Benefits of Using Consumer Legal Funding to Pay Medical Expenses

Using consumer legal funding to pay medical expenses can significantly benefit a plaintiff’s personal injury case. That funding, known as “medical funding,” will:

• help ensure greater recovery on claims
• provide admissible evidence of economic damages and pain and suffering
• limit attacks on the credibility of the expert medical provider testifying regarding the necessary expenses incurred

Medical Expenses Are a Critical Component of Personal Injury Damages

Proving past and future medical expense damages with admissible evidence is critical in a plaintiff’s personal injury case. A lot of money depends on that proof. According to a 2019 study of motor vehicle accidents nationwide, 4.5 million people were injured in 14.2 million motor vehicle crashes in the United States. In turn, those injuries resulted in present and future medical costs of $30.9 billion. ¹

Moreover, proving past and future medical damages can be essential to establishing non-economic damages. It is a common practice in some states, such as New York, to compute pain and suffering damages as a multiple of the medical and other economic costs incurred.² Studies show that pain and suffering damages correlate with economic damages based on the tendency of juries to increase pain and suffering awards as medical costs increase. ³

Medical Funding Provides Admissible Evidence of Recoverable Damages

To prove economic damages in a personal injury case, a plaintiff must submit admissible evidence of any past and future medical expenses. What amounts to admissible evidence and what damages are recoverable depends on the state where the claim is being litigated. For example, in New York and Texas, a plaintiff must prove the actual costs paid or incurred for any medical services.⁴ In California, only medical expenses paid by the patient or insurer, as opposed to the amounts billed, for medical services received can be introduced in court (because the plaintiff is considered not to have suffered any economic loss over the amount paid).⁵ Similarly, in Florida, evidence of past medical expenses is limited to bills paid for services, and damages cannot include any amounts above the amount paid for services provided to the plaintiff.⁶

Thus, in all these states, using medical funding to pay medical providers will not only ensure that the plaintiff has admissible evidence of bills paid. It will also ensure that the plaintiff has an economic loss and recoverable damages in an amount equal to the medical bills that were paid by the funding.

Medical Funding Is Superior to Letters of Protection and Medical Liens

Medical funding is superior to a “letter of protection” or a “medical lien.” A letter of protection is an agreement with a medical provider that defers any payment for medical services until the plaintiff has a recovery in a case from which to pay the provider. A medical lien is a lien on a plaintiff’s case recovery that the medical provider receives in return for its medical services, which lien is often sold by the medical provider to a third-party factoring company.

There are two reasons why medical funding is superior. First, letters of protection may not be admissible or may not be evidence of recoverable damage in some states. For example, such letters are not admissible in Florida to prove past medical expenses, are questionable in California, and have been subject to criticism in Texas.⁷ Similarly, medical liens are admissible in Florida only to show the amount paid to the medical provider by the person or entity who purchased the lien, not to show the original price for the medical service provided.⁸

Second, even if a letter of protection is admissible and proof of recoverable damages, such a letter subjects the medical provider to impeachment for bias when testifying regarding medical treatment and expenses. Bias will be claimed primarily because the provider has a strong personal interest in the case’s outcome (i.e., ensuring that the plaintiff recovers an amount sufficient to pay the medical bill due to the provider). Similarly, the medical provider will be subject to impeachment if the provider’s cost of the medical service covered by the letter of protection bills is higher than the market price, which it often is.

