Sunday, October 4, 2009

Impact negligible from malpractice cap

Published in Standard-Examiner, Ogden, Utah, October,3,2009

By Vijay K. Mathur

In the current debate on health care reform some people are critical of the Congress and the President for not paying much attention to medical malpractice tort liability reform. Some claim that we have reached a crisis in medical tort liability. Even though others dispute the crisis claim, there is no denying the fact that medical malpractice tort liability reform should be an essential part of health care reform. It must also be recognized that national caps on non-economic damage awards will neither remedy frequency of malpractice law suits nor will it solve the overall problems in health care.

Tort liability law is mainly a civil law and is based upon common law tort system. If the patient is harmed by the negligent behavior of a physician or other medical care provider, the victim is entitled to recover for all losses, both financial and for pain and suffering. Financial losses include medical and household expenses and lost earnings. Pain and suffering include loss of enjoyment of life of the patient and the family due to disability. The most heated debate is on the magnitude of claims for pain and suffering. The current law is tort-fault liability law, as opposed to no-fault liability (strict liability) law (as in New Zealand) and a very limited no-fault law applicable to infants in the states of Virginia and Florida.

Many Republican politicians, including Senator Hatch of Utah, and many physician groups argue that huge damage awards are driving the insurance cost of health care providers and the cost of health care due to the practice of defensive medicine. Therefore, to deal with this problem they are proposing a federal cap on damage awards, especially for pain and suffering, to a maximum of $250,000. California was the first to cap such damage awards to $250,000 in 1972 and now 30 other states have such caps.

Using data from National Practitioners Data Bank, the study by A. Chandra, S. Nundy and S. Seabury in the journal Health Affairs, May 31, 2005, finds that the inflation adjusted average payment amount (court judgments and out of court settlements) increased from $173,018 to $263,101 (average growth of 3.55 percent per year), and the average payment amount for top 10 percent of all payments increased from $867,792 to $1,155,031 (average growth of 2.41 percent per year) from 1991 to 2003. These estimates are not indicative of a crisis requiring Federal intervention.

Estimates also show that defensive medicine accounts for only 5 percent to 9 percent of total health care cost. This wide range indicates that it is hard to measure defensive medicine. There is a great deal of variation in procedures and medical tests among physicians, states, and regions of states and partly because of widespread variation in medical practice guidelines. Perhaps national uniformity in up-to-date guidelines would help mitigate this problem. Moreover, emphasis on diagnostic techniques based upon new but expansive technologies has substituted diagnostic skills of physicians. Emphasis on diagnostic skills in medical schools would curtail the use of tests and cost of health care.

The current tort liability system has not deterred the medical error rate. The Institute of Medicine's 2000 report found 44,000 to 98,000 hospital deaths per year due to medical errors. The consensus evidence is that medical malpractice problem is driven partly by extreme claims cost, insurance premiums driven by poor returns on investment of insurance premiums, and by poor pricing strategies of insurance companies. A cap on non-economic damage awards will not significantly reduce the cost of malpractice insurance for certain medical specialties and thus health care cost.

There are a few other issues which must also be considered. First, medical malpractice problem is concentrated in a few states; 50 percent of total paid claims in the U.S. were concentrated in 8 States in 2007. Second, the problem varies among specialties. It is more severe, for example, in surgery and obstetrics-gynecology, where insurance premiums have skyrocketed since 1960's. Third, The New York Times reported in 2005 that the study of 22 states for the years 1992, 1996 and 2001 by Professor Catherine Sharkey, Columbia Law School, found no significant difference in average damage awards among states with or without caps -- perhaps a result of change in tactics by plaintiff lawyers. Fourth, a cap on non-economic damages may discriminate against stay-at-home mothers or fathers, who have no work history, lower income people and/ or poor. In fact, lawyers may not even take legitimate malpractice cases for such people. Finally, a national cap would violate state control of tort law, thus breaking historical tradition.

States primarily regulate malpractice insurance and implement rules governing tort liability law. Therefore, a call for a national cap is unwarranted. Rather, federal guidance and help to states in handling malpractice issues would be more productive. Successful outcomes of ongoing experiments in states may show us the path to an efficient solution to this problem without national legislation on caps.

Mathur is former chair of the economics department and professor emeritus of economics at Cleveland State University, Cleveland, Ohio. He is also adjunct professor of economics at Weber State University, Ogden. He resides in Ogden. His articles also appear at

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