Damage Cap Hits Some Hard

California’s landmark medical malpractice law has reduced jury awards by 30%, but the savings have come largely at the expense of severely injured or impaired patients, according to a study released Monday.

The 1975 law caps at $250,000 the amount a patient can recover for noneconomic damages, such as pain and suffering, distress and disfigurement. There are no caps on economic damages, such as lost wages and medical expenses.

The Rand Corp. study stopped short of assessing the effect on malpractice insurance premiums. But proponents of a bill in Congress that would institute a national cap pointed out that premiums in California have risen less than the rate of inflation, and substantially less than they have in the rest of the nation, since 1975.

In its study of 257 jury awards in California malpractice cases from 1995 to 1999, Rand, a Santa Monica think tank, found that:

* In 45% of the cases, judges had to cut the pain and suffering damage awards by juries -- who are not told about the cap -- to conform with the $250,000 limit. The typical reduction was $366,000.

* Patients with the severest injuries, such as brain damage or paralysis, typically had their awards reduced by more than $1 million each.

* Infants’ malpractice damage awards were cut 71% of the time, often by $2.5 million or more.

The study said the law’s effect was most striking in cases in which patients’ injuries led to modest financial hardships but whose quality of life was greatly diminished.

In one case cited in the study, a jury awarded $78,000 for economic losses and $1.5 million for pain and suffering to a 42-year-old woman who underwent an unnecessary mastectomy after her fibrocystic breast condition was misdiagnosed as cancer. Under the cap, the judge reduced her total award to $338,000 -- 78% less than what the jury deemed appropriate.

The cap has come at a high price for many, said Bruce G. Fagel, a physician and malpractice lawyer.

“The limitation of noneconomic damages has the greatest impact on wrongful-death cases,” Fagel said. “In a perverse sense, it is far cheaper for a doctor to kill a patient than to merely injure them.”

One of the chief goals of California’s malpractice cap was to keep medical malpractice premiums affordable for doctors by limiting insurers’ payouts.

The Rand study didn’t assess whether it has made any difference in premiums. Nick Pace, the study’s lead author, said that would have required insurers to open their books so researchers could scour their claims-paying history and other variables.

One insurance trade group insisted that the law had been instrumental in keeping malpractice premiums relatively stable. Malpractice rates in California have risen 168% since 1975, compared with 420% in the rest of the nation, according to the Insurance Information Network of California.

In the same period, the cost of living has increased 248%.

“It’s a dramatic difference that ultimately helps save the public money,” said Candysse Miller, executive director of the trade group. “If you keep the cost of insurance for doctors down, it’s going to help keep the pool of doctors in California from fleeing the state.”

California was one of the first states to cap medical malpractice awards in the face of rising premiums. Several states have adopted some form of malpractice tort reform.

President Bush has cited the California law as a model for the country. He supports a malpractice overhaul bill that has passed in the House but stalled in the Senate.

Lawyers for patients said the Rand study, which found 55% of juries’ pain and suffering damage awards fell below $250,000, showed that California’s law was both unnecessary and cruel.

“It’s clear those who are most catastrophically injured pay the biggest price,” said Robert Peck, president of the Center for Constitutional Litigation, a Washington law firm whose clients include the Assn. of Trial Lawyers of America.

“The study demonstrates that the vast majority of medical malpractice victims do not get noneconomic damages above $250,000,” he said. “But if you do, you are the most severely injured. It shows the irrationality of that kind of cap.”

One case examined by the study involved a 22-month-old who was left in a vegetative state when medical personnel failed to detect an incorrectly placed breathing tube. The jury’s $8.9-million award for intangible losses was reduced to $250,000.

That case showed that the law works, said Dr. Jack Lewin, chief executive of the California Medical Assn.

“The report doesn’t point out that thousands of very sick babies are born in very dangerous deliveries that are malpractice risks,” he said. “Keeping malpractice rates down and making doctors available to take care of these people” is the law’s achievement.

The malpractice law also caps attorneys’ fees. Lawyers are paid on a sliding scale, and the Rand study found malpractice fees have dropped about 60% since 1975.

As a result, lawyers said, they can’t afford to bring a lot of worthy cases, a contention the medical association disputed.

The study didn’t examine the eight out of 10 cases that are won by defendants, focusing just on what happened to awards when plaintiffs were victorious.

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Reducing malpractice awards

The California Medical Injury Compensation Reform Act caps noneconomic malpractice awards, which cover such things as pain, suffering, distress and disfigurement, at $250,000. There are no caps on economic damages, such as for lost wages and medical expenses.

Median reduction of awards in capped cases by injury type (In millions)

Paralysis (any body part) $1.70 Brain damage 1.24 Catastrophic loss* 1.15 Eye injury or reduced vision 0.50 Hip or leg injury 0.41 Foot or ankle injury 0.33 Dental injuries 0.26 Loss of consortium 0.21 Arm injury 0.13

*Burns over more than 50% of the body, quadriplegia, paraplegia, becoming infected with HIV or allowing AIDS to develop, severe brain damage or blindness.

Specific cases** Amount noneconomic Economic damage award Age of Type of damage was plaintiff negligence Injuries award reduced

22 months Incorrectly Persistent positioned vegetative breathing tube state $6.6 mill -$8.65 mill

8 months Failure to Permanent diagnose brain damage meningitis and spastic quadriplegia $21.9 mill -$6.35 mill

6 years Error in Severe filling retardation, prescription, inability to triggering speak or walk seizures $26.2 mill -$4.85 mill

27 years Perforation of Severe pain, duodenum (in scarring, mult. the small reconstructive intestine) surgeries $10,500 -$4.45 mill

Newborn Failure to Quadriplegia, treat seizures, borderline cognitive hypoglycemia impairment $12.2 mill -$3.95 mill

**These cases were among the top 10% of capped injury cases in terms of the dollar size of the reduction of the total award.

Data are for cases from 1995 to 1999; figures are in 1999 dollars.

Source: Rand Corp.