Despite Severe Limits on Victims’ Rights, California Insurers Continue Push For Higher Doctors’ Premiums
Santa Monica, CA — A new survey by the Rand Corporation found that the most significant impact of California’s 29 year old medical malpractice caps law falls on patients and families who are severely injured or killed as a result of medical negligence or mistakes. Rand reports that in verdicts involving death cases, victims’ jury-awarded compensation was reduced by the California law 58% of the time, with a 49% median reduction in total compensation for those cases.
The Rand study does not analyze the impact of the liability caps on medical malpractice insurance rates. However, a new analysis by the California-based Foundation for Taxpayer and Consumer Rights shows, despite the caps law, medical malpractice insurers in California have pushed for major and repeated rate increases in recent years.
The liability law addressed in the Rand study, known as the Medical Injury Compensation Reform Act of 1975, or MICRA, limits non-economic payments to injured victims or their families to $250,000, among other rules. MICRA has been presented by the insurance and medical lobbies as a panacea to the high medical malpractice insurance premiums that have led the American Medical Association to declare an insurance crisis in many states and before Congress.
"The study sheds a light on how far from the mainstream the medical and insurance lobby finds itself as it pushes to place limits on the rights of infants disfigured by shoddy medicine and patients killed due to negligence," said Douglas Heller, executive director of the nonprofit Foundation for Taxpayer and Consumer Rights (FTCR). "The Rand study illustrates the obvious injustice of arbitrary caps by providing data showing that the law hurts most those who have lost the most."
According to the study, in more than half of the cases in which a California jury finds a medical provider to have killed a patient due to error or other avoidable malpractice, the amount ordered to be paid to the victims family by the jury is capped at $250,000 the compensation amount found by a jury to be appropriate for most families is cut at least by half.
The study also found:
– Most cases in which the verdict was reduced by more than $2.5 million involved critical injuries to infants and young children;
– Compensation to malpractice victims who sustained brain damage was limited in 65% of cases in which the jury determined that there was malpractice;
– 67% of verdicts in cases involving seniors were capped by MICRA;
– Verdicts to compensate female patients were reduced by approximately one third more than verdicts in favor of male victims
The combined impact of MICRA‘s caps and its provisions limiting attorneys’ fees do not provide more money to the injured patients, as insurers often claim in support of caps legislation. The study shows that the overall effect of the California law is to lower compensation to injured patients by an average of 15%, and much more so to those who sustain the most severe injuries.
The study also notes that the amount juries award is meant to represent what the jurors "believed to be the proper amount of damages." In California, juries are not apprised of MICRA and do not know that the award will be reduced at all, let alone as significantly as the study’s findings indicate.
"The California law ensures that most victims of malpractice who win in court get far less than a jury believes to be the proper amount. Jurors are not told that the decision they make about how to best compensate an innocent victim will be overturned by a judge the moment they leave the jury box," said Heller.
No Analysis of Impact of Caps on Medical Malpractice Rates
The Rand study does not consider the impact of reduced liability payouts on the medical malpractice premiums paid by physicians. Although the medical-insurance lobby has consistently argued that caps such as those contained in MICRA are needed in order to resolve the malpractice premium crisis faced by doctors throughout the country, the Rand study makes no such conclusion, and there is no evidence to support that claim.
The claim commonly made by advocates of caps, that caps and the resulting reduction in claims payments leads to lower insurance premiums, is not corroborated by either California’s nearly 30 year experience with MICRA (see FTCR’s study How Insurance Reform Lowered Doctor’s Medical Malpractice Rates In California And How Malpractice Caps Failed at http://www.consumerwatchdog.org/healthcare/rp/rp003103.pdf) or by current data concerning rates in California.
In 2003, for example, there were 25 medical malpractice premium increase requests before the California Department of Insurance, requesting as much as 96.8% higher rates for physicians. Irrespective of California’s harsh MICRA law and the Rand study data showing that under MICRA insurers have dramatically limited liability, medical malpractice providers have continued to request premium increases from the Department of Insurance. In fact, every major medical malpractice insurer in California proposed rate hikes in 2003.
Rate Increase Requests by Top Five Medical Malpractice Providers in California, 2003
Company in order of market share Proposed Increase
1. Norcal Mutual (physicians coverage) 9.9%
2. SCPIE Indemnity (healthcare facilities) 21.7%
(physicians coverage) 8.9%
3. The Doctors’ Company (physicians coverage) 9.8%
4. Truck Insurance Exchange (hospital liability) 27.0%
5. Medical Ins. Exchange of California (physicians coverage) 14.4%
Source: California Department of Insurance
Proposition 103 Prevents Unjustified Medical Malpractice Rate Hikes in California
Unlike most other states, in which the rate hikes identified above would likely have been imposed without regulation or challenge, California insurers are subject to the regulatory system known as Proposition 103. That 1988 voter approved initiative requires insurance companies, including medical malpractice carriers, to open their books to public scrutiny prior to the approval of any rate hikes. Both the Insurance Commissioner and members of the public may challenge any rate increases as excessive. As a result, the Medical Insurance Exchange proposal was reduced by almost a third, the Norcal request was slashed by 71% and neither SCPIE increase was allowed to take effect.
Using Proposition 103‘s public right to challenge increases, FTCR has blocked nearly $50 million in physician premium hikes in recent years, while California Insurance Commissioner John Garamendi has stopped or reduced other increases without a public challenge.
"Insurers continue to push for higher premiums regardless of the reduction in claims payments due to legal restrictions. Caps put all of the pain of reform on the victims of malpractice, but provide none of the promised relief to physicians. To address high premiums, politicians should focus on regulating the rates of insurance companies rather than restricting the rights of patients," concluded Heller.
Rand Findings in Line With Recent Harvard Study
The Rand study corroborates a Harvard School of Public Health study issued last week that found California’s damage caps law unfairly limits compensation to people who are severely injured as a result of malpractice. According to the researchers:
"We found strong evidence that the cap’s fiscal impact was distributed inequitably across different types of injuries. In absolute dollar terms, the reductions imposed on grave injury were seven times larger than those for minor injury’"
The Harvard study, " Are Damages Caps Regressive? A Study Of Malpractice Jury Verdicts In California," appears in the July/August issue of the journal Health Affairs.
The Foundation for Taxpayer and Consumer Rights noted that the Rand Institute for Civil Justice, which released this study, has historically received significant funding from the insurance industry and has long-supported limiting the liability of and reducing regulation over the insurance industry. Rand’s relationship with the insurance industry muted the study’s critique of the inequity of the MICRA system, according to FTCR.