Argument Against Tort Reform in Medial Malpractice Cases

Overview

Medical malpractice insurance premiums are incredibly high and have been continually rising, especially in New York State. These premiums range extensively by medical specialty and the majority of physicians feel that they are unreasonable (Feldstein, 2018). Thus, there is considerable pressure for malpractice reform. Many advocate for tort reform to limit the amount of money that can be awarded in a malpractice case. In order to evaluate the proposed legislation that would limit the non-economic component of malpractice awards to $250,000 in New York State, it is important to examine medical malpractice generally as well as how other states have attempted to combat this issue.

Malpractice claims have two main purposes: to compensate victims for negligence and to deter further negligence (Feldstein, 2018). Many studies have explored how effective malpractice claims are at achieving these two goals. According to one study, average paid malpractice claims have risen 23% since the 1990s (Feldstein, 2018). The average paid claim differs by specialty, the highest average for neurology being over $500,000 and the lowest average for dermatology which is under $200,000 (Feldstein, 2018). Additionally, the number of paid claims over $1 million has increased (Feldstein, 2018). This data gives the false impression that many patients are being compensated for their experience of negligence. However, data suggests that as few as 2% of patients who are victims of negligence actually file malpractice claims (Feldstein, 2018). Additionally, very few of those who do file claims are compensated. Many patients settle within two years of filing a malpractice claim and others never receive any award for the damages they experienced (Feldstein, 2018). The victims who eventually win their cases may still wait many years before they receive compensation (Feldstein, 2018). All in all, only about 1% of those who are victims of negligence receive compensation, with the lowest rates among the elderly and the poor (Feldstein, 2018). Additionally, the administrative costs of the malpractice compensation system are high, with only 40% of malpractice insurance premiums going towards compensating victims (Feldstein, 2018). It is evident that the current system fails to adequately compensate victims of negligence despite high premiums.

Additionally, evidence does not support that high malpractice claims prevent negligence. The premise of malpractice cases is that the suits will impose a cost on physicians that will cause them to change their behavior, i.e. avoid negligence, to prevent them from incurring these costs (Feldstein, 2018). Many surmise that because as few as 2% of negligence victims file claims, physicians are not sufficiently penalized for their negligence and thus the system does not accomplish its goal of preventing further negligence. High malpractice claims also do not typically result in large financial losses to physicians, rather these costs are spread out over the entire population of physicians through raised premiums (Feldstein, 2018). Thus, the financial risk of a malpractice suit is not the most salient factor in preventing physician negligence because a physician is largely protected from the higher cost of claims. Some studies indicate that the non-financial effects of being served with a malpractice suit may actually be more effective in preventing further negligence. These include the time investment and loss of work time, damage to one’s reputation, and physiological distress that accompany a lawsuit (Feldstein, 2018). Additionally, studies have found little evidence that suggests that malpractice suits prevent physicians from committing negligence in the first place (Frakes & Jena, 2018). Essentially, there is little support that high malpractice claims themselves inhibit further negligence or improve healthcare quality.

Notably, high malpractice claims have the unintended consequence of increasing healthcare spending. The direct costs of medical insurance are a small component of healthcare spending, but the fear of a malpractice suit creates the incentive to practice defensive medicine, which has a large effect on increasing healthcare spending. Defensive medicine occurs when physicians worry about incurring a malpractice claim and thus do whatever they can to prevent that from happening. It is often described as “when doctors order tests, procedures, or visits, or avoid high risk patients for procedures, primarily (but not necessarily solely) to reduce their exposure to malpractice liability” (Nelson, Morrisey, & Kilgore, 2007). This excess use of the healthcare system in ways that may not be necessary contributes to the high healthcare costs that burden patients across the country. One study conducted in 2008 estimated that defensive medicine costs $55.5 billion or 2.4% of total healthcare expenditures (Feldstein, 2018). Thus, high malpractice claims that increase fear among physicians over being accused of malpractice may be indirectly contributing to the rise in healthcare spending.

