The medical malpractice crisis: Why are physicians losing?
By Jay C. Weaver, JD, EMT-P, Boston Public Health Commission Emergency Medical Services; Adjunct Faculty, Northeastern University, Boston.
Editor’s note: The skyrocketing cost of medical malpractice insurance has affected physicians throughout the United States. Many emergency physicians (EPs) have seen the costs of insurance nearly double in the past three years. Some insurers have deemed EPs with three claims against them in a five-year period as uninsurable. Specialists have limited their practices or left states where insurance premiums have become too high. This has adversely affected both patients and health care providers. This month’s issue of ED Legal Letter will provide insight into the malpractice crisis by looking at the cause, effect, and potential solutions to the problem. Furthermore, it will review why past legislative attempts to remedy previous malpractice crises have failed.
Introduction
In Las Vegas, 60 specialists walk off the job, forcing University Medical Center to close its trauma unit for 10 days. The reason for this action? The physicians feel they need to publicize the rising cost of malpractice insurance.1
All across America, skyrocketing medical malpractice premiums are wreaking havoc with health care delivery. Hospitals are curtailing services. Doctors are retiring early. Many of those who continue to practice have migrated across state lines in search of an affordable premium. In some parts of the country, patients no longer have access to specialists.2
The medical profession blames unscrupulous lawyers for this mess. Lawyers point their fingers at incompetent doctors. Consumer advocacy groups have suggested that the insurance companies themselves bear some of the responsibility. Legislative efforts to resolve this dilemma have sparked fierce debate, with lobbyists on both sides challenging the effectiveness of each proposed measure.
One thing has become certain, however. The problems associated with escalating malpractice premiums demand immediate attention. There truly exists a malpractice crisis in the United States.
The Heart of the Problem: Escalating Premiums
The cost of medical malpractice insurance has risen steadily during the past four decades.3 The introduction of the Medicare and Medicaid programs in the 1960s developed unprecedented access to health care. This, in turn, created more opportunities for malpractice to occur.4 To counter this risk, insurance companies gradually raised malpractice premiums.
During the past several years, premiums have shot upward at about three times the rate of inflation.5 Nationally, malpractice premiums rose 25% for surgeons between July 2001 and July 2002. Premiums for internists rose 24.7%, while those for obstetricians rose 19.6%.6 In isolated regions, insurance costs have increased even more sharply. According to John Shaffer, spokesman for the Medical Society of New Jersey, premiums in that state have doubled and even tripled in the past few years. Some physicians in that state now pay more than $200,000 annually.7
Physician incomes have not kept pace with these increases. The average surgeon earned only 2.8% more last year than the year before. The average internist received a raise of just 2.7%. Meanwhile, the median salary for obstetricians actually dropped by 4%.8 This combination of escalating costs and limited income paints a bleak financial picture for practitioners.
Hospitals, too, have suffered from dramatic increases in malpractice premiums. In the Charlotte, NC, area alone, one hospital saw its institutional malpractice premium double within a single year. Another hospital saw a 188% increase, while a third has faced a whopping 400% hike. These types of policies now cost health care institutions millions of dollars per year.9 Philadelphia’s Thomas Jefferson Hospital, for example, last year paid an astonishing $32 million in malpractice premiums.10
In the commercial setting, vendors often cope with increased operating costs by raising prices. This approach does not represent a viable solution for today’s health care providers. A physician no longer can raise his fees at will.11 If his patient has health insurance, the fee will be fixed by the contract between the physician and the insurance company or managed care organization.
The Cause
Why has medical malpractice insurance suddenly become unaffordable?
Pose this question to a doctor, and the answer almost certainly will focus on the greed of some of those in the legal profession. Many physicians feel that attorneys, enticed by the prospect of a hefty fee, actively encourage the filing of lawsuits by patients against their health care providers. In the words of one physician, "[Lawyers] reinforce the erroneous notion that every adverse medical outcome is due to negligence. Their motivation is clear. A lawyer’s 30-40% cut of a fat multimillion-dollar judgment typically is 10-20 times more than any physician could make in a year."12
Trial lawyers tell a different story. Bad medicine has driven up the cost of insurance, they say.13 According to the 2000 annual report of the National Academy of Sciences’ Institute of Medicine, some 98,000 Americans die each year as a result of medical errors in hospitals. This figure places medical malpractice ahead of motor vehicle accidents, AIDS, and breast cancer on the nation’s mortality list.14 According to the lawyers, malpractice insurance would cost less if physicians made fewer mistakes.
"There is a crisis, all right," Tampa trial lawyer Mike Trentalange says, "but it is in the care patients receive from their doctors."15
Insurance companies blame so-called "runaway jury awards" for the rate hikes.16 Premiums, they say, have not kept pace with the amounts they have been forced to pay out on malpractice claims.17 The problem lies not so much in the number of decisions rendered in favor of plaintiffs, says Lawrence Smarr, president of a self-insurance group for doctors, but in a handful of exceptionally generous awards that drive up the total amount of claims paid. "We actually don’t lose that many cases when we come to trial," he said in 2002. "In fact, 70% of the claims filed against a doctor wind up in no payment at all, or the cases are dismissed entirely."18 Insurers, along with physicians, have pushed for legislation capping such awards.19
Consumer groups suggest that the insurers themselves largely are responsible for today’s inflated premiums. The Center for Medical Consumers, Consumer Federation of America, and Public Citizen all have accused insurance companies of exaggerating the significance of large jury awards in an effort to "divert attention from their own failings."20 Bryan Clark, legislative advocate for the Ohio Public Interest Research Group, agrees. Noting that premiums of the past 30 years have been linked more closely to national economic trends than to malpractice payouts,21 he calls today’s rising malpractice premiums "a smoke screen for an insurance industry that faces declining profits due to a faltering economy."
