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Emerging Issues: LAO Releases Analysis of Medical Malpractice Damage Increase Initiative, SOS Clears for Circulation

October 31, 2013
One ballot battle shaping up for the November 2014 general election is a clash between consumer attorneys and a coalition of doctors, hospitals and insurance companies over proposed changes to the state’s Medical Injury Compensation Reform Act (MICRA).
The ballot initiative, entitled the “Troy and Alana Pack Patient Safety Act of 2014,” seeks to increase the state’s medical malpractice damage limits capped under MICRA. Recently, the nonpartisan Legislative Analyst Office (LAO) released its analysis of the measure followed by the Secretary of State (SOS) authorizing proponents to begin gathering signatures for ballot qualification.
The measure will do the following:
  • Require physicians be subject to random drug and alcohol testing and send positive results to the California Medical Board. The Medical Board would then be charged with administering disciplinary actions.
  • Require physicians to report other physicians they suspect of using drugs or alcohol while on the job.
  • Require the suspension of any physician who refuses testing or tests positive for drugs or alcohol pending investigation.
  • Require prescription oversight for Schedule II and Schedule III drugs by requiring physicians consult the Controlled Substance Utilization Review and Evaluation System (CURES) when prescribing such drugs to see if patient already has a prescription.
  • Increase and adjust for inflation the current $250,000 Medical Injury Compensation Reform Act (MICRA) cap on non-economic damages in medical negligence lawsuits.
In order to qualify for the 2014 general election, the initiative must garner 504,760 valid signatures by March 24, 2014.
California’s Existing Medical Malpractice Cap (MICRA) 
Signed by Gov. Jerry Brown during his first term as Governor, the 1975 MICRA law was created during a special legislative session to address increasing medical liability costs. Legislation was enacted and implemented via the following California law code sections:
California was the first in the nation to pass such a cap on non-economic medical malpractice damages. Since then, 31 other states have adopted similar caps. On the higher end of caps, Virginia has a gradually increasing cap that now stands at $2.15 million and adheres to a fee schedule. States like Oregon, Florida and Illinois cap medical malpractice non-economic damages between $500,000 and $1 million. However, most tend to be on the lower end of the cap limits with around 15 states having caps ranging from $250,000 to $400,000. Only 18 states currently do not have any limitations.
Five Things to Know About MICRA
The following is a breakdown of the five most important components of the California MICRA law:
  • Non-economic damages are capped at $250,000. Such claims include non-monetary losses like pain, suffering and emotional distress, and loss of enjoyment of life due to injury. However, MICRA does not place a cap on monetary based economic damages awarded by a court in a civil suit to someone found wrongfully injured. These claims include lost wages, potential earnings, present and future medical costs, and medical care support needs.   
  • Allows for disclosure of the amount of damages already paid to plaintiff. For example, if an insurer has already paid a significant amount of damages, the defendant or defendant’s attorney may reveal such information to the jury.
  • Places strict limitations on the attorney contingency fees in medical malpractice cases, or fees paid to an attorney when the result is favorable.
  • Statute of limitations on when claims can be filed and provides for damage installment payments.
  • Provides for binding arbitration to settle claims before going to court.
LAO’s Evaluation of Effects on State and Local Government
According to LAO’s evaluation, should the measure pass it is “likely to have a wide variety of fiscal effects on state and local governments.” Should malpractice costs go up, LAO anticipates that employers’ costs would also rise. Under an assumption that 2 percent of state and local government healthcare spending goes towards malpractice costs, LAO projects the malpractice portion of state, local government and provider costs could increase 10 percent; resulting in an overall 0.2 percent increase in healthcare spending. Due to “uncertainty surrounding these assumptions,” the LAO projects potential costs ranging from the “low tens of millions of dollars to over one hundred million dollars annually.”
The review found potential, however uncertain, cost increases to local governments associated with changes in available policies and health care services. These changes would result from providers and/or physicians reducing the amount of services they provide in order to avoid or lower their probability of being sued for malpractice. In this case, LAO believes that health care premium costs could increase. LAO estimates that if health care costs increase 0.3 percent, state and local governments could see cost increases anywhere from “relatively minor to the hundreds of millions of dollars annually.”
If the measure is approved, LAO predicts that there may be a slight change in local revenues as well. LAO claims that higher health care premiums may result in lower expendable consumer income and therefore lower taxable retail sales. Unlike previous cost increase projections, however, LAO estimates the change in local tax revenue “is not likely to be significant.”   
No Current League Position on MICRA or Pending Initiative
Currently the League does not have a position on the ballot measure or policies pertaining to MICRA. The League has a policy of reviewing, analyzing and presenting ballot measures to appropriate policy committees and the board of directors only after they have qualified for the ballot. Given its policies regarding local government costs, the League will continue to monitor the initiative’s progress and follow policy procedure should it qualify next March.

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