Medical Liability Facts

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1 Medical Liability Facts For more information on the pending healthcare crisis in South Carolina, contact: The South Carolina Medical Association Why Does South Carolina Need Tort Reform? South Carolina s judicial system is out of balance, creating economic side effects that harm individuals, businesses and organizations. A recent study by the Harris Organization ranked our state in the bottom 10 for our overall tort system, making it one of the worst in the nation. How Did We Fall So Far Behind? Due to lax venue and unjust liability laws, South Carolina has experienced an increase in the numbers of junk and frivolous lawsuits - lawsuits seeking high cash awards and effectively clogging our court systems. As a result, South Carolina has earned a national reputation as the go-to place for jackpot or lottery-like payouts. At the core of the problem are non-economic and punitive damages. Judicial reform of the tort system seeks reasonable limits only on non-economic (such as pain and suffering) and punitive (meant strictly to punish) damages. Judicial reform of the tort system does not seek to limit economic damages, which deal specifically with such losses as damage to property, medical expenses, and loss of wages. While other states, including many of our own neighbors, have already taken measures to limit these awards, South Carolina remains the only state in the Southeast without reasonable limits. Why Is It So Important to Limit These Damages? Because non-economic and punitive damages cannot be easily defined in terms of a dollar amount, and therefore have the greatest potential for abuse under our current system. This hurts everyone from the individual to businesses, organizations and providers of health care services. The costs of these lawsuits hurt businesses and manufacturers by forcing them to shut down or discontinue certain products resulting in reductions to the work force, reduced wages, or loss of employment opportunities. Because of the skyrocketing costs of malpractice insurance, physicians and providers of health care services may be forced to retire early, discontinue certain services such as obstetrics, or move to states with more favorable judicial systems. Communities and families pay through the loss of employment opportunities when business and industry, fearing South Carolina s lax venue laws, refuse to build or relocate here. Individuals pay through added-on costs to goods and services. It is estimated that frivolous lawsuits cost the average family of four approximately $2,600 annually in the form of more expensive products and services. In South Carolina, that amounts to 6 percent of the median family income. Most South Carolinians agree. We can no longer stand alone. We need common sense tort reform. Many South Carolinians favor legislation that addresses both personal responsibility and reasonable limits to non-economic and punitive damages. Setting reasonable limits would reduce junk and frivolous lawsuits and free up court dockets for legitimate claims. Setting reasonable limits would discourage joint and several liability claims that actively seek out individuals or corporations with deep pockets. Common sense reforms would do away with lax venue laws that deter much-needed jobs from coming to South Carolina. And common sense reforms would continue to protect the individual while ensuring that all South Carolinians have access to health care and affordable goods and services. 12/16/2004

2 How Did the Crisis Begin? Over two decades ago, many states faced a crisis as malpractice insurance rates skyrocketed. Carriers either abandoned markets where they couldn t make an adequate profit or were declared insolvent and shut down by state insurance commissioners. Many physicians simply couldn t afford the premiums. Fear of litigation leads to the practice of defensive medicine, costing an additional $ billion per year. According to CMS, in 2000, national health care expenditures totaled $1.3 trillion, $286 billion of which equal physician charges. In 2002, JUA and PCF premiums increased an average of 35 percent. Since 1995, rates have increased an average of 665%. The number of suits filed and the size of payouts are steadily increasing. Nationally, median malpractice jury awards rose from $500,000 in 1995 to $800,000 in Malpractice awards rank second to product liability payouts, with median awards of $1.8 million. - The Tampa Tribune, December 19, Facts About Tort Liability On any given day, there are over 120,000 malpractice actions pending against physicians in the U. S. 1/6 th of America s physicians report a claim every year. The average neurosurgeon reports a claim every 2 years, and 50% of them are sued every year. Over 1/3 of ER physicians, OB s, plastic surgeons, trauma surgeons, and orthopedists are sued every year. - The Doctors Company, 2002 The Cost of Defensive Medicine A physician survey showed that 79% of physicians ordered more tests than they thought medically necessary. 74% referred patients to specialists more than they felt necessary. 51% have recommended invasive procedures such as biopsies more than they believed to be medically necessary. 41% have prescribed more medications such as antibiotics than they felt necessary. Are Doctors Really Misdiagnosing the Problem? In Nevada, Las Vegas only level one trauma center closed for 10 days. In Mississippi, rural women are having trouble finding obstetricians. You would be hard pressed to find a neurosurgeon in West Virginia; they are leaving in droves. In Pennsylvania s Montgomery County, the only trauma center is closed. America is experiencing a medical malpractice insurance coverage crisis that is increasing the cost of health care, decreasing access to doctors and hospitals for many patients and lowering the overall quality of care provided to patients. - Secretary of Health and Human Services Tommy G. Thompson, July 18, 2002 Our badly broken medical liability system is responsible for higher costs for patients, for lower quality of care, and for decreased access. And I worry about it. Frivolous lawsuits drive up the cost of government health programs by over $25 billion every year. It's a national problem that requires a national solution. - President George W. Bush, July 25, 2002 Will Tort Reform Take Away the Right to Sue? Absolutely not. No one takes issue with a victim s right to receive compensation for damages caused by negligence. In fact, everyone agrees that damages for economic losses such as medical expenses, loss of wages or earning capacity are a fair and direct means by which plaintiffs can receive compensation. Judicial reform of the tort system is about restoring balance to a system that is out of whack. What Is the Difference Between Economic and Non-economic Damages? There are actually three components to consider. Economic damages are actual losses such as medical expenses or loss of wages or earning capacity. We all believe victims should be fairly and adequately compensated for these losses. The second type of damages is non-economic damages, and the term most people are familiar with

