NCPA - National Center for Policy Analysis

How California Reined In Malpractice Costs

March 14, 2002

For many years California was the leader in malpractice claims (and losses among insurers) growing to a flood by 1973. But pressure from malpractice insurers caused providers to address some of the quality issues partly responsible for large damage awards. In addition, legislation limiting general damages helped contain malpractice costs.

Anesthesia illustrates how patient injuries and malpractice losses were reduced. California's first doctor-owned malpractice insurance carrier endorsed anesthesia policies requiring constant pulse monitoring and the presence of an anesthesiologist or a substitute at the operating table. Later, anesthesiologists adopted the use of pulse oximetry to reduce adverse events. The improvement in anesthesia losses was striking.

Tort reform also helped contain malpractice costs. California passed the Medical Injury Compensation Reform Act (MICRA) in 1975. The act limited general damages -- payment for pain and suffering and other noneconomic losses -- to $250,000.

Additional measures included disclosure to the jury of other sources of the plaintiff's income (such as Social Security disability payments), and periodic payment of future damages beyond $50,000.

  • Fees paid to defense attorneys account for almost half of the expense for a malpractice carrier, so reducing litigation can be a great cost containment measure.
  • As a result of MICRA, dozens of cases were settled rather than sent to trial.
  • And California has gone from a loss leader in medial malpractice in 1974 to about the middle of the pack in malpractice losses among the states.

However, there has been a steady increase in malpractice claims in California, and every other state.

Source: David S. Rubsamen, "Malpractice Focus: How California Reined in Malpractice Costs," Physician's Financial News, January 2002.


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