RTRP: Health Care Reform, Tort Reform

As we wait for more details to emerge about Obamacare, let's talk about reforms that can actually fix the problems with our health care system. . . call it CommentaramaCare.

Over the next three or four posts, we will lay out the entire reform package. Today we begin with tort reform. Next time, we’ll address structural reforms for the medical profession. Then, we’ll talk about the coverage plan and the program’s costs. Read on. . .

Tort Reform

As we’ve discussed, tort reform is not THE answer to the problems with our health care system, but it is necessary. With that in mind, CommentaramaCare proposes the following:

1. Health Care Must Be Federalized

Alright, calm down, nobody said “nationalize.” We said “federalize.” There is a big difference. Nationalize means to take over the industry. Federalize means to subject the industry to federal regulation rather than state regulation.

Even though health care in the United States accounts for 16% of our GNP (with the federal government spending the lion’s share of those dollars), health care is basically regulated at the state level -- though there are some federal requirements. This means that our health care system is run by fifty different regimes, each with different rules and different interests.

This complex framework of state regulations imposes significant administrative costs on providers, makes it extremely difficult for providers to move between the states, and is highly susceptible to manipulation by local politics -- not to mention that the government’s health care bureaucracy is duplicated fifty times.

States have shown that they are poor managers of the health care system and programs like Medicaid are breaking their budgets, even with federal support.

The only way to fix this is to federalize health care, to remove states from this process. Under the commerce clause, Congress has the power to regulate the health care industry. When Congress speaks, it can supplement state law or it can replace state law in its entirety. In this instance, Congress should replace state law entirely by passing one set of regulations for health care providers. In this way, the complex net of regulations would be eliminated, the burden on state coffers removed, and medical providers would gain the same freedoms that virtually every other industry in America enjoys.

Moreover, if this is not done, then none of the reforms proposed here can be effective because state law would continue to dominate.

Federalizing also will allow Congress to require that medical malpractice actions be brought in federal court. Unlike federal courts, state courts are subject to intense political pressures. State judges often run for election, and those that do require the financial support of local organizations like trial lawyers or hospital groups. Federal judges, by comparison, are appointed for life (hence no need to satisfy contributors) and are generally considered to be higher quality judges. Similarly, federal juries are drawn from much larger pools and thus are less likely to be subject to local influence.

2. Stopping Bad Lawsuits

Now that we’re federalizing health care, let’s talk about specific changes to tort law. The first goal of tort reform should be to discourage bad lawsuits. In that regard, CommentaramaCare proposes:

1. Requiring Certificates of Merit: Prior to filing any malpractice suit, the plaintiffs must obtain a certificate, under oath, from a medical expert of similar or greater qualification to the defendant doctor(s), stating both that the medical expert has reviewed the record and has concluded to a reasonable degree of medical certainty that the defendant doctor failed to satisfy the appropriate standard of care. Without such a certificate, the plaintiff cannot file suit. In my experience with medical malpractice suits, this requirement more than any other eliminates bad lawsuits.

2. Fee Shifting: Fee shifting (making the loser pay the winner’s attorneys fees) actually does little to deter bad lawsuits. Indeed, it is common knowledge among plaintiffs’ attorneys that even where fees are shifted to losing plaintiffs, they are rarely paid. Nevertheless, fee shifting is a good idea, because it does have some deterrent effect and because it is fair to legitimate plaintiffs whose awards are often largely eaten up by attorneys fees.

3. Stopping Outrageous Awards

The second goal of tort reform should be to reduce outrageous awards, without reducing the ability of plaintiffs to obtain fair compensation for their injuries. In that regard, CommentaramaCare proposes:

1. Eliminating Punitive Damages: Punitive damages are intended to discourage truly egregious behavior that affects society at large by allowing juries to punish defendants far beyond the specific harm caused in that instance. However, there is little reason to believe that punitive damages encourage doctors to take greater care, and there are other mechanism in place to punish doctors for misconduct. Thus, there is no justification for continuing to allow punitive damages and they should be banned.

2. Capping Non-Economic Harm: Non-economic harm is better known as pain and suffering. Capping these damages at a reasonable level is a decent way to prevent juries from being swayed by emotion. However, you need to establish the cap level carefully.

