How Am I Going to Pay These Medical Bills?
Let’s use a hypothetical to understand how the health care billing system works and who is responsible for paying your medical bills. The following is an overview of a very complex, intricate, system of civil justice that is constantly evolving. In writing this post, I have used broad generalizations and assumptions that may or may not be present in any particular case. Please do not rely on anything in this post as applying to your specific case, your friend’s specific case, or anyone else’s specific case. I made up these facts to illustrate important points. These facts are not based on any particular case. “Jim” is not an actual person.
Let’s pretend that Jim is driving to work in clear weather and in no hurry to get to his office. Jim’s light is green, and he is driving the speed limit. Suddenly, a drunk driver runs the red light and smashes into Jim’s car. Jim’s leg is broken in three places. Jim has to be rushed from the scene in an ambulance to the local emergency room. Jim is treated by an emergency room physician, an orthopedic surgeon, and other health care professionals. Jim is admitted in the hospital, where he remains for three days. When he returns home, he checks his mailbox and finds a bill from the emergency room doctor, a bill from the orthopedic surgeon, the hospital, and a bill from the ambulance service. The bills total $37,293.32. The drunk driver’s automobile insurance policy has $50,000.00 in bodily injury liability coverage.
Jim has no health insurance. He is not covered by Medicare or Medicaid. Jim has no medical payments coverage or uninsured/underinsured (“UM”) motorist insurance on his automobile insurance policy. He rents his home, has $510.54 in a savings account, and lives from paycheck to paycheck. If he loses his job, he will be unable to support himself. Jim has no family members who would be able to take him in. Now, not only does Jim have a broken leg, he has $37,292.23 in medical bills because of something that was not his fault.
“Why are these bills in my name,” Jim thinks to himself. “Why did these bills get delivered to my mailbox? These bills should be in the drunk driver’s name because he’s the one who caused this mess.” These bills should have been delivered to the drunk driver’s mailbox because he’s responsible for paying them, RIGHT??”
The more that Jim thinks about it, the angrier he becomes. “This is just not right! Why am I the one about to lose everything when that drunk driver got off with just a bruise?? How do these doctors think I’m going to pay them when I can’t work? Don’t they understand that I didn’t do anything wrong??”
Jim thinks to himself, “maybe the doctors don’t understand that I was not at fault. Maybe they don’t know about the drunk driver. I’d better call them, explain the situation, and make sure that they understand that the drunk driver is responsible for paying my bills.” So, Jim calls the emergency room and speaks to the person in charge of billing. Jim explains that he did nothing wrong, that he was simply going to work, minding his own business, when a drunk driver ran a red light and crashed into him. Jim explains that the doctor must have mistakenly sent him the bill and asks the billing clerk to correct her records and send the bill to the drunk driver.
“I’m terribly sorry, Jim,” says the billing clerk, “but you are responsible for paying your bill.” Jim is floored. “How on earth can this be happening to me?? I DID NOTHING WRONG!!!!”
While this example is purely hypothetical, similar fact patterns occur every day in cities across the United States. Because we, as a society, have done such a poor job educating our people about tort law, contract law, the insurance industry, and how each system operates, people like Jim wrongfully assume that the wrongdoer is legally responsible for paying their medical bills. This assumption could not be further from the truth. Under basic contract law, Jim is responsible for paying his own bills.
In our civil justice system, there are two separate, distinct bodies of law defined as contract law and tort law. When an injured person receives medical care, a contract is formed between the injured person and the care provider. In our example, Jim is one party to the contract, and the emergency room doctor is the other party to the contract. In exchange for the doctor’s professional services, Jim agreed to pay the doctor. Those are the essential terms of the contract. Regardless of how Jim was injured or who was at fault, the contract is between Jim and the doctor. If Jim does not pay the doctor, the doctor can sue Jim for breach of contract and win a judgment against Jim. That is how the law of contracts works.
Again using our example, the drunk driver is not a party to the contract between Jim and Jim’s doctor. There was no contract for the drunk driver to breach. If the doctor filed a lawsuit against the drunk driver for breach of contract, the judge would dismiss the case (throw it out of court) on the basis that the doctor lacked standing to bring the lawsuit. There is no other legal basis for the doctor to collect money directly from the drunk driver.
Jim thinks, “Well what about the tort system? Why can’t the doctor sue the drunk driver for a tort because he was at fault?”
The short answer is because the drunk driver did not commit a tort against the doctor. A tort is defined as a civil wrong, other than breach of contract, for which the victim is entitled to be compensated by money damages. Money damages can be general damages (sometimes called “pain and suffering”) or special damages. Special damages include things like medical bill amounts, lost wage amounts, and prescription medicine costs.
