Law & Medicine

Tort reform


Question: Criticisms of the current tort system for compensating medical injuries include all of the following, except:

A. It’s a lottery-style system where worthy cases go uncompensated and some frivolous ones end up with windfall verdicts.

B. It is inefficient and raises medical costs.

C. The United States is about the only country with such an adversarial system, as other developed countries have adopted a no-fault approach.

D. Annual medical liability premiums can exceed $100,000 in high-risk specialties.

E. Defensive medicine is believed to be an adverse consequence of unbridled malpractice litigation.

Answer: C. Justice, compensation, and deterrence are the ostensible objectives of the tort system, but its use in litigating injuries arising out of medical treatment can lead to unfair and inefficient results.

Only relatively few injured people file actions, and they typically wait many years for resolution. Even with soaring insurance premiums, it has been said that the system returns some 28 cents of every insurance dollar to the victim, with the remainder gobbled up by legal, expert, and court fees and by profits and transactional overhead.

In some jurisdictions, high-risk specialists pay six-figure premiums for coverage. The fear of being sued leads to excessive testing, termed defensive medicine, and that adds to health care costs.1

Still, the tort approach is used in most countries to resolve medical liability allegations, with the United States at the forefront of reform efforts to improve the system.

Tort reforms are nothing new. In the 1980s, the U.S. Attorney General’s Tort Policy Working Group released findings in strong support of tort reform. The group concluded that "while there are a number of factors underlying the insurance availability/affordability crisis, tort law is a major cause."

The best-known reform proposal is a cap on noneconomic losses such as pain and suffering, typically without abridging compensation for medical expenses and lost wages. The rationale is to provide some predictability because noneconomic damages are difficult to quantify and jury sympathy may result in unrealistically high payments. California was one of the pioneers in this area, and many others have since followed suit, including Florida, Illinois, Kansas, Missouri, and Texas. Statutory caps vary somewhat from state to state but are typically $250,000-$500,000.

Predictably, caps on damages have been challenged as a violation of equal protection and the patient’s right to a jury trial. By and large however, they have been upheld, as in California and, most recently, Texas and Kansas.

The California Supreme Court for example, ruled that reforms passed by the legislature in 1975 under its Medical Injury Compensation Reform Act (MICRA)2 – which, among other measures, limits noneconomic recovery in medical negligence cases to $250,000 – are constitutional because they are rationally related to the legitimate legislative goal of reducing medical costs.

Other jurisdictions, however – notably Georgia and Missouri – have ruled them unconstitutional. In 2010, the Supreme Court of Illinois famously held that the state’s $500,000 cap for noneconomic damages violated the separation of powers doctrine.3

Notwithstanding arguments from trial lawyers and others, most doctors and insurers believe that limits on pain and suffering can reduce insurance premiums.

A 2004 study reported that states with caps evidence a loss ratio (losses plus costs over premiums) that is 12% lower than in those without damage caps.4 Lower premiums in turn are linked to greater physician entry into the locality, especially high-risk specialists. In addition, caps may have a salutary effect on the wasteful practice of defensive medicine. A 2007 report by the American Medical Association (AMA) confirmed and extended an earlier study that reached such conclusions.5

Screening panels and arbitration

Two other tort reforms that have seen good acceptance are the use of screening panels and arbitration.

Many states have set up screening panels, with the objective of weeding out frivolous or nuisance suits. Some are mandatory, as they are in Massachusetts, while others are optional, such as Alaska. In some states, such as New Hampshire, unanimous panel findings are admissible as evidence at a subsequent trial, whereas states like Hawaii do not allow panel findings in court.

A 2008 study commissioned by the AMA revealed that states with screening panels had 20% lower medical liability insurance rates, corresponding to lower claim costs.

Critics, however, contend that pretrial screening panels only prolong the litigation process and increase costs without substantial corresponding benefit. In Ohio, pretrial screening panels were tried and abandoned for these reasons.

In a recent New Hampshire case, the state Supreme Court allowed the jurors to hear the unanimous panel findings absolving a defendant alleged to have delayed making a diagnosis of meningitis. The court upheld the constitutionality of the statute and rejected the argument that such a screening process impermissibly encroaches on core judicial functions. 6


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