Opinion
GATOS-SARATOG INC S.F. 24171
3-31-1983
, 660 P.2d 829 AMERICAN BANK AND TRUST COMPANY, as Special Administrator, etc., Plaintiff and Respondent, v. COMMUNITY HOSPITAL OF LOS, Defendant and Appellant.
Thomas R. Fellows, Robinson & Wood, San Jose, for defendant and appellant. Popelka, Allard, McCowan & Jones, Bernard J. Allard, Donald D. Howard, Stephen A. Barber, San Jose, and Michael J. Murray, San Francisco, for plaintiff and respondent.
AMERICAN BANK AND TRUST COMPANY, as Special Administrator, etc., Plaintiff and Respondent,
v.
COMMUNITY HOSPITAL OF LOS GATOS-SARATOGA, INC., Defendant and Appellant.
March 31, 1983.
For Opinion on Rehearing, see 204 Cal. Rptr. 671, 683 P.2d 670.
Opinion, 104 Cal.App.3d 219, 163 Cal.Rptr. 513, vacated.
Thomas R. Fellows, Robinson & Wood, San Jose, for defendant and appellant.
Hassard, Bonnington, Rogers & Huber, David E. Willett, Maureen E. Corcoran, Howard Hassard, Charles Bond, San Francisco, John H. Larson, County Counsel (Los Angeles), Peter R. Krichman, Deputy County Counsel, James E. Ludlam, Musick, Peeler & Garrett, Los Angeles, Ellis J. Horvitz, Marjorie G. Romans, John L. Klein, Kent L. Richland, Horvitz & Greines, Horvitz, Greines & Poster, Encino, Fred J. Hiestand, San Francisco, Donald L. Reidhaar, James E. Holst and John F. Lundberg, Berkeley, as amici curiae on behalf of defendant and appellant.
Popelka, Allard, McCowan & Jones, Bernard J. Allard, Donald D. Howard, Stephen A. Barber, San Jose, and Michael J. Murray, San Francisco, for plaintiff and respondent.
Arne Werchick, San Francisco, Leonard Sacks, Northridge, Glen T. Bashore, North Fork, Ralph Drayton, Sacramento, Richard D. Bridgman, Oakland, Robert E. Cartwright, San Diego, Ian Herzog, Edward I. Pollock, Los Angeles, Harvey R. Levine, San Diego, Stephen I. Zetterberg, Claremont, Wylie Aitken, Santa Ana, Sanford M. Gage, Beverly Hills, J. Nick DeMeo, David M. Harney and Michael F. Dillingham, Los Angeles, as amici curiae on behalf of plaintiff and respondent.
MOSK, Justice.
We consider here a constitutional attack on one provision of the 1975 Medical Injury Compensation Reform Act (MICRA)--namely, the section that permits a judgment for periodic payment of "future damages" to be awarded against a "provider of health care services." (Code Civ.Proc., § 667.7.) We shall conclude that the provision violates state and federal equal protection guarantees insofar as it applies to judgments against hospitals.
Defendant Community Hospital of Los Gatos-Saratoga, Inc. (the hospital), appeals from a judgment entered on a jury verdict for $198,069.88 in favor of plaintiff Mary English.
Late in 1976, after a scan had disclosed a lesion or tumor, plaintiff was admitted to the hospital for brain surgery. On the eve of the scheduled operation she fainted or fell in a shower stall and suffered severe burns to thigh, hip, and groin, as a result of overheated water. After the burns had been treated and dressed by her neurosurgeon, the operation proceeded as scheduled. The tumor, though then in remission, was found to be malignant and of a type which reportedly results in death within one year in 95 percent of all cases. Following release from the hospital plaintiff received radiation and chemotherapy treatments.
Treatment for her burn injuries was undertaken by a plastic surgeon under whose care a gradual but steady healing took place. Because of the burns, however, plaintiff was totally disabled for four months and partially disabled for two more. Intermittent breakdown and blistering of the healed tissues continued to occur.
At the time of trial, some fourteen months after the accident, there was still residual disability caused by recurring blisters, and scarring in three of the four burn areas had resulted in a permanent cosmetic deformity. It was reasonably probable that future surgery would be required, followed by periods of total and partial disability to permit proper healing.
Plaintiff testified that she had not been able to work in 1977, the year following the accident; that she did not anticipate returning to work in 1978 because the condition of her left knee and leg prevented her from driving a car; and that if future surgery were recommended she "would certainly do it."
On March 13, 1978, the jury rendered a general verdict in favor of plaintiff for $198,069.88. The hospital moved for a new trial on all statutory grounds (Code Civ.Proc., § 657), and requested in the alternative an order conditioned on remittitur (Code Civ.Proc., § 662.5, subd. (b)). The motion was denied. The hospital also moved, pursuant to section 667.7 of the Code of Civil Procedure, that the court enter a judgment providing for the periodic payment of all future damages in excess of $50,000. That motion also was denied, on the ground that section 667.7 is violative of state and federal constitutional provisions guaranteeing equal protection and due process of law. A lump-sum judgment was entered in the amount of the verdict.
The hospital's appeal from the judgment is now before us. On November 24, 1978, while the appeal was pending, plaintiff died of an ovarian cancer. On stipulation of the parties it was ordered that American Bank and Trust Company, as special administrator of the estate, be substituted as plaintiff and respondent in the action. The Statute
On May 16, 1975, responding to what came to be popularly described as "the medical malpractice crisis," the Governor issued a proclamation convening the Legislature in extraordinary session. The proclamation declared that medical malpractice insurance rates had risen to levels which many doctors found intolerable, that the inability of doctors to obtain such insurance at reasonable cost was endangering the health of the people and threatened the closing of many hospitals, and that the long term consequences of such closing could seriously limit the health care provided to hundreds of thousands of Californians. (Governor's Proclamation to Leg. (May 16, 1975) Stats.1975, Second Ex.Sess. 1975-1976, p. 3947.)
The proclamation went on to state that only "sacrifice and fundamental reform" would provide a lasting solution. "It is critical," the Governor concluded, "that the Legislature enact laws which will change the relationship between the people and the medical profession, the legal profession and the insurance industry, and thereby reduce the costs which underlie these high insurance premiums."
The genesis of the crisis was explained by the legislator who was the principal author of MICRA as follows: The medical malpractice insurance industry in California had severe problems for many years because it had failed since 1957 to charge doctors premiums high enough to allow sufficient reserves to be set aside to meet future claims. By 1975, the crisis affected the public health of the state's residents. Because the number of malpractice claims and the dollar amount of judgments had risen sharply since 1968, insurers were paying out $180 for each $100 in premiums collected. As a result, they were either abandoning the malpractice market or raising premiums by several hundred percent.
Nor could the medical profession afford to absorb these increases or to pass them on to their patients. Only 27,000 doctors in California carried independent medical malpractice insurance, and this small number could not absorb the entire increase. Moreover, because doctors received a substantial proportion of their fees from the government, they could only pass the increases on to a limited number of patients who paid their own expenses, and these patients were unable to shoulder the entire burden. Some physicians, believing that they could neither absorb the additional premiums nor pass them on to their patients, went on strike, and medical care in certain sections of the state came to a virtual halt. (Keene, California's Medical Malpractice Crisis, A Legislator's Guide to the Medical Malpractice Issue (Georgetown U. and Nat. Conf. of State Legs. 1976) at p. 27.)