Tort law specifically excludes breaches of contract and is based on different legal principles. Common torts are negligence, slander, libel, battery, and others. To prove that another person, such as the drunk driver in our example, has committed a tort, the injured person must prove four things: (1) duty, (2) breach, (3) causation, and (4) injury. If the injured person cannot prove all four elements of the tort by a preponderance of evidence, he is not entitled to recover any money from the other person.
In our example, the drunk driver committed the tort of negligence by breaching a duty to obey the traffic control device and causing Jim to suffer an injury. Jim is the victim. Jim has a legal ground, the tort of negligence, to file a lawsuit and win a judgment against the drunk driver.
The doctor, on the other hand, has no legal ground to sue or collect a judgement from the drunk driver because (1) the drunk driver owed the doctor no duty and (2) the doctor was not injured. Therefore, if the doctor filed a lawsuit against the drunk driver for negligence, the judge would dismiss the frivolous case and likely order the doctor to pay the drunk driver’s attorney’s fees and expenses of litigation.
So, how can this be right? Where is the justice in all of this?
Here is the justice. This is how our system works.
When Jim sues the drunk driver, he asks the jury to return a verdict in his favor and award him the amount of $37,293.32, the total amount of his medical bills. The judge will then instruct the jury that under Georgia law:
[i]n all cases, necessary expenses resulting from the injury are a legitimate item of damages. As to medical expenses, such as hospital, doctor, and medicine bills, the amount of the damage would be the reasonable value of such expense as was reasonably necessary. O.C.G.A. Section 51-12-7
Note that Jim does not ask the jury to “make the drunk driver pay his medical bills.” Even if he asked the jury for such an award, the jury would not have the authority to force the drunk driver to pay Jim’s bills. The jury only has the authority to award Jim an amount of money. It is up to Jim to decide what to do with the money.
If the jury awards Jim $37,293.32, the drunk driver’s insurance company will deliver to Jim a check or draft to pay the amount of the judgment. The check will be made payable to “Jim” in the amount of $37,293.32. The check will not be made payable to the emergency room doctor, the orthopedic surgeon, or anyone else. If Jim wants to use the money to pay his doctor bills, he can do that. If he wants to pay his hospital bill, he can do that. HOWEVER, UNLESS A PROVIDER HAS FILED AN ENFORCEABLE LIEN, JIM IS NOT REQUIRED TO USE THE MONEY TO PAY HIS MEDICAL BILLS. Of course, remember that if Jim does not pay a medical bill, the provider can sue Jim for breach of contract, win a judgment, and avail itself of all legal remedies to collect the judgment from Jim.
The same result occurs in the event of a settlement, rather than a verdict. When an attorney helps a client settle a case, the insurance company issues the check, and the attorney deposits the check in his/her trust account. After waiting until the check clears, the attorney disburses the money, subject to Georgia State Bar Rule 1.15(I). It is at this stage that many attorneys violate their professional obligations to their clients by paying the client’s medical bills from the trust account automatically without fully informing the client of his/her actual responsibilities. The bottom line is that the money belongs to the client, subject to legal, enforceable liens and other rights of reimbursement. Georgia law provides a way for a doctor or hospital to establish a legal, enforceable lien, but if the provider fails to perfect such a lien, then the doctor or hospital remains a mere creditor with the same rights to recover money from Jim as a utility company or other contractor that Jim fails to pay.
In the absence of an enforceable lien, Jim or any other injured client can instruct his lawyer to disburse the total amount of money without any money being paid to a doctor or hospital. The lawyer can, and must, honor his client’s instruction and comply with impunity. Not only can the lawyer disburse settlement money without paying medical bills, the lawyer is not even required to notify the doctor or hospital that the client/patient has received any money. In fact, notifying the provider could be construed as a violation of the attorney’s duty of loyalty to his client.
However, many unethical lawyers essentially force their clients to allow them to pay the doctor bills from settlement money by telling the client that he is required to pay the medical bills. The reason for this is simple. The doctor and lawyer have an express or implied agreement to “scratch each other’s back.” The agreement between the doctor and lawyer works like this:
Doctor to lawyer: “If you will make sure that my bill is paid from the settlement proceeds, I will refer injured people to you for representation.”
Lawyer to doctor: “I will make sure that you are paid from the settlement proceeds if you will refer injured people to me for representation.”
This type of arrangement is unethical, immoral, and criminal, but it has become an epidemic. See my blog post at the following link for more information about this despicable conduct.
If a chiropractor, medical doctor, or other health care provider attempts to refer you to a specific lawyer or law firm and you have not asked for a referral, please report it to me or a fellow member of the State Bar of Georgia Fair Marketing Practices Committee. It is possible that the doctor and lawyer have a relationship similar to the one I described above, and you may suffer the consequences.