Prior to 1988, a plaintiff, relying on the collateral source rule, could recover the full amount of a health provider’s charges despite the fact that an insurer or governmental agency had prenegotiated a discounted rate for the services and the plaintiff was not liable for the full amount. (Helfend v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal. 3d 1, 6.) A plaintiff seeking to prove past medical damages was generally permitted to introduce the billed amount for the services rendered, so long as there was independent evidence that the underlying medical procedures were necessitated by the tortious act. (Bermudez v. Ciolek (2015) 237 Cal. App 4th 1311, 1332.)
In the 1988 case of Hanif v. Housing Authority ((1988) 200 Cal. App. 3d 635), the court limited awards for medical damages in cases where the plaintiff has a benefit (here, Medi-Cal) that has a prenegotiated arrangement with the medical services provider for reduced cost of the services. (200 Cal. App. 3d at 566.) A similar rule was adopted by the California Supreme Court for private medical insurance in Howell v. Hamilton Meats and Provisions, Inc. ((2011) Cal. 4th 541, 566.)
Since Hanif and Howell, the measure of medical damages has been the lesser of (1) the amount paid or incurred, and (2) the reasonable value of the services rendered. (Howell, supra, 52 Cal. 4th 541, 555; Bermudez v. Ciolek, supra, 237 Cal. App. 4th 1311, 1330.)
In Howell, the insured plaintiff was severely injured when the big rig truck he was driving was rear-ended by another big rig. The plaintiff was treated by medical providers who were in his insurance plan. The full amount of the injured plaintiff’s medical bills was $189,978.63. Due to a pre-negotiated agreement between the insurer and the medical providers, the bills were reduced to $130,286.90. The jury nevertheless awarded the plaintiff the full billed amount of $189,978.63 in past medical expenses.
In a posttrial motion, the insurer claimed that the full billed amount of past medical damages ($189,978.63) should have been reduced to the discounted price it had paid ($130,286.90), a difference of almost $60,000. The defendant presented evidence at the posttrial hearing that the medical provider had accepted the lower amount as full payment pursuant to a preexisting agreement with the insurer, the plaintiff’s managed care plan. The negotiated rate differential is the difference between the provider’s full billing and the amount they have agreed to accept from a patient’s insurer as payment in full.
The California Supreme Court agreed with the defendant, reasoning that the plaintiff could not recover the $60,000 “for the simple reason that the injured plaintiff did not suffer any economic loss in that amount.” (52 Cal. 4th at 548.) The court declared that in such event, “the full billed amount is not itself relevant and thereby inadmissible to prove the amount of past medical expenses.” (52 Cal. 4th at 567. See also Corenbaum v. Lampkin (2013) 215 Cal. App. 4th 1308, 1320-24 (the billed amount for medical services when the insurer prenegotiates a lower rate for services is inadmissible to prove not only past medical damages, but also future medical damages and/or noneconomic damages.)
An injured, insured plaintiff who is treated by medical providers within his or her insurance plan may not recover economic medical damages that exceed the amount paid by the insurer for the medical services provided. The amount of the “full bill” for past medical services is not relevant in cases of insured plaintiffs treated by in network providers to prove past or future medical expense and/or noneconomic damages. (Howell v. Hamilton Meats and Provisions, Inc., supra, 52 Cal. 4th 541, 566-567; Corenbaum v. Lampkin (2013) 215 Cal. App. 4th 1308, 1330-31.).
In Ochoa v. Dorado ((2014) 228 Cal. App. 4th 120), the court categorically ruled that where the plaintiff was insured and received treatment from medical providers within the plan, evidence of the full amount billed, but unpaid, for past medical service is not relevant to the reasonable value of services provided and cannot support an award of damages for past medical expenses. (228 Cal. App. 4th 120, 135-36). Ochoa also stated that even when there is no prenegotiated discounted rate, the full amount billed, but unpaid, for past medical services is still not relevant to the reasonable value of the services provided. (228 Cal. App. 4th 120, 135.)
