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Common Sense And Malpractice Reform

September 26th, 2011

Having both medical and law degrees typecasts me.  New acquaintances ask if I have ever sued myself.  Within the health policy community, colleagues assume I study medical malpractice. So I have let it become a self-fulfilling prophecy.  I worked on medical malpractice in the Clinton White House, and devoted my first scholarly efforts to analyzing liability in managed care.  In the early 2000s, I directed a $3.5 million research initiative on medical liability funded by the Pew Charitable Trusts.  Since 2005, other law professors and I have published a series of articles about malpractice litigation in Texas using data collected by the state’s Department of Insurance.

Medical malpractice policy is interesting but frustrating.  Professional passions run high, and money and politics further inflame them.  Shouting is common, listening rare.  Logic and consistency are often elusive.  In the early 1990s, one physician leader railed against the Clinton administration for trying to take away his “constitutional right to be sued.”  A few years later, when new studies revealed that serious medical errors are far more frequent than had been thought, liability insurers cited them in support of their efforts to further restrict malpractice lawsuits.

It can be entertaining to watch doctors and trial lawyers fight, but after a while one tires of it.  Veteran reporters can only write so many stories about hurled epithets and skewed statistics before longing for actual progress.  I have hit my head against the brick wall of malpractice policy for many years, and undoubtedly will do so again.  So I would like to offer readers – whether partisan or unaligned – five thoughts based on my two decades working on medical malpractice reform.  My bottom line: malpractice reform should be debated as a health policy issue, not as a political referendum on personal injury litigation.

  1. Malpractice liability is a marginal pressure on the health care system, not a major one.  The problems with health care come mainly from health care.  Health care provides nearly one in ten jobs and represents more than 1/7th of the US economy.  The overwhelming majority of this activity involves the delivery of medical services.  How likely is it, really, that “sinister forces” outside this professional and industrial behemoth are the reason why tens of millions of Americans lack access to services, or why even those who can afford it often get mediocre care at inflated prices?  Get rid of your favorite villains (whether greedy trial lawyers, profit-mongering drug and insurance executives, or power-hungry government bureaucrats) and you will still only be tinkering at the edges of health reform.
  2. Most malpractice reform rationales are politically motivated. The American medical profession enjoys both respect and prosperity, making it an attractive political ally.  In the 1970s and 1980s, malpractice politics was mainly driven by physician self-interest.  Doctors hated and feared lawsuits, and threatened to quit practicing medicine en masse unless states passed reforms to keep liability insurance available and affordable.  When malpractice insurance markets stabilized but health care costs continued to rise, reducing “defensive medicine” replaced doctor strikes as the political justification for tort reform.
    From the mid-1990s into the 2000s, malpractice reform was co-opted to a considerable extent by the general business community and conservative intellectuals who cared little about medicine but used doctors’ “street cred” to argue that personal injury lawyers (and, by extension, Democratic politicians) were destroying America’s economy and social fabric.  Conversely, Democrats reflexively opposed tort reform, in no small part because the plaintiffs’ bar contributes large amounts to ensure its interests are protected.
    Today, with high unemployment and a deepening recession, Republicans seeking to curry favor from both business interests and Tea Party malcontents have embraced tort reform as a simple, reactive strategy that contrasts with the complexity and intrusiveness of “Obamacare.” These politicians often claim that physicians flock to states that enact tort reform, implying not only access to care but also job creation and economic development.
  3. The chest-thumping about attracting physicians by reducing malpractice litigation is overblown.  Doctors, like all working people, seek economic opportunity.  Fewer “negatives” help – lower malpractice insurance premiums and other practice costs, less insurance paperwork, lower taxes – but so do “positives” such as generous payment terms and a growing insured population that both needs and can afford physicians’ services.  So one should be very skeptical of politically motivated “research” that portrays malpractice reform as the primary determinant of physician supply and a major step toward ensuring access to medical care..
    To begin with, people don’t uproot their families on a whim.  Mass physician relocation from one state to another is unlikely, and in any event would be a zero-sum game nationally.  A peer-reviewed study I co-authored in 2005 estimated that state tort reform increases long-term physician supply by about 3 percent (roughly equivalent to the effect of a 10 percent pay raise), mainly by attracting newly trained physicians and delaying the retirement of older ones.  This is not a trivial change, but it is hardly a magic bullet either.
    In addition, having more physicians in a state doesn’t necessarily mean people receive better health care.  Some doctors will indeed offer critical skills to underserved populations, but others will merely add to the glut of overpriced, unnecessary tests and treatments that have long characterized American fee-for-service medicine.
  4. Less of a bad malpractice system is not the same thing as a good malpractice system.  The Holy Grail for physicians remains universal adoption of a set of crude measures to reduce lawsuits and payouts – notably a $250,000 cap on damages for pain and suffering, and limits on lawyers’ contingent fees – that California dubbed “MICRA” and put in place in 1975 when the US health care system looked significantly different than it does today.  “Just say no” to MICRA has been the equally simplistic response of the trial lawyers.  But the supposedly frivolous claims and outsized jury verdicts that are cited in support of MICRA are only the small visible part of the medical malpractice iceberg, the most dangerous parts of which remain hidden below the waterline.  It is clear from research that far too many patients are injured by avoidable errors, that very few of them receive compensation through tort claims, that malpractice insurance is poorly structured to improve safety and manage the costs of injury, and that the litigation process is slow and inhumane to both patients and providers – imagine undergoing surgery with a blunt scalpel and no anesthesia.
    Yet the political combatants tend to resist more comprehensive reforms that do not resemble MICRA, and are often contemptuous of significant progress that has been made in the professional norms surrounding medical error.  A growing number of hospitals and physicians, for example, are now open and honest with patients and families if medical outcomes are worse than anticipated, and some even offer immediate compensation for out-of-pocket losses without requiring a signed release of claims.  This is truly a big deal (though why it wasn’t always done that way is another story), and has happened without the need for large contributions to sympathetic legislators who sponsor bills, or the blessing of elected judges who have the power to overturn MICRA-style reforms on state constitutional grounds (as Illinois just did for the third time in thirty years).
  5. If physicians really want tort reform, they should offer the health care system something meaningful in return.  The health care system needs more accessible services, especially primary care, and better organized, cheaper, and more demonstrably effective acute and specialized care.  The existing medical malpractice system is incidental to achieving these goals.  It is a minor contributor to problems with access and cost, and represents a flawed solution even to the small (though important) slice of overall care quality consisting of acute safety failures.  MICRA-style reforms will not make malpractice liability any more significant to the big picture.
    On the other hand, physicians’ decades-long preoccupation with MICRA indicates that they would value its enactment more highly than the health care system could reasonably value its absence.  The key question then becomes what the medical profession should concede in return for getting its way on malpractice.  Here’s one proposal: Doctors get MICRA, but waive their unreasonable objections to advanced practice nurses, pharmacists, and other trained, mid-level providers delivering low-cost, community-based primary care.  Here’s another: Doctors get MICRA, but accept a rapid transition from conventional fee-for-service reimbursement to more coordinated payment methods that create fewer perverse incentives, such as capitation with performance bonuses for managing serious chronic diseases or episode-based case rates that combine professional and facility (hospital) fees for providing complex acute care.

