The Economy Hub
12:28 AM EDT, July 10, 2013
It's a very rare thing for a legislator to admit that a law he sponsored hasn't worked out as expected. It's even rarer for him to label it "oppressive" and call for its revision.
But that's the case with former California Assemblyman Barry Keene and one of his legislative offspring. The law is the Medical Injury Compensation Reform Act of 1975, or MICRA, which tried to address a malpractice insurance "crisis" — rising premiums threatened to drive doctors out of California or into retirement — by imposing draconian restrictions on patient lawsuits.
Has MICRA worked? By some measures, yes.
The law has destroyed the ability of large segments of California patients to file malpractice lawsuits. It's not uncommon for those who sue their doctors and win to see their damage awards slashed by hundreds of thousands of dollars. So the goal of its original supporters, which was to make malpractice cases harder to bring and cheaper to defend, has been gloriously realized.
But as Keene acknowledges, MICRA is grossly outdated. The good news is that there's a move on to bring it into the 21st century, which Keene supports. The consumer group Consumer Watchdog is drafting a ballot initiative it hopes to place before the voters at the November 2014 election.
The group says it will hold off if the Legislature reforms MICRA this summer. Given the grip that the insurance industry and the medical lobby have on the Legislature, the chances of that are slim. So brace yourself for an initiative campaign likely to break spending records next year.
MICRA imposes a cap of $250,000 on all damages in malpractice cases except for the victim's medical bills and economic losses, typically lost earnings. Everything else, such as "pain and suffering," mental anguish and loss in quality of life, is subject to the cap.
That cap was set in 1975. Because it was not indexed to inflation, in 1975 dollars it's worth less than $58,000 today. To put it another way, if it had been inflation-indexed in 1975, the cap now would be $1.1 million. Raising the cap to at least to that level and permanently indexing it to inflation is the goal of the proposed initiative.
Keene, now 74 and long retired from the Legislature, is tormented by the failure to protect the $250,000 cap from inflation.
As he explained to me in an email, he proposed an inflation-indexed cap in an amendment to his original bill, assuming it would pass routinely. Instead the trial lawyers lobby, which adamantly opposed MICRA, came out against the inflation index in order to make the bill as noxious as possible to guarantee its rejection.
They misplayed their hand. To their shock, MICRA passed the Legislature without the inflation provision, got signed by then-Gov. Jerry Brown and then was upheld by the state Supreme Court.
There's no mystery about who really gets whacked by MICRA. A 2004 study by Rand Corp. found that juries tended to award proportionately more pain and suffering judgments to women than men, who typically can show higher earning losses. As a result, women's damage awards were typically cut more than a third to meet the MICRA limit, while men's awards were cut only 25%. Damage awards to injured plaintiffs less than 1 year old were slashed in 71% of the cases Rand studied.
Consider the case of Cali Andrist, 59, who died after treatment at Providence St. Joseph Hospital in Burbank last year. Cali had been developmentally disabled all her life, with a mental age of 4, according to Eric Andrist, her brother and long-term caregiver. Andrist alleges that she died in part because the hospital failed to diagnose that the abdominal pain that brought her to the emergency room came from a bowel obstruction.
Cali was the perfect MICRA victim: She had no earnings and obviously no future medical expenses. Determined to bring a lawsuit, Eric Andrist was turned down by more than 15 lawyers who viewed the case as one with a recovery topped out at $250,000, and possibly less.
"There's no way they could make enough money to take the case on," Andrist told me last week. "MICRA made Cali's life valueless."
Eventually Christopher B. Dolan, a San Francisco personal injury lawyer, agreed to take on the case practically pro bono. Andrist's lawsuit was filed in Los Angeles County Superior Court on May 30. The hospital declined to comment.
There's plenty of evidence that the only real beneficiaries of MICRA are insurers. Doctors would like to think that the insurers pass MICRA savings on to them, but they're dreaming. Last year, Insurance Commissioner Dave Jones ordered rollbacks of $52 million in "excessive" malpractice premiums.
Over the last 22 years, California malpractice insurers have paid out in claims an average of only 36 cents of every premium dollar they've collected, according to Insurance Department statistics. For comparison's sake, for all property and casualty insurance lines the figure is 62 cents; for passenger auto insurers alone it's more than 60 cents.
MICRA's backers, chiefly the medical and insurance industries, paint the law as a bulwark against frivolous lawsuits filed by unscrupulous lawyers. Don't buy it. According to a 2006 study of 1,452 claims published in the New England Journal of Medicine, the facts don't support this picture of malpractice litigation.
The researchers found that the most frequent injustice in malpractice cases involved not undeserving patients collecting payments, but the opposite, deserving patients getting nothing.
Nevertheless, the MICRA lobby keeps parroting the myth. And it doesn't stop there. A central claim of Californians Allied for Patient Protection, or CAPP, the medical and insurance industries' cynically named pro-MICRA lobby, is that merely doubling the cap to $500,000 would drive up California healthcare costs by $9.5 billion a year.
This is the kind of eye-opening number that begs for scrutiny. It's based on a 2002 study by researchers at Stanford and the Hoover Institution that calculated the cost of "defensive medicine" — extra tests and procedures performed only to stave off malpractice claims — at 3.04% of total spending. So CAPP simply multiplied total healthcare spending in the state, which was $296 billion in 2010, by 3.04%. It threw in some putative increases in Medi-Cal and premium costs and presto! You get $9.5 billion.
The problem is that the Stanford study dealt only with the treatment of elderly heart patients on Medicare, a very narrow category. The idea that their figures are applicable to healthcare in general has been widely questioned, including by the Congressional Budget Office. The CBO, in fact, has estimated the cost of defensive medicine at 0.3% of total spending, or one-tenth CAPP's figure.
But that's just a taste of the bogus statistics we'll be inundated with in an initiative campaign.
Malpractice litigation has indeed failed to serve patients and their doctors. The cost of a lawsuit, which includes extensive expert witness fees, has become exorbitant for both sides, and the typical case takes five years to resolve.
The remedy is to make the process more efficient, perhaps by steering such cases to a specialized arbitration court. Simply padlocking the courthouse to whole categories of plaintiffs doesn't meet the fairness test. But MICRA shoulders all other options to the back burner. It's time to bring this 37-year-old law into the 21st century, and fix the malpractice system so that it actually works.
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