Briefing Report: Why MICRA Matters

Wednesday, March 6, 2013

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 the Medical Injury Compensation Reform Act (MICRA).  Specifically, MICRA: 1] Limits attorney contingency fees on a sliding scale. 2] Places a $250,000 limit on non-economic damages only. 3] Ensures compensation for economic damages such as present and future medical costs, lost wages, future earnings, custodial care and rehabilitation. 4] Provides a statute of limitations on claims. 5] Requires advance notice of a claim. 6] Allows for binding arbitration to settle disputes. 7] Provides for periodic payments for future damages.

A January 2013 report on the arguments of MICRA’s supporters and opponents is in the Briefing Report “MICRA Under Attack,” which can be found at:
/content/briefing-report-micra-35

Changing MICRA?

The purpose of this report is to provide a summary of the effects and significance of MICRA and why it should remain unchanged.

The Consumer Attorneys of California (CAOC), the state’s trial lawyers association, states that the MICRA cap places restrictions on victims’ recovery of non-economic damages.  Based on the Bureau of Labor Statistics inflation calculator,  MICRA’s $250,000 ceiling in 1975 is currently worth $58,407.  In today’s dollars victims would need $1,070,074 to equal $250,000 in 1975 dollars. The CAOC have long advocated increasing MICRA’s caps.

According to CAOC, MICRA: 1] Is particularly egregious to stay-at-home parents, low wage earners, the elderly, and children since these groups cannot demonstrate economic losses.  2] Cuts off access to justice in meritorious medical malpractice cases and most severely affects the catastrophically injured.  3] 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. 4] 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.  Whatever arguments they make to change MICRA limits, the import of all of them is that greater damages awards will increase the attorneys’ fees collected by the members of the association, which advocates for changing MICRA.

MICRA’s Benefits

Patients Can Receive Unlimited Recoveries
Under the provisions of MICRA, injured patients receive unlimited compensation for any and all economic damages including any and all past and future medical expenses, any and all past and future lost wages and unlimited punitive damage recovery. They can also receive an additional $250,000 in non-economic damages. MICRA includes a descending fee schedule for determining attorneys’ fees, while limiting the amount a lawyer can take as payment for representing an injured patient. That means more money goes to patients, not lawyers. Californians Allied for Patient Protection reports that, under MICRA, the average size of medical liability awards in California has increased faster than the rate in inflation.

Patients Have Better Access to Healthcare
Other states that have enacted medical malpractice reforms have experienced increases in numbers of physicians including those in high risk specialties. The legal environment in Texas had caused medical liability insurance premiums to soar and had severely limited health care available to Texans. Prior to the passage of the reforms, Texas physicians had reported significant cutbacks in services they offered to their patients. Many physicians refused to accept patients with complex or high-risk problems, referring them to an increasingly shrinking pool of specialists in tertiary-care centers. There are nearly 5,000 more in-state physicians today than would likely have occurred without medical lawsuit reforms for liability insurance, according to the Dynamic Growth in the Texas Physician Workforce study, conducted by the Austin-based Texas Alliance For Patient Access, a statewide coalition of doctors, hospitals, clinics, nursing homes and physicians.

Problems Caused by Changing MICRA

Patients Harmed
A former Legislative Analyst and others analyzed MICRA and its impact on healthcare costs in a report titled, “MICRA and Access to Healthcare” published November, 2008.

According to the report, doubling the $250,000 cap on awards for non-economic damages would lead to more litigation, larger awards, and higher litigation-related expenses. In 2005, the impact of doubling MICRA’s cap was estimated to increase healthcare costs for consumers by $6.5 billion. In 2010, their update estimated that doubling the non-economic damages cap would raise healthcare costs for consumers by approximately $9.5 billion per year.

The report also found the increase in medical liability costs, resulting from a higher cap on awards for non-economic damages, would be passed along to California patients and employers who would pay more for healthcare.

MICRA Changes Would Harm Women, the Poor and Rural Patients
Advocates for women and doctors, (including the American College of Obstetricians and Gynecologists, Region IX, California Academy of Family Physicians, California Family Health Council, Inc.) report that experience in other states shows that many obstetric providers upon dealing with substantially higher costs for professional liability coverage and greater fear of lawsuits will stop or reduce their obstetric services.  MICRA changes will particularly impact rural women.  With the economic viability of practicing obstetrics already marginal due to sparse population and low reimbursement for pregnancy services by state-funded programs, an increase in liability insurance costs will force many rural physicians to stop deliveries.  Raising the MICRA cap will adversely affect the large percentage of California’s more than 2.5 million uninsured women who rely on non-profit licensed community clinics for health care. Unable to shift higher insurance costs to their patients, these clinics will have no alternative but to reduce services. (http://micra.org/womens-health/docs/womens_health.pdf)

Raises Costs for State and Local Governments and Taxpayers
If MICRA was changed, it would raise healthcare costs for anyone receiving healthcare services in California. This includes federal, state and local government employees, as well as patients with non-government-subsidized insurance or no insurance. For those with government-subsidized insurance, the cost of modifying MICRA would ultimately impact federal, state and local taxpayers.  Changes to MICRA would negatively impact all state funds including the General Fund, since California is a significant purchaser of health care services.

In Whose Interest?

A critical question for all those who would change MICRA is, who would benefit? It is impossible to justify changing MICRA for the sake of the few attorneys who might benefit from increased attorneys’ fees.  Balanced against the increased recoveries for attorneys are the much larger and more significant impacts that the changes would have on healthcare for large numbers of Californians, especially women and the poor.

Worse yet, changing MICRA’s caps would cost Californians billions of dollars in additional healthcare costs.

For more information on this report or other Judiciary issues, contact Mike Petersen, Senate Republican Office of Policy at 916/651-1501.