PIAA: California tort reform needs to go national

By Vanessa Van Voorhis | Apr 3, 2016

SACRAMENTO – Physician Insurers Association of America says a bill before Congress that seeks to discourage frivolous lawsuits by limiting noneconomic compensation is an important step toward much-needed tort reform.

On March 17, U.S. Representative Trent Franks (R-Ariz.) reintroduced to Congress the Help Efficient, Accessible, Low-cost, Timely Healthcare 6 (HEALTH) Act of 2016. It would limit the amount a plaintiff can recover at trial for noneconomic damages such as pain and suffering to $250,000, which is the same cap under California’s Medical Injury Compensation Reform Act (MICRA) of 1975.

“On a national basis, we need to have the entire country embrace California’s medical liability reforms. This includes caps on noneconomic damages, limits on attorneys’ fees and the period payments of future damages,” Michael C. Stinson, PIAA vice president of government relations and public policy, told the Northern California Record.

These measures are necessary in order to stabilize medical liability insurance premiums, he said. PIAA, a Maryland insurance industry trade association whose members insure more than two-thirds of America’s private-practice physicians and more than 2,000 hospitals, has championed for many years national-level reforms similar to California’s MICRA.

“Since the enactment of medical liability reform in California, the state has seen relative stability in the medical liability insurance market that was unparalleled for decades,” Stinson said.

MICRA resulted in a 15 percent decrease in aggregate net recoveries for plaintiffs and a 30 percent decrease in net aggregate liabilities for defendants, a RAND Corp. study published in 2004 concluded. It attributed the 15-point difference to sizable decreases in attorney fees, meaning that costs for compensating medical malpractice shifted from defendants to plaintiffs and to plaintiffs’ counsel.

Stinson praised California voters’ 2014 decision to reject Proposition 46 that would have, among other things, provided a 40-year inflation adjustment to the 1975 MICRA cap, raising to $1.1 million.

“In our view, its rejection was of benefit to insurers and the whole system,” Stinson said. “It was pretty widely known that the emphasis of Proposition 46 was to try to increase the caps. What we saw in California was when people were aware of the dramatic increase in caps, the coalition of support was huge.”

Sixty-seven percent of voters gave Proposition 46 thumbs down on voting day. The ballot measure was later criticized for having too many provisions and contradictory interests. Fortunately, a poll conducted by USC Dornsife and The Los Angeles Times on each provision revealed voters were split when it came to increasing the cap on medical negligence lawsuits, with 46 percent opposed and 43 percent in favor.

Opponents had argued that an inflationary adjustment to the cap would increase state and local government costs by hundreds of millions of dollars annually, drive up insurance rates and bureaucracy, and prevent doctors from providing care, Southern California Public Radio reported.

Between 1975 and 2007, health care costs had increased across the board: medical care by more than 500 percent, total tort costs by more than 1,000 percent and medical malpractice nearly 2,500 percent, according to Towers-Perrin, an actuarial and financial consulting firm.

Since MICRA, 29 states followed California’s lead in adopting limits malpractice damages, according to PIAA. Sixteen states have statutes that limit attorney contingency fees, and 31 states have some rule addressing the allowable period of payment for future damages.

“As more states have adopted reforms, we’ve seen improvements in their markets as well. As an example, following the enactment of effective tort reforms in Mississippi and Texas in the early 2000s, the largest insurers in those states were able to reduce their premiums on an annual basis going forward. In addition, annual dividends and refunds for policy holders in both states reached 20 percent or more,” Stinson said.

“Those states which do not currently have reforms on the books would be expected to, likewise, see improvements in their medical liability environments, if they adopted reforms or if reforms were adopted at the federal level,” he said.

However, an increasingly complex regulatory environment makes it increasingly difficult to measure the effectiveness of such reform, especially since the adoption of the Affordable Care Act (ACA) in 2012.

Generally, there are two schools thought pertaining to the ACA, Stinson said. One theory is that flooding the health care market with 40 million new consumers would put such a crunch on physicians that there would be an increase in lawsuits. As a result, there would be errors of perceived low-quality care.

The other theory is that with all these folks getting care, some for the first time, they might take better care of themselves and have better health outcomes.

“I think we’re still waiting to see what the impact will be,” said Stinson, adding that it may take up to five years to know the outcomes. “For now, there’s no real study on this.”

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