In 2011, the California Supreme Court held that an injured plaintiff whose medical expenses are paid through private insurance may recover as economic damages no more than the amounts paid by the plaintiff or his or her insurer for the medical services received or still owing at the time of trial. See, Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541, 566.
That is, if an injured plaintiff had the forethought to purchase health insurance, which in turn paid her medical bills following an accident, she could only recover from the tortfeasor the contractually adjusted amount that was actually paid. Thus, under Howell, the injured plaintiff cannot recover the difference between the full amount billed and the actual amount paid by private health insurance, often referred to as the "negotiated rate differential."
Unfortunately for the personal injury client and her attorney, this amount is often drastically lower than the amount charged for the services, thus significantly affecting the value of the personal injury case.
On the other hand, if the injured plaintiff had not purchased health insurance, and was injured by the same tortfeasor, that client could recover the full amount charged by the medical provider, assuming the medical provider had not reduced their bill for any other reason.
Seemingly an anomalous result, no?
The Collateral Source Rule and Howell
And what about that doctrine called the collateral source rule? As stated in the seminal case, Helfend v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal.3d 1, 6, under the rule, if an injured party receives some compensation for his injuries from a source wholly independent of the tortfeasor, such payment should not be deducted from the damages which the plaintiff would otherwise collect from the tortfeasor.
"The collateral source rule ensures plaintiffs will receive the benefits of their decision to carry insurance and thereby encourages them to do so." Helfend, supra, 2 Cal.3d at pp. 9-10.
Yet, the Howell court reasoned that the collateral source rule has no bearing on amounts that were included in a provider's bill but for which the plaintiff never incurred liability because the provider, by prior agreement, accepted a lesser amount as full payment.
The Howell court further explained that the negotiated rate differential was not subject to the collateral source rule because "it is not primarily a benefit to the plaintiff and, to the extent it does benefit the plaintiff, it is not provided as compensation for the plaintiff's injuries."
Can Evidence of the Negotiated Rate Differential Be Presented to the Jury?
Explicitly left open by the Howell court, however, was the evidentiary issue. What can be presented to the jury? The full amount billed by the medical provider or the amount that was actually paid?
Acknowledging that evidence of payments by an insurer was precluded by the evidentiary aspect of the collateral source rule, the Howell court went on to state:
"Where the provider has, by prior agreement, accepted less than a billed amount as full payment, evidence of the full billed amount is not itself relevant on the issue of past medical expenses. We express no opinion as to its relevance or admissibility on other issues, such as noneconomic damages or future medical expenses. (The issue is not presented here because defendant, in this court, conceded it was proper for the jury to hear evidence of plaintiff's full medical bills.)" Howell, supra, 52 Cal.4th at 567.
What emerged post-Howell was a general practice of the following: plaintiff attorneys filing a motion in limine precluding evidence of insurance payments at trial and any reduced amounts accepted by a medical provider, with the full amount of the bills being presented to the jury, and defense attorneys reserving their right to a post-trial motion to reduce the amount of a plaintiff's damages to what was paid by the insurer.
Corenbaum v. Lampkin, Carter v. Lampkin Answer the Evidentiary Question Left Open by Howell
In twin cases issued by the California Court of Appeals, Second Appellate District, Division Three, the evidentiary issue left open by Howell has now been addressed.
"Evidence of the full amount billed for a plaintiff's medical care is not relevant to the determination of a plaintiff's damages for past medical expenses, and therefore is inadmissible for that purpose if the plaintiff's medical providers, by prior agreement, had contracted to accept a lesser amount as full payment for the services provided." See, Corenbaum v. Lampkin (2013) __ Cal.App.4th __ [No. B236227. Second Dist., Div. Three. Apr. 30, 2013.], and Carter v. Lampkin (2013) __ Cal.App.4th __ [No. B237871. Second Dist., Div. Three. Apr. 30, 2013.]
