The collateral source rule governs whether insurance, Medicare, Medicaid, or other third-party payments offset a defendant's liability for damages. Some jurisdictions preserve the traditional rule (no offset); others have modified or abrogated it by statute.
Under the traditional rule, a tortfeasor does not benefit from payments the plaintiff received from collateral sources such as insurance (Restatement (Second) of Torts sec. 920A). Damages are calculated without offsetting those payments.
Many jurisdictions have modified or abrogated the rule by statute, permitting or requiring offsets for specific types of collateral payments. The specifics vary widely by state and by category of payment.
Federal and state programs have separate lien and reimbursement rules (the Medicare Secondary Payer framework, state Medicaid liens). These interact with, but are distinct from, the collateral source rule. For a life care plan the practical point is that the plan projects the cost of care regardless of who ultimately pays; whether public or private payments offset the award is a legal question for counsel. Where a settlement must protect Medicare's interests, a Medicare set-aside allocation is a separate analysis from the life care plan (see life care plan vs. Medicare set-aside).
Generally yes, though offsets for anticipated collateral payments are imposed in some jurisdictions. Confirm state-specific rules.