The Debate Over Medical Malpractice Tort Reform

States are passing laws limiting plaintiffs' rights, and not everyone is a fan.

The purpose of medical malpractice law is to make a patient whole again after an error in treatment occurs. In other words, the law seeks to provide a patient with sufficient monetary compensation to place the patient in the same position that he or she would have been in had the mistake never occurred.

But with the rising costs of health insurance, reformers have been looking for ways to reduce the burden that medical malpractice places on the health care industry. These reformers have suggested a variety of ideas for how to reduce costs. 

The purpose of this article is to provide a neutral explanation of the arguments on both sides of a controversial issue. As sources, this article relies on neutral studies, particularly those conducted by governmental agencies, as well as position papers issued by organizations that can be expected to reliably articulate the positions of both sides, including an American Medical Association study titled "Medical Liability Claim Frequency: A 2007-2008 Snapshot of Physicians."

Arguments For and Against Medical Malpractice Reform

The primary argument in favor of medical malpractice reform is that the majority of medical malpractice lawsuits are meritless, while at the same time, even meritless suits are costly to defend. Those costs are passed on to consumers, driving up the costs of health care for everyone.

According to AMA statistics, 60% of liability claims against physicians are dropped, dismissed or withdrawn. But that 60% of cases costs an average of $22,000 each to defend. Moreover, physicians are found not negligent in 90% of cases that do go to trial. Those cases cost an average of $110,000 each to defend. As a result, according to the AMA, malpractice liability costs increase overall health system costs by between $84 and $151 billion per year.

Opponents of medical malpractice reform argue that rising health care costs have nothing to do with malpractice lawsuits. Instead, according to the AAJ, health insurance companies are to blame. Insurance companies’ annual profits rose from $38.7 billion in 2004 to $61.9 billion in 2007.

Moreover, according to opponents of reform, medical malpractice claims are actually underreported and under-litigated. According to one CNN story, only 22% of medical mistakes result in medical malpractice lawsuits.

Proponents of reform sometimes argue that there is nothing wrong with relatively small malpractice claims, but claims worth millions of dollars are unnecessary and result in windfalls to individual patients and attorneys. Opponents counter that the largest awards go to the most severely injured patients. So, banning large awards harms the group of people that is least able to live a normal life without financial restitution.

Proponents of reform also argue that the costs of medical malpractice liability are driving potential doctors away from the industry, contributing to a shortage of doctors expected to be around 63,000 in 2015. Opponents argue that the overall number of physicians is up more than 40% since 1990 and that there is no evidence of malpractice cases negatively affecting access to health care.

According to the Congressional Budget Office, the direct annual cost to health care providers resulting from malpractice liability is about $35 billion, or about 2% of total health care costs. If Congress were to pass national medical malpractice reform, health insurance premiums for consumers would fall by about 10%.

The Most Commonly Suggested Reforms

Cap on Total Damages. For example, “No patient may recover more than $500,000 in a medical malpractice case.” This rule eliminates the risk that a doctor will be exposed to multi-million dollar awards, which lowers the cost of medical malpractice insurance to doctors.

Cap on Noneconomic Damages. Noneconomic damages include pain and suffering, loss of normal life, loss of consortium, and punitive damages. These damages are difficult to measure because they are subjective. What is the monetary value of five hours of intense pain and suffering? Reformers argue that juries have a tendency to award excessive noneconomic damages. When the cap only applies to noneconomic damages, there is no limit on economic damages, including medical bills and lost wages. many states already have enacted laws that cap noneconomic damages in medical malpractice cases, including California, which places a $250,000 ceiling on these kinds of damages. 

Modification of the Collateral Source Rule. In many instances, an insurance company or other source will compensate a patient for injuries resulting from medical malpractice prior to a lawsuit. Traditionally, parties may not inform a jury of these prior payments during the malpractice lawsuit. If the patient wins, the insurance company that paid initially might be entitled to reimbursement out of the award. Reformers argue that informing juries that a patient has already been compensated for some or all of the injuries would reduce the size of jury verdicts, thereby reducing medical malpractice costs overall.

Reduced Statute of Limitations. A statute of limitations is the time limit that a patient has to file a lawsuit. It can be as short as one year from the date of the doctor’s mistake. Reducing the statute of limitations cuts costs by eliminating the claims of patients who delay before filing lawsuits.

Replacement of Joint and Several Liability With the "Fair Share" Rule. Joint and several liability means that a party that is responsible for any portion of a patient’s injuries may be on the hook for compensating the patient for all his or her losses. Reformers argue that reducing doctors’ responsibility to levels that match the extent of their fault will reduce insurance premiums -- so if a doctor bears 40% of the blame, he or she will be liable only for 40% of the total damages.

Although no single one of these reforms would drastically decrease health care costs, reformers argue that collectively they could reverse the growth of the cost of health insurance in the United States.

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