Medical Malpractice Reform: Fair and Just Compensation for All

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1 Medical Malpractice Reform: Fair and Just Compensation for All Mary E. Spear, Esq. The Council for Affordable Health Insurance April 1994

2 Executive Summary The Council for Affordable Health Insurance, because it is concerned about the adverse impact of tort laws on our medical practices and health care costs, has developed this issue brief to explore the impact of the current legal system on America s health care and discuss ways in which the two systems can work together to provide fair and just compensation for all. The Council for Affordable Health Insurance advocates a strong, accessible justice system, in which injured persons can recover reasonable compensation for their damages. However, the American legal system falls short of this objective, often awarding inequitable unwarranted judgments to some people, and failing to compensate others. The Council for Affordable Health Insurance believes reform of the legal system is necessary. Therefore, the Council for Affordable Health Insurance recommends the following proposals: 1. Elimination of the joint and several liability rule. 2. Reform of the collateral source evidentiary rule and increased availability of subrogation. 3. Limitation of liability for Good Samaritan charitable care. 4. Reform of the award and payment of punitive and noneconomic damage awards. 5. Encouragement of alternative dispute resolution procedures ( ADR ). 6. Establishment of practice protocols to serve as safe harbors for health professionals.

3 ,- Introduction 2 The Council for Affordable Health Insurance ( CAHI ) advocates a strong, accessible justice system, in which injured persons can recover reasonable compensation for their damages. However, the American legal system falls short of this objective, often awarding inequitable unwarranted judgments to some people, and failing to compensate others. Therefore, the Council for Affordable Health Insurance believes reform of the legal system is essential. As state and federal legislators consider the reform of our health care delivery system, close analysis of the problems within that system are necessary. This issue brief examines the impact of the current legal system on America s health care and discusses ways in which the hvo systems can work together to provide fair and just compensation for all. Presently, American tort law encourages medical behaviors which often subject patients to unnecessary tests and treatments, resulting in higher health care and insurance costs. Often, the legal system inappropriately and inconsistently rewards plaintiffs and their counsel, arbitrarily punishing physicians for what may be reasonable health care. Such inequities drive up the cost of health care and discourage formerly acceptable regimens of treatment. The intermingling of law and medicine demands solutions to the problems created. The lottery-like aspect of civil liability is nowhere more evident than in medical liability. The recent report of the Harvard Medical Practice Study Group, Patients, Doctors, and Lawyers: Medical Injury, Malpractice Litigation, and Patient Compensation in New York, concludes that very few acts of medical negligence result in patient claims. The study further concludes that very few paid claims actually involve medical negligence. Now-notorious inequities and inefficiencies of the medical liability system negatively affect the cost and quality of health care, as well as access to adequate health care. While the direct costs associated with medical liability may be a relatively small part of the total health care bill, they are, in absolute terms, extremely high. The practice of defensive medicine as a means of reducing or avoiding tort liability is a major contributor to higher health care costs. Access to health care services is hindered by the medical liability system. Increases in the cost of liability insurance premiums and defensive medicine ultimately increase the overall cost of medical care. Patients pay the price.

4 Increased Costs Necessitate Malpractice Reforms Medical malpractice claims have increased, and malpractice insurance premiums have fluctuated drastically, in the last 20 years.1 The severity of claims, measured by the size of damage awards, has increased substantially, especially for non-economic damage awards. * One malpractice claim was filed for every three to four physicians in 1991; in 1968, only one claim was filed per 37 physicians. * The average medical malpractice jury award increased from $220,018in 1975t0.$1,760,000in * More medical malpractice suits were tiled in the decade ending in 1987 than in the entire previous history of American tort law.3 * Approximately 40% of all practicing physicians will be sued during their careers % of those claims will be dismissed without merit4 * Almost half of all medical liability insurers defense costs are spent on cases in which no liability is found. Conversely, only 6 of every 100 patients who experience adverse outcomes as a result of negligence receive compensati0n.s Fear of lawsuits can encourage physicians to provide more services than are reasonably necessary for medical treatment. Many doctors and hospitals order additional tests, not because they are medically necessary or incrementally improve the physician s ability to diagnose and treat, but because they fear the possibility of a liability suit. * Health care providers liability inmrance premiums rose from $60 million in 1960 to nearly $5,C00 million in * Total medical liability premiums for hospitals and physicians contributed $9.2 billion to the cost of health care in * Defensive medicine is estimated to have added $25 billion to the cost of health care in A recent study found that the health care system could save an estimated $36 billion over 5 years by eliminating defensive medicine practices9 Liability concerns have caused some physicians to discontinue their practice. Such concern may force some effective medicines and medical devices off of the market. Furthermore, they may interfere with the research and development of new pharmaceuticals and medical equipment.1o 40% ofallpracticing r nhysicians will be suedduring their careers % of those claim will be dismissed without merit. 3

5 The Council for Affordable Health Insurance recommends the following proposals: 1. Elimination of the joint and several liability rule. 2. Reform of the collateral source evidentiary rule and increased availability of subrogation. 3. Limitation of liability for Good Samaritan charitable care. 4. Reform of the award and payment of punitive and non-economic damage awards. 5. Encouragement of alternative dispute resolution procedures ( ADR ). 6. Establishment of practice protocols to serve as safe harbors for health professionals.

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