Inflating Medical Costs - The American Spectator | USA News and Politics
Inflating Medical Costs
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Sacramento

Like rust, California’s initiative process never sleeps. There’s always some new political battle that’s brewing given the state’s permissive rules for qualifying statewide ballot measures, which let deep-pocketed special interests put wide-ranging legislation before the public. Given the signature-gathering deadlines, Californians are already getting a preview of the big issues that they will decide upon in the November 2022 general election.

For the umpteenth time in decades, Californians will get to decide whether to make it easier or harder for personal-injury lawyers to file tort actions, with a particular focus on medical malpractice claims. “The intensity of the war varies from year to year, and 2022 is shaping up as one of its hotter periods as the factions propose dueling ballot measures,” explains CALMatters columnist Dan Walters, who has covered the issue for years.

As he points out, in 1975 then-Gov. Jerry Brown signed the Medical Injury Compensation Reform Act, known as MICRA, which limits punitive damages in medical injuries to $250,000. The law prompted other states to follow suit, but California hasn’t adjusted that number for inflation. Even liberal Democrats have generally opposed increasing those limits given their concern that it would make it tougher to implement Obamacare.

Now, trial attorneys and consumer activists are backing an initiative with a mouthful of a title: “Fairness for Injured Patients Act to Adjust California’s Maximum Compensation Cap of $250,000 Set by Politicians on Wrongful Death and Quality of Life Damages That Has Never Been Updated.” One hardly needs to read the summary or text to get the gist of what’s going on here.

One can make a serious case for increasing the damage limits after 47 years, but the initiative would essentially scrap MICRA and potentially drive up the cost of malpractice insurance. Proponents note that $250,000 is only around $50,000 in 1975 dollars. But the initiative would adjust the cap “to reflect any increase in inflation since the cap was established in 1975” and would then be adjusted annually to reflect changes in the Consumer Price Index. Based on the inflation calculator, the current cap would rise to nearly $1.3 million.

In addition, “judges and juries may award damages in excess of the cap … upon finding of catastrophic injury.” The measure states that “judges, not politicians, should have the discretion to determine that the fees paid to an attorney are reasonable and not excessive … and attorney’s fees originally capped in 1975 and adjusted in 1987 should be updated for inflation,” lest you wonder about at least one motivation for the initiative. MICRA currently capsattorneys’ fees at 40 percent of the first $50,000 and 15 percent of amounts above $600,000.

The measure would also allow survivor damages — described as “the loss of love, companionship, comfort, care, fellowship, assistance, protection, affection, society, moral support, and the enjoyment of sexual relations, suffered by a loved one of a patient-victim who died as a result of professional negligence.” Such losses are real, of course, but voters need also consider the losses that will occur if a new torrent of lawsuits drives healthcare professionals out of business.

Prior to MICRA’s passage, medical-malpractice insurance premiums were rising to astronomical levels. “Many medical physicians had four choices, none of them acceptable: Raise fees and make medical care unaffordable for many patients, drop their professional liability insurance coverage, leave the state, or quit practicing medicine,” according to the California Medical Association.

The nation is enduring a troubling bout of inflation, as prices for virtually everything are rising. If this reform passes muster, Californians will also face new rounds of “social inflation.” That’s insurance-industry terminology for increased costs due to higher court verdicts, out-of-court settlements, and attorney payments. This type of inflation is untethered to the Consumer Price Index or to other economic or supply-chain factors.

“If unchecked, social inflation … will become a self-perpetuating phenomenon that … will lead to higher insurance premiums, financial strain on insurers, depletion of municipal resources and disincentives for businesses to take risks,” my R Street Institute colleague Jerry Theodorou explained in his new study. It amounts to a “tort tax” that will cause real harm to consumers, too.

As Walters noted, another proposed November 2022 ballot initiative would push back in the other direction. The Civil Justice Association of California, a tort-reform group, is circulating an initiative that would limit all contingency fee agreements to attorneys’ fees of no more than 20 percent of the amount recovered by the claimant. The goal is to reduce lawsuits by limiting the financial incentive for attorneys to file them.

I’ve often defended our system of direct democracy as the People’s only means to circumvent the state’s progressive Democratic leadership, but one of the downsides is that it derails efforts to come up with pragmatic legislative solutions. Instead of focusing on, say, a modest effort to adjust the MICRA caps to reflect nearly five decades of inflation, we’re instead gearing up for a political war that could endanger the medical system and only add to spiraling inflation.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

Steven Greenhut
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Steven Greenhut is a senior fellow and Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org. His political views are his own.
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