Illinois Association of Defense Trial Counsel
Springfield, Illinois | www.iadtc.org | 800-232-0169
IDC Quarterly | Volume 18, Number 3 (18.3.15)
Evidence and Practice Tips
By: Joseph G. Feehan
Heyl, Royster, Voelker & Allen
Injured Plaintiff Entitled to Recover
Face Value of Medical Bills Even Though
Healthcare Providers Accepted Reduced Amount from
Medicare or Medicaid
In Wills v. Foster, 2008 WL 2446696 (Ill. June 19, 2008), the Illinois Supreme Court held that the
collateral source rule applies to medical bills paid by Medicare or Medicaid. The Wills court further held that a
plaintiff may recover the entire amount of medical bills initially billed even though the medical providers
ultimately accepted a discounted amount from Medicare or Medicaid to fully satisfy the bills.
In Wills, the plaintiff was injured when the defendant drove through a red light and struck the plaintiff’s
vehicle. The plaintiff injured her neck and underwent a spinal fusion. The plaintiff incurred total medical bills
of $80,163.47. However, the amount actually paid to plaintiff’s medical providers by Medicare and the Illinois
Department of Healthcare and Family Services (“DHFS” or “Medicaid”) was $19,005.50.
At trial, the plaintiff sought to introduce evidence establishing that her medical bills totaled $80,163.47.
Conversely, the defendant filed a motion in limine which sought to limit the evidence regarding the medical
bills to the amount actually paid: $19,005.50. The trial court denied the defendant’s motion and allowed the
jury to consider $80,163.47 as the amount of the plaintiff’s past medical expenses. In light of this ruling, the
defendant then stipulated to the amount of the plaintiff’s medial bills; and they were entered into evidence.
The jury awarded the plaintiff medical bills of $80,163.47, plus $7,500 for pain and suffering. The
defendant filed a post-trial motion requesting that the court reduce the amount of the jury’s award for past
medical expenses from $80,163.47 to $19,005.50. The trial court granted the defendant’s motion and reduced
the plaintiff’s recoverable medical bills to $19,005.50. The trial court’s order was contingent upon the
assumption that the medical providers would not seek to recover from plaintiff the difference between the
amount billed and the amount paid by Medicaid and Medicare.
The plaintiff appealed, contending that the collateral source rule applied and that this rule precluded the
court from reducing the amount of her recoverable medical bills. In support of her argument, the plaintiff relied
heavily upon the Illinois Supreme Court’s decision in Arthur v. Catour, 216 Ill. 2d 72, 833 N.E.2d 847 (2005).
In Arthur, the court held that the collateral source rule allows a plaintiff to submit the entire amount of a
medical bill into evidence—even though the medical provider accepted a much lower amount as full
satisfaction of the bill, pursuant to a preferred provider agreement. However, the defendant in Wills contended
that the Arthur decision did not apply because, unlike the plaintiff in Arthur, the plaintiff in Wills did not pay
premiums or any other consideration to obtain the medical benefits from Medicare and Medicaid. Further, the
defendant argued that the plaintiff in Wills did not bargain or contract for these benefits.
The Fourth District Appellate Court held that the Arthur decision did not apply to situations where the
plaintiff did not bargain or pay for the benefits but, rather, received the benefits free of charge from the
government. In other words, the Fourth District distinguished Arthur because that case had involved a private
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insurance company, not Medicaid or Medicare. Wills v. Foster, 372 Ill. App. 3d 670, 672-73, 867 N.E.2d 1223
(4th Dist. 2007). The Fourth District noted that the Medicare/Medicaid situation is factually more similar to the
scenario addressed by the Illinois Supreme Court in Peterson v. Lou Bachrodt Chevrolet Co., 76 Ill. 2d 353,
392 N.E.2d 1 (1979), where the court held that the plaintiff could not recover the value of free medical services
rendered by the Shriner’s Hospital.
The Fourth District carefully reviewed the Arthur and Peterson decisions and determined that Arthur did
not overrule Peterson, stating:
With our supreme court’s decision in Peterson, it appears Illinois has aligned itself with the former set
of cases and intends to exclude Medicaid and Medicare payments as “collateral sources” within the
meaning of the rule. Akin to the plaintiff in Peterson, those individuals, like plaintiff here, covered by
Medicaid or Medicare do not make “expenditures” and have not bargained for their coverage. A
covered plaintiff’s liability is nonexistent as well because by accepting payments from DHFS,
Medicare, or Medicaid, health-care providers have agreed such payments constitute full satisfaction of
their fees. See 305 ILCS 5/11-13 (West 2004); 89 Ill. Adm. Code § 140.12(i), as amended by 24 Ill.
Reg. 18320 (eff. December 1, 2000). We therefore hold that plaintiff is precluded from recovering the
billed amounts and is limited to recovery of those amounts paid by DHFS and Medicare.
Wills v. Foster, 372 Ill. App. 3d at 675.
The Illinois Supreme Court allowed the plaintiff’s petition for leave to appeal. On appeal, the court
conducted a thorough analysis of the origins of the collateral source rule and its previous decisions in Peterson
and Arthur. The court also reviewed numerous decisions from other jurisdictions and analyzed the various
approaches taken by these courts in determining the admissibility of medical bills when medical providers
accept a significantly reduced amount from Medicare or Medicaid in full satisfaction.
