Medical Malpractice Tort Reform and Federalism

Following up on some Volokh Conspiracy posts about the relationship between tort reform and federalism, Jonathan Adler quotes Walter Olson on the subject. Olson suggests that there is

a very real difference between areas like product liability and nationwide class actions—in which suits ordinarily cross state lines, and the majority of runaway verdicts are against out-of-state defendants—and more conventional kinds of tort litigation arising from car crashes, slip-and-falls, and medical misadventure, where cases are mostly filed against locally present defendants. As a rough rule of thumb, it’s worth presuming that most of the local suits do not externalize heavy costs across state lines and should accordingly be left alone by Congress unless it is itself vindicating some constitutional right or coordinating the functioning of some constitutionally authorized federal government activity.

Adler extrapolates,

Olson is anything but an opponent of tort reform generally. Indeed, he’s been one of the litigation explosion’s most prominent critics. But he recognizes that support of a particular policy goal does not require abandoning a principled commitment to the broader federalist scheme.

I'll take Olson's comments at face value, but let's recognize that not all insurance companies or medical industry lobbies want federal "tort reform". This battle has already been mostly won at the local level. It's difficult to conceive of a federal "reform" that would so heavily favor industry as to preempt state laws and caps that are less restrictive than the federal standard while allowing states to set more stringent standards and lower caps. Which is to say that states like Texas, that have all-but-eliminated medical malpractice as a viable tort, would likely see a federal reform reduce the burdens and hurdles they have placed in front of plaintiffs.

Further, part of the reason for local success is that it has become relatively cheap and easy to influence state legislatures and appellate courts, with insurance companies pouring millions into state supreme court races with the intention of electing judges favorable to their positions on such issues as tort reform. Following them Ohio Supreme Court's rejection of damages caps in malpractice case, the insurance and medical industries worked hard to change the composition of the court - not to change the law or state constitution, but to change the judges who interpreted and applied the laws and constitution - with the result that a reconstituted state supreme court found damages caps to be permissible.

If you federalize restrictions on medical malpractice cases you change that context significantly. Suddenly a single example or case can be used to propel a national public relations campaign to make the system more fair - and if you're honest about the impact of tort reform you know that's the opposite of what the insurance companies want. Reforms that increase the cost of litigation for plaintiffs but do little to nothing to improve the integrity of the system, such as requiring "certificates of merit" in association with the filing of a malpractice suit, might be challenged. Low, one-size-fits-all caps on "pain and suffering" damages might be revealed as absurdly low for certain severely injured patients - as they are. Caps would likely also be indexed to inflation, rather than remaining subject to a rigid, unchanging cap for years or decades.

In implementing tort reform, it is conceivable that Congress would do a better job than most states in creating a fair and balanced system. That isn't going to be reassuring to the insurance industry, so we can't be particularly surprised if national tort reform advocates find sudden value in federalism - you don't bite the hand that feeds you. Why, despite an express willingness to include tort reform in the Health Care Reform Act, did the issue all-but-drop off the radar in the otherwise contentious debate over the bill? In my opinion, because federalizing the issue is no longer a priority, and for the reasons I just provided may in fact be viewed as a negative, by a healthy proportion of health and insurance industry lobbyists.