Medical Malpractice Reform

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					Medical Malpractice Reform

Country: USA
Partner Institute: The Commonwealth Fund, New York
Survey no: (1)2003
Author(s):
Health Policy Issues: Quality Improvement, Others, Remuneration / Payment
Current Process Stages

          Idea            Pilot       Policy Paper     Legislation    Implementation    Evaluation        Change


Featured in half-yearly report: Health Policy Developments Issue 2




1. Abstract

In a speech in July 2002, the American President called for Medical Malpractice Reform. Specifically, Mr. Bush has
proposed that legislation be enacted to cap non-economic damages in malpractice suits at $250,000 and limit the
number of suits that can be filed.




2. Purpose of health policy or idea

Blaming excessive jury awards and "frivolous lawsuits" for rising malpractice insurance premiums, President Bush has
called for medical malpractice reform. In a speech, July 25, 2002 in North Carolina, the President charged that
malpractice awards drive up the cost of government health care programs by more than $25 billion a year and argued
that the current system forced too many doctors to practice defensive medicine.

Specifically, Mr. Bush has proposed that legislation be enacted to cap non-economic damages in malpractice suits at
$250,000 and limit the number of suits that can be filed. His proposal would limit non-economic damages, such as
those from pain and suffering, to $250,000; limit punitive damages to "reasonable" amounts; require payments of
judgements over time rather than in a lump sum: limit the amount of time a patient has to file suit; limit the amount of
judgments that doctors must pay if other parties, such as an insurer, made payments to compensate for losses; and
link defendants' share of payments to their degree of culpability.

The context for this proposal is soaring malpractice premiums and concern about runaway jury awards. The past three
years have seen a spike in malpractice premiums- malpractice insurance rose by an average of 20 percent in 2002,
with some states experiencing rate increases of 45-70 percent. (Recent data from the National Center for State
Courts, showed that in an analysis of 14 states, there has been no change in the volume of malpractice claims in the
last five years). According to the National Practitioner Data Bank, the size of jury awards has also been more or less
steady since 1991. The mean payout in 2001 was $135,941. Over 10 years, malpractice payouts have grown an
average of 6.2 percent a year, which is comparable to the rate of medical inflation (6.7 percent between 1990 and
2001). The impression of an explosion of jaw-dropping awards by juries to medical malpractice victims, follows though
from a doubling of million dollar awards over the last five years, although such awards still represent only 8 percent of
awards. Moreover, some states are finding that a small number of physicians account for the majority of big
malpractice claims.

Group(s) affected:


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Patients would be limited in the amount of damages for which they could sue, particularly for non-economic damages,
which compensate for real, permanent harms, such as blindness, physical disfigurement, loss of fertility, loss of a limb,
loss of a child. Caps on non-economic damages would also disproportionately affect children, women, seniors, and
minorities, who get less for lost wages, i.e. economic damages than white males.

Providers would in theory be protected from skyrocketing increases in medical malpractice premiums, and would not
have to practice defensive medicine "Ÿ doing unnecessary diagnostic tests and procedures for fear of being sued

Trial lawyers would lose under the assumption that fewer lawsuits would be brought and, with potential damages
limited, their opportunity to earn substantial fees from big financial settlements, would be dramatically reduced. The
proposed legislation also restricts attorney's fees on malpractice cases.

Insurance Industry would benefit as its financial risk and potential liability for expensive jury awards would dramatically
decline.




3. Characteristics of this policy

Degree of Innovation                                           traditional                  innovative

Degree of Controversy                                        consensual                     highly controversial

Structural or Systemic Impact                                   marginal                    fundamental

Public Visibility                                               very low                    very high

Transferability                              strongly system-dependent                      system-neutral




4. Political and economic background

Medical malpractice reform is one of the most cyclical health policy issues, gaining minimal attention when premiums
are stable and creating intense debate during crises when doctors' premiums skyrocket. Medical malpractice crises
made national news in the 1970's and 1980's and national attention was drawn to this issue in recent months when
women in the state of Nevada were unable to find obstetrician-gynecologists willing to deliver their babies because of
soaring malpractice premiums, with similar stories making headlines in West Virginia, Pennsylvania, Florida,
Mississippi, and other states. The situation was further dramatized in February when most of New Jersey's 20,000
doctors staged a work stoppage to protest rising malpractice insurance rates and cancelled elective surgeries and
office visits for a week.



In a speech in July 2002 and again in his State of the Union Speech, the President called for Medical Malpractice
Reform.




