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Luttrell v. Island Pacific Supermarkets, Inc., recent decision holding Howell v. Hamilton Meats applies to cases involving Medicare and Medi-Cal payments

Luttrell v. Island Pacific Supermarkets, Inc., recent decision holding Howell v. Hamilton Meats applies to cases involving Medicare and Medi-Cal payments

In an unambiguous application of Howell v. Hamilton Meats, Inc., (2011) 52 Cal.4th 541, Division Five of the First District Court of Appeal held in Luttrell v. Island Pacific Supermarkets, Inc. (4/8/13) 13 C.D.O.S. 3838, that a plaintiff in a personal injury action for premises liability could only recover the amounts actually paid by Medicare for his medical treatment, not the amounts billed to Medicare by plaintiff's healthcare providers. In addition, when a jury finds comparative negligence or failure to mitigate on the part of the plaintiff in such a case, the Howell cap on amounts actually paid rather than amounts billed will be applied first, with a further reduction based on plaintiff's percentage of fault after that. The court of appeal affirmed and held "specifically that Howell governs where past medical expenses have been paid by Medicare, and the Howell cap should be imposed before any reduction for failure to mitigate damages."

Plaintiff James Luttrell had a host of preexisting conditions and was disabled before he was injured in defendant's malfunctioning automatic door. After being trapped by the automatic door, he experienced a broken hip, and then, after hip surgery, got a grade IV decubitus ulcer. Defendants made a motion in limine to limit the evidence of past medical expenses to only those amounts paid, not those that were billed by providers to Medicare. (All of plaintiff's medical care was provided by Medicare, which had a lien for the cost of care rendered.) The in limine motion was denied without prejudice, and the jury received evidence of amounts billed. The jury found that defendant was liable for some of the injury, but that plaintiff had failed to mitigate by not following medical advice.

After the verdict, several post-trial motions were filed. Among them was defendant's request that the amount of the award for past medical damages be reduced per Hanif v. Housing Authority (1988) 200 Cal.App.3d 635, and the jury's finding that plaintiff had failed to mitigate. The trial court granted Pacific's motion to reduce the amount of the past medical damages to those "actually paid," per Howell. In so ruling, the trial court agreed that plaintiff's award for past medical expenses should be reduced to the amount Medicare actually paid, and then reduced the award further by 50% for failure to mitigate. Plaintiff appealed on several grounds, among them that the mitigation reduction should have been applied to "amounts billed" rather than "amounts paid."

The appellate court agreed with the trial court that Howell applied, even if the payments were made by Medicare rather than private insurance. Citing to both the Hanif, and Nishihama v. City and County of San Francisco (2001) 93 Cal.App.4th 298 decisions, the court gave a concise, well-reasoned explanation of why Howell applied to the instant case:

The primary thrust of Luttrell’s theory in this regard is that the Howell rule – limiting recovery to the amount paid for past medical expenses rather than the amount billed – should not be applied to this case at all. But it plainly must. As a general rule, a plaintiff in a tort action is not to be placed in a better position than he would have had if the wrong had not been done. (Valdez v. Taylor Automobile Co. (1954) 129 Cal.App.2d 810, 821-822.) Thus, a plaintiff typically may not recover more than the actual amounts paid by him or on his behalf for past medical services, even though the amounts billed for those services were greater. (Howell, supra, 52 Cal.4th at pp. 555, 566 [plaintiff may recover as economic damages the lesser of the reasonable value of the medical services received and the amount paid by the plaintiff or private insurance on the plaintiff’s behalf, not the amount billed]; Hanif, supra, 200 Cal.App.3d at pp. 639-644 [plaintiff’s recovery should have been limited to amount Medi-Cal paid medical providers on plaintiff’s behalf, even if substantially lower than the reasonable value of the treatment, because the plaintiff’s detriment and pecuniary loss was only what Medi-Cal paid]; Nishihama v. City and County of San Francisco (2001) 93 Cal.App.4th 298, 306 [plaintiff could recover only amounts paid to medical providers on his behalf by private insurer]; Sanchez v. Brooke (2012) 204 Cal.App.4th 126, 131, 142 [injured employee’s recovery limited to amounts paid to medical providers by employer under workers’ compensation law, where employee not liable for balance of billed amount].) Here, Medicare and Medi-Cal had pre-existing contractual relationships with Luttrell’s medical providers, by which the providers agreed to accept a sum less than their usual and customary charges as payment in full for their services. Those providers may not seek reimbursement over the amount that Medicare and Medi-Cal was contractually obligated to pay. (See Parnell v. Adventist Health System/West (2005) 35 Cal.4th 595, 609.) Because Luttrell’s liability to medical providers for their past medical services is limited to the amounts Medicare and Medi-Cal actually paid, Luttrell’s recovery from Island Pacific for past medical services must be limited to those amounts actually paid. (Howell, supra, 52 Cal.4th at p. 567.) (Emphasis added.)