The Wills court overruled Peterson and adopted a doctrine known as the “reasonable-value approach.” The
Wills court described the reasonable-value approach as follows:
Most courts follow the reasonable-value approach. Courts applying this approach hold that the
plaintiff is entitled to recover the reasonable value of medical services and do not distinguish between
whether a plaintiff has private insurance or is covered by a government program.
***
The vast majority of courts to employ a reasonable-value approach hold that the plaintiff may seek to
recover the amount originally billed by the medical provider.
Wills, 2008 WL 2446696 at *7, *9.
Defendant argued that the court should adopt the “benefit-of-the-bargain” theory rather than a reasonablevalue approach because the court previously applied the benefit-of-the-bargain method in the Arthur case.
Under the benefit-of-the-bargain theory, a plaintiff is allowed to recover the full value of the medical expenses
only when the plaintiff has paid some consideration for the discount (e.g., health insurance premiums). In other
words, the defendant contended that Arthur allowed a privately insured plaintiff to seek recovery of write-offs
but did not allow such a recovery when the plaintiff’s bills were satisfied by Medicare or Medicaid. The Wills
court rejected the defendant’s interpretation of Arthur, stating:
[W]e make clear today that we follow the reasonable-value approach, not the benefit-of-the-bargain
approach. We do so for several reasons. First, we note that, when discussing the policy justifications
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for the collateral source rule, this court has stated that “‘the wrongdoer should not benefit from the
expenditures made by the injured party or take advantage of contracts or other relations that may exist
between the injured party and third persons.’” (Emphasis added.) Arthur, 216 Ill. 2d at 79, quoting
Wilson, 131 Ill. 2d at 320. Clearly, another relationship between an injured plaintiff and a third party
could be a relationship with the government that allows the plaintiff’s medical expenses to be paid
because of factors such as her age or income level. Similarly, an arrangement between the plaintiff
and a physician who agrees to perform free medical services is a relationship with a third party who is
collateral to the tortfeasor. In either case, the benefit is intended to be for the plaintiff, not for the
tortfeasor. A “‘benefit that is directed to the injured party should not be shifted so as to become a
windfall for the tortfeasor.’” Arthur, 216 Ill. 2d at 79, quoting Restatement (Second) of Torts §920A,
Comment b, at 514 (1979).
Second, Arthur relied on section 920A of the Restatement, and that section supports a reasonablevalue approach. As set forth above, the Restatement allows all injured plaintiffs to recover the
reasonable value of medical expenses and does not distinguish between those who have private
insurance, those whose expenses are paid by the government, or those who receive their treatment on
a gratuitous basis. See Restatement (Second) of Torts §920A, Comments b, c, at 514-15 (1979).
Third, as discussed more fully above, the deficiencies of the benefit-of-the-bargain approach are
obvious. Courts employing this approach discriminate amongst plaintiffs, holding that only the sick or
disabled plaintiff whose expenses are covered by Medicaid may not seek to recover the full billed
amount of medical expenses.
Id. at *10-*11.
The Wills court also addressed whether a defendant can introduce evidence of the reduced amount
paid to the medical provider to assist the jury in determining what constitutes “reasonable-value” of medical
services. The court made it clear that a defendant is prohibited from introducing any evidence that the
plaintiff’s medical bills were satisfied at a discounted rate, because such evidence would indirectly violate the
collateral source rule.
The Wills court stated:
We agree with the latter cases. In Arthur, this court made clear that the collateral source rule “operates
to prevent the jury from learning anything about collateral income” (emphasis added) and that the
evidentiary component prevents “defendants from introducing evidence that a plaintiff’s losses have
been compensated for, even in part, by insurance.” Arthur, 216 Ill. 2d at 79, 80. Thus, defendants are
free to cross-examine any witnesses that a plaintiff might call to establish reasonableness, and the
defense is also free to call its own witnesses to testify that the billed amounts do not reflect the
reasonable value of the services. Defendants may not, however, introduce evidence that the plaintiff’s
bills settled for a lesser amount because to do so would undermine the collateral source rule.
***
Under the reasonable-value approach that we have adopted, the fact that the collateral source was the
government instead of a private insurance company is a distinction without a difference. All plaintiffs
are entitled to seek to recover the full reasonable value of their medical expenses.
Id. at *13.
The Wills court answered numerous questions which had been created by the Illinois Supreme Court’s
decision in Arthur. Unfortunately, the answers provided by the Wills decision will make it much more
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challenging for defense counsel to obtain favorable settlements and jury verdicts for their clients. It is
well-known that juries often consider the amount of medical bills incurred when arriving at intangible
awards for past and future pain and suffering, disability, loss of normal life, permanency, etc. Thus,
the overall settlement value and jury verdict range of a claim could be significantly affected by the
Wills decision.
About the Author
Joseph G. Feehan is a partner in the Peoria office of Heyl, Royster, Voelker & Allen, where he concentrates his practice in commercial litigation,
products liability and personal injury defense. He received his B.S. from Illinois State University and his J.D. (Cum Laude) from the Northern
Illinois University College of Law. Mr. Feehan is a member of the ISBA Tort Law Section Council and is also a member of the Peoria County,
Illinois State and American Bar Associations. He can be contacted at jfeehan@hrva.com.
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