My biggest pet peeve with “tort reform” – capping the amount a jury can award a plaintiff in a lawsuit – is that it is just a massive handout to insurance companies. Doctors do not pay lawsuit damages. Insurance companies do. Limiting malpractice awards is a handout to big insurance companies (big companies who, not surprisingly, lobby for these types of protections) without in any way protecting the consumer. If someone kills your child in a car accident, the jury can award whatever they feel is just? If your child is killed in a building collapse, the jury can award you whatever they feel is just? If your child is killed by the negligence of anyone, the jury can award you what they feel is just? BUT, if your child is killed because of the negligence of a medical professional, your damages are capped? Tell me this isn’t a handout to the medical insurance lobby. Think about the traditional cap number: $250,000. Obama’s photo-op over the Statue of Liberty cost $250,000. The minimum major league salary is $390,000. 12 US States have average home listing prices in excess of $413,000 (38 US states have average listing prices greater than $250,000). Of course, no cite is needed for the absurd costs of military weaponry, or even the cost of a prized racehorse.
But we have now decreed that the value of your child, dead due to the negligence of a doctor or medical facility, is worth $250,000. What is worse – we have not decreed that a dead child is only worth so much, or even that law suits for dead children are frivolous. We have simply decreed that damages for dead children who are dead as a result of a doctor’s negligence are capped. If your child dies in a fire there is no cap; if your child dies in a plane crash there is no cap; if your child dies because of the reckless behavior of some drunk in his car there is no cap; but if your child dies because of the negligence of a doctor, well, suddenly your child just became worth less…for some reason. If reforming the legal system is such a necessity, then why wouldn’t all damages for personal injury be capped at $250,000? What possible relevant distinction can be made to those injuries caused be a doctor and those caused by a driver? None. Mind you, I have no problem with the average salary of a baseball player, the average listing price of a home, or even the absurd price one might pay for a purebred racehorse. Those numbers are all market-driven. Thus, the numbers indicate the true cost of those items – their true value. But when we arbitrarily limit the amount a mother can receive for the death of her child due to negligence by members of a specific industry, or the amount a son can receive for the death of his father, we take the market out of the equation – and not for the good of the public, but for the insurance lobby.
My second biggest peeve is that tort reform is advocated by those who give lip-service to small government/free market principles – i.e. Republicans/conservatives – as a solution to the “health care” problem. See Cao’s blog. In drafting a post with which I generally agree, Cao threw out the following with regard to health care reform: “My point was that tort reform should be included, that the free market should be allowed to work, and government should get out of the way.” I find it funny that Cao would cite tort reform in the same breath as “free-market” and “government should get out of the way,” despite the fact that tort reform asks the government to substitute its general judgment for that of a specific jury listening to the specific facts of a case. It asks for the government to decide, without being privy to case-by-case analysis, to simply decide that “all” cases of a certain type are worth, at a maximum, “X number” of dollars, thus taking away from the jury – and the market – the ability to determine, on a case-by-case basis, the actual value of your case. Very “Big Brother,” if you ask me.
Putting the ideological aspects of tort reform aside, the question becomes, fundamentally: Is tort reform needed? In this case, is litigation the reason for skyrocketing medical costs? The answer is an emphatic, “No.” (See here for why health care costs or so high.)
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.
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.
Well, so much for the myth that litigation is bringing up costs. But what about that red herring that there are “tons of frivolous lawsuits,” as proponents of tort reform like to squeal?
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…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.
So very few people actually bring their claims to the attention of the Court, and those claims that are brought account for less than 2% of medical costs.
From the Des Moines Register:
The Congressional Budget Office in December filed a report, based on a study of states that do have caps on damages, that showed little effect of lawsuits on the cost of health care.
“In CBO’s estimation, the effect would be relatively small – less than 0.5 percent of total health care spending,” the report of the nonpartisan agency stated.
The whole idea has been debunked in studies, but also fails even the basic “smell” test. Lawsuits cost a lot of money to bring. You have to pay for experts, depose witnesses, pay for records, travel, etc. Plus, prosecuting the claim requires untold hours – weeks and weeks of time. No attorney is going to take a completely frivolous case and sink tens of thousands of dollars and hundreds of man hours in to it. It makes no sense. The principle that makes the market work so well in other respects – the assessment of risk on the part of individuals doing business with each other – is what keeps frivolous lawsuits down. No one is going to take such a risk and lose so much.
