The Litigation Debate About the Reasonable Value of Medical Expenses Continues

by: David Melton, Lindsay Goulding and Colleen Howard

A few months ago, the Fourth Appellate District changed the landscape of personal injury damages by issuing its decision in Howell v. Hamilton Meats & ProvisionsHowell held that plaintiffs with private health insurance were entitled to compensation for the full amounts billed for medical care and expenses, despite the fact that the health care providers had accepted a lesser amount as payment in full.  The Supreme Court took this case under review in March 2010, which effectively depublishesHowell as valid authority.

Now, the First Appellate District has followedHowell’s lead by issuing Yanez v. SOMA Environmental Engineering.  In Yanez, the trial court held a post-trial hearing during which it reduced the jury’s award of $150,000.00 by $21,355.66 after determining that the plaintiff was entitled to receive only the amount actually paid for her medical care ($18,368.24), rather than the full amounts billed for those services ($44,519.01).  Plaintiff appealed.

The court of appeal came to the same conclusion as Howell: that the discount rate paid by the tort victim’s insurance company constitutes a collateral benefit.  The court explained that the reductions were an integral part of the consideration Ms. Yanez received for her (or her employer’s) premium payments, and this consideration came in two forms: (1) the write-offs reduced Ms. Yanez’s out-of-pocket costs; and (2) the discounts reflected non-cash, pecuniary savings in the cost of healthcare which were financed by Ms. Yanez’s premium dollars.  Furthermore, the court concluded that the negotiated rate discounts should be considered collateral benefits, which should inure to the insured plaintiff who paid for those benefits, as opposed to the defendant.

Just as in Howell, the court differentiated between private insurance and Medi-Cal because Medi-Cal recipients have not purchased insurance coverage by paying premiums, and the discounted rates paid by Medi-Cal represent rates set as a matter of legislative policy to balance the health care providers’ interests with the availability of public funds.  Thus, the rate discount was not a collateral benefit for tort victims.

In furtherance of its holding, the Yanez court hinted that it may be unfair to withhold information about the discounted amounts paid for medical services from juries, since that information would likely help them decide what was “reasonable” to pay for medical care and services.  However, that issue was not before the court as SOMA made no attempt to introduce such evidence at trial.

Yanez brings new life to the arguments raised by Howell.  Since Howell has been depublished pending review by the Supreme Court, Yanez offers tort victims another case to hang their hat on in seeking damages.  However, all is not lost for defendants asYanez leaves open the argument as to proof of the reasonable value of medical expenses at the time of trial (rather than post-trial).  Either way, a definitive decision inHowell may soon bring an end to this decades-long debate.

Contact our office to discuss the reasonable value of your medical expenses.