Rudolph v. Iowa Methodist Medical Center

REYNOLDSON, Chief Justice

(dissenting).

I respectfully dissent from division III of the majority opinion.

In the late 1920s and 1930s numerous states, including Iowa, were stampeded into enacting guest statutes, 23 Drake L.Rev. 216, 217 (1973). It is anomalous that as we today finally recognize the equal protection violation of Iowa’s enactment, Bierkamp v. Rogers, 293 N.W.2d 577 (Iowa 1980), we simultaneously ignore similar deficiencies in this state’s version of another national wave of panic-motivated legislation. Medical Malpractice Act, 1975 Session, 66th G.A., ch. 239.

I would hold the collateral source abolition (Medical Malpractice Act, § 16) (hereinafter, section 16) (codified in section 147.-136, The Code) unconstitutional as violating article I, section 6, of the Iowa Constitution, on the ground that it creates three distinct levels of irrational classification.

First, the negligent health care provider is given special privileges and immunities not afforded other tortfeasors. Second, the statute creates a special class of tort victims, which, unlike other tort victims, effectively is deprived of the benefits of collateral source payments. Third, the provision under scrutiny creates two classifications of medical malpractice tort victims: those who have paid for financial protection in the event of tort injury, and those who have saved those payments and elected to be self-insurers.

I. Standard of judicial scrutiny.

Iowa Constitution article I, section 6, states:

All laws of a general nature shall have a uniform operation; the General Assembly shall not grant to any citizen, or class of citizens, privileges or immunities, which, upon the same terms shall not equally belong to all citizens.

I agree with the majority in holding a traditional equal protection analysis is appropriate in these circumstances. See Bier *562 kamp, 293 N.W.2d at 579 ; MRM, Inc. v. City of Davenport, 290 N.W.2d 338, 342 (Iowa 1980). But in Iowa this traditional analysis requires that legislative classifications not be “arbitrary or unreasonable,” but based “on a real and substantial difference having a reasonable relation to a legitimate object of government.” Redmond v. Carter, 247 N.W.2d 268, 271 (Iowa 1976). See also Chicago & Northwestern Railway v. Fachman, 255 Iowa 989, 999 , 125 N.W.2d 210, 216 (1963) (“We think something more tangible than a mere name, business [profession], or purpose of a corporation is exacted by the courts as a basis of classification.”).

In Gleason v. City of Davenport, 275 N.W.2d 431 (Iowa 1979), we struck down on equal protection grounds a statute which created two classifications of municipal claimants, citing with approval Kallas Millwork Corp. v. Square D. Co., 66 Wis.2d 382 , 225 N.W.2d 454 (1975), as a case in which the Wisconsin Supreme Court had “reached a similar conclusion regarding distinctions between private tortfeasors.” 275 N.W.2d at 436 . In State v. Books, 225 N.W.2d 322, 325 (Iowa 1975), we held unconstitutional an amendment to a gift law statute which created two classes of public officials and employees and granted immunity to state officials and employees, holding “[t]here is no reasonable basis for such a distinction.” See also Knudson v. Linstrum, 233 Iowa 709, 716 , 8 N.W.2d 495, 499 (1943) (a legislative classification must be reasonable and based on some substantial distinction). Accord, Davis v. Commonwealth Edison Co., 61 Ill.2d 494, 497 , 336 N.E.2d 881, 883 (1975) (“A classification . . . cannot be arbitrary or unreasonable. It must be based on a rational difference of condition or situation existing in the persons or the objects upon which the classification rests.”).

Of course the plaintiffs carry a heavy burden in challenging the constitutionality of Iowa’s collateral source statute, Franks v. Kohl, 286 N.W.2d 663, 669 (Iowa 1979). But it is also true that recital of the traditional “rational basis rule” sometimes serves as a substitute for critical analysis. Without such analysis we abdicate our highest duty:

The provisions of the Fourteenth Amendment to the Constitution of the United States requiring equal protection of the laws, and the sixth section of Article I of the State Constitution requiring that all laws shall have a uniform operation, should not be frittered away. We have said their importance in guarding against the segregation of society into classes, and in assuring to all citizens that equality before the law, which is essential to free government, cannot be overestimated. ... If the constitutionality of these statutes cannot be sustained save by resort to refinements in distinction and sophistry in reasoning, in which no court should indulge, and which would be destructive of the limitations above referred to on legislative power, they should fall.

Fachman, 255 Iowa at 1003 , 125 N.W.2d at 217-18 .

II. Overview of decisions.

An overview of the authorities the majority relies on discloses they are inapposite here. Although Easton v. Broomfield, 116 Ariz. 576 , 570 P.2d 744 (1977), held an Arizona collateral source statute did not violate equal protection, that statute abolished only the collateral source evidentiary rule while not specifically limiting the amount of damages recoverable. Ariz.Rev.Stat.Ann. § 12-565 (Supp.1979). But the Iowa statute sub judice provides that “the damages awarded shall not include actual economic losses incurred ... to the extent that those losses are replaced or are indemnified by insurance, or by governmental, employment, or service benefit programs.” § 147.-136, The Code (emphasis added).

The other decisions the majority relies on are similarly concerned largely with procedural and evidentiary requirements and not substantive rights. Cf. Woods v. Holy Cross Hospital, 591 F.2d 1164 (5th Cir. 1979) (mandate of prior participation in mediation process, and admissibility of mediation panel’s findings, upheld); Seoane v. Ortho Pharmaceuticals, Inc., 472 F.Supp. 468 (E.D.

*563 La.1979) (presuit review panel requirement upheld); Hines v. Elkhart General Hospital, 465 F.Supp. 421 (N.D.Ind.), aff’d, 603 F.2d 646 (7th Cir. 1979) (condition precedent of submission to medical malpractice review panel upheld); Attorney General v. Johnson, 282 Md. 274 , 385 A.2d 57 , app. dismissed for want of a substantial federal question, 439 U.S. 805 , 99 S.Ct. 60 , 58 L.Ed.2d 97 (1978) (requirement of prior submission to arbitration panel upheld); Paro v. Longworth Hospital, 373 Mass. 645 , —, 369 N.E.2d 985, 991 (1977) (screening procedure and cost bond requirement for plaintiffs whose claims are found meritless on screening upheld, the court explaining, “[The act] does not eliminate any substantive right of recovery possessed by the plaintiffs; it merely alters the procedure for enforcing that right.”); Prendergast v. Nelson, 199 Neb. 97 , 256 N.W.2d 657 (1977) (where plaintiff had option of electing coverage under the act, mandatory prerequisite submission to review panel and $500,000 ceiling on recovery upheld); and State ex rel. Strykowski v. Wilkie, 81 Wis.2d 491 , 261 N.W.2d 434 (1978) (statute mandating prior submission to compensation panel, delaying disbursement of future medical expenses exceeding $25,000, and providing that awards over $1,000,000 be paid in installments of $500,000 or less, upheld).

Under similar circumstances, other states have found even procedural limitations unconstitutional. See Wright v. Central Du Page Hospital Association, 63 Ill.2d 313 , 347 N.E.2d 736 (1976) (procedural requirements and statutory ceiling on recovery in malpractice action unconstitutional); State ex rel. Cardinal Glennon Memorial Hospital for Children v. Gaertner, 583 S.W.2d 107 (Mo. 1979) (malpractice act violative of state constitutional provision guaranteeing free access to courts); Arneson v. Olson, 270 N.W.2d 125 (N.D.1978) (act’s application only to limited category of health care professionals, and limitation on use of res ipsa loquitur doctrine, plus near-abolition of collateral source rule, cumulatively violated due process); Simon v. St. Elizabeth Medical Center, 3 Ohio Op.3d 164 , 355 N.E.2d 903 (Ct. C.P. Montgomery County 1976) (pleading, arbitration panel, and recovery ceiling provisions struck down); Graley v. Satayatham, 74 Ohio Op.2d 316 , 343 N.E.2d 832 (Ct. C.P. Cuyahoga County 1976) (pleading requirements and provision mandating deduction for certain collateral sources held unconstitutional).

It is plain that Iowa’s collateral source statute arbitrarily reduces the malpractice damage award and thus impinges on a substantive rather than a procedural right. See Groesbeck v. Napier, 275 N.W.2d 388, 391 (Iowa 1979) (“[W]hen a remedy is eliminated or limited by a statute, we have found the statute to be substantive and not procedural . . . .”). Limitation on, or elimination of, a pre-existing right may not be arbitrarily imposed. Arneson, 270 N.W.2d at 135 (citing Wright, 63 Ill.2d at 329 , 347 N.E.2d at 743 ). See also Graley, 74 Ohio Op.2d at 320-21, 343 N.E.2d at 838 (distinguishing substantive from procedural rights).

