Pelosi’s Hidden Tort Bomb — an Alternative View

Silver_charles_lgWe once thought Democrats would accept tort reform to win Republicans’ support for national health care legislation.  Now, however, Democrats have dispensed with bipartisanship.  Perhaps they think they can ram health care legislation through without any Republican backing.  Perhaps the price required to obtain even a few Republican votes was too high.  Perhaps Democrats received too much pressure from the trial bar.  Whatever the reason, neither the bill passed by the House nor the bill pending in the Senate contains any of the tort reform provisions Republicans want. To the contrary, the House health care bill is anti-tort reform.

Not only does it reject the entire slate of lawsuit restrictions Representative John Boehner put forward in the Republican alternative to the Democrats’ bill; it contains a provision that will reward states for scrapping damages caps and other tort reforms many already have in place.  This provision flew beneath the radar during the House debate, but the editorial board of the Wall Street Journal condemned it after the vote took place.  Describing the provision as a  “hidden Pelosi tort bomb,” the Journal editors predicted that “[i]f it passes in anything like its current form, we are going to be cleaning up the mess for decades to come.”

Most predictions that the sky will fall are wrong. This one is wrong as well.

Empirical studies of medical malpractice claims–including studies by us of Texas, long notorious as a pro-plaintiff haven–have thoroughly debunked the claim of a “lawsuit” crisis.  Malpractice insurance premiums spiked in Texas beginning in 2000, but there was no preceding or concurrent spike in claims or payouts.  Indeed, from 1988-2005, claims and payouts were either stable or declining, once one controls for population and inflation. (The linked article runs through 2002; we have since updated the analysis through 2005, with similar findings).  Further, as decades of research make clear, the medical malpractice liability climate is stable.  Overall claiming correlates with population, consumption of health care services, lost earnings, and health care costs.“Blockbuster” jury verdicts are rare, and are almost never paid in full.  This is not to suggest the liability system is perfect; it is slow and expensive, and it systematically under-compensates negligently injured plaintiffs.

In this column, we examine the menu of reforms offered by Rep. Boehner and the anti-tort reform provision that made it into the House bill.  We also consider the claims made by the editors of the Wall Street Journal.

The House Republicans’  Bill

Rep. Boehner’s proffered alternative to the House Democrats’ health care bill contains a smorgasbord of lawsuit restrictions intended to apply to all health care lawsuits, including product liability cases involving drugs, medical devices, or biological products.  The proposals include:

  • A 1-year statute of limitations on medical malpractice claims involving patients who are adults, and a somewhat longer and more complicated limitations period for claims involving children.
  • A $250,000 cap on non-economic damages recoverable from all sources for the same injury, with no adjustment for inflation.
  • A cap on punitive damages of $250,000 or two times the plaintiff’s economic damages, whichever is greater, plus a heightened standard of proof and special procedural requirements for punitive damages claims.
  • Requirements that jurors be kept in the dark about the damage caps.
  • Proportionate liability when multiple health care providers were responsible for a patient’s care.
  • Broad judicial discretion to take money from plaintiffs’ lawyers and to give it to plaintiffs.
  • A sliding scale of caps on contingent fees, with a maximum of 15% of any amount recovered in excess of $600,000.
  • Abrogation of the collateral source rule.
  • Periodic payment of future damages in all cases where they exceed $50,000.
  • A set of complicated preemption provisions that, it appears, would have allowed state laws more favorable to health care providers to remain in place.

These proposals, which taken as a whole go well beyond the reforms adopted by any of the 50 states, would profoundly affect medical malpractice litigation. Texas adopted some of these measures in 2003, including a less-restrictive cap on non-economic damages.  We recently published a paper estimating that the Texas non-econ cap would reduce payouts in malpractice cases by about 18% in settled cases and 27% in tried cases, with larger impacts on claimants who are deceased, unemployed, or elderly.  In unpublished work, we find that post-reform, the number of claims and mean and median payouts per claim have dropped significantly.  The Republican proposals will likely have a greater impact across a broader range of lawsuits.

The proposals in Rep. Boehner’s bill are all examples of “dumb” tort reforms.  They would insulate health care providers and product manufacturers from liability without getting anything in return.  Doctors who practice outdated medicine would benefit as much as doctors who carefully follow evidence-based guidelines — maybe more.  Hospitals whose employees ignore mistakes or hide them would gain every bit as much as, and arguably more than hospitals whose employees report mistakes and identify their root causes.  And so on.

