how do untreated casualties work?

recently in a game of SGII me and my friend got into an argument over
how
untreated casualties affect confidence tests.  I was arguing that if a
squad
took casualties from fire then each untreated casualty should count
towards the
threat level for the confidence test.  in this case he had taken two
casualties
and he was at low motivation so this rule actually applied.  This meant
he had a
threat level of +4 instead of +2.  He argued that he hadn't had a chance
to
treat the casualties yet so this modifier shouldn't apply yet.	I was
wondering
how other people interpreted this rule.