Bremer Whyte Brown & O'Meara

The California Supreme Court issued its decision in a seminal case:  Howell v. Hamilton Meats.  The Howell case and the related appellate decisions discussed what was the “reasonable value of medical services” when private insurance has paid for part of the treatment and written off part of the bill.  The big question was whether the Plaintiff could recover the full bill, including the written off sum.  In Howell, the billed medical specials were over $180,000, but private insurance had written off $130,000 of that amount. Thus, the amount Plaintiff actually “incurred” for the treatment was about $50,000.  So, you can see that this can be a very, very big issue.

The California Supreme Court upheld the principals states in Hanif v. Housing Authority, (1988) 200 Cal.App.3d 635 and Nishihama v. City and County of San Francisco, (2001) 93 Cal.App.4th 298 and found that the amount that a medical provider agrees to write off of its bill pursuant to an agreement with an insurance company is not damages and thus not recoverable in a tort action.  The Court stated:

We hold, therefore, 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.

This is because “Plaintiff cannot meaningfully be said ever to have incurred the full charges” when some portion of the bill is written off.  Howell, at 13.  Further, the Court found that the medical provider agrees in advance to bill a certain price under an insurance plan, and it is this price, and not the greatly inflated one on the bill, that is the provider’s actual price for his services.  Howell, at 17.  The Court also noted that:

With so much variation, making any broad generalization about the relationship between the value or cost of medical services and the amounts providers bill for them—other than that the relationship is not always a close one—would be perilous.

In the past, the defense would bring a motion post verdict under Hanif to reduce the medical specials to the amount that the medical providers accepted from the insurance carriers in full payment of their services.  The thinking behind this being a post trial function was that the jury should base the award for general damages based on the full amount charged for the medical services.  The California Supreme Court has now made the evidence of what was accepted as full payment and what amounts were written off ADMISSIBLE in the trial itself.  The Court stated:

It follows from our holding that when a medical care provider has, by agreement with the plaintiff‘s private health insurer, accepted as full payment for the plaintiff‘s care an amount less than the provider‘s full bill, evidence of that amount is relevant to prove the plaintiff‘s damages for past medical expenses and, assuming it satisfies other rules of evidence, is admissible at trial. Evidence that such payments were made in whole or in part by an insurer remains, however, generally inadmissible under the evidentiary aspect of the collateral source rule.  Howell, at 29.

The Court also left open the issue of whether agreements between the medical providers and the Plaintiff’s medical insurer would be admissible with respect to the amount for future medical treatment.  Howell, at 29.