Malpractice Law Is Bad for Your Health
A version of this Health Alert (co-authored by Pamela Villarreal) appeared at Townhall.
One of the worst features of the American health care system is the sorry state of medical malpractice law. Fewer than 2 percent of injured patients ever file a lawsuit. Of those that do, only one in 15 receives compensation. More than half of every dollar goes to cover the cost of litigation, rather than to the injured and their families.
Ironically, the medical malpractice system is inordinately focused on whether someone was at fault when an injury or accident occurs. Of the estimated 187,000 deaths (NCPA estimate based on NEJM and NCBI) and 6 million injuries that occur in hospitals each year, only an estimated one in four are considered negligent (malpractice) — and the actual number is probably much lower than that. Another 30 percent (such as certain types of infections) are judged to be “preventable,” even though no one is guilty of negligence. Almost half of adverse medical events are “acts of God” — no one was at fault and there is no obvious way of preventing them.
Here’s the problem. When we focus exclusively on malpractice and do nothing about the other categories of adverse events, doctors will do things that reduce malpractice events but increase the risk of some other type of injury. For example, doctors can reduce their malpractice risk by ordering more tests. But each of these tests carries a risk of hospital-acquired infections and other adverse consequences.
Fortunately, there is a better way. Forget for a moment who is to blame or who is at fault. Also, put aside all concerns about whether events are preventable or not. Let’s compensate all patients any time an injury or death occurs in a hospital for any reason other than the condition that brought them to the hospital in the first place. [See detailed proposal here]
For half of the estimated $300 billion our nation spends on the medical malpractice system, we could afford to pay $200,000 for every death that occurs due to an adverse event and an average of $20,000 for every injury (with the actual amounts varying based on the severity of the injury). The system would be voluntary, but many patients would willingly forgo the long, drawn-out and expensive tort process in exchange for a low-cost, efficient system where they generally know what they will get if something goes wrong.
The incentives on the supply side of the market would change almost overnight. Since doctors and hospitals would have to pay premiums to insurance companies to pay off the claims, they would have strong incentives to reduce the number of adverse medical events, regardless of their cause. Under the reformed system we propose, every death would be equally expensive — no matter what caused it. Providers would continue to have good incentives to reduce deaths from malpractice. But they would be equally incentivized to prevent what is “preventable.” They might even discover that all those other deaths and injuries really aren’t “acts of God” after all.
This idea may be catching on. Legislation under consideration in Florida and Georgia would create a no-fault system modeled after the workers’ compensation system. Because both reforms continue to focus on the idea of an “avoidable medical injury,” they don’t go as far as we would like. But their efforts are a step in the right direction.
These reforms could save billions of dollars in defensive medicine costs as well as court costs. Miami-Dade, Florida, is one of the most medically litigious counties in the country. So almost any system that keeps medical cases out of the courts will benefit Floridians and Georgians and reduce the malpractice premiums doctors must pay.
John, I like your plan with two modifications:
1. I assume that you are speaking of non-economic damages (pain & suffering). There should be either no limit or very high limits on actual damages caused by malpractice. We already have a $250,000 cap in Texas for non-economic damages on malpractice, and it has worked to hold down malpractice insurance premiums.
2. Also, there should be no limits for the medical professional who causes egregious injury through gross negligence or who makes numerous errors. The purpose of a no-fault system is to eliminate arguments and expense over the 80% of deaths and injuries where it is arguable that someone was at fault or the injuries fall within the range of expected risk, not to provide cover for an incompetent or careless person.
I find it ironic that you correctly peg the ills of out of control medical costs on third party payment. Yet, with regard to what you perceive to be out of control malpractice expense you prescribe, guess what: Third Party Payment!
I just don’t get it. How will Third Party Payment rein in costs? What will third party payment do for malpractice expense that it hasn’t already done for general medical expense.
No fault insurance systems typically do the reverse of what they advertise. They encourage numerous small claims and false claims. They encourage fraud. These numerous small and false claims result in premiums which inflate wildly out of control. No fault auto liability schemes in the various states over the last forty-five years provide a wealth of data which prove out this phenomenon. Most states which adopted no fault auto insurance usually abandoned it.
As a post-script to my above comment, what incentives does a no-fault malpractice payor provide for a doctor to be more careful? No fault schemes rely on community rating and guaranteed participation in order to function. Once you have those two cogs in the machine, then there really isn’t a reason to be careful since the claim will get paid and it will have no impact on a provider’s premium.
