Tort Reform: The Basics

Timothy R. Bone, President, MedMal Direct Insurance Company // May 13, 2011

The essential elements of tort reform are discussed here, with the object of generating even more detailed discussion on each topic in future issues. As in all things political, each option has advocates for and against the proposed resolution of the perceived problem. In the case of healthcare tort reform, the loudest voices are to be heard from (a) Physicians and from (b) Trial Attorneys. Let’s review “The Basics”!

Three elements of reform are being discussed at the national level:

1. Apologize and resolve early
a. These “Apology Statutes” – sometimes referred to as Disclosure-and-Offer Programs — exist in 35 states, and the Physician’s apology cannot be used as evidence in a court of law. A group called the Sorry Works Coalition is advancing this type of reform. Hospitals throughout the nation, most notably in Michigan and in New Jersey, have applied this, with some success. Trial Lawyers do not usually like these statutes as they reduce fees and reduce the number of cases that actually get to a lawyer’s office for resolution of the problem. Doctors like these statutes as they decrease the frequency and length of litigation.

2. Physician Protocols
a. These “Safe Harbor” systems provide that if a physician follows approved sets of practice guidelines or protocols, they are then protected in lawsuits (usually, they are presumed to be innocent if the protocols were followed). Doctors do not generally like these as “best practices” are constantly changing; and for these protocols to keep up with the constant evolution of medicine would be difficult. Trial Attorneys like these systems as billable hours are the same or greater, and most patients still go to the attorney’s office to seek resolution to their problem.

3. Special Health Courts or Medical Tribunals
a. This “Administrative Law Tribunal” would have a judge who specializes in medical malpractice lawsuits, with testimony from [allegedly] neutral expert witnesses. No juries. Formula for non-economic damages. This system exists in Sweden, Denmark and surrounding countries. This does require a completely new infrastructure, and, in my humble opinion, would also affect the right of an individual to a jury trial. Trial Attorneys would have a decreased amount of discovery, but the patient would still go to the Trial Attorney’s office seeking resolution of the problem. Physicians would benefit from the decreased length of litigation, but somebody will need to bear the cost of this entirely new administrative infrastructure – and that cost could be added to the current insurance premiums. 
A fourth reform is also considered, though not usually listed: caps on non-economic damages.

This is the fall-back position of most state legislatures, which may occur at the federal level as well, especially since the AMA advocates this as the answer to the medical malpractice problem everywhere. The caps make the public feel good about what the legislature accomplished and the legislators get to claim “Tort Reform” that they passed as being the cause of the current decrease in premiums. In reality, it is only one portion of the proper answer (see MICRA, below). The current decrease in premiums is due to the normal nature of the insurance “cycle” (it is a sine curve – we are now in a “soft” market with falling premiums) and due to the physicians buying lower limits of liability insurance (due to costs), thus driving Trial Attorneys away from the smaller limits carried by Physicians and toward the companies that have larger limits and large liability exposures (McDonalds, CSX railroad, etc.).

In my opinion, the true answer to implementing Tort Reform lies with either of two systems: Indiana or California.

1. In Indiana, a system has been implemented where (a) a panel of experts must grant permission before the actual lawsuit may be filed, and (b) there is a cap on all damages (economic and non-economic) for each lawsuit. This works, with Indiana healthcare providers enjoying what are probably the lowest premiums for medical malpractice insurance in the nation. The downside is that there are a very few cases where negligence did occur and this amount of money is simply not sufficient to pay the damages caused by that negligence.

2. In California, the Medical Injury Compensation Recovery Act (MICRA) was implemented where certain laws have been changed affecting lawsuits. These changes have also resulted in a significant drop in premiums for med-mal insurance. Changes such as:
a. All payments to plaintiffs/patients are made on a structured settlement basis. 
b. All payments to attorneys are by percentage of award, but decreasing percentages apply as the award becomes larger (by formula).
c. Elimination of joint and several liability; thus, if a defendant is found to be 10% liable, then that is the portion of the total award that the defendant actually pays – no matter the financial status of the codefendant. 
d. The ability to speak to the jury about other awards the plaintiff/patient has already received in this case.
e. $250,000 cap on all non-economic damage awards.

These elements of Tort Reform and these proposed solutions are merely “The Basics” of this overall discussion that will be heard in the halls of state and federal government in incredible detail over the next two years. Physicians must enter into this discussion and let their voices be heard at the highest levels of our government. To do so, we must all be knowledgeable about the options that exist and which can be realistically implemented. We shall analyze each of these options, and more, in future issues. Let the dialogue begin!