The Medical Injury Compensation Reform Act (Stats.1975, Second Ex.Sess. 1975-1976, ch. 1, p. 3949 et seq.) was the Legislature's response. Generally speaking, it addressed the problems by enacting reforms in three basic areas: medical quality assurance, medical malpractice insurance, and medical malpractice litigation. Regarding medical quality assurance MICRA undertook a comprehensive restructuring of existing machinery for the licensing, regulating, educating, and disciplining of physicians and other health care providers. (See Bus. & Prof.Code, §§ 2000 et seq., 2220 et seq., 2320 et seq.) With respect to malpractice insurance MICRA introduced a procedure by which a physician or other health care provider may demand explanation and, in some cases, obtain a public hearing requiring justification by the insurer of substantial rate increases. (Ins.Code, §§ 11587, 11588.)
In the area of medical malpractice litigation MICRA directed its attention to four basic concerns: time limitations, damages, attorney's fees, and arbitration. With respect to limitations of time MICRA set up a special statute of limitations for actions against health care providers (Code Civ.Proc., § 340.5) and established the requirement, enforceable through attorney discipline, of a 90-day notice of intention to file suit (Code Civ.Proc., §§ 364, 365). Regarding damages in such actions, it imposed a ceiling of $250,000 on the amount recoverable for "noneconomic losses" (Civ.Code, § 3333.2), permitted "collateral source" evidence while precluding subrogation (id., § 3333.1), and introduced the system of periodic payment which concerns us here (Code Civ.Proc., § 667.7). Limitations were placed on attorney's contingency fee contracts (Bus. & Prof.Code, § 6146) and language was prescribed for arbitration clauses in contracts for medical services (Code Civ.Proc., § 1295). Section 667.7 of the Code of Civil Procedure, set forth in full in the margin, provides that in an action for medical malpractice involving $50,000 or more "future damages" (i.e., "damages for future medical treatment, care or custody, loss of future earnings, loss of bodily function, or future pain and suffering ...") the court shall on request of either party enter a judgment ordering the periodic payment of such damages, and specifying the amount and interval thereof. The specification of these matters may not be altered following entry of judgment. If the plaintiff subsequently dies, the debtor retains any sums which have not been paid out in accord with the periodic payment schedule set forth in the judgment, except as to future earnings if the plaintiff leaves dependents.
The hospital, following a general verdict of nearly $200,000, moved under section 667.7 for periodic payment of future damages. The motion was resisted on two grounds: (1) that the statute was inapplicable because future damages had not been shown to equal or exceed $50,000; and (2) that the statute was unconstitutional. The trial judge, expressing uneasiness that the statute required him rather than the jury to determine what portion of the award was attributable to future rather than present damages, determined (without making a specific apportionment) that "a substantial portion of the award appreciably in excess of $50,000 was awarded to the plaintiff for future damages" and, therefore, that the statute was applicable. He went on to conclude, however, that the measure violated state and federal constitutional guarantees of equal protection and due process of law. Operation and Effect of the Statute
Before proceeding to the consideration of plaintiff's constitutional challenge, we discuss a subject to which the parties and amicus curiae devote much attention: the operation and effect of section 667.7.
The section was designed to reduce malpractice premiums by lessening the cost to the insurer of supplying insurance. It provides two mechanisms for the achievement of this goal. First, it allows the insurer to retain the benefit of the use of the future damages portion of the award, in accordance with the payment schedule specified in the judgment. Thus, the opportunity to invest the retained sums in high yield long-term accounts and to obtain earnings on such amounts commensurate with the rate of inflation is shifted from the injured victim to the insurer. In addition, the insurer avoids the necessity of liquidating large amounts of capital to satisfy the judgment. Second, the insurer retains outright any portion of the future damages award which has not been paid out at the time of the victim's death, except as to future earnings if the victim leaves dependents.
Although the hospital claims that the effects of these provisions on the injured plaintiff are minimal--indeed, that they are beneficial in some respects--we have serious misgivings about the pragmatic result.
The hospital's primary assertion is that periodic payments are fair to the malpractice victim because damages are paid out as they are incurred--month by month and year by year. But this assumes that a court, in structuring the payments for future damages, is able to predict with some accuracy the condition of the plaintiff and the rate of inflation for perhaps decades into the future. If the victim's condition deteriorates so that he requires medical treatment or custodial care involving costs more than the amount set forth in the schedule of payments, he is unable to obtain these additional sums (or to be compensated for his increased pain and suffering) because the payment schedule is fixed. Even if his condition remains as predicted, it is impossible to foresee in advance the rate at which future medical costs will increase. For a number of years, such costs have been increasing at a pace far higher than the general inflation rate. (Health United States--1981 (U.S. Dept. of Health and human Services, Public Health Service, Office of Health Research, Statistics, & Technology) p. 83.)
By depriving a malpractice victim of the opportunity to gain access to the whole amount of the judgment and the benefits from its investment, section 667.7 places upon him the entire risk that unforeseeable future consequences of his injury will render the periodic payments inadequate to meet his needs. This problem is alleviated for the victims of torts other than medical malpractice; they may use the entire amount awarded by the judgment and its earnings as needed.
The second feature of the statute is the retention by the insurer of any sums not paid out at the time of the victim's death. This provision was designed by the Legislature to prevent "the potential windfall from a lump-sum recovery which was intended to provide for the care of an injured plaintiff over an extended period who then dies shortly after the judgment is paid, leaving the balance of the judgment award to persons and purposes for which it was not intended." (§ 667.7, subd. (f).) The hospital justifies this provision on the ground that the premature death of a judgment creditor signifies that future damages (except as to earnings if the creditor leaves dependents) have in fact not been sustained, and that there is no reason to require a defendant to gratuitously pay for harm which has not occurred. While it is true that a windfall results to the heirs of a malpractice victim if there are funds remaining from the judgment at the time of his death, in a real sense the availability of such a fund is itself due to the fact that the statute prevents the victim from using the entire amount awarded as his needs may require. The sums retained by the insurer are the same funds which would have provided a financial safety valve to the victim for unexpected expenses connected with his injury during the course of his life, but which the statute prevents him from using to the extent he may find necessary.
We turn next to the hospital's assertion that the malpractice victim whose recovery is paid out on a periodic basis derives certain benefits from the arrangement. In this connection, we note that some decisions which have considered the constitutionality of statutes imposing disabilities on certain classes of tort victims have relied on the presence or absence of a quid pro quo to the disadvantaged class as a factor in their determination.
The situation which comes most readily to mind is workers' compensation. While the enactment of a program for workers' compensation deprives an employee of his common law right to obtain damages against his employer in most circumstances, this disadvantage has been justified on the ground that he receives in exchange greater certainty of recovery and an award of compensation without regard to fault. (New York Central R.R. Co. v. White (1917) 243 U.S. 188, 201, 37 S.Ct. 247, 252, 61 L.Ed. 667; Hurst v. Triad Shipping Co. (3d Cir.1977) 554 F.2d 1237, 1243-1244; see also Carr v. United States (4th Cir.1970) 422 F.2d 1007, 1011.)
