28
OCT 2014Posted by Dwight Steward, Ph.D. | U.S. Economy
The Medical
Injury Compensation Reform Act (MICRA) of 1975 was a statute enacted by the California Legislature in August 1975. One of the provisions of the statute was to allow doctors to make periodic payments of awards in Med Mal cases.
Injury Compensation Reform Act (MICRA) of 1975 was a statute enacted by the California Legislature in August 1975. One of the provisions of the statute was to allow doctors to make periodic payments of awards in Med Mal cases.Accordingly, in California in those instances, the jury is required to award/come back with both un-discounted and present value discounted amounts. If the defendant chooses to make periodic payments, then the un-discounted award amounts come into play.
In a recent the jury came back with an award but only mentioned present value numbers and no future values.
The Court and the attorneys agreed that it was better to not send the jury back to give a future value award. Instead they decided to have the economists figure out what the undiscounted future values are based on the present value numbers that the jury awarded.
So the following approach was offered.
Both economists used the ratio of the award to the present value numbers to future value numbers to back into the jury’s implicit undiscounted amount. For example, if the award was about 25% more than what testified to, then the future value was increased by the same percentage.
So for example if you two both used a 3% rate and calculated the present value of a loss over 10 years, the PV factor is 8.5302 (old school approach using tables!). If you calculated a $50,000 loss and the opposing expert calculated a $75,000 loss that would give you present value amounts of $426,510 and $639,765 respectively.
If the jury came back with a present value number in between the two experts then this would be about $539,137,. The annual loss that the jury implicitly used to arrive at the $533,137 figure is about $62,500. The annual loss number is right in the middle of the two experts.
| Annual Loss | PV factor | PV of Award | |
| Economist 1 | $ 50,000 | 8.5302 | $ 426,510 |
| Economist 2 | $ 75,000 | 8.5302 | $ 639,765 |
| Jury | $ 533,137.50 | ||
| Your 50% Guess (based on Jury award) | $ 62,500.0 | 8.5302 | $ 533,138 |
