Legislative hearings love a tidy math trick: a hospital submits a $100,000 bill, a health plan would reimburse $23,000 in 30 days, so the $77,000 “gap” must be “phantom damages.” It sounds surgical. It isn’t. That gap isn’t imaginary; it reflects (1) what the patient is legally on the hook for without insurance, (2) the real cost of earning plan discounts—decades of premiums— (3) 98% of personal injury medical bills are settled for less that the billed amount, and (4) the time and risk equity baked into injury cases that almost never resolve like a 30-day insurance claim and can result in no reimbursement.
When you account for liability, premiums, and risk, there’s no “phantom”—just price and time.
What the Full Bill Actually Represents
Start with liability. The charge submitted to a jury is the price a patient faces absent contractual rights. That is the dollar amount providers post for care delivered—MRIs, OR time, pharmacy, supplies, staff—before any third party agrees to shrink it. For insured patients, a discount exists only because someone bought and kept a contract that trades monthly premiums for a lower price and faster payment. For the uninsured or underinsured person hit by a distracted driver, there is no such contract. The posted charge is not a fiction; it is the real, un-discounted cost the provider must try to collect on a long, uncertain timeline.
Courts also try a tiny fraction of cases; most resolve through negotiation, and those resolutions routinely discount the headline bill. But that negotiated endgame is not proof that the original bill is make-believe; it’s acknowledgement that PI claims involve uncertainty, comparative fault, lien reconciliations, and time.
Premiums Buy the Discount; Defendants Don’t Get Them for Free
Now put the 30-day, $23,000 insurer payment in context. That “deal” wasn’t conjured by the at-fault party or their carrier. It exists because the patient (or their employer) paid premiums—$12,000, $24,000, sometimes $48,000 a year—for years. Add it up and that family may have paid hundreds of thousands over decades for the privilege of a fast, discounted reimbursement when life goes sideways.
If policymakers want to peg recoverable damages to the $23,000, they can’t pretend the premiums weren’t paid. Fairness demands one of two numbers: either the full $100,000 bill—the liability without an insurance contract—or the $23,000 plus the premiums that purchased that $23,000 outcome. Anything else hands the at-fault side a windfall from a benefit they didn’t finance. The discount isn’t “phantom”; it’s prepaid.
Why 30-Day Insurer Math Doesn’t Map to Two-Year PI Timelines
Finally, timing and risk. Insurers pay fast because they’ve pre-negotiated networks, standardized codes, and the right to deny or claw back. PI medicine—especially on liens—lives in a different world: uncertain liability, highly variable recoveries, and a collection cycle that can stretch 18–36 months. Even when a matter resolves, providers and funders still face negotiation risk, documentation fights, and write-offs.
That long, bumpy road carries a cost of capital and a risk premium—call it the equity discount rate—that doesn’t exist in a 30-day claim. Comparing a 30-day, guaranteed $23,000 to a two-year, uncertain repayment and calling the difference “phantom” is like comparing a T-bill to a startup and insisting the venture investor accept Treasury yields. In practice, billed charges are the starting point; the system then applies timing and risk to find a fair number. That premium for uncertainty is modest relative to the volatility PI brings; it is not evidence of price inflation.
A Better Way to Talk About Damages
If legislators want to clean up the debate, there’s a simpler, more honest framework:
- Recognize that billed charges reflect real liability without insurance.
- Recognize that insurer discounts are purchased with premiums; they are not free credits to wrongdoers.
- Recognize that PI carries duration and default risk that justify a risk-adjusted reimbursement, not a 30-day benchmark.
Policy that erases any one of those realities doesn’t make costs vanish; it shifts them—to providers who stop treating hard cases, to responsible funders who exit long-duration matters, and to injured families pressed into early, unfair settlements.
This argument is consistent with—but distinct from—our broader push for “smart guardrails” in consumer legal funding: define products accurately, require plain-English, dollar-based disclosures, and set structural rules that align incentives without choking off access. The same principle applies here: use the right math for the right market, and people get care and fair outcomes; use the wrong math, and you congratulate yourself for savings that show up as avoidable write-offs and foregone treatment.
And as states like Georgia formalize oversight of litigation finance, the real work is operational: organize definitions, disclosures, and outcome data so regulators and counterparties can see how risk and time are actually priced—without pretending PI medicine clears like a 30-day claim. Get that right and you protect consumers, providers, and the integrity of settlements in the same motion.
Informational only; not legal advice.