Problems in Health Care: Malpractice and Tort Reform
One of the problems with Health Care that is driving up costs is Medical Malpractice. To what degree Malpractice drives up cost is debated by doctors and lawyers. Dr.’s argue that Malpractice costs a great deal to the health care system, while lawyers argue that it is such an infinitesimally small part of the Health Care costs, that it doesn’t need reform.
The best way to start understanding Medical Malpractice and then Malpractice reform is to understand how medical Malpractice is supposed to work. Medical Malpractice is suppose to function in a way that doctors who make mistakes due to negligence pay financially for those mistakes. Negligent mistakes being that a doctor did something wrong like prescribing the wrong medication when the doctor should have known better. That the mistake was avoidable, like mixing medications.
In the system of how malpractice “ought to” work when someone is injured by a doctor, they are able to bring a suit against the physician. Having several cases brought against an individual doctor, or having a few big awards against an individual physician will drive up his insurance rates, just as getting into car accidents will make it more expensive to get car insurance.
This in and of itself isn’t a problem; a doctor who is constantly negligent should not be practicing medicine. We should all be able to find the common ground that grossly negligent doctors should find another profession. People who defend the malpractice system do so because they say it is a mechanism to remove unfit physicians from practicing. In theory they are right. But in reality our medical malpractice system is vastly different then how it is “in theory”.
The crucial detail between the theory and the reality of medical malpractice is which doctors are being sued. In theory only doctors who are negligent get sued. The reality is that anytime there is a negative outcome where a patient is unhappy with the result can result in lawsuit. In fairness it isn’t easy to determine when a doctor is to blame. Patients have such lofty expectations of doctors it is easy to erroneously conclude that anytime a doctor can’t fix a problem they made a mistake. Instead of doctors being sued over negligence they are sued over a variety reasons.
The number one factor that determines whether or not a physician is going to be sued (Blink) is how much a patient likes their physician. If a patient believes that the doctor cares about them, and is doing their best for the patient probability of lawsuit is minimal. Conversely if the doctor comes off as arrogant and insensitive, their likelihood of lawsuit is much higher. Therefore negligence is not the number one cause of lawsuits, it is popularity.
If doctors only had to worry about being sued when they made mistakes, that would motivate doctors to practice medicine the best they could. This would drive up the quality of care. Instead of negligence, lawsuits are initiated when patients are unhappy with the outcome they have received. The lawsuit will proceed forward if a lawyer determines that they can make money from the case.
Because patients being unhappy with outcome of care does not always correlate with a physician making a mistake then a lot of cases are brought forward even though the doctor hasn’t done anything wrong. Not all of those cases that patients want initiated will be pushed, because a lawyer must determine that money can be made from the case. Therefore the two determining factors of a lawsuit are unhappy patients, and the ability to make lawyer money, not doctor liability. The perversion of medical malpractice away from how ought to function to how it in fact does function costs the United States health care system a great deal. It increases the cost of medical care in two ways. Malpractice premiums and defensive medicine.
Malpractice premiums are insurance premiums that doctors pay to protect themselves against a lawsuit. The premiums vary by state (due to what tort reforms have been enacted) and by specialty. The premiums need to be large enough for the insurance company to pay lawyer’s fees; lawsuit damages and then still have enough money left over to stay in business. Therefore the states with the highest number of suits, and the largest damages means the insurance premiums will be the highest. If the insurance company has to be paying out a lot of money, it needs to take in a lot of money to stay in business.
When people refer to Tort Reform, they are almost exclusively referring to a cap (a maximum amount an insurance company is required to pay) on the payment due to pain and suffering, not economic damages. In a civil suit those are the two ways a plaintiff can be awarded money. Economic damages are the monetary losses suffered by the plaintiff. For example, a school teacher making $30,000 a year is left unable to work due to negligence by a surgeon. Economic damages would cover the cost of subsequent procedures and operations due to the negligence by the surgeon, and it would cover the cost of her income, and possibly care for her if need be. This type of damage is almost never capped.
