The Magazine

Legal Malpractice

Will Congress side with the lawyers or the doctors?

Mar 24, 2003, Vol. 8, No. 27 • By WILLIAM TUCKER
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MEDICAL MALPRACTICE reform is moving steadily through Congress. The House passed President Bush's plan last Thursday, and it now goes to the Senate. The administration is hoping the reforms will head off a national malpractice crisis, which has already closed emergency rooms and trauma centers in Philadelphia and Las Vegas and sent doctors out on strike in Texas, West Virginia, and New Jersey. Obstetricians are particularly affected by rising premiums for malpractice insurance, and in many states it is getting difficult to find doctors who will deliver babies.

The Help Efficient, Accessible, Low-cost, Timely Healthcare Act (some people will do anything for an acronym) gives the president just about everything he wanted: a $250,000 cap on non-economic "pain-and-suffering" damages; a limit on punitive damages at two times economic damages; a three-year statute of limitations on complaints; damage payments apportioned by actual negligence; disclosure to juries of other sources of compensation to injured plaintiffs, such as their insurance coverage; and a limit on lawyers' contingency fees to 15 percent of damages above $600,000.

The limits on non-economic and punitive damages will discourage lawyers from escalating routine cases into the multi-multi-million-dollar range. The three-year statute prevents older children and adults from coming back and claiming birth trauma. The apportioning of damage claims counteracts that masterpiece of legal legerdemain by which a deep pocket with 1 percent of the liability can be made to pay 100 percent of the damages.

Supporters point to California's $250,000 cap on non-economic damages, adopted in 1976, which reduced the number of million-dollar verdicts to 60 percent of the national average. "Since 1976 malpractice premiums have increased only 168 percent in California versus 505 percent nationwide," says Gretchen Schaefer of the American Tort Reform Association.

Trial lawyers counter that the California law had no impact until state voters capped insurance premiums in 1988. They also argue that the current national crisis is the result of bad investments by the insurance industry. "Premiums were flat or went down from 1990 until 2000," says Carlton Carl, spokesman for the Association of Trial Lawyers of America. "Then the stock market tanked. Now the insurance companies are trying to raise premiums to cover their losses. All caps will do is penalize the most seriously injured victims of malpractice."

Of course that argument also works the other way. "The relatively flat malpractice premiums of the 1990s were partially subsidized by gains from the insurance companies' stock and bond portfolios," says Robert Wegman, chief economist for the Insurance Industry Institute. "The real problem is that malpractice costs have risen 140 percent since 1990 while medical costs have risen only 60 percent. In the end, gains from investment couldn't make up the difference."

In 1995, insurers paid out 99.7 cents for every $1 they took in malpractice premiums. Today payouts have risen to $1.65 per $1, the highest in history. "You have to remember, more than half the doctors in this country buy malpractice insurance from non-profit companies run by doctors themselves," says Wegman. "Even those companies can't make it."

Lawyers charge the medical industry is rife with malpractice. They have publicized the case of a Minnesota woman who had both breasts wrongly removed because of a mix-up in biopsies. They also cite the 2002 Harvard Medical Practice Study, which attributed 98,000 annual deaths to medical mistakes. The death of Jésica Santillán, the 17-year-old girl given a wrong heart-and-lung transplant in February, has alone affected the debate.

"The real problem is lack of disciplining by state medical boards," says Sidney Wolfe, of Ralph Nader's Public Citizen Health Research Group. "Among the three states with the most serious insurance crises--West Virginia, Pennsylvania, and New York--all have high percentages of doctors with five or more malpractice payments against them."

Yet the key question is whether astronomical damage awards are making the medical system any better. In theory, large awards should encourage doctors and hospitals to clean up their mistakes. But that's only true if the awards coincide with actual blunders and incompetence. In practice, the distribution of awards has been much more arbitrary.

Perhaps the best example is cerebral palsy, the neurological malfunctioning that accounts for nearly 60 percent of all malpractice payouts. Infants with cerebral palsy develop very little muscular control and are often unable to nurse. They remain incontinent and are wheelchair-bound throughout their lives. Most victims survive into adulthood. Each year there are about 10,000 new cases--about 3 per 1,000 births. Estimated lifetime cost of care is $1-to-$5 million.