The Court of Appeal just issued a groundbreaking case in Audish v. Macias (2024) 102 Cal.App.5th 740 (review denied August 21, 2024), which provides welcome relief to the defense community with respect to its ability to establish the reasonable market value of past and future medical treatment claimed by personal injury plaintiffs. The case is important for at least two reasons: (1) it bolsters the import of Cuevas v. Contra Costa County (2017) 11 Cal.App.5th 163, which held, in a medical malpractice case, that future Medi-Cal and other insurance benefits are admissible for determining the reasonable value of medical services; and (2) it provides a rebuttal case to language in Pebley v. Santa Clara Organics, LLC (2018) 22 Cal.App.5th 1266, which rejected the notion that future Medicare/insurance benefits are admissible to establish the reasonable value of medical services.
The Audish Decision
Plaintiff David Audish appealed a judgment after a jury found both he and the defendant, David Macias, equally responsible for a car accident. One of the issues on appeal centered on the admissibility of evidence of future Medicare coverage.
At trial, Audish’s expert opined that his future medical expenses would exceed $1.4 million, based on undiscounted billing rates for such services. The court allowed Macias to cross-examine the expert on the fact she did not account for reduced amounts Medicare (and private insurers) would accept for those services. The jury returned a verdict that awarded Audish $65,699 in damages.
Audish moved unsuccessfully for a partial new trial, then appealed. As relevant here, he contended that the trial court abused its discretion by admitting evidence related to his future Medicare coverage.
Court of Appeal Affirms Admissibility of Medicare Evidence
Audish effectively argued that the admission of evidence that Medicare and other insurers would pay less for his future treatment violated the collateral source rule. The collateral source rule generally prohibits a defendant from introducing evidence that the plaintiff has received compensation for injuries from sources such as insurance. (Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541.) The rule is based on the idea that a tortfeasor should not benefit from payments made to the plaintiff by independent third parties, nor from a plaintiff’s foresight in obtaining insurance.
The appellate court disagreed with Audish’s arguments, finding that the collateral source rule is not implicated in this context. It recognized the well-established rule that an injured plaintiff may recover the lesser of either (1) the amount actually incurred (i.e., paid and/or owed) for medical services, or (2) the reasonable market value of those services. Macias was not seeking to avoid responsibility for the amounts Audish would actually incur for future medical treatment. Rather, the evidence was offered to show simply that Audish would incur less for those services if procured through Medicare (or private insurance), and this, in turn, was relevant to the reasonable value of those services.
In finding the trial court did not err in admitting this evidence, the Court of Appeal in Audish cited two especially instructive cases. First, in Corenbaum v. Lampkin (2013) 215 Cal.App.4th 1308, the court held that the full amount charged for past medical services is not an accurate measure of the value of future medical services. This decision reinforced the principle that evidence of what healthcare providers accept as payment, rather than what they bill, is relevant to determining the reasonable value of medical care.
Second, in Cuevas v. Contra Costa County (2017) 11 Cal.App.5th 163, the plaintiff again used undiscounted estimates to try to establish future medical expenses, while the defendant sought to admit the anticipated discounted rates that would be made available through Medi-Cal or other insurance obtained through the Affordable Care Act. The trial court prevented the defendant from referencing such discounts, but the appellate court reversed, relying on Howell and Corenbaum. It recognized that the defendant was merely offering evidence of the market value of the future medical services, an issue that does not implicate the collateral source rule.
The appellate court in Audish concluded that the trial court did not abuse its discretion by admitting evidence of Audish’s potential Medicare eligibility. Consistent with Cuevas, the court reasoned that such evidence is pertinent to establishing the reasonable value of future medical expenses.
Implicit Departure from Pebley v. Santa Clara Organics
Although not cited in the decision, or in any of the parties’ briefs, the Audish case departs in significant respects from Pebley v. Santa Clara Organics, LLC. There, a plaintiff injured in a car accident initially received treatment through his insurance provider, Kaiser, but switched to uncovered treatment after filing suit. In addition, despite becoming Medicare-eligible in March 2013, Pebley continued seeking only uncovered treatment, charged at much higher rates. At trial, the court granted the plaintiff’s requests to exclude all evidence of Pebley’s available insurance coverage and what insurance companies would have paid for the treatment at issue. In light of this order forbidding reference to insurance, the court also barred a defense expert from opining on the reasonable value of professional fees because his methodology involved an analysis of Medicare rates.
The Court of Appeal affirmed. As relevant here, the court reasoned that the defendants cited “no authority suggesting that Pebley’s tort recovery should be limited to what Kaiser (and possibly Medicare) would have paid had he chosen to treat with providers who accept that insurance. The better view is that he is to be considered uninsured (or noninsured) for purposes of proving the amount of his damages for past and future medical expenses.” (Pebley v. Santa Clara Organics, LLC, supra, 22 Cal.App.5th at p. 1277 [citation omitted; emphasis added].)
In other words, the court in Pebley found that a trial court acted properly by preventing a defendant from admitting evidence of Medicare or other insurance-reduced pricing for either past or future medical treatment, offered to demonstrate that the reasonable value of such treatment was lower than what the plaintiff claimed. The Audish court, in contrast, recognized “that it is permissible—or even necessary—for a trial court to admit evidence concerning a tort plaintiff’s future eligibility for health insurance and the anticipated amounts the insurer would be expected to pay for the patient’s future medical needs, evidence that is relevant to the reasonable value of future medical care.” (Audish v. Macias, supra, 102 Cal.App.5th at p. 749 [emphasis added].)
Why the Audish Decision Is Important
As noted at the outset, the court in Cuevas established that defendants should be allowed to offer evidence of the market value of future medical expenses, including the rates providers would accept from public or private insurance. The case involved medical malpractice claims, and, thus, was governed by MICRA (the Medical Injury Compensation Reform Act). Part of the decision was based on whether MICRA allows the introduction of evidence of future health insurance benefits, leading to some debate as to whether Cuevas applied in non-MICRA cases. However, an independent part of the decision addressed the introduction of such evidence in light of the collateral source rule, and now the Audish court has effectively clarified that, indeed, Cuevas applies outside the MICRA context.
In addition, Audish provides contrasting authority to the discussion in Pebley about the admissibility of future insurance benefits when determining the reasonable market value of future medical treatment. There, the court noted that the defendant failed to cite any authority that the plaintiff’s recovery should be limited by what insurers might pay for his treatment in the future. Now, however, there are at least two such authorities – Cuevas and Audish. The defense community should stress how these later two decisions addressed this issue through comprehensive and well-supported discussions. In Pebley, by contrast, this was not the primary focus of the decision, which centered on the definition of “uninsured” and on the admissibility of past medical bills offered by one who had insurance but chose not to use it. As such, there is an argument the language in Pebley on this point is dicta. In any event, trial courts may choose which precedent to follow, pursuant to Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 456.
Conclusion
The Audish case provides much-needed guidance and relief to the defense community as concerns unreasonable claims for medical special damages, especially future medical damages. With the modern trend of outlandish “life care plans” and other exorbitant damages claims, this is an important case for anyone who practices personal injury law in California.
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About the Authors
Steve Disharoon is a Certified Specialist in Appellate Law (the State Bar of California), and is the Managing Partner of the Sonoma County office of Wood Smith Henning & Berman, LLP. Caitlin Mitchell is a Senior Associate in the Sonoma County office of WSHB, with a practice focused on complex civil litigation in a host of areas, including commercial and business litigation, appellate law, personal injury, and medical malpractice.