Medical Funding Helps Ensure Greater Recovery on Plaintiffs’ Claims

Medical funding ensures that plaintiffs have sufficient funds to pay for the medical services they need. Without those services, plaintiffs will not only jeopardize their full physical recovery but also limit their ability to recover the full damages they have suffered. As described above in the first section, ensuring that a plaintiff receives all necessary medical services creates a record of past medical expenses. It is the foundation for claims of future medical costs and pain-and-suffering damages. Using medical funding to build that record of medical expenses ensures that plaintiffs will receive a greater recovery on their claims, as studies have shown. ⁹

Indeed, medical funding is just one way plaintiffs can use consumer legal funding to increase their ultimate recovery. The insurance industry has confirmed that the rise in third-party litigation funding is a “leading cause” of higher settlements and verdicts in tort cases. They recognize that funding “has given plaintiffs and their lawyers the capacity to hold out for larger recoveries while increasing case investment returns.” ¹⁰

The benefits of consumer legal funding have been shown to outweigh the expense. Thus, it is a good investment that helps lawyers and their clients increase financial returns and optimize outcomes on their legal claims!

This article is for marketing purposes only, does not constitute legal advice, and should not be relied upon as legal advice.

1. The Economic and Societal Impact of Motor Vehicle Crashes, 2019 (Revised) (dot.gov) at pp. 1, 2, 5. For accidents more generally, the average one-year medical cost of all non-fatal injuries per person who was initially treated in an emergency department in 2014-2015was approximately $6620, and ranged by injury type from $1,698 to $80,172. Peterson, Xu, and Florence, Average medical cost of fatal and non-fatal injuries by type in the USA, HHS Public Access, Author Manuscript  (February 2021), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7326639/
2. [ii] Ronen Avrahan, Putting a Price on Pain and Suffering Damages: A Critique of Current Approaches and a Preliminary Proposal for Change, Northwestern University Law Review, Vol. 100, p. 116 (2006).
3. [iii]  Id. at pp. 112-113
4. Sheila Boston and Antonio Elefano, Medical Expenses under New York Law, American Bar Association 50-State Survey, pp. 293-294 (2011), https://www.americanbar.org/content/dam/aba/publications/litigation_committees/products/50-state-survey/litigation-products-2011-newyork.pdf ; Aimee Hamoy-Perera and Katrina Romero, Brief Survey of Plaintiff’s Recoverable Past Medical Expenses in Multiple Jurisdictions, In-House Defense Quarterly  (Fall 2015)
5. Chartis Legal Insights, Sanchez v. Strickland and the Measure of Damages in California for Past Medical Expenses (Winter 2012) https://docplayer.net/776394-Sanchez-v-strickland-and-the-measure-of-damages-in-california-for-past-medical-expenses.html; Elizabeth Y. Healy, Inflated Medical Damages and Lien-Based Care, The Doctor’s Advocate (2018), https://www.thedoctors.com/the-doctors-advocate/fourth-quarter-2018/inflated-medical-damages-and-lien-based-care/
6. Sheehan and Bedoya, Florida’s New Tort Reform Package: Changes Affect Admissibility of Evidence and Calculation of Medical Damage, pp. 1-2 (March 23, 2023)  https://www.wilsonelser.com/publications/floridas-new-tort-reform-package-changes-affect-admissibility-of-evidence-and-calculation-of-medical-damages.
7. Sheehan and Bedoya, Florida’s New Tort Reform Package: Changes Affect Admissibility of Evidence and Calculation of Medical Damage, supra, p. 3; Kevin Leahy and Laura Wright, Letters of Protection, Deferred Medical Payments, and the Law, pp. 2-4 (March 2017)
8. Shehan and Bedoya, Florida’s New Tort Reform Package: Changes Affect Admissibility of Evidence and Calculation of Medical Damage, supra, p. 2;
9. Ronen Avrahan, Putting a Price on Pain and Suffering Damages: A Critique of Current Approaches and a Preliminary Proposal for Change, Northwestern University Law Review, Vol. 100, pp. 112-113 (2006).
10. NAMIC Advocacy, Social Inflation Is Complicated and Costly – A Five Part Series Examining Social Inflation and its Impact On Insurers, p. 8 (September 2021) https://www.namic.org/pdf/publicpolicy/210920_socialinflation_full.pdf; See also https://cartiga.com/articles/consumer-funding-increases-claimants-recoveries-in-personal-injury-cases