Gingrich & Goodman Idea #8: "Eliminate Junk Lawsuits"

One of the interesting aspects of healthcare reform has been how quiet the insurance industry has been. When you hear people like Newt Gingrich talk, you would think that "tort reform" was perhaps the most pressing issue that must be addressed as part of a reform package. But instead the insurance companies appear happy with the status quo.

If you think about it, the insurance industry has good cause to be happy with the status quo. Despite their squawking about evil "trial lawyers," they have achieved their "tort reform" goals in pretty much every state. They have consistently focused on four goals: limit damages awards, so that the most severely injured individuals recover get little compensation for their pain and suffering; abolish "joint and several damages" and implement the "empty chair defense" to force plaintiff's lawyers to sue every conceivable defendant and drive up the costs of litigation; require notice periods and "certificates of merit" before a lawsuit can be commenced so as to prolong and again drive up the cost of litigation; and shorten statutes of limitations and implement statutes of repose, such that patients have a narrow window of time to make their claims before they're permanently barred from doing so, regardless of a claim's merit.

I read an article recently by a doctor who was sued as part of a malpractice case and who was ultimately dropped from the suit. She asked her defense lawyer "Why was I sued" and the defense lawyer lied, "I don't know." The defense lawyer does know. If you have a system of "joint and several liability", you can sue those you believe are most responsible. If a defendant believes others are in fact responsible, or are more responsible, the defendant can bring those others into the case. Insurance companies have worked very hard to abolish joint and several liability and to create the "empty chair defense" - so that a defendant can point to the "empty chair" where that defendant "should be sitting" and argue at trial that the plaintiff didn't sue the actual culprit, and that the actual culprit is responsible for most or all of the damages. That defense may amount to lies and innuendo, but courtroom arguments won't support a defamation case and the goal is to win, right? So to avoid that outcome the plaintiff now brings every conceivable defendant at the start of the litigation. This pro-insurance industry reform increases the cost and burden of litigation, and measurably harms the health professionals (and others - this isn't limited to malpractice) who are brought into claims to avoid the "empty chair defense". Plaintiff's lawyers would be happy to go back to joint and several liability with the onus on the defendant to bring in a supposedly culpable third party, and that should work out quite well for doctors, but the insurance industry is not going to give up this "reform".

Of the four leading "reforms", arguably the "certificate of merit" should help avoid "junk lawsuits" but in reality malpractice lawyers work hard not to file meritorious claims. Even without that requirement, due to the high cost of litigation, malpractice lawyers pay medical professionals to help them screen their cases - they don't want to waste their time and money on cases they cannot win. The dubious claims get filed because lawyers lack the information necessary to fully assess the merits of the claim without discovery - without forcing that information out of the defendants and their insurance companies. The certificate of merit prepared for such a case is prepared by a doctor who is similarly forced to make assumptions about what happened. So in practice it's a great way to generate revenue for doctors who prepare certificates of merit, drive up the cost of litigation and drag out the settlement process, but does little to ensure that a case is meritorious.

Some realities of medical malpractice litigation:

• Most malpractice cases are correctly decided.


• Those in which are arguably wrongly decided in favor of the plaintiff have smaller-than-average recoveries, and claims without merit are "generally resolved appropriately".


• About one in six malpractice cases are wrongly decided in favor of the doctor.

Further,

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.

And, when "non-error claims" were made, it was not for a lack of diligence by the plaintiff's lawyers:

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.

The most serious problem identified?

Although the number of claims without merit that resulted in compensation was fairly small, the converse form of inaccuracy — claims associated with error and injury that did not result in compensation — was substantially more common. One in six claims involved errors and received no payment. The plaintiffs behind such unrequited claims must shoulder the substantial economic and noneconomic burdens that flow from preventable injury. Moreover, failure to pay claims involving error adds to a larger phenomenon of underpayment generated by the vast number of negligent injuries that never surface as claims.

That's right - not enough people injured by malpractice receive fair compensation for their injuries. All of that information coming from the New England Journal of Medicine.

One of the criticisms of the malpractice system is that too much of the money that goes into the system goes to the cost of litigation, with too little ending up in the pockets of an injured plaintiff. It's a fair criticism. It's also fair to recognize that delay and increased cost are a defense lawyer's friend, and the plaintiff's lawyer's enemy. A dream case for the plaintiff's lawyer would involve calling the defendant's insurance adjuster, negotiating a fair settlement, executing the settlement agreement, and getting a check at the earliest possible date. It almost never happens. Instead, even when liability is blindingly obvious, insurance companies want to make plaintiff's lawyers work for the money, and benefit from prolonging litigation during which time a severely injured plaintiff may decide that they would rather take a small settlement now than have to wait additional months or years to be more fully compensated. Returning to the New England Journal of Medicine:

Frivolous litigation is in the bull's-eye of the current tort-reform efforts of state and federal legislators. The need to constrain the number and costs of frivolous lawsuits is touted as one of the primary justifications for such popular reforms as limits on attorneys' fees, caps on damages, panels for screening claims, and expert precertification requirements. Our findings suggest that moves to curb frivolous litigation, if successful, will have a relatively limited effect on the caseload and costs of litigation. The vast majority of resources go toward resolving and paying claims that involve errors. A higher-value target for reform than discouraging claims that do not belong in the system would be streamlining the processing of claims that do belong.