3 to describe this is pain and suffering. Finally, there are punitive damages, which are just what they sound like: a financial penalty meant to punish a guilty party. We are simply proposing reasonable limits on those types of damages in line with what many states around us are using. How Much Does the Average Lawsuit Cost? A better way to look at it might be to ask what average plaintiffs receive in a successful lawsuit. On average, plaintiffs receive less than half of the total awarded, with up to 58 percent going to attorneys and court costs. 57% of medical malpractice premiums go toward attorneys fees. - The Charlotte Observer, January 21, Isn t This Really a Fight Between Physicians and Lawyers, or Something Being Pushed by Large Companies? How is the Average South Carolinian Affected by This So-called Problem? All South Carolinians (not just physicians and personal injury lawyers) are affected by a lack of jobs caused by companies going to states with more balanced court systems. All South Carolinians are affected when doctors move out of state, close their practices or stop performing some medical procedures because of high malpractice rates. Finally, the average family of four pays an additional $2600 per year for goods and services because of higher prices caused by frivolous lawsuits. Aren t Most Frivolous Lawsuits Thrown Out of the Courts Anyway? That s a common misconception. According to the U.S. Department of Health and Human Services, 70% of medical liability claims do not result in any payments to patients, and fewer than two percent of cases result in trial victories for plaintiffs. But each of these cases costs an average of almost $25,000 to defend, even if they have no merit whatsoever. That s what drives up costs for consumers and forces companies and physicians out of business. Will the Reforms Restrict Access to South Carolina s Court System for People Who Have Been Harmed by the Negligence of Others? No. There are no provisions that will make it more difficult for people who have been legitimately harmed by the negligence of others to file suit to recover fair and reasonable damages for their losses. The reforms called for are designed to discourage, reduce and eliminate the frivolous lawsuits and other kinds of lawsuit abuse made possible by the current liability laws. What Effects Will Replacing Joint and Several Liability With Proportionate Liability Have on the Ability of Innocent Victims of Negligence to Recover Compensation For Their Losses? Two fundamental principles of the 2004 bills were (1) people who have been legitimately harmed by the negligence of others have a right to seek fair and reasonable compensation for their losses from all responsible parties, and (2) negligent parties should be held accountable for their actions. Common sense and fairness dictate that at-fault parties should pay for damages directly in proportion to their degree of fault and that s exactly what replacing joint and several liability with proportionate liability accomplishes. It simply makes no sense and is not fair to order a defendant (with a deep pocket) who may be as little as one percent at fault to pay 100 percent of a plaintiff s damages. In a few cases, parties who are primarily responsible for the plaintiff s injury or loss may be uninsured, insolvent or otherwise unable to pay full damages. Any solution to this larger problem must be addressed by broad changes in social policy not by tort reform. And the burden certainly should not fall on a single defendant who is only marginally at fault. Who Will Benifit From Civil Justice Reforms? By providing fair, reasonable, common sense solutions to the most severe lawsuit abuse problems facing South Carolina, civil justice reforms serve a wide, broad-based range of interests. Consumers, taxpayers, small and large businesses, local governments, non-profit organizations, charitable groups and volunteers will all benefit from the proposed reforms. In fact, just about the only people who won t benefit from these reforms are the personal injury lawyers who typically collect contingency fees ranging from 30 to 40 percent or more of the damages awarded in lawsuit sometimes earning more than the actual victim.

