Damage Caps and Medical Malpractice Litigation: VI

Ok, one last posting on cap design, before I move on to the impact of caps on physician supply. As I noted previously, when California adopted the first non-econ cap in 1975, it set the level at $250,000, without an inflation adjustment. That approach has anchored subsequent debates over non-econ caps. Most state damage caps are not indexed for inflation, so their impact becomes stricter over time.

If the California non-econ cap was inflation adjusted, it would have been $855k in 2003, and $970k in 2007. The next table shows how not adjusting for inflation affects the impact of the California cap at various points over time. The first four rows estimate the payout reduction in tried cases if the cap had been set at the level that applied during the specified year. The last four rows estimate the payout reduction into the future, using two different assumptions about the inflation rate.

To summarize the last several postings, cap design is usually ignored, but it makes a big difference in cap impact. The moving parts include the absolute cap level, whether the cap is on non-econ damages or total damages, whether it affects all or only some cases, and whether it is inflation-adjusted or not.

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