Proponents Predict Billions In Savings From Reform, But Opponents Say Changes Aren’t Worth It
Addressing the American Medical Association in June, President Obama got applause for bringing up an issue facing many doctors — the threat of malpractice suits. “I recognize that it will be hard to make some of these changes if doctors feel like they’re constantly looking over their shoulders for fear of lawsuits,” he said. “I understand some doctors may feel the need to order more tests and treatments to avoid being legally vulnerable.”
But he immediately tempered the crowd. “I’m not advocating caps on malpractice awards, which I personally believe can be unfair to people who’ve been wrongfully harmed,” he added, to scattered booing.
Obama’s tightrope walk captured some of the difficulties on both sides of the debate over tort reform, a long-standing debate that has gained new prominence amid the summer’s larger battle over health care reform. It’s almost universally agreed that the threat of lawsuits hangs over doctors and has led to more tests and costs, but wholesale reform of the tort system is viewed by many observers as too big — or too divisive — a step without enough of a payoff.
The Threat Of Suits
Doctors’ insurance premiums have been rising; between 2000 and 2002 alone they went up 15 percent, according to the Congressional Budget Office. Not only that, in a 2006 study published in the New England Journal of Medicine that examined thousands of cases, 40 percent of claims involved no error or were brought by defendants without injuries, largely wasting money and time.
But the real problem isn’t the cost of malpractice claims, it’s the threat of them. A 2005 study from the Journal of the American Medical Association showed more than 90 percent of doctors reporting that they practice “defensive medicine,” ordering extra tests to make sure that they don’t miss anything. Dr. Cecil Wilson, president-elect of the AMA, said most of these tests end up as wasteful spending.
“When you see a patient in the ER that fell and hit their head, you know that most of the time they don’t need a CAT scan,” Wilson said. “But with the threat of going to court, you have to order extra tests.”
The costs of defensive medicine are hard to pin down because it’s difficult to quantify what tests were ordered for what reasons. In 2003, the Department of Health and Human Services pegged it as high as $126 billion per year, including $56.2 billion paid by federal programs, but a 2008 study from the Health Research Institute at PricewaterhouseCoopers put the cost at a whopping $210 billion. However, those estimates were derived from a 1996 Stanford study that both CBO and the General Accounting Office later questioned because of its small sample size; when attempting to expand the study, CBO “found no evidence that restrictions on tort liability reduce medical spending.”
Some contend, however, that defensive medicine won’t be solved by tort reform. Sid Shapiro, a law professor at Wake Forest University, said the tort issue is overblown and that the extra testing may be mostly the result of the fee-for-service system that gives doctors incentives for more tests.
“It’s really hard to sort out whether [doctors] are ordering tests as defensive medicine or to make money,” Shapiro said. “Or there’s the third possibility that they’re just being doctors. In the best of all worlds, wouldn’t we want our doctors to look at us and say, ‘There’s a 1 percent chance this is serious, but I want to rule that out’?”
Is It An Issue?
Even though proponents see billions in savings under tort reform, some say those savings are just a drop in the bucket. The CBO concluded in 2004 that malpractice costs make up less than 2 percent of all health care spending and reforms that reduced malpractice costs 25 to 30 percent would shave off only 0.4 to 0.5 percent of total spending. Additionally, the CBO said that reforms wouldn’t curb rising premiums, which had more to do with rising costs.
Linda Lipsen, senior vice president of public affairs with the American Association for Justice, said those figures mean tort reform just isn’t worth it.
“The current health care debate is focused on two tenets: lowering costs while improving care and covering the uninsured,” Lipsen said. “Changing the legal system will not accomplish these goals and only make it harder for those injured by medical negligence, through no fault of their own, to seek legal recourse.”
However, the CBO estimate did not account for defensive spending, which most proponents say eats up the real costs. In its 2003 report, HHS estimated that, between malpractice costs and defensive medicine, reasonable tort reforms would save the federal government between $28.1 billion and $50.6 billion a year. Projected out over 10 years, that’s far more than CBO-estimated savings for replacing fee-for-service with bundled payments ($18.6 billion), setting up a health IT system ($34 billion) or a tax on the wealthy or insurance companies (about $100 billion).
“Even if it costs 2 cents, why wouldn’t we want to eliminate those costs?” askedDarren McKinney, a spokesman for the American Tort Reform Association. “In the grand scheme of things, it’s not the mother lode of costs, but it’s certainly not insignificant.”
Seeing the rising costs of medical malpractice in 2002, President George W. Bush took a cue from some states and proposed a nationwide cap of $250,000 for non-economic, or “pain and suffering” damages in medical malpractices cases. Although the proposal was blocked by Senate Democrats, it remains a popular solution: Dozens of states currently have some sort of cap on non-economic damages.
In an editorial published last month in newspapers across the country, Texas Gov.Rick Perry (R) described the effect of a cap in his state, writing that 10 new insurance carriers were lured to Texas and doctors’ insurance rates went down by an average of 27 percent.
Yet the cost of health care hasn’t seen a noticeable dip. Critics point to a June New Yorker article that profiled the town of McAllen, Texas, where exorbitant health care costs reign despite tort reform caps. And some say the caps hurt people with legitimate claims, leaving them to fend for themselves and costing the states.
“If you cap damages, there will be people that fall through the cracks. Some people will have more than $1 million or $2 million worth of damages,” Shapiro said. “They become wards of the public. It’s like a balloon — if you push in one direction, it comes out somewhere else. So that’s Medicare, Medicaid and state welfare on the other side.”
Even Wilson, who supports tort reform, said caps wouldn’t be enough of a fix. “The caps are like putting a tourniquet around a bleeding limb,” he said. “It stops the bleeding, but we really need an overhaul of the tort system.”
To that end, a larger proposed solution is establishing medical courts, or a specialized system modeled after bankruptcy and tax courts. Opponents, including the AAJ, say new courts would mean too much bureaucracy and money spent on an issue that doesn’t merit it, especially since few malpractice claims end up in court. But Philip K. Howard, chairman of the nonprofit legal reform organization Common Good, said a medical court system would help streamline malpractice suits.
“It would be designed for speed, with judges making written rulings based on standard of care,” Howard said. “It would build up written law and set standards. Right now, it’s just done on a thumbs-up or thumbs-down from a jury.” Cases take an average of five years to get resolved and about 60 cents of every dollar spent on the malpractice system goes to lawyers or administrative costs, according to a 2004 New England Journal of Medicine study.
Loyalty To The Lobby
While supporters point to savings under tort reform, former Sen. Bill Bradley, D-N.J., said they could do more — get health care passed. In a recent editorial in the New York Times, Bradley wrote that tort reform might be a necessary concession for the Democrats to get a bipartisan bill passed.
But that will be a tough pill for many Democrats to swallow. According to the Center for Responsive Politics, lawyers and law firms were the second highest contributing industry to the Democratic Party during the 2008 election cycle, trailing only candidate committees (by contrast, law firms were the sixth largest contributor to Republicans). McKinney said those stark political realities meant reform wasn’t likely to happen.
“Congress is rather cognizant of how their bread is buttered,” McKinney said. “There’s no larger donor to the Democrats’ campaign than the plaintiffs’ bar. So no one is expecting vigorous tort reform.” Howard agreed, calling the lawyers’ influence a “scandal.”
This sentiment got another, more unlikely, backer at an August town hall in Northern Virginia: former Democratic National Committee Chairman Howard Dean, who said tort reform was too big a battle for the Democrats to fight.
“This bill has enough enemies,” Dean said in response to an audience question about tort reform. “The people who wrote it did not want to take on the trial lawyers in addition to everyone else.”