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Oregon Medicaid Benefits Excluded as Federal Social Security Benefits under Collateral Source Rule

The Oregon Court of Appeals, in Cohens v. McGee, 219 Or App 78 (2008), recently held that Oregon Medicaid benefits paid to an injured plaintiff fell within the federal social security benefits exception to Oregon’s collateral source rule.

In short, ORS 31.580 permits, but does not compel, a court to reduce a plaintiff’s damage award by the amount of “benefits” that the plaintiff receives from a third party for the plaintiff’s injuries, unless the benefits are excluded by statute. For example, certain insurance payments, retirement, disability, pension and social security benefits do not reduce a plaintiff’s damage award. On its face, the statute appears to apply only to federal benefits. The Cohen court, however, found that Oregon Medicaid benefits also fell within this exception.

In Cohen, the plaintiff appealed a judgment that reduced the economic damages that a jury awarded her. The trial court reduced the damage award by the amount of charges that plaintiff’s medical provider had written off pursuant to its agreement with the Oregon Health Plan (“OHP”) for medical services provided to plaintiff.

The jury awarded plaintiff $28,423 in economic damages for medical services, which included approximately $23,000 in medical charges that plaintiff’s medical provider had later written off in order to receive part payment from Oregon’s Medicaid program, OHP. After entry of the jury verdict, defendant moved to deduct the write-offs under ORS 31.580. The trial court concluded that OHP write-offs were collateral source benefits under ORS 31.580, and that none of the exceptions applied.

The Oregon Court of Appeals reversed the trial court, and held that the OHP benefits were excluded under the social security exception. The Court of Appeals, citing White v. Jubitz Corp., 219 Or App 62 (2008), held that Medicaid is a “federal Social Security program, and, pursuant to ORS 31,580(1)(d), a court may not reduce a plaintiff’s award of damages by the amount of write-offs that an injured party receives pursuant to Medicaid Coverage.” The Court explained that the State’s involvement in managing OHP does not change the inherent character of those benefit as federal Social Security benefits.

Oregon Medicaid benefits are now collateral source benefits that are not admissible at trial. A court or jury, therefore, cannot take these write-offs into account when determining a plaintiff’s economic damage recovery.

Thanks to John Barhoum and Jim Hillas for writing this Enews.

Insurance Defense Team

Eric Kekel, Leader
Randy Arthur
John Barhoum
Anne Foster
Damon Henrie
Sam Smith
Don Templeton
Tom Tongue

FEBRUARY 2009 v1