California's Malpractice Damage Caps Still Debated
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Read Making a Killing

home / healthcare / in the media

The San Francisco Chronicle
Aug 14, 2002

by Robert Jablon, Associated Press Writer

California's Malpractice Damage Caps Still Debated

LOS ANGELES: California's cap on damages in medical malpractice lawsuits is being recommended by President Bush as a model for the nation.

But his claim that such caps will drive down soaring health care costs is hotly debated by consumer and medical groups.

The 1975 Medical Injury Compensation Reform Act, or MICRA, placed a $250,000 ceiling on damage awards for pain and suffering, and limited attorneys' fees. It was passed to stem skyrocketing insurance premiums.

Nearly 30 years later, premiums for doctors in high-risk practices such as obstetrics generally are lower in California than in states without a cap.

The average malpractice premium paid by California doctors was among the highest in the country, and now it is in the lower third, said Ron Neupauer, vice president of underwriting at Medical Insurance Exchange of California in Oakland, a physician-owned company that insures 6,300 doctors in the West.

By comparison, California's premiums remain among the costliest for product liability and other areas where there is a risk of lawsuits, he said.

But critics contend that California doctors as a group haven't benefited as much. In 2000, the average premium per doctor in California was $7,200.61 a year, only 8.2 percent lower than for the nation as a whole, according to a study by the Foundation for Taxpayer and Consumer Rights in Santa Monica.

Also despite the cap, health care costs in California are among the highest in the nation and continue to soar. About 7 million Californians remain without health insurance, health insurance premiums continue to grow, and 11 public health clinics in Los Angeles County are in danger of being closed.

Medical malpractice premiums contribute only about 1 percent to the overall cost of health care, according to the Insurance Information Institute.

"The major factors that drive up health care costs are not this," said Dr. Richard Corlin, a gastroenterologist in Santa Monica and past president of the American Medical Association. "They're aging populations and advancing technology."

"Medical costs haven't gone down in California. They haven't gone down anywhere," Neupauer said. But at least hikes in medical malpractice premiums appear to be slower in California than in some other states, he said.

Korlin said he pays less than $10,000 a year for malpractice insurance, about a fourth of what he would pay in the costliest states, such as Florida.

There is no evidence that doctors are charging less for their high-risk services in California than in states without the caps. But Korlin argues at least Californians have access to such specialists at a time when other states are losing them.

"Doctors are not being driven out" by high malpractice premiums, he argued.

"We think it's a good idea for the nation. It's been a very good law in California," said Steven Thompson of the California Medical Association.

In addition to savings in insurance premiums, there is a "defensive medicine" savings, he argued. That is, medical costs are reduced because physicians don't order more tests in order to protect themselves from potential lawsuits.

"I think that's all subjective stuff. No one could ever put a realistic figure on that," said Carol Golin editor of the Medical Liability Monitor, a Chicago-based publication that covers insurance rates.

Jamie Court of the Foundation for Taxpayer and Consumer Rights, has a different view. He testified last month before a congressional committee that the proposed cap is more about lining insurers' pockets than reducing medical costs. The number of medical malpractice claims filed in California hasn't risen substantially since the 1975 law was passed, he noted.

"I don't see claims or lawsuits rising 200 to 300 percent, commensurate with premiums. This is not a crisis driven by a sudden increase in lawsuits," he said.

"Insurers have seen their profits upsized and patients have seen their justice downsized," he said. "This is simply being done to give insurers a nice big profit return at a time when Wall Street's been bad to them."

The cap infuriates Scott Olsen of San Diego. His son, Steve, was left blind and developmentally disabled after doctors failed to do a scan that would have detected a brain abscess. In 1994 a jury awarded the boy $4 million in economic damages and $7 million for pain and suffering, which was reduced to $250,000 because of the cap. Olsen, of San Diego, said court costs and attorney's fees used up all of that and nearly a quarter of the economic damage award.

"What's proper pain and suffering for someone who was made blind at the age of 2 and crippled?" he asked. "The money he received is money to keep him alive. The medical system has damaged him."

By limiting pain and suffering, Olsen said, the state is saying: "Here's your white cane. That's $30. But for being blind, you don't get anything."



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