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Read Making a Killing

home / healthcare / in the media

Philadelphia Inquirer
May 22, 2003

by Karl Stark; Inquirer Staff Writer

West Coast answer is seen as model malpractice system

SAN FRANCISCO -- It isn't the surfing or the wine that generally inspires out-of-state doctors
about California. It's the malpractice system.

California was arguably in worse shape in the early 1970s than Pennsylvania is now. Anesthesiologists in San Francisco could not get insurance and went on a monthlong strike. Doctors' wives staged an all-night vigil in the governor's office.

Then, a group of liberal Democrats, led by Gov. Jerry Brown, pushed through changes that hold down attorneys' fees and limit pain-and-suffering awards to $250,000. Other laws, intended to make insurers justify premium increases, also were enacted.

Now, the medical community cites California as a model of relative calm. Malpractice premiums in Los Angeles are about half what the same high-risk specialists pay in Philadelphia.

A bill introduced by U.S. Rep. James Greenwood (R., Bucks) would turn much of California's plan, known as MICRA, into federal law. Legislators in Pennsylvania and New Jersey are considering several bills that mimic MICRA in some cases.

And doctors who stopped working last month to protest Pennsylvania's high premiums post signs in their offices that read: "California solved the problem in 1975. It's time for Pennsylvania."

The good vibrations from California may carry a heavy price. With a limit on pain and suffering, plaintiffs must rely more on economic damages to win judgments in California, injured patients and their advocates say. MICRA makes it harder for nonworking mothers and elderly patients to find a lawyer. The limit "affects the most vulnerable elements of our society," said San Francisco-based malpractice attorney James S. Bostwick.

Grant Beall, 6, and his family in Fremont, Calif., are learning about MICRA. His right leg was amputated after doctors allegedly failed to diagnose his rare blood disease. The child faces an uphill fight for compensation in court because he will be able to work. To hire a lawyer, his father, Kent Beall, agreed to pay expenses up-front, even though malpractice attorneys typically cover such costs.

Virtually every aspect of the California malpractice story remains enmeshed in partisan debate. One big flap involves the reason for the state's success in holding down premium increases: Consumer advocates and trial lawyers say MICRA is less effective than insurance changes passed in 1988 under Proposition 103, a ballot initiative that requires insurers to justify premium increases.

"Prop 103 is the real deal," said Jamie Court, executive director of the Foundation for Taxpayers and Consumer Rights in Santa Monica, which wrote 103. "MICRA is basically Milli Vanilli lip-synching."

Richard E. Anderson, CEO of the Doctors Co., a large Napa-based insurer founded after MICRA's passage, referred to Court's view as "ministry of information pabulum."

As Anderson sees it, "MICRA is created [in 1975], and that's the end of the crisis."

Asked which change led to California's relatively lower rates, California's elected Insurance Commissioner John Garamendi said, "It's both."

He holds a unique perspective on this debate. He voted for MICRA as a freshman assemblyman in 1975. He also implemented the insurance changes of Proposition 103 in 1991 during a previous term as insurance commissioner.

Garamendi cites another helpful factor in lower rates: The state has improved the licensing and disciplining of physicians and the accrediting of hospitals and HMOs.

Consumer advocates doubt if California doctors are disciplined more thoroughly than elsewhere. And trial lawyers continue to dismiss the effects of MICRA even as they try to rescind it.

Yet virtually no one disputes that malpractice rates are dramatically lower in California than in eastern Pennsylvania.

Obstetricians in Los Angeles pay about $67,000 a year for malpractice coverage. That is less than half the $140,000 that the same company charges obstetricians in Philadelphia and Delaware County, if they can persuade an insurer to write a policy.

Surgeons in the Philadelphia area also pay roughly twice what their counterparts are charged in California.

Some experts say the limit is one of many factors holding down costs on the West Coast. Researcher Nicholas Pace of the Rand Corp.'s Institute for Civil Justice looked at all jury awards for medical malpractice in California between 1995 and 1999. The limit reduced the total ultimately paid to plaintiffs by almost 25 percent, he found in a preliminary review of data to be published this spring.

Large malpractice awards still strike the California medical community. Attorneys for Andrew Leyvas, now 5, won an $84 million verdict in December in Alameda County after he developed a preventable condition called kernicterus. Jaundice poisoned his brain and left him a quadriplegic suffering from cerebral palsy.

The verdict included $73 million for future medical expenses and $11 million in lost future earnings. MICRA's effect was minor, reducing the pain-and-suffering portion from $750,000 to $250,000.

Many doctors in California are suffering from the same angst as their colleagues elsewhere. As many as one-third of the state's physicians could quit in the next five years because of managed care, poor pay and other pressures, said John C. Lewin, CEO of the California Medical Association. "Protecting MICRA is paramount."

So far, the California malpractice-insurance market remains more stable than other states'. Malpractice premiums were growing by 6 percent in California over the last year compared with about 50 percent in Southeastern Pennsylvania, insurance officials said.

And that's when insurance is attainable. PMSLIC, the largest insurer for doctors in Pennsylvania, is restricting new business, covering only doctors who join practices that the company already insures.

Back East, legislators are full of ideas to lessen the crisis. Bills to create limits are pending in both the Pennsylvania and New Jersey legislatures.

California's malpractice crisis in the early 1970s was like Pennsylvania's current malaise - only worse. Insurers were raising rates by more than 400 percent in a year. Hospitals were closing emergency rooms and turning away patients because surgeons and anesthesiologists were unable to get insurance.

To the rescue came Gov. Jerry Brown, a.k.a. Gov. Moonbeam, the former seminarian turned Buddhist.

While Democrats often oppose limits, Brown and other liberal Democrats were pivotal in creating MICRA. Brown's malpractice consultant, Fred J. Hiestand, was a Democratic lawyer who would later represent Huey Newton and the Black Panthers.

Hiestand's first proposals omitted a limit on pain and suffering. When Brown asked if any ideas had been left out, Hiestand mentioned the limit, but he warned that it would be controversial.

"Well, the governor said, if people are suffering pain, they should turn to religion, sex or drugs. Money is a false god," Hiestand recalled.

He said Brown feared that high awards could further torpedo a troubled system.

In a public statement in 1993, Brown backed away from MICRA and urged that it be left out of the Clinton health plan, then under discussion. "MICRA has revealed itself to have an arbitrary and cruel effect on the victims of malpractice," Brown declared, echoing a widespread criticism. Now the mayor of Oakland, he did not respond to requests for comment.

The limit of $250,000 set in 1975 is now worth about $73,000.

Hiestand is still fighting for his legislation, heading a pro-MICRA lobbying group.

He is not optimistic about the possibility of change in states such as Pennsylvania and New Jersey. To make a dramatic shift, "you've got to have a very serious crisis where people are not getting care," he said. "Other than that, the legislators all cater to whatever special interests they happen to listen to."
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Contact staff writer Karl Stark at 215-854-5363 or kstark@phillynews.com


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