This section provides a brief history of the California’s Medical Injury Compensation Reform Act (MICRA) and the medical liability crisis that led to its enactment, looks at the situation in other states without MICRA-like reforms, and shows how MICRA for 36 years has kept malpractice insurance rates affordable for California physicians and has protected access to care.
MICRA: A brief history
Under California’s Medical Injury Compensation Reform Act of 1975 (MICRA), injured patients are fairly compensated, medical liability rates are kept in check, and physicians and clinics can remain in practice treating patients. MICRA has no limits on the economic damages that can be recovered by injured patients (medical costs and lost wages). Injured patients also can sue for unlimited punitive damages and recover up to $250,000 in non-economic damages (pain and suffering). In addition, MICRA includes a sliding pay scale, which ensures that more money goes to patients, not lawyers. The $250,000 cap on non-economic damages is an effective way of limiting meritless lawsuits and keeping health care costs lower, but has been targeted by the trial lawyers because it restricts the amount of money they can collect in damage awards. Increasing MICRA’s cap on speculative non-economic damages will have a dramatic, costly and negative impact on the cost of health care in California, including medical liability rates.
What are MICRA’s key provisions?
MICRA allows patients with justifiable medical malpractice claims to receive the following forms of compensation:
- Unlimited economic damages for past and future medical costs.
- Unlimited damages for lost wages, lifetime earning potential or any other economic losses.
- Unlimited punitive damages.
- Up to $250,000 for non-economic damages, often referred to as “pain and suffering.” Unlike economic damages, non-economic damages are inherently subjective and often difficult to verify and measure. MICRA’s $250,000 ceiling on non-economic damages has proved effective in reducing and stabilizing medical liability insurance costs, which in turn has limited the rate of growth in health care costs and increased access to health care for all Californians.
What led to MICRA’s enactment?
In the mid-1970s, California physicians were embroiled in a malpractice insurance crisis. Driven by frivolous lawsuits and excessive jury awards, medical liability insurers levied massive insurance premium increases and canceled insurance policies for many physicians across the state.
“In 1974 we were served notice they were going to increase our premiums 250 percent,” said Brad P. Cohn, M.D., who was president of the San Francisco Medical Society at the height of the malpractice crisis. “The profession became highly exercised about what was going on.”1
The situation worsened in early 1975 when malpractice carriers announced that premiums for some physicians would increase by as much as 400 percent, effective May 1. Many medical physicians had four choices, none of them acceptable: Raise fees and make medical care unaffordable for many patients, drop their professional liability insurance coverage, leave the state, or quit practicing medicine.
Newspaper headlines reflected the extent of the problem.
“Insurance Rates Peril Medical Care,” San Jose Mercury News, 2/23/75
Premiums have reached the point that some physicians are leaving California or retiring from active practice and some other physicians in high-risk categories are unable to obtain liability insurance.
“Doctors Face Insurance Crisis-May Affect 8,000 in Southland,” Los Angeles Times, 2/22/75
Eight thousand physicians in seven Southern California counties face loss of their malpractice insurance coverage... The seven counties are Los Angeles, Orange, San Bernardino, Ventura, Santa Barbara, Kern and San Luis Obispo. The 8,000 doctors make up the bulk of medical practitioners in those counties.
“New Bay Area Crisis in Medical Care: Doctors Might Halt Practice,” San Francisco Chronicle, 1/31/75
A major health care crisis loomed yesterday with the cancellation of malpractice insurance, effective May 1, for most of the doctors in eight Northern California counties. “As May arrives, it is accompanied, for some 4,000 Northern California physicians, by staggering increases in medical insurance costs…,” announced a May 1, 1975, San Francisco Chronicle editorial.
As their premiums more than tripled, anesthesiologists and surgeons in the Bay Area and other parts of Northern California began a walkout, refusing to handle any patients except those in imminent danger of death. Some hospitals agreed to pay premiums for anesthesiologists and some physicians agreed to work emergency cases without pay. Throughout the winter and spring of 1975, the crisis continued to escalate as the May 1 rate increase approached. The Legislature worked on stop-gap bills that would allow formation of joint underwriting associations among the state’s private insurance companies to offer malpractice coverage, but no major legislation addressing the medical liability issue had cleared the Legislature by May 1. There was general alarm throughout California’s medical profession.
Seeking a stronger focus on the issue, the California Medical Association (CMA) channeled physician outrage into a massive grassroots campaign that mobilized thousands of physicians, patients, and other medical professionals to call and write their legislators to demand that the state act to cut the cost of malpractice insurance.
On May 13, 1975, CMA led more than 800 physicians, nurses, lab technicians and hospital personnel in a Capitol rally calling on Gov. Edmund G. “Jerry” Brown, Jr., to convene a special session of the Legislature to deal with the crisis.
Three days later, on May 16, Brown yielded, issuing a proclamation for a special session that began on May 19. Negotiations and legislative hearings that involved CMA and other health care providers, the insurance industry and trial lawyers continued until September 11, when the Legislature passed AB 1XX, a collection of statutes that is now known as the Malpractice Insurance Compensation Reform Act (MICRA).
Governor Brown signed the CMA-supported bill on September 23, 1975, and MICRA today remains the model for national medical liability tort reform.
MICRA’s constitutionality upheld
Passage of MICRA was only the first step. Lawsuits challenging the constitutionality of MICRA weaved their way through the judicial system until 1985, when the California Supreme Court upheld its constitutionality with the following comments:
[I]n enacting MICRA, the Legislature was acting in a situation in which it had found that the rising cost of medical malpractice insurance was posing serious problems for the health care system in California, threatening to curtail the availability of medical care in some parts of the state and creating the very real possibility that many doctors would practice without insurance, leaving patients who might be injured by such doctors with the prospect of uncollectible judgments. In attempting to reduce the cost of medical malpractice insurance in MICRA, the Legislature enacted a variety of provisions affecting doctors, insurance companies and malpractice plaintiffs. [The limitation on recoverable non-economic damages] is, of course, one of the provisions which made changes in existing tort rules in an attempt to reduce the cost of medical malpractice litigation, and thereby restrain the increase in medical malpractice insurance premiums. It appears obvious that this section – by placing a ceiling of $250,000 on the recovery of noneconomic damages – is rationally related to the objective of reducing the costs of malpractice defendants and their insurers.2
The California Supreme Court decision was appealed to the U.S. Supreme Court, which, on October 15, 1985, declined to review the case, “for want of a substantial federal question.” Thus, 10 years after passage, the question of MICRA’s constitutionality finally was settled law.