Plaintiff's lawyers would get on board with that. Why won't Newt Gingrich's clients in the insurance industry?

Frankly, "tort reform" is a subject that a few poeple find interesting, but makes most people's eyes glaze over. That's why the insurance industry and its shills use misleading sound bites "junk lawsuits", "lawsuit lottery", etc., to mischaracterize the facts. (Why don't "tort reform" advocates ever show us the paraplegic in a wheelchair, or the severely brain injured child, who "won" this "lawsuit lottery"?) When there's real scholarship available from credible sources, such as the NEJM article quoted above, it's disgraceful that the mainstream media gives unquestioning coverage to the insurance company spin than they do to the facts, but... that's pretty typical of mainstream media coverage of contentious or scientific issues.

Speaking of shills....

The Newt Gingrich, John C. Goodman editorial is subtitled, "We don't need to study lawsuit reform for one minute longer", so I guess they've read the NEJM article and... yeah, right. They don't want to study lawsuit reform for one minute longer lest some facts enter the debate. It's enough to declare that "The current system is broken" then demand "reforms" that will ensure that even fewer victims of medical malpractice receive any compensation, and fewer of the rest receive fair compensation. And of all states to hold up as an example, Texas - a state that went farther than any other to kowtow to the insurance industry to the significant detriment of victims of malpractice. Tort reform was sold on lines like this: "52 counties in Texas now have no obstetrician. Wide swaths of Texas have no neurosurgeon or orthopedic surgeon". Four years after "tort reform", the number of counties without obstetricians is unchanged--152 counties still have none, according to the Observer's examination of county-by-county data at the state Medical Board... Nearly half of Texas counties--124, or 49 percent--have no obstetrician, neurosurgeon, or orthopedic surgeon. Those specialists aside, 21 Texas counties have no physician of any kind." Let's not forget the New Yorker article, in which a doctor turns a spotlight on high medical costs in Texas:

Some were dubious when I told them that McAllen was the country’s most expensive place for health care. I gave them the spending data from Medicare. In 1992, in the McAllen market, the average cost per Medicare enrollee was $4,891, almost exactly the national average. But since then, year after year, McAllen’s health costs have grown faster than any other market in the country, ultimately soaring by more than ten thousand dollars per person.

“Maybe the service is better here,” the cardiologist suggested. People can be seen faster and get their tests more readily, he said.

Others were skeptical. “I don’t think that explains the costs he’s talking about,” the general surgeon said.

“It’s malpractice,” a family physician who had practiced here for thirty-three years said.

“McAllen is legal hell,” the cardiologist agreed. Doctors order unnecessary tests just to protect themselves, he said. Everyone thought the lawyers here were worse than elsewhere.

That explanation puzzled me. Several years ago, Texas passed a tough malpractice law that capped pain-and-suffering awards at two hundred and fifty thousand dollars. Didn’t lawsuits go down?

“Practically to zero,” the cardiologist admitted.

“Come on,” the general surgeon finally said. “We all know these arguments are bullshit. There is overutilization here, pure and simple.” Doctors, he said, were racking up charges with extra tests, services, and procedures.

So Texas-sized "tort reform" left it with one of the highest cost, most wasteful healthcare markets in the nation. And when confronted with that fact doctors still try to blame "malpractice litigation" even though virtually no malpractice suits are filed.

In 2006, Medicare spent fifteen thousand dollars per enrollee here, almost twice the national average. The income per capita is twelve thousand dollars. In other words, Medicare spends three thousand dollars more per person here than the average person earns.

It must make Newt Gingrich very proud.

All of that said, let me briefly touch on the reasons why I don't think that the insurance companies are eager for the federal government to impose Texas-style "tort reform" upon the nation, and are instead appear largely content with the softer reform measures that exist in both the House and Senate bills. It's not that they're trying to silence their shills, but even Gingrich put "malpractice reform" eighth on his list of "ideas". If you impose a national cap on damages, it's likely to be higher than many state caps - many such caps were imposed decades ago and have not since been raised - and to be indexed to inflation.

Further, it's easier to target Congress with a litany of cases in which a cap brought about an unjust result, both because you're targeting one legislative body instead of fifty and because you're better able to get media attention, potentially having the cap raised in subsequent years. It's hard to make a "conservative" case for a federally imposed statute of limitations for malpractice cases, and you suffer the same consequence - it is easy to find examples of people, particularly people injured as minors, whose claims were cut off by a statute of limitations before they realized the severity or cause of their injury, or before they were legally competent to pursue the claim. A national statute of limitations could significantly expand the number of people able to bring claims currently time-barred under state law. Imposing an abolition of joint and several liability would be hard to disguise as anything but an intrusion on states rights. Further, all of these restrictions would be subject to appeal to the U.S. Supreme Court which, although largely pro-industry, might nonetheless have a difficult time finding a constitutional basis for supporting the federalization of a single type of tort, or reading the 7th Amendment out of the Constitution.

You would also think that a "conservative" like Newt Gingrich would want to empower states - any of which can, right now, emulate Texas - to enjoy the right to fashion their own remedies consistent with their own views of public policy. Surely he's heard of this thing called "federalism"? Instead, as with insurance regulation, he'll apparently support anything his industry sponsors want even if it undermines federalism. Of course, that's no surprise if you look at his track record.

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