August 31, 2009, 3:45 pm
Would Tort Reform Lower Costs?
By Anne Underwood
Medical tort reform is moving to the fore of the health care debate. On Sunday in The New York Times, former Senator Bill Bradley, Democrat of New Jersey, argued that one way to gain support of both Democrats and Republicans might be to combine universal coverage with tort reform. Mr. Bradley also suggested that medical courts with special judges could be established, similar to bankruptcy or admiralty courts.
On ?This Week With George Stephanopoulos,? Senators Orrin G. Hatch, Republican of Utah, and John Kerry, Democrat of Massachusetts, seemed to agree that medical malpractice lawsuits are driving up health care costs and should be limited in some way. ?We?ve got to find some way of getting rid of the frivolous cases, and most of them are,? Mr. Hatch said. ?And that?s doable, most definitely,? Mr. Kerry replied.
But some academics who study the system are less certain. One critic is Tom Baker, a professor of law and health sciences at the University of Pennsylvania School of Law and author of ?The Medical Malpractice Myth,? who believes that making the legal system less receptive to medical malpractice lawsuits will not significantly affect the costs of medical care. He spoke with the freelance writer Anne Underwood.
Q.
A lot of people seem to have taken up the cause of tort reform. Why isn?t it included in the health care legislation pending on Capitol Hill?
A.
Because it?s a red herring. It?s become a talking point for those who want to obstruct change. But [tort reform] doesn?t accomplish the goal of bringing down costs.
Q.
Why not?
A.
As the cost of health care goes up, the medical liability component of it has stayed fairly constant. That means it?s part of the medical price inflation system, but it?s not driving it. The number of claims is small relative to actual cases of medical malpractice.
Q.
But critics of the current system say that 10 to 15 percent of medical costs are due to medical malpractice.
A.
That?s wildly exaggerated. According to the actuarial consulting firm Towers Perrin, medical malpractice tort costs were $30.4 billion in 2007, the last year for which data are available. We have a more than a $2 trillion health care system. That puts litigation costs and malpractice insurance at 1 to 1.5 percent of total medical costs. That?s a rounding error. Liability isn?t even the tail on the cost dog. It?s the hair on the end of the tail.
Q.
You said the number of claims is relatively small. Is there a way to demonstrate that?
A.
We have approximately the same number of claims today as in the late 1980s. Think about that. The cost of health care has doubled since then. The number of medical encounters between doctors and patients has gone up ? and research shows a more or less constant rate of errors per hospitalizations. That means we have a declining rate of lawsuits relative to numbers of injuries.
Q.
Do you have numbers on injuries and claims?
A.
The best data on medical errors come from three major epidemiological studies on medical malpractice in the 1970s, 1980s and 1990s. Each found about one serious injury per 100 hospitalizations. There hasn?t been an epidemiological study since then, because people were really persuaded by the data and it?s also very expensive to do a study of that sort. These data were the basis of the 1999 report from the Institute of Medicine, ?To Err Is Human.?
Q.
And what percent of victims make claims?
A.
Those same studies looked at the rate of claims and found that only 4 to 7 percent of those injured brought a case. That?s a small percentage. And because the actual number of injuries has gone up since those studies were done ? while claims have remained steady ? the rate of claims is actually going down.
Q.
So the idea that there are lots of frivolous lawsuits is . . .
A.
Ludicrous.
Q.
In those cases that are brought, are jury awards excessive?
A.
There are already caps on awards in many states. These tend to be on non-economic damages ? not medical expenses or lost wages, but typically on pain and suffering. The first was in California in the 1970s. There is pretty good research on that, showing it reduced medical liability payments. These caps vary from state to state, but they?re generally set around $250,000 to $500,000.
Q.
Many people would think that a quarter-million to a half-million dollars is a lot of money for pain and suffering.
A.
When California adopted its cap in the mid-1970s, it set it at $250,000. That doesn?t mean everyone got that much. It was the maximum. But that was considered a fair amount at the time. Since then, think how much inflation has eaten into that. These caps typically don?t index for inflation.
Q.
So a patient can get reimbursed for medical costs, but they?re limited for pain and suffering.
A. They get reimbursement of medical costs in principle. But in fact, they don?t, because the lawyer has to be paid. These cases can cost $100,000 to $150,000 to bring, so the patient has to deduct that amount from any award.
