New Statute Precludes Plaintiffs in Medical Malpractice Actions from Recovering Windfall in Economic Damages

(January 18, 2017) Under certain contractual agreements between health insurers and medical providers, many medical providers agree to accept a reduced amount for medical services provided to the patient as payment in full.  The difference between the amount billed and the amount actually accepted as payment in full by the provider is commonly referred to as a “discount” or “write-off.”

As reported in our prior blog post regarding Greer v Advantage Health, the Court of Appeals held in Greer that a negotiated discount qualified as a collateral source under the statutory collateral source rule but further held that discounts are removed from the definition of collateral source pursuant to the last sentence of MCL 600.6303(4).  The Court of Appeals’ ruling allows plaintiffs in personal injury actions to potentially recover the entire billed amount for past medical expenses even if their medical providers accepted a lower amount as payment in full.  This results in a potential windfall to plaintiffs as the insurer will be entitled to a lien as to the paid amount allowing plaintiffs to potentially recover and retain the difference between the paid and billed amount.  Plaintiff medical malpractice attorneys have interpreted Greer broadly and relied on the opinion to contend that plaintiffs are entitled to admit the entire “billed” amount of medical expenses at trial while at the same precluding defendants from introducing the actual “paid” amount by relying on the collateral source rule.

The Michigan Legislature recently addressed the potential “loophole” created by MCL 600.6303 and Greer by enacting a new statute (MCL 600.1482) that limits plaintiffs in medical malpractice actions to recovery of “actual damages for medical care.”  See 2016 Senate Bill 1104; Public Act 556 of 2016.  The phrase “actual damages for medical care” is defined to include the “dollar amount actually paid for past medical expenses or rehabilitation service expenses by or on behalf of the individual whose medical care is at issue….”  MCL 600.1482(2)(a).  The definition expressly excludes “any contractual discounts, price reductions, or write-offs by any person.”  MCL 600.1482(2)(a).  In short, new MCL 600.1482 precludes plaintiffs in medical malpractice actions from introducing evidence at trial of anything beyond amounts actually paid for medical care and treatment thereby avoiding a potential windfall to the plaintiff based on application of MCL 600.6303.

The Legislature passed the new legislation on December 13, 2016 and voted to give the legislation “immediate effect.”  Governor Snyder signed the new legislation on January 6, 2017.  The bill was filed with the Secretary of State on January 10, 2017.  Given the Legislature’s vote to give the legislation “immediate effect” it appears any medical malpractice action filed after January 10, 2017 is subject to the new statute.  It does not appear that the statute will have retroactive effect and therefore it will not apply to medical malpractice actions filed prior to January 10, 2017.