Under Texas law, recovery of past medical expenses is limited to the amount actually paid or incurred. Section 41.0105 was enacted in 2003 by the Texas Legislature as a tort reform initiative to limit past medical damages to only those expenses that are actually reasonable. Since its enactment, lawyers have debated and courts have opined on the meaning of “paid or incurred.”
In 2011, the Texas Supreme Court interpreted this paid or incurred language in the case of Haygood v. de Escabedo, 356 S.W.3d 390 (Tex. 2011). The suit arose from an automobile collision in which Haygood sustained injuries requiring surgery. Haygood was covered by Medicare, and a substantial portion of the bills were written off. Specifically, the medical providers billed a total of $110,069.12, but $82,329.69 was written off. At the time of trial, $14,257.41 had been paid by Medicare and $14,482.02 was due. Haygood attempted to exclude evidence of the payments by Medicare and the write-offs. The trial court granted Haygood’s motion to exclude and the jury returned a verdict awarding Haygood the full amount of his medical expenses: $110,069.12.
The Texas Supreme Court disagreed and held that Section 41.0105 limits a claimant’s recovery of medical expenses to what a health care provider has been paid or has a legal right to be paid under law or contract. Accordingly, evidence of billing that was written off is irrelevant to the issues of damages and inadmissible.
The Court did not address how to handle an uninsured claimant, and thus, we are left in a quandary of possible unequal recovery, where uninsured claimants have their entire medical bills submitted to the jury even though frequently health care providers do not expect to receive payment on the full amount. The amount of medical expenses billed to an uninsured patient are typically two to eight times the adjusted rates paid by private or government insurance. Nationally, only one out of five of uninsured patients actually pay the full amount billed. It is common for healthcare providers to reduce the full billed amounts as charity or settle for a fraction of the billed amount for uninsured patients. This is especially prevalent in Texas, the state with the highest uninsured population: 16.6 percent, which is almost double the national uninsured rate of 8.8 percent.
It is common for plaintiff’s lawyers to utilize tools like Letters of Protection, promising proceeds if/when any are received as a result of litigation. In accepting a Letter of Protection, a provider is taking a risk that he might not receive payment at all, and as a result, providers frequently involved in such dealings can tend to spread out the risk by inflating billed amounts. Even insured claimants might opt not to use their health insurance, resulting in billing that is much more expensive than the amounts that would be adjusted under insurance agreements.
In any situation where a claimant is not insured or is not using his insurance, it is important to use discovery and other tools to determine the true amount of what the provider expects to receive or has received for the services. Since Texas law also requires that medical expenses be reasonable, attorneys can use this as an opportunity for advocacy to question the witness on what amounts are typically recovered from a patient without insurance. Establishing the usual inflation in medical billing and that those amounts are rarely actually recovered can be powerful evidence in demonstrating the appropriate measure of past medical damages.
Authored by Katie A. Fillmore
 Tex. Civ. Prac. & Rem. Code § 41.0105 (“recovery of medical or health care expenses incurred is limited to the amount actually paid or incurred by or on behalf of the claimant.”)
 George A. Nation III, Obscene Contracts: The Doctrine of Unconscionability and Hospital Billing of the Uninsured, 94 Ky. L.J. 101, 103-04 & n.16 (2006).
 Id. at 104, 120.