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MICRAscope: RAND's methodical inspection of California's tort reform law

A recent study that looks at MICRA's noneconomic damages cap is garnering a lot of attention.

By Tanya Albert amednews correspondent — Posted Nov. 8, 2004

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Perhaps you've seen this statistic from a study released this summer: California's $250,000 cap on noneconomic damages resulted in 30% less being paid out in medical liability cases that went to trial from 1991 to 1995.

If you haven't yet heard politicians reference the report that the nonprofit, nonpartisan RAND Institute for Civil Justice put forward in July, you likely will soon enough.

Since the report's release, Vice President Dick Cheney has cited the study as proof that tort reform works. The Bush administration is a staunch supporter of the American Medical Association's call for a nationwide $250,000 cap -- like the one in California -- on pain and suffering awards in medical liability cases as a way to help stabilize professional liability insurance rates. But trial lawyers, too, have cited statistics from the nearly 80-page report to support their belief that capping noneconomic damages is not the way to solve the insurance problems that physicians are facing. Trial lawyers believe better insurance regulations are needed to control doctors' premiums. They also argue that caps are unfair to injured patients and say the study bolsters their argument that caps disproportionately affect women, children and the elderly.

Study authors, whose aim was to let the facts speak for themselves, said they knew the report would get some attention. But they've been surprised at just how much it has received.

"It says something about the importance of this debate," said Nicholas M. Pace, the project's lead researcher. "It says there is a need for this research. I suspect everyone wants a system that is fair and works well."

The RAND study is not the only one on California's nearly 30-year-old Medical Injury Compensation Reform Act, tort reform that is commonly known as MICRA.

But "Capping Non-Economic Awards in Medical Malpractice Trials: California Jury Verdicts Under MICRA" comes at a time when lawmakers at state and federal levels are passionately debating the best way to ensure that patients don't lose access to medical care as a result of physicians giving up all or parts of their practices because they can't afford their professional liability rates.

The RAND report also has received so much attention because a group that most view as objective and reputable put it forward and it offers some concrete data in an area where concrete data are not always easy to obtain.

Everyone involved in the debate over the best way to reduce physicians' medical liability insurance rates, including the California Medical Assn., agrees that the study offers only a small piece of the picture and doesn't answer all the questions swirling around the issue. But both sides also agree that the report offers at least some useful, objective numbers. And many agree that both sides will continue to cite those numbers as the nation debates how to solve what doctors call a full-blown medical liability insurance crisis.

"We welcome any objective look at MICRA," said Fred Hiestand, general counsel and CEO for Californians Allied for Patient Protection, a MICRA watchdog group. "The more the merrier in the way of MICRA. Let people read [the report] and chew on it."

What those who support MICRA say

Those who believe that the Medical Injury Compensation Reform Act is responsible for keeping medical liability insurance rates affordable for California physicians found nothing surprising in the study.

Instead, they saw it as more proof that the caps are doing what they were intended to do.

After evaluating the outcome of plaintiff wins in 257 medical liability trials that took place between 1995 and 1999, the study found that payments were 30% less than they would have been without the cap. The total payout would have been $421 million before the cap was applied but came to $295 million after judges reduced excess awards.

"It gives us proof that MICRA is working extremely well," said Richard Anderson, MD, chair of The Doctors Company, a physician-owned national medical liability insurer based in California. "We have always said MICRA is worth 20% to 30% when all of the provisions of MICRA are used."

The study also showed that patients weren't seeing a 30% reduction in their awards.

MICRA limits the amount that attorneys can collect, and the study showed that the combination of award caps and attorney's fee limits reduced the amount that plaintiffs' attorneys collected by 60%.

Consequently, plaintiffs saw 15% less then they would have without the cap or attorney fee limits -- not the full 30% less. And after MICRA reductions, the total awards in most of the cases were still more than $1 million.

"A reasonable person could conclude that it adds to a growing body of evidence that MICRA works," said Donald J. Palmisano, MD, immediate past president of the AMA, which has made fighting for tort reform its No. 1 legislative priority. "The trade-off is you keep doctors in practice so patients have access to their doctors."

The CMA says the report has a number of shortcomings, but CMA legal counsel Susan L. Penney said the report proves that MICRA works.

In addition to the observations above, Penney noted that the study also showed that noneconomic damage awards are below the $250,000 cap more than half of the time. Judges were not required to reduce awards in 55% of the cases, according to the RAND study.

"That's positive," Penney said.

What those who oppose MICRA say

Trial lawyers and some patient advocates use other findings to support their position that the cap does not treat all injured patients fairly.

Not surprisingly, those who don't support a cap say the study showed that plaintiffs who saw the greatest impact on their awards were the ones who sustained small economic damages, but whose large pain and suffering awards were later reduced.

"It disproportionately affects seniors, stay-at-home moms and children," said Ken Sigelman, MD, a lawyer who is chair of the medical malpractice committee for the Consumer Attorneys of California.

For example, the study showed that the plaintiffs who were younger than 1 year old most often saw reductions in their total awards when the ages of plaintiffs were considered: 71% of that age group experienced reductions. The median reduction was $1.5 million, according to the study. Other plaintiffs saw a median reduction of $268,000.

