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Executive Summary #1908 on Health Care

January 17, 2006

Executive Summary: Code Blue: The Case for Serious State Medical Liability Reform

By and

In many states, a medical liability crisis is prompting physicians to scale back their practices or shut their doors entirely. As a result, patients are losing access to vital health services and must travel farther and wait longer to receive needed care. For the many doctors and millions of their patients who are concerned about access to quality medical care, serious relief will come only from smart and innovative state-based reforms.

The High Price of Inaction. The rising cost of lia­bility insurance and the state laws that govern med­ical malpractice are jeopardizing patient access to care in many states, especially in rural areas. The high price of practicing medicine is forcing a grow­ing number of physicians to limit their areas of prac­tice, retire early, or move their practices to other states. It also encourages defensive medicine prac­tices in which a doctor departs from doing what is best for the patient because of the fear of lawsuits.

What State Lawmakers Can Do. Each state should address the medical malpractice crisis in a way that reflects its particular circumstances. State legislators have a menu of reform options from which to select those that would work best in their respective states.

  • Early offer. Early offer allows quick recovery of economic losses associated with an injury, including lawyers’ fees. It is intended to pro­vide a strong motivation to settle claims quickly without the typical years of delay in the courts. With the disposition of medical injury claims soon after they have been discovered, more doctors would feel free to share information about bad outcomes and openly discuss ways to avoid them in the future.
  • Patient indemnity insurance. Patient indem­nity insurance is a new category of insurance that could benefit both doctors and patients. It would allow patients to purchase coverage for adverse medical events, much as people can purchase insurance against unlikely events like airline disasters.
  • Special health courts. Health court proposals have received bipartisan support as a possible improvement on the current tort system. In a health court system, judges would receive spe­cialized training in medical topics in addition to their legal training. While lawyers would still represent the parties at trial, judges would rely more heavily on court-appointed expert wit­nesses to offer unbiased testimony on the range of possible treatment options as well as clinical guidelines on the standard of care.
  • Limited liability for Medicaid, charity, and emergency care. States could provide an alter­native to standard tort liability for Medicaid patients as well as for patients receiving charity or emergency care. Doctors who treat the poor pro bono, particularly those who care for espe­cially difficult-to-treat patients, should get relief. The same holds true for physicians work­ing in emergency rooms, who invariably treat patients whom they have never seen before.
  • The MICRA model. With three decades of proven results, California’s largely successful Medical Injury Compensation Reform Act (MICRA) of 1975 is a model that other states can use to craft their own medical malpractice reforms. State lawmakers can incorporate MICRA components into their legislative remedies.
  • Learning from Oregon’s bad example. In 1987, Oregon enacted a cap on non-economic damages in response to a previous malpractice crisis. By 1990, the reforms had taken hold, alle­viating the crisis and helping to reduce premi­ums by 50 percent. However, in 1999, the Oregon Supreme Court declared the cap uncon­stitutional. Over the next five years, premiums skyrocketed. The Oregon example shows that effective reforms must not only restore a measure of certainty to the insurance market, but also survive constitutional muster.
  • Real competition to reduce medical errors. While the goal of zero medical errors is perhaps unattainable, reducing the number of errors would reduce the need for medical malpractice litigation. A better health system would allow providers to compete on the basis of the quality of care that they offer, creating better value for consumers. Empowered consumers make the best regulators. In time, consumers would begin to subsidize the providers that do the best job and cut off funding for providers who underperform. In the battle to offer the best value, providers will reduce their medical error rates and improve their services.

States can encourage real competition in health care by requiring providers to use transparent pricing, rolling back insurance coverage mandates, encouraging consumer-driven insurance options like health savings accounts (HSAs), and collecting and publish­ing better information on health care quality and outcomes.

While reforming the system to reduce frivolous suits and make the system fairer for everyone, state legislators must be careful to protect those who have a genuine claim of malpractice. Reim­bursement for out-of-pocket expenses, lost wages, and compensation for pain and suffering should be readily available, but they should also be rea­sonable and reserved for real cases of negligent conduct, not for simply bad medical outcomes.

Conclusion. The medical malpractice crisis in the United States must be addressed. Access to affordable care is being compromised for millions of Americans. Far too many highly skilled and car­ing hands can no longer afford to practice medi­cine, while trial lawyers are reaping the benefits of an outdated, outmoded system. States need to stop the exodus of good physicians while protecting the right of patients to seek redress for medical injuries.

While reforming the medical malpractice sys­tem will not cure all of America’s health care woes, the right kind of reform could virtually eliminate the long-drawn-out lawsuits in which the biggest winners are the trial lawyers, not the parties. It could free doctors from the crush of ever-increas­ing liability premiums and empower patients to choose their own destinies.

Randolph W. Pate, J.D., M.P.H., is Visiting Health Policy Fellow and Derek Hunter, at the time this paper was written, was a Research Assistant in the Center for Health Policy Studies at The Heritage Foundation. The authors are grateful to Todd F. Gaziano, Senior Fellow in Legal Studies and Director of the Center for Legal and Judicial Studies at The Heritage Foundation, for his help­ful comments and suggestions.

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