Verdict Not In on Malpractice Caps

With malpractice premiums soaring nationally, many doctors and insurance companies--and even President Bush--are looking to a 27-year-old California law that limits damage awards as a model for reform.

The trouble is, debate still rages over whether the law has been a success or a failure. Despite the vehemence of claims by doctors and counterclaims by trial lawyers, independent experts say the jury is still out.

The legislation was passed in 1975 after some California doctors became so fed up with rising malpractice premiums that they curtailed patient visits and their wives occupied the governor’s office. The sweeping set of reforms included a cap of $250,000 on “pain and suffering” damages and limits on patients’ attorney fees.

Now, with premiums rising 50% to 80% annually in some states, many doctors, insurance companies and politicians are clamoring for California-style reforms. Legislators in Nevada approved a proposal to cap damages early Thursday during a special session; Mississippi is planning a similar session.

Bush entered the debate last week, calling for a national damage cap identical to that in California--an effort that appears to have stalled in Congress, at least for now.

The key question is whether California’s law has worked. Supporters say it has kept premiums in check and insulated the state from problems being experienced elsewhere. Doctors aren’t leaving California for fear of being sued, as has happened in Nevada, Mississippi and West Virginia. And insurers aren’t leaving over heavy losses.

Supporters see the law as a national model because of its stringency: Unlike laws in other states, it allows for no exceptions to the limit on “pain and suffering” damages and it has not been overturned in court.

Patients’ lawyers, however, say the caps in California have made them reluctant to accept all but the most clear-cut cases, shutting the door on many patients who may have been injured but whose prospects for a large reward are slim. And these critics say malpractice insurers are pocketing higher profits here than elsewhere.

They also complain that the limit on pain and suffering has not increased since 1975. If the $250,000 cap were adjusted for inflation, it would be $838,926.

Experts note, with some frustration, that both sides in the debate use some of the same evidence to make contradictory arguments.

“You can have the people who want to have caps on damages say, ‘Look at California, they’re a model,’ and the other side says, ‘Look at California, it shows this doesn’t work,’ ” said Mimi Marchev, a senior policy analyst at the Maine-based National Academy for State Health Policy.

“The data [are] inconclusive. And you don’t go passing more tort reform before somebody looks at whether it does any good.”

The editor of the Chicago-based Medical Liability Monitor, which surveys insurance carriers about their rates, says her published data are being misused by both sides.

The American Trial Lawyers Assn., for instance, used the publication’s data to suggest that average premiums are higher for internists, surgeons and obstetrician-gynecologists in California than in 26 states without limits on damages for pain and suffering.

On the other side, Californians Allied for Patient Protection, a tort reform group, used data from the same newsletter to suggest that California doctors pay far less, on average, than peers in Florida, Illinois, New York, Texas and Michigan.

Carol Golin, editor of the monthly newsletter, said her publication doesn’t even calculate average premiums because circumstances and jurisdictions are so different that “we don’t think they exist.”

Many experts agree, however, that physicians in Los Angeles and San Francisco typically pay lower premiums than doctors in other large cities around the country and that rate increases in California are not as dramatic as in other states.

Dr. Peter Weiss, an obstetrician-gynecologist in Beverly Hills, said he pays about $40,000 a year for malpractice coverage. In southern Florida, where premiums are among the highest in the nation, comparable coverage would cost him $108,043 to $208,949, according to the Medical Liability Monitor.

Orthopedic surgeon Dr. Clayton Patchett said low malpractice premiums are a strong incentive for physicians contemplating a move to the state--and they offset drawbacks, including low-paying HMO plans and the high cost of housing.

But plaintiffs’ lawyers, citing mostly anecdotal evidence, say patients lose out under California’s law. In April 2000, for example, a jury awarded the family of 26-year-old Sujon Guha more than $8 million after finding UCLA Neuropsychiatric Hospital negligent in not preventing his suicide. But because of the law, the award was reduced to about $306,000, including funeral expenses and lost economic support to his parents.

With the cap on “pain and suffering,” patients’ lawyers say, the only way to recover a substantial award is by proving heavy economic losses. But some patients--stay-at-home mothers, retirees and children, for example--are penalized because they have little, if any, lost earnings that they can legally recoup.

“It essentially blocks the courthouse doors for the most vulnerable and the most injured ... because they just happen to not be wage earners,” said Oxnard lawyer Mark Hiepler, who says he handles more malpractice cases outside the state than within it.

A February 2000 award of $1.5 million to the family of a 17-year-old girl who died of undiagnosed congestive heart failure was thus reduced to $250,000. The girl earned no wages, so her family only received damages for pain and suffering.

“The doctor can continue in business and continue to make money,” said the girl’s 45-year-old mother, Kara Goforth, who lives in Kern County. “My daughter is dead forever.”

Lawyers say they must spend tens of thousands to hire experts, take depositions, copy records and prepare for trial. If the ultimate payoff is only $250,000, they say, it’s often not worth the risk of losing.

“The anecdotal evidence certainly is that plaintiffs’ lawyers are far less enthusiastic and far less willing to bring small-dollar malpractice claims than they were before, “ said Stanford University law professor Robert Rabin.

Although doctors and insurers often blame higher malpractice premiums on lawsuits and runaway jury verdicts, some executives acknowledge that carriers are partly to blame.

For years, some companies charged premiums that were too low so they could attract new business. Then, when medical claims caught up with them, they raised their rates more than 100% or left the market entirely.

“They failed because they didn’t raise enough money ... and they are now suffering for it,” said William Scheuber, president of the Medical Underwriters of California, which runs the Medical Insurance Exchange of California. He said his company, owned by physicians, is an exception.

The bottom line for physicians, though, is that malpractice premiums are increasing at steep rates around the nation. In some areas, premiums for high-risk specialists have increased 200% or more.

“The way the national trends are moving right now, this is going to be a big issue in a lot more states,” said Cheye Calvo, a program manager at the National Conference of State Legislatures. “We may be looking at a national crisis.”

But California’s law--and damage caps in particular--should not be viewed as a panacea for other states, Calvo said. Physicians in Massachusetts and Montana, which have damage caps, haven’t avoided large rate increases, he said. At the same time, doctors in Minnesota, which doesn’t have a cap, aren’t having problems.