Political discourse is consumed with health care reform. Yet, as various bills move through Congress, one facet of reform is missing tort reform. The subject of medical malpractice and its effect on health care costs is absent from the debate. Objective facts suggest, however, that any meaningful reform of the health care system must include some measured tort reform.
Over the last 20-plus years we have experienced an explosion in medical malpractice insurance premiums, malpractice settlements and judgments. According to the Medical Liability Monitor, a publication that tracks insurance premiums from a number of medical liability insurance carriers, average rates for obstetricians in Pennsylvania increased from $45,938 in 2001 to $145,131 by 2007. Premiums in New Jersey increased from $68,000 in 2000 to $171,199 in 2007. General surgery and internal medicine insurance premiums, while not as high, showed similar percentages of increase over the same period.
These are to be contrasted with obstetrics premiums in California, a state where tort reform was adopted in the 1970s.
In Los Angeles, the average premium in 2000 was $52,874 and only rose to $63,272 by 2007.
Similarly, the Physicians Insurers Association of America reports that, nationally, the median medical malpractice jury award increased from $157,000 to $487,500 over the period 1997 to 2006. The average award increased from $347,134 to $637,134 over the same period. Settlements have also increased by similar percentages, according to the report.
In addition, the costs of defensive medicine, that is, tests and treatments that are administered in order to avoid lawsuits, are also on the rise. A 2003 Department of Health and Human Services report estimated the costs of defensive medicine to be between $70 and $126 billion per year. The American Medical Association estimates those figures to be between $99 and $179 billion using data available in 2005. And, a report from the Congressional Budget Office released on October 9 of this year estimates that the direct costs that providers will incur in 2009 for medical malpractice liability which consist of malpractice insurance premiums together with settlements, awards and administrative costs not covered by insurance will total approximately $35 billion, or about 2 percent of total health care expenditures. The simple fact is that efforts to get such costs under control are long overdue.
Most significantly, however, the recent CBO report concluded that malpractice reform would not only reduce the costs of malpractice insurance premiums, but it would also reduce the utilization of health care services. According to the report, the adoption of some of the reforms discussed would reduce total national health care spending by about $11 billion in 2009. And over the next 10 years, the reforms would reduce the federal budget deficit by $54 billion.
Generally, tort law is the prerogative of the states, many of which have adopted reforms in the medical malpractice area. For example, as of 2008, 24 states had adopted a cap on non-economic damages, discussed below. Given the current crisis in health care, however, the federal government should strongly consider the enactment of limited measures that would preempt state law in this area.
There are a number of reforms that have been considered and / or adopted by various states. They include:
(1) Limitation on the recovery of non-economic damages, i.e. pain and suffering. Some states have established a ceiling for such a recovery, per occurrence. Others limit the recovery per provider, thus allowing a recovery from a physician and a hospital with each subject to the cap. Still another type of reform in this area sets a cap for non-economic loss, but allows exceptions (and higher caps) for injuries involving conditions such as a substantial physical deformity, loss of a limb or a permanent physical functional injury that prevents a patient from caring for himself independently. In some states the cap does not apply if the provider is found to have recklessly disregarded the risk of harm to the patient or acted in a willful and wanton manner.
(2) Repeal of the collateral source rule. This rule prohibits a defendant from introducing into evidence proof that any of the plaintiffs medical expenses have been paid by insurance or from some other source. When this rule is in effect, evidence of all of the plaintiffs medical expenses is admitted at trial, but juries are not informed that third parties have paid any of those expenses. The effect of the rule is that the plaintiff often double-dips, recovering damages for medical expenses that the plaintiff did not have to pay. Were the rule to be repealed, evidence of such payments would be admitted into evidence and, under some proposals, those payments would become a credit against any jury award.
(3) Replacement of the joint and several liability doctrine with a fair share rule. Where joint and several liability is the rule, any defendant found liable for negligence is responsible for the entire judgment even if other defendants are also responsible for the injury. Were that principle scrapped, a defendant would only be responsible for the percentage of the judgment that was equivalent to that defendants share of responsibility for the injury.
(4) A cap on punitive damages. Currently, for example, Virginia limits punitive damages to $350,000.
(5) Shortening the statute of limitations so that malpractice claims must be brought within a reasonable time after discovery of the injury.
(6) Placing a cap on the contingency fee arrangement between plaintiffs and their lawyers.
According to available research, the proposals most likely to have an impact on health care costs would limit awards for pain and suffering and repeal the collateral source rule. According to the CBO, abolishing the doctrine of joint and several liability yields mixed results, given that this likely would increase the risk to treating providers since providers have tended to be held responsible for malpractice more often than institutional defendants. And, given that most malpractice actions allege simple negligence, punitive damages are rarely awarded. They are only appropriate where there has been bad faith, gross negligence or willful misconduct.
It is encouraging that the CBO has concluded that reform along these lines would have a positive impact by reducing the federal deficit over the next 10 years. Missing from its analysis, however, is the effect on the private sector if such reforms were put in place at the national level.
Numerous studies examining the effects of state-based reforms in this area have shown, in states where reforms of this type have been implemented, particularly the cap on non-economic damages, that malpractice insurance premiums fell sharply; the number of malpractice claims fell; and the use of health care service defensive medicine declined, thus lowering health care expenditures. In some states the number of physicians increased after reforms were implemented. All are desirable outcomes.
Which reforms would be appropriate on a national level should be determined after careful study. The time has come, however, for Congressional leaders to stop burying their heads in the sand when the subject of tort reform is mentioned. The evidence is clear; meaningful tort reform would have a positive impact on the health care system and should be included in any package of comprehensive health care reform proposals.
W. Michael Holm is a long-time Alexandria resident who practices law in Northern Virginia.