What will and won't happen if medical malpractice 'pain and suffering' awards are indexed for inflation

For haters of junk mail, Proposition 46 may be this election season's biggest nuisance. Groups supporting and opposing 46 have spared no expense in stuffing voters' mailboxes. Among other provisions, the measure would reset California's cap on noneconomic damages recoverable in medical malpractice cases based on inflation, meaning that the $250,000 cap, imposed in 1975, would become a cap of $1.1 million. Rarely, if ever, has the commonplace idea of a regular inflation adjustment provoked such bitter controversy.

Noneconomic damage caps — which restrict damages for pain, suffering and loss of enjoyment of life but not damages for lost wages, rehabilitation costs or medical bills — are admittedly complicated. Not surprisingly, then, misperceptions about 46 abound. As Stanford law professors who study accident law and liability reforms, we seek to clarify the issue.

First, the No on 46 effort suggests that indexing the damage cap for inflation would cost "California families $1,000 more each year." That's a big exaggeration. California's estimate, from the Legislative Analyst's Office suggests the number is vastly lower. In 2013, healthcare spending in California was about $7,062 per person. The Legislative Analyst projects a 0.1% to 0.5% increase in such spending, which corresponds to between $28.25 and $141.23 a year for a family of four — and our estimate indicates the number is at the low end of that range.

Next, those who oppose 46 have asserted that the measure would lead doctors to "leave California altogether." Again, the evidence suggests otherwise. Many respected researchers have probed the relationship between damage caps and physician supply. Of those, some have found no evidence that damage caps measurably increase physician supply. Others have found an effect, but a modest one. And these studies compare states with caps to states without caps; the effects found are probably larger than what occurs when a state just adjusts the cap amount. The upshot is clear: Indexing California's damage cap for inflation is unlikely to jeopardize our physician supply.

So, if the relationships between both damage caps and healthcare costs, and damage caps and physician supply, are tenuous — what, if anything, do we know for sure? Four points stand out.

First, this damage cap singles out one category of injury victims — namely, medical malpractice victims — for inferior treatment. If you are injured by a defective product or by a careless motorist, California law entitles you to a full recovery. If you are injured by a negligent physician, on the other hand, your recovery may be partial and incomplete.

Second, damage caps hit hardest those who are most seriously injured. Ordinarily, injured people are entitled to compensation commensurate with their suffering. Caps like California's dictate otherwise. Patients with the most agonizing injuries, such as brain damage or permanent disfigurement, lose out more than those with lesser injuries. Raising the cap is progress toward reducing this inequity.

Third, it's clear that damage caps influence the kinds of cases lawyers are willing to take — and not in ways most people think are desirable. Weeding out “frivolous lawsuits” is a common goal of tort reform. But caps don't do this. They simply make it harder for people who don't have big economic losses, like lost wages, to access the civil justice system. This is because lawyers take medical malpractice cases on a contingency fee — typically one-third of the client's recovery, paid only if the case is won. When a client's recovery is reduced, the lawyer's ability to make a living on the case is compromised — particularly because medical malpractice cases are hard to win and expensive to prepare (requiring extensive reliance on expert testimony). This means that lawyers will decline many meritorious cases in a severely capped environment.

Fourth, this lost access may particularly burden the disadvantaged — women, children, the elderly and the impoverished — who often lack high wages to recover as economic damages.

In short, indexing California's damage cap for inflation would not make the sky fall. To the contrary, it might make the civil justice system in our state fairer, more humane and more equitable.

Nora Engstrom, Robert L. Rabin and Michelle M. Mello are law professors at Stanford University. Mello is also a professor of health research and policy at Stanford's School of Medicine.

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