As Mr. Clark sees it, insurance companies underpriced their policies during the 1990s in a battle for market share. Insurers earned high returns by investing the premiums they collected, but were forced to impose dramatic rate hikes to cover the cost of claims when the stock market collapsed in 2000. He and others, therefore, feel that the current malpractice crisis actually represents an attempt by the insurance industry to rectify its own misfortune.22
J. Robert Hunter, director of insurance for the Consumer Federation of America, echoes these sentiments. "Insurance companies are blaming judges and juries for the decision to make insurance unaffordable for doctors," Mr. Hunter says. "Despite the hype about exploding’ jury awards coming from the insurance and medical lobbies, when one looks at the data and sees exactly what insurers are paying out in claims, the average is under $30,000. There has been absolutely no upward trend in medical malpractice payouts at any time over the last decade."23
Over the years, a number of insurance companies have quit the medical malpractice business altogether.24 Most notable of these departures was that of the St. Paul Companies, America’s second-largest insurer of physicians. In December 2001, after losing two dollars for every dollar of premiums collected, St. Paul announced that it would write no more malpractice policies.25 With fewer places to shop, physicians now must pay the higher premiums demanded by the remaining carriers.26
In truth, all of these factors probably have affected the cost of malpractice insurance to some degree. Some authorities have argued as well that today’s malpractice crisis is at least partially a product of scientific advancement. Over the years, diagnostic and therapeutic procedures have grown increasingly sophisticated. With the introduction of every new technique comes the opportunity for misuse, and, therefore, for malpractice.27 Each time a new drug appears on the market, for example, a physician unfamiliar with its properties runs the risk of prescribing it for the wrong purpose, at the wrong dose, or in combination with an incompatible agent.28 The same can be said of a newly developed surgical procedure, or any other application of technology.
The Effects
Experts disagree about the cause of today’s malpractice crisis, but there can be no doubt that the effects of high premiums have been profound.
Physicians in many areas of the country have crossed state borders seeking affordable insurance.29 One of the hardest-hit states, Nevada, already has lost 100 doctors to California,30 while a staggering 42% of the state’s obstetricians have announced plans to relocate.31 This trend has left patients in some regions without access to specialists. One Nevada woman reportedly called 50 doctors’ offices before finding an obstetrician who would accept her as a patient. The residents of Wheeling, WV, meanwhile, have not a single neurosurgeon at their disposal.32 "This is something that isn’t just affecting the economics of medical practices," gastroenterologist Richard Corlin told Modern Healthcare in July 2002. "In certain areas, it’s affecting the very existence of medical practices."33
Staffing shortages have forced hospitals in some areas to curtail services.34 Trauma centers in Nevada, Mississippi, and Pennsylvania have closed due to a lack of surgeons.35 Philadelphia’s Methodist Hospital shut down its maternity ward after the insurance bill on its six obstetricians doubled to $6 million.36 In fact, a 2002 American Hospital Association survey of 5000 health care institutions revealed that 20% of those facilities already have reduced services as a result of the crisis.37
In some parts of the country, the gap between earnings and insurance premiums has grown so wide that physicians have resorted to practicing without coverage.38 This has occurred most frequently in Texas, one of 12 states that have reached crisis status in the American Medical Association’s (AMA) eyes. Health care insurers there have not removed such providers from their networks. They have, however, identified uninsured practitioners for patients.39
Today’s malpractice crisis also has affected the way physicians provide care. More and more, the fear of litigation and the concomitant fear of rate hikes have caused doctors to practice so-called defensive medicine. Some physicians simply refuse to perform high-risk procedures.40 At the same time, a Harris poll of 500 medical professionals conducted last year revealed that 79% of physicians order more tests than they believe are necessary, while 74% admitted that they had referred patients to specialists unnecessarily, and 41% prescribe medications that are not medically indicated.41 The downside to such practices, of course, is that they increase the overall cost of health care delivery.42
Insurers, too, have felt the impact of the current malpractice crisis. Despite the hefty premiums recently collected from physicians, many insurance companies have foundered. First there was the St. Paul Companies, which stopped writing malpractice policies in 2001 after posting losses in the hundreds of millions of dollars.43 Then came concerns that Reciprocal of America, which insures more than 150 hospitals throughout the Southeast, would collapse under an after-tax loss of $88 million.44 Also in 2001, state insurance regulators seized control of PHICO, a malpractice insurer operated by the Hospital and Healthsystem Association of Pennsylvania, after the company’s surplus plunged from $127 million to $6.8 million in just six months.45 Five companies stopped selling malpractice insurance in Connecticut during 2002,46 and at least one insurer has imposed a "mandatory capital call" upon its customers to remain afloat.47
Not all experts agree with the AMA’s bleak analysis, however. Kelly McGivern, president of a health plan association in Ohio — one of the AMA’s "crisis" states — told Managed Care Week in January 2003 that she had not heard about any health care plans experiencing difficulty in providing services to policyholders.
The Solution
The only thing more controversial than the cause of the malpractice crisis is the remedy.
Beginning in the 1970s, when the first malpractice crisis arose, legislators debated the wisdom of tort reform. By restricting the number of lawsuits against doctors, proponents argued, and by imposing caps on malpractice awards, the financial risk of insurers would decrease, and insurance companies would respond by reducing their malpractice premiums.48 A number of states enacted legislation with these goals in mind, but the effectiveness of such measures in controlling insurance prices remains the subject of intense debate.49
Tort reform measures fall into several categories. Some states have inhibited frivolous malpractice suits by requiring plaintiffs to reimburse defendant physicians for legal fees, witness fees, and court costs.50 Others have instituted pretrial screening panels intended to weed out dubious claims.51 More than 40 jurisdictions already have shortened their statutes of limitations on malpractice actions, thereby narrowing the window of opportunity during which a patient may advance a malpractice lawsuit.52 By far the most controversial tort reform provision, however, is the strict limitation on liability, or damage cap.
Damage Caps
Damage caps seek to control insurance costs by imposing a dollar limit on physician liability. Proponents contend that this is the only effective way to stabilize the turbulent insurance market53 and reduce premiums to an affordable level. "Caps are the only answer for us," AMA president-elect Donald Palmisano said in 2002. "We would never be in favor of any state legislation that does not include a cap on noneconomic damages because that, for us, would not be meaningful reform."54
Some tort reform advocates favor the imposition of limits only on noneconomic damages, such as punitive damages and awards for pain and suffering. These kinds of damages are subjective in nature, they say, and limits are vital to prevent emotional juries from granting excessive awards. Economic damages, in contrast, require less control because they are based on objective criteria, such as medical bills and the patient’s annual income prior to injury.55
So far, 17 states have enacted legislation that limits the liability of physicians for noneconomic damages,56 while five other states have imposed caps that apply to all damages.57
The AMA has demanded tort reform at the federal level for nearly 30 years. Dissatisfied with the response of the state legislatures to the present malpractice crisis, the association last summer launched a $15 million campaign designed to gain the backing of the public. About 80% of this money has been earmarked for national advertising in an effort to convince Americans that high malpractice premiums have driven up the cost of health care.58 The AMA wants Congress to impose a $250,000 cap on noneconomic damages and to limit the percentages of malpractice awards attorneys may take as fees.
