Lecture Seven: Tort Reform

H516 STUDY NOTES

Health care is a risky business. The stakes are very high. There is also a lot of competition in the medical field. In order to distinguish oneself and one’s institution often claims are made about excellence or being the best at this or that. Expectations are raised. When those expectations are not met, even in the absence of negligence, or when a violation of the standard of care does occur, litigation offers some consolation, revenge, or vindication, as much as monetary damages.

The landscape for the delivery of health care has changed dramatically over the past 50 years. The day of the GP making house calls, providing full-service care is over. Most doctors no longer own their own practices and must be accountable to others for their time. Many health plans restrict consumer choices. Office-based doctors may not be available to care for patients admitted to hospital. Insurance providing first dollar fee-for-service reimbursement, friendly to both doctor and patient, is most times replaced by some managed care product restricting access and limiting choice. Even if the care provided is as good as the other (or better), any bad outcomes as a result of pure chance or actual negligence, will appear more malignant because the patient had so little choice in the matter.

We have, in many ways, become the victims of our own success. The more we rely on the science of medicine (i.e. technology), and not the art (i.e. relationships), the more impersonal the doctor-patient relationship (now better denominated the health services delivery system-health services consumer relationship) becomes. The GP of 50 years ago was seen as an extension of the family. No mistaking the way the health system delivers care nowadays as being family. Have we taken the “care” out of health care?

The manner in which we compensate “victims” of professional negligence is by no means unchangeable. Who is served by the fact that it is done in an adversarial, all-or-nothing manner? Inertia and self-interest have kept it in the courts. Are there alternative forums that would eliminate substantial waste and emotional hardship? Should physicians who mean patients no ill-will be forced to play the role of “bad doctor” or put in the position to deny the plaintiff any recovery at all?

Below are listed alternatives to the current system of providing compensation for patients harmed by an encounter with the health delivery system. The asterisk indicates the current system.

Who pays the cost of liability insurance?

Physician or physician’s employer*

Patient or patient’s employer

Hospital

Government

How is the determination that payment is due made?

Malpractice occurred*

Injury occurred

Certain type of event occurred

Who determines that payment is due?

Court/judge/jury*

Arbitrator

Expert panel

Government agency

How are damages awarded?

Case-by-case*

According to a schedule

Lump sum or payment over time

Non-economic damages or not

What causes a malpractice insurance crisis? In Florida, the number of claims was static, but the size of the awards increased substantially. In Minnesota, neither the number of claims nor the size of awards increased. However, the insurance companies overestimated their liability exposure on pending claims 2-3 times. However, what is felt to be the biggest cause of a malpractice insurance crisis is when a period of economic boom is followed by a recession. When the economy is growing, insurance companies look for more investment capital. They get their capital by selling policies. This money is invested and during periods of boom, the companies get a big return on their investment. This encourages them to want to get more capital. They compete with other liability insurers and, since they are making so much money off of investments, this drives the price of policies down. Then the bottom falls out of the economy. Investments go bad. Suddenly the insurance companies don’t have enough money to even pay off their claims. Premiums go up. The high premiums threaten to drive doctors out of the state or to go without insurance. Companies sell fewer policies. A malpractice insurance crisis occurs. It has little to do with the number or value of claims, but with the overall economy and the manner in which malpractice insurance companies participate in the investment market. One dollar out of every $200 health care dollars pays for malpractice insurance.

This is not to say that some awards seem outrageously high. But much of the money is awarded to help the patient cover the costs of medical care, including extended care in some cases. The inflation in the cost of health care has far outpaced the general rate of inflation.

First Generation Tort Reform Measures-----

*make it harder to sue----shorter statutes of limitations, restrict attorneys’ fees, provide court costs and legal fees against plaintiffs for frivolous claims, restrict duty creation (as in transfer-of-care cases)

*limit recovery----don’t let plaintiffs set award in pleading but make juries set damage awards, provide for payment of damages over time, let jury know if plaintiff has already collected from own insurance policy, place dollar limits on recoveries

*change forum to one more sympathetic to doctors----from juries of 12 non-physicians to panels of 3 physicians, from courts to arbitrators

Second Generation Tort Reform Measures-----

*medical practice guidelines as the standard of care

*alternative dispute resolution

*no-fault systems----provider-based early payment, administrative

Criticisms of Current Tort Model

1) fails to compensate all injured patients (only those who win lawsuits)

2) sends inaccurate deterrence signal

3) administrative/social costs of malpractice system are too high

4) decreases access to health care for patients as a result of high malpractice insurance costs/doctors fear of lawsuits

The best system seems to be one that divides compensation from accountability, and where the upfront costs are borne by the consumers (many) rather than the providers (few). Access to payment for injury incurred as a result of a health care encounter would be evidentiary rather than adversarial. The decision as to whether, and how much, would be administrative. This decision would be subject to the safeguards of all other administrative decisions. Graphically, it would look something like this:

Health Care Injury

/ |\

/ | \

Compensation | Accountability

Recovery based on demonstration Requires demonstration of violation of standard

of injury; does not require medical of care; sanctions may include requirement of

malpractice; amount based on continuing medical education, proctoring of pro-

cost and damages schedule like cedures, passing of examinations, restriction of

worker’s compensation or even loss of license

This system would be radically different from the current system. Most of those ways are obvious, but the most drastic difference is the lack of a requirement of negligence in order to make a recovery. By removing the requirement of fault from the recovery system, we acknowledge that the purpose of the system is not to punish, but to compensate. More people would be compensated increasing cost, but by removing the adversarial nature of the system, we save millions in court costs and attorney fees, allowing us to compensate more of the victims in a more fair and equitable way. We also eliminate the denial, required by the current system, of doctors that they did something wrong. They are free to admit their mistakes without the fear that such admissions will amount to a concession in a medical malpractice lawsuit. The system we have currently continues because it benefits the legal profession. All rhetoric aside, we can help more people recover from medical injury and promote healing among patients and the medical profession if we scrap the present system.