Two recent cases have used a similar rationale in contexts other than employee injuries. In Duke Power Company v. Carolina Env. Study Group (1978) 438 U.S. 59, 93, 98 S.Ct. 2620, 2640, 57 L.Ed.2d 595, the United States Supreme Court upheld a federal law imposing a monetary limit on liability for nuclear accidents resulting from the operation of federally licensed private nuclear power plants. In meeting a due process challenge to the legislation, the court relied in part on the fact that "a reasonably just substitute" for the common law cause of action was provided to the victims of such accidents by Congress' commitment to take action in the event the monetary limit on liability was exceeded, and by other advantages the legislation offered.
Closer to the mark is Wright v. Central Du Page Hospital Association (Ill.1976) 63 Ill.2d 313, 347 N.E.2d 736, 742-743, which held unconstitutional a statute enacted, like MICRA, to respond to a purported medical malpractice crisis in Illinois. Among other provisions, the statute placed a limit of $500,000 on recoveries in malpractice actions. The court held this provision unconstitutional on the ground that depriving the seriously injured malpractice victim of full recovery without a quid pro quo constituted a special law in violation of the Illinois Constitution. Although the court expressly refrained from holding that the Legislature was absolutely prohibited from abolishing a common law cause of action without providing a quid pro quo, it held that the limitation in question was arbitrary. (See also Arneson v. Olson (N.D.1978) 270 N.W.2d 125, 134-135; Simon v. St. Elizabeth Medical Center (Ohio Ct.Com.Pleas 1976) 355 N.E.2d 903, 910; but see Jones v. State Board of Medicine (Idaho 1976) 97 Idaho 859, 555 P.2d 399, 408-409 ; State ex rel. Strykowski v. Wilkie (Wis.1978) 81 Wis.2d 491, 261 N.W.2d 434, 447-448.)
We should not be understood as holding that the Constitution requires the Legislature to provide a quid pro quo each time it diminishes the common law rights of tort victims. However, as the cases cited above make clear, the question whether such persons derive some advantage from the legislation is not irrelevant to a determination of whether they have been deprived of their constitutional right to equal treatment under the law. (See Note, Learner, Medical Malpractice (1981) 18 Harv.J.Legis. 143.)
One advantage derived by the victim of malpractice from periodic payments, according to the hospital, is that it prevents the victim or his family from dissipating the monies awarded, so that continued compensation is assured to meet future needs. This is true, of course, but the victim who receives a lump-sum payment may also assure a continued income by purchasing an annuity and he may, in addition, derive growth and flexibility by acquiring a liquid, income-producing investment with some of the funds awarded by the judgment, and adopt other means to hedge against inflation losses. Thus, we cannot view the provision for inflexible periodic payments as a "reasonably just substitute" for a lump-sum award.
Another advantage advanced by the hospital is that the victim receives significant tax benefits from periodic payments which he would not obtain from a lump-sum recovery. Damages for personal injuries are exempt from taxation (26 U.S.C. § 104(a)(2)), but the return earned on the investment of that sum is taxable. However, according to a ruling of the Internal Revenue Service relied on by the hospital, periodic payments received in satisfaction of a recovery for personal injuries are exempt from taxation because the plaintiff does not have the "economic benefit of the lump-sum amount." (Rev.Rul. No. 79-220, C.B. 1979-2, 74.) Thus, the reason for the exemption is that the victim does not receive any return on the portion of the award withheld under the periodic payment judgment (except for the possible exception of interest, which is presumably taxable). It seems obvious that it is to the advantage of the victim to obtain a return on the invested lump-sum award, even though he must pay taxes on the profit, if the alternative is to forego the opportunity to earn any return.
Thus we conclude that section 667.7 imposes serious detriments on the victims of malpractice, and that they derive no quid pro quo from the legislation to compensate for these disadvantages. Equal Protection
We come, then, to the primary issue involved in this proceeding--whether section 667.7 offends the clauses of the state and federal Constitutions that guarantee equal protection of the laws. (Cal. Const., art. I, § 7; U.S. Const., 14th Amend., § 1.)
There are three respects in which the classifications of section 667.7 are urged to exceed constitutional limits: (1) The statute sets the tortfeasor who is a "health care provider" apart from other tortfeasors by permitting him to pay future damages of $50,000 or more on a periodic (rather than a lump-sum) basis, subject to modification on the subsequent death of the victim. (2) It sets the victim of medical malpractice apart from other victims by requiring him to accept payment on the terms above described. (3) It classifies medical malpractice victims by limiting its application to those suffering future damages of $50,000 or more, permitting all others to obtain a lump-sum judgment.
The standard to be applied in considering whether a classification denies equal protection of the law depends on the character of the interest at stake. In the case of a statute which involves a suspect classification, or touches on a fundamental interest, the classification is subject to strict scrutiny to determine its validity. (Shapiro v. Thompson (1969) 394 U.S. 618, 638, 89 S.Ct. 1322, 1333, 22 L.Ed.2d 600; Serrano v. Priest (1971) 5 Cal.3d 584, 597, 96 Cal.Rptr. 601, 487 P.2d 1241.) The right to recover in tort has been held not to invoke a strict scrutiny analysis. (See Duke Power Co. v. Carolina Env. Study Group, supra, 438 U.S. 59, 93-94, 98 S.Ct. 2620, 2640-2641, 57 L.Ed.2d 595; Brown v. Merlo (1973) 8 Cal.3d 855, 862, fn. 2, 106 Cal.Rptr. 388, 506 P.2d 212; Cooper v. Bray (1978) 21 Cal.3d 841, 847, 148 Cal.Rptr. 148, 582 P.2d 604; State ex rel. Strykowski v. Wilkie, supra, 261 N.W.2d 434, 442.)
Thus, we apply the familiar rational-relationship test, which is used to test the constitutionality of economic regulations. Recent cases have expressed this test in different ways. Some hold that a classification made by the Legislature satisfies equal protection of the laws if it bears a rational relationship to a conceivable legitimate state purpose (e.g., D'Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 16, 112 Cal.Rptr. 786, 520 P.2d 10), while others state the test as whether the classification rests upon " 'some ground of difference having a fair and substantial relation to the object of the legislation' " (Reed v. Reed (1971) 404 U.S. 71, 75-76, 92 S.Ct. 251, 253-254, 30 L.Ed.2d 225; Brown v. Merlo, supra, 8 Cal.3d 855, 861, 106 Cal.Rptr. 388, 506 P.2d 212). In recent cases we have recognized these differences in terminology without making a choice between them, holding that whichever "linguistic formulation" is employed, the court must conduct a " 'serious and genuine judicial inquiry into the correspondence between the classification and the legislative goals.' " (Newland v. Board of Governors (1977) 19 Cal.3d 705, 711, 139 Cal.Rptr. 620, 566 P.2d 254; Cooper v. Bray, supra, 21 Cal.3d 841, 848, 148 Cal.Rptr. 148, 582 P.2d 604.)