The reduction in malpractice recoveries mandated by the Iowa statute is indistinguishable from the ceilings on such recoveries struck down in Illinois (Wright), North Dakota (Arneson), Ohio (Simon), and called into question in Idaho and Louisiana. See Jones v. State Board of Medicine, 97 Idaho 859 , 555 P.2d 399 (1976), cert. denied, 431 U.S. 914 , 97 S.Ct. 2173 , 53 L.Ed.2d 223 (1977); Everett v. Goldman, 359 So.2d 1256 (La.1978) (ceiling ruled unconstitutional by trial court; on appeal, issue held not properly raised). Only in Indiana, Johnson v. St. Vincent Hospital, Inc., — Ind. —, 404 N.E.2d 585 (1980), and in Nebraska (Pren-dergast) (where the statute is elective for the patient) has a recovery limit been upheld. Several of the authorities relied on by the majority cautiously sidestepped this issue. See, e. g., Seoane, 472 F.Supp. at 472 (“Our disposition of the issues does not require us to state any opinion concerning the Louisiana statute’s provision limiting the recovery against a covered health care provider to a maximum of $500,000. . . . [Defendant has not raised this question but merely seeks to have plaintiff’s claim screened by a review panel.”); Hines, 465 F.Supp. at 431 *564 (“The closest question here presented is the constitutional challenge to the dollar limitation on the amount of possible recovery. It is not necessary to confront that issue here and now”) (emphasis in original). These cases, viewed together, indicate that legislation which singles out medical malpractice awards for mandatory reduction is arbitrary and irrational.

Our focus should now be narrowed to examine the classifications resulting from this legislation.

III. Classification of negligent health care provider.

There is no dispute that with this enactment the legislature has singled out a special class of negligent persons and organizations — “licensed health care providers”— upon whom to bestow privileges and immunities not granted to other tortfeasors, even malpractice tortfeasors.

Section 1 of Iowa’s Medical Malpractice Act seeks to justify this classification by referring to an emergency for which the act will provide only an “interim solution” and by referring to the “impending unavailability of medical malpractice insurance.”

These plaintiffs point out the written reports of the legislative study committees do not support the stated reasons for this legislation. Defendant responds by stating “the legislative body itself was in no way persuaded by the factual data gathered and the conclusions reached by the two committees,” Appellant’s Reply Brief, p. 7, and this court should likewise reject the reasoning of the study committees. Other sources indicate any “crisis” confronted by the malpractice carriers was partially due to “unsuccessful [corporate] investment practices,” Jones, 97 Idaho at 873 , 555 P.2d at 413 , and that the threatened insurance collapse did not materialize, Arneson, 270 N.W.2d at 136 . Although much emphasis has been placed on the “emergency” nature of this legislation, no authority has been advanced to support the proposition that an alleged emergency suspends constitutional restraints on irrational and arbitrary classifications affecting substantive rights. See Grace v. Howlett, 51 Ill.2d 478, 485, 487 , 283 N.E.2d 474, 478, 479 (1972) (“[T]he fact that a problem ‘does exist does not permit arbitrary or unrelated means of meeting it to be adopted.’ . . [T]his court cannot rule that the legislature is free to enact special legislation simply because ‘reform may take one step at a time.’ ”) (citations omitted).

It is irrational to grant special immunities for the purpose of providing cheaper negligence insurance for health care providers, when, unlike several other states, Iowa does not even require them to carry malpractice insurance. This irrationality is extended by the reasoning that legislation such as this enhances the protection of the public’s health. Pragmatically, the quality of health care might decline if the medical profession, held less accountable than formerly, relaxes medical standards. American Bank & Trust Co. v. Community Hospital of Los Gatos-Saratoga, Inc., 104 Cal. App.3d 219 , 233-35, 163 Cal.Rptr. 513 , 521-22 (1980); Graley, 74 Ohio Op.2d at 320, 343 N.E.2d at 837-38. See also Ferri v. Ackerman, 444 U.S. 193, 204 , 100 S.Ct. 402, 409 , 62 L.Ed.2d 355, 363 (1979) (“The fear that an unsuccessful defense of a criminal charge will lead to a malpractice claim does not conflict with performance of that [legal representation] function. If anything, it provides the same incentive for appointed and retained counsel to perform that function competently.”). Certainly this legislation has had little impact on the cost of health services. In a five-year interval roughly approximating the current life of the Medical Malpractice Act, from April 1975 to April 1980, the federal government’s consumer price index discloses the cost of physician services increased 59.3 percent, hospital rooms 78.3 percent, and medical care (services and commodities) 55.2 percent.

