How is that different from "cancelling out"? If you throw 6 bleeding on 2 vitality, the unit with still bleed for 4. So, in that regard, it's subtracting one from the other.
It seems that there are two different mod's opinions so here is how it works currently in game:
If you use Vitality on card with Bleeding (or the other way) current Vitality works as +X and current Bleeding work as -Y.
The result of operation X-Y is put as Vitality/Bleeding status on the card.
So @tompudd, it's substracted. If you have some other result then it is a bug.
Not quite. It's probably just a misunderstanding because of the poor choice of words, in particular "cancel out". What did the OP really mean by that?