While there is a need for reform it isn't in tort reform but rather it should be in the medical malpractice insurance system itself..

Tort Reform Unlikely to Cut Health Care Costs

Studies Show Malpractice Awards Are Not Big Driver of Skyrocketing Costs

By Daphne Eviatar 8/19/09 6:00 AM

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Amid the obstructionists claims that health care reform is socialist or a means of speeding Grandma towards her deathbed, a large focus of the conservative position on health care reform has been that frivolous lawsuits drive up health care costs and require doctors to practice defensive medicine thats costly and wasteful.

In a recent Washington Post op-ed, Charles Krauthammer put tort reform on the top of his wish-list for reducing the costs of the health care system. Gov. Rick Perry of Texas in the Washington Examiner boasts that Texas tort reform that capped injured patients damages was the answer to his states problems. And the American Medical Association has said it wont support any health reform bill that doesnt reduce liability for doctors. If the bill doesnt have medical liability reform in it, then we dont see how it is going to be successful in controlling costs, James Rohack, president-elect of the organization, told Politico in March. Why spend the political capital and energy in passing a bill if it is not successful?

Illustration by: Matt Mahurin

So far Republicans have mostly focused on tearing apart any reform with a role for the federal government, portraying it as the government dictating how long old people get to live. But an undercurrent of those complaints is the insistence of doctors, hospitals, insurance companies and ideological conservatives that medical malpractice claims are out of control and a leading cause of rising health care costs.

The health economists and independent legal experts who study the issue, however, dont believe thats true. They say that malpractice liability costs are a small fraction of the spiraling costs of the U.S. health care system, and that the medical errors that malpractice liability tries to prevent are themselves a huge cost both to the injured patients and to the health care system as a whole.

Its really just a distraction, said Tom Baker, a professor at the University of Pennsylvania Law School and author of The Medical Malpractice Myth. If you were to eliminate medical malpractice liability, even forgetting the negative consequences that would have for safety, accountability, and responsiveness, maybe wed be talking about 1.5 percent of health care costs. So were not talking about real money. Its small relative to the out-of-control cost of health care.

Insurance costs about $50-$60 billion a year, Baker estimates. As for whats often called defensive medicine, theres really no good study thats been able to put a number on that, said Baker.

Krauthammer cited a study by the Massachusetts Medical Society that found that five out of six doctors said they ordered additional tests, procedures and referrals to protect themselves from lawsuits. He also relies on a much-criticized study from the libertarian Pacific Research Institute on the civil justice system to conclude that defensive medicine wastes more than $200 billion a year.

Baker is skeptical, and makes the point that defensive medicine is not the same thing as wasteful medicine. Like defensive driving, some defensive medicine is good, he said. To change behavior. When you drill down those studies, you see that what it means is, doctors are more careful with patient records. They spend more time with the patient. Theyre more careful to say hello and goodbye to the patient. Thats good.

Other health economists agree that defensive medicine is not the main driver of costs, and malpractice liability reform is not a panacea.

If you were to list the top five or ten things that you could do to bring down health care costs that would not be on the list, said Michelle Mello, a professor of Law and Public Health at Harvard.

Still, that doesnt mean the medical liability system we now have is a good one. Mello estimates the costs of so-called defensive medicine to be far less than Krauthammer does around $20 billion a year. So theres some savings to be had and frankly the health reform package has not come up with a lot of ideas for major savings.

President Obama at a recent town hall meeting said he wants to reduce doctors insurance premiums, but that, based on his conversations with health care experts, the evidence at least is that that is a very small, maybe not even a measurable factor in the reason that health care costs are going up.

He gets it, said Baker.

Although damage award caps could slightly limit the future growth of liability insurance premiums about 6 to 13 percent over time, says Mello, it tends to be oversold as a solution and its pretty unfair to patients.

Annual jury awards and legal settlements involving doctors amounts to a drop in the bucket in a country that spends $2.3 trillion annually on health care, Amitabh Chandra, another Harvard University economist, recently told Bloomberg News. Chandra estimated the cost of jury awards at about $12 per person in the U.S., or about $3.6 billion. Insurer WellPoint Inc. has also said that liability awards are not whats driving premiums.

And a 2004 report by the Congressional Budget Office said medical malpractice makes up only 2 percent of U.S. health spending. Even significant reductions would do little to curb health-care expenses, it concluded.

