The End of Medical Malpractice Lawsuits?

Is Legislation to End Malpractice Lawsuits Realistic?

Hal Dasinger, JD

|July 30, 2015

Editor's Note:
A recent Medscape article contended that controversial legislation now wending its way through the Georgia and Florida legislatures would, if enacted, put an end to malpractice litigation in those states and could serve as a template for other states to follow suit, replacing the current medical tort system with an administrative system for redress.

The patient, via a patient advocate, would appeal to the system to investigate an injury. The full record would be reviewed by a rotating panel of relevant medical experts. If the panel agreed that the injury was avoidable, the case would be referred to a compensation committee to make payment.

The patient would not need a lawyer, although he or she could have one to ensure that due process was followed. Physicians would not need malpractice insurance because they could not be sued. Instead, they would pay an annual contribution to administer to the program—rates, the article contended, that would be significantly below the current market rate for professional liability premiums. In response, Hal Dasinger, JD, Vice President of Government Relations at the Napa, California-based Doctors Company, the nation's largest physician-owned medical malpractice insurer, offers the following counterpoint.

An End to Malpractice Lawsuits?

In recent years, physicians, other health care providers, and lawmakers across the United States have been addressed by keynote speakers, pitched to, surveyed, and lobbied by people promoting a proposal that would replace civil litigation for claims of medical professional liability with an administrative process for compensating patients for avoidable injuries.

The proponents claim that their administrative system has several advantages over civil litigation. The most striking of these claims, and the source of much of the initial physician interest in the idea, is the promise that physicians will no longer be sued. Next, the proponents claim that payments to patients will not be reported to the National Practitioner Data Bank (NPDB). Finally, proponents say that far more claims would be paid to patients who have suffered genuine harm, but who aren't able obtain legal representation under the current tort system because their cases are too insignificant to be potentially profitable—yet system costs would not exceed current levels.

That last promise is the key to understanding this proposal, and also its most fundamental flaw. Proponents insist that because the process is nonadversarial, defensive medicine—treatment designed primarily to avoid liability rather than to improve the patient's health—would all but disappear, producing savings on overall healthcare spending.

Even if we accept these proponents' estimate of the cost of defensive medicine, which Gallup reports is 1 in 4 health care dollars, or about $650 billion annually^[1]—an estimate that has been widely criticized as excessive—there is no assurance that this cost will decrease.

Under the plan, a panel of experts would review each claim to determine whether an injury was avoidable. Plan administrators would have discretion in reporting providers to their state medical boards. This assignment of causation and culpability is not conceptually different from finding fault. There may be fewer depositions, and certainly fewer opportunities for physicians to defend their actions, but the likelihood is that defensive medicine will continue.

Will the Proposed System Actually Cost More?

Nor is the cost of defensive medicine the only problem with the promise to reduce costs. The proposal promises to compensate far more patients than currently receive settlements or jury awards through the courts, and to do so according to a payment schedule using NPDB data for typical payments for particular types of injuries. More payments at current average-per-claim values can only result in far more money paid out. This inevitable increase in costs is addressed in the versions of the bill introduced so far in a manner unlikely to satisfy anyone trying to calculate costs and benefits: The proposed statutes explicitly prohibit compensation from exceeding current medical professional liability costs.

To repeat: Simple math says the new system will cost more, but the proposed law says it won't.

You don't have to be an actuary to spot the problem with that legislative requirement. As it happens, actuaries consulted about the proposal agree that costs will inevitably rise. The proponents' own study estimated a 13% increase from the bill introduced in Georgia.^[2]Others put that figure from 35% to over 100%. Compensation for insignificant injuries would rise an estimated 1730%.^[3]

The most recent versions of the bills seeking to install this process rely on physician surcharges to pay for patient compensation, costs of handling the claims, and presumably a fee for the entity providing the administrative support. If any state enacts this proposal, when the actual costs exceed the stated estimates and swamp the available funds, some combination of undesirable effects will follow soon after: Physician surcharges will increase, payments to patients will decrease, or the criteria for compensation will tighten—or perhaps all of these will occur.

In short, the benefits promised will disappear, but the shortcomings of the administrative process will remain. The state will have to subsidize the fund or scrap the program altogether, and taxpayers, physicians, and patients will be left picking up the pieces.

Will You Avoid Being Reported to the NPDB?

The pronouncement that physicians in the system will not be reported to the NPDB is no more credible. No state has adopted this plan, so no definitive opinion is available. However, recent action by the Department of Health and Human Services (HHS) regarding new legislation in Oregon and Massachusetts is instructive.

Both states enacted alternative programs for dealing with medical injury, although neither went as far as the administrative model proposed in Georgia, Florida, and elsewhere. Both states sought rulings from HHS that payments under their alternative models be exempt from reporting to NPDB. Both were instructed that payments are reportable. And before any objection is raised that the situations aren't comparable, take a look at the first paragraph of the HHS decision^[4]:

Although the Massachusetts and Oregon medical malpractice reform models are the only two existing models of their type, based in legislation, other states (including Florida and Georgia) are examining similar models for future implementation.

Much of the momentum behind these proposals has been generated by promising physicians that they will never be sued. Unfortunately, this promise will prove as impossible to keep as the others. The right to jury trial for medical injury is a feature of common law; is guaranteed by many state constitutions; and has been clearly enunciated by the state supreme courts in Georgia, Illinois, Missouri, Oregon, and a multitude of other states. Substituting administrative review as an exclusive remedy for medical injury will not stand up to the criteria applied even to proven, effective reforms. The former Georgia attorney general wrote an opinion^[5] to that effect, and no credible counter has been offered by the proponents.

Too Good to Be True?

No one will argue that civil litigation is an efficient way to compensate legitimate claimants for their injuries. But the proposed substitute doesn't stand up to legal scrutiny, actuarial analysis, or logical examination. Legislation seeking to establish this administrative substitute has been introduced in a number of states, usually under the guise of tort reform. So far, none of these bills has been successful.

Advocates for patients and for physicians should be wary of any plan promising to both increase payments and decrease costs. If something seems too good to be true, it probably is. In the case of this particular proposal, both patients and providers stand to lose when the plan inevitably fails to keep the promises made by its proponents.