To summarize, “dumb”  tort reforms give away the store with no assurance of any demonstrable gain for patients or taxpayers.  “Smart” tort reforms tie liability reductions to improved performance, including adherence to treatment guidelines and proven error reduction strategies. “Dumb”  tort reforms are wrongheaded, regardless of whether one wants to improve quality, reduce spending, or both.

What about the potential of tort reform to reduce defensive medicine?  The Wall Street Journal believes that lawsuit restrictions are “a rare reform provision that really would reduce health-care costs,” citing a report by PriceWaterhouseCoopers estimating that doctors order $240 billion in tests per year “to protect against the risk of lawsuits.”  Peer-reviewed empirical studies of the impact of tort reforms on defensive medicine suggest that this estimate is wildly over-stated.  The most recent such study found that tort reforms had little effect on Medicare spending, and concluded that “assertions that tort reforms will reduce waste of scarce resources seem, at best, highly premature.”

A more plausible figure comes from the Congressional Budget Office (“CBO”), which recently “scored”  a package of tort reforms similar to the Republican proposal.  In a letter to Senator Orrin Hatch, the CBO estimated that the package would “reduce federal deficits by roughly $54 billion over the next 10 years.” Both Rep. Boehner and the Wall Street Journal trumpeted this figure.

How did the CBO arrive at this number?  It estimated the reforms would reduce federal health spending by $41 billion and increase federal tax revenues by $13 billion.  Taken together, this totals $54 billion, or $5.4 billion per year over the ten year budget horizon.  The CBO also noted that tort reform would likely lower malpractice premiums by roughly 10%, or $3.5 billion per year, or $8.9 billion a year (which would increase to $11 billion per year once the reforms are fully in place).  These amounts certainly sound very impressive – but as the CBO report notes, the combined per-year savings once the reforms are fully effective total roughly 0.5% of health care spending.

The House Democrats’ Rollback Provision

As mentioned previously, the House bill not only omits all the Republican tort reform proposals, it may even cause states to abandon some existing restrictions on lawsuits.  Section 2531 of the bill would authorize the Secretary of Health and Human services to provide financial subsidies to states that adopt “alternative medical liability” laws.  A state satisfies this standard if it requires a certificate of merit or adopts an “early offer” settlement regime – but it does not satisfy this standard if it caps damages and/or limits attorneys’ fees.

About 30 states currently cap the damages patients can recover in medical malpractice suits. Sixteen states limit attorneys’ fees.  It is not entirely clear whether states will have to repeal these caps and limits if they wish to receive the financial subsidies.  Section 2351 could be interpreted to mean that a state that already has a damages cap and/or fee limit is not disqualified from receiving the subsidies if it also adopts a certificate of merit or early offer regime.  Even if that interpretation is wrong, and states have to repeal their damages caps and fee limits to obtain the subsidies, the size of the proposed payments has not been determined.  Health care providers, who lobbied heavily to enact these damages caps and fee limits, are powerful players in state politics.  Unless tens of billions of dollars in federal funds are made available, it is plausible that nothing much will change as a result of Section 2351.

The Wall Street Journal asserts that without damages caps and fee limits, “jackpot justice” will result, as the prospect of winning “[h]uge contingency fees and damage awards” encourages frivolous lawsuits.  “Jackpot justice” is a tired and wholly inappropriate description of the way the malpractice liability system treats claimants.  Patients rarely come out ahead.  Most lose badly, and the patients who receive the largest awards tend to lose the most.  To recover a large sum, a patient must suffer a terrible injury.  In 36% of Texas malpractice claims with payouts of greater than $25,000 (1988$, or roughly $50,000 in 2009$), the injury is death.  In other cases with large payments, the injury is brain damage, paraplegia or some other awful impairment.  Even with these large awards, payments fall far short of actual losses. Unlike lottery winners, patients who receive large tort awards would probably prefer never to have spun the wheel of (mis)fortune.

The real jackpot winners in the malpractice liability system are the many health care providers who harm patients negligently but get off scot free.  The rate of medical errors is high; the Institute of Medicine has estimated that between 50,000 and 100,000 Americans die every year as a result of medical negligence in the hospital, and a far greater number are injured.  Most of those who are negligently injured never even file a claim – and when they do, they often lose.   In a recent (2006) closed claim study conducted by researchers at the Harvard School of Public Health, “[o]ne in six claims involved errors and received no payment.”

