Constitutionality of MICRA damage caps argued in Court of Appeal
Thursday, August 18, 2011
On August 16 in Fresno, a three-judge panel of California’s Fifth District Court of Appeal heard arguments why the state’s MICRA (Medical Injury Compensation Reform Act of 1975) law limiting compensation for medical negligence should be overturned.
The case before the court was Stinnett v. Tam, in which a jury found health care providers liable for the death of a young man and awarded his widow, Holly Stinnett, $6 million as compensation for loss of her spouse. Under MICRA, the jury’s award was reduced to $250,000, the maximum that can be awarded under the law for non-economic damages (such as loss of a spouse, loss of fertility, loss of mobility or severe disfigurement).
“Our argument was twofold,” said attorney Robert Peck of the Center for Constitutional Litigation in Washington, D.C., one of two attorneys who argued the case at the Court of Appeal on behalf of the plaintiff. “First, there is no longer a crisis affecting the medical malpractice insurance industry, as was alleged when the law was passed in 1975. The lack of a crisis no longer justifies a $250,000 cap on the most catastrophically injured individuals. And second, the right to jury trial means you get the benefit of the jury’s determination of damages. Any interference with that violates this inviolable right.”
In the trial court, the plaintiffs submitted an affidavit from former Missouri insurance commissioner Jay Angoff showing how California’s medical malpractice insurance industry is thriving, with high profits, record surpluses and a competitive marketplace. The trial court judge opined that the matter is one for the legislature to decide, not the courts.
But Peck argued that MICRA violates the equal protection clause of the state constitution by dividing a class of plaintiffs—people injured by medical negligence—and then discriminating against those who are catastrophically injured and thus do not get the full benefit awarded by a jury. Patients who suffer lesser injuries are not affected by the cap. Peck said the justification for the discrimination in 1975 was the malpractice “crisis,” a justification that was later upheld by the California Supreme Court, but he argued that if the crisis no longer exists, the discrimination cannot be allowed to continue.
“Equal protection means you have to have a rational basis for not treating groups equally,” Peck told the court. “We submit the rational basis for MICRA has evaporated.”
“Now, 36 years after MICRA was passed, times have changed,” said attorney Daniel U. Smith, who also argued the plaintiffs’ case before the Court of Appeal. “The conditions in the insurance market and in health care are completely different than they were in 1975. There is no crisis. Medical malpractice insurers are profitable. Mr. Angoff’s affidavit showed that by every measure their profits exceed the national average, and we showed that health care is not at all at risk. Doctors have their choice of malpractice insurance carriers, new carriers are moving into California to take advantage of this market, and premiums are declining. On that basis we suggested to the court that there is no rational basis for continuing discrimination against the most severely injured plaintiffs.”
“We’re not here to litigate whether there was a true crisis in the mid-1970s,” said Stewart Tabak, who represented Ms. Stinnett at trial. “But there is no evidence whatsoever—none—to suggest a crisis currently exists. And if there’s no crisis, there’s no rational basis to claim that MICRA has any life left in it. We have Proposition 103 [enacted in 1988] in place now to regulate malpractice insurance premiums and ensure insurance companies get a fair return and health care providers are not overcharged.”
Smith made the analogy during his argument before the court that MICRA is like a cast put on a broken leg. Just as a cast is used to help heal an injury, MICRA was used to help treat what was thought to be an insurance crisis. But once the leg heals, there’s no rational basis to keep the cast on, and Smith argued now that the crisis is over, there is no reason to keep MICRA.
The defense was represented at the Court of Appeal by Kenneth Pedroza, on behalf of the health care providers involved; Todd Chayett, on behalf of the California Medical Association, California Hospital Association and American Medical Association, among others; and Fred Hiestand, on behalf of the Civil Justice Association of California, the big-business-backed group that works to reduce citizen access to the courts.
“The arguments that were made by the other side were, one, this is really something for the legislature to do and no court has the authority; the court seemed to look down on that argument pretty much,” Peck said. “The second was that because of the way the evidence came in at trial on the current lack of a crisis, in the affidavit from Mr. Angoff that was submitted late in the process, maybe it’s necessary to have a full-fledged evidentiary hearing and do it differently.”
Pedroza said during his argument in court, “They [plaintiffs] argue it’s Proposition 103 that has kept malpractice insurance rates reasonable. We say, no, it’s MICRA that has kept rates reasonable….I don’t think this is an appropriate function of the court to determine who’s keeping rates stable.”
He went on to add, “Proposition 103 does nothing to control premium increases based on claims, it just guarantees insurers a fair rate of return. It won’t help doctors with premium increases after a $7 million case.”
Pedroza also said the analysis in the Angoff brief claiming medical malpractice insurers paid out too low a percentage of their premiums in claims did not take into account the cost of defending the cases.
“There are going to be good years and bad years [for insurance companies based on the amount paid in claims],” he told the court. “The point of MICRA is to provide stability, so companies can continue providing insurance and doctors can continue to practice….There continues to be a rational basis for MICRA.”
Chayett countered Smith’s cast analogy with an analogy of his own, saying enacting MICRA in response to an insurance crisis was more like a dam built in response to a flood. Remove the dam, he said, and the flood will come back. “We think we would revert to a medical malpractice crisis [without MICRA],” Chayett told the court. “We think there would be problems retaining physicians.”
Peck later referred to a California Medical Association report that cited the reason for doctors leaving the state as the penetration of managed care and noted there was nothing in that report about medical malpractice premiums.
Chayett pointed out the state Supreme Court’s 1985 ruling in Fein v. Permanent Medical Group that there was an insurance crisis that created a rational basis for MICRA. “Are we stuck with that forever?” asked Justice Dennis Cornell. “On that basis there would still be Japanese-Americans interned. Aren’t there constitutional issues that can be investigated by a trial court?”
The question was aimed at defense arguments that only the legislature has the power to change MICRA since it is a statute. Peck later pointed out that when the state of Texas implemented caps on damage awards to malpractice victims, it did so through an amendment to the state constitution granting the legislature the power to enact a cap.
In his final remarks, Peck said, “The [malpractice insurance] crisis doesn’t exist, therefore the rational basis [for MICRA] doesn’t exist. We think the court has full authority to declare MICRA unconstitutional based on changed circumstances.”
In addition to Justices Cornell, Justices Betty Dawson and Gene Gomes heard the case for the Court of Appeal and must issue a decision by mid-November. The justices, especially Justices Cornell and Dawson, extensively questioned all the attorneys who presented, and at the conclusion Justice Cornell said the case was “very well argued.” Cornell had started the proceedings by saying it is “an amazingly interesting case.”
Here is a video report on this story: