The Medical Malpractice Industry Actually Protects Consumers
A Cato post by Shirley Svorny as a preamble to a paper posted (and free) at the link:
Supporters of capping court awards for medical malpractice argue that caps will make health care more affordable. It may not be that simple. First, caps on awards may result in some patients not receiving adequate compensation for injuries they suffer as a result of physician negligence. Second, because caps limit physician liability, they can also mute incentives for physicians to reduce the risk of negligent injuries. Supporters of caps counter that this deterrent function of medical malpractice liability is not working anyway--that awards do not track actual damages, and medical malpractice insurance carriers do not translate the threat of liability into incentives that reward high-quality care or penalize errant physicians.This paper reviews an existing body of work that shows that medical malpractice awards do track actual damages. Furthermore, this paper provides evidence that medical malpractice insurance carriers use various tools to reduce the risk of patient injury, including experience rating of physicians' malpractice premiums. High-risk physicians face higher malpractice insurance premiums than their less-risky peers. In addition, carriers offer other incentives for physicians to reduce the risk of negligent care: they disseminate information to guide riskmanagement efforts, oversee high-risk practitioners, and monitor providers who offer new procedures where experience is not sufficient to assess risk. On rare occasions, carriers will even deny coverage, which cuts the physician off from an affiliation with most hospitals and health maintenance organizations, and precludes practice entirely in some states.
If the medical malpractice liability insurance industry does indeed protect consumers, then policies that reduce liability or shield physicians from oversight by carriers may harm consumers. In particular, caps on damages would reduce physicians' and carriers' incentives to keep track of and reduce practice risk. Laws that shield government- employed physicians from malpractice liability eliminate insurance company oversight of physicians working for government agencies. State-run insurance pools that insure risky practitioners at subsidized prices protect substandard physicians from the discipline that medical malpractice insurers otherwise would impose.
The medical malpractice industry will *protect* consumers right out of getting high risk medical care at all.
Try finding an obstetrician that will handle a high risk pregnancy outside of a major metropolitan area, and then you will find out that doctors don't magically appear to try and fix what is wrong with you, when the chances of a bad outcome exceed the possibility of a good one.
Until the system can force doctors to treat high risk patients, doctors in high risk fields will flee those states without damage caps, for locations where their malpractice insurance premiums will allow them to actually make a living.
Isab at October 15, 2014 2:42 AM
About "high risk" patients:
Just where does anyone get the idea that they have a right to be treated?
This devolves to my old question about health care: What makes you think you can command the resources of others to your benefit?
And fits my observation of this fact: You do not get to say what treatment you get unless you are the one paying for it.
Radwaste at October 15, 2014 3:42 AM
Do awards track actual *damages*, or do they track actual *bad outcomes*? Because those two are not the same. An OB can do everything exactly right and end up with a dead baby. Last I checked, the prevailing wisdom was that malpractice awards tracked *outcomes* closely.
I admit that I'm biased here because my OB -- who I credit with coming through in a big way to make my high-risk pregnancy and premature birth of multiples as least-awful as it could possibly be -- stopped delivering babies as of the first of this year. She loves babies and loves delivering them -- the cost of malpractice insurance was a significant factor in her decision. Which is what airy reassurances that efforts to cap malpractice awards would harm consumers fail to take into account -- the weight of malpractice insurance/awards/awareness is ALREADY affecting consumers.
Oh, and one more thing to throw in here: If you're trying to roll out a giant new plan expanding coverage and trying to cut costs to keep the thing semi-manageable, you're going to be pressuring doctors to reduce the number of tests and interventions. Well, tests and interventions are a major tool in dealing with potential malpractice liability. A head-on collision is being set up here. People whine about C-section rates...well, guess what? A failure to perform a "timely" C-section is a major disadvantage in a malpractice case. There's a reason that most government-run health systems limit malpractice -- the two are not compatible. I don't like Obamacare, but it appears to be a reality for now, and at some point those who called for it are going to have to deal with the incompatibility of the U.S. malpractice system with a big government-run program.
