Mayo and the End (For Now) of the Medical Malpractice Cap

Earlier this month, the Wisconsin District I Court of Appeals held that the cap on noneconomic damages for medical malpractice claims was facially unconstitutional. The case, Mayo v. Wisc. Injured Patients and Families Compensation Fund, involved plaintiffs who were awarded $16,500,000 in noneconomic damages, far more than the $750,000 cap allowed. Mayo was not the first case that examined the constitutionality of the cap nor will it likely be the last. This article takes a brief look at the history of the cap, the Mayo decision, and the future viability of caps.

Briefly, first, to explain what the cap limited: the cap was not a limit on damages; it only limited noneconomic damages. Special or pecuniary damages, i.e. medical bills, loss of services, or lost wages, were not counted towards the cap. Typical noneconomic damages in a medical malpractice claim might include pain and suffering, loss of consortium, and loss of society and companionship.

Second, given how both types have been argued in Mayo, it is important to understand what it means when a court holds that a law is unconstitutional either facially or as applied:

“If a court holds a statute unconstitutional on its face, the state may not enforce it under any circumstances, unless an appropriate court narrows its application; in contrast, when a court holds a statute unconstitutional as applied to particular facts, the state may enforce the statute in different circumstances.” Michael C. Dorf, Facial Challenges to State and Federal Statutes, 46 Stan. L. Rev. 235, 236 (1994) (cited in Olson v. Town of Cottage Grove, 2008 WI 51, 309 Wis. 2d 365, 749 N.W.2d 211, fn. 9.

I.          The beginning of the cap

In 1979, the Wisconsin legislature created Wis. Stat. § 893.55. The statute was originally created as a different type of limitation for medical malpractice claims. It comprised itself of statute of limitations language largely present in the statute’s current form. Separate from the statute was a cap of $500,000, found in Chapter 655, that automatically limited claims if the Fund dropped below certain monetary levels. State ex rel. Strykowski v. Wilkie, 81 Wis. 2d 491, 500, 261 N.W.2d 434 (Wis. 1978).

In 1985, the legislature enacted 1985 WI Act 340, which, among other changes, created a $1,000,000 cap on noneconomic damages under s. 893.55 for medical malpractice claims. Interestingly, the new cap contained a sunset clause, which terminated the cap on January 1, 1991. Sure enough, the cap disappeared on that date. Wisconsin had no cap on noneconomic damages from 1991 to 1995.

In 1995, the legislature reinstated a cap under s. 893.55. This time, per 1995 WI Act 10, the cap was set at $350,000. The statute contained a provision that instructed the director of state courts to adjust the cap based on “the consumer price index for all urban consumers.”

II.          Ferdon

A decade later, the Wisconsin Supreme Court addressed the constitutionality of the cap. In Ferdon v. Wis. Patients Comp. Fund, 2005 WI 125, 284 Wis. 2d 573, 701 N.W.2d 440, the Court held that then-$350,000 cap was facially unconstitutional in light of Wisconsin’s Equal Protection Clause.

In coming to its conclusion, the Ferdon court made several findings. Given the constitutional law nature of the issue, it began by settling on the appropriate level of judicial scrutiny. Id. ¶ 59. It decided to address the cap’s constitutionality on the rational basis standard, asking the question of whether “if a plausible policy reason exists for the classification and the classification is not arbitrary in relation to the legislative goal.” Id. ¶ 73. Justice Abrahamson, who authored the majority opinion, ultimately wrote that: the cap disproportionately affects young people (who ostensibly would have lived longer or would live longer with disability, the cap had no discernible impact on the health of the Fund, and the cap bore no relationship between the cost of premiums, consumer health care costs in general, and the quality of healthcare. Id. ¶¶ 97-176.

