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Medical Malpractice & California | A Crisis in the 70’s

In the California of the 1970’s, the medical profession was in a state of turmoil.

With skyrocketing coverage rates for medical malpractice, California doctors were dealt severe shockwaves as the result of frivolous lawsuits and the huge settlements they incurred. These multi-million dollar settlements were the result of astronomical non-economic damages, awards given in addition to any lost wages, the loss of future income, and medical bills. Without a limit imposed, these damages regularly reached into seven figures.

As a result of this trend, in 1974 medical malpractice companies began to raise their premium rates. Brad P. Cohn, president of the San Francisco Medical Society during this period, commented that “we were served notice they were going to increase our premiums 250 percent.” In early 1975, some carriers announced that certain physicians might have their rates increased by up to 400 percent on May 1.

In reaction to the looming deadline, physicians were faced with four options, none of which were happy choices:

  1. Raise their fees, which would make medical care too expensive for many patients
  2. Stop paying for medical malpractice insurance
  3. Move away from California to a region where rates were more affordable
  4. Stop practicing medicine altogether

When it came to medical malpractice, California doctors began to catalyze their entire profession. In February, the Los Angeles Times reported that “eight thousand physicians in seven Southern California counties face loss of their malpractice insurance…These doctors make up the bulk of medical practitioners in those counties.”1 At the same time, anesthesiologists and surgeons in northern California began to refuse to treat any patients not in imminent danger of dying.

Half-measure actions were put into effect: physicians worked pro bono to cover the loss of their colleagues, and California’s legislature worked to create stopgap measures. However, it was apparent that major legislation that addressed the skyrocketing damages would be needed to reign in the crisis.

 

Medical Malpractice & California: Saved by MICRA

As a response to this crisis, California’s legislature enacted the Medical Injury Compensation Reform Act (MICRA) in September 1975. The new regulation allowed up to $250,000 to be awarded for non-economic damages (i.e., damages not associated with medical costs, lost wages, future earnings, custodial care and rehabilitation). This new maximum limit gave medical malpractice providers in California the freedom to lower their premium rates. In just a few years, California’s rates went from being the highest in the nation to among the lowest.

In 2014, Proposition 46 was put to a vote. This ballot initiative, which was backed by trial lawyers, would have increased the maximum limit of non-economic damages by over 400%. These trial lawyers understood that an increased limit would have led to a similar increase in the payments they stood to receive by taking on malpractice cases.

Thanks to a grassroots campaign that highlighted the proponents behind the bill, as well as the benefits MICRA provided to physicians and patients in California, voters defeated the initiative in November 2014, 67% to 33%.

 

Medical Malpractice & California: An Innovative Solution

The Cooperative of American Physicians, Inc. (CAP), was started by a group of physicians during the 1970’s medical malpractice crisis in California. With insurance rates spiraling out of control, and physicians facing a grim reality of higher fees and costs, CAP’s founders realized that there was a need for an alternative to traditional medical malpractice insurance.

CAP’s flagship product, the Mutual Protection Trust (MPT), is a strong alternative to traditional insurance for solo and small group practices. Instead of paying premiums, physicians pay assessments that are based on the collective cost of protecting CAP’s membership over 12 months. 

In addition to MPT, we also offer additional benefits and resources like:

We also offer educational materials on governmental regulations, like ICD-10 and HIPAA, as well as situations like how to work with office staff to limit risk in your practice.

Discover why CAP’s medical professional liability coverage is superior to traditional medical malpractice insurance.

Get a free quote today


1"Doctors Face Insurance Crisis-May Affect 8,000 in Southland." Los Angeles Times [Los Angeles] 22 Feb. 1975: n. pag. Print.