Saturday, July 11, 2009

The Innumerate Michael Kinsley


It should, perhaps, go without saying that you shouldn't take financial advice from a guy who can't do simple math, but in case you somehow glossed past this doozy from Michael Kinsley on healthcare reform:
My list would start with malpractice reform. An achingly balanced CBO report last year cited a study showing that victims of medical negligence are 2 1/2 times more likely to get compensation than people who were not victims. This was an argument against reform: that for every dollar going to victims of malpractice, "only" 40 cents goes to plaintiffs who have no case at all.
Does it need to be explained that his conclusion isn't supported by his claimed data? Nothing in the snippet he presents describes either the frequency of claim by people who are "not victims" or the relative amounts of recovery.

Kinsley could have easily tracked down the study online. It's easier than ever - before I had even finished typing the third word of the title into Google, it was offering to auto-complete the title as a search term. Ten seconds.

Looking at some of the data from the study, the issue seems to be this: The study found that of 1452 malpractice claims, 889 involved both error and injury. Of those claims, 73% of claimaints received compensation. In contrast, by the study's criteria, 515 claims involved injury without medical error at 37 claims involved neither injury nor medical error. Of those claims, 151 (27%) resulted in compensation. 73% is "approximately 2 1/2 times" 27%.

But as the study plainly states:
Our findings point toward two general conclusions. One is that portraits of a malpractice system that is stricken with frivolous litigation are overblown. Although one third of the claims we examined did not involve errors, most of these went unpaid. The costs of defending against them were not trivial. Nevertheless, eliminating the claims that did not involve errors would have decreased the direct system costs by no more than 13 percent (excluding close calls) to 16 percent (including close calls). In other words, disputing and paying for errors account for the lion's share of malpractice costs. A second conclusion is that the malpractice system performs reasonably well in its function of separating claims without merit from those with merit and compensating the latter. In a sense, our findings lend support to this view: three quarters of the litigation outcomes were concordant with the merits of the claim.
That is, Kinsley would have difficulty being more wrong if he tried.

Since Kinsley raised the subject, though, it is fair to ask "Exactly what would this 'malpractice reform' look like?" Would it diligently ferret out all actual claims of malpractice - as the study indicates, "the great majority of patients who sustain a medical injury as a result of negligence do not sue." Apparently not. Even if administrative costs were pared to the bone for such a system, that approach would significantly increase expenditures on medical malpractice claims. What if there were better ways to ferret out claims without merit?
Although one third of the claims we examined did not involve errors, most of these went unpaid. The costs of defending against them were not trivial. Nevertheless, eliminating the claims that did not involve errors would have decreased the direct system costs by no more than 13 percent (excluding close calls) to 16 percent (including close calls). In other words, disputing and paying for errors account for the lion's share of malpractice costs.
So what precise reforms does Kinsley propose that will save us the 13-16% of current malpractice expenditures that go to defending against claims that should not have been filed?

The authors of the article explain why these cases are filed in the first place:
The profile of non-error claims we observed does not square with the notion of opportunistic trial lawyers pursuing questionable lawsuits in circumstances in which their chances of winning are reasonable and prospective returns in the event of a win are high. Rather, our findings underscore how difficult it may be for plaintiffs and their attorneys to discern what has happened before the initiation of a claim and the acquisition of knowledge that comes from the investigations, consultation with experts, and sharing of information that litigation triggers. Previous research has described tort litigation as a process in which information is cumulatively acquired.
Well, we could require the disclosure of the outcome of peer review to patients and their families. (You think doctors howl about malpractice... just try legislating public peer review.)

Having noted the fact that a huge factor in the cost of malpractice litigation lies in trying to penetrate the wall between the patient and information that can lead to proper assessment of malpractice cases, the authors of the study make this curious suggestion:
The combination of defense costs and standard contingency fees charged by plaintiffs' attorneys (35 percent of the indemnity payment) brought the total costs of litigating the claims in our sample to 54 percent of the compensation paid to plaintiffs. The fact that nearly 80 percent of these administrative expenses were absorbed in the resolution of claims that involved harmful errors suggests that moves to combat frivolous litigation will have a limited effect on total costs. Substantial savings depend on reforms that improve the system's efficiency in the handling of reasonable claims for compensation.
The authors' mistake, of course, is in assuming that malpractice reforms are primarily meant to reduce frivolous litigation. It should be patent from the result that they are designed to make it more difficult and enormously more costly to get any malpractice case to trial, to increase risk to the plaintiff's lawyer both by vastly increasing the amount of money it takes to litigate a claim and by forcing a significant expenditure to investigate other claims before they can even be properly reviewed for merit, and to place economic pressure on the plaintiff to settle by dragging out the litigation process and by imposing caps that limit the amount of damages that a severely injured plaintiff can recover.

If we truly wanted to create an efficient system that allowed plaintiffs' lawyers to minimize the number of questionable cases they bring, reduced the cost of litigation, shortened the time it takes to litigate a case, and ensured that people received fair and appropriate damages, a good place to start would be by jettisoning the "reforms" that have been implemented to date that largely benefit the insurance industry and taking a good hard look at other systems. I suspect that malpractice victims would be largely supportive of a two-track system, one of which involves fair, fast administrative review of malpractice claims but with limits on non-economic damages (perhaps even a schedule of damages) and limits on attorney fees similar to worker's comp, and a more traditional tort-based system. Mind you, a number of "small damages" cases that aren't economically viable under the current system (e.g., negligent misdiagnosis of appendicitis resulting in a rupture) might become viable under such a reform, but damage awards for such claims should be small. I'm not convinced that such a system would turn out to be cheaper, but it should turn out to be a lot more fair and a lot more efficient than a pure tort-based system.

In short, the study Kinsley indirectly relies upon suggests that we would get minimal savings from reforms directed at "frivolous" cases, but that the greater sin of the current system is that an even greater number of actual malpractice victims end up with no recovery. That is, if you were to somehow make the authors' wishes come true, and the system were made more accurate, you would end up increasing the cost of the system due to the appropriate grant of compensation to claimants who are wrongly denied recovery.

I don't think Kinsley's a stupid man. But given the magnitude of his errors on this subject, he should perhaps reflect on whether he should limit his writings to subjects he actually understands.

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