Predictably, insurers and trial attorneys have lobbied against the proposed cap. Limiting recovery in malpractice cases, they say, will harm malpractice victims without really improving the availability of health care. "Doctors are right to be concerned about increased medical malpractice claims," Carlton Carl, spokesman for the Association of Trial Lawyers of America, said in a 2002 interview. "But they are wrong to think that the solution is to penalize people who have had their wrong leg cut off or the wrong side of their brain operated on or their breast cancer misdiagnosed, which is exactly what their proposal would do."59
Trial attorneys also complain that damage caps inhibit malpractice victims from advancing legitimate claims. With trial preparation costing as much as $200,000 in complex cases, a plaintiff might prevail yet still leave the courthouse with nothing. In the eyes of some observers, this may cause seriously injured patients to forego lawsuits, since they would be suing "just to prove a point."60
Some authorities contend that a federal damage cap would not just be morally wrong, but unconstitutional.61 Recent decisions pertaining to state-imposed damage caps do not bear this out, however. In fact, as the following cases illustrate, damage caps and other tort reforms have survived constitutional challenges in a number of jurisdictions, both state and federal.
Case #1: Fein v. Permanente Medical Group.62 On Feb. 21, 1976, 34-year-old attorney Lawrence Fein sought treatment at his physician’s office after experiencing three episodes of chest pain in one week. There, he was examined by a nurse practitioner. After consulting with a doctor, the nurse practitioner informed Mr. Fein that he had suffered a muscle spasm. Mr. Fein filled a prescription for Valium, went home, and fell asleep.
At 1 a.m., Mr. Fein awoke with severe pain in his chest. His wife drove him to the emergency department at Kaiser Hospital, where Dr. Lowell Redding performed an examination, evaluated a chest x-ray, and concluded, once again, that Mr. Fein was suffering from muscle spasms. Dr. Redding gave Mr. Fein a Demerol injection and a prescription for codeine before discharging him.
Throughout the next morning, Mr. Fein continued to complain of intermittent chest pain. At noon, he returned to Kaiser and was examined by yet another physician, Dr. Donald Oliver. Dr. Oliver suspected that the pain was muscular in nature, but he ordered an electrocardiogram (ECG) as a precaution. The ECG revealed that Mr. Fein had suffered a myocardial infarction. Mr. Fein was admitted to Kaiser’s cardiac care unit, and eventually recovered without surgery.
In February 1977, Mr. Fein brought a malpractice action against Permanente Medical Group, the Kaiser Health Foundation affiliate that had been responsible for Mr. Fein’s care. He alleged that the Kaiser physicians should have diagnosed his heart condition sooner, and that timely treatment would have prevented his heart attack or lessened its residual effects.
Dr. Harold Swan, head of cardiology at Cedars-Sinai Medical Center in Los Angeles, served as the principal witness for Mr. Fein. Dr. Swan testified that Mr. Fein should have received an ECG during his original examination, and that the resulting delay in treatment had caused substantial death of myocardial tissue. According to Dr. Swan, the treatment delay had cut Mr. Fein’s life expectancy significantly.
The jury found for the plaintiff. It awarded Mr. Fein $700,000 for wages lost due to his decreased life expectancy, $24,733 for wages lost before the time of trial, and $63,000 for future medical expenses. In addition, the jury awarded Mr. Fein $500,000 in noneconomic damages compensation for pain, suffering, inconvenience, impairment, and other intangible past and future harm.
Mr. Fein requested a modification of the award in accordance with various provisions of California’s Medical Injury Compensation Reform Act (MICRA) of 1975, including Civil Code section 3333.2, which imposes a $250,000 cap on noneconomic damages; Civil Code section 3333.1, which alters the state’s collateral source rule; and Code of Civil Procedure section 667.7, which permits periodic payment of damages. The trial court rejected Mr. Fein’s constitutional challenge to the damage cap and reduced the noneconomic damage award to $250,000. Both parties appealed.
Mr. Fein contended before the California Supreme Court that the state’s damage cap denied due process to plaintiffs because it limited potential recovery without providing adequate quid pro quo. Mr. Fein also contended that MICRA violated the equal protection clause, in that it discriminated between medical malpractice victims and other tort claimants. The court rejected these contentions. "It should be evident," the court said in its opinion, "that the Legislature limited the application of Section 3333.2 to medical malpractice cases because it was responding to an insurance crisis’ in that particular area, and that the statute is rationally related to the legislative purpose."
In rendering this decision, the court acknowledged that MICRA’s damage cap provision would result in lower awards to malpractice victims. Overall, however, the court felt that plaintiffs would benefit from such legislation, since without damage caps, physicians would begin practicing without insurance, and there likely would come a day when victims would collect nothing at all in malpractice cases.
California is not the only state to adopt this view. Courts in a number of jurisdictions have upheld the constitutionality of damage caps under nearly identical lines of reasoning. In Johnson v. St. Vincent Hospital, for example, the Indiana Supreme Court observed that in the setting of a medical malpractice crisis, damage caps preserve the availability of health care services "to the benefit of the entire community, including the badly injured plaintiff."63
Similarly, the Nebraska Supreme Court in Prendergast v. Nelson upheld a total liability ceiling of $500,000, on grounds that this cap "makes available qualified medical services to the Nebraska public."64 Thus, it appears that damage caps have survived in many parts of the country at least in part because they serve a utilitarian purpose.
The highest courts of at least three states have invalidated damage caps, however.65 Noting that a $500,000 damage cap would permit only malpractice victims with relatively small claims to collect the full amount of their jury awards, the Illinois Supreme Court in Wright v. Central Du Page Hospital Association66 held that the cap violated equal protection principles by imposing arbitrary restrictions on a patient’s right of recovery.
