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Measuring MICRA How the Medical Injury Compensation Reform Act of 1975 stands up to nationwide trends

Measuring MICRA How the Medical Injury Compensation Reform Act of 1975 stands up to nationwide trends. Richard Lord, FCAS, MAAA CAS Annual Meeting Nov. 12, 2007. Purpose of presentation. Motivation for law Overview of MICRA Law Where we are today Challenges Comparison

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Measuring MICRA How the Medical Injury Compensation Reform Act of 1975 stands up to nationwide trends

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  1. Measuring MICRA How the Medical Injury Compensation Reform Act of 1975 stands up to nationwide trends • Richard Lord, FCAS, MAAACAS Annual MeetingNov. 12, 2007

  2. Purpose of presentation • Motivation for law • Overview of MICRA Law • Where we are today • Challenges • Comparison • Malpractice insurance costs in CA vs other states

  3. History: the need for tort reform in California

  4. History: the need for tort reform in California • Rapid increase in the number and size of lawsuits between 1960 and 1974 • Premiums rose an average of 14% per year over this period • Market failure in 1975 • Two largest insurers in the state (Argonaut and Travelers) increase premiums 300% + • Lack of availability of medical group coverage • Doctors go on strike (similar to events in Nevada, West Virginia and New Jersey in recent years)

  5. History: the need for tort reform in California • 1975: Legislature passes MICRA in response to market problems • Skyrocketing Premiums • Insurers leaving state • Doctors leaving practice/state • Medically unwarranted, but legally defensible, procedures (i.e., unnecessary Cesarean sections)

  6. Overview of MICRA law

  7. Overview of MICRA law • Major provisions: • $250,000 cap on non-economic damages (i.e., pain and suffering) • Does not impact economic damages (e.g., medical costs or lost wages) or punitive damages (fewer than 1% of CA med mal awards include punitive damages) • Sliding-scale limits on attorney contingency fees • According to the California Supreme Court’s interpretation of the legislature, this is done in part to reduce the number of marginal claims and help ease the cap’s burden • Other Provisions: • Periodic payments for future damages in excess of $50,000 • Collateral source rule, i.e., allows evidence of other recoveries such as disability or health insurance

  8. History: MICRA becomes law

  9. History: MICRA becomes law • Enacted by legislature in 1975 • Upheld by Supreme Court in 1984 “As we have frequently recounted, the Legislature enacted MICRA in response to a medical malpractice insurance “crisis,” which it perceived threatened the quality of the state’s health care. . . . The continuing availability of adequate medical care depends directly on the availability of adequate insurance coverage, which in turn operates as a function of costs associated with medical malpractice litigation. . . . Accordingly, MICRA includes a variety of provisions all of which are calculated to reduce the cost of insurance by limiting the amount and timing of recovery in cases of professional negligence. . . . MICRA thus reflects a strong public policy to contain the costs of malpractice insurance by controlling or redistributing liability for damages, thereby maximizing the availability of medical services to meet the state’s health care needs. • Until then, the limit had not been tested. • Defendants were willing to settle for higher amounts rather than risk higher awards in the event MICRA was reversed

  10. Rand Study • Studied verdicts from 1995 to 1999 • Jury verdicts of $421 million reduced to $295 million by MICRA (45% of cases triggered cap) • Settlements generally do not distinguish between economic and non-economic damages, but we presume the affect of the cap is proportional since settlements are based on potential verdicts • Had the cap been inflation indexed, reduction would be 20% rather than 30% • Plaintiff attorney fees dropped 60% • About half of this amount due to the impact of a lower award on the standard contingency fee, and half due to the impact of the sliding scale itself

  11. MICRA: Where are we today?

  12. MICRA: Where are we today? • Challenges to law • Elder abuse allegation circumvents MICRA • Neglect—covered by MICRA • Professional negligence—Not covered by MICRA • Delaney v. Baker [Does MICRA apply to cases of elder abuse where reckless or fraudulent behavior is proved? State Supreme Court says no in Delaney v. Baker…plaintiff lawyers trying to use this as precedent to prove MICRA covers even non-reckless elder abuse (i.e., non-willful] • Possible Federal tort reform • Federal backstop could make MICRA harder to justify and would likely diminish protection

  13. Tort reform elsewhere: Where are we today?

  14. Tort reform elsewhere: Where are we today? • Some states seen measurable improvement in tort environment • Some states rolling back protections • Court battles over meaning of laws • Popular wedge issue in election year

  15. States without Medical Liability Reform suffer

  16. Questions?

  17. Contact info Richard B. Lord FCAS, MAAA Principal & Consulting Actuary Milliman, Inc. Direct +1 626.584.0243 Fax +1 626.793.2808 Main/Asst. +1 626.577.1144 ext. 107

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