In 1975, California passed the Medical Insurance Compensation Reform Act which placed an artificial limit on the recovery of non-economic damages. Non-economic damages incorporate damages such as pain and suffering, loss of relationship, loss of enjoyment of life and other similar losses. Civil Code sec. 3333.2 indicates that in any malpractice, or professional negligence, action against a health care provider, damages for non-economic losses may not exceed $250,000. Separate from the non-economic damages, an injured patient could recover losses for economic damages. These damages are only limited by the amount proven to exist, in either past losses or future expenses.
Many would say that this was a good thing to help prevent runaway verdicts. I concur in some respect, but disagree on other grounds. First, an artificial limit allows the insurance companies to know exactly their maximum exposure and then negotiate settlements significantly below that number. Unfortunately, for the injured victims they are often left accepting a lesser settlement to avoid the huge costs of trying the cases. The insurance companies have huge reserves to try these cases, while the injured patients rely upon the finances of their attorneys or from their limited resources.
The arguments from the insurance companies and doctors in support of the financial limits, are that these caps reduce insurance premium costs, health care costs and get more money into the hands of the injured victims by also reducing the amount the attorneys can receive for their services. In reality, health care costs have had little to no reduction by the caps on pain and suffering damages and the amount of money for injured victims has not increased over the thirty plus years it has been in effect. In fact, adjusted from inflation, the amount available to injured patients from settlements or judgments is significantly less than in the 1970s.
The only advantage these caps have had is to limit the amount of insurance premiums paid by the healthcare providers. The California Medical Board was to take a more active roll in eliminating bad doctors from the practice of medicine. However, this does not seem to have been the case because many of these same doctors continue to practice medicine despite multiple successful claims against them.
Good medical malpractice claims need to be properly compensated, while the bad claims eliminated. The present system lumps all claims together and punishes good claims with an artificial cap because of the many bad claims. Frankly, I would not object as much to a cap, if it is adjusted for inflation or otherwise modified over time. At least a person injured in 2009 would receive the same compensation as a patient in 1975.