Wisconsin court strikes liability cap

Physicians worry the decision may harm the state's steady medical liability climate.

By Mike Norbut — Posted Aug. 1, 2005

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The Wisconsin Supreme Court last month struck down the state's long-standing cap on noneconomic damages in medical liability lawsuits, leaving physicians across the state concerned that patients' access to care will be dramatically compromised.

In a 4-3 decision, the court, which in the past has upheld such caps, recognized the latest challenge, declaring the cap to be a violation of the plaintiff's constitutional right to equal protection guarantees. The court did not find any rational relationship between "the classifications of victims in the $350,000 cap on noneconomic damages and the legislative objective of compensating victims of medical malpractice fairly," nor did it see a specific connection between the amount of the cap and the notion that it helps lower liability insurance premiums, according to the majority opinion.

The court reversed the Wisconsin Court of Appeals decision on the issue, and sent the case back to the trial court for a ruling consistent with its opinion. The plaintiffs in the case, Ferdon v. Wisconsin Patients Compensation Fund, also challenged a state law requiring future medical awards exceeding $100,000 be placed in an expense fund and be paid out over time, but the court sent the issue back to the circuit court for further argument.

The ruling on noneconomic damage caps, which physicians credit as a critical factor in maintaining a steady liability climate, sent a shock wave through a medical community that had grown accustomed to the protection. The state originally established a $1 million cap in 1985, but the law expired in 1991. In 1995, the state enacted a new $350,000 cap that is regularly adjusted for inflation. It stood at $445,775 at the time of the court's ruling.

The cap withstood several constitutional challenges over the last decade, helping to cement physicians' perceptions that Wisconsin was one of the rare states to have a liability solution.

"It's really a sad day for Wisconsin's health care system," said Susan Turney, MD, executive vice president and CEO of the Wisconsin Medical Society. The WMS and the AMA/State Medical Societies Litigation Center filed a brief supporting the cap. "All we need to do is look at states that don't have caps on medical awards to see what is to come," Dr. Turney said.

Wisconsin has been one of six states the American Medical Association has considered to have a stable liability environment, compared with 20 crisis states in which doctors are retiring early, avoiding high-risk procedures or moving to a different state.

In a statement, AMA Trustee Cyril M. Hetsko, MD, said the court's decision "superseded the will of the people" and is further evidence of the need for federal liability reform. Tort reform efforts in Congress previously have failed because there is not enough support in the U.S. Senate to overcome a Democratic filibuster.

"Wisconsin has certainly benefited from medical liability reforms that include a reasonable cap on noneconomic damages," Dr. Hetsko said. "These common-sense reforms are proven to reduce frivolous lawsuits, stabilize insurance premiums, preserve competition in the liability insurance market, trim health care costs, and most importantly, preserve patient access to health care."

David Skoglind, president of the Wisconsin Academy of Trial Lawyers, saw the ruling as a victory for patients. "This is a decision that balances the scales of justice after 10 years of watching our state's legal system be blatantly tilted in favor of the insurance companies, against ordinary citizens."

Rural areas may face hardships

But the ruling could have an adverse effect on access to care, especially in rural areas, doctors said. Mark Belknap, MD, an internist and president of the Wisconsin Medical Society, said in Ashland, a small town in the northern region, family physicians are the only ones delivering babies because the obstetricians retired.

"If no one in Ashland is willing to deliver babies, the next town is Duluth [Minn.], which is 75 miles," Dr. Belknap said. "Maintaining access to care is a grave concern to everyone in our part of the state."

The need to retain doctors is a common argument among physician groups lobbying for caps. However, the court's majority opinion says data do not support the Wisconsin Legislature's notion that a cap on noneconomic damages would help reduce medical liability insurance premiums and create a desirable practice climate for physicians.

Based on evidence from cases in Wisconsin and other states, "it is not reasonable to conclude that the $350,000 cap has its intended effect of reducing medical malpractice insurance premiums," according to the opinion, written by Chief Justice Shirley S. Abrahamson.

The ruling will send physicians and supportive legislators back to the drawing board to collaborate on new legislation that could pass constitutional muster. The court's opinion did point out that it was not ruling all caps to be unconstitutional, said Ruth Heitz, associate general counsel for the medical society.

"What's surprising is in the 10 years we've had caps, we've provided proof that caps do work," Heitz said. "The court really didn't accord very much weight to prior experience.

"I do think there's certainly an opportunity for the Legislature to revisit this and demonstrate the rational basis" between caps, premiums, and the overall liability climate, Heitz said.

