Give a Little To Get a Little?

'Quid Pro Quo' the Key to Medical Liability Caps

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Law Feature -- February 2003

By Walt Borges
Associate Editor

Texas physicians are pushing for a cap on noneconomic damages in medical liability lawsuits as the surest way to lower damage awards and hold insurance premiums in check. But securing caps during the 2003 legislative session may hinge on what physicians and other medical professionals are willing to give in return.

How much -- if anything -- should be given to injured patients in exchange for capping noneconomic damages is a question Texas Medical Association leaders are studying.

Based on a 1988 Texas Supreme Court ruling,

Sensing a favorable political and legal climate in the wake of the Republican electoral triumphs of 2002, TMA and health care allies are seeking caps to essen the impact of rising payments to patients with medical liability claims. While TMA officials see caps as the keystone of legislation to address the medical liability insurance crisis, the exact form of the proposal is still at issue.

"We have a crisis in medical liability, and we believe the legislature intends to address the problem," said TMA General Counsel Donald P. Wilcox, JD. "In asking for these measures to make insurance affordable, we are providing a way for judgments to be satisfied. If nothing is done to reduce premiums, more doctors will struggle to afford liability insurance, and fewer will choose to practice in high-risk areas such as obstetrics and neurosurgery. Fewer doctors means a deterioration of medical care, and that is not acceptable to our patients and the citizens of Texas."

Among the proposals being studied are those backed by the Texas Alliance for Patient Access (TAPA), a coalition of physicians, hospitals, health care professionals, and health insurers that includes TMA. TAPA has proposed a $250,000 cap on noneconomic and punitive damages for physicians and other health care professionals who are insured to a level set by the legislature. To trigger the cap, physicians initially would have to carry liability coverage of $200,000 per person and $600,000 per occurrence. By 2007, they would be required to have coverage of $500,000 per person and $1.5 million per occurrence.

But the sufficiency of those requirements is uncertain. In August, the Texas Legislative Council (TLC) issued an opinion requested by Rep. John Smithee (R-Amarillo), chair of the House Insurance Committee, suggesting that demonstrating liability coverage was an insufficient quid pro quo that did not provide all plaintiffs in medical liability cases with "adequate alternative remedies."

Why Caps?

Caps on noneconomic damages, primarily for pain and suffering, are among the provisions of California's Medical Injury Compensation Reform Act (MICRA), which has kept medical liability premiums in check there. But an attempt to cap such damages in Texas failed in 1988 when the Texas Supreme Court struck down damage caps, ruling that they stripped injured plaintiffs of their "open court" rights under the Texas Constitution. These are rights that allow state residents to seek redress for every injury in court.

In its decision in Lucas v. Texas , the court suggested that absent a sufficient quid pro quo for catastrophically injured victims, caps on medical liability damages impaired Texans' right to use the courts to obtain a remedy for their injuries. The key issue in Lucas was how the court should view the open courts provision in the face of legislation that limited some noneconomic and some economic damages. The open courts provision in the Texas Constitution says, "All courts shall be open and every person for an injury done him, in his lands, goods, person or reputation, shall have remedy by due course of law."

The case involved the treatment of 14-month-old Christopher Lucas, who was paralyzed after an injection of antibiotics directly into an artery in his buttocks blocked the artery and led to blood starvation in his legs. The treatment was administered at William Beaumont Army Medical Center near El Paso.

Although the case was brought in federal court, the U.S. 5th Circuit Court of Appeals asked the Texas Supreme Court to determine if the caps on medical liability damages violated the Texas Constitution. At the time, the Texas Supreme Court was composed of seven Democrats and two Republicans, and was regarded as pro-plaintiff. TMA's political action committee, TEXPAC, was then actively supporting campaigns to fill six seats up for reelection, an effort that resulted in the election of five of six TEXPAC-endorsed candidates.

William Kilgarlin, who would be defeated in the 1988 election by Republican Nathan Hecht, authored the seven-justice majority opinion.

Justice Kilgarlin said caps and damages were arbitrary and unreasonable when balanced against the purpose of the statutes. He based his opinion in part on legislative uncertainty about how effective the caps would be in reducing rates charged by medical liability insurers.

