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Tort Reform Won't Fix Healthcare?, Ctd

by Patrick Appel

A reader writes:

Tort reform in Texas was supposedly passed to decrease the incentive for people with non-meritous claims to file lawsuits.  The real effect however, was to decrease the incentive and the ability of those with meritous claims to file lawsuits. Our courts already have numerous mechanisms in place to dismiss non-meritous cases. There's motions to dismiss, summary judgments, and the contingency-fee agreement, and judges have the ability to issue directed verdicts. Tort reform isn't about cheaper health care, it's about legislating away financial risk to insurers, which exist solely to assume responsibility for that risk.

All the evidence available shows that the liability "crisis" is a myth.  Malpractice payments account for less than 1% of the nation's health care costs each year. Since 1987 medical malpractice insurance costs have risen just 52% despite the fact that medical costs have increased 113%. The size of malpractice damage awards has remained steady since 1991. Adjusted for inflation, the average malpractice payment has actually decreased since then. The number of payments for malpractice judgments of $1 million or more has never exceeded one-half of one percent of the annual total number of malpractice payments dating back to 1991. 

The only evidence supporting claims of a liability crisis is anecdotal; hearsay propagated by lies from malpractice insurers who tell doctors their premiums are high because of out-of-control malpractice claims.  Yet data (pdf) show that the medical liability system produces rational outcomes. The great irony of the tort reform argument is that if the proponents of tort reform ever went to court to argue their case that frivolous lawsuits have created a liability crisis which threatens our health care system, their case would be thrown out as frivolous. 

Proponents of damage caps fabricated a liability crisis in Texas earlier in the decade to push through tort reform.  Yet malpractice premiums continued to rise, and didn't decrease until many of the Texas politicians who had supported tort reform began taking heat and demanded that the malpractice insurers lower their premiums.  They're lower today, yet patients haven't seen any reduction in health care costs, and there's no evidence that the rise in costs has been slowed by tort reform.  Doctors are still practicing defensive medicine.

Meanwhile, thousands to tens of thousands of Texans with meritous claims are unable to find lawyers to take their cases because it's no longer financially feasible for the lawyers to do so.  If a child dies, there's no economic damages, and that child's life is worth $250,000 maximum.  If a retired person dies, they're worth little more.  As someone who lost their father to malpractice, I have trouble deciding whether it's hilarious or infuriating that the "death panel" crowd, who likely all support tort reform, apparently have absolutely no problem legislating the value of someone's life.

This data is in the study I linked to above:

Only 8.61% of doctors who made two or more malpractice payments were disciplined by their state board.

Only 11.71% of doctors who made three or more malpractice payments were disciplined by their state board.

Only 14.75% of doctors who made four or more malpractice payments were disciplined by their state board.

Only 33.26% of doctors who made 10 or more malpractice payments were disciplined by their state board.

Most doctors are good doctors, but there are enough bad ones out there ruining it for the rest.  Only a third of the doctors who are found guilty of malpractice on 10 different occasions are disciplined by their state board?  Even cops, notorious for protecting their own, would be shocked by that.

Meanwhile, an estimated 98,000 patients die each year from preventable medical errors and another 99,000 die each year from hospital-acquired infections.  Even if only 1/4th of those instances were malpractice, that's nearly 50,000 people a year that tort reformers would like to deny justice.

Another reader writes:

You write:
"If you are unable to work for the rest of your life because of medical errors, a few hundred thousand dollars, the cap on damages in some states, isn't going to do near enough to compensate you for your loss, especially if you have ongoing medical needs."
I would have to check on this, but my understanding is that the caps associated with tort reform are on punitive damages.  Plaintiffs still get compensatory damages (which include the costs of lost wages and furture medical care) in states that have capped punitive damages.  Punitive damages, as the name suggests, are designed to punish mal-practicioners for sloppiness or willful negligence.  They necessarily go beyond what is required to make the plaintiff "whole."  Some states (like Texas) have capped punitive damages at a fixed number, e.g. $500,000.  Others have used formulas that restrict punitive damage awards to a certain percentage of compensatory damages.

Capping punitive damages makes sense to me, as long as there are exceptions for truly egregious "beyond the pale" malpractice.

(Full disclosure:  I am attorney representing the plaintiff in a medical malpractice case at the moment, though I normally do not do this kind of work.  Immigration is my main practice area.)

States have different laws, and punitive damages are capped in some states, but this lawyer isn't entirely correct. The tort reform I know best is California's Malpractice Injury and Compensation Reform Act (MICRA), which passed in the 1970s. California caps pain and suffering, which are compensatory damages, at two hundred and fifty thousand. This cap has not been adjusted for inflation and doctors are allowed to pay out damages in installments. It's true that my first post was misleading: in California at least, medical bills and life time wage damages are not capped. In my defense, the lawyer's fee will take a chunk of those damages. On the other hand, the plaintiff's award is not taxed.

Pundits like to talk about frivolous cases, but as the first reader above writes, there are already mechanisms to deal with such cases, and overall lawsuits improve safety. For years construction site accidents were bread and butter cases for a lot of personal injury lawyers. Eventually, the construction companies got tired of paying for these lawsuits and implemented better workplace safety rules, which reduced lawsuits and was better for everyone (besides the lawyers). The truth is it's very difficult to successfully sue a doctor; you have to prove that not only that the doctor made the wrong call, but that he did something no other competent doctor would do. I don't deny that defensive medicine happens, but it doesn't appear that tort reform is going to do much to address it. After considering the evidence that has come in, I have to say that tort reform seems like a fake solution to the health care crisis. I'm open to new evidence and arguments, but it's not clear that tort would do anything to prevent medical costs from spiraling. A few years ago, RAND had a report on California's tort reform. Here's a highlight:

When their awards are capped, plaintiffs typically lose many hundreds of thousands of dollars. Certain types of claims and plaintiffs are most affected by MICRA:

Death cases are capped more frequently than injury cases (58 percent versus 41 percent) and have much higher percentage reductions in total award size than injury cases, with a median loss of 49 percent when the award is capped versus a 28 percent drop for injury cases.

Plaintiffs with the severest non-fatal injuries (brain damage, paralysis, or a variety of catastrophic losses) had their non-economic damage awards capped far more often than injury claims generally and had median reductions exceeding $1 million (compared with $286,000 for all injury cases).

Plaintiffs who lost the highest percentage of their total awards due to the cap were often those with injuries that led to relatively modest economic damage awards (about $100,000 or less) but that caused a great loss to their quality of life (as suggested by the jury’s million-dollar-plus award for pain, suffering, anguish, distress, and the like). These plaintiffs sometimes received final judgments that were cut by two-thirds or more from the jury’s original decision.

Plaintiffs less than one year of age had awards capped 71 percent of the time, compared with 41 percent for all plaintiffs with identifiable non-fatal injuries. Injury cases with reductions of $2.5 million or more usually involved newborns and young children with very critical injuries.