This legislation does more than create a favored class of tort defendants among all tortfeasors; its classification draws lines between negligent providers of health care. The limited class in this instance comprises only the “physician and surgeon, osteopath, *565 osteopathic physician and surgeon, dentist, podiatrist, optometrist, pharmacist, chiropractor, or nurse licensed to practice that profession in this state, or . . .a hospital licensed for operation in this state.” Medical Malpractice Act, § 16. This list is elsewhere designated for benefits under the enactment as “[licensed health care provider[s].” Id., at § 2(5). Other persons in the chain of patient care, who might well be co-defendants in the same litigation (for example, nurse’s aides, dental assistants, physical therapists and medical technicians), are omitted. Cf. Gaertner, 583 S.W.2d at 108 (addressing a Missouri statute which defines “health care provider” as including, e. g., clinical psychologists, physicians’ assistants, physical therapists, emergency medical technicians, nursing homes and extended care facilities).

Assume in the case before us the hospital employees who caused William’s head to drop backwards were nurses’ aides who were not among those favored in the classification “licensed health care provider,” and the injury was caused by their inadequate training and supervision. These persons could be named co-defendants with a “licensed health care provider” in the same action by the same plaintiffs for the same injuries and yet under this classification not be accorded the same privileges and immunities. It is in these circumstances, where the statute under scrutiny singles out the group to be protected while excluding others similarly situated, that the courts have held there has been a denial of equal protection of the law.

Among the authorities most apposite are those involving limitations statutes for the benefit of architects and engineers but excluding the owner of the building and manufacturers and suppliers of component parts. Underlying these statutes, of course, is the objective of reducing malpractice insurance costs. See H.F. 315, 68th G.A., 1980 Session, and the Governor’s May 26, 1980, veto message filed in the office of the Secretary of State.

Kallas Millwork Corp., 66 Wis.2d 382 , 225 N.W.2d 454 , which we approvingly cited in

Gleason, 275 N.W.2d at 436 , was such a case. The opinion, 66 Wis.2d at 390 , 225 N.W.2d at 458-59, quotes from a decision written by Mr. Justice Schaefer of the Illinois Supreme Court in Skinner v. Anderson, 38 Ill.2d 455, 460 , 231 N.E.2d 588, 591 (1967):

The arbitrary quality of the statute clearly appears when we consider that architects and contractors are not the only persons whose negligence in the construction of a building or other improvement may cause damage to property or injury to persons. If, for example, four years after a building is completed a cornice should fall because the adhesive used was defective, the manufacturer of the adhesive is granted no immunity. And so it is with all others who furnish materials used in constructing the improvement. But if the cornice fell because of defective design or construction for which an architect or contractor was responsible, immunity is granted.

In addition to Kallas Millwork Corp. and Skinner, see Fujioka v. Kam, 55 Haw. 7, 12 , 514 P.2d 568, 571 (1973) (“[T]he cause of the injuries is the same, the plaintiff is the same and the injuries are the same .... We are unable to see any rational basis for treating the engineer and the contractor differently from the owners under the same circumstances.”); Muzar v. Metro Town Houses, Inc., 82 Mich.App. 368, 375-80 , 266 N.W.2d 850, 854-56 (1978) (conclusion “inescapable” that classification “limited to ‘licensed architects and professional engineers’ is arbitrary and without reasonable relation to the object of the legislation,” and unconstitutionally violates equal protection; the court observed, “Even if we agree that the statute is intended to remedy . . potential problems, we remain unconvinced that any of these rationales support the classification made in the legislation.”); Loyal Order of Moose, Lodge 1785 v. Cavaness, 563 P.2d 143, 147-48 (Okla.1977) (“[I]f one class of defendants . is excluded from this protection, the 14th Amendment to the United States Constitution is violated and the legislation is not valid.”); Broome v. Truluck, 270 S.C. *566 227, 230 , 241 S.E.2d 739, 740 (1978) (“[S]uch classification must fall if the benefits . . . granted to [architects, engineers and contractors] is [sic] denied to others similarly situated.”). See generally, Annot., 93 A.L. R.3d 1242, 1258-64 (1979).