Q.
Why are these cases so expensive?
A.
You need expert witnesses who must be compensated for their time, which is valuable. You need depositions, which are expensive. You have to hire investigators. You have to pay your junior staff. It?s not worth bringing a suit if the potential award is less.
Imagine you go to the emergency room with appendicitis. For whatever reason, they fail to diagnose it. Your appendix bursts, and you spend a couple weeks in the hospital. I?ve had lawyers tell me they would not take a case like that, even if it?s a slam-dunk. The damages wouldn?t be enough ? medical expenses, maybe a month of lost salary, although the patient might have short-term disability insurance that would cover a large part of that. It?s not enough to justify going to court.
Q.
So you?re saying that a case has to be serious to be worth trying.
A.
The medical malpractice system only works for serious injuries. What it doesn?t work for is more moderate ones. Lawyers discourage people from bringing suits if their injuries are not serious in monetary terms ? a poor person or an older person who can?t claim a lot in lost wages. That?s why obstetrician-gynecologists pay such high premiums. If you injure a baby, you?re talking about a lifetime-care injury. Gerontologists? premiums are exceedingly low.
That?s the reason I say if people are serious about tort reform, they should improve compensation for moderate injuries. Nobody likes that idea, by the way. They say it would make the system more expensive, not less expensive. More people would bring claims. That says to me that the critics are not serious about tort reform.
Q.
But it?s not just the cost of premiums and litigation. What about the charge that it causes doctors to practice ?defensive medicine,? ordering tests that are expensive and unnecessary?
A.
A 1996 study in Florida found defensive medicine costs could be as high as 5 to 7 percent. But when the same authors went back a few years later, they found that managed care had brought it down to 2.5 to 3.5 percent of the total. No one has a good handle on defensive medicine costs. Liability is supposed to change behavior, so some defensive medicine is good. Undoubtedly some of it may be unnecessary, but we don?t have a good way to separate the two.
Q.
Tell me more about the 1996 study.
A.
It was published in The Quarterly Journal of Economics by Stanford economist Daniel Kessler and Dr. Mark McClellan, who was head of the Centers for Medicare & Medicaid Services under President George W. Bush. For two types of heart disease ? heart attacks and ischemic heart disease ? the authors found that 5 to 7 percent of the additional costs in Florida, compared to other states with lower medical malpractice liability, could be attributed to defensive medicine. This was based on 1980s data.
Using that estimate, some politicians used to say that medical malpractice cost the system $50 billion a year. But you can?t blindly say that all diseases are the same as heart disease, and if you want a nationwide estimate, you can?t say every state is the same as Florida. Furthermore, the second study, published in 2002 in The Journal of Public Economics, found that much of the difference disappeared as managed care took hold in Florida in the 1990s.
Q.
But many doctors complain about having to practice defensive medicine.
A.
Doctors will say that. But when you dig down, you find that what?s really happening is that doctors tend to do what other doctors around them do. They go along with the prevailing standard of care in their region ? which in many cases isn?t even a state, but a city or county.
Q.
If medical malpractice doesn?t explain the high costs of our health-care system, what does?
A.
A variety of things. The American population is aging. We?ve had advances in technology that are expensive. We?re also a rich nation, and the richer you get, the more money you spend on health care. And compared to other countries, we have heavy administrative costs from the private-insurance system.
Q.
If it?s not true that medical malpractice is driving the high cost of medical care in this country, why won?t the argument go away?
A.
It makes sense to people intuitively ? in part, because they?ve been told it so often. And it?s a convenient argument for those who want to derail the process. Maybe it?s a deep political game. Maybe they?re raising it to say, we?ll back off tort reform if you back off the public option.
Q.
What about former Senator Bill Bradley?s idea that medical courts with special judges should be established?
A.
Mr. Bradley has been backing tort reform for as long as I can remember, so this is hardly a compromise for him. I?m not saying medical courts would be a bad idea, as long as they?re not set up in a way that insulates medical providers from responsibility. That?s a big caveat.
Q.
What about Senator John Kerry?s assertion that it?s ?doable? to rid the system of frivolous lawsuits?
A.
I guess it?s doable because there aren?t very many frivolous suits.
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