In making its determination whether a classification offends equal protection, a court cannot confine itself to the terms of the specific statute under attack, but must judge its operation against the background of other legislative, administrative and judicial directives which govern the legal rights of similarly situated persons. " 'The question of constitutional validity is not to be determined by artificial standards [confining review "within the four corners" of a statute]. What is required is that state action, whether through one agency or another, or through one enactment or more than one, shall be consistent with the restrictions of the Federal Constitution.' " (Brown v. Merlo, supra, 8 Cal.3d 855 at p. 862, 106 Cal.Rptr. 388, 506 P.2d 212.)
Another relevant principle of constitutional adjudication, and one which is especially significant to the determination of the issue before us, is that the constitutionality of a statute predicated on the existence of a particular state of facts may be challenged by showing that those facts have ceased to exist. This principle has been utilized in numerous cases to invalidate statutes on the basis of denial of equal protection, due process, and other grounds.
In Brown v. Merlo, supra, 8 Cal.3d 855, 869, 106 Cal.Rptr. 388, 506 P.2d 212, we held invalid as a denial of equal protection a statute which denied recovery to nonpaying automobile passengers against a negligent driver reasoning, in part, that although the statute might have been justified when it was enacted as rationally related to the protection of hosts from the "ingratitude" of their passengers, the widespread availability of liability insurance in later years eliminated this justification for the distinction between those passengers who were entitled to recover against a negligent driver and those who were not. The guest statute has been invalidated in other states on this basis. (See, e.g., Thompson v. Hagan (Idaho 1974) 96 Idaho 19, 523 P.2d 1365, 1368-1369; Henry v. Bauder (Kan.1974) 213 Kan. 751, 518 P.2d 362, 369-371; McGeehan v. Bunch (N.M.1975) 88 N.M. 308, 540 P.2d 238, 242-244; see also Johnson v. Hassett (N.D.1974) 217 N.W.2d 771, 779-780.)
The application of this principle is not confined to guest statutes. (E.g., Milnot Company v. Richardson (S.D.Ill.1972) 350 F.Supp. 221, 224-225 [statute prohibiting interstate shipment of imitation milk and dairy products violated equal protection in view of changes in marketing conditions occurring after earlier decision of United States Supreme Court upholding constitutionality of statute]; People v. McCabe (Ill.1971) 49 Ill.2d 338, 275 N.E.2d 407, 409, 413 [classification of marijuana under law providing for 10-year mandatory sentence violated equal protection in view of recent information regarding nature and effects of marijuana]; State v. Anonymous (Super.Ct.Conn.1976-3) 32 Conn.Sup. 324, 355 A.2d 729, 732-733, 740-741 [classification of marijuana with certain dangerous drugs for penalty purposes violated equal protection on basis of "present state of knowledge" regarding properties of the drug].)
The rule that postenactment information may be considered in passing on the constitutionality of a statute has been invoked with respect to constitutional provisions other than equal protection. In a recent case, this court applied such reasoning to hold unconstitutional a statute challenged on the ground that it impaired the obligation of contracts in violation of the United States and California Constitutions. (Sonoma County Organization of Public Employees v. County of Sonoma (1979) 23 Cal.3d 296, 311, 152 Cal.Rptr. 903, 591 P.2d 1.) We observed that a law which depends on the existence of an emergency to uphold it may be invalid if the emergency ceases or if the facts have changed even though the law was valid when passed, that it is "always open to judicial inquiry whether the exigency still exists upon which the continued operation of the law depends," and that a court is not precluded from considering matters which occurred after enactment of the statute in order to decide whether later events render it invalid. (See also, Leary v. United States (1969) 395 U.S. 6, 38, 52-53, 89 S.Ct. 1532, 1556-1557, 23 L.Ed.2d 57 [statutory presumption that users knew that marijuana was imported held irrational in part on basis of information developed following enactment]; Chastelton Corp. v. Sinclair (1924) 264 U.S. 543, 547-548, 44 S.Ct. 405, 406, 68 L.Ed. 841 [question whether emergency initially justifying legislation still continued remanded to lower court]; see Home Bldg. & L. Assn. v. Blaisdell (1934) 290 U.S. 398, 442, 54 S.Ct. 231, 241, 78 L.Ed. 413; Abie State Bank v. Bryan (1931) 282 U.S. 765, 772, 51 S.Ct. 252, 255, 75 L.Ed. 690.)
Of particular interest are Arneson v. Olson, supra, 270 N.W.2d 125, and a pair of Florida cases. In Arneson, the North Dakota Supreme Court held unconstitutional as a denial of equal protection a monetary limit on the amount of compensation recoverable by malpractice victims. The court held that the limitation amounted to a drastic curtailment of the rights of malpractice victims and was not justified by the Legislature's purpose to enhance the availability and lower the cost of malpractice insurance. The trial court had found that there was no crisis attributable to these factors, and the North Dakota Supreme Court upheld this finding, stating (at p. 136) that the "evidence in the case before us ... indicates that either the Legislature was misinformed or subsequent events have changed the situation substantially" because malpractice insurance rates in North Dakota are the sixth lowest in the United States.
The Florida cases considered the constitutionality of a statute requiring plaintiffs to submit malpractice claims to a medical liability mediation panel. Initially, the Florida Supreme Court held the statute constitutional on its face. (Carter v. Sparkman (Fla.1976) 335 So.2d 802, 805-806.) Four years later, however, the court reversed itself, holding that the statute had proved "unworkable and inequitable in practical operation," thereby denying due process to plaintiffs in malpractice actions. (Aldana v. Holub (Fla.1980) 381 So.2d 231, 237.)
We proceed now to the "serious and genuine" inquiry required of us in deciding whether the classifications drawn by section 667.7 violate equal protection. In making this inquiry, we shall confine ourselves to the application of the statute to hospitals; the only defendant in this action is a hospital, and we do not deem it necessary or appropriate to consider at this time the constitutionality of the statute as it relates to other categories of medical providers.
We begin, as we must, with an analysis of the goals which the Legislature sought to accomplish by enactment of section 667.7. There is ample guidance as to the purpose of the legislation in the preamble to MICRA, of which section 667.7 is a part (see fn. 3, ante) and in the Governor's Proclamation, supra. These indicators point to the same purpose: to lower malpractice premiums, thereby reducing or containing the cost of medical care to the public. This intent is implicit in the statement of the preamble that the health care crisis, with its resulting hardship to the "medically indigent" and "the economically marginal" is "attributable to skyrocketing medical malpractice premium costs," and in the statement in the Governor's Proclamation that the inability of doctors to obtain such insurance at reasonable rates was endangering the health of the people and threatened the closing of many hospitals, a result which would seriously limit the health care available to hundreds of thousands of Californians.
The assumption made by the Legislature was that insurers could provide malpractice insurance at lower rates if they could save on the cost of providing such insurance and that these lower premium rates would then be passed on to the public in the form of lower medical costs, or at least containment of such costs.
