Everyone wins in deal to increase malpractice payouts — especially victims

It's being called the Sacramento equivalent of the Berlin Wall falling. Or a Middle East peace pact.

Long-warring enemies have suddenly negotiated a historic compromise over how much money medical malpractice victims can be awarded for pain and suffering.

On most public policies, California is politically progressive. But on medical malpractice payouts, no state has been more regressive for nearly half a century.

We're also seeing a rare example of how a governor and legislature can achieve overwhelming bipartisan agreement on a contentious issue despite opposing sides being locked in their positions for decades.

The key to ending this war was the desire and ability of combative private interests to lay down their arms and negotiate. Hardly anything major gets done in the state Capitol without willing powerful interests — euphemistically called "stakeholders."

Everyone wins this time, especially malpractice victims.

California voters also benefit because they won't be bombarded with a $100-million-plus barrage of disingenuous TV ads for and against a trial-lawyers-backed reform initiative on the November ballot.

The initiative will be withdrawn if Gov. Gavin Newsom signs the compromise legislation before a June 28 deadline. He will and probably much sooner. The governor spurred the interests to reach agreement. The measure, AB 35, is speeding through the Legislature.

On one side are trial lawyers and consumer activists. On the other are healthcare providers and insurers.

This war has been raging for 47 years, ever since the lawyer lobby victimized itself with political malpractice by not accepting a good deal offered by the sponsors of legislation to cap pain and suffering awards. The lawyers miscalculated.

In 1975, doctors were threatening to retire or flee the state and clinics were near closing because malpractice awards and insurance premiums were climbing. New Gov. Jerry Brown and the Democrat-controlled Legislature overreacted by capping pain and suffering awards at $250,000.

Trial lawyers messed up by not grabbing an offer to index the cap with annual inflation adjustments. The lawyers figured that if the cap was permanently fixed at only $250,000, Brown would veto the measure and, if not, the state Supreme Court would overturn it. But Brown signed it and the court left the cap alone.

If there'd been inflation boosts, that cap today would be about $1.3 million.

Victims have had a hard time finding an attorney willing to handle a case with such a low maximum award. A winning lawyer may get roughly a third of the judgment. And after paying for expert witnesses and other costs, a victim may net around $100,000 — for a lost limb, blindness or dead loved one. Any actual economic losses, however, are covered.

The lawyers have been fighting back for decades without achieving anything for victims. In 1987, the Legislature reaffirmed the cap but tweaked it to slightly benefit attorneys only. That was part of a legendary "napkin deal" — scribbled on a restaurant napkin by lawmakers and lobbyists.

In 2014, the lawyers failed miserably in their attempt to raise the cap to $1.1 million. They muddied the issue by trying to require drug testing of hospital doctors. Voters lopsidedly rejected the initiative.

Both sides were arming for another ballot battle this year, but neither wanted to spend the needed tens of millions. So they sensibly negotiated what they believe will be a lasting peace.

The deal is this: The cap will be gradually raised over 10 years, then indexed. The phase-in was demanded by healthcare providers — especially clinics — to assure they're not bankrupted by dramatic increases in awards and premiums.

In January, the cap will be hiked to $350,000, then gradually boosted to $750,000. If there's a wrongful death, the cap will be $500,000 initially and grow to $1 million. Then there'll be annual 2% increases.

But lawyers and injured patients gained additional money targets. They can collect separate maximums from two or three provider groups — up to $3 million total for a wrongful death.

During the Senate floor debate Thursday, Judiciary Committee Chairman Tom Umberg (D-Santa Ana) asserted that the Legislature passes thousands of bills, but "only a handful" change things so significantly.

The measure passed 37 to 1.

It's unlikely the deal would have come together without some key players.

One was Nick Rowley, a wealthy trial attorney from a hardscrabble rural background. His newborn son died 14 years ago from alleged malpractice. He bankrolled signature gathering for the initiative with $7 million and was prepared to put up another $40 million during the fall campaign.

"If we lost, I was going to just file another ballot measure," Rowley told me.

That tenacity caught weary opponents' attention.

Former state Insurance Commissioner Steve Poisner — a Republican while in office but now an independent — was pivotal. He wrote an op-ed piece in December calling the cap a "gross injustice."

Poisner phoned longtime friend Jim Brulte, former leader of Republican legislators and the state GOP who's now a consultant.

He asked him to help eliminate the cap. Brulte replied that he was on the other side advising medical providers.

But Brulte convened a secret meeting with Poisner, Rowley and Dustin Corcoran, chief executive of the California Medical Assn. That began weeks of intense negotiations quietly urged on by Newsom.

"This deal would not have happened but for the governor," says Jamie Court, president of Consumer Watchdog, which has fought the caps for years.

It also wouldn't have happened without a 2014 reform passed by the Legislature. The law allows initiatives to be taken off a ballot if a compromise is negotiated and passed by lawmakers.

All this shows what can be achieved when the only goal is good policy — not political gain.

Political columnist George Skelton has covered government and politics for nearly 60 years and for The Los Angeles Times since 1974.