In contrast, the amount or measure of economic damages for an uninsured plaintiff typically turns on the amount paid or incurred, and the reasonable value of the services rendered or expected to be rendered. Thus, an uninsured plaintiff may introduce evidence of the full amounts billed for medical services to prove the services’ reasonable value. When a plaintiff is not insured, medical bills are relevant and admissible to prove both the amount incurred and the reasonable value of the medical services provided. (Pebley v. Santa Clara Organics, LLC (2018) 22 Cal. App. 5th 1266, 1269, 1275.) Evidence of the full amount billed is admissible to assess the reasonable value of past medical services if the plaintiff is uninsured and remained fully liable to his or her medical providers for the full amount billed. (Katiuzhinsky v. Perry (2007) 152 Cal. App. 4th 1288, 1295-96.)
In Qaadir v. Figueroa ((2021) 67 Cal. App. 5th 790), the total amount billed to the uninsured plaintiff for past medical services was $838,320.02. The plaintiff’s expert testified that the reasonable value of the past medical expenses was $632,456. The defendant’s expert put the figure at $174,111 based on an average of what private insurers, Medicare, and workers’ compensation would pay. The jury awarded the plaintiff $500,000 for past medical expenses and another $500,000 for future medical expenses. The appellate court concluded that the trial court abused its discretion when it admitted evidence of the full amount of the unpaid bills to prove the plaintiff’s past and future medical damages, as it had first failed to demonstrate the plaintiff actually paid or incurred those amounts. However, the appellate court ruled the error was harmless.
The main holding of Qaadir is that evidence of a medical bill is relevant in cases of uninsured plaintiffs to prove or disprove the “paid or incurred” prong of past medical damages if it can be established that the bill was actually paid or incurred. The second prong is that expert witness opinion testimony is required to establish that the amount of the bills is reasonable.
Insured Plaintiff Going Out of Network
In Pebley v. Santa Clara Organics, LLC ((2018) 22 Cal. App. 5th 1266.), the court ruled that when an insured plaintiff chooses to seek medical care outside of his or her insurance plan, such a plaintiff is considered “uninsured” (or noninsured), making the incurred but unpaid medical bills potentially relevant to prove past and future medical expenses – so long as additional evidence, usually in the form of expert witness testimony, is also presented on the reasonable value of the medical services provided. One of the main reasons for this is that the plaintiff, rather than a health insurer, is the one who is obligated to pay the bills. (Pebley, supra, 22 Cal. App. 5th at 1275, 1277; Qaadir v. Figueroa, supra, 67 Cal. App. 5th at 602.).
It would be inequitable to classify a plaintiff as insured when the plaintiff, and not the insurance carrier, is responsible for the bills. Indeed, precluding the plaintiff from recovering the reasonable value of services for which he or she is entitled would result in both undercompensation for the plaintiff and a windfall for the defendant. (Pebley, supra, 22 Cal App 5th at 1277-78; Katiuzhinsky, supra, 152 Cal. App. 4th at 1296.
In Pebley, the trial court did not err by allowing the plaintiff to introduce evidence of the $269,498.65 in billed charges for his past medical expenses. But that evidence, by itself, was insufficient to establish the reasonable value of the services rendered. The plaintiff was required to proffer expert testimony on the reasonable value of the services provided. (Pebley, 22 Cal. App. 5th at 1275-76, 1278. See also Bermudez v. Ciolek, supra, 237 Cal. App 4th 1311, 1336.).
A plaintiff may recover as economic damages no more than the amount paid by the plaintiff or his or her insurer for the medical services received or still owing at the time of trial. A plaintiff may not recover more than the reasonable value of the medical services received and is not entitled to recover the reasonable value of the medical services if his or her actual loss was less. However, to be recoverable the medical expenses must be both paid or incurred and reasonable, which applies equally to those with and without medical insurance. (Howell v. Hamilton Meats and Provisions, Inc., supra, 52 Cal. 4th 541, 559 & fn. 7; Bermudez v. Ciolek (2015) 237 Cal. App. 4th 1311, 1329).
In cases involving a plaintiff who has insurance but elects to be treated outside of the insurance plan, evidence that the plaintiff was covered by a health insurance policy is properly excluded under Evidence Code section 352 (relevancy), as evidence of the plaintiff’s insurance status would only confuse the issues and mislead and prejudice the jury. (Qaadir, 67 Cal. App. 5th at 809-10; Pebley, 22 Cal. App. 5th at 1278.)