Plaintiff does not question--nor could it successfully do so--that the primary motivation of the legislation, i.e., to promote the health of the general public by containing medical costs, is a proper governmental purpose. Rather, it challenges the factual assumptions which underlie the statute. Alternatively, it urges that even if these assumptions are correct, section 667.7 is unconstitutional because the burdens fall not on the broad class of ultimate beneficiaries, but on a narrow class of malpractice victims whose future damages equal or exceed $50,000.
We need reach only the first contention. With regard thereto, plaintiff insists that there was in fact no malpractice crisis, and that the dramatic increase in premiums in 1974 and 1975 was due not to a sudden increase in the frequency or amount of malpractice judgments, but to losses suffered by insurers on their stock market investments. Furthermore, it asserts, even if there was a crisis in 1975, the emergency no longer exists because malpractice insurance rates have been substantially reduced since the enactment of MICRA in 1975. Finally, it challenges the Legislature's premise that the cost of medical care may be contained by a reduction of malpractice premiums paid by hospitals.
We agree with the last of these assertions. The assumption that there exists a significant relationship between the reduction in malpractice premiums and a meaningful containment of medical costs to the general public lies at the heart of MICRA. Yet, a comparison between the amount of such premiums and the cost of hospital care in the years following the enactment of the legislation demonstrates that this premise is erroneous.
According to amicus curiae, the California Hospital Association, in a study of the premiums paid by 420 of the state's 650 hospitals, the cost of malpractice insurance had risen dramatically before the enactment of MICRA, so that by October 1, 1976, the charge for $1 million in coverage for each occupied hospital bed was $124.31 a month, or roughly $4 a day. Premium charges were lower by 1981, amounting to only $93.46 a month for the same amount of coverage for each occupied bed, or approximately $3 a day.
In 1975, the year MICRA was enacted, the average daily charge for hospitalization in a community hospital in California was $217 a day. (U.S. Dept. of Commerce, Statistical Abstract of the U.S., table No. 177, p. 111 (1981).) By 1981, the average hospital charge had risen to $547 daily, an increase of more than 20 percent over the previous year. (Cal.Health Facil.Com., Quarterly Fin. & Utilization Rep. No. 82-5, Aggregate Hospital Data, 4th Quarter 1981 (Apr. 15, 1982) at p. A-1.) Another increase of more than 20 percent occurred between the first quarter of 1981 and the first quarter of 1982, so that in the first quarter of 1982, the average daily hospitalization charge amounted to $620. (Id., Rep. No. 82-8, 1st Quarter 1982 (July 15, 1982) at p. A-1.)
In short, while malpractice premiums for most of the state's hospitals declined by 25 percent in the years following enactment of MICRA, the cost of hospitalization rose dramatically; by the first quarter of 1982 the ratio of the premium to the charge for hospitalization amounted to considerably less than one percent. These spiraling costs are significant in assessing the total expense for medical care because hospital expenditures constitute more than 40 cents of every dollar spent on medical care, a far higher segment than any other component of the overall cost. (Health United States--1981 (U.S. Dept. of Health and Human Services, Public Health Service, Office of Health Research, Statistics & Technology) table No. 68, p. 203.)
We do not imply, of course, that the charge for malpractice premiums plays no part in the cost of hospitalization. It is obvious from the figures set forth above, however, that the cost effect of the former on the latter is negligible at best, and that experience since 1975 has demonstrated the fallacy of the Legislature's assumption that the reduction of malpractice premiums paid by hospitals would result in a meaningful containment of hospital costs. Since section 667.7 was premised on that assumption, the classification of malpractice victims made therein constitutes a denial of equal protection of the law under the foregoing standard.
A large number of other jurisdictions have enacted statutes to deal with the problems posed by increases in medical malpractice premiums. Most of the decisions interpreting these statutes have upheld the legislation, but they deal largely with the constitutionality of procedural conditions to recovery, such as the requirement that a plaintiff submit his claim to a malpractice review panel before filing an action (e.g., Everett v. Goldman (La.1978) 359 So.2d 1256, 1267; Attorney General v. Johnson (Md.1978) 282 Md. 274, 385 A.2d 57, 65-66; Paro v. Longwood Hospital (Mass.1977) 373 Mass. 645, 369 N.E.2d 985, 992; Linder v. Smith (Mont.1981) 629 P.2d 1187, 1192).
Other cases have upheld more substantive limitations on the rights of malpractice plaintiffs, such as the abolition of the collateral source rule (e.g., Eastin v. Broomfield (Ariz.1977) 116 Ariz. 576, 570 P.2d 744, 752-753; Pinillos v. Cedars of Lebanon Hospital Corp. (Fla.1981) 403 So.2d 365, 368; Rudolph v. Iowa Methodist Medical Ctr. (Iowa 1980) 293 N.W.2d 550, 559) and monetary limitations on the fees of plaintiffs' attorneys (Johnson v. St. Vincent's Hospital, Inc. (Ind.1980) 404 N.E.2d 585, 602-603) and on the amount of recovery (id. at p. 598).
However, the decisions are by no means unanimous. Both types of limitations have been struck down in a substantial number of decisions. These cases have held unconstitutional the requirement for submission to a medical review panel (Aldana v. Holub, supra, 381 So.2d 231, 237; State, Cardinal Glennon Mem. Hosp. v. Gaertner (Mo.1979) 583 S.W.2d 107, 110), imposition of a monetary limitation on recovery (Carson v. Maurer (N.H.1980) 424 A.2d 825, 836, 838; Arneson v. Olson, supra, 270 N.W.2d 125, 136; Simon v. St. Elizabeth Medical Center, supra, 355 N.E.2d 903, 910), and abolition of the collateral source rule (Doran v. Priddy (D.Kan.1981) 534 F.Supp. 30, 37; Graley v. Satayatham (Ohio Ct.Com. Pleas 1976) 343 N.E.2d 832, 836; see also Jones v. State Board of Medicine, supra, 555 P.2d 399).
We are aware of only two cases which have ruled on the constitutionality of a provision for periodic payments. One of these held the statute unconstitutional on the ground that it unreasonably discriminated against malpractice plaintiffs and deprived them of the right to dispose of their property (Carson v. Maurer, supra, 424 A.2d 825, 836), while the other upheld the constitutionality of the provision against an equal protection challenge, reasoning that it was intended to benefit a claimant who required long term care (State ex rel. Strykowski v. Wilkie, supra, 261 N.W.2d 434, 443). Thus, the cases from other jurisdictions which have considered the constitutionality of legislation similar to MICRA are not consistent in their results.
In view of our conclusion that section 667.7 is unconstitutional because it denies the victims of malpractice of equal protection of the laws, we need not consider other grounds of invalidity urged by plaintiff. Damages
The hospital's final assertion is that the damages awarded are excessive as a matter of law and were the result of passion and prejudice of the jury. Special damages in the 14 months between the accident and the time of trial amounted to approximately $15,000. Plaintiff's attorney argued to the jury that $30,000 would be an appropriate award for general damages to the time of trial. As to prospective special damages, it was estimated that surgery which might be required in the future could cost $10,000, and would leave plaintiff disabled for approximately six months. While it is true there was testimony that plaintiff's life expectancy would likely be short because of her brain tumor, the disease was in remission at the time of trial. In these circumstances, we cannot say as a matter of law that a verdict of $198,069.88 was excessive. (See Seffert v. Los Angeles Transit Lines (1961) 56 Cal.2d 498, 508-509, 15 Cal.Rptr. 161, 364 P.2d 337.)
