Caps on Medical Malpractice Awards Injure Patients

A little over two weeks after she underwent a heart and double lung transplant, 17-year-old Jesica Santillan passed away. With any major operation such as this, a number of complications might have contributed to Jesica’s death. This might be true even if her surgeons had performed perfectly. In this case, Jesica’s body rejected the transplanted organs because the practitioners at Duke University Hospital made a mistake. Jesica- blood type O- received organs from someone that was blood type A. This was the type od detail that the dozens of medical personnel working at the hospital should have checked but did not. After trying to cover up their mistake for 11 days, the hospital finally made a public appeal to find a new donor for Jessica. By the time Jesica received the second transplant, it was too late.

Laws that cap medical malpractice liability directly impact people like Jesica and her family. Such laws quantify pain, suffering, loss and injustice to an amount that may have no bearing to true compensation. Imagine that Jescia’s family was told that under state law, they could only receive a maximum of $250,000 in damages despite the hospital’s gross negligence. With an annual gross revenue of $2.539 billion, this judgment could hardly be viewed as holding the hospital “accountable.”

The issue of capping medical malpractice liability was recently before California citizens. Proposition 46, a multi-faceted initiative, would have raised the malpractice judgment cap from $250,000 to $1.1 million. It would also have mandated random drug and alcohol testing of doctors and require health care practitioners to check a state prescription drug history database before prescribing certain drugs. Opponents spent nearly $60 million to persuade voters to reject the measure. It worked. Two thirds of voters voted against Proposition 46.

History of Medical Malpractice Liability Caps

Proposition 46 was product of a long history of state measures to cap medical malpractice liability. States enacted damages caps in three waves in response to perceived crises in the cost and availability of medical liability insurance, in the mid-1970s, mid-1980s, and early 2000s, as well as occasional enactments during the lulls between the crises.

The malpractice crisis of the mid-1970s was provoked by both a spike in premiums and the lack of available malpractice insurance coverage. In response, beginning in 1975, several states enacted caps on noneconomic damages that applied only to malpractice cases. These caps were set at levels ranging from $200,000 to $500,000. Other jurisdictions capped total damages (both economic and noneconomic) in malpractice actions at levels ranging from $500,000 to $750,000. By the late 1970s, the malpractice insurance crisis had subsided, but by 1985 the general liability insurance market was in crisis, primarily because of the lack of affordability of several lines of insurance. By 1986, forty-one states had enacted tort reform measures, including provisions for caps on noneconomic damages that applied to personal injury actions and malpractice actions at levels ranging from $350,000 to $500,000. In addition, some states in the 1980s imposed caps on noneconomic damages specific to malpractice cases at various levels ranging from $225,000 to $1 million.

In the early 2000s, in response to another affordability crisis in the medical liability insurance market, the states enacted more malpractice reforms. Several states imposed caps on noneconomic damages applicable in medical malpractice cases at levels ranging from $250,000 to $650,000. Some of these statutes, however, apply only to particular types of malpractice cases or include significant exceptions. The cap proposals submitted to voters have met with mixed results. In 2003 the Nevada legislature adopted a cap of $350,000 on noneconomic damages in medical malpractice cases with several exceptions, and in a 2004 referendum the cap was retained but stripped of exceptions. In 2004, Oregon voters defeated a ballot measure that would have capped noneconomic damages at $500,000 in medical malpractice cases, and in 2005, Washington voters rejected a proposal to cap noneconomic damages in malpractice cases at $350,000.

State appellate courts have declared several damages caps statutes to be unconstitutional. Typically, the state courts have relied on various provisions of their state constitutions in declaring these statutes unconstitutional, including guarantees of equal protection, due process, right to a jury trial, and access to courts. In some of these cases, discussed later, the courts based their determination of unconstitutionality partly on the lack of sufficient proof that caps would reduce liability insurance premiums.

Caps Are Ineffective & Complicate Accountability

Ultimately, evidence and various studies indicate that caps on medical malpractice claims should be barred for two major reasons. First, imposing a medical malpractice cap diminishes accountability for doctors who perform complex surgeries with the potential to result in multi-million dollar malpractice suits. Lesley Ann Clement, an elder-abuse attorney in Sacramento, said that California’s $250,000 cap has “effectively eliminated any kind of accountability for the industry.” She said once medical experts, private investigators and court fees are accounted for, there’s “no way it’s workable for the client.”

