Opinion ID: 844253
Heading Depth: 2
Heading Rank: 2

Heading: Hanif and Private Health Insurance

Text: Plaintiff contends Hanif 's limitation on recovery, even if correct as to Medi-Cal recipients, does not logically apply to plaintiffs, like her, with private medical insurance. The appellate court below agreed, reasoning that Howell, who was privately insured, incurred personal liability for her medical providers' usual and customary charges, whereas the plaintiff in Hanif incurred no personal liability for the medical charges billed to Medi-Cal. Observing that Hanif stated the measure of recovery for medical expenses was the amounts actually paid or incurred ( Hanif, supra, 200 Cal.App.3d at p. 641), plaintiff argues she incurred liability for the full amount of Scripps's and CORE's bills when she signed patient agreements with those providers and accepted their services. We find the distinction unpersuasive. Evidence presented at the posttrial hearing showed Scripps and CORE accepted the discounted amounts as full payment pursuant to preexisting agreements with PacifiCare, plaintiff's managed care plan. Since those agreements were in place when plaintiff sought medical care from the providers and signed the patient agreements, her prospective liability was limited to the amounts PacifiCare had agreed to pay the providers for the services they were to render. Plaintiff cannot meaningfully be said ever to have incurred the full charges. (See Parnell v. Adventist Health System/West, supra, 35 Cal.4th at p. 609 [where hospital had agreed with plaintiff's health plan to accept discounted amounts as payment in full, plaintiff owed hospital nothing beyond those discounted payments]; cf. People v. Bergin (2008) 167 Cal.App.4th 1166, 1170 [84 Cal.Rptr.3d 700] for purposes of Pen. Code, § 1202.4, subd. (f)(3), requiring restitution in the amount of the economic loss incurred, crime victim incurred loss only in the amount medical provider accepted as payment from private insurer].) In this respect, plaintiff here was in the same position as the Hanif plaintiff, who also bore no personal liability for the providers' charges. This is not a case like Katiuzhinsky v. Perry, supra, 152 Cal.App.4th at page 1296, where the plaintiffs remain[ed] fully liable for the amount of the medical provider's charges for care and treatment. Hanif noted one exception to its rule, viz., for medical services that are gratuitously provided or discounted, an exception included in the Restatement section on which the court relied (Rest.2d Torts, § 911, com. h, pp. 476-477). (See Hanif, supra, 200 Cal.App.3d at p. 643 [no evidence the low rate charged Medi-Cal was intended as a gift to the plaintiff].) The question arises whether this exception, if accepted, limits Hanif 's logic in a manner important to the present issue. That is, if a plaintiff, as the Restatement provides, may recover the reasonable value of donated medical services services for which neither the plaintiff nor the plaintiff's insurer paidshould a plaintiff also be permitted to recover other amounts that were not paid but were reasonably billed by the provider, including the negotiated rate differential? If the amount of a gratuitous discount would be considered a collateral source payment, should the amount of a negotiated discount be treated in the same way? The Restatement reflects the widely held view that the collateral source rule applies to gratuitous payments and services. (Rest.2d Torts, § 920A, com. c, subd. (3), p. 515 [Thus the fact that the doctor did not charge for his services or the plaintiff was treated in a veterans hospital does not prevent his recovery for the reasonable value of the services.]; see also Rest.2d Torts, § 924, com. f, pp. 526-527.) California law is less clear on the point. In Helfend, we suggested in dictum that the collateral source rule applies to unpaid services only when those are rendered with the expectation of repayment out of any tort recovery. ( Helfend, supra, 2 Cal.3d at p. 7, fn. 5.) But in Arambula v. Wells (1999) 72 Cal.App.4th 1006 [85 Cal.Rptr.2d 584], the Court of Appeal declined to follow this dictum, finding it inconsistent with other California cases, the law of sister states, and the policy of encouraging charitable action: We doubt such gifts would continue if, notwithstanding a donor's desire to aid the injured, the person who caused the injury ultimately stood to gain a windfall. Donors should not have to consult with a lawyer to make sure their largesse is not hijacked by the tortfeasor. ( Id. at p. 1013.) Thus, although in Arambula the injured plaintiff's employer