Georgia Supreme Court Strikes Down Cap on Noneconomic Damages

March 22, 2010

March 22, 2010 ( UPDATED March 23, 2010 ) — Less than a day after congressional Democrats passed a historic overhaul of the nation's healthcare system, physicians received a jolting reminder of what they call the unfinished work of reform.

The Georgia Supreme Court today unanimously overturned that state's law setting a $350,000 limit on damages paid out for pain and suffering in malpractice cases involving physicians. It ruled that the 5-year-old Georgia law violated a person's constitutional right to trial by jury — more specifically, the right of a plaintiff to have a jury set noneconomic damages as it sees fit.

The American Medical Association (AMA) and other major medical societies consider such laws — commonly called caps — essential to reducing the number of frivolous malpractice suits and lowering the cost of medical liability insurance. By preventing plaintiffs from receiving 7 figures for pain and suffering damages, the argument goes, a cap law might discourage some individuals from ever filing a malpractice suit. And if a plaintiff does prevail at trial, jury awards are tempered, meaning lower payouts by malpractice insurers, which then don't have to charge physicians as much in premiums.

For years, organized medicine has lobbied Congress to pass a national cap on noneconomic damages that would replace a patchwork of state laws. But Congress has declined to do so, and the absence of a cap on noneconomic damages in the healthcare reform bill passed by the House yesterday disappointed medical societies that otherwise applauded the legislation.

What makes the Georgia high-court decision even more unsettling to organized medicine is that it comes on the heels of the Illinois Supreme Court overturning that state's cap on noneconomic damages back in February. The Illinois court ruled that the law, which set a $500,000 limit in malpractice cases involving physicians, violated the separation-of-powers clause in that state's constitution. In other words, the job of setting damages belong to trial courts, not the legislature.

In other states, cap laws have survived constitutional challenges — Maryland is a recent example — but the vulnerability of these laws still leaves physicians all the more anxious to see a federal equivalent.

"Today's court ruling to strike down proven medical liability reform in Georgia is a step backward for the state's patients and physicians as Georgia once again allows a broken legal system to jeopardize access to health care," AMA president J. James Rohack, MD, said today in a press release. "The AMA continues to vigorously support strong, proven medical liability reforms at the state and federal levels to keep physicians caring for patients, while still allowing patients their day in court."

AMA Argued That Georgia Law Had Stabilized Cost of Malpractice Insurance

The Georgia case stemmed from cosmetic surgery gone awry.

In 2006, Harvey P. Cole, MD, of Atlanta Oculoplastic Surgery performed carbon dioxide laser resurfacing and a full face lift on a woman named Betty Nestlehutt, according to the Georgia high-court opinion. Complications from the procedures left her permanently disfigured.

Nestlehutt and her husband sued Atlanta Oculoplastic Surgery for malpractice, and a jury sided with them, awarding a verdict of $1,265,000, which included $900,000 in noneconomic damages. When the surgery practice asked the trial court to reduce the noneconomic damages to the $350,000 prescribed by that state's cap law, the court declared the law unconstitutional.

The surgery practice appealed the case to the state supreme court. The AMA, along with the state medical association and the American Tort Reform Association, filed a friend-of-the-court brief defending the constitutionality of the contested cap law. They argued that the law did not divest trial courts of their constitutional authority or jurisdiction, and that Georgia case law had not shown that the right to a jury trial extended to the remedy phase of a civil trial.

The brief also stated that since the law's passage in 2005, the cost of malpractice insurance in Georgia had stabilized, the number of malpractice suits had declined, and more physicians were practicing in that state.

The Georgia Supreme Court nevertheless affirmed the trial court's decision. "The very existence of the caps, in any amount, is violative of the right to trial by jury," the justices wrote in their opinion.

Congressional Budget Office Says Caps, Other Tort Reforms Would Cut Healthcare Spending by One Half of 1%

Thirty-one states have laws limiting damages of all sorts in malpractice cases, according to a roster of state laws compiled by the National Conference of State Legislatures. Of these states, 22 (including Georgia) specify a limit on noneconomic damages that range from a low of $250,000 in 9 states to a high of $650,000 in Maryland.

Organized medicine likes to tout what a $250,000 cap and other tort reform measures in Texas have accomplished. Claims and lawsuits in most Texas counties have decreased by 50 percent, and malpractice premium rates for 90% of physicians have fallen by 30% or more, according to the Texas Medical Association (TMA). Furthermore, Texas has seen a surge of newly licensed physicians — a 59% growth rate during the past 2 years compared with the 2 years preceding tort reform — which TMA views as evidence that Texas is less of a happy hunting ground for plaintiffs' attorneys. The deepening of the physician pool — including obstetricians, orthopedic surgeons, and neurosurgeons — has improved access to care, the TMA states.

By discouraging litigation, caps on noneconomic damages and other tort reform measures also reduce defensive medicine and its costly play-it-safe tests and procedures, as physicians practice with less fear of being sued, add tort reform advocates.

Some political conservatives view tort reform as a big axe for cutting healthcare costs, but the Congressional Budget Office sees it more as a pocket knife. In a report released last fall, the office estimated that capping noneconomic damages at $250,000 and enacting other measures such as limiting punitive damages and tightening the statute of limitations for filing a suit would reduce the nation's healthcare spending by one half of 1%. Of these savings, 40% would stem from lower malpractice insurance premiums, and the remainder from less defensive medicine.

Caps on Noneconomic Damages Won't Fly in Congress, Says Expert

Michelle Mello, PhD, a professor of law and public health at the Harvard School of Public Health, Boston, Massachusetts, said caps and other restrictions placed on malpractice plaintiffs are no panacea for what ails medicine.

"They are modestly effective in achieving their goals, but they don't fix the real problem with medical liability from a scholar's perspective," said Dr. Mello. And that problem is a raw deal not for physicians, but for patients. Research by Dr. Mello and others has shown that most patients who are injured as a result of medical negligence never sue and never receive compensation. Plaintiffs typically lose when a case goes to trial. Meanwhile, the quest for quality improvement — which requires an open, nonpunitive atmosphere — takes a back seat to the acrimony of subpoenas, depositions, and cross-examinations.

Dr. Mello calls caps on noneconomic damages a first-generation variety of tort reform that is being eclipsed by other methods that don't alter the jury system so much as bypass it. The healthcare reform bill passed by the House on Sunday takes this second-generation approach, funneling money to states to test alternatives to malpractice litigation, such as early and voluntary disclosure of medical errors outside of court, or settling malpractice claims in a no-fault system akin to workers' compensation programs.

Such reforms are much more politically saleable than capping noneconomic damages, especially now that Democrats control Congress, said Dr. Mello.

"The Democratic party is ideologically opposed to caps on damages," she said. "A lot of Congressmen are lawyers. They see caps as usurping the jury system, which they believe in."

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