He also said it was unreasonable for the legislature to conclude that damage caps applicable to all claimants without regard to the severity of their injuries would assure a rational relationship between actual damages and the amounts awarded, the legislature's stated purpose. To the contrary, he said, the open courts provision "guarantees meaningful access to the courts whether or not liability rates are high."

The prevailing justices suggested that a cap could pass constitutional muster if there was an alternative way to compensate injured patients, such as a compensation fund for medical malpractice.

Dissents were filed by Justice Raul Gonzalez, a Democrat who is now a TAPA consultant, and Chief Justice Thomas Phillips, a Republican. Justice Barbara Culver, an interim Republican appointee who would lose to TEXPAC-supported Democrat Jack Hightower in November 1988, concurred with the majority.

The dissents provide the framework for later efforts to allow caps under the open courts provision. Justice Gonzalez argued that there is a dichotomy in the open courts provision between access, which must be preserved, and redress, which could be restricted. Chief Justice Phillips went further. He argued that the legislature had assembled a well-crafted proposal including caps to address the medical liability crisis.

"The primary purpose of the cap was not to protect health care providers, but to protect the public," Chief Justice Phillips wrote. "The legislature was reasonable in concluding that cheaper and more widely available insurance coverage would result in greater health care services being provided to more citizens in more areas at more economical charges, all to the public benefit."

Societal Good Versus the Individual

What Chief Justice Phillips laid out is an argument that a quid pro quo benefiting society is sufficient and that a quid pro quo for the benefit of the injured individuals is not required.

Fourteen years after Lucas, some cap supporters are not so sure that interpretation will hold up, even with the ensuing conservative shift in the judiciary and legislature.

Charles Bailey, JD, general counsel of the Texas Hospital Association and chair of the TAPA Legal and Claims Committee, says the alliance has chosen to propose individual quid pro quo because "the court in Lucas rejected a societal quid pro quo."

"TAPA has retained former Justice Gonzalez to research the issue of constitutionality," Mr. Bailey said. "It's our understanding that his legal opinion maintains that a quid pro quo is necessary and must be reasonable."

To support caps, TAPA wants to make sure the legislative record contains extensive explanations of the rationale behind the reforms, he says.

"We believe that it is important to have a clear legislative record explaining the extent of the medical liability crisis and the problems that [doctors and hospitals] are having in obtaining insurance," Mr. Bailey said.

"TMA and TAPA are working with the legislature and governor to achieve the primary goal of meaningful medical liability reform," said Robert Sloane, MD, chair of TMA's Committee on Professional Liability.

TAPA's proposed cap is more extensive than either the previous Texas cap or the California cap in that it seeks to limit noneconomic damages per incident rather than per defendant.

MICRA allows injured patients to seek damages from multiple physicians, hospitals, and health care professionals when the facts warrant a "per defendant" approach.

In Lucas , the majority did not address the question from the 5th Circuit asking whether the Texas caps were intended to limit defendants' liability or the recovery of claimants. But the dissenters did.

"The limitation clearly applies to the recovery against the individual defendant, not the award to the individual plaintiff," Chief Justice Phillips wrote. "[T]hus, a plaintiff who recovers against more than one defendant may secure a judgment in excess of the cap. This interpretation is consistent with the purpose as well as the text of the provision."

Justice Gonzalez went further: "It is clear . . .  that the legislature was concerned with limiting the liability of each defendant, not with unreasonably and arbitrarily limiting the amount a plaintiff will recover."

Under the new proposal requiring doctors to carry certain levels of medical liability coverage, the distinction between limiting a doctor's liability and limiting a plaintiff's recovery is less relevant, say TMA officials.

Was Lucas an Anomaly?

Some supporters of caps suggest Lucas was an anomaly produced by a pro-plaintiff court that no longer exists. Judicial reconsideration of Lucas would expedite resolution of the constitutional issues, they argue. Chances are good, as caps on punitive damages and damages in wrongful death and survival cases have been upheld by Texas' high court.

There are legal subtleties that undermine this option, other lawyers point out. The courts have upheld caps for causes of action established by statutes -- such as wrongful death and survival. But medical malpractice claims rest on negligence, a cause of action established under common law derived from judicial decisions. The open courts provision applies only to common law cause of action and is not in play when considering statutory causes of action.