had continued to pay his salary, the appellate court held the jury should have been permitted to award damages for lost earnings. ( Id. at pp. 1008-1009, 1016.) This court has neither approved nor disapproved Arambula 's holding, nor does this case require that we do so. (14) Assuming California follows the Restatement's view that a plaintiff may recover the value of donated services under the collateral source rule, this exception to Hanif 's limitation on recovery does not, we believe, militate against applying Hanif 's rulethat only amounts paid or incurred are recoverableto medical expenses paid by the plaintiff's insurer. Medical providers that agree to accept discounted payments by managed care organizations or other health insurers as full payment for a patient's care do so not as a gift to the patient or insurer, but for commercial reasons and as a result of negotiations. As plaintiff herself explains, hospitals and medical groups obtain commercial benefits from their agreements with health insurance organizations; the agreements guarantee the providers prompt payment of the agreed rates and often have financial incentives for plan members to choose the providers' services. (See Stanley v. Walker (Ind. 2009) 906 N.E.2d 852, 863-864 (dis. opn. of Dickson, J.) [detailing administrative and marketing advantages medical providers derive from managed care agreements, particularly those with preferred provider plans].) That plaintiffs are not permitted to recover undiscounted amounts from those who have injured them creates no danger these negotiations and agreements will disappear; the medical provider has no financial reason to care whether the tortfeasor is charged with or the plaintiff recovers the negotiated rate differential. Having agreed to accept the negotiated amount as full payment, a provider may not recover any difference between that and the billed amount through a lien on the tort recovery. ( Parnell v. Adventist Health System/West, supra, 35 Cal.4th at p. 598.) In jurisdictions where donated services are considered to fall within the collateral source rule, the plaintiff is presumably entitled to recover the reasonable value of the services even though he or she did not incur liability in that amount. The dissent argues that to limit the recovery of a plaintiff with medical insurance, such as Howell, to the amounts paid or incurred is anomalous, given that he or she could have recovered a hypothetically larger reasonable value had the services been gratuitously provided. (Dis. opn., post, at p. 572.) We see no anomaly, even assuming we would recognize the gratuitous-services exception to the rule limiting recovery to the plaintiff's economic loss. The rationale for that exceptionan incentive to charitable aid ( Arambula v. Wells, supra, 72 Cal.App.4th at p. 1013)has, as just explained, no application to commercially negotiated price agreements like those between medical providers and health insurers. Nor, as discussed below, does the tort law policy of avoiding a windfall to the tortfeasor suggest the necessity of treating the negotiated rate differential as if it were a gratuitous payment by the medical provider. [6] (See pt. C, post. ) (15) The dissent's repeated description of the negotiated rate differential as a writeoff from the provider's bill illustrates the confusion between negotiated prices and gratuitous provision of medical services. (See dis. opn., post, at pp. 568-569, 571, 572-573, 577.) Where a plaintiff has incurred liability for the billed cost of services and the provider later writes off part of the bill because, for example, the plaintiff is unable to pay the full charge, one might argue that the amount of the writeoff constitutes a gratuitous benefit the plaintiff is entitled to recover under the collateral source rule. But in cases like that at bench, the medical provider has agreed, before treating the plaintiff, to accept a certain amount in exchange for its services. That amount constitutes the provider's price, which the plaintiff and health insurer are obligated to pay without any writeoff. There is no need to determine a reasonable value of the services, as there is in the case of services gratuitously provided. [W]here, as here, the exact amount of expenses has been established by contract and those expenses have been satisfied, there is no longer any issue as to the amount of expenses for which the plaintiff will be liable. In the latter case, the injured party should be limited to recovering the amount paid for the medical services. ( Moorhead v. Crozer Chester Medical Center (2001) 564 Pa. 156 [765 A.2d 786, 789].)