Annals of Emergency Medicine
Volume 50, Issue 1 , Pages 59-63, July 2007

Elephants, Blind Sharpshooters, Golddiggers, and Beyond: The Prospects for Constructive Tort Reform (Part 1 of A 2-Part Series)

Article Outline

 

The Healthy Americans Act (S. 334), introduced on January 18, 2007 by Senator Ron Wyden (D-Oregon) and under consideration by the Senate Finance Committee at this writing, calls for bonus payments to states that change their medical malpractice laws. To physicians who see insurance premiums rising and hear alarming tales of frivolous suits, renegade juries, and colleagues in some specialties relocating or even leaving practice, this proposed legislation might look like blessed relief—had another measure, funding demonstration projects to foster alternatives to tort litigation, not already appeared in the previous session. The Fair and Reliable Medical Justice Act (S. 1337), co-sponsored by Senators Michael Enzi (R-Wyoming) and Max Baucus (D-Montana) in June 2005, died in committee as the 109th Congress closed up shop; at this writing, the senators reportedly plan to bring up another version in the current Congress. A succession of other bills over recent years, often reiterating the same basic concepts, have taken aim at malpractice damages: H.R. 4600 in 2002, H.R. 5 in 2003 and 2005, H.R. 4280 and 4279 in 2004. Not one has become law.

The absence of a federal solution does not mean the public sector is ignoring the elephant in every physician’s living room. Malpractice proceedings and insurance have traditionally been regulated at the state level. Twenty-six states already limit noneconomic damages,1 6 limit total damages,2 and 33 have recently considered some variety of tort reform legislation.3 The National Conference of State Legislatures, while taking no substantive position in the tort reform debate, opposes federal legislation on jurisdictional grounds. If the malpractice system is capable of changing, most commentators agree, such change will probably occur in the laboratories of state law. Few students of the system are sanguine about change actually taking place.

“Reform always sounds like a good thing,” comments Robert L. Wears, MD, MS, professor of emergency medicine at the University of Florida. “Even if you’re the incumbent, you’re for reform.”

The precise meaning of the term, however, engenders controversy and confusion. Tort reform is more of an umbrella category than a single clearly defined concept; different interests have applied the phrase to a wide variety of measures and systems,4 not all of which strike physicians as congruent with either their own interests or those of patients. Some proposals have pitted doctors against patients in the political arena, while others, more systemic in nature, have been subjects of intensive scholarly speculation but little practical testing. The situation is complicated by the use of the same term “tort reform” in nonmedical contexts to apply to measures that would grant immunity from product liability to interests such as the tobacco and firearms industries—not exactly natural political bedfellows for physicians.

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Band-Aids and Overhauls 

The simplest version of tort reform in the malpractice arena is to limit awards, either total damages or the noneconomic components. California’s Medical Injury Compensation Reform Act (MICRA), enacted in 1975, was the first such measure and remains the national model; along with a cap of $250,000 on noneconomic damages, MICRA regulates attorneys’ contingency fees to reduce incentives for unjustifiable suits and alters the legal collateral source rule to make evidence of compensation by sources other than the defendant admissible in court. Some jurisdictions have also experimented with pretrial screening panels, binding arbitration, and shorter statutes of limitations to reduce the frequency of claims. Proposals extending beyond these adjustments of existing procedures—which Dr. Wears terms “Band-Aids on a larger problem”—include reorganizing the system so that litigation risk applies to institutions rather than individuals (enterprise liability) or replacing the tort system outright with any of several alternative schemes. (The term “tort reform” is not customarily applied to these more systemic remedies.)

An early offer system championed by Jeffrey O’Connell, JD, professor of law at the University of Virginia, would strengthen incentives for prompt settlement of claims by giving insurers the option of offering, within a defined period (eg, 180 days), to cover a claimant’s net economic losses, with the burden of proof at trial increasing if the claimant rejects it, and with noneconomic losses excluded.5

Partisans of laissez-faire economic theory such as Richard Epstein, LLB, of the University of Chicago Law School, have advocated reclassifying malpractice under contract law rather than tort law,6 so that patients desiring lower-cost care could waive the right to sue (a feature that courts, O’Connell observes, have consistently found unconstitutional). Others have recommended quasi-contractual models in which a patient’s choice of certain health care organizations includes opt-in selection of alternative claims systems. Scholars who have analyzed various compensation systems inside and outside the United States often recommend specialized health courts, which replace lay jurors with medical professionals, or no-fault administrative systems resembling those used with some success in New Zealand and Sweden.

