Caps on Medical Malpractice Awards Deter Lawsuits, Perhaps Too Well

The Los Angeles Times reports that California’s $250,000 cap on pain and suffering awards in medical malpractice lawsuits has proved to be more beneficial to doctors and insurers than legislators may have intended. Not only does the law reduce the amount of damages, but it has had the effect of deterring lawsuits, particularly involving elderly and low income patients. The reason? Aside from pain and suffering, the other basis for an award is lost income. With relatively small or no wage impairment, the cap is sufficiently low as to make these cases uneconomic for lawyers who take contingency fees.

The Times finds evidence that the level of the cap, unchanged since 1975, has led to a marked fall in malpractice suits in recent years, beyond what can be explained by improvements in medical practice or a decline in litigiousness. It seems the cap is forestalling legitimate lawsuits, not merely frivolous claims.

It is obviously hard to draw any kind of line between useful lawsuits (as in those that call attention to doctor and facility incompetence and are appropriate given the nature of the damages suffered) and ones that are not. And while the notion of pain and suffering creates issues of interpretation, eliminating them eliminating them would ignore an important form of harm. And contingency fees are problemmatic, since while they enable middle and lower income individuals to seek redress, and therefore serves as a check (and helps preserve the illusion of the fairness of the court system). Having awards based solely on lost income would mean that those who, say, treat only the elderly and the lower income are lawsuit proof.

From the LA Times:

Dave Stewart’s 72-year-old mother went to Stanford University Medical Center for double knee-replacement surgery in April. Four days later, she was dead.

To Stewart, an anesthesiologist, it seemed a classic case of medical malpractice. After the operation, his mother developed sharp abdominal pain that she described as “10 on a scale of 1 to 10,” according to her medical records.

The hospital failed to diagnose the cause of her pain and continued to treat her with narcotics. Her vital signs became unstable and she was moved to the intensive care unit, but she died of complications from an untreated bowel obstruction. State regulators cited the hospital in the case this fall.

Stewart and his two sisters decided to sue, and they approached two dozen lawyers. One after another declined to take the case, always for the same reason: It wasn’t worth the money.

In 1975, California enacted legislation capping malpractice payments after an outcry from doctors and insurers that oversized awards and skyrocketing insurance rates were driving physicians out of the state.

The law limited the amount of money for “pain and suffering” — usually the physical and emotional stress caused from an injury — to $250,000. There is no limit on what patients can collect for loss of future wages or other expenses.

Over the years, it has been easy to quantify the effects of the law, known as the Medical Injury Compensation Reform Act, or MICRA. In the years since the law was enacted, malpractice premiums in California have risen by just a third of the national average, and doctors say the law now helps attract physicians to the state. Proponents also say it discourages frivolous lawsuits.

Thirty states have enacted similar legislation. Two Republican presidential candidates — Mitt Romney and Rudolph W. Giuliani — have recently endorsed the approach as a possible national model.

It’s been harder to tally the law’s costs. Critics say it is increasingly preventing victims and their families from getting their day in court, especially low-income workers, children and the elderly. Their reasoning: The cap on pain and suffering has never been raised nor tied to inflation….

Several states have set their malpractice caps considerably higher than California’s because of worries that they affected poorer patients the most. Some state courts have begun to examine the fairness of their malpractice laws, especially those not tied to inflation. California lawmakers have rarely reconsidered the state’s malpractice legislation.

Yet a Times analysis of state court records, physician payment data and insurer financial records suggests that the cap is increasingly preventing families such as the Stewarts from getting their day in court.

Among the findings:

* Court malpractice filings have fallen in eight of the 10 most populous counties in California that track such information. In Los Angeles, they’re down 48% since 2001 to their lowest per-capita level in nearly four decades. In Orange County, they fell 29% over the same period

* At Kaiser Permanente, where members must resolve malpractice claims in arbitration rather than court, claims have fallen almost 20% since 2001.

* The number of payments to victims and their families across the state was down 24% since 1991, according to a review of a federal government database of nearly half a million claims. Nationally, the decline over the same period was 10%.

* The malpractice earnings of California insurers has far outpaced national averages in recent years. According to financial reports, insurers in the state have paid out just 39 cents of every premium dollar since 1991. The national average was 63 cents.

Proponents of the law attribute the state’s recent decline in malpractice lawsuits to several reasons unrelated to its award cap, including a slight drop in overall personal injury cases nationwide and a possible decrease in medical errors in recent years.

Some states have seen larger per-capita declines in malpractice cases than California, after they enacted caps on medical malpractice awards.

A spokesman for Kaiser Permanente said its drop in malpractice filings was the result of a company program begun five years ago in which doctors apologized to patients for errors rather than wait to fight the accusations in court.

