CHEAP SUITS
Rising Malpractice Coverage Rekindles California Reform Push
By LAURENCE DARMIENTO
As medical malpractice rates have soared elsewhere in the nation, California doctors have been protected by the state’s groundbreaking law putting a $250,000 cap on damages for pain and suffering,at least that’s been the prevailing wisdom.
But a study done on behalf of the Santa Monica-based Foundation for Taxpayer and Consumer Rights has concluded that the Medical Injury Compensation Reform Act,viewed as a model nationwide,has actually done little.
And it’s prompting a call for state legislators to look at amending the law, which has been on the books since 1975.
The study concludes that the average medical malpractice premium in California was $7,200 in 2000, compared with the national average of $7,843.
Moreover, it found that over the past decade premiums have increased at a faster rate in California than the nation as whole, closing the cost difference between the state and nation.
The average medical malpractice premium in California was $6,957 in 1991, rising 3.5% annually through 2000. In contrast, the average premium nationwide in 1991 was $7,700, rising 1.9% annually through 2000.
The $250,000 cap has limited action against the medical profession by discouraging attorneys from taking cases.
But it hasn’t limited premiums as much as widely believed, said Jaime Court, a patient rights advocate with the foundation.
“This law is being looked at as a model, but it’s a model that has not produced any major changes, except in victims not having their day in court,” Court said. “These figures could fuel a legislative effort to raise the cap, because the legislature is not going to get rid of it.”
Raising Caps
Efforts to amend California’s law by increasing the cap on judgments have failed in the Legislature twice in the past five years, most recently in 1999 when then-Assembly Speaker Antonio Villaraigosa sponsored such a bill.
The study was conducted by actuary J. Robert Hunter, director of insurance for the Consumer Federation of America and a former federal insurance administrator under the Nixon, Ford and Carter Administrations.
Court said the foundation has no specific plans to try again, though he hopes the latest study may give legislators the ammunition they need to try.
But nationally the tide is turning the other way.
There is a widely perceived medical malpractice crisis,St. Paul Cos., the nation’s second-largest medical malpractice insurer, pulled out of the market in December. That has prompted the introduction in Congress of two tort reform bills with caps and other elements similar to California’s law.
“We are not at all surprised by this,” said Joanne Doroshow, executive director of the Center for Justice and Democracy, a national public interest group.
“Our own more comprehensive study of insurance rates of every state in the country of all types of insurance shows there is absolutely no correlation between tort reform and insurance rates.
“Premium increases are driven not by the legal system but by the economic cycle of the insurance industry. Insurance companies make money off of investment incomes. At times of high interest rates they engage in price wars just to get premium to invest, so there is severe underpricing that is well recognized by the industry. Then when interest rates drop and the stock markets plummet they will raise rates dramatically.”
But doctors and insurers question the study’s methodology and its conclusions.
They note surveys showing that malpractice rates start about $7,000 in parts of California for less risky specialties alone and go up from there, while some states without caps on non-economic damages have rates several times that.
Officials of the California Medical Association cite their own data showing that the average annual medical malpractice premium for a cardiovascular surgeon in Los Angeles County is $42,000, versus $213,000 in Dade County, Fla., a comparable metropolitan area without tort reform.
Weakening the Law
“I am a little surprised that their costs are so out of sync,” said Peter Warren, a spokesman for the California Medical Association, which has fiercely defended efforts to weaken the law.
Danielle Walters, executive vice president of Californians Allied for Patient Protection, a coalition of health care providers, insurers and others who support the caps, believes one problem may be that the study draws its premium data from the National Association of Insurance Commissioners.
She said the study does not include self-insurance premiums.
But Hunter, the study’s author, said not using self insurance premiums should not make a big difference since past work he has done has shown California and the nation have similar rates of malpractice self insurance.
Darmiento is a staff reporter with the Los Angeles Business Journal.
