California Malpractice Law Works

Physician's Money Digest, August15 2004, Volume 11, Issue 15

As the US Congress and several stateswrestle with laws that would capmedical malpractice awards, which nowaverage $1 million, evidence is mountingthat California's 1975 model law, whichlimits jury awards for "noneconomic"damages such as pain and suffering,effectively reduces payouts on claims.And the reductions apparently come atthe expense of the trial lawyers morethan the patients, according to a recentstudy by the Rand Corporation's Instituteof Civil Justice (www.rand.org). The studyshows that payments to patients werereduced by 15%, while fees paid to plaintiffattorneys dropped by 60%.

Because the caps are applied by thetrial judge after the jury has decided onan award, the Rand study was able to puta value on the difference between whatthe jury intended to give the plaintiff andwhat the actual award was under the capsystem. Under the original verdicts, thejuries would have awarded victoriousmalpractice plaintiffs $421 million. Afterthe legal caps were applied, that totalwas pared to $295 million. Attorneys'fees, which would have been $140 millionif the jury awards had stooduncapped, got hit twice. Legal costs werecut to $56 million, reduced not onlybecause of the malpractice cap law, butalso under California's sliding scale limitson contingency fees. These sliding scalelimits peg fees as low as 15% of anyrecovery amount over $600,000.

The median cut in non-economicawards was pegged at $366,000, but forsome catastrophic cases, the total reductionwas much larger. The median reductionfor cases involving brain damage, forexample, was close to $1.24 million; forparalysis, the median reduction wasabout $1.7 million.