5. Purpose and process analysis



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          Idea            Pilot        Policy Paper    Legislation    Implementation    Evaluation        Change



Origins of health policy idea
Who were or are the driving forces behind this idea and why?
Medical malpractice awards have been a perennial issue in the health care debate.

Is it an entirely new approach, does it follow earlier discussions, has it been borrowed from elsewhere?
President Bush's plans for medical malpractice reform are modelled on a 1975 California law (MICRA), which
supporters say has kept that state's premium's below the national average. However, an analysis conducted by the
Foundation for Taxpayer and Consumer Rights found that malpractice premiums in the State increased 175 percent
between 1975 and 1985, but dropped 8 percent between 1988 and 2000 after the insurance laws were altered.

It should be noted that the limit of $250,000 imposed in California (MICRA) was not indexed to inflation and currently
equals about $75,000 in 1975 dollars.

Is it aimed at amending / updating a prior enactment ("reforming the reform"), and why would it have been passed?
Please explain.

It would be aimed at reforming current tort law.

Who were the main actors?
The President and the Administration

Are there small-scale examples for this innovation (e.g. at local level, within a single institution, as pilot
projects)?The most frequently cite example is California, which enacted the Medical Injury Compensation Reform Act
(MICRA) in 1975, capping jury awards for noneconomic damages at $250,000. Nonetheless, medical malpractice
insurance premiums continued to increase for the decade that followed, and with premiums rising 26 percent annually
in 1986, California was again in a crisis. In response, California enacted Proposition 103, the strongest insurance rate
regulation in the nation in 1998, along with a rate freeze and a rate rollback. After three years of insurance regulation
under Proposition 103, malpractice rates fell by more than 20 percent.

Following MICRA's passage, however, 20 other states instituted California-like caps on payouts to victims. Taken as a
whole, capped states raised premiums an average of 12.7 percent, while states without them saw premiums rise 20.4
percent. In 2001, the gap was slimmer, capped states' premium rose 5.8 percent compared with 9.6 percent in
jurisdictions without them. The year before, premiums actually rose more in states with caps (3.2%) versus those
without (2.7%), which was also true in 1999, (2.12%vs .54%).

The proposal put forth by President Bush hinges on the premise that caps on awards to patients will be effective in
keeping doctors insurance premium down. The evidence shows, however, that caps might moderate premium hikes
but not to the extent that tort reformers claim.



Stakeholder positions
Who opposes / opposed this idea or policy and why?

    • Democrats oppose the policy saying that it will unfairly prevent innocent victims of medical malpractice from
      seeking legal recourse and that patients will not be fairly compensated under the caps on noneconomic pain
      and suffering. Also, they believe the potential for uncapped malpractice awards may serve as a deterrent for
      providers, making hospitals more diligent about doctors who practice poor quality care. They also argue that
      there is no evidence that the bill will reduce malpractice premiums, and that in order to address the rising costs
      of medical malpractice insurance, efforts need to focus on reforming the insurance industry.

    • Democrats have introduced legislation in the House to establish a Commission on Medical Malpractice Liability
      to examine the issues. Congressman Pallone has introduced legislation (HR 485) to stabilize medical

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      malpractice premiums, and Senator Leahy has introduced the Medical Malpractice Insurance Antitrust Act ( S
      352) to prevent commercial insurers from anti-competitive behavior.

    • It should be noted as well, that the American Trial Lawyers Association, which strongly oppose this bill, are
      major contributors to the Democratic party.

    • Opponents also believe that rising malpractice premium rates are a result of the insurance industry premium
      cycle, changes in market structure and competition (firms underwriting nearly 15 percent of the malprcatice
      market have exited the business in recent years), and insurance companies offsetting lower returns on their
      investments in the capital markets

    • AARP, which represents over 30 million Americans has come out as opposed to any reform that would impair
      the rights of injured patients to full and just compensation for injuries from inappropriate medical care

    • The American Trial Lawyers Association is strongly opposed to this proposed policy. Trial lawyers said that the
      plan would do little to lower premiums and make it harder for patients with legitimate cases to sue.

    • The public's reactions are mixed. A recent Wall Street Journal survey showed that half (48%) of those polled
      favored a cap on medical liability awards, 26 percent oppose it and 25 percent say they don't know. Almost
      two-thirds (62%) favour having medical malpractice cases tried in special courts presided over by medical
      professional sand other experts, while only 17 percent oppose this idea and 21 percent answered "don't know".

Has the idea or policy been accepted by relevant actors; or was it abandoned?

