Q: Does Lonnie Ritter require a damaged asset for her ability to work? Or is this a case of "doing as much as you can", so as long as you can heal Lonnie, you can still target a non-damaged item instead? A: Lonnie Ritter’s ability states: “ Exhaust Lonnie Ritter and spend 1 resource: Choose an Item asset controlled by an investigator at your location. Heal 1 damage from that asset and 1 horror from Lonnie Ritter.” It is true that the only costs of the ability are exhausting Lonnie and spending 1 resource, and the choosing and healing of an item are effects, not costs. However, whenever you see the word “choose” in an ability, there are a few additional rules to keep in mind. These rules can be found under the Target section of the Rules Reference.
The term "choose" indicates that one or more targets must be chosen in order for an ability to resolve. The player resolving the ability must choose a game element (usually a card) that meets the targeting requirements of the ability. If an ability requires the choosing of a target, and there is no valid target (or not enough valid targets), the ability cannot be initiated.
In other words, you cannot use Lonnie’s ability if there is no Item to target with its effect. The question remains—can you choose an item with no damage on it (or even, an item with no health value at all?) simply to heal 1 horror from Lonnie. Thankfully, the Rules Reference answers this question as well, in that same section:
A card is not an eligible target for an ability if the resolution of that ability's effect could not change the target's state. (For example, an exhausted enemy could not be chosen as the target of an effect that reads, "choose and exhaust an enemy.")
So there you have it—you must choose an eligible target in order to activate Lonnie’s ability, and an item that cannot be healed is not an eligible target. This is true even though healing 1 damage from the chosen item is an effect and not a cost, because the word “choose” indicates that one or more eligible targets must be chosen in order for the ability to correctly resolve, and a target can only be chosen if the ability’s effect has the potential to change its game state.