The judgment is affirmed.
BIRD, C.J., and RATTIGAN and RACANELLI,* JJ., concur.
KAUS, Justice, dissenting. I.
Although there are a number of constitutional objections that may plausibly be raised with respect to MICRA's periodic payment provision, I submit--with all respect--that the equal protection claim on which the majority relies is not one of them. As I understand its reasoning, the majority concludes that section 667.7 is unconstitutional as applied to hospitals simply because--in the years since its enactment--the provision has not succeeded in achieving what the majority conceives to be the principal purpose of the legislation: the "reduction" or "containment" of the overall costs of medical and hospital care. In my view, this analysis seriously misses the mark. A.
To begin with, it is--to say the least--a novel proposition that a statute is to be declared unconstitutional simply because it does not accomplish all that the enacting Legislature may have hoped for. Under the traditional "rational relation" equal protection standard--which the majority concedes is applicable here--a court's task has always been simply to determine whether the classifications drawn by a statute bear a reasonable relationship to the legislative goals. There is no precedent for the majority's conclusion that, in order to pass constitutional muster, statutory classifications must not only be reasonable or rational, but must in fact work. Under that reasoning, one could as plausibly argue that the entire Penal Code is unconstitutional if the crime rate continues to rise. B.
Second, even if success in fulfilling a legislative goal were a constitutional prerequisite, the majority's conclusion would still be untenable because it rests on a fundamentally inaccurate characterization of the legislative purposes underlying both MICRA in general and section 667.7 in particular. To be sure, one--but only one--of the reasons the Legislature adopted section 667.7 was its belief that the provision--along with other changes in the tort system--would help to hold down the cost of medical malpractice insurance. Contrary to the majority's claim, however, there is nothing in the Legislature's express statement of purpose or in the statute's legislative history which suggests that the Legislature's sole--or even principal--objective in limiting such costs was simply a means of reducing or containing the overall expense of medical or hospital care. Although the Legislature may have viewed the containment of total medical costs as an incidental benefit of limiting malpractice insurance costs, its primary goal was related directly to the reduction of insurance costs and insurance premiums themselves.
As the majority recognizes, the "medical malpractice crisis" which was the prime impetus to the enactment of MICRA arose when the insurance companies which issued virtually all of the medical malpractice insurance policies in California determined that the costs of affording such coverage were so high that they would no longer continue to provide such coverage as they had in the past. Some of the insurers withdrew from the medical malpractice field entirely, while others raised the premiums which they charged to doctors and hospitals to what were frequently referred to as "skyrocketing" rates. As a consequence, many doctors decided either to stop providing medical care with respect to certain high risk procedures or treatment, to terminate their practice in this state altogether, or to "go bare," i.e., to practice without malpractice insurance. The result was that in parts of the state medical care was not fully available, and patients who were treated by uninsured doctors faced the prospect of obtaining only unenforceable judgments if they should suffer serious injury as a result of malpractice.
MICRA's cost reduction objectives were intended, in large part, to meet these immediate problems. By enacting a variety of measures to reduce the cost of medical malpractice insurance, the Legislature hoped (1) to restore insurance premiums to a level which doctors and hospitals could afford, thereby inducing them to resume providing medical care to all segments of the community, and (2) to insure that insurance would in fact be available as a protection for patients injured through medical malpractice. To achieve these objectives, of course, the statutory provisions needed only to control the cost of medical malpractice insurance itself; the control of overall medical costs was not relevant.
The majority's own statistics suggest that since MICRA's enactment, the cost of medical malpractice insurance premiums has in fact stabilized and may even have been reduced. Thus, even if the purpose of section 667.7 were solely one of reducing costs, and even if the constitutionality of the section were to be judged with respect to the provision's success in meeting that objective, the majority's conclusion would be unfounded. Under more orthodox constitutional analysis, of course, there can be no question but that the statutory provisions are reasonably related to the legislative objective of reducing malpractice insurance costs.
In concluding this part of the dissent, I must express the fear that its length may be misleading. I therefore reiterate that the opinion's fundamental error lies in its thesis that a statute is constitutional only if it works. That MICRA has not even been shown to flunk that novel standard is only secondary. C.
The majority's holding is additionally flawed insofar as it is premised on the assertion that section 667.7 was enacted solely for the purpose of reducing costs. Subdivision (f) of section 667.7 makes it clear that the Legislature also determined that a periodic payment procedure would ensure a better match of injury losses and damage payments, providing "compensation sufficient to meet the needs of an injured plaintiff and those who are dependent on the plaintiff for whatever period is necessary ...." For many years, numerous tort scholars--noting that lump-sum awards are often dissipated by improvident expenditures or investments before the injured persons actually incur their future medical expenses or earning losses--have advocated the adoption of a periodic payment procedure as a reform measure to benefit both plaintiffs and defendants. Indeed, a uniform act on the subject has been drafted under the auspices of the National Conference of Commissioners on Uniform State Laws. (Uniform Law Commissioners' Model Periodic Payment of Judgments Act (tent. draft 1979).) While there obviously can be a difference of opinion as to whether a periodic payment procedure is, on balance, beneficial or detrimental to injured plaintiffs, we cannot hold a statute unconstitutional simply because we might have resolved this basic policy decision differently than the Legislature. D.
Thus, I think the majority is totally unjustified in striking down section 667.7 because of its alleged failure to fulfill the Legislature's intended purposes. Indeed, when the majority's analysis is reduced to its essentials, the holding cannot be accepted even on its own terms. By relying solely on statistics showing the rapid rise in overall hospital costs in the late 1970's and early 1980's, the majority in essence finds section 667.7--and, one presumes, MICRA in general--unconstitutional simply because the legislation did not control the general inflation that drove up the overall costs of hospital care. Although the Legislature may have had high hopes for MICRA, even its strongest supporters did not see the measure as a general cure for inflation. If there is a constitutional defect in section 667.7, it surely is not the one on which the majority relies. II.
Although the majority has not addressed the point, I feel that I should at least briefly discuss the more orthodox equal protection claim on which the trial court relied in holding section 667.7 unconstitutional. That court concluded that the statute is invalid because it provides a "special benefit" to one class of negligent tortfeasors--medical care providers--which is not afforded to other negligent tortfeasors; in a variant on this theme, plaintiff asserts that the provision denies equal protection to persons injured by medical malpractice, withholding from this class--and only this class--the benefits of lump-sum damage awards that are available to those who suffer negligently inflicted injury outside of the medical malpractice context. The gist of both of these arguments, of course, is that the Legislature acted unconstitutionally in limiting the operation of section 667.7 to medical malpractice cases.