Bob Pack, another the proponent of the measure, comes from a different point of view. The Troy and Alana Pack Patient Safety Act was named for his 10- and 7-year-old children, who were hit and killed by a drug-impaired motorist while on a walk with their mother 11 years ago. She survived, but lost their unborn twins following the crash. The driver, later convicted of second-degree murder, was obtaining pain and other drugs from six doctors all working in the same HMO, Pack said. Bob Pack said an investigation found doctors didn’t share a medical file and didn’t communicate with each other. Pack sat down with nine different attorneys who all told him about the $250,000 cap – “and I was dumbfounded.” “What, my children are limited to $250,000 value?” he remembered saying. Because the elderly, children or stay-at-home parents don’t have incomes that can be easily accounted for under economic damages, Pack has come to believe the cap arbitrarily discriminates against many people. “You want to pursue your rights to get judicial justice,” he said. “You want closure, and you want to feel like there’s some accountability that’s acknowledged.” Accountability cannot be truly achieved if a doctor’s liability is capped to a fraction of the actual measure of damages.

The second reason is that there is evidence to suggest that medical malpractice caps do not actually reduce payouts from insurers to victims of malpractice. Some studies counter-intuitively suggest that caps can actually increase loss payouts. Kathryn Zeiler hypothesized that damages caps could reduce the quality of care provided by physicians, thereby increasing the frequency of injuries caused by negligent medical care. Based on a game theoretic model, she concluded that caps could result in an increase in ex ante damages unless the cap were set so low that the total amount of damages recovered was below the litigation costs. Moreover, William M. Sage has pointed out that a cap on noneconomic damages had no effect on increases in awards for economic damages. C. M. Sharkey suggested that if noneconomic damages were capped, plaintiffs’ attorneys would try to prove more economic damages, resulting in higher jury awards.

William Gronfein and Eleanor Kinney have found that paid malpractice claims were actually higher in Indiana, which had a cap on total damages, than in Michigan and Ohio, which did not have such caps. Nonetheless, Indiana still had lower malpractice premiums than Michigan and Ohio had. Linda Babcock and Greg Pogarsky compared simulated negotiations with and without a cap of $250,000 and found that the mean settlement amount among those negotiating teams that were subject to the cap was approximately twice that of the mean settlement amount for those negotiating teams that were not subject to the cap. They concluded that caps encouraged settlements and lowered negotiating costs.

Finally, Joanne Doroshow, executive director of the Center for Justice and Democracy at New York Law School, states that caps in medical malpractice cases not only harm patients and their families, but also are ruining the health care system. Doroshow, a supporter of Proposition 46, but would abolish caps if given the choice, cites a study by researchers at Northwestern University which found no evidence that limiting medical malpractice lawsuits bends the health care cost curve, “except perhaps in the wrong direction.” She further states, “We have found that the legal system, and whether or not there are caps, [has] nothing to do with rates.”

“Do No Harm”

Some supporters of a cap on medical malpractice damage awards assert that if there is no measure to prevent extraordinarily high judgments, doctors in more risk-prone areas of medical practice will be forced to move their practice to another state with a cap or a cap with a lower maximum award than in their current state. While this point is valid in terms of expressing the importance of access to specialized medical care, it is unlikely that the threat of an occasional high verdict medical malpractice case will cause a mass exodus of doctors to other states. Like in many other areas of tort law, the increased costs of insurance premiums will simply be passed onto consumers. Norman K. Thurston notes that physicians should be concerned about their medical malpractice premiums only if they could not pass on the premiums to their patients in the form of higher prices. He used data on physician fees and malpractice premiums from the 1983–1985 Physicians’ Practice Costs and Income Survey and found that both surgeons and nonsurgeons were able to pass on premium increases to payers but that significantly more of these costs were passed on to surgical than to nonsurgical patients. More recently, M.V Pauly examined net income data from single-specialty group practices in 1994, 1996, and 2002. They found no evidence that higher malpractice premiums depressed physician incomes over this period, thereby suggesting that physicians had been able to pass on the premium increases to payers.

Most importantly, however, doctors take the Hippocratic Oath to provide medical services competently and diligently; if a doctor is put out of business by a large number of malpractice suits for his negligent care, he or she is most likely not deserving to be in the practice of medicine to begin with. We should not protect less-than competent doctors by imposing caps on judgments that will allow these doctors to continue in their practice without full accountability while those who are wronged by their acts of negligence are not made whole.