Earlier this year, the Fourth District Court of Appeal decided Audish v. Macias.[i] This groundbreaking case builds upon the foundation started in Howell v. Hamilton Meats & Provision, Inc. by clarifying the application of the collateral source rule regarding the admissibility of Medicare evidence to establish future medical costs.

Case Background

This case arises from an auto accident. At the trial, Audish’s lifecare planner testified that his future medical expenses would exceed $1.4 million based on the average amounts medical providers charged their patients.[ii] On cross examination, the expert admitted she did not account for the reduced amounts that Medicare actually pays providers for those medical services.[iii]

The jury found each party 50% liable and awarded Audish $65,699.50 in damages, including $32,790.56 for future medical expenses.[iv] On appeal, Audish argued the trial court abused its discretion by admitting evidence he would have Medicare insurance at the age of 65, which supposedly encouraged the jury to reduce his award for future medical expenses.[v]

The Audish Decision

The appellate court concluded evidence of Audish’s future Medicare eligibility and anticipated costs of his medical treatment did not violate the collateral source rule. Citing Howell, the court explained the collateral source rule prevents a defendant from receiving a credit against his potential liability based on compensation that plaintiffs receive from “source[s] wholly independent of the tortfeasor.”[vi] The reasoning behind the rule is that a defendant should not benefit from third-party payments to plaintiff that would otherwise be recoverable from the defendant.[vii]

The Audish court cited two instructive cases. In Corenbaum v. Lampkin, the court held the full amount charged for past medical services “is not an accurate measure of the value of medical services” and was “therefore irrelevant to the reasonable value of either past or future medical services.”[viii]  The Audish court also looked to Cuevas v. Contra Costa County, which held the trial court erred when it precluded defendant from introducing evidence regarding plaintiff’s Medi-Cal and Affordable Care Act benefits.[ix] The Cuevas court explained “the collateral source rule is not violated when a defendant is allowed to offer evidence of the market value of future medical benefits.” These decisions reinforce the principle first laid out in Howell–that a plaintiff’s recovery is limited to the discounted rate the health provider accepts as payment.[x]

The Importance of Audish[xi]

Despite heavy lobbying from the plaintiffs’ bar, the California Supreme Court ordered the publication of the Audish opinion.[xii] Defendants and their counsel should be prepared to present evidence at mediation and trial regarding “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[.]”[xiii] The Audish court specifically concluded that such evidence “is relevant to the reasonable value of future medical care.”[xiv] In an era of increasing Nuclear Verdicts®, defense attorneys must arm themselves with the Audish decision so they can refute plaintiffs’ unreasonable claims regarding future medical damages, rebut outlandish life care plans, and negotiate more favorable settlements on behalf of their clients.[xv]

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Sources

[i] Audish v. Macias (2024) 102 Cal.App.5th 740 (review denied August 21, 2024).

[ii] Id. at 746-747.

[iii] Id. at 746-747.

[iv] Id. at 745.

[v] Id. at 747.

[vi]Id. at 748; Samuel D. Gallman, California Court of Appeal further clarifies Howell and grants publication of Audish v. Macias, et al., August 27, 2024, https://www.fmglaw.com/business-litigation/california-court-of-appeal-further-clarifies-howell-and-grants-publication-of-audish-v-macias-et-al/.

[vii] Audish at 748;

[viii] Id. (quoting Corenbaum v. Lampkin (2013) 215 Cal.App.4th 1308, 1326).

[ix] Id. (quoting Cuevas v. Contra Costa County (2017) 11 Cal.App.5th 163, 166).

[x] Id.(quoting Cuevas v. Contra Costa County (2017) 11 Cal.App.5th 163, 180.)

[xi] Although outside the scope of this article, Audish implicitly rebuts the language in Pebley v. Santa Clara Organics (1018) 22 Ca.App.5th 1266, which found that a plaintiff is allowed to treat with doctors on lien, even if he or she was insured at the time of the accident. The Pebley case severely limits the ability of defendants to introduce evidence on the failure to mitigate damages and the reasonable value of medical services. See Gregory P. Arakawa and Steven R. Disharoon, WSHB Case Update: Pebley v. Santa Clara Opens the Door in California to Inflated Medical Damages Claims, https://www.wshblaw.com/experience-wshb-case-update-pebley-v-santa-clara-opens-the-door-in-california-to-inflated-medical-damages-claims.

[xii] Forrest Booth, Shain Wasser, and Cameron Cushner, California Court of Appeal Clarifies Howell and proceeds to publish Audish v. Macias, November 9, 2024, https://kennedyslaw.com/en/thought-leadership/article/2024/california-court-of-appeal-clarifies-howell-and-proceeds-to-publish-audish-v-macias/.

[xiii] Audish 102 Cal.App.5th at 749.

[xiv] Id.

[xv] Steve Disharoon and Caitlin Mitchell, California Court of Appeal Upholds Admissibility of Medicare Eligibility, in an Implicit Rebuke of Pebley v. Santa Clara Organics, September 17, 2024, https://www.wshblaw.com/publication-california-court-of-appeal-upholds-admissibility-of-medicare-eligibility-in-an-implicit-rebuke-of-pebley-v-santa-clara-organics.