The Wisconsin legislature, faced with no cap after Ferdon, immediately went to work putting in a new cap. After several proposed numbers, it settled on $750,000. 2005 WI Act 183. The $750,000 remained in place until recent events. In order to inoculate itself given the Ferdon decision, the legislature added its own express objectives into the statute, writing:

  1. Protecting access to health care services across the state and across medical specialties by limiting the disincentives for physicians to practice medicine in Wisconsin, such as the unavailability of professional liability insurance coverage, the high cost of insurance premiums, large fund assessments, and unpredictable or large noneconomic damage awards, as recognized by a 2003 U.S. congress joint economic committee report, a 2003 federal department of health and human services study, and a 2004 office of the commissioner of insurance report.
  2. Helping contain health care costs by limiting the incentive to practice defensive medicine, which increases the cost of patient care, as recognized by a 2002 federal department of health and human services study, a 2003 U.S. congress joint economic committee report, a 2003 federal government accounting office study, and a 2005 office of the commissioner of insurance report.
  3. Helping contain health care costs by providing more predictability in noneconomic damage awards, allowing insurers to set insurance premiums that better reflect such insurers’ financial risk, as recognized by a 2003 federal department of health and human services study.
  4. Helping contain health care costs by providing more predictability in noneconomic damage awards in order to protect the financial integrity of the fund and allow the fund’s board of governors to approve reasonable assessments for health care providers, as recognized by a 2005 legislative fiscal bureau memo, a 2001 legislative audit bureau report, and a 2005 office of commissioner of insurance report.

III.          Mayo

In 2011, Ascaris Mayo visited the emergency room of Columbia St. Mary’s in Milwaukee. Due to what appears to have been a series of communication errors, medical professionals diagnosed, but failed to tell Ms. Mayo certain information, including antibiotic treatment that she needed. Ms. Mayo left the hospital, only to return the next day with what was diagnosed then as a septic infection. The infection caused Ms. Mayo to become comatose and caused nearly every organ to fail, eventually resulting in Ms. Mayo losing all of her extremities.

The Mayos brought an action against her treating doctors, the hospital, and the Fund. At the pre-trial stage, the Fund brought a motion on the issue of the $750,000 cap. The circuit court initially ruled that the cap was facially constitutional, but allowed for further argument on its as applied constitutionality at the post-judgment phase, if needed.

Lo and behold, the jury awarded Ms. Mayo $15,000,000 in noneconomic damages as well as $1,500,000 to Ms. Mayo’s husband for loss of society and companionship. The Fund moved to reduce the awarded damages to the $750,000, at which time the court held that the application of the cap would be facially unconstitutional as applied to Ms. Mayo.

The court of appeals, in its July 5, 2017 decision, followed the rubric set by the supreme court in Ferdon. It applied the same rational basis level of scrutiny. Id. ¶ 12. Although the appeal technically centered on the issue of the as applied constitutionality of the cap, the court of appeals mimicked Ferdon, deciding instead whether the cap was facially constitutional. Id. ¶ 9.

The law presented before the court in Mayo differed slightly from that which was reviewed by the court in Ferdon. With the introduction of the $750,000 cap, the legislature added in its legislative objectives in order to facilitate (or better survive) a constitutional challenge. The analysis, however, did not change all that much. In many ways, the statutory objectives overlapped with Justice Abrahamson’s rational review analysis in Ferdon. Nevertheless, presented with its convenient objectives, the Mayo court conducted its rational review scrutiny of the cap.

In the end, even with the new statutory objectives, the court largely came to the same conclusions as the Ferdon court. As the court put it: “[a]ll of the conclusions reached by the supreme court in Ferdon continue to hold true today.” Id. ¶ 21. The court of appeals looked at the legislative objectives against quantifiable data it had over the past 10 years or so, finding that there was no proof that the cap achieved any statutorily-listed objective.

IV.          Post-Mayo

For the immediate future, Wisconsin no longer has a cap on noneconomic damages for medical malpractice claims. The loss of the cap is subject to either an appeal to the supreme court, or the legislature, as it did in 2005, amending the statute with a new cap. Of possible relevant note—though it is dangerous to divine too much from summary procedure—the supreme court has technically had an opportunity to review Mayo, having denied a petition to bypass the court of appeals in September 2016.