The claim is not a novel one. In the mid-1970's, in reaction to medical malpractice crises throughout the country, virtually every state passed one or more statutory provisions to deal with the medical malpractice insurance problem. Although legislative solutions varied from state to state, in many jurisdictions the resulting enactments have been challenged, inter alia, as a violation of the federal equal protection clause or a related state constitutional provision, on the ground that they improperly single out medical malpractice litigants for differential treatment. The overwhelming majority of courts--both state and federal--which have spoken to the issue have emphatically rejected the contention.
With respect to section 667.7, I too believe that the equal protection claim is unfounded. It is true, of course, that a periodic payment of damages procedure could reasonably be applied across the entire tort spectrum; as already noted, there have been a variety of proposals advocating just such a general reform. Countless constitutional precedents establish, however, that the equal protection clause does not prohibit a Legislature from implementing a reform measure "one step at a time" (williaMson v. lee opTicAL co. (1955) 348 u.s. 483, 489, 75 S.CT. 461, 465, 99 L.Ed. 563), or prevent it "from striking the evil where it is felt most." (Werner v. Southern Cal. etc. Newspapers (1950) 35 Cal.2d 121, 132, 216 P.2d 825.) Here, the medical malpractice insurance crisis pointed up an area in which it appeared that there was a special need to devise new rules and procedures to reduce insurance costs. The Legislature could reasonably have concluded that the high costs in this area--attributable in part to large lump-sum damage awards--posed special problems with respect to the continued availability of adequate medical care and insurance coverage. Under these circumstances, it was neither irrational nor unreasonable to limit section 667.7 to medical malpractice cases, as part of a general medical malpractice reform. (Cf. Duke Power Co. v. Carolina Env. Study Group (1978) 438 U.S. 59, 93-94, 98 S.Ct. 2620, 2640-2641, 57 L.Ed.2d 595.) III.
Although section 667.7 is not vulnerable to an equal protection challenge, I do think that the provision raises potentially serious constitutional questions with respect to the preservation of the right to jury trial. While the statute clearly permits the jury to determine the total amount of damages to which the plaintiff is entitled, the provision is at best ambiguous as to whether it is the court or the jury that designates the amount of "future damages" to which the periodic payment procedure applies. (See § 667.7, subd. (a),) Construing the statute to avoid all doubts as to its constitutionality (United States ex rel. Atty. Gen. v. Delaware & Hudson Co. (1909) 213 U.S. 366, 407-408, 29 S.Ct. 527, 535, 53 L.Ed. 836), I would interpret it to require the jury to designate not only the total damages but also the amount of "future damages" subject to periodic payment; in addition, I believe that the jury should be required to segregate the future damage award into damages which are to cease on the death of the plaintiff and those which will continue to the plaintiff's dependents under section 667.7, subdivision (c). Once these basic findings have been made by the jury, the court can properly structure the schedule of future payments.
The question remains as to the proper disposition of this case. Here, defendant did not raise the matter of periodic payments until after the jury had returned its verdict; as a consequence, the jury made no specific findings to guide the structuring of a periodic payment schedule. Because plaintiff has died in the interim, granting a new trial at this point obviously would not restore the status quo ante. Although it is impossible to determine with certainty how the jury would have apportioned the damages or how the court would have scheduled payments, the evidence at trial did indicate that plaintiff had a short life expectancy. Thus, it seems reasonable to assume that at least the bulk of the damages would have been attributed either to past damages or to the period of time which the plaintiff survived. Under these circumstances, I believe the interests of justice would be best served by an affirmance of the judgment.
BROUSSARD and FEINBERG, JJ., concur. --------------- * Pursuant to Constitution, article VI, section 21. 1 Defendant also purports to appeal from an order, prior to judgment, denying the motion for periodic payments. Though reviewable on appeal from the judgment, that order itself is nonappealable. (Code Civ.Proc., § 904.1.) The purported appeal is therefore dismissed. 2 Although there were 46,000 doctors practicing in California, all but 27,000 were self-insured, or worked for a government entity, or in an institutional setting. 3 The preamble to MICRA states: "The Legislature finds and declares that there is a major health care crisis in the State of California attributable to skyrocketing malpractice premium costs and resulting in a potential breakdown of the health delivery system, severe hardships for the medically indigent, a denial of access for the economically marginal, and depletion of physicians such as to substantially worsen the quality of health care available to citizens of this state. The Legislature, acting within the scope of its police powers, finds the statutory remedy herein provided is intended to provide an adequate and reasonable remedy within the limits of what the foregoing public health and safety considerations permit now and into the foreseeable future." (Stats.1975, Second Ex.Sess. 1975-1976, ch. 2, § 12.5, p. 4007.) 4 Section 667.7 provides: "(a) In any action for injury or damages against a provider of health care services, a superior court shall, at the request of either party, enter a judgment ordering that money damages or its equivalent for future damages of the judgment creditor be paid in whole or in part by periodic payments rather than by a lump-sum payment if the award equals or exceeds fifty thousand dollars ($50,000) in future damages. In entering a judgment ordering the payment of future damages by periodic payments, the court shall make a specific finding as to the dollar amount of periodic payments which will compensate the judgment creditor for such future damages. As a condition to authorizing periodic payments of future damages, the court shall require the judgment debtor who is not adequately insured to post security adequate to assure full payment of such damages awarded by the judgment. Upon termination of periodic payments of future damages, the court shall order the return of this security, or so much as remains, to the judgment debtor. "(b)(1) The judgment ordering the payment of future damages by periodic payments shall specify the recipient or recipients of the payments, the dollar amount of the payments, the interval between payments, and the number of payments or the period of time over which payments shall be made. Such payments shall only be subject to modification in the event of the death of the judgment creditor. "(2) In the event that the court finds that the judgment debtor has exhibited a continuing pattern of failing to make the payments, as specified in paragraph (1), the court shall find the judgment debtor in contempt of court and, in addition to the required periodic payments, shall order the judgment debtor to pay the judgment creditor all damages caused by the failure to make such periodic payments, including court costs and attorney's fees. "(c) However, money damages awarded for loss of future earnings shall not be reduced or payments terminated by reason of the death of the judgment creditor, but shall be paid to persons to whom the judgment creditor owed a duty of support, as provided by law, immediately prior to his death. In such cases the court which rendered the original judgment, may, upon petition of any party in interest, modify the judgment to award and apportion the unpaid future damages in accordance with this subdivision. "(d) Following the occurrence or expiration of all obligations specified in the periodic payment judgment, any obligation of the judgment debtor to make further payments shall cease and any security given, pursuant to subdivision (a) shall revert to the judgment debtor. "(e) As used in this section: "(1) 'Future damages' includes damages for future medical treatment, care or custody, loss of future earnings, loss of bodily function, or future pain and suffering of the judgment creditor. "(2) 'Periodic payments' means the payment of money or delivery of other property to the judgment creditor at regular intervals. "(3) 'Health care provider' means any person licensed or certified pursuant to Division 2 (commencing with Section 500) of the Business and Professions Code, or licensed pursuant to the Osteopathic Initiative Act, or the Chiropractic Initiative Act, or licensed pursuant to Chapter 2.5 (commencing with Section 1440) of Division 2 of the Health and Safety Code; and any clinic, health dispensary, or health facility, licensed pursuant to Division 2 (commencing with Section 1200) of the Health and Safety Code. 