As I mentioned in a previous post, almost all of the states have enacted a variety of laws that treat medical malpractice cases differently from all other torts. “Medical malpractice reform proponents argue that tort reforms – such as limiting malpractice awards, tightening statutes of limitations for filing claims and screening cases before they go to trial – not only reduce overall medical care spending, but also increase access to care. Opponents dispute these claims, arguing that ‘a nationwide crackdown on malpractice, not a campaign to roll back the rights of patients who are injured,’ is needed instead.” National Conference of State Legislators, https://www.ncsl.org/portals/1/documents/health/MedicalMalReform-2011.pdf, page 1 (footnote omitted). One of the many types of “reform” statutes is described as follows:
Periodic payment provisions allow or require insurers to pay damage awards over time, rather than in a lump sum. Thirty jurisdictions have periodic payment laws. Among states that set a specific threshold above which damages must be paid in whole or in part periodically rather than as a lump sum, $100,000 is the most frequent threshold. The threshold in California and Nevada is $50,000. Periodic payment laws in Alabama, Arizona, Arkansas and Georgia have been held unconstitutional. Opponents of periodic payment requirements argue this decision should be the plaintiff’s, some of whom may prefer to invest the awards themselves or may be concerned about the solvency of the entity that provides the annuity coverage. (Id., page 2; emphasis added.)
The Missouri Supreme Court has just joined the four states listed above in declaring Missouri’s periodic payment statute unconstitutional. The case is Williams v. Mercy Clinic, https://www.courts.mo.gov/file.jsp?id=135696. The plaintiff sustained severe, permanently disabling injuries due to her physicians’ failure to timely diagnose and treat Wilson’s disease. The jury’s award of $28.9 million included $21 million for future medical expenses. That figure, of course, represented the total anticipated cost of future medical expenses reduced to present value. The plaintiff’s economic expert testified that the per annum interest rates used to calculate present value ranged from .74% to 5.18% over the plaintiff’s 57-year life expectancy.
The trial judge ruled that the plaintiff would receive $10 million of the future medical expenses award in periodic payments at an interest rate of 1.2%, which was the rate mandated by the Missouri periodic payment statute. On appeal, the plaintiff argued, and the supreme court agreed, that the statute violated her due process rights under the state constitution:
Applying [the periodic payment statute] here, after the jury discounted the award to present value, deprived Williams of the full value of the jury’s award. The $10 million of Williams’ future medical damage award to be paid periodically was effectively discounted twice – once by the jury when it reduced the entirety of the future medical damage award to present value, and again when the $10 million in future periodic payments was subjected to the arbitrarily low statutory interest rate. Subjecting the $10 million to future periodic payments at a different interest rate than was used to reduce the future medical damages results in Williams receiving less than the jury awarded her. [The statute] is unconstitutional as applied to Williams. Accordingly, the judgment is reversed and the case is remanded. The circuit court is directed to enter a new periodic payment schedule that ensures Williams will receive the full benefit of the jury’s award for future medical care. (Id., pages 9-10; footnotes omitted.)
Despite the court’s “as applied” holding and its footnoted caveat that “It is conceivable that the interest rate requirement…could be constitutional when applied to a different set of facts,” I find it difficult to come up with a hypothetical set of facts that would lead to a different conclusion. Therefore, as a practical matter, it seems that the mandated 1.2% interest rate in the Missouri periodic payment statute is unconstitutional on its face. Amending the statute to require the application of market interest rates to periodic payments, based on expert testimony, would cure this defect; whether the Missouri legislature will be interested in taking that step remains to be seen.
The provisions of these periodic payment statutes vary significantly from state to state, and the rationales of the other four courts that declared such statutes unconstitutional (Alabama, Arizona, Arkansas and Georgia) are probably different from the Missouri Supreme Court’s. The plaintiffs’ bar in the 25 states that still have periodic payment laws on the books should carefully review those laws to determine if their constitutionality is open to challenge based on the rationales of any of the five courts that have struck down their states’ periodic payment laws.