In American Bank & Trust Co. v. Community Hospital of Los Gatos-Saratoga, Inc., 104 Cal.App.3d at 226-35, 163 Cal. Rptr. at 516-22, the California court had before it a statute which provided that, upon request, a tortfeasor health care provider could pay awards for future damages exceeding $50,000 on a periodic basis. The court held the statute unconstitutional under the California and federal equal protection and due process guarantees, rejecting the rationale that alleviation of an alleged financial crisis was a legitimate legislative objective permitting the dilution of the right to seek redress of grievances. Quoting Graley, 74 Ohio Op.2d at 320, 343 N.E.2d at 837, the California court significantly stated:

There is no satisfactory reason for this separate and unequal treatment. There obviously is ‘no compelling governmental interest’ unless it be argued that any segment of the public in financial distress be at least partly relieved of financial accountability for its negligence. To articulate the requirement is to demonstrate its absurdity, for at one time or another every type of profession or business undergoes difficult times, and it is not the business of government to manipulate the law so as to provide succor to one class, the medical, by depriving another, the malpracticed patients, of the equal protection mandated by the constitution.

104 Cal.App.3d at 232-33, 163 Cal.Rptr. at 520 (emphasis added and footnote omitted). Importantly, although the California court specifically rejected the strict scrutiny test utilized by the Ohio courts, it found the reasoning equally persuasive under the traditional rational basis test. 1 Id. at 232 n.4, 163 Cal.Rptr. at 520. The opinion notes that

“a law which confers particular privileges or imposes peculiar disabilities upon an arbitrarily selected class of persons who stand in precisely the same relation to the subject matter of the law as does the larger group from which they are segregated constitutes a special law which is tantamount to a denial of equal protection.”

Id. at 233, 163 Cal.Rptr. at 520-21, quoting California Federation of Teachers v. Oxnard Elementary Schools, 272 Cal.App.2d 514, 527-28 , 77 Cal.Rptr. 497, 509 (1969).

The separate and unequal treatment this statute accords tortfeasors, and more importantly, selected persons engaged in the profession of health care, is illogical to the point of irrationality. I would thus hold it fails to accord equal protection.

IV. Classification of malpractice tort victims.

We may judicially note that many persons regularly expend large sums in main *567 taining health, accident, and disability insurance policies. Others over a period of years have paid thousands of dollars into the social security trust fund. Still others have negotiated with employers for disability protections, often at the cost of a higher current wage level. Out of all these persons, section 16 singles out the victims of the negligence of “licensed health care providers” to make a special sacrifice: those earned and paid-for financial benefits are to be used for the relief of health care providers and their insurance carriers. The appropriate questions were posed by the California court in American Bank & Trust, 104 Cal.App.3d at 234, 163 Cal.Rptr. at 521:

Even if it is argued that the Legislature had a valid reason for singling out health care providers and their insurance carriers, as opposed to other tortfeasors and their insurers, for special privileges and immunities in the interest of general public health protection, what rational reason is there for imposing the burden of such legislation on a limited group of victims of medical malpractice? If, in fact, there was a statewide major health care crisis resulting in a potential breakdown of the health delivery system, should not all health care recipients, rather than a limited group of seriously injured malpractice victims, share the burden of supporting the medical care industry?

[I]t defies reason why, although the general population purportedly derives the benefits . . ., only the victims of medical malpractice must be penalized.