I love the idea! Great solution Dr. Goodman.
“These reforms could save billions of dollars in defensive medicine costs as well as court costs”
– I am all about saving money!
I wonder about this … as a patient, suppose I could ELECT at admission-time to accept a standard-rate settlement in the event of adversity, in exchange for which I get a lower bill from the hospital / doctor / lab. I get an immediate benefit (money). This would work particularly well with my present Medicare Advantage high-deductible plan.
This would be closer, I think, to my present driver’s insurance no-fault option.
My hospital name-tag could be a different color …
“My hospital name-tag could be a different color …”. Priceless!
Pirates had this figured out 400 years ago. This is an excerpt from a pirate constitution written about in 1678:
“Then came the agreed awards for the wounded, who might have lost a limb or suffered injuries. They would be compensated as follows: for the loss of a right arm, 600 pieces of eight or six slaves; for a left arm 500 pieces of eight or five slaves. The loss of a right leg also brought 500 pieces of eight or five slaves in compensation; a left leg 400 or four slaves; an eye, 100 or one slave, and the same award was made for the loss of a finger. If a man lost the use of an arm, he would get as much as if it had been cut off, and a severe internal injury which meant the victim had to have a pipe inserted in his body would receive 500 pieces of eight or five slaves in recompense.”
Source: Peter Leeson, George Mason University.
“The Law and Economics of Pirate Organization”
http://www.peterleeson.com/an-arrgh-chy.pdf
This proposal relies on an estimate of the cost of medical malpractice liability that includes an unreliable estimate of the amount of defensive medicine. The only seriously reliable estimate of the cost of malpractice liability is the cost of malpractice insurance, which runs $30B+ per year, one-tenth of the amount claimed in the article.
Interesting article. I trust it has enough merit to actually become the law of the land….but….You can count on trial lawyers to resist this tooth and nail. They make a fortune “settling” these cases with insurers.
Very interesting proposal here. Malpractice is a big problem–one of many–in our health care system. I would be interested to see if these reforms in Florida and Georgia pass and what it does to their malpractice system.
I am not sure this would end up working as it doesn’t really address the source of the problem. However, the way it works now, perhaps most reforms out there that could incentivize preventing malpractice would be much better than what we have now in place.
good idea.
I have to echo Jardinero1’s comments finding this idea to be nothing more than another entitlement which has little to do with the actual act of malpractice. Malpractice can be easily controlled, but for big dollar litigation attorney interests. It is my understanding that in southeast Florida, where some of the nations highest premiums exist, after caps and many physicians going bare the number of suits dramatically dropped and lawyers were looking towards other areas of income revenue.
The author is correct in stating that the vast majority of “malpractice” claims are not based on negligence, but simply on a bad outcome (some of which are predictable). The author is extremely wrong, however, in the proposal for a solution. First, the proposal assumes that the billions saved in defensive medicine would be available to then compensate victims. Not true. The only way to come up with the funds to compensate victims would be to assess a tax or fee on healthcare providers in order to fund the system. Health insurers would come out much better off if defensive medicine would be reduced as much as claimed (a dubious proposition at best), but no one else. Furthermore, the author believes that $200,000 in compensation for the premature death of an individual is sufficient. Not even the most ardent tort reform supporters have suggested that the value of a human life was so low. It is absolutely absurd to think that a family who lost a loved one due to an adverse event would voluntarily accept that amount any other options remained to them. While a workers’ comp style system may sound good at first blush, it cannot without hard scrutiny.
Jardinero1, hold on a second. Before considering the merits of your viewpoint, let’s make sure our point of reference is correct. You suggest that “third party” involvement is not a good idea (either in healthcare delivery or malpractice cases). When we talk about “third party” involvement in healthcare we are talking about an entity (other than doctor and patient) interfering with the decision for treatment and amount paid for that treatment.
In the case of malpractice, there is automatically “third party” involvement due to the fact that a third party must determine if there is indeed “malpractice”. It then simply becomes a matter of what kind of settlements are possible and the legal implications thereof.
Consequently we are talking apples and oranges, unless we consider than John Goodman is suggesting a way to moderate the third party involvement (attorneys and courtrooms) by having the opportunity for a predefined remedy for malpractice incidents.
