Measuring Past and Future Medical Expenses in Personal Injury and Medical Malpractice Cases: Time for an Overdue Course Correction

Determining the reasonable value of medical expenses for the purpose of assessing economic damages in tort cases continues to pose challenges for the legal system. Legal debate over whether billed charges or paid amounts should form the basis for establishing economic damages in tort cases continues, and court opinions show wide diversity of perspectives in the application of the Collateral Source Rule and in the concept of reasonable value. This paper argues for the need for new thinking and measurement approaches that recognize how contemporary medical care is provided and how health insurance and payment methods operate. It presents data, offers discussion and provides case examples with the aim of advancing understanding of how the reasonable value of medical care may be defined and measured for the purpose of assessing economic damages that may be recoverable in tort cases. Hospital billed charges are compared to operating costs both longitudinally and cross-sectionally. The results of this analysis raise serious questions about the validity of using billed charges to determine the reasonable value of both past and future medical services. It is time the legal system make a “course correction” to better align the assessment of economic damages with the reasonable value of past and future medical expenses.