The proposed legislation would not be unique, as similar tort reform laws have been implemented since the 1970s. There have been three waves of states enacting non-economic damage caps, resulting in almost 30 states currently having a cap on medical malpractice claims (Frakes & Jena, 2018). States were induced to institute tort reform following several crises in the medical malpractice insurance industry. In the 1970s, there was a spike in malpractice insurance premiums and decreased availability of malpractice insurance coverage that resulted in several states placing caps on malpractice awards (Nelson, Morrisey, & Kilgore, 2007). Then in the 1980s, many malpractice insurance premiums were unaffordable for physicians and thus noneconomic damages for malpractice suits were capped in other states (Nelson, Morrisey, & Kilgore, 2007). Again in the early 2000s, there was a crisis in the affordability of medical malpractice premiums and other states imposed tort reform (Nelson, Morrisey, & Kilgore, 2007). At the same time, other states have declared caps on noneconomic damages for medical malpractice cases to be unconstitutional.

The evidence supporting tort reform comes largely from studies in states that have previously enacted caps on medical malpractice claims. Since the purpose of tort reform is to lower medical malpractice premiums, studies since the 1990s have examined this relationship. Several analyses demonstrate that damage caps do reduce premiums for medical malpractice insurance (Nelson, Morrisey, & Kilgore, 2007). Other studies have identified a link between higher malpractice insurance claims and higher incidences of defensive medicine (Nelson, Morrisey, & Kilgore, 2007). Researchers also found that caps on malpractice claims decrease medical spending. In the case of heart disease, one study found that a cap on claims decreased medical expenses for treatment by up to 9% and importantly there was no associated change in cardiac complications or mortality (Nelson, Morrisey, & Kilgore, 2007)

Stakeholder Analysis

Doctors and Hospitals

Doctors and hospitals would both support limiting the non-economic component of malpractice awards to $250,000. Doctors would appreciate having lower malpractice insurance premiums that would result from the tort reform and thus you would earn their support by supporting this legislation. The medical associations through which physicians exert influence, such as the American Medical Association, would support you if you approve this legislation and provide an important political backing in future elections. Hospitals and other medical institutions would approve because the potential to decrease defensive medicine and the corresponding expenditures would appeal to them. Thus, approving this legislation would gain you backing from the medical institution.

Patients and Malpractice Advocates

Patients, especially those who have experienced medical negligence, would be against this reform because it would limit the compensation that they could receive from their experiences of negligence. This group would have increased power through malpractice advocacy groups such as the National Medical Malpractice Advocacy Association. If you supported this legislation, you would likely lose the support of this population. However, relative to other groups, the loss of this group’s political support may be insignificant.

Malpractice Lawyers

Malpractice lawyers would also advocate against the tort reform because the cap on compensation for negligence would result in decreased profits. As a result of the decreased compensation potential, patients may be less likely to take legal action in the first place and those that do would receive less compensation. These outcomes would ultimately decrease the compensation for lawyers, which is why they would adamantly oppose the damage cap reform. This population would have considerable electoral power through their organizing organizations such as the American Bar Association. Your support of this legislation could lose you the support of this politically powerful group.

Stance

All in all, you should not support this legislation because in doing so you would lose the most political support. While doctors and their associations represent an important group of voters, you could afford to lose their support more than you could afford to lose the combined support of patients and malpractice advocates as well as lawyers, specifically those in medical malpractice law. Voting against the tort reform would be the most politically safe decision in this case.

References

Feldstein, P. J. (2018). Health policy issues: An economic perspective (7th ed.). Health Administration Press.

Frakes, M. & Jena, A. B. (2017). Does medical malpractice law improve healthcare quality? Journal of Public Economics, 143. 142-158. https://doi.org/10.1016/j.jpubeco.2016.09.002.

Nelson, L. J., Morrisey, M. A., & Kilgore, M. L. (2007). Damage Caps in Medical Malpractice Cases. Milbank Quarterly, 85(2). 259-286.