After a crisis in the 1980s in which insurers withdrew all coverage for obstetricians in rural St. John’s County (and complications such as breech births began appearing in emergency departments), Florida created a special Birth-Related Neurologic Injury Compensation Association, a limited no-fault fund supported by payments from all physicians in the state. Virginia administers a similar system through its Workers’ Compensation Commission. The idea has not spread beyond the clinical category of perinatal neurologic damage, but it has prevented an exodus of obstetricians and neurosurgeons, 2 of the specialties that are most vulnerable, along with emergency physicians, to insurance cost crises. Wears describes the fund as a qualified success, a limited experiment that minimizes transactional expenses and distributes burdens reasonably evenly.

“There are people who are not happy with it,” he says; “in a sense I’m not happy with it, because why should I have to pay for the obstetrician? Except I’m very glad breeches aren’t showing up in my ER.”

A process that takes an average of 4 to 5 years7 to reach verdicts, leaving injured patients in financial limbo, and allocates an enormous percentage of overall premium dollars to “frictional costs” (payments to lawyers, expert witnesses, and administrative entities), not to injured patients, obviously needs greater efficiency and rationality.8

To Wears, “the current tort system is like a blind night watchman with a loaded gun. He hears a noise and he shoots; sometimes he hits a criminal, sometimes he hits a customer.” The core question may be whether adjusting the economic variables, as conventional tort reform measures do, can increase fairness and preserve accountability in the absence of deeper changes in other components of the health care system. Many researchers contend that any repair of the tort system is inseparable from broader efforts to improve the delivery of care.

“I used to be a surgeon, and we’re reductionist thinkers,” says Lucian L. Leape, MD, adjunct professor of health policy at the Harvard School of Public Health and a specialist in the control of medical error—the other elephant in medicine’s living room since the revelations of widespread iatrogenic injuries in the 1999 Institute of Medicine (IOM) report To Err Is Human.9, 10 “We tend to say ‘What’s really the problem here, and what can you do about it?’ … The answer to the malpractice problem is to deal with the substantive issues”—not insurance premiums, he believes, but injuries, compensation, and error prevention.

William M. Sage, MD, JD, of the University of Texas at Austin School of Law (formerly at Columbia Law School) finds that the malpractice system’s obvious flaws and recurrent crises have drawn excessive attention that would be better directed to more fundamental restructurings.11, 12 The structure and behavior of liability insurance, he argues—a third-party insurance system that fails to connect information and incentives rationally, efficiently, or promptly—overwhelms the assumptions on which conventional tort reform is based.13

“I look at medical liability as a health policy problem,” Dr. Sage says, “not as a problem of lawyers, but a problem about access and quality and cost in health care …. Medical malpractice is the Anna Nicole Smith issue of health policy: we find it absolutely fascinating, but at the end of the day, it’s not very important.”

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Systemic Change in A Political Context 

In the United States, tort reform also appears inseparable from partisan politics. “There’s an ideological view that considers personal injury lawyering a destructive force in society,” comments Sage. “Some of it is concerned about the economic effects, but I also think there are people who are ideologically concerned about the social effects, and they view litigation as a force against social cohesiveness. In some ways, I think part of the New Right movement in American politics generally has made tort reform an ideologically appealing concept of the newer Republican party—which is not to say that it doesn’t have a self-interested component economically.”

A desire to reduce the funding base of the Democratic party, which receives substantial support from the Association of Trial Lawyers of America, provides additional motivation for the political right. Conversely, Sage observes, opposition to tort reform (at least the damage-cap version) invokes populist principles: “Many successful plaintiffs’ lawyers really view the individual lawsuit as a citizen’s last defense against both oppressive government and oppressive corporations.” Along with an economic stake in the existing system, Sage observes “a tort defenders’ dislike of social engineering, preferring to get individual micro-justice for identified clients to any process that, even if it would serve a lot of potential clients quite well, would disadvantage one injured person to benefit another.”

Since the ostensible purposes of tort litigation are to compensate the injured and to ensure incentives for caution by sanctioning practitioners whose work falls below professional standards, some plaintiffs’ attorneys and patients’ rights groups have defended the existing system on the grounds that removing its countervailing force will harm patients. David M. Studdert, LLB, MPH, ScD, formerly associate professor of health policy and law at the Harvard School of Public Health, now Federation Fellow and professor of law and population health at the University of Melbourne, Australia, replies that the system’s potential protections are exercised so rarely that they are nearly moot: “It may be right to say that, in theory, patients have recourse to courts of general jurisdiction, jury trials, and relatively large awards for pain and suffering (things that health courts and early-offer systems propose to modify in one way or another). However, the empirical reality on the ground is that the vast majority of patients injured by negligent care—perhaps as much as 95%—never see a dime.”

