Paid-or-Incurred in Texas: How Haygood and §41.0105 Cap Medical Damages

In a Texas personal injury case, the medical-bill stack is rarely what the jury actually sees. Tex. Civ. Prac. & Rem. Code §41.0105 caps recoverable medical expenses at the amount actually paid or incurred by or on behalf of the claimant. That single phrase, and the Texas Supreme Court's 2011 decision in Haygood v. De Escabedo, 356 S.W.3d 390 (Tex. 2011), reshaped how every Texas PI lawyer evaluates a case at intake. Fifteen years of appellate refinement filled in what "incurred" means for insured care, self-pay care, and the gray-zone of letter-of- protection (LOP) billing.

This article walks through what §41.0105 actually says, the Haygood holding in full, how billed-vs-paid evidence runs at trial, how the rule applies to self-pay and Medicare situations, and the post-Haygood case law that built out the modern doctrine.

Answer first

Texas caps medical-expense damages at what the plaintiff actually paid or remains legally obligated to pay. The chargemaster amount on the bill is rarely the recoverable amount. For insured care, the recoverable amount is the negotiated rate the insurer paid (plus any beneficiary cost-share). For self-pay care, it is the full chargemaster amount, subject to a reasonableness challenge. For LOP-billed care, it is the LOP rate — the contractual obligation the claimant signed.

The doctrinal anchor is §41.0105. The case interpreting it is Haygood v. De Escabedo, 356 S.W.3d 390 (Tex. 2011). The discovery cases that let defense counsel develop reasonableness evidence alongside it are In re North Cypress Med. Ctr. Operating Co., 559 S.W.3d 128 (Tex. 2018), and In re K & L Auto Crushers, LLC, 627 S.W.3d 239 (Tex. 2021).

What §41.0105 actually says

Tex. Civ. Prac. & Rem. Code §41.0105 is a one-sentence statute. It reads:

The statute was enacted as part of the 2003 medical-liability reform package (House Bill 4) and applies to all causes of action accruing on or after September 1, 2003. Its scope reaches every medical-expense component of a Texas civil damages claim — auto, premises, products, medical malpractice, all of it.

The phrase the appellate courts have spent two decades parsing is "or incurred by or on behalf of the claimant." Read narrowly, it captures only out-of-pocket payments. Read broadly, it captures every legal obligation the claimant has assumed (deductibles, denied claims, LOP contracts, post-judgment Medicare cost-share). Haygood resolved the breadth question.

The Haygood holding

In Haygood v. De Escabedo, the plaintiff suffered injuries in a 2005 collision and incurred approximately $110,000 in chargemaster- billed medical expenses. Medicare paid roughly $27,000 in full satisfaction of the bills under federal cost-sharing rules. The remainder was statutorily written off — the providers were barred from collecting anything more from the patient.

At trial, the plaintiff sought to introduce the full $110,000 as recoverable medical damages. The defendant invoked §41.0105 and argued that only the $27,000 actually paid by Medicare (plus any beneficiary cost-share) was recoverable. The trial court permitted the full chargemaster amount; the court of appeals reversed; the Texas Supreme Court affirmed the reversal:

Three principles flow from Haygood:

1. Negotiated insurance write-offs reduce the recoverable amount. If an insurer paid $27,000 in satisfaction of a $110,000 bill, the $83,000 difference is not recoverable.

2. Evidence of charges in excess of the recoverable amount is inadmissible at trial. This is the rule that controls how medical-bill exhibits are structured at trial — the bill the jury sees has been pre-filtered to remove the write-off.

3. The "incurred" prong protects self-pay claimants. A claimant who is uninsured and contractually on the hook for the chargemaster amount has "incurred" that amount under the statute, even if no payment has yet been made.

Billed vs paid at trial

The mechanical effect of Haygood at trial is structural. Before a jury sees a single medical bill, plaintiff's counsel must prepare an exhibit that reflects only the §41.0105-recoverable amount. For most insured cases, this means scrubbing the chargemaster rate from the bill and substituting the negotiated rate the insurer paid. For Medicare and Medicaid cases, the substitution is the federal allowed-amount.