Likewise, the Supreme Court of North Dakota — which expressed doubt as to whether a malpractice crisis even exists in the state — invalidated a $300,000 cap on grounds that such a low ceiling would preclude many victims from recovering even their medical expenses, let alone other damages to which they might be entitled.67
"Certainly the limitation of recovery does not provide adequate compensation to patients with meritorious claims," the court wrote in its 1978 opinion. "On the contrary, it does just the opposite for the most seriously injured claimants. It does nothing toward the elimination of nonmeritorious claims. Restrictions on recovery may encourage physicians to enter into practice and remain in practice, but do so only at the expense of claimants with meritorious claims."68
At least with regard to damage caps, then, state courts have aligned themselves into two camps: those willing to sacrifice rights of the individual patient in order to protect the public from the looming malpractice crisis, and those determined to shield malpractice victims from the harsh effects of liability limits. Not surprisingly, the courts have demonstrated a greater willingness to strike down damage cap statutes that limit both economic and noneconomic damages, presumably because these all-encompassing statutes impact seriously injured victims so severely.69
Pretrial Screening Devices
So far, the debate over tort reform has focused squarely on damage caps. Other solutions to the malpractice crisis have been suggested and initiated, however, and the vast majority of these measures have been found to comport with due process, equal protection, and jury trial requirements.70 A number of courts have held, for example, that the imposition of a screening process as a prerequisite to jury trial inhibits the flow of malpractice claims, but does not implicate federal or state due process guarantees.71 These pretrial screenings may take the form of mediation,72 arbitration,73 or review by a medical tribunal.74 The following case provides an example of a medical tribunal deemed constitutional.
Case #2: Barrett v. Baird.75 On Jan. 26, 1989, Thomas Barrett became ill and sought treatment at Nevada’s St. Rose de Lima Hospital. Dr. George Baird examined Mr. Barrett, performed several tests, and discharged the patient home.
That night, Mr. Barrett’s mental status changed for the worse. He was rushed back to the hospital, where he required ventilatory assistance. Recognizing that Mr. Barrett required a higher level of care than St. Rose de Lima could provide, his doctors transferred him to University Medical Center. There he suffered cardiac arrest while receiving dialysis. This led to brain damage, and eventually Mr. Barrett died.
Mr. Barrett’s widow brought a malpractice action against St. Rose de Lima Hospital, Dr. Baird, and two of the physicians responsible for Mr. Barrett’s care at University Medical Center. The complaint alleged that Mr. Barrett had suffered from disseminated chickenpox, which had caused varicella pneumonia, secondary infections, and, ultimately, massive pleural bleeding and death. Mrs. Barrett contended that the defendants had negligently failed to hospitalize, diagnose, and treat Mr. Barrett, and that they had dialyzed him while he was hemodynamically unstable, thereby driving him into cardiac arrest.
Nevada law required Mrs. Barrett to appear before a Medical-Legal Malpractice Screening Panel before commencing her lawsuit. In fact, Mrs. Barrett appeared before two such panels. Expert witnesses appeared for the defendants, but Mrs. Barrett was not permitted to cross-examine them. Both panels concluded that there existed "no probability of negligence." Mrs. Barrett proceeded with a wrongful death action anyway, and the findings of the panels were admitted into evidence as required by Nevada law. A jury returned a unanimous verdict in favor of the defendants.
Mrs. Barrett appealed to the Nevada Supreme Court, challenging the constitutionality of Nevada’s malpractice screening statute. She argued first that the screening procedure had deprived her of a proper jury trial. By permitting the jury to consider the panel’s decision, she said, the screening statute had allowed for the introduction of hearsay and testimony not subject to cross-examination.
The court found nothing wrong with this practice. In accordance with the screening statute, the judge had instructed the jury that the screening panel’s findings constituted an expert opinion that was to be evaluated and weighed in the same manner as any other expert opinion. The introduction of the screening panel’s decision, therefore, had not interfered with the jury’s fact-finding duty, even though the screening panel’s conclusions had been based on evidence inadmissible at trial.
Mrs. Barrett also challenged the screening statute on equal protection grounds. By protecting hospitals and physicians to a greater extent than other alleged tort-feasors, she contended, the screening statute violated both the state and federal constitutions.
Again the court disagreed. Finding that, "Nevada’s lawmakers could have concluded that physicians and hospitals were more affected by the perceived malpractice crisis than other health care providers," the court held that the screening statute, as enacted, bore a rational relationship to a legitimate government interest, and therefore did not implicate equal protection guarantees.
Finally, Mrs. Barrett alleged that Nevada’s malpractice screening statute violated principles of due process. The court dismissed this contention with minimal discussion, noting only that the claimant in a malpractice action retains the right under the statute to seek redress at trial, regardless of the screening panel’s decision.
As with damage caps, the courts have split on the constitutionality of malpractice screening panels.76 In Bernier v. Burris, the Supreme Court of Illinois invalidated a statute that had established a medical review panel comprised of a judge, an attorney, and a health care provider. This panel determined both liability and damages. The judicial member of the panel decided questions of law, while the panel as a whole decided issues of fact.77
The makeup of the Illinois malpractice panel was not unusual. In fact, the judge-attorney-practitioner arrangement already had been adopted by a number of other states without legal challenge.78 The problem with this setup, in the eyes of the Illinois Supreme Court, was that the statute forced the sole judge on the panel to share his judicial authority with the nonjudicial members. In essence, the judge could decide issues of fact, but he had no greater authority in this area than the attorney or the health care provider.79 Some years earlier, the same court had declared a similar, three-judge panel unconstitutional on grounds that the legislature lacked the power to "create a new court" at will.80 "If a panel of three circuit judges cannot operate constitutionally," the Bernier court wrote in its opinion, "it is difficult to see how a panel consisting of one circuit judge and two laymen can."81
Reducing Claims’ Filing Time Frame
Claims periods, too, have been altered by the states in an effort to control runaway malpractice litigation. So far, at least 19 states have shortened their statutes of limitations on malpractice actions in an effort to reduce the frequency of claims.82 In all of these jurisdictions, the new statutes have survived equal protection challenges, even though some of them impose more stringent filing requirements on malpractice claimants than they do on other classes of tort claimants.83
Periodic Payment Statutes
In common law, a plaintiff who prevailed on a claim of personal injury or wrongful death had the right to collect both past and future damages as soon as judgment was rendered.84 Beginning in the 1970s, however, a number of jurisdictions enacted statutes that gave defendants the option of deferring payment of future damages until those damages actually accrued.85 These statutes required courts to render judgments that specified the amount, frequency, and duration of the payments.86 In the eyes of many tort scholars, these periodic payment statutes benefited plaintiffs and defendants alike.87
Since the malpractice crisis of the 1980s, more than a dozen states have enacted periodic payment statutes applicable only to medical malpractice cases.88 Judicial response to these statutes has been mixed. Some courts have upheld these statutes.89 Others have invalidated them on due process and equal protection grounds.90,91
Limitations on Attorneys’ Fees
Convinced that attorneys are driving up the cost of malpractice premiums with their exorbitant fees, physicians’ groups have lobbied successfully in some states for statutory controls on the compensation lawyers may collect on malpractice awards.92 Unlike damage caps and periodic payment statutes, these laws consistently have overcome constitutional challenges. In Johnson v. St. Vincent Hospital, for example, the Supreme Court of Indiana rejected a contention that the fee limitations imposed by the state’s Medical Malpractice Act interfered with an individual’s right to contract. Instead, the court held that that this provision of the Act served a rational purpose by protecting malpractice victims from "inordinate contingency fees."93 Similarly, in Roa v. Lodi Medical Group Inc., the Supreme Court of California dismissed allegations that limitations on attorneys’ fees infringe upon the rights of malpractice victims to retain effective counsel.94 Expressing "no view as to the wisdom of the measure," the California court held that state’s attorney fee limitations indeed are constitutional.