Actually this would be more correctly defined as third party involvement in the attorney relationship with his bank account.
Frank, Third party payment refers to the removal of the adversarial negotiating process between buyer and seller on, in this case, between plaintiff and defendant. I refer to John Goodman’s apt description of its myriad problems here:
http://healthblog.ncpathinktank.org/myth-buster-20-third-party-payment/
Insurance can be a third party payor but insurance is not what is meant by third party payment.
John and friends…
There is another model: Kaiser requires patients facing surgery or other serious treatment to sign an agreement for binding arbitration in the case of an untoward result.
Also-doctors now have an incentive to reduce incidence of bad events as their malpractice insurance is out of sight. A no-fault would make them less careful rather than more.
The players are locked into an adversarial culture. At the top of the pyramid are the trial lawyers who are among the most rapacious of any category of legal practice. Their incentives are to wait for the most egregious multi-problem case where the injured party is particularly sympathetic. They can spend a year prosecuting a difficult case, then be rewarded in the millions. A few of those a year and their income is gigantic. Meanwhile, the low revenue problems go without much compensation.
Should there be a no-fault system, many patients, seriously hurt or not, would seek compensation, and $200,000 would soon grow well beyond that, as patients and their families would, indeed, see this as an entitlement.
And by substantially increasing the number of awards attributed to each hospital and doctor, more practices would suffer loss of reputation and practice volume before the public got over the fact that an award didn’t necessarily mean someone was truly incompetent.
One thing to mention: a jury trial is the worst way to figure an appropriate award, as each juror sees through his own lenses-more should go to the patient, even if the patient bore a great share of the fault.
I believe that there should be medical courts so the 3-judge panel could bring some expertise to the case, and have a prayer of being objective rather than emotional.
Good topic, but dealing with it rationally seems beyond our elected officials and our powerful interest groups.
Wanda J. Jones, President
New Century Healthcare Institute
SF
Wanda I wonder how impartial binding arbitration is with regard to Kaiser sits. Each party gets some choice in having a judge hear the case, but after awhile I would think the relatively small panel of justices would realize that if they went heavily against Kaiser they would be scratched off the potential list of arbitration judges.
Great piece, Dr. Goodman and colleagues. I have been working exhaustively to gain traction on the Patients’ Compensation System here in Florida as the President of the Florida Chapter of Docs4PatientCare. Although all of our surveys of physicians show >90% approval of the system, there is still absolutely no support from the Florida Medical Association for the initiative. This legislation went to the House Judiciary Committee a couple weeks ago. It was supported by independent doctors, patients and of course Patients for Fair Compensation. Speaking in opposition were the FMA, the Florida Trial Bar and Florida’s largest med/mal carrier, The Doctors Company. Following the hearing, the Committee chair commented that, “If all of the parties that stand to make money off of the current system are opposed to this plan, we might be onto something here.” It never made it out of committee. I will continue to educate people on this brilliant solution to the malpractice crisis.
The deaths from adverse events was publicized by the IOM. Some factoids:
Institute of Medicine report claimed that hospital medical errors caused 44,000-98,000 deaths—a “fact” advertised as something like 5 crashes of 747 airplanes weekly yet allegedly ignored by a delinquent medical sector, When repeated like a mantra for over a decade, a bogus statistic becomes “true” by repetition.
Since Minnesota has 1/70th of the U. S. population, we ought to have 1,400 such adverse hospital deaths. However, when MN began tabulating 12 month results each October, there was only modest variation, no trend, and no mayhem. For example, the reports showed 12 deaths in October 2005, 24 in 2006, 13 in 2007, five in 2011, and now 14 in October 2012—typical statistical variation. And 14 not 1,400 deaths! Why?
The original IOM report was based on death being the adverse event in a small subset of seriously ill patients amongst, in one paper, 31,429 hospital admissions. C. J. MacDonald from the University of Indiana noted that the IOM report was based on two old studies not designed to find a causal relationship between an adverse event and the deaths—and indeed that was not the conclusion of the studies. The 98,000 deaths were an extrapolation from the very sick subset, while the percentage of deaths per total admissions in the two studies, 3.4, was no different from all state of New York hospital admissions—sick folks do die in hospitals but very rarely from an adverse event.
