Fixing Medical Liability

By Greg Scandlen

(Note: I am hoping for and expect some vigorous comment and discussion on this issue. Fire away!)

One of the key points for the Republicans going forward is what to do about professional liability. This was ignored in ObamaCare, but is essential in any health reform proposal.

We have been wrestling with it for decades without much success. There have been a handful of states that have taken action, notably Texas and California, with good results. Other states, like Illinois, have tried, but in that case the state Supreme Court disallowed any limit on what plaintiffs could collect, so threw the law out.

As with a lot of intractable issues, sometimes the problem is that we aren’t thinking about it in the right way. The problem needs to be reframed to get us out of the cul-de-sac. Let me try to do that here.

First principles. Tort law is a state, not a federal responsibility. Some of my physician friends are so frustrated by the control the trial bar seems to have over state legislatures, that they are looking to the Feds for relief. I understand the sentiment, but I don’t think it is a good idea to sacrifice Constitutional principles of federalism for expediency. Plus, I’m not sure the trial attorneys are any less influential in Congress than they are at the state level. And, if the Feds take over the issue and get it wrong, it will be nearly impossible to fix in the future.

A better approach would be to remove professional liability from the tort system entirely. There are enormous problems with using the courts to remedy the consequences of poor medical outcomes. Notice I say “poor outcomes.” Many of the malpractice complaints have nothing to do with “malpractice” per se. The physician is not shown to have committed any error, or to have been negligent or incompetent. Things simply didn’t work out the way the patient hoped. If a jury is sympathetic to the plaintiff, it may provide an award regardless of the performance of the physician.

There are other problems with using the tort system in these cases:

  • Many patients are uncomfortable bringing suit or in dealing with lawyers. They avoid courtrooms, so have no mechanism for curing their complaint.
  • Contingency fees often mean that the complainant receives only a fraction of the award, with 25% or more going to the attorney.
  • Marginal cases are likely not to be brought at all. An attorney working on a contingency will cherry pick only the strongest cases and not risk investing time on a borderline case.
  • When there is real negligence or incompetence, the offending physician is not disciplined other than having to pay higher insurance premiums. The medical board may not even be notified of the problem, so the physician is free to continue being negligent or incompetent.
  • If the suit is settled before judgment, there is no record of the outcome, so no one knows that a particular physician has a problem.
  • Finally, using the courts is expensive and slow. It may be months or years before a damaged patient receives any compensation. Those may be months or years of extreme discomfort or pain for the patient, and real economic damage until the case is resolved.

Let me offer a better approach. This would be a no-fault system that would allow, but not require, legal representation. There would be a pool of money for awards financed by a tax on all health care providers, possibly as a percentage of income. This tax would be strictly dedicated to funding the pool. Providers would benefit by not having to pay malpractice premiums. Awards would be made by an administrative law judge (ALJ), kind of like the Workers Compensation system used by most states. The standard for awards would not be punitive, but be aimed at making the patient whole. Decisions by the ALJ could be appealed to a higher level of adjudication. The ALJ would notify regulatory boards of cases of negligence or incompetence, and the discipline of the offending provider would be left to the appropriate regulatory board. All cases and all awards would be public information. Every patient would be notified of his or her rights of remedy prior to receiving a service. Creditors of the damaged patient would be informed that a case is underway, so would be more patient in collecting debts.

This could be a federal system, like the federal bankruptcy courts. It would allow the states to continue their tort law systems in tact, but remove medical liability from those systems.

I don’t know if total costs would be any less than the current system, but I think it would be far more efficient and fair to both patients and providers.