Damages after Howell

Apr 15, 2016 by Mary Person

In 2011, the California Supreme Court held that a plaintiff could recover as damages for his or her past medical condition no more than his or her medical providers had accepted as payment in full from plaintiff and his or her insurer. (Howell v. Hamilton Meats [2011] 52 Cal.4th 541.) The court found that, “Because so many patients, insured, uninsured, and recipients under government healthcare programs, pay discounted rates, hospital bills have been called ‘insincere, in the sense that they would yield truly enormous profits if those prices were actually paid.’” (Id., at 561.) As a result, “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.” (Id., at 567.)
In 2012, the Consumer Attorneys of California sponsored SB 1528, designed to nullify Howell. It failed to be signed into law. Short of getting legislation passed, does the plaintiff’s bar have a way to ethically avoid the impact of Howell? As discussed below, the answer is likely no.
Central questions in Howell were: “(1) Was Hanif correct that a tort plaintiff can recover only what has been paid or incurred for medical care, even if that is less than the reasonable value of the services rendered? (2) Even if Hanif, which involved Medi–Cal payments, reached the right result on its facts, does its logic extend to plaintiffs covered by private insurance? (3) Does limiting the plaintiff’s recovery to the amounts paid and owed on his or her behalf confer a windfall on the tortfeasor, defeating the policy goals of the collateral source rule? (Id., at 555.)
The Howell Court, after an extensive analysis, held that a plaintiff can only recover the amount actually paid for the reasonable value of services rendered, even if that amount is lower than the reasonable value of the services provided. (Id.) The court further concluded that it, “…it is not possible to say generally that providers’ full bills represent the real value of their services, nor that the discounted payments they accept from private insurers are mere arbitrary reductions.” (Id., at 567.) As a result, the court extended the logic of Hanif to include payments made by private insurance. Finally, the Howell Court found that allowing proof of the amount paid without admitting evidence of the payment’s source does not violate the collateral source rule. (Id.)
Howell was expanded to include Medi-Cal and Medicare (Luttrell v. Island Pac. Supermarkets, Inc. [2013] 215 Cal.App.4th 196) and amounts paid under workers’ compensation law (Sanchez v. Brooke [2012] 204 Cal.App.4th 126). In Corenbaum, the court held that the amounts billed by medical service providers were irrelevant to damages; only the amount actually paid can be considered. (Corenbaum v. Lampkin [2013] 215 Cal.App.4th 1308.) The Dodd case involved a situation where the bill for medical services was sold to a third party financing company. (Dodd v. Cruz [2014] 167 Cal.Rptr.3rd 601.) In Dodd, an appellate court held that information concerning what the medical provider actually accepted from the financing company pursuant to the agreement to discharge the provider’s account receivable is discoverable. (Dodd was later ordered depublished.) In Children’s Hospital (which essentially also confirmed and extended Dodd in a published opinion), the court held that a defendant can conduct discovery into the amounts paid by other parties (such as other insurers) for the same medical services at the hospital to determine the actual amounts typically paid for such services. (Children’s Hosp. Cent. Cal. v. Blue Cross [2014] 226 Cal.App.4th 1260.)

Since Howell became law in California, the Patient Protection and Affordable Care Act (“ACA”), or, as it is commonly referred to, “Obamacare,” was enacted, and became effective on January 1, 2014. The ACA requires most Americans to purchase qualifying health insurance coverage or face a tax penalty. In light of Howell, the decisions extending Howell, and the ACA, is there any way for a plaintiff to submit into evidence the full amount of hospital charges as damages?

The law is well settled that a plaintiff in California has a clear duty to mitigate his or her own damages. In fact, a plaintiff who does not take reasonable steps to mitigate his or her own damages “will be debarred from recovering for those additional damages which result from such failure.” (Placer County Water Agency v. Hofman (1985) 165 Cal.App.3d 890). No case in California has specifically addressed the issue of the ACA’s impact on the Howell decision. However, based on the decisions interpreting Howell, it is likely that a court will allow a plaintiff’s failure to file a claim for reimbursement with his or her own insurer into evidence as a failure to mitigate damages. A court might even allow evidence of the lack of insurance (and a violation of the law) to establish a failure to mitigate damages. Either way, a court will likely allow the defendant to introduce evidence of the amount the provider would have paid if a claim had been submitted, as evidence of the plaintiff’s damages. This is because the plaintiff’s conscious decision to forego insurance coverage is done to artificially increase his or her own damages, when the law requires them to make efforts to reduce such damages. A plaintiff will have a difficult, if not impossible, time getting the full amount of billed charges into evidence as damages.

Defense counsel can seek to “posture” the case so that the plaintiff is limited to presenting evidence of either (1) the amounts paid by an insurer or Medi-Cal or (2) the amounts that would have been paid by an insurer. A “failure to mitigate” affirmative defense must be asserted in the answer to the complaint. (A special affirmative defense could be used, alleging that plaintiff was required by law to have health insurance at the time, yet failed to submit a claim to artificially increase damages). Next, defense counsel should conduct discovery on (1) the existence of insurance, (Form Interrogatory 4.1); (2) the amounts actually paid to any healthcare provider for the services rendered; and (3) the amount of money the healthcare provider typically gets paid (by insurers or otherwise) for the same services. These steps should not only help limit the amount of plaintiff’s recovery, but put plaintiff’s counsel on notice that defense counsel is aware of the impact of Howell, its progeny, and the ACA.

(The views expressed by Mary Person in this article are hers, and do not necessarily reflect the views of Law & Beyond.)