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What Are Paid and Incurred Medical Expenses?

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The phrase “paid and incurred” in Texas civil law refers to Texas Civil Practice & Remedies Code §41.0105, which discusses the amount and type of damages that plaintiffs are entitled to recover in personal injury cases.


In addition to any other limitation under law, recovery of medical or health care expenses incurred is limited to the amount actually paid or incurred by or on behalf of the claimant.

This section of the statute went into effect Sept. 1, 2003, after tort reform legislation was passed in Texas—and it quickly became obvious that the verbiage “actually paid or incurred” was open to some interpretation. This ambiguously-worded passage of Texas civil code has been the subject of scrutiny since the section’s addition in 2003.

Below, we’ll look at what “paid and incurred” medical expenses are, and how the analysis of this phrase can affect your legal claim—making it all the more important to have the right personal injury lawyer on your side when seeking fair compensation through civil legal action.

Understanding How Medical Expenses Are Billed

Medical expenses are among the most common costs associated with a personal injury. While some plaintiffs may also be eligible for economic damages like property damage or non-economic damages like pain and suffering, almost all plaintiffs will seek damages for medical expenses after an injury.

Medical expenses may include both those that have already been incurred, as well as medical expenses that are projected to be incurred in the future based on the medical condition.

Medical expenses generally cover health care service costs such as:

  • Hospital fees
  • Doctor or specialist fees
  • Cost of exams, tests, and medical imaging to make a diagnosis
  • Cost of medical procedures used to treat a condition, such as surgery
  • Physical therapy costs
  • Cost of prescription medications
  • And more

When you receive a bill for health care services, the charges are itemized and broken down on the bill sent or given to you by the medical provider.

Charging for medical care is a complex issue in the United States, subject to both government regulations and the influence of private insurance companies. Most people are not actually charged the “full rate” or “list rate” for medical treatment. When you receive a hospital bill, you’ll usually find itemized lines for:

  • The full cost of medical services
  • The amount your insurance company or Medicare is paying
  • Any write-offs or adjustments
  • The amount you are actually required to pay

Patients who do not have health insurance or Medicare are often required to pay a higher cost than those who are covered by insurance. A discount is typically provided to patients who have insurance policies through a company with which the hospital has an affiliation, and is thus eligible for reimbursement.

Why the Phrase “Paid and Incurred” Matters to Your Personal Injury Case

Based on the language in the 2003 tort reform to Texas civil code, there is vagueness over what the phrase “actually paid or incurred” means when it comes to medical expenses.

So what are paid and incurred medical expenses? There are generally two interpretations:

  • Paid and incurred medical expenses are the full amount billed by the hospital.
  • Paid and incurred medical expenses only include the amount actually owed or paid to the hospital.

As you can see, the first interpretation leans much more in favor of the plaintiff than the second. On the other hand, the second interpretation benefits insurance companies. The second interpretation means that if you are not charged a portion of the cost of health care, you are not legally entitled to make a claim for that part of the bill in a personal injury lawsuit.

Here’s an example to help illustrate how this idea might work in a personal injury case.

You were injured in a car accident and rushed to the emergency room. After treating your injuries, the hospital sent you home with a bill for $20,000. Your insurance company covered $10,000 and the remainder was covered through a hospital write-off.

Should you be eligible for recovering the full cost of your bill, $20,000, or only for the portion you paid through your insurance carrier, $10,000? Obviously, this makes a big difference to injured plaintiffs looking toward a future of medical care for severe injuries. And that is the exact question Texas courts must now work to answer when faced with interpreting what paid and incurred medical expenses actually are.

Legal Precedents in Texas Involving Paid and Incurred Medical Expenses

Because there is so much ambiguity surrounding the wording of “actually paid or incurred,” Texas judges often look to previous cases that set a precedent for the interpretation of this phrase.

The most well-known legal precedent for the “paid or incurred” issue is Haygood v. De Escabedo, which reached a decision Jan. 27, 2012 in the Texas Supreme Court.

In the case, Aaron Haygood filed a personal injury lawsuit against Margarita De Escabedo following a car accident that occurred in a grocery store parking lot. Haygood sustained neck and shoulder injuries that left him with some impairment. After receiving treatment from a total of 12 health care providers, Haygood was given a bill for a total of $110,069.12 in medical expenses. However, because Haygood had Medicare Part B coverage, his hospital bills were adjusted with credits of $82,329.69, leaving a remainder of $27,739.43. At the time of the trial in 2011, $13,257.41 had been paid and $14,482.02 was still owed.

The Texas Supreme Court held that only medical expenses that have been or must be paid by the defendant are admissible in court, meaning that Haygood could only recover compensation for the costs he actually owed and had paid the hospital, not the full amount of health care service costs listed on his hospital bill. The decision stated that “‘actually paid and incurred’ means expenses that have been or will be paid, and excludes the difference between such amount and charges the service provider bills but has no right to be paid.”

It is clear that when health insurance or Medicare/Medicaid is involved in a personal injury case, it can become highly complicated. Without skilled and experienced legal representation, plaintiffs stand at risk of losing out on a great deal of money—money they need to cover the past and future medical expenses they’ve incurred as a result of their injuries.

Find a Legal Advocate With Experience as a Plaintiff’s Attorney

At Buckingham & Vega Law Firm, every attorney on our team works with the goal of ensuring that our clients are given fair treatment by the courts. Part of that is making sure that the “paid and incurred” law is appropriately interpreted and applied so that you receive full and fair compensation.

We are a plaintiff’s law firm, and we’ll always side with the injured victim over the insurance company. If you were injured in an accident, call us. We have what it takes to make sure your case gets the best outcome possible.

A free, no-obligation consultation is available to prospective clients in Houston and surrounding areas.

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