For decades, advocates of tort reform have pushed to limit the amount that courts can award for noneconomic damages such as pain and suffering. The California Legislature first capped this type of damages in medical malpractice lawsuits in 1975, and roughly half the states have followed California's lead.
This summer, however, nearly 40 years after California's Medical Injury Compensation Reform Act first limited noneconomic damages in malpractice cases to $250,000, trial lawyers and consumer groups have unveiled a ballot initiative that would relax the cap considerably. If the measure qualifies for the ballot and is approved by voters next year, the allowable amount for noneconomic damage payouts for victims of medical malpractice would be quadrupled.
Relaxing the $250,000 cap, which has never been adjusted for inflation, is a wise move. As a reform idea, noneconomic damage caps have never made much sense.
One problem is that the effects of caps are not felt evenly. California's cap, for example, limits damages awarded to victims of medical malpractice, while people who sue for other reasons have no such strictures. Caps also have a much greater impact on those who are the most grievously hurt. Someone who is, say, severely brain damaged or paralyzed can collect no more for loss of enjoyment of life than someone who will eventually recover fully.
Caps also tend to disproportionately punish women, children and the elderly. A 2004 study of California medical malpractice jury verdicts compared awards before and after the law took effect, and found that caps significantly exacerbated gender disparities in damage awards. Women's pre-cap median jury awards were 94% of the median for men. After caps were imposed, however, the women's median dropped to 59% of the men's median. Both men and women were affected, but women were harder hit.
Why? Largely because of the kind of awards the cap limits and those it does not. The law does not limit damages that reimburse a person for actual monetary losses caused by an injury, such as lost wages and medical bills. But because women tend to earn less than men (and the elderly and children generally earn nothing at all), they often have less in lost wages for which they can be reimbursed. Women are further affected because some injuries they sustain overwhelmingly result in noneconomic, rather than economic, damages. A miscarriage or loss of fertility brought on by medical malpractice, for example, might cause severe emotional injury but little economic damage.
Award caps can also reduce an injured person's ability to sue, by limiting access to counsel. Attorneys handling tort litigation in the United States usually work on contingency: Clients pay nothing upfront, and lawyers are paid a portion of what is ultimately recovered. That means they're reluctant to take on cases with little chance of significant payouts. When damage awards are limited, cases may no longer be profitable for plaintiffs' lawyers. Because claimants without counsel rarely succeed in court, losing access to counsel means losing access to justice. Caps don't just cut compensation; they also, in many cases, close courthouse doors entirely.
Moreover, caps aren't good at doing what they purport to do. Damage caps were sold to the public, in part, as a way to inject predictability into the system. They were to be an antidote to "jackpot justice" — the notion that lawsuits are like a lottery, with unpredictable losers and winners. But as instruments go, caps are too blunt. While limiting some awards at the top, they do nothing to counteract the problem of big damage awards that fall beneath the cap level but that might nonetheless be regarded as excessive if the plaintiff's injury is slight.
If what we want, as some cap supporters claim, is more rationality and equity in the awarding of damages, it would be far better to have neutral fact-finders review damage awards and alter them when necessary, taking a plaintiff's particularized injury into account. Fortunately, our civil justice system already provides for just that: Judges have the power to reduce excessive awards, and studies suggest it's a power they frequently exercise.
Malpractice caps have also been marketed as part of the solution to soaring healthcare costs. Certainly, reducing healthcare costs is a worthy goal. But a number of studies have considered whether caps actually cut costs, and results have been mixed. Furthermore, even when an effect is found, it tends to be trivial, with caps cutting total healthcare costs on the order of 0.5%.
What's clear is that caps are weak medicine for most of their stated aims. Meanwhile, their side effects for those suffering the most grievous harm are serious. We in California have now had nearly four decades of experience with damage caps. It's high time for the $250,000 cap to be repealed or relaxed.
Nora Freeman Engstrom is an associate professor and Robert L. Rabin is a professor at Stanford Law School.