October 20, 2009

October 20, 2009 | Commentary on Legal Issues

The Power of the Plaintiffs' Bar: Why Democrats are Avoiding Medical-Malpractice Reform at All Costs

The health-care bill the Senate Finance Committee approved makes a lot of promises. It will cost American taxpayers $829 billion, on top of an already out-of-control federal budget, as well as guarantee an increase in their individual medical expenditures.

But one thing the bill does not do is bring down the high cost of health care, which is driven in large measure by abusive tort litigation. This litigation greatly increases medical malpractice-insurance costs and forces doctors to practice "defensive medicine" -- that is, order unnecessary tests and treatments to avoid potential lawsuits.

When President Obama addressed Congress on health care, he actually mentioned medical-malpractice reform. But he made only a dubious offer of future medical-malpractice "pilot projects," as if that would make the proposed government takeover of health care any more palatable.

The president said he doesn't "believe malpractice reform is a silver bullet." He claims he has talked to enough doctors to know that defensive medicine "may" be contributing to costs. "May" be contributing? The Journal of the American Medical Association found that 93 percent of doctors admit practicing defensive medicine. A new study by the Pacific Research Institute estimates that such practices cost $191 billion a year, while a separate study by PricewaterhouseCoopers puts the number even higher -- $239 billion.

Medical-malpractice premiums have risen by more than 80 percent each year in some parts of the country and can cost almost half a million dollars a year in some specialties. The direct costs of medical-malpractice tort claims range from $16 billion according to the Pacific Research Institute to more than $30 billion according to Tillinghast-Towers Perrin. A CBO report requested by Sen. Orrin Hatch admitted that medical-malpractice reform could save $54 billion for the U.S. government alone.

President Obama professed interest in a "range of ideas about how to put patient safety first and let doctors focus on practicing medicine." He ordered Secretary of Health and Human Services Kathleen Sebelius to move forward with "authorizing demonstration projects in individual states to test these issues."

Test these issues? There's no need for federal tests -- we already know what works. States that have implemented medical-malpractice reforms, such as Texas and Mississippi, have seen significant decreases in malpractice premiums -- a major medical cost for doctors that's passed directly to patients -- and substantial decreases in the number of malpractice claims filed by the plaintiffs' bar.

Medical-malpractice reform clearly works. This isn't primarily a federal issue, but federal health-care programs shouldn't inflame the problem or prevent reform, which is what the pending federal legislation could do. As we described in a recent Heritage Foundation paper, an amendment to Medicare that was proposed for one of the House health-care bills would flood federal courts with speculative and abusive class-action lawsuits to benefit plaintiffs' lawyers at the expense of the American taxpayer and Medicare beneficiaries. It would also override much of state tort law and state tort reform.

Moreover, the larger the share of the health-care system that is regulated by the federal government, the less freedom states will have to implement medical-malpractice reform. The pending legislation threatens to make a serious tort problem catastrophically worse.

Obama's legal-reform rhetoric is an empty offer for other reasons as well. The president qualified his "offer" in an interview on 60 Minutes when he said he opposes caps on malpractice awards, a key component of successful reform. Second, no federal "demonstration" project intended to "test" this issue will likely change the medical-malpractice dynamics in states where trial lawyers control the legislative process. Only federal legislation that conditions federal funding for Medicaid or Medicare on states' passing liability reform for providers in those federal programs could induce many states to implement them. Short of that, any federal action should encourage, or at least be consistent with, state medical-malpractice reform.

Moreover, this offer is particularly ironic -- rather like putting the fox in charge of the henhouse -- given that the cabinet secretary tasked with implementing this proposal for demonstration projects is Kathleen Sebelius. Before she was governor of Kansas and the insurance commissioner of Kansas, she spent eight years as the head of the Kansas Trial Lawyers Association, now the Kansas "Association for Justice."

The KAJ's militant opposition to reform is highlighted on its website. Unlike the vast majority of Americans, the KAJ doesn't believe there's a litigation crisis. It denies that the plaintiffs' bar files frivolous lawsuits. In its view, all businesses, health-care providers, and insurance companies that are sued are villains, out to cheat, injure, and steal from consumers -- a view that's clearly shared by the White House and other Democratic leaders, given their recent attacks on the insurance industry for daring to question the high cost imposed by the Baucus bill. Of course, Sebelius is also the state executive who, according to the New York Times, "failed to make significant improvement in health coverage or costs during her two terms as governor."

Despite what the president says, nothing in any of the health-care bills floating around Congress, including the Baucus bill, would implement any real tort reform. And other bills, such as the misnamed Medical Device Safety Act, would make the situation far worse. The MDSA would gut the carefully crafted regulation of medical devices by the FDA and expose manufacturers to the conflicting laws, regulations, and juries of 50 states, substantially raising the costs of life-saving medical devices or eliminating them from the market entirely.

Worse, the Baucus bill would impose a $4 billion tax on the manufacturers of medical devices, a cost that would be passed on to patients. It would also impose a $2.3 billion tax on drug manufacturers, guaranteeing an increase in the cost of the prescription drugs vital to the health of millions of Americans. Also, under the bill, medical expenses would have to add up to 10 percent of a taxpayer's income before he could deduct them, instead of the current 7.5 percent.

There is a reason for the pro-trial lawyer bias evident throughout the "reform" proposals: The top contributor to President Obama's presidential campaign was the legal industry, whose donations came to more than $43 million. More than 80 percent of the money given to Congress by lawyers, mostly from the plaintiffs' bar, went to Democrats -- almost $22 million. As Howard Dean admitted at a town-hall meeting in Virginia, there is no tort reform in any of the Senate or House health-care bills because "the people who wrote it did not want to take on the trial lawyers. ... And that is the plain and simple truth."

Plain and simple, indeed. Another plain and simple truth is that the best way for states to contain the growth of health-care costs is to implement serious and sustained medical-malpractice reforms, from caps on damage awards to medical-review boards that have to approve the instigation of any malpractice claims. They also shouldn't increase health-care costs by imposing onerous new taxes, penalties, and requirements on medical providers, manufacturers, and individual citizens.

It's not the government's job to take over health care or drive private companies out of business. Until and unless Congress and President Obama recognize that fact, more and more Americans will voice their skepticism of the reform being proposed. And they will be absolutely right to oppose turning the AMA into the GMA -- the Government Medical Association.

Edwin Meese III, the attorney general of the United States from 1985 to 1988, is Chairman of The Heritage Foundation's Center for Legal and Judicial Studies. Hans A. von Spakovsky is a visiting legal scholar at the Heritage Foundation. He is also a former commissioner on the Federal Election Commission and counsel to the assistant attorney general for civil rights at the Department of Justice.

About the Author

Edwin Meese III Ronald Reagan Distinguished Fellow Emeritus
Edwin Meese III Center for Legal and Judicial Studies

Hans A. von Spakovsky Manager, Election Law Reform Initiative and Senior Legal Fellow
Edwin Meese III Center for Legal and Judicial Studies

Related Issues: Legal Issues

First appeared in National Review Online