The Court further held that evidence of the full amount billed for a plaintiff's medical care was not relevant to the amount of damages for a plaintiff's future medical care or noneconomic damages, i.e. pain and suffering. Because plaintiffs had not shown that evidence of the full amounts of their medical bills was relevant to any other issue, the admission of such evidence was error.
The Corenbaum court acknowledged that Howell had not decided the evidentiary issue, but found that its reasoning on the issue of recovery compelled limiting evidence to the amount actually paid. "[E]vidence of the amount accepted by medical providers as full payment does not violate the collateral source rule and is admissible provided that the source of the payment is not disclosed to the jury and the evidence satisfies the other rules of evidence."
In so holding, the Corenbaum court rejected arguments made by the Consumer Attorneys Association of California that evidence of the amount accepted by a medical provider as full payment for the services provided would violate the hearsay and parol evidence rules, or that a plaintiff should be allowed to show the reasonable value of the services.
The Corenbaum court determined that the "reasonable value" argument was not only foreclosed by the holding in Howell, but it would also likely cause jury confusion and suggest the existence of a collateral source payment. Surprisingly, the court did not address how evidence regarding the amount accepted by the medical provider would also suggest existence of a collateral source payment.
Moreover, with ostensibly minimal analysis, the Corenbaum court concluded that because the full billed amount was not relevant to past medical damages, it necessarily was not relevant to future medical damages or noneconomic damages.
As to future medical damages, the Court reiterated its explanation regarding irrelevance to past medical expenses and jury confusion, and that it would be improper for an expert to rely on full billed amount when opining on the reasonable value of future treatment.
On the issue of non-economic damages, the Court found that there is no fixed standard for determining this item, and declined to comment on the practice of using the amount of economic damages as a point of reference in an attorney's argument to a jury, or in settlement discussions, as a means to help determine the amount of non-economic damages.
This opinion will no doubt be hailed by the defense bar, and roundly rejected by the plaintiff's bar as unsound. And with good reason as to the latter, as the opinion will undercut the value of many personal injury cases, without consideration for the unfairness it creates with respect to those who responsibly purchase health insurance, and the significant damage it may do to the clear policy set forth in Helfend -- that our system should encourage people to carry health insurance, and ensure that they receive the benefits of their decision, and not allow tortfeasors to benefit from years of premiums paid by the injured plaintiff.
Other considerations that were not adequately addressed by the Corenbaum court:
- As Judge Klein wrote in the dissent to the Howell opinion, "[t]he vast majority of courts to consider the issue follow the common-law rule articulated in section 924 of the Restatement and permit plaintiffs to seek the reasonable value of their expenses without limitation to the amount that they pay or that third parties pay on their behalf.
- Corenbaum ignores the reality of the health care system, in which providers adjust bills for patients who have purchased health insurance and this adjustment is a benefit to which plaintiff is entitled under the collateral source rule.
- How can the full amount billed by a medical provider not be relevant to future medical specials, if there is a possibility that the personal injury plaintiff will not have health insurance in the future?
- Even cases that have recognized that a reduction to plaintiff's recovery to the amount paid by a private health insurer would be appropriate, have allowed evidence of the full amount billed to be presented to the jury as relevant to the issue of non-economic damages. In Nishihama v. City and County of San Francisco (2001) 93 Cal.App.4th 298, the court stated: "There is no reason to assume that the usual rates provided a less accurate indicator of the extent of plaintiff's injuries than did the specially negotiated rates obtained by Blue Cross. Indeed, the opposite is more likely to be true." In Greer v. Buzgheia, (2006) 141 Cal.App.4th 1150, the court held that neither Nishihama nor Hanif v. Housing Authority (1988) 200 Cal.App.3d 635 "holds that evidence of the reasonable cost of medical care may not be admitted. Indeed, Nishihama suggests just the opposite: Such evidence gives the jury a more complete picture of the extent of a plaintiff's injuries."
Practitioners should be on the lookout for what other California appellate districts do, when faced with this question.
Next stop -- the California Supreme Court.