The court explained that plaintiff would be made whole by reducing the award to amounts actually paid--the amount of the Medicare lien--which, under Howell, "represents the maximum amount a plaintiff could recover." (Emphasis in original). The subsequent reduction of the maximum possible award by 50% for failure to mitigate guarantees that plaintiff does not get a windfall and that the tortfeasor does not pay more than the cost of its negligence, something that could conceivably occur if the failure to mitigate reduction was made before the application of the Howell cap.

Furthermore, the point of the Hanif-Howell line of cases is that the tortfeasor should be held to pay the full cost of its negligence or wrongdoing – no more and no less. (Howell, supra, 52 Cal.4th at pp. 560, 566.) This can be accomplished if the maximum potential recovery is first ascertained by reference to the amounts actually paid for medical expenses and then reducing it by the percentage attributable to the plaintiff’s contribution to that expense. It will not be accomplished in some instances, however, by first applying the mitigation reduction to the billed amounts, and then imposing the amounts-paid cap. The facts of the matter before us bear this out. The amounts billed by St. Rose, Danville Rehabilitation, Dr. Kannan, and Dr. Allen with respect to Luttrell’s decubitus ulcer totaled $511,105.21; the amounts paid to those providers (by Medicare/Medi-Cal) totaled $87,733.76; applying the 50 percent mitigation reduction to the amounts paid to each of those providers, the total awarded to Luttrell as past medical expenses for his decubitus ulcer was $43,866.89. If the 50 percent reduction had instead been taken first from the amounts billed (reducing the $511,105.21 award to $255,552.60), and then the court applied the Howell cap equal to the amounts paid ($87,733.76), Luttrell would have recovered the entire amount paid ($87,733.76), and his failure to mitigate would have had no consequence whatsoever. The result would have provided a windfall to Luttrell and imposed liability upon Island Pacific in excess of the damage it caused. The trial court did not err in reducing the amounts paid for Luttrell’s decubitus ulcer by 50 percent.

This is a very useful decision for defendants for a variety of reasons. First, it fully embraces the ruling and policy issues in Howell. Because Luttrell interprets and applies Howell to cases involving Medicare and Medi-Cal, it broadens the scope of Howell; arguably, attorneys will no longer have to go through the Hanif-Nishihama discussion in order to limit past medical damages to amounts actually paid in Medicare and Medi-Cal cases.

Second, in Luttrell, the defendants initially made a motion in limine to limit evidence of past medical costs to only those amounts actually paid by Medicare, not the amounts billed. Though the motion was denied without prejudice, the motion to reduce the verdict after trial was granted per Hanif and Howell. After Luttrell, it would be worth making a MIL citing to this decision to limit the evidence to amounts paid by Medicare, rather than allowing the jury to get evidence of amounts billed rather than waiting to make a post-trial motion.

Finally, the Luttrell decision gives parties a clear understanding of the sequencing of award reductions for purposes of calculating past medical damages in the wake of Howell: first the Howell cap (amounts actually paid) will be applied, then, from that "maximum" amount to which plaintiff would be entitled, reductions for failure to mitigate and/or contributory negligence will be made.