Certainly, some lawyers will misjudge the risk and take poor claims, but they are a small percentage. And they are not very good lawyers and they will not be around to make future claims. In any event, good and bad lawsuits, combined, only account for 1-1.5% of medical care costs.
And don’t forget that the only way anyone actually recovers any money is if a jury – people like you and me – find, basically, that A) medical malpractice existed, B) that there was an injury, C) the malpractice caused the injury, and D) compensation is required to make the injured party whole. The jury then decides the appropriate amount. As an aside, it is irrelevant if some attorney asks for $100 million or some other absurd amount. The jury awards what the jury feels is appropriate, irrespective of what is demanded. And medical malpractice cannot be found outside expert testimony – i.e. another physician comes in and says the defendant physician breached the standard of care.
And the excessive demand does not make a lawsuit frivolous, either. You can run the red light, hit my car, and injure me. I have a valid claim. If I demand $50 million in compensation, my claim is still very valid, and it is not frivolous. I may lose credibility with the jury, and I may have an impossible time settling the case, but I do not suddenly have a frivolous case because of my exaggerated demand. I simply have an exaggerated demand – or the inability to value a case.
Nor can any of you, or I, determine the the viability of a claim simply by reading a newspaper account of the case, much less a newspaper account of just the demand.
And is not the threat of a lawsuit for your actual negligence a fair part of the risk equation for a doctor? We all take risks in our jobs and in our activities everyday. Some jobs carry a higher reward, but also a higher risk. It is all part of the fair, free market equation. That’s why we have insurance. Plus, the number of products and procedures that have been modified or created for the better in response to lawsuits is staggering. Same rationale for medical care.
What about other specific questions people have?
“Doctors have to run excessive tests to protect their well-being – their behinds – and that adds to the costs,” Larry Shover, a Delhi dairy farmer, told Braley in Manchester. “And I really believe we should have tort limits.”
Well that doesn’t even make sense. Doctors need to protect their behind whether they get sued for $250,000, $500,000, or $50 million. The idea that some doctor would run “excessive tests” that he otherwise would not run because he could be sued for $1 million, but would cease to run those same tests if non-economic damages were capped at $250,000, is absurd. Your insurance pays the award either way. Plus, no doctor is going to do unnecessary tests and risk doing someone harm. If they actually harmed people by doing extra tests, that would subject them to the same medical malpractice suits. Doing unnecessary tests is not “reasonable” and would not shield you from liability should you have discovered something but did not.
From that NYT article above:
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.
So costs are up 2-3% because doctors are doing tests that do not harm, but, in fact, further help rule out other problems. How many of those “excessive” tests diagnosed a previously un-diagnosed problem?
To be blunt, the data does not support tort reform. Conservative ideology – leaving decisions to the lowest common denominator – does not support tort reform. In the end, it removes the decision-making from the people who are sitting there hearing the actual, intimate details of your case. It hurts you. And only protects insurance companies. It allows insurance companies to monopolize their profits (because nothing is limiting their profits!), but socialize their losses (basically, by forcing you to accept a capped amount, you “eat” the extra compensation you would have received, to the benefit of the insurance companies who pay less).
Update: Thanks to Dr. Douglas for the link. He gets a lot of readers and a good discussion was had over there.
Update 2: Sadly, the “conservative” blogosphere is mostly on the wrong side of this one. I mean, it makes no libertarian or conservative sense to ask the government to substitute its judgment for that of the people hearing the actual merits of the case. Thus, on ideological grounds alone, conservatives should oppose it. But, I recognize that practical grounds can, and should, sometimes overcome rigid ideology. But what are the practicalities here? The evidence just does not show that litigation has anything but a marginal affect on health care costs.
Update #3 – Thanks to Common Sense Political Thought for the link!
“…in 2004 the Congressional Budget Office pegged the costs of malpractice lawsuits at less than 2 percent. They also noted that “even a reduction of 25 percent to 30 percent in malpractice costs would lower health care costs by only about 0.4 percent to 0.5 percent, and the likely effect on health insurance premiums would be comparably small…The great majority of patients who sustain a medical injury as a result of negligence do not sue.” Indeed, the New York Times reports, although “recent studies have found that one of every 100 hospital patients suffers negligent treatment, and that as many as 98,000 die each year as a result . . . only a small fraction of injured patients — perhaps 2 percent—press legal claims…And it appears that doctors are paying high malpractice insurance rates in part because of a few bad apples: “Just 1.1 percent of all doctors accounted for 30 percent of all malpractice payments made between 1990 and 2002, while only 5.2 percent of doctors were responsible for 55 percent of all payouts.” A very small group of doctors are losing or settling malpractice lawsuits, but they are losing big. “Eighty percent of claims involved injuries that caused significant or major disability (39 percent and 15 percent, respectively) or death (26 percent).”
