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McGeorge Law Review


Today, despite significant legislative changes in healthcare insurance, tort reform, and subrogation, the collateral source rule has remained in force in many jurisdictions even in the face of rising health insurance costs. This Article argues that as long as health insurance markets are fragmented, the collateral source rule will continue to play an important normative role in the administration of the tort injury compensation process. The rule also helps deter tortious behavior, supports the insured's contractual expectations, is consistent with distributive fairness, and ensures that those engaging in risky activities bear the full cost of injuries. The collateral source will only lose its normative imperative if and when the healthcare system becomes less fragmented, either through a single-payer system or through other forms of federalization.

The Article begins in Part II by examining the background of and basis for the collateral source rule. Subsequent sections examine three issues that have recently affected the functioning of the collateral source rule: tort reform, health insurance reform, and increased subrogation.

Part III examines the impact of the tort reform movement on the collateral source rule and concludes that tort reform altered, but did not abrogate, the collateral source rule in most states. Part IV looks at how recent changes in federal and state laws regarding health insurance have impacted the collateral source rule. While these laws, particularly the Affordable Care Act, undermine some of the rationales for the collateral source rule, the changes in healthcare law have done little to change the rule itself. Part V examines the rise of subrogation in U.S. health insurance practice. This rise has had the largest impact on the collateral source rule, but the limitations on full subrogation found in the laws of many states provide a continuing role for the collateral source rule in calculating tort damages.

The Article concludes by acknowledging the enduring power of the collateral source rule as applied to medical expenses covered by insurance and predicts the rule's continuing role in the tort compensation process as long as the United States' healthcare insurance and injury compensation systems remain fragmented.

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McGeorge School of Law, University of the Pacific





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Sacramento, CA

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