Modifying the Collateral Damage Rule
In tort actions, courts traditionally have focused solely on the damage inflicted by the defendant, and have kept juries from learning about other forms of compensation available to the plaintiff, such as medical insurance or disability payments.95 This collateral damage rule allowed some plaintiffs to recover from more than one source for the same injury.
Theorizing that the elimination of these double recoveries would ease the burden on malpractice defendants and their insurers, a number of states have modified or abolished the common law collateral damage rule by statute.96 Some of these jurisdictions now require disclosure to the jury about payments already received by the plaintiff. Others require the jury to offset its award against such payments.97 Predictably, these modifications have been challenged on equal protection and due process grounds. Finding that these statutes eliminate duplicative recoveries — and that they therefore bear a rational relationship to the governmental interest of reducing the costs of malpractice actions — the courts generally have upheld them.98
The Effectiveness of Reform Measures
Can damage caps and other tort reform initiatives really alleviate the malpractice crisis? A number of studies conducted after the last malpractice crisis suggest that they will.
One analysis of closed insurance claims conducted during the early 1990s revealed that damage caps and modifications to statutes of limitations reduced malpractice awards by nearly 40%.99 Another showed that reducing the duration of the filing period for malpractice claims resulted in fewer lawsuits against physicians.100 One investigator concluded that pretrial screening panels had no consistent effect,101 but another found that these panels reduced OB/GYN premiums by as much as 20%.102 Studies conducted in California, Maryland, and Michigan all revealed that mandatory arbitration reduced the number of malpractice claims and led to faster resolution with lower awards.103
According to insurers’ and physicians’ groups, these data prove that tort reform works. Regulation by the states has not solved the problem entirely, though. Federal tort reform is needed, they say, to prevent the current malpractice situation from growing worse.104
An October 2002 study of jury awards, settlements, and costs associated with malpractice litigation flatly contradicts these contentions, however. Americans for Insurance Reform (AIR), a coalition of 100 consumer groups throughout the United States, tracked medical malpractice claims and premiums over the past 30 years and found that premiums do not, as tort reform proponents claim, coincide with the number or size of jury awards in any direct way. Rather, they "rise and fall in direct relationship to the state of the economy." In fact, AIR found that there has been "no explosion in medical malpractice payouts at any time during the last 30 years."105
If AIR’s findings are correct, and insurer payouts are not driving up malpractice premiums, then additional tort reforms will prove useless. Reducing the number and amount of payouts will have no effect on premiums, if, as organizations like AIR assert, the insurers merely are adjusting premiums in response to investment losses incurred during a weak economic climate.106
Is Tort Reform in America’s Future?
Insurers and physicians’ groups have united in their call for tort reform, and state legislators all over the country have responded. Task forces have formed to study reform proposals.107 Screening panels have been established.108 New damage caps have been signed into law, and existing caps have been strengthened.109
The federal government has reacted somewhat less enthusiastically. Congress has rejected a number of tort reform proposals over the past several years, prompting Modern Healthcare to describe the issue as now being "on life support."110 With the chief executive squarely in its corner, however, and with Congress now controlled by Republicans, the AMA holds out hope that federal tort reform legislation will pass.111 Health and Human Services Secretary Tommy Thompson, too, has expressed optimism. "A national answer, not a state answer, is needed," Thompson told the Florida Times-Union in December 2002. "I think this year is the year. I think the stars are aligned correctly."112
Already there have been signs of movement. During the first three months of 2003 alone, the House and Senate introduced more than a dozen bills intended to alleviate the crisis.113 These proposals cover a lot of territory. One bill would impose a 12-month statute of limitations, with a three-year statute of repose.114 Another would cap punitive damages at $250,000, or twice the amount of the economic damage award, whichever is greater.115 Other proposals include mediation as a prerequisite to trial,116 sanctions for the filing of frivolous actions,117 and a requirement that the plaintiff submit to the court before trial an affidavit from a medical specialist indicating belief that the cause of action is "reasonable and meritorious."118 A bill sponsored by Rep. Max Sandlin of Texas purports to authorize periodic payments of malpractice awards, but it does not specify the conditions under which this would occur.119
Some of these bills propose to attack the crisis through heightened regulation of the insurance industry.120-122 The harshest provision of any of these bills, though, is the one that proposes to discourage insurers from leaving the malpractice business. Under Rep. Sandlin’s bill, any insurer that ceases to offer malpractice coverage thereafter would be prohibited from selling any other type of insurance within the same state.123 A number of bills propose direct relief to physicians. One would amend the Internal Revenue Code to allow tax credits against the cost of medical malpractice premiums.124 Another would guarantee the renewal of existing policies.125
So far, neither the House nor the Senate has approved any bill pertaining to the current malpractice crisis. All of this legislation has been referred to various committees and subcommittees for further consideration. Thus, while the president has made clear his willingness to sign a tort reform bill, the enactment of such legislation does not appear imminent.
