Governor Schwarzenegger broke a promise to the taxpayers and injured consumers of the State of California when he failed sign SB 93 (Corbett). The insurance industry has been artificially deflating the value of medical treatment for wrongfully injured people in this state for almost 20 years. This has resulted in huge losses to state programs like Medi-Cal and to those people who are injured by tortuous conduct. As a result, the insurance
industry has been receiving an enormous windfall, money that the industry should be paying instead of the taxpayers of this state.
It works like this. The law states that an injured person is entitled to recover the reasonable value of the medical treatment they receive as a result of the wrongful conduct of another person. Sounds simple, however, the insurance industry has been successfully arguing in court that the reasonable value of medical treatment is what the insurance industry pays through their contracts with medical providers. This is where the train leaves the tracks. This is because a health insurance company gets huge discounts from medical providers that regular folks aren’t able to negotiate. In exchange for the huge discounts, the health insurers give the hospitals all kinds of valuable benefits instead of money. A few examples are: millions of patients without the need to advertise, fast guaranteed payment and uniform billing.
So if a hospital would get paid $100.00 by you and me for a particular service. They might only get paid $25.00 by a health insurance company. But they also get all those valuable benefits in addition to the $25.00. Once the case gets to trial, the insurance lawyer has been successfully persuading judges to only let you and me recover the $25.00. (Which by the way, your health insurer wants reimbursed.) If you are on Medi-Cal this means there is less money in the verdict to be reimbursed from and invariably the program doesn’t get as much money back and the taxpayer has to pay.
SB 93 would have fixed this insurance industry boon, by letting judges know that the amount paid by Medi-cal does not represent the reasonable value and is not admissible evidence for that proposition.
This bill would prohibit consideration of the amount paid by Medi-Cal for medical services provided to a beneficiary as evidence of past medical damages, or for the purpose of reducing the third party’s liability to the beneficiary in any third-party action. In effect, for purposes of measuring damages, an injured party who is a Medi-Cal beneficiary would be treated the same as any other injured party where a third party is found liable for the injuries.
However, the Governor didn’t see it that way and the insurance industry continues to keep money they are not entitled to keep at the expense of the taxpayers and injured people of California.