Superior Court Holds that Common Law Collateral Source Rule Generally Applies to Medicare

On February 6, 2014, the Superior Court of the District of Columbia decided Shell v. Rock Creek Nursing Center, Inc., No. 12 CA 8632, 2014 D.C. Super. LEXIS 3 (D.C. Super. Ct. Feb. 6, 2014), in which it considered whether the common law collateral source rule generally applies to Medicare. Id. at *1-2. The Superior Court held that it does. Id. at *6-7.

By way of background, the plaintiff in this case brought a survival action against the defendants for medical malpractice allegedly resulting, inter alia, in the plaintiff’s decedent incurring hospital bills of approximately $57,000. Id. at *1. Medicare paid the hospital approximately $10,000 as full payment for those bills in accordance with the program’s reimbursement formula. Id. The hospital “wrote-off” the remaining amount. Id. The defendants filed a motion in limine seeking “to preclude the plaintiff from seeking damages for the full amount . . . billed by the hospital.” Id. at *1-2. The plaintiff opposed the motion on the grounds that the collateral source rule permits recovery for the full amount rather than merely the amount reimbursed by Medicare. Id. at *2.

In considering the defendants’ motion, the Superior Court explained that, under the collateral source rule, “‘[a]n injured person may usually recover in full from a wrongdoer regardless of anything [the injured person] may get from a ‘collateral source’ unconnected with the wrongdoer.'” Id. at *2 (alterations in original; quoting District of Columbia v. Jackson, 451 A.2d 867, 870 (D.C. 1982)). It further explained that the collateral source rule applies “whenever (1) ‘a payment to the injured party came from a source wholly independent of the tortfeasor’; or (2) ‘the plaintiff may be said to have contracted for the prospect of a double recovery,’ because ‘a party should receive the benefit of a bargain for which he or she [has] contracted.'” Id. at *3 (brackets, ellipse, and internal quotation marks omitted; quoting Hardi v. Mezzanotte, 818 A.2d 974, 984 (D.C. 2003)).

Applying these principles, the Superior Court concluded that “the collateral source rule permits the plaintiff to seek damages for the full amount billed by [the hospital], including the amount written off by the hospital pursuant to the Medicare reimbursement formula.” Id. at *6. The Superior Court explained that the collateral source rule permits the plaintiff to seek damages for the full amount billed because “the Medicare program is administered by the federal government and is wholly independent of the defendants in this case,” and “it is a near certainty that [the decedent] received Medicare hospital benefits [during the relevant time period] as a result of financial contributions she (or her spouse, if she had one) made to the Medicare program.” Id. at 5. It further explained that the plaintiff essentially “bargained” for her Medicare benefits “by paying into the Medicare system, and under the collateral source rule, as it has developed at common law in the District of Columbia, she ‘should receive the benefit of [her] bargain.'” Id. at *6-7 (alteration in original; quoting Hardi, 818 A.2d at 984).

In ruling on the motion, the Superior Court stated that it was not expressing any view “concerning the related evidentiary question of whether the defendants will be permitted to challenge the fairness and reasonableness of the initial bills through the presentation of evidence of the actual amount accepted by the hospital as payment in full.” Id. at *7 n.1. It stated that the defendants should file another motion in limine “[i]f [they] wish to present such evidence.” Id.