The excellent and thorough MN annual reports are based on over 2 million hospital admissions and outpatient surgical procedures—not a few thousand. They include not only deaths, but all adverse events. Ninety-one percent of the adverse events were from pressure ulcers (130—a decline) and falls (79—an increase). Six of the 14 deaths were due to falls, and 4 were suicides (2 after they “eloped” from the hospital).
MN is probably not unique. We can be grateful that our hospitals and surgical suites are safer than advertised by the IOM and quoted in John’s excellent analysis. Bob
@Bob Geist
This is very interesting to me Mr. Geist. It is especially interesting in light of the recent news of Diederik Stapel, the discredited Dutch scientist who essentially was making up his own statistics to advance his own theories.
It’s scary when one realizes how much legislation is presented and enacted based upon completely erroneous information. Obamacare is a prime example. It is amazing the amount of (falsely presented) sound bytes that were used to support this legislative abomination. These days can we trust anyone that presents “scientifically gathered information”?
So doctors need the threat of litigation to force them to reduce errors? Thanks for the confidence. I thought I already worked my tail off doing that.
In my family and my church I learned ethics. In medical school and residency I learned how to take care of sick folks. Then in practice I learned prudent risk management. I learned that prudent risk management was needed to reduce the inevitable legal risk I took every time I saw a patient.
Let me tell you, prudent risk management is not the same as practicing good medicine.
I was successfully sued for doing something that is physically impossible–causing a severe abdominal infection by doing uncomplicated nasal surgery a few weeks earlier.
Don’t tell me we’re going to see malpractice reform anytime soon. Glad I’m retired. I’m done.
@ Blake
Your second point is correct: gross negligence should not be protected. I don’t agree with the first point, however. I would set the compensation for a life at $200,000. If that’s not enough, people can pay higher premiums (out of their own pockets) and raise the payout. For disability, the threshhold could be very high, however.
@ Jardinaro1
Hospitals can self-insure and avoid third parties if they wish. Also, they don’t have to do this. The hospital’s choice is to pay for adverse events, regardless of cause, or stay in the current malpractice system.
I assume no community rating and no guaranteed issue. Premiums need to reflect real risks.
@ Mike and several others
When you enter a hospital, you are already at risk. So the arbitrary compensation should not be the same as what one should pay if you were killed while walking down the street. As noted, individuals should be free to double or quadruple the premium and receive double or triple the arbitrary amount.
Or, they can refuse the offer and stay in the common law system.
@John Goodman – 1. As Patients for Fair Compensation has advertised their plan, their would be no common law system left for patients to use. PFC claims that their entire system would be funded by shifting current medical liability premiums into the Patient Compensation System, effectively eliminating medical liability insurance. You cannot do away with medical liability insurance and have it serve as your backstop at the same time.
2. If you think liability insurance will continue to exist with a PCS system, then you are merely compounding the current problem. In a voluntary system, all those who now could not currently win a claim in court (70% of claims currently filed are demonstrated to lack sufficient merit) will simply take a chance with the PCS system in the hopes of getting compensated that way. In the meantime, medical liability insurers will continue to pay out the same high-value claims they currently do via adverse selection. Thus the PCS will add cost to the system by merely compensating more people than the present system without fixing anything.
3. It is not clear what “premiums” you think people should be paying, as the PFC plan says its program would not cost individuals anything. If you think individuals should be paying a premium to protect themselves from adverse medical events, you should be advocating for former Cong. Ron Paul’s proposal to have people buy their own insurance to cover bad outcomes. It would be must more cost effective than a Patient Compensation System.
3. If,
I wonder if any of the world’s developed nations have no-fault compensation systems for negligent healthcare. New Zealand comes to mind. Does anyone know about their experience with it?
The no-fault proposal misses the real point. The real problem with malpractice is malpractice itself, not malpractice compensation.
Over the last 20 years less than 2 percent of physicians were responsible for over half of all the money paid out for malpractice compensation based on analysis of the NPDB Public Use File. Yet only about 10 percent of this 2 percent had ever had any action taken against their licenses and only about 6 percent f the 2 percent had ever had any action taken against their hospital or HMO clinical privileges. Most of the 2 percent had multiple malpractice payments in their records…. but no action by licensing boards or peer reviewers. And the malpractice payments that are the source of these data are only the tip of the iceberg when it comes to actual levels of malpractice since most injured patients never make a claim and most claims aren’t paid. Conservative estimates are that there are 100,000 malpractice deaths a year, but there are only roughly 10,000 physician malpractice payments a year for all causes, not just death.