The entire premise underlying Bierkamp —the irrationality of distinguishing one class of tort victims from another class of victims — supports an affirmance in this case. Other supportive decisions include Marley v. Kirby, 271 S.C. 122, 125 , 245 S.E.2d 604, 606 (1978) (comparative negligence statute applying only to limited class of tort defendants — those involved in motor vehicle accidents — struck down as violative of equal protection, the court observing, “We cannot perceive the rational justification for singling out persons injured in automobile accidents as different from all others injured in negligent torts.”), and Georgia Southern & Florida Railway v. Seven-Up Bottling Company of Southeast Georgia, Inc., 175 So.2d 39 (Fla.1965) (comparative negligence statute applicable only to railroads held unconstitutional as viola-tive of equal protection guarantees). Cf. Wessinger v. Southern Railway, 470 F.Supp. 930,933 (D.C.S.C.1979) (statute barring use of contributory negligence defense by railroads struck down, the court stating, “[I]t seems clear that any difference in classification as to both liability and defenses between railroads and others, such as users of the highways, can no longer withstand constitutional challenge under the equal protection clause.”).

This statute’s classification constitutes an irrational and arbitrary imposition of burdens on a narrow group of tort victims and denies equal protection.

V. Classification of insured medical malpractice victims.

Out of the general classification of victims of health care provider malpractice, section 16 generates an even narrower classification of those who may have sacrificed for years so that in the event of their disability they would have available “insurance, or . governmental, employment, or service benefit programs.” It is this group that is called upon to contribute their prior efforts to a reduction of their malpractice award.

Other malpractice tort victims, more affluent and therefore less fearful of a major medical disaster, may have simply operated as self-insurers for years, saving the funds which might otherwise have been spent for insurance policy premiums. These savings of course would constitute “assets of the claimant or of the members of the claimants’ immediate family” which the act exempts as a deduction from the malpractice recovery.

This under-inclusion of persons burdened, penalizing only the tort victim who cannot afford to self-insure, denies equal protec *568 tion. See Gulf, Colorado & Santa Fe Railway v. Ellis, 165 U.S. 150, 157, 165-66 , 17 S.Ct. 255, 257-58, 261 , 41 L.Ed. 666, 669, 672 (1897); Fachman, 255 Iowa at 1004-05 , 125 N.W.2d at 218-19 . Accord, American Bank & Trust, 104 Cal.App.3d at 233, 163 Cal. Rptr. at 521.

Our deference to separation of power concepts must be limited:

We are all aware of the delicate balance required of courts in constitutional adjudication. On the one side are considerations of usual legislative prerogative in matters of public policy. Under those considerations the separation of powers concept demands judicial deference. On the other side are considerations of judicial responsibility to safeguard rights assured the people by the federal and state constitutions. Under those considerations the separation of powers concept demands judicial interference.

Keasling v. Thompson, 217 N.W.2d 687, 705 (Iowa 1980) (McCormick, J., dissenting).

The various classifications spawned by section 16 treat both negligent health care providers and their victims differently than other persons similarly situated, and do not bear a fair and substantial relation to any reasonably conceivable legislative purpose for the statute, which is inherently irrational and arbitrary. I would hold section 16 denies equal protection and thus violates article I, section 6, of the Iowa Constitution.

REES and LARSON, JJ., join this dissent.

. The majority opinion states the American Bank & Trust Co. court applied the strict scrutiny standard. To the contrary, that court rejected that standard at the outset of its analysis in favor of the lower standard, observing that “it cannot be held that the provisions of [Cal. Civ.Proc.Code] section 667.7 [a part of California’s Medical Injury Compensation Reform Act] require ‘strict scrutiny’ review. To the contrary, legislative regulation and ordering of personal injury actions is a matter for more restrained ‘rationality’ review.” 104 Cal. App.3d at 227-28, 163 Cal.Rptr. at 517. The court then approvingly quoted from Brown v. Merlo, 8 Cal.3d 855, 861 , 506 P.2d 212, 216 , 106 Cal.Rptr. 388, 392 (1973): “A classification ‘must be reasonable, not arbitrary, and must rest upon some ground of difference having a fair and substantial relation to the object of the legislation, so that all persons similarly circumstanced shall be treated alike.’ ” As I have noted in division I, this is the same traditional analysis test we articulated in Redmond v. Carter, 247 N.W.2d at 271 , and cited to today in Bierkamp, 293 N.W.2d at 579 . The majority’s statement is apparently derived from footnote 4 of the California decision, 104 Cal.App.3d at 232 n.4, 163 Cal.Rptr. at 520:

Although the Ohio court employed the “strict scrutiny” test, which we do not believe to be the proper standard of review for such legislation, the reasoning is equally applicable to analysis based on the “rational basis” test.