REDUCING OHIO MEDICAL MALPRACTICE DAMAGES BY ADMITTING EVIDENCE OF FUTURE PAYMENTS MADE TO PLAINTIFFS UNDER THE AFFORDABLE CARE ACT
Author: Michael Roberts, Associate Editor
I. INTRODUCTION
Ever since the Collateral Source Rule first appeared in American jurisprudence in 1854, it has become a source of discord among legal scholars.[i] The common law of Ohio has defined the Collateral Source Rule as “the judicial refusal to credit to the benefit of the wrongdoer money or services received in reparation of the injury caused which emanates from sources other than the wrongdoer.”[ii] In other words, it prohibits defendants from introducing evidence of payments received from third parties in order to reduce an injured party’s damage award. Although there are various sources from which third party payments to a plaintiff can emanate, there are four categories of collateral sources that are the most common: insurance programs, employment programs, government programs, and gratuitous donations.[iii] The rationale of the rule is that “the defendant wrongdoer should not, it is said, get the benefit of payments that come to the plaintiff from a 'collateral source' (i. e., 'collateral' to the defendant).”[iv] However, the Ohio common law rule has long been noted to contradict the principle of corrective justice, whereas the goal of tort law is to make the plaintiff whole again, rather than award double-recoveries.[v] This has led a majority of states, including Ohio, to either eliminate or make substantial changes to the Collateral Source Rule.[vi]
In 2009, only eleven states had maintained the common law Collateral Source Rule.[vii] More specifically, the rule in Ohio for medical malpractice actions has been abrogated by Ohio Revised Code § 2323.41, which states:
“In any civil action upon a medical, dental, optometric, or chiropractic claim, the defendant may introduce evidence of any amount payable as a benefit to the plaintiff as a result of the damages that result from an injury, death, or loss to person or property that is the subject of the claim, except if the source of collateral benefits has a mandatory self-effectuating federal right of subrogation, a contractual right of subrogation, or a statutory right of subrogation.”[viii]
Although the statute has yet to receive significant judicial attention regarding whether future payments of benefits are deemed “collateral sources,” the Ohio Supreme Court has considered this issue when interpreting its predecessor – Ohio Revised Code § 2305.27. In Morris v. Savoy, 576 N.E.2d 765, 766 (Ohio 1991), the court granted certification to answer whether Ohio Revised Code § 2305.27 compelled the reduction of damages in a medical claim by the amount of collateral benefits that were payable in the future.[ix] The language of Ohio Revised Code § 2305.27 required that “an award of damages * * * shall be reduced by any other collateral recovery for medical and hospital care, custodial care or rehabilitation services, and loss of earned income."[x] Upon further review, the Supreme Court held:
“Reading the language of the statute consistent with our finding that the legislature intended to eliminate certain types of double recovery, we find that future payments, to the extent they can be determined with a reasonable degree of certainty, can and should be deducted from the jury's verdict for future lost wages.”[xi]
Ultimately, the General Assembly enacted Ohio Revised Code § 2305.27 to respond to an immediate health care crisis in which the Ohio State Medical Association stated that “the number of physicians unable to continue medical practice in Ohio because of lack of adequate malpractice coverage will reach crisis proportions.”[xii] The emergency nature of the act was necessary to “insure a continuance of health care delivery to the citizens of Ohio.”[xiii] Because Ohio still ranks eleventh highest among states for the total amount of medical malpractice payouts annually, it is indisputable that the General Assembly acted with the same intent when enacting Ohio Revised Code § 2323.41.[xiv]
Based on the legislative intent in abrogating the Collateral Source Rule, Ohio courts should allow evidence of future payments made by collateral sources to a plaintiff under the Affordable Care Act (“ACA”) when assessing the reasonable value of medical services.[xv] As described below, these future payments to plaintiffs can be “determined with a reasonable degree of certainty,” which passes the test of admissibility that was proffered by the Supreme Court in Morris.
