Public Health Law Map - Beta 5 - Medical and Public Health Law Site

medical costs from the lawsuit.
Some states have moved to modify or abolish the collateral source rule. They may
allow the judge to reduce the plaintiff’s award by the amount of already paid
expenses, allow the defense to tell the jury that the plaintiff has been compensated, or
prevent the plaintiff from claiming for reimbursed injuries. It is not clear how these
rules affect claims for future medical expenses since their payment is contingent on
the plaintiff’s maintaining his or her insurance.
5. Strategies for Paying Damages
The central problem in determining the proper compensation for an injury is the
speculative nature of the claimant’s future medical and economic needs. Traditional
insurance schemes pay medical costs as they are incurred. If the claimant requires
treatment five years after the injury, that claim is paid by the insurer at the time the
care is rendered. This creates an open-ended obligation, but it obviates the need to
speculate on the future needs of the claimant when evaluating the claim.
a) Lump Sum Payments
Courts do not like open-ended obligations. When the court enters a judgment, it
wants to be rid of the case. If the defendant is found not liable, the plaintiff may not
bring another lawsuit on the same facts. If the defendant is found liable, he or she
must pay the plaintiff a sum that will compensate the plaintiff for both existing
losses and all the future losses related to the injury. The plaintiff cannot come back
to the court and ask for money for unforeseen consequences of the injury, and the
defendant cannot come back to court and request a refund of the money if the
plaintiff does not need all of it. This finality creates an incentive on both sides to put
an unrealistic value on the plaintiff’s injuries: plaintiffs demand too high a figure,
and defendants offer too little. If the plaintiff prevails with the high value, the
defendant must pay more than is appropriate. If the defendant prevails, the plaintiff
may become a ward of the state for unpaid medical expenses.
The lump sum payment in a lawsuit is intended to last for the duration of the effects
of the injury. For many cases, this means the rest of the plaintiff’s life. These
judgments may be $1 million cash, tax free. (Personal injury settlements and court
awards are tax free.) Managing a sum of this magnitude so that it provides current
income and future security is a difficult task. In many, perhaps most, cases, the
money will be gone in a few years, and the plaintiff is left in debt, sometimes from
failed investment schemes. This is undesirable social policy because plaintiffs or
their dependents often become wards of the state after the lump sum has been
dissipated.
b) Structured Settlements
The most desirable situation is to provide a way of paying the plaintiff’s expenses
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