Maybe common sense will prevail.  After all these years, I guess I’m still an optimist.


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1 Response to “Common Sense And Malpractice Reform”

  1. Thomas Cox Says:

    Great piece and good thoughts!

    I would add a couple of nuances just to foster discussion.

    The last thing malpractice insurers really want is an end to high awards for pain and suffering. Absent the rare, highly publicized malpractice case their industry would collapse. Put a cap of $5,ooo on awards and there would be no malpractice insurance market at all. So, the issue is how much of their insurance premiums malpractice carriers are going to collect and even more important how much of them can they keep. High jury awards keep their industry alive, capped settlements – as long as there are still a few really large awards, allow them to keep more of their premiums.

    The most important issue – and one we just are not preparing for at all, is the use of claims made malpractice insurance and the need for providers to buy tail coverage when they retire. Claims made policies cover claims that emerge in the year for which the policy is in force. These policies are very cheap in the early years because providers have little exposure from prior years. They increase in price as practitioners age. The increasing price is not so bad because the practitioners earnings are also likely to have been rising.

    But tail policies cover for all prior claims that are only beginning to emerge. These policies, if correctly priced in the future, may have premiums so high that nobody will be able to buy them. This is especially true as the lifespan of insurance risk transferring health care finance mechanisms are revealed for what they are – impractical, inefficient, and doomed to fail. So, health care providers who acted foolishly, but not maliciously, will suffer along with health care providers who thought they were really smart and extracted maximum possible gain from these flawed health care finance mechanisms by simply delaying and denying care.

    As that litigation reaches fruition tail malpractice policies simply will not be available. It would be like a modern workers compensation insurer offering to write policies for workplace injuries that occurred between 1920 and 2010 without regard to the source of the injury, and pricing them at the levels in force for equivalent coverage in the 1950s.

    Viewed this way, the factions involved are fighting over something much larger and more ominous than may appear at first glance. Some physicians simply will not be able to afford tail policies and will become bankrupt after retirement. Malpractice insurers will be happy to continue the illusion of protection, as long as they are not compelled to pay the costs for tail coverage. Physicians want to keep more of their dollars from current practices, but if they really understood the risk they face, they would be more concerned about getting occurrence malpractice policies, not claims made policies.

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