Conclusion
Some authorities continue to deny the existence of a widespread malpractice crisis in this country. Two facts cannot be disputed, however: Malpractice premiums are skyrocketing, and these increases are affecting the provision of health care. Doctors blame this situation on runaway jury awards; lawyers blame the doctors for committing so many errors; and public interest groups contend that the greedy insurance companies are the real villains.
A number of solutions have been proposed, but their effectiveness has yet to be proven. The states have responded more quickly to this problem than the federal government has. In fact, despite President Bush’s intent to address the malpractice issue, the federal government might not respond at all.
Endnotes
1. Boulard G. The Doctors’ Big Squeeze, State Legislatures Magazine; December 2002.
2. See Norbeck T. "Access to Care Threatened; Medical Malpractice Crisis," Hartford Courant. Feb. 3, 2003, at A9.
3. See Dewees DN, et al. "The Medical Malpractice Crisis: A Comparative Empirical Perspective." 54 Law & Contemp Prob 217 (1991).
4. See Saks M. Do We Really Know Anything About the Behavior of the Tort Litigation System — and Why Not? 140 U. Pa. L. Rev. 1147 (1992).
5. See Boulard, supra note 1.
6. Fiechtl JF, Frick SL. "Crisis in Medical Malpractice Has Too High a Cost; Reforms are Urgently Needed to Maintain Quality of Health Care." Charlotte Observer. Dec. 5, 2002, at 13A (quoting data compiled by Medical Liability Monitor).
7. Hinkleman M. "NJ Docs to Protest High Costs." Philadelphia Daily News. Jan. 31, 2003, at 12. See also Boulard, supra note 1 (obstetricians in Fort Lauderdale, FL, also paying $200,000 per year in premiums).
8. Fiechtl supra note 6, at 13A.
9. Id.
10. Boulard, supra note 1.
11. See Spice B. "Bush Malpractice Solution Misses the Mark, Expert Says." Pittsburgh Post-Gazette. Jan. 30, 2003, at B-5.
12. Levy ES. "Letters to the Editor: Doctors, Lawyers Debate Medical Malpractice Costs." St. Louis Post-Dispatch. Oct. 12, 2002, at 32. See also "The Complicated History of Medical Malpractice Insurance," Tampa Tribune , Dec. 15, 2002, at 2.
13. Smith E. "A Solution to Medical Malpractice Crisis — Stat," Philadelphia Daily News. Oct. 4, 2002, at 17.
14. See Jacobi JV. "Competition Law’s Role in Health Care Quality." 11 Ann. Health L. 45 (2002). See also "The Complicated History of Medical Malpractice Insurance," supra note 14, at 2. A number of investigators have questioned the accuracy of the IOM report. See Sox Jr. HC, Woloshin S. "How Many Deaths are Due to Medical Error? Getting the Number Right." Effects of Clinical Practice 2000; 3(6):277.
15. Trentalange M. "Bad Doctors are the Primary Reason for the Medical Malpractice Crisis." Tampa Tribune. June 22, 2002, at 19.
16. Boulard, supra note 1. See Malpractice: Lawmakers request GAO review of insurers." American Health Line; July 3, 2002.
17. See Romano M. "Malpractice Worries Spread." Modern Healthcare. Jan. 13, 2003, at 14.
18. Boulard, supra note 1.
19. Id.
20. Medical deterioration. Insurance Day. Jan. 14, 2003.
21. See Americans for Insurance Reform. Medical Malpractice Insurance: Stable Losses/Unstable Rates 4, 2002.
22. Waging uphill battle. Business First. Nov. 15, 2002, at A1. See Malpractice: lawmakers request GAO request of insurers. American Health Line. July 3, 2002.
23. Americans for Insurance Reform. New Study Shows Average Medical Malpractice Payout Over Last Decade Only $28,524; New Data Reveals Same Trends in 2001. Jan. 23, 2003.
24. See Hassan M. How Profitable is Medical Malpractice Insurance? 28 Inquiry 74 (1991); Norbeck, supra note 2.
25. See Boulard, supra note 3; Fiechtl, supra note 6.
26. See Id.
27. Shroder M, Weisbrod BA. "Medical Malpractice, Technological Change, and Learning by Doing, II." Advances in Health Economics and Health Services Research 185 (Schiffler RM, Roniter LF, eds.); 1990.
28. See Dep’t of Health, Educ. & Welfare. Report of the Secretary’s Commission on Medical Malpractice. U.S. Gov’t Printing Office; 1973.
29. See Fiechtl, supra note 6; Romano M. AMA’s call to arms; $15 million campaign to enact tort reform. Modern Healthcare. July 15, 2002, at 12; Worden A. "Rendell Addresses Crisis in Medicine; Rosemarie Greco, a Former Philadelphia Banking Executive, is Expected to Run the Office of Health Care Reform." Philadelphia Inquirer. Jan. 14, 2003, at B01.
30. See Norbeck, supra note 2.
31. See Malpractice: Nevada obstetricians leaving hospitals. American Health Line April 26, 2002; Fiechtl, supra note 6.
32. See Norbeck, supra note 2.
33. Romano, supra note 29.
34. See Romano, supra note 29.
35. See Worden, supra note 29; Fiechtl, supra note 6; Norbeck, supra note 2.
36. See "Malpractice: Nevada Obstetricians Leaving Hospitals," supra note 31.
37. See Boulard, supra note 1.
38. See Wiethoff RA. "Malpractice Threat to Healthcare." Indianapolis Star. Jan. 1, 2003, at 17A.
39. See Malpractice crisis continues to build, but few health plans see effects yet. Managed Care Week, Jan. 20, 2003, at 1.
40. See Id.
41. See Wechsler J. Health plans, providers urge legal system reform; runaway litigation is boosting healthcare costs and reducing patient access to care. Managed Healthcare Executive 2002;14(2).
42. See Fiechtl, supra note 6.
43. See Boulard, supra note 1.
44. See Romano, supra note 17.
45. See Becker C. "Runaway Insurance Train: Pennsylvania Hospital Group Sees Malpractice Unit Seized," Modern Healthcare. Aug. 27, 2001, at 5.
46. See Norbeck, supra note 2.
47. See Romano, supra note 17.
48. See Barker D. The effects of tort reform on medical malpractice insurance markets: an empirical analysis. J Health Pol Pol & Law 1992;17:143; Robinson G. The medical malpractice crisis of the 1970s: A retrospective. Law & Contemp Prob 1986;49:5; Bovbjerg R. Legislation on medical malpractice: Further developments and a preliminary report card. U. Cal. Davis L. Rev 1989;22:499.
