The terms paid and incurred medical expenses are applicable both in considering billing for healthcare services and in calculating damage awards in a medical malpractice case. In accounting terms, when goods and services are requested and delivered to a consumer, they are incurred and paid. Similarly, incurred medical expenses are the amounts billed by a healthcare provider to a patient for services related to the treatment and prevention of a disease or injury. These amounts are calculated before any applicable reductions are made, such as through a patient’s health insurance coverage. Paid medical expenses refer to amounts paid for these services, whether by the patient’s insurance or out of pocket.
In health insurance coverage, the final amount billed for services is usually a reduced amount depending on the contractual agreement between carrier and provider and on the types of services provided. A patient’s policy may cover various medical expenses depending on the coverage limits and deductible. Those can include office visits, procedures, prescriptions, therapy, and other treatments. A patient would be responsible for any amounts beyond those covered by their policy, and that portion is usually subject to a deductible and some type of copay.
When a healthcare provider faces a claim or lawsuit following a patient injury or adverse event, that defendant provider’s medical professional liability insurance (MPL) is triggered. Their policy can pay associated defense costs, including legal and attorney fees, for a covered professional incident. Their insurance would also cover compensatory payments, or economic and noneconomic damages, if the provider is found liable for the patient’s injury or condition. Noneconomic damages are subjective complaints that cannot be quantified (such as pain and suffering or emotional distress). Economic damages are losses that can be quantified or given a monetary value, such as lost wages or medical expenses.
In a court settlement, compensation for medical damages is based on a number of factors, including what would reasonably or customarily cover past, present, and future treatments and care, and the patient’s overall financial impact, for instance. Further, incurred and paid medical expenses are treated differently from state to state in this determination. Most if not all states will allow the patient to enter into evidence the total amount billed/incurred for medical expenses related to their injury or event. Another state may allow the defense to enter into evidence the actual amounts paid by the health insurance carrier and the patient. Some states only allow the amount billed and prohibit the defense from entering paid amounts into evidence. The amount may also be subject to a lien by the health insurance carrier for the benefits paid under their policy. It is then left to the jury to decide what amount to award the plaintiff.