No Windfall to Injured Employees

In January this year two decisions, one from the Louisiana Supreme Court and the other from the Fifth Circuit Court of Appeals, placed limits on recovery by employees for medical costs incurred as a result of job related injuries.  Historically, when a seaman is injured while in the service of the vessel his employer is obligated to pay all reasonable medical costs incurred in his treatment until he reaches maximum medical improvement (MMI), the point when his condition has plateaued and further treatment is palliative as opposed to curative.  For those who work on land and are entitled to workers’ compensation benefits (whether it be state compensation or Longshore and Harbor Workers’ compensation) due to an injury sustained while in the course of their employment the law requires that the employer pay all medical expenses incurred until the employee reaches maximum improvement.

The majority of the time, the process works smoothly.  When an employee is legitimately injured on the job either at sea or on land, the employer steps up and discharges its duty under the law.  However, there are instances where the legitimacy of the injury is suspect or a dispute may arise as to when the employee has reached MMI.  In those instances, litigation is often the result and the employee will make a claim for all medical costs incurred.  Invariably, the employee/plaintiff makes a claim for the total amount of medical costs incurred irrespective of whether he actually incurred those full costs.  In the past this has resulted in a windfall for the employee.  The following two cases recognized this inequity.

In Benoit v. Turner Industries Group, LLC, 2011-1130 (La. 1/24/12), — So. 2d —-, 2012 WL 182131, the Supreme Court was called upon to determine whether Turner should be required to pay the plaintiff/employee $625,168.27 in medical costs incurred in his treatment.  Benoit sued his employer for benefits and medical costs alleging that he had developed acute myeloid leukemia during his twenty-seven year employment due to his exposure to benzene.  Following the trial, the Office of Workers’ Compensation awarded Benoit benefits, all medical costs and attorneys’ fees.  Turner appealed.  On the outset, the Court noted that noted that Turner qualified for the Medicaid program.  Of the total $625,168.27 charges submitted, Medicaid paid $203,124.68.  The remaining $422,043.59 was written off under the Medicaid program.  Benoit claimed that he was entitled to the total costs paid, $203,124.68.  With regard to the $203,124.68, Turner pointed to La. R.S. 23:1212, Paragraph A, which states in part that “payment by any person or entity, other than a direct payment by the employee, as relative or a friend of the employee, or by Medicaid, shall extinguish the claim against the employer or insurer for those medical expenses….”  Turner argued that since Benoit had not paid a cent, he was not entitled to recovery.  Benoit pointed to Paragraph B of the statute which states, in part, that payments made by Medicaid “shall not extinguish these claims,” and any such payments by Medicaid shall be subject to recovery by the State.

The Court noted that prior to 1990 the law prohibited an employer from taking an offset for medical expenses paid by a health care insurer.  Responding to pressure from the business community, the legislature amended the law to permit a medical offset to the employer if the benefits were paid by someone other than a direct payment by the employee, a relative or friend of the employee.  In opinions that followed, the courts held that this included payments made by Medicare, even though they recognized that as a result the State will ultimately bear much of the burden for the medical expenses incurred, resulting in a windfall to the employee.  To remedy this problem the law was amended to provide that if Medicaid pays the medical costs, the State has the right to seek reimbursement from the employer.

Applying these principals, the Louisiana Supreme Court held that Benoit had no right of recovery of the $203,124.68 from Turner.

As for the $422,043.59 that Benoit claimed the Medicaid wrote off, the Court noted that it had ruled in a prior decision that when an injured plaintiff is a Medicaid recipient the law requires that the health care provider accept as full payment the amount set by the Medicaid fee schedule which is invariably less that than charged by the provider.  The difference between what is charged and what is paid is referred to as the “write-off” amount.  See Bozeman v. State, 2003-1016 (La. 7/2/04), 879 So.2d 692.  In Bozeman, a widow  brought suit against the Louisiana Department of Transportation for the death of her husband due to dangerous highway conditions.  The Court held that where the plaintiff pays no enrollment fees, has no wages deducted and otherwise provides no consideration for the benefits he receives, he is unable to recover the “write-off” amount.  Benoit claimed that Bozeman was not applicable because it was a tort action and that he was forced to seek benefits through Medicaid because his employer refused to live up to its statutory obligation to pay his medical costs.

The Supreme Court did not buy Benoit’s argument.  The Court found no conflict between the Medicaid write-off process and Workers’ Compensation law and found that Benoit, because he paid nothing for Medicaid benefits, would receive an improper windfall if he was allowed to recover for medical expenses which have been reduced by health care providers as a result of their contractual arrangements with Medicaid.  Such double recovery of damages is not permitted under Louisiana law.  (Please note that the courts have not adopted this rule when it comes to payments made by Medicare on the theory that the employee pays into the Medicare program for its benefits.)

In Manderson v. Chet Morrison Contractors, Inc., — F.3d —-, 2012 WL 10541 (5th Cir. 2012), a seaman brought suit for his injuries against his employer.  He also sought payment from this employer all medical expenses incurred.  In a judge-tried case, the judge dismissed Manderson’s negligence and unseaworthiness claims, but awarded him maintenance and cure (his medical costs).  On appeal, the employer contended that the cure award should not have included the difference between the amount Manderson’s medical providers charged and the lesser amount they accepted from his insurer in full payment.  The trial judge found that as part of his employment with CMC, Manderson paid fifty percent of the cost of his health insurance and ruled that CMC was liable to pay the full amount, not the “discounted” amount the provider accepted.

On appeal, the Court found that CMC was only obligated to pay the lesser amount.  The duty of the employer to pay cure is only in the amount of those expenses “actually incurred.”  The relevant amount is that amount needed to satisfy the seaman’s medical charges.  This applies whether the charges are incurred by a seaman’s insurer on his behalf and then paid at a written down amount or incurred and then paid by the seaman at a non-discounted rate.  Even though Manderson paid a percentage of his healthcare premiums, because this was “cure” which is owed by the employer irrespective of negligence, CMC was only responsible for the amount actually paid.  The Court noted that if the medical costs were owed due to the negligent conduct of CMC or the unseaworthy condition of its vessel, that CMC would be responsible for the higher amount.  However, in the context of its cure obligation where fault is not an issue, the employer is only on the hook for the lesser amount, irrespective of the source of payment.

Both of these decisions are welcome news to both marine and land based employers.