49. See U.S. General Accounting Office. Medical Malpractice: No Agreement on the Problems or Solutions (1986); Institute of Medicine. Beyond Malpractice: Compensation for Medical Injuries 29 (1978).
50. E.g., Ala. Code § 16-22-309; Ill. Rev. Stat. § 607-14.5.
51. See, e.g., Colo. Rev. Stat. §§ 13-2-401 to 409; Haw. Rev. Stat. §§ 671-11 to 20.
52. See U.S. Office of Technology Assessment. Impact of Legal Reforms on Medical Malpractice Costs; 1993.
53. See Waging uphill battle, supra note 22.
54. See Boulard, supra note 1.
55. See Fiechtl, supra note 6.
56. See id.
57. Id.
58. See Romano, supra note 29.
59. See Romano, supra note 24.
60. See Boulard, supra note 1.
61. See Waging uphill battle, supra note 22.
62. Fein v. Permanente Medical Group, 695 P.2d 665 (Cal. 1985).
63. Johnson v. St. Vincent Hosp. Inc., 404 N.E.2d 585 (Ind. 1980). See Prendergast v. Nelson, 256 N.W.2d 657 (Neb. 1977).
64. Prendergast, supra note 63.
65. See Wright v. Central Du Page Hosp. Ass’n, 347 N.E.2d 736 (Ill. 1976); Carson v. Maurer, 424 A.2d 825 (N.H. 1980); Arneson v. Olson, 270 N.W.2d 125 (N.D. 1978).
66. 347 N.E.2d 736 (Ill. 1976).
67. Arneson v. Olson, supra note 65.
68. See Fein, supra note 62. See also Anderson v. Wagner, 402 N.E.2d 560 (Ill. 1979); Arneson, supra note 65.
69. See Johnson, supra note 63. See also Woods v. Holy Cross Hosp. 591 F.2d 1164 (5th Cir. 1979); Eastin v. Broomfield, 570 P.2d 744 (Ariz. 1977); Carter v. Sparkman, 335 So.2d 802 (Fla. 1976); Everett v. Goldman, 359 So.2d (La. 1978); Attorney Gen. of Md. v. Johnson, 385 A.2d 57 (Md. 1978); Paro v. Longwood Hosp., 369 N.E.2d 985 (Mass. 1977); Prendergast, supra note 65; Comiskey v. Arlen, 390 N.Y.S.2d 122 (N.Y. 1976); Parker v. Children’s Hosp. of Philadelphia, 394 A.2d 932 (Pa. 1978); State ex. rel. Strykowski v. Wilkie, 261 N.W.2d 434 (Wis. 1978).
70. See Everett v. Goldman, supra note 69; Attorney Gen. of Md. v. Johnson, supra note 69; Paro v. Longwood Hosp., supra note 69; Linder v. Smith, 629 P.2d 1187 (Mont. 1981).
71. E.g., Woods, supra note 69.
72. E.g., Johnson, supra note 69.
73. E.g., Paro, supra note 69.
74. 908 P.2d 689 (Nev. 1995).
75. Barrett v. Baird, 908 P.2d 689 (Nev. 1995).
76. See Aldana v. Holub, 381 So.2d 231 (Fla. 1980); Cardinal Glennon Mem. Hosp. v. Gaertner, 582 S.W.2d 107 (Mo. 1979).
77. Bernier v. Burris, 497 N.E.2d 763 (Ill. 1986).
78. E.g., Mass. Gen. L. ch. 231 § 60B.
79. Bernier, supra note 77.
80. See In re Contest for Governor, 443 N.E.2d 170 (Ill. 1983); People ex rel. Rice v. Cunningham, 336 N.E.2d 1 (Ill. 1975).
81. Bernier, supra note 77.
82. See, e.g., Di Antonio v. Northampton Accomak Mem’l Hosp., 628 F.2d 287 (4th Cir. 1980); Woods, supra note 69; Reese v. Rankin Fite Mem’l Hosp., 403 So.2d 158 (Ala. 1981); Eastin, supra note 69; Austin v. Litvak, 682 P.2d 41 (Colo. 1984); Lacy v. Green, 428 A.2d 1171 (Del. Super. 1981); Pinillos v. Cedars of Lebanon Hosp. Corp., 403 So.2d 365 (Fla. 1981); Carter supra note 69; LePelley v. Grefenson, 614 P.2d 962 (Idaho 1980); Anderson, supra note 68; Rudolph v. Iowa Methodist Med. Ctr., 293 N.W.2d 550 (Iowa 1980); Stephens v. Snyder Clinic Assn., 631 P.2d 222 (Kan. 1981); Everett v. Goldman, supra note 69; Johnson, supra note 69; Paro v. Longwood Hosp., supra note 69; Linder v. Smith, supra note 69; Suchit v. Baxt, 423 A.2d 670 (N.J. Super. 1980); Prendergast, supra note 63; Comiskey, supra note 69; Beatty v. Akron City Hosp., 424 N.E.2d 586 (Ohio 1981); Parker, supra note 69; State ex. rel. Strykowski, supra note 69.
83. See Austin supra note 84. See also Di Antonio, supra note 82; Woods, supra note 69; Reese, supra note 82; Eastin, supra note 69; Lacy, supra note 82; Pinillos, supra note 82; Carter supra note 69; LePelley, supra note 82; Anderson, supra note 68; Rudolph, supra note 82; Stephens, supra note 82; Everett, supra note 69; Johnson, supra note 63; Paro, supra note 69; Linder, supra note 70; Suchit, supra note 82; Prendergast, supra note 63; Comiskey, supra note 69; Beatty, supra note 82; Parker, supra note 69; State ex. rel. Strykowski, supra note 69.
84. See Dobbs DB. 2 Law of Remedies § 8.5(5) (2d ed. 1993); Harper & James, 2 The Law of Torts § 25.2 (1956).
85. See Henderson RC. Designing a Responsible Periodic-Payment System for Tort Awards: Arizona Enacts a Prototype, 32 Ariz. L. Rev. 21 (1990).
