Malpractice Reform – California Style

In yesterday’s health care summit, malpractice reform was all the rage.  It’s especially frustrating, because I cannot, for the life of me, understand why some people feel that it’s the magic bullet for reducing health care costs.  My frustration was lessenned by Sen. Durbin’s pretty darn good summary of the problem with that line of thought:

Of course that didn’t stop the continued assertions that – REALLY – malpractice costs were the biggest and baddest problem in all of health care.  And then Senator McCain was kind enough to whip out the examples everyone knows and loves:

And the — and the point is that we don’t have to go very far. There’s two examples right now of medical malpractice reform that is working. One’s called California, the other called — called Texas.


Well, I tackled Texas a little while ago.  You can go reread that one if you like.  And today, Kevin Drum was kind enough to explain the problem with using California:

We passed a law called MICRA in 1975 that limited noneconomic damages in malpractice cases to $250,000. Adjusted for inflation, that cap is now about the equivalent of $60,000. Nonetheless, its impact on malpractice premiums has been negligible. The chart below comes from the Foundation for Taxpayer and Consumer Rights, which definitely has a dog in the fight since it was founded by insurance industry scourge Harvey Rosenfield, who championed Proposition 103, an initiative that implemented state approval of insurance rates. It was passed in 1988.

Still, the results are pretty clear. After 1975, malpractice premiums continued to zoom upward, rising at an even higher rate than in other states. But after 1988 (that’s the green line for easy reference), California premiums leveled off while rates in the rest of the country continued to rise. The reason for this is pretty simple: large damage awards are actually pretty rare and don’t make up a huge proportion of total malpractice payouts. Capping them changes the picture, but it doesn’t change it that much. But it does substantially cut into trial lawyer income.

So what you’re seeing is that capping awards in 1975 did little to decrease the premiums in California over the next 13 years.  Allowing government regulation of insurance premiums since 1988, on the other hand, has done quite a bit to keep rates from rising.  So which method are the Republicans clamoring for?  Can you guess?

I said it about Texas, so I’ll say it again to be complete:  There are probably some examples that can support the cause of tort reform, but California sure ain’t one of them.  Please stop using it.

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