'Health care provider' includes the legal representatives of a health care provider. "(4) 'Professional negligence' means a negligent act or omission to act by a health care provider in the rendering of professional services, which act or omission is the proximate cause of a personal injury or wrongful death, provided that such services are within the scope of services for which the provider is licensed and which are not within any restriction imposed by the licensing agency or licensed hospital. "(f) It is the intent of the Legislature in enacting this section to authorize the entry of judgments in malpractice actions against health care providers which provide for the payment of future damages through periodic payments rather than lump-sum payments. By authorizing periodic payment judgments, it is the further intent of the Legislature that the courts will utilize such judgments to provide compensation sufficient to meet the needs of an injured plaintiff and those persons who are dependent on the plaintiff for whatever period is necessary while eliminating the potential windfall from a lump-sum recovery which was intended to provide for the care of an injured plaintiff over an extended period who then dies shortly after the judgment is paid, leaving the balance of the judgment award to persons and purposes for which it was not intended. It is also the intent of the Legislature that all elements of the periodic payment program be specified with certainty in the judgment ordering such payments and that the judgment not be subject to modification at some future time which might alter the specifications of the original judgment." 5 This result follows by implication from the provisions of subdivisions (c), (d), and (f) of the section. 6 The hospital relies on Werner v. Southern California Associated Newspapers (1950) 35 Cal.2d 121, 216 P.2d 825, for the proposition that the Legislature may, without constitutional objection, abrogate common law causes of action. It should be pointed out, however, that in Werner, this court, in denying an equal protection challenge to legislation which conditioned recovery of general damages for libel against a newspaper or slander against a radio broadcaster to situations in which a correction was denied, pointed out that the retraction provision could reasonably have been viewed by the Legislature as "a reasonable substitute for general damages." (Id. at p. 126, 216 P.2d 825.) 7 One writer has suggested that the tax benefit under a periodic payment arrangement arises because, while future damages in the case of a lump-sum award are discounted to take into consideration the future earning power of the amount awarded, and earnings of the discounted sum are subject to taxation, in the case of periodic payments no discount for present value occurs and the entire payment is tax free. (Henderson, Periodic Payments of Bodily Injury Awards (1980) 66 A.B.A.J. 734, 736.) The force of this argument is considerably diminished by the hospital's assertion that the amount of the future damage award, if discounted, is subject to post-judgment interest. Presumably, such interest income is subject to taxation if it is received by the plaintiff. 8 Amicus explained that of the 650 hospitals in California, 420 and the 6,000 doctors they employ are insured through an insurance exchange which furnishes the hospitals a claims service for a fee. The claims experience of these hospitals is directly reflected in the malpractice premiums paid by them, since any savings or losses are passed directly from the exchange to the affected hospitals. The hospitals which are not insured through the exchange are self-insured either by virtue of the fact that they are operated by the government or because they are insured by companies owned by the hospitals themselves. Commercial insurers have virtually abandoned the hospital insurance market in California since 1975. 9 These daily charges are based on a study of 552 hospitals, not including state hospitals, Kaiser Foundation hospitals, Shriners' hospitals, and dental hospitals. If these additional special facilities are considered, the average daily cost of hospitalization for the first quarter of 1982 would be $488 a day (id., Rep. No. 82-8, 1st Quarter 1982 (July 15, 1982) at p. A-2), and for 1981 $431 a day (id., Rep. No. 82-5, 4th Quarter 1981 (Apr. 15, 1982) at p. A-2). 10 The statute considered in Strykowski was significantly different than section 667.7. It required that future medical expense awards of more than $25,000 be paid to a fund to be disbursed in periodic payments as expenses were incurred, until the amount was exhausted, or the patient died. 11 The parties stipulated that the judgment on the verdict would be reduced by $2,500 because of "Medi-Cal involvement." * Assigned by the Chairperson of the Judicial Council. 1 See, e.g., 2 Harper & James, The Law of Torts (1956) section 25.2, pages 1303-1304; Keeton & O'Connell, Basic Protection for the Traffic Victim--A Blueprint for Reforming Automobile Insurance (1965) pages 351-358; Henderson, Periodic Payments of Bodily Injury Awards (1980) 66 A.B.A.J. 734. 2 The courts of 18 states and 2 federal circuits have rejected equal protection challenges in this setting. (See Reese v. Rankin Fite Memorial Hospital (Ala.1981) 403 So.2d 158, 160-162; Eastin v. Broomfield (1977) 116 Ariz. 576, 570 P.2d 744, 750-751; Lacy v. Green (Del.Super.1981) 428 A.2d 1171, 1177-1178; Pinillos v. Cedars of Lebanon Hospital Corp. (Fla.1981) 403 So.2d 365, 367-368; LePelley v. Grefenson (1980) 101 Idaho 422, 614 P.2d 962, 967-968; Anderson v. Wagner (1979) 79 Ill.2d 295, 37 Ill.Dec. 558, 402 N.E.2d 560, 570-571; Johnson v. St. Vincent Hospital, Inc. (Ind.1980) 404 N.E.2d 585, 600-601; Rudolph v. Iowa Methodist Medical Ctr. (Iowa 1980) 293 N.W.2d 550, 557-559; Stephens v. Snyder Clinic Assn. (1981) 230 Kan. 115, 631 P.2d 222, 233-236; Everett v. Goldman (La.1978) 359 So.2d 1256, 1265-1267; Attorney General v. Johnson (1978) 282 Md. 274, 385 A.2d 57, 76-80, 373 Mass. 645, app. dism. 439 U.S. 805, 99 S.Ct. 60, 58 L.Ed.2d 97; Paro v. Longwood Hosp. (Mass.1977) 373 Mass. 645, 369 N.E.2d 985, 987-989; Linder v. Smith, (Mont.1981) 629 P.2d 1187, 1192-1193; Prendergast v. Nelson (1977) 199 Neb. 97, 256 N.W.2d 657, 667-669; Suchit v. Baxt (1980) 176 N.J.Super. 407, 423 A.2d 670, 676-678; Comiskey v. Arlen (App.Div.1976) 55 A.D.2d 304, 390 N.Y.S.2d 122, 129-130; Beatty v. Akron City Hospital (1981) 67 Ohio St.2d 483, 424 N.E.2d 586, 591-595; State ex rel. Strykowski v. Wilkie (1978) 81 Wis.2d 491, 261 N.W.2d 434, 441-444; Woods v. Holy Cross Hospital (5th Cir.1979) 591 F.2d 1164, 1172-1175; DiAntonio v. Northampton-Accomack Memorial (4th Cir.1980) 628 F.2d 287, 291-292.) Three state courts have reached a contrary conclusion. (See Carson v. Maurer (N.H.1980) 120 N.H. 925, 424 A.2d 825, 830-839; Hartford Acc. & Indem. Co. v. Ingram (1976) 290 N.C. 457, 226 S.E.2d 498, 407; Arneson v. Olson (N.D.1978) 270 N.W.2d 125, 131-136.) * Assigned by the Chairperson of the Judicial Council.