The other type of payment due to “pain and suffering” is the type subject to Tort Reform. Lets take the same teacher who is permanently disabled. She is awarded $1 million dollars in economic damages to cover her cost of living, and medical procedures. Now it is time to award pain and suffering. In states without Tort Reform the sky is the limit on how much money that woman can walk away with. And many juries will reward her with an obscene amount of money lets say $4,000,000 (in addition to her $1,000,000 in economic damages) thinking that the cold insurance company can suffer the loss.
But that means the insurance company will then have to raise rates on its doctors. The doctors will then in turn raise rates on its consumers, and everyone else pays the price. The teacher and her trial lawyer (who would take home around 30-50% or 1million dollars) benefit. In states that have Tort Reform, the school teacher in the scenario would have had her pain and suffering damages capped to the tune of about $750,000. In the state with Tort Reform she would have received $1.75 million dollars, in the state without she receives $5 Million.
If there were just five cases like that in an entire state. The insurance company in the state with Tort Reform is on the hook for $8,750,000, while the insurance company in the state without Tort Reform has to pay out $25,000,000. That difference of $16,250,000 will then be made up higher premiums for doctors in that state.
Missouri passed Tort reform several years ago, and insurance premiums for doctors have been falling consistently since then. That is because at the end of the year the insurance company recalculates the cost of doing business, and if it has gone down they lower their prices. I know many people would expect that insurance companies would keep that money because they are greedy and evil. The reality is that there is competition among insurance companies and that keeps them from doing that.
Insurance premiums get passed onto consumers in terms of higher costs going to the doctor. If a primary care physician’s annual premium is $5,000 in the state of Wisconsin and $20,000 in the state of Illinois. The Illinois doctor has to charge more if he wants to make the same amount of money. Those numbers aren’t just to prove a point. A friend of my father runs an insurance company that provides malpractice insurance to doctors in Wisconsin. He recently tried to venture into Illinois, and even when he quadrupled the premiums to the doctors there, he couldn’t manage to stay in business. The reason is that it is easier to bring a lawsuit in the state of Illinois, and easier to get a settlement there.
Let’s follow the progression of what happens to the people of Illinois as a result of this. People seem to think that Malpractice is only an issue for Doctors. But this view fails to take into account that doctors don’t practice in isolation. The Doctor in Illinois has to pay four to five times his counterpart in Wisconsin for medical Malpractice. Therefore he has to charge more to his costumers.
Since we have a third party payer system, the cost is not directly passed onto the consumer. But it does mean that it is passed on to the insurance company for the people who see that doctor. This means that insurance pay outs for medical health insurance companies in the state of Illinois will be higher.
If the health insurance companies are paying out at a higher rate then they need to raise their rates to stay in business. This means higher insurance premiums, and lower wages (or simply a wage freeze). Lower wages because if a business has to pay higher insurance premiums for its employees that means it has less money to give salaries or raises.
Furthermore the driving up of health care costs causes some employers to not cover employees at all, particularly low wage employees. Malpractice is not the only cause of rising costs in our health care system, that assertion is disingenuous. But Malpractice is a cost on our health care system that benefits almost no one.
Who does benefit? Lawyers; and the occasional person who hits the lottery with a big settlement. It is fair to say that most people who are suing and seeking damages are not benefitting from the system; if someone loses the ability to walk then receives $500,000. That person can’t walk anymore, compensation seems fair.
The people that really benefit from Malpractice are lawyers who bring cases to trial. A $500,000 settlement means that with standard lawyer fees of between (30-50%) that lawyer will be making between $150,000 and $250,000 off of that case. That’s a second house, and that is why trial lawyers do not want tort reform. That is a pretty sweet gig for trial lawyers. Trial lawyers benefit, everyone else suffers. People pay for trial lawyers’ second homes and BMWs through higher insurance premiums and slightly lower wages. The question we should ask is how much is this costing our system?
