Why Impose Caps?
Evidence from states that have actually enacted some form of legislative malpractice tort reform indicates that premiums for malpractice insurance are lower when tort liability is restricted than they would be otherwise. However, even large savings in premiums can have only a small direct impact on health care spending, private or governmental. This is true because malpractice costs account for less than 2 percent of that spending. Although advocates cite other possible effects of limiting tort liability, such as reducing the extent to which physicians practice “defensive medicine” and preventing widespread problems of access to health care, the evidence of such is weak or inconclusive (CBO Brief, 2004). California is often cited as the model for tort reform. In 1975 California passed the Medical Injury Compensation Reform Act (MICRA). This legislation capped NEDs at $250,000. Although there was an initial reduction in premium rates, premiums continued to rise. “By 1988, twelve years a
