Editorial: What lack of tort reform really costs

September 1, 2003

EDITORIAL

 

EDITORIAL

What lack of tort reform really costs

I know by now I must sound like a broken record, railing against the current tort system and lobbying for professional liability reform. Certainly, seeing physicians subjected to ridiculous lawsuits that are unjust, degrading, and time-consuming contributes to my passionate perseveration on the topic. I also feel that the current medicolegal system is eroding the very fabric of the patient-physician relationship. Much of my angst emanates from the growing realization that escalating liability insurance premiums and liability-induced impediments to product development and manufacturing are a clear and growing threat to the economic health of this nation. In other words, it isn't just medicine that is being affected by escalating lawsuits.

As of 1994, our tort system directly cost the United States economy over $150 billion per year, consuming 2.2% of the Gross Domestic Product (GDP) yet returning less than a quarter of that money to claimants.1 Far greater even than these escalating expenditures for judgments, legal fees, court costs, and insurance premiums are the hidden economic costs of our tort system. These include the costs of delayed development or outright abandonment of new products, shortages of much-needed products like generic drugs, as well as lost tax revenue and unemployment as companies take their manufacturing and financial operations offshore. Further expenses are engendered by patently ridiculous product labeling, excessive safety recalls, and over-engineered safety systems.

By itself, the financial impact of the medical liability crisis on the nation's economy is extraordinary. Total medical professional liability insurance premiums amounted to $21 billion in 2001 or 0.25% of our GDP.2 Over the past decade, medical malpractice liability premiums have soared 8.1% per year—over three times the rate of inflation and double the rate of medical inflation.3 Unbelievably, premiums for ob/gyns have increased at nearly double that pace, reaching 15.3% last year.4 Despite a continuous infusion of revenue from premiums, insurers cannot keep up with the pace of awards and settlements. James Hurley of the American Academy of Actuaries recently testified before Congress that medical professional liability insurers paid out $1.34 in claims for every $1 in premiums in 2001.5 Hurley ascribed a significant proportion of this financial hemorrhage to escalating awards, which have jumped nearly 200% in the past decade, reaching an average of $3.5 million per award in 2001 and rising unchecked at 15% per year.6

While most people have no sympathy for insurance companies and many believe that doctors are too rich and deserve to pay more for their insurance, the public may not appreciate that they are the ones who ultimately bear the cost of rising malpractice premiums. In 2001, such premiums translated into an extra $350 in health-care insurance for the average American family or their employers. Indeed, conservative estimates indicate that defensive medicine accounts for up to $124 billion in US health-care costs, or nearly 10% of overall health-care expenditures.7,8 You may want to point that out to the next person you hear criticizing tort reform who also complains about rising co-pays.

More ominously, the escalating pace of jury awards is driving US malpractice insurers out of the market. Already the industry has contracted by 15%, and if it collapses, health-care delivery in this country will essentially come to a screeching halt.5 A "slowdown" has already started. Many hospitals across the country have either dropped or "downsized" their obstetric services and many more institutions—including several prominent academic medical centers—are making similar plans. In Georgia, 33% of ob/gyns are planning to give up obstetrics and similar action is likely in other high-impact states.9

The immediate victims of the professional liability insurance crisis are the working poor and unemployed who cannot afford artificially inflated health insurance premiums. Indeed, 74% of those who are uninsured cite high costs as the major reason for their situation.10 In fact, Congress has estimated that tort reform could reduce the number of uninsured by up to 3.9 million.11

While the working poor are the biggest losers if tort reform fails, trial lawyers are by far the biggest beneficiaries of the current system, taking in 33% to 40% of an average award payment.12 However, the system is also unjust in many other ways. Estimates indicate that payments are awarded in 43% of cases in which no true negligence exists.13 That's not surprising when one considers that medically unsophisticated juries are often subjected to the testimony of unregulated "expert" witnesses touting junk science. So perverse is the system that in one study, physicians who had the most medical knowledge were found to be the most likely to be sued.14 The dirty little secret of the current tort system is that in our country today awards are far more likely to be based on evidence of injury than on evidence of negligence.15

There is no rational excuse for opposing tort reform, given overwhelming evidence that the current system is often unjust, causes grave harm to the country's economy, reduces access to health care for the nation's most needy, and is threatening access for all of us. Yet on July 9, 48 senators blocked an attempt by Dr. Bill Frist (R-TN) to overcome a filibuster of medical liability reform legislation (S. 11, the Patients First Act). That bill would have set shorter statutes of limitation on filing lawsuits, limited noneconomic (pain and suffering) and punitive damages to $250,000, limited attorneys' fees, and established tougher standards for "expert" witnesses. Not one Democrat voted for tort reform and two Republicans, one a trial lawyer and the other a "States-Rights" activist, voted against tort reform. While the chief argument of these anti-reform senators is that the cap on noneconomic damages was too low, virtually all of them are the recipients of enormous largesse from trial lawyers (see "Confronting the professional liability crisis (Part 2)," in Contemporary OB/GYN, May 2002, page 11).

