Last August in Howell v. Hamilton Meats, 52 Cal.4th 541 (2011), the California Supreme Court confirmed what appears fairly obvious – that the quantum of a personal injury plaintiff's medical expenses potentially recoverable in tort litigation are those amounts actually paid for the medical services, plus any amounts still owed.
But a significant block of legislators backed by the Consumer Attorneys of California are actively pushing Senate Bill 1528 in an attempt to limit, or gut, the Howell decision. They argue that the actual recoverable value of medical costs should be based upon "the reasonable value of medical services provided without regard to the amount actually paid," which would be based upon evidence of the gross amounts billed, even if those amounts were never paid.
Last week, the Senate Judiciary Committee approved the bill – in a somewhat watered down form at the moment – but the drive to create a mechanism that would result in a potential windfall recovery to personal injury plaintiffs continues.
The Howell decision reflects the modern reality that healthcare providers typically have contractual agreements to accept significantly less than the gross amount billed from health insurers in full satisfaction of their bills. The actual billed amounts are rarely paid, either because a medical insurer has a predetermined payment arrangement for lesser amounts, or because many patients do not have the ability to pay their bills in full, or at all.
In tort litigation, personal injury plaintiffs would obviously prefer that a court calculate their medical damages at the typically-much-higher gross amount billed. For example, in the Howell case, the total amount billed for medical care resulting from an auto accident was $189,978.63, but $130,286.90 of that was written off. Still, Ms. Howell argued that she should be entitled to reimbursement of the entire billed amount. She, and the Consumer Attorneys of California, argue that it would result in a windfall to tortfeasors to allow them or their insurers to reimburse plaintiffs who establish tort liability the paid amount of the bill rather than the gross amount billed, simply because, they say, the plaintiff had the "foresight" to purchase medical insurance that had a lower contracted rate with the provider. The California Supreme Court in Howell disagreed, and found that it would actually be the plaintiff who would be the recipient of a windfall recovery if she would be entitled to the total billed amount as "compensatory," when those total bills were for amounts that neither she or her medical insurer ever had to pay.
In its current amended version, Senate Bill 1528 simply states that its purpose is to "establish a framework for compensating persons with injuries due to the fault of third parties." But the Consumer Attorneys of California's website states the goals of Senate Bill 1528 as clearly subjugating the Howell decision:
SB 1528 addresses the implications of the California State Supreme Court's devastating decision in Howell v. Hamilton Meats & Provisions (2011) 52 Cal.4th 541. We strongly believe that a party responsible for causing injury should pay the reasonable value of medical care for the injury, regardless of the injured person's medical benefits .... This measure is a top priority for our organization.
While the plaintiff's bar is strongly supporting the bill, the insurance industry and numerous business groups are rallying in opposition, in recognition of the extraordinary inflation of personal injury awards that could result.
Importantly, California law both before and after Howell provides that the "collateral source rule" bars the introduction of evidence that the medical bills at issue in the personal injury suit had already been paid by an insurer. This issue now is how those medical services are valued: by the actual free market cost, or by some alternative method that sets the value at what possibly could have been paid, based upon the billed amounts before write-offs.
The California Supreme Court gave its opinion on what was fair and reasonable last year, now it's the legislature's turn.
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