Medical malpractice changes must accompany health care reforms

by Don C. Brunell

Americans overwhelmingly support reforms to our nation’s health care system. Health insurance costs are rising two and three times the rate of inflation. But enthusiasm for change has been somewhat dampened by the sticker shock to pay for it.

Richard Epstein, a University of Chicago law professor, believes that one way to offset some of the costs is to change the country’s medical malpractice laws, something President Obama declined to endorse when he met with the American Medical Association earlier this year.

Epstein wrote in the Wall Street Journal that litigation in the U.S. has at least four distinctive procedural features that drive up malpractice costs. They include:

1. Jury trials, which can veer out of control and, at a minimum, introduce significant uncertainty.

2. The contingency-fee system, which allows well-heeled lawyers to self-finance litigation.

3. The rule that makes each side bear its own costs. This encourages more frivolous lawsuits than in most other countries, such as Canada, England and most of Europe, where the loser pays the legal costs of the winner.

4. Extensive pretrial discovery outside the direct supervision of judges, which occurs far more readily here than elsewhere.

According to Epstein, even these features aren’t the whole story. American judges frequently let juries decide whether honest mistakes constitute negligence. Judges in other nations are less likely to do so. American courts commonly think it proper for juries to infer medical negligence from the mere occurrence of a serious injury. European judges usually will not.

In sum, the medical malpractice system provides incentives for plaintiffs that really do matter. Americans, for example, file claims about 3.5 times more often than Canadians.

Epstein cites a study led by David Studdert published in the 2006 New England Journal of Medicine which concluded that the administrative expenses of the malpractice system were “exorbitant.” And worse, it found errors in jury verdicts in about 25 percent of litigated cases. Juries denied compensation properly due in 16 percent of the cases, and awarded it about 10 percent of the time when it was unwarranted. These error rates don’t include damage awards set at improper levels.

More disturbingly, according to Epstein, a careful 1992 study by Donald Dewees and Michael Trebilcock in the Osgoode Hall Law Journal concluded that the frequency of medical malpractice in Canada was about the same as in the U.S., even though our malpractice costs are ten times higher. In other words, our costly system doesn’t seem to do much to deter malpractice.

Epstein believes the U.S. cannot ignore serious tort reform. To be sure, medical malpractice premiums constitute well under one percent of the total U.S. health-care bill. But defensive medicine — unnecessary tests and procedures performed solely to protect against a potential lawsuit — adds perhaps as much as 10 percent.

In a Massachusetts Medical Society survey published last November, 83 percent of Bay State physicians cited the fear of being sued in their decisions to practice “defensive medicine,” a phenomenon that adds at least $1.4 billion to annual health-care costs in that state alone. According to the 900 doctors surveyed, on average, 18 to 28 percent of tests, procedures, referrals and consultations, and 13 percent of hospitalizations were ordered to avoid lawsuits.

High malpractice costs can shut down clinics that serve vulnerable populations, leading to more patient harm than the occasional case of malpractice.

With cost estimates hovering around $1.6 trillion for proposed changes in health care, the frequency and costs of lawsuits will likely rise if we don’t pass tort reform because Uncle Sam will be the deep pocket, rather than insurers and their ratepayers.

The bottom line is, without legal reform, real health care reform won’t happen.

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