When a plaintiff is not insured, medical bills are relevant and admissible to prove both the amount incurred and the reasonable value of medical services provided. The uninsured plaintiff must present evidence, generally in the form of expert opinion testimony, to establish that the amount billed was a reasonable value for the services rendered. (Pebley, 22 Cal. App. 5th at 1278; Bermudez, 237 Cal. App. 4th at 1336-38.). Whether a plaintiff has or doesn’t have insurance is really not relevant as to what the reasonable value of medical services is. (Qaadir v. Figueroa, supra, 67 Cal. App. 5th at 808, 810; Pebley v. Santa Clara Organics, LLC, supra, 22 Cal. App. 5th at 1277.)
The measure of damages for uninsured plaintiffs who have not paid their medical bills will usually turn on a wide-ranging inquiry into the reasonable value of medical services provided, because uninsured plaintiffs will typically incur standard, nondiscounted charges that will be challenged by the defendants as unreasonable. (Bermudez v. Ciolek, supra, 237 Cal. App. 4th 1311, 1330-31; Uspenskay v. Meline (2015) 241 Cal. App. 4th 996, 1007.). Howell noted that there can be a significant disparity between the amounts charged by medical providers and the costs of providing service, that prices for providing a particular service can vary tremendously from hospital to hospital in California, and there can be significant disparities between the amounts charged to insured and uninsured patients. (Howell, 52 Cal. 4th at 560-62.).
In Howell, the court recognized that there is an element of fortuity involved with respect to the medical expenses a tortfeasor may be liable to pay. A tortfeasor who injures a member of a managed care organization may pay less in compensation for medical expenses than one who inflicts the same injury on an uninsured person treated at a hospital. (Howell, supra, 52 Cal. 4th at 566.)
Mitigation of Damages
In tort cases, every plaintiff has a duty to take reasonable steps to minimize the loss caused by a defendant’s actions. (Placer County Water Agency v. Hofman (1985) 165 Cal. App. 3d 890, 897). Under the avoidable consequences doctrine, a person injured by another’s wrongful conduct will not be compensated for damages that the injured person could have avoided by reasonable effort or expenditure. (State Dept. of Health Services v. Superior Court (2003) 31 Cal. 4th 1026, 1043)
When an insured plaintiff has chosen to get treatment and care from medical providers outside of his or her insurance plan, the defense has argued that it should have been allowed to present evidence that the plaintiff had a duty to mitigate his or her damages by treating with providers in the insurance plan. In several cases (Qaadir v. Figueroa (2021) 67 Cal. App. 5th 790; Pebley v. Santa Clara Organics, LLC (2018) 22 Cal. App. 5th 1266; Bermudez v. Ciolek (2015) 237 Cal. App. 4th 1311), the defendants have contended that an insured plaintiff who has opted to go outside his or her insurance plan for medical treatment has failed to mitigate his or her damages and therefore the defense should be allowed to present evidence at trial that the plaintiff was insured.
In Pebley, the defendants maintained that the insured plaintiff who had chosen to be treated outside of his insurance plan had failed to mitigate his medical expenses by opting for “the most expensive method” to pay for his treatment. The defendants contended that the plaintiff’s “unreasonable choice” in going outside his insurance plan for treatment and care resulted in excess medical expenses which constituted avoidable losses the plaintiff sought to pass on to the defendants. The defendants presented no authority for the proposition that the plaintiff was required to mitigate his damages by seeking care only within his insurance plan. Instead, the court noted that it was undisputed that the plaintiff had a right to seek treatment outside of his insurance plan. In Qaadir, the court stated that the rule of mitigation of damages has no application where its effect would be to require the innocent party to sacrifice and surrender important and valuable rights. (Qaadir, 67 Cal. App. 5th at 810.)
A tortfeasor cannot force a plaintiff to use his or her own insurance to obtain medical treatment and care for injuries caused by the tortfeasor. That choice belongs to the plaintiff. If the plaintiff elects to be treated through an insurance carrier, the plaintiff typically will be limited to the amounts paid by the carrier for the services provided. But when the plaintiff chooses to be treated outside of the available insurance plan, the plaintiff is in the same position as an uninsured (or noninsured) plaintiff and should be classified as such under the law for purposes of proving the amount of his or her past and future medical expenses. The plaintiff may prove the reasonable value of the services he or she received by admission of unpaid medical bills and by expert testimony on the issue of reasonable charges. (Pebley, 22 Cal. App. 5th at 1277-78.)