Discrimination claim

The Legislature will have a difficult time making that connection, said Vincent Petrucelli, a Michigan-based attorney who represented the plaintiffs, Dennis and Cynthia Ferdon and their 8-year-old son. The Ferdons, whose son was born with obstetric brachial plexus palsy, had said the cap violates the boy's constitutional right to a jury trial and due process.

Petrucelli argued to the high court that between 1996 and 2004, he counted only eight verdicts in which damages exceeded the cap. And yet, "health care costs have gone up just as fast in Wisconsin as they have anywhere else," he said.

Caps also inherently discriminate against the most severely injured victims, he said, explaining his successful argument to the court. Those with minor injuries can collect their full award, while those with severe injuries can only collect the percentage that falls under the cap, he said.

The Ferdons challenged the cap's constitutionality after a 2002 jury verdict that ruled a physician was negligent when delivering their baby, causing deformities and some paralysis to the boy's right arm.

The jury awarded $403,000 in future medical expenses and $700,000 for past and future noneconomic damages. Since the cap at that time was $410,322, the physician and other defendants asked the court to reduce the damages.

The lower courts ruled in favor of the doctor and the compensation fund, agreeing the cap was constitutional based on prior court decisions. The high court, however, said the prior rulings did not apply in this situation because they did not address the issues that are specific to this case.

While the medical community disagrees, all it can do now is wait for any fallout.

"Rather than being a destination state, we will see an exodus of physicians," said Eric Borgerding, senior vice president for the Wisconsin Hospital Assn. "We soon can be plunged into the same crisis as states with no caps."

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The state of caps

Laws limiting damages in medical liability actions have been enacted in 29 states, ranging in scope from California's $250,000 cap on noneconomic damages to Nebraska's $1.75 million cap on total damages.

Caps found unconstitutional: Alabama, New Hampshire, Oregon, Wisconsin.

Caps lower than $500,000: Alaska, California, Colorado*, Georgia*, Hawaii, Idaho, Kansas, Maine, Michigan, Missouri, Montana, Nevada, Ohio, Oklahoma, South Carolina, Texas, Utah, West Virginia. (* Colorado has a $250,000 cap on non-economic damages and a $1 million cap on total damages. Georgia has a $350,000 cap against doctors and a $350,000 cap against a facility.)

Caps $500,000 and higher: Florida, Illinois*, Indiana, Louisiana, Maryland, Massachusetts, Mississippi, Nebraska, New Mexico, North Dakota, South Dakota, Virginia. (* Illinois has action pending the governor's approval.)

Source: AMA

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Eastward bound

Meetul Shah, MD, left his family practice in Washington to practice in Wisconsin partly because he wanted lower medical liability insurance premiums. Statistics show that Wisconsin physicians, on average, pay less for insurance and have not been beset with rate increases.

Washington Wisconsin
2000 2004 Change 2000 2004 Change
Internal medicine $7,768 $14,422 +86% $5,376 $6,757 +26%
General surgery $25,343 $48,114 +90% $16,320 $22,977 +41%
Ob-gyn $39,555 $65,330 +65% $25,990 $30,618 +18%

Source: Medical Liability Monitor 2000 and 2004 rate surveys

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Doctor finds that the grass is not always greener

Meetul Shah, MD, left one state and avoided another to steer clear of rising medical liability premiums.

But the family physician may have failed in his quest to stay clear of liability problems by settling in Wisconsin, now that the state Supreme Court has ruled that the state's cap on noneconomic damages in medical malpractice cases is unconstitutional.

"It's the definition of irony. Washington [state] is thinking of passing [tort] reform. Illinois has passed it. And Wisconsin just repealed it, so to speak," Dr. Shah said.

Dr. Shah, 32, practiced the past few years at a multispecialty group in Vancouver, Wash. But his medical liability premium climbed from $1,300 to $8,500. "The [insurance] was getting much worse over time. The longer I stayed, the more it was costing to stay," he said.

He thought about moving to Illinois, where he trained to become a physician. That didn't seem much better because Illinois physicians have grappled with rising insurance rates.

"All of my friends in Illinois said, 'Please don't come here. You should go to Wisconsin.' "

So he went to Wisconsin. But just a few weeks after he moved, the state Supreme Court made its ruling -- before Dr. Shah got to see his first patient.

"At this point, it's too early to say I'm not going to stay. I'll have to work around it."

Dr. Shah echoed concerns of state medical leaders that the ruling could make it more difficult to find physicians willing to stay.

Dr. Shah was disappointed with the court's decision, but he's optimistic that state legislators will introduce new tort reform.

"I try not to let things faze me too much or I'll be an unhappy boy. Hopefully, we can fix things here so I don't have to [move] again."

--Damon Adams

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