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					Reforming Medical Liability
   Conventional Approaches and
        Randall R. Bovbjerg, J.D.
              (Bó - berg)
            The Urban Institute †

                                        Standard disclaimer applies
Bovbjerg # 1
               Who’s Missing?
n   Patients
n   Payers

                                Bovbjerg # 2
          “Road Map” of Talk

n   A bit of history
n   Problems today: insurance “crisis,” safety
n   Causes and implications
n   Conventional solutions, mainly tort reform
n   More fundamental changes to improve
    compensation and safety

                                            Bovbjerg # 3
                 A Bit of History
n   Series of crises that have changed industry
    n   Two lesser known crises in 50s & 60s: rising
        claims, then better rating, medical society plans
    n   First national crisis in mid-70s: higher claims,
        availability problems, mutuals enter, tort reform
    n   Second in mid-80s: higher claims, affordability,
        other lines too, shift to claims-made, tort reform
    n   Third from Y2K: described below
n   Regulation by states ― solvency & rates
    n   exception: Federal Risk Retention Act ‘81, ‘86.

                                                       Bovbjerg # 4
         Latest Insurance Crisis

n   Insurer withdrawal, retrenchment
n   Price increases and selective underwriting;
    varies by state
n   Big for some MD’s, can’t pass through
n   Limited access problems ― high-risk
    providers in high-risk regions, perhaps long
    -term shifts

                                          Bovbjerg # 5
Trends in Physician Premiums

       Source: CBO analysis of Med Liabil Mon surveys

                                                        Bovbjerg # 6
        Factors Underlying Rise

n   Lawyers say it’s all insurance cycle,
    interest rates and insurer misbehavior
n   Doctors and insurers agree there’s
    cycle, but
    n trend in claims payouts went up in mid-90s
    n in some states, claims up

    n reinsurance up

n   Both partly right, doctors/insurers more
                                            Bovbjerg # 7
       Crises: Cycles & Costs

      Superimposed price fluctuation from competitive cycle


       Underlying trend in “true” claims and other costs


                                                              Bovbjerg # 8
        Problems & Implications
n   Main cost of malpractice insurance is
    malpractice claims [Duh]
n   Interest earnings have effect because
    they’re a negative cost but don’t drive
n   Crisis seems to be abating, not “normalcy”
n   Big differences across States, even within

                                         Bovbjerg # 9
$ billions
               National Malpractice Costs



    Source: Tillinghast (2004)

                                              Bovbjerg # 10
            Potential Solutions
n   Today’s top three: tort reform, tort
    reform, and tort reform
n   Insurance market interventions, other
    near-term reforms
n   Broader reforms ― replace part or all of
    current liability system

                                         Bovbjerg # 11
        Conventional “Tort Reforms”
n   Goals: insurance availability, affordability
n   Legal cutbacks
    n Caps on awards, shorter times to sue, no
      double recovery, cut attorney fees, etc.
    n Work to cut claims costs, also premiums;
      calms insurance markets (somewhat)
    n As “takeaways,” face challenges in court

n   Improve insurance performance
n   Sometimes add quality or safety regulation
                                             Bovbjerg # 12
          Caps Are Centerpiece
n   Design ¾ total award, only “pain and suffering”
n   Doctors ¾ only caps are more than “band-aids”
n   Lawyers ¾ unconstitutional, the worst hurt are
    hurt worst
n   Insurers ¾ like caps, trade premium volume for
    claims predictability
n   Scorecard ¾ in about 1/2 of States, push for

                                             Bovbjerg # 13
           California MICRA & Federal Bills
              “Big three”                                  Other provisions
  n   $250K cap on pain & suffering              n   Periodic payments
  n   Collateral source offset                   n   Sliding scale for attorney fees
  n   Shorter time to sue                        n   Multiple defendants pay by
                                                     percentage of responsibility
                                                 n   CA
MICRA = Medical Injury Compensation Reform Act
of 1975                                               n   90-day notice of claim,
Federal, HR 4600 & successors, administration             physician discipline
                                                 n   Federal
N.B. Federal bill would alter traditional
Federal/State roles in this field                     n   Punitive damage limits,
                                                          drug/device provisions,
                                                          asbestos reforms, class action

