Michigan, Missouri High Courts to Examine Caps on Noneconomic Damages

Is it constitutional to place a cap on noneconomic damages in a medical malpractice case? If not, how should that cap be calculated when one of multiple defendants settles prior to the trial?

These are questions soon to be decided by the Supreme Courts in Michigan and Missouri.

In the Missouri case of Sanders v. Ahmed, the plaintiff contends that the state’s noneconomic damages cap, which lowered a jury award of $9.2 million to $1.2 million, is in violation of the state’s constitution. The plaintiff’s attorney claims that the cap denies a plaintiff’s right to receive the “full and intended” effect of a jury’s determination of damages. However, counsel for the defendant argues that the constitutional right to a trial by jury does not translate into a right to a jury award, but a right to have a jury determine the case’s facts and make a judgment.

In Velez v. Tuma, the cap itself is not being challenged, but the method of calculating damages when a plaintiff receives a jury award as well as a pretrial settlement from a joint tortfeasor. In Velez, the jury awarded the plaintiff $1.4 million in noneconomic damages, which was reduced by the judge to $394,200 in compliance with the state’s cap. The defendant physician argues that the award should also have been offset by the $195,000 settlement that the plaintiff received from two other hospital defendants prior to trial. The physician’s position is supported by the American Medical Association, which is filing an amicus curiae brief.

The issue of caps on noneconomic damages has already been litigated in Illinois, where the state’s Supreme Court found a cap to violate the separation of powers between the judicial and legislative branches by limiting the ability of a judge to award damages. The court stated, “It is the province of the court system to determine damages and not the prerogative of the legislature to require judges to reduce damages to a predetermined level.”

Agreeing with the court’s rationale, the President of the American Bar Association, Carolyn B. Lamm stated that research showed that it is inappropriate to adopt statutory limits in medical malpractice compensation because “courts have inherent power to increase or reduce verdicts if they are…excessive or…inadequate.” However, one justice dissented, contending that the judiciary’s function is not to make law, but to utilize it to achieve justice and that the legislature’s function is to formulate “statutory solutions to social problems.”

Many believe that reining in jury awards in medical malpractice cases will lower medical malpractice insurance premiums, which had become so high in Illinois that physicians were allegedly leaving the state to practice. According to the American Medical Association, after the cap was passed in Illinois, liability costs stabilized, insurance competition increased, and more specialists were attracted to shortage areas. Only time will tell whether this progress will become undone as a result of the Lebron decision.

Do you believe that legislative caps on noneconomic damages are necessary for tort reform? Do they violate the concept of separation of powers?

Sanders v. Ahmed, Mo. Cir. Ct., Case No. 0516-CV12867, September 28, 2010.

Velez v. Tuma, Mich. Ct. App., Doc. No. 281136, April 16, 2009.

Will Health Insurance Exchanges Be Up and Running by the Deadline?

Perhaps one of the more labor-intensive duties given to states under the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) is the development of the health insurance exchanges, the government-operated insurance markets for consumers who have no access to affordable employer-based health insurance. As of January 1, 2013, just over one year from now, the statute requires states to show CMS by October 1, 2013 that their exchanges will be operational by January 1, 2014.

When we last looked at this issue, nine states had passed legislation.  Since then, the Michigan Senate passed its bill on December 1, 2011. No new states have passed legislation.

Legislative action is not the only indicator of progress, or lack of it, in the implementation of the exchanges.  Study commissions have been created, planning grants obtained, and governing boards  established within existing state agencies pursuant to executive order in several states.

Virginia passed legislation last spring declaring its intent to establish an exchange and establishing an advisory committee.  Governor Bob McDonnell (R)  made recommendations for amendments to the  bill, which were accepted by the legislature. The governor’s amendments prohibited any exchange from offering coverage for abortion even as an option at additional cost to the insured and disclaimed any  recognition of the constitutionality of the law. (It’s worth noting that Virginia  sued federal officials to enjoin the implementation of the law. The 4th Circuit  Court of Appeals  ruled that the state had no standing to sue. The case is pending before the Supreme Court, as discussed here.)

The advisory committee, comprised the directors of the departments of human services and insurance, working with stakeholders, was directed to to make recommendations on five issues related to governance, structure, and the similarity or differences between requirements to be applied to policies sold through the exchange and those sold in the private market  and other questions. In his letter transmitting the advisory council’s recommendations, the governor reiterated  his support of Virginia’s challenge to PPACA  without making any recommendation himself, except that Virginia should create its own exchange if PPACA is upheld. According to the Richmond Times-Dispatch, McDonnell said, “any major expense would be irresponsible and a waste of money.”  The state Secretary of Health and Human Resources was quoted as saying that the federal government has not issued enough guidance tfor states to implement the law.

Has CMS issued timely guidance?  PPACA directsed the Secretary to publish regulations concerning the exchanges  “as soon as practicable” after the date of enactment, March 23, 2010. On August 3, 2010, the agency published a proposed rule  requesting comments on a variety of issues  related to encouraging consumer and employer participation, among others. The actual Proposed rule that would govern the exchanges in was published in July 2011.. July, 2011. In late September, it extended the comment period to October 31, 2011. The law also directed the Secretary to set standards for “qualified health plans ” so that they may be reviewed and approved in time for the first open enrollment.

Recently CMS has issued additional guidance that states will be allowed more flexibility in establishing the exchanges than the published in July.  States with federally-operated or partnership exchanges will be given more options for maintaining control over their Medicaid and children’s health insurance program (CHIP) eligibility determination processes. The federal government will not charge states for making eligibility determinations for Medicaid or CHIP, though it will require that the states provide consumers with a seamless application process by promptly providing needed data and requiring consumers to submit the same documentation only once.  Federally funded and multi-state exchanges will consult with states on issues that traditionally are governed by state departments of insurance, such as network adequacy.

The guidance  also provides some reassurance to states concerned about maintaining the privacy of patient information shared with federal agencies and  other entities. CMS assures states that neither it nor the IRS  will not seek or maintain information that could identify individual patients or their doctors. States also had expressed concern that the federal government would charge them for access to the records that they will need to determine eligibility for Medicaid, CHIP or premium subsidies. If a state chooses not to develop a a health insurance exchange,it still will have to develop interoperable data systems and share applicant information promptly with a federally funded, multistate or partnership exchange. Such a state may receive grant funds for the cost of planning and building the computer system  that will support the one-stop application process still may receive a grant to support their planning for implementation of PPACA.

CMS announced awards of $220 million  in grants to states for the development of health insurance exchanges and oextended the deadline to apply for level one establishment grants to June 29, 2012 from December 30, 2011. Nearly every state has received at least a planning grant as of November 29th.  Level one and level two establishment grants mya still be awarded afterward. All grants must be approved by January 1, 2014. No federal money may be used to support an exchange on or after January 1, 2015.