California Law Shrinks Malpractice Payouts

A California law that limits medical malpractice payouts to patients and their lawyers has cut payments in such lawsuits by 30 percent, Rand Corporation researchers reported on Monday.

Lawyers may also be more careful about the types of lawsuits that they take on because of the measure, the think tank report found.

California passed the Medical Injury Compensation Reform Act in 1975 because of soaring medical malpractice insurance premiums.

The law caps noneconomic damages such as emotional distress at $250,000 and restricts attorneys’ fees. But economic damages such as medical care costs and wage loss are uncapped.

“The law has had a direct and observable role in about half the malpractice cases where there is a verdict for the plaintiffs,” said Rand’s Nicholas Pace, who led the study.

“For defendants, for plaintiffs, and for attorneys, MICRA has clearly changed the playing field upon which malpractice claims are litigated in California.”

Federal and state legislators have watched the California law with an eye to passing similar bills. Doctors have complained for decades that excessive liability insurance premiums, often hundreds of thousands of dollars per year, are driving them out of practice.

Pennsylvania Republican Rep. James Greenwood says the U.S. House of Representatives has been trying to pass federal malpractice legislation only to see it stall in the Senate.

“The trial lawyers there are stopping it,” Greenwood, chairman of the House Energy and Commerce oversight subcommittee, told reporters last week. He said he was studying the California law as a possible model.

For their study, Pace and colleagues looked at 257 medical malpractice trials in California from 1995 to 1999 in which juries voted for the plaintiffs.

They found that plantiffs in malpractice trials won only 22 percent of the time in California, compared with 53 percent for all other types of trials.

But juries awarded big payouts, and judges had to step in and cut awards in 45 percent of the cases.

“Awards in the original verdicts in our sample totaled $421 million, but with MICRA, the final judgments in those cases dropped to $295 million. In other words, MICRA reduced the overall liabilities of the defendants by 30 percent,” Pace and colleagues wrote.