                                                                          Bovbjerg # 14
        Insurance Changes ― Public
n   Regulation/antitrust (lawyers’ preferences)
n   State provision of insurance
    n   Insurer of last resort ― Joint Underwriting Association
    n   High-end risk ― Patient Compensation Fund or
n   Some subsidies of physician premiums
    n   Old NY requirement that hospitals provide top layer
    n   PA for catastrophic coverage
    n   MD subsidy ― ended HMOs exemption from premium

                                                        Bovbjerg # 15
        Insurance Changes - Private
n   Alternative Risk Mechanisms (ARMs)
    n   Mainly hospitals, seem more common this crisis
n   Hospital-physician collaboration
    n   May subsidize rates ― stark issues
    n   “Channeling” programs at academic medical centers
n   Broader hospital-physician collaboration could:
    n   Create new risk pool, with positive attributes
    n   Save on investigation, defense
    n   Prompt new mode of cooperation on safety
    n   Multistate arrangements?
                                                         Bovbjerg # 16
                  What’s Missing?

n   More even-handedness, not just takeaways
n   Major underperformance of law’s 3 key goals:
    n   Compensation
    n   Deterrence
    n   Justice
n   These are persistent problems, not crises
n   Hereafter, possible alternatives to CA’s MICRA
    and proposed national mega-MICRA

                                                Bovbjerg # 17
Key Goal 1: Fairer Compensation

                      “It’s a treasure

                                   Bovbjerg # 18
Key Goal 2: Better “Signals”/Safety

                             “It’s from my

                                    Bovbjerg # 19
                Five Alternatives
n   Akin to conventional reform
    n   More even-handed liability reforms
n   Broader reforms, aim at all medical
    n Radical disclosure, full “transparency”
    n Reward (only) disclosure with tort reform

    n Trial run for administrative compensation
    n Create advance lists of “avoidable classes of
                                               Bovbjerg # 20
         1. More Even-Handedness
n   Within current system
n   Improve liability process, not just prospects for
    one party or other
n   Address specific problems
    n   Unpredictable/inaccurate liability determinations
    n   Unpredictable payouts, not just intangibles but also
        future “economic” losses, discount rates

                                                       Bovbjerg # 21
          Elements of Improvement
n   Expert witnesses
    n   Not just “tighter” qualifications (e.g., <20% of
        income) but also availability, objectivity
    n   Evidence-based medicine?
n   Caps other than flat, one-size-fits-all
    n   “Stacked” caps, sliding scales, or ranges
    n   Routinize elements of future loss determinations
n   Improve legal performance
    n   More active judicial management, tracking of data
        (timeliness, costs, awards, lawyers’ performance)

                                                           Bovbjerg # 22
        Why Do More Than This?
n   Tap into new capabilities in “patient safety”
     n Fix the problem, not the blame

     n Regulation, punishment can help, but fall short

     n “Surface” problems, analyze, change processes,
       monitor, repeat
n   Early successes in medicine
n   BUT fear of blame and liability keeps problems
    hidden (and claims, too)

                                                 Bovbjerg # 23
        2. Greater Transparency
n   More “transparent” disclosure to patients
    n Risks before the fact, unanticipated outcomes
    n Remediation, settlement offer

n   Motivations
    n Treat patients ethically
    n Improve trust, cut litigiousness

    n Ease providers’ malpractice fears

    n Facilitate systemic improvements

                                             Bovbjerg # 24
        Greater Transparency, cont’d
n   Many saying this should happen, including AMA,
    Joint Commission on Accreditation of Healthcare
n   Actual practice less clear, many say they do
n   May be good business/liability strategy
    n   Some indication from VA that it’s fiscally feasible
    n   Increasingly becoming conventional wisdom
n   May help safety analysis, too
n   Fears may linger