Frivolous malpractice lawsuits are another bogeyman, as anyone who read the 2006 Harvard study would know. It concludes that “portraits of a malpractice system that is stricken with frivolous litigation are overblown.” Although a high percentage of claims are dropped without payment, there is no empirical evidence the frivolous malpractice lawsuits (i.e., claims that are known to be without merit at the time they are brought) are common.  Instead, cases are brought and then dropped because the merits of claims are often hard to determine until lawsuits are filed and the information hidden in providers’ files becomes available. Once that information is disclosed, plaintiffs’ attorneys drop weak claims like hot potatoes.  Because the tort system is stingy and plaintiffs’ attorneys are only paid when they win, the most likely consequence of holding onto a hot potato is that one will be burned.

Finally, the Wall Street Journal argues that tort reform results in “a flood of new doctors.” Texas Governor Rick Perry has made similar claims, arguing that applications to practice medicine in Texas “skyrocketed,” with “14,498 doctors either returned to practice in Texas or began practicing [there] for the first time” after tort reform was passed.  As we show in an earlier article these assertions are misleading.  They paint far too rosy a picture of the impact of tort reform on the size of Texas’ physician population because they ignore the number of doctors who retire, leave the state, or are otherwise unavailable to treat the general population of Texas residents.  They also fail to control for preexisting patterns (e.g., how many of these “new” doctors would have come to Texas anyway, and how many would have left, if past trends had held).  Using accurate data and applying appropriate controls, it is clear that the number of physicians in Texas grew every year before tort reform was adopted and that there was no spike in the number of physicians after lawsuit restrictions were imposed.  To the contrary, Texas’ physician population actually grew more slowly after the state adopted tort reform.

American Medical Association (“AMA”) statistics tell a similar story.  Texas ranked 40th in physicians per capita in 2003, 43rd in 2006, and 41st in 2008. Less than a month before the Wall Street Journal editorial appeared, the AMA identified Texas as a “hot spot” state where Medicare patients have difficulty finding care.  These results are consistent with earlier research finding that liability regimes exert little influence on physicians’ location decisions.

Of course, if Texas had attracted more physicians by limiting lawsuits, it could only have done so by luring doctors away from other states.  If all states had the same federally-imposed liability regime, however, no state could enjoy an advantage because liability would cease to affect doctors’ location decisions.  So, if one believes that tort reform substantially affects location decisions, federal legislation on the subject can only hurt the states that have already adopted tort reform.


We do not know whether the bill that emerges when the House and Senate versions of the health care bill are reconciled (assuming the Senate bill passes) will contain the House’s liability provision.  If it does, though, we are confident that the liability provision will have little effect on health care spending or physician location decisions.  Pelosi’s hidden tort bomb will blow up myths about the medical liability system, if it explodes at all.

Professor Charles Silver holds the Roy W. and Eugenia C. McDonald Endowed Chair
at the University of Texas School of Law, where he writes and teaches
about civil procedure, professional responsibility and, increasingly,
health care law and policy. Professor Silver is currently an Associate Reporter on the American Law
Institute’s Project on Aggregate Litigation and a member of the
ABA/TIPS Task Force on the Contingent Fee. He has been Visiting
Professor at the University of Michigan Law School and the Vanderbilt
University Law School.

Professor David Hyman is considered to be one of the country’s top health law scholars,
and is the Richard W. and Marie L. Corman Professor of
Law, teaches civil procedure and health care regulation. His principal
research interests are the regulation of health care financing and
delivery and empirical law and economics. Professor Hyman has published
articles on a wide range of subjects, including medical malpractice,
managed care, consumer protection, narrative, professional
responsibility, tax exemption, and civil procedure.

17 replies »

  1. Tort Reform would be the final Push; to not just limit responsibility but to remove all accountability and Liability.Well, What about the Patient that faces a lifetime of care and multiple surgeries. Caused from Medical error and Preventable Staph Infections. To Bad;So Sad?
    No Fault Health Care. They (the Patient) Knew what they were getting into
    being Hospitalized. They Knew that the risks of Health Care included No
    Fault Staph Infections. They Knew that when they entered the Hospital and
    had a Medical Error that it was a NO Fault Error.The patient knows better to
    place their trust in Health Care Professionals and a fractured system that
    is you guessed it; No Fault of their own! Even when evidence suggests
    certian interventions and it is knowingly ignored. It is No Fault of their
    Who’s fault is it? The Patient! Of Course! After all the premise of Health
    Insurance is that each individual is accountable for their Health and
    staying healthy. Hey ;Its no fault of my own. Why should I be placed in the
    high risk pool and pay nearly twice that of others. Not MY Fault!
    So where is my NO Fault Insurance for Health Care?

