Medical Injury Compensation Reform Act Winfield J. Wells, MD Division of Thoracic and Cardiovascular Surgery, Childrens Hospital of Los Angeles, Los Angeles, California

Introduction by Thomas D. Bartley, MD Our next speaker is Dr Winfield J. Wells, member and Chairman-designate of the Medico-Legal Affairs Committee of The

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n 1976, a special session of the California legislature enacted a landmark bill commonly referred to by its acronym, MICRA (Medical Injury Compensation Reform Act). The “malpractice crisis” that preceded this legislation had resulted in a dramatic decrease in the number of companies willing to write medical liability coverage. The few who remained announced such tremendous increases in their premiums (300% to 400%) that many California physicians talked seriously of leaving practice or initiating a work-action by refusing to care for nonemergent patients. The Medical Injury Compensation Reform Act was the result of an agreement reached between the major concerned parties, including physicians and hospitals, the insurance industry, and the California Trial Lawyers Association. The legislation had three major provisions. The first dealt with restructuring of disciplinary proceedings by the California Board of Medical Quality Assurance. It was intended to help with education and retraining of physicians involved in medical negligence, as well as to deal more effectively with those who could not be retrained. The second provision addressed insurance carriers and attempted to make them more accountable for premium increases. By far the most important and controversial of MICRA’s provisos were seven tort reforms that included limitations on fees and awards, as well as provisions for the payment of settlements or judgments over time. A brief summary of the tort reforms includes: 1. Limitation on damages for noneconomic losses to $250K. Comment: These are damages for pain, suffering, inconvenience, physical impairment, disfigurement, and other nonpecuniary issues. There is no limit for economic losses. 2. Periodic payment of future damages greater than $sO,OOO. Comment: The court shall make a specific finding as to the dollar amount of periodic payments, and may require the judgment debtor who is not adequately insured to post security adequate to assure full payment as awarded. Also, money awarded for loss of future earnings is not reduced or terminated by death of the judgment creditor, but is paid to those to whom the creditor owed a duty of support (as provided by law). Presented at the Interim Meeting of The Society of Thoracic Surgeons, Chicago, IL, Sep 21-23, 1990. Address correspondence to Dr Wells, 1245 Wilshire Blvd, Suite 703, Los Angeles, CA 90017.

0 1991 by The Society of Thoracic Surgeons

Society. Dr Wells is v e y knowledgeable about the effect of tort reform on professional liability insurance rates in California.

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From a practical standpoint, periodic payments are usually handled by the purchase of an annuity. Limitation on plaintiff attorneys’ contingent fee: 40% of full 50K, 33%% of next 50K, 25% of next 100K, 10% of any amount over 200K. Comment: Subsequently raised in 1987, as discussed later. Allowed evidence of collateral sources of recovery to the plaintiff. Comment: In many states payment through sources such as Worker’s Compensation, disabilityinsurance, or even medical insurance payments may not be disclosed to offset a judgment or settlement. This provision also included language that effectively prevents the subrogation of claims by a collateral source of payment (ie, if medical negligence is established, a physician may not be countersued by a plaintiff‘s disability company to recover payments to which they are obligated). Redefined the statute of limitations. Comment: For adults, 3 years after date of injury or 1year after plaintiff discovers or, through reasonable diligence, should have discovered the injury, whichever occurs first. Specified a format for contracts of arbitration in medical malpractice cases. Comment: Specified carefully, including the fact that just above the signature line the following clause be present in 10 point (or greater) BOLD red type ”NOTICE: BY SIGNING THIS CONTRACT YOU ARE AGREEING TO HAVE ANY ISSUE OF MEDICAL MALPRACTICE DECIDED BY NEUTRAL ARBITRATION AND YOU ARE GIVING UP YOUR RIGHT TO A JURY OR COURT TRIAL.” Also specified that such contracts may be rescinded by written notice within 30 days of signature. 90-Day notice prior to commencement of suit. Comment: Intended to provide an opportunity to resolve potential disputes amicably. Has little “teeth’ because the sole statutory sanction is subjecting an attorney who fails to comply to “professional discipline.”

