Summary: In 1975, a cap of $250,000 was
adopted by California on noneconomic losses in malpractice cases. It was
imposed in a time of perceived crisis, when state legislators and others
believed rising malpractice premiums and risk of lawsuit would encourage physicians
to retire from practicing medicine and would raise overall medical costs
through defensive medicine.
Findings: Since the adoption of the cap, two
arguments have been put forward as reasons to revise or eliminate it: The first
is that the lack of adjustment to reflect inflation or the growth of household
incomes is inequitable, because it lowers the real value of the reward — which
in current dollars, could be as much as $1.5 million; the second is that the
cap, by lowering the risk of suit for malpractice, also weakens the deterrent
effect of risk of suit on physician efforts to avoid malpractice. The best
available research suggests imposing caps is associated with a 16% increase in
adverse events, and several approaches to applying this to California data are
suggested or implemented. The estimated additional costs due to loss of
deterrence are a significant offset to the potential costs of higher and more
frequent claims were the cap to be eliminated or raised to reflect inflation.