  2. Lisa, let me give you an answer in Dr. Patmas’ place:
    A.If a physician does document a reasonable history, exam and differential and then misses an uncommon diagnosis, he/she is not negligent.
    B. If he/she however, does not examine the patient, or does not react to a clearly abnormal test finding that he was called about or signed up on, he probably is.
    Now you can of course say that every physician in a case like A is incompetent, which is another matter. But that’s simply not realistic. Everybody makes mistakes, probably even you at times.
    This might also be helpful:

  3. once again this analysis completely misses the point of tort reform from a physician’s standpoint. it never was, never is and never will be about money, it is about the risk of being dragged through prolonged litigation by trial lawyers and plaintiffs with a jackpot mentality who hope that they can make a physicians live enough of a living hell that they will settle. We see our collegues go through this and we refer and overtreat problems we really can handle on our own.
    When society is serious about controlling cost they will change the medmal system, until then docs will spend away in their defense…..and no one should blame them

  4. This discussion contains many comments that are interesting and worthy of further thought. However, the comment by Bill H immediately preceding this one is not on of them. Bill H quotes the (in)famous Harvard Medical Practice Study from 1996. That study should never again be cited on the point Bill H. makes. It was not designed to study the accuracy of the med mal system, did a poor job on that score, and has been wholly supplanted by more recent research, including the 2006 Harvard study cited in the column.
    Re Bill H’s proposal for an administrative system similar to workers comp: health care providers have repeatedly rejected this proposal because it would cost far, far more than the current system. Given the enormous number of persons injured by medical care and the small number of persons compensated for malpractice claims, the shift to a workers comp-based approach would send costs through the roof.

  5. One major problem with the current system is that there is very little relationship between injury-causing negligent practice and malpractice judgments. A better system would be similar to workman’s comp, where the patient receives compensation if there is an injury with the amount based on the extent of the injury. This could also allow a better path for disciplinary action against negligent physicians.
    This is from a study from New York published in the New England Journal of Medicine: “…initiation of malpractice suits correlates poorly with the actual occurrence of adverse events (injuries resulting from medical treatment) and negligence… Among the malpractice claims we studied, the severity of the patient’s disability, not the occurrence of an adverse event or an adverse event due to negligence, was predictive of payment to the plaintiff.” NEJM 335:1963-1967

  6. Pelosi would lower taxes before she would pursue real tort reform. Her bill is a joke. Incentives provided for states to enact tort reform as long as caps and attorneys’ fees are not part of the plan. What kind of tort reform does she have in mind? States that have already tort reform are barred from receiving her wacky incentives. In other words, punish states that have already done the right thing. I have not been a fan of caps, but I supported them in Ohio when I witnessed good physicians leaving the profession and leaving Ohio because of skyrocketing premiums. The caps worked and the situation has stablilized. I would much prefer an effective filter to screen out the nonsense lawsuits from the outset. Defensive medicine is a real threat, as has been belatedly admitted by the Congressional Budget Office. More thoughts at http://www.MDWhistlblower.blogspot.com

  7. As my lawyer friends tell me, the “kind of tort reform Republicans want,” would never withstand its first court challenge because a federal rule on torts against providers would run afoul of the commerce clause. Insurers work across state lines, but doctors generally do not. So a federal regulation could be tossed out on constitutional grounds.
    This brings us back to Matthew Holt’s position — that medical error issues deserve to be addressed, but anyone that thinks tort reform is the proper avenue is allowing themselves to be a sock puppet for a political agenda, fronted by a policy chimera that will always be argued but could never be enacted.

