Nearly half-century later, lawyers and doctors see peace over MICRA

The latest chapter in a decades-long battle between physicians and lawyers is unfolding through compromise in Sacramento and so far, almost everyone involved has come aboard.

The agreement caught the Capitol by surprise — the language was placed in an existing bill after it was gutted. Legislative leaders in both houses praised the compromise, as did the governor and representatives of the competing interests.

“I never envisioned a legislative compromise,” said attorney Nick Rowley, a backer and funder of a November ballot initiative this year targeting MICRA, “but I’m very proud that our work has led us to this point. When this becomes law, we will have changed history for the better.”

The political fight revolves around California’s Medical Injury Compensation Reform Act (MICRA), which limits the amount of money patients can receive if injured by a physician in connection with medical treatment. MICRA, sponsored almost half a century ago by the California Medical Association, has been the focal point of one of California’s most enduring political fights.

It limits the amount a patient can receive to $250,000 on top of compensation for medical treatment. It was passed by the Legislature in 1975 and signed by Gov. Jerry Brown.

The goal was to curtail the skyrocketing insurance costs of doctors and other medical professionals, and cut back on multimillion-dollar settlements and big fees for lawyers — which insurers said were at least partly responsible for driving the high premiums.

Since then, the law has been challenged repeatedly, with the fiercest opposition coming from the trial bar.

In 2014, an attempt to modify MICRA by lifting the $250,000 and pegging it to inflation — $1.1 million at the time of the election — was rejected in Proposition 46 by two-thirds of the voters.

Absent a deal this year, MICRA was all but certain to go before voters again in November.

The new compromise bill making changes in MICRA is AB 35, sponsored by Assembly Majority Leader Eloise Gómez Reyes, (D-Colton) and Sen. Tom Umberg, (D-Santa Ana) and coauthored by 38 legislators.  Its introduction was spurred by a desire on all sides to avoid an expensive ballot measure that had been heading for the November ballot. (Find a Capitol Weekly Podcast discussion of AB 35 with Sen. Umberg here.)

Starting on Jan. 1, 2023, the bill — which is supported by Gov. Gavin Newsom —  would boost the MICRA limit to $350,000, increasing to $750,000 over 10 years. It also expands the law to include actions for injuries against health care institutions.

“This agreement signals the end to one of the most long-standing battles in California politics, and strikes a fair balance between protecting patients,” Newsom said in a written statement. “This is an important victory for the stability and health of our health care system…”

After a decade, there would be a 2 percent annual increase, according to the compromise. Cases involving a death will have a limit of $500,000, growing over the coming decade to $1 million in 10 years, with a 2 percent yearly increase after that.  Statements of sympathy or regret could not be admitted into evidence.

Proponents of the changes argue that inflation had shrunk the original 1975 figure of $250,000 to only $50,768 in today’s dollars.  Only two other states, Kansas and Montana, have caps as low as California. Twenty-one states and Washington, D.C., have no cap at all, and the rest have modified limits. The cap in one state, Florida, was struck down by the courts in 2014.

AB 35 started out in life as legislation dealing with false information authored by former Assemblyman Ed Chau. It was gutted and the MICRA provisions were inserted.

In a letter to the membership, CMA President Robert E. Wailes said the AB 35 compromise would avoid “another costly initiative battle that could obliterate existing safeguards for out-of-control medical lawsuits and result in skyrocketing health care costs.

 “Now, for the first time in a generation, we were met with an opportunity to achieve a meaningful consensus between competing interests through a revised framework that could protect both the rights of injured patients while keeping MICRA’s essential guardrails solidly in place for patients and providers alike,” Wailes declared.

The fight between physicians and attorneys over compensation for victims of medical malpractice has a long and colorful history, including a secret 1975 “napkin deal” meeting targeting the aftermath of MICRA. By dessert, there was agreement on a far-reaching compromise. Negotiators include doctors, lawyers, insurers and tobacco interests.

Legislation by Sen. Bill Lockyer (D-Hayward) putting the compromise into law was then whisked through the Legislature.

Notes on the 1975 agreement, engineered by then-Assembly Speaker Willie Brown, (D-San Francisco) were made on a napkin. Frank Fat’s, the Sacramento restaurant where the meetings took place, later exhibited the napkin as a memento.

When they met at “Frank Fat’s restaurant in Sacramento to reach a deal, it would be a small win for lawyers, but the so-called “truce” struck between these four industries would not last long,” noted an analysis by the Adamson Adhoot law firm. “The Napkin Deal would be repealed just ten years after being signed into law.”