                                                         Bovbjerg # 25
             3. Early-Offer Reform
n   Defendants promptly offering to pay future out-
    of-pocket losses cannot be sued for pain and
n   Pluses
    n   Rewards fast disclosure, potentially increases ##
    n   Much faster and lower overhead
    n   Assures funds for future needs
    n   No complex changes to law or liability insurance
n   Minuses
    n   May be “gamed” ― only offer for big cases
    n   Lawyers hate, insurers uneasy about ongoing risk

                                                      Bovbjerg # 26
New Systems
              “We would like
              to request a
              change in venue
              to an entirely
              different legal

                     Bovbjerg # 27
                 4. Administrative
n   Cover preventable injuries (not full “no fault”),
    control payouts
n   Similar to Workers Compensation, other nations
n   Pluses
    n   Fiscal incentives for safety practices, data
    n   High speed, low overhead, more consistency
n   Minuses
    n   Hard to legislate as good package ― cf. no-fault auto
    n   Still dependent on claims brought by patients
    n   Not well-grounded in operations of medical entities
                                                       Bovbjerg # 28
               Admin Comp, cont’d
n   Evidence from VA and FL birth-related
    neurological injury compensation
n   Successes:
    n   feasible to run program with one listed event
    n   maintained access to obstetrician liability insurance
    n   cut OBs’ premiums 2.5 times below trend
    n   settles in 1/3 time, 1/5 the administrative costs
    n   comparable compensation, satisfaction
n   But:
    n   too small, some variability in application
    n   political and legal attacks

                                                        Bovbjerg # 29
      5. ACEs & Provider Groups
n   List preventable injuries in advance as
    ACEs (avoidable classes of events)
n   Pay structured damages automatically,
    like disability insurance, without liability
n   Resolve disputes, other cases through
    nonjudicial process

                                             Bovbjerg # 30
                    ACEs, cont’d
n   Implement through private contract
    n   provider-patient contracts
    n   employer/health plan-enrollee contract (akin to Kaiser
        mandated arbitration but with new rules)
    n   potential for choice at time of service, PPO model
n   Nature of oversight an open issue (sanctioned
    by State, in IOM model)
n   Could also be used to promote case-finding,
    resolution under other reforms

                                                       Bovbjerg # 31
               ACEs, cont’d

n   Evidence from research
    n listings are feasible
    n would cover a lot of current system (1/2
      hospital OB cases but 3/4 of $$)
n   Potential is great but unproven; need
    demonstration in willing locale

                                            Bovbjerg # 32
      Need State Experimentation
n   Proposed November 2002 in IOM report to
n   Nonjudicial, patient-centered, safety-friendly
    new injury resolution system
n   Federal liability reinsurance to encourage State
    action (cover very high level of losses)
n   State legislation to try one of two approaches
    (akin to 4 & 5 above)

                                               Bovbjerg # 33
                   Summing Up

n   In short term, be more even handed
n   In medium and long run, try more
    promising approaches, support demos
n   Key standards throughout
    n   Fairer compensation
    n   Better safety

                                     Bovbjerg # 34
               Final Thought
Ideally, caregivers would tell patients and families when
problems occur. Reasonable compensation would
follow for avoidable injuries, and safety management
would constantly be informed by experience. Patients
treated decently are mainly grateful, not vengeful.
Practitioners need to worry more about patient
outcomes than legal outcomes, and systems of
accountability need to make it easier for caregivers and
medical institutions to do the right thing.

                                                   Bovbjerg # 35

                  Bovbjerg # 36
        Sliding Scale in Lieu of Cap
                “Pain & Suffering” Reform

    “Traditional” Flat Cap                             Sliding Scale



Minor                    Severe             Minor                          Severe

                             Level of injury

                                        Source: Author's schematic

                                                                       Bovbjerg # 37

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