A. Future Payments made by the Affordable Care Act Deserve to be Admitted as Evidence of the “Reasonable Value of Medical Services” because “they can be determined with a Reasonable Degree of Certainty.”
The Collateral Source Rule was created when health insurance was an oddity, and thus, a rule that excluded health insurance payments when calculating medical damages did not generally overcompensate personal injury plaintiffs.[xvi] Today, health insurance is less of a rarity, especially after the passage of the ACA in 2010, and personal injury victims have an increased chance of receiving damages that far exceed the cost of their medical services.[xvii] The ACA has destroyed the justification of the Collateral Source Rule in medical malpractice suits because health insurance enables personal injury victims to obtain coverage for medical services regardless of their recovery from tortfeasors. Moreover, the counterargument to the justification of admitting evidence of payments made to plaintiffs under the ACA - that individuals will choose not to obtain health insurance under the ACA - has proven to be a fallacy. Instead, the ACA resulted in 91.4 percent of the American population acquiring health insurance in 2020.[xviii] Therefore, payments made to the plaintiff under the ACA should be deducted from medical malpractice damages because the health insurance industry is better equipped to stimulate the cost of health care through risk pooling.
As stated by Victor Matheson, a Professor in the Economics and Accounting Department at the College of Holy Cross, the ACA provides beneficial changes to the healthcare system that makes the assessment of damages predictable, and specifically, more reasonable.[xix] Essentially, there are two components of the ACA that garners support for this conclusion. First, under 26 U.S.C. § 5000A, the individual mandate provision requires most Americans to maintain “minimum essential” health insurance coverage. Although there are exemptions to this rule for certain individuals, “[n]onexempt individuals who do not comply with the mandate are subject to a ‘penalty of the greater of $695 per year up to a maximum of three times that amount ($ 2085) per family or 2.5% of household income.’”[xx] Due to over 90% of the American population having health insurance, the ACA has minimized adverse selection (i.e., where less risk-averse individuals are driven away from obtaining insurance because the more risk-averse parties make it too costly) by broadening the health insurance pool to include less risk-averse individuals, which has stabilized the cost of health insurance premiums.[xxi] According to a report by Investopedia, data suggests that “post-ACA premium increases have been rather modest compared to those prior to ACA implementation.”[xxii]
Second, the ACA instituted important limits on insurance carriers, which makes insurance contracts more standardized. These limits include limiting maximum out-of-pocket expenditures for health insurance plans, limiting variability between insurance plans by “prohibiting lifetime limits on coverage, prohibiting insurers from rescinding coverage except in fraud cases, prohibiting preexisting-condition exclusions, requiring guarantee issue and renewability of health insurance plans, and limiting rating variations based only on age, premium rating area, family composition, and tobacco use.”[xxiii] Nevertheless, these limitations have caused health insurance plans to become less variable, making it easier to discern how much money a plaintiff will receive in the future from their insurance carrier.[xxiv] Because health insurance has been expanded to practically everyone, and health insurance plans have marginal variability in terms of what they cover, future payments made by collateral sources under the ACA can be “determined with a reasonable degree of certainty.”[xxv]
Oftentimes, opponents of the admissibility of future payments made to plaintiffs under the ACA will claim that health insurance companies will always have a right of subrogation. To have a right of subrogation, an insurance company must establish a right under conventional (“contractual”) subrogation; “equitable subrogation” only arises when an entity has a “fiduciary” relationship with the insured, which health insurance companies do not have.[xxvi] Although insurance companies may create a contractual right of subrogation in their health insurance plans, data suggests that they rarely assert it. In a report analyzing the trends in healthcare subrogation, it was documented that insurance providers in 2010 only recovered $1 billion per year in subrogation, which represented only a small fraction of the $2.6 trillion in overall healthcare expenditures and the $849 billion in private insurers’ expenditures.[xxvii] More specifically, the six largest health insurers in Ohio “indicated that their subrogation recoveries ranged from 0.0% to 0.32% of incurred claims in 2009.”[xxviii] Consequently, the likelihood that an insurance provider in Ohio will assert a right to subrogation is slim, and thus, should not prohibit defendants from introducing evidence of future payments made by collateral sources under the ACA.
