Briefing Report: MICRA at 35

Wednesday, April 6, 2011

Introduction

Nearly 36 years after signing into law the Medical Injury Compensation Reform Act of 1975 (MICRA), Jerry Brown is once again Governor of California. Most Californians are probably not aware of this landmark legislation. Just what is MICRA, and what has it meant to the residents of California?

Background

According to Californians Allied for Patient Protection (CAPP), a pro-MICRA group, in the early 1970s, a medical malpractice insurance crisis gripped California. Liability premiums soared more than 300 percent because of more frequent and severe liability claims and larger malpractice jury awards. Many physicians - particularly in high-risk specialties such as obstetrics and neurosurgery - were forced to close their doors, either unable to get insurance or unable to afford inflated rates. Denied access to affordable care, California patients suffered. In 1975, Governor Jerry Brown called a special session of the California Legislature to solve the "malpractice crisis."

During that special session, on a bipartisan vote, legislators took action to fix the broken system by enacting MICRA. Specifically, MICRA:

  • Limits attorney contingency fees on a sliding scale.
  • Places a $250,000 limit on non-economic damages only.
  • Ensures compensation for economic damages such as present and future medical costs, lost wages, future earnings, custodial care and rehabilitation.
  • Provides a statute of limitations on claims.
  • Requires advance notice of a claim.
  • Allows for binding arbitration to settle disputes.
  • Provides for periodic payments for future damages.

MICRA's Impact

CAPP believes MICRA ensures injured patients receive fair compensation while preserving patients' access to healthcare by keeping doctors, nurses, and healthcare providers in practice and hospitals and clinics open. MICRA has saved healthcare consumers tens of billions of dollars. Any changes to MICRA would be most devastating to specialty services like OBGYNs, emergency providers, community clinics, and rural health providers who remain particularly vulnerable to any liability increases or weakening of MICRA's reforms.

According to CAPP:

  • Prior to MICRA, California was facing a crisis: Out-of-control medical liability costs were forcing clinics, doctors, OBGYNs and other healthcare providers to leave the practice altogether.

  • MICRA has helped stabilize liability costs - preserving access to thousands of physicians, nurses, hospitals, clinics, dentists and other healthcare providers.

  • In particular, MICRA protects specialty and high-risk services, including women's services, community clinics and rural providers that can least afford skyrocketing insurance costs.

  • States without medical liability reform suffer from shortages of providers leading to the closing of hospitals, clinics and trauma centers and leaving patients with no doctors in their immediate vicinity.

  • MICRA has saved healthcare consumers tens of billions of dollars by protecting against runaway damage awards.

  • Increasing the amount of non-economic damages allowed under MICRA from $250,000 to $500,000 would raise healthcare costs in California by at least $9.5 billion annually, according to a 2008 Berkeley Research Group report. That translates into $1,032 annually for a family of four.

  • MICRA preserves patients' access to fair compensation when they have justifiable claims, including unlimited: 1) Economic damages for all past and future medical costs; 2) Economic damages for lost wages, lifetime earning potential, and any other conceivable economic losses; and 3) Punitive damages, which seek to punish a defendant.

  • Only speculative non-economic damages, sometimes called pain and suffering awards, are limited to $250,000.

  • Under MICRA, the average size of medical liability awards in California has increased faster than the rise in inflation.

  • MICRA limits attorneys' fees so that patients - not lawyers - receive more from awards. From 1999-2009 more than $245 million in high damage awards was redirected from lawyers to patients as a result of MICRA.

Opposing View

However, the Consumer Attorneys of California (CAOC), the state's trial lawyers association, has a different view. CAOC states that the MICRA cap places restrictions on victims' recovery of non-economic damages. MICRA's $250,000 ceiling in 1975 is currently worth $61,383. In today's dollars victims would need $1,018,201 to equal $250,000 in 1975 dollars.

According to CAOC, MICRA:

  • Is particularly egregious to stay-at-home parents, low wage earners, the elderly, and children since these groups cannot demonstrate economic losses.

  • Cuts off access to justice in meritorious medical malpractice cases and most severely affects the catastrophically injured, as the RAND Institute for Civil Justice found in a 2004 study.

  • Interferes with the constitutional right to a trial by jury by replacing a jury verdict based on the evidence in the case with an arbitrary one-size-fits-all limit in certain serious cases.

  • Denies due process and irrationally treats people differently, limiting compensation to the most severely injured, in violation of the equal protection guarantee for all Americans - a right established in the U.S. Constitution's 14th Amendment.

CAOC further asserts:

  • Victims of medical negligence can collect the estimated cost of actual economic damages, such as loss of income resulting from their injuries. On the surface, that may seem fair. But the law has a disproportionate impact on people who have little or no income, including children, the elderly, stay-at-home parents, and working class Californians. The reason is that these citizens have little or no economic losses resulting from lost income.

  • Because of its restrictions, MICRA limits access to the justice system for people injured by medical negligence, especially for the disabled as well as the youngest, oldest and poorest victims who receive little, if any, compensation for lost income. Attorneys who represent victims of medical negligence work on a contingency-fee basis. Those lawyers spend long hours and incur tens of thousands, and sometimes hundreds of thousands, of dollars in costs to fully investigate cases. The attorneys have no prospect of being repaid unless the victim prevails against the teams of insurance industry lawyers who defend negligence cases. Because of the tight caps on potential judgments, many victims are unable to find an attorney who can afford to take their cases.

  • California's malpractice law draws an arbitrary distinction between causes of injury. If a doctor were to run through a stoplight and run over a mother and child, the victims would be able to sue without limits. But if that same doctor were to commit an act of malpractice that maims a patient, damages are capped.

When considering opponents' arguments, it is important to remember that MICRA does not limit economic damages awards related to medical costs, lost wages, or lifetime earning potential. The MICRA cap only applies to pain and suffering awards. Of course, as supporters and opponents both point out, MICRA also limits attorney's fees. One can only speculate as to whether this may be the real source of some opponents' consternation.

Conclusion

35 years after its enactment, MICRA continues to perform as intended, ensuring injured patients receive fair compensation and preserving patients' access to healthcare. Despite opponents' assertions, there appears to be no need to amend MICRA. As the old saying goes, "If it ain't broke, don't fix it."

 

For more information on this report or other Health issues , contact Joe Parra, Senate Republican Office of Policy at 916/651-1501.