Medical Malpractice and Tort Reform: Yes, Deal Better With the Issues but Don't Get Sidelined From More Costly, Needed Health Care Reforms

Medical malpractice costs are a flash point for physicians and malpractice trial lawyers, each side claiming their solutions must be heeded to avoid potential disaster for patients and our health care delivery system.
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A contentious cloud hangs over the health care reform debate. Medical malpractice costs are a flash point for physicians and malpractice trial lawyers, each side claiming their solutions must be heeded to avoid potential disaster for patients and our health care delivery system.

I believe the issue is a distraction, but that doesn't mean it shouldn't be addressed. The topic obstructs discussion of the higher impact reforms we need to tackle. It's out there, like a sore thumb, so I'd like to walk through some of the important aspects of medical malpractice reform, and then talk about some solutions.

Certainly, each side in the debate has legitimate concerns. The cost of malpractice insurance and the threat of being sued influences doctors. Some say it permeates the system and leads to defensive medicine, or physicians performing tests and procedures that are not needed. Doctors spend time and money, the argument goes, covering all possible medical options to protect themselves from lawsuits. Indeed, a 2005 study found that 93 percent of physicians responding to a survey reported practicing some form of defensive medicine. In some cases, physicians say they would not choose a high-risk specialty, such as obstetrics or neurosurgery, or they have left those specialties, because of the threat of legal action. And to give credence to the other side of the argument, some lawyers and patient advocates say we risk becoming a system where patients harmed by negligence or incompetence do not receive fair compensation, or where truly negligent or incompetent health care providers are not held accountable.

Before I get into some ideas of what to do about it, let's look at some facts.

Points of Comparison

The truth is medical malpractice costs — both direct costs of insurance premiums and indirect costs of defensive medicine — are not among the primary drivers of health care costs. Percent direct costs in 2009 to providers of medical malpractice liability insurance, costs including insurance premiums, settlements, awards and administrative costs, totaled $35 billion, according to the Congressional Budget Office. If those costs were lowered by 10 percent, it would reduce national health expenditures by 0.2 percent. Even if reforms resulted in less use of health care services driven by fear of lawsuits, savings to the system would be about 0.5 percent, or $11 billion in 2009.

Let's compare those costs with the true culprits in out-of-control costs of health care: The economic toll of millions of Americans who don't have health insurance dwarfs the impact of malpractice by as much as 20-fold. Because many of the elements of the health reform law will not take effect until 2014, some 50 million Americans go without health insurance. The cost of uninsured people to the system comes in at around $124 billion a year in direct costs to doctors, hospitals and other providers. That figure doubles when you add in the costs to society of shorter lives, poorer health and lost productivity. And let's not forget that the uninsured eventually receive health care. But they wait longer and their care costs more because patients are sicker; they also tend to use the highest-cost services, such as emergency rooms.

When uninsured patients finally receive medical care, about a third of the cost, or $40 billion, is uncompensated, according to a Kaiser Family Foundation analysis of 2004 costs. That means doctors, hospitals and providers never get paid and the costs they're forced to write off make their way onto the escalating costs of health insurance premiums.

It is true that about 30 percent of health care spending goes for tests, procedures, hospital stays and other procedures that are unneeded, don't help patients and may, in fact, harm them. (See my blog post on excessive testing.) But there is no evidence to support the assumption that fear of lawsuits is solely, or even primarily, responsible for propelling health care costs. As long as our health care system rewards doctors and hospitals for doing more, they will do more, regardless of any change in malpractice laws. Defensive medicine is not the real culprit. The CBO numbers indicate it accounts for only about 0.3 percent of health care expenditures.

I think that the constant pointing to "defensive medicine" can be an excuse for some doctors to take an easier, faster path, or what I'd call shotgunning a diagnosis. Instead of sorting through potential diagnoses in a deliberate, sequential fashion — ruling out the most likely problems first before searching for less probable illnesses — some providers run multiple tests simultaneously. Such a shotgun approach takes less time than doing a thorough physical exam along with a detailed patient interview. And, unfortunately, sometimes doctors or hospitals get higher reimbursement when they run tests, even if they are not truly needed. Let's put the bulk of the blame for the cost of unnecessary medical care where it belongs: on an irrational payment system that financially rewards doctors and hospitals for doing that extra test or procedure or for upgrading an X-ray to a more expensive CT scan or for putting a patient who can recover at home in a hospital bed.

We have a health care system that now costs $2.6 trillion dollars a year. Even using the high-end estimate of 0.5 percent a year in savings from medical tort reform, it is clear that malpractice is a drop in the bucket.

Direct Costs

California was the first state to pass tort reform laws and now at least 38 states have them on their books. Each state has different rules and financial caps but a typical package includes a limit on damages for "pain and suffering," typically a cap of $250,000; a $500,000 cap on punitive damages; a provision allowing payments by other insurance carriers and worker's compensation to be subtracted from jury awards; a statute of limitations of one year for adults and three years for children; and a provision known as the "fair share rule," which means each health care practitioner is held responsible only for his or her share of the injury. When the CBO looked at those provisions, they concluded that if all states adopted them, malpractice premiums would go down by 10 percent, resulting in direct cost savings to the entire system of 0.2 percent. Another way to look at the numbers is that tort reform could save the federal government's Medicare, Medicaid and other federal health insurance programs $54 billion over 10 years, or $5.4 billion yearly. Those are certainly savings worth aiming for, but within a broken health care system that costs $2.6 trillion a year, they are minuscule.