Similarly, punitive damages are damages assessed against the defendant as punishment and are not considered to redress the injury to the plaintiff, even though, in Texas,plaintiffs receive the punitive damages. Because the punitive damages are in addition to making the injured party whole, they are considered to be outside the remedy protected by the open courts provision.

Punitive damages in many cases are capped atthe lesser of two times the amount of the actual damages or $750,000,which include both economic damages for health care and loss of income as well as noneconomic pain and suffering awards. While there is little chance that a limit on punitive damages could be disqualified under the open courts provision, including them in a cap on noneconomic damages may lead critics to argue that the $250,000 cap on combined punitive and noneconomic damages is too little.

Those who would look to the courts in other states for guidance find an uncertain record.  The TLC found that almost all states enacted caps on medical liability awards in the 1970s, in many different forms. Some covered only noneconomic damages, others placed the entire award under the caps.

Judicial reaction was mixed. Courts in Florida, Illinois, Ohio, New Hampshire, Virginia and North Dakota struck down the caps. In Florida, the caps were struck for violating the state's open courts provision. In Illinois, caps fell in ruling that they were special laws providing advantages for one designated group in violation of the state constitution. Courts in other states held the caps violated equal protection guarantees in state constitutions. (In Lucas , the Texas Supreme Court questioned in a footnote whether caps constituted special laws, which are prohibited in Texas, but declined to address that point because they already had reached a result based on the open courts provision.)

In California, Indiana, Louisiana, Missouri, Colorado, Nebraska, and West Virginia, the caps were upheld over legal objections. In Nebraska, the victory was tenuous, as a 3-3 split allowing the caps to stand was recorded when the seventh high-court judge declined to take up constitutional issues in an advisory opinion.

Quid Pro Quo or Compensation Fund?

TAPA's decision to seek a quid pro quo for individuals was bolstered by the TLC opinion for Representative Smithee, who asked if mandated liability coverage would satisfy the quid pro quo requirements. While the council did not address the question of whether a societal quid pro quo was sufficient, it suggested that coverage alone did not provide enough of a quid pro quo to overcome the Lucas objections. The council indicated that a compensation fund paid for by taxpayers, physicians, and insurers could make up the difference between the capped awards and those awarded by a jury or judge.

Absent the alternative of a compensation fund or higher limits for the caps, the TLC suggested that demonstrating mandated levels of liability coverage would not be sufficient under Lucas .

Mr. Bailey says TAPA looked at other alternatives, such as the compensation fund, but found several problems. "In many states, those compensation funds have gone bankrupt. Another reason not to take that approach is that such an approach is more expensive and will contribute to higher insurance premiums," Mr. Bailey said.

Walt Borges can be reached at (800) 880-1300, ext. 1385, or (512) 370-1385; or by email at Walt Borges.

SIDEBAR

Quid Pro Quo Not the Only Way To Go

If physicians and hospitals can win the legislative battles for medical liability caps, the war is only half won. Sustaining the caps in the face of constitutional challenges will be the final step in medical liability reform.

Although a quid pro quo would satisfy the Texas Supreme Court's existing interpretation of the open courts provision, that may not be the only approach considered.

Some reform proponents, including Gov. Rick Perry, are proposing that the legislature pass resolutions supporting a constitutional amendment that would either abolish the open courts provision or exclude medical liability claims from the provision's guarantee of access to the courts for consideration of every injury based on common law.

If the resolutions pass, a constitutional referendum would have to be approved by the state's voters before the amendment goes into effect. There is both confidence and doubt that voters would approve such a measure.

As of mid-December 2002, two bills had been filed addressing medical liability claims.

Sen. Jane Nelson's Senate Bill 12 includes a $250,000 cap on noneconomic damages, but the Flower Mound Republican's legislation does not require physicians to have a minimum level of insurance coverage to access the caps.

Rep. Arlene Wohlgemuth (R-Burleson) has included a $250,000 cap in House Bill 197. Representative Wohlgemuth's cap encompasses all damages, not just noneconomic damages, which is a far broader proposal than either TMA or TAPA is considering.

HB 197 includes a requirement that physicians must have liability insurance coverage of at least $200,000 per claim to invoke the caps, or alternatively must demonstrate financial reserves are sufficient to cover the total amount of claims that historically are filed each year.

February 2003 Texas Medicine Contents
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