Court Affirms Maryland Legislature’s Balance to the Collateral Source Rule

Posted on by Jonathan Nelson in Litigation.

Historically, Maryland judicial proceedings have been bound by the “collateral source rule;” a rule that permits a tort plaintiff to recover the full value of the cost of treatment, and other economic losses, even to the extent that the value of the treatment, etc. exceeds the associated costs actually paid.  Juries are instructed that they are not to reduce an award for medical expenses and earnings losses based on a belief that the tort plaintiff has or will receive reimbursement or payment from another (collateral) source, such as a health insurance policy or paid sick days from an employer.  Likewise, introduction of evidence of collateral source payments is generally inadmissible.

In practice, however, a significant portion of the actual medical expenses paid by health insurance companies are at a substantially lower rate than the amounts that are billed by the health care providers.  This is particularly true when Medicare is the insurance provider paying the bills.  Typically, the health care provider writes-off the difference between the amount it billed and the amount it receives in payment from the insurer.

Nonetheless, when a tort case comes to trial, the tort plaintiff can put into evidence the full amount of his/her medical bills and expenses and the jury is not informed if or the amount of any portion of the bills or expenses that have been written off.  Such a scenario creates the potential for a windfall by the injured plaintiff, with the plaintiff getting a damages award for medical expenses that will never, in fact, be paid.

In order to address this inequity, the Maryland legislature created a remedy for the defendant against whom a verdict for past medical expenses has been entered in health care malpractice claims.   Md. Code Ann., Cts. and Jud. Proc. §3-2A-09 permits a defendant, in a health care malpractice claim, to file a post-trial motion to reduce the judgment by the amount of the write-offs.

The Court of Special Appeals of Maryland has recently decided a case rearticulating and confirming that rule, effectively preventing tort plaintiffs from doing an end-run around the Maryland statute in order to realize an inflated recovery.

The case in question is Netro v. Greater Baltimore Medical Center, Inc., 238 Md. App. 62 (2018).  In Netro, the injured plaintiff had primary insurance from a private carrier, with Medicare as a secondary carrier.  Federal law requires that Medicare be repaid from the recovery by an injured plaintiff and that the Medicare recovery be maximized.  The Netro matter arose from the plaintiff’s argument that Md. Code Ann., Cts. and Jud. Proc. §3-2A-09 was preempted by the Federal law and, therefore, the plaintiff argued that the trial court could not reduce the judgment by the amount any write-offs.  If the plaintiff’s argument were successful, the result would be a larger payment to Medicare, and the plaintiff, based on the larger (unreduced) recovery.

The Court of Special Appeals rejected the plaintiff’s argument in Netro.  The Court ruled that there was no conflict between the Federal and the Maryland statutes.  The Court noted that Congress’ intent was to make Medicare a secondary payer to the maximum extent possible, not to ensure that Medicare would be reimbursed to the maximum extent possible.  In other words, Medicare is to be reimbursed based on the amount it actually paid, not the amount billed by the health care provider.  The Court of Special Appeals’ decision maintains the statutory structure in Maryland that prevents tort plaintiffs from recovering damages for past medical expenses that he or she did not pay nor are obligated to pay.

The Netro case is good news for Maryland tort defendants and liability insurers.  It clarifies the law in the particular situations where Medicare is a secondary insurer.  More importantly, Netro confirms that the Maryland appellate courts are serious about maintaining the structure established by the legislature, which provides a check and balance to the permissiveness of the collateral source rule and limits inflated recoveries by certain tort plaintiffs.