Indirect Costs

One of the areas of greatest concern regarding malpractice is defensive medicine, and one of the specialties most affected is obstetrics. In part, that's because injury awards consider the years of life lost or compromised and an injured baby has a whole life ahead. Obstetrics premiums are costly, emotions run high, two lives — mother and baby — are at stake, and every parent hopes for and expects a perfect baby. A common belief is that when an infant is less than perfect, parents are eager to blame medical providers. When researchers looked at the effect of various states' tort reform laws and the effect on obstetrics outcomes, they found mixed results. They looked at two areas of reform: caps on damages and a reform rule allowing for individual practitioners to be held responsible only for their share of involvement. Caps on damages actually increased preventable complications by 6 percent. But tort reform that included shared liability among practitioners reduced preventable complications by 13 percent.

Another group of researchers looked at the effect of being sued on the future behavior of obstetricians. They wanted to explore the belief that obstetricians who have faced lawsuits are more likely to perform unnecessary caesarean sections afterward. They found a very short-term bump in the number of C-sections individual doctors perform following litigation, but overall, malpractice suits did not affect the number of such operations.

And when the National Bureau of Economic Research examined the question of whether medical malpractice costs affect the delivery of health care, they found minimal relationship between such costs and medical practice. They found that rising malpractice premiums do not lead to increased frequency of most medical treatments, though they did note a small rise in the use of mammography. The authors suggested that costs associated with defensive medicine are likely small.

In an attempt to get definitive answers, in 2010, the federal Agency for Health Care Research and Quality funded seven state demonstration projects intended to reduce medical errors, fairly compensate injured patients and reduce costs due to defensive medicine.

Relatively Few Lawsuits

A study that received considerable attention in 1999 was the Institute of Medicine's report "To Err is Human." The report noted that as many as 98,000 people a year die because of mistakes made in hospitals. The report, based on earlier studies, also found that for every 100 people hospitalized, one patient suffers a serious, preventable injury. Yet only 1.5 percent of those injured patients filed a malpractice lawsuit. The actual number of malpractice claims paid remained fairly steady between 1991 and 2003, according an analysis by the nonpartisan Kaiser Family Foundation: 13,687 in 1991 to 15,287. By 2011, the number of paid claims nationwide went down to 9,497, with 849 of them filed in California. The total number of claims paid is just one-tenth the number of hospital deaths that can be attributed to mistakes, so it's hard to argue that patients are overly litigious.

The Power of Apology

Once, it was common for lawyers to forbid their physician clients in malpractice cases to say they were sorry to patients they had injured. Such an apology could be used as evidence that the doctor was wrong and legally liable. Thank goodness some researchers set about studying the power of an apology. In 2005, two senators, Barack Obama and Hillary Clinton, introduced legislation requiring disclosure of medical errors to patients, early compensation for the mistakes and an apology. The bill didn't pass, but it got a national dialogue going. Now, 35 states, including California, have laws on the books that prohibit using apologies as evidence of liability, and eight of these states also protect doctors and hospitals from having an admission of fault to a patient or family shortly after the event from being used against them in malpractice litigation. While the effect of such laws on litigation isn't yet known, it's encouraging to believe that full disclosure, along with sincere apologies and attempts to learn from the harmful experience, may soon become an expectation in medicine.

Special Courts

An idea I like — some are discussing it but it's not yet on anyone's books — is a specialized court to deal with medical malpractice cases. The Affordable Care Act provides grants for demonstration projects and such courts are one possible idea. There are precedents: Delaware has a Court of Chancery to deal with business litigation among corporations; North Carolina has a Business Court for complex litigation; and the federal government has specialized operations including the U.S. Court of Federal Claims and the secret intelligence chambers of the Foreign Intelligence Surveillance Act. Each of these institutions is equipped to deal with complex cases that might prove challenging for any jury of peers.

A similar specialized court might be worth considering for medical malpractice claims. A panel of three judges with no axe to grind or political points to win and with specialized training or expertise in medicine could hear the cases. They would have the ability to call unbiased expert witnesses of their choosing who would truly be expert in specific areas of medicine and not simply professionals-for-hire willing to spout pseudoscience. Those cases that do end up in this court wouldn't be clouded by half-truths, scientific nonsense and high levels of emotion. Lawsuit results would be evidence-based, argued and judged by people with specialized knowledge of medical issues.

There is inherent risk in much that we decide to do: ski down a snowy mountain, jump from an airplane with a parachute strapped to one's back, or hike into the wilderness. There is also inherent risk in taking any pharmaceutical drug, or in going under a surgeon's knife. Each participant in our system, health care providers and patients alike, needs to be aware of the risks and accept a share of responsibility for taking them.

Let's hope that evidence accumulates quickly as malpractice demonstration projects proceed so that we finally get some good answers to this thorny, blurring issue. With this sidelight issue better resolved, we can get on to the more important and far more costly issues of health care reform.

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