From Reader’s Digest:
Last year, a Senate report revealed that in the previous seven years, the federal Medicare program had paid as much as $92.8 million for about a half-million claims submitted in the names of doctors who were six feet under. The charges were for medical supplies, ranging from wheelchairs to prescription drugs. One pair of scam artists in Florida used the Medicare identification numbers of dead docs to bilk $1.3 million from the government—also known as we the taxpayers.
It’s not like this was a hard crime to spot. More than 50,000 of the bogus claims involved doctors who had been deceased for at least ten years. Despite a warning from the Department of Health & Human Services (HHS) in 2001 about exactly this problem, tough safeguards were never put in place.
Here’s another good one: the podiatrist who allegedly billed the government for treating people with no feet. Dr. David Quang Pham was indicted in St. Louis this past June for charging the government for nonexistent procedures that he backed up with phony notes (Pham has pleaded not guilty). As an unforgettable press release from the local U.S. Attorney’s office put it, “Dr. Pham submitted reimbursement claims for treating the feet of patients whose feet had been amputated prior to the dates of service.” And once again, it was the taxpayer who had to, er, foot the bill.
People will want to say these are minor exceptions, but they aren’t.
[T]here’s no disputing one important truth: Shocking amounts of money are stolen by crooked doctors and scammers, and that’s driving up costs for all of us. The National Health Care Anti-Fraud Association estimates that more than $60 billion a year is lost to fraud—or 3 percent of federal health-care spending. Think of how all that money could improve, extend, or outright save lives.
Fraud alone accounts for 3% of health care costs. That’s right, fraud accounts for a higher percentage of health care costs than litigation does!
Cross-posted at The Regiment.
Update 4: Constitutionally? What about the Seventh Amendment? People can recite the First, Second, and Fifth. Many people also know the Fourth, Sixth, Eight, and Tenth. The Seventh Amendment, however, like the Third and Ninth Amendments, is rarely discussed. A very large percentage of the people you meet will not be able to tell you what the Seventh Amendment says. And maybe that is the problem. It has become a footnote.
The Seventh Amendment:
In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.
…the right of a trial by jury shall be preserved… Simple enough.
no fact tried by a jury… The determination of damages in a civil suit is a fact that has always been determined by a jury. Other than in criminal and related areas of the law, where statutory penalties are often codified, the determination of damages has never been a question of law. It has always been a fact question.
shall be otherwise re-examined…than according to the rules of the common law. Under the common law, damages for suits in negligence were determined by the jury.
Thus, by the plain language of the Seventh Amendment to the Constitution, Congress does not have the ability to determine the value of a civil case, not because the Amendment specifically prohibits Congress from doing so, but because the Amendment specifically preserves that right for the jury.
From Justice Souter:
The Seventh Amendment provides that “[i]n Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved….” … Since Justice Story’s day, …we have understood that “[t]he right of trial by jury thus preserved is the right which existed under the English common law when the Amendment was adopted.” … In keeping with our longstanding adherence to this “historical test,” … we ask, first, whether we are dealing with a cause of action that either was tried at law at the time of the founding or is at least analogous to one that was… If the action in question belongs in the law category, we then ask whether the particular trial decision must fall to the jury in order to preserve the substance of the common-law right as it existed in 1791.
Markman v. Westview Instruments, Inc., 517 U.S. 370, 376 116 S.Ct. 1384, 1389 (U.S.Pa.,1996). (citations omitted).
Negligence actions clearly fall under the law category, and under the “historical test” thus must fall to the jury “in order to preserve the substance of the common law right.” Thus, Congress has no right to take the determination of damages in a negligence suit away from the jury.
As an aside, it should be noted that the Seventh Amendment has not been incorporated against the states. Therefore, although Congress has no authority for capping damages in negligence cases, the states could cap the damages in suits at law, even in diversity actions. See Davis v. Omitowoju, 883 F.2d 1155, 1161-1165 (C.A.3 1989).
Tort reform, passed by Congress with the intention of being applicable to state negligence claims that historically have been tried by the common law, is thus in violation of the Seventh Amendment.
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