Texas civil-procedure mechanics make this operational:

• Affidavit of medical-expense reasonableness under Tex. Civ. Prac. & Rem. Code §18.001 establishes a prima facie case for the recoverable amount. The amount on the §18.001 affidavit must align with §41.0105 — affidavits showing chargemaster rates invite immediate motions to strike.
• Defense counterclaim affidavits under §18.001 can introduce the negotiated-rate evidence the discovery process developed (per K&L and North Cypress, below).
• Pre-trial motions in limine typically exclude any reference to the chargemaster amount — Haygood treats it as inadmissible surplusage that misleads the jury about the recoverable amount.

The practical jury exhibit is therefore the post-§41.0105 number, not the original bill. A claimant whose providers billed $110,000 but whose insurer paid $35,000 will see exhibits totaling $35,000. The pre-Haygood "phantom damages" of the $75,000 write-off are gone.

Self-pay, Medicare, and LOPs

The §41.0105 doctrine plays differently across coverage shapes.

Insured care (employer-sponsored, ACA marketplace, individual private): Recoverable amount is the negotiated rate the insurer paid. The chargemaster excess is statutorily written off and non-recoverable. Insurer subrogation rights operate alongside the recovery, not against the §41.0105 cap.

Medicare and Medicaid: Recoverable amount is the federal allowed- amount that Medicare or Medicaid paid the provider, plus any beneficiary cost-share (deductible, copay) that was incurred. Federal Medicare Secondary Payer recovery (42 U.S.C. §1395y(b)) operates separately — Medicare can recover its conditional payments out of the settlement under federal procedure, but that recovery right doesn't expand the §41.0105 cap.

Self-pay: Recoverable amount is the chargemaster amount the provider billed and the claimant remains legally obligated to pay. This is where K&L's reasonableness-discovery framework matters most: defense counsel can develop evidence that the chargemaster rate is unreasonable relative to the same provider's negotiated rates with insurers. Reasonableness becomes a jury question.

Letters of protection (LOPs): An LOP creates a contractual obligation between the patient and a treating provider — typically an orthopedic clinic, physical-therapy practice, or imaging facility that doesn't qualify for a Tex. Prop. Code §55 hospital lien. The patient signs a written agreement to pay the provider's stated rate (typically billed-rate, sometimes a negotiated LOP rate) out of any settlement or judgment. Under §41.0105's "incurred" prong, the LOP rate is the legal obligation and therefore the recoverable amount.

In all four scenarios, plaintiff's counsel runs the §41.0105 number at intake before evaluating settlement value. The sticker-shock total on a hospital itemization is rarely what the case is worth.

Reasonableness, necessity, causation

§41.0105 sets a numerical ceiling. It does not, by itself, make every amount under that ceiling automatically recoverable. Texas law layers three independent gates alongside the §41.0105 number, and each operates separately:

1. Reasonableness. A medical charge must be reasonable for the service rendered. In re North Cypress and K&L authorize discovery of negotiated rates as evidence of reasonableness — a chargemaster rate that's two or three times what the same provider accepts from private insurers is vulnerable to a reasonableness attack at trial. The jury decides reasonableness as a fact question; §41.0105 sets the maximum; reasonableness can pull the recoverable number lower.

2. Necessity. A treatment must have been medically necessary for the injury. Defense IMEs (independent medical examinations under Tex. R. Civ. P. 204) routinely target necessity — the orthopedic physical therapy course, the second MRI, the procedure that was billed but allegedly not required. Necessity disputes are evidence questions, won and lost on the treating-physician and IME-physician testimony at trial.

3. Causation. The injury must have been caused by the defendant's conduct, and the medical care must have been caused by the injury. Pre-existing condition arguments live here. A chronic back issue that flared after a low-speed rear-end collision sets up a causation fight on every spinal-imaging charge in the bill stack.

