Medicaid Liens: The Collateral Source Rule
Cates v. Wilson, 321 N.C. 1 (1987)
Supreme Court of North Carolina
Cates v. Wilson arose out of the circumstances surrounding the birth of Morgan Reed Cates, daughter of Joyce Cates. Morgan was born with cerebral palsy and mental retardation. The mother and child, as plaintiffs, brought a medical malpractice action against Doctor Stanley Wilson (defendant).
At trial, the defense moved for a directed verdict against the plaintiffs. The jury ultimately found that Morgan Cates suffered no injury as a result of any negligence on the part of the doctor. Upon appeal to the North Carolina Court of Appeals, the court ordered a new trial. However, the defendant, seeking further review, appealed to the North Carolina Supreme Court.
Joyce Cates was under the treatment and care of Dr. Wilson. Cates originally sought the doctor’s help in reducing her weight, but when she was evaluated by the doctor she was found to be pregnant. When Cates’ daughter Morgan was delivered, she was severely handicapped. The plaintiff then filed a complaint alleging medical malpractice against the doctor. At the close of the trial, the jury found that the doctor was not negligent in providing Cates’ care.
The Collateral Source Rule provides that a plaintiff’s recovery may not be reduced because a source collateral to the defendant, such as the plaintiff’s family, employer, or insurance company, paid the plaintiff’s expenses. The collateral source rule also includes those sources which provide certain benefits to society, such as Medicaid. Medicaid, which at its essence is social legislation, equates to health insurance for those in need or disabled, and acts just as any other health insurance plan would.
This rule especially applies to payments made by Medicaid, as North Carolina law entitles the State to reimbursement for medical expenses made on a plaintiff’s behalf and prevents any type of windfall profit for the plaintiff.
In this case, the defendant was allowed at trial to introduce evidence that Medicaid paid for all of the medical expenses and would continue to pay for expenses in the future. However, the Supreme Court found that, concerning future benefits, the collateral source rule bars the defendants from offering evidence which tends to show that plaintiffs can mitigate damages by using public resources.
Essentially the Court found that if it allowed the defendant to show such evidence, it could potentially prevent Medicaid from receiving reimbursement, which would be in violation of N. C. Gen. Stat. § 108A-57. The Supreme Court quoted Judge Wells’ opinion from the N.C. Court of Appeals, which stated that the defense had “eroded plaintiff’s verdict-worthiness by suggesting to the jury that plaintiffs were already fully compensated and were trying to obtain a double recovery”. Cates v. Wilson, 361 S.E.2d 734 (1987). Thus, such evidence should not have been permitted at the trial court.
The key takeaway from this case is that although Medicaid is a public good, available to those persons who specifically qualify for its benefits, it is not to be used as a means to reduce a plaintiff’s recovery in a personal injury or medical malpractice action. Medicaid will seek reimbursement to the fullest extent of the law, and the use of such payments by the defense seeks to undermine the likelihood that the medical expenses will be reimbursed.