  8. It is evident that the Republican party has created a much clear political calculation that their path to re-election is to Obama’s agenda. That’s an entirely fair position to take.
    – Herman Swan

  9. The actual practice of defensive medicine and the associated costs are nearly impossible to quantify particularity when looking at reimbursement data by itself.
    For example in reference to the article quoted in the above post, state by state variations in Medicare reimbursement and the use of diagnosis-related hospitalization data to analyze the cost of defensive medicine is flawed. Indeed most of the defensive medicine is performed on patients who never had the disease in question and thus would be less likely to ever be hospitalized.
    Engage almost any physician and ask them “Do you order tests, send patients to the ED or admit patients purely to protect against lawsuits?” to attain a measure of what ‘really’ goes on. Refer to survey tools such as: this and this to provide some data.
    While it is harder to prove the link between the effect of tort reform on reducing defensive practice and cost, it certainly is intuitive. It will take years to correct the culture of defensive behavior and see such effect. In addition, defensive medicine is virtually non-existent in protected environments as seen in other countries.
    No one should lose the right to adjudicate malpractice. The method to provide this right however currently financially favors the trial lawyers far and above the payments to the victims. Let’s add an amendment to the current legislation requiring attorneys to defend individuals at a low, preset government reimbursement rate, with a system akin to a ‘global DRG’ and see how hard they are willing to fight for ‘victim’s rights’…..

  10. The real malpractice crisis in the United States is the fraction of doctors who commit most of the negligence and medical errors. According to the NPDB, just 5.3% of doctors are responsible for 56% of medical malpractice payouts nationally. Doctors who get sued this often are bad doctors. Of those bad doctors, only 7.6% have ever been disciplined by state medical boards. State Medical boards have to do a better job of weeding out the bad doctors who cause most of the harm, and then we can have meaningful tort reform.

  11. The whole defensive medicine and tort reform mess is impossible to untangle.
    US docs are overdiagnosing and overtreating on an epic scale – just ask a couple of astute foreign medical graduates who worked or trained abroad.
    I used to think that defensive medicine is the major driver, nd I still believe that iti is important.
    But what becomes more and more clear is that we have a whole culture of overutilization, and this culture involves docs and patients alike – not all of them, but more than enough.
    I am all for tort reform, tort reform that effectively protects physicians from errors of judgment that are still targets of lawsuits (basically, the modus operandi of tort often lawyers is: if you have an unhappy patient with a bad outcome in your office, look at the series of events with hindsight knowledge and see where you can find the misjudgment that can be construed to be negligence – that is why many docs feel they need every imaging study and every possible consult just to CYA). Obviously, capping awards does very little in terms of defensiveness (physicians are scared of getting sued in any case, be if for 500 K or 2 million). And patients who suffered injury from true negligence do need compensation. But even the smartest tort reform will fail to curb overutilization if a seizable fraction of patients continues to desire PSA screening often followed by robotic prostatectomy, or MRIs for migraine headaches.

  12. This is a well written piece, thanks.
    Unfortunately, pro and con publications both hold similarly strong convictions, cite the other side for using faulty data, and do an equally good job of trying to convince the reader that the world is, or is not collapsing into judicial hell.
    The best reviews i have read conclude the science in 2009 is a wash.
    What i will say, is regardless of payouts or dismissals, or court hearings, etc., just getting named in a suit is chilling–even with an expected dismissal. That happens often (just talk to docs), is not counted up or studied like the high profile actions, and contributes to our toxic practice environment. That my friends is what generates a defensive environment. It exists, its costs are probably underestimated; but i will await the better estimates and solutions in years to come.

  13. Charles and David it sounds like you set up your study wrong. I don’t see any reference to utilization of care and treatment patterns. If doctors over treated to avoid the potential of being sued then common sense is you would see no increase in suits and payouts you would only see an increase in healthcare spending. Hint, there has been an increase in health care spending.
    You can’t study the number and payout of lawsuits and made any deduciton as to the impactof tort reform, your ignoring half the variables.

  14. Correction: The Institute of Medicine “Chasm Report” found evidence that up 100,000 American die annually in hospitals from “preventable medical errors”. The report did not suggest that there was negligence involved. There is a distinction to be made between an error, and negligence.

  15. “Now, however, Democrats have dispensed with bipartisanship.”
    Sen. Jim DeMint: “If we’re able to stop Obama on [health care reform], it will be his Waterloo. It will break him and we will show that we can, along with the American people, begin to push those freedom solutions that work in every area of our society.”
    That was July. At around this time, Republicans began slamming Democratic “death panels” that were in fact, non-controversial end of life care that had been introduced in a bipartisan bill earlier that year, and which has been for years a subject championed by Sen. Jonny Isakson, a Republican from Georgia.
    The Republican party has made a clear political calculation that their path to re-election is to stymie Obama’s agenda. That’s an entirely fair position to take.
    But let’s not pretend it’s a decision Democrats made. There are simply no House Republicans and only a tiny handful of Senate Republicans willing to negotiate in anything approaching good faith.