MICRA: Long-simmering dispute looming in Capitol

The deep-pockets political dispute over medical malpractice insurance has a long and stormy history in the Capitol. The blurred battle lines include the trial bar and some consumer activists on one side confronting doctors, insurers, clinics and other providers of medical care on the other.

The fight is over money as much as medicine.  

The crux of the issue is simple: In September 1975, Gov. Jerry Brown signed the Medical Insurance Compensation Reform Act, or MICRA, which limited pain-and-suffering awards in malpractice cases to $250,000. Other awards – future lost wages and medical costs, for example – were left untouched, as were punitive damages.

Brown’s action followed turmoil in the medical insurance markets, in which doctors said unlimited pain-and-suffering awards resulted in skyrocketing insurance rates, forcing some to flee the state and reducing the public’s access to care – a scenario contested by the lawyers.

Indeed, many in the Capitol believed then that the insurers deliberately jacked up premiums in order to provoke a crisis that would force a cap to be imposed. The insurers denied it, but the battle lines were drawn.

The reality of the $250,000 limit is that it ratchets down on lawyers’ fees, which means victims can’t attract the best lawyers, said the Consumer Attorneys of  California (CAOC).

Because of the cap, “today many patients wronged by their doctors can’t even find an attorney to take their case. Between 2004 and 2008, malpractice awards plummeted nearly two-thirds in California,” noted a report by the CAOC, which seeks to remove or raise the cap.

They said states with a cap on damages have about 288 doctors per 100,000 population, while those without have 349 per 100,000.

Insurers, anxious to hit the attorneys in their pocketbooks, favored the cap. Attorneys said the move protected well-heeled insurance companies at the expense of victims’ well-being, and by limiting the size of their contingency fees for pain and suffering it crippled the victims’ ability to get top-drawer legal talent.

In the fight between insurers and trial lawyers, the providers of medical care – the hospitals, the clinics, the physicians – feel caught in the middle, fearing that their premiums will rise if the cap is removed. That especially applies to high-risk OBGYN and pediatric procedures.

“When there are no caps on non-economic damages, these larger premiums skyrocket,” said Kathy Kneer, president of the Planned Parenthood Affiliates of Southern California. “Our goal is to make California as attractive as possible for OB-GYNs.”

Before  MICRA was enacted, she added, “We had a real crisis” keeping and attracting OB-GYNs.

Thirty-five years later, the cap remains at $250,000, although in the interim the percentage of attorneys’ fees was raised marginally – reportedly a small part of a much larger tort-reform deal that was written on the back of a napkin at Frank Fat’s restaurant.

Brown, consumed with the state budget, has not taken a position on changing MICRA, although his stance has been nuanced over the years. But clearly, the attorneys see a far more receptive governor in Brown than they had in Schwarzenegger.

The doctors, then and now, said the issue for the attorneys is money, not health – a division that raises the temperature on both sides.

“Changing MICRA would be absolutely the wrong move,” said Dustin Corcoran, the CEO of the 35,000-member California Medical Association. “The trial attorneys want to legislate their way to a big pay day. I don’t think it’s much more than that to them.”

Lisa Maas, executive director of a group called Californians Allied for Patient Protection, agreed.

“All of their out-of-pocket costs are paid for, even punitive damages are paid on an unlimited basis. In fact those payments are going up at double the rate of inflation,” Maas said. Her group, formed specifically to fight attempts to change MICRA, represents scores of clinics, hospitals, medical associations and insurers.

“There are limits on attorneys’ fees so more money will go to the patient and not the lawyer,” she added.

The last major effort to alter MICRA occurred a decade ago in legislation authored by Democrats Antonio Villaraigosa of Los Angeles and Sheila Kuehl of Santa Monica.  

A new move, again from the trial bar, is developing in the Capitol to rework MICRA. No bill has been introduced, but the attorneys reached out to lobby newly elected lawmakers and to educate them about the issue.

That attorneys’ move sent reverberations through the Capitol where MICRA, however obscure to the general public, is a hot-button issue. The debate has multiple elements of a classic Capitol confrontation: insurers vs. lawyers and doctors vs. lawyers.

Meanwhile, the providers of health care through community clinics are watching the fight nervously. If the cap is removed, they believe premiums will rise because litigation will rise, and the fees for non-economic damages – pain and suffering – will rise commensurately.

The attorneys have rejected those allegations, and they note that preventable injuries are on the rise, which means victims are entitled to greater, not less, pain and suffering awards.

The clinics are not convinced.

“For the consumer attorneys, their cost of living has increased but the relative value of the benefit has not increased,” said Louise McCarthy, vice president of governmental affairs for the Community Clinic Association of Los Angeles, whose 45 clinics see some 800,000 patients annually. “This discussion needs to be about patients, period.”

“Our clinics have not got any indexing either, so welcome to our world,” she added. “For them, the argument has not been about changing the impact on the patient, it was about changing the dollars the attorney could collect.”

The CAOC has long considered changing MICRA a top priority. The group notes that it has not changed in decades, and that in dollars pegged to inflation, the value of the cap today is worth about $62,000. If the cap had risen with inflation it would be just over $1 million.

“Through five governors, four recessions and a more than 300 percent boost in the Consumer Price Index, MICRA has survived unchanged,” the CAOC noted in an analysis of MICRA.

Meanwhile, “health care spending has skyrocketed 83 percent, making a mockery of arguments that medical malpractice is driving an increase in health care costs,” the report noted.

Moreover, they note that medical malpractice insurers are making enormous sums of money, returning perhaps only 30 cents on the dollar on premiums, and banking or investing the rest, according to foes of the MICRA cap.

In a court filing in a medical malpractice case in Stanislaus County, a medical insurance expert examined the companies’ loss ratios from 1998 through 2007 and said their profits – with the exception of 2001 – were “presumptively excessive.”

The numbers showed that “California medical malpractice insurers projected they would pay out in claims only 30 cents for each dollar they earned in premium, thus leaving 70 cents of each premium dollar available for general overhead, defense lawyers fees, agent commissions and profit. That profit is in addition to the profit provided by the income they earn on their investments.” The brief was written by Jay Angoff, a Missouri lawyer and former insurance industry regulator. He also was the co-author of
Proposition 103, the landmark insurance reform initiative approved in 1988 – one of numerous insurance-linked measures on the ballot that year.

“I’m not surprised that this is coming,” McCarthy said. “I just wish it wasn’t coming at this time. “Our community clinics and free clinics do not get access to federal funds. We have to cover our own malpractice insurance premiums.”

Eds: CORRECTS name of attorneys group to Consumer Attorneys of California, 6th graf.

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