What Do You Mean It's Not Covered: How One Catastrophic Medical Policy Compares to Major Med

The supreme court of Nevada considered the mechanics of catastrophic coverage in its 1993 decision -- State Farm Mutual Automobile Insurance Co. v. Ronald Cramer. In November 1987, Cramer was injured in an automobile collision and incurred a total of $35,120.95 in medical expenses. At the time of the accident, Cramer had medical expense coverage through his automobile and health insurance policies. Cramer purchased both policies from State Farm, and paid separate premiums for the policies. The automobile insurance policy provided medical payment coverage (MPC) up to $25,000. The health insurance policy provided basic medical coverage for hospital, surgical and miscellaneous medical expenses. A catastrophic medical expense rider (CMER) appended to the health insurance policy provided an additional $1 million in medical expense coverage. Benefits under the CMER were payable if Cramer's medical expenses exceeded the sum of benefits payable to him from other medical expense coverage. "Other medical expense coverage" included automobile MPC. In 1987, Cramer submitted $3,991.26 in accident-related medical bills to State Farm. Of that amount, $1,378.40 was paid under the base health insurance policy. State Farm also paid $4,442.09 under the automobile MPC. So, Cramer received $1,829.23 over and above his actual medical expenses for 1987. In 1988, Cramer submitted bills totaling $31,129.69 for accident-related medical expenses. State Farm paid $12,960.20 in accordance with the terms of the basic medical policy, leaving a balance of $18,169.49 in expenses. It then paid Cramer $20,557.91, the remainder of the automobile MPC policy limits. So, Cramer received $2,388.42 more than he incurred for medical expenses in 1988. In total, Cramer received $4,217.56 in excess payments from State Farm. He also received $47,739.51 for bodily injury and an unspecified amount for property damage from the adverse driver's insurance company.