If you are looking for a diatribe for or against what we have come to know as “tort reform”, you will be disappointed. The problem is too complex. The purpose here is to shed some light.

Let’s clarify the issue. Advocates of “tort reform” are really arguing for lower incidence of medical malpractice awards, smaller dollar awards, and lower medical malpractice insurance premiums for physicians. They also hope to reduce the level of “defensive medicine”, the result of which is higher medical cost in response to the fear of being sued.

According to the National Practitioner Data Bank, the number and dollar value of medical malpractice award payouts has been flat since 1991, and have actually declined since 2001.The figures presented by the National Association of Insurance Commissions back this up. Public Citizens’ Congress Watch in Washington, D.C. reports that medical malpractice award payments declined 13.6% from 2001 through 2004 (the latest data available). Award payments of $1 million or more actually fell 56% from 1991 through 2004. According to a Harvard University study, very few medical errors ever result in legal claims – only one claim per 7.6 injuries ever results in legal action. Of those claims, plaintiffs drop 9 of every 10 that are initiated. Let’s at least admit that a case made solely on the basis of the “exploding incidence” of medical malpractice claims and awards has its problems.

Well, then, what about medical malpractice insurance premiums? Premiums have increased and there is no doubt about it. The question is WHY have premiums increased. There are authorities who have looked at this issue and concluded that medical malpractice insurance premiums rise NOT just because of increased frequency of litigation or jury awards, but to compensate for poor insurance company investment returns. Robert Hunter, Insurance Director for the Consumer Federation of America recently pointed this out. The U.S. Government Accountability Office (formerly the U.S. General Accounting Office) has reported this several times, the most relevant being GAO 03-702. GAO reported that multiple factors, including falling investment income and rising reinsurance costs, have contributed to increases in premium rates. In one interesting comparison, the GAO report showed that the premiums insurers charge physicians in different locales have such huge variability that the discrepancy cannot be explained by claims incidence alone. If it is true that other factors contribute to premium increases, then it follows that preventing or limiting medical malpractice awards may not result in corresponding premium decreases.

Defensive medicine is the hardest to deal with because its impact is difficult to calculate. There is no doubt that there are more medical tests being ordered for fear of medical liability then there would be otherwise. The question is what is the impact. Nobody really knows (GAO 03-836). We do know that medical insurance costs average about 3.2% of average physician revenues. We also know that 5.5% of physicians cause 57.3% of all medical malpractice payouts to patients. Do we approach the problem, as some have suggested, by not interfering with tort claims and instead going after the few transgressors?

Much study still needs to be done, but the end game will not change. As a society, we will have to decide whether we want to prevent or limit the legitimate claims of citizens damaged by medical errors by making it harder to obtain compensation for those errors, or insulate physicians and thus reduce the motivation for defensive medicine in the hope that the cost savings will justify the lost opportunities.


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