Some malpractice victims and their families say the benefits of the law have swung too far in favor of doctors. Without accountability, some ask, what will keep physicians from making careless mistakes?….

Linda Fermoyle Rice, one of the state’s best-known malpractice lawyers, says the law often leads to difficult trade-offs.

“It has had the effect of making an infant who is severely injured more valuable than those who don’t make it, since families of children who die are limited to the cap,” said Rice, who is based in Woodland Hills. “It’s sad to say, but most attorneys I know won’t take a dead-baby case.”

A 2003 Rand Corp. report found that the law has reduced jury awards by 30%, and that the savings have come largely at the expense of severely injured or impaired patients.

On average, California juries (which are rarely informed of the cap during trials) awarded $800,000 in malpractice death cases from 1995 to 1999, but the amounts were later reduced to $250,000 under the law. This suggests that medical malpractice victims and their families could be reaping much larger payouts than the law allows. But proponents of MICRA say raising the cap could harm patients.

“Raising the MICRA cap would significantly increase healthcare costs, limiting patient access to doctors, hospitals and clinics throughout California,” said Lisa Maas, executive director of Californians Allied for Patient Protection, a trade group. “MICRA protects patient access to healthcare.”

San Diego obstetrician Philip Diamond is skeptical that the law is keeping patients from obtaining malpractice lawyers. But he acknowledged that limits on payouts do lead to trade-offs.

“If we raise the cap, where does that money come from?” he asked. “Any increase means a drop in access.”

The link between malpractice payouts and increases in doctors’ insurance premiums, though, remains unclear.

One of the largest studies done on the topic — by Dartmouth College researchers in 2003 — concluded that malpractice payments had risen in line with medical care costs, whereas doctors’ insurance premiums grew far faster — by double-digit percentages annually for some specialties.

To some, that suggests that recent malpractice premium increases may have had more to do with insurers’ business models and financial investments — including documented losses in their investment portfolios in recent years — than with their core businesses.

Nationally, the rise in malpractice premiums has slowed in recent years.

“Just 16.2% of insurers raised their malpractice premiums in 2007 compared to 77.3% in 2003,” said the Medical Liability Monitor, a newsletter based in Chicago.

Douglas Heller, executive director of the Santa Monica-based Foundation for Taxpayer and Consumer Rights, says the 1975 liability caps aren’t the reason that doctors’ insurance premiums have been relatively low in California. He says the reason is that, unlike other states, insurance is tightly regulated here. In a 1988 statewide vote, Proposition 103 rolled back all casualty insurance rates by 20% and required the approval of the state insurance commissioner for any rate increase.

Malpractice rates rose sixfold between 1975 and 1988 despite the state’s awards cap, Heller said, but have held roughly steady since Proposition 103’s passage.

Stewart, of San Diego, said he had long been a MICRA advocate, believing it was in the best interest of doctors and patients. Not anymore.

After he and his family got over the initial shock of losing their mother, they wanted justice. Most attorneys turned them down over the phone, although three agreed to meet in person. Last summer, the entire family and their 80-year-old father made the trip to San Francisco and Oakland for meetings.

One lawyer said he would take the case only if the family paid the expected $50,000 in trial costs upfront.

San Francisco lawyer Brad Corsiglia at first seemed interested but later sent a letter dated July 11, 2007, that read: “As you can understand, with a cap of $250,000, we are limited in the type of case we can take on a contingency fee basis to only those cases that involve catastrophic economic losses.” …..

Some state courts have struck down malpractice caps that didn’t rise over time. Last month, an Illinois circuit court judge ruled unconstitutional a 2005 state law that caps noneconomic damages in medical liability cases. The case is on appeal.

In 2006, a Louisiana appeals court ruled that its state malpractice cap, established in 1975, did not adequately compensate patients and needed to be raised to $1.6 million. The ruling was overturned this year by the state’s Supreme Court.

Some families who succeed at trial in California are often surprised at how little money they see in the end.

Becky Dessenberger’s 2-year-old son, Jacob, died at Children’s Hospital in Oakland in 2004 after surgery to repair a foot. Her son, who was suffering from bronchitis, was given a high dose of pain medication though the drug is known to cause slower breathing. He died the next day.

In 2006 the family settled with the hospital, which acknowledged no wrongdoing, for just under the $250,000 cap. After deducting for trial costs and lawyer fees, Dessenberger, 36, of Suisun City, said the family received “a little over” $100,000.

Dessenberger said no money would help ease her grief, but the small amount felt to her and her family like a slap in the face.

“Because he was a baby, this is all he was worth,” she said. “I think it is horrible. I don’t think it’s fair.”