In Swanson v. Brewster, Ct. File AO8-8O6, a decision of the Minnesota Supreme Court released on June 29, 2010, the court held that negotiated-discount amounts—amounts a plaintiff is billed by a medical provider but does not pay because the plaintiff’s insurance provider negotiates a discount on the plaintiff’s behalf—are “collateral sources” for purposes of the collateral-source statute, Minn. Stat. § 548.251 (2008).
In the case, David Swanson sued Rebecca Brewster and Christopher Brewster to recover damages for personal injuries Swanson sustained after a motor vehicle owned by Christopher and driven by Rebecca collided with his motorcycle. A jury trial was held to determine the amount of Swanson’s damages, and the jury awarded Swanson damages including $62,259.30 in past medical expenses. Swanson incurred $62,259.30 in medical bills at Regions Hospital and other medical providers. However, In discharge of the obligation, Swanson paid $1,169.80 in copayments and HealthPartners paid $17,643.76. The remaining amount, $43,445.74, was forgiven because the medical providers apparently discounted their medical services for Swanson as an insured of HealthPartners. It was undisputed that because HealthPartners was able to negotiate a discount on Swanson’s behalf, the entire $62,259.30 amount was discharged and Swanson would never be responsible for the amount by which Swanson’s medical bills were discounted. In anticipation of future litigation, State Farm, the Brewster’s liability insurer, paid HealthPartners $10,500 for HealthPartners’ subrogation rights against whoever may be liable for Swanson’s injuries. In accordance with Minnesota’s collateral-source statute, Minn. Stat. § 548.251 (2008), the trial court reduced Swanson’s award by the amount HealthPartners paid to Swanson’s medical providers, $17,643.76. The Brewsters appealed the court’s determination, arguing that Swanson’s award also should have been reduced by the discount HealthPartners secured for Swanson through negotiation with Swanson’s medical providers. The Brewsters asserted that the discount is a collateral source as defined by Minn. Stat. § 548.251 and therefore the court erred when it failed to deduct the negotiated-discount amount from Swanson’s damage award. The Supreme Court reversed. It held the negotiated discount was unambiguously a collateral source for purposes of the collateral-source statute. A negotiated-discount amounts—amounts a plaintiff is billed by a medical provider but does not pay because the plaintiff’s insurance provider negotiated a discount on the plaintiff’s behalf—are “collateral sources” for purposes of the Minnesota collateral-source statute, Minn. Stat. § 548.251.
Note that the rule is different in the context of the No-Fault Act. Stout v. AMCO Insurance Co., 645 N.W.2d 108 (Minn. 2002). Stout held that a no-fault insurer must provide basic economic loss benefits “even when the injured person is entitled to compensation for the same loss from a different source.” Accordingly, the no-fault insurer had to compensate Stout for the entire amount billed up to policy limits; Stout’s damages were not reduced by the negotiated discount amount. The Supreme Court in Brewster noted that the collateral-source statute is different from the No-Fault Act in form, purpose, and function.