A new effort by the persistent plaintiff’s bar to drastically change and gut significant provisions of MICRA was slated for the November 2022 ballot. If passed, this ballot initiative would have had devastating consequences for California doctors, hospitals, and ultimately consumers, as there would be no non-economic damages cap if a jury were to find that a plaintiff suffered “catastrophic injuries.” The initiative would have also extended the statute of limitations, eliminated periodic payments, and required a judge to award attorney’s fees upon a plaintiff verdict.[i]
To avoid the risks inherent with the proposed initiative, a compromise was reached by both sides of the debate, which is codified in Assembly Bill 35.[ii] AB 35 passed in the State Senate on May 5, 2022 on a 37-1 vote, and more recently passed in the State Assembly on May 12, 2022 by a vote of 66-0.[iii] It is expected to be signed into law soon by Governor Newsom, who has publicly expressed support for AB 35 and will likely advertise its passage as an example of his bipartisan reach ahead of the November 2022 election.[iv]
MICRA was enacted by the California Legislature in 1975 in response to reports that physicians were leaving California due to high malpractice premiums.[v] Upon becoming implemented in 1976, it has placed a $250,000 cap on general damages in medical malpractice cases, a figure that has not been adjusted for inflation since 1976.[vi]
The provisions of MICRA have consistently been deemed constitutional by the Courts over the years.[vii] Plaintiff attorneys have tried to change MICRA at the ballot box before. An attempt to do so took place in 2014 with Proposition 46, which would have raised the cap on non-economic damages to $1.1 million. This effort ended in defeat, having been rejected by a two-thirds margin.[viii] [ix]
AB 35 applies only to medical malpractice cases filed after January 1, 2023.[x] For the cap on non-economic damages, AB 35 will initially raise the existing limit to $350,000 for non-death cases, and to $500,000 for wrongful death matters for the year 2023.[xi] For non-death cases, there will be incremental increases of $40,000 a year for 10 years until it reaches $750,000 in 2033, and for wrongful death cases, there will be an incremental increase of $50,000 a year for 10 years, until it reaches $1,000,000 in 2033.[xii] Starting on January 1, 2034, both non-death and wrongful death matters will receive a 2.0 percent annual inflationary adjustment.[xiii]
Additionally, the minimum amount of a judgment for a defendant to request periodic payments will increase from $50,000 to $250,000.[xiv] Had the November 2022 initiative passed, this provision would have been eliminated.
The provisions for attorney’s fees are changed as well. Starting in 2023, plaintiff lawyers will be able to collect a 25% share from a settlement reached prior to the filing of a complaint or demand for arbitration. Lawyers will also be able to take 33% of the amount recovered pursuant to settlement, arbitration or judgment after a civil complaint or demand for arbitration is filed. Additionally, if an action is tried or arbitrated, a lawyer will now be able to file a motion to permit a contingency fee in excess of the aforementioned statutory fee provisions. This is a dramatic change from the prior fee structure under MICRA, which allowed a plaintiff’s lawyer 40 percent of the first $50,000 recovered, 33 and one-third percent of the next $50,000 recovered, then 25 percent of the next $500,000, followed by 15 percent of any amount which exceeds $600,000.[xv]
Whether these changes to MICRA reached by bipartisan compromise will increase malpractice insurance premiums dramatically or lead to an increase in medical malpractice filings remains to be seen. However, whatever the impact, it will be far less dramatic than what could have happened had California voters been left to decide the fate of MICRA in November of 2022. Conventional wisdom dictates that filings and premiums will at least increase gradually over time, as cases that were previously limited to a $250,000 recovery will incrementally appear more profitable to plaintiff lawyers.
[ii] Californians Allied for Patient Protection, The Coalition to Protect MICRA, California’s Legislative Leaders Join Health Care Providers, Consumer Attorneys, and Patient Advocates in Announcing Landmark Agreement to Modernize California’s Medical Injury Compensation Reform Act, April 27, 2022, Online.
[iv] Melody Gutierrez, California’s Malpractice Payouts Would Rise Under a Deal to Avoid a Costly Ballot Fight, LA Times, April 27, 2022, Online.
[v] Melody Gutierrez, California’s Malpractice Payouts Would Rise Under a Deal to Avoid a Costly Ballot Fight, LA Times, April 27, 2022, Online.
[vi] Leonard J. Nelson III, Michael A. Morrisey and Meredith L. Kilgore, Damages Caps in Medical Malpractice Cases, The Milbank Quarterly, June 2007 at Page 259-286.
[vii] Fein v. Permanente Medical Group (1985) 38 Cal.3d 137; Stinnett v. Tam (2011) 198 Cal.App.4th 1412; Hoffman v. United States (9th Cir. 1985) 767 F.2d 1431, 1437; Yates v. Pollock (1987) 194 Cal.App.3d 195, 200.
[viii] Melody Gutierrez, California’s Malpractice Payouts Would Rise Under a Deal to Avoid a Costly Ballot Fight, LA Times, April 27, 2022, Online.
[ix] Melanie Mason, Prop. 46 Foes Spent $60 million to Maintain 1975 Malpractice Award Cap, LA Times, November 9, 2014, Online.
[x] Assembly Bill 35, 2021-2022 Leg. Sess. §3333.2(g)(CA 2022).
[xi] Assembly Bill 35, 2021-2022 Leg. Sess. §3333.2(b)(1-3)(CA 2022).
[xii] Assembly Bill 35, 2021-2022 Leg. Sess. §3333.2(g)(CA 2022).
[xiii] Assembly Bill 35, 2021-2022 Leg. Sess. §3333.2(h)(CA 2022).
[xiv] Assembly Bill 35, 2021-2022 Leg. Sess. §667.7(a)(CA 2022).
[xv] Assembly Bill 35, 2021-2022 Leg. Sess. §6146(a)(CA 2022).