To solve the malpractice problem, the medical profession and the licensing boards need to be much more vigorous in requiring retraining or even revoking licenses to protect the public from incompetent practitioners.
The real way to reduce malpractice payments (and the cost of malpractice that is borne by patients and their medical insurers — as opposed to malpractice insurers) is to reduce the incidence of malpractice. Switching to a no-fault system is only treating the symptoms, not curing the disease.
@ Mike
1. No doctor has to be in the new system. They all have the option of remaining in the current system. So yes, there can be parallel systems.
2. “In a voluntary system, all those who now could not currently win a claim in court (70% of claims currently filed are demonstrated to lack sufficient merit) will simply take a chance with the PCS system in the hopes of getting compensated that way.”
I think you are missing the point. If a patient has an adverse outcome, he should be compensated, regardless of fault. The Florida reform doesn’t go as far as I would like on this.
3. The third point also reflects the way I think the system should work, not necessarily the way it will work in Florida. I would let people top up their insurance coverage if they don’t think the statutory amounts are generous enough.
Ron Paul’s proposal is defective. The liability needs to rest with the party who is in the best position to avoid the injury with minimum cost — per Posner, et. al.
John, I don’t know why you are mixing outcomes with malpractice. Don’t sicker patients have worse outcomes? You seem to be burying malpractice into outcomes instead of managing it and at the same time perhaps encouraging the selection of patients that have the least illness, a problem that exists today.
Additionally, we know that whenever a government agency takes over it can crowd everything else out and no matter how good it might initially appear it too frequently grows out of control. Thus without my knowing Ron Paul’s exact plan I don’t know why you dismiss it so casually since the chances are the insurers can do do a better job than the government and they have reason set individual premiums based upon the facilities and physicians on the case so it appears to me that the liability would eventually rest with the “party who is in the best position to avoid the injury with minimum cost”.
@ AL
An adverse medical event is when there is a death or injury for some reason other than the reason that brought the patient to the hospital in the first place.
I agree that insurers can do a better job than government but the job to be done is monitoring doctors and provider institutions. Their premiums should reflect the risk that they will generate a claim. Bad doctors and dangerous hospitals will pay higher premiums in a rational compensation system.
@Bob
” Conservative estimates are that there are 100,000 malpractice deaths a year..”
Bob, is it possible that is just a nice round number that is thrown in to support an argument. Where did that number come from and how was it calculated?
Are you saying there were 100,000 cases of “negligence” resulting in deaths? That doesn’t seem possible. If, in fact, most of these deaths were “Acts of God” our problem is not so much “prevention” as it is “economics”. If economics is the issue the problem clearly revolves around the tort problem.
Frank, here are the references to the 44,000 to 98,000 deaths in hospitals supposedly due to adverse events–as in the hospital is where we kill them:
1) Institute of Medicine (IOM). Crossing the quality chasm—a new health system for the 21st century. National Academy Press, Washington DC.1999:240-242.
2) McDonald CJ, Weiner M, Siu L Hui. Deaths due to medical error are exaggerated in the Institute of Medicine report. JAMA. 2000;284:93-95.
Google IOM Report, 1999: all the references are there and it tells about how they extrapolated the numbers.
McDonald’s report tells you why the numbers are bunk–he says that more diplomatically than me.
Bob
John Goodman,
Ron Paul’s plan is not defective. It is analogous to comp and collision coverage in automobile insurance. The insured pays an additional premium for the additional protection. The carrier agrees to pay the claim, under subrogation. Under subrogation, the carrier can go after the negligent party, for recovery, if a negligent party exists.
John, thank you for responding. I understand your definition of adverse medical events, but as you wrote in your piece above most adverse events are not considered negligent. Therefore I cannot understand the willingness to group and hide malpractice with all adverse events when the latter requires a search for better methodologies and the former requires training or loss of licensure? Furthermore based upon everything I have learned on this blog we shouldn’t be converting state problems into federal issues and entitlements, especially when options in the private sector exist or haven’t been tried. But, in your response you make it appear (“… insurers can do a better job than government but the job to be done is monitoring doctors and provider institutions.”) that only government is in the position to do the monitoring.