In terms of an appeal, there are arguments to be made in favor of reversing the court of appeals. In the Mayo majority opinion, the court cited to the s. 893.55 legislative objectives while conducting its rational basis review. That made sense. When deciding whether there are policy reasons for a law, there are few better places to begin than a list of policy reasons embedded in the statute by the drafters of that law. Arguably, however, the court of appeals decision did not look at every statutory policy reason for the cap.

Predictability (or unpredictability) is mentioned in three of the four statutory objectives for the cap. Predictability, however was hardly mentioned in the court of appeals’ decision. The bulk of the court’s reasoning concentrated on quantifiable data from the Fund’s last ten years. To be sure: the court was wise to do so. Much of the reasoning behind the cap, including the statutory objectives, has been nested in the idea that the cap makes sure the Fund never becomes insolvent. By using quantifiable data, for example citing to the amount in dollars of assets currently held by the Fund or the amounts the Fund has paid out over the past decade, the Court made its decision not just on abstract or conceptual principles that have sometimes dictated legal battles over statutory caps of all kinds.

Predictability, however, is not achieved solely because an entity has considerable assets. In many respects, the two concepts (wealth versus predictability) do not overlap at all. A wealthy entity can often be just as risk-prone or subject to unpredictability just as much as a relatively-poorer one.

Furthermore, the notion of predictability does not only work retroactively. A farmer does not end his crop insurance just because he or she has benefited from several, or a decade’s worth of good seasons in a row. He or she knows that a single event might have a catastrophic effect. By the same stroke, without the cap, the Fund has a hypothetical unlimited exposure to future claims, regardless of whether or not past claims ever reached “catastrophic” levels. A more appropriate response to several years of low claims for any insurance contract is to change the assessments or premiums, not to eliminate the caps or limits for future claims.

The court of appeals deftly and persuasively dismissed many of the arguments in favor of the cap. Its reference to the higher physician retention rates of other states which did not have medical malpractice caps dispelled much of the argument that the cap influenced doctors to stay. Id. ¶ 21, fn. 5. The court similarly pointed to the fact that the Fund has considerably grown over the past decade, since the last cap was put in place. Id. ¶ 26. Fortunately for proponents of the cap, a future court need only find that a plausible policy reason exists.

Lastly, it is important to note how arguably cumbersome the cap constitutionality methodology has played out in Ferdon and Mayo. Both cases, but especially Mayo, reviewed the effects of the cap in terms of a look back over the decade or so while the cap operated. If history repeats itself, and either the supreme court denies review or affirms the court of appeals on similar grounds, then the legislature will likely write a new cap. If future courts continue the cap constitutionality methodology employed in Ferdon and Mayo, they will have to wait a decade in order to review the new cap. No matter how you feel about the cap, the way it is reviewed is slow and painful.

In sum, the court of appeals in Wisconsin has done away with the cap on noneconomic damages in medical malpractice claims. In Mayo, the court held that then-$750,000 cap had no more rational effect on the purposes behind such a cap than the previously-struck down $350,000 cap more than a decade ago. In the near future, it will be interesting to see whether Mayo is appealed, or if not, whether the legislature will draft a new cap. As explained above, there are arguments to be made in favor of the cap. Stepping further back, if a cap is reinstated or redrafted, whether the cap can ever survive a constitutional challenge when the Fund has significant assets will be an interesting question going forward given the courts’ inclination to focus so heavily on the Fund’s assets.

For more information please contact Attorney Frank J. Remington at remingtonf@corneillelaw.com or (608) 662-1166

This news update is designed to provide general, educational information on pertinent legal topics, and the statements therein do not constitute legal advice. This news update is not intended to create an attorney-client relationship between you and Corneille Law Group, LLC. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.

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