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Mythical Menaces 

Strong beliefs about the tort system often rest on quasi-mythic narratives identifying one group or another as culprits: windfall-hunting lawyers, profiteering insurers, or health care providers unwilling to admit error. The growing empirical literature on the topic calls some of these assumptions into question. One strong inference from existing data involves the poor fit between the outcomes of tort cases and the underlying medical findings. Many observers have cited a 1996 study implying that jury awards and actual negligence are essentially unrelated,14 following observations, based on 1980s data in the pathbreaking Harvard Medical Practice study, that negligence-related injuries seldom resulted in claims.15 The 1996 study, however, was based on too small a sample of claims to have the statistical power to detect effects.

A more recent analysis, larger (1,452 cases) and methodologically stronger, found that the relation of payments to medical negligence (defined according to IOM standards) is not arbitrary—payment outcomes matched determinations of claims’ merit 73% of the time—but is still far from reliable.16 Claims lacking evidence of error still frequently received payment; nonmeritorious claims accounted for 13 to 16% of the system’s total monetary costs, depending on whether close call cases were excluded. Perhaps more alarming is the observation that 16% of claims involving injuries attributable to error went unpaid. The findings go some distance toward refuting the belief that frivolous suits are widespread, but they are hardly reassuring to either plaintiffs or potential defendants.

Paul J. Barringer, III, JD, general counsel for the nonprofit organization Common Good (which advocates replacing jury trials with specialized health courts), sums it up roughly as follows: “In approximately one quarter of meritorious cases, there’s no payment, and [in] approximately one quarter of so-called frivolous cases, there’s payment …. One bullet out of 4 chambers is not a gun that you’d want to play Russian roulette with.”

With or without caps, the current system fares no better at controlling burdens on physicians than it does at allocating compensation for injured patients. Most reforms instituted to date—caps, collateral source offsets, contingent fee limits, pretrial screening panels, and shorter statutes of limitations—have reduced payouts but exerted little effect on rising insurance premiums.17 Indeed, some opponents of caps, like the nonprofit group Public Citizen, call attention to weak correlations between payouts and premiums in states without caps and rising premiums in states with caps, despite a lack of change in payouts, as evidence that the premium crisis cannot be blamed on litigation:

In the 11 states we have studied, we found that the legal system has nothing to do with malpractice insurance rates. In Washington [a non-cap state], there has been no increase in the dollar value of medical malpractice payouts over the past decade, when adjusted for inflation. And the number of medical malpractice payouts in 2001 is about the same as in 1993 …. Contrary to assertions of many, doctors are not fleeing Washington. In fact, Washington continues to experience a steady and significant increase in the number of doctors. Today, there are about 1,500 more licensed doctors in the state than in 1999. Malpractice rates for certain specialties are rising because insurance industry profits are suffering in the current economic downturn, just like everyone else …. Damage caps are … a reward to big corporations for their financial support of lawmakers.18

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The Blame Game 

While some of the rhetoric carries a whiff of the smoke-filled room, contentions about the effective causes of premium crises can be maddeningly inconclusive. As Public Citizen and similar organizations cite data from Jury Verdict Research, the American Medical Association counters with figures from the Physician Insurers Association of America and Brown Brothers Harriman19; each, unsurprisingly, finds grounds for its view. At least 1 independent financial analysis firm, Weiss Ratings, suggests that both single-cause explanations, blaming a litigation explosion and blaming gouging by insurers, are oversimplifications.20

Insurance premiums, as Sage and others emphasize, are subject to all manner of complex influences and cannot be driven by any one variable. Premium costs in recent decades have been roughly cyclical, peaking about every decade and exhibiting something of a ratchet effect, never quite returning to the previous set point. Sage identifies 3 significant 3-to-5-year periods of instability in malpractice insurance markets (in the mid-1970s, in the mid-1980s, and after 2003). “The fact that it’s a relatively complicated discussion is the reason you don’t tend to hear about it in politics,” he says; the parties to the debate “only want to tell stories about injuries and lawsuits. Neither side wants to tell stories about complicated insurance-driven phenomena.”

