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How Indiana’s Medical Malpractice Cap Works

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February 15, 2016 | Medical Malpractice |


Do you know how medical malpractice awards are handled in Indiana? You might think that medical malpractice awards can be unlimited and that the doctor and their insurance company pay the claim. But in fact, neither of those things is true: Claim amounts have an absolute cap, and physicians and their insurers only pay part of each claim.

These limitations have been in place for several decades and were intended to create a fair system that protects both healthcare practitioners as well as patients and their families. Most of those who understand the system feel that it works—most of the time. However, some argue that there have been situations where those who need the most help have been let down by the system.

First-in-Nation Malpractice Reform

In 1975, Indiana imposed a cap on medical malpractice awards. It was the first state to do so, and 34 other states have followed. The idea behind the cap was that the best interests of everyone would be served if doctors knew they would not be ruined by excessive malpractice awards, while at the same time patients knew that they would be guaranteed compensation for successful claims because the State would step in. Funded by a fee on malpractice insurance, the State created the Patient’s Compensation Fund (PCF), a new mechanism to cover the expense of large claims. The PCF is funded by a surcharge on insurance paid by physicians and hospitals.

The cap on any single damage award, which has been raised since 1975, is limited to $1.25 million. When a large amount is awarded (over $250,000), the physician is only responsible for the first $250,000. After that, the PCF pays a maximum of $1 million more, adding up to the statutory cap of $1.25 million. In addition, no physician has to pay more than $750,000 in total claims in a single year; above that cumulative amount, the PCF steps in to pay up to $1 million per case.

Not Always Fair

But is the cap always a good thing? Some think not. Take the case of an Indiana child left disabled for life after medical errors led to her premature birth in 2003. A medical expert at trial testified that the lifetime costs for her care would likely be between $8 million and $10 million. In 2013, a jury awarded the family $15 million. Because of the medical malpractice cap, that amount was reduced to only $1.25 million.

The difference in costs and payments—in this case millions of dollars—is critically important to some of those harmed. The family has sued the state, hoping to overturn the cap, and a verdict might be reached in state court later this year. Even though Indiana’s cap has been in place for over 40 years, there is precedent: Similar cap laws in Illinois and other states have been ruled unconstitutional and overturned.

Cap Holds Steady, Surcharges Increased

Some Indiana law makers have concerns about the current law, or at least about the current cap amount. A bill had been making its way through the legislature earlier this year which would have raised the cap to $1.65 million. However, it was unexpectedly withdrawn, and no further action is expected this session. In the meantime, because of several recent large multi-plaintiff settlements, the PCF has paid out more than anticipated in recent years and has already announced that it will raise the surcharge rates significantly in 2016 (more than 4% for physicians and over 11% for hospitals).

Contact a Medical Malpractice Attorney Today

If you or a loved one have been victim of medical error, medical negligence, or another harmful event, you are urged to contact the Indianapolis Medical Malpractice Attorneys of Wilson Kehoe Winingham. The lawyers at WKW can help you understand your options. Call 317.920.6400 or fill out an online contact form for a free, no-obligation case evaluation.

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