86. See American Bank & Trust Co. v. Community Hosp. of Los Gatos-Saratoga Inc., 683 P.2d 670 (Cal. 1984).
87. See id.; Henderson RC. Periodic Payment of Bodily Injury Awards, 66 A.B.A. J. 734 (1980).
88. See Ala. Code § 6-5-486; Alaska Stat. § 09.55.548; Ark Stat. Ann. § 34-2619; Cal. Civ. Proc. § 667.7; Del. Code Ann. tit. 18 § 6864; Fla. Stat. Ann. 768.51; Kan. Stat. Ann. § 60-2609; N.M. Stat. Ann. § 41-5-7; Or. Rev. Stat. § 752.070; S.C. Ann. Code § 38-59-180; Wash. Rev. Code Ann. § 4.56.240; Wis. Stat. §§ 655.015, 655-27(5)(d).
89. 683 P.2d 670 (Cal. 1984).
90. 887 P.2d 541 (Ariz. 1994).
91. Carson, supra note 65.
92. Salinero M. "Doctors Begin Fight to Limit Jury Payouts." Tampa Tribune. Nov. 21, 2002, at 1.
93. Johnson, supra note 63.
94. 695 P.2d 164 (Cal. 1985).
95. See, e.g., Helfend v. Southern Cal. Rapid Transit Dist., 465 P.2d 61 (Cal. 1970).
96. See Fein, supra note 62; Barme v. Wood, 689 P.2d 446 (Cal. 1984).
97. See Alaska Stat. § 09.55.548; Ariz. Rev. Stat. Ann. § 12-565; Cal. Civ. Code § 3333.1; Colo. Rev. Stat. § 13-21-111.6; Del. Code Ann. tit. 18 6862; Fla. Stat. Ann. § 768.50; Iowa Code Ann. § 147.136; Ga. Code Ann. § 51-12-1; Ky. Rev. Stat. § 411.188; Neb. Rev. Stat. § 44-2819; N.Y. C.P.L.R. § 4545(a); S.C. Code Ann. § 21-3-12; Tenn. Code Ann. § 29-26-119; Utah Code Ann. § 78-14-4.5; Wash. Rev. Code 7.70.080.
98. See Eastin, supra note 69; Fein, supra note 62; Pinillos, supra note 82; Bernier, supra note 77; Rudolph, supra note 82. But see Doran v. Priddy, 534 F. Supp. 30 (D. Kan. 1981); Graley v. Satayathan (Ohio Ct. Com. Pleas 1976).
99. See Sloan FA, et al. Effects of tort reforms on the value of closed medical malpractice claims: A microanalysis. J Health Pol Pol & Law 1989;14:663.
100. See Zukerman, et al., Effects of Tort Reforms and Other Factors on Medical Malpractice Insurance Premiums, 27 Inquiry 167 (1990).
101. See Thurston SS. Medical malpractice dispute resolution in Maryland. Courts, Health Science & the Law 1990;1:81.
102. See Zukerman, supra note 100.
103. See Morlock L. Nonbinding Arbitration of Medical Malpractice Claims: A Decade of Experience with Pretrial Screening Panels in Maryland (1988); Applied Social Research Inc. Evaluation: State of Michigan Medical Malpractice Arbitration Program — Summary Report 5 (Oct. 1984); Heintz DH. Medical malpractice arbitration: A viable alternative. Arbitration J 1979;34:12.
104. See Appleby J, Rubin R. "New Jersey Doctors Begin Protest." USA Today Feb. 3, 2003, at 17A.
105. Americans for Insurance Reform, supra note 21.
106. See id.
107. See Bull JMR. "State Legislature Gets Cracking; Malpractice, Reform of Property Tax Loom as large Issues" Pittsburgh Post-Gazette. Jan. 27, 2003, at A-10; Worden, supra note 37; Medical deterioration, supra note 20.
108. See Romano, supra note 17.
109. See Boulard, supra note 1; Nevada: Guinn signs medical malpractice reform bill. American Health Line Aug. 8, 2002; Romano, supra note 17; Waging uphill battle, supra note 22; Salinero, supra note 92; Wechsler, supra note 41; Nevada: Petition could challenge new medical liability laws. American Health Line Oct. 17, 2002.
110. See id.
111. See id.
112. See Thompson’s town hall meeting focuses on medical malpractice. American Health Line Dec. 18, 2002.
113. See Medical Malpractice and Litigation Reform Act, H.R. 1116, 108th Cong. (2003); Medical Malpractice and Insurance Reform Act of 2003, H.R. 1219, 108th Cong. (2003); Medical Malpractice Reform Act of 2003, H.R. 1124, 108th Cong. (2003); Medical Liability Insurance Crisis Response Act of 2003, H.R. 1158, 108th Cong. (2003); Federal Medical Malpractice Insurance Stabilization Act of 2003, H.R. 485, 108th Cong. (2003); Physician Relief Act of 2003, H.R. 1178, 108th Cong. (2003); Emergency Malpractice Liability Insurance Commission (EMLIC) Act, H.R. 446, 108th Cong. (2003); Improved Medical Malpractice Information Reporting and Competition Act of 2003, H.R. 447, 108th Cong. (2003); Medical Malpractice Insurance Antitrust Act of 2003, S. 352, 108th Cong. (2003); Freedom From Unnecessary Litigation Act of 2003, H.R. 1249, 108th Cong. (2003); Common Sense Medical Malpractice Reform Act of 2003, H.R. 321, 108th Cong. (2003); H.R. 1044, 108th Cong (2003); S. 1055, 108th Cong. (2003).
114. H.R. 321 § 3.
115. H.R. 1178 § 3(b)(2).
116. H.R. 1158 § 303(a).
117. H.R. 1219 § 103.
118. H.R. § 102 (a).
119. H.R. 1158.
120. H.R. 1158 § 402.
121. H.R. 1116 § 201.
122. H.R. 1219 § 106.
123. H.R. 1158 § 403(a).
124. H.R. 1178.
125. H.R. 1158 § 404.
The skyrocketing cost of medical malpractice insurance has affected physicians throughout the nation. Many emergency physicians (EPs) have seen the costs of insurance nearly double in the past three years. Some insurers have deemed EPs with three claims against them in a five-year period as uninsurable. This months ED Legal Letter will provide insight into the malpractice crisis by looking at the cause, effect, and potential solutions to the problem. Furthermore, it will review why past legislative attempts to remedy previous malpractice crises have failed.
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