Michelle M. Mello, JD, PhD, professor of health policy and law at the Harvard School of Public Health and author of some of the most respected statistical analyses in the field, agrees. “It’s just one of these situations where you have political interest groups articulating parts of the story as if they were the entire story. You have the trial lawyers and some consumer groups asserting that this has nothing to do with malpractice claims and all [to do with] bad decisions on the part of insurers, whether investment decisions or underwriting decisions,” she says. “You have the doctors and liability insurers asserting that it has nothing to do with bad investments or business decisions, and everything to do with plaintiffs and the high cost of claims. Neither one of these groups has moved over time in their willingness to admit that there’s more going on than they would like the public to believe.”

Higher litigation costs, related to broad social trends extending well beyond medicine, are partial but not sufficient causes, she says, along with falloffs in investment income and changes in informed consent law from “the standard of what a reasonable physician would disclose to his patients” to “what a reasonable patient would want to know” in about half the states. “I think there’s this persistent belief that poor people are more likely to sue you,” she adds, “which is not true statistically,” as the underprivileged are less likely to have access to the social capital required to navigate the formidable system.

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Perceptions of the Practice Environment 

The prevalence of any type of malpractice suit, frivolous or otherwise, is among the many areas where research and beliefs diverge. Mello comments, “I think physicians will always tend to overestimate their liability risk. For decades now we’ve had data showing that on average about 2 percent of incidents of malpractice result in a lawsuit, and when you survey physicians they’ll tell you it’s more like 30, 40, 60 percent.” She is circumspect about drawing conclusions where available data are limited: “There’s no basis on which we could infer there are more losses because there are more medical errors, for example.” She does find an intriguing gap between expressed views of a controversial practice environment and professional choices about that environment: in one of the studies in the Pew Charitable Trust’s Project on Medical Liability in Pennsylvania, examining administrative data from the state insurance department, she and her colleagues found that physicians in nearly all high-risk specialties (emergency medicine included) did not move away or restrict their scope of practice during the 1993-2002 period, although “a third to a half said yes” to survey questions about exactly such an intention. Despite a report by researchers at the Agency for Healthcare Research and Quality21 suggesting that the presence or absence of caps influences physicians’ decisions about practice locations, Mello and colleagues found that the insurance crisis beginning in 1999 did not drive Pennsylvania’s specialists away, except for a small number of obstetrician-gynecologists (premium hikes were correlated with an 8 percent reduction in the supply of that specialty, offset by increases in other specialties).22

The overall portrait that emerges from Dr. Mello’s research indicates that the existing system is highly irrational, but not as drastically irrational as the worst-case scenarios offered by MICRA-style tort reform advocates. Their chief remedy, she believes, would introduce even more irrationality by “undercompensating a lot of seriously injured people and distributing compensation in a way that doesn’t make a whole lot of sense. It’s not rational to give the same amount of money to someone with a very severe injury as to someone with a modest injury.” Instead of flat caps, she favors exploring alternatives such as health courts (some of her work is supported by a Robert Wood Johnson Foundation grant in partnership with Common Good), enterprise-liability models as found de facto in teaching hospitals or systems like Kaiser Permanente, and less adversarial European-style administrative systems that use the avoidability of injury, not personal negligence, as the criterion for compensation.