A study by Bloomberg also found that the proportion of medical malpractice verdicts among the top jury awards in the U.S. declined over the last 20 years. Of the top 25 awards so far this year, only one was a malpractice case. Moreover, at least 30 states now cap damages in medical lawsuits.

The experience of Texas in capping damage awards is a good example. Contrary to Perrys claims, a recent analysis by Atul Gawande in the New Yorker found that while Texas tort reforms led to a cap on pain-and-suffering awards at two hundred and fifty thousand dollars, which led to a dramatic decline in lawsuits, McAllen, Texas is one of the most expensive health care markets in the country. In 2006, Medicare spent fifteen thousand dollars per person enrolled in McAllen, he finds, which is almost twice the national average although the average town resident earns only $12,000 a year. Medicare spends three thousand dollars more per person here than the average person earns.

Still, many health policy experts dont believe the current malpractice liability system is either efficient or fair. Mello and others favor an alternative compensation system that takes the issue away from courts and juries and gives it instead to a panel of independent experts to judge whether malpractice occurred and what compensation should be provided. Thats unlikely to bring about significant cost savings, though, because it would encourage many more claims to be filed. Currently, only about two of every 100 patients injured by malpractice ever receive compensations. The new system would make it a lot easier to file claims, said Mello, and would reduce the uncertainty doctors complain about from jury awards.

Such a system implemented at a hospital could mean the hospital pays for malpractice insurance, with premium costs tied to the number of claims. The hospital then has an economic incentive to ensure its doctors are providing good care. Currently, Mello says, most insurance is not experience-rated, meaning premiums arent tied to the number of claims filed against the doctor.

But Mello, who has advised the Obama administration on malpractice reform, doesnt expect to see such proposals coming out of Congress or the White House anytime soon. Trial lawyers dont embrace proposals that would remove their role in the malpractice system, she said. And they have a lot of influence with Democrats in Washington.

Fib: High medical malpractice awards are driving up the cost of medical malpractice insurance:

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FACT: Consumer groups, a bi-partisan legislative committee, and even the insurance industry say insurers' bad business practices, not jury awards, drive up premiums.

 

"[M]edical malpractice premiums charged by insurance companies do not correspond to increases or decreases in payouts, which have been steady for 30 years. Rather, premiums rise and fall in concert with the state of the economy." Medical Malpractice Insurance: Stable Losses/Unstable Rates, Americans for Insurance Reform, under the direction of J. Robert Hunter (Director of Insurance for the Consumer Federation of America, former Federal Insurance Administrator and Texas Insurance Commissioner) October 10, 2002.

 

"[The] insurance industry has played a role in the continuing limitations on accessible and affordable insurance coverage for the health care providers . . . " Final Report of the Insurance Availability and Medical Malpractice Industry Committee, a bipartisan committee of the West Virginia Legislature, issued <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />January 7, 2003.

 

"I don't like to hear insurance-company executives say it's the tort system - it's self inflicted.'" - Donald J. Zuk, Chief Executive of Scopie Holdings Inc., a leading malpractice insurer in California, Wall Street Journal, June 24, 2002.

 

Fib: Caps on non-economic damages will bring down doctors' malpractice insurance premiums:

 

FACT: Experience in states with caps has shownand insurers and tort "reformers" admitthat caps and tort "reform" won't lower doctors' premiums.

 

In California, which limits non-economic damages to $250,000, the average actual premium is $27,570, eight percent higher than the average of all states that have no caps on non-economic damages. Medical Liability Monitor, 2001.

 

Malpractice premiums in California increased by 190% during the first 12-years following enactment of the $250,000 MICRA cap. Proposition 103 Enforcement Project Study, 1995. It took California's Proposition 103insurance reformto lower and stabilize malpractice premium rates.

 

"[A]ny limitations placed on the judicial system will nave no immediate effect on the cost of liability insurance for health care providers." Final Report of the Insurance Availability and Medical Malpractice Industry Committee, a bipartisan committee of the West Virginia Legislature, issued January 7, 2003.

 

"Nevada's new medical-liability program won't see immediate improvement in premium rates after a recent legislative initiative. . . . [A]nother company insuring physicians for medical liability, American Physicians Assurance, also wasn't planning any reduction." Best's Insurance News, August 20, 2002.

 

"We wouldn't tell you or anyone that the reason to pass tort reform would be to reduce insurance rates." Sherman Joyce, President of the American Tort Reform Association, "Study Finds No Link Between Tort Reforms and Insurance Rates," Liability Week, July 19, 1999.