The first way that our system is affected is that doctors pay premiums to insurance companies. To the tune of about 35 billion a year, doctors pay to protect themselves against law suit. That $35 billion is then passed onto people in higher premiums, higher deductibles and lower wages. With three hundred million Americans this amounts to about $100 per person per year. It really isn’t that much money in relation to the 1.6 trillion Americans spend on health care (or roughly $6000 per person per year). And this is the argument given by lawyers and defenders of the current system. There are a few things wrong with this argument. Wasting $35 billion dollars a year is a lot of money. Obviously it won’t save the health care system on its own but as Senator Everett Dirksen used to say “A billion here, a billion there, pretty soon it adds up to real money.”
The CBO estimated that tort reform on a national level would save the Federal government $5.4 Billion per year over the next ten years. This savings would come from decreased costs of Medicare and Medicaid because prices would decrease as insurance rates would decrease.
The much larger cost on the system is defensive medicine. This cost on the system is argued to be between $100 and $200 billion per year (CITATION), which amounts to 10-15% cost of the entire health care system, is doctors running useless tests to cover themselves legally. That is a serious cost to our health care system. And chipping away at that number could significantly alter health care in America.
Defensive medicine is when a doctor runs tests that are not needed or for which they already know the results, not for the benefit of the patient, but for due diligence if there is ever a lawsuit. As discussed earlier doctors are sued regardless of whether or not they made a mistake.
Since practicing excellent medicine is not enough to avoid lawsuit, doctors take preventative measures in case they are ever brought to trial. For this reason doctors run unneeded labs, X-Rays and CT scans to protect themselves from lawsuits. If a doctor can show through the running of labs, that everything medically possible was explored they are less likely to lose a lawsuit.
It is sad to think that drives medicine, and it is hurting our health care system. That $100 billion a year could be used expand coverage to uninsured Americans, or used for research of new cures. As it currently stands it is wasted.
Lawyers will argue that the $100 Billion a year number is a fantasy. That doctors do not practice defensive medicine, even though doctors are willing to admit it. Lawyers also put forward a second argument that doctors still practice defensive medicine even with Tort Reform. If this is true it is a real problem, Tort reform is aimed at both lowering Malpractice rates for doctors and reducing defensive medicine. It may be that simple Tort reform is not enough to prevent doctors from practicing defensive medicine.
There are a number of options for Tort reform outlined in a recent New York Times article. Instead of regurgitating their ideas as my own, I have provided a link to the article (see Attachment). It is important to know that while our current system of Malpractice is wasteful and primarily benefits trial lawyers. We must recognize that their must be a safety net to catch negligence, because medical mistakes hurt and kill people, not to mention it drives up costs.
The goal of any Tort Reform should be to drive down costs. But another goal that should be talked about with Tort Reform but often isn’t is preventing doctor mistakes. One of the problems with the current systems is doctors are afraid of lawsuits. This leads to defensive medicine that drives up medical costs. But it also leads to covering up of mistakes, instead of learning from them. And that drives down patient care.
There are mistakes made by physicians that lead to lawsuits. There are times when lawsuits are brought against physicians and hospitals when no mistake is made. But there are also mistakes made by doctors that result in no consequences. Mistakes in medicine are inevitable. The medical health care field is run by human beings and people have and always will make mistakes. The best that we can hope for as individuals or as a medical community is to not make the same mistake over and over.
The problem is that medical professionals have a strong fiscal incentive to hide mistakes. If they admit to medical mistakes they open themselves up to malpractice, increased insurance premiums and loss of business. It is to their own personal advantage to keep a tight lid on all mistakes.
The problem with this method is that sharing lessons learned from mistakes has the potential to save lives. Some estimates are that 100,000 people die each year from needless medical mistakes. Those numbers could be reduced if an atmosphere of fostering the lessons that providers learn from medical mistakes, and near misses. Sharing the case of one bad incident could enlighten other providers and prevent them from making the same error.
To make any serious dent in this issue would require alleviating doctors from the fear of baseless lawsuits. There are several ideas out there on the subject. All would require a dramatic shift from the current system that we have now. But if any of them would mean the saving of thousands of lives each year. They are worth it.
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