[t is most remarkable that, between 1976 and 1984, MICRA was generally ignored and seldom applied to the analysis or resolution of the majority of California malpractice cases. This resulted from the general belief within the legal community, including plaintiff and defense attorneys as well as many on the bench, that most of MICRA’s tort reforms were unconstitutional. One can imagine the reluctance of insurance camers to bear the burden of pursuing the issues through the inevitable maze of legal appeals, particularly in the face of a California State Supreme Court Ann Thorac Surg 1991;52:36&1

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WELLS MICRA

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Table 1. California Supreme Court Decisions Upholding MICRA Case

Comment

Issue

American Bank & Trust v Los Gatos Community Hospital (1984)

Periodic payment of future damages >50K

Barme v Wood (1984) Roa v Lodi Community Hospital (1985)

Subrogation of claim by collateral sources Plaintiff attorney contingent fee

Fein v Permanente (1985) Jordan v Wachs (1985) Waters v Bourhis (1985)

250K limit on noneconomic damages 250K limit Plaintiff attorney contingent fee

that was perceived as "liberal" and unlikely to be sympathetic toward the medical community. Fortunately there were those who believed the law would be upheld and, in 1984, the first cases were heard and decided by the court. In general, the challenges to MICRA contended that the law violated the constitutionalguarantees of due process, equal protection, and the right to a jury trial, but, as MICRA came under scrutiny, the court repeatedly came to the conclusion that the legislature had the right to enact such provisions in the best interest of the people of California. The major California Supreme Court decisions upholding MICRA are summarized in Table 1. The members of the California Trial Lawyers Association were not pleased with the decisions of the Court. In 1985 they began to work within the legislature, introducing bills and amendments that ranged from the virtual repeal of MICRA's pertinent sections to increases in the limitation on noneconomic damages and contingency fees. They met with little success. The strategy then switched to sponsoring a ballot initiative because, in California, such issues can be taken directly to the popular vote where media campaigns have a significant impact. As the major stake holders on each side of the issue prepared for what was expected to be a hard fought and expensive campaign, a compromise was reached and a bill passed. This remarkable legislation (SB 241) enacted in 1987 gave the plaintiff's lawyers an increase in their contingency fees in exchange for a 5-year moratorium on any bills or initiatives designed to alter or affect MICRA. It also stiffened the standard of proof required to claim punitive damages, a tactic used increasingly by the counsel for the plaintiff in malpractice cases. It is difficult to measure precisely the impact of MICRA, though a few generalities may be made. The reforms have not reduced the number of suits filed for medical malpractice. Because this is very likely related to the number of lawyers (and in California that number has been growing steadily: >135,000 at the current time), this fact is not surprising. The incidence of suits has also progressively increased. In 1975, roughly 5% of physicians had been sued and, by 1985, that had increased to 16% despite the existence of MICRA reforms. Currently, in some subspecialties, a malpractice action has been filed against more than 50% of physicians. There have, however, been substantial savings in judgments and settlements where

Court ruled that MICRA does not violate constitutional guarantee to due process, equal protection, and right to trial Prohibits collateral payor from suing physician for reimbursement Upheld MICRA limitations and stated they did not deprive plaintiffs the right to select attorney of their choice

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Upheld MICRA limitations even if voluntarily waived by plaintiff

MICRA has been applied. One estimate places this savings in the range of 35% to 40%. The future will undoubtedly bring changes to the provisions of MICRA. There will be pressure to increase the 1976 mandated $250K limit on noneconomic damages because inflation over the 15-year interval has significantly eroded its value. There will certainly be arguments to index fees and judgments to some standard such as the consumer or medical price index. The tort reforms of MICRA are among the most comprehensive and aggressive measures regulating medical liability, but many believe that tort reform alone is not enough. It is argued that the technically complex disputes that arise from malpractice cases must be taken out of the civil court system. The American Medical Association-sponsored Specialty Society Medical Liability Project has recently proposed an alternative fault-based administrative system to handle medical malpractice which merits careful consideration and support.

Bibliography 1. Medical Injury Compensation Reform Act of 1975 (MICRA) Implementation Manual. Prepared for The California Medical Association by Horvitz, Levy, and Amerian. Encino, CA, July 1988 revision. 2. AMA Tort Reform Compendium. American Medical Association, 1989. 3. Is history repeating itself? LACMA Physician 1985;June 3:27. 4. Doheny K. California physicians-a slow climb out of the crisis. LACMA Physician 1985;June 3:2&9. 5. A talk with the man who defended MICRA: interview with Ellis J. Horvitz. LACMA Physician 1985;June 3:34-7. 6 . Villaire M. Organized medicine sets wheels of action in motion for members. LACMA Physician 1985;June 3 : 3 W . 7. Villaire M. Fate of MICRA being fought in legislature. LACMA Physician 1985;June 30:33. 8. Devlin MM. Constitutionality of California's Medical Injury Compensation Reform Act and other matters. J Med Practice Management 1986;1:2724. 9. Bender H. Who blinked first? LACMA Physician 1988;Jan 11:41-8. 10. A comprehensive review of alternatives to the present system of resolving medical liability claims. Written and researched by The Committee to Study Alternatives to the Present System Physician Insurers Association of America, Lawrenceville, NJ, 1989.

Medical Injury Compensation Reform Act.

Medical Injury Compensation Reform Act Winfield J. Wells, MD Division of Thoracic and Cardiovascular Surgery, Childrens Hospital of Los Angeles, Los A...
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