MICRA Reforms: More Than Meets The Eye

Skyrocketing malpractice insurance costs may force closure of the University of Nevada Medical School.

Doctors practicing obstetrics in one county in Mississippi experienced nearly a four-fold increase in insurance premiums.

States now considering tort reforms to help resolve the problem might do well to look to Californias experience. The states Medical Injury Compensation Reform Act of 1975, MICRA, has played a key role in keeping medical malpractice insurance premiums affordable.

The MICRA statutes as enacted by the California State Legislature, however, are only half the explanation for Californias successful tort reform. The other half of the explanation lies in the dozens of court cases decided by the California Courts of Appeal and Supreme Court during the 27 years since MICRA was enacted–court cases that have fleshed out the all-important details of MICRA.

Other states looking to duplicate Californias successful tort reform experience should not simply copy the MICRA statutes. To do so would mean spending years in court working out the details, affording courts less sympathetic to tort reform than Californias the opportunity to torpedo the reforms.

To receive the benefit of the lessons California health care providers and their malpractice insurers have learned during the past 27 years of hard-fought court battles, a revised version of MICRA should be adopted–one in which the all-important details are addressed in the text of the statutes themselves.

The MICRA statues as enacted in 1975 seem straightforward enough. The statutes:

Limit recovery for non-economic losses, such as pain and suffering, to $250,000.

Allow periodic, rather than lump sum, payment of damages for future losses.

Allow the defendant to introduce evidence of third party (i.e. collateral source) benefits, such as health insurance, that the plaintiff is entitled to receive.

Eliminate the reimbursement, or subrogation, rights of third parties (collateral sources) who might claim part of the judgment.

Shorten the statute of limitations to one year in most cases, and up to a maximum of three years in others.

Require the plaintiff to give 90 days notice to the defendant before filing suit.

Limit contingent attorney fees to 40 percent of the first $50,000 recovered, 33 1/3 percent of the next $50,000 recovered, 25 percent of the next $500,000 recovered, and 15 percent of the recovery over $600,000.

Encourage and facilitate arbitration.

In a 1994 case, Western Steamship Lines Inc. v. San Pedro Peninsula Hospital, the California Supreme Court succinctly explained why these measures were enacted:

"In the view of the Legislature, the rising cost of medical malpractice insurance was imposing serious problems for the health care system in California, threatening to curtail the availability of medical care in some parts of the state and creating the very real possibility that many doctors would practice without insurance, leaving patients who might be injured by such doctors with the prospect of uncollectible judgments."

The Court went on to explain: "The continuing availability of adequate medical care depends directly on the availability of adequate insurance coverage, which in turn operates as a function of costs associated with medical malpractice litigation.Accordingly, MICRA includes a variety of provisions all of which are calculated to reduce the cost of insurance by limiting the amount and timing of recovery in cases of professional negligence."

Finally, the Court said, "MICRA thus reflects a strong public policy to contain the costs of malpractice insurance by controlling or redistributing liability for damages, thereby maximizing the availability of medical services to meet the states health care needs."

In the years since MICRA was enacted, numerous questions of statutory interpretation have arisen.

For example, the MICRA statutes apply in actions for injury against health care providers, raising questions about who qualifies as a health care provider.

While doctors and hospitals are clearly health care providers, is an HMO a health care provider? Is a blood bank a health care provider? Is a residential care facility?

Does MICRA apply when a non-licensed person or entity that employs a doctor is held vicariously liable for the doctors professional negligence?

Does MICRA apply when a doctor is held vicariously liable for the negligence of a non-licensed employee?

The fact that the MICRA statutes apply in actions that are based on professional negligence raises another set of questions.

When a patient in a hospital is allowed to fall out of bed, is it professional negligence? When a hospital fails to adequately screen the competency of its medical staff, is it professional negligence?

When a doctor fails to obtain the patients informed consent to treatment, is it professional negligence? When a doctor commits battery by unauthorized surgery, is it professional negligence?

MICRA caps damages for non-economic losses, such as pain and suffering, at $250,000. Should the jury be told about the cap? In cases with multiple plaintiffs–such as husband and wife, or baby, mother and father, or a decedents heirs–should the $250,000 cap apply to the case as a whole or to each plaintiff separately?

When the patient is partially at fault, should the $250,000 cap be applied before or after applying the patients percentage of fault?

MICRA provides for periodic payment of future damages. What are the respective roles of the judge and jury with regard to periodic payments? Should a contingent attorney fee on periodic payments be payable periodically as well? Should interest accrue on periodic payments until they are paid?

If the defendant purchases an annuity from a reputable life insurance company to fund the periodic payments, is the periodic payment portion of the judgment satisfied?

These are just a few of the questions of statutory interpretation spawned by MICRA. Most have now been answered by the appellate courts, although some, 27 years after MICRA was enacted, are still unresolved.

For example, two California trial courts recently said that MICRA does not apply to a large medical group that was held vicariously liable for the professional negligence of a doctor employed by the group. The cases are on appeal.

Some of the appellate courts answers have not been favorable to health care providers and their insurers. For example, in cases with multiple plaintiffs, except wrongful death cases, the $250,000 cap applies to each plaintiff separately. And, when a plaintiff is partially at fault, the $250,000 cap is applied only if the verdict for non-economic losses still exceeds $250,000 after applying the plaintiffs percentage of fault.

Enough answers have been favorable, though, to allow MICRA to function, even if not as effectively as the Legislature may have intended.

Other states that simply copy the MICRA statutes and leave it to their courts to work out the details may not be as fortunate as California.

With more detailed statutes to begin with, the desired favorable impact on medical malpractice insurance premiums has a much better chance of being achieved. Revised statutory wording that incorporates the lessons of MICRA case law is available from this writer.

S. Thomas Todd, a partner in Los Angeles-based Horvitz & Levy, LLP, has handled the MICRA issues in more than 100 major medical malpractice cases in California. He is the author of Horvitz & Levys MICRA Manual (December 2001), a 158-page document that covers all the MICRA case law.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, June 17, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.