The report also showed that women often have a larger cut to their overall verdict. Overall awards that women received had a median change of 34%when their noneconomic damages were adjusted. Men saw a 25% median reduction in their overall when caps were factored in.

Last, trial lawyers point to the study's conclusion that plaintiffs who are 65 or older see 67% of their cases reduced by the cap. The median dollar reduction is smaller than any other age group because their awards are often close to the $250,000 cap.

"In terms of recovery, these groups don't get what the jury believes they are entitled to," Dr. Sigelman said. Jurors are not told the award will be automatically reduced.

The need for context

Although the RAND study has received much attention, those who look at it closely caution that it needs to be looked at as one small piece of the medical liability insurance debate.

"You have to look at the study in context," Dr. Sigelman said.

Trial lawyers, physicians and insurers pointed out that the study looked at only cases that settled in favor of the plaintiff. It didn't include out-of-court settlements.

CMA's Penney cautioned that the report also did not factor in cases involving lack of informed consent or elder or dependent adult abuse as well as medical liability. Those claims aren't subject to the $250,000 cap.

Consequently, he said, those cases would see a smaller reduction in the overall award than what was reflected in the RAND study.

Dr. Anderson noted that MICRA works as a whole package. In addition to the cap and lawyer fee limits, the law also allows physicians to make periodic payments for future damages and juries are told what other money the plaintiff has received from insurance or other sources.

The study authors also realized that they raised questions that went unanswered. For example, the study didn't answer whether the restriction on attorney fees affected what cases lawyers pursue, and it didn't look at MICRA's impact on insurance premiums, the quality of health care, defensive medicine or frivolous lawsuit filings.

More studies are already under way. Californians Allied for Patient Protections expects to release a study in early 2005 that answers some of those questions. RAND also plans to undertake more studies that look at topics such as how insurance premiums are affected.

"It's a hot topic," Pace said. "We hope that whatever decisions are made are made based on solid empirical data."

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ADDITIONAL INFORMATION

Putting it in context

Noneconomic damages are only a portion of a jury award. Plaintiffs also receive awards for economic damages such as lost wages or medical expenses. Here's a look at the median economic and pre-reduction noneconomic awards from 1995 to 1999 and the median total award when the two are combined. The median is the midpoint of the awards studied. Noneconomic damage awards in some cases were as high as $8.9 million. All figures are in 1999 dollars.

All cases
(257)
Injuries only
(195)
Deaths only
(62)
Economic$61,000$58,000$80,000
Noneconomic$260,000$250,000$330,000
Total award$382,000$358,000$573,000

Source: "Capping Non-Economic Awards in Medical Malpractice Trials, California Jury Verdicts Under MICRA"; RAND Institute for Civil Justice

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Overall reductions

Among the 257 cases that plaintiffs won, judges reduced the noneconomic damages 45% of the time to comply with the state's $250,000 cap on noneconomic damages. Here's a look at by how much awards were reduced. All figures are in 1999 dollars.

Award reductionAll cases
(116)
Injuries only
(80)
Deaths only
(36)
Mean$1,079,000$1,116,000$996,000
Median$366,000$286,000$459,000
Minimum$5,000$5,000$50,000
Maximum$8,667,000$8,667,000$7,526,000

Note: All numbers have been rounded to the nearest $1,000.

Source: "Capping Non-Economic Awards in Medical Malpractice Trials, California Jury Verdicts Under MICRA"; RAND Institute for Civil Justice

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Some of the biggest hits

Based on the five years of negligence cases the study examined, these plaintiffs experienced the largest reduction when the jury's original noneconomic damages award was cut to $250,000. In some cases the noneconomic award far outweighed the economic damages awarded, but that was not always the case. All figures are in 1999 dollars.

Plaintiff ageType of negligenceInjuriesEconomic damage awardOriginal noneconomic award
22 monthsBreathing tube incorrectly positioned; failure to detect error and respond in timePersistent vegetative state$6.6
million
$8.9
million
8 monthsFailure to diagnose meningitis; misdiagnosed as middle ear infectionPermanent brain damage; spastic quadriplegia$21.9
million
$6.6
million
6 yearsError in filling prescription, triggering seizuresInability to speak or walk; incontinence, severe retardation$26.2
million
$5.1
million
27 yearsPerforation of duodenum during sphincterectomySevere pain; weight loss; scarring; multiple reconstructive surgeries$10,500$4.7
million
NewbornFailure to treat borderline hypoglycemiaQuadriplegia; seizures; cognitive impairment; severe developmental delay$12.2
million
$4.2
million

Source: "Capping Non-Economic Awards in Medical Malpractice Trials, California Jury Verdicts Under MICRA," RAND Institute for Civil Justice

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External links

Rand study, "Capping Non-Economic Awards in Medical Malpractice Trials: California Jury Verdicts Under MICRA." (link)

American Medical Association document, "Medical Liability Reform -- Now!" in pdf (link)

Assn. of Trial Lawyers of America, collection of medical malpractice reports and studies (link)

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