§41.0105 is the easy gate to satisfy — most claimants can document what was paid or incurred. The reasonableness, necessity, and causation gates are where Texas PI cases actually break or hold together. Plaintiff's counsel runs all four checks at intake, not just §41.0105 in isolation.

Fifteen years of refinement

Three appellate developments since Haygood matter for current Texas practice:

Daughters of Charity Health Servs. of Waco v. Linnstaedter, 226 S.W.3d 409 (Tex. 2007). Pre-dates Haygood by four years but is the doctrinal ancestor. Daughters of Charity held that a hospital cannot enforce a §55 lien against the portion of charges its insurer had already written off under a negotiated rate. Haygood extended the same logic to the §41.0105 trial-evidence rule. The two cases together mean that write-offs reduce both the lien-enforceable amount and the recoverable damages amount.

In re North Cypress Med. Ctr. Operating Co., 559 S.W.3d 128 (Tex. 2018). Recognized that defense counsel can discover the negotiated rates a hospital accepts from private insurers as evidence of what is "reasonable" for §41.0105 purposes. The court conditionally granted mandamus directing the trial court to allow narrowly tailored discovery of negotiated insurer rates. North Cypress did not change Haygood's ceiling; it gave defense counsel a discovery vehicle to attack the reasonableness of charges that fall under the "incurred" prong.

In re K & L Auto Crushers, LLC, 627 S.W.3d 239 (Tex. 2021). Extended the North Cypress discovery framework to non-network providers and LOP-billed care. The court held that defense counsel could subpoena the negotiated billing rates and chargemaster data of a plaintiff's treating providers — what those providers accept from in-network insurers, public programs, and similarly-situated payors for the same services. The mandamus relief in K&L is conditional on narrow tailoring (per-service, per-provider, per-time-period). For the full discovery framework K&L sets out, see the K&L discovery article.

The cumulative arc is: Haygood set the §41.0105 ceiling; North Cypress and K&L gave defense counsel the discovery tools to attack the reasonableness of charges within the ceiling. The plaintiff-side response is to keep the §41.0105 number tight and well-documented at intake — the cases that go badly for plaintiffs are the ones where the bill-stack arrives at trial without a clean paid-or-incurred audit.

Strategic implications

For a Texas personal injury claimant, the practical takeaways:

1. The bill stack at intake is not the recoverable amount. Run the §41.0105 audit early. Pull the actual paid amounts from each payor (insurer, Medicare, Medicaid, self-pay receipts) and reconcile against the chargemaster. The post-§41.0105 number is what drives settlement valuation.

2. LOP decisions have §41.0105 consequences. Choosing LOP-billed care over insured care typically increases the recoverable medical expense (because the LOP rate is higher than the negotiated rate the insurer would have paid), but also exposes that amount to a K&L reasonableness attack. The decision depends on the case shape — out-of-network status, deductible exposure, and the size of the liability case all factor in.

3. Subrogation and conditional-payment recovery sit alongside §41.0105, not under it. A health-insurer reimbursement claim or Medicare Secondary Payer recovery operates against the settlement amount, not against the §41.0105 cap. Settlement structuring has to address both.

4. Reasonableness fights happen on the discovery record. A clean reasonableness defense to a chargemaster rate requires the negotiated-rate discovery K&L authorizes. A claimant whose providers refuse discovery, or whose §18.001 affidavits don't withstand counter-affidavit attack, has a weak reasonableness posture at trial.

Most Texas personal injury cases turn on a §41.0105 calculation at some point. Texas attorneys who handle PI on a contingency basis run the calculation as part of intake — which is one reason the firm's fee structure is usually contingent on recovery rather than billed hourly.

FAQ

The seven-question FAQ near the start of the page answers the most common client questions about §41.0105, Haygood, and how paid-or-incurred plays across coverage shapes. If you have a specific situation that doesn't match one of those, the firm's intake process runs the §41.0105 audit as part of evaluating your case.