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Governor Signs New Medical Malpractice Legislation Into Law: Cap Raises 1/1/23 On New Filings – Healthcare

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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. On May 23, 2022, Governor Gavin
Newsom signed the measure into law. Practitioners are wise to be
reminded that this law goes into effect for cases filed next year.
This is notable because plaintiff lawyers will be holding off
filing their cases if possible so as not to blow the statute of
repose. Brace yourself for a slew of new filings in 2023.

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
set limits on awards in medical malpractice cases and aimed 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 asserted 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 from 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.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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