 

"Insurers never promised that tort reform would achieve specific premium savings . . ." From a March 13, 2002 press release by the American Insurance Association (AIA).

 

An internal document citing a study written by Florida insurers regarding that state's omnibus tort "reform" law of 1986 said that "The conclusion of the study is that the non-economic cap . . . [and other tort 'reforms'] will produce little or no savings to the tort system as it pertains to medical malpractice." Medical Professional Liability, State of Florida, St. Paul fire and Marine Insurance Company, St. Paul Mercury Insurance Company.

 

In Missouri, which has caps, the number of claims has been declining, the cost per claim has been declining, yet medical malpractice premiums are going up.

 

Fib: Juries are giving medical malpractice victims outrageously high verdict awards:

 

FACT: Median payouts are relatively low - and have not risen significantly over the past decade.

 

Despite questionable anecdotal evidence of excessive jury verdicts, the hard facts show that malpractice awards are rarely excessive. The median malpractice payout for 2000 is $125,000, according to the National Practitioner's Databank.

 

"Not only has there been no 'explosion' in medical malpractice payouts at any time during the last 30 years . . .payments (in constant dollars) have been extremely stable and virtually flat since the mid-1980s." Medical Malpractice Insurance: Stable Losses/Unstable Rates, Americans for Insurance Reform, October 10, 2002.

 

Fib: There are many frivolous medical malpractice lawsuits.

 

FACT: Most people with legitimate medical malpractice claims never go to court.

 

A study done by the Harvard Medical Practice Study Group determined that for every 8 potential medical malpractice claims, only 1 claim was actually filed. Patients, Doctors, and Lawyers: Medical Injury, Malpractice Litigation, and Patient Compensation in New York, Harvard Medical Practice Study Group (Cambridge, Mass.: Harvard University, 1990).

 

"Legal professionals, legislators, and the public in general often receive a distorted picture of medical negligence litigation based on selective reporting of cases by the mass media and by propaganda efforts of groups advocating changes to American tort laws." Medical Negligence, the Litigation Process and Jury Verdicts in Medical Malpractice Cases: Implications for Indiana, Neil Vidmar, Ph.D., Russell M. Robinson II Professor of law at Duke Law School, December 2, 2002. See also Java Jive: Genealogy of a Juridical Icon, Michael McCann, William Haltom, and Anne Bloom, 56 University of Miami Law Review 114 (2001).

 

Fib: Insurers constantly must settle frivolous lawsuits in order to "make them go away":

 

FACT: Insurers themselves admit that they don't settle frivolous claims.

 

"In interviews with liability insurers that I undertook, the most consistent theme from them was: 'We do not settle frivolous cases!' . . . [Insurers'] policy on frivolous cases is based on the belief that if they ever begin to settle cases just to make them go away, their credibility will be destroyed and this will encourage more litigation." Medical Negligence, the Litigation Process and Jury Verdicts in Medical Malpractice Cases: Implications for Indiana, Neil Vidmar, Ph.D., Russell M. Robinson II Professor of law at Duke Law School, December 2, 2002.

 

Fib: We should follow the example of California, where caps are working:

 

FACT: Though California has some of the most draconian limits on the rights of patients in medical malpractice (via a 1975 law called MICRA), average medical malpractice premiums are higher than in states without caps, premiums and health care costs continue to rise, and most Californians want to eliminate the cap. The state had to pass insurance reform to stop skyrocketing premiums after its tort "reform" succeeded only in filling insurer's pockets.

 

In California, which limits non-economic damages to $250,000, the average actual premium is $27,570, eight percent higher than the average of all states that have no caps on non-economic damages. Medical Liability Monitor, 2001.

 

Malpractice premiums in California increased by 190% during the first 12-years following enactment of the $250,000 MICRA cap. Proposition 103 Enforcement Project Study, 1995. It took California's Proposition 103 - insurance reform - to lower and stabilize malpractice premium rates.

 

Since 1998, premiums in California have risen 37% compared to the nationwide average of just 5.7%. American Medical Association, Socioeconomic Characteristics of Medical Practice, 2000-2002.

 

California's health care costs have continued to skyrocket at a rate faster than inflation since the passage of MICRA. Inflation as measured by the Consumer Price Index rose 186% between 1975 and 1993; yet California's health care costs grew by 343% during the same period. In addition, California's health care costs have grown at almost twice the rate of inflation since 1985.