Try finding an obstetrician that will handle a high risk pregnancy outside of a major metropolitan area, and then you will find out that doctors don't magically appear to try and fix what is wrong with you, when the chances of a bad outcome exceed the possibility of a good one.
Yep. I will never forget my frantic phone calls with a friend living in a small town whose pregnancy had gone south who was getting TERRIBLE medical oversight. When she and her spouse finally hired an ambulance to take them to a city with a major medical center a couple of hours away, they were told the same thing. Their child is thriving today -- but they had resources that many people do not.
marion at October 15, 2014 5:40 AM
"Do awards track actual *damages*, or do they track actual *bad outcomes*? "
Many points to be made here, but Marion brings up one of the best. In a malpractice case, a bad outcome is more or less prima facie evidence of malpractice. The insurance company "tools" that the article author speaks of consist mainly of case management -- refusing to take high-risk cases, and ordering "unnecessary" tests for others. For the non-wealthy, the result is that high-risk cases have to turn to public agencies for their care. Those public agencies are, in most cases, legally shielded from malpractice claims. So tell me again how well the malpractice system "protects" consumers of these services?
People who deal with lawsuits involving specialized knowledge know that the outcome of a jury trial in these cases is almost completely random, and rarely has any connection to the facts of the case. (Patent lawsuits have the same problem.) Accordingly, the plaintiff has an opening to engage in trial by extortion -- threaten the defendant with legal actions for which the defendant will incur a high cost in legal services. There's also the threat to reputation that the defendant incurs; going to trial usually causes harm to the defendant's reputation regardless of the trial outcome, while the plaintiff, who is usually not a public figure, faces no such concern. The vast majority of cases are settled without going to trial based on the concerns of cost of defense, the risk of trial outcome randomness, and threat to reptuation; the actual facts of the case play little or no role in these settlement calculations. The author's statistics probably don't include any of this.
It doesn't help that most judges are lawyers and are motivated to help their fellow plaintiff and defense lawyers make money, and summary dismissal of a case does not aid that cause, so even the most ridiculous cases go forward. My shining example of this sort of thing is the woman who successfully sued a hospital and won a nine-figure judgement over a claim that a CAT scan had damaged her psychic powers. In a rational system, the defense would have been required to present at a show-cause hearing the moment the action was filed; it would have been summarility dismissed and the plaintiff firm's bank account would be liberated of a few tens of thousands of dollars after a finding of contempt for wasting the court's time.
And then there is the opposite problem: cases in which actual malpractice occurs, but good fortune prevents a bad outcome. The malpractice system largely ignores these cases. If the object were to actually correct the problem, rather than to just extort money, these cases would be addressed. We've all seen the recent studies looking at rates of medical errors. The aviation industry has something called the Aviation Safety Reporting System (ASRS), in which pilots can anonymously fess up to their mistakes. NASA compiles the reports and does statistical analysis on them, looking for trends and making recommendations for improvements that reduce the chances of errors. By law, ASRS reports cannot be subpoenaed or used as evidence in a lawsuit. That's a big reason why it works, and ASRS reports have been very beneficial to the industry. The medical industry badly needs something like ASRS, but the law industry will fight to its dying breath to prevent that from happening.
Cousin Dave at October 15, 2014 6:57 AM
You don't need to cap damages. You need to make one simple change:
Replace a "jury of one's peers" with an expert jury of people who know something about medicine, evidence and causality.
The system right now relies on attorney-peddled pseudo-science and the appeal to emotion. Why? Because it works in a society that has no grasp of science.
AB at October 15, 2014 7:55 AM
Re: One simple change. Add a second simple change...loser pays.
FBMc at October 15, 2014 9:13 AM
" First, caps on awards may result in some patients not receiving adequate compensation for injuries they suffer as a result of physician negligence."
AFAIK, most of these caps are on punitive damages. Actual damages and future healthcare costs are not capped.
Mike at October 15, 2014 1:18 PM
I came here to say the same thing as Mike. The issue is awards for non-economic damages. As CD notes, such awards are like rolling dice, completely random. Even a few ginormous awards can scare medical providers out of an area.
Ben at October 15, 2014 2:53 PM
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