Medical-malpractice tort reform trouble spots. (Property/Casualty).

After California passed the Medical Injury Compensation Reform Act in 1975, its physicians experienced a drop and stabilization of medical-liability insurance rates, along with a reduction of $1 million-plus verdicts. Experts hold MICRA as the standard of medical-liability tort reform, pointing to its $250,000 cap on noneconomic damages for mental suffering or pain and suffering as the linchpin of its effectiveness. The American Medical Association said such a cap is necessary because median professional-liability jury awards increased 43% between 1999 and 2000, causing medical-liability insurers to raise rates and physicians to close practices. The following overview of five tort-reform trouble spots for medical-liability insurance shows how past, present and pending legislation compares to MICRA's standard. Legislation is reported as of late October 2002.

The MICRA Standard

Highlights of the California Tort Reform

Noneconomic damages: A claim against a health-care provider for medical negligence is capped at $250,000 per incident.

Statute of Limitations: A claim for alleged medical negligence must be brought within one year of discovery of its injury and negligent cause, or within three years from injury.

Periodic Payments: Defendants may choose to pay a claimant's future economic damages, such as lost earnings or rehabilitation costs, if more than $50,000, in periodic amounts.

Limits on Attorney Contingency Fees: In an action against a healthcare provider for professional negligence, an attorney's contingency fee is limited to 40% of the first $50,000 recovered; 33% of the next $50,000; 25% of the next $500,000, and 15% of any amount exceeding $600,000.

Nevada

Problem

High medical-liability premiums for physicians. The American Medical Association reports neurosurgeons in the Las Vegas area pay as much as $139,000 a year for coverage. In July, a trauma center in Las Vegas closed temporarily because physicians resigned from the facility due to problems with medical-liability lawsuits.

Legislation Passed or Pending

AB1 signed by governor in August 2002. Shortens the statute of limitations for filing a medical-liability case; allows a judge to decide if periodic payments are allowed and adopts a several-liability standard for cases when noneconomic damages are considered.

Variations From MICRA

Caps noneconomic damages at $350,000 and allows the cap to be waived if the patient can prove there was gross negligence.

Pennsylvania

Problem

Physicians closing practices statewide due to escalating medical-liability insurance fees. Phico, one of the state's largest writers of medical-liability coverage, is in liquidation, and Miix Group and Princeton Insurance have ceased writing new business in the state.

Legislation Passed or Pending

Medical-Liability Reform Bill signed into law in March 2002 by governor. Allows periodic payouts of judgment; requires claims to be filed within seven years of injury; punitive damages capped at two times actual damages, and medical-liability lawsuits may only be tried in county where the alleged malpractice took place.

Variations From MICRA

No pain and suffering cap in place; joint and several liability intact. Joint and several liability is a rule holding each defendant responsible for the entire amount of the plaintiff's damages.

New Jersey

Problem

Medical-liability premiums rising 20% to 25% annually. Medical-liability insurers lowering limits and some only offering claims-made policies. Medical Society of New Jersey predicts 3,000 physicians in state will lose coverage due to insurers cherry-picking profitable business.

Legislation Passed or Pending

In addition to 20 medical-liability reform bills introduced earlier in 2002, S1850 and S1902 also were presented in October.

Variations From MICRA

S1850 and S1902 state that pain and suffering would be capped at $250,000, but depending on extent of injury, can go up to $500,000.

West Virginia

Problem

Physicians are ceasing to practice in the state due to rising medical-liability premiums, and trauma centers are closing.

Legislation Passed or Pending

In December 2001, a bill guaranteeing all health-care providers in the state access to medical-liability insurance was signed by the governor.

Variations From MICRA

Additional legislation allows $1 million cap on noneconomic damages; doesn't permit periodic payouts of settlement payment.

Mississippi

Problem

State suffering from a chronic shortage of doctors and gaining a reputation for big payouts in jury awards.

Legislation Passed or Pending

HB 2 passed by state legislature and signed by governor in October 2002. Limits venue in malpractice actions to the county where the cause occurred. This is an important change since three Mississippi counties are notorious for being plaintiff-friendly jurisdictions.

Variations From MICRA

Caps noneconomic damages at $500,000 through 2011; establishes a 30% at-fault requirement for joint and several liability for economic damages. This means a defendant who is one of multiple defendants must be found to be more than 30% at fault to be held responsible for up to 50% of the jury award.

RELATED ARTICLE: Medical-Malpractice Reform: On the Way to Recovery

Jury awards in the hundreds of millions of dollars, trauma centers shutting their doors and physicians closing practices have insurers calling for a diagnosis of tort reform to cure the ills in medical-liability coverage.

Although physicians in high-risk practices, such as orthopedics and obstetrics, face a one-in-five chance of dealing with a medical-liability claim, the really bad news is the explosion in the cost of claims, said Dr. Richard Anderson, chairman of medical-liability insurer The Doctors Co. "We have accepted indefensible and inexcusable levels of frequency as normal. We've entered an environment of seeing $100 million verdicts for an individual patient," Dr. Anderson said.

Because medical-liability lawsuits have such a dramatic ripple effect on the public, they hold the No. 1 ticket in the line for tort reform. "When doctors disappear, people notice it very quickly," said Dave Golden, director of commercial lines for the National Association of Independent Insurers. Over the past year, huge increases in medical-liability insurance premiums caused an exodus of physicians from West Virginia, Pennsylvania and Mississippi and the temporary closing of the Las Vegas University Medical Center Trauma Center.

These events forced the hand of state legislatures to pass tort-reform laws to bring physicians back to the job, to quell an anxious public and to help balance escalating medical-liability insurance premiums.

Dr. Anderson points to the need for states with medical-liability problems to pass tort reform that imitates California's Medical Injury Compensation Reform Act of 1975, which caps noneconomic damages at $250,000. "In California we've had 27 years of experience with tort reform, and medical-liability insurance rates are only going up 5% to 7% annually today, and less than 3% per year historically," Dr. Anderson said. But as trouble spots such as Mississippi and Pennsylvania pass tort-reform laws, they aren't matching the MICRA standard and the constitutionality of the laws is being challenged as soon as they are passed. For example, the cap on noneconomic damages is considered to be the most effective part of any tort reform as it keeps jury awards from reaching unreasonable 1evels, but recent reforms haven't followed California's lead in this respect.

Also, over the years, 21 states have found medical-liability tort-reform laws unconstitutional, said Ann W. Spragens, senior vice president and general counsel for the Alliance of American Insurers.

In Florida, for instance, the state Supreme Court is considering whether the state's medical-liability reform act is unconstitutional because of the single subject rule, said Victor Schwartz, general counsel to the American Tort Reform Association. The rule allows only one subject to be addressed at any time in a law. The rule, developed to prevent unrelated and unpopular rules being inserted into a law, allows for very elastic or subjective interpretation, so it is a favorite way for tort-reform opponents to overturn laws, Schwartz said. In the meantime, insurers are caught in a Catch-22 situation once medical-liability reforms are passed, not wanting to lower rates until the laws withstand the constitutional challenges. "Every year the trial bar launches assaults on tort reform, so defending it is as much of a battle as getting it in the first place," said Dr. Anderson.