North Carolina Rule 414 Evidence -- Medical Bills / Expenses

In 2011 North Carolina enacted a rule of evidence which seems to affect the damages recoverable in many cases. In order to understand the import of this new rule, it is necessary to understand the general rule for the recovery of damages, the language of the new rule, and the background on the rule. It is also critical to examine whether the rule is substantive or procedural, whether the rule applies to future medical expenses, and the manner in which this affects the trial.

General Measure of Damages for Medical Expenses

In order to recover medical expenses, the services must be "reasonably necessary." They must also be due to the accident.

These expenses include the expenses for treatment and diagnosis. It also includes any medical expense incurred as the result of the accident. "The plaintiff is entitled to recover for medical and hospital bills to the extent that they may or have been incurred as the proximate result of the injuries complained of."

If the medical service was reasonably necessary, then the next inquiry is determining the amount of compensation for those services to which the plaintiff is entitled. The case law has used various language in describing the medical bills recoverable. Some cases say that damages "may embrace indemnity for actual expense incurred in nursing, medical attention." Other cases say that the damages are "understood to embrace indemnity for actual nursing and medical expenses . . . ." Other authority states that the "medical charges" must be "reasonable in amount."

The plaintiff can recover a bill which has been paid and also a bill which has simply been incurred but not paid.

The Pattern Jury Instruction simply requires that the bills be "reasonably incurred [or to be incurred in the future] by the plaintiff as a proximate result of the negligence of the defendant." The requirement that the service be necessary and that the cost be reasonable are merged into the one word "reasonably

North Carolina Rule 414

Pursuant to legislation enacted in 2011 (applicable to claims arising on or after October 1, 2011; SB 586, Section 1.1), Rule of Evidence 414 states:

Evidence offered to prove past medical expenses shall be limited to evidence of the amounts actually paid to satisfy the bills that have been satisfied, regardless of the source of payment, and evidence of the amounts actually necessary to satisfy the bills that have been incurred but not yet satisfied. This rule does not impose upon any party an affirmative duty to seek a reduction in billed charges to which the party is not contractually entitled.

There are obviously no appellate cases construing this new rule yet, and so we can only speculate as to how this new rule will play out. Several aspects of this rule are addressed below.

Background on Rule 414

This Rule came about during a legislative session that saw several efforts aimed at tort-reform, which were generally conservative in nature. Interestingly, North Carolina does not seem to have any appellate case law addressing the issue addressed in this statute: i.e. the amount of medical bills which the plaintiff can recover when the original bill is reduced pursuant to (a) the Medicare program, (b) the Medicaid program, (c) an agreement with private insurance (e.g. Blue Cross Blue Shield), or possibly (d) a voluntary write-off by the hospital.

Other states have struggled with this issue, most commonly by case law and sometimes by statute. Most states seem to have held that the plaintiff is entitled to recover the full amount of the original bill, regardless of any reduction (or write-off) of the bill.

Most states did this pursuant to the collateral source rule, viewing the write-off as a collateral source.

Other courts, however, held that the plaintiff never really "incurred" the full bill, and hence the plaintiff could not recover for the full original bill

Some states enacted legislation that limited the plaintiff's recovery to the actual amount paid by e.g. Medicaid or Medicare, and did not address other reductions in the bill. Some states enacted reform in this area that affected only medical malpractice actions.

Against this backdrop in other states, and the void of controlling case law from North Carolina on this issue, the North Carolina Legislature ultimately enacted the statute quoted above. There were four previous versions of the statute.

Is Rule Procedural (evidentiary) or substantive?

This new rule is, on its face, a rule of evidence, and not a substantive rule pertaining to the recovery of damages. Therefore, if the defendant does not object to the introduction of such evidence, then it is not clear whether the plaintiff can recover the full amount of the original bill, or only the amount paid to satisfy the bill.

It is likewise not clear how the new Rule affects the jury instructions. Presumably the legislative intent was to limit the plaintiff's recovery to the amounts actually paid (or payable). Thus, presumably the jury will be instructed that the plaintiff can recover only those amounts paid or payable, but this point remains unsettled.

Future medical expenses

The Rule does not apply to future medical expenses. Therefore, even though a plaintiff has Medicaid or Medicare coverage, or private insurance which pays a lower rate, the plaintiff can presumably introduce evidence and recover the amount of the full future bill. This therefore creates an anomaly in the law. Of course, there is not necessarily a guarantee that a person will have Medicaid or private insurance in the future, but these events could be quite likely; and Medicare coverage would continue.

Disclosure of Payor and Subrogation to Jury

The Rule does not address whether the jury should be advised that a third-party (e.g. Medicare) paid the bill. Presumably the collateral source rule continues to apply and the jury would not be informed that a third party paid the bill. This does, however, seem to present pragmatic issues for trial. The plaintiff would, in theory, have to limit his testimony to the amounts paid to "satisfy" the bill, and not the original bill; and he would not identify the payor of the bill. A sophisticated juror could also infer that the plaintiff had Medicaid, Medicare or insurance based on the low amount of the bill.

Scope of rule

The new rule is very broad on its face, and its application is not limited. Thus, if the plaintiff wanted to introduce the amount of prior medical expenses to demonstrate the extent of medical treatment (in addition to introducing the actual medical records of course), to corroborate the extent of his injuries, the Rule would presumably apply, even if the plaintiff was not actually seeking the recovery of medical expenses.

Although the context of this webpage is the automobile accident case, query whether this Rule would apply in a criminal action by the State against a health care provider for Medicaid fraud. On its face, the rule would arguably apply (stating "Evidence offered to prove past medical expenses shall be limited to evidence of the amounts actually paid to satisfy the bills . . . .")

The Rule would presumably apply to situations where the bill is written-off based on agreements with Medicaid, Medicare, or a private insurer. It is less clear whether the rule applies to a situation where the provider simply writes-off the bill without any payment. (For example, where the patient likely has no recoverable assets, the provider might simply write-off the bill, rather than attempt to collect it, and rather than having the bill on the books as an "account receivable.")

Such a bill has not been "satisfied," and thus this issue is controlled by that portion of the Rule limiting "evidence [to] amounts actually necessary to satisfy the bills that have been incurred but not yet satisfied." In such a case (where the provider has simply written-off the bill), it is not clear what amount would be necessary to satisfy the bills. The defendant could argue that no amount (i.e. zero) is necessary to satisfy the bill, because there is no pending bill. The plaintiff could argue that the full amount is required to satisfy the bill. This issue could be further complicated by whether the bill that was written-off is listed on the plaintiff's credit report; the plaintiff could choose to voluntarily pay the debt that was written-off if it would help her credit score, in which event it makes more sense to allow the plaintiff to recover the original bill (which the provider has written-off).

This website contains other recent North Carolina cases.


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