Opinion ID: 2617106
Heading Depth: 3
Heading Rank: 1

Heading: The Constitutionality of AS 09.55.548(b)

Text: The superior court reduced the damage award for past medical expenses by the amount Reid's insurer paid. The court applied AS 09.55.548(b), [1] which abrogates the collateral source bar found in AS 09.17.070. Reid claims that AS 09.55.548(b) violates his constitutional rights to substantive due process and equal protection. He asks us to set aside the trial court's order offsetting his damages by the amount paid by his medical insurance. [2]
The parties dispute whether Reid waived any constitutional challenge by only briefly stating the constitutional argument to the court below. We will not ordinarily consider issues unless they were raised in the trial court. Brooks v. Brooks, 733 P.2d 1044, 1053 (Alaska 1987). Reid only briefly identified his due process and equal protection arguments. He articulated his constitutional challenge in a footnote in a trial court memorandum, and alluded to the alleged constitutional violation in a later memorandum. Reid cited no cases or legal authority. He provided no analysis of the issue apart from asserting that the statute was unconstitutional because it treats medical care providers differently from other defendants. Despite the brevity of Reid's superior court arguments, we will consider the constitutional issues. The arguments do not depend on new or controverted facts, and are identical to the theory that Reid presented below. See O'Neill Investigations, Inc. v. Illinois Employers Ins., 636 P.2d 1170, 1175 n. 7 (Alaska 1981). [3] Moreover, Williams will not be prejudiced if we consider the statute. Williams responded to the merits of Reid's constitutional arguments during the proceedings below, and the parties have fully briefed the issues on appeal.
Reid argues that reducing the damage award under AS 09.55.548(b) violated his substantive due process rights guaranteed by article I, section 7 of the Alaska Constitution. [4] The party asserting a substantive due process challenge must demonstrate that the statute bears no reasonable relationship to a legitimate governmental purpose. See, e.g., Chiropractors for Justice v. State, 895 P.2d 962, 968 (Alaska 1995); Keyes v. Humana Hosp. Alaska, Inc., 750 P.2d 343, 351 (Alaska 1988). [5] To determine whether reducing Reid's damages violated his substantive due process rights, we first examine the stated purpose of AS 09.55.548(b) and assess whether the statute is reasonably related to that stated purpose. Alaska Statute 09.55.548(b) was enacted in 1976 as part of a comprehensive medical malpractice reform package intended to alleviate a perceived crisis in medical malpractice insurance costs. [6] Although there is little specific discussion of AS 09.55.548(b) in the legislative history, the House and Senate committee files for the 1976 medical malpractice reform legislation show that AS 09.55.548(b) was part of a comprehensive system to furnish hospitals and individual health care providers with medical malpractice insurance. Plumley v. Hale, 594 P.2d 497, 498-99 n. 3 (Alaska 1979) (citing Chapter 102 SLA 1976). [7] In Keyes v. Humana Hospital Alaska, Inc., 750 P.2d 343, 351-52 (Alaska 1988), we upheld a different section of the medical malpractice reform statute in the face of a substantive due process challenge. The plaintiff in Keyes challenged AS 09.55.536, which required her to present her case to an expert advisory panel. See id. We noted that [i]t is virtually beyond dispute that the panel review procedures were enacted to alleviate the effects of the malpractice insurance crisis. Id. We concluded that AS 09.55.536 was a reasonable legislative response to the perceived medical malpractice insurance crisis, and thus did not deny substantive due process. Id. at 352. Alaska Statutes 09.55.548(b) and 09.55.536 were part of the same medical malpractice reform package, Chapter 102 SLA 1976, and were enacted for the same purpose, to alleviate the medical malpractice insurance crisis. See AS 09.55.548(b); AS 09.55.536; Plumley, 594 P.2d at 498-99 n. 3. As we held in Keyes, the desire to alleviate the medical malpractice insurance crisis was a legitimate governmental purpose behind the medical malpractice reform statutes. We next consider whether AS 09.55.548(b) is reasonably related to that purpose. By abrogating the collateral source rule, AS 09.55.548(b) reduces the medical malpractice damage awards for which some health care providers and their insurers are liable. It is reasonable to conclude that reducing damage awards would help reduce the cost of medical malpractice insurance. We conclude that alleviating a perceived medical malpractice insurance crisis was a legitimate public purpose for enacting AS 09.55.548(b), and that the statute was reasonably related to that goal. Reid cannot make out his substantive due process claim because he has not disproved the factual justification for the statute. See Keyes, 750 P.2d at 352. Reid concedes that responding to a perceived medical malpractice insurance crisis was a legitimate government purpose. He fails to disprove the relationship between the statute and medical malpractice insurance rates, and instead attacks the statute on policy grounds. He argues that the statute benefits negligent doctors who injure insured patients, and that this benefit for negligent doctors is not reasonably related to the governmental purpose of controlling medical malpractice insurance rates. He further argues that the statute shifts plaintiffs' medical expenses to plaintiffs, or their employers, through increased insurance premiums. [8] Reid's arguments fail to disprove the relationship between the statute and the medical malpractice insurance rates. Even if the statute unwisely benefits negligent doctors or shifts the costs away from defendants, the statute may still reduce medical malpractice insurance rates. See Kenai Peninsula Borough, 527 P.2d at 452 (stating that it is not a court's role to decide whether a particular statute or ordinance is a wise one in substantive due process analysis). We conclude that Reid has not met the burden of establishing that there is no conceivable legitimate public policy for the enactment of the statute. [9] See Kenai Peninsula Borough, 527 P.2d at 452. His substantive due process challenge therefore fails. [10]