4 What Do the Patients Want? The public is concerned. In a February 2003 poll by Wirthlin Worldwide, 84% of Americans felt that skyrocketing medical liability costs would limit their access to care. A poll released in September 2004 by the Health Coalition on Liability and Access (HCLA) reveals that South Carolinians believe the health care liability system is deeply flawed and needs reform. By an overwhelming margin (78%), the residents of South Carolina say their ability to get the health care they need is threatened by rising medical liability costs. Nearly six in ten (61 percent) believe their representatives in Congress should address this problem by enacting comprehensive reform of the medical liability system. More than three-quarters of those polled (79%) support reforms that include common-sense limits on payments for non-economic damages, while at the same time ensuring that injured patients receive full payment for lost wages and medical expenses. Seventy-three percent support limits on the amount of money a trial lawyer can receive from a malpractice settlement or award. Christian Shalgian, Chairman of the HCLA, said, "Every day in South Carolina, patients are suffering because the medical liability lottery has forced good doctors out of the practice of medicine. The problem isn't confined to just one state; people all over the nation are facing the loss of access to affordable, quality health care as a result of the crisis. A nation-wide poll conducted for the HCLA in April 2004 found the same high level of concern about the medical liability crisis, and the same overwhelming support for common-sense re-forms." "In South Carolina and in many states across the country, the health care liability crisis is getting worse, and the time for action is long overdue," Shalgian said. Overall Impact on the United States Economy Medical liability concern (defensive medicine) adds as much as $108 billion annually to the cost of health care in the United States. Excessive medical liability adds $47 billion annually to the cost of Federal health care programs. The cost of the U.S. tort system for 2001 was $205 billion, or $721 per citizen. U.S. tort costs increased 14.3 percent in 2001, the highest percentage increase since U.S. tort costs are 2.04% of Gross Domestic Product (GDP). The U.S. tort system is inefficient; it returns less than 50 cents on the dollar and less than 22 cents for actual economic loss to claimants. - Tillinghast-Towers Perrin. U.S. Tort Costs: 2002 Update, (New York, New York, 2002) Over the past several years, medical liability insurers in Pennsylvania, California, Ohio, Virginia, and New Jersey all filed bankruptcy! In 2002, America lost $1 Billion of medical liability capacity when the St. Paul Insurance Company stopped offering coverage. Empirical Evidence in the States In 1995 the Texas legislature passed a series of bills to reform the state s civil justice system. These bills addressed: limits on punitive damages, joint and several liability, sanctions for filing frivolous suits, limits on venue shopping and out-of-state filings, modifications to deceptive trade practices and medical malpractice reform. According to the study, The Impact of Judicial Reforms on Economic Activity in Texas, the total cost of the Texas tort system in 2000 was $ billion. Without reforms, it is estimated that the total cost would have been $ billion. Of the $ billion in total direct savings, approximately $2.777 billion may be attributed to improvements at the national level while $7.630 billion in savings were from reforms in Texas. Of the total savings, $2.542 billion went directly to benefit consumers. - The Perryman Group. The Impact of Judicial Reforms on Economic Activity in Texas Overall Economic Impact on State s Economy. (August 2000) Malpractice insurance premiums in states with caps are 17% lower than in those without caps. (Independent study by Kenneth Thorpe, chair of the Department of Health Policy and Management at Emory University s Rollins School of Public Health)

5 Premiums were 25% lower in states that had caps on damages and collateral source rule provisions, which reduce awards by the amount plaintiffs recover from other sources such as health insurance and workers compensation. (Kenneth Thorpe study) A July 2003 study by the Agency for Healthcare Research and Quality (AHRQ) found that states with damage caps averaged 12 percent more physicians per capita than state without damage caps. Additional findings included that caps are effective in improving the supply of physicians and patients access to care and the lower the cap, the greater its effectiveness in ensuring patients access to care. A $250,000 cap on non-economic damages would likely result in savings, while a $500,000 cap would probably be of little benefit to physicians. (Study by Tillinghast-Towers Perrin) Size of Awards Between 1996 and 2002 the average liability judgment increased 234% and, by , 52% of all awards exceeded $1 million. The average jury award in 2002 was $6.2 million. The median medical liability award in malpractice cases jumped over 175% from 1994 to 2001 and the median verdict doubled to $1,000,000 between 1997 and The frequency of very large awards is increasing, with over half of awards in 2001 over $1 million, and 25% of awards exceeding $2.7 million. In Texas, a single plaintiff was awarded $268 million. Pennsylvania and Mississippi have both seen $100 million awards. The average cost of a wrongful death claim in the United States today is $5.7 million. If a new drug saved 99 lives for every 1 lost because of adverse effects, a charge of $57,000 per dose would be required solely to cover the cost of indemnity. Richard E. Anderson, MD, Defending the Practice of Medicine, Archives of Internal Medicine, Volume 164, June 14, 2004 Frequency of Awards SC Trends The number of medical malpractice awards in SC increased from 101 in 1997 to 131 in The average verdict in was $3.5 million. Settlements and judgments paid out by JUA/PCF have increased 367% between 1998 and TAYLOR VS. MEDINICA Hampton County - February 21, $11,000,000 Defendant physician allegedly used improper chemotherapy protocol in the treatment of breast cancer BARTHOLOMEW VS. ZURBRUGG Beaufort County - January 28, $14,000,000 Defendant pediatrician allowed mother to transport ill baby to hospital some distance from his office. Baby had arrest in route and suffered brain damage. Very strong defense showing that physician made appropriate judgment call in permitting transport by private vehicle. NEWELL VS. NORTH TRIDENT HOSPITAL Dorchester County - Spring $10,600,000 Complications from lap chole. Hospital s liability premised on failure to advise plaintiff that surgeon was scheduled for CABG. MISHOE VS. QHG OF KINGSTREE Williamsburg County - June 27, $1,925,000 Plaintiff was visitor at hospital. Tripped on uneven pavement in parking lot. Sustained twisted ankle and knee contusion. DURHAM VS. VINSON Oconee County - November 19, $17,300,000 Alleged improper surgical technique used in laparoscopic repair of hiatal hernia. Post-op complications.

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