Award Caps Are Being Debated

Physician's Money Digest, February15 2005, Volume 12, Issue 3

Wall Street Journal

Will capping pain and suffering awards on medicalmalpractice suits lower malpractice premiums? In a recentstory, a consumer groupoffered evidence that caps would not have mucheffect on soaring premiums.

The Foundation for Taxpayer and Consumer Rights,which has opposed capping malpractice awards,reported that malpractice insurer Medical Protective,Inc, the second-largest malpractice insurer in Texas,said that the caps recently enacted in Texas would onlylower malpractice payouts by about 1%. The groupfound the information in a request for a rate increasethat Medical Protective recently filed with the TexasDepartment of Insurance.

Out of Context?

Journal

In the article, the quoted a spokespersonfor Medical Protective, who said that the group hadtaken statements about savings from caps on non-economicawards out of context and that any claim thatthe caps would have no effect "ignores the realitiesof the litigation arena."

Journal

In a follow-up letter to the , the lead attorneyfor Medical Protective noted that the actuarialdata submitted with the rate increase request indicateda need for a 25% boost, but that figure wasscaled back to 19% in view of the award caps. TheTexas Medical Liability Trust, the largest malpracticeinsurer in the state, has already cut premiums by 17%after the cap law passed.

Journal

Another letter to the indicated that it mightbe some time before the full effects of the Texas capsare felt. The letter writer noted that Texas courthouseswere inundated with new lawsuits filed by attorneystrying to get their lawsuits in under the wire in theweeks before the new law took effect.

Working Model

The consumer advocate group's argument may havealso ignored mounting evidence that California's modelmalpractice law, which caps jury awards for non-economicdamages at $250,000, effectively reduces payoutson claims, according to a recent study by the RandCorporation's Institute of Civil Justice. The Rand studyshows that payments to patients were reduced by 15%,while fees paid to plaintiff attorneys dropped by 60%.

Because the caps are applied by the trial judgeafter the jury has decided on an award, the Randstudy was able to put a value on the differencebetween what the jury intended to give the plaintiffand what the actual award was under the cap system.Under the original verdicts, the juries wouldhave awarded victorious plaintiffs $421 million. Afterthe legal caps were applied, that total was pared to$295 million.