Calblog

Bush's Medical Liability Reform

Bush proposed reforms to the medical liability system that would limit non-economic damages (generally known as "pain and suffering" damages) to $250,000. Calpundit did a post that pointed out why $250,00 is not enough. We entered into an e-mail discussion which led me on a hunt for the underlying data.

I suspected that the $250,000 limit was plucked from California's law, which limited non-economic damages to $250,000. That law is embodied in California Civil Code section 3333.2 (California statutes are available here.) That suspicion was borne out by visiting the HHS study that supports Bush's position and reading some of the information cited in the footnotes. The reference to California's law is ubiquitous and almost every other state that has made some effort at reform has picked the $250,000 number. (Refer to the section of this document entitled noneconomic damages.)

So here's where we get to the part where we show that Calpundit is right about $250,000 not being a lot of money. California's law was passed in 1975 and there's been no adjustment for inflation. None of the states who have since limited noneconomic damages since then have picked a number lower than $250,000 and several have picked higher numbers. Two have instituted reforms which addressed the concerns raised by Calpundit. Alaska calculates the limit in part by multiplying a dollar amount by the number of the years in the life expectancy of the plaintiff and Wisconsin indexes the limit for inflation. It seems to me the ideal statute would combine those concepts.

Here's a concern that became apparent when I did the research. Roughly half the states in which a limit was passed by the legislature saw that limit declared unconstitutional by the courts in that state. How does the President plan to tackle that hurdle?

The HHS study had a fair amount of data supporting the proposition that a limit on noneconomic damages lowers the rate of premium increases but I must admit it raised some questions. First, take a look at the chart on page 16. In states with caps of $250,000 or less the average rate increase was 15%. In states with $350,000 or less the average was 12%. Why would a higher cap result in a lower increase? The answer appears to be that California and Montana have higher rate increases and they skew the $250,000 and under numbers higher. Clearly there's some other factor at play in CA and MT than the cap. CA and MT are remarkably dissimilar so I can't guess at what it is. Also suspicious was the comparison to average rate increases in "select" states without caps. That average was 44% but who selected these states and would a review of all states show a different result? After all there are only 50 states. How long would it have taken to average them all out? Finally, before I leave this chart, my 7th grade math teacher told me not to average percentages. A 5% increase among ten people and a 15% increase among 1000 people does not average out to a 10% increase across the board.

More compelling was the comparison of premiums for malpractice insurance between CA from 75 to today compared with the rest of the country. CA premiums went up 167% and the rest of the country increased 505%. That chart is on page 19.

Now, having read the HHS study, I am convinced that lowering the cap does lower premiums. However, I was unconvinced that this was objective and not just an effort by insurance companies to force states into limiting awards by raising premiums and driving doctors out of the state. The PIAA had some interesting information on claim payout rates rising over the years in their remarks to Congress but it was not sorted by state.

The HHS study does make the link between no cap leads to higher premiums leads to doctors leaving the state. I am left to wonder, though, if there are different studies showing different conclusions. What feeds my insecurity about the conclusion is the anecdotal evidence about high premiums and doctors leaving practice here in the "model" state, California.

Posted by Justene Adamec at January 19, 2003 09:34 PM