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New Agreement on MICRA Averts Ballot Box Uncertainty in November

May 6, 2022

After decades of debate, the reform of medical malpractice claims in California is finally coming to fruition. Legislators and interested parties on both sides of the MICRA debate have reached a compromise and agreed to a deal that will avert a planned ballot measure in the upcoming election.

The Current Law

The Medical Injury Compensation Reform Act (MICRA) was passed in 1975 by the California Legislature. Its purpose was to lower medical malpractice liability insurance premiums for healthcare providers by limiting their exposure to damages in tort claims. It sets limits on awards in medical malpractice cases and aims to balance compensation for injured patients while still protecting the healthcare industry from excessive awards. Currently, the law allows for a single payment of $250,000 for noneconomic losses including pain, suffering, inconvenience, physical impairment, disfigurement, and other nonpecuniary damages regardless of how many healthcare providers are held responsible by the court.

Patients’ attorneys have long pursued an increase in recovery limits, arguing that injured parties and their families are not justly compensated in some cases. On the opposing end, healthcare groups assert that a raise in the caps would result in skyrocketing malpractice insurance premiums, putting some medical professionals out of business and raising healthcare costs for all consumers.

Following years of heated debate on both sides, this new agreement would maintain the overall structure of MICRA, while also removing the $250,000 limit on noneconomic damages and increasing the caps based on whether the claim involves wrongful death. The agreement and the bill to follow specify that the caps would increase by $40,000 each January 1st for the first ten years and then starting on January 1, 2034, would increase by a 2% inflation adjustment each year. This bill would also increase the minimum amount of the judgment required to request periodic payments to $250,000. Currently the total only needs to be $50,000 before periodic payments may be requested.

This agreement stops the potential passage of the Fairness for Injured Patients Act, which would have proven a hot ticket for debate on the November ballot. Medical professionals are relieved with this development because the ballot measure called for a judge to have discretion in raising the current cap of $250,000 to any amount they felt appropriate if the injured party suffered death or a catastrophic injury.

Details on the New Limits

The framework will go into effect on January 1, 2023 and creates three separate categories of caps, which will be applied case-by-case basis. These new categories include:
• One cap for healthcare providers (regardless of the number of providers or causes of action)
• One cap for healthcare institutions (regardless of the number of providers or causes of action)
• One cap for unaffiliated health care institutions or providers at an institution that commits a separate and independent negligent act and the negligent act or omission occur or relate to medical transport.

The amounts of the increased limits on recovery will be assessed as follows:

• Cases not involving a claim of wrongful death will have a $350,000 cap, with an incremental increase over the next ten years to $750,000 and a 2% yearly adjustment for inflation thereafter.
• Wrongful death claims will have a limit of $500,000 with an incremental increase over the next ten years to $1,000,000 and a 2% yearly adjustment for inflation thereafter.

These caps apply regardless of the number of providers or institutions within each category and a defendant may only be held liable under one category per case. Other MICRA guardrails will also continue under the new agreement, such as a defendant’s ability to pay awards in payments over time. It will also continue to limit the amount of contingency fees that plaintiff attorneys may collect.

It is important to note that even with the limits in place, an injured patient could be eligible for two separate payments for noneconomic damages at the increased amount, with one set of damages for a doctor’s negligence and another for the hospital’s negligence. In limited cases, a third payment may also be allowed for pain and suffering involving a separate, unaffiliated provider.

Benevolent Statements

The revised MICRA legislation will include expanded evidentiary protections and discovery for pre-litigation statements of benevolence, sympathy, regret, or fault by a doctor, health care provider, or other involved party. Current law “makes statements, or benevolent gestures expressing sympathy or a general sense of benevolence relating to the pain, suffering, or death of a person involved in an accident and made to that person, or to the family of that person” inadmissible as evidence of liability in a civil action.

AB-35 extends this protection and specifies that “statements. writings, or benevolent gestures expressing sympathy, regret, a general sense of benevolence, or suggesting, reflecting, or accepting fault relating to the pain, suffering, or death of a person, or to an adverse patient safety event or unexpected health care outcome” will remain confidential, privileged and protected. They will not be subject to subpoena, discovery, or disclosure, and will not be used or admitted into evidence.

Contingency Fees

Under the new law limits on plaintiff attorney contingency fees shall remain in place. Attorneys may not contract for, or collect a contingency fee from a plaintiff seeking damages in connection with an action for injury or damage against a health care provider based upon medical malpractice in excess of the following limits:

• 25% of the dollar amount recovered if the recovery is pursuant to settlement agreement and release of all claims executed by all parties thereto prior to a civil complaint or demand for arbitration being filed.
• 33% of the dollar amount recovered if the recovery is pursuant to settlement, arbitration, or judgment after a civil complaint or demand for arbitration is filed.
• If an action is tried in a civil court or arbitrated, the attorney representing the plaintiff may file a motion with the court or arbitrator for a contingency fee in excess of the percentage stated above and decided in the court’s discretion based on evidence establishing good cause for the higher contingency fee.

The limits apply whether recovery is obtained through settlement, arbitration, or judgment and regardless of whether the person who recovers is an adult, infant, or a person of unsound mind.

What’s Next

California law allows proponents to withdraw a measure form the ballot if an alternate agreement is reached by June 30th. With this new agreement, both sides are collaborating with the Governor’s office as well as the California Legislature to move this agreement forward finalized legislation as soon as possible. Assuming approval by the Legislature and signage by the Governor, the new provision of MICRA will go into effect January 1, 2023 as agreed upon by the parties.

How Does This Change The Landscape

The predominant likely effect of this new proposed bill will (1) increase medical malpractice lawsuits; (2) reduce the percentage of settlements in medical malpractice lawsuits; and (3) increase insurance premiums for medical malpractice insurance.

Both the raising of the noneconomic damages caps, and the creation multiple recovery caps for categories of healthcare defendants create incentives for the bringing medical malpractice claims, and will naturally increase the amount of damages sought.

This will inevitably place additional strain on the judicial system, which is still reeling from the effects of COVID-19 shutdowns, and still suffers from the backlog of congested dockets which resulted from trials not going forward.

The benevolent statement provision appears to expand protections to healthcare defendants on such benevolent statements, and even statements accepting of fault, made prior to the filing of any lawsuit, and seeks to keep such statements protected from admissibility and even discovery. While this provision has obvious benefits in the context of civil actions and arbitrations, its benefit to healthcare providers may be most profound in the context of administrative or disciplinary actions. However, the logistics of the real world enforcement mechanism of the benevolent statement provision remains an open question, as it may not account for voluntary disclosure or testimony by patients or any other recipient of such statements.

The bottom line of the proposed bill is that it expands the exposure to damages of healthcare defendants. The increased exposure will necessarily increase insurance premiums for malpractice insurance coverage. Moreover, healthcare institutions may also require healthcare providers to carry higher insurance policy limits in order to extend privileges to practice in such institutions.

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