 

Californians overwhelmingly oppose their state's caps. A 1997 statewide poll of Californians shows: 74% approve of removing MICRA's limit on non-economic damages in certain cases; 66% believe the MICRA cap should be eliminated for doctors who negligently harm children and 58% believe the MICRA cap should be eliminated for doctors who negligently cause death. Fairbank, Maslin, Maulin, & Associates California statewide poll, 1997.

 

Fib: Non-economic damages caps just limit frivolous "pain and suffering" claims by plaintiffs:

 

FACT: Juries are competent and conservative, and jury verdicts tend to be consistent with judgments of neutral medical experts.

 

"The assertion that jurors decide cases out of sympathy for injured plaintiffs rather than the legal merits of the case . . . have been made about malpractice juries in the United States since at least the nineteenth century. Yet, research shows no support for these claims."

 

Medical Negligence, the Litigation Process and Jury Verdicts in Medical Malpractice Cases: Implications for Indiana, Neil Vidmar, Ph.D., Russell M. Robinson II Professor of Law at Duke Law School, December 2, 2002.

 

A 1992 comparison of jury verdicts and the reviews of insurance company-hired doctors showed that jury verdicts tended to be "consistent with" the doctors' assessments of medical records. The Influence of Standard of Care and Severity of Injury on the Resolution of Medical Malpractice Claims, Taragin et al, 117 Annals of Internal Medicine 780 (1992).

 

Fib: A recent Bush Administration U.S. Health and Human Services (HHS) report shows that America's legal system is the cause of high medical-malpractice insurance rates for doctors.

 

FACT: The one-sided "report" is nothing more than 28 pages of industry talking points.

 

Key sources have direct money ties to the insurance industry. Law Professor Jeffrey O'Connell, cited throughout the "report," took $67,000 from the insurance industry to oppose the 1988 California insurance reform initiative (Proposition 103, which was approved by voters) to roll-back insurance rates.

 

The American Tort Reform Association (ATRA) and the law firm of its general counsel, Victor Schwartz, are cited frequently, including as a source of statistics. Schwartz's law firm - Shook, Hardy & Bacon - lobbies for USAA Insurance Co., Health Insurance Association of America, CIGNA Corp., and the American Association of Health Plans.

 

The "report" relies on data from the Physician Insurers Association of America, a trade group of medical-malpractice insurance companies owned by healthcare providers.

 

Key numbers are dubious or old. A company called Jury Verdict Research (JVR) is cited as a source of jury awards in medical malpractice cases. But on June 24, 2002, The Wall Street Journal reported that Jury Verdict Research's 2,951-case database "has large gaps." The company collects information unsystematically, can't say how many cases it misses, and doesn't include "zero" verdicts, the newspaper reported.

 

In addition, numbers claiming malpractice caps result in lower premiums for doctors are 12 years old.

 

"Personal correspondence" is cited repeatedly as a source of statistics. Some of the most exaggerated examples of premium increases are based on the personal correspondence of US Rep. Charles "Chip" Pickering (R-MS).

 

The "report" relies heavily on a survey of doctors conducted by Harris Interactive and paid for by the American Medical Association.

 

Key facts are left out. When claiming that malpractice premium increases are higher in states that don't cap malpractice awards, the "report" omits examples that don't fit its argument. Nine states without damage caps had no increase in premiums, but that doesn't appear in the "report."

 

Fib: High malpractice premiums for doctors cause the patients' health insurance premiums to rise.

 

FACT: The cost of medical malpractice liability premiums amount to less than one percent of total health care costs.

 

The Consumer Federation of America reports that medical malpractice premiums comprise only 0.59 percent of national health care costs - so even eliminating medical liability altogether would do little to reduce health care costs. Malpractice Suits Not Driving Medical Costs Up, Says Group, The New Orleans Times-Picayune, May 5, 1999, at E3.

 

FACTS: Caps do not reduce premiums.

 

Instead, caps discriminate against patients most seriously injured by malpractice and children, women, seniors, and minorities - while enriching the insurance companies that caused premiums to rise because of their own bad business decisions and investments.

 

Juries, not a one-size-fits-all arbitrary cap determined by politicians, should decide what medical malpractice victims receive in compensation.

 

The only thing we need to reform is the insurance industry - not the legal system.

 

 

Also, insurance rates are higher in CA where there are caps than in states where there are no caps.

 

http://www.atla.org/medmal/caltable.pdf