that §41.0105 contained no procedural direction for its application at trial. The court wrote, "Without a more explicit statutory provision or guidance from our supreme court, we see no abuse of discretion in the trial court’s decision to apply section 41.0105 post-verdict."

In 2009, two additional courts of appeals weighed in on the interpretation of §41.0105. Both courts concluded that a claimant can not recover the gross amount of his medical bills, because such amount is not "actually" paid or incurred by the claimant. In Matbon, Inc. v. Gries, 2009 WL 94319 (Tex.App.-Eastland January 15, 2009), the trial court permitted the appellees to present evidence to the jury of the gross amount of their medical bills. Post-verdict, the trial court considered evidence that appellees' health care providers had "written off" portions of appellees' medical bills, but nevertheless ruled that appellees could recover the gross amount of their bills. The court of appeals, citing Mills, held that the trial court erred in permitting recovery of the gross amounts of the bills. The court wrote:

By its express terms, Section 41.0105 limits the recovery of medical or health care expenses incurred "to the amount actually paid or incurred by or on behalf of the claimant" (emphasis added). The word "actually" is the operative term of the statute. It is an adverb that modifies both "paid" and "incurred."

Matbon at *5. The court of appeals acknowledged the argument that a patient normally incurs charges for medical services at the time services are rendered, but dismissed this argument as a misinterpretation of the statute. The court further wrote:
However, Section 41.0105 does not provide for the recovery of the amounts initially incurred by the claimant. To the contrary, it limits the recovery to the amounts actually incurred by the claimant or his insurer. Amounts that a health care provider subsequently writes off its bill do not constitute amounts actually incurred by either the claimant or the claimant’s insurer because neither the claimant nor the insurer will ultimately be liable for paying these amounts.
Id. (emphasis added).

The court of appeals in Escabedo v. Haygood, 2009 WL 387153 (Tex.App.—Tyler February 18, 2009) took the decision of the Matbon court a step further. At trial appellee presented evidence of the amount billed to him by his health care providers. The trial court refused to permit evidence of reductions in the amount of the bills and entered judgment on a verdict awarding appellee the full amount of his medical bills. The court of appeals not only held that appellee should not have been allowed to recover amounts written off by his health care providers, but also held that the amount of medical expenses initially incurred before write-offs was not relevant and should not be admitted into evidence at trial. The court wrote:

As its title reflects. Section 41.0105, as a measure of damages, not only limits the amount of damages recoverable, but also affects the relevance of evidence offered to prove damages. As such, medical bills reflecting only the amount "initially incurred," and understood by the trial court and the parties to omit evidence of the amount "actually incurred," are irrelevant and should be excluded at trial.

Escabedo at *3 (citations omitted). Because the evidence at trial included no bills reflecting actual payments, and thus there was no direct evidence before the jury of the amount actually paid or incurred by the claimant, the court held the evidence legally insufficient to support the jury’s award of past medical expenses. Id.

While the Texas Supreme Court has yet to weigh in directly on the matter, in Daughters of Charity Health Services of Waco v. Linnstaedter, 226 S.W.3d 409 (Tex. 2007), the Court indicated that it did favor a theory of jurisprudence that avoided a "windfall" to the injured party created by the discounted difference between a hospital's "full charges" and the amounts actually paid by the injured party's workers' compensation carrier. In discussing the extent to which a hospital could file a lien against its patient's tortfeasor, the Court said, "[w]e agree that a recovery of medical expenses in [the full undiscounted amount] would be a windfall; as the hospital had no claim for these amounts against the patients, they in turn had no claim for them against [the wrongdoer]." Id. at 412. While Linnstaedter did not deal with interpretation of §41.0105 it does support the position that compensation is the ultimate purpose of our system of jurisprudence.

While most of the above cases provide support for the argument that a plaintiff should be barred from recovering or introducing evidence of the full amount of medical expenses which are subsequently written off, the Texas Supreme Court has yet to speak directly on the issue, leaving the matter of how a court is to handle the application of §41.0105 in question. Parties should be prepared that even in the instance of properly developed evidence of the amounts actually paid to various medical providers, courts in their uncertainty may exclude that evidence from the jury and not apply any reduction of medical expenses until the time judgment is entered.