Special Section

Patching Holes in the Medical Malpractice System Is No Longer Enough

By David M. Studdert

David Studdert, a lawyer and epidemiologist at the Harvard School of Public Health, is an adjunct member of the RAND staff.

Talk of a “medical malpractice crisis” is growing. The symptoms are all too familiar. Premiums for professional liability coverage are spiraling. Liability insurers are leaving the market. Health care providers are pressing for reforms to ease the burden of litigation and insurance costs. The trial bar is vigorously opposing any reforms that restrict the ability of injured patients to sue for compensation. And policymakers, seeking solutions, are caught between the diametrically opposed demands of two powerful professional groups — physicians and trial lawyers — both of which claim that patients’ interests are their guiding motivation.

If this all seems like déjà vu, it should. We faced similar crises in the 1970s and 1980s. The mid-1970s crisis was chiefly one of insurance availability. As malpractice insurers pulled out of volatile markets, physicians in a number of regions struggled to find liability coverage at any price. To escape the future whims of commercial carriers, physicians formed their own insurance companies; states also established “joint underwriting organizations” to act as insurers of last resort. Unfortunately, in the long run, securing coverage was not enough. A huge surge in the premium costs in many regions of the country during the early-to-mid-1980s precipitated a second crisis, one of affordability.

The current crisis appears to be one of both availability and affordability. St. Paul’s Companies, one of the nation’s largest writers of medical malpractice insurance, announced in late 2001 that it was dropping this product line altogether. An exodus of insurers followed over the next two years, leaving thousands of physicians scrambling to find alternative coverage. In some states, such as Pennsylvania, the remaining insurers have either declined to write new policies or offered coverage only to physicians with unblemished claims records. Physicians have had to turn to their local joint underwriting associations, where they’ve found prohibitively high rates. In states such as Florida that do not require physicians to carry liability insurance, a growing number of physicians are “going bare” — a strategy in which physicians forgo insurance altogether and attempt to put their financial assets beyond reach of potential plaintiffs.

How are legislators responding? The short answer is that they are responding with pretty much the same tort reforms as before. As in the 1970s and 1980s, caps on non-economic damages are a popular counter. The Bush administration has come out strongly in support of caps, a response likely driven by the perception that increases in the frequency of multimillion-dollar awards have fueled the current crisis. Previous research on the efficacy of caps has found that caps significantly reduce payouts, and some studies have also linked caps to reductions in premiums. But too little attention has been paid to the specific types of claims that are affected by caps and to the equity implications of applying a flat dollar cap. A recent study from the RAND Institute for Civil Justice provides valuable new information in this area (see news story).

Another tort reform strategy seeks to curb the rates and costs of litigation by limiting how much access plaintiffs have to the courts—for example, by shortening the time within which patients must lodge their claims. Yet another approach involves altering liability rules to make it more difficult for plaintiffs to recover compensation. New standards for informed consent, evidence, and expert witnesses are all examples of this approach.

Unfortunately, although such conventional tort reforms will calm the liability insurance market temporarily, they will do no more than that. Future crises are a safe bet. More important, the health care system and our knowledge of it have changed over the past decade, and they’ve changed in ways that demand more-creative responses to the perceived problem of litigation.

One change is that patient safety and the prevention of medical errors have become major policy issues. A series of landmark studies over the past 15 years has shed light on the enormous burden imposed by medical injury and has offered insights into how medical errors occur. Lessons from these studies have inspired the catch phrases of the modern patient-safety movement: blame-free environments, transparency, adverse-event reporting, disclosure of adverse outcomes to patients, and systemic approaches to understanding and combating errors.

AP/WIDE WORLD PHOTOS/   SETH PERLMAN    Hundreds of doctors and nurses rally at the state capitol in Springfield, Ill., on April 28, demanding legislation to help them contend with soaring medical malpractice insurance rates.

Such aspirations could hardly be more at odds with the hallmarks of the tort system, with its individualized inquiries of fault, its adversarial proceedings, and its secrecy. Reconciling this clash of cultures presents a major challenge for researchers and policymakers alike — a challenge that traditional tort reforms completely bypass.

The spread of “defensive medicine” is another change in the health care landscape. Deterrence is, of course, one of the main objectives of malpractice litigation: By deterring substandard care, so the theory goes, tort law helps to improve quality. But the evidence of a deterrent effect in health care is stunningly thin. Ironically, the strongest indications that litigation drives changes in provider behavior suggest that the effects on quality may actually run in the opposite direction. Defensive medical practices, such as the over-ordering of tests and physicians’ refusal to perform risky procedures, are deviations from sound medical practice — deviations induced by a threat of liability.

An ever-expanding armory of diagnostic technologies creates fresh reasons and opportunities for defensiveness. Although the problem of defensive medicine is fairly well established, its pervasiveness continues to be the subject of fierce debate. Unfortunately, there are no reliable estimates of its fiscal effects on the health care system. Such data would inject valuable information into the debate.

A third change in the health care system is the nature of physician and hospital reimbursement for health care services. The advent of managed care has significantly constrained the ability of these providers to absorb premium hikes by passing them on to payers. Some commentators are concerned that the combination of rising premiums and tighter reimbursement will squeeze physicians out of practice, or at least drive them away from regions, patients, or procedures. The implications of such behavior for quality of care and access to services are potentially serious. Hence, careful monitoring of the situation is critical.

Measuring the scope and scale of malpractice litigation itself remains a perennial problem. Because the litigation is almost exclusively based in state courts, tracking it is a notoriously difficult task. RAND research has proven to be a credible and much-relied-upon source of information in this area with its reports on caseload trends in the civil justice system. For example, a recent study shows that malpractice verdicts have grown steadily as a proportion of all tort verdicts nationally, from 2 percent in the 1960s to 7 percent in the 1980s to 15 percent in the 1990s. No other category of tort verdicts has experienced an increase of this magnitude.

Taken together, the shifts in the legal and health care spheres described above demand innovative responses. There is a growing sense that standard tort reforms merely tinker at the edges of a system that is patently dysfunctional to its core. As a recent Institute of Medicine report concluded, experimentation with alternative approaches to the compensation of medical injuries is sorely needed.

The prospect of wholesale redesign of the medical malpractice system raises some key research questions. What departures from the traditional court-based methods of adjudicating negligence are feasible? What alternatives will pass muster under state and federal constitutions? Negligence aside, what other criteria may be used to more efficiently and effectively determine patients’ eligibility for compensation? What type of system redesign promises the greatest returns in terms of error reduction? If we dodge meaningful reform and ignore such tough questions, the result, a decade from now, is entirely predictable: déjà vu all over again.