II. CONCLUSION
As Ohio continues to deal with the exorbitant cost of medical malpractice suits, the price of health care will continue to rise for its citizens. The ACA was enacted in 2010 and has ensured that Americans obtain health insurance coverage while standardizing the mechanism by which it is provided. It is undeniable that almost every personal injury victim will receive payments from their insurance carrier after the alleged negligence occurs. Because the Collateral Source Rule has only been known to be associated with past benefits that have been paid to a plaintiff for reparation of an injury, it cannot be assumed that evidence of future payments of benefits is excluded by the rule. Ultimately, health insurance providers are better equipped at absorbing the costs of medical services through risk pooling, which lessens the burden on physicians to obtain malpractice insurance and stabilizes the cost of health care. Therefore, future payments made to a plaintiff under the ACA by a collateral source should be admitted into evidence when deciding damages in a medical malpractice suit because these payments can be “determined with a reasonable degree of certainty.”[xxix]
[i] Cara Hanson, Comment, Ohio Collateral Source Rule Following Robinson v. Bates and the Enactment of Ohio Revised Code Section 2315.20, 40 U. Tol. L. Rev. 711, 712 (2009).
[ii] Pryor v. Webber, 263 N.E.2d 235, 238 (Ohio 1970).
[iii] Hanson, supra note i.
[iv] Pryor, 263 N.E.2d at 238.
[v] J. Zachary Balasko, Comment, A Return to Reasonability: Modifying the Collateral Source Rule in Light of Artificially Inflated Damage Awards, 72 Wash. & Lee L. Rev. 16, 24 (2015).
[vi] Hanson, supra note i, at 720.
[vii] Id.
[viii] Ohio Rev. Code Ann. § 2323.41 (West 2003).
[ix] Morris v. Savoy, 576 N.E.2d 765, 767 (Ohio 1991).
[x] Id. at 773.
[xi] Id. at 773.
[xii] Id. at 768.
[xiii] Id.
[xiv] Rosenbaum & Associates, A Comprehensive Look at Medical Malpractice Statistics (last visited Nov. 12, 2022), https://www.rosenbaumfirm.com/medical-malpractice-statistics.html.
[xv] Robinson v. Bates, 857 N.E.2d 1195, 1197 (Ohio 2006).
[xvi] Ann S. Levin, Comment, The Fate of the Collateral Source Rule After Healthcare Reform, 60 UCLA l. Rev. 736, 742 (2013).
[xvii] Id.
[xviii] Katherine Keisler-Starkey et al., Health Insurance Coverage in the United States: 2020, The United States Census Bureau (Sept. 2021), https://www.census.gov/content/dam/Census/library/publications/2021/demo/p60-274.pdf.
[xix] Joshua Congdon-Hohman & Victor Matheson, Potential Effects of the Affordable Care Act on the Award of Life Care Expenses, Econ.[ics] Dep’t Working Papers, at 10, https://crossworks.holycross.edu/econ_working_papers/10/.
[xx] Levin, supra note xvi.
[xxi] Id.
[xxii] Daniel Kurt, Did Obamacare Premiums Go Up?, Investopedia (last visited Nov. 12, 2022), https://www.investopedia.com/articles/personal-finance/071415/did-obamacare-make-premiums-go.asp.
[xxiii] Levin, supra note xvi.
[xxiv] Id.
[xxv] Morris, 576 N.E.2d at 767.
[xxvi] State, Dep't of Taxation v. Jones, 399 N.E.2d 1215, 1217 (Ohio 1980).
[xxvii] Michael J. Brien et al., Trends and Practices in Healthcare Subrogation, Deloitte, at 3 (2013), https://www.dol.gov/sites/dolgov/files/ebsa/researchers/analysis/health-and-welfare/trends-and-practices-in-healthcare-subrogation.pdf.
[xxviii] Id.
[xxix] Morris, 576 N.E.2d at 767.