Reid argues that AS 09.55.548(b) violates the equal protection clause of the Alaska Constitution [11] because it unlawfully discriminates between negligent doctors and other tort defendants. A medical malpractice plaintiff's right to damages is an economic interest, which traditionally receives only minimal protection under our equal protection analysis. See, e.g., Chiropractors for Justice, 895 P.2d at 969 (applying minimum level of judicial scrutiny to equal protection claim regarding health care provider's economic interest in receiving payment under Workers' Compensation Act). Reid has not demonstrated that the statute discriminates against a class that receives heightened protection under the Equal Protection Clause. We therefore review AS 09.55.548(b) under the lowest level of equal protection scrutiny. [12] Because the interest affected is economic and receives minimal judicial protection, the legislative classification must bear only a fair and substantial relation to attaining legitimate government objectives. [13] In Keyes we considered an equal protection challenge to a different section of the medical malpractice reform package, AS 09.55.536, which required medical malpractice plaintiffs to present their cases to expert advisory panels. See Keyes, 750 P.2d at 357-58. [14] We upheld the statute under low-level scrutiny, concluding that it bore a fair and substantial relation to the statute's legitimate purposes of alleviating the effects of the malpractice insurance crisis, and reducing the cost and improving the availability of health care. See id. at 352, 357-58. We noted that the plaintiff was unable to show that the statute was unlikely to reduce litigation over malpractice claims. See id. at 358. The analysis we followed and the conclusion we reached in Keyes apply here as well, as AS 09.55.536 and AS 09.55.548(b) were enacted as part of the same reform package. The interests involved and the greater statutory purpose, i.e., to control medical malpractice insurance costs and increase the availability of health care, are identical. We were persuaded by the legislative history in Keyes, and we are persuaded by this same legislative history today. Reducing medical malpractice damage awards by the amount received by a malpractice victim's insurer lessens the liability of health care providers. This in turn reduces the cost of insuring the health care providers. We therefore conclude that AS 09.55.548(b) bears a fair and substantial relation to the goal of alleviating the medical malpractice insurance crisis. Cf. Eastin v. Broomfield, 116 Ariz. 576, 570 P.2d 744, 753 (Ariz.1977) (stating that [b]y scaling down the size of jury verdicts by the amount of collateral benefits the plaintiff may have received, the legislature could reasonably assume that a reduction in premiums would follow). Reid states that we rejected an argument that reducing insurance costs was a legitimate purpose in Alaska Pacific Assurance Co. v. Brown, 687 P.2d 264, 272 (Alaska 1984) (We hold that the asserted goal of lowering insurance premiums can have no independent force in the state's attempt to meet its burden under the equal protection clause.). Brown is inapposite. We there evaluated a statute that adjusted workers' compensation benefits paid to recipients who moved out of state. Id. The statute burdened the constitutional right to travel, and was therefore subjected to a very high level of scrutiny. Id. at 273-74. No analogous fundamental right is burdened by AS 09.55.548(b). Our observation in Brown that savings will always be achieved by excluding a class of persons from benefits they would otherwise receive is less significant when the statute creating such savings is subject to rational basis review rather than very high scrutiny. See Brown, 687 P.2d at 272. Reid also argues that AS 09.55.548(b) fails the nexus test under Turner Construction Co. v. Scales, 752 P.2d 467, 470-72 (Alaska 1988). In Turner we invalidated a statute that provided a six-year statute of repose on suits against design professionals. Applying the fair and substantial relationship test, we noted that the statute was intended to encourage construction by shielding design professionals from future liability, and concluded that this governmental purpose was legitimate. Id. at 471. The statute, however, shifted liability from design professionals to owners and material suppliers. We reasoned that any incentive to build that the statute might give design professionals was offset by the disincentive to build that the statute gave owners and material suppliers. We invalidated the statute because it discouraged these third parties from building and therefore interfered with the statute's stated purpose of encouraging construction. Id. at 472. Turner is distinguishable from the instant case. Turner turned upon the fact that the statute's effect on third parties actually chilled construction, an effect that was at odds with the stated purpose of the statute. Here, there is no chilling effect that interferes with the stated purpose of the statute, which is to decrease the costs of medical malpractice liability insurance for health care providers. The central flaw in Turner was that the statute intended to encourage construction had the opposite effect. Reid has not shown that this statute, which was intended to lower malpractice insurance rates, actually has the opposite effect and instead raises malpractice insurance rates. Turner is therefore inapposite. Reid seems to imply that AS 09.55.548(b) may have become unconstitutional because the conditions which potentially justified its enactment in 1976 no longer exist or have been ameliorated. Reid has not shown that there is merit to that position. We must also assume that the statute helped alleviate the conditions perceived by the legislature in 1976; to abrogate the statute would potentially restore conditions that convinced the legislature to adopt the statute in the first place. For these reasons, Reid's equal protection challenge fails. We note that courts elsewhere have discussed equal protection attacks on statutes that abrogate the collateral source rule for medical malpractice suits. Courts that have reviewed the statutes under a version of the rational basis test have found that the statutory distinctions between malpractice plaintiffs and defendants and other tort plaintiffs and defendants were reasonably related to the legislative objectives of lowering the costs of medical malpractice actions, and ensuring the continued availability of health care for the public. [15] By contrast, courts that have employed a more stringent standard of equal protection review, such as heightened scrutiny or means scrutiny, have invalidated statutes that abrogate the collateral source rule for medical malpractice defendants. [16] Reid's other equal protection arguments were raised for the first time on appeal, and are therefore waived. See Arnett v. Baskous, 856 P.2d 790, 791 n. 1 (Alaska 1993).