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California’s Medical Liability Cure

Cruz Reynoso, a retired state Supreme Court justice, sits on the Kaiser Foundation Health Plan Arbitration Oversight Board.

Doctors who protest the exorbitant cost of their medical liability protection by walking off the job are trying to tell the rest of us that something’s gone seriously awry. Some of these physicians are being charged up to $200,000 annually for liability coverage. We may not like doctor work stoppages, but they are warnings of a pending breakdown in the delivery of health care. What can be done to reduce these astronomical liability rates, enhance access to health care and assure that malpractice victims can be fairly compensated?

California’s answer to this challenge is the Medical Injury Compensation Reform Act, or MICRA. It was passed more than a quarter-century ago when Gov. Jerry Brown called a special session of the Legislature to solve our medical liability crisis.

California’s crisis then was similar to those now engulfing many states, including Pennsylvania, West Virginia, Mississippi, Ohio and Florida, and had interrupted medical care and threatened the closure of hospitals.

Brown asked lawmakers to consider a package of medical liability reforms that included a sliding contingency fee scale so that seriously injured patients would get more (and their attorneys correspondingly less) of the award; periodic payments for future damages so that resources could be better marshaled for the benefit of the parties; arbitration agreements between health-care providers and patients that would avoid more costly and cumbersome court trials; and a limit of $250,000 on noneconomic damages.

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When the governor called for these specific reforms he was not writing on a blank slate but had the benefit of a report from the Assembly Select Committee on Medical Malpractice, issued just before the announced 400% premium increases that hit doctors and hospitals in California. After an additional year of hearings, the Legislature passed the bill, which took effect in 1976. By 1985, the law had survived numerous challenges to its constitutionality.

What is obvious about MICRA is that it works and works well. Gov. Gray Davis, who was Brown’s chief of staff when the bill was crafted, can proudly add it to the list of exports to the rest of the nation. Our doctors and hospitals pay significantly less for liability protection today than their counterparts in states without MICRA-type reforms.

Yet the number of medical malpractice suits filed per physician has not gone down since 1975, nor has the size of the average inflation-adjusted award, which means that those with malpractice claims still have access to the courts and apparently fare better financially than they did before MICRA.

That the average size of awards did not decrease despite the cap on noneconomic damages is largely due to the plaintiff lawyers’ abilities to prove economic losses (e.g., future earnings, medical expenses, rehabilitation costs), which are not limited and can amount to hundreds of thousands or even millions of dollars.

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MICRA has, then, helped stabilize the liability insurance market by avoiding the blockbuster awards seen in other states. At the same time, our medical liability cases are resolved in less time than it takes in non-MICRA states.

A principal MICRA feature responsible for reducing malpractice costs is the $250,000 ceiling on noneconomic damages, which 19 other states have enacted in varying amounts.

Rand Corp., Congress’ Office of Technology Assessment and the American Academy of Actuaries independently agree with the Health and Human Services Department’s recent finding: The malpractice insurance crisis sweeping the nation “is less acute in states that have reformed their litigation systems. States with limits of $250,000 or $350,000 on noneconomic damages have average combined highest premium increases of 12%-15%, compared to 44% in states without caps on noneconomic damages.”

Stabilizing insurance premiums is crucial for the poor, millions of whom are served by nonprofit medical clinics and centers. There are 7 million Californians who do not have health insurance. The dedicated physicians who work in those clinics and centers must be provided insurance coverage.

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California has long been, as Carey McWilliams’ book about our state is titled, “the great exception.” This is plainly true of medical liability reform, where we’ve become the exception that other jurisdictions are examining.


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