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References 

  1. Kaminski JL. Medical malpractice insurance legislation (Office of Legislative Resarch, Connecticut General Assembly, Research Report 2006-R-0397). 2006;June 28, Available at: http://www.cga.ct.gov/2006/rpt/2006-R-0397.htm. Accessed May 8, 2007.
  2. American Medical Association. In: Medical liability reform – now! A compendium of facts supporting medical liability reform and debunking arguments against reform. 2006;p. 26;July 19, Available at: http://www.ama-assn.org/go/mlrnow. Accessed April 30, 2007.
  3. Kaminski, op. cit., and National Conference of State Legislatures. Medical malpractice tort reform: 2006 state introduced legislation. Nov. 2, 2006. Available at: http://www.ncsl.org/standcomm/sclaw/medmalreform06.htm. Accessed May 8, 2007.
  4. Studdert DM, Mello MM, Brennan TA. Medical malpractice. N Engl J Med. 2004;350:283–292
  5. Hersch J, O’Connell J, Viscusi WK. Evaluation of early offer reform of medical malpractice claims: final report. Washington, D.C: U.S. Department of Health and Human Service; 2006;June. Available at: http://aspe.hhs.gov/daltcp/reports/2006/medmalcl.pdf. Accessed May 8, 2007.
  6. Epstein R. Contractual principle versus legislative fixes: coming to closure on the unending travails of medical malpractice. 54. DePaul L Rev. 2005;503:
  7. Nordman E, Cermak D, McDaniel K. Medical malpractice insurance report: a study of market conditions and potential solutions to the recent crisis. Kansas City, KS: National Association of Insurance Commissioners; 2004;
  8. The percentage of overall malpractice premium costs that ultimately reach injured patients is uncertain, though some estimates place it in the 15-20% range (Wears RL, personal communication). One commonly cited figure for the proportion of monies in tort actions nationwide reaching plaintiffs, in the form of either awards or claims settled out of court, is 22% for economic loss compensation, with 54% consumed in transactional costs and the remaining 24% going for noneconomic losses (Tillinghast-Towers Perrin, U.S. Tort Costs: 2003 Update–Trends and Findings on the Costs of the U.S. Tort System, 2003, p. 17 [http://www.towersperrin.com/tillinghast/publications/reports/ 2003_Tort_Costs_Update/Tort_Costs_Trends_2003_Update.pdf]). However, these figures cover the tort system as a whole instead of separating medical malpractice claims from other categories such as asbestos-related cases; overall liability is consistently an order of magnitude larger than the medical malpractice component. Medical malpractice costs are analyzed separately for aggregate costs and annual growth – malpractice tort costs have grown at 11.9% annually, compared with 9.5% annually for all U.S. tort costs since 1975 – but not for the breakdown of economic loss, noneconomic loss, and transactional “friction.” In the more recent analysis of 1,452 closed malpractice claims (Studdert DM, Mello MM, Gawande AA, et al. Claims, errors, and compensation payments in medical malpractice litigation. N Engl J Med 2006;354:2024-2033), administrative friction consumed 54 cents of every dollar spent on compensation.
  9. Leape LL, Berwick DM. Five Years After To Err Is Human: What Have We Learned?. JAMA. 2005;293:2384–2390
  10. In:  Kohn LT,  Corrigan JM,  Donaldson MS editor. To Err Is Human: Building a Safe Health System. Washington, DC: National Academy Press, Institute of Medicine; 1999;
  11. Sage WM. Putting the patient in patient safety: linking patient complaints and malpractice risk. JAMA. 2002;287:3003–3005
  12. Sage WM. Medical liability and patient safety. Health Aff (Millwood). 2003;22:26–36
  13. Sage WM. Malpractice insurance and the emperor’s clothes. DePaul Law Review. 2005;54:463–484(Clifford Symposium on tort law)
  14. Brennan TA, Sox CM, Burstin HR. Relation between negligent adverse events and the outcomes of medical malpractice litigation. N Engl J Med. 1996;335:1963–1967
  15. Localio AR, Lawthers AG, Brennan TA, et al. Relation between malpractice claims and adverse events due to negligence: results of the Harvard Medical Practice Study III. N Engl J Med. 1991;325:245–251
  16. Studdert DM, Mello MM, Gawande AA, et al. Claims, errors, and compensation payments in medical malpractice litigation. N Engl J Med. 2006;354:2024–2033
  17. Studdert, Mello, Brennan (2004), op. cit.
  18. Claybrook J. No medical malpractice “crisis” in Washington State; damage caps would harm those most injured, wouldn’t lower rates. Available at: http://www.citizen.org/pressroom/release.cfm?ID=1405. Accessed May 8, 2007.
  19. American Medical Association (“Medical liability reform – now!”), op. cit., pp. 3, 50 ff.
  20. Weiss Ratings. Medical malpractice caps: the impact of non-economic damage caps on physician premiums, claims payout levels, and availability of coverage. Available at: http://www.weissratings.com/malpractice.asp. Accessed May 8, 2007.
  21. Encinosa WE, Hellinger FJ. Have state caps on malpractice awards increased the supply of physicians?. Health Aff (Millwood). 2005;(Suppl Web Exclusives):W5-250–W5-258
  22. Mello MM, Studdert DM, Schumi J, et al. Changes in physician supply and scope of practice during a malpractice crisis: evidence from Pennsylvania. Health Aff (Millwood). 2007;26:w425–w435

PII: S0196-0644(07)00605-1

doi:10.1016/j.annemergmed.2007.05.007

Annals of Emergency Medicine
Volume 50, Issue 1 , Pages 59-63, July 2007