Calif. Appeals Court Permits Use of Medicare Reimbursement Rates to Prove Reasonable Value of Future Medical Services

Walnut Creek/San Diego, Calif. (July 19, 2024) - Expanding upon prior decisions that support the use of insurance adjusted rates when mitigating future medical damage claims, the Fourth District Appellate Court recently ruled that in a personal injury action the defense is permitted to ask questions regarding future eligibility for Medicare without violating the collateral source rule. This decision allows the defense to introduce evidence of Medi-Cal and Medicare eligibility along with anticipated future costs at those significantly reduced rates. The Fourth District reasoned in its ruling that the collateral source rule was not violated because such evidence pertained to the value of future medical services, which is permitted according to well-established precedent.

Case Summary

The underlying action concerned a motor vehicle accident involving two cars driven by the plaintiff and defendant. According to the trial court, the defendant, Macias, made an illegal left-hand turn and the two vehicles collided as a result. The plaintiff, Audish, alleged a mild concussion, with symptoms of anxiety, insomnia, light sensitivity, fatigue, headaches, neck pain, nausea, loss of balance, vomiting, dizziness, brain fog and memory loss after the accident. Prior to trial, Audish filed a motion in limine that sought to preclude any mention that he may have, or would have, medical insurance. The Court granted in part and denied in part Audish’s motion, “reasoning that an expert witness with a proper foundation could testify about the reasonable value of medical care based on the rates insurers pay for medical treatments.”

On the fifth day of trial, a nurse/life care planner testified on Audish’s behalf. This expert prepared a life care plan for Audish wherein she estimated that the future care for Audish would cost $1,417,146.00. On defense cross-examination, Audish’s expert admitted that she based her life care costs on average amounts that medical providers in the area charged for similar medical treatments. Audish’s expert was then asked if her client would be eligible for Medicare at 65, and over a relevance objection, the expert replied, “I assume so.” Audish’s expert went on to agree that her future cost estimates did not account for what Medicare would pay.

A jury returned a special verdict finding Audish and Macias were both negligent in the operation of their vehicles. Further, the jury found that Audish has incurred $29,288.94 in past medical damages, and only $32,790.56 in future medical damages. Audish moved for a partial new trial on the issue of damages, which was denied, and a judgment was entered consistent with the verdict. Audish appealed.

Decision

For years, California courts have been chipping away at the protections once afforded to plaintiffs under a collateral source argument. In 2011, the state Supreme Court decided Howell, which limits medical damages to the discounted rate the health care provider accepted as payment for the medical services rendered. Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541, 551. The Supreme Court reasoned that its decision in Howell did not violate the collateral source rule because the rule was inapplicable. Id. at 548.

In Cuevas, the Court precluded defense evidence of Medi-Cal rates to mitigate future damages. Cuevas v. Contra Costa County (2017) 11 Cal.App.5th 163. The decision was overturned on appeal, wherein the First District Court held, “the collateral source rule is not violated when a defendant is allowed to offer evidence of the market value of future medical benefits.” Id. at 180.

In 2019, the Second District Court of Appeal upheld a trial court’s decision to allow the defendant to make various references to the plaintiff’s past medical insurer and his future eligibility for Medicare and Social Security. Stokes v. Muschinske (2019) 34 Cal.App.5th 45. The Court reasoned in the Stokes case that most of the references to Kaiser and Medicare “were helpful and even necessary to the jury's understanding” of the plaintiff's past treatment and the calculation of future reasonable medical expenses. (Id. at p. 58-59.) The Court went on to conclude that, the trial court did not “abuse its discretion in admitting these references to assist the jury's understanding of the facts.” (Ibid.)

Relying on the Howell, Cuevas, and Stokes cases, the Fourth District Court of Appeal held in Audish that, “the trial court in the present case acted well within the bounds of its discretion when it permitted the defense to question Audish's life-care planner briefly about his future eligibility for Medicare and the anticipated costs of his recommended medical treatments if he were to obtain Medicare coverage. These evidentiary rulings did not violate the collateral source rule or amount to an abuse of discretion.” Audish v. Macias (2024) 102 Cal.App.5th 740, 750.

Practice Pointers

In light of Audish case and its predecessors, defense counsel should ensure their life care planners evaluate future medical damage claims using adjusted insurance rates, including statutory Medi-Cal and Medicare rates, which have now been deemed admissible. While counsel should also anticipate collateral source objections during motions in limine and during trial, this plainly establishes defendants are permitted to present evidence of the significantly reduced rates available to Medi-Cal and Medicare-eligible recipients in support of their damages analysis.

For more information about this decision, contact the author or editor of this alert. Visit our General Liability Practice page to learn more about our capabilities in this area.

Author:

Brooke E. Washburne, Partner

Editor:

Amy Frerich, Partner and Vice-Chair of National General Liability Practice