Trial and Error


At first glance, the White House archives suggest nothing unusual
about President Bush's activity on January 16, 2003. Appearing
before a university audience in Scranton, Pennsylvania, Bush touted
his proposal for curbing medical malpractice lawsuits by limiting
jury awards. It was a familiar conservative cause he had championed
many times before, and he hit the usual notes in his speech: that
"there are too many lawsuits filed against doctors and hospitals
without merit" and that the malpractice system is "one of the main
reasons" for rising health care costs. But, inside the White House,
the day had a very special purpose. Even though John Edwards was,
at the time, just one of several Democratic presidential hopefuls,
Bush was staging a preemptive strike against him. One Bush adviser
actually told the Associated Press that January 16 was "Whack John
Edwards Day."Now that John Kerry has picked Edwards as his running mate, every
day is going to be Whack John Edwards Day. And you can bet medical
malpractice will be a big part of the assault. Partly, this is
because Edwards is a trial lawyer who first rose to fame--not to
mention fortune--by taking on malpractice cases. And partly, this
is because malpractice reform holds out the promise of reducing the
traditional Democratic political advantage on health care, an issue
that Kerry has pledged to emphasize this fall and one that weighs
heavily on the minds of voters.

Bush has a point when he talks about the current medical malpractice
system. It is severely flawed, and the political resistance of
trial lawyers is a real impediment to fixing it. But Bush is wrong
to blame the malpractice system for the entirety of America's
spiraling health care costs--it's only a tiny aspect of a much more
complex problem. What's worse, when Bush starts talking about
solutions, he advocates policies that help primarily a narrow class
of Republican financiers, even as he pretends to fix an urgent
problem that afflicts most of the country.

It's often said that a good medical malpractice system should have
two goals: deterring doctors from committing malpractice and
compensating its victims. And, as Paul Ginsburg, president of the
Center for Studying Health System Change, puts it, "Our current
system has failed badly in both of those tasks."

One reason the current system fails to deter malpractice is that it
discourages physicians from talking about mistakes. Today, a doctor
who acknowledges an error exposes himself to a lawsuit; yet it is
through precisely those introspective conversations that
physicians, along with hospitals and managed care companies, can
best identify and fix systematic problems in patient care. More
subtly, the current system fails to prevent bad medicine because it
doesn't impose more severe financial penalties on those who commit
the worst infractions. A 2002 analysis by Public Citizen showed that
just 5 percent of all physicians are responsible for nearly half
the money paid out in malpractice awards every year. But--unlike a
car insurance company, which demands higher premiums from drivers
with poor records--the companies that insure doctors against
malpractice awards traditionally haven't charged these troublesome
physicians more. Instead, they typically charge all local
physicians of the same specialty the same rate.

All of which might not be so awful if the current system at least
served patients well. But it doesn't. Yes, those patients who find
the right lawyers can receive money to compensate them for their
lost incomes and suffering-- sometimes quite a lot of money, which
is why critics of the system frequently call it a lottery. But
those who don't make it to court end up with very little, and they
may actually comprise the majority of malpractice victims. A
frequently cited study from the reputable New England Journal of
Medicine analyzed data from New York state in 1984 and found that
just 1.5 percent of likely malpractice victims ever sued.

What's more, outsized jury awards don't fully explain ballooning
malpractice insurance premiums. Insurance carriers hike rates
whenever their investment portfolios decline, and the General
Accounting Office estimates that this explains half of the recent
rise in malpractice premiums. Meanwhile, the liability insurance
industry itself admits that, of all the money physicians and
hospitals pay as premiums, less than half is used to cover payments
to the victims of malpractice. The rest goes to overhead, in the
form of defense costs and insurance company administration, and to

It's not hard to envision a better medical malpractice system--one
that still allowed for large jury awards in cases of true
negligence, but that handled the majority of bad medical outcomes
through a no-fault system requiring more disclosure and analysis of
medical errors. Ideally, such a system would also include more
aggressive disciplinary action against habitually negligent
physicians, either by licensing boards or a government body. And
most of the money coursing through the system would end up where it
belongs: not in the pockets of trial lawyers, but of those who
suffer physical harm. But that's not something you're going to hear
from the trial lawyers--and, as a result, it's not something you're
going to hear from most Democrats, at least until somebody else
starts the conversation.

Unfortunately, the Republicans have their own favored political
financiers, many of whom represent corporate interests. And, like
the trial lawyers, they seem less interested in improving medical
care than in advancing their own agenda--in this case, limiting
their financial exposure and reducing lawsuits generally. So, while
Republicans actually do talk about the problems with the current
malpractice system, they tend to limit their proposed reforms to
blunt measures that would simply restrict the amount of money even
the legitimately aggrieved can claim, while failing to propose
alternative methods for improving the quality of medicine or for
punishing negligent physicians. Sure enough, this is the approach
Bush advocated back in January 2003 and continues to tout today.

Where Bush and the Republicans really veer into questionable
territory, though, is in their argument that malpractice suits
account for the rapid increases in health insurance premiums for
average Americans--increases that have priced many out of insurance
altogether. They base this argument largely on the theory that the
threat of malpractice lawsuits forces doctors to practice
"defensive medicine"--ordering unnecessary tests and procedures
that drive up the cost of health insurance. The White House claims
defensive medicine increases overall health spending by 5 to 9
percent every year. Or, to put it another way, eliminating
defensive medicine would reduce the nation's total health bill by
$60 billion.

Although still a small fraction of overall health care spending, if
spent properly, $60 billion could buy health insurance coverage for
20 million people (about half of the current uninsured population).
And it's not as if the administration pulled this number out of
thin air. It's based on a pair of papers co-authored by Mark
McClellan, a fully credentialed economist and physician who,
despite having served for years in the Bush administration, has
maintained his reputation for academic integrity. The two papers
compared the spending on patients with certain severe heart
conditions in states that have caps on the amount juries can award
in malpractice cases with states that don't. The difference, they
found, was that magical 5 to 9 percent.

But the McClellan papers focused on just one type of health problem
for one narrow slice of the population. When the nonpartisan
Congressional Budget Office (CBO) tried to replicate the findings
for other health problems and other groups, it couldn't.
Specifically, it "found no evidence that restrictions on tort
liability reduce medical spending." And, when it compared per
capita health spending in states with liability restrictions to
states without the restrictions, it again "found no statistically
significant difference." So, while the CBO didn't discount the
existence of defensive medicine, it was highly skeptical of the
administration's claim that malpractice cases are a major source of
higher health insurance premiums. And most experts argue that a
variety of other factors--including new technology and patient
demands for expensive diagnostic tests--matter far more.

If the administration was serious about addressing rising health
insurance premiums and the large numbers of uninsured
Americans--the problems most on voters' minds this election
year--it would take a different approach. It might, for instance,
work toward a universal coverage system, perhaps by strengthening
existing programs for the poor while opening up the federal
employees plan to individuals who can't buy coverage on their own.
That is, in fact, the approach Kerry and Edwards advocate. It's far
more ambitious than anything the Bush administration has
proposed--and likely more effective, too. No wonder Bush would
rather talk about something else.

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