While the defeat strikes an initial blow at meaningful reform in the 108th Congress, compromise is still possible. Dr. Frist has repeatedly said that professional medical liability reform is his number one legislative priority and has pledged to continue to work until a resolution is signed into law. For its part, the American College of Obstetricians and Gynecologists has told its members to focus on Democrats, especially those up for reelection, and to urge them to pass meaningful medical liability reform this year. Our key targets should be senators who have expressed some sympathy with our current plight and the need for a solution. They include: Baucus (D-MT), Bayh (D-IN), Bingaman (D-NM), Boxer (D-CA), Breaux (D-LA), Cantwell (D-WA), Corzine (D-NJ), Dayton (D-MN), Feinstein (D-CA), Hollings (D-SC), Jeffords (I-VT), Kohl (D-WI), Landrieu (D-LA), Lincoln (D-AR), Miller (D -GA), Nelson (D-NE), and Pryor (D-AR).

In my opinion, party affiliation pales beside tort reform as the ultimate litmus test for a politician to receive support from health-care providers. We must be politically active, whether that means writing a check, joining a political action committee, or putting a candidate's bumper sticker on our cars. As I have said over and over, no one is going to fight for us on this issue but us.

REFERENCES

1. Tillinghast-Towers Perrin. Tort Costs Trends: An International Perspective, New York, NY, 1995.

2. Tillinghast-Towers and Perrin, U.S. Tort Costs: 2002 Update – Trends and Findings on the Costs of the U.S. Tort System, New York, NY, 2003.

3. U.S. Department of Labor, Bureau of Labor Statistics, "Consumer Price Index," March, 2003.

4. Medical liability rates continue their upward swing. Medical Liability Monitor. October 2001.

5. James Hurley, American Academy of Actuaries, in Testimony on 2/27/2003 to the U.S. House Subcommittee on Health, Committee on Energy and Commerce.

6. Jury Verdict Research, Current Award Trends in Personal Injury: 2002 Edition. Horsham, PA, LRP Publications, 2003.

7. Daniel P, McClellan MB. Medical liability, managed care and defensive medicine. National Bureau of Economic Research. Feb. 2000. Working Paper 7537.

8. Dubay L, Kaestner R, Waidmann T. The impact of malpractice fears on cesarean section rates. J Health Econ. 1999;18:491-522.

9. Yee D. Study insurance rates affect Ga. Care. The Washington Post, January 26. 2003.

10. Kaiser Commission on Medicaid and the Uninsured. Uninsured in America: A chart book (May 2000). On line at: http://www.kff.org/content/archive/1407 .

11. Congressional Joint Economic Committee study: Liability for Medical Malpractice: Issues and Evidence, May 2003.

12. Danzon PM. Report on awards for noneconomic loss. In: Manne HG, ed. Medical Malpractice Policy Guidebook. Jacksonville, Fla: Florida Medical Association; 1985.

13. Brennan TA, Sox CM, Burstin HR. Relation between negligent adverse events and outcomes of medical malpractice litigation. N Engl J Med. 1996;335:1963-1967.

14. Ely JW, Dawson JD, Young PR, et al. Malpractice claims against family physicians: Are the best doctors sued more? J Fam Pract. 1999;48:23-30.

15. Farber HS, White MJ. Medical Malpractice: An Empirical Examination of the Litigation Process, National Bureau of Economic Research Working Paper No. w3428. Sept. 1990.

Charles J. Lockwood, MD

Charles J. Lockwood, MD, Editor in Chief, is Anita O'Keefe Young Professor and Chair, Department of Obstetrics and Gynecology, Yale University School of Medicine, New Haven, Conn.

 



Charles Lockwood. Editorial: What lack of tort reform really costs.

Contemporary Ob/Gyn

Sep. 1, 2003;48:12-15.