2 Comments

The problem with the application of the collateral source rule in modern tort litigation is that in practice it allows recovery of “medical bills” that have no significant relationship to reasonable and necessary expense in that since no one pays the bill generated by the hospital the bill does not reflect the true value of the service. Since hospitals get most of their revenue from negotiated rates with insurers, that negotiated rate reflects the true economic value of the services rendered. The hospital and the insurer are the only ones with equal bargaining power and the bills generated by the hospital don’t reflect that price.

Agreed, Nettles–the tortfeasor is compelled to pay the “manufacturer’s suggested retail price” of the bill (i.e.: face value of the bill) but the patient’s insurer pays the negotiated rate (the market clearing price). Then, the plaintiff gets to pocket the difference (and lawyers take a third). This is not equitable and violates the principle of indemnity. This is not the same as saying a tortfeasor should benefit (i.e.: not repay or otherwise be responsible for medical costs he was responsible for, regardless if the plaintiff was insured) but not at above market rate. Trial lawyers always scream bloody murder when defendants challenge this. It’s a cash cow for them.