If the cap is too low, old people and poor will be unable to find lawyers, because their economic harm will be too small to justify the expense. A medical malpractice suit typically costs a plaintiff’s attorney around $100,000 (out-of-pocket) to bring to trial. If there are few economic damages and the non-economic damages are capped around $250,000, as they are now in many states, it is not worth the risk for the attorney to take the case.

Moreover, you must ask if this cap is just. Consider the case of a 20 year old computer programmer who loses both legs as a result of medical malpractice. Because the programmer does not need his legs to continue in his profession, there is limited economic harm. Thus, his damages will primarily be pain and suffering. Would $250,000 compensate this person for being legless the rest of his life?

For these reasons, the cap should be set at $1,000,000.

3. Bad Faith Surcharge: To counter balance the changes above, judges should be allowed to impose an additional sanction of up to 20% of the final award, if the judge finds that the insurer denied the medical malpractice claim in bad faith. This is necessary because certain medical malpractice insurers have begun refusing to settle any claims, even where the doctor wishes to settle, because they believe they benefit from litigating all claims. This clogs the court system, wastes time and effort, abuses injured plaintiffs, and needlessly harms doctors. And this will get worse as the potential verdicts shrink in size.

4. Removing Legal Considerations From Medical Decision Making

The third goal of tort reform should be to remove the threat of lawsuits from the day to day practice of medicine -- reducing the need for so-called “defensive medicine.” In that regard, CommentaramaCare proposes adopting each of the defenses commonly allowed in common law, plus specifically guaranteeing the following two by statute:

1. Standard of Care: As will be discussed in the next article, a new Federal Medical Board must be established to regulate the medical profession. That Board will be responsible for establishing national standards of care for most conditions. Where such a standard is established, doctors may not be sued for failing to go beyond that standard.

2. Failure To Comply With Recommendations: If a patient refuses to comply with a doctor’s order/ recommendation, the patient may not base their suit in any way on that order/ recommendation; the doctor, however, may raise the patient's refusal as a defense (where relevant). In other words, if the doctor recommends a test/ procedure and the patient does not have it done, the patient cannot use that test/ procedure to prove malpractice, but the doctor can use the refusal to prove that the patient interfered with the doctor's ability to render adequate treatment -- although, such refusals will need to be noted in writing in the patient’s records, with a clear explanation that the patient was advised that the particular treatment or test is required by the standard of care.

5. Reviving Hospital Oversight

The final goal of tort reform should be to reconstruct the relationship between doctors and hospitals, which has been severed by prior tort reform.

As we noted previously, hospitals have lobbied states to change the law to allow them to avoid liability for the actions of doctors who practice at the hospital by treating the doctors as independent contractors.

This is a form of protection that other fields of commerce do not share, and it has destroyed the role of hospitals in overseeing doctors. In fact, under the current system, hospitals have an incentive to keep doctors at arms length and to avoid taking any role in supervising those doctors.

To reverse this, hospitals must again be held jointly responsible for the actions of any provider who practices within the hospital. This change will give hospitals an incentive to again oversee doctor conduct. This should lead to increased oversight by hospital staff and likely will result in physicians again being made into employees of the hospital, which will result in cost savings (to be discussed in next article).

Moreover, to encourage hospitals to conduct thorough oversight, we must remove the fear that their efforts will be used against them. Thus, the work of any oversight committee must be made inadmissible at court and not discoverable by patients/plaintiffs. In other words, it remains confidential.

However, to obtain that protection, the results of these reports must be disclosed to the new Federal Medical Board, which will oversee medical licensing. This will encourage full voluntary disclosure. (Federal Medical Board records also must be treated as inadmissible and not discoverable by patients/plaintiffs.)

Finally, in addition to protecting records from patient suits, the oversight committees/hospitals must be granted immunity from suit by the doctors they oversee and/or discipline. This is to prevent physicians from avoiding discipline by threatening to sue the committee or hospital.

Conclusion

Taken together, these reforms should (1) greatly reduce non-legitimate suits, (2) prevent outlandish jury awards, (3) greatly reduce the practice of defensive medicine, and (4) revive the system of supervision, thereby reducing medical errors.