    • The American Medical Association, a trade association for physicians, strongly supports this proposal. The
      AMA has designated medical malpractice reform as its number one priority.

    • The American Association of Health Plans and Federation of American Hospitals also strongly supported
      President Bush's proposal for medical malpractice reform.

    • The American Insurance Association, an industry trade group, has also enthusiastically supported the bill.

Was a policy paper formulated?
The Administration would have developed a policy paper as its position was being defined.

Who held the leadership role in bringing forward this idea or policy?
President Bush and the White House

Were there alliances between stakeholders in support of the idea or new policy?
There are strong alliances on this issue between the Republicans, physicians, hospitals, the health plans, and the
insurers on this issue (in favour)

Who mediated conflicts of interest between stakeholders?
The debate is currently in progress.



Influences in policy making and legislation
Did or will the development of this idea or health policy lead to a formal piece of legislation?
In the House, legislation (HR 4600), the Help, Efficient, Accessible, Low Cost, Timely Health Act (H.E.A.L.T.H.)
mirroring the White House proposal, was introduced by Congressman James C. Greenwood, Republican of
Pennsylvania in 2002. Its aim was to "improve patient access to health care services and provide improved medical
care by reducing the excessive burden the liability system places on the health care delivery system." A key provision
was capping jury awards for non-economic damages at $250,000.

In how far has the original proposal been changed or modified in the process?
The Greenwood bill (HR 4600) was passed by the House of Representatives in 2002, but the Senate did not consider


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it. Senate Democrats had threatened to fight the proposal with a filibuster.

In January 2003, Representative Greenwood introduced the Health Act of 2003 (HR 5) with the provisions that
President Bush proposed. In February, it was the subject of heated debate in the House Energy and Commerce
Health Subcommittee, with Republican committee members taking the position that limiting jury awards would bring
down spiralling malpractice premiums and Democrats arguing that capping lawsuit awards would not guarantee lower
malpractice insurance premiums and would instead, prevent people from being properly compensated.

In March, the House Energy and Commerce Committee approved the bill introduced by Congressman Greenwood
and supported by the Bush administration (HR 5), which would establish a $250,000 cap on damages for pain and
suffering in medical malpractice cases, set limits on contingency fees and the number of years a plaintiff has to sue a
provider, allocate damages in proportion to a party's degree of fault, and limit punitive damages to the greater of two
times economic damages or $250,000. There would be no limits on medical or funeral expenses under the bill. It
would, however, also protect pharmaceutical and medical device manufacturers from punitive damages if the product
involved had been approved by the Food and Drug Administration. Its protections also apply to HMOs and insurers.

On March 13, it went to the House of Representatives Floor for a vote and passed by a vote of 229 to 196. It may face
challenges in the Senate where some members from both parties have called for an exemption for "egregious" cases
of malpractice.

Legislative outcome



Adoption and implementation
Need to check Frist-Breaux-Jeffords Bill and add. Not at that stage yet.



Monitoring and evaluation
Not at that stage yet.




6. Expected outcome

Looking at the intended objectives and effects of the health policy assessed: Will the policy achieve its
objectives? It might moderate malpractice insurance premiums but without reform of the health insurance industry,
the problem will not be resolved.

What might be its unexpected or undesirable effects?Patients with legitimate cases of medical injury would have
more difficulty in bringing suits, and those who suffer a lifetime of damage, would receive relatively small
compensation.

What are or will be the effects on costs, quality, equity etc.?Capping malpractice awards is likely to reduce some
costs. In states with noneconomic caps, awards are 25 percent lower than states without caps, and similarly premiums
trends have been lower. However, the insurance industry offers no guarantee that premiums will be reduced and there
is a long lag time before any gain from the cap on awards would be enjoyed, given that it takes years for malpractice
suits to be settled.

As such, the evidence shows that modest reforms of the tort system improve the profitability of the malpractice
insurance carriers and reduce awards and premiums. This however does not improve the quality of care, which is the
real underlying issue. Deterrence is the primary rationale for tort law and the evidence that malpractice litigation deters
negligence is weak.



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The proposed reform of malpractice law would offer a stop gap measure only that would affect costs but not likely do
anything to improve quality of care. Instead, there remains a pressing need to focus on the causes of medical errors,
address and reduce the frequency of medical errors, improve risk management, identify poorly performing providers,
and encourage transparency and reporting of medical errors so that the health care system can learn from experience
and improve quality overall.




Suggested citation for this online article
. "Medical Malpractice Reform". Health Policy Monitor, 01. Available at
http://www.hpm.org/survey/us/c1/4




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